CCCL China Ceramics Co Ltd

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

China Ceramics Co., Ltd. (“the Company” or “China Ceramics”) and its subsidiaries (together, “the Group”) manufacture and sell ceramic tiles used for exterior siding and for interior flooring and design in residential and commercial buildings. The Group has operation primarily in the People’s Republic of China (“PRC”).

The Company is an exempt corporation incorporated and domiciled in the British Virgin Islands with its shares listed on the NASDAQ Global Market. The address of its registered office is c/o Harneys Corporate Services Limited of Tortola, British Virgin Islands. The head office of the Company is located at Junbing Industrial Zone, Jinjiang City, Fujian Province, the People’s Republic of China (“PRC”).

The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). They do not include all of the information required in annual financial statements in accordance with International Financial Reporting Standards (“IFRS”), and should be read in conjunction with the audited consolidated financial statements and related footnotes on Form 20-F for the year ended December 31, 2015 as filed with the Securities and Exchange Commission. The accompanying unaudited condensed consolidated interim financial statements reflect all normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods presented. Results for the six months ended June 30, 2016 are not necessarily indicative of the results expected for the full fiscal year or for any future period.

These interim financial statements are presented in RMB, unless otherwise stated. They were approved for issue by the Audit Committee of the Board of Directors and the Board of Directors on September 28, 2016.

These interim financial statements have been prepared in accordance with the same accounting policies adopted in the 2015 annual financial statements, except for the accounting policy changes that are expected to be reflected in the 2016 annual financial statements. Details of any changes in accounting policies are set out in note 3.

The preparation of interim financial statements in conformity with IAS 34 requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.

These interim financial statements contain condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the 2015 annual financial statements.

The IASB has issued the following amendments to IFRSs that are first effective for the current accounting period of the Company:

None of these developments have had a material effect on how the Group’s results and financial position for the current or prior periods have been prepared or presented. The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.

The preparation of interim financial statements in conformity with IAS 34 requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.

China Ceramics Co., Ltd. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

The Company identifies operating segments and prepares segment information based on the regular internal financial information reported to the Chief Executive Officer and executive directors, who are the Company’s chief operating decision maker, for their decisions about the allocation of resources to the Company’s business components and for their review of the performance of those components.

The Company operates principally in the manufacturing and sale of medium to high-end ceramic tiles. The Chief Executive Officer and executive directors regularly review the Company’s business as one business segment.

The business of the Company is engaged entirely in the PRC. The Chief Executive Officer and executive directors regularly review the Company’s business as one geographical segment.

China Ceramics Co., Ltd. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the six months ended June 30, 2016, cost of inventories recognized as expense included staff costs of RMB18.0 million (2015: RMB27.4 million), depreciation and amortization expense of RMB18.3 million (2015: RMB33.6 million), operating lease charges of RMB7.0 million (2015: RMB6.0 million) and write down of inventories of RMB1.4 million (2015: RMB7.6 million), which amounts are also included in the respective total amounts disclosed separately for each of these types of expenses.

China Ceramics Co., Ltd. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

British Virgin Islands Profits Tax

The Company has not been subject to any taxation in this jurisdiction in 2015 and 2016.

Hong Kong Profits Tax

The subsidiary in Hong Kong is subject to tax charged on Hong Kong sourced income with a statutory tax rate of 16.5%. No Hong Kong profits tax has been provided as the Company has no assessable profit arising in Hong Kong in 2015 and 2016.

PRC Income Tax

The subsidiaries in the PRC are subject to the enterprise income tax in accordance with “PRC Enterprise Income Tax Law” (“EIT Law”), and the applicable income tax rate is 25%.

China Ceramics Co., Ltd. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

The analysis of the amount of inventories recognized as an expense and included in profit or loss is as follows:

The Company’s trade receivables are denominated in Renminbi and non-interest bearing. In 2011, the credit period granted to distributors was generally for a period within 90 days. Since the end of 2012, the Company has extended the collection period to 150 days to address funding pressures of its distributors. Other customers were granted a credit period of 120 days in 2015 and 2016.

All of the trade receivables are expected to be recovered within one year.

An aging analysis of trade receivables that were neither past due nor impaired or past due but not impaired, is as follows:

Receivables that were neither past due nor impaired, and past due but not impaired relate to a large number of customers for whom there was no recent history of default. All amounts are short-term. The Company does not hold any collateral over these receivables.

As of December 31, 2015, the Company is exposed to certain credit risks as 8% and 22% of the total trade receivables were due from the Company's largest and the five largest customers, respectively.

As of June 30, 2016, the Company is exposed to certain credit risks as 7% and 24% of the total trade receivables were due from the Company's largest and the five largest customers, respectively.

China Ceramics Co., Ltd. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

Trade payables are denominated in Renminbi, non-interest bearing and generally settled within 120-day terms. All of the trade payables are expected to be settled within one year.

Deposits received represent deposits from the Company’s distributors. The Company usually requests a deposit from RMB400,000 to RMB1,000,000 from new distributors upon signing a distributorship agreement as security for the performance of their obligations under the distributorship agreement.

Accrued liabilities consist mainly of accrued rental, wages and utility expenses.

The carrying value of accrued liabilities and other payables is considered to be a reasonable approximation of fair value.

The Company’s banking facilities are pledged by bank deposits, the Company’s buildings and land use rights, land use rights of third parties and guaranteed by related parties, a subsidiary of the Company and third parties.

China Ceramics Co., Ltd. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

The Company paid a cash dividend of US$0.10 (equivalent to RMB0.61) per share each on July 13, 2013 and January 14, 2014, respectively, to its shareholders which totaled in aggregate US$4.1 million (equivalent to RMB24.9 million gross, RMB23.66 million net of 5% PRC withholding tax).

The Company paid a cash dividend of US$0.0125 (equivalent to RMB0.08) per share each on July 14, 2014 and January 14, 2015, respectively, to its shareholders which totaled in aggregate US$0.5 million (equivalent to RMB3.2 million gross, RMB3.01 million net of 5% PRC withholding tax).

No other dividend was declared or paid for the period ended June 30, 2016,

China Ceramics Co., Ltd. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

The Company leases production factories, warehouses and employees’ hostel from unrelated parties under non-cancellable operating lease arrangements. The leases have varying terms and the total future minimum lease payments of the Company under non-cancellable operating leases are payable as follows: 

The leases typically run for an initial period of three to five years, with an option to renew the lease when all terms are renegotiated. Lease payments are usually increased every five years to reflect market rentals. None of the leases includes contingent rentals.

The Company had the following other commitments:

During 2014, several putative class action complaints were filed in the United States District Court for the Southern District of New York against the Company and various current and former directors and officers asserting claims of violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder against all defendants, and asserting claims for violations of Section 20(a) of the Exchange Act against the individual defendants; and pursuing remedies under the Exchange Act.

On February 6, 2015, the Company and the individual defendants reached an agreement in principle to settle the above-described cases as against all defendants in consideration of the payment by the Company of US$850,000 (equivalent to approximately RMB5,274,000), consisting of a combination of cash of US$310,000 and the Company’s common stock of US$540,000. The settlement is subject to the execution of a mutually acceptable settlement agreement and the approval of the settlement by the Court. A charge for the settlement amount is included as an expense item in the Company’s financial statements in the second half of 2014.

On May 29, 2015, the Company executed a settlement stipulation with the Plaintiffs in the class action litigation, memorializing the terms of the settlement; and the parties to the litigation filed the same with the Court. A Stipulation of Settlement and related documents were subsequently filed with the court, and were revised on July 22, 2015 pursuant to court order. The settlement is subject to Court approval.

On September 1, 2015, the United States District Court for the Southern District of New York issued a preliminary approval order that among other things preliminarily approved the proposed settlement of the class action litigation.

On January 6, 2016, the United States District Court for the Southern District of New York (the “Court”) held a final hearing to consider approval of the settlement, and on April 22, 2016, it issued a final order approving the settlement and ordering that the parties file a stipulation voluntarily dismissing the action on or before May 23, 2016 or, in the alternative, to file a joint letter by the same deadline stating the reasons for the delay in filing such a stipulation.

China Ceramics Co., Ltd. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

Under the terms of Court’s final order approving the settlement issued on April 22, 2016, the number of common shares issuable by the Company is determined by the dividing $540,000 by the average closing price of the Company’s common shares on the ten days preceding the final approval hearing, which took place on January 6, 2016. That provision resulted in the Company being obligated to issue 554,415 common shares (which equates to 69,302 shares after the 1 for 8 reverse stock split recently implemented by the Company), all of which shares were freely tradeable. The Counsel for the Lead Plaintiffs in the litigation subsequently sought to renegotiate the date for the determination of the number of shares issuable in the settlement. The Court requested submissions from the Company and the individual defendants with respect to the issues raised by the Counsel for the lead plaintiffs and all of the submissions were filed by May 24, 2016.

On June 20, 2016, the Court denied the request by the Counsel for the Lead Plaintiffs to modify the terms of the Settlement. As a result of the Court's order, the terms and provisions of the Settlement remain unchanged and the case was closed on August 2, 2016. A charge for the settlement amount is included as an expense item in our fiscal 2014 financial statements and RMB1.7 million attributable to recognition of the over-provision of funds for the settlement of litigation was included in Other Income in the Company’s financial statements for the second quarter of 2016.

Pursuant to the public offering of securities dated February 3, 2016, the Company sold 1,428,571 ordinary shares at a price of $0.63 per share, 1,428,571 Class A Warrants to purchase one common share per warrant and 1,428,571 Class B Warrants to purchase one common share per warrant. The Class A Warrants have an exercise price of $0.63 per share and the Class B Warrants have an exercise price of $0.78 per share. The Class A Warrants were exercisable up until the six-month anniversary of the date of issuance. The Class B Warrants are currently exercisable and will terminate on the five-year anniversary of the date of issuance.

On July 28, 2016, 7,936 Class A Warrants were exercised at an exercise price of $0.63 per share resulting in the issuance of 7,936 common shares. The remainder of the Class A Warrants expired unexercised on August 3, 2016.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We, through our operating subsidiaries, are a leading PRC-based manufacturer of ceramic tiles used for exterior siding and for interior flooring and design in residential and commercial buildings. The ceramic tiles, sold under the “HD” or “Hengda”, “HDL” or “Hengdeli”, “TOERTO”, “WULIQIAO” and “Pottery Capital of Tang Dynasty” brands are available in over two thousand styles, colors and size combinations. Currently, we have five principal product categories: (i) porcelain tiles, (ii) glazed tiles, (iii) glazed porcelain tiles, (iv) rustic tiles and (v) polished glazed tiles. Porcelain tiles are our major products and accounted for over 62.1% of our total revenue in for the six-months ended June 30, 2016 (2015 fiscal year: 67.6%).

We are a British Virgin Islands limited liability company whose predecessor, China Holdings Acquisition Corp (“CHAC”), was incorporated in Delaware on June 22, 2007 and was organized as a blank check company for the purpose of acquiring an operating business.

Pursuant to the terms of a merger and stock purchase agreement dated August 19, 2009, on November 20, 2009, CHAC merged with and into China Ceramics, its wholly owned British Virgin Islands subsidiary, and, immediately thereafter, as part of the same integrated transaction, China Ceramics acquired all of the outstanding securities of Success Winner.

Our manufacturing facilities operated by Jinjiang Hengda Ceramics Co., Ltd. are located in Jinjiang, Fujian Province, and our manufacturing facilities operated by Jiangxi Hengdali Ceramic Materials Co., Ltd. are located in Gaoan, Jiangxi Province. Combined, these facilities currently provide an aggregate annual maximum production capacity of approximately 72 million square meters of ceramic tiles. However, due to current economic conditions, we are currently utilizing production facilities capable of producing 27 million square meters and leasing out production facilities capable of producing 10 million square meters of ceramic tiles to a third party pursuant to an eight year lease. We currently have sixteen production lines (ten of them were utilized as of the end of June 2016), with each production line optimized to manufacture specific size ranges to maximize efficiency and output, with one production line being utilized pursuant to the eight year lease.

Basis of Presentation

The following discussion and analysis of our financial condition and results of operations is based on the selected financial information as of and for the six months ended June 30, 2016 and has been prepared based on the condensed consolidated interim financial statements of China Ceramics Co., Ltd. and its subsidiaries. The condensed consolidated interim financial statements of China Ceramics Co., Ltd. and its subsidiaries have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim financial reporting. The condensed consolidated interim financial statements have been prepared on the historical cost basis, except for derivative financial instruments that have been measured at fair value.

The translation of certain RMB amounts as of and for the period ended June 30, 2016 into US$ is included in these financial statements solely for the convenience of readers and was made at the rate of RMB6.6459 to US$1.00, which was based on the noon buying rate on June 30, 2016 in The City of New York cable transfers of RMB as certified for customers purposes by the Federal Reserve Bank of New York. Such translation should be construed as representation that RMB amounts could be converted, realized or settled into US$ at the rate stated above or at any other rate.

Description of Selected Income Statement Items

Revenue. We generate revenue from the sales of ceramic tiles, including porcelain tiles, glazed porcelain tiles, glazed tiles, rustic tiles and polished glazed tiles. For the past three fiscal years, the second and third calendar quarters have been the peak season of the property developing industry, and, therefore, our quarterly sales are usually highest from May to September. In addition, we have observed that sales are lowest from January to March. This is because property developing activities are low due to the effects of cold weather and the PRC Spring Festival.

Cost of sales. Cost of sales consists of costs directly attributable to production, including the cost of clay, color materials, glaze materials, coal, gas, salaries for staff engaged in production activity, electricity, depreciation, packing materials, and related expenses.

The most significant factors that directly or indirectly affect our cost of sales are as follows:

Clay is a key material for making ceramic tiles, and accounted for approximately 24.3% and 22.8% of our cost of sales in the six months ended June 30, 2016 and 2015, respectively. Fujian and Jiangxi Provinces, where our production facilities are located, are the largest clay resources areas in China and clay supply is stable and sufficient for our production and planned production.

Coal and gas are our major fuel sources for making ceramic tiles. Coal and gas accounted for approximately 5.5% and 8.3% respectively, of our cost of sales in the six months ended June 30, 2016. As a comparison, coal and gas accounted for approximately 4.7% and 9.7%, respectively, of our cost of sales in the six months ended June 30, 2015. We have long-term relationships with our coal suppliers. Prices of coal have experienced fluctuations in the past few years. Since 2015, our Hengda facility has been required by the local governmental entity to use natural gas to operate the facility. This increased our cost of goods produced at that facility because natural gas is a more expensive energy source than coal.

Dyes are another key material for making ceramic tiles, and accounted for approximately 26.8% and 25.9% of our cost of sales in the six months ended June 30, 2016 and 2015, respectively. A number of dyes are used in ceramic tiles, and the prices of different dyes have experienced fluctuations in the past few years.

Other income and other expenses . Other income consists of interest income, rental income and reversal of funds reserved for the settlement of litigation due to its over-provision. Other expenses primarily consist of loss on disposal of property, plant and equipment, depreciation on rental property and interest expense.

Selling and distribution expenses . Selling and distribution expenses consist of payroll, transportation and advertising expenses incurred by our selling and distribution team.

Administrative expenses . Administrative expenses consist primarily of employee remuneration, payroll taxes and benefits, general office expenses and depreciation. We also incur additional expenses related to costs of compliance with securities laws and other regulations, including audit and legal fees and investor relations expenses.

Finance costs . Finance costs consist of interest expense on bank loans.

Income taxes. Our subsidiaries in the PRC are subject to the PRC Enterprise Income Tax Law, and the applicable income tax rate pursuant to such law in 2016 and 2015 is 25%.

Comparison of six months ended June 30, 2016 and June 30, 2015

Revenue. The following table sets forth the breakdown of revenue, by product categories, for the six months ended June 30, 2016 and 2015:

Revenue decreased by RMB129.2 million, or 27.5% to RMB340.6 million ($51.6 million) in the six months ended June 30, 2016, from RMB469.8 million for the six months ended June 30, 2015. Customer demand continued to shrink in 2016, as seen by a 31% decrease in the sales volume of ceramic tiles to 10.7 million square meters for the six months ended June 30, 2016, from 15.4 million square meters for the six months ended June 30, 2015. The decrease was partially offset by a 4% increase in the average selling price to RMB31.8 ($4.8) per square meter in the six months ended June 30, 2016 from RMB30.5 per square meter in the same period last year.

Porcelain tiles. Revenue from porcelain tiles decreased by RMB106.0 million, or 33.4%, from RMB317.4 million for the six months ended June 30, 2015 to RMB211.4 million ($3.2 million) for the six months ended June 30, 2016. The sales volume decreased 34% from 11.6 million square meters for the six months ended June 30, 2015 to 7.6 million square meters for the same period in 2016. The average selling price increased by 1% to RMB27.7 ($4.2) per square meter for the six months ended June 30, 2016 from an average selling price of RMB27.4 per square meter for the six months ended June 30, 2015. Porcelain tiles for exterior walls are still our most popular product and have the largest market potential of all of our tiles. We expect porcelain tiles to continue to be our key product for the foreseeable future.

Glazed porcelain tiles. Revenue from glazed porcelain tiles decreased by RMB6.1 million, or 30.8%, from approximately RMB19.8 million for the six months ended June 30, 2015 to RMB13.7 million ($2.1 million) for the same period in 2016. The sales volume decreased 29% from 0.7 million square meters from the six months ended June 30, 2015 to 0.5 million square meters from the same period in 2016. The average selling price decreased by 1% to RMB27.1 ($4.1) per square meter from the six months ended June 30, 2016 from an average selling price of RMB27.3 per square meter for the six months ended June 30, 2015.

Glazed tiles. Revenue from glazed tiles decreased 30.7%, from RMB22.5 million for the six months ended June 30, 2015 to RMB15.6 million ($2.3 million) for the same period in 2016, mainly due to the decrease in sales volume by 30% from 1.0 million square meters from the six months ended June 30, 2015 to 0.7 million square meters from the same period in 2016. The average selling price for this product increased 2%, from RMB23.2 per square meter for the six months ended June 30, 2015 to RMB23.6 ($3.6) per square meter for the same period in 2016. Glazed tiles have a lower selling price than our other products.

Rustic tiles. Revenue from rustic tiles decreased 14.3% from RMB44.0 million for the six months ended June 30, 2015 to RMB37.7 million ($5.7 million) for the same period in 2016 due to the decrease in sales volume by 20% from 1.0 million square meters for the six months ended June 30, 2015 to 0.8 million square meters from the same period in 2016. The decrease was partially offset by a 2% increase in the average selling price, from RMB44.4 per square meter for the six months ended June 30, 2015 to RMB45.3 ($6.8) per square meter for the same period in 2016. We have been promoting rustic tiles since we introduced them in 2007 and believe that rustic tiles will become a larger portion of our product mix due to the variety of patterns and textures that can be achieved with this product.

Polished Glazed tiles. Revenue from polished glazed tiles decreased 5.7%, from RMB66.1 million for the six months ended June 30 2015 to RMB62.3 million ($9.4 million) for the same period in 2016, due to the decrease in sales volume of 6%, from 1.14 million square meters for the six months ended June 30, 2015 to 1.07 million square meters for the same period in 2016. We introduced polished glazed tiles in March 2011 and began selling them in the second quarter of 2011. We believe that this product represents both a functional and cost-effective replacement for actual marble or stone materials used in a decorative fashion inside homes. The polished glazed tiles are of a large size than our other tiles and we believe that demand for this series will increase in future.

Cost of sales. The following table sets forth the breakdown of cost of sales, by product categories, for the six months ended June 30, 2016 and 2015:

Cost of sales was RMB290.4 million ($44.7 million) for the six months ended June 30, 2016 compared to RMB420.2 million for the same period in 2015, a decrease of RMB129.8 million, or 30.9%, mainly due to the decrease in sales volume.

Gross profit. The following table sets forth the breakdown of our gross profit and gross profit margin, by product categories, for the six months ended June 30, 2016 and 2015.

Our gross profit increased 1.2% from RMB49.6 million for the six months ended June 30, 2015 to RMB50.2 million ($7.6 million) for the same period in 2016. Gross profit margin percentage was 14.7% for the six months ended June 30, 2016, compared to 10.6% for the same period in 2015. The year-over-year increase in gross profit margin and gross profit margin percentage was primarily driven by decrease in the cost of sales attributable to (i) a decrease in depreciation due to the Company’s taking an asset impairment charge in the fourth quarter of 2015 that reduced the value of the Company’s plant, property and equipment, and (ii) an increase in average selling price.

Other income. Other income were RMB8.2 million ($1.2 million) for the six months ended June 30, 2016 compared to RMB0.4 million for the same period in 2015, representing an increase of RMB7.8 million, or 1,950% mainly caused by: (i) rental income of RMB4.7 million received as a result of the Company leasing out a production line from its Hengdali plant pursuant to an eight-year lease contract, and (ii) RMB1.7 million attributable to recognition of the overprovision of funds for the settlement of litigation for the six months ended June 30, 2016.

Selling and distribution expenses. Selling and distribution expenses were RMB7.0 million ($1.1 million) for the six months ended June 30, 2016 compared to RMB5.4 million for the same period in 2015, representing an increase of RMB1.6 million, or 30%, mainly due to an increase in advertisement expenses of RMB1.7 million ($0.3 million) for the six months ended June 30, 2016.

Administrative expenses. Administrative expenses were RMB11.8 million ($1.8 million) for the six months ended June 30, 2016, compared to RMB11.0 million for the same period in 2015, representing an increase of RMB0.7 million, or 7%. Higher accounting service fees were incurred in 2016 in connection with the preparation of our financial statements.

Finance costs. Finance costs was RMB0.7 million ($0.1 million) for the six months ended June 30, 2016, compared to RMB2.1 million for the same period in 2015, representing an decrease of RMB1.4 million, or 67%, mainly due to a bank loan that was fully repaid in 2016.

Other expenses. Other expenses increased 529% from RMB0.7 million for the six months ended June 30, 2015 to RMB4.4 million ($0.7 million) for the same period in 2016. The increase in other expense was mainly due to the depreciation of rental property of RMB3.3 million for the six months ended June 30, 2016.

 Profit/(loss) before taxation. Profit before taxation was RMB34.5 million ($5.2 million) for the six months ended June 30, 2016 compared to profit before taxation of RMB30.8 million for the same period in 2015, representing an increase of RMB3.7, or 12%. The increase in first half 2016 profit was mainly due to (i) the year-over-year increase in gross profit of RMB0.6 million, or 1.2%, and (ii) rental income of RMB4.7 million derived from the Company leasing out a production line from its Hengdali plant consequent to an eight-year lease contract.

Income taxes. We incurred an income tax expense of RMB5.0 million ($0.8 million) for the six months ended June 30, 2016, compared to RMB8.8 million for the same period in 2015. The decrease in income tax was primarily the result of the deferred tax assets being recognized from accumulated loss attributed from the Company’s subsidiaries for the six months ended June 30, 2016. Our PRC statutory enterprise income tax rate was 25.0% in 2015 and 2016. Excluding the loss of our BVI holding company and Hong Kong incorporated subsidiary, our effective tax rate was 14% and 28% respectively for the six months ended June 30, 2015 and 2016.

Profit/(loss) attributable to shareholders. Profit attributable to shareholders was RMB29 million ($4.4 million) for the six months ended June 30, 2016, compared to loss attributable to shareholders of RMB22.0 million for the same period in 2015, as a result of the factors described above.