Statutory Reserves

12 Months Ended

Dec. 31, 2012

NOTE 12– STATUTORY RESERVES

The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve, statutory public welfare fund and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (the “PRC GAAP”). Appropriation to the statutory surplus reserve should be at least 10% of the after tax net income determined in accordance with the PRC GAAP until the reserve is equal to 50% of the entities’ registered capital or members’ equity. Appropriations to the statutory public welfare fund are at a minimum of 5% of the after tax net income determined in accordance with PRC GAAP. Commencing on January 1, 2006, the new PRC regulations waived the requirement for appropriating retained earnings to a welfare fund. Prior to December 31, 2009, the Company appropriated the required maximum 50% of its registered capital to statutory reserves for Electric. As of December 31, 2012, the Company had not appropriated the required maximum 50% of its registered capital to statutory reserve for Dyeing and Fulland Wind Energy.

For the years ended December 31, 2012 and 2011, statutory reserve activities were as follows:

	Dyeing		Electrical		Fulland Wind Energy		Total
Balance – December 31, 2010	$	72,407	$	1,168,796	$	416,994	$	1,658,197
Addition to statutory reserves		-		-		406,354		406,354
Balance – December 31, 2011		72,407		1,168,796		823,348		2,064,551
Addition to statutory reserves		300,641		-		114,546		415,187
Balance – December 31, 2012	$	373,048	$	1,168,796	$	937,894	$	2,479,738