Mail Stop 0510
June 20, 2005
Mr. Yu Li
Chairman
Jilin Chemical Industrial Company Limited
No. 9 Longtan Street, Longtan District
Jilin City, Jilin Province, PRC
RE: Form 20-F for Fiscal Year Ended December 31, 2004
File No. 1-13750
Dear Mr. Yu:
We have reviewed your filing and have the following
comments. If you disagree with a comment, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 20-F for the Year Ended December 31, 2004
General
1. Where a comment below requests additional disclosures or other
revisions to be made, please show us in your supplemental response
what the revisions will look like. Some of our comments refer to
US
GAAP literature. If your accounting under International Financial
Reporting Standards differs from your accounting under US GAAP,
please also show us the additional disclosures that will be
included
in your US GAAP reconciliation footnote. These revisions should
be
included in your future filings.
Operating and Financial Review and Prospects, page 37
Year Ended December 31, 2004 Compared with Year Ended December 31,
2003, page 39
2. Please also discuss the business reasons for the changes
between
periods in the gross profit and income (loss) of each of your
segments discussed in Note 30 of your financial statements. In
doing
so, please disclose the amount of each significant change in line
items between periods and the business reasons for it. In
circumstances where there is more than one business reason for the
change, attempt to quantify the incremental impact of each
individual
business reason discussed on the overall change in the line item.
Please show us what your revised MD&A for 2004 as compared to 2003
will look like, since it will still appear in your next Form 20-F.
See Item 5 of Form 20-F.
Contractual Obligations, page 47
3. Please revise your table of contractual cash obligations to
include estimated interest payments on your debt. Because the
table
is aimed at increasing transparency of cash flow, we believe these
payments should be included in the table. Please also disclose
any
assumptions you made to derive these amounts.
Evaluation of Disclosure Controls and Procedures, page 76
4. If, as we assume, you assessed your disclosure controls and
procedures as of the end of the period covered by your report on
Form
20-F, rather than within 90 days of the end of the period, please
revise your disclosures to state this. Please refer to Item 15(a)
of
Form 20-F.
Financial Statements
Note 2 - Summary of Principal Accounting Policies, page 7
5. Please disclose the types of expenses that you include in the
cost
of sales, distribution costs, administrative expenses and other
operating (expenses) income line items. Please also disclose
whether
you include inbound freight charges, purchasing and receiving
costs,
inspection costs, internal transfer costs, and the other costs of
your distribution network in the cost of sales line item. If you
currently exclude a portion of these costs from cost of sales,
please
disclose:
* the line items that these excluded costs are included in and the
amounts included in each line item for each period presented, and
* in MD&A, that your gross margins may not be comparable to those
of
other entities, since some entities include all of the costs
related
to their distribution network in cost of sales and others like you
exclude a portion of them from gross margin, including them
instead
in another line item, such as distribution costs.
Note 13 - Accounts Receivable, page 18
6. Please disclose the nature of the significant receivables for
which you recorded a reserve prior to 2002.
Note 16 - Property, Plant and Equipment, page 21
7. Please breakout the plant and machinery line item into smaller
and
more meaningful components. In addition, the range of useful
lives
for your machinery and equipment of 8 to 28 years is very broad.
Please separately disclose the range of useful lives for each new
category presented. For categories that still have very broad
useful
lives, you should separately discuss the types of assets that fall
in
each part of the range.
Note 31 - Significant Differences Between IFRS and US GAAP, page
41
8. We have reviewed your policy of capitalizing technical know-how
under IFRS in note 2(G)(i). Please provide us with additional
information to help us understand the appropriateness of your
capitalization of acquired technical know-how under US GAAP,
including SFAS 141 and 142.
9. We have reviewed your policy of carrying inventory at the lower
of
cost or net realizable value in note 2(H). However, we also note
that the balance sheet and note 14 appear to indicate that
inventory
is carried at an amount in excess of net realizable value. Please
advise.
10. Please also address how the significant difference between the
carrying value of your inventory and its net realizable value is
reflected in your reconciliation from IFRS to US GAAP. Please
tell
us how your accounting under US GAAP is consistent with paragraph
8
of Chapter 4 of ARB 43.
* * * *
Please respond to these comments within 10 business days
or
tell us when you will provide us with a response. Please provide
us
with a response letter that keys your responses to our comments
and
provides any requested information. Detailed letters greatly
facilitate our review.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff
of
the Division of Corporation Finance in our review of your filing
or
in response to our comments on your filing.
You may contact Scott Watkinson, Staff Accountant, at (202)
551-3741, or in his absence, me at (202) 551-3769 with any other
questions.
Sincerely,
Rufus Decker
Accounting Branch Chief
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Yu Li
Jilin Chemical Industrial Company Limited
June 20, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0510
DIVISION OF
CORPORATION FINANCE