2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. SHENZHEN ZHONGHENG HUAFA CO., LTD.
ANNUAL REPORT 2014
April 2015
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Section I. Important Notice, Contents and Paraphrase
Board of Directors, Supervisory Committee, all directors, supervisors and senior executives of SHENZHEN ZHONGHENG HUAFA CO., LTD. (hereinafter referred to as the Company) hereby confirm that there are no any fictitious statements, misleading statements, or important omissions carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents.
Other directors attended the board meeting on deliberating the report except for the following directors:
|||||
|-|-|-|-|
|Name of absent director|Position of absent director|Reason for absence|Attorney|
|Li Xiaodong|Independent Director|On a business trip|Zhang Zhaoguo|

 The Company has no plan of cash dividends carried out, bonus issued and capitalizing of common reserves either.
Li Zhongqiu, Principal of the Company, Cao Li, person in charger of accounting works and Wu Aijie, person in charge of accounting organ (accounting principal) hereby confirm that the Financial Report of 2014 Annual Report is authentic, accurate and complete.
Concerning the forward-looking statements with future planning involved in the Report, they do not constitute a substantial commitment for investors. Majority investors are advised to exercise caution of investment risks.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Contents
Section I Important Notice, Contents and Paraphrase ................................................................. 2 Section II Company Profile ............................................................................................................... 6 Section III Accounting data and summary of finnaical indexes .................................................. 9 Section IV Report of the Board of Directors ................................................................................ 11 Section V Important Events .......................................................................................................... 27 Section VI Changes in shares and particular about shareholders ............................................... 30 Section VIIPreferredstock………………………………………………………………………..35 Section VIII Particulars about Directors, Supervisors,Senior Executives and Employees ...... 36 Section IX Corporate Governance ................................................................................................. 48 Section X Internal Control .............................................................................................................. 49 Section XI Financial Report ............................................................................................................ 50 Section XII Documents available for reference ........................................................................... 131
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Paraphrase
||||
|-|-|-|
|Items|Refers to|Contents|
|Company, Shen Huafa|Refers to|SHENZHEN ZHONGHENG HUAFA CO., LTD.|
|Hengfa Technology|Refers to|Wuhan Hengfa Technology Co., Ltd.|
|Huafa Property|Refers to|Shenzhen Zhongheng Huafa Property Co., Ltd|
|Huafa Lease|Refers to|Shenzhen Huafa Property Lease Management Co., Ltd|
|Huafa Trade|Refers to|Wuhan Zhongheng Huafa Trade Co., Ltd.|
|Wuhan Zhongheng Group|Refers to|Wuhan Zhongheng New Science & Technology Industrial Group Co., Ltd.|
|HK Yutian|Refers to|Hong Kong Yutian International Investment Co., Ltd.|
|Hengsheng Photoelectricity|Refers to|Wuhan Hengsheng Photoelectricity Industry Co., Ltd.|
|Hengsheng Yutian|Refers to|Wuhan Hengsheng Yutian Industrial Co., Ltd.|
|Yutian Henghua|Refers to|Shenzhen Yutian Henghua Co., Ltd.|
|Huafa Hengtian|Refers to|Shenzhen Huafa Hengtian Co., Ltd.|
|Huafa Hengtai|Refers to|Shenzhen Huafa Hengtai Co., Ltd.|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Warning of major risks
Please pay attention to the risks factors the Company facing, that well-described in section IV “Report of the Board of Directors”
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Section II Company profile
I. Company information
|||||
|-|-|-|-|
|Short form of the stock|SHEN HUAFA|Stock code|000020 200020|
|Stock exchange for listing|Shenzhen Stock Exchange|||
|Name of the Company (in Chinese)|深圳中恒华发股份有限公司|||
|Short form of the Company (in Chinese)|深华发|||
|Foreign name of the Company(if applicable)|SHENZHEN ZHONGHENG HUAFA CO., LTD.|||
|Legal representative|Li Zhongqiu|||
|Registrations add.|411 Bldg., Huafa (N) Road, Futian District, Shenzhen|||
|Code for registrations add|518031|||
|Offices add.|6/F, East Tower of 411 Bldg., Huafa (N) Road, Futian District, Shenzhen|||
|Codes for office add.|518031|||
|Website of company|http://www.hwafa.com.cn|||
|E-mail|hwafainvestor@126.com.cn|||

II. Person/Way to contact
||||
|-|-|-|
||Secretary of the Board|Rep. of security affairs|
|Name|Weng Xiaojue|Niu Yuxiang|
||6/F, East Tower, Huafa (N) Road, Futian|6/F, East Tower, Huafa (N) Road, Futian|
|Contact add.|||
||District, Shenzhen|District, Shenzhen|
|Tel.|(0755) 83352206|(0755) 61389198|
|Fax.|(0755) 61389001|(0755) 61389001|
|E-mail|hwafainvestor@126.com.cn|hwafainvestor@126.com.cn|

III. Information disclosure and preparation place
|||
|-|-|
|Newspaper appointed for information disclosure|China Securities Journal; Securities Times; Hong Kong Commercial Daily|
|Website for annual report publish appointed by CSRC|h ttp://www.cninfo.com.cn|
|Preparation place for annual report|Office of the Board of SHENZHEN ZHONGHENG HUAFA CO., LTD.|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. IV. Registration changes of the Company
|||||||
|-|-|-|-|-|-|
||||Registration NO. for|||
|||||No. of taxation||
||Date for registration|Place for registration|enterprise legal||Organization code|
|||||registration||
||||license|||
|||411 Bldg., Huafa (N)||||
|Initial registration|1981-12-08|Road, Futian|440301501120670|440301618830372|61883037-2|
|||District, Shenzhen||||
|||411 Bldg., Huafa (N)||||
|Registration at end||||||
||2007-11-23|Road, Futian|440301501120670|440301618830372|61883037-2|
|of report period||||||
|||District, Shenzhen||||
|||Before the change of controlling shareholders: the main business was production and||||
|||sales of color TV, printed circuit board and injection molded parts etc.||||
|Changes of main business since listing (if||||||
|||After the change of controlling shareholders: the main business gradually adjusted to||||
|applicable)||||||
|||production and sales of injection molded parts, foam part (light packaging materials) and||||
|||LCD whole machine.||||
|||The Company‘s predecessor was Shenzhen Huafa Electronic Co., LTD, which was||||
|||founded in 1981, initiated and established by three legal persons-- Shenzhen Electronics||||
|||Group Co., LTD, China Zhenhua Electronic Group Co., LTD and Hong Kong Luks||||
|||Industrial Co., LTD. In June 2005, Wuhan Zhongheng Group transferred the 44.12%||||
|Previous changes for controlling||||||
|||equity of company, held by original first and second largest shareholder of the Company||||
|shareholders (if applicable)||||||
|||Shenzhen Electronics Group Co., LTD and China Zhenhua Electronic Group Co., LTD,||||
|||and equity transfer formalities completed in April 2007; Wuhan Zhongheng Group||||
|||became the controlling shareholder of the Company. In September 2007, the company||||
|||officially changed its name to ―Shenzhen Zhongheng Huafa Co., Ltd‖.||||

V. Other relevant information
CPA engaged by the Company
|||
|-|-|
|Name of CPA|Shinewing Certified Public Accountants LLC|
||9/F, Block A, Fu Hua Mansion No.8 Chaoyang Men, Bei da jie, Dong Cheng District, Beijing,|
|Offices add. for CPA||
||P.R.China|
|Signing Accountants|Zhang Weijian, Zhang Yongde|

Sponsor engaged by the Company for performing continuous supervision duties in reporting period
□ Applicable√ Not applicable
Financial consultant engaged by the Company for performing continuous supervision duties in reporting period
□ Applicable√ Not applicable
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Section III. Accounting data and summary of financial indexes I. Main accounting data and financial indexes
Whether it has retroactive adjustment or re-statement on previous accounting data for accounting policy changed and accounting error correction or not
□ Yes√ No
||||||
|-|-|-|-|-|
||2014|2013|Changes over last year|2012|
|Operating income (RMB)|694,839,760.10|626,821,044.64|10.85%|723,891,496.54|
|Net profit attributable to shareholders|7,687,620.27|-6,517,401.44|||
||||217.96%|3,241,897.70|
|of the listed company(RMB)|||||
|Net profit attributable to shareholders|||||
|of the listed company after deducting|2,322,082.33|-5,934,309.10|139.13%|3,856,768.38|
|non-recurring gains and losses(RMB)|||||
|Net cash flow arising from operating|119,492,159.01|-69,353,440.38|||
||||272.29%|18,419,090.98|
|activities(RMB)|||||
|Basic earnings per share|0.0271|-0.0230|||
||||217.96%|0.0114|
|(RMB/Share)|||||
|Diluted earnings per share|0.0271|-0.0230|||
||||217.96%|0.0114|
|(RMB/Share)|||||
|Weighted average ROE|2.77%|-2.35%|3.51 percentage points up|1.16%|
||||Changes over end of last||
||End of 2014|End of 2013||End of 2012|
||||year||
|Total assets (RMB)|1,162,740,984.93|731,348,499.86|58.99%|681,645,093.97|
|Net assets attributable to shareholder|281,351,269.74|273,663,649.47|||
||||2.81%|280,181,050.91|
|of listed company (RMB)|||||

II. Items and amounts of extraordinary profit (gains)/loss
√Applicable□Not applicable
In RMB
||||||
|-|-|-|-|-|
|Item|Amount in 2014|Amount in 2013|Amount in 2012|Note|
|Gains/losses from the disposal ofnon-current asset (including the write-offthat accrued for impairment of assets)|1,587,819.80||||
|||104,043.85|3,843.23||
|Governmental subsidy reckoned into currentgains/losses (not including the subsidy|4,159,795.00||||
|||1,652,600.00|||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||||
|-|-|-|-|-|
|enjoyed in quota or ration according to|||||
|national standards, which are closely|||||
|relevant to enterprise‘s business)|||||
|Other non-operating income and expenditure|149,500.69||||
|||-1,736,569.94|-978,232.33||
|except for the aforementioned items|||||
|Other gain/loss items satisfying the|983,612.12||||
|definition of nonrecurring gain/loss account|||||
|Less: impact on income tax|1,515,189.67|603,166.25|-359,518.42||
|Total|5,365,537.94|-583,092.34|-614,870.68|--|

Concerning the extraordinary profit (gain)/loss defined byQ&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, and the items defined as recurring profit (gain)/loss according to the lists of extraordinary profit (gain)/loss inQ&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, explain reasons
□ Applicable√ Not applicable
In reporting period, the Company has no particular about items defined as recurring profit (gain)/loss according to the lists of extraordinary profit (gain)/loss inQ&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Section IV. Report of the Board of Directors
I. Introduction
In 2014, the differentiation of the world economic recovery intensified, the growth of the developing economic entities slowed down; despite the downward pressure, China's economy has still remained the smooth and steady development with progress and quality improved, the economic development has entered a new normal which changes from the extensive growth in scope and speed to the intensive growth in quality and efficiency, the personalized and diversified consume is becoming the mainstream, the importance to ensure the product quality and safety and activate the needs by innovative supply rises significantly. Under the current political and economic environment that the downward pressure of macro economy increases and the demands for home-appliance industry are in downturn and no favorable policy is released, the sales growth of most home-appliance categories has slowed down, some are even in negative growth, the sales volume of refrigerators and air conditioners is weak, the traditional home-appliance manufacturers transform to the new business mode and the products transform to the smart home, and the consumption upgrade is in a clear trend. As an industrial manufacturing and processing enterprise providing the supporting products and services for the home-appliance industry, the Company has withstood the market pressure and maintained a stable situation, though the gross margin of some businesses has slid down because of the undercut price competition in sales and increase of production costs, the overall business performance has fundamentally kept the same as the same period of last year; the leasing business of own property has grown substantially as most of the unused places are leased. In 2014, the company achieved the operating income of 694,839,800 Yuan, an increase of10.85% compared to the same period last year; and net profits of 7.6876 million Yuan, which turned losses into gains.●The injection molding business has realized the annual operating income of 275,568,100 Yuan, an increase of12.90% compared to the same period last year. In the case of poor overall market, the injection business division has taken measures in time to decisively readjust the product mix, significantly reduce the costs by saving the energy and strengthening the internal management, and has made new achievements. The company has focused on maintaining the customer relations, appropriately adjusted the strategy to receive orders, reduced the order shares of the products with small gross margin, increased the cooperation businesses with high profitability, and undertaken the orders for new products; the company has strengthened the fine management, strictly controlled the production site, and improved the product quality so as to well withstand the well-known manufacturers and customers to make excessive demands for the quality and repeated spot checks, and continued to maintain a good quality reputation and has been honored as a leading enterprise of injection products and the annual excellent supplier; the company also has updated some old injection molding machines based on the previously introduced injection molding machine manipulator and servo system which made the energy-saving effects continue to show, the automation improvement and process optimization progress have greatly reduced the waste of human input and manufacturing materials, and the production efficiency has been significantly enhanced.●The Styrofoam business has achieved the annual revenue of 75,274,200 Yuan, a decrease of2.02% compared to the same period last year. Under the severe challenges of constantly rising costs, increasingly fierce market competition, and sharply shrinking profit margin, the Styrofoam division constantly develops and innovates, seizes the opportunity of customer product modification, cooperates with the customer to accomplish the design and optimization of product structure, 150 kinds of new products have been increased in 2014; the company has paid more attention to the details of management, improved ISO9001: 2008 quality management system, completed the basic work of production management, enhanced the execution, controlled and prevented the wastes in the production process, decreased the ineffective work, further reduced production cost, updated the equipments and technologies in the slack season, implemented the index of consumption reduction to the relevant departments, classified the improvement to product quality, the reduction of rejection rate, the decrease of raw material loss and the productivity improvement as the major assessment items, grasped the details, focused on the implementation, managed the assessment, and all staff worked together to achieve the good
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. results.
●LCD monitor business has achieved the annual revenue of 264,125,900 Yuan, which is almost equivalent to the last year. In the premise of ensuring the basic production, the video division shall invest more energies into the design and development of new products, make new attempts to optimize themonitors‘ costs, adjust the models and improve the structures, increase new series of monitors with various sizes and cost advantages and realize the mass production, and develop from the single brand OEM to the multi-brand production; at the same time, the video division has tried to explore OEM cooperative business in other product fields from the business computer, all-in-one machine, tablet PC, desktop computer to the air-conditioning assembly and aroma products, actively learned and developed, and laid the foundation of undertaking the new tasks and objects.
●The property rental business has realized the annual revenue of 49,938,600 Yuan, an increase of about50.10% compared to the last year. The company owns the area from first to third floor of Hwafa Building, which is under the refitting for leasing since the tenancy contract expired in the third quarter of 2012; the unfavorable business environment caused by the construction of No.7 subway line near―HuangqiangBei‖ business area makes the leasing bristle with difficulties to a certain extent. During the report period, the company has continued to actively discuss with the suitable shops and accelerate the leasing work, and has achieved a great progress, most of the places have been leased and the shops have successively opened, so the idle places significantly have reduced. Although the average rental price has grown, the whole rental income of tenement is similar to the normal years before readjustment as the new leases have the rent-free period.
II. Main business analysis
1. Introduction
Review and summary of the progress of development strategy and operation plan as disclosed in previous period during the reporting period
Nil
Reasons for difference of actual operation performance has20% lower or higher than profit forecast of the Year disclosed
□ Applicable√ Not applicable
Changes of main operation mode
□ Applicable√ Not applicable
2. Revenue
Statement
The Company achieved operation income amounting as RMB 694,839,800 in report period, a10.85% up over same period of last year
Whether income from physical sales larger than income from labors or not
√ Yes□ No
|||||||
|-|-|-|-|-|-|
||||||Increase/decrease|
|Industries|Item|Unit|2014|2013||
||||||y-o-y|
||Sales|Set|536,764|502,233|7.00%|
|Display|Production|Set|546,253|511,444|7.00%|
||Inventory|Set|21,215|11,726|81.00%|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||||
|-|-|-|-|-|-|
||Sales|Ton|13,187.24|12,353.58|7.00%|
|Plastic injection||||||
||Production|Ton|13,330.52|12,080.10|10.00%|
|hardware||||||
||Inventory|Ton|562.13|418.85|34.00%|
||Sales|Ton|3,647|3,794.44|-4.00%|
|Foam|Production|Ton|3,789|3,774.04|0.40%|
||Inventory|Ton|378.89|236.89|60.00%|

 Reasons for y-o-y relevant data with over30% changes
√Applicable□Not applicable
Inventory of display increased: the amount of stock at the end of the year increased.
Inventory of plastic injection hardware increased: the amount of stock at the end of the year increased.
Inventory of foam increased: the amount of stock at the end of the year increased.
Material orders in hands
□ Applicable√ Not applicable
Material changes or adjustment for products or services of the Company in reporting period
□ Applicable√ Not applicable
Major sales of the Company
|||
|-|-|
|Total top five clients in sales (RMB)|570,868,162.89|
|Proportion in total annual sales volume for top five clients|82.16%|

 Information of top five clients of the Company
√Applicable□Not applicable
|||||
|-|-|-|-|
|Serial|Name|Sales (RMB)|Proportion in total annual sales|
|1|Hong Kong Yutian International Investment Co., Ltd.|234,811,940.55|33.79%|
|2|Qingdao Haier Part Purchasing Co., Ltd.|210,588,571.24|30.31%|
|3|Gree Electric Appliances (Wuhan) Co.,Ltd.|69,268,366.23|9.97%|
|4|TCL Air –conditioner (Wuhan) CO., Ltd.|28,597,617.69|4.12%|
|5|Qingdao Haidayuan Procurement Service Co., Ltd.|27,601,667.18|3.97%|
|Total|--|570,868,162.89|82.16%|

 Other situation of main clients
□ Applicable√ Not applicable
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 3. Cost
Industry classification
In RMB
||||||||
|-|-|-|-|-|-|-|
|||2014||2013|||
|Industry|||||||
||Item||Ratio in operation||Ratio in operation|Y-o-y changes|
|classification||Amount||Amount|||
||||cost||cost||
|Display|Raw materials|238,361,408.90|96.59%|251,201,871.47|97.91%|-1.32%|
|Display|Labor wages|4,277,251.56|1.73%|1,931,843.00|0.75%|0.98%|
|Display|Depreciation|1,228,205.02|0.50%|1,929,800.62|0.75%|-0.25%|
|Display|Energy|0|0|0|0|0|
|Plastic injection|||||||
||Raw materials|212,169,010.71|84.66%|146,166,295.88|65.98%|18.68%|
|hardware|||||||
|Plastic injection|||||||
||Labor wages|14,220,363.10|5.67%|11,853,602.41|5.35%|0.32%|
|hardware|||||||
|Plastic injection|||||||
||Depreciation|5,275,408.51|2.11%|5,227,232.53|2.36%|-0.25%|
|hardware|||||||
|Plastic injection|||||||
||Energy|0|0|0|0|0|
|hardware|||||||
|Foam|Raw materials|44,025,375.89|65.64%|42,841,798.19|63.40%|2.24%|
|Foam|Labor wages|4,224,487.03|6.30%|2,950,691.36|4.37%|1.93%|
|Foam|Depreciation|1,858,016.51|2.77%|1,409,523.51|2.09%|0.68%|
|Foam|Energy|7,144,911.48|10.65%|6,244,789.00|9.24%|1.41%|

 Statement
TheCompany‘s main business cost was RMB 564,457,891.72, including display RMB 246,787,271.6, plastic injection hardware RMB 250,600,705.25, and foam RMB 67,069,914.87.
Main suppliers of the Company
|||
|-|-|
|Total purchase amount from top five suppliers (RMB)|360,274,417.88|
|Proportion in total annual purchase amount for top five||
||63.83%|
|suppliers||

Information of top five suppliers of the Company
√Applicable□Not applicable
|||||
|-|-|-|-|
||||Proportion in total annual purchase|
|Serial|Name|Purchase amount (RMB)||
||||amount|
||Hong Kong Yutian International Investment|||
|1||136,379,457.77|24.16%|
||Co., Ltd.|||
|2|Qingdao Haier Part Purchasing Co., Ltd.|122,720,474.29|21.74%|
|3|Gree Electric Appliances (Wuhan) Co.,Ltd.|50,241,765.72|8.90%|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||
|-|-|-|-|
||Wuhan Hengsheng Photoelectricity Industry|||
|4||27,985,217.75|4.96%|
||Co., Ltd.|||
|5|Jingdongfang Technology (HK) Co., Ltd.|22,947,502.35|4.07%|
|Total|--|360,274,417.88|63.83%|

 Other notes of main suppliers of the Company
□ Applicable√ Not applicable
4. Expenses
|||||
|-|-|-|-|
|Item|2014|2013|Y-o-y changes|
|Sales expenses|11,512,229.16|10,021,716.98|14.87%|
|Management expenses|39,200,279.02|39,240,424.34|-0.10%|
|Financial expenses|39,784,553.27|21,454,338.85|85.44%|
|Income tax expenses|2,956,031.00|-1,077,769.12|374.27%|

 Main reasons of financial expenses increased: interest generated from long-term loans.
Main reasons of income tax expenses increased: deferred income tax expenses generated from preparation of assets depreciation written off
5. Cash flow
In RMB
|||||
|-|-|-|-|
|Item|2014|2013|Y-o-y changes|
|Subtotal of cash in-flow from|559,888,802.08|408,744,234.62||
||||36.98%|
|operation activity||||
|Subtotal of cash out-flow from|440,396,643.07|478,097,675.00||
||||-7.89%|
|operation activity||||
|Net cash flow from operation activity|119,492,159.01|-69,353,440.38|272.29%|
|Subtotal of cash in-flow from|1,925,000.00|147,000.00||
||||1,209.52%|
|investment activity||||
|Subtotal of cash out-flow from|506,526,605.58|10,138,667.85||
||||4,895.99%|
|investment activity||||
|Net cash flow from investment|-504,601,605.58|-9,991,667.85||
||||-4,950.22%|
|activity||||
|Subtotal of cash in-flow from|971,853,411.47|488,889,296.63||
||||98.79%|
|financing activity||||
|Subtotal of cash out-flow from|617,002,557.02|457,333,878.70||
||||34.91%|
|financing activity||||
|Net cash flow from financing activity|354,850,854.45|31,555,417.93|1,024.53%|
|Net increased amount of cash and|-28,312,172.74|-49,544,183.56|42.85%|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||
|-|
|cash equivalent|

Reasons for y-o-y relevant data with over30% changes
√Applicable□Not applicable
Y-o-y increased of cash in-flow from operation activitiy: sales receivables increased over same period of last year;
Y-o-y increased of net cash flow from operation activity: sales receivables increased over same period of last year;
Y-o-y increased of cash in-flow from investment activitiy: cash in-flow from fixed assets disposal in the year increased over same period of last year;
Y-o-y increased of cash out-flow from investment activitiy: purchasing financial products in the Period;
Cash in-flow from financing activity increased y-o-y: loans increased over the same period of last year.
Y-o-y increased of cash out-flow from financing activitiy: loans increased over same period of last year, thus interest expenditure increased correspondingly;
Net cash flow from financing activity increased y-o-y: loans increased over the same period of last year.
Reasons of major difference between the cash flow of operation activity in report period and net profit of the Company
□ Applicable√ Not applicable
III. Composition of main business
In RMB
||||||||
|-|-|-|-|-|-|-|
|||||Increase/decrease|Increase/decrease|Increase/decrease of|
||Operating||||||
|||Operating cost|Gross profit ratio|of operating|of operating cost|gross profit ratio|
||revenue||||||
|||||revenue y-o-y|y-o-y|y-o-y|
|According to industries|||||||
|||||||3.68 percentage|
|Display|264,125,902.82|246,787,271.60|6.56%|-0.02%|-3.81%||
|||||||points up|
|Plastic injection||||||0.18 percentage|
||275,568,139.15|250,600,705.25|9.06%|12.90%|13.12%||
|hardware||||||points down|
|||||||1.15 percentage|
|Foam|75,274,165.11|67,069,914.87|10.90%|-2.02%|-0.74%||
|||||||points down|
|According to products|||||||
|||||||3.68 percentage|
|Display|264,125,902.82|246,787,271.60|6.56%|-0.02%|-3.81%||
|||||||points up|
|Plastic injection||||||0.18 percentage|
||275,568,139.15|250,600,705.25|9.06%|12.90%|13.12%||
|hardware||||||points down|
|||||||1.15 percentage|
|Foam|75,274,165.11|67,069,914.87|10.90%|-2.02%|-0.74%||
|||||||points down|
|According to region|||||||
|||||||3.68 percentage|
|Hong Kong|264,125,902.82|246,787,271.60|6.56%|-0.02%|-3.81%||
|||||||points up|
|Central China|350,842,304.26|317,670,620.12|9.45%|9.32%|9.88%|0.46 percentage|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||
|-|
|points down|

 Under circumstances of adjustment in reporting period for statistic scope of main business data, adjusted main business based on latest oneyear‘s scope of period-end
□ Applicable√ Not applicable
IV. Assets and liability analysis
1. Major changes of assets
In RMB
||||||||
|-|-|-|-|-|-|-|
||End of 2014||End of 2013||||
|||Ratio in total||Ratio in total|Ratio changes|Notes of major changes|
||Amount||Amount||||
|||assets||assets|||
|Monetary fund|28,819,357.68|2.48%|54,251,456.20|7.42%|-4.94%||
|Account|112,425,468.57||162,278,705.83||||
|||9.67%||22.19%|-12.52%||
|receivable|||||||
|Inventory|30,880,050.55|2.66%|47,119,303.85|6.44%|-3.78%||
|Investment real|31,274,663.74||32,529,420.82||||
|||2.69%||4.45%|-1.76%||
|estate|||||||
|Long-term equity|0||0||||
|||0.00%||0.00%|0.00%||
|investment|||||||
|Fix assets|186,438,814.34|16.03%|195,542,067.03|26.74%|-10.71%||
|Construction in|2,853,356.00||2,323,356.00||||
|||0.25%||0.32%|-0.07%||
|progress|||||||

2. Major changes of liability
In RMB
||||||||
|-|-|-|-|-|-|-|
||2014||2013||||
||||||Ratio||
||Amount|Ratio in total||Ratio in totalassets||Notes of major changes|
||||Amount||changes||
|||assets|||||
|Short-term loans|138,114,376.32|11.88%|162,140,601.13|22.17%|-10.29%||
|Long-term loans|585,300,000.00|50.34%|162,418,800.00|22.21%|28.13%||

V. Core competence analysis
1. All industrial lands of the Company located in Shenzhen were taken into the first batch of plan under 2010 Shenzhen urban
upgrade planning. In the future, development and operation of self-owned land resources would become the income source of the
Company on a long-term and stable basis.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 2. The Company has three plants in Wuhan economic technology park with an area of nearly 90,000 square meters where various famous enterprises are located in this area. Benefiting from radiation radius requirements for processing matching services, the Company enjoys superior and stable customer resources and has established a good long-term cooperative relationship; in particular, its injection molding business and polystyrene businesses have been operated for many years with steady management group and abundant production experiences, which makes the Company enjoying high recognition and annual production capacity and scale in the forefront of Central China.
VI. Investment analysis
1. Trust financing, investment of derivatives and entrustment loan
(1) Trust financing
√Applicable□Not applicable
In 10 thousand Yuan
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||||Amount|||
|||||||||Amount|of reserve|||
|||||||||of|for|||
||Relate|Whether|||||Determin||||Actual|
|||||Amount|Start date of|End date of||principal|devaluati|||
|Name of|d|related|||||ation|||Estimated|gains/loss|
||||Type|of trust|trust|trust||actual|on of|||
|trustee|relatio|trade or|||||method of|||income|es in|
|||||financing|financing|financing||taking|withdrawi|||
||nship|not|||||reward||||period|
|||||||||back in|ng (if|||
|||||||||period|applicable|||
||||||||||)|||
||||||||Accordin|||||
|||No|Trust financial|||||0|0|1,200|0|
|CITIC Trust|N/A|||10,000|2014-12-26|2015-12-25|g to the|||||
||||products|||||||||
||||||||contract|||||
||||||||Accordin|||||
|||No|Trust financial|||||0|0|1,200|0|
|CITIC Trust|N/A|||10,000|2014-12-26|2015-12-25|g to the|||||
||||products|||||||||
||||||||contract|||||
||||||||Accordin|||||
|||No|Trust financial|||||0|0|1,200|0|
|CITIC Trust|N/A|||10,000|2014-12-26|2015-12-25|g to the|||||
||||products|||||||||
||||||||contract|||||
||||||||Accordin|||||
|||No|Trust financial|||||0|0|1,200|0|
|CITIC Trust|N/A|||10,000|2014-12-26|2015-12-25|g to the|||||
||||products|||||||||
||||||||contract|||||
||||||||Accordin|||||
|||No|Trust financial|||||0|0|1,200|0|
|CITIC Trust|N/A|||10,000|2014-12-26|2015-12-25|g to the|||||
||||products|||||||||
||||||||contract|||||
|Total||||50,000|--|--|--|0|0|6,000|0|
|Capital resource||||Own capital||||||||
|Overdue un-received principal and accumulated||||||||||||
|||||0||||||||
|earnings amount||||||||||||
|Lawsuit involved (if applicable)||||N/A||||||||
|Disclosure date for approval from the Board for||||||||||||
|||||2014-07-22||||||||
|trust financing (if applicable)||||||||||||
|Disclosure date for approval from board of||||2014-08-09||||||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||
|-|
|shareholders for trust financing (if applicable)|

2. Main subsidiaries and stock-jointly companies
√Applicable□Not applicable
Particular about main subsidiaries and stock-jointly companies
In RMB
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Company|||Main products|Register|||Operating|Operating||
||Type|Industries|||Total assets|Net Assets|||Net profit|
|name|||or service|capital|||revenue|profit||
||||R&D,|||||||
|Hengfa|||production,|||||||
|Technolo||Production|sales of products|||||||
||Subsidiary|||181,643,111.00|435,568,994.48|201,868,257.67|618,669,459.33|-2,173,367.33|897,972.26|
|gy||sales|and import and|||||||
|company|||export business|||||||
||||etc.|||||||
||||Property leasing|||||||
|Huafa|||and|||||||
|||Property||||||||
|Property|Subsidiary||management|1,000,000.00|497,547.76|-518,815.06|1,996,124.80|359,086.47|327,676.70|
|||management||||||||
|Company|||of self-owned|||||||
||||property|||||||
||||Property leasing|||||||
|Huafa|||and|||||||
|||Property||||||||
|Lease|Subsidiary||management|1,000,000.00|1,900,692.20|-5,026,990.71|0|0|0|
|||management||||||||
|Company|||of self-owned|||||||
||||property|||||||
||||Property leasing|||||||
|Yutian|||and|||||||
|||Property||||||||
|Henghua|Subsidiary||management|1,000,000.00|999,940.00|999,940.00|0|-60.00|-60.00|
|||management||||||||
|Company|||of self-owned|||||||
||||property|||||||
||||Property leasing|||||||
|Huafa|||and|||||||
|||Property||||||||
|Hengtian|Subsidiary||management|1,000,000.00|999,940.00|999,940.00|0|-60.00|-60.00|
|||management||||||||
|Company|||of self-owned|||||||
||||property|||||||
||||Property leasing|||||||
|Huafa|||and|||||||
|||Property||||||||
|Hengtai|Subsidiary||management|1,000,000.00|999,940.00|999,940.00|0|-60.00|-60.00|
|||management||||||||
|Company|||of self-owned|||||||
||||property|||||||

Notes of main subsidiaries and stock-jointly companies
Nil
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Particular about subsidiaries obtained or disposed in report period
√Applicable□Not applicable
|||||
|-|-|-|-|
||Purpose of getting and treating|The way of getting and treating|Influence on overall product|
|Name of company||||
||subsidiary in the reporting|subsidiary in the reporting|and performance|
|Huafa Trade Company|Integration of the business|Sales|No significant impact|
|Huafa Hengtai Company|Integration of the business|Newly established|No significant impact|

VII. Prospect for future development of the Company
(I) The industry development and market analysis
Looking ahead to 2015, the global economy will remain in a state of gradually climbing from the bottom of the crisis, the domestic economy will still be under the downward pressure, the demand will still be in the attenuation stage, the consumer growth points will continue to turn to the service consumption and information consumption, the technology revolution will accelerate the upgrade of products like communication equipments, etc., and the innovation enthusiasm will rise obviously. The economy is preparing and waiting, the economic structure is being optimized, the industry structure is changing, the information, health, high-end equipment manufacturing, new energy and environmental protection, and business services may become the new dominant force, and the traditional industries may revitalize after "downsizing".
Under the circumstances that the state ministries united to save the real estate market and the mortgage policy is rather loose, the home appliance industry is expected to bring about the new demand growth by decorating the new homes, the high-end, intelligent and energy-saving home appliances shall become the new―benchmark‖ in the home appliance industry in 2015.The Company's industrial production and processing businesses belong to the labor-intensive and technology-intensive combined and semi-automatic production mode, the product orders are mainly from many well-known and large-scale home appliance manufacturers in domestic which are with large scale and have the stable businesses. As a traditional industry under the fierce market competition, the core choice to solve the developing dilemma is promoting the additional value or profitability of technology by technology upgrading. Under the background of downstream consumer demand upgrade, it will be one of the strategic targets of thecompany‘s industrial business development to further consolidate the industry position by adjusting and improving the product structure, increasing the development efforts to the new products, improving the production processes, enhancing the productivity, expanding the downstream channels, cultivating its own brands, and actively seeking for the transformation and upgrading.
Over the years, the Company has focused on both manufacturing and property management, except for producing and selling the LCD monitors, injection molding, and foam parts, the property leasing has always been the key pillar of business, the own property is the company's core assets, the operating profits of property leasing business has always been greater than the industrial business profits. It is thecompany‘s long-term strategic goal to make full use of the existing property and land assets to continue to expand and upgrade the operation, leasing and service businesses of the commercial real estate, and further become the long-term and stable source of incomes for the company step by step.
(II) The new annual business plan
◆Continue to promote the urban renewal project
The renewal project of Hwafa area at Gongming streets in Guangming new district Shenzhen joins hands with the controlling shareholders to seek for the beneficial cooperation with the real estate developers with well-known brands and the developing abilities so as to accelerate and propel the project implementation process together, hurry up and accomplish the development process
at an earlier stage, and strive for starting the construction and implementation of the first-stage project in the recent two years; the
renewal project of Hwafa building at Huaqiang Bei street, Futian district, Shenzhen shall continue to coordinate with some small
owners to finish the compensation and resettlement of removal, and strive to make achievements for the subject declaration at an
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. early date.
◆Plan the implement the non-public offering of A shares
To further optimize the company's capital structure, improve the financial situation and provide the necessary capital and liquidity support for thecompany‘s transformation and upgrading of the industrial business, the professionalization and scale development of the real estate management, the company plans to issue the non-public offering of A shares, the controlling shareholders subscribe with cash, the raised funds are used for refunding and supplementing the circulating fund, which lays a solid foundation for thecompany‘s sustainable development.
◆Continue to steadily develop the industrial business
Firstly, ensure the stability of the existing customers, continue to maintain the existing order quotas from Haier, Gree, AOC, and TCL, comprehensively continue and introduce the customer to make more orders for the newly developed products, strive for more market shares; secondly, seek for the new business growth points, entirely expand the scope of business, actively develop the markets, and selectively and targetedly carry on and develop the new OEM businesses in order to achieve the annual tasks based on the rich OEM experience over the years, the current resources for industrial production, the superior geographic position of central China, and the study and attempts in 2014.
◆Continue to focus on the production management
Carry the energy-saving and cost-reducing through to the end, accelerate the technical transformation progress of production equipment, further carry out the automated management, improve the production processes, reduce the energy consumption, and cut the payroll to improve efficiency so as to reduce the production costs, enhance the productivity, improve the product quality, and ensure the product quality, costs and delivery can better meet thecustomers‘ requirements; In the market environment that the demands for end products are upgrading, focus on the development and promotion of new products, enlarge the product categories and product lines, enhance the product diversification as needed, utilize the factory cost advantage and internet channel of e-commerce, and comprehensively promote its own brand in the market expansion and marketing.
◆Positively reinforce the property business
In the situation that the industrial business is transforming and upgrading and the profitability weaker than expected in recent years, the company actively develops the property business, revitalizes the stock assets, refits its own property– Hwafa building, and attracts the investment, the property business contributes good profits to the company and becomes thecompany‘s important strategic business. In order to enhance the profitability, the company will further promote the specialty of property business, explore the diversified property management modes, and timely enlarge the property leasing scale.
(III) Fund demand, using plan and sources
To further promote the company's business development strategy to meet the needs for the growing business, the company will focus on the annual operating and investment plans to continue working with the existing banks, combine the different credit terms of these banks, comprehensively use the financial instruments to reduce the use cost of funds, actively clean up the accounts receivable, reduce the inventory, control the daily expenses, and accelerate the cash flow; continue to negotiate and explore the new financing channels, consolidate and strengthen the strategic cooperation between the banks and enterprises, establish the special financing plan according to the implementation progress of the urban transformation and renovation project, timely deploy the stock and working funds to maintain the current business, and accelerate the future growth.
(IV) The risks of thecompany’s production and management and the countermeasures to be taken in 2015 1. The operational risks of industrial business: the industrial structure adjustment, the fluctuations in raw material prices, the reduction in market demand, the obstruction to the promotion of new products, etc.
Countermeasures to be taken: see "The new annual business plan".
2.Financial risks: large quantity demands for funds and exchange rate fluctuations resulting in the substantial increase or decrease in
financial costs, tense bank credit caused by the changes in macroeconomic policies, etc.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Countermeasures to be taken: pay close attention to the macroeconomic policy trend, actively expand the financing channels, establish a virtuous cycle mechanism for funding, improve the efficiency, and use the financial instruments to avoid the exchange rate risks.
VIII. Explanation on changes of accounting policy, accounting estimation and settlement method compared with the lastyear’s financial report
√Applicable□Not applicable
Ministry of Finance revised the follow "Accounting Standards for Business Enterprises No. 2 - Long-term EquityInvestments‖, "Accounting Standards for Business Enterprises No. 9 - Employee Remuneration", " Accounting Standards for Business Enterprises No. 30 - Presentation of Financial Statements " and " Accounting Standards for Business Enterprises No. 33 - Consolidated Financial Statements " in 2014, and issued specific standards as "Accounting Standards for Business Enterprises No. 39 - Fair Value Measurements ", "Accounting Standards for Business Enterprises No. 40 - Joint Arrangement" and "Accounting Standards for Business Enterprises No. 41 - Disclosure of Interests in Other Entities", and executed since 1 July 2014; the―Accounting Standards for Business Enterprises– BasicNorms‖ has been revised and carried into effect since 23 July, the date announced for amendment; the "Accounting Standards for Business Enterprises No. 37 - Presentation of FinancialInstruments‖ has been revised and carried into effect on the financial reports since 2014. The Company executed the above mentioned accounting standards since the corresponding time point in line with the regulations. Changed of the accounting standards show no impact on consolidates financial statement of the Company and no need to carry out the retroactive treatment.
IX. Compare with lastyear’s financial report; explain changes in consolidationstatement’s scope
√Applicable□Not applicable
Compared with last year, Huafa Hengtai Company was newly established in the Year, and Huafa Trading Company was sold. X. Profit and dividend distribution
Determination, execution or adjustment of the profit distribution policy in the reporting period
□ Applicable√ Not applicable
The profit distribution plan or scheme and capital reserve capitalization plan or scheme of the Company for the last 3 years (reporting period included)
In recent three years the Company accumulated retained net profit is negative and it did not have the conditions for profit distribution, so the Company did not undertake profit allocation in recent years and no capital reserve shall be converted into share capital either. Cash dividend in latest three years
In RMB
|||||||
|-|-|-|-|-|-|
|||Net profit||||
||||Ratio of net profit|||
|||attributable to||||
||||attributable to|||
||Amount of cash|shareholders of|||Proportion of the|
|Year for bonus|||shareholders of|Amount reckoned||
||||||amount reckoned|
||bonus|listed company in||into cash bonus from||
|distribution|||listed company in||into cash bonus from|
||(tax included)|consolidated||cash repurchase||
||||||cash repurchase|
||||consolidated|||
|||statement of bonus||||
||||statement|||
|||year||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||||
|-|-|-|-|-|-|
|2014|0.00|7,687,620.27|0.00%|0.00|0.00%|
|2013|0.00|-6,517,401.44|0.00%|0.00|0.00%|
|2012|0.00|3,241,897.70|0.00%|0.00|0.00%|

 The Company gains profits in reporting period and the retained profit of parent company is positive but no plan of cash dividend proposed
√Applicable□Not applicable
|||
|-|-|
|Reasons of cash dividend distribution plan was not proffered while the Company||
||Utilization plan for the retained profit|
|profited and parent company‘s undistributed profits were positive in the reporting||
|Being audited and confirmed by ShineWing CPA pursuit to the accounting principles of||
|China, the net profit achieved by the Company for year of 2014 was 7.6876 million||
|Yuan, however, the cumulative retained profit at end of 2014 was -188.6984 million||
||Make up the annual losses of previous|
|Yuan, in accordance with the relevant regulations of Article of Association and||
||years|
|Rewards Program of Bonus for Shareholders of the Company, combine the above||
|financial status and actual operation condition of the Company, the Company did not||
|possess the condition of profit distribution.||

XI. Profit distribution and plan of capitalization from capital public reserve
□ Applicable√ Not applicable
The Company has no plans of cash dividend distributed, no bonus shares and has no share converted from capital reserve either for the year
XII. In the report period, reception of research, communication and interview
√Applicable□Not applicable
|||||||
|-|-|-|-|-|-|
||||||Contents discussed and|
|Time|Place|Way|Type|Reception||
||||||material provided|
||||||Communicating operation|
||||||situation of the Company,|
|January to December|Headquarter of|Telephone||Some individual||
||||Individual||assets status and process of|
|2014|the Company|communication||investors||
||||||city update projects and|
||||||private placement etc.|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Section V. Important Events
I. Significant related transaction
1. Related transaction related to daily operation
√Applicable□Not applicable
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|||||||Amount||||||
|||Type|||||Ration in|Account||||
|Parties|Relate||||Price|of||||||
|||of||Pricing|||amount of|s-settlem||||
|of|d||Contents of||of|related|||Market price of similar|Date of|Index of|
|||related||principle of|||similar|ent of||||
|related|relatio||related trade||related|trade (10|||transaction available|disclosure|disclosure|
|||trade||related trade|||related|related||||
|trade|nship||||trade|thousand||||||
||||||||trade|trade||||
|||||||Yuan)||||||
||Sharin|||||||||||
||g the|||||||||||
||same||Purchasing|Synchronized||||Telegrap||||
|HK||Purcha||||||||||
||control||LCD|with the|14,513|14,513|58.81%|hic|—|2014-||
|Yutian||se||||||||04-22||
||ling||monitors|market||||transfer||||
||shareh|||||||||||
||older|||||||||||
||||||||||The average market price|||
||||||||||refers to the price of|||
||||||||||same specifications|||
|||||Confirmed||||||||
||||||||||which is searched from|||
||Sharin|||with 1% of||||||||
||||||||||through the world|||
||g the|||current market||||||||
|Hengshe|||||||||famous professional|||
||same||Purchasing|average price||||Telegrap|||http://www.cni|
|ng||Purcha|||||||market survey company|2014-|nfo.com.cn/fin|
||control||LCD|in principle,|2,799|2,799|11.34%|hic|||alpage/2014-0|
|Photoele||se|||||||website|04-22||
||ling||monitors|and refer to||||transfer|||4-22/6388875|
|ctricity|||||||||http://www.witsview.com||0.PDF|
||shareh|||both their||||||||
||||||||||recognized authority in|||
||older|||bargaining||||||||
||||||||||the industry and LCD|||
|||||power||||||||
||||||||||professional market|||
||||||||||survey company website|||
||||||||||http://www.witsview.com|||
||Sharin|||||||||||
||g the|||||||||||
||||Sales LCD|According to||||||||
||same|||||||Telegrap||||
|HK|||overall|the customer||||||||
||control|Sales|||23,481|23,481|88.90%|hic|—|2014-||
|Yutian|||monitor|sales order||||||04-22||
||ling|||||||transfer||||
||||machine set|price sure||||||||
||shareh|||||||||||
||older|||||||||||
|Total||||--|--|40,793|--|--|--|--|--|
|Details of returned large sales||||N/A||||||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||
|-|-|
|Essentiality and persistence of related||
|trade, as well as reason for choosing|Daily related trade could reduce production cost of overall LCD monitor and improve sustainable|
|trading with related parties (not other|development of the Company|
|traders in market)||
||The company and related party in business, personnel, assets, institutions and financial aspects separates|
|Impact on individuality of listed||
||completely, the independent complete autonomy in operation ability, connected transaction does not affect|
|companies from related trade||
||the independence of the company|
|Dependence on related parties from||
|the Company, as well as related|The Company and related parties were cooperation relationship, existing no dependence|
|measurements (if applicable)||
|Predict on total amount of daily|In the reporting, Hengfa Technology purchased LCD from Hengsheng Photoelectricity with $ 4,573,500|
|related trade on the way in this period|approximately, 38.11% of the annual amount predicted at the beginning of the year; purchased LCD from|
|according to classification, as well as|HK Yutian with $ 23,717,700 approximately, 47.44% of the annual amount predicted at the beginning of the|
|actual implementation in reporting|year; sold LCD whole machine to HK Yutian with $ 38,374,200 approximately, 69.77% of the annual|
|period (if applicable)|amount predicted at the beginning of the year.|
|Reason of the greater difference||
|between trade price and market|N/A|
|reference price (if applicable)||

2. Major related transactions of mutual outward investment
□Applicable√ Not applicable
The Company has no major related transactions of mutual outward investment in the Period
3. Contact of related credit and debt
√Applicable□Not applicable
Whether has non-operating contact of related credit and debt or not
□ Yes√ No
The Company has no non-operating contact of related credit and debt in the Period
II. Significant contracts and its implementation
1. Guarantees
√Applicable□Not applicable
In 10 thousand Yuan
||||||||||
|-|-|-|-|-|-|-|-|-|
|Particulars about the external guarantee of the Company (Barring the guarantee for the controlling subsidiaries)|||||||||
||Related||||||||
||||Actual date of||||Complete|Guarante|
||Announcem||||||||
|Name of the Company||Guarantee|happening (Date|Actual||Guarantee|implemen|e for|
||ent||||Guarantee type||||
|guaranteed||limit|of signing|guarantee limit||term|tation or|related|
||disclosure||||||||
||||agreement)||||not|party|
||date||||||||
|N/A|||||||||
|Guarantee of the Company for the subsidiaries|||||||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||||||||
|-|-|-|-|-|-|-|-|-|
||Related||||||||
||||Actual date of||||Complete|Guarante|
||Announcem||||||||
|Name of the Company||Guarantee|happening (Date|Actual||Guarantee|implemen|e for|
||ent||||Guarantee type||||
|guaranteed||limit|of signing|guarantee limit||term|tation or|related|
||disclosure||||||||
||||agreement)||||not|party|
||date||||||||
|Wuhan Hengfa|||||Joint liability||||
||2015-04-22|50,000||10,331.44||1 year|No|No|
|Technology Co., Ltd.|||||guarantee||||
|||||Total amount of actual occurred|||||
|Total amount of approving guarantee|||||||||
|||50,000||guarantee for subsidiaries in||25,482.86|||
|for subsidiaries in report period (B1)|||||||||
|||||report period (B2)|||||
|Total amount of approved guarantee||||Total balance of actual|||||
|for subsidiaries at the end of reporting||50,000||guarantee for subsidiaries at the||10,311.44|||
|period (B3)||||end of reporting period (B4)|||||
|Total amount of guarantee of the Company( total of two abovementioned guarantee)|||||||||
|||||Total amount of actual occurred|||||
|Total amount of approving guarantee|||||||||
|||50,000||guarantee in report period||25,482.86|||
|in report period (A1+B1)|||||||||
|||||(A2+B2)|||||
|||||Total balance of actual|||||
|Total amount of approved guarantee at|||||||||
|||50,000||guarantee at the end of report||10,311.44|||
|the end of report period (A3+B3)|||||||||
|||||period (A4+B4)|||||
|The proportion of the total amount of actually guarantee in the net|||||||||
|||||36.65%|||||
|assets of the Company (that is A4+ B4)|||||||||
|Including:|||||||||
|Amount of guarantee for shareholders, actual controller and its|||||||||
|||||0|||||
|related parties(C)|||||||||
|The debts guarantee amount provided for the guaranteed parties|||||||||
|||||0|||||
|whose assets-liability ratio exceed 70% directly or indirectly(D)|||||||||
|Proportion of total amount of guarantee in net assets of the Company|||||||||
|||||0|||||
|exceed 50%(E)|||||||||
|Total amount of the aforesaid three guarantees(C+D+E)||||0|||||
|Explanations on possibly bearing joint and several liquidating|||||||||
|||||N/A|||||
|responsibilities for undue guarantees (if applicable)|||||||||
|Explanations on external guarantee against regulated procedures (if|||||||||
|||||N/A|||||
|applicable)|||||||||

Explanation on details of guarantee by complex method: Nil
(1) Guarantee outside against the regulation
□Applicable√Not applicable
No guarantee outside against the regulation in Period.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. III. Implementation of commitments
1. Commitments from the Company or shareholders (with over5% shares held) in or occurred in the previous period but continued to reporting period
√Applicable□Not applicable
|||||||
|-|-|-|-|-|-|
||Commitment||Dated for|||
|Commitments||Contents||Commitment term|Implementation|
||party||commitment|||
|Share Merger Reform||||||
|||Within 1 year after transferred of this equity||||
|||||From April 12, 2007||
||Wuhan|acquisition: 1. Injected relevant capital of||||
|||||to April 11, 2008;||
||Zhongheng|plastic injection business into the Company;|2007-03-29||Implementing|
|||||From May 13, 2014||
||Group|2.70% equity of the Hengsheng||||
|||||to May 12, 2015||
|||Photoelectricity will inject into the Company.||||
|||The enterprise and its subsidiaries will not||||
|||participate directly or indirectly in operation||||
|||of the business with competitive of Shen||||
||Wuhan|||Implement since 12||
|||Huafa and its controlling subsidiary||||
||Zhongheng||2007-03-29|April 2007|Implementing|
|||concerned, and not to damage the interest of||||
||Group|||throughout the year||
|||the Shen Huafa and its controlling subsidiary||||
|||by making use of the potential||||
|||controlling-ship of the Shen Huafa either||||
|||The enterprise and its subordinate enterprise||||
|||shall avoid a related transaction as far as||||
|Commitments in||||||
|||possible with Shen Huafa and its controlling||||
|report of||||||
|||subsidiary, as for the related dealings occurred||||
|acquisition or equity||||||
|||inevitable or have reasonable cause, the||||
|change||||||
|||enterprise promise to follow the principle of||||
||Wuhan|fair-ness, justice and open-ness, signed the||Implement since 12||
||Zhongheng|agreement in line with the laws, perform legal|2007-03-29|April 2007|Implementing|
||Group|program, fulfill information disclosure||throughout the year||
|||obligation and relevant approval procedures||||
|||according to the relevant laws, regulations and||||
|||―Listing Rules‖ of the Shenzhen Stock||||
|||Exchange, guarantee not to damage the legal||||
|||interest of Shen Huafa and its shareholders||||
|||through related transactions||||
|||After acquisition and assets restructuring,||||
||Wuhan|guarantee to have an independent staff, owns||Implement since 12||
||Zhongheng|independent and completed assets, and|2007-03-29|April 2007|Implementing|
||Group|independent in aspect of business, financial||throughout the year||
|||and institution from Shen Huafa||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||
|-|-|
|Commitments in||
|assets reorganization||
|Commitments in||
|initial public offering||
|or refinancing||
|Other commitments to||
|minority shareholders||
|of the Company||
|Completed on time or||
||No|
|not||
||1. On 5 June 2008, approving by the 3rd Extraordinary Meeting of Board of Directors 2008, the Company|
||purchased relevant assets of plastic injection products from Wuhan Zhongheng Group by cash of RMB 27 million, the|
||commitment have been implemented;|
||2. In the first 10 days of May, 2008, the Company officially started off the significant asset restructures work of|
||purchasing the 70% equities of Hengsheng Photoelectricity.; engaged financial consultant and law consultant to carry|
||out earnest investigation on the restructure assets that may be involved, and negotiated with relevant departments|
||which were in charge of this. However, due to that relevant condition was not mature; there still remain obstacles in|
||material asset restructure and suspended.|
|Detail reasons for||
||In April 2014, considering unpleasant operation of Hengsheng Photoelectricity, as well avoid causing loss to listed|
|un-complement and||
||companies due to forced commitment fulfillment, holding shareholder Wuhan Zhongheng Group raised proposal of|
|further plan (if||
||changing the commitment from perspective of maintaining long-term interests of listed company, which was changed|
|applicable)||
||to: within 1 year since the General Shareholders‘ Meeting approved, Wuhan Zhongheng Group sold its underneath|
||street shops located in property of the 1st phase of Yutian Happy Sea in cash. The revised commitment has been|
||approved in Shareholders‘ General Meeting of 2013 held on 13th May 2014.|
||The 2nd extraordinary meeting of 2015 of the Board was held on 17 March 2015, agreed to purchase the underlying|
||shops along the street of the Phase I ―Yutian • Xingfuhai‖ real estate project developed and constructed by Wuhan|
||Xindongfang Real Estate Development Co., Ltd. (the wholly-owned subsidiary of Wuhan Zhongheng New Technology|
||Industry Group Co., Ltd., controlling shareholder of the Company) with 25 million Yuan in cash, found more in the|
||notice released on 19 March 2015 and 17 April 2015.|

IV. Appointment and non-reappointment (dismissal) of CPA
Accounting firm appointed
|||
|-|-|
|Name of domestic accounting firm|Shine Wing Certified Public Accountants LLC|
|Remuneration for domestic accounting firm (10||
||48|
|thousand Yuan)||
|Continuous life of auditing service for domestic||
||9 years|
|accounting firm||
|Name of domestic CPA|Zhang Weijian, Zhang Yongde|
|Name of foreign accounting firm (if applicable)|N/A|
|Remuneration for foreign accounting firm (10|0|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||
|-|-|
|thousand Yuan) (if applicable)||
|Continuous life of auditing service for foreign||
||N/A|
|accounting firm (if applicable)||
|Name of foreign CPA|N/A|

Whether re-appointed accounting firms in this period or not
□ Yes√ No
Appointment of internal control auditing accounting firm, financial consultant or sponsor
√Applicable□Not applicable
In 2014, the Company employed Shine Wing Certified Public Accountants LLC as internal control audit institutions and the expense of internal control audit was RMB 140,000.
V. Other material events
√Applicable□Not applicable
(I)The Company signed Asset Exchange Contract with Wuhan Zhongheng Group on 29 April 2009 (details were referred to in the announcement dated 30 April 2009), and the contract was executed well (details were set out in the 2010 annual report). Pursuant to the contract, since part of the assets of the Company (namely two parcel of industrial lands located at Huafa road, Gongming town, Guangming new district, Shenzhen (the property certificate No. were SFDZ No.7226760 and SFDZ No.7226763, No. of parcels were A627-005 andA627-007, and the aggregate area was 48,200 sq.m)) were the lands listed in the first batch of plan for 2010 Shenzhen urbanization unit planning preparation plan. For promotion of such urbanization project and joint cooperation, the Company has not completed the transfer procedures in respect of the aforesaid land.
The Company convoked the first extraordinary meeting of the Board in 2015 on February 16, 2015 and the first extraordinary general meeting of the Board in 2015 on March 4, 2015, which considered and approved the―Motion on promoting and implementing the urban renewal project for the renewal units of Hwafa area at Gongming street, Guangming new district,Shenzhen‖, specified that the Company and Wuhan Zhongheng Group shall obtain the corresponding compensatory consideration for removal from the respectively owned project plots and the respectively contributed and constructed above-ground buildings in accordance with Shenzhen urban renewal policies and regulations and the provision of relevant governmental departments before the land development, it is estimated that the compensatory consideration obtained by the Company accounts for50.5% of the total consideration and Wuhan Zhongheng Group accounts for49.5% by calculation.
(II) With purpose of further optimize the capital structure, improve financial status of the Company and providing necessary caital condition and liquidity for the upgrade of industry business transformation, specialization of the property operation and development of large-scale, the Company plans to private offering A-share. Controlling shareholder - Wuhan Zhongheng New Technology Industry Group Co., Ltd. subscribe 87.6 million shares at most in cash, fund raised no more than 599.184 million Yuan (issuance cost included) in total, the fund are raised for debt payment and supplement current capital in order to laying a solid foundation of the sustainable development of the Company. Relevant private placment of A-share has been deliberated and approved by third extraordinary meeting fo 2015 of the Board, and shall submite for approval by general meeting and implemente after verify by CSRC, found more in notice released on 20 March 2015.
(III) In order to further integrate the resources of the group and adjust the industrial distribution, thecompany‘s controlling
shareholder - Wuhan Zhongheng Group has been separated into "Wuhan Zhongheng New Technology Industry Group Co., Ltd." and
"Wuhan Zhongheng Huaxin Industry Co., Ltd.": "Wuhan Zhongheng New Technology Industry Group Co., Ltd." is the remainder
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. enterprise after separation, keeps the original name of Wuhan Zhongheng Group, and possesses the assets and interests of real estate belonging to Wuhan Zhongheng Group; "Wuhan Zhongheng Huaxin Industry Co., Ltd." is the newly established company, possesses the assets and interests of properties except for the real estate belonging to Wuhan Zhongheng Group, including theCompany‘s41.14% stock rights held by Wuhan Zhongheng Group. Huaxin Industry has got the―Official reply for approving Wuhan Zhongheng Huaxin Industry Co., Ltd. to announce the acquisition report of Shenzhen Zhongheng Hwafa Co., Ltd. and exempt its tender offer obligation from China Securities RegulatoryCommission‖ (CSRC permission No[2013] 1503). Through this acquisition, the controlling shareholder of the Company will be changed to Huaxin Industry without changing the actual control and thecompany‘s general capital, whichdoesn‘t constitute a substantial impact on the Company.
As the Company has started planning and preparing the non-public offering of shares since June, 2014, at that time, Wuhan Zhongheng Group intended to subscribe theCompany‘s non-public offering of shares with its real estate properties in Wuhan, after the subscription, Wuhan Zhongheng Group shall increase the possession of theCompany‘s stock rights. If the separation transfers the current41.14% of theCompany‘s stock rights to Huaxin Industry shall result in that both Wuhan Zhongheng Group and Huaxin Industry hold theCompany‘s stock rights, whichdon‘t comply with the commercial object of the separation to Wuhan Zhongheng Group, the significance and necessity of the separation is insufficient. Therefore, Huaxin Industry has decided to terminate this acquisition,41.14% of theCompany‘s stock rights held by Wuhan Zhongheng Group shall not be transferred to Huaxin Industry, and Wuhan Zhongheng Group shall continue to hold theCompany‘s stock rights and be theCompany‘s controlling shareholder. See details on thecompany‘s announcement on December 10, 2014.
(IV) The controlling shareholder - Wuhan Zhongheng Group shares held 116,489,894 shares of theCompany‘s stock, accounting for41.14% of the Company's total share capital, because of involving in the debt dispute andcreditor‘s application for the property preservation, Wuhan Zhongheng Group has been frozen by judicial office on October 14, 2014 and has not yet been released, see details on thecompany‘s announcement on November 22, 2014.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Section VI. Changes in Shares and Particulars about Shareholders I. Particulars about shareholder and actual controller of the Company
1. Amount of shareholders of the Company and particulars about shares holding
In shares
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||||Total preference||||
|||||Total common|||||shareholders with||||
|Total common||||shareholders ended|||||voting rights||||
|shareholders in||24,690||as the 5th trading day||22816|||recovered at end of||0||
|reporting period-end||||before annual report|||||reporting period (if||||
|||||disclosed|||||applicable) (see||||
||||||||||note8)||||
|Particulars about shares held above 5% by shareholders or top 10 shares holding|||||||||||||
|||||Total||||||Number of share pledged/frozen|||
|||||shareholders|Changes||Amount of|Amount of|||||
||||Proportion||||||||||
|Full name of|Nature of||||||||||||
||||of shares|at the end|in report||the restricted|the restricted|||||
|Shareholders|shareholder|||||||||State of share||Amount|
||||held|of report|period||shares held|shares held|||||
|||||period|||||||||
|WuhanZhonghengGroup|Domesticnon-state-owned legalperson||41.14%|116,489,894|0||116,489,894|0||Pledged||116,489,894|
|||||||||||Frozen||116,489,894|
|SEG (HONGKONG) CO.,LTD.|Overseaslegal person||5.58%|16,569,560|0||0|16,569,560||Pledged||0|
|||||||||||Frozen||0|
|GOOD HOPECORNERINVESTMENTSLTD|Overseaslegal person||4.91%|13,900,000|0||0|13,900,000||Pledged||0|
|||||||||||Frozen||0|
|BINGHUA LIU|Domesticnature person||0.31%|876,213|||0|876,213||Pledged||0|
|||||||||||Frozen||0|
|Xie Deqing|Domesticnature person||0.28%|780,100|||0|780,100||Pledged||0|
|||||||||||Frozen||0|
|Shi Feng|Domesticnature person||0.25%|714,273|||0|714,273||Pledged||0|
|||||||||||Frozen||0|
|Wang Jianguang|Domesticnature person||0.23%|651,849|||0|651,849||Pledged||0|
|||||||||||Frozen||0|
|Li Jianfeng|Domesticnature person||0.23%|637,600|||0|637,600||Pledged||0|
|||||||||||Frozen||0|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Zhu Ming|Domesticnature person|0.22%||611,348|0|611,348||Pledged|0|
|||||||||Frozen|0|
|Jia Wenjun|Domesticnature person|0.20%||557,232|0|557,232||Pledged|0|
|||||||||Frozen|0|
|Strategy investors or general||||||||||
|legal person becomes top 10||||||||||
|||N/A||||||||
|shareholders due to rights issued||||||||||
|(if applicable)||||||||||
|||Among the top ten shareholders, Wuhan Zhongheng Group neither bears associated relationship||||||||
|||with other shareholders, nor belongs to the consistent actor that are prescribed in Measures for the||||||||
|Explanation on associated||||||||||
|||Administration of Disclosure of Shareholder Equity Changes of Listed Companies. The Company||||||||
|relationship among the||||||||||
|||neither knew whether there exists associated relationship among the other tradable shareholders, nor||||||||
|aforesaid shareholders||||||||||
|||they belong to consistent actors that are prescribed in Measures for the Administration of Disclosure||||||||
|||of Shareholder Equity Changes of Listed Companies.||||||||
|Particular about top ten shareholders with un-restrict shares held||||||||||
||||||||Type of shares|||
|Shareholders‘ name|||Amount of listed shares held at period-end|||||||
||||||||Type||Amount|
|SEG (HONG KONG) CO., LTD.|||16,569,560||||Domestically|||
||||||||listed foreign||16,569,560|
||||||||shares|||
|GOOD HOPE CORNERINVESTMENTS LTD|||13,900,000||||Domestically|||
||||||||listed foreign||13,900,000|
||||||||shares|||
|BINGHUA LIU|||876,213||||Domestically|||
||||||||listed foreign||876,213|
||||||||shares|||
|Xie Deqing|||780,100||||Domestically|||
||||||||listed foreign||780,100|
||||||||shares|||
|Shi Feng|||714,273||||RMB common|||
||||||||||714,273|
||||||||share|||
|Wang Jianguang|||651,849||||Domestically|||
||||||||listed foreign||651,849|
||||||||shares|||
|Li Jianfeng|||637,600||||Domestically|||
||||||||listed foreign||637,600|
||||||||shares|||
|Zhu Ming|||611,348||||Domestically|||
||||||||||611,348|
||||||||listed foreign|||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||
|-|-|-|-|
|||shares||
|Jia Wenjun|557,232|RMB common||
||||557,232|
|||share||
|Wu Jingmin|491,786|RMB common||
||||491,786|
|||share||
||Among the top ten unrestricted shareholders, the Company neither knew whether there exists|||
|Expiation on associated relationship or|associated relationship among the other tradable shareholders, nor they belong to consistent|||
|consistent actors within the top 10|actors that are prescribed in Measures for the Administration of Disclosure of Shareholder|||
|un-restrict shareholders and between|Equity Changes of Listed Companies. Among the top ten shareholders, Wuhan Zhongheng|||
|top 10 un-restrict shareholders and top|Group neither bears associated relationship with other shareholders, nor belongs to the|||
|10 shareholders|consistent actor that are prescribed in Measures for the Administration of Disclosure of|||
||Shareholder Equity Changes of Listed Companies.|||
|Explanation on top 10 shareholders|In top ten shareholders, 714,273 shares of the Company were hold by Shifeng through the|||
|involving margin business (if|guarantee securities account of client credit trading under the name of China Merchants|||
|applicable)(see note4)|Securities Co., Ltd., representing 100 percent of the Company‘s stock held by himself|||

 Whether top ten common shareholders or top ten common shareholders with un-restrict shares held have a buy-back agreement dealing in reporting period
□ Yes√ No
The top ten common shareholders or top ten common shareholders with un-restrict shares held of the Company have no buy-back agreement dealing in reporting period.
2. Particulars about controlling shareholder of the Company
Legal person
|||||||
|-|-|-|-|-|-|
||Legal|||||
|Controlling||Date|Organization|||
||rep./person in|||Register capital|Main business|
|shareholder||established|code|||
||charge of unit|||||
||||||Production, sales of computers, TV set, display,|
||||||other hardware and computer software;|
||||||development of internal data communication|
||||||network, building of packing materials and light|
||||||weight building material for packaging;|
|Wuhan||||||
||||||management of exports business for the own|
|Zhongheng New||||||
||||||products and technologies for the Company and|
|Science &||||RMB 34,500,000||
||Li Zhongqiu|1996-03-21|71195460-1||member enterprise; management of export|
|Technology||||(after splitting)||
||||||business on raw material, apparatus and|
|Industrial Group||||||
||||||instrument, machinery equipments, spare parts and|
|Co., Ltd.||||||
||||||technologies (not including goods and|
||||||technologies that import and export are national|
||||||restricted or prohibited ); dry clean and steam iron|
||||||service; copy & print; business information|
||||||consulting; house tenancy; property management;|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|||wholesale and retails of the hardware metal|
|||products, plastic products, audio electronic|
|||products, electronic equipment, textile, toys,|
|||clothing & shoes, luggage, bedding article, general|
|||merchandise, curtain, household appliances and|
|||building materials; development of real-estate and|
|||sales of commercial housings (projects with|
|||special provision of the state can be operation after|
|||approval)|
|Future|||
|development|N/A||
|strategy|||
|Operation result,|Ended as 31 December 2014, total assets of Wuhan Zhongheng Group amounting as 1.507 billion Yuan||
|financial status|approximately; the operation income for year of 2014 was approximately 309 million Yuan and net profit was||
|and cash flow|17.4177 million Yuan.(The above data unaudited)||
|Equity|||
|controlling and|||
|ointly of other|||
|foreign/domestic|||
||N/A||
|isted company|||
|by controlling|||
|shareholder in|||
|reporting period|||

Controlling shareholder changes in reporting period
□ Applicable√ Not applicable
Controlling shareholder of the Company has no changed in the Period
3. Particulars about actual controller of the Company
Nature person
||||
|-|-|-|
|||Enjoy the residence rights in the other country or area|
|Actual controller‘s name|Nationality||
|||(Y/N)|
|Li Zhongqiu|P.R.C|N|
||He serves as the Chairman for Wuhan Zhongheng Group since 1996 and serves as||
|Occupation or position in latest five years|||
||Chairman and GM of the Company since 2007.||
|Listed companies in and out of China thatcontrolled in last 10 years|||
||N/A||

Changes of controlling shareholders in reporting period
□ Applicable√ Not applicable
Actual controllers of the Company has no changed in reporting period
Property right and controlling relationship between the actual controller and the Company is as follow:
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Li Zhongqiu
99%
Wuhan Zhongheng New Science& Technology Industrial Group Co., Ltd
41.14%
Shenzhen Zhongheng Huafa Co., Ltd.
Actual controller controlling the Company by entrust or other assets management
□ Applicable√ Not applicable
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Section VII. Preferred Stock
□ Applicable√ Not applicable
The Company had no preferred stock in the reporting.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Section VIII. Particulars about Directors, Supervisors and Senior Executives and Employees
I. Changes of shares held by directors, supervisors and senior executives
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||||||||Shares held|Increasing|Decreasing|Shares|
|||W o r k in g|||||at|shares held|shares held|held at|
||||||Start dated of|End date of|||||
||Title||Sex|Age|||||||
|Name||status|||office term|office term|period-begin|in this period|in this period|period-end|
||||||||(Share)|(Share)|(Share)|(Share)|
|Li|Chairman&|Currently|||||||||
||||M|52|2007-07-18|2016- 08-22|0|0|0|0|
|Zhongqiu|GM|in office|||||||||
|Li|Vice|Currently|||||||||
||||M|57|2013-08-23|2016- 08-22|0|0|0|0|
|Yongping|chairman|in office|||||||||
|Chen|Director|Currently|||||||||
||||M|41|2007-07-18|2015- 04-22|0|0|0|0|
|Zhigang||in office|||||||||
|Wang||Currently|||||||||
||Director||M|62|2013-08-23|2016- 08-22|0|0|0|0|
|Feng||in office|||||||||
||Independent|Leave|||||||||
|Li Dingan|||M|69|2008-06-27|2014- 05-12|0|0|0|0|
||director|office|||||||||
||Independent|Leave|||||||||
|Zhang Yi|||M|44|2008-09-04|2014- 05-12|0|0|0|0|
||director|office|||||||||
|Li|Independent|Currently|||||||||
||||M|48|2010-08-11|2016- 08-22|0|0|0|0|
|Xiaodong|director|in office|||||||||
|Qiu|Independent|Currently|||||||||
||||M|48|2014-05-23|2016- 08-22|0|0|0|0|
|Daliang|director|in office|||||||||
|Zhang|Independent|Currently|||||||||
||||M|59|2014-05-23|2016- 08-22|0|0|0|0|
|Zhaoguo|director|in office|||||||||
||Chairman of||||||||||
|Huang||Currently|||||||||
||the||F|52|2012- 01-16|2016- 08-22|0|0|0|0|
|Yanbo||in office|||||||||
||Supervisory||||||||||
||Supervisor|Currently|||||||||
|Geng Qu|||F|45|2012- 04-09|2016- 08-22|0|0|0|0|
|||in office|||||||||
|Zhao||Currently|||||||||
||Supervisor||M|41|2013-08-23|2016- 08-22|0|0|0|0|
|Xiangfeng||in office|||||||||
|Tang||Currently|||||||||
||Deputy GM||F|37|2013-08-23|2016- 08-22|0|0|0|0|
|Ganyu||in office|||||||||
|Weng|Secretary of|Currently|||||||||
||||F|34|2012-04-11|2016- 08-22|0|0|0|0|
|Xiaojue|the Board|in office|||||||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|||Currently|||||||||
|Cao Li|CFO||F|44|2013-08-23|2016- 08-22|0|0|0|0|
|||in office|||||||||
|Total|--|--|--|--|--|--|0|0|0|0|

 II. Post-holding
Major working experience of directors, supervisors and senior executive at the present in latest five years
Li Zhongqiu: Male, was born in 1962 with Master of Engineering. He is representative to the tenth session of NPC of Hubei Province, May the first of labor medalist of Wuhan. He serves as Chairman of Wuhan Zhongheng New Science& Technology Industrial Group Co., Ltd. since 1996. And serves as Chairman and the General Manager of the Company since July of 2007.
Li Yongping: Male, born in 1957, member of the CPC, a vice researcher. He served as director and vice director in industry& traffic office of Hubei Statistics Bureau from December 1978 to May 1984; head of comprehensive group of worker office of Hubei Province from May 1984 to September 1988; vice director of scientific research institute of Hubei Statistics Bureau from September 1988 to July 1992; took post of standing deputy editor of Reform Horizontal magazine of Hubei Commission for Economic Restructuring from July 1992 to September 1994; served as research assistant in comprehensive office of Shenzhen Economic Restructuring Office from September 1994 to September 1999, investigator of Shenzhen Economic Restructuring Office from September 1999 to January 2001; served as secretary of research society of Shenzhen Economic Restructuring Office from January 2001 to December 2002; and a head of policy group of Shenzhen Enterprise Reform and Development Office from January 2003 to June 2004; investigator of assessment office of Shenzhen SASAC Statistics from June 2004 to December 2004; director of Inspection Office of Shenzhen SASAC from December 2004 to June 2006; he also served as deputy GM of Shenzhen Dachanwan Port Investment& Development Co., Ltd. from July 2006 to December 2010, and he serves as deputy Gm and member of Party Committee of Shenzhen Electronics Group Co., Ltd. since January 2011 and a deputy chairman of the Company since August 2013. Chen Zhigang: Male, born in 1973, Master of Business Administration. From 2002 to 2005, he was supervisor, investment manager, securities representative of Wuhan Huaxin Hi-Tech Co., Ltd. He is CFO and secretary of the board of directors of Wuhan Zhongheng New Science& Technology Industrial Group Co., Ltd. from June 2005 to Aug. 2008, the Executive Deputy General Manager of Wuhan Zhongheng New Science& Technology Industrial Group Co., Ltd. from Aug. 2008 to Dec. 2014, and he works as Director of the Company from July 2007 to April 2015.
Wang Feng: Male, born in 1952, owes a bachelor degree and a senior economist. He engaged in technical work in Wuhan Tractor Factory from July 1981 to February 1984 and hold deputy chairman of the Factory from March 1984 to May 1992 and chairman of the Factory from June 1992 to May 1995; he served as GM of Wuhan Cable Group Co., Ltd. from June 1995 to July 1997; took post as director of the Board Office of WSAMC from August 1997 to August 1998; from September 1998 to April 2008, he served as Chairman and GM of Wuhan Huanghe Lou Wine Industry Group Co., Ltd.; served as manager of the Economic Operation Department of WSAMC from May 2008 to April 2013; he works in the Company since May 2013 and serves as Director and special Assistant to the GM of the Company since August 2013.
Li Xiaodong: male, born in 1967, MBA and economist title. He graduated from Beihang University and then worked in China Commercial and Industrial BankXi‘an North Avenue Branch as deputy director in north branch office of the bank; in Oct. of 1998,
he was called in China Commercial BankXi‘an Branch; in 2003 he joined Shenzhen Walkers Technology Co., Ltd. (short code:
002351) and worked as assistant of general manager, vice general manager in succession. And presently he serves as vice general
manager and secretary of the board of Shenzhen Walkers Technology Holding Co., Ltd. he serves as independent director of the
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Company since August 2010.
Qiu Daliang: Male, born in 1966, a legum magister and graduated from Northwest Institute of Politics. He respectively worked in Shenzhen Special Economic Zone Branch ofPeople‘s Bank of China, Shenzhen Securities Management Office and Shenzhen Regulatory Authority(Shenzhen Inspection Department) of CSRC from July 1992 to September 2007; he successively worked as audit staff of the share issuance, chief of regulatory section of the listed company, deputy chief of the inspection office, director of the information research department etc.; acts as deputy president of Zhongshan Securities Co., Ltd. since December 2008; serves as executive director and GM of the Beichuan Qianglin Eco-Agriculatural Development Co., Ltd. and Beichun Qiuchu Chicken Ecological Farm Co., Ltd. since October 2011. He served as members of fiscal& taxation finacne committee of the first and second session of Shenzhen Advisory Committee for Policy Decision; now he serves as independent directors of ShenzhenHan‘s Laser Polytron Technologies Inc. (stock code 002008) and Shenzhen Sunlord Electronics Co., Ltd.
Zhang Zhaoguo, male, born in 1956, a professor (secondary) and doctoral supervisor. He worked as chief of the accounting teaching& research section of Yichang Finance& Trading School from August 1978 to November 1993, served as deputy head of financial department of Wuhan University Business College from December 1993 to August 2004, serves as director of the accounting department of School of Management of the Huazhong University of Science and Technology since Septtember 2004. He successively acted as part-time professor in China University of Geosciences, Harbin University of Commerce, Huazhong Agricultural University and Huazhong University of Wuchang Branch, School of Manageemtn dean of the Wuhan Yangtze Business University, independent director and outside director of the large-scale company as WuhanP&S, Beijing Dawn, Fuhan Group and HRTN, member of the review committee of Advanced Level Accountant of Hubei Province and Wuhan City, Director of Institute of Chinese Accounting, council member of Demonstartion Accounting Society of China and vice-chairman of the Accounting Association of Colleges& Universities for Science& Technology, act as the academic advivises of the magazine as Finance and Accounting, Finance and Accounting Monthly, Financial Supervision and International Finance and Accounting.
Huang Yanbo: female, born in 1962, a university background and a senior accountant. She served as financial director of Wuhan Zhongda Shopping Mall since 1985 to 1998; and worked as financial manager of Wuhan Zhongheng New Science& Technology Industrial Group Co., Ltd. from 1998 to 2007 and GM assistant in charge of auditing supervise from 2007 to 2011; she serves as CFO of the Company since 2012; she serves as supervisor of the Company since January 2012, and she serves as chairman of the Supervisory of the Company since August 2013.
Zhao Xiangfeng: Male, born in 1973, graduate from junior college, an accountant and CPA. He served as PM of Wuhan Yinjian Real Estate Development Co., Ltd. from September 1994 to April 2001; a broker in Ping An Securities from April 2001 to April 2003; served as financial advisor of Hubei Financial Advisory Co., Ltd. from June 2003 to April 2006; from April 2006 to May 2007 he served as head of the Finance in Wuhan Fuershi Food Co., Ltd.; served as PM of Hubei Jinye CPA Co., Ltd. from May 2007 to March 2009; a head of the Finance in Wuhan Tongji Modern Pharmacy Co., Ltd. from March 2009 to August 2009; hold post of financial manager of Wuhan Fashion Homes Co., Ltd. from August 2009 to April 2010; he works in the Company since April 2010 and successively served as deputy director and director of the auditing department and serves as supervisor of the Company since August 2013.
Geng Qu: female, born in 1969, is graduated from Beihang University, the first quality engineer, a real estate economist, a human resources economist and an engineer. She worked for the Company since 1990 and successively served as director of quality standard, director of comprehensive management department and deputy chief of office of the Company. She serves as employee supervisory of the Company since April 2012.
Weng Xiaojue: Female, was born in 1980. She graduated from Zhongshan University. She was engaging in securities work in the
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. office of board of directors of Guangzhou Friendship Co., Ltd. from July 2002 to August 2006 and became Representative for Securities Affairs of the Company from January 2007 to 10 April 2012; she served as supervisor of the Company from July 2007 to 9 April 2012; and serves as Vice Chairman of Labor Union of the Company since July 2007; and since Mar. of 2010 she has taken post of office director of the board of directors of the Company; secretary of the board of the Company since April 2012; at the same time serves as director of Wuhan Hengfa Technology Co., Ltd and supervisor of Shenzhen Zhongheng Huafa Property Co., Ltd.
Tang Ganyu: Female, born in 1977, graduate from junior college. She served as assistant to Plant Manager of Wuhan Hengsheng Photovoltaic Industry Co., Ltd. from August 2003 to July 2005 and manager of project department from August 2005 to July 2006; act as deputy project manager of general office and production manager from August 2006 to December 2011; she served as supervisor of the Company from July 2007 to January 2012 and GM assistant of the Company from January 2012 to August 2013, she serves as deputy GM of the Company since August 2013.
Cao Li: Female, born in 1970, on-job postgraduates and an accountant. She act as CFO of Wuhan Zhongheng New Science& Technology Industrial Group Co., Ltd. from 2000 to May 2005, a member of work group of the transitional period in the Company from June 2005 to Jun e2006; GM assistant of the Company from July 2006 to October 2007 and secretary of the Board of the Company from October 2006 to July 2007; served as GM of procurement center from May 2007 to October 2007, a chairman of supervisory committee of the Company from July 2007 to August 2013 and serves as CFO of the Company since August 2013. Post-holding inshareholder‘s unit
√Applicable□Not applicable
|||||||
|-|-|-|-|-|-|
||||||Weather receiving|
|Name|Name of shareholder‘s unit|Position|Start dated of office|End date of|remuneration from|
||||term|office term||
||||||shareholder‘s unit|
|Li Zhongqiu|Wuhan Zhongheng Group|Chairman|1996-03-21||No|
|Chen Zhigang|Wuhan Zhongheng Group|Executive Deputy GM|2008-08-18||Yes|
|||Deputy GM, party||||
|Li Yongping|Shenzhen SEG Group Co., Ltd.||2011-01-03||Yes|
|||committee||||
|Huang Yanbo|Wuhan Zhongheng Group|CFO|2012-05-16||Yes|
|Statement of||||||
|post-holding in||||||
||N/A|||||
|shareholder‘s||||||
|unit||||||

Post-holding in other unit
√Applicable□Not applicable
|||||||
|-|-|-|-|-|-|
||||||Weather receiving|
|Name|Name of other units|Position|Start dated of|End date of|remuneration from|
||||office term|office term||
||||||other units|
|||Director& Deputy||||
|Li Xiaodong|Shenzhen Walkers Technology Co., Ltd.|GM & Secretary||||
|||of the Board||||
|Qiu Daliang|Beichuan Qianglin Eco-Agriculatural|Executive director||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
||Development Co., Ltd.|and GM|
||Shenzhen Han‘s Laser Polytron|Independent|
|Qiu Daliang|||
||Technologies Inc.|director|
||accounting department of School of||
|Zhang Zhaoguo|Management of the Huazhong University|Director|
||of Science and Technology||
|Zhang Zhaoguo|Institute of Chinese Accounting|Council member|
||Financial management Committee of||
|Zhang Zhaoguo|Experts of the Accounting Society of|Council member|
||China||
||Higher Accounting Association of Science||
|Zhang Zhaoguo|and Technology of the Accounting Society|Vice-chairman|
||of China||
||School of Management of the Wuhan||
|Zhang Zhaoguo||Dean|
||Yangtze Business University||
||Beiojing Dawn Aerospace Bio-Tech Co.,|Independent|
|Zhang Zhaoguo|||
||Ltd.|director|
||Wuhan P&S Information Technology Co.,|Independent|
|Zhang Zhaoguo|||
||Ltd.|director|
|||Independent|
|Zhang Zhaoguo|Wuhan Fuhan Group||
|||director|
||Hubei Radio and Television Information|Independent|
|Zhang Zhaoguo|||
||Network Co., Ltd.|director|
|Statement of|||
|post-holding in|N/A||
|other unit|||

III. Remuneration of directors, supervisors and senior management
Decision-making procedures, recognition basis and payment for directors, supervisors and senior executives
Remuneration of directors and supervisors are determined by general meeting, and the allowance standard for each independent director is RMB60, 000 per year (tax included).
Remuneration of senior management is determined by the board based on the unified remuneration management system and actual completion of operational targets, and the―Proposal of Basic Remuneration for High-ranking Managers of theCompany‖ was deliberated and approved in 2nd extraordinary meeting of the Board for year of 2012.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Remuneration for directors, supervisors and senior executives in reporting period
In 10 thousand Yuan
|||||||||
|-|-|-|-|-|-|-|-|
|||||||Total||
||||||Total||Remuneration|
|||||||remuneration||
||||||remuneration||actually|
|Name|Title|Sex|Age|Post-holding status||obtained from||
||||||obtained from||obtained at|
|||||||shareholder‘s||
||||||the Company||period-end|
|||||||unit||
||Chairman&|||||||
|Li Zhongqiu||M|52|Currently in office|48|0|48|
||GM|||||||
|Li Yongping|Vice chairman|M|57|Currently in office|0|74.82|74.82|
|Chen Zhigang|Director|M|41|Currently in office|0|26.4|26.4|
|Wang Feng|Director|M|62|Currently in office|20.9|0|20.9|
||Independent|||||||
|Li Dingan||M|69|Leave office|2.5|0|2.5|
||director|||||||
||Independent|||||||
|Zhang Yi||M|44|Leave office|2.5|0|2.5|
||director|||||||
||Independent|||||||
|Li Xiaodong||M|48|Currently in office|6|0|6|
||director|||||||
||Independent|||||||
|Qiu Daliang||M|48|Currently in office|3.5|0|3.5|
||director|||||||
|Zhang|Independent|||||||
|||M|59|Currently in office|3.5|0|3.5|
|Zhaoguo|director|||||||
|Huang Yanbo|Supervisory|F|52|Currently in office|0|18|18|
|Geng Qu|Supervisor|F|45|Currently in office|7.48|0|7.48|
|Zhao||||||||
||Supervisor|M|41|Currently in office|8.4|0|8.4|
|Xiangfeng||||||||
|Tang Ganyu|Deputy GM|F|37|Currently in office|29.76|0|29.76|
||Secretary of|||||||
|Weng Xiaojue||F|34|Currently in office|20.9|0|20.9|
||the Board|||||||
|Cao Li|CFO|F|44|Currently in office|20.9|0|20.9|
|Total|--|--|--|--|174.34|119.22|293.56|

 Delegated equity incentive for directors, supervisors and senior executives in reporting period
□ Applicable√ Not applicable
IV. Post-leaving and dismissals for directors, supervisors and senior executives
||||||
|-|-|-|-|-|
|Name|Title|Type|Date|Reasons|
|Li Dingan|Independent director|End-of-term leave|2014-05-12|Leave the post when office terms expires|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||||
|-|-|-|-|-|
|Zhang Yi|Independent director|End-of-term leave|2014-05-12|Leave the post when office terms expires|
|Qiu Daliang|Independent director|Be elected|2014-05-13|Be elected as independent director of the Company|
|Zhang Zhaoguo|Independent director|Be elected|2014-05-13|Be elected as independent director of the Company|

 V. Particulars of workforce
The Company has1, 059 employees at end of reporting period, and no retired employees should stand the expenses by the Company
||||
|-|-|-|
|Professional composition|||
|Type|Numbers|Ratio|
|Production staff|818|77.24%|
|Sales man|21|1.98%|
|Technician|73|6.89%|
|Financial staff|17|1.61%|
|Administration staff|130|12.28%|

||||
|-|-|-|
|Educational background|||
|Type|Numbers|Ratio|
|Master and on-jobpostgraduates|3|0.28%|
|Undergraduate|42|3.97%|
|Junior college|115|10.86%|
|Other|899|84.89%|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Section IX. Corporate Governance
I. Corporate governance of the Company
During the reporting period, in accordance with the laws and regulations of the "Company Law", "Securities Law", and "Governance Norms of Listed Companies", and the relevant rules and requirements promulgated by the China Securities Regulatory Commission, the company has constantly improved the corporate governance structure, established a sound internal control system, enhanced the level of standard operation, strictly followed the provisions of the production and management control and the financial management and control and the information disclosure and control, carried out the work on the basis of the "Articles of Association", "Rules of Procedure of the Board ofDirectors‖, "Rules of Procedure of the Board ofSupervisors‖,―Working System of the IndependentDirectors‖, and―Working Rules of the GeneralManager‖, and ensured that the shareholders' meeting, the board of directors and the board of supervisors can perform their duties and responsibilities normally. The company's governance meets the requirements on the documents of governance norms of listed companies issued by China Securities Regulatory Commission.
During the reporting period, in order to improve the profit distribution policy and further protect the interests of the medium and small investors, the company has revised the corresponding contents on the "Articles of Association" and "Rules of the Shareholders' Meeting" according to the requirements of―Supervision Guidelines for the Listed Companies No.3 - cash dividends of listed companies" established by China Securities Regulatory Commission in 2013, "Statutes Guidelines for the Listed Companies" (CSRC announcement No.[2014]19) revised in 2014, and―Rules of the Shareholders' Meeting of the ListedCompanies‖ and combining with the actual situation.
Is there any difference between the corporate governance and the relevant requirements as provided by the Company Law and the CSRC
□ Yes√ No
There is no difference between the corporate governance and the relevant requirements as provided by the Company Law and the CSRC.
Implementation of special corporate governance activity and preparation and implementation of inside information registration management system
1.According to the requirements of the "Notice to complete the investor protection and propaganda work of the listed companies" issued by China Securities Regulatory Commission Shenzhen Bureau, the company has carried out the investor protection and propaganda work to communicate with the investors by establishing a special column for the―InvestorRelations‖ on the official website and replying theinvestors‘ questions on the interaction platform of Shenzhen Stock Exchange so as to enhance theinvestors‘ understanding to the company and maintain the legitimate rights and interests of the medium and small shareholders; On November 6, 2014, the company organized the directors, supervisors, senior executives and the staff in key positions, a total of 30 people, to participate in the second caution and education exhibition of insider trading held by China Securities Regulatory Commission Shenzhen Bureau to strengthen the discipline consciousness of insider information and complete the prevention and control work of insider trading.
2.The company has always attached importance to the standardization to the insider information management, strengthened the confidentiality of insider information and maintained the principle of fair information disclosure in order to improve the insider information management system; the second extraordinary meeting of the board of directors in 2012 has deliberated and revised the "Insider Registration Management System". During the reporting period, the company has strictly implemented the relevant system, taken effective measures before the major and sensitive information disclosure, controlled the insiders to a minimum, propagandized theinsiders‘ duty of confidentiality, and practically avoided the disclosure of insider information and insider trading. Through the
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. self-examination, the company did not find the insiders use the insider information to illegally buy or sell the Company's shares, nor the supervision department takes supervision measures and administrative penalties to the insider trading.
II. In the report period, the Company held annual general meeting (AGM) and extraordinaryshareholders’ general meeting
1. Annual General Meeting (AGM) in the report period
|||||||
|-|-|-|-|-|-|
|Session of||||||
||Date|Name of meeting motion|Situation|Date of disclosure|Index of disclosure|
|meeting||||||
|||1. Report from the Board for year of 2013||||
|||2. Report from Supervisory Committee for||||
|||year of 2013||||
|||3. Financial Result Report for year of||||
|||2013||||
|||4. Profit Distribution Plan of 2013||||
|||5. ―Annual report of 2013‖ and Summary||||
|||6. ―Financial Result Report for year of||||
|||2014‖||||
|||7. ―Bank Loans Limit for year of 2014‖||||
||||Deliberated and||http://www.cninfo.co|
|AGM of 2013|2014-05-13|8. ―Guarantee Limit for Bank Loans of|approved all|2014-05-14|m.cn/finalpage/2014-|
|||Wholly-owned subsidiary for year of||||
||||proposals||05-14/64023103.PDF|
|||2014‖||||
|||9.―Prediction of Daily related transaction||||
|||of Video Business for year of 2014‖||||
|||10. ―Engagement of auditing institute for||||
|||financial report and internal control for||||
|||year of 2014‖||||
|||11. ―Independent Director Resignation and||||
|||Supplement of the Independent Director‖;||||
|||12. ―Change the Commitment of Assets||||
|||Injection by Controlling Shareholder‖||||

2. Extraordinaryshareholders’ general meeting in the report period
|||||||
|-|-|-|-|-|-|
|Session of||||Date of||
||Date|Name of meeting motion|Situation||Index of disclosure|
|meeting||||disclosure||
|||1. ―proposal of purchasing financial||||
|The first||||||
|||products‖;||||
|extraordinary|||Deliberated and||http://www.cninfo.com.cn/|
|||2. ―Amendment of ‗Article of||||
|shareholders‘|2014-08-08||approved all|2014-08-09|finalpage/2014-08-09/120|
|||Association‘‖;||||
|general meeting|||proposals||0112760.PDF|
|||3. ‗Amendment of ‗Rules of Procedure||||
|2014||||||
|||for the Shareholder‘ Meeting‘‖||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. III. Responsibility performance of independent directors in report period
1. The attending of independent directors to Board meetings andshareholders’ general meeting
||||||||
|-|-|-|-|-|-|-|
|The attending of independent directors|||||||
||Times of Board||||||
|||||||Absent the|
||meeting||Times of|Times of|||
|Name of independent||Times of|||Times of|Meeting for the|
||supposed to||attending by|entrusted|||
|director||Presence|||Absence|second time in a|
||attend in the||communication|presence|||
|||||||row (Y/N)|
||report period||||||
|Li Xiaodong|5|2|3|0|0|N|
|Qiu Daliang|3|1|2|0|0|N|
|Zhang Zhaoguo|3|1|2|0|0|N|
|Li Dingan|2|1|1|0|0|N|
|Zhang Yi|2|1|1|0|0|N|
|Times of independent directors|||||||
|attending to shareholders‘ general||2|||||
|meeting|||||||

Explanation of absent the Board Meeting for the second time in a row
Nil
2. Other explanation about responsibility performance of independent directors
Whether the opinions from independent directors have been adopted or not
√Yes□ No
Explanation on advice that accepted/not accepted from independent directors
During the reporting period, the independent directors of the company have performed their duties seriously, taken their professional advantages and combined with the actual situation to put forward the reasonable proposals for the company's operational management and standard operation which have been adopted, and given many professional suggestions to the company's future sound development at the same time; during the reporting period, the independent directors have made independent, objective and impartial judgments to thecompany‘s internal controls, related transactions, profits distribution, employ of audit agency, the controlling shareholders and relatedparties‘ occupation to the funds of listed company and the external security, changes of the controlling shareholder and the asset injection commitments, issued the independent opinions, and really maintained the interests of the company and the shareholders.
IV. Responsibility performance of subordinate special committee of the Board in report period
During the reporting period, the company has adjusted the special committee members of the board of directors, thecompany‘s former independent directors Mr. Li Dingan and Mr. Zhangyi have resigned their posts as thecompany‘s independent directors and the special committee members of the board of directors due to the expiration of six years tenure, thecompany‘s eighth board of directors has nominated and 2013 annual general meeting of stockholders has elected Mr. Qiu Daliang and Mr. Zhang Zhaoguo as the independent directors of thecompany‘s eighth board of directors. Hereby, the special committee members of the board of directors have been adjusted accordingly: Mr. Qiu Daliang is supplemented as the member of nominations committee and
compensation& appraisal committee, and holds the post of director in the nominations committee; Mr. Zhang Zhaoguo is
supplemented as the member of strategy committee, nominations committee and audit committee, and holds the post of director in
audit committee.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Committee Date Proposals
2014-4-8 ―Financial Report of2013‖
―Conclusion of Audit for year of 2013 from Shine Wing Certified Public Audit committee Accountants‖
‖Engagedment of the audit organ for financial reprot of 2014 and internal control of theCompany‖
Remuneration and 2014-4-8 ‖Remuneration Plan of Directors, Supervisors and Senior Executives for year appraisal committee of2013‖
2014-4-8 ―Independent Director Resignation and Supplement of the Independent Nomination committee
Director‖
1. Duty performance of the audit committee
During the reporting period, the work carried out by the audit committee mainly included: listening to the company's annual operating, financial and internal audit work, continuing to concern and guide thecompany‘s financial affairs and internal audit supervision, carrying forward the audit work to thecompany‘s annual financial report, sending a letter to urge the audit report to be submitted on time, communicating with the certified public accountants time after time during the annual audit, objectively evaluating the annual audit work of the accounting firm, and making the resolution to agree to re-appoint the accounting firm.
2. Remuneration& appraisal committee
During the reporting period, the remuneration& appraisal committee has audited 2013 annual remuneration of thecompany‘s directors, supervisors and senior management which was considered to be consistent with the actual situation and in line with the provisions of relevant laws and the regulations of remuneration and appraisal system.
3. The nominations committee
During the reporting period, the nominations committee has investigated the proposal for the supplement of independent directors, and made the decision to agree to submit to the board of directors for consideration.
V. Works from Supervisory Committee
Whether the Company has risks or not in reporting period that found in supervisory activity from supervisory committee
□ Yes√ No
Supervisory committee has no objection about supervision events in reporting period
VI. Independency of the Company relative to controllingshareholders’ in aspect of businesses, personnel, assets, organization and finance
During the reporting period, thecompany‘s controlling shareholder - Wuhan Zhongheng Group has separated the business, personnel, assets, organization and finance from the controlling shareholders in accordance with the laws and regulations of the "Company Law" and "Articles of Association", and had the independent and complete business system and the capabilities of independent management. 1.Personnel: The company fully and independently operates in the labor, personnel and salary management systems and has established the independent management system, all of the company's senior executives are working in the Company and receive the salaries, no senior executive has held a post in both the Company and the controllingshareholder‘s company, and no financial staff has held a post in two or more of the related companies.
2. Assets: The company has the clear property rights with the controlling shareholders and the capabilities of independent management, possesses the full rights to control the production system, supporting facilities and land use rights, no major shareholder has occupied or dominated the assets.
3. Finance: The company has established the independent, complete, standardized financial accounting system and financial management system, and the corresponding internal control system and internal audit system in accordance with the requirements of
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. the "Accounting Standards for Business Enterprises" to make the independent financial decisions.
4. Organization: the board of directors, the board of supervisors, and other internal organizations are sound and operate independently, the organization is completely separated from the controlling shareholders, all organizations of the company are set up based on the norms and requirements of the listed company and thecompany‘s actual business features which have the independent office addresses and there is no mixed operation or co-working, and the controlling shareholders legally exercise theinvestors‘ rights and undertake the corresponding obligations.
5. Business: the company has the completely independent business operation system, the capabilities of independent management, the independent purchasing system, production system and marketing system,doesn‘t depend on the controlling shareholders to gain profits or have the horizontal competition relationship with the controlling shareholders or the subsidiaries.
VII. Appraisal and incentives for senior management
During the reporting period, in order to enable the senior management to better perform their duties and maintain the interests of the company and its shareholders, the company has floatingly paid the remuneration to urge the company's management to work more diligently and ensure the realization of the company's development strategy and operation target accordingly to the―Staff rank and basic salarysystem‖ and the performance assessment and combining with the company's actual operating conditions.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Section X. Internal control
I. Construction of internal control (IC)
During the reporting period, the company has further strengthened the training to relevant personnel, further sorted out the business, posts, functions and matching status of personnel, combined with the further requirements of the "Fundamental Norms of the Enterprise Internal Control ", and checked the conformity of thecompany‘s existing rules and regulations and program files (such as ISO9000, TS16949) so as to make thecompany‘s internal controls stipulation have the unified logic and the orderly rights and liabilities and form a complete management system, and so that there are laws to abide by; in the daily management, the company has fully implemented the awareness of risk control, required to make corresponding countermeasures for the management to the existing matters or the development of new items based on the risk assessment and thecompany‘s actual situations so that the company management could be constantly optimized according to the PDCA circle. The continuous optimization of the management is the result of joint efforts of both the company and the staff, in view of the operational process and results of the current management processes, we think the design of thecompany‘s internal controls is reasonable and the implementation is effective.
II. Statement from the board on responsibility for internal control
Internal control system is the controlling process that implemented together with the Board, supervisory committee, managements and whole staffs, aims at guarantee a legal operation management reasonably, assets safety, the real and completion of the financial report and relevant information. Board of the Directors are responsible for continues to established and improvedCompany‘s IC system according to Basic Internal Control Standard for Enterprise and supporting guidelines, furthermore, to promoted the effective implementation of IC, and take important responsibilities for the completion and rationality of the IC system establishment. The supervisory committee supervises the establishment and implementation of IC by the board; managers are in charge of normal operation of the internal control.
The target of thecompany‘s internal control is to reasonably guarantee the legality and compliance of operating management, the assets safety, the financial reports and the sincerity and integrity of relevant information, improve the operating efficiency and effects, and promote the realization of development strategy. Moreover, as the situation changes may result in the inappropriate internal controls or reduce the degree of following the control policies and procedures, there are certain risks to speculate the availability of future internal controls according to the evaluation results of internal controls.
III. Basis of IC establishment of financial report
According to the Basic Internal Control Standard for Enterprise and its supporting guidelines jointly issued by the ministry of finance, CSRC and other three authorities, Standard Operation Guidance for Company Listed on the Main board of Shenzhen Stock Exchange, as well as requirement of normative documents of Accounting Law and Accounting Standards for Business Enterprises, the Company established financial report internal control system based on its actual conditions.
IV. Appraisal Report of internal control
|||
|-|-|
|Details of major defects in appraisal report that found in reporting period||
|No major defect has been found in the report period||
|Disclosure date of internal control||
||2015-04-28|
|appraisal report (full-text)||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||
|-|-|
|Index of internal control appraisal||
||Full text found Notice published on Juchao Website(www.cninfo.com.cn) dated 28 April 2015|
|report disclosed (full-text)||

V. Audit report of internal control or verification report
Audit report of internal control
|||
|-|-|
|Auditing comments section for audit report of internal control||
|According to relevant regulations and ―Basic Internal Control Standard for Enterprise‖, Zhongheng Huafa Company maintained an||
|efficiency internal control of financial report, in all material aspects dated 31 December 2014.||
|Disclosure date of audit report of||
||2015-04-28|
|internal control (full-text)||
|Index of audit report of internal||
||Full text found Notice published on Juchao Website(www.cninfo.com.cn) dated 28 April 2015|
|control disclosed (full-text)||

Is the CPA carries out qualified opinion for audit report of the internal control
□ Yes√ No
Is the internal control audit report, issued by CPA, consistent with the opinions of self appraisal report issued from the Board√ Yes□ No
VI. Establishment and enforcement of Accountability Mechanism for Major Errors in Annual Report
。In order to further improve the quality and transparency of information disclosure of annual report, thus to increase the truthfulness, accuracy, completeness and promptness of information disclosed in annual report, the Company established Responsibility Accounting System for Material Mistakes in Annual Report Information Disclosure in 2010. The detail conditions, affirmation and treatment procedures and accountability of major errors for annual information disclosure are well-defined. During the reporting period, the Company observed the system. There is no correction for material accounting errors, supplement for material omissions and amendment to results prediction.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Section XI. Financial Report
I. Audit report
|||
|-|-|
|Type of audit opinion|Standard unqualified opinion|
|Signing date of audit report|2015-04-24|
|Name of audit institute|Shine Wing Certified Public Accountants (LLP)|
|Document serial of audit report|XYZH/2014SZA2013|
|Name of CPA|Zhang Weijian, Zhang Yongde|

Text ofAuditor‘s Report
To all shareholders of Shenzhen Zhongheng Huafa Co., Ltd.:
We have audited the companying consolidated and parentCompany‘s financial statements of Shenzhen Zhongheng Huafa Co., Ltd(―Zhongheng HuafaCompany‖), including balance sheet of 31 December 2014, and profit statement, and cash flow statement, and statement on changes ofshareholders‘ equity for the year ended, and notes to the financial statements for the year ended.
I.Management’s responsibility for the financial statements
Management of the Company is responsible for prepare and present financial statement of the Company, which including: (1) Prepare financial statements with fair presentation in line with Accounting Standards for Business Enterprises; (2) Designing, executed and maintaining necessary internal control in order to prevent fundamental miscarrying in financial statement from fraudulent or errors.
II. Auditor's responsibility
Our responsibility is to express an audit opinion on these financial statements based on our audit. We performed our audit in accordance with Chinese Certified Public Accountants' Auditing Standards. Those standards require us to comply with professional ethics, and to plan and perform our audit so as to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures of the financial statements. The selective audit procedures depend on auditor's judgment, including the evaluation of the risk of material misstatement of the consolidated financial statements due to frauds or errors. When evaluating risk, we consider internal control related to financial statements, in order to design auditing procedures. An audit also includes assessing the appropriateness of the accounting policies adopted and the reasonableness of the
accounting estimates made by management, as well as evaluating the overall presentation of the financial
statements.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. We believe that we have obtained sufficient and appropriate audit evidences to provide a basis for our audit opinion.
III. Auditing opinion
In our opinion, in all material aspects, ZhonghengHuafa‘s financial statements have been prepared in accordance with the Enterprises Accounting Standards and Enterprises Accounting System, and they fairly present the financial status of the consolidated and parentcompany‘s as of December 31, 2014, and its operation results and cash flows for the year ended.
II．Financial statement
Currency used in note of financial statement is RMB (Yuan)
1. Consolidated Balance Sheet
Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD
2014-12-31
In RMB
||||
|-|-|-|
|Items|Closing balance|Opening balance|
|Current assets:|||
|Monetary funds|28,819,357.68|54,251,456.20|
|Settlement provisions|||
|Capital lent|||
|Financial liability measured by fair value and with|||
|variation reckoned into current gains/losses|||
|Derivative financial liability|||
||100,821,063.85|154,375,936.49|
|Notes receivable|||
||112,425,468.57|162,278,705.83|
|Accounts receivable|||
|Accounts paid in advance|5,669,119.87|13,483,243.19|
|Insurance receivable|||
|Reinsurance receivables|||
|Contract reserve of reinsurance receivable|||
|Interest receivable|||
|Dividend receivable|||
|Other receivables|109,094,812.29|9,623,767.78|
|Purchase restituted finance asset|||
|Inventories|30,880,050.55|47,119,303.85|
|Divided into assets held for sale|||
|Non-current asset due within one year|||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|Other current assets|500,000,000.00||
|Total current assets|887,709,872.81|441,132,413.34|
|Non-current assets:|||
|Loans and payments on behalf|||
|Finance asset available for sales|||
|Held-to-maturity investment|||
|Long-term account receivable|||
|Long-term equity investment|||
|Investment property|31,274,663.74|32,529,420.82|
|Fixed assets|186,438,814.34|195,542,067.03|
|Construction in progress|2,853,356.00|2,323,356.00|
|Engineering material|||
|Disposal of fixed asset|||
|Productive biological asset|||
|Oil and gas asset|||
|Intangible assets|47,866,685.21|49,360,979.93|
|Expense on Research and Development|||
|Goodwill|||
|Long-term expenses to be apportioned|345,658.24|1,773,524.86|
|Deferred income tax asset|6,251,934.59|8,686,737.88|
|Other non-current asset|||
|Total non-current asset|275,031,112.12|290,216,086.52|
|Total assets|1,162,740,984.93|731,348,499.86|
|Current liabilities:|||
|Short-term loans|138,114,376.32|162,140,601.13|
|Loan from central bank|||
|Absorbing deposit and interbank deposit|||
|Capital borrowed|||
|Financial liability measured by fair value and with|||
|variation reckoned into current gains/losses|||
|Derivative financial liability|||
|Notes payable|39,994,397.62|34,646,052.79|
|Accounts payable|65,547,836.32|52,206,342.81|
|Accounts received in advance|727,331.06|1,572,324.29|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|Selling financial asset of repurchase|||
|Commission charge and commission payable|||
|Wage payable|6,208,793.90|4,760,822.51|
|Taxes payable|18,552,046.85|14,943,081.06|
|Interest payable|||
|Dividend payable|||
|Other accounts payable|24,179,349.31|22,392,413.99|
|Reinsurance payables|||
|Insurance contract reserve|||
|Security trading of agency|||
|Security sales of agency|||
|Divided into liability held for sale|||
|Non-current liabilities due within 1 year|||
|Other current liabilities|||
|Total current liabilities|293,324,131.38|292,661,638.58|
|Non-current liabilities:|||
|Long-term loans|585,300,000.00|162,418,800.00|
|Bonds payable|||
|Including: preferred stock|||
|Perpetual capital securities|||
|Long-term account payable|||
|Long-term wages payable|||
|Special accounts payable|||
|Projected liabilities|2,765,583.81|2,604,411.81|
|Deferred income|||
|Deferred income tax liabilities|||
|Other non-current liabilities|||
|Total non-current liabilities|588,065,583.81|165,023,211.81|
|Total liabilities|881,389,715.19|457,684,850.39|
|Owner‘s equity:|||
|Share capital|283,161,227.00|283,161,227.00|
|Other equity instrument|||
|Including: preferred stock|||
|Perpetual capital securities|||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|Capital public reserve|109,496,837.33|109,496,837.33|
|Less: Inventory shares|||
|Other comprehensive income|||
|Reasonable reserve|||
|Surplus public reserve|77,391,593.25|77,391,593.25|
|Provision of general risk|||
|Retained profit|-188,698,387.84|-196,386,008.11|
|Total owner‘s equity attributable to parent company|281,351,269.74|273,663,649.47|
|Minority interests|||
|Total owner‘s equity|281,351,269.74|273,663,649.47|
|Total liabilities and owner‘s equity|1,162,740,984.93|731,348,499.86|

 Legal representative: Li Zhongqiu Person in charge of accounting works: Cao Li Person in charge of accounting institution: Wu Aijie
2. Balance Sheet of Parent Company
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Current assets:|||
||14,802,258.59|18,575,925.94|
|Monetary funds|||
|Financial liability measured by fair value and with variation|||
|reckoned into current gains/losses|||
|Derivative financial liability|||
|Notes receivable|||
|Accounts receivable|1,857,222.07|38,718,332.28|
|Account paid in advance|1,005,472.83|1,004,976.83|
|Interest receivable|||
|Dividends receivable|||
|Other receivables|106,214,702.41|100,394,931.80|
|Inventories|14,806.50|14,806.50|
|Divided into assets held for sale|||
|Non-current assets maturing within one year|||
|Other current assets|500,000,000.00||
|Total current assets|623,894,462.40|158,708,973.35|
|Non-current assets:|||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|Available-for-sale financial assets|||
|Held-to-maturity investments|||
|Long-term receivables|||
|Long-term equity investments|187,608,900.00|186,708,900.00|
|Investment property|31,274,663.74|32,529,420.82|
|Fixed assets|100,029,320.14|104,096,997.92|
|Construction in progress|2,853,356.00|2,323,356.00|
|Project materials|||
|Disposal of fixed assets|||
|Productive biological assets|||
|Oil and natural gas assets|||
|Intangible assets|5,278,437.84|5,423,383.56|
|Research and development costs|||
|Goodwill|||
|Long-term deferred expenses|291,666.67|1,698,633.25|
|Deferred income tax assets|7,056,901.94|8,485,262.26|
|Other non-current assets|||
|Total non-current assets|334,393,246.33|341,265,953.81|
|Total assets|958,287,708.73|499,974,927.16|
|Current liabilities:|||
|Short-term borrowings|20,000,000.00|36,180,000.00|
|Financial liability measured by fair value and with variation|||
|reckoned into current gains/losses|||
|Derivative financial liability|||
|Notes payable|||
|Accounts payable|10,745,840.16|10,745,344.16|
|Accounts received in advance|420,611.24|126,522.29|
|Wage payable|724,418.36|655,258.44|
|Taxes payable|11,286,781.44|10,616,750.61|
|Interest payable|||
|Dividend payable|||
|Other accounts payable|56,873,489.93|11,799,762.43|
|Divided into liability held for sale|||
|Non-current liabilities due within 1 year|||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|Other current liabilities|||
|Total current liabilities|100,051,141.13|70,123,637.93|
|Non-current liabilities:|||
|Long-term loans|585,300,000.00|162,418,800.00|
|Bonds payable|||
|Including: preferred stock|||
|Perpetual capital securities|||
|Long-term account payable|||
|Long-term wages payable|||
|Special accounts payable|||
|Projected liabilities|2,765,583.81|2,604,411.81|
|Deferred income|||
|Deferred income tax liabilities|||
|Other non-current liabilities|||
|Total non-current liabilities|588,065,583.81|165,023,211.81|
|Total liabilities|688,116,724.94|235,146,849.74|
|Owners‘ equity:|||
|Share capita|283,161,227.00|283,161,227.00|
|Other equity instrument|||
|Including: preferred stock|||
|Perpetual capital securities|||
|Capital public reserve|109,496,837.33|109,496,837.33|
|Less: Inventory shares|||
|Other comprehensive income|||
|Reasonable reserve|||
|Surplus reserve|77,391,593.25|77,391,593.25|
|Retained profit|-199,878,673.79|-205,221,580.16|
|Total owner‘s equity|270,170,983.79|264,828,077.42|
|Total liabilities and owner‘s equity|958,287,708.73|499,974,927.16|

 3. Consolidated Profit Statement
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|I. Total operating income|694,839,760.10|626,821,044.64|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|Including: Operating income|694,839,760.10|626,821,044.64|
|Interest income|||
|Insurance gained|||
|Commission charge and commission income|||
|II. Total operating cost|691,076,836.44|634,436,289.11|
|Including: Operating cost|593,998,799.18|556,598,949.78|
|Interest expense|||
|Commission charge and commission expense|||
|Cash surrender value|||
|Net amount of expense of compensation|||
|Net amount of withdrawal of insurance contract reserve|||
|Bonus expense of guarantee slip|||
|Reinsurance expense|||
|Operating tax and extras|5,655,209.84|5,047,372.25|
|Sales expenses|11,512,229.16|10,021,716.98|
|Administration expenses|39,200,279.02|39,240,424.34|
|Financial expenses|39,784,553.27|21,454,338.85|
|Losses of devaluation of asset|925,765.97|2,073,486.91|
|Add: Changing income of fair value(Loss is listed with ―-‖)|||
|Investment income (Loss is listed with ―-‖)|983,612.12||
|Including: Investment income on affiliated company and joint venture|||
|Exchange income (Loss is listed with ―-‖)|||
|III. Operating profit (Loss is listed with ―-‖)|4,746,535.78|-7,615,244.47|
|Add: Non-operating income|6,490,823.59|2,575,851.50|
|Including: Disposal gains of non-current asset|1,752,028.49|267,153.14|
|Less: Non-operating expense|593,708.10|2,555,777.59|
|Including: Disposal loss of non-current asset|164,208.69|163,109.29|
|IV. Total Profit (Loss is listed with ―-‖)|10,643,651.27|-7,595,170.56|
|Less: Income tax expense|2,956,031.00|-1,077,769.12|
|V. Net profit (Net loss is listed with ―-‖)|7,687,620.27|-6,517,401.44|
|Net profit attributable to owner‘s of parent company|7,687,620.27|-6,517,401.44|
|Minority shareholders‘ gains and losses|||
|VI. Net after-tax of other comprehensive income|||
|Net after-tax of other comprehensive income attributable to owners of|||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|parent company|||
|(I) Other comprehensive income items which will not be reclassified|||
|subsequently to profit of loss|||
|1. Changes as a result of re-measurement of net defined benefit|||
|plan liability or asset|||
|2. Share of the other comprehensive income of the investee|||
|accounted for using equity method which will not be reclassified|||
|subsequently to profit and loss|||
|(II) Other comprehensive income items which will be reclassified|||
|subsequently to profit or loss|||
|1. Share of the other comprehensive income of the investee|||
|accounted for using equity method which will be reclassified subsequently|||
|to profit or loss|||
|2. Gains or losses arising from changes in fair value of|||
|available-for-sale financial assets|||
|3. Gains or losses arising from reclassification of|||
|held-to-maturity investment as available-for-sale financial assets|||
|4. The effect hedging portion of gains or losses arising from|||
|cash flow hedging instruments|||
|5. Translation differences arising on translation of foreign|||
|currency financial statements|||
|6. Other|||
|Net after-tax of other comprehensive income attributable to minority|||
|shareholders|||
|VII. Total comprehensive income|7,687,620.27|-6,517,401.44|
|Total comprehensive income attributable to owners of parent|||
||7,687,620.27|-6,517,401.44|
|Company|||
|Total comprehensive income attributable to minority shareholders|||
|VIII. Earnings per share:|||
|(i) Basic earnings per share|0.0271|-0.0230|
|(ii) Diluted earnings per share|0.0271|-0.0230|

 Enterprise combine under the same control in the Period, the combined party realized net profit of 0 Yuan before combination, and realized 0 Yuan at last period for combined party
Legal representative: Li Zhongqiu Person in charge of accounting works: Cao Li Person in charge of accounting institution: Wu Aijie
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 4. Profit Statement of Parent Company
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|I. Operating income|57,459,329.67|38,573,827.05|
|Less: Operating cost|10,236,937.60|10,063,936.59|
|Operating tax and extras|3,204,860.53|2,494,875.84|
|Sales expenses||138,440.72|
|Administration expenses|19,086,085.26|18,144,318.27|
|Financial expenses|18,513,856.94|8,751,126.52|
|Losses of devaluation of asset|975,765.97|839,574.18|
|Add: Changing income of fair value(Loss is listed with ―-‖)|||
|Investment income (Loss is listed with ―-‖)|||
|Including: Investment income on affiliated company and|||
|joint venture|||
|II. Operating profit (Loss is listed with ―-‖)|5,441,823.37|-1,858,445.07|
|Add: Non-operating income|1,756,470.00|409,661.28|
|Including: Disposal gains of non-current asset|1,600,000.00|107,000.00|
|Less: Non-operating expense|427,026.68|2,360,280.48|
|Including: Disposal loss of non-current asset|||
|III. Total Profit (Loss is listed with ―-‖)|6,771,266.69|-3,809,064.27|
|Less: Income tax expense|1,428,360.32|-347,614.41|
|IV. Net profit (Net loss is listed with ―-‖)|5,342,906.37|-3,461,449.86|
|V. Net after-tax of other comprehensive income|||
|(I) Other comprehensive income items which will not be|||
|reclassified subsequently to profit of loss|||
|1. Changes as a result of re-measurement of net defined|||
|benefit plan liability or asset|||
|2. Share of the other comprehensive income of the|||
|investee accounted for using equity method which will not be|||
|reclassified subsequently to profit and loss|||
|(II) Other comprehensive income items which will be|||
|reclassified subsequently to profit or loss|||
|1. Share of the other comprehensive income of the|||
|investee accounted for using equity method which will be reclassified|||
|subsequently to profit or loss|||
|2. Gains or losses arising from changes in fair value of|||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|available-for-sale financial assets|||
|3. Gains or losses arising from reclassification of|||
|held-to-maturity investment as available-for-sale financial assets|||
|4. The effect hedging portion of gains or losses arising|||
|from cash flow hedging instruments|||
|5. Translation differences arising on translation of|||
|foreign currency financial statements|||
|6. Other|||
|VI. Total comprehensive income|5,342,906.37|-3,461,449.86|
|VII. Earnings per share:|||
|(i) Basic earnings per share|||
|(ii) Diluted earnings per share|||

5. Consolidated Cash Flow Statement
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|I. Cash flows arising from operating activities:|||
|Cash received from selling commodities and providing labor services|531,329,345.21|382,754,162.28|
|Net increase of customer deposit and interbank deposit|||
|Net increase of loan from central bank|||
|Net increase of capital borrowed from other financial institution|||
|Cash received from original insurance contract fee|||
|Net cash received from reinsurance business|||
|Net increase of insured savings and investment|||
|Net increase of amount from disposal financial assets that measured|||
|by fair value and with variation reckoned into current gains/losses|||
|Cash received from interest, commission charge and commission|||
|Net increase of capital borrowed|||
|Net increase of returned business capital|||
|Write-back of tax received||3,999.97|
|Other cash received concerning operating activities|28,559,456.87|25,986,072.37|
|Subtotal of cash inflow arising from operating activities|559,888,802.08|408,744,234.62|
|Cash paid for purchasing commodities and receiving labor service|317,306,581.05|368,039,415.49|
|Net increase of customer loans and advances|||
|Net increase of deposits in central bank and interbank|||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|Cash paid for original insurance contract compensation|||
|Cash paid for interest, commission charge and commission|||
|Cash paid for bonus of guarantee slip|||
|Cash paid to/for staff and workers|60,699,398.41|51,347,044.11|
|Taxes paid|15,885,699.17|15,391,325.19|
|Other cash paid concerning operating activities|46,504,964.44|43,319,890.21|
|Subtotal of cash outflow arising from operating activities|440,396,643.07|478,097,675.00|
|Net cash flows arising from operating activities|119,492,159.01|-69,353,440.38|
|II. Cash flows arising from investing activities:|||
|Cash received from recovering investment|||
|Cash received from investment income|||
|Net cash received from disposal of fixed, intangible and other|||
||1,925,000.00|147,000.00|
|long-term assets|||
|Net cash received from disposal of subsidiaries and other units|||
|Other cash received concerning investing activities|||
|Subtotal of cash inflow from investing activities|1,925,000.00|147,000.00|
|Cash paid for purchasing fixed, intangible and other long-term assets|6,482,152.86|10,138,667.85|
|Cash paid for investment|500,000,000.00||
|Net increase of mortgaged loans|||
|Net cash received from subsidiaries and other units obtained|||
|Other cash paid concerning investing activities|44,452.72||
|Subtotal of cash outflow from investing activities|506,526,605.58|10,138,667.85|
|Net cash flows arising from investing activities|-504,601,605.58|-9,991,667.85|
|III. Cash flows arising from financing activities|||
|Cash received from absorbing investment|||
|Including: Cash received from absorbing minority shareholders‘|||
|investment by subsidiaries|||
|Cash received from loans|971,853,411.47|488,889,296.63|
|Cash received from issuing bonds|||
|Other cash received concerning financing activities|||
|Subtotal of cash inflow from financing activities|971,853,411.47|488,889,296.63|
|Cash paid for settling debts|576,115,233.45|437,643,335.50|
|Cash paid for dividend and profit distributing or interest paying|40,887,323.57|19,690,543.20|
|Including: Dividend and profit of minority shareholder paid by|||
|subsidiaries|||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|Other cash paid concerning financing activities|||
|Subtotal of cash outflow from financing activities|617,002,557.02|457,333,878.70|
|Net cash flows arising from financing activities|354,850,854.45|31,555,417.93|
|IV. Influence on cash and cash equivalents due to fluctuation in exchange|||
||1,946,419.38|-1,754,493.26|
|rate|||
|V. Net increase of cash and cash equivalents|-28,312,172.74|-49,544,183.56|
|Add: Balance of cash and cash equivalents at the period -begin|50,704,319.86|100,248,503.42|
|VI. Balance of cash and cash equivalents at the period -end|22,392,147.12|50,704,319.86|

 6. Cash Flow Statement of Parent Company
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|I. Cash flows arising from operating activities:|||
|Cash received from selling commodities and providing labor|||
||54,826,654.35|33,328,094.89|
|services|||
|Write-back of tax received|||
|Other cash received concerning operating activities|575,856,964.00|20,752,882.11|
|Subtotal of cash inflow arising from operating activities|630,683,618.35|54,080,977.00|
|Cash paid for purchasing commodities and receiving labor|||
||7,677,862.85|1,177,778.17|
|service|||
|Cash paid to/for staff and workers|5,118,552.72|5,415,040.53|
|Taxes paid|5,814,559.80|5,528,215.33|
|Other cash paid concerning operating activities|489,120,594.10|53,369,786.85|
|Subtotal of cash outflow arising from operating activities|507,731,569.47|65,490,820.88|
|Net cash flows arising from operating activities|122,952,048.88|-11,409,843.88|
|II. Cash flows arising from investing activities:|||
|Cash received from recovering investment|||
|Cash received from investment income|||
|Net cash received from disposal of fixed, intangible and other|||
||1,600,000.00|147,000.00|
|long-term assets|||
|Net cash received from disposal of subsidiaries and other units|100,000.00||
|Other cash received concerning investing activities|||
|Subtotal of cash inflow from investing activities|1,700,000.00|147,000.00|
|Cash paid for purchasing fixed, intangible and other long-term|||
||1,042,600.00|1,067,935.00|
|assets|||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|Cash paid for investment|501,000,000.00|2,000,000.00|
|Net cash received from subsidiaries and other units|||
|Other cash paid concerning investing activities|||
|Subtotal of cash outflow from investing activities|502,042,600.00|3,067,935.00|
|Net cash flows arising from investing activities|-500,342,600.00|-2,920,935.00|
|III. Cash flows arising from financing activities|||
|Cash received from absorbing investment|||
|Cash received from loans|632,000,000.00|39,000,000.00|
|Cash received from issuing bonds|||
|Other cash received concerning financing activities|||
|Subtotal of cash inflow from financing activities|632,000,000.00|39,000,000.00|
|Cash paid for settling debts|225,298,800.00|4,270,000.00|
|Cash paid for dividend and profit distributing or interest|||
||33,088,836.69|12,330,056.23|
|paying|||
|Other cash paid concerning financing activities|||
|Subtotal of cash outflow from financing activities|258,387,636.69|16,600,056.23|
|Net cash flows arising from financing activities|373,612,363.31|22,399,943.77|
|IV. Influence on cash and cash equivalents due to fluctuation in|||
||4,520.46|-48,353.20|
|exchange rate|||
|V. Net increase of cash and cash equivalents|-3,773,667.35|8,020,811.69|
|Add: Balance of cash and cash equivalents at the period -begin|18,575,925.94|10,555,114.25|
|VI. Balance of cash and cash equivalents at the period -end|14,802,258.59|18,575,925.94|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 7. Statement of Changes inOwners’ Equity (Consolidated)
This Period
In RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||This Period|||||||||||||
||Owners‘ equity attributable to parent company|||||||||||||
|||Other||||||||||||
|Item||||||||||||||
|||equity instrument|||||Other|||Provision||Minority|Total owners‘|
|||||||Less:||Reasona||||||
||Share capital||||||compre|||of||||
|||Prefer|Perpetual||Capital reserve|Inventor|hensive|ble|Surplus reserve|general|Retained profit|interests|equity|
|||||||y shares||reserve||||||
|||red|capital|Other|||income|||risk||||
|||stock|securities|||||||||||
|I. Balance at the end of the last year|283,161,227.00||||109,496,837.33||||77,391,593.25||-196,386,008.11||273,663,649.47|
|Add: Changes of accounting||||||||||||||
|policy||||||||||||||
|Error correction of the last||||||||||||||
|period||||||||||||||
|Enterprise combine under||||||||||||||
|the same control||||||||||||||
|Other||||||||||||||
|II. Balance at the beginning of this||||||||||||||
||283,161,227.00||||109,496,837.33||||77,391,593.25||-196,386,008.11||273,663,649.47|
|year||||||||||||||
|III. Increase/ Decrease in this year||||||||||||||
||||||||||||7,687,620.27||7,687,620.27|
|(Decrease is listed with ―-‖)||||||||||||||
||||||||||||7,687,620.27||7,687,620.27|
|(i) Total comprehensive income||||||||||||||
|(ii) Owners‘ devoted and decreased||||||||||||||
|capital||||||||||||||
|1.Common shares invested by||||||||||||||
|shareholders||||||||||||||
|2. Capital invested by holders of other||||||||||||||
|equity instruments||||||||||||||
|3. Amount reckoned into owners||||||||||||||
|equity with share-based payment||||||||||||||
|4. Other||||||||||||||
|(III) Profit distribution||||||||||||||
|1. Withdrawal of surplus reserves||||||||||||||
|2. Withdrawal of general risk||||||||||||||
|provisions||||||||||||||
|3. Distribution for owners (or||||||||||||||
|shareholders)||||||||||||||
|4. Other||||||||||||||
|(IV) Carrying forward internal||||||||||||||
|owners‘ equity||||||||||||||
|1. Capital reserves conversed to||||||||||||||
|capital (share capital)||||||||||||||
|2. Surplus reserves conversed to||||||||||||||
|capital (share capital)||||||||||||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||||
|-|-|-|-|-|-|
|3. Remedying loss with surplus||||||
|reserve||||||
|4. Other||||||
|(V) Reasonable reserve||||||
|1. Withdrawal in the report period||||||
|2. Usage in the report period||||||
|(VI)Others||||||
|IV. Balance at the end of the report|||||281,351,269.74|
||283,161,227.00|109,496,837.33|77,391,593.25|-188,698,387.84||
|period||||||

Last Period
In RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||Last Period|||||||||||||
||Owners‘ equity attributable to the parent Company|||||||||||||
|||Other||||||||||||
|Item||||||||||||||
|||equity instrument|||||Other|||Provisi||Minority|Total owners‘|
|||||||Less:||Reasona||||||
||Share capital||||||compre||Surplus|on of||interests|equity|
|||Preferred|Perpetual||Capital reserve|Inventoryshares|hensive|blereserve|reserve|general|Retained profit|||
||||capital|Other|||income|||risk||||
|||stock||||||||||||
||||securities|||||||||||
||283,161,227.00||||109,496,837.33||||77,391,593.25||-189,868,606.67||280,181,050.91|
|I. Balance at the end of the last year||||||||||||||
|Add: Changes of accounting||||||||||||||
|policy||||||||||||||
|Error correction of the last||||||||||||||
|period||||||||||||||
|Enterprise combine under||||||||||||||
|the same control||||||||||||||
|Other||||||||||||||
|II. Balance at the beginning of this||||||||||||||
||283,161,227.00||||109,496,837.33||||77,391,593.25||-189,868,606.67||280,181,050.91|
|year||||||||||||||
|III. Increase/ Decrease in this year||||||||||||||
||||||||||||-6,517,401.44||-6,517,401.44|
|(Decrease is listed with ―-‖)||||||||||||||
||||||||||||-6,517,401.44||-6,517,401.44|
|(i) Total comprehensive income||||||||||||||
|(ii) Owners‘ devoted and decreased||||||||||||||
|capital||||||||||||||
|1.Common shares invested by||||||||||||||
|shareholders||||||||||||||
|2. Capital invested by holders of||||||||||||||
|other equity instruments||||||||||||||
|3. Amount reckoned into owners||||||||||||||
|equity with share-based payment||||||||||||||
|4 Other||||||||||||||
|(III) Profit distribution||||||||||||||
|1. Withdrawal of surplus reserves||||||||||||||
|2. Withdrawal of general risk||||||||||||||
|provisions||||||||||||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||||
|-|-|-|-|-|-|
|3. Distribution for owners (or||||||
|shareholders)||||||
|4. Other||||||
|(IV) Carrying forward internal||||||
|owners‘ equity||||||
|1. Capital reserves conversed to||||||
|capital (share capital)||||||
|2. Surplus reserves conversed to||||||
|capital (share capital)||||||
|3. Remedying loss with surplus||||||
|reserve||||||
|4. Other||||||
|(V) Reasonable reserve||||||
|1. Withdrawal in the report period||||||
|2. Usage in the report period||||||
|(VI)Others||||||
|IV. Balance at the end of the report||||||
||283,161,227.00|109,496,837.33|77,391,593.25|-196,386,008.11|273,663,649.47|
|period||||||

8. Statement of Changes inOwners’ Equity (Parent Company)
This Period
In RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||This Period|||||||||||
|||Other||||||||||
|||equity instrument|||||Other|||||
|Item||||||Less:||||||
||||||||compre|Reasonable|Surplus|||
||Share capital|||||||||Retained profit|Total owners‘ equity|
||||||Capital reserve|Inventory||||||
||||Perpetual||||hensive|reserve|reserve|||
|||Preferred||||shares||||||
||||capital|Other|||income|||||
|||stock||||||||||
||||securities|||||||||
||283,161,227.00||||109,496,837.33||||77,391,593.25|-205,221,580.16|264,828,077.42|
|I. Balance at the end of the last year||||||||||||
|Add: Changes of accounting||||||||||||
|policy||||||||||||
|Error correction of the last||||||||||||
|period||||||||||||
|Other||||||||||||
|II. Balance at the beginning of this||||||||||||
||283,161,227.00||||109,496,837.33||||77,391,593.25|-205,221,580.16|264,828,077.42|
|year||||||||||||
|III. Increase/ Decrease in this year||||||||||||
|||||||||||5,342,906.37|5,342,906.37|
|(Decrease is listed with ―-‖)||||||||||||
|||||||||||5,342,906.37|5,342,906.37|
|(i) Total comprehensive income||||||||||||
|(ii) Owners‘ devoted and decreased||||||||||||
|capital||||||||||||
|1.Common shares invested by||||||||||||
|shareholders||||||||||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||||
|-|-|-|-|-|-|
|2. Capital invested by holders of||||||
|other equity instruments||||||
|3. Amount reckoned into owners||||||
|equity with share-based payment||||||
|4. Other||||||
|(III) Profit distribution||||||
|1. Withdrawal of surplus reserves||||||
|2. Distribution for owners (or||||||
|shareholders)||||||
|3. Other||||||
|(IV) Carrying forward internal||||||
|owners‘ equity||||||
|1. Capital reserves conversed to||||||
|capital (share capital)||||||
|2. Surplus reserves conversed to||||||
|capital (share capital)||||||
|3. Remedying loss with surplus||||||
|reserve||||||
|4. Other||||||
|(V) Reasonable reserve||||||
|1. Withdrawal in the report period||||||
|2. Usage in the report period||||||
|(VI)Others||||||
|IV. Balance at the end of the report|||||270,170,983.79|
||283,161,227.00|109,496,837.33|77,391,593.25|-199,878,673.79||
|period||||||

Last period
In RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||Last period|||||||||||
|||Other||||||||||
|||equity instrument||||||||||
||||||||Other|||||
|Item||||||Less:nventoryshares||||||
||||Perpet||||compreh|Reasonable||||
||Share capital|||||||||Retained profit|Total owners‘ equity|
||||||Capital reserve I||||Surplus reserve|||
||||ual||||ensive|reserve||||
|||Preferred||||||||||
||||capital|Other|||ncome|||||
|||stock||||i||||||
||||securit|||||||||
||||ies|||||||||
||283,161,227.00||||109,496,837.33||||77,391,593.25|-201,760,130.30|268,289,527.28|
|I. Balance at the end of the last year||||||||||||
|Add: Changes of accounting||||||||||||
|policy||||||||||||
|Error correction of the last||||||||||||
|period||||||||||||
|Other||||||||||||
|II. Balance at the beginning of this||||||||||||
||283,161,227.00||||109,496,837.33||||77,391,593.25|-201,760,130.30|268,289,527.28|
|year||||||||||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||||
|-|-|-|-|-|-|
|III. Increase/ Decrease in this year||||||
|||||-3,461,449.86|-3,461,449.86|
|(Decrease is listed with ―-‖)||||||
|||||-3,461,449.86|-3,461,449.86|
|(i) Total comprehensive income||||||
|(ii) Owners‘ devoted and decreased||||||
|capital||||||
|1.Common shares invested by||||||
|shareholders||||||
|2. Capital invested by holders of||||||
|other equity instruments||||||
|3. Amount reckoned into owners||||||
|equity with share-based payment||||||
|4. Other||||||
|(III) Profit distribution||||||
|1. Withdrawal of surplus reserves||||||
|2. Distribution for owners (or||||||
|shareholders)||||||
|3. Other||||||
|(IV) Carrying forward internal||||||
|owners‘ equity||||||
|1. Capital reserves conversed to||||||
|capital (share capital)||||||
|2. Surplus reserves conversed to||||||
|capital (share capital)||||||
|3. Remedying loss with surplus||||||
|reserve||||||
|4. Other||||||
|(V) Reasonable reserve||||||
|1. Withdrawal in the report period||||||
|2. Usage in the report period||||||
|(VI)Others||||||
|IV. Balance at the end of the report||||||
||283,161,227.00|109,496,837.33|77,391,593.25|-205,221,580.16|264,828,077.42|
|period||||||

Ⅲ. Basic information of the Company
Shenzhen Zhongheng Hwafa Co, Ltd. (hereinafter referred to as―theCompany‖ or referred to as―theGroup‖ when it includes the subsidiary) was founded on Dec. 8, 1981, with the business license number being 440301501120670. The legal representative of the Company is Mr. Li Zhongqiu and theCompany‘s registered address is at No. 411 Building, Huafa North Road, Futian District, Shenzhen.
The Company is specialized in manufacturing the computer, communication and other electronic equipment, the business scope:
manufacturing& operating each kind of color TV, LCD monitor, LCD screen (subject to branch offices), hi-fi equipment, digital
watch, TV game player and computer as well as auxiliary circuit boards, precise injection moulding ware, light packing materials
(manufacturing& operating in Wuhan), hardware (including molds), electroplate and solder stick, real estate development and
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. operation (ref. S.F.D.C.No. 7226760), property management. Establishing affiliate companies in Wuhan and Jilin, branch offices in each capital city (excluding Lhasa) and cities directly under jurisdiction of the Central Government.
The Company has established theshareholders‘ meeting, board of directors and board of supervisors. Theshareholders‘ meeting is the organ of authority of the Company that is responsible for exercising the right to decide the significant matters such as theCompany‘s management guideline, financing, investing and profit distribution according to laws. The board of directors is responsible for theshareholders‘ meeting and has the right to exercise theCompany‘s right of management and decision-making according to laws; the management layer is responsible for organizing theshareholders‘ meeting, implementing the resolutions of the board of directors and presiding over theCompany‘s production, operation and management.
The approved release date of the financial report: April 24, 2015.
When compared with last year, Huafa Hengtai Company is newly established in this year as the sales to Huafa Trade Company are reduced. See the Note―VIII. Change in the ConsolidationScope‖ and the Note―IX. Rights and Interests in OtherEntities‖ for details.
IV. Preparation Basis of Financial Statements
1. Preparation Basis
The Group's financial statements were prepared on the basis of the actual transactions or businesses occurred in its continuous operation according to the Enterprise Accounting Principle promulgated by the Ministry of Finance and according to the "important accounting policies and accounting evaluation".
2. Going Concern
The Group has the sustainable operation ability within at least 12 months since the end of the reporting period and has no significant matters that will affect such sustainable operation ability.
Ⅴ. Significant Accounting Policy and Accounting Estimate
Specific accounting policy and accounting estimate tips:
The specific accounting policy and accounting estimate prepared by the Group according to actual production and operation characteristics include operating cycle, recognition and measurement of bad debt provisions over account receivable, measurement of delivered inventories, fixed asset classification and depreciation method, intangible assets amortization, income recognition and measurement.
1. Statement regarding Following Business Accounting Standards
The Financial Statement prepared by the Group complies with the requirements of Business Accounting Standards, and reflect such information regarding enterprise financial situation, operation result and cash flows, etc. on the factual and complete basis. 2. Accounting Period
The accounting period of the Group is from each 01 January to 31 December in the Gregorian calendar.
3. Operating Cycle
The operating cycle of the Group is 12 months and the operating cycle is treated as the classification standard for the liquidity of
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. the assets and liabilities.
4. Standard Currency
RMB is adopted as standard currency by the Group.
5．Accounting processes of business mergers under the same control and those not under the same control The assets and liabilities obtained by the Group, as the combining party, during the business merger under common control shall be measured based on the book value of the combined party in the consolidated statements of the final controlling party on the merger date. Where there is any difference between the book value of obtained net assets and the book value of paid merger consideration, the capital reserve shall be adjusted; where the capital reserve is not sufficient for writing down, the retained earnings shall be adjusted.
Theacquiree‘s identifiable assets, liabilities or contingent liabilities obtained during business merger under non-common control shall be measured based on the fair value in the acquisition date. The merger cost is the sum of the fair value of the cashes or non-cash assets paid by the Group on the acquisition date for obtaining the control right of the acquire, liabilities issued or assumed and equity securities issued and direct related expenses occurred in the business merger (for the business merger achieved step by step through several times of transaction, the merger cost shall be the sum of the costs of all single transactions). The difference between the merger cost and the fair value of identifiable net assets of the acquiree obtained in the merger shall be recognized as the goodwill; where the merger cost is lower than the fair value of identifiable net assets of the acquiree obtained in the merger, the fair value of various identifiable assets, liabilities or contingent liabilities obtained in the merger and the fair value of the non-cash assets of the merger consideration or the equity securities issued shall be reviewed. Upon review, where the merger cost is still less than the fair value of the identifiable net assets of the acquiree obtained in the merger, the difference shall be recorded in the non-business income on the same period of the merger.
6. Preparation of Consolidated Financial Statement
The Group incorporates all controlled subsidiaries into the scope of the consolidated financial statements.
It shall make necessary adjustment onsubsidiaries‘ financial statements according to the accounting policy or accounting period adopted by the Company when prepare consolidated financial statement.
All significant internal transactions, balance of current accounts and unrealized profit within the scope of merger shall be offset when preparing the consolidated financial statements. The shares in the ownership interest of the subsidiary thatdon‘t belong to the parent company and the shares in the current net profits and losses, other comprehensive incomes and total comprehensive incomes that belong to the minoritystockholder‘s interest shall be listed respectively in the item of―minoritystockholder‘s interest, minority interest income, other comprehensive incomes belonging to the minority shareholder and total comprehensive incomes belonging to the minorityshareholder‖ in the consolidated financial statement.
The operating result and cash flow of the subsidiary obtained during the business merger under common control shall be incorporated into the consolidated financial statements at the beginning of the merger period. When preparing the consolidated financial statement, relevant items in the financial statement of last year shall be adjusted and the report entity formed after merger shall be deemed to exist always since the final controlling party starts control.
Where the business merger is finally realized by obtaining the equity of the invested unit under common control step by step via several times of transactions, the handling method in the consolidated financial statement shall be supplemented and disclosed
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. during the reporting period when obtaining the control right. For instance: where the business merger is finally realized by obtaining the equity of the invested unit under common control step by step via several times of transactions, when preparing the consolidated financial statement, it shall be deemed as being adjusted according to the current status when the final controlling party starts control; when preparing the comparison statement, relevant assets and liabilities of the acquiree shall be incorporated into the comparison statement of the consolidated financial statement of the Group not earlier than the period when the Group and the acquiree are under the common control of the final controlling party, and the net assets increased due to merger shall be adjusted in the comparison statement as the relevant items under the item of ownership benefit. In order to avoid repeated calculation of the value of net assets of the acquiree, the long-term equity investment held by the Group before merger, relevant profits and losses recognized from the date when obtaining the original equity and the date when the Group and the acquiree are under the common final control (whichever is later) to the merger date, other comprehensive income and change in other net asset shall be written down to compare the retained earnings at the beginning of the period and the profits and losses at the current period during the comparison statement period. Where the subsidiary is obtained via business merger under non-common control, the operating result and cash flow shall be incorporated into the consolidated financial statement since the date when the Group obtains the control right. When preparing the consolidated financial statement, the financial statement of the subsidiary shall be adjusted based on the fair value of various identifiable assets, liabilities and contingent liabilities determined on the acquisition date.
Where the business merger is finally realized by obtaining the equity of the invested unit under common control step by step via several times of transactions, the handling method in the consolidated financial statement shall be supplemented and disclosed during the reporting period when obtaining the control right. For instance: where the business merger is finally realized by obtaining the equity of the invested unit under common control step by step via several times of transactions, when preparing the consolidated financial statement, the equity of the acquiree held before the acquisition date shall be re-measured according to the fair value of the equity on the acquisition date; the difference between the fair value and the book value shall be recorded in the current investment income; where the relevant equity of the acquiree held before the acquisition date involves other comprehensive income under the accounting based on equity method and other ownership benefit change other than the net profit and loss, other comprehensive income and profit distribution, the equity shall be transferred to the profit and loss on investments on the current period of the acquisition date, with an exception of the other comprehensive income generated from the change in the net liabilities or net assets under the benefit plan set based on the re-measurement by the investee.
Where the Group disposes part of the long-term equity investment on the subsidiary without losing the control right, in the consolidated financial statement, the difference between the disposal cost and the shares of the net assets of the subsidiary continuously calculated since the acquisition date or the merger date to which the disposal cost of long-term equity investment corresponds shall be adjusted as the capital premium or stock premium; where the capital reserve is not sufficient for write-downs, the retained earnings shall be adjusted.
Where the Group loses the control over the investee due to reasons such as disposal of partial equity investment, when preparing the consolidated financial statement, the remaining equity shall be re-measured based on its fair value on the date when it loses the control right. The sum of the consideration obtained from disposal of the equity and the fair value of remaining equity, after deducting the difference between the shares of the net assets of the original subsidiary continuously calculated since the acquisition date or merger date and calculated based on the original shareholding ratio, shall be recorded in the profit and loss on the investment on the current period when losing the control right and shall be used to write down the goodwill. The other comprehensive income related to the equity investment of original subsidiary shall be transferred to the profit and loss on investment on current period when losing the control right.
Where the Group disposes the equity investment on subsidiary step by step via several times of transactions until the Group
loses the control right, if several transactions about disposal of the equity investment on subsidiary till loss of the control right belong
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. to package deals, various transactions shall be treated as a transaction disposing the subsidiary and losing the control right for accounting handling; however, before loss of the control right, the difference between each disposal price and the share in the net assets of the subsidiary which corresponds to the disposed investment shall be recognized as other comprehensive income in the consolidated financial statement, which shall be transferred into the profit and loss on investment on the current period when the control right is lost.
7. Joint Venture Arrangement and Classification and Joint Operation Accounting Handling Method The joint venture arrangement of the Group includes the joint operation and joint venture. For joint operation project, the Group, as the cooperative enterprise in the joint operation, shall have the right to confirm the separately held assets and assumed liabilities and shall confirm the held assets and assumed liabilities according to shares and confirm relevant income and expense separately according to relevant agreement or based on shares. Where the joint operation related procurement and salesdoesn‘t constitute the business asset transaction, only the part of the profit and loss generated from the transaction that belongs to the other participants under joint operation shall be recognized.
8. Determination criteria of cash and cash equivalents
The cash referred to in the Cash Flow Statement of the Group means stocked cash and deposit available for payment at any time. The cash equivalents therein refer to investment due within 3 months since purchasing day, strong fluidity, small risk in value variation and easy to converted into cash of predictable sum.
9. Conversion in foreign currency transactions and Conversion of foreign currency statements
(1) Foreign currency transaction
Foreign currency amount of thegroup‘s foreign currency business is converted into Renminbi amount in accordance with market exchange rate published by thePeople‘s Bank of China at the beginning of the current month. At the reporting day of Balance Sheet, the monetary assets in foreign currencies are translated at the instant exchange rate of the reporting day of Balance sheet. As to the exchange loss and profit occurred, except for that of special loan for the purchase or production of assets which meet the conditions of capitalization, which shall be treated according to the principles of capitalization, others shall be accrued into loss and profit in current term.
(2) Conversion of foreign-currency financial statement
Assets and debt items in foreign-currency balance shall be converted with spot rate on the date of balance sheet; ownership items except―undistributedprofit‖ shall be converted according to spot rate; income and fee item in profit statement shall be converted according to market exchange rate issued byPeople‘s Bank of China at the beginning of the month when transaction is made. The translation difference in the foreign currency statement generated due to above translation shall be listed in the item of other comprehensive income. Foreign-currency cash flow adopts in conversion market exchange rate issued byPeople‘s Bank of China at the beginning of the month when cash flow is incurred. Change amount due to influence from change of exchange rate to cash shall be listed independently in cash flow sheet.
10. Financial Instruments
When the Group becomes a party to the financial instrument contract, one financial asset or financial liability shall be recognized.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. (1) Financial asset
1) Financial asset classification, recognition basis and measurement method
The Group divides its owned financial assets, based on the investment purpose and economic nature, into the financial assets which are measured based on fair value and which changes are recorded in current loss and profit, held-to-maturity investment, accounts receivables and available-for-sale financial assets.
The financial assets that are measured based on the fair value and which change is recorded in current profit and loss shall include the trading financial assets and the financial assets which are designated at the initial recognition as assets which are measured based on the fair value and which change is recorded in current profit and loss. The Group divides the financial assets meeting one of the following conditions into the trading financial assets: the purpose for obtaining the financial asset is for sales within a short term period; which belong to a part of the identifiable financial instrument portfolio under centralized management and there is an objective evidence showing that the company adopts short-term profit method in recent period to manage the portfolio; which also belong to the derivative instrument, but the derivative instrument that are designated and that belong to effective arbitrage instrument, the derivative instrument within the scope of financial guarantee contract, the equity instrument that is not quoted in the active market and which fair value cannot be reliably measured and the derivative instrument that is settled via delivery of equity instrument are not included. The Group requires designating the financial instrument meeting one of the following conditions as the financial asset which is measured based on fair value and which change is recorded in the current profit and loss at the time of initial recognition: such designation can eliminate or obviously reduce the discrepancy in the recognition or measurement of relevant profit or loss caused by different measurement basis of financial instrument; the official written document ofcompany‘s risk management or investment strategy has specified that the financial instrument portfolio shall be managed, evaluated and reported to the key management personnel based on the fair value; include the mixed instruments with one or several embedded derivative instruments, unless that the embedded derivative instrumentdoesn‘t significantly change the cash flow of the mixed instruments, or the embedded derivative instrument shall not be separated from relevant mixed instruments obviously; include the mixed instruments of embedded derivative instruments to be separated but that cannot be separately measured on the date of acquisition date or on the subsequent balance sheet date. The financial assets designated by the Group mainly include the trading financial assets. Such financial assets shall be measured subsequently based on fair value. The change in the fair value shall be recognized in profit or loss; the interest or cash dividends obtained during the period when the assets are held shall be recognized as income from investment; at the time of disposal, the difference between the fair value and the initial recorded amount shall be recognized as the profit and loss on investment. Meanwhile, the profit and loss on the change in fair value shall be adjusted.
Held-to-maturity investment refers to non-derivative financial asset with fixed maturity, fixed or confirmable returnable amount and that can be held to maturity according to theGroup‘s clear intention and ability. The held-to-maturity investment shall be subsequently measured based on the amortized cost according to the effective interest method. And the amortized or reduced amount and the profit or loss generated at the time of final recognition shall be recorded in current profit and loss.
Accounts receivables refer to the non-derivative financial assets that have no quotation in active market and that have fixed or confirmable recoverable amount. Accounts receivables shall be subsequently measured based on the amortized cost according to the effective interest method. And the amortized or reduced amount and the profit or loss generated at the time of final recognition shall be recorded in current profit and loss.
Available-for-sale financial assets refer to the non-derivative financial assets which are designated as the available-for-sale financial assets at the time of initial recognition and the financial assets that are not divided into other categories. In such assets, the equity instrument investment that have no quotation in the active market and that fair value cannot be reliably measured and the derivative financial assets that are linked to the equity instrument and that shall be settled via delivery of the equity instrument shall
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. be measured subsequently according to cost; other assets that have quotation in active market or that have no quotation in active market but have fair value that can be reliably measured shall be measured based on fair value and the change in fair value shall be recorded in the other comprehensive income. Such financial assets shall be subsequently measured based on fair value; except for the impairment loss and the exchange gain or loss generated by the foreign currency financial assets, the change in fair value of the available-for-sale financial assets shall be directly recorded in thestockholders‘ equity. When the financial assets are finally recognized, the accumulated changes in fair value that are directly recorded in the equity shall be transferred into the current profit and loss. The interest of the available-for-sale debt instrument investment calculated based on effective interest method during the holding period and the cash dividends to be distributed according to the announcement of the invested unit that are related to the available-for-sale equity instrument shall be recorded in the current profit and loss as the income from investment. The equity instrument investment that has no quotation in the active market and that fair value cannot be reliably measured shall be measured based on the cost.
2) Recognition basis and measurement method of financial asset transfer
The financial assets meeting one of the following conditions shall be derecognized: (1) the contractual right for collecting the cash flow of the financial asset shall be terminated; (2) the financial asset has been transferred and the Group transfers almost all risks and remunerations on the ownership of financial asset to the carrying party; (3) the financial asset has been transferred, even though the Group neither transfers nor retains almost all risks and remunerations on the ownership of the financial assets, but waives the control right over the financial asset.
Where the enterprise neither transfers nor retains almost all risks and remunerations on the ownership of the financial asset anddoesn‘t waive the control right over the financial asset, relevant financial asset shall be recognized according to its involvement degree in the transferred financial asset and relevant liabilities shall be recognized accordingly.
Where the overall transfer of the financial asset can meet the condition of derecognition, the difference between the book value of transferred financial assets and the sum of the consideration received due to transfer and the accumulated changes in fair value that are originally recorded in other comprehensive income shall be recorded in current profit and loss.
Where partial transfer of the financial asset can meet the condition of derecognition, the overall book value of transferred financial assets shall be shared based on respective relative fair value between the derecognized part and the non-derecognized part; and the difference between the sum of the consideration received due to transfer and the accumulated changes in fair value that are originally recorded in other comprehensive income and the above shared book value shall be recorded in the current profit and loss. 3) Test method and accounting treatment method of financial assets impairment
Except for the financial assets that are measured based on fair value and which changes are recorded in current profit and loss, the Group shall inspect the book value of other financial assets on the balance sheet date. If there is any objective evidence showing that a certain financial asset is impaired, the provision for impairment shall be withdrawn.
Where the financial assets measured based on amortized cost are impaired, the provision for impairment shall be withdrawn based on the difference between the present value of estimated future cash flow (excluding the future credit loss that has not yet occurred) and the book value. If there is any objective evidence showing that the value of the financial asset has been recovered, which is related to the matter occurred after the loss is confirmed objectively, the originally recognized impairment loss shall be transferred back and recorded in current profit and loss.
Where the available-for-sale financial assets are impaired, the accumulated losses caused due to decrease in fair value that are originally and directly recorded in the ownership interest shall be transferred out and recorded in the impairment loss. For the
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. available-for-sale debt instrument investment which impairment loss has been recognized, if the future fair value increases and it is related to the matter occurred after recognition of original impairment loss objectively, the originally recognized impairment loss shall be transferred back and recorded in current profit and loss. For the available-for-sale equity instrument investment which impairment loss has been recognized, the increased in future fair value shall be directly recorded in the ownership interest.
(2) Financial liabilities
1) Classification, recognition basis and measurement method of financial liabilities
The financial liabilities of the Group shall, at the time of initial recognition, be classified as the financial liabilities that are measured based on fair value and which changes are recorded in current profit and loss and other financial liabilities.
The financial liabilities that are measured based on the fair value and which change is recorded in current profit and loss shall include the trading financial liabilities and the financial assets which are designated at the initial recognition as liabilities which are measured based on the fair value and which change is recorded in current profit and loss. The financial liabilities shall be subsequently measured based on the fair value and the profit or loss generated from change in fair value and the dividend and interest expense related to the financial liabilities shall be recorded in current loss and profit.
Other financial liabilities shall be subsequently measured based on the amortized cost according to the effective interest method.
2) Condition for derecognition of the financial liabilities
When the current obligations of financial liabilities have been removed fully or partially, the part of the financial liabilities or obligations that has been removed shall be derecognized. Where the Company and the creditor enter into an agreement to replace current financial liabilities by assuming new financial liabilities and where the contractual terms with regard to new financial liabilities and the current financial liabilities are different in substance, the current financial liabilities shall be derecognized and the new financial liabilities shall be recognized. Where the Company makes substantial amendment to all or part of the contractual terms for the current financial liabilities, all or part of the current financial liabilities shall be derecognized and the financial liabilities which terms are amended shall be recognized as new financial liabilities. The difference between the book value of the part that is derecognized and the paid consideration shall be recorded in current profit and loss.
(3) Determination method of the fair value of financial assets and financial liabilities
The Group measures the fair value of financial assets and financial liabilities according to the price of the main market. If there is no main market, the Group will measure the fair value of financial assets and financial liabilities according to the price that is most favorable to the market and adopt the suitable valuation technique that is supported by sufficient available data and other information. The input value used for measurement of fair value can be divided into three levels: for the first level, the input value is the unadjusted quotation of the same asset or liability in the active market that can be obtained in the measurement date; for the second level, the input value refers to the input value of relevant asset or liability that can be observed directly or indirectly other than the input value at first level; for the third level, the input value refers to the input value of relevant asset or liability that cannot be observed. The Group preferentially uses the input value at first level and then uses the input value at third level. The level of the measurement result of fair value shall be determined based on the lowest level of the input value that is significant to the overall measurement of the fair value.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 11. Accounts Receivables
(1) Accounts receivables with large single amount which bad debt provision is withdrawn separately
|||
|-|-|
|Judgment criteria or amount standard of material specific|The accounts receivables with the single amount being larger than|
|amount or amount criteria|RMB 500000 are treated as the significant accounts receivables|
|Provision method with material specific amount and|Provision bad debt preparation in accordance with the difference of|
|provision of specific bad debt preparation|present value of future cash flow below the book value|

(2) Accounts receivable which bad debt provision is withdrawn according to the credit risk characteristics
|||
|-|-|
|Combination name|Methods for withdrawing the bad debt provision|
|Aging portfolio|Aging analysis method|

Bad debt reserve accrued by aging analysis method in the combination
√ Applicable□ Inapplicable
||||
|-|-|-|
|||Accrual proportion of Other Accounts|
|Account ageing|Accrual proportion of account receivables||
|||Receivable|
|< 1 year|0.00%|0.00%|
|1-2 year (s)|5.00%|5.00%|
|2-3 year (s)|10.00%|10.00%|
|Over 3 years|30.00%|30.00%|

 Bad debt reserve accrued by balance percentage method in the combination
□ Applicable√ Inapplicable
Bad debt reserve accrued by other method in the combination
□ Applicable√ Inapplicable
(3) Accounts receivable that were not significant but have been provisioned bad debt preparation separately
|||
|-|-|
|Reason of specific bad debt preparation|Accounts receivable with non-material specific amount and being not able to reflect|
|provision|its risk character by provisioning bad debt preparation in accordance with portfoio|
||Bad debt preparation will be provisioned in accordance with the difference of presentvalue of its future cash flow below its book value.|
|Provision method of bad debt preparation||

12. Inventories
The inventories of the Group mainly include the raw materials, goods in process, commodities in stock, low priced and easily worn articles, self-made and semi-finished products and outsourced materials.
The perpetual inventory system is implemented for inventories. The inventories shall be valued based on actual cost at the time of acquisition; for reception or delivery of inventories, the actual cost of the inventories shall be determined based on the first-in and
first-out method. The low priced and easily worn articles and packing materials shall be amortized based on the one-ff amortization
method.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. For such stocked goods directly for sales as products in stocks, products in progress and materials for sales, their net realizable value shall be recognized after deducting the estimated sales expenses and relevant taxes from estimated sales price of such inventories. For stocked materials for production use, their net realizable value shall be recognized after deducting estimated cost occurring at completion, sales expenses and relevant tax from estimated sales price of products to be manufactured.
13. Long-term Equity Investment
TheGroup‘s long-term equity investment mainly refers to the investment in subsidiaries, joint ventures and cooperative enterprises.
The judgment basis of the Group on common control: all participants or the participating groups collectively control the arrangement and the policy of the arrangement-related activity shall be consistently agreed by the participants who collectively control such arrangement.
When the Group directly or indirectly owns the voting rights larger than20% of the total voting rights of the invested unit (inclusive) but lower than50% of the total voting rights via subsidiaries, it is often considered a significant influence on the invested unit. Where the Group holds less than20% of the voting rights of the invested unit, whether it has a significant influence on the invested unit shall be judged after comprehensively considering the facts and situations that the Group assign representatives to the investedunit‘s board of directors or similar organs of power, the Group participates in the financial and operation policy preparation process of the invested unit, the Group has important transactions with the invested unit, the Group assigns management personnel to the invested unit or the Group provides the invested unit with key technical information and materials.
The unit controlling the invested unit shall be the subsidiary of the Group. For the long-term equity investment obtained from the business merger under common control, the shares of the book value of the net assets of the acquiree in the consolidated financial statement of the final controlling party obtained in the merger date shall be treated as the initial investment cost of the long-term equity investment. Where the book value of the net assets of the acquiree on the merger date is negative, the long-term equity investment cost shall be determined as zero.
Where the business merger is finally realized by obtaining the equity of the invested unit under common control step by step via several times of transactions, the handling method of long-term equity investment in the parentcompany‘s consolidated financial statement shall be supplemented and disclosed during the reporting period when obtaining the control right. For instance: where the business merger is finally realized by obtaining the equity of the invested unit under common control step by step via several times of transactions, which belongs to the package deal, the Group shall conduct accounting treatment by treating various transactions as a transaction obtaining the control right. Where itdoesn‘t belong to a package deal, on the merger date, the shares of the book value of the net assets of the acquiree in the consolidated financial statement of final controlling party after merger shall be treated as the initial investment cost of the long-term equity investment. The difference between the initial investment cost and the sum of the book value of long-term equity investment before the merger and the book value of new payment consideration of shares further obtained on the merger date shall be used to adjust the capital reserves. Where the capital reserves are not sufficient for write-downs, the retained earnings shall be written down.
Where the long-term equity investment is obtained through the business merger under non-common control, the merger cost shall be treated as the initial investment cost.
Where the business merger is finally realized by obtaining the equity of the invested unit under non-common control step by step via several times of transactions, the handling method of long-term equity investment in the parentcompany‘s consolidated financial statement shall be supplemented and disclosed during the reporting period when obtaining the control right. For instance:
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. where the business merger is finally realized by obtaining the equity of the invested unit under non-common control step by step via several times of transactions, which belongs to the package deal, the Group shall conduct accounting treatment by treating various transactions as a transaction obtaining the control right. Where itdoesn‘t belong to a package deal, the sum of the book value of originally held equity investment and the newly-increased investment cost shall be treated as the initial investment cost accounted based on cost method. Where the equity held before the acquisition date is accounted based on equity method, other relevant comprehensive income accounted based on original equity method shall not be adjusted temporarily and during disposal of such investment, accounting treatment shall be carried out based on the same basis on which the invested unit directly disposes relevant assets or liabilities. Where the equity held before the acquisition date in the available-for-sale financial assets is accounted based on fair value, the accumulated changes in fair value that shall be recorded in other comprehensive income originally shall be transferred into the current profit and loss on investment on the merger date.
Except for the long-term equity investment obtained via the business merger, for the long-term equity investment obtained via the cash payment, the purchase price actually paid shall be treated as the investment cost; while for the long-term equity investment obtained via issuance of equity securities, the fair value of the issued equity securities shall be treated as the investment cost; for the long-term equity investment invested by the investors, the value specified in the investment contract or the agreement shall be treated as the investment cost; where the Company has any long-term equity investment obtained via debt restructuring and non-currency asset exchange, the method to determine the investment cost shall be disclosed in accordance with relevant regulations of accounting standards for business enterprises and the actual situation of the Company.
The Group adopts the cost method to account the investment on the subsidiaries and adopts the equity method to account the investment on the joint venture and cooperative enterprises.
For the long-term equity investment measured and accounted subsequently based on the cost method, when increasing the investment, the book value of the long-term equity investment cost shall be added based on the fair value of cost paid for additional investment and relevant transaction cost occurred. Where the invested unit declares the distributed cash dividend or profit, the amounts to be shared shall be recognized as the current investment income.
For the long-term equity investment measured and accounted subsequently based on the equity method, the book value of long-term equity investment shall be added or reduced accordingly based on the change in the ownership interest of the invested unit. When recognizing the shares of the net profit and loss of invested unit, the net profit of invested unit shall be adjusted before recognition based on the fair value of the identifiable assets of the invested unit when obtaining the investment and based on the accounting policies of the Group during accounting period and the internal transaction profit or loss between the joint venture and cooperative enterprises shall be offset and the part that belongs to the investment enterprise shall be calculated based on the shareholding ratio.
When disposing the long-term equity investment, the difference between the book value and the actually obtained price shall be recorded in the current profit and loss on investment. When accounting the long-term equity investment based on equity method, where the other changes in the ownership interest of the invested unit other than the net profit and loss are recorded in the ownership interest, when disposing such investment, the part that shall be recorded in the ownership interest originally shall be transferred into current profit and loss on investment according to corresponding ratio.
In case of loss of common control or significant influence on the invested unit due to reasons such as disposal of partial equity investment, the remaining equity after disposal can be accounted based on the available-for-sale financial asset and difference between the fair value and book value of the remaining equity on the date of loss of the common control or significant influence shall be recorded in the current profit and loss. Accounting treatment shall be carried out on other comprehensive income of original equity investment recognized due to the accounting based on equity method according to the same basis based on which the invested
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. unit directly disposes relevant assets or liabilities when terminating adoption of equity method for accounting.
In case of loss of control on the invested unit due to disposal of partial long-term equity investment and where the remaining equity after disposal can implements common control or exerts significant influence on the invested unit, the accounting based on equity method shall be carried out and the difference between the book value of disposed equity and disposal consideration shall be recorded in investment income and the remaining equity shall be deemed as being adjusted based on the equity-method accounting at the time of acquisition; where the remaining equity after disposal cannot implement common control or exert significant influence on the invested unit, accounting treatment can be carried out based on relevant regulations of available-for-sale financial assets; and the difference between book value of disposed equity and disposal consideration shall be recorded in investment income. The difference of the fair value and book value of remaining equity on the date of loss of control shall be recorded in the current profit and loss on the investment.
Where various transactions conducted by the Group from step-by-step disposal of equity to loss of controlling interestdon‘t belong to a package deal, the accounting treatment on each transaction shall be carried out separately. Where they belong to a package deal, various transactions shall be treated as a transaction disposing the subsidiary and losing the control right for accounting treatment. However, before loss of control right, the difference between each transaction disposal price and the book value of long-term equity investment to which the disposed equity corresponds shall be recognized as other comprehensive income and shall be transferred into the current profit and loss without control right at the time of loss of control right.
14. Property of Investment
Measurement mode for investment real estate
Measurement based on cost method
Depreciation method or amortization method
The depreciation or amortization of theGroup‘s investment real estate is withdrawn based on the composite life method. The expected service life, net residual value rate and annual depreciation (amortization) rate of various investment real estates are shown as follows:
|||||
|-|-|-|-|
|Items|Depreciation Term (Year)|Expected Salvage Rate (%)|Annual Depreciation Rate (%)|
|Land-use Right|50|10.00%|1.80%|
|Houses & Buildings|5—50|10.00%|1.80%—18.00%|

15. Fixed Assets
(1) Recognition Condition
Fixed assets of the Group refer to the tangible assets that simultaneously possess the following features. They are held for the sake of producing commodities, rendering labor service, renting or business management; their useful life is in excess of one fiscal year; and unit value has exceeded 2,000 Yuan.
The fixed assets shall be recognized when its relevant economic benefit may be flowed into the Group and its cost can be reliably measured. TheGroup‘s fixed assets include Houses& buildings, Machinery equipment, Mould equipment, Transport
equipment, Apparatus equipment, Tooling equipment and Office equipment.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. (2) Depreciation method
||||||
|-|-|-|-|-|
|Items|Depreciation method|Depreciation Term|Rate of salvage value|Annual Depreciation Rate|
|Houses & buildings|Straight-line method|20—50|10.00%|1.80-4.50|
|Machinery equipment|Straight-line method|10|10.00%|9.00|
|Mould equipment|Straight-line method|3|10.00%|30.00|
|Transport equipment|Straight-line method|5|10.00%|18.00|
|Apparatus equipment|Straight-line method|5|10.00%|18.00|
|Tooling equipment|Straight-line method|5|10.00%|18.00|
|Office equipment|Straight-line method|5|10.00%|18.00|

 16. Project in Process
Since the day when project in process reaching the expected service status, carry over the estimated value of the project to fixed assets in line with project budget, construction cost or actual cost, etc. with depreciation drawn since the preceding month. After the completion procedures have been completed, an adjustment shall be made to the difference of original fixed assets value.
17. Borrowing Costs
When occuring the borrowing costs that can be directly attributed to the fixed assets, investment real estate and inventories which can reach the predetermined usable or marketable state through more than 1 year of construction or production activity, when the asset expenditure has occurred, borrowing cost has occurred, the necessary construction or production activity that can make the asset reach the predetermined usable or marketable status has occurred, the capitalization shall be conducted; when the constructed or produced assets meeting the capitalization condition can reach the predetermined usable or marketable status, the capitalization shall be suspended and the subsequent borrowing costs shall be recorded in current profit and loss. If the assets meeting capitalization condition are abnormally suspended during construction or production and the suspension period lasts for more than three months, the capitalization of borrowing costs shall be suspended until the asset construction or production activity is restarted.
As for specifically borrowed loans, the to-be-capitalized amount of interests shall be determined in light of the actual cost incurred of the specially borrowed loan at the present period minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment. As for the general borrowing; for ordinary borrowings, the capitalized amount is determined by multiplying the capitalization rate of ordinary borrowings by the weighted average of the accumulative asset expenditure in excess of the special borrowings.
18. Intangible Assets
(1) Valuation Method, Service Life and Impairment Test
The major intangible assets of the Group include land-use right, patented technologies and non-patented technologies, etc., and shall be measured according to the actual cost when acquired. The acquired intangible assets shall be recorded as per actual price and relevant other disbursements. The intangible assets invested by investors shall be priced as per the value agreed in investment contract or agreement, with the exception of those of unfair value as is stipulated in such contract or agreement. At the time of initial
recognition of theacquiree‘s assets, the intangible assets owned by the acquiree during merger under non-common control which are
not recognized in the financial statement shall be recognized as the intangible assets based on the fairvalue.。
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. The land-use right shall be averagely amortized based on its useful years since the beginning date of use; the patented technologies, non-patented technologies and other intangible assets will be averagely amortized by installments depending the shortest one among predicted service years, benefiting years set out in the contract and legal effective years. The amortized amount shall be accrued into relevant assets cost and current loss and profit as per their beneficiary objects. The estimated life of and amortization method for the intangible assets with limited life is to be reviewed at the end of every financial year. In case of any change, it will be handled as accounting estimate change.
19. Long-term Asset Impairment
The Group carries out inspection on the long-term equity investment, investment real estate measured based on cost mode, fixed asset, project under construction, production biological asset measured based on cost mode, oil and gas asset, intangible assets with limited service life on each balance sheet date. Where there is any sign of impairment, the Group shall carry out the impairment test. The impairment test shall be carried out on the intangible assets which goodwill and service life are uncertain at the end of each year no matter whether there is any sign of impairment. After an impairment test to an asset, if the book value of such asset exceeds its recoverable amount, the positive difference shall be recognized as impairment loss. The impairment loss of above said assets shall not be reversed in later accounting period after being recognized.
20. Long-term Deferred Expenses
Long-term deferred expenses of the Group refer to various expenses that have been paid but shall be assumed on current period or subsequent period with the amortization period of more than one year (exclusive). Such expenses shall be amortized averagely during the beneficial period. Where the long-term deferred expenses will not benefit the later accounting period, the remaining amount to-be-amortized shall be recorded into the loss or profits of current period.
21．Employees’ Remuneration
(1) Accounting Treatment Method of Short-term Remuneration
Short-term remuneration mainly includes the wage, bonus, allowance, subsidy,employee‘s welfare expense, medical insurance premium, birth insurance premium, industrial injury insurance premium, legal reserves of housing acquisition, labor union expenditure, personnel education fund and non-currency welfare. During the accounting period when the employees provide the service for the Company, the Company shall recognize the actual short-termemployees‘ remuneration as the liability and shall record it in current profit and loss or relevant asset cost. The non-currency welfare shall be measured based on the fair value.
(2) Accounting Treatment Method of Welfare after Departure
The welfare after departure mainly includes the defined contribution plan, which mainly includes basic endowment insurance, unemployment insurance and annuity. Corresponding payable amount shall be recorded in relevant asset cost or current profit and loss at the time of occurrence.
(3) Accounting Treatment Method of Dismissal Welfare
When terminating the labor relationship with employees before expiration of theemployees‘ labor contract or proposing a suggestion on provision of compensation for the purpose of encouraging employees to accept workforce reduction willingly, theemployees‘ remuneration related liabilities generated from dismissal welfare shall be recognized and recorded in current profit and loss when the Company fails to unilaterally cancel the dismissal welfare offered for labor relationship termination plan or reduction
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. suggestion and when the Company recognizes the cost related to payment of dismissal welfare restructuring (whichever is earlier). However, if the dismissal welfare cannot be fully paid within 12 months after the end of the annual reporting period, it shall be treated as the other long-termemployee‘s remuneration.
Theemployees‘ internal retirement plan shall be treated based on the same principle of above dismissal welfare. The Company shall record the internal retiredemployees‘ wages and paid social insurance premiums to be paid from the date when the employees stop providing service to the normal retirement date in current profit and loss (dismissal welfare) when they meet the expected liability recognition condition.
(4) Accounting Treatment Method of Other Long-termEmployees’ Welfare
Where the other long-termemployees‘ welfare provided by the Company to the employees can meet the defined contribution plan, accounting treatment on such welfare shall be conducted based on the defined contribution plan; otherwise, it shall be conducted based on the defined income plan.
22. Predictable Liabilities
In case all the obligations in relation to such contingent items as external guaranty, suspensive lawsuit or arbitration, product quality guarantee, staff cutback plan, loss contract, restructuring obligation and fixed assets discarding obligation, etc. comply with the following conditions simultaneously, the Group will recognize them as liabilities. Such obligations are constant burdened by the Group; the execution of such obligations will possibly result in the outflowing of economic benefit from the Group; the amount of such obligations can be reliably measured.
The predictable liabilities shall be initially measured as per the best estimated amount to be paid for executing relevant instant obligations in combination with such factors as risk, uncertainty and time value of money regarding contingent issues. If the time value of money exerts serious effect, the best estimated amount shall be determined through discounting relevant cash outflows in the future. On the date of Balance Sheet, the Company shall double check the book value of predictable liabilities and make adjustment to it so as to reflect the best estimated amount at present.
23. Stock Payment
The stock payment settled based on equity which is used to exchange the service provided by the employees shall be measured based on the fair value on the date of grant ofemployees‘ equity instrument. The amount of fair value shall be recorded in relevant costs or expenses based on straight-line method under the condition that the service within the waiting period is completed or the specified performance condition is met before exercise of right by taking the best estimate of the quantity of exercisable equity instruments within the waiting period as the basis, in order to increase the capital reserves accordingly.
Share-based payment adopting cash settlement, The measurement accords with the fair value of liabilities borne by the enterprise and determined through the calculation based on share or other equity instruments. Where the right can be exercised immediately upon grant, the fair value of assumed liabilities shall be recorded in relevant costs or expenses on the date of grant to increase the liabilities accordingly; where it needs to complete the service within waiting period or meet the specified performance condition before exercise of right, the best estimate of exercisable right can be taken as the basis on each balance sheet date during the waiting period to record the obtained service on current period in the cost or expense in accordance with the fair value amount of liabilities assumed by the Group to adjust the liabilities accordingly.
The enterprise remeasures the fair value of liabilities and record its change in current profit and loss on every balance sheet date before related liability settlement and the settlement date.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Where the Group cancels the granted equity instruments within the waiting period (with an exception of cancellation due to failure in meeting the exercisable condition), it shall be deemed as accelerated exercise of right, which means that the equity payment plan within the remaining waiting period have fully met the exercisable condition and all expenses within the remaining waiting period shall be recognized on the current period when cancelling the granted equity instrument.
24. Income
The operating income of the Group mainly includes the sales revenue of commodities, income from provision of labor service, income from transfer of asset use right and income from construction contract. The income recognition policy is shown as follows: (1) Sales revenue of commodities: When the Group has transferred the significant risks and rewards of ownership of the goods to the buyer; the Group retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; The relevant amount of revenue can be measured in a reliable way; The relevant economic benefits may flow into the enterprise; The relevant costs incurred or to be incurred can be measured in a reliable way, it may recognize the realization of revenue.
(2) Income from provision of labor service: When total revenue and total cost from labor service can be measured in a reliable way; the relevant economic benefits are likely to flow into the enterprise; the schedule of completion under the transaction can be confirmed in a reliable way; it may recognize the realization of revenue from labor service. On the date of Balance Sheet, where the result of a transaction concerning the providing of labor service can be measured in a reliably way, it shall recognize relevant revenue according to the schedule of completion; Percentage of completion is the percentage of incurred costs in the total costs; where the result of a transaction concerning the providing of labor service cannot be measured in a reliably way and the cost of labor services incurred is expected to be compensated, the revenue from the providing of labor services shall be recognized in accordance with the amount of the cost of labor services incurred, and the cost of labor services shall be carried forward at the same amount; where the result of a transaction concerning the providing of labor service cannot be measured in a reliably way and the cost of labor services incurred is not expected to compensate, the cost incurred should be included in the current profits and losses, and no revenue from the providing of labor services may be recognized.
(3) Income from transfer of assets: The revenue from abalienating of right to use assets may be recognized on the condition that the relevant economic benefits are likely to flow into the Company and the amount of revenues can be measured in a reliable way. 25. Government Grants
(1) Judgment Basis and Accounting Treatment Method of Asset-related Governmental Subsidies
The governmental subsidies related to the assets refer to the governmental subsidies obtained by the enterprise, governmental subsidies used for construction and procurement or the governmental subsidies forming long-term assets in other ways. A government grant pertinent to assets shall be recognized as deferred income, equally distributed within the useful lives of the relevant assets, and included in the current profits and losses.
(2) Judgment Basis and Accounting Treatment Method of Income-related Governmental Subsidies The income related governmental subsidies refer to the governmental subsidies other than the asset-related governmental subsidies. The government grant pertinent to incomes, if used for compensating the related future expenses or losses of the Company, shall be recognized as deferred income and shall included in the current profits and losses during the period when the relevant expenses are recognized; or if used for compensating the related expenses or losses incurred to the Company, shall be directly included in the current profits and losses.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 26. Deferred Income Tax Assets/Deferred Income Tax Liabilities
TheGroup‘s deferred income tax assets and deferred income tax liabilities shall be recognized based on the difference between the tax base and book value of the assets and liabilities (temporary difference). For the deductible loss that can be used to offset the taxable income of following years according to the tax law regulations, corresponding deferred income tax assets shall be recognized. For the temporary difference generated from initial recognition of the goodwill, the corresponding deferred income tax liabilities shall not be recognized. For the temporary difference generated from initial recognition of the assets or liabilities generated during the transaction of non-business merger which neither affects the accounting profit nor affects the taxable income tax (or deductible loss), no corresponding deferred income tax asset and deferred income tax liability shall be recognized. On the balance sheet date, the deferred income tax asset and deferred income tax liability shall be measured based on the applicable tax rate during the period when it is expected to recover such assets or pay off such liabilities. The Group will recognize the deferred income tax assets based on the future taxable income that may be used to deduct the deductible temporary difference, deductible loss and tax payment offsetting. 27. Lease
(1) Accounting treatment method of operating lease
Operating lease refers to a lease other than a financing lease. Where the Group is lessee, the rents shall be recorded in the relevant asset costs or the profits and losses of the current period by using the straight-line method over each period of the lease term. Where the Group is lessor, the rents shall be recorded in the profits and losses of the current period by using the straight-line method over each period of the lease term.
(2) Accounting treatment method of finance lease
Financing lease refers to a lease that has transferred in substance all the risks and rewards related to the ownership of an asset. On the lease beginning date, the Group as lessee shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account, recognize the amount of the minimum lease payments as the entering value in an account of long-term account payable, and treat the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges.
28. Significant accounting policy and accounting estimate change
(1) Change in significant accounting policy
□Applicable√ Inapplicable
||||
|-|-|-|
|Contents and cause of change in|||
||Approval procedure|Remark|
|accounting policy|||
|In 2014, the Ministry of Finance newly|||
|issued or amended a series of statements|||
|such as No. 2 Accounting Standards for||The change in the accounting policy has no|
||Relevant accounting policy change has||
|Business Enterprises-Long-term Equity||influence on the Group‘s financial|
||been approved by the sixth meeting of 8th||
|Investment, implemented relevant||statements, so that there is no need to make|
||Board Meeting of the Company.||
|accounting rules and carried out||any retroactive adjustment.|
|accounting treatment based on relevant|||
|connection regulations.|||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. (2) Change in significant accounting estimate
□Applicable√ Inapplicable
Ⅵ. Taxes
1．Main tax types and rates
||||
|-|-|-|
|Tax type|Tax basis|Tax rate|
|VAT|Sales revenue of commodities|17%|
|Business Tax|Taxable income|5%|
|Urban Maintenance & Construction Tax|Circulating tax payable|7%|
|Enterprise Income Tax|Taxable income amount|25%|
|Extra charges of education funds|Circulating tax payable|3%|
|Real estate tax|70% of the original value of real estate|1.2%|

Ⅶ. Notes to the Items of Consolidated Financial Statements
1. Monetary Fund
Unit: RMB
||||
|-|-|-|
|Items|Ending balance|Beginning balance|
|Ready money|516,454.17|492,314.95|
|Bank Deposit|21,875,692.95|50,212,004.91|
|Other Monetary Fund|6,427,210.56|3,547,136.34|
|Total|28,819,357.68|54,251,456.20|

 Other explanations
(1) Other monetary capitals of the Group at the end of the year refer to the cash deposit for bank acceptance.
(2) In the monetary capitals of the Group at the end of the year, the limited monetary capital is RMB 6,427,210.56. The monetary capital limited at the beginning of the year is RMB 3,547,136.34.
2. Notes Receivable
(1) Classified Presentation of Notes Receivable
Unit: RMB
||||
|-|-|-|
|Items|Ending balance|Beginning balance|
|Bank acceptance bill|100,821,063.85|154,352,869.68|
|Commercial Acceptance Bill||23,066.81|
|Total|100,821,063.85|154,375,936.49|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. (2) Notes Receivable of the Company that Have Been Pledged at the End of the Period
Unit: RMB
|||
|-|-|
|Items|Pledged amount at the end of the period|
|Bank‘s acceptance bill|45,473,002.10|
|Total|45,473,002.10|

 (3) Notes Receivable of the Company that Have Been Endorsed or Discounted and that Are not Expired on Balance Sheet Date at the End of the Period
Unit: RMB
||||
|-|-|-|
|Items|Amount Ceased to Recognized at Year End|Amount Ceased to Recognized at Year End|
|Bank’s acceptance bill|29,259,431.94||
|Total|29,259,431.94||

3. Notes Receivable
(1) Classified Disclosure of Accounts Receivable
Unit: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Amount at the end of period|||||Beginning balance|||||
||||Provision for Bad|||||Provision for Bad|||
||Book balance|||||Book balance|||||
|Items|||Debts|||||Debts|||
||||||Book Value|||||Book Value|
|||||Percent|||||Percent||
||Amount|Proportion|Amount|||Amount|Proportion|Amount|||
|||||Drawn|||||Drawn||
|Accounts|||||||||||
|receivable with|||||||||||
|significant specific|||||||||||
|amount that were|7,649,789.11|6.17%|6,227,694.47|81.41%|1,422,094.64|7,649,789.11|4.40%|6,227,694.47|81.41%|1,422,094.64|
|provisioned bad|||||||||||
|debt preparation|||||||||||
|separately|||||||||||
|Accounts|||||||||||
|receivable which|||||||||||
|bad debt provision|||||||||||
||111,125,574.26|89.67%|122,200.33|0.11%|111,003,373.93|160,967,562.02|92.60%|110,950.83|0.07%|160,856,611.19|
|shall be withdrawn|||||||||||
|based on credit|||||||||||
|risk characteristics|||||||||||
|Accounts|||||||||||
|receivable that|5,160,953.41|4.16%|5,160,953.41|100.00%||5,210,953.41|3.00%|5,210,953.41|100.00%||
|were not|||||||||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||||||
|-|-|-|-|-|-|-|
|significant but|||||||
|have been|||||||
|provisioned bad|||||||
|debt preparation|||||||
|separately|||||||
|Total|123,936,316.78|11,510,848.21|112,425,468.57|173,828,304.54|11,549,598.71|162,278,705.83|

 Other Accounts Receivable with major individual amount and separate accrual of bad debt reserve at the end ofperiod：
√ Applicable□ Inapplicable
Unit: RMB
||||||
|-|-|-|-|-|
||Ending balance||||
|Accounts receivable (based on unit)|||||
||Notes Receivable|Provision for Bad Debts|Percent Drawn|Reason of provision|
|Shenzhen Boteman Bowling Club|||||
|Co., Ltd. (hereinafter referred to as|2,555,374.75|2,555,374.75|100.00%|Can not be taken back|
|Boteman)|||||
|||||Failure to recover on time|
|H. K. Haowei Industry Co., Ltd.|1,870,887.18|448,792.54|23.99%|because of customer‘s fund|
|||||shortage|
|TCL Wangpai Electric Appliance|||||
||1,325,431.75|1,325,431.75|100.00%|Can not be taken back|
|(Huizhou) Co., Ltd.|||||
|Qingdao Hai‘er Spare Parts|||||
||1,225,326.15|1,225,326.15|100.00%|Can not be taken back|
|Procurement Co., Ltd.|||||
|Skyworth Multimedia(Shenzhen)|||||
||672,769.28|672,769.28|100.00%|Can not be taken back|
|Co.,Ltd.|||||
|Total|7,649,789.11|6,227,694.47|--|--|

Accounts receivable with accrual of bad debt reserve by aging analysis method in the combination
√ Applicable□ Inapplicable
Unit: RMB
|||||
|-|-|-|-|
||Ending balance|||
|Account ageing||||
||Notes Receivable|Provision for Bad Debts|Percent Drawn|
|Subitem within one year||||
||110,568,246.50|||
|Subtotal within 1 year|110,568,246.50|||
|2-3 year (s)|224,990.00|22,499.00|10.00%|
|Over 3years|332,337.76|99,701.33|30.00%|
|Total|111,125,574.26|122,200.33||

Instructions for determining the combination basis:
Accounts receivable with accrual of bad debt reserve by balance percentage method in the combination
□ Applicable√ Inapplicable
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Accounts receivable with accrual of bad debt reserve by other method in the combination
Accounts receivable without major individual amount but with separate accrual of bad debt reserve at the end of period
||||||
|-|-|-|-|-|
|Unit name|Balance at the end of the year||||
||NotesReceivable|Provision for BadDebts|Percent Drawn（%）|Reason of provision|
|Shenzhen Huixin Video Science andTechnology Co.,Ltd.|381,168.96|381,168.96|100.00|Can not be taken back|
|Shenzhen Wandial Number Science andTechnology Co.,Ltd.|351,813.70|351,813.70|100.00|Can not be taken back|
|Shenzhen Dalong Electric Co.,Ltd.|344,700.00|344,700.00|100.00|Can not be taken back|
|Shenzhen Qunpin Electric Co.,Ltd.|304,542.95|304,542.95|100.00|Can not be taken back|
|China Galaxy Electric(Hong Kong) Co.,Ltd.|288,261.17|288,261.17|100.00|Can not be taken back|
|Dongguan Weite Electric Co.,Ltd.|274,399.80|274,399.80|100.00|Can not be taken back|
|Hong Kong New Century Electric Co.,Ltd.|207,409.40|207,409.40|100.00|Can not be taken back|
|Shenyang Beitai Electric Co.,Ltd.|203,304.02|203,304.02|100.00|Can not be taken back|
|Bejing Xinfanweiye Science and TechnologyCo.,Ltd.|193,000.00|193,000.00|100.00|Can not be taken back|
|TCL Electric(Hong kong) Co.,Ltd.|145,087.14|145,087.14|100.00|Can not be taken back|
|Huizhou TCL New and Special ElectronicsCo., Ltd.|142,707.14|142,707.14|100.00|Can not be taken back|
|Shenzhen Skyworth-RGB Electric Co.,Ltd.|133,485.83|133,485.83|100.00|Can not be taken back|
|Shenzhen Xinfa Electronics Co., Ltd.|119,094.78|119,094.78|100.00|Can not be taken back|
|Other|2,071,978.52|2,071,978.52|100.00|Can not be taken back|
|Total|5,160,953.41|5,160,953.41|||

(2) Bad Debt Provision Withdrawn, Recovered or Refunded at Current Period
The bad debt provision withdrawn at current period is RMB 11,249.50; the bad debt provision recovered or refunded at current period is RMB 50,000.00.
Among which, the important bad debt provision recovered or refunded at current period:
Unit: RMB
||||
|-|-|-|
|Unit name|Recovered or refunded amount|Recovery method|
|Guangzhou Midea Refrigeration Plant Co.,Ltd.|||
||50,000.00|Bank acceptance bill|
|Total|50,000.00|--|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. (3) Accounts Receivable with Top Five Ending Balances Collected Based on the Debtor
The total amount of accounts receivable with top five ending balances collected by the Debtor this year reaches RMB
106,260,853.21, which accounts for85.74% of the total ending balance of the accounts receivable. The total amount of ending balances of withdrawn bad debt provision is RMB 1,225,326.15.
4. Advance payment
(1) List of advance payments according to aging
Unit: RMB
||||||
|-|-|-|-|-|
||Ending balance||Beginning balance||
|Account ageing|||||
||Amount|Proportion|Amount|Proportion|
|Within 1 year|4,042,321.66|71.30%|13,346,708.54|98.99%|
|1-2year (s)|1,496,115.65|26.39%|136,534.65|1.01%|
|2-3 year (s)|130,682.56|2.31%|||
|Total|5,669,119.87|--|13,483,243.19|--|

Instruction for the cause of failure in completion of timely settlement of advance payment with aging larger than 1 year and significant amount: none
(2) Advance Payment with Top Five Ending Balances Collected Based on the Prepayment Object
The total amount of advance payment with top five ending balances collected based on the prepayment object this year reaches RMB 3,724,326.72, which accounts for65.69% of the total ending balances of the advance payment.
5. Other Accounts Receivable
(1) Classified Disclosure of Other Accounts Receivable
Unit: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Ending balance|||||Beginning balance|||||
||||Provision for Bad|||||Provision for Bad|||
||Book balance|||||Book balance|||||
|Items|||Debts||Book|||Debts|||
|||||||||||Book Value|
|||Proporti||Percent|Value||Propor||Percent||
||Amount||Amount|||Amount||Amount|||
|||on||Drawn|||tion||Drawn||
|Accounts receivable|||||||||||
|with significant|||||||||||
|specific amount that|||||||||||
||5,662,187.38|4.70%|5,662,187.38|100.00%||5,662,187.38|28.23%|5,662,187.38|100.00%||
|were provisioned|||||||||||
|bad debt preparation|||||||||||
|separately|||||||||||
|Other accounts|109,162,244.07|90.60%|67,431.78|0.06%|109,094,812.2|10,081,917.80|50.27%|458,150.02|4.54%|9,623,767.78|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|receivable which|||||9||||||
|bad debt provision|||||||||||
|shall be withdrawn|||||||||||
|based on credit risk|||||||||||
|characteristics|||||||||||
|Accounts receivable|||||||||||
|that were not|||||||||||
|significant but have|||||||||||
||5,668,513.51|4.70%|5,668,513.51|100.00%||4,313,278.80|21.50%|4,313,278.80|100.00%||
|been provisioned|||||||||||
|bad debt preparation|||||||||||
|separately|||||||||||
||||||109,094,812.29|||||9,623,767.78|
|Total|120,492,944.96||11,398,132.67|||20,057,383.98||10,433,616.20|||

Other Accounts Receivable with major individual amount and separate accrual of bad debt reserve at the end of period
√ Applicable□ Inapplicable
Unit: RMB
||||||
|-|-|-|-|-|
||Ending balance||||
|Other accounts receivable|||||
||Other Accounts||||
|(based on unit)||Provision for Bad Debts|Percent Drawn|Reason of provision|
||Receivable||||
|Boteman|4,021,734.22|4,021,734.22|100.00%|Can not be taken back|
|Zhao Baomin|564,646.35|564,646.35|100.00%|Can not be taken back|
|Traffic incident indemnity|555,785.81|555,785.81|100.00%|Can not be taken back|
|Hebei Botou Court|520,021.00|520,021.00|100.00%|Can not be taken back|
|Total|5,662,187.38|5,662,187.38|--|--|

Other Accounts Receivable with accrual of bad debt reserve by aging analysis method in the combination
√ Applicable□ Inapplicable
Unit: RMB
|||||
|-|-|-|-|
||Ending balance|||
|Account ageing||||
||Other Accounts Receivable|Provision for Bad Debts|Percent Drawn|
|Subitem within one year||||
||108,354,131.23|||
|Subtotal within 1 year|108,354,131.23|||
|1-2 year (s)|328,685.91|16,434.30|5.00%|
|2-3 year (s)|464,152.99|46,415.30|10.00%|
|Over 3years|15,273.94|4,582.18|30.00%|
|Total|109,162,244.07|67,431.78||

Instructions for determining the combination basis:
Other Accounts Receivable with accrual of bad debt reserve by balance percentage method in the combination
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.□ Applicable√ Inapplicable
Other Accounts Receivable with accrual of bad debt reserve by other method in the combination
√ Applicable□ Inapplicable
Other Accounts Receivable without major individual amount but with separate accrual of bad debt reserve at the end of period:
||||||
|-|-|-|-|-|
|Unit name|Balance at the end of the year||||
||Other AccountsReceivable|Provision for BadDebts|Percent Drawn（%）|Reason of provision|
|Shenzhen Lotus Island Restaurant Co.,Ltd|236,293.80|236,293.80|100.00|Can not be taken back|
|Weili Electric Corporation Co.,Ltd,Zhangzhou City, Fujian Province|112,335.62|112,335.62|100.00|Can not be taken back|
|Employee canteen ect.|1,036,916.46|1,036,916.46|100.00|Can not be taken back|
|Personal borrowings|987,090.51|987,090.51|100.00|Can not be taken back|
|Trade Union|297,402.55|297,402.55|100.00|Can not be taken back|
|Chuangjing workshop|192,794.00|192,794.00|100.00|Can not be taken back|
|Others|2,805,680.57|2,805,680.57|100.00|Can not be taken back|
|Total|5,668,513.51|5,668,513.51|||

(2) Bad Debt Provision Withdrawn, Recovered or Refunded at Current Period
The bad debt provision withdrawn at current period is RMB 964,516.47; the bad debt provision recovered or refunded at current period is RMB 0.00.
Among which, the important bad debt provision recovered or refunded at current period: none
(3) Classification of Other Accounts Receivable Based on Nature of Money
Unit: RMB
||||
|-|-|-|
|Payment nature|Book balance at the end of period|Book balance at the beginning of period|
|Lease Deposit|330,400.00|330,400.00|
|Borrowing|2,472,108.12|3,106,310.17|
|Current accounts|107,947,763.80|8,614,008.37|
|Wage and utilities paid by agent|1,832,111.50|1,066,860.39|
|Rent receivable|7,181,456.09|5,207,178.01|
|Others|729,105.45|1,732,627.04|
|Total|120,492,944.96|20,057,383.98|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. (4) Other Accounts Receivable with Top Five Ending Balances Collected Based on Debtor
Unit: RMB
|||||||
|-|-|-|-|-|-|
|||||Proportion in the||
|||||total ending balances|Ending balance of|
|Unit name|Payment nature|Ending balance|Account ageing|||
|||||of other accounts|bad debt provision|
|||||receivable||
|Huafa Trade||||||
||Current accounts|101,400,000.00|Within 1 year|84.15%||
|Company||||||
|Boteman|Rent receivable|4,021,734.22|Over 3years|3.34%|4,021,734.22|
|Zhao Baomin|Rent receivable|564,646.35|Over 3years|0.47%|564,646.35|
|Traffic incident||||||
||Current accounts|555,785.81|Over 3years|0.46%|555,785.81|
|indemnity||||||
|Hebei Botou Court|Current accounts|520,021.00|Over 3years|0.43%|520,021.00|
|Total|--|107,062,187.38|--|88.85%|5,662,187.38|

 6. Inventories
(1) Type of Inventories
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||Ending balance|||Beginning balance|||
|Items||Depreciation|||Depreciation||
||Book balance||Book Value|Book balance||Book Value|
|||Provisions|||Provisions||
|Raw Materials|16,000,026.71|1,260,134.51|14,739,892.20|29,655,107.32|4,893,231.35|24,761,875.97|
|Finishing Product|1,296,995.00||1,296,995.00|27,982.75||27,982.75|
|Stocked Goods|12,222,310.12|549,643.94|11,672,666.18|19,282,804.52|3,222,621.17|16,060,183.35|
|Turnover|||||||
||440,625.54|51,587.59|389,037.95|914,440.54|363,236.79|551,203.75|
|materials|||||||
|Self-made|||||||
|semi-finished|2,740,898.61|33,070.70|2,707,827.91|2,287,490.60|250,244.88|2,037,245.72|
|product|||||||
|Processed|||||||
|Materials upon|73,631.31||73,631.31|3,680,812.31||3,680,812.31|
|entrustment|||||||
|Total|32,774,487.29|1,894,436.74|30,880,050.55|55,848,638.04|8,729,334.19|47,119,303.85|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. (2) Provision for Depreciation of Inventories
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||Beginning|Current increment||Current decrement|||
|Items||||||Ending balance|
||balance|Withdrawing|Others|Carryover or resale|Others||
|Raw Materials|4,893,231.35|||3,633,096.84||1,260,134.51|
|Stocked Goods|3,222,621.17|||2,672,977.23||549,643.94|
|Low-value|||||||
|consuming|363,236.79|||311,649.20||51,587.59|
|products|||||||
|Self-made|||||||
|semi-finished|250,244.88|||217,174.18||33,070.70|
|product|||||||
|Total|8,729,334.19|||6,834,897.45||1,894,436.74|

 7. Other Current Assets
Unit: RMB
||||
|-|-|-|
|Items|Ending balance|Beginning balance|
|Trust and financing product|500,000,000.00||
|Total|500,000,000.00||

Other instructions:
The trust and financing product is the―Zhongxin Qianjing-Green Star City Investment Fund Collective TrustPlan‖ issued by CITIC Trust, with the annual expected yield of12% and term of 12 months, which interest shall be paid at the end of each quarter. The product principal shall be paid when it becomes due.
8. Property of Investment
(1) Investment Real Estate Measured Based on Cost
√ Applicable□ Inapplicable
Unit: RMB
||||||
|-|-|-|-|-|
|Items|Houses & Buildings|Land-use Right|Project in Progress|Total|
|. Original value of book value|||||
|1.Beginning balance|107,661,686.94|||107,661,686.94|
|2. Additional amount of current period|||||
|(1) Outsourcing|||||
|(2) Transferred from inventory/fixed|||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|assets/construction in progress|||
|(3) Increase in business merger|||
|3.Decreased amount of current period|||
|(1) Disposal|||
|(2) Other transfer-out|||
|4.Ending balance|107,661,686.94|107,661,686.94|
|II. Accumulated depreciation and|||
|accumulated amortization|||
|1.Beginning balance|75,132,266.12|75,132,266.12|
|2. Additional amount of current period|1,254,757.08|1,254,757.08|
|(1) Withdrawal or amortization|1,254,757.08|1,254,757.08|
|3.Decreased amount of current period|||
|(1) Disposal|||
|(2) Other transfer-out|||
|4.Ending balance|76,387,023.20|76,387,023.20|
|III. Impairment Provision|||
|1.Beginning balance|||
|2. Additional amount of current period|||
|(1) Withdrawing|||
|3、Decreased amount of current period|||
|(1) Disposal|||
|(2) Other transfer-out|||
|4.Ending balance|||
|IV. Book Value|||
|1.End-of-period book value|31,274,663.74|31,274,663.74|
|2.Opening book value|32,529,420.82|32,529,420.82|

(2) Investment Real Estate Measured Based on Fair Value
□ Applicable√ Inapplicable
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.9．Fixed Assets
(1) Condition of Fixed Assets
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||Houses &|Machinery|Electronic|Transport|||
|Items|||||Others|Total|
||Buildings|Equipment|equipment|equipment|||
|I. Original value of book value：|||||||
|1.Beginning balance|218,177,134.33|85,808,429.03|20,279,295.96|4,718,484.59|21,929,996.69|350,913,340.60|
|2. Additional amount of|||||||
||216,000.00|4,373,897.50|41,062.36|562,051.28|1,133,131.34|6,326,142.48|
|current period|||||||
|(1) Procurement|216,000.00|3,071,726.29|41,062.36|562,051.28|1,038,091.34|4,928,931.27|
|(2) Transferred from|||||||
||0.00|1,302,171.21|0.00|0.00|95,040.00|1,397,211.21|
|construction in progress|||||||
|(3) Increase in|||||||
||0.00|0.00|0.00|0.00|0.00||
|business merger|||||||
|3.Decreased amount of|||||||
||0.00|11,025,745.64|11,472,716.18|1,139,113.00|1,336,996.45|24,974,571.27|
|current period|||||||
|(1) Disposal or scrap|0.00|11,025,745.64|11,472,716.18|1,139,113.00|1,336,996.45|24,974,571.27|
|4.Ending balance|218,393,134.33|79,156,580.89|8,847,642.14|4,141,422.87|21,726,131.58|332,264,911.81|
|II. Accumulated depreciation|||||||
|1.Beginning balance|61,872,274.85|53,695,012.53|17,630,534.85|3,400,834.30|15,887,082.82|152,485,739.35|
|2. Additional amount of|||||||
||5,742,187.55|6,533,627.90|246,646.81|375,402.59|1,744,961.27|14,642,826.12|
|current period|||||||
|(1) Withdrawing|5,742,187.55|6,533,627.90|246,646.81|375,402.59|1,744,961.27|14,642,826.12|
|3.Decreased amount of|||||||
||0.00|9,667,859.53|10,097,288.54|1,017,193.84|1,111,735.49|21,894,077.40|
|current period|||||||
|(1) Disposal or scrap|0.00|9,667,859.53|10,097,288.54|1,017,193.84|1,111,735.49|21,894,077.40|
|4.Ending balance|67,614,462.40|50,560,780.90|7,779,893.12|2,759,043.05|16,520,308.60|145,234,488.07|
|III. Impairment Provision|||||||
|1.Beginning balance|0.00|1,499,613.30|1,160,684.99|104,388.91|120,847.02|2,885,534.22|
|2. Additional amount of|||||||
||0.00|0.00|0.00|0.00|0.00||
|current period|||||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||||||
|-|-|-|-|-|-|-|
|(1) Withdrawing|0.00|0.00|0.00|0.00|0.00||
|3.Decreased amount of|||||||
||0.00|941,073.98|1,138,160.85|99,168.90|115,521.09|2,293,924.82|
|current period|||||||
|(1) Disposal or scrap|0.00|941,073.98|1,138,160.85|99,168.90|115,521.09|2,293,924.82|
|4.Ending balance|0.00|558,539.32|22,524.14|5,220.01|5,325.93|591,609.40|
|IV. Book Value|||||||
|1.End-of-period book value|150,778,671.93|28,037,260.67|1,045,224.88|1,377,159.81|5,200,497.05|186,438,814.34|
|2.Opening book value|156,304,859.48|30,613,803.20|1,488,076.12|1,213,261.38|5,922,066.85|195,542,067.03|

 (2) Condition of temporarily idle fixed asset
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Original value of|Accumulated|Impairment|||
|Items||||Net book value|Remark|
||book value|Depreciation|Provision|||
|Machinery Equipment|430,718.00|289,031.93|98,614.27|43,071.80||
|Mould Equipment|8,350,729.36|7,515,656.43||835,072.93||
|Transport equipment|207,000.00|186,300.00||20,700.00||
|Apparatus Equipment|5,800.00|5,220.00||580.00||
|Total|8,994,247.36|7,996,208.36|98,614.27|899,424.73||

(3) Fixed assets leased by operating lease
Unit: RMB
|||
|-|-|
|Items|End-of-period book value|
|Houses & buildings|95,862,690.65|
|Machinery Equipment|515,880.61|
|Total|96,378,571.26|

 (4) Condition of fixed assets without certificate of title
Unit: RMB
||||
|-|-|-|
|Items|Book Value|Cause of failure in handling the certificate of title|
|Warehouse|2,808,802.16|Handling relevant formalities|
|New dormitory building|4,151,261.36|Handling relevant formalities|
|Total|6,960,063.52||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 10. Project in Progress
(1) Condition of construction in process
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||Ending balance|||Beginning balance|||
|Items||Impairment|||Impairment||
||Book balance||Book Value|Book balance||Book Value|
|||Provision|||Provision||
|Huafa building renovation|||||||
||654,356.00||654,356.00|654,356.00||654,356.00|
|project|||||||
|Gongming Electronics|||||||
||2,199,000.00||2,199,000.00|1,669,000.00||1,669,000.00|
|Town renovation project|||||||
|Total|2,853,356.00||2,853,356.00|2,323,356.00||2,323,356.00|

 (2) Changes in Major Construction-in-Process
Unit: RMB
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||Other||Proportion||Accum|Including:|||
|||||Transfer-in|||||||Proportion of||
||||Additional||reduced||||ulated|accumulated|||
|||||fixed asset|||of project|Job|||capitalization|Source|
|Project|Budget|Beginning|amount of||amount|Ending|||capitali|capitalization|||
|||||amount of|||investment||||of interest in|of|
|name|amounts|balance|current||of|balance||schedule|zation|of interest in|||
|||||current|||in the||||the current|capital|
||||period||current||||of|the current|||
|||||period|||budget||||period||
||||||period||||interest|period|||
|Huafa building|||||||||||||
|||654,356.00||||654,356.00||||||Others|
|renovation project|||||||||||||
|Gongming|||||||||||||
|Electronics Town||1,669,000.00|530,000.00|||2,199,000.00||||||Others|
|renovation project|||||||||||||
|10 tons of|||||||||||||
||||1,302,171.21|1,302,171.21||||||||Others|
|biomass boiler|||||||||||||
|Cable of power|||||||||||||
|distribution|||95,040.00|95,040.00||||||||Others|
|cabinet|||||||||||||
|Total||2,323,356.00|1,927,211.21|1,397,211.21||2,853,356.00|--|--||||--|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 11. Intangible Assets
(1) Condition of intangible assets
Unit: RMB
|||||||
|-|-|-|-|-|-|
||||Non-patented|||
|Items|Land-use Right|Patent||Others|Total|
||||technology|||
|I. Original value of book value||||||
|1.Beginning balance|55,187,826.36|||661,878.97|55,849,705.33|
|2. Additional amount of current period||||||
|(1) Procurement||||||
|(2) Internal research and||||||
|development||||||
|(3) Increase in business merger||||||
|3.Decreased amount of current period||||||
|(1) Disposal||||||
|4.Ending balance|55,187,826.36|||661,878.97|55,849,705.33|
|II. Accumulated amortization||||||
|1.Beginning balance|6,236,209.05|||252,516.35|6,488,725.40|
|2. Additional amount of current period|1,444,408.80|||49,885.92|1,494,294.72|
|(1) Withdrawing|1,444,408.80|||49,885.92|1,494,294.72|
|3.Decreased amount of current period||||||
|(1) Disposal||||||
|4.Ending balance|7,680,617.85|||302,402.27|7,983,020.12|
|III. Impairment Provision||||||
|1.Beginning balance||||||
|2. Additional amount of current period||||||
|(1) Withdrawing||||||
|3.Decreased amount of current period||||||
|(1) Disposal||||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||
|-|-|-|-|
|4.Ending balance||||
|V. Book Value||||
|1.End-of-period book value|47,507,208.51|359,476.70|47,866,685.21|
|2.Opening book value|48,951,617.31|409,362.62|49,360,979.93|

 Proportion of the intangible assets produced from internal research and development of the Company at the end of the period in the balance of the intangible assets:0%.
12. Long-term deferred charges
Unit: RMB
|||||||
|-|-|-|-|-|-|
||||The amortization|||
|||||Other reduction||
|Items|Beginning balance|Current increment|amount of the||Ending balance|
|||||amounts||
||||current period|||
|Golf membership fee|511,133.25||60,333.39|159,133.19|291,666.67|
|Renovation||||||
||1,262,391.61||1,208,400.04||53,991.57|
|expenditures||||||
|Total|1,773,524.86||1,268,733.43|159,133.19|345,658.24|

 Other instructions:
The membership cost of Golf Club refers to the cost for obtaining the membership of the Golf Club and Mission Hills Golf Club. The other reduction in the membership cost of Golf Club is caused by theCompany‘s transfer of membership of Mission Hills Golf Club.
13. Deferred Income Tax Assets& Deferred Income Tax Liabilities
(1) Deferred Income Tax Assets that are Not Offset
Unit: RMB
||||||
|-|-|-|-|-|
||Ending balance||Beginning balance||
|Items|To deduct temporary|Deferred Income Tax|To deduct temporary|Deferred Income Tax|
||difference|Assets|difference|Assets|
|Provision drawn for|||||
||22,241,854.51|5,560,538.64|30,300,959.61|7,575,314.91|
|assets impairment|||||
|Deductible loss|||1,841,280.09|460,320.02|
|Estimated liabilities|2,765,583.81|691,395.95|2,604,411.81|651,102.95|
|Total|25,007,438.32|6,251,934.59|34,746,651.51|8,686,737.88|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. (2) Deferred Income Tax Assets or Liabilities Listed as the Net Amount after Offsetting
Unit: RMB
||||||
|-|-|-|-|-|
||||Deductible amount of||
||Deductible amount of|Ending balance of||Opening balance of|
||||deferred income tax||
||deferred income tax|deferred income tax||deferred income tax|
|Items|||assets and liabilities at||
||assets and liabilities at|assets or liabilities after||assets or liabilities after|
||||the beginning of the||
||the end of the period|offsetting||offsetting|
||||period||
|Deferred Income Tax||6,251,934.59||8,686,737.88|
|Assets|||||

(3) Deferred tax assets that have not been confirmed
Unit: RMB
||||
|-|-|-|
|Items|Ending balance|Beginning balance|
|Deductible loss|27,567,291.70|37,473,229.25|
|Provision drawn for assets impairment|3,153,172.51|3,297,123.71|
|Total|30,720,464.21|40,770,352.96|

 (4) The deductible loss of the unrecognized deferred income tax assets will become due in the following years.
Unit: RMB
|||||
|-|-|-|-|
|Year|Ending amount|Initial amount|Remark|
|2014||210,527.72||
|2015|142,552.20|290,960.95||
|2016|253,206.10|556,637.59||
|2017|24,123,775.77|33,350,633.02||
|2018|3,047,757.63|3,064,469.97||
|Total|27,567,291.70|37,473,229.25|--|

14. Short-term Borrowings
(1) Classification of Short-term Borrowings
Unit: RMB
||||
|-|-|-|
|Items|Ending balance|Beginning balance|
|Pledged loan|15,000,000.00|49,493,738.74|
|Mortgage Loan|103,114,376.32|67,348,857.39|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|Credit loan|20,000,000.00|45,298,005.00|
|Total|138,114,376.32|162,140,601.13|

 15. Notes Payable
Unit: RMB
||||
|-|-|-|
|Type|Ending balance|Beginning balance|
|Bank acceptance bill|39,994,397.62|34,646,052.79|
|Total|39,994,397.62|34,646,052.79|

 Total amount of notes payable that is due but unpaid at the end of the period is RMB 0.00.
16. Accounts Payable
(1) Presentation of Accounts Payable
Unit: RMB
||||
|-|-|-|
|Items|Ending balance|Beginning balance|
|Material cost|65,547,836.32|52,206,342.81|
|Total|65,547,836.32|52,206,342.81|

 (2) Important Accounts Payables with Aging Larger than 1 Year
Unit: RMB
||||
|-|-|-|
|Items|Ending balance|Cause of failure in repayment or carry-over|
|Shenzhen YH Global Logistics Co., Ltd.|2,858,885.97|Unsettled|
|Taiwan LG Company|1,906,267.50|Unsettled|
|Total|4,765,153.47|--|

17. Advance Collections
(1) Presentation of Advance Collections
Unit: RMB
||||
|-|-|-|
|Items|Ending balance|Beginning balance|
|Payment for goods|727,331.06|1,572,324.29|
|Total|727,331.06|1,572,324.29|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 18.Employees’ Remuneration Payable
(1) Presentation ofEmployees’ Remuneration Payable
Unit: RMB
||||||
|-|-|-|-|-|
|Items|Beginning balance|Current increment|Current decrement|Ending balance|
|I. Short-term remuneration|4,765,916.33|57,938,825.80|56,490,854.41|6,213,887.72|
|II. Welfare after departure-defined|||||
||-5,093.82|4,158,544.00|4,158,544.00|-5,093.82|
|contribution plan|||||
|III. Dismissal welfare||50,000.00|50,000.00||
|Total|4,760,822.51|62,147,369.80|60,699,398.41|6,208,793.90|

 (2) Presentation of Short-term Remuneration
Unit: RMB
||||||
|-|-|-|-|-|
|Items|Beginning balance|Current increment|Current decrement|Ending balance|
|1. Salary, bonus, allowance &|||||
||4,028,594.41|50,566,071.42|49,205,799.53|5,388,866.30|
|subsidies|||||
|2. Staff Welfare Treatment Fund||4,980,536.18|4,980,536.18||
|3. Social Insurance Premium|23,041.98|1,475,526.61|1,475,526.61|23,041.98|
|Among it: Medical insurance premium|23,041.98|1,277,973.44|1,277,973.44|23,041.98|
|Industrial Injury Insurance|||||
|||89,505.47|89,505.47||
|Premium|||||
|Birth Insurance Premium||108,047.70|108,047.70||
|4. Public Housing Fund|24,310.00|794,130.24|794,130.24|24,310.00|
|5. Labor union expense and personnel|||||
||689,969.94|122,561.35|34,861.85|777,669.44|
|education fund|||||
|Total|4,765,916.33|57,938,825.80|56,490,854.41|6,213,887.72|

 (3) Presentation of Defined Contribution Plan
Unit: RMB
||||||
|-|-|-|-|-|
|Items|Beginning balance|Current increment|Current decrement|Ending balance|
|1. Basic retirement|||||
||-5,093.82|3,836,132.70|3,836,132.70|-5,093.82|
|insurance premium|||||
|2. Unemployment|||||
|||322,411.30|322,411.30||
|Insurance Premium|||||
|Total|-5,093.82|4,158,544.00|4,158,544.00|-5,093.82|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 19. Taxes Payable
Unit: RMB
||||
|-|-|-|
|Items|Ending balance|Beginning balance|
|VAT|7,294,271.06|4,546,472.19|
|Business Tax|1,405,738.37|1,185,572.87|
|Enterprise Income Tax|8,804,564.06|8,314,523.29|
|Personal Income Tax|35,016.79|43,155.25|
|Urban Maintenance & Construction Tax|124,888.48|23,767.75|
|Property Tax|452,346.57|610,591.84|
|Land use tax|330,904.20|195,937.53|
|Educational Surcharge|33,119.68|16,053.95|
|Others|71,197.64|7,006.39|
|Total|18,552,046.85|14,943,081.06|

 20. Other accounts Payables
(1) Other Accounts Payable Listed Based on Payment Nature
Unit: RMB
||||
|-|-|-|
|Items|Ending balance|Beginning balance|
|Cash deposit and cash pledge|11,080,224.58|5,846,332.45|
|Lease management fee|1,393,897.07|1,393,897.07|
|Equipment cost payable|246,722.49|332,322.49|
|Current accounts|9,851,796.05|12,057,421.18|
|After-sales and repai|333,642.00|108,012.00|
|Others|1,273,067.12|2,654,428.80|
|Total|24,179,349.31|22,392,413.99|

 (2) Important Other Accounts Payable with the Aging Larger Than 1 Year
Unit: RMB
||||
|-|-|-|
|Items|Ending balance|Cause of failure in repayment or carry-over|
|Shenzhen SED Property Development Co., Ltd.|1,393,897.07|Unsettled|
|Zhenxing Branch of CMBC|1,170,008.00|Unsettled|
|Shenzhen PNT Co., Ltd.|656,345.28|Unsettled|
|Shenzhen Tongxing Electronics Co., Ltd.|578,259.83|Unsettled|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|Shenzhen Yongdasheng Investment Development|||
||558,970.00|Unsettled|
|Co., Ltd.|||
|Total|4,357,480.18|--|

21. Long-term borrowings
(1) Classification of long-term borrowings
Unit: RMB
||||
|-|-|-|
|Items|Ending balance|Beginning balance|
|Mortgage Loan|585,300,000.00|162,418,800.00|
|Total|585,300,000.00|162,418,800.00|

 Description of classification of long-term borrowings: None
Other instructions: interest rate interval: the lending rate involves the upward fluctuation of benchmark interest rate of bank loan at the same period and level, which is subject to8.1875% this year.
22. Estimated liabilities
Unit: RMB
|||||
|-|-|-|-|
|Items|Ending balance|Beginning balance|Cause|
|Pending legal action|2,765,583.81|2,604,411.81|Commercial and labor dispute|
|Total|2,765,583.81|2,604,411.81|--|

23. Capital Stock
Unit: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|||Increase and decrease of change in the current period (+, -)||||||
||Beginning|||Share transfer of||||
||||||||Ending balance|
||balance|Issuing new shares|Donate hare|public accumulation|Others|Subtotal||
|||||fund||||
|Total shares|283,161,227.00||||||283,161,227.00|

 24. Capital Reserves
Unit: RMB
||||||
|-|-|-|-|-|
|Items|Beginning balance|Current increment|Current decrement|Ending balance|
|Capital premium (Shares Premium)|96,501,903.02|||96,501,903.02|
|Other Capital Reserves|12,994,934.31|||12,994,934.31|
|Total|109,496,837.33|||109,496,837.33|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 25. Surplus Reserves
Unit: RMB
||||||
|-|-|-|-|-|
|Items|Beginning balance|Current increment|Current decrement|Ending balance|
|Statutory Surplus Reserves|21,322,617.2|5||21,322,617.25|
|Any Surplus Reserves|56,068,976.0|0||56,068,976.00|
|Total|77,391,593.2|5||77,391,593.25|

 26. Undistributed profits
Unit: RMB
||||
|-|-|-|
|Items|Current period|Previous period|
|Undistributed profits at the end of previous periodbefore adjustment|||
||-196,386,008.11|-189,868,606.67|
|Beginning-of-year undistributed profits afteradjustment|-196,386,008.11||
|||-189,868,606.67|
|Add: net profit belonging to the owner of theparent company of the current period|||
||7,687,620.27|-6,517,401.44|
|End-of-period undistributed profits|-188,698,387.84|-196,386,008.11|

 Details of undistributed profits at the beginning of the adjustment period:
1). Retroactive adjustment is made according to the Accounting Standards for Business Enterprises and relevant new provisions; affected undistributed profit at the beginning of the period is RMB 0.
2). Due to the change in accounting policy, the affected undistributed profit at the beginning of the period is RMB 0.
3). Due to correction of significant accounting mistakes, the affected undistributed profit at the beginning of the period is RMB 0. 4). Due to the change in the merger scope under common control, the affected undistributed profit at the beginning of the period is RMB 0.
5). The undistributed profit at the beginning of the period affected by other adjustment: RMB 0.
27. Business Revenues& Business Cost
Unit: RMB
||||||
|-|-|-|-|-|
||Accruals of the current period||Accruals of the previous period||
|Items|||||
||Income|Cost|Income|Cost|
|Main Businesses|614,968,207.08|564,457,891.72|585,086,234.27|545,670,732.98|
|Other Business|79,871,553.02|29,540,907.46|41,734,810.37|10,928,216.80|
|Total|694,839,760.10|593,998,799.18|626,821,044.64|556,598,949.78|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 28. Business Tax& Surcharges
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|Business Tax|2,349,770.66|1,662,673.11|
|Urban Maintenance & Construction Tax|1,345,107.38|1,363,872.25|
|Educational Surcharge|576,474.58|584,516.67|
|Property Tax|442,258.65|442,258.56|
|Land use tax|239,994.10|239,994.10|
|Local education development fees|384,374.97|389,677.80|
|Others|317,229.50|364,379.76|
|Total|5,655,209.84|5,047,372.25|

 29. Sales costs
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|Employees‘ Remuneration|4,916,515.15|4,019,077.85|
|Transportation expenses|3,135,971.86|2,775,973.32|
|Commodity inspection expenses|239,667.47|349,539.47|
|Customs affairs fee|109,718.52|222,239.21|
|Commodity wastage|321,271.86|390,776.18|
|Others|2,789,084.30|2,264,110.95|
|Total|11,512,229.16|10,021,716.98|

 30. Management costs
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|Payroll|9,067,143.41|8,010,902.71|
|Depreciation costs|4,096,098.36|5,815,235.66|
|Social Insurance Premium|6,336,762.05|6,069,612.82|
|Social contact fees|1,562,052.88|1,892,026.53|
|Tax and surcharges|3,255,137.17|3,508,721.56|
|Staff Welfare Treatment Fund|1,878,679.25|1,762,758.92|
|Business trip costs|1,460,818.53|1,487,454.41|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|Amortization of intangible assets|1,494,294.72|1,341,612.23|
|Transportation fees|1,491,600.64|1,279,878.43|
|Consulting fees|2,317,319.50|615,827.70|
|Safety protection fee|1,184,265.52|1,286,102.50|
|Repair costs|1,519,462.47|1,194,933.55|
|Auditing costs|773,171.95|849,241.21|
|Office costs|614,373.83|1,049,189.72|
|Communication fees|320,228.44|161,571.17|
|Amortization of low-value, perishable goods|353,442.02|361,177.31|
|Securities information disclosure fees|273,950.56|245,500.00|
|Legal action costs|6,520.89|122,098.60|
|Others|1,194,956.83|2,186,579.31|
|Total|39,200,279.02|39,240,424.34|

 31. Financial Expenses
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|Interest Expenditures|40,887,323.57|19,690,543.20|
|Less: interest return|260,396.93|139,025.25|
|Add: exchange loss|-1,946,419.38|1,754,493.26|
|Add: other expenditures|1,104,046.01|148,327.64|
|Total|39,784,553.27|21,454,338.85|

 32. Assets Impairment Loss
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|I. Provision for Bad Debts|925,765.97|1,082,308.51|
|II. Provision for Depreciation of|||
|||991,178.40|
|Inventories|||
|Total|925,765.97|2,073,486.91|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 33. Investment income
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|Investment income generated from disposal of|||
||983,612.12||
|long-term equity investment|||
|Total|983,612.12||

34. Non-business Revenues
Unit: RMB
|||||
|-|-|-|-|
|||Accruals of the previous|Amount recorded in current|
|Items|Accruals of the current period|||
|||period|nonrecurring profit and loss|
|Gains of Disposal ofnon-current assets|1,752,028.49|267,153.14||
||||1,752,028.49|
|Among it: income from fixedassets disposition||||
||1,752,028.49|267,153.14|1,752,028.49|
|Government Grants|4,159,795.00|1,652,600.00|4,159,795.00|
|Payment that can not be paid|341,320.10|467,913.11|341,320.10|
|Penalty fine income|155,570.00|58,256.00|155,570.00|
|Others|82,110.00|129,929.25|82,110.00|
|Total|6,490,823.59|2,575,851.50|6,490,823.59|

 Governmental subsidies recorded in current profit and loss:
Unit: RMB
|||||
|-|-|-|-|
||Occurred amount of currentperiod|Occurred amount of previous||
|Subsidies|||Assets related/income related|
|||period||
|Position subsidy|200,695.00||Income related|
|Export subsidy and bonus|3,393,000.00||Income related|
|Energy saving subsidy|76,800.00||Income related|
|L2278W machine type subsidy|80,000.00||Income related|
|Bonus for enterprises paying the||||
|||200,000.00|Income related|
|tax of more than RMB 1 million||||
|Loan with discounted interest|409,300.00|169,600.00|Income related|
|Special support fund||200,000.00|Income related|
|Innovation and development||||
|||50,000.00|Income related|
|related special fund||||
|Special energy saving fund||83,000.00|Income related|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||
|-|-|-|-|
|Development fund for medium-and small-sized enterprises||||
|||950,000.0|0 Income related|
|Total|4,159,795.00|1,652,600.0|0 --|

35. Non-business Expenditures
Unit: RMB
|||||
|-|-|-|-|
|||Accruals of the previous|Amount recorded in current|
|Items|Accruals of the current period|||
|||period|nonrecurring profit and loss|
|Loss of Disposal of Non-current|164,208.69|163,109.29||
||||164,208.6|
|Assets||||
|Among it: Loss from fixed-assets||||
||164,208.69|163,109.29|164,208.6|
|disposition||||
|Litigation indemnity|161,172.00|2,360,203.26|161,172.0|
|Others|268,327.41|32,465.04|268,327.4|
|Total|593,708.10|2,555,777.59|593,708.1|

 36. Expenses of Income Tax
(1) Expense Statement of Income Tax
Unit: RMB
|||
|-|-|
|Items|Accruals of the current period|
|Income tax expenses of current period|521,227.71|
|Expense of deferred income tax|2,434,803.29|
|Total|2,956,031.00|

 (2) Accounting Profit and Income Tax Adjustment
Unit: RMB
|||
|-|-|
|Items|Accruals of the current period|
|Total profit|10,643,651.27|
|Income tax calculated based on legal/applicable tax rate|2,660,912.82|
|Influence of non-deductible cost, expense and loss|53,136.31|
|Influence of deductible loss of deferred income tax assets unrecognized at the early stage of use|-2,192,821.42|
|Influence of deductible temporary difference or deductible loss of deferred income tax assets that||
||2,434,803.29|
|are not recognized at current period||
|Income tax expense|2,956,031.00|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 37. Items in Cash Flow Statement
(1) Other Cash Received Related to Operation Activities
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|Business Transaction Payment|10,157,369.88|11,089,580.53|
|Administration fee and water and electricity charges|||
||9,827,961.00|7,310,433.74|
|collection|||
|Employees' repayment for their borrowings|2,323,827.06|5,787,306.85|
|Lease Deposit|5,989,902.00|1,659,726.00|
|Interest income|260,396.93|139,025.25|
|Total|28,559,456.87|25,986,072.37|

 (2) Other Paid Related to Operation Activities
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|The unit's current money|6,213,713.40|9,170,778.56|
|Advances to employees|4,768,944.01|6,520,029.82|
|Legal action costs|6,520.89|122,098.60|
|Deposit, security|1,142,674.29|385,491.56|
|Social contact fees|1,562,052.88|2,060,175.83|
|water & electricity fees|18,771,965.55|15,940,284.79|
|Business trip costs|1,460,818.53|1,459,961.65|
|Transportation expenses|3,135,971.86|1,473,677.18|
|Transportation fees|1,491,600.64|1,457,535.10|
|Repair costs|1,519,462.47|1,012,148.48|
|Auditing and consulting fee|3,090,491.45|1,309,626.00|
|Security fee|309,351.00|202,553.25|
|Procedure fee of financial organization|1,104,046.01|148,327.64|
|Office costs|614,373.83|1,031,428.16|
|Communication fees|320,228.44|365,743.11|
|Others|992,749.19|660,030.48|
|Total|46,504,964.44|43,319,890.21|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. (3) Other paid cashes related to investment activities
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|Balance of the equity transfer amount received when disposing the|||
|subsidiary that is lower than the monetary capital held on the disposal|44,452.72||
|date of subsidiary|||
|Total|44,452.72||

38. Supplementary information of cash flow statement
(1) Supplementary information of cash flow statement
Unit: RMB
||||
|-|-|-|
|Supplementary information|Current amount|Previous amount|
|1. Convert net profit to cash flow from operating activities:|--|--|
|Net Profit|7,687,620.27|-6,517,401.44|
|Add: provision drawn for assets impairment|925,765.97|2,073,486.91|
|Depreciation of fixed assets, depletion of oil and gas, depreciation of|||
||15,897,583.20|17,348,558.97|
|production materials or equipment|||
|Amortization of Intangible Assets|1,494,294.72|1,486,557.95|
|Amortization of Long-term Expenses to be Apportioned|1,268,733.43|1,408,200.12|
|Loss from Disposal of Fixed Assets, Intangible Assets & Other|||
||-1,587,819.80|-104,043.85|
|Long-term Assets (Proceeds indicated by ―-‖)|||
|Financial Expenses (Proceeds indicated by ―-‖)|40,887,323.57|19,690,543.20|
|Investment loss(Proceeds indicated by ―-‖)|-983,612.12||
|Decrement of Deferred Income Tax Assets (Addition indicated by ―-‖)|2,434,803.29|-1,077,769.12|
|Decrement of Inventories (Addition indicated by ―-‖)|23,074,150.75|-5,339,420.80|
|Decrement of Operative Receivables (Addition indicated by ―-‖)|5,491,533.44|-111,247,005.94|
|Increment of Operative Payables (Decrease indicated by ―-‖)|22,901,782.29|12,924,853.62|
|Net Cash Flow Provided by Operating Activities|119,492,159.01|-69,353,440.38|
|2. Important investment and fund raising activities involving no cash：|--|--|
|3. Net Variation of Cash and Cash Equivalent：|--|--|
|Year-end balance of cash|22,392,147.12|50,704,319.86|
|Less: year-beginning balance of cash|50,704,319.86|100,248,503.42|
|Net increase of cash and cash equivalent|-28,312,172.74|-49,544,183.56|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. (2) Net Cash for Disposal of Subsidiary Received at Current Period
Unit: RMB
|||
|-|-|
||Amount|
|Cash or cash equivalent received at the current period from disposal||
||100,000.00|
|of the subsidiary at current period||
|Wherein:|--|
|Huafa Trade Company|100,000.00|
|Less: cash and cash equivalent held by subsidiary on the date of loss||
||144,452.72|
|of control right||
|Wherein:|--|
|Huafa Trade Company|144,452.72|
|Wherein:|--|
|Net cash received from disposal of subsidiary|-44,452.72|

 (3) Composition of cash and cash equivalents
Unit: RMB
||||
|-|-|-|
|Items|Ending balance|Beginning balance|
|I. Cash|22,392,147.12|50,704,319.86|
|Among it: Ready money|516,454.17|492,314.95|
|Bank deposit available for payment anytime|21,875,692.95|50,212,004.91|
|III. Balance of Cash & Cash Equivalents at Term End|22,392,147.12|50,704,319.86|

 Other instructions: Monetary capital at the end of the year-other monetary capitaldoesn‘t belongs to cash and cash equivalent but refers to cash deposit forbank‘s acceptance bill of RMB 6,427,210.56.
39. Assets whose ownership or right to use is restricted
Unit: RMB
||||
|-|-|-|
|Items|End-of-period book value|Cause of limitation|
|Monetary Fund|6,427,210.56|Used for issuing the bank’s acceptance bill|
|Notes Receivable|45,473,002.10|Used for pledge to obtain the bank loan|
|Investment property|31,274,663.74|Used to secure the bank loans|
|Fixed Assets|46,128,426.60|Used to secure the bank loans|
|Intangible Assets|47,344,188.72|Used to secure the bank loans|
|Total|176,647,491.72|--|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 40. Foreign Currency Monetary Item
(1) Foreign Currency Monetary Item
Unit: RMB
|||||
|-|-|-|-|
||Ending balance of foreign|||
|Items||Exchange rate of conversion|Converted ending RMB balance|
||currency|||
|Wherein: USD|269,109.39|6.1190|1,647,548.30|
|HKD|166,488.16|0.7897|131,467.38|
|Wherein: USD|3,885,496.81|6.1190|23,844,905.37|
|Advance payment||||
|Wherein: USD|97,630.95|6.1190|599,151.38|
|Accounts payable||||
|Wherein: USD|1,188.60|6.1190|7,294.32|
|Short-term borrowing||||
|Wherein: USD|8,680,238.00|6.1190|53,114,376.32|

Ⅷ. Change of Merger Scope
1. Disposal of Subsidiary
Where there is any circumstance under which the control right over thesubsidiary’s investment is lost at single disposal?
√ Yes□ No
Unit: RMB
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||t|Difference|||||||
||||||||||||Determin||
|||||||of disposal|||||||
|||||||||||Profit or|ation|Amount of|
|||||||price and|||||||
||||||||Ratio|Book||loss|method|other|
|||||||he net asset|||Fair||||
||||||||of|value of||generate|and main|comprehensive|
|||||||share of|||value of||||
||||||||remain|remaini||from|assumpti|income related|
|||||Time|Determinati|subsidiary|||remainin||||
||||||||ing|ng||re-measu|on of fair|to original|
||Equity|Equity|Equity|point of|on basis for t|o be shared|||g equity||||
|Subsidiary|||||||equity|equity||rement|value of|subsidiary‘s|
||disposal|disposal|disposal|loss of|time point of|at the|||on the||||
|name|||||||on the|on the||of|remainin|equity|
||price|ratio|way|control|loss of c|onsolidated|||date of||||
||||||||date of|date of||remainin|g equity|investment|
|||||right|control right|financial|||loss of||||
||||||||loss of|loss of||g equity|on the|transferred into|
||||||s|tatement to|||control||||
||||||||control|control||based on|date of|the profit and|
|||||||which the|||right||||
||||||||right|right||fair|loss of|loss on|
|||||||disposed|||||||
|||||||||||value|control|investment|
|||||||investment|||||||
||||||||||||right||
|||||||corresponds|||||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||||||
|-|-|-|-|-|-|-|
||||||Handover of||
||||||actual||
||||||control right||
|Huafa Trade||||Sep. 30,|||
||100,000.00|100.00%|Sales||and|983,612.12|
|Company||||2014|||
||||||resolution of||
||||||shareholders||
||||||‘ meeting||

Other instructions:
Where there is any circumstance under which thesubsidiary‘s investment is disposed step by step through several times of
transactions and the control right is lost at current period?
□ Yes√ No
2. Change in Merger Scope Caused by Other Reasons
Please describe the change in merger scope caused by other reasons (such as establishment of new subsidiaries and liquidation of subsidiaries) and relevant information:
In this year, the information of subsidiaries that are newly incorporated into the merger scope due to establishment of new subsidiaries by the Group is shown as follows:
|||||||
|-|-|-|-|-|-|
|Name ofsubsidiary|Main businessplace|Registeredaddress|Business nature|Shareholding ratio(%)|Obtainingmethod|
|Huafa HengtaiCompany|Shenzhen|Shenzhen|Property management|100.00%|Newestablishment|

 Huafa Hengtai Company, founded on Mar. 5, 2014, is a limited liability company registered in Shenzhen Market Supervision and Management Bureau, with the registration number being 440301108909539. The registered capital is RMB 1 million and the paid-up capital is RMB 1 million. The Company holds100.00% of the shares.
Ⅸ. Equity in Other Entities
1. Equity in subsidiaries
(1) Composition of Enterprise Group
||||||||
|-|-|-|-|-|-|-|
||Main business|Registered||Shareholding ratio|||
|Name of subsidiary|||Business nature|||Obtaining method|
||place|address||Direct|Indirect||
||||Property|||Invested and|
|Huafa Lease Company|Shenzhen|Shenzhen||60.00%|||
||||management|||established|
||||Property|||Invested and|
|Huafa Property Company|Shenzhen|Shenzhen||100.00%|||
||||management|||established|
|||||||Invested and|
|Hengfa Technology Company|Wuhan|Wuhan|Production and sale|100.00%|||
|||||||established|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||||
|-|-|-|-|-|-|
||||Property||Invested and|
|Yutian Henghua Company|Shenzhen|Shenzhen||100.00%||
||||management||established|
||||Property||Invested and|
|Huafa Hengtian Company|Shenzhen|Shenzhen||100.00%||
||||management||established|
||||Property||Invested and|
|Huafa Hengtai Company|Shenzhen|Shenzhen||100.00%||
||||management||established|

 Instruction for shareholding ratio of subsidiary different from the proportion of voting right:
Basis for holding half or less than half of the voting rights but still controlling the invested unit and basis for holding more than half of the voting rights but failing to control the invested unit:
Basis for control over the important structured entity incorporated in the merger scope:
Basis for determining whether the Company is an agent or a client: none.
Other instructions: none.
Ⅹ. Financial Instruments Related Risks
The main financial instruments of the Group include the borrowing, accounts receivable, accounts payable, trading financial assets and trading financial liabilities. The detailed information of various financial instruments is shown in Note VI. The financial instruments related risks and the risk management policy taken by the Group for reducing these risks are shown as follows. TheGroup‘s management layer will manage and monitor these risk exposures in order to ensure controlling above risks within the limited scope.
1. Various risk management objectives and policies
TheGroup‘s risk management aims to achieve proper balance between risk and benefit; minimize the negative influence of risk on theGroup‘s operation performance and maximize the benefits of shareholders and other equity investors. Based on this risk management objective, the basic strategy of risk management of the Group is determining and analyzing the risks faced by the Group; establishing proper risk tolerance and carrying out risk management and supervising various risks in a timely and reliable manner in order to control the risks within a limited scope.
(1) Market risk
The market risk of financial instruments refers to the risk of fluctuation of fair value or future cash flow of financial instruments caused by market price change, including foreign exchange risk, interest rate risk and other price risk.
1）Exchange rate risk
The exchange rate risk assumed by the Group is mainly related to the USD and HKD. Except for the daily operation activities related to display carried out by the secondary subsidiary of the Group Hengfa Science and Technology Co., Ltd. in USD, the other main business activities of the Group shall be settled in RMB. On Dec. 31, 2014, except for the USD balance of following assets and liabilities and the petty UKD balance, the assets and liabilities of the Group are the RMB balances. The exchange rate risk generated from the assets and liabilities of the USD and HKD balance may exert an influence on the operating performance of the Group.
||||
|-|-|-|
|Item|Dec. 31, 2014 (converted into RMB)|Dec. 31, 2013 (converted into RMB)|
|Monetary capital-USD|1,647,548.30|25,626,333.15|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||
|-|-|-|
|Monetary capital-HKD|131,467.38|151,240.37|
|Accountsreceivable-USD|23,844,905.37|59,104,721.62|
|Advance payment-USD|599,151.38|9,057,267.97|
|Accountsreceivable-USD|7,294.32|19,977.88|
|Short-termborrowing-USD|53,114,376.32|75,960,601.13|

The Group attaches close attention to the influence of change in exchange rate on the Group.
2) Interest rate risk
TheGroup‘s interest rate risk is generated from the bank loan. The financial liabilities of floating interest rate cause the cash flow interest rate risk faced by the Group and the financial liabilities of fixed interest rate cause the fair value interest rate risk faced by the Group. The Group shall determine the relative ratio of fixed interest rate and floating interest rate contract according to the market environment. On Dec. 31, 2014, the interest-bearing debts of the Group mainly include the floating interest rate loan contract valued at RMB and USD, with the total amount being RMB 723,414,376.32 (on Dec. 31, 2013: RMB 324,559,401.13).
TheGroup‘s risk of financialinstrument‘s cash flow change caused by change in interest rate is mainly related to the bank loan of floating interest rate. TheGroup‘s policy aims to remain the floating interest rate of these borrowings to eliminate the fair value risk caused by interest rate change.
3) Price risk
The Group sells the display at market price so that the performance is affected by such price fluctuation.
(2) Credit risk
The credit risk refers to the risk of property loss caused to the other party due to the failure of a party to the financial instrument in performance its obligations. On Dec. 31, 2014, the maximum credit risk exposure that may cause the financial loss of the Group mainly comes from the loss of theGroup‘s financial assets caused by the failure of other party of the Contract in performance its obligation and the financial guarantee assumed by the Group, which mainly includes:
In order to reduce the credit risk, the Group establishes a special department to determine the credit line and carry out credit approval and implement other monitoring procedures to ensure that necessary measures are taken to recover the overduecreditor‘s right. In addition, the Group reviews the recovery situation of each single account receivable on each balance sheet date to ensure full withdrawal of bad debt provision for the accounts that cannot be recovered. Therefore, theGroup‘s management layer believes that the credit risk assumed by the Group has been reduced significantly.
TheGroup‘s working capital is stored in the bank with higher credit rating so that the credit risk of working capital is lower. The Group implements necessary policies to ensure that all trade debtors have good credit record. Except for the top five accounts receivable, the Group has no other significant credit concentration risk.
Total amount of top five accounts receivable: RMB 106,260,853.21.
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. (3) Liquidity risk
Liquidity risk is the risk that the Group fails to perform its financial obligation on the due date. The method for the Group to manage the liquidity risk is to ensure sufficient fund liquidity for performance of due debts so as to avoid unacceptable loss or damage to theenterprise‘s reputation. The Group regularly analyzes the liability structure and period in order to ensure sufficient funds. TheGroup‘s management layer is responsible for monitoring the use of bank loan and ensuring its compliance with the loan agreement. Meanwhile, theGroup‘s management layer shall also have negotiation with the financial institution about the financing to ensure a certain line of credit and reduce the liquidity risk.
The financial assets and financial liabilities held by the Group are analyzed based on the maturity of undiscounted remaining contractual obligation:
Amount as of Dec. 31, 2014
|||||||
|-|-|-|-|-|-|
|Items|Within 1 year|1-2 years|2-3 years|More than 3 years|Total|
|Financial assets||||||
|Monetary capital|28,819,357.68||||28,819,357.68|
|Notes receivable|100,821,063.85||||100,821,063.85|
|Notes Receivable|112,425,468.57||||112,425,468.57|
|Other Accounts Receivable|109,094,812.29||||109,094,812.29|
|Advance payment|5,669,119.87||||5,669,119.87|
|Other current assets|500,000,000.00||||500,000,000.00|
|Financial liabilities||||||
|Short-term borrowing|138,114,376.32||||138,114,376.32|
|Notes payable|39,994,397.62||||39,994,397.62|
|Accounts payable|65,547,836.32||||65,547,836.32|
|Other payables|20,168,149.31||4,011,200.00||24,179,349.31|
|Deposit received|727,331.06||||727,331.06|
|Employees‘ remuneration payable|6,208,793.90||||6,208,793.90|
|Long-term borrowing||||585,300,000.00|585,300,000.00|

 2. Sensitivity analysis
The Group adopts sensitivity analysis technology to analyze the influence of reasonable and potential change in the risk variables on the current profit and loss or ownership interest. As few risk variables will change in isolation and the correlation of the variables will have a large influence on the final affected amount of a certain risk variable change, the following analysis is carried out based on the assumption that each variable changes in isolation.
(1) Sensitivity analysis of foreign exchange risk
Assumption of sensitivity analysis of foreign exchange risk: all foreign operation net investment hedging and cash flow hedging are highly effective.
Based on the above assumptions and under the circumstance that other variables remain unchanged, the after-tax influence of
potential reasonable change in the exchange rate on the current profit and loss and equity is shown as follows:
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||||
|-|-|-|-|-|-|
|Item|Exchange rate change|2014||2013||
|||Influence on netprofit|Influence onownershipinterest|Influence on netprofit|Influence onownershipinterest|
|All foreigncurrencies|Appreciation of 5%against RMB|-1,011,402.55|-1,011,402.55|674,440.11|674,440.11|
|All foreigncurrencies|Depreciation of 5%against RMB|1,011,402.55|1,011,402.55|-674,440.11|-674,440.11|

XI. Connected parties and connected transactions
1. Condition of parent company of the Enterprise
|||||||
|-|-|-|-|-|-|
|||||Shareholding|Percentage of voting|
|Name of parent company||||proportion of the|rights held by the|
||Registered place|Business scope|Registered capital|||
|||||parent company over|parent company over|
|||||the Enterprise|the Enterprise|
|Wuhan Zhongheng Group|Wuhan|Production and sale|34,500,000|41.14%|41.14%|

 Description of condition of the other affiliates of the Enterprise
Registered capital and its change
||||||
|-|-|-|-|-|
|Controlling shareholder|Opening balance|Increase of thisyear|Decrease of thisyear|Ending balance|
|Wuhan Zhongheng Group|34,500,000|||34,500,000|

 Held share or equity and its change
||||||
|-|-|-|-|-|
|Controllingshareholder|Shareholding amount||Shareholding ratio (%)||
||Ending balance|Opening balance|Ending ratio|Opening ratio|
|Wuhan Zhongheng Group|116,489,894.00|116,489,894.00|41.14|41.14|

 The final controlling party of the enterprise is Li Zhongqiu.
2. Condition of subsidiaries of the Enterprise
See Note―Composition of EnterpriseGroup‖ for information of theenterprise‘s subsidiaries.
3. Information of Other Related Parties
|||
|-|-|
|Name of other affiliates|Relationship between other related party and the enterprise|
|Shenzhen Zhongheng Huafa Science and Technology Co., Ltd.|Under the control of the same parent company and the final controlling party|
|Wuhan Hengsheng Yutian Industry Co., Ltd.|Under the control of the same parent company and the final controlling party|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||
|-|-|
|Wuhan Hengsheng Opto-electric Industry Co., Ltd.|Under the control of the same parent company and the final controlling party|
|Hongkong Yutian International Co., Ltd.|Under the control of the same parent company and the final controlling party|
|Wuhan Xindongfang Real Estate Development Co., Ltd.|Under the control of the same parent company and the final controlling party|
|Wuhan Zhongheng Property Management Co.,Ltd.|Under the control of the same parent company and the final controlling party|
|Wuhan Guanggu Display System Co., Ltd.|Under the control of the same parent company and the final controlling party|
|Wuhan Yutian Xingye Property Purchase Co., Ltd.|Under the control of the same parent company and the final controlling party|
|Wuhan Yutian East Land Holding Co., Ltd.|Under the control of the same parent company and the final controlling party|
|Wuhan Xiahua Zhongheng Electronic Co., Ltd.|Under the control of the same parent company and the final controlling party|
|Wuhan ZHongheng Yutian Trade Co., Ltd.|Under the control of the same parent company and the final controlling party|
|Wuhan Yutian Hongguang Real Estate Co., Ltd.|Under the control of the same parent company and the final controlling party|
|Shenzhen Zhongheng Huayu Investment Holding Co., Ltd.|Under the control of the same parent company and the final controlling party|
|Famous Sky Capital Limited|Under the control of the same parent company and the final controlling party|
|Yutian International Co., Ltd.|Under the control of the same parent company and the final controlling party|
|Hong Kong Zhongheng Yutian Co., Ltd.|Under the control of the same parent company and the final controlling party|

 Other instructions:
Wuhan Hengshen Opto-Electronics Industry Co., Ltd. changed its name to Wuhan Hengsheng Opto-Electronics Industry Co., 4. Connected Transaction
(1) Connection Transactions about Procurement and Sales of Commodities, Provision and Acceptance of Labor Service
List of procured commodities/accepted labor
Unit: RMB
|||||
|-|-|-|-|
||Content of connected|||
|Related parties||Accruals of the current period|Accruals of the previous period|
||transaction|||
|Hongkong Yutian International Co., Ltd.|Commodities purchased|145,128,560.64|173,527,202.49|
|Wuhan Hengsheng Yutian Industry Co., Ltd.|Commodities purchased|27,985,217.75|20,560,124.11|
|Total||173,113,778.39|194,087,326.60|

 Fact statement of sales of goods and provisions of labor
Unit: RMB
|||
|-|-|
|Affiliated transaction|Accruals of the current period|
|Sales of commodities|234,811,940.55|
|Sales of commodities|185,805.98|
|Provision of labor||
||636,090.00|
|service||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||
|-|-|-|-|
|Wuhan Hengsheng Yutian Industry Co., Ltd.|Sales of commodities|0|440,740.74|
|Wuhan Zhongheng New Tech Industry||||
||Sales of commodities|60,056.30|111,612.97|
|Group Co., Ltd.||||
|Total||235,693,892.83|241,714,900.08|

 (2) Associated lease situation
The Company is the Lessor:
Unit: RMB
|||||
|-|-|-|-|
||Category of leased assets|Recognized lease income of|Recognized lease income of|
|Name of Lessee||||
|||current period|previous period|
|Shenzhen Zhongheng Huafa||||
||House building|2,309,448.00|1,598,622.00|
|Science and Technology Co., Ltd||||

(3) Associated guarantee situation
The Company is the Guarantor:
Unit: RMB
||||||
|-|-|-|-|-|
|||||Whether guarantee has|
||Amount of guarantee|Starting date of guarantee|Expiry date of guarantee||
|Guaranteed person||||been fully performed or|
|||||not|
|Hengfa Technology|||||
||75,000,000.00|Aug 28, 2014|Aug 28, 2015|None|
|Company|||||
|Hengfa Technology|||||
||48,000,000.00|Sep. 29, 2014|Sep. 29, 2015|None|
|Company|||||

The Company acts as the secured party
Unit: RMB
||||||
|-|-|-|-|-|
||Amount of guarantee|Starting date of guarantee|Expiry date of guarantee|Whether guarantee has|
|Guarantor|||||
|||||been fully performed or not|
|Li Zhongqiu|20,000,000.00|Dec. 4, 2014|Dec. 4, 2015|None|

 (4) Remuneration of Key Management Personnel
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|Total remuneration|1,743,400.00|1,655,800.00|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.5、Receivables and payable of related party
(1) Receivables
Unit: RMB
|||||||
|-|-|-|-|-|-|
|||Ending balance||Beginning balance||
|Project name|Associated party||Provision for Bad||Provision for Bad|
|||Book balance||Book balance||
||||Debts||Debts|
|Notes|Hong Kong Tianyu International|||||
|||23,844,905.37||58,271,302.17||
|Receivable|Investment Co.,Ltd.|||||
|Advance|Hong Kong Tianyu International|||||
|||1,745,857.69||8,310,763.53||
|payment|Investment Co.,Ltd.|||||
|Total||25,590,763.06||66,582,065.70||

(2) Payables
Unit: RMB
|||||
|-|-|-|-|
|Project name|Associated party|Ending book balance|Opening book balance|
||Shenzhen Zhongheng New Science|||
|Other payables|and Technology Industry Group Co.,|0|3,654.74|
||Ltd.|||
|Advance collections|Shenzhen Zhongheng Huafa Science|276,329.24|0|
||and Technology Co., Ltd.|||
|Accounts payables|Wuhan Hengsheng Opto-Electronics|1,231,780.60|0|
||Industry Co., Ltd.|||
|Total||1,508,109.84|3,654.74|

Ⅻ. Commitment and Contingent Matters
1. Contingent Affairs
(1) Important contingent matters on the balance sheet date
1. Contigent liabilities formed by pending litigation or arbitration
(1) Contract disputes between the Company and Shaanxi Linghua Electronic Co., Ltd.
The contract dispute case filed by Shaanxi Linghua Electronic Co., Ltd. (2007SDDMC 2441): Shaanxi Linghua made a claim
for damages to the printed circuit board with potential quality problems that were sold to it during the period May 30, 2006 to May 9,
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. 2007. The amount at issue is RMB 3,100,773.20. The company received summons from Futian DistrictPeople‘s Court on Jan. 14, 2008. The first hearing was opened for cross examination of evidence on March 6, 2008. The case was not completed by the balance sheet date.
The company lodged a counter claim for the overdue freight fee and the interest accrued to Shaanxi Linghuaon November 12, 2007. The amount at issue is RMB 1,054,290.19. The first court session is on March 6, 2008 and the cross examination of evidence was completed.
On Jul. 25, 2009, Shenzhen Futian People's Law Court settled the above cases (No. 2007 SHEN FU FA MIN ER CHU ZI NO. 2441), ruling that, the Company pay 1,797,975.48 Yuan of compensation to Shaanxi Linghua within 10 days of the settlement, and that Shaanxi Linghua pay to the Company the balance of payment for goods (1,797,975.48 Yuan) within 10 days of the settlement as well as interests associated thereto.
For that legal settlement, the Company brought an appeal to the Shenzhen intermediate People's Court on Aug. 31, 2009. The Shenzhen Intermediate People's Court settlement appeal on Mar. 22, 2010 (rule No. (2009) SHEN ZHONG FA MIN ER ZHONG ZI NO. 2227), ruling that the original settlement has no convincing evidences and that case shall be re-settled by the Shenzhen Futian People's Law Court. Canceling the civil judgment No. Shen Fu Zi Min Er Chu 2441 (2007) made by the People's Court of Futian District Shenzhen City, and remand to the People's Court of Futian District Shenzhen City for retrial.
On May 5, 2013, Futian DistrictPeople‘s Court of Shenzhen City has made judgment regarding abovementioned case (S.F.F.M.E.C.Z.No.9 in 2010): the company shall, within 10 days after the judgment becomes effective, pay RMB2,386,995.81 to Shaanxi Linghua as damages and Shaanxi Linghua shall, within 10 days after the judgment becomes effective , pay RMB869,458.96 as the residual payment for the goods to the company and compensate the interest loss.
The Company shall lodge the suit on July 7, 2013 to Shenzhen Municipal IntermediatePeople‘s Court regarding the judgment. According to the existing judgment, the company has withdrawn RMB2, 360,203.26 as the litigation cost of the case and determines as expected liabilities.
As of the approval and submission date of this financial report, this case has not been completed legal proceedings. The Company shall lodge the suit on July 7, 2013 to Shenzhen Municipal IntermediatePeople‘s Court regarding the judgment. According to the existing judgment, the company has withdrawn RMB2, 360,203.26 as the litigation cost of the case and determines as expected liabilities.
As of the approval and submission date of this financial report, this case has not been completed legal proceedings.
(2) Labor disputes that have been confirmed estimated liability in previous years but have not been executed till now. According to the Notice on Judgment Enforcement (2008 SFFZZ NO. 522-529) issued by the ShenzhenPeople‘s Court of Guangdong Province concerning the 14persons‘(including Cai Yaoqiang and others) labor dispute case, the SLZC[2007] NO. 1069-1077, 1079, 1081, 1085-1087 arbitration awards have started to take legal effect. And according to the Corporate Basic Information and Credit Report, the Company has the unperformed labor dispute object of 38,386.00 Yuan in total, which has been confirmed as the estimated liability by the Company.
Labor Dispute Case between Yang Guangze, former employee of the Company, and the Company claiming for wages, bonus,
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. overtime pay, housing provident fund, holiday pay, etc., According to the court judgment, the Company shall pay living expense of off-post recuperation of RMB 23,851.00 from May 2007 to December 2008 to Yang Guangze.
2. Except for above contingent matters, as of Dec. 31, 2014, the Groups has no other significant contingent matters.
XIII. Events after Balance Sheet Date
1. Instruction of other events after balance sheet date
As of the approved release date of financial report, the Group has no significant events after balance sheet date to be disclosed. XIV. Other Significant Events
1. Miscellaneous
As of Dec. 31, 2014, the Group has no other significant events to be disclosed.
XV. Notes of main items of parentcompany’s financial statements
1. Accounts Receivable
(1) Classified Disclosure of Accounts Receivable
Unit: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Ending balance|||||Beginning balance|||||
||Book balance||Provision for Bad Debts|||Book balance||Provision for Bad Debts|||
|Type|||||||||||
|||Proporti||Percent|Book Value||||Percent|Book Value|
||Amount||Amount|||Amount|Proportion|Amount|||
|||on||Drawn|||||Drawn||
|Accounts receivable with|||||||||||
|significant specific amount|||||||||||
||5,094,414.36|48.59%|3,672,319.72|72.09%|1,422,094.64|5,094,414.36|10.76%|3,672,319.72|72.09%|1,422,094.64|
|that were provisioned bad|||||||||||
|debt preparation separately|||||||||||
|Accounts receivable which|||||||||||
|bad debt provision shall be|||||||||||
||557,327.76|5.32%|122,200.33|21.93%|435,127.43|37,407,188.47|79.03%|110,950.83|0.30%|37,296,237.64|
|withdrawn based on credit|||||||||||
|risk characteristics|||||||||||
|Accounts receivable that|||||||||||
|were not significant but have|||||||||||
||4,832,157.56|46.09%|4,832,157.56|100.00%||4,832,157.56|10.21%|4,832,157.56|100.00%||
|been provisioned bad debt|||||||||||
|preparation separately|||||||||||
|Total|10,483,899.68||8,626,677.61||1,857,222.07|47,333,760.39||8,615,428.11||38,718,332.28|

Other Accounts Receivable with major individual amount and separate accrual of bad debt reserve at the end ofperiod：
√ Applicable□ Inapplicable
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Unit: RMB
||||||
|-|-|-|-|-|
||Ending balance||||
|Accounts Receivable (based on|||||
||Accounts|Provision for Bad|||
|unit)|||Percent Drawn|Reason of provision|
||Receivable|Debts|||
|TCL Wangpai Electric Appliance|||||
||1,325,431.75|1,325,431.75|100.00%|Can not be taken back|
|( Huizhou)Co., Ltd.|||||
|Skyworth Multimedia(Shenzhen)|||||
||672,769.28|672,769.28|100.00%|Can not be taken back|
|Co.,Ltd.|||||
|Qingdao Hai‘er Spare Parts|||||
||1,225,326.15|1,225,326.15|100.00%|Can not be taken back|
|Procurement Co., Ltd.|||||
|||||Failure to recover on time because|
|H. K. Haowei Industry Co., Ltd.|1,870,887.18|448,792.54|23.99%||
|||||of customer‘s fund shortage|
|Total|5,094,414.36|3,672,319.72|--|--|

In the combination, aging analysis method is used to accrue the receivables of bad debt reserves:
√ Applicable□ Inapplicable
Unit: RMB
|||||
|-|-|-|-|
||Ending balance|||
|Account ageing||||
||Accounts Receivable|Provision for Bad Debts|Percent Drawn|
|Subitem within one year||||
|2-3 year (s)|224,990.00|22,499.00|10.00%|
|Over 3years|332,337.76|99,701.33|30.00%|
|Total|557,327.76|122,200.33||

Instructions for determining the combination basis:
Accounts receivable with accrual of bad debt reserve by balance percentage method in the combination:
□ Applicable√ Inapplicable
Accounts receivable with accrual of bad debt reserve by other method in the combination:
Accounts receivable without major individual amount but with separate accrual of bad debt reserve at the end of period:
||||||
|-|-|-|-|-|
|Unit name|Balance at the end of the year||||
||AccountsReceivable|Provision for BadDebts|Percent Drawn（%）|Reason of provision|
|Shenzhen Huixin Video Science andTechnology Co.,Ltd.|381,168.96|381,168.96|100.00|Can not be taken back|
|Shenzhen Wandial Number Science andTechnology Co.,Ltd.|351,813.70|351,813.70|100.00|Can not be taken back|
|Shenzhen Dalong Electric Co.,Ltd.|344,700.00|344,700.00|100.00|Can not be taken back|
|Shenzhen Qunpin Electric Co.,Ltd.|304,542.95|304,542.95|100.00|Can not be taken back|
|China Galaxy Electric(Hong Kong) Co.,Ltd.|288,261.17|288,261.17|100.00|Can not be taken back|
|Dongguan Weite Electric Co.,Ltd.|274,399.80|274,399.80|100.00|Can not be taken back|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||||
|-|-|-|-|-|
|Hong Kong New Century Electric Co.,Ltd.|207,409.40|207,409.40|100.00|Can not be taken back|
|Shenyang Beitai Electric Co.,Ltd.|203,304.02|203,304.02|100.00|Can not be taken back|
|Bejing Xinfanweiye Science and TechnologyCo.,Ltd.|193,000.00|193,000.00|100.00|Can not be taken back|
|TCL Electric(Hong kong) Co.,Ltd.|145,087.14|145,087.14|100.00|Can not be taken back|
|Huizhou TCL New and Special ElectronicsCo., Ltd.|142,707.14|142,707.14|100.00|Can not be taken back|
|Shenzhen Skyworth-RGB Electric Co.,Ltd.|133,485.83|133,485.83|100.00|Can not be taken back|
|Shenzhen Xinfa Electronics Co., Ltd.|119,094.78|119,094.78|100.00|Can not be taken back|
|Others|1,743,182.67|1,743,182.67|100.00|Can not be taken back|
|Total|4,832,157.56|4,832,157.56|||

(2) Bad Debt Provision Withdrawn, Recovered or Refunded at Current Period
The bad debt provision withdrawn at current period is RMB 11,249.50; the bad debt provision recovered or refunded at current period is RMB 0.00.
Among which, the important bad debt provision recovered or refunded at current period: none.
(3) Accounts Receivable with Top Five Ending Balances Collected Based the Debtor
The total amount of accounts receivable with top five ending balances collected by the Debtor this year reaches RMB
5,475,583.32, which accounts for52.23% of the total ending balance of the accounts receivable. The total amount of ending balances of withdrawn bad debt provision is RMB 4,053,488.68.
2. Other Accounts Receivable
(1) Classified Disclosure of Other Accounts Receivable
Unit: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Ending balance|||||Beginning balance|||||
||Book balance||Provision for Bad Debts|||Book balance||Provision for Bad Debts|||
|Type|||||||||||
|||Proporti||Percent|Book Value||Proporti||Percent|Book Value|
||Amount||Amount|||Amount||Amount|||
|||on||Drawn|||on||Drawn||
|Accounts receivable with|||||||||||
|significant specific amount|||||||||||
||10,221,046.53|8.39%|10,221,046.53|100.00%|0|10,221,046.53|8.88%|10,221,046.53|100.00%|0|
|that were provisioned bad|||||||||||
|debt preparation separately|||||||||||
|Other accounts|||||||||||
|receivable which bad|||||||||||
|debt provision shall be|106,277,411.47|87.21%|62,709.06|0.06%|106,214,702.41|100,848,359.10|87.64%|453,427.30|0.45%|100,394,931.80|
|withdrawn based on|||||||||||
|credit risk|||||||||||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|characteristics|||||||||||
|Accounts receivable that|||||||||||
|were not significant but|||||||||||
||5,359,981.34|4.40%|5,359,981.34|100.00%|0|4,004,746.63|3.48%|4,004,746.63|100.00%|0|
|have been provisioned bad|||||||||||
|debt preparation separately|||||||||||
|Total|121,858,439.34||15,643,736.93||106,214,702.41|115,074,152.26||14,679,220.46||100,394,931.80|

 Other Accounts Receivable with major individual amount and separate accrual of bad debt reserve at the end of period:
√ Applicable□ Inapplicable
Unit: RMB
||||||
|-|-|-|-|-|
||Ending balance||||
|Other Accounts|||||
||Other Accounts||||
|Receivable (based on unit)||Provision for Bad Debts|Percent Drawn|Reason of provision|
||Receivable||||
|Huafa Lease Company|4,558,859.15|4,558,859.15|100.00%|Can not be taken back|
|Boteman|4,021,734.22|4,021,734.22|100.00%|Can not be taken back|
|Zhao Baomin|564,646.35|564,646.35|100.00%|Can not be taken back|
|Traffic incident indemnity|555,785.81|555,785.81|100.00%|Can not be taken back|
|Hebei Botou Court|520,021.00|520,021.00|100.00%|Can not be taken back|
|Total|10,221,046.53|10,221,046.53|--|--|

Other Accounts Receivable with accrual of bad debt reserve by aging analysis method in the combination::
√ Applicable□ Inapplicable
Unit: RMB
|||||
|-|-|-|-|
||Ending balance|||
|Account ageing||||
||Other Accounts Receivable|Provision for Bad Debts|Percent Drawn|
|Subitem within one year||||
||105,563,753.03|0|0|
|Subtotal within 1 year|105,563,753.03|0|0|
|1-2 year (s)|234,231.51|11,711.58|5.00%|
|2-3 years|464,152.99|46,415.30|10.00%|
|Over 3years|15,273.94|4,582.18|30.00%|
|Total|106,277,411.47|62,709.06||

Instructions for determining the combination basis:
Other Accounts Receivable with accrual of bad debt reserve by balance percentage method in the combination:
□ Applicable√ Inapplicable
Other Accounts Receivable with accrual of bad debt reserve by other method in the combination:
√ Applicable□ Inapplicable
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Other Accounts Receivable without major individual amount but with separate accrual of bad debt reserve at the end of period:
||||||
|-|-|-|-|-|
|Unit name|Balance at the end of the year||||
||Other AccountsReceivable|Provision for BadDebts|Percent Drawn（%）|Reason of provision|
|Shenzhen Lotus Island Restaurant Co.,Ltd|236,293.80|236,293.80|100.00|Can not be taken back|
|Weili Electric Corporation Co.,Ltd,Zhangzhou City, Fujian Province|112,335.62|112,335.62|100.00|Can not be taken back|
|Employee canteen ect.|1,036,916.46|1,036,916.46|100.00|Can not be taken back|
|Personal borrowings|987,090.51|987,090.51|100.00|Can not be taken back|
|Trade Union|297,402.55|297,402.55|100.00|Can not be taken back|
|Chuangjing workshop|192,794.00|192,794.00|100.00|Can not be taken back|
|Others|2,497,148.40|2,497,148.40|100.00|Can not be taken back|
|Total|5,359,981.34|5,359,981.34|||

(2) Bad Debt Provision Withdrawn, Recovered or Refunded at Current Period
The bad debt provision withdrawn at current period is RMB 964,516.47; the bad debt provision recovered or refunded at current period is RMB 0.00.
Among which, the important bad debt provision recovered or refunded at current period: none.
(3) Classification of Other Accounts Payable Based on Payment Nature
Unit: RMB
||||
|-|-|-|
|Payment nature|Ending book balance|Opening book balance|
|Borrowing|2,119,400.72|2,658,719.17|
|Current accounts|112,557,582.53|107,129,565.73|
|Rent income|7,181,456.09|5,207,178.01|
|Others||78,689.35|
|Total|121,858,439.34|115,074,152.26|

 (4) Other Accounts Receivable with Top Five Ending Balances Collected Based on Debtor
Unit: RMB
|||||||
|-|-|-|-|-|-|
|||||Proportion in the||
|||||total ending balances|Ending balance of|
|Unit name|Payment nature|Ending balance|Account ageing|||
|||||of other accounts|bad debt provision|
|||||receivable||
|Huafa Trade Company|Current accounts|101,400,000.00|Within 1 year|83.21%||
|Huafa Lease Company|Current accounts|4,558,859.15|Over 3years|3.74%|4,558,859.15|
|Boteman|Rental expense|4,021,734.22|Over 3years|3.30%|4,021,734.22|

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||||
|-|-|-|-|-|-|
||receivable and other|||||
||expenses|||||
||Rental expense|||||
|Huafa Property||||||
||receivable under|882,564.39|Within 1 year|0.72%||
|Company||||||
||custody|||||
||Rental expense|||||
|Zhao Baomin|receivable and other|564,646.35|Over 3years|0.46%|564,646.35|
||expenses|||||
|Total|--|111,427,804.11|--|91.43%|9,145,239.72|

 3. Long-term Equity Investment
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||Ending balance|||Beginning balance|||
|Items||ImpairmentProvision|Book Value||Impairment||
||Book balance|||Book balance||Book Value|
||||||Provision||
|Investment in|||||||
||188,208,900.00|600,000.0|0 187,608,900.00|187,308,900.00|600,000.00|186,708,900.00|
|subsidiary|||||||
|Total|188,208,900.00|600,000.0|0 187,608,900.00|187,308,900.00|600,000.00|186,708,900.00|

 (1) Investment in subsidiary
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||||||Withdrawal of||
|||Additional|Decreased|||Ending balance of|
||Beginning||||depreciation||
|Invested unit||amount of|amount of|Ending balance||depreciation|
||balance||||reserves of current||
|||current period|current period|||reserves|
||||||period||
|Huafa Lease|||||||
||600,000.00|||600,000.00||600,000.00|
|Company|||||||
|Huafa Property|||||||
||1,000,000.00|||1,000,000.00|||
|Company|||||||
|Hengfa Technology|||||||
||183,608,900.00|||183,608,900.00|||
|Company|||||||
|Huafa Trade|||||||
||100,000.00||100,000.00||||
|Company|||||||
|Yutian Henghua|||||||
||1,000,000.00|||1,000,000.00|||
|Company|||||||
|Huafa Hengtian|||||||
||1,000,000.00|||1,000,000.00|||
|Company|||||||
|Huafa Hengtai||1,000,000.00||1,000,000.00|||

2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd.
|||||||
|-|-|-|-|-|-|
|Company||||||
|Total|187,308,900.00|1,000,000.00|100,000.00|188,208,900.00|600,000.00|

 4. Business Revenues& Business Cost
Unit: RMB
||||||
|-|-|-|-|-|
||Accruals of the current period||Accruals of the previous period||
|Items|||||
||Income|Cost|Income|Cost|
|Other Business|57,459,329.67|10,236,937.60|38,573,827.05|10,063,936.59|
|Total|57,459,329.67|10,236,937.60|38,573,827.05|10,063,936.59|

 Other explanations:
Other business-classified based on categories
||||||
|-|-|-|-|-|
|Products|Amount of current year||Amount of last year||
||Business revenues|Business cost|Business revenues|Business cost|
|Property lease|47,942,501.28|2,527,059.80|32,077,987.32|2,036,622.39|
|Utilities and other expenses|9,516,828.39|7,709,877.80|6,495,839.73|8,027,314.20|
|Total|57,459,329.67|10,236,937.60|38,573,827.05|10,063,936.59|

 XVI. Supplementary information
1. Detailed Statement of Non-recurring Profit and Loss of Current Period
√ Applicable□ Inapplicable
Unit: RMB
||||
|-|-|-|
|Items|Amount|Description|
|Profit and loss on non-current asset disposal|1,587,819.80||
|Governmental subsidies recorded in current profit and loss|||
|(be closely related to the enterprise business, with an|||
||4,159,795.00||
|exception of the governmental subsidies enjoyed based on|||
|national unified standard quota or ration)|||
|Other non-business income and expenditure other than|||
||149,500.69||
|above items|||
|Other profit and loss items meeting the definition of|||
||983,612.12||
|non-recurring profit and loss|||
|Less: amount affected by income tax|1,515,189.67||
|Total|5,365,537.94|--|

Where the non-recurring profit and loss item identified by the Company according to No. 1Company’s Information Disclosure
Explanatory Announcement for Public Issuance of Securities-Non-recurring Profit and Loss and the non-recurring profit and loss
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. items listed in No. 1Company’s Information Disclosure Explanatory Announcement for Public Issuance of Securities-Non-recurring Profit and Loss are defined as the recurring profit and loss items, proper explanation shall be given.
□ Applicable√ Inapplicable
2. Return on Net Assets and Earnings Per Share
|||||
|-|-|-|-|
|||Earning per Share||
|Profit during Reporting Period|Averagely-weighted return on net asset|Basic Earning per Share|Diluted Earning per|
|||(Yuan/Share)|Share(Yuan/Share)|
|Net profit ascribed to shareholder||0.0271|0.0271|
||2.77%|||
|of mother company||||
|Net profit belonging to parent||||
|company shareholders after|0.84%|0.0082|0.0082|
|excluding non-recurring items||||

3. Accounting Data Difference under Domestic and Foreign Accounting Standards
(1) Difference of Net Profit and Net Assets in Financial Report Disclosed Based on International Accounting Standard and Chinese Accounting Standard
□ Applicable√ Inapplicable
(2) Difference of Net Profit and Net Assets in Financial Report Disclosed Based on Overseas Accounting Standard and Chinese Accounting Standard
□ Applicable√ Inapplicable
4. Accounting Policy Change-related Supplementary Materials
□ Applicable√ Inapplicable
2014 Annual Report of Shenzhen Zhongheng Huafa Co, Ltd. Section XII. Documents available for Reference
I. Text of annual report carrying signature of the Chairman;
II. Text of financial report carrying signature and seal of person in charge of the Company, person in charge of accounting works and person in charge of accounting institution;
III. All files disclosed on China Securities Journal, Securities Times and Hong Kong Commercial Daily appointed by CSRC;
IV. Article of Association;
V. Other relevant files
[Note]: This Report is prepared respectively both in Chinese and English. Should be there any difference in interpretation of these two versions, the Chinese version shall prevail.
Board of Directors of
SHENZHEN ZHONGHENG HUAFA CO., LTD. 28 April 2015