2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd SHENZHEN ZHONGHENG HUAFA CO., LTD.
ANNUAL REPORT 2013
April 2014
2013 Annual Report of Shenzhen Zhongheng Hwafa 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 quarterly report except for the following directors:
|||||
|-|-|-|-|
|Name of absent director|Position of absent director|Reason for absence|Attorney|
|Chen Zhigang|Director|For busy work|Li Zhongqiu|

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 2013 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.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Contents
Annual Report 2013 ........................................................................................................................... 1 Section I Important Notice, Contents and Paraphrase .................................................................. 5 Section II Company Profile ............................................................................................................... 6 Section III Accounting data and summary of finnaical indexes .................................................... 8 Section IV Report of the Board of Directors ................................................................................. 10 Section V Important Events ............................................................................................................ 20 Section VI Changes in shares and particular about shareholders ............................................... 25 Section VII Particulars about Directors, Supervisors,Senior Executives and Employees ........ 29 Section VIII Corporate Governance .............................................................................................. 37 Section IX Internal Control ............................................................................................................ 42 Section X Financial Report ............................................................................................................. 44 Section XI Documents available for reference ............................................................................ 132
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Paraphrase
||||
|-|-|-|
|Items|Refers to|Contents|
|Company, Shen Huafa|Refers to|SHENZHEN ZHONGHENG HUAFA CO., LTD.|
|Hengfa Technology company|Refers to|Wuhan Hengfa Technology Co., Ltd.|
|Huafa Property Company|Refers to|Shenzhen Zhongheng Huafa Property Co., Ltd|
|Huafa Lease Company|Refers to|Shenzhen Huafa Property Lease Management Co., Ltd|
|Huafa Trade Co., Ltd.|Refers to|Wuhan Zhongheng Huafa Trade Co., Ltd.|
|Wuhan Zhongheng Group|Refers to|Wuhan Zhongheng New Science & Technology Industrial Group Co., Ltd.|
|HK Yutian Company|Refers to|Hong Kong Yutian International Investment Co., Ltd.|
|Hengsheng Photoelectricity Company|Refers to|Wuhan Hengsheng Photoelectricity Industry Co., Ltd.|
|Hengsheng Yutian Company|Refers to|Wuhan Hengsheng Yutian Industrial Co., Ltd.|
|Yutian Henghua Company|Refers to|Shenzhen Yutian Henghua Co., Ltd.|
|Huafa Hengtian Company|Refers to|Shenzhen Huafa Hengtian Co., Ltd.|

2013 Annual Report of Shenzhen Zhongheng Hwafa 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”
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Section II Company profile
I. Company information
|||||
|-|-|-|-|
|Short form of the stock|SHEN HUAFA|Stock code|000020|
|Stock exchange for listing|Shenzhen Stock Exchange|||
|Name of the Company (in|深圳中恒华发股份有限公司|||
|Chinese)||||
|Short form of the Company||||
||深华发|||
|(in Chinese)||||
|Foreign name of the||||
||SHENZHEN ZHONGHENG HUAFA CO., LTD.|||
|Company(if applicable)||||
|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 Xiaoyu|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||
||http://www.cninfo.com.cn|
|CSRC||
|Preparation place for annual report|Office of the Board of SHENZHEN ZHONGHENG HUAFA CO., LTD.|

2013 Annual Report of Shenzhen Zhongheng Hwafa 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||||
|Previous changes for controlling||the 44.12% equity of company, held by original first and second largest shareholder of||||
|shareholders (if applicable)||the Company 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
2013 Annual Report of Shenzhen Zhongheng Hwafa 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
||||||
|-|-|-|-|-|
||||Changes over last year||
||2013|2012||2011|
||||(%)||
|Operating income (RMB)|626,821,044.64|723,891,496.54|-13.41%|875,778,275.09|
|Net profit attributable to shareholders|-6,517,401.44|3,241,897.70|||
||||-301.04%|10,374,521.20|
|of the listed company(RMB)|||||
|Net profit attributable to shareholders|||||
|of the listed company after deducting|-5,934,309.10|3,856,768.38|-253.87%|10,892,370.66|
|non-recurring gains and losses(RMB)|||||
|Net cash flow arising from operating|-69,353,440.38|18,419,090.98|||
||||-476.53%|48,170,937.23|
|activities(RMB)|||||
|Basic earnings per share (RMB/Share)|-0.023|0.0114|-301.75%|0.0366|
|Diluted earnings per share|-0.023|0.0114|||
||||-301.75%|0.0366|
|(RMB/Share)|||||
||||3.51 percentage points||
|Weighted average ROE (%)|-2.35%|1.16%||3.82%|
||||down||
||||Changes over end of||
||End of 2013|End of 2012||End of 2011|
||||last year (%)||
|Total assets (RMB)|731,348,499.86|681,645,093.97|7.29%|668,385,621.82|
|Net assets attributable to shareholder|273,663,649.47|280,181,050.91|||
||||-2.33%|276,939,153.21|
|of listed company (RMB)|||||

II. Difference of the accounting data under accounting rules in and out of China
1. Difference of the net profit and net assets disclosed in financial report, under both IAS (International Accounting Standards) and Chinese GAAP (Generally Accepted Accounting Principles)
In RMB
||||||
|-|-|-|-|-|
||Net profit attributable to shareholders of listed company||Net assets attributable to shareholders of listed company||
||Amount in this period|Amount in last period|Amount at period-end|Amount at period-begin|
|Chinese GAAP|-6,517,401.44|3,241,897.70|273,663,649.47|280,181,050.91|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Items and amount adjusted by IAS
2. Difference of the net profit and net assets disclosed in financial report, under both foreign accounting rules and Chinese GAAP (Generally Accepted Accounting Principles)
In RMB
||||||
|-|-|-|-|-|
||Net profit attributable to shareholders of listed||Net assets attributable to shareholders of listed||
||company||company||
|||||Amount at|
||Amount in this period|Amount in last period|Amount at period-end||
|||||period-begin|
|Chinese GAAP|-6,517,401.44|3,241,897.70|273,663,649.47|280,181,050.91|
|Items and amount adjusted by foreign accounting rules|||||

3. Reasons for the differences of accounting data under accounting rules in and out of China
III. Items and amounts of extraordinary profit (gains)/loss
In RMB
||||||
|-|-|-|-|-|
|Item|Amount in 2013|Amount in 2012|Amount in 2011|Note|
|Gains/losses from the disposal of|104,043.85||||
|non-current asset (including the write-off||3,843.23|-285,821.40||
|that accrued for impairment of assets)|||||
|Governmental subsidy reckoned into current|1,652,600.00||||
|gains/losses (not including the subsidy|||||
|enjoyed in quota or ration according to|||||
|national standards, which are closely|||||
|relevant to enterprise’s business)|||||
|Other non-operating income and expenditure|-1,736,569.94||||
|||-978,232.33|-360,193.92||
|except for the aforementioned items|||||
|Less: impact on income tax|603,166.25|-359,518.42|-128,165.86||
|Total|-583,092.34|-614,870.68|-517,849.46|--|

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
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Section IV. Report of the Board of Directors
I. Introduction
The year 2013, the changing global economy, economy of the U.S. slowdown in growth, Euro zone continues to shrink, economy shows a stable operation in China and presents an active sign of new normal changed, is crucial for accelerate the transformation of development pattern under the transform background of growing stage. In face of the new economic situation of structural adjustment and transformation, the Company proactively takes actions to overcome difficulties. The overall business performance in industrial operations have a slight down compared with same period of last year, however, due to some of the sites fails to absorb tenants, revenue of leasing business from self-owned property declined dramatically, which impact a lot in operation performance of the Company for the Year: during the reporting period, the Company achieved operation revenue of RMB 626,821,000, down 13.41 percent over same period of last year; net profit loss RMB 6,517,400, a decrease of 301.04 percent compared to same period of last year.
●operating revenue of RMB 244,090,900 was realized in injection molding business, an increase of 26 percent compared to same period of last year. In the reporting period, the Company resist pressure of weak demand in appliance industry and maturity of the subsidy policy of energy-saving, decisively adjusted product structures, focus on close cooperation with original clients, further to enlarge the order quota of Gree Electric, the new client introduced last year, more than 3 million sets of the A/C housing injection molding have been produced and sold in the whole year, which was at an all-time high. Fundamentally, effectively controlling and solving the quality difficulties, in field of injection molding business, in aspect of dark spot, impurity and aberration for home appliance, maintain permanent sound delivery record, and rated as the―ExcellentSupplier‖ by several well-known clients as Gree, Haier and TCL successively; after introduction of the injection molding machine manipulator and servo system, part of the aged injection molding machine equipment have been renewal, energy-saving effect continues to presented with dramatically improved in production efficiency.
●operating revenue of RMB 76,827,900 was realized in polystyrene business, an increase of 21 percent compared to same period of last year. In the reporting period, based on market demand oriented, seized opportunity of product innovation from current clients, adjusted and improved product structure, expanded new clients to enlarge market shares; starting from cost controlling, equipment facility management, reducing production cost and improved production efficiency, listed improvement of quality, reducing scrap rate and increase productivity as the main items in appraisal for production staffs; carried out target management, strictly accordance with operation process and technological process, arranged the production reasonably, put more efforts to operates with a sound operation results achieved.
●operating revenue of RMB 264167400 was realized in LCD whole set business, decrease approximately 37 percent compared to last year. During the reporting period, orders from major clients declined dramatically, video business division made a major adjustment in aspect of business and product strategy consequently: put more efforts into the planning and design as well as research for new products, production items extends to the small-screen products as Touch Tablet Pcs, which has multiple functions and wide screen products as the multi-media interactive teaching electronic white board; make an attempt on contracted for new-type case display products with outside business and import self-owned brand to the electricity trade platform and regional retail outlet, based on maintain whole set business of traditional display.
●operating revenue of RMB 33.27 million was realized in property leasing business, decrease approximately 14 percent compared to last year. During the reporting period, as the pillar property with major shares occupied in property leasing business, Huafa Building has to introduce the clients for rented again due to leasing contract for some of the sites are expired in 3Q of last year, moreover, most of the roads are enclosed for implementation of the metro No.7 Line―Huaqiangbei‖ around, people counting declined dramatically, business environment depressed relatively, the attraction of investment is hard to complete. With all, the Company communicated and negotiated actively with multiple parties, expected to introduced qualified cooperation clients with orientation of
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd commercial district required and needs of the Company as soon as possible; in that period some of the shops open successively, but the main attraction of investment has not been completed; venue rental has a gap terms, which resulted in the sharply down in wholeyear’s rental revenue and profit.
II. Main business analysis
1. Introduction
The major business of the Company was production and sales of injection molding pieces, foam pieces (light material package) and LCD whole sets. Sales are mainly focused in Central China and Hong Kong.
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
2. Revenue
Statement
The Company achieved operation income amounting as RMB 626,821,000 in report period, a13% down over same period of last year
Whether income from physical sales larger than income from labors or not
√ Yes□ No
||||||
|-|-|-|-|-|
|||||Increase/decrease y-o-y|
|Industries|Item|2013|2012||
|||||(%)|
||Sales|502,233|840,765|-40%|
|Display|Production|511,444|828,639|-38%|
||Inventory|11,726|2,515|366%|
||Sales|12,353.58|9,158.28|35%|
|Plastic injection|||||
||Production|12,080.1|10,777.8|12%|
|hardware|||||
||Inventory|418.85|808.3|-48%|
||Sales|3,794.44|3,108.11|22%|
|Foam|Production|3,774.04|3,307.1|14%|
||Inventory|236.89|257.29|-8%|

 Reasons for y-o-y relevant data with over30% changes
√Applicable□Not applicable
Sales and production of display decreased: under the double pressure of the bad economy and market competition incandescence, the major customers order for the video business reduced greatly.
Inventory of display increased: the order increased at the end of the year.
Sales of plastic injection hardware increased: the new client– Gree introduced last year, electrical order share further expanded
sharply.
Inventory of plastic injection hardware decreased: reduce the amount of stock at the end of the year.
Material orders in hands
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd□ 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)|559,709,076.01|
|Proportion in total annual sales volume for top five clients||
||89.28%|
|(%)||

Information of top five clients of the Company
√Applicable□Not applicable
|||||
|-|-|-|-|
|Serial|Name|Sales (RMB)|Proportion in total annual sales (%)|
||Hong Kong Yutian International Investment|||
|1||240,643,844.59|38.39%|
||Co., Ltd.|||
|2|Qingdao Haier Part Purchasing Co., Ltd.|194,031,592.90|30.95%|
|3|Gree Electric Appliances (Wuhan) Co.,Ltd.|83,559,134.02|13.33%|
|4|TCL Air –conditioner (Wuhan) CO., Ltd.|26,293,367.92|4.19%|
|5|Wuhan Aidemeng Technology Co., Ltd.|15,181,136.58|2.42%|
|Total|--|559,709,076.01|89.28%|

 3. Cost
Industry classification
In RMB
||||||||
|-|-|-|-|-|-|-|
|||2013||2012|||
|Industry||||||Y-o-y changes|
||Item||Ratio in operation||Ratio in operation||
|classification||Amount||Amount||(%)|
||||cost (%)||cost (%)||
|Display|Raw materials|251,201,871.47|97.91%|384,793,038.45|95.64%|2.27%|
|Display|Labor wages|1,931,843.00|0.75%|2,014,651.80|0.5%|0.25%|
|Display|Depreciation|1,929,800.62|0.75%|1,871,372.00|0.47%|0.28%|
|Display|Energy|0.00|0%|0.00|0%|0%|
|Plastic injection|||||||
||Raw materials|146,166,295.88|65.98%|123,712,537.73|72.84%|-6.86%|
|hardware|||||||
|Plastic injection|||||||
||Labor wages|11,853,602.41|5.35%|11,651,906.62|6.86%|-1.51%|
|hardware|||||||
|Plastic injection|||||||
||Depreciation|5,227,232.53|2.36%|5,119,158.90|3.01%|-0.65%|
|hardware|||||||
|Plastic injection|||||||
||Energy|0.00|0%|0.00|0%|0%|
|hardware|||||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||||
|-|-|-|-|-|-|-|
|Foam|Raw materials|42,841,798.19|63.4%|35,839,741.46|66.41%|-3.01%|
|Foam|Labor wages|2,950,691.36|4.37%|2,661,223.19|4.93%|-0.56%|
|Foam|Depreciation|1,409,523.51|2.09%|1,317,468.59|2.44%|-0.35%|
|Foam|Energy|6,244,789.00|9.24%|5,213,976.19|9.66%|-0.42%|

 Statement
TheCompany’s main business cost was RMB 545,670,732.98, including display RMB 256,565,145.64, plastic injection hardware RMB 221,533,947.18, and foam RMB 67,571,640.16.
Main suppliers of the Company
|||
|-|-|
|Total purchase amount from top five suppliers (RMB)|374,951,222.32|
|Proportion in total annual purchase amount for top five suppliers (%)|83.98%|

 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|||
|1||173,527,202.49|38.87%|
||Investment Co., Ltd.|||
|2|Qingdao Haier Part Purchasing Co., Ltd.|98,133,241.56|21.98%|
||Gree Electric Appliances (Wuhan)|||
|3||73,072,677.50|16.37%|
||Co.,Ltd.|||
||Wuhan Hengshen Photoelectricity|||
|4||20,560,124.11|4.61%|
||Industry Co., Ltd.|||
||Hong Kong Jingdongfang Photoelectric|||
|5||9,657,976.66|2.16%|
||Technology Co., Ltd.|||
|Total|--|374,951,222.32|83.98%|

 4. Expenses
|||||
|-|-|-|-|
|Item|2013|2012|Y-o-y changes|
|Sales expenses|10,021,716.98|8,068,151.58|24.21%|
|Management expenses|39,240,424.34|45,568,945.84|-13.89%|
|Financial expenses|21,454,338.85|21,670,454.84|-1.00%|
|Income tax expenses|-1,077,769.12|1,390,222.88|-177.52%|

Income tax expenses decreased greatly: losses in the year causes deferred income tax expenses occurred
5. Cash flow
In RMB
|||||
|-|-|-|-|
|Item|2013|2012|Y-o-y changes (%)|
|Subtotal of cash in-flow from operation activity|408,744,234.62|734,514,147.17|-44.35%|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||
|-|-|-|-|
|Subtotal of cash out-flow from operation activity|478,097,675.00|716,095,056.19|-33.24%|
|Net cash flow from operation activity|-69,353,440.38|18,419,090.98|-476.53%|
|Subtotal of cash in-flow from investment activity|147,000.00|414,329.90|-64.52%|
|Subtotal of cash out-flow from investment activity|10,138,667.85|10,335,206.09|-1.9%|
|Net cash flow from investment activity|-9,991,667.85|-9,920,876.19|0.71%|
|Subtotal of cash in-flow from financing activity|488,889,296.63|451,420,257.93|8.3%|
|Subtotal of cash out-flow from financing activity|457,333,878.70|465,889,025.02|-1.84%|
|Net cash flow from financing activity|31,555,417.93|-14,468,767.09|-318.09%|
|Net increased amount of cash and cash equivalent|-49,544,183.56|-7,496,224.95|560.92%|

 Reasons for y-o-y relevant data with over30% changes
√Applicable□Not applicable
Net cash flow from operation activity greatly decreased y-o-y: sales income decreased y-o-y
Net cash flow from financing activity greatly 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|
||Operating||Gross profit ratio|of operating|||
|||Operating cost|||of operating cost|of gross profit|
||revenue||(%)|revenue y-o-y|||
||||||y-o-y (%)|ratio y-o-y (%)|
|||||(%)|||
|According to industries|||||||
|||||||0.88 percentage|
|Display|264,167,431.84|256,565,145.64|2.88%|-36.81%|-36.23%||
|||||||points down|
|Plastic injection||||||2.99 percentage|
||244,090,890.04|221,533,947.18|9.24%|26.14%|30.43%||
|hardware||||||points down|
|||||||2.58 percentage|
|Foam|76,827,912.39|67,571,640.16|12.05%|21.54%|25.21%||
|||||||points down|
|According to products|||||||
|||||||0.88 percentage|
|Display|264,167,431.84|256,565,145.64|2.88%|-36.81%|-36.23%||
|||||||points down|
|Plastic injection||||||2.99 percentage|
||244,090,890.04|221,533,947.18|9.24%|26.14%|30.43%||
|hardware||||||points down|
|||||||2.58 percentage|
|Foam|76,827,912.39|67,571,640.16|12.05%|21.54%|25.21%||
|||||||points down|
|According to region|||||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||||
|-|-|-|-|-|-|-|
|||||||0.88 percentagepoints down|
|Hong Kong|264,167,431.84|256,565,145.64|2.88%|-36.81%|-36.23%||
|||||||2.91 percentagepoints down|
|Central China|320,918,802.43|289,105,587.34|9.91%|25.01%|29.18%||

 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 2013||End of 2012||||
||||||Ratio changes||
|||Ratio in total assets||Ratio in total assets||Notes of major changes|
||Amount||Amount||(%)||
|||(%)||(%)|||
|Monetary fund|54,251,456.20|7.42%|112,834,841.39|16.55%|-9.13%||
|Account|162,278,705.83||161,782,907.79||||
|||22.19%||23.73%|-1.54%||
|receivable|||||||
|Inventory|47,119,303.85|6.44%|42,771,061.45|6.27%|0.17%||
|Investment real|32,529,420.82||33,784,177.90||||
|||4.45%||4.96%|-0.51%||
|estate|||||||
|Long-term equity|||||||
|||0%||0%|0%||
|investment|||||||
|Fix assets|195,542,067.03|26.74%|202,743,248.34|29.74%|-3%||
|Construction in|2,323,356.00||2,043,356.00||||
|||0.32%||0.3%|0.02%||
|progress|||||||

2. Major changes of liability
In RMB
||||||||
|-|-|-|-|-|-|-|
||2013||2012||||
||Amount|Ratio in total||Ratio in total|Ratio changes (%)|Notes of major changes|
||||Amount||||
|||assets (%)||assets (%)|||
|Short-term loans|162,140,601.13|22.17%|109,694,640.00|16.09%|6.08%||
|Long-term loans|162,418,800.00|22.21%|163,718,800.00|24.02%|-1.81%||

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
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 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.
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 almost 10 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. Situation of foreign equity investment
2. Main subsidiaries and stock-jointly companies
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||
||||Property|||||||
|Huafa|||leasing and|||||||
|||Property||||||||
|Lease|Subsidiary||management|1,000,000.00|1,900,692.20|-5,026,990.71||||
|||management||||||||
|Company|||of self-owned|||||||
||||property|||||||
||||Property|||||||
|Huafa|||leasing and|||||||
|||Property||||||||
|Property|Subsidiary||management|1,000,000.00|198,930.62|-846,491.76|1,192,033.52|-371,374.33|-525,348.33|
|||management||||||||
|Company|||of self-owned|||||||
||||property|||||||
||||R&D,|||||||
||||production,|||||||
|Hengfa|||sales of|||||||
|||Production||||||||
|Technology|Subsidiary||products and|181,643,111.00|555,243,868.38|200,970,285.41|586,993,389.18|-5,315,369.86|-2,615,122.04|
|||sales||||||||
|company|||import and|||||||
||||export business|||||||
||||etc.|||||||
||||Sales of|||||||
|Huafa|||Photoelectricity|||||||
|Trade Co.,|Subsidiary|Sales|products,|100,000.00|235,404.44|-918,013.81|61,794.89|-16,712.34|-16,712.34|
|Ltd.|||Imp&Exp|||||||
||||business of|||||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||||
|-|-|-|-|-|-|-|
||||goods||||
||||Property||||
|Yutian|||leasing and||||
|||Property|||||
|Henghua|Subsidiary||management|1,000,000.00|1,000,000.00|1,000,000.00|
|||management|||||
|Company|||of self-owned||||
||||property||||
||||Property||||
|Huafa|||leasing and||||
|||Property|||||
|Hengtian|Subsidiary||management|1,000,000.00|1,000,000.00|1,000,000.00|
|||management|||||
|Company|||of self-owned||||
||||property||||

Notes of main subsidiaries and stock-jointly companies
Nil
Particular about subsidiaries obtained or disposed in report period
□ Applicable√ Not applicable
VII. Prospect for future development of the Company
(I) Industry development and market analysis
Look forward to the 2014, after 4-year sharply down, the world economy entered a new turning point of climbing up, global economics turns to stabilized after in bottom, growing points expanded and the foundation for growth tend to be stable. Prelude of theChina’s comprehensively deepen reform kicked off, and is in the multi-stage of changes term for growth, growing pains for structural adjustment and a digestion phase for pre-stage of the stimulus policy; growth rate for domestic economy turns to high-speed growth from fast-growing, continues to deepen up structural transformation of the economy and de-productionlization; investment of traditional manufacturing industry and industrial added value have a slow down in growing, and the strategic emerging industries and high-end manufacturing industry obtained more supports, such as energy-saving& emission reduction and technological updating of enterprises. Industrial production and processing of the Company belongs to the semi-automation production mode combined with labor-intensive and skill-intensive, orders of the products mainly depends on many large home appliance manufactures well-known in China which is bigger in scales and stable in business; however, along with rigid demand houses and security housing delivery at the same time in future years, home appliance upgrade terms and the concentrated release needs from rapid up urbanization process by the government, home appliances consumer market expected to gains a room in growth; from the point of status of regional market, as a central city in central China, Wuhan absorbed many large enterprises in and out of China to settled in with the continues development of land-linked transportation network, which bringing new cooperation opportunity for theCompany’s business expansion along with the intensify competition. In face of the mingle hop and fear for outside situation, how to avoid weaknesses to give full play in self-owned advantages and how to further optimized the adjustment of technology innovation and energy-saving& emission reduction propose a more requirement and challenge as for theCompany’s industry business.
(II) Operation plans for new period
◆liquidize remnant assets
Focus on the completion of venue rental for 1/F to 3/F of Huafa Building, the self-owned property of the Company; on one hand,
maintaining the current tenant relationship, on the other hand, actively absorbed leasing and introduce investment, rapid up the tenant
negotiation, make great efforts to achieved operation profit from the current idle venues in Huafa Building. Meanwhile, close to the
market, improving market consciousness of the property leasing and earnings profit from increasing revenues and cutting
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd expenditures.
◆promote urban renewal projects
Boost implementation of the renewal projects of Huafa Area in Gongming street, Guangming New District, complete entity confirmation for the development implementation, as well as serial pre-phase process of EIA project approval, additional premium, re-signed of the land grant contract and examination& approval of specific renewal projects, try hard to construct and implement first phase project in later two years. At the same time, for the renewal project of Huafa Building, continues to negotiate with some of the minority proprietors, complete compensation and resettlement of relocation, and strive to complete entity application as soon as possible.
◆extending industrial business orders
Priority in extended thinking, broaden customers, maintain orders, and on basis of integration and establishment of main business center in 2013, to play synergistic effect in full on vary business resources from business unified communication window; continues to maintain current orders quota in Admiral and Haier, enlarge supporting quota from new clients of Gree and TCL to gains more market shares; attaches great importance to the detail management, focus on quality and productivity improvement; strengthen cost controlling, conducts technical reform for the production equipments, emphasized the promotion of automated management, reduce energy consumption and downsizing for efficiency.
◆intensified promotion andR&D for the industrial new products
Focus on development and promotion of new products and derivative products, rich the category and production line for video products on the premise that costs are under control, realized product diversification according to the needs of clients; deeper understand the upstream supply condition of LCD, combine needs from terminal market, adjusted self-owned machine size and types; developed potential and strength distributors, expanded marketing channel for the self-owned brand; with the help of current industrial production resources, newly plan out a OEM production line for A/C assembly, and trying to conduct new OEM business. (III) Financing demand, utilization plans and fund resources
For further promoting the business development strategy and satisfy soaring business needs, the Company continues to adjust the existing cooperative banks, use instrument of credit loans and bill financing comprehensively, improved capital utilization and control financial expenses through matching up the payment days and form for payment received related to different credit conditions of vary banks; furthermore, continues to expand financing channels, consolidate and strengthen strategy cooperation between banks and enterprises; formulate a special financing plan according to the implementation progress of urban renewal project, deployed stock current funds in a good time, reduced capital use-cost as much as possible.
(IV) Risks in operation for year of 2014 and measures about to taking
1. risks from real estate market modification: real estate industry of the China enter to a depth phase of adjustment in 2014, supply-demand structure shows a trend of reversal, market segmentation in areas, and the growth presents a weak condition, domestic financial institutions tighten up real estate credit, profits space in the industry reduced and risks come up gradually. Countermeasures: expand financing channels, rapid up process of the urban renewal projects
2. Financial risk: large funds demand, financial expenses drop dramatically due to the change of exchange rate, bank credit show nervous due to the variation of macro policy etc.
Countermeasures: pay close attention to the move of macro policy, actively expand financing channels, formulated a favorable circle mechanism for capitals, improve service efficiency and avoiding exchange-rate risk by using the financial instruments.
VIII. Profit and dividend distribution
Determination, execution or adjustment of the profit distribution policy especially cash dividend 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)
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 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 attributable to|Ratio in net profit attributable to|
||Amount for cash bonus|shareholders of listed company|shareholders of listed company|
|Year for bonus shares||||
||(tax included)|in consolidation statement for|contained in consolidation|
|||bonus year|statement (%)|
|2013|0.00|-6,517,401.44|0%|
|2012|0.00|3,241,897.70|0%|
|2011|0.00|10,374,521.20|0%|

 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
IX. In the report period, reception of research, communication and interview
|||||||
|-|-|-|-|-|-|
||||||Contents discussed and material|
|Time|Place|Way|Type|Reception||
||||||provided|
||||||Communicating operation situation|
||Headquarter of the|Telephone||Some individual||
|2013.1.1～2013.12.31|||Individual||of the Company, assets status and|
||Company|communication||investors||
||||||process of city update projects|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Section V. Important Events
I. Significant related transaction
1. Related transaction related to daily operation
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||Ration in|||||
|||||||Amount of||||||
|||||Pricing|||amount of|Accounts-settle||||
|Parties of related|Related|Type of|Contents of||Price of|related trade|||Market price of similar|Date of|Index of|
|||||principle of|||similar|ment of related||||
|trade|relationship|related trade|related trade||related trade|(10 thousand|||transaction available|disclosure|disclosure|
|||||related trade|||related trade|trade||||
|||||||Yuan)||||||
||||||||(%)|||||
||Sharing the||Purchasing|Synchronized||||||||
|||||||||Telegraphic||||
|HK Yutian|same controlling|Purchase|LCD|with the|17,353|17,353|31.18%|||2013-04-24||
|||||||||transfer||||
||shareholder||monitors|market||||||||
||||||||||The average market price|||
||||||||||refers to the price of same|||
|||||Confirmed||||||||
||||||||||specifications which is|||
|||||with 1% of||||||||
||||||||||searched from through the|||
|||||current||||||||
||||||||||world famous professional|||
|||||market|||||||http://www.cn|
||Sharing the||Purchasing||||||market survey company|||
|Hengsheng||||average price||||Telegraphic|||info.com.cn/fi|
||same controlling|Purchase|LCD||2056|2,056|3.69%||website|2013-04-24||
|Photoelectricity||||in principle,||||transfer|||nalpage/2013|
||shareholder||monitors||||||http://www.witsview.com|||
|||||and refer to|||||||-04-24/62415|
||||||||||recognized authority in the|||
|||||both their|||||||857.PDF|
||||||||||industry and LCD|||
|||||bargaining||||||||
||||||||||professional market survey|||
|||||power||||||||
||||||||||company website|||
||||||||||http://www.witsview.com.|||
||||Sales LCD|According to||||||||
||Sharing the|||||||||||
||||overall|the customer||||Telegraphic||||
|HK Yutian|same controlling|Sales|||24066|24,066|38.39%|||2013-04-24||
||||monitor|sales order||||transfer||||
||shareholder|||||||||||
||||machine set|price sure||||||||
||||Sales LCD|||||||||
|Zhongheng|Controlling||overall|||||||||
|||Sales|||11|11|0.02%|Cash||||
|Group|shareholder||monitor|||||||||
||||machine set|||||||||
||||Sales LCD|||||||||
||Sharing the|||||||||||
|Hengshen|||overall|||||||||
||same controlling|Sales|||50|50|0.08%|Cash||||
|Photoelectricity|||monitor|||||||||
||shareholder|||||||||||
||||machine set|||||||||
||Sharing the||Sales LCD|||||||||
|Hengsheng||||||||||||
||same controlling|Sales|overall||44|44|0.07%|Cash||||
|Yutian||||||||||||
||shareholder||monitor|||||||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||machine set|||||||||
|Total||--|--|43,580|--|--|--|--|--|
|Details of returned large sales||N/A||||||||
|Essentiality and persistence of related trade, as well as reason for||||||||||
|||Daily related trade could reduce production cost of overall LCD monitor and improve sustainable development of the Company||||||||
|choosing trading with related parties (not other traders in market)||||||||||
|||The company and related party in business, personnel, assets, institutions and financial aspects separates completely, the independent||||||||
|Impact on individuality of listed companies from related trade||||||||||
|||complete autonomy in operation ability, connected transaction does not affect the independence of the company||||||||
|Dependence on related parties from the Company, as well as||||||||||
|||The Company and related parties were cooperation relationship, existing no dependence||||||||
|related measurements (if applicable)||||||||||
|||In the reporting, Hengfa Technology purchased LCD from Hengsheng Photoelectricity with $ 3,370,000 approximately, 34% of the annual||||||||
|Predict on total amount of daily related trade on the way in this||||||||||
|||amount predicted at the beginning of the year; purchased LCD from HK Yutian with $ 28,450,000 approximately, 43% of the annual||||||||
|period according to classification, as well as actual||||||||||
|||amount predicted at the beginning of the year; sold LCD whole machine to HK Yutian with $ 39,450,000 approximately, 49.00% of the||||||||
|implementation in reporting period (if applicable)||||||||||
|||annual amount predicted at the beginning of the year.||||||||
|Reason of the greater difference between trade price and market||||||||||
|||N/A||||||||
|reference price (if applicable)||||||||||

II.Significant contracts and its implementation
1. Guarantees
In 10 thousand Yuan
||||||||||
|-|-|-|-|-|-|-|-|-|
|Particulars about the external guarantee of the Company (Barring the guarantee for the controlling subsidiaries)|||||||||
||Related||Actual date of|||||Guarantee|
||||||||Complete||
|Name of the Company|Announcemen|Guarantee|happening (Date|Actual guarantee|||implementa|for related|
||||||Guarantee type|Guarantee term|||
|guaranteed|t disclosure|limit|of signing|limit||||party (Yes|
||||||||tion or not||
||date||agreement)|||||or no)|
|Guarantee of the Company for the subsidiaries|||||||||
||Related||Actual date of|||||Guarantee|
||||||||Complete||
|Name of the Company|Announcemen|Guarantee|happening (Date|Actual guarantee|||implementat|for related|
||||||Guarantee type|Guarantee term|||
|guaranteed|t disclosure|limit|of signing|limit||||party (Yes|
||||||||ion or not||
||date||agreement)|||||or no)|
|Wuhan Hengfa|||||Joint liability||||
||2013-04-24|30,000||12,597.31||1 year|No|No|
|Technology Co., Ltd.|||||guarantee||||
|||||Total amount of actual occurred|||||
|Total amount of approving guarantee for|||||||||
|||30,000||guarantee for subsidiaries in report||45,087.93|||
|subsidiaries in report period (B1)|||||||||
|||||period (B2)|||||
|Total amount of approved guarantee for||||Total balance of actual guarantee for|||||
|subsidiaries at the end of reporting||30,000||subsidiaries at the end of reporting||12,597.31|||
|period (B3)||||period (B4)|||||
|Total amount of guarantee of the Company( total of two abovementioned guarantee)|||||||||
|Total amount of approving guarantee in||||Total amount of actual occurred|||||
|||30,000||||45,087.93|||
|report period (A1+B1)||||guarantee in report period (A2+B2)|||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||
|-|-|-|-|
|Total amount of approved guarantee at||Total balance of actual guarantee atthe end of report period (A4+B4)||
||30,000||12,597.31|
|the end of report period (A3+B3)||||
|The proportion of the total amount of actually guarantee in the net assets of||||
|||46.03%||
|the Company (that is A4+ B4) (%)||||
|Including:||||
|Amount of guarantee for shareholders, actual controller and its related||||
|||0||
|parties(C)||||
|The debts guarantee amount provided for the guaranteed parties whose||||
|||0||
|assets-liability ratio exceed 70% directly or indirectly(D)||||
|Proportion of total amount of guarantee in net assets of the Company exceed||||
|||0||
|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
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
|||||||
|-|-|-|-|-|-|
||||Dated for|Commitment||
|Commitments|Commitment party|Contents|||Implementation|
||||commitment|term||
|Share Merger Reform||||||
||||||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|
|||Within 1 year after transferred||||
||||||by cash of RMB 27 million, the commitment have|
|||of this equity acquisition: 1.||||
|Commitments in|||||been implemented;|
|||Injected relevant capital of||From April 12,||
|report of|W uhan Zhongheng||||2. In the first 10 days of May, 2008, the Company|
|||plastic injection business into|2007-03-29|2007 to April 11,||
|acquisition or equity|Group||||officially started off the significant asset restructures|
|||the Company; 2.70% equity of||2008||
|change|||||work of purchasing the 70% equities of Hengsheng|
|||the Hengsheng Photoelectricity||||
||||||Photoelectricity.; engaged financial consultant and|
|||will inject into the Company.||||
||||||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|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|||condition was not mature; there still remain|
|||obstacles in material asset restructure.|
|Commitments in|||
||N/A||
|assets reorganization|||
|Commitments in|||
|initial public offering|N/A||
|or refinancing|||
|Other commitments to|||
|minority shareholders|N/A||
|of the Company|||
|Completed on time or|||
||No||
|not|||
|Detail reasons for|||
|un-complement and|||
||Found in ―Implementation‖||
|further plan (if|||
|applicable)|||

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||
||8 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|
|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 2013, 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.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd V. Other material events
(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.
(II) Controlling shareholder of the Company– Wuhan Zhongheng Group, derived established the―Wuhan Zhongheng New Technology Industrial Group Co.,Ltd.‖ and―Wuhan Zhongheng Huaxin Industrial Co.,Ltd.‖ in September 2013 for further resource integration and industry layout adjustment:―Wuhan Zhongheng New Technology Industrial Group Co.,Ltd.‖ is the surviving corporation after derived, maintains original name of Wuhan Zhongheng Group and owns assets and equity with the real estate concerned under the name of former Wuhan Zhongheng Group;―Wuhan Zhongheng Huaxin Industrial Co.,Ltd.‖ (Huaxin Industrial) is a newly company derived, owes assets and equity without real estate concerned under the name of former Wuhan Zhongheng Group. After splitting, the two enterprises have the same shareholder structures as 99 percent equity held by Mr. Li Zhongqiu and 1 percent equity owned by Wuhan Henghui Investment Consulting Co., Ltd.
After completion of splitting, Huaxin Industrial inherit 41.14 percent equity of the Company that held by former Wuhan Zhongheng Group, and the―Reply on Approval of Wuhan Zhongheng Huaxin Industrial Co., Ltd. Notified the Purchase Report and Exempted the Mandatory Tender Offer to Shenzhen Zhongheng Huafa Co., Ltd. issued byCSRC‖ (Zheng Jian Xu Ke[2013] No.1503) was received dated 27 November 2013. Up to end of the Period, ownership transfer procedures for the aforesaid shares are not completed. Wuhan Zhongheng Group no longer owns shares of the Company after ownership of stock transfer, controlling shareholder of the Company change to Huaxin Industrial with actual controller stay the same as well as total share capital of the Company; the controlling shareholder splitting has no substantive impact on the Company.
2013 Annual Report of Shenzhen Zhongheng Hwafa 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 shareholders at the end of the||||Total shareholders ended as the 5th trading day before||||||
|||26,022||||||25,751||
|reporting period||||annual report disclosed||||||
|Particulars about shares held above 5% by shareholders or top 10 shares holding||||||||||
||||Total||||Number of share pledged/frozen|||
|||||Changes|Amount of the|Amount of||||
|||Proportio||||||||
|Full name of|Nature of shareholder|n of|shareholders at|in report|restricted|the restricted||||
|Shareholders||shares|the end of||||State of share||Amount|
|||held (%)||period|shares held|shares held||||
||||report period|||||||
|Wuhan ZhonghengGroup|Domesticnon-state-ownedlegal person|41.14%|116,489,894|N/A|116,489,894|0|Pledged||116,489,894|
||||||||Frozen||0|
|SEG (HONGKONG) CO., LTD.|Overseas legalperson|5.58%|16,569,560|N/A|0|16,569,560|Pledged||0|
||||||||Frozen||0|
|GOOD HOPECORNERINVESTMENTSLTD|Overseas legalperson|4.91%|13,900,000|N/A|0|13,900,000|Pledged||0|
||||||||Frozen||0|
|Xie Deqing|Domestic natureperson|0.33%|948,290||0|948,290|Pledged||0|
||||||||Frozen||0|
|Li Jianfeng|Domestic natureperson|0.33%|924,100||0|924,100|Pledged||0|
||||||||Frozen||0|
|BINGHUA LIU|Domestic natureperson|0.31%|876,213||0|876,213|Pledged||0|
||||||||Frozen||0|
|Zhu Ming|Domestic natureperson|0.22%|611,348||0|611,348|Pledged||0|
||||||||Frozen||0|
|Specific account foragreed to repurchaseof Caida SecuritiesCo., Ltd.|State-owned legalperson|0.21%|600,000||0|600,000|Pledged||0|
||||||||Frozen||0|
|Lin Song|Domestic natureperson|0.18%|516,000||0|516,000|Pledged||0|
||||||||Frozen||0|
|Wu Jingmin|Domestic natureperson|0.17%|477,561||0|477,561|Pledged||0|
||||||||Frozen||0|
|Strategy investors or general legal person||||||||||
|||N/A||||||||
|becomes top 10 shareholders due to rights||||||||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||
|-|-|-|-|
|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 Administration of|||
|Explanation on associated relationship|Disclosure of Shareholder Equity Changes of Listed Companies. The Company neither knew whether there|||
|among the aforesaid shareholders|exists associated relationship among the other tradable shareholders, nor 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||
||||16,569,560|
|||foreign shares||
|GOOD HOPE CORNER INVESTMENTSLTD|13,900,000|Domestically listed||
||||13,900,000|
|||foreign shares||
|Xie Deqing|948,290|Domestically listed||
||||948,290|
|||foreign shares||
|Li Jianfeng|924,100|Domestically listed||
||||924,100|
|||foreign shares||
|BINGHUA LIU|876,213|Domestically listed||
||||876,213|
|||foreign shares||
|Zhu Ming|611,348|Domestically listed||
||||611,348|
|||foreign shares||
|Specific account for agreed to repurchase ofCaida Securities Co., Ltd.|600,000|||
|||RMB common share|600,000|
|Lin Song|516,000|Domestically listed||
||||516,000|
|||foreign shares||
|Wu Jingmin|477,561|RMB common share|477,561|
|Dai Xuerong|467,881|RMB common share|467,881|
||Among the top ten unrestricted shareholders, the Company neither knew whether there exists associated|||
|Expiation on associated relationship or||||
||relationship among the other tradable shareholders, nor they belong to consistent actors that are prescribed in|||
|consistent actors within the top 10||||
||Measures for the Administration of Disclosure of Shareholder Equity Changes of Listed Companies. Among the|||
|un-restrict shareholders and between top 10||||
||top ten shareholders, Wuhan Zhongheng Group neither bears associated relationship with other shareholders, nor|||
|un-restrict shareholders and top 10||||
||belongs to the consistent actor that are prescribed in Measures for the Administration of Disclosure of|||
|shareholders||||
||Shareholder Equity Changes of Listed Companies.|||
|Explanation on top ten shareholders||||
|involving margin business (if applicable)|N/A|||
|(see note4)||||

Whether has a buy-back agreement dealing in reporting period
□ Yes√ No
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 2. Particulars about controlling shareholder of the Company
Legal person
|||||||
|-|-|-|-|-|-|
||Legal|||||
|||Date||||
|Controlling shareholder|rep./person in||Organization code|Register capital|Main business|
|||established||||
||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; hardware metal product,|
||||||plastic product; acoustic product and|
||||||electronic equipment; fabrics and garments;|
||||||sales of building materials; management of|
|Wuhan Zhongheng New Science|||||exports business for the own products and|
|& Technology Industrial Group|Li Zhongqiu|1996-03-21|71195460-1|RMB 34,500,000|technologies for the Company and member|
|Co., Ltd.|||||enterprise; management of export business on|
||||||raw material, apparatus and instrument,|
||||||machinery equipments, spare parts and|
||||||technologies (not including goods and|
||||||technologies that import and export are|
||||||national restricted or prohibited ),|
||||||development of real-estate and sales of|
||||||commercial housings (projects with special|
||||||provision of the state can be operation after|
||||||approval)|
|Operation result, financial status,|Ended as 31 December 2013, total assets of Wuhan Zhongheng Group (after splitting) amounting as 4.3 billion Yuan|||||
|cash flow and future development|approximately; the operation income for year of 2013 was approximately 316 million Yuan and net profit was -1.24 million|||||
|strategy etc.|Yuan.(The above data unaudited)|||||
|Equity of other domestic/foreign||||||
|listed company with share||||||
|controlling and share participation|N/A|||||
|by controlling shareholder in||||||
|reporting period||||||

Controlling shareholder changes in reporting period
□ Applicable√Not applicable
3. Particulars about actual controller of the Company
Nature person
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|||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 that|||
||N/A||
|controlled in last 10 years|||

Changes of controlling shareholders in reporting period
□ Applicable√ Not applicable
Property right and controlling relationship between the actual controller and the Company is as follow:
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
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Section VII. Particulars about Directors, Supervisors and Senior Executives and Employees
I. Changes of shares held by directors, supervisors and senior executives
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|||||||||Increasing|Decreasing||
||||||||Shares held at|||Shares held at|
|||||||||shares held|shares held||
||Title|Working status|Sex|Age|Start dated of|End date of office|period-begin|||period-end|
|Name|||||office term|term||in this period|in this period||
||||||||(Share)|||(Share)|
|||||||||(Share)|(Share)||
||Chairman&||||||||||
|Li Zhongqiu||Currently in office|M|51|2007-07-18|2016-08-22|0|0|0|0|
||GM||||||||||
||Vice||||||||||
|Li Yongping||Currently in office|M|56|2013-08-23|2016-08-22|0|0|0|0|
||chairman||||||||||
|Chen Zhigang|Director|Currently in office|M|40|2007-07-18|2016-08-22|0|0|0|0|
|Wang Feng|Director|Currently in office|M|61|2013-08-23|2016-08-22|0|0|0|0|
||Independent||||||||||
|Li Dingan||Currently in office|M|68|2008-06-27|2014-06-26|0|0|0|0|
||director||||||||||
||Independent||||||||||
|Zhang Yi||Currently in office|M|43|2008-09-04|2014-09-03|0|0|0|0|
||director||||||||||
||Independent||||||||||
|Li Xiaodong||Currently in office|M|47|2010-08-11|2016-08-10|0|0|0|0|
||director||||||||||
||Vice||||||||||
|Tang Chongyin||Leave office|M|53|2007-07-18|2013-08-22|0|0|0|0|
||chairman||||||||||
||Director&||||||||||
|Jiang Yanjun|Deputy GM|Leave office|M|44|2010-08-11|2013-08-22|0|0|0|0|
||& CFO||||||||||
||Chairman of||||||||||
|Huang Yanbo|the|Currently in office|F|51|2012-01-16|2016-08-22|0|0|0|0|
||Supervisory||||||||||
|Geng Qu|Supervisor|Currently in office|F|44|2012-04-09|2016-08-22|0|0|0|0|
|Zhao Xiangfeng|Supervisor|Currently in office|M|40|2013-08-23|2016-08-22|0|0|0|0|
|Tang Ganyu|Deputy GM|Currently in office|F|36|2013-08-23|2016-08-22|0|0|0|0|
||Secretary of||||||||||
|Weng Xiaojue||Currently in office|F|33|2012-04-11|2016-08-22|0|0|0|0|
||the Board||||||||||
|Cao Li|CFO|Currently in office|F|43|2013-08-23|2016-08-22|0|0|0|0|
||Chairman of||||||||||
|||Leave office|F|43|2007-07-18|2013-08-22|0|0|0|0|
||the||||||||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Supervisory||||||||||
|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 NPC of Hubei Province (the tenth session), 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. since Aug. 2008, and he works as Director of the Company since July 2007.
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.
LiDing’an: Male, was born in 1945, Professor, Ph D Graduate Intutor, the first Chinese Certified Accountant. He was the Standing Deputy Dean of South China University of Technology School of International Trade and Economics; member of the 8th, 9th and 10th Standing Committee of Political Consultative Conference of Guangdong Province and member of The China Democratic National
Construction Association. Obtained an MSc Economics from Zhongnan University of Economics in 1982 and teach in the University
after graduated; transfer to South China University of Technology from Zhongnan University of Economics in June 1996, and served
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd as professor of Applied Mathematics and deputydirector，he was the Professor in Accounting Department of School of Management of South China University of Technology since May 2001; and was transferred to School of International Trade and Economics of South China University of Technology as Standing Deputy Dean in July 2005; Now he is the member of China Accounting Society; member of China Society of Accountants; Standing Director of Guangdong International Tax Association; Independent Director of Suntek Technology Co., Ltd.(short code: 600728); Independent Director of Guangdong Kang Mei Pharmaceutical Co., Ltd. (600518) and serves as Independent Director of the Company since June 2008.
Zhang Yi: Male, was born in 1970, Master Degree. He served as Co-partner and Lawyer of Guangdong Junyan Law Firm from 2003 to October 2012; serves as co-partner and lawyer of Beijing Dacheng (Shenzhen) Law Office and was the Column Writer of website of Shenzhen Stock Exchange, and Author ofBook—Rights Safeguarding ofInvestors—one of series of Securities Class of Shenzhen Stock Exchange. He served as the 2nd Session and 3rd Session of Independent Director in Shanxi Xishan Coal and Electricity Power Co., Ltd.(short code: 000983). Now, he is the Independent Director of Shanxi Coking Co., Ltd.(short code: 600740) and independent director of Shenzhen Chino-E Co., Ltd.; he serves as independent director of the Company since September 2008.
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 Director, vice general manager and secretary of the board of Shenzhen Walkers Technology Holding Co., Ltd. he serves as independent director of the Company since August 2010.
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 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
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 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|End date of|remuneration from|
||||office term|office term||
||||||shareholder’s unit|
|Li Zhongqiu|Wuhan Zhongheng Group|Chairman|1996-03-21||No|
|||Executive||||
|Chen Zhigang|Wuhan Zhongheng Group||2008-08-18||Yes|
|||Deputy GM||||
|||Deputy GM,|||Yes|
|Li Yongping|Shenzhen SEG Group Co., Ltd.|party|2011-01-03|||
|||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|
|Li Dingan|South China University of Technology|Professor||||
|||Independent||||
|Li Dingan|Guangzhou Xintai Technology Co., Ltd.|||||
|||director||||
|||Independent||||
|Li Dingan|Guangdong Kang Mei Pharmaceutical Co., Ltd.|||||
|||director||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|||Partner and|
|Zhang Yi|Beijing Dacheng (Shenzhen) Law Office||
|||lawyer|
|||Independent|
|Zhang Yi|Shanxi Jiaohua Co., Ltd.||
|||director|
||Shenzhen Zhongnuo Telecommunication Co.,Ltd.|Independent|
|Zhang Yi|||
|||director|
|||Director&|
|||Deputy GM|
|Li Xiaodong|Shenzhen Walkers Technology Co., Ltd.||
|||& Secretary|
|||of the Board|
|Statement of|||
|post-holding in|N/A||
|other unit|||

III. Remuneration for directors, supervisors and senior executives
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.
Remuneration for directors, supervisors and senior executives in reporting period
In 10 thousand Yuan
|||||||||
|-|-|-|-|-|-|-|-|
||||||Total remuneration|Total remuneration|Remuneration|
|||||Post-holding||||
|Name|Title|Sex|Age||obtained from the|obtained from|actually obtained|
|||||status||||
||||||Company|shareholder’s unit|at period-end|
|Li Zhongqiu|Chairman& GM|M|51|Currently in office|48|0|48|
|Li Yongping|Vice chairman|M|56|Currently in office|0|75|75|
|Chen Zhigang|Director|M|40|Currently in office|0|30|30|
|Wang Feng|Director|M|61|Currently in office|4.19|0|4.19|
||Independent|||||||
|Li Dingan||M|68|Currently in office|6|0|6|
||director|||||||
||Independent|||||||
|Zhang Yi||M|43|Currently in office|6|0|6|
||director|||||||
||Independent|||||||
|Li Xiaodong||M|47|Currently in office|6|0|6|
||director|||||||
|Tang Chongyin|Vice chairman|M|53|Leave office|0|44.51|44.51|
|Jiang Yanjun|Director& Deputy|M|44|Leave office|15.72|0|15.72|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||||||
|-|-|-|-|-|-|-|-|
||GM & CFO|||||||
||Chairman of the|||||||
|Huang Yanbo||F|51|Currently in office|0|12|12|
||Supervisory|||||||
|Geng Qu|Supervisor|F|44|Currently in office|6.9|0|6.9|
|Zhao Xiangfeng|Supervisor|M|40|Currently in office|8.4|0|8.4|
|Tang Ganyu|Deputy GM|F|36|Currently in office|24.92|0|24.92|
||Secretary of the|||||||
|Weng Xiaojue||F|33|Currently in office|18.49|0|18.49|
||Board|||||||
|Cao Li|CFO|F|43|Currently in office|20.96|0|20.96|
||Chairman of the|||||||
|||F|43|Leave office||||
||Supervisory|||||||
|Total|--|--|--|--|165.58|161.51|327.09|

 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|
|||End-of-term|||
|Tang Chongyin|Director||2013-08-22|The board of directors general election|
|||leave|||
||Director&||||
|||End-of-term|||
|Jiang Yanjun|Deputy GM &||2013-08-22|The board of directors general election|
|||leave|||
||CFO||||
||Chairman of the|End-of-term|||
|Cao Li|||2013-08-22|The board of supervisors general election|
||Supervisory|leave|||
|Li Yongping|Vice chairman|Be elected|2013-08-23|The board of directors general election|
|Wang Feng|Director|Be elected|2013-08-23|The board of directors general election|
||Chairman of the||||
|Huang Yanbo||Be elected|2013-08-23|The board of supervisors general election|
||Supervisory||||
|Zhao Xiangfeng|Supervisor|Be elected|2013-08-23|The board of supervisors general election|
|Tang Ganyu|Deputy GM|Engaged|2013-08-23|Senior executives general election|
|Cao Li|CFO|Engaged|2013-08-23|Senior executives general election|

V. Particulars of workforce
The Company has1,047 employees at end of reporting period, and no retired employees should stand the expenses by the Company
||||
|-|-|-|
|Professional composition|||
|Type|Numbers|Ratio|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
||806|76.98%|
|Sales man|21|2.01%|
|Technician|73|6.97%|
|Financial staff|17|1.62%|
|Administration staff|130|12.43%|

Professional composition
Numbers , 130,
12%
Numbers , 17,2%
Numbers , 73,7% Production staff
Numbers , 21,2%
Sales man
Technician
Financial staff
Administration staff
Numbers , 806,
77%
||||
|-|-|-|
|Educational background|||
|Type|Numbers|Ratio|
|Master and on-job postgraduates|2|0.19%|
|Undergraduate|47|4.49%|
|Junior college|96|9.17%|
|Other|902|86.15%|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Educational background
Numbers , 96,9%
Master and on-job postgraduates Numbers , 47,4%
Undergraduate Numbers , 2,0%
Junior college Numbers , 902,
Other
87%
Section VIII. Corporate Governance
I. Corporate governance of the Company
During the reproting period, by strictly follows requirement of laws and regulations of Company Law, Securites Laws and Code of Corporate Governce for Listed Companies in China, the Company further perfected the internal control (IC) system, improved regulated operation standards; actual corporate governance of the Company meets normative documents requriement with corporate governance for lised companies concerned that released by CSRC and Company Law.
1. Shareholders and shareholders meeting
The Company in strict accordance with relevant regulations and requirement of Rules for the General Meeting of Shareholders of Listed Companies andCompany’s Rule of Procedure of Shareholders Meeting, to concene a general meeting ensure that whole shareholders, minority shareholders in particular, enjoys equal status and fully exercise rights of theirown.
2. The Company and shareholders
The Company owns independent business and ability to operate independently, and is completely separate from its shareholders in terms of business, staff, assets, institution and finance. Board of the Company, supervisory committee and internal institution operates independently, controlling shareholder of the Company vigorously regulateone’s action without directly or indirtectly interposed in the decision-making and operation activities of the Company over the general meeting.
3. Directors and Board of Directors
The Company carried on general election in strict accordance with the routine regulated in Company Law and Article of Association; pursuite to Article of Association, members of the Board should be 7, including 3 independent directors, representing over one third of the all directors required; all directors of the Company can work in light with mechanish of Rule of Procedure of Board of Directors and Standard Operational Guidelines for Listed Companies in Main Board, earnestly fulfill duties of directors.
4. Supervisors and sueprvisory committee
The Company carried on general election in strict accordance with the routine regulated in Company Law and Article of Association; supervisory committee comprise 3 members, one staff supervisor included; members and composition of the supervisory committee meets requirment of laws and regulations, all supervisors of the Company can work in light with regulation of Rule of Procedure of
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Sueprvisory Committee earnestly fulfill duties of supervisors, effectively monitoring and express opinions on material evetns, financial status of the Company and execution ability of directors and senior executives.
5. Information disclosure and transparency
The Company technicallyinbreach of relevant laws and regulations as well as regulation ofCompany’s Management System of Information Disclosure, released a real, accurate information ontime. Appointed China Securiteis Journal, Securities Times and Juchao Website as the official information disclosure media to ensure all shareholders obtained information in a fair way. During the Period, continues to focous on improving the IRM(investor relations management), reinfored all-in-one communication with majority shareholders and investors via effective and innovative measures. Meanwhile, take an active part in the activity of―Interactive Platform On-line Open Day for Investors of Listed Companies inShenzhen‖, jointly held by Shenzhen Securities Regulatory Bureau and Shenzhen Association for Listed Companies as well as Shenzhen Securities Information Co., Ltd., enhance communication and interactive with minority investors and shareholdres.
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. Special corporate governance activity of the Company in line with regulations and requirement of relevant documents from CSRC, Shenzhen Securities Regulatory Bureau and Shenzhen Stock Exchange, in the reproting period, continues to make extensive and thorough going efforts to promote corporate governance activity, further to reinforce communication and understanding of related laws and regulations. Made active response to the meeting spirit of inside trading prevention for listed companies in Shenzhen held on 19 March 2013 by Shenzhen Securities Regulatory Bureau, pay high attention to the inside trading education and prevention. Furthermore, distributed the―Inside Trading PreventionManual‖ handed out from Securities Regulatory Bureau to all directors, supervisors and senior executives as well as staffs who may come into contact with inside information as financial department, laws department, auditing department and secretary of the board. In the 10th meeting of 7th session of the Board held dated 22 April 2013, as for the meeting spirit, chairman of the Company and secretary of the board carried out specific instructions and warning educations to all participants of directors, supervisors and senior executives. At the same time, in strict accordance with related requirements, the Company strengthens the confidentiality management for inside information, enter names in register of inside information timely, accuracy and completed, prevent inside information disclosed and behavior of inside trading effectively. 2. Formulation and implementation of the registration system for inside information, improves management system of inside information as well as the confidential for inside information, protect fairness principle for the information disclosure. On 5 June 2012, revise for―Registration Management System for InsideInformation‖ was deliberated and approved in 2nd extraordinary meeting of the Board for 2012, found more in Notice released on Juchao Website dated 7 June 2012. During the reporting period, the Company strictly according to regulation of the system, prior to a lawful disclosure of major events of the Company as periodic report, actually filled in the source files of inside information accurately; and carried out self-examination on the person with knowledge of inside information, conduct trading with shares and derivatives products of the Company. No person with knowledge of inside information, in the reporting period, conduct trading with shares of the Company against regulations after self-examination. II. In the report period, the Company held annual general meeting (AGM) and extraordinaryshareholders’ general meeting
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 1. Annual General Meeting (AGM) in the report period
|||||||
|-|-|-|-|-|-|
|Session||||||
|||||Date of|Index of|
|of|Date|Name of meeting motion|Situation|||
|||||disclosure|disclosure|
|meeting||||||
|||1. Report from the Board for year of 2012; 2. Report from Supervisory Committee||w.||
|||for year of 2012; 3. Financial Result Report for year of 2012; 4. Profit Distribution|Deliberated|||
||||||http://ww|
|||Plan of 2012; 5. ―Annual report of 2012‖ and Summary; 6. ―Financial Result|and approved|||
||||||cninfo.com|
|||Report for year of 2013‖ ; 7. ―Bank Loans Limit for year of 2013‖; 8. ―Guarantee|all proposals|||
|AGM|||||/finalpage/|
||2013-05-15|Limit for Bank Loans of Wholly-owned subsidiary for year of 2013‖; 9.|and resulted|.cn2013-05-1620||
|of 2012|||||13-05-16/6|
|||―Prediction of Daily related transaction of Video Business for year of 2013‖;|the|24F||
||||||94421.PD|
|||10. ―Engagement of auditing institute for financial report and internal control for|Resolution of|||
|||year of 2013‖; and 11.‖Practical subject confirmation for the implementation of|AGM 2012|||
|||urban renewal projects‖||||

2. Extraordinaryshareholders’ general meeting in the report period
|||||||
|-|-|-|-|-|-|
|Session of||||Date of||
||Date|Name of meeting motion|Situation||Index of disclosure|
|meeting||||disclosure||
|The first||1. ―General Election of the||||
||||Deliberated and approved all proposals|||
|extraordinary||Board of Directors‖; 2.|||http://www.cninfo.com.cn|
||||and resulted the Resolution of 1st|||
|shareholders’|2013-08-23|―General Election of the||2013-08-24|/finalpage/2013-08-24/62|
||||extraordinary shareholders’ general|||
|general||Supervisory Committee of the|||986680.PDF|
||||meeting of 2013|||
|meeting 2013||Company‖||||

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 Dingan|4|2|2|0|0|N|
|Zhang Yi|4|2|2|0|0|N|
|Li Xiaodong|4|2|2|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
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd There is no situation about independent directors absent the Board Meeting for the second time in a row in the reporting.
2. Objection for relevant events from independent directors
Whether independent directors come up with objection aboutcompany’s relevant matters or not
□ Yes√ No
Independent directors has no objections for relevant events in reporting period
3. 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
Independent directors earnestly perform their duties, on basis of bonest and diligent, make use of theirown professional advantages, combine actual condition of the Company and operation manageement as well as standardized operation, propose rational suggestions and all of them have been accepted, meanwhile give advice and suggestions on the furture healthy development of the Company and giving many professional advice. During the reproting period, in terms of the major events of the Company as internal control, related transactions, profit distribution, engagement of audit authority, fund of listed company occupied by controlling shareholders and related parties, guarantee offering, general election of the Board and appointment of high-ranking management, independent directors express independent opinions with independent, objective and impartial judgement, effectively protect interest of the Company and majortiy shareholders. (Found more in―Performance Report of Independent Directors for Year of2013‖) IV. Responsibility performance of subordinate special committee of the Board in report period
Committee Date Proposals
’Financial Report of2012‖
Audit committee 2013-4-1 ‖Conclusion of Audit for year of 2012 from Shine Wing Certified Public Accountants‖‖Engagement of Audit Institute for year of2013‖
Remuneration and ‖Remuneration Plan of Directors, Supervisors and Senior Executives for year of2012‖ 2013-4-5
appraisal committee
Strategy committee 2013-4-5 ‖Practical subject confirmation for the implementation of urban renewalprojects‖
―General Election of the Board and Director Candidate for 8th session of the Board 2013-7-28
Nomination‖
Nomination ‖Engagement of General Manager of theCompany‖;
committee ‖Engagement of Deputy General Manager of theCompany‖;
2013-8-23
‖Engagement of Secretary of theBoard‖
‖Engagement of CFO of theCompany‖
1. Performance of the audit committee
In order to strengthen the fundction of decision-making, board of directors established audit committee. The committee comprising 3 directors, two independent directors included and one independent director acts as converner, the accounting professionals, in charge of the communication, supervise and examination for internal audit and external audit. During the reporting period, the audit committee performed their duties according to the working procedures of the audit committee, and continuous attention to the annual audit works and supervision. Formulated a written opinion, prior to annual CPA entered for auditing, after reviewed the financial reports up to 31 December 2013 that prepared by the Company; after CPA starts auditing, audit committee communicated with
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd CPA for several times, analyzed adjustment events in auditing and directed problems that found in process of auditing; reviewed the financial auditing report of the Company again after preliminary auditing opinions issued by CPA and formulated a written opinion. 2. Nomination committee
Board of directors carried out general election in the reproting period, nomination committee supervised and reviewed the election and engagement of directors and high-ranking managers with decisions of agree to submit for deliberation in the Board Meeting made; and seriously examined the senior executive engagement by new term of the board at the same time.
3. Remuneration and appraisal committee
Remuneration for year of 2012 was reviewed by remuneration and appraisal committee in the reporting period, and shows that the conditions agrees with the practice, and also in line with the relevant regulations as well as rules of theCompany’s regulation. 4. Strategy committee
During the reporting period, strategy committee of the Board put forward valuable suggestions for the urban renewal projects, and promote a further development of theCompany’s urban renewal projects.
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
Wuhan Zhongheng Group is the controlling shareholder of the Company, in the reporting period, in line with laws and regulations of Company Law and Article of Association, the Company standard operated and completely separate from controlling shareholders in terms of business, staff, assets, institution and finance, and owns independent business system and self-management ability in the market.
1. Independent business: the Company owns completed independent business operation system and self-management ability in the market. And has self-contained purchase system, production system and sales system; shows no horizontal competition with controlling shareholders without obtained profit rely on controlling shareholder.
2. Independent staff: directors, supervisors and high-ranking managers of the Company are elected and engaged in line with relevant legal procedure of laws and regulations, no condition of arranged personal scheduling by substantial shareholder beyond the Board and General Meeting being found. High-ranking manager of the Company as General Manager, deputy GM, finance manager and secretary of the Board as well as key technical staffs serves full-time and collects remuneration in the Company, they serves no administration post inshareholders’’ unit and subordinate enterprises. The Company established independent personnel archives, the personnel appointment and remove system and salary management system, entered into labor contract with all employees, appointment, appraisal, rewards and punishment on employees are managed by theH&R department independently.
3. Independent assets: the Company has clear definition and complete procedures of the property right with controlling shareholder, the Company manage independently without assets of listed company occupied, controlled or be interfered by substantial shareholders in aspect of operation management.
4. Independent institution: the Company established perfected functional departments with independent operation management rights exercised, such as general meeting, board of directors, supervisory committee and vary management departments. In the reporting period, the Company deliberate relevant proposals by strict accordance with approval process of Article of Association, Working Procedures of the General Meeting and Working Procedures of the Board as well as other related regulations and ordinance, no condition of controlling shareholder interposed in the normal operation activities of the Company being found.
5. Independent finance: in line with requirement of ASBE (Accounting Standards for Business Enterprises), the Company formulated
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd an independent, completed and regulated financial accounting system and financial management system, and also established corresponding internal control mechanism and audit system for internal control, carried out financial decisions independently. VII. Appraisal and incentives for senior management
The Company formulated a better performance appraisal system, remuneration for senior executives are related with the working performance and corporate performance. Remuneration and appraisal committee of the Board conduct appraisals on working ability, duty execution and completion of responsibility& targets for high-ranking managers at year-end.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Section IX. Internal control
I. Construction of internal control (IC)
During the reporting period, the Company organized related department and staffs conducts examination on IC system, and sort out condition of design and execution for the internal control system of the Company. On the basis of full sorting out management system, business management target-oriented, and as a precondition of risk appraisal, optimized vary procedures; on the principle of accordance with manager of needs and respond to clients requirement on time, management structure of the subsidiary Wuhan Hengfa Technology Co., Ltd was adjusted, that is, business center in charge of the business negotiation, manufacture center is responsible for production and management department take charge of back-office support, rights and liabilities are well-defined a step further and management process is organized.
In line with the Basic Internal Control Standard for Enterprise issued by the five ministries as CSRC etc., the Company re-formulated draft of IC auditing, defined on auditing process of IC in five aspects of internal environment, risks appraisal, control activities, information& communication and supervise, and specific well-described from understanding the IC environment of audited target to detail controlling points in business cycles; formulated an accounting standard manual, improved comprehensive budget management in order to standardized the accounting treatment and makes the budget management runs efficiently.
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.
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||
||2014-04-22|
|appraisal report (full-text)||
|Index of internal control appraisal||
||Full text found Notice published on Juchao Website(www.cninfo.com.cn) dated 22 April 2014|
|report disclosed (full-text)||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd V. Audit report of internal control
√ Applicable□ Not applicable
|||
|-|-|
|Auditing comments section for audit report of internal control||
|We believe that 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 2013.||
|Disclosure date of audit report of||
||2014-04-22|
|internal control (full-text)||
|Index of audit report of internal||
||Full text found Notice published on Juchao Website(www.cninfo.com.cn) dated 22 April 2014|
|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.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Section X. Financial Report
I. Audit report
|||
|-|-|
|Type of audit opinion|Standard unqualified opinion|
|Signing date of audit report|2014-04-18|
|Name of audit institute|Shine Wing Certified Public Accountants (LLP)|
|Document serial of audit report|XYZH/2013SZA2011|
|Name of CPA|Zhang Weijian, Zhang Yongde|

Auditor’s Report
XYZH/2013SZA2011 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 2013, 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.
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, 2013, and its operation results and cash flows for the year ended.
Shine Wing Certified Public Accountants(LLP) Chinese CPA: Zhang Weijian
Chinese CPA: Zhang Yongde
Beijing China 18April 2014
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, LtdII．Financial statement
Currency used in note of financial statement is RMB (Yuan)
1. Consolidated Balance Sheet
Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD
In RMB
||||
|-|-|-|
|Items|Closing balance|Opening balance|
|Current assets:|||
|Monetary funds|54,251,456.20|112,834,841.39|
|Settlement provisions|||
|Capital lent|||
|Transaction finance asset|||
|Notes receivable|154,375,936.49|43,000,217.81|
|Accounts receivable|162,278,705.83|161,782,907.79|
|Accounts paid in advance|13,483,243.19|14,168,016.74|
|Insurance receivable|||
|Reinsurance receivables|||
|Contract reserve of reinsurance receivable|||
|Interest receivable|||
|Dividend receivable|||
|Other receivables|9,623,767.78|9,563,505.01|
|Purchase restituted finance asset|||
|Inventories|47,119,303.85|42,771,061.45|
|Non-current asset due within one year|||
|Other current assets|||
|Total current assets|441,132,413.34|384,120,550.19|
|Non-current assets:|||
|Granted loans and advances|||
|Finance asset available for sales|||
|Held-to-maturity investment|||
|Long-term account receivable|||
|Long-term equity investment|||
|Investment real estate|32,529,420.82|33,784,177.90|
|Fixed assets|195,542,067.03|202,743,248.34|
|Construction in progress|2,323,356.00|2,043,356.00|
|Engineering material|||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|Disposal of fixed asset|||
|Productive biological asset|||
|Oil and gas asset|||
|Intangible assets|49,360,979.93|50,538,067.80|
|Expense on Research and Development|||
|Goodwill|||
|Long-term expenses to be apportioned|1,773,524.86|806,724.98|
|Deferred income tax asset|8,686,737.88|7,608,968.76|
|Other non-current asset|||
|Total non-current asset|290,216,086.52|297,524,543.78|
|Total assets|731,348,499.86|681,645,093.97|
|Current liabilities:|||
|Short-term loans|162,140,601.13|109,694,640.00|
|Loan from central bank|||
|Absorbing deposit and interbank deposit|||
|Capital borrowed|||
|Transaction financial liabilities|||
|Notes payable|34,646,052.79|34,511,327.39|
|Accounts payable|52,206,342.81|48,952,915.87|
|Accounts received in advance|1,572,324.29|764,493.92|
|Selling financial asset of repurchase|||
|Commission charge and commission payable|||
|Wage payable|4,760,822.51|4,609,188.91|
|Taxes payable|14,943,081.06|16,502,523.22|
|Interest payable|||
|Dividend payable|||
|Other accounts payable|22,392,413.99|21,280,539.65|
|Reinsurance payables|||
|Insurance contract reserve|||
|Security trading of agency|||
|Security sales of agency|||
|Non-current liabilities due within 1 year|||
|Other current liabilities|||
|Total current liabilities|292,661,638.58|236,315,628.96|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|Non-current liabilities:|||
|Long-term loans|162,418,800.00|163,718,800.00|
|Bonds payable|||
|Long-term account payable|||
|Special accounts payable|||
|Projected liabilities|2,604,411.81|1,429,614.10|
|Deferred income tax liabilities|||
|Other non-current liabilities|||
|Total non-current liabilities|165,023,211.81|165,148,414.10|
|Total liabilities|457,684,850.39|401,464,043.06|
|Owner’s equity (or shareholders’ equity):|||
|Paid-up capital (or share capital)|283,161,227.00|283,161,227.00|
|Capital public reserve|109,496,837.33|109,496,837.33|
|Less: Inventory shares|||
|Reasonable reserve|||
|Surplus public reserve|77,391,593.25|77,391,593.25|
|Provision of general risk|||
|Retained profit|-196,386,008.11|-189,868,606.67|
|Balance difference of foreign currency translation|||
|Total owner’s equity attributable to parent company|273,663,649.47|280,181,050.91|
|Minority interests|||
|Total owner’s equity(or shareholders’ equity)|273,663,649.47|280,181,050.91|
|Total liabilities and owner’s equity(or shareholders’ equity)|731,348,499.86|681,645,093.97|

 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
Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD
In RMB
||||
|-|-|-|
|Items|Closing balance|Opening balance|
|Current assets:|||
|Monetary funds|18,575,925.94|10,555,114.25|
|Transaction finance asset|||
|Notes receivable||1,790,000.00|
|Accounts receivable|38,718,332.28|45,179,657.87|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|Accounts paid in advance|1,004,976.83|3,576,103.62|
|Interest receivable|||
|Dividend receivable|||
|Other receivables|100,394,931.80|64,735,528.50|
|Inventories|14,806.50|14,806.50|
|Non-current asset due within one year|||
|Other current assets|||
|Total current assets|158,708,973.35|125,851,210.74|
|Non-current assets:|||
|Finance asset available for sales|||
|Held-to-maturity investment|||
|Long-term account receivable|||
|Long-term equity investment|186,708,900.00|184,708,900.00|
|Investment real estate|32,529,420.82|33,784,177.90|
|Fixed assets|104,096,997.92|108,512,126.65|
|Construction in progress|2,323,356.00|2,043,356.00|
|Engineering material|||
|Disposal of fixed asset|||
|Productive biological asset|||
|Oil and gas asset|||
|Intangible assets|5,423,383.56|5,568,329.28|
|Expense on Research and Development|||
|Goodwill|||
|Long-term expenses to be apportioned|1,698,633.25|710,933.33|
|Deferred income tax asset|8,485,262.26|8,137,647.85|
|Other non-current asset|||
|Total non-current asset|341,265,953.81|343,465,471.01|
|Total assets|499,974,927.16|469,316,681.75|
|Current liabilities:|||
|Short-term loans|36,180,000.00|250,000.00|
|Transaction financial liabilities|||
|Notes payable|||
|Accounts payable|10,745,344.16|11,719,031.31|
|Accounts received in advance|126,522.29|332,823.92|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|Wage payable|655,258.44|667,119.57|
|Taxes payable|10,616,750.61|11,766,728.78|
|Interest payable|||
|Dividend payable|||
|Other accounts payable|11,799,762.43|11,143,036.79|
|Non-current liabilities due within 1 year|||
|Other current liabilities|||
|Total current liabilities|70,123,637.93|35,878,740.37|
|Non-current liabilities:|||
|Long-term loans|162,418,800.00|163,718,800.00|
|Bonds payable|||
|Long-term account payable|||
|Special accounts payable|||
|Projected liabilities|2,604,411.81|1,429,614.10|
|Deferred income tax liabilities|||
|Other non-current liabilities|||
|Total non-current liabilities|165,023,211.81|165,148,414.10|
|Total liabilities|235,146,849.74|201,027,154.47|
|Owner’s equity (or shareholders’ equity):|||
|Paid-up capital (or share capital)|283,161,227.00|283,161,227.00|
|Capital public reserve|109,496,837.33|109,496,837.33|
|Less: Inventory shares|||
|Reasonable reserve|||
|Surplus public reserve|77,391,593.25|77,391,593.25|
|Provision of general risk|||
|Retained profit|-205,221,580.16|-201,760,130.30|
|Balance difference of foreign currency translation|||
|Total owner’s equity(or shareholders’ equity)|264,828,077.42|268,289,527.28|
|Total liabilities and owner’s equity(or shareholders’ equity)|499,974,927.16|469,316,681.75|

 Legal representative: Li Zhongqiu Person in charge of accounting works: Cao Li Person in charge of accounting institution: Wu Aijie
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 3. Consolidated Profit Statement
Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD
In RMB
||||
|-|-|-|
|Items|Current Period|Last Period|
|I. Total operating income|626,821,044.64|723,891,496.54|
|Including: Operating income|626,821,044.64|723,891,496.54|
|Interest income|||
|Insurance gained|||
|Commission charge and commission income|||
|II. Total operating cost|634,436,289.11|718,284,986.86|
|Including: Operating cost|556,598,949.78|637,127,498.77|
|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|5,047,372.25|3,485,761.22|
|Sales expenses|10,021,716.98|8,068,151.58|
|Administration expenses|39,240,424.34|45,568,945.84|
|Financial expenses|21,454,338.85|21,670,454.84|
|Losses of devaluation of asset|2,073,486.91|2,364,174.61|
|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|||
|Exchange income (Loss is listed with ―-‖)|||
|III. Operating profit (Loss is listed with ―-‖)|-7,615,244.47|5,606,509.68|
|Add: Non-operating income|2,575,851.50|426,773.51|
|Less: Non-operating expense|2,555,777.59|1,401,162.61|
|Including: Disposal loss of non-current asset|163,109.29|133,656.77|
|IV. Total Profit (Loss is listed with ―-‖)|-7,595,170.56|4,632,120.58|
|Less: Income tax expense|-1,077,769.12|1,390,222.88|
|V. Net profit (Net loss is listed with ―-‖)|-6,517,401.44|3,241,897.70|
|Including: net profit realized before consolidation by mergered party|||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|Net profit attributable to owner’s of parent company|-6,517,401.44|3,241,897.70|
|Minority shareholders’ gains and losses|||
|VI. Earnings per share|--|--|
|i. Basic earnings per share|-0.023|0.0114|
|ii. Diluted earnings per share|-0.023|0.0114|
|VII. Other consolidated income|||
|VIII. Total comprehensive income|-6,517,401.44|3,241,897.70|
|Total consolidated income attributable to owners of parent company|-6,517,401.44|3,241,897.70|
|Total consolidated income attributable to minority shareholders|||

Legal representative: Li Zhongqiu Person in charge of accounting works: Cao Li Person in charge of accounting institution: Wu Aijie
4. Profit Statement of parent company
Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD
In RMB
||||
|-|-|-|
|Items|Current Period|Last Period|
|I. Operating income|38,573,827.05|56,554,919.74|
|Less: operating cost|10,063,936.59|20,863,195.35|
|Operating tax and extras|2,494,875.84|2,846,047.70|
|Sales expenses|138,440.72|425,824.11|
|Administration expenses|18,144,318.27|22,444,858.15|
|Financial expenses|8,751,126.52|8,460,960.95|
|Losses of devaluation of asset|839,574.18|917,318.00|
|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 ―-‖)|-1,858,445.07|596,715.48|
|Add: Non-operating income|409,661.28|318,379.00|
|Less: Non-operating expense|2,360,280.48|1,185,425.55|
|Including: Disposal loss of non-current asset|||
|III. Total Profit (Loss is listed with ―-‖)|-3,809,064.27|-270,331.07|
|Less: Income tax expense|-347,614.41|-384,097.64|
|IV. Net profit (Net loss is listed with ―-‖)|-3,461,449.86|113,766.57|
|V. Earnings per share|--|--|
|i. Basic earnings per share|||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|ii. Diluted earnings per share|||
|VI. Other consolidated income|||
|VII. Total comprehensive income|-3,461,449.86|113,766.57|

 Legal representative: Li Zhongqiu Person in charge of accounting works: Cao Li Person in charge of accounting institution: Wu Aijie
5. Consolidated cash flow statement
Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD
In RMB
||||
|-|-|-|
|Items|Current Period|Last Period|
|I. Cash flows arising from operating activities:|||
|Cash received from selling commodities and providing labor services|382,754,162.28|683,112,871.33|
|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 disposal of transaction financial asset|||
|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|16,830,976.54|
|Other cash received concerning operating activities|25,986,072.37|34,570,299.30|
|Subtotal of cash inflow arising from operating activities|408,744,234.62|734,514,147.17|
|Cash paid for purchasing commodities and receiving labor service|368,039,415.49|599,924,665.76|
|Net increase of customer loans and advances|||
|Net increase of deposits in central bank and interbank|||
|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|51,347,044.11|51,968,647.10|
|Taxes paid|15,391,325.19|24,982,497.90|
|Other cash paid concerning operating activities|43,319,890.21|39,219,245.43|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|Subtotal of cash outflow arising from operating activities|478,097,675.00|716,095,056.19|
|Net cash flows arising from operating activities|-69,353,440.38|18,419,090.98|
|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 long-term assets|147,000.00|414,329.90|
|Net cash received from disposal of subsidiaries and other units|||
|Other cash received concerning investing activities|||
|Subtotal of cash inflow from investing activities|147,000.00|414,329.90|
|Cash paid for purchasing fixed, intangible and other long-term assets|10,138,667.85|10,335,206.09|
|Cash paid for investment|||
|Net increase of mortgaged loans|||
|Net cash received from subsidiaries and other units|||
|Other cash paid concerning investing activities|||
|Subtotal of cash outflow from investing activities|10,138,667.85|10,335,206.09|
|Net cash flows arising from investing activities|-9,991,667.85|-9,920,876.19|
|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|488,889,296.63|430,324,611.62|
|Cash received from issuing bonds|||
|Other cash received concerning financing activities||21,095,646.31|
|Subtotal of cash inflow from financing activities|488,889,296.63|451,420,257.93|
|Cash paid for settling debts|437,643,335.50|444,949,474.73|
|Cash paid for dividend and profit distributing or interest paying|19,690,543.20|20,939,550.29|
|Including: Dividend and profit of minority shareholder paid by subsidiaries|||
|Other cash paid concerning financing activities|||
|Subtotal of cash outflow from financing activities|457,333,878.70|465,889,025.02|
|Net cash flows arising from financing activities|31,555,417.93|-14,468,767.09|
|IV. Influence on cash and cash equivalents due to fluctuation in exchange rate|-1,754,493.26|-1,525,672.65|
|V. Net increase of cash and cash equivalents|-49,544,183.56|-7,496,224.95|
|Add: Balance of cash and cash equivalents at the period -begin|100,248,503.42|107,744,728.37|
|VI. Balance of cash and cash equivalents at the period -end|50,704,319.86|100,248,503.42|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Legal representative: Li Zhongqiu Person in charge of accounting works: Cao Li Person in charge of accounting institution: Wu Aijie
6. Cash Flow Statement of parent company
Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD
In RMB
||||
|-|-|-|
|Items|Current Period|Last Period|
|I. Cash flows arising from operating activities:|||
|Cash received from selling commodities and providing labor services|33,328,094.89|47,691,944.43|
|Write-back of tax received|||
|Other cash received concerning operating activities|20,752,882.11|45,101,131.50|
|Subtotal of cash inflow arising from operating activities|54,080,977.00|92,793,075.93|
|Cash paid for purchasing commodities and receiving labor service|1,177,778.17|6,702,283.36|
|Cash paid to/for staff and workers|5,415,040.53|8,716,236.70|
|Taxes paid|5,528,215.33|4,906,367.32|
|Other cash paid concerning operating activities|53,369,786.85|51,917,232.35|
|Subtotal of cash outflow arising from operating activities|65,490,820.88|72,242,119.73|
|Net cash flows arising from operating activities|-11,409,843.88|20,550,956.20|
|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 long-term assets|147,000.00|414,329.90|
|Net cash received from disposal of subsidiaries and other units|||
|Other cash received concerning investing activities|||
|Subtotal of cash inflow from investing activities|147,000.00|414,329.90|
|Cash paid for purchasing fixed, intangible and other long-term assets|1,067,935.00|2,198,502.88|
|Cash paid for investment|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|3,067,935.00|2,198,502.88|
|Net cash flows arising from investing activities|-2,920,935.00|-1,784,172.98|
|III. Cash flows arising from financing activities|||
|Cash received from absorbing investment|||
|Cash received from loans|39,000,000.00|250,000.00|
|Cash received from issuing bonds|||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|Other cash received concerning financing activities|||
|Subtotal of cash inflow from financing activities|39,000,000.00|250,000.00|
|Cash paid for settling debts|4,270,000.00|22,422,400.00|
|Cash paid for dividend and profit distributing or interest paying|12,330,056.23|12,416,059.14|
|Other cash paid concerning financing activities|||
|Subtotal of cash outflow from financing activities|16,600,056.23|34,838,459.14|
|Net cash flows arising from financing activities|22,399,943.77|-34,588,459.14|
|IV. Influence on cash and cash equivalents due to fluctuation in exchange rate|-48,353.20|-51,551.61|
|V. Net increase of cash and cash equivalents|8,020,811.69|-15,873,227.53|
|Add: Balance of cash and cash equivalents at the period -begin|10,555,114.25|26,428,341.78|
|VI. Balance of cash and cash equivalents at the period -end|18,575,925.94|10,555,114.25|

 Legal representative: Li Zhongqiu Person in charge of accounting works: Cao Li Person in charge of accounting institution: Wu Aijie
7. Consolidated Statement on Changes of Owners' Equity
Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD
Current Period
In RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Current Period||||||||||
||Owners' equity attributable to the parent company||||||||||
|Items|||Less:||||||Minority’s||
||Paid-up capital|||Reasonable||General risk||||Total owners’ equity|
|||Capital reserves|Treasury||Surplus reserves||Retained profit|Others|equity||
||(Share capital)|||reserve||provision|||||
||||Stock||||||||
|I. Balance at the end of|||||||||||
||283,161,227.00|109,496,837.33|||77,391,593.25||-189,868,606.67|||280,181,050.91|
|last year|||||||||||
|Add: Changes of|||||||||||
|accounting policy|||||||||||
|Error correction|||||||||||
|of the last period|||||||||||
|Others|||||||||||
|II. Balance at the|||||||||||
||283,161,227.00|109,496,837.33|||77,391,593.25||-189,868,606.67|||280,181,050.91|
|beginning of this year|||||||||||
|III. Increase/ Decrease in|||||||||||
|this year (Decrease is|||||||-6,517,401.44|||-6,517,401.44|
|listed with'"-")|||||||||||
|(i) Net profit|||||||-6,517,401.44|||-6,517,401.44|
|(ii) Other consolidated|||||||||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||||
|-|-|-|-|-|-|
|income||||||
|Subtotal of (i)and (ii)||||-6,517,401.44|-6,517,401.44|
|(III) Owners' devoted and||||||
|decreased capital||||||
|1. Owners' devoted capital||||||
|2. Amount calculated into||||||
|owners' equity paid in||||||
|shares||||||
|3. Others||||||
|(IV)Profit distribution||||||
|1. Withdrawal of surplus||||||
|reserves||||||
|2. Withdrawal of general||||||
|risk provisions||||||
|3. Distribution for owners||||||
|(shareholders)||||||
|4. Others||||||
|(V) 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. Others||||||
|(VI) Reasonable reserve||||||
|1. Withdrawal in this||||||
|period||||||
|2. Usage in this period||||||
|(VII) Other||||||
|IV. Balance at the end of|||||273,663,649.47|
||283,161,227.00|109,496,837.33|77,391,593.25|-196,386,008.11||
|the report period||||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Amount in last year
In RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Amount in last year||||||||||
||Owners' equity attributable to the parent company||||||||||
|Items|||Less:||||||Minority’s||
||Paid-up capital|||Reasonable||General risk||||Total owners’ equity|
|||Capital reserves|Treasury||Surplus reserves||Retained profit|Others|equity||
||(Share capital)|||reserve||provision|||||
||||Stock||||||||
|I. Balance at the end of|||||||||||
||283,161,227.00|109,496,837.33|||77,391,593.25||-193,110,504.37|||276,939,153.21|
|last year|||||||||||
|Add: retroactive|||||||||||
|adjustment arising from|||||||||||
|enterprise consolidation|||||||||||
|under the same control|||||||||||
|Add: Changes of|||||||||||
|accounting policy|||||||||||
|Error correction of|||||||||||
|the last period|||||||||||
|Others|||||||||||
|II. Balance at the|||||||||||
||283,161,227.00|109,496,837.33|||77,391,593.25||-193,110,504.37|||276,939,153.21|
|beginning of this year|||||||||||
|III. Increase/ Decrease in|||||||||||
|this year (Decrease is|||||||3,241,897.70|||3,241,897.70|
|listed with'"-")|||||||||||
|(i) Net profit|||||||3,241,897.70|||3,241,897.70|
|(ii) Other consolidated|||||||||||
|income|||||||||||
|Subtotal of (i)and (ii)|||||||3,241,897.70|||3,241,897.70|
|(III) Owners' devoted and|||||||||||
|decreased capital|||||||||||
|1. Owners' devoted capital|||||||||||
|2. Amount calculated into|||||||||||
|owners' equity paid in|||||||||||
|shares|||||||||||
|3. Others|||||||||||
|(IV)Profit distribution|||||||||||
|1. Withdrawal of surplus|||||||||||
|reserves|||||||||||
|2. Withdrawal of general|||||||||||
|risk provisions|||||||||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||||
|-|-|-|-|-|-|
|3. Distribution for owners||||||
|(shareholders)||||||
|4. Others||||||
|(V) 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. Others||||||
|(VI) Reasonable reserve||||||
|1.Withdrawal in this||||||
|period||||||
|2.Usage in this period||||||
|(VII) Other||||||
|IV. Balance at the end of||||||
||283,161,227.00|109,496,837.33|77,391,593.25|-189,868,606.67|280,181,050.91|
|the report period||||||

Legal representative: Li Zhongqiu Person in charge of accounting works: Cao Li Person in charge of accounting institution: Wu Aijie
8. Statement on Changes of Owners' Equity of Parent Company
Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD
Current Period
In RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
||Current Period||||||||
||||Less:||||||
|Items|Paid-up capital|||Reasonable||General risk|||
|||Capital reserves|Treasury||Surplus reserves||Retained profit|Total owners’ equity|
||(Share capital)|||reserve||reserve|||
||||Stock||||||
|I. Balance at the end of|||||||||
||283,161,227.00|109,496,837.33|||77,391,593.25||-201,760,130.30|268,289,527.28|
|last year|||||||||
|Add: Changes of|||||||||
|accounting policy|||||||||
|Error correction|||||||||
|of the last period|||||||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||||
|-|-|-|-|-|-|
|Others||||||
|II. Balance at the||||||
||283,161,227.00|109,496,837.33|77,391,593.25|-201,760,130.30|268,289,527.28|
|beginning of this year||||||
|III. Increase/ Decrease in||||||
|this year (Decrease is||||-3,461,449.86|-3,461,449.86|
|listed with'"-")||||||
|(i) Net profit||||-3,461,449.86|-3,461,449.86|
|(ii) Other consolidated||||||
|income||||||
|Subtotal of (i)and (ii)||||-3,461,449.86|-3,461,449.86|
|(III) Owners' devoted and||||||
|decreased capital||||||
|1. Owners' devoted capital||||||
|2. Amount calculated into||||||
|owners' equity paid in||||||
|shares||||||
|3. Others||||||
|(IV) Profit distribution||||||
|1. Withdrawal of surplus||||||
|reserves||||||
|2. Withdrawal of general||||||
|risk reserve||||||
|3. Distribution for owners||||||
|(shareholders)||||||
|4. Others||||||
|(V) 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 reserves||||||
|4. Others||||||
|(VI) Reasonable reserve||||||
|1. Withdrawal in this||||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||
|-|-|-|-|-|
|period|||||
|2. Usage in this period|||||
|(VII) Other|||||
|IV. Balance at the end of|||||
||283,161,227.00|109,496,837.33|77,391,593.25|-205,221,580.16|
|the report period|||||

Amount in last year
In RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
||Amount in last year||||||||
||||Less:|Reasona|||||
|Items|Paid-up capital|||||General|||
|||Capital reserves|Treasury|ble|Surplus reserves||Retained profit|Total owners’ equity|
||(Share capital)|||||risk reserve|||
||||Stock|reserve|||||
|I. Balance at the end of last year|283,161,227.00|109,496,837.33|||77,391,593.25||-201,873,896.87|268,175,760.71|
|Add: Changes of accounting policy|||||||||
|Error correction of the last period|||||||||
|Others|||||||||
|II. Balance at the beginning of this year|283,161,227.00|109,496,837.33|||77,391,593.25||-201,873,896.87|268,175,760.71|
|III. Increase/ Decrease in this year|||||||||
||||||||113,766.57|113,766.57|
|(Decrease is listed with'"-")|||||||||
|(i) Net profit|||||||113,766.57|113,766.57|
|(ii) Other consolidated income|||||||||
|Subtotal of (i)and (ii)|||||||113,766.57|113,766.57|
|(III) Owners' devoted and decreased capital|||||||||
|1. Owners' devoted capital|||||||||
|2. Amount calculated into owners' equity|||||||||
|paid in shares|||||||||
|3. Others|||||||||
|(IV) Profit distribution|||||||||
|1. Withdrawal of surplus reserves|||||||||
|2. Withdrawal of general risk reserve|||||||||
|3. Distribution for owners (shareholders)|||||||||
|4. Others|||||||||
|(V) Carrying forward internal owners'|||||||||
|equity|||||||||
|1. Capital reserves conversed to capital|||||||||
|(share capital)|||||||||
|2. Surplus reserves conversed to capital|||||||||
|(share capital)|||||||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||||
|-|-|-|-|-|-|
|3. Remedying loss with surplus reserves||||||
|4. Others||||||
|(VI) Reasonable reserve||||||
|1. Withdrawal in this period||||||
|2. Usage in this period||||||
|(VII) Other||||||
|IV. Balance at the end of the report period|283,161,227.00|109,496,837.33|77,391,593.25|-201,760,130.30|268,289,527.28|

 Legal representative: Li Zhongqiu Person in charge of accounting works: Cao Li Person in charge of accounting institution: Wu Aijie
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, LtdIII．Basic information of the Company
Shenzhen Zhongheng Hwafa Co, Ltd. (hereinafter referred to as the Company, or, in case any of its subsidiary companies is implied, the Group; its former name was "Shenzhen Huafa Electronics Co., Ltd..) was established on Dec. 8, 1981; it is a Sino-joint venture jointly established by Shenzhen SEG Group Co., Ltd., China Zhenhua Electronics Co., Ltd. and H.K. Luks Industrial Co., Ltd. In 1991, the Company was reorganized into a limited liability company, its corporate business license No. being 440301501120670; in the same year, it issued 53130000 shares of common stock, each share with a face value of 1 Yuan, the shares including 29630000 A Shares and 23500000 B Shares. In 1992, the A shares and B shares got listed on the Shenzhen Securities Exchange; 53130000 shares were tradable shares, and 159203000 shares were non-tradable shares.
In November 1996, H.K. Luks Industrial Co., Ltd. transferred as agreed12% of the shares in the Company, or 25,500,000 shares, to the SEG (H.K.) Co., Ltd. That transfer was ratified by Shenzhen Securities Administration Office, and, on Mar. 5, 1997, was registered with Shenzhen Securities Clearing Co. Ltd. After the transfer, the H.K. Luks Industrial Co., Ltd.'s shares in the Company was reduced to 25,796,663 shares, accounting for12.16% of the shares of the Company, and the SEG (H.K.) Co., Ltd. holds 25,500,000 shares, or12%, of the Company's shares.
In December 1997, the Company conducted shares allotment program, issuing extra 63,699,895 shares to all shareholders by the ratio of 10:3 against the total 212,332,989 shares before the allotment, among which, 30,777,997 shares were alloted to domestic corporate shareholders and 3,600,000 shares were subscribed, with the remaining 27,177,997 shares assigned to public shareholders on paid basis, 15,388,998 shares were allotted to foreign corporate shareholders and 1,800,000 shares were subscribed with 13,588,998 shares abandoned, and also 9,777,900 shares allotted to public shareholders and 7,755,000 shares to domestic-listed foreign shareholders.
In January 1998, the Company carried out the capital reserve-to-capital program for year 1996, i.e. based on the total 212,332,989 shares ended 1996, 2 shares will be increased to per 10 shares for all shareholders, and based on the total 240,701,488 shares ended 1997 after allocation, 1.764 shares will be increased to each 10 shares for all shareholders.
On January 05, 2001, upon ratification, the increased shares of the Company, totaling 6,394,438 shares, went public in Shenzhen Stock Exchange.
On May 29, 2001, upon the approval of CSRC, the non-listed foreign capital totaling 62,462,914 shares of the Company were transferred as listed circulating stock, marking the circulation of entire foreign capital.
On Nov. 30 and Dec. 7 of 2001, H.K. Luks Industrial Co., Ltd. reduced its B Shares in the Company by 14,158,000 shares and 14,159,000 shares respectively. By Dec. 17, 2001, the SEG (H.K.) Co., Ltd. reduced a total of 14,487,400 foreign shares in the Company, or5.12% of the Company's total shares.
On June 06, 2005, the Company bulletined that original shareholder SEG and China Zhenhua Group assigned the state-owned corporate capital they held in the Company totaling 124,920,000 shares to Wuhan Zhongheng New Tech Industry Group Co., Ltd. (Wuhan Zhongheng for short), which was ratified by the State-owned Assets Committee, the State Ministry of Commerce and CSRC with relevant assignment procedures completed on April 11, 2007.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd On November13, 2006, the Board of Shareholders of the Company passed the Equity Division Reform Program of Shenzhen Huafa Electronics Co., Ltd. In line the program, Zhongheng Group carried out assets reorganization to the Company, including bestowing assets and integrating industries covered by the Company, also paying 1.5 shares as consideration for per 10 shares to all A-share shareholders enrolled as at the equity registration day for the program, totaling 8,435,934 shares which may be tradable since the first business day after the implementation of the program. On May 17, 2007, the Company had completed the equity division reform program, and the consideration shares had been at market to circulate on May 18, 2007. The Company also had completed the equity division reform program with ceding procedures for bestowed assets completed in 2007.
As of December 31, 2013, the aggregate shares of the Company are 28,316,000 shares, among which, restricted shares total to 116,489,894 shares, accounting for41.14% of total shares, and unrestricted shares total to 166,671,333 shares, accounting for58.86% of total shares. Among the unrestricted shares, there are 64,675,497 A shares and 101,995,836 B shares, accounting for22.84% and36.02% of total shares respectively.
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 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.
Main business is processing and selling of precision injection parts; processing and selling of liquid crystal display; processing, selling of light packaging materials and property leasing business.The Company is registered at Block 411, Huafabei Road, Futian District, Shenzhen Cty; legal representative is Li Zhongqiu.
Controlling shareholder of the company is Zhongheng Group, and the shareholders meeting is its agency of power, which executes the decision right on material matter such as operation guildlines, funding, investment and profit distribution. Board of directors shall answer for shareholders meeting, which implements operation and decision right of the company according to laws; Managers take charge for organizing and executing the decisions made in shareholders meeting and board of directors meeting, as well as presiding the production and operation management work of the company. The functional management departments include Enterprise Planning Department, Financial Department, Comprehensive Management Department, Business Center, Video Business Department, Circuit Panel Business Department, Plastic Injection Business Department, Auditing Department, Office of Board of Directors etc., and subsidiaries mainly include Shenzhen Huafa Property Lease Management Co., Ltd. (hereinafter referred to as Huafa Lease Company), Shenzhen Zhongheng Huafa Property Management Co., Ltd. (hereinafter referred to as Huafa Property Company), and Wuhan Hengfa Scientific and Technology Co., Ltd. (hereinafter referred to as Hengfa Technology Company), Wuhan Zhongheng Huafa Trade Co.,Ltd.(hereinafter referred to as Huafa Trade Company) , Shenzhen Yutian Henghua Co., Ltd. (hereinafter referred to as Yutian Henghua Company) and Shenzhen Huafa Hengtian Co., Ltd. (hereinafter referred to as Huafa Hengtian Company)
IV. Main accounting policies, accounting estimates and previous errors
1. Basis of Preparation of Financial Statements
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
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd accounting policies and accounting evaluation and financial statement preparation methods".
2. 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. 3. Accounting Period
The accounting period of the Group is from each 01 January to 31 December in the Gregorian calendar.
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（1）Business mergers under the same control
In a business combination under the same control, the assets and liabilities that the combining party obtains in a business combination shall be measured on the basis of their carrying amount in the combined party on the combining date. The additional paid-in capital shall be adjusted according to the balance between the carrying amount of the net assets obtained by the combining party and the carrying amount of the consideration paid by it; if the additional paid-in capital is not sufficient to be offset, the retained earnings shall be adjusted.
（2）Business mergers not under the same control
In a business combination not under the same control, the combination costs shall be the fair values, on the acquisition date, of the assets paid, the liabilities incurred or assumed and the equity securities issued by the acquirer in exchange for the control on the acquiree. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as good will; if the combination costs are less than the fair value of the identifiable net assets it obtains from the acquiree, it shall record the balance into the profits and losses of the current period after reexamination.
6. Preparation of Consolidated Financial Statement
（1）Preparation of Consolidated Financial Statement
The Group has prepared for the Consolidated Financial Statement in line with the Business Accounting Standards No.33- Consolidated Financial Statement and its relevant regulations, with all key internal trades and transactions within the scope of
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd consolidation offset. Among the shareholders equity of subsidiaries, the part that does not belong to the parent company shall be presented under shareholders equity as minority interest in the consolidated financial statement.
Where the accounting policy or accounting period adopted by subsidiaries and the Company is inconsistent, 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.
As to the subsidiary acquired through business combination not under the same control, when prepare consolidated financial statement, it shall make adjustment on individual financial statement based on the fair value of the net assets recognized on the purchasing day; As to the subsidiary acquired through business combination under the same control, it will be regarded existing since the begin of the year of the current period of combination, and its assets, liabilities, operating results and cash flows will be included into the consolidated financial statement based on its original carrying value since the begin of the year of the current period of combination.
7. 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.
8. Conversion in foreign currency transactions and Conversion of foreign currency statements
（1）Conversion in foreign currency transactions
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. Those non-monetary assets measured by fair value are translated into RMB at the instant exchange rate of the recognizing day of fair value, with translation different occurred accrued into loss and profit in current term as change of fair value. Those non-monetary foreign assets measured by history cost, shall still be translated at the instant exchange rate of the day when business occurred, and shall not change the amount of RMB.
（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 “undistributed profit” 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. Converted differences incurred in conversion of foreign-currency statement shall be independently listed under owner benefit
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd item. 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.
9. Recognition criteria and accrual method of bad debt reserves for account receivables
The Group regards the following circumstances as account-receivable bad debt loss confirmation criteria: dissolution, bankruptcy or insolvency of the debtor; seriously insufficient cash flow; debts that can not be repaid within foreseeable future for national disaster, etc.; debts overdue for more than 5 years; debts that cannot be repaid or are highly unlikely to be repaid as supported by convincing evidences.
For possible bad debt loss, allowance method will be adopted to conduct calculation, and impairment will be conducted separately or in accordance with portfolio at the end of the period to provision bed debt preparation and recorded into profit/loss of the current period. As for payment payable with unambiguous evidence verifying that it can not be taken back indeed, the Group will approve according to ruled procedure and handle as loss on bad debt and bad debt reserve withdrawn due to writeoff.
（1）Bad debt reserves for account receivables with major individual amount
|||
|-|-|
|Judgment criteria or amount standard of material specific amount or|Non-connected party amount with specific amount exceeding|
|amount criteria|500 thousand yuan is viewed as material accounts receivable|
||Provision bad debt preparation in accordance with the|
|Provision method with material specific amount and provision of||
||difference of present value of future cash flow below the|
|specific bad debt preparation||
||book value|

（2）Accounts receivable with bad debt preparation provisioned in accordance with portfolio
||||
|-|-|-|
||Provision method with||
|Combination name|provisioning bad debt in|The evidence of confirming portfolio|
||accordance with portfolio||
|||Classify portfolio with aging of accounts receivable as credit risk|
|Aging portfolio|Aging analysis method||
|||character|

Bad debt reserve accrued by aging analysis method in the combination
√ Applicable□ Inapplicable
||||
|-|-|-|
||Accrual proportion of account||
|Account ageing||Accrual proportion of other receivables (%)|
||receivables (%)||
|≤ 1 year|0%|0%|
|1-2 year (s)|5%|5%|
|2-3 year (s)|10%|10%|
|Over 3 years|30%|30%|

Bad debt reserve accrued by balance percentage method in the combination
□ Applicable√ Inapplicable
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 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 present|
|Provision method of bad debt preparation||
||value of its future cash flow below its book value.|

10. Inventories
（1）Classification of inventory
Inventories of the Group includes raw materials, product in progress, goods in stock, turnover material, Self-made semi-finished product and consigned processing material,etc..。
（2）Valuation method of delivered inventory
Valuation method: first-in first-out method
Purchasing is priced at the actual cost; procurement or delivery of inventory shall be made by adopting first-in-first-out method to confirm the actual cost. Low-value consuming goods and packing materials are amortized by one-off write-off method.
（3）Determination basis of net realizable value of inventory and accrual method of inventory falling price reserve
The provisions for inventories depreciation shall be drawn against the predicted uncollectible cost caused by inventories damage, part or entire out-of-fashion or selling price lower than cost. The provisions depreciation of finished products and large bulk of raw materials shall be drawn against the excess part between the cost of single inventory item and its net realizable value. The provisions depreciation of the other raw and auxiliary materials with various kinds and low unit price shall be drawn as per category. 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.
（4）Inventory system
Inventory system: perpetual inventory system
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd（5）Amortization method of low value consumables and packages
Low-value consuming products
Amortization method: one-off amortization method
Packages
Amortization method: one-off amortization method
11、Long-term Equity Investment
（1）Determination of investment cost
Long-term equity investment mainly includes the equity investment held by the Group that may produce control, joint control or significant influence over invested entity, and the equity investment that does not have control, joint control or significant influence on the invested entry, and has no offer in active market and its fair value cannot be reliably measured. If the long-term equity investment is acquired via business merger under the same control, it shall, on the day of merger, regard the share of the carrying amount of the owner's equity of the merged enterprise as the cost of the long-term equity investment. As for the long-term equity investment acquired via business merger under different control, the merger cost shall be, shall be the fair values, on the merger (acquiring) date, of the assets given, the liabilities incurred or assumed, and the equity securities issued by the acquirer, in exchange for the control of the merged (acquired) enterprise, which will be, on the merger (acquiring) date, further regarded as the initial investment cost of long-term equity investment. Apart from the aforesaid long-term equity investment acquired through business merger, those long-term equity investment, if acquiring through paying cash, shall consider its purchasing price actually paid as the investment cost, if acquired by issuing equity securities, shall consider the fair value of issuing equity securities as the investment cost; if invested by investors, shall consider the value agreed in the investment contract or agreement as the investment cost; if acquiring from debt reorganization or non-monetary assets exchange, shall confirm the investment cost according to the regulation of relevant accounting rule.
（2）Subsequent measurement and profit and loss recognition
The investment of the Group to its subsidiaries shall be calculated through cost method and shall be adjusted through equity method in the Financial Statement; the investment to its associated companies shall be calculated through equity method; For the long-term equity investment without any control, joint control or serious influence for which there is no offer in the active market and of which the fair value cannot be reliably measured, the Group adopts cost method to calculate it; For the long-term equity investment without any control, joint control or serious influence for which there is offer in the active market and of which the fair value can be reliably measured, the Group shall calculate it under the entry of―Financial Assets forSales‖ When adopting a cost method to calculate, long-term shareholding investment will be calculated cost in accordance with its initial investment cost, and the cost of long-term shareholding investment will be adjusted at the time of adding or recovering investment. When adopting an equity method, current period investment profit/loss shall be the share of net profit/loss realized in the current year of the invested organization that shall be enjoyed or burdened. When confirming the share of net profit/loss of the invested organization that shall be enjoyed, based on a foundation of the fair value of various identifiable assets of the invested organization at the time of obtaining
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd investment, according to accounting policies and accounting period of the group, the portion belonging to the investing company shall be calculated in accordance with thecompany’s accounting policies after offsetting internal transaction profit/loss incurred with collective-owned enterprises and joint-owned enterprises, and the investedorganization’s net profit will be confirmed after adjustment. For shareholding investment in collective-owned enterprises and joint-owned enterprises already held before the first execution date, if there is shareholding investment debit difference in relation to this investment, the shareholding investment debit difference shall be deducted in accordance with straight-line amortization of the remaining period to confirm investment profit/loss. The group no longer possesses joint control or significant influence over the invested organization due to reasons such as reducing investment, and for which there is no price quotation in the active market and the fair value can not be reliably measured, the group will change to a cost method to calculate; for long-term shareholding investment that the group can implement control over the invested organization due to reasons such as increasing investment, the group will also change to a cost method to calculate; for long-term investment that the group can implement joint control or significant influence over the invested organization but can not implement control due to reasons such as increasing investment, or the group no longer possesses control over the invested organization but can implement joint control or significant influence over the invested organization due to reasons such as disposing investment, the group will change to an equity method to calculate. For long-term shareholding investment disposal, the difference between its book value and the actual obtained amount value shall be recorded into current period investment profit. For long-term shareholding investment calculated with an equity method, if it is recorded intoowners’ equity due to other changes of owners equity except for the net profit/loss of the invested organization, the group will transfer the original portion which has been recorded intoowners’ equity into current period investment profit at the time of disposing this investment.
（3）Determination basis of common control and significant influence on the invested unit
Common control means the shared control on certain economic activity according to contract provisions. Determination basis of common control mainly includes any partnercan’t separately control the production operations of a joint enterprise, decision making involving basic business operations of joint enterprise is subject to the consensus of all partners, etc. Significant influence means a partner has the right to participate in the decision making on the financial and business policies of the invested unit, but is unentitled to control or control the formulation of such policies together with other parties. Determination basis of significant influence mainly includes the group directly or via a subsidiary indirectly owns the investedunit’s voting power share of not less than20% but below50%, nevertheless, if any clear evidence shows the disqualification for participating in the decision making on the production operations of the invested unit, such sharecan’t form significant influence.
(4) Impairment test method and impairment reserve accrual method
The Group has, on each reporting day of Balance Sheet, checked the long-term equity investment, fixed assets, project in progress and intangible assets, etc.. In case of any of the following circumstances, possible impairment has occurred to assets. We will conduct impairment test at each year end over good will and those intangible assets without fixed beneficiary term. If difficult to test the recoverable amount of a single asset item, the test may be applied to the asset group or combined asset group containing such asset.
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. The recoverable amount shall be determined according to the net amount of the fair value of an asset minus the disposal expenses, and the current value of the expected future cash flow of the asset, whichever is higher.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd The following circumstances may constitute a sign of possible asset impairment:
a. The current market price of an asset declines drastically, and the price drop is obviously higher than the expected drop over time or due to the normal use;
b. The economic, technological or legal environment in which the enterprise conducts its business operations, or the market where an asset is situated has or will have any significant change in the current period or in the near future, and thus has or will have an adverse impact on the enterprise;
c. The market interest rate or any other market investment return rate has risen in the current period, and the enterprise' calculation of capitalization rate of the current value of the expected future cash flow of the asset is affected and thus leads to a big fall in the recoverable amount of asset;
d. Any evidence shows that an asset has become obsolete or it has been damaged substantially;
e. An asset has been or will be left unused, or the use of an asset has been or will be terminated, or an asset has been or will be disposed of ahead of schedule;
f. Any evidence in the internal report of the enterprise shows that the economic performances of an asset has been or will be lower than the expected performances, for example, the net cash flow created by an asset or business profit (or loss) realized (incurred) an asset is lower (higher) than the excepted amount, etc.;
g. Other evidence that indicates that an asset impairment has probably occurred.
12. Property of Investment
Property of investment of the Group includes the right to use any land which has already been rented; the right to use any land which is held and prepared for transfer after appreciation; the right to use any houses& building which has already been rented. Property of investment is priced as per its cost. The cost of purchased property of investment includes purchasing payment, relevant taxes and other expenditures which may be directly ascribed to such assets. The cost of building such property of investment is composed of all necessary expenditures occurred prior to that such property has reached the projected service status.
The Company adopts cost mode to follow measurement of property of investment, for which, depreciation or amortization composite life method applied will be drawn aiming to the building and land-use right against the predictable service life and net salvage value. The following shows the net salvage value and annual depreciation (amortization) rate:
|||||
|-|-|-|-|
|Type|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%|

In case the property of investment is taken for self-use, such property shall be recorded as fixed assets or intangible assets since
the date of taking. If the self-use property is taken for rent or capital appreciating, such fixed assets or intangible assets shall be
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd recorded as property of investment since the date of taking. For such recording, the book value before it shall be taken as the recording value after that.
If the property of investment is disposed of, or if it withdraws permanently from use and if no economic benefit will be obtained from the disposal, the recognition of it as property of investment shall be terminated. Such revenues of disposal of the property of investment as sales, transfer, discard, or being damaged or destroyed, after deducting the book value of such property as well as the relevant taxes, shall be accrued into the current profits and losses.
13. Fixed Assets
（1）Recognition conditions of fixed assets
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.
（2）Recognition basis and valuation method of financial lease fixed assets
Fixed Assets include houses& buildings, machinery equipment, mould equipment, transport equipment, apparatus equipment, tooling equipment and office equipment. Fixed assets shall be measured at their cost, among which, the cost of a purchased fixed asset includes the purchase price, import duties and relevant taxes as well as other disbursements that bring the fixed asset to the expected conditions for use and that may be attributed to the fixed asset; the cost of self-constructed fixed assets shall be formed by the necessary disbursements incurred for bringing the asset to the expected conditions for use. The cost put into fixed assets by the investor shall be determined according to the value as stipulated in the investment contract or agreement, with the exception of those of unfair value as is stipulated in the contract or agreement. The costs of fixed assets acquired through financial leasing shall be determined at an amount equal to the fair value of the leased asset or the present value of the minimum lease payments, whichever is lower. The subsequent disbursement relevant to fixed assets mainly composes of repair expense, renovation expense etc., where the expenses meet the condition to be recognized as fixed assets, it shall be accrued into cost of fixed assets; for the substituted part, its book value shall be terminating from recognition; where it does not meet the condition to be recognized as fixed assets, it shall be accrued into current loss and profit at occurring.
（3）Depreciation methods of various fixed assets
The Group shall draw previsions for all fixed assets except for those having fully drawn provisions and under normal service as well as the land recorded separately. It adopts computing life method to draw depreciation and is included in the cost of the relevant assets or in the expenses in current term in accordance with the purposes of the fixed assets.
|||||
|-|-|-|-|
|Type|Depreciation Term (Year)|Rate of salvage value (%)|Annual Depreciation Rate (%)|
|Houses & buildings|20-50 Years|10%|1.8%-4.5%|
|Machinery equipment|10 Years|10%|9%|
|Transport equipment|5 Years|10%|18%|
|Apparatus equipment|5 Years|10%|18%|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||
|-|-|-|-|
|Tooling equipment|5 Years|10%|18%|
|Office equipment|5 Years|10%|18%|
|Mould equipment|3 Years|10%|30%|

（4）Impairment test method and impairment reserve accrual method of fixed assets
The Group has, on each reporting day of Balance Sheet, checked the long-term equity investment, fixed assets, project in progress and intangible assets, etc... In case of any of the following circumstances, possible impairment has occurred to assets. We will conduct impairment test at each year end over good will and those intangible assets without fixed beneficiary term. If difficult to test the recoverable amount of a single asset item, the test may be applied to the asset group or combined asset group containing such asset.
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. The recoverable amount shall be determined according to the net amount of the fair value of an asset minus the disposal expenses, and the current value of the expected future cash flow of the asset, whichever is higher.
The following circumstances may constitute a sign of possible asset impairment:
(1) The current market price of an asset declines drastically, and the price drop is obviously higher than the expected drop over time or due to the normal use;
(2) The economic, technological or legal environment in which the enterprise conducts its business operations, or the market where an asset is situated has or will have any significant change in the current period or in the near future, and thus has or will have an adverse impact on the enterprise;
(3) The market interest rate or any other market investment return rate has risen in the current period, and the enterprise' calculation of capitalization rate of the current value of the expected future cash flow of the asset is affected and thus leads to a big fall in the recoverable amount of asset;
(4) Any evidence shows that an asset has become obsolete or it has been damaged substantially;
(5) An asset has been or will be left unused, or the use of an asset has been or will be terminated, or an asset has been or will be disposed of ahead of schedule;
(6) Any evidence in the internal report of the enterprise shows that the economic performances of an asset has been or will be lower than the expected performances, for example, the net cash flow created by an asset or business profit (or loss) realized (incurred) an asset is lower (higher) than the excepted amount, etc.;
(7) Other evidence that indicates that an asset impairment has probably occurred.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd（5）Other explanations
The Group will, at the end of each year, have a check on the useful life, estimated net residue value, and the depreciation method of the fixed assets, and if there is any change, it will be treated as the change of accounting estimation.
Where the fixed asset is in a state of disposal or unable to generate any economic benefits through use or disposal as expected, the recognition of it as a fixed asset shall be terminated. When an enterprise sells, transfers or discards any fixed asset, or when any fixed asset of an enterprise is damaged or destroyed, the Company shall deduct the book value and relevant taxes from the disposal income through disposal, transfer, discard or being damaged or destroyed, and then include the remaining in the current profits and losses.
14. Project in Process
（1）Type of construction in progress
Project in process shall be measured at the actual cost. The self-operating project shall be measured in line with direct materials, direct salary and direct construction expenses, etc.; The out-contracted project shall be measured in line with project price payable, etc.; Equipment installation project shall determine its cost as per the occurring disbursements as equipment value, installation charge and project trial running, etc. The cost of project in progress also includes borrowing costs to be capitalized and exchange loss and profit.
（2）Criteria and time point for transfer of construction in progress into fixed asset
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.
（3）Impairment test method and impairment reserve accrual method of construction in progress
The Group has, on each reporting day of Balance Sheet, checked the long-term equity investment, fixed assets, project in progress and intangible assets, etc.. In case of any of the following circumstances, possible impairment has occurred to assets. We will conduct impairment test at each year end over good will and those intangible assets without fixed beneficiary term. If difficult to test the recoverable amount of a single asset item, the test may be applied to the asset group or combined asset group containing such asset.
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. The recoverable amount shall be determined according to the net amount of the fair value of an asset minus the disposal expenses, and the current value of the expected future cash flow of the asset, whichever is higher.
The following circumstances may constitute a sign of possible asset impairment:
a. The current market price of an asset declines drastically, and the price drop is obviously higher than the expected drop over time or due to the normal use;
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd b. The economic, technological or legal environment in which the enterprise conducts its business operations, or the market where an asset is situated has or will have any significant change in the current period or in the near future, and thus has or will have an adverse impact on the enterprise;
c. The market interest rate or any other market investment return rate has risen in the current period, and the enterprise' calculation of capitalization rate of the current value of the expected future cash flow of the asset is affected and thus leads to a big fall in the recoverable amount of asset;
d. Any evidence shows that an asset has become obsolete or it has been damaged substantially;
e. An asset has been or will be left unused, or the use of an asset has been or will be terminated, or an asset has been or will be disposed of ahead of schedule;
f. Any evidence in the internal report of the enterprise shows that the economic performances of an asset has been or will be lower than the expected performances, for example, the net cash flow created by an asset or business profit (or loss) realized (incurred) an asset is lower (higher) than the excepted amount, etc.;
g. Other evidence that indicates that an asset impairment has probably occurred.
15. Borrowing Costs
（1）Recognition principle of capitalization of borrowing cost
The borrowing costs shall include interest on borrowings, amortization of discounts or premiums on borrowings, ancillary expenses, and exchange balance on foreign currency borrowings. The borrowing costs incurred to an enterprise that can be directly attributable to the acquisition and construction or production of assets eligible for capitalization, shall be capitalized after the asset disbursements have already incurred, the borrowing costs have already incurred, and the acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started; When the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased. The remaining borrowing costs shall be recognized as expenses.
（2）Capitalization period of borrowing cost
Asset qualified for the capitalization conditions refers to the fixed assets, property of investment and inventory which must spend long term (usually above 1 year) to purchase, build or produce before reaching expected service or sales status.
（3）Capitalization suspension period
Where the acquisition or construction of assets that meet the capitalization conditions is interrupted abnormally for more than 3 consecutive months, such borrowing costs shall be suspended capitalizing till the acquisition or construction of the asset restarts.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd（4）Calculation method of capitalized amount of borrowing cost
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.
16. Intangible Assets
（1）Valuation method of intangible assets
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.
（2）Estimate of service life of intangible assets with a limited service life
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.
（3）Judgment basis of intangible assets with an uncertain service life
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. It shall also check the service life of intangible assets with uncertain service life during each accounting period, where there are evidences to prove the intangible assets have limited service life, it shall be estimated of its service life, and be amortized within such estimated life.
（4）Accrual of impairment reserve for intangible assets
The Group has, on each reporting day of Balance Sheet, checked the long-term equity investment, fixed assets, project in progress and intangible assets, etc.. In case of any of the following circumstances, possible impairment has occurred to assets. We will conduct impairment test at each year end over good will and those intangible assets without fixed beneficiary term. If difficult to test the recoverable amount of a single asset item, the test may be applied to the asset group or combined asset group containing such asset.
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. The recoverable amount shall be determined according to the net amount of the fair value of an asset minus the disposal expenses, and the current value of the expected future cash flow of the asset, whichever is higher.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd The following circumstances may constitute a sign of possible asset impairment:
a. The current market price of an asset declines drastically, and the price drop is obviously higher than the expected drop over time or due to the normal use;
b. The economic, technological or legal environment in which the enterprise conducts its business operations, or the market where an asset is situated has or will have any significant change in the current period or in the near future, and thus has or will have an adverse impact on the enterprise;
c. The market interest rate or any other market investment return rate has risen in the current period, and the enterprise' calculation of capitalization rate of the current value of the expected future cash flow of the asset is affected and thus leads to a big fall in the recoverable amount of asset;
d. Any evidence shows that an asset has become obsolete or it has been damaged substantially;
e. An asset has been or will be left unused, or the use of an asset has been or will be terminated, or an asset has been or will be disposed of ahead of schedule;
f. Any evidence in the internal report of the enterprise shows that the economic performances of an asset has been or will be lower than the expected performances, for example, the net cash flow created by an asset or business profit (or loss) realized (incurred) an asset is lower (higher) than the excepted amount, etc.;
g. Other evidence that indicates that an asset impairment has probably occurred.
（5）Criteria for division ofR&D stages of internalR&D projects
The expenses occurred in the development process and meet the following conditions are determined as intangible assets: a. In respect of the technology, it is feasible to finish the intangible asset for use or sale;
b. It is intended to finish and use or sell the intangible asset;
c. There is a potential market for the products manufactured by applying this intangible asset or that there is a potential market for the intangible asset itself;
d. With the support of sufficient technologies, financial resources and other resources, it is able to finish the development of the intangible asset, and it is able to use or sell the intangible asset;
e. The disbursements attributable to the development of the intangible asset can be reliably measured.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd（6）Accounting of expenditures for internalR&D projects
The expenditures for its internal research and development projects of the Company shall be classified into research expenditures and development expenditures depending on the project property and the degree of uncertainty of the intangible assets finally brought out. The expenses occurred in research process is determined as profit or loss of the period;
The development disbursement not meeting the above conditions will be accrued into current loss and profit at occurring. The development disbursement accrued into loss and profit in previous term will not be recognized as assets as term thereafter. The development disbursement capitalized will be presented as―DevelopmentDisbursement‖ in the Balance Sheet and then be brought forward to intangible assets since such project has reached the expected service status.
17. Long-term Deferred Expenses
Thegroup’s long term deferred expense refers to expenses such as decoration expense of houses and constructions and decoration expense of rented office sites with amortization period of above one year(excluding one year) that should be undertaken in the current period and various periods later, 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.
18. Predictable Liabilities
（1）Recognition criteria of estimated 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.
（2）Measuring method of estimated liabilities
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.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd19、Share-based payment and equity instrument
（1）Type of share-based payment
The share-based payments shall consist of equity-settled share-based payments and cash-settled share-based payments.
（2）Determination method of fair value of equity instrument
Equity Instruments refer to the contract which may proves holding all remain equity of the Company after deducting all liabilities. During business combination, the transactional expenses for issuing the equity instrument by combining party offset the premium revenue of equity instruments, if it is not enough to offset, reduce the reserve profits. Other equity instruments, the consideration received at issuing will increaseshareholder’s equity after deducting transactional expenses. The consideration and transactional expenses paid for purchasing back the equity instruments will decreaseshareholder’s equity. It will not recognize profits and losses when issuing, purchasing back, selling or writing off the equity instruments.
The distribution (excluding dividend) to the party who owns the equity instrument by the Company shall decreaseshareholder’s equity. The Company does not recognize the change of fair value of equity instruments.
（3）Recognition basis of optimal estimate of vested equity instrument
On every balance sheet date in the waiting period, optimal estimate is made according to the latest acquired change of number of vested employees and other subsequent information, and then number of estimated vested equity instruments is corrected
accordingly.
（4）Accounting processes related to implementation, modification and termination of share-based payment plan
a. Implementation of share-based payment
Where share-based payment adopting equity settlement changes foremployee’s service, its measurement accords with the fair value of equity instrument granted to the employee. Where share-based payment adopting equity settlement is immediately vested after granting to change foremployee’s service, it is recorded in related cost or expense according to the fair value of equity instrument on the grant date, and capital surplus is increased accordingly. Where share-based payment adopting equity settlementcan’t be vested to change foremployee’s service until service in waiting period is finished or specified performance condition is met, on every balance sheet date in the waiting period, on the basis of the optimal estimate of number of vested equity instruments, the service acquired in current period is recorded in related cost or expense and capital surplus according to the fair value on the grant date of equity instrument. On a balance sheet date, where subsequent information shows the number of vested equity instruments is different from previous estimate, adjustment is made, and such number is adjusted to the number of actually vested equity instruments on the vesting date. For share-based payment taking specified service period as vesting condition, its waiting period is from grant date to vesting date; for share-based payment taking specified performance as vesting condition, the length of waiting period is estimated according to the most possible performance result on the grant date. After the vesting date, the enterprisedoesn’t adjust recognized total amount of related cost or expense orowner’s equity any more.
Where share-based payment adopting equity settlement changes for the service of other parties, the accounting process shall be pertinent to the circumstances as follows:
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Where the fair value of otherparty’s service can be reliably measured, such service is recorded in related cost or expense according to its fair value on the acquisition date of service, andowner’s equity is increased accordingly. Where the fair value of otherparty’s servicecan’t be reliably measured, but that of equity instrument can be reliably measured, such service is recorded in related cost or expense according to the fair value of equity instrument on the acquisition date of service, andowner’s equity is increased accordingly. On the exercise date, the enterprise calculates and determines the amount that shall be transferred to paid-in capital or capital stock according to the number of actually exercised equity instruments, and transfers it to paid-in capital or capital stock.
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 share-based payment adopting cash settlement is immediately vested after granting,it’s recorded in related cost or expense as per the fair value of liabilities borne by the enterprise on the grant date, and liabilities are increased accordingly. Where share-based payment adopting cash settlementcan’t be vested until service in waiting period is finished or specified performance condition is met, on every balance sheet date in the waiting period, the service acquired in current period is recorded in cost or expense and relevant liability according to the amount of fair value of liabilities borne by the enterprise and based on the optimal estimate of vesting condition. On a balance sheet date, where subsequent information shows the fair value of liabilities borne by the enterprise is different form previous estimate, adjustment is made, and such adjustment is to the actually vested level on the vesting date. 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.
b. Modification of share-based payment
Where modification increases the fair value of granted equity instrument, acquired service is increased accordingly. Where modification occurs in the waiting period, the recognition of fair value of service acquired from modification date to the vesting date after modification includes both the service amount determined on the basis of fair value of original equity instrument on its grant date in the remaining of original waiting period and the increment of fair value of equity instrument. Where modification occurs after the vesting date, the increase of fair value of equity instrument is recognized immediately. If share-based payment agreement requires that an employee can acquire modified equity instrument only if longer time service is finished, increase of fair value of equity instrument is recognized in the whole waiting period. Where modification increases the number of granted equity instruments, the fair value of increased equity instrument is recognized as increment of acquired service accordingly. If modification occurs in the waiting period, the recognition of fair value of service acquired from modification date to the vesting date of increased equity instrument includes both the service amount determined on the basis of fair value of original equity instrument on its grant date in the remaining of original waiting period and the increment of fair value of equity instrument. If vesting condition is modified in a way favorable for employees, e.g. shortening of waiting period, modification or cancellation of performance condition (rather than market condition), when vesting condition is processed, post-modification vesting condition is considered. Where modification decreases the fair value of granted equity instrument, the amount of acquired service is recognized still on the basis of the fair value of equity instrument on its grant date, regardless of decrement of fair value of equity instrument. Where modification decreases the number of granted equity instruments, the decrement is viewed as cancellation of relevant granted equity instruments. Where vesting condition is modified in a way unfavorable for employees, e.g. extension of waiting period, increase or modification of performance condition (rather than market condition), post-modification vesting conditionisn’t taken into account when processing vesting condition. c. Termination of share-based payment
Cancellation or settlement is viewed as accelerated vesting, and the amount that should be recognized in the remaining of original waiting period is immediately recognized. All payments to an employee at the time of cancellation or settlement shall be viewed as equity repurchase, the excess of repurchase cost above the equityinstrument’s fair value on the repurchase date is recorded in current expenses. Where new equity instrument is granted to an employee, andit’s recognized that the new equity instrument replaces for the cancelled one on the grant date of the new one, the enterprise processes the granted substitute equity instrument in a
way the same as that for processing the modification of original equity instrument provision and condition. Where the enterprise
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd purchases anemployee’s vested equity instrument,owner’s equity is debited, and the excess of repurchase cost above the equityinstrument’s fair value on the repurchase date is recorded in current expenses.
20．Income
（1）Judgment criteria for recognition time of sales income
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）Recognition basis of income from transfer of right to use asset
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.
（3）Recognition basis of service income
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.
（4）Determination basis and method of degree of completion of contract for the recognition of service income and construction contract income by completion percentage method
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.
21. Government Grants
（1）Type
The government grant may be recognized on the condition that the Group complies with the conditions for the government grant and that the Group can receive the government grant. If a government grant is a monetary asset, it shall be measured on the basis of the amount received, or that receivable if such grant is appropriated as fixed quota standard. If a government grant is a non-monetary asset, it shall be measured at its fair value, or at its nominal amount (1 Yuan) if its fair value cannot be obtained reliably.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd（2）Accounting policies
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. 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.
22. Deferred Income Tax Assets& Deferred Income Tax Liabilities
（1）Recognition basis of deferred income tax assets
Thegroup’s deferred income tax assets are recognized through the calculation of the balance between the tax base of assets and liabilities and their book value (deductible temporary difference) Deductible loss and tax deduction that can write off taxable income in future fiscal year according to provisions of tax law are viewed as temporary difference and recognized as relevant deferred income tax assets. On a balance sheet date, deferred income tax assets are measured according to the tax rate applicable to the expected recovery of the assets. The Company shall recognize the deferred income tax assets arising from a deductible temporary difference to the extent of the amount of the taxable income which it is most likely to obtain and which can be deducted from the deductible temporary difference. For the determined deferred income tax assets, if it is unlikely to obtain sufficient taxable income to offset against the benefit of the deferred income tax asset, the carrying amount of the deferred income tax assets shall be written down. Any such write-down should be subsequently reversed where it becomes probable that sufficient taxable income will be available.
（2）Recognition basis of deferred income tax liabilities
Thegroup’s deferred income tax liabilities are recognized through the calculation of the balance between the tax base of assets and liabilities and their book value (taxable temporary difference). Deferred income tax liabilities are measured according to applicable tax rate of the expected payoff period of such liability on the balance sheet date.
23. Operating lease and financial lease
（1）Accounting process 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 process of financial 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.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd V. Taxes
1. Main tax types and rates
||||
|-|-|-|
|Tax type|Tax basis|Tax rate|
|VAT|Sales amount of commodities for the home market|17%|
|Business Tax|Turnover of taxable service|5%|
|Urban Maintenance & Construction Tax|Circulating tax payable|7%|
|Enterprise Income Tax|Corporate taxable income|25%|

Income tax rate executed by every Branch Company or factory
a. Enterprise Income Tax
For the Company and its subsidiary Huafa Lease Company, former applicable enterprise income tax rate was15%. According to the regulation of Enterprise Income Tax Law of the People's Republic of China put in force from January 1, 2008, the enterprise income tax rate will gradually transit to25% from 2008 to 2012, and that in this year is25%
For the Company's Wuhan Branch, subsidiary Huafa Property Company and Hengfa Technology Company, Huafa Trade Company the enterprise income tax rate is25%.
b. VAT
VAT is applied to the sales of goods of the Group, among which, the input VAT rate of domestically-sold goods is17%. The input VAT paid for purchasing raw materials, etc. may offset against output VAT at the rate of17%, among which, the input VAT paid for import may be refunded upon application.
VAT payable refers to the balance after deduction between the output VAT and input VAT at current term.
c. Business Tax
The applicable tax rate of business tax of the Company is5%.
d. Urban Construction Tax& Educational Surcharge
Tax calculation basis of thecompany’s urban construction tax and surtax for education expense shall be based on payable turnover tax, applicable tax rate is7% and3% respectively.
e. Property Tax
The Company applies70% of original value of properties as tax basis with the rate of1.2%.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 2. Tax preference and approval
3. Other introduction
VI. Business Merger and Consolidated Financial Stateent
1. Conditions of subsidiary
Subsidiaries mainly include Shenzhen Huafa Property Lease Management Co., Ltd. (hereinafter referred to as "Huafa Lease Company"), Shenzhen Zhongheng Huafa Property Management Co., Ltd. (hereinafter referred to as "Huafa Property Company"), and Wuhan Hengfa Scientific and Technology Co., Ltd. (hereinafter referred to as "Hengfa Technology Company"), Wuhan Zhongheng Huafa Trade Co.,Ltd.(hereinafter referred to as―Huafa TradeCompany‖), Shenzhen Huafa Hengtian Co., Ltd., and Shenzhen Yutian Henghua Co., Ltd. etc.
（1）Subsidiaries acquired by means of foundation, investment, etc.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Unit: RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||Materially|||||Amount of|The balance produced by subtracting the|
||||||||constitutes the|||||minority interests|parent company's equities from the loss of the|
|||||||Actual investment||Share|Proportion of|||||
|Full name of|Type of|Registered|||||balance of other|||Statements are|Minority|for setting off|period shared by the minority shareholders of|
||||Business Nature|Registered Capital|Business Scope|amount at the end of||proportion|voting rights|||||
|subsidiary|subsidiary|Address|||||items of the net|||consolidated or not|Interests|minority|the company in excess of the theirs in equities|
|||||||period||（%）|（%）|||||
||||||||investment in|||||shareholders|of the subsidiary at the beginning of the|
||||||||subsidiary|||||profits or losses|subsidiary|
||Company of|||||||||||||
|Huafa Lease|||Property||Lease and management of|||||||||
||limited|Shenzhen||1000000.00||600,000.00||60%|60%|Yes||||
|Company|||Management||self-owned property|||||||||
||liabilities|||||||||||||
||Company of|||||||||||||
|Huafa Property|||Property||Lease and management of|||||||||
||limited|Shenzhen||1000000.00||1,000,000.00||100%|100%|Yes||||
|Company|||Management||self-owned property|||||||||
||liabilities|||||||||||||
|Hengfa|Company of||||R&D, production and|||||||||
||||Production and|||||||||||
|Technology|limited|Wuhan||18,1643100|selling and import and|181,643,100.00||100%|100%|Yes||||
||||Sale|||||||||||
|Company|liabilities||||export business of product|||||||||
||Company of||||Selling, goods import and|||||||||
|Huafa Trade||||||||||||||
||limited|Wuhan|Sale|100000.00|export business of|100,000.00||100%|100%|Yes||||
|Company||||||||||||||
||liabilities||||optoelectronic products|||||||||
||Company of|||||||||||||
|Yutian Henghua|||Property||Lease and management of|||||||||
||limited|Shenzhen||1000000.00||1,000,000.00||100%|100%|Yes||||
|Company|||Management||self-owned property|||||||||
||liabilities|||||||||||||
||Company of|||||||||||||
|Huafa Hengtian|||Property||Lease and management of|||||||||
||limited|Shenzhen||18,1643100||1,000,000.00||100%|100%|Yes||||
|Company|||Management||self-owned property|||||||||
||liabilities|||||||||||||

Other explanations to subsidiaries acquired by means of foundation, investment, etc.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd（2）Subsidiaries obtained from enterprise merger under different controls
2. Introduction to the change of merger scope
Introduction to the scope change of the merger statement
√ Applicable□ Not applicable
Two new merged units are added this year comparing to last year because
Two new companies are established this year.
Two new merged units are reduced this year comparing to last year because
3. Subject concluded into merger scope during report period and subject that will be not concluded into merger scope any more during report period
Subsidiaries and subjects with special purpose concluded into merger scope newly this term become operating entity that forms control right through entrusted operation or lessee way.
Unit: RMB
||||
|-|-|-|
|Name|Ending net asset|Net profit in this term|
|Yutian Henghua Company|1,000,000.00|0.00|
|Huafa Hengtian Company|1,000,000.00|0.00|

 Subsidiaries and subjects with special purpose concluded into merger scope newly this term become operating entity that forms control right through entrusted operation or lessee way.
VII. Note to Major Items in the Consolidated Financial Statement
1. Monetary Fund
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||Amount at the end of period|||Amount at the beginning of period|||
|Items|In foreign|Exchange||In foreign|Exchange||
||||In RMB|||In RMB|
||currency|Rate||currency|Rate||
|Cash|--|--|492,314.95|--|--|272,718.79|
|RMB|--|--|422,312.83|--|--|263,662.92|
|HKD|77,966.13|0.79|61,326.60|134.43|0.81|109.08|
|USD|1,422.45|6.10|8,675.52|1,422.45|6.29|8,946.79|
|Bank Deposit|--|--|50,212,004.91|--|--|99,975,784.63|
|RMB|--|--|26,233,133.17|--|--|93,759,499.42|
|HKD|114,309.76|0.79|89,913.77|114,406.00|0.81|92,834.71|
|USD|3,918,213.84|6.10|23,888,957.97|974,110.57|6.29|6,123,450.50|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||||
|-|-|-|-|-|-|-|
|Other Monetary Fund|--|--|3,547,136.34|--|--|12,586,337.97|
|RMB|--|--|1,818,436.68|--|--|12,586,337.97|
|USD|283,537.48|6.10|1,728,699.66||||
|Total|--|--|54,251,456.20|--|--|112,834,841.39|

 Funds under use restriction for mortgage, pledge, freeze and others, deposited abroad or in potential risk on recovery, if any, shall be separately explained.
2. Transaction financial asset
3. Notes Receivable
（1）Classification of bills receivable
Unit: RMB
||||
|-|-|-|
|Type|Amount at the end of period|Amount at the beginning of period|
|Bank Acceptance Bill|154,352,869.68|40,215,239.33|
|Commercial Acceptance Bill|23,066.81|2,784,978.48|
|Total|154,375,936.49|43,000,217.81|

（2）Bills receivable already pledged at the end of period
Unit: RMB
||||||
|-|-|-|-|-|
|Issuer|Issuing Date|Due Date|Amount|Note|
|Qingdao Hai’er Spare Parts|||||
||Dec. 13, 2013|Jun. 13, 2014|5,700,000.00||
|Procurement Co., Ltd.|||||
|Qingdao Hai’er Spare Parts|||||
||Nov. 13, 2013|May 13, 2014|5,500,000.00||
|Procurement Co., Ltd.|||||
|TCL Air-conditioner|||||
||Jul. 30, 2013|Jan. 30, 2014|4,800,000.00||
|(Wuhan) Co., Ltd.|||||
|Qingdao Hai’er Spare Parts|||||
||Jul. 16, 2013|Jan. 16, 2014|1,753,351.47||
|Procurement Co., Ltd.|||||
|TCL Air-conditioner|||||
||Sept. 23. 2013|Mar. 23, 2014|1,600,000.00||
|(Wuhan) Co., Ltd.|||||
|Total|--|--|19,353,351.47|--|

4. Notes Receivable
（1）Disclosure of accounts receivable according to type
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Unit: RMB
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Amount at the end of period||||Amount at the beginning of period|||||
|Type|Book balance||Provision for Bad Debts||Book balance||Provision for Bad Debts|||
||Amount|Proportion (%)|Amount|Proportion (%)|Amount|Proportion (%)|Amount|Proportion (%)||
|Accounts receivable with||||||||||
|significant specific amount that||||||||||
||7,649,789.11|4.4%|6,227,694.47|81.41%|7,630,192.43|4.41%|6,208,097.79|81.36%||
|were provisioned bad debt||||||||||
|preparation separately||||||||||
|Other receivables with accrual of bad debt reserve according to combination||||||||||
|Aging portfolio|160,967,562.02|92.6%|110,950.83|0.07%|160,472,444.86|92.64%|111,631.71||0.07%|
|Subtotal of combination|160,967,562.02|92.6%|110,950.83|0.07%|160,472,444.86|92.64%|111,631.71||0.07%|
|Accounts receivable that were||||||||||
|not significant but have been||||||||||
||5,210,953.41|3%|5,210,953.41|100%|5,116,838.00|2.95%|5,116,838.00||100%|
|provisioned bad debt||||||||||
|preparation separately||||||||||
|Total|173,828,304.54|--|11,549,598.71|--|173,219,475.29|--|11,436,567.50||--|

 Description of types of other receivables
Other receivables with major individual amount and separate accrual of bad debt reserve at the end of period
√ Applicable□ Inapplicable
Unit: RMB
||||||
|-|-|-|-|-|
|Content of accounts receivable|Book balance|Provision for Bad Debts|Percent Drawn（%）|Reason of provision|
|Shenzhen Boteman Bowling Club Co., Ltd.|2,555,374.75|2,555,374.75|100%|Can not be taken back|
|TCL Wangpai Electric Appliance (Huizhou)|||||
||1,325,431.75|1,325,431.75|100%|Can not be taken back|
|Co., Ltd.|||||
|Skyworth Multimedia(Shenzhen) Co.,Ltd.|672,769.28|672,769.28|100%|Can not be taken back|
|Qingdao Hai’er Spare Parts Procurement|||||
||1,225,326.15|1,225,326.15|100%|Can not be taken back|
|Co., Ltd.|||||
|||||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|
|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
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||Amount at the end of period|||Amount at the beginning of period|||
||Book balance|||Book balance|||
|Account ageing|||Provision for Bad|||Provision for Bad|
|||Proportion(%)|||Proportion||
||Amount||Debts|Amount||Debts|
||||||(%)||
|Within 1 year|||||||
|Among it:|--|--|--|--|--|--|
||160,410,234.26|||160,021,795.01|||
|Subtotal within 1|||||||
||160,410,234.26|||160,021,795.01|||
|year|||||||
|1-2 year (s)|224,990.00|5%|11,249.50|94,252.98|5%|4,712.65|
|2-3 year (s)|332,337.76|30%|99,701.33|356,396.87|30%|106,919.06|
|Over 3years|160,967,562.02|--|110,950.83|160,472,444.86|--|111,631.71|

 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
□ Applicable√ Inapplicable
Accounts receivable without major individual amount but with separate accrual of bad debt reserve at the end of period
√ Applicable□ Inapplicable
Unit: RMB
||||||
|-|-|-|-|-|
|Content of accounts receivable|Book balance|Provision for Bad Debts|Percent Drawn（%）|Reason of provision|
|Shenzhen Huixin Video Science and|||||
||381,168.96|381,168.96|100%|Can not be taken back|
|Technology Co.,Ltd.|||||
|Shenzhen Wandial Number Science|||||
||351,813.70|351,813.70|100%|Can not be taken back|
|and Technology Co.,Ltd.|||||
|Shenzhen Dalong Electric Co.,Ltd.|344,700.00|344,700.00|100%|Can not be taken back|
|Shenzhen Qunpin Electric Co.,Ltd.|304,542.95|304,542.95|100%|Can not be taken back|
|China Galaxy Electric(Hong Kong)|||||
||288,261.17|288,261.17|100%|Can not be taken back|
|Co.,Ltd.|||||
|Dongguan Weite Electric Co.,Ltd.|274,399.80|274,399.80|100%|Can not be taken back|
|Hong Kong New Century Electric|||||
||207,409.40|207,409.40|100%|Can not be taken back|
|Co.,Ltd.|||||
|Shenyang Beitai Electric Co.,Ltd.|203,304.02|203,304.02|100%|Can not be taken back|
|Bejing Xinfanweiye Science and|||||
||193,000.00|193,000.00|100%|Can not be taken back|
|Technology Co.,Ltd.|||||
|TCL Electric(Hong kong) Co.,Ltd.|145,087.14|145,087.14|100%|Can not be taken back|
|Huizhou TCL New and Special|142,707.14|142,707.14|100%|Can not be taken back|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||
|-|-|-|-|-|
|Electronics Co., Ltd.|||||
|Shenzhen Skyworth-RGB Electric|||||
||133,485.83|133,485.83|100%|Can not be taken back|
|Co.,Ltd.|||||
|Shenzhen Xinfa Electronics Co., Ltd.|119,094.78|119,094.78|100%|Can not be taken back|
|Others|2,121,978.52|2,121,978.52|100%|Can not be taken back|
|Total|5,210,953.41|5,210,953.41|--|--|

（2）Conditions of accounts receivable actually cancelled after verification in the report period
Unit: RMB
|||||||
|-|-|-|-|-|-|
||||Amount of|Cause for|Whether generated|
||Nature of accounts|Time of cancellation||||
|Unit name|||cancellation of|cancellation of|by affiliated|
||receivable|after verification||||
||||verification|verification|transactions|
|Shenzhen Wanshang|||||No|
|Youyi Department||||||
||Management|||||
|Store Co., Ltd.||||Can not be taken||
||expense|Nov. 18, 2013|154,574.00|||
|(hereinafter referred||||back||
|to as the Wanshang||||||
|Department Store)||||||
|Total|--|--|154,574.00|--|--|

（3）Conditions of top 5 units in the amount of other receivables
Unit: RMB
||||||
|-|-|-|-|-|
||Relation with this|||Proportion in other|
|Unit name||Amount|Years||
||company|||receivables (%)|
|Qingdao Hai’er Spare|||||
|Parts Procurement Co.,|Nonaffiliated parties|63,254,926.19|Within 1 year|36.39%|
|Ltd.|||||
|Hong Kong Tianyu|||||
|International Investment|||||
||The same controlling||||
|Co.,Ltd.(herein after||58,271,302.17|Within 1 year|33.52%|
||shareholder||||
|referred to Yutian|||||
|International for short)|||||
|Gree Electric Appliance|||||
||Nonaffiliated parties|21,925,779.90|Within 1 year|12.61%|
|(Wuhan) Co., Ltd|||||
|TCL Air-conditioner|||||
||Nonaffiliated parties|5,933,625.56|Within 1 year|3.41%|
|(Wuhan) Co., Ltd.|||||
|Guanjie Display|||||
||Nonaffiliated parties|4,818,535.36|Within 1 year|2.77%|
|Technology (Wuhan)|||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||
|-|-|-|-|-|
|Co., Ltd.|||||
|Total|--|154,204,169.18|--|88.7%|

（4）About the accounts receivable from the related parties
Unit: RMB
|||||
|-|-|-|-|
||||As a percentage in accounts|
|Unit name|Relation with this company|Amount||
||||receivable (%)|
||The same controlling|||
|Yutian International||58,271,302.17|33.52%|
||shareholder|||
|Total|--|58,271,302.17|33.52%|

 5. Other Receivables
（1）Disclosure of other receivables according to type
Unit: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
||Amount at the end of period||||Amount at the beginning of period||||
||Book balance||Provision for Bad Debts||Book balance||Provision for Bad Debts||
|Type|||||||||
|||Proportion||Proportion||Proportion||Proportion|
||Amount||Amount||Amount||Amount||
|||(%)||(%)||(%)||(%)|
|Accounts receivable|||||||||
|with significant specific|||||||||
|amount that were|5,662,187.38|28.23%|5,662,187.38|100%|7,404,690.78|37.39%|6,219,285.23|83.99%|
|provisioned bad debt|||||||||
|preparation separately|||||||||
|Other receivables with accrual of bad debt reserve according to combination|||||||||
|Aging portfolio|10,081,917.80|50.27%|458,150.02|4.54%|8,881,593.33|44.84%|503,493.87|5.67%|
|Subtotal of combination|10,081,917.80|50.27%|458,150.02|4.54%|8,881,593.33|44.84%|503,493.87|5.67%|
|Accounts receivable|||||||||
|that were not|||||||||
|significant but have|||||||||
||4,313,278.80|21.5%|4,313,278.80|100%|3,520,048.00|17.77%|3,520,048.00|100%|
|been provisioned bad|||||||||
|debt preparation|||||||||
|separately|||||||||
|Total|20,057,383.98|--|10,433,616.20|--|19,806,332.11|--|10,242,827.10|--|

 Description of types of other receivables
Other receivables with major individual amount and separate accrual of bad debt reserve at the end of period
√ Applicable□ Inapplicable
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Unit: RMB
||||||
|-|-|-|-|-|
|Content of other receivables|Book balance|Bad debts|Percent Drawn（%）|Cause|
|Hebei Botou Court|520,021.00|520,021.00|100%|Can not be taken back|
|Traffic incident indemnity|555,785.81|555,785.81|100%|Can not be taken back|
|Shenzhen Boteman Bowling|||||
||4,021,734.22|4,021,734.22|100%|Can not be taken back|
|Club Co., Ltd.|||||
|Zhao Baomin|564,646.35|564,646.35|100%|Can not be taken back|
|Total|5,662,187.38|5,662,187.38|--|--|

Other receivables with accrual of bad debt reserve by aging analysis method in the combination
√ Applicable□ Inapplicable
Unit: RMB
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Amount at the end of period|||||Amount at the beginning of period||||
||Book balance|||||Book balance||||
|Account ageing|||||Provision for||||Provision for Bad|
|||Proportion|||||Proportion|||
||Amount||||Bad Debts|Amount|||Debts|
|||(%)|||||(%)|||
|Within 1 year||||||||||
|Among it：||||||||||
||7,751,585.53|||||6,515,934.15||||
|Subtotal within 1 year|7,751,585.53|||||6,515,934.15||||
|1-2 year (s)|963,798.62||5%|48,189.93||628,495.27||5%|31,424.76|
|2-3 year (s)||||||245,400.32||10%|24,540.03|
|Over 3years|1,366,533.65||30%|409,960.09||1,491,763.59||30%|447,529.08|
|Total|10,081,917.80||--|458,150.02||8,881,593.33||--|503,493.87|

 Other receivables with accrual of bad debt reserve by balance percentage method in the combination
□ Applicable√ Inapplicable
Other receivables with accrual of bad debt reserve by other method in the combination
□ Applicable√ Inapplicable
Other receivables without major individual amount but with separate accrual of bad debt reserve at the end of period
√ Applicable□ Inapplicable
Unit: RMB
||||||
|-|-|-|-|-|
|Content of other receivables|Book balance|Provision for Bad Debts|Percent Drawn（%）|Reason of provision|
|Shenzhen Lotus Island|||||
||236,293.80|236,293.80|100%|Can not be taken back|
|Restaurant Co.,Ltd|||||
|Weili Electric Corporation|||||
|Co.,Ltd, Zhangzhou City,|112,335.62|112,335.62|100%|Can not be taken back|
|Fujian Province|||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||
|-|-|-|-|-|
|Employee canteen ect.|1,036,916.46|1,036,916.46|100%|Can not be taken back|
|Individual loan and|||||
||469,161.93|469,161.93|100%|Can not be taken back|
|expenditure|||||
|Trade Union|297,402.55|297,402.55|100%|Can not be taken back|
|Chuangjing workshop|192,794.00|192,794.00|100%|Can not be taken back|
|Others|1,968,374.44|1,968,374.44|100%|Can not be taken back|
|Total|4,313,278.80|4,313,278.80|--|--|

（2）Conditions of other receivables actually cancelled after verification in the report period
Unit: RMB
|||||||
|-|-|-|-|-|-|
||||Amount of|Cause for|Whether generated byaffiliated transactions|
||Nature of other|Time of cancellation||||
|Unit name|||cancellation of|cancellation of||
||receivables|after verification||||
||||verification|verification||
||Lease and water and|||Can not be taken|None|
|Wanshang Company||Nov. 18, 2013|623,914.20|||
||electricity fee|||back||
|Total|--|--|623,914.20|--|--|

（3）Conditions of top 5 units in the amount of other receivables
Unit: RMB
||||||
|-|-|-|-|-|
||Relation with this|||Proportion in other|
|Unit name||Amount|Years||
||company|||receivables (%)|
|Shenzhen Boteman|||||
||Nonaffiliated parties|4,021,734.22|Over 3years|20.05%|
|Bowling Club Co., Ltd.|||||
|Wuhan Electricity|||||
|Supply Company of|||||
||Nonaffiliated parties|849,127.51|Within 1 year|4.23%|
|Hubei Electric Power|||||
|Company|||||
|Zhao Baomin|Nonaffiliated parties|564,646.35|Over 3years|2.82%|
|Traffic incident|||||
||Nonaffiliated parties|555,785.81|Over 3years|2.77%|
|indemnity|||||
|Hebei Botou Court|Nonaffiliated parties|520,021.00|Over 3years|2.59%|
|Total|--|6,511,314.89|--|32.46%|

6、Advance payment
（1）List of advance payments according to aging
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Unit: RMB
||||||
|-|-|-|-|-|
||Amount at the end of period||Amount at the beginning of period||
|Account ageing||Proportion||Proportion|
||Amount||Amount||
|||(%)||(%)|
|Within 1 year|13,346,708.54|98.99%|14,168,016.74|100%|
|1-2 year (s)|136,534.65|1.01%|||
|Total|13,483,243.19|--|14,168,016.74|--|

（2）Conditions of top 5 units in the amount of advance payments
Unit: RMB
||||||
|-|-|-|-|-|
||Relation with this||||
|Unit name||Amount|Account ageing|Reason of non-settlement|
||company||||
|Dongguan Hoqun|||||
||Nonaffiliated parties|653,946.61|Within 1 year|Not to settlement period|
|Electronics Co., Ltd.|||||
|Shenzhen Isolution|||||
||Nonaffiliated parties|864,758.51|Within 1 year|Not to settlement period|
|Technologies Ltd.|||||
|Shenzhen Kingfly|||||
|Science and Technology|Nonaffiliated parties|260,000.00|Within 1 year|Not to settlement period|
|Co., Ltd.|||||
||The same controlling||||
|Yutian International||8,310,763.53|Within 1 year|Not to settlement period|
||shareholder||||
|Hongkong Jingdongfang|||||
|Photoelectricity|Nonaffiliated parties|623,895.78|Within 1 year|Not to settlement period|
|Technology Co., Ltd.|||||
|Total|--|10,713,364.43|--|--|

7. Inventories
（1）Type of Inventories
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||Amount at the end of period|||Amount at the beginning of period|||
|Items||Depreciation|||Depreciation||
||Book balance||Book Value|Book balance||Book Value|
|||Provisions|||Provisions||
|Raw Materials|29,655,107.32|4,893,231.35|24,761,875.97|27,067,307.45|4,386,909.15|22,680,398.30|
|Finishing Product|27,982.75||27,982.75|117,486.79||117,486.79|
|Stocked Goods|19,282,804.52|3,222,621.17|16,060,183.35|16,686,427.68|2,737,764.97|13,948,662.71|
|Low priced and easily worn|914,440.54|363,236.79|551,203.75|1,402,567.61|363,236.79|1,039,330.82|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||||
|-|-|-|-|-|-|-|
|articles|||||||
|Self-made semi-finished|||||||
||2,287,490.60|250,244.88|2,037,245.72|4,666,920.93|250,244.88|4,416,676.05|
|product|||||||
|Processed Materials upon|||||||
||3,680,812.31||3,680,812.31|568,506.78||568,506.78|
|entrustment|||||||
|Total|55,848,638.04|8,729,334.19|47,119,303.85|50,509,217.24|7,738,155.79|42,771,061.45|

（2）Provision for Depreciation of Inventories
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Book balance at the|Current accrual|Current decrement||Book balance at the|
|Inventory type||||||
||beginning of period|amount|Carryover|Resale|end of period|
|Raw Materials|4,386,909.15|506,322.20|||4,893,231.35|
|Stocked Goods|2,737,764.97|484,856.20|||3,222,621.17|
|Low priced and easily||||||
||363,236.79||||363,236.79|
|worn articles||||||
|Self-made||||||
||250,244.88||||250,244.88|
|semi-finished product||||||
|Total|7,738,155.79|991,178.40|||8,729,334.19|

 8. Property of Investment
（1）Real property as an investment measured by cost
Unit: RMB
||||||
|-|-|-|-|-|
||Book balance at the||||
|Items||Increment This Year|Decrement This Year|Book balance at the end of period|
||beginning of period||||
|I. Total original book value|107,661,686.94|||107,661,686.94|
|1. Houses & Buildings|107,661,686.94|||107,661,686.94|
|II. Sum of accumulated|||||
|depreciation and|73,877,509.04|1,254,757.08||75,132,266.12|
|accumulated amortization|||||
|1.Houses & Buildings|73,877,509.04|1,254,757.08||75,132,266.12|
|III. Total net book value of|||||
||33,784,177.90|-1,254,757.08||32,529,420.82|
|investment real estate|||||
|1.Houses & Buildings|33,784,177.90|-1,254,757.08||32,529,420.82|
|V. Total book value of|||||
||33,784,177.90|-1,254,757.08||32,529,420.82|
|investment real estate|||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||
|-|-|-|-|
|1.Houses & Buildings|33,784,177.90|-1,254,757.08|32,529,420.82|

 9. Fixed Assets
（1）Condition of Fixed Assets
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Book balance at|||||
||||||Book balance at|
|Items|the beginning of|Current increment||Current decrement||
||||||the end of period|
||period|||||
|I. Total original book value:|342,607,701.72|9,750,984.25||1,445,345.37|350,913,340.60|
|Among it：Houses &||||||
||217,145,765.84|1,031,368.49|||218,177,134.33|
|Buildings||||||
|Machinery Equipment|81,515,896.95|5,428,547.67||1,136,015.59|85,808,429.03|
|Means of conveyance|4,075,185.59|643,299.00|||4,718,484.59|
|Tooling Equipment|342,607,701.72|9,750,984.25|||10,200,502.85|
|Office Equipment|217,145,765.84|1,031,368.49||10,609.97|6,402,627.02|
|Mould Equipment|81,515,896.95|5,428,547.67||283,418.81|11,729,493.84|
|Apparatus Equipment|4,075,185.59|643,299.00||15,301.00|13,876,668.94|
||Book balance at|||||
|||Current|||Current ending|
|--|the beginning of||Current accrual|Current decrement||
|||increment|||balance|
||period|||||
|II. Total accumulated||||||
||136,978,919.16||16,109,893.79|603,073.60|152,485,739.35|
|depreciation||||||
|Among it：Houses &||||||
||57,452,659.27||4,426,754.62|7,139.04|61,872,274.85|
|Buildings||||||
|Machinery Equipment|46,223,871.77||8,000,177.49|529,036.73|53,695,012.53|
|Means of conveyance|2,482,424.40||923,506.89|5,096.99|3,400,834.30|
|Tooling Equipment|4,600,416.97||1,923,505.19|136.37|6,523,785.79|
|Office Equipment|5,445,547.45||186,503.54|11,538.88|5,620,512.11|
|Mould Equipment|9,043,302.92||356,348.80|36,354.69|9,363,297.03|
|Apparatus Equipment|11,730,696.38||293,097.26|13,770.90|12,010,022.74|
||Book balance at|||||
||||||Current ending|
|--|the beginning of|--||||
||||||balance|
||period|||||
|III. Total net book value of||||||
||205,628,782.56|--|||198,427,601.25|
|fixed assets||||||
|Among it：Houses &|159,693,106.57|--|||156,304,859.48|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||
|-|-|-|-|
|Buildings||||
|Machinery Equipment|35,292,025.18|--|32,113,416.50|
|Means of conveyance|1,592,761.19|--|1,317,650.29|
|Tooling Equipment|4,213,467.64|--|3,676,717.06|
|Office Equipment|839,793.83|--|782,114.91|
|Mould Equipment|1,920,935.79|--|2,366,196.81|
|Apparatus Equipment|2,076,692.36|--|1,866,646.20|
|IV. Total provisions for||||
||2,885,534.22|--|2,885,534.22|
|impairment||||
|Machinery Equipment|1,499,613.30|--|1,499,613.30|
|Means of conveyance|104,388.91|--|104,388.91|
|Tooling Equipment|120,847.02|--|120,847.02|
|Office Equipment|72,480.11|--|72,480.11|
|Mould Equipment||--||
|Apparatus Equipment|1,088,204.88|--|1,088,204.88|
|V. Total book value of fixed|202,743,248.34||195,542,067.03|
|||--||
|assets||||
|Among it：Houses &||||
||159,693,106.57|--|156,304,859.48|
|Buildings||||
|Machinery Equipment|33,792,411.88|--|30,613,803.20|
|Means of conveyance|1,488,372.28|--|1,213,261.38|
|Tooling Equipment|4,092,620.62|--|3,555,870.04|
|Office Equipment|767,313.72|--|709,634.80|
|Mould Equipment|1,920,935.79|--|2,366,196.81|
|Apparatus Equipment|988,487.48|--|778,441.32|

 The depreciation allowance of the current period is RMB 16,109,893.79; the original price of fixed assets transferred from
construction in process in the current period is RMB719, 263.59.
（2）Condition of temporarily idle fixed asset
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Original value of|Accumulated|Impairment|||
|Items||||Net book value|Note|
||book value|Depreciation|Provision|||
|Machinery||||||
||10,012,680.57|8,293,352.39|1,233,761.45|485,566.73||
|Equipment||||||
|Means of||||||
||41,548.00|37,393.20|4,154.80|||
|conveyance||||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||
|-|-|-|-|-|
|Tooling Equipment|1,213,732.59|1,076,384.94|64,619.55|72,728.10|
|Office Equipment|378,102.00|303,202.57|46,730.39|28,169.04|
|Mould Equipment|8,350,729.36|7,515,656.43||835,072.93|
|Apparatus|||||
||10,519,305.06|9,394,337.24|741,885.93|383,081.89|
|Equipment|||||

（3）Fixed assets borrowed through financing lease
Unit: RMB
|||
|-|-|
|Type|End-of-period book value|
|Houses & buildings|97,748,516.74|
|Machinery Equipment|632,688.01|

（4）Condition of fixed assets without certificate of title
||||
|-|-|-|
||Reasons for non-issuance of certificate of|Expected time for issuance of certificate of|
|Items|||
||title|title|
|Houses & buildings|Relevant procedures are being handled.|2014|

10. Project in Progress
（1）Condition of construction in process
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||Amount at the end of period|||Amount at the beginning of period|||
|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 Town|||||||
||1,669,000.00||1,669,000.00|1,389,000.00||1,389,000.00|
|renovation project|||||||
|Total|2,323,356.00||2,323,356.00|2,043,356.00||2,043,356.00|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd（2）Changes in important projects in process
Unit: RMB
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|||||||Proportion||Accumul|Including:|Proportion of|||
|||||||of project|Job|ated|accumulated|capitalization of|Source of||
|Project|Budget|Beginning-of-period|Current|Transfer to|Other|||||||Amount at the end|
|||||||investment||capitaliz|capitalization of|interest in the|||
|name|amounts|amounts|increment|fixed assets|reduction||schedule||||capital|of period|
|||||||in the||ation of|interest in the|current period|||
|||||||budget (%)||interest|current period|(%)|||
|Huafa building|||||||||||||
|||654,356.00|||||||||Own funds|654,356.00|
|renovation project|||||||||||||
|Gongming Electronics|||||||||||||
|Town renovation||1,389,000.00|280,000.00||||||||Own funds|1,669,000.00|
|project|||||||||||||
|Workshop fire-fighting|||||||||||||
||||719,263.59|719,263.59|||||||Own funds||
|renovation project|||||||||||||
|Total||2,043,356.00|999,263.59|719,263.59||--|--|||--|--|2,323,356.00|

 11. Intangible Assets
（1）Condition of intangible assets
Unit: RMB
||||||
|-|-|-|-|-|
||Book balance at the|||Book balance at the end|
|Items||Current increment|Current decrement||
||beginning of period|||of period|
|I. Total original book value:|55,540,235.25|309,470.08||55,849,705.33|
|Land-use Right|55,187,826.36|||55,187,826.36|
|Software cost|352,408.89|309,470.08||661,878.97|
|II. Total accumulated|||||
||5,002,167.45|1,486,557.95||6,488,725.40|
|amortization|||||
|Land-use Right|4,758,839.30|1,477,369.75||6,236,209.05|
|Software cost|243,328.15|9,188.20||252,516.35|
|III. Total net book value of|||||
||50,538,067.80|-1,177,087.87||49,360,979.93|
|intangible assets|||||
|Land-use Right|50,428,987.06|-1,477,369.75||48,951,617.31|
|Software cost|109,080.74|300,281.88||409,362.62|
|Land-use Right|||||
|Software cost|||||
|Total book value of|50,538,067.80|-1,177,087.87||49,360,979.93|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||
|-|-|-|-|
|intangible assets||||
|Land-use Right|50,428,987.06|-1,477,369.75|48,951,617.31|
|Software cost|109,080.74|300,281.88|409,362.62|

 The amortization amount of the current period is RMB1, 486,557.95.
12．Long-term deferred charges
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||Amount at the||The amortization||||
|||Current||Other reduction|Amount at the|Cause for other|
|Items|beginning of||amount of the||||
|||increment||amounts|end of period|decrease|
||period||current period||||
|Financial|||||||
|consulting fees|||||||
|for the|125,000.00||125,000.00||||
|Construction|||||||
|Bank|||||||
|Golf membership|||||||
||585,933.33||74,800.08||511,133.25||
|fee|||||||
|Renovation|||||||
||95,791.65|2,375,000.00|1,208,400.04||1,262,391.61||
|expenditures|||||||
|Total|806,724.98|2,375,000.00|1,408,200.12||1,773,524.86|--|

13．Deferred Income Tax Assets& Deferred Income Tax Liabilities
（1）Deferred income tax assets and deferred income tax liabilities not to be presented with the net amount after offsetting
Recognized deferred income tax assets and deferred income tax liabilities
Unit: RMB
||||
|-|-|-|
|Items|Amount at the end of period|Amount at the beginning of period|
|Deferred income tax assets：|||
|Provisions for impairment of assets|7,575,314.91|7,251,565.23|
|Deductible loss|460,320.02||
|Estimated liabilities|651,102.95|357,403.53|
|Subtotal|8,686,737.88|7,608,968.76|
|Deferred income tax liabilities:|||

Deferred tax assets that have not been confirmed
Unit: RMB
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|Items|Amount at the end of period|Amount at the beginning of period|
|Deductible loss|37,473,229.25|34,412,217.28|
|Provision for bad debt impairment of Huafa Lease|||
||3,153,172.51|3,297,123.71|
|Company|||
|Provision for Fixed Assets Impairment of Huafa|||
||143,951.20||
|Trade Company|||
|Total|40,770,352.96|37,709,340.99|

 The deductible loss of the unrecognized deferred income tax assets will become due in the following years.
Unit: RMB
|||||
|-|-|-|-|
|||Amount at the beginning||
|Year|Amount at the end of period||Note|
|||of period||
|2013||3,458.00||
|2014|210,527.72|210,527.72||
|2015|290,960.95|290,960.95||
|2016|556,637.59|556,637.59||
|2017|33,350,633.02|33,350,633.02||
|2018|3,064,469.97|||
|Total|37,473,229.25|34,412,217.28|--|

Schedule of taxable differences and deductible differences
Unit: RMB
||||
|-|-|-|
||Amount of temporary difference||
|Items|||
||Amount at the end of period|Amount at the beginning of period|
|Difference project that tax shall be paid.|||
|Deductible difference project|||
|Deductible loss|1,841,280.09||
|Provision drawn for assets impairment|30,300,959.61|29,005,960.90|
|Estimated liabilities|2,604,411.81|1,429,614.10|
|Subtotal|34,746,651.51|30,435,575.00|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd（2）Deferred income tax assets and deferred income tax liabilities to be presented with the net amount after offsetting
Items making up the offset deferred income tax assets and deferred income tax liabilities
Unit: RMB
||||||
|-|-|-|-|-|
|aItemsr||||Deductible or taxable|
||Deferred income tax|Deductible or taxable|Deferred income tax assets||
|||||temporary differences|
||ssets and liabilities after|temporary differences|and liabilities after offset||
|||||after offset at the|
||offset at the end of the|after offset at the end of|at the beginning of the||
|||||beginning of the|
||eporting period|the reporting period|reporting period||
|||||reporting period|
|Deferred income tax assets|8,686,737.88||7,608,968.76||

Schedule of offset between deferred income tax assets and deferred income tax liabilities
14. Schedule of provisions for impairment of assets
Unit: RMB
|||||||
|-|-|-|-|-|-|
||Book balance at thebeginning of period||Current decrement||Book balance at|
|Items||Current increment||||
||||Carryover|Resale|the end of period|
|I. Provision for Bad Debts|21,679,394.60|1,082,308.51||778,488.20|21,983,214.91|
|II. Provision for Depreciation|7,738,155.79|991,178.40|||8,729,334.19|
|of Inventories||||||
|VII. Provision for Fixed|2,885,534.22||||2,885,534.22|
|Assets Impairment||||||
|Total|32,303,084.61|2,073,486.91||778,488.20|33,598,083.32|

 15. Short-term Borrowings
（1）Classification of Short-term Borrowings
Unit: RMB
||||
|-|-|-|
|Items|Amount at the end of period|Amount at the beginning of period|
|Pledged loan|49,493,738.74|33,649,895.00|
|Mortgage Loan|67,348,857.39|75,794,745.00|
|Credit loan|45,298,005.00|250,000.00|
|Total|162,140,601.13|109,694,640.00|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 16. Notes Payable
Unit: RMB
||||
|-|-|-|
|Type|Amount at the end of period|Amount at the beginning of period|
|Bank acceptance bill|34,646,052.79|34,511,327.39|
|Total|34,646,052.79|34,511,327.39|

 Amounts to be matured at the next accounting period will be RMB 34,646,052.79.
17. Accounts Payable
（1）Condition of accounts payable
Unit: RMB
||||
|-|-|-|
|Items|Amount at the end of period|Amount at the beginning of period|
|Within 1 year|42,060,913.97|38,677,487.67|
|Over 1year|10,145,428.84|10,275,428.20|
|Total|52,206,342.81|48,952,915.87|

 18. Advance receipts
（1）Conditions of advance receipts
Unit: RMB
||||
|-|-|-|
|Items|Amount at the end of period|Amount at the beginning of period|
|Within 1 year|1,491,467.29|764,493.92|
|Over 1year|80,857.00||
|Total|1,572,324.29|764,493.92|

 19. Salary Payable to Employees
Unit: RMB
||||||
|-|-|-|-|-|
||Book balance at the|||Book balance at the end|
|Items||Current increment|Current decrement||
||beginning of period|||of period|
|I. Salary, bonus, allowance|||||
||3,756,905.54|44,332,037.54|44,060,348.67|4,028,594.41|
|& subsidies|||||
|II. Staff Welfare Treatment|||||
||113,000.00|1,845,955.30|1,958,955.30||
|Fund|||||
|III. Social Insurance|||||
||42,943.65|5,070,204.12|5,095,199.61|17,948.16|
|Premium|||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||
|-|-|-|-|-|
|Among it: Medical|||||
||20,981.62|611,698.53|609,638.17|23,041.98|
|insurance premium|||||
|Basic retirement insurance|||||
||-7,779.97|1,840,679.07|1,837,992.92|-5,093.82|
|premium|||||
|Unemployment Insurance|||||
||23,896.00|309,002.34|332,898.34||
|Premium|||||
|Industrial Injury Insurance|||||
||5,846.00|1,654,846.79|1,660,692.79||
|Premium|||||
|Birth Insurance Premium||653,977.39|653,977.39||
|IV. Public Housing Fund|24,310.00|180,740.04|180,740.04|24,310.00|
|V. Welfare of retirement||10,000.00|10,000.00||
|VI. Others|672,029.72|119,890.40|101,950.18|689,969.94|
|Total|4,609,188.91|51,558,827.40|51,407,193.80|4,760,822.51|

 Those amounts in arrears among the payrolls payable is RMB .
Union funds and employee education expenses is RMB 119,890.40, amounts of non-monetary benefits is RMB , and compensations for terminating the labor relation is RMB 10,000.00.
Arrangements such as expected payment time and amounts of the payrolls payable
20．Taxes Payable
Unit: RMB
||||
|-|-|-|
|Items|Amount at the end of period|Amount at the beginning of period|
|VAT|4,546,472.19|4,339,120.74|
|Business Tax|1,185,572.87|1,090,583.21|
|Enterprise Income Tax|8,314,523.29|10,271,431.90|
|Personal Income Tax|43,155.25|65,991.03|
|Urban Maintenance & Construction Tax|23,767.75|17,085.57|
|Property Tax|610,591.84|535,244.94|
|Land use tax|195,937.53|155,516.59|
|Educational Surcharge|16,053.95|11,290.32|
|Others|7,006.39|16,258.92|
|Total|14,943,081.06|16,502,523.22|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd21．Other accounts Payables
（1）Conditions of other accounts payable
Unit: RMB
||||
|-|-|-|
|Items|Amount at the end of period|Amount at the beginning of period|
|Within 1 year|9,721,208.00|11,066,321.01|
|Over 1year|12,671,205.99|10,214,218.64|
|Total|22,392,413.99|21,280,539.65|

（2）Amounts to be paid to those shareholding units holding more than5% (including5%) of the voting shares among the other accounts payable during the reporting period
Unit: RMB
||||
|-|-|-|
|Unit name|Amount at the end of period|Amount at the beginning of period|
|Zhongheng Group|3,654.74|340,610.71|
|Total|3,654.74|340,610.71|

（3）Description of other significant accounts payable with account age exceeding one year
（4）Description of other accounts payable of large amounts
|||||
|-|-|-|-|
|Items|Amount|Aging portfolio|Property or content|
|CMBC Zhenxing Branch|1,170,008.00|Within one year|Lease premium|
|CBC Shenzhen Shangbu Branch|1,000,000.00|Over 3 years|Consultation fee|
|Borch Machiney Co.,Ltd.|931,811.00|Within one year|Accounts|
|TPV Electronics（Fujian）Co., Ltd.|728,456.00|Within one year|Accounts|
|Total|3,830,275.00|||

22．Estimated liabilities
Unit: RMB
||||||
|-|-|-|-|-|
||Amount at the beginning|||Amount at the end of|
|Items||Increment this year|Decrement this year||
||of period|||period|
|Pending legal action|1,429,614.10|2,360,203.26|1,185,405.55|2,604,411.81|
|Total|1,429,614.10|2,360,203.26|1,185,405.55|2,604,411.81|

 Description of estimated liabilities
The provisions of the estimated liabilities for pending legal action of the Group in this year is RMB 2,360,203.26, which is the
estimated expenditures for contentious matters launched by Shaanxi Linghua Electronic Co., Ltd. (hereinafter―ShaanxiLinghua‖).
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd23．Long-term borrowings
（1）Classification of long-term borrowings
Unit: RMB
||||
|-|-|-|
|Items|Amount at the end of period|Amount at the beginning of period|
|Mortgage Loan|162,418,800.00|163,718,800.00|
|Total|162,418,800.00|163,718,800.00|

（2）Top five long-term borrowings
Unit: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
||||||Amount at the end of period||Amount at the beginning of period||
|||||Interest rate||Amount offoreigncurrency|||
|Borrower|Starting date|Ending date|Currency||In foreign||In foreign|Amount of foreign|
|||||(%)|||||
||||||currency||currency|currency|
|China|||||||||
|Construction Bank|Mar.12, 2009|Mar. 11, 2016|RMB|6.55%||72,418,800.00||73,718,800.00|
|Shangbu branch|||||||||
|China|||||||||
|Construction Bank|Apr.3, 2009|Mar. 11, 2016|RMB|6.55%||90,000,000.00||90,000,000.00|
|Shangbu branch|||||||||
|Total|--|--|--|--|--|162,418,800.00|--|163,718,800.00|

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

 25. Capital Reserves
Unit: RMB
||||||
|-|-|-|-|-|
||Amount at the beginning|||Amount at the end of|
|Items||Current increment|Current decrement||
||of period|||period|
|Capital premium (Shares|||||
||96,501,903.02|||96,501,903.02|
|Premium)|||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|Other Capital Reserves|12,994,934.31|12,994,934.31|
|Total|109,496,837.33|109,496,837.33|

 26. Surplus Reserves
Unit: RMB
||||||
|-|-|-|-|-|
||Amount at the beginning|||Amount at the end of|
|Items||Increment this year|Decrement this year||
||of period|||period|
|Statutory Surplus Reserves|21,322,617.25|||21,322,617.25|
|Any Surplus Reserves|56,068,976.00|||56,068,976.00|
|Total|77,391,593.25|||77,391,593.25|

 27. Undistributed profits
Unit: RMB
||||
|-|-|-|
|||Proportion retained or|
|Items|Amount||
|||distributed|
|Undistributed profit by the end of last year before|||
||-189,868,606.67|--|
|adjusting|||
|Beginning-of-year undistributed profits after|-189,868,606.67||
|||--|
|adjusting|||
|Add: net profit belonging to the owner of the|||
||-6,517,401.44|--|
|parent company of the current period|||
|End-of-period undistributed profits|-196,386,008.11|--|

Schedule of beginning-of-year undistributed profits:
1) Influence over the beginning-of-year undistributed profits (RMB) due to retroactive adjustment of Accounting Standards for Business Enterprises and relevant new provisions;
2) Influence over the beginning-of-year undistributed profits (RMB) due to change in the accounting policy;
3) Influence over the beginning-of-year undistributed profits (RMB) due to change in significant accounting errors;
4) Influence over the beginning-of-year undistributed profits (RMB) due to change of consolidated range caused by business merger of the same control;
5) Influence over the beginning-of-year undistributed profits (RMB) due to other adjustments.
Description of undistributed profits; for those companies initially and publicly issuing the securities, if the accumulation profits before issuance are jointly owned by the new and old shareholders based on the resolution of general meeting of shareholders, this
shall be clearly stated; if the accumulation profits before issuance are to be distributed before issuance and owned by the old
shareholders based on the resolution of general meeting of shareholders, the Company shall clearly disclose the audited profits
owned by the old shareholders in the dividends payable.
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 28. Business Revenues& Business Cost
（1）Business Revenues& Business Cost
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|Revenues from Major Business|585,086,234.27|674,803,907.76|
|Revenues from Other Business|41,734,810.37|49,087,588.78|
|Business revenues|556,598,949.78|637,127,498.77|

（2）Main Businesses(By industries)
Unit: RMB
||||||
|-|-|-|-|-|
||Accruals of the current period||Accruals of the previous period||
|Industry names|||||
||Business revenues|Business cost|Business revenues|Business cost|
|Display|264,167,431.84|256,565,145.64|418,081,081.14|402,355,565.95|
|Injection moulded pieces|244,090,890.04|221,533,947.18|193,512,708.20|169,843,686.67|
|Foamed pieces|76,827,912.39|67,571,640.16|63,210,118.42|53,964,618.56|
|Total|585,086,234.27|545,670,732.98|674,803,907.76|626,163,871.18|

（3）Main Businesses(By products)
Unit: RMB
||||||
|-|-|-|-|-|
||Accruals of the current period||Accruals of the previous period||
|Product name|||||
||Business revenues|Business cost|Business revenues|Business cost|
|Display|264,167,431.84|256,565,145.64|418,081,081.14|402,355,565.95|
|Injection moulded pieces|244,090,890.04|221,533,947.18|193,512,708.20|169,843,686.67|
|Foamed pieces|76,827,912.39|67,571,640.16|63,210,118.42|53,964,618.56|
|Total|585,086,234.27|545,670,732.98|674,803,907.76|626,163,871.18|

（4）Main Businesses(By regions)
Unit: RMB
||||||
|-|-|-|-|-|
||Accruals of the current period||Accruals of the previous period||
|Region name|||||
||Business revenues|Business cost|Business revenues|Business cost|
|Hong Kong|264,167,431.84|256,565,145.64|418,081,081.14|402,355,565.95|
|Central China|320,918,802.43|289,105,587.34|256,722,826.62|223,808,305.23|
|Total|585,086,234.27|545,670,732.98|674,803,907.76|626,163,871.18|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd（5）Business revenues of the top five clients of the Company
Unit: RMB
||||
|-|-|-|
|||Proportion among the total Business revenues of the|
|Name of customer|Revenues from Major Business||
|||company (%)|
|Yutian International|240,643,844.59|38.39%|
|Qingdao Hai’er Spare Parts|||
||194,031,592.90|30.95%|
|Procurement Co., Ltd.|||
|Gree Electric Appliance (Wuhan)|||
||83,559,134.02|13.33%|
|Co., Ltd|||
|TCL Air-conditioner (Wuhan) Co.,|||
||26,293,367.92|4.19%|
|Ltd.|||
|Wuhan Aidemeng Science and|||
||15,181,136.58|2.42%|
|Technology Co., Ltd.|||
|Total|559,709,076.01|89.28%|

 29. Business Tax& Surcharges
Unit: RMB
|||||
|-|-|-|-|
||Accruals of the current|Accruals of the previous||
|Items|||Calculation and payment criteria|
||period|period||
|Business Tax|1,662,673.11|2,010,970.79|5%|
|Urban Maintenance & Construction||||
||1,363,872.25|319,632.90|7%|
|Tax||||
|Educational Surcharge|584,516.67|173,724.73|3%|
|Property Tax|442,258.56|479,361.99|1.2%|
|Land use tax|239,994.10|239,994.10||
|Local education development fees|389,677.80|48,938.43|0.1%|
|Others|364,379.76|213,138.28||
|Total|5,047,372.25|3,485,761.22|--|

30. Selling expense
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|Employee’s pay|4,019,077.85|2,517,609.58|
|Transportation expenses|2,775,973.32|2,312,363.85|
|Commodity inspection expenses|349,539.47|324,623.35|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|Customs affairs fee|222,239.21|212,179.19|
|Commodity wastage|390,776.18|95,679.09|
|Others|2,264,110.95|2,605,696.52|
|Total|10,021,716.98|8,068,151.58|

31．Management expense
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|Payroll|8,010,902.71|10,140,884.96|
|Depreciation costs|5,815,235.66|6,930,213.93|
|Social Insurance Premium|6,069,612.82|6,450,067.89|
|Social contact fees|1,892,026.53|2,426,753.71|
|Tax and surcharges|3,508,721.56|3,100,620.61|
|Staff Welfare Treatment Fund|1,762,758.92|3,167,320.84|
|Business trip costs|1,487,454.41|1,543,764.54|
|Amortization of intangible assets|1,341,612.23|1,569,003.26|
|Transportation fees|1,279,878.43|1,307,355.67|
|Consulting fees|615,827.70|1,370,839.24|
|Safety protection fee|1,286,102.50|920,917.42|
|Repair costs|1,194,933.55|1,266,444.51|
|Auditing costs|849,241.21|675,210.40|
|Office costs|1,049,189.72|850,590.45|
|Communication fees|161,571.17|321,210.66|
|Amortization of low-value, perishable|||
||361,177.31|346,997.65|
|goods|||
|Securities information disclosure fees|245,500.00|258,708.18|
|Legal action costs|122,098.60|507,488.46|
|Others|2,186,579.31|2,414,553.46|
|Total|39,240,424.34|45,568,945.84|

 32. Financial Expenses
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|Interest Expenditures|19,690,543.20|20,939,550.29|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|Less: interest return|-139,025.25|-1,131,945.89|
|Add: exchange loss|1,754,493.26|1,525,672.65|
|Add: other expenditures|148,327.64|337,177.79|
|Total|21,454,338.85|21,670,454.84|

33．Assets Impairment Loss
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|I. Provision for Bad Debts|1,082,308.51|922,539.49|
|II. Provision for Depreciation of Inventories|991,178.40|1,441,635.12|
|Total|2,073,486.91|2,364,174.61|

34．Non-business Revenues
（1）Condition of non-Business revenues
Unit: RMB
|||||
|-|-|-|-|
||Accruals of the currentperiod|Accruals of the previous|Amount recorded in current|
|Items||||
|||period|nonrecurring profit and loss|
|Gains of Disposal of non-current assets|1,082,308.51|922,539.49|1,082,308.51|
|Among it: income from fixed assets||||
||991,178.40|1,441,635.12|991,178.40|
|disposition||||
|Governmental award|1,652,600.00||1,652,600.00|
|Payment that can not be paid|467,913.11||467,913.11|
|Penalty fine income|58,256.00|178,846.00|58,256.00|
|Penalty income|28,689.25|1,080.00|28,689.25|
|Others|101,240.00|109,347.51|101,240.00|
|Total|2,575,851.50|426,773.51|2,575,851.50|

（2）Governmental subsidy counted into current income and loss
Unit: RMB
||||||
|-|-|-|-|-|
|||||Whether belong to|
|Subsidy item|Accrual in this term|Accrual of last term|Relevant to asset/income|non-recurrent income|
|||||and loss|
|Bonus for enterprise that|200,000.00||Relevant to income|Yes|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||
|-|-|-|-|
|pays tax of over one million||||
|yuan||||
|Loan with discounted||||
||169,600.00|Relevant to income|Yes|
|interest||||
|Special support fund|200,000.00|Relevant to income|Yes|
|Special fund for innovation||||
||50,000.00|Relevant to income|Yes|
|and development||||
|Special energy-saving fund|83,000.00|Relevant to income|Yes|
|Development fund for||||
|middle-scale and small-scale|950,000.00|Relevant to income|Yes|
|enterprises||||
||||Yes|
|Total|1,652,600.00|--|--|

35. Non-business Expenditures
Unit: RMB
|||||
|-|-|-|-|
|Items|||Amount recorded in|
||Accruals of the current|Accruals of the previous||
||||current nonrecurring|
||period|period||
||||profit and loss|
|Loss of Disposal of Non-current Assets|163,109.29|133,656.77|163,109.29|
|Among it: Loss from fixed-assets disposition|163,109.29|133,656.77|163,109.29|
|Litigation indemnity|2,360,203.26|1,185,405.55|2,360,203.26|
|Others|32,465.04|82,100.29|32,465.04|
|Total|2,555,777.59|1,401,162.61|2,555,777.59|

 36. Expenses of Income Tax
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|Current income taxes computed in accordance with the tax law|||
|||1,949,354.20|
|and related regulations.|||
|Adjustment of deferred income taxes|-1,077,769.12|-559,131.32|
|Total|-1,077,769.12|1,390,222.88|

 37. Calculation Process of Basic Earning per Share and Diluted Earning per Share
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||
|-|-|-|-|
|Items|No.|Amount of currentyear|Amount of last year|
|Net profit ascribed to mother company|1|-6,517,401.44|3,241,897.70|
|Incidental loss & profit ascribed to mother company|2|-583,092.34|-921,634.99|
|Net profit ascribed to shareholder of mother companyafter deducting incidental loss & profit|3=1-2|-5,934,309.10|4.163.532.69|
|Total shares at term beginning|4|283,161,227.00|283,161,227.00|
|Shares increased through capital reserve-to-shares ordividends distribution (I)|5|||
|Shares increased through issuing new shares ordebt-to-stock (II)|6|||
|Number of months since next month after sharesincreasing (II) till term end of reporting period|7|||
|Shares decreased due to counter purchased or shareshrinking|8|||
|Number of months since next month after sharesDecreasing till term end of reporting period|9|||
|Share number decrease for shares deduction|10|||
|Number of months during reporting period|11|12|12|
|Averagely weighted common shares issued|12=4+5+6×7÷11-8×9÷11-10|283,161,227.00|283,161,227.00|
|Basic earning per share (I)|13=1÷12|-0.023|0.0114|
|Basic earning per share (II)|14=3÷12|-0.021|0.0147|
|Diluted potential common stock interest switchexpenses which are recognized as expenses|15|||
|Replacement expenses|16|||
|Income tax rate|17|||
|Subscription warrant, option Weighted average of thecommon stocks produced by exercise and convertibledebenture|18|||
|Diluted earning per share (I)|19=[1+(15-16)×(1-17)]÷(12+18)|-0.023|0.0114|
|Diluted earning per share (II)|19=[3+(15-16)×(1-17)]÷(12+18)|-0.021|0.0147|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 38. Annotations to cash flow statement
（1）Other Cash Received Related to Operation Activities
Unit: RMB
|||
|-|-|
|Items|Amount|
|Business Transaction Payment|11,089,580.53|
|Administration fee and water and electricity charges collection|7,310,433.74|
|Personal borrowings|5,787,306.85|
|Lease Deposit|1,659,726.00|
|Interest income|139,025.25|
|Total|25,986,072.37|

（2）Other Paid Related to Operation Activities
Unit: RMB
|||
|-|-|
|Items|Amount|
|The unit's current money|9,170,778.56|
|Employees' repayment for their borrowings|6,520,029.82|
|Legal action costs|122,098.60|
|Deposit, security|385,491.56|
|Social contact fees|2,060,175.83|
|water & electricity fees|15,940,284.79|
|Business trip costs|1,459,961.65|
|Transportation expenses|1,473,677.18|
|Transportation fees|1,457,535.10|
|Repair costs|1,012,148.48|
|Auditing and consulting fee|1,309,626.00|
|Security fee|202,553.25|
|Procedure fee of financial organization|148,327.64|
|Office costs|1,031,428.16|
|Communication fees|365,743.11|
|Others|660,030.48|
|Total|43,319,890.21|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 39. 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|-6,517,401.44|3,241,897.70|
|Add: provision drawn for assets impairment|2,073,486.91|2,364,174.61|
|Depreciation of fixed assets, depletion of oil and gas,|||
||17,364,650.87|17,243,066.29|
|depreciation of production materials or equipment|||
|Amortization of Intangible Assets|1,486,557.95|1,425,469.92|
|Amortization of Long-term Expenses to be Apportioned|1,408,200.12|839,741.69|
|Loss from Disposal of Fixed Assets, Intangible Assets &|||
||-104,043.85|-3,843.23|
|Other Long-term Assets (Proceeds indicated by ―-‖)|||
|Financial Expenses (Proceeds indicated by ―-‖)|19,690,543.20|20,939,550.29|
|Decrement of Deferred Income Tax Assets (Addition|||
||-1,077,769.12|-559,131.32|
|indicated by ―-‖)|||
|Decrement of Inventories (Addition indicated by ―-‖)|-5,339,420.80|13,425,313.36|
|Decrement of Operative Receivables (Addition indicated by|||
||-111,247,005.94|-66,979,657.84|
|―-‖)|||
|Net Cash Flow Provided by Operating Activities|-69,353,440.38|18,419,090.98|
|2. Important investment and fund raising activities|||
||--|--|
|involving no cash：|||
|3. Net Variation of Cash and Cash Equivalent：|--|--|
|Year-end balance of cash|50,704,319.86|100,248,503.42|
|Less: year-beginning balance of cash|100,248,503.42|107,744,728.37|
|Net increase of cash and cash equivalent|-49,544,183.56|-7,496,224.95|

（2）Composition of cash and cash equivalents
Unit: RMB
||||
|-|-|-|
|Items|Amount at the end of period|Amount at the beginning of period|
|I. Cash|50,704,319.86|100,248,503.42|
|Among it: Ready money|492,314.95|272,718.79|
|Bank deposit available for payment anytime|50,212,004.91|99,975,784.63|
|III. Balance of Cash & Cash Equivalents at Term End|50,704,319.86|100,248,503.42|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd VIII. Connected parties and connected transactions
1. Condition of parent company of the Enterprise
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||||||||Shareholding||||
|||||||||Percentage of|||
||||||||proportion of||||
|||||||||voting rights|||
||||||||||Ultimate||
||||||||the parent||||
|Name of||||||||held by the|||
|||||||Registered|||||
||Affiliation|Company|Registered|Legal|Business||company|parent|controlling|Code of|
|parent|||||||||||
||||||||over the||||
|||type|place|representative|scope|capital||company|party of the|Organization|
|company|||||||||||
||||||||Enterprise||||
|||||||||over the|Enterprise||
||||||||(%)||||
|||||||||Enterprise|||
|||||||||(%)|||
|||Company|||||||||
|Zhongheng|Controlling||||Production|138,000,00|||Li||
|||of limited|Wuhan|Li Zhongqiu|||41.14%|41.14%||711954601|
|Group|shareholder||||and sale|0.00|||Zhongqiu||
|||liabilities|||||||||

2. Condition of subsidiaries of the Enterprise
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||||||||Share|Vote as a||
|Names of|Type of|Company|Registered|Legal|Business|Registered|||Code of|
||||||||proporti|percentag||
|Subsidiary|subsidiaries|type|place|representative|scope|capital|||Organization|
||||||||on (%)|e (%)||
|Huafa||||||||||
||Holding|Company of|||Property|||||
|Lease|||Shenzhen|Liu Zuodong||1,000,000.00|60%|60%|70843859-3|
||subsidiary|limited|||management|||||
|Company||||||||||
|Huafa||||||||||
||Holding|Company of|||Property|||||
|Property|||Shenzhen|Li Zhongqiu||1,000,000.00|100%|100%|68378841-4|
||subsidiary|limited|||management|||||
|Company||||||||||
|Hengfa||||||||||
||Holding|Company of|||Production|||||
|Technology|||Wuhan|Li Zhongqiu||181,643,111.00|100%|100%|67911516-1|
||subsidiary|limited|||and sale|||||
|Company||||||||||
|Huafa Trade|Holding|Company of||||||||
||||Wuhan|Liu Huixiong|Sale|100,000.00|100%|100%|56233214-6|
|Company|subsidiary|limited||||||||
|Yutian||||||||||
||Holding|Company of|||Property|||||
|Henghua|||Shenzhen|Li Zhongqiu||1,000,000.00|100%|100%|08078761-5|
||subsidiary|limited|||management|||||
|Company||||||||||
|Huafa||||||||||
||Holding|Company of|||Property|||||
|Hengtian|||Shenzhen|Li Zhongqiu||1,000,000.00|100%|100%|08077019-4|
||subsidiary|limited|||management|||||
|Company||||||||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 3. Condition of the other affiliates of the Enterprise
||||
|-|-|-|
|Name of other affiliates|Relation with this company|Code of Organization|
||Under the control of the same parent company||
|Wuhan Hengsheng Yutian Industry Co., Ltd.||73108664-5|
||and the final controlling party||
||Under the control of the same parent company||
|Wuhan Hengshen Opto-electric Industry Co., Ltd.||59454567-2|
||and the final controlling party||
|Shenzhen Zhongheng Huafa Science and|Under the control of the same parent company||
|||68536237-X|
|Technology Co., Ltd.|and the final controlling party||
|Wuhan Xindongfang Real Estate Development|Under the control of the same parent company||
|||74476047-5|
|Co., Ltd.|and the final controlling party||
||Under the control of the same parent company||
|Wuhan Zhongheng Property Management Co.,Ltd.||75180426-1|
||and the final controlling party||
||Under the control of the same parent company||
|Wuhan Guanggu Display System Co., Ltd.||75510305-9|
||and the final controlling party||
||Under the control of the same parent company||
|Hongkong Yutian International Co., Ltd.|||
||and the final controlling party||
||Under the control of the same parent company||
|Wuhan Yutian Xingye Property Purchase Co., Ltd.||05571411-5|
||and the final controlling party||
||Under the control of the same parent company||
|Wuhan Yutian East Land Holding Co., Ltd.||05571415-8|
||and the final controlling party||
||Under the control of the same parent company||
|Wuhan Xiahua Zhongheng Electronic Co., Ltd.||27186154-X|
||and the final controlling party||
||Under the control of the same parent company||
|Wuhan ZHongheng Yutian Trade Co., Ltd.||56559237-3|
||and the final controlling party||
||Under the control of the same parent company||
|Wuhan Yutian Hongguang Real Estate Co., Ltd.||56234774-3|
||and the final controlling party||
|Shenzhen Zhongheng Huayu Investment Holding|Under the control of the same parent company||
|||58918224-8|
|Co., Ltd.|and the final controlling party||
||Under the control of the same parent company||
|Famous Sky Capital Limited|||
||and the final controlling party||
||Under the control of the same parent company||
|Yutian International Co., Ltd.|||
||and the final controlling party||
||Under the control of the same parent company||
|Hong Kong Zhongheng Yutian Co., Ltd.|||
||and the final controlling party||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 4. Associated Transactions
（1）Fact statement of procurement of goods and acceptance of labor
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||||Accruals of the current period||Accruals of the previous period||
|||Pricing method and||Ratio of the||Ratio of the|
||Affiliated||||||
|Affiliated party||||amount of the||amount of the|
|||decision-making process of|||||
||transaction||Amount|same|Amount|same|
|||affiliated transaction|||||
|||||transactions||transactions|
|||||(%)||(%)|
|||The price for raw material|||||
|||from Yutian International is|||||
|||the same to that of the|||||
|||market; procure raw|||||
|Other enterprises|||||||
|||material from Yutian and|||||
|under the control of|||||||
||Procurement|Hengshen Opto-electricity,|||||
|the same parent|||||||
||of LCD|determine the price|194,087,326.60|34.87%|304,031,834.17|43.17%|
|company and the|||||||
||screen|according to about 1%|||||
|final controlling|||||||
|||lower than average|||||
|party|||||||
|||transaction price of the|||||
|||market principally and refer|||||
|||to the bargaining power of|||||
|||both parties.|||||
|Among it:|||||||
||||||5,479,256.45|0.78%|
|Hengsheng Yutian|||||||
|Yutian International|||173,527,202.49|31.18%|298,552,577.72|42.39%|
|Hengshen|||||||
||||20,560,124.11|3.69%|||
|Opto-electricity|||||||

Fact statement of sales of goods and provisions of labor
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||||Accruals of the current period||Accruals of the previous period||
|||Pricing method and||Ratio of the||Ratio of the|
||Affiliated||||||
|Affiliated party||||amount of the||amount of the|
|||decision-making process of|||||
||transaction||Amount|same|Amount|same|
|||affiliated transaction|||||
|||||transactions||transactions|
|||||(%)||(%)|
|||The price for selling liquid|||||
|Controlling|||||||
||Sales of liquid|crystal display to Yitian|||||
|shareholder and the|||111,612.97|0.02%|1,300,974.00|0.19%|
||crystal display|International shall be|||||
|final controller|||||||
|||determined based on the|||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||||
|-|-|-|-|-|-|
||sales order price of the|||||
||client.|||||
|Among it：||||||
|||111,612.97|0.02%|1,300,974.00|0.19%|
|Zhongheng Group||||||
|Other enterprises||||||
|under the control of||||||
|the same parent||||||
|||240,694,576.45|38.4%|395,289,680.96|58.58%|
|company and the||||||
|final controlling||||||
|party||||||
|Among it：Yutian||||||
|||240,643,844.59|38.39%|395,003,155.00|58.54%|
|International||||||
|Hengsheng Yutian||||286,525.96|0.04%|
|Hengshen||||||
|||50,731.86|0.01%|||
|Opto-electricity||||||

（2）Associated lease situation
Lease situation table of the Company
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
|||||||Rental income|
|Name of the|Name of the|Type of leased|Beginning date of|Expiration date of|Pricing basis for||
|||||||recognized in the|
|lessor|lessee|asset|lease|lease|lease||
|||||||report period|
||Huafa||||||
|The Company||Buildings|Jul. 1, 2013|Jun. 30, 2016|Market price|1,598,622.00|
||Technology||||||

（3）Associated guarantee situation
Unit: RMB
|||||||
|-|-|-|-|-|-|
||||||Whether guarantee|
||||Starting date of|Expiry date of||
|Guarantor|Guaranteed person|Amount of guarantee||||
||||||has been fully|
||||guarantee|guarantee||
||||||performed or not|
|Li Zhongqiu, Our|Hengfa Technology|||||
|||80,000,000.00|Jun.17, 2013|Jun.17, 2014|None|
|company|Company|||||

5．Receivables and payable of related party
Receivables of listed company from related party
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Unit: RMB
|||||||
|-|-|-|-|-|-|
|||Ending||Initial||
|Project name|Associated party||Provision for Bad||Provision for Bad|
|||Book balance||Book balance||
||||Debts||Debts|
|Notes Receivable||||||
||Yutian International|58,271,302.17||84,085,697.15||
|Other Receivables|Hengsheng Yutian|||335,235.36||
|Advance payment|Hengsheng Yutian|||9,344,987.88||
|Advance payment|Yutian International|8,310,763.53||||

Payables of listed company to related party
Unit: RMB
|||||
|-|-|-|-|
|Project name|Associated party|Ending amount|Initial amount|
|Other accounts Payables|Zhongheng Group|3,654.74|340,610.71|
||Huafa Technology||214,683.80|

 IV. Contingent Affairs
1. Pending action or contingent liabilities formed by arbitration and its financial impact
（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, 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
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 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.
（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.
The former employees Yang Guangze of the Company filed a claim for their unpaid salary, allowance, overtime, public reserve fund, festival allowance, etc. And according to the judgment ofPeople’s Court, the Company has confirmed the claimed damages of 23,851.00 Yuan as its estimated liability.
X. Promises
1. Significant promises
Up to December 31, 2013, the group has not significant matters to disclose.
XI. Notes of main items of parentcompany’s financial statements
1. Notes Receivable
（1）Notes Receivable
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Unit: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Amount at the end of period||||||Amount at the beginning of period||||
||Book balance|||Provision for Bad Debts|||Book balance||Provision for Bad Debts||
|Type|||||||||||
|||Proportion|||Proportion|||Proporti||Proporti|
||Amount|||Amount|||Amount||Amount||
|||(%)|||(%)|||on (%)||on (%)|
|Accounts receivable with|||||||||||
|significant specific|||||||||||
||||||||5,074,817.6||||
|amount that were|5,094,414.36|10.76%||3,672,319.72|72.09%|||9.44%|3,652,723.04|71.98%|
||||||||8||||
|provisioned bad debt|||||||||||
|preparation separately|||||||||||
|Other receivables with accrual of bad debt reserve according to combination|||||||||||
|Aging portfolio|37,407,188.47||79.03%|110,950.83|0.3%|43,863,102.29||81.58%|105,539.06|0.24%|
|Subtotal of combination|37,407,188.47||79.03%|110,950.83|0.3%|43,863,102.29||81.58%|105,539.06|0.24%|
|Accounts receivable that|||||||||||
|were not significant but|||||||||||
|have been provisioned bad|4,832,157.56||10.21%|4,832,157.56|100%|4,832,295.13||8.98%|4,832,295.13|100%|
|debt preparation|||||||||||
|separately|||||||||||
|Total|47,333,760.39||--|8,615,428.11|--|53,770,215.10||--|8,590,557.23|--|

 Description of type of accounts receivable
Other receivables with major individual amount and separate accrual of bad debt reserve at the end of period
√ Applicable□ Inapplicable
Unit: RMB
||||||
|-|-|-|-|-|
|||Provision for Bad|||
|Content of accounts receivable|Book balance||Percent Drawn（%）|Reason of provision|
|||Debts|||
|TCL Wangpai Electric Appliance||||Can not be taken|
||1,325,431.75|1,325,431.75|100%||
|( Huizhou)Co., Ltd.||||back|
|Skyworth Multimedia(Shenzhen)||||Can not be taken|
||672,769.28|672,769.28|100%||
|Co.,Ltd.||||back|
|Qingdao Hai’er Spare Parts Procurement||||Can not be taken|
||1,225,326.15|1,225,326.15|100%||
|Co., Ltd.||||back|
|||||Failure to recover on|
|||||time because of|
|H. K. Haowei Industry Co., Ltd.|1,870,887.18|448,792.54|23.99%||
|||||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
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||||
|-|-|-|-|-|-|-|
||Amount at the end of period|||Amount at the beginning of period|||
|Account|Book balanceProportionAmount(%)|||Book balance|||
||||Provision for Bad|||Provision for Bad|
|ageing|||||Proportion||
||Amount||Debts|Amount||Debts|
||||||(%)||
|Within 1 year|||||||
|Among it:|--|--|--|--|--|--|
|||||326,792.20|||
|Subtotal|||||||
|||||326,792.20|||
|within 1 year|||||||
|1-2 year (s)|224,990.00|5%|11,249.50|455,510.84|||
|2-3 year (s)|455,510.84|||6,334,652.51|||
|Over 3years|36,726,687.63|0.27%|99,701.33|36,746,146.74|0.29%|105,539.06|
|Total|37,407,188.47|--|110,950.83|43,863,102.29|--|105,539.06|

 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
□ Applicable√ Inapplicable
Accounts receivable without major individual amount but with separate accrual of bad debt reserve at the end of period
√ Applicable□ Inapplicable
Unit: RMB
||||||
|-|-|-|-|-|
|Content of accounts receivable|Book balance|Provision for Bad Debts|Percent Drawn（%）|Reason of provision|
|Shenzhen Huixin Video|||||
|Science and Technology|381,168.96|381,168.96|100%|Can not be taken back|
|Co.,Ltd.|||||
|Shenzhen Wandial Number|||||
|Science and Technology|351,813.70|351,813.70|100%|Can not be taken back|
|Co.,Ltd.|||||
|Shenzhen Dalong Electric|||||
||344,700.00|344,700.00|100%|Can not be taken back|
|Co.,Ltd.|||||
|Shenzhen Qunpin Electric|||||
||304,542.95|304,542.95|100%|Can not be taken back|
|Co.,Ltd.|||||
|China Galaxy Electric(Hong|||||
||288,261.17|288,261.17|100%|Can not be taken back|
|Kong) Co.,Ltd.|||||
|Dongguan Weite Electric|||||
||274,399.80|274,399.80|100%|Can not be taken back|
|Co.,Ltd.|||||
|Hong Kong New Century|||||
||207,409.40|207,409.40|100%|Can not be taken back|
|Electric Co.,Ltd.|||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||
|-|-|-|-|-|
|Shenyang Beitai Electric|||||
||203,304.02|203,304.02|100%|Can not be taken back|
|Co.,Ltd.|||||
|Bejing Xinfanweiye Science|||||
||193,000.00|193,000.00|100%|Can not be taken back|
|and Technology Co.,Ltd.|||||
|TCL Electric(Hong kong)|||||
||145,087.14|145,087.14|100%|Can not be taken back|
|Co.,Ltd.|||||
|Huizhou TCL New and Special|||||
||142,707.14|142,707.14|100%|Can not be taken back|
|Electronics Co., Ltd.|||||
|Shenzhen Skyworth-RGB|||||
||133,485.83|133,485.83|100%|Can not be taken back|
|Electric Co.,Ltd.|||||
|Shenzhen Xinfa Electronics|||||
||119,094.78|119,094.78|100%|Can not be taken back|
|Co., Ltd.|||||
|Others|1,743,182.67|1,743,182.67|100%|Can not be taken back|
|Total|4,832,157.56|4,832,157.56|--|--|

（2）Conditions of top 5 units among the amounts of accounts receivable
Unit: RMB
||||||
|-|-|-|-|-|
||Relation with this|||As a percentage in|
|Unit name||Amount|Years||
||company|||accounts receivable (%)|
|Hengfa Technology|||2-3 years and Over||
||Subsidiary|36,849,860.71||77.85%|
|Company|||3years||
|H. K. Haowei Industry|||||
||Nonaffiliated parties|1,870,887.18|Over 3years|3.95%|
|Co., Ltd.|||||
|TCL Wangpai Electric|||||
|Appliance (Huizhou)|Nonaffiliated parties|1,325,431.75|Over 3years|2.8%|
|Co., Ltd.|||||
|Skyworth|||||
|Multimedia(Shenzhen)|Nonaffiliated parties|672,769.28|Over 3years|1.42%|
|Co.,Ltd.|||||
|Shenzhen Huixin Video|||||
|Science and Technology|Nonaffiliated parties|381,168.96|Over 3years|0.81%|
|Co.,Ltd.|||||
|Total|--|41,100,117.88|--|86.83%|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd（3）About the accounts receivable from the related parties
Unit: RMB
|||||
|-|-|-|-|
||||As a percentage in accounts|
|Unit name|Relation with this company|Amount||
||||receivable (%)|
|Hengfa Technology Company|Subsidiary|36,849,860.71|77.85%|
|Total|--|36,849,860.71|77.85%|

2．Other Receivables
（1）Other Receivables
Unit: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
||Amount at the end of period||||Amount at the beginning of period||||
||Book balance||Provision for Bad Debts||Book balance||Provision for Bad Debts||
|Type|||||||||
|||Proportion||Proportion||Proportion||Proportion|
||Amount||Amount||Amount||Amount||
|||(%)||(%)||(%)||(%)|
|Accounts receivable with|||||||||
|significant specific amount that|||||||||
||10,221,046.53|8.88%|10,221,046.53|100%|11,963,549.93|15.11%|10,778,144.38|90.09%|
|were provisioned bad debt|||||||||
|preparation separately|||||||||
|Other receivables with accrual of bad debt reserve according to combination|||||||||
|Aging portfolio|100,848,359.10|87.64%|453,427.30|0.45%|64,674,259.66|81.63%|1,124,136.71|1.74%|
|Subtotal of combination|100,848,359.10|87.64%|453,427.30|0.45%|64,674,259.66|81.63%|1,124,136.71|1.74%|
|Accounts receivable that were not|||||||||
|significant but have been|||||||||
||4,004,746.63|3.48%|4,004,746.63|100%|2,586,150.27|3.26%|2,586,150.27|100%|
|provisioned bad debt preparation|||||||||
|separately|||||||||
|Total|115,074,152.26|--|14,679,220.46|--|79,223,959.86|--|14,488,431.36|--|

 Description of types of other receivables
Other receivables with major individual amount and separate accrual of bad debt reserve at the end of period
√ Applicable□ Inapplicable
Unit: RMB
||||||
|-|-|-|-|-|
|Content of other|||||
||Book balance|Bad debts|Percent Drawn（%）|Cause|
|receivables|||||
|Hebei Botou Court|520,021.00|520,021.00|100%|Can not be taken back|
|Traffic incident|||||
||555,785.81|555,785.81|100%|Can not be taken back|
|indemnity|||||
|Huafa Lease Company|4,558,859.15|4,558,859.15|100%|Can not be taken back|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||
|-|-|-|-|-|
|Shenzhen Boteman|||||
||4,021,734.22|4,021,734.22|100%|Can not be taken back|
|Bowling Club Co., Ltd.|||||
|Zhao Baomin|564,646.35|564,646.35|100%|Can not be taken back|
|Total|10,221,046.53|10,221,046.53|--|--|

Other receivables with accrual of bad debt reserve by aging analysis method in the combination
√ Applicable□ Inapplicable
Unit: RMB
||||||||
|-|-|-|-|-|-|-|
||Amount at the end of period|||Amount at the beginning of period|||
||Book balance|||Book balance|||
|Account ageing|||Provision for Bad|||Provision for Bad|
|||Proportion(%)|||Proportion||
||Amount||Debts|Amount||Debts|
||||||(%)||
|Within 1 year|||||||
|Among it:|--|--|--|--|--|--|
||41,110,109.07|||3,939,877.14|||
|Subtotal within|||||||
||41,110,109.07|||3,939,877.14|||
|1 year|||||||
|1-2 year (s)|869,344.22|5%|43,467.21|225,172.18|5%|11,258.61|
|2-3 year (s)||||19,889,835.01|0.05%|8,969.19|
|Over 3years|58,868,905.81|0.7%|409,960.09|40,619,375.33|2.72%|1,103,908.91|
|Total|100,848,359.10|--|453,427.30|64,674,259.66|--|1,124,136.71|

 Other receivables with accrual of bad debt reserve by balance percentage method in the combination
□ Applicable√ Inapplicable
Other receivables with accrual of bad debt reserve by other method in the combination
□ Applicable√ Inapplicable
Other receivables without major individual amount but with separate accrual of bad debt reserve at the end of period
√ Applicable□ Inapplicable
Unit: RMB
||||||
|-|-|-|-|-|
|Content of other|||||
||Book balance|Provision for Bad Debts|Percent Drawn（%）|Reason of provision|
|receivables|||||
|Shenzhen Lotus Island|||||
||236,293.80|236,293.80|100%|Can not be taken back|
|Restaurant Co.,Ltd|||||
|Weili Electric|||||
|Corporation Co.,Ltd,|||||
||112,335.62|112,335.62|100%|Can not be taken back|
|Zhangzhou City, Fujian|||||
|Province|||||
|Employee canteen ect.|1,036,916.46|1,036,916.46|100%|Can not be taken back|
|Individual loan and|469,161.93|469,161.93|100%|Can not be taken back|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||||
|-|-|-|-|-|
|expenditure|||||
|Trade Union|297,402.55|297,402.55|100%|Can not be taken back|
|Chuangjing workshop|192,794.00|192,794.00|100%|Can not be taken back|
|Others|1,659,842.27|1,659,842.27|100%|Can not be taken back|
|Total|4,004,746.63|4,004,746.63|--|--|

（2）Conditions of other receivables actually cancelled after verification in the report period
Unit: RMB
|||||||
|-|-|-|-|-|-|
||||Amount ofcancellation ofverification|Cause for|Whether generated byaffiliated transactions|
||Nature of other|Time of cancellation||||
|Unit name||||cancellation of||
||receivables|after verification||||
|||||verification||
||Lease and water and|||Can not be taken|None|
|Wanshang Company||Nov. 18, 2013|623,914.20|||
||electricity fee|||back||
|Total|--|--|623,914.20|--|--|

（3）Nature or content of other receivables in large amount
（4）Conditions of top 5 units in the amount of other receivables
Unit: RMB
||||||
|-|-|-|-|-|
||Relation with this|||Proportion in other|
|Unit name||Amount|Years||
||company|||receivables (%)|
|Hengfa Technology|||Within 1 year and over 3||
||Subsidiary|96,067,134.97||83.48%|
|Company|||years||
|Huafa Lease Company|Subsidiary|4,558,859.15|Over 3years|3.96%|
|Shenzhen Boteman|||||
||Nonaffiliated parties|4,021,734.22|Over 3years|3.49%|
|Bowling Club Co., Ltd.|||||
|Huafa Property Company|Subsidiary|945,131.49|Within 1 year|0.82%|
|Zhao Baomin|Nonaffiliated parties|564,646.35|Over 3years|0.49%|
|Total|--|106,157,506.18|--|92.24%|

（5）Other receivables from affiliated parties
Unit: RMB
|||||
|-|-|-|-|
||||Proportion in other receivables|
|Unit name|Relation with this company|Amount||
||||(%)|
|Hengfa Technology Company|Subsidiary|96,067,134.97|83.48%|
|Huafa Property Company|Subsidiary|945,131.49|0.82%|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
|||||
|-|-|-|-|
|Huafa Lease Company|Subsidiary|4,558,859.15|3.96%|
|Total|--|101,571,125.61|88.26%|

 3. Long-term Equity Investment
Unit: RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|||||||||Description about||||
|||||||Proportion||||||
||||||||Proportion|inconsistency between||||
|||||||||||Provision for|Cash bonus|
|||||Change-||of||proportion of||||
||Accounting||||||of voting||Depreciation|||
|Invested unit||Investment costs|Beginning balance||Ending balance|shareholdi||shareholding in the||impairment loss|of the|
|||||increase or|||right in the|||||
||method|||||ng in the||invested unit and|reserves|in the current|current|
|||||decrease|||invested|||||
|||||||invested||proportion of voting||period|period|
||||||||unit (%)|||||
|||||||unit (%)||right in the invested||||
|||||||||unit||||
|Huafa Lease||||||||||||
||Cost method|600,000.00|600,000.00||600,000.00|60%|60%||600,000.00|||
|Company||||||||||||
|Huafa Property||||||||||||
||Cost method|1,000,000.00|1,000,000.00||1,000,000.00|100%|100%|||||
|Company||||||||||||
|Hengfa||||||||||||
|Technology|Cost method|183,608,900.00|183,608,900.00||183,608,900.00|100%|100%|||||
|Company||||||||||||
|Huafa Trade||||||||||||
||Cost method|100,000.00|100,000.00||100,000.00|100%|100%|||||
|Company||||||||||||
|Yutian Henghua||||||||||||
||Cost method|1,000,000.00||1,000,000.00|1,000,000.00|100%|100%|||||
|Company||||||||||||
|Huafa Hengtian||||||||||||
||Cost method|1,000,000.00||1,000,000.00|1,000,000.00|100%|100%|||||
|Company||||||||||||
|Total|--|187,308,900.00|185,308,900.00|2,000,000.00|187,308,900.00|--|--|--|600,000.00|||

4. Business Revenues& Business Cost
（1）Business Revenues
Unit: RMB
||||
|-|-|-|
|Items|Accruals of the current period|Accruals of the previous period|
|Revenues from Major Business||10,130,816.72|
|Revenues from Other Business|38,573,827.05|46,424,103.02|
|Total|38,573,827.05|56,554,919.74|
|Business cost|10,063,936.59|20,863,195.35|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd（2）Main business(By industries)
Unit: RMB
||||||
|-|-|-|-|-|
||Accruals of the current period||Accruals of the previous period||
|Industry names|||||
||Business revenues|Business cost|Business revenues|Business cost|
|Display|||10,130,816.72|11,239,206.47|
|Total|||10,130,816.72|11,239,206.47|

（3）Main business(By products)
Unit: RMB
||||||
|-|-|-|-|-|
||Accruals of the current period||Accruals of the previous period||
|Product name|||||
||Business revenues|Business cost|Business revenues|Business cost|
|Display|||10,130,816.72|11,239,206.47|
|Total|||10,130,816.72|11,239,206.47|

（4）Main business(By regions)
Unit: RMB
||||||
|-|-|-|-|-|
||Accruals of the current period||Accruals of the previous period||
|Region name|||||
||Business revenues|Business cost|Business revenues|Business cost|
|Hongkong|||10,130,816.72|11,239,206.47|
|Total|||10,130,816.72|11,239,206.47|

 5. Supplementary information of cash flow statement
Unit: RMB
||||
|-|-|-|
|Supplementary Materials|Current amount|Previous amount|
|1. Convert net profit to cash flow from operating activities:|--|--|
|Net Profit|-3,461,449.86|113,766.57|
|Plus: provision drawn for assets impairment|839,574.18||
|Depreciation of fixed assets, depletion of oil and gas, depreciation of|||
||6,012,561.81|6,820,708.30|
|production materials or equipment|||
|Amortization of Intangible Assets|144,945.72|144,945.72|
|Amortization of Long-term Expenses to be Apportioned|1,387,300.08|831,033.34|
|Loss from Disposal of Fixed Assets, Intangible Assets & Other|||
||-107,000.00|-137,500.00|
|Long-term Assets (Proceeds indicated by ―-‖)|||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd
||||
|-|-|-|
|Financial Expenses (Proceeds indicated by ―-‖)|12,330,056.23|12,416,059.14|
|Decrement of Deferred Income Tax Assets (Addition indicated by|||
||-347,614.41||
|―-‖)|||
|Decrement of Inventories (Addition indicated by ―-‖)||566,333.02|
|Decrement of Operative Receivables (Addition indicated by ―-‖)|-23,389,352.11|-1,240,354.99|
|Increment of Operative Payables (Decrease indicated by ―-‖)|-4,818,865.52|1,035,965.10|
|Net Cash Flow Provided by Operating Activities|-11,409,843.88|20,550,956.20|
|2. Important investment and fund raising activities involving no cash|--|--|
|3. Net Variation of Cash and Cash Equivalent|--|--|
|Year-end balance of cash|18,575,925.94|10,555,114.25|
|Less: year-beginning balance of cash|10,555,114.25|26,428,341.78|
|Net increase of cash and cash equivalent|8,020,811.69|-15,873,227.53|

 XII. Supplementary Materials
1. Con-current Non-recurrent Income and Loss Breakdown
Unit: RMB
||||
|-|-|-|
|Item|Amount|Introduction|
|Handling income and loss of non-current asset (including the|||
||104,043.85||
|writing-off part of withdrawn depreciation reserves of the asset)|||
|Governmental subsidy counted into concurrent income and loss|||
|(excluding governmental subsidy that has close relation to|||
||1,652,600.00||
|enterprise business and has standard rating or quotation of the|||
|state)|||
|Other non-operating income and expenditure beyond|||
||-1,736,569.94||
|abovementioned items|||
|Less: income tax influence amount|603,166.25||
|Total|-583,092.34|--|

Governmental subsidy counted into concurrent income and loss is recurrent income and loss and the determination reason shall be disclosed item by item.
□ Applicable√ Not Applicable
2. Difference of accounting data according to domestic and foreign accounting rules
（1）Difference of net profit and net asset in financial report disclosed according to international
accounting rules and Chinese accounting rules
2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Unit: RMB
||||||
|-|-|-|-|-|
||Net profit belonging to shareholders of listed||Net asset belonging to shareholders of listed||
||company||company||
||||Amount at the end of|Amount at the|
||Amount of this term|Amount of last term|||
||||period|beginning of period|
|According to Chinese|-6,517,401.44|3,241,897.70|273,663,649.47|280,181,050.91|
|accounting rules|||||
|Item and amount adjusted according to international accounting rules|||||

（2）Difference of net profit and net asset in financial report disclosed according to overseas accounting rules and Chinese accounting rules
Unit: RMB
||||||
|-|-|-|-|-|
||Net profit belonging to shareholders of listed||Net asset belonging to shareholders of listed||
||company||company||
||||Amount at the end of|Amount at the|
||Amount of this term|Amount of last term|||
||||period|beginning of period|
|According to Chinese|-6,517,401.44|3,241,897.70|273,663,649.47|280,181,050.91|
|accounting rules|||||
|Item and amount adjusted according to international accounting rules|||||

（3）Introduction to the reason for the difference of the accounting data according to domestic and overseas accounting rules
3. Return on Net Assets and Earnings Per Share
Unit: RMB
|||||
|-|-|-|-|
|||Earning per Share||
||Averagely-weighted return|||
|Profit during Reporting Period||||
||on net asset（%）|Earning per Share|Earning per Share|
|Net profit ascribed to shareholder of mother||||
||-2.35%|-0.023|-0.023|
|company||||
|Net profit belonging to parent company||||
|shareholders after excluding non-recurring|-2.14%|-0.021|-0.021|
|items||||

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd 4. Introduction to the abnormal conditions and reason of main items of accounting statement of the company
（1）Hereinafter list the items of the balance sheet during merger that has huge change between the end and the beginning:
||||||
|-|-|-|-|-|
|Item|Ending amount|Beginningamount|Amount ofvariation (%)|Note|
|Notes receivable|154,375,936.49|43,000,217.81|259.01|Mainly caused by the increase of the settlement ofthe notes|
|Long-termdeferred expense|1,773,524.86|806,724.98|119.84|Mainly caused by the increased decorationexpense of Huafa Building|
|,Short-term loan|162,140,601.13|109,694,640.00|47.81|Mainly caused by the increased loan|
|Accrued accounts|1,572,324.29|764,493.92|105.67|Mainly caused by the increase of the accrued loan|
|Accrued liabilities|2,604,411.81|1,429,614.10|82.18|Mainly refer to the accrued liabilities for thedispute that Shaanxi Linghua lodges litigationagainst the company. Please see Notes to FinancialStatement VIII-1-(1)|

（2）Hereinafter list the item in income statement during merger that has huge change between this year and last year:
||||||
|-|-|-|-|-|
|Item|Amount of thisyear|Amount oflast year|Amount ofvariation (%)|Note|
|Operating tax andsurtax|5,047,372.25|3,485,761.22|44.80|Mainly caused by operating tax and surtaxwithdrawn exempted tax for exported goods|
|Sale expense|10,021,716.98|8,068,151.58|24.21|Caused by pay increase|
|Non-operatingincome|2,575,851.50|426,773.51|503.56|Mainly caused by the increased governmentalsubsidy|
|Non-operatingexpendigure|2,555,777.59|1,401,162.61|82.40|Mainly caused by the increase of the litigation.Please see Notes to Financial Statement VIII-1-(1)for further details.|
|Income tax expense|-1,077,769.12|1,390,222.88|-177.52|Mainly caused by the huge shrinking of the total ofthe profit of this year.|

2013 Annual Report of Shenzhen Zhongheng Hwafa Co, Ltd Section XI. 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. 22 April 2014