SHENZHEN ZHONGHENG HUAFA CO., LTD.
ANNUAL REPORT 2017
April 2018
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.
Li Zhongqiu, Principal of the Company, Yang Bin, person in charger of accounting works and WuAi’jie, person in charge of accounting organ (accounting principal) hereby confirm that the Financial Report of 2017 Annual Report is authentic, accurate and complete.
All directors are attended the Board Meeting for report deliberation.
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.
Risks factors are being well-described in the Report, found more in risks factors and countermeasures disclosed in Prospects for Future Development of the Board ofDirectors’ Report.
The Company has no plan of cash dividends carried out, bonus issued and capitalizing of common reserves either.
Contents
Section I Important Notice, Contents and Paraphrase ................................................................. 2 Section II Company Profile and Main Finnaical Indexes ............................................................. 5 Section III Summary of Company Business .................................................................................. 7 Section IV Discussion and Analysis of Operation .......................................................................... 8 Section V Important Events .......................................................................................................... 12 Section VI Changes in shares and particular about shareholders ............................................... 16 Section VII PreferredStock……………………………………………………………………….18 Section VIII Particulars about Directors, Supervisors,Senior Executives and Employees ...... 19 Section IX Corporate Governance ................................................................................................. 20 Section X Corporate Bonds ........................................................................................................... 22 Section XI Financial Report ............................................................................................................ 22 Section XII Documents Available for Reference ........................................................................... 85
Paraphrase
||||
|-|-|-|
|Items|Refers to|Contents|
|Company, Shen HUAFA|Refers to|SHENZHEN ZHONGHENG HUAFA CO., LTD.|
|Hengfa Technology|Refers to|Wuhan Hengfa Technology Co., Ltd.|
|HUAFA Property|Refers to|Shenzhen Zhongheng HUAFA Property Co., Ltd|
|HUAFA Lease|Refers to|Shenzhen HUAFA Property Lease Management Co., Ltd|
|HUAFA Trade|Refers to|Wuhan Zhongheng HUAFA Trade Co., Ltd.|
|Wuhan Zhongheng Group|Refers to|Wuhan Zhongheng New Science & Technology Industrial Group Co., Ltd.|
|HK Yutian|Refers to|Hong Kong Yutian International Investment Co., Ltd.|
|Hengsheng Photoelectricity|Refers to|Wuhan Hengsheng Photoelectricity Industry Co., Ltd.|
|Hengsheng Yutian|Refers to|Wuhan Hengsheng Yutian Industrial Co., Ltd.|
|Yutian Henghua|Refers to|Shenzhen Yutian Henghua Co., Ltd.|
|HUAFA Hengtian|Refers to|Shenzhen HUAFA Hengtian Co., Ltd.|
|HUAFA Hengtai|Refers to|Shenzhen HUAFA Hengtai Co., Ltd.|
|Shenzhen Vanke|Refers to|Shenzhen Vanke Real Estate Co., Ltd.|
|Vanke Guangming|Refers to|Shenzhen Vanke Guangming Real Estate Development Co., Ltd|

Section II. Company Profile and Main Finnaical Indexes
I. Company profile
|||||
|-|-|-|-|
|Short form of the stock|Shen HUAFA A, Shen HUAFA B|Stock code|000020, 200020|
|Short form of the stock after||||
||N/A|||
|changed (if applicable)||||
|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 Company||||
||SHENZHEN ZHONGHENG HUAFA CO., LTD.|||
|(if applicable)||||
|Abbr. of the foreign name (if||||
||N/A|||
|applicable)||||
|Legal representative|Li Zhongqiu|||
|Registrations add.|411 Bldg., Huafa (N) Road, Futian District, Shenzhen|||
|Code for registrations add|518031|||
|Offices add.|33/F, No. 2 Building of Dachong Business Center, Nanshan District, Shenzhen|||
|Codes for office add.|518057|||
|Company’s Internet Web Site|http://www.hwafa.com.cn|||
|E-mail|huafainvestor@126.com.cn|||

II. Person/Way to contact
||||
|-|-|-|
||Secretary of the Board|Rep. of security affairs|
|Name|Yang Bin|Niu Yuxiang|
||33/F, No. 2 Building of Dachong Business|33/F, No. 2 Building of Dachong Business|
|Contact add.|||
||Center, Nanshan District, Shenzhen|Center, Nanshan District, Shenzhen|
|Tel.|0755-86360220|0755-86360201|
|Fax.|0755-86360206|0755-86360206|
|E-mail|huafainvestor@126.com.cn|huafainvestor@126.com.cn|

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

 IV. Registration changes of the Company
|||
|-|-|
|Organization code|Before change: 61883037-2; after changed: 91440300618830372G|
||Before the change of controlling shareholders: the main business was production and|
||sales of color TV, printed circuit board and injection molded parts etc. After the change|
|Changes of main business since listing (if||
||of controlling shareholders: the main business gradually adjusted to production and|
|applicable)||
||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|DAXIN Certified Public Accountants LLP|
|Offices add. for CPA|15/F College International Mansion, No.1 Zhi Chun Road, Haidian District, Beijing|
|Signing Accountants|Li Wei, Fan Zhang|

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
VI. Main accounting data and financial indexes
Whether it has retroactive adjustment or re-statement on previous accounting data
□ Yes√ No
|||||
|-|-|-|-|
|2017|2016|Changes over last year|2015|

||||||
|-|-|-|-|-|
|Operating income (RMB)|858,040,132.74|619,167,770.74|38.58%|499,455,781.11|
|Net profit attributable to|974,409.39|5,457,710.33|||
|shareholders of the listed company|||-82.15%|-4,200,845.61|
|(RMB)|||||
|Net profit attributable to|||||
|shareholders of the listed company|||||
||2,079,588.86|5,109,926.82|-59.30%|-29,211,107.30|
|after deducting non-recurring gains|||||
|and losses (RMB)|||||
|Net cash flow arising from|11,723,254.36|-18,693,296.58|||
||||162.71%|173,486,015.99|
|operating activities (RMB)|||||
|Basic earnings per share|0.0034|0.0193|||
||||-82.38%|-0.0148|
|(RMB/Share)|||||
|Diluted earnings per share|0.0034|0.0193|||
||||-82.38%|-0.0148|
|(RMB/Share)|||||
|Weighted average ROE|0.30%|1.72%|-1.42%|-1.50%|
||||Changes over end of||
||End of 2017|End of 2016||End of 2015|
||||last year||
|Total assets (RMB)|629,762,731.38|632,475,542.40|-0.43%|1,154,989,593.34|
|Net assets attributable to|320,672,978.02|319,698,568.63|||
|shareholder of listed company|||0.30%|313,937,229.70|
|(RMB)|||||

VII. 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)
□ Applicable√ Not applicable
The Company had no difference of the net profit or net assets disclosed in financial report, under either IAS (International Accounting Standards) or Chinese GAAP (Generally Accepted Accounting Principles) in the period.
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)
□ Applicable√ Not applicable
The Company had no difference of the net profit or net assets disclosed in financial report, under either foreign accounting rules or Chinese GAAP (Generally Accepted Accounting Principles) in the period.
VIII. Quarterly main financial index
In RMB
||||||
|-|-|-|-|-|
||1st Q|2nd Q|3rd Q|4th Q|
|Operating income|191,829,256.72|247,650,887.45|232,880,839.08|185,679,149.49|
|Net profit attributable to|||||
||421,173.37|1,725,298.63|-1,798,082.55|626,019.94|
|shareholders of the listed company|||||
|Net profit attributable to|||||
|shareholders of the listed company|||||
||-36,964.59|1,514,165.88|-3,376,198.78|3,978,586.35|
|after deducting non-recurring gains|||||
|and losses|||||
|Net cash flow arising from|||||
||-18,501,959.59|-16,895,407.33|19,537,585.01|27,583,036.27|
|operating activities|||||

Whether there are significant differences between the above-mentioned financial index or its total number and the relevant financial index disclosed in thecompany’s quarterly report and semi-annual report
□Yes√ No
IX. Items and amounts of extraordinary profit (gains)/loss
√Applicable□ Not applicable
In RMB
||||||
|-|-|-|-|-|
|Item|2017|2016|2015|Note|
|Gains/losses from the disposal of|199,069.56||||
|non-current asset (including the write-off||82,132.08|449,051.44||
|that accrued for impairment of assets)|||||
|Governmental subsidy reckoned into current|1,451,189.68||||
|gains/losses (not including the subsidy|||||
|enjoyed in quota or ration according to||1,419,888.89|1,691,800.00||
|national standards, which are closely|||||
|relevant to enterprise’s business)|||||
|Other non-operating income and expenditure|427,054.02||||
|||-1,209,982.33|690,149.43||
|except for the aforementioned items|||||
|Other gain/loss items satisfying the|||||
|||333,974.06|25,247,171.27||
|definition of nonrecurring gain/loss account|||||
|Less: Impact on income tax|-672,860.55|278,229.19|3,067,910.45||
|Total|-1,105,179.47|347,783.51|25,010,261.69|--|

Concerning the extraordinary profit (gain)/loss defined byQ&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, and the items defined as recurring profit (gain)/loss according to the lists of extraordinary profit (gain)/loss inQ&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, explain reasons
□ Applicable√ Not applicable
In reporting period, the Company has no particular about items defined as recurring profit (gain)/loss according to the lists of
extraordinary profit (gain)/loss inQ&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to
the Public --- Extraordinary Profit/loss
Section III. Summary of Company Business
I. Main businesses of the company in the reporting period
Whether the company needs to comply with the disclosure requirements of the particular industry
No
After years of development, the company has gradually formed two main businesses in industry and property management. Among them, the industrial business mainly includes injection molding, foam pieces (light-weight packaging materials), and complete machine production and sales of liquid crystal display, property management business is mainly the lease of its own property.
II. Major changes in main assets
1. Major changes in main assets
|||
|-|-|
|Major assets|Note of major changes|
|Equity assets|No major change|
|Fixed assets|No major change|
|Intangible assets|No major change|
|Construction in progress|No major change|

2. Main overseas assets
□ Applicable√ Not applicable
III. Core competitiveness analysis
Whether the company needs to comply with the disclosure requirements of the particular industry
No
1. All industrial lands of the Company located in Shenzhen were taken into the first batch of plan under 2010 Shenzhen urban upgrade planning. In the future, development and operation of self-owned land resources would become the income source of the Company on a long-term and stable basis.
2. The Company has three plants in Wuhan economic technology park with an area of nearly 90,000 square meters where various famous enterprises are located in this area. Benefiting from radiation radius requirements for processing matching services, the Company enjoys superior and stable customer resources and has established a good long-term cooperative relationship; in particular, its injection molding business and polystyrene businesses have been operated for many years with steady management group and
abundant production experiences, which makes the Company enjoying high recognition and annual production capacity and scale in
the forefront of Central China.
Section IV. Discussion and Analysis of Operation
1. Introduction
In 2017, theChina’s economy entered a shifting period of growth, and the traditional industries were undergoing transformation and rebirth while the new economy was growing rapidly. Under the current situation, enterprises have been faced with unprecedented complex challenges and opportunities. From the perspective of the operating status ofChina’s home appliance industry, it has been still moving forward under pressure, after years of rapid development, it has entered the stage of low-speed growth and integration improvement with the main features of improved consumption. As an industrial manufacturing enterprise of supporting products and services in the home appliance industry, under the influence of internal and external factors, the company has always been providing high-quality services and high-quality products to its customers, striving to open up the market, accelerating transformation and upgrading, and adapting to changes in the industry and the trend of development. In 2017, the company achieved operating revenue of 858,040,100 Yuan, an increase of38.58% on a year-on-year basis, and net profits of 974,400 Yuan, decreased slightly compared with the same period last year.
● Video service business achieved annual operating revenue of 477,934,200 Yuan, an increase of52.7% over the same period last year. The management team of the video business division strengthened the fine management, and focused on the efficiency promotion and management improvement, fully mobilized resources, and added three series of new products and researches on various new products on the basis of original ones, and deepened the diversified development road of products; in the market, served customer needs, embarked on customer sales model innovation, quickly responded to the customization needs, and formed good market effects, with the product sales covering the domestic, Asia Pacific, Europe, North America and other regions, the multi -channel sales model promoted the steady growth of sales revenue. Under the squeeze of market competition, labor costs and other unfavorable factors, the turnover efficiency has been improved, capital costs have been reduced, and fine management work has been further enhanced.
● Injection molding business achieved annual operating revenue of 252,361,800 Yuan, an increase of3.84% over the same period last year. Driven by the leading enterprises of white goods, the injection molding business as a whole has grown to some extent. In the face of external pressures such as significant increase in labor costs and rise in material prices, the injection molding business management team timely and decisively took measures to adjust the product structure, greatly reduced the costs by energy saving and consumption reduction and promoting the product automatic production, and ensured product quality and production efficiency through personnel training, institutional guarantee, and error correction mechanism, and other measures; gave full play to geographical advantages, maintained good customer relationships to provide more customer needs, played the upstream and downstream driving effect of the industrial chain, found new business growth points, and fully expanded the scope of business, so that customer satisfaction fed back in the business profits.
● Polystyrene business achieved annual operating revenue of 81,395,500 Yuan, an increase of18.80% over the same period last year. In the face of intensified market competition, rising production costs and weak pricing
ability, the company continued to implement advanced management concepts, paid attention to environmental protection, ensured up to the standard to reduce the risks environmental protection policy influence, and maintained a good growth trend; promoted development by innovation, seized the opportunities of customer product structure adjustment through continuous process innovation, market innovation and management innovation to continuously expanded market shares.
● The property rental business achieved annual operating revenue of 36,350,800 Yuan, a decrease of7.98% over the same period last year. Thecompany’s own property, Huafa Building, had a renovation, so the tenants had a relatively large change, resulting in a relative decrease in rental income. Gongming Huafa Electronic City was still in the renovation stage, no rental income was generated during the year, therefore, in 2017, thecompany’s overall rental income slightly decreased compared with the previous year.
II. Main business analysis
1. Introduction
See the “I-Introduction” in “Discussion and Analysis of Operation”
2. Revenue and cost
(1) Constitute of operation revenue
In RMB
|||||||
|-|-|-|-|-|-|
||2017||2016|||
||||||Increase/decrease|
|||Ratio in operation||Ratio in operation||
||Amount||Amount||y-o-y|
|||revenue||revenue||
|Total operation|858,040,132.74||619,167,770.74|||
|||100%||100%|38.58%|
|revenue||||||
|According to industries||||||
|Display|477,934,212.10|55.70%|312,991,895.11|50.55%|52.70%|
|Plastic injection||||||
||252,361,777.26|29.41%|188,550,863.79|30.45%|33.84%|
|hardware||||||
|Foam|81,395,469.03|9.49%|68,514,616.64|11.07%|18.80%|
|Property leasing|36,350,826.04|4.24%|39,501,885.54|6.38%|-7.98%|
|Scrap income|2,695,453.61|0.31%|2,385,455.00|0.39%|13.00%|
|Utilities and other|7,302,394.70|0.85%|7,223,054.66|1.17%|1.10%|
|According to products||||||
|Display|477,934,212.10|55.70%|312,991,895.11|50.55%|52.70%|
|Plastic injection||||||
||252,361,777.26|29.41%|188,550,863.79|30.45%|33.84%|
|hardware||||||

|||||||
|-|-|-|-|-|-|
|Foam|81,395,469.03|9.49%|68,514,616.64|11.07%|18.80%|
|Property leasing|36,350,826.04|4.24%|39,501,885.54|6.38%|-7.98%|
|Scrap income|2,695,453.61|0.31%|2,385,455.00|0.39%|13.00%|
|Utilities and other|7,302,394.70|0.85%|7,223,054.66|1.17%|1.10%|
|According to region||||||
|Hong Kong|279,854,122.73|32.62%|211,129,139.32|34.10%|32.55%|
|Central China|535,937,015.83|62.46%|363,057,765.71|58.64%|47.62%|
|South China|42,248,994.18|4.92%|44,980,865.71|7.26%|-6.07%|

 (2) About the industries, products, or regions accounting for over10% of thecompany’s operating income or operating profit
√Applicable□ Not applicable
Whether the company needs to comply with the disclosure requirements of the particular industry
No
In RMB
||||||||
|-|-|-|-|-|-|-|
|||||Increase/decrease|Increase/decrease|Increase/decrease|
||Operating||||||
|||Operating cost|Gross profit ratio|of operating|of operating cost|of gross profit|
||revenue||||||
|||||revenue y-o-y|y-o-y|ratio y-o-y|
|According to industries|||||||
|Display|477,934,212.10|459,102,321.66|3.94%|52.70%|54.76%|-1.28%|
|Plastic injection|||||||
||252,361,777.26|233,283,112.81|7.56%|33.84%|39.03%|-3.45%|
|hardware|||||||
|Foam|81,395,469.03|75,512,163.41|7.23%|18.80%|25.27%|-4.79%|
|Property leasing|36,350,826.04|2,341,112.56|93.56%|-7.98%|27.73%|-1.80%|
|According to products|||||||
|Display|477,934,212.10|459,102,321.66|3.94%|52.70%|54.76%|-1.28%|
|Plastic injection|||||||
||252,361,777.26|233,283,112.81|7.56%|33.84%|39.03%|-3.45%|
|hardware|||||||
|Foam|81,395,469.03|75,512,163.41|7.23%|18.80%|25.27%|-4.79%|
|Property leasing|36,350,826.04|2,341,112.56|93.56%|-7.98%|27.73%|-1.80%|
|According to region|||||||
|Hong Kong|279,854,122.73|270,565,333.69|3.32%|60.71%|59.32%|0.85%|
|Central China|531,914,907.91|501,765,727.19|5.67%|99.23%|109.59%|-4.62%|
|South China|36,273,253.79|5,877,729.00|83.80%|-24.98%|-32.94%|1.65%|

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
(3) Income from physical sales larger than income from labors
√ Yes□ No
|||||||
|-|-|-|-|-|-|
||||||Increase/decrease|
|Industries|Item|Unit|2017|2016||
||||||y-o-y|
||Sales volume|Set|1,130,907|811,394|39.38%|
|Display|Output|Set|1,118,816|808,745|38.34%|
||Storage|Set|12,530|24,621|-49.11%|
||Sales volume|Ton|13,179|11,182|17.86%|
|Plastic injection||||||
||Output|Ton|13,566|11,450|18.48%|
|hardware||||||
||Storage|Ton|1,057|670|57.69%|
||Sales volume|Ton|4,487.58|3,918|14.54%|
|Foam|Output|Ton|4,341.03|4,006|8.36%|
||Storage|Ton|225.45|372|-39.40%|

 Reasons for y-o-y relevant data with over30% changes
√Applicable□ Not applicable
Sales volume increased for display mainly due to the sales increased from a year earlier; Output increased for display mainly due to the sales volume increased from a year earlier; Storage for plastic injection hardware increased mainly due to the inventory for year-end; storage for foam decreased mainly due to the decrease of inventory for year-end.
(4) Fulfillment of thecompany’s signed significant sales contracts up to this reporting period
□ Applicable√ Not applicable
(5) Constitute of operation cost
Classification of products
Classification of products
In RMB
||||||||
|-|-|-|-|-|-|-|
|||2017||2016|||
|||||||Increase/decrease|
|Industries|Item||Ratio in operation||Ratio in operation||
|||Amount||Amount||y-o-y|
||||cost||cost||
|Display|Raw materials|448,842,209.98|97.77%|286,810,241.68|96.68%|1.09%|
|Display|Labor wages|6,506,927.33|1.42%|4,308,058.58|1.45%|-0.03%|
|Display|Depreciation|1,255,263.35|0.27%|991,591.74|0.33%|-0.06%|
|Display|Energy||||||
|Plastic injection|Raw materials|205,433,313.18|85.68%|151,841,264.00|90.49%|-4.81%|

||||||||
|-|-|-|-|-|-|-|
|hardware|||||||
|Plastic injection|||||||
||Labor wages|16,716,971.22|6.97%|9,626,323.95|5.74%|1.23%|
|hardware|||||||
|Plastic injection|||||||
||Depreciation|3,537,615.26|1.48%|4,344,035.13|2.59%|-1.11%|
|hardware|||||||
|Plastic injection|||||||
||Energy||||||
|hardware|||||||
|Foam|Raw materials|42,999,667.41|53.47%|33,860,390.08|56.17%|-2.70%|
|Foam|Labor wages|9,868,282.35|12.27%|9,931,093.00|16.48%|-4.21%|
|Foam|Depreciation|1,685,290.19|2.10%|1,589,128.86|2.64%|-0.54%|
|Foam|Energy|10,858,241.16|13.50%|10,391,245.05|17.24%|-3.74%|

 Explanation
Cost of main business amounting to 779,289,846.16 Yuan, including 459,102,321.66 Yuan for display, 239,771,854.49 Yuan for plastic injection hardware and 80,415,670.01 Yuan for foam.
(6) Whether the changes in the scope of consolidation in Reporting Period
□Yes√No
(7) Major changes or adjustment in business, product or service of the Company in Reporting Period□ Applicable√ Not applicable
(8) Major sales and main suppliers
Major sales client of the Company
|||
|-|-|
|Total top five clients in sales (RMB)|733,342,661.49|
|Proportion in total annual sales volume for top five clients|85.47%|
|Ratio of related parties in annual total sales among the top||
||24.62%|
|five clients||

Information of top five clients of the Company
|||||
|-|-|-|-|
|Serial|Clients|Sales (RMB)|Proportion in total annual sales|
|1|No. 1|223,278,364.34|26.02%|
|2|No. 2|211,214,811.44|24.62%|
|3|No. 3|150,667,996.59|17.56%|
|4|No. 4|79,542,177.83|9.27%|
|5|No. 5|68,639,311.29|8.00%|
|Total|--|733,342,661.49|85.47%|

Other situation of main clients
□ Applicable√ Not applicable
Main suppliers of the Company
|||
|-|-|
|Total purchase amount from top five suppliers (RMB)|496,000,099.41|
|Proportion in total annual purchase amount for top five||
||69.99%|
|suppliers||
|Ratio of related parties in annual total sales among the top||
||44.45%|
|five suppliers||

Information of top five suppliers of the Company
|||||
|-|-|-|-|
|Serial|Supplier|Purchase (RMB)|Proportion in total purchase|
|1|No. 1|209,991,225.25|29.63%|
|2|No. 2|130,565,469.07|18.42%|
|3|No. 3|105,013,206.11|14.82%|
|4|No. 4|29,167,805.77|4.12%|
|5|No. 5|21,262,393.21|3.00%|
|Total|--|496,000,099.41|69.99%|

 Other notes of main suppliers
□ Applicable√ Not applicable
3. Expenses
In RMB
||||||
|-|-|-|-|-|
||||Increase/decrease||
||2017|2016||Note of major changes|
||||y-o-y||
|Sales expense|15,916,493.87|11,415,270.82|39.43%|Sale increased in the period|
|Administrative expense|42,783,111.53|50,261,495.60|-14.88%||
||8,979,085.95|5,012,897.34||Exchange losses from change of|
|Financial expense|||79.12%||
|||||exchange rate in the period|

4.R&D investment
□ Applicable√ Not applicable
5. Cash flow
In RMB
|||||
|-|-|-|-|
|Item|2017|2016|Y-o-y changes|
|Subtotal of cash in-flow from|840,952,371.80|644,747,922.80||
||||30.43%|
|operation activity||||

|||||
|-|-|-|-|
|Subtotal of cash out-flow from|829,229,117.44|663,441,219.38||
||||24.99%|
|operation activity||||
|Net cash flow from operation|11,723,254.36|-18,693,296.58||
||||162.71%|
|activity||||
|Subtotal of cash in-flow from|291,541,885.91|335,222,336.06||
||||-13.03%|
|investment activity||||
|Subtotal of cash out-flow from|301,268,751.27|341,328,243.65||
||||-11.74%|
|investment activity||||
|Net cash flow from investment|-9,726,865.36|-6,105,907.59||
||||-59.30%|
|activity||||
|Subtotal of cash in-flow from|288,636,279.36|249,042,766.85||
||||15.90%|
|financing activity||||
|Subtotal of cash out-flow from|312,866,866.83|752,494,340.83||
||||-58.42%|
|financing activity||||
|Net cash flow from financing|-24,230,587.47|-503,451,573.98||
||||95.19%|
|activity||||
|Net increased amount of cash|-22,540,338.67|-528,831,643.19||
||||95.74%|
|and cash equivalent||||

Main reasons for y-o-y major changes in aspect of relevant data
√Applicable□ Not applicable
1.Sales increased in the periiod and renewing equipment at the same time, purchasing of fixed assets increased;
2. Long-term loans are paid last period
Reasons of major difference between the cash flow of operation activity in report period and net profit of the Company
□ Applicable√ Not applicable
III. Analysis of the non-main business
√Applicable□Not applicable
In RMB
||||||
|-|-|-|-|-|
||Amount|Ratio in total profit|Note|Whether be sustainable|
||||Income from short-term||
|Investment income|372,245.91|14.71%||No|
||||financial products||
||||Mainly due to current||
|Asset impairment|1,421,786.71|56.17%|accrued for other account|No|
||||receivable bad debt losses||
|Non-operating|||Liquidated damages and||
||3,476,152.23|137.34%||No|
|income|||government grants||
|Non-operating|||Loss of transfer of creditor’s||
||5,902,438.16|233.20%||No|
|expense|||rights||

IV. Assets and liability
1. Major changes of assets composition
In RMB
||||||||
|-|-|-|-|-|-|-|
||End of 2017||End of 2016||||
||||||Ratio||
|||Ratio in total||Ratio in total||Notes of major changes|
||Amount||Amount||changes||
|||assets||assets|||
|Monetary fund|68,812,495.97|10.93%|93,332,709.81|14.76%|-3.83%||
|Account|148,795,998.26||139,808,058.20||||
|||23.63%||22.10%|1.53%||
|receivable|||||||
|Inventory|60,387,021.65|9.59%|46,902,384.80|7.42%|2.17%||
|Investment real|52,410,958.62||54,145,225.02||||
|||8.32%||8.56%|-0.24%||
|estate|||||||
|Long-term equity|||||||
|||0.00%||0.00%|0.00%||
|investment|||||||
|Fix assets|83,619,842.39|13.28%|81,544,707.02|12.89%|0.39%||
|Construction in|654,356.00||654,356.00||||
|||0.10%||0.10%|0.00%||
|process|||||||
||166,620,264.81||181,210,467.81||||
|Short-term loans||26.46%||28.65%|-2.19%||
|Long-term loans||||0.00%|0.00%||

2. Assets and liability measured by fair value
□ Applicable√ Not applicable
3. Assets right restriction till end of reporting period
||||
|-|-|-|
|Item|Ending book value|Restriction reasons|
|Monetary Fund|2,571,550.38|Bank acceptance bill|
|Notes receivable|15,738,970.85|Pledge|
|Accounts receivable|8,831,928.89|Pledge|
|Investment real estate|27,583,299.22|Bank loan secured|
|Fixed assets|74,643,021.02|Bank loan secured|
|Liquidation of fixed assets|92,857,471.69|Court closure|
|Intangible assets|43,097,497.43|Bank loan secured|
|Total|265,323,739.48||

V. Investment
1. Overall situation
□ Applicable√ Not applicable
2. The major equity investment obtained in the reporting period
□ Applicable√ Not applicable
3. The major non-equity investment doing in the reporting period
□ Applicable√ Not applicable
4. Financial assets investment
(1) Securities investment
□ Applicable√ Not applicable
The Company has no securities investment in the Period.
(2) Derivative investment
□ Applicable√ Not applicable
The Company has no derivatives investment in the Period.
5. Application of raised proceeds
□ Applicable√ Not applicable
The Company has no application of raised proceeds in the Period.
VI. Sales of major assets and equity
1. Sales of major assets
□ Applicable√ Not applicable
The Company had no sales of major assets in the reporting period.
2. Sales of major equity
□ Applicable√ Not applicable
VII. Analysis of main holding company and stock-jointly companies
√Applicable□ Not applicable
Particular about main subsidiaries and stock-jointly companies net profit over10%
In RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Company||Main||||Operating|Operating||
||Type||Register capital|Total assets|Net Assets|||Net profit|
|name||business||||revenue|profit||
|Hengfa|||||||||
|||Production|||||||
|Technolog|Subsidiary||181,643,111.00|465,649,679.80|215,763,646.31|815,791,138.56|3,651,019.75|4,243,458.88|
|||sales|||||||
|y company|||||||||
|HUAFA||Property|||||||
|Property|Subsidiary|m anageme|1,000,000.00|217,436.82|-1,807,801.75|1,092,686.41|-922,623.13|-922,623.13|
|Company||nt|||||||
|HUAFA||Property|||||||
|Lease|Subsidiary|m anageme|1,000,000.00|1,900,692.20|-5,026,990.71||||
|Company||nt|||||||
|HUAFA||Property|||||||
|Hengtian|Subsidiary|m anageme|1,000,000.00|997,220.20|997,220.20||-863.66|-863.66|
|Company||nt|||||||
|HUAFA||Property|||||||
|Hengtai|Subsidiary|m anageme|1,000,000.00|997,950.73|997,950.73||-861.28|-861.28|
|Company||nt|||||||

Particular about subsidiaries obtained or disposed in report period
□Applicable√Not applicable
Explanation of main holding company and stock-jointly companies
Nil
VIII. Structured vehicle controlled by the Company
□ Applicable√ Not applicable
IX. Future Development Prospects
(I) Industry development and market analysis
In 2018, the global economic situation is complex and changeable, China is also shifting from the high-speed growth phase to the high-quality development phase, and the home appliance industry will benefit from the background of rising consumption and maintain relatively stable growth. However, we can also see that the era in which made in china relies solely on scale for benefits has gone far away, under the condition of overall worrying gross profit margin, it is futile to get rid of the slow lane of slow development simply by reducing expenditure. Affected by intensified market competition, rising prices of raw materials, rising labor costs, and exchange rate fluctuations, the pressure faced by home appliances OEMs and supporting enterprises is increasing. Under the
pressure of huge market, young customer groups are gradually becoming the main consumer groups of home
appliances, and willing to pay for the quality of life has become the youngergeneration’s consumption concept.
Thecompany’s industrial production and processing business belongs to a labor-intensive and technology-intensive, and semi-automated production mode, product orders mainly rely on a number of well-known domestic large-scale home appliance manufacturers with brand effect, larger scale, and business stability. As a traditional industry, the core of solving the development dilemma is to improve profitability by upgrading technology and increasing technology added value. Under the background of downstream consumer demand upgrading, we will actively seek transformation and upgrading by increasingR&D efforts on new products, adjusting and improving product mix, improving production processes, increasing production efficiency, expanding downstream channels, and nurturing own brands. In terms of technology upgrading, in addition to inner nurturing, we also take the road of extensional development, allowing innovative technologies to inject new potential energy into business growth.
For a certain period of time, property rental is still an important business for thecompany’s development, making full use of self-owned properties, providing operations, leasing, and service business will bring certain contributions to thecompany’s cash flow. The upgrade of commercial properties will bring long-term and stable sources of income for the company after the gradual implementation of renovation projects.
New Annual Business Plan
◆ Industrial Business Upgrade
On the basis of serving existing customers, we will vigorously expand the market and strive for more market shares; strengthen management, increase production efficiency, enhance product quality, and make full use of the geographical advantages of the company to make the business bigger and stronger. Actively seek out high-quality technical projects for consumer electronics, and gradually realize industrial upgrading through technological optimization and management optimization.
◆ Promote the urban renewal project
Speed up the promotion of renewal unit project of Huafa District, Gongming Street, Guangming New District, Shenzhen and the renewal project renovation progress of Huafa Building, Huaqiang North Street, Futian District, Shenzhen, accelerate the settlement of project procedures, and strive to make stage progress as early as possible.◆ Continue to focus on strengthening thecompany’s internal control
In 2018, the company will further optimize the corporate governance structure and improve the internal control system and process and strictly implement and improve the executive ability of relevant system in accordance with the governance requirements of listed companies, thecompany’s management and relevant departments will execute the administrative provisions for approval procedures of fund utilizing, management system of related transactions, working system of internal audit, internal reporting system of major information in strict accordance with the requirements of internal control documents.
X. Reception of research, communication and interview
1. In the report period, reception of research, communication and interview
√Applicable□ Not applicable
||||||
|-|-|-|-|-|
|Time|Way||Type|Basic situation index of investigation|
|2017-01-01|Telephone communication||Individual|N/A|
|Reception (times)||10|||
|Number of hospitality||0|||
|Number of individual reception||0|||
|Number of other reception||0|||
|Disclosed, released or let out major undisclosed|||||
|||No|||
|information|||||

Section V. Important Events
I. Profit distribution plan of common stock and capitalizing of common reserves plan
Formulation, Implementation and Adjustment of common stock Profit Distribution Policy Especially Cash Dividend policy during the Reporting Period
□ Applicable√ Not applicable
Profit distribution plan (pre-plan) of common stock and capitalizing of common reserves plan (pre-plan) in latest three years (including the reporting period)
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 of common stock in latest three years (including the reporting period)
In RMB
|||||||
|-|-|-|-|-|-|
|||Net profit attributable to|Ratio in net profit|||
||Amount for cash|common stock|attributable to common|||
|Year for||||Amount for cash|Proportion for cash|
||bonus (tax|shareholders of listed|stock shareholders of listed|||
|bonus shares||||bonus by other ways|bonus by other ways|
||included)|company in consolidation|company contained in|||
|||statement for bonus year|consolidation statement|||
|2017|0.00|974,409.39|0.00%|0.00||
|2016|0.00|5,457,710.33|0.00%|0.00||
|2015|0.00|-4,200,845.61|0.00%|0.00||

The Company gains profits in reporting period and the retained profit of common stock shareholders provided by parent company is positive but no plan of cash dividend proposed of common stock
□ Applicable√ Not applicable
II. Profit distribution plan and capitalizing of common reserves plan for the Period
□ Applicable√ Not applicable
The Company has no plans of cash dividend distributed, no bonus shares and has no share converted from capital reserve either for the year.
III. Implementation of commitment
1. Commitments that the actual controller, shareholders, related party, offeror and committed party as the Company etc. have fulfilled during the reporting period and have not yet fulfilled by the end of reporting period
√Applicable□ Not applicable
||||||||
|-|-|-|-|-|-|-|
|||Type of|||||
|||||Commitment|Commitment||
|Commitments|Promise||Content of commitments|||Implementation|
|||commitments||date|term||
||||The enterprise and its subsidiaries||||
||||will not participate directly or||||
||||indirectly in operation of the||||
||||||Implement||
||||business with competitive of Shen||||
||Wuhan||||since 12 April||
||||Huafa and its controlling subsidiary|||In normal|
||Zhongheng|||2007-03-29|2007||
||||concerned, and not to damage the|||implementing|
||Group||||throughout the||
||||interest of the Shen Huafa and its||||
||||||year||
||||controlling subsidiary by making||||
||||use of the potential controlling-ship||||
||||of the Shen Huafa either||||
||||The enterprise and its subordinate||||
||||enterprise shall avoid a related||||
||||transaction as far as possible with||||
||||Shen Huafa and its controlling||||
||||subsidiary, as for the related||||
||||dealings occurred inevitable or||||
||||have reasonable cause, the||||
||||enterprise promise to follow the||||
|Commitments for|||||Implement||
||||principle of fair-ness, justice and||||
|share reform|Wuhan||||since 12 April||
||||open-ness, signed the agreement in|||In normal|
||Zhongheng|||2007-03-29|2007||
||||line with the laws, perform legal|||implementing|
||Group||||throughout the||
||||program, fulfill information||||
||||||year||
||||disclosure obligation and relevant||||
||||approval procedures according to||||
||||the relevant laws, regulations and||||
||||“Listing Rules” of the Shenzhen||||
||||Stock Exchange, guarantee not to||||
||||damage the legal interest of Shen||||
||||Huafa and its shareholders through||||
||||related transactions||||
||||After acquisition and assets||||
||||restructuring, guarantee to have an||Implement||
||Wuhan||independent staff, owns||since 12 April||
|||||||In normal|
||Zhongheng||independent and completed assets,|2007-03-29|2007||
|||||||implementing|
||Group||and independent in aspect of||throughout the||
||||business, financial and institution||year||
||||from Shen Huafa||||
|Commitments in|||||||
|report of|||||||
|acquisition or|||||||
|equity change|||||||

|||||||
|-|-|-|-|-|-|
|Commitments in||||||
|assets||||||
|reorganization||||||
|Commitments||||||
|make in initial||||||
|public offering or||||||
|re-financing||||||
|Equity incentive||||||
|commitment||||||
|||Regarding the lawsuit with||||
|||Shenzhen Vanke: 1. If the||||
|||arbitration judges Shenzhen Vanke||||
|||to win, the arbitration losses caused||||
|||||Implemented||
||Wuhan|by the contract disputes shall be||||
|||||since 20|In normal|
||Zhongheng|undertaken by Wuhan Zhongheng|2016-12-20|||
|||||December|implementing|
||Group|Group in full; 2. The contingent||||
|||||2016||
|||losses and risks arising from the||||
|||termination of relevant contracts||||
|||shall be undertaken by Wuhan||||
|Other||Zhongheng Group in advance.||||
|commitments for||||||
||||||Ended as the|
|medium and||||||
|small||Promise to increasing shares of|||reporting period,|
|shareholders|Wuhan|||In 6 months||
|||holding as 2.83 million shares of|||the promises during|
||Zhongheng||2017-11-20|since the date||
|||B-stock of the Company in 6|||performance period|
||Group|||of notification||
|||months since the letter delivery|||has not been|
||||||implemented yet|
||||||Ended as the|
|||Promise to increasing shares of|||reporting period,|
||Wuhan|||n 6 months||
|||holding as 2.8 million shares of|||the promises during|
||Zhongheng||2017-11-28|since the date||
|||A-stock at least in 6 months since|||performance period|
||Group|||of notification||
|||the letter delivery|||has not been|
||||||implemented yet|
|Completed on||||||
||Yes|||||
|time(Y/N)||||||
|If the||||||
|commitments is||||||
|not fulfilled on||||||
|time, shall||||||
||Not applicable|||||
|explain the||||||
|specify reason||||||
|and the next work||||||
|plan||||||

2. Concerning assts or project of the Company, which has profit forecast, and reporting period still in forecasting period, explain reasons of reaching the original profit forecast
□ Applicable√ Not applicable
IV. Non-operational fund occupation from controlling shareholders and its related party□ Applicable√ Not applicable
No non-operational fund occupation from controlling shareholders and its related party in period.
V. Explanation from Board of Directors, Supervisory Committee and Independent Directors (if applicable) for “Qualified Opinion” that issued by CPA
□ Applicable√ Not applicable
VI. Particulars about the changes in aspect of accounting policy, estimates and calculation method compared with the financial report of last year
√Applicable□ Not applicable
In 2017, the Ministry of Finance issued the “Accounting Standards for Business Enterprises No. 42 - Non-current Assets for Sale, Disposal Groups, and Termination of Operations”, which has taken effect on May 28, 2017, andit’s required to adopt prospective applications to dispose the non-current assets for sale, disposal groups, and termination of operations existing on the date of implementation. The Company has implemented according to the requirements of the Standards.
The Ministry of Finance revised the “Accounting Standards for Business Enterprises No. 16 - Government Grants” in 2017, the revised Standards has taken effect on June 12, 2017. Government grants existed before January 1, 2017 were required to be disposed by prospective applications; the government grants newly added from January 1, 2017 to the implementation date were also required to be adjusted according to the revised Standards. The Company has implemented according to the requirements of the Standards.
In 2017, the Ministry of Finance issued the “Notice on Revising and Issuing the Financial Statements Format of General Enterprises of the Ministry of Finance” (CK (2017) No. 30). Enterprises implementing the Accounting Standards for Business Enterprises should prepare the financial statements of 2017 and the subsequent periods in accordance with the Accounting Standards for Business Enterprises and the Notice requirements. The Company has implemented according to the requirements of the Notice.
Impact from new rules executed:
||||||
|-|-|-|-|-|
|Itemsimpacted|Amountimpacted|Amountre-stated lastperiod|Amount listed innon-operationrevenue lastperiod|Amount listed innon-operationexpenditure lastperiod|
|Financialcost|Written down276,000.00|—|—|—|

concerned
||||||
|-|-|-|-|-|
|Otherbenefits|161,420.00|—|183,500.00|—|
|Assetdisposalincome|199,069.56|82,132.08|122,730.30|40,598.22|

VII. Major accounting errors within reporting period that needs retrospective restatement□ Applicable√ Not applicable
No major accounting errors within reporting period that needs retrospective restatement for the Company in the period.
VIII. Compare with lastyear’s financial report; explain changes in consolidationstatement’s scope
□ Applicable√ Not applicable
Compared with last year, the Company sold Yutian Henghua Company in the period.
IX. Appointment and non-reappointment (dismissal) of CPA
Accounting firm appointed
|||
|-|-|
|Name of domestic accounting firm|DAXIN Certified Public Accountants LLP|
|Remuneration for domestic accounting firm (in 10||
||50|
|thousand Yuan)||
|Continuous life of auditing service for domestic||
||2|
|accounting firm||
|Name of domestic CPA|Li Wei, Fan Zhang|
|Consecutive years for auditing service from||
||2|
|domestic CPA||
|Name of foreign accounting firm (if applicable)|N/A|
|Remuneration for foreign accounting firm (in 10||
||0|
|thousand Yuan) (if applicable)||
|Continuous life of auditing service for foreign||
||0|
|accounting firm (if applicable)||
|Name of foreign CPA|N/A|
|Consecutive years for auditing services from foreign||
||0|
|CPA (If applicable)||

Re-appointed accounting firms in this period
□Yes√ No
Appointment of internal control auditing accounting firm, financial consultant or sponsor
√Applicable□ Not applicable
In 2017, the Company employed Shine Wing Certified Public Accountants LLC as internal control audit institutions.
X. Particular about suspended and delisting after annual report disclosed
□ Applicable√ Not applicable
XI. Bankruptcy reorganization
□ Applicable√ Not applicable
No bankruptcy reorganization for the Company in reporting period
XII. Significant lawsuits and arbitrations of the Company
√Applicable □Not applicable
|||||||||
|-|-|-|-|-|-|-|-|
||Amount of|||||||
||||||Execution|||
||money||Advances|||||
|||Predicted||The results and effects|of the|||
|The basic situation of|involved||in litigation|||Disclosure||
|||liabilities||of litigation|litigation||Disclosure index|
|litigation (Arbitration)|(in 10||(Arbitration|||date||
|||(Y/N)||(Arbitration)|(Arbitratio|||
||thousand||)|||||
||||||n)|||
||Yuan)|||||||
|In September 2016, Wuhan|||Ruling on|||||
|Zhongheng Group Co., Ltd.|||16 August|||||
|and the Company and|||2017; put|||||
|Shenzhen Vanke were|||forward the||||http://www.cninfo.co|
|applied for arbitration due to|||application||||m.cn/cninfo-new/discl|
|the dispute case of|||for|Found more in notice|Court|2018-02-0|osure/szse_main/bulle|
||46,460|N||||||
|“Contract for the|||dismantling|of the Company|accepted|9|tin_detail/true/120440|
|Cooperative Operation of|||by the||||6606?announceTime=|
|the Old Projects at Huafa|||Company||||2018-02-09|
|Industrial Park, Gongming|||and|||||
|Street, Guangming New|||controlling|||||
|District”.|||shareholder|||||
||||In|||||
|||||Court decision as||||
||||November|||||
|||||Jifang Company has||||
|In March 2016, HUAFA|||||||http://www.cninfo.co|
||||2016, the|||||
|||||to paid 27.9023||||
|Property suit against the|||Company||||m.cn/cninfo-new/discl|
|||||million Yuan||||
|Shenzhen Jifang Investment|||win in the||Implement|2016-11-0|osure/szse_main/bulle|
||1,416.67|N||(including rental,||||
|Co., Ltd. for site occupation,|||ruling||ing|8|tin_detail/true/120281|
|||||administrative fee,||||
|without rental, and utilities|||judged by||||7664?announceTime=|
|||||compensation,||||
|paid for a long-time|||Shenzhen||||2016-11-08|
|||||penalty, lawyer’s fee||||
||||Arbitration|||||
|||||and arbitration fees) in||||
||||Commissio|||||

|||||||||
|-|-|-|-|-|-|-|-|
||||n|total for the Company||||
|In March 2016, the||||||||
|Company and HUAFA||||||||
|Science & Technology suit||||||||
|against the follow||||||||
|companies, including||||||||
|Shenzhen Huayongxing||||||||
|Environmental Technology||||||||
|Co., Ltd., Shenzhen|||First trail||||http://www.cninfo.co|
|Guangyong Breadboard Co.,|||has||||m.cn/cninfo-new/discl|
|Ltd., Shenzhen Mingyi|||completed|2nd trial has not been|Not|2016-09-1|osure/szse_main/bulle|
||1,964.92|N||||||
|Electronic Co., Ltd.,|||and 2nd trial|judged|applicable|4|tin_detail/true/120270|
|Shenzhen Ouruilai|||in||||2423?announceTime=|
|Technology Co., Ltd and|||processing||||2016-09-14 07:41|
|Shenzhen Kangzhengxin||||||||
|Technology Co., Ltd., for||||||||
|arrears of rent. and refuse to||||||||
|move the site, forcibly||||||||
|occupied switch board room||||||||
|and other power unit under||||||||
|the name of the Company||||||||
||||2018.3.15-|||||
|The Company and HUAFA||||||||
||||The|||||
|Property suit against||||||||
||||Company||||http://www.cninfo.co|
|Shenzhen Jifang investment||||||||
||||wins in 2nd||||m.cn/cninfo-new/discl|
|Co., Ltd. and Shenzhen||||||||
||||judgment;||Implement|2016-09-1|osure/szse_main/bulle|
|Jianianhua Foreign Trade|73.38|N||Enter a judgment||||
||||2018.3.26-||ing|4|tin_detail/true/120270|
|Clothing City Co., Ltd. for||||||||
||||application||||2423?announceTime=|
|refusing to paid the rents||||||||
||||for||||2016-09-14 07:41|
|and administrative fee||||||||
||||enforcemen|||||
|without justified reasons||||||||
||||t|||||
||||2018-3-15:|||||
||||The|||||
|In March 2016, the||||||||
||||Company|||||
|Company and HUAFA||||||||
||||wins in 2nd||||http://www.cninfo.co|
|Property suit against||||||||
||||judgment;||||m.cn/cninfo-new/discl|
|Shenzhen Huayongxing||||||||
||||the||Applying|2016-09-1|osure/szse_main/bulle|
|Environmental Technology|947.26|N||Enter a judgment||||
||||Company||in April|4|tin_detail/true/120270|
|Co., Ltd., and Shenzhen||||||||
||||wins in 2nd||||2423?announceTime=|
|Yidaxin Technology Co.,||||||||
||||judgment||||2016-09-14 07:41|
|Ltd. for contract violation||||||||
||||and ready|||||
|and refuse to move the site||||||||
||||for|||||
||||enforcemen|||||

|||||||
|-|-|-|-|-|-|
||||t|||
||||The|||
||||Company|||
|In December 2015, the||||||
||||win in the|||
|Company and HUAFA||||||
||||ruling|||
|Property suit against Dai||||||
||||judged by|||
|Qiangbo for arrears of rent||||||
||||People’s|||
|and occupied the leased|||||Case|
||68|N|Court of|Act under coercion||
|premises, and refuse to|||||closed|
||||Futian|||
|move out; Dai Zhijun, Xie||||||
||||District,|||
|Lihua and Dai Tianyi bear||||||
||||Shenzhen|||
|joint liability for debts of||||||
||||Municipal|||
|Dai Qiangbo||||||
||||on 13|||
||||Feb.2017|||

XIII. Penalty and rectification
√Applicable□Not applicable
||||||||
|-|-|-|-|-|-|-|
||||Type of||||
|||||Conclusion (if|Date of||
|Name|Type|Reason|investigation and|||Index of disclosure|
|||||applicable)|disclosure||
||||punishment||||
|||i. Failing to disclose related|||||
|||transactions with the subsidiary|||||
|||||||http://www.cninfo.com.cn/c|
|||of controlling shareholder in|||||
||||Condemned by|||ninfo-new/disclosure/szse_|
|Shen|The|accordance with regulations; ii.|||||
||||Stock Exchange|Denounced|2017-01-06|main/bulletin_detail/true/12|
|HUAFA|Company|Failing to disclose significant|||||
||||publicly|||02994856?announceTime=2|
|||financial transactions; iii.|||||
|||||||017-01-06|
|||Failing to disclosed the related|||||
|||transactions out of amount limit|||||
|||i. Failing to disclose related|||||
|||transactions with the subsidiary|||||
|||||||http://www.cninfo.com.cn/c|
|||of controlling shareholder in|||||
||||Condemned by|||ninfo-new/disclosure/szse_|
|Li|Actual|accordance with regulations; ii.|||||
||||Stock Exchange|Denounced|2017-01-06|main/bulletin_detail/true/12|
|Zhongqiu|controller|Failing to disclose significant|||||
||||publicly|||02994856?announceTime=2|
|||financial transactions; iii.|||||
|||||||017-01-06|
|||Failing to disclosed the related|||||
|||transactions out of amount limit|||||

Note of rectification
√ Applicable□Not applicable
Completed
XIV. Integrity of the company and its controlling shareholders and actual controllers
√ Applicable□Not applicable
During the reporting period, the Company and the controlling shareholders and the actual controllers have no large amount due unliquidated debt sentenced by the court.
XV. Implementation of thecompany’s stock incentive plan, employee stock ownership plan or other employee incentives
□ Applicable√ Not applicable
The Company had no stock incentive plan, employee stock ownership plan or other employee incentive in the reporting period. XVI. Major related transaction
1. Related transaction with routine operation concerned
√Applicable□Not applicable
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||||Whethe|||||
|||||||||Trading|r over|||||
|||||||Related|||||Availabl|||
|||||||||limit|the|Clearin|||Index|
|||Type of|Content|||transacti|Proporti|||g form|e|Date of||
||||of|Pricing|Related|on|on in|approve|approve||||of|
|Related|Relatio|related|related|principl|transacti|amount|similar|||for|similar|disclosu||
|party|nship|transacti||||||d (in 10|d|related|||disclos|
|||on|transacti|e|on price|(in 10|transacti|||transacti|market|re||
||||on|||thousan|ons|thousan|limited||||ure|
|||||||d Yuan)||||on|price|||
|||||||||d Yuan)|or not|||||
||||||||||(Y/N)|||||
||||||||||||||http://w|
||||||||||||||ww.cni|
||||||||||||||nfo.co|
||||||||||||||m.cn/cn|
||||||||||||||info-ne|
||Sharing||||||||||||w/discl|
||the||||||||||||osure/s|
|||||Synchro||||||||||
||same||Purchasi|||||||Telegra|||zse_ma|
|HK||||nized||||||||2017-04||
||controll|Purchase|n g LCD||20,999|20,999|47.10%|26,137|No|phic|——||in/bulle|
|Yutian||||with the||||||||-30||
||ing||monitors|||||||transfer|||tin_deta|
|||||market||||||||||
||shareho||||||||||||il/true/1|
||lder||||||||||||202284|
||||||||||||||604?an|
||||||||||||||nounce|
||||||||||||||Time=2|
||||||||||||||017-04-|
||||||||||||||30|
|Hengshen|Sharing|Purchase|Purchasi|Confirm|8,512|8,512|19.09%|10,781|No|Telegra|The|2017-04|Same|

|||||||||
|-|-|-|-|-|-|-|-|
|g|the|ng LCD|ed with|phic|average|-30|as|
|Photoelec|same|monitors|1% of|transfer|market||above|
|tricity|controll||current||price|||
||ing||market||refers to|||
||shareho||average||the|||
||lder||price in||price of|||
||||principl||same|||
||||e, and||specific|||
||||refer to||ations|||
||||both||which is|||
||||their||searche|||
||||bargaini||d from|||
||||ng||through|||
||||power||the|||
||||||world|||
||||||famous|||
||||||professi|||
||||||onal|||
||||||market|||
||||||survey|||
||||||compan|||
||||||y|||
||||||website|||
||||||http://w|||
||||||ww.wits|||
||||||view.co|||
||||||m|||
||||||recogni|||
||||||zed|||
||||||authorit|||
||||||y in the|||
||||||industry|||
||||||and|||
||||||LCD|||
||||||professi|||
||||||onal|||
||||||market|||
||||||survey|||
||||||compan|||
||||||y|||
||||||website|||
||||||http://w|||
||||||ww.wits|||
||||||view.co|||

|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||||||m|||
|||||Accordi||||||||||
|||||ng to||||||||||
||Sharing|||the||||||||||
||the|||order||||||||||
|Hengshen||||||||||||||
||same||Purchasi|price,||||||Telegra|||Same|
|g||||||||||||2017-04||
||controll|Purchase|ng LCD|deducte|1,990|1,990|4.46%|6,861|No|phic|——||as|
|Photoelec||||||||||||-30||
||ing||monitors|d 1||||||transfer|||above|
|tricity||||||||||||||
||shareho|||Yuan||||||||||
||lder|||each for||||||||||
|||||operatio||||||||||
|||||n charge||||||||||
|||||Accordi||||||||||
||Sharing|||||||||||||
||||Sales|ng to||||||||||
||the|||||||||||||
||||LCD|the||||||||||
||same|||||||||Telegra|||Same|
|HK|||overall|custome||||||||2017-04||
||controll|Sales|||21,121|21,121|44.19%|36,592|No|phic|——||as|
|Yutian|||monitor|r sales||||||||-30||
||ing|||||||||transfer|||above|
||||machine|order||||||||||
||shareho|||||||||||||
||||set|price||||||||||
||lder|||||||||||||
|||||sure||||||||||
|Total||||--|--|52,622|--|80,371|--|--|--|--|--|
|Detail of sales return with major||||||||||||||
|||||N/A||||||||||
|amount involved||||||||||||||
|||||In the reporting, Hengfa Technology purchased LCD from HK Yutian with $ 30.99 million||||||||||
|Report the actual implementation of||||approximately, 77.49% of the annual amount predicted at the beginning of the year;||||||||||
|the daily related transactions which||||purchased LCD from Hengsheng Photo electricity with $ 13.02 million approximately,||||||||||
|were projected about their total||||78.95% of the annual amount predicted at the beginning of the year; purchasing LCD from||||||||||
|amount by types during the reporting||||Hengsheng Photo electricity with about $ 3.04 million, 29% of the annual amount predicted||||||||||
|period(if applicable)||||at the beginning of the year; sold LCD whole machine to HK Yutian with $ 31.25 million||||||||||
|||||approximately, 55.81% of the annual amount predicted at the beginning of the year.||||||||||
|Reasons for major differences||||||||||||||
|between trading price and market||||N/A||||||||||
|reference price||||||||||||||

2. Related transactions by assets acquisition and sold
□Applicable√Not applicable
No above mentioned transactions occurred
3. Main related transactions of mutual investment outside
□ Applicable√ Not applicable
No main related transactions of mutual investment outside for the Company in reporting period.
4. Contact of related credit and debt
□ Applicable√ Not applicable
The company had no contact of related credit or debt in reporting period.
5. Other related transactions
□ Applicable√ Not applicable
The company had no other significant related transactions in reporting period.
XVII. Significant contract and implementations
1. Trusteeship, contract and leasing
(1) Trusteeship
□ Applicable√ Not applicable
No trusteeship for the Company in reporting period.
(2) Contract
□ Applicable√ Not applicable
No contract for the Company in reporting period.
(3) Leasing
□ Applicable√ Not applicable
No leasing for the Company in reporting period.
2. Major guarantees
√Applicable□ Not applicable
(1) Guarantees
In 10 thousand Yuan
||||||||||
|-|-|-|-|-|-|-|-|-|
|Particulars about the external guarantee of the Company (Barring the guarantee for subsidiaries)|||||||||
||Related|||||||Guarante|
||||Actual date of||||||
||Announce|||Actual||||e for|
|Name of the Company||Guarantee|happening (Date||Guarantee|Guarantee|Implemen||
||ment|||guarantee||||related|
|guaranteed||limit|of signing||type|term|ted (Y/N)||
||disclosure|||limit||||party|
||||agreement)||||||
||date|||||||(Y/N)|
|N/A|||||||||

||||||||||
|-|-|-|-|-|-|-|-|-|
|Guarantee of the Company and the subsidiaries|||||||||
||Related|||||||Guarante|
||||Actual date of||||||
||Announce|||Actual||||e for|
|Name of the Company||Guarantee|happening (Date||Guarantee|Guarantee|Implemen||
||ment|||guarantee||||related|
|guaranteed||limit|of signing||type|term|ted (Y/N)||
||disclosure|||limit||||party|
||||agreement)||||||
||date|||||||(Y/N)|
|Wuhan Hengfa|||||Joint liability||||
||2017-04-30|30,000||14,089.39||1 year|No|No|
|Technology Co., Ltd.|||||guarantee||||
|||||Total amount of actual|||||
|Total amount of approving|||||||||
|||||occurred guarantee for|||||
|guarantee for subsidiaries in report||30,000||||14,089.39|||
|||||subsidiaries in report period|||||
|period (B1)|||||||||
|||||(B2)|||||
|||||Total balance of actual|||||
|Total amount of approved|||||||||
|||||guarantee for subsidiaries at|||||
|guarantee for subsidiaries at the||30,000||||3,812.03|||
|||||the end of reporting period|||||
|end of reporting period (B3)|||||||||
|||||(B4)|||||
|Guarantee of the subsidiaries for the subsidiaries|||||||||
||Related||||||||
||||Actual date of||||Complete|Guarante|
||Announce|||Actual|||||
|Name of the Company||Guarantee|happening (Date||Guarantee|Guarantee|implemen|e for|
||ment|||guarantee|||||
|guaranteed||limit|of signing||type|term|tation or|related|
||disclosure|||limit|||||
||||agreement)||||not|party|
||date||||||||
|N/A|||||||||
|Total amount of guarantee of the Company( total of three abovementioned guarantee)|||||||||
|Total amount of approving||||Total amount of actual|||||
|guarantee in report period||30,000||occurred guarantee in report||14,089.39|||
|(A1+B1+C1)||||period (A2+B2+C3)|||||
|Total amount of approved||||Total balance of actual|||||
|guarantee at the end of report||30,000||guarantee at the end of||3,812.03|||
|period (A3+B3+C2)||||report period (A4+B4+C4)|||||
|The proportion of the total amount of actually guarantee in the net|||||||||
|||||11.89%|||||
|assets of the Company (that is A4+ B4+C4)|||||||||
|Including:|||||||||
|Amount of guarantee for shareholders, actual controller and its|||||||||
|||||0|||||
|related parties (D)|||||||||
|The debts guarantee amount provided for the guaranteed parties|||||||||
|||||0|||||
|whose assets-liability ratio exceed 70% directly or indirectly (E)|||||||||
|Proportion of total amount of guarantee in net assets of the|||||||||
|||||0|||||
|Company exceed 50% (F)|||||||||
|Total amount of the aforesaid three guarantees (D+E+F)||||0|||||
|Explanations on possibly bearing joint and several liquidating|||||||||
|||||N/A|||||
|responsibilities for undue guarantees (if applicable)|||||||||

|||
|-|-|
|Explanations on external guarantee against regulated procedures||
||N/A|
|(if applicable)||

Explanation on compound guarantee
(2) Guarantee outside against the regulation
□Applicable√Not applicable
No guarantee outside against the regulation in Period.
3. Entrust others to cash asset management
(1) Trust financing
□Applicable√Not applicable
No entrust others to cash asset management
(2) Entrusted loans
□ Applicable√ Not applicable
The company had no entrusted loans in the reporting period.
4. Other material contracts
□ Applicable√ Not applicable
No other material contracts for the Company in reporting period.
XVIII. Social responsibility
1. Performance of social responsibility
Not applicable
2. Execution of social responsibility of targeted poverty alleviation
(1) Targeted poverty alleviation scheme
Not applicable
(2) Summary of targeted poverty alleviation
Not applicable
(3) Targeted poverty alleviation effect
||||
|-|-|-|
|Index|Unit of measure|Quantity /implementation|
|I. Overall condition|——|——|
|II. Poverty alleviation by items|——|——|
|1.Industry development|——|——|
|2.Shift employment|——|——|
|3. Relocating in other places|——|——|
|4. Education|——|——|
|5. Health|——|——|
|6.Ecological protection|——|——|
|7. Reveal all the details|——|——|
|8. Society|——|——|
|9.Other|——|——|
|III. Award received (content and grade)|——|——|

(4) Follow-up targeted poverty alleviation scheme
Not applicable
3. Environmental protection
The listed Company and its subsidiary whether belongs to the key sewage units released from environmental protection department No
The listed Company and its subsidiarydon’t belongs to the key sewage units released from environmental protection department XIX. Explanation on other significant events
√Applicable□Not applicable
(I) The Company signed Asset Exchange Contract with Wuhan Zhongheng Group on 29 April 2009 (details were referred to in the announcement dated 30 April 2009), and pursuant to the contract, since part of the assets of the Company (namely two parcel of industrial lands located at Huafa road, Gongming town, Guangming new district, Shenzhen (the property certificate No. were SFDZ No.7226760 and SFDZ No.7226763, No. of parcels were A627-005 andA627-007, and the aggregate area was 48,200 sq.m) were the lands listed in the first batch of plan for 2010 Shenzhen urbanization unit planning preparation plan. For promotion of such urbanization project and joint cooperation, the Company has not completed the transfer procedures in respect of the aforesaid land.
The Company convoked the first extraordinary meeting of the Board in 2015 on February 16, 2015 and the first
extraordinary general meeting of the Board in 2015 on March 4, 2015, which considered and approved the
“Motion on promoting and implementing the urban renewal project for the renewal units of Huafa area at Gongming street, Guangming new district, Shenzhen”, specified that the Company and Wuhan Zhongheng Group shall obtain the corresponding compensatory consideration for removal from the respectively owned project plots and the respectively contributed and constructed above-ground buildings before the land development, it is estimated that the compensatory consideration obtained by the Company accounts for50.5% of the total consideration and Wuhan Zhongheng Group accounts for49.5% by calculation.
The sixth extraordinary meeting of the board of directors in 2015 and the third extraordinary general meeting held on September 11, 2015 have considered and adopted the “Proposal on the project promotion and implementation of urban renewal and the progress of related transactions of‘the updated units at Huafa Area, Gong Ming Street, Guangming New District,Shenzhen’”, the company has signed the “Agreement on the cooperation of urban renewal project of the updated units at Huafa Area, Gong Ming Street, Guangming New District, Shenzhen”, “Contract for the cooperative venture of reconstruction project for Huafa Industrial Park, Gong Ming Street, Guangming New District” and “Agreement on housing acquisition and removal compensation and resettlement” with Wuhan Zhongheng New Technology Industry Group Co., Ltd. (hereinafter referred to as “Wuhan Zhongheng Group”), Shenzhen Vanke Real Estate Co., Ltd. (hereinafter referred to as “Shenzhen Vanke”), and Shenzhen Vanke Guangming Real Estate Development Co., Ltd. (hereinafter referred to as “Vanke Guangming”). On 12 September 2016, the Company received a “Notice of Arbitration No.: SHEN DP20160334” from SCIA, Shenzhen Vanke applied for arbitration in respect of “Agreement on the cooperation of urban renewal project of the updated units at Huafa Area, Gong Ming Street, Guangming New District, Shenzhen” against the Company and Wuhan Zhongheng Group. The arbitration court holds hearings on 12 November 2016 and 13 May 2017. Shenzhen Court of International Arbitration (SCIA) has given a ruling in August 2017, although most of the arbitration claims proposed by Shenzhen Vanke are rejected by arbitration court, the arbitration procedures and so-called cognizance of fact of contract breach still has problems in arbitration. The results have damaged the legitimate rights and interest of the Company, and we have putting forward the application for dismantling in February 2018 to the Shenzhen IntermediatePeople’s Court. The Court has accepted the case formally. Progress of the case found more in the Notices released on Juchao website (www.cninfo.com.cn) dated 14 Sept. 2016, 1 Nov. 2016, 16 Nov. 2016, on 18 Feb. 2017, 24 March 2017, 25 April 2017, 1 July 2017, 18 August 2017 and 9 Feb. 2018 respectively.
(II) On 31 December 2015, the 88,750,047 shares held by Wuhan Zhongheng Group, are pledge to China Merchants Securities Assets Co., Ltd. with due date of 31 December 2016. Wuhan Zhongheng Group deferred the repurchase business day to 30 June 2017. on 1 Feb. 2016, Wuhan Zhongheng Group pledge the 27,349,953 shares held to China Merchants Securities Assets Co., Ltd. with due date of 31 December 2016. The above mentioned shares are deferred for repurchase of stock pledge by Wuhan Zhongheng Group; pledge expired on 31 December 2017. The trading day for repurchase put off to the date when pledge actually removed. Till end of this period released, controlling shareholder still not removed the pledge and the Company has apply by letter, relevant
Notice of Presentment on Stock Pledge from Controlling Shareholder was released. Found more in notice released
on Juchao website (www.cninfo.com.cn) date 2 Feb. 2018.
(III) Our controlling shareholder Wuhan Zhongheng Group holds 116,489,894 shares of the Company, accounting for41.14% of total share capital. The above shares were judicially sealed on 27 September 2016, shares freeze from 27 September 2016 to 26 September 2018. Details are set out in the announcement published at Juchao information website (www.cninfo.com.cn) on 27 October 2016.
(IV) The company received the notice about registering and investigating from China Securities Regulatory Commission on January 18, 2016, who decided to register and investigate the company on suspicion of illegal information disclosure. On January 5, 2017, the company received the “Notice on Giving Public Censure and Punishment to Shenzhen Zhongheng HUAFA Co., Ltd. and the Relevant Parties” from the Shenzhen Stock Exchange, see details on the notice published at www.cninfo.com.cn on January 6, 2017.
(V) On March 21, 2014, Huafa Property and Shenzhen Jifang Investment Co., Ltd. (hereinafter referred to as "Jifang Investment") signed the "Shenzhen Housing Leasing Contract" and the "Supplemental Agreement on Leasing Contract", which were canceled on February 5, 2016. As Jifang Investment occupied the site, and defaulted rent, management fee and water and electricity bills in the long term, in order to safeguard the legitimate rights and interests, Huafa Property submitted a request for arbitration to Shenzhen Arbitration Commission on March 8, 2016, and received the (2016) SZCZ No. 346 ruling paper from Shenzhen Arbitration Commission in November 2016 which ruled Huafa Property won the lawsuit. See details on the notice published at www.cninfo.com.cn by the company on November 8, 2016. The Case still in act under coercion stage presently (VI) Mr. Li Yongping, the director and vice-president of the company, has applied for resigning the director, vice-president and the committee member of the special committee under the board of directors of the company due to the mandatory retirement age (60 years old), recommended by thecompany’s second largest shareholder, SEG (Hong Kong) Co., Ltd., thecompany’s first extraordinary general meeting of shareholders in 2017 considered and approved Mr. Zhang Guangliu to be the director of the company, and elected Mr. Zhang Guangliu as the vice-president of thecompany’s
9th
Board of Directors by the
3rd
extraordinary meeting of the board of directors of the company in 2017, see details on the relevant announcement the company issued at www.cninfo.com.cn on July 19, 2017.
(VII) Thecompany’s planning for major assets restructuring
The company was planning for major asset reorganization which involved the sale of the stock right of the wholly-owned subsidiary - Wuhan Hengfa Technology Co., Ltd. and the small land and plant located at Wuhan plant under the name of the Company, due to the uncertainties in relevant matters, the company's stock was suspended since the opening on May 31, 2017 in order to maintain the investor interests and avoid significant impact on thecompany’s share price. Later, after careful research for current market environment changed, the Company terminated the major asset reorganization, stock of the Company resumption of trading on 25 August 2017. See details on the relevant announcement the company issued at www.cninfo.com.cn on August 25, 2017.
(VIII) Changes in the ownership structure of controlling shareholders
Li Zhongqiu, the original shareholder of the controlling shareholder - Wuhan Zhongheng Group, transferred part of shares he held in Wuhan Zhongheng Group to Li Li, and Wuhan Henghui Investment and Consulting Co., Ltd. transferred all shares it held in Wuhan Zhongheng Group to Li Li, after the transfer, Li Zhongqiu held51% equity stake of Wuhan Zhongheng Group, and Li Li held49% equity stake of Wuhan Zhongheng Group, in the above natural person shareholders, Li Zhongqiu and Li Li have parent-child relationship and belong to concerted action person.
(IX) Commitments of Major shareholder to Increase Shareholding
On November 20, and November 28, 2017, the controlling shareholders respectively made commitments to increase the shareholding of 2.83 million shares of thecompany’s B Shares and no less than 2.8 million shares of thecompany’s A Shares, with a commitment period of 6 months. As of the disclosure date of this report,it’s still in the commitment fulfillment period, and the commitment has not been fulfilled.
XX. Significant event of subsidiary of the Company
□ Applicable√ Not applicable
Section VI. Changes in Shares and Particulars about Shareholders I. Changes in Share Capital
1. Changes in Share Capital
In Share
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Before the Change||Increase/Decrease in the Change (+, -)|||||After the Change||
||||||Capitaliza|||||
||||New|||||||
|||Proportio||Bonus|tion of||Subtot||Proportio|
||Amount||shares|||Others||Amount||
|||n|issued|shares|public||al||n|
||||||reserve|||||
|I. Restricted shares|0|0.00%|0|0|0|0|0|0|0.00%|
||283,161,2|||||||||
|II. Unrestricted shares||100.00%|0|0|0|0|0|283,161,227|100.00%|
||27|||||||||
||181,165,3|||||||||
|1. RMB Ordinary shares||63.98%|0|0|0|0|0|181,165,391|63.98%|
||91|||||||||
|2. Domestically listed foreign|101,995,8|||||||||
|||36.02%|0|0|0|0|0|101,995,836|36.02%|
|shares|36|||||||||
||283,161,2|||||||||
|III. Total shares||100.00%|0|0|0|0|0|283,161,227|100.00%|
||27|||||||||

Reasons for share changed
□Applicable√ Not applicable
Approval of share changed
□ Applicable√ Not applicable
Ownership transfer of share changed
□ Applicable√ Not applicable
Influence on the basic EPS and diluted EPS as well as other financial indexes of net assets per share attributable to common shareholders of Company in latest year and period
□ Applicable√ Not applicable
Other information necessary to disclose or need to disclosed under requirement from security regulators
□ Applicable√ Not applicable
2. Changes of restricted shares
□ Applicable√ Not applicable
II. Securities issuance and listing
1. Security offering (without preferred stock) in Reporting Period
□ Applicable√ Not applicable
2. Changes of total shares and shareholders structure as well as explanation on changes of assets and liability structure
□ Applicable√ Not applicable
3. Existing internal staff shares
□ Applicable√ Not applicable
III. Particulars about shareholder and actual controller of the Company
1. Amount of shareholders of the Company and particulars about shares holding
In Share
||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|||||||||||||Total preference|||
|||||||||||||shareholders|||
||||||||Total preference||||||||
||||Total common|||||||||with voting|||
|Total common|||||||shareholders with||||||||
||||stock|||||||||rights recovered|||
|stock|||||||voting rights||||||||
||||shareholders at|||||||||at end of last|||
|shareholders in|27,633||||28,974||recovered at end of|||0||||0|
||||end of last month|||||||||month before|||
|reporting|||||||reporting period (if||||||||
||||before annual|||||||||annual report|||
|period-end|||||||applicable) (found||||||||
||||report disclosed|||||||||disclosed (if|||
||||||||in note8)||||||||
|||||||||||||applicable)|||
|||||||||||||(found in note8)|||
|Particulars about shares held above 5% by shareholders or top ten shareholders|||||||||||||||
||||||Total||||||Number of share pledged/frozen||||
|||||||||Amount|Amount||||||
||||||sharehold||||||||||
|||||Proportio||Changes||of|of||||||
||||||ers at||||||||||
|Full name of||Nature of||n of||in report||restricted|un-restrict||||||
|Shareholders||shareholder||shares|the end of||||||State of share||Amount||
|||||held||period||shares|ed shares||||||
||||||report||||||||||
|||||||||held|held||||||
||||||period||||||||||
|Wuhan ZhonghengGroup||Domesticnon-state-ownedlegal person||41.14%|116,489,894|0||0|116,489,894||Pledged||116,489,894||
||||||||||||Frozen||116,489,894||
|SEG (HONGKONG) CO., LTD.||Overseas legalperson||5.85%|16,569,560|0||0|16,569,560||Pledged||0||
||||||||||||Frozen||0||

||||||||||
|-|-|-|-|-|-|-|-|-|
|GOOD HOPECORNERINVESTMENTSLTD|Overseas legalperson|4.49%|12,700,000|0|0|12,700,000|Pledged|0|
||||||||Frozen|0|
|ChangjiangSecuritiesBrokerage(Hongkong) Co.,Ltd.|Overseas legalperson|1.89%|5,355,249|0|0|5,355,249|Pledged|0|
||||||||Frozen|0|
|Jiangsu ShengheInvestment Co.,Ltd.|Domesticnon-state-ownedlegal person|0.64%|1,793,900|||1,793,900|Pledged|0|
||||||||Frozen|0|
|Xu Dongdong|Domestic natureperson|0.44%|1,231,700|||1,231,700|Pledged|0|
||||||||Frozen|0|
|Zhou Hongbing|Domestic natureperson|0.43%|1,221,800|||1,221,800|Pledged|0|
||||||||Frozen|0|
|Zhong Jiachao|Domestic natureperson|0.39%|1,112,200|||1,112,200|Pledged|0|
||||||||Frozen|0|
|LI SHERYNZHAN MING|Overseas natureperson|0.36%|1,022,800|||1,022,800|Pledged|0|
||||||||Frozen|0|
|Li Senzhuang|Domestic natureperson|0.32%|900,000|||900,000|Pledged|0|
||||||||Frozen|0|
|Strategy investors or general|||||||||
|corporation comes top 10 shareholders|||||||||
|||N/A|||||||
|due to rights issue (if applicable) (see|||||||||
|note 3)|||||||||
|||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 Disclosure of Shareholder Equity Changes of Listed|||||||
|Explanation on associated relationship|||||||||
|||Companies. The Company neither knew whether there exists associated relationship among|||||||
|among the aforesaid shareholders|||||||||
|||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 un-restrict shares held at Period-end|||||||
||||||||Type|Amount|
|Wuhan Zhongheng Group||116,489,894|||||RMB common||
|||||||||116,489,894|
||||||||share||

|||||
|-|-|-|-|
|SEG (HONG KONG) CO., LTD.|16,569,560|Domestically||
|||listed foreign|16,569,560|
|||shares||
|GOOD HOPE CORNERINVESTMENTS LTD|12,700,000|Domestically||
|||listed foreign|12,700,000|
|||shares||
|Changjiang Securities Brokerage(Hongkong) Co., Ltd.|5,355,249|Domestically||
|||listed foreign|5,355,249|
|||shares||
|Jiangsu Shenghe Investment Co., Ltd.|1,793,900|RMB common||
||||1,793,900|
|||share||
|Xu Dongdong|1,231,700|RMB common||
||||1,231,700|
|||share||
|Zhou Hongbing|1,221,800|RMB common||
||||1,221,800|
|||share||
|Zhong Jiachao|1,112,200|RMB common||
||||1,112,200|
|||share||
|LI SHERYN ZHAN MING|1,022,800|Domestically||
|||listed foreign|1,022,800|
|||shares||
|Li Senzhuang|900,000|Domestically||
|||listed foreign|900,000|
|||shares||
||Among the top ten unrestricted shareholders, the Company neither knew whether there|||
|Expiation on associated relationship or|exists associated relationship among the other tradable shareholders, nor they belong to|||
|consistent actors within the top 10|consistent actors that are prescribed in Measures for the Administration of Disclosure of|||
|un-restrict shareholders and between|Shareholder Equity Changes of Listed Companies. Among the top ten shareholders, Wuhan|||
|top 10 un-restrict shareholders and top|Zhongheng Group neither bears associated relationship with other shareholders, nor|||
|10 shareholders|belongs to the consistent actor that are prescribed in Measures for the Administration of|||
||Disclosure of Shareholder Equity Changes of Listed Companies.|||
|Explanation on top 10 shareholders||||
|involving margin business (if|N/A|||
|applicable) (see note 4)||||

Whether top ten common stock shareholders or top ten common stock shareholders with un-restrict shares held have a buy-back agreement dealing in reporting period
□ Yes√ No
The top ten common stock shareholders or top ten common stock shareholders with un-restrict shares held of the Company have no buy-back agreement dealing in reporting period.
2. Controlling shareholder of the Company
Nature of controlling shareholders: natural person holding
Type of controlling shareholders: legal person
||||||
|-|-|-|-|-|
||Legal||||
||person/person|Date of|Organizati||
|Controlling shareholders||||Main operation business|
||in charge of|foundation|on code||
||the 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; management of exports business for the|
|||||own products and technologies for the Company and member|
|||||enterprise; management of export business on raw material,|
|||||apparatus and instrument, machinery equipments, spare parts and|
||||91420114|technologies (not including goods and technologies that import and|
|Wuhan Zhongheng Group|Li Zhongqiu|1996-03-21|71195460|export are national restricted or prohibited ); dry clean and steam|
||||1W|iron service; copy & print; business information consulting; house|
|||||tenancy; property management; wholesale and retails of the|
|||||hardware metal products, plastic products, audio electronic|
|||||products, electronic equipment, textile, toys, clothing & shoes,|
|||||luggage, bedding article, general merchandise, curtain, household|
|||||appliances and building materials; development of real-estate and|
|||||sales of commercial housings (projects with special provision of the|
|||||state can be operation after approval)|
|Equity of other|||||
|domestic/oversea listed|||||
|company control by|||||
||Not applicable||||
|controlling shareholder as|||||
|well as stock-joint in|||||
|report period|||||

Changes of controlling shareholders in reporting period
□ Applicable√ Not applicable
The Company had no changes of controlling shareholders in reporting period
3. Actual controller of the Company
Nature of actual controller: domestic natural person
Type of actual controller: natural person
||||
|-|-|-|
|||Enjoy the residence rights in the other country or area|
|Actual controller’s name|Nationality||
|||(Y/N)|
|Li Zhongqiu|Hong Kong|Y|
|Main occupation in position|He serves as the Chairman for Wuhan Zhongheng Group since 1996 and serves as||

|||
|-|-|
||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 actual controller in reporting period
□ Applicable√ Not applicable
No changes of actual controllers for the Company in reporting period.
Property right and controlling relationship between the actual controller and the Company is as follow:
Li Zhongqiu
51%
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
4. Particulars about other legal person shareholders with over10% shares held
□ Applicable√ Not applicable
5. Limitation and reducing the holdings of shares of controlling shareholders, actual controllers, restructuring side and other commitment subjects
□ Applicable√ Not applicable
Section VII. Preferred Stock
□ Applicable√ Not applicable
The Company had no preferred stock in the Period.
Section VIII. Particulars about Directors, Supervisors, Senior Executives and Employees
I. Changes of shares held by directors, supervisors and senior executives
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|||||||||Amount|Amount|||
||||||||Shares||||Shares|
|||||||||of shares|of shares|||
||||||Start||held at|||Other|held at|
|||W o r k i n g||||End date||increased|decreased|||
||Title||Sex|Age|dated of|of office|period-be|||changes|period-en|
|Name||status|||office|||in this|in this|||
||||||term|term|gin|||(share)|d|
|||||||||period|period|||
||||||||(Share)||||(Share)|
|||||||||(Share)|(Share)|||
|Li||Currently|||2007-07-|2019-09-||||||
||Chairman||M|53|||0|0|0|0|0|
|Zhongqiu||in office|||08|18||||||
|Li|Vice|Leave the|||2013-08-|2017-07-||||||
||||M|60|||0|0|0|0|0|
|Yongping|Chairman|office|||23|17||||||
|Zhang|Vice|Currently|||2017-07-|2019-09-||||||
||||M||||0|0|0|0|0|
|Guangliu|Chairman|in office|||18|18||||||
||Director,|||||||||||
||secretary|||||||||||
|||Currently|||2015-11-|2019-09-||||||
|Yang Bin|of the||M|45|||0|0|0|0|0|
|||in office|||06|18||||||
||Board,|||||||||||
||CFO|||||||||||
||Independ|||||||||||
|Li||Currently|||2016-09-|2019-09-||||||
||ent||M|72|||0|0|0|0|0|
|Ding’an||in office|||19|18||||||
||director|||||||||||
||Independ|||||||||||
|Xu||Currently|||2016-09-|2019-09-||||||
||ent||M|52|||0|0|0|0|0|
|Jingwen||in office|||19|18||||||
||director|||||||||||
||Independ|||||||||||
|Zhang||Currently|||2014-05-|2019-09-||||||
||ent||M|61|||0|0|0|0|0|
|Zhaoguo||in office|||23|18||||||
||director|||||||||||
|Huang|Superviso|Currently|||2012-01-|2019-09-||||||
||||F|55|||0|0|0|0|0|
|Yanbo|r|in office|||16|18||||||
||Superviso|Currently|||2012-04-|2019-09-||||||
|Geng Qu|||F|48|||0|0|0|0|0|
||r|in office|||09|18||||||
||Superviso|Currently|||2015-11-|2019-09-||||||
|Chen Qin|||F|31|||0|0|0|0|0|
||r|in office|||06|18||||||

|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Tang|Deputy|Currently|||2013-08-|2019-09-18||||||
||||F|40|||0|0|0|0|0|
|Ganyu|GM|in office|||23|||||||
|Total|--|--|--|--|--|--|0|0|0|0|0|

 II. Changes of directors, supervisors and senior executives
√ Applicable□ Not applicable
||||||
|-|-|-|-|-|
|Name|Title|Type|Date|Reasons|
|Li Yongping|Vice Chairman|Leave the office|2017-07-17|Mandatory age for retirement (60-year-old)|

III. Post-holding
Professional background, major working experience and present main responsibilities in Company of directors, supervisors and senior executive
Li Zhongqiu: Male, was born in 1962 with Master of Engineering, members of the Hubei Political Consultative Conference. 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 he serves as Chairman and the General Manager of the Company since July 2007.
Zhang Guangliu, male, born in 1962, a master of management, currently serves as a director of Shenzhen SEG Co., Ltd., the deputy general manager, a member of the party committee, and the secretary of the board of Shenzhen Electronics Group Co., Ltd., the president of Shenzhen SEG Kangle Enterprise Development Co., Ltd., and the chairman of the board of supervisors of Shenzhen SI Semiconductors Co., Ltd. He once served as the deputy section chief, deputy general manager and a member of party committee of Jiangxi Pingxiang Department Store, the deputy manager of Jiangxi Pingxiang Industrial Products Trade Center, the deputy manager of Zhenhua Subbranch of Shenzhen Rainbow Shopping Mall, and the first class director of Shenzhen Rainbow Shopping Mall Co., Ltd., a director and the chief financial officer of Shenzhen Hua Sheng Enterprise Group Company Limited, Shenzhen Pharmaceutical Production and Supply Corporation and Shenzhen Building Material Group Co., Ltd., the chairman of the board of supervisors of Shenzhen Huakong SEG Co., Ltd., and the chairman of SEG (Hong Kong) Co., Ltd.
Yang Bin, male, born in April 1972, a master degree holder graduated fromXi’an Jiaotong University. He once worked at the high-tech development zone branch ofXi’an Branch of Industrial and Commercial Bank of China, the business department ofXi’an Branch of China Minsheng Banking Corporation, and the international sales department of Shenzhen Mindray Bio-Medical Electronics Co., Ltd.; he once served as the deputy general manager and secretary of the board of Shenzhen China Agricultural University Technology Co., Ltd., an independent director of Livzon Group, and an independent director of CTL Testing. Since November 2015, he has
been serving as a director, the secretary of the board and the chief financial officer of the Company.
LiDing’an: male, born in Dec. 1945, professor, doctoral tutor, the first batch of Chinese certified public accountants. In 1982, he obtained the master degree of economics of Zhongnan University of Finance and Economics and stayed at the university as a teacher; in June 1996, he was transferred to South China University of Technology, served as the professor and deputy director of the Department of Applied Mathematics; from 1998 to 2012, he served successively as the
8th, 9th,
and
10th
standing committee member of CPPCC Guangdong Provincial Committee; he serves as the professor at School of Business Administration from May, 2002, and served as executive vice president of the School of Economics and Trade from July 2005 to January 2009. He has been serving as the professor at School of Business Administration South China University of Technology since 2009, he is also the director of Guangdong Provincial Tax Institute, the director of Guangdong Provincial Local Tax Institute, the vice chairman of the enterprise development research specialist working committee of Guangdong Manufacturers Association, the director of CPPCC Guangdong Provincial Committee Fellowship Council, the independent director of Guangdong Kangmei Pharmaceutical Co., Ltd., the independent director of PCI-Suntek Tech Co., Ltd., and the independent director of Wuhan Liyuan Information Technology Co., Ltd.. He has been serving as the independent director of the company since September 2016.
Zhang Zhaoguo, Ph. D. in Management, former director of accounting dept. in School of Management of Huazhong University of Science& Technology, a professor (secondary) and doctoral supervisor. He enjoys the special allowance of the State Council. Successively study in Finance& Economics University of Jiangxi, Zhongnan University of Economics and Law and HUST, and serve as a teacher in Wuhan University and HUST. He served as chief editor in Communication of Finance& Accounting. Now served as the president of Accounting Institute of China, vice president of Accounting Association of Hubei Province, vice president of Hubei Central Enterprise Accounting Association, dean of Wuhan Yangtze Business University, and served as independent directors of Hubei Radio&Television Information Network Co., Ltd., Shenzhen Zhongheng Huafa, Kaidi Ecological and Mailyard. And in 2016, he selected in top 50 of the Academic Influence of College Accountancy ( Ranked 17th), the only one selected in Hubei.
Xu Jinwen, male, born in 1965, is a doctor of management science and engineering of Huazhong University of Science and Technology. He worked at China Construction Bank Wuhan Sub-branch from July 1984 to September 1985; served as the credit section chief at China Construction Bank Hubei Branch from September 1985 to December 1990; served as the deputy general manager of Hubei Province Trust and Investment Corporation of China Construction Bank; served as the executive deputy general manager of Guotai Junan Securities Hubei Branch from October 1995 to August 2000; served as the general manager of Guotai Junan Securities Jiangxi Headquarters from August 2000 to November 2002; served as the president of Golden Sun Securities Co., Ltd. from November 2002 to April 2006; served as the chairman of Changjiang Bali Baifuqin Securities Co., Ltd. from April 2006 to May 2007; served as the vice president and secretary of the board of Changjiang Securities Co., Ltd. from May 2007 to March 2016; he has been serving as the chairman and CEO of Changjiang Securities Holding (Hong Kong) Co., Ltd. since December 2011. He has been serving as an independent director of the company since September 2016.
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 from 2012 to 2016; she serves as deputy GM of Wuhan Zhongheng New Science& Technology Industrial Group Co., Ltd. since October 2016, and the supervisor of the Company since January 2012 and she is the chairman of supervisory committee 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.
Chen Qin: Female, born in 1986, bachelor degree, human resources professional. Worked on administrative work in Merida Bicycle (China) Co., Ltd. from July 2002 to July 2003, engaged in purchasing work in Hui Pu Electronics (Shenzhen) Co., Ltd. from August 2003 to September 2004, and served as the administration manager in Huake United Technology (Shenzhen) Co., Ltd. from September 2004 to 2005 October; works in the Company since October 2005 and serves as supervisor of the Company since 2015
Tang Ganyu: Female, born in 1977, college degree. Served as assistant of factory director in Wuhan Hengsheng Optoelectronics Industry Co., Ltd. from August 2003 to July 2005, engineering manager from August 2005 to July 2006, project manager and production manager from August 2006 to December 2011; served as the supervisor of the Company from July 2007 to January 2012 and general manager assistant of the Company from January 2012 to August 2013, and serves as deputy general manager of the Company since August 2013, and in charge of the operation management in three division of the industry.
Post-holding inshareholder’s unit
√ Applicable□ Not applicable
|||||||
|-|-|-|-|-|-|
||||||Received|
|||Position in|||remuneration from|
|Name|Name of shareholder’s unit||Start dated of office|End date of||
|||shareholder’s unit n|term|office term|shareholder’s unit|
||||||(Y/N)|
|Li Zhongqiu|Wuhan Zhongheng Group|Chairman|1996-03-21||Y|
||Shenzhen Electronics|Deputy GM, party||||
|Zhang||||||
||Group Co., Ltd. and its|committee and secretary|||N|
|Guangliu||||||
||subsidiaries|of the Board||||
|Huang Yanbo|Wuhan Zhongheng Group|Deputy GM|2016-10-12||N|

Post-holding in other unit
√ Applicable□ Not applicable
|||||||
|-|-|-|-|-|-|
||||||Received|
|||Position in|||remuneration|
|Name|Name of other units||Start dated of|End date of office||
|||other unit n|office term|term|from other unit|
||||||(Y/N)|
|Li Ding’an|South China University of Technology|Professor||||
||Guangdong Provincial International Tax|||||
|Li Ding’an||Director||||
||Institute|||||
||Guangdong Provincial Local Taxation|||||
|Li Ding’an||Director||||
||Institute|||||
||Working Committee of Experts on|||||
|Li Ding’an|Enterprise Development of Guangdong|Vice president||||
||Manufacturing Association|||||
||Guangdong Provincial Committee of|||||
|Li Ding’an||Director||||
||CPPCC|||||
||Guangdong Kangmei Pharmaceutical Co.,|Independent||||
|Li Ding’an||||||
||Ltd.|director||||
|||Independent||||
|Li Ding’an|Jiadu Xintai Technology Co., Ltd.|||||
|||director||||
||Wuhan LiYuan Information Technology|Independent||||
|Li Ding’an||||||
||Co., Ltd.|director||||
||Changjiang Securities Holding (Hong|Chairman and||||
|Xu Jingwen||||||
||Kong) Co., Ltd.|CEO||||
||Chinese Accounting Association Branch of|President of||||
|Zhang Zhaoguo||||||
||High Engineering College and University|the Board||||
|Zhang Zhaoguo|Accounting Association of Hubei Province|Vice president||||
||Hubei Central Enterprise Accounting|||||
|Zhang Zhaoguo||Vice president||||
||Association|||||
|Zhang Zhaoguo|Wuhan Yangtze Business University|Dean||||
|||Independent||||
|Zhang Zhaoguo|HRTN|||||
|||director||||
||Katie Ecological Environment POlytron|Independent||||
|Zhang Zhaoguo||||||
||Technology Inc|director||||
|||Independent||||
|Zhang Zhaoguo|Eastern Jin Yu Co., Ltd.|||||
|||director||||

Punishment of securities regulatory authority in recent three years to thecompany’s current and outgoing directors, supervisors and
senior management during the reporting period
√ Applicable□ Not applicable
1. On December 22, 2016, the company received the “Written Decision of Administrative Penalty”([2006] No. 7) from CSRC Shenzhen Securities Regulatory Bureau which gave following penalties to the company and related parties: (a) order Shen HUAFA to correct errors, give a warning, and impose a fine of 400,000 Yuan; (b) give a warning to Li Zhongqiu and impose a fine of 250,000 Yuan; (c) give a warning to Chen Zhigang, and impose a fine of 80,000 Yuan; (d) give a warning to Tang Ganyu, and impose a fine of 80,000 Yuan; (e) give a warning to Weng Xiaoyu and Cai Li, and impose a fine of 30,000 Yuan. See details on the “Notice on Receiving Written Decision of Administrative Penalty from CSRC” (Notice No.: 2016-68) at http://www.cninfo.com.cn.
2. On January 5, 2017, the company received the “Announcement on Public Condemnation to Shenzhen Zhongheng Huafa Co., Ltd. and Related Parties” of the Shenzhen Stock Exchange (hereinafter referred to as the “SZSE”): 1. Give a public condemnation to Shenzhen Huafa; 2. Give a public condemnation to Li Zhongqiu, the actual controller, chairman and general manager of Shenzhen Huafa; for the illegal behavior of Shenzhen Huafa and related parties and the punishment given by SZSE, SZSE will record in the credit archive of listed companies and publish to the public. See details at http://www.cninfo.com.cn about the Announcement on Receipt of Public Condemnation of Shenzhen Stock Exchange to the Company and Related Parties” (Announcement No.: 2017-01). IV. 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 RMB 60, 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 the Company” 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|Whether|
||||||remuneration|remuneration|
|||||Post-holding|||
|Name|Title|Sex|Age||obtained from the|obtained from|
|||||status|||
||||||Company (before|related party of|
||||||taxes)|the Company|
|||||Currently in|||
|Li Zhongqiu|Chairman, GM|M|53||48|No|
|||||office|||
|Li Yongping|Vice Chairman|M|60|Leave the office|0|Yes|
|||||Currently in|||
|Zhang Guangliu|Vice Chairman|M|55||0|Yes|
|||||office|||
||Director,||||||
|||||Currently in|||
|Yang Bin|secretary of the|M|45||30|No|
|||||office|||
||Board, CFO||||||
||Independent|||Currently in|||
|Li Ding’an||M|72||6|No|
||director|||office|||

||||||||
|-|-|-|-|-|-|-|
||Independent|||Currently in|||
|Xu Jingwen||M|52||6|No|
||director|||office|||
||Independent|||Currently in|||
|Zhang Zhaoguo||M|61||6|No|
||director|||office|||
|||||Currently in|||
|Huang Yanbo|Supervisor|F|55||0|Yes|
|||||office|||
|||||Currently in|||
|Geng Qu|Supervisor|F|48||9.3|No|
|||||office|||
|||||Currently in|||
|Chen Qin|Supervisor|F|31||9|No|
|||||office|||
|||||Currently in|||
|Tang Ganyu|Deputy GM|F|40||36|No|
|||||office|||
|Total|--|--|--|--|150.3|--|

 Delegated equity incentive for directors, supervisors and senior executives in reporting period
□ Applicable√ Not applicable
V. Particulars of workforce
1. Number of Employees, Professional composition, Education background
|||
|-|-|
|Employee in-post of the parent Company (people)|30|
|Employee in-post of main Subsidiaries (people)|963|
|The total number of current employees (people)|993|
|The total number of current employees to receive pay (people)|993|
|Retired employee’ s expenses borne by the parent Company and||
||0|
|main Subsidiaries (people)||
|Professional composition||
|Category of professional composition|Numbers of professional composition (people)|
|Production personnel|835|
|Sales personnel|21|
|Technical personnel|33|
|Financial personnel|12|
|Administrative personnel|92|
|Total|993|
|Education background||
|Category of education background|Numbers (people)|
|Master and on-the-job graduate students|6|
|Undergraduate|37|

|||
|-|-|
|Junior college|98|
|Other|852|
|Total|993|

 2. Remuneration Policy
Thecompany’s directors (excluding independent directors), supervisors and senior management personnel are monthly paid by basic pay and performance pay, and the annual remunerations are paid after annual assessment; thecompany’s independent directors are paid 60,000 Yuan per person per year as allowances (including tax), the travel expenses for attending the board meeting and stockholders' meeting and the necessary expenses generated by exercising their powers in accordance with relevant laws and regulations can be applied for reimbursement according to thecompany’s regulations; the remuneration ordinary employees are decided by the positions, including probationary period salary regular employee salary, and the company pays social security and public accumulated funds for them in accordance with the national regulations.
3. Training programs
(1) The directors, supervisors and senior management personnel actively participate in the relevant training and assessment organized by the regulatory agencies, such as Shenzhen Stock Exchange, Shenzhen Securities Regulatory Bureau, etc.
(2) The company regularly or irregularly organizes professional trainings for employees according to the departments and division of labor, including internal trainings and external trainings, thereinto, internal trainings are provided by specialized personnel in the company; external trainings are provided by organizing employees to participate in the trade associations and the training organized by supervision department.
(3) Organize staff in all positions to actively participate in the learning and assessment of technical professional qualifications required by different positions.
4. Labor outsourcing
□ Applicable√ Not applicable
Section IX. Corporate Governance
I. Corporate governance of the Company
During the reporting period, in accordance with the laws and regulations of the "Company Law", "Securities Law", and "Governance Norms of Listed Companies", and the relevant rules and requirements promulgated by the China Securities Regulatory Commission, the company has constantly improved the corporate governance structure, established a sound internal control system, enhanced the level of standard operation, strictly followed the provisions of the production and management control and the financial management and control and the information disclosure and control, carried out the work on the basis of the "Articles of Association", "Rules of Procedure of the Board of Directors”, "Rules of Procedure of the Board of Supervisors”, “Working System of the Independent Directors”, and “Working Rules of the General Manager”, and ensured that the shareholders' meeting, the board of directors and the board of supervisors can perform their duties and responsibilities normally. The company's governance meets the requirements on the documents of governance norms of listed companies issued by China Securities Regulatory Commission.
During the reporting period, in order to safeguard the legitimate rights and interests of the company, the shareholders and the creditors and regulate the organization and behavior of the company, the company has revised the “Constitution of Shenzhen Zhongheng Huafa Co., Ltd.” according to the “Company Law of the People's Republic of China”, “Securities Law of the People's Republic of China” and the “Guidelines for the Articles of Association of Listed Companies (2014 Revision)” issued by China Securities Regulatory Commission Is there any difference between the actual condition of corporate governance and relevant regulations about corporate governance for listed company from CSRC?
□Yes√ No
There are no differences between the actual condition of corporate governance and relevant regulations about corporate governance for listed company from CSRC.
II. Independency of the Company relative to controllingshareholders’ in aspect of businesses, personnel, assets, organization and finance
During the reporting period, thecompany’s controlling shareholder - Wuhan Zhongheng Group has separated the business, personnel, assets, organization and finance from the controlling shareholders in accordance with the laws and regulations of the "Company Law" and "Articles of Association", and had the independent and complete business system and the capabilities of independent management.
1. Personnel: The company fully and independently operates in the labor, personnel and salary management systems and has established the independent management system, all of the company's senior executives are
working in the Company and receive the salaries, no senior executive has held a post in both the Company and the controllingshareholder’s company, and no financial staff has held a post in two or more of the related companies. 2. Assets: The company has the clear property rights with the controlling shareholders and the capabilities of independent management, possesses the full rights to control the production system, supporting facilities and land use rights, no major shareholder has occupied or dominated the assets.
3. Finance: The company has established the independent, complete, standardized financial accounting system and financial management system, and the corresponding internal control system and internal audit system in accordance with the requirements of the "Accounting Standards for Business Enterprises" to make the independent financial decisions.
4. Organization: the board of directors, the board of supervisors, and other internal organizations are sound and operate independently, the organization is completely separated from the controlling shareholders, all organizations of the company are set up based on the norms and requirements of the listed company and thecompany’s actual business features which have the independent office addresses and there is no mixed operation or co-working, and the controlling shareholders legally exercise theinvestors’ rights and undertake the corresponding obligations.
5. Business: the company has the completely independent business operation system, the capabilities of independent management, the independent purchasing system, production system and marketing system,doesn’t depend on the controlling shareholders to gain profits or have the horizontal competition relationship with the controlling shareholders or the subsidiaries.
III. Horizontal competition
□ Applicable√ Not applicable
IV. In the report period, the Company held annualshareholders’ general meeting and extraordinaryshareholders’ general meeting
1. AnnualShareholders’ General Meeting in the report period
|||||||
|-|-|-|-|-|-|
|||Ratio of investor||||
|Session of meeting|Type||Date|Date of disclosure|Index of disclosure|
|||participation||||
||||||http://www.cninfo.co|
||||||m.cn/cninfo-new/dis|
||||||closure/fulltext/bulle|
|2016 AGM|AGM|47.02%|2017-05-16|2017-05-17||
||||||tin_detail/true/12035|
||||||26132?announceTim|
||||||e=2017-05-17|
|2017 First|Extraordinary||||http://www.cninfo.co|
|Extraordinary|shareholders’ general|47.01%|2017-07-18|2017-07-19|m.cn/cninfo-new/dis|
|shareholders’ general|meeting||||closure/fulltext/bulle|

|||||||
|-|-|-|-|-|-|
|meeting|||||tin_detail/true/12037|
||||||12866?announceTim|
||||||e=2017-07-19|
||||||Cancel the Meeting|
||||||http://www.cninfo.co|
|2017 Second||||||
||Extraordinary||||m.cn/cninfo-new/dis|
|Extraordinary||||||
||shareholders’ general||||closure/fulltext/bulle|
|shareholders’ general||||||
||meeting||||tin_detail/true/12038|
|meeting||||||
||||||64961?announceTim|
||||||e=2017-08-25|
||||||http://www.cninfo.co|
|2017 Third|||||m.cn/cninfo-new/dis|
||Extraordinary|||||
|Extraordinary|||||closure/fulltext/bulle|
||shareholders’ general|47.11%|2017-11-16|2017-11-17||
|shareholders’ general|||||tin_detail/true/12041|
||meeting|||||
|meeting|||||45314?announceTim|
||||||e=2017-11-17|

 2. Request for extraordinary general meeting by preferred stockholders whose voting rights restore□ Applicable√ Not applicable
V. Responsibility performance of independent directors
1. The attending of independent directors to Board meetings and general meeting
|||||||||
|-|-|-|-|-|-|-|-|
|The attending of independent directors and BOD||||||||
||Times of|||||Absent the|Times|
||||Times of|||||
||Board meeting|Times of||Times of||Meeting for|presented in|
|Independent|||attending by||Times of|||
||supposed to|present in||entrusted||the second|shareholders’|
|Director|||communicatio||Absence|||
||attend in the|person||presence||time in a row|general|
||||n|||||
||report period|||||(Y/N)|meeting|
|Zhang Zhaoguo|10|3|6|1|0|N|3|
|Li Ding’an|10|4|6|0|0|N|3|
|Xu Jingwen|10|2|6|2|0|N|3|

 Explanation of absent the Board Meeting for the second time in a row
Nil
2. Objection for relevant events from independent directors
Independent directors come up with objection aboutCompany’s relevant matters
□Yes√No
Independent directors has no objections for relevant events in reporting period
3. Other explanation about responsibility performance of independent directors
The opinions from independent directors have been adopted
√ Yes□ No
Explanation on advice that accepted/not accepted from independent directors
Advices about the Company from independent directors are all accepted in the reporting period.
VI. Duty performance of the special committees under the board during the reporting period 1. Duty performance of the audit committee
During the reporting period, the work carried out by the audit committee mainly included: listening to the company's annual operating, financial and internal audit work, continuing to concern and guide thecompany’s financial affairs and internal audit supervision, carrying forward the audit work to thecompany’s annual financial report, sending a letter to urge the audit report to be submitted on time, communicating with the certified public accountants time after time during the annual audit, objectively evaluating the annual audit work of the accounting firm, and making the resolution to agree to re-appoint the accounting firm.
2. Remuneration& appraisal committee
During the reporting period, the remuneration& appraisal committee has audited 2013 annual remuneration of thecompany’s directors, supervisors and senior management which was considered to be consistent with the actual situation and in line with the provisions of relevant laws and the regulations of remuneration and appraisal system. 3. The nominations committee
During the reporting period, the nominations committee has investigated the proposal for the supplement of independent directors, and made the decision to agree to submit to the board of directors for consideration. 4. The Strategic Committee
In the reporting period, the Strategic Committee
VII. Works from Supervisory Committee
The Company has risks in reporting period that found in supervisory activity from supervisory committee
□ Yes√ No
Supervisory committee has no objection about supervision events in reporting period
VIII. Examination and incentives of senior management
During the reporting period, in order to enable the senior management to better perform their duties and maintain the interests of the company and its shareholders, the company has floatingly paid the remuneration to urge the company's management to work more diligently and ensure the realization of the company's development strategy and operation target accordingly to the “Staff rank and basic salary system” and the performance assessment and combining with the company's actual operating conditions.
IX. Internal Control
1. Details of major defects in IC appraisal report that found in reporting period
□Yes√ No
2. Appraisal Report of Internal Control
||||
|-|-|-|
|Disclosure date of full internal control|||
||2018-04-24||
|evaluation report|||
|Disclosure index of full internal control|Juchao Website||
|evaluation report|http://www.cninfo.com.cn||
|The ratio of the total assets of units|||
|included in the scope of evaluation|||
|accounting for the total assets on the|100.00%||
|company's consolidated financial|||
|statements|||
|The ratio of the operating income of units|||
|included in the scope of evaluation|||
|accounting for the operating income on the|100.00%||
|company's consolidated financial|||
|statements|||
|Defects Evaluation Standards|||
|Category|Financial Reports|Non-financial Reports|
|||1. General deficiencies: when facing|
||1. General deficiencies: the amount of direct|low-risk matters in the process of|
||property loss is between 50,000 and 150,000|business operation, the unit being|
||Yuan, penalized by the district-level|inspected didn’t take corresponding|
||(including district-level) government sector|internal control measures and respond|
||but not having a negative impact on the|effectively;|
||company’s regular disclosure; 2. Important|2. Important deficiencies: when facing|
||deficiencies: the amount of direct property|matters at a moderate risk level in the|
||loss is between 150,000 and 450,000 Yuan,|process of business operation, the unit|
|Qualitative criteria|||
||penalized by the provincial level (including|being inspected didn’t take|
||provincial level) government sector but not|corresponding internal control measures|
||having a negative impact on the company’s|and respond effectively;|
||regular disclosure; 3. Major deficiencies: the|3. Major deficiencies: when facing|
||amount of direct property loss is more than|high-risk matters in the process of|
||450,000 Yuan, penalized by the government|business operation, the unit being|
||sector and having a negative impact on the|inspected didn’t take corresponding|
||company’s regular disclosure;|internal control measures and respond|
|||effectively.|

||||
|-|-|-|
||1. It belongs to important deficiency if the||
||misstatement of the company’s cash on hand,||
||bank deposits, notes receivable, and notes||
||payable caused by internal control||
||deficiencies is less than RMB 1000 Yuan; it|General deficiencies: misstatement index|
||belongs to major deficiency if the|1 ≥0.5‰, and misstatement index 2 <|
||misstatement caused by internal control|0.5‰;|
|Quantitative standard|deficiencies is greater than or equal to RMB|Important deficiencies: 0.5‰ ≤|
||1000 Yuan.|misstatement index 2 < 1‰;|
||2. Other deficiencies in internal controls:|Major deficiencies: misstatement index|
||general deficiencies: misstatement index 1 ≥|2≥1‰|
||0.5 ‰, and misstatement index 2 < 0.5 ‰;||
||important deficiencies: 0.5 ‰ ≤||
||misstatement index 2 <1 ‰; major||
||deficiencies: misstatement index 2 ≥ 1 ‰||
|Amount of significant defects in financial|||
||0||
|reports|||
|Amount of significant defects in|||
||0||
|non-financial reports|||
|Amount of important defects in financial|||
||0||
|reports|||
|Amount of important defects in|||
||0||
|non-financial reports|||

X. Auditing report of internal control
√ Applicable□ Not applicable
|||
|-|-|
|Deliberations in Internal Control Audit Report||
|We believes the Company was in accordance with the "basic norms of internal control" and the relevant provisions and maintained||
|effective internal control of financial reporting in all material respects on 31 Dec. 2017.||
|Disclosure details of audit report of||
||Disclosed|
|internal control||
|Disclosure date of audit report of||
||2018-04-24|
|internal control (full-text)||
|Index of audit report of internal||
||The designated website: Juchao Website|
|control (full-text)||
|Opinion type of auditing report of||
||Standard unqualified|
|IC||
|Whether the non-financial report||
||No|
|had major defects||

Carried out modified opinion for internal control audit report from CPA
□Yes√ No
The internal control audit report, issued by CPA, has concerted opinion with self-evaluation report, issued from the Board
√ Yes□ No
Section X. Corporate Bond
Whether the Company has a corporation bonds that issuance publicly and listed on stock exchange and without due on the date when annual report approved for released or fail to cash in full on due
□Yes√ No
Section XI. Financial Report
I. Audit report
|||
|-|-|
|Type of audit opinion|Standard unqualified opinion|
|Signing date of audit report|2018-04-20|
|Name of audit institute|DAXIN Certified Public Accountants LLP|
|Document serial of audit report|Da Xin Shen Zi [2018] No.: 5-00108|
|Name of CPA|Li Wei, Fan Zhang|

Auditor’s Report
I. Auditing opinions
We have audited the financial statement under the name of SHENZHEN ZHONGHENG HUAFA CO., LTD. (hereinafter referred to as the Company), including the consolidated and parentCompany’s balance sheet of 31 December 2017 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.
In our opinion, theCompany’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 Company and of its parent company as of 31 December 2017 and its operation results and cash flows for the year ended.
II. Basis of opinion
We conducted our audit in accordance with the Auditing Standards for Certified Public Accountants of China. Our responsibilities under those standards are further described in the“Auditor’s Responsibilities for the Audit of the Financial Statements” section of theauditor’s report. We are independent of the Company in accordance with the Certified Public Accountants ofChina’s Code of Ethics for Professional Accountants, and we have fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
III. Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
(I) The transfer of creditor's rights to Jifang Company.
1. Description of the matter
Refer to Notes V (28) and V (38) of the consolidated statements that thecompany’s subsidiary Huafa Property
and Shenzhen Jifang Investment Co., Ltd. signed a house lease contract to rent out the first to third floors of the
company’s own property Huafa Building to Jifang Company. However, Jifang Company has not paid the rent and management fees since December 2015, Huafa Property submitted arbitration to Shenzhen Arbitration Commission in March 2016 and received the Award No. 346 from Shenzhen Arbitration Commission in November 2016, according to the arbitration, Jifang Company needed to pay the rent and management fees of 2017 of RMB 23,020,800 to the company, the company confirmed the income of RMB 21,717,000 according to the lease contract, this income accounted for53% of thecompany’s property income for this year. The company hanged out its shingle to transfer this claim at the cost of RMB 17,265,600 via Shenzhen United Property and Share Rights Exchange, Shenzhen Jufan Investment Industry Co., Ltd. successfully picked the shingle and paid RMB 17,265,600 in December 2017, the company confirmed the loss of RMB 5,755,000 in transfer, this matter had the risks ofcreditor’s rights confirmed by the management and the authenticity of credit assignment. Therefore, we regarded this matter as a key audit matter.
2. Audit response
We have implemented procedures for this matter:
(1) Understand and evaluate the effectiveness of the internal control design and operation related to the formation of management revenue recognition claims, and understand the procedures for the collection and payment of credit assignment.
(2) Check the lease contract, award, and recognize whether the assessment to the formation of revenue recognition clauses claims meet the accounting standards, and confirm whether the accounting treatment for thecreditor’s right is correct.
(3) Check the credit assignment commission contract, the transaction certificate of Shenzhen United Property and Share Rights Exchange, and bank slip, verify the amount of funds received from this credit assignment, and recheck the loss of this credit assignment and whether its accounting treatment is correct.
(4) Inquire the industrial and commercial information whether Shenzhen Jufan Investment Industrial Co., Ltd. is a related party and implement visit procedures to evaluate the authenticity of the transfer.
(II) Arbitration with Vanke
1. Description of the matter
In accordance with Notes XI (2) of the consolidated statements, in August 2015, Shenzhen Huafa and Wuhan Zhongheng New Technology Industry Group Co., Ltd. (hereinafter referred to as “Wuhan Zhongheng”) signed the “Cooperation Agreement on Urban Renewal Project of Updated Units at Huafa Industrial Park, Gongming Street, Guangming New District, Shenzhen”. In September 2016, Shenzhen Vanke went to arbitration to South China International Economic and Trade Arbitration Commission (hereinafter referred to as “South China International Arbitration”) on the ground that Shenzhen Huafa and Wuhan Zhongheng violated the “Cooperation Contract” and exceeded the time limit and handled the “Confirmation of Reforming Implementation Subject”, and required Shenzhen Huafa and Wuhan Zhongheng to pay the payment of liquidated damages and theattorneys’ fees of RMB 464,600,000 in total. On August 16, 2017, South China International Economic and Trade Arbitration Commission made the “Arbitral Award” SCIA[2017] D376, ruling Shenzhen Huafa and Wuhan Zhongheng to
pay the payment of liquidated damages and other expenses of 234 million Yuan in total. The company considered that the verdict of this case had problems with the arbitration procedures and the assertions of the so-called breach of contract facts, its verdict has damaged thecompany’s legitimate rights and interests, and the company has filed a withdrawal application to the Shenzhen IntermediatePeople’s Court, and the Shenzhen IntermediatePeople’s Court has already formally accepted the case on February 7, 2018, the case number was (2018) Yue 03 MT 113. Whether thecompany’s management had breach of contract and whether the defaultingparty’s internal fault liability allocation was correct, and the judgment risks that the finding did not confirm the estimated liability or the current profit and loss, therefore, we regarded the arbitration matters with Vanke as key audit matters. 2. Audit response
(1) Understand thecompany’s policies or procedures for determining contingencies by performing inspections, consulting with thecompany’s legal advisor, etc.
(2) Check thecompany’s assets replacement contract related to this matter, the asset replacement and related transaction announcement, the renovation contract, the cooperation agreement between the company and Wuhan Zhongheng Group, the award of the case, and whether the reasons and facts and thecompany’s affirmation for the company to revoke the arbitration application and verify the formation of this matter are reasonable.
(3) Communicate with thecompany’s legal advisor and obtain special legal opinion from the legal advisor, and understand the professional advice with legislative confirmation on this matter.
(III) Arbitration onlawyers’ fee withV&T Law Firm
1. Description of the matter
Refer to Note V (5) and XI (2) of the consolidated statements, on October 8, 2016, Wuhan Zhongheng New Technology Industry Group and the Company entrustedV&T Law Firm to agent for the arbitration case with Vanke and signed the “Entrusted Agency Contract” and “Supplementary Agreement”. According to the supplementary agreement, if the seized objects could be successfully applied for replacement with other assets, RMB 2 million would be paid within 3 days after receiving the adjudication. In view of the fact thatV&T Law Firm promised to replace the seized objects, the company has paid 2 million Yuan as a prepayment in advance. However,V&T Law Firm failed to replace the seized objects and eventually lost the case. The company has applied to Shenzhen Intermediate People's Court for the revocation of the arbitral award on February 8, 2018, and the Intermediate People's Court has accepted the case. However,V&T Law Firm still asked for a huge amount of legal fees after losing the case and filed an arbitration with the arbitration commission, the company received the application for arbitration thatV&T Law Firm applied to Wuhan Zhongheng and the Company for paying the legal fees of RMB 19,402,000 for Vanke arbitration case from Shenzhen International Arbitration Commission on March 12, 2018, in view of the fact thatV&T Law Firm did not complete the agreement on the replacement of seized objects and did not satisfy the payment condition of RMB 2 million, the company has already filed an arbitration on refunding the lawyer fees. The company transferred the pre-expenditure of RMB 2 million to other receivables and bad debts were accrued based on the aging of the account, as the amount of lawyer fees had a greater impact on profit or loss and there was risk of management judgment, therefore, we regarded this matter as
a key audit matter.
2. Audit response
(1) Understand and evaluate the effectiveness of the internal control design and operation related to the management payment and bad debts provisions
(2) Examine the agency contract, bank slip, and the arbitration application for lawyer fees, and implement the authenticity of lawfirm’s external confirmations procedures to evaluate the creditor's right.
(3) Understand thecompany’s procedures for determining contingencies by performing inspections, consulting with thecompany’s legal advisor, etc.
(4) Check the agency contracts, awards, identification of payment, analysis of aging, check whether the bad debt accruals assessment conforms to accounting standards, a , and whether the accounting treatment is correct. We have fulfilled the responsibilities described in the “CPA's Responsibility for the Audit of Financial Statements” in this report, including those responsibilities related to these key audit matters. The results of our audit procedures, including the procedures performed in response to the above key audit matters, provided the basis for the overall release of the audit opinion in the financial statements.
IV. Other information
The management of the Company (the “Management”) is responsible for other information which includes the information covered in theCompany’s 2017 annual report excluding the financial statement and our audit report. The audit opinion issued by us for the financial statement has not covered other information, for which we do not issue any form of assurance opinions.
Considering our audit on financial statements, we are liable to read other information, during which, we shall consider whether other information differs materially from the financial statements or that we understand during our audit, or whether there is any material misstatement.
Based on the works executed by us, we should report the fact if we find any material misstatement in other information. In t his regards, we have nothing to report.
V. Responsibilities of management and those charged with governance for the financial statements
The management is responsible for the preparation of the financial statements in accordance with the Accounting Standards for Enterprise to secure a fair presentation, and for the design, establishment and maintenance of the internal control necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the management is responsible for assessing theCompany’s ability to continue as a going concern, disclosing matters related to going concern and using the going concern assumption unless the management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing theCompany’s financial reporting process. VI. Responsibilities of the auditor for the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an audit report that includes our audit opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the CAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with the CAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for audit opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management.
(4) Conclude on the appropriateness of themanagement’s use of the going concern assumption and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required by the CAS to drawusers’ attention in audit report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify audit opinion. Our conclusions are based on the information obtained up to the date of audit report. However, future events or conditions may cause the Company to cease to continue as a going concern.
(5) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express audit opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguard measures.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in theauditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in theauditor’s report because of the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
II. 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
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Current assets:|||
|Monetary funds|68,812,495.97|93,332,709.81|
|Settlement provisions|||
|Capital lent|||
|Financial assets measured by fair|||
|value and with variation reckoned into|||
|current gains/losses|||
|Derivative financial liability|||
||64,778,266.65|52,663,100.89|
|Notes receivable|||
||148,795,998.26|139,808,058.20|
|Accounts receivable|||
|Accounts paid in advance|943,328.01|13,075,721.93|
|Insurance receivable|||
|Reinsurance receivables|||
|Contract reserve of reinsurance|||
|receivable|||
|Interest receivable|||
|Dividend receivable|||
|Other receivables|4,335,729.72|3,934,376.89|
|Purchase restituted finance asset|||

||||
|-|-|-|
|Inventories|60,387,021.65|46,902,384.80|
|Assets held for sale|||
|Non-current asset due within one||12,191.49|
|year|||
|Other current assets|52,310.51||
|Total current assets|348,105,150.77|349,728,544.01|
|Non-current assets:|||
|Loans and payments on behalf|||
|Finance asset available for sales|||
|Held-to-maturity investment|||
|Long-term account receivable|||
|Long-term equity investment|||
|Investment real estate|52,410,958.62|54,145,225.02|
|Fix assets|83,619,842.39|81,544,707.02|
|Construction in progress|654,356.00|654,356.00|
|Engineering material|||
|Disposal of fixed asset|92,857,471.69|92,857,471.69|
|Productive biological asset|||
|Oil and gas asset|||
|Intangible assets|43,307,316.37|44,878,095.77|
|Expense on Research and|||
|Development|||
|Goodwill|||
|Long-term expenses to be|141,666.55|191,666.59|
|apportioned|||
|Deferred income tax asset|6,731,168.99|8,475,476.30|
|Other non-current asset|1,934,800.00||
|Total non-current asset|281,657,580.61|282,746,998.39|
|Total assets|629,762,731.38|632,475,542.40|
|Current liabilities:|||
|Short-term loans|166,620,264.81|181,210,467.81|
|Loan from central bank|||
|Absorbing deposit and interbank|||
|deposit|||
|Capital borrowed|||
|Financial liability measured by fair|||
|value and with variation reckoned into|||
|current gains/losses|||

||||
|-|-|-|
|Derivative financial liability|||
|Notes payable|17,810,270.28|16,714,584.01|
|Accounts payable|84,004,870.73|73,714,424.77|
|Accounts received in advance|278,128.18|48,846.60|
|Selling financial asset of|||
|repurchase|||
|Commission charge and|||
|commission payable|||
|Wage payable|5,083,357.93|4,542,531.22|
|Taxes payable|15,136,277.68|16,768,030.70|
|Interest payable|164,895.80|123,641.69|
|Dividend payable|||
|Other accounts payable|19,927,276.95|17,050,035.16|
|Reinsurance payables|||
|Insurance contract reserve|||
|Security trading of agency|||
|Security sales of agency|||
|Liability held for sale|||
|Non-current liabilities due within 1|||
|year|||
|Other current liabilities|||
|Total current liabilities|309,025,342.36|310,172,561.96|
|Non-current liabilities:|||
|Long-term loans|||
|Bonds payable|||
|Including: preferred stock|||
|Perpetual capital|||
|securities|||
|Long-term account payable|||
|Long-term wages payable|||
|Special accounts payable|||
|Projected liabilities|64,411.00|2,604,411.81|
|Deferred income|||
|Deferred income tax liabilities|||
|Other non-current liabilities|||
|Total non-current liabilities|64,411.00|2,604,411.81|
|Total liabilities|309,089,753.36|312,776,973.77|

||||
|-|-|-|
|Owner’s equity:|||
|Share capital|283,161,227.00|283,161,227.00|
|Other equity instrument|||
|Including: preferred stock|||
|Perpetual capital|||
|securities|||
|Capital public reserve|146,587,271.50|146,587,271.50|
|Less: Inventory shares|||
|Other comprehensive income|||
|Reasonable reserve|||
|Surplus public reserve|77,391,593.25|77,391,593.25|
|Provision of general risk|||
|Retained profit|-186,467,113.73|-187,441,523.12|
|Total owner’s equity attributable to|320,672,978.02|319,698,568.63|
|parent company|||
|Minority interests|||
|Total owner’s equity|320,672,978.02|319,698,568.63|
|Total liabilities and owner’s equity|629,762,731.38|632,475,542.40|

 Legal representative: Li Zhongqiu Person in charge of accounting works:Yang Bin Person in charge of accounting institution: Wu Aijie
2. Balance Sheet of Parent Company
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Current assets:|||
||25,181,764.87|10,375,152.87|
|Monetary funds|||
|Financial assets measured by fair|||
|value and with variation reckoned into|||
|current gains/losses|||
|Derivative financial liability|||
|Notes receivable|||
|Accounts receivable|||
|Account paid in advance||2,500,000.00|
|Interest receivable|||
|Dividends receivable|||

||||
|-|-|-|
|Other receivables|99,922,143.84|114,067,051.57|
|Inventories|14,806.50|14,806.50|
|Assets held for sale|||
|Non-current assets maturing within|||
|one year|||
|Other current assets|||
|Total current assets|125,118,715.21|126,957,010.94|
|Non-current assets:|||
|Available-for-sale financial assets|||
|Held-to-maturity investments|||
|Long-term receivables|||
|Long-term equity investment|186,608,900.00|186,608,900.00|
|Investment real estate|27,583,299.22|28,796,525.38|
|Fix assets|6,821,367.58|6,491,983.71|
|Construction in progress|654,356.00|654,356.00|
|Project materials|||
|Disposal of fixed assets|92,857,471.69|92,857,471.69|
|Productive biological assets|||
|Oil and natural gas assets|||
|Intangible assets|4,843,600.68|4,988,546.40|
|Research and development costs|||
|Goodwill|||
|Long-term deferred expenses|141,666.55|191,666.59|
|Deferred income tax assets|7,519,546.71|9,217,543.32|
|Other non-current assets|||
|Total non-current assets|327,030,208.43|329,806,993.09|
|Total assets|452,148,923.64|456,764,004.03|
|Current liabilities:|||
|Short-term borrowings|120,000,000.00|120,000,000.00|
|Financial liability measured by fair|||
|value and with variation reckoned into|||
|current gains/losses|||
|Derivative financial liability|||
|Notes payable|||
|Accounts payable|10,745,840.16|10,745,840.16|

||||
|-|-|-|
|Accounts received in advance|67,210.00|44,162.00|
|Wage payable|1,039,196.20|857,735.20|
|Taxes payable|9,305,468.70|10,094,737.11|
|Interest payable|||
|Dividend payable|||
|Other accounts payable|14,339,551.78|13,383,939.40|
|Liability held for sale|||
|Non-current liabilities due within 1|||
|year|||
|Other current liabilities|||
|Total current liabilities|155,497,266.84|155,126,413.87|
|Non-current liabilities:|||
|Long-term loans|||
|Bonds payable|||
|Including: preferred stock|||
|Perpetual capital|||
|securities|||
|Long-term account payable|||
|Long-term wages payable|||
|Special accounts payable|||
|Projected liabilities|64,411.00|2,604,411.81|
|Deferred income|||
|Deferred income tax liabilities|||
|Other non-current liabilities|||
|Total non-current liabilities|64,411.00|2,604,411.81|
|Total liabilities|155,561,677.84|157,730,825.68|
|Owners’ equity:|||
|Share capita|283,161,227.00|283,161,227.00|
|Other equity instrument|||
|Including: preferred stock|||
|Perpetual capital|||
|securities|||
|Capital public reserve|146,587,271.50|146,587,271.50|
|Less: Inventory shares|||
|Other comprehensive income|||

||||
|-|-|-|
|Reasonable reserve|||
|Surplus reserve|77,391,593.25|77,391,593.25|
|Retained profit|-210,552,845.95|-208,106,913.40|
|Total owner’s equity|296,587,245.80|299,033,178.35|
|Total liabilities and owner’s equity|452,148,923.64|456,764,004.03|

 3. Consolidated Profit Statement
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|I. Total operating income|858,040,132.74|619,167,770.74|
|Including: Operating income|858,040,132.74|619,167,770.74|
|Interest income|||
|Insurance gained|||
|Commission charge and commission|||
|income|||
|II. Total operating cost|853,455,010.07|611,110,771.22|
|Including: Operating cost|777,906,611.12|534,736,613.02|
|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|||
|Taxes and surcharge|6,447,920.89|6,137,557.58|
|Sales expenses|15,916,493.87|11,415,270.82|
|Administration expenses|42,783,111.53|50,261,495.60|
|Financial expenses|8,979,085.95|5,012,897.34|
|Losses of devaluation of asset|1,421,786.71|3,546,936.86|
|Add: Changing income of fair|||
|value(Loss is listed with “-”)|||
|Investment income (Loss is listed|372,245.91|333,974.06|

||||
|-|-|-|
|with “-”)|||
|Including: Investment income on|||
|affiliated company and joint venture|||
|Exchange income (Loss is listed|||
|with “-”)|||
|Income from assets disposal|||
||199,069.56|82,132.08|
|(Loss is listed with “-”)|||
|Other income|161,420.00||
|III. Operating profit (Loss is listed with|||
||5,317,858.14|8,473,105.66|
|“-”)|||
|Add: Non-operating income|2,971,956.07|5,410,701.48|
|Less: Non-operating expense|5,758,731.56|5,200,794.92|
|IV. Total Profit (Loss is listed with “-”)|2,531,082.65|8,683,012.22|
|Less: Income tax expense|1,556,673.26|3,225,301.89|
|V. Net profit (Net loss is listed with “-”)|974,409.39|5,457,710.33|
|(i) net profit from continuous|||
|operation (Net loss is listed with “-”)|||
|(ii) net profit from discontinued|||
|operation (Net loss is listed with “-”)|||
|Net profit attributable to owner’s of|||
||974,409.39|5,457,710.33|
|parent company|||
|Minority shareholders’ gains and|||
|losses|||
|VI. Net after-tax of other comprehensive|||
|income|||
|Net after-tax of other comprehensive|||
|income attributable to owners of parent|||
|company|||
|(I) Other comprehensive income|||
|items which will not be reclassified|||
|subsequently to profit of loss|||
|1. Changes as a result of|||
|re-measurement of net defined benefit|||
|plan liability or asset|||
|2. Share of the other|||
|comprehensive income of the investee|||
|accounted for using equity method which|||
|will not be reclassified subsequently to|||
|profit and loss|||

||||
|-|-|-|
|(II) Other comprehensive income|||
|items which will be reclassified|||
|subsequently to profit or loss|||
|1. Share of the other|||
|comprehensive income of the investee|||
|accounted for using equity method which|||
|will be reclassified subsequently to profit|||
|or loss|||
|2. Gains or losses arising|||
|from changes in fair value of|||
|available-for-sale financial assets|||
|3. Gains or losses arising|||
|from reclassification of held-to-maturity|||
|investment as available-for-sale financial|||
|assets|||
|4. The effect hedging portion|||
|of gains or losses arising from cash flow|||
|hedging instruments|||
|5. Translation differences|||
|arising on translation of foreign currency|||
|financial statements|||
|6. Other|||
|Net after-tax of other comprehensive|||
|income attributable to minority|||
|shareholders|||
|VII. Total comprehensive income|974,409.39|5,457,710.33|
|Total comprehensive income|||
||974,409.39|5,457,710.33|
|attributable to owners of parent Company|||
|Total comprehensive income|||
|attributable to minority shareholders|||
|VIII. Earnings per share:|||
|(i) Basic earnings per share|0.0034|0.0193|
|(ii) Diluted earnings per share|0.0034|0.0193|

 Enterprise combine under the same control in the Period, the combined party realized net profit of 0 Yuan before combination, and realized 0 Yuan at last period for combined party
Legal representative: Li Zhongqiu Person in charge of accounting works:Yang Bin Person in charge of accounting institution: Wu Aijie
4. Profit Statement of Parent Company
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|I. Operating income|41,156,307.77|43,547,414.64|
|Less: Operating cost|5,877,729.00|6,585,571.92|
|Taxes and surcharge|2,665,603.29|2,909,400.85|
|Sales expenses|||
|Administration expenses|21,974,153.89|24,443,614.03|
|Financial expenses|8,006,852.33|5,510,413.62|
|Losses of devaluation of asset|502,503.49|3,296,102.05|
|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|||
|Income from assets disposal|||
|||-18,924.00|
|(Loss is listed with “-”)|||
|Other income|||
|II. Operating profit (Loss is listed|||
||2,129,465.77|783,388.17|
|with “-”)|||
|Add: Non-operating income|1,689,721.90|3,569,624.89|
|Less: Non-operating expense|5,755,745.88|5,154,489.08|
|III. Total Profit (Loss is listed with|||
||-1,936,558.21|-801,476.02|
|“-”)|||
|Less: Income tax expense|509,374.34|415,372.60|
|IV. Net profit (Net loss is listed with|||
||-2,445,932.55|-1,216,848.62|
|“-”)|||
|(i) net profit from continuous|||
|operation (Net loss is listed with “-”)|||
|(ii) net profit from discontinued|||
|operation (Net loss is listed with “-”)|||
|V. Net after-tax of other comprehensive|||
|income|||
|(I) Other comprehensive income|||
|items which will not be reclassified|||
|subsequently to profit of loss|||

||||
|-|-|-|
|1. Changes as a result of|||
|re-measurement of net defined benefit|||
|plan liability or asset|||
|2. Share of the other|||
|comprehensive income of the investee|||
|accounted for using equity method|||
|which will not be reclassified|||
|subsequently to profit and loss|||
|(II) Other comprehensive income|||
|items which will be reclassified|||
|subsequently to profit or loss|||
|1. Share of the other|||
|comprehensive income of the investee|||
|accounted for using equity method|||
|which will be reclassified subsequently|||
|to profit or loss|||
|2. Gains or losses arising|||
|from changes in fair value of|||
|available-for-sale financial assets|||
|3. Gains or losses arising|||
|from reclassification of held-to-maturity|||
|investment as available-for-sale|||
|financial assets|||
|4. The effect hedging|||
|portion of gains or losses arising from|||
|cash flow hedging instruments|||
|5. Translation differences|||
|arising on translation of foreign|||
|currency financial statements|||
|6. Other|||
|VI. Total comprehensive income|-2,445,932.55|-1,216,848.62|
|VII. Earnings per share:|||
|(i) Basic earnings per share|||
|(ii) Diluted earnings per share|||

5. Consolidated Cash Flow Statement
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|I. Cash flows arising from operating|||
|activities:|||

||||
|-|-|-|
|Cash received from selling|||
|commodities and providing labor|827,133,048.96|576,271,328.32|
|services|||
|Net increase of customer deposit|||
|and interbank deposit|||
|Net increase of loan from central|||
|bank|||
|Net increase of capital borrowed|||
|from other financial institution|||
|Cash received from original|||
|insurance contract fee|||
|Net cash received from reinsurance|||
|business|||
|Net increase of insured savings and|||
|investment|||
|Net increase of amount from|||
|disposal financial assets that measured|||
|by fair value and with variation|||
|reckoned into current gains/losses|||
|Cash received from interest,|||
|commission charge and commission|||
|Net increase of capital borrowed|||
|Net increase of returned business|||
|capital|||
|Write-back of tax received|11,937.37||
|Other cash received concerning|||
||13,807,385.47|68,476,594.48|
|operating activities|||
|Subtotal of cash inflow arising from|||
||840,952,371.80|644,747,922.80|
|operating activities|||
|Cash paid for purchasing|||
|commodities and receiving labor|700,632,478.96|469,147,356.40|
|service|||
|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|74,059,833.16|61,583,984.43|
|Taxes paid|12,201,020.91|21,225,973.55|
|Other cash paid concerning|||
||42,335,784.41|111,483,905.00|
|operating activities|||
|Subtotal of cash outflow arising from|||
||829,229,117.44|663,441,219.38|
|operating activities|||
|Net cash flows arising from operating|||
||11,723,254.36|-18,693,296.58|
|activities|||
|II. Cash flows arising from investing|||
|activities:|||
|Cash received from recovering|||
||291,000,000.00|334,700,000.00|
|investment|||
|Cash received from investment|||
||372,245.91|333,974.06|
|income|||
|Net cash received from disposal of|||
|fixed, intangible and other long-term|169,640.00|188,362.00|
|assets|||
|Net cash received from disposal of|||
|subsidiaries and other units|||
|Other cash received concerning|||
|investing activities|||
|Subtotal of cash inflow from investing|||
||291,541,885.91|335,222,336.06|
|activities|||
|Cash paid for purchasing fixed,|||
||10,268,751.27|6,628,243.65|
|intangible and other long-term assets|||
|Cash paid for investment|291,000,000.00|334,700,000.00|
|Net increase of mortgaged loans|||
|Net cash received from|||
|subsidiaries and other units obtained|||
|Other cash paid concerning|||
|investing activities|||
|Subtotal of cash outflow from investing|||
||301,268,751.27|341,328,243.65|
|activities|||
|Net cash flows arising from investing|||
||-9,726,865.36|-6,105,907.59|
|activities|||

||||
|-|-|-|
|III. Cash flows arising from financing|||
|activities|||
|Cash received from absorbing|||
|||303,628.60|
|investment|||
|Including: Cash received from|||
|absorbing minority shareholders’|||
|investment by subsidiaries|||
|Cash received from loans|288,636,279.36|248,739,138.25|
|Cash received from issuing bonds|||
|Other cash received concerning|||
|financing activities|||
|Subtotal of cash inflow from financing|||
||288,636,279.36|249,042,766.85|
|activities|||
|Cash paid for settling debts|302,262,347.00|743,361,629.35|
|Cash paid for dividend and profit|||
||10,604,519.83|9,132,711.48|
|distributing or interest paying|||
|Including: Dividend and profit of|||
|minority shareholder paid by|||
|subsidiaries|||
|Other cash paid concerning|||
|financing activities|||
|Subtotal of cash outflow from financing|||
||312,866,866.83|752,494,340.83|
|activities|||
|Net cash flows arising from financing|||
||-24,230,587.47|-503,451,573.98|
|activities|||
|IV. Influence on cash and cash|||
|equivalents due to fluctuation in|-306,140.20|-580,865.04|
|exchange rate|||
|V. Net increase of cash and cash|||
||-22,540,338.67|-528,831,643.19|
|equivalents|||
|Add: Balance of cash and cash|||
||104,015,312.97|632,846,956.16|
|equivalents at the period-begin|||
|VI. Balance of cash and cash|||
||81,474,974.30|104,015,312.97|
|equivalents at the period-end|||

6. Cash Flow Statement of Parent Company
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|

||||
|-|-|-|
|I. Cash flows arising from operating|||
|activities:|||
|Cash received from selling|||
|commodities and providing labor|39,724,764.06|21,453,165.00|
|services|||
|Write-back of tax received|||
|Other cash received concerning|||
||58,292,413.82|76,073,111.02|
|operating activities|||
|Subtotal of cash inflow arising from|||
||98,017,177.88|97,526,276.02|
|operating activities|||
|Cash paid for purchasing|||
|commodities and receiving labor|5,040,091.56|5,792,314.81|
|service|||
|Cash paid to/for staff and workers|4,211,674.37|3,166,849.75|
|Taxes paid|4,009,011.87|11,555,523.30|
|Other cash paid concerning|||
||60,441,124.86|127,611,991.39|
|operating activities|||
|Subtotal of cash outflow arising from|||
||73,701,902.66|148,126,679.25|
|operating activities|||
|Net cash flows arising from operating|||
||24,315,275.22|-50,600,403.23|
|activities|||
|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||576.00|
|assets|||
|Net cash received from disposal of|||
|subsidiaries and other units|||
|Other cash received concerning|||
|investing activities|||
|Subtotal of cash inflow from investing|||
|||576.00|
|activities|||
|Cash paid for purchasing fixed,|||
||1,449,992.31|2,763,012.20|
|intangible and other long-term assets|||

||||
|-|-|-|
|Cash paid for investment|||
|Net cash received from|||
|subsidiaries and other units|||
|Other cash paid concerning|||
|investing activities|||
|Subtotal of cash outflow from investing|||
||1,449,992.31|2,763,012.20|
|activities|||
|Net cash flows arising from investing|||
||-1,449,992.31|-2,762,436.20|
|activities|||
|III. Cash flows arising from financing|||
|activities|||
|Cash received from absorbing|||
|||303,628.60|
|investment|||
|Cash received from loans|120,000,000.00|120,000,000.00|
|Cash received from issuing bonds|||
|Other cash received concerning|||
|financing activities|||
|Subtotal of cash inflow from financing|||
||120,000,000.00|120,303,628.60|
|activities|||
|Cash paid for settling debts|120,000,000.00|574,300,000.00|
|Cash paid for dividend and profit|||
||8,058,841.68|7,203,237.97|
|distributing or interest paying|||
|Other cash paid concerning|||
|financing activities|||
|Subtotal of cash outflow from financing|||
||128,058,841.68|581,503,237.97|
|activities|||
|Net cash flows arising from financing|||
||-8,058,841.68|-461,199,609.37|
|activities|||
|IV. Influence on cash and cash|||
|equivalents due to fluctuation in|170.77|-132.65|
|exchange rate|||
|V. Net increase of cash and cash|||
||14,806,612.00|-514,562,581.45|
|equivalents|||
|Add: Balance of cash and cash|||
||10,375,152.87|524,937,734.32|
|equivalents at the period -begin|||
|VI. Balance of cash and cash|||
||25,181,764.87|10,375,152.87|
|equivalents at the period -end|||

7. Statement of Changes inOwners’ Equity (Consolidated)
This Period
In RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||This Period|||||||||||||
||Owners’ equity attributable to parent company|||||||||||||
|||Other||||||||||||
|||equity instrument||||||||||||
|Item||||||||||||||
||Share||Perpet|||Less:|Other|Reason||Provisio||Minority|Totalowners’|
||capital|Prefer|ual||Capitalreserve|Inventory|comprehensive|able|Surplusreserve|n ofgeneral|Retained profit|interests|equity|
|||red|capita|Other||shares|income|reserve||risk||||
||||l|||||||||||
|||stock||||||||||||
||||securi|||||||||||
||||ties|||||||||||
||283,16||||||||||-187,44|||
|I. Balance at the|||||146,587||||77,391,||||319,698|
||1,227.||||||||||1,523.1|||
|end of the last year|||||,271.50||||593.25||||,568.63|
||00||||||||||2|||
|Add:||||||||||||||
|Changes of||||||||||||||
|accounting policy||||||||||||||
|Error||||||||||||||
|correction of the||||||||||||||
|last period||||||||||||||
|Enterprise||||||||||||||
|combine under||||||||||||||
|the same control||||||||||||||
|Other||||||||||||||
||283,16||||||||||-187,44|||
|II. Balance at the|||||146,587||||77,391,||||319,698|
|beginning of this|1,227.||||||||||1,523.1|||
||||||,271.50||||593.25||||,568.63|
|year|00||||||||||2|||
|III. Increase/||||||||||||||
||||||||||||974,409||974,409|
|Decrease in this||||||||||||||
|year (Decrease is|||||||||||.39||.39|
|listed with “-”)||||||||||||||
|(i) Total|||||||||||974,409||974,409|
|comprehensive||||||||||||||
||||||||||||.39||.39|
|income||||||||||||||
|(ii) Owners’||||||||||||||
|devoted and||||||||||||||
|decreased capital||||||||||||||
|1.Common shares||||||||||||||
|invested by||||||||||||||
|shareholders||||||||||||||
|2. Capital invested||||||||||||||
|by holders of other||||||||||||||
|equity instruments||||||||||||||

|||||||
|-|-|-|-|-|-|
|3. Amount||||||
|reckoned into||||||
|owners equity with||||||
|share-based||||||
|payment||||||
|4. Other||||||
|(III) Profit||||||
|distribution||||||
|1. Withdrawal of||||||
|surplus reserves||||||
|2. Withdrawal of||||||
|general risk||||||
|provisions||||||
|3. Distribution for||||||
|owners (or||||||
|shareholders)||||||
|4. Other||||||
|(IV) Carrying||||||
|forward internal||||||
|owners’ equity||||||
|1. Capital reserves||||||
|conversed to||||||
|capital (share||||||
|capital)||||||
|2. Surplus reserves||||||
|conversed to||||||
|capital (share||||||
|capital)||||||
|3. Remedying loss||||||
|with surplus||||||
|reserve||||||
|4. Other||||||
|(V) Reasonable||||||
|reserve||||||
|1. Withdrawal in||||||
|the report period||||||
|2. Usage in the||||||
|report period||||||
|(VI)Others||||||
||283,16|||-186,46|320,672,978.02|
|IV. Balance at the||146,587|77,391,|||
|end of the report|1,227.|||7,113.7||
|||,271.50|593.25|||
|period|00|||3||

Last Period
In RMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||Last Period|||||||||||||
||Owners’ equity attributable to the parent Company|||||||||||||
|||Other|||Capital||||Surplus||Retaine|||
|||equity instrument||||||||||||
|||||||||||||Minorit||
|Item||||||||||||||
||Share||Perpetual|||Less:Invento|Othercompre|Reasonable||Provision of||yinterest|Totalowners’|
||capital|Preferred|capital|Other|reserve|ryshares|hensiveincome|reserve|reserve|generalrisk|d profit|s|equity|
|||stock||||||||||||
||||securi|||||||||||
||||ties|||||||||||
||283,16||||||||||-195,42|||
||||||146,283||||77,391,||||311,406|
|I. Balance at the||||||||||||||
||1,227.||||||||||9,900.9|||
|end of the last year|||||,642.90||||593.25||||,562.20|
||00||||||||||5|||
|Add:||||||||||||||
|Changes of||||||||||||||
|accounting policy||||||||||||||
|Error|||||||||||2,530,6||2,530,6|
|correction of the||||||||||||||
||||||||||||67.50||67.50|
|last period||||||||||||||
|Enterprise||||||||||||||
|combine under the||||||||||||||
|same control||||||||||||||
|Other||||||||||||||
||283,16||||||||||-192,89|||
|II. Balance at the|||||146,283||||77,391,||||313,937|
|beginning of this|1,227.||||||||||9,233.4|||
||||||,642.90||||593.25||||,229.70|
|year|00||||||||||5|||
|III. Increase/||||||||||||||
||||||303,628||||||5,457,7||5,761,3|
|Decrease in this||||||||||||||
|year (Decrease is|||||.60||||||10.33||38.93|
|listed with “-”)||||||||||||||
|(i) Total|||||||||||5,457,7||5,457,7|
|comprehensive||||||||||||||
||||||||||||10.33||10.33|
|income||||||||||||||
|(ii) Owners’|||||303,628||||||||303,628|
|devoted and||||||||||||||
||||||.60||||||||.60|
|decreased capital||||||||||||||
|1.Common shares||||||||||||||
|invested by||||||||||||||
|shareholders||||||||||||||
|2. Capital invested||||||||||||||
|by holders of other||||||||||||||
|equity instruments||||||||||||||
|3. Amount||||||||||||||
|reckoned into||||||||||||||
|owners equity with||||||||||||||
|share-based||||||||||||||
|payment||||||||||||||

|||||||
|-|-|-|-|-|-|
|||303,628|||303,628|
|4 Other||||||
|||.60|||.60|
|(III) Profit||||||
|distribution||||||
|1. Withdrawal of||||||
|surplus reserves||||||
|2. Withdrawal of||||||
|general risk||||||
|provisions||||||
|3. Distribution for||||||
|owners (or||||||
|shareholders)||||||
|4. Other||||||
|(IV) Carrying||||||
|forward internal||||||
|owners’ equity||||||
|1. Capital reserves||||||
|conversed to||||||
|capital (share||||||
|capital)||||||
|2. Surplus reserves||||||
|conversed to||||||
|capital (share||||||
|capital)||||||
|3. Remedying loss||||||
|with surplus||||||
|reserve||||||
|4. Other||||||
|(V) Reasonable||||||
|reserve||||||
|1. Withdrawal in||||||
|the report period||||||
|2. Usage in the||||||
|report period||||||
|(VI)Others||||||
||283,16|||-187,44||
|IV. Balance at the||146,587|77,391,||319,698|
|end of the report|1,227.|||1,523.1||
|||,271.50|593.25||,568.63|
|period|00|||2||

8. Statement of Changes inOwners’ Equity (Parent Company)
This Period
In RMB
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||This Period|||||||||
|Item||||||||||
||Share|Other|Capital|Less:|Other|Reasonab|Surplus|Retaine|Total|

|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||capital|equity instrument|||reserve|Inventory|comprehe|le reserve|reserve|d profit|owners’|
|||PerpetualPreferrecapital Otherd stocksecurities||||shares|nsive||||equity|
||||||||income|||||
||||al|||||||||
|||Preferre||||||||||
||||capital|Other||||||||
|||d stock||||||||||
||||securiti|||||||||
||||es|||||||||
|||||||||||-208,10||
||283,161,||||146,587,2||||77,391,59||299,033,1|
|I. Balance at the||||||||||||
|||||||||||6,913.4||
|end of the last year|227.00||||71.50||||3.25||78.35|
|||||||||||0||
|Add: Changes||||||||||||
|of accounting||||||||||||
|policy||||||||||||
|Error||||||||||||
|correction of the||||||||||||
|last period||||||||||||
|Other||||||||||||
|||||||||||-208,10||
|II. Balance at the|283,161,||||146,587,2||||77,391,59||299,033,1|
|beginning of this||||||||||6,913.4||
||227.00||||71.50||||3.25||78.35|
|year||||||||||0||
|III. Increase/||||||||||||
|||||||||||-2,445,9|-2,445,93|
|Decrease in this||||||||||||
|year (Decrease is||||||||||32.55|2.55|
|listed with “-”)||||||||||||
|(i) Total||||||||||-2,445,9|-2,445,93|
|comprehensive||||||||||||
|||||||||||32.55|2.55|
|income||||||||||||
|(ii) Owners’||||||||||||
|devoted and||||||||||||
|decreased capital||||||||||||
|1.Common shares||||||||||||
|invested by||||||||||||
|shareholders||||||||||||
|2. Capital invested||||||||||||
|by holders of other||||||||||||
|equity instruments||||||||||||
|3. Amount||||||||||||
|reckoned into||||||||||||
|owners equity with||||||||||||
|share-based||||||||||||
|payment||||||||||||
|4. Other||||||||||||
|(III) Profit||||||||||||
|distribution||||||||||||
|1. Withdrawal of||||||||||||
|surplus reserves||||||||||||
|2. Distribution for||||||||||||
|owners (or||||||||||||

|||||||
|-|-|-|-|-|-|
|shareholders)||||||
|3. Other||||||
|(IV) Carrying||||||
|forward internal||||||
|owners’ equity||||||
|1. Capital reserves||||||
|conversed to||||||
|capital (share||||||
|capital)||||||
|2. Surplus reserves||||||
|conversed to||||||
|capital (share||||||
|capital)||||||
|3. Remedying loss||||||
|with surplus||||||
|reserve||||||
|4. Other||||||
|(V) Reasonable||||||
|reserve||||||
|1. Withdrawal in||||||
|the report period||||||
|2. Usage in the||||||
|report period||||||
|(VI)Others||||||
|||||-210,55|296,587,245.80|
|IV. Balance at the|283,161,|146,587,2|77,391,59|||
|end of the report||||2,845.9||
||227.00|71.50|3.25|||
|period||||5||

Last period
In RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||Last period|||||||||||
|||Other||||||||||
|||equity instrument||||||||||
||||||||Other||||Total|
|Item|Share||Perpetu||Capital|Less:|comprehe|Reasonab|Surplus|Retaine||
|||||||Inventory|||||owners’|
||capital||al||reserve||nsive|le reserve|reserve|d profit||
|||Preferre|capital|Other||shares|income||||equity|
|||d stock||||||||||
||||securiti|||||||||
||||es|||||||||
|||||||||||-209,42||
||283,161,||||146,283,6||||77,391,59||297,415,7|
|I. Balance at the||||||||||||
|||||||||||0,732.2||
|end of the last year|227.00||||42.90||||3.25||30.87|
|||||||||||8||
|Add: Changes||||||||||||
|of accounting||||||||||||
|policy||||||||||||
|Error||||||||||2,530,6|2,530,667|
|correction of the||||||||||67.50|.50|

|||||||
|-|-|-|-|-|-|
|last period||||||
|Other||||||
|||||-206,89||
|II. Balance at the|283,161,|146,283,6|77,391,59||299,946,3|
|beginning of this||||0,064.7||
||227.00|42.90|3.25||98.37|
|year||||8||
|III. Increase/||||||
|||303,628.6||-1,216,8|-913,220.|
|Decrease in this||||||
|year (Decrease is||0||48.62|02|
|listed with “-”)||||||
|(i) Total||||-1,216,8|-1,216,84|
|comprehensive||||||
|||||48.62|8.62|
|income||||||
|(ii) Owners’||303,628.6|||303,628.6|
|devoted and||||||
|||0|||0|
|decreased capital||||||
|1.Common shares||||||
|invested by||||||
|shareholders||||||
|2. Capital invested||||||
|by holders of other||||||
|equity instruments||||||
|3. Amount||||||
|reckoned into||||||
|owners equity with||||||
|share-based||||||
|payment||||||
|||303,628.6|||303,628.6|
|4. Other||||||
|||0|||0|
|(III) Profit||||||
|distribution||||||
|1. Withdrawal of||||||
|surplus reserves||||||
|2. Distribution for||||||
|owners (or||||||
|shareholders)||||||
|3. Other||||||
|(IV) Carrying||||||
|forward internal||||||
|owners’ equity||||||
|1. Capital reserves||||||
|conversed to||||||
|capital (share||||||
|capital)||||||
|2. Surplus reserves||||||
|conversed to||||||
|capital (share||||||
|capital)||||||
|3. Remedying loss||||||
|with surplus||||||

|||||||
|-|-|-|-|-|-|
|reserve||||||
|4. Other||||||
|(V) Reasonable||||||
|reserve||||||
|1. Withdrawal in||||||
|the report period||||||
|2. Usage in the||||||
|report period||||||
|(VI)Others||||||
|||||-208,10||
|IV. Balance at the|283,161,|146,587,2|77,391,59||299,033,1|
|end of the report||||6,913.4||
||227.00|71.50|3.25||78.35|
|period||||0||

III. Company profile
1. The registration place of the enterprise, the form of organization and the headquarters address
Shenzhen Zhongheng HUAFA Company Limited (hereinafter referred to as Company or the Company), established on 8 December 1981. Uniform social credit code 91440300618830372G.
Registered place and head office of the Company: 411 Bldg., Huafa (N) Road, Futian District, Shenzhen
Legal representative: Li Zhongqiu
Registered capital: RMB 283,161,227
2. The nature of the business and the main business activities
The Company belongs to the computer, telecommunication and manufacturing of other electronic equipment. Business scope: producing and sales of vary color TV set, liquid crystal display, LCD (operates in branch), radio-recorder, sound equipment, electronic watch, electronic game and computers, the printed wiring board, precision injection parts, light packaging material (operates in Wuhan) and hardware (including tool and mould) for various electronic products and supporting parts, plating and surface treatment and tin wire, development and operation of real estate (Shen Fang Di Zi No.: 7226760) and property management. Funded affiliated companies in Wuhan and Jilin. Setting up branches in capital of the province (Lhasa City excluded) in China and municipality directly under the central government.
3. Relevant party offering approval reporting of financial statements and date thereof
The financial statement has been deliberated and approved by BOD on 23 April 2018. According to Article of Association, the statement shall be submitted for deliberation in shareholders general meeting.
4. Scope of consolidate financial statement
Consolidate scope in the Period including: parent company– Shenzhen Zhongheng HUAFA Company Limited, subsidiary including Shenzhen HUAFA Property Leasing Management Co., Ltd. (no annual inspection in 2011, and business license revoke on 1 April 2014), Shenzhen Zhongheng HUAFA property Co., Ltd., Wuhan Hengfa
Technology Co., Ltd., Shenzhen HUAFA Hengtian Co., Ltd. and Shenzhen HUAFA Hengtai Co., Ltd. more of
subsidiaries found in “Note VII. Equity in other subjects”.
IV. Preparation basis of Financial Statements
1. Preparation basis
Base on the running continuously and actual transactions and events, in line with the Accounting Standards for Business Enterprise– Basic Standards and specific principle of accounting standards issued by the Ministry of Finance, the Company prepared and formulate the financial statement lies on the followed important accounting policy and estimation.
2. Going concern
The Company estimated that the production and sales of the Company, in 12 months since end of the period, will in a virtuous cycle. We have good management and continuous operation ability, and there is no risk of continuing operations.
V. Important accounting policy and estimation
Whether the company needs to comply with the disclosure requirements of the particular industry
No
Notes on specific accounting policies and accounting estimation:
According to actual operation characteristic, the Group formulate specific accounting policy and accounting estimation, including trade cycle, reorganization and measurement on account bad debt provision of receivables, inventory measurement, classification and depreciation method of fixed assets, intangible assets amortization and reorganization and measurement of revenue etc.
1. Declaration of obedience to Accounting Standards for Business Enterprise
The Financial Statements of the Company are up to requirements of Accounting Standards for Business Enterprise and also a true and thorough reflection to the relevant information as theCompany’s financial position dated 30th June 2017 and the operation results as well as cash flow for the year of 2017.
2. Accounting period
TheCompany’s accounting year is Gregorian calendar year, namely from
1st
January to
31st
December of every year.
3. Business cycle
TheCompany’s business cycle is one year (12 months) as a normal cycle, and the business cycle is the determining criterion for the liquidity of assets and liabilities of the Company.
4. Bookkeeping standard currency
The Renminbi (RMB) is taken as the book-keeping standard currency.
5. Accounting methods for consolidation of enterprises under the same control or otherwise
1. Consolidation of enterprises under the same control
Where the Company for long term equity investment arising from business combination under common control satisfies the combination consideration by payment of cash, transfer of non-cash assets or assumption of debt, the carrying value of the net assets of the acquire in combined financial statement of the ultimate controller shared by the Company as at the combination date shall be deemed as the initial investment cost of such long term equity investment. If the equity instrument issued by combining party are consider as the combination consideration, than the total value of the issuing shares are consider as the share capital. The difference between the initial cost of long-term equity investment and book value of consideration (or total face value of the shares issued) paid, capital surplus adjusted; if the capital surplus not enough to written down, than retained earning adjusted.
2. Business combination not under common control
As for business combination not under common control, combination costs refer to the sum of the fair value of the assets paid, liabilities occurred or assumed as well as equity securities issued by the acquirer to obtain control over the acquire as at the acquisition date. As for acquiree that obtained by consolidation not under the same control, the qualified confirmation of identified assets, liability and contingency liabilities should calculated by fair value on day of purchased. If the consolidation cost larger than the fair value amount of indentified net assets fromacquiree’s, the differences should be recognized as goodwill. If the consolidation cost less than the fair value amount of indentified net assets fromacquiree’s, the differences should reckoned into current gains/losses after re-examination.
6. Preparation methods for consolidated financial statements
1. Consolidation financial statement range
The Company includes all the subsidiaries (including the separate entities controlled by the Company) into consolidated financial statement, including companies controlled by the Company, non-integral part of the investees and structural main body.
2. Centralize accounting policies, balance sheet dates and accounting periods of parent and subsidiaries.
As for the inconsistency between the subsidiaries and the Company in the accounting policies and periods, the necessary adjustment is made on thesubsidiaries’ financial statements in the preparation of the consolidated financial statements according to theCompany’s accounting policies and periods.
3. Setoff of consolidated financial statement
The consolidated financial statements shall be prepared on the basis of the balance sheet of the parent company and subsidiaries, which offset the internal transactions incurred between the parent company and subsidiaries and within subsidiaries. Theowner’s equity of the subsidiaries not attributable to the parent company shall be presented as minority equity under theowner’s equity item in the consolidated balance sheet. The long term equity investment of the parent company held by the subsidiaries, deemed as treasury stock of the corporate group as well as the reduction ofowners’ equity, shall be presented as “Less: treasury stock” under theowners’ equity item in the consolidated balance sheet.
4. Accounting for acquisition of subsidiary through combination
For subsidiaries acquired under enterprise merger involving enterprises under common control, the assets, liabilities, operating results and cash flows of the subsidiaries are included in the consolidated financial statements from the beginning of the financial year in which the combination took place. When preparing the consolidated financial statements, for the subsidiaries acquired from business combination not involving entities under common control, the identifiable net assets of the subsidiaries are adjusted on the basis of their fair values on the date of acquisition.
7. Classification of joint arrangements and accounting treatment of joint operation
1. Classification of joint arrangements
Joint arrangements are divided into joint operations and joint ventures. Joint arrangements achieved not through separate entities are classified as joint operations. Separate entities refer to the entities with separate identifiable financial architecture including separate legal entities and legally recognized entities without the qualification of legal entity. Joint arrangements achieved through separate entities are generally classified as joint ventures. In case of changes in rights entitled to and obligations undertaken by the parties of joint venture under a joint arrangement due to the changes in relevant facts and circumstances, the parties of joint venture will re-assess the classification of joint arrangements.
2. Accounting treatment for joint operations
The parties of joint operation should recognize the following items in relation to their share of interest in joint operation, and proceed with accounting in accordance with the relevant provisions under the Accounting Standards for Business Enterprises: to recognize their separate assets or liabilities held, and recognize the assets or liabilities jointly held according to their respective shares; to recognize the income from the disposal of their output share under joint operation; to recognize the income from the disposal of output under joint operation according to their respective shares; to recognize the expenses incurred separately, and recognize the expenses incurred under joint operation according to their respective shares.
For the parties of a joint operation not under common control, if they are entitled to relevant assets and undertake relevant liabilities of the joint operation, accounting will be carried out with reference to the provisions of the parties of joint operation; otherwise, it should be subject to relevant Accounting Standards for Business Enterprises.
3. Accounting treatment for joint ventures
The parties of a joint venture should perform accounting for investments by the joint venture in accordance with the Accounting Standards for Business Enterprises No. 2– Long-term Equity Investments. The parties not under common control should carry out accounting depending on their influence on the joint venture.
8. Determination criteria of cash and cash equivalent
The cash recognized in the preparation of the cash flow statements, is theCompany’s storage cash and deposits available for payment anytime. The cash equivalents recognized in the preparation of the cash flow statements
refers to the investment held by the Company with characteristic of short-term, strong mobility, easy transfer to known sum cash and has slim risk from value changes.
9. Foreign currency exchange and the conversion of foreign currency statements
1. Foreign currency exchange
The approximate exchange rate of the spot exchange rate on trasaction occurred should be used for standard money conversion while foreign currency exchange occurred On the balance sheet day, the monetary items are converted on the current rate on the balance sheet day, concerning the exchange differences between the spot exchange rate on that date and initial confirmation or the sport exchange rate on previously balance sheet date, should reckoned in to current gains/losses except the capitalizing on exchange differences for foreign specific loans, which was reckoned into cost for capitalizing. The non-monetary items measured on the historic cost are still measured by the original bookkeeping rate with the sum of the bookkeeping standard currency unchanged. Items of non-monetary foreign currency which was calculated by fair value, should converted by spot exchange rate on the confirmation day of fair value, difference between the converted amount of bookkeeping currency and original amount of bookkeeping currency, was treated as changes of fair value (including exchange rate changed) reckoned into current gains/losses or recognized as other consolidated income.
2. Conversion of foreign currency financial statements
Upon the conversion of the foreign currency financial statements of the controlling subsidiaries, joint enterprises, and the affiliated enterprises on the bookkeeping standard currency different from theCompany’s, the accounting check and preparation of the consolidated financial statements are made. Assets and liabilities items in the balance sheet are converted on the current rate on the balance sheet day;owners’ equity items besides the “retained profit” item, the other items are converted on the actual rate. Items of revenue and expenses in profit statement, should converted by the approximate exchange rate of spot exchange rate on occurring date. The conversion difference of the foreign currency financial statements is listed specifically in theowners’ equity in the balance sheet. If the foreign cash flow determined by rational system method, the approximate exchange rate of spot exchange rate on occurring date should prevail. The cash influenced by the rate fluctuation is listed specifically in the cash flow statement. As for the foreign operation, the conversion difference of the foreign currency statement related to the foreign operation is transferred in proportion into the disposal of the current loss/gain.
10. Account receivable
(1) Account receivables with single major amount and withdrawal bad debt provision independently
|||
|-|-|
||Book balance of the account receivable with over 0.5 million|
|Criterion or amount standards of major single amount||
||Yuan|
|Withdrawal method for individual bad debt provision accrual|Recognized on the difference between the book value and the|
|with major single amount concerned|current value of the estimative future cash flow|

(2) Account receivable with bad debt provision accrual by portfolio
|||
|-|-|
|Portfolio|Accrued method for bad debts|
|Age portfolio|Aging of accounts|

Withdrawing bad bed provision by aging method in portfolio:
√ Applicable□ Not applicable
||||
|-|-|-|
|||Accrued proportion of other accounts|
|Account ages|Accrued proportion of accounts receivable||
|||receivable|
|Within one year (one year included)|0.00%|0.00%|
|1－2 years|5.00%|5.00%|
|2－3 years|10.00%|10.00%|
|Over three years|30.00%|30.00%|

 Withdrawing bad bed provision by percentage of total accounts receivable outstanding in portfolio:
□ Applicable√ Not applicable
Withdrawing bad bed provision by other methods in portfolio:
□ Applicable√ Not applicable
(3) Account receivable with minor single amount but has individual bad debt provision accrual
|||
|-|-|
||Receivable has minor amount and cannot reflect the risk|
|Reasons for individual bad debt prevision accrual||
||characteristic by withdrawing bad debt provision by group|
||Recognized on the difference between the book value and the|
|Accrued method for bad debt provision||
||current value of the estimative future cash flow|

11. Inventory
Whether the company needs to comply with the disclosure requirements of the particular industry
No
1. Categories of inventory
The inventory is goods or manufactured products held for sale, products in process, and materials and matters utilized in the production or supply of labor. Mainly including raw material, revolving materials, outside processing materials, wrappage, low-value consumption goods, goods in process, semi-finished goods, stocks and so on.
2. Accounting method for inventory delivery
When inventories are issued, the actual cost is determined by the first in first out method.
3. Accrual method inventory falling price reserves
On the balance sheet day, the inventory is measured on the lower one between the cost and the net realizable value,
and the provision for the falling price reserves is accrued on each inventory item; however, as for the inventory of
large quantity and low price, the provision is accrued on the inventory category.
4. Inventory system
Inventory system of the Company is perpetual inventory system
5. Amortization method for the low-value consumables and wrap page
Low-value consumables and packages are amortized by one-point method
12. Long term equity investment
1. Recognition of initial investment cost
Initial investment cost of long term equity investment obtained by corporate consolidation: in the case of the consolidation of enterprises under the same control, recognized as the initial cost is the book value of theowners’ equity obtained from the consolidated party; in the case of the consolidation of enterprises not under the same control, recognized as the initial cost is the recognized consolidation cost on the purchase day. As for the long term equity investment obtained by cash payment, the initial investment cost is the actual purchase payment. As for the long term equity investment obtained by the equity securities offering, the initial investment cost is the fair value of the equity securities. As for the long-term equity investment obtained by debt reorganization, initial investment cost of such investment should determine by relevant regulation of the “Accounting Standards for Business Enterprise No.12- Debt Reorganization”; As for the long term equity investment obtained by the exchange of the non-monetary assets and the debts restructuring, the initial investment cost is recognized on the relevant rules in the Principles.
2. Subsequent measurement and profit or loss recognition
Where the investor has a control over the investee, long-term equity investments are measured using cost method. Long-term equity investments in associates and joint ventures are measured using equity method. Where part of the equity investments of an investor in its associates are held indirectly through venture investment institutions, common fund, trust companies or other similar entities including investment linked insurance funds, such part of equity investments indirectly held by the investor shall be measured at fair value through profit or loss according to according to relevant requirements of Accounting Standards for Business EnterprisesNo.22—Recognization and measurement of Financial Instruments regardless whether the above entities have significant influence on such part of equity investments, while the remaining part shall be measured using equity method.
3. Basis of conclusion for common control and significant influence over the investee
Joint control over an investee refers to where the activities which have a significant influence on return on certain arrangement could be decided only by mutual consent of the investing parties sharing the control, which includes the sales and purchase of goods or services, management of financial assets, acquisition and disposal of assets, research and development activities and financing activities, etc.; Significant influence on the investee refers to that: significant influence over the investee exists when holding more than20% but less than50% of the shares with voting rights or even if the holding is below20%, there is still significant influence if any of the following conditions is met: there is representative in the board of directors or similar governing body of the investee; participation in theinvestee’s policy setting process; assign key management to the investee; the investee relies on the technology or technical information of the investing company; or major transactions with the investee. 13. Investment real estate
Measurement for investment real estate
Cost method
Depreciation or amortization method
The leased buildings in theCompany’s investment property adopts straight-line depreciation to calculate and distill depreciation, specific accounting policy are same as part of the fixed assets. The leased land use rights in the investment property and the land use rights to be transferred after appreciation adopt straight-line amortization, specific accounting policy are same as part of the intangible assets.
14. Fixed assets
(1) Recognition
Fixed assets refers to the tangible assets holding for purpose of producing goods, providing labor services, leasing or operation management, which has one accounting fiscal year of using life. Meanwhile as up to the following conditions, they are recognized: the economic interest related to the fixed assets probably flow into the Company; the cost of the fixed assets can be measured reliably.
(2) Depreciation method
||||||
|-|-|-|-|-|
|Category|Depreciation method|Depreciation life (year)|Salvage rate|Annual depreciation rate|
|House building|Straight-line depreciation|20-50|10.00|1.80-4.50|
|Machine equipment|Straight-line depreciation|10|10.00|9.00|
|Mold equipment|Straight-line depreciation|3|10.00|30.00|
|Transportation|||||
||Straight-line depreciation|5|10.00|18.00|
|equipment|||||
|Instrument equipment|Straight-line depreciation|5|10.00|18.00|
|Tool equipment|Straight-line depreciation|5|10.00|18.00|
|Office equipment|Straight-line depreciation|5|10.00|18.00|

The fixed assets of the Company mainly include buildings, machinery equipment, electronic equipment, transportation equipment, etc.; the method of depreciation is based on the straight-line method. Determine the useful life and estimated net residual value of fixed assets according to the nature and use of various types of fixed assets. At the end of the year, review the useful life, estimated net residual value, and depreciation method of fixed assets, if there is a difference from the original estimate, make corresponding adjustments. Except for the fixed assets that have been fully depreciated and continue to be used and the land that is separately accounted for, the Company calculates and depreciates all fixed assets.
15. Project in progress
Whether the company needs to comply with the disclosure requirements of the particular industry
No
Project in progress of the Company divided as self-run construction and out-bag construction. The project in
progress of the Company carried forward as fixed assets while the construction is ready for the intended use.
Criteria of the expected condition for use should apply one of the follow conditions: The substance construction
(installation included) of the fixed assets has completed all or basically; As the projects have been in test
production or operation, and the results show that the assets can operate properly and produce the qualified products stably, or the test operation result shows the assets can operate or open properly. The expenditure of the fixed assets on the construction is a little or little. The fixed assets of the project constructed have been up to the requirements of the design or contract, or basically up to.
16. Borrowing expenses
1. Recognition principle on capitalization of borrowing expenses
As for theCompany’s actual borrowing expenses directly attributable to the assets construction or production, it is capitalized and reckoned into the relevant assets cost; as for other borrowing expenses, it is recognized on the actual sum and reckoned into the current loss/gain. The assets up to the capitalization are assets as the capital assets, investment real estate, and inventory reaching the expectant availability or sale ability.
2. Calculation of the capitalization
Capitalization term: the period from the time starts to capitalization to the time the capitalization ends. The period of capitalization suspended is not included. The capitalization of borrowing expenses should be suspended while the abnormal interrupt, which surpass three months continuously, in the middle of acquisition or construction or production.
As for the borrowing of the specific borrowing, the capitalization sum is recognized on the current actual interest expenses less the interest income of the borrowing capital not utilized but deposited in the bank or the return of the temporary investment; As for the appropriation of the general borrowing, the capitalization sum is recognized on the weighted average of, the accumulative assets expenditure above the specific borrowing, and times the capitalization rate of the appropriation; As for the discount or premium of the borrowing, the discount or premium to be diluted in every accounting period is recognized in the actual rate method.
The effective interest method is the method for the measurement of the diluted discount or premium or interest expenses on the actual interest rate; and the actual interest rate is the interest rate used in the discount of the future cash flow in the expectant duration period as the current book value of the borrowing.
17. Intangible assets
(1) Accounting method, service life and impairment test
1. Accounting method of intangible assets
TheCompany’s intangible assets are measured initially on cost. The intangible assets purchased in are taken as the actual cost on the actual payment and relevant expenditure. As for the intangible assets invested in by the investors, the actual cost is recognized on the value stipulated in the contract or agreement; however, if what is stipulated in the contract or agreement is not fair value, the actual cost is recognized on fair value. As for the self-developed intangible assets, their cost is the actual total expenditure before reaching the expectant purpose. The follow-up measurements of theCompany’s intangible assets respectively are: the line amortization method is taken on the intangible assets of finite service life, and at the yea-end, the check is taken on the service life and dilution of the intangible assets, and the corresponding adjustment is made if there is inconsistency with the
previous estimative ones. As for the intangible assets of uncertain service life, it is not diluted, however, the service life is checked at year-end; If there is solid evidence to its finite service life, its service life is estimated and diluted in straight line method.
2. Judgment basis for uncertain service life
The Company will not be able to foresee the time limit within which the asset brings economic benefits to the company, or the intangible assets with uncertain useful life identified as intangible assets with uncertain useful life. The basis for judging the uncertainty of useful life is from the contractual rights or other legal rights, but the contract stipulates or the law rules there is no definite useful life; combining the same industry case and or the relevant expert argumentation, it is still incapable of judging the time limit within which the intangible assets bring economic benefits to the company.
At the end of each year, review the useful life of intangible assets with indefinite useful life by mainly adopting the bottom-up method, the relevant departments of intangible assets take the basic review and evaluate whether there is any change in the judgment basis for indefinite useful life.
(2) Accounting policies for internal research and development expenditure
Expenditures for internal research and development projects at the research phase shall be included in the current profit or loss when incurred; expenditures incurred at the development phase and recognized as intangible assets shall be transferred to intangible assets accounting.
18. Long-term investment impairment
Long-term equity investments, investment properties measured at cost and long-term assets such as fixed assets, construction in progress, productive biological assets at cost method, oil and gas assets, intangible assets and goodwill are tested for impairment if there is any indication that an asset may be impaired at the balance date. If the result of the impairment test indicates that the recoverable amount of the asset is less than its carrying amount, a provision for impairment and an impairment loss are recognized for the amount by which theasset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of anasset’s fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. Provision for asset impairment is determined and recognized on the individual asset basis. If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of a group of assets to which the asset belongs is determined. A group of assets is the smallest group of assets that is able to generate independent cash inflows.
Goodwill arising from a business combination is tested for impairment at least at each year end, irrespective of whether there is any indication that the asset may be impaired. For the purpose of impairment testing, the carrying amount of goodwill acquired in a business combination is allocated from the acquisition date on a reasonable basis to each of the related asset groups; if it is impossible to allocate to the related asset groups, it is allocated to each of the related set of asset groups. If the carrying amount of the asset group or set of asset groups is higher than its recoverable amount, the amount of the impairment loss first reduced by the carrying amount of the goodwill allocated to the asset group or set of asset groups, and then the carrying amount of other assets (other than the goodwill) within the asset group or set of asset groups, pro rata based on the carrying amount of each asset.
Once the impairment loss of such assets is recognized, it is not be reversed in any subsequent period.
19. Long-term deferred expenditure
TheCompany’s long-term deferred expenditure are expenses paid out and with one year above (1-year included) benefit period. The long-term unamortized expenses are diluted by periods according to the benefit period. As the long-term unamortized expenses cannot enable the accountingperiod’s beneficiary, all dilution values of the project undiluted yet, are transferred into the current loss/gain.
22. Employees benefits
(1) Accounting for short-term benefits
In the period of employee services, short-term benefits are actually recognized as liabilities and charged to profit or loss, or if otherwise required or allowed by other accounting standards, to the related costs of assets for the current period. At the time of actual occurrence, TheCompany’s employee benefits are recorded into the profits and losses of the current year or assets associated costs according to the actual amount. The non-monetary employee benefits are measured at fair value. Regarding to the medical and health insurance, industrial injury insurance, maternity insurance and other social insurances, housing fund and labor union expenditure and personnel education that the Company paid for employees, the Company should recognize corresponding employees benefits payable according to the appropriation basis and proportion as stipulated by relevant requirements and recognize the corresponding liabilities and include these expenses in the profits or losses of the current period or recognized as respective assets costs.
(2) Accounting for post-employment benefits
During the accounting period in which an employee provides service, the amount payable calculated under defined contribution scheme shall be recognized as a liability and recorded in profit and loss of the current period or in assets. In respect of the defined benefit scheme, the Company shall use the projected unit credit method and attribute the welfare obligations calculated using the formula stipulated by the defined benefit scheme to the service period of the employee, and record the obligation in the current profit and loss or related assets cost. (3) Accounting for termination benefits
The Company recognizes a liability and expenses in the current profit or loss for termination benefits at the earlier of the following dates: when the Company can no longer withdraw the offer of those benefits; and when the Company recognizes costs for restructuring involving the payment of termination costs.
(4) Accounting for other long-term employee benefits
The Company provides other long-term employee benefits to its employees. For those falling within the scope of defined contribution scheme, the Company shall account for them according to relevant requirements of the defined contribution scheme. In addition, the Company recognizes and measures the net liabilities or net assets of the other long-term employee benefits according to relevant requirements of the defined contribution scheme.
21. Accrual liability
The obligation related to contingencies is the current obligation assumed by the company, and performing this obligation may result in an outflow of economic benefits, and this obligation can be determined as the estimated liabilities when the amount can be reliably measured. The Company makes initial measurement in accordance with the best estimate for performing the related current obligation, if the expenditure as needed has a continuous range, and the likelihood of occurrence of various results in this range is the same, the best estimate is determined by the median value within the range; if a number of items are involved, the best estimate is determined by the calculation of various possible outcomes and related probabilities.
At the balance sheet date, the book value of estimated liabilities should be rechecked, if there is conclusive evidence indicates that this book value cannot truly reflect the current best estimate, and then the book value should be adjusted in accordance with the current best estimate.
22. Revenue
Whether the company needs to comply with the disclosure requirements of the particular industry
No
1. Sales of goods
The Company shall ascertain the revenue incurred by selling goods in accordance with the received or receivable price stipulated in the contract or agreement signed between the enterprise and the buyer unless the following conditions are met simultaneously:① the significant risks and rewards of ownership of the goods have been transferred to the buyer by the enterprise;② the enterprise retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods;③the relevant amount of revenue can be measured in a reliable way;④ relevant economic benefits may flow into the enterprise and⑤ the relevant costs incurred or to be incurred can be measured in a reliable way.
Money collection for the contract or agreement use the mode of deferred, actually has the financing features. The revenue of commodity sales is recognized by the fair value of the money receivable on contract or agreement. 2. Labor service providing
If an enterprise can, on the date of the balance sheet, reliably estimate the outcome of a transaction concerning the labor services it provides, it shall recognize the revenue from providing services employing the percentage-of-completion method. The enterprise can ascertain the schedule of completion (percentage-of-completion) under the transaction concerning the providing of labor services based on calculation of completed works.
If an enterprise cannot, on the date of the balance sheet, measure the result of a transaction concerning the providing of labor service in a reliable way, it shall be conducted in accordance with the following circumstances, respectively:①if 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;②if the cost of labor services incurred is not expected to compensate, the cost incurred should be included in the current profits and losses, and no revenue from the providing of labor services may be recognized.
3. Transition of asset use right
When economic benefits relating to transition of asset use right is likely to inflow into the Company and the relevant income can be measured reliably, the Company shall recognize such income from transition of asset use right.
TheCompany’s specific income recognition method: it is recognized as income when the product has been sent out and signed for receipt by the other party for domestic sales; it is recognized as income when the product has been shipped and its customs procedures have been completed with the relevant declaration documents for export sales. Income from house leases and property management is recognized according to the lease contract agreement, receipt of relevant payments, or relevant collection proof.
23. Government subsidy
(1) Determination basis and accounting treatment for government grants related to assets
Government grant obtained by the Company for the purpose of constructing or otherwise forming long term assets is recognized as government grant related to assets. The specific projects for which the government documents have specified the subsidies should be divided according to the relative proportion of the amount paid for forming assets and the amount paid included in costs in the budgeting of the specific project, and the dividing ratio needs to be rechecked on each balance sheet date, and be changed if necessary. Government grants related to assets that were received before January 1, 2017 are recognized as deferred income, the useful life of underlying assets is included in the current profit or loss by reasonable and systematic methods, and those received on and after January 1, 2017 are recognized as deferred income. The amount recognized as deferred income shall be included in the current profit and loss in a reasonable and systematic way within the useful life of the relevant assets. Those related to the daily activities of the Company are included in other income, and those not related to the daily activities of the Company are included in non-operating income.
Government grants measured on the basis of nominal amounts are directly included in the current profit or loss. (2) Determination basis and accounting treatment for government grants related to income
The government documents only make general statements on the use, and those not specified as special items are regarded as government grants related to income.
Government grants related to income are treated in the following situations respectively: those used to compensate the related expenses or losses of the enterprise in the subsequent period shall be recognized as deferred income and shall be included in the current profit or loss during the period of confirming related expenses. Those used to compensate the occurred related expenses or losses of the enterprise shall be directly included in the current profit and loss. When being included in the current profits and losses, the government grants related to theCompany’s daily activities are included in other income; government grants that are not related to theCompany’s daily activities are included in non-operating income.
24. Deferred income tax asset / deferred income tax liability
1. Where there is difference between the carrying amount of the assets or liabilities and its tax base, (as for an item that has not been recognized as an asset or liability, if its tax base can be determined in light of the tax law, the tax base shall recognized as the difference) the deferred income tax and deferred income tax liabilities shall be determined according to the applicable tax rate in period of assets expected to recover or liability expected to pay off.
2. The deferred income tax assets shall be recognized 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. On balance sheet date, if there have concrete evidence of obtaining, in future period, enough taxable amounts to deduct the deductible temporary difference, the un-confirmed deferred income tax assts in previous accounting period shall be recognized. If there has no enough taxable amounts, obtained in future period, to deducted the deferred income tax assets, book value of the deferred income tax assets shall be kept in decreased.
3. The taxable temporary differences related to the investments of subsidiary companies and associated enterprises shall recognized as deferred income tax liability, unless the Company can control the time of the reverse of temporary differences and the temporary differences are unlikely to be reversed in the expected future. As for the deductible temporary difference related to the investment of the subsidiary companies and associated enterprises, deferred income tax assets shall be recognized while the temporary differences are likely to be reversed in the expected future and it is likely to acquire any amount of taxable income tax that may be used for making up the deductible temporary differences.
25. Leasing
(1) Accounting treatment for operating lease
Accounting treatment for operating lease: Operating lease payments are recognized on a straight-line basis over the term of the relevant lease, and are either included in the cost of related asset or charged to profit or loss for the period.
(2) Accounting treatment for finance lease
Accounting treatment for finance lease: At the commencement of the lease term, the Group records the leased asset at an amount equal to the lower of the fair value of the leased asset and the present value of the minimum lease payments. The difference between the recorded amounts is accounted for as unrecognized finance charge, using the effective interest method amortization during the lease term. Minimum lease payments deducting unrecognized financing charges are listed as long-term payables.
26. Other important accounting policy and estimation
The company does not disclose other important accounting policies and accounting estimates.
27. Changes in important accounting policies and estimates
(1) Changes in important accounting policies
√ Applicable□ Not applicable
||||
|-|-|-|
|Content and reason of changes in|||
||Approval procedure|Note|
|accounting policies|||

(2) Changes in important accounting estimates
√ Applicable□ Not applicable
|||||
|-|-|-|-|
|Contents and reasons of||||
||Approval procedure|Time for application|Notes|
|changes in accounting estimates||||

VI. Taxes
1. Major tax and tax rate
||||
|-|-|-|
|Taxes|Taxation basis|Tax rate|
|VAT|Domestic sales revenue|17%, 6%, 5%, 3%|
|Urban maintenance and construction tax|Transfer tax payable|7%|
|Corporate income tax|Taxable income|15, 25%|
|Business tax|Taxable income|5%|
|Educational surtax|Transfer tax payable|3%|
|Local educational surtax|Transfer tax payable|2%, 1.5%|
|Property tax|70% of original value of the property|1.2%|

Explain the different taxation entity of the enterprise income tax
|||
|-|-|
|Taxation entity|Income tax rate|
|Shenzhen Zhongheng Huafa Co., Ltd.|25%|
|Wuhan Hengfa Technology Co. Ltd.|15%|

2. Tax preferences
According to the “Measures for the Determination of High-tech Enterprises”, and through the enterprise application, expert review, and public announcement and other procedures, theCompany’s wholly-owned subsidiary, Wuhan Hengfa Technology Co., Ltd., has been identified as a high-tech enterprise, and obtained the “High-tech Enterprise Certificate” jointly issued by the Science and Technology Department of Hubei Province,
Hubei Provincial Finance Department, Hubei Provincial Office, SAT, and Local Taxation Bureau of Hubei
Province on November 28, 2017, the certificate number is GR201742001840, which is valid for 3 years. The
applicable corporate income tax rate of the subsidiary Wuhan Hengfa Technology Co., Ltd. for 2017 was15%. VII. Notes to main items in consolidated financial statement
1. Monetary fund
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Cash on hand|170,053.77|235,039.12|
|Bank deposit|66,070,891.82|91,075,765.36|
|Other monetary fund|2,571,550.38|2,021,905.33|
|Total|68,812,495.97|93,332,709.81|

 Other explanation
Other monetary funds are bank acceptance deposits.
2. Note receivable
(1) Category
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Bank acceptance bill|37,676,025.26|30,321,803.17|
|Commercial acceptance bill|27,102,241.39|22,341,297.72|
|Total|64,778,266.65|52,663,100.89|

 (2) Note receivable pledged at period-end
In RMB
|||
|-|-|
|Item|Amount pledged|
|Bank acceptance bill|15,738,970.85|
|Total|15,738,970.85|

 (3) Note receivable which have endorsed and discount at period-end and has not expired on balance sheet date
In RMB
||||
|-|-|-|
|Item|De-recognization amount at period-end|Un de-recognization amount at period-end|
|Bank acceptance bill|43,511,682.25||
|Commercial acceptance bill|36,173,534.80||

|||
|-|-|
|Total|79,685,217.05|

3. Account receivable
(1) Category of account receivable
In RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Closing balance|||||Opening balance|||||
||Book balance||Bad debt provision|||Book balance||Bad debt provision|||
|Category|||||Book||||||
|||Proportio||Accrualratio|||Proportio||Accrual|Book value|
||Amount||Amount||value|Amount||Amount|||
|||n|||||n||ratio||
|Account receivable|||||||||||
|with single|||||||||||
|significant amount|7,556,36||7,556,36|||7,649,7||7,649,789|||
|||4.67%||100.00%|||5.00%||100.00%||
|and withdrawal bad|3.72||3.72|||89.11||.11|||
|debt provision|||||||||||
|separately|||||||||||
|Account receivable|||||||||||
|with bad debt|148,804,||||148,795,9|139,832||||139,808,05|
|||91.88%|8,352.08|0.01%|||91.36%|24,580.65|0.02%||
|provision accrual by|350.34||||98.26|,638.85||||8.20|
|portfolio|||||||||||
|Accounts with single|||||||||||
|significant amount|||||||||||
||5,592,83||5,592,83|||5,576,9||5,576,978|||
|and bad debts||3.45%||100.00%|||3.64%||100.00%||
||8.19||8.19|||78.19||.19|||
|provision accrued|||||||||||
|individually|||||||||||
||161,953,||13,157,5||148,795,998.26|153,059||13,251,34||139,808,058.20|
|Total||100.00%|||||100.00%||||
||552.25||53.99|||,406.15||7.95|||

 Account receivable with major single amount and withdrawal bad debt provision single at period-end:
√ Applicable□ Not applicable
In RMB
||||||
|-|-|-|-|-|
|Account receivable (by|Closing balance||||
|units)|Account receivable|Bad debt reserve|Accrual ratio|Reasons|
|TCL ACE ELECTRIC|||||
|APPLIANCE|1,870,887.18|1,870,887.18|100.00%|Un-recyclable|
|(HUIZHOU) CO., LTD.|||||
|SKYWORTH|||||
|Multimedia (Shenzhen)|1,325,431.75|1,325,431.75|100.00%|Un-recyclable|
|Co., Ltd.|||||
|Hongkong Haowei|1,225,326.15|1,225,326.15|100.00%|Un-recyclable|

||||||
|-|-|-|-|-|
|Industry Co. Ltd.|||||
|Qingdao Haier Parts|||||
||579,343.89|579,343.89|100.00%|Un-recyclable|
|Procurement Co., Ltd.|||||
|Shenzhen Portman|||||
||2,555,374.75|2,555,374.75|100.00%|Un-recyclable|
|Bowling Club Co., Ltd.|||||
|Total|7,556,363.72|7,556,363.72|--|--|

Account receivable with bad debt provision withdrawal by method of account age in portfolio:
√ Applicable□ Not applicable
In RMB
|||||
|-|-|-|-|
||Closing balance|||
|Account age||||
||Account receivable|Bad debt provision|Accrual ratio|
|Sub-item of within one year||||
|Subtotal of within one year|148,639,591.75|||
|1-2 year|162,475.62|8,123.78|5.00%|
|2-3 year|2,282.97|228.30|10.00%|
|Total|148,804,350.34|8,352.08||

Explanation on portfolio basis:
Withdrawing bad bed provision by percentage of total accounts receivable outstanding in portfolio:
□ Applicable√ Not applicable
Withdrawing bad bed provision by other methods in portfolio:
Accounts with single significant amount and bad debts provision accrued individually at period-end
||||||
|-|-|-|-|-|
|Debtor|Book balance|Bad debt|Accrual ratio (%)|Reasons|
|Shenzhen Huixin Video Technology Co.,Ltd.|381,168.96|381,168.96|100||
|Shenzhen Wandelai Digital TechnologyCo., Ltd.|351,813.70|351,813.70|100||
|Shenzhen Dalong Electronic Co., Ltd.|344,700.00|344,700.00|100||
|Shenzhen Keya Electronic Co., Ltd.|332,337.76|332,337.76|100||
|Shenzhen Qunping Electronic Co., Ltd.|304,542.95|304,542.95|100||
|China Galaxy Electronics (Hong Kong)Co., Ltd.|288,261.17|288,261.17|100||
|Dongguan Weite Electronic Co., Ltd.|274,399.80|274,399.80|100||
|Chuangjing|247,811.87|247,811.87|100||
|Hong Kong New Century Electronics Co.,Ltd.|207,409.40|207,409.40|100||
|Shenyang Beitai Electronic Co., Ltd.|203,304.02|203,304.02|100||
|Beijing Xinfang Weiye Technology Co.,|193,000.00|193,000.00|100||

|||||
|-|-|-|-|
|Ltd.||||
|TCL Electronics (Hong Kong) Co., Ltd.|145,087.14|145,087.14|100|
|Huizhou TCL Xinte Electronics Co., Ltd.|142,707.14|142,707.14|100|
|SkyWorth – RGB Electronic Co., Ltd.|133,485.83|133,485.83|100|
|Other|2,042,808.45|2,042,808.45|100|
|Total|5,318,438.39|5,592,838.19||

(2) Bad debt provision accrual, switch-back or taken back in the period
Bad debt provision accrual was 15,860.00 Yuan; the amount collected or switches back amounting to 109,653.96 Yuan.
Including major amount of bad debt provision that switch-back or taken back in the Period:
In RMB
||||
|-|-|-|
|Company|Amount switch back or taken back|Way|
|SKYWORTH Multimedia (Shenzhen) Co.,Ltd.|93,425.39|Bank deposit|
|Total|93,425.39|--|

(3) Top five receivables collected by arrears party at ending balance
||||
|-|-|-|
|Name|Closing balance|Proportion of total accountsreceivable (%)|
|Qingdao Haier Spare PartsPurchasing Co., Ltd.|57,011,599.00|35.20|
|Hongkong Yutian InternationalInvestment Co., Ltd.|44,436,775.47|27.44|
|Wuhan Aidemeng Technology Co.,Ltd.|10,068,618.43|6.22|
|TCL Air-Conditioner Wuhan Co.,Ltd.|10,006,057.60|6.18|
|TopVictoryInvestmentsLtd|9,876,423.70|6.10|
|Total|131,399,474.20|81.13|

4. Prepayments
(1) Prepayments listed by account age
In RMB
||||||
|-|-|-|-|-|
||Closing balance||Opening balance||
|Account age|||||
||Amount|Proportion|Amount|Proportion|
|Within one year|937,895.64|90.47%|12,760,284.18|97.59%|

||||||
|-|-|-|-|-|
|1-2 year|3,732.52|9.47%|17,494.85|0.13%|
|2-3 year|1,699.85|0.06%|297,942.90|2.28%|
|Total|943,328.01|--|13,075,721.93|--|

Explanation on prepayments with over one year in age and reasons of un-settle:
None
Other explanation:
None
5. Other account receivable
(1) Category of other account receivable
In RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Closing balance|||||Opening balance|||||
||Book balance||Bad debt provision|||Book balance||Bad debt provision|||
|Category|||||Book||||||
|||Proportio||Accrual|||Proportio||Accrual|Book value|
||Amount||Amount||value|Amount||Amount|||
|||n||ratio|||n||ratio||
|Other account|||||||||||
|receivable with|||||||||||
|single significant|6,722,60||6,722,60||641,266.6|7,572,2||6,042,827||1,529,426.6|
|||34.28%||91.29%|||41.36%||79.80%||
|amount and|2.71||2.71||4|54.02||.38||4|
|withdrawal bad debt|||||||||||
|provision separately|||||||||||
|Other account|||||||||||
|receivable with bad|4,528,82||193,093.||3,615,664|2,384,0||||2,326,151.8|
|||23.09%||5.07%|||13.02%|57,893.17|2.43%||
|debt provision|3.44||72||.68|45.02||||5|
|accrual by portfolio|||||||||||
|Other account|||||||||||
|receivable with|||||||||||
|single minor amount|8,359,64||8,359,64|||8,351,8||8,273,100|||
|||42.63%||99.07%|78,798.40||45.62%||99.06%|78,798.40|
|but withdrawal single|3.58||3.58|||98.56||.16|||
|item bad debt|||||||||||
|provision|||||||||||
||19,611,0||15,275,3||4,335,729.72|18,308,||14,373,82||3,934,376.89|
|Total||100.00%|||||100.00%||||
||69.73||40.01|||197.60||0.71|||

 Other account receivable with major single amount and withdrawal bad debt provision single at period-end:
√ Applicable□ Not applicable
In RMB
||||||
|-|-|-|-|-|
|Other account receivable|Closing balance||||
|(units)|Other account receivable|Bad debt provision|Accrual ratio|Accrual reason|

||||||
|-|-|-|-|-|
|Portman|4,021,734.22|4,021,734.22|100.00%|Un-recyclable|
|Shenzhen Jifang|||||
||1,071,160.00|1,071,160.00|100.00%|Un-recyclable|
|Investment Co., Ltd.|||||
|Traffic accident|||||
||555,785.81|555,785.81|100.00%|Un-recyclable|
|compensation|||||
|Zhao Baomin|553,901.68|553,901.68|100.00%|Un-recyclable|
|Hebei Botou Court|520,021.00|520,021.00|100.00%|Un-recyclable|
|Total|6,722,602.71|6,722,602.71|--|--|

Other account receivable with bad debt provision withdrawal by method of account age in portfolio:
√ Applicable□ Not applicable
In RMB
|||||
|-|-|-|-|
||Closing balance|||
|Account age||||
||Other account receivable|Bad debt provision|Accrual ratio|
|Sub-item of within one year||||
|A combination of bad debts|720,065.04|||
|Subtotal of within one year|633,884.00|||
|1-2 year|3,037,474.40|151,873.72|5.00%|
|2-3 year|||10.00%|
|Over three years|137,400.00|41,220.00|30.00%|
|Total|4,528,823.44|193,093.72||

Explanation on portfolio basis:
Withdrawing bad bed provision by percentage of total other accounts receivable outstanding in portfolio
□ Applicable√ Not applicable
Withdrawing bad bed provision by other methods in portfolio:
√ Applicable□ Not applicable
Other account receivable with single minor amount but withdrawal single item bad debt provision at period-end
||||||
|-|-|-|-|-|
|Debtor|Book balance|Bad debt|Accrual ratio (%)|Reasons|
|Electricity fee in Gongming canteen|489,214.70|489,214.70|100.00||
|Jiantao (Fogang) Laminates Co., Ltd.|465,528.10|465,528.10|100.00||
|Labor union|332,402.55|332,402.55|100.00||
|Lu Wei|290,000.00|290,000.00|100.00||
|4/F hotle Daiqiangbo|194,569.00|194,569.00|100.00||
|Chuangjing|192,794.00|192,794.00|100.00||
|Shenzhen Mingli Co., Ltd.|170,394.84|170,394.84|100.00||
|Other units|6,224,740.39|6,224,740.39|100.00||
|Total|8,359,643.58|8,359,643.58|——||

(2) Bad debt provision accrual, switch-back or taken back in reporting period
Bad debt provision accrual was 901,519.30 Yuan; the amount collected or switches back amounting to 0.00 Yuan.
Including major amount of bad debt provision that switch-back or taken back in the Period:
In RMB
||||
|-|-|-|
|Company|Amount switch-back or taken back|Way|

(3) Classify according to nature
In RMB
||||
|-|-|-|
|Nature|Ending book balance|Opening book balance|
|Margin and deposit|1,793,485.04|1,793,485.04|
|Borrow money|2,190,666.85|2,719,549.04|
|Intercourse funds|9,081,233.88|7,503,053.91|
|Rent receivable|5,857,777.46|6,195,824.01|
|Other|687,906.50|96,285.60|
|Total|19,611,069.73|18,308,197.60|

 (4) Top 5 other receivables collected by arrears party at ending balance
In RMB
|||||||
|-|-|-|-|-|-|
|||||Proportion in total||
||||||Ending balance of|
|Company|Nature|Ending balance|Account age|other receivables at||
||||||bad debt provision|
|||||year-end||
|Portman|Lease receivable|4,021,734.22|Over three years|22.84%|4,021,734.22|
|Shenzhen Jifang||||||
||Lease receivable|1,071,160.00|1-2 year|6.08%|1,071,160.00|
|Investment Co., Ltd.||||||
|Fujian Jielian||||||
||Deposit|800,000.00|Within 1 year|4.54%||
|Electronic Co., Ltd.||||||
|Wuwu Branch of||||||
|Shenzhen Dachong|Deposit|641,266.64|2-3 year|3.64%||
|Industrial Co., Ltd.||||||
|Traffic accident||||||
||Other|555,785.81|Over three years|3.16%|555,785.81|
|compensation||||||
|Total|--|7,089,946.67|--|40.26%|5,648,680.03|

 6. Inventory
Whether the company needs to comply with the disclosure requirements of the real estate industry
No
(1) Category of inventory
In RMB
||||||||
|-|-|-|-|-|-|-|
||Closing balance|||Opening balance|||
|Item||Provision for|||Provision for||
||Book balance||Book value|Book balance||Book value|
|||price fall-down|||price fall-down||
|Raw materials|29,640,518.78|937,858.86|28,702,659.92|29,871,068.31|1,089,943.56|28,781,124.75|
|Goods in process|119,575.09||119,575.09||||
|Inventory goods|29,291,605.18|1,660,379.81|27,631,225.37|15,940,570.96|914,927.55|15,025,643.41|
|Homemade|||||||
|semi-finished|3,433,461.82|1,444.25|3,432,017.57|2,757,682.20|41,816.29|2,715,865.91|
|products|||||||
|Low priced and|||||||
|easily worn|587,236.21|85,692.51|501,543.70|404,377.39|24,626.66|379,750.73|
|articles|||||||
|Total|63,072,397.08|2,685,375.43|60,387,021.65|48,973,698.86|2,071,314.06|46,902,384.80|

 Does the Company comply with the disclosure requirement of “Information Disclosure Guidelines of Shenzhen Stock Exchange No.4– Listed Companies Engaged in Seed Industry and Planting Business” or not
No
(2) Provision for price fall-down
In RMB
||||||||
|-|-|-|-|-|-|-|
|||Current increased||Current decreased|||
|Items|Opening balance|||Switch back or||Closing balance|
|||Accrual|Other||Other||
|||||Written-off|||
|Raw materials|1,089,943.56|434,503.93||586,588.63||937,858.86|
|Inventory goods|914,927.55|1,304,232.69||558,780.43||1,660,379.81|
|Homemade|||||||
|semi-finished|41,816.29|1,444.25||41,816.29||1,444.25|
|products|||||||
|Low priced and|||||||
|easily worn|24,626.66|69,485.78||8,419.93||85,692.51|
|articles|||||||
|Total|2,071,314.06|1,809,666.65||1,195,605.28||2,685,375.43|

 Inventory depreciation combining with sluggishness and inventory age was accrued based on the net realizable value, some raw material prices went up and down, and some low-value consumables were recycled.
(3) Explanation on capitalization of borrowing costs in ending balance of inventory
(4) Assets completed without settle resulted by construction contract at period-end
In RMB
|||
|-|-|
|Item|Amount|

Other explanation:
7. Non-current assets due within one year
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Decoration fee||12,191.49|
|Total||12,191.49|

 Other explanation:
8. Other current assets
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Value-added tax to be deducted|9,996.21||
|Advance payment of income tax|42,314.30||
|Total|52,310.51||

Other explanation:
Nil
9. Investment real estate
(1) Investment real estate measured at cost
√ Applicable□ Not applicable
In RMB
||||||
|-|-|-|-|-|
|Item|House and building|Land use right|Construction in process|Total|
|I. Original book value|||||
|1.Opening balance|133,661,686.94|||133,661,686.94|
|2.Current increased|||||
|(1) outsourcing|||||
|(2) inventory\fixed|||||
|assets\construction in|||||

||||
|-|-|-|
|process transfer-in|||
|(3) increased by|||
|combination|||
|3.Current decreased|||
|(1) disposal|||
|(2) other|||
|transfer-out|||
|4.Closing balance|133,661,686.94|133,661,686.94|
|II. Accumulated|||
|depreciation and|||
|accumulated|||
|amortization|||
|1.Opening balance|79,516,461.92|79,516,461.92|
|2.Current increased|1,734,266.40|1,734,266.40|
|(1) accrual or|||
||1,734,266.40|1,734,266.40|
|amortization|||
|3.Current decreased|||
|(1) disposal|||
|(2) other|||
|transfer-out|||
|4.Closing balance|81,250,728.32|81,250,728.32|
|III. Depreciation reserves|||
|1.Opening balance|||
|2.Current increased|||
|(1) accrual|||
|3. Current decreased|||
|(1) disposal|||
|(2) other|||
|transfer-out|||
|4.Closing balance|||

||||
|-|-|-|
|IV. Book value|||
|1. Ending Book||52,410,958.62|
||52,410,958.62||
|value|||
|2. Opening Book||54,145,225.02|
||54,145,225.02||
|value|||

(2) Investment real estate measure on fair value
□ Applicable√ Not applicable
10. Fixed assets
(1) Fixed assets
In RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
||House and|Machine|Transportatio|Office|Instrument|Tool|Mold||
|Items||||||||Total|
||building|equipment|n equipment|equipment|equipment|equipment|equipment||
|I. Original|||||||||
|book value:|||||||||
|1.Opening|65,608,798.8|77,069,199.6|||||12,606,833.3|174,538,795.|
||||5,213,153.64|6,900,942.25|2,755,661.49|4,384,205.71|||
|balance|5|9|||||9|02|
|2.Current||||||||11,888,960.0|
|||6,656,731.60|1,440,927.36|90,551.41|296,264.95|1,134,912.22|2,269,572.50||
|increased||||||||4|
|||||||||11,888,960.0|
|||6,656,731.60|1,440,927.36|90,551.41|296,264.95|1,134,912.22|2,269,572.50||
|(1)purchasing||||||||4|
|(2)constructi|||||||||
|on in|||||||||
|progress|||||||||
|transfer-in|||||||||
|(3) increased|||||||||
|by|||||||||
|combination|||||||||
|3.Current|||||||||
|||3,567,206.46|222,226.00|10,029.81||51,121.45||3,850,583.72|
|decreased|||||||||
|(1) disposal|||||||||
|||3,567,206.46|222,226.00|10,029.81||51,121.45||3,850,583.72|
|or scrapping|||||||||
|4.Closing|65,608,798.8|80,158,724.8|6,431,855.00|6,981,463.85|3,051,926.44|5,467,996.48|14,876,405.8|182,577,171.|

||||||||||
|-|-|-|-|-|-|-|-|-|
|balance|5|3|||||9|34|
|II.|||||||||
|Accumulativ|||||||||
|e|||||||||
|depreciation|||||||||
|1.Opening|12,890,366.5|57,558,303.0||||||92,994,088.0|
||||3,162,640.76|5,197,749.19|2,426,117.30|2,566,496.57|9,192,414.59||
|balance|6|3||||||0|
|2.Current|||||||||
||1,953,603.12|4,185,128.76|585,278.77|295,829.04|70,786.08|568,510.06|1,582,869.80|9,242,005.63|
|increased|||||||||
|(1) accrual|1,953,603.12|4,185,128.76|585,278.77|295,829.04|70,786.08|568,510.06|1,582,869.80|9,242,005.63|
|3.Current|||||||||
|||3,063,586.19|179,753.40|9,026.83||26,398.26||3,278,764.68|
|decreased|||||||||
|(1) disposal|||||||||
|||3,063,586.19|179,753.40|9,026.83||26,398.26||3,278,764.68|
|or scrapping|||||||||
|4.Closing|14,843,969.6|58,679,845.6|||||10,775,284.3|98,957,328.9|
||||3,568,166.13|5,484,551.40|2,496,903.38|3,108,608.37|||
|balance|8|0|||||9|5|
|III.|||||||||
|Depreciation|||||||||
|reserves|||||||||
|1.Opening|||||||||
|balance|||||||||
|2.Current|||||||||
|increased|||||||||
|(1) accrual|||||||||
|3.Current|||||||||
|decreased|||||||||
|(1) disposal|||||||||
|or scrapping|||||||||
|4.Closing|||||||||
|balance|||||||||
|IV. Book|||||||||
|value|||||||||
|1. Ending|50,764,829.1|21,478,879.2||||||83,619,842.3|
||||2,863,688.87|1,496,912.45|555,023.06|2,359,388.11|4,101,121.50||
|Book value|7|3||||||9|

||||||||||
|-|-|-|-|-|-|-|-|-|
|2. Opening|52,718,432.2|19,510,896.6||||||81,544,707.0|
||||2,050,512.88|1,703,193.06|329,544.19|1,817,709.14|3,414,418.80||
|Book value|9|6||||||2|

 (2) Fixed assets leasing-out by operational lease
In RMB
|||
|-|-|
|Item|Ending book value|
|House and building|905,391.76|
||905,391.76|

 11. Construction in progress
(1) Construction in progress
In RMB
||||||||
|-|-|-|-|-|-|-|
||Closing balance|||Opening balance|||
|Item||Impairment|||Impairment||
||Book balance||Book value|Book balance||Book value|
|||provision|||provision||
|Transformation|||||||
|project of Huafa|654,356.00||654,356.00|654,356.00||654,356.00|
|Building|||||||
|Total|654,356.00||654,356.00|654,356.00||654,356.00|

 12. Disposal of fixed assets
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Gongming Huafa Electronic City|92,857,471.69|92,857,471.69|
|Total|92,857,471.69|92,857,471.69|

 Other explanation:
Urban reconstruction in Gongming
14. Intangible assets
(1) Intangible assets
In RMB
|||||||
|-|-|-|-|-|-|
||||Non-patented|||
|Item|Land use right|Patent right||Computer software|Total|
||||technology|||
|I. Original book||||||

|||||
|-|-|-|-|
|value||||
|1.Opening||||
||55,187,826.36|661,878.97|55,849,705.33|
|balance||||
|2.Current||||
|increased||||
|(1) purchasing||||
|(2) internal||||
|R&D||||
|(3) increased by||||
|combination||||
|3.Current||||
||98,052.00||98,052.00|
|decreased||||
|(1) disposal|98,052.00||98,052.00|
|4.Closing||||
||55,089,774.36|661,878.97|55,751,653.33|
|balance||||
|II. Accumulated||||
|amortization||||
|1.Opening||||
||10,569,435.45|402,174.11|10,971,609.56|
|balance||||
|2.Current||||
||1,443,964.11|49,885.92|1,493,850.03|
|increased||||
|(1) accrual|1,443,964.11|49,885.92|1,493,850.03|
|3.Current||||
||21,122.63||21,122.63|
|decreased||||
|(1) disposal|21,122.63||21,122.63|
|4.Closing||||
||11,992,276.93|452,060.03|12,444,336.96|
|balance||||
|III. Depreciation||||
|reserves||||
|1.Opening||||
|balance||||
|2.Current||||
|increased||||

|||||
|-|-|-|-|
|(1) accrual||||
|3.Current||||
|decreased||||
|(1) disposal||||
|4.Closing||||
|balance||||
|IV. Book value||||
|1. Ending Book||||
||43,097,497.43|209,818.94|43,307,316.37|
|value||||
|2. Opening||||
||44,618,390.91|259,704.86|44,878,095.77|
|Book value||||

The proportion of intangible assets form by internalR&D in total book value of intangible assets at period-end
14. Long-term deferred expenditure
In RMB
|||||||
|-|-|-|-|-|-|
|Item|Opening balance|Current increased|Amortized in Period|Other decreased|Closing balance|
|Golf membership fee|191,666.59||50,000.04||141,666.55|
|Total|191,666.59||50,000.04||141,666.55|

 Other explanation
15. Deferred income tax asset /deferred income tax liability
(1) Deferred income tax assets un-offset
In RMB
||||||
|-|-|-|-|-|
||Closing balance||Opening balance||
|Item|Deductible temporary|Deferred income tax|Deductible temporary|Deferred income tax|
||differences|asset|differences|asset|
|Provision for impairment|||||
||27,849,536.92|6,690,066.24|26,543,004.31|6,635,751.08|
|of assets|||||
|Estimated liabilities|64,411.00|16,102.75|2,604,411.81|651,102.95|
|Other|||4,754,489.08|1,188,622.27|
|Total|27,913,947.92|6,706,168.99|33,901,905.20|8,475,476.30|

(2) Amount of deferred income tax asset and deferred income tax liability after trade-off
In RMB
||||||
|-|-|-|-|-|
|||Ending balance of|Trade-off between the|Opening balance of|
||Trade-off between the||||
|||deferred income tax|deferred income tax|deferred income tax|
|Item|deferred income tax||||
|||assets or liabilities after|assets and liabilities at|assets or liabilities after|
||assets and liabilities||||
|||off-set|period-begin|off-set|
|Deferred income tax||6,731,168.99||8,475,476.30|
|asset|||||

(3) Deferred income tax asset without confirmed
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Deductible temporary difference|3,172,018.51|3,153,478.41|
|Deductible loss|525,348.33|1,006,234.22|
|Total|3,697,366.84|4,159,712.63|

 (4) Deductible losses of deferred income tax asset without confirmed will expired in later year
In RMB
|||||
|-|-|-|-|
|Year|Closing amount|Opening amount|Note|
|2017||480,885.89||
|2018|525,348.33|525,348.33||
|Total|525,348.33|1,006,234.22|--|

Other explanation:
Nil
16. Short-term borrowing
(1) Category of short-term borrowing
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Loan in pledge|8,500,000.00|6,500,000.00|
|Mortgage borrowing|100,000,000.00|100,000,000.00|
|Guaranteed loan|20,000,000.00|20,000,000.00|
|Portfolio loans with mortgage guarantee|38,120,264.81|54,710,467.81|
|Total|166,620,264.81|181,210,467.81|

Explanation on category of short-term borrowing:
Nil
17. Note payable
In RMB
||||
|-|-|-|
|Category|Closing balance|Opening balance|
|Bank acceptance bill|17,810,270.28|16,714,584.01|
|Total|17,810,270.28|16,714,584.01|

 Totally 0 Yuan due note payable are paid at period-end
18. Account payable
(1) Account payable
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Within one year (one year included)|71,817,382.90|61,929,564.68|
|Over 1 year|12,187,487.83|11,784,860.09|
|Total|84,004,870.73|73,714,424.77|

 (2) Major account payable over one year
In RMB
||||
|-|-|-|
|Item|Closing balance|Reasons of un-paid or carry-over|
|Shenzhen Yuehai Global Logistics Co.,|||
||2,858,885.97|Unsettled|
|Ltd.|||
|LG|1,906,267.50|Unsettled|
|Dongjin Electronics (Nanjing) Plasma Co.,|||
||617,963.45|Unsettled|
|Ltd.|||
|Total|5,383,116.92|--|

Other explanation:
Nil
19. Account received in advance
(1) Account received in advance
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|

||||
|-|-|-|
|Within one year (one year included)|234,017.18|1,067.00|
|Over 1 year|44,111.00|47,779.60|
|Total|278,128.18|48,846.60|

 20. Salary payable
(1) Salary payable
In RMB
||||||
|-|-|-|-|-|
|||Increase during the|Decrease during this||
|Item|Opening balance|||Closing balance|
|||period|period||
|I. Short-term compensation|4,547,625.04|66,161,797.50|65,620,970.79|5,088,451.75|
|II. Post-employment|||||
|welfare- defined|-5,093.82|4,639,594.05|4,639,594.05|-5,093.82|
|contribution plans|||||
|III. Dismiss welfare||296,106.68|296,106.68||
|Total|4,542,531.22|71,097,498.23|70,556,671.52|5,083,357.93|

 (2) Short-term compensation
In RMB
||||||
|-|-|-|-|-|
|||Increase during the|Decrease during this||
|Item|Opening balance|||Closing balance|
|||period|period||
|1. Wages , bonuses, allowances|||||
||3,542,662.41|58,299,582.57|57,802,934.79|4,039,310.19|
|and subsidies|||||
|2. Welfare for workers|||||
|||5,162,936.06|5,135,827.06|27,109.00|
|and staff|||||
|3. Social insurance|23,041.98|2,059,937.27|2,059,937.27|23,041.98|
|Including: Medical|||||
||23,041.98|1,720,922.00|1,720,922.00|23,041.98|
|insurance|||||
|Work injury|||||
|||191,453.81|191,453.81||
|insurance|||||
|Maternity|||||
|||147,561.46|147,561.46||
|insurance|||||
|4. Housing accumulation|||||
||24,310.00|468,303.32|468,303.32|24,310.00|
|fund|||||
|5. Labor union|||||
|expenditure and|957,610.65|171,038.28|153,968.35|974,680.58|
|personnel education|||||

||||||
|-|-|-|-|-|
|expense|||||
|Total|4,547,625.04|66,161,797.50|65,620,970.79|5,088,451.75|

 (3) Defined contribution plans
In RMB
||||||
|-|-|-|-|-|
|||Increase during the|Decrease during this||
|Item|Opening balance|||Closing balance|
|||period|period||
|1. Basic endowment|||||
||-5,093.82|4,439,964.74|4,439,964.74|-5,093.82|
|insurance|||||
|2. Unemployment|||||
|||199,629.31|199,629.31||
|insurance|||||
|Total|-5,093.82|4,639,594.05|4,639,594.05|-5,093.82|

 Other explanation:
Nil
21. Tax payable
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Value-added tax|5,473,037.12|5,922,024.47|
|Enterprise income tax|5,228,514.39|8,460,507.90|
|Individual income tax|20,213.76|72,577.79|
|Urban maintenance and construction tax|1,447,509.59|444,600.28|
|House property tax|743,004.72|763,249.59|
|Land use tax|324,212.74|324,212.71|
|Education surcharge|621,129.51|191,311.22|
|Local education surcharge|322,572.35|101,317.51|
|Dike fee|1,665.00|1,149.33|
|Stamp tax|34,988.50|20,009.90|
|Disposal fund of waste electrical products|919,430.00|467,070.00|
|Total|15,136,277.68|16,768,030.70|

 Other explanation:
Nil
22. Interest payable
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Interest of short-term loans payable|164,895.80|123,641.69|
|Total|164,895.80|123,641.69|

 Significant overdue and unpaid interest:
In RMB
||||
|-|-|-|
|Loan unit|Overdue amount|Reason for overdue|

Other explanation:
Nil
23. Other payable
(1) Classification of other payable according to nature of account
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Margin and deposit|6,280,204.22|5,957,390.38|
|Lease management fee|2,307,901.27|2,003,231.87|
|Intercourse funds|6,534,652.44|5,330,161.96|
|After sale and repairmen|2,384,774.18|1,302,101.54|
|Other|2,419,744.84|2,457,149.41|
|Total|19,927,276.95|17,050,035.16|

 (2) Significant other payable with over one year age
In RMB
||||
|-|-|-|
|Item|Closing balance|Reasons of un-paid or carry-over|
|Shenzhen SED Property Development Co.,|||
||1,244,058.55|Unsettled|
|Ltd.|||
|Shenzhen Huayongxing Environmental|||
||1,000,000.00|Deposit|
|Protection Technology Co., Ltd.|||
|Linghang Technology (Shenzhen) Co., Ltd.|656,345.28|Unsettled|
|Shenzhen Tongxing Electronics Co., Ltd.|578,259.83|Unsettled|
|Shenzhen Yongdasheng Investment|||
||558,970.00|Deposit|
|Development Co., Ltd.|||
|Total|4,037,633.66|--|

Other explanation
Nil
24. Accrued liabilities
In RMB
|||||
|-|-|-|-|
|Item|Closing balance|Opening balance|Causes|
|Pending action|64,411.00|2,604,411.81|Business and labor disputes|
|Total|64,411.00|2,604,411.81|--|

Other explanations, including important assumptions and estimation about important estimated liabilities:
Note 1: On November 24, 2015, Shenzhen Intermediate People's Court adjudicated the dispute case that Shaanxi Linghua complained about theCompany’s work contract ((2013) SZFSZZ No. 1491): Shaanxi Linghua should pay the damages for breach of contract of 1,778,081.05 Yuan to the Company within 10 days from the date the adjudication takes effect, Shaanxi Linghua should pay the remaining payment of 869,458.96 Yuan to the Company within 10 days from the date the adjudication takes effect, and compensate for the loss of interest. The Company applied for retrial to Guangdong Higher People's Court. On December 3, 2016, Guangdong Higher People's Court made a ruling on the application ((2016) YMSNo. 3280), and rejected theCompany’s retrial application. Up to December 31, 2016, the Company accrued the litigation cost of RMB 2,360,203.26 and recognized it as an estimated liability. On July 27, 2017, the Company received the closing notice from thePeople’s Court of Futian District, Shenzhen, Guangdong Province, stating that the Company did not execute its obligations according to the judgments of Civil Judgment (2010) SFFMECZ No. 9 and Civil Judgment (2013) SZFSZZ No. 1491, on July 18, 2017, the court made a mandatory deduction of the amount of RMB 1,012,400.00 from theCompany’s account at China CITIC Bank, Shenzhen Houhai Sub-branch (7352). At this point, the dispute case between the Company and Adlink was settled.
Note 2: According to the Enforcement Notice ( (2008) SFFZZ No.522-529) of Shenzhen Intermediate People's Court, Shenzhen Labor Dispute Arbitration Commission issued SLZC[2007] No. 1069-1077, No. 1079, No. 1081, and No. 1085-1087 arbitration awards for the labor dispute case of Cai Yaoqiang and other thirteen people, which has taken legal effect. According to the Basic Information Credit Report of Enterprises, the Company has total unexecuted labor dispute subject of RMB 64,411.00, and the Company recognizes it as the estimated liability. 25. Share capital
In RMB
|||||||||
|-|-|-|-|-|-|-|-|
|||Changes in the Period (+,-)||||||
||Opening|||Shares transfer|||Closing|
|||Issuing new||||||
||balance||Bonus shares|from public|Other|Subtotal|balance|
|||shares||||||
|||||reserves||||
|Total shares|283,161,227.00||||||283,161,227.00|

 Other explanation:
Ended as 31 December 2016, the shares of the Company held by controlling shareholder has 116,100,000 shares
in status of pledge, taking41% of the total share capital; mortgagee is China Merchants Securities Assets
Management Co., Ltd. Shares in judicial freeze amounted as 116,489,894 shares. The mortgage expired on 31
December 2017
26. Capital surplus
In RMB
||||||
|-|-|-|-|-|
|||Increase during theperiod|Decrease during this||
|Item|Opening balance|||Closing balance|
||||period||
|Capital premium (equity|||||
||96,501,903.02|||96,501,903.02|
|premium)|||||
|Other capital surplus|50,085,368.48|||50,085,368.48|
|Total|146,587,271.50|||146,587,271.50|

 Other explanation, including changes and reasons of changes:
Nil
27. Surplus reserves
In RMB
||||||
|-|-|-|-|-|
|||Increase during theperiod|Decrease during this||
|Item|Opening balance|||Closing balance|
||||period||
|Statutory surplus|||||
||21,322,617.25|||21,322,617.25|
|reserves|||||
|Discretionary surplus|||||
||56,068,976.00|||56,068,976.00|
|reserve|||||
|Total|77,391,593.25|||77,391,593.25|

 Other explanation, including changes and reasons for changes:
Nil
28. Retained profit
In RMB
||||
|-|-|-|
|Item|This period|Last period|
|Retained profit at the end of the previous periodbefore adjustment|-187,441,523.12||
|Retained profit at period-begin after adjustment|-187,441,523.12||
|Add: net profit attributable to owners of the parentcompany|974,409.39||
|Retained profit at period-end|-186,467,113.73||

Details about adjusting the retained profits at the beginning of the period:
1) The retroactive adjustments to Accounting Standards for Business Enterprises and its relevant new regulations affect the retained
profits at the beginning of the period amounting to 0 Yuan.
2) The changes in accounting policies affect the retained profits at the beginning of the period amounting to 0 Yuan.
3) The major accounting error correction affects the retained profits at the beginning of the period amounting to 2,530,667.50 Yuan 4) Merge scope changes caused by the same control affect the retained profits at the beginning of the period amounting to 0 Yuan. 5) Other adjustments affect the retained profits at the beginning of the period amounting to 0 Yuan
29. Operating income and cost
In RMB
||||||
|-|-|-|-|-|
||Current Period||Last Period||
|Item|||||
||Income|Cost|Income|Cost|
|Main business|811,691,458.39|767,897,597.88|570,057,375.54|524,715,312.30|
|Other business|46,348,674.35|10,311,192.00|49,110,395.20|10,021,300.72|
|Total|858,040,132.74|778,208,789.88|619,167,770.74|534,736,613.02|

 31. Tax and surcharges
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|City maintenance and construction tax|1,427,781.18|1,237,422.94|
|Educational surtax|611,819.05|532,299.17|
|House property tax|2,699,817.08|2,379,135.20|
|Land use tax|864,650.63|651,551.53|
|Vehicle use tax|9,075.62|1,050.62|
|Stamp tax|515,320.90|314,848.62|
|Business tax||705,358.40|
|Local education development fee|319,456.43|315,891.10|
|Total|6,447,920.89|6,137,557.58|

 Other explanation:
Nil
31. Sales expenses
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|Employee compensation|4,984,220.26|3,961,051.20|
|Transportation fee|4,707,497.34|3,734,511.93|
|Commodity inspection fee|1,016,453.60|835,099.19|
|Customs fee|71,162.46|73,375.06|

||||
|-|-|-|
|Commodity loss|1,270,308.03|577,556.46|
|After sales service fee|3,184,997.76|1,750,857.26|
|Entertainment expense|183,187.97|134,299.80|
|Other|498,666.45|348,519.92|
|Total|15,916,493.87|11,415,270.82|

 Other explanation:
Nil
32. Administrative expenses
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|Salary|9,181,074.76|10,789,526.57|
|Depreciation charge|2,005,410.35|2,727,784.79|
|Social insurance premium|3,063,807.83|6,752,570.66|
|Business entertainment expenses|2,164,825.72|2,789,553.98|
|Taxes and surcharges||1,053,920.89|
|Employee benefits|2,282,050.50|1,582,132.90|
|Travel expenses|3,182,447.37|3,242,531.84|
|Amortization of intangible assets|1,472,727.40|1,494,294.72|
|Transportation fee|1,234,314.61|1,564,024.45|
|Consulting fee|4,178,432.28|5,469,220.77|
|Security fee|1,909,696.23|1,213,334.31|
|Repairs fee|2,434,021.55|1,380,527.36|
|Audit fee|967,918.64|734,235.85|
|Office allowance|1,472,390.85|2,282,069.51|
|Communication fee|294,064.24|364,141.24|
|Amortization of low cost and short lived|||
||391,757.33|540,722.73|
|articles|||
|Securities information disclosure fee|646,641.60|404,595.80|
|Litigation fee|487,564.11|460,211.00|
|Lease fee|4,416,416.15|4,499,772.41|
|Staff education and labor union|||
||113,009.17|100,664.53|
|expenditure|||
|Water and electricity fee|476,436.91|101,827.25|
|Other expenses|408,103.93|713,832.04|

||||
|-|-|-|
|Total|42,783,111.53|50,261,495.60|

 Other explanation:
Nil
33. Financial expenses
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|Interest costs|10,849,008.00|9,256,353.17|
|Less: interest income|1,682,070.72|865,609.05|
|Exchange loss|4,516,307.95|2,967,605.72|
|Less: exchange gains|5,205,454.35|8,734,892.51|
|Handing expense|498,775.07|427,320.01|
|Asset management fee||1,960,000.00|
|Other expense|2,520.00|2,120.00|
|Total|8,979,085.95|5,012,897.34|

 Other explanation:
Nil
34. Losses on assets impairment
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
||807,725.34|3,370,059.54|
|I. Bad debt losses|||
||614,061.37|176,877.32|
|II. Inventory falling price loss|||
|Total|1,421,786.71|3,546,936.86|

 Other explanation:
Nil
35. Gains on investment
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|Investment income generated by financial|||
||372,245.91|333,974.06|
|products|||
|Total|372,245.91|333,974.06|

Other explanation:
36. Asset disposal income
In RMB
||||
|-|-|-|
|Source of asset disposal income|Current Period|Last Period|
|Disposal gains or losses arising from the|||
|disposal of not held for sale fixed assets \|||
||199,069.56|82,132.08|
|construction in progress \ productive|||
|biological assets \ intangible assets|||
||199,069.56|82,132.08|

 37. Other income
In RMB
||||
|-|-|-|
|Source of other income|Current Period|Last Period|
|Stabilization subsidy|161,420.00||

38. Non-operating income
In RMB
|||||
|-|-|-|-|
||||Amount reckoned in current|
|Item|Current Period|Last Period||
||||non-recurring gains/losses|
|Receive donations|51,500.00|4,000.00|51,500.00|
|Government subsidy|1,013,769.68|1,419,888.89|1,013,769.68|
|Unable to pay|139,368.16|379,187.99|139,368.16|
|Penalty revenue|1,670,673.90|3,526,305.00|1,670,673.90|
|Fine income|77,471.33|81,319.60|77,471.33|
|Other|19,173.00||19,173.00|
|Total|3,476,152.23|5,533,431.78|2,971,956.07|

 Government subsidy reckoned into current gains/losses:
In RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|||||Subsidy|||||
|||||impact|The special|||Assets-relate|
||Issuing|Offering||||Amount in|Amount in||
|Item|||Nature|current|subsidy|||d/income-rela|
||subject|causes||||the Period|last period||
|||||gains/losses|(Y/N)|||ted|
|||||(Y/N)|||||
||Commercial||Subsidy||||||
||Bureau of||obtained for|||||Income-relate|
|Export bonus||Reward||No|Yes|50,000.00|20,000.00||
||Caidian||conforms|||||d|
||District,||with the local||||||

||||||||||
|-|-|-|-|-|-|-|-|-|
||Wuhan||support||||||
||||policy for||||||
||||investment||||||
||||incentive to||||||
||||encourage||||||
||||investment||||||
||||Subsidy||||||
||Human||obtained for||||||
||Resources &||conforms||||||
||Social||with the local||||||
|Stabilization|Security||support|||||Income-relate|
|||Reward||No|Yes||183,500.00||
|subsidy|Bureau of||policy for|||||d|
||Caidian||investment||||||
||District,||incentive to||||||
||Wuhan||encourage||||||
||||investment||||||
||||Subsidy||||||
||||obtained for||||||
|Reward for|||||||||
||||conforms||||||
|excellent|Commercial||||||||
||||with the local||||||
|private|Bureau of||||||||
||||support|||||Income-relate|
|enterprise in|Caidian|Reward||No|Yes|200,000.00|||
||||policy for|||||d|
|Caidian|District,||||||||
||||investment||||||
|District for|Wuhan||||||||
||||incentive to||||||
|year of 2016|||||||||
||||encourage||||||
||||investment||||||
||||Subsidy||||||
||||obtained for||||||
|Development|||||||||
||||conforms||||||
|& promotion|Commercial||||||||
||||with the local||||||
|funds for|Bureau of||||||||
||||support|||||Income-relate|
|processing|Caidian|Reward||No|Yes|270,000.00|||
||||policy for|||||d|
|trade of|District,||||||||
||||investment||||||
|Midwest for|Wuhan||||||||
||||incentive to||||||
|year of 2016|||||||||
||||encourage||||||
||||investment||||||
||||Subsidy||||||
||Economic &||||||||
||||obtained for||||||
||Information||||||||
|Enterprise|||conforms||||||
||Bureau of|||||||Income-relate|
|development||Subsidy|with the local|No|Yes||100,000.00||
||Caidian|||||||d|
|subsidy|||support||||||
||District,||||||||
||||policy for||||||
||Wuhan||||||||
||||investment||||||

||||||||||
|-|-|-|-|-|-|-|-|-|
||||incentive to||||||
||||encourage||||||
||||investment||||||
||||Subsidy||||||
||||obtained for||||||
||||conforms||||||
|Excellent|Caidian||with the local||||||
|enterprise|Bureau of||support|||||Income-relate|
|||Reward||No|Yes|200,000.00|200,000.00||
|award for|Finance,||policy for|||||d|
|year of 2016|Wuhan||investment||||||
||||incentive to||||||
||||encourage||||||
||||investment||||||
|Enterprise|||Subsidy for||||||
|development|||research and||||||
|fund|Caidian||development,||||||
|(manufacturi|Bureau of||technical|||||Income-relate|
|||Subsidy||No|Yes|293,769.68|863,469.00||
|ng project of|Finance,||reforming|||||d|
|home|Wuhan||and||||||
|appliance|||reconstructio||||||
|parts )|||n||||||
||||Subsidy||||||
||||obtained for||||||
||||conforms||||||
||Office of||with the local||||||
|Water|||||||||
||Water||support|||||Income-relate|
|conservation||Reward||No|Yes||10,000.00||
||Conservation||policy for|||||d|
|subsidy|||||||||
||of Wuhan||investment||||||
||||incentive to||||||
||||encourage||||||
||||investment||||||
||||Subsidy||||||
||||obtained for||||||
||Shenzhen||||||||
||||conforms||||||
||Municipal||||||||
||||with the local||||||
|Maternity|Bureau of||||||||
||||support|||||Income-relate|
|insurance|Human|Subsidy||No|Yes||42,919.89||
||||policy for|||||d|
|benefits|Resources &||||||||
||||investment||||||
||Social||||||||
||||incentive to||||||
||Security||||||||
||||encourage||||||
||||investment||||||
|Total|--|--|--|--|--|1,013,769.68|1,419,888.89|--|

Other explanation:
Nil
39. Non-operating expenditure
In RMB
|||||
|-|-|-|-|
||||Amount included in current|
|Item|Current Period|Last Period||
||||non-recurring profits or losses|
|Penalty expenditure|2,985.68|401,518.25|2,985.68|
|Loss of creditor's rights transfer|5,755,200.00|4,754,489.08|5,755,200.00|
|Other expenses|545.88|44,787.59|545.88|
|Total|5,758,731.56|5,200,794.92||

Other explanation:
Nil
40. Income tax expenses
(1) Statement of income tax expense
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|Current income tax expense|1,000,988.22|5,300,506.90|
|Deferred income tax expense|555,685.04|-2,075,205.01|
|Total|1,556,673.26|3,225,301.89|

 (2) Adjustment on accounting profit and income tax expenses
In RMB
|||
|-|-|
|Item|Current Period|
|Total profit|2,531,082.65|
|Income tax based on statutory/applicable rate|442,130.64|
|Impact by different tax rate applied by subsidies|-461,085.57|
||553,226.30|
|Cost, expenses and loss which are not deductible||
|Impact on deductible temporary differences or losses deductible||
||1,022,694.52|
|which was un-recognized as deferred income tax assets||
|Income tax expense|1,556,673.26|

 Other explanation
Nil
41. Items of statement of cash flow
(1) Other cash received in relation to operation activities
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|Unit intercourse account|5,469,555.18|58,857,368.87|
|Collection management fee and utilities|||
||430,720.45|887,774.50|
|etc.|||
|Repayment from employees|3,315,558.82|2,519,419.93|
|Margin, deposit|59,281.50|1,195,207.00|
|Interest income|211,336.37|198,375.93|
|Refund|1,764,059.75|1,484,810.16|
|Claim deduction etc.|905,067.46|70,996.80|
|Government grants|1,451,189.68|1,419,888.89|
|Receive grant|15,500.00|4,000.00|
|Capital occupation fee|0.00|1,838,752.40|
|Other|185,116.26||
|Total|13,807,385.47|68,476,594.48|

 Explanation on other cash received in relation to operation activities:
Nil
(2) Other cash paid in relation to operation activities
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|Unit intercourse account|2,512,814.07|67,264,966.80|
|Advances to employees|3,794,266.72|3,149,396.42|
|Litigation fee|2,215,866.00|489,061.00|
|Margin, deposit|1,167,554.00|1,665,134.00|
|Entertainment expense|2,769,800.23|2,974,661.79|
|Water and electricity|370,312.12|101,827.25|
|Travel expenses|3,287,308.11|3,356,481.54|
|Transportation fee|5,008,475.05|3,918,442.17|
|Transportation fee|1,030,400.36|1,632,669.14|
|Repairs|3,724,821.24|1,419,253.95|
|Audit fees, consulting fees|5,258,621.00|9,261,709.50|

||||
|-|-|-|
|Security|166,131.50|1,212,962.31|
|Financial institutions handling fee|517,938.92|426,098.13|
|Office expenses|668,598.26|2,171,388.26|
|Communication fee|313,916.50|381,223.14|
|Lease fee|4,616,957.86|4,507,704.41|
|Other|971,692.54|1,410,801.99|
|Refund||1,114,064.48|
|Asset management fee||1,960,000.00|
|Commodity inspection fee|977,449.41|812,042.67|
|After sales service fee|1,698,357.00|1,447,902.00|
|Fines and indemnities|600,818.52|401,518.25|
|Securities information disclosure fee|663,685.00|404,595.80|
|Total|42,335,784.41|111,483,905.00|

 Explanation on other cash paid in relation to operation activities:
Nil
42. Supplementary information to statement of cash flow
(1) Supplementary information to statement of cash flow
In RMB
||||
|-|-|-|
|Supplementary information|This Period|Last Period|
|1. Net profit adjusted to cash flow of|||
||--|--|
|operation activities:|||
|Net profit|974,409.39|5,457,710.33|
|Add: Assets impairment provision|1,421,786.71|3,546,936.86|
|Depreciation of fixed assets, consumption of|||
|oil assets and depreciation of productive|10,976,272.03|11,051,791.44|
|biology assets|||
|Amortization of intangible assets|1,493,850.03|1,494,294.72|
|Amortization of long-term deferred expenses|62,191.53|70,900.08|
|Loss from disposal of fixed assets, intangible|||
|assets and other long-term assets(gain is|-199,069.56|-101,056.08|
|listed with “-”)|||
|Loss from discarding fixed assets as useless|||
|||18,924.00|
|(gain is listed with “-”)|||
|Financial expenses (gain is listed with “-”)|10,910,660.03|11,476,211.74|

||||
|-|-|-|
|Investment loss (income is listed with “-”)|-372,245.91|-333,974.06|
|Decrease of deferred income tax assets|1,744,307.31|-2,075,205.01|
|(increase is listed with “-”)|||
|Decrease of inventory (increase is listed with|||
||-13,484,636.85|-19,947,136.21|
|“-”)|||
|Decrease of operating receivable accounts|||
||2,182,974.23|-65,334,769.96|
|(increase is listed with “-”)|||
|Increase of operating payable accounts|||
||-3,987,244.58|35,982,075.57|
|(decrease is listed with “-”)|||
|Net cash flow arising from operating|11,723,254.36|-18,693,296.58|
|activities|||
|2. Material investment and financing not|||
||--|--|
|involved in cash flow:|||
|3. Net change of cash and cash equivalents:|--|--|
|Balance of cash at period end|66,240,945.59|91,310,804.48|
|Less: Balance of cash at period-begin|91,310,804.48|632,846,956.16|
|Add: Balance of cash equivalent at|||
||15,234,028.71|12,704,508.49|
|period-end|||
|Less: Balance of cash equivalent at|||
||12,704,508.49||
|period-begin|||
|Net increasing of cash and cash equivalents|-22,540,338.67|-528,831,643.19|

 (2) Constitution of cash and cash equivalent:
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Ⅰ. Cash|66,240,945.59|91,310,804.48|
|Including: Cash on hand|170,053.77|235,039.12|
|Bank deposit available for payment|||
||66,070,891.82|91,075,765.36|
|at any time|||
|II. Cash equivalent|15,234,028.71|12,704,508.49|
|Including: bond investment due in three|15,234,028.71|12,704,508.49|
|months|||
|Ⅲ. Balance of cash and cash equivalent at|81,474,974.30|104,015,312.97|
|period-end|||

Other explanation:
Monetary fund at year-end-other monetary fund refers to the bank acceptance bond 2,571,550.38 Yuan, which is
not belonging to the cash and cash equivalent. At end of the year, among the note receivable due within 3 months,
the 8,228,588.14 Yuan are used for pledge, which is not belongs to cash and cash equivalent.
43. Assets with ownership or use right restricted
In RMB
||||
|-|-|-|
|Item|Ending book value|Restriction reasons|
|Monetary Fund|2,571,550.38|Bank acceptance bill|
|Notes receivable|15,738,970.85|Pledge|
|Fixed assets|74,643,021.02|Bank loan secured|
|Intangible assets|43,097,497.43|Bank loan secured|
|Accounts receivable|8,831,928.89|Pledge|
|Investment real estate|27,583,299.22|Bank loan secured|
|Liquidation of fixed assets|92,857,471.69|Court closure|
|Total|265,323,739.48|--|

Other explanation:
Nil
44. Item of foreign currency
(1) Item of foreign currency
In RMB
|||||
|-|-|-|-|
||Closing balance of foreign|||
|Items||Rate of conversion|Ending RMB balance converted|
||currency|||
|Including: USD|3,121,823.67|6.5342|20,398,620.22|
|HKD|32.66|0.8359|27.30|
|Including: USD|8,312,142.14|6.5342|54,313,199.17|
|Advance account||||
|Including: USD|6,885.13|6.5342|44,988.82|
|Short term loan||||
|Including: USD|3,538,346.67|6.5342|23,120,264.81|

 Other explanation:
Nil
45. Other
1. The government grants collected in the year amounting as 1,451,189.68 Yuan in total, including 0.00 Yuan governmetn grants with assets concerned, 1,451,189.68 Yuan received in the period; the grants with income
concerned amounting as 1,451,189.68 Yuan.
2. Government grants related to income
||||
|-|-|-|
|Item|Amount reckoned into|Item that reckoned|
||gain/loss (listed by positive||
||number)||
|Stabilization subsidy|161,420.00|Other income|
|Export bonus|50,000.00|Non operating income|
|Reward for excellent private enterprise in Caidian|200,000.00|Non operating income|
|District for year of 2016|||
|Development & promotion funds for processing trade of|270,000.00|Non operating income|
|Midwest for year of 2016|||
|Excellent enterprise award for year of 2016|200,000.00|Non operating income|
|Enterprise development fund (manufacturing project of|293,769.68|Non operating income|
|home appliance parts )|||
|Subsidized loan|258,500.00|Finacnial cost reduction|
|Interest subsidy for liquidity loans from growth|17,500.00|Finacnial cost reduction|
|enterprise in Wuhan for year of 2016|||
|Total|1,451,189.68|——|

VIII. Equity in other entity
1. Equity in subsidiary
(1) Constitute of enterprise group
||||||||
|-|-|-|-|-|-|-|
||Main operation|||Share-holding ratio|||
|Subsidiary||Registered place|Business nature|||Acquired way|
||place|||Directly|Indirectly||
|Huafa Leasing|||Property|||Investment|
||Shenzhen|Shenzhen||60.00%|||
|Company|||management|||establishment|
|Huafa Property|||Property|||Investment|
||Shenzhen|Shenzhen||100.00%|||
|Company|||management|||establishment|
|Hengfa|||||||
||||Production and|||Investment|
|Technology|Wuhan|Wuhan||100.00%|||
||||sales|||establishment|
|Company|||||||
|Hengfa Hengtian|||Property|||Investment|
||Shenzhen|Shenzhen||100.00%|||
|Company|||management|||establishment|
|Hengfa Hengtai|||Property|||Investment|
||Shenzhen|Shenzhen||100.00%|||
|Company|||management|||establishment|

 Explanation on share-holding ratio in subsidiary different from ratio of voting right:
Nil
Basis for controlling the invested entity with half or below voting rights held and without controlling invested entity but with over
half and over voting rights:
Nil
Controlling basis for the structuring entity included in consolidated range:
Nil
Basis on determining to be an agent or consignor:
Nil
Other explanation:
Nil
IX. The risk associated with financial instruments
The Group's main financial instruments include loans, receivables, payables, tradable financial assets, trading financial liabilities, etc., please refer to the details of each financial instrument in Note 5. The risks associated with these financial instruments and the risk management policies adopted by the Group to reduce these risks are described below. The management of the Group manages and monitors these risk exposures to ensure that the above risks are controlled within the limits.
1. Various risk management objectives and policies
The objective of the Group's risk management is to strike a proper balance between risks and profits, minimize the negative impact of risks on the Group's operating results, and maximize the benefits of shareholders and other equity investors. Based on this risk management objectives, the Group's basic strategy for risk management is to identify and analyze the risks faced by the Group, establish appropriate risk bottom lines and carry out risk management, and timely and reliably monitor the risks control them within the limits.
(1) Market risk
The market risk of financial instruments refers to the risk that the fair value or the future cash flows of financial instruments fluctuate due to the changes in market prices, including foreign exchange risk, interest rate risk and other price risk.
1) Exchange rate risk
The Group's exchange rate risk is mainly related to US dollars and Hong Kong dollars. Except the Group's second level subsidiary, Hengfa TechnologyCompany’s monitor business has day-to-day operations in US dollars; other principal business activities of the Group settle accounts in RMB. On December31, 2017, except for the US dollar balance of assets and liabilities in below table and the sporadic Hong Kong dollar balance, the Group's assets and liabilities are all RMB balance. The exchange rate risk arising from the assets and liabilities of the US dollar, Hong Kong dollar balance may have an impact on the Group's operating results.
|||
|-|-|
|Item|2017-12-31 (RMB convertion)|
|Monetary Fund - USD|20,398,620.23|
|Monetary Fund - HKD|27.30|
|Accounts receivable - USD|54,313,199.17|
|Advance account - USD|44,988.82|
|Accounts payable - USD||

|||
|-|-|
|Short term borrowings- USD|23,120,264.81|

The Company eyes on the influence from variation of exchange
2) Interest rate risk
The interest rate risk of the Group arises from bank loans. The financial liabilities of floating interest rate make the Group face cash flow interest rate risk, and the financial liabilities of fixed rate make the Group face the interest rate risk of fair value. The Group determines the relative proportion of fixed rate and floating interest rate contracts based on the prevailing market environment. On December 31, 2017, the Group's interest-bearing debt was mainly the floating interest rate loan contract denominated in Renminbi and US dollars, amounting to RMB 166,620,264.81 (December 31, 2016: RMB 181,210,467.81).
The Group's risk of changes in the cash flow of financial instruments due to changes in interest rates is mainly related to the floating interest rate bank loans. The Group's policy is to maintain the floating interest rate of these loans so as to eliminate the fair value risk of the interest rate changes.
3) Price risk
The Group sells monitors and so on at market prices and is therefore affected by such price fluctuations.
(2) Credit risk
Credit risk refers to the risk that a party of the financial instrument does not fulfill its obligations and causes property loss to another party. On December 31, 2017, the maximum credit risk exposure that may cause financial losses to the Group is mainly attributable to the failure of the other party to fulfill its obligations resulting in the losses of the Group's financial assets and the Group's financial guarantees, including:
The carrying amount of the financial assets recognized in the consolidated balance sheet; for the financial instruments measured at fair value, the book value reflects its risk exposures but not the maximum risk exposure, and its maximum risk exposure changes with the future changes in fair value.
In order to reduce the credit risk, the Group has set up a special department to determine the credit line, carry out the credit approval, and implement other monitoring procedures to take necessary measures to recover the overdue credit. In addition, the Group reviews the recovery of each individual receivable at every balance sheet date to accrue sufficient provision for bad debts of uncollectible funds. As a result, the Group's management believes that the Group's credit risk has been greatly reduced.
The Group's working capital is deposited in banks with higher credit ratings, so the credit risk of working capital is low.
The Group has adopted necessary policies to ensure that all customers have good credit records. In addition to the top five account receivables, the Group has no other significant credit risk.
The total amount of the top five account receivables is RMB 131,399,474.20.
(3) Liquidity risk
The liquidity risk is the risk that the Group is unable to fulfill its financial obligations on the due date. The Group's approach to manage liquidity risk is to ensure that there is sufficient financial liquidity to fulfill its due debts but not cause unacceptable losses or damages to the corporate reputation. The Group regularly analyzes the structure and duration of liabilities to ensure there are sufficient funds. The management of the Group monitors the use of bank loans and ensures the compliance with loan agreement, and conducts financing consultations with financial institutions in order to maintain a certain line of credit and reduce the liquidity risk.
The financial assets and financial liabilities held by the Group based on the maturity of the undiscounted outstanding contractual obligations are analyzed as follows
Amount on December 31, 2017
||||||
|-|-|-|-|-|
|Item|Within 1 year|1-2 year|2-3 year|Over 3 year|
|Financial assets|||||
|Monetary Fund|68,812,495.97||||
|Notes receivable|64,778,266.65||||
|Accounts receivable|148,639,591.75|154,351.84|2,054.67||
|Other receivables|1,443,680.72|895,869.00||96,180.00|
|Advance account|2,603,895.64|272,532.52|1,699.85||
|Financial liabilities|||||
|Short term borrowings|166,620,264.81||||
|Notes payable|17,810,270.28||||
|Accounts payable|71,817,382.90|178,286.54|126,368.67|11,882,832.62|
|Other payables|15,889,643.29|||4,037,633.66|
|Advance receivable|234,017.18|77.00|25,952.00|18,082.00|
|Employee salarypayable|5,083,357.93||||

2. Sensitivity analysis
The Group uses the sensitivity analysis technique to analyze the possible impacts of the reasonable and possible changes in risk variable on the currents profit and losses or the owner's equity. Since any risk variable rarely changes in isolation, and the correlation among the variables has a significant effect on the final effect amount of a certain risk variable changes, and the following contents are on the assumption that the change in each variable is independent.
(1) Sensitivity analysis of foreign exchange risk
Sensitivity analysis of foreign exchange risk assumes that all overseas operating net investment hedges and cash flow hedges are highly effective.
On the basis of the above assumptions, in case that other variabledon’t change, the after-tax effect of the possible
and reasonable changes in the exchange rate on the current profits and losses are as follows
||||||
|-|-|-|-|-|
|Item|Exchange ratefluctuation|2017|||
|||Impact on net profit|Impact on owner'sequity|Impact on net profit|
|All foreigncurrency|5% appreciation of theRMB|-2,581,828.54|-2,581,828.54|-998,138.25|
|All foreigncurrency|5% devaluarion of theRMB|2,581,828.54|2,581,828.54|998,138.25|

X. Related party and related transactions
1. Parent company of the enterprise
|||||||
|-|-|-|-|-|-|
|||||Share-holding ratio||
||||||Voting right ratio on|
|Parent company|Registration place|Business nature|Registered capital|on the enterprise for||
||||||the enterprise|
|||||parent company||
|||Production and sales,||||
|Wuhan Zhongheng||real estate||||
|New Technology||development and||||
||Wuhan||34,500,000.00|41.14%|41.14%|
|Industry Group Co.,||sales, housing||||
|Ltd.||leasing and||||
|||management||||

Explanation on parent company of the enterprise
Nil
The ultimate control of the enterprise is Li Zhongqiu.
Other explanation:
Nil
2. Subsidiary of the Enterprise
Found more in VIII. Equity in other entity in the Note
3. Other related party
|||
|-|-|
|Other related party|Relationship with the Enterprise|
|Shenzhen Zhongheng Huafa Science and Technology Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Wuhan Hengsheng Yutian Industrial Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Wuhan Hengsheng Photoelectric Industry Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Hongkong Yutian International Investment Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Wuhan New Oriental Real Estate Development Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Wuhan Zhongheng Property Management Co., Ltd.|Control by same controlling shareholder and ultimate controller|

|||
|-|-|
|Wuhan Optical Valley Display System Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Wuhan Yutian Xingye Property Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Wuhan Yutian Dongfang Property Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Wuhan Xiahua Zhongheng Electronics Co. Ltd.|Control by same controlling shareholder and ultimate controller|
|Wuhan Zhongheng Yutian Trade Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Wuhan Yutian Hongguang Real Estate Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Shenzhen Zhongheng Huayu Investment Holding Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Yutian Investment Co., Ltd. (Famous Sky Capital Limited)|Control by same controlling shareholder and ultimate controller|
|Yutian International Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Hongkong Zhongheng Yutian Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Shenzhen Yutian Henghua Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Shenzhen Zhongheng Yongye Technology Co., Ltd.|Control by same controlling shareholder and ultimate controller|
|Shenzhen Yutian Hengrui Co., Ltd.|Control by same controlling shareholder and ultimate controller|

 Other explanation
Nil
4. Related transaction
(1) Goods purchasing, labor service providing and receiving
Goods purchasing/labor service receiving
In RMB
|||||||
|-|-|-|-|-|-|
|||||Whether over the||
|||Amount of this|Trading limit|||
|Related party|Content|||approved limited or|Amount of last period|
|||period|approved|||
|||||not||
|Hongkong Yutian||||||
|International||||||
||Purchase good|209,991,225.25|261,368,000.00|N|160,560,343.18|
|Investment Co.,||||||
|Ltd.||||||
|Wuhan Hengsheng||||||
|Photoelectric|Purchase good|122,865,451.21|176,423,400.00|N|48,070,877.55|
|Industry Co., Ltd.||||||

Goods sold/labor service providing
In RMB
|||||
|-|-|-|-|
|Related party|Content|Amount of this period|Amount of last period|
|Hongkong Yutian International||||
||Sales good|211,214,811.40|193,821,823.74|
|Investment Co., Ltd.||||
|Wuhan Hengsheng|Sales good|4,328,922.01|1,907,193.07|

||
|-|
|Photoelectric Industry Co., Ltd.|

Explanation on goods purchasing, labor service providing and receiving
(2) Related guarantee
As the guarantor
In RMB
||||||
|-|-|-|-|-|
|Secured party|Amount guarantee|Start|End|Completed or not (Y/N)|
|Hengfa Technology|||||
||50,000,000.00|2017-11-21|2018-11-21|No|
|Company|||||

As the secured party
In RMB
||||||
|-|-|-|-|-|
|Guarantor|Amount guarantee|Start|End|Completed or not (Y/N)|
|Li Zhongqiu|20,000,000.00|2017-05-19|2018-05-19|No|
|Li Zhongqiu, Wuhan|||||
|Zhongheng New Science|||||
||100,000,000.00|2016-07-22|2018-07-21|No|
|& Technology Industrial|||||
|Group Co., Ltd.|||||

Explanation on related guarantee
Nil
(3) Remuneration of key manager
In RMB
||||
|-|-|-|
|Item|Current Period|Last Period|
|Remuneration of key manager|1,143,000.00|1,394,600.00|

 5. Receivable/payable items of related parties
(1) Receivable item
In RMB
|||||||
|-|-|-|-|-|-|
|||Closing balance||Opening balance||
|Item|Related party|||||
|||Book balance|Bad debt reserves|Book balance|Bad debt reserves|
|Accounts receivable||44,436,775.47||41,299,300.89||
||Hongkong Yutian|||||
|Advance payment|International|44,988.82||8,873,087.08||
||Investment Co., Ltd.|||||

(2) Payable item
In RMB
|||||
|-|-|-|-|
|Item|Related party|Ending book balance|Opening book balance|
||Shenzhen Zhongheng Huafa|||
|Other payables|Science and Technology Co.,||6,288.00|
||Ltd.|||
||Wuhan Hengsheng|||
|Accounts payable||3,565,595.98|7,173,172.20|
||Photoelectric Industry Co., Ltd.|||

6. Commitments of related party
In line with the claim of application for arbitration from Shenzhen Vanke, Shen HUAFA and Wuhang Zhongheng paid and money together. As the commitment letter to Shen HUAFA from Wuhang Zhongheng Group, if the Vanke wins, the losses from disputes arising by contract will bear by Wuhan Zhongheng Group in full.
XI. Commitment or contingency
1. Important commitment
Important commitment on balance sheet date
As of the balance sheet date, the irrepealable operating lease contract signed by the Company are as:
The Company entered into a house leasing contract with Wuwu Branch of Shenzhen Dacong Industrial Co., Ltd., term of the leasing period from 18 August 2015 to 17 August 2020
||
|-|
|Minimum leasing payment for irrepealable operating leasecontract|
|First year after balance sheet date|
|Second year after balance sheet date|
|Third year after balance sheet date|
|Total|

2. Contingency
(1) Contingency on balance sheet date
1. Pending arbitration with Shenzhen Vanke
In August 2015, Shenzhen HUAFA and Wuhan Zhongheng New Technology Industry Group Co., Ltd. (hereinafter referred to as “Wuhan Zhongheng”) signed the “Cooperation Agreement on Urban Renewal Project of Update Units at Huafa Industrial Park, Gongming Street, Guangming New District, Shenzhen”. As Shenzhen
HUAFA and Wuhan Zhongheng planned to cooperate with Shenzhen Vanke Real Estate CO., Ltd. (hereinafter
referred to as “Shenzhen Vanke”) on the Huafa urban renewal project (hereinafter referred to as “Huafa
Renovation Project) at Gongming Street, Guangming New District, Shenzhen, both parties appointed that
Shenzhen HUAFA entrusted Wuhan Zhongheng to represent it in this cooperation, and established project company - Shenzhen Vanke Guangming Real Estate Co., Ltd. (hereinafter referred to as “Vanke Guangming”) as the subject of project implementation with Shenzhen Vanke; Vanke Guangming signed “Demolition Compensation Agreement” with Shenzhen HUAFA and Wuhan Zhongheng, and paid the compensation for demolition.
On August 21, 2015, Shenzhen HUAFA, Wuhan Zhongheng and Shenzhen Vanke signed the “Cooperative Operation Contract of Renovation Project at Huafa Industrial Park, Gongming Street, Guangming New District”(hereinafter referred to as “Cooperative Operation Contract”), the contract refined and appointed the cooperation model and operating steps of both sides. And then Shenzhen HUAFA, Wuhan Zhongheng and Shenzhen Vanke signed the “Agreement on the Housing Acquisition and Removal Compensation and Settlement”. After signing the above agreement, Shenzhen Vanke paid the cooperation price of 600 million Yuan to Wuhan Zhongheng through Vanke Guangming.
In September 2016, Shenzhen Vanke filed an arbitration to South China International Economic and Trade Arbitration Commission (hereinafter referred to as “South China Arbitration”) as Shenzhen HUAFA and Wuhan Zhongheng violated the appointment of “Cooperative Operation Contract” and handled the “Confirmation of Subject of Reconstruction Implementation” at an overdue time, and required Shenzhen HUAFA and Wuhan Zhongheng to pay liquidated damages and attorneys' fees of RMB 464.60 million.
While filing the arbitration, Shenzhen Vanke also applied for property preservation of 400 million Yuan of property under the name of Shenzhen Huafa and Wuhan Zhongheng to Shenzhen IntermediatePeople’s Court. According to the ruling of Shenzhen Intermediate People's Court and “Notification of Sealing up, Seizing and Freezing Assets” (The reference numbers are (2016) Yue 03 Cai Bao No. 51, (2016) Yue 03 Cai Bao No. 53), the 27 house properties (Note: the property within the scope of Huafa renovation project) under the name of Shenzhen HUAFA and 116,489,894 shares (Note: of which 116,100,000 shares have been pledged) of Shenzhen HUAFA stock held by Wuhan Zhongheng were frozen.
On November 12, 2016, the arbitration court held a hearing on this case.
In December 2016, Wuhan Zhongheng to Shenzhen HUAFA issued a “Commitment Letter” which included that if the arbitration (Note: the case) ruled in favor of Shenzhen Vanke, the loss of arbitration caused by the contract disputes should be fully assumed by our company. In the above contingent losses, if the judicial decision ruled your company to pay the compensation in advance, our company promised to pay your company in cash within one month, if our company could not pay on time due to uncontrollable factors, our company would like to pay the corresponding interest according to the benchmark interest rate of bank loans in the corresponding period. Because the plots in the renovation project placed in our companyhadn’t been applied for transfer procedures and were still under yourcompany’s name (Note: based on the “Asset Replacement Contract” signed by Wuhan Zhongheng and Shenzhen HUAFA on April 29, 2009), therefore, there was no risk of compliance, at the same time, our company promised to give priority to paying the above compensation with the compensation for demolition of renovation project.
On March 14, 2017, Shenzhen HUAFA received the “Decision of Arbitrator not Granting Avoiding” issued by South China Arbitration, which rejected the application for avoiding of chief arbitrator proposed by Shenzhen Vanke. On March 15, 2017, Shenzhen HUAFA received the “Letter About the Resignation of the Chief Arbitrator of No. SHEN DP20160334 Case” signed by the chief arbitrator and forwarded by South China Arbitration. On March 20, 2017, Shenzhen HUAFA received the “Letter About the Resignation of the Arbitrator of No. SHEN DP20160334 Case” forwarded by South China Arbitration, the arbitrator selected by Shenzhen Vanke said to
resign from the arbitrator of this case due to physical reasons.
The deadline for giving a ruling to this case was originally scheduled on February 12, 2017. According to the “Decision of Adjourning the Ruling” issued by South China Arbitration on February 10, 2017, the deadline for giving a ruling to this case shall be prolonged to May 12, 2017. Due to the changes in the members of above arbitration court, this case needs South China Arbitration to reassign the chief arbitrator and Shenzhen Vanke to reselect the arbitrators. According to the provisions of article 32 of the Arbitration Rules of South China Arbitration, after constituting the new arbitration court, it shall decide whether all or part of the hearing procedures that have been carried out before need to be reopened; if the arbitration court decides to reopen all hearing procedures, then the deadline for giving a ruling shall be calculated from the date that the arbitration court decides to reopen the hearing procedures.
On August 16, 2017, South China International Economic and Trade Arbitration Commission made the “Arbitral Award” SCIA[2017] D376, according to the arbitral award, the applicant and counterclaim respondent in arbitration case SCIA[2017] D376 were Shenzhen Vanke Real Estate Co., Ltd. (hereinafter referred to as “Applicant” and “Vanke”). The first respondent and the first applicant for counterclaim were Wuhan Zhongheng New Technology Industry Group Co., Ltd. (hereinafter referred to as “Wuhan Zhongheng” and “First Respondent”). The second respondent and the second applicant for counterclaim were Zhongheng Huafa. The award results were as follows:
(1) The first respondent and the second respondent pay liquidated damages to the applicant with a base number of RMB 600 million, calculating by the annual interest rate of36% from October 1, 2015 to November 11, 2016; (2) The first respondent and the second respondent pay the lawyer fees of RMB 1.4 million to the applicant due to the case;
(3) The first respondent and the second respondent pay the property preservation fees of RMB 10,000 to the applicant;
(4) The arbitration fees for this request and case was RMB 3,101,515.00, the first respondent and the second respondent should bear70%, i.e. RMB 2,171,060.50, and the applicant should bear30%, i.e. RMB 930,454.50. The applicant had already paid the arbitration fees in full amount for this request which could be used as the arbitration fees of this case and request and shall not be refunded. The first respondent and the second respondent should directly pay RMB 2,171,060.50 to the applicant;
The arbitration fee of counterclaim in this case was RMB 76,050 which was undertaken by the first respondent and the second respondent at their own expense. The first respondent and the second respondent paid the arbitration fees in full amount for this request which could be used as the arbitration fees of this case and request and shall not be refunded;
The actual expenses of the arbitrators in this case amounted to RMB 7,754.90, the first respondent and the second respondent assumed70%, i.e. RMB 5,428.43, and the applicant assumed30%, i.e. RMB 2,326.47; the above actual expenses of the arbitrators had been paid by the Commission, so the first respondent and the second respondent and the applicant should directly pay RMB 5,428.43 and RMB 2,326.47 respectively to the Commission;
(5) Reject theapplicant’s other arbitration requests;
(6) Reject the arbitration counterclaims of the first respondent and the second respondent.
In summary, Wuhan Zhongheng and Shenzhen Huafa should pay liquidated damages, interest, lawyer fees,
property preservation fees, and arbitration fees for this request to Vanke and pay actual expenses of the arbitrators in this case and pay the actual expenses incurred by the arbitrators in this case to South China International Economic and Trade Arbitration Commission.
The reasons of Wuhan Zhongheng resulted in a failure of a net handover, the district urban renewal functional department could not issue the corresponding demolition documents, which in turn made the project company fail to be confirmed as the subject of implementation, and finally and directly made the subject of implementation fail to get the “Land Value Payment Notification” and sign the “Land Use Rights Transfer Contract”. Wuhan Zhongheng shall bear all responsibilities for faults in response to the three major default facts. On February 6, 2018, Shenzhen Huafa believed that the ruling of the case had problems in the arbitration procedure and the assertion of the so-called breach of contract facts, the ruling results damaged the legitimate rights and interests of Shenzhen Huafa, Huafa has filed an application for revoking the award to Shenzhen IntermediatePeople’s Court, and Shenzhen IntermediatePeople’s Court has officially accepted the case on February 7, 2018, the case number is (2018) Yue 03 MT 113. The case has been accepted but not sub judice yet.
2. The contingent liability from pending action and its financial impact
||||||
|-|-|-|-|-|
|Litigious party|Types of litigations, times andexplaination|Cause ofaction|Case No.|Amountobject|
|Defendant: Shenzhen JifangInvestment Co., Ltd. andShenzhen CarnivalForeigning Trade ClothingCity Co., Ltd .|-----2016.03.08(People’s Court ofFutian Disctrict, Shenzhen) accept thecase-----2016.03.24 Application forbankaccount preservation of 550,000Yuan-----Date of first instance opening:2017.3.7----- Date of second instance opening2017.11.9-----2018.3.15 (verdict of the 2ndinstance effective)---2018.3.26 Application forenforcement, in processing|Disputeoverleasingcontracts|(2016) Yue0304MC No.: 5870;(2017) Yue 03 MZNo.: 22027;(2018) Yue 0304 ZNo.: 10334|Litigationamount:733800Yuan|
|Defendant: ShenzhenHuayongxing EnviornmentalTechnology Co., Ltd.Shenzhen YidaxingTechnology Co., Ltd.|----2016.03.23 (Pepole’s Court ofBaoan District, Shenzhen) accept thecase(Pepole’s Court of Baoan District,Shenzhen) Application forbankaccount preservation of 8 millionYuan (in payment)-----2017.3.20 Opening a trailThe first trial has come out, and theopponent applied for an appeal, the|Disputeoverleasingcontracts|2016 Yue 0306MC No.6180|Litigationamount:9.4726millionYuan|

||||||
|-|-|-|-|-|
||2nd trial’s citation has not beenreceived yet||||
|Defendant: ShenzhenHuayongxing EnviornmentalTechnology Co., Ltd.,Shenzhen GuangyongBreadboard Co., Ltd.,Shenzhen Mingyi ElectricCo., Ltd., Shenzhen OuruilaiTechnology Co., Ltd. andShenzhen KangzhengxinTechnology Co., Ltd.|----2016.03.24(Pepole’s Court ofBaoan District, Shenzhen) accept thecase-----2016.04.11(Pepole’s Court ofBaoan District, Shenzhen) Applicationfor bankaccount preservation of 17million Yuan------2017.2.14 Opening a trailThe first trial has come out, and theopponent applied for an appeal, the2nd trial’s citation has not beenreceived yet|Disputeoverleasingcontracts|2016 Yue 0306MC No. 6229|Litigationamount:19.6492millionYuan|
|Defendant: WuhanZhongheng New TechnologyIndustrial Group Co., ltd. andShenzhen Zhongheng HuawaCo., Ltd.Plaintiff: V&T LAW FIRM|---- On March 12, 2018, we receivedthe arbitration application of V&TLaw Firm from ShenzhenInternational Arbitration Commission,we have entrusted lawyers to respondto the suits and filed a counterclaimagainst V&T Law Firm, there is nonotice of hearing at present.|Disputeoveragencycontract|Case No.: SHENDX20180087|Litigationamount:19.402millionYuan|

XII. Principle notes of financial statements of parent company
1. Accounts receivable
(1) Category of account receivable
In RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Closing balance|||||Opening balance|||||
||Book balance||Bad debt reserves|||Book balance||Bad debt reserves|||
|Category|||||Book||||||
|||||Accrual|||||Accrual|Book value|
||Amount|Ratio|Amount||value|Amount|Ratio|Amount|||
|||||ratio|||||ratio||
|Account receivable|||||||||||
|with single|||||||||||
|significant amount|5,000,98||5,000,98|||5,094,4||5,094,414|||
|||48.58%||100.00%|||49.05%||100.00%||
|and withdrawal bad|8.97||8.97|||14.36||.36|||
|debt provision|||||||||||
|separately|||||||||||
|Accounts with single|5,292,43|51.42%|5,292,43|100.00%||5,292,4|50.95%|5,292,435|100.00%||

||||||||
|-|-|-|-|-|-|-|
|significant amount|5.32||5.32|35.32||.32|
|and bad debts|||||||
|provision accrued|||||||
|individually|||||||
||10,293,4||10,293,424.29|10,386,||10,386,84|
|Total||100.00%|||100.00%||
||24.29|||849.68||9.68|

Account receivable with major single amount and withdrawal bad debt provision single at period-end:
√ Applicable□ Not applicable
In RMB
||||||
|-|-|-|-|-|
|Account receivable (by|Closing balance||||
|unit)|Accounts receivable|Bad debt reserve|Provision ratio|Provision reason|
|Hongkong Haowei|||||
||1,870,887.18|1,870,887.18|100.00%|Un-recyclable|
|Industry Co. Ltd.|||||
|TCL ACE ELECTRIC|||||
|APPLIANCE|1,325,431.75|1,325,431.75|100.00%|Un-recyclable|
|(HUIZHOU) CO., LTD.|||||
|Qingdao Haier Parts|||||
||1,225,326.15|1,225,326.15|100.00%|Un-recyclable|
|Procurement Co., Ltd.|||||
|SKYWORTH Multimedia|||||
||579,343.89|579,343.89|100.00%|Un-recyclable|
|(Shenzhen) Co., Ltd.|||||
|Total|5,000,988.97|5,000,988.97|--|--|

Account receivable with bad debt provision withdrawal by method of account age in portfolio:
□ Applicable√ Not applicable
In combination, withdrawal proportion of bad debt provision based on balance proportion for account receivable:
□ Applicable√ Not applicable
In combination, withdrawal proportion of bad debt provision based on other methods for account receivable:
Accounts with single significant amount and bad debts provision accrued individually at period-end
||||||
|-|-|-|-|-|
|Debtor|Book balance|Bad debt|Accrual ratio|Reasons|
|Shenzhen Huixin Video Technology Co.,Ltd.|381,168.96|381,168.96|100.00||
|Shenzhen Wandelai Digital TechnologyCo., Ltd.|351,813.70|351,813.70|100.00||
|Shenzhen Dalong Electronic Co., Ltd.|344,700.00|344,700.00|100.00||
|Shenzhen Keya Electronic Co., Ltd.|332,337.76|332,337.76|100.00||
|Shenzhen Qunping Electronic Co., Ltd.|304,542.95|304,542.95|100.00||
|China Galaxy Electronics (Hong Kong)Co., Ltd.|288,261.17|288,261.17|100.00||
|Dongguan Weite Electronic Co., Ltd.|274,399.80|274,399.80|100.00||
|Hong Kong New Century Electronics Co.,|207,409.40|207,409.40|100.00||

|||||
|-|-|-|-|
|Ltd.||||
|Shenyang Beitai Electronic Co., Ltd.|203,304.02|203,304.02|100.00|
|Beijing Xinfang Weiye Technology Co.,Ltd.|193,000.00|193,000.00|100.00|
|TCL Electronics (Hong Kong) Co., Ltd.|145,087.14|145,087.14|100.00|
|Huizhou TCL Xinte Electronics Co., Ltd.|142,707.14|142,707.14|100.00|
|SkyWorth – RGB Electronic Co., Ltd.|133,485.83|133,485.83|100.00|
|Other|1,990,217.45|1,990,217.45|100.00|
|Total|5,292,435.32|5,292,435.32|——|

(2) Bad debt provision accrual, switch-back or taken back in reporting period
Bad debt provision accrual was 0.00 Yuan; the amount collected or switches back amounting to 93,425.39 Yuan.
Including major amount of bad debt provision that switch-back or taken back in the Period:
In RMB
||||
|-|-|-|
|Company|Amount switch back or taken back|Way|
|SKYWORTH Multimedia (Shenzhen) Co.,Ltd.|93,425.39|Bank deposit|
|Total|93,425.39|--|

(3)Top five receivables collected by arrears party at ending balance
||||
|-|-|-|
|Company|Closing balance|Ratio in total accountreceivable (%)|
|Hong Kong Haowei Industrial Co. Ltd.|1,870,887.18|100.00|
|TCL ACE ELECTRIC APPLIANCE(HUIZHOU) CO., LTD|1,325,431.75|100.00|
|Qingdao Haier Parts Procurement Co., Ltd.|1,225,326.15|100.00|
|SKYWORTH Multimedia (Shenzhen) Co.,Ltd.|579,343.89|100.00|
|Shenzhen Huixin Video Technology Co.,Ltd.|381,168.96|100.00|
|Total|5,382,157.93|——|

2. Other accounts receivable
(1) Category of other account receivable
In RMB
||||
|-|-|-|
|Category|Closing balance|Opening balance|

||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Book balance||Bad debt reserves|||Book balance||Bad debt reserves|||
||||||Book||||||
|||||Accrualratio|||||Accrual|Book value|
||Amount|Ratio|Amount||value|Amount|Ratio|Amount|||
||||||||||ratio||
|Other account|||||||||||
|receivable with|||||||||||
|single significant|108,940,||11,281,4||97,659,34|123,637||10,601,68||113,035,81|
|||91.51%||10.36%|||93.25%||8.57%||
|amount and|808.28||61.86||6.42|,504.36||6.53||7.83|
|withdrawal bad debt|||||||||||
|provision separately|||||||||||
|Other account|||||||||||
|receivable with bad|2,286,09||102,100.||2,183,999|965,485|||||
|||1.92%||4.47%|||0.73%|13,050.45|1.35%|952,435.34|
|debt provision|9.02||00||.02|.79|||||
|accrual by portfolio|||||||||||
|Other account|||||||||||
|receivable with|||||||||||
|single minor amount|7,815,58||7,736,78|||7,988,4||7,909,685|||
|||6.57%||98.99%|78,798.40||6.02%||99.01%|78,798.40|
|but withdrawal single|8.16||9.76|||84.16||.76|||
|item bad debt|||||||||||
|provision|||||||||||
||119,042,||19,120,3||99,922,143.84|132,591||18,524,42||114,067,051.57|
|Total||100.00%|||||100.00%||||
||495.46||51.62|||,474.31||2.74|||

 Other account receivable with major single amount and withdrawal bad debt provision single at period-end:
√ Applicable□ Not applicable
In RMB
||||||
|-|-|-|-|-|
||Closing balance||||
|Other account receivable|||||
||Other accountreceivable||||
|(units)||Bad debt provision|Accrual ratio|Accrual reason|
|Shenzhen Huafa Property|||||
||4,558,859.15|4,558,859.15|100.00%|Un-recyclable|
|Leasing Co., Ltd.|||||
|Hebei Botou Court|520,021.00|520,021.00|100.00%|Un-recyclable|
|Traffic accident|||||
||555,785.81|555,785.81|100.00%|Un-recyclable|
|compensation|||||
|Portman|4,021,734.22|4,021,734.22|100.00%|Un-recyclable|
|Zhao Baomin|553,901.68|553,901.68|100.00%|Un-recyclable|
|Shenzhen Jifang|||||
||1,071,160.00|1,071,160.00|100.00%|Un-recyclable|
|Investment Co., Ltd.|||||
|Total|11,281,461.86|11,281,461.86|--|--|

Other account receivable with bad debt provision withdrawal by method of account age in portfolio:
√ Applicable□ Not applicable
In RMB
|||||
|-|-|-|-|
||Closing balance|||
|Account age||||
||Other receivable|Bad debt reserves|Accrual ratio|
|Sub-item of within one year||||
|A combination of bad debts.|97,738,144.82|||
|Subtotal of within one year|279,099.02|||
|1-2 year|2,000,000.00||5.00%|
|2-3 year|||10.00%|
|Over three years|7,000.00|2,100.00|30.00%|
|Total|100,024,243.38|2,100.00||

Explanation on portfolio basis:
Nil
In combination, withdrawal proportion of bad debt provision based on balance proportion for other account receivable:
□ Applicable√ Not applicable
In combination, withdrawal proportion of bad debt provision based on other methods for other account receivable:
√ Applicable□ Not applicable
Other account receivable with single minor amount but withdrawal single item bad debt provision at period-end
||||||
|-|-|-|-|-|
|Debtor|Book balance|Bad debt|Accrual ratio (%)|Reasons|
|Electricity fee in Gongming canteen|489,214.70|489,214.70|100.00||
|Jiantao (Fogang) Laminates Co., Ltd.|465,528.10|465,528.10|100.00||
|Labor union|332,402.55|332,402.55|100.00||
|Lu Wei|290,000.00|290,000.00|100.00||
|4/F hotel Dai Qiangbo|194,569.00|194,569.00|100.00||
|Chuangjing|192,794.00|192,794.00|100.00||
|Shenzhen Mingli Co., Ltd.|170,394.84|170,394.84|100.00||
|Shenzhen Poly Property Group Co., Ltd.|78,798.40||||
|Other Units|5,601,886.57|5,601,886.57|100.00||
|Total|7,815,588.16|7,736,789.76|——||

(2) Bad debt provision accrual, switch-back or taken back in reporting period
Bad debt provision accrual was 495,928.88 Yuan; the amount collected or switches back amounting to 0.00 Yuan.
Including major amount of bad debt provision that switch-back or taken back in the Period:
In RMB
||||
|-|-|-|
|Company|Amount switch-back or taken back|Way|

(3) Other receivables by nature
In RMB
||||
|-|-|-|
|Nature|Ending book balance|Opening book balance|
|Margin and deposit|720,065.04|720,065.04|
|Borrow money|2,013,402.14|2,570,694.91|
|Intercourse funds|110,451,250.82|123,104,890.35|
|Rent receivable|5,857,777.46|6,195,824.01|
|Total|119,042,495.46|132,591,474.31|

 (4) Top 5 other receivables collected by arrears party at ending balance
In RMB
|||||||
|-|-|-|-|-|-|
|||||Proportion in total||
||||||Ending balance of|
|Company|Nature|Ending balance|Account age|other receivables at||
||||||bad debt provision|
|||||year-end||
|Wuhan Hengfa||||||
||Intercourse funds|95,098,997.30|0-2 year|81.25%||
|Technology Co. Ltd.||||||
|Shenzhen Huafa||||||
|Property Leasing Co.,|Intercourse funds|4,558,859.15|Over three years|3.90%|4,558,859.15|
|Ltd.||||||
|Portman|Lease receivable|4,021,734.22|Over three years|3.44%|4,021,734.22|
|Wan shang tian qin||||||
|(shenzhen) law firm|Receivables|2,000,000.00|1-2year|1.68%|100,000.00|
|company.||||||
|Shenzhen Zhongheng||||||
|Huafa Property Co.,|Intercourse funds|1,919,082.48|Within 1 year|1.64%||
|Ltd.||||||
|Total|--|107,598,673.15|--|90.39%|9,651,753.37|

 3. Long-term equity investment
In RMB
||||||||
|-|-|-|-|-|-|-|
||Closing balance|||Opening balance|||
|Item||Impairment|||Impairment||
||Book balance||Book value|Book balance||Book value|
|||provision|||provision||
|Investment for|||||||
||187,208,900.00|600,000.00|186,608,900.00|187,208,900.00|600,000.00|186,608,900.00|
|subsidiary|||||||
|Total|187,208,900.00|600,000.00|186,608,900.00|187,208,900.00|600,000.00|186,608,900.00|

(1) Investment for subsidiary
In RMB
||||||||
|-|-|-|-|-|-|-|
|||||||Ending balance of|
|||Increase during|Decrease during||Impairment||
|The invested entity|Opening balance|||Closing balance||impairment|
|||the period|this period||accrual||
|||||||provision|
|Huafa Leasing|||||||
||600,000.00|||600,000.00||600,000.00|
|Company|||||||
|Huafa Property|||||||
||1,000,000.00|||1,000,000.00|||
|Company|||||||
|Hemgfa|||||||
|Technology|183,608,900.00|||183,608,900.00|||
|company|||||||
|Huafa Hengtian|||||||
||1,000,000.00|||1,000,000.00|||
|Company|||||||
|Huafa Hengtai|||||||
||1,000,000.00|||1,000,000.00|||
|Company|||||||
|Total|187,208,900.00|||187,208,900.00||600,000.00|

 4. Operating income and cost
In RMB
||||||
|-|-|-|-|-|
||Current Period||Last Period||
|Items|||||
||Income|Cost|Income|Cost|
|Other business|41,156,307.77|5,877,729.00|43,547,414.64|6,585,571.92|
|Total|41,156,307.77|5,877,729.00|43,547,414.64|6,585,571.92|

 Other explanation:
Other business - by category
|||||
|-|-|-|-|
|Item|Current Period|||
||Income|Cost|Income|
|Subtotal of other business|41,156,307.77|5,877,729.00|43,547,414.64|
|Property leasing|36,273,253.79|1,517,893.56|38,068,434.47|
|Utilities and others|4,883,053.98|4,359,835.44|5,478,980.17|
|Total|41,156,307.77|5,877,729.00|43,547,414.64|

XIII. Supplementary Information
1. Current non-recurring gains/losses
√ Applicable□ Not applicable
In RMB
||||
|-|-|-|
|Item|Amount|Note|
|Gains/losses from the disposal of|||
||199,069.56||
|non-current asset|||
|Governmental subsidy reckoned into current|||
|gains/losses (not including the subsidy|||
|enjoyed in quota or ration according to|1,451,189.68||
|national standards, which are closely|||
|relevant to enterprise’s business)|||
|Other non-operating income and expenditure|||
||-3,800,545.17||
|except for the aforementioned items|||
|Other gains and losses items complying with|||
||372,245.91||
|definition for non-current gains and losses|||
||-672,860.55||
|Less: impact on income tax|||
|Total|-1,105,179.47|--|

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
2. REO and earnings per share
|||||
|-|-|-|-|
|||Earnings per share||
|Profits during report period|Weighted average ROE||Diluted EPS|
|||Basic EPS (RMB/Share)||
||||(RMB/Share)|
|Net profits belong to common stock||0.0034|0.0034|
||0.30%|||
|stockholders of the Company||||
|Net profits belong to common stock||||
|stockholders of the Company after||||
||0.65%|0.0073|0.0180|
|deducting nonrecurring gains and||||
|losses||||

Section XII. Documents available for reference
I. Text of the Annual Report caring signature of the Chairman;
II. Financial statement carrying the signatures and seals of the person in charge of the Company, principal of the accounting works and person in charge of accounting organ;
III. All documents of the Company and manuscripts of public notices that disclosed in the China Securities journal, Securities Times and Hong Kong Commercial Daily designated by CSRC in the report period;
IV. Article of Association
V. Other relevant files.