Stock Code: 000020 200020 Public Notice No.: 2020-15

Short Form of the Stock: SHEN HUAFA-A SHEN HUAFA- B

Shenzhen Zhongheng Huafa Co. Ltd.Summary of Annual Report 2019

I. Important Notice

The summary is abstract from full-text of annual report for more details of operating results financial condition and future

development plan of the Company; investors should found in the full-text of annual report that published on media appointed by

CSRC.

Objection statement of directors supervisors and senior executives

Name Position Content and reason

Statement

Other directors attending the Meeting for annual report deliberation except for the followed

Name of director absent Title for absent director Reasons for absent Attorney

Prompt of non-standard audit opinion

□ Applicable √ Not applicable

Profit distribution pre-plan of common stock or capitalizing of common reserves pre-plan deliberated by the Board in the reporting

period

□ Applicable √ Not applicable

The Company has no plan of cash dividends carried out bonus issued and capitalizing of common reserves either.Profit distribution pre-plan of preferred stock deliberated and approved by the Board in the reporting period

□Applicable □Not applicable

II. Basic information of the company

1. Company profile

Short form of the stock Shen HuafaA Shen HuafaB Stock code 000020 200020

Stock exchange for listing Shenzhen Stock Exchange

Person/Way to contact Secretary of the Board Rep. of security affairs

Name Niu Zhuo

Office add. 618 6/F East Tower No.411 Building

Huafa (N) Road Futian District Shenzhen

Fax. 0755-86360206

Tel. 0755-86360201

E-mail huafainvestor@126.com.cn

2. Main business or product introduction in the reporting period

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 polylon (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.

3. Main accounting data and financial indexes

(I) Main accounting data and financial indexes for recently three years

Whether it has retroactive adjustment or re-statement on previous accounting data

□Yes √ No

In RMB

2019 2018 Changes over last year 2017

Operating income 721557440.51 637046707.03 13.27% 858040132.74

Net profit attributable to

shareholders of the listed company

5460049.15 3295022.72 65.71% 974409.39

Net profit attributable to

shareholders of the listed company

after deducting non-recurring gains

and losses

4843096.96 1535043.65 215.50% 2079588.86

Net cash flow arising from

operating activities

74463707.01 -21894459.66 440.10% 11723254.36

Basic earnings per share

(RMB/Share)

0.0193 0.0116 66.38% 0.0034

Diluted earnings per share

(RMB/Share)

0.0193 0.0116 66.38% 0.0034

Weighted average ROE 1.67% 1.02% 0.65% 0.30%

End of 2019 End of 2018

Changes over end of

last year

End of 2017

Total assets 614163899.86 617090153.46 -0.47% 629762731.38

Net assets attributable to

shareholder of listed company

329428049.89 323968000.74 1.69% 320672978.02

(2) Quarterly main financial index

In RMB

First quarter Second quarter Third quarter Fourth quarter

Operating income 143921648.63 195268525.42 209822500.84 172544765.62

Net profit attributable to

shareholders of the listed company

258233.98 2322177.15 796282.59 2083355.43

Net profit attributable to

shareholders of the listed company

after deducting non-recurring gains

and losses

196868.38 2001043.68 -207411.34 2757615.61

Net cash flow arising from

operating activities

19403902.99 20584093.18 8608010.36 25867700.48

Whether there are significant differences between the above-mentioned financial index or its total number and the relevant financial

index disclosed in the company’s quarterly report and semi-annual report

□Yes √ No

4. Shares and shareholders

(1) Particulars about common stock shareholders preference shareholders with voting rights recovered

and top ten shareholders

In Share

Total common

stock

shareholders in

reporting

period-end

23761

Total common

stock

shareholders at

end of last month

before annual

report disclosed

24131

Total preference

shareholders

with voting

rights recovered

at end of

reporting period

0

Total preference

shareholders with

voting rights

recovered at end of

last month before

annual report

disclosed

0

Top ten shareholders

Full name of

Shareholders

Nature of

shareholder

Proportion of

shares held

Amount of

shares held

Amount of restricted shares held

Number of shares

pledged/frozen

State of share Amount

Wuhan

Zhongheng

Group

Domestic

non-state-ow

ned legal

person

42.13% 119289894 0

Pledged 116100000

Frozen 119289894

SEG (HONG

KONG) CO.

LTD.

Overseas

legal person

5.85% 16569560 0

Pledged 0

Frozen 0

GOOD HOPE

CORNER

INVESTMENT

S LTD.Overseas

legal person

4.40% 12464500 0

Pledged 0

Frozen 0

Changjiang

Securities

Brokerage

(Hong Kong)

Co. Ltd.

Overseas

legal person

1.89% 5355249 0

Pledged 0

Frozen 0

Guoyuan

Securities

Brokerage

(Hong Kong)

Limited

Overseas

legal person

1.36% 3870117 0

Pledged 0

Frozen 0

Li Zhongqiu

Overseas

legal person

1.00% 2830000 0

Pledged 0

Frozen 0

Zhong Jiachao

Domestic

nature

person

0.47% 1329602 0

Pledged 0

Frozen 0

LI SHERYN

ZHAN MING

Overseas

legal person

0.36% 1022600 0

Pledged 0

Frozen 0

Li Senzhuang

Domestic

nature

person

0.35% 989350 0

Pledged 0

Frozen 0

Wang Jianxin

Domestic

nature

person

0.34% 959000 0

Pledged 0

Frozen 0

Explanation on associated

relationship among the

aforesaid shareholders

Among the top ten shareholders Li Zhongqiu is the actual controller of Wuhan Zhongheng New

Science & Technology Industrial Group Co. Ltd. and is a party acting in concert.

Explanation on involving

margin business (if

applicable)

Among the top ten shareholders Zhong Jiachao held 795602 shares through ordinary accounts

534000 shares through credit securities accounts and total held 1329602 shares.

(2) Total preferred stock shareholders of the Company and shares held by top ten shareholders with

preferred stock held

□ Applicable √ Not applicable

The Company had no shareholders with preferred stock held in the reporting.

(3) Property right and controlling relationships between the actual controllers of the Company and the

Company is as follows:

Li Zhongqiu Li Li (Son of Li Zhongqiu)

Wuhan Zhongheng New Science & Technology Industrial Group

Co. Ltd.

Shenzhen Zhongheng Huafa Co. Ltd.

51%

49%

42.21%

5. Corporate bonds

Whether or not the Company public offering corporation bonds in stock exchange which undue or without payment in full at

maturity on the approval date for annual report disclosed

No

III. Discussion and analysis of business

1. Introduction of operation in the reporting period

In 2019 affected by the Sino-US trade war the downward pressure on China’s economy increased and the

economic growth slowed down. Facing the unfavorable market environment the company has actively taken

measures to adjust its management concept and operating strategies and expand its main business which were

supplemented with assessment and incentive mechanism. At the same time some assets were cleaned and

disposed of to maximize the benefits of assets and achieve better returns. In 2019 the company achieved

operating revenue of 721557400 Yuan an increase of 13.27% on a year-on-year basis total net profits of

7750800 Yuan increased by 68.79% compared with the same period last year net profit amounted to 5460000

yuan a 65.71% up from a year earlier.●Video service business achieved annual operating income of 332014600 Yuan an increase of 13.41% on a

year-on-year basis operation profit amounted as 2786900 Yuan with 17.73% down from a year earlier. During

the reporting period the Video Business Division adjusted the product structure and optimized the sales ratio of

each brand of products. The sales ratio of AOC VSCN and VSC series brands have increased which opened

online sales channels such as Jingdong while completing existing customer orders and sold 820000 LCD

monitors in 2019 an increase of 16.5% over last year.●Injection molding business achieved annual operating income of 250187900 Yuan an increase of 13.25% over

the same period last year operation profit amounted as 535800 Yuan an increase of 20.81% from a year earlier.With the unceasingly fierce competition in the market the profit margin of injection molding was squeezed but

the new production line put into production by this business division at the end of 2018 gave full play to its

automation advantages in 2019 which greatly improved production efficiency and reduced production costs. The

injection molding division achieved annual sales volume of 10800 tons outperforming the annual sales target.●Polylon business achieved annual operating income of 64.33 million Yuan a decrease of 3.39% over the same

period last year operating profit amounted as -1.08 million yuan a decrease of 40.63% from a year earlier. The

actual sales volume throughout the year was 3900 tons basically reaching the sales target but due to the fierce

market competition in order to improve market competitiveness this business division made some sacrifices in

profit. In order to better fulfill the sales target of 2020 the EPS business division maintained existing orders

increased the proportion of structural parts orders developed new customer resources and strive to accept more

domestic and foreign large-scale household appliance customers’ orders.●The property rental business achieved annual operating income of 38.82 million yuan an increase of 12.95%

from a year earlier operating profit amounted as 5.56 million yuan with major growth over that of lat year. In

2019 the company optimized the structural proportion of commercial tenants and the occupancy rate was greatly

improved at the same time the company strictly controlled costs and reduced unnecessary expenditures.Therefore the company’s overall rental profits increased significantly compared with the previous year.

2. Whether the main business had major change in the reporting period

□ Yes √ No

3. About the industries products or regions accounting for over 10% of the company’s operating income

or operating profit

√Applicable □Not applicable

In RMB

Name

Operating

revenue

Operating cost Gross profit ratio

Increase/decrease

of operating

revenue y-o-y

Increase/decrease

of operating cost

y-o-y

Increase/decrease

of gross profit

ratio y-o-y

Monitor 332014645.59 310508719.13 6.48% 13.41% 13.05% 0.30%

Injection model 250187919.33 223473984.32 10.68% 13.25% 8.36% 4.03%

EPS products 64330319.24 62186951.52 3.33% -5.90% -3.39% -2.52%

Property lease 38819374.89 2478432.62 93.62% 12.95% 78.22% -2.33%

4. Whether the characteristics of management seasonal or cyclical need special attention

□ Yes √ No

5. In the reporting period note of major changes in operating income operating cost total net profit

attributable to common stock shareholders of listed company or composing the previous reporting period

□ Applicable √ Not applicable

6. Particular about suspended and delisting

□ Applicable √ Not applicable

7. Related matters relating to financial reports

(1) Particulars about the changes in aspect of accounting policy estimates and calculation method

compared with the financial report of last year

√Applicable □ Not applicableThe Ministry of Finance issued revised “Accounting Standards for Business Enterprises No. 22-Recognition andMeasurement of Financial Instruments” “Accounting Standards for Business Enterprises No. 23-Transfer of

Financial Assets” and “Accounting Standards for Business Enterprises No. 24- Hedge Accounting” and“Accounting Standards for Business Enterprises No. 37-Presentation of Financial Instruments” in 2017 (the above

four standards are hereinafter collectively referred to as “new financial instrument standards”). The Company has

implemented the above revised standards from January 1 2019 and adjusted the relevant content of accounting

policies.

In April 2019 the Ministry of Finance issued the “Notice on the Revision and Issuance of the Format of General

Enterprise Financial Statements for 2019” (CK [2019] No. 6) (hereinafter referred to as the “financial statementformat”). An enterprise that implements accounting standards for business enterprises should prepare the 2019

interim financial statements and annual financial statements and financial statements for subsequent periods in

accordance with the requirements of the accounting standards for business enterprises and the notice.This accounting policy change was reviewed and approved by the 11

th

meeting of the Ninth Board of Directors.The company will implement the relevant provisions of CK (2019) No. 6 issued by the Ministry of Finance and

adjust and change the presentation of the relevant financial statements. The items and amount of the balance sheet

that were significantly affected on December 31 2018 are as follows:

Item Consolidated balance sheet

Before adjustment After adjustment

Note receivable and Account

receivable

185983351.22

Note receivable 69185516.71

Account receivable 116797834.51

Notes payable and Account

payable

88617663.09

Notes payable 27642356.66

(2) 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.

(3) Compare with last year’s financial report; explain changes in consolidation statement’s scope

□ Applicable √ Not applicable

No changes in consolidation statement’s scope for the Company in the period.