深华发B：2018年年度报告（英文版）

SHENZHEN ZHONGHENG HUAFA CO. LTD.

ANNUAL REPORT 2018

April 2019

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 Wu Ai’jie person in charge of accounting organ

(accounting principal) hereby confirm that the Financial Report of 2018 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 of Directors’ 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 Preferred Stock……………………………………………………………………….18

Section VIII Particulars about Directors SupervisorsSenior 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 Photo-electricity Refers to Wuhan Hengsheng Photo-electricity 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 Financial Indexes

I. Company profile

Short form of the stock Shen HUAFA A Shen HUAFA B Stock code 000020 200020

Stock exchange for listing Shenzhen Stock Exchange

Name of the Company (in

Chinese)

深圳中恒华发股份有限 Company

Short form of the Company

(in Chinese)深华发

Foreign name of the

Company (if applicable)

SHENZHEN ZHONGHENG HUAFA CO. LTD.

Abbr. of the foreign name

(if applicable)

N/A

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

Contact add.

33/F No. 2 Building of Dachong

Business Center Nanshan District

Shenzhen

33/F No. 2 Building of Dachong

Business Center Nanshan District

Shenzhen

Tel. 0755-86360201 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

Changes of main business since listing

(if applicable)

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 of controlling shareholders: the main business gradually adjusted to

production and sales of injection molded parts foam part (light packaging materials)

and LCD whole machine.Previous changes for controlling

shareholders (if applicable)

The Company’s predecessor was Shenzhen Huafa Electronic Co. LTD which was

founded in 1981 initiated and established by three legal persons-- Shenzhen

Electronics Group Co. LTD China Zhenhua Electronic Group Co. LTD and Hong

Kong Luks Industrial Co. LTD. In June 2005 Wuhan Zhongheng Group transferred

the 44.12% equity of company held by original first and second largest shareholder

of 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. InSeptember 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

2018 2017

Changes over last

year

2016

Operating income(RMB) 637046707.03 858040132.74 -25.76% 619167770.74

Net profit attributable to

shareholders of the listed

company(RMB)

3295022.72 974409.39 238.16% 5457710.33

Net profit attributable to

shareholders of the listed

company after deducting

non-recurring gains and

losses(RMB)

1535043.65 2079588.86 -26.19% 5109926.82

Net cash flow arising from

operating activities(RMB)

-21894459.66 11723254.36 -286.76% -18693296.58

Basic earnings per

share(RMB/Share)

0.0116 0.0034 241.18% 0.0193

Diluted earnings per

share(RMB/Share)

0.0116 0.0034 241.18% 0.0193

Weighted average ROE 1.02% 0.30% 0.72% 1.72%

End of 2018 End of 2017

Changes over end of

last year

End of 2016

Total assets(RMB) 617090153.46 629762731.38 -2.01% 632475542.40

Net assets attributable to

shareholder of listed

company(RMB)

323968000.74 320672978.02 1.03% 319698568.63

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 171620013.62 169364829.62 148975383.05 147086480.74

Net profit attributable to

shareholders of the listed

company

307367.89 2485765.71 -2295638.52 2797527.64

Net profit attributable to

shareholders of the listed

company after deducting

non-recurring gains and losses

5469.74 2047997.28 -3406233.82 2887810.45

Net cash flow arising from

operating activities

337819.42 -27009145.05 -27365096.05 32141962.02

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

IX. Items and amounts of extraordinary profit (gains)/loss

√Applicable □ Not applicable

In RMB

Item 2018 2017 2016 Note

Gains/losses from the disposal of

non-current asset (including the write-off

that accrued for impairment of assets)

49159.75 199069.56 82132.08

Governmental subsidy reckoned into

current gains/losses (not including the

subsidy enjoyed in quota or ration

according to national standards which are

closely relevant to enterprise’s business)

3795820.00 1451189.68 1419888.89

Gain/loss of entrusted investment or assets

management

326439.49 372245.91

Other non-operating income and

expenditure except for the aforementioned

items

-167795.70 427054.02 -1209982.33

Other gain/loss items satisfying the

definition of nonrecurring gain/loss

account

333974.06

Accrual liability reversal 1527600.81

Loss on assignment of claims -2158200.00 -5755200.00

Less: Impact on income tax 85444.47 -672860.55 278229.19

Total 1759979.07 -1105179.47 347783.51 --

Concerning the extraordinary profit (gain)/loss defined by Q&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 in Q&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 in Q&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

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.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

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.Section IV. Discussion and Analysis of Operation

1. Introduction

In 2018 the international environment was complicated 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 2018 the company achieved

operating revenue of 637046700 Yuan a decrease of 25.76% on a year-on-year basis and net profits of

3295000 Yuan increased slightly compared with the same period last year.

●Video service business achieved annual operating revenue of 292748400 Yuan a decrease of 38.75% on a

year-on-year basis operation profit amounted as 3387600 Yuan with 10.82% up 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 proportion of AOC series brands decreased due to the Group's adjustment the Great Wall

brand accounted for 22.41% and the proportion of VSCN domestic sales rose to 24.54% the increased VSCN

export sales accounted for 4.91% ACER accounted for 18.89% and Changhong and Skyworth brands were

newly increased. In 2018 it achieved sales volume of 703900 units outperforming the annual profit target.●Injection molding business achieved annual operating revenue of 220923600 Yuan a decrease of 12.46% over

the same period last year operation profit amounted as 443500 Yuan a declined over same period last year. With

the unceasingly fierce competition in the market the profit margin of injection molding has been greatly reduced

but all the staff of the business division adjusted the sales strategy in time actively seized the market share and

expanded the production workshop purchased new type of production lines and more than 10 existing automatic

equipment such as automatic gumming robots injection molding machines etc. have been put into production in

November 2018 and the annual output is expected to increase by 2.3 million sets.●Polylon business achieved annual operating revenue of 68365100 Yuan a decrease of 16.01% over the same

period last year net profit amounted as -770000 yuan an increase of 7.49% from a year earlier. EPS Business

Division actually sold 3873 tons in 2018. The EPS Business Division won the title of “Excellent Scientific andTechnological Innovation Enterprise of China Plastics Processing Industry” due to its outstanding achievements in

promoting industrial technology advancement and promoting the transformation of scientific and technological

achievements. In 2018 the main projects won the bidding by several hundred percents the electric heating P3

packaging won 100% bidding the fuel gas and K series packaging won 100% bidding the T3 structural parts won

100% bidding the freezer Dafuhao won 100% bidding and the dual variable temperature freezer won 100%

bidding.●The property rental business achieved annual operating revenue of 34369800 Yuan a decrease of 5.45% over

the same period last year. The company’s own property Huafa Building has been included in the urban renewal

project the lessees had great changes and the rental income decreased relatively. Gongming Huafa Electronic

City was still in the stage of renovation and transformation and no rental income was generated in the current year.

Therefore in 2018 the company’s overall rental income decreased somewhat 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 operating income

In RMB

2018 2017

Increase/decrease

y-o-y Amount

Ratio in operation

income

Amount

Ratio in operation

income

Total operation

income

637046707.03 100% 858040132.74 100% -25.76%

According to industries

Display 292748410.48 45.95% 477934212.10 55.70% -38.75%

Plastic injection

hardware

220923611.40 34.68% 252361777.26 29.41% -12.46%

Foam 68365102.41 10.73% 81395469.03 9.49% -16.01%

Property leasing 34369761.45 5.40% 36350826.04 4.24% -5.45%

Income from

materials and

waste

14235066.01 2.23% 2695453.61 0.31% 428.11%

Water and

electricity costs

and other

6404755.28 1.01% 7302394.70 0.85% -12.29%

According to products

Display 292748410.48 45.95% 477934212.10 55.70% -38.75%

Plastic injection

hardware

220923611.40 34.68% 252361777.26 29.41% -12.46%

Foam 68365102.41 10.73% 81395469.03 9.49% -16.01%

Property leasing 34369761.45 5.40% 36350826.04 4.24% -5.45%

Income from

materials and

waste

14235066.01 2.23% 2695453.61 0.31% 428.11%

Water and

electricity costs

and other

6404755.28 1.01% 7302394.70 0.85% -12.29%

According to region

Hong Kong 133145269.85 20.90% 279854122.73 32.62% -52.42%

Central China 464355922.55 72.89% 535937015.83 62.46% -13.36%

South China 39545514.63 6.21% 42248994.18 4.92% -6.40%

(2) About the industries products or regions accounting for over 10% of the company’s operating income

or operating profit

√Applicable □ Not applicable

Whether the company needs to comply with the disclosure requirements of the particular industry

In RMB

Operating

income

Operating cost

Gross profit

ratio

Increase/decrea

se of operating

revenue y-o-y

Increase/decrea

se of operating

cost y-o-y

Increase/decrea

se of gross

profit ratio

y-o-y

According to industries

Display 292748410.48 274670759.10 6.18% -38.75% -40.17% 2.24%

Plastic

injection

hardware

220923611.40 206230661.93 6.65% -12.46% -11.60% -0.91%

Foam 68365102.41 64368704.31 5.85% -16.01% -14.76% -1.38%

Property

leasing

34369761.45 1390657.20 95.95% -5.45% -31.79% 1.56%

According to products

Display 292748410.48 274670759.10 6.18% -38.75% -40.17% 2.24%

Plastic

injection

hardware

220923611.40 206230661.93 6.65% -12.46% -11.60% -0.91%

Foam 68365102.41 64368704.31 5.85% -16.01% -14.76% -1.38%

Property

leasing

34369761.45 1390657.20 95.95% -5.45% -31.79% 1.56%

According to region

Hong Kong 133145269.85 124734192.47 6.32% -52.42% -53.90% 3.00%

Central China 448891854.44 420535932.87 6.32% -15.60% -15.44% -0.17%

South China 34369761.45 1390657.20 95.95% -5.45% -31.79% 1.56%

Under circumstances of adjustment in reporting period for statistic scope of main business data adjusted main business based on

latest one year’s scope of period-end

□ Applicable √ Not applicable

(3) Income from physical sales larger than income from labors

√ Yes □ No

Industries Item Unit 2018 2017

Increase/decrease(

+-) y-o-y

Display

Sales volume Set 703930 1130907 -37.76%

Output Set 705883 1118816 -36.91%

Storage Set 14483 12530 15.59%

Plastic injection

hardware

Sales volume Ton 10888.35 13179.47 -17.38%

Output Ton 10542.22 13566 -22.29%

Storage Ton 710.87 1057 -32.75%

EPS package

Sales volume Ton 3873.82 4487.58 -13.68%

Output Ton 3881.86 4341.03 -10.58%

Storage Ton 233.49 225.45 3.57%

Reasons for y-o-y relevant data with over 30% changes

√Applicable □ Not applicable

Orders of display business declined over that of last period than output and sales volume reduced correspondingly. Sales of plastic

injection hardware declined correspondingly storage decreased.

(4) Fulfillment of the company’s signed significant sales contracts up to this reporting period

□ Applicable √ Not applicable

(5) Constitute of operation cost

Category of industry and products

In RMB

Industries Item 2018 2017 Increase/decrea

Amount

Ratio in

operation cost

Amount

Ratio in

operation cost

se(+-) y-o-y

Display Raw materials 259032420.00 94.31% 448842209.98 97.00% -3.00%

Display Labor wages 5350338.95 1.95% 6506927.33 1.00% 1.00%

Display Depreciation 2041472.54 0.74% 1255263.35 0.00% 1.00%

Display Energy

Plastic

injection

hardware

Raw materials 175505397.97 85.10% 205433313.18 90.00% -5.00%

Plastic

injection

hardware

Labor wages 14177081.31 6.87% 16716971.22 6.00% 1.00%

Plastic

injection

hardware

Depreciation 3187779.06 1.55% 3537615.26 3.00% -1.00%

Plastic

injection

hardware

Energy

EPS package

products

Raw materials 40102966.95 62.30% 42999667.41 56.00% 6.00%

EPS package

products

Labor wages 8829344.71 13.72% 9868282.35 16.00% -2.00%

EPS package

products

Depreciation 2000366.49 3.11% 1685290.19 3.00% 0.00%

EPS package

products

Energy 10746289.68 16.69% 10858241.16 17.00% 0.00%

In RMB

Products Item

2018 2017

Increase/decrea

se(+-) y-o-y Amount

Ratio in

operation cost

Amount

Ratio in

operation cost

Display Raw materials 259032420.00 94.31% 448842209.98 97.00% -3.00%

Display Labor wages 5350338.95 1.95% 6506927.33 1.00% 1.00%

Display Depreciation 2041472.54 0.74% 1255263.35 0.00% 1.00%

Display Energy

Plastic

injection

hardware

Raw materials 175505397.97 85.10% 205433313.18 90.00% -5.00%

Plastic Labor wages 14177081.31 6.87% 16716971.22 6.00% 1.00%

injection

hardware

Plastic

injection

hardware

Depreciation 3187779.06 1.55% 3537615.26 3.00% -1.00%

Plastic

injection

hardware

Energy

EPS package

products

Raw materials 40102966.95 62.30% 42999667.41 56.00% 6.00%

EPS package

products

Labor wages 8829344.71 13.72% 9868282.35 16.00% -2.00%

EPS package

products

Depreciation 2000366.49 3.11% 1685290.19 3.00% 0.00%

EPS package

products

Energy 10746289.68 16.69% 10858241.16 17.00% 0.00%

Explanation

Cost of main business amounting to 545270125.34 Yuan including 274670759.10 Yuan for display 206230661.93 Yuan for

plastic injection hardware and 64368704.31 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) 487280007.23

Proportion in total annual sales volume for top five

clients

76.50%

Ratio of related parties in annual total sales among the

top five clients

15.65%

Information of top five clients of the Company

Serial Clients Sales (RMB) Proportion in total annual sales

1 No. 1 221249250.56 34.73%

No. 2 99679782.04 15.65%

3 No. 3 87845841.88 13.79%

4 No. 4 41955596.90 6.59%

5 No. 5 36549535.85 5.74%

Total -- 487280007.23 76.50%

Other situation of main clients

□ Applicable √ Not applicable

Main suppliers of the Company

Total purchase amount from top five suppliers (RMB) 397340709.18

Proportion in total annual purchase amount for top five

suppliers

68.76%

Ratio of related parties in annual total sales among the

top five suppliers

40.72%

Information of top five suppliers of the Company

Serial Supplier Purchase (RMB) Proportion in total purchase

1 No. 1 235309925.64 40.72%

2 No. 2 79516916.49 13.76%

3 No. 3 40961483.25 7.09%

4 No. 4 21266983.80 3.68%

5 No. 5 20285400.00 3.51%

Total -- 397340709.18 68.76%

Other notes of main suppliers

□ Applicable √ Not applicable

3. Expenses

In RMB

2018 2017

Increase/decreas

e(+-) y-o-y

Note of major changes

Sales expense 14100247.17 15916493.87 -11.41%

Administrative

expense

38515205.15 42783111.53 -9.98%

Financial expense 10316763.45 8979085.95 14.90%

4. R&D investment

□ Applicable √ Not applicable

. Cash flow

In RMB

Item 2018 2017 Increase/decrease(+-) y-o-y

Subtotal of cash in-flow from

operation activity

628379927.86 840952371.80 -25.28%

Subtotal of cash out-flow

from operation activity

650274387.52 829229117.44 -21.58%

Net cash flow arising from

operating activities

-21894459.66 11723254.36 -286.76%

Subtotal of cash in-flow from

investment activity

145251259.49 291541885.91 -50.18%

Subtotal of cash out-flow

from investment activity

159063404.44 301268751.27 -47.20%

Net cash flow from

investment activity

-13812144.95 -9726865.36 -42.00%

Subtotal of cash in-flow from

financing activity

381872622.67 288636279.36 32.30%

Subtotal of cash out-flow

from financing activity

399842065.16 312866866.83 27.80%

Net cash flow from financing

activity

-17969442.49 -24230587.47 25.84%

Net increased amount of cash

and cash equivalent

-53513764.70 -22540338.67 -137.41%

Main reasons for y-o-y major changes in aspect of relevant data

√Applicable □ Not applicable

Sales of the company deceased in the period and collection account declined correspondingly.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

Investment

income

326439.49 7.11%

Income from short-term

financial products

Asset impairment 700496.64 15.25% Mainly due to current N

accrued for other account

receivable bad debt losses

Non-operating

income

2886811.06 62.87%

Income from government

subsidy

Non-operating

expense

2341006.76 50.98%

Loss on assignment of

claims

IV. Assets and liability

1. Major changes of assets composition

In RMB

End of 2018 End of 2017

Ratio

changes

Notes of major changes

Amount

Ratio in

total assets

Amount

Ratio in

total assets

Monetary fund 34108330.27 5.53% 68812495.97 10.93% -5.40%

Account

receivable

116797834.51 18.93% 148795998.26 23.63% -4.70%

Inventory 62973909.38 10.20% 60387021.65 9.59% 0.61%

Investment real

estate

50681322.86 8.21% 52410958.62 8.32% -0.11%

Long-term

equity

investment

0.00% 0.00% 0.00%

Fixed assets 188083873.38 30.48% 176477314.08 28.02% 2.46%

Construction in

process

5727760.23 0.93% 654356.00 0.10% 0.83%

Short-term

loans

161568657.88 26.18% 166620264.81 26.46% -0.28%

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 6147120.67

Drawing bank acceptance bill court

freeze

Notes receivable 11151688.25 Pledge

Account receivable 14860475.10 Pledge

Investment real estate 26374703.70 Mortgage to obtain bank loans

Fixed assets 43227436.86 Mortgage to obtain bank loans

Disposal of fixed assets 92857471.69 Court seizure

Intangible assets 36957101.76 Mortgage to obtain bank loans

Total 231575998.03

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 over 10%

In RMB

Company

name

Type

Main

business

capital

Total

assets

Net Assets

Operating

revenue

Operating

profit

Net profit

Hengfa

Technolog

y Company

Subsidiary

Production

sales

18164311

1.00

47433664

6.26

22067590

6.52

59750119

2.40

3059503.

4912260.

HUAFA

Property

Company

Subsidiary

Property

manageme

1000000.

1052173.

-3222009.

2774205.

-404207.5

-414207.5

HUAFA

Lease

Company

Subsidiary

Property

manageme

1000000.

1900692.

-5026990.

HUAFA

Hengtian

Company

Subsidiary

Property

manageme

1000000.

996381.66 996381.66 -838.54 -838.54

HUAFA

Hengtai

Company

Subsidiary

Property

manageme

1000000.

997112.68 997112.68 -838.05 -838.05

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

In 2019 the household appliance industry is facing the challenge of insufficient domestic demand and Sino-US

trade friction the industry performance growth is at a trough period and the upward turning point has not yet

formed. However with consumer’s pursuit of higher quality life and better experience high-end upgrades will be

a big trend in the market. As a supporting enterprise in the home appliance industry it is imperative for us to

improve product quality and move towards high-end development we will enhance technology added value and

improve profitability through technology upgrades and actively seek transformation and upgrading by increasing

research and development of new products adjusting and improving product structure improving production

processes improving production efficiency expanding downstream channels and cultivating own brands.

For a certain period of time property rental is still an important business for the company’s development making

full use of self-owned properties providing operations leasing and service business will bring certain

contributions to the company’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 urban 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 the company’s internal control

In 2019 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 the company’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

2018-01-04 Telephone communication Individual N/A

Reception (times) 10

Number of hospitality 0

Number of individual reception 10

Number of other reception 0

Disclosed released or let out major undisclosed

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

Year for

bonus shares

Amount for

cash bonus

(tax

included)

Net profit

attributable

to common

stock

shareholders

of listed

company in

consolidation

statement for

bonus year

Ratio of the

cash bonus in

net profit

attributable

to common

stock

shareholders

of listed

company

contained in

consolidation

statement

Proportion

for cash

bonus by

other

ways(i.e.share

buy-backs)

Ratio of the

cash bonus

by other

ways in net

profit

attributable

to common

stock

shareholders

of listed

company

contained in

consolidation

statement

Total cash

bonus

(including

other ways)

Ratio of the

total cash

bonus (other

ways

included) in

net profit

attributable

to common

stock

shareholders

of listed

company

contained in

consolidation

statement

2018 0.00 3295022.72 0.00% 0.00 0.00% 0.00 0.00%

2017 0.00 974409.39 0.00% 0.00 0.00% 0.00 0.00%

2016 0.00 5457710.33 0.00% 0.00 0.00% 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

Commitments Promise

Type of

commitme

nts

Content of commitments

Commitm

ent date

Commitm

ent term

Implement

ation

Commitments for

share reform

Wuhan

Zhonghe

Group

The enterprise and its subsidiaries will not

participate directly or indirectly in

operation of the business with

competitive of Shen Huafa and its

controlling subsidiary concerned and not

to damage the interest of the Shen Huafa

and its controlling subsidiary by making

use of the potential controlling-ship of the

Shen Huafa either

2007-03-2

Implemen

t since 12

April

2007

throughou

t the year

In normal

implementi

Wuhan

Zhonghe

Group

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 principle of fair-ness justice

and open-ness signed the agreement in

line with the laws perform legal program

fulfill information 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

2007-03-2

Implemen

t since 12

April

2007

throughou

t the year

In normal

implementi

Wuhan

Zhonghe

After acquisition and assets restructuring

guarantee to have an independent staff

2007-03-2

Implemen

t since 12

In normal

implementi

Group

owns independent and completed assets

and independent in aspect of business

financial and institution from Shen Huafa

April

2007

throughou

t the year

Commitments in

report of

acquisition or

equity change

Commitments in

assets

reorganization

Commitments

make in initial

public offering or

re-financing

Equity incentive

commitment

Other

commitments for

medium and

small

shareholders

Wuhan

Zhonghe

Group

Regarding the lawsuit with Shenzhen

Vanke: 1. If the arbitration judges

Shenzhen Vanke to win the arbitration

losses caused by the contract disputes shall

be undertaken by Wuhan Zhongheng

Group in full; 2. The contingent losses and

risks arising from the termination of

relevant contracts shall be undertaken by

Wuhan Zhongheng Group in advance.

2016-12-2

Implemen

ted since

December

2016

In normal

implementi

Wuhan

Zhonghe

Group

Promise to increasing shares of holding as

2.83 million shares of B-stock of the

Company in 6 months since the letter

delivery

2017-11-2

In 6

months

since the

date of

notificatio

Ended as

the

reporting

period the

promises

during

performanc

e period

has not

been

implemente

d yet

Wuhan

Zhonghe

Group

Promise to increasing shares of holding as

2.8 million shares of A-stock at least in 6

months since the letter delivery

2017-11-2

In 6

months

since the

date of

Ended as

the

reporting

period the

notificatio

promises

during

performanc

e period

and part of

the

commitme

implemente

Completed on

time(Y/N)

Yes

If the

commitments is

not fulfilled on

time shall explain

the specify reason

and the next work

plan

Not applicable

2. Concerning assets 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

The “Notice on Revising and issuing the Format of General Enterprise Financial Statement for 2018” (CK[2018]

No.15) issued by Ministry of Finance on 15 June 2018 the format of financial statement for enterprise who

implemented the accounting standards shall be prepared for 2018 and later years in line with the above mentioned

Notice.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 last year’s financial report; explain changes in consolidation statement’s

scope

□ Applicable √ Not applicable

No changes in consolidation scope 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 thousand

Yuan)

Continuous life of auditing service for domestic accounting

firm

Name of domestic CPA Li Wei Fan Zhang

Consecutive years for auditing service from domestic CPA 3

Name of foreign accounting firm (if applicable) Nil

Remuneration for foreign accounting firm (in 10 thousand

Yuan) (if applicable)

Continuous life of auditing service for foreign accounting firm

(if applicable)

Name of foreign CPA N/A

Consecutive years for auditing services from foreign 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 2018 the Company employed DAXIN Certified Public Accountants LLP 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 arbitration of the Company

√Applicable □Not applicable

The basic

situation of

litigation

(Arbitration)

Amount

of money

involved

(in 10

thousand

Yuan)

Predict

liabiliti

(Y/N)

Advances

litigation

(Arbitratio

The

results

and

effects of

litigation

(Arbitrati

on)

Executi

on of

the

litigatio

(Arbitrat

ion)

Disclosu

re date

Disclosure index

In September

2016 Wuhan

Zhongheng Group

Co. Ltd. and the

Company and

Shenzhen Vanke

were applied for

arbitration due to

the dispute case of

“Contract for the

Cooperative

Operation of the

Old Projects at

Huafa Industrial

Park Gongming

Street

Guangming New

District”.

46460 N

Ruling on

16 August

2017; put

forward

the

application

for

dismantlin

g by the

Company

and

controlling

shareholder

the

application

was

rejected by

the court

Found

more in

notice of

the

Company

Implem

enting

-09

http://www.cninfo.com.cn/cninf

o-new/disclosure/szse_main/bull

etin_detail/true/1204406606?an

nounceTime=2018-02-09 ；

http://www.cninfo.com.cn/new/d

isclosure/detail?plate=szse&stoc

kCode=000020&announcementI

d=1205326846&announcement

Time=2018-08-25

In March 2016

HUAFA Property

suit against the

Shenzhen Jifang

Investment Co.Ltd. for site

occupation

1416.67 N

November

2016 the

Company

win in the

ruling

judged by

Court

decision

as Jifang

Company

has to

paid

27.9023

Executi

terminat

-08

http://www.cninfo.com.cn/cninf

o-new/disclosure/szse_main/bull

etin_detail/true/1202817664?an

nounceTime=2016-11-08

without rental

and utilities paid

for a long-time

Shenzhen

Arbitration

Commissio

million

Yuan

(includin

g rental

administr

ative fee

compens

ation

penalty

lawyer’s

fee and

arbitratio

n fees) in

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

Guangyong

Breadboard Co.

Ltd. Shenzhen

Mingyi Electronic

Co. Ltd.

Shenzhen

Ouruilai

Technology Co.Ltd and Shenzhen

Kangzhengxin

Technology Co.Ltd. for arrears of

rent. and refuse to

move the site

forcibly occupied

switch board

1964.92 N

The

judgment

of 2nd trial

has been

issued and

has applied

for

compulsor

execution

Impleme

nting

Implem

enting

-14

http://www.cninfo.com.cn/cninf

o-new/disclosure/szse_main/bull

etin_detail/true/1202702423?an

nounceTime=2016-09-14 07:41

room and other

power unit under

the name of the

Company

The Company and

HUAFA Property

suit against

Shenzhen Jifang

investment Co.Ltd. and

Shenzhen

Jianianhua

Foreign Trade

Clothing City Co.

Ltd. for refusing

to paid the rents

and administrative

fee without

justified reasons

73.38 N

2018.3.15-

The

Company

wins in 2nd

judgment;

2018.3.26-

application

for

enforceme

Enter a

judgment

Executi

terminat

-14

http://www.cninfo.com.cn/cninf

o-new/disclosure/szse_main/bull

etin_detail/true/1202702423?an

nounceTime=2016-09-14 07:41

In March 2016

the Company and

HUAFA Property

suit against

Shenzhen

Huayongxing

Environmental

Technology Co.Ltd. and

Shenzhen Yidaxin

Technology Co.Ltd. for contract

violation and

refuse to move the

site

947.26 N

The second

trial

decides the

Company

wins the

lawsuit on

15 March

2018 and

has applied

for

enforceme

Impleme

nting

Implem

enting

-14

http://www.cninfo.com.cn/cninf

o-new/disclosure/szse_main/bull

etin_detail/true/1202702423?an

nounceTime=2016-09-14 07:41

Application for

arbitration in case

of contract dispute

between the V&T

(Shenzhen) Law

Firm and

Shenzhen

Zhongheng Huafa

Co. Ltd. and

1940.2 N

The

arbitration

has been

heard

In trial In trial

-14

http://www.cninfo.com.cn/new/d

isclosure/detail?plate=szse&stoc

kCode=000020&announcementI

d=1205602053&announcement

Time=2018-11-14

Wuhan

Zhongheng Group

XIII. Penalty and rectification

√Applicable □Not applicable

Name Type Reason

Type of

investigation

and punishment

Conclusion (if

applicable)

Date of

disclosure

Index of

disclosure

Yang Bin Director

During the

tenure as

Secretary of the

Board of

Shenzhen

China

Agricultural

University

Technology

Co. Ltd. did

not urge and

organize the

information

disclosure work

for the

company’s

temporary

announcement

in accordance

with relevant

regulations.

Filing a case

for

investigation or

administrative

punishment by

CSRC

Warning and

fine of 30000

yuan

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 the company’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

Relate

party

Relat

ionsh

Type

relate

transa

ction

Cont

ent

relate

trans

actio

Pricing

principle

Relate

transa

ction

price

Relate

transa

ction

amou

(in 10

thousa

Yuan)

Propo

rtion

simil

transa

ctions

Tradin

g limit

approv

ed (in

thousa

Yuan)

Whet

her

over

the

appro

ved

limite

d or

not

(Y/N)

Clear

ing

form

for

relate

trans

actio

Availabl

e similar

market

price

Date

disclo

sure

Index of

disclosure

Yutian

Shari

the

same

contr

ollin

holde

Purch

ase

Purc

hasin

LCD

moni

tors

Synchro

nized

with the

market

12786

1278

6.8

57.38

30884

Teleg

raphi

transf

2018-

http://www.c

ninfo.com.cn/

new/disclosur

e/detail?plate

=szse&stock

Code=00002

0&announce

mentId=1204

699541&ann

ouncementTi

me=2018-04-

Hengs

heng

Photo-

electri

city

Shari

the

same

contr

ollin

holde

Purch

ase

Purc

hasin

LCD

moni

tors

Confirm

ed with

1% of

current

market

average

price in

principle

and

refer to

both

7380.

33.12

24021

Teleg

raphi

transf

The

average

market

price

refers to

the price

of same

specifica

tions

which is

searched

2018-

http://www.c

ninfo.com.cn/

new/disclosur

e/detail?plate

=szse&stock

Code=00002

0&announce

mentId=1204

699541&ann

ouncementTi

me=2018-04-

their

bargaini

power

from

through

the

world

famous

professi

onal

market

survey

compan

website

http://w

ww.wits

view.co

recogniz

authorit

y in the

industry

and

LCD

professi

onal

market

survey

compan

website

http://w

ww.wits

view.co

Hengs

heng

Photo-

electri

city

Shari

the

same

contr

ollin

holde

Purch

ase

Purc

hasin

LCD

moni

tors

Accordi

ng to the

order

price

deducted

1 Yuan

each for

operatio

n charge

3363.

100.0

17158 N

Teleg

raphi

transf

2018-

http://www.c

ninfo.com.cn/

new/disclosur

e/detail?plate

=szse&stock

Code=00002

0&announce

mentId=1204

699541&ann

ouncementTi

me=2018-04-

Yutian

Shari

the

same

contr

ollin

holde

Sales

LCD

overa

moni

tor

mach

ine

set

Accordi

ng to the

custome

r sales

order

price

sure

9967.

34.05

41179

Teleg

raphi

transf

2018-

http://www.c

ninfo.com.cn/

new/disclosur

e/detail?plate

=szse&stock

Code=00002

0&announce

mentId=1204

699541&ann

ouncementTi

me=2018-04-

Total -- --

3349

8.98

11324

2.8

-- -- -- -- --

Detail of sales return with major

amount involved

N/A

Report the actual

implementation of the daily

related transactions which were

projected about their total

amount by types during the

reporting period(if applicable)

In the reporting Hengfa Technology purchased LCD monitors from HK Yutian with $ 19.26 million

approximately 42.81% of the annual amount predicted at the beginning of the year; purchased LCD

monitor from Hengsheng Photo electricity with $ 10.75 million approximately 30.72% of the annual

amount predicted at the beginning of the year; purchasing LCD Display from Hengsheng Photo

electricity with about $ 4.9 million 19.60% of the annual amount predicted at the beginning of the

year; sold LCD Display whole machine to HK Yutian with $ 15 million approximately 25.01% of the

annual amount predicted at the beginning of the year.Reasons for major differences

between trading price and

market reference price

N/A

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

Whether has a non-operational related debtor-creditor contact

□ yes √No

No non-operational related debtor-creditor contact in the 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)

Name of the

Company

guaranteed

Announc

ement

disclosur

e date

Guarante

e limit

Actual date of

happening

Actual

guarantee

limit

Guarantee

type

Guarantee

term

Implem

ented

(Y/N)

Guaran

tee for

party

(Y/N)

Guarantee of the Company and the subsidiaries

Name of the

Company

Announc

Guarante

e limit

Actual date of

happening

Actual

guarantee

Guarantee

type

Guarantee

term

Implem

ented

Guaran

tee for

guaranteed ement

disclosur

e date

limit (Y/N) related

party

(Y/N)

Wuhan Hengfa

Technology Co.Ltd.

2019-04-

30000 4806.87

Joint

liability

guarantee

One year N N

Total amount of approving

guarantee for subsidiaries in

report period (B1)

30000

Total amount of actual

occurred guarantee for

subsidiaries in report

period (B2)

4806.87

Total amount of approved

guarantee for subsidiaries at the

end of reporting period (B3)

30000

Total balance of actual

guarantee for subsidiaries

at the end of reporting

period (B4)

4806.87

Guarantee of the subsidiaries for the subsidiaries

Name of the

Company

guaranteed

Announc

ement

disclosur

e date

Guarante

e limit

Actual date of

happening

Actual

guarantee

limit

Guarantee

type

Guarantee

term

Comple

implem

entatio

n or not

Guaran

tee for

party

Total amount of guarantee of the Company( total of three above mentioned guarantee)

Total amount of approving

guarantee in report period

(A1+B1+C1)

30000

Total amount of actual

occurred guarantee in

report period

(A2+B2+C3)

4806.87

Total amount of approved

guarantee at the end of report

period (A3+B3+C2)

30000

Total balance of actual

guarantee at the end of

report period

(A4+B4+C4)

4806.87

The proportion of the total amount of actually guarantee in the

net assets of the Company (that is A4+ B4+C4)

14.84%

Including:

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

The listed Company and its subsidiary don’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 48200 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 atGongming 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 for 50.5% of the total

consideration and Wuhan Zhongheng Group accounts for 49.5% by calculation.The sixth extraordinary meeting of the board of directors in 2015 and the third extraordinary general meeting heldon September 11 2015 have considered and adopted the “Proposal on the project promotion and implementationof urban renewal and the progress of related transactions of ‘the updated units at Huafa Area Gong Ming StreetGuangming New District Shenzhen’” the company has signed the “Agreement on the cooperation of urbanrenewal 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 StreetGuangming 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 “WuhanZhongheng Group”) Shenzhen Vanke Real Estate Co. Ltd. (hereinafter referred to as “Shenzhen Vanke”) andShenzhen 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 SCIAShenzhen Vanke applied for arbitration in respect of “Agreement on the cooperation of urban renewal project ofthe 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. In February 2018 the

company filed an application for repeal of arbitration to the Shenzhen Intermediate People’s Court the Shenzhen

Intermediate People’s Court made a judgment on August 16 2018 to reject the company’s claims. On August 29

2018 the court accepted the compulsory execution application of Shenzhen Vanke at present the controlling

shareholders are actively communicating with the relevant parties for the solution. 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 9 Feb. 2018 25 Aug. 2018

and 7 Sept. 2018 respectively.(ii) On 31 December 2015 the 88750047 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 27349953 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 116489894 shares of the Company accounting

for 41.14% of total share capital. The above shares were judicially sealed on 27 September 2016 shares freeze

from 27 September 2016 to 13 September 2021; and on 14 December 2018 shares are waiting freeze by

Shenzhen Intermediate’s Court with period of 36 months in freeze. Details are set out in the announcement

published at Juchao information website (www.cninfo.com.cn) on 27 October 2016 and 11 Jan. 2019.(iv) 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 site occupied by Jifang was collected in May

2018.

(v) 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 the company’s B Shares and no less than 2.8 million shares of

the company’s A Shares with a commitment period of 6 months. After that controlling shareholders apply for

two deferrals. As of the disclosure date of this report it’s still in the commitment fulfillment period and the

commitment has not been fulfilled.(vi) Director and deputy chairman of the Company Mr. Zhang Guangliu resigned his job as director deputy

chairman and member of the committee of the Board of the Company for job mobility. Nominated by second

largest shareholder SEG (HK) Co. Ltd Mr. Gao Jianbo was elected as the director of 9

BOD of the Company

with office same as the session of BOD.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

Amount

Proporti

New

issued

Bonus

Capitali

zation

public

reserve

Others Subtotal

Amoun

Proport

ion

I. Restricted shares 0 0.00% 0 0 0 0 0 0 0.00%

II. Unrestricted shares

283161

227

100.00

0 0 0 0 0

28316

1227

100.00

1. RMB Ordinary shares

181165

391

63.98% 0 0 0 0 0

18116

5391

63.98%

2. Domestically listed

foreign shares

101995

836

36.02% 0 0 0 0 0

10199

5836

36.02%

III. Total shares

283161

227

100.00

0 0 0 0 0

28316

1227

100.00

Reasons for share changed

□ Applicable √ Not applicable

Approval of share changed

□ Applicable √ Not applicable

Ownership transfer of share changed

□ Applicable √ Not applicable

Progress of shares buy-back

□ Applicable √ Not applicable

Implementation progress of the reduction of repurchases shares by centralized bidding

□ 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

. 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

common

stock

shareholders

in reporting

period-end

25862

Total common

stock

shareholders at

end of last

month before

annual report

disclosed

24818

Total preference

shareholders

with voting

rights recovered

at end of

reporting period

(if applicable)

(found in note 8)

Total

preference

shareholders

with voting

rights

recovered at

end of last

month before

annual report

disclosed (if

applicable)

(found in note

Particulars about shares held above 5% by shareholders or top ten shareholders

Full name of

Shareholders

Nature of

shareholder

Proport

ion of

held

Total

shareho

lders at

the end

report

Change

s in

report

period

Amoun

t of

restrict

held

Amount

un-restri

cted

held

Number of share pledged/frozen

State of share Amount

period

Wuhan

Zhongheng

Group

Domestic

non-state-owne

d legal person

11668

1094

191200 0

116681

094

Pledged 116100000

Frozen 116489894

SEG (HONG

KONG) CO.

LTD

Overseas legal

person

16569

560

0 0

16569

560

Pledged 0

Frozen 0

GOOD HOPE

CORNER

INVESTMENTS

LTD

Overseas legal

person

12700

000

0 0

12700

000

Pledged 0

Frozen 0

Changjiang

Securities

Brokerage

(Hong Kong)

Co. Ltd.

Overseas legal

person

53552

0 0

53552

Pledged 0

Frozen 0

Guoyuan

Securities

Brokerage

(Hong Kong)

Limited

Overseas legal

person

38451

0 0

384511

Pledged 0

Frozen 0

Li Senzhuang

Domestic nature

person

10222

Pledged 0

Frozen 0

LI SHERYN

ZHAN MING

Overseas nature

person

10099

Pledged 0

Frozen 0

Han Yaming

Domestic nature

person

86420

0 864200

Pledged 0

Frozen 0

BINGHU LIU

Overseas nature

person

84031

0 840313

Pledged 0

Frozen 0

Wu Jingmin

Domestic nature

person

78835

0 788352

Pledged 0

Frozen 0

Strategy investors or general

corporation comes top 10

shareholders due to rights issue (if

applicable) (see note 3)

N/A

Explanation on associated

relationship among the aforesaid

shareholders

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 Companies. The Company neither knew whether there exists

associated relationship among the other tradable shareholders nor they belong to

consistent actors that are prescribed in Measures for the Administration of Disclosure of

Shareholder Equity Changes of Listed Companies.Particular about top ten shareholders with un-restrict shares held

Shareholders’ name Amount of un-restrict shares held at Period-end

Type of shares

Type Amount

Wuhan Zhongheng Group 116681094

RMB common

116681094

SEG (HONG KONG) CO. LTD 16569560

Domestically

listed foreign

16569560

GOOD HOPE CORNER

INVESTMENTS LTD

12700000

Domestically

listed foreign

12700000

Changjiang Securities Brokerage

(Hong Kong) Co. Ltd.

5355249

Domestically

listed foreign

5355249

Guoyuan Securities Brokerage

(Hong Kong) Limited

3845117

Domestically

listed foreign

3845117

Li Senzhuang 1022260

Domestically

listed foreign

1022260

LI SHERYN ZHAN MING 1009900

Domestically

listed foreign

1009900

Han Yaming 864200

Domestically

listed foreign

864200

BINGHU LIU 840313

Domestically

listed foreign

840313

Wu Jingmin 788352

Domestically

listed foreign

788352

Expiation on associated relationship

or consistent actors within the top 10

un-restrict shareholders and between

top 10 un-restrict shareholders and

top 10 shareholders

Among the top ten unrestricted shareholders the Company neither knew whether there

exists associated relationship among the other tradable shareholders nor they belong to

consistent actors that are prescribed in Measures for the Administration of Disclosure of

Shareholder Equity Changes of Listed Companies. 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 Companies.

Explanation on top 10 shareholders

involving margin business (if

applicable) (see note 4)

N/A

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: Foreign-funds controlling

Type of controlling shareholders: legal person

Controlling

shareholders

Legal

person/person

in charge of the

unit

Date of

foundation

Organization code Main operation business

Wuhan

Zhongheng

Group

Li Zhongqiu 1996-03-21 91420114711954601W

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 equipment spare parts and technologies

(not including goods and technologies that import

and export are national restricted or prohibited );

dry clean and steam iron service; copy & print;

business information consulting; house tenancy;

property management; 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

Not applicable

listed company

control by

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 and persons acting in concert

Nature of actual controller: Overseas nature person

Type of actual controller: Natural person

Actual controller’s name Relationship Nationality

Enjoy the residence rights in the other

country or area (Y/N)

Li Zhongqiu

himself

Hong Kong Y

Li Li

Person acting in

concert (including

agreement

relatives share the

same controlling)

P.R.C N

Main occupation in position

Mr. Li Zhongqiu serves as the Chairman for Wuhan Zhongheng Group since 1996 and

serves as Chairman and GM of the Company since July 2007.Listed companies in and out of

China that controlled in last 10

years

N/A

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:

% 49%

41.21%

Actual controller controlling the Company by entrust or other assets management

□ Applicable √ Not applicable

4. Particulars about other legal person shareholders with over 10% 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

Li Li (Son of Li Zhongqiu) Li Zhongqiu

Wuhan Zhongheng New Science & Technology Industrial Group Co. Ltd

Shenzhen Zhongheng Huafa Co. Ltd.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

Name

Title

Workin

g status

Sex

(F/M)

Age

Start

dated

office

term

End

date of

office

term

held at

period-

begin

(Share)

Amoun

t of

increas

ed in

this

period

(Share)

Amoun

t of

decreas

ed in

this

period

(Share)

Other

changes

(share)

held at

period-

end

(Share)

Zhongq

Chairm

Current

ly in

office

M 54

0 0 0 0 0

Zhang

Guangli

Vice

Chairm

Leave

the

office

0 0 0 0 0

Gao

Jianbo

Vice

Chairm

Current

ly in

office

M 54 0 0 0 0 0

Yang

Bin

Directo

secretar

y of the

Board

CFO

Current

ly in

office

M 46

0 0 0 0 0

Ding’a

Indepen

dent

director

Current

ly in

office

M 73

0 0 0 0 0

Jingwe

Indepen

dent

director

Current

ly in

office

M 53

0 0 0 0 0

Zhang

Zhaogu

Indepen

dent

director

Current

ly in

office

M 62

0 0 0 0 0

Huang Supervi Current F 56 2012-0 2019-0 0 0 0 0 0

Yanbo sor ly in

office

1-16 9-18

Geng

Supervi

sor

Current

ly in

office

F 49

0 0 0 0 0

Chen

Qin

Supervi

sor

Current

ly in

office

F 32

0 0 0 0 0

Tang

Ganyu

Deputy

Current

ly in

office

F 41

0 0 0 0 0

Total -- -- -- -- -- -- 0 0 0 0 0

II. Changes of directors supervisors and senior executives

√ Applicable □ Not applicable

Name Title Type Date Reasons

Zhang

Guangliu

Vice Chairman

Leave the

office

2018-07-17 Job mobility

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 1964 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.

Mr. Gao Jianbo born in July 1964 native of Anhui Han nationality member of the Communist Party of China;

master of economics senior economist. He graduated from the Mathematics Department of Anhui Normal

University in June 1985 as a Bachelor of Science. From September 1990 to June 1993 he studied at the

Department of Investment Economics of Zhongnan University of Finance and Economics and obtained a master’s

degree in economics. In June 1993 he joined Shenzhen Tagen (Group) Co. Ltd. and successively worked in the

company’s subordinates Tagen Xiangmi Engineering Development Company Tagen Real Estate Sales

Department Securities Department Real Estate Management Department Asset Management Department and

Enterprise Development Management Department and successively served as deputy manager manager of the

company’s asset management department manager of the enterprise development management department. From

April 2008 to July 2018 he served as Vice President and Secretary of the Board of Directors of Shenzhen Tagen

(Group) Co. Ltd.; from October 2001 to April 2013 he served as Director of Shenzhen Laibao High-Tech Co.Ltd.; Since July2018 he has been serving as deputy general manager of Shenzhen SEG Group Co. Ltd.; since

September 2018 he has been serving as a director of Shenzhen SEG Co. Ltd.; since September 2018 he has been

serving as director and vice president of Shenzhen Zhongheng Huafa Co. Ltd.Yang Bin male born in April 1972 a master degree holder graduated from Xi’an Jiaotong University. He once

served as the executive 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 and the Supervisor of Shenzhen Moyi Investment Co. Ltd

Li Ding’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 8

and 10

standing committee member of CPPCC Guangdong

Provincial Committee; he serves as the professor at School of Business Administration since May 2002 and

served as executive vice president of the School of Economics and Trade from July 2005 to January 2009. Now

He is 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

Supervisor of Guangdong Kangmei Pharmaceutical Co. Ltd. the independent director of PCI-Suntek Tech Co.Ltd. and 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 the listed companies like Hubei Eastern Gold Jade Co. Ltd. Shenzhen Zhongheng Huafa and

Mailyard.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 in shareholder’s unit

√ Applicable □ Not applicable

Name Name of shareholder’s unit

Position in

shareholder

’s unit n

Start dated of

office term

End date of

office term

Received

remuneration

from

shareholder’s

unit (Y/N)

Li Zhongqiu

Wuhan Zhongheng Group and its

subsidiary

Chairman 1996-03-21 N

Gao Jianbo

Shenzhen Electronics Group Co. Ltd.and its subsidiaries

Deputy

GM party

committee

and

secretary of

the Board

2018-07-02 Y

Huang Yanbo Wuhan Zhongheng Group

Deputy

2016-10-12 Y

Post-holding in other unit

√ Applicable □ Not applicable

Name Name of other units

Position in

other unit n

Start dated of

office term

End date of

office term

Received

remuneration

from other unit

(Y/N)

Li Ding’an South China University of Technology Professor

Li Ding’an

Working Committee of Experts on

Enterprise Development of Guangdong

Manufacturing Association

Vice

president

Li Ding’an

Guangdong Provincial Committee of

CPPCC

Director

Li Ding’an

Guangdong Kangmei Pharmaceutical Co.Ltd.Supervisor

Li Ding’an Jiadu Xintai Technology Co. Ltd.

Independen

t director

Li Ding’an

Wuhan LiYuan Information Technology

Co. Ltd.

Independen

t director

Xu Jingwen

Changjiang Securities Holding (Hong

Kong) Co. Ltd.

Chairman

and CEO

Zhang

Zhaoguo

Wuhan University Professor

Zhang

Zhaoguo

Huazhong University of Science and

Technology

Professor

Zhang

Zhaoguo

Chinese Accounting Association Branch

of High Engineering College and

University

President of

the Board

Zhang

Zhaoguo

Accounting Association of Hubei

Province

Vice

president

Zhang

Zhaoguo

Hubei Central Enterprise Accounting

Association

Vice

president

Zhang

Zhaoguo

Wuhan Yangtze Business University Dean

Zhang

Zhaoguo

Hubei Mailyard Co. Ltd

Independen

t director

Zhang

Zhaoguo

Hubei Eastern Gold Jade Co. Ltd.Independen

t director

Explanation

post-holding

in other unit

N/A

Punishment of securities regulatory authority in recent three years to the company’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 400000 Yuan; (b) give a warning to Li Zhongqiu and impose a fine of 250000

Yuan; (c) give a warning to Chen Zhigang and impose a fine of 80000 Yuan; (d) give a warning to Tang Ganyu and impose a fine

of 80000 Yuan; (e) give a warning to Weng Xiaoyu and Cai Li and impose a fine of 30000 Yuan. See details on the “Notice onReceiving 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 toShenzhen 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 onReceipt of Public Condemnation of Shenzhen Stock Exchange to the Company and Related Parties” (Announcement No.: 2017-01).

3. Mr. Yang Bin Secretary of the Board of Directors and Chief Financial Officer of the Company due to the failure to urge and

organize the information disclosure work for the temporary announcement of Shenzhen China Agricultural University Technology

Co. Ltd. in accordance with relevant regulations during his tenure as Secretary of the Board of Directors of Shenzhen China

Agricultural University Science and Technology Co. Ltd. received the “Written Decision of Administrative Penalty” ([2018] No. 6)

in August 2018 was given a disciplinary warning and was fined 30000 yuan.

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-rankingManagers of the Company” was deliberated and approved in 2

extraordinary meeting of the Board for year of

2012.

Remuneration for directors supervisors and senior executives in reporting period

In 10 thousand Yuan

Name Title Sex (F/M) Age

Post-holding

status

Total

remuneration

obtained from

the Company

(before taxes)

Whether

remuneration

obtained from

related party of

the Company

Li Zhongqiu Chairman GM M 54

Currently in

office

48 N

Gao Jianbo Vice Chairman M 54

Currently in

office

0 Y

Zhang

Guangliu

Vice Chairman M 56

Leave the

office

0 Y

Yang Bin

Director

secretary of the

Board CFO

M 46

Currently in

office

30 N

Li Ding’an

Independent

director

M 73

Currently in

office

6 N

Xu Jingwen

Independent

director

M 53

Currently in

office

6 N

Zhang Zhaoguo

Independent

director

M 62

Currently in

office

6 N

Huang Yanbo Supervisor F 56

Currently in

office

0 Y

Geng Qu Supervisor F 49

Currently in

office

9.3 N

Chen Qin Supervisor F 32

Currently in

office

12 N

Tang Ganyu Deputy GM F 41

Currently in

office

36 N

Total -- -- -- -- 153.3 --

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) 33

Employee in-post of main Subsidiaries (people) 983

The total number of current employees (people) 1016

The total number of current employees to receive pay (people) 1016

Retired employee’ s expenses borne by the parent Company

and main Subsidiaries (people)

Professional composition

Category of professional composition Numbers of professional composition (people)

Production personnel 729

Sales personnel 73

Technical personnel 83

Financial personnel 13

Administrative personnel 118

Total 1016

Education background

Category of education background Numbers (people)

Master and on-the-job graduate students 3

Undergraduate 54

Junior college 64

Other 895

Total 1016

2. Remuneration Policy

The company’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;

the company’s independent directors are paid 60000 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 the company’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 training for employees according to the

departments and division of labor including internal training and external training therein to internal training are

provided by specialized personnel in the company; external training 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 ofProcedure of the Board of Directors” "Rules of Procedure of the Board of Supervisors” “Working System of theIndependent Directors” and “Working Rules of the General Manager” and ensured that the shareholders' meetingthe 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 thePeople's Republic of China” “Securities Law of the People's Republic of China” and the “Guidelines for the

Articles of Association of Listed Companies (2016 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. Independent of the Company relative to controlling shareholders’ in aspect of businesses

personnel assets organization and finance

During the reporting period the company’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

controlling shareholder’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 the

company’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 the investors’ 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 annual general meeting and extraordinary

shareholders’ general meeting

1. Shareholders’ General Meeting in the report period

Session of meeting Type

Ratio of investor

participation

Date

Date of

disclosure

Index of disclosure

Annual General

Meeting of 2017

AGM 51.64% 2018-05-17 2018-05-18

http://www.cninfo.com.cn/new/di

sclosure/detail?plate=&orgId=gs

sz0000020&stockCode=000020

&announcementId=1204953591

&announcementTime=2018-05-1

2018 First

Extraordinary

shareholders’

Extraordinary

shareholders’

general meeting

47.19% 2018-09-28 2018-09-29

http://www.cninfo.com.cn/new/di

sclosure/detail?plate=&orgId=gs

sz0000020&stockCode=000020

general meeting &announcementId=1205478496

&announcementTime=2018-09-2

2018 Second

Extraordinary

shareholders’

general meeting

Extraordinary

shareholders’

general meeting

6.02% 2018-11-15 2018-11-16

http://www.cninfo.com.cn/new/di

sclosure/detail?plate=&orgId=gs

sz0000020&stockCode=000020

&announcementId=1205605907

&announcementTime=2018-11-1

2018 Third

Extraordinary

shareholders’

general meeting

Extraordinary

shareholders’

general meeting

5.89% 2018-12-10 2018-12-11

http://www.cninfo.com.cn/new/di

sclosure/detail?plate=&orgId=gs

sz0000020&stockCode=000020

&announcementId=1205661217

&announcementTime=2018-12-1

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 shareholders’ general meeting

The attending of Board Meeting and shareholders’ general meeting by independent directors

Independent

director

Times of

Board

meeting

supposed to

attend in the

report period

Times of

present in

person

Times of

attending by

communicati

Times of

entrusted

presence

Times of

Absence

Absent the

Board

Meeting for

the second

time in a

row (Y/N)

Times

presented in

shareholders

’ general

meeting

Zhang Zhaoguo 6 2 4 0 0 N 4

Li Ding’an 6 2 4 0 0 N 4

Xu Jingwen 6 1 4 1 0 N 4

Explanation of absent the Board Meeting for the second time in a row

2. Objection for relevant events from independent directors

Independent directors come up with objection about Company’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

Advises 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 the company’s

financial affairs and internal audit supervision carrying forward the audit work to the company’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 the

company’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 puts forward reasonable suggestions for the strategic

development of the Company by combining with actual situation of the Company.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 variable 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

evaluation report

2019-04-30

Disclosure index of full internal control

evaluation report

Juchao Website 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

company's consolidated financial

statements

100.00%

The ratio of the operating income of

units included in the scope of evaluation

accounting for the operating income on

the company's consolidated financial

statements

100.00%

Defects Evaluation Standards

Category Financial Reports Non-financial Reports

1. General deficiencies: the amount of

direct property loss is between 50000

yuan and 150000 yuan penalized by the

district-level (including district-level)

government sector but not having a

negative impact on the company’s regular

disclosure; 2. Important deficiencies: the

amount of direct property loss is between

150000 yuan and 450000 yuan penalized

by the provincial level (including

provincial level) government sector but

not having a negative impact on the

company’s regular disclosure; 3. Major

deficiencies: the amount of direct property

loss is more than 450000 yuan penalized

1. General deficiencies: when facing

low-risk matters in the process of

business operation the unit being

inspected didn’t take corresponding

internal control measures and respond

effectively;

2. Important deficiencies: when facing

matters at a moderate risk level in the

process of business operation the unit

being inspected didn’t take

corresponding internal control

measures and respond effectively;

3. Major deficiencies: when facing

high-risk matters in the process of

business operation the unit being

by the government sector and having a

negative impact on the company’s regular

disclosure;

inspected didn’t take corresponding

internal control measures and respond

effectively.Quantitative standard

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 belongs to major deficiency if the

misstatement caused by internal control

deficiencies is greater than or equal to

RMB 1000 Yuan.

2. Other deficiencies in internal controls:

general deficiencies: misstatement index 1

≥ 0.5 ‰ and misstatement index 2 < 0.5

‰; important deficiencies: 0.5 ‰ ≤

misstatement index 2 <1 ‰; major

deficiencies: misstatement index 2 ≥ 1 ‰

General deficiencies: misstatement

index 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 reports

Amount of significant defects in

non-financial reports

Amount of important defects in financial

reports

Amount of important defects in

non-financial reports

X. Auditing report of internal control

√ Applicable □ Not applicable

Deliberations in Internal Control Audit Report

We believe that the Huafa 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 2018

Disclosure details of audit report

of internal control

Disclosed

Disclosure details of audit report

of internal control

2019-04-30

Disclosure date of audit report of

internal control (full-text)

The designated website: Juchao Website

Opinion type of auditing report of

Standard unqualified

Whether the non-financial report

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 2019-04-26

Name of audit institute DAXIN Certified Public Accountants LLP

Document serial of audit report Da Xin Shen Zi[2019] No.: 5-00045

Name of CPA Li Wei Fan Zhang

Auditor’s Report

To all shareholders of SHENZHEN ZHONGHENG HUAFA CO. LTD.:

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 parent Company’s balance sheet of 31

December 2018 and profit statement and cash flow statement and statement on changes of shareholders’ equity

for the year ended and notes to the financial statements for the year ended.In our opinion the Company’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 2018 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. Ourresponsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the

Financial Statements” section of the auditor’s report. We are independent of the Company in accordance with the

Certified Public Accountants of China’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) Revenue recognition

1. Description of the matter

As stated in Note V (xxv) to the consolidated statement of your company the main business income from display

and injection molded foam of 2018 recognized by your company was RMB 582.037 million accounting for 91.36%

of operating income. The income from selling products is confirmed when the risks and the rewards of the

property in the goods have been transferred to the customer for domestic sales the income is confirmed by the

other party’s receipt of the product for export sales the income is confirmed by the relevant customs declaration

documents when the product has been shipped and the declaration formalities have been completed.Since income is one of your company’s key performance indicators in order to prevent the inherent risks of

manipulating the time point of income recognition for achieving specific goals or expectations we identify the

authenticity of income recognition for displays and injection molded foam as key audit items.

2. Audit response

In response to the authenticity of revenue recognition we design and implement the following audit procedures:

(1) We understand evaluate and test the design and implementation of key internal controls related to the revenue

cycle and test the effectiveness of internal controls;

(2) Select samples to inspect the sales contract or order check the invoice outbound order receipt and customs

declaration identify the contract terms and conditions related to the risks and reward transfer of the ownership of

the goods and evaluate whether the time point of revenue recognition meets the requirements of Accounting

Standards for Business Enterprises

(3) Enquire the business information of major customers to identify whether there is related relationship; check

the rationality and fairness of the related transactions;

(4) For the income transactions recorded before and after the balance sheet date select samples check the

outbound order receipt logistics records bills of lading and other supporting documents to assess whether the

income is recorded in the appropriate accounting period;

(5) According to the characteristics and nature of the customer transaction we select income samples with large

amount to send a letter to the customer to confirm the current sales income amount and the balance of accounts

receivable and maintain control over the letter during the process of sending the letter.(ii) Related transaction

1. Description of the matter

As stated in Note IX (iv) to the consolidated statement of your company your company purchased a total of 235

million yuan of materials and finished products from the related parties Hong Kong Yutian International

Investment Co. Ltd. and Wuhan Hengsheng Photoelectric Industry Co. Ltd. and sold a total of 120 million yuan

of goods to the related parties Hong Kong Yutian International Investment Co. Ltd. and Wuhan Hengsheng

Photoelectric Industry Co. Ltd. As the related transactions involve a large amount of money and there is a risk if

the transaction constitutes a transaction cycle we classify the related transaction as a key audit matter.

2. Audit response

(1) Understand evaluate and test the internal control of your company’s related relationships and related

transactions;

(2) Obtain the related party relationship table compiled by your company and conduct appropriate background

investigation to identify and verify related parties through Internet information inquiry;

(3) Obtain a list of related transactions of your company understand the commercial reasons of related

transactions check related contracts or agreements invoices customs declarations etc. of related transactions

and conduct letter confirmation for the accrual and balance of major related transactions to verify whether the

accounting treatment is appropriate. ;

(4) Understand the authorization and approval procedures for related transactions of your company check the

procurement and sales vouchers to third parties compare the purchase and sales prices of related parties and

non-related parties and verify whether the related transactions are fair;

(5) Obtain the related party’s final procurement and sales lists to the third party provided by your company check

the relevant contract agreements and bank slip of the procurement and sales of the related party to the third party

and verify the authenticity of the transaction and whether it constitutes a transaction cycle.(iii) Material arbitration

1. Description of the matter

As stated in Note XII to the consolidated statement on August 16 2017 the South China International Economic

and Trade Arbitration Commission made a ruling of HNGZSC [2017] No. D376 ruled that your company and

Wuhan Zhongheng had to pay a total of 234 million yuan of liquidated damages and other cost. Your company

believed that the ruling of this case had problems in the arbitral procedure and in the determination of the

so-called breach of contract and believed that the result of the ruling damaged the legitimate rights and interests

of the company. Your company had submitted an application for repeal of arbitration to the Shenzhen Intermediate

People’s Court and Shenzhen Intermediate People’s Court officially accepted the case on February 7th the case

number was (2018) Yue 03 Minte No. 113 Shenzhen Intermediate People’s Court made a judgment on August 16

2018 rejecting the company’s request for repeal of arbitration. On September 5 2018 the company and itscontrolling shareholder Wuhan Zhongheng Group received the “Enforcement Notice of Shenzhen IntermediatePeople’s Court” ([2018] Yue 03 Zhi No. 1870) and the execution applicant applied to the court for enforcement.Your company believed that the liability for breach of contract should be fully borne by Wuhan Zhongheng Group

Wuhan Zhongheng promised to bear all the arbitration losses in full. If the company made advanced payment due

to the execution of the case the company would immediately request Wuhan Zhongheng to fulfill its

commitments and eliminate the effects. Due to the uncertainty of the division of liability for fault of internal

performance the defaulting entity and the possibility of the transfer of interest in Wuhan Zhongheng the

management needs to make significant judgments and estimates on whether the matter is recognized as the

estimated liability or the current profits or losses so we recognize the major arbitration matter as a key audit

matter.

2. Audit response

(1) Understand the company’s policies and procedures for determining major issues by conducting inspections

consulting with management and corporate legal counsel;

(2) Collect your company’s asset replacement contracts asset replacement and related transaction announcements

and old contracts cooperation agreement between your company and Wuhan Zhongheng Group and the

Arbitration Award HNGZSC [2017] No. D376. related to this major issue your company’s application for repeal

of arbitration the ruling of Shenzhen Intermediate People’s Court for rejection the enforcement notice of

Shenzhen Intermediate People’s Court and other documents and materials and understand the supporting

evidence for the management of your company to make judgments on the important matters;

(3) Engage legal experts to make independent judgments on the matter and make independent judgments on legal

special opinions issued by legal experts;

(4) Check whether the major arbitration matter is sufficiently and properly disclosed in the financial report.

IV. Other information

The management of the Company (the “Management”) is responsible for other information which includes the

information covered in the Company’s 2018 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 this 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 the Company’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 the Company’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 the management’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 the Company’s ability to continue as a going concern. If we conclude that a material

uncertainty exists we are required by the CAS to draw users’ 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 the auditor’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 the auditor’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

Statement in Financial Notes are carried in RMB/CNY

1. Consolidated balance sheet

Prepared by SHENZHEN ZHONGHENG HUAFA CO. LTD.

2018-12-31

In RMB

Item Balance at period-end Balance at period-begin

Current assets:

Monetary funds 34108330.27 68812495.97

Settlement provisions

Capital lent

Financial assets measured by fair

value and with variation reckoned into

current gains/losses

Derivative financial assets

Note receivable and account

receivable

185983351.22 213574264.91

Including: Note receivable 69185516.71 64778266.65

Account receivable 116797834.51 148795998.26

Accounts paid in advance 31348429.54 943328.01

Insurance receivable

Reinsurance receivables

Contract reserve of reinsurance

receivable

Other account receivable 5777179.08 4335729.72

Including: Interest receivable

Dividend receivable

Buying back the sale of financial

assets

Inventories 62973909.38 60387021.65

Assets held for sale

Non-current asset due within one

year

Other current assets 59370.18 52310.51

Total current assets 320250569.67 348105150.77

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 50681322.86 52410958.62

Fixed assets 188083873.38 176477314.08

Construction in progress 5727760.23 654356.00

Productive biological asset

Oil and gas asset

Intangible assets 41815689.74 43307316.37

Expense on Research and

Development

Goodwill

Long-term expenses to be

apportioned

542116.99 141666.55

Deferred income tax asset 6829856.59 6731168.99

Other non-current asset 3158964.00 1934800.00

Total non-current asset 296839583.79 281657580.61

Total assets 617090153.46 629762731.38

Current liabilities:

Short-term loans 161568657.88 166620264.81

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

Note payable and account payable 88617663.09 101815141.01

Accounts received in advance 159528.60 278128.18

Selling financial asset of repurchase

Commission charge and

commission payable

Wage payable 4700208.36 5083357.93

Taxes payable 11232819.87 15136277.68

Other account payable 26778863.92 20092172.75

Including: Interest payable 439558.70 164895.80

Dividend payable

Reinsurance payable

Insurance contract reserve

Security trading of agency

Security sales of agency

Liability held for sale

Non-current liabilities due within

one year

Other current liabilities

Total current liabilities 293057741.72 309025342.36

Non-current liabilities:

Long-term loans

Bonds payable

Including: preferred stock

Perpetual capital

securities

Long-term account payable

Long-term wages payable

Accrual liability 64411.00 64411.00

Deferred income

Deferred income tax liabilities

Other non-current liabilities

Total non-current liabilities 64411.00 64411.00

Total liabilities 293122152.72 309089753.36

Owner’s equity:

Share capital 283161227.00 283161227.00

Other equity instrument

Including: preferred stock

Perpetual capital

securities

Capital public reserve 146587271.50 146587271.50

Less: Inventory shares

Other comprehensive income

Reasonable reserve

Surplus public reserve 77391593.25 77391593.25

Provision of general risk

Retained profit -183172091.01 -186467113.73

Total owner’s equity attributable to

parent company

323968000.74 320672978.02

Minority interests

Total owner’s equity 323968000.74 320672978.02

Total liabilities and owner’s equity 617090153.46 629762731.38

Legal Representative: Li Zhongqiu

Person in charge of accounting works: Yang Bin

Person in charge of accounting institute: Wu Aijie

2. Balance Sheet of Parent Company

In RMB

Item Balance at period-end Balance at period-begin

Current assets:

Monetary funds 13234774.97 25181764.87

Financial assets measured by fair

value and with variation reckoned into

current gains/losses

Derivative financial assets

Note receivable and account

receivable

Including: Note receivable

Account receivable

Accounts paid in advance 153050.00

Other account receivable 99155253.08 99922143.84

Including: Interest receivable

Dividend receivable

Inventories 14806.50 14806.50

Assets held for sale

Non-current asset due within one

year

Other current assets 17055.88

Total current assets 112574940.43 125118715.21

Non-current assets:

Finance asset available for sales

Held-to-maturity investment

Long-term account receivable

Long-term equity investment 186608900.00 186608900.00

Investment real estate 26374703.70 27583299.22

Fixed assets 99227872.22 99678839.27

Construction in progress 654356.00

Productive biological asset

Oil and gas asset

Intangible assets 4698654.96 4843600.68

Expense on Research and

Development

Goodwill

Long-term expenses to be

apportioned

141666.55

Deferred income tax asset 7506905.90 7519546.71

Other non-current asset

Total non-current asset 324417036.78 327030208.43

Total assets 436991977.21 452148923.64

Current liabilities:

Short-term loans 100000000.00 120000000.00

Financial liability measured by fair

value and with variation reckoned into

current gains/losses

Derivative financial liability

Note payable and account payable 10745840.16 10745840.16

Accounts received in advance 41937.00 67210.00

Wage payable 1020979.02 1039196.20

Taxes payable 7161707.15 9305468.70

Other account payable 22672441.54 14339551.78

Including: Interest payable

Dividend payable

Liability held for sale

Non-current liabilities due within 1

year

Other current liabilities

Total current liabilities 141642904.87 155497266.84

Non-current liabilities:

Long-term loans

Bonds payable

Including: preferred stock

Perpetual capital securities

Long-term account payable

Long-term wages payable

Accrual liability 64411.00 64411.00

Deferred income

Deferred income tax liabilities

Other non-current liabilities

Total non-current liabilities 64411.00 64411.00

Total liabilities 141707315.87 155561677.84

Owner’s equity:

Share capital 283161227.00 283161227.00

Other equity instrument

Including: preferred stock

Perpetual capital securities

Capital public reserve 146587271.50 146587271.50

Less: Inventory shares

Other comprehensive income

Reasonable reserve

Surplus public reserve 77391593.25 77391593.25

Retained profit -211855430.41 -210552845.95

Total owner’s equity 295284661.34 296587245.80

Total liabilities and owner’s equity 436991977.21 452148923.64

3. Consolidated Profit Statement

In RMB

Item Current period Last period

I. Total operating income 637046707.03 858040132.74

Including: Operating income 637046707.03 858040132.74

Interest income

Insurance gained

Commission charge and

commission income

II. Total operating cost 634300173.31 853455010.07

Including: Operating cost 566691476.49 777906611.12

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

Tax and extras 3975984.41 6447920.89

Sales expense 14100247.17 15916493.87

Administrative expense 38515205.15 42783111.53

R&D expense

Financial expense 10316763.45 8979085.95

Including: Interest

expenses

12785854.43 10476762.09

Interest income 656538.09 1309824.81

Losses of devaluation of

asset

700496.64 1421786.71

Add: other income 924020.00 161420.00

Investment income (Loss is

listed with “-”)

326439.49 372245.91

Including: Investment

income on affiliated company and

joint venture

Income from change of fair

value (Loss is listed with “-”)

Exchange income (Loss is

listed with “-”)

Income from assets

disposal (Loss is listed with “-”)

49159.75 199069.56

III. Operating profit (Loss is listed

with “-”)

4046152.96 5317858.14

Add: Non-operating income 2886811.06 2971956.07

Less: Non-operating expense 2341006.76 5758731.56

IV. Total Profit (Loss is listed with

“-”)

4591957.26 2531082.65

Less: Income tax expense 1296934.54 1556673.26

V. Net profit (Net loss is listed with 3295022.72 974409.39

“-”)

(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 parent company

3295022.72 974409.39

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 gain/loss

1.Re-measurement of the

change of defined benefit plan

2.Other comprehensive

income unable transfer to gain/loss

under equity method

(II) Other comprehensive

income items which will be

reclassified subsequently to profit or

loss

1.Other comprehensive

income able to transfer to gain/loss

under equity method

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 3295022.72 974409.39

Total comprehensive income

attributable to owners of parent

Company

3295022.72 974409.39

Total comprehensive income

attributable to minority shareholders

VIII. Earnings per share:

(i) Basic earnings per share 0.0116 0.0034

(ii) Diluted earnings per share 0.0116 0.0034

As for the enterprise combined under the same control net profit of 0 Yuan achieved by the merged party before combination while 0

Yuan achieved last period.Legal Representative: Li Zhongqiu

Person in charge of accounting works: Yang Bin

Person in charge of accounting institute: Wu Aijie

4. Profit Statement of Parent Company

In RMB

Item Current period Last period

I. Operation income 36771309.00 41156307.77

Less: Operating cost 5902505.91 5877729.00

Tax and extras 1115764.39 2665603.29

Sales expense

Administrative expense 19018506.25 21974153.89

R&D expense

Financial expense 9466405.33 8006852.33

Including: Interest

expenses

9451554.17

Interest income 29174.19

Losses of devaluation of

asset

-50563.29 502503.49

Add: other income

Investment income (Loss is

listed with “-”)

Including: Investment

income on affiliated company and

joint venture

Income from change of fair

value (Loss is listed with “-”)

Income from assets

disposal (Loss is listed with “-”)

-27388.25

II. Operating profit (Loss is listed

with “-”)

1291302.16 2129465.77

Add: Non-operating income 200.00 1689721.90

Less: Non-operating expense 2289447.82 5755745.88

III. Total Profit (Loss is listed with

“-”)

-997945.66 -1936558.21

Less: Income tax expense 304638.80 509374.34

IV. Net profit (Net loss is listed with

“-”)

-1302584.46 -2445932.55

(i) net profit from continuous

operation (Net loss is listed with “-”)

-1302584.46 -2445932.55

(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 gain/loss

1.Re-measurement of the

change of defined benefit plan

2.Other comprehensive

income unable transfer to gain/loss

under equity method

(iii) Other comprehensive

income items which will be

reclassified subsequently to

profit or loss

1.Other comprehensive

income able to transfer to gain/loss

under equity method

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 -1302584.46 -2445932.55

VII. Earnings per share:

(i) Basic earnings per share

(ii) Diluted earnings per share

5. Consolidated Cash Flow Statement

In RMB

Item Current period Last period

I. Cash flows arising from operating

activities:

Cash received from selling

commodities and providing labor

services

479256981.38 827133048.96

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 11937.37

Other cash received concerning

operating activities

149122946.48 13807385.47

Subtotal of cash inflow arising from

operating activities

628379927.86 840952371.80

Cash paid for purchasing

commodities and receiving labor

service

419823861.32 700632478.96

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

59375348.93 74059833.16

Taxes paid 18875771.50 12201020.91

Other cash paid concerning

operating activities

152199405.77 42335784.41

Subtotal of cash outflow arising from

operating activities

650274387.52 829229117.44

Net cash flows arising from operating

activities

-21894459.66 11723254.36

II. Cash flows arising from investing

activities:

Cash received from recovering

investment

Cash received from investment

income

326439.49 372245.91

Net cash received from disposal

of fixed intangible and other

long-term assets

924820.00 169640.00

Net cash received from disposal

of subsidiaries and other units

Other cash received concerning

investing activities

144000000.00 291000000.00

Subtotal of cash inflow from

investing activities

145251259.49 291541885.91

Cash paid for purchasing fixed

intangible and other long-term assets

15063404.44 10268751.27

Cash paid for investment

Net increase of mortgaged

loans

Net cash received from

subsidiaries and other units obtained

Other cash paid concerning

investing activities

144000000.00 291000000.00

Subtotal of cash outflow from

investing activities

159063404.44 301268751.27

Net cash flows arising from investing

activities

-13812144.95 -9726865.36

III. Cash flows arising from financing

activities

Cash received from absorbing

investment

Including: Cash received from

absorbing minority shareholders’

investment by subsidiaries

Cash received from loans 381872622.67 288636279.36

Cash received from issuing

bonds

Other cash received concerning

financing activities

Subtotal of cash inflow from

financing activities

381872622.67 288636279.36

Cash paid for settling debts 387355473.63 302262347.00

Cash paid for dividend and

profit distributing or interest paying

12486591.53 10604519.83

Including: Dividend and profit

of minority shareholder paid by

subsidiaries

Other cash paid concerning

financing activities

Subtotal of cash outflow from

financing activities

399842065.16 312866866.83

Net cash flows arising from financing

activities

-17969442.49 -24230587.47

IV. Influence on cash and cash

equivalents due to fluctuation in

exchange rate

162282.40 -306140.20

V. Net increase of cash and cash

equivalents

-53513764.70 -22540338.67

Add: Balance of cash and cash

equivalents at the period -begin

81474974.30 104015312.97

VI. Balance of cash and cash

equivalents at the period -end

27961209.60 81474974.30

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

services

33955787.66 39724764.06

Write-back of tax received

Other cash received concerning 238751046.31 58292413.82

operating activities

Subtotal of cash inflow arising from

operating activities

272706833.97 98017177.88

Cash paid for purchasing

commodities and receiving labor

service

4705956.98 5040091.56

Cash paid to/for staff and

workers

4162519.09 4211674.37

Taxes paid 5303657.62 4009011.87

Other cash paid concerning

operating activities

241037646.61 60441124.86

Subtotal of cash outflow arising from

operating activities

255209780.30 73701902.66

Net cash flows arising from operating

activities

17497053.67 24315275.22

II. Cash flows arising from investing

activities:

Cash received from recovering

investment

Cash received from investment

income

Net cash received from disposal

of fixed intangible and other

long-term assets

82000.00

Net cash received from disposal

of subsidiaries and other units

Other cash received concerning

investing activities

Subtotal of cash inflow from

investing activities

82000.00

Cash paid for purchasing fixed

intangible and other long-term assets

1285642.47 1449992.31

Cash paid for investment

Net cash received from

subsidiaries and other units obtained

Other cash paid concerning

investing activities

Subtotal of cash outflow from

investing activities

1285642.47 1449992.31

Net cash flows arising from investing

activities

-1203642.47 -1449992.31

III. Cash flows arising from financing

activities

Cash received from absorbing

investment

Cash received from loans 200000000.00 120000000.00

Cash received from issuing

bonds

Other cash received concerning

financing activities

Subtotal of cash inflow from

financing activities

200000000.00 120000000.00

Cash paid for settling debts 220000000.00 120000000.00

Cash paid for dividend and

profit distributing or interest paying

9451554.17 8058841.68

Other cash paid concerning

financing activities

Subtotal of cash outflow from

financing activities

229451554.17 128058841.68

Net cash flows arising from financing

activities

-29451554.17 -8058841.68

IV. Influence on cash and cash

equivalents due to fluctuation in

exchange rate

557.68 170.77

V. Net increase of cash and cash

equivalents

-13157585.29 14806612.00

Add: Balance of cash and cash

equivalents at the period -begin

25181764.87 10375152.87

VI. Balance of cash and cash

equivalents at the period -end

12024179.58 25181764.87

7. Statement of Changes in Owners’ Equity (Consolidated)

Current period

In RMB

Item

Current period

Owners’ equity attributable to parent company Mino

rity

Total

owneShar Other equity Capit Less: Other Reaso Surpl Provi Retai

capi

tal

instrument al

publi

reserv

Inven

tory

comp

rehen

sive

inco

nable

reserv

publi

reserv

sion

gener

al risk

ned

profit

intere

sts

r’s

equit

Pref

erre

stoc

Per

petu

capi

tal

sec

uriti

Oth

I. Balance at the

end of the last

year

283

161

227.

1465

8727

1.50

7739

1593

.25

-186

4671

13.73

3206

7297

8.02

Add:

Changes of

accounting

policy

Error

correction of the

last period

Enterprise

combined under

the same control

Other

II. Balance at

the beginning of

this year

283

161

227.

1465

8727

1.50

7739

1593

.25

-186

4671

13.73

3206

7297

8.02

III. Increase/

Decrease in this

year (Decrease

is listed with

“-”)

3295

022.

3295

022.

(i) Total

comprehensive

income

3295

022.

3295

022.

(ii) Owners’

devoted and

decreased

capital

．Common

shares invested

by owners

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．Change

amount of

defined benefit

plans that carry

forward retained

earnings

5．Other

(v) Reasonable

reserve

1. Withdrawal in

the report period

2. Usage in the

report period

(vi) Other

IV. Balance at

the end of the

report period

283

161

227.

1465

8727

1.50

7739

1593

.25

-183

1720

91.01

3239

6800

0.74

Last period

In RMB

Item

Last period

Owners’ equity attributable to parent company

Mino

rity

intere

sts

Total

owne

r’s

equit

Shar

capi

tal

Other equity

instrument

Capit

publi

reserv

Less:

Inven

tory

Other

comp

rehen

sive

inco

Reaso

nable

reserv

Surpl

publi

reserv

Provi

sion

gener

al risk

Retai

ned

profit

Pref

erre

stoc

Per

petu

capi

tal

sec

uriti

Oth

I. Balance at the

end of the last

year

283

161

227.

1465

8727

1.50

7739

1593

.25

-187

4415

23.12

3196

9856

8.63

Add:

Changes of

accounting

policy

Error

correction of the

last period

Enterprise

combined under

the same control

Other

II. Balance at

the beginning of

this year

283

161

227.

1465

8727

1.50

7739

1593

.25

-187

4415

23.12

3196

9856

8.63

III. Increase/

Decrease in this

year (Decrease

is listed with

“-”)

9744

09.39

9744

09.39

(i) Total

comprehensive

income

9744

09.39

9744

09.39

(ii) Owners’

devoted and

decreased

capital

1．Common

shares invested

by owners

2．Capital

invested by

holders of other

equity

instruments

3．Amount

reckoned into

owners equity

with share-based

payment

4．Other

(III) Profit

distribution

．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．Change

amount of

defined benefit

plans that carry

forward retained

earnings

5．Other

(v)Reasonable

reserve

1. Withdrawal in

the report period

2. Usage in the

report period

(vi)Other

IV. Balance at 283 1465 7739 -186 3206

the end of the

report period

161

227.

8727

1.50

1593

.25

4671

13.73

7297

8.02

8. Statement of Changes in Owners’ Equity (Parent Company)

Current period

In RMB

Item

Current period

capita

Other equity instrument

Capital

public

reserve

Less:

Invento

Other

compre

hensive

income

Reason

able

reserve

Surplus

public

reserve

Retai

ned

profit

Total

owner’

s equity

Prefer

red

stock

Perpe

tual

capita

securi

ties

Other

I. Balance at the

end of the last

year

2831

6122

7.00

14658

7271.5

77391

593.25

-210

5528

45.95

29658

7245.8

Add:

Changes of

accounting

policy

Error

correction of the

last period

Other

II. Balance at

the beginning of

this year

2831

6122

7.00

14658

7271.5

77391

593.25

-210

5528

45.95

29658

7245.8

III. Increase/

Decrease in this

year (Decrease

is listed with

“-”)

-130

2584.

-1302

584.46

(i)Total

comprehensive

income

-130

2584.

-1302

584.46

(ii) Owners’

devoted and

decreased

capital

1．Common

shares invested

by owners

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．Change

amount of

defined benefit

plans that carry

forward retained

earnings

5．Other

(v)Reasonable

reserve

1. Withdrawal in

the report period

2. Usage in the

report period

(vi)Other

IV. Balance at

the end of the

report period

2831

6122

7.00

14658

7271.5

77391

593.25

-2118

5543

0.41

29528

4661.3

Last period

In RMB

Item

Last period

capita

Other equity instrument

Capital

public

reserve

Less:

Invento

Other

compre

hensive

income

Reason

able

reserve

Surplus

public

reserve

Retai

ned

profit

Total

owner’

s equity

Prefer

red

stock

Perpe

tual

capita

securi

ties

Other

I. Balance at the

end of the last

year

2831

6122

7.00

14658

7271.5

77391

593.25

-208

1069

13.40

29903

3178.3

Add:

Changes of

accounting

policy

Error

correction of the

last period

Other

II. Balance at

the beginning of

this year

2831

6122

7.00

14658

7271.5

77391

593.25

-208

1069

13.40

29903

3178.3

III. Increase/

Decrease in this

year (Decrease

is listed with

“-”)

-244

5932.

-2445

932.55

(i) Total

comprehensive

income

-244

5932.

-2445

932.55

(ii) Owners’

devoted and

decreased

capital

1．Common

shares invested

by owners

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．Change

amount of

defined benefit

plans that carry

forward retained

earnings

5．Other

(v)Reasonable

reserve

1. Withdrawal in

the report period

2. Usage in the

report period

(vi)Other

IV. Balance at

the end of the

report period

2831

6122

7.00

14658

7271.5

77391

593.25

-210

5528

45.95

29658

7245.8

III. Company profile

(i) 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 283161227

(ii) 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.(iii) Relevant party offering approval reporting of financial statements and date thereof

The financial statement has been deliberated and approved by BOD on 16 April 2019. According to Article of

Association the statement shall be submitted for deliberation in shareholders general meeting.

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 IX. 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

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 the Company’s financial position dated 31

December 2018 and the operation results as well as cash flow for the year of 2018.

2. Accounting period

The Company’s accounting year is Gregorian calendar year namely from 1

January to 31

December of every

year.

3. Business cycle

The Company’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 identified net assets from

acquiree’s the differences should be recognized as goodwill. If the consolidation cost less than the fair value

amount of identified net assets from acquiree’s the differences should reckoned into current non-operating

income.

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 the subsidiaries’ financial statements in the preparation of the consolidated

financial statements according to the Company’s accounting policies and periods.

3. Offset 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. The owner’s equity of the subsidiaries not attributable to the parent company shall be

presented as minority equity under the owner’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 of owners’ equity shall be presented as “Less: treasury stock” under the owners’ 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 the Company’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 transaction 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 the Company’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 the owners’ 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. Financial instrument

1. Category and recognition of financial instrument

Financial instruments are classified into financial assets or financial liabilities and equity instruments. When the

Company becomes a party to a financial instrument contract it is recognized as a financial asset or financial

liability or an equity instrument.

Financial assets are classified as financial assets measured at fair value and with changes included in current profit

and loss held-to-maturity investments receivables and available-for-sale financial assets at the initial recognition.The classification of financial assets other than receivables depends on the intention and ability of the Company

and its subsidiaries to hold financial assets. Financial liabilities are classified as financial liabilities measured at

fair value and with changes included in current profit and loss and other financial liabilities at the initial

recognition.

Financial assets measured at fair value and with changes included in current profit and loss include the trading

financial assets held for sale in the short term and the financial assets designated to be measured at fair value at

the initial recognition and with changes included in current profit and loss. The accounts receivables refer to the

non-derivative financial assets that are not quoted in an active market and have a fixed or ascertainable

recoverable amount. The available-for-sale financial assets include the non-derivative financial assets designated

as available-for-sale financial assets at the initial recognition or the financial assets have not been classified into

other types. The held-to-maturity investments refer to the non-derivative financial assets with fixed maturity

date fixed or ascertainable recoverable amount and the management having clear intentions and ability to hold to

maturity.

2. Measurement of financial instruments

The initial recognition of the Company’s financial instruments is measured at fair value. Subsequent measurement

is classified as the financial assets measured at fair value and with changes included in current profit or loss the

financial assets available for sale and the financial liabilities measured at fair value and with changes included in

current profit or loss; the held-to-maturity investments loans and receivables and other financial liabilities are

measured at amortized cost; the equity instrument investment that is not quoted in an active market and whose fair

value cannot be reliably measured and the derivative financial assets or derivative financial liabilities that are

linked to the equity instrument and is required to be settled through the delivery of the equity instrument are

measured at cost. The gains or losses arising from changes in the fair value in the subsequent measurement of the

Company’s financial assets or financial liabilities except for hedging are treated as follows: ① The gains or

losses arising from changes in the fair value of the financial assets or financial liabilities measured at fair value

and with changes included in current profit or loss are included in the variable loss and profit of fair value. ②

Changes in fair value of available-for-sale financial assets are included in other comprehensive income.

3. The Company’s methods for confirming the fair value of financial instruments

If the financial instrument has an active market the fair value is determined by the quoted price in the active

market; if the financial instrument doesn’t have an active market the fair value is determined by adopting the

valuation technique. Valuation techniques mainly include market approach income approach and cost approach.

4. Confirmation basis and measurement method for the transfer of liabilities of financial assets

When almost all risks and rewards of the ownership of financial assets are transferred or almost all risks and

rewards of the ownership of financial assets are neither transferred nor retained but the control of the financial

assets is abandoned the financial assets should be derecognized. If the financial assets meet the conditions for

derecognition the book value of the financial assets transferred and the difference between the consideration of

received from the transfer and the sum of accumulated amount of changes in fair value originally and directly

included in other comprehensive income are included in current profits and losses. When some transfer meets the

conditions for derecognition amortize the whole book value of the transferred financial assets between the

derecognized portion and the recognized portion at their respective fair values.If all or part of the current obligations of a financial liability has been discharged the financial liability or part of

it shall be derecognized.

5. Impairment of financial assets

When the financial assets measured at amortized cost are impaired make provision for impairment based on the

difference between the present value of the estimated future cash flows (excluding future credit losses that have

not occurred) and the book value. If there is objective evidence that the value of the financial asset has been

recovered and is objectively related to the event that occurred after the recognition of the loss the previously

recognized impairment loss shall be reversed and included in current profit or loss.When the financial assets measured at cost are impaired make provision for impairment. The impairment loss

incurred will not be reversed once confirmed.When there is objective evidence that the available-for-sale financial assets are impaired the accumulated losses

arising from the decline in fair value that are directly recognized in shareholders’ equity are transferred out and

included in the impairment losses. For available-for-sale equity instrument investments with impairment losses

recognized the increase in fair value after the period is directly recognized in shareholders’ equity.

For equity instrument investments the specific quantitative criteria for the Company to determine the “serious” or

“non-temporary” decline in fair value the method of calculating the cost the method for determining the fair

value at the end of the period and the basis for determining the period of continuous decline are as follows:

Specific quantitative criteria for a “serious” decline in

fair value

The decline in fair value at the end of the period relative to cost

has reached or exceeded 50%.Specific quantitative criteria for a “non-temporary”

decline in fair value

It has been falling for 12 consecutive months.

Cost calculation method

Take the sum of payment consideration (deducting the cash

dividends that have been declared but not yet issued or the bond

interest that have reached the interest payment period but not

yet received) and related transaction costs as the investment

costs when obtained.Method for determining the fair value at the end of the

period

The fair value of financial instruments that have an active

market is determine by the quoted prices in the active market; if

there is no active market in the financial instruments valuation

techniques are used to determine their fair value.

Basis for determining the period of

continuous decline

A continuous decline or the rebound in the

period of the downward trend continued to rise

below 20% and the rebound duration not

exceeding 6 months are recognized as a period

of continuous decline..Note receivable and account receivable

(1)Account receivables with single major amount and withdrawal bad debt provision independently

Criterion or amount standards of major single amount

Book balance of the account receivable with over 0.5 million

Yuan

Withdrawal method for individual bad debt provision accrual

with major single amount concerned

Recognized on the difference between the book value and the

current value of the expected future cash flow

(2) Account receivable with bad debt provision accrual by portfolio

Portfolio Accrued method for bad debts

Withdrawing bad debt provision by aging method Age analysis

No accrual for bad debt provision

Withdrawing bad bed provision by aging method in portfolio:

√ Applicable □ Not applicable

Account ages

Accrued proportion of accounts

receivable

Accrued proportion of other accounts

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

Reasons for individual bad debt prevision accrual

Receivable has minor amount and cannot reflect the risk

characteristic by withdrawing bad debt provision by group

Accrued method for bad debt provision

Recognized on the difference between the book value and the

current value of the expected future cash flow

12. Inventory

Whether the company needs to comply with the disclosure requirements of the particular industry

. 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

13. Long-term equity investment

1. Recognition of initial investment cost

For a long-term equity investment obtained by a business combination if it is a business combination under the

same control take the share of the combine party obtained in the book value of the net assets in the consolidated

financial statements of the ultimate controlling party on the combination date as the initial investment cost; 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 the initial investment cost isrecognized on the relevant rules in the “Accounting Standards for Business Enterprise No. 7- Exchange ofNon-Monetary Assets”

2. Subsequent measurement and profit or loss recognition

Where the company 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 Enterprises No.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 than 20% but less than 50% of the shares

with voting rights or even if the holding is below 20% 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 the investee’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.

14. Investment real estate

Measurement for investment real estate

Cost method

Depreciation or amortization method

The types of investment real estate of the Company include the leased land use rights leased buildings and land

use rights held and prepared for transfer after appreciation. Investment real estate is initially measured at cost and

subsequently measured by using the cost model.The leased buildings in the Company’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.

15. 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

Machinery equipment

Straight-line

depreciation

10 10.00 9.00

Mold equipment

Straight-line

depreciation

3 10.00 30.00

Transportation

equipment

Straight-line

depreciation

5 10.00 18.00

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.

(3) Recognition basis valuation and depreciation method for fixed assets under financing lease

The fixed assets under financing lease are the lease that has substantially transferred all the risks and rewards

associated with asset ownership. The initial valuation of the fixed assets under financing lease is to take the lower

one between the fair value of the leased assets and the present value of the minimum lease payments on the start

date of the lease period as the entry value; the subsequent valuation of the fixed assets under financing lease

adopts the depreciation policy consistent with the own fixed assets to make depreciation and impairment

provision.. Construction in process

Whether the company needs to comply with the disclosure requirements of the particular industry

Construction in process of the Company divided as self-run construction and out-bag construction. The

Construction in process 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.

17. Borrowing expenses

1. Recognition principle on capitalization of borrowing expenses

As for the Company’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.. Intangible assets

(1) Accounting method service life and impairment test

1. Accounting method of intangible assets

The Company’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 the Company’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 expected 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.

19. Long-term assets 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 the asset’s carrying

amount exceeds its recoverable amount.The recoverable amount is the higher of an asset’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.

20. Long-term deferred expenditure

The Company’s long-term deferred expenditure are expenses paid out and with one year above (one-year

excluded) benefit period. The long-term deferred expenses are diluted by periods according to the benefit period.

As the long-term deferred expenses cannot enable the accounting period’s beneficiary all dilution values of the

project undiluted yet are transferred into the current loss/gain.

21. Employees remuneration

(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 The Company’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.

22. 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.

23. Revenue

Whether the company needs to comply with the disclosure requirements of the particular industry

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 and ⑤

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.The Company’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. 【Respectively sell goods render labor

services transfer the right to use assets etc. combine with the actual production and operation characteristics

disclose the specific revenue recognition time and measurement methods the similar businesses using different

business models and recognizing income at different time points should be disclosed separately. For the income

from rendering of service and construction recognized according to the percentage of completion method the

basis and method for determining the progress of completion shall be disclosed.】

. Government subsidy

1.Category of government subsidy and accounting treatment

Governments subsidy of the Company refer to the monetary and non-monetary assets obtained from government

for free (excluding the capital invested by government as an owner). If the government grants are monetary assets

it shall be measured according to the amount received or receivable. If the government grants are non-monetary

assets it shall be measured at fair value; if the fair value cannot be obtained reliably it shall be measured at the

nominal amount.Government grants related to daily activities are included in other income in accordance with the economic

business. Government grants not related to daily activities are included in the non-operating income and

expenditure.Government grants that the government documents clearly stipulate to be used for the purchase and establishment

or forming long-term assets in other way are recognized as government grants related to assets. For the

government grants that the government documents do not clearly specify the subsidy target and can form

long-term assets the part corresponding to the asset value is recognized as the government grants related to the

assets and the rest is recognized as the government grants related to the income. For the government grants which

are difficult to be distinguished recognize the whole as the government grants related to the income. Government

grants related to assets are recognized as deferred income. The amount recognized as deferred income is included

in the current profit and loss in a reasonable and systematic manner within the useful life of the relevant asset.Government grants other than government grants related to assets are recognized as government grants related to

income. If the government grants related to the income are used to compensate the related expenses or losses of

the enterprise in the future period recognize them as deferred income and include them in the current profit and

loss during the period of recognizing the related expenses. The government grants used to compensate the relevant

expenses or losses incurred by the enterprise are directly included in the current profit and loss.The Company obtained the policy preferential loan interest subsidy and the finance allocated the interest subsidy

funds to the loan bank and the loan bank provides loans to the Company at a preferential interest rate take the

actual amount of the loan received as the entry value of the loan and calculate the relevant borrowing costs

according to the loan principal the policy preferential interest rate. If the finance directly appropriates the interest

subsidy funds to the Company the Company will offset the relevant borrowing costs with the corresponding

interest subsidy.

2. Time points to recognize the government grants

Government grants are recognized when they meet the conditions attached to government grants and can be

received. Government grants measured in accordance with the amount receivable are recognized when there is

conclusive evidence at the end of the period that it meets the relevant conditions stipulated in the financial support

policy and is expected to receive financial support funds. Other government grants other than government grants

measured in accordance with the receivable amount are recognized when the grant is actually received.

25. 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 assets 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.

26. Leasing

(1) 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 payable.. Changes in important accounting policies and estimates

(1) Changes in important accounting policies

√ Applicable □ Not applicable

Content and reason of changes in

accounting policies

Approval procedure NoteThe “Notice on Revising and issuing the

Format of General Enterprise FinancialStatement for 2018” (CK[2018] No.15)

issued by Ministry of Finance on 15 June

2018 the format of financial statement

for enterprise who implemented the

accounting standards shall be prepared

for 2018 and later years in line with the

above mentioned Notice.

Contents and causes for

accounting policy changed

Item affected

Amount affected

(RMB/CNY)

Amount re-state last

period (RMB/CNY)

Item and amount listed last period

1. Note receivable and

account receivable merge

listed

Note receivable

and account

receivable

185983351.22 213574264.91

Note receivable: 64778266.65 yuan

Account receivable: 148795998.26

yuan

2. Interest receivable and

dividend receivable listed

under Other account

receivable

Other account

receivable

5777179.08 4335729.72

Interest receivable: 4335729.72

yuan

3. Disposal of fixed assets

listed under Fixed assets

Fixed assets

188083873.38 176477314.08

Fixed assets: 83619842.39 yuan

Disposal of fixed assets:

92857471.69 yuan

4. Engineering material listed

under construction in process

Construction in

process

5727760.23 654356.00

Construction in process: 654356.00

yuan

5. Note payable and account

payable merge listed

Note payable

and account

payable

88617663.09 101815141.01

Note payable : 17810270.28 yuan

Account payable: 84004870.73

yuan

6. Interest payable and

dividend payable listed under

Other account

payable

26778863.92 20092172.75

Interest payable: 164895.80 yuan

Other account payable:

Other account payable 19927276.95 yuan

Note: explain the item and amount that is significantly affected.

(2) Changes in important accounting estimates

□ Applicable √ Not applicable

Contents and reasons of

changes in accounting

estimates

Approval procedure Time for application Notes

Note: explain the item and amount that is significantly affected.VI. Taxes

1. Major tax and tax rate

Taxes Taxation basis Tax rate

VAT Domestic sales revenue 17% 16% 6% 5% 3%

Urban maintenance and construction tax Turnover tax payable 7%

Corporate income tax Taxable income 15% 25%

Educational surtax Turnover tax payable 3%

Local educational surtax Turnover 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 the Company’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 2018 was 15%.VII. Notes to main items in consolidated financial statement

1. Monetary fund

RMB/CNY

Item Closing balance Opening balance

Cash on hand 236354.29 170053.77

Bank deposit 28935450.70 66070891.82

Other Monetary fund 4936525.28 2571550.38

Total 34108330.27 68812495.97

Other explanation

Other monetary funds are bank acceptance deposits.

2. Note receivable and account receivable

RMB/CNY

Item Closing balance Opening balance

Note receivable 69185516.71 64778266.65

Account receivable 116797834.51 148795998.26

Total 185983351.22 213574264.91

(1) Note receivable

1) Category of note receivable

RMB/CNY

Item Closing balance Opening balance

Bank acceptance bill 56817845.23 37676025.26

Commercial acceptance bill 12367671.48 27102241.39

Total 69185516.71 64778266.65

2)Notes receivable already pledged by the Company at the end of the period

RMB/CNY

Item Amount pledge at period-end

Bank acceptance bill 11151688.25

Total 11151688.25

3)Notes endorsement or discount and undue on balance sheet date

RMB/CNY

Item Amount derecognition at period-end Amount not derecognition at period-end

Bank acceptance bill 46053555.41

Commercial acceptance bill 30020300.93

Total 76073856.34

(2) Account receivable

1)Category of account receivable

RMB/CNY

Category

Closing balance Opening balance

Book balance

Bad debt

provision Book

value

Book balance Bad debt provision

Book

value Amoun

Proport

ion

Amoun

Accrua

l ratio

Amo

unt

Proport

ion

Amount

Accrual

ratio

Account receivable

with single

significant amount

and withdrawal

bad debt provision

separately

75563

63.72

5.82%

75563

63.72

100.00

7556

363.

4.67%

75563

63.72

100.00%

Account receivable

with bad debt

provision accrual

by portfolio

11679

8645.7

89.88

811.28 0.00%

11679

7834.5

1488

0435

0.34

91.88

8352.0

0.01%

148795

998.26

Account receivable

with single minor

amount but

withdrawal bad

debt provision

individually

55876

43.49

4.30%

55876

43.49

100.00

5592

838.

3.45%

55928

38.19

100.00%

Total

12994

2653.0

100.00

13144

818.49

11679

7834.5

1619

5355

2.25

100.00

13157

553.99

148795

998.26

Account receivable with major single amount and withdrawal bad debt provision single at period-end

√ Applicable □ Not applicable

RMB/CNY

Account receivable (by

unit)

Closing balance

Account receivable Bad debt provision Accrual ratio Accrual causes

Hong Kong Haowei

Industry Co. Ltd.

1870887.18 1870887.18 100.00% 无法收回

TCL ACE ELECTRIC

APPLIANCE

(HUIZHOU) CO.

LTD.

1325431.75 1325431.75 100.00% 无法收回

Qingdao Haier Parts

Procurement Co. Ltd.

1225326.15 1225326.15 100.00% 无法收回

SKYWORTH

Multimedia

(Shenzhen) Co. Ltd.

579343.89 579343.89 100.00% 无法收回

Shenzhen Portman

Bowling Club Co.

Ltd.

2555374.75 2555374.75 100.00% 无法收回

Total 7556363.72 7556363.72 -- --

Account receivable with bad debt provision withdrawal by method of account age in portfolio

√ Applicable □ Not applicable

RMB/CNY

Account ages

Closing balance

Account receivable Bad debt provision Accrual ratio

Sub-item of within one year

116793835.05

Subtotal of within one year 116793835.05

1-2 years 2527.77 126.39 5.00%

Over three years 2282.97 684.89 30.00%

Explanation on portfolio basis:

Nil

Withdrawal proportion of bad debt provision based on balance proportion for account receivable in portfolio:

□ Applicable √ Not applicable

Withdrawing bad bed provision for account receivable by other methods in portfolio:

Accounts with single minor amount but with bad debts provision accrued individually at period-end

Debtor Book balance Bad debt provision Accrual ratio(%) Accrual causes

Shenzhen Huixin Video Technology

Co. Ltd.

381168.96 381168.96 100.00 Uncollectible

Shenzhen Wandelai Digital Technology

Co. Ltd.

351813.70 351813.70 100.00 Uncollectible

Shenzhen Dalong Electronic Co. Ltd. 344700.00 344700.00 100.00 Uncollectible

Shenzhen Keya Electronic Co. Ltd. 332337.76 332337.76 100.00 Uncollectible

Shenzhen Qunping Electronic Co. Ltd. 304542.95 304542.95 100.00 Uncollectible

China Galaxy Electronics (Hong Kong) 288261.17 288261.17 100.00 Uncollectible

Co. Ltd.

Dongguan Weite Electronic Co. Ltd. 274399.80 274399.80 100.00 Uncollectible

Chuangjing 247811.87 247811.87 100.00 Uncollectible

Hong Kong New Century Electronics

Co. Ltd.

207409.40 207409.40 100.00 Uncollectible

Shenyang Beitai Electronic Co. Ltd. 203304.02 203304.02 100.00 Uncollectible

Beijing Xinfang Weiye Technology Co.

Ltd.

193000.00 193000.00 100.00 Uncollectible

TCL Electronics (Hong Kong) Co. Ltd. 145087.14 145087.14 100.00 Uncollectible

Huizhou TCL Xinte Electronics Co.Ltd.

142707.14 142707.14 100.00 Uncollectible

SkyWorth – RGB Electronic Co. Ltd. 133485.83 133485.83 100.00 Uncollectible

Other 2037613.75 2037613.75 100.00 Uncollectible

Total 5587643.49 5587643.49

2)Bad debt provision accrual switch-back or taken back in the period

Bad debt provision accrual was Yuan; the amount collected or switches back amounting to 12735.50 Yuan.

Including major amount of bad debt provision that switch-back or taken back in the Period:

RMB/CNY

Company Amount switch back or taken back Collection way

Nil

3)Top five receivables collected by arrears party at ending balance

Company Closing balance Proportion of total

accounts receivable(%)

Balance of bad debt

provision

Hong Kong Yutian International

Investment Co. Ltd.

36750397.49 28.28

Qingdao Haidayuan Purchasing Service

Co. Ltd

36154096.22 27.82

ViewSonic Tech. (China) Co. Ltd 19848248.00 15.27

Xiamen Edmond Electronic Technology

Co. Ltd

11403961.34 8.78

Viewsonic International Corp 5865344.25 4.51

Total 110022047.30 84.67

3. Prepayments

(1) Prepayments listed by account age

RMB/CNY

Account ages

Closing balance Opening balance

Amount Proportion Amount Proportion

Within one year 31254429.54 99.70% 937895.64 99.42%

1-2 years 94000.00 0.25% 3732.52 0.40%

2-3 year 1699.85 0.18%

Total 31348429.54 -- 943328.01 --

Explanation on prepayments with over one year in age and reasons of un-settle:

Creditor's unit Debt unit Closing

balance

Account ages Unsettled reasons

Wuhan Hengfa Technology

Co. Ltd.

Shenzhen Xuanyuan Soft

Technology Co. Ltd

94000.00 Within two

years

Open contract

Total 94000.00

(2) Top 5 prepayments collected by objects at ending balance

Company Closing balance Proportion of the total amount of

prepayments(%)

Hong Kong Yutian International

Investment Co. Ltd.

17120874.77 54.61

Wuhan Hengsheng Photo-electricity

Industry Co. Ltd.

8294072.28 26.46

Haier Digital Tech. (Qingdao) Co. ltd. 1861392.76 5.94

Hefei Xinsheng Photoelectric Tech. Co.ltd.

938902.90 3.00

Guangzhou Shiyuan Electronic

Technology Co. Ltd.

641603.55 2.05

Total 28856846.26 92.05

Other explanation

4. Other account receivable

RMB/CNY

Item Closing balance Opening balance

Other account receivable 5777179.08 4335729.72

Total 5777179.08 4335729.72

(1) Other account receivable

1)Category of other account receivable

RMB/CNY

Category

Closing balance Opening balance

Book balance

Bad debt

provision Book

value

Book balance Bad debt provision

Book

value Amoun

Proport

ion

Amoun

Accrua

l ratio

Amo

unt

Proport

ion

Amount

Accrual

ratio

Other account

receivable with

single significant

amount and

withdrawal bad

debt provision

separately

70320

50.71

33.43

70320

50.71

100.00

6722

602.

34.28

67226

02.71

100.00%

Other account

receivable with bad

debt provision

accrual by

portfolio

59184

60.63

28.13

14128

1.55

2.72%

57771

79.08

4528

823.

23.09

193093

.72

5.07%

433572

9.72

Other account

receivable with

single minor

amount but

withdrawal bad

debt provision

individually

80875

37.78

38.44

80875

37.78

100.00

8359

643.

42.63

83596

43.58

100.00%

Total

21038

049.12

100.00

15260

870.04

57771

79.08

1961

1069

.73

100.00

15275

340.01

433572

9.72

Other account receivable with major single amount and withdrawal bad debt provision single at period-end:

√ Applicable □ Not applicable

RMB/CNY

Other account

receivable (by unit)

Closing balance

Other account

receivable

Bad debt provision Accrual ratio Accrual causes

Portman 4021734.22 4021734.22 100.00

Jifang Investment 1380608.00 1380608.00 100.00

Traffic accident

compensation

555785.81 555785.81 100.00

Zhao Baomin 553901.68 553901.68 100.00

Hebei Botou Court 520021.00 520021.00 100.00

Total 7032050.71 7032050.71 -- --

Other account receivable with bad debt provision withdrawal by age analysis in portfolio:

√ Applicable □ Not applicable

RMB/CNY

Account ages

Closing balance

Other account receivable Bad debt provision Accrual ratio

Sub-item of within one year

Subtotal of within one year 3967784.65

1-2 years 157190.94 7859.55 5.00%

2-3 year 943020.00 94302.00 10.00%

Over three years 130400.00 39120.00 30.00%

Total 5198395.59 141281.55

Explanation on portfolio basis:

Nil

Withdrawing bad bed provision based on balance proportion for other account receivable in portfolio

□ Applicable √ Not applicable

Withdrawing bad bed provision based on other methods for other account receivable 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 amount Accrual ratio(%) Accrual causes

Electricity fee in Gongming

canteen

489214.70 489214.70 100.00 Uncollectible

Jiantao (Fogang) Laminates Co.Ltd.

465528.10 465528.10 100.00 Uncollectible

4/F hotle Daiqiangbo 354569.00 354569.00 100.00 Uncollectible

Lu Wei 290000.00 290000.00 100.00 Uncollectible

Chuangjing 192794.00 192794.00 100.00 Uncollectible

Shenzhen Mingli Co. Ltd. 170394.84 170394.84 100.00 Uncollectible

Other units 6125037.14 6125037.14 100.00 Uncollectible

Total 8087537.78 8087537.78 —— ——

2)Bad debt provision accrual switch-back or taken back in the period

Bad debt provision accrual was 0.00 Yuan; the amount collected or switches back amounting to 14469.97 Yuan.

Including major amount of bad debt provision that switch-back or taken back in the Period:

RMB/CNY

Company Amount switch-back or taken back Collection way

Nil

)Nature of other account receivable

RMB/CNY

Nature Ending book balance Opening book balance

Margin and deposit 1793485.04 1793485.04

Borrow money 1973013.76 2190666.85

Intercourse funds 6647012.36 9081233.88

Rent receivable 6626917.46 5857777.46

Other 3997620.50 687906.50

Total 21038049.12 19611069.73

4)Top 5 other receivables collected by arrears party at ending balance

RMB/CNY

Company Nature Closing balance Account ages

Proportion in total

other receivables

at year-end

Closing balance of

bad debt provision

Portman

Rental fee

receivable

4021734.22 Over three years 19.12% 4021734.22

Shenzhen Jifang

Investment Co.Ltd

Rental fee

receivable

1380608.00 Over three years 6.56% 1380608.00

Fujian Jielian

Electronic Co.

Ltd.Non-related party 800000.00 1-2 years 3.80% 80000.00

Wuwu Branch of

Shenzhen

Dachong

Industrial Co. Ltd.Other 641266.64 2-3 years 3.05%

Traffic accident

compensation

Other 555785.81 Over three years 2.64% 555785.81

Total -- 7399394.67 -- 35.17% 6038128.03

5. Inventory

Whether the company needs to comply with the disclosure requirements of the real estate industry

(1)Category of inventory

RMB/CNY

Item Closing balance Opening balance

Book balance

Provision for

price fall-down

Book value Book balance

Provision for

price fall-down

Book value

Raw materials 39497353.01 1695940.61 37801412.40 29640518.78 937858.86 28702659.92

Goods in

process

119575.09 119575.09

Inventory

goods

24483140.41 1543123.71 22940016.70 29291605.18 1660379.81 27631225.37

Homemade

semi-finished

products

2175657.06 124384.26 2051272.80 3433461.82 1444.25 3432017.57

Low priced and

easily worn

articles

216771.16 35563.68 181207.48 587236.21 85692.51 501543.70

Total 66372921.64 3399012.26 62973909.38 63072397.08 2685375.43 60387021.65

Whether the Company needs to comply with the disclosure requirement of Industry Information Disclosure Guidelines of Shenzhen

Stock Exchange No.4 -Listed Companies Engaged in Seed Planting Business

Whether the Company needs to comply with the disclosure requirement of Industry Information Disclosure Guidelines of Shenzhen

Stock Exchange No.11 -Listed Companies Engaged in Jewelry Related Business

(2) Provision for price fall-down

RMB/CNY

Item

Opening

balance

Current increased Current decreased

Closing

balance Accrual Other

Switch back or

Written-off

Other

Raw materials 937858.86 1164244.40 406162.65 1695940.61

Inventory

goods

1660379.81 912427.42 1029683.52 1543123.71

Homemade

semi-finished

products

1444.25 124384.26 1444.25 124384.26

Low priced and

easily worn

articles

85692.51 4290.88 54419.71 35563.68

Total 2685375.43 2205346.96 1491710.13 3399012.26

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

Nil

(4) Assets completed without settle resulted by construction contract at period-end

RMB/CNY

Item Amount

Other explanation

Nil

6. Other current assets

RMB/CNY

Item Closing balance Opening balance

Value-added tax to be deducted 17055.88 9996.21

Advance payment of income tax 42314.30 42314.30

Total 59370.18 52310.51

Other explanation

Nil

7. Investment real estate

(1) Investment real estate measured at cost

√ Applicable □ Not applicable

RMB/CNY

Item House and building Land use right

Construction in

process

Total

I. Original book value

1.Opening

balance

133661686.94 133661686.94

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 133661686.94 133661686.94

II. Accumulated

depreciation and

accumulated

amortization

1.Opening

balance

81250728.32 81250728.32

2.Current

increased

1729635.76 1729635.76

(1) Accrual or

amortization

1208595.52 1208595.52

3.Current

decreased

(1) Disposal

(2) other

transfer-out

4.Closing balance 82980364.08 82980364.08

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

value

50681322.86 50681322.86

2.Opening Book

value

52410958.62 52410958.62

8. Fixed assets

RMB/CNY

Item Closing balance Opening balance

Fixed assets 95226401.69 83619842.39

Disposal of fixed assets 92857471.69 92857471.69

Total 188083873.38 176477314.08

(1) Fixed assets

RMB/CNY

Item

House and

building

Machinery

equipment

Means of

transport

Office

equipment

Instrument

equipment

Tool

equipment

Mold

equipment

Total

I. Original

book

value：

1.Opening

balance

65608798

.85

80158724

.83

6431855.

6981463.

3051926.

5467996.

14876405

.89

18257717

1.34

2.Current

increased

15157423

.38

600321.20 121633.02 228039.24

2242517.

5482356.

23832291

.06

(1)

Purchasing

15157423

.38

600321.20 121633.02 228039.24

2242517.

5482356.

23832291

.06

Constructio

n in

process

transfer-in

(3)

increased

combinatio

3.Current

decreased

5118187.

1071656.

778053.14 142258.03

1157814.

4127637.

12395606

.87

(1)

Disposal or

scrapping

5118187.

1071656.

778053.14 142258.03

1157814.

4127637.

12395606

.87

4.Closing

balance

65608798

.85

90197960

.43

5960519.

6325043.

3137707.

6552700.

16231125

.01

19401385

5.53

II.

Accumulati

depreciatio

1.Opening

balance

14843969

.68

58679845

.60

3568166.

5484551.

2496903.

3108608.

10775284

.39

98957328

.95

2.Current

increased

1953602.

3646758.

612130.93 295217.03 110384.39 838350.48

2454365.

9910809.

(1)

Accrual

1953602.

3646758.

612130.93 295217.03 110384.39 838350.48

2454365.

9910809.

3.Current

decreased

3662378.

1491.75

1608326.

128032.23 986778.01

3693677.

10080684

.51

(1)

Disposal or

scrapping

3662378.

1491.75

1608326.

128032.23 986778.01

3693677.

10080684

.51

4.Closing

16797572

.46

58664225

.14

4178805.

4171441.

2479255.

2960180.

9535972.

98787453

.84

balance

III.

Depreciatio

n reserves

1.Opening

balance

2.Current

increased

(1)

Accrual

3.Current

decreased

(1)

Disposal or

scrapping

4.Closing

balance

IV. Book

value

1.Ending

Book value

48811226

.39

31533735

.29

1781714.

2153601.

658452.11

3592519.

6695152.

95226401

.69

2.Opening

Book value

50764829

.17

21478879

.23

2863688.

1496912.

555023.06

2359388.

4101121.

83619842

.39

(2) Fixed assets leasing-out by operational lease

RMB/CNY

Item Ending Book value

House and building 852905.29

(3) Disposal of fixed assets

RMB/CNY

Item Closing balance Opening balance

Gongming Huafa Electric Town 92857471.69 92857471.69

Total 92857471.69 92857471.69

Other explanation

Original value of the fixed assets that have been fully depreciated at period-end and continued to be used amounted as 44010028.21

yuan.

9. Construction in process

RMB/CNY

Item Closing balance Opening balance

Construction in

process

5727760.23 654356.00

Total 5727760.23 654356.00

(1) Construction in process

RMB/CNY

Item

Closing balance Opening balance

Book balance

Impairment

provision

Book value Book balance

Impairment

provision

Book value

Transformation

project of

Huafa Building

654356.00 654356.00

Expansion for

3# Plant

5727760.23 5727760.23

Total 5727760.23 5727760.23 654356.00 654356.00

(2) change of major construction in process in the period

RMB/CNY

Item Budget

Openi

balanc

Curren

increas

Fixed

assets

transfe

r-in in

the

Period

Other

decrea

sed in

the

Period

Closin

balanc

Propor

tion of

project

invest

ment

budget

Progre

Accum

ulated

amoun

t of

interes

capital

ization

includi

ng:

interes

capital

ized

amoun

t of the

year

Interes

capital

ization

rate of

the

year

Source of

funds

Expan

sion

for 3#

Plant

6000

000.00

5727

760.23

5727

760.23

95.46

95.46 Other

Total

6000

000.00

5727

760.23

5727

760.23

-- -- --

10. Intangible assets

(1) Intangible assets

RMB/CNY

Item Land use right Patent right

Non-patented

technology

Computer

software

Total

I. Original book

value

1.Opening

balance

55089774.36 661878.97 55751653.33

2.Current

increased

(1)

Purchasing

(2) internal

R&D

(3)

increased by

combination

3.Current

decreased

(1)

Disposal

4.Closing

balance

55089774.36 661878.97 55751653.33

II. Accumulated

amortization

1.Opening

balance

11992276.93 452060.03 12444336.96

.Current

increased

1441740.71 49885.92 1491626.63

(1) Accrual 1441740.71 49885.92 1491626.63

3.Current

decreased

(1)

Disposal

4.Closing

balance

12137222.65 452060.03 12589282.68

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 value

41655756.72 159933.02 41815689.74

2.Opening

Book value

43097497.43 209818.94 43307316.37

The proportion of intangible assets form by internal R&D in total book value of intangible assets at period-end

11. Long-term deferred expenditure

RMB/CNY

Item Opening balance Current increased

Amortized in

Period

Other decreased Closing balance

Golf membership 141666.55 141666.55

fee

Cloud service cost

amortization

697007.55 154890.56 542116.99

Total 141666.55 697007.55 296557.11 542116.99

Other explanation

Nil

12. Deferred income tax asset /deferred income tax liability

(1) Deferred income tax assets un-offset

RMB/CNY

Item

Closing balance Opening balance

Deductible temporary

differences

Deferred income tax

asset

Deductible temporary

differences

Deferred income tax

asset

Provision for

impairment of assets

6813753.84 28641162.96 6715066.24 27949536.92

Accrual liability 16102.75 64411.00 16102.75 64411.00

Total 6829856.59 28705573.96 6731168.99 28013947.92

(2) Amount of deferred income tax asset and deferred income tax liability after trade-off

RMB/CNY

Item

Trade-off between the

deferred income tax

assets and liabilities

Ending balance of

deferred income tax

assets or liabilities

after off-set

Trade-off between the

deferred income tax

assets and liabilities at

period-begin

Opening balance of

deferred income tax

assets or liabilities

after off-set

Deferred income tax

asset

6829856.59 6731168.99

(3) Deferred income tax asset without confirmed

RMB/CNY

Item Closing balance Opening balance

Deductible temporary difference 3163837.81 3172018.51

Deductible loss 1427605.96 525348.33

Total 4591443.77 3697366.84

(4) Deductible losses of deferred income tax asset without confirmed will expired in later year

RMB/CNY

Year Closing amount Opening amount Note

2019 51859.78 51859.78

2020 0.00 0.00

2021 182573.55 182573.55

2022 848078.83 290915.00

2023 345093.80

Total 1427605.96 525348.33 --

Other explanation

Nil

13. Other non-current assets

RMB/CNY

Item Closing balance Opening balance

Advance payment for works 80000.00

Advance payment for equipment 357810.00 1934800.00

Advance payment for intangible assets 2721154.00

Total 3158964.00 1934800.00

Other explanation

Nil

14. Short-term loans

(1) Short-term loans

RMB/CNY

Item Closing balance Opening balance

Loan in pledge 13500000.00 8500000.00

Mortgage borrowing 148068657.88 138120264.81

Guaranteed loan 20000000.00

Total 161568657.88 166620264.81

Explanation on category of Short-term loans

Nil

. Note payable and accounts payable

RMB/CNY

Item Closing balance Opening balance

Note payable 27642356.66 17810270.28

Accounts payable 60975306.43 84004870.73

Total 88617663.09 101815141.01

(1) Note payable

RMB/CNY

Category Closing balance Opening balance

Commercial acceptance bill 10000000.00

Bank acceptance bill 17642356.66 17810270.28

Total 27642356.66 17810270.28

Totally 0 Yuan due note payable are paid at period-end

(2) Accounts payable

RMB/CNY

Item Closing balance Opening balance

Within one year (one year included) 48686573.85 71817382.90

Over 1 year 12288732.58 12187487.83

Total 60975306.43 84004870.73

(3) Major account payable over one year

RMB/CNY

Item Closing balance 未偿还或结转的原因

Shenzhen Yuehai Global Logistics Co.Ltd.

2858885.97 Unsettled

LG 1906267.50 Unsettled

Dongjin Electronics (Nanjing) Plasma

Co. Ltd.

617963.45 Unsettled

Total 5383116.92 --

Other explanation

Nil

. Account received in advance

(1) Account received in advance

RMB/CNY

Item Closing balance Opening balance

Within one year (one year included) 139961.60 234017.18

Over 1 year 19567.00 44111.00

Total 159528.60 278128.18

17. Employee salary payable

(1) Employee salary payable

RMB/CNY

Item Opening balance

Increase during the

period

Decrease during this

period

Closing balance

I. Short-term

compensation

5088451.75 57766776.79 58155020.18 4700208.36

II. Post-employment

welfare- defined

contribution plans

-5093.82 4541995.90 4536902.08

III. Dismiss welfare 47398.10 47398.10

Total 5083357.93 62356170.79 62739320.36 4700208.36

(2) Short-term compensation

RMB/CNY

Item Opening balance

Increase during the

period

Decrease during this

period

Closing balance

1. Wages bonuses

allowances and subsidies

4039310.19 50703365.41 51022649.80 3720025.80

2. Welfare for workers

and staff

27109.00 4472116.36 4499225.36

3. Social insurance 23041.98 2148346.09 2148346.09 23041.98

Including:

Medical insurance

23041.98 1797746.68 1797746.68 23041.98

Work

injury insurance

191986.98 191986.98

Maternity

insurance

158612.43 158612.43

4. Housing

accumulation fund

24310.00 359328.16 359328.16 24310.00

5. Labor union

expenditure and

personnel education

expense

974680.58 83620.77 125470.77 932830.58

Total 5088451.75 57766776.79 58155020.18 4700208.36

(3) Defined contribution plans

RMB/CNY

Item Opening balance

Increase during the

period

Decrease during this

period

Closing balance

1. Basic endowment

insurance

-5093.82 4390138.90 4385045.08

2. Unemployment

insurance

151857.00 151857.00

Total -5093.82 4541995.90 4536902.08

Other explanation

Nil

18. Tax payable

RMB/CNY

Item Closing balance Opening balance

VAT 3432174.00 5473037.12

Corporate income tax 5683136.41 5228514.39

Individual income tax 45962.89 20213.76

Urban maintenance and construction tax 547965.38 1447509.59

Property tax 290438.28 743004.72

Land use tax 75345.69 324212.74

Educational surtax 235610.56 621129.51

Local educational surtax 126852.76 322572.35

Dike fee 1665.00 1665.00

Stamp tax 24738.90 34988.50

Disposal fund of waste electrical 768930.00 919430.00

products

Total 11232819.87 15136277.68

Other explanation

Nil

19. Other account payable

RMB/CNY

Item Closing balance Opening balance

Interest payable 439558.70 164895.80

Other account payable 26339305.22 19927276.95

Total 26778863.92 20092172.75

(1) Interest payable

RMB/CNY

Item Closing balance Opening balance

Interest of short-term loans payable 439558.70 164895.80

Total 439558.70 164895.80

Significant overdue and unpaid interest:

RMB/CNY

Loan unit Overdue amount Reason for overdue

Other explanation

Nil

(2) Other account payable

1)Other account payable by nature

RMB/CNY

Item Closing balance Opening balance

Margin and deposit 10914478.12 6280204.22

Lease management fee 2612566.67 2307901.27

Intercourse funds 7531055.87 6534652.44

After sale and repairmen 1696994.97 2384774.18

Other 3584209.59 2419744.84

Total 26339305.22 19927276.95

2)Significant other payable with over one year age

RMB/CNY

Item Closing balance Reasons of un-paid or carry-over

Shenzhen SED Property Development

Co. Ltd.

1244058.55 Unsettled

Shenzhen Huayongxing Environmental

Protection Technology Co. Ltd.

1000000.00 Deposit

Linghang Technology (Shenzhen) Co.Ltd

656345.28 Unsettled

Shenzhen Tongxing Electronics Co. Ltd. 578259.83 Unsettled

Shenzhen Yongdasheng Investment

Development Co. Ltd.

558970.00 Deposit

Total 4037633.66 --

Other explanation

Nil

20. Accrued liabilities

RMB/CNY

Item Closing balance Opening balance Causes

Pending action 64411.00 64411.00 Business and labor disputes

Total 64411.00 64411.00 --

Other explanations including important assumptions and estimation about important estimated liabilities:

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 64411.00 yuan and the Company

recognizes it as the estimated liability.

21.Share capital

In RMB

Opening

balance

Changes in the Period (+-)

Closing

balance

Issuing new

Bonus shares

transfer from

public

reserves

Other Subtotal

Total shares

283161227.

Other explanation

Ended as 31 December 2018 the shares of the Company held by controlling shareholder has 116100000 shares in status of pledge

taking 41% of the total share capital; mortgagee is China Merchants Securities Assets Management Co. Ltd. Shares in judicial freeze

amounted as 116489894 shares. The notice on progress of the shares pledged or frozen held by controlling shareholder are released

on 11 Jan. 2019

22. Capital surplus

RMB/CNY

Item Opening balance

Increase during the

period

Decrease during this

period

Closing balance

Capital premium

(equity premium)

96501903.02 96501903.02

Other capital surplus 50085368.48 50085368.48

Total 146587271.50 146587271.50

Other explanation including changes and reasons of changes:

Nil

23. Surplus reserves

RMB/CNY

Item Opening balance

Increase during the

period

Decrease during this

period

Closing balance

Statutory surplus

reserves

21322617.25 21322617.25

Discretionary surplus

reserve

56068976.00 56068976.00

Total 77391593.25 77391593.25

Other explanation including changes and reasons for changes:

Nil

24. Retained profit

RMB/CNY

Item Current period Last period

Retained profit at the end of the previous period

before adjustment

-186467113.73 -187441523.12

Retained profit at period-begin after adjustment -186467113.73 -187441523.12

Add: net profit attributable to owners of the

parent company

3295022.73 974409.39

Retained profit at period-end -183172091.01 -186467113.73

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 0 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

25. Operating income and cost

RMB/CNY

Item

Current Period Last Period

Income Cost Income Cost

Main business 582037124.29 545577228.99 811691458.39 767897597.88

Other business 55009582.74 21114247.50 46348674.35 10009013.24

Total 637046707.03 566691476.49 858040132.74 777906611.12

26. Tax and surcharges

RMB/CNY

Item Current Period Last Period

Urban maintenance and construction tax 920169.24 1427781.18

Educational surtax 394358.26 611819.05

Property tax 1331816.18 2699817.08

Land use tax 710368.64 864650.63

Vehicle use tax 6540.00 9075.62

Stamp tax 407261.30 515320.90

Local education development fee 205470.79 319456.43

Total 3975984.41 6447920.89

Other explanation

Nil

27. Sales expense

RMB/CNY

Item Current Period Last Period

Employees remuneration 4042578.84 4984220.26

Freight 4452902.42 4707497.34

Commodity inspection fee 675532.35 1016453.60

Customs fee 202996.81 71162.46

Commodity loss 755506.56 1270308.03

After-sales service fee 3046552.35 3184997.76

Business entertainment expenses 338626.00 183187.97

Other 585551.84 498666.45

Total 14100247.17 15916493.87

Other explanation

Nil

28. Administrative expense

RMB/CNY

Item Current Period Last Period

Salary 9019534.64 9181074.76

Depreciation charge 1682743.00 2005410.35

Social insurance premium 2656825.97 3063807.83

Business entertainment expenses 3031992.90 2164825.72

Employee benefits 1452996.99 2282050.50

Travel expenses 1472496.29 3182447.37

Amortization of intangible assets 1491626.63 1472727.40

Traffic expenses 1319577.46 1234314.61

Consulting fee 1368885.21 4178432.28

Security 1911021.67 1909696.23

Repairs 3126804.08 2434021.55

Audit fee 778988.81 967918.64

Office expenses 1364212.02 1472390.85

Communication fee 317611.81 294064.24

Amortization of low cost and short lived

articles

798387.40 391757.33

Securities information disclosure fee 392164.56 646641.60

Litigation fee 28055.00 487564.11

Lease fee 4711758.56 4416416.15

Staff education and labor union

expenditure

83620.77 113009.17

Water and electricity fee 622054.17 476436.91

Other expenses 883847.21 408103.93

Total 38515205.15 42783111.53

Other explanation

Nil

29. R& D expenses

RMB/CNY

Item Current Period Last Period

Other explanation

30. Financial expense

RMB/CNY

Item Current Period Last Period

Interest costs 12785854.43 10476762.09

Less: interest income 656538.09 1309824.81

Exchange loss 4895989.78 4516307.95

Less: exchange gains 6915754.78 5205454.35

Handing expense 206052.11 498775.07

Other expense 1160.00 2520.00

Total 10316763.45 8979085.95

Other explanation

Nil

31. Losses on assets impairment

RMB/CNY

Item Current Period Last Period

I. Bad debt losses -13140.19 807725.34

II. Inventory falling price loss 713636.83 614061.37

Total 700496.64 1421786.71

Other explanation

Nil

32. Other income

RMB/CNY

Sources Current Period Last Period

Stabilization subsidy 139020.00 161420.00

Subsidy for R&D input 785000.00

33. Gains on investment

RMB/CNY

Item Current Period Last Period

Investment income generated by financial

products

326439.49 372245.91

Total 326439.49 372245.91

Other explanation

34. Asset disposal income

RMB/CNY

Source of asset disposal income Current Period Last Period

Disposal gains arising from the disposal

of not held for sale fixed assets \

intangible assets

49159.75 199069.56

35. Non-operating income

RMB/CNY

Item Current Period Last Period

Amount included in current

non-recurring profits or losses

Receive donations 51500.00

Government subsidy 2871800.00 1013769.68 2871800.00

Accrual liability reversal 1527600.81

Unable to pay 139368.16

Penalty revenue 143073.09

Fine income 3314.07 96644.33 3314.07

Other 11696.99 11696.99

Total 2886811.06 2971956.07

Government subsidy reckoned into current gains/losses:

RMB/CNY

Item

Issuing

subject

Offering

causes

Nature

Subsidy

impact

The special

subsidy

Amount in

the Period

Amount in

last period

Assets-rela

ted/income

current

gains/losse

s (Y/N)

(Y/N) -related

Export

subsidy

bonus

Caidian

Bureau of

Finance

Wuhan

Award

Subsidy

obtained

for

conforms

with the

local

support

policy for

investment

incentive to

encourage

investment

No Y 50000.00

Income-rel

ated

Award 金

Award for

highlightin

g private

enterprise

for 2016 in

Caidian

District

Caidian

Bureau of

Finance

Wuhan

Award

Subsidy

obtained

for

conforms

with the

local

support

policy for

investment

incentive to

encourage

investment

No Y 200000.00

Income-rel

ated

Developme

nt of

processing

trade and

promoting

funds in

Central and

Western

China for

2016

Caidian

Bureau of

Finance

Wuhan

Award

Subsidy

obtained

for

conforms

with the

local

support

policy for

investment

incentive to

encourage

investment

No Y 270000.00

Income-rel

ated

Award for

excellent

enterprise

for 2016

Caidian

Bureau of

Finance

Wuhan

Award

Subsidy

obtained

for

conforms

No Y 200000.00

Income-rel

ated

with the

local

support

policy for

investment

incentive to

encourage

investment

Enterprise

developme

nt fund

(manufactu

re of

household

appliances

component

Caidian

Bureau of

Finance

Wuhan

Subsidy

Subsidy for

research

and

developme

technical

reforming

and

reconstruct

ion

No Y 293769.68

Income-rel

ated

Subsidy for

cultivating

enterprise

Wuhan

Science

and

Technolog

y Bureau

(Wuhan

Intellectual

Property

Office)

Award

Subsidy

obtained

for

conforms

with the

local

support

policy for

investment

incentive to

encourage

investment

No Y 50000.00

Income-rel

ated

2018

municipal

foreign

economic

and trade

funds

Ministry of

Finance

Wuhan

Award

Subsidy

obtained

for

conforms

with the

local

support

policy for

investment

incentive to

encourage

investment

No Y 271800.00

Income-rel

ated

Awards for Economic Award Subsidy No Y 1900000. Income-rel

enterprise

developme

Developme

nt Zone

Manageme

Committee

of Caidian

District

Wuhan

obtained

for

conforms

with the

local

support

policy for

investment

incentive to

encourage

investment

00 ated

Subsidy for

recognition

high-tech

enterprise

for 2018

Bureau of

Science

Technolog

y and

Economic

Informatio

n of

Caidian

District

Wuhan

Subsidy

obtained

for

conforms

with the

local

support

policy for

investment

incentive to

encourage

investment

No Y 50000.00

Income-rel

ated

Guiding

funds for

business

developme

Caidian

Bureau of

Finance

Wuhan

Award

Subsidy

obtained

for

conforms

with the

local

support

policy for

investment

incentive to

encourage

investment

No Y 150000.00

Income-rel

ated

Subsidy for

science &

technology

innovation

platform in

2017

Bureau of

Science

Technolog

y and

Economic

Informatio

n of

Caidian

Subsidy

obtained

for

conforms

with the

local

support

policy for

No Y 300000.00

Income-rel

ated

District

Wuhan

investment

incentive to

encourage

investment

Central

special

fund for

foreign

trade and

economic

cooperatio

(promoting

developme

nt of

processing

trade in the

Midwest)

in 2017

Ministry of

Finance of

Wuhan

Award

Subsidy

obtained

for

conforms

with the

local

support

policy for

investment

incentive to

encourage

investment

No Y 150000.00

Income-rel

ated

Other explanation

Nil

36. Non-operating expenditure

RMB/CNY

Item Current Period Last Period

Amount included in current

non-recurring profits or losses

Penalty expenditure 181801.76 2985.68 181801.76

Loss on assignment of claims 2158200.00 5755200.00 2158200.00

Other expenses 1005.00 545.88 1005.00

Total 2341006.76 5758731.56 2341006.76

Other explanation

Nil

37. Income tax expenses

(1) Statement of income tax expense

RMB/CNY

Item Current Period Last Period

Current income tax expense 1395622.14 1000988.22

Deferred income tax expense -98687.60 555685.04

Total 1296934.54 1556673.26

(2) Adjustment on accounting profit and income tax expenses

RMB/CNY

Item Current Period

Total profit 4591957.26

Income tax based on statutory/applicable rate 1147989.32

Impact by different tax rate applied by subsidies -590455.60

Cost expenses and loss which are not deductible 739400.82

Income tax expense 1296934.54

Other explanation

Nil

38. Annotation of cash flow statement

(1) Cash received with other operating activities concerned

RMB/CNY

Item Current Period Last Period

Unit intercourse account 111961826.54 5469555.18

Collection management fee and utilities

etc.

3382270.33 430720.45

Repayment from employees 63050.23 3315558.82

Margin deposit 3655539.50 59281.50

Interest income 146904.87 211336.37

Refunds 25925884.92 1764059.75

Claim deduction etc. 191650.09 905067.46

Government subsidy 3795820.00 1451189.68

Receive grant 15500.00

Other 185116.26

Total 149122946.48 13807385.47

Note of cash received with other operating activities concerned:

Nil

(2)Cash paid with other operating activities concerned

RMB/CNY

Item Current Period Last Period

Unit intercourse account 126247786.47 2512814.07

Advances to employees 991373.48 3794266.72

Litigation fee 81105.00 15866.00

Margin deposit 1181899.00 1167554.00

Entertainment expense 3000255.62 2769800.23

Water and electricity 388342.19 370312.12

Travel expenses 1437228.54 3287308.11

Freight 3868873.39 5008475.05

Traffic expenses 1109528.61 1030400.36

Repairs 856969.82 3724821.24

Audit fees consulting fees 2392374.59 7458621.00

Security 457335.66 166131.50

Financial institutions handling fee 187021.74 517938.92

Office expenses 881794.91 668598.26

Communication fee 294321.76 313916.50

Lease fee 4711758.56 4616957.86

Other 1411122.02 971692.54

Refunds 42523.31

Commodity inspection fee 141794.01 977449.41

After-sales service fee 1265862.21 1698357.00

Fines and indemnities 857970.32 600818.52

Securities information disclosure fee 392164.56 663685.00

Total 152199405.77 42335784.41

Note of cash paid with other operating activities concerned:

Nil

(3) Cash received with other investment activities concerned

RMB/CNY

Item Current Period Last Period

Redemption of principal of financial

products

144000000.00 291000000.00

Total 144000000.00 291000000.00

Note of cash received with other investment activities concerned

Nil

(4) Cash paid related with investment activities

RMB/CNY

Item Current Period Last Period

Purchasing financial products 144000000.00 291000000.00

Total 144000000.00 291000000.00

Note of cash paid related with investment activities

Nil

39. Supplementary information to statement of cash flow

(1) Supplementary information to statement of cash flow

RMB/CNY

Supplementary information This Period Last Period

1. Net profit adjusted to cash flow of

operation activities:

-- --

Net profit 3295022.72 974409.39

Add: Assets impairment provision 700496.64 1421786.71

Depreciation of fixed assets consumption

of oil assets and depreciation of productive

biology assets

11640445.16 10976272.03

Amortization of intangible assets 1491626.63 1493850.03

Amortization of long-term deferred

expenses

296557.11 62191.53

Loss from disposal of fixed assets

intangible assets and other long-term

assets(gain is listed with “-”)

-49159.75 -199069.56

Financial expenses (gain is listed with “-”) 12785854.43 10910660.03

Investment loss (income is listed with “-”) -326439.49 -372245.91

Decrease of deferred income tax assets

(increase is listed with “-”)

98687.60 1744307.31

Decrease of inventory (increase is listed

with “-”)

-2586887.73 -14098698.22

Decrease of operating receivable accounts

(increase is listed with “-”)

-12126884.80 2182974.23

Increase of operating payable accounts

(decrease is listed with “-”)

-37113778.18 -3373183.21

Net cash flow arising from operating

activities

-21894459.66 11723254.36

2. Material investment and financing not

involved in cash flow:

-- --

3. Net change of cash and cash

equivalents:

-- --

Balance of cash at period end 27961209.60 66240945.59

Less: Balance of cash at period-begin 66240945.59 91310804.48

Add: Balance of cash equivalent at

period-end

15234028.71

Less: Balance of cash equivalent at

period-begin

15234028.71 12704508.49

Net increased amount of cash and cash

equivalent

-53513764.70 -22540338.67

(2) Constitution of cash and cash equivalent

RMB/CNY

Item Closing balance Opening balance

Ⅰ. Cash 27961209.60 66240945.59

Including: Cash on hand 236354.29 170053.77

Bank deposit available for payment

at any time

28935450.70 66070891.82

II. Cash equivalent 15234028.71

Note receivable due within

three months

23317491.64 15234028.71

Ⅲ. Balance of cash and cash equivalent at

period-end

27961209.60 81474974.30

Other explanation

Monetary fund at year-end-other monetary fund refers to the bank acceptance bond 4936525.28 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 11151688.25 Yuan are used for

pledge which is not belongs to cash and cash equivalent.. Assets with ownership or use right restricted

RMB/CNY

Item Ending Book value Restriction reasons

Monetary fund 6147120.67

Bank acceptance margin and Court

frozen

Note receivable 11151688.25 Pledged

Fixed assets 43227436.86 Bank loan secured

Intangible assets 36957101.76 Bank loan secured

Account receivable 14860475.10 Pledged

Investment real estate 26374703.70 Bank loan secured

Disposal of fixed assets 92857471.69 Court closure

Total 231575998.03 --

Other explanation

Nil

41. Item of foreign currency

(1) Item of foreign currency

RMB/CNY

Item

Closing balance of foreign

currency

Rate of conversion

Ending RMB balance

converted

Monetary fund -- --

Including: USD 292887.69 6.8632 2010146.81

Euro

HKD 32.66 0.8762 28.62

Account receivable -- --

Including: USD 6423629.78 6.8632 44086655.90

Euro

HKD

Long-term loans -- --

Including: USD

Euro

HKD

Short-term loans

Including: USD 3652619.46 6.8632 25068657.88

Other explanation

Nil

(2) Explanation on foreign operational entity including as for the major foreign operational entity

disclosed main operation place book-keeping currency and basis for selection; if the book-keeping

currency changed explain reasons

□ Applicable √ Not applicable

42. Government subsidy

(1) Government subsidy

RMB/CNY

Category Amount Item

Amount reckoned into current

gains/losses

Stabilization subsidy 139020.00 Other income 139020.00

Subsidy for R&D input 785000.00 Other income 785000.00

Subsidy for cultivating

enterprise

50000.00 Non-operating income 50000.00

2018 municipal foreign

economic and trade funds

271800.00 Non-operating income 271800.00

Awards for enterprise

development

1900000.00 Non-operating income 1900000.00

Subsidy for recognition of

high-tech enterprise for 2018

50000.00 Non-operating income 50000.00

Guiding funds for business

development

150000.00 Non-operating income 150000.00

Subsidy for science &

technology innovation

platform in 2017

300000.00 Non-operating income 300000.00

Central special fund for

foreign trade and economic

cooperation (promoting

development of processing

trade in the Midwest) in 2017

150000.00 Non-operating income 150000.00

(2) Refund of government subsidy

□ Applicable √ Not applicable

Other explanation

Nil

VIII. Equity in other entity

1. Equity in subsidiary

(1) Constitute of enterprise group

Subsidiary

Main operation

place

Registered

place

Business nature

Share-holding ratio

Acquired way

Directly Indirectly

HUAFA Lease

Company

Shenzhen Shenzhen

Property

management

60.00%

Investment

establishment

HUAFA

Property

Company

Shenzhen Shenzhen

Property

management

100.00%

Investment

establishment

Hengfa

Technology

Company

Wuhan Wuhan

Production

sales

100.00%

Investment

establishment

HUAFA

Hengtian

Company

Shenzhen Shenzhen

Property

management

100.00%

Investment

establishment

HUAFA

Hengtai

Company

Shenzhen Shenzhen

Property

management

100.00%

Investment

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

Major structured entity included in consolidate statement:

Nil

Basis of termination of agent or consignor:

Nil

Other explanation

Nil

(2) Important non-wholly-owned subsidiary

RMB/CNY

Subsidiary

Share-holding ratio of

minority

Gains/losses

attributable to minority

in the Period

Dividend announced to

distribute for minority

in the Period

Ending equity of

minority

Explanation on holding ratio different from the voting right ratio for minority shareholders:

Other explanation

(3) Main finance of the important non-wholly-owned subsidiary

RMB/CNY

Subsid

iary

Closing balance Opening balance

Curren

t assets

Non-c

urrent

assets

Total

assets

Curren

liabilit

Non-c

urrent

liabilit

Total

liabilit

Curren

t assets

Non-c

urrent

assets

Total

assets

Curren

liabilit

Non-c

urrent

liabilit

Total

liabilit

RMB/CNY

Subsidiary

Current Period Last Period

Operating

income

Net profit

Total

comprehen

sive

income

Cash flow

from

operation

activity

Operating

income

Net profit

Total

comprehen

sive

income

Cash flow

from

operation

activity

Other explanation

(4) Significant restrictions on the use of enterprise group assets and pay off debts of the enterprise group

(5) Financial or other supporting offers to the structured entity included in consolidated financial statement

range

Other explanation

IX. The risk associated with financial instruments

The Group's main financial instruments include loans receivables payable 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.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.

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 Technology Company’s monitor business has day-to-day operations in US dollars; other

principal business activities of the Group settle accounts in RMB. On December 31 2018 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 2018-12-31(RMB conversion) 2017-12-31(RMB conversion)

Monetary fund -USD 2010146.81 20398620.22

Monetary fund -HKD 28.62 27.30

Account receivable -USD 44086655.90 54313199.17

Account paid in advance -USD 19035307.91 44988.82

Short-term loans -USD 25068657.88 23120264.81

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 2018 the Group's interest-bearing debt

was mainly the floating interest rate loan contract denominated in Renminbi and US dollars amounting to RMB

161568657.88 (December 31 2017: RMB 166620264.81).

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 110022047.30.

(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 2018

Item Within one year 1-2 years 2-3 years Over three years Total

Financial assets

Monetary fund 34108330.27 34108330.27

Note receivable 69185516.71 69185516.71

Account receivable 116793835.05 2401.38 1598.08 116797834.51

Other account

receivable

4687849.69 149331.39 848718.00 91280.00 5777179.08

Account paid in advance 37608672.06 94000.00 37702672.06

Financial liabilities

Short-term loans 161568657.88 161568657.88

Note payable 27642356.66 27642356.66

Accounts payable 55040816.37 12178883.48 109849.10 67329548.95

Other account payable 22301671.56 4037633.66 26339305.22

Advance receivable 139961.60 19567.00 159528.60

Employee salary

payable

4700208.36 4700208.36

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 variable don’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 rate

fluctuation

2018 2017

Impact on net profit Impact on owner's

equity

Impact on net profit Impact on owner's

equity

All foreign

currency

5% appreciation of

the RMB

-2003174.07 -2003174.07 -2581828.54 -2581828.54

All foreign

currency

5% devaluarion of the

RMB

2003174.07 2003174.07 2581828.54 2581828.54

X. Related party and related transactions

1. Parent company of the enterprise

十. Related party 及关联交易

1. 本企业的母 Company 情况

Parent company Registration place Business nature Registered capital

Share-holding

ratio on the

enterprise for

Voting right ratio

on the enterprise

parent company

Wuhan Zhongheng

New Science &

Technology

Industrial Group

Co. Ltd

Wuhan

Production and

sales real estate

development and

sales housing

leasing and

management

34500000.00 41.21% 41.21%

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 Photo-electricity Industry Co. Ltd.

Control by same controlling shareholder and ultimate

controller

Hong Kong 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 Trading 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

Hong Kong 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

RMB/CNY

Category

Closing balance Opening balance

Book balance

Bad debt

provision Book

value

Book balance Bad debt provision

Book

value Amoun

Ratio

Amoun

Accrua

l ratio

Amo

unt

Ratio Amount

Accrual

ratio

Account receivable

with single

significant amount

and withdrawal

bad debt provision

separately

50009

88.97

48.58

50009

88.97

100.00

5000

988.

48.58

50009

88.97

100.00%

Account receivable

with single minor

amount but

withdrawal bad

debt provision

individually

52924

35.32

51.42

52924

35.32

100.00

5292

435.

51.42

52924

35.32

100.00%

Total

10293

424.29

100.00

10293

424.29

1029

3424

100.00

10293

424.29

.29

Account receivable with major single amount and withdrawal bad debt provision single at period-end

√ Applicable □ Not applicable

RMB/CNY

Account receivable (by

unit)

Closing balance

Account receivable Bad debt provision Accrual ratio Accrual causes

Hong Kong Haowei

Industry Co. Ltd.

1870887.18 1870887.18 100.00

TCL ACE ELECTRIC

APPLIANCE

(HUIZHOU) CO. LTD.

1325431.75 1325431.75 100.00

Qingdao Haier Parts

Procurement Co. Ltd.

1225326.15 1225326.15 100.00

SKYWORTH

Multimedia (Shenzhen)

Co. Ltd.

579343.89 579343.89 100.00

Total 5000988.97 5000988.97 -- --

Account receivable with bad debt provision withdrawal by method of account age in portfolio

□ Applicable √ Not applicable

Withdrawal proportion of bad debt provision based on balance proportion for account receivable in portfolio:

□ Applicable √ Not applicable

Withdrawing bad bed provision for account receivable by other methods in portfolio:

Accounts with single significant amount and bad debts provision accrued individually at period-end

Debtor Book balance Bad debt amount Accrual ratio(%) Accrual causes

Shenzhen Huixin Video Technology

Co. Ltd.

381168.96 381168.96 100.00 Uncollectible

Shenzhen Wandelai Digital

Technology Co. Ltd.

351813.70 351813.70 100.00 Uncollectible

Shenzhen Dalong Electronic Co. Ltd. 344700.00 344700.00 100.00 Uncollectible

Shenzhen Keya Electronic Co. Ltd. 332337.76 332337.76 100.00 Uncollectible

Shenzhen Qunping Electronic Co.Ltd.

304542.95 304542.95 100.00 Uncollectible

China Galaxy Electronics (Hong

Kong) Co. Ltd.

288261.17 288261.17 100.00 Uncollectible

Dongguan Weite Electronic Co. Ltd. 274399.80 274399.80 100.00 Uncollectible

Hong Kong New Century Electronics

Co. Ltd.

207409.40 207409.40 100.00 Uncollectible

Shenyang Beitai Electronic Co. Ltd. 203304.02 203304.02 100.00 Uncollectible

Beijing Xinfang Weiye Technology

Co. Ltd.

193000.00 193000.00 100.00 Uncollectible

TCL Electronics (Hong Kong) Co.

Ltd.

145087.14 145087.14 100.00 Uncollectible

Huizhou TCL Xinte Electronics Co.Ltd.

142707.14 142707.14 100.00 Uncollectible

SkyWorth – RGB Electronic Co. Ltd. 133485.83 133485.83 100.00 Uncollectible

Other 1990217.45 1990217.45 100.00 Uncollectible

Total 5292435.32 5292435.32 —— ——

2)Top five receivables collected by arrears party at ending balance

Company Closing balance Proportion of total accounts

receivable(%)

Balance of bad debt provision

Hong Kong Haowei Industry Co. Ltd. 1870887.18 18.18 1870887.18

TCL ACE ELECTRIC APPLIANCE

(HUIZHOU) CO. LTD.

1325431.75 12.88 1325431.75

Qingdao Haier Parts Procurement Co.Ltd.

1225326.15 11.90 1225326.15

SKYWORTH Multimedia (Shenzhen)

Co. Ltd.

579343.89 5.63 579343.89

Shenzhen Huixin Video Technology

Co. Ltd.

381168.96 3.70 381168.96

Total 5382157.93 52.29 5382157.93

2. Other account receivable

RMB/CNY

Item Closing balance Opening balance

Other account receivable 99155253.08 99922143.84

Total 99155253.08 99922143.84

(1) Other account receivable

1) Category of other account receivable

RMB/CNY

Category

Closing balance Opening balance

Book balance

Bad debt

provision

Book

value

Book balance Bad debt provision Book

value

Amoun Ratio Amoun Accrua Amo Ratio Amount Accrual

t t l ratio unt ratio

Other account

receivable with

single significant

amount and

withdrawal bad

debt provision

separately

11590

909.86

9.80%

11590

909.86

100.00

1128

1461

.86

9.48%

11281

461.86

100.00%

Other account

receivable with bad

debt provision

accrual by

portfolio

99158

389.91

83.88

3136.8

99155

253.08

1000

2424

3.84

84.02

102100

.00

4.47%

999221

43.84

Other account

receivable with

single minor

amount but

withdrawal bad

debt provision

individually

74757

41.64

6.32%

74757

41.64

100.00

7736

789.

6.50%

77367

89.76

100.00%

Total

11822

5041.4

19069

788.33

99155

253.08

1190

4249

5.46

19120

351.62

999221

43.84

Other account receivable with major single amount and withdrawal bad debt provision single at period-end:

√ Applicable □ Not applicable

RMB/CNY

Other account

receivable (by unit)

Closing balance

Other account

receivable

Bad debt provision Accrual ratio Accrual causes

Shenzhen Huafa

Property Leasing Co.Ltd.

4558859.15 4558859.15 100.00% Uncollectible

Portman 4021734.22 4021734.22 100.00% Uncollectible

Shenzhen Jifang

Investment Co. Ltd

1380608.00 1380608.00 100.00% Uncollectible

Traffic accident

compensation

555785.81 555785.81 100.00% Uncollectible

Zhao Baomin 553901.68 553901.68 100.00% Uncollectible

Hebei Botou Court 520021.00 520021.00 100.00% Uncollectible

Total 11590909.86 11590909.86 -- --

Other account receivable with bad debt provision withdrawal by age analysis in portfolio:

√ Applicable □ Not applicable

RMB/CNY

Account ages

Closing balance

Other account receivable Bad debt provision Accrual ratio

Sub-item of within one year

Subtotal of within one year 820172.10

1-2 years 62736.54 3163.83 5.00%

Total 882908.64 3136.83

Explanation on portfolio basis:

Nil

Withdrawing bad bed provision based on balance proportion for other account receivable in portfolio

□ Applicable √ Not applicable

Withdrawing bad bed provision based on other methods for other account receivable 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 amount Accrual ratio(%) Accrual causes

Electricity fee in Gongming

canteen

489214.70 489214.70 100.00 Uncollectible

Jiantao (Fogang) Laminates Co.Ltd.

465528.10 465528.10 100.00 Uncollectible

工会 72402.55 72402.55 100.00 Uncollectible

Lu Wei 290000.00 290000.00 100.00 Uncollectible

4/F hotle Daiqiangbo 354569.00 354569.00 100.00 Uncollectible

Chuangjing 192794.00 192794.00 100.00 Uncollectible

Shenzhen Mingli Co. Ltd. 170394.84 170394.84 100.00 Uncollectible

Other units 5440838.45 5440838.45 100.00 Uncollectible

Total 7475741.64 7475741.64 —— ——

2)Bad debt provision accrual switch-back or taken back in the period

Bad debt provision accrual was 954905.54 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:

RMB/CNY

Company Amount switch-back or taken back Collection way

Nil

3)Nature of other account receivable

RMB/CNY

Nature Ending book balance Opening book balance

Margin and deposit 720065.04 720065.04

Borrow money 1960013.76 2013402.14

Intercourse funds 108761355.74 110451250.82

Rent receivable 6317469.46 5857777.46

Other 466137.41

Total 118225041.41 119042495.46

4)Top 5 other receivables collected by arrears party at ending balance

RMB/CNY

Company Nature Closing balance Account ages

Proportion in total

other receivables

at year-end

Closing balance of

bad debt provision

Wuhan Hengfa

Technology Co.Ltd.Intercourse funds 94914929.62 Within one year 80.41%

Shenzhen Huafa

Property Leasing

Co. Ltd.

Intercourse funds 4558859.15 Over 5 years 3.86% 4558859.15

Portman

Rental fee

receivable

4021734.22 Over 5 years 3.41% 4021734.22

Shenzhen

Zhongheng HUAFA

Property Co. Ltd

Intercourse funds 2621868.61 Within one year 2.22%

Shenzhen Jifang

Investment Co. Ltd

Rental fee

receivable

1380608.00 Within two years 1.17% 1380608.00

Total -- 107497999.60 -- 91.07% 9961201.37

3. Long-term equity investment

RMB/CNY

Item

Closing balance Opening balance

Book balance

Impairment

provision

Book value Book balance

Impairment

provision

Book value

Investment for

subsidiary

187208900.00 600000.00 186608900.00 187208900.00 600000.00 186608900.00

Total 187208900.00 600000.00 186608900.00 187208900.00 600000.00 186608900.00

(1) Investment for subsidiary

RMB/CNY

The invested

entity

Opening

balance

Increase during

the period

Decrease

during this

period

Closing

balance

Current accrual

of impairment

provision

Closing balance

of impairment

provision

HUAFA Lease

Company

600000.00 600000.00 600000.00

HUAFA

Property

Company

1000000.00 1000000.00

Hengfa

Technology

Company

183608900.0

HUAFA

Hengtian

Company

1000000.00 1000000.00

HUAFA Hengtai

Company

1000000.00 1000000.00

Total

187208900.0

600000.00

4. Operating income and cost

RMB/CNY

Item

Current Period Last Period

Income Cost Income Cost

Other business 36771309.00 5902505.91 41156307.77 5877729.00

Total 36771309.00 5902505.91 41156307.77 5877729.00

Other explanation

Nil

XIV. Supplementary Information

1. Current non-recurring gains/losses

√ Applicable □ Not applicable

RMB/CNY

Item Amount Note

Gains/losses from the disposal of non-current asset 49159.75

Governmental subsidy reckoned into current gains/losses (not

including the subsidy enjoyed in quota or ration according to national

standards which are closely relevant to enterprise’s business)

3795820.00

Gain/loss of entrusted investment or assets management 326439.49

Other non-operating income and expenditure except for the

aforementioned items

-167795.70

Accrual liability reversal

Loss on assignment of claims -2158200.00

Less: Impact on income tax 85444.47

Total 1759979.07 --

Concerning the extraordinary profit (gain)/loss defined by Q&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 in Q&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

Profits during report period Weighted average ROE

Earnings per share

Basic earnings per

share(RMB/Share)

Diluted earnings per

share(RMB/Share)

Net profits belong to common stock

stockholders of the Company

1.02% 0.0116 0.0116

Net profits belong to common stock

stockholders of the Company after

deducting nonrecurring gains and losses

0.48% 0.0054 0.0054

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.

行情