SHENZHEN ZHONGHENG HUAFA CO. LTD.
ANNUAL REPORT 2019
April 2020
Section I. Important Notice Contents and Interpretation
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 2019 Annual
Report is authentic accurate and complete.
Concerning the forward-looking statements with future planning involved in the
Report they do not constitute a substantial commitment for investors. Majority
investors are advised to exercise caution of investment risks.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 Interpretation .............................................................. 2
Section II Company Profile and Main Financial Indexes .............................................................. 5
Section III Summary of Company Business .................................................................................. 10
Section IV Discussion and Analysis of the Operation ................................................................... 11
Section V Important Events ............................................................................................................ 22
Section VI Changes in shares and particular about shareholders .............................................. 39
Section VII Preferred Stock ............................................................................................................ 46
section VIII Convertible Bonds.......................................................................................................47
Section IX Particulars about Directors Supervisors Senior Executives and Employees ........ 48
Section X Corporate Governance ................................................................................................... 58
Section XI Corporate bond ............................................................................................................. 65
Section XII Financial Report .......................................................................................................... 66
Section XIII Documents available for reference ......................................................................... 193
Interpretation
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. now renamed as Shenzhen
Vanke Development Co. Ltd.Vanke Guangming Refers to Shenzhen Vanke Guangming Real Estate Development Co. Ltd
V& T Law Firm Refers to Shenzhen V& T Law Firm
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公司
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. 6/F East Tower No.411 Building Huafa (N) Road Futian District Shenzhen
Codes for office add. 518031
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 Niu Zhuo
Contact add.
618 6/F East Tower No.411 Building
Huafa (N) Road Futian District
Shenzhen
Tel. 0755-86360201
Fax. 0755-86360206
E-mail huafainvestor@126.com.cn
III. Information disclosure and preparation place
Newspaper appointed for information disclosure 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
2019 2018
Changes over last
year
2017
Operating income(RMB) 721557440.51 637046707.03 13.27% 858040132.74
Net profit attributable to
shareholders of the listed
company(RMB)
5460049.15 3295022.72 65.71% 974409.39
Net profit attributable to
shareholders of the listed
company after deducting
non-recurring gains and
losses(RMB)
4843096.96 1535043.65 215.50% 2079588.86
Net cash flow arising from
operating activities(RMB)
74463707.01 -21894459.66 440.10% 11723254.36
Basic earnings per
share(RMB/Share)
0.0193 0.0116 66.38% 0.0034
Diluted earnings per
share(RMB/Share)
0.0193 0.0116 66.38% 0.0034
Weighted average ROE 1.67% 1.02% 0.65% 0.30%
Year-end of 2019 Year-end of 2018
Changes over end of
last year
Year-end of 2017
Total assets(RMB) 614163899.86 617090153.46 -0.47% 629762731.38
Net assets attributable to
shareholder of listed
company(RMB)
329428049.89 323968000.74 1.69% 320672978.02
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
Q 1 Q 2 Q 3 Q 4
Operating income 143921648.63 195268525.42 209822500.84 172544765.62
Net profit attributable to
shareholders of the listed
company
258233.98 2322177.15 796282.59 2083355.43
Net profit attributable to
shareholders of the listed
company after deducting
non-recurring gains and losses
196868.38 2001043.68 -207411.34 2757615.61
Net cash flow arising from
operating activities
19403902.99 20584093.18 8608010.36 25867700.48
Whether there are significant differences between the above-mentioned financial index or its total number and the relevant financial
index disclosed in the company’s quarterly report and semi-annual report
□Yes √ No
IX. Items and amounts of extraordinary profit (gains)/loss
√Applicable □ Not applicable
In RMB
Item 2019 2018 2017 Note
Gains/losses from the disposal of
non-current asset (including the write-off
that accrued for impairment of assets)
9298.34 49159.75 199069.56
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)
534380.00 3795820.00 1451189.68
Gain/loss of entrusted investment or assets
management
180964.60 326439.49 372245.91
Switch back of provision for depreciation
of account receivable and contractual
assets which were singly taken
depreciation test
553901.68
Other non-operating income and
expenditure except for the aforementioned
items
-424941.86 -167795.70 427054.02
Reversal of accrual liability 1527600.81
Loss on assignment of claims -2158200.00 -5755200.00
Less: Impact on income tax 236650.57 85444.47 -672860.55
Total 616952.19 1759979.07 -1105179.47 --
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
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
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 2019 affected by the Sino-US trade war the downward pressure on China’s economy increased and the
economic growth slowed down. Facing the unfavorable market environment the company has actively taken
measures to adjust its management concept and operating strategies and expand its main business which were
supplemented with assessment and incentive mechanism. At the same time some assets were cleaned and
disposed of to maximize the benefits of assets and achieve better returns. In 2019 the company achieved
operating revenue of 721557400 Yuan an increase of 13.27% on a year-on-year basis total net profits of
7750800 Yuan increased by 68.79% compared with the same period last year net profit amounted to 5460000
yuan a 65.71% up from a year earlier.●Video service business achieved annual operating income of 332014600 Yuan an increase of 13.41% on a
year-on-year basis operation profit amounted as 2786900 Yuan with 17.73% down from a year earlier. During
the reporting period the Video Business Division adjusted the product structure and optimized the sales ratio of
each brand of products. The sales ratio of AOC VSCN and VSC series brands have increased which opened
online sales channels such as Jingdong while completing existing customer orders and sold 820000 LCD
monitors in 2019 an increase of 16.5% over last year.●Injection molding business achieved annual operating income of 250187900 Yuan an increase of 13.25% over
the same period last year operation profit amounted as 535800 Yuan an increase of 20.81% from a year earlier.With the unceasingly fierce competition in the market the profit margin of injection molding was squeezed but
the new production line put into production by this business division at the end of 2018 gave full play to its
automation advantages in 2019 which greatly improved production efficiency and reduced production costs. The
injection molding division achieved annual sales volume of 10800 tons outperforming the annual sales target.●Polylon business achieved annual operating income of 64.33 million Yuan a decrease of 3.39% over the same
period last year operating profit amounted as -1.08 million yuan a decrease of 40.63% from a year earlier. The
actual sales volume throughout the year was 3900 tons basically reaching the sales target but due to the fierce
market competition in order to improve market competitiveness this business division made some sacrifices in
profit. In order to better fulfill the sales target of 2020 the EPS business division maintained existing orders
increased the proportion of structural parts orders developed new customer resources and strive to accept more
domestic and foreign large-scale household appliance customers’ orders.●The property rental business achieved annual operating income of 38.82 million yuan an increase of 12.95%
from a year earlier operating profit amounted as 5.56 million yuan with major growth over that of lat year. In
2019 the company optimized the structural proportion of commercial tenants and the occupancy rate was greatly
improved at the same time the company strictly controlled costs and reduced unnecessary expenditures.Therefore the company’s overall rental profits increased significantly compared with the previous year.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
2019 2018
Increase/decrease
y-o-y Amount
Ratio in operation
income
Amount
Ratio in operation
income
Total operation
income
721557440.51 100% 637046707.03 100% 13.27%
According to industries
Display 332014645.59 46.01% 292748410.48 45.95% 13.41%
Plastic injection
hardware
250187919.33 34.67% 220923611.40 34.68% 13.25%
EPS products 64330319.24 8.92% 68365102.41 10.73% -5.90%
Property leasing 38819374.89 5.38% 34369761.45 5.40% 12.95%
Income from
materials
30416394.86 4.22% 14235066.01 2.23% 113.67%
Utilities and others 5788786.60 0.80% 6404755.28 1.01% -9.62%
According to products
Display 332014645.59 46.01% 292748410.48 45.95% 13.41%
Plastic injection
hardware
250187919.33 34.67% 220923611.40 34.68% 13.25%
EPS products 64330319.24 8.92% 68365102.41 10.73% -5.90%
Property leasing 38819374.89 5.38% 34369761.45 5.40% 12.95%
Income from
materials
30416394.86 4.22% 14235066.01 2.23% 113.67%
Utilities and others 5788786.60 0.80% 6404755.28 1.01% -9.62%
According to region
Hong Kong 151975729.64 21.06% 133145269.85 20.90% 14.14%
Taiwan
Central China 520756503.39 72.17% 464355922.55 72.89% 12.15%
South China 48825207.48 6.77% 39545514.63 6.21% 23.47%
(2) About the industries products or regions accounting for over 10% of the company’s operating income or
operating profit
√Applicable □ Not applicable
In RMB
Operating
income
Operating cost
Gross profit
ratio
Increase/decrea
se of operating
income 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 332014645.59 310508719.13 6.48% 13.41% 13.05% 0.30%
Plastic
injection
hardware
250187919.33 223473984.32 10.68% 13.25% 8.36% 4.03%
EPS products 64330319.24 62186951.52 3.33% -5.90% -3.39% -2.52%
Property
leasing
38819374.89 2478432.62 93.62% 12.95% 78.22% -2.33%
According to products
Display 332014645.59 310508719.13 6.48% 13.41% 13.05% 0.30%
Plastic
injection
hardware
250187919.33 223473984.32 10.68% 13.25% 8.36% 4.03%
EPS products 64330319.24 62186951.52 3.33% -5.90% -3.39% -2.52%
Property
leasing
38819374.89 2478432.62 93.62% 12.95% 78.22% -2.33%
According to region
Hong Kong
Taiwan
151975729.64 142733984.58 6.08% 14.14% 14.43% -0.24%
Central China 494557154.52 453435670.39 8.31% 10.17% 7.82% 1.99%
South China 38819374.89 2478432.62 93.62% 12.95% 78.22% -2.33%
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
According to
industries
Item Unit 2019 2018
Increase/decrease(
+-) y-o-y
Display
Sales volume Set 821188 703930 16.66%
Output Set 881992 705883 24.95%
Storage Set 41028 14483 183.28%
Plastic injection
hardware
Sales volume Ton 10701.62 10888.35 -1.71%
Output Ton 10538.27 10542.22 -0.04%
Storage Ton 547.52 710.87 -22.98%
EPS products
Sales volume Ton 3902.94 3873.82 0.75%
Output Ton 3886.34 3881.86 0.12%
Storage Ton 216.89 233.49 -7.11%
Reasons for y-o-y relevant data with over 30% changes
√Applicable □ Not applicable
Inventory of display increased mainly due to the stock at year-end.
(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 product
In RMB
Industries Item
2019 2018
Increase/decrea
se(+-) y-o-y Amount
Ratio in
operation cost
Amount
Ratio in
operation cost
Display Raw materials 297635346.58 95.85% 259032420.00 94.31% 1.54%
Display Labor wages 8056874.03 2.59% 5350338.95 1.95% 0.64%
Display Depreciation 2707468.22 0.87% 2041472.54 0.74% 0.13%
Plastic
injection
hardware
Raw materials 188922768.85 84.54% 175505397.97 85.10% -0.56%
Plastic
injection
hardware
Labor wages 19712637.41 8.82% 14177081.31 6.87% 1.95%
Plastic
injection
hardware
Depreciation 3758398.37 1.68% 3187779.06 1.55% 0.13%
EPS products Raw materials 37579378.81 60.43% 40102966.95 62.30% -1.87%
EPS products Labor wages 9502156.33 15.28% 8829344.71 13.72% 1.56%
EPS products Depreciation 1545988.21 2.49% 2000366.49 3.11% -0.62%
EPS products Utilities 11106824.84 17.86% 10746289.68 16.69% 1.17%
product Item
2019 2018
Increase/decrea
se(+-) y-o-y Amount
Ratio in
operation cost
Amount
Ratio in
operation cost
Display Raw materials 297635346.58 95.85% 259032420.00 94.31% 1.54%
Display Labor wages 8056874.03 2.59% 5350338.95 1.95% 0.64%
Display Depreciation 2707468.22 0.87% 2041472.54 0.74% 0.13%
Plastic
injection
hardware
Raw materials 188922768.85 84.54% 175505397.97 85.10% -0.56%
Plastic
injection
hardware
Labor wages 19712637.41 8.82% 14177081.31 6.87% 1.95%
Plastic
injection
hardware
Depreciation 3758398.37 1.68% 3187779.06 1.55% 0.13%
EPS products Raw materials 37579378.81 60.43% 40102966.95 62.30% -1.87%
EPS products Labor wages 9502156.33 15.28% 8829344.71 13.72% 1.56%
EPS products Depreciation 1545988.21 2.49% 2000366.49 3.11% -0.62%
EPS products Utilities 11106824.84 17.86% 10746289.68 16.69% 1.17%
Explanation
(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) 599484816.83
Proportion in total annual sales volume for top five
clients
83.08%
Ratio of related parties in annual total sales among the
top five clients
14.96%
Information of top five clients of the Company
Serial Clients Sales (RMB) Proportion in total annual sales
1 Client1 247901573.29 34.36%
2 Related party 1 107934645.13 14.96%
3 Client 2 103127028.80 14.29%
4 Client 3 82917331.79 11.49%
5 Client 4 57604237.82 7.98%
Total -- 599484816.83 83.08%
Other situation of main clients
□ Applicable √ Not applicable
Main suppliers of the Company
Total purchase amount from top five suppliers (RMB) 440850636.06
Proportion in total annual purchase amount for top five
suppliers
59.88%
Ratio of related parties in annual total sales among the
top five suppliers
35.49%
Information of top five suppliers of the Company
Serial Supplier Purchase (RMB) Proportion in total purchase
1 Related party 1 139134803.14 18.90%
2 Related party 2 122172251.41 16.59%
3 Supplier 1 118325448.66 16.07%
4 Supplier 2 34005111.69 4.62%
5 Supplier 3 27213021.16 3.70%
Total -- 440850636.06 59.88%
Other notes of main suppliers
□ Applicable √ Not applicable
3. Expenses
In RMB
2019 2018
Increase/decreas
e(+-) y-o-y
Note of major changes
Sales expense 20879256.97 14100247.17 48.08%
Costs for export declaration and long
distance transportation increased in
the period
Administrative
expense
38034071.63 38515205.15 -1.25%
Financial expense 9946778.92 10316763.45 -3.59%
R&D expenses 6649163.02
R&D investment was presented in
the Period
4. R&D investment
□ Applicable √ Not applicable
5. Cash flow
In RMB
Item 2019 2018 Increase/decrease(+-) y-o-y
Subtotal of cash in-flow from
operation activity
567726597.98 628379927.86 -9.65%
Subtotal of cash out-flow
from operation activity
493262890.97 650274387.52 -24.15%
Net cash flow arising from
operating activities
74463707.01 -21894459.66 440.10%
Subtotal of cash in-flow from
investment activity
75379501.53 145251259.49 -48.10%
Subtotal of cash out-flow
from investment activity
78288039.15 159063404.44 -50.78%
Net cash flow from
investment activity
-2908537.62 -13812144.95 78.94%
Subtotal of cash in-flow from
financing activity
215911217.10 381872622.67 -43.46%
Subtotal of cash out-flow
from financing activity
278912458.77 399842065.16 -30.24%
Net cash flow from financing
activity
-63001241.67 -17969442.49 -250.60%
Net increased amount of cash
and cash equivalent
8683852.01 -53513764.70 116.23%
Main reasons for y-o-y major changes in aspect of relevant data
√Applicable □ Not applicable
The note receivable were due for collection in the Period and decreased in purchasing bank financial products and bank loans.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 Description of formation Whether be sustainable
Investment
income
180964.60 2.33%
Income from short-term
financial products
N
Asset impairment 385333.82 4.97%
Mainly due to the current
accrued for inventory loss
and loss of intangible
assets impairment
N
Non-operating
income
334950.66 4.32%
Income from government
subsidy
N
Non-operating
expense
484592.52 6.25%
The liquidated damages
paid
N
IV. Assets and liability
1. Major changes of assets composition
New financial instrument standards new revenue standards or new leasing standards implemented by the Company at first time since
2019 and adjusted relevant items of the financial statement on beginning of the year when implemented the Standards
√Applicable □Not applicable
In RMB
Year-end of 2019 Year-begin of 2019
Ratio
changes
Notes of major changes
Amount
Ratio in
total
assets
Amount
Ratio in
total assets
Monetary 38095501.00 6.20% 34108330.27 5.53% 0.67%
fund
Account
receivable
138755691.43 22.59% 116797834.51 18.93% 3.66%
Inventory 66971551.96 10.90% 62973909.38 10.20% 0.70%
Investment
real estate
48952992.57 7.97% 50681322.86 8.21% -0.24%
Long-term
equity
investment
0.00% 0.00% 0.00%
Fixed
assets
198229817.31 32.28% 188083873.38 30.48% 1.80%
Constructio
n in
process
0.00% 5727760.23 0.93% -0.93%
Short-term
loans
24633898.20 4.01% 161568657.88 26.18% -22.17%
Long-term
loans
73000000.00 11.89% 0.00% 11.89%
2. Assets and liability measured by fair value
□ Applicable √ Not applicable
3. Assets right restriction till end of reporting period项目
Ending book value Restriction reasons
Monetary fund 1450439.39 Bank acceptance deposit court freeze
Receivable financing 16762424.96 Pledge
Account receivable 20830185.59 Pledge
Investment real estate 36996301.06 Mortgage to obtain bank loans
Fixed assets 13384379.59 Mortgage to obtain bank loans
Disposal of fixed assets 92857471.69 Court seizure
Intangible assets 7032797.52 Mortgage to obtain bank loans
Total 189313999.80 --
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
The Company had no important holding company and stock-jointly company that need to disclosed in the reporting period.VIII. Structured vehicle controlled by the Company
□ Applicable √ Not applicable
IX. Future Development Prospects
(i) The impact of the novel coronavirus pneumonia epidemic on the company
At the beginning of 2020 due to the impact of the novel coronavirus pneumonia epidemic Wuhan Hengfa
Technology the company’s wholly-owned subsidiary in Wuhan resumed work and resumed production later than
other areas of the country which had a significant impact on the company’s first quarter performance. In order to
buffer the impact of the epidemic on the company while strengthening market development the company
accelerated product technology upgrades enhanced technology added value and improved profitability.The company’s own property Huafa Building has provided the company with stable rental income for many
years but the outbreak of novel coronavirus pneumonia epidemic in early 2020 has had a greater impact on the
commercial tenants of Huafa Building. In order to alleviate the difficulties of the tenants and overcome the
difficulties together with the tenants the company has partially reduced or exempted the rents of all the tenants. In
order to offset the impact of rent reduction and exemption on profits the company will carry the burden increase
revenue and cut costs and increase income and reduce expenditures. At the same time it will accelerate the
implementation of urban renewal and reconstruction projects and bring a long-term stable source of income to the
company as soon as possible.(ii)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 2020 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
2019-01-04 Telephone communication Individual N/A
Reception (times) Several
Number of hospitality 0
Number of individual reception Several
Number of other reception 0
Disclosed released or let out major undisclosed
information
N
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)
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
2019 0.00 5460049.15 0.00% 0.00 0.00% 0.00 0.00%
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%
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
ng
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
9
Implemen
t since 12
April
2007
throughou
t the year
In normal
implementi
ng
Wuhan
Zhonghe
ng
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
9
Implemen
t since 12
April
2007
throughou
t the year
In normal
implementi
ng
Wuhan
Zhonghe
ng
Group
After acquisition and assets restructuring
guarantee to have an independent staff
owns independent and completed assets
and independent in aspect of business
financial and institution from Shen Huafa
2007-03-2
9
Implemen
t since 12
April
2007
throughou
t the year
In normal
implementi
ng
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
ng
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
0
Implemen
ted since
20
December
2016
In normal
implementi
ng
Wuhan
Zhonghe
ng
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
0
In 6
months
since the
date of
notificatio
n
Fulfilled
Wuhan
Zhonghe
ng
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
8
In 6
months
since the
date of
notificatio
n
Fulfilled
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 applicableThe Ministry of Finance issued revised “Accounting Standards for Business Enterprises No. 22-Recognition andMeasurement of Financial Instruments” “Accounting Standards for Business Enterprises No. 23-Transfer of
Financial Assets” and “Accounting Standards for Business Enterprises No. 24- Hedge Accounting” and
“Accounting Standards for Business Enterprises No. 37-Presentation of Financial Instruments” in 2017 (the above
four standards are hereinafter collectively referred to as “new financial instrument standards”). The Company has
implemented the above revised standards from January 1 2019 and adjusted the relevant content of accounting
policies.
In April 2019 the Ministry of Finance issued the “Notice on the Revision and Issuance of the Format of General
Enterprise Financial Statements for 2019” (CK [2019] No. 6) (hereinafter referred to as the “financial statementformat”). An enterprise that implements accounting standards for business enterprises should prepare the 2019
interim financial statements and annual financial statements and financial statements for subsequent periods in
accordance with the requirements of the accounting standards for business enterprises and the notice.This accounting policy change was reviewed and approved by the 11
th
meeting of the Ninth Board of Directors.The company will implement the relevant provisions of CK (2019) No. 6 issued by the Ministry of Finance and
adjust and change the presentation of the relevant financial statements. The items and amount of the balance sheet
that were significantly affected on December 31 2018 are as follows:
Item Consolidated balance sheet
Before adjustment After adjustment
Note receivable and Account
receivable
185983351.22
Note receivable 69185516.71
Account receivable 116797834.51
Notes payable and Account
payable
88617663.09
Notes payable 27642356.66
Account payable 60975306.43
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)
50
Continuous life of auditing service for domestic accounting
firm
4
Name of domestic CPA Li Wei Fan Zhang
Consecutive years for auditing service from domestic CPA 3
Name of foreign accounting firm (if applicable) N/A
Continuous life of auditing service for foreign accounting firm
(if applicable)
0
Name of foreign CPA N/A
Consecutive years for auditing services from foreign CPA (If
applicable)
0
Re-appointed accounting firms in this period
□Yes √ No
Appointment of internal control auditing accounting firm financial consultant or sponsor
√Applicable □ Not applicable
The Company employed DAXIN Certified Public Accountants LLP as internal control audit institutions in the year.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
ed
liabiliti
es
(Y/N)
Advances
in
litigation
(Arbitratio
n)
The
results
and
effects of
litigation
(Arbitrati
on)
Executi
on of
the
litigatio
n
(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
shareholde
r 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/
disclosure/detail?plate=szse&sto
ckCode=000020&announcemen
tId=1205326846&announcemen
tTime=2018-08-25
29
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
room and other
power unit under
the name of the
Company
1964.92 N
The
judgment
of 2nd trial
has been
issued and
has applied
for
compulsor
y
execution
Impleme
nting
Ended
-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
947.26 N
The second
trial
decides the
Company
wins the
lawsuit on
15 March
2018 and
has applied
for
enforceme
nt
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
30
violation and
refuse to move the
site
Application for
arbitration in case
of contract dispute
between the V&T
(Shenzhen) Law
Firm and
Shenzhen
Zhongheng Huafa
Co. Ltd. and
Wuhan
Zhongheng Group
1940.2 N
The
arbitration
has been
heard
A ruling
has been
issued
and the
company
filed an
applicatio
n for
revocatio
n
In trial
-14
http://www.cninfo.com.cn/new/
disclosure/detail?plate=szse&sto
ckCode=000020&announcemen
tId=1205602053&announcemen
tTime=2018-11-14
XIII. Penalty and rectification
□ Applicable √ Not applicable
No penalties or rectifications during the reporting period.XIV. Integrity of the company and its controlling shareholders and actual controllers
□ Applicable √ Not applicable
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
Related
party
Relati
onshi
p
Type
of
relate
d
trans
actio
n
Cont
ent
of
relate
d
trans
actio
n
Pricin
g
princip
le
Related
transact
ion
price
Relat
ed
trans
actio
n
amou
nt
(in
10
thous
and
Yuan
)
Propo
rtion
in
simila
r
transa
ctions
Trad
ing
limit
appr
oved
(in
10
thou
sand
Whe
ther
over
the
appr
oved
limit
ed
or
Cleari
ng
form
for
relate
d
transa
ction
Available
similar
market price
Date
of
discl
osur
e
Inde
x of
discl
osur
e
31
Yua
n)
not
(Y/
N)
HK
Yutian
Sharin
g the
same
contro
lling
shareh
older
Purc
hase
Displ
ay
Synchr
onized
with
the
market
122172
251.41
1221
7.23
48.50
%
170
91.6
9
N
Teleg
raphic
transf
er
The average
market price
refers to the
price of same
specification
s which is
searched
from
through the
world
famous
professional
market
survey
company
website
http://www.witsview.co
m recognized
authority in
the industry
and LCD
professional
market
survey
company
website
Hengsh
eng
Photo-el
ectricity
Sharin
g the
same
contro
lling
shareh
older
Purc
hase
Displ
ay
Confir
med
with
1% of
current
market
averag
e price
in
princip
le and
refer
to both
their
110747
651.72
1107
4.77
43.96
%
125
57.1
6
N
Teleg
raphic
transf
er
Same as
above
32
bargai
ning
power
Hengsh
eng
Photo-el
ectricity
Sharin
g the
same
contro
lling
shareh
older
Purc
hase
Displ
ay
Accor
ding to
the
order
price
deduct
ed 1
Yuan
each
for
operati
on
charge
28387
151.42
2838
.72
99.44
%
837
1.44
N
Teleg
raphic
transf
er
Same as
above
HK
Yutian
Sharin
g the
same
contro
lling
shareh
older
Sales
Displ
ay
Accor
ding to
the
custo
mer
sales
order
price
sure
107934
645.13
1079
3.46
30.07
%
244
16.7
N
Teleg
raphic
transf
er
Same as
above
Hengsh
eng
Photo-el
ectricity
/Zhongh
eng
Yutian
Sharin
g the
same
contro
lling
shareh
older
Sales
Displ
ay
Accor
ding to
the
custo
mer
sales
order
price
sure
13311
670.04
1331
.17
0.02
%
279
0.48
N
Teleg
raphic
transf
er
Same as
above
Hengsh
eng
Photo-el
ectricity
Sharin
g the
same
contro
lling
shareh
older
Sales
Mate
rial
Accor
ding to
the
custo
mer
sales
order
price
sure
83055
34.66
830.5
5
3.66
%
125
5.72
N
Teleg
raphic
transf
er
Same as
above
Total -- --
3908
5.9
--
664
83.1
9
-- -- -- -- --
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 $ 16.62
million approximately 67.84% of the annual amount predicted at the beginning of the year;
purchased LCD monitor from Hengsheng Photo electricity with $ 15.87 million
approximately 88.19% of the annual amount predicted at the beginning of the year;
purchasing LCD Display from Hengsheng Photo electricity with about $ 4.07 million 33.91%
of the annual amount predicted at the beginning of the year; sold LCD Display whole machine
to HK Yutian with $ 16.96 million approximately 48.47% 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
No contact of related credit and debt during the reporting period.
5. Other related transactions
□ Applicable √ Not applicable
The company had no other significant related transactions in reporting period.XVII. Significant contract and implementations
1. Trusteeship contract and leasing
(1) Trusteeship
□ Applicable √ Not applicable
No trusteeship for the Company in reporting period.
(2) Contract
□ Applicable √ Not applicable
No contract for the Company in reporting period.
(3) Leasing
□ Applicable √ Not applicable
No leasing for the Company in reporting period.
2. Major guarantees
√Applicable □ Not applicable
(1) Guarantees
In 10 thousand Yuan
Particulars about the external guarantee of the Company (Barring the guarantee for subsidiaries)
Name of the
Company
guaranteed
Related
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
related
party
(Y/N)
Guarantee of the Company and the subsidiaries
Name of the
Company
guaranteed
Related
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
related
party
(Y/N)
Wuhan Hengfa
Technology Co.Ltd.
2020-04-
30
30000 2506.87
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)
2506.87
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)
1263.39
Guarantee of the subsidiaries for the subsidiaries
Name of the
Company
guaranteed
Related
Announc
ement
disclosur
e date
Guarante
e limit
Actual date of
happening
Actual
guarantee
limit
Guarantee
type
Guarantee
term
Comple
te
implem
entatio
n or not
Guaran
tee for
related
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)
2506.87
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)
1263.39
The proportion of the total amount of actually guarantee in the
net assets of the Company (that is A4+ B4+C4)
3.84%
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
Trust financing in the period
In 10 thousand Yuan
Type Capital sources Amount occurred Outstanding balance Overdue amount
Bank financial
products
Own funds 75000000 0 0
Total 75000000 0 0
Details of the single major amount or high-risk trust investment with low security poor fluidity and non-guaranteed
□Applicable √Not applicable
Entrust financial expected to be unable to recover the principal or impairment might be occurred
□ Applicable √ Not applicable
(2) Entrusted loans
□ Applicable √ Not applicable
The company had no entrusted loans in the reporting period.
4. Other material contracts
□ Applicable √ Not applicable
No other material contracts for the Company in reporting period.XVIII. Social responsibility
1. Performance of social responsibility
Not applicable
2. Execution of social responsibility of targeted poverty alleviation
(1) Targeted poverty alleviation scheme
Not applicable
(2) Summary of targeted poverty alleviation
Not applicable
(3) Targeted poverty alleviation effect
Index Unit of measure Quantity /implementation
I. Overall condition —— ——
II. Poverty alleviation by items —— ——
1.Industry development —— ——
2.Shift employment —— ——
3. Relocating in other places —— ——
4. Education —— ——
5. Health —— ——
6.Ecological protection —— ——
7. Reveal all the details —— ——
8. Society —— ——
9.Other —— ——
III. Award received (content and grade) —— ——
(4) Follow-up targeted poverty alleviation scheme
Not applicable
3. Environmental protection
The listed Company and its subsidiary whether belongs to the key sewage units released from environmental protection department
No
The listed Company and its 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 Shenzhen Vanke applied for arbitration in respect of “Agreement on the cooperation ofurban renewal project of the updated units at Huafa Area Gong Ming Street Guangming New DistrictShenzhen” against the Company and Wuhan Zhongheng Group. Shenzhen Court of International Arbitration
(SCIA) has given a ruling in August 2017. On August 29 2018 the court accepted the compulsory execution
application of Shenzhen Vanke. In October 2019 as a number of outsiders filed an “execution objection” and
applied for “no execution” to Shenzhen Intermediate People’s Court the Shenzhen Intermediate People’s Court
ruled to terminate the enforcement procedure on March 20 2020. If the “execution objection” and “no execution”
proposed by outsiders are rejected according to law Shenzhen Vanke may continue to apply to the Shenzhen
Intermediate People’s Court to resume execution. 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.In November 2019 the company was listed by Shenzhen Intermediate People’s Court as the dishonest person
subjected to execution and was removed from the dishonest person subjected to execution list by the ShenzhenIntermediate People’s Court in December 2019. For details see the “Announcement About the Company BeingIncluded in the List of Dishonest Person Subjected to Execution” (Announcement No.: 2019-33) and
“Announcement About the Company Being Removed from the List of Dishonest Person Subjected to Execution”
(Announcement No.: 2019 -35) issued by the company on November 9 2019 and December 14 2019 on
www.cninfo.com.cn.(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
pledged shares are deferred 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) The controlling shareholder Wuhan Zhongheng Group holds 119289894 shares of the Company’ stock
accounting for 42.13% of the total share capital of the Company of which 116489894 shares were judicially frozen
by Shenzhen Intermediate People's Court (hereinafter referred to as "Shenzhen Intermediate Court") on September
27 2016 which were frozen again by the Shenzhen Intermediate People's Court on December 14 2018 with a
frozen period of 36 months; the remaining 2800000 shares were frozen by the Shenzhen Intermediate People's
Court on May 29 2019 and were frozen again by the Higher People’s Court of Guangdong Province on July 5
2019. For details please refer to the company’s announcements published on www.cninfo.com.cn on October 27
2016 January 11 2019 May 31 2019 and August 7 2019.
(iv) The term of office of the ninth board of directors and the ninth board of supervisors of the company expired in
September 2019 the company held the 11
th
meeting of the ninth board of directors and the 11
th
meeting of the
ninth board of supervisors on August 23 2019 and held the first extraordinary general meeting of 2019 on
September 12 2019 to consider and approve the relevant proposals for the election at expiration of office terms of
the board of directors and the board of supervisors.(v) On September 29 2016 the company and its controlling shareholder Wuhan Zhongheng Group signed the
“Agency Contract” with V&T Law Firm. On October 8 2016 the three parties also signed the “Supplemental
Agreement for Agency Contract” it was agreed that V&T acted as an agent for the company and Wuhan
Zhongheng Group to deal with the arbitration case with Shenzhen Vanke. After losing the lawsuit due to
differences in the payment of attorney fees V&T sued our company and Wuhan Zhongheng Group to the
Shenzhen Court of International Arbitration and applied to the court to seize a bank account under our company’sname and part of our company dormitories please refer to “Other Announcements on the Progress InvolvingLitigation and Arbitration” (Announcement Numbers: 2018-43 2019-02) released by our company on
www.cninfo.com on November 14 2018 and March 6 2019. 02. In November 2019 the Shenzhen Court of
International Arbitration ruled that the company and Wuhan Zhongheng Group paid the corresponding fees.
According to the “Agency Contract” and “Supplemental Agreement for Agency Contract” signed by the three
parties the loss of the arbitrament in this case was borne by Wuhan Zhongheng Group so it had no impact on thecompany’s 2019 annual profit. For details see the company’s “Other Announcements on the Progress InvolvingLitigation and Arbitration” (Announcement No.: 2019-34) released on www.cninfo.com.cn on November 25
2019.
(vi) the company suffered losses in the first quarter.(vii) On April 17 2020 Shenzhen Zhongheng HUAFA Co. Ltd. (hereinafter referred to as "the company" or "the
defendant") received the notice of responding to the lawsuit [(2020) Yue 03 min Chu 17] and other relevant
materials delivered by Shenzhen intermediate people's Court of Guangdong Province (hereinafter referred to as
"Shenzhen intermediate court"). Shenzhen Zhongheng HUAFA Technology Co. Ltd. (hereinafter referred to as
"HUAFA technology" or "the plaintiff") sued the company and its controlling shareholder Wuhan Zhongheng
New Technology Industry Group Co. Ltd. (hereinafter referred to as "Wuhan Zhongheng group" or "the third
party") for the dispute over the asset replacement contract. Shenzhen Zhongyuan has filed the case No. (2020)
Yue 03 min Chu 17.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
on
New
shares
issued
Bonus
shares
Capitali
zation
of
public
reserve
Others Subtotal
Amoun
t
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
2. Changes of restricted shares
□ Applicable √ Not applicable
II. Securities issuance and listing
1. Security offering (without preferred stock) in Reporting Period
□ Applicable √ Not applicable
2. Changes of total shares and shareholders structure as well as explanation on changes of assets and liability
structure
□ Applicable √ Not applicable
3. Existing internal staff shares
□ Applicable √ Not applicable
III. Particulars about shareholder and actual controller of the Company
1. Amount of shareholders of the Company and particulars about shares holding
In Share
Total
common
stock
shareholders
in reporting
period-end
23761
Total common
stock
shareholders at
end of last
month before
annual report
disclosed
24131
Total preference
shareholders
with voting
rights recovered
at end of
reporting period
(if applicable)
(found in note 8)
0
Total
preference
shareholders
with voting
rights
recovered at
end of last
month before
annual report
disclosed (if
applicable)
(found in note
8)
0
Particulars about shares held above 5% by shareholders or top ten shareholders
Full name of
Shareholders
Nature of
shareholder
Proport
ion of
shares
held
Total
shareho
lders at
the end
of
report
Change
s in
report
period
Amoun
t of
restrict
ed
shares
held
Amount
of
un-restri
cted
shares
held
Number of share pledged/frozen
State of share Amount
period
Wuhan
Zhongheng
Group
Domestic
non-state-owne
d legal person
42.13%
11928
9894
260880
0
0
116681
094
Pledged 116100000
Frozen 119289894
SEG (HONG
KONG) CO.
LTD.
Overseas legal
person
5.85%
16569
560
0 0
16569
560
Pledged 0
Frozen 0
GOOD HOPE
CORNER
INVESTMENTS
LTD.
Overseas legal
person
4.40%
12464
500
0
12464
500
Pledged 0
Frozen 0
Changjiang
Securities
Brokerage
(Hong Kong)
Co. Ltd.
Overseas legal
person
1.89%
53552
49
0
53552
49
Pledged 0
Frozen 0
Guoyuan
Securities
Brokerage
(Hong Kong)
Limited
Overseas legal
person
1.36%
38701
17
0
38701
17
Pledged 0
Frozen 0
Li Zhongqiu
Overseas legal
person
1.00%
28300
00
283000
0
0
28300
00
Pledged 0
Frozen 0
Zhong Jiachao
Domestic nature
person
0.47%
13296
02
0
13296
02
Pledged 0
Frozen 0
LI SHERYN
ZHAN MING
Overseas legal
person
0.36%
10226
00
0
10226
00
Pledged 0
Frozen 0
Li Senzhuang
Domestic nature
person
0.35%
98935
0
0 989350
Pledged 0
Frozen 0
Wang Jianxin
Domestic nature
person
0.34%
95900
0
0 959000
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 Li Zhongqiu is the actual controller of Wuhan Zhongheng
New Science & Technology Industrial Group Co. Ltd. and is a party acting in concert.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 119289894
RMB common
share
119289894
SEG (HONG KONG) CO. LTD. 16569560
Domestically
listed foreign
shares
16569560
GOOD HOPE CORNER
INVESTMENTS LTD.
12464500
Domestically
listed foreign
shares
12464500
Changjiang Securities Brokerage
(Hong Kong) Co. Ltd.
5355249
Domestically
listed foreign
shares
5355249
Guoyuan Securities Brokerage
(Hong Kong) Limited
3870117
Domestically
listed foreign
shares
3870117
Li Zhongqiu 2830000
Domestically
listed foreign
shares
2830000
Zhong Jiachao 1329602
RMB common
share
1329602
LI SHERYN ZHAN MING 1022600
Domestically
listed foreign
shares
1022600
Li Senzhuang 989350
Domestically
listed foreign
shares
989350
Wang Jianxin 959000
RMB common
share
959000
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 Li Zhongqiu is the actual controller of
Wuhan Zhongheng New Science & Technology Industrial Group Co. Ltd. and is a party
acting in concert.The Company neither knew whether there exists associated relationship among the other
shareholders nor they belong to consistent actors 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)
Among the top ten shareholders Zhong Jiachao held 795602 shares through ordinary
accounts 534000 shares through credit securities accounts and total held 1329602
shares.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
91420114711954601
W
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
listed company
control by
controlling
shareholder as
well as
stock-joint in
report period
Not applicable
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
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 Chairman and General Manager
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:
51% 49%
42.21%
Actual controller controlling the Company by entrust or other assets management
□ 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.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
Section VII. Preferred Stock
□ Applicable √Not applicable
The Company had no preferred stock in the Period.Section VIII. Convertible Bonds
□ Applicable √Not applicable
The Company had no convertible bonds in the Period.Section IX. 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
of
office
term
End
date of
office
term
Shares
held at
period-
begin
(Share)
Amoun
t of
shares
increas
ed in
this
period
(Share)
Amoun
t of
shares
decreas
ed in
this
period
(Share)
Other
changes
(share)
Shares
held at
period-
end
(Share)
Li
Zhongq
iu
Chairm
an
Current
ly in
office
M 55
0
28300
00
0 0
28300
00
Gao
Jianbo
Vice
Chairm
an
Leave
the
office
M 55
0 0 0 0 0
Jiang
Junmin
g
Vice
Chairm
an
Current
ly in
office
M 41
0 0 0 0 0
Yang
Bin
Directo
r
secretar
y of the
Board
Leave
the
office
M 47
0 0 0 0 0
Chen
Zhigan
g
Directo
r
Current
ly in
office
M 46
0 0 0 0 0
Li
Ding’a
n
Indepen
dent
director
Leave
the
office
M 74
0 0 0 0 0
Zhang
Zhaogu
o
Indepen
dent
director
Leave
the
office
M 63
0 0 0 0 0
Xu
Jingwe
Indepen
dent
Leave
the
M 54
0 0 0 0 0
50
n director office
Zheng
Chunm
ei
Indepen
dent
director
Current
ly in
office
F 54
0 0 0 0 0
Wu
Weihua
Indepen
dent
director
Current
ly in
office
M 41
0 0 0 0 0
Yang
Xiongw
en
Indepen
dent
director
Current
ly in
office
M 49
0 0 0 0 0
Huang
Yanbo
Chairm
an of
the
Supervi
sory
Board
Current
ly in
office
F 57
0 0 0 0 0
Chen
Qin
Supervi
sor
Current
ly in
office
F 33
0 0 0 0 0
Geng
Qu
Employ
ee
Supervi
sor
Leave
the
office
F 50
0 0 0 0 0
Niu
Zhuo
Employ
ee
Supervi
sor
Leave
the
office
F 37
0 0 0 0 0
Wu
Aijie
Employ
ee
Supervi
sor
Current
ly in
office
F 48
0 0 0 0 0
Yang
Bin
Deputy
General
Manage
r Chief
Financi
al
Officer
Current
ly in
office
M 47
0 0 0 0 0
Tang
Ganyu
Deputy
General
Manage
Current
ly in
office
F 42
0 0 0 0 0
51
r
Niu
Zhuo
Secreta
ry of
the
Board
Current
ly in
office
F 37
0 0 0 0 0
Total -- -- -- -- -- -- 0
28300
00
0 0
28300
00
II. Changes of directors supervisors and senior executives
√ Applicable □ Not applicable
Name Title Type Date Reasons
Gao Jianbo Vice Chairman
Term of office
expires
departure
2019-09-11 Expiration of the term of office
Yang Bin Director
Appointment
and removal
2019-09-11
During the reporting period he resigned as director and
secretary of the board of directors continued to serve as
financial controller and newly appointed deputy general
manager of the company.
Li Ding’an
Independent
director
Term of office
expires
departure
Expiration of the term of office
Zhang
Zhaoguo
Independent
director
Term of office
expires
departure
Expiration of the term of office
Xu Jingwen
Independent
director
Term of office
expires
departure
Expiration of the term of office
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.
Jiang Junming male born in February 1978 in Dalian Liaoning Han nationality holds a bachelor degree in Law
from Shenyang University of Technology and a master degree in Finance from Peking University. He is currently
52
deputy general manager of Risk Control Department of Shenzhen SEG Group Co. Ltd. He has served
successively as legal assistant of Shenzhen Gemdale Real Estate Co. Ltd. legal supervisor of Shenzhen Maoye
(Group) Co. Ltd. legal deputy manager of Shenzhen Changcheng Investment Holding Co. Ltd. legal affairs post
of Shenzhen SEG Group Co. Ltd. and partner of Guangdong Guanghe Law Firm.
Chen Zhigang male born in 1973 master of business administration he is currently the assistant to chairman of
Wuhan Zhongheng Group. He has successively served as supervisor investment manager and securities affairs
representative of Wuhan Huaxin High-Tech Co. Ltd. financial director secretary of the board of directors and
executive deputy general manager of Wuhan Zhongheng New Technology Industry Group Co. Ltd. and director
of the Company etc.Ms. Zheng Chunmei Chinese nationality without permanent residency abroad female born in 1965. She
graduated from the Department of Economics and Management of Wuhan University in June 1986 in 1990 she
was awarded the certificate of completion of the University Teachers Training Course of International Accounting
and International Finance and Taxation (Co-sponsored by the World Bank and the State Education Commission)
of the School of Economics Xiamen University she received a master’s degree in business management
(accounting) from Wuhan University in 1997 and a doctorate degree in economics from Wuhan University in
2005. She acted as a visiting scholar at St. Mary's University in Canada Seoul National University in South Korea
and Ohio State University in the United States. She has been teaching at Wuhan University since June 1986 and
is currently a professor and a doctoral tutor in the School of Economics and Management of Wuhan University a
member of Canadian Management Science (ASAC) an independent director of Routon Electronics Co. Ltd. and
Wuhan Accelink Co. Ltd. and an independent director of Tianjin Tianhai Investment Development Co. Ltd.
From November 2013 to present she has been serving as an independent director of Huachangda Intelligent
Equipment Group Co. Ltd.
Yang Xiongwen male born in 1970 Doctor of Civil and Commercial Law Renmin University of China a
visiting scholar at the Faculty of Law University of Oxford he is currently a professor at the School of Law of
South China University of Technology a senior engineer a member of the Local People’s Congress of Panyu
District (2016.9.26) a member of the Supervision and Judicial Work Committee of the Standing Committee of the
17
th
Local People’s Congress of Panyu District a member of the Legal Committee of the Guangdong Provincial
Committee of the China Democratic National Construction Association a part-time attorney of Beijing Lifang
(Guangzhou) Law Firm and is concurrently serving as deputy secretary general and executive director of China
Intellectual Property Law Research Association.Wu Weihua male born in 1978 master of law at Peking University he is currently the managing director of the
investment banking department of Founder Financing Services Co. Ltd. He successively served as the managing
director of the investment banking department and principal of the M & A financing business department of Hua
Chuang Securities Co. Ltd.; the managing director of the investment banking department and principal of
53
Shenzhen business department of Tianfeng Securities Co. Ltd.; executive deputy general manager of the
investment banking department X of Guosen Securities Co. Ltd.; assistant director of the investment banking
department of Dapeng Securities Co. Ltd.; auditor of Shenzhen Tianjian Xinde Certified Public Accountants.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.
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
Wu Aijie female born in 1971 bachelor degree she is currently the person in charge of the company’s
accounting organization. She successively served as the accounting director of Wuhan No. 2 Pharmaceutical
Factory Wuhan Benben Electronics Co. Ltd. Wuhan Hengsheng Photo-electricity Industry Co. Ltd. and Wuhan
Zhongheng New Science & Technology Industrial Group Co. Ltd
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.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. Now served as the Supervisor of Shenzhen Moyi Investment Co. Ltd. he used to be the company's
director and secretary to the board of directors and now serves as the company's deputy general manager and
chief financial officer.Niu Zhuo former name was Niu Yuxiang female born in 1982 master intermediate economist. From July 2006
to August 2010 she worked on securities affairs at Shenzhen OFILM Technology Co. Ltd. From September 2010
to present she has been serving in the Company she once held the posts of deputy director of the office of the
54
board of directors securities affairs representative and currently holds the post of the company’s board secretary.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
Zhongqi
u
Wuhan Zhongheng Group and
its subsidiaries
Chairman 1996-03-21 N
Jiang
Junming
Shenzhen SEG Group Co. Ltd.and its subsidiaries
Deputy GM party
committee and secretary
of the Board
2018-07-02 Y
Chen
Zhigang
Wuhan Zhongheng Group Assistant to the chairman Y
Huang
Yanbo
Wuhan Zhongheng Group Deputy GM 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)
Zheng
Chunmei
Wuhan University Teacher 1986-06-01 Y
Zheng
Chunmei
Hubei Huachangda Intelligent Equipment
Co. Ltd.
Independen
t director
2013-10-01 Y
Zheng
Chunmei
Tianhai Investment Co. Ltd.Independen
t director
2015-03-01 Y
Zheng
Chunmei
Jinglun Electronics Co. Ltd.Independen
t director
2015-10-01 Y
Zheng
Chunmei
Wuhan Guangxun Technology Co. Ltd.Independen
t director
2016-08-01 Y
Wu Weihua China National Securities Co. Ltd.Managing
Director
2018-12-01 Y
Yang
Xiongwen
South China University of Technology Teacher 2008-08-01 Y
55
Yang
Xiongwen
Beijing Lifang (Guangzhou) Law Firm
Part-time
lawyer
2015-07-01
Explanation
on
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 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).
2. Mr. Yang Bin deputy general manager 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. in August 2018 he was given a warning and fined 30000 yuan by Shenzhen Securities
Regulatory Bureau of China Securities Regulatory Commission.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 managementsystem and actual completion of operational targets and the “Proposal of Basic Remuneration for High-rankingManagers of the Company” was deliberated and approved in 2
nd
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 55
Currently in
office
49.9 N
Gao Jianbo Vice Chairman M 55
Leave the
office
0 Y
56
Jiang
Junming
Vice Chairman M 41
Currently in
office
0 Y
Chen
Zhigang
Director M 46
Currently in
office
0 Y
Yang Bin
Deputy General
Manager CFO
M 47
Currently in
office
34.6 N
Li Ding’an Independent director M 74
Leave the
office
4.25 N
Xu Jingwen Independent director M 54
Leave the
office
4.25 N
Zhang
Zhaoguo
Independent director M 63
Leave the
office
4.25 N
Zheng
Chunmei
Independent director F 54
Currently in
office
1.75 N
Yang
Xiongwen
Independent director M 41
Currently in
office
1.75 N
Wu Weihua Independent director M 49
Currently in
office
1.75 N
Huang
Yanbo
Supervisor F 57
Currently in
office
0 Y
Geng Qu Supervisor F 50
Leave the
office
8.5 N
Chen Qin Supervisor F 33
Currently in
office
14.7 N
Tang
Ganyu
Deputy General
Manager
F 42
Currently in
office
36 N
Wu Aijie Employee Supervisor F 48
Currently in
office
14.26 N
Niu Zhuo Secretary of the Board F 37
Currently in
office
23.8
Total -- -- -- -- 199.76 --
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) 17
57
Employee in-post of main Subsidiaries (people) 981
The total number of current employees (people) 998
The total number of current employees to receive pay (people) 998
Retired employee’ s expenses borne by the parent Company
and main Subsidiaries (people)
0
Professional composition
Category of professional composition Numbers of professional composition (people)
Production personnel 793
Sales personnel 25
Technical personnel 71
Financial personnel 13
Administrative personnel 96
Total 998
Education background
Category of education background Numbers (people)
Master and on-the-job graduate students 2
Undergraduate 59
Junior college 63
Other 874
Total 998
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
58
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
59
Section X. 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.
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
60
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 2018
AGM 48.02% 2019-05-21 2019-05-22
http://www.cninfo.com.cn/new/disclo
sure/detail?plate=s
zse&orgId=gssz00
00020&stockCode
=000020&announ
cementId=120628
8941&announcem
entTime=2019-05-
22
2019 First
Extraordinary
shareholders’
general meeting
Extraordinary
shareholders’
general meeting
2019-09-12 2019-09-16
http://www.cninfo.com.cn/new/disclo
sure/detail?plate=s
zse&orgId=gssz00
00020&stockCode
=000020&announ
cementId=120692
61
1954&announcem
entTime=2019-09-
16
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
on
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 2 2 0 0 0 N 1
Li Ding’an 2 2 0 0 0 N 1
Xu Jingwen 2 0 0 2 0 Y 1
Zheng Chunmei 1 0 1 0 0 N 1
Yang Xiongwen 1 0 1 0 0 N 1
Wu Weihua 1 0 1 0 0 N 1
Explanation of absent the Board Meeting for the second time in a row
Mr. Xu Jinwen worked in Hong Kong and failed to attend the company’s board of directors for two consecutive times due to work
reasons. After the second absence Mr. Xu Jinwen ceased to serve as an independent director of the company.
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.
62
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 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.63
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
2020-04-30
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
v
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
by the government sector and having a
negative impact on the company’s regular
disclosure;
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
inspected didn’t take corresponding
internal control measures and respond
effectively.64
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
0
Amount of significant defects in
non-financial reports
0
Amount of important defects in financial
reports
0
Amount of important defects in
non-financial reports
0
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
Disclosure details of audit report
of internal control
Disclosed
Disclosure details of audit report
of internal control
2020-04-30
Disclosure date of audit report of
internal control (full-text)
Juchao Website http://www.cninfo.com.cn
Opinion type of auditing report of
IC
Standard unqualified
Whether the non-financial report
had major defects
No
Carried out modified opinion for internal control audit report from CPA
65
□Yes √ No
The internal control audit report issued by CPA has concerted opinion with self-evaluation report issued from the Board
√ Yes □ No
66
Section XI. 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
No
67
Section XII. Financial Report
I. Audit report
Type of audit opinion Standard unqualified opinion
Signing date of audit report 2020-04-28
Name of audit institute DAXIN Certified Public Accountants LLP
Document serial of audit report Da Xin Shen Zi[2020] No.: 5-00106
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 2019 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 2019 and its operation results and cash flows for the year
ended.II. Basis of opinion
We conducted our audit in accordance with the Auditing Standards for Certified Public Accountants of China.Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit ofthe 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
68
these matters.(i) Revenue recognition
1. Description of the matter
As stated in Note V (XXXI) to the consolidated statement of your company the main business income from display
and injection molded foam of 2019 recognized by your company was RMB 6465328.8416 million accounting for
89.60% of operating income an increase of 9.98% compared to 2018. 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 261
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 130 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.69
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 (I) (II) 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. On
November 5 2019 the South China International Economic and Trade Arbitration Commission issued the ruling
HNGZSC [2019] No. D618 that your company and Wuhan Zhongheng Group should pay V&T Law Firm the
lawyer fee of RMB 19402000 and the liquidated damages. Your company believed that case [2017] No. D376
(Vanke arbitration case for short) had problems in the arbitration procedure and the determination of the so-called
breach of contract facts and the ruling results damaged the company’s legitimate rights and interests. Your
company believed that the liability for breach of contract in the Vanke arbitration case should be fully borne by
Wuhan Zhongheng Group and Wuhan Zhongheng promised to bear all arbitration losses in full. If the company
paid in advance due to the execution of the case it will immediately request Wuhan Zhongheng to fulfill its
commitment and eliminate the impact. Your company believed that case [2019] No. D618 (referred to as the
lawyer fee arbitration case) was caused by the Vanke arbitration case there’s a close causal relationship between
the two cases and Wuhan Zhongheng Group issued a Commitment Letter to Shenzhen Hwafa in December 2016
that Wuhan Zhongheng Group shall bear the full amount if the arbitration determines that Vanke wins the lawsuit
and the disputes caused by the contract lead to arbitration losses. 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
70
(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 the Arbitration Award HNGZSC [2019] No. D618 counsel's legal
opinion 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 2019 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.71
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 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
72
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.
DAXIN Certified Public Accountants LLP Chinese Certified Public Accountant:
(Project partner)
China Chinese Certified Public Accountant:
28 April 2020
II. Financial Statement
Statement in Financial Notes are carried in RMB/CNY
1. Consolidated balance sheet
Prepared by SHENZHEN ZHONGHENG HUAFA CO. LTD.
2020-04-28
In RMB
Item 2019-12-31 2018-12-31
Current assets:
Monetary funds 38095501.00 34108330.27
Settlement provisions
Capital lent
Trading financial assets
Financial assets measured by fair
value and with variation reckoned
73
into current gains/losses
Derivative financial assets
Note receivable 69185516.71
Account receivable 138755691.43 116797834.51
Receivable financing 42096834.02
Accounts paid in advance 23007637.46 31348429.54
Insurance receivable
Reinsurance receivables
Contract reserve of reinsurance
receivable
Other account receivable 6351361.16 5777179.08
Including: Interest receivable
Dividend receivable
Buying back the sale of financial
assets
Inventories 66971551.96 62973909.38
Contractual assets
Assets held for sale
Non-current assets maturing
within one year
Other current assets 1395071.36 59370.18
Total current assets 316673648.39 320250569.67
Non-current assets:
Loans and payments on behalf
Debt investment
Available-for-sale financial
assets
Other debt investment
Held-to-maturity investments
Long-term receivables
Long-term equity investments
Investment in other equity
instrument
Other non-current financial
assets
Investment real estate 48952992.57 50681322.86
74
Fixed assets 198229817.31 188083873.38
Construction in process 5727760.23
Productive biological assets
Oil and natural gas assets
Right-of-use assets
Intangible assets 42968600.44 41815689.74
Research and development costs
Goodwill
Long-term deferred expenses 309781.15 542116.99
Deferred income tax assets 6803360.00 6829856.59
Other non-current assets 225700.00 3158964.00
Total non-current assets 297490251.47 296839583.79
Total assets 614163899.86 617090153.46
Current liabilities:
Short-term borrowings 24633898.20 161568657.88
Loan from central bank
Capital borrowed
Trading financial liability
Financial liability measured by
fair value and with variation reckoned
into current gains/losses
Derivative financial liability
Notes payable 16761590.51 27642356.66
Account payable 108804905.20 60975306.43
Accounts received in advance 356446.21 159528.60
Contract liabilities
Selling financial asset of
repurchase
Absorbing deposit and interbank
deposit
Security trading of agency
Security sales of agency
Wage payable 5877341.25 4700208.36
Taxes payable 12877944.98 11232819.87
Other accounts payable 28027592.62 26778863.92
75
Including: Interest payable 89365.28 439558.70
Dividend payable
Commission charge and
commission payable
Reinsurance payable
Liability held for sale
Non-current liabilities due
within one year
12000000.00
Other current liabilities
Total current liabilities 209339718.97 293057741.72
Non-current liabilities:
Insurance contract reserve
Long-term loans 73000000.00
Bonds payable
Including: Preferred stock
Perpetual capital
securities
Lease liability
Long-term account payable
Long-term wages payable
Accrual liability 64411.00 64411.00
Deferred income 2331720.00
Deferred income tax liabilities
Other non-current liabilities
Total non-current liabilities 75396131.00 64411.00
Total liabilities 284735849.97 293122152.72
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
76
Reasonable reserve
Surplus public reserve 77391593.25 77391593.25
Provision of general risk
Retained profit -177712041.86 -183172091.01
Total owner’ s equity attributable to
parent company
329428049.89 323968000.74
Minority interests
Total owner’ s equity 329428049.89 323968000.74
Total liabilities and owner’ s equity 614163899.86 617090153.46
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 2019-12-31 2018-12-31
Current assets:
Monetary funds 3494245.90 13234774.97
Trading financial assets
Financial assets measured by fair
value and with variation reckoned
into current gains/losses
Derivative financial assets
Note receivable
Account receivable
Receivable financing
Accounts paid in advance 153050.00
Other account receivable 97165023.85 99155253.08
Including: Interest receivable
Dividend receivable
Inventories 14806.50 14806.50
Contractual assets
Assets held for sale
77
Non-current assets maturing
within one year
Other current assets 173950.26 17055.88
Total current assets 100848026.51 112574940.43
Non-current assets:
Debt investment
Available-for-sale financial
assets
Other debt investment
Held-to-maturity investments
Long-term receivables
Long-term equity investments 186608900.00 186608900.00
Investment in other equity
instrument
Other non-current financial
assets
Investment real estate 25166301.06 26374703.70
Fixed assets 98410024.38 99227872.22
Construction in process
Productive biological assets
Oil and natural gas assets
Right-of-use assets
Intangible assets 4553709.24 4698654.96
Research and development costs
Goodwill
Long-term deferred expenses
Deferred income tax assets 7367646.35 7506905.90
Other non-current assets
Total non-current assets 322106581.03 324417036.78
Total assets 422954607.54 436991977.21
Current liabilities:
Short-term borrowings 100000000.00
Trading financial liability
Financial liability measured by
fair value and with variation reckoned
into current gains/losses
78
Derivative financial liability
Notes payable
Account payable 10745840.16 10745840.16
Accounts received in advance 57266.01 41937.00
Contract liabilities
Wage payable 1220979.02 1020979.02
Taxes payable 8489130.72 7161707.15
Other accounts payable 19100375.42 22672441.54
Including: Interest payable
Dividend payable
Liability held for sale
Non-current liabilities due
within one year
12000000.00
Other current liabilities
Total current liabilities 51613591.33 141642904.87
Non-current liabilities:
Long-term loans 73000000.00
Bonds payable
Including: Preferred stock
Perpetual capital
securities
Lease liability
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 73064411.00 64411.00
Total liabilities 124678002.33 141707315.87
Owner’s equity:
Share capital 283161227.00 283161227.00
Other equity instrument
Including: Preferred stock
Perpetual capital
79
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 -208863486.54 -211855430.41
Total owner’ s equity 298276605.21 295284661.34
Total liabilities and owner’ s equity 422954607.54 436991977.21
3. Consolidated Profit Statement
In RMB
Item 2019 2018
I. Total operating income 721557440.51 637046707.03
Including: Operating income 721557440.51 637046707.03
Interest income
Insurance gained
Commission charge and
commission income
II. Total operating cost 713911668.31 633599676.67
Including: Operating cost 634502127.35 566691476.49
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 3900270.42 3975984.41
Sales expense 20879256.97 14100247.17
Administrative expense 38034071.63 38515205.15
R&D expense 6649163.02
80
Financial expense 9946778.92 10316763.45
Including: Interest
expenses
10638951.99 12785854.43
Interest
income
631958.95 656538.09
Add: other income 259080.00 924020.00
Investment income (Loss is
listed with “-”)
180964.60 326439.49
Including: Investment
income on affiliated company and joint
venture
The termination of
income recognition for financial assets
measured by amortized cost(Loss is
listed with “-”)
Exchange income (Loss is
listed with “-”)
Net exposure hedging
income (Loss is listed with “-”)
Income from change of fair
value (Loss is listed with “-”)
Loss of credit impairment
(Loss is listed with “-”)
190618.99
Losses of devaluation of
asset (Loss is listed with “-”)
-385333.82 -700496.64
Income from assets disposal
(Loss is listed with “-”)
9298.34 49159.75
III. Operating profit (Loss is listed with
“-”)
7900400.31 4046152.96
Add: Non-operating income 334950.66 2886811.06
Less: Non-operating expense 484592.52 2341006.76
IV. Total profit (Loss is listed with “-”) 7750758.45 4591957.26
Less: Income tax expense 2290709.30 1296934.54
V. Net profit (Net loss is listed with
“-”)
5460049.15 3295022.72
(i) Classify by business continuity
1.continuous operating net profit(net loss listed with ‘-”)
5460049.15 3295022.72
2.termination of net profit (net
81loss listed with ‘-”)
(ii) Classify by ownership
1.Net profit attributable to
owner’s of parent company
5460049.15 3295022.72
2.Minority shareholders’ gains
and losses
VI. Net after-tax of other
comprehensive income
Net after-tax of other comprehensive
income attributable to owners of parent
company
(I) Other comprehensive income
items which will not be reclassified
subsequently to profit of loss
1.Changes of the defined
benefit plans that re-measured
2.Other comprehensive
income under equity method that
cannot be transfer to gain/loss
3.Change of fair value of
investment in other equity instrument
4.Fair value change of
enterprise's credit risk
5. Other
(ii) Other comprehensive income
items which will be reclassified
subsequently to profit or loss
1.Other comprehensive
income under equity method that can
transfer to gain/loss
2.Change of fair value of
other debt investment
3.gain/loss of fair value
changes for available-for-sale financial
assets
4.Amount of financial
assets re-classify to other
comprehensive income
5.Gain/loss of
82
held-to-maturity investments that
re-classify to available-for-sale
financial asset
6.Credit impairment
provision for other debt investment
7.Cash flow hedging
reserve
8.Translation differences
arising on translation of foreign
currency financial statements
9.Other
Net after-tax of other comprehensive
income attributable to minority
shareholders
VII. Total comprehensive income 5460049.15 3295022.72
Total comprehensive income
attributable to owners of parent
Company
5460049.15 3295022.72
Total comprehensive income
attributable to minority shareholders
VIII. Earnings per share:
(i) Basic earnings per share 0.0193 0.0116
(ii) Diluted earnings per share 0.0193 0.0116
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 2019 2018
I. Operating income 38216680.42 36771309.00
Less: Operating cost 7304872.41 5902505.91
Taxes and surcharge 1302971.22 1115764.39
83
Sales expenses
Administration expenses 15825546.36 19018506.25
R&D expenses
Financial expenses 8665845.55 9466405.33
Including: interest
expenses
8631842.66 9451554.17
Interest income 16312.01 29174.19
Add: other income
Investment income (Loss is
listed with “-”)
Including: Investment
income on affiliated Company and
joint venture
The termination of
income recognition for financial
assets measured by amortized cost
(Loss is listed with “-”)
Net exposure hedging
income (Loss is listed with “-”)
Changing income of fair
value (Loss is listed with “-”)
Loss of credit impairment
(Loss is listed with “-”)
557038.21
Losses of devaluation of
asset (Loss is listed with “-”)
50563.29
Income on disposal of
assets (Loss is listed with “-”)
-27388.25
II. Operating profit (Loss is listed
with “-”)
5674483.09 1291302.16
Add: Non-operating income 11431.87 200.00
Less: Non-operating expense 440391.48 2289447.82
III. Total Profit (Loss is listed with
“-”)
5245523.48 -997945.66
Less: Income tax 2253579.61 304638.80
IV. Net profit (Net loss is listed with
“-”)
2991943.87 -1302584.46
(i)continuous operating netprofit (net loss listed with ‘-”)
2991943.87 -1302584.46
84
(ii) termination of net profit (netloss listed with ‘-”)
V. Net after-tax of other
comprehensive income
(I) Other comprehensive income
items which will not be reclassified
subsequently to profit of loss
1.Changes of the defined
benefit plans that re-measured
2.Other comprehensive
income under equity method that
cannot be transfer to gain/loss
3.Change of fair value of
investment in other equity instrument
4.Fair value change of
enterprise's credit risk
5. Other
(II) Other comprehensive
income items which will be
reclassified subsequently to profit or
loss
1.Other comprehensive
income under equity method that can
transfer to gain/loss
2.Change of fair value of
other debt investment
3.gain/loss of fair value
changes for available-for-sale
financial assets
4.Amount of financial
assets re-classify to other
comprehensive income
5.Gain/loss of
held-to-maturity investments that
re-classify to available-for-sale
financial asset
6.Credit impairment
provision for other debt investment
7.Cash flow hedging
reserve
85
8.Translation differences
arising on translation of foreign
currency financial statements
9.Other
VI. Total comprehensive income 2991943.87 -1302584.46
VII. Earnings per share:
(i) Basic earnings per share 0.0106 -0.0046
(ii) Diluted earnings per share 0.0106 -0.0046
5. Consolidated Cash Flow Statement
In RMB
Item 2019 2018
I. Cash flows arising from operating
activities:
Cash received from selling
commodities and providing labor
services
553928004.01 479256981.38
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
Cash received from interest
commission charge and commission
Net increase of capital borrowed
Net increase of returned business
capital
Net cash received by agents in
sale and purchase of securities
Write-back of tax received
86
Other cash received concerning
operating activities
13798593.97 149122946.48
Subtotal of cash inflow arising from
operating activities
567726597.98 628379927.86
Cash paid for purchasing
commodities and receiving labor
service
378873939.95 419823861.32
Net increase of customer loans
and advances
Net increase of deposits in
central bank and interbank
Cash paid for original insurance
contract compensation
Net increase of capital lent
Cash paid for interest
commission charge and commission
Cash paid for bonus of
guarantee slip
Cash paid to/for staff and
workers
64417822.74 59375348.93
Taxes paid 12372419.54 18875771.50
Other cash paid concerning
operating activities
37598708.74 152199405.77
Subtotal of cash outflow arising from
operating activities
493262890.97 650274387.52
Net cash flows arising from operating
activities
74463707.01 -21894459.66
II. Cash flows arising from investing
activities:
Cash received from recovering
investment
Cash received from investment
income
180964.60 326439.49
Net cash received from disposal
of fixed intangible and other
long-term assets
198536.93 924820.00
Net cash received from disposal
of subsidiaries and other units
87
Other cash received concerning
investing activities
75000000.00 144000000.00
Subtotal of cash inflow from
investing activities
75379501.53 145251259.49
Cash paid for purchasing fixed
intangible and other long-term assets
3288039.15 15063404.44
Cash paid for investment
Net increase of mortgaged loans
Net cash received from
subsidiaries and other units obtained
Other cash paid concerning
investing activities
75000000.00 144000000.00
Subtotal of cash outflow from
investing activities
78288039.15 159063404.44
Net cash flows arising from investing
activities
-2908537.62 -13812144.95
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 215911217.10 381872622.67
Other cash received concerning
financing activities
Subtotal of cash inflow from
financing activities
215911217.10 381872622.67
Cash paid for settling debts 267928436.03 387355473.63
Cash paid for dividend and
profit distributing or interest paying
10984022.74 12486591.53
Including: Dividend and profit
of minority shareholder paid by
subsidiaries
Other cash paid concerning
financing activities
Subtotal of cash outflow from
financing activities
278912458.77 399842065.16
88
Net cash flows arising from financing
activities
-63001241.67 -17969442.49
IV. Influence on cash and cash
equivalents due to fluctuation in
exchange rate
129924.29 162282.40
V. Net increase of cash and cash
equivalents
8683852.01 -53513764.70
Add: Balance of cash and cash
equivalents at the period -begin
27961209.60 81474974.30
VI. Balance of cash and cash
equivalents at the period -end
36645061.61 27961209.60
6. Cash Flow Statement of Parent Company
In RMB
Item 2019 2018
I. Cash flows arising from operating
activities:
Cash received from selling
commodities and providing labor
services
31130517.17 33955787.66
Write-back of tax received
Other cash received concerning
operating activities
126052122.79 238751046.31
Subtotal of cash inflow arising from
operating activities
157182639.96 272706833.97
Cash paid for purchasing
commodities and receiving labor
service
5137335.48 4705956.98
Cash paid to/for staff and
workers
3853129.50 4162519.09
Taxes paid 3503529.69 5303657.62
Other cash paid concerning
operating activities
130808236.27 241037646.61
Subtotal of cash outflow arising from
operating activities
143302230.94 255209780.30
Net cash flows arising from operating
activities
13880409.02 17497053.67
II. Cash flows arising from investing
89
activities:
Cash received from recovering
investment
Cash received from investment
income
Net cash received from disposal
of fixed intangible and other
long-term assets
1000.00 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
1000.00 82000.00
Cash paid for purchasing fixed
intangible and other long-term assets
228914.40 1285642.47
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
228914.40 1285642.47
Net cash flows arising from investing
activities
-227914.40 -1203642.47
III. Cash flows arising from financing
activities
Cash received from absorbing
investment
Cash received from loans 90000000.00 200000000.00
Other cash received concerning
financing activities
Subtotal of cash inflow from
financing activities
90000000.00 200000000.00
Cash paid for settling debts 105000000.00 220000000.00
Cash paid for dividend and
profit distributing or interest paying
8631842.66 9451554.17
Other cash paid concerning
90
financing activities
Subtotal of cash outflow from
financing activities
113631842.66 229451554.17
Net cash flows arising from financing
activities
-23631842.66 -29451554.17
IV. Influence on cash and cash
equivalents due to fluctuation in
exchange rate
1311.90 557.68
V. Net increase of cash and cash
equivalents
-9978036.14 -13157585.29
Add: Balance of cash and cash
equivalents at the period -begin
12024179.58 25181764.87
VI. Balance of cash and cash
equivalents at the period -end
2046143.44 12024179.58
7. Statement of Changes in Owners’ Equity (Consolidated)
Current period
In RMB
Item
2019
Owners’ equity attributable to the parent Company
Min
ority
inter
ests
Tota
l
own
er’ s
equit
y
Sha
re
cap
ital
Other equity
instrument
Capi
tal
publ
ic
reser
ve
Less
:
Inve
ntor
y
shar
es
Othe
r
com
preh
ensi
ve
inco
me
Reas
onab
le
reser
ve
Surp
lus
publ
ic
reser
ve
Prov
ision
of
gene
ral
risk
Reta
ined
profi
t
Othe
r
Subt
otal
Pre
fer
red
sto
ck
Per
pet
ual
cap
ital
sec
urit
ies
Ot
her
I. Balance at
the end of the
last year
283
16
12
27.
00
146
587
271.
50
773
915
93.2
5
-183
172
091.
01
323
968
000.
74
323
968
000.
74
Add:
Changes of
accounting
policy
Error
correction of
91
the last period
Enterprise
combine
under the
same control
Other
II. Balance at
the beginning
of this year
283
16
12
27.
00
146
587
271.
50
773
915
93.2
5
-183
172
091.
01
323
968
000.
74
323
968
000.
74
III. Increase/
Decrease in
this year
(Decrease is
listed with
“-”)
546
004
9.15
546
004
9.15
546
004
9.15
(i) Total
comprehensiv
e income
546
004
9.15
546
004
9.15
546
004
9.15
(ii) Owners’
devoted and
decreased
capital
1.Common
shares
invested by
shareholders
2. Capital
invested by
holders of
other equity
instruments
3. Amount
reckoned into
owners equity
with
share-based
payment
4. Other
(III) Profit
distribution
1. Withdrawal
of surplus
reserves
2. Withdrawal
of general
risk
92
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．Carry-over
retained
earnings
from the
defined
benefit
plans
5．Carry-over
retained
earnings from
other
comprehensiv
e income
6. Other
(V)
Reasonable
reserve
1. Withdrawal
in the report
period
2. Usage in
the report
period
(VI)Others
IV. Balance at 283 146 773 -177 329 329
93
the end of the
report period
16
12
27.
00
587
271.
50
915
93.2
5
712
041.
86
428
049.
89
428
049.
89
Last period
In RMB
Item
2018
Owners’ equity attributable to the parent Company
Mino
rity
intere
sts
Total
owne
r’ s
equit
y
Sha
re
cap
ital
Other equity
instrument
Capi
tal
publ
ic
reser
ve
Less
:
Inve
ntor
y
shar
es
Othe
r
com
preh
ensi
ve
inco
me
Reas
onab
le
reser
ve
Surp
lus
publ
ic
reser
ve
Prov
ision
of
gene
ral
risk
Reta
ined
profi
t
Othe
r
Subt
otal
Pr
efe
rre
d
sto
ck
Pe
rpe
tua
l
ca
pit
al
sec
uri
tie
s
Oth
er
I. Balance at
the end of the
last year
283
16
12
27.
00
146
587
271.
50
773
915
93.2
5
-186
467
113.
73
320
672
978.
02
3206
7297
8.02
Add:
Changes of
accounting
policy
Error
correction of
the last
period
Enterprise
combine
under the
same
control
Other
II. Balance at
the beginning
of this year
283
16
12
27.
146
587
271.
50
773
915
93.2
5
-186
467
113.
73
320
672
978.
02
3206
7297
8.02
94
00
III. Increase/
Decrease in
this year
(Decrease is
listed with
“-”)
329
502
2.72
329
502
2.72
3295
022.
72
(i) Total
comprehensi
ve income
329
502
2.72
329
502
2.72
3295
022.
72
(ii) Owners’
devoted and
decreased
capital
1.Common
shares
invested by
shareholders
2. Capital
invested by
holders of
other equity
instruments
3. Amount
reckoned into
owners
equity with
share-based
payment
4. Other
(III) Profit
distribution
1.
Withdrawal
of surplus
reserves
2.
Withdrawal
of general
risk
provisions
3.
Distribution
for owners
(or
shareholders)
4. Other
(IV) Carrying
forward
internal
95
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．Carry-over
retained
earnings
from the
defined
benefit
plans
5．Carry-over
retained
earnings
from other
comprehensi
ve income
6. Other
(V)
Reasonable
reserve
1.
Withdrawal
in the report
period
2. Usage in
the report
period
(VI)Others
IV. Balance
at the end of
the report
period
283
16
12
27.
00
146
587
271.
50
773
915
93.2
5
-183
172
091.
01
323
968
000.
74
3239
6800
0.74
96
8. Statement of Changes in Owners’ Equity (Parent Company)
Current period
In RMB
Item
2019
Share
capit
al
Other equity
instrument
Capita
l
public
reserv
e
Less:
Invent
ory
shares
Other
compr
ehensi
ve
incom
e
Reaso
nable
reserv
e
Surplu
s
reserv
e
Retai
ned
profi
t
Other
Total
owners’
equity
Prefe
rred
stock
Perp
etual
capit
al
secur
ities
Othe
r
I. Balance at
the end of the
last year
2831
6122
7.00
14658
7271.
50
77391
593.2
5
-211
855
430.
41
295284
661.34
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.
50
77391
593.2
5
-211
855
430.
41
295284
661.34
III. Increase/
Decrease in
this year
(Decrease is
listed with “-”)
299
194
3.87
299194
3.87
(i) Total
comprehensive
income
299
194
3.87
299194
3.87
(ii) Owners’
devoted and
decreased
capital
1.Common
shares
invested by
shareholders
2. Capital
97
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．Carry-over
retained
earnings from
the defined
benefit plans
5．Carry-over
retained
earnings from
other
comprehensive
income
6. Other
(V)
Reasonable
reserve
98
1. Withdrawal
in the report
period
2. Usage in the
report period
(VI)Others
IV. Balance at
the end of the
report period
2831
6122
7.00
14658
7271.
50
77391
593.2
5
-208
863
486.
54
298276
605.21
Last period
In RMB
Item
2018
Shar
e
capit
al
Other equity
instrument
Capit
al
public
reserv
e
Less:
Invent
ory
shares
Other
compr
ehensi
ve
incom
e
Reason
able
reserve
Surpl
us
publi
c
reserv
e
Retaine
d profit
Other
Total
owner’ s
equity
Pref
erre
d
stoc
k
Perp
etual
capit
al
secu
ritie
s
Othe
r
I. Balance at
the end of the
last year
283
161
227.
00
1465
8727
1.50
7739
1593
.25
-21055
2845.9
5
296587
245.80
Add:
Changes of
accounting
policy
Error
correction of
the last
period
Other
II. Balance at
the beginning
of this year
283
161
227.
00
1465
8727
1.50
7739
1593
.25
-21055
2845.9
5
296587
245.80
III. Increase/
Decrease in
this year
(Decrease is
listed with
-1302
584.46
-130258
4.46
99
“-”)
(i) Total
comprehensiv
e income
-1302
584.46
-130258
4.46
(ii) Owners’
devoted and
decreased
capital
1.Common
shares
invested by
shareholders
2. Capital
invested by
holders of
other equity
instruments
3. Amount
reckoned into
owners equity
with
share-based
payment
4. Other
(III) Profit
distribution
1.
Withdrawal
of surplus
reserves
2.
Distribution
for owners
(or
shareholders)
3. Other
(IV) Carrying
forward
internal
owners’
equity
1. Capital
reserves
conversed to
capital (share
capital)
2. Surplus
reserves
conversed to
capital (share
capital)
100
3. Remedying
loss with
surplus
reserve
4．Carry-over
retained
earnings from
the defined
benefit plans
5．Carry-over
retained
earnings from
other
comprehensiv
e income
6. Other
(V)
Reasonable
reserve
1.
Withdrawal
in the report
period
2. Usage in
the report
period
(VI)Others
IV. Balance
at the end of
the report
period
283
161
227.
00
1465
8727
1.50
7739
1593
.25
-21185
5430.4
1
295284
661.34
III. Company profile
1. The registration place of the enterprise the form of organization and the headquarters address
Shenzhen Zhongheng HUAFA Company Limited (hereinafter referred to as Company or the Company)
established on 8 December 1981. Uniform social credit code 91440300618830372G.Registered place and head office of the Company: 411 Bldg. Huafa (N) Road Futian District Shenzhen
Legal representative: Li Zhongqiu
Registered capital: RMB 283161227.00
2. The nature of the business and the main business activities
The Company belongs to the computer telecommunication and manufacturing of other electronic equipment.
Business scope: producing and sales of vary color TV set liquid crystal display LCD (operates in branch)
radio-recorder sound equipment electronic watch electronic game and computers the printed wiring board
101
precision injection parts light packaging material (operates in Wuhan) and hardware (including tool and mould)
for various electronic products and supporting parts plating and surface treatment and tin wire development and
operation of real estate (Shen Fang Di Zi No.: 7226760) and property management. Funded affiliated companies
in Wuhan and Jilin. Setting up branches in capital of the province (Lhasa City excluded) in China and
municipality directly under the central government.
3. Relevant party offering approval reporting of financial statements and date thereof
The financial statement has been deliberated and approved by BOD on 28 April 2020. According to Article of
Association the statement shall be submitted for deliberation in shareholders general meeting.
Consolidate scope in the Period including: subsidiaries including Shenzhen HUAFA Property Lease 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 VIII. 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 expects that the production and sales will be in a virtuous cycle within 12 months from the end of
he reporting period and there is no risk that affects the continued operations.V. Important accounting policy and estimation
Notes on specific accounting policies and accounting estimation:
The following disclosure has covered the specific accounting policies and accounting estimates formulated by the Company
according to the actual production and operation characteristics.
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
st
December 2019 and the operation results as well as cash flow for the year of 2019.
102
2. Accounting period
The Company’s accounting year is Gregorian calendar year namely from 1
st
January to 31
st
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
103
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.
5. Accounting treatment of disposal subsidiaries
In the case of partial disposal of long-term equity investments in subsidiaries without loss of control in the
consolidated financial statements the difference between the disposal price and the net asset share corresponding
to the disposal of long-term equity investments and enjoying the subsidiaries’ continued calculation from the
purchase date or the merger date is used to adjust the capital reserve (capital premium or equity premium). If the
capital reserve is insufficient to offset the retained earnings are adjusted.If the control power of the investee is lost due to the disposal of part of the equity investment etc. when preparing
the consolidated financial statements the remaining equity shall be re-measured according to its fair value on the
date of loss of control. The sum of the consideration obtained from the disposal of equity and the fair value of the
remaining equity minus the difference between the share of the original subsidiary’s net assets that should be
continuously calculated from the purchase date or the merger date is included in the current investment income
when the control is lost and also offsets goodwill. Other comprehensive income related to the equity investment of
the original subsidiary is converted into current investment income when the control is lost.104
7. 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.
8. 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.105
9. Financial instrument
1. Category and recognition of financial instrument
Financial instrument is the contract that taken shape of the financial asses for an enterprise and of the financial
liability or equity instrument for other units.
(1) Financial assets
The Company classifies financial assets that meet the following conditions as financial assets measured at
amortized cost: ① The Company’s business model for managing financial assets is to collect contractual cash
flows as its goal; ② The contractual terms of the financial assets stipulate that the cash flow generated on a
specific date is only the payment of principal and interest based on the outstanding principal amount.The Company classifies financial assets that meet the following conditions as financial assets measured at fair
value and whose changes are included in other comprehensive income: ① The Company’s business model for
managing financial assets is to collect contractual cash flows and sell the financial assets as its goal; ② The
contractual terms of the financial assets stipulate that the cash flow generated on a specific date is only for the
payment of principal and interest based on the outstanding principal amount
For investment in non-trading equity instruments the Company may irrevocably designate it as a financial asset
measured at fair value and its changes included in other comprehensive income at initial recognition. The
designation is made on the basis of a single investment and the relevant investment meets the definition of equity
instruments from the perspective of the issuer.
Except for financial assets classified as financial assets measured at amortized cost and financial assets measured
at fair value and whose changes are included in other comprehensive income the Company classifies the financial
assets as financial assets measured at fair value and whose changes are included in current profit or loss. At the
initial recognition if the accounting mismatch can be eliminated or reduced the Company can irrevocably
designate the financial asset as a financial asset measured at fair value and its changes are included in the current
profit and loss.When the Company changes the business model for managing financial assets it will reclassify all affected
related financial assets on the first day of the first reporting period after the business model has been changed and
will apply future applicable methods from the date of reclassification for relevant accounting treatment no
retroactive adjustments shall be made for previously recognized gains losses (including impairment losses or
gains) or interest.
(2) Financial liabilities
Financial liabilities are classified as financial liabilities measured at fair value and whose changes are included in
the current profit or loss financial liabilities formed by the transfer of financial assets that does not meet the
conditions for derecognition or continues to be involved in the transferred financial assets and financial liabilities
measured at amortized cost at initial recognition. All financial liabilities are not reclassified.
2. Measurement of financial instruments
The initial recognition of the Company’s financial instruments is measured at fair value. For financial assets and
financial liabilities measured at fair value and whose changes are included in the current profit and loss the
106
related transaction costs are directly included in the current profit and loss; for other types of financial assets or
financial liabilities the related transaction costs are included in the initial recognition amount. For the accounts
receivable or bills receivable arising from the sale of products or the provision of labor services not containing or
not considering significant financing components the Company shall use the amount of consideration expected to
be received as the initial recognition amount. The subsequent measurement of financial instruments depends on
their classification.
(1) Financial assets
① Financial assets measured at amortized cost. After initial recognition such financial assets are measured at
amortized cost by using the effective interest method. Gains or losses arising from financial assets that are
measured at amortized cost and do not belong to any hedging relationship are included in the current profit or loss
when they are derecognized reclassified amortized in accordance with the effective interest rate method or
recognized for impairment.
② Financial assets measured at fair value and whose changes are included in the current profit and loss. After
initial recognition for such financial assets (except for a part of financial assets that belong to the hedging
relationship) the fair value is used for subsequent measurement and the resulting gains or losses (including
interest and dividend income) are included in the current profit and loss.③ Investment in debt instruments measured at fair value and whose changes are included in other comprehensive
income. After initial recognition the subsequent measurement of such financial assets is conducted at fair value.Interest impairment losses or gains calculated by using the effective interest rate method and the exchange gains
and losses are included in the current profit and loss and other gains or losses are included in other
comprehensive income. In derecognition the accumulated gains or losses previously included in other
comprehensive income are transferred out of other comprehensive income and included in the current profit and
loss.
(2) Financial liabilities
① Financial liabilities measured at fair value and whose changes are included in the current profit and loss. Such
financial liabilities include transactional financial liabilities (including derivatives that belong to financial
liabilities) and financial liabilities designated to be measured at fair value and whose changes are included in the
current profit and loss. After initial recognition the subsequent measurement of such financial liabilities is at fair
value except for those related to hedge accounting gains or losses (including interest expenses) resulting from
changes in the fair value of transactional financial liabilities are included in the current profit and loss. If a
financial liability designated to be measured at fair value and whose changes are included in the current profit or
loss the amount of change in the fair value of the financial liability caused by changes in the enterprise’s own
credit risk is included in other comprehensive income other changes in fair value are included in the current profit
and loss. If the impact of changes in the financial liability’s own credit risk included in other comprehensive
income causes or expands the accounting mismatch in profit or loss the Company will include all gains or losses
on the financial liability in the current profit and loss.
② Financial liabilities measured at amortized cost. After initial recognition such financial liabilities are
measured at amortized cost by using the effective interest method.107
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.In limited circumstances if the recent information used to determine fair value is insufficient or the range of
possible estimated amounts of fair value is widely distributed and the cost represents the best estimate of fair
value within this range the cost may represent the appropriate estimates of fair value within this distribution range.The Company uses all information on the performance and operation of the investee gettable after the initial
recognition date to determine whether the cost represents the fair value or not.
4. Confirmation basis and measurement method for the transfer of liabilities of financial assets
(1)Financial assets
If the Company’s financial asset meets one of the following conditions it shall be terminated for confirmation: ①
The contract right to receive the cash flow of the financial asset is terminated; ② The financial asset has been
transferred and the Company has transferred almost all risks and rewards of ownership of the financial asset; ③
The financial asset has been transferred although the Company has neither transferred nor retained almost all the
remuneration in the ownership of the financial asset it has not retained control of the financial asset.If the Company neither transfers nor retains almost all the remuneration in the ownership of financial assets and
retains control over the financial assets the relevant financial assets are recognized according to the extent that
they continue to be involved in the transferred financial assets and the related liabilities are accordingly
recognized.If the transfer of financial assets meets the conditions for derecognition the difference between the following two
amounts shall be included in the current profit and loss: ① The book value of the transferred financial assets on
the date of derecognition; ② The sum of the consideration received for the transfer of financial assets and the
amount corresponding to the derecognized part of the cumulative amount of changes in fair value that was directly
included in other comprehensive income (the financial assets involved in the transfer are classified as financial
assets measured at fair value and their changes are included in other comprehensive income).If partial transfer of financial assets satisfies the conditions for derecognition the book value of the transferred
financial assets as a whole is apportioned respectively according to the relative fair value on the transfer date
between the derecognition portion and the non- derecognition portion and then the difference of following two
amounts is included in the current profit and loss: ①The book value of the derecognition part on the
derecognition date; ②The sum of the consideration received in the derecognition part and the amount
corresponding to the derecognized part of the cumulative amount of changes in fair value that was directly
108
included in other comprehensive income (the financial assets involved in the transfer are classified as financial
assets measured at fair value and their changes are included in other comprehensive income).
(2) Financial liability
If the current obligation of the financial liability (or part of it) has been discharged the Company derecognizes the
financial liability (or part of the financial liability).If the financial liability (or part of it) is derecognized the Company shall include the difference between its book
value and the consideration paid (including non-cash assets transferred out or liabilities assumed) into the current
profit and loss.
10.Note receivable
Found more in 11.Account receivable
11.Account receivable、Account receivable
1. How to determine expected credit losses
Based on expected credit losses the Company makes impairment accounting treatment and confirm loss
provisions for financial assets (including receivables) measured at amortized cost and financial assets (including
receivables financing) that are measured at fair value and whose changes are included in other comprehensive
income and lease receivables.The Company assesses on each balance sheet date whether the credit risk of relevant financial instruments has
increased significantly since initial recognition and divides the process of credit impairment of financial
instruments into three stages and adopts different accounting treatment methods for financial instruments
impairment at different stages: (1) In the first stage if the credit risk of a financial instrument has not increased
significantly since its initial recognition the Company shall measure the loss provisions according to the expected
credit losses of the financial instrument in the next 12 months and calculate the interest income according to its
book balance (i.e. without deducting impairment) and actual interest rate; (2) In the second stage if the credit risk
of a financial instrument has increased significantly since the initial recognition but no credit impairment has
occurred the Company shall measure the loss provisions according to the expected credit losses of the financial
instrument during the entire duration and calculate the interest income according to its book balance and actual
interest rate; (3) In the third stage if the credit impairment occurs after initial recognition the Company shall
measure loss provisions based on the expected credit losses of the financial instrument for the entire duration and
calculate the interest income according to its book balance and actual interest rate.
(1) Methods of measuring loss provisions for financial instruments with lower credit risk
109
For financial instruments with lower credit risk on the balance sheet date the Company can directly make the
assumption that the credit risk of the instrument has not increased significantly since the initial recognition
without comparing with the credit risk at the initial recognition.If the default risk of financial instruments is low the debtor’s ability to fulfill its contractual cash flow obligations
is strong in the short term and even if there are adverse changes in the economic situation and operating
environment over a long period of time it may not necessarily reduce the borrower’s ability to fulfill the
contractual cash flow obligations the financial instrument shall be considered to have lower credit risk.
(2) Methods of measuring loss provisions for accounts receivable and lease receivables
①Receivables that do not contain significant financing components. For the receivables formed by transactions
regulated by “Accounting Standards for Business Enterprises No.14-Revenue” and without containing significant
financing components the Company adopts a simplified method that is it always calculates the loss provisions
based on the expected credit losses for the entire duration.
Based on the nature of financial instruments the Company assesses whether credit risk has increased significantly
on the basis of individual financial assets or financial assets portfolios. The Company divides the notes receivable
and accounts receivable into several portfolios based on the characteristics of credit risk and calculates the
expected credit losses on the basis of the portfolios the basis for determining the portfolios is as follows:
Accounts receivable portfolio 1: A portfolio that uses the aging of accounts receivables as credit risk
characteristics
Accounts receivable portfolio 2: Combination of related parties included in the scope of consolidated statements
Notes receivable portfolio 1: Same as the division of accounts receivable portfolio
Notes receivable portfolio 2: Management evaluates that this type of fund is bank acceptance portfolio with lower
credit risk
For the accounts receivable and notes receivable being divided into portfolio 1 the Company refers to the
historical credit loss experience combines with the current conditions and the prediction of future economic
situation and prepares a comparison table of the aging of accounts receivable and the expected credit loss rate of
the entire duration and calculates the expected credit losses.
For accounts receivable and notes receivable being divided into portfolio 2 the Company refers to historical credit
loss experience combines with the current conditions and the predictions of future economic conditions and
calculates the expected credit losses of 0% through default risk exposure and expected credit loss rate for the
entire duration.
②Accounts receivables and leases receivables that contain significant financing components. For accountsreceivables that contain significant financing components and leases receivables regulated by “AccountingStandards for Business Enterprises No. 21-Leases” the Company measures loss provisions in accordance with the
general method that is the “third stage” model.
(3)Accrual method of bad debt provision for those accrual by account age as the portfolio
Account age Expected credit loss rate of receivable (%)
Within one year (one year 0
110
included)
1-2 years 5
2-3 years 10
Over 3 years 30
2. Accounting treatment methods of expected credit losses
In order to reflect the changes in the credit risk of financial instruments since initial recognition the Company
remeasures the expected credit losses on each balance sheet date and the resulting increase or reversal of the loss
provisions should be counted as an impairment loss or gain and included in the current profit and loss and based
on the type of financial instrument offsets the book value of the financial asset listed in the balance sheet or
includes in the estimated liability (loan commitment or financial guarantee contract) or includes in other
comprehensive income (debt investments measured at fair value and whose changes are included in other
comprehensive income).
12.Receivable financing
Accounts receivable financing reflects the bills receivable and receivables that are measured at fair value on the
balance sheet date and whose changes are included in other comprehensive income for example the company
uses bank acceptance discounts or endorsements as a daily fund management business model then the company
aims to both collect contractual cash flow and sell the bank’s acceptance bill and classifies it as a financial asset
measured at fair value and whose changes are included in other comprehensive income. The occasional bank
acceptance discounts or endorsements not used as a daily fund management business model cannot be classified
as financial assets measured at fair value and whose changes are included in other comprehensive income or be
included in accounts receivable financing.
Accounting treatment reference to the 9.4 Classification recognition basis and measurement method of financial
assets above mentioned
13. Other account receivable
Determination and accounting treatment on the expected credit losses of other account receivable
The Company measures the loss provisions according to the general method that is the “third stage” model.When measuring the credit impairment of financial instruments the Company considers the following factors to
assess whether the credit risk has increased significantly:
The Company divides other receivables into several portfolios based on the nature of the payments and calculates
the expected credit losses on the basis of the portfolio the basis for determining the portfolio is as follows:
Other receivables portfolio 1: Combination of non-related parties that make provision for impairment according to
the expected loss rate
Other receivables portfolio 2: Combination of related parties included in the scope of consolidated statements
For other receivables being divided into portfolio 1 the Company refers to the historical credit loss experience
combines with the current conditions and the prediction of future economic situation and prepares a comparison
111
table of the aging of accounts receivable and the expected credit loss rate of the entire duration and calculates the
expected credit losses.
For other receivables being divided into portfolio 2 the Company refers to historical credit loss experience
combines with the current conditions and the predictions of future economic conditions and calculates the
expected credit losses of 0% through default risk exposure and expected credit loss rate for the entire duration.
Accrual method of bad debt provision for those accrual by account age as the portfolio
Account age Expected credit loss rate of other receivable (%)
Within one year (one year
included)
0
1-2 years 5
2-3 years 10
Over 3 years 30
14. Inventory
1. Categories of inventory
The inventory is goods or manufactured products held for sale products in process and materials and matters
utilized in the production or supply of labor. Mainly including raw material revolving materials (wrappage and
low-value consumption goods etc.) outside processing materials 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
15. Long-term equity investment
1. Recognition of initial investment cost
112
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—Recognition
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.
16. Investment real estate
Measurement for investment real estate
Cost method
113
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.
17. 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 house and buildings machinery equipment electronic equipment
114
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.
18. Construction in process
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.
19. 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.115
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.
20. 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.116
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.
21. 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.117
22. 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.
23. 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.118
24. 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.
25. Revenue(Income)
Whether implemented the new revenue standards
√Yes □No
Accounting policy for recognition and measurement of revenue(income)
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
119
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.
Different business models of similar business resulted in different accounting policies for revenue recognition
N/A
26. 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
120
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.
27. 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
121
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.
28. 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.
29. 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 Note
The Ministry of Finance issued the
Accounting Standards for Business
Enterprise No. 22- Recognition and
Measurement of Financial Instruments
Accounting Standards for Business
Enterprise No. 23- Transfer of Financial
Assets Accounting Standards for
Business Enterprise No. 24- Hedge
Accounting and Accounting Standards
for Business Enterprise No. 37-
Presentation of Financial Instruments
after revised in 2017 ( these four items
Change of the accounting policy has
deliberated and approved by the 11th
session of 9th BOD
122
are collectively referred to as the new
financial instrument standards).The
Company implemented the above
mentioned new standards after revision
since 1st January 2019 and relevant
content with accounting policy
concerned are been adjusted.
In April 2019 the Ministry of Finance
issued the Notice on Revision and
Issuance of 2019 Financial Statement
Format for General Corporate (Cai Kuai
[2019] No.6) (hereinafter referred to as
Financial Statement Format) in terms of
the financial statement of mid-term
2019 the annual financial statement and
later period’s financial statement are
required to preparing in line with the
Accounting Standards for Business
Enterprise and Financial Statement
Format.
Change of the accounting policy has
deliberated and approved by the 11th
session of 9th BOD
The Company will implement the relevant regulation of Cai Kuai (2019) No.6 issued by Ministry of Finance relevant financial
statements are been adjusted. Items and amount has major influence on 31st December 2018 in balance sheet are as:
Item Consolidate balance sheet
Before adjustment After adjustment
Note receivable and account receivable 185983351.22
Note receivable 69185516.71
Account receivable 116797834.51
Note payable and account payable 88617663.09
Note payable 27642356.66
Account payable 60975306.43
(2)Changes in important accounting estimates
□ Applicable √Not applicable
(3) Adjustment the financial statements at the beginning of the first year of implementation of new financial
instrument standards new revenue standards and new leasing standards since 2019
√ Applicable □ Not applicable
Consolidate balance sheet
123
In RMB
Item 2018-12-31 2019-01-01 Adjustments
Current assets:
Monetary funds 34108330.27 34108330.27
Settlement provisions
Capital lent
Tradable financial
assets
Financial assets
measured by fair value and
with variation reckoned
into current gains/losses
Derivative financial
assets
Note receivable 69185516.71 69185516.71
Account receivable 116797834.51 116797834.51
Receivable financing
Accounts paid in
advance
31348429.54 31348429.54
Insurance receivable
Reinsurance
receivables
Contract reserve of
reinsurance receivable
Other account
receivable
5777179.08 5777179.08
Including: Interest
receivable
Dividend
receivable
Buying back the sale
of financial assets
Inventories 62973909.38 62973909.38
Contractual assets
Assets held for sale
Non-current asset due
within one year
124
Other current assets 59370.18 59370.18
Total current assets 320250569.67 320250569.67
Non-current assets:
Loans and payments
on behalf
Debt investment
Finance asset
available for sales
Other debt investment
Held-to-maturity
investment
Long-term account
receivable
Long-term equity
investment
Investment in other
equity instrument
Other non-current
financial assets
Investment real estate 50681322.86 50681322.86
Fixed assets 188083873.38 188083873.38
Construction in
progress
5727760.23 5727760.23
Productive biological
asset
Oil and gas asset
Right-of-use assets
Intangible assets 41815689.74
Expense on Research
and Development
Goodwill
Long-term expenses
to be apportioned
542116.99 542116.99
Deferred income tax
asset
6829856.59 6829856.59
Other non-current
asset
3158964.00 3158964.00
125
Total non-current asset 296839583.79
Total assets 617090153.46 617090153.46
Current liabilities:
Short-term loans 161568657.88 161568657.88
Loan from central
bank
Capital borrowed
Trading financial
liability
Financial liability
measured by fair value and
with variation reckoned
into current gains/losses
Derivative financial
liability
Note payable 27642356.66 27642356.66
Account payable 60975306.43 60975306.43
Accounts received in
advance
159528.60 159528.60
Contractual liability
Selling financial asset
of repurchase
Absorbing deposit and
interbank deposit
Security trading of
agency
Security sales of
agency
Wage payable 4700208.36 4700208.36
Taxes payable 11232819.87 11232819.87
Other account payable 26778863.92 26778863.92
Including: Interest
payable
439558.70 439558.70
Dividend payable
Commission charge
and commission payable
Reinsurance payable
Liability held for sale
Non-current liabilities
due within one year
Other current
liabilities
Total current liabilities 293057741.72 293057741.72
Non-current liabilities:
Insurance contract
reserve
Long-term loans
Bonds payable
Including:
Preferred stock
Perpetual
capital securities
Lease liability
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 293122152.72
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 -183172091.01
Total owner’ s equity
attributable to parent
company
323968000.74 323968000.74
Minority interests
Total owner’ s equity 323968000.74 323968000.74
Total liabilities and owner’
s equity
617090153.46 617090153.46
Explanation on adjustment
N/A
Balance Sheet of Parent Company
In RMB
Item 2018-12-31 2019-01-01 Adjustments
Current assets:
Monetary funds 13234774.97 13234774.97
Trading financial
assets
Financial assets
measured by fair value and
with variation reckoned
into current gains/losses
Derivative financial
assets
Note receivable
Account receivable 0.00
Receivable financing
Accounts paid in
advance
153050.00 153050.00
Other account
receivable
99155253.08 99155253.08
Including: Interest
receivable
Dividend
receivable
Inventories 14806.50 14806.50
Contractual assets
Assets held for sale
Non-current assets
maturing within one year
Other current assets 17055.88 17055.88
Total current assets 112574940.43 112574940.43
Non-current assets:
Debt investment
Available-for-sale
financial assets
Other debt investment
Held-to-maturity
investments
Long-term receivables
Long-term equity
investments
186608900.00 186608900.00
Investment in other
equity instrument
Other non-current
financial assets
Investment real estate 26374703.70 26374703.70
Fixed assets 99227872.22 99227872.22
Construction in
process
Productive biological
assets
Oil and natural gas
assets
Right-of-use assets
Intangible assets 4698654.96 4698654.96
Research and
development costs
Goodwill
Long-term deferred
expenses
Deferred income tax
assets
7506905.90 7506905.90
Other non-current
assets
Total non-current assets 324417036.78 324417036.78
Total assets 436991977.21 436991977.21
Current liabilities:
Short-term
borrowings
100000000.00 100000000.00
Trading financial
liability
Financial liability
measured by fair value and
with variation reckoned
into current gains/losses
Derivative financial
liability
Notes payable
Account payable 10745840.16 10745840.16
Accounts received in
advance
41937.00 41937.00
Contract liabilities
Wage payable 1020979.02 1020979.02
Taxes payable 7161707.15 7161707.15
Other accounts
payable
22672441.54 22672441.54
Including: Interest
payable
Dividend
payable
Liability held for sale
Non-current liabilities
due within one year
Other current
liabilities
Total current liabilities 141642904.87 141642904.87
Non-current liabilities:
Long-term loans
Bonds payable
Including:
Preferred stock
Perpetual
capital securities
Lease liability
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 141707315.87
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 -211855430.41
Total owner’ s equity 295284661.34 295284661.34
Total liabilities and owner’
s equity
436991977.21 436991977.21
Explanation on adjustment
N/A
(4) Retrospective adjustment of early comparison data description when initially implemented the new financial
instrument standards and new leasing standards since 2019
□ Applicable √ Not applicable
VI. Taxes
1. Major tax and tax rate
Taxes Taxation basis Tax rate
VAT Domestic sales revenue 16%. 13%. 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 0% 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 2019 was 15%.VII. Notes to main items in consolidated financial statement
1. Monetary fund
RMB/CNY
Item Closing balance Opening balance
Cash on hand 432301.32 236354.29
Bank deposit 37660862.75 28935450.70
Other monetary fund 2336.93 4936525.28
Total 38095501.00 34108330.27
Other explanation
Other monetary funds are bank acceptance draft deposit
2. Note receivable
(1) Category
RMB/CNY
Item Closing balance Opening balance
Bank acceptance bill 56817845.23
Commercial acceptance bill 12367671.48
Total 69185516.71
RMB/CNY
Category
Closing balance Opening balance
Book balance
Bad debt
provision Book
value
Book balance Bad debt provision
Book
value Amoun
t
Proport
ion
Amoun
t
Accrua
l ratio
Amoun
t
Proport
ion
Amount
Accrual
ratio
Including:
Including:
Accrual of bad debt provision on single basis:
RMB/CNY
Name
Closing balance
Book balance Bad debt provision Accrual ratio Accrual causes
Accrual of bad debt provision on portfolio:
RMB/CNY
Name
Closing balance
Book balance Bad debt provision Accrual ratio
Explanation on portfolio basis:
If the provision for bad debts of note receivable is made in accordance with the general model of expected credit losses please refer to
the disclosure of other receivables to disclose related information about bad-debt provisions:
□ Applicable √Not applicable
3. Account receivable
(1) Category
RMB/CNY
Category
Closing balance Opening balance
Book balance
Bad debt
provision Book
value
Book balance Bad debt provision
Book
value Amoun
t
Proport
ion
Amoun
t
Accrua
l ratio
Amoun
t
Proport
ion
Amoun
t
Accrual
ratio
Account receivable
with bad debt
provision accrual
on a single basis
13146
290.18
8.65%
13146
290.18
100.00
%
0.00
13144
007.21
10.12%
13144
007.21
100.00
%
0.00
Including:
Account receivable
with bad debt
provision accrual
by combination
13875
9879.4
9
91.35
%
4188.0
6
0.00%
13875
5691.4
3
11679
8645.7
9
89.88% 811.28 0.00%
116797
834.51
Including:
Including:
combination 1:
Take account ages
of receivables as a
combination of
credit risk
characteristics
13875
9879.4
9
91.35
%
4188.0
6
0.00%
13875
5691.4
3
11679
8645.7
9
89.88% 811.28 0.00%
116797
834.51
Total
15190
6169.6
7
100.00
%
13150
478.24
8.66%
13875
5691.4
3
12994
2653.0
0
100.00
%
13144
818.49
10.12%
116797
834.51
Accrual of bad debt provision on single basis: 13146290.18
RMB/CNY
Name
Closing balance
Book balance Bad debt provision Accrual ratio Accrual causes
Hong Kong Haowei 1870887.18 1870887.18 100.00% Uncollectible
Industrial Co. Ltd.
TCL ACE ELECTRIC
APPLIANCE
(HUIZHOU) CO.
LTD.
1325431.75 1325431.75 100.00% Uncollectible
Qingdao Haier Parts
Procurement Co. Ltd.
1225326.15 1225326.15 100.00% Uncollectible
SKYWORTH
Multimedia
(Shenzhen) Co. Ltd.
579343.89 579343.89 100.00% Uncollectible
Shenzhen Portman
Bowling Club Co.
Ltd.
2555374.75 2555374.75 100.00% Uncollectible
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
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 145087.14 145087.14 100.00% Uncollectible
(Hong Kong) Co. Ltd.Huizhou TCL Xinte
Electronics Co. Ltd.
142707.14 142707.14 100.00% Uncollectible
Sky Worth – RGB
Electronic Co. Ltd.
133485.83 133485.83 100.00% Uncollectible
Other 2039896.72 2039896.72 100.00% Uncollectible
Total 13146290.18 13146290.18 -- --
Accrual of bad debt provision on single basis:
RMB/CNY
Name
Closing balance
Book balance Bad debt provision Accrual ratio Accrual causes
Accrual of bad debt provision on portfolio: 4188.06
RMB/CNY
Name
Closing balance
Book balance Bad debt provision Accrual ratio
Within one year 138678646.05
1-2 years 78705.66 3935.28 5.00%
2-3 years 2527.78 252.78 10.00%
Over 3 years
Total 138759879.49 4188.06 --
Explanation on portfolio basis:
Take account ages of receivables as a combination of credit risk characteristics
Accrual of bad debt provision on portfolio:
RMB/CNY
Name
Closing balance
Book balance Bad debt provision Accrual ratio
Explanation on portfolio basis:
Nil
Accrual of bad debt provision on portfolio:
RMB/CNY
Name
Closing balance
Book balance Bad debt provision Accrual ratio
Explanation on portfolio basis:
If the provision for bad debts of accounts receivable is made in accordance with the general model of expected credit losses please
refer to the disclosure of other receivables to disclose related information about bad-debt provisions:
□ Applicable √ Not applicable
By account age
RMB/CNY
Account ages Book balance
Within one year (one year included) 138678646.05
1-2 years 78705.66
2-3 years 2527.78
Over 3 years 13146290.18
Over 5 years 13146290.18
Total 151906169.67
(2) Bad debt provision accrual collected or reversal in the period
Bad debt provision accrual in the period:：
RMB/CNY
Category
Opening
balance
Amount changed in the period
Closing
balance Accrual
Collected or
reversal
written-off Other
Take account
ages of
receivables as a
combination of
credit risk
characteristics
811.28 5659.75 6471.03
Total 811.28 5659.75 6471.03
Including major amount bad debt provision that collected or reversal in the period:
RMB/CNY
Company Amount collected or reversal Way of collection
Nil
(3) Top 5 account receivables collected by arrears party at ending balance
RMB/CNY
Company
Closing balance of account
receivable
Proportion in total acount
receivables at year-end
Closing balance of bad debt
provision
Qingdao Haidayuan
Purchasing Service Co.Ltd.
65447634.65 43.08%
Hong Kong Yutian
International Investment
Co. Ltd.
25582267.94 16.84%
ViewSonic Technology
(China) Co. Ltd.
12410110.25 8.17%
Viewsonic International
Coperation
8106932.08 5.34%
Xiamen Edmond
Electronic Technology
Co. Ltd.
7409898.88 4.88%
Total 118956843.80 78.31%
4. Receivable financing
RMB/CNY
Item Closing balance Opening balance
Note receivable 42096834.02
Total 42096834.02
Receivable financing Changes in the period and changes in fair value
□ Applicable √ Not applicable
If the provision for bad debts of accounts receivable is made in accordance with the general model of expected credit losses please
refer to the disclosure of other receivables to disclose related information about bad-debt provisions:
□ Applicable √ Not applicable
Other explanation:
The amount of pledged notes receivable at the end of the year is 16762424.96 yuan and the amount of notes receivable endorsed or
discounted at the end of the year but not yet due at the balance sheet date is 103461070.37 yuan. At the end of the year there is no bill
converted into accounts receivable due to the drawer's failure to perform the contract.
5. Accounts paid in advance
(1) By account age
RMB/CNY
Account ages
Closing balance Opening balance
Amount Ratio Amount Ratio
Within one year 22879096.29 99.44% 31254429.54 99.70%
1-2 years 128541.17 0.56% 94000.00 0.30%
Total 23007637.46 -- 31348429.54 --
Explanation on reasons of failure to settle on important account paid in advance with age over one year:
Nil
(2) Top 5 account paid in advance at ending balance by prepayment object
Company Closing balance Proportion in total accounts paid in
advance (%)
Hong Kong Yutian International Investment
Co. Ltd.
13902631.23 60.43
Haier Digital Technology (Qingdao) Co.Ltd.
6772918.25 29.44
Haier Digital Technology (Shanghai) Co.Ltd.
926683.93 4.03
Guangzhou Shikun Electronic Technology
Co. Ltd.
638467.37 2.78
Shengya Asia Technology (Shenzhen) Co.Ltd.
140000.00 0.61
Total 22380700.78 97.28
Other explanation:
Nil
6. Other account receivable
RMB/CNY
Item Closing balance Opening balance
Other account receivable 6351361.16 5777179.08
Total 6351361.16 5777179.08
(1) Other account receivable
1) Other account receivable by nature
RMB/CNY
Nature Closing book balance Opening book balance
Margin & deposit 1583408.99 1793485.04
Borrow money 1944700.12 1973013.76
Intercourse funds 11534893.51 6647012.36
Rental receivable 5847389.48 6626917.46
Other 505560.36 3997620.50
Less: Bad debt provision -15064591.30 -15260870.04
Total 6351361.16 5777179.08
2) Accrual of bad debt provision
RMB/CNY
Bad debt provision
Phase I Phase II Phase III
Total
Expected credit
losses over next 12
months
Expected credit losses for
the entire duration
(without credit
impairment occurred)
Expected credit losses for
the entire duration (with
credit impairment
occurred)
Balance on1 Jan. 2019 141281.55 15119588.49 15260870.04
Balance of 1 Jan. 2019
in the period
—— —— —— ——
Accrual in current
period
208688.65 279286.17 487974.82
Reversal in current
period
97438.68 586814.88 684253.56
Balance on Dec. 31
2019
252531.52 14812059.78 15064591.30
Change of book balance of loss provision with amount has major changes in the period
□ Applicable √ Not applicable
By account age
RMB/CNY
Account ages Book balance
Within one year (one year included) 5360212.08
Within one year 5360212.08
1-2 years 447862.44
Over 3 years 15607877.94
3-4 years 2389726.00
Over 5 years 13218151.94
Total 21415952.46
3) Bad debt provision accrual collected or reversal in the period
Bad debt provision accrual in the period:：
RMB/CNY
Category
Opening
balance
Amount changed in the period
Closing balance
Accrual
Collected or
reversal
written-off Other
Phase I 141281.55 208688.65 97438.68 252531.52
Phase III
15119588.
49
279286.17 586814.88 14812059.78
Total
15260870.
04
487974.82 684253.56 15064591.30
Nil
Including the important amount collected or switches back in the period：
RMB/CNY
Company Amount collected or switches back Way of collection
Zhao Baomin 553901.68 Recovery by court
Total 553901.68 --
Nil
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 receivable 4021734.22 Over 3 years 18.78% 4021734.22
Shenzhen Jifang
Investment Co.Ltd
Rental receivable 1380608.00 Over 3 years 6.45% 1380608.00
Fujian Jielian
Electronics Co.
Ltd.Margin & deposit 800000.00 Over 3 years 3.74% 240000.00
Compensation for
traffic accidents
Intercourse funds 555785.81 Over 3 years 2.60% 555785.81
Hebei Botou Court Intercourse funds 520021.00 Over 3 years 2.43% 520021.00
Total -- 7278149.03 -- 33.98% 6718149.03
7. Inventories
Whether implemented the new revenue standards
√ Y □ N
(1) Category
RMB/CNY
Item
Closing balance Opening balance
Book balance Inventories fall Book value Book balance Inventories fall Book value
provision or
contract
performance
costs
impairment
provision
provision or
contract
performance
costs
impairment
provision
Raw materials 33817180.23 2844484.06 30972696.17 39497353.01 1695940.61 37801412.40
Inventory
goods
27590425.68 486362.31 27104063.37 24483140.41 1543123.71 22940016.70
Homemade
semi-finished
products
8775225.16 232090.00 8543135.16 2175657.06 124384.26 2051272.80
Low priced and
easily worn
articles
463639.07 111981.81 351657.26 216771.16 35563.68 181207.48
Total 70646470.14 3674918.18 66971551.96 66372921.64 3399012.26 62973909.38
(2) Inventories fall provision or contract performance costs impairment provision
RMB/CNY
Item
Opening
balance
Current increased Current decreased
Closing
balance Accrual Other
Reversal or
write-off
Other
Raw materials 1695940.61 1148543.45 2844484.06
Inventory
goods
1543123.71 1056761.40 486362.31
Homemade
semi-finished
products
124384.26 107705.74 232090.00
Low priced and
easily worn
articles
35563.68 76418.13 111981.81
Total 3399012.26 1332667.32 1056761.40 3674918.18
The decline in inventory combined with sluggishness and aging is accrued at net realizable value and some
inventory goods are sold off.
8. Other current assets
Whether implemented the new revenue standards
√ Y □ N
RMB/CNY
Item Closing balance Opening balance
Value-added tax to be deducted 1352757.06 17055.88
Advance payment of income tax 42314.30 42314.30
Total 1395071.36 59370.18
Other explanation:
Nil
9. 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 82980364.08 82980364.08
2.Current increased 1728330.29 1728330.29
(1) Accrual or
amortization
1728330.29 1728330.29
3.Current decreased
(1) Disposal
(2) other transfer-out
4.Closing balance 84708694.37 84708694.37
三. Impairment
provision
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 48952992.57 48952992.57
2.Opening book value 50681322.86 50681322.86
10. Fixed assets
RMB/CNY
Item Closing balance Opening balance
Fixed assets 105372345.62 95226401.69
Disposal of fixed assets 92857471.69 92857471.69
Total 198229817.31 188083873.38
(1) Fixed asset
RMB/CNY
Item
House
building
Machinery
equipment
Means of
transportati
Office
equipment
Instrument
equipment
Tool
equipment
Mold
equipment
Total
on
I. Original
book value
1.Opening
balance
65608798
.85
90197960
.43
5960519.
70
6325043.
73
3137707.
65
6552700.
16
16231125
.01
19401385
5.53
2.Current
increased
7591818.
56
5894639.
83
413065.19 883365.75 85910.41
2885542.
77
4421333.
33
22175675
.84
(1)
Purchasing
39042.10
5894639.
83
413065.19 883365.75 85910.41
2885542.
77
4421333.
33
14622899
.38
(2)Constru
ction in
process
transfer-in
7552776.
46
7552776.
46
(3)increase
d by
combinatio
n
3.Current
decreased
1446345.
31
203000.00 28266.09 12210.00 85470.09
1775291.
49
(1)
Disposal or
scrapping
1446345.
31
203000.00 28266.09 12210.00 85470.09
1775291.
49
4.Closing
balance
73200617
.41
94646254
.95
6170584.
89
7180143.
39
3211408.
06
8754968.
35
21250262
.83
21441423
9.88
II.
Accumulati
ve
depreciatio
n
1.Opening
balance
16797572
.46
58664225
.14
4178805.
31
4171441.
92
2479255.
54
2960180.
84
9535972.
63
98787453
.84
2.Current
increased
1990962.
81
3915991.
50
655958.62 866630.09 105051.60 891253.60
3304267.
07
11730115
.29
(1)Accrual
1990962.
81
3915991.
50
655958.62 866630.09 105051.60 891253.60
3304267.
07
11730115
.29
3.Current
decreased
1219090.
30
182700.00 20587.89 10989.00 42307.68
1475674.
87
(1)
Disposal or
scrapping
1219090.
30
182700.00 20587.89 10989.00 42307.68
1475674.
87
4.Closing
balance
18788535
.27
61361126
.34
4652063.
93
5017484.
12
2573318.
14
3809126.
76
12840239
.70
10904189
4.26
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
54412082
.14
33285128
.61
1518520.
96
2162659.
27
638089.92
4945841.
59
8410023.
13
10537234
5.62
2.Opening
book value
48811226
.39
31533735
.29
1781714.
39
2153601.
81
658452.11
3592519.
32
6695152.
38
95226401
.69
(2) Fixed assets leasing-out by operational lease
RMB/CNY
Item Ending Book value
House building 800418.77
(3) Disposal of fixed assets
RMB/CNY
Item Closing balance Opening balance
Renovation of Gongming Huafa Electric
Town
92857471.69 92857471.69
Total 92857471.69 92857471.69
Other explanation
11. Construction in process
RMB/CNY
Item Closing balance Opening balance
Construction in process 5727760.23
Total 5727760.23
(1) Construction in process
RMB/CNY
Item
Closing balance Opening balance
Book balance
Impairment
provision
Book value Book balance
Impairment
provision
Book value
Expansion of
Plant 3 item
5727760.23 5727760.23
Total 5727760.23 5727760.23
(2) Change of major construction in process in the period
RMB/CNY
Item Budget
Openi
ng
balanc
e
Curren
t
increas
ed
Fixed
assets
transfe
r-in in
the
Period
Other
decrea
sed in
the
Period
Closin
g
balanc
e
Propor
tion of
project
invest
ment
in
budget
Progre
ss
Accum
ulated
amoun
t of
interes
t
capital
ization
includi
ng:
interes
t
capital
ized
amoun
t of the
year
Interes
t
capital
ization
rate of
the
year
Source of
funds
Expan
sion of
Plant 3
item
5727
760.23
5727
760.23
Total
5727
760.23
5727
760.23
-- -- --
12. 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
3034537.44 3034537.44
(1)
Purchasing
3034537.44 3034537.44
(2) internal
R&D
(3)increased by
combination
3.Current
decreased
(1)
Disposal
4.Closing
balance
55089774.36 3696416.41 58786190.77
II. Accumulated
amortization
1.Opening
balance
13434017.64 501945.95 13935963.59
2.Current
increased
1445488.89 326709.95 1772198.84
(1)Accrual 1445488.89 326709.95 1772198.84
3.Current
decreased
(1)
Disposal
4.Closing
balance
14879506.53 828655.90 15708162.43
III. Depreciation
reserves
1.Opening
balance
2.Current
increased
109427.90 109427.90
(1)Accrual 109427.90 109427.90
3.Current
decreased
(1) Disposal
4.Closing
balance
109427.90 109427.90
IV. Book value
1.Ending 40210267.83 2758332.61 42968600.44
book value
2.Opening
book value
41655756.72 159933.02 41815689.74
The proportion of intangible assets form by internal R&D in total book value of intangible assets at period-end
13. Long-term deferred expenses
RMB/CNY
Item Opening balance Current increased
Amortized in
Period
Other decreased Closing balance
Amortization of
cloud service fees
542116.99 232335.84 309781.15
Total 542116.99 232335.84 309781.15
Other explanation
14. Deferred income tax assets/Deferred income tax liabilities
(1) Deferred income tax assets without offset
RMB/CNY
Item
Closing balance Opening balance
Deductible temporary
differences
Deferred income tax
assets
Deductible temporary
differences
Deferred income tax
assets
Provision for assets
impairment
28835877.80 6787257.25 28641162.96 6813753.84
Accrual liability 64411.00 16102.75 64411.00 16102.75
Total 28900288.80 6803360.00 28705573.96 6829856.59
(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
assets
6803360.00 6829856.59
(3) Deferred income tax asset without recognized
RMB/CNY
Item Closing balance Opening balance
Deductible temporary differences 3163837.81 3163837.81
Deductible loss 1427605.96
Total 3163837.81 4591443.77
15. Other non-current assets
Whether implemented the new revenue standards
√ Y □ N
RMB/CNY
Item
Closing balance Opening balance
Book
balance
Impairment
provision
Book value
Book
balance
Impairment
provision
Book value
Advance payment for engineering 80000.00 80000.00
Advance payment for equipment 225700.00 225700.00 357810.00 357810.00
Advance payment for intangible assets
2721154.
00
2721154.
00
Total 225700.00 225700.00
3158964.
00
3158964.
00
Other explanation:
16. Short-term borrowings
(1) Category
RMB/CNY
Item Closing balance Opening balance
Loan in pledge 12000000.00 13500000.00
Secured portfolio loan 12633898.20 148068657.88
Total 24633898.20 161568657.88
Explanation on category of Short-term loans
Nil
17. Notes payable
RMB/CNY
Category Closing balance Opening balance
Bank acceptance bill 16761590.51 17642356.66
Letter of credit 10000000.00
Total 16761590.51 27642356.66
Totally 0 Yuan due note payable are paid at period-end
18. Account payable
(1) Account payable
RMB/CNY
Item Closing balance Opening balance
Within one year (one year included) 95647603.05 48686573.85
Over one year 13157302.15 12288732.58
Total 108804905.20 60975306.43
(2) Major account payable over one year
RMB/CNY
Item Closing balance Reasons for non-payment or carry over
Shenzhen Yuehai Global Logistics Co.Ltd.
2858885.97 Without settlement
LG 1906267.50 Without settlement
Dongjin Electronics (Nanjing) Plasma
Co. Ltd.
617963.45 Without settlement
Total 5383116.92 --
Other explanation:
Nil
19. Accounts received in advance
Whether implemented the new revenue standards
√ Y □ N
(1) Accounts received in advance
RMB/CNY
Item Closing balance Opening balance
Within one year (one year included) 257789.27 139961.60
Over one year 98656.94 19567.00
Total 356446.21 159528.60
20. Wage payable
(1) Wage payable
RMB/CNY
Item Opening balance
Increase during the
period
Decrease during this
period
Closing balance
I. Short-term benefits 4700208.36 61598913.85 60450469.42 5848652.79
II. Post-employment
benefits-defined
contribution plans
4537771.29 4509082.83 28688.46
III. Dismiss welfare 208190.30 208190.30
Total 4700208.36 66344875.44 65167742.55 5877341.25
(2) Short-term benefits
RMB/CNY
Item Opening balance
Increase during the
period
Decrease during this
period
Closing balance
1. Wages bonuses
allowances and subsidies
3720025.80 54370174.64 53236136.41 4854064.03
2. Employee benefits 4580070.92 4580070.92
3. Social insurance
premium
23041.98 2220880.78 2206474.58 37448.18
Including:
Medical insurance
23041.98 1953519.63 1940842.69 35718.92
Work
injury insurance
110913.75 110173.02 740.73
Maternity
insurance
156447.40 155458.87 988.53
4. Housing
accumulation fund
24310.00 310133.88 310133.88 24310.00
5. Labor union
expenditure and
personnel education
expense
932830.58 117653.63 117653.63 932830.58
Total 4700208.36 61598913.85 60450469.42 5848652.79
(3) Defined contribution plans
RMB/CNY
Item Opening balance
Increase during the
period
Decrease during this
period
Closing balance
1. Basic endowment
insurance
4372268.24 4344706.65 27561.59
2. Unemployment
insurance
165503.05 164376.18 1126.87
Total 4537771.29 4509082.83 28688.46
Other explanation:
Nil
21. Taxes payable
RMB/CNY
Item Closing balance Opening balance
VAT 3192458.47 3432174.00
Corporate income tax 7032715.76 5683136.41
Individual income tax 30265.20 45962.89
Urban maintenance and construction tax 1050282.59 547965.38
Property tax 310683.11 290438.28
Land use tax 25424.98 75345.69
Educational surtax 450889.35 235610.56
Local educational surtax 234049.86 126852.76
Dike fee 1665.00 1665.00
Stamp tax 39940.66 24738.90
Disposal fund of waste electrical
products
509570.00 768930.00
Total 12877944.98 11232819.87
Other explanation:
Nil
22. Other accounts payable
RMB/CNY
Item Closing balance Opening balance
Interest payable 89365.28 439558.70
Other accounts payable 27938227.34 26339305.22
Total 28027592.62 26778863.92
(1) Interest payable
RMB/CNY
Item Closing balance Opening balance
Interest of short-term loans payable 89365.28 439558.70
Total 89365.28 439558.70
Significant overdue and unpaid interest:
RMB/CNY
Loan unit Overdue amount Reason for overdue
Other explanation:
(2) Dividend payable
RMB/CNY
Item Closing balance Opening balance
Other explanation including important Dividend payables that have not been paid for more than 1 year the reasons for non-payment
should be disclosed:
(3) Other accounts payable
1) Other account payable by nature
RMB/CNY
Item Closing balance Opening balance
Margin & deposit 10354134.67 10914478.12
Lease management fee 3251610.67 2612566.67
Intercourse funds 8544383.61 7531055.87
After sale and repairment 1747809.47 1696994.97
Other 4040288.92 3584209.59
Total 27938227.34 26339305.22
2) Significant other account payable with over one year age
RMB/CNY
Item Closing balance Reasons for non-payment or carry over
Shenzhen SED Property Development 1853393.35 Without settlement
Co. Ltd.
Shenzhen Huayongxing Environmental
Protection Technology Co. Ltd.
1000000.00 Margin
Linghang Technology (Shenzhen) Co.Ltd
656345.28 Without settlement
Shenzhen Tongxing Electronics Co.Ltd.
578259.83 Without settlement
Shenzhen Yongdasheng Investment
Development Co. Ltd.
558970.00 Margin
Total 4646968.46 --
Other explanation
Nil
23. Non-current liabilities due within one year
RMB/CNY
Item Closing balance Opening balance
Long-term loans due within one year 12000000.00
Total 12000000.00
Other explanation:
Nil
24. Long-term loans
(1) Category
RMB/CNY
Item Closing balance Opening balance
Mortgage loan 73000000.00
Total 73000000.00
Description of Long-term loans classification:
Nil
Other explanation including interest rate range:
Interest rate range 7.9166 ‰
25. Accrual liability
Whether implemented the new revenue standards
√ Y □ N
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:
Nil
26. Deferred income
RMB/CNY
Item Opening balance
Increase during
the period
Decrease during
this period
Closing balance Causes
Government
subsidy
2590800.00 259080.00 2331720.00
Industrial
transformation
subsidies
Total 2590800.00 259080.00 2331720.00 --
Items involving Government subsidy:
RMB/CNY
Liability
Opening
balance
New
subsidy
increased
in the
period
Amount
reckoned
in
non-operat
ing
income in
the period
Amount
included
in other
income in
the current
period
Amount of
cost and
expense
offset in
the current
period
Other
change
Closing
balance
Assets-rel
ated/Inco
me-related
Incentive
fund for
Wuhan
industrial
intelligent
transforma
tion
demonstra
tion
project in
2019
2000000.
00
200000.0
0
1800000.00
Assets-rel
ated
Provincial
special
fund for
transforma
tion and
upgrading
590800.0
0
59080.00 531720.00
Assets-rel
ated
of
traditional
industry
for 2018
Other explanation:
Nil
27. Share capital
In RMB
Opening
balance
Changes in the Period (+-)
Closing
balance
Issuing new
shares
Bonus shares
Shares
transfer from
public
reserves
Other Subtotal
Total shares
283161227.
00
283161227.
00
Other explanation:
Ended as 31 December 2019 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 119289894 shares.
28. Capital public reserve
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 public
reserve
50085368.48 50085368.48
Total 146587271.50 146587271.50
Other explanation including changes and reasons of changes:
Nil
29. Surplus public reserve
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
30. Retained profit
RMB/CNY
Item Current period Last period
Retained profit at the end of the previous period
before adjustment
-183172091.01 -186467113.73
Retained profit at period-begin after adjustment -183172091.01 -186467113.73
Add: net profit attributable to owners of the
parent company
5460049.15 3295022.72
Retained profit at period-end -177712041.86 -183172091.01
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
31. Operating revenue and cost
RMB/CNY
Item
Current Period Last Period
Revenue Cost Revenue Cost
Main business 646532884.16 596169654.97 582037124.29 545577228.99
Other business 75024556.35 38332472.38 55009582.74 21114247.50
Total 721557440.51 634502127.35 637046707.03 566691476.49
Whether implemented the new revenue standards
√ Y □ N
Information relating to revenue:
RMB/CNY
Category Branch 1 Branch 2 Total
Including:
Including:
Including:
Including:
Including:
Including:
Including:
Information relating to performance obligations:
Nil
Information related to the transaction price apportioned to the remaining performance obligations:
The amount of income corresponding to the performance obligations that have been signed at the end of this reporting period but
have not yet been fulfilled or have not done with fulfillment is 0.00 yuan among them yuan of revenue is expected to be recognized
in YEAR yuan of revenue is expected to be recognized in YEAR and yuan of revenue is expected to be recognized in YEAR.Other explanation
32. Tax and surcharges
RMB/CNY
Item Current Period Last Period
Urban maintenance and construction tax 804287.45 920169.24
Educational surtax 344694.60 394358.26
Property tax 1521853.12 1331816.18
Land use tax 579168.99 710368.64
Vehicle use tax 24828.58 6540.00
Stamp tax 443943.26 407261.30
Local education development fee 181494.42 205470.79
Total 3900270.42 3975984.41
Other explanation:
Nil
33. Sales expense
RMB/CNY
Item Current Period Last Period
Employee compensation 4301179.20 4042578.84
Freight 6467421.32 4452902.42
Commodity inspection fee 876706.96 675532.35
Customs fee 143589.91 202996.81
Commodity loss 3797231.43 755506.56
After-sales service fee 4383391.47 3046552.35
Business entertainment expense 184161.63 338626.00
Other 725575.05 585551.84
Total 20879256.97 14100247.17
Other explanation:
Increase of the sales expenses in the period mainly because increase of the export declaration and long-distance freight the return
and exchange expenses are directly included in the current expenses.
34. Administrative expense
RMB/CNY
Item Current Period Last Period
Salary 10633657.05 9019534.64
Depreciation charge 2158804.24 1682743.00
Social insurance premium 2484358.93 2656825.97
Business entertainment expense 4726829.54 3031992.90
Employee benefits 932274.48 1452996.99
Travel expenses 1012373.74 1472496.29
Amortization of intangible assets 1772198.84 1491626.63
Traffic expenses 757169.92 1319577.46
Consulting fee 1059054.98 1368885.21
Security 1111784.83 1911021.67
Repairs 2266890.44 3126804.08
Audit fee 773163.57 778988.81
Office expenses 1247596.34 1364212.02
Communication fee 209777.84 317611.81
Amortization of low cost and short lived
articles
190664.39 798387.40
Securities information disclosure fee 344524.44 392164.56
Litigation fee 53050.00 28055.00
Lease fee 4395032.42 4711758.56
Staff education and labor union funds
Staff education and labor union funds
117653.63 83620.77
Water and electricity 646754.82 622054.17
Other expenses 1140457.19 883847.21
Total 38034071.63 38515205.15
Other explanation:
Nil
35. R& D expenses
RMB/CNY
Item Current Period Last Period
Employee compensation 4804190.42
Direct material input 390914.57
Depreciation and amortization 650145.58
Power and manufacturing cost 698061.22
Other 105851.23
Total 6649163.02
Other explanation:
Nil
36. Financial expense
RMB/CNY
Item Current Period Last Period
Interest costs 10638951.99 12785854.43
Less: Interest income 631958.95 656538.09
Exchange loss 4801837.04 4895989.78
Less: exchange gains 5145385.72 6915754.78
Handing expense 281574.56 206052.11
Other expense 1760.00 1160.00
Total 9946778.92 10316763.45
Other explanation:
Nil
37. Other income
RMB/CNY
Sources Current Period Last Period
Stabilization subsidy 139020.00
Subsidy for R&D input 785000.00
Incentive fund for Wuhan industrial
intelligent transformation demonstration
project in 2019
200000.00
Provincial special fund for
transformation and upgrading of
traditional industry for 2018
59080.00
Total 259080.00 924020.00
38. Investment income
RMB/CNY
Item Current Period Last Period
Investment income from financial products 180964.60 326439.49
Total 180964.60 326439.49
Other explanation:
Nil
39. Credit impairment loss
RMB/CNY
Item Current Period Last Period
Bad debt loss of other account receivable 196278.74
Credit impairment loss of account
receivable
-5659.75
Total 190618.99
Other explanation:
Nil
40. Losses on assets impairment
Whether implemented the new revenue standards
√ Y □ N
RMB/CNY
Item Current Period Last Period
I. Bad debt loss 13140.19
II. Inventory falling price loss and
impairment loss of contract performance
cost
-275905.92 -713636.83
XII. Impairment loss of Intangible assets -109427.90
Total -385333.82 -700496.64
Other explanation:
Nil
41. 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
9298.34 49159.75
Total 9298.34 49159.75
42. Non-operating income
RMB/CNY
Item Current Period Last Period
Amount included in current
non-recurring profits or losses
Government subsidy 275300.00 2871800.00 275300.00
Fine income 40702.97 3314.07 40702.97
Other 18947.69 11696.99 18947.69
Total 334950.66 2886811.06 334950.66
Government subsidy reckoned into current gains/losses:
RMB/CNY
Item
Issuing
subject
Offering
causes
Nature
Subsidy
impact
current
gains/losse
s (Y/N)
The special
subsidy
(Y/N)
Amount in
the Period
Amount in
last period
Assets-rela
ted/Income
-related
Subsidy for
cultivating
enterprises
Wuhan
Science &
Technolog
y Bureau
(Wuhan
Intellectual
Property
Office)
Subsidy
Subsidy
obtained
for
conforms
with the
local
support
policy for
investment
incentive to
Y N 50000.00
Income-rel
ated
encourage
investment
2018
municipal
foreign
trade fund
Ministry of
Finance of
Wuhan
Subsidy
Subsidy
obtained
for
conforms
with the
local
support
policy for
investment
incentive to
encourage
investment
Y N 50000.00 271800.00
Income-rel
ated
Enterprise
developme
nt bonus
Manageme
nt
committee
of Wuhan
Caidian
Economic
Developme
nt Zone
Award
Subsidy
obtained
for
conforms
with the
local
support
policy for
investment
incentive to
encourage
investment
Y N
1900000.
00
Income-rel
ated
Subsidy for
recognition
of Hi-Tech
Enterprises
in 2018
Bureau of
Science
Technolog
y and
Economic
Informatio
n of
Caidian
District
Wuhan
Subsidy
Subsidiarie
s acquired
due to
R&D
technology
update and
transformat
ion etc.Y N 50000.00
Income-rel
ated
Trade
developme
nt guide
fund
Bureau of
Commerce
in Wuhan
Caidian
District
Subsidy
Subsidy
obtained
for
conforms
with the
local
support
Y N 150000.00
Income-rel
ated
policy for
investment
incentive to
encourage
investment
Subsidy for
science and
technology
innovation
platform
for 2017
Bureau of
Science
Technolog
y and
Economic
Informatio
n of
Caidian
District
Wuhan
Subsidy
Subsidiarie
s acquired
due to
R&D
technology
update and
transformat
ion etc.Y N 300000.00
Income-rel
ated
2017
central
foreign
trade and
economic
cooperatio
n special
fund
(promoting
the
developme
nt of
processing
trade in
central and
western
China)
Ministry of
Finance of
Wuhan
Subsidy
Subsidy
obtained
for
conforms
with the
local
support
policy for
investment
incentive to
encourage
investment
Y N 150000.00
Income-rel
ated
Job search
and
entreprene
urship
subsidy
received
for
injection
molding
Labor and
employme
nt
administrat
ion bureau
of Wuhan
Caidian
District
Subsidy
Subsidy
obtained
for
conforms
with the
local
support
policy for
investment
incentive to
encourage
Y N 6000.00
Income-rel
ated
investment
Award for
excellent
enterprises
in 2018
Financial
branch of
Economic
Developme
nt Zone of
Wuhan
Caidian
Award
Subsidy
obtained
for
conforms
with the
local
support
policy for
investment
incentive to
encourage
investment
Y N 200000.00
Income-rel
ated
Foreign
trade funds
at
provincial
level in
2018
Zero
balance
special
account of
Wuhan
Finance
Bureau
Subsidy
Subsidy
obtained
for
conforms
with the
local
support
policy for
investment
incentive to
encourage
investment
Y N 17300.00
Income-rel
ated
Provincial
foreign
economic
and trade
developme
nt project
Departmen
t of
Commerce
of Hubei
Province
Subsidy
Subsidy
obtained
for
conforms
with the
local
support
policy for
investment
incentive to
encourage
investment
Y N 2000.00
Income-rel
ated
Other explanation:
Nil
43. Non-operating expenditure
RMB/CNY
Item Current Period Last Period
Amount included in current
non-recurring profits or losses
Loss on debt restructuring 484592.52 181801.76 484592.52
Loss on exchange of
non-monetary assets
2158200.00
External donation 1005.00
Total 484592.52 2341006.76
Other explanation:
Nil
44. Income tax expense
(1) Statement of income tax expense
RMB/CNY
Item Current Period Last Period
Current income tax expense 2264212.71 1395622.14
Deferred income tax expense 26496.59 -98687.60
Total 2290709.30 1296934.54
(2) Adjustment on accounting profit and income tax expenses
RMB/CNY
Item Current Period
Total profit 7750758.45
Income tax based on statutory/applicable rate 1937689.61
Impact by different tax rate applied by subsidies -251490.04
Effect of adjusting the income tax in previous period -14546.09
Impact of non-taxable income 1339362.52
Impact of deductible loss of un-recognized deferred income
tax assets in the prior period of use
27724.13
Extra tax deduction for R&D costs -748030.84
Income tax expense 2290709.30
Other explanation
Nil
45. Annotation of cash flow statement
(1) Cash received with other operating activities concerned
RMB/CNY
Item Current Period Last Period
Unit intercourse account 2484797.74 111961826.54
Collection management fee and utilities
etc.
2977706.16 3382270.33
Repayment from employees 160311.00 63050.23
Margin deposit 3289643.20 3655539.50
Interest income 689183.43 146904.87
Refunds 597038.28 25925884.92
Claim deduction etc. 722943.15 191650.09
Government subsidy 2866100.00 3795820.00
Other 10871.01
Total 13798593.97 149122946.48
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 1975618.44 126247786.47
Advances to employees 879995.14 991373.48
Litigation fee 81105.00
Margin deposit 8161965.07 1181899.00
Entertainment expense 4471380.81 3000255.62
Water and electricity 1493292.41 388342.19
Travel expenses 1117219.86 1437228.54
Freight 5104276.56 3868873.39
Traffic expenses 870970.33 1109528.61
Repairs 2153601.68 856969.82
Audit fees consulting fees 3008697.45 2392374.59
Security 812676.00 457335.66
Financial institutions handling fee 120224.97 187021.74
Office expenses 724155.68 881794.91
Communication fee 223819.12 294321.76
Lease fee 3386329.51 4711758.56
Other 1357458.71 1411122.02
Refunds 9058.00 42523.31
Commodity inspection fee 310390.97 141794.01
After-sales service fee 1055553.88 1265862.21
Fines and indemnities 17499.71 857970.32
Securities information disclosure fee 344524.44 392164.56
Total 37598708.74 152199405.77
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
75000000.00 144000000.00
Total 75000000.00 144000000.00
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 75000000.00 144000000.00
Total 75000000.00 144000000.00
Note of cash paid related with investment activities
Nil
46. 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 5460049.15 3295022.72
Add: Assets impairment provision 1114001.22 700496.64
Depreciation of fixed assets
consumption of oil assets and depreciation
of productive biology assets
12250042.94 11640445.16
Amortization of intangible assets 1772198.84 1491626.63
Amortization of long-term
deferred expenses
232335.84 296557.11
Loss from disposal of fixed
assets intangible assets and other
long-term assets(gain is listed with “-”)
-10298.34 -49159.75
Financial expenses (income is listed with
“-”)
10640263.89 12785854.43
Investment loss (income is listed with “-”) -180964.60 -326439.49
Decrease of deferred income tax
assets (increase is listed with “-”)
26496.59 98687.60
Decrease of inventory (increase
is listed with “-”)
-4273548.50 -2586887.73
Decrease of operating receivable
accounts (increase is listed with “-”)
18484235.02 -12126884.80
Increase of operating payable
accounts (decrease is listed with “-”)
28948894.96 -37113778.18
Net cash flow arising from
operating activities
74463707.01 -21894459.66
2. Material investment and financing not
involved in cash flow:
-- --
3. Net change of cash and cash
equivalents:
-- --
Closing balance of cash 36645061.61 27961209.60
Less: Opening balance of cash 27961209.60 66240945.59
Less: opening balance of cash
equivalent
15234028.71
Net increased amount of cash and
cash equivalent
8683852.01 -53513764.70
(2) Constitution of cash and cash equivalent
RMB/CNY
Item Closing balance Opening balance
Ⅰ. Cash 36645061.61 27961209.60
Including: Cash on hand 432301.32 236354.29
Bank deposit available for payment
at any time
36212760.29 27724855.31
III. Balance of cash and cash equivalent at
period-end
36645061.61 27961209.60
Other explanation:
Year-end Monetary fund-other monetary fund refers to the bank acceptance bond 2336.93 Yuan which is not
belonging to the cash and cash equivalent; year-end Monetary funds- bank deposit 1448102.46 yuan was frozen
by court and not belonging to the cash and cash equivalent.
47. Assets with ownership or use right restricted
RMB/CNY
Item Ending Book value Restriction reasons
Monetary funds 1450439.39
Bank acceptance margin and Court
frozen
Fixed assets 13384379.59 Bank loan secured
Intangible assets 7032797.52 Bank loan secured
Receivable financing 16762424.96 Pledged
Account receivable 20830185.59 Pledged
Investment real estate 36996301.06 Bank loan secured
Disposal of fixed assets 92857471.69 Court closure
Total 189313999.80 --
Other explanation:
Nil
48. 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 funds -- --
Including: USD 241956.84 6.9762 1687939.31
Euro
HKD 100032.66 0.8958 89609.26
Account receivable -- --
Including: USD 5828231.35 6.9762 40658907.54
Euro
HKD
Long-term loans -- --
Including: USD
Euro
HKD
Account paid in advance 2283539.58 6.9762 15930428.80
Including: USD 2283539.58 6.9762 15930428.80
Short-term borrowings 1811000.00 6.9762 12633898.20
Including: USD 1811000.00 6.9762 12633898.20
Account received in advance 14980.00 6.9762 104503.48
Including: USD 14980.00 6.9762 104503.48
Other explanation:
Nil
49. Government subsidy
(1) Government subsidy
RMB/CNY
Category Amount Item for presentation
Amount reckoned into current
gains/losses
Award for excellent
enterprises in 2018
200000.00 Non-operating income 200000.00
Foreign trade funds at
provincial level in 2018
17300.00 Non-operating income 17300.00
Job search and
entrepreneurship subsidy
6000.00 Non-operating income 6000.00
Provincial special fund for
transformation and upgrading
590800.00 Deferred income 59080.00
of traditional industry for
2018
Foreign trade funds at the
municipal level in 2018
(Export award)
50000.00 Non-operating income 50000.00
Provincial foreign economic
and trade development
project
2000.00 Non-operating income 2000.00
Incentive fund for Wuhan
industrial intelligent
transformation demonstration
project in 2019
2000000.00 Deferred income 200000.00
VIII. Equity in other subjects
1. Equity in subsidiary
(1) Constitute of enterprise group
Subsidiary
Main operation
place
Registration
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 consolidates statement:
Nil
Basis of termination of agent or consignor:
Nil
Other explanation
Nil
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 2019 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 2019-12-31(RMB conversion) 2018-12-31(RMB conversion)
Monetary funds- USD 1687939.31 2010146.81
Monetary funds- HKD 89609.26 28.62
Account receivable- USD 40658907.54 44086655.90
Account paid in advance- USD 15930428.80 19035307.91
Short-term borrowings- USD 12633898.20 25068657.88
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 2019 the Group's interest-bearing debt
was mainly the fixed rate and floating interest rate loan contract denominated in Renminbi and US dollars
amounting to RMB 109633898.20 (December 31 2018: RMB 161568657.88).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: 118956843.80 Yuan.
(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 2019
Item Within one year 1-2 years 2-3 years Over 3 years Total
Financial assets
Monetary funds 38095501.00 38095501.00
Receivable financing 42096834.02 42096834.02
Account receivable 138678646.05 78705.66 2527.78 13146290.18 151906169.67
Other account
receivable
5360212.08 447859.44 3.00 15607877.94 21415952.46
Account paid in
advance
22879096.29 128541.17 23007637.46
Financial liabilities
Short-term borrowings 24633898.20 24633898.20
Notes payable 16761590.51 16761590.51
Account payable 106393443.21 2411461.99 108804905.20
Other accounts payable 27938227.34 27938227.34
Advance receivable 257789.27 98656.94 356446.21
Wage payable 5877341.25 5877341.25
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
2019 2018
Impact on net profit Impact on owner's Impact on net profit Impact on owner's
equity equity
All foreign
currency
5% appreciation of
the RMB
-2281529.08 -2281529.08 -2003174.07 -2003174.07
All foreign
currency
5% devaluation of the
RMB
2281529.08 2281529.08 2003174.07 2003174.07
X. Related party and related transactions
1. Parent company of the enterprise
Parent company Registration place Business nature Registered capital
Share-holding
ratio on the
enterprise for
parent company
Voting right ratio
on the enterprise
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
Wuhan Henglian Optoelectronics 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
Related party Content Current Period
Trading limit
approved
Whether over the
approved limited or
not (Y/N)
Last Period
Hong Kong
Yutian
International
Investment Co.Ltd.Purchasing
display
122172251.41 170916900.00 N 127867957.79
Wuhan
Hengsheng
Photo-electricity
Industry Co. Ltd.Purchasing
display
110747651.72 125571600.00 N 73806587.19
Wuhan
Hengsheng
Photo-electricity
Industry Co. Ltd.Purchasing
display
28387151.42 83714400.00 N 33635380.66
Goods sold/labor service providing
RMB/CNY
Related party Content Current Period Last Period
Hong Kong Yutian
International Investment Co.Ltd.Sales of display 107934645.13 99679782.04
Wuhan Zhongheng Yutian
Trading Co Ltd
Sales of display 58479.76 92116.00
Wuhan Hengsheng
Photo-electricity Industry
Co. Ltd.
Sales of display 13253190.28 10018665.74
Wuhan Hengsheng
Photo-electricity Industry
Co. Ltd.
Sales of materials 8305534.66 10685360.21
Explanation on goods purchasing labor service providing and receiving
Nil
(2) Related guarantee
As the guarantor
RMB/CNY
Secured party Amount guarantee Start End
Completed or not
(Y/N)
Hengfa Technology
Company
36000000.00 2018-04-20 2022-04-20 N
As the secured party
RMB/CNY
Guarantor Amount guarantee Start End
Completed or not
(Y/N)
36000000.00 90000000.00 2019-07-01 2022-07-01 N
Explanation on related guarantee
Nil
(3) Remuneration of key manager
RMB/CNY
Item Current Period Last Period
Total 1443000.00 1056077.00
5. Receivable/payable items of related parties
(1) Receivable
RMB/CNY
Item Related party
Closing balance Opening balance
Book balance Bad debt provision Book balance Bad debt provision
Account
receivable
Hong Kong
Yutian
International
Investment Co.Ltd.
25582267.94 36750397.49
Account
receivable
Wuhan Hengsheng
Photo-electricity
Industry Co. Ltd.
350779.63 2591229.44
Accounts paid in
advance
Hong Kong
Yutian
International
Investment Co.Ltd.
13902631.23 17120874.77
Accounts paid in
advance
Wuhan Hengsheng
Photo-electricity
Industry Co. Ltd.
8294072.28
Total 39835678.80 64756573.98
(2) Payable
RMB/CNY
Item Related party Closing book balance Opening book balance
Account payable
Wuhan Hengsheng
Photo-electricity Industry
Co. Ltd.
3186713.37
Notes payable
Wuhan Hengsheng
Photo-electricity Industry
Co. Ltd.
138355.71
Total 3325069.08
6. Commitments of related party
In line with the claim of application for arbitration from Shenzhen Vanke Shen HUAFA and Wuhan Zhongheng
paid and money together. As the commitment letter to Shen HUAFA from Wuhan Zhongheng Group if the
Vanke wins the losses from disputes arising by contract will bear by Wuhan Zhongheng Group in full.
7. Other
Nil
XI. Commitment or contingency
1. Important commitment
Important commitment on balance sheet date
Nil
2. Contingency
On April 17 2020 Shenzhen Zhongheng HUAFA Co. Ltd. received the notice of responding to the lawsuit [(2020) Yue 03 min Chu
17] and other relevant materials delivered by Shenzhen intermediate people's Court of Guangdong Province . Shenzhen Zhongheng
HUAFA Technology Co. Ltd. (hereinafter referred to as "HUAFA technology" or "the plaintiff") sued the company and its
controlling shareholder Wuhan Zhongheng New Technology Industry Group Co. Ltd. (hereinafter referred to as "Wuhan Zhongheng
group" or "the third party") for the dispute over the asset replacement contract. Shenzhen Zhongyuan has filed the case No. (2020)
Yue 03 min Chu 17.XII. Events after the balance sheet date
1. Explanation on other events after the balance sheet date
Affected by the novel coronavirus pneumonia epidemic the lessees of property leasing request free rent the
factory has been shut down for nearly two months the company’s operation has been affected to a certain extent
the first quarter suffered losses and the subsequent impact on the company as of the reporting date is still under
evaluation.XIII. Other important events
1. Other
(i) Matters of adjudication of Southern International Arbitration Shen [2017] No. D376 from Southern China
International Economic & Trade Arbitration Commission
(1) Arbitration
In August 2015 Shenzhen HUAFA and Wuhan Zhongheng New Technology Industry Group Co. Ltd.
(hereinafter referred to as “Wuhan Zhongheng”) signed the “Cooperation Agreement on Urban Renewal Projectof Update Units at Huafa Industrial Park Gongming Street Guangming New District Shenzhen”. As Shenzhen
HUAFA and Wuhan Zhongheng planned to cooperate with Shenzhen Vanke Real Estate CO. Ltd. (hereinafter
referred to as “Shenzhen Vanke”) on the Huafa urban renewal project (hereinafter referred to as “Huafa
Renovation Project) at Gongming Street Guangming New District Shenzhen both parties appointed that
Shenzhen HUAFA entrusted Wuhan Zhongheng to represent it in this cooperation and established project
company - Shenzhen Vanke Guangming Real Estate Co. Ltd. (hereinafter referred to as “Vanke Guangming”) asthe subject of project implementation with Shenzhen Vanke; Vanke Guangming signed “Demolition
Compensation Agreement” with Shenzhen HUAFA and Wuhan Zhongheng and paid the compensation for
demolition.
On August 21 2015 Shenzhen HUAFA Wuhan Zhongheng and Shenzhen Vanke signed the “CooperativeOperation Contract of Renovation Project at Huafa Industrial Park Gongming Street Guangming New
District”(hereinafter referred to as “Cooperative Operation Contract”) the contract refined and appointed thecooperation model and operating steps of both sides. And then Shenzhen HUAFA Wuhan Zhongheng and
Shenzhen Vanke signed the “Agreement on the Housing Acquisition and Removal Compensation and Settlement”.
After signing the above agreement Shenzhen Vanke paid the cooperation price of 600 million Yuan to Wuhan
Zhongheng through Vanke Guangming.In September 2016 Shenzhen Vanke filed an arbitration to South China International Economic and Trade
Arbitration Commission (hereinafter referred to as “South China Arbitration”) as Shenzhen HUAFA and Wuhan
Zhongheng violated the appointment of “Cooperative Operation Contract” and handled the “Confirmation ofSubject of Reconstruction Implementation” at an overdue time and required Shenzhen HUAFA and Wuhan
Zhongheng to pay liquidated damages and attorneys' fees of 464.60 million yuan.While filing the arbitration Shenzhen Vanke also applied for property preservation of 400 million Yuan of
property under the name of Shenzhen Huafa and Wuhan Zhongheng to Shenzhen Intermediate People’s Court.
According to the ruling of Shenzhen Intermediate People's Court and “Notification of Sealing up Seizing andFreezing Assets” (The reference numbers are (2016) Yue 03 Cai Bao No. 51 (2016) Yue 03 Cai Bao No. 53) the
27 house properties (Note: the property within the scope of Huafa renovation project) under the name of Shenzhen
HUAFA and 116489894 shares (Note: of which 116100000 shares have been pledged) of Shenzhen HUAFA
stock held by Wuhan Zhongheng were frozen.
(2) Progress of arbitration
On November 12 2016 the arbitration court held a hearing on this case.
In December 2016 Wuhan Zhongheng to Shenzhen HUAFA issued a “Commitment Letter” which included that if
the arbitration (Note: the case) ruled in favor of Shenzhen Vanke the loss of arbitration caused by the contract
disputes should be fully assumed by our company. In the above contingent losses if the judicial decision ruled
your company to pay the compensation in advance our company promised to pay your company in cash within
one month if our company could not pay on time due to uncontrollable factors our company would like to pay the
corresponding interest according to the benchmark interest rate of bank loans in the corresponding period.
Because the plots in the renovation project placed in our company hadn’t been applied for transfer procedures and
were still under your company’s name (Note: based on the “Asset Replacement Contract” signed by Wuhan
Zhongheng and Shenzhen HUAFA on April 29 2009) therefore there was no risk of compliance at the same time
our company promised to give priority to paying the above compensation with the compensation for demolition of
renovation project.On March 14 2017 Shenzhen HUAFA received the “Decision of Arbitrator not Granting Avoiding” issued by
South China Arbitration which rejected the application for avoiding of chief arbitrator proposed by ShenzhenVanke. On March 15 2017 Shenzhen HUAFA received the “Letter About the Resignation of the Chief Arbitratorof No. SHEN DP20160334 Case” signed by the chief arbitrator and forwarded by South China Arbitration. OnMarch 20 2017 Shenzhen HUAFA received the “Letter About the Resignation of the Arbitrator of No. SHEN
DP20160334 Case” forwarded by South China Arbitration the arbitrator selected by Shenzhen Vanke said to
resign from the arbitrator of this case due to physical reasons.The deadline for giving a ruling to this case was originally scheduled on February 12 2017. According to the
“Decision of Adjourning the Ruling” issued by South China Arbitration on February 10 2017 the deadline for
giving a ruling to this case shall be prolonged to May 12 2017. Due to the changes in the members of above
arbitration court this case needs South China Arbitration to reassign the chief arbitrator and Shenzhen Vanke to
reselect the arbitrators. According to the provisions of article 32 of the Arbitration Rules of South China
Arbitration after constituting the new arbitration court it shall decide whether all or part of the hearing
procedures that have been carried out before need to be reopened; if the arbitration court decides to reopen all
hearing procedures then the deadline for giving a ruling shall be calculated from the date that the arbitration court
decides to reopen the hearing procedures.
On August 16 2017 South China International Economic and Trade Arbitration Commission made the “ArbitralAward” SCIA [2017] D376 according to the arbitral award the applicant and counterclaim respondent in
arbitration case SCIA [2017] D376 were Shenzhen Vanke Real Estate Co. Ltd. (hereinafter referred to as
“Applicant” and “Vanke”). The first respondent and the first applicant for counterclaim were Wuhan Zhongheng
New Science & Technology Industrial Group Co. Ltd (hereinafter referred to as “Wuhan Zhongheng” and “FirstRespondent”). The second respondent and the second applicant for counterclaim were Zhongheng Huafa. The
award results were as follows:
① The first respondent and the second respondent pay liquidated damages to the applicant with a base number of
RMB 600 million calculating by the annual interest rate of 36% from October 1 2015 to November 11 2016;
②The first respondent and the second respondent pay the lawyer fees of RMB 1.4 million to the applicant due to
the case;
③The first respondent and the second respondent pay the property preservation fees of RMB 10000 to the
applicant;
④The arbitration fees for this request and case was RMB 3101515.00 the first respondent and the second
respondent should bear 70% i.e. RMB 2171060.50 and the applicant should bear 30% i.e. RMB 930454.50.The applicant had already paid the arbitration fees in full amount for this request which could be used as the
arbitration fees of this case and request and shall not be refunded. The first respondent and the second respondent
should directly pay RMB 2171060.50 to the applicant;
The arbitration fee of counterclaim in this case was RMB 76050 which was undertaken by the first respondent
and the second respondent at their own expense. The first respondent and the second respondent paid the
arbitration fees in full amount for this request which could be used as the arbitration fees of this case and request
and shall not be refunded;
The actual expenses of the arbitrators in this case amounted to RMB 7754.90 the first respondent and the second
respondent assumed 70% i.e. RMB 5428.43 and the applicant assumed 30% i.e. RMB 2326.47; the above
actual expenses of the arbitrators had been paid by the Commission so the first respondent and the second
respondent and the applicant should directly pay RMB 5428.43 and RMB 2326.47 respectively to the
Commission;
⑤ Reject the applicant’s other arbitration requests;
⑥Reject the arbitration counterclaims of the first respondent and the second respondent.In summary Wuhan Zhongheng and Shenzhen Huafa should pay liquidated damages interest lawyer fees
property preservation fees and arbitration fees for this request to Vanke and pay actual expenses of the arbitrators
in this case and pay the actual expenses incurred by the arbitrators in this case to South China International
Economic and Trade Arbitration Commission.
On February 7 2018 the company and Wuhan Zhongheng Group applied to Shenzhen Intermediate People’s
Court to revoke the Ruling HNGZSC [2017] D376 the court made a judgment on August 16 2018 rejecting the
company’s request for revocation. The company and its controlling shareholder Wuhan Zhongheng Group
received the “Execution Notice of Shenzhen Intermediate People’s Court” ([2018] Yue03Zhi No. 1870) and the
executor applied to the court for compulsory execution the company was listed as dishonest person subject to
execution by Shenzhen Intermediate People’s Court. On December 13 2019 the company announced that it had
been removed from the list of dishonest persons subject to execution by the Shenzhen Intermediate People’s
Court.
(3) The response of the company’s management and the identification of the event
The company engaged lawyers to make an independent investigation and judgment on the event and issued
special legal opinion that the reasons of Wuhan Zhongheng resulted in a failure of a net handover the
corresponding urban renewal functional department could not issue the corresponding demolition documents
which in turn made the project company fail to be confirmed as the subject of implementation and finally and
directly made the subject of implementation fail to get the “Land Value Payment Notification” and sign the “LandUse Rights Transfer Contract”. Therefore Wuhan Zhongheng should bear all responsibilities for faults in
response to the breach of contract. Wuhan Zhongheng issued the Commitment Letter in December 2016 pledged
that if the arbitration judged Vanke to win the case Wuhan Zhongheng should bear all arbitration losses caused
by the contract dispute; after the award came into effect Wuhan Zhongheng issued the Confirmation Letter again
on November 23 2017 to divide the duty of performance of the award; the independent directors of the company
issued independent opinions after careful study that Wuhan Zhongheng should bear the arbitration losses in full;
the management of the company also made an investigation and affirmed that Wuhan Zhongheng should bear all
liability for satisfaction on the Award HNGZSC [2017] D376 and the award amount should be paid by Wuhan
Zhongheng in full.(ii) Arbitration case of legal service contract dispute with V&T (Shenzhen) Law Firm
On March 12 2018 the company received the arbitration notice No. SHEN DX20180087 from Shenzhen Court
of International Arbitration V&T (Shenzhen) Law Firm requested to make a ruling that the Company and Wuhan
Zhongheng pay the delinquent lawyer’s fees of RMB 19402000 and the liquidated damages (The liquidated
damages shall take five ten-thousandths of a day as a standard based on RMB 19402000 from August 24 2017
to the date of payment of the above-mentioned lawyer’s fees and the liquidated damages up to February 12 2018
was RMB 1678273.00). The company should bear all the arbitration fees for this case.On November 5 2019 the company received the arbitration award HNGZSC [2019] D618 from Shenzhen Court
of International Arbitration ruling that the company and its controlling shareholder Wuhan Zhongheng New
Science & Technology Industrial Group Co. Ltd should pay Shenzhen V & T Law Firm the arrears of legal fees
of RMB 19402000 and the liquidated damages.The verification opinion of Guangdong HAIBU Attorneys-at-law engaged by the company on the performance of
legal liability of the arbitration result believed that the case is caused by the Vanke arbitration case No. SHEN
DP20160334 there is a close causal relationship between the two cases as the ultimate beneficiary of the
“Agency Contract” Wuhan Zhongheng shall be responsible for all payment in response to the Arbitration Award
HNGZSC [2019] D618
According to the company’s announcement the dispute between V & T Law Firm and Wuhan Zhongheng Group
and the company on attorney fees was caused by its agency of the Vanke arbitration case and it was of the samenature as the loss of the Vanke arbitration case. In addition Wuhan Zhongheng Group has issued a “CommitmentLetter” to Shenzhen Hwafa in December 2016 that if the arbitration decides that Vanke wins Wuhan Zhongheng
Group shall bear the full amount of arbitration losses caused by the contract disputes. Wuhan Zhongheng Group
as the beneficiary of the “Agency Contract” should bear full payment responsibility for the Arbitration Award
HNGZSC [2019] D618 and the company should not bear the arbitration losses in this case.XIV. Principle notes of financial statements of parent company
1. 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
t
Ratio
Amoun
t
Accrua
l ratio
Amoun
t
Ratio
Amoun
t
Accrual
ratio
Account receivable
with bad debt
provision accrual
on a single basis
10293
424.29
100.00
%
10293
424.29
100.00
%
0.00
10293
424.29
100.00
%
10293
424.29
100.00
%
0.00
Including:
Including:
Total
10293
424.29
100.00
%
10293
424.29
100.00
%
10293
424.29
100.00
%
10293
424.29
100.00
%
0.00
Accrual of bad debt provision on single basis:10293424.29 yuan
RMB/CNY
Name
Closing balance
Book balance Bad debt provision Accrual ratio Accrual causes
Hong Kong Haowei
Industrial Co. Ltd.
1870887.18 1870887.18 100.00% Uncollectible
TCL ACE ELECTRIC
APPLIANCE
(HUIZHOU) CO.
LTD.
1325431.75 1325431.75 100.00% Uncollectible
Qingdao Haier Parts 1225326.15 1225326.15 100.00% Uncollectible
Procurement Co. Ltd.SKYWORTH
Multimedia
(Shenzhen) Co. Ltd.
579343.89 579343.89 100.00% Uncollectible
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
Sky Worth – RGB
Electronic Co. Ltd.
133485.83 133485.83 100.00% Uncollectible
Other 1990217.45 1990217.45 100.00% Uncollectible
Total 10293424.29 10293424.29 -- --
Accrual of bad debt provision on single basis:
RMB/CNY
Name Closing balance
Book balance Bad debt provision Accrual ratio Accrual causes
Accrual of bad debt provision on portfolio:
RMB/CNY
Name
Closing balance
Book balance Bad debt provision Accrual ratio
Explanation on portfolio basis:
If the provision for bad debts of accounts receivable is made in accordance with the general model of expected credit losses please
refer to the disclosure of other receivables to disclose related information about bad-debt provisions:
□ Applicable √ Not applicable
By account age
RMB/CNY
Account ages Book balance
Over 3 years 10293424.29
Over 5 years 10293424.29
Total 10293424.29
(2) Top 5 account receivables collected by arrears party at ending balance
RMB/CNY
Company
Closing balance of account
receivable
Proportion in total account
receivables at year-end
Closing balance of bad debt
provision
Hong Kong Haowei
Industrial 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%
2. Other account receivable
RMB/CNY
Item Closing balance Opening balance
Other account receivable 97165023.85 99155253.08
Total 97165023.85 99155253.08
(1) Other account receivable
1)Other account receivable by nature
RMB/CNY
Nature Closing book balance Opening book balance
Margin & deposit 304608.00 720065.04
Borrow money 1869073.12 1960013.76
Intercourse funds 107488541.28 108761355.74
Rental receivable 5847389.48 6317469.46
Other 168162.09 466137.41
Less: Bad debt provision -18512750.12 -19069788.33
Total 97165023.85 99155253.08
2) Accrual of bad debt provision
RMB/CNY
Bad debt provision
Phase I Phase II Phase III
Total
Expected credit
losses over next 12
months
Expected credit losses for
the entire duration
(without credit
impairment occurred)
Expected credit losses for
the entire duration (with
credit impairment
occurred)
Balance on 1 Jan. 2019 3136.83 19066651.50 19069788.33
Balance of 1 Jan. 2019
in the period
—— —— —— ——
Accrual in current
period
Reversal in current
period
3136.53 553901.68 557038.36
Balance on Dec. 31
2019
0.30 18512749.82 18512750.12
Change of book balance of loss provision with amount has major changes in the period
□ Applicable √ Not applicable
By account age
RMB/CNY
Account ages Book balance
Within one year (one year included) 96860413.55
Within one year 96860413.55
1-2 years 312212.44
2-3 years
Over 3 years 18505147.98
3-4 years 1446706.00
Over 5 years 17058441.98
Total 115677773.97
3) Bad debt provision accrual collected or reversal in the period
Bad debt provision accrual in the period:
RMB/CNY
Category
Opening
balance
Amount changed in the period
Closing balance
Accrual
Collected or
reversal
written-off Other
Nil
Including the important amount collected or switches back in the period:
RMB/CNY
Company Amount collected or switches back Way of collection
Zhao Baomin 553901.68 Recovery by court
Total 553901.68 --
Nil
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 88710861.94 Within one year 76.69%
Shenzhen
Zhongheng
HUAFA Property
Co. Ltd
Intercourse funds 7773832.83 Within one year 6.72%
Shenzhen HUAFA
Property Leasing
Co. Ltd.
Rental fee
receivable
4558859.15 Over 3 years 3.94% 4558859.15
Portman Intercourse funds 4021734.22 Over 3 years 3.48% 4021734.22
Shenzhen Jifang
Investment Co. Ltd
Rental fee
receivable
1380608.00 Over 3 years 1.19% 1380608.00
Total -- 106445896.14 -- 92.02% 9961201.37
3. Long-term equity investments
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
Book value)
Changes in the period
Closing
balance Book
value)
Closing
balance of
impairment
provision
Additional
investment
Reduce
investment
Accrual of
impairment
provision
Other
HUAFA
Lease
Company
600000.00
HUAFA
Property
Company
1000000.00 1000000.00
Hengfa
Technology
Company
183608900.
00
183608900.
00
HUAFA
Hengtian
Company
1000000.00 1000000.00
HUAFA
Hengtai
Company
1000000.00 1000000.00
Total
186608900.
00
186608900.
00
600000.00
4. Operating revenue and cost
RMB/CNY
Item
Current period Last period
Revenue Cost Revenue Cost
Main business 38216680.42 7304872.41 36771309.00 5902505.91
Total 38216680.42 7304872.41 36771309.00 5902505.91
Whether implemented the new revenue standards
√Yes □No
Information relating to revenue:
RMB/CNY
Category Branch 1 Branch 2 Total
Including:
Including:
Including:
Including:
Including:
Including:
Including:
Information relating to performance obligations:
Nil
Information relating to the transaction price assigned to the remaining performance obligation:
At end of the period the corresponding revenue amount for performance obligations that have been signed but have not been
performed or have not been performed is 0.00 yuan of which yuan expected to recognized as revenue in the year.Other explanation
XV. Supplementary Information
1. Current non-recurring gains/losses
√ Applicable □ Not applicable
RMB/CNY
Item Amount Note
Gains/losses from the disposal of 9298.34
non-current asset
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)
534380.00
Gain/loss of entrusted investment or assets
management
180964.60
Switch back of provision for depreciation
of account receivable and contractual
assets which were singly taken
depreciation test
553901.68
Other non-operating income and
expenditure except for the aforementioned
items
-424941.86
Reversal of accrual liability
Loss on assignment of claims
Less: Impact on income tax 236650.57
Total 616952.19 --
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. ROE 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
1.67% 0.0193 0.0193
Net profits belong to common
stock stockholders of the
Company after deducting
nonrecurring gains and losses
1.48% 0.0171 0.0171
Section XIII. 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.
沪公网安备31011802005267号
