深圳中恒华发股份有限公司
Shenzhen Zhongheng Huafa Co., Ltd.
SEMI-ANNUAL REPORT 2009
Short Form of the Stock: SHEN HUAFA-A, SHEN HUAFA-B
Stock Code: 000020, 2000202
Important Notice
The Board of Directors and the Supervisory Committee of Shenzhen Zhongheng Huafa Co., Ltd.
(hereinafter referred to as the Company) and its directors, supervisors and senior executives confirm
that there are no fictitious records, misleading statements or material omissions carried in this report,
and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of
the whole contents. No directors, supervisors or senior executives stated that he (she) couldn’t
ensure the reality, accuracy and completion of the contents of the Semi-annual Report or have
objection to this report.
Independent Director of the Company Mr. Yang Junyuan could not present the meeting due to go
abroad, but he entrusted Independent Director Mr. Li Ding’an to attend and vote on his behalf; other
directors attended the meeting of the Board.
Mr. Li Zhongqiu, Chairman of Board and General Manager of the Company, Mr. Fu Yanhua, Person
in Charge of Accounting Works, and Mr. Sun Wei, Person in Charge of Accounting Organ hereby
state that: the financial report of the Semi-annual Report 2009 is true and complete.
The Semi-annual Financial Report of the Company has not been audited.
Board of Directors of
Shenzhen Zhongheng Huafa Co., Ltd.
Contents
Ⅰ. COMPANY PROFILE-----------------------------------------------------------------------------------------------------3
Ⅱ. CHANGES IN SHARE CAPITAL AND PARTICULARS ABOUT SHARES HELD BY MAIN
SHAREHOLDERS--------------------------------------------------------------------------------------------------------------5
III. PARTICULARS ABOUT DIRECTORS, SUPERVISORS AND SENIOR EXECUTIVES ----------------8
Ⅳ. REPORT OF THE BAORD OF DIRECTORS------------------------------------------------------------------------9
Ⅴ. SIGNIFICANT EVENTS-------------------------------------------------------------------------------------------------13
Ⅵ. FINANCIAL REPORT (UN-AUDITED) -----------------------------------------------------------------------------17
Ⅶ. DOCUMENTS AVAILABLE FOR REFERENCE------------------------------------------------------------------693
I. Company Profile
1. Name of the Company
In Chinese: 深圳中恒华发股份有限公司
In English: SHENZHEN ZHONGHENG HUAFA CO., LTD.
2. Legal Representative: Li Zhongqiu
3. Secretary of the Board: Fu Yanhua
Securities Affairs Representative: Weng Xiaojue
Contact Address: 6/F, East Tower of 411 Bldg, Huafa Building, Huafa Road (N), Futian District,
Shenzhen.
Tel: (86) 83352206
Fax: (86) 755-83323160
E-mail: hwafainvestor@163.com
4. Registered Address: 411 Bldg., Huafa North Road, Futian District, Shenzhen
Office Address: 6/F, East Tower of 411 Bldg., Huafa Road (N), Futian District, Shenzhen.
Post Code: 518031
Company’s Internet Web Site: http://www.hwafa.com
5. Newspapers for Disclosing the Information of the Company:
China Securities Journal, Securities Times and Hong Kong Wen Wei Po
Internet Web Site for Publishing the Semi-Annual Report: http://www.cninfo.com.cn
The Place Where the Semi-Annual Report is Prepared and Placed: OFF. of Board of Directors of
Shenzhen Zhongheng Huafa Co., Ltd.
6. Stock Exchange Listed with: Shenzhen Stock Exchange
Short Form of the Stock: SHEN HUAFA-A, SHEN HUAFA- B
Stock Code: 000020, 200020
7. Other Relevant Information of the Company
Initial registered date and place or changed registered date and place:
Registered date: May, 1992
Registered place: 411 Bldg., Huafa North Road, Futian District, Shenzhen
Registered number of enterprise legal person’s business license: 100296
Registered number of tax: 113260
Name and office address of Certified Public Accountants engaged by the Company:
Name: Shinewing Certified Public Accountants
Address: 9/F, Block A, Fu Hua Mansion No.8 Chaoyang Men, Bei da jie, Dong Cheng District,
Beijing, P.R.China4
II. Major financial data and indexes
Unit: RMB
At the end of this
report period
At the period-end
of last year
Increase/decrease at the end of this
report period compared with that
in the year-begin (%)
Total assets 644,761,359.00 446,670,716.88 44.35%
Owners’ equity attributable to shareholders of
listed company 252,168,488.96 247,809,266.16 1.76%
Share capital 283,161,227.00 283,161,227.00 0.00%
Net assets per share attributable to
shareholders of listed company (RMB/Share) 0.89 0.88 1.14%
This report period
(Jan. to Jun.)
The same period
of last year
Increase/decrease in this report
period year-on-year (%)
Total operating income 212,122,658.94 72,721,200.02 191.69%
Operating profit 4,488,787.23 -4,320,768.46 —
Total profit 4,359,222.80 -2,503,393.28 —
Net profit attributable to the shareholders of
listed company 4,359,222.80 -2,503,393.28 —
Net profit attributable to the shareholders of
the company after deducting non-recurring
gains and losses
4,488,787.23 -4,320,768.46 —
Basic earnings per share(RMB/Share) 0.015 -0.009 —
Diluted earnings per share (RMB/Share) 0.015 -0.009 —
Return on equity (%) 1.73% -0.01% Increased 1.74 percentage points
Net cash flow arising from operating activities -78,925,182.83 -26,048,943.94 —
Net cash flow arising from operating activities
per share (RMB/Share) -0.28 -0.09 —
Items of non-recurring gains and losses Amount
Other non-operating income and expenditure
except for the aforementioned items -129,564.43
Total -129,564.43
CAS IAS
Net profit 4,359,222.80 4,359,222.80
Net asset 255,682,531.84 255,682,531.845
Return on equity Earnings per share
Item Fully diluted
(%)
Weighted
average (%)
Basic earnings per
share
(RMB)
Diluted earnings
per share(RMB)
Net profit attributable to the
shareholders of the company 1.73 1.74 0.015 0.015
Net profit attributable to the
shareholders of the company
after deducting non-recurring
gains and losses
1.78 1.79 0.015 0.015
II. Change in Share Capital and Particulars about Shares Held by Main
Shareholders
I. Particulars about change in share capital
In the report period, the share structure of the Company had no changes.
Before the change Increase/decrease in the change of this time (+, - ) After the change
Amount
(RMB)
Proportion
(%)
New
share
issued
Bonus
shares
Capitalization
of public
reserve
Others Subtotal Amount Proportion
(%)
I. Restricted
shares 116,489,894 41.14 116,489,894 41.14
1. State-owned
shares
2. State-owned
legal person’s
shares
3. Other
domestic shares 116,489,894 41.14 116,489,894 41.14
Including:
Domestic legal
person’s shares 116,489,894 41.14 116,489,894 41.14
Domestic natural
person’s shares
(shares of senior
executives)
4. Foreign shares
Including:
Foreign legal
person’s shares
Foreign natural
person’s shares
II. Unrestricted
shares 166,671,333 58.86 166,671,333 58.86
1. RMB Ordinary
shares 64,675,497 22.84 64,675,497 22.84
2. Domestically
listed foreign
shares
101,995,836 36.02 101,995,836 36.02
3. Overseas listed
foreign shares
4. Others
III. Total shares 283,161,227 100 283,161,227 1006
II. Particulars about shareholders (registered on Jun. 30, 2009)
Total shareholders 26,356
Particulars about shares held by the top ten shareholders
Full name of Shareholders Nature of
shareholders
Proportion
of shares
held
Total amount
of shares held
Amount of
restricted shares
held
Amount of
shares pledged
or frozen
Wuhan Zhongheng New Science &
Technology Industrial Group Co., Ltd.
Domestic
non-state-owned
legal person
41.14% 116,489,894 116,489,894 0
SEG (HONG KONG) CO., LTD. Foreign legal
person
5.85% 16,569,560 0 0
GOOD HOPE CORNER
INVESTMENTS LTD
Foreign legal
person 4.91% 13,900,000 0 Unknown
BINGHUA LIU Foreign natural
person 0.31% 876,213 0 Unknown
LUO YA Domestic
natural person 0.27% 756,620 0 Unknown
LIU LIAO YUAN Domestic
natural person 0.26% 734,200 0 Unknown
FENG ZHI E Domestic
natural person 0.24% 693,500 0 Unknown
ZHU MING Domestic
natural person 0.22% 611,348 0 Unknown
DBS VICKERS(HONG KONG) LTD
A/C CLIENTS
Foreign legal
person 0.21% 591,150 0 Unknown
ZENG HONG YING Domestic
natural person 0.21% 586,380 0 Unknown
Particulars about shares held by the top ten shareholders of unrestricted shares
Name of shareholder Amount of unrestricted shares held Type of share
SEG (HONG KONG) CO., LTD. 16,569,560 Domestically listed foreign
share
GOOD HOPE CORNER INVESTMENTS
LTD 13,900,000 Domestically listed foreign
share
BINGHUA LIU 876,213 Domestically listed foreign
share
LUO YA 756,620 Domestically listed foreign
share
LIU LIAO YUAN 734,200 Domestically listed foreign
share
FENG ZHI E 693,500 RMB common share
ZHU MING 611,348 Domestically listed foreign
share
DBS VICKERS(HONG KONG) LTD A/C
CLIENTS 591,150 Domestically listed foreign
share7
ZENG HONG YING 586,380 Domestically listed foreign
share
FENG QIU HONG 566,001 RMB common share
Explanation on associated relationship among
the aforesaid shareholders or consistent action
Among the top ten shareholders, Wuhan Zhongheng New Science &
Technology Industrial Group Co., Ltd. neither bears associated relationship
with other shareholders, nor belongs to the consistent actor that are prescribed
in Measures for the Administration of Disclosure of Shareholder Equity
Changes of Listed Companies.
The Company neither knew whether there exists associated relationship among
the other tradable shareholders, nor they belong to consistent actors that are
prescribed in Measures for the Administration of Disclosure of Shareholder
Equity Changes of Listed Companies.
III. The amount and sale restriction condition of shares held by the top ten restricted shareholders
No. Name of restricted
shareholders
Amount of
restricted shares
held
Date of being listed for
trade
Amount of
newly added
shares being
listed for trade
Restriction condition
1
Wuhan Zhongheng
New Science &
Technology
Industrial Group
Co., Ltd.
116,489,894 May 18, 2010 0
Promising that the
non-tradable shares
of the Company held
by it will not be
listed for trade within
36 months since the
date of acquiring
circulating right.
4. Change of the controlling shareholder of the Company
The controlling shareholder of the Company Wuhan Zhongheng New Science & Technology
Industrial Group Co., Ltd.(Hereinafter refers to as Wuhan Zhongheng Group), the actural controller
is Mr. Li Zhongqiu, and did not change in the report period.8
III. Particulars about Directors, Supervisors and Senior Executives
I. Changes in shares held by directors, supervisors, and senior executives
Directors, supervisors, and senior executives of the Company did not hold shares of the Company,
and there was no change in holding shares.
II. Changes of the directors, supervisors, and senior executives of the Company in the report period.
In Feb. 2009, Mr. Shi Cheng put forward to resign his posts of Director, Deputy General Manager,
and Secretary of the Board of the Company due to personal reason.
In Feb. 2009, with the suggestion from the Nomination Committee of the Board and nomination of
the General Manger of the Company, the Board of Director engaged Mr. Fu Yanhua as the Deputy
General Manager of the Company; with the suggestion from the Nomination Committee of the
Board and nomination of the Chairman of the Company, the Board of Director engaged Mr. Fu
Yanhua as the Secretary of the Baord of the Company; with the nomination of the Board and
election in the 1st Extraordinary Shareholders’ General Meeting of 2009, Mr. Fu Yanhua was
supplemented to be the Director of the 6th Board of Directors of the Company.9
IV. Report of Board of Directors
I. Overall operation and management of the Company in the report period
As Wuhan Zhongheng Group, the controlling shareholder of the Company, successively input the
Company with business in polystyrene, installation for whole set of liquid-crystal display (referred
to LCD later) and injection piece in recent years, the Company has started integrated its industrial
assets gradually since 2009: to lighten tax burden and predigest administration structure, the
Company injected Wuhan Hengfa Science and Technology Co., Ltd.(referred to Wuhan Hengfa
Science and Technology later), the wholly-owned subsidiary of the Company established in Wuhan,
with polystyrene business from Wuhan Branch in way of capital increase; in order to enlarge
production scale of injection business in Wuhan and save production cost occurred in Shenzhen and
Wuhan and thus reduce repeat business, the Company sold the injection business of Shenzhen to
Wuhan Hengfa Science and Technology, to realize injection business combination with Wuhan.
After the initial adjustment, Wuhan Hengfa Science & Technology now is mainly engaged in
business of injection and polystyrene, becoming one of the backbone enterprises of the Company in
industry production.
With various efforts, the Company received a distinctly better performance in main business
operation over the same period of last year. Net profit realized from January to June amounted to
RMB 4.36 million, mainly resulted from the following aspects:
﹡Business of whole set of LCD: as the domestic economy got warm, price of LCD also received a
rise in some degree, product orders received by the video communication department gradually
increased; For the production model, it changed to processing imported materials from the original
model-processing supplied materials, and balance between imported materials became source of
part profit; besides, purchasing raw materials from underlying enterprises of controlling
shareholders saved production cost more or less; meanwhile, for the video communication
department, after governance, neatening and administration strengthening, it effectively improved
instability of employees, its production quality got strict control and its productivity enjoyed a great
upgrade. In the first half year, the department realized operation income of RMB 0.104 billion and
profit of 2.04 million.
﹡Business of lease of self-owned property: in the report period, it was operated steadily; the
Company collected rent in strict accordance with property lease contract; rent income received
increase over the same period of last year; property lease rate exceeded 90%, rent income reached at
RMB 21.03 million, rent profit reached at RMB 16.4 million.
II. Analysis on main business achievements and financial condition
(I) Scope and operation of main business
The main operation of the Company focuses on products manufacture related to electron, including
production and sales of injection pieces, printed circuit boards, polystyrene and LCD whole set
business. The sales of products of the Company focus on the areas of Middle China, South China,
Southwest and Hong Kong. Details could be available in the following statement:
Unit: RMB’0000
Product Income from
operations
Cost of
operations
Gross
profit
ratio
(%)
Increase/decrease
in income from
operations
year-on-year (%)
Increase/decrease
in cost of
operations
year-on-year (%)
Increase/decrease
in gross profit
ratio
year-on-year (%)
Plastic
injection
hardware
6,891.30 6,204.70 9.96% 2,039.25% 1,460.27% Increased 33.41
percentage points
Printed
circuit
b d
534.55 742.14 -38.83% -74.19% -78.85% Decreased 16.81
percentage points10
boards
LCD 10,379.47 9,908.45 4.54% 263.01% 255.85% Increased 1.92
percentage points
Polystyrene 1,221.51 1,007.15 17.55% — — —
Area Income from operation Increase/decrease in income from operations
over last year (%)
South China 219.49 -87.70%
Southwest 315.06 -63.00%
Hong Kong 10,379.47 297.75%
Middle China 6,891.30 —
(II) General analysis on financial condition
1. Change in main financial index in the report period
Unit: RMB
Item Amount in the
period
Amount in the
same period of last
year
Increase or
decrease (%)
Operation income 212,122,658.94 72,721,200.02 191.69
Operation profit 4,488,787.23 -4,320,768.46 —
Net profit attributable to shareholders of the
company 4,359,222.80 -2,503,393.28 —
Net increase amount of cash and cash
equivalents 66,637,082.71 29,543,782.07 125.55
Item Amount of
period-end
Amount of
period-begin
Increase or
decrease (%)
Total assets 644,761,359.00 446,670,716.88 44.35
Owners’ equity attributable to parent company 252,168,488.96 247,809,266.16 1.76
Reasons for the above changes:
(1)Main reasons on great increase of operation income year-on-year:
①Operation income from Wuhan Hengfa Science and Technology Co., Ltd., the newly-merged
wholly-owned subsidiary of the Company;
②Income increased greater, since the production model for whole set business of LCD was
changed to processing imported materials from the original processing supplied materials.
(2)Main reasons on turning losses into gains of operating profit and net profit attributable to
shareholders of the Company:
①Income received from self-owned property lease increased in some degree;
②The production model for whole set business of LCD was changed to processing imported
materials from the original one--processing supplied materials. And balance between imported
materials became source of part profit; besides, purchasing raw materials from underlying11
enterprises of controlling shareholders saved cost more or less.
(3) Net increase amount of cash and cash equivalents increased greatly due to increase of bank
loans.
(4)Main reasons on the great increase in total assets year-on-year:
①Bank loans increased greatly;
②The production model for whole set business of LCD was changed to processing imported
materials from the original one-processing supplied materials, which brought increase in account
receivable and inventory commodities.
2. Explanation on reasons of material changes in main operations and its structure
The Company purchased manufacture business related to injection products from its controlling
shareholder Wuhan Zhongheng Group in June 2008, but the asset transfer had transition period, in
order to guarantee the normal production of injection business, the Company entrusted Wuhan
Zhongheng Group to manage the aforementioned assets relevant to injection business from the date
of asset transfer to Dec. 31, 2008. On Jan. 1, 2009, the Company officially took the management of
Wuhan injection business. Thus, Wuhan injection business was newly increased in main operation
of the Company in the report period over the same period of last year.
3. Explanation on reasons of material changes in profitability (gross profit ratio) of main operations
compared with that of last year
Printed circuit board was influenced by the international financial crisis, so the sales income
decreased largely and gross profit ratio further dropped with a great margin.
4. Profit constitution did not have material changes compared with that in last year.
(III)Other operation business of the Company which set significant influence upon net profit of the
report period
Other operation business Gains and losses occurred
(RMB’0000)
Property lease 1,640
(IV)In the report period, there is no investment income received by the Company from single joint
stock company, influencing net profit of the Company over 10 %( 10% included)
(V)Problems and difficulties in operation
In the first half year, profit occurred from injection business of the Company was less than the
budget. Injection business of the Company was still expanding in the first half year, the original
injection business of Shenzhen was merged to Wuhan, and 20 new equipments were purchased, so
input for fixed assets greatly increased; besides, because equipments increased too fast and skillful
workers were comparatively insufficient, production efficiency got no effective advance in a short
time correspondingly; influenced by the global economic crisis, unit price of product had to be cut
The injection business was just Shenzhen Injection Department in the same report period, and
remained losses; in the report period, Shenzhen injection business was consolidated with Wuhan
injection business and had gains; thus, the gross profit ratio of injection business had material
changes.12
down. Together with the losses occurred from appreciation of RMB exchange rate, sales income
was affected greatly; meanwhile, due to that the newly-developed customers needed an adjustment
period for introducing new products, new profit-yielding point was unavailable to form; besides,
labor cost climbed in some degree. Therefore, injection business of Wuhan faced s short-term
difficulty resulted from rapid expansion in the report period, thus its production efficiency couldn’t
show up immediately.
(VI)Main working plan for the later half year
In the later half year, the Company would continue to take the spirit of integrating industrial assets,
allocate resources to advanced fields, and consider moving whole set business of LCD to Wuhan
from Shenzhen, mainly focus on installation of whole set of LCD business and injection business,
meanwhile, assist with polystyrene business.
As the main industrial assets moved to Wuhan, how to strengthen management and control,
standardize internal control, enhance operation management level and risk-prevention ability in
subsidiaries located in other area are the significant problems for the Company to solve at present.
The Company plans to smooth and perfect internal management procedure, reinforce execution of
management system, strengthen audit and daily supervision for operation procedure; reinforce
power in self-check and self-correction, internal-audit and internal-correction to find out control
deficiency and management leak, focusing on the key taches such as significant business exchange,
significant investment project and related transaction; meanwhile, people in charge of various
targets are examined according to the execution of procedure management. That is to say,
management standardization is practically combined with personal encouragement.
III. Investment
(I) Usage of raised proceeds
In the report period, the Company hasn’t raised any fund or fund raised in previous period used
lasting to this report period.
(II) Significant investment with non-raised proceeds
The board of directors of the Company held the 2nd extraordinary meeting of 2009 dated Apr. 3rd,
2009. In this meeting, it was approved for the Company to add capital to Shenzhen Zhongheng
Huafa Science and Technology Co., Ltd. (referred to Huafa Science and Technology later), the
wholly-owned subsidiary of the Company, with approximately RMB 105.12 million, including
capital adding with cash of RMB 55 million and capital adding with entity of RMB 50.12 million.
The entity assets mainly referred to fixed assets---the machine equipments for printed circuit board
business, and two land properties of the Company amounting to 48,161.6 square meters with No.
A627-005 and No.A627-007 lands of Huafa Electron City, located in the production base in
Gongming, Shenzhen; meanwhile, it sold all inventories involved to printed circuit board business
as of Mar 31st of 2009 to Huafa Science and Technology, and the transaction price was the financial
book value of the inventories as of Mar 31st of 2009. At present, procedure for capital adding of
Huafa Science and Technology with cash and machine equipment (fixed assets) has been completed.
And procedure for capital adding with the aforementioned lands is still being transacted.13
V. Significant Events
I. Corporate Governance
According to the requirements of Laws and regulations including Company Law, Securities Law,
Code of Corporate Governance for Listed Companies and Listed Rules for Stock in Shenzhen Stock
Exchange, the Company further standardized the operation, and the actual conditions of legal
person governance structure accorded with the requirements of the aforementioned documents,
which protected all shareholders’ interests, especially the interests of medium and small
shareholders. In the report period, the Company revised items of cash dividends and guarantee in
Article of Association according to the requirements of Decision on Amending Several Regulations
of Cash Dividends of Listed Company issued by CSRC No. 57 and the regulations of Item 9.11 in
Listed Rules for Stock in Shenzhen Stock Exchange – Providing Guarantee; at the same time, also
approved and established Special System of Engaging Certified Public Accountants according to
relevant regulations of Notice on Further Standardizing Relevant Issues of Engaging CPAs of Listed
Company in Shenzhen and Direction of Engaging CPAs System of Listed Company promulgated by
Shenzhen Securities Regulatory Bureau of CSRC.
II. Implementation of profit distribution plan
In the report period, the Company has no profit distribution plan, capital reserve transferred into
share capital plan or issuing new shares plan which were planned in previous periods and
implemented in this report period.
No profit would be distributed and no capital reserve would be transferred to add share capital in
the first half year of 2009.
III. Significant lawsuits and arbitrations
The Company signed House Leasing Contract and complementary agreement with Shenzhen
Wanshang Friendship Department Store Co., Ltd. (hereinafter refer to as “Wanshang Friendship”) in
the year of 2001, and had agreement of step-up rent. Considering the actual aim of signing contract
and transaction equality, Wanshang Friendship did not strictly implement regulations of House
Leasing Contract and did not pay enough rent; at the same time, Wanshang Friendship privately
built the place of 229.89 square meters without our admission, and did not pay any rent. In order to
protect the interests of listed company and all shareholders, the Company handed in civil indictment
to Shenzhen Futian District People’s Court, which impleaded that Wanshang Friendship did not pay
rent as agreement, and ask for judgment: ① release the House Lease Contract about leasing Huafa
Building and relevant Complementary Agreement signed by the Company and Wanshang
Friendship; ② Wanshang Friendship should pay the rent which was owed the Company
(temporarily calculated amounting to RMB 34,381,679.31 till May 7, 2009, and actually was the
rent till the date that the defendant retroceded the lease place); ③ Wanshang Friendship should take
the responsibility of compensation for violation of contract (the compensation was calculated as
0.05% of the owed rent per day from the date owing till the date actually paying off, which was
temporarily calculated amounting to RMB 10 million till May 7, 2009); ④ Wanshang Friendship
should afford all litigation expenses of the case. At present, the Court formally received the case of
appeal, waiting for a judgment in session. Details could be found in notice on May 22, 2009.
IV. Security investment
In the report period, the Company hasn’t carried out security investment, nor held equity of other
listed company, non-listed financial enterprise or company that planned to be listed.14
V. Significant asset purchase, sales and asset restructure
No significant asset purchase, sales and enterprise merger concerning non related transaction
happened in this report period, nor did them happened in previous period but lasted to this report
period.
VI. Significant related transaction
(I) With consideration that the business of the Company and its controlling shareholder- Wuhan
Zhongheng Group is positioned in the middle or even lower stage in the industry chain of LCD, in
order to promote the Company to develop rapidly in LCD field, the Company continued to carry out
daily related transaction with Wuhan Zhongheng Group as well as its subsidiary Wuhan Hengsheng
Photoelectricity Industry Co., Ltd from which raw materials LCD needed in production were
purchased in 2009. Proposal on Prediction of Daily Related Transaction in Visual Communication
Business for 2009 was examined and approved in the 1st Extraordinary Shareholders’ Meeting of
2008 on Feb. 6, 2009, which expected that the Company may purchase LCD about 805,000 sets
from related parties, with purchasing amount of USD 65,240,000, and the pricing principle was that
transaction price was at least 1% lower than the average market price of that time. Details could be
available in the Company’s notice dated Feb. 7, 2009. In the report period, the Company actually
purchased LCD about 107,000 sets of various specifications such as 19 inch and 22 inch with about
RMB 56,570,000.
(II) In order to effectively take off the circuit printing business which was in serious loss and always
disturbed the Company’s development, improve the assets quality and profitability, and eliminate
the related transaction issues about the subsidiary company in Wuhan always leasing factory from
the controlling shareholders – Wuhan Zhongheng Group, the Company planned to replace the
circuit printing business and part of Gongming industrial land with part of industrial land assets in
Wuhan of the controlling shareholders - Wuhan Zhongheng Group:
The board of directors of the Company held the 3rd Extraordinary Meeting for 2009 dated Apr. 22,
2009, which approved the Company and Wuhan Zhongheng Group to jointly add capitals to Wuhan
Hengfa Science and Technology Co., Ltd.(refer to Wuhan Hengfa Science and Technology later),
the wholly-owned subsidiary of the Company: in which, Wuhan Zhongheng Group added capital to
Hengfa Science and Technology with the land use right and ground buildings of the No.10 and No.2
lands (whose appraisal value was RMB 101,693,100) located in Zhuankou Community of Wuhan
Economic and Technology Development Zone , and obtained 56% equities of Hengfa Science and
Technology which was accomplished adding capital; Wuhan Zhongheng Group planned to
exchange 56% equities of Hengfa Science and Technology for 100% equities of Huafa Science and
Technology held by the Company in price of RMB 101,693,100, and the balance could be made up
with cash. Details could be found in notice of the Company on Apr. 30, 2009.
The aforesaid proceedings still need examination and discussion by Shareholders’ General Meeting.
(III) There was no non-operational current credit and liability and guarantee existed among the
Company, controlling subsidiaries and related parties
VII. Significant contracts and their implementations
(I) Besides the aforesaid property leasing contract involved in Item III – Significant lawsuit and
arbitration, the Company had no significant transaction, trusteeship, contract and leasing contract
occurred in the report period or in the past but lasted to this period.
(II) The Company hasn’t any significant guarantee contract occurred in the report period or
occurred in previous period but lasted to the report period.
(III) The Company hasn’t any significant entrusting event of others to manage assets of the
Company occurred in the report period or previous period but lasted to the report period; neither has15
other entrusted financing events.
VIII. Special explanation and independent opinion issued by independent directors on capital
occupancy and external guarantee of related parties of the Company
Independent directors made careful inspection on the capital occupancy by largest shareholder and
its related parties and external guarantee of the Company, and they held the opinions that: during
the report period, the Company hadn’t capital occupancy by controlling shareholder and other
related parties; the Company also hadn’t provided guarantees for controlling shareholder, actual
controller and other related parties, any non-legal person unit or individual; the Company hadn’t
been forcibly supplied guarantees for others by controlling shareholder, actual controller and other
related parties; ended as June 30, 2009, the Company hadn’t any current external guarantee or
accumulated guarantee matters.
IX. Commitments
(I) Commitments that probably have significant influence on operational result and financial status
of the Company occurred in the report period or previous period but lasted to the report period
made by the Company or shareholders holding over 5% (including 5%) of the Company.
Name of
shareholder
Commitment Performance of commitment
Wuhan Zhongheng
New Science &
Technology
Industrial Group
Co., Ltd.
Plan to transfer the
relevant assets concerning
plastic injection business
and the 70% equities of
Wuhan Hengsheng
Photoelectricity Industry
Co., Ltd. held by it to the
Company within 1 year
after equity ownership
transfer of the purchase
was accomplished.
1. Wuhan Zhongheng Group didn’t finish the assets
injection within the commitment term;
2. On Jun. 5, 2008, with examination and approval from
the 3rd temporary meeting of the Board for 2008, the
Company took cash RMB 27 million to buy relevant
assets concerning production of injection products from
Wuhan Zhongheng Group, and thus part commitment had
been finished;
3. In the first 10 days of May, 2008, the Company
officially started off the significant asset restructure work
of purchasing the 70% equities of Wuhan Hengsheng
Photoelectricity Industry Co., Ltd.; engaged financial
consultant and law consultant to carry out earnest
investigation on the restructure assets that may be
involved, and negotiated with relevant departments which
were in charge of this. However, due to that relevant
condition was not mature, there were obstacles in material
asset restructure and paused the planning in short time.
(II)Commitments of controlling shareholders made in the share merger reform scheme of the
Company
Name of shareholder Special commitment Performance of commitment
Wuhan Zhongheng
New Science &
Technology
Industrial Group
Co., Ltd.
Promised that the holding non-circulating shares
of the Company won’t be traded on the market
within 36 months since they acquired listed
trading right.
Under implementation
X. Audit
The financial report of the Company in semi-annual of year 2009 hasn’t been audited. The16
Company has not engaged any audit organization for 2009.
XI. Other significant events
(I) In the report period, the Company, as well as its directors, supervisors, senior executives,
controlling shareholders and actual controllers haven’t received any inspection, administrative
penalty, forbiddance to enter securities market and pointed as inappropriate person by CSRC;
haven’t received other penalty from administrative departments and public condemn from Shenzhen
Stock Exchange.
(II) In the report period, the Company hasn’t had any reception or research, communication,
interview etc. activities from the special objects indicated by Guiding Rules for Fair Information
Disclosure of Listed Company.
(III) 2008 Annual Report of the Company has been disclosed on April 27, 2009, Shinewing
Certified Public Accountants issued standard unqualified Auditors’ Report. In 2008, the Company
realized net profit amounting to RMB 7.57 million and the net profit after deducting non-recurring
gains/losses amounting to RMB 1.82 million, and the main operation of the Company ran normally.
The audit results showed that the audited net profit and net profit after deducting non-recurring
gains/losses were both positive, the status of implementing other special treatment in stock trade has
been eliminated. In line with the regulation on Article 13.3.5 of Listing Rules for Stock in Shenzhen
Stock Exchange, with the application of the Company and with the approval of Shenzhen Stock
Exchange, other special treatment in stock trade of the Company was cancelled since May 19, 2009,
the short form of the stocks were changed into SHEN HUAFA-A and SHEN HUAFA-B from
original ST HUAFA-A and ST HUAFA-B, the daily price limits of stock trade resumed to 10%
from the original 5%, and the stock code remained unchanged.17
VI. Financial Report (Un-audited)
BALANCE SHEET
Prepared by Shenzhen Zhongheng Huafa Co., Ltd. June 30, 2009 Unit: RMB
Items MerAgmero u nt at pePriaorde-netn Cd ompany MerAgmero u nt at yePara-rbeengt iCn ompany
Current assets:
Monetary funds 90,951,737.27 75,418,602.94 24,314,654.56 23,236,402.77
Settlement provisions
Capital lent
Transaction finance asset
Notes receivable 4,206,527.69 4,106,527.69 6,767,862.01 6,767,862.01
Accounts receivable 166,369,887.50 123,708,285.87 98,397,251.00 98,372,655.00
Accounts paid in advance 5,033,315.13 601,661.33 2,046,277.06 1,966,277.06
Insurance receivable
Reinsurance receivables
Contract reserve of
reinsurance receivable
Interest receivable
Dividend receivable
Other receivables 23,021,097.05 39,660,966.77 15,576,239.03 15,883,360.82
Purchase restituted finance
asset
Inventories 111,820,212.73 74,118,809.58 50,460,254.12 50,350,104.12
Non-current asset due
within one year
Other current assets
Total current assets 401,402,777.37 317,614,854.18 197,562,537.78 196,576,661.78
Non-current assets:
Granted loans and advances
Finance asset available for
sales
Held-to-maturity
investment
Long-term account
receivable
Long-term equity
investment 125,683,539.00 30,465,789.00
Investment property 41,659,336.04 41,659,336.04 42,938,764.28 42,938,764.28
Fixed assets 188,982,331.74 137,213,254.69 194,494,830.65 176,935,860.29
Construction in progress 1,289,792.70 864,984.79 1,624,882.03 1,135,030.03
Engineering material
Disposal of fixed asset
Productive biological asset
Oil and gas asset
Intangible assets 6,201,921.20 6,183,231.12 6,253,073.63 6,253,073.63
Expense on Research and
Development
Goodwill
Long-term expenses to be
apportioned 1,428,571.44 1,428,571.44
Deferred income tax asset 3,796,628.51 4,813,975.21 3,796,628.51 4,813,975.21
Other non-current asset
Total non-current asset 243,358,581.63 317,846,892.29 249,108,179.10 262,542,492.44
Total assets 644,761,359.00 635,461,746.47 446,670,716.88 459,119,154.2218
BALANCE SHEET (CON.)
Prepared by Shenzhen Zhongheng Huafa Co., Ltd. June 30, 2009 Unit: RMB
Current liabilities:
Short-term loans 23,481,853.33 23,481,853.33 94,000,000.00 94,000,000.00
Loan from central bank
Absorbing deposit and
interbank deposit
Capital borrowed
Transaction financial
liabilities
Notes payable 8,679,163.55 1,331,366.97 3,429,765.26 3,429,765.26
Accounts payable 117,112,123.40 52,026,008.02 49,895,119.48 49,732,770.38
Accounts received in
advance 804,229.57 26,764,229.57 1,962,952.11 1,962,952.11
Selling financial asset of
repurchase
Commission charge and
commission payable
Wage payable 1,157,694.86 510,692.56 908,291.64 844,458.29
Taxes payable -607,626.82 -367,125.44 2,766,213.08 2,678,179.46
Interest payable
Dividend payable
Other accounts payable 15,049,557.74 43,806,665.20 45,523,634.74 53,272,582.46
Reinsurance payables
Insurance contract reserve
Security trading of agency
Security sales of agency
Non-current liabilities due
within 1 year
Other current liabilities
Total current liabilities 165,676,995.63 147,553,690.21 198,485,976.31 205,920,707.96
Non-current liabilities:
Long-term loans 226,540,400.00 226,540,400.00
Bonds payable
Long-term account payable
Special accounts payable
Projected liabilities 175,474.41 175,474.41 175,474.41 175,474.41
Deferred income tax liabilities
Other non-current liabilities 200,000.00 200,000.00 200,000.00 200,000.00
Total non-current liabilities 226,915,874.41 226,915,874.41 375,474.41 375,474.41
Total liabilities 392,592,870.04 374,469,564.62 198,861,450.72 206,296,182.37
Owner’s equity (or shareholders’
equity):
Paid-in capital (or share
capital) 283,161,227.00 283,161,227.00 283,161,227.00 283,161,227.00
Capital public reserve 104,073,326.94 104,073,326.94 104,073,326.94 104,073,326.94
Less: Inventory shares
Reasonable reserve
Surplus public reserve 77,391,593.25 77,391,593.25 77,391,593.25 77,391,593.25
Provision of general risk
Retained profit -212,457,658.23 -203,633,965.34 -216,816,881.03 -211,803,175.34
Balance difference of
foreign currency translation
Total owner’s equity attributable 252,168,488.96 260,992,181.85 247,809,266.16 252,822,971.8519
to parent company
Minority interests
Total owner’s equity 252,168,488.96 260,992,181.85 247,809,266.16 252,822,971.85
Total liabilities and owner’s
equity 644,761,359.00 635,461,746.47 446,670,716.88 459,119,154.22
PROFIT STATEMENT
Prepared by Shenzhen Zhongheng Huafa Co., Ltd. Jan.-Jun., 2009 Unit: RMB
Amount in this period Amount in last period
Items Merger Parent
Company Merger Parent
Company
I. Total operating income 212,122,658.94 141,587,417.02 72,721,200.02 71,708,604.02
Including: Operating income 212,122,658.94 141,587,417.02 72,721,200.02 71,708,604.02
Interest income
Insurance gained
Commission charge and commission
income
II. Total operating cost 207,633,871.71 136,802,685.47 79,232,188.19 78,219,940.09
Including: Operating cost 180,418,375.74 118,371,361.95 61,521,143.96 60,921,341.49
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
Operating tax and extras 1,830,716.14 1,650,080.70 1,014,361.45 961,706.47
Sales expenses 3,027,035.54 1,796,971.45 2,211,264.49 2,211,264.49
Administration expenses 16,821,127.85 9,975,520.04 11,037,561.09 10,677,864.88
Financial expenses 5,536,616.44 5,008,751.33 2,968,516.75 2,968,422.31
Losses of devaluation of asset 479,340.45 479,340.45
Add: Changing income of fair value
Investment income
Including: Investment income on
affiliated company and joint venture
Exchange income
Entrusted operating income 2,190,219.71 2,190,219.71
III. Operating profit 4,488,787.23 4,784,731.55 -4,320,768.46 -4,321,116.36
Add: Non-operating income 120,889.30 3,634,932.18 2,703,449.75 2,703,449.75
Less: Non-operating expense 250,453.73 250,453.73 886,074.57 885,726.67
Including: Disposal loss of non-current
asset
IV. Total Profit 4,359,222.80 8,169,210.00 -2,503,393.28 -2,503,393.28
Less: Income tax expense
V. Net profit 4,359,222.80 8,169,210.00 -2,503,393.28 -2,503,393.28
Net profit attributable to owner’s of
parent company 4,359,222.80 8,169,210.00 -2,503,393.28 -2,503,393.28
Minority shareholders’ gains and losses
VI. Earnings per share
i. Basic earnings per share 0.015 0.029 -0.009 -0.00920
ii. Diluted earnings per share 0.015 0.029 -0.009 -0.009
VII. Other consolidated income 0 0 0 0
VIII. Total consolidated income 4,359,222.80 8,169,210.00 -2,503,393.28 -2,503,393.28
CASH FLOW STATEMENT
Prepared by Shenzhen Zhongheng Huafa Co., Ltd. Jan.-Jun., 2009 Unit: RMB
Items MeArgmeoru nt in tPhaisr epnetr Cioodm pany MeArmgeoru nt in laPsat rpeenrti oCdo m pany
I. Cash flows arising from operating
activities:
Cash received from selling
commodities and providing labor services 131,268,785.30 115,053,063.61 66,992,386.24 65,988,639.24
Net increase of customer deposit and
interbank deposit
Net increase of loan from central bank
Net increase of capital borrowed from
other financial institution
Cash received from original insurance
contract fee
Net cash received from reinsurance
business
Net increase of insured savings and
investment
Net increase of disposal of transaction
financial asset
Cash received from interest, commission
charge and commission
Net increase of capital borrowed
Net increase of returned business
capital
Write-back of tax received
Other cash received concerning
operating activities 20,902,319.80 65,827,829.48 5,994,252.05 5,987,500.39
Subtotal of cash inflow arising from
operating activities 152,171,105.10 180,880,893.09 72,986,638.29 71,976,139.63
Cash paid for purchasing commodities
and receiving labor service 132,892,144.14 114,713,508.58 73,831,893.59 73,831,893.59
Net increase of customer loans and
advances
Net increase of deposits in central bank
and interbank
Cash paid for original insurance
contract compensation
Cash paid for interest, commission
charge and commission
Cash paid for bonus of guarantee slip
Cash paid to/for staff and workers 13,502,102.92 7,999,606.65 12,393,419.24 11,992,088.25
Taxes paid 3,158,433.58 2,605,857.98 4,207,727.14 4,163,613.94
Other cash paid concerning operating
activities 81,543,607.29 93,290,043.39 8,602,542.26 7,249,212.74
Subtotal of cash outflow arising from
operating activities 231,096,287.93 218,609,016.60 99,035,582.23 97,236,808.52
Net cash flows arising from operating
activities -78,925,182.83 -37,728,123.51 -26,048,943.94 -25,260,668.89
II. Cash flows arising from investing21
activities:
Cash received from recovering
investment
Cash received from investment income
Net cash received from disposal of
fixed, intangible and other long-term assets 135,000.00 135,000.00
Net cash received from disposal of
subsidiaries and other units
Other cash received concerning
investing activities
Subtotal of cash inflow from investing
activities 135,000.00 135,000.00
Cash paid for purchasing fixed,
intangible and other long-term assets 2,455,181.70 369,445.56 453,571.40 453,571.40
Cash paid for investment 60,636,991.79
Net increase of mortgaged loans
Net cash received from subsidiaries and
other units
Other cash paid concerning investing
activities 2,899,313.79
Subtotal of cash outflow from investing
activities 5,354,495.49 61,006,437.35 453,571.40 453,571.40
Net cash flows arising from investing
activities -5,354,495.49 -61,006,437.35 -318,571.40 -318,571.40
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 253,481,853.33 253,481,853.33 88,783,965.04 88,783,965.04
Cash received from issuing bonds
Other cash received concerning
financing activities
Subtotal of cash inflow from financing
activities 253,481,853.33 253,481,853.33 88,783,965.04 88,783,965.04
Cash paid for settling debts 97,459,600.00 97,459,600.00 30,000,000.00 30,000,000.00
Cash paid for dividend and profit
distributing or interest paying 5,027,225.33 5,027,225.33 2,291,092.20 2,291,092.20
Including: Dividend and profit of
minority shareholder paid by subsidiaries
Other cash paid concerning financing
activities
Subtotal of cash outflow from
financing activities 102,486,825.33 102,486,825.33 32,291,092.20 32,291,092.20
Net cash flows arising from financing
activities 150,995,028.00 150,995,028.00 56,492,872.84 56,492,872.84
IV. Influence on cash and cash equivalents
due to fluctuation in exchange rate -78,266.97 -78,266.97 -581,575.43 -581,575.43
V. Net increase of cash and cash equivalents 66,637,082.71 52,182,200.17 29,543,782.07 30,332,057.12
Add: Balance of cash and cash
equivalents at the period -begin 24,314,654.56 23,236,402.77 18,308,223.25 17,175,103.18
VI. Balance of cash and cash equivalents at
the period -end 90,951,737.27 75,418,602.94 47,852,005.32 47,507,160.3022
CONSOLIDATED STATEMENT ON CHANGES OF OWNERS’ EQUITY
Prepared by Shenzhen Zhongheng Huafa Co., Ltd. Semi-Annual of 2009 Unit: RMB
Amount in this report period Amount in last year
Owners' equity attributable to the parent company Owners' equity attributable to the parent company
Items
Paid-up capital
(Share capital) Capital reserves
Less:
Treasur
y Stock
Reasona
ble
reserve
Surplus
reserves
General
risk
provisio
n
Retained profit Others
Minority’s
equity
Total owners’
equity Paid-up capital
(Share capital) Capital reserves
Les
s:
Tre
asur
y
Sto
ck
Reason
able
reserve
Surplus
reserves
General
risk
provision
Retained profit Others
Minority’
s equity
Total owners’
equity
I. Balance at the end of last year 283,161,227.00 104,073,326.94 77,391,593.25 -216,816,881.03 247,809,266.16 283,161,227.00 106,032,173.92 77,391,593.25 -224,384,793.57 242,200,200.60
Add: Changes of accounting policy
Error correction of the last period
Others
II. Balance at the beginning of this year 283,161,227.00 104,073,326.94 77,391,593.25 -216,816,881.03 247,809,266.16 283,161,227.00 106,032,173.92 77,391,593.25 -224,384,793.57 242,200,200.60
III. Increase/ Decrease in this year
(Decrease is listed with'"-") 4,359,222.80 4,359,222.80 -1,958,846.98 7,567,912.54 5,609,065.56
(I) Net profit 4,359,222.80 4,359,222.80 7,567,912.54 7,567,912.54
(II) Profits and losses calculating into
owners' equity -1,958,846.98 -1,958,846.98
1. Net changing amount of fair value of
financial assets available for sale
2. Effect of changes of other owners'
equity of invested units under equity
method
3. Effect of income tax related to owners'
equity
4. Others -1,958,846.98 -1,958,846.98
Subtotal of (I)and (II) 4,359,222.80 4,359,222.80 -1,958,846.98 7,567,912.54 5,609,065.56
(III) Owners' devoted and decreased
capital
1. Owners' devoted capital
2. Amount calculated into owners' equity
paid in shares
3. Others
(IV) Profit distribution
1. Withdrawal of surplus reserves
2. Withdrawal of general risk provisions
3. Distribution for owners (shareholders)
4. Others
(V) Carrying forward internal owners'
equity
1. Capital reserves conversed to capital
(share capital)
2. Surplus reserves conversed to capital
(share capital)
3. Remedying loss with surplus reserve
4. Others
IV. Balance at the end of the report
period 283,161,227.00 104,073,326.94 77,391,593.25 -212,457,658.23 252,168,488.96 283,161,227.00 104,073,326.94 77,391,593.25 -216,816,881.03 247,809,266.1623
STATEMENT ON CHANGES OF OWNERS' EQUITY OF PARENT COMPANY
Prepared by Shenzhen Zhongheng Huafa Co., Ltd. Semi-Annual of 2009 Unit: RMB
Amount in this report period Amount in last year
Items Paid-up capital
(Share capital)
Capital
reserves
Less: Treasury
Stock
Reasonable
reserve
Surplus
reserves Retained profit Total owners’
equity
Paid-up capital
(Share capital)
Capital
reserves
Less: Treasury
Stock
Reasonable
reserve
Surplus
reserves Retained profit Total owners’ equity
I. Balance at the end of last year 283,161,227.00 104,073,326.94 77,391,593.25 -211,803,175.34 252,822,971.85 283,161,227.00 106,032,173.92 77,391,593.25 -224,384,793.57 242,200,200.60
Add: Changes of accounting policy
Error correction of the last period
Others
II. Balance at the beginning of this year 283,161,227.00 104,073,326.94 77,391,593.25 -211,803,175.34 252,822,971.85 283,161,227.00 106,032,173.92 77,391,593.25 -224,384,793.57 242,200,200.60
III. Increase/ Decrease in this year
(Decrease is listed with'"-") 8,169,210.00 8,169,210.00 -1,958,846.98 12,581,618.23 10,622,771.25
(I) Net profit 8,169,210.00 8,169,210.00 12,581,618.23 12,581,618.23
(II) Profits and losses calculating into
owners' equity -1,958,846.98 -1,958,846.98
1. Net changing amount of fair value of
financial assets available for sale
2. Effect of changes of other owners'
equity of invested units under equity
method
-1,958,846.98 -1,958,846.98
3. Effect of income tax related to owners'
equity
4. Others
Subtotal of (I)and (II) 8,169,210.00 8,169,210.00 -1,958,846.98 12,581,618.23 10,622,771.25
(III) Owners' devoted and decreased
capital
1. Owners' devoted capital
2. Amount calculated into owners' equity
paid in shares
3. Others
(IV) Profit distribution
1. Withdrawal of surplus reserves
2. Distribution for owners (shareholders)
3. Others
(V) Carrying forward internal owners'
equity
1. Capital reserves conversed to capital
(share capital)
2. Surplus reserves conversed to capital
(share capital)
3. Remedying loss with surplus
reserves
4. Others
IV. Balance at the end of the report
period 283,161,227.00 104,073,326.94 77,391,593.25 -203,633,965.34 260,992,181.85 283,161,227.00 104,073,326.94 77,391,593.25 -211,803,175.34 252,822,971.85Semi-annual Report 2009
24
Annotations to the Accounting StatementS
1. Company Profile
Shenzhen Zhongheng Hwafa Co., Ltd. (“the Company” for short, but “the Company (or
‘the Group’)” when including subsidiaries), previously known as Shenzhen Zhongheng
Huafa Co., Ltd. (renamed as set out herein in this term), is a Sino-foreign joint venture
jointly invested and incorporated by such three legal persons as Shenzhen Electronics
Group Co., Ltd. (“SEG” for short), China Zhenhua Electronics Group Co., Ltd. (“Zhenhua
Group” for short) and Luks Industrial (Group) Limited (“Luks Group” for short) on 08
December 1981. In 1991, the Company was reorganized as a company of limited
liabilities by stocks (registered number of the License for a Corporation Legal Person:
Q.G.Y.S.Z.Z.No. 100296 and is changed as 440301501120670 in this term) and made its
IPO in the same year, issuing 53,130,000 shares of RMB common stock with par value 1
Yuan per share, including 29,630,000 shares of A shares and 23,500,000 shares of B shares.
In 1992, the Company launched it’s A shares and B shares in Shenzhen Stock Exchange,
53,130,000 shares were tradable and 159,203,000 shares remaining unlisted.
In November 1996, Luks Group assigned 12% of its shares in the Company, totaling
25,500,000 shares, to SEG through agreement, which was approved in the reply of
Shenzhen Stock Regulatory Office and ceded on 05 March 1997. After such assignment,
Luks Group held 25,796,663 shares of the Company, accounting for 12.16% of the total
shares capital, and SEG held 25,500,000 shares of the Company, accounting for 12% of
the total shares capital.
In December 1997, the Company conducted shares allotment program, issuing extra
63,699,895 shares to all shareholders by the ratio of 10:3 against the total 212,332,989
shares before the allotment, among which, 30,777,997 shares were alloted to domestic
corporate shareholders and 3,600,000 shares were subscribed, with the remaining
27,177,997 shares assigned to public shareholders on paid basis, 15,388,998 shares were
allotted to foreign corporate shareholders and 1,800,000 shares were subscribed with
13,588,998 shares abandoned, and also 9,777,900 shares allotted to public shareholders
and 7,755,000 shares to domestic-listed foreign shareholders.
In January 1998, the Company carried out the capital reserve-to-capital program for year
1996, i.e. based on the total 212,332,989 shares ended 1996, 2 shares will be increased to
per 10 shares for all shareholders, and based on the total 240,701,488 shares ended 1997
after allotation, 1.764 shares will be increased to each 10 shares for all shareholders.
On 05 January 2001, upon ratification, the increased shares of the Company, totaling
6,394,438 shares, went public in Shenzhen Stock Exchange.
On 29 May 2001, upon the approval of CSRC, the non-listed foreign capital totaling
62,462,914 shares of the Company were transferred as listed circulating stock, marking
the irculation of entire foreign capital.
On 30 November 2001 and 07 December 2001, Luks Group reduced the B-share of the
Company, totaling 14,158,000 shares and 14,159,000 shares respectively. As of 17
December 2001, SEG had aggregately reduced B-share of the Company totaling
14,487,400 shares, accounting for 5.12% of total shares capital of the Company.
Ended as 31 Dec. 2006, the aggregate shares of the Company are 28,316,000 shares,Semi-annual Report 2009
25
158,240,000 shares were listed including 56,240,000 A-shares and 102,000,000 B-shares.
On 06 June 2005, the Company bulletined that original shareholder SEG and Zhenhua
Group assigned the state-owned corporate capital they held in the Company totaling
124,920,000 shares to Wuhan Zhongheng New Tech Industry Group Co., Ltd. (“Wuhan
Zhongheng” for short), which was ratified by the State-owned Assets Committee, the State
Ministry of Commerce and CSRC with relevant assignment procedures completed on 11
April 2007.
On 13 November 2006, the Board of Shareholders of the Company passed the Share
Merger Reform Program of Shenzhen Zhongheng Huafa Co., Ltd. In line the program,
Wuhan Zhongheng carried out assets reorganization to the Company, including bestowing
assets and integrating industries covered by the Company, also paying 1.5 shares as
consideration for per 10 shares to all A-share shareholders enrolled as at the equity
registration day for the program, totaling 8,435,934 shares which may be tradable since
the first business day after the implementation of the program. On May 18, 2007, the
Company accomplished the implementation of consideration of shares in the share merger
reform scheme. As of August 2007, the Company had completed the share merger reform
program with ceding procedures for bestowed assets completed.
As of 30 June 2008, the aggregate shares of the Company are 28,316,000 shares, among
which, restricted shares total to 116,516,142 shares, accounting for 41.15% of total shares,
and unrestricted shares total to 166,645,085 shares, accounting for 58.85% of total shares.
Among the unrestricted shares, there are 64,649,249 A shares and 101,995,836 B shares,
accounting for 22.83% and 36.02% of total shares respectively.
The business scope: manufacturing & operating each kind of color TV, LCD monitor,
LCD screen (subject to branch offices), hi-fi equipment, digital watch, TV game player
and computer as well as auxiliary circuit boards, precise injection moulding ware, light
packing materials (manufacturing & operting in Wuhan), hardware (including molds),
electroplate and solder stick, real estate development and operation (ref. S.F.D.C.No.
7226760), property management. Establish affiliatd companies in Wuhan and Jilin, branch
offices in each capital city (excluding Lhasa) and cities directly under jurisdiction of the
Central Government.
Its major business is manufacturing and sales of circult board, processing of precise
injection moulding ware, hardware (including molds); property lease and processing and
sales of LCD displayer and color TV. The Company is registered at Block 411, Huafabei
Road, Futian District, Shenzhen Cty; legal representative is Li Zhongqiu.
The parent company of the Company is Wuhan Zhongheng, and the shareholders meeting
is its angecy of power, which execuates the decision right on material matter such as
operation guildlines, funding, investment and profit distribution. Board of directors shall
answer for shareholders meeting, which implements operation and decision right of the
company according to laws; Managers take charge for organizing and executing the
decisions made in shareholders meeting and board of directors meeting, as well as
presiding the production and operation management work of the company. The functional
management departments include Enterprise Planning Department, Financial Department,
Comperhensive Management Department, Business Center, Video Business Department,
Circuit Panel Business Department, Plastic Injection Business Department, AuditingSemi-annual Report 2009
26
Department, Office of Borad of Directors etc., the branches include Wuhan branch etc.,
and subsidiaries mainly include Shenzhen Huafa Property Lease Management Co., Ltd.,
Shenzhen Zhongheng Huafa Property Management Co., Ltd., Wuhan Hengfa Scientific
and Technology Co., Ltd. and Shenzhen Zhongheng Huafa Scientific and Technology Co.,
Ltd., etc., among which Shenzhen Zhongheng Huafa Scientific and Technology Co., Ltd.
is newly invested and established wholly-owned subsidiary in March 2009, the initial
registered capital was RMB 200,000, later, fixed assets such as machinery equipment of
printed circuit board and cash were increasingly invested amounting to RMB 86,767,750.
The business scope are: technological development and sales of printed circuit board,
development of property; the registered address is: 1/F, No.1 Buidling, Huafa Electronic
City, Gongming Street, Guangming New District, Shenzhen; and the business period is
from March 2, 2009 to March 2, 2019.
II. Basis of Preparation of Financial Statements
This Financial Statement is prepared on the basis of continual operation of the Company.
III. Statement regarding Following Business Accounting Standards
The Financial Statement prepared by the Group complies with the requirements of
Business Accounting Standards, and reflect such information regarding enterprise
financial situation, operation result and cash flows, etc. on the factual and complete basis.
IV. Change of Accounting Policy and Estimate and Correction of Key Errors of Prior
Period
1. Change of accounting policy and its effect:
Whereas the working procedure of industrial production was long, the cost of inventory
was calculated by weighted average method, and the disadvantages of too many taches
and long time were difficult to satisfy the control and management requirement of
inventory, the Company changed the sending inventory calculation method from weighted
average method to first-in and first out method from Jan. 1, 2009. This accounting policy
change was good for improving the time effectiveness of cost calculation, and suitable for
the actual condition of production cost calculation in each accounting period, which truly
and fairly reflected the financial condition of enterprise.
Due to the inventory value at period-begin in each period before could not be identified in
batches and recalculated, the accumulative affected amount caused by aforesaid
accounting policy change was difficult to confirm in retroactive adjustment method,
therefore, this change adopted modified prospective method. This calculation method
change of sending inventory neither have significant influence on disclosed financial
statement, net profit and owners’ equity of the Company, nor cause change of the
Company’s profit and loss.
2. Change of accouting estimate and its effect: Naught
3. Correction of key errors of prior period and its effect: NaughtSemi-annual Report 2009
27
V. Key Accounting Policies, Accounting Estimate and Preparation Method of
Consolidated Financial Statement
1. Accounting Period
The accounting period of the Group is from each 01 January to 31 December in the
Gregorian calendar.
2. Standard Currency
RMB is adopted as standard currency by the Group.
3. Recording Basis and Pricing Principles
Accrual system is adopted as recording basis of the Group. Except for tradable financial
assets, financial assets for sales and those measured by fair value, history cost is adopted
as pricing principle.
4. Cash & Cash Equivalents
The cash referred to in the Cash Flow Statement of the Group means stocked cash and
deposit available for payment at any time. The cash equivalents therein refer to investment
due within 3 months since purchasing day, strong fluidity, small risk in value variation and
easy to converted into cash of predictable sum.
5. Translation of Foreign Currency
The transactions in foreign currencies of the Group are recorded after translating into
RMB at fixed exchange rate. At the reporting day of Balance Sheet, the monetary assets in
foreign currencies are translated at the instant exchange rate of the reporting day of
Balance sheet. As to the exchange loss and profit occurred, except for that of special loan
for the purchase or production of assets which meet the coditions of capitalization, which
shall be treated according to the principles of capitalization, others shall be accurred into
loss and profit in current term. Those non-monetary assets measured by fair value are
translated into RMB at the instant exchange rate of the recognizing day of fair value, with
translation different occurred accured into loss and profit in current term as change of fair
value. Those non-monetary foreign assets measured by history cost, shall still be translated
at the instant exchange rate of the day when business occurred, and shall not change the
amount of RMB.
The cash flows in foreign currencies are translated at the instant exchange rate on the
occurring day of cash flows, with sum affected by exchange rate separately presented in
the Cash Flow Statement.
6. Financial Assets and Debts
(1) Financial Assets
The group divides its controlling financial assets in 4 types according to investment
purpose and economic property: fair value through profit or loss, held to maturity
investments, receivables and for sale assets.
1) Fair value through profit or loss refers to those financial statements to be sold within
short term which are measured by fair value with any change accrued into current loss andSemi-annual Report 2009
28
profit, presented as “Tradable Financial Assets” in the Balance Sheet.
2) Held to maturity investments refer to those non-derived financial assets which have
fixed due date and fixed or affirmable recovered sum and reflect the clear intention and
capacity of the management to hold till maturity.
3) Receivables refer to non-derived financial assets which have fixed or assured recovered
sum without quotation in an acitive market, including note receivable, account receivable,
interest receivable, dividends receivable and other receivables, etc..
4) For sale assets include those non-derived financial assets appointed as sellable assets at
initial recognition and those are not classified as other types.
Financial assets are initially recognized by fair value. For fair value through profit or loss,
the relevant trade expenses at acquisition are directly accrued into current loss and profit.
The relevant trading expenses of other types of financial assets are accrued into initial
recognized sum. When the rights as set out in a contract to receive cash flow of a certain
kind of financial assets have expired, or when almost all the risk and reward of the
ownership of such financial assets have been transferred to the transferee, recognition of
such financial assets will be terminated.
Fair value through profit or loss and for sale assets shall be subsequently measured as per
fair value; the moneys receivable and investment holding till maturity shall be presented
as per amortized cost by actual interest method.
The fair value variation of the fair value through profit or loss shall be accured into loss
and profit of fair value variation. The interests or cash dividends obtained during holding
the investment will be recognized as investment yield. During processing, the difference
between its fair value and initial amount entered into the account will be recognized as
investment loss and profit, and the loss and profit of fair value variation will be adjusted at
the same time.
The fair value variation of for sale assets shall be accrued into shareholders’ equity, and
interests calculated against actual interest method durng holding the investment will be
accured into investment yield. The cash dividends of investment through equity tools for
sales will be accrued into investment yield when the invested unit announced to issue
dividends. Durng processing, after deducting the accumulated sum of fair value variation
that are directly accrued into shareholders’ equity, the remaining of payment and book
value will be accrued into investment yield and loss.
Other than the fair value through profit or loss, the Company has checked the book value
of the financial assets as at the reporting date of the Balance Sheet: if there is any
objective evidence showing impairment has occurred to certain kind of financial assets, a
provision for impairment shall be drawn. If the fair value of for sale assets reduces largely
or non-temporarily, the accumulated loss occurred due to decrease of fair value which are
directly accrued into shareholders’ equity shall be accrued into impairment loss. For
investment through debt tools for sales which have recognized its impairment loss, in case
the fair value rises which objectively relates with matters incurred after confirming
original impairment loss preceding current term, the originally recognized ipairment loss
shall be carried back and accrued into current loss and profit. For investment through
equity tools for sales which have recognized its impairment loss, in case the fair value
rises which objectively relates with matters incurred after confirming original impairmentSemi-annual Report 2009
29
loss preceding current term, the originally recognized impairment loss shall be carried
back and accrued into shareholders’ equity, with an exception of those without quotation
in an active market with fair value unable to be reliably measured.
(2) Financial Liabilities
As initially recognized, financial Liabilities of the Group are divided into financial
liabilities measured at their fair values and of which the variation is recorded into the
profits and losses of the current period and other financial liabilities.
Financial liabilities measured at their fair values and of which the variation is recorded
into the profits and losses of the current period include transactional financial liabilities
and financial liabilities measured at their fair values and of which the variation is recorded
into the profits and losses of the current period when initially recognized. As to those
kinds of financial liabilities, it shall make subsequent measurement according to their fair
values. Profit or loss arised from the variation of fair value and the dividend and interest
expenditure related to the financial liabilities shall be recorded into the loss and profits of
the current period.
Other financial Liabilities will be processed by actual interest method and shall be
measured by amortized cost.
7. Receivables, Provisions for Bad Debts
Rreceivables include account receivable and other receivables, etc.
For receivables occurred to the Company through sales of goods or providing services to
others, the fair value of price set out in the contract or agreement with the purchasers shall
be deemed as initial recognized amount. Receivables will be processed by actual interest
method and through deducting the bad debts from amortized cost.
For bad debt loss possibly occurred, it shall be caculated by provision method, at the end
of the year, draw provision for bad debt according to analysis method of age of account
combining individually recognizing method and record into loss and profit of current
period. As to account receivalbes that has objective evidence showing that it is impossible
to recover, it may be regarded as loss of bad debt after being approved by the Group based
on the procedure, and the provision drawn for bad debt shall be writeen off.
Such receivables of the Company, if any exceeding 500,000 Yuan, are deemed as key item.
If there is any objective evidence showing that the Company is predicted impossible to
recover all receivables as originally agreed, an impairment test shall be conducted
separately against the less part between its present value of the future cash flows and its
book value so as to draw provisions for bad debts.
Any single item of receivables, if involving large sum, shall be divided into several groups
as per their credit risk features together with those tested unimpaired receivables, which
shall then, based on the actual loss rate of receivables group with same or similar type and
credit risk features in previous years and in combination with present situation, fix the
provision percentage to be drawn for bad debts for each group in current term so as to
determine the privisions drawable this term. The Group will regard receivalbes with
authentic evidence to prove that they can not be recovered or the probility to recover is
very small as certain assets profile, and draw provisions for bad debts based on total
amcount.Semi-annual Report 2009
30
In the table below is the percentage of provisions drawn for bad debts of account
receivables based on the age of account:
Account Age Percent Drawn
Within 1 Year 0
1-2 Year (s) 5%
2-3 Years 10%
Over 3 years 30%
In the table below is the percentage of provisions drawn for bad debts of other receivables
based on the age of account:
Account Age Percent Drawn
Within 1 Year 0
1-2 Year (s) 5%
2-3 Years 10%
Over 3 years 30%
8. Inventories
Inventories of the Group includes raw materials, packing materials, low-value consuming
product, product in progress, goods in stock, and self-manufactured semi finished prodct
etc..
The perpetual inventory system is applied to inventories. Purchasing are priced at the
actual cost, receiving and selling raw materials are calculated by first-in first-out method.
Low-value consuming goods and packing materials are amortized by one-off write-off
method.
At the year end, the inventories at term end shall be priced at the lower one between cost
and net realizable value, the provisions for inventories depreciaton shall be drawn against
the predicted uncollectible cost caused by inventories damage, part or entire
out-of-fashion or selling price lower than cost. The provisions depreciation of finished
products and large bulk of raw materials shall be drawn against the excess prat between
the cost of single inventory item and its net realizable value. The provisions depreciation
of the other raw and auxiliary materials with various kinds and low unit price shall be
drawn as per category.
For such stocked goods directly for sales as products in stocks, products in progress and
materials for sales, their net realizable value shall be recognized after deducting the
estimated sales expenses and relevant taxes from estimated sales price of such inventories.
For stocked materials for production use, their net realizable value shall be recognized
after deducting estimated cost ocucring at completion, sales expenses and relevant tax
from estimated sales price of products to be manufactured; for inventories holding for
executing sales contract or labor contract, its net realizable value shall be calculated based
on the price set out in relevant contracts.Semi-annual Report 2009
31
9. Long-term Equity Investment
Long-term equity investment mainly includes the equity investment held by the Group
that may produce control, joint control or significant influence over invested entity, or the
equity investment that does not have control, joint control or significant influence on the
invested entiry, and has no offer in active market and its fair value cannot be reliably
measured.
Joint control refers to the control over an economic activitiy in accordance with contracts
and agreements. The confirm basis for joint control is any joint enterprise can not control
separately over the producing and operation activities of the joint enterprise; and the
decision involved in the basic operating activities of the joint enterprise needs to gain
consensus of each party.
Significant influences refer to the power to participate in making decision on the financial
and operatin policies of the invested company, but not to control or do joint control
together with other parties over the formulation of these policies. The confirm basis of
significant influences is when the Group directly or through its subsidiaries owns more
than 20% (including) but less 50% of shares with voting rights of invested company,
unless there is obvious evidence showing in this kind of situation, it can not participate in
the making decision on the financial and operatin policies of the invested company, and
not forming significant influences.
If the long-term equity investment is acquired via business merger under the same control,
it shall, on the day of merger, regard the share of the carrying amount of the owner's equity
of the merged enterprise as the initial cost of the long-term equity investment. As for the
long-term equity investment acquired via business meger under different control, the
merger cost shall be, shall be the fair values, on the merger (acquiring) date, of the assets
given, the liabilities incurred or assumed, and the equity securities issued by the acquirer,
in exchange for the control of the merged (acquired) enterprise, which will be, on the
merger (acquiring) date, further regarded as the initial investment cost of long-term equity
investment.
Apart from the aforesaid long-term equity investment acquired through business merger,
those long-term equity investment, if acquiring through paying cash, shall consider its
purchasing price actually paid as the initial investment cost, which includes expenses,
taxes and other necessary expenditure directly related to the acquiring of the long-term
equity investment; if acquired by issuing equity securities, shall consider the fair value of
issing equity securities as the initial investment cost; if invested by investors, shall
consider the value agreed in the investment contract or agreement as the initial investment
cost; if acquiring from debt reorganization or non-monetary assets exchange, shall confirm
the initial investment cost according to the regulation of relevant accounting rule.
The investment of the Group to its subsidiaries shall be calculated through cost method
and shall be adjusted through equity method in the Financial Statement; the investment to
its associated companies shall be calculated through equity method; For the long-term
equity investment without any control, joint control or serious influence for which there is
no offer in the active market and of which the fair value cannot be reliably measured, the
Group adopts cost method to calculate it; For the long-term equity investment without any
control, joint control or serious influence for which there is offer in the active market andSemi-annual Report 2009
32
of which the fair value can be reliably measured, the Group shall calculate it under the
entry of “Financial Assets for Sales”.
The price of a long-term equity investment measured by employing the cost method shall
be included at its initial investment cost. Where the investment income recognized by the
investing enterprise shall be limited to the amount received from the accumulative net
profits that arise after the invested entity has accepted the investment, the amount of
profits or cash dividends obtained by the investing entity that exceeds the aforesaid
amount shall be regarded as recovery of initial investment cost, and shall ruduce the book
value of the investment.
When calculated by euiqty method, the loss or profits of current period shall be the
attributable or shareble the net profits or losses of the invested entity in current year. The
investing enterprise shall, on the ground of the fair value of all identifiable assets of the
invested entity when it obtains the investment, according to the accounting policies and
period of the Group, offset the loss or profits from interal transaction with joint enterprise,
and calculate the part belonging to the investing enterprise based on the shares holding
ration, recognize the attributable share of the net profits and losses of the invested entity
after it adjusts the net profits of the invested entity.
The Group shall recognize the net losses of the invested enterprise until the book value of
the long-term equity investment and other long-term equity which substantially form the
net investment made to the invested entity are reduced to zero, unless the investing
enterprise has the obligation to undertake extra losses. In addition to, if the Group assumes
the obligation for additional loss of invested entity, it shall recognize estimated liabilities
according to the assumed obligation, and record into the loss and profit of current period.
If the invested entity realizes any net profits later, the Group shall, after the amount of its
attributable share of profits offsets against its attributable share of the un-recognized losses,
resume the recognization of its attributable share of profits.
As to the long-term equity investment in joint enterprise and co-operative enterprise held
before the first executing day, if there is any debit balance of equity investment, it shall
recognize investment loss or profit after deducting the debit balance amortized with
straight-line method on the remaining term.
10. Property of Investment
Property of investment of the Group includes the right to use any land which has already
been rented; the right to use any land which is held and prepared for transfer after
appreciation; The right to use any building which has already been rented.
Property of investment is priced as per its cost. The cost of purchased property of
investment includes purchasing payment, relevant taxes and other expenditures which may
be directly ascribed to such assets. The cost of building such property of investment is
composed of all necessary expenditures occurred prior to that such property has reached
the projected service status.
The Company adopts cost mode to follow measurement of property of investment, for
which, depreciation or amortization will be drawn aiming to the building and land-use
right against the predictable service life and net salvage value. The following shows the
net salvage value and annual depreciation (amortization) rate:Semi-annual Report 2009
33
Type Depreciation
Term (Year)
Expected
Salvage Rate
Annual
Depreciation Rate
Land-use Right 50 10% 1.80%
Houses &
Buildings 5--50 10% 1.80%--18.00%
In case the property of investment is taken for self-use, such property shall be recorded as
fixed assets or intangible assets since the date of taking. If the self-use property is taken
for rent or capital appreciating, such fixed assets or intangible assets shall be recorded as
property of investment since the date of taking. For such reording, the book value before it
shall be taken as the recording value after that.
If the property of investment is disposed of, or if it withdraws permanently from use and if
no economic benefit will be obtained from the disposal, the recognition of it as property of
investment shall be terminated. Such revenues of disposal of the property of investment as
sales, transfer, discard, or being damaged or destroyed, after deducting the book value of
such property as well as the relevant taxes, shall be accrued into the current profits and
losses.
11. Fixed Assets
Fixed assets of the Group refer to the tangible assets that simultaneously possess the
following features (a). they are held for the sake of producing commodities, rendering
labor service, renting or business management; (b). their useful life is in excess of one
fiscal year; and (c) unit value has exceeded 2,000 Yuan.
Fixed Assets include houses & buildings, machinery equipment, mould equipment,
transport equipment, apparatus equipment, tooling equipment and office equipment. Fixed
assets shall be measured at their cost, among which, the cost of a purchased fixed asset
includes the purchase price, VAT, import duties and relevant taxes as well as other
disbursements that bring the fixed asset to the expected conditions for use and that may be
attributed to the fixed asset; the cost of self-constructed fixed assets shall be formed by the
necessary disbursements incurred for bringing the asset to the expected conditions for use.
The cost put into fixed assets by the investor shall be determined according to the value as
stipulated in the investment contract or agreement, with the exception of those of unfair
value as is stipulated in the contract or agreement. The costs of fixed assets acquired
through financial leasing shall be determined at an amount equal to the the fair value of
the leased asset or the present value of the minimum lease payments, whichever is lower.
The subsequent disbursement relevant to fixed assets mainly composes of repair expense,
renovation expense etc., where the expenses meet the condition to be recognized as fixed
assets, it shall be accrued into cost of fixed assets; for the substituted part, its book value
shall be terminating from recognition; where it does not meet the condition to be
recognized as fixed assets, it shall be accrued into current loss and profit at occurring.
The Group shall draw privisions for all fixed assets except for those having fully drawn
provisions and under normal service as well as the land recorded separately. It adoptsSemi-annual Report 2009
34
compstie life method to draw depreciation and is included in the cost of the relevant assets
or in the expenses in current term in accordance with the purposes of the fixed assets. The
estimated residue rate, depreciation years in different types and the dereciation rate of
fixed assets in our Group are as follows:
No. Type Depreciation
Term (Year)
Estimated
Residue Rate (%)
Annual
Depreciation
Rate (%)
1 houses & buildings 20—50 Years 10% 1.80-4.50%
2 machinery equipment 10 Years 10% 9.00%
3 mould equipment 3 Years 10% 30.00%
4 transport equipment 5 Years 10% 18.00%
5 apparatus equipment 5 Years 10% 18.00%
6 tooling equipment 5 Years 10% 18.00%
7 office equipment 5 Years 10% 18.00%
The Group will, at the end of each year, have a check on the useful life, estimated net
residue value, and the depreciation method of the fixed assets, and if there is any change,
it will be treated as the change of accouting estimation.
Where the fixed asset is in a state of disposal or unable to generate any economic benefits
through use or disposal as expected, the recognition of it as a fixed asset shall be
terminated. When an enterprise sells, transfers or discards any fixed asset, or when any
fixed asset of an enterprise is damaged or destroyed, the Company shall deduct the book
value and relevant taxes from the disposal income through disposal, transfer, discard or
being damaged or destroyed, and then include the remaining in the current profits and
losses.
12. Project in Process
Project in process shall be measured at the actual cost. The self-operating project shall be
measued in line with direct materials, direct salary and direct construction expenses, etc..
The out-contracted project shall be measued in line with project price payable, etc..
Equipment installation project shall determine its cost as per the occurring disbursements
as equipment value, installation charge and project trial running, etc.. The cost of project
in progress also includes borrowing costs to be capitalized and exchange loss and profit.
Since the day when project in process reaching the expected service status, carry over the
estimated value of the project to fixed assets in line with project budget, constrtuction cost
or actual cost, etc. with depreciation drawn since the preceding month. After the
completion procedures have been completed, an adjustment shall be made to the
difference of original fixed assets value.
13. Borrowing Costs
The borrowing costs shall include interest on borrowings, amortization of discounts or
premiums on borrowings, ancillary expenses, and exchange balance on foreign currency
borrowings. The borrowing costs incurred to an enterprise that can be directly attributableSemi-annual Report 2009
35
to the acquisition and construction or production of assets eligible for capitalization, shall
be capitalized after the asset disbursements have already incurred, the borrowing costs
have already incurred, and the acquisition and construction or production activities which
are necessary to prepare the asset for its intended use or sale have already started; When
the qualified asset under acquisition and construction or production is ready for the
intended use or sale, the capitalization of the borrowing costs shall be ceased. The
remaining borrowing costs shall be recognized as expenses.
As for specifically borrowed loans, the to-be-capitalized amount of interests shall be
determined in light of the actual cost incurred of the specially borrowed loan at the present
period minus the income of interests earned on the unused borrowing loans as a deposit in
the bank or as a temporary investment. As for the general borrowing, it calculate and
determine the to-be-capitalized amount of interests on the general borrowing by
multiplying the weighted average asset disbursement of the part of the accumulative asset
disbursements minus the general borrowing by the capitalization rate of the general
borrowing used.
Asset qualified for the capitalization conditions refers to the fixed assets, property of
investment and inventory which must spend long term (usally above 1 year) to purchase,
build or produce before reaching expected service or sales status.
Where the acquisition or construction of assets that meet the capitalization conditions is
interrupted abnormally for more than 3 consecutive months, such borrowing costs shall be
suspended capitalizing till the acquisition or construction of the asset restarts.
14. Intangible Assets
The major intangible assets of the Group include land-use right, patented technologies and
non-patented technologies, etc.. , and shall be measured according to the actual cost when
acquired. The acquired intangible assets shall be recorded as per actual price and relevant
other disbursements. The intangible assets invested by investors shall be priced as per the
value agreed in investment contract or agreement, with the exception of those of unfair
value as is stipulated in such contract or agreement.
The land-use right shall be averagely amortized based on its useful years since the
beginning date of use; the patented technologies, non-patented technologies and other
intangible assets will be averagely amortized by installments depending the shortest one
among predicted service years, benefiting years set out in the contract and legal effective
years. The amortized amount shall be accrured into relevant assets cost and current loss
and profit as per their beneficiary objects.
The Group shall, at the end of each year, check the service life and the amortization
method of intangible assets with limited service life and adjust where appropriate. It shall
also check the service life of intangible assets with uncertain service life during each
accounting period, where there are evidences to prove the intangible assets have limited
service life, it shall be estimated of its service life, and be amortized within such
estimiated life.
15. Research & Development
The expenditures for its internal research and development projects of the Company shallSemi-annual Report 2009
36
be classified into research expenditures and development expenditures depending on the
project property and the degree of uncertainty of the intangible assets finally brought out.
The research disbursements for the internal research and development project shall be
recorded in the profits and losses of the current period; its development disbursements
may be recognized as intangible asset if meeting the following conditions simultaneously:
(1) In respect of the technology, it is feasible to finish the intangible asset for use or sale;
(2) It is intended to finish and use or sell the intangible asset;
(3) There is a potential market for the products manufactured by applying this intangible
asset or that there is a potential market for the intangible asset itself;
(4) With the support of sufficient technologies, financial resources and other resources, it
is able to finish the development of the intangible asset, and it is able to use or sell the
intangible asset; and
(5) The disbursements attributable to the development of the intangible asset can be
reliably measured.
The development disbursement not meeting the above conditions will be accured into
current loss and profit at occurring. The development disbursement accrued into loss and
profit in previous term will not be recognized as assets as term thereafter. The
development disbursement capitalized will be presented as “Development Disburesement”
in the Balance Sheet and then be brough forward to intangible assets since such project
has reached the expected service status.
16. Non-financial Asset Impairment
The Group has, on each reporting day of Balance Sheet, checked the long-term equity
investment, fixed assets, project in progress and intangible assets, etc.. In case of any of
the following circumstances, possible impairment has occurred to assets. We will conduct
impairment test at each year end over good will and those intangible assets without fixed
beneficiary term. If difficult to test the recoverable amount of a single asset item, the test
may be applied to the asset group or combined asset group containing such asset.
After an impairment test to an asset, if the book value of such asset exceeds its recoverable
amount, the positive difference shall be recognized as impairment loss. The impairment
loss of abovesaid assets shall not be reversed in later accounting period after being
recognized.The recoverable amount shall be determined according to the net amount of
the fair value of an asset minus the disposal expenses, and the current value of the
expected future cash flow of the asset, whichever is higher.
The following circumstances may constitute a sign of possible asset impairment:
(1) The current market price of an asset declines drastically, and the price drop is
obviously higher than the expected drop over time or due to the normal use;
(2) The economic, technological or legal environment in which the enterprise conducts its
business operations, or the market where an asset is situated has or will have any
significant change in the current period or in the near future, and thus has or will have an
adverse impact on the enterprise;
(3) The market interest rate or any other market investment return rate has risen in the
current period, and the enterprise' calculation of capitalization rate of the current value ofSemi-annual Report 2009
37
the expected future cash flow of the asset is affected and thus leads to a big fall in the
recoverable amount of asset;
(4) Any evidence shows that an asset has become obsolete or it has been damaged
substantially;
(5) An asset has been or will be left unused, or the use of an asset has been or will be
terminated, or an asset has been or will be disposed of ahead of schedule;
(6) Any evidence in the internal report of the enterprise shows that the economic
performances of an asset has been or will be lower than the expected performances, for
example, the net cash flow created by an asset or business profit (or loss) realized
(incurred) an asset is lower (higher) than the excepted amount, etc.; and
(7) Other evidence that indicates that asset impairment has probably occurred.
17. Good Will
Good will refers to the positive difference between the equity investment cost or business
merger cost under different control and the fair value of the identifiable net assets of the
invested unit or the acquiree which the Company is entitled to or obtains through business
merger on the obtaining date or acquiring date.
The good will in relation to its subsidiaries is separately presented in the consolidated
financial statement, while that in relation to the assoiated enterprises and joint enterprises
are included in the book value of long-term equity investment.
18. Long-term Deferred Expneses
Long-term deferred expenses of the Group refers to the expenses that have been expended,
and shall be amortized during current period and each period afterwards with amortizing
term beyond 1 year (excluding 1 year). Those expenses shall be amortized evenly in its
benefited periods. Where the long-term deferred expenses will not benefit the later
accounting period, the remaining amount to-be-mortized shall be recorded into the loss or
profits of current period.
19. Wages and Salaries of Employees
During the accounting periods of the employees' rendering services to the Company, the
Company shall recognize the payable salaries and wages as liabilities, which shall,
according to beneficiaries of the services offered by employee, be accrued into relevant
asset cost and expense. The compensations for the cancellation of the labor relationship
with an employee will be accrued into current loss and profit.
The employees' wages and salaries include: the employees' wages, bonuses, allowances
and subsidies, welfare expenses, social insurance expenses, housing accumulation funds,
operating funds for labor unions and the operating funds for the education of employees
and other relevant disbursements for obtaining employees' services.
If the Group cancels the labor relationship with any employee prior to the expiration of the
relevant labor contract or brings forward any compensation proposal for the purpose of
encouraging the employee to accept a layoff, where the Group has formulated a formal
plan on the cancellation of labor relationship or has brought forward a proposal onSemi-annual Report 2009
38
voluntary layoff and will execute it soon, and at the same time, the Group is unable to
unilaterally withdraw the plan on the cancellation of labor relationship or the layoff
proposal, the Group shall recognize the expected liabilities incurred due to the
compensation for the cancellation of the labor relationship with the employee, and shall
simultaneously record them into the profit or loss for the current period.
As for the internal retirement plan, it will be treated complying with the same principles as
the layoff. The Group shall, in line with the regulations of such plan, recognize the salary
and social insurance premium to be paid to such retired employees during the date of
terminating service and their normal retirement date as predictable liabilities when it
meets to the conditions, then accrure it into loss or profit of current term.
20. Share-based Payments
Share-based payments refer to a transaction in which an enterprise grants equity
instruments or undertakes equity-instrument-based liabilities in return for services from
employee or other parties. The share-based payments shall consist of equity-settled
share-based payments and cash-settled share-based payments.
The equity-settled share-based payment in return for employee services shall be measured
at the fair value of the equity instruments granted to the employees. As to a equity-settled
share-based payment in return for employee services, if the right cannot be exercised until
the vesting period comes to an end or until the prescribed performance conditions are met,
then on each balance sheet date within the vesting period, the services obtained in the
current period shall, based on the best estimate of the number of vested equity instruments,
be included in the relevant costs or expenses using straight-line method ,and the capital
reserves shallbe increased accordingly.
A cash-settled share-based payment shall be measured in accordance with the fair value of
liability calculated and confirmed based on the shares or other equity instruments
undertaken by the Company; If the right may be exercised immediately after the grant, the
fair value of the liability undertaken by the Company shall, on the date of the grant, be
included in the relevant costs or expenses, and the liabilities shall be increased accordingly;
If the right may not be exercised until the vesting period comes to an end or until the
specified performance conditions are met, on each balance sheet date within the vesting
period, the services obtained in the current period shall, based on the best estimate of the
information about the exercisable right, be included in the relevant costs or expenses and
the corresponding liabilities at the fair value of the liability undertaken by the Company.
On each balance sheet date and on each account date prior to the settlement of the relevant
liabilities, it shall re-measure the fair values of the liabilities and include the changes in
the profits or losses of current period.
21. Equity Instruments
Equity Instruments refer to the contract which may proves holding all remain equity of the
Company after deducting all liabilities. During business combination, the transactional
expenses for issuing the equity instrument by combining party offset the premium revenue
of equity insutruments, if it is not enough to offset, reduce the reserve profits. Other equity
instruments, the consideration received at issuing will increase shareholder’s equity afterSemi-annual Report 2009
39
deducting transactional expenses. The consideration and transactional expenses paid for
purchasing back the equity instruments will decrease shareholder’s equity. It will not
recognize profits and losses when issuing, purchasing back, selling or writting off the
equity instruments.
The distribution (excluding dividend) to the party who owns the equity instrument by the
Company shall decrease shareholder’s equity. The Company does not recognize the
change of fair value of equity instruments.
22. Predictable Liabilities
In case all the obligations in relation to such contingent items as external guarnaty,
suspensive lawsuit or arbitration, product quality guarantee, staff cutback plan, loss
contract, restructuring obligation and fixed assets discarding obligation, etc. comply with
the following conditions simultaneously, the Group will recognize them as liabilities. Such
obligations are constant burdened by the Group; the execution of such obligations will
possibly result in the outflowing of economic benefit from the Group; the amout of such
obligations can be reliably measured.
The predictable liabilities shall be initially measured as per the best estimatd amount to be
paid for executing relevant instant obligations in combinaion with such factors as risk,
uncertanity and time value of money regarding contingent issues. If the time value of
money exerts serious effect, the best estimated amount shall be determined through
discounting relevant cash outflows in the future. On the date of Balance Sheet, the
Company shall double check the book value of predictable liabilities and make
adjustement to it so as to reflect the best estimated amount at present.
23. Principles of Revenue Recognition
The business revenues of the Group are mainly composed of revenues from sales of goods
revenues from providing service and revenue from abalienating the right to use assets, its
recognizing pricinples are as follows:
When the Group has transferred the significant risks and rewards of ownership of the
goods to the buyer; the Group retains neither continuous management right that usually
keeps relation with the ownership nor effective control over the sold goods; The relevant
amount of revenue can be measured in a reliable way; The relevant economic benefits may
flow into the enterprise; The relevant costs incurred or to be incurred can be measured in a
reliable way, it may recognize the realization of revenue.
When total revenue and total cost from labor service can be measured in a reliable way;
the relevant economic benefits are likely to flow into the enterprise; the schedule of
completion under the transaction can be confirmed in a reliable way; it may recognize the
realization of revenuefrom labor service. On the date of Balance Sheet, where the result of
a transaction concerning the providing of labor service can be measured in a reliably way,
it shall recognize relevant revenue according to the schedule of completion; where the
result of a transaction concerning the providing of labor service cannot be measured in a
reliably way and the cost of labor services incurred is expected to be compensated, the
revenue from the providing of labor services shall be recognized in accordance with the
amount of the cost of labor services incurred, and the cost of labor services shall be carriedSemi-annual Report 2009
40
forward at the same amount; where the result of a transaction concerning the providing of
labor service cannot be measured in a reliably way and the cost of labor services incurred
is not expected to compensate, the cost incurred should be included in the current profits
and losses, and no revenue from the providing of labor services may be recognized.
The revenue from abalienating of right to use assets may be recognized on the condition
that the relevant economic benefits are likely to flow into the Company and the amount of
revenues can be measured in a reliable way.
24. Construction Contracts
As to fixed price contract, when the total contract revenue can be measured in a reliable
way; the economic benefits pertinent to the contract will flow into the Group; the actual
contract costs incurred can be clearly distinguished and can be measured in a reliable way;
both the schedule of the contracted project and the contract costs to complete the contract
can be measured in a reliable way; and as to a cost plus conctract, when the economic
benefits pertinent to the contract will flow into the Group; the actual contract costs
incurred can be clearly distinguished and measured in a reliable way, the contract revenue
and contract costs shall be recognized in light of the percentage-of- completion method on
the date of the balance sheet by the Group.
Where the outcome of a construction contract can not be estimated in a reliable way, if the
contract costs can be recovered, the contract revenue shall be acknowledged in accordance
with contract costs that can be recovered and the contract costs shall be acknowledged as
contract expenses in the current period they are incurred; if the contract costs cannot be
recovered, these costs shall be acknowledged as contract expenses immediately when
incurred and no contract revenue shall be acknowledged.
The Group will check the construction contracts at the end of year, if the estimated total
cost of construction contracts surpasses its total revenue, it shall draw provison against
loss, and recognize the expected loss as expenses of the current period.
25. Lease
The Group classifies a lease as a financing lease and an operating lease on the lease
beginning date.
Financing lease refers to a lease that has transferred in substance all the risks and rewards
related to the ownership of an asset. On the lease beginning date, the Group as lessee shall
record the lower one of the fair value of the leased asset and the present value of the
minimum lease payments on the lease beginning date as the entering value in an account,
recognize the amount of the minimum lease payments as the entering value in an account
of long-term account payable, and treat the balance between the recorded amount of the
leased asset and the long-term account payable as unrecognized financing charges.
Operating lease refers to a lease other than a financing lease. Where the Group is lessee,
the rents shall be recorded in the relevant asset costs or the profits and losses of the current
period by using the straight-line method over each period of the lease term. Where the
Group is lessor, the rents shall be recorded in the profits and losses of the current period
by using the straight-line method over each period of the lease term.Semi-annual Report 2009
41
26. Government Grants
The government grant may be recognized on the condition that the Group complies with
the conditions for the government grant and that the Group can receive the government
grant. If a government grant is a monetary asset, it shall be measured on the basis of the
amount received, or that receivable if such grant is appropriated as fixed quota standard. If
a government grant is a non-monetary asset, it shall be measured at its fair value or at its
nominal amount (1 Yuan if its fair value cannot be obtained reliably.
A government grant pertinent to assets shall be recognized as deferred income, equally
distributed within the useful lives of the relevant assets, and included in the current profits
and losses. The government grant pertinent to incomes, if used for compensating the
related future expenses or losses of the Company, shall be recognized as deferred income
and shall included in the current profits and losses during the period when the relevant
expenses are recognized; or if used for compensating the related expenses or losses
incurred to the Company, shall be directly included in the current profits and losses.
27. Deferred Income Tax Assets & Deferred Income Tax Liabilities
The deferred income tax assets and deferred income tax liabilities shall be priced at the
difference (temporary difference) between the tax base of assets and liabilities and their
book value. For any deductible loss or tax deduction that can be carried forward to the
next year, the corresponding deferred income tax asset shall be determined to the extent
that the amount of future taxable income to be offset by the deductible loss or tax
deduction to be likely obtained. On the balance sheet date, the deferred income assets and
deferred income tax liabilities shall be measured at the tax rate applicable to the period
during which the assets are expected to be recovered or the liabilities are expected to be
settled.
The Company shall recognize the deferred income tax assets arising from a deductible
temporary difference to the extent of the amount of the taxable income which it is most
likely to obtain and which can be deducted from the deductible temporary difference. For
the determined deferred income tax assets, if it is unlikely to obtain sufficient taxable
income to offset against the benefit of the deferred income tax asset, the carrying amount
of the deferred income tax assets shall be written down. Any such write-down should be
subsequently reversed where it becomes probable that sufficient taxable income will be
available.
28. Accounting Process of Income Tax
The Group adopts balance sheet debt method to calculate the income tax. Income tax
expenses include income tax of current period and deferred income tax. Except for the
income taxes of the current period and deferred income tax related to the transactions or
events directly relevant to the shareholder's rights and interests shall be recorded into the
shareholder’s rights and interests, and adjust the the carrying amount of goodwill based on
the deferred income tax due to enterprise combination, all other current period and
deferred income tax expenses or profit shall be recorded into the profits and losses of
current period.
Income tax of current period refers to the amount payable to tax department calculated bySemi-annual Report 2009
42
the Group according to regulation of tax agency aiming at the transaction and matter
occurred in current period, also called income tax payable; deferred income tax refers to
the balance between the due amount of deferred income tax assets and deferred income tax
libilities at the end of year recoginized according to the libilities method of Balance Sheet
and the amont originally recognized.
29. Business Combinations
Business combinations refer to a transaction or event bringing together two or more
separate enterprises into one reporting entity. The Group confirms the acquired assets and
liabilities due to bushiness combinations on the combining date or purchasing date.
Combining date refers to the date on which the combining party actually obtains control
on the combined or purchased party.
In a business combination under the same control, the assets and liabilities that the
combining party obtains in a business combination shall be measured on the basis of their
carrying amount in the combined party on the combining date. The additional paid-in
capital shall be adjusted according to the balance between the carrying amount of the net
assets obtained by the combining party and the carrying amount of the consideration paid
by it; if the additional paid-in capital is not sufficient to be offset, the retained earnings
shall be adjusted.
In a business combination not under the same control, the combination costs shall be the
fair values, on the acquisition date, of the assets paid, the liabilities incurred or assumed
and the equity securities issued by the acquirer in exchange for the control on the acquiree.
The acquirer shall recognize the positive balance between the combination costs and the
fair value of the identifiable net assets it obtains from the acquiree as good will; if the
combination costs are less than the fair value of the identifiable net assets it obtains from
the acquiree, it shall record the balance into the profits and losses of the current period
after reexamination.
30. Report from the Branch
Business branch refers to the unit in the Group that is divisible and may provide single or
a group of relevant products or labor service. This part assumes the risk and rewards
different than that of other parts. Regional branch refers to the unit in the Group that is
divisible and may provide products or labor service in certain economic environment. This
part assumes the risk and rewards different than that of the part in other economic
environment.
31. Discontinued Operations
Discontinued Operations refer to the composing part of the Group that has been disposed
or divided into available for sale, and may be distinguished separately when operate and
prepare financial statements. This part will be disposed wholly or partly according to the
plan of the Group. The composing part of the Group that meets the following conditions
will be divided into available for sale: the Group has made decision on how to dispose this
composing part, the Group has entered irrevocable transfer aggrement with transferee, and
the transfer will be completed within one year.Semi-annual Report 2009
43
32. Determination of Fair Value of Financial Instruments
As for the financial assets for which there is an active market, the quoted prices in the
active market shall be used to determine the fair values thereof. Where there is no active
market for a financial instrument, the Compay shall adopt value appraisal techniques to
determine its fair value. The value appraisal techniques mainly include the prices adopted
by the parties, who are familiar with the condition, in the latest market transaction upon
their own free will, the current fair value obtained by referring to other financial
instruments of the same essential nature, the cash flow capitalization method and the
option pricing model, etc.. If adopting value appraisal techniques, one shall adopt, if
possible, all the market parameters and avoid adopting those parameters that relate to the
Compay.
33. Preparation of Consolidated Financial Statement
(1) Principles of Recognition of Scope for Consolidation
The Group incorporates those subsidiaries actually controlled and objects with special
purpose into the scope of the Consolidated Financial Statement.
(2) Account Method Adopted in the Consolidated Accounting Statement
The Group has prepared for the Consolidated Financial Statement in line with the Business
Accounting Standards No.33- Consolidated Financial Statement and its relevant
regulations, with all key internal trades and transactions within the scope of consolidation
offset. Among the shareholders equity of subsidaries, the part that does not belong to the
parent company shall be presented under shareholders equity as minority interest in the
consolidated financial statement.
Where the accounting policy or accounting period adopted by subsidiaries and the
Company is inconsistent, it shall make necessary adjustment on subsidiaries’ financial
statements according to the accounting policy or accounting period adopted by the
Company when prepare consolidated financial statement.
As to the subsidiary acquired through business combination not under the same control,
when prepare consolidated financial statement, it shall make adjustment on individual
financial statement based on the fair value of the net assets recognized on the purchasing
day; As to the subsidiary acquired through business combination under the same control, it
will be regarded existing since the begin of the year of the current period of combination,
and its assets, liabilities, operating results and cash flows will be included into the
consolidated financial statement based on its original carrying value since the begin of the
year of the current period of combination.
VI. Taxes
The following taxes and rate are applied to the Group:
1. Enterprise Income Tax
The originally applicable enterprise income tax rate for the Company and Shenzhen Huafa
Property Lease Management Co., Ltd is 15%. According to the regulation of Enterprise
Income Tax Law of the People's Republic of China put in force from January 1, 2008, the
enterprise income tax rate will gradually transit to 25% from 2008 to 2012, and that in this
year is 18%. The applicable tax rate of enterprise income tax of the Company is 15%.Semi-annual Report 2009
44
The applicable tax rate of enterprise income tax of Wuhan branch of the Company, and
wholly-owned subsidiaries Shenzhen Zhongheng Huafa Property Management Co., Ltd
and Wuhan Hengfa Scientific and Technology Co., Ltd. and Shenzhen Zhongheng Huafa
Scientific and Technology Co., Ltd. are all 25%.
2. VAT
VAT is applied to the sales of goods of the Company, among which, the input VAT rate of
domestically-sold goods is 17%.
The input VAT paid for purchasing raw materials, etc. may offset against output VAT at the
rate of 17%, among which, the input VAT paid for import may be refunded upon
application.
VAT payable refers to the balance after deduction between the output VAT and input VAT
at current term.
3. Business Tax
The applicable tax rate of business tax of the Company is 5%.
4. Urban Construction Tax & Educational Surcharge
The urban construction tax of the Company is levied on the basis of turnover tax payable
at the rate of 1%; the urban construction tax and education surcharge of our subsidiary
Shenzhen Huafa Property Lease Management Co., Ltd. and Shenzhen Zhongheng Huafa
Property Management Co., Ltd are both levied on the basis of turnover tax payable at the
1% and 3% respectively; the urban construction tax and education surcharge of our
subsidiary Wuhan Hengfa Scientific and Technology Co., Ltd. are both levied on the basis
of turnover tax payable at the 3% and 7% respectively.
5. Property Tax
The Company applies 70% of original value of properties as tax basis with the rate of
1.2%.
VII. Business Merger and Consolidated Financial Stateent
(i) Key Subsidiaries and Profile
Company Name
Registered
Address
Business
Nature
Registered
Capital
Business Scope
Wuhan Hengfa Scientific and
Technology Co., Ltd.
Wuhan Production
and Sale
RMB
35,950,000
Produce packaging
material for sale and
palastic product
Wuhan Zhongheng Huafa
Scientific and Technology Co., Ltd.
Shenzhen Production
and Sale
RMB
86,767,750
Development, production
and sales of technology of
printed circuit board;
property developmentSemi-annual Report 2009
45
Shenzhen Zhongheng Huafa
Property Management Co., Ltd
Shenzhen
Property
Management
RMB 1 Mill
ion
Lease and management of
self-owned property
Shenzhen Huafa Property Lease
Management Co., Ltd.
Shenzhen
Property
Management
RMB
1Million
Lease and management of
self-owned property
(Continued)
Company Name
Investment
amount at the
end of the year
Holding
Percentage
Voting
Right
percentage
Statements
are
consolida
ted or not
Wuhan Hengfa Scientific and
Technology Co., Ltd.
RMB
35,950,000
100% 100% Yes
Wuhan Zhongheng Huafa
Scientific and Technology Co.,
Ltd.
RMB 86,767,750
100% 100% Yes
Shenzhen Zhongheng Huafa
Property Management Co., Ltd RMB 1 Million
100% 100% Yes
Shenzhen Huafa Property Lease
Management Co., Ltd. RMB 0.6 Million
60% 60% Yes
(ii) Change of the Scope of Consolidation
Company Name
Reason for
newly bringing
into
consolidated
scope
Proportion
of holding
shares
Total assets
Total
liabilities
Net asset Net profit
Shenzhen Zhongheng Huafa
Scientific and Technology
Co., Ltd.
Newly-founded
subsidiary
100% 86,767,750.00 0 86,728,629.90 -39120.10
VII. Note to Major Items in the Consolidated Financial Statement
1. Monetary fund
June 30, 2009 Dec. 31, 2008
Item Original
currency
Exchange
rate
Original
currency
Exchange rate
Original
currency
Exchange rate
Cash in
Treasury
345,448.90 361,428.77Semi-annual Report 2009
46
RMB 280,538.87 1.00 280,538.87 351,349.33 1.00 351,349.33
HKD 62,718.50 0.88 55,192.28 378.93 0.88 334.94
USD 1,422.80 6.83 9,717.75 1,422.45 6.84 9,744.50
Bank deposit 53,771,890.77 12,989,322.13
RMB 46,824,178.12 1.00 46,824,178.12 11,615,608.63 1.00 11,615,608.63
HKD 56,415.39 0.88 49,721.69 383,476.73 0.88 338,955.07
USD 1,009,703.43 6.83 6,897,990.96 151,048.60 6.84 1,034,758.43
Other currency
fund 36,834,397.60 10,963,903.66
RMB 36,834,397.60 1.00 36,834,397.60 10,962,998.55 1.00 10,962,998.55
HKD 905.11 1.00 905.11
Total 90,951,737.27 24,314,654.56
Balance at the end of the term of other currency fund mainly waqs the guarantee fund of
bank acceptance bill and loan guarantee fund of current fund.
2. Notes receivable
Type of Notes June 30, 2009 Dec. 31, 2008
Bank acceptance bill 4,206,527.69 6,767,862.01
Total 4,206,527.69 6,767,862.01
Ended June 30, 2009, the company had no any notes that had already endorsed to
others but not due or no any notes that had discounted but not due.
3. Accounts receivable
(1) Account age
June 30, 2009 Dec. 31, 2008
Item
Amount Proportion
Provision for
bad debt
Amount Proportion
Provision for
bad debt
Within 1
year 153,281,531.75 87.06% 19,086.03 87,761,755.23 81.19% 37,406.70
1-2 years 8,050,395.26 4.57% 322,920.75 6,247,669.23 5.78% 313,217.23
2-3 years 3,813,058.68 2.17% 939,034.05 3,302,604.58 3.06% 930,416.90
Over 3
years 10,915,766.65 6.20% 8,409,824.01 10,776,086.8 9.97% 8,409,824.01
Total 176,060,752.34 100% 9,690,864.84 108,088,115.84 100.00% 9,690,864.84Semi-annual Report 2009
47
(2) Type of Risk of Accounts Receivable
June 30, 2009
Item Book balance Provison for bad debt
Amount Proportion Amount Proportion
That with large amount in single
item
161,074,590.24 91.49% 4,654,184.40 2.89%
That in group with larger risk after
grouping as per credit risk features
though single item sum is small
3,372,800.12 1.91% 3,372,800.12 100%
That without large
amount in other single item
11,613,361.98 6.60% 1,663,880.32 14.33%
Total 176,060,752.34 100% 9,690,864.84 5.50%
Dec. 31, 2008
Item Book balance Provison for bad debt
Amount Proportion Amount Proportion
That with large amount in single
item
96,973,074.40 89.72% 4,654,184.40 4.80%
That in group with larger risk after
grouping as per credit risk features
though single item sum is small
3,372,800.12 3.12% 3,372,800.12 100.00%
That without large
amount in other single item
7,742,241.32 7.16% 1,663,880.32 21.49%
Total 108,088,115.84 100.00% 9,690,864.84 8.97%
No arrearage of the shareholder companies which hold over 5% (include 5%) of the
company’s voting share is in the balance at the end of the term of the accounts receivable.
The total sum of the arrearage of the top 5 companies in debt in the accounts receivable at
the end of the term was RMB 128,607,712.33, accounting for 73.05% of the balance at the
end of the term of the accounts receivable.
The amount in period-end increased RMB 67,972,636.50 with up 62.88% compared with
amount in period-begin, the main reasons were: (1) The subsidiary Wuhan Hengfa
Scientific and Technology Co., Ltd. newly increased RMB 53,558,887.23 for accounts
receivable of goods; (2) RMB 55,356,509.21 was increased in accounts reveivable of
business of entire set of display.
4. Account paid in advance
June 30, 2009 Dec. 31, 2008
Item
Amount Proportion Amount Proportion
Within 1 year 4,663,408.60 92.65% 1,700,284.27 83.09%Semi-annual Report 2009
48
1-2 years 369,906.53 7.35% 345,992.79 16.91%
Total 5,033,315.13 100.00% 2,046,277.06 100.00%
(1) The total sum of the arrearage of the top 5 companies in debt in balance at the end of
the term is RMB 3,743,316.64, accounting for 74.37% of account paid in advance.
(2) No arrearage of the shareholder companies which hold over 5% (include 5%) of the
company’s voting share is in the balance at the end of the year.
(3) The amount in period-end increased RMB 2,987,038.07 with up 145.97% compared
with amount in period-begin, the main reason was that Wuhan Hengfa Scientific and
Technology Co., Ltd. paid in advance RMB 1,577,760.00 to TPV Display Technology
(Wuhan) Co., Ltd. for goods accounts and RMB 1,350,000.00 to Guangdong Sunslux
Forstar Precision Machine Co., Ltd. for equipment accounts.
5. Other Receivables
(1) Account age
Item June 30, 2009 Dec. 31, 2008
Amount Proportion Amount Proportion Amount Proportion
Within 1
year 10,548,291.38 35.10% 4,281,715.68 18.94% 51,595.15
1-2 years 4,926,863.20 16.39% 318,128.57 4,047,420.19 17.90% 561,138.66
2-3 years 3,705,614.95 12.33% 477,862.75 4,720,769.26 20.88% 1,209,494.13
Over 3 years 10,874,792.57 36.18% 6,238,473.73 9,560,798.95 42.28% 5,212,237.11
Total 30,055,562.10 100.00% 7,034,465.05 22,610,704.08 100.00% 7,034,465.05
(2) Categories of the risks of other accounts receivable
June 30, 2009
Item Book balance Book balance
Amount Amount Amount Amount
That with large amount in single item 22,269,509.53 74.09% 4,442,961.24 19.95%
That in group with larger risk after
grouping as per credit risk features
though single item sum is small
2,084,536.50 6.94% 2,084,536.50 100.00%
That without large
amount in other single item
5,701,516.07 18.97% 506,967.31 8.89%
Total 30,055,562.10 100.00% 7,034,465.05 23.40%
Dec. 31, 2008
Item Book balance Book balance
Amount Amount Amount Amount
That with large amount in single item 15,901,534.11 70.33% 4,442,961.24 27.94%Semi-annual Report 2009
49
That in group with larger risk after
grouping as per credit risk features
though single item sum is small
2,084,536.50 9.22% 2,084,536.50 100.00%
That without large
amount in other single item
4,624,633.47 20.45% 506,967.31 10.96%
Total 22,610,704.08 100.00% 7,034,465.05 31.11%
No arrearage of the shareholder companies which hold over 5% (include 5%) of the
company’s voting share is in the balance at the end of the term.
The total sum of the arrearage of the top 5 companies in other account receivable at the
end of term is RMB 16,678,203.02, accounting for 51.57% in other receivable.
Other accounts receivable increased RMB 7,444,858.02 in period-end with up 32.93%
compared with amount in period-begin, which was mainly due to the irregularity of part of
the house rent incomes in the first half of the year and the increase of the current accounts
with the clients.
6. Inventories
Item June 30, 2009 Dec. 31, 2008
Raw Materials 49,518,061.3 24,140,700.20
Products under production 2,484,737.95 2,747,155.89
Stocked Goods 56,771,563.97 23,171,248.12
Low-value consuming
products
5,400,946.87 3,140,265.57
Self-made semi-finished
product
2,977,610.91 2,646,615.52
Delivered Goods - -
Processed Materials upon
entrustment
53,022.91 -
Total 117,205,943.91 55,845,985.30
Balance of inventories increased RMB 61,359,958.61 at year-end with up 109.87%
compared with that in year- begin, which was mainly due to that the pattern of LCD entire
machine business changed from processing with materials supplied to processing with
imported materials and Wuhan Hengfa Scientific and Technology Co., Ltd. expanded the
production and increased the inventory.
(1) Provision for Depreciation of Inventories
Decrease in this period
Item Dec. 31, 2008
Increase in this
period
Switch
back
Other
transferring-out
June 30, 2009
Raw Materials 626,421.00 - - - 626,421.00
Stocked Goods 4,525,122.19 - - - 4,525,122.19Semi-annual Report 2009
50
Low-value
consuming products
142,991.83 - - - 142,991.83
Self-made
semi-finished product
91,196.16 - - - 91,196.16
Total 5,385,731.18 - - - 5,385,731.18
7. Property of investment and accumulative amortization
Property of Investment Measured by Cost Mode
Item Dec. 31, 2008
Increase in
this
period
Decrease
in this
period
June 30, 2009
Original Value 107,439,914.94 - - 107,439,914.94
houses & buildings 107,439,914.94 - - 107,439,914.94
Accumulated
Depreciation &
Amortization
64,501,150.66 1,279,428.24 - 65,780,578.90
houses & buildings 64,501,150.66 1,279,428.24 - 65,780,578.90
Depreciation allowance - - -
houses & buildings - - -
Book Value 42,938,764.28 - - 41,659,336.04
houses & buildings 42,938,764.28 - - 41,659,336.04
For the property of investment in the form above, part houses and buildings have been
mortgaged to obtain the loans from Shenzhen Branch of China Construction Bank.
8. Fixed assets and accumulated depreciation
Item Dec. 31, 2008
Increase
In this
period
Decrease
in this
period
June 30, 2009
Original price 351,954,715.13 2,972,802.63 354,927,517.76
Houses and buildings 156,603,767.38 156,603,767.38
Machineray equipments 127,911,240.41 2,972,802.63 130,884,043.04
Transport instruments 4,823,879.54 4,823,879.54
Electronics and other
equipments
62,615,827.80 62,615,827.80
Accumulated
depreciation:
156,486,387.75 8,485,301.54 164,971,689.29
Houses and buildings 37,433,976.91 3,084,505.84 40,518,482.75
Machineray equipments 65,861,002.36 4,795,833.00 70,656,835.36Semi-annual Report 2009
51
Transport instruments 2,425,302.78 289,588.21 2,714,890.99
Electronics and other
equipments
50,766,105.70 315,374.49 51,081,480.19
Impairment Provision 973,496.73 973,496.73
Electronics and other
equipments
973,496.73
973,496.73
Book value 194,494,830.65 188,982,331.74
Houses and buildings 119,169,790.47 116,085,284.63
Machineray equipments 62,050,238.05 60,227,207.68
Transport instruments 2,398,576.76 2,108,988.55
Electronics and other
equipments
10,967,225.37
10,560,850.88
9. Construction in progress
(1) List of Construction in Progress
Project Name Dec. 31, 2008
Increase this
year
Transferred
into fixed
asset this year
Other
decrease
June 30, 2009
Renovation construction
project
756,476.22 756,476.22
Environmental protection
project 321,983.02 154,762.67 476,745.69
Plate casting machine
construction 56,570.79 56,570.79
Coal-to-gas project - -
Hengfa assets relocation
and installation 489,852.00 489,852.00 0
Total 1,624,882.03 1,289,792.70
Including: capitalized
borrowings
- - - - -
(2) The fund used for construction in process is from self-financing fund, and there is no
capitalized interest occurred therein.
10. Intangible assets
Item Dec. 31, 2008
Increase
In this
period
Decrease
in this
period
June 30, 2009
Original Value: 6,516,471.70 - - 6,516,471.70Semi-annual Report 2009
52
Land use right 6,353,451.70 - - 6,353,451.70
Non-patent technology 163,020.00 - - 163,020.00
Accumulated
Amortization
263,398.07 51,152.43
-
314,550.50
Land use right 205,339.69 23,666.28 - 229,005.97
Non-patent technology 58,058.38 27,486.15 - 85,544.53
Impairment Provision - - - -
Land use right - - - -
Non-patent technology - - - -
Book Value 6,253,073.63 - - 6,201,921.20
Land use right 6,148,112.01 - - 6,124,445.73
Non-patent technology 104,961.62 - - 77,475.47
11. Deferred income tax assets
(1) Confirmed deferred income tax assets and deferred income tax liabilities
Items June 30, 2009 December 31, 2008
I. Deferred income tax assets
Deferred income tax assets formed by provision
for devaluation of bad debts
2,719,482.28 2,719,482.28
Deferred income tax assets formed by provision
for devaluation of inventory
1,077,146.23 1,077,146.23
Deferred income tax assets formed by provision
for devaluation of fixed-asset
- -
Total 3,796,628.51 3,796,628.51
(2) Temporarily different items of the deferred income tax assets confirmed at the end of
the year
I. Temporarily different items that can be
offset
June 30, 2009 December 31, 2008
Provision for bad debt impairment 13,597,411.38 13,597,411.38
Provision for inventories impairment 5,385,731.18 5,385,731.18
Provision for fixed Assets Impairment - -
Total 18,983,142.56 18,983,142.56
12. Short-term loan
Currency June 30, 2009 December 31, 2008
RMB 23,481,853.33 94,000,000.00Semi-annual Report 2009
53
Total 23,481,853.33 94,000,000.00
The loan RMB 23,481,853.33 obtained by the pledge of bank deposit was to obtain the
exchange income from the forward settlement and surrender exchange transaction and
obtain the loan with the full amount deposit of RMB.
13. Notes payable
Type June 30, 2009 December 31, 2008
Bank Acceptance bill 8,679,163.55 3,429,765.26
Total 8,679,163.55 3,429,765.26
14. Accounts payable
Type June 30, 2009 December 31, 2008
Total 117,112,123.40 49,895,119.48
Among it: Over 1 year -- 7,097,636.14
Account payable to the shareholders holding more than 5% (5% included) voting right
shares of the Company did not exist in the balance of accounts payable as of period end.
RMB 67,217,003.92 has increased in accounts payable as of period end compared to that
as of last year end, with an increase rate of 134.71%. The main reason was that the entire
assets of plastic and injection business was transferred from Wuhan Zhongheng in this
report period included accounts payable and the pattern of LCD entire machine business
from processing with materials supplied to processing with imported materials made an
increase in accounts payable.
15. Account received in advance
Type June 30, 2009 December 31, 2008
Total 804,229.57 1,962,952.11
Among it: Over 1 year 369,075.58
Account to the shareholders holding more than 5% (5% included) voting right shares of
the Company did not exist in the balance of accounts received in advance.
16. Wages payable
Item
December
31, 2008
Increment This
Period
Decrement
This Period
June 30, 2009
Salary (including bonus, allowance &
subsidies) 377,453.17 13,069,612.57 12,775,994.97 671,070.77
Staff Welfare Treatment Fund - 463,086.80 461,147.80 1,939.00
Social Insurance Premium 7,843.40 138,293.17 97,226.28 48,910.29
Among it: medical insurance premium - 30,510.38 27,435.93 3,074.45
Basic retirement insurance premium 7,843.40 101,010.52 87,220.45 21,633.47Semi-annual Report 2009
54
Unemployment Insurance Premium - 5,448.06 1,245.69 4,202.37
Industrial Injury Insurance Premium - 883.14 883.14 0.00
Birth Insurance Premium - 441.07 441.07 0.00
Public Housing Fund - 0.00
Labor Union fund & staff educational
fund 522,995.07 80,513.6 167,733.87 435,774.8
Non-monetary Welfare Treatment -
Compensation regarding Canceling
Employment Relation - -
Others - -
Among it: shares paid in cash - -
Total 908,291.64 13,751,506.14 13,502,102.92 1,157,694.86
17. Tax payable
Tax Type
Applicable
Tax Rate
June 30, 2009 December 31, 2008
VAT 17% -2,142,832.26 939,262.39
Business Tax 5% 815,284.04 1,081,136.29
Enterprise Income Tax 18%, 25% 254,941.82 322,784.69
Personal Income Tax -21,507.18 -31,320.70
Urban Maintenance &
Construction Tax
1%, 3% 2,201.82 4,893.26
Property Tax 1.2% 444,953.55 444,954.15
Educational Surcharge 3%, 7% 18,480.46 3,922.71
Price adjustment funds 18,617.1 580.29
Total -607,626.82 2,766,213.08
The input tax of VAT were more because the entire set business changed from
processing with materials supplied to processing with imported materials and most of the
materials exported after purchased at home.
18. Other accounts payable
Type June 30, 2009 December 31, 2008
Total 15,049,557.74 45,523,634.74
Among it: Over 1 year 5,585,772.14
(1) The amount of other account payable as of period end has decreased RMB
30,474,077.00 compared to amount as of period begin. The main reason was that
plastic and injection business transferred from Wuhan Zhongheng in the earlier report
period has been paid amounting to RMB 27,000,000.00.Semi-annual Report 2009
55
19. Long-term loan
Currency June 30, 2009 December 31, 2008
RMB 226,540,400.00 -
Total 226,540,400.00 -
In the report period, the Company applied for a commercial property mortgage loan of
RMB 230,000,000 from the China Construction Bank Co., Ltd. Shenzhen Branch, with
the 1st, 2nd, 3rd, 4th, 5th and 6th floor of the Huafa Mansion as mortgage with total area of
36269.93 square meters, which are located on the Huafa N. Road, Futian District,
Shenzhen City. The term of the loan is seven years and the interest rate is current prime
rate, repaying principal and interest monthly.
20. Predicted liabilities
Type December 31, 2008
Increment
this period
Decrement
this period
June 30, 2009
Pending legal action 175,474.41 - - 175,474.41
Total 175,474.41 - - 175,474.41
21. Deferred income
Type
December 31,
2008
Increment
this period
Decrement
this period
June 30, 2009
Subsidies from Wuhan
Financial Department for
earthquake relief equipment
200,000.00 - - 200,000.00
Total 200,000.00 - - 200,000.00
On June 10, 2008, the Wuhan branch of the Company received from Wuhan Financial
Department a subsidy of RMB 200,000 Yuan for purchase of earthquake-relief equipment
to produce earthquake-relief materials.
22. Share capital
The par value is RMB 1 Yuan per share
Shareholder Name/Type June 30, 2009 December 31, 2008
Restricted Shares
State-owned Shares - -
State-owned Corporate Shares - -
Other Domestic Shares 116,489,894 116,489,894
among it: domestic corporate shares 116,489,894 116,489,894
domestic natural person shares - -
Foreign SharesSemi-annual Report 2009
56
among it: foreign corporate shares - -
foreign natural person shares - -
Total Restricted Shares 116,489,894 116,489,894
Unrestricted Shares - -
RMB Common Shares 64,675,497 64,675,497
Foreign Shares Listed Domestically 101,995,836 101,995,836
Foreign Shares Listed Overseas - -
Others - -
Total Unrestricted Shares 166,671,333 166,671,333
Total Shares 283,161,227 283,161,227
23. Capital reserves
Item December 31, 2008
Increment
this period
Decrement
this period
June 30, 2009
Shares Premium 96,501,903.02 96,501,903.02
Other Capital Reserves 7,571,423.92 7,571,423.92
Total 104,073,326.94 104,073,326.94
24. Surplus reserve
Item
December 31,
2008
Increment
this period
Decrement
this period
June 30, 2009
Statutory Surplus Reserves 21,322,617.25 - - 21,322,617.25
Arbitrary Surplus Reserves 56,068,976.00 - - 56,068,976.00
Total 77,391,593.25 - - 77,391,593.25
25. Retained profit
June 30, 2009 December 31, 2008
Profit retained at year beginning -216,816,881.03 -224,384,793.57
Add: net profit attributable to owners of
parent company in this period
4,359,222.80 7,567,912.54
Less: drawing statutory surplus reserves --- ---
Drawing arbitrary surplus reserves --- ---
Dividend for ordinary shares payable --- ---
Retained profit at period end -212,457,658.23 -216,816,881.03Semi-annual Report 2009
57
26. Business revenues & business cost
Jan. to Jun., 2009 Jan. to Jun., 2008
Operating
items
Business
Revenues
Business Cost
Business
gross profit
Business
Revenues
Business Cost
Business gross
profit
Plastic
injection ware
51,529,320.04 45,025,714.73 6,503,605.67 3,221,357.57 3,976,683.25 -755,325.68
Printed circuit
board
5,345,495.71 7,421,396.86 -2,075,901.15 20,710,905.92 25,272,028.80 -4,561,122.88
LCD 103,794,691.53 98,761,372.59 5,033,318.91 28,592,565.52 27,844,240.90 748,324.62
Sales
materials
780,801.07 677,796.65 103,004.42
Property
leasing
21,032,780.74 1,958,095.71 19,074,685.03 17,382,973.94 2,481,450.11 14,901,523.83
Property
management
822,237.00 -- 822,237.00 1,012,596.00 599,802.47 412,793.53
Equipment
hire
1,020,000.00 669,141.78 350,858.22
Foam
Business
29,598,133.92 27,251,795.85 2,346,338.07 - - -
Others 50,444.66 40,252.20 10,192.46
Total 212,122,658.94 180,418,375.74 31,704,283.20 72,721,200.02 61,521,143.96 11,200,056.06
27. Business tax & extras
Tax type
Payment as a
percentage
Jan. to Jun.,
2009
Jan. to Jun.,
2008
Business Tax 5% 1,335,122.76 999,826.87
Urban Maintenance &
Construction Tax
1%, 3%
81,601.38 13,015.69
Educational Surcharge
Property Tax
Land use tax
1%, 7%
37,985.50 1,518.89
Property tax 0.12% 205,906.50
Land use tax 170,100.00
Total 1,830,716.14 1,014,361.45Semi-annual Report 2009
58
28. Financial expenses
Item Jan. to Jun., 2009 Jan. to Jun., 2008
Interest Expenditures 5,045,225.33 2,291,092.20
Less: interest income 68,875.85 65,755.04
Exchange loss 103,080.94 775,763.93
Less: exchange income 9,041.07 194,188.50
Other 466,227.09 161,604.16
Total 5,536,616.44 2,968,516.75
29. Assets impairment loss
Item Jan. to Jun., 2009 Jan. to Jun., 2008
Bad debts loss -- 479,340.45
Loss of depreciation of
inventories
-- --
Total -- 479,340.45
30. Non-operating income
Item Jan. to Jun., 2009 Jan. to Jun., 2008
Income on donated asset -- ---
Scrap revenue -- 363,609.07
Net income on disposal of
fixed asset
-- 31,485.14
Net forfeit income 5,955.30 5,543.86
Breach of faith income 114,934.00 363,629.55
Other income -- 1,939,182.13
Total 120,889.30 2,703,449.75
31. Non-operating expenses
Item Jan. to Jun., 2009 Jan. to Jun., 2008
Forfeit expenditure 10,316.79 114,568.57
Donation expenditure 771,506.00Semi-annual Report 2009
59
Others * 216,636.94
Total 226,953.73 886,074.57
＊Paying compensation money for industrial injury and death of the employees.
32. Cash Flow Statement Annotations
1. Adjusting net profit into cash flow from operating
activities:
Jan. to Jun., 2009
Net Profit 7,873,265.68
Add: Losses and gains of minority shareholders 0.00
Unidentified investment losses 0.00
Withdrawal of provision drawn for assets
impairment
0.00
Fixed assets depreciation 8,485,301.54
Amortization of intangible assets 146,590.97
Amortization of long-term expenses to be
apportioned
0.00
Decrease of other long-term assets 0.00
Decrease of expenses to be apportioned 0.00
Increase of provision for expense 0.00
Loss from disposal of fixed assets 0.00
Loss from discard of fixed assets 0.00
Financial expenses 5,027,225.33
Investment loss 0.00
Decrement of inventories -61,359,958.61
Decrement of operative receivables -163,738,025.97
Increment of operative payables 124,640,418.23
Other transfer-in 0.00
Net cash flow provided by operating activities -78,925,182.83
VIII. Notes on main items of financial statement of parent company
1. Accounts receivable
Jun 30th of 2009 December 31st of 2008
Item
Amount Proportion
Provision for
bad debt
Amount Proportion
Provision for
bad debt
Within 1 114,684,302.31 87.82% - 87,762,929.23 83.39% 37,406.70Semi-annual Report 2009
60
year
1-2 years 3,709,525.94 2.84% 20,266.24 6,210,353.23 5.9% 275,901.23
2-3 years 4,825,834.69 3.70% 1,023,458.59 3,302,604.58 3.14% 930,416.90
Over 3
years 7,364,824.15 5.64% 5,632,476.39 7,972,969.18 7.57% 5,632,476.39
Total 130,584,487.09 100% 6,876,201.22 105,248,856.22 100% 6,876,201.22
There is no arrearage of the shareholder companies which hold over 5% (include 5%)
voting right share of the company in the balance at the end of the term of accounts
receivable.
The total sum of the arrearage of the top 5 companies in debt in the accounts receivable at
the end of the term is RMB 57,890,598.36, accounting for 44.33% of the balance at the
end of the term of the accounts receivable.
2. Other accounts receivable
Item Jun 30th of 2009 December 31st of 2008
Amount Proportion Provision for
bad debt
Amount Proportion Provision for
bad debt
Within 1
year 27,117,666.60 53.31% -- 4,584,114.25 16.92% 51,595.15
1-2 years 3,070,760.44 6.04%
225,323.43
4,045,572.90 14.93% 550,755.50
2-3 years 3,705,614.95 7.28%
477,862.75
4,719,869.26 17.42% 1,209,404.13
Over 3
years 16,974,868.45 33.37%
10,504,757.49
13,741,748.08 50.73% 9,396,188.89
Total 50,868,910.44 100.00% 11,207,943.67 27,091,304.49 100.00% 11,207,943.67
No arrearage of the shareholder companies which hold over 5% (include 5%) of the
company’s voting right share is in the balance at the end of the term of other accounts
receivable.
The total sum of the arrearage of the top 5 companies in debt in other accounts receivable
at the end of the term is RMB 47,594,485.40, accounting for 93.56% of the total other
accounts receivable.
The increased accounts receivable were mainly RMB 24,083,429.02 of Wuhan Hengfa
Science and Technology Co., Ltd. and RMB 11,261,395.92 of Wanshang Company.
3. Operating revenue and cost
Jan. to Jun., 2009 Jan. to Jun., 2008
Operating items Operating
revenue
Operating costs Operating gross
profit
Operating
revenue
Operating costs Operating gross
profit
Plastic injection
ware
-264,836.81
-437,834.49 172,997.68 3,221,357.57 3,976,683.25
-755,325.68Semi-annual Report 2009
61
Printed circuit
board
5,345,495.71
7,421,396.86 -2,075,901.15 20,710,905.92 25,272,028.80
-4,561,122.88
LCD 103,794,691.53
98,761,372.59 5,033,318.94 28,592,565.52 27,844,240.90
748,324.62
Sales materials --
-- -- 780,801.07 677,796.65
103,004.42
Property leasing 21,032,780.74
1,958,095.71 19,074,685.03 17,382,973.94 2,481,450.11
14,901,523.83
Equipment hire --
-- -- 1,020,000.00 669,141.78
350,858.22
Foam Business 11,679,285.85
10,668,331.28 1,010,954.57
Total 141,587,417.02
118,371,361.95 23,216,055.07 71,708,604.02 60,921,341.49
10,787,262.53
IX. Related party relationship and transactions
1. Parent company
(1) General information of parent company
Parent
Company
Type of the
Company
Registra
tion
place
Legal
represent
ative
Nature of
business
Final
controller
Organi
zation
code
Wuhan
Zhongheng
Group
Company of
limited liability
Wuhan
Li
Zhongqiu
Manufacture
and sale
Li
Zhongqiu
711954
601
(2) Registered capital of the parent company and its change
Name of the parent
company
Annual
opening
balance
Increment
this year
Decrement this
year
Annual
closing
balance
Wuhan Zhongheng
Group
138,000,000.
00
---- ----
138,000,000
.00Semi-annual Report 2009
62
(3) Shares held by the parent company and its change
Share amount Share proportion
Proportion of voting
rights
Parent
company
Amount at
the end of
year
Amount at
the beginning
of year
Proportion
at the end
of year
Proportion
at the
beginning
of year
Proportion
at the end
of year
Proportion
at the
beginning
of year
Wuhan
Zhongheng
116,489,894 116,489,894 41.14% 41.14% 41.14% 41.14%
(4) Nature of the related parties without controlling relationship and other related parties
Type of
association-relation
Name of related party
Organization
code
Main transaction
Other enterprises
under control of the
same parent company
Wuhan Hengsheng Photoelectricity
Industry Co., Ltd.
73108664-5 Purchase LCD
Wuhan Xindongfang Real Estate
Development Co., Ltd.
74476047-5 None
Wuhan Zhongheng Property
Management Co., Ltd.
75180426-1 None
Wuhan Guanggu Display System
Co., Ltd.
75510305-9 None
2. Related party transaction
Purchased commodities from related party
Jan. to Jun., 2009 Jan. to Jun., 2008
Name of related party
Amount
Percentage
points in the
same
transation in
current period
(%)
Amount
Percentage
points in the
same
transation in
current
period (%)
Wuhan Hengsheng Photoelectricity
Industry Co., Ltd.
56,565,948.32 47.13% -
-
Total 56,565,948.32 47.13% - -Semi-annual Report 2009
63
Funds paid to related party
Jan. to Jun., 2009 Jan. to Jun., 2008
Name of related party
Amount
Percentage
points in the
same
transation in
current
period (%)
Amount
Percentage
points in the
same
transation in
current
period (%)
Wuhan Hengsheng Photoelectricity
Industry Co., Ltd.
34,956,697.71 80.20% -
-
Total 34,956,697.71 80.20% - -
3. Current amount of related party
Name of related party Items June 30, 2009 December 31, 2008
Wuhan Zhongheng
Other accounts
payable
917,800.00 35,874,497.71
Wuhan Hengsheng Photoelectricity
Industry Co., Ltd.
Accounts
receivable
189,629.17 189,629.17
Wuhan Hengsheng Photoelectricity
Industry Co., Ltd.
Accounts payable -614,070.84 147,800.00
X. Contingent item
1. Pending lawsuit or contingent item formed by arbitration
The Company signed House Leasing Contract and complementary agreement with
Shenzhen Wanshang Friendship Department Store Co., Ltd. (hereinafter refer to as
“Wanshang Friendship”) in the year of 2001, and had agreement of step-up rent.
Considering the actual aim of signing contract and transaction equality, Wanshang
Friendship did not strictly implement regulations of House Leasing Contract and did not
pay enough rent; at the same time, Wanshang Friendship privately built the place of
229.89 square meters without our admission, and did not pay any rent. In order to protect
the interests of listed company and all shareholders, the Company handed in civil
indictment to Shenzhen Futian District People’s Court, which impleaded that Wanshang
Friendship did not pay rent as agreement, and ask for judgment: ① release the House
Lease Contract about leasing Huafa Building and relevant Complementary Agreement
signed by the Company and Wanshang Friendship; ② Wanshang Friendship should pay
the rent which was owed the Company (temporarily calculated amounting to RMB
34,381,679.31 till May 7, 2009, and actually was the rent till the date that the defendantSemi-annual Report 2009
64
retroceded the lease place); ③ Wanshang Friendship should take the responsibility of
compensation for violation of contract (the compensation was calculated as 0.05% of the
owed rent per day from the date owing till the date actually paying off, which was
temporarily calculated amounting to RMB 10 million); ④ Wanshang Friendship should
afford all litigation expenses of the case. At present, the Court formally received the case
of appeal, waiting for a judgment in session. Details could be found in notice on May 22,
2009. Once the Company wins the case and implements the verdict, the relevant item
would increase the profit of the Company and the financial status of the Company would
effectively improve.
2. After-period matters
(1)At the end of July, 2009, the Company received the notice of respondence to action
from Shenzhen Futian People’s Court, informed that Wanshang Friendship appealed to
the court since the Company hadn’t delivered the areas stipulated by the contract to it for
use, and asked for the following verdict: ①the Company should deliver the shop located
in the 1st floor of Huafa Building with an area of 121.2 square meters to Wanshang
Friendship; ②the Company should compensate Wanshang Friendship for the economic
losses resulted from breach of contract, amounting to RMB 6,466,020 (temporarily
calculated till June of 2009, and finally be calculated till the date when the Company
deliver the shop to Wanshang Friendship) ; ③the Company take charge of all expenses
arising from this lawsuit. Till now, the court has not started hearing for this case.
(2)As for the dispute case between the Company and Shanxi Linghua Electronics Co., Ltd.
(referred to Linghua Electronics later)in undertaking contract, on August 11, 2009, the
Company received the civil judgement ([2007] SFFMECZ No. 2441) concerning the
above litigation from Guangdong Shenzhen Futian People’s Court, in which the verdict
after first trial is as follows: the Company should jointly pay breach of contract damages
RMB 1,797,975.48 to Shanxi Linghua Company; Shanxi Linghua should pay rest
payment of the goods of RMB 869,458.96 to the Company with compensation for losses
of interest. The Company didn’t think the law accordance for the above breach of contract
damages was sufficient, so it planed to appeal to the court recently.
XI. Commitment
There is no commitment of the company to be disclosed this year.
XII. Detailed statement on provision for the devaluation of assets
Decrease in current
period
Item
Book balance at the
beginning of the
year
Withdrawn
amount in
current period Switch
back
Transfer-out
Book
balance at
the end of
the term
Provision for bad
debt
15,428,690.66 -- -- -- 15,428,690.66
Provision for
inventory
depreciation
5,357,358.62 -- -- -- 5,357,358.62Semi-annual Report 2009
65
Provision for
long-term equity
investment
depreciation
-- -- -- -- --
Provision for fixed
asset depreciation
973,496.73 -- -- -- 973,496.73
Total 21,759,546.01 -- -- -- 21,759,546.01
XIII. Complementary materials
1. Non-operating gains/losses Statement
Items
Amount of
current year
Amount of last
year
Profit & Loss of Disposal of Non-current Assets -69,313.15
Tax rebate or derate approved by going beyond the authority. Tax
rebate or derate without official approval document.
Incidental tax rebate or derate.
-
Government Grants Accrued into current profit & loss 400,000.00
List into “the fund occupation expense charged on non-financial
enterprise”, subordinate to the accounting item “Current profit &
loss”
-
Earning arising from identifiable fair value of net assets of investees,
which should be enjoyed when costs (which are obtained by the
enterprise) invested in subsidiary companies, pool companies and
joint ventures, is less than the obtained investment.
- -
Non-currency asset exchange profit & loss - -
Profit & loss arising from entrusting the third party to invest or
manage assets
- -
Provision for asset impairment withdrawn due to force majeure (e.g.
natural disaster)
- -
Profit & loss arising from debt recombination - -
Expenses for enterprise recombination - -
Profit & loss that exceed the fair value, arising from transaction with
unfair transaction price.
- -
Net Profit & Loss during Term Beginning to Merger Date of the
Subsidiaries Arising from Business Merger under Same Control - -Semi-annual Report 2009
66
Profit & loss arising from the probable events irrelevant to normal
operating business of the company.
- -
Except effective hedging business relating to normal operation of the
company, the changed profit & loss of fair value arising from
holding transaction-based financial assets and liabilities. And the
investment yield obtained by disposal of transaction-based financial
assets and liabilities as well as sellable financial assets.
- -
Carry-back of impairment provision of payment receivable for single
impairment test
- -
Profit & loss obtained from loan for outwards entrust - -
Profit & loss arising from change of fair value of investment-based
real estate where subsequent measurement is conducted by using the
Fair Value Mode
-
Impact on the current profit & loss caused by one-off adjustment
conducted on the current profit & loss according to requirements
stipulated by taxation /accounting laws and regulations *
2,776,601.27
Entrusting earning arising from the entrusted operation. -
Except the above items, other non-operating earning and expenditure -129,564.43 3,067,269.87
Other profit & loss items confirming to the definition of
nonrecurring profit & loss
- -
Subtotal -129,564.43 6,174,557.99
Affected amount of income tax 423,808.06
Total of Net Incidental Profit & loss -129,564.43 5,750,749.93
Among it, that attributable to shareholder of parent company -129,564.43 5,750,749.93Semi-annual Report 2009
67
2. Return on equity and earnings per share
In line with the requirement of the Compilation Rules for Information Disclosures by
Companies That Offer Securities to the Public No.9- Calculation and Discolsure of Return
on Equity and Earnings per Share issued by CSRC(revised in year 2007), the return on
equity and earnings per share of the Company in comparative periods are set out below:
Jan. –June, 2009 Return on equity Earning per Share (RMB/Share)
Fully
diluted
Weighted
average
Fully diluted
Weighted
average
Net profit attributable to ordinary
shareholders of company
1.73% 1.74% 0.015 0.015
Net profit attributable to ordinary
shareholders of company after
deducting non-recurring profit and
loss
1.78% 1.79% 0.015 0.015
Return on equity Earning per Share (RMB/Share)
Jan. –June, 2008 Fully
diluted
Weighted
average
Fully diluted
Weighted
average
Net profit attributable to ordinary shareholders
of company
-1.044% -1.039% -0.009 -0.009
Net profit attributable to ordinary shareholders
of company after deducting non-recurring
profit and loss
-1.803% -1.793% -0.015 -0.015Semi-annual Report 2009
68
VII. Documents Available for Reference
I. Semi Annual Report with the signature of Chairman of the Board.
II. Accounting statements with the signatures and seals of legal representative, principal of
the Company, principal in charge of accounting affairs and director of accounting
department.
III. Original of all documents disclosed on China Securities Journal, Securities Times and
Hong Kong Wen Wei Po in the report period.
IV. Articles of Association of the Company.
V. Other relevant materials.
Note: This Report is prepared respectively both in Chinese and English. Should be there
any difference in interpretation of these two versions, the Chinese version shall prevail.
Chairman of the Board: Li Zhongqiu
Board of the Directors of
Shenzhen Zhongheng Huafa Co., Ltd.
August 17, 2009
