Shenzhen Zhongheng Huafa Co., Ltd.
SEMI-ANNUAL REPORT 2010
Short Form of the Stock: SHEN HUAFA-A
SHEN HUAFA-B
Stock Code: 000020, 200020Semi-Annual Report 2010
1
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.
All the directors attended the meeting of the Board.
Mr. Li Zhongqiu, Chairman of Board and General Manager of the Company, Mr. Jiang Yanjun,
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 2010 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
Ⅱ. CHANGES IN SHARE CAPITAL AND PARTICULARS ABOUT SHARES HELD BY MAIN
SHAREHOLDERS
III. PARTICULARS ABOUT DIRECTORS, SUPERVISORS AND SENIOR EXECUTIVES
Ⅳ. REPORT OF THE BAORD OF DIRECTORS
Ⅴ. SIGNIFICANT EVENTS
Ⅵ. FINANCIAL REPORT (UN-AUDITED)
Ⅶ. DOCUMENTS AVAILABLE FOR REFERENCESemi-Annual Report 2010
2
I. Company Profile
(I)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.
(II) Legal Representative: Li Zhongqiu
(III)Secretary of the Board: Li Zhongqiu (Proxy)
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
(IV) 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
(V)Newspapers for Disclosing the Information of the Company:
China Securities Journal, Securities Times and Hong Kong Commercial Daily
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.
(VI)Stock Exchange Listed with: Shenzhen Stock Exchange
Short Form of the Stock: SHEN HUAFA-A, SHEN HUAFA- B
Stock Code: 000020, 200020
(VII)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: 440301501120670
Registered number of tax: 440301618830372
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.ChinaSemi-Annual Report 2010
3
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 817,922,955.67 756,779,839.48 8.08
Owners’ equity attributable to shareholders of
listed company 269,339,355.15 251,963,858.81 6.90
Share capital 283,161,227.00 283,161,227.00 0.00
Net assets per share attributable to
shareholders of listed company (RMB/Share) 0.951 0.89 6.85
This report period
(Jan. to Jun.)
The same period
of last year
Increase/decrease in this report
period year-on-year (%)
Total operating income 366,405,407.84 212,122,658.94 72.73
Operating profit 10,001,631.67 4,488,787.23 122.81
Total profit 17,194,750.52 4,359,222.80 294.45
Net profit attributable to the shareholders of
listed company 17,375,496.34 4,359,222.80 298.59
Net profit attributable to the shareholders of
the company after deducting non-recurring
gains and losses
10,182,377.49 4,488,787.23 126.84
Basic earnings per share(RMB/Share) 0.061 0.015 306.67
Diluted earnings per share (RMB/Share) 0.061 0.015 306.67
Return on equity (%) 6.45 1.73 Increased 4.72 percentage
points
Net cash flow arising from operating activities 29,661,871.80 -78,925,182.83 —
Net cash flow arising from operating activities
per share (RMB/Share) 0.105 -0.279 —
Items of non-recurring gains and losses Amount
Exchange gains and loss of non-monetary
assets 6,902,326.45
Other non-operating income and
expenditure except for the
aforementioned items
290,792.40
Total 7,193,118.85Semi-Annual Report 2010
4
CAS IAS
Net profit 17,375,496.34 17,375,496.34
Net asset 269,339,355.15 269,339,355.15
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 6.45 6.67 0.0614 0.0614
Net profit attributable to the
shareholders of the company
after deducting non-recurring
gains and losses
3.78 3.91 0.0360 0.0360
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
(Share)
Proportion
(%)
New
share
issued
Bonus
shares
Capitalization
of public
reserve
Others Subtotal Amount
(Share)
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 ofSemi-Annual Report 2010
5
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 283,161,227 100 283,161,227 100
II. Particulars about shareholders (registered on Jun. 30, 2010)
Total shareholders 32,649
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
general legal
person
41.14% 116,489,894 116,489,894 116,489,894
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 0
Jia Wenjun Domestic
natural person 0.41% 1,152,032 0 0
BINGHUA LIU Foreign natural
person 0.31% 876,213 0 0
Liu Liaoyuan Domestic
natural person 0.26% 741,900 0 0Semi-Annual Report 2010
6
Zhu Ming Domestic
natural person 0.22% 611,348 0 0
Liang Genpei Domestic
natural person 0.21% 595,305 0 0
DBS VICKERS (HONG KONG)
LTD A/C CLIENTS
Foreign legal
person 0.21% 591,150 0 0
Luo Ya Domestic
natural person 0.21% 589,800 0 0
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
Jia Wenjun 1,152,032 RMB common share
BINGHUA LIU 876,213 Domestically listed foreign
share
Liu Liaoyuan 741,900 Domestically listed foreign
share
Zhu Ming 611,348 Domestically listed foreign
share
Liang Genpei 595,305 Domestically listed foreign
share
DBS VICKERS (HONG KONG) LTD
A/C CLIENTS 591,150
Domestically listed foreign
share
Luo Ya 589,800 Domestically listed foreign
share
Lin Caili 561,087 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.
Note: on Dec. 25th of 2009, comtrolling shareholder Wuhan Zhongheng Technology Industries
Group Limited (hereinafter referred to as "Wuhan Zhongheng Group") mortgaged all the holding
limited current stock of the Company 116,489,894 shares to CITIC Bank Corporation Limited
Wuhan Branch, mortgage period lasted from Dec 25th of 2009 to pledge applying thaw. Equity
Mortgage registration had been completed in China Securities Depository and Clearing Co., Ltd.
Shenzhen Branch. Till the reporting period ended, total 116,489,894 shares Wuhan Hunching
Group held in the Company took up 100% equity of the Company, taking up 41.14% of total equity
of the Company.Semi-Annual Report 2010
7
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 2010-5-18 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.
Note: regarding total 116,489,894 sahres holding in the Company were in situation of being
pledged, till end of reporting period, Wuhan Hunching Group didn’t apply to Shenzhen Stock
Exchange for thaw procedure of the above restricted sale shares.
IV.Change of the controlling shareholder of the Company
The controlling shareholder of the Company Wuhan Zhongheng New Science & Technology
Industrial Group Co., Ltd., the actural controller is Mr. Li Zhongqiu, and did not change in the
report period.
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 middle of Dec. 2009, Mr. Fu Yanhua put forward to resign his posts of Director, Deputy General
Manager, and Secretary of the Board of the Company due to adjustment work in Beijing.
In Apr. 2010, 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. Jiang Yanjun as the Deputy
General Manager of the Company; and then Mr. Jiang Yanjun was supplemented to be the Director
of the 6th Board of Directors of the Company.
IV. Report of Board of Directors
I.Overall operation and management of the Company in the report period
Affected by recovery of international economy and further promotion of National home appliances
to the countryside policy, order of operation entity of industrial assets of the Company which is
Wuhan Hengfa Technology Co., Ltd. significantly increased; at the same time, implementation of
asset replacement program led to successful peeling of printed circuit board business. Compared to
the same period of last year, it decreased loss from this part and brought about assets replacementSemi-Annual Report 2010
8
income.
The Company received a significant increase in main business operation over the same period of
last year. Net profit realized from January to June amounted to RMB 17.38 million, 299% up
compared to the same time of last year, mainly resulted from the following aspects:
●Business of whole set of LCD: Wuhan Heng Fat Video Technology Division further enlarged
market share of main clients, meanwhile actively explored Haier, Shenzhou and other new clients,
thus order number significanty increased; meanwhile in process of manufacture, fined process
technology, improved production effiency. Positively promoted supply chain management, explored
new suppliers, thus competitiveness of products was enhanced.
●Plastic and styrofoam business: in reporting period, Wuhan Hengfa Technology Division took
market as orientation, successfully explored Haier Hefei market; meanwhile optimized products
structure, integrated edge power of manufacture and equipment division, persistently caaried out
final goal of energy saving, re-organized labor productivity thus effectively improved labor
productivity.
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, polystyrene and LCD whole set business. The sales of
products of the Company focus on the areas of Middle China 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
9,810.15 8,865.97 9.62 90.38 96.91 Decreased 3
percentage points
LCD 22,142.27 21,106.73 4.68 113.33 113.71 Decreased 0.17
percentage points
Polystyrene 2,755.85 2,484.40 9.85 -6.89 -8.84 Increased 1.92
percentage points
Area Income from operation Increase/decrease in income from
operations over last year (%)
HongKong 22,142.27 113.33
Middle China 12,566.00 82.35
(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 366,405,407.84 212,122,658.94 72.73Semi-Annual Report 2010
9
Operation profit 10,001,631.67 4,488,787.23 122.81
Net profit attributable to shareholders
of the company 17,375,496.34 4,359,222.80 298.59
Net increase amount of cash and cash
equivalents 101,408,959.26 66,637,082.71 52.18
Item Amount of
period-end
Amount of
period-begin
Increase or
decrease (%)
Total assets 817,922,955.67 756,779,839.48 8.08
Owners’ equity attributable to parent
company 269,339,355.15 251,963,858.81 6.90
Reasons for the above changes:
(1) Operating income significantly increased compared to the same period of last year, mainly due
to operating income of wholly owned subsidiary of Wuhan Hengfa Technology Co., Ltd.
significantly increased.
(2) Main reason for increase of operating profit and et profit attributable to shareholders of the
Company:
a. Peeling of circuit board business decreased loss of the Company, and produced income of assets
replacement;
b. Net profit of Wuhan Hengfa Technology Company in the first half year dramatically increased.
(3) Net increase amount of cash and cash equivalent significantly increased, mainly due to increase
of bank loan.
(4) Main reason for increase of total assets compared to the same period of last year:
a. Singnificant increase of bank loan;
b. Flourishing production and sales of Wuhan Hengfa Technology increased accounts receivable
and inventory goods.
(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 1526.52
(IV) Investment income received by the Company from single joint stock company in the reporting
period
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 reporting period, integrity business of LCD has greater growth over the same period of last year.
Due to the market of LCD-the raw material fluctuated greatly, the integrity production
correspondingly changed and remained un-steady factor; the business of plastic injection and
Styrofoam has growth either, but there remain many steps needing improvement in internal
management, especially in the plastic injection business department which has a greater space for
fine management and cost reduced.
(VI)Main working plan for the later half year
In second half year, the Company will continuously attach importance to integrity organization
business of LCD, strive to remain the same order volume as the one of first half year and put effortSemi-Annual Report 2010
10
in implementation. Business of plastic injection and Styrofoam focus on the management strengthen,
strongly bring in ERP management system, perfect the procedure of production business, detail
diagnosis should be taken in fine management level for the purpose of improving by special
consultancy recruitment on schedule, meanwhile propose strategically plan. Concerning the cost
reduction, on one hand put efforts in the supplier exploring, on other hand, promote the
energy-saving reform on the equipment steadily; concerning the development & reform of land
resource right now, renewal unit of Huafa Mansion still in the application, the development plan in
the discussion and Gongming land project will prepare renewal plan in second half year.
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
In reporting period there was no significant investment with non-raised proceeds.
V. Significant Events
I. Company Gorvernance
According to the related files of China securities regulatory commission，company has established
relatively perfect governance structure of corporate governance, and the actual status of the
governance can basically comply with relevant regulatory documents, it can better meet the
company’s developing needs.
(I)During the reporting period, the company examined and formulated annual information
disclosure of major mistakes responsibility system according to the listed companies in 2009
regarding annual report and related work announcement (CSRC announcement no. 34 [2009])and
shenzhen bureau ‘s request for information disclosure of listed company annals of major mistakes
responsibility system; To further perfect and regulate report and major issues in compiling, review
and external information users during the disclosure of management, established the external
information users management system.
(II)According to the Securities law of the People's Republic of China and the on-site inspection
measures of listed company, shenzhen SRC bureau did the on-site inspection to our company
towards corporate governance, the information disclosure, financial management and accounting
treatments from March to July 2010, and noticed the inspect condition to the company's board of
directors and supervisors, and issued the report of the shenzhen zhongheng huafa industrial Co., ltd.,
on-site examination opinions of supervision. According to all the problems found out by the
expectation, Company made a comprehensively arrangement and analyzed the causes of problems
and responsible man, and formulated the self-examination action plan, which is currently
implementing now.
(III)According to the demand of announcement of the listed company in shenzhen area about
launching comprehensive standard accounting basis of special activitie([2010] No109), which
promulgated by Shenzhen SRC , the company insisted the spirit of seeking truth from facts and
strict discipline, serious rectification, regulating the operation, and made special activities around
the financial control work plan, accounting, financial links and aspects of financial management,
and made a thorough and careful work of special self-examination to the finance basic work.
Currently, the company is perfecting a series of financial management system and process, regulate
internal financial management operation
II. Implementation of profit distribution planSemi-Annual Report 2010
11
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 2010.
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. The Company considered that from the view of
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. 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 sued that Wanshang Friendship did not pay rent as
agreement, concerning amount of 17.7466 million yuan. The Court formally received the case of
appeal and rejected the appeal from the Company. The Company appealed to Shenzhen
Intermediate People's Court regarding this judgment. And Shenzhen Intermediate People's Court
made the second instance trial. Till now, there is no judgment being made.
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.
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) In order to improve assets quality and profitability, realize industrial assets integration
meanwhile remove related transaction events which is that the industry production business of the
Company in Wuhan rented plants to controlling shareholder Wuhan Hunching Group for a long
time, the Company replaced printed circuit board business, partial Gongming industrial land and
partial land assets controlling shareholder Wuhan Hunching Group held in Wuhan. Specific
operation is as follows:
1. The Company involved printed circuit board business in wholly owned subsidiary Shenzhen
Zhongheng Huafa Technology Co., Ltd.: increase investment in Shenzhen Hunching Haifa
Technology Co., Ltd via instrument and equipment and fixed assets of printed circuit board business
as well as cash, meanwhile sold inventory of printed circuit board business and transferred
management team and staff related to printed circuit board business as well as all the related
documents and information (including but not restricted, documents of clients and suppliers,
purchase and sales contract, rules and regulation and so on), the registration capital increased to
86.76775 million yan.
2. The Copany and Wuhan Hunching Group increased investment in wholly owned subsidiary
Shenzhen Zhongheng Huafa Technology Co., Ltd.: the Company increased 44 million yuan in
Wuhan Hengfa Technology Co., Ltd in monetary way with 1:1 rate calculation and got 44% equity
of Wuhan Hengfa Technology Co., Ltd after the completion of increase of investment; Wuhan
Hunching Group increased investment in Wuhan Hengfa Technology Co., Ltd via land use right of
Tunkou District NO.10 and NO. 2 places located in Wuhan Economic and Technological
Development Zone with 101.6931 million yuan evaluation value and 1:1 calculation rate, thus gotSemi-Annual Report 2010
12
56% equity of Wuhan Hengfa Technology Co., Ltd after the completion of increase of investment.
Total increased investment amounted to 145.6931 million yuan, registration capital of Wuhan
Hengfa Technology Co., Ltd increased to 181.6431 million yuan.
3. Wuhan Hunching Group made a assets replacement between the holding 56% equity of Wuhan
Hengfa Technology Co., Ltd amounting to 101693100 yuan and holding 100% equity of Shenzhen
Zhongheng Huafa Technology Co., Ltd. held by the Company. The difference will be supplemented
with cash.
4. As long as the Company completed the second increased investment in Shenzhen Hunching
Haifa Technology Co., Ltd via Gongming Industrial Land, the Company can get about 17.6% equity
of Shenzhen Hunching Haifa Technology Co., Ltd after the second increased investment for the
second time and paid them to Wuhan Hunching Group. Therefore before the Company paid this
equity, the Company should pay 14925350 yuan difference fees to Wuhan Hunching Group. After
the Company pays the equity, Wuhan Hunching Group returned 18550000 yuan to the Company
with equity transfer fees.
The Board of Directors of the Company held the 3rd temporary meeting of 2009 on Apr 22nd of 2009
and discussed and approved the above assets replacement events; on Apr 29th , the Company signed
Contract of Assets Replacement with Wuahan Hunching Group; on Nov 4, the 2009 second
temporary meeting of shareholders discussed and approved assets replacement events, Contract of
Assets Replacement was into effect. In Dec of 2009, Wuhan Hunching Group transferred Wuhan
land and property to wholly owned subsidiary Wuhan Hengfa Technology Co., Ltd., and 100%
equity of wholly owned subsidiary Shenzhen Zhongheng Huafa Technology Co., Ltd. to Wuhan
Hunching Group; in Mar of 2010, the Company and Wuhan Hunching Group increased investment
in Wuhan Hengfa Technology Co., Ltd via land use right and cash, thus got 56% equity of Wuhan
Hengfa Technology Co., Ltd after the completion of increase of investment.
On Apr 20th of 2009, Hubei Zhonglian Assets Appraisal Co., Ltd. appraised real estate concerning
assets replacement, and issued E-public joint assessment report Zi [2009] No. 024 appraisal report.
The property and land respectively were through property transfer procedures on Nov 30th of 2009
and Nov 14th of 2009, and transferred it to Hengfa Technology Company. But in process of striving
land ownership certificates, there is need to re-measure the area of transferred land. As result of
current measurement technology, precision and measurement different from history, and all along
local government occupied partial transferred land for green project and establishment of road and
other public facilities, so the real area of transferred land is smaller than agreed area on Contract of
Assets Replacment, the Difference is about 3,618.96 square meters, amounting to about 2365200
yuan. For this difference, Wuhan Hunching made a commitment to the Company on Dec 30th of
2009: supplement the difference before Jun 30th of 2010 with cash. Till reporting period-end, related
difference had been supplemented.
(II) According to requirements of development of the Company business, the Company will
continue 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 2010. Proposal on Prediction of Daily Related Transaction
in Visual Communication Business for 2010 was examined and approved in Annual Extraordinary
Shareholders’ Meeting of 2009 on Jun 29th, 2010, which expected that the Company may purchase
LCD about 675000 sets from related parties, with purchasing amount of USD 60990000, 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. 6, 2010. From January to
June of 2010, the Company actually purchased 19 inch LCD with about RMB 70,500,000 from
related parties.Semi-Annual Report 2010
13
(III) With the involving of printed circuit board business of the Company into Shenzhen Hunching
Haifa Technology Co., Ltd, based on that Shenzhen Hunching Haifa Technology Co., Ltd needed to
get previous clients of this business and acceptance of suppliers and acceptance of processing trade
qualification license from customs in charge to carry out printed circuit board business, There is a
transition phase before transfer operation of the above business. In order to assist Shenzhen
Hunching Haifa Technology Co., Ltd to successfully take over printed circuit board business, partial
material purchase and products sales of Shenzhen Hunching Haifa Technology Co., Ltd temporarily
need to be conducted through channels of the Company. The Company only offers transactional
assistance for Shenzhen Hunching Haifa Technology Co., Ltd, doesn’t pay for operating capital in
advance, neither brings about any loss, neither take on any purchase or sales deputy responsibility.
The rising expense loss during the time will be taken over totally by controlling shareholder Wuhan
Hunching Group and Shenzhen Hunching Haifa Technology Co., Ltd. Details can be seen on
company report on Feb 6th of 2010. From Jan. to Jun. of 2010, actually the Company purchased
goods about RMB 9,550,000 from Shenzhen Zhongheng Huafa Technology Co., Ltd, sold goods
about RMB 170,000 and offered comprehensive service about RMB 630,000.
(IV) 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 has
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, 2010, the Company hadn’t any current external guarantee or
accumulated guarantee matters.Semi-Annual Report 2010
14
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.
Planning within 1 year
after completion of equity
transaction procedures:
1.Relevant capital of
plastic injection business
will injected into the
Company;
2. 70% equity of
Hengsheng Photoelectricity
will be injected into the
Company.
1. 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;
2. 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.
Commitment has been fulfilled
on May 18th of 2010; regarding
total holding shares of the
Company 116,489,894 shares
were still in pledge, till the
period-end of this reporting
period, Wuhan Hunching Group
didn’t apply lifting procedure
over restricted shares to the
Shenzhen Stock Exchange.
X. Audit
The financial report of the Company in semi-annual of year 2010 hasn’t been audited.
The Company has not engaged any audit organization for 2010 in reporting period.
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, management of investors of the Company was mainly conducted through
maintenance of investors management platform and daily telephone inquiries, 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.Semi-Annual Report 2010
15
VI. Financial Report (Un-audited)
BALANCE SHEET
Prepared by Shenzhen Zhongheng Huafa Co., Ltd. June 30, 2010 Unit: RMB
Item MerAgmero u nt at pePriaorde-netn Cd ompany MerAgmero u nt at yePara-rbeengt iCn ompany
Current assets:
Monetary funds 128,562,059.19 41,844,246.88 81,045,080.98 49,500,363.83
Settlement provisions
Capital lent
Transaction finance asset
Notes receivable 8,164,918.45 2,567,614.40 16,494,962.28 5,210,693.07
Accounts receivable 255,979,933.94 34,233,162.63 198,525,735.70 189,832,968.64
Accounts paid in advance 17,303,182.05 1,392,828.71 2,540,752.30 984,065.76
Insurance receivable
Reinsurance receivables
Contract reserve of
reinsurance receivable
Interest receivable
Dividend receivable
Other receivables 19,641,547.23 81,776,231.55 98,540,829.55 130,922,698.28
Purchase restituted finance
asset
Inventories 72,172,187.16 14,960,445.40 46,659,614.06 5,430,049.66
Non-current asset due within
one year
Other current assets
Total current assets 501,823,828.02 176,774,529.57 443,806,974.87 381,880,839.24
Non-current assets:
Granted loans and advances
Finance asset available for
sales
Held-to-maturity investment
Long-term account
receivable
Long-term equity investment 184,609,820.00 38,915,789.00
Investment property 39,205,813.64 39,205,813.64 40,432,444.22 40,432,444.22
Fixed assets 207,969,896.28 121,658,867.62 209,483,513.59 126,119,724.23
Construction in progress 3,863,446.23 3,839,714.54 813,658.48 789,926.79
Engineering material
Disposal of fixed asset
Productive biological asset
Oil and gas asset
Intangible assets 57,026,173.06 8,244,431.87 54,779,557.90 6,053,471.83
Expense on Research and
Development
Goodwill
Long-term expenses to be
apportioned 2,000,000.00 2,000,000.00 2,375,000.00 2,375,000.00
Deferred income tax asset 6,033,798.44 6,066,614.89 5,088,690.42 6,066,614.89
Other non-current asset
Total non-current asset 316,099,127.65 365,625,262.56 312,972,864.61 220,752,970.96
Total assets 817,922,955.67 542,399,792.13 756,779,839.48 602,633,810.20
Current liabilities:Semi-Annual Report 2010
16
Short-term loans 117,091,620.66 12,918,204.61 33,442,212.57 23,570,130.56
Loan from central bank
Absorbing deposit and
interbank deposit
Capital borrowed
Transaction financial
liabilities
Notes payable 30,689,698.51 18,480,655.16
Accounts payable 166,988,515.46 30,783,765.44 81,546,114.17 50,331,249.99
Accounts received in
advance 1,364,902.08 778,433.18 1,762,766.25 1,442,334.29
Selling financial asset of
repurchase
Commission charge and
commission payable
Wage payable 2,196,752.72 545,694.35 2,047,294.58 526,475.34
Taxes payable 1,102,837.29 2,689,496.10 8,828,793.97 9,015,502.25
Interest payable
Dividend payable
Other accounts payable 10,710,209.81 17,869,175.52 132,645,479.98 40,020,152.97
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 330,144,536.53 65,584,769.20 278,753,316.68 124,905,845.40
Non-current liabilities:
Long-term loans 211,997,600.00 211,997,600.00 219,621,200.00 219,621,200.00
Bonds payable
Long-term account payable
Special accounts payable
Projected liabilities 6,241,463.99 6,241,463.99 6,241,463.99 6,241,463.99
Deferred income tax
liabilities
Other non-current liabilities 200,000.00 200,000.00 200,000.00 200,000.00
Total non-current liabilities 218,439,063.99 218,239,063.99 226,062,663.99 226,062,663.99
Total liabilities 548,583,600.52 284,023,833.19 504,815,980.67 350,968,509.39
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 -195,286,792.04 -206,250,188.25 -212,662,288.38 -212,960,846.38
Balance difference of foreign
currency translation
Total owner’s equity
attributable to parent
company
269,339,355.15 258,375,958.94 251,963,858.81 251,665,300.81
Minority interests
Total owner’s equity 269,339,355.15 258,375,958.94 251,963,858.81 251,665,300.81Semi-Annual Report 2010
17
Total liabilities and owner’s
equity 817,922,955.67 542,399,792.13 756,779,839.48 602,633,810.20
PROFIT STATEMENT
Prepared by Shenzhen Zhongheng Huafa Co., Ltd. Jan.-Jun., 2010 Unit: RMB
Amount in this period Amount in last period
Item Merger Parent
Company Merger Parent
Company
I. Total operating income 366,405,407.84 24,888,551.57 212,122,658.94 141,587,417.02
Including: Operating income 366,405,407.84 24,888,551.57 212,122,658.94 141,587,417.02
Interest income
Insurance gained
Commission charge and
commission income
II. Total operating cost 356,403,776.17 25,331,083.61 207,633,871.71 136,802,685.47
Including: Operating cost 326,247,895.99 7,495,814.81 180,418,375.74 118,371,361.95
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 1,493,633.36 1,253,188.97 1,830,716.14 1,650,080.70
Sales expenses 1,169,773.97 240,907.09 3,027,035.54 1,796,971.45
Administration expenses 16,030,758.40 9,796,198.49 16,821,127.85 9,975,520.04
Financial expenses 7,681,282.39 6,544,974.25 5,536,616.44 5,008,751.33
Losses of devaluation of
asset 3,780,432.06
Add: Changing income of
fair value
Investment income
Including: Investment
income on affiliated
company and joint venture
Exchange income
Entrusted operating
income 10,001,631.67 -442,532.04 4,488,787.23 4,784,731.55
III. Operating profit 7,220,163.57 7,151,181.45 120,889.30 3,634,932.18
Add: Non-operating income 27,044.72 -2,008.72 250,453.73 250,453.73
Less: Non-operating expense
Including: Disposal loss of
non-current asset 17,194,750.52 6,710,658.13 4,359,222.80 8,169,210.00
IV. Total Profit -180,745.82
Less: Income tax expense 17,375,496.34 6,710,658.13 4,359,222.80 8,169,210.00
V. Net profit 17,375,496.34 6,710,658.13 4,359,222.80 8,169,210.00
Net profit attributable to
owner’s of parent company
Minority shareholders’ gains
and losses
VI. Earnings per share 0.061 0.024 0.015 0.029Semi-Annual Report 2010
18
i. Basic earnings per share 0.061 0.024 0.015 0.029
ii. Diluted earnings per share 0 0.00 0.00
VII. Other consolidated
income 17,375,496.34 6,710,658.13 4,359,222.80 8,169,210.00
Total comprehensive income
attributable to parent
company
17,375,496.34 6,710,658.13 4,359,222.80 8,169,210.00
Total comprehensive income
attributable to minority
shareholders
CASH FLOW STATEMENT
Prepared by Shenzhen Zhongheng Huafa Co., Ltd. Jan.-Jun., 2010 Unit: RMB
Amount i Item Merger n thiPsa preenrito Cd ompany MerAgmero unt in lasPta preenrito Cd o mpany
I. Cash flows arising from
operating activities:
Cash received from selling
commodities and providing
labor services
306,901,158.16 119,051,361.84 131,268,785.30 115,053,063.61
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
11,843,581.77 33,320,273.71 20,902,319.80 65,827,829.48
Subtotal of cash inflow
arising from operating
activities
318,744,739.93 152,371,635.55 152,171,105.10 180,880,893.09
Cash paid for purchasing
commodities and receiving
labor service
250,172,083.95 27,452,062.31 132,892,144.14 114,713,508.58
Net increase of customer
loans and advancesSemi-Annual Report 2010
19
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 14,498,567.95 3,819,860.45 13,502,102.92 7,999,606.65
Taxes paid 4,696,333.60 2,261,491.06 3,158,433.58 2,605,857.98
Other cash paid concerning
operating activities 19,715,882.63 16,737,663.89 81,543,607.29 93,290,043.39
Subtotal of cash outflow
arising from operating
activities
289,082,868.13 50,271,077.71 231,096,287.93 218,609,016.60
Net cash flows arising from
operating activities 29,661,871.80 102,100,557.84 -78,925,182.83 -37,728,123.51
II. Cash flows arising from
investing activities:
Cash received from
recovering investment
Cash received from
investment income
Net cash received from
disposal of fixed, intangible
and other long-term assets
Net cash received from
disposal of subsidiaries and
other units
Other cash received
concerning investing
activities
Subtotal of cash inflow from
investing activities
Cash paid for purchasing
fixed, intangible and other
long-term assets
4,297,438.24 3,204,747.00 2,455,181.70 369,445.56
Cash paid for investment 58,300,000.00 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 4,297,438.24 61,504,747.00 5,354,495.49 61,006,437.35
Net cash flows arising from
investing activities -4,297,438.24 -61,504,747.00 -5,354,495.49 -61,006,437.35
III. Cash flows arising from
financing activities
Cash received from
absorbing investment
Including: CashSemi-Annual Report 2010
20
received from absorbing
minority shareholders’
investment by subsidiaries
Cash received from loans 102,001,334.04 253,481,853.33 253,481,853.33
Cash received from
issuing bonds
Other cash received
concerning financing
activities
Subtotal of cash inflow from
financing activities 102,001,334.04 253,481,853.33 253,481,853.33
Cash paid for settling debts 18,611,834.09 18,611,834.09 97,459,600.00 97,459,600.00
Cash paid for dividend and
profit distributing or interest
paying
7,344,974.25 6,208,666.11 5,027,225.33 5,027,225.33
Including: Dividend and
profit of minority
shareholder paid by
subsidiaries
Other cash paid concerning
financing activities
Subtotal of cash outflow
from financing activities 25,956,808.34 24,820,500.20 102,486,825.33 102,486,825.33
Net cash flows arising from
financing activities 76,044,525.70 -24,820,500.20 150,995,028.00 150,995,028.00
IV. Influence on cash and
cash equivalents due to
fluctuation in exchange rate
-78,266.97 -78,266.97
V. Net increase of cash and
cash equivalents 101,408,959.26 15,775,310.64 66,637,082.71 52,182,200.17
Add: Balance of cash and
cash equivalents at the period
-begin
27,153,099.93 26,068,936.24 24,314,654.56 23,236,402.77
VI. Balance of cash and cash
equivalents at the period -end 128,562,059.19 41,844,246.88 90,951,737.27 75,418,602.94Semi-Annual Report 2010
21
CONSOLIDATED STATEMENT ON CHANGES OF OWNERS’ EQUITY
Prepared by Shenzhen Zhongheng Huafa Co., Ltd. Semi-Annual of 2010 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:
Treasury
Stock
Reasonable
reserve
Surplus
reserves
General
risk
provision
Retained profit Others
Minority’s
equity
Total owners’
equity
Paid-up capital
(Share capital)
Capital
reserves
Less:
Treasury
Stock
Reasonable
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 -212,662,288.38 251,963,858.81 283,161,227.00 104,073,326.94 77,391,593.25 -216,816,881.03 247,809,266.16
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 -212,662,288.38 251,963,858.81 283,161,227.00 104,073,326.94 77,391,593.25 -216,816,881.03 247,809,266.16
III. Increase/
Decrease in
this year
(Decrease is
listed with'"-")
17,375,496.34 17,375,496.34 4,154,592.65 4,154,592.65Semi-Annual Report 2010
22
(I) Net profit 17,375,496.34 17,375,496.34 4,154,592.65 4,154,592.65
(II)Other
consolidated
income
Subtotal of
(I)and (II)
17,375,496.34 17,375,496.34 4,154,592.65 4,154,592.65
(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. OthersSemi-Annual Report 2010
23
(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
(VI)Reasonable
reserve
1．Withdrewal
this period
2．Usage this
period
IV. Balance at
the end of the
report period
283,161,227.00 104,073,326.94 77,391,593.25 -195,286,792.04 269,339,355.15 283,161,227.00 104,073,326.94 77,391,593.25 -212,662,288.38 251,963,858.81Semi-Annual Report 2010
24
STATEMENT ON CHANGES OF OWNERS' EQUITY OF PARENT COMPANY
Prepared by Shenzhen Zhongheng Huafa Co., Ltd. Semi-Annual of 2010 Unit: RMB
Amount in this report period Amount in last year
Item Paid-up capital
(Share capital)
Capital
reserves
Less:
Treasury
Stock
Reasonable
reserve
Surplus
reserves
General
risk
reserve
Retained profit
Total owners’
equity
Paid-up capital
(Share capital)
Capital
reserves
Less:
Treasury
Stock
Reasonable
reserve
Surplus
reserves
General
risk
reserve
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 -212,960,846.38 251,665,300.81 283,161,227.00 104,073,326.94 77,391,593.25 -211,803,175.34 252,822,971.85
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 -212,960,846.38 251,665,300.81 283,161,227.00 104,073,326.94 77,391,593.25 -211,803,175.34 252,822,971.85
III. Increase/ Decrease in
this year (Decrease is
listed with'"-")
6,710,658.13 6,710,658.13 -1,157,671.04 -1,157,671.04
(I) Net profit 6,710,658.13 6,710,658.13 -1,157,671.04 -1,157,671.04
(II)Other consolidated
income
Subtotal of (I)and (II) 6,710,658.13 6,710,658.13 -1,157,671.04 -1,157,671.04
(III) Owners' devoted and
decreased capital
1. Owners' devoted capitalSemi-Annual Report 2010
25
2. Amount calculated into
owners' equity paid in
shares
3. Others
(IV) Profit distribution
1. Withdrawal of surplus
reserves
2．Withdraw of general
risk provision
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 reserves
4. Others
(VI)Reasonable reserve
1．Withdrawal this period
2．Usage this period
IV. Balance at the end of
the report period
283,161,227.00 104,073,326.94 77,391,593.25 -206,250,188.25 258,375,958.94 283,161,227.00 104,073,326.94 77,391,593.25 -212,960,846.38 251,665,300.81Semi-Annual Report 2010
26
Annotations to the Accounting Statements:
1. Company Profile
Shenzhen Zhongheng Huafa 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 totalingSemi-Annual Report 2010
27
14,487,400 shares, accounting for 5.12% of total shares capital of the Company.
On 06 June 2005, the Company bulletined that original shareholder SEG and China
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 ending at 31 December 2009, the aggregate shares of the Company are 283.16 million
shares, among which, restricted shares total to 116,489,894 shares, accounting for 41.14%
of total shares, and unrestricted shares total to 166,671,333 shares, accounting for 58.86%
of total shares. Among the unrestricted shares, there are 64,675,497A shares and
101,995,836 B shares, accounting for 22.84% 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 functionalSemi-Annual Report 2010
28
management departments include Enterprise Planning Department, Financial Department,
Comperhensive Management Department, Business Center, Video Business Department,
Circuit Panel Business Department, Plastic Injection Business Department, Auditing
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.,(Huafa Proporty for short)
Wuhan Hengfa Scientific and Technology Co., Ltd.(Hafa Scientific& Technology for short)
etc.
II. Basis of Preparation of Financial Statements
This preparation of the Financial Statements is based on the continual operation of the
Company, according to the actual transaction and event, pursuant to the Corporate
Accounting Principles and relevant rules, and grounded on the accounting polies and
estimations stated in Note IV Important accounting policy & estimation and method for
preparation of consolidated financial statements.
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. Important accounting policy & estimation, and method for preparation of
consolidated financial statements
1. Accounting period
The Company’s accounting period is in from 1 January to 31 December in Gregorian
calendar.
2. Bookkeeping standard currency
The RMB is taken as the bookkeeping standard currency.
3. Bookkeeping basis and pricing principle
The accrual basis is taken as the Group’s bookkeeping basis, and the historic cost the
pricing principle besides the tradable financial assets and assets available for sale
measured on the fair value.
4. Cash and cash equivalents
The cash in the Group’s cash flow statement is storage cash and deposits available for
payment anytime. The cash equivalents in the cash flow statement are the investment of
3-month-blow holding period, strong mobility, easy change into the cash of the known
sum and slight risk of the value change.
5. Foreign currency business and conversion of financial statements in foreign currency
(1) As for the Group’s foreign currency transaction, the sum in foreign currency is
converted into the one in RMB on the fixed exchange rate. On the balance sheet day, the
monetary item in foreign currency is converted into the one in RMB on the current rate on
the balance sheet day, and the difference arising is reckoned into the current loss/gain
besides the one on the capitalization principled, of the specific foreign currency borrowing
for the construction and production of the assets qualified for capitalization. As for the
non-monetary item in foreign currency and on the fair value measurement, it is converted
into the one in RMB on the current rate on the day of fair value recognition, and the
difference arising is directly reckoned into the current loss/gain as the fair value change.Semi-Annual Report 2010
29
As for the non-monetary item in foreign currency and on historic cost measurement, is still
converted on the current exchange rate on the day of the actual transaction, without the
change in its sum in RMB.
(2) Conversion of financial statement in foreign currency
The assets/liabilities items in the balance sheet in the foreign currency are converted on
the current exchange rate on the balance sheet day; owners’ equity items besides the
“undistributed profit” are converted on the current exchange rate on the actual business
day; income/expense items in the profit statement are converted on the current exchange
rate on the actual transaction day. The differences arising from the above conversions of
the financial statement in foreign currency is specifically listed in owners’ equity items.
The foreign currency cash flow is converted on the current rate on the actual cash flow day.
The cash sum influenced by the fluctuation of the exchange rate, is listed specifically in
the cash flow statement.
6. Financial assets and liabilities
(1) Financial assets
The Group’s owned financial assets are divided on the investment purpose and the
economic nature into the four categories as ones measured on the fair value and with its
change reckoned into the current loss/gain, the long-term investment, loan & account
receivable, and the tradable ones
1) As for the financial assets on fair value measurement and with its change reckoned into
the current loss/gain, they are ones mainly for short-term sales and listed as the tradable
financial assets in the balance sheet.
2) As for the long-term investment, it is non- derivative financial assets of fixed due date,
of fixed or certain recoverable, and of the management’s identified intention for and
capability of holding due.
3) As for the loan and the account receivable, they are the non-derivative financial assets
of no quotation in the active market, but of a fixed or certain recoverable.
4) The financial assets available for sale, consist of the non-derivative ones designated as
available for sale and other ones undivided
The financial assets are recognized initially on the fair value. As for the ones on fair value
measurement and with its change reckoned into the current loss/gain, the actual relevant
transaction expense is directly reckoned into the current loss/gain; relevant transaction
expenses of other financial assets are reckoned into the initial recognition. The termination
of the financial assets recognition is available as the contract right for the taking the cash
flow of certain financial asset is terminated, or nearly all risks and compensation in the
ownership of the financial asset has been transferred into the transfer-in party.
As for the financial assets on fair value measurement and with its change reckoned the
current loss/gain, and the financial assets available for sale, are on fair value follow-up
measurement; the loan & the account receivable, and the long-term investment are
measured on the actual rate and listed on diluted cost.
The fair value change of the financial assets on fair value measurement and with its
change reckoned into the current loss/gain, is reckoned into the loss/gain of the fair value
change. The interest or cash dividend obtained during holding the investment are
recognized as the investment return; upon the disposal, the difference between its fair
value and initial bookkept sum is recognized as investment loss/gain, and meanwhile the
adjustment is made on the fair value change.
The fair value change of financial assets available for sale is reckoned into theSemi-Annual Report 2010
30
shareholders’ equity, and the interests measured on the actual interest in holding is
reckoned into the investment return. The cash dividends from investment of the stock
instrument available for sale is reckoned into investment return when the invested unit
announces to issue dividends; upon disposal, the difference between the price and the
book value minus the accumulative sum of fair value change directly reckoned into
shareholders’ equity previously, are reckoned into the investment loss/gain.
Besides the financial assets on the fair value measurement and with its change reckoned
into the current loss/gain, the check is taken on the book value of the other financial assets
on the balance sheet day, and if there is any objective evidence for the actual impairment
of certain financial asset, the provision for the impairment is accrued. If there is a large or
not temporary decrease in the fair value of financial assets available for sale, the
accumulative loss from the fair value fall-down and previously and directly reckoned into
the shareholders’ equity is reckoned into the impairment loss. As for the investment of
liabilities available for sale with its impairment loss recognized, in case the fair value rises
which objectively relates with matters incurred after confirming original impairment loss
preceding current term, the originally recognized impairment loss is transferred back and
reckoned into the current loss/gain. As for the investment of stock instrument available for
sale with its impairment loss recognized, in case the fair value rises which objectively
relates with matters incurred after confirming original impairment loss preceding current
term, the originally recognized impairment loss is transferred back and reckoned into
shareholders’ equity. As for the actual impairment loss in the investment of the stock
instrument with no quotation in the active market and no reliable measurement on its fair
value, it may not be transferred back.
(2) Financial Liabilities
In the initial recognition, the financial liabilities are divided into financial liabilities on the
fair value measurement and with their change reckoned into the current loss/gain, and
other financial liabilities. As for the financial liabilities on the fair value measurement and
with their change reckoned into the current loss/gain, they consist of the tradable liabilities
and ones on fair value measurement in the initial recognition and with their change
reckoned into the current loss/gain; the follow-up measurement is taken on them on the
fair value; and the profit or loss from the fair value change and the relevant dividend and
the interest, are reckoned into the current loss/gain.
The follow-up measurement is taken on other financial liabilities on the actual rate and the
diluted cost.
(3) Method for the recognition of fair value of financial assets/liabilities
a) As the financial instrument is in the active market, the quotation in the active market is
used for the recognition of its fair value. In the active market, as for the financial assets
held or the financial liabilities to be assumed, the current offering price is taken as the fair
value of the corresponding assets or liabilities; as for the financial assets to be purchased
in or the financial liabilities assumed, the current asking price is taken as the fair value of
the corresponding assets or liabilities. As for the financial assets or liabilities, of no current
offering price and no asking price, if there is no significant change in the economic
environment after the latest transaction day, the market quotation of the latest transaction
is recognized as the fair value of the financial assets or liabilities.Semi-Annual Report 2010
31
b) As the financial instrument is not in the active market, the fair value is recognized on
the evaluation technology. The evaluation method consists of the reference to the price in
the market transaction between the parties familiar to the situations and voluntary in the
transaction, the reference to the current fair value of other substantially same financial
assets, the conversion of the cash flow, the stock pricing model.
7. Provision for bad debts of account receivable
The following cases are taken as the principle of the recognition of the loss of the bad
debts of the account receivable: due to the cancellation, bankruptcy, insolvency, sever
deficiency in the cash flow, and the incidence of the fatal natural disaster, the institutional
debtor stops and is unable to pay off the debts in the expectable future; the institutional
debtor has not fulfilled its debts payoff over 5 years; other solid evidence show no chance
or little chance of recovery. The account receivable is listed on the actual rate and on the
diluted cost minus the provision for bad debts.
As for the possible impairment of bad debts, it is checked in balance-out method, and at
the Period-end, the provision for bad debts is accrued by the combination of aging analysis
and individual identification and reckoned into the current loss/gain. As for the account
receivable of the solid evidence to the no chance of the recovery, it is taken as the loss of
bad debts after the approval in the regulatory process, for balancing out the provision for
bad debts.
The sign account receivable above 0.5 million is taken as the substantive account
receivable; as there is objective evidence to the no chance of the recovery in the original
terms of the account receivable, the impairment test is taken individually on the difference
of the future cash flow below its book value, and the provision for the bad debts is
accrued.
As for the single account receivable not substantive, it and the account receivable of the
single test but no impairment are divided into several portfolios on the same credit risk
character, and the provision proportion of bad debts in the Period is recognized on the
actual loss rate of the previous same or similar account receivable portfolios of similar
credit risk characters and in combination with the current situations, and then the
provision is accrued on the proportion. As for the account receivable of the solid evidence
of no or little chance of the recovery, it is grouped into the specific asset portfolio and the
provision is accrued totally.
Proportion of provision for bad debts of account receivables grouped on aging
Aging Proportion of provision
Within 1-year 0%
1—2-year 5%
2 – 3-year 10%
3-year above 30%
Proportion of provision for bad debts of other account receivables grouped on aging
Aging Proportion of provision
Within 1-year 0%
1—2-year 5%Semi-Annual Report 2010
32
Aging Proportion of provision
2 – 3-year 10%
3-year above 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 product
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 depreciation 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 part 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 occurring 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.
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 entity, and has no offer in active market and its fair value cannot be reliably
measured.
Joint control refers to the control over an economic activity in accordance with contracts
and agreements. The confirm basis for joint control is any joint enterprise cannot 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 operation 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 cannot participate in
the making decision on the financial and operation 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 merge under different control, the
merger cost shall be, shall be the fair values, on the merger (acquiring) date, of the assetsSemi-Annual Report 2010
33
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
issuing 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 and
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. When calculated by equity method, the loss or
profits of current period shall be the attributable or shareable 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 internal 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.
As for the long-term stock investment of no common control over or significant influence
on the invested organization any longer due to the investment decrease, and of no
quotation in the active market and no reliable measurement on its fair value, it is changed
to be on cost check; as for the long-term stock investment of common control over the
invested organization due to the investment addition, it is also changed to be on cost check;
as for the long-term stock investment of the exertion of the common control over or the
significant influence on the invested organization but of no control due to the investment
addition, or of no control over the invested organization any longer but the exertion of the
common control or the significant influence on the invested organization due to the
investment disposal, it is changed to be on equity check.
As for the long-term stock investment disposed, the difference between its book value and
the price actually obtained, is reckoned into the current loss/gain. As for the long-termSemi-Annual Report 2010
34
stock investment reckoned into the owners’ equity due to the change in owners’ equity
besides the net loss/gain of the invested organization, its original part reckoned into the
owners’ equity is transferred into the current investment return on corresponding
proportion in disposal of the investment.
10. Investment property
The investment property consists of the land use right leased, the land use right held and to
be transferred after appreciation, and house building leased.
The cost of the investment property is taken as its book value. The cost of investment
property purchased includes purchasing payment, relevant taxes and other expenditures
which may be directly ascribed to such assets; the cost of investment property self-built
consists of all actual necessary expenditure of the assets construction before up to
expectant availability.
The follow-up measurement on cost is taken on the investment property; the depreciation
is accrued or diluted on its estimative service life and the net remnant rate and in the
average year method. The estimative service life, net remnant rate and depreciation
(dilution) rate are as follows:
Type Depreciation year(year)
Net
estimative
remnant
rate
Annual depreciation rate
Land use right 50 10% 1.80%
House building 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 recording, the book value before
it shall be taken as the recording value after that.
As the investment property is disposed, or is permanently withdrawn from use and
estimated unable to obtain the economic profit from its disposal, the termination of the
recognition of the investment property is available. The sum of the disposal income from
sale, transfer, discarding or break deducting its book value and relevant tax, is reckoned
into the current loss/gain.
11. Capital assets
The capital assets are ones of all the following characters, namely the tangible assets of
1-year-above service life, of RMB 2,000-above unit value and held for the goods
production, labor supply, lease, or operation & management.
Capital assets include houses & buildings, machinery equipment, mold 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 fair value of the
leased asset or the present value of the minimum lease payments, whichever is lower.Semi-Annual Report 2010
35
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.
Besides the capital assets of the sufficient depreciation accrual but in the continual use,
and the land specifically booked, the depreciation of all other capital assets is accrued. The
depreciations are accrued in the average year method, and are respectively reckoned into
relevant assets cost or current expense according to their purpose. The depreciation year,
net estimative remnant rate, annual depreciation rate in different categories are as follows:
Serial No. Type Depreciation year (year) Estimative remnant rate (%)
Annual depreciation
rate (%)
1 House building 20—50-year 10% 1.80-4.50%
2 Machine equipment 10-year 10% 9.00%
3 Mold equipment 3-year 10% 30.00%
4
Transportation
equipment
5-year 10% 18.00%
5 Device equipment 5-year 10% 18.00%
6 Tool equipment 5-year 10% 18.00%
7 Office appliance 5-year 10% 18.00%
At the Year-end, the check is taken on the estimative service of , net estimative remnant of
and the depreciation method for the capital assets, and the change is dealt with as the one
in the accounting estimation.
As the capital assets cannot generate the economic interest by the disposal, or expectantly
by use or disposal, the termination of the recognition is available.
12. Project under construction
The project under construction is on the actual cost measurement. The self-operating
project shall be measured in line with direct materials, direct salary and direct construction
expenses, etc. The out-contracted project shall be measured 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.
From the day of the project under construction up to the expectant availability, the capital
assets are transferred and settled on the estimative value according to the project budget,
construction price or the actual project cost, and the depreciation is accrued on the next
day, and the inconsistency of the original value is adjusted upon the project final account.
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 attributable
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. TheSemi-Annual Report 2010
36
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 (usually 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 accrued 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 estimated
life.
15. Research & Development
The expenditures for its internal research and development projects of the Company shall
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 willSemi-Annual Report 2010
37
be accrued 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
Disbursement” in the Balance Sheet and then be brought 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 above 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 of
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 acquire 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 associated enterprises and joint enterprises
are included in the book value of long-term equity investment.
18. Long-term Un-amortized Expenses
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 itsSemi-Annual Report 2010
38
benefited periods. Where the long-term deferred expenses will not benefit the later
accounting period, the remaining amount to-be-mortised 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 on
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 accrue it into loss or profit of current term.
20. Stock 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 shall be 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, beSemi-Annual Report 2010
39
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, the fair value of the liabilities is measured again and with its change reckoned
into the current loss/gain.
21. Equity Instrument
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 instruments, if it is not enough to offset, reduce the reserve profits. Other equity
instruments, the consideration received at issuing will increase shareholder’s equity after
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 writing 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. Estimative Liabilities
In case all the obligations in relation to such contingent items as external guarantee,
pending 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 out-flowing of economic benefit from the Group; the amount of such
obligations can be reliably measured.
The predictable liabilities shall be initially measured as per the best estimated amount to
be paid for executing relevant instant obligations in combination with such factors as risk,
uncertainty 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 adjustment
to it so as to reflect the best estimated amount at present.
23. Principles on Income Recognition
The business revenues of the Group are mainly composed of revenues from sales of goods
revenues from providing service and revenue from alienating the right to use assets, its
recognizing principles are as follows:
(1) 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 relevantSemi-Annual Report 2010
40
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.
(2) 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 revenue from 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 carried
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.
(3) The revenue from alienating 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. 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 include 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.
25. 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.Semi-Annual Report 2010
41
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.
26. 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 lesser, 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.
27. Accounting Check on 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 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 by
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
liabilities at the end of year recognized according to the liabilities method of Balance
Sheet and the amount originally recognized.
28. Segment information
The operation segment is recognized on the basis of the internal organization structure,
management requirement, and internal report system, and the report segment is recognized
on the basis of the operation segment. The operation segment is the component up to the
following conditions: the component can generate the income, and expense in the daily
activities; its operation result can be assessed by the Company’s management regularly forSemi-Annual Report 2010
42
the decision on the allocation of the resources to it and the appraisal of its performance;
the relevant accounting information as its financial status, operation result and cash flow,
can be obtained by the Company.
The business segment is the component distinguishable and able to provide single product
or a group of relevant products or labor service, and responsible for the risk and
compensation different from other components. The geography segment is the component
distinguishable and able to provide products or labor service under certain economic
environment, and responsible for the risk and compensation different in other economic
environment.
The transfer price between segments are recognized with reference to the market price,
and the common expenses besides the part impossible to distributed rationally, are
distributed on the income proportion between different segments.
29. Operation terminated
Operation terminated is the component disposed or grouped as held for sale, and
distinguishable in operation and preparation of the financial statement, and is disposed as
a whole or in part on the Group’s plan.
The Group’s component is grouped as held for sale, if up to the all the following
conditions: the resolution has been made on the disposal of the component by the Group;
and the irrevocable transfer agreement is signed between the Group and the transferring
party, and the transfer is to be accomplished within a year.
30. 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 Company 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
Company.
31. 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 business 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 theSemi-Annual Report 2010
43
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 re-examination.
32. 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 subsidiaries, 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.
V. Change in accounting policy & estimation, and correction for previous error
1. Change in accounting policy and influence: nil
2. Change in accounting estimation and influence: nil
3. Correction for previous error and influence: nil
VI. Tax
Main tax and tax rate applicable to Group as follows:
1. Corporate income tax
The previous corporate income tax applicable to the Company and the subsidiary – Huafa
Lease, is 15%. Pursuant to
implemented since 1 January 2008, the corporate income rate is in gradual transition into
25% in the five years from 2008 to 2012, and the rate applicable in the Year is 22%.
The rate applicable to Wuhan Branch, Huafa Lease – the subsidiary and Hengfa Science
and Technology Company, is 25%.
2. Value-added tax
The value-added tax is applicable to the Group’s goods sales income, among which, the
output rate of domestic-sales goods is 17%.
As the input value-added tax paid for the raw materials purchase, can deduct the output
tax, the rate is 17%, among which, the rebate is applicable to the input tax paid for the
export goods.
Taxable value-added tax is the balance of the current output tax deducting the current
input tax.
3. Operation income
The operation income is applicable to the Group’s lease income, and the applicable rate isSemi-Annual Report 2010
44
5%.
4. Extra charges of, city planning tax and educational expenses
The taxable circulating tax is taken as the taxation basis of the city planning tax, with 1%
applicable rate; the taxable circulating tax is taken as the taxation basis of all extra charges
of the city planning tax and the educational expenses of the Company’s subsidiaries as
Huafa Lease Company, Huafa Property Company, with the applicable rates respectively
1% and 3%, and in the same way the respective applicable rates for the subsidiary –
Hengfa Science and Technology respectively are 7% and 3%.
5. Housing property tax
The 70% of the previous value of the housing property is taken as the taxation basis, with
the 1.2% tax rate.
VII. Business Merger and Consolidated Financial Statement
(I) Subsidiaries
Company
Name
Company
type
Registered
Address
Business
Nature
Registered
Capital
Business
Scope
Invested capital
at period-end
Other
project
amount for
net
investment
to
subsidiaries
actually
Subsidiaries
obtained
from other
way
Huafa
Property
Lease
Company
Limited
Liability
Shenzhen
Property
Management
RMB1 million
Property
leasing and
management
of
self-owned
property
RMB0.6 million -
Huafa
Property
Company
Limited
Liability
Shenzhen
Property
Management
RMB1 million
Property
leasing and
management
of
self-owned
property
RMB1 million -
Hengfa
Scientific
and
Technology
Limited
Liability
Wuhan
Production
and Sale
RMB181,643,100
production
and sale of
packing
material and
plastic
products etc.
RMB181,643,100 -Semi-Annual Report 2010
45
Continued
Company
Name
Holding
Percentage
Voting
Right
percentage
Statements
are
consolidated
or not
Equity of
minor
shareholders
Minority
interest
used for
offsetting
minority
interest
gains and
losses
Balance of
owners’ equity of
parent company
for deducting loss
in Period diluted
by minority
shareholders of
subsidiary above
share enjoyed in
owners’ equity at
Period-beginning
Subsidiaries
obtained
from other
way
Huafa
Property
Lease
Company
60% 60% Yes
- - -
Huafa
Property
Company
100% 100% Yes
- - -
Hengfa
Scientific and
Technology
100% 100% Yes
- - -Semi-Annual Report 2010
46
Notes to Major Items in the Consolidated Financial Statement
Unless stated otherwise, among the financial data disclosing bellowed, “period-begin”
refers to 31 December 2009, “period-end” refers to 30 June 2010, “this period” refers to 1
January 2010 to 30 June 2010, “last period” refers to 1 January 2009 to 30 June 2009,
RMB is the currency unit used in this report.
1. Monetary fund
2010.06.30 2009.12.31
Item
Original currency
Exchange
rate
Converted into
RMB
Original currency
Exchange
rate
Converted into
RMB
Cash in
Treasury
274,382.72
516,789.61
RMB 211,136.50 1 211,136.50 453,543.39 1.00 453,543.39
HKD 60,773.93 0.88 53,535.15 60,773.93 0.88 53,535.15
USD 1,422.45 6.83 9,711.07 1,422.45 6.83 9,711.07
Bank
deposit
43,485,580.11 26,636,310.32
RMB 29,748,761.10 1 29,748,761.10 23,841,671.15 1.00 23,841,671.15
HKD 69,314.45 0.88 61,058.38 69,314.45 0.88 61,058.38
USD 2,002,307.56 6.83 13,675,760.63 400,405.76 6.83 2,733,580.79
Other
currency
fund
84,802,096.36 53,891,981.05
RMB 63,039,749.32 1 63,039,749.32 52,930,385.35 52,930,385.35
HKD - 0.88 -
USD 3,186,288.00 6.83 21,762,347.04 140,790.00 6.83 961,595.70
Total 128,562,059.19 81,045,080.98
（1）amount at period-end increase RMB47,516,978.21compraed with that of
period-begin, mainly due to the increase of bank loan in this period.
（2）balance of other monetary fund at period-end mainly was the note payable and
margin of short-term loans.
2. Notes receivable
1. Type of note receivable
Type of Notes 2010.06.30 2009.12.31
Bank acceptance bill 7,406,346.31 12,704,598.81
Commercial acceptance
bill
758,572.14 3,790,363.47
Total 8,164,918.45 16,494,962.28Semi-Annual Report 2010
47
3. Accounts receivable
(1) Classification of Risk of Accounts Receivable
2010.06.30
Item Book balance Provision for bad debt
Amount Proportion Amount Proportion
That with large amount in single
item
247,355,035.92 93.35% 3,967,091.65 44.10%
That in group with larger risk after
grouping as per credit risk features
though single item sum is small
4,763,458.70 1.80% 4,651,429.94 51.71%
That without large
amount in other single item
12,856,536.57 4.85% 376,575.66 4.19%
Total 264,975,031.19 100.00% 8,995,097.25 100.00%
Continue
2009.12.31
Item Book balance Provision for bad debt
Amount Proportion Amount Proportion
That with large amount in single item 195,973,281.46 94.44% 3,967,091.65 44.10%
That in group with larger risk after
grouping as per credit risk features
though single item sum is small
4,763,458.70 2.30% 4,651,429.94 51.71%
That without large
amount in other single item
6,784,092.79 3.27% 376,575.66 4.19%
Total 207,520,832.95 100.00% 8,995,097.25 100.00%
1）account receivable with major amount individually at period-end, or with minor
amount but perform impairment test separately
Name of the company Book balance
Bad debt
amount
Accrual
proportion
HORACE INDUSTRIAL LTD. 161,904,255.51 0.00 0.00%
Qingdao Haier Component Purchase Co., Ltd. 46,693,949.52 2,320.40 0.00%
Hefei Haier Logistic Co., Ltd. 9,892,279.25 0.00 0.00%
Guanjie Display Technology (Wuhan)Co.,
Ltd.
8,965,760.21 0.00 0.00%Semi-Annual Report 2010
48
Name of the company Book balance
Bad debt
amount
Accrual
proportion
Wuhan Yintai Technology 3,607,066.34 0.00 0.00%
Weiguan Technology (Shenzhen) Co., Ltd. 3,344,915.97 0.00 0.00%
Shenzhen Boteman Bowling Club Co. ,Ltd. 2,555,374.75 2,555,374.75 100.00%
Hefei Haier Estern China Packing Co., Ltd.
Wuhan Branch
2,199,014.95 0.00 0.00%
TCL (Huizhou) Co., Ltd. 1,916,677.91 1,190,653.90 62.12%
Shenzhen Baoluda Electronic Technology
Co., Ltd.
1,407,339.51 0.00 0.00%
Shanxi Linghua Electronic Co., Ltd. 1,010,389.70 62,322.99 6.17%
Shen Dajiang Electronic Development Co.,
Ltd.
747,476.10 14,518.44 1.94%
Guangzhou Fanyu Hongtu Computer
Equipment Co., Ltd.
716,650.40 80,037.40 11.17%
LIM-TECCO.,LTD. 712,661.59 61,863.77 8.68%
Chengdu Xuguang Technology Co., Ltd. 665,291.01 0.00 0.00%
Shenzhen Gengchuang Electronic Co., Ltd. 509,124.09 0.00 0.00%
Wuhan Kingbull Economy Developmetn Co.,
Ltd.
506,809.11 0.00 0.00%
Total 247,355,035.92 3,967,091.65
2）account receivable with minor single amount but with greater risk after classified
into same group with similar credit risk features
2010.06.30 2009.12.31
Item
Amount proportion
Bad debt
provision
Amount proportion
Bad debt
provision
Within 1 year - - - - - -
1-2 years 3,530.78 0.07% 2,167.81 3,530.78 0.07% 2,167.81
2-3 years 229,564.67 4.82% 229,564.67 229,564.67 4.82% 229,564.67
3-4 years 769,383.15 16.15% 685,711.91 769,383.15 16.15% 685,711.91
4-5 years 265,997.01 5.58% 254,190.91 265,997.01 5.58% 254,190.91
Over 5 years 3,494,983.09 73.38% 3,479,794.64 3,494,983.09 73.38% 3,479,794.64
Total 4,763,458.70 100.00% 4,651,429.94 4,763,458.70 100.00% 4,651,429.94
(1)Arrearage of the shareholder companies which hold over 5% (including 5%) of the
company’s voting share is in the balance at the end of the term.
(2)Particular about top 5 account receivablesSemi-Annual Report 2010
49
Name of the company
Relationship
with the
Company
Amount Age
Proportion in
total account
receivable
HORACE INDUSTRIAL LTD. Major client 161,904,255.51 Within 1year 61.10%
Qingdao Haier Component Purchase
Co., Ltd.
Major client 46,693,949.52 Within 1year 17.62%
Hefei Haier Logistic Co., Ltd. Major client 9,892,279.25 Within 1year 3.73%
Guanjie Display Technology
(Wuhan)Co., Ltd.
Major client 8,965,760.21 Within 1year 3.38%
Wuhan Yintai Technology Major client 3,607,066.34 Within 1year 1.36%
Total - 231,063,310.83 - 87.20%
4、Account paid in advance
（1） Age of account paid in advance
2010.06.30 2009.12.31
Items
Amount Proportion Amount Proportion
Within one year 17,253,181.51 99.71% 2,167,980.00 85.33%
1－2 years 50,000.54 0.29% 372,772.30 14.67%
Total 17,303,182.05 100.00% 2,540,752.30 100.00%
（2） Major companies of account paid in advance
Name of the company
Relationship with
the Company
Amount Age
Reasons for
unsettlement
Guanjie Display Technology(Wuhan) CO., Ltd. Supplier 10,211,952.00 Within 1 year Purchase
Chimei InnoLux Corporation Supplier 2,622,720.00 Within 1 year Purchase
InnoLux Corporation Supplier 703,490.00 Within 1 year Purchase
Qunkang Technology (Shenzhen) CO., Ltd. Supplier 495,768.90 Within 1 year Purchase
Shenzhen Gaolinda Plastic Electronic Co., Ltd. Supplier 440,037.00 Within 1 year Purchase
Total - 14,473,967.90 - -
The total amount of arrearage of the top 5 companies in debt in balance at the end of the
term is RMB 14,473,967.90, accounting for 83.65% of account paid in advance.
(3) No arrearage of the shareholder companies which hold over 5% (include 5%) of the
company’s voting share is in the balance of account paid in advance at period-end.
(4)There is no foreign currency balance in account paid in advance.
5. Other account receivable
(1) Risk classification of other account receivable
2010.06.30
Item Book balance Provision for bad debt
Amount Proportion Amount Proportion
That with large amount in single item 16,883,350.53 61.28% 5,008,767.57 63.31%Semi-Annual Report 2010
50
That in group with larger risk after
grouping as per credit risk features
though single item sum is small
2,300,494.96 8.35% 2,300,494.96 29.08%
That without large
amount in other single item
8,368,728.01 30.37% 601,763.74 77.61%
Total 27,552,573.50 100.00% 7,911,026.27 100.00%
Continue
2009.12.31
Item Book balance Provision for bad debt
Amount Proportion Amount Proportion
That with large amount in single item 97,468,193.11 91.56% 5,008,767.57 63.31%
That in group with larger risk after
grouping as per credit risk features
though single item sum is small
2,300,494.96 2.16% 2,300,494.96 29.08%
That without large
amount in other single item
6,683,167.75 6.28% 601,763.74 7.61%
Total 106,451,855.82 100.00% 7,911,026.27 100.00%
1）At period-end, the other account receivable with large amount in single item, or with minor
amount but perform impairment test separately
Name of the company Book balance
Bad debt
amount
Accrual
proportion
Reasons for
accrual
Shenzhen Wanshang Friendship
Department Store Co., Ltd.
7,344,035.98 619,802.34 8.44%
Difference of
current
checking
Shenzhen Boteman Bowling Club Co., Ltd. 4,037,215.42 3,833,179.42 94.95%
Over 5 years of
account age
HORACE INDUSTRIAL LTD. 2,895,942.00 0.00 0.00% N/A
Wuhan Guanfan Enginerring Limited
Liability Co.,
1,123,840.32 0.00 0.00% N/A
ZHAO BAO MIN 926,531.00 0.00 0.00% N/A
Traffic accident compensation receivable 555,785.81 555,785.81 100.00%
Over 5 years of
account age
Total 16,883,350.53 5,008,767.57 - -
2）other account receivable with minor single amount but with greater risk after classified into
same group with similar credit risk featuresSemi-Annual Report 2010
51
2010.06.30 2009.12.31
Items Amount Bad debt
provision
Amount Bad debt
provision
Within 1 year - - - - - -
1-2 years 51,595.15 2.24% 51,595.15 51,595.15 2.24% 51,595.15
2-3 years - - - - - -
3-4 years - - - - - -
4-5 years 192,789.94 8.38% 192,789.94 192,789.94 8.38% 192,789.94
Over 5 years 2,056,109.87 89.38% 2,056,109.87 2,056,109.87 89.38% 2,056,109.87
Total 2,300,494.96 100.00% 2,300,494.96 2,300,494.96 100.00% 2,300,494.96
(2) Other account receivable at period-end decrease RMB 74,464,994.47 over that of period-begin, a
69.95% down. Mainly due to the other account receivable of Wuhan Zhongheng—controlling
shareholder, decrease RMB 75,380,243.70.
(3) Arrearage of the shareholder companies which hold over 5% (including 5%) of the
company’s voting share is in the balance at the end of the term: Naught
(4)Top 5 companies of other account receivable
Name of the company
Relationship
with the
Company
Amount Age
Proportion in total
other account
receivable
Natural and
content
Shenzhen Wanshang Friendship
Department Store Co., Ltd.
Lessees 7,344,035.98
Over 5
years 26.65% Rent
Shenzhen Boteman Bowling Club Co.,
Ltd.
Lessees 4,037,215.42
Over 5
years
14.65% Rent
HK HORACE INDUSTRIAL LTD. Supplier 2,895,942.00
Within 1
year 10.51% Compensation
Wuhan Guanfan Enginerring Limited
Liability Co.,
Supplier 1,123,840.32
Within 1
year 4.08% Pay-in account
ZHAO BAO MING Lessees 926,531.00
Within 1
year 3.36%
Rent
Total - 16,327,564.72 - 59.26%
(5) Account receivable from related parties: Naught
6. Inventory
(1)Classification of inventorySemi-Annual Report 2010
52
2010.06.30
Item Book balance Depreciation
provision
Book value
Raw Materials 51,572,313.06 3,442,934.60 48,129,378.46
Products under production
Stocked Goods 22,848,521.39 2,979,459.78 19,869,061.61
Low-value consuming products 948,242.30 193,307.73 754,934.57
Self-made semi-finished product 3,598,060.72 179,248.20 3,418,812.52
Processed Materials upon entrustment
Total 78,967,137.47 6,794,950.31 72,172,187.16
Continue
2009.12.31
Item Book balance Depreciation
provision
Book value
Raw Materials 28,889,033.80 406,433.34 28,482,600.46
Products under production 58,880.04 - 58,880.04
Stocked Goods 15,979,634.79 2,260,033.57 13,719,601.22
Low-value consuming products 1,006,659.44 168,803.14 837,856.30
Self-made semi-finished product 3,603,017.82 179,248.20 3,423,769.62
Processed Materials upon entrustment 136,906.42 - 136,906.42
Total 49,674,132.31 3,014,518.25 46,659,614.06
(2) Provision for Depreciation of Inventories
Decrease in this period
Item
Amount at
period-begin
Increase in
this period Switch back
Other
transferring-out
Amount at
period-end
Raw
Materials
406,433.34 3,036,501.26 3,442,934.60
Products
under
production
Stocked
Goods
2,260,033.57 719,426.21 2,979,459.78
Low-value
consuming
168,803.14 24,504.59 193,307.73Semi-Annual Report 2010
53
Decrease in this period
Item
Amount at
period-begin
Increase in
this period Switch back
Other
transferring-out
Amount at
period-end
products
Self-made
semi-finished
product
179,248.20 179,248.20
Processed
Materials
upon
entrustment
Total 3,014,518.25 3,780,432.06 0.00 0.00 6,794,950.31
1）the withdrawal method for provision of inventory depreciation see in 8 of Note IV.
2）the withdrawal amount RMB 3,780,432.06 for provision of inventory depreciation was
mainly caused by the depreciation of partially materials. The accumulated withdrawal amount this
period occupied 8.06% of inventory balance at period-end.
(3)Withdrawal for provision of inventory depreciation
Items Withdrawal basis
Reasons for
switch-back this
period
Proportion of
switch-back amount
this period in
inventory balance at
period-end
Raw Materials
Lower one between the book
value and net realizable
value
Products under
production
Lower one between the book
value and net realizable value
Stocked Goods
Lower one between the book
value and net realizable value
Low-value
consuming
products
Lower one between the book
value and net realizable value
Self-made
semi-finished
product
Lower one between the book
value and net realizable value
(4)Balance of inventory at period-end excluding the amount capitalizing from loan
expenses.Semi-Annual Report 2010
54
(5) Balance of inventory at period-end has excluding the amount being mortgage or
frozen.
7. Investment real estate
(1) Investment real estate based on cost
Item 2009．12．31
Increase in
this
period
Decrease in
this
period
2010．06．30
Original value 107,439,914.94 107,439,914.94
houses & buildings 107,439,914.94 107,439,914.94
Land-use right
Accumulated Depreciation
& Amortization
67,007,470.72 1,226,630.58 68,234,101.30
houses & buildings 67,007,470.72 1,226,630.58 68,234,101.30
Land-use right
Net book value 40,432,444.22 39,205,813.64
houses & buildings 40,432,444.22 39,205,813.64
Land-use right
Impairment provision
houses & buildings
Land-use right
Book value 40,432,444.22 39,205,813.64
houses & buildings 40,432,444.22 39,205,813.64
Land-use right
(2)The abovementioned investment real estate has been mortgage to China Construction
Bank Shangbu Sub-branch for bank loans.
8. Fixed assets
(1) Details of fixed assets
Item Amount at period-begin
Increase in
this
period
Decrease in
this
period Amount at period-end
Original price 310,382,347.05 4,583,491.98 842.74 314,964,996.29
Houses and
buildings 207,478,138.60 207,478,138.60
Machinery
equipments 63,708,803.63 2,539,776.02 66,248,579.65
Transport
instruments 4,580,516.59 119,999.96 4,700,516.55
Office equipment 8,929,898.73 125,359.79 9,055,258.52
Apparatus 12,825,646.68 1,095,031.67 13,920,678.35Semi-Annual Report 2010
55
Instrument 3,010,902.01 470,286.47 842.74 3,480,345.74
Mould 9,848,440.81 233,038.07 - 10,081,478.88
Accumulated
Depreciation 99,889,472.74 6,097,025.02 758.47 105,985,739.29
Houses and
buildings 41,367,123.58 2,522,283.49 43,889,407.07
Machinery
equipments 29,638,879.12 2,973,634.47 32,612,513.59
Transport
instruments 2,644,383.14 17,114.01 2,661,497.15
Office equipment 6,787,572.70 54,435.52 6,842,008.22
Apparatus 10,563,589.80 216,430.35 10,780,020.15
Instrument 1,362,307.13 218,730.78 758.47 1,580,279.44
Mould 7,525,617.27 94,396.41 - 7,620,013.68
Net book value 210,492,874.31 208,979,257.00
Houses and
buildings 166,111,015.02 163,588,731.54
Machinery
equipments 34,069,924.51 33,636,066.07
Transport
instruments 1,936,133.45 2,039,019.40
Office equipment 2,142,326.03 2,213,250.30
Apparatus 2,262,056.88 3,140,658.20
Instrument 1,648,594.88 1,900,066.30
Mould 2,322,823.54 2,461,465.20
Impairment
provision 1,009,360.72 1,009,360.72
Houses and
buildings - -
Machinery
equipments 30,643.99 30,643.99
Transport
instruments 5,220.00 5,220.00
Office equipment 973,496.73 973,496.73
Apparatus - -
Instrument - -
Mould - -Semi-Annual Report 2010
56
Book value 209,483,513.59 207,969,896.28
Houses and
buildings 166,111,015.02 163,588,731.54
Machinery
equipments 34,039,280.52 33,605,422.08
Transport
instruments 1,930,913.45 2,033,799.40
Office equipment 1,168,829.30 1,239,753.57
Apparatus 2,262,056.88 3,140,658.20
Instrument 1,648,594.88 1,900,066.30
9. Construction in progress
(1)Details of construction in progress
2010．06．30 2009．12．31
Projects
Book balance
Depreciation
provision
Book value
Book
balance
Depreciation
provision
Book value
Environmental
protection project
324,650.50 - 324,650.50 - - -
Renovation
construction project
1,353,559.07 - 1,353,559.07 634,356.00 - 634,356.00
Plate casting machine
construction
56,570.79 - 56,570.79 56,570.79 - 56,570.79
Hengfa assets
relocation and
installation
- - - -
Construction of
Gongming Electronic
Town
2,104,934.18 - 2,104,934.18 99,000.00 - 99,000.00
Line construction 23,731.69 - 23731.69 23,731.69 - 23,731.69
Total 3,863,446.23 - 3,863,446.23 813,658.48 - 813,658.48Semi-Annual Report 2010
57
(2)Change of major construction in progress
Decrease this period
Projects 2009．12．31
Increase this
period
Transferred into
fixed asset
Other
decrease
2010．06．30
Environmental protection
project
- 324,650.50 324,650.50
Renovation construction
project 634,356.00 719,203.07
1,353,559.07
Plate casting machine
construction 56,570.79
56,570.79
Hengfa assets relocation and
installation
Construction of Gongming
Electronic Town
99,000.00 2,005,934.18 2,104,934.18
Line construction 23,731.69 23,731.69
Total 813,658.48 3,049,787.75 3,863,446.23
(3)The construction in progress of the Company has the capital from self-fund-raised.
There are no amounts of interest capitalizing in expenses for construction in progress this
period.
(4)The balance at year-begin of construction in progress increase RMB 3,049,787.75 over
that of period-begin, up 274.82%. Mainly due to the increased invested capital for
construction of Gongming Electronic Town of the Company.
10. Intangible assets
Item 2009．12．31
Increase
In this
period
Decrease
in this
period
2010．06．30
Original Value 55,350,846.36 2,761,267.80 58,112,114.16
Land use right 55,187,826.36 2,638,267.80 0.00 57,826,094.16
Non-patent
technology
163,020.00 123,000.00 0.00 286,020.00
Accumulated
Amortization
571,288.46 514,652.64 1,085,941.10
Land use right 458,573.95 487,482.66 0.00 946,056.61
Non-patent technology 112,714.51 27,169.98 0.00 139,884.49
Net book value 54,779,557.90 2,246,615.16 57,026,173.06
Land use right 54,729,252.41 2,150,785.14 0.00 56,880,037.55
Non-patent technology 50,305.49 95,830.02 0.00 146,135.51
Impairment Provision 0.00 0.00 0.00 0.00Semi-Annual Report 2010
58
Item 2009．12．31
Increase
In this
period
Decrease
in this
period
2010．06．30
Land use right 0.00 0.00 0.00 0.00
Non-patent technology 0.00 0.00 0.00 0.00
Book Value 54,779,557.90 2,246,615.16 0.00 57,026,173.06
Land use right 54,729,252.41 2,150,785.14 0.00 56,880,037.55
Non-patent technology 50,305.49 95,830.02 0.00 146,135.51
（1）Among the accumulated amortization increased in this period, RMB 514,652.64
was amortized in this period.
（2）The intangible assts increased in this period was the account paid for Gongming
land.
11. Long-term expense to be amortized
Item 2009.12.31
Increase
In this
year
Amortized
this year
Other
decrease
in this
year
2010.06.30
Financial consultancy of
Construction Bank of
China
2,375,000.00 375,000.00
-
2,000,000.00
Total 2,375,000.00 375,000.00 - 2,000,000.00
(1)The long-term amortized expense refers to the financial consultancy that engaged with
Construction Bank of China with total amount of RMB3 million. Service term is from 19
March 2009 to 18 March 2013.
12. Deferred income tax assets and deferred income tax liabilities
(1) Deferred income tax assets and deferred income tax liabilities that have been
recognized
Items 2010.06.30 2009.12.31
Deferred income tax assets formed by provision for
devaluation of bad debts 3,025,649.22 3,025,649.22
Deferred income tax assets formed by
provision for devaluation of inventory 1,627,137.06 682,029.04
Deferred income tax assets formed by
provision for devaluation of fixed-asset 7,890.08 7,890.08
Deferred income tax assets formed by
projected liabilities 1,373,122.08 1,373,122.08
Total deferred income tax assets 6,033,798.44 5,088,690.42Semi-Annual Report 2010
59
(2) Details of deferred income tax assets without recognition
Items 2010.06.30 2009.12.31 Note
Provision for bad debt
impairment 3,153,172.51 3,153,172.51
Provision for fixed
Assets Impairment 973,496.73 973,496.73
Deductible losses 213,985.72 213,985.72
Total 4,340,654.96 4,340,654.96
(3)Deductible losses of deferred income tax assets without recognition will due in the
following years
Items 2010.06.30 2009.12.31 Note
2013 3,458.00 3,458.00
2014 210,527.72 210,527.72
Total 213,985.72 213,985.72
(4)Items of provisional differences of deferred income tax assets recognized at period-end
Items 2010.06.30 2009.12.31
Provision for bad debt impairment 13,752,951.01 13,752,951.01
Provision for inventories impairment 6,794,950.31 3,014,518.25
Provision for fixed Assets Impairment 35,863.99 35,863.99
Projected liabilities 6,241,463.99 6,241,463.99
Total 26,825,229.30 23,044,797.24
13. Details of provision for impairment loss on assets
Decreased this period
Items 2009．12．31
Increased this
period Switch-back
Other
transfer-out
2010．06．30
Bad debt provision 16,906,123.52 16,906,123.52
Provision for inventories
depreciation 3,014,518.25 3,780,432.06 6,794,950.31
Provision for fixed
Assets Impairment 1,009,360.72 1,009,360.72
Total 20,930,002.49 24,710,434.55Semi-Annual Report 2010
60
14. Short-tem loans
(1)Classification of short-tem loans
types 2010．06．30 2009．12．31
Mortgage loans - -
Margin loans 117,091,620.66 33,442,212.57
Total 117,091,620.66 33,442,212.57
(2) The amount at period-end increase RMB 83,649,408.09 over that of period-begin, a
150.13% up. Mainly due to the margin loans of Hengfa Scientific and Technology
Company increased in this period.
(3)Till the end of 30 June 2010, the Company has no short-tem loans due without paying.
15. Note payable
(1)Classification of note payable
Type 2010．06．30 2009．12．31
Bank Acceptance bill 30,689,698.51 18,480,655.16
Total 30,689,698.51 18,480,655.16
16. Account payable
(1)Account payable
Item 2010．06．30 2009．12．31
Total 166,988,515.46 81,546,114.17
Including: Over 1year 10,356,727.74 10,869,353.19
(2)Amount at period-end increase RMB 95,442,401.29 compared with that of
period-begin, with an increase rate of 117.04%. Mainly due to the account payable of
Hengfa Scientific and Technology Company increased this period.
17. Account received in advance
(1)Account received in advance
Items 2010．06．30 2009．12．31
Total 1,364,902.08 1,762,766.25
Including: Over 1year 1,008,509.90
(2)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.Semi-Annual Report 2010
61
18. Wages payable
Item 2009．12．31 Increment This
Period
Decrement This
Period
2010．06．30
Salary, bonus, allowance &
subsidies
1,549,184.66 13,458,230.30 13,257,920.19 1,749,494.77
Staff Welfare Treatment Fund 4,840.00 12,168.00 17,008.00 -
Social Insurance Premium -5,093.82 996,120.28 1,074,181.62 -83,155.16
Including: medical insurance
premium - 549,441.95 549,441.95 -
Basic retirement insurance
premium -5,093.82 369,302.16 447,363.50 -83,155.16
Unemployment Insurance
Premium - 43,651.83 43,651.83 -
Industrial Injury Insurance
Premium - 16,447.77 16,447.77 -
Maternity Insurance
Premium - 17,276.57 17,276.57 -
Labor Union fund & staff
educational fund 498,363.74 32,049.37 530,413.11
Total 2,047,294.58 14,498,567.95 14,349,109.81 2,196,752.72
19. Tax payable
Items 2010．06．30 2009．12．31
VAT -1,083,005.29 3,574,940.00
Business Tax 736,117.70 879,174.43
Enterprise Income Tax 764,362.20 3,903,004.72
Personal Income Tax 22,850.75 -20,357.55
Urban Maintenance & Construction Tax 357.24
Property Tax 626,732.67 444,954.15
Educational Surcharge 20,681.12
Price adjustment funds 27,522.06 20,810.01
Stamp tax 8,257.20 5,229.85
Total 1,102,837.29 8,828,793.97
Amount at period-end decrease RMB 7,725,956.68 compared with that of period-begin, with a
decrease rate of 87.51%. Main reason due to the major amount of input invoice of VAT received in
this period and taxable amount.Semi-Annual Report 2010
62
20. Other account payable
(1)Other account payable
Item Amount at period-end Amount at period-begin
Total 15,144,497.66 132,645,479.98
Including: Over 1year 9,226,137.22 9,726,137.22
(2)Amount at period-end decrease RMB117, 500,982.32 compared with that of period-begin, with a
decrease rate of 88.58%. Main reason was that Wuhan Zhongheng increase capital into Hengfa
Scientific Technology Company by house, buildings and land-use right, the relevant procedure
have been completed and caused by transferring of other account receivable.
(3) Account payable to the shareholders holding more than 5% (5% included) voting right
shares of the Company
Name of the company Amount at period-end Amount at period-begin
Wuhan Zhongheng 95,387,959.69
Total 95,387,959.69
(4)Other account payable with major amount in period-end
Name of the company Amount Age Natural or content
Shenzhen Wanshangyouyi Department
Store CO., Ltd. 3,477,008.00
Over 5
years
Margins
Construction Bank of China Shangbu
Sub-branch 1,000,000.00
Within 2
years
Service charge
Total 4,477,008.00
21. Long-term loans
(1)Classification of long-term loans
Types 2010.06.30 2009.12.31
Mortgage loans 211,997,600.00 219,621,200.00
Total 211,997,600.00 219,621,200.00Semi-Annual Report 2010
63
(2)On 12 March 2009, the Company signed a Loan Contract of Jie 2009 Shang 0181008R with
Construction Bank of China Shangbu Sub-branch for obtaining RMB 230 million loans. Term of
the loans is 7 years namely from 12 March 2009 to 11 March 2016, floating rate will be adopt for
this loan, 20th of every month was the interest settlement date that listed in the contract. According
to the contract, RMB140 million have been obtained on 12 March 2009 by property mortgage of
the 2nd, 3rd and 4th floor of Huafa Mansion (Number of property certificate: SFDC No. 3000522977,
3000522975 and 3000522976); RMB 90 million loans on 3 April 2009 by property mortgage of
the 1st, 5th and 6th floor of Huafa Mansion (Number of property certificate: SFDC No. 3000503696,
3000503720 and 3000511945). Among which RMB 140 million was constant amortization
mortgage, RMB 90 million was monthly interest payment for principal payment while expire.
(3)Top 5 long-term loans in period-end
Amount at period-end
Amount at
period-begin
Company
Date of
loans
Date of
expire
currency
Rate
(%)
Amount
in foreign
currency
Amount in local
currency
Amount
in
foreign
currency
Amount
in local
currency
Construction
Bank
Of
China
Shangbu
Sub-branch
12 March
2009
11 March
2016
RMB 5.94% - 121,997,600.00 - -
Construction
Bank
Of
China
Shangbu
Sub-branch
12 March
2009
11 March
2016
RMB 5.94% - 90,000,000.00 - -
Total 211,997,600.00
22. Projected liabilities
Items 2009．12．31
Increased this
period
Carry-over
this period
2010．06．30
Pending action 4,117,293.57 4,117,293.57
Product warranty 2,124,170.42 2,124,170.42
Total 6,241,463.99 6,241,463.99
(1)Details of projected liabilities see Note IX.Semi-Annual Report 2010
64
23. Deferred income
Items 2010．06．30 2009．12．30
Subsidies from Wuhan Financial
Department for earthquake relief
equipment
200,000.00 200,000.00
Total 200,000.00 200,000.00
24. Share capital (RMB1.00 per share in value)
Shareholder Name/Type 2010.06.30 2009.12.31
Restricted Shares
State-owned Shares - -
State-owned Corporate Shares - -
Other Domestic Shares 116,489,894 116,489,894
Including: Domestic corporate shar 116,489,894 116,489,894
Domestic natural person share - -
Foreign Shares -
Including: 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
25. Capital reserves
Item 2009．12．30 Increment
this period
Decrement
this period
2010．06．30
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 - - 104,073,326.94Semi-Annual Report 2010
65
26. Surplus reserve
Item 2009．12．30 Increment
this period
Decrement
this period
2010．06．30
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
(1) According to the Company Law of P. R.C, the Article of Association and the resolution of
Board, the Company withdrawal statutory surplus reserves based on the 10% of the amount after
remedying previously deficit with annual net profit and stop withdrawal ling while the
accumulated statutory surplus reserve occupied over 50% of the share capital. The approval
statutory surplus reserves can be used for deficit remedy or increasing the share capital. Except for
deficit remedy, the balance after share capital increasing shall not less than the 25% of share
capital before increasing.
(2) Retained profit
Item amount Proportion of
withdrawal or
distribution
Amount at last period-end -212,662,288.38 -
Add: adjustment amount of retained profit at
period-begin - -
Including: Changes in accounting policies - -
Mistakes in last period rectified - -
Change of consolidated scope under
same control - -
Other adjustment factors - -
Amount at this period-begin -212,662,288.38 -
Add: net profit attributable to shareholders of
parent company in this period
17,375,496.34
-
Less: Drawing statutory surplus reserves - -
Drawing arbitrary surplus reserves - -
Drawing general risk provision - -
Dividend for ordinary shares payable - -Semi-Annual Report 2010
66
Item amount Proportion of
withdrawal or
distribution
Dividend for ordinary shares transferred to
share capital - -
Amount at period-end this period -195,286,792.04 -
27. Business revenues & business cost
Jan. to Jun., 2010 Jan. to Jun., 2009
Industries
or products
Business
Revenues
Business Cost Gross profit
Business
Revenues
Business Cost Gross profit
Main business according to products
Plastic
injection
ware
98,101,549.40 88,659,731.24 9,441,818.16 51,529,320.04 45,025,714.73 6,503,605.31
LCD 221,422,722.87 211,067,288.24 10,355,434.63 103,794,691.53 98,761,372.59 5,033,318.94
Styrofoam 27,558,453.28 24,843,971.70 2,714,481.58 29,598,133.92 27,251,795.85 2,346,338.07
Property
leasing
18,534,021.29 1,676,904.81 16,857,116.48 21,032,780.74 1,958,095.71 19,074,685.03
Property
management
788,661.00 788,661.00 822,237.00 822,237.00
PCB 5,345,495.71 7,421,396.86 -2,075,901.15
Total 366,405,407.84 326,247,895.99 40,157,511.85 212,122,658.94 180,418,375.74 31,704,283.20
(1)Business revenue this period increase RMB 154,282,748.90compared with that of last period,
with a 72.73% increase rate. Main reasons were that the business revenue increase by the business
of display from Hengfa Scientific and Technology increased caused corresponding increase of
business cost.
28. Business tax & extras
Item Jan. to Jun., 2010 Jan. to Jun., 2009 Taxable basis
Business Tax 971,277.93 1,335,122.76 5%
Urban Maintenance &
Construction Tax
9,712.78 81,601.38
1%, 7%
Educational Surcharge
29,138.34 31,985.50
3%
Property Tax 181,778.52 205,906.50 0.12%Semi-Annual Report 2010
67
Item Jan. to Jun., 2010 Jan. to Jun., 2009 Taxable basis
Land use tax 155,516.66 170,100.00 -
Local educational
development charge
9,790.42
0.1%
Price adjustment fund 136,418.71 0.1%
Other -
Total 1,493,633.36 1,830,716.14 -
29. Financial expenses
Item Jan. to Jun., 2010 Jan. to Jun., 2009
Interest Expenditures 7,344,974.25 5,045,225.33
Less: interest income 45,917.23 68,875.85
Add: Exchange loss 258,678.45 94,039.87
Add: Other expenses 123,546.92 466,227.09
Total 7,681,282.39 5,536,616.44
（1）RMB 2,144,665.95 was increase this period compared with that of last period, with a
38.74% increase rate. Mainly due to the increase of bank loans which results in the increase of
interest expenses in this period.
30. Assets impairment loss
Item Jan. to Jun., 2010 Jan. to Jun., 2009
Bad debt provision
Provision for inventory depreciation 3,780,432.06
Impairment provision for fixed assets
Total 3,780,432.06
31. Non-operating income
(1)Details of non-operating income
Item Jan. to Jun., 2010 Jan. to Jun., 2009
Income from disposal of non-current assets
Including: Income from disposal of fixed
assets
Gains/losses from transaction of
non-monetary assets
6,902,326.45
Subsidy from governmentSemi-Annual Report 2010
68
Item Jan. to Jun., 2010 Jan. to Jun., 2009
Income on disposal
Breach of faith income 317,837.12 114,934.00
Compensation from quality warranty 5,955.30
Other
Total 7,220,163.57 120,889.30
(1)Gains/losses from transaction of non-monetary assets were the equity exchange of Hengfa Scientific
and Technology with Shenzhen Huafa Scientific and Technology Co., Ltd. in 2010. The added value of
RMB 6,902,326.45 reckoned into non-operating revenue. Details of exchanges see in the Annual
Report of 2009.
32. Non-operating expenses
Item Jan. to Jun., 2010 Jan. to Jun., 2009
Losses from disposal of non-current assets
Including: Losses from disposal of fixed
assets
Forfeit expenses 10,316.79
External donation
Inventory shortage losses
Compensation from lawsuit
Other 27,044.72 240,136.94
Total 27,044.72 250，453.73
33．calculation procedure of basic earnings per share and diluted earnings per share
Item
Code
Amount in this
period
Amount in last
period
Net profit attributable to shareholders
of the parent Company
1 17,375,496.34 4,359,222.80
Non-recurring gains/losses attributable
to parent Company
2 7,193,118.85 -129,564.43
Net profit attributable to shareholders
of the parent Company after
deducting non-recurring gains and
losses
3=1-2 10,182,377.49 4,488,787.23
Total shares in year-begin 4 283,161,227.00 283,161,227.00
Amount of shares increase from public 5 - -Semi-Annual Report 2010
69
Item
Code
Amount in this
period
Amount in last
period
reserve capitalizing or share dividend
distribution（Ⅰ）
Amount of shares increase from newly
issuing shares or shares transfer from
debt（Ⅱ）
6 - -
Accumulated months from next month
of share increased（Ⅱ） to year-end
7 - -
Shares decreased by repurchasing 8 - -
Accumulated months from next month
of share decreased to year-end
9 - -
Reducing shares 10 - -
Amount of months in report period 11 6 12
Weighted average of common shares
issuing outside
12=4+5+6×7÷11
-8×9÷11-10
283,161,227.00 283,161,227.00
Basic earnings per share (Ⅰ) 13=1÷12 0.0614 0.0158
Basic earnings per share (Ⅱ) 14=3÷12 0.0360 0.0158
Interest of common shares with diluted
potential that have been recognized as
expense
15 - -
Transferring expense 16 - -
Rate of income tax 17 - -
Weighted average of common shares
increased by warrants, stock option
and convertible bonds etc.
18 - -
Diluted earnings per share (Ⅰ) 19=[1+(15-16)×(1-17)]÷(12+18) 0.0614 0.0158
Diluted earnings per share (Ⅱ) 19=[3+(15-16)×(1-17)]÷(12+18) 0.0360 0.0158
34. Items of cash flow statement
(1) Cash flow statement annotation
Item 2010.06.30 2009.6.30
1．Reconciliation of net profit to cash flows from operating activities:
Net Profit 17,375,496.34 4,359,222.8
Add: Provision for impairment of assets 3,780,432.06Semi-Annual Report 2010
70
Item 2010.06.30 2009.6.30
Depreciation of fixed assets, oil assets and productive biological assets 6,097,025.02 8,485,301.54
Amortization of intangible assets 514,652.64 146,590.97
Amortization of long-term prepayments 283,854.15
Losses on disposal of fixed assets, intangible assets and other long-term assets
(income is listed with “- ”)
Losses on scrapping of fixed assets(income is listed with “- ”)
Losses on fair value change(income is listed with “- ”)
Financial expenses(income is listed with “- ”) 7,344,974.25 5,027,225.33
Investment losses(income is listed with “- ”)
Decrease in deferred income tax assets (increase is listed with “-”)
Increase in deferred income tax liabilities (decrease is listed with “- ”)
Decrease in inventories(increase is listed with “-”) -29,293,005.16 -61,359,958.61
Decrease in operating receivables(increase is listed with “-”) -87,355,780.17 -160,223,983.1
Increase in operating payables(decrease is listed with “- ”) 110,914,222.67 124,540,418.2
Others
Net cash flows from operating activities 29,661,871.80 -78,925,182.83
VIII. Related party relationship and transactions
1. Parent company
(1) General information of parent company
Parent
Company
Type of the
Company
Registrati
on place
Legal
representative
Nature of
business
Final
controller
Organizati
on code
Wuhan
Zhongheng
Group
Company of
limited liability
Wuhan Li Zhongqiu Manufacture
and sale
Li Zhongqiu 711954601
(2) Registered capital of the parent company and its change
Parent Company Amount at
year-begin
Increment this
year
Decrement
this year
Amount at
year-end
Wuhan Zhongheng Group 138,000,000.00 - - 138,000,000.00Semi-Annual Report 2010
71
(3) Shares held by the parent company and its change
Amount of share held Proportion of share held Proportion of voting right
Parent
Company Amount at
year-end
Amount at
year-begin
proportion at
year-end
proportion at
year-begin
proportion
at year-end
proportion
at
year-begin
Wuhan
Zhongheng
Group
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 Photo electricity
Industry Co., Ltd.
73108664-5 Purchase of LCD
Shenzhen Zhongheng Huafa Scientific
and Technology Co., Ltd.
68536237-X Sales of commodities
and leasing
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
(1) Purchased commodities from related party
Jan. to Jun., 2010 Jan. to Jun., 2009
Name of related party
Amount
Percentage
points in the
same
transaction in
current period
(%)
Amount
Percentage
points in the
same transaction
in current period
(%)）
Wuhan Hengsheng Photo
electricity Industry Co., Ltd.
70,502,675.07
21.79% 56,565,948.32
47.13%
Shenzhen Zhongheng Huafa
Scientific and Technology Co., Ltd.
9,545,922.14
2.95% -
-
Total 80,048,597.21 24.74% 56,565,948.32 47.13%Semi-Annual Report 2010
72
(2) Commodities selling to related parties
Jan. to Jun., 2010 Jan. to Jun., 2009
Name of related party
Amount
Percentage
points in the
same
transaction in
current period
(%)
Amount
Percentage
points in the
same
transaction in
current period
(%)）
Shenzhen Zhongheng Huafa
Scientific and Technology Co., Ltd.
174,720.86
0.05% -
-
Total 174,720.86
0.05% -
-
(3)Comprehensive service offered to related parties
Jan. to Jun., 2010 Jan. to Jun., 2009
Name of related party
Amount
Percentage
points in the
same
transaction in
current period
(%)
Amount
Percentage
points in the
same
transaction in
current period
(%)）
Shenzhen Zhongheng Huafa Scientific
and Technology Co., Ltd.
627,611.05
3.39% -
-
Total 627,611.05
3.39% -
-
(4) Loans from related parties offered to subsidiaries
Jan. to Jun., 2010 Jan. to Jun., 2009
Name of related party Amount
Percentage
points in
transaction of
the same period
(%)
Amount
Percentage
points in
transaction of
the same period
(%)
Wuhan Zhongheng 18,000,000.00 100.00% - -
Total 18,000,000.00 100.00% - -
(5)Funds paid to related parties
Jan. to Jun., 2010 Jan. to Jun., 2009
Name of related party Amount
Percentage
points in the
same
transaction in
current period
(%)
Amount
Percentage
points in the
same
transaction in
current period
(%)）
Wuhan Hengsheng Photo electricity
Industry Co., Ltd.
2,274,398.93
0.90% 34,956,697.71
80.20%
Total 2,274,398.93
0.90% 34,956,697.71 80.20%Semi-Annual Report 2010
73
IX. Contingent events
1. Contingent liability formed by pending action or arbitration
(1) Dispute case that Shanxi Linghua Electronics Co., Ltd sued Company for undertaking
contract
Dispute case that Shanxi Linghua Electronics Co., Ltd. (hereafter referred as “Shanxi
Linghua”) sued Company for undertaking contract (No. 2441Civil Secondary First Shen
Fu Court 2007): Shanxi Linghua sued the Company for the compensation for its loss
caused by the printed circuit boards (PBC) of latent quality problems sold to it in the
period from 30 May 2006 to 9 May 2007, with the object of action of RMB 3,100,773.20.
The Company received the summons on the case from the People’s Court of Futian
District on 14 January 2008; Court of First Instance started the first hearing on Mar 6th of
2008.
The Company prosecuted the countercharge to the action on 12 November 2007, and sued
the Shanxi Liinghua in arrears with loans from the Company and relevant interest, with
the object of action of RMB 1,054,290.19. Court of First Instance started the first hearing
on Mar 6th of 2008.
On 25 July 2009, the People’s Court of Futian District of Shenzhen Municipality made
judgment on the above cases (No. 2441Civil Secondary First Shen Fu Court 2007): the
Company might pay to Shanxi Hualing the liquidated damages of RMB 1,797,975.48, and
Shanxi Hualing to the Company the remanent loans of RMB 869,458.96 and the interest
loss, within10 days from the judgment validity day.
The Company appealed against the judgment to the People’s Intermediate Court of
Shenzhen Municipality on 31 August 2009; People’s Intermediate Court of Shenzhen
Municipality made civil decision (No. 2227 Civil Secondary Final Shen Intermediate
Court (2009)) on the case on 22 March 2010, with the reason that the previous judgment
was of the unclear identification on and insufficient evidence to the major facts in the case,
and repealed the No. 2441 Civil Judgment (Civil Secondary First Shen Fu Court) of the
People’s Court of Futian District of Shenzhen Municipality (2007) and remanded to the
People’s Court of Futian District of Shenzhen Municipality.
Pursuant to presented
on 22 April 2010 by Lawyer Zhang Guozhi of Gongdong Jiang Shanhong CPAs: based on
the existing evidence, as the People’s Court of Futian District of Shenzhen Municipality
retries the case, the Company has big chance to recovery. The lawsuit expense of RMB
179,797.55 for the case was accrued last year and recognized as estimative liability. As
ending at the day of the approved presentation of the Financial Report, the case has not
been concluded.
(2) Dispute case that Company sued Shenzhen Wanshang Youyi Department Co., Ltd. for
undertaking contract.
Dispute case (No. 2336 Court Civil Third First Shen Fu Court) that Company sued
Shenzhen Wanshang Youyi Department Co., Ltd. (hereafter referred as “Wanshang
Department”) for undertaking contract: in May 2009, the Company prosecuted the lawsuit
against the Wanshang Department for the payment of the undercharged rental of RMB
34,381,679.31 ending at 7 May 2009 and the liquidated damages of RMB 10,000,000, and
the revocation of contracts and relevant amended agreements as regards the lease of Huafa
Building signed with Wanshang Department; the People’s Court of Futian District of
Shenzhen Municipality registered and handled the case on 13 July 2009; in September
2009, for the convenience to solve the dispute in other ways, the Company applied forSemi-Annual Report 2010
74
recalling and got the approval from the court; in November 2009, the Company
prosecuted the lawsuit on the case to the People’s Court of Futian District of Shenzhen
Municipality again, for the payment of the undercharged rental of RMB 17,746,563.78
(from February 2007 to September 2009), and the court registered the case formally and
made a judgment of refusal the lawsuit from the Company. The Company appealed against
the judgment to the People’s Intermediate Court of Shenzhen Municipality, and the latter
made the court of the second instance in session but has not made the judgment yet now.
Upon the first of the above case, Wanshang Department prosecuted the countercharge as
filing the answer against the Company’s under-delivery of the shop of 121.2 square meters
related in the lease contract and for the economic loss caused, with the object of action
RMB 6,466,020.00. On 1 December 2009, People’s Court of Futian District of Shenzhen
Municipality made the judgment (No. 2336 Court Civil Third First Shen Fu Court) on the
case: the Company might deliver the shop of 121.1 square meters to Wanshang
Department and pay for the economic loss of RMB 3,605,613.86. The Company appealed
against the judgment to the People’s Intermediate Court of Shenzhen Municipality in
January 2010. The People’s Intermediate Court of Shenzhen Municipality tried the case in
session in May 2010, and has not made the final judgment as ending at the day of the
approved presentation of the Financial Report. According to the judgment of the People’s
Court of Futian District of Shenzhen Municipality of the first instance, the Company
recognized the damages of RMB 3,605,613.86 in the first instance as the estimative
liability last year, and did not increase or decrease the relevant liability in the Period.
(3) Shenzhen Baoluda Electronics Technology Company sued the Shenzhen Baoluda
Electronics Technology Co., Ltd.to People’s Court of Baoan District of Shenzhen
Municipality for the refund of the lease deposits, payment for processing expenses, and
return of the equipment, with the object of action of RMB 1,590,262.51. On 26 July 2010,
the Company prosecuted the countercharge to the People’s Court of Baoan District of
Shenzhen Municipality against Shenzhen Baoluda Electronics Technology Co., Ltd. in
arrears with the house rental, water & electricity, pollutant charges and relevant interest,
with the oject of the contercharge of RMB 4,318,133.32. The People’s Court of Baoan
District of Shenzhen Municipality has accepted the countercharge but not tried the case in
session yet now.
2. The Company produced and processed the video communication products and
maintained them three years for free according to the contract signed with the client.
According to the actual maintenance in 2009, the estimative maintenance expenditure to
be actual in the free maintenance period is RMB 2,124,170.42 and was recognized as the
estimative liability in last year.
3. Besides the above contingent events, as ending at 30 June 2010, there was no incidence
of other new significant contingent events.
X. Commitment events
As ending at 30 June 2010, there were no significant commitment events necessary for
disclosure.
XI. Events after Balance Sheet Day
1. As for the labor dispute case that the Company’s former staff as Zhou Changqing, Li
Weidong, Zhang Yuan, Zhou Moufeng, Ge Hongshui, and Qiu Weilin sued against the
Company in arrears with their wages, rewards, overtime payment, reserve and holidaySemi-Annual Report 2010
75
payment, the estimative liability recognized in the last year was RMB 147,632.11. The
case was concluded and the judgment executed in this July, with the sum of RMB
121,650.02 executed.
2. Besides the above event after the balance day, as ending at the day of the approved
presentation of the Financial Report, there was no incidence of other significant events
after the balance sheet day.
XII. Other important events
1. Stock replacement between Company and Wuhan Zhongheng
On 29 April 2009, the Company signed the with Wuhan
Zhongheng, and on 4 November 2009, the 2nd Temporary Shareholders’ Meeting 2009
approved the .
(1) Major contents in
1) The Company and Wuhan Zhongheng jointly add the investment into Hengfa Science
and Technology Company – the wholly-owned subsidiary: the Company’s additional
investment of RMB 44 million in currency with obtaining the 44% shareholding of the
after- addition total in Hengfa Science and Technology; Wuhan Zhongheng additional
investment of the use right of and the buildings on No. 10 Land and No. 2 Land of RMB
101.6931 million total appraisal value in Dunkou Subdistrict, Wuhan Economic and
Technologic Development District with obtaining the 44% shareholding of the afteraddition
total in Hengfa Science and Technology. The total of the additional investment
was RMB 145.6931 million and the registered capital of Hengfa Science and Technology
increased to RMB 181.6431 million.
2) The Company made the first additional investment via the capital assets and cash in
PCB business into Huafa Science and Technology Company, with the after-addition
registered capital and actually received capital of Huafa Science and Technology
Company RMB 8,676,775.00.
3) The second additional investment was made into Huafa Science and Technology
Company via the use right of land (Shenzhen Housing Property Certificate No. 7226760
and No. 7226763, Land Parcel No.“A627-005” and No.“A627-007”, total area of 48,161.6
square meters)(hereafter referred as “Gongming Industrial Land”) of RMB 18.55 million
(appraisal value as the actual value including re-grant premium of RMB 7.7 million) in
Huafa Road, Gongming Town, Baoan District, Shenzhen. Meanwhile, the Company
ensured that the Gongming Industrial Land was transformed into Huafa Science and
Technology Company in the second additional investment.
4) Huafa Science and Technology Company continuously implemented the agreement of
inventory purchase signed with the Company to purchase from the Company the inventory
of the PCB.
Wuhan Zhongheng evaluated its after-addition 56% shareholding in Hengfa Science and
Technology Company (hereafter referred as “input asset”) as RMB 101.6931 and went on
the stock replacement with the Company’s 100% shareholding in Huafa Science and
Technology Company (hereafter referred as “output asset”), with the difference made up
by cash.
6) Within 90 days upon the agreement validity, the Company delivers 100% shareholding
in Huafa Science and Technology Company to Wuhan Zhongheng, and Wuhan Zhongheng
delivers 56% shareholding in Hengfa Science and Technology Company; as only after the
completion of second additional investment into Huafa Science and Technology Company,
the Company can obtain the after-the-second-addition 17.6% shareholding in Huafa
Science and Technology Company and deliver to Wuhan Zhongheng; and therefore,Semi-Annual Report 2010
76
before the delivery of the stock, the Company may pay Wuahn Zhongeng the difference of
RMB 14.92535 million, and after the delivery, Wuhan Zhongheng returns the stock
transfer payment of RMB 18.55 million.
7) Within 30 business days after the agreement validity, Wuhan Zhongheng pays to the
Company RMB 2 million in cash as the prepayment of the stock transfer.
8) It is recognized by the agreement two parties that after delivering the input asset to the
Company on the contract agreement, Wuhan Zhongheng is regarded as of the full
fulfillment of the contract duty of consideration value payment in the stock transfer; and
that after delivering the output asset to Wuhan Zhongheng, the Company is regarded as of
the full fulfillment of the contract duty of consideration value payment in the stock
transfer. Besides the above consideration value, any party under the contract has no right
or right claim for the payment of consideration value to the counterparty.
9) stipulates the loss/gain in the Period as follows: as for
the input asset related in the Contract, the loss/gain from the appraisal base day to the day
of asset transfer agreed in the Contract, is enjoyed by the Company; as for the output asset
related in the Contract, the loss/gain from the appraisal base day to the day of asset
transfer agreed in the Contract, is enjoyed by Wuhan Zhongheng. In spite of the above
stipulation, Wuhan Zhongheng commits here: if the total profit of the input asset is plus
from appraisal base day to the day of asset transfer agreed in the Contract, the relevant
profit equity is distributed on the above agreement; if the profit is minus, Wuhan
Zhongheng pays the Company the cash of the absolute value equal to the total minus
profit as the compensation.
10) Pricing policy and basis in the : the related transaction is
obedient to the fair pricing principle. The Company’s input asset is the after-addition 56%
shareholding in Hengfa Science and Technology Company with its evaluation on the
appraisal value of the No. 10 Land and No. 2 Land; the appraisal base day of the No. 10
Land and No. 2 Land related in the asset replacement, is 31 March 2009, with the
appraisal report presented by Hubei Zhonglian Asset Appraisal Co., Ltd. as the standard;
the Company’s output asset is the 100% shareholding in Huafa Science and Technology
Company, and its auditing base day is 22 April 2009, with the auditing report presented by
the Xinyong Zhonghe CPAs as the standard.
(2) As ending at the day of the approved presentation of the Financial Report, the
accomplishment of the replacement of the relevant assets are as follows:
1) On 20 April 2009, Hubei Zhonglian Asset Appraisal Co., Ltd. appraised the housing
property related in the asset replacement, and presented the appraisal report No. 024 E
Zhonglian Appraisal Report [2009]. The housing property and land went through the
account transfer procedures respectively on 30 December 2009 and on 14 December 2009,
and were input into the Hengfa Science and Technology Company. As the input-land area
needs new measurement in the progress of the handling the ownership certificate of the
relevant input-land, and the actual transfer area of the land use right is less than the area
stipulated in the due to the difference between the current
measurement technology, accuracy, method and the historic ones, and the appropriation of
part of the input-land by the constructions of the public facilities by the local government
as greening, streetcar; the difference was about 3,618.96 square meters of RMB 2.3652
million. Wuhan Zhongheng commits to Company for the difference on 30 December 2009:
the difference is to be made up for in cash before 30 June 2010; and as ending at the
Period-end, the difference has been made up for.
The Company made the additional investment into Huafa Science and Technology
Company via the cash of RMB 55million, capital assets of RMB 31,567,750.00 asSemi-Annual Report 2010
77
machinery equipment of the PCB, total of RMB 86,567,750.00. The registered capital
after the change was RMB 86,767,750.00. Xinyong Zhonghe CPAs verified the additional
investment, and presented the No. XYZH/2008SZATS038 Assets Verification Report on 8
April 2009.
3) Huafa Science and Technology Company applied for the shareholder change to
Administration of Market Supervision and Regulation of Shenzhen Municipality on 21
December 2009, with the shareholder changed from the Company to Wuhan Zhongheng,
which was approved on 22 December 2009.
4) On 11 March 2010, Wuhan Zhonghan made the additional investment into Hengfa
Science and Technology Company via the use right of and the buildings on No. 10 Land
and No. 2 Land in Dunkou Subdistrict, Wuhan Economic and Technologic Development
District, and the Companny made the additional investment via the currency; Wuhan
Jingkai CPAs Co., Ltd. presented the No. [2010]0119 Verification Report, with the
registered capital and actually received capital both RMB 181,643,100, among that,
Wuhan Zhongheng of 56% shareholding, and the Company of 44% shareholding.
After the accomplishment of the additional investment, Hengfa Science and Technology
Company applied for the corporate type and the institutional shareholder change to Caidin
Branch of Administration of Industry and Commerce of Wuhan Municipality, and received
the corporation change notice and the after-change corporate institutional license from the
Caidian Branch. The Company owned the 100% after-change shareholding in Hengfa
Science and Technology Company.
(3) Accounting dealing related with stock replacement
The input asset in the transaction is 56% shareholding Wuhan Zhongheng in Hengfa
Science and Technology Company and the output asset is 100% shareholding by the
Companny in Huafa Science and Technology Company. The stock replacement has been
accomplished on 25 March 2010. Pursuant to the relevant requirements in the corporate
accounting principles, the loss/gain from the non-monetary exchange related in the stock
replacement, may not be recognized until the accomplishment of the stock replacement,
and was recognized as about RMB 6.9 million on 25 March 2010.
XIII. Notes to the main items of financial statement of parent company
1. Accounts receivable
(1) Account receivable classified according to risk
2010.06.30
Item Book balance Provision for bad debts
Amount Proportion Amount Proportion
That with large amount in single item 21,668,256.08 53.65% 1409396.50 6.50%
That in group with larger risk after grouping
as per credit risk features though single item
sum is small
4,478,915.83 11.09% 4,366,887.07 97.50%
That without large
amount in other single item 14,241,170.35 35.26% 378,896.06 2.66%
Total 40,388,342.26 100.00% 6,155,179.63 15.24%Semi-Annual Report 2010
78
Continue
2009.12.31
Item Book balance Provision for bad debts
Amount Proportion Amount Proportion
That with large amount in single item 186,808,058.36 95.31% 1,411,716.90 0.76%
That in group with larger risk after grouping
as per credit risk features though single item
sum is small
4,478,915.83 2.29% 4,366,887.07 97.50%
That without large
amount in other single item 4,701,174.08 2.40% 376,575.66
8.01%
Total 195,988,148.27 100.00% 6,155,179.63 3.14%
1）Account receivable with major amount at period-end, or with minor amount but perform
impairment test separately
Name of the company Book balance Bad debt amount
Accrual
proportion
Wuhan Hengfa Scientific and Technology
Co,, Ltd.
9,710,760.10 0.00 0.00%
TCL(Huizhou) Co., Ltd. 1,916,677.91 1,190,653.90 62.12%
Shenzhen Baoluda Electronic Technology
Co., Ltd.
1,407,339.51 0.00 0.00%
Weiguan Technology(Shenzhen) CO., Ltd. 3,344,915.97 0.00 0.00%
Shanxi Linghua Electronic Co., Ltd. 1,010,389.70 62,322.99 6.17%
HORACE INDUSTRIAL LTD. 926,969.70 0 0.00%
Shenzhen Dajiang Electronic Developmetn
Co., Ltd.
747,476.10 14,518.44 1.94%
Guangzhou Fanyu Hongtu Computer
Equipment Co., Ltd.
716,650.40 80,037.40 11.17%
LIM-TECCO.,LTD. 712,661.59 61,863.77 8.68%
Chengdu Xuguang Technology Co., Ltd. 665,291.01 0.00 0.00%
Shenzhen Gengchuang Electronic Co., Ltd. 509,124.09 0.00 0.00%
Total 21,668,256.08 1,409,396.5 -
2）Account receivable with minor single amount but with greater risk after classified into
same group with similar credit risk featuresSemi-Annual Report 2010
79
2010.06.30 2009.12.31
Items Amount Proportion Bad debt
provision
Amount Proportion Bad debt
provision
Within
1year - - - - - -
1-2years 3,530.78 0.08% 2,167.81 3,530.78 0.08% 2,167.81
2-3 years 231,020.67 5.16% 231,020.67 231,020.67 5.16% 231,020.67
3-4 years 769,383.15 17.18% 685,711.91 769,383.15 17.18% 685,711.91
4-5 years 265,954.01 5.94% 254,147.91 265,954.01 5.94% 254,147.91
Over 5 years 3,209,027.22 71.64% 3,193,838.77 3,209,027.22 71.64% 3,193,838.77
Total 4,478,915.83 100.00% 4,366,887.07 4,478,915.83 100.00% 4,366,887.07
(2) There is no arrearage of the shareholder companies which hold over 5% (including 5%)
voting right share of the company in the balance at the end of the term of accounts
receivable.
(3)Top 5 companies in account receivable
Name of the company
Relationship with
the Company
Amount Age
Proportion
in total
account
receivable
Wuhan Hengfa Scientific and
Technology Co., Ltd. Related party
9,710,760.10 Within 1 year
23.78%
Weiguan Scientific and Technology
(Shenzhen) Co., Ltd. Major client
3,344,915.97 Within 2 years
8.19%
TCL (Huizhou) Co., Ltd. Major client 1,916,677.91 Within 5 years 4.69%
Shenzhen Baoluda Electronic
Technology Co., Ltd. Major client
1,407,339.51 Within 2 years
3.45%
Shanxi Linghua Electronic Co., Ltd. Major client 1,010,389.70 Within 4years 2.47%
Total 174,356,644.45 42.59%
(4)Balance of foreign currency in account receivable
Amount at period-end Amount at period-begin
Foreign
currency
Original
currency
Exchange
rate
Converted into
RMB
Original
currency
Exchange
rate
Converted into
RMB
USD 135,720.30 6.83 926,969.70 16,187,868.22 6.83 110,534,639.52
Total 926,969.70 110,534,639.52Semi-Annual Report 2010
80
2. Other account receivable
(1)Other account receivable classified according to risk
2010.06.30
Item Book balance Provision for bad debts
Amount Proportion Amount Proportion
That with large amount in single item 77,610,103.45 82.62% 9,567,326.72 6.75%
That in group with larger risk after grouping
as per credit risk features though single item
sum is small
2,001,524.52 2.13% 2,001,524.52 100.00%
That without large
amount in other single item
14,320,934.11 15.25% 5,146,038.44 28.98%
Total 93,932,562.08 100.00% 12,156,330.53 12.94%
Continue
2009.12.31
Item Book balance Provision for bad debts
Amount Proportion Amount Proportion
That with large amount in single item 135,267,940.40 94.54% 9,567,326.72 7.07%
That in group with larger risk after
grouping as per credit risk features though
single item sum is small
2,001,524.52 1.40% 2,001,524.52 100.00%
That without large
amount in other single item
5,809,563.89 4.06% 587,479.29 10.11%
Total 143,079,028.81 100.00% 12,156,330.53 8.50%
1）other account receivable with major single amount at period-end, or with minor amount but
performed impairment test separately
Name of the company Book balance
Bad debt
amount
Accrual
proportion
Reasons for
accrual
Shenzhen Wanshangyouyi Departmetn Store
Co., Ltd.
7,344,035.98 619,802.34 8.44%
Difference of
current checking
Shenzhen Boteman Bowling Club Co. ,Ltd. 4,037,215.42 3,833,179.42 94.95%
Over 5 years
account age
Compensation of traffic accident 555,785.81 555,785.81 100.00%
Over 5 years
account age
Huafa Leasing Company 4,558,559.15 4,558,559.15 100.00%
Over 5 years
account ageSemi-Annual Report 2010
81
Name of the company Book balance
Bad debt
amount
Accrual
proportion
Reasons for
accrual
HORACE INDUSTRIAL LTD. 2,895,942.00 0.00 0.00% N/A
ZHAO BAO MIN 926,531.00 0.00 0.00% N/A
Wuhan Hengfa Scientific and Technology
Co., Ltd.
57,292,034.09 0.00 0.00% N/A
Total 77,610,103.45 9,567,326.72 - -
2）other account receivable with minor single amount but with greater risk after classified into
same group with similar credit risk features
2010．06．30 2009．12．30
Item
Amount Proportion Bad debt
provision Amount Proportion Bad debt
provision
Within 1
year - - - - - -
1-2 years 51,595.15 2.58% 51,595.15 51,595.15 2.58% 51,595.15
2-3 years - - - - - -
3-4 years - - - - - -
4-5 years 192,789.94 9.63% 192,789.94 192,789.94 9.63% 192,789.94
Over 5
years
1,757,139.43
87.79%
1,757,139.43 1,757,139.43
87.79%
1,757,139.43
Total 2,001,524.52 100.00% 2,001,524.52 2,001,524.52 100.00% 2,001,524.52
(2)Top 5 companies of other account receivable
Name of the company
Relationshi
p with the
Company
Amount Age
Proportion in
total other
account
receivable
Natural and
content
Wuhan Hengfa Scientific and
Technology Co., Ltd.
Subsidiary 57,292,034.09 Within 1 year 60.99%
Borrowing
and loans
Shenzhen wanshangyouyi
Department Store Co., Ltd.
Lessees 7,344,035.98 Over 5 years 7.82% Rent
Huafa Leasing Company Subsidiary 4,558,559.15 Within 1 year 4.85% Rent
Shenzhen Boteman Bowling
Club Co., Ltd.
Lessees 4,037,215.42 Over 5 years 4.30% Rent
HORACE INDUSTRIAL LTD. supplier 2,895,942.00 Within 1 year 3.08% Compensation
Total - 76,127,786.64 - 81.04%Semi-Annual Report 2010
82
3. Long-term equity investment
(1)Classification of long-term equity investment
Item 2010．06．30 2009．12．31
Long-term equity investment
measured on cost
185,209,820.00 39,515,789.00
Total long-term equity
investment 185,209,820.00 39,515,789.00
Less: Impairment provision of
long-term equity investment 600,000.00 600,000.00
Value of long-term equity
investment 184,609,820.00 38,915,789.00
(2)Long-term equity investment calculated on cost and on equity
Invested company
Proportion
of shares
held
Proportion
of voting
right
2009．12．30 Increased in
this period
Decreased
in this
period
2010．06．30
Calculated on cost
Huafa Leasing
Company
60% 60% 600,000 - - 600,000
Huafa Property
Company
100% 100% 1,000,000 - - 1,000,000
Hengfa Scientific
and Technology
100% 100% 37,915,789 145,694,031 - 183,609,820
Total 39,515,789 145,694,031 - 185,209,820
(3)Depreciation provision for long-term equity investment
Invested company 2009．12．31
Increased in this
period
Decreased in this
period
2010．12．31
Huafa Leasing Company 600,000.00 - - 600,000.00
Total 600,000.00 - - 600,000.00Semi-Annual Report 2010
83
4. Operating revenue and operating cost
5. Supplementary information of cash flow statement of parent company
Items Jan.-Jun. 2010 Jan.-Jun. 2009
1．Reconciliation of net profit to cash flows from operating activities:
Net profit 6,710,658.13 4,359,222.8
Add: Provision for impairment of assets
Depreciation of fixed assets, oil assets and productive biological assets 1,836,447.66 8,485,301.54
Amortization of intangible assets 42,696.27 146,590.97
Amortization of long-term prepayments
Losses on disposal of fixed assets, intangible assets and other long-term assets
(income is listed with “- ”)
Losses on scrapping of fixed assets(income is listed with “- ”) 2,008.72
Losses on fair value change(income is listed with “- ”)
Financial expenses(income is listed with “- ”) 6,208,666.11 5,027,225.33
Investment losses(income is listed with “- ”)
Decrease in deferred income tax assets (increase is listed with “-”)
Increase in deferred income tax liabilities (decrease is listed with “- ”)
Decrease in inventories(increase is listed with “-”) -16,714,252.65 -61,359,958.61
Decrease in operating receivables(increase is listed with “-”) 139,302,015.88 -160,223,983.10
Increase in operating payables(decrease is listed with “- ”) -35,287,682.28 124,640,418.20
Others
Net cash flows from operating activities 102,100,557.84 -78,925,182.83
Jan.-Jun. 2010 Jan.-Jun. 2009
Items Operating revenue Operating cost Gross profit Operating revenue Operating cost Gross profit
Plastic injection ware 51,529,320.04 45,025,714.73 6,503,605.31
PCB 5,345,495.71 7,421,396.86 -2,075,901.15
LCD 103,794,691.53 98,761,372.59 5,033,318.94
Materials selling 5,565,869.28 5,818,910.00 -253,040.72 0.00
Property leasing 18,534,021.29 1,676,904.81 16,857,116.48 21,032,780.74 1,958,095.71 19,074,685.03
Property management 788,661.00 822,237.00 822,237.00
Foam business 29,598,133.92 27,251,795.85 2,346,338.07
24,888,551.57 7,495,814.81 16,604,075.76 212,122,658.94 180,418,375.74 31,704,283.20Semi-Annual Report 2010
84
XIV. Supplementary information
1. Statement of non-recurring gains/losses this period
Item
Amount at this
period
Amount at last
period
Gains and loss from disposal of non-current assets - -
Ultra vires approval, or none formal approval documents, or accidental tax return and relief - -
Government subsidy recorded into the current gains and losses - -
Capital occupation received from non- financial enterprises and recorded into the current
gains and losses
- -
The investment cost of subsidiaries, affiliated enterprise and combined enterprise obtained by
the enterprise is less than the obtained investment, then gains resulting from recognizable fair
value of net asset of investee units should be enjoyed
- -
Profit and loss on exchange of non-monetary assets 6,902,326.45 2,975,082.95
Profit and loss on entrusted investment or manage asset -
Assets devalue provisions withdrawn for force majeure, such as natural disaster -
Gains and losses from debt restructuring -
Enterprise restructuring expense -
Profit and loss exceeding fair value, resulting from unfair transactions -
Net profit and loss of the current period from the beginning of the subsidiary to combination
date, resulting from enterprise combination under the common control
-
Profit and loss on predicted liabilities unrelated to main business of the Company -
Held transaction financial asset, gains/losses of changes of fair values from transaction
financial liabilities, and investment gains from disposal of transaction financial asset,
transaction financial liabilities and financial asset available for sales, exclude the effective
hedging business relevant with normal operations of the Company
-
Reversal of provisions for asset impairment of account receivable which is made singly
impairment test
347,534.20
Gains/losses obtained from external entrusted loan -
Losses/gains from the change of fair values of investing property of subsequent measurement
adopted by method of fair value
-
Influences on current losses/gains for one adjustment of current losses/gains in accordance
with the requirements of laws and regulations such taxation and accountings.
-Semi-Annual Report 2010
85
Item
Amount at this
period
Amount at last
period
Income of trustee fee from entrusted operation -
Net amount of other non-operating income and expense except the above items 290,792.40 -4,135,364.87
Other losses/gains items conforming the definitions of non-recurring gains/losses -
Subtotal 7,193,118.85 -812,747.72
Impact on income tax -240,032.54
Influenced amount of minority shareholders’ equity(after tax) -
Total 7,193,118.85 -572,715.18
2. Return on equity and earnings per share
Earnings per share
Profit in the report period
weighted average of return on
equity
Basic earnings
per share
Diluted
earnings per
share
Net profit attributable to shareholders of parent
company
6.67% 0.0614 0.0614
Net profit attributable to shareholders of parent
company after deducting non-recurring gains and
losses
3.71% 0.0360 0.0360
3. Calculation procedure for return on equity
Item Code
Amount in this
period
Amount last
period
Net profit attributable to shareholders of
the parent Company 1
17,375,496.34 4,154,592.65
Non-recurring gains/losses attributable to
parent Company 2
7,193,118.85 -572,715.18
Net profit attributable to shareholders of
the parent Company after deducting
non-recurring gains and losses
3=1-2 10,182,377.49 4,727,307.83
Net assets attributable to shareholders of
the parent Company 4 269,339,355.15 251,963,858.81
Fully diluted return on equity（Ⅰ） 5=1÷4 6.45% 1.65%
Fully diluted return on equity（Ⅱ） 6=3÷4 3.78% 1.88%Semi-Annual Report 2010
86
Item Code
Amount in this
period
Amount last
period
Net assets at year-begin attributable to
shareholders of the parent Company
7 251,963,858.81 247,809,266.16
Net assets increased by new shares
issuing or convertible bonds that
attributable to shareholder of the parent
company
8 -
Amount of months from next month of
increase of net assets attributable to
shareholders of parent company to
year-end of this period
9 -
Net assets decreased by repurchased or
cash bonus etc. that attributable to
shareholders of parent company
10 -
Amount of months from next month of
decrease of net assets attributable to
shareholders of parent company to
year-end of this period
11 -
Amount of months in report period 12 6 12
Weighted average of net assets
attributable to shareholders of the parent
company
13=7+1÷(2)+8×9
÷12-10×11÷12
260,651,606.98 249,886,562.49
Weighted average of return on equity
（Ⅰ） 14=1÷13
6.67% 1.66%
Weighted average of return on equity
（Ⅱ） 15=3÷13
3.91% 1.89%Semi-Annual Report 2010
87
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 Commercial Daily 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.
Board of the Directors of
Shenzhen Zhongheng Huafa Co., Ltd.
August 26, 2010
Chairman of the Company (Signature) ___ Li Zhongqiu ____
