Semi-annual Report 2011
Shenzhen Zhongheng Huafa Co., Ltd.
SEMI-ANNUAL REPORT 2011
Short Form of the Stock: SHEN HUAFA-A
SHEN HUAFA-B
Stock Code: 000020
200020
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Semi-annual Report 2011
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.
Director of the Company Mr. Chen Zhigang and independent director Mr. Li Xiaodong absent the
Meeting for busy business, Chairman Mr. Li Zhongqiu and independent director Mr. Zhang Yi
were entrusted for attending the Meeting respectively for voting; other directors all attend the
Meeting.
Li Zhongqiu, person in charge of the Company, Jiang Yanjun, person in charge of accounting
works and accounting institution, hereby state that: the financial report of the Semi-annual Report
2011 is true and complete.
The 2011 Semi-annual Financial Report of the Company has not been audited.
Board of Directors of Shenzhen Zhongheng Huafa Co., Ltd.
Contents
ChapterⅠ. COMPANY PROFILE
ChapterⅡ. CHANGES IN SHARE CAPITAL AND PARTICULARS ABOUT SHARES HELD BY MAIN
SHAREHOLDERS
Chapter III. PARTICULARS ABOUT DIRECTORS, SUPERVISORS AND SENIOR EX
Chapter IV. REPORT OF THE BAORD OF DIRECTORS
Chapter V. SIGNIFICANT EVENTS
Chapter VI. FINANCIAL REPORT (UN-AUDITED)
Chapter VII. DOCUMENTS AVAILABLE FOR REFERENCE
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Semi-annual Report 2011
Chapter I. Company Profile
I. Basic information
(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: Jiang Yanjun
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
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Semi-annual Report 2011
II. Major financial data and indexes
Unit: RMB
Increase/decrease at the end of
At the end of
this report period compared
this report At the period-end of last year
with that in the year-begin
period
(%)
Total assets 848,071,202.62 725,894,326.42 16.83
Owners‘ equity attributable to
275,845,356.64 266,564,632.01 3.48
shareholders of listed company
Share capital 283,161,227 283,161,227 0.00
Net assets per share attributable
to shareholders of listed 0.97 0.94 3.19
company (RMB/Share)
Increase/decrease in this
This report The same period of last year
report period year-on-year (%)
period
Before After Before After
(Jan. to Jun.)
adjustment adjustment adjustment adjustment
Total operating income 461,498,937.23 366,405,407.84 366,405,407.84 25.95 25.95
Operating profit 11,111,623.21 10,001,631.67 10,001,631.67 11.10 11.10
Total profit 11,066,688.81 17,194,750.52 10,292,424.07 -35.64 7.52
Net profit attributable to the
9,280,724.63 17,375,496.34 10,473,169.89 -46.59 -11.39
shareholders of listed company
Net profit attributable to the
shareholders of the company
9,325,659.03 10,182,377.49 10,182,377.49 -8.41 -8.41
after deducting non-recurring
gains and losses
Basic earnings per
0.033 0.061 0.037 -45.90 -10.81
share(RMB/Share)
Diluted earnings per share
0.033 0.061 0.037 -45.90 -10.81
(RMB/Share)
Weighted average return on Down 3.03 Down 0.65
3.42% 6.45% 4.07%
equity (%) percents percents
Weighted average return on
equity after deducting Down 3.04 Down 0.52
3.44% 3.78% 3.96%
non-recurring gains and losses percents percents
(%)
Net cash flow arising from
-15,077,925.90 29,661,871.80 29,661,871.80 — —
operating activities
Net cash flow arising from
operating activities per share -0.05 0.10 0.10 — —
(RMB/Share)
Note: asset replacements of the Company in the 1st season of 2010 have been completed,
including, they produced RMB 6.9 million above of income. The Company disposed them as
non-operating income which belongs to non-recurring gains and losses based on requirements of
Corporation Accounting Rules. During 2010 annual auditing, CPA calculated the above events in
subject of Capital Reserve possessing nature of capital investment based on Answers for Problems
in Supervision and Management Listed Companies Conducted in Accounting Rules issued by
CSRC in Apr. of 2009 (KJBH [2009] No. 60) owing to prudent principle. Thus 2010 semi-annual
financial data was adjusted.
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Semi-annual Report 2011
Items of non-recurring gains and losses Amount
Gains and losses arising from possible events
-44,934.40
un-relevant to normal operation business
Total -44,934.40
CAS IAS
Net profit 9,280,724.63 9,280,724.63
Net asset 275,845,356.64 275,845,356.64
Return on equity Earnings per share
Item Basic earnings Diluted
Fully diluted Weighted
per share earnings per
(%) average (%)
(RMB) share(RMB)
Net profit attributable to
the shareholders of the 3.42 3.42 0.033 0.033
company
Net profit attributable to
the shareholders of the
company after deducting 3.44 3.44 0.033 0.033
non-recurring gains and
losses
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Semi-annual Report 2011
Chapter 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.
Unit: share
Before the change Increase/decrease in the change of this time (+, - ) After the change
New Capitalization
Amount Proportion Bonus Amount Proportion
share of public Others Subtotal
(Share) (%) shares (Share) (%)
issued reserve
I. Restricted
116,489,894 41.14 - - - - - 116,489,894 41.14
shares
1. State-owned
shares
2. State-owned
legal person‘s
shares
3. Other
116,489,894 41.14 - - - - - 116,489,894 41.14
domestic shares
Including:
Domestic legal
116,489,894 41.14 - - - - - 116,489,894 41.14
person‘s shares
Domestic
natural person‘s
shares
4. Foreign
shares
Including:
Foreign legal
person‘s shares
Foreign natural
person‘s shares
II. Unrestricted
166,671,333 58.86 - - - - - 166,671,333 58.86
shares
1. RMB
64,675,497 22.84 - - - - - 64,675,497 22.84
Ordinary shares
2. Domestically
listed foreign 101,995,836 36.02 - - - - - 101,995,836 36.02
shares
3. Overseas
listed foreign
shares
4. Others
III. Total shares 283,161,227 100 - - - - - 283,161,227 100
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Semi-annual Report 2011
II. Particulars about shareholders (registered on Jun. 30, 2011)
Unit: share
Total shareholders 30,005
Particulars about shares held by the top ten shareholders
Amount of Amount of
Nature of Proportion of Total amount of
Full name of Shareholders restricted shares shares pledged or
shareholders shares held shares held
held frozen
Wuhan Zhongheng New Science
Domestic general
& Technology Industrial Group 41.14% 116,489,894 116,489,894 116,489,894
legal person
Co., Ltd.
SEG (HONG KONG) CO., LTD. Foreign legal person 5.85% 16,569,560 0 0
GOOD HOPE CORNER
Foreign legal person 4.91% 13,900,000 0 0
INVESTMENTS LTD
Domestic natural
Chen Zhuzhan 0.47% 1,318,700 0 0
person
Domestic natural
Jia Wenjun 0.44% 1,239,232 0 0
person
Domestic natural
BINGHUA LIU 0.31% 876,213 0 0
person
Domestic natural
Li Jianfeng 0.28% 781,718 0 0
person
Domestic natural
Zhu Ming 0.22% 611,348 0 0
person
Domestic natural
Chen Hongyun 0.21% 596,750 0 0
person
DBS VICKERS (HONG
Foreign legal person 0.21% 581,150 0 0
KONG)LTD A/C CLIENTS
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
Chen Zhuzhan 1,318,700 Domestically listed foreign share
Jia Wenjun 1,239,232 RMB common share
BINGHUA LIU 876,213 Domestically listed foreign share
Li Jianfeng 781,718 Domestically listed foreign share
Zhu Ming 611,348 Domestically listed foreign share
Chen Hongyun 596,750 RMB common share
DBS VICKERS (HONG KONG)LTD A/C
581,150 Domestically listed foreign share
CLIENTS
Zheng Qiaofen 534,000 Domestically listed foreign share
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Semi-annual Report 2011
Among the top ten shareholders, Wuhan Zhongheng New Science & Technology Industrial
Group Co., Ltd. neither bears associated relationship with other shareholders, nor belongs to
Explanation on associated the consistent actor that are prescribed in Measures for the Administration of Disclosure of
relationship among the aforesaid Shareholder Equity Changes of Listed Companies.
shareholders or consistent action 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.
th
Note: on Dec. 25 of 2009, controlling 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.
III. The amount and sale restriction condition of shares held by restricted shareholders
Unit: share
Amount
of
Amount of Date of
increased Restricted
Name of Restricted stock relieved relieving
restricted stocks at Reason for sales restriction
shareholders at period-begin restricted sales
stocks of period-end
stocks of restriction
this
this period
period
Considering the total holding
shares of the Company
Wuhan
116,489,894 shares were in
Zhongheng
state of pledge, till the
New Science
reporting period-end, Wuhan
& 2010-
116,489,894 0 0 116,489,894 Zhongheng New Technology
Technology 5-18
Industry Group Co., Ltd
Industrial
didn‘t apply to Shenzhen
Group Co.,
Stock Exchange for
Ltd.
procedure of removing the
above restricted stock.
Total 116,489,894 0 0 116,489,894 － －
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 actual controller is Mr. Li Zhongqiu, and did not change in the
report period.
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Semi-annual Report 2011
Chapter 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 Jan. of 2011, suggested by Nomination Commission of Board of Directors and nominated by
President, Mr. Jiang Yanjun was engaged as secretary of Board of Directors.
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Semi-annual Report 2011
Chapter IV. Report of Board of Directors
I. Overall operation and management of the Company in the report period
In the first half year of 2011, main international economy slowed down the steps, US dollars
gained a dramatically depreciation, the pressure of inflation turns more and more seriously. Faced
with complicated situation, the Company actively got rid of unfavorable factors, strived to keep
the steady growth of operating income. Customer‘s orders significantly increased over last year.
But profit of part of business especially visual communication business decreased dramatically
owing to unfavorable factors such as rising price of raw material, ascending currency rate of RMB,
increased labor expense and price of products lowed by customers. In reporting period, the
Company realized RMB 461,498,900 of operating income increasing by 25.95% over last period;
RMB 11,066,700 of profit increasing by 7.52% over last period.
Industrial production: injection business department, basically, perfected long-term troubles such
as black spots and impurities through technology transformation and innovation based on perfect
realization of full Haier air-conditioners‘ orders in Wuhan. Thus amount of order of Haier
electro-heat rose to 80% from 20%. At the same time, we vigorously promoted and brought in tens
of manipulators which replacing manual work, obtained obvious economic income. These not
only decreased above a hundred operators but also improved productivity by about 20%.
Poly-Foam business department took chance of adjustment to products structure of customers and
correspondingly regulated our own products structure. in the 1st half year, we coordinated Haier,
Jieguan and other companies to develop tens of types of new products, continuously persisted
energy-saving and consumption-decreasing, improved production technique, enhanced production
management and re-integrated labor productivity, thus achieved a favorable situation of income
increase was higher than cost increase. While profitability of visual business department
weakened owing to substantial decrease of terminal sale price.
Property lease: timely we chased favorable opportunity of busy time of property lease in the 1 st
half year, flexibly took various measurements and boost advertisement of investment attraction,
newly brought in nearly 30 tenements and 11,210 square meters. We realized pleasant record that
renting rate of all the subordinations reached 100%. Besides, the Company slightly improved unit
price of lease, thus income of property lease and profit in reporting period increased by 15% over
last period.
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, foam pieces 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
Gross Increase/decrease Increase/decrease Increase/decrease
Income
Cost of profit in income from in cost of in gross profit
Product from
operations ratio operations operations ratio
operations
(%) year-on-year (%) year-on-year (%) year-on-year (%)
Plastic
4.64 percent poi
injection 10,324.29 8,851.31 14.27 5.24 -0.17
nts increased
hardware
Foam 5.41 percent
3,426.98 2,903.87 15.26 24.35 16.88
piece points increased
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Semi-annual Report 2011
3.08 percent
LCD 30,155.38 29,671.73 1.60 36.19 40.58
points decreased
Increase/decrease in income
Area Income from operation from operations over last year
(%)
Hong Kong 30,155.38 36.19
Middle China 13,751.27 9.43
(II) General analysis on financial condition
1. Change in main financial index in the report period
Unit: RMB
Amount in the same
Item Amount in the period Increase or decrease (%)
period of last year
Operation income 461,498,937.23 366,405,407.84 25.95
Operation profit 11,111,623.21 10,001,631.67 11.10
Net profit attributable to
9,280,724.63 10,473,169.89 -11.39
shareholders of the company
Net increase amount of cash
-4,144,645.87 101,408,959.26 -104.09
and cash equivalents
Amount of Amount of
Item Increase or decrease (%)
period-end period-begin
Total assets 848,071,202.62 725,894,326.42 16.83
Owners‘ equity attributable to
275,845,356.64 266,564,632.01 3.48
parent company
Reasons for the above changes:
(1) Operating income increased over same period of last year mainly due to sales volume of
wholly-set video machine increased.
(2) Operating profit increased over same period of last year mainly due to the soaring profit in
process business of injection plastic, foam products and business of property leasing in report
period;
(3) Net profit attributable to shareholders of the Company decreased over same period of last year
mainly due to gross profit of complete visual appliance business decreased and asset devaluation
existed in last period thus income tax expense decreased thus income tax expense of this period
increased over last period.
(4) Net increase amount of cash and cash equivalent decreased over same period of last year
mainly due to accounts prepaid for suppliers caused more cash out-flow.
(5) Total asset increased over same period of last year mainly due to bank loan increased.
(III)Other operation business of the Company which set significant influence upon net profit of
the report period
Gains and losses occurred
Other operation business
(RMB’0000)
Property lease 1,729.62
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Semi-annual Report 2011
(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
Main operating troubles in reporting period refer to that overall price of complete visual appliance
business dramatically decreased due to market competition of LCD products, thus directly
performance of visual operation substantially decreased over last period.
(VI)Main working plan for the later half year
in aspect of industrial production, we will continuously take the opportunity of accelerating light
industry appliance and promoting Industrial Multiplication Plan in period of the 12 th-Fiva-Year,
take technology transformation on injection and Poly-Foam business department, and as soon as
possible create favorable condition thus offer supporting service for leading enterprises such as
Gree Electric and TCL and strive for more client channel and marketing share. Meanwhile the
Company will pay attention to that CSRC promotes establishment and perfection of internal
control in listed companies. And we will involve the construction of internal control in various
stages of production and operation, assist improvement of fine management, prevent and reduce
internal management risk. Visual business department will enhance communication with clients
and strive for profit. Besides, transformation on city updating will continuously strengthen contact
with market research and executive departments. At the same time, we will supplement
specialized personnel and perfect procedure and regulations.
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.
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Semi-annual Report 2011
Chapter V. Significant Events
I. Company Governance
The Company had built governance structure on legal person which conformed to requirements of
modern corporation management. Actual condition of governance basically conformed to
requirements of standardized documents about governance of listed companies issued by CSRC.
The main working in reporting period focused on establishment and perfection of internal control
system. based on requirements of Notice to Working Relevant to Experimental Spots of
Normalized Internal Control of Listed Companies in Shenzhen (SZJGSZi [2011] No. 31) issued
by Shenzhen SRC, we built item group for normalized internal control, formulated Working
Program of Implementation of Normalized Internal Control, arranged backbone cabals to
participate training for construction of internal control and experience exchange meeting among
listed companies organized by Shenzhen SRC. In the light of principle of relation and importance,
the Company cleared process of internal control, confirmed payment for purchase, sale
receivables, asset management, quality management, property lease, financial accounting, budget
management, financial report and process of capital management as main stages of internal
control relevant to financial report. We distinguished risks faced various processes, arranged and
listed risks, orderly promoted implementation of construction of internal control in the 1st phase.
II. Implementation of dividend and share capitalizing from public reserve for first half year
and particular about profit distribution plan for mid-term
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 2011.
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 in 2009, 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 recently, the case still made no
judge.
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.
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Semi-annual Report 2011
VI. Significant related transaction
Wholly-owned subsidiaries Wuhan Hengfa Technology Co., Ltd (hereinafter referred to as Hengfa
Technology) and Wuhan Zhongheng Huafa Trade Co., Ltd (hereinafter referred to as Huafa Trade)
will conduct daily related transaction in 2011 with Hong Kong Yutian International Investment
Co., Ltd (hereinafter referred to as HK Yutian) and Wuhan Henghseng Opto-Electrical Industry
Co., Ltd (hereinafter referred to as Hengsheng Opto-Electrical) which are subordinate controlled
subsidiaries of Wuhan Zhongheng New Technology Industry Group Co., Ltd. Budget is as follow:
1. Purchasing raw material: Hengfa Technology purchased LCD and other raw materials from HK
Yutian or Hengsheng Opto-Electrical in way of direct trade or entrusted agent.
①Hengfa Technology planed to purchase 1 million pieces of LCD from HK Yutian, concerning
US$ 60 million; trading price was the same of the marketing price.
②Hengfa Technology planed to purchase 1.6 million pieces of LCD from Hengsheng
Opto-Electrical, concerning US$ 96 million, trading price was lower by 1% than the average
marketing price.
2. Export of finished products: Hengfa Technology sold complete assembly LCD to HK Yutian.
Hengfa Technology planed to sell about 2.6 sets of complete LCD to HK Yutian, concerning
US$ 208 million, the trading price was confirmed by ordering price. At the same time, HK Yutian
charged Hengfa Technology US$ 100 of customs transport fees per order.
3. Export of finished products: HK Yutian sold the above assembly LCD to Huafa Trade, HK
Yutian planed to sell about 1.8 million sets of assembly LCD to Huafa Trade, concerning US$ 144
million, the trading price was confirmed by ordering price, excluding any additional trading
difference price.
Details could be seen from notice on Jan. 15 of 2011.
In reporting period, Hengfa Technology actually purchased 232436 pieces of LCD from
Hengsheng Poto-Electrical, concerning US$ 13.719 million; from HK Yutian 310,074 pieces with
US$ 22.6539 million; while it sold 591,872 sets of assembly LCD to HK Yutian with
US$ 45.7685 million. Huafa actually purchased 263831 sets of assembly LCD from HK Yutian
with US$ 16.768 million.
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)Found more details of guarantee contract in Chapter VIII. ―External Guarantee of the
Company‖
(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. External guarantee
1. Wholly owned subsidiary Hengfa Technology took over foundry orders about LCD and needed
to purchase main material namely LCD mould or LCD open cell for producing LCD from
Shanghai Zhonghang Opto-Electric Co., Ltd due to production and operation and then signed the
Sale Frame Term. To ensure enough account for Hengfa Technology for paying for loan of
Shanghai Zhonghang Opto-Electric Co., Ltd occurring during trade, the Company offered
guarantee for debts occurring during trade between Hengfa Technology and Shanghai Zhonghang
Opto-Electric Co., Ltd, the amount was confirmed by actual trading amount, less than US$ 10
million every month. Details could be seen from notice on Oct. 15 of 2010. From Jan. to Jun. of
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Semi-annual Report 2011
2011, the Company accumulatively offered guarantee for Hengfa Technology over the above
transaction, dismissed US$ 12,096,288 of guarantee accumulatively. Guarantee amount reached to
US$ 326,850 till Jun. 30 of 2011.
2. For ensuring necessary capital for production and operation of wholly-owned subsidiary Hengfa
Technology, the Company planed to offer below RMB 0.2 billion of joint liability guarantees for
2011 annual bank loan of Hengfa Technology. Details could be seen from notice on Mar. 12 of
2011.
In reporting period, the Company took over joint liability for guarantor who granted Hengfa
Technology RMB 0.1 billion (or equivalent foreign currency) of line of credit from China
Minsheng Banking Co., Ltd. On Jan. 6 of 2011, the Company accumulatively offered RMB
56,046,248.32 and US$ 11,238,738.92 of guarantee for Hengfa Technology‘s bank loan. Thus
accumulatively we dismissed RMB 14,851,972.06 and US$ 3,149,618.00 of guarantee. Till Jun.
30 of 2011, the guarantee amount reached RMB 46,194,276.26 and US$ 8,089,120.92.
Above all, total amount of guarantee of the Company and controlled subsidiaries was RMB 100.9
million taking up about 36.58% of the net asset of the Company at period-end. They were all for
wholly-owned subsidiary Hengfa Technology, un-existing overdue guarantee and guarantee
concerning lawsuits.
IX. Non-operating capital occupation and discharge of majority shareholder and affiliated
enterprises
Among asset replacements from 2009 to 2010 of the Company and controlling shareholder Wuhan
Zhongheng Group, industrial land located on Huafa Road, Gongming Town, Guangming New
District, Shenzhen (Real Estate Certificate SFDZi No. 7226760 and SFDZi No. 7226763, Parcel
No. A627-005 and A627-007) belongs to sold asset of our own of asset replacement program. Till
present, the transferring-out procedure hasn‘t been handled. For getting rid of idle land, Wuhan
Zhongheng Group entrusted subordinate wholly-owned subsidiary Shenzhen Zhongheng Huafa
Technology Co., Ltd built temporary warehouse on the above lands. But the land ownership is
ours; construction procedure of temporary warehouse was implemented in the name of the
Company paid part of construction fees for the above temporary warehouses. Till April 30 of 2011,
the above paid fees accounted to RMB 2.4284 million. Wuhan Zhongheng Group has paid the
above accounts in cash on May 6 of 2011.
X. Special explanation and independent opinion issued by independent directors on capital
occupancy and external guarantee of related parties of the Company
Based on Notice to Several Problems about Capital Contact between Listed Companies and
Related Parties as well as External Guarantee of Listed Companies (ZJF[2003] No. 56) and Notice
to Normalized Guarantee of Listed Companies (ZJF[2005] No. 120), we approved capital
occupation of controlling shareholder and other related parties and external guarantee as
independent director, and believed that:
1. Till Jun. 30 of 2011, controlling shareholder and other related parties did never occupied capital of
the Company illegally.
2. The Company did never offer guarantee for controlling shareholder and other related parties,
any illegal unit or person. In reporting period, all the guarantees were for wholly-owned
subsidiaries and conformed to normalized approval and disclosure procedure. There was no
overdue guarantee or ones concerning lawsuit, and no particulars against relevant rules of CSRC.
15
Semi-annual Report 2011
XI. Particulars about 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
1. On Jun. 5, 2008, with examination and approval from the 3rd
Planning within 1 year temporary meeting of the Board for 2008, the Company took cash
after completion of equity RMB 27 million to buy relevant assets concerning production of
transaction procedures: injection products from Wuhan Zhongheng Group, and thus part
Wuhan Zhongheng 1.Relevant capital of commitment had been finished;
New Science & plastic injection business 2. In the first 10 days of May, 2008, the Company officially started
Technology will injected into the off the significant asset restructure work of purchasing the 70%
Industrial Group Company; equities of Wuhan Hengsheng Photoelectricity Industry Co., Ltd.;
Co., Ltd. 2. 70% equity of engaged financial consultant and law consultant to carry out
Hengsheng Photoelectricity earnest investigation on the restructure assets that may be involved,
will be injected into the and negotiated with relevant departments which were in charge of
Company. this. However, due to that relevant condition was not mature, there
were obstacles in material asset restructure.
(II)Commitments of controlling shareholders made in the share merger reform scheme of the
Company
Name of shareholder Special commitment Performance of commitment
Commitment has been fulfilled on May 18th
of 2010; regarding total holding shares of
Wuhan Zhongheng
Promised that the holding non-circulating the Company 116,489,894 shares were still
New Science &
shares of the Company won‘t be traded on in pledge, till the period-end of this
Technology
the market within 36 months since they reporting period, Wuhan Hunching Group
Industrial Group
acquired listed trading right. didn‘t apply lifting procedure over
Co., Ltd.
restricted shares to the Shenzhen Stock
Exchange.
XII. Audit
The financial report of the Company in semi-annual of year 2011 hasn‘t been audited.
The Company has not engaged any audit organization for 2011 in reporting period.
XIII. 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 investor‘s 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.
16
Semi-annual Report 2011
Chapter VI. Financial Report (Un-audited)
CONSOLIDATED BALANCE SHEET
2011-6-30
Prepared by Shenzhen Zhongheng Huafa Holding Co., Ltd Unit: RMB
Items Annotation Balance of year-begin Balance of period-end
Current assets:
Monetary funds VIII.1 113,686,755.85 109,542,109.98
Settlement provisions
Capital lent
Transaction finance asset
Notes receivable VIII.2 26,574,387.66 17,234,658.70
Accounts receivable VIII.3 181,675,191.14 228,043,354.24
Accounts paid in advance VIII.4 1,505,815.10 76,111,524.67
Insurance receivable
Reinsurance receivables
Contract reserve of reinsurance receivable
Interest receivable
Dividend receivable
Other receivables VIII.5 17,233,030.06 11,351,452.56
Purchase restituted finance asset
Inventories VIII.6 74,479,853.17 84,794,846.83
Non-current asset due within one year
Other current assets
Total current assets 415,155,032.98 527,077,946.98
Non-current assets:
Granted loans and advances
Finance asset available for sales
Held-to-maturity investment
Long-term account receivable
Long-term equity investment
Investment property VIII.7 37,979,444.15 36,948,612.17
Fixed assets VIII.8 204,623,451.74 213,205,439.11
Construction in progress VIII.9 5,641,008.31 8,281,281.21
Engineering material
Disposal of fixed asset 215.50
Productive biological asset
Oil and gas asset
Intangible assets VIII.10 53,426,885.35 53,039,490.53
Expense on Research and Development
Goodwill
Long-term expenses to be apportioned VIII.11 2,193,225.00 1,929,505.92
Deferred income tax asset VIII.12 6,875,278.89 7,588,711.20
Other non-current asset
Total non-current asset 310,739,293.44 320,993,255.64
Total assets 725,894,326.42 848,071,202.62
Legal representative: Mr. Li Zhongqiu
Charger of Accounting: Mr. Jiang Yanjun
Charger of Accounting Institution: Mr. Jiang Yanjun
17
Semi-annual Report 2011
CONSOLIDATED BALANCE SHEET (CONT’)
2011-6-30
Prepared by Shenzhen Zhongheng Huafa Holding Co., Ltd Unit: RMB
Items Annotation Balance of year-begin Balance of period-end
Current liabilities:
Short-term loans VIII.14 66,073,930.00 110,199,880.15
Loan from central bank
Absorbing deposit and interbank deposit
Capital borrowed
Transaction financial liabilities
Notes payable VIII.15 31,992,283.10 32,842,359.61
Accounts payable VIII.16 125,758,949.05 204,415,894.98
Accounts received in advance VIII.17 32,473.00 775,636.18
Selling financial asset of repurchase
Commission charge and commission
payable
Wage payable VIII.18 3,265,665.51 3,389,381.16
Taxes payable VIII.19 5,169,117.15 -2,166,886.37
Interest payable
Dividend payable
Other accounts payable VIII.20 17,667,880.97 16,708,967.12
Reinsurance payables
Insurance contract reserve
Security trading of agency
Security sales of agency
Non-current liabilities due within 1 year
Other current liabilities 5,807,617.52
Total current liabilities 249,960,298.78 371,972,850.35
Non-current liabilities:
Long-term loans VIII.21 204,374,000.00 195,257,600.00
Bonds payable
Long-term account payable
Special accounts payable
Projected liabilities VIII.22 4,995,395.63 4,995,395.63
Deferred income tax liabilities
Other non-current liabilities VIII.23
Total non-current liabilities 209,369,395.63 200,252,995.63
Total liabilities 459,329,694.41 572,225,845.98
shareholders’ equity:
Paid-in capital (or share capital) VIII.24 283,161,227.00 283,161,227.00
Capital public reserve VIII.25 109,496,837.33 109,496,837.33
Less: Inventory shares
Reasonable reserve
Surplus public reserve VIII.26 77,391,593.25 77,391,593.25
Provision of general risk
Retained profit VIII.27 -203,485,025.57 -194,204,300.94
Balance difference of foreign currency
translation
Total shareholder’s equity attributable to 266,564,632.01 275,845,356.64
18
Semi-annual Report 2011
parent company
Minority interests
Total shareholder’s equity 266,564,632.01 275,845,356.64
Total liabilities and shareholder’s equity 725,894,326.42 848,071,202.62
Legal representative: Mr. Li Zhongqiu
Charger of Accounting: Mr. Jiang Yanjun
Charger of Accounting Institution: Mr. Jiang Yanjun
CONSOLIDATED PROFIT STATEMENT
January-June, 2011
Prepared by Shenzhen Zhongheng Huafa Holding Co., Ltd Unit: RMB
Items Annotation Amount at year-begin Amount at period-end
I. Total operating income 366,405,407.84 461,498,937.23
Including: Operating income VIII.28 366,405,407.84 461,498,937.23
Interest income
Insurance gained
Commission charge and commission income
II. Total operating cost 356,403,776.17 450,387,314.02
Including: Operating cost VIII.28 326,247,895.99 416,891,940.56
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 VIII.29 1,493,633.36 1,737,536.45
Sales expenses VIII.30 1,169,773.97 3,328,879.52
Administration expenses VIII.30 16,030,758.40 19,453,213.98
Financial expenses VIII.30 7,681,282.39 8,801,913.51
Losses of devaluation of asset VIII.31 3,780,432.06
Add: Changing income of fair value
Investment income
Including: Investment income on affiliated
company and joint venture
Entrust operating income
Exchange income (loss was listed as -)
III. Operating profit (loss was listed as ‘-‘) 10,001,631.67 11,111,623.21
Add: Non-operating income VIII.32 317,837.12 16,726.00
Less: Non-operating expense VIII.33 27,044.72 61,660.40
Including: Disposal loss of non-current asset
IV. Total Profit (loss was listed as ‘-‘) 10,292,424.07 11,066,688.81
Less: Income tax expense -180,745.82 1,785,964.18
V. Net profit 10,473,169.89 9,280,724.63
Net profit attributable to owner‘s of parent
10,473,169.89 9,280,724.63
company
Minority shareholders‘ gains and losses
VI. Earnings per share — —
19
Semi-annual Report 2011
i. Basic earnings per share 0.0370 0.0328
ii. Diluted earnings per share 0.0370 0.0328
VII. Other consolidated income
VIII. Total comprehensive income 10,473,169.89 9,280,724.63
Total comprehensive income attributable to parent
10,473,169.89 9,280,724.63
company
Total comprehensive income attributable to
minority shareholders
Legal representative: Mr. Li Zhongqiu
Charger of Accounting: Mr. Jiang Yanjun
Charger of Accounting Institution: Mr. Jiang Yanjun
CONSOLIDATED CASH FLOW STATEMENT
January-June, 2011
Prepared by Shenzhen Zhongheng Huafa Holding Co., Ltd Unit: RMB
Items Annotation Amount at year-begin Amount at period-end
I. Cash flows arising from operating activities:
Cash received from selling commodities and
306,901,158.16 452,076,662.93
providing labor services
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 24,796,515.05
Subtotal of cash inflow arising from operating
318,744,739.93 476,873,177.98
activities
Cash paid for purchasing commodities and
250,172,083.95 444,560,216.90
receiving labor service
Net increase of customer loans and advances
Net increase of deposits in central bank and
interbank
Cash paid for original insurance contract
compensation
Cash paid for interest, commission charge and
commission
Cash paid for bonus of guarantee slip
Cash paid to/for staff and workers 14,498,567.95 22,214,509.42
Taxes paid 4,696,333.60 2,828,520.42
Other cash paid concerning operating activities 19,715,882.63 22,347,857.14
20
Semi-annual Report 2011
Subtotal of cash outflow arising from operating
289,082,868.13 491,951,103.88
activities
Net cash flows arising from operating activities 29,661,871.80 -15,077,925.90
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
4,297,438.24 11,339,162.84
other long-term assets
Cash paid for investment
Net increase of mortgaged loans
Net cash received from subsidiaries and other
units
Other cash paid concerning investing activities
Subtotal of cash outflow from investing
4,297,438.24 11,339,162.84
activities
Net cash flows arising from investing activities -4,297,438.24 -11,339,162.84
III. Cash flows arising from financing activities
Cash received from absorbing investment
Including: Cash received from absorbing
minority shareholders‘ investment by subsidiaries
Cash received from loans 102,001,334.04 155,585,303.70
Cash received from issuing bonds
Other cash received concerning financing activities
Subtotal of cash inflow from financing activities 102,001,334.04 155,585,303.70
Cash paid for settling debts 18,611,834.09 124,418,515.27
Cash paid for dividend and profit distributing or
7,344,974.25 8,974,493.04
interest paying
Including: Dividend and profit of minority
shareholder paid by subsidiaries
Other cash paid concerning financing activities
Subtotal of cash outflow from financing
25,956,808.34 133,393,008.31
activities
Net cash flows arising from financing activities 76,044,525.70 22,192,295.39
IV. Influence on cash and cash equivalents due
80,147.48
to fluctuation in exchange rate
V. Net increase of cash and cash equivalents 101,408,959.26 -4,144,645.87
Add: Balance of cash and cash equivalents at the
27,153,099.93 113,686,755.85
period -begin
VI. Balance of cash and cash equivalents at the
128,562,059.19 109,542,109.98
period -end
Legal representative: Mr. Li Zhongqiu
Charger of Accounting: Mr. Jiang Yanjun
Charger of Accounting Institution: Mr. Jiang Yanjun
21
Semi-annual Report 2011
CONSOLIDATED STATEMENT ON CHANGES OF SHAREHOLDERS’ EQUITY
The 1st half year of 2011
Prepared by Shenzhen Zhongheng Huafa Holding Co., Ltd Unit: RMB
Amount in this report period
Owners' equity attributable to the parent company
Items Less: General Minority‘s Total shareholders‘
Paid-up capital Reasonable equity equity
Capital reserves Treasury Surplus reserves risk Retained profit Others
(Share capital) reserve
Stock provision
I. Balance at the end of last year 283,161,227.00 109,496,837.33 77,391,593.25 -203,485,025.57 266,564,632.01
Add: Changes of accounting policy
Error correction of the last period
Others
II. Balance at the beginning of this year 283,161,227.00 109,496,837.33 77,391,593.25 -203,485,025.57 266,564,632.01
III. Increase/ Decrease in this year (Decrease is
9,280,724.63 9,280,724.63
listed with'"-")
(I) Net profit 9,280,724.63 9,280,724.63
(II)Other consolidated income
Subtotal of (I)and (II) 9,280,724.63 9,280,724.63
(III) Owners' devoted and decreased capital
1. Owners' devoted capital
2. Amount calculated into owners' equity paid in shares
3. Others
(IV) Profit distribution
1. Withdrawal of surplus reserves
2. Withdrawal of general risk provisions
3. Distribution for owners (shareholders)
4. Others
(V) Carrying forward internal owners' equity
1. Capital reserves conversed to capital (share capital)
2. Surplus reserves conversed to capital (share capital)
3. Remedying loss with surplus reserve
4. Others
(VI)Reasonable reserve
1. Withdrawal in the report period
2. Usage in the report period
IV. Balance at the end of the report period 283,161,227.00 109,496,837.33 77,391,593.25 -194,204,300.94 275,845,356.64
22
Semi-annual Report 2011
CONSOLIDATED STATEMENT ON CHANGES OF OWNERS’ EQUITY（CON）
The 1st half year of 2011
Prepared by Shenzhen Zhongheng Huafa Holding Co., Ltd Unit: RMB
Amount in last year
Owners' equity attributable to the parent company
Items Less: General Minority‘s
Paid-up capital Reasonable Total owners‘ equity
Capital reserves Treasury Surplus reserves risk Retained profit Others equity
(Share capital) reserve
Stock provision
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
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
III. Increase/ Decrease in this year (Decrease is
5,423,510.39 9,177,262.81 14,600,773.20
listed with'"-")
(I) Net profit 9,177,262.81 9,177,262.81
(II)Other consolidated income
Subtotal of (I)and (II) 9,177,262.81 9,177,262.81
(III) Owners' devoted and decreased capital 5,423,510.39 5,423,510.39
1. Owners' devoted capital
2. Amount calculated into owners' equity paid in shares
3. Others 5,423,510.39 5,423,510.39
(IV) Profit distribution
1. Withdrawal of surplus reserves
2. Withdrawal of general risk provisions
3. Distribution for owners (shareholders)
4. Others
(V) Carrying forward internal owners' equity
1. Capital reserves conversed to capital (share capital)
2. Surplus reserves conversed to capital (share capital)
3. Remedying loss with surplus reserve
4. Others
(VI)Reasonable reserve
1. Withdrawal in the report period
2. Usage in the report period
IV. Balance at the end of the report period 283,161,227.00 109,496,837.33 77,391,593.25 -203,485,025.57 266,564,632.01
23
Semi-annual Report 2011
BALANCE SHEET OF PARENT COMPANY
2011-6-30
Prepared by Shenzhen Zhongheng Huafa Holding Co., Ltd Unit: RMB
Items Annotation Balance of year-begin Balance of period-end
Current assets:
Monetary funds 29,345,694.04 30,023,514.65
Transaction finance asset
Notes receivable 2,777,176.74 2,175,966.83
Accounts receivable XIII.1 74,524,052.26 64,297,585.95
Accounts paid in advance 702,915.76
Interest receivable
Dividend receivable
Other receivables XIII.2 50,283,251.74 48,824,498.34
Inventories 2,771,554.67 2,118,210.90
Non-current asset due within one year
Other current assets
Total current assets 159,701,729.45 148,142,692.43
Non-current assets:
Finance asset available for sales
Held-to-maturity investment
Long-term account receivable
Long-term equity investment XIII.3 184,708,900.00 184,708,900.00
Investment property 37,979,444.15 36,948,612.17
Fixed assets 118,466,024.39 116,199,926.64
Construction in progress 1,273,356.00 1,623,356.00
Engineering material
Disposal of fixed asset
Productive biological asset
Oil and gas asset
Intangible assets 5,858,220.67 5,858,220.67
Expense on Research and Development
Goodwill
Long-term expenses to be apportioned 2,193,225.00 1,929,505.92
Deferred income tax asset 7,431,752.66 7,431,752.66
Other non-current asset
Total non-current asset 357,910,922.87 354,700,274.06
Total assets 517,612,652.32 502,842,966.49
Legal representative: Mr. Li Zhongqiu
Charger of Accounting: Mr. Jiang Yanjun
Charger of Accounting Institution: Mr. Jiang Yanjun
24
Semi-annual Report 2011
BALANCE SHEET OF PARENT COMPANY (CONT’)
2011-6-30
Prepared by Shenzhen Zhongheng Huafa Holding Co., Ltd Unit: RMB
Items Annotation Balance of year-begin Balance of period-end
Current liabilities:
Short-term loans 23,570,130.56
Transaction financial liabilities
Notes payable
Accounts payable 21,908,611.35 11,456,088.45
Accounts received in advance 2,373.00 771,585.06
Wage payable 565,169.69 606,745.69
Taxes payable 10,729,506.76 10,279,167.88
Interest payable
Dividend payable
Other accounts payable 14,027,951.25 11,334,886.69
Non-current liabilities due within 1 year
Other current liabilities 3,535,863.13
Total current liabilities 47,233,612.05 37,984,336.90
Non-current liabilities:
Long-term loans 204,374,000.00 195,257,600.00
Bonds payable
Long-term account payable
Special accounts payable
Projected liabilities 4,995,395.63 4,995,395.63
Deferred income tax liabilities
Other non-current liabilities
Total non-current liabilities 209,369,395.63 200,252,995.63
Total liabilities 256,603,007.68 238,237,332.53
Owner’s equity (or shareholders’ equity):
Paid-in capital (or share capital) 283,161,227.00 283,161,227.00
Capital public reserve 109,496,837.33 109,496,837.33
Less: Inventory shares
Reasonable reserve
Surplus public reserve 77,391,593.25 77,391,593.25
Provision of general risk
Retained profit -209,040,012.94 -205,444,023.62
Total owner’s equity 261,009,644.64 264,605,633.96
Total liabilities and owner’s equity 517,612,652.32 502,842,966.49
Legal representative: Mr. Li Zhongqiu
Charger of Accounting: Mr. Jiang Yanjun
Charger of Accounting Institution: Mr. Jiang Yanjun
25
Semi-annual Report 2011
PROFIT STATEMENT OF PARENT COMPANY
January-June, 2011
Prepared by Shenzhen Zhongheng Huafa Holding Co., Ltd Unit: RMB
Items Annotation Amount at year-begin Amount at period-end
I. Operating income XIII.4 24,888,551.57 21,045,959.33
Less: operating cost XIII.4 7,495,814.81 1,667,103.70
Operating tax and extras 1,253,188.97 1,538,172.11
Sales expenses 240,907.09 174,622.90
Administration expenses 9,796,198.49 9,498,164.72
Financial expenses 6,544,974.25 4,527,872.18
Losses of devaluation of asset
Add: Changing income of fair value
Investment income
Including: Investment income on affiliated company
and joint venture
Entrust operating income
II. Operating profit (loss listed with “-“) -442,532.04 3,640,023.72
Add: Non-operating income 248,855.00 16,726.00
Less: Non-operating expense -2,008.72 60,760.40
Including: Disposal loss of non-current asset
III. Total Profit (loss listed with “-“) -191,668.32 3,595,989.32
Less: Income tax expense
IV. Net profit (loss listed with “-“) -191,668.32 3,595,989.32
V. Earnings per share — —
i. Basic earnings per share
ii. Diluted earnings per share
VI. Other consolidated income
VII. Total comprehensive income -191,668.32 3,595,989.32
Legal representative: Mr. Li Zhongqiu
Charger of Accounting: Mr. Jiang Yanjun
Charger of Accounting Institution: Mr. Jiang Yanjun
26
Semi-annual Report 2011
CASH FLOW STATEMENT OF PARENT COMPANY
January-June, 2011
Prepared by Shenzhen Zhongheng Huafa Holding Co., Ltd Unit: RMB
Items Annotation Amount at year-begin Amount at period-end
I. Cash flows arising from operating activities:
Cash received from selling commodities and
119,051,361.84 22,993,971.40
providing labor services
Write-back of tax received
Other cash received concerning operating activities 33,320,273.71 13,564,025.31
Subtotal of cash inflow arising from operating
152,371,635.55 36,557,996.71
activities
Cash paid for purchasing commodities and receiving
27,452,062.31 1,305,400.85
labor service
Cash paid to/for staff and workers 3,819,860.45 2,635,998.00
Taxes paid 2,261,491.06 2,630,581.04
Other cash paid concerning operating activities 16,737,663.89 13,514,544.58
Subtotal of cash outflow arising from operating
50,271,077.71 20,086,524.47
activities
Net cash flows arising from operating activities 102,100,557.84 16,471,472.24
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
3,204,747.00 533,492.40
long-term assets
Cash paid for investment 58,300,000.00
Net cash received from subsidiaries and other
units
Other cash paid concerning investing activities
Subtotal of cash outflow from investing activities 61,504,747.00 533,492.40
Net cash flows arising from investing activities -61,504,747.00 -533,492.40
III. Cash flows arising from financing activities
Cash received from absorbing investment
Cash received from loans
Other cash received concerning financing activities
Subtotal of cash inflow from financing activities - -
Cash paid for settling debts 18,611,834.09 9,116,400.00
Cash paid for dividend and profit distributing or
6,208,666.11 6,143,759.23
interest paying
Other cash paid concerning financing activities
Subtotal of cash outflow from financing activities 24,820,500.20 15,260,159.23
Net cash flows arising from financing activities -24,820,500.20 -15,260,159.23
IV. Influence on cash and cash equivalents due to
fluctuation in exchange rate
27
Semi-annual Report 2011
V. Net increase of cash and cash equivalents 15,775,310.64 677,820.61
Add: Balance of cash and cash equivalents at the
26,068,936.24 29,345,694.04
period -begin
VI. Balance of cash and cash equivalents at the
41,844,246.88 30,023,514.65
period -end
Legal representative: Mr. Li Zhongqiu
Charger of Accounting: Mr. Jiang Yanjun
Charger of Accounting Institution: Mr. Jiang Yanjun
28
Semi-annual Report 2011
STATEMENT ON CHANGES OF PARENT COMPANY SHAREHOLDERS’ EQUITY
The 1st half year of 2011
Prepared by Shenzhen Zhongheng Huafa Holding Co., Ltd
Unit: RMB
Amount in this report period
Items Less: General
Reasonable
Share capital Capital reserves Treasury Surplus reserves risk Retained profit Total owners‘ equity
reserve
Stock reserve
I. Balance at the end of last year 283,161,227.00 109,496,837.33 77,391,593.25 -209,040,012.94 261,009,644.64
Add: Changes of accounting policy
Error correction of the last period
Others
II. Balance at the beginning of this year 283,161,227.00 109,496,837.33 77,391,593.25 -209,040,012.94 261,009,644.64
III. Increase/ Decrease in this year 3,595,989.32 3,595,989.32
(I) Net profit 3,595,989.32 3,595,989.32
(II)Other consolidated income
Subtotal of (I)and (II) 3,595,989.32 3,595,989.32
(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．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 in the report period
2. Usage in the report period
IV. Balance at the end of the report period 283,161,227.00 109,496,837.33 77,391,593.25 -205,444,023.62 264,605,633.96
29
Semi-annual Report 2011
STATEMENT ON CHANGES OF PARENT COMPANY SHAREHOLDERS’ EQUITY (CONT’)
The 1st half year of 2011
Prepared by Shenzhen Zhongheng Huafa Holding Co., Ltd Unit: RMB
Amount in last year
Items Less:
Reasonable General
Share capital Capital reserves Treasury Surplus reserves Retained profit Total owners‘ equity
reserve risk reserve
Stock
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
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
III. Increase/ Decrease in this year 5,423,510.39 3,920,833.44 9,344,343.83
(I) Net profit 3,920,833.44 3,920,833.44
(II)Other consolidated income
Subtotal of (I)and (II) 3,920,833.44 3,920,833.44
(III) Owners' devoted and decreased capital 5,423,510.39 5,423,510.39
1. Owners' devoted capital
2. Amount calculated into owners' equity paid in
shares
3. Others 5,423,510.39 5,423,510.39
(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 in the report period
2. Usage in the report period
IV. Balance at the end of the report period 283,161,227.00 109,496,837.33 77,391,593.25 -209,040,012.94 261,009,644.64
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Semi-annual report of 2011
Annotations to the Accounting Statements:
I. 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 allotted 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 allocation, 1.764 shares
will be increased to each 10 shares for all shareholders.
On 5 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 circulation of entire
foreign capital.
On 30 November 2001 and 7 December 2001, Luks Group reduced the B-share of the Company,
totaling 14,158,000 shares and 14,159,000 shares respectively. As of 17 December 2001, SEG had
aggregately reduced B-share of the Company totaling 14,487,400 shares, accounting for 5.12% of
total shares capital of the Company.
On 6 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
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Semi-annual report of 2011
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 30 June 2011, 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 molding ware, light packing materials (manufacturing &
operating in Wuhan), hardware (including molds), electroplate and solder stick, real estate
development and operation (ref. S.F.D.C.No. 7226760), property management. Establish affiliated
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 processing and sales of the fine injection plastic parts, LED display and
light-style packaging materials as well as leasing business and property. The Company is registered
at Block 411, Huafabei Road, Futian District, Shenzhen City; legal representative is Li Zhongqiu.
The parent company of the Company is Wuhan Zhongheng, and the shareholders meeting is its
agency of power, which executes the decision right on material matter such as operation guidelines,
funding, investment and profit distribution. Board of directors shall answer for shareholders
meeting, which implements operation and decision right of the company according to laws;
Managers take charge for organizing and executing the decisions made in shareholders meeting and
board of directors meeting, as well as presiding the production and operation management work of
the company. The functional management departments include Enterprise Planning Department,
Financial Department, Comprehensive Management Department, Business Center, Video Business
Department, Circuit Panel Business Department, Plastic Injection Business Department, Auditing
Department, Office of Board of Directors etc., the branches include Wuhan branch etc., and
subsidiaries mainly include Shenzhen Huafa Property Lease Management Co., Ltd.,(―Huafa Lease
Co., ―) Shenzhen Zhongheng Huafa Property Management Co., Ltd.,(―Huafa Property Co.‖),
Wuhan Hengfa Scientific and Technology Co., Ltd.(―Hengfa Scientific& Technology‖) and
Wuhan Zhongheng Huafa Trade Co., Ltd.(―Huafa Trade Co., ―) 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 policy and estimations stated in Note IV Important
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Semi-annual report of 2011
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) Transaction of foreign currency
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. 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 ―retained 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
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Semi-annual report of 2011
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 held maturity, 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 held maturity 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 book kept 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 the 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
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Semi-annual report of 2011
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.
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. Bad debts provision for 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.
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Semi-annual report of 2011
The sign account receivable above 0.5 million yuan 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 bad debts provision of other 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%
8. Inventories
Inventories of the Group include raw materials, packing materials, low-value consuming product,
product in progress and goods in stock 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
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Semi-annual report of 2011
realizable value shall be calculated based on the price set out in relevant contracts.
9. Long-term equity investment
Long-term equity investment mainly includes the equity investment held by the Group that may
produce control, joint control or significant influence over invested entity, or the equity investment
that does not have control, joint control or significant influence on the invested 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, the fair
values, on the merger (acquiring) date, of the assets given, the liabilities incurred or assumed, and
the equity securities issued by the acquirer, in exchange for the control of the merged (acquired)
enterprise, which will be, on the merger (acquiring) date, further regarded as the initial investment
cost of long-term equity investment.
Apart from the aforesaid long-term equity investment acquired through business merger, those
long-term equity investment, if acquiring through paying cash, shall consider its purchasing price
actually paid as the initial investment cost, which includes expenses, taxes and other necessary
expenditure directly related to the acquiring of the long-term equity investment; if acquired by
issuing equity securities, shall consider the fair value of 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 available for Sales‖.
The price of a long-term equity investment measured by employing the cost method shall be
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Semi-annual report of 2011
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-term 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:
Net
Depreciation estimative Annual
Type
year(year) remnant depreciation rate
rate
Land use 50 10% 1.80%
right
House 5--50 10% 1.80%--18.00%
building
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
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Semi-annual report of 2011
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. Fixed Assets
The fixed 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.
Fixed 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.
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:
Annual
Depreciation Estimative
Serial No. Type depreciation
year (year) remnant rate (%)
rate (%)
1 House building 20—50 years 10% 1.80-4.50%
Machine
10 years 10% 9.00%
2 equipment
3 Mold equipment 3 years 10% 30.00%
Transportation
5years 10% 18.00%
4 equipment
5 Device equipment 5 years 10% 18.00%
6 Tool equipment 5 years 10% 18.00%
7 Office appliance 5 years 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 fixed assets, and the change is dealt with as the one in the accounting
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Semi-annual report of 2011
estimation.
As the fixed assets cannot generate the economic interest by the disposal, or expectantly by use or
disposal, the termination of the recognition is available. For those fixed assts for sale, transfer, and
disposal income of discard or damaged fixed assets, the amount after deducting its book carrying
value and relevant taxes, shall reckoned into current gains/losses.
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 fixed 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. The remaining borrowing costs shall be recognized as expenses in current period.
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 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
9
Semi-annual report of 2011
intangible assets, determined its actual cost by actual payment and relevant other expenditures.
The intangible assets invested by investors shall be recognized its actual cost for value that agreed
in investment contract or Agreements; for those values are agreed without fair value in contract or
Agreement, determined actual cost by fair value.
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 will 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.
10
Semi-annual report of 2011
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 expenses to be amortized
Long-term deferred expenses of the Group refers to the expenses that have been expended, and shall
be amortized during current period and each period afterwards with amortizing term beyond 1 year
(excluding 1 year). Those expenses shall be amortized evenly in its benefited periods. Where the
long-term deferred expenses will not benefit the later accounting period, the remaining amount
to-be-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
11
Semi-annual report of 2011
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, be included in the relevant costs or
expenses, and the liabilities shall be increased accordingly; If the right may not be exercised until
the vesting period comes to an end or until the specified performance conditions are met, on each
balance sheet date within the vesting period, the services obtained in the current period shall, based
on the best estimate of the information about the exercisable right, be included in the relevant costs
or expenses and the corresponding liabilities at the fair value of the liability undertaken by the
Company.
On each balance sheet date and on each account date prior to the settlement of the relevant
liabilities, 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,
12
Semi-annual report of 2011
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 makes 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 relevant amount of revenue can be
measured in a reliable way; The relevant economic benefits may flow into the enterprise; The
relevant costs incurred or to be incurred can be measured in a reliable way, it may recognize the
realization of revenue.
(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
13
Semi-annual report of 2011
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.
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
14
Semi-annual report of 2011
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 for 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
15
Semi-annual report of 2011
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 the fair value of the identifiable
net assets it obtains from the acquiree as good will; if the combination costs are less than the fair
value of the identifiable net assets it obtains from the acquiree, it shall record the balance into the
gains 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:
16
Semi-annual report of 2011
1. Corporate income tax
The previous corporate income tax applicable to the Company and the subsidiary – Huafa Lease, is
15%. Pursuant to ―Corporate Income Tax in People‘s Republic of China‖ 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 24%.
The rate applicable to Wuhan Branch, Shenzhen Zhongheng Huafa Property Co., Ltd. – the
subsidiary and Wuhan Hengfa Science and Technology Co., Ltd., 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 is 5%.
4. Extra charges of, city planning tax and educational expenses
The city planning tax and educational expenses extra were levy on payable turn-over taxes for the
Company and its all subsidiaries with applicable rate of 7% and 3% respectively since 1 December
2010.
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
Other project
amount for net
Company Company Registered Business Business Invested capital
Registered Capital investment to
Name type Address Nature Scope at period-end
subsidiaries
actually
Subsidiaries
obtained from
other way
Property
leasing and
Huafa Leasing Limited Property management
Shenzhen RMB1 million RMB0.6 million -
Co., Liability Management of
self-owned
property
Property
leasing and
Huafa Property Limited Property management
Shenzhen RMB1 million RMB1 million -
Co., Liability Management of
self-owned
property
Hengfa production
Limited Production RMB181,643,100 RMB181,643,100
Scientific and Wuhan and sale of -
Liability and Sale
Technology packing
17
Semi-annual report of 2011
material and
plastic
products etc.
Sales of
photoelectric
Limited products and
Huafa Trade Co., Wuhan Sales RMB 100,000 RMB 100,000 -
Liability business of
import and
export
Continued
Balance of owners’ equity of
Minority parent company for
Statements interest used deducting loss in Period
Voting Equity of
Holding are for offsetting diluted by minority
Company Name Right minor
Percentage consolidated minority shareholders of subsidiary
percentage shareholders
or not interest gains above share enjoyed in
and losses owners’ equity at
Period-beginning
Subsidiaries obtained
from other way
Huafa Leasing Co., 60% 60% Yes - - -
Huafa Property Co., 100% 100% Yes - - -
Hengfa Scientific and 100% 100% Yes
- - -
Technology Co.,
Huafa Trade Co., 100% 100% Yes - - -
VIII. Notes to Major Items in the Consolidated Financial Statement
Unless stated otherwise, among the financial data disclosing bellowed, ―period-begin‖ refers to 31
December 2010, ―period-end‖ refers to 30 June 2011, ―this period‖ refers to 1 January 2011 to 30
June 2011, ―last period‖ refers to 1 January 2010 to 30 June 2010, RMB is the currency unit used in
this report.
1. Monetary fund
2011.06.30 2010.12.31
Item Exchange Converted into Exchange Converted into
Original currency Original currency
rate RMB rate RMB
Cash in
538,828.84 216,981.27
Treasury
RMB 485,116.60 1.00 485,116.60 159,296.55 1.00 159,296.55
HKD 53,363.93 0.83 44,489.50 56,721.43 0.85 48,264.26
USD 1,422.45 6.47 9,222.74 1,422.45 6.62 9,420.46
Bank
95,430,498.37 74,420,061.99
deposit
RMB 74,867,610.63 1.00 74,867,610.63 28,874,418.16 1.00 28,874,418.16
HKD 105,306.17 0.83 87,793.75 92,942.76 0.85 79,085.00
USD 3,163,786.34 6.47 20,475,093.99 6,865,198.05 6.62 45,466,558.83
18
Semi-annual report of 2011
2011.06.30 2010.12.31
Item Exchange Converted into Exchange Converted into
Original currency Original currency
rate RMB rate RMB
Other
currency 13,572,782.77 13,572,782.77 39,049,712.59
fund
RMB 13,572,782.77 1.00 13,572,782.77 19,181,612.59 1.00 19,181,612.59
HKD 0.00
USD 0.00 3,000,000.00 6.62 19,868,100.00
Total 109,542,109.98 113,686,755.85
(1) Monetary fund at period-end decrease 4,144,678.87 yuan over that of period-begin.
(2) Balance of other monetary fund at period-end mainly was the note payable and margin of
short-term loans.
2. Notes receivable
Type of note receivable
Type of Notes 2011.06.30 2010.12.31
Bank acceptance bill 15,445,046.32 2,777,176.74
Commercial acceptance bill 1,789,612.38 23,797,210.92
Total 17,234,658.70 26,574,387.66
3. Accounts receivable
(1) Classification of Risk of Accounts Receivable
2011.06.30
Item Book balance Provision for bad debt
Amount Proportion Amount Proportion
That with large amount in single item 229,068,003.80 96.71% 4,257,135.91 1.86%
That in group with larger risk after grouping
as per credit risk features though single item 1,018,864.88 0.43% 75,716.17 7.02%
sum is small
That without large
6,792,068.05 2.86% 5,126,303.41 69.13%
amount in other single item
Total 237,502,509.73 100.00% 9,459,155.49 ——
Continue
2010.12.31
Item Book balance Provision for bad debt
Amount Proportion Amount Proportion
That with large amount in single item 180,814,754.19 94.60% 4,533,228.63 2.51%
19
Semi-annual report of 2011
That in group with larger risk after grouping as
per credit risk features though single item sum 2,685,674.89 1.41% 75,716.17 2.82%
is small
That without large
7,633,917.55 3.99% 4,850,210.69 63.54%
amount in other single item
Total 191,134,346.63 100.00% 9,459,155.49 ——
1) Account receivable with major amount individually at period-end, or with minor amount but
perform impairment test separately
Bad debt Accrual
Name of the company Book balance
amount proportion
Yutian HK International Investment Co., Ltd. 115,505,168.57
Qingdao Haier Component Purchase Co., Ltd. 75,776,567.26
HORACE INDUSTRIAL LTD. 12,533,770.05 195,112.41 1.56%
Guanjie Display Technology (Wuhan)Co.,
Ltd. 8,377,133.13
Shenzhen Boteman Bowling Club Co. ,Ltd. 2,555,374.75 2,555,374.75 100.00%
Hefei Haier Eastern China Packing Co., Ltd.
Wuhan Branch 2,510,779.81
TCL (Huizhou) Co., Ltd. 2,282,313.53 1,190,653.90 52.17%
Wuhan Yintai Technology Co., Ltd. 1,754,346.21
Shenzhen Baoluda Electronic Technology
Co., Ltd. 1,259,317.50
Hefei Haier Logistic Co., Ltd. 1,243,922.78
Weiguan Technology (Shenzhen) Co., Ltd. 1,063,734.50
Shanxi Linghua Electronic Co., Ltd. 993,160.40 99,316.04 10.00%
Shenzhen Dajiang Electronic Development
Co., Ltd. 737,476.10 73,747.61 10.00%
Guangzhou Fanyu Hongtu Computer
Equipment Co., Ltd. 716,650.40 71,665.04 10.00%
LIM-TEC CO.,LTD. 712,661.59 71,266.16 10.00%
TCL 623,573.72
Zhuhai Jinzheng Electronic Industrial Co.,
Ltd. 536,502.41
Shenzhen Gengchuang Electronic Co., Ltd. 509,124.09
Total 229,691,576.80 4,257,135.91
2) Account receivable with bad debt provision withdrawal by age combination
2011.06.30 2010.12.31
Item Bad debt Bad debt
Amount proportion Amount proportion
provision provision
Within 1 379,494.12 37.25% - 2,046,304.13 76.19% -
20
Semi-annual report of 2011
2011.06.30 2010.12.31
Item Bad debt Bad debt
Amount proportion Amount proportion
provision provision
year
1-2 years 84,273.75 8.27% 4,208.66 84,273.75 3.14% 4,208.66
2-3 years 475,107.93 46.63% 47,510.79 475,107.93 17.69% 47,510.79
Over 3
79,989.08 7.85% 23,996.72 79,989.08 2.98% 23,996.72
years
Total 1,018,864.88 100% 75,716.17 2,685,674.89 100% 75,716.17
(2)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.
(3)Particular about top 5 account receivables
Relationship with Proportion in total
Name of the company Amount Age
the Company account receivable
Yutian HK International Investment Co., Owes the same
115,505,168.57 Within 1year 48.63%
Ltd. parent company
Qingdao Haier Component Purchase Co.,
Major client 75,776,567.26 Within 1year 31.91%
Ltd.
HORACE INDUSTRIAL LTD. Major client 12,533,770.05 1-2 years 5.28%
Guanjie Display Technology (Wuhan)Co.,
Major client 8,377,133.13 Within 1year 3.53%
Ltd.
Shenzhen Boteman Bowling Club Co. ,Ltd. Major client 2,555,374.75 Over 5 years 1.08%
Total - 214,748,013.76 - 90.44%
(4)Account receivable from related party
Relationship with the Proportion in total account
Name of the company Amount
receivable
Company
Yutian International (HK) Investment Owes the same parent
115,505,168.57 48.63%
Co., Ltd. company
Total 115,505,168.57 48.63%
(5) Balance of foreign currency in account receivable
2011.06.30 2010.12.31
Foreign
Original Conversion Converted into Original Conversion Converted into
currency
currency rate RMB currency rate RMB
21
Semi-annual report of 2011
2011.06.30 2010.12.31
Foreign
Original Conversion Converted into Original Conversion Converted into
currency
currency rate RMB currency rate RMB
USD 20,789,971.12 6.47 134,544,377.10 16,174,512.40 6.6227 107,118,943.27
Total 134,544,377.10 107,118,943.27
4. Account paid in advance
(1) Age of account paid in advance
2011.06.30 2010.12.31
Items
Amount Proportion Amount Proportion
Within one year 75,358,608.37 99.01% 1,455,814.56 96.68%
1－2 years 752,916.30 0.99% 50,000.54 3.32%
Total 76,111,524.67 100.00% 1,505,815.10 100.00%
(2) Top 5 units of account paid in advance
Relationship with Reasons for
Name of the company Amount Age
the Company un-settle
Wuhan Hengsheng Photoelectric Industry Co., Owes the same
37,387,600.00 Within 1year Purchasing
Ltd. parent company
Owes the same
Yutian HK International Investment Co.,Ltd. 34,602,928.07 Within 1year Purchasing
parent company
Hefei Jingdongfang Photoelectric Technology
Supplier 2,292,622.38 Within 1year Purchasing
Co., Ltd.
Guanjie Display Technology (Wuhan)Co., Ltd. Supplier 903,740.20 Within 1year Purchasing
Within 2
Wuhan Natural Gas Co., Ltd. Supplier 50,000.00 Deposit
years
Total - 75,236,890.65 - -
Top five units totaled owe arrears at period-end of 75,236,890.65 yuan with 94.59 percent in total
account paid in advance.
(3) Related parties in account paid in advance at period-end
Relationship with the Proportion in total account
Name of the company Amount receivable
Company
Wuhan Hengsheng Photoelectric Owes the same parent
37,387,600.00 49.12%
company
Industry Co., Ltd.
Yutan HK International Investment Owes the same parent
34,602,928.07 45.46%
company
Co.,Ltd.
Total 71,990,528.07 94.58%
22
Semi-annual report of 2011
5. Other account receivable
(1) Risk classification of other account receivable
2011.06.30
Item Book balance Provision for bad debt
Amount Proportion Amount Proportion
That with large amount in single item 15,340,815.09 71.66% 6,601,051.57 43.03%
That in group with larger risk after grouping as
per credit risk features though single item sum 2,582,110.92 12.06% 273,036.93 10.57%
is small
That without large
3,484,209.50 16.28% 3,181,594.45 91.31%
amount in other single item
Total 21,407,135.51 100.00% 10,055,682.95 ——
Continue
2010.12.31
Item Book balance Provision for bad debt
Amount Proportion Amount Proportion
That with large amount in single item 19,634,175.01 71.95% 6,601,051.57 33.62%
That in group with larger risk after grouping
as per credit risk features though single item 3,856,177.50 14.13% 273,036.93 7.08%
sum is small
That without large
3,798,360.50 13.92% 3,181,594.45 83.76%
amount in other single item
Total 27,288,713.01 100.00% 10,055,682.95 ——
1) At period-end, the other account receivable with large amount in single item, or with minor
amount but perform impairment test separately
Bad debt Accrual Reasons for
Name of the company Book balance
amount proportion accrual
Shenzhen Wanshang Friendship Difference from
6,392,496.86 873,555.24 13.67%
Department Store Co., Ltd. book checking
Over 5 years of
Shenzhen Boteman Bowling Club Co., Ltd. 4,037,215.42 4,037,215.42 100.00%
account age
HORACE INDUSTRIAL LTD. 2,895,942.00 144,797.10 5.00% 1-2 years age
ZHAO BAO MIN 939,354.00 469,677.00 50.00% Ruling by court
Over 5 years of
Traffic accident compensation receivable 555,785.81 555,785.81 100.00%
account age
Over 5 years of
Hebei Botou Court 520,021.00 520,021.00 100.00%
account age
Total 15,340,815.09 6,601,051.57 ——
2) Other account receivable with minor single amount but with greater risk after classified into
23
Semi-annual report of 2011
same group with similar credit risk features
2011.06.30 2010.12.31
Items Amount Accrual Bad debt Amount Accrual Bad debt
proportion provision proportion provision
Within 1
340,590.03 0 1,614,656.61
year
1-2 years 717,090.97 5.03% 36,034.35 717,090.97 5.03% 36,034.35
2-3 years 1,102,127.04 10.01% 110,311.71 1,102,127.04 10.01% 110,311.71
Over 3 years 422,302.88 30.00% 126,690.87 422,302.88 30.00% 126,690.87
Total 2,582,110.92 273,036.93 3,856,177.50 —— 273,036.93
(2) Other account receivable at period-end decrease 5,881,577.50 yuan over that of period-begin
with 21.55 percent down in proportion.
(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: Nil
(4)Top 5 companies of other account receivable
Relationship Proportion in
Natural and
Name of the company with the Amount Age total other
content
Company account receivable
Shenzhen Wanshang Friendship Over 5
Lessees 6,392,496.86 29.86% Rent
Department Store Co., Ltd. years
Shenzhen Boteman Bowling Club Co., Over 5
Lessees 4,037,215.42 18.86% Rent
Ltd. years
HK HORACE INDUSTRIAL LTD. Supplier 2,895,942.00 1-2 years 13.53% Compensation
ZHAO BAO MING Lessees 939,354.00 1-2 years 4.39% Rent
Over 5
Compensation for traffic accident employee 555,785.81 2.60% Compensation
years
Total - 14,820,794.09 - 69.23%
6. Inventory
(1)Classification of inventory
2011.06.30
Item Depreciation
Book balance Book value
provision
Raw Materials 46,337,293.26 3,141,657.63 43,195,635.63
Products under production 781,319.96 0.00 781,319.96
Stocked Goods 38,513,220.40 2,745,088.90 35,768,131.50
Low-value consuming products 2,201,099.49 288,244.53 1,912,854.96
24
Semi-annual report of 2011
Self-made semi-finished product 2,932,420.71 191,087.97 2,741,332.74
Processed Materials upon entrustment 395,572.04 0.00 395,572.04
Total 91,160,925.86 6,366,079.03 84,794,846.83
Continue
2010.12.31
Item Depreciation
Book balance Book value
provision
Raw Materials 54,053,563.22 3,141,657.63 50,911,905.59
Products under production 719,265.47 719,265.47
Stocked Goods 20,768,586.58 2,745,088.90 18,023,497.68
Low-value consuming products 1,200,729.74 288,244.53 912,485.21
Self-made semi-finished product 3,657,561.30 191,087.97 3,466,473.33
Processed Materials upon entrustment 446,225.89 446,225.89
Total 80,845,932.20 6,366,079.03 74,479,853.17
(2) Provision for Depreciation of Inventories
Decrease in this period
Amount at Increase in this Amount at
Item Other
period-begin period Switch back period-end
transferring-out
Raw Materials 3,141,657.63 3,141,657.63
Products under
production
Stocked Goods 2,745,088.90 2,745,088.90
Low-value
consuming 288,244.53 288,244.53
products
Self-made
semi-finished 191,087.97 191,087.97
product
Processed
Materials upon
entrustment
Total 6,366,079.03 0.00 0.00 0.00 6,366,079.03
(3)Withdrawal for provision of inventory depreciation
Proportion of
Reasons for
switch-back amount this
Items Withdrawal basis switch-back this
period in inventory
period
balance at period-end
Lower one between the book value
Raw Materials
and net realizable value
25
Semi-annual report of 2011
Products under Lower one between the book value
production
and net realizable value
Lower one between the book value
Stocked Goods
and net realizable value
Low-value consuming Lower one between the book value
products
and net realizable value
Self-made Lower one between the book value
semi-finished product and net realizable value
(4)Balance of inventory at period-end excluding the amount capitalizing from loan expenses.
(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
Increase in Decrease in
Item 2010.12.31 2011.06.30
This period this period
Original value 107,439,914.94 200,772.00 107,640,686.94
Houses & buildings 107,439,914.94 200,772.00 107,640,686.94
Land-use right
Accumulated Depreciation
69,460,470.79 1,231,603.98 70,692,074.77
& Amortization
Houses & buildings 69,460,470.79 1,231,603.98 70,692,074.77
Land-use right
Net book value 37,979,444.15 36,948,612.17
Houses & buildings 37,979,444.15 36,948,612.17
Land-use right
Impairment provision
Houses & buildings
Land-use right
Book value 37,979,444.15 36,948,612.17
Houses & buildings 37,979,444.15 36,948,612.17
Land-use right
(2)The abovementioned investment real estate has been mortgage to China Construction Bank
Shangbu Sub-branch for long-term loans.
8. Fixed assets
(1)Details of fixed assets
Increase in Decrease in
Item 2010．12．31 2011．06．30
This period this period
Original price 316,644,393.74 14,919,655.56 199,408.35 331,364,640.95
26
Semi-annual report of 2011
Houses and
207,599,476.87 979,546.65 - 208,579,023.52
buildings
Machinery
68,958,532.71 11,112,203.75 20,848.35 80,049,888.11
equipments
Transport
5,006,121.59 219,500.00 178,560.00 5,047,061.59
instruments
Office equipment 7,518,745.24 40,298.92 7,559,044.16
Apparatus 12,870,943.03 544,785.69 - 13,415,728.72
Instrument 4,661,998.97 21,012.81 - 4,683,011.78
Mould 10,028,575.33 2,002,307.74 - 12,030,883.07
Accumulated
111,210,683.96 6,138,259.84 117,348,943.80
Depreciation
Houses and
46,531,165.88 2,253,840.80 48,785,006.68
buildings
Machinery
34,562,125.87 3,100,365.37 1,939.50 37,660,551.74
equipments
Transport
3,156,826.98 206,490.32 117,849.60 3,245,467.70
instruments
Office equipment 6,263,983.99 60,403.91 6,324,387.90
Apparatus 10,926,560.56 103,781.94 11,030,342.50
Instrument 1,760,702.61 271,392.99 2,032,095.60
Mould 8,009,318.07 261,773.61 8,271,091.68
Net book value 205,433,709.78 214,015,697.15
Houses and
161,068,310.99 159,794,016.84
buildings
Machinery
34,396,406.84 42,389,336.37
equipments
Transport
1,849,294.61 1,801,593.89
instruments
Office equipment 1,254,761.25 1,234,656.26
Apparatus 1,944,382.47 2,385,386.22
Instrument 2,901,296.36 2,650,916.18
Mould 2,019,257.26 3,759,791.39
Impairment
810,258.04 810,258.04
provision
Houses and
buildings
Machinery
338,694.95 338,694.95
equipments
Transport
32,228.33 32,228.33
instruments
Office equipment 31,007.24 31,007.24
Apparatus 347,275.68 347,275.68
Instrument 61,051.84 61,051.84
Mould
Book value 204,623,451.74 213,205,439.11
27
Semi-annual report of 2011
Houses and
161,068,310.99 159,794,016.84
buildings
Machinery
34,057,711.89 42,050,641.42
equipments
Transport
1,817,066.28 1,769,365.56
instruments
Office equipment 1,223,754.01 1,203,649.02
Apparatus 1,597,106.79 2,038,110.54
Instrument 2,840,244.52 2,589,864.34
Mould 2,019,257.26 3,759,791.39
9. Construction in progress
(1)Details of construction in progress
2011.06.30 2010.12.31
Projects Depreciation Depreciation
Book balance Book value Book balance Book value
provision provision
Reforming project of Huafa
654,356.00 654,356.00 654,356.00 654,356.00
mansion
Construction of Gongming
969,000.00 969,000.00 619,000.00 619,000.00
Electronic Town
Dormitory building 3,948,967.00 3,948,967.00 824,831.75 824,831.75
Expansion of warehouse of
1,809,827.25 1,809,827.25 1,809,827.25 1,809,827.25
plastic injection
Project of I-bar support of
aisle for plastic injection 353,130.96 353,130.96 353,130.96 353,130.96
warehouse
0.00 0.00 839,478.65 839,478.65
Project of foam warehouse
Reforming of foam
0.00 0.00 540,383.70 540,383.70
warehouse
Wall painting for foam
factory and amount for 30,000.00 30,000.00
road reforming project
Reforming project for
compatibility of power 516,000.00 516,000.00
supplying
Total 8,281,281.21 8,281,281.21 5,641,008.31 5,641,008.31
(2)Change of major construction in progress
Decrease this period
Increase this
Projects 2010．12．31 Transferred 2011．06．30
period Other decrease
into fixed asset
Reforming project of Huafa
654,356.00 654,356.00
mansion
Construction of Gongming
619,000.00 350,000.00 969,000.00
Electronic Town
Dormitory building 824,831.75 3,124,135.25 3,948,967.00
Expansion of warehouse of plastic
1,809,827.25 1,809,827.25
injection
Project of I-bar support of aisle for 353,130.96 353,130.96
28
Semi-annual report of 2011
plastic injection warehouse
Project of foam warehouse 839,478.65 839,478.65 0.00
Reforming of foam warehouse 540,383.70 540,383.70 0.00
Wall painting for foam factory and
amount for road reforming 30,000.00 30,000.00
project
Reforming project for 516,000.00 516,000.00
compatibility of power supplying
Total 5,641,008.31 4,020,135.25 839,478.65 540,383.70 8,281,281.21
(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) Construction in progress increase 4,020,135.25 yuan in this period with 71.27 percent up.
Mainly caused by the followed: expenses of reforming of the Gongming Electronic Town Phase II;
investment in dormitory buildings increased in this period from Hengfa Technology Co., -subsidiary
of the Company; 40 percent amount for project of compatibility reformation for power supplying
have been paid in advance. Expansion project for plastic injection warehouse and canopy project of
aisle for plastic injection warehouse abovementioned have completed in January of 2011; new
dormitory building will complete in March of 2011 and relevant completion settlement still in
handling.
10. Intangible assets
Increase Decrease
Item 2010．12．31 2011．06．30
In this period in this period
Original Value 55,540,235.25 211,781.80 55,752,017.05
Land use right 55,187,826.36 211,781.80 55,399,608.16
Non-patent technology 352,408.89 0.00 352,408.89
Accumulated Amortization 2,113,349.90 599,176.62 2,712,526.52
Land use right 1,902,982.70 550,251.18 2,453,233.88
Non-patent technology 210,367.20 48,925.44 259,292.64
Net book value 53,426,885.35 53,039,490.53
Land use right 53,284,843.66 52,946,374.28
Non-patent technology 142,041.69 93,116.25
Impairment Provision
Land use right 0.00
Non-patent technology 0.00
Book Value 53,426,885.35 53,039,490.53
Land use right 53,284,843.66 52,946,374.28
Non-patent technology 142,041.69 93,116.25
29
Semi-annual report of 2011
11. Long-term expense to be amortized
Other
Increase
In this Amortized decrease
Item 2010.12.31 2011.06.30
Period this period in this
period
Financial consultancy of
Construction Bank of 1,625,000.00 375,000.00 - 1,250,000.00
China
Membership fee of golf 568,225.00 175,000.00 63,719.08 679,505.92
Total 2,193,225.00 175,000.00 438,719.08 - 1,929,505.92
(1)The long-term amortized expense refers to the financial consultancy that engaged with
Construction Bank of China with total amount of RMB 3 million. Service term is from 19
March 2009 to 18 March 2013.
(2)Membership fee of golf will amortize within 10 years.
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 2011.06.30 2010.12.31
Deferred income tax assets formed by provision for
4,640,513.83 3,927,081.52
devaluation of bad debts
Deferred income tax assets formed by provision for
1,554,840.49 1,554,840.49
devaluation of inventory
Deferred income tax assets formed by provision for
194,461.93 194,461.93
devaluation of fixed-asset
Deferred income tax assets formed by projected
1,198,894.95 1,198,894.95
liabilities
Total 7,588,711.20 6,875,278.89
13. Details of provision for impairment loss on assets
Decreased this period
Increased this
Items 2010．12．31 Other 2011．06．30
period Switch-back
transfer-out
Bad debt provision 19,514,838.43 19,514,838.43
Provision for
inventories 6,366,079.03 6,366,079.03
depreciation
Provision for fixed
810,258.04 810,258.04
Assets Impairment
Total 26,691,175.50 26,691,175.50
30
Semi-annual report of 2011
14. Short-tem loans
(1)Classification of short-tem loans
Types 2011．06．30 2010．12．31
Mortgage loans 33,143,724.95 19,868,100.00
Margin loans 27,000,000.00 27,000,000.00
Financing of export voice 50,056,155.20 19,205,830.00
Total 110,199,880.15 66,073,930.00
(2) Amount at period-end increase 44,125,950.15 yuan over that of period-begin with 67.78
percent up. Mainly caused by the short-term turn-over funds borrowed in this period.
(3)Till the end of 30 June 2011, the Company has no short-tem loans due without paying.
15. Note payable
(1)Classification of note payable
Type 2011．06．30 2010．12．31
Bank Acceptance bill 32,842,359.61 31,992,283.10
Total 32,842,359.61 31,992,283.10
(2) Note payable with form of bank margin
Proportion of
Issuer bank Carrying amount Margin amount
margin
Wuhan Chunkou Branch of
40.00% 23,657,144.04 9,462,857.62
Minsheng Bank
Wuhan Chunkou Branch of
100.00% 9,185,215.57 9,185,215.57
Minsheng Bank
Total 32,842,359.61 18,648,073.19
16. Account payable
(1)Account payable
Item 2011．06．30 2010．12．31
Total 204,415,894.98 125,758,949.05
Including: Over 1year 18,859,456.30 32,481,311.88
Amount at period-end increase 78,656,945.93 yuan with 62.55 percent up over that of
period-begin. Mainly because in period, the account for purchase of LED display by Hengfa
Technology –Subsidiary of the Company, from related party—Tianyu HK International Investment
Co., was increased.
(2)Balance of account payable for related parties
Relationship with Proportion in total
Name of the company Amount
the Company account payable
Wuhan Hengsheng Photoelectric Owes the same
16,673,735.21 8.16%
Industry Co., Ltd. parent company
31
Semi-annual report of 2011
Relationship with Proportion in total
Name of the company Amount
the Company account payable
Yutian HK International Investment Owes the same
33,696,077.12 16.48%
Co.,Ltd. parent company
Total 50,369,812.33 24.64%
(3)Balance of foreign currency in account payable
2011．06．30 2010．12．31
Foreign
Original Conversion Converted into Original Conversion Converted into
currency
currency rate RMB currency rate RMB
USD 17,416,721.43 6.47 112,714,054.40 10,939,369.50 6.62 72,448,126.39
HKD 4,151.42 0.85 3,532.44
Total 112,714,054.40 72,451,658.83
17. Account payable
(1)Account payable
Item 2011．06．30 2010．12．31
Total 775,636.18 32,473.00
Including: Over 1year 771,585.06 30,100.00
(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.
18. Wages payable
Item 2010．12．31 Increment This Decrement This 2011.06.30
Period Period
Salary, bonus, allowance &
2,783,027.80 16,598,335.46 16,716,837.39 2,664,525.87
subsidies
Staff Welfare Treatment Fund -0.40 321,552.00 234,308.06 87,243.54
Social Insurance Premium -64,495.02 253,794.05 99,866.11 89,432.92
Housing reserve 81,946.90 86,111.20 -4,164.30
Labor Union fund & staff
educational fund 547,133.13 12,072.00 6,862.00 552,343.13
Total 3,265,665.51 17,267,700.41 17,143,984.76 3,389,381.16
19. Tax payable
Items 2011．06．30 2010．12．31
VAT -10,553,456.18 -5,265,546.46
Business Tax 1,142,410.31 1,390,721.45
Enterprise Income Tax 6,181,374.20 7,770,884.75
32
Semi-annual report of 2011
Items 2011．06．30 2010．12．31
Personal Income Tax -134,077.14 -20,580.70
Urban Maintenance & Construction Tax 13,255.21 35,791.23
Property Tax 742,627.00 903,166.41
Tax of land used 397,118.27 306,208.04
Educational Surcharge 16,164.68 25,727.37
Price adjustment funds 21,036.16 17,219.66
Other 6,661.12 5,525.40
Total -2,166,886.37 5,169,117.15
Amount at period-end decrease 7,336,003.52 yuan over that of period-begin. Mainly because
video division of subsidiary received major input invoice of VAT, most of the products are for
exporting.
20. Other account payable
(1)Other account payable
Item Amount at period-end Amount at period-begin
Total 16,968,011.88 17,667,880.97
Including: Over 1year 9,646,413.34 11,122,419.27
(2)Account payable to the shareholders holding more than 5% (5% included) voting right
shares of the Company
(3)Other account payable with major sum at period-end
Name of the company Amount A/C age Natural or content
Shenzhen Wanshang Friendship Department
Store Co., Ltd. 3,477,008.00 Over 5 years Margin for leasing
Shangbu Branch of CBC 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 2011.06.30 2010.12.31
Mortgage loans 195,257,600.00 204,374,000.00
Total 195,257,600.00 204,374,000.00
(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,
33
Semi-annual report of 2011
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
2011．06．30
Date of Date of Rate Amount in
Company currency Amount in local
loans expire (%) foreign
currency
currency
Shangbu
Branch of 2009-3-12 2016-3-11 RMB 5.94% - 195,257,600.00
CBC
Total
195,257,600.00
22. Projected liabilities
Increased this Carry-over this
Items 2010．12．31 2011．06．30
period period
Pending action 3,933,310.42 3,933,310.42
Product warranty 1,062,085.21 1,062,085.21
Total 4,995,395.63 4,995,395.63
(1)Details of projected liabilities see Note ―X‖.
23. Deferred income
24. Share capital (RMB1.00 per share in value)
Shareholder Name/Type 2011.06.30 2010.12.31
Restricted Shares
State-owned Shares - -
State-owned Corporate Shares - -
Other Domestic Shares 116,489,894 116,489,894
Including: Domestic corporate shares 116,489,894 116,489,894
Domestic natural person shares - -
Foreign Shares -
Including: Foreign corporate
- -
shares
Foreign natural person shares - -
Total Restricted Shares 116,489,894 116,489,894
Unrestricted Shares - -
34
Semi-annual report of 2011
RMB Common Shares 64,675,497 64,675,497
Foreign Shares Listed
101,995,836 101,995,836
Domestically
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
Increment this Decrement this
Item 2010.12.31 2011．06．30
period period
Shares Premium 96,501,903.02 - - 96,501,903.02
Other Capital Reserves 12,994,934.31 - - 12,994,934.31
Total 109,496,837.33 - - 109,496,837.33
26. Surplus reserve
Increment this Decrement this
Item 2010.12.31 2011．06．30
period period
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
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.
27. Retained profit
Proportion of withdrawal
Item Amount
or distribution
Amount at last period-end -203,485,025.57 -
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 - -
35
Semi-annual report of 2011
Proportion of withdrawal
Item Amount
or distribution
Other adjustment factors - -
Amount at this period-begin -203,485,025.57 -
Add: net profit attributable to shareholders of parent
9,282,462.93
company in this period -
Less: Drawing statutory surplus reserves - -
Drawing arbitrary surplus reserves - -
Drawing general risk provision - -
Dividend for ordinary shares payable - -
Dividend for ordinary shares transferred to share
capital - -
Amount at period-end this period -194,202,562.64 -
28. Business revenues & business cost
Jan. to Jun., 2011 Jan. to Jun., 2010
Industries or Business Business
Business Cost Gross profit Business Cost Gross profit
products Revenues Revenues
Plastic injection
ware 103,242,855.44 88,513,108.21 14,729,747.23 98,101,549.40 88,659,731.24 9,441,818.16
LCD
301,553,845.91 296,717,272.38 4,836,573.53 221,422,722.87 211,067,288.24 10,355,434.63
Styrofoam 34,269,808.72 29,038,727.56 5,231,081.16 27,558,453.28 24,843,971.70 2,714,481.58
Property leasing 21,045,959.33 1,667,103.7 19,378,855.63 18,534,021.29 1,676,904.81 16,857,116.48
Property
management 852,518.5 852,518.50 788,661.00 788,661.00
Other 533,949.33 955,728.71 -421,779.38
Total 461,498,937.23 416,891,940.56 44,606,996.67 366,405,407.84 326,247,895.99 40,157,511.85
29. Business tax & extras
Item Jan. to Jun., 2011 Jan. to Jun., 2010 Taxable basis
Business Tax 1,123,307.64 971,277.93 5%
Urban Maintenance &
89,217.57 9,712.78 7%
Construction Tax
Educational Surcharge 38,797.29 29,138.34 3%
Property Tax 966,305.08 181,778.52 0.12%
Land use tax 222,601.65 155,516.66 -
Local educational development
0 9,790.42 0.1%
charge
36
Semi-annual report of 2011
Item Jan. to Jun., 2011 Jan. to Jun., 2010 Taxable basis
Price adjustment fund 141,059.91 136,418.71 0.1%
Other 14,686.78 -
Total 2,595,975.92 1,493,633.36 -
30. Period expenses
Item Jan. to Jun., 2011 Jan. to Jun., 2010
Sales expenses 3,328,879.52 1,169,773.97
Administration expenses 19,453,213.98 16,030,758.40
Financial expenses 8,801,913.51 7,681,282.39
Total 31,584,007.01 24,881,814.76
Sales expense at this period increase 2,159,105.55 yuan over that of last period with 184.57
percent up mainly due to the soaring business from Video Company, subsidiary of the
Company, with growth of transportation cost occurred. Administration expense at this period
increase 3,422,455.58 yuan over that of last period with 21.35 percent up. Financial expense at
this period increase 1,120,631.12 yuan over that of last period with 14.59 percent up.
31. Assets impairment loss
Item Jan. to Jun., 2011 Jan. to Jun., 2010
Bad debt provision
Provision for inventory depreciation 3,780,432.06
Impairment provision for fixed assets
Total - 3,780,432.06
32. Non-operating income
(1)Details of non-operating income
Item Jan. to Jun., 2011 Jan. to Jun., 2010
Income from disposal of non-current assets
Including: Income from disposal of fixed assets
Gains/losses from transaction of non-monetary assets
Subsidy from government
Income on disposal
Breach of faith income 16,726.00 317,837.12
Compensation from quality warranty
Other
Total 16,726.00 317,837.12
33. Non-operating expenses
37
Semi-annual report of 2011
Item Jan. to Jun., 2011 Jan. to Jun., 2010
Losses from disposal of non-current assets
Including: Losses from disposal of fixed assets 60,760.40
Penalty expenses
External donation
Inventory shortage losses
Compensation from lawsuit
Other 900.00 27,044.72
Total 61,660.40 27,044.72
34. Items of cash flow statement
(1) Supplementary information for consolidated cash flow statement
Item 2011.06.30 2010.6.30
1．Reconciliation of net profit to cash flows from operating activities:
Net Profit 9,280,724.63 17,375,496.34
Add: Provision for impairment of assets 3,780,432.06
Depreciation of fixed assets, oil assets and productive biological assets 7,962,362.97 6,097,025.02
Amortization of intangible assets 387,394.82 514,652.64
Amortization of long-term prepayments 263,719.08 283,854.15
Losses on disposal of fixed assets, intangible assets and other long-term assets
60,710.40
(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 ―- ‖) 7,601,931.51 7,344,974.25
Investment losses(income is listed with ―- ‖)
Decrease in deferred income tax assets (increase is listed with ―-‖) 524,621.88
Increase in deferred income tax liabilities (decrease is listed with ―- ‖)
Decrease in inventories(increase is listed with ―-‖) -14,737,179.79 -29,293,005.16
Decrease in operating receivables(increase is listed with ―-‖) -65,105,203.65 -87,355,780.17
Increase in operating payables(decrease is listed with ―- ‖) -34,340,413.44 110,914,222.67
Others 4,031.94
Net cash flows from operating activities -15,077,925.9 29,661,871.80
XI. Related party relationship and transactions
1. Parent company
(1) General information of parent company
38
Semi-annual report of 2011
Type of the Registration Legal Nature of Organizati
Parent Company Final controller
Company place representative business on code
Wuhan Zhongheng Company of Wuhan Li Zhongqiu Manufacture Li Zhongqiu 711954601
Group limited liability and sale
(2) Registered capital of the parent company and its change
Increment this Decrement this
Parent Company 2010.12.31 2011.06.30
period period
Wuhan Zhongheng Group 138,000,000.00 - - 138,000,000.00
(3) Shares held by the parent company and its change
Amount of share held Proportion of share held Proportion of voting right
Parent Company
2011.06.30 2010.12.31 2011.06.30 2010.12.31 2011.06.30 2010.12.31
Wuhan Zhongheng
116,489,894 116,489,894 41.14% 41.14% 41.14% 41.14%
Group
(4) Nature of the related parties without controlling relationship and other related parties
Type of Organization
Name of related party Main transaction
association-relation code
Other enterprises
under control of the
same parent company
Wuhan Hengsheng Photo electricity 73108664-5 Purchase of LCD
Industry Co., Ltd.
Shenzhen Zhongheng Huafa Scientific and 68536237-X Purchase of
Technology Co., Ltd. commodities and leasing
Wuhan Xindongfang Real Estate 74476047-5 None
Development Co., Ltd.
Wuhan Zhongheng Property Management 75180426-1 None
Co., Ltd.
Wuhan Guanggu Display System Co., Ltd. 75510305-9 None
Yutian HK International Investment Co., Purchase & sale for
Ltd. goods
Yutian Property (Wuhan) Co., Ltd. 66348637-1 None
39
Semi-annual report of 2011
(II) Related transaction
1. Related transaction of goods purchased, labor received etc.
Jan. to Jun., 2011 Jan. to Jun., 2010
Name of related party
Amount Proportion Amount Proportion
Wuhan Hengsheng Photo electricity Industry
90,322,747.61 16.30% 70,502,675.07 21.79%
Co., Ltd.
Yutian HK International Investment Co., Ltd. 258,875,026.53 46.72%
Shenzhen Zhongheng Huafa Scientific and
64,905.00 0.01% 9,545,922.14 2.95%
Technology Co., Ltd
Total 349,262,679.14 63.03% 80,048,597.21 24.74%
2. Related transaction of goods sales, labor provided etc.
(1) Sales of goods
Jan. to Jun., 2011 Jan. to Jun., 2010
Name of related party
Amount Proportion Amount Proportion
Yutian HK International Investment Co., Ltd. 301,259,106.74 68.61% - -
Total 301,259,106.74 68.61% - -
3. Assets rented
Jan. to Jun., 2011 Jan. to Jun., 2010
Name of related party
Amount Proportion Amount Proportion
Shenzhen Zhongheng Huafa Scientific and Technology Co.,
887,188.14 4.05% 627,611.05 3.39%
Ltd
Total 887,188.14 4.05% 627,611.05 3.39%
(III) Balance from related parties
1. Account receivable of related party
Related party(Item) 2011.06.30 2010.12.31
Yutian HK International Investment Co., Ltd. 115,505,168.57 86,315,935.72
Total 115,505,168.57 86,315,935.72
2. Other account receivable of related party
Related party(Item) 2011.06.30 2010.12.31
Shenzhen Zhongheng Huafa Scientific and Technology Co., 1680.00 1,950,910.00
Ltd Total 1680.00 1,950,910.00
40
Semi-annual report of 2011
3. Account paid in advance of related party
Related party(Item) 2011.06.30 2010.12.31
Wuhan Hengsheng Photo electricity Industry Co., Ltd. 37,387,600.00
Yutian HK International Investment Co., Ltd. 34,602,928.07
Total 71,990,528.07
4. Account payable of related party
Related party(Item) 2011.06.30 2010.12.31
Wuhan Hengsheng Photo electricity Industry Co., Ltd. 16,673,735.21 36,033,246.26
Yutian HK International Investment Co., Ltd. 75,062,520.95
Total 91,736,256.16 36,033,246.26
X. 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 remnant 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
41
Semi-annual report of 2011
Shenzhen Municipality (2007) and remanded to the People‘s Court of Futian District of
Shenzhen Municipality.
Pursuant to ―Introduction to Dispute Case of Undertaking Contract between Shenzhen
Zhongheng Huafa Holding Co., Ltd. and Shanxi Linghua Electronics Co., Ltd.‖ 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. At present, collegiate
bench of this case was trialing by People‘s Court of Futian District, Shenzhen. The case is in
process of identification without court conducting for judicial identification requirements from
Shanxi Linghua on PCB that involved.
(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 for 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. The People‘s Intermediate Court of Shenzhen
Municipality conducted 2nd trial late. The trial made no 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 in 2009, and no
relevant predicted liabilities changed in this period.
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
maintenance actually occurred in 2009, the actually estimative maintenance expenditure in the
free maintenance period is RMB 2,124,170.42. Last period, 50 percent of the expenses have
42
Semi-annual report of 2011
been switch-back and balance of predicted liability recognized at period-end amounting to RMB
1,062,085.21.
3. Besides the above contingency, as ending at 30 June 2011, there was no incidence of other
new significant contingent events.
XI. Commitment events
As ending at 30 June 2011, there were no significant commitment events necessary for
disclosure.
XII. Events after Balance Sheet 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.
XIII. Notes to the main items of financial statement of parent company
1. Accounts receivable
(1)Account receivable classified according to risk
2011.06.30
Item Book balance Provision for bad debts
Amount Proportion Amount Proportion
That with large amount in single item 63,924,737.90 90.15% 1,701,761.16 2.66%
That in group with larger risk after grouping as per
555,097.01 0.78% 71,507.51 12.88%
credit risk features though single item sum is small
That without large
6,432,780.25 9.07% 4,841,760.54 64.40%
amount in other single item
Total 70,912,615.16 100.00% 6,615,029.21
Continue
2010.12.31
Item Book balance Provision for bad debts
Amount Proportion Amount Proportion
That with large amount in single item 73,234,609.78 90.26% 1,977,853.88 2.70%
That in group with larger risk after grouping
as per credit risk features though single item 555,097.01 0.68% 71,507.51 12.88%
sum is small
That without large
7,349,374.68 9.06% 4,565,667.82 62.12%
amount in other single item
Total 81,139,081.47 100.00% 6,615,029.21 ——
43
Semi-annual report of 2011
1) Account receivable with major amount at period-end, or with minor amount but perform
impairment test separately
Accrual
Name of the company Book balance Bad debt amount
proportion
Wuhan Hengfa Scientific and Technology
Co,, Ltd. 42,580,027.33 0.00%
HORACE INDUSTRIAL LTD. 12,533,770.05 195,112.41 1.56%
TCL(Huizhou) Co., Ltd. 2,282,313.53 1,190,653.90 52.17%
Shenzhen Baoluda Electronic Technology
Co., Ltd. 1,259,317.50 0.00%
Weiguan Technology(Shenzhen) CO., Ltd. 1,063,734.50 0.00%
Shanxi Linghua Electronic Co., Ltd. 993,160.40 99,316.04 10.00%
Shenzhen Dajiang Electronic Development
Co., Ltd. 737,476.10 73,747.61 10.00%
Guangzhou Fanyu Hongtu Computer
Equipment Co., Ltd. 716,650.40 71,665.04 10.00%
LIM-TEC CO.,LTD. 712,661.59 71,266.16 10.00%
Zhuhai Jinzheng Electronic Industrial Co.,
536,502.41 0.00%
Ltd.
Shenzhen Gengchuang Electronic Co., Ltd. 509,124.09 0.00%
Total 63,924,737.90 1,701,761.16 -
2) Account receivable with minor single amount but with greater risk after classified into same
group with similar credit risk features
Amount at period-end Amount at period-begin
Items Bad debt Bad debt
Amount Proportion Amount Proportion
provision provision
Within
1year
1-2 years
2-3 years 475,107.93 10.00% 47,510.79 475,107.93 10.00% 47,510.79
Over 3
years 79,989.08 30.00% 23,996.72 79,989.08 30.00% 23,996.72
Total 555,097.01 —— 71,507.51 555,097.01 —— 71,507.51
(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
Proportion in
Relationship with
Name of the company Amount Age total account
the Company
receivable
Wuhan Hengfa Scientific and Within
42,580,027.33 60.05%
Technology Co., Ltd. Subsidiary 1 year
Within 2
12,533,770.05 17.67%
HORACE INDUSTRIAL LTD. Client year
44
Semi-annual report of 2011
Proportion in
Relationship with
Name of the company Amount Age total account
the Company
receivable
Within 5
2,282,313.53 3.22%
TCL (Huizhou) Co., Ltd. Client year
Shenzhen Baoluda Electronic Within 2
1,259,317.50 1.78%
Technology Co., Ltd. Client year
Weiguan Scientific and Technology Within 3
1,063,734.50 1.50%
(Shenzhen) Co., Ltd. Client year
Total 59,719,162.91 84.22%
(4) Account receivable from related party at period-end
Relationship with
Name of the company Amount Age
the Company
Hengfa Scientific and
Subsidiary 42,580,027.33 60.05%
Technology Co.,
Total 42,580,027.33 60.05%
(5)Balance of foreign currency in account receivable
2011.06.30 2010.12.31
Foreign
Original Exchange Converted into Original Exchange Converted into
currency
currency rate RMB currency rate RMB
USD 1,834,911.59 6.48 11,890,227.10 16,187,868.22 6.83 110,534,639.52
Total 11,890,227.10 110,534,639.52
2. Other account receivable
(1)Other account receivable classified according to risk
2011.06.30
Item Book balance Provision for bad debts
Amount Proportion Amount Proportion
That with large amount in single item 57,165,477.22 90.59% 11,159,610.72 19.52%
That in group with larger risk after grouping as per
2,767,957.67 5.21% 271,866.93 9.82%
credit risk features though single item sum is small
That without large
3,168,089.48 4.20% 2,845,548.38 89.82%
amount in other single item
Total 63,101,524.37 100.00% 14,277,026.03 ——
45
Semi-annual report of 2011
Continue
2010.12.31
Item Book balance Provision for bad debts
Amount Proportion Amount Proportion
That with large amount in single item 58,004,143.78 89.84% 11,159,610.72 19.24%
That in group with larger risk after grouping as
per credit risk features though single item sum is 3,287,978.67 5.09% 271,866.93 8.27%
small
That without large
3,268,155.32 5.06% 2,845,548.38 87.07%
amount in other single item
Total 64,560,277.77 100.00% 14,277,026.03 ——
1) Other account receivable with major single amount at period-end, or with minor amount but
performed
Bad debt Accrual Reasons for
Name of the company Book balance
amount proportion accrual
Hengfa Science & Technology 37,266,102.98
Difference of
Wanshang Department Store
6,392,496.86 873,555.24 12.75% current checking
Over 5 years
Huafa Leasing Company
4,558,559.15 4,558,559.15 100.00% account age
Over 5 years
Shenzhen Boteman Bowling Club Co. ,Ltd.
4,037,215.42 4,037,215.42 100.00% account age
HORACE INDUSTRIAL LTD. 2,895,942.00 144,797.10 5.00% 1 year account age
ZHAO BAO MIN 939,354.00 469,677.00 50.00% Ruling by court
Over 5 years
Compensation of traffic accident
555,785.81 555,785.81 100.00% account age
Over 5 years
Botou Court of Hebei
520,021.00 520,021.00 100.00% account age
Total 57,165,477.22 11,159,610.72 ——
2) Other account receivable with minor single amount but with greater risk after classified into
same group with similar credit risk features
2011．06．30 2010．12．30
Item Bad debt Bad debt
Amount Proportion Amount Proportion
provision provision
Within 1 year 530,336.78 1,050,357.78
1-2 years 717,090.97 5.03% 36,034.35 717,090.97 5.03% 36,034.35
2-3 years 1,102,127.04 10.01% 110,311.71 1,102,127.04 10.01% 110,311.71
Over 3 years 418,402.88 30.00% 125,520.87 418,402.88 30.00% 125,520.87
Total 2,767,957.67 —— 271,866.93 3,287,978.67 —— 271,866.93
46
Semi-annual report of 2011
(2)Top 5 companies of other account receivable
Relationshi Proportion in total
Natural and
Name of the company p with the Amount Age other account
content
Company receivable
Within 1 Borrowing and
Hengfa Science & Technology Subsidiary 37,266,102.98 59.06%
year loans
Over 5
Wanshang Department Store Lessees 6,392,496.86 10.13% Rent
years
Within 1
Huafa Leasing Company Subsidiary 4,558,559.15 7.22% Rent
year
Shenzhen Boteman Bowling Club Co., Over 5
Lessees 4,037,215.42 6.40% Rent
Ltd. years
Within 1
HORACE INDUSTRIAL LTD. supplier 2,895,942.00 4.59% Compensation
year
Total - 55,150,316.41 - 87.40%
3. Long-term equity investment
(1)Classification of long-term equity investment
Item 2011．06．30 2010．12．31
Long-term equity investment measured
185,308,900.00 185,308,900.00
on cost
Total long-term equity investment 185,308,900.00 185,308,900.00
Less: Impairment provision of
long-term equity investment 600,000.00 600,000.00
Value of long-term equity investment 184,708,900.00 184,708,900.00
(2)Long-term equity investment calculated on cost and on equity
Proportion Proportion Increased Decreased
Invested Initial Amount at Amount at
of shares of voting in this in this
company amount year-begin period -end
held right period period
Calculated on
cost
Huafa Leasing
60% 60% 600,000 600,000 600,000
Company
Huafa Property
100% 100% 1,000,000 1,000,000 1,000,000
Company
Hengfa
Scientific and 100% 100% 183,608,900 183,608,900 183,608,900
Technology
47
Semi-annual report of 2011
Huafa Trading
100% 100% 100,000 100,000 100,000
Co.,
Total 185,308,900 185,308,900 185,308,900
(3)Impairment provision for long-term equity investment based on cost and equity
Invested company 2011．12．31 Increased in this Decreased in this 2010．06．30
period period
Huafa Leasing Company 600,000.00 600,000.00
Total 600,000.00 600,000.00
4. Operating revenue and operating cost
Jan.-Jun. 2011 Jan.-Jun. 2010
Industry or Operating Operating
Operating cost Gross profit Operating cost Gross profit
revenue revenue
products
Materials
5,565,869.28 5,818,910.00 -253,040.72
selling
Property
21,045,959.33 1,667,103.7 19,378,855.63 18,534,021.29 1,676,904.81 16,857,116.48
leasing
property
852,518.5 852,518.50 788,661.00
management
Total 21,898,477.83 1,667,103.70 20,231,374.13 24,888,551.57 7,495,814.81 16,604,075.76
5. Supplementary information of cash flow statement of parent company
Items Jan.-Jun. 2011 Jan.-Jun. 2010
1．Reconciliation of net profit to cash flows from operating activities:
Net profit 3,595,989.32 6,710,658.13
Add: Provision for impairment of assets
Depreciation of fixed assets, oil assets and productive biological assets 3,296,929.73 3,836,447.66
Amortization of intangible assets 42,696.27
Amortization of long-term prepayments 263,719.08
Losses on disposal of fixed assets, intangible assets and other long-term assets
60,710.40
(income is listed with ―- ‖)
2,008.72 2,008.72
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 ―- ‖) 4,527,892.18 6,208,666.11
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 ―- ‖)
48
Semi-annual report of 2011
Items Jan.-Jun. 2011 Jan.-Jun. 2010
Decrease in inventories(increase is listed with ―-‖) 653,343.77 -16,714,252.65
Decrease in operating receivables(increase is listed with ―-‖) 2,797,221.61 137,302,015.88
Increase in operating payables(decrease is listed with ―- ‖) 1,275,666.15 -35,287,682.28
Others
16,471,472.24 102,100,557.84
Net cash flows from operating activities
XIV. Supplementary information
1. Statement of non-recurring gains/losses this period
Items Jan.-Jun. 2011 Jan.-Jun. 2010
Gains and loss from disposal of non-current assets 60,710.40 -
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
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
Gains/losses obtained from external entrusted loan -
49
Semi-annual report of 2011
Items Jan.-Jun. 2011 Jan.-Jun. 2010
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.
Income of trustee fee from entrusted operation -
Net amount of other non-operating income and expense except the above items 290,792.40
Other losses/gains items conforming the definitions of non-recurring gains/losses
Subtotal 60,710.40 290,792.40
Impact on income tax
Influenced amount of minority shareholders‘ equity(after tax) -
Total 60,710.40 290,792.40
2. Return on equity and earnings per share
Earnings per share
weighted average of return on
Profit in the report period Diluted
Basic earnings
equity earnings per
per share
share
Net profit attributable to shareholders of parent
3.42% 0.033 0.033
company
Net profit attributable to shareholders of parent
company after deducting non-recurring gains and 3.44% 0.033 0.033
losses
3. Calculation procedure for return on equity
Item Code Jan.-Jun. 2011 Jan.-Jun. 2010
Net profit attributable to shareholders of
9,280,724.63 10,473,169.89
the parent Company 1
Non-recurring gains/losses attributable to
44,934.40 290,792.40
parent Company 2
Net profit attributable to shareholders of
the parent Company after deducting 3=1-2 9,325,659.03 10,182,377.49
non-recurring gains and losses
Net assets attributable to shareholders of
the parent Company 4 275,845,356.64 262,437,028.7
Fully diluted return on equity(I) 5=1÷4 3.42% 3.99%
50
Semi-annual report of 2011
Item Code Jan.-Jun. 2011 Jan.-Jun. 2010
Fully diluted return on equity(II) 6=3÷4 3.44% 3.88%
Net assets at year-begin attributable to
7 266,564,632.01 251,963,858.81
shareholders of the parent Company
Net assets increased by new shares
issuing or convertible bonds that
8
attributable to shareholder of the parent
company
Amount of months from next month of
increase of net assets attributable to
9
shareholders of parent company to
year-end of this period
Net assets decreased by repurchased or
cash bonus etc. that attributable to 10
shareholders of parent company
Amount of months from next month of
decrease of net assets attributable to
11
shareholders of parent company to
year-end of this period
Amount of months in report period 12 6 6
Weighted average of net assets 13=7+1÷(2)+8×9
attributable to shareholders of the parent 271,204,994.33 257,200,443.76
company ÷12-10×11÷12
Weighted average of return on
3.42% 4.07%
equity(I) 14=1÷13
Weighted average of return on
3.44% 3.96%
equity(II) 15=3÷13
51
Semi-annual report of 2011
Chapter 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 19, 2011
Chairman of the Company (Signature) __LI ZHONG QIU _
52
