Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
SHENZHEN ZHONGHENG HUAFA CO., LTD.
ANNUAL REPORT 2018
April 2019
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Section I. Important Notice, Contents and Paraphrase
Board of Directors, Supervisory Committee, all directors, supervisors and senior
executives of Shenzhen Zhongheng HUAFA Co., Ltd. (hereinafter referred to as
the Company) hereby confirm that there are no any fictitious statements,
misleading statements, or important omissions carried in this report, and shall
take all responsibilities, individual and/or joint, for the reality, accuracy and
completion of the whole contents.
Li Zhongqiu, Principal of the Company, Yang Bin, person in charger of
accounting works and Wu Ai’jie, person in charge of accounting organ
(accounting principal) hereby confirm that the Financial Report of 2018 Annual
Report is authentic, accurate and complete.
All directors are attended the Board Meeting for report deliberation.
Concerning the forward-looking statements with future planning involved in the
Report, they do not constitute a substantial commitment for investors. Majority
investors are advised to exercise caution of investment risks.
Risks factors are being well-described in the Report, found more in risks factors
and countermeasures disclosed in Prospects for Future Development of the
Board of Directors’ Report.
The Company has no plan of cash dividends carried out, bonus issued and
capitalizing of common reserves either.
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Contents
Section I Important Notice, Contents and Paraphrase ................................................................. 2
Section II Company Profile and Main Finnaical Indexes ............................................................. 5
Section III Summary of Company Business .................................................................................. 7
Section IV Discussion and Analysis of Operation .......................................................................... 8
Section V Important Events .......................................................................................................... 12
Section VI Changes in shares and particular about shareholders............................................... 16
Section VII Preferred Stock……………………………………………………………………….18
Section VIII Particulars about Directors, Supervisors,Senior Executives and Employees ...... 19
Section IX Corporate Governance ................................................................................................. 20
Section X Corporate Bonds ........................................................................................................... 22
Section XI Financial Report ............................................................................................................ 22
Section XII Documents Available for Reference ........................................................................... 85
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Paraphrase
Items Refers to Contents
Company, Shen HUAFA Refers to SHENZHEN ZHONGHENG HUAFA CO., LTD.
Hengfa Technology Refers to Wuhan Hengfa Technology Co., Ltd.
HUAFA Property Refers to Shenzhen Zhongheng HUAFA Property Co., Ltd
HUAFA Lease Refers to Shenzhen HUAFA Property Lease Management Co., Ltd
HUAFA Trade Refers to Wuhan Zhongheng HUAFA Trade Co., Ltd.
Wuhan Zhongheng New Science & Technology Industrial Group
Wuhan Zhongheng Group Refers to
Co., Ltd
HK Yutian Refers to Hong Kong Yutian International Investment Co., Ltd.
Hengsheng Photo-electricity Refers to Wuhan Hengsheng Photo-electricity Industry Co., Ltd.
Hengsheng Yutian Refers to Wuhan Hengsheng Yutian Industrial Co., Ltd.
Yutian Henghua Refers to Shenzhen Yutian Henghua Co., Ltd.
HUAFA Hengtian Refers to Shenzhen HUAFA Hengtian Co., Ltd.
HUAFA Hengtai Refers to Shenzhen HUAFA Hengtai Co., Ltd.
Shenzhen Vanke Refers to Shenzhen Vanke Real Estate Co., Ltd.
Vanke Guangming Refers to Shenzhen Vanke Guangming Real Estate Development Co., Ltd
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Section II. Company Profile and Main Financial Indexes
I. Company profile
Short form of the stock Shen HUAFA A, Shen HUAFA B Stock code 000020, 200020
Stock exchange for listing Shenzhen Stock Exchange
Name of the Company (in
深圳中恒华发股份有限 Company
Chinese)
Short form of the Company
深华发
(in Chinese)
Foreign name of the
SHENZHEN ZHONGHENG HUAFA CO., LTD.
Company (if applicable)
Abbr. of the foreign name
N/A
(if applicable)
Legal representative Li Zhongqiu
Registrations add. 411 Bldg., Huafa (N) Road, Futian District, Shenzhen
Code for registrations add 518031
Offices add. 33/F, No. 2 Building of Dachong Business Center, Nanshan District, Shenzhen
Codes for office add. 518057
Company’s Internet Web
http://www.hwafa.com.cn
Site
E-mail huafainvestor@126.com.cn
II. Person/Way to contact
Secretary of the Board Rep. of security affairs
Name Yang Bin Niu Yuxiang
33/F, No. 2 Building of Dachong 33/F, No. 2 Building of Dachong
Contact add. Business Center, Nanshan District, Business Center, Nanshan District,
Shenzhen Shenzhen
Tel. 0755-86360201 0755-86360201
Fax. 0755-86360206 0755-86360206
E-mail huafainvestor@126.com.cn huafainvestor@126.com.cn
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
III. Information disclosure and preparation place
China Securities Journal; Securities Times; Hong Kong Commercial
Newspaper appointed for information disclosure
Daily
Website for annual report publish appointed by
http://www.cninfo.com.cn
CSRC
Preparation place for annual report Office of the Board of SHENZHEN ZHONGHENG HUAFA CO., LTD.
IV. Registration changes of the Company
Organization code Before change: 61883037-2; after changed: 91440300618830372G
Before the change of controlling shareholders: the main business was production and
sales of color TV, printed circuit board and injection molded parts etc. After the
Changes of main business since listing
change of controlling shareholders: the main business gradually adjusted to
(if applicable)
production and sales of injection molded parts, foam part (light packaging materials)
and LCD whole machine.
The Company’s predecessor was Shenzhen Huafa Electronic Co., LTD, which was
founded in 1981, initiated and established by three legal persons-- Shenzhen
Electronics Group Co., LTD, China Zhenhua Electronic Group Co., LTD and Hong
Kong Luks Industrial Co., LTD. In June 2005, Wuhan Zhongheng Group transferred
Previous changes for controlling the 44.12% equity of company, held by original first and second largest shareholder
shareholders (if applicable) of the Company Shenzhen Electronics Group Co., LTD and China Zhenhua
Electronic Group Co., LTD, and equity transfer formalities completed in April 2007;
Wuhan Zhongheng Group became the controlling shareholder of the Company. In
September 2007, the company officially changed its name to “Shenzhen Zhongheng
HUAFA Co., Ltd”.
V. Other relevant information
CPA engaged by the Company
Name of CPA DAXIN Certified Public Accountants LLP
Offices add. for CPA 15/F College International Mansion, No.1 Zhi Chun Road, Haidian District, Beijing
Signing Accountants Li Wei, Fan Zhang
Sponsor engaged by the Company for performing continuous supervision duties in reporting period
□ Applicable √ Not applicable
Financial consultant engaged by the Company for performing continuous supervision duties in reporting period
□ Applicable √ Not applicable
VI. Main accounting data and financial indexes
Whether it has retroactive adjustment or re-statement on previous accounting data
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
□ Yes √ No
Changes over last
2018 2017 2016
year
Operating income(RMB) 637,046,707.03 858,040,132.74 -25.76% 619,167,770.74
Net profit attributable to
shareholders of the listed 3,295,022.72 974,409.39 238.16% 5,457,710.33
company(RMB)
Net profit attributable to
shareholders of the listed
company after deducting 1,535,043.65 2,079,588.86 -26.19% 5,109,926.82
non-recurring gains and
losses(RMB)
Net cash flow arising from
-21,894,459.66 11,723,254.36 -286.76% -18,693,296.58
operating activities(RMB)
Basic earnings per
0.0116 0.0034 241.18% 0.0193
share(RMB/Share)
Diluted earnings per
0.0116 0.0034 241.18% 0.0193
share(RMB/Share)
Weighted average ROE 1.02% 0.30% 0.72% 1.72%
Changes over end of
End of 2018 End of 2017 End of 2016
last year
Total assets(RMB) 617,090,153.46 629,762,731.38 -2.01% 632,475,542.40
Net assets attributable to
shareholder of listed 323,968,000.74 320,672,978.02 1.03% 319,698,568.63
company(RMB)
VII. Difference of the accounting data under accounting rules in and out of China
1. Difference of the net profit and net assets disclosed in financial report, under both IAS (International
Accounting Standards) and Chinese GAAP (Generally Accepted Accounting Principles)
□ Applicable √ Not applicable
The Company had no difference of the net profit or net assets disclosed in financial report, under either IAS (International
Accounting Standards) or Chinese GAAP (Generally Accepted Accounting Principles) in the period.
2. Difference of the net profit and net assets disclosed in financial report, under both foreign accounting
rules and Chinese GAAP (Generally Accepted Accounting Principles)
□ Applicable √ Not applicable
The Company had no difference of the net profit or net assets disclosed in financial report, under either foreign accounting rules or
Chinese GAAP (Generally Accepted Accounting Principles) in the period.
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
VIII. Quarterly main financial index
In RMB
1st Q 2nd Q 3rd Q 4th Q
Operating income 171,620,013.62 169,364,829.62 148,975,383.05 147,086,480.74
Net profit attributable to
shareholders of the listed 307,367.89 2,485,765.71 -2,295,638.52 2,797,527.64
company
Net profit attributable to
shareholders of the listed
5,469.74 2,047,997.28 -3,406,233.82 2,887,810.45
company after deducting
non-recurring gains and losses
Net cash flow arising from
337,819.42 -27,009,145.05 -27,365,096.05 32,141,962.02
operating activities
Whether there are significant differences between the above-mentioned financial index or its total number and the relevant financial
index disclosed in the company’s quarterly report and semi-annual report
□Yes √ No
IX. Items and amounts of extraordinary profit (gains)/loss
√Applicable □ Not applicable
In RMB
Item 2018 2017 2016 Note
Gains/losses from the disposal of
non-current asset (including the write-off 49,159.75 199,069.56 82,132.08
that accrued for impairment of assets)
Governmental subsidy reckoned into
current gains/losses (not including the
subsidy enjoyed in quota or ration 3,795,820.00 1,451,189.68 1,419,888.89
according to national standards, which are
closely relevant to enterprise’s business)
Gain/loss of entrusted investment or assets
326,439.49 372,245.91
management
Other non-operating income and
expenditure except for the aforementioned -167,795.70 427,054.02 -1,209,982.33
items
Other gain/loss items satisfying the
definition of nonrecurring gain/loss 333,974.06
account
Accrual liability reversal 1,527,600.81
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Loss on assignment of claims -2,158,200.00 -5,755,200.00
Less: Impact on income tax 85,444.47 -672,860.55 278,229.19
Total 1,759,979.07 -1,105,179.47 347,783.51 --
Concerning the extraordinary profit (gain)/loss defined by Q&A Announcement No.1 on Information Disclosure for Companies
Offering Their Securities to the Public --- Extraordinary Profit/loss, and the items defined as recurring profit (gain)/loss according to
the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their
Securities to the Public --- Extraordinary Profit/loss, explain reasons
□ Applicable √ Not applicable
In reporting period, the Company has no particular about items defined as recurring profit (gain)/loss according to the lists of
extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to
the Public --- Extraordinary Profit/loss
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Section III. Summary of Company Business
I. Main businesses of the company in the reporting period
Whether the company needs to comply with the disclosure requirements of the particular industry
No
After years of development, the company has gradually formed two main businesses in industry and property
management. Among them, the industrial business mainly includes injection molding, polylon (light-weight
packaging materials), and complete machine production and sales of liquid crystal display, property management
business is mainly the lease of its own property.
II. Major changes in main assets
1. Major changes in main assets
Major assets Note of major changes
Equity assets No major change
Fixed assets No major change
Intangible assets No major change
Construction in progress No major change
2. Main overseas assets
□ Applicable √ Not applicable
III. Core competitiveness analysis
Whether the company needs to comply with the disclosure requirements of the particular industry
No
All industrial lands of the Company located in Shenzhen were taken into the first batch of plan under 2010 Shenzhen urban upgrade
planning. In the future, development and operation of self-owned land resources would become the income source of the Company
on a long-term and stable basis.
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Section IV. Discussion and Analysis of Operation
1. Introduction
In 2018, the international environment was complicated, the downward pressure on China’s economy increased,
and the economic growth slowed down. Facing the unfavorable market environment, the company has actively
taken measures to adjust its management concept and operating strategies and expand its main business which
were supplemented with assessment and incentive mechanism. At the same time, some assets were cleaned and
disposed of to maximize the benefits of assets and achieve better returns. In 2018, the company achieved
operating revenue of 637,046,700 Yuan, a decrease of 25.76% on a year-on-year basis, and net profits of
3,295,000 Yuan, increased slightly compared with the same period last year.
●Video service business achieved annual operating revenue of 292748400 Yuan, a decrease of 38.75% on a
year-on-year basis, operation profit amounted as 3387600 Yuan with 10.82% up from a year earlier. During the
reporting period, the Video Business Division adjusted the product structure and optimized the sales ratio of each
brand of products. The proportion of AOC series brands decreased due to the Group's adjustment, the Great Wall
brand accounted for 22.41%, and the proportion of VSCN domestic sales rose to 24.54%, the increased VSCN
export sales accounted for 4.91%, ACER accounted for 18.89%, and Changhong and Skyworth brands were
newly increased. In 2018, it achieved sales volume of 703,900 units, outperforming the annual profit target.
●Injection molding business achieved annual operating revenue of 220923600 Yuan, a decrease of 12.46% over
the same period last year, operation profit amounted as 443500 Yuan, a declined over same period last year. With
the unceasingly fierce competition in the market, the profit margin of injection molding has been greatly reduced,
but all the staff of the business division adjusted the sales strategy in time, actively seized the market share, and
expanded the production workshop, purchased new type of production lines, and more than 10 existing automatic
equipment, such as automatic gumming robots, injection molding machines, etc., have been put into production in
November 2018, and the annual output is expected to increase by 2.3 million sets.
●Polylon business achieved annual operating revenue of 68365100 Yuan, a decrease of 16.01% over the same
period last year, net profit amounted as -770000 yuan, an increase of 7.49% from a year earlier. EPS Business
Division actually sold 3,873 tons in 2018. The EPS Business Division won the title of “Excellent Scientific and
Technological Innovation Enterprise of China Plastics Processing Industry” due to its outstanding achievements in
promoting industrial technology advancement and promoting the transformation of scientific and technological
achievements. In 2018, the main projects won the bidding by several hundred percents, the electric heating P3
packaging won 100% bidding, the fuel gas and K series packaging won 100% bidding, the T3 structural parts won
100% bidding, the freezer Dafuhao won 100% bidding, and the dual variable temperature freezer won 100%
bidding.
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
●The property rental business achieved annual operating revenue of 34369800 Yuan, a decrease of 5.45% over
the same period last year. The company’s own property, Huafa Building, has been included in the urban renewal
project, the lessees had great changes, and the rental income decreased relatively. Gongming Huafa Electronic
City was still in the stage of renovation and transformation, and no rental income was generated in the current year.
Therefore, in 2018, the company’s overall rental income decreased somewhat compared with the previous year.
II. Main business analysis
1. Introduction
See the “I-Introduction” in “Discussion and Analysis of Operation”
2. Revenue and cost
(1) Constitute of operating income
In RMB
2018 2017
Increase/decrease
Ratio in operation Ratio in operation
Amount Amount y-o-y
income income
Total operation
637,046,707.03 100% 858,040,132.74 100% -25.76%
income
According to industries
Display 292,748,410.48 45.95% 477,934,212.10 55.70% -38.75%
Plastic injection
220,923,611.40 34.68% 252,361,777.26 29.41% -12.46%
hardware
Foam 68,365,102.41 10.73% 81,395,469.03 9.49% -16.01%
Property leasing 34,369,761.45 5.40% 36,350,826.04 4.24% -5.45%
Income from
materials and 14,235,066.01 2.23% 2,695,453.61 0.31% 428.11%
waste
Water and
electricity costs 6,404,755.28 1.01% 7,302,394.70 0.85% -12.29%
and other
According to products
Display 292,748,410.48 45.95% 477,934,212.10 55.70% -38.75%
Plastic injection
220,923,611.40 34.68% 252,361,777.26 29.41% -12.46%
hardware
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Foam 68,365,102.41 10.73% 81,395,469.03 9.49% -16.01%
Property leasing 34,369,761.45 5.40% 36,350,826.04 4.24% -5.45%
Income from
materials and 14,235,066.01 2.23% 2,695,453.61 0.31% 428.11%
waste
Water and
electricity costs 6,404,755.28 1.01% 7,302,394.70 0.85% -12.29%
and other
According to region
Hong Kong 133,145,269.85 20.90% 279,854,122.73 32.62% -52.42%
Central China 464,355,922.55 72.89% 535,937,015.83 62.46% -13.36%
South China 39,545,514.63 6.21% 42,248,994.18 4.92% -6.40%
(2) About the industries, products, or regions accounting for over 10% of the company’s operating income
or operating profit
√Applicable □ Not applicable
Whether the company needs to comply with the disclosure requirements of the particular industry
No
In RMB
Increase/decrea
Increase/decrea Increase/decrea
Operating Gross profit se of gross
Operating cost se of operating se of operating
income ratio profit ratio
revenue y-o-y cost y-o-y
y-o-y
According to industries
Display 292,748,410.48 274,670,759.10 6.18% -38.75% -40.17% 2.24%
Plastic
injection 220,923,611.40 206,230,661.93 6.65% -12.46% -11.60% -0.91%
hardware
Foam 68,365,102.41 64,368,704.31 5.85% -16.01% -14.76% -1.38%
Property
34,369,761.45 1,390,657.20 95.95% -5.45% -31.79% 1.56%
leasing
According to products
Display 292,748,410.48 274,670,759.10 6.18% -38.75% -40.17% 2.24%
Plastic
injection 220,923,611.40 206,230,661.93 6.65% -12.46% -11.60% -0.91%
hardware
Foam 68,365,102.41 64,368,704.31 5.85% -16.01% -14.76% -1.38%
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Property
34,369,761.45 1,390,657.20 95.95% -5.45% -31.79% 1.56%
leasing
According to region
Hong Kong 133,145,269.85 124,734,192.47 6.32% -52.42% -53.90% 3.00%
Central China 448,891,854.44 420,535,932.87 6.32% -15.60% -15.44% -0.17%
South China 34,369,761.45 1,390,657.20 95.95% -5.45% -31.79% 1.56%
Under circumstances of adjustment in reporting period for statistic scope of main business data, adjusted main business based on
latest one year’s scope of period-end
□ Applicable √ Not applicable
(3) Income from physical sales larger than income from labors
√ Yes □ No
Increase/decrease(
Industries Item Unit 2018 2017
+,-) y-o-y
Sales volume Set 703,930 1,130,907 -37.76%
Display Output Set 705,883 1,118,816 -36.91%
Storage Set 14,483 12,530 15.59%
Sales volume Ton 10,888.35 13,179.47 -17.38%
Plastic injection
Output Ton 10,542.22 13,566 -22.29%
hardware
Storage Ton 710.87 1,057 -32.75%
Sales volume Ton 3,873.82 4,487.58 -13.68%
EPS package Output Ton 3,881.86 4,341.03 -10.58%
Storage Ton 233.49 225.45 3.57%
Reasons for y-o-y relevant data with over 30% changes
√Applicable □ Not applicable
Orders of display business declined over that of last period, than output and sales volume reduced correspondingly. Sales of plastic
injection hardware declined correspondingly, storage decreased.
(4) Fulfillment of the company’s signed significant sales contracts up to this reporting period
□ Applicable √ Not applicable
(5) Constitute of operation cost
Category of industry and products
In RMB
Industries Item 2018 2017 Increase/decrea
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Ratio in Ratio in se(+,-) y-o-y
Amount Amount
operation cost operation cost
Display Raw materials 259,032,420.00 94.31% 448,842,209.98 97.00% -3.00%
Display Labor wages 5,350,338.95 1.95% 6,506,927.33 1.00% 1.00%
Display Depreciation 2,041,472.54 0.74% 1,255,263.35 0.00% 1.00%
Display Energy
Plastic
injection Raw materials 175,505,397.97 85.10% 205,433,313.18 90.00% -5.00%
hardware
Plastic
injection Labor wages 14,177,081.31 6.87% 16,716,971.22 6.00% 1.00%
hardware
Plastic
injection Depreciation 3,187,779.06 1.55% 3,537,615.26 3.00% -1.00%
hardware
Plastic
injection Energy
hardware
EPS package
Raw materials 40,102,966.95 62.30% 42,999,667.41 56.00% 6.00%
products
EPS package
Labor wages 8,829,344.71 13.72% 9,868,282.35 16.00% -2.00%
products
EPS package
Depreciation 2,000,366.49 3.11% 1,685,290.19 3.00% 0.00%
products
EPS package
Energy 10,746,289.68 16.69% 10,858,241.16 17.00% 0.00%
products
In RMB
2018 2017
Increase/decrea
Products Item Ratio in Ratio in
Amount Amount se(+,-) y-o-y
operation cost operation cost
Display Raw materials 259,032,420.00 94.31% 448,842,209.98 97.00% -3.00%
Display Labor wages 5,350,338.95 1.95% 6,506,927.33 1.00% 1.00%
Display Depreciation 2,041,472.54 0.74% 1,255,263.35 0.00% 1.00%
Display Energy
Plastic
injection Raw materials 175,505,397.97 85.10% 205,433,313.18 90.00% -5.00%
hardware
Plastic Labor wages 14,177,081.31 6.87% 16,716,971.22 6.00% 1.00%
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
injection
hardware
Plastic
injection Depreciation 3,187,779.06 1.55% 3,537,615.26 3.00% -1.00%
hardware
Plastic
injection Energy
hardware
EPS package
Raw materials 40,102,966.95 62.30% 42,999,667.41 56.00% 6.00%
products
EPS package
Labor wages 8,829,344.71 13.72% 9,868,282.35 16.00% -2.00%
products
EPS package
Depreciation 2,000,366.49 3.11% 1,685,290.19 3.00% 0.00%
products
EPS package
Energy 10,746,289.68 16.69% 10,858,241.16 17.00% 0.00%
products
Explanation
Cost of main business amounting to 545,270,125.34 Yuan, including 274,670,759.10 Yuan for display, 206,230,661.93 Yuan for
plastic injection hardware and 64,368,704.31 Yuan for foam.
(6) Whether the changes in the scope of consolidation in Reporting Period
□Yes √No
(7) Major changes or adjustment in business, product or service of the Company in Reporting Period
□ Applicable √ Not applicable
(8) Major sales and main suppliers
Major sales client of the Company
Total top five clients in sales (RMB) 487,280,007.23
Proportion in total annual sales volume for top five
76.50%
clients
Ratio of related parties in annual total sales among the
15.65%
top five clients
Information of top five clients of the Company
Serial Clients Sales (RMB) Proportion in total annual sales
1 No. 1 221,249,250.56 34.73%
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
2 No. 2 99,679,782.04 15.65%
3 No. 3 87,845,841.88 13.79%
4 No. 4 41,955,596.90 6.59%
5 No. 5 36,549,535.85 5.74%
Total -- 487,280,007.23 76.50%
Other situation of main clients
□ Applicable √ Not applicable
Main suppliers of the Company
Total purchase amount from top five suppliers (RMB) 397,340,709.18
Proportion in total annual purchase amount for top five
68.76%
suppliers
Ratio of related parties in annual total sales among the
40.72%
top five suppliers
Information of top five suppliers of the Company
Serial Supplier Purchase (RMB) Proportion in total purchase
1 No. 1 235,309,925.64 40.72%
2 No. 2 79,516,916.49 13.76%
3 No. 3 40,961,483.25 7.09%
4 No. 4 21,266,983.80 3.68%
5 No. 5 20,285,400.00 3.51%
Total -- 397,340,709.18 68.76%
Other notes of main suppliers
□ Applicable √ Not applicable
3. Expenses
In RMB
Increase/decreas
2018 2017 Note of major changes
e(+,-) y-o-y
Sales expense 14,100,247.17 15,916,493.87 -11.41%
Administrative
38,515,205.15 42,783,111.53 -9.98%
expense
Financial expense 10,316,763.45 8,979,085.95 14.90%
4. R&D investment
□ Applicable √ Not applicable
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
5. Cash flow
In RMB
Item 2018 2017 Increase/decrease(+,-) y-o-y
Subtotal of cash in-flow from
628,379,927.86 840,952,371.80 -25.28%
operation activity
Subtotal of cash out-flow
650,274,387.52 829,229,117.44 -21.58%
from operation activity
Net cash flow arising from
-21,894,459.66 11,723,254.36 -286.76%
operating activities
Subtotal of cash in-flow from
145,251,259.49 291,541,885.91 -50.18%
investment activity
Subtotal of cash out-flow
159,063,404.44 301,268,751.27 -47.20%
from investment activity
Net cash flow from
-13,812,144.95 -9,726,865.36 -42.00%
investment activity
Subtotal of cash in-flow from
381,872,622.67 288,636,279.36 32.30%
financing activity
Subtotal of cash out-flow
399,842,065.16 312,866,866.83 27.80%
from financing activity
Net cash flow from financing
-17,969,442.49 -24,230,587.47 25.84%
activity
Net increased amount of cash
-53,513,764.70 -22,540,338.67 -137.41%
and cash equivalent
Main reasons for y-o-y major changes in aspect of relevant data
√Applicable □ Not applicable
Sales of the company deceased in the period, and collection account declined correspondingly.
Reasons of major difference between the cash flow of operation activity in report period and net profit of the Company
□ Applicable √ Not applicable
III. Analysis of the non-main business
√Applicable □Not applicable
In RMB
Amount Ratio in total profit Note Whether be sustainable
Investment Income from short-term
326,439.49 7.11% N
income financial products
Asset impairment 700,496.64 15.25% Mainly due to current N
18
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
accrued for other account
receivable bad debt losses
Non-operating Income from government
2,886,811.06 62.87% N
income subsidy
Non-operating Loss on assignment of
2,341,006.76 50.98% N
expense claims
IV. Assets and liability
1. Major changes of assets composition
In RMB
End of 2018 End of 2017
Ratio
Ratio in Ratio in Notes of major changes
Amount Amount changes
total assets total assets
Monetary fund 34,108,330.27 5.53% 68,812,495.97 10.93% -5.40%
Account
116,797,834.51 18.93% 148,795,998.26 23.63% -4.70%
receivable
Inventory 62,973,909.38 10.20% 60,387,021.65 9.59% 0.61%
Investment real
50,681,322.86 8.21% 52,410,958.62 8.32% -0.11%
estate
Long-term
equity 0.00% 0.00% 0.00%
investment
Fixed assets 188,083,873.38 30.48% 176,477,314.08 28.02% 2.46%
Construction in
5,727,760.23 0.93% 654,356.00 0.10% 0.83%
process
Short-term
161,568,657.88 26.18% 166,620,264.81 26.46% -0.28%
loans
2. Assets and liability measured by fair value
□ Applicable √ Not applicable
3. Assets right restriction till end of reporting period
Item Ending book value Restriction reasons
Drawing bank acceptance bill, court
Monetary fund 6,147,120.67
freeze
Notes receivable 11,151,688.25 Pledge
19
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Account receivable 14,860,475.10 Pledge
Investment real estate 26,374,703.70 Mortgage to obtain bank loans
Fixed assets 43,227,436.86 Mortgage to obtain bank loans
Disposal of fixed assets 92,857,471.69 Court seizure
Intangible assets 36,957,101.76 Mortgage to obtain bank loans
Total 231,575,998.03
V. Investment
1. Overall situation
□ Applicable √ Not applicable
2. The major equity investment obtained in the reporting period
□ Applicable √ Not applicable
3. The major non-equity investment doing in the reporting period
□ Applicable √ Not applicable
4. Financial assets investment
(1) Securities investment
□ Applicable √ Not applicable
The Company has no securities investment in the Period.
(2) Derivative investment
□ Applicable √ Not applicable
The Company has no derivatives investment in the Period.
5. Application of raised proceeds
□ Applicable √ Not applicable
The Company has no application of raised proceeds in the Period.
20
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
VI. Sales of major assets and equity
1. Sales of major assets
□ Applicable √ Not applicable
The Company had no sales of major assets in the reporting period.
2. Sales of major equity
□ Applicable √ Not applicable
VII. Analysis of main holding company and stock-jointly companies
√Applicable □ Not applicable
Particular about main subsidiaries and stock-jointly companies net profit over 10%
In RMB
Company Main Register Total Operating Operating
Type Net Assets Net profit
name business capital assets revenue profit
Hengfa
Production 181,643,11 474,336,64 220,675,90 597,501,19 3,059,503. 4,912,260.
Technolog Subsidiary
sales 1.00 6.26 6.52 2.40 83 21
y Company
HUAFA Property
1,000,000. 1,052,173. -3,222,009. 2,774,205. -404,207.5 -414,207.5
Property Subsidiary manageme
00 81 32 63 7 7
Company nt
HUAFA Property
1,000,000. 1,900,692. -5,026,990.
Lease Subsidiary manageme
00 20 71
Company nt
HUAFA Property
1,000,000.
Hengtian Subsidiary manageme 996,381.66 996,381.66 -838.54 -838.54
00
Company nt
HUAFA Property
1,000,000.
Hengtai Subsidiary manageme 997,112.68 997,112.68 -838.05 -838.05
00
Company nt
Particular about subsidiaries obtained or disposed in report period
□Applicable √Not applicable
Explanation of main holding company and stock-jointly companies
Nil
VIII. Structured vehicle controlled by the Company
□ Applicable √ Not applicable
21
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
IX. Future Development Prospects
In 2019, the household appliance industry is facing the challenge of insufficient domestic demand and Sino-US
trade friction, the industry performance growth is at a trough period, and the upward turning point has not yet
formed. However, with consumer’s pursuit of higher quality life and better experience, high-end upgrades will be
a big trend in the market. As a supporting enterprise in the home appliance industry, it is imperative for us to
improve product quality and move towards high-end development, we will enhance technology added value and
improve profitability through technology upgrades, and actively seek transformation and upgrading by increasing
research and development of new products, adjusting and improving product structure, improving production
processes, improving production efficiency, expanding downstream channels, and cultivating own brands.
For a certain period of time, property rental is still an important business for the company’s development, making
full use of self-owned properties, providing operations, leasing, and service business will bring certain
contributions to the company’s cash flow. The upgrade of commercial properties will bring long-term and stable
sources of income for the company after the gradual implementation of urban renovation projects.
New Annual Business Plan
◆ Industrial Business Upgrade
On the basis of serving existing customers, we will vigorously expand the market and strive for more market
shares; strengthen management, increase production efficiency, enhance product quality, and make full use of the
geographical advantages of the company to make the business bigger and stronger. Actively seek out high-quality
technical projects for consumer electronics, and gradually realize industrial upgrading through technological
optimization and management optimization.
◆ Promote the urban renewal project
Speed up the promotion of renewal unit project of Huafa District, Gongming Street, Guangming New District,
Shenzhen and the renewal project renovation progress of Huafa Building, Huaqiang North Street, Futian District,
Shenzhen, accelerate the settlement of project procedures, and strive to make stage progress as early as possible.
◆ Continue to focus on strengthening the company’s internal control
In 2019, the company will further optimize the corporate governance structure and improve the internal control
system and process and strictly implement and improve the executive ability of relevant system in accordance
with the governance requirements of listed companies, the company’s management and relevant departments will
execute the administrative provisions for approval procedures of fund utilizing, management system of related
transactions, working system of internal audit, internal reporting system of major information in strict accordance
with the requirements of internal control documents.
22
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
X. Reception of research, communication and interview
1. In the report period, reception of research, communication and interview
√Applicable □ Not applicable
Time Way Type Basic situation index of investigation
2018-01-04 Telephone communication Individual N/A
Reception (times) 10
Number of hospitality 0
Number of individual reception 10
Number of other reception 0
Disclosed, released or let out major undisclosed
N
information
23
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Section V. Important Events
I. Profit distribution plan of common stock and capitalizing of common reserves plan
Formulation, Implementation and Adjustment of common stock Profit Distribution Policy Especially Cash Dividend policy during
the Reporting Period
□ Applicable √ Not applicable
Profit distribution plan (pre-plan) of common stock and capitalizing of common reserves plan (pre-plan) in latest three years
(including the reporting period)
In recent three years the Company accumulated retained net profit is negative and it did not have the conditions for profit distribution,
so the Company did not undertake profit allocation in recent years and no capital reserve shall be converted into share capital either.
Cash dividend of common stock in latest three years (including the reporting period)
In RMB
Ratio of the
Ratio of the
total cash
Ratio of the cash bonus
bonus (other
Net profit cash bonus in by other
ways
attributable net profit ways in net
Proportion included) in
to common attributable profit
for cash net profit
Amount for stock to common attributable Total cash
bonus by attributable
Year for cash bonus shareholders stock to common bonus
other to common
bonus shares (tax of listed shareholders stock (including
ways(i.e. stock
included) company in of listed shareholders other ways)
share shareholders
consolidation company of listed
buy-backs) of listed
statement for contained in company
company
bonus year consolidation contained in
contained in
statement consolidation
consolidation
statement
statement
2018 0.00 3,295,022.72 0.00% 0.00 0.00% 0.00 0.00%
2017 0.00 974,409.39 0.00% 0.00 0.00% 0.00 0.00%
2016 0.00 5,457,710.33 0.00% 0.00 0.00% 0.00 0.00%
The Company gains profits in reporting period and the retained profit of common stock shareholders provided by parent company is
positive but no plan of cash dividend proposed of common stock
□ Applicable √ Not applicable
24
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
II. Profit distribution plan and capitalizing of common reserves plan for the Period
□ Applicable √ Not applicable
The Company has no plans of cash dividend distributed, no bonus shares and has no share converted from capital reserve either for
the year.
III. Implementation of commitment
1. Commitments that the actual controller, shareholders, related party, offeror and committed party as the
Company etc. have fulfilled during the reporting period and have not yet fulfilled by the end of reporting
period
√Applicable □ Not applicable
Type of
Commitm Commitm Implement
Commitments Promise commitme Content of commitments
ent date ent term ation
nts
The enterprise and its subsidiaries will not
participate directly or indirectly in
Implemen
operation of the business with
Wuhan t since 12
competitive of Shen Huafa and its In normal
Zhonghe 2007-03-2 April
controlling subsidiary concerned, and not implementi
ng 9 2007
to damage the interest of the Shen Huafa ng
Group throughou
and its controlling subsidiary by making
t the year
use of the potential controlling-ship of the
Shen Huafa either
The enterprise and its subordinate
enterprise shall avoid a related transaction
as far as possible with Shen Huafa and its
controlling subsidiary, as for the related
Commitments for
dealings occurred inevitable or have
share reform
reasonable cause, the enterprise promise to Implemen
Wuhan follow the principle of fair-ness, justice t since 12
In normal
Zhonghe and open-ness, signed the agreement in 2007-03-2 April
implementi
ng line with the laws, perform legal program, 9 2007
ng
Group fulfill information disclosure obligation throughou
and relevant approval procedures t the year
according to the relevant laws, regulations
and “Listing Rules” of the Shenzhen Stock
Exchange, guarantee not to damage the
legal interest of Shen Huafa and its
shareholders through related transactions
Wuhan After acquisition and assets restructuring, 2007-03-2 Implemen In normal
Zhonghe guarantee to have an independent staff, 9 t since 12 implementi
25
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
ng owns independent and completed assets, April ng
Group and independent in aspect of business, 2007
financial and institution from Shen Huafa throughou
t the year
Commitments in
report of
acquisition or
equity change
Commitments in
assets
reorganization
Commitments
make in initial
public offering or
re-financing
Equity incentive
commitment
Regarding the lawsuit with Shenzhen
Vanke: 1. If the arbitration judges
Shenzhen Vanke to win, the arbitration Implemen
Wuhan
losses caused by the contract disputes shall ted since In normal
Zhonghe 2016-12-2
be undertaken by Wuhan Zhongheng 20 implementi
ng 0
Group in full; 2. The contingent losses and December ng
Group
risks arising from the termination of 2016
relevant contracts shall be undertaken by
Wuhan Zhongheng Group in advance.
Ended as
Other the
commitments for reporting
medium and In 6 period, the
small Wuhan Promise to increasing shares of holding as months promises
shareholders Zhonghe 2.83 million shares of B-stock of the 2017-11-2 since the during
ng Company in 6 months since the letter 0 date of performanc
Group delivery notificatio e period
n has not
been
implemente
d yet
Wuhan In 6 Ended as
Promise to increasing shares of holding as
Zhonghe 2017-11-2 months the
2.8 million shares of A-stock at least in 6
ng 8 since the reporting
months since the letter delivery
Group date of period, the
26
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
notificatio promises
n during
performanc
e period
and part of
the
commitme
nt
implemente
d
Completed on
Yes
time(Y/N)
If the
commitments is
not fulfilled on
time, shall explain Not applicable
the specify reason
and the next work
plan
2. Concerning assets or project of the Company, which has profit forecast, and reporting period still in
forecasting period, explain reasons of reaching the original profit forecast
□ Applicable √ Not applicable
IV. Non-operational fund occupation from controlling shareholders and its related party
□ Applicable √ Not applicable
No non-operational fund occupation from controlling shareholders and its related party in period.
V. Explanation from Board of Directors, Supervisory Committee and Independent Directors
(if applicable) for “Qualified Opinion” that issued by CPA
□ Applicable √ Not applicable
VI. Particulars about the changes in aspect of accounting policy, estimates and calculation
method compared with the financial report of last year
√Applicable □ Not applicable
The “Notice on Revising and issuing the Format of General Enterprise Financial Statement for 2018” (CK[2018]
No.15) issued by Ministry of Finance on 15 June 2018, the format of financial statement for enterprise who
implemented the accounting standards shall be prepared for 2018 and later years in line with the above mentioned
27
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Notice.
VII. Major accounting errors within reporting period that needs retrospective restatement
□ Applicable √ Not applicable
No major accounting errors within reporting period that needs retrospective restatement for the Company in the period.
VIII. Compare with last year’s financial report; explain changes in consolidation statement’s
scope
□ Applicable √ Not applicable
No changes in consolidation scope in the period
IX. Appointment and non-reappointment (dismissal) of CPA
Accounting firm appointed
Name of domestic accounting firm DAXIN Certified Public Accountants LLP
Remuneration for domestic accounting firm (in 10 thousand
50
Yuan)
Continuous life of auditing service for domestic accounting
3
firm
Name of domestic CPA Li Wei, Fan Zhang
Consecutive years for auditing service from domestic CPA 3
Name of foreign accounting firm (if applicable) Nil
Remuneration for foreign accounting firm (in 10 thousand
0
Yuan) (if applicable)
Continuous life of auditing service for foreign accounting firm
0
(if applicable)
Name of foreign CPA N/A
Consecutive years for auditing services from foreign CPA (If
0
applicable)
Re-appointed accounting firms in this period
□Yes √ No
Appointment of internal control auditing accounting firm, financial consultant or sponsor
√Applicable □ Not applicable
In 2018, the Company employed DAXIN Certified Public Accountants LLP as internal control audit institutions.
28
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
X. Particular about suspended and delisting after annual report disclosed
□ Applicable √ Not applicable
XI. Bankruptcy reorganization
□ Applicable √ Not applicable
No bankruptcy reorganization for the Company in reporting period
XII. Significant lawsuits and arbitration of the Company
√Applicable □Not applicable
The Executi
Amount
Predict Advances results on of
The basic of money
ed in and the
situation of involved Disclosu
liabiliti litigation effects of litigatio Disclosure index
litigation (in 10 re date
es (Arbitratio litigation n
(Arbitration) thousand
(Y/N) n) (Arbitrati (Arbitrat
Yuan)
on) ion)
In September Ruling on
2016, Wuhan 16 August
Zhongheng Group 2017; put
Co., Ltd. and the forward
Company and the
http://www.cninfo.com.cn/cninf
Shenzhen Vanke application
o-new/disclosure/szse_main/bull
were applied for for
Found etin_detail/true/1204406606?an
arbitration due to dismantlin
more in nounceTime=2018-02-09 ；
the dispute case of g by the Implem 2018-02
46,460 N notice of http://www.cninfo.com.cn/new/d
“Contract for the Company enting -09
the isclosure/detail?plate=szse&stoc
Cooperative and
Company kCode=000020&announcementI
Operation of the controlling
d=1205326846&announcement
Old Projects at shareholder
Time=2018-08-25
Huafa Industrial , the
Park, Gongming application
Street, was
Guangming New rejected by
District”. the court
In March 2016, In Court
HUAFA Property November decision
Executi http://www.cninfo.com.cn/cninf
suit against the 2016, the as Jifang
on 2016-11 o-new/disclosure/szse_main/bull
Shenzhen Jifang 1,416.67 N Company Company
terminat -08 etin_detail/true/1202817664?an
Investment Co., win in the has to
ed nounceTime=2016-11-08
Ltd. for site ruling paid
occupation, judged by 27.9023
29
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
without rental, Shenzhen million
and utilities paid Arbitration Yuan
for a long-time Commissio (includin
n g rental,
administr
ative fee,
compens
ation,
penalty,
lawyer’s
fee and
arbitratio
n fees) in
total for
the
Company
In March 2016,
the Company and
HUAFA Science
& Technology suit
against the follow
companies,
including
Shenzhen
Huayongxing
Environmental The
Technology Co., judgment
Ltd., Shenzhen of 2nd trial
Guangyong has been http://www.cninfo.com.cn/cninf
Breadboard Co., issued, and Impleme Implem 2016-09 o-new/disclosure/szse_main/bull
1,964.92 N
Ltd., Shenzhen has applied nting enting -14 etin_detail/true/1202702423?an
Mingyi Electronic for nounceTime=2016-09-14 07:41
Co., Ltd., compulsor
Shenzhen y
Ouruilai execution
Technology Co.,
Ltd and Shenzhen
Kangzhengxin
Technology Co.,
Ltd., for arrears of
rent. and refuse to
move the site,
forcibly occupied
switch board
30
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
room and other
power unit under
the name of the
Company
The Company and
HUAFA Property
suit against
2018.3.15-
Shenzhen Jifang
The
investment Co.,
Company
Ltd. and
wins in 2nd Executi http://www.cninfo.com.cn/cninf
Shenzhen
judgment; Enter a on 2016-09 o-new/disclosure/szse_main/bull
Jianianhua 73.38 N
2018.3.26- judgment terminat -14 etin_detail/true/1202702423?an
Foreign Trade
application ed nounceTime=2016-09-14 07:41
Clothing City Co.,
for
Ltd. for refusing
enforceme
to paid the rents
nt
and administrative
fee without
justified reasons
In March 2016,
the Company and
The second
HUAFA Property
trial
suit against
decides the
Shenzhen
Company
Huayongxing
wins the http://www.cninfo.com.cn/cninf
Environmental
lawsuit on Impleme Implem 2016-09 o-new/disclosure/szse_main/bull
Technology Co., 947.26 N
15 March nting enting -14 etin_detail/true/1202702423?an
Ltd., and
2018, and nounceTime=2016-09-14 07:41
Shenzhen Yidaxin
has applied
Technology Co.,
for
Ltd. for contract
enforceme
violation and
nt
refuse to move the
site
Application for
arbitration in case
of contract dispute http://www.cninfo.com.cn/new/d
The
between the V&T isclosure/detail?plate=szse&stoc
arbitration 2018-11
(Shenzhen) Law 1,940.2 N In trial In trial kCode=000020&announcementI
has been -14
Firm and d=1205602053&announcement
heard
Shenzhen Time=2018-11-14
Zhongheng Huafa
Co., Ltd. and
31
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Wuhan
Zhongheng Group
XIII. Penalty and rectification
√Applicable □Not applicable
Type of
Conclusion (if Date of Index of
Name Type Reason investigation
applicable) disclosure disclosure
and punishment
During the
tenure as
Secretary of the
Board of
Shenzhen
China
Agricultural
University
Technology Filing a case
Co., Ltd., did for
Warning and
not urge and investigation or
Yang Bin Director fine of 30,000
organize the administrative
yuan
information punishment by
disclosure work CSRC
for the
company’s
temporary
announcement
in accordance
with relevant
regulations.
XIV. Integrity of the company and its controlling shareholders and actual controllers
√ Applicable □Not applicable
During the reporting period, the Company and the controlling shareholders and the actual controllers have no large amount due
unliquidated debt sentenced by the court.
32
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
XV. Implementation of the company’s stock incentive plan, employee stock ownership plan or
other employee incentives
□ Applicable √ Not applicable
The Company had no stock incentive plan, employee stock ownership plan or other employee incentive in the reporting period.
XVI. Major related transaction
1. Related transaction with routine operation concerned
√Applicable □Not applicable
Whet
Tradin her
Relate
g limit over Clear
Cont d
Propo ing
Type ent transa approv the Availabl Date
Relate rtion form
of of ction
Relate Relat d in ed (in appro for e similar of Index of
relate relate Pricing amou
d ionsh transa simil relate
d d principle nt 10 ved market disclo disclosure
party ip ction ar d
transa trans (in 10
price transa thousa limite trans price sure
ction actio thousa
ctions actio
n nd nd d or n
Yuan)
Yuan) not
(Y/N)
http://www.c
Shari ninfo.com.cn/
ng new/disclosur
the Purc e/detail?plate
Teleg
same hasin Synchro =szse&stock
raphi
HK contr Purch g nized 12,786 12,78 57.38 30,884 2018- Code=00002
N c --
Yutian ollin ase LCD with the .8 6.8 % .4 04-24 0&announce
transf
g moni market mentId=1204
er
share tors 699541&ann
holde ouncementTi
r me=2018-04-
24
Confirm The http://www.c
Shari
ed with average ninfo.com.cn/
ng
1% of market new/disclosur
the Purc
Hengs current Teleg price e/detail?plate
same hasin
heng market raphi refers to =szse&stock
contr Purch g 7,380. 7,380. 33.12 24,021 2018-
Photo- average N c the price Code=00002
ollin ase LCD 66 66 % .2 04-24
electri price in transf of same 0&announce
g moni
city principle er specifica mentId=1204
share tors
, and tions 699541&ann
holde
refer to which is ouncementTi
r
both searched me=2018-04-
33
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
their from 24
bargaini through
ng the
power world
famous
professi
onal
market
survey
compan
y
website
http://w
ww.wits
view.co
m
recogniz
ed
authorit
y in the
industry
and
LCD
professi
onal
market
survey
compan
y
website
http://w
ww.wits
view.co
m
Shari http://www.c
Accordi
ng ninfo.com.cn/
ng to the
the Purc new/disclosur
Hengs order Teleg
same hasin e/detail?plate
heng price, raphi
contr Purch g 3,363. 3,363. 100.0 2018- =szse&stock
Photo- deducted 17,158 N c --
ollin ase LCD 54 54 0% 04-24 Code=00002
electri 1 Yuan transf
g moni 0&announce
city each for er
share tors mentId=1204
operatio
holde 699541&ann
n charge
r ouncementTi
34
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
me=2018-04-
24
http://www.c
Shari ninfo.com.cn/
Sales
ng new/disclosur
LCD Accordi
the e/detail?plate
overa ng to the Teleg
same =szse&stock
ll custome raphi
HK contr 9,967. 9,967. 34.05 41,179 2018- Code=00002
Sales moni r sales N c --
Yutian ollin 98 98 % .2 04-24 0&announce
tor order transf
g mentId=1204
mach price er
share 699541&ann
ine sure
holde ouncementTi
set
r me=2018-04-
24
33,49 113,24
Total -- -- -- -- -- -- -- --
8.98 2.8
Detail of sales return with major
N/A
amount involved
In the reporting, Hengfa Technology purchased LCD monitors from HK Yutian with $ 19.26 million
Report the actual
approximately, 42.81% of the annual amount predicted at the beginning of the year; purchased LCD
implementation of the daily
monitor from Hengsheng Photo electricity with $ 10.75 million approximately, 30.72% of the annual
related transactions which were
amount predicted at the beginning of the year; purchasing LCD Display from Hengsheng Photo
projected about their total
electricity with about $ 4.9 million, 19.60% of the annual amount predicted at the beginning of the
amount by types during the
year; sold LCD Display whole machine to HK Yutian with $ 15 million approximately, 25.01% of the
reporting period(if applicable)
annual amount predicted at the beginning of the year.
Reasons for major differences
between trading price and N/A
market reference price
2. Related transactions by assets acquisition and sold
□Applicable √Not applicable
No above mentioned transactions occurred
3. Main related transactions of mutual investment outside
□ Applicable √ Not applicable
No main related transactions of mutual investment outside for the Company in reporting period.
4. Contact of related credit and debt
√ Applicable□Not applicable
Whether has a non-operational related debtor-creditor contact
35
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
□ yes √No
No non-operational related debtor-creditor contact in the period
5. Other related transactions
□ Applicable √ Not applicable
The company had no other significant related transactions in reporting period.
XVII. Significant contract and implementations
1. Trusteeship, contract and leasing
(1) Trusteeship
□ Applicable √ Not applicable
No trusteeship for the Company in reporting period.
(2) Contract
□ Applicable √ Not applicable
No contract for the Company in reporting period.
(3) Leasing
□ Applicable √ Not applicable
No leasing for the Company in reporting period.
2. Major guarantees
√Applicable □ Not applicable
(1) Guarantees
In 10 thousand Yuan
Particulars about the external guarantee of the Company (Barring the guarantee for subsidiaries)
Related Guaran
Name of the Announc Actual Implem tee for
Guarante Actual date of Guarantee Guarantee
Company ement guarantee ented related
e limit happening type term
guaranteed disclosur limit (Y/N) party
e date (Y/N)
Guarantee of the Company and the subsidiaries
Name of the Related Guarante Actual date of Actual Guarantee Guarantee Implem Guaran
Company Announc e limit happening guarantee type term ented tee for
36
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
guaranteed ement limit (Y/N) related
disclosur party
e date (Y/N)
Wuhan Hengfa Joint
2019-04-
Technology Co., 30,000 4,806.87 liability One year N N
30
Ltd. guarantee
Total amount of actual
Total amount of approving
occurred guarantee for
guarantee for subsidiaries in 30,000 4,806.87
subsidiaries in report
report period (B1)
period (B2)
Total balance of actual
Total amount of approved
guarantee for subsidiaries
guarantee for subsidiaries at the 30,000 4,806.87
at the end of reporting
end of reporting period (B3)
period (B4)
Guarantee of the subsidiaries for the subsidiaries
Related Comple
Guaran
Name of the Announc Actual te
Guarante Actual date of Guarantee Guarantee tee for
Company ement guarantee implem
e limit happening type term related
guaranteed disclosur limit entatio
party
e date n or not
Total amount of guarantee of the Company( total of three above mentioned guarantee)
Total amount of actual
Total amount of approving
occurred guarantee in
guarantee in report period 30,000 4,806.87
report period
(A1+B1+C1)
(A2+B2+C3)
Total balance of actual
Total amount of approved
guarantee at the end of
guarantee at the end of report 30,000 4,806.87
report period
period (A3+B3+C2)
(A4+B4+C4)
The proportion of the total amount of actually guarantee in the
14.84%
net assets of the Company (that is A4+ B4+C4)
Including:
Explanation on compound guarantee
(2) Guarantee outside against the regulation
□Applicable √Not applicable
No guarantee outside against the regulation in Period.
37
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
3. Entrust others to cash asset management
(1) Trust financing
□Applicable √Not applicable
No entrust others to cash asset management
(2) Entrusted loans
□ Applicable √ Not applicable
The company had no entrusted loans in the reporting period.
4. Other material contracts
□ Applicable √ Not applicable
No other material contracts for the Company in reporting period.
XVIII. Social responsibility
1. Performance of social responsibility
Not applicable
2. Execution of social responsibility of targeted poverty alleviation
(1) Targeted poverty alleviation scheme
Not applicable
(2) Summary of targeted poverty alleviation
Not applicable
(3) Targeted poverty alleviation effect
Index Unit of measure Quantity /implementation
I. Overall condition —— ——
II. Poverty alleviation by items —— ——
1.Industry development —— ——
2.Shift employment —— ——
3. Relocating in other places —— ——
38
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
4. Education —— ——
5. Health —— ——
6.Ecological protection —— ——
7. Reveal all the details —— ——
8. Society —— ——
9.Other —— ——
III. Award received (content and grade) —— ——
(4)Follow-up targeted poverty alleviation scheme
Not applicable
3. Environmental protection
The listed Company and its subsidiary whether belongs to the key sewage units released from environmental protection department
No
The listed Company and its subsidiary don’t belongs to the key sewage units released from environmental protection department
XIX. Explanation on other significant events
√ Applicable □ Not applicable
(i) The Company signed Asset Exchange Contract with Wuhan Zhongheng Group on 29 April 2009 (details were
referred to in the announcement dated 30 April 2009), and pursuant to the contract, since part of the assets of the
Company (namely two parcel of industrial lands located at Huafa road, Gongming town, Guangming new district,
Shenzhen (the property certificate No. were SFDZ No.7226760 and SFDZ No.7226763, No. of parcels were
A627-005 andA627-007, and the aggregate area was 48,200 sq.m) were the lands listed in the first batch of plan
for 2010 Shenzhen urbanization unit planning preparation plan. For promotion of such urbanization project and
joint cooperation, the Company has not completed the transfer procedures in respect of the aforesaid land.
The Company convoked the first extraordinary meeting of the Board in 2015 on February 16, 2015 and the first
extraordinary general meeting of the Board in 2015 on March 4, 2015, which considered and approved the
“Motion on promoting and implementing the urban renewal project for the renewal units of Huafa area at
Gongming street, Guangming new district, Shenzhen”, specified that the Company and Wuhan Zhongheng Group
shall obtain the corresponding compensatory consideration for removal from the respectively owned project plots
and the respectively contributed and constructed above-ground buildings before the land development, it is
estimated that the compensatory consideration obtained by the Company accounts for 50.5% of the total
consideration and Wuhan Zhongheng Group accounts for 49.5% by calculation.
39
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
The sixth extraordinary meeting of the board of directors in 2015 and the third extraordinary general meeting held
on September 11, 2015 have considered and adopted the “Proposal on the project promotion and implementation
of urban renewal and the progress of related transactions of ‘the updated units at Huafa Area, Gong Ming Street,
Guangming New District, Shenzhen’”, the company has signed the “Agreement on the cooperation of urban
renewal project of the updated units at Huafa Area, Gong Ming Street, Guangming New District, Shenzhen”,
“Contract for the cooperative venture of reconstruction project for Huafa Industrial Park, Gong Ming Street,
Guangming New District” and “Agreement on housing acquisition and removal compensation and resettlement”
with Wuhan Zhongheng New Technology Industry Group Co., Ltd. (hereinafter referred to as “Wuhan
Zhongheng Group”), Shenzhen Vanke Real Estate Co., Ltd. (hereinafter referred to as “Shenzhen Vanke”), and
Shenzhen Vanke Guangming Real Estate Development Co., Ltd. (hereinafter referred to as “Vanke Guangming”).
On 12 September 2016, the Company received a “Notice of Arbitration No.: SHEN DP20160334” from SCIA,
Shenzhen Vanke applied for arbitration in respect of “Agreement on the cooperation of urban renewal project of
the updated units at Huafa Area, Gong Ming Street, Guangming New District, Shenzhen” against the Company
and Wuhan Zhongheng Group. The arbitration court holds hearings on 12 November 2016 and 13 May 2017.
Shenzhen Court of International Arbitration (SCIA) has given a ruling in August 2017. In February 2018, the
company filed an application for repeal of arbitration to the Shenzhen Intermediate People’s Court, the Shenzhen
Intermediate People’s Court made a judgment on August 16, 2018 to reject the company’s claims. On August 29,
2018, the court accepted the compulsory execution application of Shenzhen Vanke, at present, the controlling
shareholders are actively communicating with the relevant parties for the solution. Progress of the case found
more in the Notices released on Juchao website (www.cninfo.com.cn) dated 14 Sept. 2016, 1 Nov. 2016, 16 Nov.
2016, on 18 Feb. 2017, 24 March 2017, 25 April 2017, 1 July 2017, 18 August 2017, 9 Feb. 2018, 25 Aug. 2018
and 7 Sept. 2018 respectively.
(ii) On 31 December 2015, the 88,750,047 shares held by Wuhan Zhongheng Group, are pledge to China
Merchants Securities Assets Co., Ltd. with due date of 31 December 2016. Wuhan Zhongheng Group deferred the
repurchase business day to 30 June 2017. on 1 Feb. 2016, Wuhan Zhongheng Group pledge the 27,349,953 shares
held to China Merchants Securities Assets Co., Ltd. with due date of 31 December 2016. The above mentioned
shares are deferred for repurchase of stock pledge by Wuhan Zhongheng Group; pledge expired on 31 December
2017. The trading day for repurchase put off to the date when pledge actually removed. Till end of this period
released, controlling shareholder still not removed the pledge and the Company has apply by letter, relevant
Notice of Presentment on Stock Pledge from Controlling Shareholder was released. Found more in notice released
on Juchao website (www.cninfo.com.cn) date 2 Feb. 2018.
(iii) Our controlling shareholder Wuhan Zhongheng Group holds 116,489,894 shares of the Company, accounting
for 41.14% of total share capital. The above shares were judicially sealed on 27 September 2016, shares freeze
from 27 September 2016 to 13 September 2021; and on 14 December 2018, shares are waiting freeze by
Shenzhen Intermediate’s Court with period of 36 months in freeze. Details are set out in the announcement
40
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
published at Juchao information website (www.cninfo.com.cn) on 27 October 2016 and 11 Jan. 2019.
(iv) On March 21, 2014, Huafa Property and Shenzhen Jifang Investment Co., Ltd. (hereinafter referred to as
"Jifang Investment") signed the "Shenzhen Housing Leasing Contract" and the "Supplemental Agreement on
Leasing Contract", which were canceled on February 5, 2016. As Jifang Investment occupied the site, and
defaulted rent, management fee and water and electricity bills in the long term, in order to safeguard the legitimate
rights and interests, Huafa Property submitted a request for arbitration to Shenzhen Arbitration Commission on
March 8, 2016, and received the (2016) SZCZ No. 346 ruling paper from Shenzhen Arbitration Commission in
November 2016 which ruled Huafa Property won the lawsuit. See details on the notice published at
www.cninfo.com.cn by the company on November 8, 2016. The site occupied by Jifang was collected in May
2018.
(v) Commitments of Major shareholder to Increase Shareholding
On November 20, and November 28, 2017, the controlling shareholders respectively made commitments to
increase the shareholding of 2.83 million shares of the company’s B Shares and no less than 2.8 million shares of
the company’s A Shares, with a commitment period of 6 months. After that, controlling shareholders apply for
two deferrals. As of the disclosure date of this report, it’s still in the commitment fulfillment period, and the
commitment has not been fulfilled.
(vi) Director and deputy chairman of the Company Mr. Zhang Guangliu resigned his job as director, deputy
chairman and member of the committee of the Board of the Company for job mobility. Nominated by second
largest shareholder SEG (HK) Co., Ltd, Mr. Gao Jianbo was elected as the director of 9th BOD of the Company
with office same as the session of BOD.
XX. Significant event of subsidiary of the Company
□ Applicable √ Not applicable
41
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Section VI. Changes in Shares and Particulars about Shareholders
I. Changes in Share Capital
1. Changes in Share Capital
In Share
Before the Change Increase/Decrease in the Change (+, -) After the Change
Capitali
New zation
Proporti Bonus Amoun Proport
Amount shares of Others Subtotal
on shares t ion
issued public
reserve
I. Restricted shares 0 0.00% 0 0 0 0 0 0 0.00%
283,161 100.00 283,16 100.00
II. Unrestricted shares 0 0 0 0 0
,227 % 1,227 %
181,165 181,16
1. RMB Ordinary shares 63.98% 0 0 0 0 0 63.98%
,391 5,391
2. Domestically listed 101,995 101,99
36.02% 0 0 0 0 0 36.02%
foreign shares ,836 5,836
283,161 100.00 283,16 100.00
III. Total shares 0 0 0 0 0
,227 % 1,227 %
Reasons for share changed
□ Applicable √ Not applicable
Approval of share changed
□ Applicable √ Not applicable
Ownership transfer of share changed
□ Applicable √ Not applicable
Progress of shares buy-back
□ Applicable √ Not applicable
Implementation progress of the reduction of repurchases shares by centralized bidding
□ Applicable √ Not applicable
Influence on the basic EPS and diluted EPS as well as other financial indexes of net assets per share attributable to common
shareholders of Company in latest year and period
□ Applicable √ Not applicable
Other information necessary to disclose or need to disclosed under requirement from security regulators
□ Applicable √ Not applicable
42
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
2. Changes of restricted shares
□ Applicable √ Not applicable
II. Securities issuance and listing
1. Security offering (without preferred stock) in Reporting Period
□ Applicable √ Not applicable
2. Changes of total shares and shareholders structure as well as explanation on changes of assets and
liability structure
□ Applicable √ Not applicable
3. Existing internal staff shares
□ Applicable √ Not applicable
III. Particulars about shareholder and actual controller of the Company
1. Amount of shareholders of the Company and particulars about shares holding
In Share
Total
preference
shareholders
Total preference
Total common with voting
Total shareholders
stock rights
common with voting
shareholders at recovered at
stock rights recovered
25,862 end of last 24,818 0 end of last 0
shareholders at end of
month before month before
in reporting reporting period
annual report annual report
period-end (if applicable)
disclosed disclosed (if
(found in note 8)
applicable)
(found in note
8)
Particulars about shares held above 5% by shareholders or top ten shareholders
Total Amoun Amount Number of share pledged/frozen
shareho Change t of of
Proport
Full name of Nature of ion of lders at s in restrict un-restri
Shareholders shareholder shares the end report ed cted State of share Amount
held
of period shares shares
report held held
43
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
period
Wuhan Domestic Pledged 116,100,000
116,68 116,681,
Zhongheng non-state-owne 191200 0
1,094 094 Frozen 116,489,894
Group d legal person
SEG (HONG Pledged 0
Overseas legal 16,569, 16,569,
KONG) CO., 0 0
person 560 560 Frozen 0
LTD
GOOD HOPE Pledged 0
CORNER Overseas legal 12,700, 12,700,
0 0
INVESTMENTS person 000 000 Frozen 0
LTD
Changjiang Pledged 0
Securities
Overseas legal 5,355,2 5,355,2
Brokerage 0 0
person 49 49 Frozen 0
(Hong Kong)
Co., Ltd.
Guoyuan Pledged 0
Securities
Overseas legal 3,845,1 3,845,11
Brokerage 0 0
person 17 7 Frozen 0
(Hong Kong)
Limited
Domestic nature 1,022,2 1,022,2 Pledged 0
Li Senzhuang 0
person 60 60 Frozen 0
LI SHERYN Overseas nature 1,009,9 1,009,9 Pledged 0
0
ZHAN MING person 00 00 Frozen 0
Domestic nature 864,20 Pledged 0
Han Yaming 0 864,200
person 0 Frozen 0
Overseas nature 840,31 Pledged 0
BINGHU LIU 0 840,313
person 3 Frozen 0
Domestic nature 788,35 Pledged 0
Wu Jingmin 0 788,352
person 2 Frozen 0
Strategy investors or general
corporation comes top 10
N/A
shareholders due to rights issue (if
applicable) (see note 3)
Among the top ten shareholders, Wuhan Zhongheng Group neither bears associated
Explanation on associated
relationship with other shareholders, nor belongs to the consistent actor that are
relationship among the aforesaid
prescribed in Measures for the Administration of Disclosure of Shareholder Equity
shareholders
Changes of Listed Companies. The Company neither knew whether there exists
44
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
associated relationship among the other tradable shareholders, nor they belong to
consistent actors that are prescribed in Measures for the Administration of Disclosure of
Shareholder Equity Changes of Listed Companies.
Particular about top ten shareholders with un-restrict shares held
Type of shares
Shareholders’ name Amount of un-restrict shares held at Period-end
Type Amount
RMB common
Wuhan Zhongheng Group 116,681,094 116,681,094
share
Domestically
SEG (HONG KONG) CO., LTD 16,569,560 listed foreign 16,569,560
shares
Domestically
GOOD HOPE CORNER
12,700,000 listed foreign 12,700,000
INVESTMENTS LTD
shares
Domestically
Changjiang Securities Brokerage
5,355,249 listed foreign 5,355,249
(Hong Kong) Co., Ltd.
shares
Domestically
Guoyuan Securities Brokerage
3,845,117 listed foreign 3,845,117
(Hong Kong) Limited
shares
Domestically
Li Senzhuang 1,022,260 listed foreign 1,022,260
shares
Domestically
LI SHERYN ZHAN MING 1,009,900 listed foreign 1,009,900
shares
Domestically
Han Yaming 864,200 listed foreign 864,200
shares
Domestically
BINGHU LIU 840,313 listed foreign 840,313
shares
Domestically
Wu Jingmin 788,352 listed foreign 788,352
shares
Expiation on associated relationship Among the top ten unrestricted shareholders, the Company neither knew whether there
or consistent actors within the top 10 exists associated relationship among the other tradable shareholders, nor they belong to
un-restrict shareholders and between consistent actors that are prescribed in Measures for the Administration of Disclosure of
top 10 un-restrict shareholders and Shareholder Equity Changes of Listed Companies. Among the top ten shareholders,
top 10 shareholders Wuhan Zhongheng Group neither bears associated relationship with other shareholders,
45
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
nor belongs to the consistent actor that are prescribed in Measures for the Administration
of Disclosure of Shareholder Equity Changes of Listed Companies.
Explanation on top 10 shareholders
involving margin business (if N/A
applicable) (see note 4)
Whether top ten common stock shareholders or top ten common stock shareholders with un-restrict shares held have a buy-back
agreement dealing in reporting period
□ Yes √ No
The top ten common stock shareholders or top ten common stock shareholders with un-restrict shares held of the Company have no
buy-back agreement dealing in reporting period.
2. Controlling shareholder of the Company
Nature of controlling shareholders: Foreign-funds controlling
Type of controlling shareholders: legal person
Legal
Controlling person/person Date of
Organization code Main operation business
shareholders in charge of the foundation
unit
Production, sales of computers, TV set, display,
other hardware and computer software;
development of internal data communication
network, building of packing materials and light
weight building material for packaging;
management of exports business for the own
products and technologies for the Company and
member enterprise; management of export business
on raw material, apparatus and instrument,
machinery equipment, spare parts and technologies
Wuhan (not including goods and technologies that import
Zhongheng Li Zhongqiu 1996-03-21 91420114711954601W and export are national restricted or prohibited );
Group dry clean and steam iron service; copy & print;
business information consulting; house tenancy;
property management; wholesale and retails of
the hardware metal products, plastic products,
audio electronic products, electronic equipment,
textile, toys, clothing & shoes, luggage, bedding
article, general merchandise, curtain, household
appliances and building materials; development of
real-estate and sales of commercial housings
(projects with special provision of the state can be
operation after approval)
Equity of other
Not applicable
domestic/oversea
46
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
listed company
control by
controlling
shareholder as
well as
stock-joint in
report period
Changes of controlling shareholders in reporting period
□ Applicable √ Not applicable
The Company had no changes of controlling shareholders in reporting period
3. Actual controller and persons acting in concert
Nature of actual controller: Overseas nature person
Type of actual controller: Natural person
Enjoy the residence rights in the other
Actual controller’s name Relationship Nationality
country or area (Y/N)
Li Zhongqiu
Li Zhongqiu Hong Kong Y
himself
Person acting in
concert (including
Li Li agreement, P.R.C N
relatives, share the
same controlling)
Mr. Li Zhongqiu serves as the Chairman for Wuhan Zhongheng Group since 1996 and
Main occupation in position
serves as Chairman and GM of the Company since July 2007.
Listed companies in and out of
China that controlled in last 10 N/A
years
Changes of actual controller in reporting period
□ Applicable √ Not applicable
No changes of actual controllers for the Company in reporting period.
Property right and controlling relationship between the actual controller and the Company is as follow:
47
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Li Zhongqiu Li Li (Son of Li Zhongqiu)
51% 49%
Wuhan Zhongheng New Science & Technology Industrial Group Co., Ltd
41.21%
Shenzhen Zhongheng Huafa Co., Ltd.
Actual controller controlling the Company by entrust or other assets management
□ Applicable √ Not applicable
4. Particulars about other legal person shareholders with over 10% shares held
□ Applicable √ Not applicable
5. Limitation and reducing the holdings of shares of controlling shareholders, actual controllers,
restructuring side and other commitment subjects
□ Applicable √ Not applicable
48
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Section VII. Preferred Stock
□ Applicable √ Not applicable
The Company had no preferred stock in the Period.
49
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Section VIII. Particulars about Directors, Supervisors, Senior
Executives and Employees
I. Changes of shares held by directors, supervisors and senior executives
Amoun Amoun
t of t of
Shares Shares
Start shares shares
End held at Other held at
Workin dated increas decreas
Sex date of period-
Title Age of period- changes
Name g status (F/M) office ed in ed in
office end
term begin (share)
term this this
(Share) (Share)
period period
(Share) (Share)
Li Current
Chairm 2007-0 2019-0
Zhongq ly in M 54 0 0 0 0 0
an 7-08 9-18
iu office
Zhang Vice Leave
2017-0 2019-0
Guangli Chairm the M 0 0 0 0 0
7-18 9-18
u an office
Vice Current
Gao
Chairm ly in M 54 0 0 0 0 0
Jianbo
an office
Directo
r,
Current
Yang secretar 2015-1 2019-0
ly in M 46 0 0 0 0 0
Bin y of the 1-06 9-18
office
Board,
CFO
Li Indepen Current
2016-0 2019-0
Ding’a dent ly in M 73 0 0 0 0 0
9-19 9-18
n director office
Xu Indepen Current
2016-0 2019-0
Jingwe dent ly in M 53 0 0 0 0 0
9-19 9-18
n director office
Zhang Indepen Current
2014-0 2019-0
Zhaogu dent ly in M 62 0 0 0 0 0
5-23 9-18
o director office
Huang Supervi Current F 56 2012-0 2019-0 0 0 0 0 0
50
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Yanbo sor ly in 1-16 9-18
office
Current
Geng Supervi 2012-0 2019-0
ly in F 49 0 0 0 0 0
Qu sor 4-09 9-18
office
Current
Chen Supervi 2015-1 2019-0
ly in F 32 0 0 0 0 0
Qin sor 1-06 9-18
office
Current
Tang Deputy 2013-0 2019-0
ly in F 41 0 0 0 0 0
Ganyu GM 8-23 9-18
office
Total -- -- -- -- -- -- 0 0 0 0 0
II. Changes of directors, supervisors and senior executives
√ Applicable □ Not applicable
Name Title Type Date Reasons
Zhang Leave the
Vice Chairman 2018-07-17 Job mobility
Guangliu office
III. Post-holding
Professional background, major working experience and present main responsibilities in Company of directors,
supervisors and senior executive
Li Zhongqiu: Male, was born in 1964 with Master of Engineering, members of the Hubei Political Consultative
Conference. May the first of labor medalist of Wuhan. He serves as Chairman of Wuhan Zhongheng New Science
& Technology Industrial Group Co., Ltd. since 1996. And he serves as Chairman and the General Manager of the
Company since July 2007.
Mr. Gao Jianbo, born in July 1964, native of Anhui, Han nationality, member of the Communist Party of China;
master of economics, senior economist. He graduated from the Mathematics Department of Anhui Normal
University in June 1985 as a Bachelor of Science. From September 1990 to June 1993, he studied at the
Department of Investment Economics of Zhongnan University of Finance and Economics and obtained a master’s
degree in economics. In June 1993, he joined Shenzhen Tagen (Group) Co., Ltd., and successively worked in the
company’s subordinates, Tagen Xiangmi Engineering Development Company, Tagen Real Estate Sales
Department, Securities Department, Real Estate Management Department, Asset Management Department and
Enterprise Development Management Department, and successively served as deputy manager, manager of the
company’s asset management department, manager of the enterprise development management department. From
April 2008 to July 2018, he served as Vice President and Secretary of the Board of Directors of Shenzhen Tagen
51
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
(Group) Co., Ltd.; from October 2001 to April 2013, he served as Director of Shenzhen Laibao High-Tech Co.,
Ltd.; Since July2018, he has been serving as deputy general manager of Shenzhen SEG Group Co., Ltd.; since
September 2018, he has been serving as a director of Shenzhen SEG Co., Ltd.; since September 2018, he has been
serving as director and vice president of Shenzhen Zhongheng Huafa Co., Ltd.
Yang Bin, male, born in April 1972, a master degree holder graduated from Xi’an Jiaotong University. He once
served as the executive deputy general manager and secretary of the board of Shenzhen China Agricultural
University Technology Co., Ltd., an independent director of Livzon Group, and an independent director of CTL
Testing. Since November 2015, he has been serving as a director, the secretary of the board and the chief financial
officer of the Company and the Supervisor of Shenzhen Moyi Investment Co., Ltd
Li Ding’an: male, born in Dec. 1945, professor, doctoral tutor, the first batch of Chinese certified public
accountants. In 1982, he obtained the master degree of economics of Zhongnan University of Finance and
Economics and stayed at the university as a teacher; in June 1996, he was transferred to South China University of
Technology, served as the professor and deputy director of the Department of Applied Mathematics; from 1998 to
2012, he served successively as the 8th, 9th, and 10th standing committee member of CPPCC Guangdong
Provincial Committee; he serves as the professor at School of Business Administration since May 2002, and
served as executive vice president of the School of Economics and Trade from July 2005 to January 2009. Now
He is the vice chairman of the enterprise development research specialist working committee of Guangdong
Manufacturers Association, the director of CPPCC Guangdong Provincial Committee Fellowship Council, the
Supervisor of Guangdong Kangmei Pharmaceutical Co., Ltd., the independent director of PCI-Suntek Tech Co.,
Ltd., and independent director of Wuhan Liyuan Information Technology Co., Ltd.. He has been serving as the
independent director of the company since September 2016.
Zhang Zhaoguo, Ph. D. in Management, former director of accounting dept. in School of Management of
Huazhong University of Science & Technology, a professor (secondary) and doctoral supervisor. He enjoys the
special allowance of the State Council. Successively study in Finance & Economics University of Jiangxi,
Zhongnan University of Economics and Law and HUST, and serve as a teacher in Wuhan University and HUST.
He served as chief editor in Communication of Finance & Accounting. Now served as the president of Accounting
Institute of China, vice president of Accounting Association of Hubei Province, vice president of Hubei Central
Enterprise Accounting Association, dean of Wuhan Yangtze Business University, and served as independent
directors of the listed companies like Hubei Eastern Gold Jade Co., Ltd., Shenzhen Zhongheng Huafa and
Mailyard.
Xu Jinwen, male, born in 1965, is a doctor of management science and engineering of Huazhong University of
Science and Technology. He worked at China Construction Bank Wuhan Sub-branch from July 1984 to
September 1985; served as the credit section chief at China Construction Bank Hubei Branch from September
1985 to December 1990; served as the deputy general manager of Hubei Province Trust and Investment
Corporation of China Construction Bank; served as the executive deputy general manager of Guotai Junan
Securities Hubei Branch from October 1995 to August 2000; served as the general manager of Guotai Junan
52
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Securities Jiangxi Headquarters from August 2000 to November 2002; served as the president of Golden Sun
Securities Co., Ltd. from November 2002 to April 2006; served as the chairman of Changjiang Bali Baifuqin
Securities Co., Ltd. from April 2006 to May 2007; served as the vice president and secretary of the board of
Changjiang Securities Co., Ltd. from May 2007 to March 2016; he has been serving as the chairman and CEO of
Changjiang Securities Holding (Hong Kong) Co., Ltd. since December 2011. He has been serving as an
independent director of the company since September 2016.
Huang Yanbo: female, born in 1962, a university background and a senior accountant. She served as financial
director of Wuhan Zhongda Shopping Mall since 1985 to 1998; and worked as financial manager of Wuhan
Zhongheng New Science & Technology Industrial Group Co., Ltd. from 1998 to 2007 and GM assistant in charge
of auditing supervise from 2007 to 2011; she serves as CFO of the Company from 2012 to 2016; she serves as
deputy GM of Wuhan Zhongheng New Science & Technology Industrial Group Co., Ltd. since October 2016, and
the supervisor of the Company since January 2012 and she is the chairman of supervisory committee of the
Company since August 2013.
Geng Qu: female, born in 1969, is graduated from Beihang University, the first quality engineer, a real estate
economist, a human resources economist and an engineer. She worked for the Company since 1990 and
successively served as director of quality standard, director of comprehensive management department and deputy
chief of office of the Company. She serves as employee supervisory of the Company since April 2012.
Chen Qin: Female, born in 1986, bachelor degree, human resources professional. Worked on administrative work
in Merida Bicycle (China) Co., Ltd. from July 2002 to July 2003, engaged in purchasing work in Hui Pu
Electronics (Shenzhen) Co., Ltd. from August 2003 to September 2004, and served as the administration manager
in Huake United Technology (Shenzhen) Co., Ltd. from September 2004 to 2005 October; works in the Company
since October 2005 and serves as supervisor of the Company since 2015
Tang Ganyu: Female, born in 1977, college degree. Served as assistant of factory director in Wuhan Hengsheng
Optoelectronics Industry Co., Ltd. from August 2003 to July 2005, engineering manager from August 2005 to
July 2006, project manager and production manager from August 2006 to December 2011; served as the
supervisor of the Company from July 2007 to January 2012 and general manager assistant of the Company from
January 2012 to August 2013, and serves as deputy general manager of the Company since August 2013, and in
charge of the operation management in three division of the industry.
Post-holding in shareholder’s unit
√ Applicable □ Not applicable
Position in Received
Start dated of End date of
Name Name of shareholder’s unit shareholder remuneration
office term office term
’s unit n from
53
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
shareholder’s
unit (Y/N)
Wuhan Zhongheng Group and its
Li Zhongqiu Chairman 1996-03-21 N
subsidiary
Deputy
GM, party
Shenzhen Electronics Group Co., Ltd. committee
Gao Jianbo 2018-07-02 Y
and its subsidiaries and
secretary of
the Board
Deputy
Huang Yanbo Wuhan Zhongheng Group 2016-10-12 Y
GM
Post-holding in other unit
√ Applicable □ Not applicable
Received
Position in Start dated of End date of remuneration
Name Name of other units
other unit n office term office term from other unit
(Y/N)
Li Ding’an South China University of Technology Professor
Working Committee of Experts on
Vice
Li Ding’an Enterprise Development of Guangdong
president
Manufacturing Association
Guangdong Provincial Committee of
Li Ding’an Director
CPPCC
Guangdong Kangmei Pharmaceutical Co.,
Li Ding’an Supervisor
Ltd.
Independen
Li Ding’an Jiadu Xintai Technology Co., Ltd.
t director
Wuhan LiYuan Information Technology Independen
Li Ding’an
Co., Ltd. t director
Changjiang Securities Holding (Hong Chairman
Xu Jingwen
Kong) Co., Ltd. and CEO
Zhang
Wuhan University Professor
Zhaoguo
Zhang Huazhong University of Science and
Professor
Zhaoguo Technology
Chinese Accounting Association Branch
Zhang President of
of High Engineering College and
Zhaoguo the Board
University
54
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Zhang Accounting Association of Hubei Vice
Zhaoguo Province president
Zhang Hubei Central Enterprise Accounting Vice
Zhaoguo Association president
Zhang
Wuhan Yangtze Business University Dean
Zhaoguo
Zhang Independen
Hubei Mailyard Co., Ltd
Zhaoguo t director
Zhang Independen
Hubei Eastern Gold Jade Co., Ltd.
Zhaoguo t director
Explanation
on
N/A
post-holding
in other unit
Punishment of securities regulatory authority in recent three years to the company’s current and outgoing directors, supervisors and
senior management during the reporting period
√ Applicable □ Not applicable
1. On December 22, 2016, the company received the “Written Decision of Administrative Penalty” ([2006] No. 7) from CSRC
Shenzhen Securities Regulatory Bureau which gave following penalties to the company and related parties: (a) order Shen HUAFA
to correct errors, give a warning, and impose a fine of 400,000 Yuan; (b) give a warning to Li Zhongqiu and impose a fine of 250,000
Yuan; (c) give a warning to Chen Zhigang, and impose a fine of 80,000 Yuan; (d) give a warning to Tang Ganyu, and impose a fine
of 80,000 Yuan; (e) give a warning to Weng Xiaoyu and Cai Li, and impose a fine of 30,000 Yuan. See details on the “Notice on
Receiving Written Decision of Administrative Penalty from CSRC” (Notice No.: 2016-68) at http://www.cninfo.com.cn.
2. On January 5, 2017, the company received the “Announcement on Public Condemnation to Shenzhen Zhongheng Huafa Co., Ltd.
and Related Parties” of the Shenzhen Stock Exchange (hereinafter referred to as the “SZSE”): 1. Give a public condemnation to
Shenzhen Huafa; 2. Give a public condemnation to Li Zhongqiu, the actual controller, chairman and general manager of Shenzhen
Huafa; for the illegal behavior of Shenzhen Huafa and related parties and the punishment given by SZSE, SZSE will record in the
credit archive of listed companies and publish to the public. See details at http://www.cninfo.com.cn about the Announcement on
Receipt of Public Condemnation of Shenzhen Stock Exchange to the Company and Related Parties” (Announcement No.: 2017-01).
3. Mr. Yang Bin, Secretary of the Board of Directors and Chief Financial Officer of the Company, due to the failure to urge and
organize the information disclosure work for the temporary announcement of Shenzhen China Agricultural University Technology
Co., Ltd. in accordance with relevant regulations during his tenure as Secretary of the Board of Directors of Shenzhen China
Agricultural University Science and Technology Co., Ltd., received the “Written Decision of Administrative Penalty” ([2018] No. 6)
in August 2018, was given a disciplinary warning and was fined 30,000 yuan.
IV. Remuneration for directors, supervisors and senior executives
Decision-making procedures, recognition basis and payment for directors, supervisors and senior executives
Remuneration of directors and supervisors are determined by general meeting, and the allowance standard for
each independent director is RMB 60, 000 per year (tax included).
Remuneration of senior management is determined by the board based on the unified remuneration management
55
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
system and actual completion of operational targets, and the “Proposal of Basic Remuneration for High-ranking
Managers of the Company” was deliberated and approved in 2nd extraordinary meeting of the Board for year of
2012.
Remuneration for directors, supervisors and senior executives in reporting period
In 10 thousand Yuan
Total Whether
remuneration remuneration
Post-holding
Name Title Sex (F/M) Age obtained from obtained from
status
the Company related party of
(before taxes) the Company
Currently in
Li Zhongqiu Chairman, GM M 54 48 N
office
Currently in
Gao Jianbo Vice Chairman M 54 0 Y
office
Zhang Leave the
Vice Chairman M 56 0 Y
Guangliu office
Director,
Currently in
Yang Bin secretary of the M 46 30 N
office
Board, CFO
Independent Currently in
Li Ding’an M 73 6 N
director office
Independent Currently in
Xu Jingwen M 53 6 N
director office
Independent Currently in
Zhang Zhaoguo M 62 6 N
director office
Currently in
Huang Yanbo Supervisor F 56 0 Y
office
Currently in
Geng Qu Supervisor F 49 9.3 N
office
Currently in
Chen Qin Supervisor F 32 12 N
office
Currently in
Tang Ganyu Deputy GM F 41 36 N
office
Total -- -- -- -- 153.3 --
Delegated equity incentive for directors, supervisors and senior executives in reporting period
□ Applicable √ Not applicable
56
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
V. Particulars of workforce
1. Number of Employees, Professional composition, Education background
Employee in-post of the parent Company (people) 33
Employee in-post of main Subsidiaries (people) 983
The total number of current employees (people) 1,016
The total number of current employees to receive pay (people) 1,016
Retired employee’ s expenses borne by the parent Company
0
and main Subsidiaries (people)
Professional composition
Category of professional composition Numbers of professional composition (people)
Production personnel 729
Sales personnel 73
Technical personnel 83
Financial personnel 13
Administrative personnel 118
Total 1,016
Education background
Category of education background Numbers (people)
Master and on-the-job graduate students 3
Undergraduate 54
Junior college 64
Other 895
Total 1,016
2. Remuneration Policy
The company’s directors (excluding independent directors), supervisors and senior management personnel are
monthly paid by basic pay and performance pay, and the annual remunerations are paid after annual assessment;
the company’s independent directors are paid 60,000 Yuan per person per year as allowances (including tax), the
travel expenses for attending the board meeting and stockholders' meeting and the necessary expenses generated
by exercising their powers in accordance with relevant laws and regulations can be applied for reimbursement
according to the company’s regulations; the remuneration ordinary employees are decided by the positions,
including probationary period salary regular employee salary, and the company pays social security and public
accumulated funds for them in accordance with the national regulations.
57
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
3. Training programs
(1) The directors, supervisors and senior management personnel actively participate in the relevant training and
assessment organized by the regulatory agencies, such as Shenzhen Stock Exchange, Shenzhen Securities
Regulatory Bureau, etc.
(2) The company regularly or irregularly organizes professional training for employees according to the
departments and division of labor, including internal training and external training, therein to, internal training are
provided by specialized personnel in the company; external training are provided by organizing employees to
participate in the trade associations and the training organized by supervision department.
(3) Organize staff in all positions to actively participate in the learning and assessment of technical professional
qualifications required by different positions.
4. Labor outsourcing
□ Applicable √ Not applicable
58
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Section IX. Corporate Governance
I. Corporate governance of the Company
During the reporting period, in accordance with the laws and regulations of the "Company Law", "Securities Law",
and "Governance Norms of Listed Companies", and the relevant rules and requirements promulgated by the China
Securities Regulatory Commission, the company has constantly improved the corporate governance structure,
established a sound internal control system, enhanced the level of standard operation, strictly followed the
provisions of the production and management control and the financial management and control and the
information disclosure and control, carried out the work on the basis of the "Articles of Association", "Rules of
Procedure of the Board of Directors”, "Rules of Procedure of the Board of Supervisors”, “Working System of the
Independent Directors”, and “Working Rules of the General Manager”, and ensured that the shareholders' meeting,
the board of directors and the board of supervisors can perform their duties and responsibilities normally. The
company's governance meets the requirements on the documents of governance norms of listed companies issued
by China Securities Regulatory Commission.
During the reporting period, in order to safeguard the legitimate rights and interests of the company, the
shareholders and the creditors and regulate the organization and behavior of the company, the company has
revised the “Constitution of Shenzhen Zhongheng Huafa Co., Ltd.” according to the “Company Law of the
People's Republic of China”, “Securities Law of the People's Republic of China” and the “Guidelines for the
Articles of Association of Listed Companies (2016 Revision)” issued by China Securities Regulatory Commission
Is there any difference between the actual condition of corporate governance and relevant regulations about corporate governance for
listed company from CSRC?
□Yes √ No
There are no differences between the actual condition of corporate governance and relevant regulations about corporate governance
for listed company from CSRC.
II. Independent of the Company relative to controlling shareholders’ in aspect of businesses,
personnel, assets, organization and finance
During the reporting period, the company’s controlling shareholder - Wuhan Zhongheng Group has separated the
business, personnel, assets, organization and finance from the controlling shareholders in accordance with the laws
and regulations of the "Company Law" and "Articles of Association", and had the independent and complete
business system and the capabilities of independent management.
1. Personnel: The company fully and independently operates in the labor, personnel and salary management
systems and has established the independent management system, all of the company's senior executives are
working in the Company and receive the salaries, no senior executive has held a post in both the Company and the
59
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
controlling shareholder’s company, and no financial staff has held a post in two or more of the related companies.
2. Assets: The company has the clear property rights with the controlling shareholders and the capabilities of
independent management, possesses the full rights to control the production system, supporting facilities and land
use rights, no major shareholder has occupied or dominated the assets.
3. Finance: The company has established the independent, complete, standardized financial accounting system and
financial management system, and the corresponding internal control system and internal audit system in
accordance with the requirements of the "Accounting Standards for Business Enterprises" to make the independent
financial decisions.
4. Organization: the board of directors, the board of supervisors, and other internal organizations are sound and
operate independently, the organization is completely separated from the controlling shareholders, all
organizations of the company are set up based on the norms and requirements of the listed company and the
company’s actual business features which have the independent office addresses and there is no mixed operation
or co-working, and the controlling shareholders legally exercise the investors’ rights and undertake the
corresponding obligations.
5. Business: the company has the completely independent business operation system, the capabilities of
independent management, the independent purchasing system, production system and marketing system, doesn’t
depend on the controlling shareholders to gain profits or have the horizontal competition relationship with the
controlling shareholders or the subsidiaries.
III. Horizontal competition
□ Applicable √ Not applicable
IV. In the report period, the Company held annual general meeting and extraordinary
shareholders’ general meeting
1. Shareholders’ General Meeting in the report period
Ratio of investor Date of
Session of meeting Type Date Index of disclosure
participation disclosure
http://www.cninfo.com.cn/new/di
sclosure/detail?plate=&orgId=gs
Annual General sz0000020&stockCode=000020
AGM 51.64% 2018-05-17 2018-05-18
Meeting of 2017 &announcementId=1204953591
&announcementTime=2018-05-1
8
2018 First Extraordinary http://www.cninfo.com.cn/new/di
Extraordinary shareholders’ 47.19% 2018-09-28 2018-09-29 sclosure/detail?plate=&orgId=gs
shareholders’ general meeting sz0000020&stockCode=000020
60
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
general meeting &announcementId=1205478496
&announcementTime=2018-09-2
9
http://www.cninfo.com.cn/new/di
2018 Second sclosure/detail?plate=&orgId=gs
Extraordinary
Extraordinary sz0000020&stockCode=000020
shareholders’ 6.02% 2018-11-15 2018-11-16
shareholders’ &announcementId=1205605907
general meeting
general meeting &announcementTime=2018-11-1
6
http://www.cninfo.com.cn/new/di
2018 Third sclosure/detail?plate=&orgId=gs
Extraordinary
Extraordinary sz0000020&stockCode=000020
shareholders’ 5.89% 2018-12-10 2018-12-11
shareholders’ &announcementId=1205661217
general meeting
general meeting &announcementTime=2018-12-1
1
2. Request for extraordinary general meeting by preferred stockholders whose voting rights restore
□ Applicable √ Not applicable
V. Responsibility performance of independent directors
1. The attending of independent directors to Board meetings and shareholders’ general meeting
The attending of Board Meeting and shareholders’ general meeting by independent directors
Times of Absent the
Times
Board Times of Board
Times of Times of presented in
Independent meeting attending by Times of Meeting for
present in entrusted shareholders
director supposed to communicati Absence the second
person presence ’ general
attend in the on time in a
meeting
report period row (Y/N)
Zhang Zhaoguo 6 2 4 0 0 N 4
Li Ding’an 6 2 4 0 0 N 4
Xu Jingwen 6 1 4 1 0 N 4
Explanation of absent the Board Meeting for the second time in a row
2. Objection for relevant events from independent directors
Independent directors come up with objection about Company’s relevant matters
□Yes √No
Independent directors has no objections for relevant events in reporting period
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
3. Other explanation about responsibility performance of independent directors
The opinions from independent directors have been adopted
√ Yes □ No
Explanation on advice that accepted/not accepted from independent directors
Advises about the Company from independent directors are all accepted in the reporting period.
VI. Duty performance of the special committees under the board during the reporting period
1. Duty performance of the audit committee
During the reporting period, the work carried out by the audit committee mainly included: listening to the
company's annual operating, financial and internal audit work, continuing to concern and guide the company’s
financial affairs and internal audit supervision, carrying forward the audit work to the company’s annual financial
report, sending a letter to urge the audit report to be submitted on time, communicating with the certified public
accountants time after time during the annual audit, objectively evaluating the annual audit work of the accounting
firm, and making the resolution to agree to re-appoint the accounting firm.
2. Remuneration & appraisal committee
During the reporting period, the remuneration & appraisal committee has audited 2013 annual remuneration of the
company’s directors, supervisors and senior management which was considered to be consistent with the actual
situation and in line with the provisions of relevant laws and the regulations of remuneration and appraisal system.
3. The nominations committee
During the reporting period, the nominations committee has investigated the proposal for the supplement of
independent directors, and made the decision to agree to submit to the board of directors for consideration.
4. The Strategic Committee
In the reporting period, the Strategic Committee puts forward reasonable suggestions for the strategic
development of the Company by combining with actual situation of the Company.
VII. Works from Supervisory Committee
The Company has risks in reporting period that found in supervisory activity from supervisory committee
□ Yes √ No
Supervisory committee has no objection about supervision events in reporting period
VIII. Examination and incentives of senior management
During the reporting period, in order to enable the senior management to better perform their duties and maintain
the interests of the company and its shareholders, the company has variable paid the remuneration to urge the
company's management to work more diligently and ensure the realization of the company's development strategy
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
and operation target accordingly to the “Staff rank and basic salary system” and the performance assessment and
combining with the company's actual operating conditions.
IX. Internal Control
1. Details of major defects in IC appraisal report that found in reporting period
□Yes √ No
2. Appraisal Report of Internal Control
Disclosure date of full internal control
2019-04-30
evaluation report
Disclosure index of full internal control
Juchao Website http://www.cninfo.com.cn
evaluation report
The ratio of the total assets of units
included in the scope of evaluation
accounting for the total assets on the 100.00%
company's consolidated financial
statements
The ratio of the operating income of
units included in the scope of evaluation
accounting for the operating income on 100.00%
the company's consolidated financial
statements
Defects Evaluation Standards
Category Financial Reports Non-financial Reports
1. General deficiencies: the amount of 1. General deficiencies: when facing
direct property loss is between 50,000 low-risk matters in the process of
yuan and 150,000 yuan, penalized by the business operation, the unit being
district-level (including district-level) inspected didn’t take corresponding
government sector but not having a internal control measures and respond
negative impact on the company’s regular effectively;
disclosure; 2. Important deficiencies: the 2. Important deficiencies: when facing
v amount of direct property loss is between matters at a moderate risk level in the
150,000 yuan and 450,000 yuan, penalized process of business operation, the unit
by the provincial level (including being inspected didn’t take
provincial level) government sector but corresponding internal control
not having a negative impact on the measures and respond effectively;
company’s regular disclosure; 3. Major 3. Major deficiencies: when facing
deficiencies: the amount of direct property high-risk matters in the process of
loss is more than 450,000 yuan, penalized business operation, the unit being
63
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
by the government sector and having a inspected didn’t take corresponding
negative impact on the company’s regular internal control measures and respond
disclosure; effectively.
1. It belongs to important deficiency if the
misstatement of the company’s cash on
hand, bank deposits, notes receivable, and
notes payable caused by internal control
deficiencies is less than RMB 1000 Yuan; General deficiencies: misstatement
it belongs to major deficiency if the index 1 ≥0.5‰, and misstatement
misstatement caused by internal control index 2 < 0.5‰;
Quantitative standard deficiencies is greater than or equal to Important deficiencies: 0.5‰ ≤
RMB 1000 Yuan. misstatement index 2 < 1‰;
2. Other deficiencies in internal controls: Major deficiencies: misstatement index
general deficiencies: misstatement index 1 2≥1‰
≥ 0.5 ‰, and misstatement index 2 < 0.5
‰; important deficiencies: 0.5 ‰ ≤
misstatement index 2 <1 ‰; major
deficiencies: misstatement index 2 ≥ 1 ‰
Amount of significant defects in
0
financial reports
Amount of significant defects in
0
non-financial reports
Amount of important defects in financial
0
reports
Amount of important defects in
0
non-financial reports
X. Auditing report of internal control
√ Applicable □ Not applicable
Deliberations in Internal Control Audit Report
We believe that the Huafa Company was in accordance with the "basic norms of internal control" and the relevant provisions and
maintained effective internal control of financial reporting in all material respects on 31 Dec 2018
Disclosure details of audit report
Disclosed
of internal control
Disclosure details of audit report
2019-04-30
of internal control
Disclosure date of audit report of
The designated website: Juchao Website
internal control (full-text)
Opinion type of auditing report of
Standard unqualified
IC
64
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Whether the non-financial report
No
had major defects
Carried out modified opinion for internal control audit report from CPA
□Yes √ No
The internal control audit report, issued by CPA, has concerted opinion with self-evaluation report, issued from the Board
√ Yes □ No
65
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Section X. Corporate Bond
Whether the Company has a corporation bonds that issuance publicly and listed on stock exchange and without
due on the date when annual report approved for released or fail to cash in full on due
□Yes √ No
66
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Section XI. Financial Report
I. Audit report
Type of audit opinion Standard unqualified opinion
Signing date of audit report 2019-04-26
Name of audit institute DAXIN Certified Public Accountants LLP
Document serial of audit report Da Xin Shen Zi[2019] No.: 5-00045
Name of CPA Li Wei, Fan Zhang
Auditor’s Report
To all shareholders of SHENZHEN ZHONGHENG HUAFA CO., LTD.:
I. Auditing opinions
We have audited the financial statement under the name of SHENZHEN ZHONGHENG HUAFA CO., LTD.
(hereinafter referred to as the Company), including the consolidated and parent Company’s balance sheet of 31
December 2018 and profit statement, and cash flow statement, and statement on changes of shareholders’ equity
for the year ended, and notes to the financial statements for the year ended.
In our opinion, the Company’s financial statements have been prepared in accordance with the Enterprises
Accounting Standards and Enterprises Accounting System, and they fairly present the financial status of the
Company and of its parent company as of 31 December 2018 and its operation results and cash flows for the year
ended.
II. Basis of opinion
We conducted our audit in accordance with the Auditing Standards for Certified Public Accountants of China. Our
responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the
Financial Statements” section of the auditor’s report. We are independent of the Company in accordance with the
Certified Public Accountants of China’s Code of Ethics for Professional Accountants, and we have fulfilled our
other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
III. Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period. These matters were addressed in the context of our audit of the
67
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
(i) Revenue recognition
1. Description of the matter
As stated in Note V (xxv) to the consolidated statement of your company, the main business income from display
and injection molded foam of 2018 recognized by your company was RMB 582.037 million, accounting for 91.36%
of operating income. The income from selling products is confirmed when the risks and the rewards of the
property in the goods have been transferred to the customer, for domestic sales, the income is confirmed by the
other party’s receipt of the product, for export sales, the income is confirmed by the relevant customs declaration
documents when the product has been shipped and the declaration formalities have been completed.
Since income is one of your company’s key performance indicators, in order to prevent the inherent risks of
manipulating the time point of income recognition for achieving specific goals or expectations, we identify the
authenticity of income recognition for displays and injection molded foam as key audit items.
2. Audit response
In response to the authenticity of revenue recognition, we design and implement the following audit procedures:
(1) We understand, evaluate, and test the design and implementation of key internal controls related to the revenue
cycle, and test the effectiveness of internal controls;
(2) Select samples to inspect the sales contract or order, check the invoice, outbound order, receipt, and customs
declaration, identify the contract terms and conditions related to the risks and reward transfer of the ownership of
the goods, and evaluate whether the time point of revenue recognition meets the requirements of Accounting
Standards for Business Enterprises
(3) Enquire the business information of major customers to identify whether there is related relationship; check
the rationality and fairness of the related transactions;
(4) For the income transactions recorded before and after the balance sheet date, select samples, check the
outbound order, receipt, logistics records, bills of lading and other supporting documents to assess whether the
income is recorded in the appropriate accounting period;
(5) According to the characteristics and nature of the customer transaction, we select income samples with large
amount to send a letter to the customer to confirm the current sales income amount and the balance of accounts
receivable, and maintain control over the letter during the process of sending the letter.
(ii) Related transaction
1. Description of the matter
As stated in Note IX (iv) to the consolidated statement of your company, your company purchased a total of 235
million yuan of materials and finished products from the related parties, Hong Kong Yutian International
Investment Co., Ltd. and Wuhan Hengsheng Photoelectric Industry Co., Ltd., and sold a total of 120 million yuan
of goods to the related parties, Hong Kong Yutian International Investment Co., Ltd. and Wuhan Hengsheng
Photoelectric Industry Co., Ltd. As the related transactions involve a large amount of money and there is a risk if
68
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
the transaction constitutes a transaction cycle, we classify the related transaction as a key audit matter.
2. Audit response
(1) Understand, evaluate and test the internal control of your company’s related relationships and related
transactions;
(2) Obtain the related party relationship table compiled by your company, and conduct appropriate background
investigation to identify and verify related parties through Internet information inquiry;
(3) Obtain a list of related transactions of your company, understand the commercial reasons of related
transactions, check related contracts or agreements, invoices, customs declarations, etc. of related transactions,
and conduct letter confirmation for the accrual and balance of major related transactions to verify whether the
accounting treatment is appropriate. ;
(4) Understand the authorization and approval procedures for related transactions of your company, check the
procurement and sales vouchers to third parties, compare the purchase and sales prices of related parties and
non-related parties, and verify whether the related transactions are fair;
(5) Obtain the related party’s final procurement and sales lists to the third party provided by your company, check
the relevant contract agreements and bank slip of the procurement and sales of the related party to the third party,
and verify the authenticity of the transaction and whether it constitutes a transaction cycle.
(iii) Material arbitration
1. Description of the matter
As stated in Note XII to the consolidated statement, on August 16, 2017, the South China International Economic
and Trade Arbitration Commission made a ruling of HNGZSC [2017] No. D376, ruled that your company and
Wuhan Zhongheng had to pay a total of 234 million yuan of liquidated damages and other cost. Your company
believed that the ruling of this case had problems in the arbitral procedure and in the determination of the
so-called breach of contract, and believed that the result of the ruling damaged the legitimate rights and interests
of the company. Your company had submitted an application for repeal of arbitration to the Shenzhen Intermediate
People’s Court, and Shenzhen Intermediate People’s Court officially accepted the case on February 7th, the case
number was (2018) Yue 03 Minte No. 113, Shenzhen Intermediate People’s Court made a judgment on August 16,
2018, rejecting the company’s request for repeal of arbitration. On September 5, 2018, the company and its
controlling shareholder, Wuhan Zhongheng Group, received the “Enforcement Notice of Shenzhen Intermediate
People’s Court” ([2018] Yue 03 Zhi No. 1870), and the execution applicant applied to the court for enforcement.
Your company believed that the liability for breach of contract should be fully borne by Wuhan Zhongheng Group,
Wuhan Zhongheng promised to bear all the arbitration losses in full. If the company made advanced payment due
to the execution of the case, the company would immediately request Wuhan Zhongheng to fulfill its
commitments and eliminate the effects. Due to the uncertainty of the division of liability for fault of internal
performance the defaulting entity and the possibility of the transfer of interest in Wuhan Zhongheng, the
management needs to make significant judgments and estimates on whether the matter is recognized as the
estimated liability or the current profits or losses, so we recognize the major arbitration matter as a key audit
69
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
matter.
2. Audit response
(1) Understand the company’s policies and procedures for determining major issues by conducting inspections,
consulting with management and corporate legal counsel;
(2) Collect your company’s asset replacement contracts, asset replacement and related transaction announcements
and old contracts, cooperation agreement between your company and Wuhan Zhongheng Group, and the
Arbitration Award HNGZSC [2017] No. D376. related to this major issue, your company’s application for repeal
of arbitration, the ruling of Shenzhen Intermediate People’s Court for rejection, the enforcement notice of
Shenzhen Intermediate People’s Court and other documents and materials, and understand the supporting
evidence for the management of your company to make judgments on the important matters;
(3) Engage legal experts to make independent judgments on the matter, and make independent judgments on legal
special opinions issued by legal experts;
(4) Check whether the major arbitration matter is sufficiently and properly disclosed in the financial report.
IV. Other information
The management of the Company (the “Management”) is responsible for other information which includes the
information covered in the Company’s 2018 annual report excluding the financial statement and our audit report.
The audit opinion issued by us for the financial statement has not covered other information, for which we do not
issue any form of assurance opinions.
Considering our audit on financial statements, we are liable to read other information, during which, we shall
consider whether other information differs materially from the financial statements or that we understand during
our audit, or whether there is any material misstatement.
Based on the works executed by us, we should report the fact if we find any material misstatement in other
information. In this regards, we have nothing to report.
V. Responsibilities of management and those charged with governance for the financial statements
The management is responsible for the preparation of the financial statements in accordance with the Accounting
Standards for Enterprise to secure a fair presentation, and for the design, establishment and maintenance of the
internal control necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing matters related to going concern and using the going concern assumption
unless the management either intends to liquidate the Company or to cease operations, or has no realistic
70
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
VI. Responsibilities of the auditor for the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an audit report that includes our audit opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the CAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with the CAS, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for audit opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the management.
(4) Conclude on the appropriateness of the management’s use of the going concern assumption and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required by the CAS to draw users’ attention in audit report to the related disclosures in
the financial statements or, if such disclosures are inadequate, to modify audit opinion. Our conclusions are based
on the information obtained up to the date of audit report. However, future events or conditions may cause the
Company to cease to continue as a going concern.
(5) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures,
and whether the financial statements represent the underlying transactions and events in a manner that achieves
fair presentation.
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Company to express audit opinion on the financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguard measures.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the key audit
matters. We describe these matters in the auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in the auditor’s report because of the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
II. Financial Statement
Statement in Financial Notes are carried in RMB/CNY
1. Consolidated balance sheet
Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD.
2018-12-31
In RMB
Item Balance at period-end Balance at period-begin
Current assets:
Monetary funds 34,108,330.27 68,812,495.97
Settlement provisions
Capital lent
Financial assets measured by fair
value and with variation reckoned into
current gains/losses
Derivative financial assets
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Note receivable and account
185,983,351.22 213,574,264.91
receivable
Including: Note receivable 69,185,516.71 64,778,266.65
Account receivable 116,797,834.51 148,795,998.26
Accounts paid in advance 31,348,429.54 943,328.01
Insurance receivable
Reinsurance receivables
Contract reserve of reinsurance
receivable
Other account receivable 5,777,179.08 4,335,729.72
Including: Interest receivable
Dividend receivable
Buying back the sale of financial
assets
Inventories 62,973,909.38 60,387,021.65
Assets held for sale
Non-current asset due within one
year
Other current assets 59,370.18 52,310.51
Total current assets 320,250,569.67 348,105,150.77
Non-current assets:
Loans and payments on behalf
Finance asset available for sales
Held-to-maturity investment
Long-term account receivable
Long-term equity investment
Investment real estate 50,681,322.86 52,410,958.62
Fixed assets 188,083,873.38 176,477,314.08
Construction in progress 5,727,760.23 654,356.00
Productive biological asset
Oil and gas asset
Intangible assets 41,815,689.74 43,307,316.37
Expense on Research and
Development
Goodwill
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Long-term expenses to be
542,116.99 141,666.55
apportioned
Deferred income tax asset 6,829,856.59 6,731,168.99
Other non-current asset 3,158,964.00 1,934,800.00
Total non-current asset 296,839,583.79 281,657,580.61
Total assets 617,090,153.46 629,762,731.38
Current liabilities:
Short-term loans 161,568,657.88 166,620,264.81
Loan from central bank
Absorbing deposit and interbank
deposit
Capital borrowed
Financial liability measured by fair
value and with variation reckoned into
current gains/losses
Derivative financial liability
Note payable and account payable 88,617,663.09 101,815,141.01
Accounts received in advance 159,528.60 278,128.18
Selling financial asset of repurchase
Commission charge and
commission payable
Wage payable 4,700,208.36 5,083,357.93
Taxes payable 11,232,819.87 15,136,277.68
Other account payable 26,778,863.92 20,092,172.75
Including: Interest payable 439,558.70 164,895.80
Dividend payable
Reinsurance payable
Insurance contract reserve
Security trading of agency
Security sales of agency
Liability held for sale
Non-current liabilities due within
one year
Other current liabilities
Total current liabilities 293,057,741.72 309,025,342.36
Non-current liabilities:
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Long-term loans
Bonds payable
Including: preferred stock
Perpetual capital
securities
Long-term account payable
Long-term wages payable
Accrual liability 64,411.00 64,411.00
Deferred income
Deferred income tax liabilities
Other non-current liabilities
Total non-current liabilities 64,411.00 64,411.00
Total liabilities 293,122,152.72 309,089,753.36
Owner’s equity:
Share capital 283,161,227.00 283,161,227.00
Other equity instrument
Including: preferred stock
Perpetual capital
securities
Capital public reserve 146,587,271.50 146,587,271.50
Less: Inventory shares
Other comprehensive income
Reasonable reserve
Surplus public reserve 77,391,593.25 77,391,593.25
Provision of general risk
Retained profit -183,172,091.01 -186,467,113.73
Total owner’s equity attributable to
323,968,000.74 320,672,978.02
parent company
Minority interests
Total owner’s equity 323,968,000.74 320,672,978.02
Total liabilities and owner’s equity 617,090,153.46 629,762,731.38
Legal Representative: Li Zhongqiu
Person in charge of accounting works: Yang Bin
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Person in charge of accounting institute: Wu Aijie
2. Balance Sheet of Parent Company
In RMB
Item Balance at period-end Balance at period-begin
Current assets:
Monetary funds 13,234,774.97 25,181,764.87
Financial assets measured by fair
value and with variation reckoned into
current gains/losses
Derivative financial assets
Note receivable and account
receivable
Including: Note receivable
Account receivable
Accounts paid in advance 153,050.00
Other account receivable 99,155,253.08 99,922,143.84
Including: Interest receivable
Dividend receivable
Inventories 14,806.50 14,806.50
Assets held for sale
Non-current asset due within one
year
Other current assets 17,055.88
Total current assets 112,574,940.43 125,118,715.21
Non-current assets:
Finance asset available for sales
Held-to-maturity investment
Long-term account receivable
Long-term equity investment 186,608,900.00 186,608,900.00
Investment real estate 26,374,703.70 27,583,299.22
Fixed assets 99,227,872.22 99,678,839.27
Construction in progress 654,356.00
Productive biological asset
Oil and gas asset
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Intangible assets 4,698,654.96 4,843,600.68
Expense on Research and
Development
Goodwill
Long-term expenses to be
141,666.55
apportioned
Deferred income tax asset 7,506,905.90 7,519,546.71
Other non-current asset
Total non-current asset 324,417,036.78 327,030,208.43
Total assets 436,991,977.21 452,148,923.64
Current liabilities:
Short-term loans 100,000,000.00 120,000,000.00
Financial liability measured by fair
value and with variation reckoned into
current gains/losses
Derivative financial liability
Note payable and account payable 10,745,840.16 10,745,840.16
Accounts received in advance 41,937.00 67,210.00
Wage payable 1,020,979.02 1,039,196.20
Taxes payable 7,161,707.15 9,305,468.70
Other account payable 22,672,441.54 14,339,551.78
Including: Interest payable
Dividend payable
Liability held for sale
Non-current liabilities due within 1
year
Other current liabilities
Total current liabilities 141,642,904.87 155,497,266.84
Non-current liabilities:
Long-term loans
Bonds payable
Including: preferred stock
Perpetual capital securities
Long-term account payable
Long-term wages payable
77
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Accrual liability 64,411.00 64,411.00
Deferred income
Deferred income tax liabilities
Other non-current liabilities
Total non-current liabilities 64,411.00 64,411.00
Total liabilities 141,707,315.87 155,561,677.84
Owner’s equity:
Share capital 283,161,227.00 283,161,227.00
Other equity instrument
Including: preferred stock
Perpetual capital securities
Capital public reserve 146,587,271.50 146,587,271.50
Less: Inventory shares
Other comprehensive income
Reasonable reserve
Surplus public reserve 77,391,593.25 77,391,593.25
Retained profit -211,855,430.41 -210,552,845.95
Total owner’s equity 295,284,661.34 296,587,245.80
Total liabilities and owner’s equity 436,991,977.21 452,148,923.64
3. Consolidated Profit Statement
In RMB
Item Current period Last period
I. Total operating income 637,046,707.03 858,040,132.74
Including: Operating income 637,046,707.03 858,040,132.74
Interest income
Insurance gained
Commission charge and
commission income
II. Total operating cost 634,300,173.31 853,455,010.07
Including: Operating cost 566,691,476.49 777,906,611.12
Interest expense
Commission charge and
commission expense
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Cash surrender value
Net amount of expense of
compensation
Net amount of withdrawal of
insurance contract reserve
Bonus expense of guarantee slip
Reinsurance expense
Tax and extras 3,975,984.41 6,447,920.89
Sales expense 14,100,247.17 15,916,493.87
Administrative expense 38,515,205.15 42,783,111.53
R&D expense
Financial expense 10,316,763.45 8,979,085.95
Including: Interest
12,785,854.43 10,476,762.09
expenses
Interest income 656,538.09 1,309,824.81
Losses of devaluation of
700,496.64 1,421,786.71
asset
Add: other income 924,020.00 161,420.00
Investment income (Loss is
326,439.49 372,245.91
listed with “-”)
Including: Investment
income on affiliated company and
joint venture
Income from change of fair
value (Loss is listed with “-”)
Exchange income (Loss is
listed with “-”)
Income from assets
49,159.75 199,069.56
disposal (Loss is listed with “-”)
III. Operating profit (Loss is listed
4,046,152.96 5,317,858.14
with “-”)
Add: Non-operating income 2,886,811.06 2,971,956.07
Less: Non-operating expense 2,341,006.76 5,758,731.56
IV. Total Profit (Loss is listed with
4,591,957.26 2,531,082.65
“-”)
Less: Income tax expense 1,296,934.54 1,556,673.26
V. Net profit (Net loss is listed with 3,295,022.72 974,409.39
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
“-”)
(i) net profit from continuous
operation (Net loss is listed with “-”
(ii) net profit from discontinued
operation (Net loss is listed with “-”
Net profit attributable to owner’
3,295,022.72 974,409.39
s of parent company
Minority shareholders’ gains
and losses
VI. Net after-tax of other
comprehensive income
Net after-tax of other
comprehensive income attributable to
owners of parent company
(i) Other comprehensive income
items which will not be reclassified
subsequently to gain/loss
1.Re-measurement of the
change of defined benefit plan
2.Other comprehensive
income unable transfer to gain/loss
under equity method
(II) Other comprehensive
income items which will be
reclassified subsequently to profit or
loss
1.Other comprehensive
income able to transfer to gain/loss
under equity method
2.Gains or losses arising
from changes in fair value of
available-for-sale financial assets
3.Gains or losses arising
from reclassification of
held-to-maturity investment as
available-for-sale financial assets
4.The effect hedging
portion of gains or losses arising from
cash flow hedging instruments
5.Translation differences
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
arising on translation of foreign
currency financial statements
6. Other
Net after-tax of other
comprehensive income attributable to
minority shareholders
VII. Total comprehensive income 3,295,022.72 974,409.39
Total comprehensive income
attributable to owners of parent 3,295,022.72 974,409.39
Company
Total comprehensive income
attributable to minority shareholders
VIII. Earnings per share:
(i) Basic earnings per share 0.0116 0.0034
(ii) Diluted earnings per share 0.0116 0.0034
As for the enterprise combined under the same control, net profit of 0 Yuan achieved by the merged party before combination while 0
Yuan achieved last period.
Legal Representative: Li Zhongqiu
Person in charge of accounting works: Yang Bin
Person in charge of accounting institute: Wu Aijie
4. Profit Statement of Parent Company
In RMB
Item Current period Last period
I. Operation income 36,771,309.00 41,156,307.77
Less: Operating cost 5,902,505.91 5,877,729.00
Tax and extras 1,115,764.39 2,665,603.29
Sales expense
Administrative expense 19,018,506.25 21,974,153.89
R&D expense
Financial expense 9,466,405.33 8,006,852.33
Including: Interest
9,451,554.17
expenses
Interest income 29,174.19
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Losses of devaluation of
-50,563.29 502,503.49
asset
Add: other income
Investment income (Loss is
listed with “-”)
Including: Investment
income on affiliated company and
joint venture
Income from change of fair
value (Loss is listed with “-”)
Income from assets
-27,388.25
disposal (Loss is listed with “-”)
II. Operating profit (Loss is listed
1,291,302.16 2,129,465.77
with “-”)
Add: Non-operating income 200.00 1,689,721.90
Less: Non-operating expense 2,289,447.82 5,755,745.88
III. Total Profit (Loss is listed with
-997,945.66 -1,936,558.21
“-”)
Less: Income tax expense 304,638.80 509,374.34
IV. Net profit (Net loss is listed with
-1,302,584.46 -2,445,932.55
“-”)
(i) net profit from continuous
-1,302,584.46 -2,445,932.55
operation (Net loss is listed with “-”
(ii) net profit from discontinued
operation (Net loss is listed with “-”
V. Net after-tax of other
comprehensive income
(i) Other comprehensive income
items which will not be reclassified
subsequently to gain/loss
1.Re-measurement of the
change of defined benefit plan
2.Other comprehensive
income unable transfer to gain/loss
under equity method
(iii) Other comprehensive
income items which will be
reclassified subsequently to
profit or loss
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
1.Other comprehensive
income able to transfer to gain/loss
under equity method
2.Gains or losses arising
from changes in fair value of
available-for-sale financial assets
3.Gains or losses arising
from reclassification of
held-to-maturity investment as
available-for-sale financial assets
4.The effect hedging
portion of gains or losses arising from
cash flow hedging instruments
5.Translation differences
arising on translation of foreign
currency financial statements
6. Other
VI. Total comprehensive income -1,302,584.46 -2,445,932.55
VII. Earnings per share:
(i) Basic earnings per share
(ii) Diluted earnings per share
5. Consolidated Cash Flow Statement
In RMB
Item Current period Last period
I. Cash flows arising from operating
activities:
Cash received from selling
commodities and providing labor 479,256,981.38 827,133,048.96
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
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Net cash received from reinsurance
business
Net increase of insured savings
and investment
Net increase of amount from
disposal financial assets that
measured by fair value and with
variation reckoned into current
gains/losses
Cash received from interest,
commission charge and commission
Net increase of capital borrowed
Net increase of returned business
capital
Write-back of tax received 11,937.37
Other cash received concerning
149,122,946.48 13,807,385.47
operating activities
Subtotal of cash inflow arising from
628,379,927.86 840,952,371.80
operating activities
Cash paid for purchasing
commodities and receiving labor 419,823,861.32 700,632,478.96
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
59,375,348.93 74,059,833.16
workers
Taxes paid 18,875,771.50 12,201,020.91
Other cash paid concerning
152,199,405.77 42,335,784.41
operating activities
Subtotal of cash outflow arising from
650,274,387.52 829,229,117.44
operating activities
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Net cash flows arising from operating
-21,894,459.66 11,723,254.36
activities
II. Cash flows arising from investing
activities:
Cash received from recovering
investment
Cash received from investment
326,439.49 372,245.91
income
Net cash received from disposal
of fixed, intangible and other 924,820.00 169,640.00
long-term assets
Net cash received from disposal
of subsidiaries and other units
Other cash received concerning
144,000,000.00 291,000,000.00
investing activities
Subtotal of cash inflow from
145,251,259.49 291,541,885.91
investing activities
Cash paid for purchasing fixed,
15,063,404.44 10,268,751.27
intangible and other long-term assets
Cash paid for investment
Net increase of mortgaged
loans
Net cash received from
subsidiaries and other units obtained
Other cash paid concerning
144,000,000.00 291,000,000.00
investing activities
Subtotal of cash outflow from
159,063,404.44 301,268,751.27
investing activities
Net cash flows arising from investing
-13,812,144.95 -9,726,865.36
activities
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 381,872,622.67 288,636,279.36
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Cash received from issuing
bonds
Other cash received concerning
financing activities
Subtotal of cash inflow from
381,872,622.67 288,636,279.36
financing activities
Cash paid for settling debts 387,355,473.63 302,262,347.00
Cash paid for dividend and
12,486,591.53 10,604,519.83
profit distributing or interest paying
Including: Dividend and profit
of minority shareholder paid by
subsidiaries
Other cash paid concerning
financing activities
Subtotal of cash outflow from
399,842,065.16 312,866,866.83
financing activities
Net cash flows arising from financing
-17,969,442.49 -24,230,587.47
activities
IV. Influence on cash and cash
equivalents due to fluctuation in 162,282.40 -306,140.20
exchange rate
V. Net increase of cash and cash
-53,513,764.70 -22,540,338.67
equivalents
Add: Balance of cash and cash
81,474,974.30 104,015,312.97
equivalents at the period -begin
VI. Balance of cash and cash
27,961,209.60 81,474,974.30
equivalents at the period -end
6. Cash Flow Statement of Parent Company
In RMB
Item Current period Last period
I. Cash flows arising from operating
activities:
Cash received from selling
commodities and providing labor 33,955,787.66 39,724,764.06
services
Write-back of tax received
Other cash received concerning 238,751,046.31 58,292,413.82
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
operating activities
Subtotal of cash inflow arising from
272,706,833.97 98,017,177.88
operating activities
Cash paid for purchasing
commodities and receiving labor 4,705,956.98 5,040,091.56
service
Cash paid to/for staff and
4,162,519.09 4,211,674.37
workers
Taxes paid 5,303,657.62 4,009,011.87
Other cash paid concerning
241,037,646.61 60,441,124.86
operating activities
Subtotal of cash outflow arising from
255,209,780.30 73,701,902.66
operating activities
Net cash flows arising from operating
17,497,053.67 24,315,275.22
activities
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 82,000.00
long-term assets
Net cash received from disposal
of subsidiaries and other units
Other cash received concerning
investing activities
Subtotal of cash inflow from
82,000.00
investing activities
Cash paid for purchasing fixed,
1,285,642.47 1,449,992.31
intangible and other long-term assets
Cash paid for investment
Net cash received from
subsidiaries and other units obtained
Other cash paid concerning
investing activities
Subtotal of cash outflow from
1,285,642.47 1,449,992.31
investing activities
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Net cash flows arising from investing
-1,203,642.47 -1,449,992.31
activities
III. Cash flows arising from financing
activities
Cash received from absorbing
investment
Cash received from loans 200,000,000.00 120,000,000.00
Cash received from issuing
bonds
Other cash received concerning
financing activities
Subtotal of cash inflow from
200,000,000.00 120,000,000.00
financing activities
Cash paid for settling debts 220,000,000.00 120,000,000.00
Cash paid for dividend and
9,451,554.17 8,058,841.68
profit distributing or interest paying
Other cash paid concerning
financing activities
Subtotal of cash outflow from
229,451,554.17 128,058,841.68
financing activities
Net cash flows arising from financing
-29,451,554.17 -8,058,841.68
activities
IV. Influence on cash and cash
equivalents due to fluctuation in 557.68 170.77
exchange rate
V. Net increase of cash and cash
-13,157,585.29 14,806,612.00
equivalents
Add: Balance of cash and cash
25,181,764.87 10,375,152.87
equivalents at the period -begin
VI. Balance of cash and cash
12,024,179.58 25,181,764.87
equivalents at the period -end
7. Statement of Changes in Owners’ Equity (Consolidated)
Current period
In RMB
Current period
Item Owners’ equity attributable to parent company Mino Total
Shar Other equity Capit Less: Other Reaso Surpl Provi Retai rity owne
88
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
e instrument al Inven comp nable us sion ned intere r’s
capi publi tory rehen reserv publi of profit sts equit
Per
tal c share sive e c gener y
petu
Pref reserv s inco reserv al risk
al
erre e me e
capi Oth
d
tal er
stoc
sec
k
uriti
es
283,
I. Balance at the 146,5 77,39 -186, 320,6
161,
end of the last 87,27 1,593 467,1 72,97
227.
year 1.50 .25 13.73 8.02
00
Add:
Changes of
accounting
policy
Error
correction of the
last period
Enterprise
combined under
the same control
Other
283,
II. Balance at 146,5 77,39 -186, 320,6
161,
the beginning of 87,27 1,593 467,1 72,97
227.
this year 1.50 .25 13.73 8.02
00
III. Increase/
Decrease in this 3,295 3,295
year (Decrease ,022. ,022.
is listed with 72 72
“-”)
(i) Total 3,295 3,295
comprehensive ,022. ,022.
income 72 72
(ii) Owners’
devoted and
decreased
capital
89
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
1．Common
shares invested
by owners
2．Capital
invested by
holders of other
equity
instruments
3．Amount
reckoned into
owners equity
with share-based
payment
4．Other
(III) Profit
distribution
1．Withdrawal of
surplus reserves
2．Withdrawal of
general risk
provisions
3．Distribution
for owners (or
shareholders)
4．Other
(IV) Carrying
forward internal
owners’ equity
1. Capital
reserves
conversed to
capital (share
capital)
2. Surplus
reserves
conversed to
capital (share
capital)
3. Remedying
loss with surplus
90
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
reserve
4．Change
amount of
defined benefit
plans that carry
forward retained
earnings
5．Other
(v) Reasonable
reserve
1. Withdrawal in
the report period
2. Usage in the
report period
(vi) Other
283,
IV. Balance at 146,5 77,39 -183, 323,9
161,
the end of the 87,27 1,593 172,0 68,00
227.
report period 1.50 .25 91.01 0.74
00
Last period
In RMB
Last period
Owners’ equity attributable to parent company
Other equity
instrument
Capit Other Surpl Total
Per Mino
Less: Provi
Shar al comp Reaso us owne
Item petu rity
Pref Inven sion Retai
e publi rehen nable publi r’s
al intere
erre tory of ned
capi c sive reserv c equit
capi Oth sts
d share gener profit
tal tal reserv inco e reserv y
er
stoc s al risk
sec e me e
k
uriti
es
283,
I. Balance at the 146,5 77,39 -187, 319,6
161,
end of the last 87,27 1,593 441,5 98,56
227.
year 1.50 .25 23.12 8.63
00
Add:
Changes of
accounting
91
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
policy
Error
correction of the
last period
Enterprise
combined under
the same control
Other
283,
II. Balance at 146,5 77,39 -187, 319,6
161,
the beginning of 87,27 1,593 441,5 98,56
227.
this year 1.50 .25 23.12 8.63
00
III. Increase/
Decrease in this
974,4 974,4
year (Decrease
09.39 09.39
is listed with
“-”)
(i) Total
974,4 974,4
comprehensive
09.39 09.39
income
(ii) Owners’
devoted and
decreased
capital
1．Common
shares invested
by owners
2．Capital
invested by
holders of other
equity
instruments
3．Amount
reckoned into
owners equity
with share-based
payment
4．Other
(III) Profit
distribution
92
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
1．Withdrawal of
surplus reserves
2．Withdrawal of
general risk
provisions
3．Distribution
for owners (or
shareholders)
4．Other
(IV) Carrying
forward internal
owners’ equity
1. Capital
reserves
conversed to
capital (share
capital)
2. Surplus
reserves
conversed to
capital (share
capital)
3. Remedying
loss with surplus
reserve
4．Change
amount of
defined benefit
plans that carry
forward retained
earnings
5．Other
(v)Reasonable
reserve
1. Withdrawal in
the report period
2. Usage in the
report period
(vi)Other
IV. Balance at 283, 146,5 77,39 -186, 320,6
93
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
the end of the 161, 87,27 1,593 467,1 72,97
report period 227. 1.50 .25 13.73 8.02
00
8. Statement of Changes in Owners’ Equity (Parent Company)
Current period
In RMB
Current period
Other equity instrument
Perpe
Less: Other
Share tual Capital Reason Surplus Retai Total
Item Invento compre
Prefer
capita capita public able public ned owner’
red Other ry hensive
l l reserve reserve reserve profit s equity
stock shares income
securi
ties
I. Balance at the 283,1 146,58 -210, 296,58
77,391,
end of the last 61,22 7,271.5 552,8 7,245.8
593.25
year 7.00 0 45.95 0
Add:
Changes of
accounting
policy
Error
correction of the
last period
Other
II. Balance at 283,1 146,58 -210, 296,58
77,391,
the beginning of 61,22 7,271.5 552,8 7,245.8
593.25
this year 7.00 0 45.95 0
III. Increase/
Decrease in this -1,30
-1,302,
year (Decrease 2,584.
584.46
is listed with 46
“-”)
(i)Total -1,30
-1,302,
comprehensive 2,584.
584.46
income 46
(ii) Owners’
devoted and
decreased
94
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
capital
1．Common
shares invested
by owners
2．Capital
invested by
holders of other
equity
instruments
3．Amount
reckoned into
owners equity
with share-based
payment
4．Other
(III) Profit
distribution
1．Withdrawal of
surplus reserves
2．Distribution
for owners (or
shareholders)
3．Other
(IV) Carrying
forward internal
owners’ equity
1. Capital
reserves
conversed to
capital (share
capital)
2. Surplus
reserves
conversed to
capital (share
capital)
3. Remedying
loss with surplus
reserve
4．Change
95
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
amount of
defined benefit
plans that carry
forward retained
earnings
5．Other
(v)Reasonable
reserve
1. Withdrawal in
the report period
2. Usage in the
report period
(vi)Other
IV. Balance at 283,1 146,58 -211,8 295,28
77,391,
the end of the 61,22 7,271.5 55,43 4,661.3
593.25
report period 7.00 0 0.41 4
Last period
In RMB
Last period
Other equity instrument
Perpe
Less: Other
Share tual Capital Reason Surplus Retai Total
Item Invento compre
Prefer
capita capita public able public ned owner’
red Other ry hensive
l l reserve reserve reserve profit s equity
stock shares income
securi
ties
I. Balance at the 283,1 146,58 -208, 299,03
77,391,
end of the last 61,22 7,271.5 106,9 3,178.3
593.25
year 7.00 0 13.40 5
Add:
Changes of
accounting
policy
Error
correction of the
last period
Other
II. Balance at 283,1 146,58 -208, 299,03
77,391,
the beginning of 61,22 7,271.5 106,9 3,178.3
593.25
this year 7.00 0 13.40 5
96
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
III. Increase/
Decrease in this -2,44
-2,445,
year (Decrease 5,932.
932.55
is listed with 55
“-”)
(i) Total -2,44
-2,445,
comprehensive 5,932.
932.55
income 55
(ii) Owners’
devoted and
decreased
capital
1．Common
shares invested
by owners
2．Capital
invested by
holders of other
equity
instruments
3．Amount
reckoned into
owners equity
with share-based
payment
4．Other
(III) Profit
distribution
1．Withdrawal of
surplus reserves
2．Distribution
for owners (or
shareholders)
3．Other
(IV) Carrying
forward internal
owners’ equity
1. Capital
reserves
conversed to
capital (share
97
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
capital)
2. Surplus
reserves
conversed to
capital (share
capital)
3. Remedying
loss with surplus
reserve
4．Change
amount of
defined benefit
plans that carry
forward retained
earnings
5．Other
(v)Reasonable
reserve
1. Withdrawal in
the report period
2. Usage in the
report period
(vi)Other
IV. Balance at 283,1 146,58 -210, 296,58
77,391,
the end of the 61,22 7,271.5 552,8 7,245.8
593.25
report period 7.00 0 45.95 0
III. Company profile
(i) The registration place of the enterprise, the form of organization and the headquarters address
Shenzhen Zhongheng HUAFA Company Limited (hereinafter referred to as Company or the Company),
established on 8 December 1981. Uniform social credit code 91440300618830372G.
Registered place and head office of the Company: 411 Bldg., Huafa (N) Road, Futian District, Shenzhen
Legal representative: Li Zhongqiu
Registered capital: RMB 283,161,227
(ii) The nature of the business and the main business activities
The Company belongs to the computer, telecommunication and manufacturing of other electronic equipment.
98
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Business scope: producing and sales of vary color TV set, liquid crystal display, LCD (operates in branch),
radio-recorder, sound equipment, electronic watch, electronic game and computers, the printed wiring board,
precision injection parts, light packaging material (operates in Wuhan) and hardware (including tool and mould)
for various electronic products and supporting parts, plating and surface treatment and tin wire, development and
operation of real estate (Shen Fang Di Zi No.: 7226760) and property management. Funded affiliated companies
in Wuhan and Jilin. Setting up branches in capital of the province (Lhasa City excluded) in China and
municipality directly under the central government.
(iii) Relevant party offering approval reporting of financial statements and date thereof
The financial statement has been deliberated and approved by BOD on 16 April 2019. According to Article of
Association, the statement shall be submitted for deliberation in shareholders general meeting.
Consolidate scope in the Period including: parent company – Shenzhen Zhongheng HUAFA Company Limited,
subsidiary including Shenzhen HUAFA Property Leasing Management Co., Ltd. (no annual inspection in 2011,
and business license revoke on 1 April 2014), Shenzhen Zhongheng HUAFA property Co., Ltd., Wuhan Hengfa
Technology Co., Ltd., Shenzhen HUAFA Hengtian Co., Ltd. and Shenzhen HUAFA Hengtai Co., Ltd. more of
subsidiaries found in “Note IX. Equity in other subjects”.
IV. Preparation basis of Financial Statements
1. Preparation basis
Base on the running continuously and actual transactions and events, in line with the Accounting Standards for
Business Enterprise – Basic Standards and specific principle of accounting standards issued by the Ministry of
Finance, the Company prepared and formulate the financial statement lies on the followed important accounting
policy and estimation.
2. Going concern
The Company estimated that the production and sales of the Company, in 12 months since end of the period, will
in a virtuous cycle. We have good management and continuous operation ability, and there is no risk of continuing
operations.
V. Important accounting policy and estimation
Whether the company needs to comply with the disclosure requirements of the particular industry
No
Notes on specific accounting policies and accounting estimation:
According to actual operation characteristic, the Group formulate specific accounting policy and accounting
estimation, including trade cycle, reorganization and measurement on account bad debt provision of receivables,
99
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
inventory measurement, classification and depreciation method of fixed assets, intangible assets amortization and
reorganization and measurement of revenue etc.
1. Declaration of obedience to Accounting Standards for Business Enterprise
The Financial Statements of the Company are up to requirements of Accounting Standards for Business Enterprise
and also a true and thorough reflection to the relevant information as the Company’s financial position dated 31st
December 2018 and the operation results as well as cash flow for the year of 2018.
2. Accounting period
The Company’s accounting year is Gregorian calendar year, namely from 1st January to 31st December of every
year.
3. Business cycle
The Company’s business cycle is one year (12 months) as a normal cycle, and the business cycle is the
determining criterion for the liquidity of assets and liabilities of the Company.
4. Bookkeeping standard currency
The Renminbi (RMB) is taken as the book-keeping standard currency.
5. Accounting methods for consolidation of enterprises under the same control or otherwise
1. Consolidation of enterprises under the same control
Where the Company for long term equity investment arising from business combination under common control
satisfies the combination consideration by payment of cash, transfer of non-cash assets or assumption of debt, the
carrying value of the net assets of the acquire in combined financial statement of the ultimate controller shared by
the Company as at the combination date shall be deemed as the initial investment cost of such long term equity
investment. If the equity instrument issued by combining party are consider as the combination consideration,
than the total value of the issuing shares are consider as the share capital. The difference between the initial cost of
long-term equity investment and book value of consideration (or total face value of the shares issued) paid, capital
surplus adjusted; if the capital surplus not enough to written down, than retained earning adjusted.
2. Business combination not under common control
As for business combination not under common control, combination costs refer to the sum of the fair value of the
assets paid, liabilities occurred or assumed as well as equity securities issued by the acquirer to obtain control over
the acquire as at the acquisition date. As for acquiree that obtained by consolidation not under the same control,
100
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
the qualified confirmation of identified assets, liability and contingency liabilities should calculated by fair value
on day of purchased. If the consolidation cost larger than the fair value amount of identified net assets from
acquiree’s, the differences should be recognized as goodwill. If the consolidation cost less than the fair value
amount of identified net assets from acquiree’s, the differences should reckoned into current non-operating
income.
6. Preparation methods for consolidated financial statements
1. Consolidation financial statement range
The Company includes all the subsidiaries (including the separate entities controlled by the Company) into
consolidated financial statement, including companies controlled by the Company, non-integral part of the
investees and structural main body.
2. Centralize accounting policies, balance sheet dates and accounting periods of parent and subsidiaries.
As for the inconsistency between the subsidiaries and the Company in the accounting policies and periods, the
necessary adjustment is made on the subsidiaries’ financial statements in the preparation of the consolidated
financial statements according to the Company’s accounting policies and periods.
3. Offset of consolidated financial statement
The consolidated financial statements shall be prepared on the basis of the balance sheet of the parent company
and subsidiaries, which offset the internal transactions incurred between the parent company and subsidiaries and
within subsidiaries. The owner’s equity of the subsidiaries not attributable to the parent company shall be
presented as minority equity under the owner’s equity item in the consolidated balance sheet. The long term
equity investment of the parent company held by the subsidiaries, deemed as treasury stock of the corporate group
as well as the reduction of owners’ equity, shall be presented as “Less: treasury stock” under the owners’ equity
item in the consolidated balance sheet.
4. Accounting for acquisition of subsidiary through combination
For subsidiaries acquired under enterprise merger involving enterprises under common control,
the assets, liabilities, operating results and cash flows of the subsidiaries are included in the consolidated financial
statements from the beginning of the financial year in which the combination took place. When
preparing the consolidated financial statements, for the subsidiaries acquired from business
combination not involving entities under common control, the identifiable net assets of the subsidiaries are
adjusted on the basis of their fair values on the date of acquisition.
7. Classification of joint arrangements and accounting treatment of joint operation
1. Classification of joint arrangements
101
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Joint arrangements are divided into joint operations and joint ventures. Joint arrangements achieved not through
separate entities are classified as joint operations. Separate entities refer to the entities with separate identifiable
financial architecture including separate legal entities and legally recognized entities without the qualification of
legal entity. Joint arrangements achieved through separate entities are generally classified as joint ventures. In
case of changes in rights entitled to and obligations undertaken by the parties of joint venture under a joint
arrangement due to the changes in relevant facts and circumstances, the parties of joint venture will re-assess the
classification of joint arrangements.
2. Accounting treatment for joint operations
The parties of joint operation should recognize the following items in relation to their share of interest in joint
operation, and proceed with accounting in accordance with the relevant provisions under the Accounting
Standards for Business Enterprises: to recognize their separate assets or liabilities held, and recognize the assets or
liabilities jointly held according to their respective shares; to recognize the income from the disposal of their
output share under joint operation; to recognize the income from the disposal of output under joint operation
according to their respective shares; to recognize the expenses incurred separately, and recognize the expenses
incurred under joint operation according to their respective shares.
For the parties of a joint operation not under common control, if they are entitled to relevant assets and undertake
relevant liabilities of the joint operation, accounting will be carried out with reference to the provisions of the
parties of joint operation; otherwise, it should be subject to relevant Accounting Standards for Business
Enterprises.
3. Accounting treatment for joint ventures
The parties of a joint venture should perform accounting for investments by the joint venture in accordance with
the Accounting Standards for Business Enterprises No. 2 – Long-term Equity Investments. The parties not under
common control should carry out accounting depending on their influence on the joint venture.
8. Determination criteria of cash and cash equivalent
The cash recognized in the preparation of the cash flow statements, is the Company’s storage cash and deposits
available for payment anytime. The cash equivalents recognized in the preparation of the cash flow statements
refers to the investment held by the Company with characteristic of short-term, strong mobility, easy transfer to
known sum cash and has slim risk from value changes.
9. Foreign currency exchange and the conversion of foreign currency statements
1. Foreign currency exchange
The approximate exchange rate of the spot exchange rate on transaction occurred should be used for standard
money conversion while foreign currency exchange occurred On the balance sheet day, the monetary items are
converted on the current rate on the balance sheet day, concerning the exchange differences between the spot
102
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
exchange rate on that date and initial confirmation or the sport exchange rate on previously balance sheet date,
should reckoned in to current gains/losses except the capitalizing on exchange differences for foreign specific
loans, which was reckoned into cost for capitalizing. The non-monetary items measured on the historic cost are
still measured by the original bookkeeping rate with the sum of the bookkeeping standard currency unchanged.
Items of non-monetary foreign currency which was calculated by fair value, should converted by spot exchange
rate on the confirmation day of fair value, difference between the converted amount of bookkeeping currency and
original amount of bookkeeping currency, was treated as changes of fair value (including exchange rate changed)
reckoned into current gains/losses or recognized as other consolidated income.
2. Conversion of foreign currency financial statements
Upon the conversion of the foreign currency financial statements of the controlling subsidiaries, joint enterprises,
and the affiliated enterprises on the bookkeeping standard currency different from the Company’s, the accounting
check and preparation of the consolidated financial statements are made. Assets and liabilities items in the balance
sheet are converted on the current rate on the balance sheet day; owners’ equity items besides the “retained profit”
item, the other items are converted on the actual rate. Items of revenue and expenses in profit statement, should
converted by the approximate exchange rate of spot exchange rate on occurring date. The conversion difference of
the foreign currency financial statements is listed specifically in the owners’ equity in the balance sheet. If the
foreign cash flow determined by rational system method, the approximate exchange rate of spot exchange rate on
occurring date should prevail. The cash influenced by the rate fluctuation is listed specifically in the cash flow
statement. As for the foreign operation, the conversion difference of the foreign currency statement related to the
foreign operation is transferred in proportion into the disposal of the current loss/gain.
10. Financial instrument
1. Category and recognition of financial instrument
Financial instruments are classified into financial assets or financial liabilities and equity instruments. When the
Company becomes a party to a financial instrument contract, it is recognized as a financial asset or financial
liability, or an equity instrument.
Financial assets are classified as financial assets measured at fair value and with changes included in current profit
and loss, held-to-maturity investments, receivables, and available-for-sale financial assets at the initial recognition.
The classification of financial assets other than receivables depends on the intention and ability of the Company
and its subsidiaries to hold financial assets. Financial liabilities are classified as financial liabilities measured at
fair value and with changes included in current profit and loss and other financial liabilities at the initial
recognition.
Financial assets measured at fair value and with changes included in current profit and loss include the trading
financial assets held for sale in the short term and the financial assets designated to be measured at fair value at
the initial recognition and with changes included in current profit and loss. The accounts receivables refer to the
103
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
non-derivative financial assets that are not quoted in an active market and have a fixed or ascertainable
recoverable amount. The available-for-sale financial assets include the non-derivative financial assets designated
as available-for-sale financial assets at the initial recognition or the financial assets have not been classified into
other types. The held-to-maturity investments refer to the non-derivative financial assets with fixed maturity
date, fixed or ascertainable recoverable amount, and the management having clear intentions and ability to hold to
maturity.
2. Measurement of financial instruments
The initial recognition of the Company’s financial instruments is measured at fair value. Subsequent measurement
is classified as the financial assets measured at fair value and with changes included in current profit or loss, the
financial assets available for sale, and the financial liabilities measured at fair value and with changes included in
current profit or loss; the held-to-maturity investments, loans and receivables and other financial liabilities are
measured at amortized cost; the equity instrument investment that is not quoted in an active market and whose fair
value cannot be reliably measured and the derivative financial assets or derivative financial liabilities that are
linked to the equity instrument and is required to be settled through the delivery of the equity instrument are
measured at cost. The gains or losses arising from changes in the fair value in the subsequent measurement of the
Company’s financial assets or financial liabilities, except for hedging, are treated as follows: ① The gains or
losses arising from changes in the fair value of the financial assets or financial liabilities measured at fair value
and with changes included in current profit or loss are included in the variable loss and profit of fair value. ②
Changes in fair value of available-for-sale financial assets are included in other comprehensive income.
3. The Company’s methods for confirming the fair value of financial instruments
If the financial instrument has an active market, the fair value is determined by the quoted price in the active
market; if the financial instrument doesn’t have an active market, the fair value is determined by adopting the
valuation technique. Valuation techniques mainly include market approach, income approach and cost approach.
4. Confirmation basis and measurement method for the transfer of liabilities of financial assets
When almost all risks and rewards of the ownership of financial assets are transferred, or almost all risks and
rewards of the ownership of financial assets are neither transferred nor retained, but the control of the financial
assets is abandoned, the financial assets should be derecognized. If the financial assets meet the conditions for
derecognition, the book value of the financial assets transferred and the difference between the consideration of
received from the transfer and the sum of accumulated amount of changes in fair value originally and directly
included in other comprehensive income are included in current profits and losses. When some transfer meets the
conditions for derecognition, amortize the whole book value of the transferred financial assets between the
derecognized portion and the recognized portion at their respective fair values.
If all or part of the current obligations of a financial liability has been discharged, the financial liability or part of
it shall be derecognized.
5. Impairment of financial assets
When the financial assets measured at amortized cost are impaired, make provision for impairment based on the
difference between the present value of the estimated future cash flows (excluding future credit losses that have
104
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
not occurred) and the book value. If there is objective evidence that the value of the financial asset has been
recovered and is objectively related to the event that occurred after the recognition of the loss, the previously
recognized impairment loss shall be reversed and included in current profit or loss.
When the financial assets measured at cost are impaired, make provision for impairment. The impairment loss
incurred will not be reversed once confirmed.
When there is objective evidence that the available-for-sale financial assets are impaired, the accumulated losses
arising from the decline in fair value that are directly recognized in shareholders’ equity are transferred out and
included in the impairment losses. For available-for-sale equity instrument investments with impairment losses
recognized, the increase in fair value after the period is directly recognized in shareholders’ equity.
For equity instrument investments, the specific quantitative criteria for the Company to determine the “serious” or
“non-temporary” decline in fair value, the method of calculating the cost, the method for determining the fair
value at the end of the period, and the basis for determining the period of continuous decline are as follows:
Specific quantitative criteria for a “serious” decline in The decline in fair value at the end of the period relative to cost
fair value has reached or exceeded 50%.
Specific quantitative criteria for a “non-temporary” It has been falling for 12 consecutive months.
decline in fair value
Cost calculation method Take the sum of payment consideration (deducting the cash
dividends that have been declared but not yet issued or the bond
interest that have reached the interest payment period but not
yet received) and related transaction costs as the investment
costs when obtained.
Method for determining the fair value at the end of the The fair value of financial instruments that have an active
period market is determine by the quoted prices in the active market; if
there is no active market in the financial instruments, valuation
techniques are used to determine their fair value.
Basis for determining the period of A continuous decline or the rebound in the
continuous decline period of the downward trend continued to rise
below 20%, and the rebound duration not
exceeding 6 months are recognized as a period
of continuous decline.
105
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
11.Note receivable and account receivable
(1)Account receivables with single major amount and withdrawal bad debt provision independently
Book balance of the account receivable with over 0.5 million
Criterion or amount standards of major single amount
Yuan
Withdrawal method for individual bad debt provision accrual Recognized on the difference between the book value and the
with major single amount concerned current value of the expected future cash flow
(2) Account receivable with bad debt provision accrual by portfolio
Portfolio Accrued method for bad debts
Withdrawing bad debt provision by aging method Age analysis
No accrual for bad debt provision
Withdrawing bad bed provision by aging method in portfolio:
√ Applicable □ Not applicable
Accrued proportion of accounts Accrued proportion of other accounts
Account ages
receivable receivable
Within one year (one year included) 0.00% 0.00%
1－2 years 5.00% 5.00%
2－3 years 10.00% 10.00%
Over three years 30.00% 30.00%
Withdrawing bad bed provision by percentage of total accounts receivable outstanding in portfolio:
□ Applicable √ Not applicable
Withdrawing bad bed provision by other methods in portfolio:
□ Applicable √ Not applicable
(3) Account receivable with minor single amount but has individual bad debt provision accrual
Receivable has minor amount and cannot reflect the risk
Reasons for individual bad debt prevision accrual
characteristic by withdrawing bad debt provision by group
Recognized on the difference between the book value and the
Accrued method for bad debt provision
current value of the expected future cash flow
12. Inventory
Whether the company needs to comply with the disclosure requirements of the particular industry
No
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1. Categories of inventory
The inventory is goods or manufactured products held for sale, products in process, and materials and matters
utilized in the production or supply of labor. Mainly including raw material, revolving materials, outside
processing materials, wrappage, low-value consumption goods, goods in process, semi-finished goods, stocks and
so on.
2. Accounting method for inventory delivery
When inventories are issued, the actual cost is determined by the first in first out method.
3. Accrual method inventory falling price reserves
On the balance sheet day, the inventory is measured on the lower one between the cost and the net realizable value,
and the provision for the falling price reserves is accrued on each inventory item; however, as for the inventory of
large quantity and low price, the provision is accrued on the inventory category.
4. Inventory system
Inventory system of the Company is perpetual inventory system
5. Amortization method for the low-value consumables and wrap page
Low-value consumables and packages are amortized by one-point method
13. Long-term equity investment
1. Recognition of initial investment cost
For a long-term equity investment obtained by a business combination, if it is a business combination under the
same control, take the share of the combine party obtained in the book value of the net assets in the consolidated
financial statements of the ultimate controlling party on the combination date as the initial investment cost; in the
case of the consolidation of enterprises not under the same control, recognized as the initial cost is the recognized
consolidation cost on the purchase day. As for the long term equity investment obtained by cash payment, the
initial investment cost is the actual purchase payment. As for the long term equity investment obtained by the
equity securities offering, the initial investment cost is the fair value of the equity securities. As for the long-term
equity investment obtained by debt reorganization, initial investment cost of such investment should determine by
relevant regulation of the “Accounting Standards for Business Enterprise No.12- Debt Reorganization”; as for the
long term equity investment obtained by the exchange of the non-monetary assets, the initial investment cost is
recognized on the relevant rules in the “Accounting Standards for Business Enterprise No. 7- Exchange of
Non-Monetary Assets”
2. Subsequent measurement and profit or loss recognition
Where the company has a control over the investee, long-term equity investments are measured using cost method.
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Long-term equity investments in associates and joint ventures are measured using equity method. Where part of
the equity investments of an investor in its associates are held indirectly through venture investment institutions,
common fund, trust companies or other similar entities including investment linked insurance funds, such part of
equity investments indirectly held by the investor shall be measured at fair value through profit or loss according
to according to relevant requirements of Accounting Standards for Business Enterprises No.22—Recognization
and measurement of Financial Instruments regardless whether the above entities have significant influence on
such part of equity investments, while the remaining part shall be measured using equity method.
3. Basis of conclusion for common control and significant influence over the investee
Joint control over an investee refers to where the activities which have a significant influence on return on certain
arrangement could be decided only by mutual consent of the investing parties sharing the control, which includes
the sales and purchase of goods or services, management of financial assets, acquisition and disposal of assets,
research and development activities and financing activities, etc.; Significant influence on the investee refers to
that: significant influence over the investee exists when holding more than 20% but less than 50% of the shares
with voting rights or even if the holding is below 20%, there is still significant influence if any of the following
conditions is met: there is representative in the board of directors or similar governing body of the investee;
participation in the investee’s policy setting process; assign key management to the investee; the investee relies on
the technology or technical information of the investing company; or major transactions with the investee.
14. Investment real estate
Measurement for investment real estate
Cost method
Depreciation or amortization method
The types of investment real estate of the Company include the leased land use rights, leased buildings, and land
use rights held and prepared for transfer after appreciation. Investment real estate is initially measured at cost and
subsequently measured by using the cost model.
The leased buildings in the Company’s investment property adopts straight-line depreciation to calculate and
distill depreciation, specific accounting policy are same as part of the fixed assets. The leased land use rights in
the investment property and the land use rights to be transferred after appreciation adopt straight-line amortization,
specific accounting policy are same as part of the intangible assets.
15. Fixed assets
(1) Recognition
Fixed assets refers to the tangible assets holding for purpose of producing goods, providing labor services, leasing
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or operation management, which has one accounting fiscal year of using life. Meanwhile as up to the following
conditions, they are recognized: the economic interest related to the fixed assets probably flow into the Company;
the cost of the fixed assets can be measured reliably.
(2) Depreciation method
Annual depreciation
Category Depreciation method Depreciation life (year) Salvage rate
rate
Straight-line
House building 20-50 10.00 1.80-4.50
depreciation
Straight-line
Machinery equipment 10 10.00 9.00
depreciation
Straight-line
Mold equipment 3 10.00 30.00
depreciation
Transportation Straight-line
5 10.00 18.00
equipment depreciation
Straight-line
Instrument equipment 5 10.00 18.00
depreciation
Straight-line
Tool equipment 5 10.00 18.00
depreciation
Straight-line
Office equipment 5 10.00 18.00
depreciation
The fixed assets of the Company mainly include buildings, machinery equipment, electronic equipment, transportation equipment,
etc.; the method of depreciation is based on the straight-line method. Determine the useful life and estimated net residual value of
fixed assets according to the nature and use of various types of fixed assets. At the end of the year, review the useful life, estimated
net residual value, and depreciation method of fixed assets, if there is a difference from the original estimate, make corresponding
adjustments. Except for the fixed assets that have been fully depreciated and continue to be used and the land that is separately
accounted for, the Company calculates and depreciates all fixed assets.
(3) Recognition basis, valuation and depreciation method for fixed assets under financing lease
The fixed assets under financing lease are the lease that has substantially transferred all the risks and rewards
associated with asset ownership. The initial valuation of the fixed assets under financing lease is to take the lower
one between the fair value of the leased assets and the present value of the minimum lease payments on the start
date of the lease period as the entry value; the subsequent valuation of the fixed assets under financing lease
adopts the depreciation policy consistent with the own fixed assets to make depreciation and impairment
provision.
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16. Construction in process
Whether the company needs to comply with the disclosure requirements of the particular industry
No
Construction in process of the Company divided as self-run construction and out-bag construction. The
Construction in process of the Company carried forward as fixed assets while the construction is ready for the
intended use. Criteria of the expected condition for use should apply one of the follow conditions: The substance
construction (installation included) of the fixed assets has completed all or basically; As the projects have been in
test production or operation, and the results show that the assets can operate properly and produce the qualified
products stably, or the test operation result shows the assets can operate or open properly. The expenditure of the
fixed assets on the construction is a little or little. The fixed assets of the project constructed have been up to the
requirements of the design or contract, or basically up to.
17. Borrowing expenses
1. Recognition principle on capitalization of borrowing expenses
As for the Company’s actual borrowing expenses directly attributable to the assets construction or production, it is
capitalized and reckoned into the relevant assets cost; as for other borrowing expenses, it is recognized on the
actual sum and reckoned into the current loss/gain. The assets up to the capitalization are assets as the capital
assets, investment real estate, and inventory reaching the expectant availability or sale ability.
2. Calculation of the capitalization
Capitalization term: the period from the time starts to capitalization to the time the capitalization ends. The period
of capitalization suspended is not included. The capitalization of borrowing expenses should be suspended while
the abnormal interrupt, which surpass three months continuously, in the middle of acquisition or construction or
production.
As for the borrowing of the specific borrowing, the capitalization sum is recognized on the current actual
interest expenses less the interest income of the borrowing capital not utilized but deposited in the bank or the
return of the temporary investment; As for the appropriation of the general borrowing, the capitalization sum is
recognized on the weighted average of, the accumulative assets expenditure above the specific borrowing, and
times the capitalization rate of the appropriation; As for the discount or premium of the borrowing, the discount or
premium to be diluted in every accounting period is recognized in the actual rate method.
The effective interest method is the method for the measurement of the diluted discount or premium or interest
expenses on the actual interest rate; and the actual interest rate is the interest rate used in the discount of the future
cash flow in the expectant duration period as the current book value of the borrowing.
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18. Intangible assets
(1) Accounting method, service life and impairment test
1. Accounting method of intangible assets
The Company’s intangible assets are measured initially on cost. The intangible assets purchased in are taken as the
actual cost on the actual payment and relevant expenditure. As for the intangible assets invested in by the
investors, the actual cost is recognized on the value stipulated in the contract or agreement; however, if what is
stipulated in the contract or agreement is not fair value, the actual cost is recognized on fair value. As for the
self-developed intangible assets, their cost is the actual total expenditure before reaching the expectant purpose.
The follow-up measurements of the Company’s intangible assets respectively are: the line amortization method is
taken on the intangible assets of finite service life, and at the yea-end, the check is taken on the service life and
dilution of the intangible assets, and the corresponding adjustment is made if there is inconsistency with the
previous expected ones. As for the intangible assets of uncertain service life, it is not diluted, however, the service
life is checked at year-end; If there is solid evidence to its finite service life, its service life is estimated and
diluted in straight line method.
2. Judgment basis for uncertain service life
The Company will not be able to foresee the time limit within which the asset brings economic benefits to the
company, or the intangible assets with uncertain useful life identified as intangible assets with uncertain useful life.
The basis for judging the uncertainty of useful life is from the contractual rights or other legal rights, but the
contract stipulates or the law rules there is no definite useful life; combining the same industry case and or the
relevant expert argumentation, it is still incapable of judging the time limit within which the intangible assets
bring economic benefits to the company.
At the end of each year, review the useful life of intangible assets with indefinite useful life by mainly adopting
the bottom-up method, the relevant departments of intangible assets take the basic review and evaluate whether
there is any change in the judgment basis for indefinite useful life.
(2) Accounting policies for internal research and development expenditure
Expenditures for internal research and development projects at the research phase shall be included in the current
profit or loss when incurred; expenditures incurred at the development phase and recognized as intangible assets
shall be transferred to intangible assets accounting.
19. Long-term assets impairment
Long-term equity investments, investment properties measured at cost and long-term assets such as fixed assets,
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construction in progress, productive biological assets at cost method, oil and gas assets, intangible assets and
goodwill are tested for impairment if there is any indication that an asset may be impaired at the balance date. If
the result of the impairment test indicates that the recoverable amount of the asset is less than its carrying amount,
a provision for impairment and an impairment loss are recognized for the amount by which the asset’s carrying
amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and the present value of the future
cash flows expected to be derived from the asset. Provision for asset impairment is determined and recognized on
the individual asset basis. If it is not possible to estimate the recoverable amount of an individual asset, the
recoverable amount of a group of assets to which the asset belongs is determined. A group of assets is the smallest
group of assets that is able to generate independent cash inflows.
Goodwill arising from a business combination is tested for impairment at least at each year end, irrespective of
whether there is any indication that the asset may be impaired. For the purpose of impairment testing, the carrying
amount of goodwill acquired in a business combination is allocated from the acquisition date on a reasonable
basis to each of the related asset groups; if it is impossible to allocate to the related asset groups, it is allocated to
each of the related set of asset groups. If the carrying amount of the asset group or set of asset groups is higher
than its recoverable amount, the amount of the impairment loss first reduced by the carrying amount of the
goodwill allocated to the asset group or set of asset groups, and then the carrying amount of other assets (other
than the goodwill) within the asset group or set of asset groups, pro rata based on the carrying amount of each
asset.
Once the impairment loss of such assets is recognized, it is not be reversed in any subsequent period.
20. Long-term deferred expenditure
The Company’s long-term deferred expenditure are expenses paid out and with one year above (one-year
excluded) benefit period. The long-term deferred expenses are diluted by periods according to the benefit period.
As the long-term deferred expenses cannot enable the accounting period’s beneficiary, all dilution values of the
project undiluted yet, are transferred into the current loss/gain.
21. Employees remuneration
(1) Accounting for short-term benefits
In the period of employee services, short-term benefits are actually recognized as liabilities and charged to profit
or loss, or if otherwise required or allowed by other accounting standards, to the related costs of assets for the
current period. At the time of actual occurrence, The Company’s employee benefits are recorded into the profits
and losses of the current year or assets associated costs according to the actual amount. The non-monetary
employee benefits are measured at fair value. Regarding to the medical and health insurance, industrial injury
insurance, maternity insurance and other social insurances, housing fund and labor union expenditure and
personnel education that the Company paid for employees, the Company should recognize corresponding
employees benefits payable according to the appropriation basis and proportion as stipulated by relevant
requirements and recognize the corresponding liabilities and include these expenses in the profits or losses of the
current period or recognized as respective assets costs.
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(2) Accounting for post-employment benefits
During the accounting period in which an employee provides service, the amount payable calculated under
defined contribution scheme shall be recognized as a liability and recorded in profit and loss of the current period
or in assets. In respect of the defined benefit scheme, the Company shall use the projected unit credit method and
attribute the welfare obligations calculated using the formula stipulated by the defined benefit scheme to the
service period of the employee, and record the obligation in the current profit and loss or related assets cost.
(3) Accounting for termination benefits
The Company recognizes a liability and expenses in the current profit or loss for termination benefits at the earlier
of the following dates: when the Company can no longer withdraw the offer of those benefits; and when the
Company recognizes costs for restructuring involving the payment of termination costs.
(4) Accounting for other long-term employee benefits
The Company provides other long-term employee benefits to its employees. For those falling within the scope of
defined contribution scheme, the Company shall account for them according to relevant requirements of the
defined contribution scheme. In addition, the Company recognizes and measures the net liabilities or net assets of
the other long-term employee benefits according to relevant requirements of the defined contribution scheme.
22. Accrual liability
The obligation related to contingencies is the current obligation assumed by the company, and performing this
obligation may result in an outflow of economic benefits, and this obligation can be determined as the estimated
liabilities when the amount can be reliably measured. The Company makes initial measurement in accordance
with the best estimate for performing the related current obligation, if the expenditure as needed has a continuous
range, and the likelihood of occurrence of various results in this range is the same, the best estimate is determined
by the median value within the range; if a number of items are involved, the best estimate is determined by the
calculation of various possible outcomes and related probabilities.
At the balance sheet date, the book value of estimated liabilities should be rechecked, if there is conclusive
evidence indicates that this book value cannot truly reflect the current best estimate, and then the book value
should be adjusted in accordance with the current best estimate.
23. Revenue
Whether the company needs to comply with the disclosure requirements of the particular industry
No
1. Sales of goods
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The Company shall ascertain the revenue incurred by selling goods in accordance with the received or receivable
price stipulated in the contract or agreement signed between the enterprise and the buyer unless the following
conditions are met simultaneously: ① the significant risks and rewards of ownership of the goods have been
transferred to the buyer by the enterprise; ② the enterprise retains neither continuous management right that
usually keeps relation with the ownership nor effective control over the sold goods; ③the relevant amount of
revenue can be measured in a reliable way; ④ relevant economic benefits may flow into the enterprise and ⑤
the relevant costs incurred or to be incurred can be measured in a reliable way.
Money collection for the contract or agreement use the mode of deferred, actually has the financing features. The
revenue of commodity sales is recognized by the fair value of the money receivable on contract or agreement.
2. Labor service providing
If an enterprise can, on the date of the balance sheet, reliably estimate the outcome of a transaction concerning the
labor services it provides, it shall recognize the revenue from providing services employing the
percentage-of-completion method. The enterprise can ascertain the schedule of completion
(percentage-of-completion) under the transaction concerning the providing of labor services based on calculation
of completed works.
If an enterprise cannot, on the date of the balance sheet, measure the result of a transaction concerning the
providing of labor service in a reliable way, it shall be conducted in accordance with the following circumstances,
respectively: ①if the cost of labor services incurred is expected to be compensated, the revenue from the
providing of labor services shall be recognized in accordance with the amount of the cost of labor services
incurred, and the cost of labor services shall be carried forward at the same amount; ②if the cost of labor services
incurred is not expected to compensate, the cost incurred should be included in the current profits and losses, and
no revenue from the providing of labor services may be recognized.
3. Transition of asset use right
When economic benefits relating to transition of asset use right is likely to inflow into the Company and the
relevant income can be measured reliably, the Company shall recognize such income from transition of asset use
right.
The Company’s specific income recognition method: it is recognized as income when the product has been sent
out and signed for receipt by the other party for domestic sales; it is recognized as income when the product has
been shipped and its customs procedures have been completed with the relevant declaration documents for export
sales. Income from house leases and property management is recognized according to the lease contract
agreement, receipt of relevant payments, or relevant collection proof. 【Respectively sell goods, render labor
services, transfer the right to use assets, etc., combine with the actual production and operation characteristics,
disclose the specific revenue recognition time and measurement methods, the similar businesses using different
business models and recognizing income at different time points should be disclosed separately. For the income
from rendering of service and construction recognized according to the percentage of completion method, the
basis and method for determining the progress of completion shall be disclosed.】
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24. Government subsidy
1.Category of government subsidy and accounting treatment
Governments subsidy of the Company refer to the monetary and non-monetary assets obtained from government
for free (excluding the capital invested by government as an owner). If the government grants are monetary assets,
it shall be measured according to the amount received or receivable. If the government grants are non-monetary
assets, it shall be measured at fair value; if the fair value cannot be obtained reliably, it shall be measured at the
nominal amount.
Government grants related to daily activities are included in other income in accordance with the economic
business. Government grants not related to daily activities are included in the non-operating income and
expenditure.
Government grants that the government documents clearly stipulate to be used for the purchase and establishment
or forming long-term assets in other way are recognized as government grants related to assets. For the
government grants that the government documents do not clearly specify the subsidy target and can form
long-term assets, the part corresponding to the asset value is recognized as the government grants related to the
assets, and the rest is recognized as the government grants related to the income. For the government grants which
are difficult to be distinguished, recognize the whole as the government grants related to the income. Government
grants related to assets are recognized as deferred income. The amount recognized as deferred income is included
in the current profit and loss in a reasonable and systematic manner within the useful life of the relevant asset.
Government grants other than government grants related to assets are recognized as government grants related to
income. If the government grants related to the income are used to compensate the related expenses or losses of
the enterprise in the future period, recognize them as deferred income and include them in the current profit and
loss during the period of recognizing the related expenses. The government grants used to compensate the relevant
expenses or losses incurred by the enterprise are directly included in the current profit and loss.
The Company obtained the policy preferential loan interest subsidy, and the finance allocated the interest subsidy
funds to the loan bank, and the loan bank provides loans to the Company at a preferential interest rate, take the
actual amount of the loan received as the entry value of the loan, and calculate the relevant borrowing costs
according to the loan principal the policy preferential interest rate. If the finance directly appropriates the interest
subsidy funds to the Company, the Company will offset the relevant borrowing costs with the corresponding
interest subsidy.
2. Time points to recognize the government grants
Government grants are recognized when they meet the conditions attached to government grants and can be
received. Government grants measured in accordance with the amount receivable are recognized when there is
conclusive evidence at the end of the period that it meets the relevant conditions stipulated in the financial support
policy and is expected to receive financial support funds. Other government grants other than government grants
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measured in accordance with the receivable amount are recognized when the grant is actually received.
25. Deferred income tax asset / deferred income tax liability
1. Where there is difference between the carrying amount of the assets or liabilities and its tax base, (as for an item
that has not been recognized as an asset or liability, if its tax base can be determined in light of the tax law, the tax
base shall recognized as the difference) the deferred income tax and deferred income tax liabilities shall be
determined according to the applicable tax rate in period of assets expected to recover or liability expected to pay
off.
2. The deferred income tax assets shall be recognized to the extent of the amount of the taxable income which it is
most likely to obtain and which can be deducted from the deductible temporary difference. On balance sheet date,
if there have concrete evidence of obtaining, in future period, enough taxable amounts to deduct the deductible
temporary difference, the un-confirmed deferred income tax assets in previous accounting period shall be
recognized. If there has no enough taxable amounts, obtained in future period, to deducted the deferred income tax
assets, book value of the deferred income tax assets shall be kept in decreased.
3. The taxable temporary differences related to the investments of subsidiary companies and associated enterprises
shall recognized as deferred income tax liability, unless the Company can control the time of the reverse of
temporary differences and the temporary differences are unlikely to be reversed in the expected future. As for the
deductible temporary difference related to the investment of the subsidiary companies and associated enterprises,
deferred income tax assets shall be recognized while the temporary differences are likely to be reversed in the
expected future and it is likely to acquire any amount of taxable income tax that may be used for making up the
deductible temporary differences.
26. Leasing
(1) Accounting treatment for operating lease
Operating lease payments are recognized on a straight-line basis over the term of the relevant lease, and are either
included in the cost of related asset or charged to profit or loss for the period.
(2) Accounting treatment for finance lease
Accounting treatment for finance lease: At the commencement of the lease term, the Group records the leased
asset at an amount equal to the lower of the fair value of the leased asset and the present value of the minimum
lease payments. The difference between the recorded amounts is accounted for as unrecognized finance charge,
using the effective interest method amortization during the lease term. Minimum lease payments deducting
unrecognized financing charges are listed as long-term payable.
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27. Changes in important accounting policies and estimates
(1) Changes in important accounting policies
√ Applicable □ Not applicable
Content and reason of changes in
Approval procedure Note
accounting policies
The “Notice on Revising and issuing the
Format of General Enterprise Financial
Statement for 2018” (CK[2018] No.15)
issued by Ministry of Finance on 15 June
2018, the format of financial statement
for enterprise who implemented the
accounting standards shall be prepared
for 2018 and later years in line with the
above mentioned Notice.
Contents and causes for Amount affected Amount re-state last
Item affected Item and amount listed last period
accounting policy changed (RMB/CNY) period (RMB/CNY)
1. Note receivable and Note receivable Note receivable: 64,778,266.65 yuan
account receivable merge and account 185,983,351.22 213,574,264.91 Account receivable: 148,795,998.26
listed receivable yuan
2. Interest receivable and Other account
dividend receivable listed receivable Interest receivable: 4,335,729.72
5,777,179.08 4,335,729.72
under Other account yuan
receivable
3. Disposal of fixed assets Fixed assets Fixed assets: 83,619,842.39 yuan
listed under Fixed assets 188,083,873.38 176,477,314.08 Disposal of fixed assets:
92,857,471.69 yuan
4. Engineering material listed Construction in Construction in process: 654,356.00
5,727,760.23 654,356.00
under construction in process process yuan
5. Note payable and account Note payable Note payable : 17,810,270.28 yuan
payable merge listed and account 88,617,663.09 101,815,141.01 Account payable: 84,004,870.73
payable yuan
6. Interest payable and Other account Interest payable: 164,895.80 yuan
26,778,863.92 20,092,172.75
dividend payable listed under payable Other account payable:
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Other account payable 19,927,276.95 yuan
Note: explain the item and amount that is significantly affected.
(2) Changes in important accounting estimates
□ Applicable √ Not applicable
Contents and reasons of
changes in accounting Approval procedure Time for application Notes
estimates
Note: explain the item and amount that is significantly affected.
VI. Taxes
1. Major tax and tax rate
Taxes Taxation basis Tax rate
VAT Domestic sales revenue 17%, 16%, 6%, 5%, 3%
Urban maintenance and construction tax Turnover tax payable 7%
Corporate income tax Taxable income 15%, 25%
Educational surtax Turnover tax payable 3%
Local educational surtax Turnover tax payable 2%, 1.5%
Property tax 70% of original value of the property 1.2%
Explain the different taxation entity of the enterprise income tax
Taxation entity Income tax rate
Shenzhen Zhongheng Huafa Co., Ltd. 25%
Wuhan Hengfa Technology Co., Ltd. 15%
2. Tax preferences
According to the “Measures for the Determination of High-tech Enterprises”, and through the enterprise
application, expert review, and public announcement and other procedures, the Company’s wholly-owned
subsidiary, Wuhan Hengfa Technology Co., Ltd., has been identified as a high-tech enterprise, and obtained the
“High-tech Enterprise Certificate” jointly issued by the Science and Technology Department of Hubei Province,
Hubei Provincial Finance Department, Hubei Provincial Office, SAT, and Local Taxation Bureau of Hubei
Province on November 28, 2017, the certificate number is GR201742001840, which is valid for 3 years. The
applicable corporate income tax rate of the subsidiary Wuhan Hengfa Technology Co., Ltd. for 2018 was 15%.
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VII. Notes to main items in consolidated financial statement
1. Monetary fund
RMB/CNY
Item Closing balance Opening balance
Cash on hand 236,354.29 170,053.77
Bank deposit 28,935,450.70 66,070,891.82
Other Monetary fund 4,936,525.28 2,571,550.38
Total 34,108,330.27 68,812,495.97
Other explanation
Other monetary funds are bank acceptance deposits.
2. Note receivable and account receivable
RMB/CNY
Item Closing balance Opening balance
Note receivable 69,185,516.71 64,778,266.65
Account receivable 116,797,834.51 148,795,998.26
Total 185,983,351.22 213,574,264.91
(1) Note receivable
1) Category of note receivable
RMB/CNY
Item Closing balance Opening balance
Bank acceptance bill 56,817,845.23 37,676,025.26
Commercial acceptance bill 12,367,671.48 27,102,241.39
Total 69,185,516.71 64,778,266.65
2)Notes receivable already pledged by the Company at the end of the period
RMB/CNY
Item Amount pledge at period-end
Bank acceptance bill 11,151,688.25
Total 11,151,688.25
3)Notes endorsement or discount and undue on balance sheet date
RMB/CNY
Item Amount derecognition at period-end Amount not derecognition at period-end
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Bank acceptance bill 46,053,555.41
Commercial acceptance bill 30,020,300.93
Total 76,073,856.34
(2) Account receivable
1)Category of account receivable
RMB/CNY
Closing balance Opening balance
Bad debt
Book balance Book balance Bad debt provision
Category provision Book Book
Amoun Proport Amoun Accrua value Amo Proport Accrual value
Amount
t ion t l ratio unt ion ratio
Account receivable
with single
7,556
significant amount 7,556,3 7,556,3 100.00 7,556,3
5.82% ,363. 4.67% 100.00%
and withdrawal 63.72 63.72 % 63.72
72
bad debt provision
separately
Account receivable
116,79 116,79 148,8
with bad debt 89.88 91.88 8,352.0 148,795,
8,645.7 811.28 0.00% 7,834.5 04,35 0.01%
provision accrual % % 8 998.26
9 1 0.34
by portfolio
Account receivable
with single minor
5,592
amount but 5,587,6 5,587,6 100.00 5,592,8
4.30% ,838. 3.45% 100.00%
withdrawal bad 43.49 43.49 % 38.19
19
debt provision
individually
129,94 116,79 161,9
100.00 13,144, 100.00 13,157, 148,795,
Total 2,653.0 7,834.5 53,55
% 818.49 % 553.99 998.26
0 1 2.25
Account receivable with major single amount and withdrawal bad debt provision single at period-end
√ Applicable □ Not applicable
RMB/CNY
Account receivable (by Closing balance
unit) Account receivable Bad debt provision Accrual ratio Accrual causes
Hong Kong Haowei
1,870,887.18 1,870,887.18 100.00% 无法收回
Industry Co. Ltd.
120
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
TCL ACE ELECTRIC
APPLIANCE
1,325,431.75 1,325,431.75 100.00% 无法收回
(HUIZHOU) CO.,
LTD.
Qingdao Haier Parts
1,225,326.15 1,225,326.15 100.00% 无法收回
Procurement Co., Ltd.
SKYWORTH
Multimedia 579,343.89 579,343.89 100.00% 无法收回
(Shenzhen) Co., Ltd.
Shenzhen Portman
Bowling Club Co., 2,555,374.75 2,555,374.75 100.00% 无法收回
Ltd.
Total 7,556,363.72 7,556,363.72 -- --
Account receivable with bad debt provision withdrawal by method of account age in portfolio
√ Applicable □ Not applicable
RMB/CNY
Closing balance
Account ages
Account receivable Bad debt provision Accrual ratio
Sub-item of within one year
116,793,835.05
Subtotal of within one year 116,793,835.05
1-2 years 2,527.77 126.39 5.00%
Over three years 2,282.97 684.89 30.00%
Explanation on portfolio basis:
Nil
Withdrawal proportion of bad debt provision based on balance proportion for account receivable in portfolio:
□ Applicable √ Not applicable
Withdrawing bad bed provision for account receivable by other methods in portfolio:
Accounts with single minor amount but with bad debts provision accrued individually at period-end
Debtor Book balance Bad debt provision Accrual ratio(%) Accrual causes
Shenzhen Huixin Video Technology 381,168.96 381,168.96 100.00 Uncollectible
Co., Ltd.
Shenzhen Wandelai Digital Technology 351,813.70 351,813.70 100.00 Uncollectible
Co., Ltd.
Shenzhen Dalong Electronic Co., Ltd. 344,700.00 344,700.00 100.00 Uncollectible
Shenzhen Keya Electronic Co., Ltd. 332,337.76 332,337.76 100.00 Uncollectible
Shenzhen Qunping Electronic Co., Ltd. 304,542.95 304,542.95 100.00 Uncollectible
China Galaxy Electronics (Hong Kong) 288,261.17 288,261.17 100.00 Uncollectible
121
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Co., Ltd.
Dongguan Weite Electronic Co., Ltd. 274,399.80 274,399.80 100.00 Uncollectible
Chuangjing 247,811.87 247,811.87 100.00 Uncollectible
Hong Kong New Century Electronics 207,409.40 207,409.40 100.00 Uncollectible
Co., Ltd.
Shenyang Beitai Electronic Co., Ltd. 203,304.02 203,304.02 100.00 Uncollectible
Beijing Xinfang Weiye Technology Co., 193,000.00 193,000.00 100.00 Uncollectible
Ltd.
TCL Electronics (Hong Kong) Co., Ltd. 145,087.14 145,087.14 100.00 Uncollectible
Huizhou TCL Xinte Electronics Co., 142,707.14 142,707.14 100.00 Uncollectible
Ltd.
SkyWorth – RGB Electronic Co., Ltd. 133,485.83 133,485.83 100.00 Uncollectible
Other 2,037,613.75 2,037,613.75 100.00 Uncollectible
Total 5,587,643.49 5,587,643.49
2)Bad debt provision accrual, switch-back or taken back in the period
Bad debt provision accrual was Yuan; the amount collected or switches back amounting to 12,735.50 Yuan.
Including major amount of bad debt provision that switch-back or taken back in the Period:
RMB/CNY
Company Amount switch back or taken back Collection way
Nil
3)Top five receivables collected by arrears party at ending balance
Company Closing balance Proportion of total Balance of bad debt
accounts receivable(%) provision
Hong Kong Yutian International 36,750,397.49 28.28
Investment Co., Ltd.
Qingdao Haidayuan Purchasing Service 36,154,096.22 27.82
Co., Ltd
ViewSonic Tech. (China) Co., Ltd 19,848,248.00 15.27
Xiamen Edmond Electronic Technology 11,403,961.34 8.78
Co., Ltd
Viewsonic International Corp 5,865,344.25 4.51
Total 110,022,047.30 84.67
3. Prepayments
(1) Prepayments listed by account age
RMB/CNY
122
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Closing balance Opening balance
Account ages
Amount Proportion Amount Proportion
Within one year 31,254,429.54 99.70% 937,895.64 99.42%
1-2 years 94,000.00 0.25% 3,732.52 0.40%
2-3 year 1,699.85 0.18%
Total 31,348,429.54 -- 943,328.01 --
Explanation on prepayments with over one year in age and reasons of un-settle:
Creditor's unit Debt unit Closing Account ages Unsettled reasons
balance
Wuhan Hengfa Technology Shenzhen Xuanyuan Soft 94,000.00 Within two Open contract
Co., Ltd. Technology Co., Ltd years
Total 94,000.00
(2) Top 5 prepayments collected by objects at ending balance
Company Closing balance Proportion of the total amount of
prepayments(%)
Hong Kong Yutian International 17,120,874.77 54.61
Investment Co., Ltd.
Wuhan Hengsheng Photo-electricity 8,294,072.28 26.46
Industry Co., Ltd.
Haier Digital Tech. (Qingdao) Co., ltd. 1,861,392.76 5.94
Hefei Xinsheng Photoelectric Tech. Co., 938,902.90 3.00
ltd.
Guangzhou Shiyuan Electronic 641,603.55 2.05
Technology Co. Ltd.
Total 28,856,846.26 92.05
Other explanation
4. Other account receivable
RMB/CNY
Item Closing balance Opening balance
Other account receivable 5,777,179.08 4,335,729.72
Total 5,777,179.08 4,335,729.72
(1) Other account receivable
1)Category of other account receivable
123
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
RMB/CNY
Closing balance Opening balance
Bad debt
Book balance Book balance Bad debt provision
Category provision Book Book
Amoun Proport Amoun Accrua value Amo Proport Accrual value
Amount
t ion t l ratio unt ion ratio
Other account
receivable with
single significant 6,722
7,032,0 33.43 7,032,0 100.00 34.28 6,722,6
amount and ,602. 100.00%
50.71 % 50.71 % % 02.71
withdrawal bad 71
debt provision
separately
Other account
receivable with bad 4,528
5,918,4 28.13 141,28 5,777,1 23.09 193,093 4,335,72
debt provision 2.72% ,823. 5.07%
60.63 % 1.55 79.08 % .72 9.72
accrual by 44
portfolio
Other account
receivable with
single minor 8,359
8,087,5 38.44 8,087,5 100.00 42.63 8,359,6
amount but ,643. 100.00%
37.78 % 37.78 % % 43.58
withdrawal bad 58
debt provision
individually
19,61
21,038, 100.00 15,260, 5,777,1 100.00 15,275, 4,335,72
Total 1,069
049.12 % 870.04 79.08 % 340.01 9.72
.73
Other account receivable with major single amount and withdrawal bad debt provision single at period-end:
√ Applicable □ Not applicable
RMB/CNY
Closing balance
Other account
Other account
receivable (by unit) Bad debt provision Accrual ratio Accrual causes
receivable
Portman 4,021,734.22 4,021,734.22 100.00
Jifang Investment 1,380,608.00 1,380,608.00 100.00
Traffic accident
555,785.81 555,785.81 100.00
compensation
Zhao Baomin 553,901.68 553,901.68 100.00
124
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Hebei Botou Court 520,021.00 520,021.00 100.00
Total 7,032,050.71 7,032,050.71 -- --
Other account receivable with bad debt provision withdrawal by age analysis in portfolio:
√ Applicable □ Not applicable
RMB/CNY
Closing balance
Account ages
Other account receivable Bad debt provision Accrual ratio
Sub-item of within one year
Subtotal of within one year 3,967,784.65
1-2 years 157,190.94 7,859.55 5.00%
2-3 year 943,020.00 94,302.00 10.00%
Over three years 130,400.00 39,120.00 30.00%
Total 5,198,395.59 141,281.55
Explanation on portfolio basis:
Nil
Withdrawing bad bed provision based on balance proportion for other account receivable in portfolio
□ Applicable √ Not applicable
Withdrawing bad bed provision based on other methods for other account receivable in portfolio
√ Applicable □ Not applicable
Other account receivable with single minor amount but withdrawal single item bad debt provision at period-end
Debtor Book balance Bad debt amount Accrual ratio(%) Accrual causes
Electricity fee in Gongming 489,214.70 489,214.70 100.00 Uncollectible
canteen
Jiantao (Fogang) Laminates Co., 465,528.10 465,528.10 100.00 Uncollectible
Ltd.
4/F hotle Daiqiangbo 354,569.00 354,569.00 100.00 Uncollectible
Lu Wei 290,000.00 290,000.00 100.00 Uncollectible
Chuangjing 192,794.00 192,794.00 100.00 Uncollectible
Shenzhen Mingli Co., Ltd. 170,394.84 170,394.84 100.00 Uncollectible
Other units 6,125,037.14 6,125,037.14 100.00 Uncollectible
Total 8,087,537.78 8,087,537.78 —— ——
2)Bad debt provision accrual, switch-back or taken back in the period
Bad debt provision accrual was 0.00 Yuan; the amount collected or switches back amounting to 14,469.97 Yuan.
Including major amount of bad debt provision that switch-back or taken back in the Period:
RMB/CNY
Company Amount switch-back or taken back Collection way
Nil
125
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
3)Nature of other account receivable
RMB/CNY
Nature Ending book balance Opening book balance
Margin and deposit 1,793,485.04 1,793,485.04
Borrow money 1,973,013.76 2,190,666.85
Intercourse funds 6,647,012.36 9,081,233.88
Rent receivable 6,626,917.46 5,857,777.46
Other 3,997,620.50 687,906.50
Total 21,038,049.12 19,611,069.73
4)Top 5 other receivables collected by arrears party at ending balance
RMB/CNY
Proportion in total
Closing balance of
Company Nature Closing balance Account ages other receivables
bad debt provision
at year-end
Rental fee
Portman 4,021,734.22 Over three years 19.12% 4,021,734.22
receivable
Shenzhen Jifang
Rental fee
Investment Co., 1,380,608.00 Over three years 6.56% 1,380,608.00
receivable
Ltd
Fujian Jielian
Electronic Co., Non-related party 800,000.00 1-2 years 3.80% 80,000.00
Ltd.
Wuwu Branch of
Shenzhen
Other 641,266.64 2-3 years 3.05%
Dachong
Industrial Co., Ltd.
Traffic accident
Other 555,785.81 Over three years 2.64% 555,785.81
compensation
Total -- 7,399,394.67 -- 35.17% 6,038,128.03
5. Inventory
Whether the company needs to comply with the disclosure requirements of the real estate industry
No
(1)Category of inventory
RMB/CNY
Item Closing balance Opening balance
126
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Provision for Provision for
Book balance Book value Book balance Book value
price fall-down price fall-down
Raw materials 39,497,353.01 1,695,940.61 37,801,412.40 29,640,518.78 937,858.86 28,702,659.92
Goods in
119,575.09 119,575.09
process
Inventory
24,483,140.41 1,543,123.71 22,940,016.70 29,291,605.18 1,660,379.81 27,631,225.37
goods
Homemade
semi-finished 2,175,657.06 124,384.26 2,051,272.80 3,433,461.82 1,444.25 3,432,017.57
products
Low priced and
easily worn 216,771.16 35,563.68 181,207.48 587,236.21 85,692.51 501,543.70
articles
Total 66,372,921.64 3,399,012.26 62,973,909.38 63,072,397.08 2,685,375.43 60,387,021.65
Whether the Company needs to comply with the disclosure requirement of Industry Information Disclosure Guidelines of Shenzhen
Stock Exchange No.4 -Listed Companies Engaged in Seed Planting Business
No
Whether the Company needs to comply with the disclosure requirement of Industry Information Disclosure Guidelines of Shenzhen
Stock Exchange No.11 -Listed Companies Engaged in Jewelry Related Business
No
(2) Provision for price fall-down
RMB/CNY
Current increased Current decreased
Opening Closing
Item Switch back or
balance Accrual Other Other balance
Written-off
Raw materials 937,858.86 1,164,244.40 406,162.65 1,695,940.61
Inventory
1,660,379.81 912,427.42 1,029,683.52 1,543,123.71
goods
Homemade
semi-finished 1,444.25 124,384.26 1,444.25 124,384.26
products
Low priced and
easily worn 85,692.51 4,290.88 54,419.71 35,563.68
articles
Total 2,685,375.43 2,205,346.96 1,491,710.13 3,399,012.26
Inventory depreciation combining with sluggishness and inventory age was accrued based on the net realizable value, some raw
material prices went up and down, and some low-value consumables were recycled.
127
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
(3)Explanation on capitalization of borrowing costs in ending balance of inventory
Nil
(4) Assets completed without settle resulted by construction contract at period-end
RMB/CNY
Item Amount
Other explanation
Nil
6. Other current assets
RMB/CNY
Item Closing balance Opening balance
Value-added tax to be deducted 17,055.88 9,996.21
Advance payment of income tax 42,314.30 42,314.30
Total 59,370.18 52,310.51
Other explanation
Nil
7. Investment real estate
(1) Investment real estate measured at cost
√ Applicable □ Not applicable
RMB/CNY
Construction in
Item House and building Land use right Total
process
I. Original book value
1.Opening
133,661,686.94 133,661,686.94
balance
2.Current
increased
(1) outsourcing
(2)
inventory\fixed
assets\construction in
process transfer-in
(3) increased by
128
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
combination
3.Current
decreased
(1) Disposal
(2) other
transfer-out
4.Closing balance 133,661,686.94 133,661,686.94
II. Accumulated
depreciation and
accumulated
amortization
1.Opening
81,250,728.32 81,250,728.32
balance
2.Current
1,729,635.76 1,729,635.76
increased
(1) Accrual or
1,208,595.52 1,208,595.52
amortization
3.Current
decreased
(1) Disposal
(2) other
transfer-out
4.Closing balance 82,980,364.08 82,980,364.08
III. Depreciation
reserves
1.Opening
balance
2.Current
increased
(1) Accrual
3. Current
decreased
129
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
(1) Disposal
(2) other
transfer-out
4.Closing balance
IV. Book value
1.Ending Book
50,681,322.86 50,681,322.86
value
2.Opening Book
52,410,958.62 52,410,958.62
value
8. Fixed assets
RMB/CNY
Item Closing balance Opening balance
Fixed assets 95,226,401.69 83,619,842.39
Disposal of fixed assets 92,857,471.69 92,857,471.69
Total 188,083,873.38 176,477,314.08
(1) Fixed assets
RMB/CNY
House and Machinery Means of Office Instrument Tool Mold
Item Total
building equipment transport equipment equipment equipment equipment
I. Original
book
value：
65,608,798 80,158,724 6,431,855. 6,981,463. 3,051,926. 5,467,996. 14,876,405 182,577,17
1.Opening
.85 .83 00 85 44 48 .89 1.34
balance
15,157,423 2,242,517. 5,482,356. 23,832,291
2.Current 600,321.20 121,633.02 228,039.24
.38 90 32 .06
increased
(1) 15,157,423 2,242,517. 5,482,356. 23,832,291
600,321.20 121,633.02 228,039.24
Purchasing .38 90 32 .06
Constructio
n in
process
130
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
transfer-in
(3)
increased
by
combinatio
n
5,118,187. 1,071,656. 1,157,814. 4,127,637. 12,395,606
3.Current 778,053.14 142,258.03
78 50 22 20 .87
decreased
(1)
5,118,187. 1,071,656. 1,157,814. 4,127,637. 12,395,606
Disposal or 778,053.14 142,258.03
78 50 22 20 .87
scrapping
65,608,798 90,197,960 5,960,519. 6,325,043. 3,137,707. 6,552,700. 16,231,125 194,013,85
4.Closing
.85 .43 70 73 65 16 .01 5.53
balance
II.
Accumulati
ve
depreciatio
n
14,843,969 58,679,845 3,568,166. 5,484,551. 2,496,903. 3,108,608. 10,775,284 98,957,328
1.Opening
.68 .60 13 40 38 37 .39 .95
balance
1,953,602. 3,646,758. 2,454,365. 9,910,809.
2.Current 612,130.93 295,217.03 110,384.39 838,350.48
78 48 31 40
increased
(1) 1,953,602. 3,646,758. 2,454,365. 9,910,809.
612,130.93 295,217.03 110,384.39 838,350.48
Accrual 78 48 31 40
3,662,378. 1,608,326. 3,693,677. 10,080,684
3.Current 1,491.75 128,032.23 986,778.01
94 51 07 .51
decreased
(1)
3,662,378. 1,608,326. 3,693,677. 10,080,684
Disposal or 1,491.75 128,032.23 986,778.01
94 51 07 .51
scrapping
16,797,572 58,664,225 4,178,805. 4,171,441. 2,479,255. 2,960,180. 9,535,972. 98,787,453
4.Closing .46 .14 31 92 54 84 63 .84
131
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
balance
III.
Depreciatio
n reserves
1.Opening
balance
2.Current
increased
(1)
Accrual
3.Current
decreased
(1)
Disposal or
scrapping
4.Closing
balance
IV. Book
value
1.Ending 48,811,226 31,533,735 1,781,714. 2,153,601. 3,592,519. 6,695,152. 95,226,401
658,452.11
Book value .39 .29 39 81 32 38 .69
50,764,829 21,478,879 2,863,688. 1,496,912. 2,359,388. 4,101,121. 83,619,842
2.Opening 555,023.06
.17 .23 87 45 11 50 .39
Book value
(2) Fixed assets leasing-out by operational lease
RMB/CNY
Item Ending Book value
House and building 852,905.29
(3) Disposal of fixed assets
RMB/CNY
132
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Item Closing balance Opening balance
Gongming Huafa Electric Town 92,857,471.69 92,857,471.69
Total 92,857,471.69 92,857,471.69
Other explanation
Original value of the fixed assets that have been fully depreciated at period-end and continued to be used amounted as 44,010,028.21
yuan.
9. Construction in process
RMB/CNY
Item Closing balance Opening balance
Construction in
5,727,760.23 654,356.00
process
Total 5,727,760.23 654,356.00
(1) Construction in process
RMB/CNY
Closing balance Opening balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Transformation
project of 654,356.00 654,356.00
Huafa Building
Expansion for
5,727,760.23 5,727,760.23
3# Plant
Total 5,727,760.23 5,727,760.23 654,356.00 654,356.00
(2) change of major construction in process in the period
RMB/CNY
includi
Accum
Propor ng: Interes
Fixed ulated
Other tion of interes t
Openi Curren assets Closin amoun
decrea project t capital
ng t transfe g Progre t of Sourceof
Item Budget sed in invest capital ization
balanc increas r-in in balanc ss interes funds
the ment ized rate of
e ed the e t
Period in amoun the
Period capital
budget t of the year
ization
year
133
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Expan
sion 6,000, 5,727, 5,727, 95.46
95.46 Other
for 3# 000.00 760.23 760.23 %
Plant
6,000, 5,727, 5,727,
Total -- -- --
000.00 760.23 760.23
10. Intangible assets
(1) Intangible assets
RMB/CNY
Non-patented Computer
Item Land use right Patent right Total
technology software
I. Original book
value
1.Opening
55,089,774.36 661,878.97 55,751,653.33
balance
2.Current
increased
(1)
Purchasing
(2) internal
R&D
(3)
increased by
combination
3.Current
decreased
(1)
Disposal
4.Closing
55,089,774.36 661,878.97 55,751,653.33
balance
II. Accumulated
amortization
1.Opening
11,992,276.93 452,060.03 12,444,336.96
balance
134
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
2.Current
1,441,740.71 49,885.92 1,491,626.63
increased
(1) Accrual 1,441,740.71 49,885.92 1,491,626.63
3.Current
decreased
(1)
Disposal
4.Closing
12,137,222.65 452,060.03 12,589,282.68
balance
III. Depreciation
reserves
1.Opening
balance
2.Current
increased
(1) Accrual
3.Current
decreased
(1) Disposal
4.Closing
balance
IV. Book value
1.Ending
41,655,756.72 159,933.02 41,815,689.74
Book value
2.Opening
43,097,497.43 209,818.94 43,307,316.37
Book value
The proportion of intangible assets form by internal R&D in total book value of intangible assets at period-end
11. Long-term deferred expenditure
RMB/CNY
Amortized in
Item Opening balance Current increased Other decreased Closing balance
Period
Golf membership 141,666.55 141,666.55
135
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
fee
Cloud service cost
697,007.55 154,890.56 542,116.99
amortization
Total 141,666.55 697,007.55 296,557.11 542,116.99
Other explanation
Nil
12. Deferred income tax asset /deferred income tax liability
(1) Deferred income tax assets un-offset
RMB/CNY
Closing balance Opening balance
Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax
differences asset differences asset
Provision for
6,813,753.84 28,641,162.96 6,715,066.24 27,949,536.92
impairment of assets
Accrual liability 16,102.75 64,411.00 16,102.75 64,411.00
Total 6,829,856.59 28,705,573.96 6,731,168.99 28,013,947.92
(2) Amount of deferred income tax asset and deferred income tax liability after trade-off
RMB/CNY
Ending balance of Trade-off between the Opening balance of
Trade-off between the
deferred income tax deferred income tax deferred income tax
Item deferred income tax
assets or liabilities assets and liabilities at assets or liabilities
assets and liabilities
after off-set period-begin after off-set
Deferred income tax
6,829,856.59 6,731,168.99
asset
(3) Deferred income tax asset without confirmed
RMB/CNY
Item Closing balance Opening balance
Deductible temporary difference 3,163,837.81 3,172,018.51
Deductible loss 1,427,605.96 525,348.33
Total 4,591,443.77 3,697,366.84
136
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
(4) Deductible losses of deferred income tax asset without confirmed will expired in later year
RMB/CNY
Year Closing amount Opening amount Note
2019 51,859.78 51,859.78
2020 0.00 0.00
2021 182,573.55 182,573.55
2022 848,078.83 290,915.00
2023 345,093.80
Total 1,427,605.96 525,348.33 --
Other explanation
Nil
13. Other non-current assets
RMB/CNY
Item Closing balance Opening balance
Advance payment for works 80,000.00
Advance payment for equipment 357,810.00 1,934,800.00
Advance payment for intangible assets 2,721,154.00
Total 3,158,964.00 1,934,800.00
Other explanation
Nil
14. Short-term loans
(1) Short-term loans
RMB/CNY
Item Closing balance Opening balance
Loan in pledge 13,500,000.00 8,500,000.00
Mortgage borrowing 148,068,657.88 138,120,264.81
Guaranteed loan 20,000,000.00
Total 161,568,657.88 166,620,264.81
Explanation on category of Short-term loans
Nil
137
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
15. Note payable and accounts payable
RMB/CNY
Item Closing balance Opening balance
Note payable 27,642,356.66 17,810,270.28
Accounts payable 60,975,306.43 84,004,870.73
Total 88,617,663.09 101,815,141.01
(1) Note payable
RMB/CNY
Category Closing balance Opening balance
Commercial acceptance bill 10,000,000.00
Bank acceptance bill 17,642,356.66 17,810,270.28
Total 27,642,356.66 17,810,270.28
Totally 0 Yuan due note payable are paid at period-end
(2) Accounts payable
RMB/CNY
Item Closing balance Opening balance
Within one year (one year included) 48,686,573.85 71,817,382.90
Over 1 year 12,288,732.58 12,187,487.83
Total 60,975,306.43 84,004,870.73
(3) Major account payable over one year
RMB/CNY
Item Closing balance 未偿还或结转的原因
Shenzhen Yuehai Global Logistics Co.,
2,858,885.97 Unsettled
Ltd.
LG 1,906,267.50 Unsettled
Dongjin Electronics (Nanjing) Plasma
617,963.45 Unsettled
Co., Ltd.
Total 5,383,116.92 --
Other explanation
Nil
138
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
16. Account received in advance
(1) Account received in advance
RMB/CNY
Item Closing balance Opening balance
Within one year (one year included) 139,961.60 234,017.18
Over 1 year 19,567.00 44,111.00
Total 159,528.60 278,128.18
17. Employee salary payable
(1) Employee salary payable
RMB/CNY
Increase during the Decrease during this
Item Opening balance Closing balance
period period
I. Short-term
5,088,451.75 57,766,776.79 58,155,020.18 4,700,208.36
compensation
II. Post-employment
welfare- defined -5,093.82 4,541,995.90 4,536,902.08
contribution plans
III. Dismiss welfare 47,398.10 47,398.10
Total 5,083,357.93 62,356,170.79 62,739,320.36 4,700,208.36
(2) Short-term compensation
RMB/CNY
Increase during the Decrease during this
Item Opening balance Closing balance
period period
1. Wages, bonuses,
4,039,310.19 50,703,365.41 51,022,649.80 3,720,025.80
allowancesand subsidies
2. Welfare for workers
27,109.00 4,472,116.36 4,499,225.36
and staff
3. Social insurance 23,041.98 2,148,346.09 2,148,346.09 23,041.98
Including:
23,041.98 1,797,746.68 1,797,746.68 23,041.98
Medical insurance
Work
191,986.98 191,986.98
injury insurance
139
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Maternity
158,612.43 158,612.43
insurance
4. Housing
24,310.00 359,328.16 359,328.16 24,310.00
accumulation fund
5. Labor union
expenditure and
974,680.58 83,620.77 125,470.77 932,830.58
personnel education
expense
Total 5,088,451.75 57,766,776.79 58,155,020.18 4,700,208.36
(3) Defined contribution plans
RMB/CNY
Increase during the Decrease during this
Item Opening balance Closing balance
period period
1. Basic endowment
-5,093.82 4,390,138.90 4,385,045.08
insurance
2. Unemployment
151,857.00 151,857.00
insurance
Total -5,093.82 4,541,995.90 4,536,902.08
Other explanation
Nil
18. Tax payable
RMB/CNY
Item Closing balance Opening balance
VAT 3,432,174.00 5,473,037.12
Corporate income tax 5,683,136.41 5,228,514.39
Individual income tax 45,962.89 20,213.76
Urban maintenance and construction tax 547,965.38 1,447,509.59
Property tax 290,438.28 743,004.72
Land use tax 75,345.69 324,212.74
Educational surtax 235,610.56 621,129.51
Local educational surtax 126,852.76 322,572.35
Dike fee 1,665.00 1,665.00
Stamp tax 24,738.90 34,988.50
Disposal fund of waste electrical 768,930.00 919,430.00
140
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
products
Total 11,232,819.87 15,136,277.68
Other explanation
Nil
19. Other account payable
RMB/CNY
Item Closing balance Opening balance
Interest payable 439,558.70 164,895.80
Other account payable 26,339,305.22 19,927,276.95
Total 26,778,863.92 20,092,172.75
(1) Interest payable
RMB/CNY
Item Closing balance Opening balance
Interest of short-term loans payable 439,558.70 164,895.80
Total 439,558.70 164,895.80
Significant overdue and unpaid interest:
RMB/CNY
Loan unit Overdue amount Reason for overdue
Other explanation
Nil
(2) Other account payable
1)Other account payable by nature
RMB/CNY
Item Closing balance Opening balance
Margin and deposit 10,914,478.12 6,280,204.22
Lease management fee 2,612,566.67 2,307,901.27
Intercourse funds 7,531,055.87 6,534,652.44
After sale and repairmen 1,696,994.97 2,384,774.18
Other 3,584,209.59 2,419,744.84
Total 26,339,305.22 19,927,276.95
2)Significant other payable with over one year age
RMB/CNY
141
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Item Closing balance Reasons of un-paid or carry-over
Shenzhen SED Property Development
1,244,058.55 Unsettled
Co., Ltd.
Shenzhen Huayongxing Environmental
1,000,000.00 Deposit
Protection Technology Co., Ltd.
Linghang Technology (Shenzhen) Co.,
656,345.28 Unsettled
Ltd
Shenzhen Tongxing Electronics Co., Ltd. 578,259.83 Unsettled
Shenzhen Yongdasheng Investment
558,970.00 Deposit
Development Co., Ltd.
Total 4,037,633.66 --
Other explanation
Nil
20. Accrued liabilities
RMB/CNY
Item Closing balance Opening balance Causes
Pending action 64,411.00 64,411.00 Business and labor disputes
Total 64,411.00 64,411.00 --
Other explanations, including important assumptions and estimation about important estimated liabilities:
According to the Enforcement Notice ( (2008) SFFZZ No.522-529) of Shenzhen Intermediate People's Court, Shenzhen Labor
Dispute Arbitration Commission issued SLZC [2007] No. 1069-1077, No. 1079, No. 1081, and No. 1085-1087 arbitration awards for
the labor dispute case of Cai Yaoqiang and other thirteen people, which has taken legal effect. According to the Basic Information
Credit Report of Enterprises, the Company has total unexecuted labor dispute subject of 64,411.00 yuan, and the Company
recognizes it as the estimated liability.
21.Share capital
In RMB
Changes in the Period (+,-)
Shares
Opening Closing
Issuing new transfer from
balance Bonus shares Other Subtotal balance
shares public
reserves
283,161,227. 283,161,227.
Total shares
00 00
142
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Other explanation
Ended as 31 December 2018, the shares of the Company held by controlling shareholder has 116,100,000 shares in status of pledge,
taking 41% of the total share capital; mortgagee is China Merchants Securities Assets Management Co., Ltd. Shares in judicial freeze
amounted as 116,489,894 shares. The notice on progress of the shares pledged or frozen held by controlling shareholder are released
on 11 Jan. 2019
22. Capital surplus
RMB/CNY
Increase during the Decrease during this
Item Opening balance Closing balance
period period
Capital premium
96,501,903.02 96,501,903.02
(equity premium)
Other capital surplus 50,085,368.48 50,085,368.48
Total 146,587,271.50 146,587,271.50
Other explanation, including changes and reasons of changes:
Nil
23. Surplus reserves
RMB/CNY
Increase during the Decrease during this
Item Opening balance Closing balance
period period
Statutory surplus
21,322,617.25 21,322,617.25
reserves
Discretionary surplus
56,068,976.00 56,068,976.00
reserve
Total 77,391,593.25 77,391,593.25
Other explanation, including changes and reasons for changes:
Nil
24. Retained profit
RMB/CNY
Item Current period Last period
Retained profit at the end of the previous period
-186,467,113.73 -187,441,523.12
before adjustment
Retained profit at period-begin after adjustment -186,467,113.73 -187,441,523.12
Add: net profit attributable to owners of the
3,295,022.73 974,409.39
parent company
Retained profit at period-end -183,172,091.01 -186,467,113.73
143
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Details about adjusting the retained profits at the beginning of the period:
1) The retroactive adjustments to Accounting Standards for Business Enterprises and its relevant new regulations affect the retained
profits at the beginning of the period amounting to 0 Yuan.
2) The changes in accounting policies affect the retained profits at the beginning of the period amounting to 0 Yuan.
3) The major accounting error correction affects the retained profits at the beginning of the period amounting to 0 Yuan
4) Merge scope changes caused by the same control affect the retained profits at the beginning of the period amounting to 0 Yuan.
5) Other adjustments affect the retained profits at the beginning of the period amounting to 0 Yuan
25. Operating income and cost
RMB/CNY
Current Period Last Period
Item
Income Cost Income Cost
Main business 582,037,124.29 545,577,228.99 811,691,458.39 767,897,597.88
Other business 55,009,582.74 21,114,247.50 46,348,674.35 10,009,013.24
Total 637,046,707.03 566,691,476.49 858,040,132.74 777,906,611.12
26. Tax and surcharges
RMB/CNY
Item Current Period Last Period
Urban maintenance and construction tax 920,169.24 1,427,781.18
Educational surtax 394,358.26 611,819.05
Property tax 1,331,816.18 2,699,817.08
Land use tax 710,368.64 864,650.63
Vehicle use tax 6,540.00 9,075.62
Stamp tax 407,261.30 515,320.90
Local education development fee 205,470.79 319,456.43
Total 3,975,984.41 6,447,920.89
Other explanation
Nil
27. Sales expense
RMB/CNY
Item Current Period Last Period
Employees remuneration 4,042,578.84 4,984,220.26
Freight 4,452,902.42 4,707,497.34
144
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Commodity inspection fee 675,532.35 1,016,453.60
Customs fee 202,996.81 71,162.46
Commodity loss 755,506.56 1,270,308.03
After-sales service fee 3,046,552.35 3,184,997.76
Business entertainment expenses 338,626.00 183,187.97
Other 585,551.84 498,666.45
Total 14,100,247.17 15,916,493.87
Other explanation
Nil
28. Administrative expense
RMB/CNY
Item Current Period Last Period
Salary 9,019,534.64 9,181,074.76
Depreciation charge 1,682,743.00 2,005,410.35
Social insurance premium 2,656,825.97 3,063,807.83
Business entertainment expenses 3,031,992.90 2,164,825.72
Employee benefits 1,452,996.99 2,282,050.50
Travel expenses 1,472,496.29 3,182,447.37
Amortization of intangible assets 1,491,626.63 1,472,727.40
Traffic expenses 1,319,577.46 1,234,314.61
Consulting fee 1,368,885.21 4,178,432.28
Security 1,911,021.67 1,909,696.23
Repairs 3,126,804.08 2,434,021.55
Audit fee 778,988.81 967,918.64
Office expenses 1,364,212.02 1,472,390.85
Communication fee 317,611.81 294,064.24
Amortization of low cost and short lived
798,387.40 391,757.33
articles
Securities information disclosure fee 392,164.56 646,641.60
Litigation fee 28,055.00 487,564.11
Lease fee 4,711,758.56 4,416,416.15
Staff education and labor union
83,620.77 113,009.17
expenditure
Water and electricity fee 622,054.17 476,436.91
145
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Other expenses 883,847.21 408,103.93
Total 38,515,205.15 42,783,111.53
Other explanation
Nil
29. R& D expenses
RMB/CNY
Item Current Period Last Period
Other explanation
30. Financial expense
RMB/CNY
Item Current Period Last Period
Interest costs 12,785,854.43 10,476,762.09
Less: interest income 656,538.09 1,309,824.81
Exchange loss 4,895,989.78 4,516,307.95
Less: exchange gains 6,915,754.78 5,205,454.35
Handing expense 206,052.11 498,775.07
Other expense 1,160.00 2,520.00
Total 10,316,763.45 8,979,085.95
Other explanation
Nil
31. Losses on assets impairment
RMB/CNY
Item Current Period Last Period
I. Bad debt losses -13,140.19 807,725.34
II. Inventory falling price loss 713,636.83 614,061.37
Total 700,496.64 1,421,786.71
Other explanation
Nil
32. Other income
RMB/CNY
146
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Sources Current Period Last Period
Stabilization subsidy 139,020.00 161,420.00
Subsidy for R&D input 785,000.00
33. Gains on investment
RMB/CNY
Item Current Period Last Period
Investment income generated by financial
326,439.49 372,245.91
products
Total 326,439.49 372,245.91
Other explanation
34. Asset disposal income
RMB/CNY
Source of asset disposal income Current Period Last Period
Disposal gains arising from the disposal
of not held for sale fixed assets \ 49,159.75 199,069.56
intangible assets
35. Non-operating income
RMB/CNY
Amount included in current
Item Current Period Last Period
non-recurring profits or losses
Receive donations 51,500.00
Government subsidy 2,871,800.00 1,013,769.68 2,871,800.00
Accrual liability reversal 1,527,600.81
Unable to pay 139,368.16
Penalty revenue 143,073.09
Fine income 3,314.07 96,644.33 3,314.07
Other 11,696.99 11,696.99
Total 2,886,811.06 2,971,956.07
Government subsidy reckoned into current gains/losses:
RMB/CNY
Issuing Offering Subsidy The special Amount in Amount in Assets-rela
Item Nature
subject causes impact subsidy the Period last period ted/income
147
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
current (Y/N) -related
gains/losse
s (Y/N)
Subsidy
obtained
for
conforms
Caidian with the
Export
Bureau of local Income-rel
subsidy Award No Y 50,000.00
Finance, support ated
bonus
Wuhan policy for
investment
incentive to
encourage
investment
Subsidy
obtained
Award 金 for
Award for conforms
highlightin Caidian with the
g private Bureau of local Income-rel
Award No Y 200,000.00
enterprise Finance, support ated
for 2016 in Wuhan policy for
Caidian investment
District incentive to
encourage
investment
Subsidy
Developme obtained
nt of for
processing conforms
trade and Caidian with the
promoting Bureau of local Income-rel
Award No Y 270,000.00
funds in Finance, support ated
Central and Wuhan policy for
Western investment
China for incentive to
2016 encourage
investment
Award for Caidian Subsidy
excellent Bureau of obtained Income-rel
Award No Y 200,000.00
enterprise Finance, for ated
for 2016 Wuhan conforms
148
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
with the
local
support
policy for
investment
incentive to
encourage
investment
Subsidy for
Enterprise
research
developme
and
nt fund
Caidian developme
(manufactu
Bureau of nt, Income-rel
re of Subsidy No Y 293,769.68
Finance, technical ated
household
Wuhan reforming
appliances
and
component
reconstruct
s)
ion
Subsidy
obtained
Wuhan
for
Science
conforms
and
with the
Subsidy for Technolog
local Income-rel
cultivating y Bureau Award No Y 50,000.00
support ated
enterprise (Wuhan
policy for
Intellectual
investment
Property
incentive to
Office)
encourage
investment
Subsidy
obtained
for
2018 conforms
municipal Ministry of with the
foreign Finance local Income-rel
Award No Y 271,800.00
economic of support ated
and trade Wuhan policy for
funds investment
incentive to
encourage
investment
Awards for Economic Award Subsidy No Y 1,900,000. Income-rel
149
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
enterprise Developme obtained 00 ated
developme nt Zone for
nt Manageme conforms
nt with the
Committee local
of Caidian support
District, policy for
Wuhan investment
incentive to
encourage
investment
Subsidy
Bureau of obtained
Science, for
Subsidy for Technolog conforms
recognition y and with the
of Economic local Income-rel
Subsidy No Y 50,000.00
high-tech Informatio support ated
enterprise n of policy for
for 2018 Caidian investment
District, incentive to
Wuhan encourage
investment
Subsidy
obtained
for
conforms
Guiding
Caidian with the
funds for
Bureau of local Income-rel
business Award No Y 150,000.00
Finance, support ated
developme
Wuhan policy for
nt
investment
incentive to
encourage
investment
Bureau of Subsidy
Subsidy for Science, obtained
science & Technolog for
technology y and conforms Income-rel
Subsidy No Y 300,000.00
innovation Economic with the ated
platform in Informatio local
2017 n of support
Caidian policy for
150
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
District, investment
Wuhan incentive to
encourage
investment
Central
special
Subsidy
fund for
obtained
foreign
for
trade and
conforms
economic
with the
cooperatio Ministry of
local Income-rel
n Finance of Award No Y 150,000.00
support ated
(promoting Wuhan
policy for
developme
investment
nt of
incentive to
processing
encourage
trade in the
investment
Midwest)
in 2017
Other explanation
Nil
36. Non-operating expenditure
RMB/CNY
Amount included in current
Item Current Period Last Period
non-recurring profits or losses
Penalty expenditure 181,801.76 2,985.68 181,801.76
Loss on assignment of claims 2,158,200.00 5,755,200.00 2,158,200.00
Other expenses 1,005.00 545.88 1,005.00
Total 2,341,006.76 5,758,731.56 2,341,006.76
Other explanation
Nil
37. Income tax expenses
(1) Statement of income tax expense
RMB/CNY
Item Current Period Last Period
Current income tax expense 1,395,622.14 1,000,988.22
151
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Deferred income tax expense -98,687.60 555,685.04
Total 1,296,934.54 1,556,673.26
(2) Adjustment on accounting profit and income tax expenses
RMB/CNY
Item Current Period
Total profit 4,591,957.26
Income tax based on statutory/applicable rate 1,147,989.32
Impact by different tax rate applied by subsidies -590,455.60
Cost, expenses and loss which are not deductible 739,400.82
Income tax expense 1,296,934.54
Other explanation
Nil
38. Annotation of cash flow statement
(1) Cash received with other operating activities concerned
RMB/CNY
Item Current Period Last Period
Unit intercourse account 111,961,826.54 5,469,555.18
Collection management fee and utilities
3,382,270.33 430,720.45
etc.
Repayment from employees 63,050.23 3,315,558.82
Margin, deposit 3,655,539.50 59,281.50
Interest income 146,904.87 211,336.37
Refunds 25,925,884.92 1,764,059.75
Claim deduction etc. 191,650.09 905,067.46
Government subsidy 3,795,820.00 1,451,189.68
Receive grant 15,500.00
Other 185,116.26
Total 149,122,946.48 13,807,385.47
Note of cash received with other operating activities concerned:
Nil
152
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
(2)Cash paid with other operating activities concerned
RMB/CNY
Item Current Period Last Period
Unit intercourse account 126,247,786.47 2,512,814.07
Advances to employees 991,373.48 3,794,266.72
Litigation fee 81,105.00 15,866.00
Margin, deposit 1,181,899.00 1,167,554.00
Entertainment expense 3,000,255.62 2,769,800.23
Water and electricity 388,342.19 370,312.12
Travel expenses 1,437,228.54 3,287,308.11
Freight 3,868,873.39 5,008,475.05
Traffic expenses 1,109,528.61 1,030,400.36
Repairs 856,969.82 3,724,821.24
Audit fees, consulting fees 2,392,374.59 7,458,621.00
Security 457,335.66 166,131.50
Financial institutions handling fee 187,021.74 517,938.92
Office expenses 881,794.91 668,598.26
Communication fee 294,321.76 313,916.50
Lease fee 4,711,758.56 4,616,957.86
Other 1,411,122.02 971,692.54
Refunds 42,523.31
Commodity inspection fee 141,794.01 977,449.41
After-sales service fee 1,265,862.21 1,698,357.00
Fines and indemnities 857,970.32 600,818.52
Securities information disclosure fee 392,164.56 663,685.00
Total 152,199,405.77 42,335,784.41
Note of cash paid with other operating activities concerned:
Nil
(3) Cash received with other investment activities concerned
RMB/CNY
Item Current Period Last Period
Redemption of principal of financial
144,000,000.00 291,000,000.00
products
153
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Total 144,000,000.00 291,000,000.00
Note of cash received with other investment activities concerned
Nil
(4) Cash paid related with investment activities
RMB/CNY
Item Current Period Last Period
Purchasing financial products 144,000,000.00 291,000,000.00
Total 144,000,000.00 291,000,000.00
Note of cash paid related with investment activities
Nil
39. Supplementary information to statement of cash flow
(1) Supplementary information to statement of cash flow
RMB/CNY
Supplementary information This Period Last Period
1. Net profit adjusted to cash flow of
-- --
operation activities:
Net profit 3,295,022.72 974,409.39
Add: Assets impairment provision 700,496.64 1,421,786.71
Depreciation of fixed assets, consumption
of oil assets and depreciation of productive 11,640,445.16 10,976,272.03
biology assets
Amortization of intangible assets 1,491,626.63 1,493,850.03
Amortization of long-term deferred
296,557.11 62,191.53
expenses
Loss from disposal of fixed assets,
intangible assets and other long-term -49,159.75 -199,069.56
assets(gain is listed with “-”)
Financial expenses (gain is listed with “-”) 12,785,854.43 10,910,660.03
Investment loss (income is listed with “-”) -326,439.49 -372,245.91
Decrease of deferred income tax assets
98,687.60 1,744,307.31
(increase is listed with “-”)
Decrease of inventory (increase is listed
-2,586,887.73 -14,098,698.22
with “-”)
Decrease of operating receivable accounts
-12,126,884.80 2,182,974.23
(increase is listed with “-”)
154
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Increase of operating payable accounts
-37,113,778.18 -3,373,183.21
(decrease is listed with “-”)
Net cash flow arising from operating
-21,894,459.66 11,723,254.36
activities
2. Material investment and financing not
-- --
involved in cash flow:
3. Net change of cash and cash
-- --
equivalents:
Balance of cash at period end 27,961,209.60 66,240,945.59
Less: Balance of cash at period-begin 66,240,945.59 91,310,804.48
Add: Balance of cash equivalent at
15,234,028.71
period-end
Less: Balance of cash equivalent at
15,234,028.71 12,704,508.49
period-begin
Net increased amount of cash and cash
-53,513,764.70 -22,540,338.67
equivalent
(2) Constitution of cash and cash equivalent
RMB/CNY
Item Closing balance Opening balance
Ⅰ. Cash 27,961,209.60 66,240,945.59
Including: Cash on hand 236,354.29 170,053.77
Bank deposit available for payment
28,935,450.70 66,070,891.82
at any time
II. Cash equivalent 15,234,028.71
Note receivable due within
23,317,491.64 15,234,028.71
three months
Ⅲ. Balance of cash and cash equivalent at
27,961,209.60 81,474,974.30
period-end
Other explanation
Monetary fund at year-end-other monetary fund refers to the bank acceptance bond 4,936,525.28 Yuan, which is not belonging to the
cash and cash equivalent. At end of the year, among the note receivable due within 3 months, the 11,151,688.25 Yuan are used for
pledge, which is not belongs to cash and cash equivalent.
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
40. Assets with ownership or use right restricted
RMB/CNY
Item Ending Book value Restriction reasons
Bank acceptance margin and Court
Monetary fund 6,147,120.67
frozen
Note receivable 11,151,688.25 Pledged
Fixed assets 43,227,436.86 Bank loan secured
Intangible assets 36,957,101.76 Bank loan secured
Account receivable 14,860,475.10 Pledged
Investment real estate 26,374,703.70 Bank loan secured
Disposal of fixed assets 92,857,471.69 Court closure
Total 231,575,998.03 --
Other explanation
Nil
41. Item of foreign currency
(1) Item of foreign currency
RMB/CNY
Closing balance of foreign Ending RMB balance
Item Rate of conversion
currency converted
Monetary fund -- --
Including: USD 292,887.69 6.8632 2,010,146.81
Euro
HKD 32.66 0.8762 28.62
Account receivable -- --
Including: USD 6,423,629.78 6.8632 44,086,655.90
Euro
HKD
Long-term loans -- --
Including: USD
Euro
HKD
156
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Short-term loans
Including: USD 3,652,619.46 6.8632 25,068,657.88
Other explanation
Nil
(2) Explanation on foreign operational entity, including as for the major foreign operational entity,
disclosed main operation place, book-keeping currency and basis for selection; if the book-keeping
currency changed, explain reasons
□ Applicable √ Not applicable
42. Government subsidy
(1) Government subsidy
RMB/CNY
Amount reckoned into current
Category Amount Item
gains/losses
Stabilization subsidy 139,020.00 Other income 139,020.00
Subsidy for R&D input 785,000.00 Other income 785,000.00
Subsidy for cultivating
50,000.00 Non-operating income 50,000.00
enterprise
2018 municipal foreign
271,800.00 Non-operating income 271,800.00
economic and trade funds
Awards for enterprise
1,900,000.00 Non-operating income 1,900,000.00
development
Subsidy for recognition of
50,000.00 Non-operating income 50,000.00
high-tech enterprise for 2018
Guiding funds for business
150,000.00 Non-operating income 150,000.00
development
Subsidy for science &
technology innovation 300,000.00 Non-operating income 300,000.00
platform in 2017
Central special fund for
foreign trade and economic
cooperation (promoting 150,000.00 Non-operating income 150,000.00
development of processing
trade in the Midwest) in 2017
157
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
(2) Refund of government subsidy
□ Applicable √ Not applicable
Other explanation
Nil
VIII. Equity in other entity
1. Equity in subsidiary
(1) Constitute of enterprise group
Main operation Registered Share-holding ratio
Subsidiary Business nature Acquired way
place place Directly Indirectly
HUAFA Lease Property Investment
Shenzhen Shenzhen 60.00%
Company management establishment
HUAFA
Property Investment
Property Shenzhen Shenzhen 100.00%
management establishment
Company
Hengfa
Production Investment
Technology Wuhan Wuhan 100.00%
sales establishment
Company
HUAFA
Property Investment
Hengtian Shenzhen Shenzhen 100.00%
management establishment
Company
HUAFA
Property Investment
Hengtai Shenzhen Shenzhen 100.00%
management establishment
Company
Explanation on share-holding ratio in subsidiary different from ratio of voting right:
Nil
Basis for controlling the invested entity with half or below voting rights held and without controlling invested entity but with over
half and over voting rights:
Nil
Major structured entity included in consolidate statement:
Nil
Basis of termination of agent or consignor:
Nil
Other explanation
Nil
158
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
(2) Important non-wholly-owned subsidiary
RMB/CNY
Gains/losses Dividend announced to
Share-holding ratio of Ending equity of
Subsidiary attributable to minority distribute for minority
minority minority
in the Period in the Period
Explanation on holding ratio different from the voting right ratio for minority shareholders:
Other explanation
(3) Main finance of the important non-wholly-owned subsidiary
RMB/CNY
Closing balance Opening balance
Curren Non-c Curren Non-c
Subsid Non-c Total Non-c Total
Curren Total t urrent Curren Total t urrent
iary urrent liabilit urrent liabilit
t assets assets liabilit liabilit t assets assets liabilit liabilit
assets y assets y
y y y y
RMB/CNY
Current Period Last Period
Total Cash flow Total Cash flow
Subsidiary Operating comprehen from Operating comprehen from
Net profit Net profit
income sive operation income sive operation
income activity income activity
Other explanation
(4) Significant restrictions on the use of enterprise group assets and pay off debts of the enterprise group
(5) Financial or other supporting offers to the structured entity included in consolidated financial statement
range
Other explanation
IX. The risk associated with financial instruments
The Group's main financial instruments include loans, receivables, payable, tradable financial assets, trading
financial liabilities, etc., please refer to the details of each financial instrument in Note 5. The risks associated with
these financial instruments and the risk management policies adopted by the Group to reduce these risks are
described below. The management of the Group manages and monitors these risk exposures to ensure that the
above risks are controlled within the limits.
The objective of the Group's risk management is to strike a proper balance between risks and profits, minimize the
negative impact of risks on the Group's operating results, and maximize the benefits of shareholders and other
equity investors. Based on this risk management objectives, the Group's basic strategy for risk management is to
159
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
identify and analyze the risks faced by the Group, establish appropriate risk bottom lines and carry out risk
management, and timely and reliably monitor the risks control them within the limits.
(1) Market risk
The market risk of financial instruments refers to the risk that the fair value or the future cash flows of financial
instruments fluctuate due to the changes in market prices, including foreign exchange risk, interest rate risk and
other price risk.
Exchange rate risk
The Group's exchange rate risk is mainly related to US dollars and Hong Kong dollars. Except the Group's second
level subsidiary, Hengfa Technology Company’s monitor business has day-to-day operations in US dollars; other
principal business activities of the Group settle accounts in RMB. On December 31, 2018, except for the US
dollar balance of assets and liabilities in below table and the sporadic Hong Kong dollar balance, the Group's
assets and liabilities are all RMB balance. The exchange rate risk arising from the assets and liabilities of the US
dollar, Hong Kong dollar balance may have an impact on the Group's operating results.
Item 2018-12-31(RMB conversion) 2017-12-31(RMB conversion)
Monetary fund -USD 2,010,146.81 20,398,620.22
Monetary fund -HKD 28.62 27.30
Account receivable -USD 44,086,655.90 54,313,199.17
Account paid in advance -USD 19,035,307.91 44,988.82
Short-term loans -USD 25,068,657.88 23,120,264.81
The Company eyes on the influence from variation of exchange
2) Interest rate risk
The interest rate risk of the Group arises from bank loans. The financial liabilities of floating interest rate make
the Group face cash flow interest rate risk, and the financial liabilities of fixed rate make the Group face the
interest rate risk of fair value. The Group determines the relative proportion of fixed rate and floating interest rate
contracts based on the prevailing market environment. On December 31, 2018, the Group's interest-bearing debt
was mainly the floating interest rate loan contract denominated in Renminbi and US dollars, amounting to RMB
161,568,657.88 (December 31, 2017: RMB 166,620,264.81).
The Group's risk of changes in the cash flow of financial instruments due to changes in interest rates is mainly
related to the floating interest rate bank loans. The Group's policy is to maintain the floating interest rate of these
loans so as to eliminate the fair value risk of the interest rate changes.
3) Price risk
The Group sells monitors and so on at market prices and is therefore affected by such price fluctuations.
(2) Credit risk
Credit risk refers to the risk that a party of the financial instrument does not fulfill its obligations and causes
160
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
property loss to another party. On December 31, 2017, the maximum credit risk exposure that may cause financial
losses to the Group is mainly attributable to the failure of the other party to fulfill its obligations resulting in the
losses of the Group's financial assets and the Group's financial guarantees, including:
The carrying amount of the financial assets recognized in the consolidated balance sheet; for the financial
instruments measured at fair value, the book value reflects its risk exposures but not the maximum risk exposure,
and its maximum risk exposure changes with the future changes in fair value.
In order to reduce the credit risk, the Group has set up a special department to determine the credit line, carry out
the credit approval, and implement other monitoring procedures to take necessary measures to recover the overdue
credit. In addition, the Group reviews the recovery of each individual receivable at every balance sheet date to
accrue sufficient provision for bad debts of uncollectible funds. As a result, the Group's management believes that
the Group's credit risk has been greatly reduced.
The Group's working capital is deposited in banks with higher credit ratings, so the credit risk of working capital
is low.
The Group has adopted necessary policies to ensure that all customers have good credit records. In addition to the
top five account receivables, the Group has no other significant credit risk.
The total amount of the top five account receivables is RMB 110,022,047.30.
(3) Liquidity risk
The liquidity risk is the risk that the Group is unable to fulfill its financial obligations on the due date. The Group's
approach to manage liquidity risk is to ensure that there is sufficient financial liquidity to fulfill its due debts but
not cause unacceptable losses or damages to the corporate reputation. The Group regularly analyzes the structure
and duration of liabilities to ensure there are sufficient funds. The management of the Group monitors the use of
bank loans and ensures the compliance with loan agreement, and conducts financing consultations with financial
institutions in order to maintain a certain line of credit and reduce the liquidity risk.
The financial assets and financial liabilities held by the Group based on the maturity of the undiscounted
outstanding contractual obligations are analyzed as follows
Amount on December 31, 2018
Item Within one year 1-2 years 2-3 years Over three years Total
Financial assets
Monetary fund 34,108,330.27 34,108,330.27
Note receivable 69,185,516.71 69,185,516.71
Account receivable 116,793,835.05 2,401.38 1,598.08 116,797,834.51
Other account 4,687,849.69 149,331.39 848,718.00 91,280.00 5,777,179.08
receivable
Account paid in advance 37,608,672.06 94,000.00 37,702,672.06
Financial liabilities
161
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Short-term loans 161,568,657.88 161,568,657.88
Note payable 27,642,356.66 27,642,356.66
Accounts payable 55,040,816.37 12,178,883.48 109,849.10 67,329,548.95
Other account payable 22,301,671.56 4,037,633.66 26,339,305.22
Advance receivable 139,961.60 19,567.00 159,528.60
Employee salary 4,700,208.36 4,700,208.36
payable
2. Sensitivity analysis
The Group uses the sensitivity analysis technique to analyze the possible impacts of the reasonable and possible
changes in risk variable on the currents profit and losses or the owner's equity. Since any risk variable rarely
changes in isolation, and the correlation among the variables has a significant effect on the final effect amount of a
certain risk variable changes, and the following contents are on the assumption that the change in each variable is
independent.
(1) Sensitivity analysis of foreign exchange risk
Sensitivity analysis of foreign exchange risk assumes that all overseas operating net investment hedges and cash
flow hedges are highly effective.
On the basis of the above assumptions, in case that other variable don’t change, the after-tax effect of the possible
and reasonable changes in the exchange rate on the current profits and losses are as follows
Item Exchange rate 2018 2017
fluctuation Impact on net profit Impact on owner's Impact on net profit Impact on owner's
equity equity
All foreign 5% appreciation of -2,003,174.07 -2,003,174.07 -2,581,828.54 -2,581,828.54
currency the RMB
All foreign 5% devaluarion of the 2,003,174.07 2,003,174.07 2,581,828.54 2,581,828.54
currency RMB
X. Related party and related transactions
1. Parent company of the enterprise
十. Related party 及关联交易
1. 本企业的母 Company 情况
Share-holding
Voting right ratio
Parent company Registration place Business nature Registered capital ratio on the
on the enterprise
enterprise for
162
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
parent company
Production and
Wuhan Zhongheng
sales, real estate
New Science &
development and
Technology Wuhan 34,500,000.00 41.21% 41.21%
sales, housing
Industrial Group
leasing and
Co., Ltd
management
Explanation on parent company of the enterprise
Nil
The ultimate control of the enterprise is Li Zhongqiu.
Other explanation
Nil
2. Subsidiary of the Enterprise
Found more in VIII. Equity in other entity in the Note
3. Other Related party
Other Related party Relationship with the Enterprise
Control by same controlling shareholder and ultimate
Shenzhen Zhongheng Huafa Science and Technology Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Wuhan Hengsheng Yutian Industrial Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Wuhan Hengsheng Photo-electricity Industry Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Hong Kong Yutian International Investment Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Wuhan New Oriental Real Estate Development Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Wuhan Zhongheng Property Management Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Wuhan Optical Valley Display System Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Wuhan Yutian Xingye Property Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Wuhan Yutian Dongfang Property Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Wuhan Xiahua Zhongheng Electronics Co. Ltd.
controller
163
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Control by same controlling shareholder and ultimate
Wuhan Zhongheng Yutian Trading Co,, Ltd
controller
Control by same controlling shareholder and ultimate
Wuhan Yutian Hongguang Real Estate Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Shenzhen Zhongheng Huayu Investment Holding Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Yutian Investment Co., Ltd.(Famous Sky Capital Limited)
controller
Control by same controlling shareholder and ultimate
Yutian International Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Hong Kong Zhongheng Yutian Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Shenzhen Yutian Henghua Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Shenzhen Zhongheng Yongye Technology Co., Ltd.
controller
Control by same controlling shareholder and ultimate
Shenzhen Yutian Hengrui Co., Ltd.
controller
Other explanation
Nil
4. Related transaction
(1) Goods purchasing, labor service providing and receiving
Goods purchasing/labor service receiving
RMB/CNY
Whether over the
Trading limit
Related party Content Current Period approved limited or Last Period
approved
not (Y/N)
Hong Kong
Yutian
Purchasing LCD
International 127,867,957.79 308,844,000.00 No 209,991,225.25
monitors
Investment Co.,
Ltd.
Wuhan
Hengsheng Purchasing LCD
73,806,587.19 240,212,000.00 No 105,013,206.11
Photo-electricity monitors
Industry Co., Ltd.
Wuhan Purchase LCD 33,635,380.66 171,580,000.00 No
164
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Hengsheng
Photo-electricity
Industry Co., Ltd.
Goods sold/labor service providing
RMB/CNY
Related party Content Current Period Last Period
Hong Kong Yutian
International Investment Co., Sales of LCD 99,679,782.04 211,214,811.44
Ltd.
Wuhan Hengsheng
Photo-electricity Industry Sales of LCD 20,704,025.95 3,708,212.13
Co., Ltd.
Wuhan Zhongheng Yutian
Sales of LCD 92,116.00 0.00
Trading Co,, Ltd
Explanation on goods purchasing, labor service providing and receiving
Nil
(2) Related guarantee
As the guarantor
RMB/CNY
Completed or not
Secured party Amount guarantee Start End
(Y/N)
Hengfa Technology
36,000,000.00 2018-04-20 2022-04-20 No
Company
Hengfa Technology
50,000,000.00 2017-11-21 2018-11-21 No
Company
As the secured party
RMB/CNY
Completed or not
Guarantor Amount guarantee Start End
(Y/N)
Explanation on related guarantee
Nil
(3) Remuneration of key manager
RMB/CNY
Item Current Period Last Period
Total 1,056,077.00 1,143,000.00
165
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
5. Receivable/payable items of related parties
(1) Receivable
RMB/CNY
Closing balance Opening balance
Item Related party
Book balance Bad debt provision Book balance Bad debt provision
Hong Kong Yutian
Account International
36,750,397.49 44,436,775.47
receivable Investment Co.,
Ltd.
Wuhan Hengsheng
Account
Photo-electricity 2,591,229.44
receivable
Industry Co., Ltd.
Hong Kong Yutian
International
Prepayments 17,120,874.77 44,988.82
Investment Co.,
Ltd.
Wuhan Hengsheng
Prepayments Photo-electricity 8,294,072.28
Industry Co., Ltd.
(2) Payable
RMB/CNY
Item Related party Ending book balance Opening book balance
Wuhan Hengsheng
Accounts payable Photo-electricity Industry 4,333,021.63
Co., Ltd.
6. Commitments of related party
In line with the claim of application for arbitration from Shenzhen Vanke, Shen HUAFA and Wuhan Zhongheng paid and money
together. As the commitment letter to Shen HUAFA from Wuhan Zhongheng Group, if the Vanke wins, the losses from disputes
arising by contract will bear by Wuhan Zhongheng Group in full.
XI. Commitment or contingency
1. Important commitment
Important commitment on balance sheet date
166
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
As of the balance sheet date, the irrepealable operating lease contract signed by the Company are as:
The Company entered into a house leasing contract with Wuwu Branch of Shenzhen Dacong Industrial Co., Ltd., term of the leasing
period from 18 August 2015 to 17 August 2020
Minimum leasing payment for irrepealable operating lease Minimum leasing payment
contract
First year after balance sheet date 3,847,599.84
Second year after balance sheet date 2,426,125.45
Total 6,273,725.29
2. Contingency
(1) Contingency on balance sheet date
1. Arbitration case of legal service contract dispute with V&T (Shenzhen) Law Firm
On March 12, 2018, the company received the arbitration notice No. SHEN DX20180087 from Shenzhen Court of International
Arbitration, V&T (Shenzhen) Law Firm requested to make a ruling that the Company and Wuhan Zhongheng pay the delinquent
lawyer’s fees of RMB 19,402,000 and the liquidated damages (The liquidated damages shall take five ten-thousandths of a day as a
standard based on RMB 19,402,000 from August 24, 2017 to the date of payment of the above-mentioned lawyer’s fees, and the
liquidated damages up to February 12, 2018 was RMB 1,678,273.00). The company should bear all the arbitration fees for this case.
The company has entrusted lawyers to respond to the lawsuit and file a counterclaim against V&T Law Firm. The company filed a
countersuit against V&T Law Firm that V&T Law Firm seriously violated the obligations of the Entrusted Agency Contract and the
Supplementary Agreement of the Entrusted Agency Contract, failed to fulfill the contractual obligations, failed to fulfill the duty of
diligence and responsibility and failed to safeguard the legitimate rights and interests of the principal. And the lawyer’s fees are far
higher than the government guidance price of the Shenzhen lawyer service. It is requested to return the prepaid 2.5 million lawyers’
fees, terminate the Entrusted Agency Contract and the Supplementary Agreement of the Entrusted Agency Contract previously signed
with V&T Law Firm, and bear the lawyers’ fees of 100,000 Yuan for this counterclaim. No notice for court hearing presently.
2. Other pending lawsuit
Types of litigation, times and Cause of Amount
Litigious party Case No. Note
explanation action object
Defendant: Yidaxin The Machinery equipment of Dispute of 2018 Yue 0306 Litigation
Technology Co., Ltd. Yidaxin with over 2 million yuan subrogation MC No.: 25093 amount:
have been preserved. of creditors about 2.03
At present, the court did not confirm million yuan
the date for hearing
Defendant: Shenzhen ----2016.03.23 (Pepole’s Court of Dispute over 2016 Yue 0306 Litigation
Huayongxing Baoan District, Shenzhen) accept the leasing MC No.: 6180; amount:
Enviornmental case; contracts 2017 Yue 03 MZ 9,472,600
Technology Co., Ltd. (Pepole’s Court of Baoan District, No.: 17070 yuan
167
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Shenzhen Yidaxin Shenzhen) Application for bank
Technology Co., Ltd. account preservation of 8 million
Yuan (in payment) ;
-----2017.3.20 Opening a trail;
-----2017.11.19 Second instance
hearing;
-----Wining the lawsuits and it is
being enforced
Defendant: Shenzhen ----2016.03.24(Pepole’s Court of Dispute over 2016 Yue 0306 Litigation
Huayongxing Baoan District, Shenzhen) accept the leasing MC No. 6229; amount:
Environmental case; contracts 2018 Yue 03 MZ 19,649,200
Technology Co., Ltd., -----2016.04.11(Pepole’s Court of No. 3009 yuan
Shenzhen Guangyong Baoan District, Shenzhen)
Breadboard Co., Ltd., Application for bank account
Shenzhen Mingyi preservation of 17 million Yuan
Electric Co., Ltd., ;
Shenzhen Ouruilai ----2017.3.20 Opening a trail;
Technology Co., Ltd. and The second trial has been decided,
Shenzhen Kangzhengxin the Company wins the lawsuit and is
Technology Co., Ltd. applying for enforcement
Company ----2018.10.29 Open a trial; 2018 Yue 0306 Litigation
Plaintiff: Shenzhen ----2018.11.26 The first trial has MC No.: 18488 amount: 4.87
Huayongxing been decided, and judging our Contract million yuan
Environmental company paying 3.12 million yuan dispute
Technology Co., Ltd to Huayongxing Company;
----2018.12.19 Appealed on second
instance, not open a court session
temporary
Plaintiff: Liang Donghua, Open a trial on 19 December, in Dispute over 2018 Yue 03 MC Amount
Li Yao and Feng Jianhua settlement false No. 918-920 litigation:
statement of 400,000
securities yuan
(2) For the important contingency not necessary to disclosed by the Company, explained reasons
The Company has no important contingency that need to disclosed
XII. Other important events
1. Other
(i) concerning the ruling of Southern International Arbitration Shen [2017] No. D376 from Southern China International Economic &
Trade Arbitration Commission, the Company applying for cancellating the ruling
(1) Arbitration
168
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
In August 2015, Shenzhen HUAFA and Wuhan Zhongheng New Technology Industry Group Co., Ltd. (hereinafter referred to as
“Wuhan Zhongheng”) signed the “Cooperation Agreement on Urban Renewal Project of Update Units at Huafa Industrial Park,
Gongming Street, Guangming New District, Shenzhen”. As Shenzhen HUAFA and Wuhan Zhongheng planned to cooperate with
Shenzhen Vanke Real Estate CO., Ltd. (hereinafter referred to as “Shenzhen Vanke”) on the Huafa urban renewal project (hereinafter
referred to as “Huafa Renovation Project) at Gongming Street, Guangming New District, Shenzhen, both parties appointed that
Shenzhen HUAFA entrusted Wuhan Zhongheng to represent it in this cooperation, and established project company - Shenzhen
Vanke Guangming Real Estate Co., Ltd. (hereinafter referred to as “Vanke Guangming”) as the subject of project implementation
with Shenzhen Vanke; Vanke Guangming signed “Demolition Compensation Agreement” with Shenzhen HUAFA and Wuhan
Zhongheng, and paid the compensation for demolition.
On August 21, 2015, Shenzhen HUAFA, Wuhan Zhongheng and Shenzhen Vanke signed the “Cooperative Operation Contract of
Renovation Project at Huafa Industrial Park, Gongming Street, Guangming New District”(hereinafter referred to as “Cooperative
Operation Contract”), the contract refined and appointed the cooperation model and operating steps of both sides. And then Shenzhen
HUAFA, Wuhan Zhongheng and Shenzhen Vanke signed the “Agreement on the Housing Acquisition and Removal Compensation
and Settlement”. After signing the above agreement, Shenzhen Vanke paid the cooperation price of 600 million Yuan to Wuhan
Zhongheng through Vanke Guangming.
In September 2016, Shenzhen Vanke filed an arbitration to South China International Economic and Trade Arbitration Commission
(hereinafter referred to as “South China Arbitration”) as Shenzhen HUAFA and Wuhan Zhongheng violated the appointment of
“Cooperative Operation Contract” and handled the “Confirmation of Subject of Reconstruction Implementation” at an overdue time,
and required Shenzhen HUAFA and Wuhan Zhongheng to pay liquidated damages and attorneys' fees of RMB 464.60 million.
While filing the arbitration, Shenzhen Vanke also applied for property preservation of 400 million Yuan of property under the name
of Shenzhen Huafa and Wuhan Zhongheng to Shenzhen Intermediate People’s Court. According to the ruling of Shenzhen
Intermediate People's Court and “Notification of Sealing up, Seizing and Freezing Assets” (The reference numbers are (2016) Yue 03
Cai Bao No. 51, (2016) Yue 03 Cai Bao No. 53), the 27 house properties (Note: the property within the scope of Huafa renovation
project) under the name of Shenzhen HUAFA and 116,489,894 shares (Note: of which 116,100,000 shares have been pledged) of
Shenzhen HUAFA stock held by Wuhan Zhongheng were frozen.
(2) Progress of arbitration
On November 12, 2016, the arbitration court held a hearing on this case.
In December 2016, Wuhan Zhongheng to Shenzhen HUAFA issued a “Commitment Letter” which included that if the arbitration
(Note: the case) ruled in favor of Shenzhen Vanke, the loss of arbitration caused by the contract disputes should be fully assumed by
our company. In the above contingent losses, if the judicial decision ruled your company to pay the compensation in advance, our
company promised to pay your company in cash within one month, if our company could not pay on time due to uncontrollable
factors, our company would like to pay the corresponding interest according to the benchmark interest rate of bank loans in the
corresponding period. Because the plots in the renovation project placed in our company hadn’t been applied for transfer procedures
and were still under your company’s name (Note: based on the “Asset Replacement Contract” signed by Wuhan Zhongheng and
Shenzhen HUAFA on April 29, 2009), therefore, there was no risk of compliance, at the same time, our company promised to give
priority to paying the above compensation with the compensation for demolition of renovation project.
On March 14, 2017, Shenzhen HUAFA received the “Decision of Arbitrator not Granting Avoiding” issued by South China
Arbitration, which rejected the application for avoiding of chief arbitrator proposed by Shenzhen Vanke. On March 15, 2017,
Shenzhen HUAFA received the “Letter About the Resignation of the Chief Arbitrator of No. SHEN DP20160334 Case” signed by
the chief arbitrator and forwarded by South China Arbitration. On March 20, 2017, Shenzhen HUAFA received the “Letter About the
Resignation of the Arbitrator of No. SHEN DP20160334 Case” forwarded by South China Arbitration, the arbitrator selected by
Shenzhen Vanke said to resign from the arbitrator of this case due to physical reasons.
169
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
The deadline for giving a ruling to this case was originally scheduled on February 12, 2017. According to the “Decision of
Adjourning the Ruling” issued by South China Arbitration on February 10, 2017, the deadline for giving a ruling to this case shall be
prolonged to May 12, 2017. Due to the changes in the members of above arbitration court, this case needs South China Arbitration to
reassign the chief arbitrator and Shenzhen Vanke to reselect the arbitrators. According to the provisions of article 32 of the
Arbitration Rules of South China Arbitration, after constituting the new arbitration court, it shall decide whether all or part of the
hearing procedures that have been carried out before need to be reopened; if the arbitration court decides to reopen all hearing
procedures, then the deadline for giving a ruling shall be calculated from the date that the arbitration court decides to reopen the
hearing procedures.
On August 16, 2017, South China International Economic and Trade Arbitration Commission made the “Arbitral Award” SCIA
[2017] D376, according to the arbitral award, the applicant and counterclaim respondent in arbitration case SCIA [2017] D376 were
Shenzhen Vanke Real Estate Co., Ltd. (hereinafter referred to as “Applicant” and “Vanke”). The first respondent and the first
applicant for counterclaim were Wuhan Zhongheng New Technology Industry Group Co., Ltd. (hereinafter referred to as “Wuhan
Zhongheng” and “First Respondent”). The second respondent and the second applicant for counterclaim were Zhongheng Huafa. The
award results were as follows:
① The first respondent and the second respondent pay liquidated damages to the applicant with a base number of RMB 600 million,
calculating by the annual interest rate of 36% from October 1, 2015 to November 11, 2016;
②The first respondent and the second respondent pay the lawyer fees of RMB 1.4 million to the applicant due to the case;
③The first respondent and the second respondent pay the property preservation fees of RMB 10,000 to the applicant;
④The arbitration fees for this request and case was RMB 3,101,515.00, the first respondent and the second respondent should bear
70%, i.e. RMB 2,171,060.50, and the applicant should bear 30%, i.e. RMB 930,454.50. The applicant had already paid the arbitration
fees in full amount for this request which could be used as the arbitration fees of this case and request and shall not be refunded. The
first respondent and the second respondent should directly pay RMB 2,171,060.50 to the applicant;
The arbitration fee of counterclaim in this case was RMB 76,050 which was undertaken by the first respondent and the second
respondent at their own expense. The first respondent and the second respondent paid the arbitration fees in full amount for this
request which could be used as the arbitration fees of this case and request and shall not be refunded;
The actual expenses of the arbitrators in this case amounted to RMB 7,754.90, the first respondent and the second respondent
assumed 70%, i.e. RMB 5,428.43, and the applicant assumed 30%, i.e. RMB 2,326.47; the above actual expenses of the arbitrators
had been paid by the Commission, so the first respondent and the second respondent and the applicant should directly pay RMB
5,428.43 and RMB 2,326.47 respectively to the Commission;
⑤ Reject the applicant’s other arbitration requests;
⑥Reject the arbitration counterclaims of the first respondent and the second respondent.
In summary, Wuhan Zhongheng and Shenzhen Huafa should pay liquidated damages, interest, lawyer fees, property preservation
fees, and arbitration fees for this request to Vanke and pay actual expenses of the arbitrators in this case and pay the actual expenses
incurred by the arbitrators in this case to South China International Economic and Trade Arbitration Commission.
(3) The response of the company’s management and the identification of the event
The company engaged lawyers to make an independent investigation and judgment on the event, and issued special legal opinion that
the reasons of Wuhan Zhongheng resulted in a failure of a net handover, the corresponding urban renewal functional department
could not issue the corresponding demolition documents, which in turn made the project company fail to be confirmed as the subject
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
of implementation, and finally and directly made the subject of implementation fail to get the “Land Value Payment Notification”
and sign the “Land Use Rights Transfer Contract”. Therefore, Wuhan Zhongheng should bear all responsibilities for faults in
response to the breach of contract. Wuhan Zhongheng issued the Commitment Letter in December 2016, pledged that if the
arbitration judged Vanke to win the case, Wuhan Zhongheng should bear all arbitration losses caused by the contract dispute; after
the award came into effect, Wuhan Zhongheng issued the Confirmation Letter again on November 23, 2017 to divide the duty of
performance of the award; the independent directors of the company issued independent opinions after careful study that Wuhan
Zhongheng should bear the arbitration losses in full; the management of the company also made an investigation and affirmed that
Wuhan Zhongheng should bear all liability for satisfaction on the Award HNGZSC [2017] D376, and the award amount should be
paid by Wuhan Zhongheng in full. The company has filed an application for revoking the Award HNGZSC [2017] D376 to Shenzhen
Intermediate People’s Court, and rejected by Shenzhen Intermediate People’s Court,
XIII. Principle notes of financial statements of parent company
1. Note receivable and account receivable
RMB/CNY
Item Closing balance Opening balance
(1) Account receivable
1) Category of account receivable
RMB/CNY
Closing balance Opening balance
Bad debt
Book balance Book balance Bad debt provision
Category provision Book Book
Amoun Amoun Accrua value Amo Accrual value
Ratio Ratio Amount
t t l ratio unt ratio
Account receivable
with single
5,000
significant amount 5,000,9 48.58 5,000,9 100.00 48.58 5,000,9
,988. 100.00%
and withdrawal 88.97 % 88.97 % % 88.97
97
bad debt provision
separately
Account receivable
with single minor
5,292
amount but 5,292,4 51.42 5,292,4 100.00 51.42 5,292,4
,435. 100.00%
withdrawal bad 35.32 % 35.32 % % 35.32
32
debt provision
individually
10,293, 100.00 10,293, 10,29 100.00 10,293,
Total
424.29 % 424.29 3,424 % 424.29
171
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
.29
Account receivable with major single amount and withdrawal bad debt provision single at period-end
√ Applicable □ Not applicable
RMB/CNY
Account receivable (by Closing balance
unit) Account receivable Bad debt provision Accrual ratio Accrual causes
Hong Kong Haowei
1,870,887.18 1,870,887.18 100.00
Industry Co. Ltd.
TCL ACE ELECTRIC
APPLIANCE 1,325,431.75 1,325,431.75 100.00
(HUIZHOU) CO., LTD.
Qingdao Haier Parts
1,225,326.15 1,225,326.15 100.00
Procurement Co., Ltd.
SKYWORTH
Multimedia (Shenzhen) 579,343.89 579,343.89 100.00
Co., Ltd.
Total 5,000,988.97 5,000,988.97 -- --
Account receivable with bad debt provision withdrawal by method of account age in portfolio
□ Applicable √ Not applicable
Withdrawal proportion of bad debt provision based on balance proportion for account receivable in portfolio:
□ Applicable √ Not applicable
Withdrawing bad bed provision for account receivable by other methods in portfolio:
Accounts with single significant amount and bad debts provision accrued individually at period-end
Debtor Book balance Bad debt amount Accrual ratio(%) Accrual causes
Shenzhen Huixin Video Technology 381,168.96 381,168.96 100.00 Uncollectible
Co., Ltd.
Shenzhen Wandelai Digital 351,813.70 351,813.70 100.00 Uncollectible
Technology Co., Ltd.
Shenzhen Dalong Electronic Co., Ltd. 344,700.00 344,700.00 100.00 Uncollectible
Shenzhen Keya Electronic Co., Ltd. 332,337.76 332,337.76 100.00 Uncollectible
Shenzhen Qunping Electronic Co., 304,542.95 304,542.95 100.00 Uncollectible
Ltd.
China Galaxy Electronics (Hong 288,261.17 288,261.17 100.00 Uncollectible
Kong) Co., Ltd.
Dongguan Weite Electronic Co., Ltd. 274,399.80 274,399.80 100.00 Uncollectible
Hong Kong New Century Electronics 207,409.40 207,409.40 100.00 Uncollectible
Co., Ltd.
Shenyang Beitai Electronic Co., Ltd. 203,304.02 203,304.02 100.00 Uncollectible
172
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Beijing Xinfang Weiye Technology 193,000.00 193,000.00 100.00 Uncollectible
Co., Ltd.
TCL Electronics (Hong Kong) Co., 145,087.14 145,087.14 100.00 Uncollectible
Ltd.
Huizhou TCL Xinte Electronics Co., 142,707.14 142,707.14 100.00 Uncollectible
Ltd.
SkyWorth – RGB Electronic Co., Ltd. 133,485.83 133,485.83 100.00 Uncollectible
Other 1,990,217.45 1,990,217.45 100.00 Uncollectible
Total 5,292,435.32 5,292,435.32 —— ——
2)Top five receivables collected by arrears party at ending balance
Company Closing balance Proportion of total accounts Balance of bad debt provision
receivable(%)
Hong Kong Haowei Industry Co. Ltd. 1,870,887.18 18.18 1,870,887.18
TCL ACE ELECTRIC APPLIANCE 1,325,431.75 12.88 1,325,431.75
(HUIZHOU) CO., LTD.
Qingdao Haier Parts Procurement Co., 1,225,326.15 11.90 1,225,326.15
Ltd.
SKYWORTH Multimedia (Shenzhen) 579,343.89 5.63 579,343.89
Co., Ltd.
Shenzhen Huixin Video Technology 381,168.96 3.70 381,168.96
Co., Ltd.
Total 5,382,157.93 52.29 5,382,157.93
2. Other account receivable
RMB/CNY
Item Closing balance Opening balance
Other account receivable 99,155,253.08 99,922,143.84
Total 99,155,253.08 99,922,143.84
(1) Other account receivable
1) Category of other account receivable
RMB/CNY
Closing balance Opening balance
Bad debt
Category Book balance Book Book balance Bad debt provision Book
provision
value value
Amoun Ratio Amoun Accrua Amo Ratio Amount Accrual
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
t t l ratio unt ratio
Other account
receivable with
single significant 11,28
11,590, 11,590, 100.00 11,281,
amount and 9.80% 1,461 9.48% 100.00%
909.86 909.86 % 461.86
withdrawal bad .86
debt provision
separately
Other account
receivable with bad 100,0
99,158, 83.88 3,136.8 99,155, 84.02 102,100 99,922,1
debt provision 24,24 4.47%
389.91 % 3 253.08 % .00 43.84
accrual by 3.84
portfolio
Other account
receivable with
single minor 7,736
7,475,7 7,475,7 100.00 7,736,7
amount but 6.32% ,789. 6.50% 100.00%
41.64 41.64 % 89.76
withdrawal bad 76
debt provision
individually
118,22 119,0
19,069, 99,155, 19,120, 99,922,1
Total 5,041.4 42,49
788.33 253.08 351.62 43.84
1 5.46
Other account receivable with major single amount and withdrawal bad debt provision single at period-end:
√ Applicable □ Not applicable
RMB/CNY
Closing balance
Other account
Other account
receivable (by unit) Bad debt provision Accrual ratio Accrual causes
receivable
Shenzhen Huafa
Property Leasing Co., 4,558,859.15 4,558,859.15 100.00% Uncollectible
Ltd.
Portman 4,021,734.22 4,021,734.22 100.00% Uncollectible
Shenzhen Jifang
1,380,608.00 1,380,608.00 100.00% Uncollectible
Investment Co., Ltd
Traffic accident
555,785.81 555,785.81 100.00% Uncollectible
compensation
Zhao Baomin 553,901.68 553,901.68 100.00% Uncollectible
Hebei Botou Court 520,021.00 520,021.00 100.00% Uncollectible
Total 11,590,909.86 11,590,909.86 -- --
174
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Other account receivable with bad debt provision withdrawal by age analysis in portfolio:
√ Applicable □ Not applicable
RMB/CNY
Closing balance
Account ages
Other account receivable Bad debt provision Accrual ratio
Sub-item of within one year
Subtotal of within one year 820,172.10
1-2 years 62,736.54 3,163.83 5.00%
Total 882,908.64 3,136.83
Explanation on portfolio basis:
Nil
Withdrawing bad bed provision based on balance proportion for other account receivable in portfolio
□ Applicable √ Not applicable
Withdrawing bad bed provision based on other methods for other account receivable in portfolio
√ Applicable □ Not applicable
Other account receivable with single minor amount but withdrawal single item bad debt provision at period-end
Debtor Book balance Bad debt amount Accrual ratio(%) Accrual causes
Electricity fee in Gongming 489,214.70 489,214.70 100.00 Uncollectible
canteen
Jiantao (Fogang) Laminates Co., 465,528.10 465,528.10 100.00 Uncollectible
Ltd.
工会 72,402.55 72,402.55 100.00 Uncollectible
Lu Wei 290,000.00 290,000.00 100.00 Uncollectible
4/F hotle Daiqiangbo 354,569.00 354,569.00 100.00 Uncollectible
Chuangjing 192,794.00 192,794.00 100.00 Uncollectible
Shenzhen Mingli Co., Ltd. 170,394.84 170,394.84 100.00 Uncollectible
Other units 5,440,838.45 5,440,838.45 100.00 Uncollectible
Total 7,475,741.64 7,475,741.64 —— ——
2)Bad debt provision accrual, switch-back or taken back in the period
Bad debt provision accrual was 954,905.54 Yuan; the amount collected or switches back amounting to 0.00 Yuan.
Including major amount of bad debt provision that switch-back or taken back in the Period:
RMB/CNY
Company Amount switch-back or taken back Collection way
Nil
3)Nature of other account receivable
RMB/CNY
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Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Nature Ending book balance Opening book balance
Margin and deposit 720,065.04 720,065.04
Borrow money 1,960,013.76 2,013,402.14
Intercourse funds 108,761,355.74 110,451,250.82
Rent receivable 6,317,469.46 5,857,777.46
Other 466,137.41
Total 118,225,041.41 119,042,495.46
4)Top 5 other receivables collected by arrears party at ending balance
RMB/CNY
Proportion in total
Closing balance of
Company Nature Closing balance Account ages other receivables
bad debt provision
at year-end
Wuhan Hengfa
Technology Co., Intercourse funds 94,914,929.62 Within one year 80.41%
Ltd.
Shenzhen Huafa
Property Leasing Intercourse funds 4,558,859.15 Over 5 years 3.86% 4,558,859.15
Co., Ltd.
Rental fee
Portman 4,021,734.22 Over 5 years 3.41% 4,021,734.22
receivable
Shenzhen
Zhongheng HUAFA Intercourse funds 2,621,868.61 Within one year 2.22%
Property Co., Ltd
Shenzhen Jifang Rental fee
1,380,608.00 Within two years 1.17% 1,380,608.00
Investment Co., Ltd receivable
Total -- 107,497,999.60 -- 91.07% 9,961,201.37
3. Long-term equity investment
RMB/CNY
Closing balance Opening balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Investment for
187,208,900.00 600,000.00 186,608,900.00 187,208,900.00 600,000.00 186,608,900.00
subsidiary
Total 187,208,900.00 600,000.00 186,608,900.00 187,208,900.00 600,000.00 186,608,900.00
176
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
(1) Investment for subsidiary
RMB/CNY
Decrease Current accrual Closing balance
The invested Opening Increase during Closing
during this of impairment of impairment
entity balance the period balance
period provision provision
HUAFA Lease
600,000.00 600,000.00 600,000.00
Company
HUAFA
Property 1,000,000.00 1,000,000.00
Company
Hengfa
183,608,900.0 183,608,900.0
Technology
0 0
Company
HUAFA
Hengtian 1,000,000.00 1,000,000.00
Company
HUAFA Hengtai
1,000,000.00 1,000,000.00
Company
187,208,900.0 187,208,900.0
Total 600,000.00
0 0
4. Operating income and cost
RMB/CNY
Current Period Last Period
Item
Income Cost Income Cost
Other business 36,771,309.00 5,902,505.91 41,156,307.77 5,877,729.00
Total 36,771,309.00 5,902,505.91 41,156,307.77 5,877,729.00
Other explanation
Nil
XIV. Supplementary Information
1. Current non-recurring gains/losses
√ Applicable □ Not applicable
RMB/CNY
Item Amount Note
Gains/losses from the disposal of non-current asset 49,159.75
177
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Governmental subsidy reckoned into current gains/losses (not
including the subsidy enjoyed in quota or ration according to national 3,795,820.00
standards, which are closely relevant to enterprise’s business)
Gain/loss of entrusted investment or assets management 326,439.49
Other non-operating income and expenditure except for the
-167,795.70
aforementioned items
Accrual liability reversal
Loss on assignment of claims -2,158,200.00
Less: Impact on income tax 85,444.47
Total 1,759,979.07 --
Concerning the extraordinary profit (gain)/loss defined by Q&A Announcement No.1 on Information Disclosure for Companies
Offering Their Securities to the Public --- Extraordinary Profit/loss, and the items defined as recurring profit (gain)/loss according to
the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their
Securities to the Public --- Extraordinary Profit/loss, explain reasons
□ Applicable √ Not applicable
2. REO and earnings per share
Earnings per share
Profits during report period Weighted average ROE Basic earnings per Diluted earnings per
share(RMB/Share) share(RMB/Share)
Net profits belong to common stock
1.02% 0.0116 0.0116
stockholders of the Company
Net profits belong to common stock
stockholders of the Company after 0.48% 0.0054 0.0054
deducting nonrecurring gains and losses
178
Shenzhen Zhongheng Huafa Co., Ltd. Annual Report 2018 (Full-Text)
Section XII. Documents available for reference
I. Text of the Annual Report caring signature of the Chairman;
II. Financial statement carrying the signatures and seals of the person in charge of the Company, principal of the accounting works
and person in charge of accounting organ;
III. All documents of the Company and manuscripts of public notices that disclosed in the China Securities journal, Securities Times
and Hong Kong Commercial Daily designated by CSRC in the report period;
IV. Article of Association
V. Other relevant files.
179
