First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2019 April 2019 1 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Section I. Important Notes Board of Directors and the Supervisory Committee of Shenzhen Zhongheng Huafa Co., Ltd (hereinafter referred to as the Company) and its directors, supervisors and senior executives should guarantee the reality, accuracy and completion of the quarterly report, there are no any fictitious statements, misleading statements or important omissions carried in this report, and shall take legal responsibilities, individual and/or joint. All Directors are attended the Board Meeting for Quarterly Report deliberation. Li Zhongqiu, person in charge of the Company, Yang Bin, person in charger of accounting works and Wu Ai’jie, person in charger of accounting organ (accounting officer) hereby confirm that the Financial Statement of this Quarterly Report is authentic, accurate and complete. 2 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Section II. Basic situation of the Company I. Main accounting data and financial indexes Whether it has retroactive adjustment or re-statement on previous accounting data □Yes √ No At the same period of last Changes of this period over Current period year same period of last year Operating income (RMB) 143,921,648.63 171,620,013.62 -16.14% Net profit attributable to shareholders of 258,233.98 307,367.89 -15.99% the listed company (RMB) Net profit attributable to shareholders of the listed company after deducting 196,868.38 5,469.74 3,499.23% non-recurring gains and losses (RMB) Net cash flow arising from operating 19,403,902.99 337,819.42 5,643.87% activities (RMB) Basic earnings per share (RMB/Share) 0.0009 0.0011 -18.18% Diluted earnings per share (RMB/Share) 0.0009 0.0011 -18.18% Weighted average ROE 0.08% 0.10% -0.02% Changes of this period-end At the end of the reporting At the end of last year over same period-end of last period year Total assets (RMB) 579,621,386.06 617,090,153.46 -6.07% Net assets attributable to shareholder of 324,226,234.72 323,968,000.74 0.08% listed company (RMB) Items and amount of non-recurring gains and losses √ Applicable □ Not applicable In RMB Amount from year-begin to Item Note period-end Gains/losses from the disposal of non-current asset (including the -3,018.00 write-off that accrued for impairment of assets) Governmental subsidy reckoned into current gains/losses (not including the subsidy enjoyed in quota or ration according to 6,000.00 national standards, which are closely relevant to enterprise’s business) Gain or loss on the investment or management of assets 30,941.58 3 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Other non-operating income and expenditure except for the 37,200.00 aforementioned items Less: impact on income tax 9,757.18 Total 61,365.60 -- 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 II. Total number of shareholders at the end of this report period and top ten shareholders 1. Total number of common shareholders at the end of this report period and top ten common shareholders In shares Total preference shareholders Total common stock shareholders in with voting rights recovered at 24,818 0 reporting period-end end of reporting period (if applicable) Top ten shareholders Amount of Number of share pledged/frozen Shareholder’s Nature of Proportion of Amount of shares restricted shares name shareholder shares held held State of share Amount held Wuhan Domestic Pledged 116,100,000 Zhongheng non-state-owned 41.69% 118,044,194 0 Frozen 116,489,894 Group legal person SEG (HONG Pledged 0 Overseas legal KONG) CO., 5.85% 16,569,560 0 person Frozen 0 LTD. GOOD HOPE Pledged 0 CORNER Overseas legal 4.49% 12,700,000 0 INVESTMENTS person Frozen 0 LTD Changjiang Pledged 0 Securities Overseas legal Brokerage 1.89% 5,355,249 0 person Frozen 0 (Hongkong) Co., Ltd. 4 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Guoyuan Pledged 0 Securities Overseas legal 1.37% 3,870,117 0 Brokerage (Hong person Frozen 0 Kong) Limited LI SHERYN Overseas legal Pledged 0 0.39% 1,092,000 0 ZHAN MING person Frozen 0 Domestic nature Pledged 0 Li Senzhuang 0.36% 1,022,260 0 person Frozen 0 Domestic nature Pledged 0 Han Yaming 0.31% 864,200 0 person Frozen 0 Domestic nature Pledged 0 Zhong Jiachao 0.30% 857,994 0 person Frozen 0 Overseas nature Pledged 0 BINGHU LIU 0.30% 840,313 0 person Frozen 0 Top ten shareholders with unrestricted shares held Type of shares Shareholder’s name Amount of unrestricted shares held Type Amount RMB common Wuhan Zhongheng Group 118,044,194 118,044,194 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 (Hongkong) Co., Ltd. shares Domestically Guoyuan Securities Brokerage 3,870,117 listed foreign 3,870,117 (Hong Kong) Limited shares Domestically LI SHERYN ZHAN MING 1,092,000 listed foreign 1,092,000 shares Domestically Li Senzhuang 1,022,260 listed foreign 1,022,260 shares Han Yaming 864,200 Domestically 864,200 5 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. listed foreign shares RMB common # Zhong Jiachao 857,994 857,994 share Domestically BINGHU LIU 840,313 listed foreign 840,313 shares Among the top ten shareholders, Wuhan Zhongheng New Science & Technology Industrial Group Co., Ltd. neither bears associated relationship with other shareholders, nor belongs to Explanation on associated the consistent actor that are prescribed in Measures for the Administration of Disclosure of relationship among the aforesaid Shareholder Equity Changes of Listed Companies. The Company neither knew whether there shareholders exists associated relationship among the other tradable shareholders, nor they belong to consistent actors that are prescribed in Measures for the Administration of Disclosure of Shareholder Equity Changes of Listed Companies. Explanation on top 10 common Among the top ten shareholder, Zhong Jiachao holds 857,994 shares of the Company, shareholders involving margin including 369,000 shares holding through credit account, a 43 percent takes in total shares of business (if applicable) the company holding Whether top ten common shareholders or top ten common shareholders with un-restrict shares held have a buy-back agreement dealing in reporting period □ Yes √ No The top ten common shareholders or top ten common shareholders with un-restrict shares held of the Company have no buy-back agreement dealing in reporting period. 2. Total shareholders with preferred stock held and shares held by top ten shareholders with preferred stock held □ Applicable √ Not applicable 6 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Section III. Significant Events I. Particulars about material changes in items of main accounting statement and financial index and explanations of reasons √Applicable □Not applicable Item 2019-3-31 2018-1-1 Y-o-y changes Reasons of changes Account paid in Part of account paid in advance for advance 11,506,518.47 31,348,429.54 -63.29% material at end of last year Amount contact between the enterprises Other receivables 7,731,577.17 5,777,179.08 33.83% increased Account received in Account of goods are received in advance advance 246,190.47 159,528.60 54.32% from small customers Item Jan.-March of 2019 Jan.-March of 2018 Y-o-y changes Reasons of changes Taxes and surcharges 628,766.00 1,117,886.20 -43.75% Sales declined, than the taxes decreased Income from Bank financial purchased in the period investment 30,941.58 110,910.67 -72.10% declined Received government grants at same Non-operation income 44,300.00 512,000.00 -91.35% period last year Non-operation Loss of assets disposal arising at same expenditure 4,118.80 267,736.37 -98.46% period last year Income tax expenses 84,349.95 158,156.45 -46.67% Sales declined, than the taxes decreased Item Jan.-March of 2019 Jan.-March of 2018 Y-o-y changes Reasons of changes Taxes paid 2,076,195.55 7,128,845.32 -70.88% Sales declined, than the taxes decreased Cash received from Bank financial purchased in the period investment income 30,941.58 110,910.67 -72.10% declined Net cash received from disposal of fixed, intangible and other long-term assets - 412,682.00 -100.00% Production equipment renew last period Cash paid for purchasing fixed, intangible and other Purchased new production equipment for long-term assets 1,991,100.36 3,851,816.62 -48.31% new workshop last period Cash received from 39,255,469.21 131,532,341.95 -70.16% Short-term loans declined in the period 7 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. loans Cash paid for settling Short-term loans repayment declined in debts 51,413,400.63 131,560,722.31 -60.92% the period Influence on cash and cash equivalents due to fluctuation in exchange rate 65,528.58 -200,355.12 132.71% Impact of exchange rate fluctuations II. Analysis and explanation of significant events and their influence and solutions √ 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. 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 8 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. 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 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. Summary of important issues Disclosure date Interim report disclosure index Implementation progress of shares buy-back □ Applicable √ Not applicable Implementation progress of the reduction of repurchases shares by centralized bidding □ Applicable √ Not applicable 9 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. III. Commitments completed in Period and those without completed till end of the Period from actual controller, shareholders, related parties, purchaser and companies √Applicable □ Not applicable Type of Commitment Commitment Commitments Promise Content of commitments Implementation commitments date term The enterprise and its subsidiaries will not participate directly or indirectly in operation of the business with Implement competitive of Shen Huafa and its Wuhan since 12 April controlling subsidiary concerned, and In normal Zhongheng 2007-03-29 2007 not to damage the interest of the Shen implementing Group throughout Huafa and its controlling subsidiary by the year making 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 dealings occurred inevitable or have reasonable cause, the Commitments enterprise promise to follow the for share Implement principle of fair-ness, justice and reform Wuhan since 12 April open-ness, signed the agreement in line In normal Zhongheng 2007-03-29 2007 with the laws, perform legal program, implementing Group throughout fulfill information disclosure obligation the year and relevant approval procedures according to the relevant laws, regulations and “Listing Rules” of the Shenzhen Stock Exchange, guarantee not to damage the legal interest of Shen Huafa and its shareholders through related transactions After acquisition and assets Implement restructuring, guarantee to have an Wuhan since 12 April independent staff, owns independent In normal Zhongheng 2007-03-29 2007 and completed assets, and independent implementing Group throughout in aspect of business, financial and the year institution from Shen Huafa Commitments in report of acquisition or 10 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. 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 losses caused by the contract disputes Implemented Wuhan shall be undertaken by Wuhan since 20 In normal Zhongheng 2016-12-20 Zhongheng Group in full; 2. The December implementing Group contingent losses and risks arising from 2016 the termination of relevant contracts shall be undertaken by Wuhan Zhongheng Group in advance. Ended as the reporting period, the Other Promise to increasing shares of holding promises Wuhan In 6 months commitments as 2.83 million shares of B-stock of the during for medium Zhongheng 2017-11-20 since the date and small Company in 6 months since the letter performance Group of notification shareholders delivery period has not been implemented yet Ended as the reporting period, the promises Wuhan Promise to increasing shares of holding n 6 months during Zhongheng as 2.8 million shares of A-stock at least 2017-11-28 since the date performance Group in 6 months since the letter delivery of notification period and part of the commitment implemented Completed on Yes 11 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. time (Y/N) If the commitments is not fulfilled on time, shall Not applicable explain the specify reason and the next work plan IV. Predict of the business performance from January to June 2019 Warnings and reasons of the predict that the cumulative net profit from the begin of the year to the end of next report period may be loss or have great changes comparing with the same period of last year □Applicable √Not applicable V. Securities Investment □ Applicable √ Not applicable No security investment in the Period. VI. Derivative investment □ Applicable √ Not applicable No derivative investment in the Period. VII. Registration form for receiving research, communication and interview in the report period √Applicable □ Not applicable Date Method Type of investors Basic situation index of investigation 2019-01-03 Telephone communication Individual N/A VIII. Guarantee outside against the regulation □Applicable √Not applicable The Company has no external security against the rules in the Period. IX. Non-operational fund occupation from controlling shareholders and its related party □ Applicable √ Not applicable There are no controlling shareholders' and its related party's non-business capital occupying of the listed company. 12 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Section IV. Financial Statement I. Financial statement 1. Consolidate balance sheet Prepared by Shenzhen Zhongheng Huafa Co., Ltd. 2019-03-31 In RMB Items 2019-3-31 2018-12-31 Current assets: Monetary fund 36,204,765.03 34,108,330.27 Settlement provisions Capital lent Transactional financial assets Financial assets measured by fair value and with variation reckoned into current gains/losses Derivative financial assets Note receivable and account 155,349,020.71 185,983,351.22 receivable Including: Notes receivable 27,134,521.33 69,185,516.71 Accounts receivable 128,214,499.38 116,797,834.51 Account paid in advance 11,506,518.47 31,348,429.54 Insurance receivable Reinsurance receivables Contract reserve of reinsurance receivable Other account receivable 7,731,577.17 5,777,179.08 Including: Interest receivable Dividends receivable Buying back the sale of financial assets Inventories 70,786,993.64 62,973,909.38 Contractual assets 13 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Assets held for sale Non-current assets maturing within one year Other current assets 42,314.10 59,370.18 Total current assets 281,621,189.12 320,250,569.67 Non-current assets: Loans and payments on behalf Debt investment Available-for-sale financial assets Other debt investment Held-to-maturity investments Long-term receivables Long-term equity investments Investment in other equity instrument Other non-current financial assets Investment real estate 50,249,240.29 50,681,322.86 Fixed assets 186,259,240.27 188,083,873.38 Construction in progress 6,875,558.57 5,727,760.23 Productive biological assets Oil and natural gas assets Right-of-use assets Intangible assets 44,427,614.19 41,815,689.74 Research and development costs Goodwill Long-term deferred expenses 484,033.03 542,116.99 Deferred income tax assets 6,829,856.59 6,829,856.59 Other non-current assets 2,874,654.00 3,158,964.00 Total non-current assets 298,000,196.94 296,839,583.79 Total assets 579,621,386.06 617,090,153.46 Current liabilities Short-term borrowings 136,622,458.00 161,568,657.88 Loan from central bank Capital borrowed Transactional financial liability 14 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Financial liability measured by fair value and with variation reckoned into current gains/losses Derivative financial liability Notes payable & account payable 72,847,888.26 88,617,663.09 Accounts received in advance 246,190.47 159,528.60 Selling financial asset of repurchase Absorbing deposit and interbank deposits Agent buying and selling securities Acting underwriting securities Wage payable 2,735,590.88 4,700,208.36 Taxes payable 9,489,303.40 11,232,819.87 Other accounts payable 33,389,309.33 26,778,863.92 Including: Interest payable 163,673.05 439,558.70 Dividend payable Handling fees and commissions payable Reinsurance payable Contractual liability Liability held for sale Non-current liabilities due within one year Other current liabilities Total current liabilities 255,330,740.34 293,057,741.72 Non-current liabilities: Insurance contract reserve Long-term loans Bonds payable Including: preferred stock Perpetual capital securities Lease liability Long-term account payable Long term employee compensation payable 15 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Accrued liabilities 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 255,395,151.34 293,122,152.72 Owners’ 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 Special reserve Surplus reserve 77,391,593.25 77,391,593.25 Provision of general risk Retained profit -182,913,857.03 -183,172,091.01 Total owner’s equity attributable to 324,226,234.72 323,968,000.74 parent Company Minority interests Total owner’s equity 324,226,234.72 323,968,000.74 Total liabilities and owner’s equity 579,621,386.06 617,090,153.46 Legal Representative: Li Zhongqiu Person in charge of accounting works: Yang Bin Person in charge of accounting institute: Wu Aijie 2. Balance Sheet of Parent Company In RMB Items 2019-3-31 2018-12-31 Current assets: Monetary fund 5,239,905.52 25,181,764.87 16 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Transactional financial assets Financial assets measured by fair value and with variation reckoned into current gains/losses Derivative financial assets Note receivable and account receivable Including: Notes receivable Accounts receivable Account paid in advance 353,050.00 Other account receivable 105,431,467.95 99,922,143.84 Including: Interest receivable Dividends receivable Inventories 14,806.50 14,806.50 Contractual assets Assets held for sale Non-current assets maturing within one year Other current assets Total current assets 111,039,229.97 125,118,715.21 Non-current assets: Debt investment Available-for-sale financial assets Other debt investment Held-to-maturity investments Long-term receivables Long-term equity investments 186,608,900.00 186,608,900.00 Investment in other equity instrument Other non-current financial assets Investment real estate 26,072,603.04 27,583,299.22 Fixed assets 98,945,724.53 99,678,839.27 Construction in progress 654,356.00 Productive biological assets Oil and natural gas assets 17 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Right-of-use assets Intangible assets 4,662,418.53 4,843,600.68 Research and development costs Goodwill Long-term deferred expenses 141,666.55 Deferred income tax assets 7,506,905.90 7,519,546.71 Other non-current assets Total non-current assets 323,796,552.00 327,030,208.43 Total assets 434,835,781.97 452,148,923.64 Current liabilities Short-term borrowings 100,000,000.00 120,000,000.00 Transactional financial liability Financial liability measured by fair value and with variation reckoned into current gains/losses Derivative financial liability Notes payable & account payable 9,740,367.33 10,745,840.16 Accounts received in advance 133,844.50 67,210.00 Contractual liability Wage payable 820,979.02 1,039,196.20 Taxes payable 7,260,647.12 9,305,468.70 Other accounts payable 21,424,953.87 14,339,551.78 Including: Interest payable Dividend payable Liability held for sale Non-current liabilities due within one year Other current liabilities Total current liabilities 139,380,791.84 155,497,266.84 Non-current liabilities: Long-term loans Bonds payable Including: preferred stock Perpetual capital securities 18 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Lease liability Long-term account payable Long term employee compensation payable Accrued liabilities 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 139,445,202.84 155,561,677.84 Owners’ 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 Special reserve Surplus reserve 77,391,593.25 77,391,593.25 Retained profit -211,749,512.62 -210,552,845.95 Total owner’s equity 295,390,579.13 296,587,245.80 Total liabilities and owner’s equity 434,835,781.97 452,148,923.64 3. Consolidated Profit Statement In RMB Items Current Period Last Period I. Total operating income 143,921,648.63 171,620,013.62 Including: Operating income 143,921,648.63 171,620,013.62 Interest income Insurance gained Handling fees and commissions income II. Total operating cost 143,650,187.48 171,509,663.58 19 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Including: Operating cost 123,972,772.66 152,728,695.85 Interest expense Handling fees and commissions expenses Cash surrender value Net amount of expense of compensation Net amount of withdrawal of insurance contract reserve Bonus expense of guarantee slip Reinsurance expense Taxes and surcharge 628,766.00 1,117,886.20 Sales expenses 3,231,596.06 3,844,118.14 Administration expenses 11,971,872.78 9,464,851.87 R&D expenses Financial expenses 3,845,179.98 4,354,111.52 Including: interest expenses 2,793,872.51 3,116,070.83 Interest income 95,661.57 205,102.82 Losses of devaluation of asset Loss of credit impairment Add: other income Investment income (Loss is listed 30,941.58 110,910.67 with “-”) Including: Investment income on affiliated Company and joint venture Exchange income (Loss is listed with “-”) Net exposure hedging income (Loss is listed with “-”) Changing income of fair value(Loss is listed with “-”) Income on disposal of assets (Loss is listed with “-”) III. Operating profit (Loss is listed with “-”) 302,402.73 221,260.71 Add: Non-operating income 44,300.00 512,000.00 Less: Non-operating expense 4,118.80 267,736.37 20 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. IV. Total Profit (Loss is listed with “-”) 342,583.93 465,524.34 Less: Income tax 84,349.95 158,156.45 V. Net profit (Net loss is listed with “-”) 258,233.98 307,367.89 (i) Classify by business continuity 1.continuous operating net profit (net loss 258,233.98 307,367.89 listed with ‘-”) 2.termination of net profit (net loss listed with ‘-”) (ii) Classify by ownership 1.Net profit attributable to owner’s of 258,233.98 307,367.89 parent company 2.Minority shareholders’ gains and losses VI. Net after-tax of other comprehensive income Net after-tax of other comprehensive income attributable to owners of parent company (I) Other comprehensive income items which will not be reclassified subsequently to profit of loss 1.Changes of the defined benefit plans that re-measured 2.Other comprehensive income under equity method that cannot be transfer to gain/loss 3.Change of fair value of investment in other equity instrument 4.Fair value change of enterprise's credit risk 5. Other (II) Other comprehensive income items which will be reclassified subsequently to profit or loss 1.Other comprehensive income under equity method that can transfer to gain/loss 2.Change of fair value of other debt investment 21 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. 3.gain/loss of fair value changes for available-for-sale financial assets 4.Amount of financial assets re-classify to other comprehensive income 5.Gain/loss of held-to-maturity investments that re-classify to available-for-sale financial asset 6.Credit impairment provision for other debt investment 7.Cash flow hedging reserve 8.Translation differences arising on translation of foreign currency financial statements 9.Other Net after-tax of other comprehensive income attributable to minority shareholders VII. Total comprehensive income 258,233.98 307,367.89 Total comprehensive income 258,233.98 307,367.89 attributable to owners of parent Company Total comprehensive income attributable to minority shareholders VIII. Earnings per share: (i) Basic earnings per share 0.0009 0.0011 (ii) Diluted earnings per share 0.0009 0.0011 Enterprise combine under the same control in the Period, the combined party realized net profit of 0 Yuan before combination, and realized 0 Yuan at last period for combined party 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 Items Current Period Last Period I. Operating income 8,410,710.54 9,695,927.93 Less: Operating cost 1,229,845.47 1,069,611.54 22 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Taxes and surcharge 235,479.42 608,353.57 Sales expenses Administration expenses 4,650,071.72 5,038,857.70 R&D expenses Financial expenses 2,191,390.21 2,469,805.69 Including: interest 2,174,999.98 2,479,875.02 expenses Interest income 6,534.22 16,259.97 Losses of devaluation of asset Loss of credit impairment Add: other income Investment income (Loss is listed with “-”) Including: Investment income on affiliated Company and joint venture Net exposure hedging income (Loss is listed with “-”) Changing income of fair value(Loss is listed with “-”) Income on disposal of assets (Loss is listed with “-”) II. Operating profit (Loss is listed 103,923.72 509,299.43 with “-”) Add: Non-operating income 37,300.00 Less: Non-operating expense III. Total Profit (Loss is listed with 141,223.72 509,299.43 “-”) Less: Income tax 35,305.93 127,324.86 IV. Net profit (Net loss is listed with 105,917.79 381,974.57 “-”) (i)continuous operating net 105,917.79 381,974.57 profit (net loss listed with ‘-”) (ii) termination of net profit (net loss listed with ‘-”) V. Net after-tax of other 23 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. comprehensive income (I) Other comprehensive income items which will not be reclassified subsequently to profit of loss 1.Changes of the defined benefit plans that re-measured 2.Other comprehensive income under equity method that cannot be transfer to gain/loss 3.Change of fair value of investment in other equity instrument 4.Fair value change of enterprise's credit risk 5. Other (II) Other comprehensive income items which will be reclassified subsequently to profit or loss 1.Other comprehensive income under equity method that can transfer to gain/loss 2.Change of fair value of other debt investment 3.gain/loss of fair value changes for available-for-sale financial assets 4.Amount of financial assets re-classify to other comprehensive income 5.Gain/loss of held-to-maturity investments that re-classify to available-for-sale financial asset 6.Credit impairment provision for other debt investment 7.Cash flow hedging reserve 8.Translation differences arising on translation of foreign currency financial statements 24 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. 9.Other VI. Total comprehensive income 105,917.79 381,974.57 VII. Earnings per share: (i) Basic earnings per share 0.0004 0.0013 (ii) Diluted earnings per share 0.0004 0.0013 5. Consolidated Cash Flow Statement In RMB Items Current Period Last Period I. Cash flows arising from operating activities: Cash received from selling commodities and providing labor 131,395,643.63 129,571,099.86 services Net increase of customer deposit and interbank deposit Net increase of loan from central bank Net increase of capital borrowed from other financial institution Cash received from original insurance contract fee Net cash received from reinsurance business Net increase of insured savings and investment Net increase of 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 25 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Net cash received by agents in sale and purchase of securities Write-back of tax received Other cash received concerning 1,243,646.01 1,231,864.14 operating activities Subtotal of cash inflow arising from 132,639,289.64 130,802,964.00 operating activities Cash paid for purchasing commodities and receiving labor 85,022,628.29 96,423,780.37 service Net increase of customer loans and advances Net increase of deposits in central bank and interbank Cash paid for original insurance contract compensation Net increase of financial assets held for transaction purposes Net increase of capital lent Cash paid for interest, commission charge and commission Cash paid for bonus of guarantee slip Cash paid to/for staff and 16,234,429.46 18,269,550.80 workers Taxes paid 2,076,195.55 7,128,845.32 Other cash paid concerning 9,902,133.35 8,642,968.09 operating activities Subtotal of cash outflow arising from 113,235,386.65 130,465,144.58 operating activities Net cash flows arising from 19,403,902.99 337,819.42 operating activities II. Cash flows arising from investing activities: Cash received from recovering investment Cash received from investment 30,941.58 110,910.67 income 26 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Net cash received from disposal of fixed, intangible and other 412,682.00 long-term assets Net cash received from disposal of subsidiaries and other units Other cash received concerning 46,000,000.00 42,000,000.00 investing activities Subtotal of cash inflow from 46,030,941.58 42,523,592.67 investing activities Cash paid for purchasing fixed, 1,991,100.36 3,851,816.62 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 46,000,000.00 42,000,000.00 investing activities Subtotal of cash outflow from 47,991,100.36 45,851,816.62 investing activities Net cash flows arising from investing -1,960,158.78 -3,328,223.95 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 39,255,469.21 131,532,341.95 Cash received from issuing bonds Other cash received concerning financing activities Subtotal of cash inflow from 39,255,469.21 131,532,341.95 financing activities Cash paid for settling debts 51,413,400.63 131,560,722.31 Cash paid for dividend and 3,134,606.87 2,860,474.39 profit distributing or interest paying 27 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Including: Dividend and profit of minority shareholder paid by subsidiaries Other cash paid concerning financing activities Subtotal of cash outflow from 54,548,007.50 134,421,196.70 financing activities Net cash flows arising from -15,292,538.29 -2,888,854.75 financing activities IV. Influence on cash and cash equivalents due to fluctuation in 65,528.58 -200,355.12 exchange rate V. Net increase of cash and cash 2,216,734.50 -6,079,614.40 equivalents Add: Balance of cash and cash 27,961,209.60 81,474,974.30 equivalents at the period -begin VI. Balance of cash and cash 30,177,944.10 75,395,359.90 equivalents at the period -end 6. Cash Flow Statement of Parent Company In RMB Items Current Period Last Period I. Cash flows arising from operating activities: Cash received from selling commodities and providing labor 8,916,021.40 5,470,760.50 services Write-back of tax received Other cash received concerning 2,102,534.22 100,278,749.63 operating activities Subtotal of cash inflow arising from 11,018,555.62 105,749,510.13 operating activities Cash paid for purchasing commodities and receiving labor service Cash paid to/for staff and 841,317.45 899,173.60 workers Taxes paid 458,295.30 1,637,395.79 28 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. Other cash paid concerning 15,538,788.71 110,421,369.31 operating activities Subtotal of cash outflow arising from 16,838,401.46 112,957,938.70 operating activities Net cash flows arising from -5,819,845.84 -7,208,428.57 operating 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 long-term assets Net cash received from disposal of subsidiaries and other units Other cash received concerning investing activities Subtotal of cash inflow from investing activities Cash paid for purchasing fixed, 1,036,800.00 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 1,036,800.00 investing activities Net cash flows arising from investing -1,036,800.00 activities III. Cash flows arising from financing activities Cash received from absorbing investment Cash received from loans 100,000,000.00 Cash received from issuing 29 First Quarterly Report 2019 (Full-Text) Shenzhen Zhongheng Huafa Co., Ltd. bonds Other cash received concerning financing activities Subtotal of cash inflow from 100,000,000.00 financing activities Cash paid for settling debts 100,199,862.50 Cash paid for dividend and 2,174,999.98 2,315,212.52 profit distributing or interest paying Other cash paid concerning financing activities Subtotal of cash outflow from 2,174,999.98 102,515,075.02 financing activities Net cash flows arising from -2,174,999.98 -2,515,075.02 financing activities IV. Influence on cash and cash equivalents due to fluctuation in -23.63 -166.89 exchange rate V. Net increase of cash and cash -7,994,869.45 -10,760,470.48 equivalents Add: Balance of cash and cash 12,024,179.58 25,181,764.87 equivalents at the period -begin VI. Balance of cash and cash 4,029,310.13 14,421,294.39 equivalents at the period -end II. Explanation on financial statement adjustment 1. Financial statement adjustment at the beginning of the first year when implementation of new financial instrument rules, new revenue rules and new leasing rules □Applicable √Not applicable 2. Retrospective adjustment of the comparative data for initial implementation of new financial instrument rules and new leasing rules □Applicable √Not applicable III. Audit report Whether the 1st quarterly report has been audited or not □Yes √ No 1Q report of the Company is unaudited. 30