SEMI-ANNUAL REPORT 2019 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2019 August 2019 1 SEMI-ANNUAL REPORT 2019 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 Aijie, person in charge of accounting organ (accounting principal) hereby confirm that the Financial Report of 2019 Semi-Annual Report is authentic, accurate and complete. Other directors attending the Meeting for semi-annual report deliberation except for the followed Name of director Title for absent director Reasons for absent Attorney absent Gao Jianbai director personal reason Li Zhongqiu Xu Jinwen independent director personal reason Zhang Zhaoguo 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. The Company has no plan of cash dividends carried out, bonus issued and capitalizing of common reserves either. 2 SEMI-ANNUAL REPORT 2019 Contents Semi-annual Report 2019 ............................................................................................................ 1 Section I Important Notice and Paraphrase ................................................................................ 2 Section II Company Profile and Main Financial Indexes ............................................................ 5 Section III Summary of Company Business................................................................................. 8 Section IV Discussion and Analysis of Operation ........................................................................ 9 Section V Important Events ........................................................................................................ 15 Section VI Changes in shares and particular about shareholders ........................................... 32 Section VII Preferred Stock ........................................................................................................ 37 Section VIII Particulars about Directors, Supervisors and Senior Executives ....................... 38 Section IX Corporate Bonds ..................................................................................................... 39 Section X Financial Report ......................................................................................................... 40 Section XI Documents Available for Reference ...................................................................... 147 3 SEMI-ANNUAL REPORT 2019 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 Photoelectricity Refers to Wuhan Hengsheng Photoelectricity 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 4 SEMI-ANNUAL REPORT 2019 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 Short form of the stock after N/A changed (if applicable) Stock exchange for listing Shenzhen Stock Exchange Name of the Company (in 深圳中恒华发股份有限公司 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 II. Person/Way to contact Secretary of the Board Rep. of security affairs Name Yang Bin Niu Zhuo 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 hwafainvestor@126.com.cn hwafainvestor@126.com.cn III. Others 1. Way of contact Whether registrations address, offices address and codes as well as website and email of the Company changed in reporting period or not □ Applicable √ Not applicable Registrations address, offices address and codes as well as website and email of the Company has no change in reporting period, found more details in Annual Report 2018. 5 SEMI-ANNUAL REPORT 2019 2. Information disclosure and preparation place Whether information disclosure and preparation place changed in reporting period or not □ Applicable √ Not applicable The newspaper appointed for information disclosure, website for semi-annual report publish appointed by CSRC and preparation place for semi-annual report have no change in reporting period, found more details in Annual Report 2018 IV. Main accounting data and financial indexes Whether it has retroactive adjustment or re-statement on previous accounting data or not □Yes √No Changes over last year (+, Current period Same period last year -) Operating income (RMB) 339,190,174.05 340,984,843.24 -0.53% Net profit attributable to shareholders of 2,580,411.13 2,793,133.60 -7.62% the listed company (RMB) Net profit attributable to shareholders of the listed company after deducting 2,197,912.06 2,053,467.02 7.03% non-recurring gains and losses (RMB) Net cash flow arising from operating 45,194,220.56 -26,671,325.63 activities (RMB) Basic earnings per share (RMB/Share) 0.0091 0.0099 -8.08% Diluted earnings per share (RMB/Share) 0.0091 0.0099 -8.08% Weighted average ROE 0.79% 0.87% -0.08% Changes over period-end Period-end Period-end of last year of last year (+, -) Total assets (RMB) 623,980,175.29 617,090,153.46 1.12% Net assets attributable to shareholder of 326,548,411.87 323,968,000.74 0.80% listed company (RMB) V. 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. 6 SEMI-ANNUAL REPORT 2019 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. VI. Items and amounts of extraordinary profit (gains)/loss √Applicable □ Not applicable In RMB Item Amount Note Gains/losses from the disposal of non-current asset (including 129,039.57 the 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 223,300.00 national standards, which are closely relevant to enterprise’s business) Gains/losses from entrusted investment or assets management 74,936.14 Other non-operating income and expenditure except for the 9,458.00 aforementioned items Less: Impact on income tax 54,234.64 Total 382,499.07 -- 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 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 7 SEMI-ANNUAL REPORT 2019 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 N/A Fixed assets N/A Intangible assets N/A Construction in progress N/A 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. 8 SEMI-ANNUAL REPORT 2019 Section IV. Discussion and Analysis of Operation I. Introduction After years of development, the company has gradually formed two main businesses of industrial business and property management business. Among them, the industrial business is the production and sales of injection-molded parts, Styrofoam (lightweight material packaging), and liquid crystal display. The property management business is mainly for the rental of self-owned properties. In the first half of 2019, the company achieved operation revenue of 339.19 million yuan, with a y-o-y declined of 0.53%; operating profit of 295 million yuan, with a y-o-y growth of 16.15%; net profit of 2.58 million yuan, with a y-o-y declined of 7.62%; operation revenue from industry production has 318.76 million yuan in the first half of the year, with a y-o-y declined of 1.43%, operating profit of 1.69 million yuan, with a y-o-y declined of 68.15%; net profit of 1.6358 million yuan, with a y-o-y declined of 68.24%; the revenue earns from property leasing in first half year comes to 18.91 million yuan, an increase of 21.20% over the same period last year, and the operating profit was 1.26 million yuan, with a y-o-y growth of 3.93 million yuan (from the same period last year to (2.67) million yuan); the net profit was 94.58 million yuan, and from the same period last year to (1.72) million yuan. II. Main business analysis See the “I-Introduction” in “Discussion and Analysis of Operation” Change of main financial data on a y-o-y basis In RMB Current period Same period last year y-o-y changes Reasons Operating revenue 339,190,174.05 340,984,843.24 -0.53% Operating cost 297,580,208.34 302,582,979.44 -1.65% Sales expenses 9,130,380.22 8,433,363.31 8.26% Administrative 19,616,991.39 20,400,985.42 -3.84% expenses Financial expenses 5,068,371.24 5,447,070.22 -6.95% Increase in property Income tax expenses 603,910.08 463,831.41 30.20% rental income Net cash flow from Note receivable are 45,194,220.56 -26,671,325.63 operating activities collected at maturity Last period, invest in Net cash flow from -3,964,794.99 -6,545,541.50 new workshop and investment activities replace old production 9 SEMI-ANNUAL REPORT 2019 equipment Short-term borrowing Net cash flow from -32,459,238.76 -21,012,832.62 decreased in the financing activities current period Net increase of cash Note receivable are 8,869,836.86 -54,379,579.55 and cash equivalent collected at maturity Major changes on profit composition or profit resources in reporting period □ Applicable √ Not applicable No major changes on profit composition or profit resources occurred in reporting period Constitution of main business In RMB Increase/decrea Increase/decrea Increase/decrea Operating Gross profit se of gross Operating cost se of operating se of operating revenue ratio profit ratio revenue y-o-y cost y-o-y y-o-y According to industries Display 164,964,344.94 156,855,763.07 4.92% 32.94% 34.97% -1.42% Plastic injection 111,142,622.51 97,350,242.91 12.41% -27.04% -30.76% 4.70% hardware Styrofoam 34,292,527.88 31,279,310.58 8.79% -17.96% -18.19% 0.26% According to products Display 164,964,344.94 156,855,763.07 4.92% 32.94% 34.97% -1.42% Plastic injection 111,142,622.51 97,350,242.91 12.41% -27.04% -30.76% 4.70% hardware Styrofoam 34,292,527.88 31,279,310.58 8.79% -17.96% -18.19% 0.26% According to region Hong Kong and 63,962,270.03 60,275,954.47 5.76% -17.18% -18.18% 1.15% Taiwan Central China 158,337,367.02 140,986,540.09 10.96% -20.17% -22.39% 2.55% East China 88,099,858.28 84,222,822.00 4.40% 106.63% 112.14% -2.48% III. Analysis of the non-main business □Applicable √ Not applicable 10 SEMI-ANNUAL REPORT 2019 IV. Assets and liability 1. Major changes of assets composition In RMB Period-end Period-end last year Ratio Ratio in Ratio in Notes of major changes Amount Amount changes total assets total assets 47,981,541.6 65,403,374.3 Monetary fund 7.69% 10.55% -2.86% 1 0 Account 149,540,866. 182,542,130. 23.97% 29.45% -5.48% receivable 46 75 86,709,541.7 37,519,314.3 Inventory 13.90% 6.05% 7.85% 6 4 Investment real 49,817,157.7 29,404,574.4 7.98% 4.74% 3.24% estate 2 4 Long-term equity 0.00% 0.00% 0.00% investment 185,008,101. 108,018,926. Fix assets 29.65% 17.43% 12.22% 52 67 Construction in 7,552,776.46 1.21% 654,356.00 0.11% 1.10% process Short-term 134,676,280. 85,012,392.0 21.58% 13.72% 7.86% loans 00 0 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 Bank acceptance deposit and frozen by court Monetary Fund 11,150,495.15 Notes receivable Pledge 3,866,647.92 Accounts receivable Pledge 14,609,128.53 Investment real estate Bank loan secured 37,728,701.12 11 SEMI-ANNUAL REPORT 2019 Fixed assets Bank loan secured 42,487,962.49 Court closure Liquidation of fixed assets 92,857,471.69 Intangible assets Bank loan secured 36,306,830.17 -- Total 239,007,237.07 V. Investment analysis 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. 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. 12 SEMI-ANNUAL REPORT 2019 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 Operatin Type Net Assets Net profit name business capital assets revenue g profit R&D, production and sales of the Hengfa products as 181,643,11 472,002,52 222,311,68 318,755,72 1,694,08 Technolog Subsidiary 1,635,779.35 well as 1.00 1.79 5.87 6.11 8.29 y Company import & export business etc. Leasing Huafa and 1,000,000. 18,582,268 -1,921,466. 2,393,312. 400,723. Property Subsidiary manageme 300,542.58 00 .84 74 63 44 Company nt of own property Leasing Huafa and 1,000,000. 1,900,692. -5,026,990. Lease Subsidiary manageme 0.00 0.00 0.00 00 20 71 Company nt of own property Leasing Huafa and 1,000,000. Hengtian Subsidiary manageme 995,680.41 995,680.41 0.00 -701.25 -701.25 00 Company nt of own property Leasing Huafa and 1,000,000. Hengtai Subsidiary manageme 996,716.29 996,716.29 0.00 -396.39 -396.39 00 Company nt of own property Particular about subsidiaries obtained or disposed in report period 13 SEMI-ANNUAL REPORT 2019 □Applicable √ Not applicable Explanation of main holding company and stock-jointly companies Nil VIII. Structured vehicle controlled by the Company □ Applicable √Not applicable IX. Prediction of business performance from January – September 2019 Estimation on accumulative net profit from the beginning of the year to the end of next report period to be loss probably or the warning of its material change compared with the corresponding period of the last year and explanation on reason □ Applicable √ Not applicable X. Risks and countermeasures 1. Operational risks of industrial business: industrial restructuring, fluctuations in raw material prices, decline in market demand, and frustration of new product promotion. Countermeasures: continue to open up the market, maintain the existing customers, positively develop new customers, and continue to improve production efficiency; 2. Financial risks: large demands for funds, substantial increase or decrease in financial costs caused by exchange rate fluctuations, and bank credit constraints caused by changes in financial costs and so on. Countermeasures: pay close attention to macroeconomic policy trends, actively expand the financing channels, establish a virtuous circle mechanism for funds, improve the service efficiency, and use financial instruments to avoid exchange rate risks. 14 SEMI-ANNUAL REPORT 2019 Section V. Important Events I. In the report period, the Company held annual shareholders’ general meeting and extraordinary shareholders’ general meeting 1. Annual Shareholders’ General Meeting in the report period Ratio of investor Index of Session of meeting Type Date Date of disclosure participation disclosure http://www.cninfo. com.cn/new/disclo sure/detail?plate=s Annual General zse&stockCode=0 AGM 48.02% 2019-05-21 2019-05-22 Meeting of 2017 00020&announce mentId=12062889 41&announcement Time=2019-05-22 2. Request for extraordinary general meeting by preferred stockholders whose voting rights restore □ Applicable √Not applicable II. Profit distribution plan in the period and capitalizing of common reserves plan □ Applicable √Not applicable The Company plans not to distribute cash dividend and bonus for the semi-annual, and no capitalizing of common reserves either. III. 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 Content of Commitmen Commitmen Implementa Commitments Promise commitmen commitmen t date t term tion ts ts Commitments for share reform Commitments in report of acquisition or equity change Commitments in assets 15 SEMI-ANNUAL REPORT 2019 reorganization Commitments make in initial public offering or re-financing Equity incentive commitment Promise to increasing shares of holding as 2.83 million In 6 months Wuhan shares of since the Performanc Zhongheng B-stock of 2017-11-20 date of e Finished Group the notification Company in 6 months since the letter Other commitments for medium delivery and small shareholders Promise to increasing shares of holding as 2.8 million In 6 months Wuhan shares of since the Performanc Zhongheng 2017-11-28 A-stock at date of e Finished Group least in 6 notification months since the letter delivery Completed on time(Y/N) Yes If the commitments are not fulfilled on time, shall explain the specify Not applicable reason and the next work plan IV. Appointment and non-reappointment (dismissal) of CPA Whether the financial report has been audited or not □Yes √no The company's semi-annual report has not been audited. 16 SEMI-ANNUAL REPORT 2019 V. Explanation from Board of Directors and Supervisory Committee for “Qualified Opinion” that issued by CPA □ Applicable √Not applicable VI. Explanation from the Board for “Qualified Opinion” of last year’s □ Applicable √Not applicable VII. Bankruptcy reorganization □ Applicable √Not applicable No bankruptcy reorganization for the Company in reporting period VIII. Lawsuits Significant lawsuits and arbitration √Applicable □Not applicable Amount of Advances The basic The results and money Predicted in Execution of situation of effects of Disclosure Disclosur involved (in liabilities litigation the litigation litigation litigation date e index 10 thousand (Y/N) (Arbitrati (Arbitration) (Arbitration) (Arbitration) Yuan) on) http://ww Ruling on In September w.cninfo. 16 August 2016, Wuhan com.cn/c 2017; put Zhongheng ninfo-new forward Group Co., Ltd. /disclosur the and the e/szse_ma applicatio Company and in/bulletin n for Shenzhen Vanke _detail/tru dismantli were applied for e/120440 ng by the arbitration due to Found more in 6606?ann Company the dispute case 46,460 No announcement Implementing 2018-02-09 ounceTim and of “Contract for of the Company e=2018-0 controllin the Cooperative 2-09 ; g Operation of the http://ww sharehold Old Projects at w.cninfo. er, the Huafa Industrial com.cn/n applicatio Park, Gongming ew/disclo n was Street, sure/detai rejected Guangming New l?plate=sz by the District”. se&stock court Code=00 17 SEMI-ANNUAL REPORT 2019 0020&an nounceme ntId=120 5326846 &announ cementTi me=2018 -08-25 In March 2016, the Company and HUAFA Science & Technology suit against the follow companies, including Shenzhen Huayongxing http://ww Environmental w.cninfo. Technology Co., The com.cn/c Ltd., Shenzhen judgment ninfo-new Guangyong of 2nd trial /disclosur Breadboard Co., has been e/szse_ma Ltd., Shenzhen issued, in/bulletin Mingyi 1,964.92 No and has Ended Ended 2016-09-14 _detail/tru Electronic Co., applied e/120270 Ltd., Shenzhen for 2423?ann Ouruilai compulso ounceTim Technology Co., ry e=2016-0 Ltd and execution 9-14 Shenzhen 07:41 Kangzhengxin Technology Co., Ltd., for arrears of rent. and refuse to move the site, forcibly occupied switch board room and other power unit under the name of the Company 18 SEMI-ANNUAL REPORT 2019 In March 2016, The the Company http://ww second and HUAFA w.cninfo. trial Property suit com.cn/c decides against Shenzhen ninfo-new the Huayongxing /disclosur Company Environmental e/szse_ma wins the Technology Co., in/bulletin 947.26 No lawsuit on Implementing Implementing 2016-09-14 Ltd., and _detail/tru 15 March Shenzhen e/120270 2018, and Yidaxin 2423?ann has Technology Co., ounceTim applied Ltd. for contract e=2016-0 for violation and 9-14 enforcem refuse to move 07:41 ent the site http://ww w.cninfo. Application for com.cn/n arbitration in ew/disclo case of contract sure/detai dispute between Arbitratio l?plate=sz the V&T n has se&stock (Shenzhen) Law been To be To be Code=00 Firm and 1,940.2 No 2018-11-14 heard for adjudicated adjudicated 0020&an Shenzhen adjudicati nounceme Zhongheng on ntId=120 Huafa Co., Ltd. 5602053 and Wuhan &announ Zhongheng cementTi Group me=2018 -11-14 Other lawsuits □Applicable √ Not applicable IX. Penalty and rectification □Applicable √ Not applicable The Company has no penalty and rectification in the period X. Integrity of the company and its controlling shareholders and actual controllers □ Applicable √Not applicable 19 SEMI-ANNUAL REPORT 2019 XI. 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. XII. Major related transaction 1. Related transaction with routine operation concerned √Applicable □ Not applicable Whet Tradi her Relate ng d over Cleari Availa Propo limit Inde Type Conte transa the ng ble Date Relate rtion of nt of Pricin ction appro form x of Relate Relati d in appro simila of relate relate g amou for d onshi transa simila ved discl d d princi nt (in ved relate r disclo party p ction r transa transa ple 10 (in 10 d osur price transa limite marke sure ction ction thousa transa ctions thousa e nd d or ction t price Yuan) nd not Yuan) (Y/N) http: //w ww. cnin fo.c om.c n/ne w/di Sharin sclo Synch g the Purch sure/ ronize Telegr same asing detai HK Purch d with 5,531. 5,531. 35.26 16,77 aphic 2019- contro LCD N —— l?pla Yutian ase the 49 49 % 8.09 transf 04-30 lling monit te= marke er shareh ors &or t older gId= gssz 000 002 0&st ock Cod e=0 000 20 SEMI-ANNUAL REPORT 2019 20& anno unce men tId= 120 615 798 4&a nno unce men tTim e=2 019- 04-3 0 The http: avera //w ge ww. Confir marke cnin med t price fo.c with refers om.c 1% of to the n/ne curren price w/di t of sclo marke same sure/ t Sharin specif detai avera Hengs g the Purch icatio l?pla ge Telegr heng same asing ns te= Purch price 4,735. 4,735. 30.19 12,32 aphic 2019- Photo contro LCD N which &or ase in 80 8 % 6.76 transf 04-30 electri lling monit is gId= princi er city shareh ors search gssz ple, older ed 000 and from 002 refer throug 0&st to h the ock both world Cod their famou e=0 bargai s 000 ning profes 20& power sional anno marke unce t men 21 SEMI-ANNUAL REPORT 2019 surve tId= y 120 comp 615 any 798 websit 4&a e nno http:// unce www. men witsvi tTim ew.co e=2 m 019- recog 04-3 nized 0 author ity in the indust ry and LCD profes sional marke t surve y comp any websit e http:// www. witsvi ew.co m Accor http: ding //w Sharin to the ww. Hengs g the Purch order Telegr cnin heng same asing Purch price, 1,037. 1,037. 8,217. aphic 2019- fo.c Photo contro LCD 6.61% N —— ase deduc 41 41 84 transf 04-30 om.c electri lling monit ted 1 er n/ne city shareh ors Yuan w/di older each sclo for sure/ 22 SEMI-ANNUAL REPORT 2019 operat detai ion l?pla charge te= &or gId= gssz 000 002 0&st ock Cod e=0 000 20& anno unce men tId= 120 615 798 4&a nno unce men tTim e=2 019- 04-3 0 http: //w ww. Accor Sales cnin Sharin ding LCD fo.c g the to the overal Telegr om.c same custo HK l 6,413. 6,413. 38.87 23,96 aphic 2019- n/ne contro Sales mer N —— Yutian monit 62 62 % 8.7 transf 04-30 w/di lling sales or er sclo shareh order machi sure/ older price ne set detai sure l?pla te= &or 23 SEMI-ANNUAL REPORT 2019 gId= gssz 000 002 0&st ock Cod e=0 000 20& anno unce men tId= 120 615 798 4&a nno unce men tTim e=2 019- 04-3 0 http: //w ww. cnin fo.c Accor om.c Sharin ding n/ne Hengs g the LCD to the Telegr w/di heng same displa custo 1,218. 1,218. 3,971. aphic 2019- sclo Photo contro Sales y mer 7.77% N —— 41 41 96 transf 04-30 sure/ electri lling screen sales er detai city shareh /LCD order l?pla older price te= sure &or gId= gssz 000 002 24 SEMI-ANNUAL REPORT 2019 0&st ock Cod e=0 000 20& anno unce men tId= 120 615 798 4&a nno unce men tTim e=2 019- 04-3 0 18,93 65,26 Total -- -- -- -- -- -- -- -- 6.73 3.35 Detail of sales return with major N/A amount involved In the reporting, Hengfa Technology purchased LCD display screen from HK Yutian with US$ 8.1662 million approximately, 33.33% of the annual amount predicted at the beginning of the year; purchased LCD display screen from Hengsheng Photoelectricity Report the actual implementation with US $ 6.8918 million approximately, 38.29% of the annual amount predicted at the of the daily related transactions beginning of the year; purchasing LCD from Hengsheng Photoelectricity with about US which were projected about their $ 1.5097 million, 12.58% of the annual amount predicted at the beginning of the year; sold total amount by types during the LCD whole machine to HK Yutian with US $ 9.4896 million approximately, 27.11% of the reporting period (if applicable) annual amount predicted at the beginning of the year. Sold LCD (display screen) to Hengsheng Photoelectricity with US $ 1.7731 million approximately, 30.57% of the annual amount predicted at the beginning of the year. Reasons for major differences between trading price and market Not applicable reference price (if applicable) 2. Related transactions by assets acquisition and sold □Applicable √ Not applicable 25 SEMI-ANNUAL REPORT 2019 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 No contact of related credit and debt in the period 5. Other related transactions □ Applicable √Not applicable The Company had no other significant related transactions in reporting period. XIII. 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. XIV. 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 26 SEMI-ANNUAL REPORT 2019 (1) Guarantees In 10 thousand Yuan Particulars about the external guarantee of the Company (Barring the guarantee for subsidiaries) Related Actual date of Guaran Name of the Announc happening Actual Implem tee for Guarante Guarantee Guarantee Company ement (Date of guarantee ented related e limit type term guaranteed disclosur signing limit (Y/N) party e date agreement) (Y/N) Guarantee of the Company and the subsidiaries Related Actual date of Guaran Name of the Announc happening Actual Implem tee for Guarante Guarantee Guarantee Company ement (Date of guarantee ented related e limit type term guaranteed disclosur signing limit (Y/N) party e date agreement) (Y/N) Wuhan Hengfa Joint 2019-08- Technology Co., 30,000 2,267.63 liability One year N Y 27 Ltd. guarantee Total amount of actual Total amount of approving occurred guarantee for guarantee for subsidiaries in 30,000 5,926.83 subsidiaries in report period report period (B1) (B2) Total amount of approved Total balance of actual guarantee for subsidiaries at guarantee for subsidiaries at 30,000 2,267.63 the end of reporting period the end of reporting period (B3) (B4) Guarantee of the subsidiaries for the subsidiaries Related Actual date of Guaran Name of the Announc happening Actual Implem tee for Guarante Guarantee Guarantee Company ement (Date of guarantee ented related e limit type term guaranteed disclosur signing limit (Y/N) party e date agreement) (Y/N) Total amount of guarantee of the Company (total of three abovementioned guarantee) Total amount of approving Total amount of actual guarantee in report period 30,000 occurred guarantee in report 5,926.83 (A1+B1+C1) period (A2+B2+C3) Total amount of approved Total balance of actual guarantee at the end of report 30,000 guarantee at the end of 2,267.63 period (A3+B3+C2) report period (A4+B4+C4) The proportion of the total amount of actually guarantee in 6.94% the net assets of the Company (that is A4+ B4+C4) 27 SEMI-ANNUAL REPORT 2019 Including: Explanations on possibly bearing joint and several liquidating responsibilities for undue guarantees (if N/A applicable) Explanations on external guarantee against regulated N/A procedures (if applicable) Explanation on compound guarantee Nil (2) Guarantee outside against the regulation □Applicable √ Not applicable No guarantee outside against the regulation in Period. 3. Other material contracts □ Applicable √Not applicable No other material contracts for the Company in reporting period. XV. Social responsibility 1. Material environmental protection The listed Company and its subsidiary whether belong to the key sewage units released from environmental protection department Not applicable Listed companies and their subsidiaries do not belong to key pollutant discharge units announced by environmental protection departments. 2.Execution of social responsibility of targeted poverty alleviation (1) targeted poverty alleviation (2) Summary of targeted poverty alleviation (3) Performance of the targeted poverty alleviation Unit of Index Quantity /implementation measure I. Overall condition —— —— II. Poverty alleviation by items —— —— 1.Industry development —— —— 28 SEMI-ANNUAL REPORT 2019 2.Shift employment —— —— 3. Relocating in other places —— —— 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 XVI 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. 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 29 SEMI-ANNUAL REPORT 2019 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, although most of the arbitration claims proposed by Shenzhen Vanke are rejected by arbitration court, the arbitration procedures and so-called cognizance of fact of contract breach still has problems in arbitration. The results have damaged the legitimate rights and interest of the Company, and we have putting forward the application for dismantling in February 2018 to the Shenzhen Intermediate People’s Court. The Court has accepted the case formally. 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 and 9 Feb. 2018 respectively. (ii) Major shareholders’ commitment to increase holdings On November 20 and 28, 2017, the controlling shareholders made a commitment to increase the holding of 2.83 million shares of the company's B shares and not less than 2.8 million shares of the A shares, the commitment period was within 6 months, and it has been completed in May 2019 after two times of postponement. (iii) 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 pledged shares are deferred 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. (iv) The controlling shareholder Wuhan Zhongheng Group holds 119,289,894 shares of the Company’ stock, accounting for 42.13% of the total share capital of the Company, of which 116,489,894 shares were judicially frozen on September 27, 2016, and the frozen period was until September 13, 2021, which were frozen again by the Shenzhen Intermediate People's Court on December 14, 2018, with a frozen period of 36 months, the remaining 2,800,000 shares were frozen by the Shenzhen Intermediate People's Court on May 29, 2019, and were frozen again by the Higher People’s Court of Guangdong Province on July 5, 2019. For details, please refer to the company’s announcements published on www.cninfo.com.cn on October 27, 2016, January 11, 2019, May 31, 2019 and August 7, 2019. 30 SEMI-ANNUAL REPORT 2019 XVII. Significant event of subsidiary of the Company □ Applicable √Not applicable 31 SEMI-ANNUAL REPORT 2019 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 Proporti Amount shares of Others Subtotal Amount on shares on issued public reserve I. Restricted shares 0 0.00% 0 0 0 0 0 0 0.00% 283,161 100.00 283,161 100.00 II. Unrestricted shares 0 0 0 0 0 ,227 % ,227 % 181,165 181,165 1. RMB Ordinary shares 63.98% 0 0 0 0 0 63.98% ,391 ,391 2. Domestically listed 101,995 101,995 36.02% 0 0 0 0 0 36.02% foreign shares ,836 ,836 283,161 100.00 283,161 100.00 III. Total shares 0 0 0 0 0 ,227 % ,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 32 SEMI-ANNUAL REPORT 2019 2. Changes of restricted shares □ Applicable √Not applicable II. Securities issuance and listing □ Applicable √Not applicable III. Amount of shareholders of the Company and particulars about shares holding In Share Total preference shareholders Total common stock with voting rights recovered at shareholders in reporting 23,417 0 end of reporting period (if period-end applicable) (found in note8) Particulars about common shares held above 5% by shareholders or top ten common shareholders Total Number of share commo Amount Amount pledged/frozen n of of Proportio shareho Changes restricte un-restric Full name of Nature of n of lders at in report d ted Shareholders shareholder shares State of held the end period commo common Amount share of n shares shares report held held period Wuhan Domestic Pledged 116,100,000 119,289 119,289,8 Zhongheng non-state-owned 42.13% 2608800 0 ,894 94 Frozen 119,289,894 Group legal person SEG (HONG Pledged 0 Overseas legal 16,569, 16,569,56 KONG) CO., 5.85% 0 0 person 560 0 Frozen 0 LTD. GOOD Pledged 0 HOPE Overseas legal 12,700, 12,700,00 CORNER 4.49% 0 0 person 000 0 Frozen 0 INVESTME NTS LTD Changjiang Pledged 0 Securities Overseas legal 5,355,2 Brokerage 1.89% 0 0 5,355,249 person 49 Frozen 0 (Hong Kong) Co., Ltd. Guoyuan Overseas legal 1.36% 3,845,1 0 0 3,845,117 Pledged 0 33 SEMI-ANNUAL REPORT 2019 Securities person 17 Brokerage Frozen 0 (Hong Kong) Co., Ltd. Overseas nature 2,830,0 Pledged 0 Li Zhongqiu 1.00% 2,830,000 0 2,830,000 person 00 Frozen 0 Zhong Domestic nature 1,277,4 Pledged 0 0.45% 1,277,494 Jiachao person 94 Frozen 0 Domestic nature Pledged 0 Li Senzhuang 0.35% 986,550 986,550 person Frozen 0 LI SHERYN Overseas nature Pledged 0 0.35% 980,100 980,100 ZHAN MING person Frozen 0 Domestic nature Pledged 0 Han Yaming 0.30% 864,200 864,200 person 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 relationship with other shareholders, nor belongs to the consistent actor that are prescribed Explanation on associated in Measures for the Administration of Disclosure of Shareholder Equity Changes of Listed relationship among the aforesaid Companies. The Company neither knew whether there exists associated relationship among shareholders 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 common shares held Amount of un-restrict common shares held at Type of shares Shareholders’ name Period-end Type Amount RMB common Wuhan Zhongheng Group 119,289,894 119,289,894 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 34 SEMI-ANNUAL REPORT 2019 Domestically Guoyuan Securities Brokerage 3,845,117 listed foreign 3,845,117 (Hong Kong) Co., Ltd. shares Domestically Li Zhongqiu 2,830,000 listed foreign 2,830,000 shares RMB common Zhong Jiachao 1,277,494 1,277,494 share Domestically Li Senzhuang 986,550 listed foreign 986,550 shares Domestically LI SHERYN ZHAN MING 980,100 listed foreign 980,100 shares Domestically Han Yaming 864,200 listed foreign 864,200 shares Expiation on associated Among the top ten unrestricted shareholders, the Company neither knew whether there relationship or consistent actors exists associated relationship among the other tradable shareholders, nor they belong to within the top 10 un-restrict consistent actors that are prescribed in Measures for the Administration of Disclosure of common shareholders and Shareholder Equity Changes of Listed Companies. Among the top ten shareholders, Wuhan between top 10 un-restrict Zhongheng Group neither bears associated relationship with other shareholders, nor belongs common shareholders and top 10 to the consistent actor that are prescribed in Measures for the Administration of Disclosure shareholders of Shareholder Equity Changes of Listed Companies. Explanation on top 10 common Among the top ten shareholders, Zhong Jiachao holds 1,277,494 shares of the Company, of shareholders involving margin which, 743,494 shares held by normal account, and 534,000 shares held through credit business (if applicable) (see note security account 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. IV. Change of controlling shareholder or actual controller Changes of controlling shareholders in reporting period □ Applicable √Not applicable The Company had no changes of controlling shareholders in reporting period Changes of actual controller in reporting period □ Applicable √Not applicable 35 SEMI-ANNUAL REPORT 2019 No changes of actual controllers for the Company in reporting period. 36 SEMI-ANNUAL REPORT 2019 Section VII. Preferred Stock □ Applicable √Not applicable The Company had no preferred stock in the Period. 37 SEMI-ANNUAL REPORT 2019 Section VIII. Particulars about Directors, Supervisors and Senior Executives I. Changes of shares held by directors, supervisors and senior executives √ Applicable □ Not applicable Amount of Amount of Shares held shares Start shares Working End date at increased Sex dated of Title Age of office decreased in Name status (M/F) office period-begi in this term term this period n (Share) period (Share) (Share) Chairma Li Currentl n/Gener 2,830,00 2,830,00 Zhongqi y in 0 0 0 0 0 al 0 0 u office Manager 2,830,00 2,830,00 Total -- -- 0 0 0 0 0 0 0 II. Changes of directors, supervisors and senior executives □ Applicable √ Not applicable No changes of directors, supervisors and senior executives, found more details in Annual Report 2018. 38 SEMI-ANNUAL REPORT 2019 Section IX. Corporate Bond Whether the Company has a corporation bonds that issuance publicly and listed on stock exchange and without due on the date when semi-annual report approved for released or fail to cash in full on due No 39 深圳中恒华发股份有限公司 2019 年半年度报告全文 Section X. Financial Report I. Audit report Whether the semi-annual report was audited or not □ Yes √ No The financial report of this semi-annual report was unaudited II. Financial statement Currency used in note of financial statement is RMB (Yuan) 1. Consolidated Balance Sheet Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD 2019-08-27 In RMB Item 2019-6-30 2018-12-31 Current assets: Monetary funds 47,981,541.61 34,108,330.27 Settlement provisions Capital lent Tradable financial assets Financial assets measured by fair value and with variation reckoned into current gains/losses Derivative financial assets Note receivable 10,427,934.87 69,185,516.71 Account receivable 149,540,866.46 116,797,834.51 Receivable financing Accounts paid in advance 28,418,600.46 31,348,429.54 Insurance receivable Reinsurance receivables Contract reserve of reinsurance receivable Other account receivable 5,781,851.15 5,777,179.08 40 深圳中恒华发股份有限公司 2019 年半年度报告全文 Including: Interest receivable Dividend receivable Buying back the sale of financial assets Inventories 86,709,541.76 62,973,909.38 Contractual assets Assets held for sale Non-current asset due within one year Other current assets 1,218,695.38 59,370.18 Total current assets 330,079,031.69 320,250,569.67 Non-current assets: Loans and payments on behalf Debt investment Finance asset available for sales Other debt investment Held-to-maturity investment Long-term account receivable Long-term equity investment Investment in other equity instrument Other non-current financial assets Investment real estate 49,817,157.72 50,681,322.86 Fixed assets 185,008,101.52 188,083,873.38 Construction in progress 7,552,776.46 5,727,760.23 Productive biological asset Oil and gas asset Right-of-use assets Intangible assets 43,977,752.24 41,815,689.74 Expense on Research and Development Goodwill Long-term expenses to be 425,949.07 542,116.99 apportioned Deferred income tax asset 6,829,856.59 6,829,856.59 41 深圳中恒华发股份有限公司 2019 年半年度报告全文 Other non-current asset 289,550.00 3,158,964.00 Total non-current asset 293,901,143.60 296,839,583.79 Total assets 623,980,175.29 617,090,153.46 Current liabilities: Short-term loans 134,676,280.00 161,568,657.88 Loan from central bank Capital borrowed Transactional financial liability Financial liability measured by fair value and with variation reckoned into current gains/losses Derivative financial liability Note payable 13,804,210.29 27,642,356.66 Account payable 102,035,210.28 60,975,306.43 Accounts received in advance 156,232.44 159,528.60 Selling financial asset of repurchase Absorbing deposit and interbank deposit Security trading of agency Security sales of agency Wage payable 4,045,824.29 4,700,208.36 Taxes payable 11,609,232.63 11,232,819.87 Other account payable 31,040,362.49 26,778,863.92 Including: Interest payable 54,347.32 439,558.70 Dividend payable Commission charge and commission payable Reinsurance payable Contractual liability Liability held for sale Non-current liabilities due within one year Other current liabilities Total current liabilities 297,367,352.42 293,057,741.72 Non-current liabilities: 42 深圳中恒华发股份有限公司 2019 年半年度报告全文 Insurance contract reserve Long-term loans Bonds payable Including: Preferred stock Perpetual capital securities Lease liability 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 297,431,763.42 293,122,152.72 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 -180,591,679.88 -183,172,091.01 Total owner’ s equity attributable to 326,548,411.87 323,968,000.74 parent company Minority interests Total owner’ s equity 326,548,411.87 323,968,000.74 Total liabilities and owner’ s equity 623,980,175.29 617,090,153.46 Legal representative: Li Zhongqiu 43 深圳中恒华发股份有限公司 2019 年半年度报告全文 Person in charge of accounting works: Yang Bin Person in charge of accounting institution: Wu Aijie 2. Balance Sheet of Parent Company In RMB Item 2019-6-30 2018-12-31 Current assets: Monetary funds 1,793,275.01 13,234,774.97 Transactional financial assets Financial assets measured by fair value and with variation reckoned into current gains/losses Derivative financial assets Note receivable Account receivable Receivable financing Accounts paid in advance 53,050.00 153,050.00 Other account receivable 111,782,724.70 99,155,253.08 Including: Interest receivable Dividend receivable Inventories 14,806.50 14,806.50 Contractual assets Assets held for sale Non-current assets maturing within one year Other current assets 17,055.88 Total current assets 113,643,856.21 112,574,940.43 Non-current assets: Debt investment Available-for-sale financial assets Other debt investment Held-to-maturity investments Long-term receivables 44 深圳中恒华发股份有限公司 2019 年半年度报告全文 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 25,770,502.38 26,374,703.70 Fixed assets 98,675,129.84 99,227,872.22 Construction in progress Productive biological assets Oil and natural gas assets Right-of-use assets Intangible assets 4,626,182.10 4,698,654.96 Research and development costs Goodwill Long-term deferred expenses Deferred income tax assets 7,506,905.90 7,506,905.90 Other non-current assets Total non-current assets 323,187,620.22 324,417,036.78 Total assets 436,831,476.43 436,991,977.21 Current liabilities Short-term borrowings 100,000,000.00 100,000,000.00 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 41,605.01 41,937.00 Contractual liability Wage payable 820,979.02 1,020,979.02 Taxes payable 7,423,067.53 7,161,707.15 Other accounts payable 22,811,198.36 22,672,441.54 Including: Interest payable Dividend payable 45 深圳中恒华发股份有限公司 2019 年半年度报告全文 Liability held for sale Non-current liabilities due within one year Other current liabilities Total current liabilities 140,837,217.25 141,642,904.87 Non-current liabilities: Long-term loans Bonds payable Including: preferred stock Perpetual capital securities 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 140,901,628.25 141,707,315.87 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 -211,210,243.57 -211,855,430.41 Total owner’s equity 295,929,848.18 295,284,661.34 Total liabilities and owner’s equity 436,831,476.43 436,991,977.21 46 深圳中恒华发股份有限公司 2019 年半年度报告全文 3. Consolidated Profit Statement In RMB Item Semi-annual of 2019 Semi-annual of 2018 I. Total operating income 339,190,174.05 340,984,843.24 Including: Operating income 339,190,174.05 340,984,843.24 Interest income Insurance gained Commission charge and commission income II. Total operating cost 336,433,054.05 338,576,691.78 Including: Operating cost 297,580,208.34 302,582,979.44 Interest expense Commission charge and commission expense Cash surrender value Net amount of expense of compensation Net amount of withdrawal of insurance contract reserve Bonus expense of guarantee slip Reinsurance expense Tax and extras 1,310,110.00 1,712,293.39 Sales expense 9,130,380.22 8,433,363.31 Administrative expense 19,616,991.39 20,400,985.42 R&D expense 3,726,992.86 Financial expense 5,068,371.24 5,447,070.22 Including: Interest 5,355,676.92 5,989,883.31 expenses Interest -419,336.28 -349,858.59 income Add: other income Investment income (Loss is 74,936.14 245,679.10 listed with “-”) Including: Investment income on affiliated company and joint venture 47 深圳中恒华发股份有限公司 2019 年半年度报告全文 The termination of income recognition for financial assets measured by amortized cost(Loss is listed with “-”) Exchange income (Loss is listed with “-”) Net exposure hedging income (Loss is listed with “-”) Income from change of fair value (Loss is listed with “-”) Loss of credit impairment -8,432.50 (Loss is listed with “-”) Losses of devaluation of -5,941.50 asset (Loss is listed with “-”) Income from assets disposal 129,039.57 -105,779.36 (Loss is listed with “-”) III. Operating profit (Loss is listed with 2,952,663.21 2,542,109.70 “-”) Add: Non-operating income 232,758.00 887,662.07 Less: Non-operating expense 1,100.00 172,806.76 IV. Total profit (Loss is listed with “-”) 3,184,321.21 3,256,965.01 Less: Income tax expense 603,910.08 463,831.41 V. Net profit (Net loss is listed with 2,580,411.13 2,793,133.60 “-”) (i) Classify by business continuity 1.continuous operating net profit 2,580,411.13 2,793,133.60 (net loss listed with ‘-”) 2.termination of net profit (net loss listed with ‘-”) (ii) Classify by ownership 1.Net profit attributable to 2,580,411.13 2,793,133.60 owner’s of 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 48 深圳中恒华发股份有限公司 2019 年半年度报告全文 (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 9.Other 49 深圳中恒华发股份有限公司 2019 年半年度报告全文 Net after-tax of other comprehensive income attributable to minority shareholders VII. Total comprehensive income 2,580,411.13 2,793,133.60 Total comprehensive income attributable to owners of parent 2,580,411.13 2,793,133.60 Company Total comprehensive income attributable to minority shareholders VIII. Earnings per share: (i) Basic earnings per share 0.0091 0.0099 (ii) Diluted earnings per share 0.0091 0.0099 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 institution: Wu Aijie 4. Profit Statement of Parent Company In RMB Item Semi-annual of 2019 Semi-annual of 2018 I. Operating income 18,041,135.31 16,961,088.74 Less: Operating cost 3,172,031.59 2,510,518.82 Taxes and surcharge 562,061.05 585,014.62 Sales expenses Administration expenses 9,024,394.50 11,134,855.37 R&D expenses Financial expenses 4,423,699.05 4,888,654.05 Including: interest 4,398,333.30 4,903,025.04 expenses Interest income -9,938.10 -22,022.66 Add: other income Investment income (Loss is listed with “-”) 50 深圳中恒华发股份有限公司 2019 年半年度报告全文 Including: Investment income on affiliated Company and joint venture The termination of income recognition for financial assets measured by amortized cost (Loss is listed with “-”) Net exposure hedging income (Loss is listed with “-”) Changing income of fair value (Loss is listed with “-”) Loss of credit impairment (Loss is listed with “-”) Losses of devaluation of asset (Loss is listed with “-”) Income on disposal of assets (Loss is listed with “-”) II. Operating profit (Loss is listed 858,949.12 -2,157,954.12 with “-”) Add: Non-operating income 1,300.00 Less: Non-operating expense 131,247.82 III. Total Profit (Loss is listed with 860,249.12 -2,289,201.94 “-”) Less: Income tax 215,062.28 -444,975.63 IV. Net profit (Net loss is listed with 645,186.84 -1,844,226.31 “-”) (i)continuous operating net 645,186.84 -1,844,226.31 profit (net loss listed with ‘-”) (ii) termination of net profit (net loss listed with ‘-”) V. Net after-tax of other 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 51 深圳中恒华发股份有限公司 2019 年半年度报告全文 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 9.Other VI. Total comprehensive income 645,186.84 -1,844,226.31 VII. Earnings per share: (i) Basic earnings per share 0.0023 -0.0065 (ii) Diluted earnings per share 0.0023 -0.0065 52 深圳中恒华发股份有限公司 2019 年半年度报告全文 5. Consolidated Cash Flow Statement In RMB Item Semi-annual of 2019 Semi-annual of 2018 I. Cash flows arising from operating activities: Cash received from selling commodities and providing labor 283,565,570.88 195,284,689.59 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 Cash received from interest, commission charge and commission Net increase of capital borrowed Net increase of returned business capital Net cash received by agents in sale and purchase of securities Write-back of tax received Other cash received concerning 3,403,272.55 3,010,278.37 operating activities Subtotal of cash inflow arising from 286,968,843.43 198,294,967.96 operating activities Cash paid for purchasing commodities and receiving labor 182,811,441.04 158,655,192.45 service Net increase of customer loans and advances Net increase of deposits in 53 深圳中恒华发股份有限公司 2019 年半年度报告全文 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 33,770,584.01 35,688,181.95 workers Taxes paid 4,582,072.62 12,954,614.98 Other cash paid concerning 20,610,525.20 17,668,304.21 operating activities Subtotal of cash outflow arising from 241,774,622.87 224,966,293.59 operating activities Net cash flows arising from operating 45,194,220.56 -26,671,325.63 activities II. Cash flows arising from investing activities: Cash received from recovering investment Cash received from investment 74,936.14 253,638.00 income Net cash received from disposal of fixed, intangible and other 320,500.00 737,982.00 long-term assets Net cash received from disposal of subsidiaries and other units Other cash received concerning 49,000,000.00 80,000,000.00 investing activities Subtotal of cash inflow from 49,395,436.14 80,991,620.00 investing activities Cash paid for purchasing fixed, 4,360,231.13 7,537,161.50 intangible and other long-term assets Cash paid for investment Net increase of mortgaged loans 54 深圳中恒华发股份有限公司 2019 年半年度报告全文 Net cash received from subsidiaries and other units obtained Other cash paid concerning 49,000,000.00 80,000,000.00 investing activities Subtotal of cash outflow from 53,360,231.13 87,537,161.50 investing activities Net cash flows arising from investing -3,964,794.99 -6,545,541.50 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 61,315,748.80 156,361,250.00 Cash received from issuing bonds Other cash received concerning financing activities Subtotal of cash inflow from 61,315,748.80 156,361,250.00 financing activities Cash paid for settling debts 88,051,864.63 172,529,301.86 Cash paid for dividend and 5,723,122.93 4,844,780.76 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 93,774,987.56 177,374,082.62 financing activities Net cash flows arising from financing -32,459,238.76 -21,012,832.62 activities IV. Influence on cash and cash equivalents due to fluctuation in 99,650.05 -149,879.80 exchange rate V. Net increase of cash and cash 8,869,836.86 -54,379,579.55 equivalents 55 深圳中恒华发股份有限公司 2019 年半年度报告全文 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 36,831,046.46 27,095,394.75 equivalents at the period -end 6. Cash Flow Statement of Parent Company In RMB Item Semi-annual of 2019 Semi-annual of 2018 I. Cash flows arising from operating activities: Cash received from selling commodities and providing labor 16,386,026.55 11,824,697.08 services Write-back of tax received Other cash received concerning 4,240,814.47 107,677,057.73 operating activities Subtotal of cash inflow arising from 20,626,841.02 119,501,754.81 operating activities Cash paid for purchasing commodities and receiving labor service Cash paid to/for staff and 1,551,291.30 1,812,043.81 workers Taxes paid 791,510.74 3,627,519.72 Other cash paid concerning 25,327,205.64 116,155,663.65 operating activities Subtotal of cash outflow arising from 27,670,007.68 121,595,227.18 operating activities Net cash flows arising from operating -7,043,166.66 -2,093,472.37 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 56 深圳中恒华发股份有限公司 2019 年半年度报告全文 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, 1,696,400.00 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 1,696,400.00 investing activities Net cash flows arising from investing -1,696,400.00 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 bonds Other cash received concerning financing activities Subtotal of cash inflow from 100,000,000.00 financing activities Cash paid for settling debts 116,054,041.68 Cash paid for dividend and 4,398,333.30 3,884,001.07 profit distributing or interest paying Other cash paid concerning financing activities Subtotal of cash outflow from 4,398,333.30 119,938,042.75 financing activities Net cash flows arising from financing -4,398,333.30 -19,938,042.75 activities 57 深圳中恒华发股份有限公司 2019 年半年度报告全文 IV. Influence on cash and cash equivalents due to fluctuation in 424.56 exchange rate V. Net increase of cash and cash -11,441,499.96 -23,727,490.56 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 582,679.62 1,454,274.31 equivalents at the period -end 7. Statement of Changes in Owners’ Equity (Consolidated) Current Period In RMB Semi-annual of 2019 Owners’ equity attributable to the parent Company Other equity Othe instrument Less Tota r Prov Per : Reas Min l Item Sha Capi com Surp ision Reta pet Inve onab ority own re Pre tal preh lus of ined Othe Subt ual ntor le inter ers’ cap fer reser ensi reser gene profi r otal cap Ot y reser ests equit ital red ve ve ve ral t ital her shar ve y sto inco risk sec es ck me urit ies 283 146, 77,3 -183 323, 323, I. Balance at ,16 587, 91,5 ,172, 968, 968, the end of the 1,2 271. 93.2 091. 000. 000. last year 27. 50 5 01 74 74 00 Add: Changes of accounting policy Error correction of the last period Enterprise combine under the same control Other 58 深圳中恒华发股份有限公司 2019 年半年度报告全文 283 146, 77,3 -183 323, 323, II. Balance at ,16 587, 91,5 ,172, 968, 968, the beginning 1,2 271. 93.2 091. 000. 000. of this year 27. 50 5 01 74 74 00 III. Increase/ Decrease in 2,58 2,58 2,58 this year 0,41 0,41 0,41 (Decrease is listed with 1.13 1.13 1.13 “-”) (i) Total 2,58 2,58 2,58 comprehensiv 0,41 0,41 0,41 e income 1.13 1.13 1.13 (ii) Owners’ devoted and decreased capital 1.Common shares invested by shareholders 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 59 深圳中恒华发股份有限公司 2019 年半年度报告全文 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.Carry-over retained earnings from the defined benefit plans 5.Carry-over retained earnings from other comprehensiv e income 6. Other (V) Reasonable reserve 1. Withdrawal in the report period 2. Usage in the report period (VI)Others 283 146, 77,3 -180 326, 326, IV. Balance at ,16 587, 91,5 ,591, 548, 548, the end of the 1,2 271. 93.2 679. 411. 411. report period 27. 50 5 88 87 87 00 Last Period In RMB 60 深圳中恒华发股份有限公司 2019 年半年度报告全文 Semi-annual of 2018 Owners’ equity attributable to the parent Company Other equity instrument Pe Othe Less rpe r Prov Total : Reas Mino Sha tua Capi com Surp ision Reta owne Item Pr Inve onab rity re l tal preh lus of ined Othe Subt rs’ efe ntor le intere cap ca reser ensi reser gene profi r otal equit rre Oth y reser sts ital pit ve ve ve ral t y d er shar ve al inco risk sto es sec me ck uri tie s 283 146, 77,3 -186 320, I. Balance at ,16 320,6 587, 91,5 ,467, 672, the end of the 1,2 72,97 271. 93.2 113. 978. last year 27. 8.02 50 5 73 02 00 Add: Changes of accounting policy Error correction of the last period Enterprise combine under the same control Other 283 146, 77,3 -186 320, II. Balance at ,16 320,6 587, 91,5 ,467, 672, the beginning 1,2 72,97 271. 93.2 113. 978. of this year 27. 8.02 50 5 73 02 00 III. Increase/ Decrease in 2,79 2,79 2,793 this year 3,13 3,13 ,133. (Decrease is listed with 3.60 3.60 60 “-”) (i) Total 2,79 2,79 2,793 comprehensi 61 深圳中恒华发股份有限公司 2019 年半年度报告全文 ve income 3,13 3,13 ,133. 3.60 3.60 60 (ii) Owners’ devoted and decreased capital 1.Common shares invested by shareholders 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 62 深圳中恒华发股份有限公司 2019 年半年度报告全文 conversed to capital (share capital) 3. Remedying loss with surplus reserve 4.Carry-over retained earnings from the defined benefit plans 5.Carry-over retained earnings from other comprehensi ve income 6. Other (V) Reasonable reserve 1. Withdrawal in the report period 2. Usage in the report period (VI)Others 283 146, 77,3 -183 323, IV. Balance ,16 323,4 at the end of 587, 91,5 ,673, 466, 1,2 66,11 the report 271. 93.2 980. 111. period 27. 1.62 50 5 13 62 00 8. Statement of Changes in Owners’ Equity (Parent Company) Current period In RMB Semi-annual of 2019 Other equity Capita Less: Other Reaso Surplu Retai Share Total Item instrument l Invent compr nable s ned capit Other owners’ Prefe Perp Othe public ory ehensi reserv reserv profi al equity rred etual r reserv shares ve e e t 63 深圳中恒华发股份有限公司 2019 年半年度报告全文 stock capit e incom al e secur ities -211, I. Balance at 283,1 146,58 77,391 855, 295,284, the end of the 61,22 7,271. ,593.2 430. 661.34 last year 7.00 50 5 41 Add: Changes of accounting policy Error correction of the last period Other -211, II. Balance at 283,1 146,58 77,391 855, 295,284, the beginning 61,22 7,271. ,593.2 430. 661.34 of this year 7.00 50 5 41 III. Increase/ Decrease in 645, 645,186. this year 186. 84 (Decrease is 84 listed with “-”) (i) Total 645, 645,186. comprehensive 186. 84 income 84 (ii) Owners’ devoted and decreased capital 1.Common shares invested by shareholders 2. Capital invested by holders of other equity instruments 3. Amount reckoned into owners equity with share-based payment 4. Other 64 深圳中恒华发股份有限公司 2019 年半年度报告全文 (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.Carry-over retained earnings from the defined benefit plans 5.Carry-over retained earnings from other comprehensive income 6. Other (V) Reasonable reserve 1. Withdrawal in the report period 2. Usage in the report period (VI)Others IV. Balance at 295,929, 283,1 146,58 77,391 -211, the end of the 61,22 7,271. ,593.2 210, 848.18 report period 65 深圳中恒华发股份有限公司 2019 年半年度报告全文 7.00 50 5 243. 57 Last period In RMB Semi-annual of 2018 Other equity instrument Other Perp Capit Shar Less: compr Surpl Pref etual al Reason Total Item e Invent ehensi us Retaine erre capit public able Other owners’ capit Othe ory ve reserv d profit d al reserv reserve equity al r shares incom e stoc secu e e k ritie s 283, I. Balance at 146,5 77,39 -210,55 161, 296,587, the end of the 87,27 1,593 2,845.9 227. 245.80 last year 1.50 .25 5 00 Add: Changes of accounting policy Error correction of the last period Other 283, II. Balance at 146,5 77,39 -210,55 161, 296,587, the beginning 87,27 1,593 2,845.9 227. 245.80 of this year 1.50 .25 5 00 III. Increase/ Decrease in this year -1,844, -1,844,22 (Decrease is 226.31 6.31 listed with “-”) (i) Total -1,844, -1,844,22 comprehensiv 226.31 6.31 e income (ii) Owners’ devoted and decreased capital 1.Common shares invested by 66 深圳中恒华发股份有限公司 2019 年半年度报告全文 shareholders 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.Carry-over retained earnings from the defined benefit plans 5.Carry-over retained earnings from 67 深圳中恒华发股份有限公司 2019 年半年度报告全文 other comprehensiv e income 6. Other (V) Reasonable reserve 1. Withdrawal in the report period 2. Usage in the report period (VI)Others 283, IV. Balance at 146,5 77,39 -212,39 161, 294,743, the end of the 87,27 1,593 7,072.2 227. 019.49 report period 1.50 .25 6 00 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. 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 68 深圳中恒华发股份有限公司 2019 年半年度报告全文 The financial statement has been deliberated and approved by BOD on 23 August 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 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, 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 30 th June 2019 and the operation results as well as cash flow for the first half year of 2019. 69 深圳中恒华发股份有限公司 2019 年半年度报告全文 2. Accounting period The Company’s accounting year is Gregorian calendar year, namely from 1 st 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, 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. 70 深圳中恒华发股份有限公司 2019 年半年度报告全文 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 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 71 深圳中恒华发股份有限公司 2019 年半年度报告全文 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 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) 72 深圳中恒华发股份有限公司 2019 年半年度报告全文 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 Financial asset or financial liability is recognized when the Company becomes a party to financial instrument contract. (1) Classification, recognition and measurement of financial assets According to the business model of managing financial assets and the contractual cash flow characteristics of financial assets, the Company classifies the financial assets into the financial assets measured at amortized cost, the financial assets measured at fair value and whose changes are included in other comprehensive income, and the financial assets measured at fair value and whose changes are included in current profit or loss. Financial assets are measured at fair value on initial recognition. For financial assets measured at fair value and whose changes are included in current profit or loss, the related transaction expenses are directly included in current profit or loss. For other types of financial assets, the related transaction costs are included in the initial recognition amount. For the accounts receivable or notes receivable arising from the sale of products or the provision of labor services that do not contain or consider the significant financing components, the Company uses the consideration amount that is expected to be received as the initial recognition amount. ①Financial assets measured at amortized cost The Company's business model for managing financial assets measured at amortized cost is to collect contractual cash flows, and the contractual cash flow characteristics of such financial assets are consistent with the basic borrowing and lending arrangements, i.e. the cash flows generated on a specific date are only the payment for the principal and the interest based on the outstanding principal amount. The Company adopts effective interest method for this type of financial assets which are subsequently measured at amortized cost, the gains or losses arising from amortization or impairment are included in current profit or loss. ② Financial assets measured at fair value and whose changes are included in other comprehensive income The Company's business model for managing such financial assets is to target at both the collection of contractual 73 深圳中恒华发股份有限公司 2019 年半年度报告全文 cash flows and the sale, and the contractual cash flow characteristics of such financial assets are consistent with the basic borrowing and lending arrangements. The Company adopts the fair value measurement for such financial assets and whose changes are included in the current profit and loss, but the impairment losses or gains, exchange gains and losses and interest income calculated by using the effective interest method are included in current profit or loss. In addition, the Company designates part of non-trading equity instrument investments as financial assets measured at fair value and whose changes are included in other comprehensive income. The Company's related dividend income of such financial assets is included in the current profit and loss, and the changes in fair value are included in other comprehensive income. When the financial assets are derecognized, the accumulated gains or losses previously included in other comprehensive income are transferred from other comprehensive income to retained earnings, which are not included in current profit or loss. ③Financial assets carried at fair value through profit or loss for the current period The Company classifies the financial assets except the above financial assets measured at amortized cost and the above financial assets measured at fair value and whose changes are included in other comprehensive income into the financial assets measured at fair value and whose changes are included in current profit or loss. In addition, at the time of initial recognition, the Company designates part of financial assets as financial assets measured at fair value and whose changes are included in current profit or loss in order to eliminate or significantly reduce accounting mismatch. For such financial assets, the Company adopts fair value for subsequent measurement, and changes in fair value are included in current profit and loss. (2) Classification, recognition and measurement of financial liabilities At initial recognition, financial liabilities are classified into financial liabilities measured by fair value with changes counted into current gains/losses and other financial liabilities. For financial liabilities classified as fair value through profit or loss, relevant transaction costs are directly recognized in profit or loss for the period. For financial liabilities classified as other categories, relevant transaction costs are included in the amount initially recognized. ① Financial liabilities at fair value through profit or loss for the period Financial liabilities measured at fair value and whose changes are included in current profits or losses include the trading financial liabilities (including derivatives belong to financial liabilities) and the financial liabilities that are designated as fair value in the initial recognition and whose changes are included in current profit or loss. Trading financial liabilities (including derivatives belong to financial liabilities) are subsequently measured at fair value, in addition to those related to hedge accounting, the changes in fair value are included in current profit or loss. A financial liability designated to be measured at fair value and whose changes are included in current profit or loss, and of which the changes in fair value arising from changes in the Company's own credit risk are included in other comprehensive income, when the liability is derecognized, its accumulated amount of changes in fair value included in other comprehensive income and the changes arising from its own credit risk are transferred to retained earnings. The remaining changes in fair value are included in the current profit and loss. If the effects of 74 深圳中恒华发股份有限公司 2019 年半年度报告全文 changes in the own credit risk of these financial liabilities are handled as described above, but the handling causes or expands the accounting mismatch in the profit or loss, the Company will include all gains or losses of the financial liabilities (including the amount affected by changes in the credit risk of the enterprise itself) in the current profit and loss. ② Other financial liabilities Other financial liabilities, except for the financial liabilities whose transfer of financial assets doesn’t fit the derecognition condition or continue to be involved in the transferred financial assets, and the financial guarantee contract, are classified as financial liabilities measured at amortized cost, which takes follow-up measurement by amortized cost, the gains or losses arising from derecognition or amortization are included in current profit or loss. (3) Recognition basis and measurement method for transfer of financial assets As for the financial assets up to the following conditions, the recognition termination is available: ①Termination of the contract right to take the cash flow of the financial assets; ② transferred to the transferring-in part nearly all risk and compensation; ③ all risk and compensation neither transferred nor retained, and with the give-up of the control over the financial assets. As for financial assets of almost all risk and compensation neither transferred nor retained, and without the give-up of the control over the financial assets, it was recognized according to the extension of the continual entry into the transferred financial assets and relevant liabilities are correspondingly recognized. The continual entry into the transferred financial assets is risk level which the enterprise faces up to due to the assets changes. As for the whole transfer of the financial assets up to the recognition termination conditions, the book value of the transferred assets, together with the difference between the consideration value and the accumulative total of the fair value change of the other consolidated income, is reckoned into the current gain/loss. As for the partial transfer of the financial assets up to the recognition termination conditions, the book value of the transferred assets is diluted on the relative fair value between the terminated part and the un-terminated part; and reckoned into the current loss/gain is the difference between the sum of the consideration value and the accumulative sum of the valuation change ought to be diluted into the recognition termination part but into the other consolidated income, and the above diluted book value, is reckoned into the current loss/gain. For financial assets that are transferred with recourse or endorsement, the Group needs to determine whether the risk and rewards of ownership of the financial asset have been substantially transferred. If the risk and rewards of ownership of the financial asset have been substantially transferred, the financial assets shall be derecognized. If the risk and rewards of ownership of the financial asset have been retained, the financial assets shall not be derecognized. If the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, the Group shall assess whether the control over the financial asset is retained, and the financial assets shall be accounted for according to the above paragraphs. (4) Termination recognition of financial liabilities Only is released the whole (or part) of the current duties, the termination of the liabilities (or part of it) is available. The Group (the debtor) signed the agreement with the lender: the original liabilities are replaced by the bearing of the new liabilities; and the contract terms are fundamentally different of the new liabilities and the original ones; 75 深圳中恒华发股份有限公司 2019 年半年度报告全文 the termination of the recognition of the original ones is available; and the recognition of new ones is available. If the Company makes substantial changes to the contractual terms of the original financial liabilities (or a part thereof), derecognize the original financial liabilities, and recognize a new financial liability in accordance with the revised terms. If the financial liability (or a part thereof) is derecognized, the Company includes the difference between the book value and the consideration paid (including the transferred non-cash assets or liabilities assumed) in current profit or loss. (5) Balance-out between the financial assets and liabilities As the Group has the legal right to balance out the financial liabilities by the net or liquidation of the financial assets, the balance-out sum between the financial assets and liabilities is listed in the balance sheet. In addition, the financial assets and liabilities are listed in the balance sheet without being balanced out. (6) Method for determining the fair value of financial assets and financial liabilities Fair value refers to the price that a market participant can get by selling an asset or has to pay for transferring a liability in an orderly transaction that occurs on the measurement date. For a financial instrument having an active market, the Company uses the quoted prices in the active market to determine its fair value. Quotations in an active market refer to prices that are readily available from exchanges, brokers, industry associations, pricing services, etc., and represent the prices of market transactions that actually occur in an arm's length transaction. If there is no active market for a financial instrument, the Company uses valuation techniques to determine its fair value. Valuation techniques include reference to prices used in recent market transactions by parties familiar with the situation and through voluntary trade, and reference to current fair values of other financial instruments that are substantially identical, discounted cash flow methods, and option pricing models. At the time of valuation, the company adopts valuation techniques that are applicable in the current circumstances and that are sufficiently supported by data and other information, selects the input value with characteristics consistent with the characteristics of assets or liabilities to be considered in the transactions of the relevant assets or liabilities of the market participants, and uses the relevant observable input values as much as possible. Use unallowable input values if the relevant observable input values are not available or are not practicable. (7) Impairment of financial assets The financial assets that the Company needs to recognize impairment loss are financial assets measured at amortized cost, debt instruments investment that are measured at fair value and whose changes are included in other comprehensive income, and lease receivables, mainly including bills receivable, account receivables, other receivables, debt investment, other debt investments, long-term receivables, etc. In addition, for contract assets and some financial guarantee contracts, the impairment provision is also made and credit impairment losses are recognized in accordance with the accounting policies described in this section. ①Confirmation method of impairment provision On the basis of expected credit losses, the Company makes provision for impairment and confirms credit impairment losses for each of the above items in accordance with its applicable expected credit loss measurement method (general method or simplified method). 76 深圳中恒华发股份有限公司 2019 年半年度报告全文 Credit loss refers to the difference between all contractual cash flows that the Company discounts at the original actual interest rate and are receivable in accordance with contract and all cash flows expected to be received, that is, the present value of all cash shortages. Among them, for the purchase or source of financial assets that have suffered credit impairment, the Company discounts the financial assets at the actual interest rate adjusted by credit. The general method for measuring the estimated credit loss is that the Company assesses whether the credit risk of the financial assets (including other applicable items such as contract assets, the same below) has been significantly increased since the initial recognition on each balance sheet date, if the credit risk has increased significantly after the initial recognition, the Company shall measure the loss preparation according to the amount of expected credit loss in the whole duration; if the credit risk has not increased significantly since the initial recognition, the Company shall measure the loss preparation according to the amount equivalent to the expected credit loss in the next 12 months. The Company considers all reasonable and evidenced information, including forward-looking information, when evaluating expected credit losses. For the financial instrument with lower credit risk on the balance sheet date, the Company assumes that its credit risk has not increased significantly since the initial recognition, and measures the loss provisions according to the expected credit losses in the next 12 months. ② Judging criteria for whether credit risk has increased significantly since initial recognition If the probability of default of a financial asset within the estimated duration recognized on the balance sheet is significantly higher than the probability of default within the estimated duration decided at the initial recognition, it indicates that the credit risk of the financial asset is significantly increased. Except for special circumstances, the Company uses the change in default risk occurring within the next 12 months as a reasonable estimate of the change in default risk throughout the duration to determine whether the credit risk has increased significantly since the initial recognition. ③A combined approach to assessing expected credit risk on a portfolio basis The Company evaluates credit risk individually for financial assets with significantly different credit risks. Such as receivables from related parties; receivables that are in dispute with the other party or involve litigation or arbitration; receivables have clear indications that the debtor is likely to be unable to fulfill the repayment obligations. In addition to financial assets that assess credit risk individually, the Company classifies financial assets into different groups based on common risk characteristics and evaluates credit risk on a portfolio basis. ④Accounting treatment of financial assets impairment At the end of the period, the Company calculates the estimated credit losses of various financial assets. If the estimated credit loss is greater than the carrying amount of its current impairment provision, the difference is 77 深圳中恒华发股份有限公司 2019 年半年度报告全文 recognized as the impairment loss; if it is less than the carrying amount of the current impairment provision, the difference is recognized as an impairment gain. 11.Note receivable Found more in 10.(7)-Impairment of financial assets 12. Account receivable, account receivable For receivables that do not contain significant financing components, the Company measures the loss provision based on the amount of expected credit losses equivalent to the entire duration of the period. For receivables that contain significant financing components, the Company measures the loss provision always based on the amount of expected credit losses equivalent to the entire duration of the period. In addition to accounts receivable whose credit risk is assessed individually, they are classified into different combinations based on their credit risk characteristics: Item Basis Account age Take the account age of receivable as the credit risk characteristics Related party The related parties in consolidate scope (8) Determination and accounting treatment on the expected credit losses of account receivable found more in 10(7)Impairment of financial assets above mentioned 13. Receivable financing Including the note receivable and account receivable that measured on fair value and with its variation reckoned into other comprehensive income on balance sheet date. 14. Other account receivable Determination and accounting treatment on the expected credit losses of other account receivable 78 深圳中恒华发股份有限公司 2019 年半年度报告全文 The Company measures the impairment loss based on the amount of expected credit losses in the next 12 months or the entire duration based on whether the credit risk of other receivables has increased significantly since the initial recognition. 15. Inventory Whether the company needs to comply with the disclosure requirements of the particular industry No 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 16. 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 79 深圳中恒华发股份有限公司 2019 年半年度报告全文 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. 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. 17. 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 80 深圳中恒华发股份有限公司 2019 年半年度报告全文 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. 18. Fixed assets (1) Recognition Fixed assets refers to the tangible assets holding for purpose of producing goods, providing labor services, leasing 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. 81 深圳中恒华发股份有限公司 2019 年半年度报告全文 (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. 19. Construction in process 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. 20. 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 82 深圳中恒华发股份有限公司 2019 年半年度报告全文 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. 21. 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. 83 深圳中恒华发股份有限公司 2019 年半年度报告全文 22. Long-term assets impairment Long-term equity investments, investment properties measured at cost and long-term assets such as fixed assets, 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. 23. 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. 24. 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 84 深圳中恒华发股份有限公司 2019 年半年度报告全文 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. (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. 25. 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 85 深圳中恒华发股份有限公司 2019 年半年度报告全文 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. 26. Revenue Whether the company needs to comply with the disclosure requirements of the particular industry No Whether implemented the new revenue standards □Yes √No 1. Sales of goods 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 86 深圳中恒华发股份有限公司 2019 年半年度报告全文 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. 27. 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 87 深圳中恒华发股份有限公司 2019 年半年度报告全文 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 measured in accordance with the receivable amount are recognized when the grant is actually received. 28. 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. 29. 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. 88 深圳中恒华发股份有限公司 2019 年半年度报告全文 (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. 30. 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 Ministry of Finance issued the Accounting Standards for Business Enterprise No. 22- Recognition and Measurement of Financial Instruments, Accounting Standards for Business Enterprise No. 23- Transfer of Financial Assets, Accounting Standards for Business Enterprise No. 24- Hedge Accounting and Accounting Standards Change of the accounting policy has for Business Enterprise No. 37- deliberated and approved by the 11th Presentation of Financial Instruments session of 9th BOD after revised in 2017 ( these four items are collectively referred to as the new financial instrument standards).The Company implemented the above mentioned new standards after revision since 1st January 2019, and relevant content with accounting policy concerned are been adjusted. In April 2019, the Ministry of Finance issued the Notice on Revision and Issuance of 2019 Financial Statement Format for General Corporate (Cai Kuai Change of the accounting policy has deliberated and approved by the 11th [2019] No.6) (hereinafter referred to as Financial Statement Format), in terms of session of 9th BOD the financial statement of mid-term 2019, the annual financial statement and 89 深圳中恒华发股份有限公司 2019 年半年度报告全文 later period’s financial statement are required to preparing in line with the Accounting Standards for Business Enterprise and Financial Statement Format. The Company will implement the relevant regulation of Cai Kuai (2019) No.6 issued by Ministry of Finance, relevant financial statements are been adjusted. Items and amount has major influence on 31st December 2018 in balance sheet are as: Item Consolidate balance sheet Before adjustment After adjustment Note receivable and account receivable 185,983,351.22 Note receivable 69,185,516.71 Account receivable 116,797,834.51 Note payable and account payable 88,617,663.09 Note payable 27,642,356.66 Account payable 60,975,306.43 (2)Changes in important accounting estimates □ Applicable √Not applicable (3)Adjustment the financial statements at the beginning of the first year of implementation of new financial instrument standards, new revenue standards and new leasing standards □ Applicable √Not applicable (4)Retrospective adjustment of early comparison data description when initially implemented the new financial instrument standards and new leasing standards □ Applicable √Not applicable VI. Taxes 1. Major tax and tax rate Taxes Taxation basis Tax rate VAT Domestic sales revenue 16%, 13% 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 0% of original value of the property 1.2% 90 深圳中恒华发股份有限公司 2019 年半年度报告全文 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%. VII. Notes to main items in consolidated financial statement 1. Monetary fund RMB/CNY Item Closing balance Opening balance Cash on hand 426,742.83 236,354.29 Bank deposit 37,614,899.02 28,935,450.70 Other monetary fund 9,939,899.76 4,936,525.28 Total 47,981,541.61 34,108,330.27 Other explanation Other monetary funds are bank acceptance deposits. 2. Note receivable (1)Category RMB/CNY Item Closing balance Opening balance Bank acceptance bill 4,773,726.59 56,817,845.23 Commercial acceptance bill 5,654,208.28 12,367,671.48 Total 10,427,934.87 69,185,516.71 RMB/CNY 91 深圳中恒华发股份有限公司 2019 年半年度报告全文 Closing balance Opening balance Bad debt Book balance Book balance Bad debt provision Category provision Book Book Amoun Proport Amoun Accrua value Amoun Proport Accrual value Amount t ion t l ratio t ion ratio Including: Including: Accrual of bad debt provision on single basis: RMB/CNY Closing balance Name Book balance Bad debt provision Accrual ratio Accrual causes Accrual of bad debt provision on portfolio: RMB/CNY Closing balance Name Book balance Bad debt provision Accrual ratio Explanation on portfolio basis: If the provision for bad debts of note receivable is made in accordance with the general model of expected credit losses, please refer to the disclosure of other receivables to disclose related information about bad-debt provisions: □ Applicable √Not applicable (2)Note receivable that pledged at period-end RMB/CNY Item Amount pledged at period-end Bank acceptance bill 3,866,647.92 Total 3,866,647.92 (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 Bank acceptance bill 21,094,964.31 Commercial acceptance bill 48,107,418.75 Total 69,202,383.06 92 深圳中恒华发股份有限公司 2019 年半年度报告全文 3. Account receivable (1)Category RMB/CNY Closing balance Opening balance Bad debt Book balance Book balance Bad debt provision Category provision Book Book Amoun Proport Amoun Accrua value Amoun Proport Amoun Accrual value t ion t l ratio t ion t ratio Account receivable with bad debt 13,144, 13,144, 100.00 13,144, 13,144, 100.00 8.08% 0.00 8.08% 0.00 provision accrual 007.21 007.21 % 007.21 007.21 % on a single basis Including: Account receivable with single significant amount 7,556,3 7,556,3 100.00 7,556,3 7,556,3 100.00 4.64% 0.00 4.64% 0.00 and withdrawal 63.72 63.72 % 63.72 63.72 % bad debt provision on single basis Account receivable with single minor amount but with 5,587,6 5,587,6 100.00 5,587,6 5,587,6 100.00 3.43% 0.00 3.43% 0.00 bad debts provision 43.49 43.49 % 43.49 43.49 % accrued on a single basis Account receivable 149,54 149,54 116,79 with bad debt 91.92 116,797,8 1,677.7 811.28 0.00% 0,866.4 8,645.7 91.88% 811.28 0.01% provision accrual % 34.51 4 6 9 on portfolio Including: 162,68 149,54 129,94 13,144, 13,144, 116,797,8 Total 5,684.9 0,866.4 2,653.0 818.49 818.49 34.51 5 6 0 Accrual of bad debt provision on single basis: 7,556,363.72 Yuan RMB/CNY Closing balance Name Book balance Bad debt provision Accrual ratio Accrual causes Shenzhen Portman 2,555,374.75 2,555,374.75 100.00% Uncollectible 93 深圳中恒华发股份有限公司 2019 年半年度报告全文 Bowling Club Co., Ltd. Hong Kong Haowei 1,870,887.18 1,870,887.18 100.00% Uncollectible Industrial Co. Ltd. TCL ACE ELECTRIC APPLIANCE 1,325,431.75 1,325,431.75 100.00% Uncollectible (HUIZHOU) CO., LTD. Qingdao Haier Parts 1,225,326.15 1,225,326.15 100.00% Uncollectible Procurement Co., Ltd. SKYWORTH Multimedia 579,343.89 579,343.89 100.00% Uncollectible (Shenzhen) Co., Ltd. Total 7,556,363.72 7,556,363.72 -- -- Accrual of bad debt provision on single basis: 5,587,643.49 Yuan RMB/CNY Closing balance Name Book balance Bad debt provision Accrual ratio Accrual causes Shenzhen Huixin Video Technology Co., 381,168.96 381,168.96 100.00% Uncollectible Ltd. Shenzhen Wandelai Digital Technology 351,813.70 351,813.70 100.00% Uncollectible Co., Ltd. Shenzhen Dalong 344,700.00 344,700.00 100.00% Uncollectible Electronic Co., Ltd. Shenzhen Keya 332,337.76 332,337.76 100.00% Uncollectible Electronic Co., Ltd. Shenzhen Qunping 304,542.95 304,542.95 100.00% Uncollectible Electronic Co., Ltd. China Galaxy Electronics (Hong 288,261.17 288,261.17 100.00% Uncollectible Kong) Co., Ltd. Dongguan Weite 274,399.80 274,399.80 100.00% Uncollectible Electronic Co., Ltd. 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. 94 深圳中恒华发股份有限公司 2019 年半年度报告全文 Shenyang Beitai 203,304.02 203,304.02 100.00% Uncollectible Electronic Co., Ltd. Beijing Xinfang Weiye 193,000.00 193,000.00 100.00% Uncollectible Technology Co., Ltd. TCL Electronics 145,087.14 145,087.14 100.00% Uncollectible (Hong Kong) Co., Ltd. Huizhou TCL Xinte 142,707.14 142,707.14 100.00% Uncollectible Electronics Co., Ltd. SkyWorth – RGB 133,485.83 133,485.83 100.00% Uncollectible Electronic Co., Ltd. Other 2,037,613.75 2,037,613.75 100.00% Uncollectible Total 5,587,643.49 5,587,643.49 -- -- Accrual of bad debt provision on single basis: RMB/CNY Closing balance Name Book balance Bad debt provision Accrual ratio Accrual causes Accrual of bad debt provision on portfolio: 811.28 Yuan RMB/CNY Closing balance Name Book balance Bad debt provision Accrual ratio Account age 149,541,677.74 811.28 Total 149,541,677.74 811.28 -- Explanation on portfolio basis: Accrual of bad debt provision on portfolio: RMB/CNY Closing balance Name Book balance Bad debt provision Accrual ratio Explanation on portfolio basis: If the provision for bad debts of accounts receivable is made in accordance with the general model of expected credit losses, please refer to the disclosure of other receivables to disclose related information about bad-debt provisions: □ Applicable √Not applicable By account age RMB/CNY Account age Closing balance Within one year(One year included) 149,536,867.00 149,536,867.00 1-2 years 2,527.77 95 深圳中恒华发股份有限公司 2019 年半年度报告全文 Over 3 years 2,282.97 3-4 years 2,282.97 Total 149,541,677.74 (2)Bad debt provision accrual, collected or reversal in the period Bad debt provision accrual in the period: RMB/CNY Amount changed in the period Category Opening balance Collected or Closing balance Accrual Written-off reversal Including major amount bad debt provision that collected or reversal in the period: RMB/CNY Enterprise Amount collected or reversal Collection by (3)Account receivable actually written-off in the period RMB/CNY Item Amount written-off Including major account receivable written-off : RMB/CNY Amount arising Nature of account Amount Causes of Procedures of Enterprise from related receivable written-off written-off written-off transactions (Y/N) Explanation on account receivable written-off: (4)Top 5 account receivables at ending balance by arrears party Total period-end balance of top five receivables by arrears party amounting to 138,920,788.78 Yuan, takes 85.39 percent of the total account receivable at period-end, bad debt provision accrual correspondingly at year-end amounting as 0 Yuan. 4. Account paid in advance (1) By account age RMB/CNY Closing balance Opening balance Account age Amount Ratio Amount Ratio Within one year 28,212,818.13 99.28% 31,254,429.54 99.42% 96 深圳中恒华发股份有限公司 2019 年半年度报告全文 1-2 years 135,695.39 0.48% 94,000.00 0.40% 2-3 years 70,086.94 0.25% 0.18% Total 28,418,600.46 -- 31,348,429.54 -- Explanation on reasons of failure to settle on important account paid in advance with age over one year: Nil (2)Top 5 account paid in advance at ending balance by prepayment object Total period-end balance of top five account paid in advance by prepayment object amounted to 26,129,883.92 Yuan, takes 91.95 percent of the total advance payment at period-end. Other explanation: Nil 5. Other account receivable RMB/CNY Item Closing balance Opening balance Other account receivable 5,781,851.15 5,777,179.08 Total 5,781,851.15 5,777,179.08 (1)Other account receivable 1) By nature RMB/CNY Nature Closing book balance Opening book balance Margin and deposit 1,793,485.04 1,793,485.04 Borrow money 2,005,861.48 1,973,013.76 Intercourse funds 11,333,647.83 10,108,494.46 Rent receivable 5,918,159.34 6,317,469.46 Other 0.00 845,586.40 Total 21,051,153.69 21,038,049.12 2)Accrual of bad debt provision RMB/CNY Phase I Phase II Phase III Expected credit losses for Expected credit losses for Expected credit Bad debt provision the entire duration the entire duration (with Total losses over next 12 (without credit credit impairment months impairment occurred) occurred) 97 深圳中恒华发股份有限公司 2019 年半年度报告全文 Balance on Jan. 1, 15,260,870.04 15,260,870.04 2019 Balance of Jan. 1, 2019 —— —— —— —— in the period Current accrual 8,432.50 8,432.50 Balance on Jun. 30, 15,269,302.54 15,269,302.54 2019 Change of book balance of loss provision with amount has major changes in the period □ Applicable √Not applicable By account age RMB/CNY Account age Closing balance Within one year(One year included) 4,786,976.16 4,786,976.16 1-2 years 54,876.99 2-3 years 848,718.00 Over 3 years 91,280.00 3-4 years 91,280.00 Total 5,781,851.15 3) Top 5 other account receivables at ending balance by arrears party RMB/CNY Ratio in total Closing balance of Enterprise Nature Closing balance Account age ending balance of bad debt reserve other receivables Portman Rent receivable 4,021,734.22 Over 3 years 19.10% 4,021,734.22 Shenzhen Jifang Investment Co., Rent receivable 1,380,608.00 Over one year 6.56% 1,380,608.00 Ltd Wuwu Branch of Shenzhen Deposit for leasing 740,909.97 Within one year 3.52% Dachong Industrial Co., Ltd. Zhao Baomin Rent receivable 553,901.68 Over 3 years 2.63% 564,646.35 Traffic accident Intercourse funds 555,785.81 Over 3 years 2.64% 555,785.81 compensation Total -- 7,252,939.68 -- 34.45% 6,522,774.38 98 深圳中恒华发股份有限公司 2019 年半年度报告全文 6. Inventory Whether implemented the new revenue standards □Yes √No (1)Category RMB/CNY Closing balance Opening balance Item Provision for Provision for Book balance Book value Book balance Book value price fall-down price fall-down Raw materials 42,796,975.03 1,539,330.06 41,215,197.14 39,497,353.01 1,695,940.61 37,801,412.40 Inventory 40,987,482.00 1,083,796.82 39,903,685.18 24,483,140.41 1,543,123.71 22,940,016.70 goods Low priced and easily worn 313,838.99 0.00 356,286.82 216,771.16 35,563.68 181,207.48 articles Homemade semi-finished 5,639,117.53 404,744.91 5,234,372.62 2,175,657.06 124,384.26 2,051,272.80 products Total 89,737,413.55 3,027,871.79 86,709,541.76 66,372,921.64 3,399,012.26 62,973,909.38 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 (2)Provision for price fall-down RMB/CNY Current increased Current decreased Opening Closing Item Reversal or balance Accrual Other Other balance write-off Raw materials 1,695,940.61 156,610.55 1,539,330.06 Inventory 1,543,123.71 459,326.89 1,083,796.82 goods Low priced and easily worn 35,563.68 35,563.68 articles Homemade semi-finished 124,384.26 280,360.65 404,744.91 products 99 深圳中恒华发股份有限公司 2019 年半年度报告全文 Total 3,399,012.26 280,360.65 0.00 651,501.12 3,027,871.79 Nil 7. Other current assets Whether implemented the new revenue standards □Yes √No RMB/CNY Item Closing balance Opening balance Value-added tax to be deducted 1,176,381.08 17,055.88 Advance payment of income tax 42,314.30 42,314.30 Total 1,218,695.38 59,370.18 Other explanation 8. 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 balance 133,661,686.94 133,661,686.94 2.Current increased (1) Outsourcing (2)inventory\fixed assets\construction in process transfer-in (3)increased by combination 3.Current decreased (1) Disposal (2) other transfer-out 4.Closing balance 133,661,686.94 133,661,686.94 II. Accumulated 100 深圳中恒华发股份有限公司 2019 年半年度报告全文 depreciation and accumulated amortization 1.Opening balance 82,980,364.08 82,980,364.08 2.Current increased 864,165.14 864,165.14 (1) Accrual or 864,165.14 864,165.14 amortization 3.Current decreased (1) Disposal (2) other transfer-out 4.Closing balance 83,844,529.22 83,844,529.22 III. Depreciation reserves 1.Opening balance 2.Current increased (1)Accrual 3. Current decreased (1) Disposal (2) other transfer-out 4.Closing balance IV. Book value 1.Ending book value 49,817,157.72 49,817,157.72 2.Opening book value 50,681,322.86 50,681,322.86 9. Fixed assets RMB/CNY Item Closing balance Opening balance Fixed assets 92,150,629.83 95,226,401.69 Disposal of fixed assets 92,857,471.69 92,857,471.69 Total 185,008,101.52 188,083,873.38 101 深圳中恒华发股份有限公司 2019 年半年度报告全文 (1)Fixed asset RMB/CNY House Transportat Tool Office Mold Item Machinery Instrument Total building ion equipment equipment equipment equipment equipment equipment I. Original book value 65,608,798 90,197,960 5,960,519. 6,552,700. 6,325,043. 16,231,125 3,137,707. 194,013,85 1.Opening .85 .43 70 16 73 .01 65 5.53 balance 1,719,220. 2,844,194. 2.Current 424,216.15 27,792.74 665,886.99 7,077.88 35 11 increased (1) 1,719,220. 2,844,194. 424,216.15 27,792.74 665,886.99 7,077.88 Purchasing 35 11 (2)Constru ction in process transfer-in (3)increase d by combinatio n 1,101,038. 1,198,718. 3.Current 85,470.09 12,210.00 34 43 decreased (1) 1,101,038. 1,198,718. Disposal or 85,470.09 12,210.00 34 43 scrapping 65,608,798 90,816,142 5,960,519. 6,891,446. 6,352,836. 16,897,012 3,132,575. 195,659,33 4.Closing .85 .44 70 22 47 .00 53 1.21 balance II. Accumulati 102 深圳中恒华发股份有限公司 2019 年半年度报告全文 ve depreciatio n 16,797,572 58,664,225 4,178,805. 2,960,180. 4,171,441. 9,535,972. 2,479,255. 98,787,453 1.Opening .46 .14 31 84 92 63 54 .84 balance 2,302,459. 1,486,528. 5,765,319. 2.Current 962,101.85 368,771.97 438,939.57 148,478.01 58,040.38 41 54 73 increased 2,302,459. 1,486,528. 5,765,319. 962,101.85 368,771.97 438,939.57 148,478.01 58,040.38 (1)Accrual 41 54 73 1,044,072. 3.Current 990,775.51 42,307.68 10,989.00 19 decreased (1) 1,044,072. Disposal or 990,775.51 42,307.68 10,989.00 19 scrapping 17,759,674 59,975,909 4,547,577. 3,356,812. 4,319,919. 11,022,501 2,526,306. 103,508,70 4.Closing .31 .04 28 73 93 .17 92 1.38 balance III. Depreciatio n reserves 1.Opening balance 2.Current increased (1)Accrual 3.Current decreased (1) Disposal or scrapping 103 深圳中恒华发股份有限公司 2019 年半年度报告全文 4.Closing balance IV. Book value 1.Ending 47,849,124 30,840,233 1,412,942. 3,534,633. 2,032,916. 5,874,510. 92,150,629 606,268.61 book value .54 .40 42 49 54 83 .83 48,811,226 31,533,735 1,781,714. 3,592,519. 2,153,601. 6,695,152. 95,226,401 2.Opening 658,452.11 .39 .29 39 32 81 38 .69 book value (2)Fixed assets leasing-out by operational lease RMB/CNY Item Ending book value House building 826,662.23 (3)Disposal of fixed assets RMB/CNY Item Closing balance Opening balance Renovation of Gongming Huafa Electric 92,857,471.69 92,857,471.69 Town Total 92,857,471.69 92,857,471.69 Other explanation Nil 10. Construction in process RMB/CNY Item Closing balance Opening balance Construction in process 7,552,776.46 5,727,760.23 Total 7,552,776.46 5,727,760.23 (1)Construction in process RMB/CNY Item Closing balance Opening balance 104 深圳中恒华发股份有限公司 2019 年半年度报告全文 Impairment Impairment Book balance Book value Book balance Book value provision provision Expansion for the plastic 7,552,776.46 7,552,776.46 5,727,760.23 5,727,760.23 injection 3# plant Total 7,552,776.46 7,552,776.46 5,727,760.23 5,727,760.23 (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 Expan sion for 3# 5,727, 1,825, 7,552, injecti 760.23 016.23 776.46 on moldin g Plant 5,727, 1,825, 7,552, Total -- -- -- 760.23 016.23 776.46 11. Intangible assets (1)Intangible assets RMB/CNY Non-patented Item Land use right Patent right Software charges Total technology I. Original book value 1.Opening 55,089,774.36 661,878.97 55,751,653.33 balance 105 深圳中恒华发股份有限公司 2019 年半年度报告全文 2.Current increased (1) 3,034,537.44 3,034,537.44 Purchasing (2) internal R&D (3)increased by combination 3.Current decreased (1) Disposal 4.Closing 55,089,774.36 3,696,416.41 58,786,190.77 balance II. Accumulated amortization 1.Opening 13,434,017.64 501,945.95 13,935,963.59 balance 2.Current 722,744.45 149,730.49 872,474.94 increased (1)Accrual 722,744.45 149,730.49 872,474.94 3.Current decreased (1) Disposal 4.Closing 14,156,762.09 651,676.44 14,808,438.53 balance III. Depreciation reserves 1.Opening balance 2.Current increased 106 深圳中恒华发股份有限公司 2019 年半年度报告全文 (1)Accrual 3.Current decreased (1) Disposal 4.Closing balance IV. Book value 1.Ending 40,933,012.27 3,044,739.97 43,977,752.24 book value 2.Opening 41,655,756.72 159,933.02 41,815,689.74 book value The proportion of intangible assets form by internal R&D in total book value of intangible assets at period-end 12. Long-term deferred expenditure RMB/CNY Amortized in Item Opening balance Current increased Other decreased Closing balance Period Golf membership fee Cloud service 542,116.99 116,167.92 425,949.07 charge Total 542,116.99 116,167.92 425,949.07 Other explanation Nil 13. Deferred income tax asset/Deferred income tax liability (1)Deferred income tax assets without offset RMB/CNY Closing balance Opening balance Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax differences asset differences asset Provision for assets 28,641,162.99 6,813,753.84 28,641,162.96 6,813,753.84 impairment Accrual liability 64,411.00 16,102.75 64,411.00 16,102.75 107 深圳中恒华发股份有限公司 2019 年半年度报告全文 Total 28,705,573.99 6,829,856.59 28,705,573.96 6,829,856.59 (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 6,829,856.59 asset (3)Deferred income tax asset without recognized RMB/CNY Item Closing balance Opening balance Deductible temporary differences 3,163,837.81 3,163,837.81 Deductible loss 1,427,605.96 1,427,605.96 Total 4,591,443.77 4,591,443.77 (4)Deductible losses of deferred income tax asset without recognized will expired in later year RMB/CNY Year Closing amount Opening amount Note 2019 51,859.78 51,859.78 2020 2021 182,573.55 182,573.55 2022 848,078.83 848,078.83 2023 345,093.80 345,093.80 Total 1,427,605.96 1,427,605.96 -- Other explanation 14. Other non-current assets Whether implemented the new revenue standards □Yes √No RMB/CNY Item Closing balance Opening balance Advance payment for engineering 80,000.00 80,000.00 108 深圳中恒华发股份有限公司 2019 年半年度报告全文 Advance payment for equipment 209,550.00 357,810.00 Advance payment for intangible assets 2,721,154.00 Total 289,550.00 3,158,964.00 Other explanation 15. Short-term loans (1)Category RMB/CNY Item Closing balance Opening balance Loan in pledge 22,676,280.00 13,500,000.00 Secured portfolio loan 112,000,000.00 148,068,657.88 Total 134,676,280.00 161,568,657.88 Explanation on category of Short-term loans Nil 16. Note payable RMB/CNY Category Closing balance Opening balance Commercial acceptance bill 13,804,210.29 17,642,356.66 Bank acceptance bill 10,000,000.00 Total 13,804,210.29 27,642,356.66 Totally 0 Yuan due note payable are paid at period-end 17. Account payable (1)Account payable RMB/CNY Item Closing balance Opening balance Within one year(One year included) 90,992,129.99 48,686,573.85 Over one year 11,043,080.29 12,288,732.58 Total 102,035,210.28 60,975,306.43 (2)Major account payable over one year RMB/CNY 109 深圳中恒华发股份有限公司 2019 年半年度报告全文 Item Closing balance Reasons for non-payment or carry over Shenzhen Yuehai Global Logistics Co., 2,858,885.97 Without settlement Ltd. LG 1,906,267.50 Without settlement Dongjin Electronics (Nanjing) Plasma 617,963.45 Without settlement Co., Ltd. Total 5,383,116.92 -- Other explanation: Nil 18. Account received in advance Whether implemented the new revenue standards □Yes √No (1)Account received in advance RMB/CNY Item Closing balance Opening balance Within one year(One year included) 113,637.43 116,601.60 Over one year 42,595.01 42,927.00 Total 156,232.44 159,528.60 19. Employees remuneration payable (1)Employees remuneration payable RMB/CNY Increase during the Decrease during this Item Opening balance Closing balance period period I. Short-term benefits 4,700,208.36 32,286,086.59 32,958,058.24 4,028,236.71 II. Post-employment benefits-defined 2,247,995.53 2,230,407.95 17,587.58 contribution plans III. Dismiss welfare 45,365.00 45,365.00 Total 4,700,208.36 34,579,447.12 35,233,831.19 4,045,824.29 (2)Short-term benefits RMB/CNY 110 深圳中恒华发股份有限公司 2019 年半年度报告全文 Increase during the Decrease during this Item Opening balance Closing balance period period 1. Wages, bonuses, 3,720,025.80 28,492,788.83 29,146,144.28 3,066,670.35 allowances andsubsidies 2. Welfare for workers 754.00 2,489,517.44 2,489,517.44 754.00 and staff 3. Social insurance 22,287.98 1,067,739.83 1,086,356.03 3,671.78 Including: 22,287.98 894,902.90 913,519.10 3,671.78 Medical insurance Work 91,845.56 91,845.56 injury insurance Maternity 80,991.37 80,991.37 insurance 4. Housing 24,310.00 150,800.88 150,800.88 24,310.00 accumulation fund 5. Labor union expenditure and 932,830.58 85,239.61 85,239.61 932,830.58 personnel education expense Total 4,700,208.36 32,286,086.59 32,958,058.24 4,028,236.71 (3)Defined contribution plans RMB/CNY Increase during the Decrease during this Item Opening balance Closing balance period period 1. Basic endowment 2,170,497.43 2,152,909.85 17,587.58 insurance 2. Unemployment 77,498.10 77,498.10 insurance Total 2,247,995.53 2,230,407.95 17,587.58 Other explanation: Nil 20. Tax payable RMB/CNY Item Closing balance Opening balance VAT 3,119,280.60 3,432,174.00 111 深圳中恒华发股份有限公司 2019 年半年度报告全文 Corporate income tax 5,914,787.16 5,683,136.41 Individual income tax 219,921.41 45,962.89 Urban maintenance and construction tax 50,723.32 547,965.38 Property tax 533,189.74 290,438.28 Land use tax 552,604.04 75,345.69 Educational surtax 229,278.13 235,610.56 Local educational surtax 123,222.03 126,852.76 Dike fee 1,665.00 1,665.00 Stamp tax 33,611.20 24,738.90 Disposal fund of waste electrical 830,950.00 768,930.00 products Total 11,609,232.63 11,232,819.87 Other explanation: Nil 21. Other account payable RMB/CNY Item Closing balance Opening balance Interest payable 54,347.32 439,558.70 Other account payable 30,986,015.17 26,339,305.22 Total 31,040,362.49 26,778,863.92 (1)Interest payable RMB/CNY Item Closing balance Opening balance Interest of short-term loans payable 54,347.32 439,558.70 Total 54,347.32 439,558.70 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 112 深圳中恒华发股份有限公司 2019 年半年度报告全文 RMB/CNY Item Closing balance Opening balance Margin and deposit 17,395,159.40 10,914,478.12 Lease management fee 7,152,279.11 2,612,566.67 Intercourse funds 3,741,736.55 7,531,055.87 After sale and repairmen 1,759,470.00 1,696,994.97 Other 937,370.11 3,584,209.59 Total 30,986,015.17 26,339,305.22 2)Significant other account payable with over one year age RMB/CNY Item Closing balance Reasons for non-payment or carry over Shenzhen SED Property Development 1,244,058.55 Without settlement Co., Ltd. Shenzhen Huayongxing Environmental 1,000,000.00 Margin Protection Technology Co., Ltd. Linghang Technology (Shenzhen) Co., 656,345.28 Without settlement Ltd Shenzhen Tongxing Electronics Co., Ltd. 578,259.83 Without settlement Shenzhen Yongdasheng Investment 558,970.00 Margin Development Co., Ltd. Total 4,037,633.66 -- Other explanation Nil 22. Accrual liability Whether implemented the new revenue standards □Yes √No 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. 113 深圳中恒华发股份有限公司 2019 年半年度报告全文 23.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 Other explanation: Up to 30th June 2019, 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 119,289,894 shares. 24. 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 25. 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: 114 深圳中恒华发股份有限公司 2019 年半年度报告全文 Nil 26. Retained profit RMB/CNY Item Current period Last period Retained profit at the end of the previous period -183,172,091.01 -186,467,113.73 before adjustment Retained profit at period-begin after adjustment -183,172,091.01 -186,467,113.73 Add: net profit attributable to owners of the 2,587,578.75 3,295,022.72 parent company Retained profit at period-end -180,591,679.88 -183,172,091.01 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 27. Operating income and cost RMB/CNY Current period Last period Item Income Cost Income Cost Main business 310,399,495.33 285,485,316.56 318,222,786.98 295,038,716.84 Other business 28,790,678.72 12,094,891.78 22,762,056.26 7,544,262.60 Total 339,190,174.05 297,580,208.34 340,984,843.24 302,582,979.44 Whether implemented the new revenue standards □Yes √No Other explanation Nil 28. Tax and surcharges RMB/CNY Item Current period Last period Urban maintenance and construction tax 68,304.63 266,947.39 Educational surtax 33,062.14 159,757.95 115 深圳中恒华发股份有限公司 2019 年半年度报告全文 Property tax 706,398.83 232,452.12 Land use tax 278,113.28 663,931.20 Vehicle use tax 3,420.00 4,800.00 Stamp tax 205,372.70 217,911.90 Local education development fee 15,438.42 166,492.83 Total 1,310,110.00 1,712,293.39 Other explanation: Nil 29. Sales expense RMB/CNY Item Current period Last period Employees remuneration 2,350,311.18 2,301,867.88 Freight 2,883,611.66 2,334,595.10 Commodity inspection fee 46,041.22 335,545.03 Customs fee 85,340.66 84,390.47 Commodity loss 1,669,582.49 1,556,975.69 Other 2,095,493.01 1,819,989.14 Total 9,130,380.22 8,433,363.31 Other explanation: Nil 30. Administrative expense RMB/CNY Item Current period Last period Salary 4,819,623.00 4,210,697.93 Depreciation charge 1,108,894.27 2,586,727.68 Social insurance premium 1,183,069.73 1,219,441.85 Social expenses 1,975,609.14 1,336,624.80 Taxes and surcharge 0.00 0.00 Employee benefits 453,205.88 900,960.35 Travel expenses 913,668.77 1,086,267.27 Amortization of intangible assets 872,474.94 745,813.31 Traffic expenses 880,726.46 1,047,578.29 116 深圳中恒华发股份有限公司 2019 年半年度报告全文 Consulting fee 365,549.99 565,076.31 Security 478,584.83 710,066.72 Repairs 981,308.38 839,233.34 Audit fee 812,786.23 624,271.85 Office expenses 775,082.77 527,020.48 Communication fee 106,108.39 166,858.35 Amortization of low cost and short lived 76,180.62 488,293.61 articles Securities information disclosure fee 255,915.74 188,679.24 Litigation fee 0.00 0.00 Staff education 86,051.41 35,034.65 Water and electricity fee 336,221.83 272,971.66 Lease fee 2,444,912.69 2,298,165.79 Eco fee 194,709.07 90,598.66 Premium 45,221.73 164,030.73 Other expenses 451,085.52 296,572.55 Total 19,616,991.39 20,400,985.42 Other explanation: Nil 31. R& D expenses RMB/CNY Item Current period Last period Personnel cost 2,086,504.20 Direct input cost 846,252.61 Depreciation and amortization expenses 218,337.01 Other related expenses 575,899.04 Total 3,726,992.86 Other explanation: Nil 32. Financial expense RMB/CNY Item Current period Last period Interest expenditure 5,355,676.92 5,989,883.31 117 深圳中恒华发股份有限公司 2019 年半年度报告全文 Less: interest income 419,336.28 349,858.59 Add: Exchange loss -87,878.70 -297,171.10 Add: Other expense 219,909.30 104,216.60 Total 5,068,371.24 5,447,070.22 Other explanation: Nil 33. Investment income RMB/CNY Item Current period Last period Investment income generated by financial 74,936.14 245,679.10 products Total 74,936.14 245,679.10 Other explanation: Nil 34. Credit impairment loss RMB/CNY Item Current period Last period Bad debt loss of other account receivable -8,432.50 Total -8,432.50 Other explanation: Nil 35. Assets impairment loss Whether implemented the new revenue standards □Yes √No RMB/CNY Item Current period Last period I. Bad debt losses -5,941.50 Total -5,941.50 Other explanation: Nil 118 深圳中恒华发股份有限公司 2019 年半年度报告全文 36. Asset disposal income RMB/CNY Source of asset disposal income Current period Last period Income from fixed assets sold 129,039.57 -105,779.36 37. Non-operating income RMB/CNY Amount included in current Item Current period Last period non-recurring profits or losses Government subsidy 223,300.00 771,800.00 Fine income 9,458.00 115,862.07 Total 232,758.00 887,662.07 Government subsidy reckoned into current gains/losses: RMB/CNY Subsidy impact The special Assets-rela Issuing Offering Amount in Amount in Item Nature current subsidy ted/income subject causes the Period last period gains/losse (Y/N) -related s (Y/N) Subsidy obtained for Finance conforms bureau of Award for with the economic excellent local Income-rel developme Award N N 200,000.00 enterprise support ated nt district for 2018 policy for of Wuhan investment Caidian incentive to encourage investment Subsidy 2018 Zero-balan obtained provincial ce special for foreign account of conforms Income-rel Award N N 17,300.00 economic the Finance with the ated and trade bureau of local funds Wuhan support policy for 119 深圳中恒华发股份有限公司 2019 年半年度报告全文 investment incentive to encourage investment Subsidy obtained for Labor and conforms Job-huntin employme with the g and nt bureau local Income-rel entreprene Subsidy N N 6,000.00 of Caidian support ated urship District, policy for subsidy Wuhan investment incentive to encourage investment Subsidy Bureau of obtained Science, for Subsidy for Technolog conforms science & y and with the technology Economic local Income-rel Subsidy N N 300,000.00 innovation Informatio support ated platform in n of policy for 2017 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 N N 150,000.00 Finance, support ated developme Wuhan policy for nt investment incentive to encourage investment Subsidy for Wuhan Subsidy Income-rel cultivating Science Subsidy obtained N N 50,000.00 ated enterprise and for 120 深圳中恒华发股份有限公司 2019 年半年度报告全文 Technolog conforms y Bureau with the (Wuhan local Intellectual support Property policy for Office) investment incentive to encourage investment Subsidy obtained for 2018 conforms Treasury municipal with the branch of foreign local Income-rel Wuhan Award N N 271,800.00 economic support ated Finance and trade policy for bureau funds investment incentive to encourage investment Other explanation: Nil 38. Non-operating expenditure RMB/CNY Amount included in current Item Current period Last period non-recurring profits or losses Penalty expenditure 1,100.00 40,000.00 1,100.00 Other 132,806.76 Total 1,100.00 172,806.76 1,100.00 Other explanation: Nil 39. Income tax expenses (1)Statement of income tax expense RMB/CNY Item Current period Last period 121 深圳中恒华发股份有限公司 2019 年半年度报告全文 Current income tax expense 388,847.80 908,807.04 Deferred income tax expense 215,062.28 -444,975.63 Total 603,910.08 463,831.41 (2)Adjustment on accounting profit and income tax expenses RMB/CNY Item Current period Total profit 3,184,321.21 Income tax based on statutory/applicable rate 796,080.30 Impact by different tax rate applied by subsidies -193,287.88 Impact of the deductible temporary differences or deductible loss of deferred income tax asset without recognized in the 274.41 period Income tax expense 603,910.08 Other explanation 40. Annotation of cash flow statement (1)Cash received with other operating activities concerned RMB/CNY Item Current period Last period Unit intercourse account 1,869,387.03 1,042,828.59 Collection management fee and utilities 1,189,095.86 601,727.14 etc. Repayment from employees 32,462.10 22,608.36 Margin 40,263.30 500,000.00 Interest income 48,764.26 71,314.28 Government subsidy 223,300.00 771,800.00 Total 3,403,272.55 3,010,278.37 Note of cash received with other operating activities concerned: The cash received with other operating activities concerned in the period mainly including collection management fee and utilities, government subsidy, margin and other intercourse funds (2)Cash paid with other operating activities concerned RMB/CNY 122 深圳中恒华发股份有限公司 2019 年半年度报告全文 Item Current period Last period Unit intercourse account 1,315,156.92 1,840,448.01 Advances to employees 2,563,755.64 1,046,817.78 Litigation fee 249,530.00 Deposit, margin 1,656,408.00 831,867.00 Social expenses 1,299,864.19 1,166,779.68 Water and electricity 2,365,472.40 2,270,904.17 Travel expenses 638,939.25 849,867.40 Freight 2,983,611.66 2,336,595.10 Traffic expenses 521,848.44 620,026.07 Repairs 1,067,602.12 965,726.34 Audit and consulting fees 792,049.00 1,037,410.89 Security 620,945.00 218,400.00 Financial institutions handling fee 62,759.86 103,694.09 Office expenses 508,512.98 408,916.56 Communication fee 154,173.54 195,355.57 Lease fee 2,444,912.69 2,418,018.66 Other 1,614,513.51 1,107,946.89 Total 20,610,525.20 17,668,304.21 Note of cash paid with other operating activities concerned: (3)Cash received with other investment activities concerned RMB/CNY Item Current period Last period Redemption of principal of financial 49,000,000.00 80,000,000.00 products Total 49,000,000.00 80,000,000.00 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 49,000,000.00 80,000,000.00 123 深圳中恒华发股份有限公司 2019 年半年度报告全文 Total 49,000,000.00 80,000,000.00 Note of cash paid related with investment activities Nil 41.Supplementary information to statement of cash flow (1)Supplementary information to statement of cash flow RMB/CNY Supplementary information Current period Last period 1. Net profit adjusted to cash flow of -- -- operation activities: Net profit 2,580,411.13 2,793,133.60 Add: Provision for assets impairment 6,025,283.55 7,322,855.85 Amortization of intangible assets 872,474.94 709,576.88 Amortization of long-term deferred 116,167.92 63,722.66 expenditure Loss from disposal of fixed assets, intangible assets and other long-term -129,039.57 333,454.38 assets(gain is listed with “-”) Financial expenses (gain is listed with “-”) 5,262,857.89 5,536,037.89 Investment loss (income is listed with “-”) -74,936.14 -245,679.10 Decrease of deferred income tax assets 1,218.57 (increase is listed with “-”) Decrease of inventory (increase is listed -23,735,632.38 4,786,891.71 with “-”) Decrease of operating receivable accounts -17,697,245.84 -15,034,088.55 (increase is listed with “-”) Increase of operating payable accounts 71,973,879.06 -32,938,449.52 (decrease is listed with “-”) Net cash flow arising from operating 45,194,220.56 -26,671,325.63 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 38,041,641.85 23,838,986.21 Less: Balance of cash at period-begin 29,171,804.99 66,240,945.59 Add: Balance of cash equivalent at 3,256,408.54 124 深圳中恒华发股份有限公司 2019 年半年度报告全文 period-end Less: Balance of cash equivalent at 15,234,028.71 period-begin Net increased amount of cash and cash 8,869,836.86 -54,379,579.55 equivalent (2)Constitution of cash and cash equivalent RMB/CNY Item Closing balance Opening balance Ⅰ. Cash 38,041,641.85 29,171,804.99 Including:Cash on hand 426,742.83 236,354.29 Bank deposit available for payment 37,614,899.02 28,935,450.70 at any time Ⅲ. Balance of cash and cash equivalent at 36,831,046.46 27,961,209.60 period-end Other explanation: Ending Monetary fund-other monetary fund refers to the margin of bank acceptance 9,939,899.76 Yuan, which is not belonging to the cash and cash equivalent. Ending Monetary fund-Bank deposit has 1,210,595.39 Yuan frozen by the court, which is not belonging to the cash and cash equivalent either. 42. Assets with ownership or use right restricted RMB/CNY Item Ending book value Restriction reasons Monetary fund 11,150,495.15 Issuing the bank acceptance Note receivable 3,866,647.92 Pledged Inventory 14,609,128.53 Pledged Fixed assets 37,728,701.12 Bank loan secured Intangible assets 42,487,962.49 Bank loan secured Disposal of fixed assets 92,857,471.69 Court closure Intangible assets 36,306,830.17 Bank loan secured Total 239,007,237.07 -- Other explanation: Nil 125 深圳中恒华发股份有限公司 2019 年半年度报告全文 43. Item of foreign currency (1) Item of foreign currency RMB/CNY Closing balance of foreign Closing RMB balance Item Rate of conversion currency converted Monetary fund -- -- Including:USD 1,361,685.55 6.87 9,356,958.43 Euro HKD 32.66 0.88 28.62 Account receivable -- -- Including:USD 5,942,756.38 6.87 40,836,244.74 Euro HKD Long-term loans -- -- Including:USD Euro HKD Account paid in advance Including:USD 2,249,052.99 6.87 15,454,592.53 Short-term loans Including:USD 3,300,000.00 6.87 22,676,280.00 Other explanation: Nil 44. Government subsidy (1)Government subsidy RMB/CNY Amount reckoned into current Category Amount Item gains/losses Award for excellent 200,000.00 Non-operating income 200,000.00 enterprise for 2018 126 深圳中恒华发股份有限公司 2019 年半年度报告全文 2018 provincial foreign 17,300.00 Non-operating income 17,300.00 economic and trade funds Job-hunting and 6,000.00 Non-operating income 6,000.00 entrepreneurship subsidy (2)Refund of government subsidy □ Applicable √Not applicable Other explanation: Nil VIII. Equity in other subjects 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: 127 深圳中恒华发股份有限公司 2019 年半年度报告全文 Nil Other explanation: Nil IX. The risk associated with financial instruments The Group's main financial instruments include loans, receivables, payable, tradable financial assets, trading and financial liabilities, etc. 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 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. 1)FX 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 30 June 2019, 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 2019-6-30(RMB conversion) 2018-12-31(RMB conversion) Monetary fund -USD 9,356,958.43 2,010,146.81 Monetary fund -HKD 28.61 28.62 Account receivable -USD 40,836,244.74 44,086,655.90 Account paid in advance-USD 15,454,592.53 19,035,307.91 Account payable -USD 0.00 Short-term loans-USD 22,676,280.00 25,068,657.88 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 128 深圳中恒华发股份有限公司 2019 年半年度报告全文 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 30 June 2019, the Group's interest-bearing debt was mainly the floating interest rate loan contract denominated in Renminbi and US dollars, amounting to RMB 124,676,280 (December 31, 2018: RMB 161,568,657.88). 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 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 138,920,788.78. (3) Liquidity risk 129 深圳中恒华发股份有限公司 2019 年半年度报告全文 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. 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 Jan.-Jun. 2019 Jan.-Jun. 2018 fluctuation Impact on net profit Impact on owner's Impact on net profit Impact on owner's equity equity All foreign 5% appreciation of 1,031,885.69 1,031,885.69 -284,157.38 -284,157.38 currency the RMB All foreign 5% devaluation of -1,031,885.69 -1,031,885.69 284,157.38 284,157.38 currency the RMB 130 深圳中恒华发股份有限公司 2019 年半年度报告全文 X. Related party and related transactions 1. Parent company of the enterprise Share-holding ratio on the Voting right ratio Parent company Registration place Business nature Registered capital enterprise for on the enterprise parent company Production and Wuhan Zhongheng sales, real estate New Science & development and Technology Wuhan 138,000,000.00 42.13% 42.13% 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. 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 131 深圳中恒华发股份有限公司 2019 年半年度报告全文 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 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 55,314,886.74 167,780,900.00 N 57,922,243.81 International goods Investment Co., 132 深圳中恒华发股份有限公司 2019 年半年度报告全文 Ltd. Wuhan Hengsheng Purchasing 57,732,114.71 205,446,000.00 N 44,866,194.55 Photo-electricity goods 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 goods 64,136,216.85 63,231,882.88 Ltd. Wuhan Hengsheng Photo-electricity Industry Sales of goods 12,184,138.45 2,772,074.10 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 30,000,000.00 2018-04-20 2022-04-20 N 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 remuneration 781,248.00 784,673.68 133 深圳中恒华发股份有限公司 2019 年半年度报告全文 5. Receivable/payable items of related parties (1) Receivable item RMB/CNY Closing balance Opening balance Item Related party Book balance Bad debt provision Book balance Bad debt provision Hong Kong Yutian Account International 37,716,619.04 34,850,150.19 receivable Investment Co., Ltd. Hong Kong Yutian Account paid in International 15,495,075.48 20,591,047.90 advance Investment Co., Ltd. (2)Payable item RMB/CNY Item Related party Closing book balance Opening book balance Wuhan Hengsheng Account payable Photo-electricity Industry 1,933,617.32 871,821.45 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 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 134 深圳中恒华发股份有限公司 2019 年半年度报告全文 First year after balance sheet date 3,847,599.84 Second year after balance sheet date 502,325.53 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. The case is pending, and on 4 April 2019, the Company received a notice from the Shenzhen International Arbitration Court extending the award to 5 May 2019. 2. Other pending lawsuit Amount Accrual involved in Enforceme Basic information of liability Outcome and Disclosur the case (10 Progress nt of Index for disclosure litigation (arbitration) resulted impact e date thousand judgments (Y/N) Yuan) In September 2016, Judgement on 16 Found more in the Executing 2018-02- http://www.cninfo.com.cn/cni the dispute was August 2017, Notice of the 09 nfo-new/disclosure/szse_main submitted for arbitration the Company Company /bulletin_detail/true/12044066 on “Cooperative and its 06?announceTime=2018-02-0 Operation Contract of 46,460 N controlling 9 ; Renovation Project at shareholders are http://www.cninfo.com.cn/ne Huafa Industrial Park, applied for w/disclosure/detail?plate=szse Gongming Street, withdrawal the &stockCode=000020&annou Guangming New judgement, but it ncementId=1205326846&ann 135 深圳中恒华发股份有限公司 2019 年半年度报告全文 District” entered into was rejected by ouncementTime=2018-08-25 between Wuhan the Court. Zhongheng, the Company and Shenzhen Vanke In March 2016, the Now the second Case closed Case 2019-05- http://www.cninfo.com.cn/cni Company and Huafa instance closed 07 nfo-new/disclosure/szse_main Technology bring an judgment has /bulletin_detail/true/12027024 action against the been made, and 23?announceTime=2016-09-1 flowed enterprise as has applied for 4 07:41 Shenzhen Huayongxing compulsory Eco Technology Co., execution. Ltd, Shenzhen Guanyong Line Board Co., Ltd, Shenzhen Mingyi Electric Co., 1,964.92 N Ltd, Shenzhen ORL Technology Co., Ltd. and Shenzhen Kangzhengxin Technology Co., Ltd for delays payment of rent, refuse to move out the site, forcibly occupy the Company’s distribution room and other power supply unit In March 2016, the On 15 March Executing Executing 2016-09- http://www.cninfo.com.cn/cni nd Company and Huafa 2018, the 2 14 nfo-new/disclosure/szse_main Property bring a suit trial decides was /bulletin_detail/true/12027024 against Shenzhen won and has 23?announceTime=2016-09-1 Huayongxing Eco applied for 4 07:41 Technology Co., Ltd 947.26 N compulsory and Shenzhen YDX execution Technology Co., Ltd for violation of the Contract and refuse to clear up and remove the place Arbitration case of legal 1,940.2 N The arbitration Waiting for Waiting 2018-11-1 http://www.cninfo.com.cn/ne service contract dispute has been held adjudicate for 4 w/disclosure/detail?plate=szse with V&T (Shenzhen) and waiting for adjudicate &stockCode=000020&annou Law Firm and the adjudication ncementId=1205602053&ann Company and Wuhan ouncementTime=2018-11-14 136 深圳中恒华发股份有限公司 2019 年半年度报告全文 Zhongheng Group (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. Events after balance sheet date 1. important non-adjustment items RMB/CNY Impact on financial status and Reasons for the inability to Item Content operating results estimate the impact 2. Profit distribution RMB/CNY 3. Sales return Nil 4. Explanation on other events after balance sheet date Nil XIII. Other important event 1. Earlier accounting errors collection (1)Retrospective restatement RMB/CNY Items for each comparison Correction content Treatment procedures Cumulative impact period affected (2)Prospective application Reasons for prospective application Correction content Approval procedures adoption 137 深圳中恒华发股份有限公司 2019 年半年度报告全文 2. Debt restructuring 3. Assets exchange (1)Non-monetary assets exchange (2)Other assets exchange 4. Pension plan 5. Discontinuing operation RMB/CNY Profit of discontinuing operation Income tax Item Income Expenses Total profit Net profit attributable to expenses owners of parent company Other explanation 6. Segment (1)Recognition basis and accounting policy for reportable segment (2)Financial information for reportable segment RMB/CNY Item Offset of segment Total 138 深圳中恒华发股份有限公司 2019 年半年度报告全文 (3) If there are no segment in the Company, or the total assets and liabilities of the segment are un-able to disclosed, explain the reasons (4)Other explanation 7. Major transaction and events makes influence on investor’s decision 8. Other XIV. Principle notes of financial statements of parent company 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 Amoun Amoun Accrual value Ratio Ratio t t l ratio t t ratio Account receivable with bad debt 10,293, 100.00 10,293, 100.00 10,293, 100.00 10,293, 100.00 0.00 0.00 provision accrual 424.29 % 424.29 % 424.29 % 424.29 % on a single basis Including: Including: 10,293, 10,293, 10,293, 10,293, Total 424.29 424.29 424.29 424.29 Accrual of bad debt provision on single basis: 10,293,424.29 Yuan RMB/CNY Closing balance Name Book balance Bad debt provision Accrual ratio Accrual causes Shenzhen Huafa Proerty Leasing 4,558,859.15 4,558,859.15 100.00% Uncollectible Company 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 139 深圳中恒华发股份有限公司 2019 年半年度报告全文 compensation Zhao Baomin 553,901.68 553,901.68 100.00% Uncollectible Hebei Botou Court 520,021.00 520,021.00 101.00% Uncollectible Electricity charge of the canteen in 489,214.70 489,214.70 100.00% Uncollectible Gongming Jiantao (Fogang) Laminated Board Co., 465,528.10 465,528.10 100.00% Uncollectible Ltd. Labor union 72,402.55 72,402.55 100.00% Uncollectible Lu Wei 290,000.00 290,000.00 100.00% Uncollectible Dai Qiangbo 4/F hotel 354,569.00 354,569.00 100.00% Uncollectible Chuangjing 192,794.00 192,794.00 100.00% Uncollectible Shenzhen Mingli Co., 170,394.84 170,394.84 100.00% Uncollectible ltd Other enterprise 5,440,838.45 5,440,838.45 100.00% Uncollectible Total 10,293,424.29 10,293,424.29 -- -- Accrual of bad debt provision on single basis: RMB/CNY Closing balance Name Book balance Bad debt provision Accrual ratio Accrual causes Accrual of bad debt provision on portfolio: RMB/CNY Closing balance Name Book balance Bad debt provision Accrual ratio Explanation on portfolio basis: Nil Accrual of bad debt provision on portfolio: RMB/CNY Closing balance Name Book balance Bad debt provision Accrual ratio Explanation on portfolio basis: If the provision for bad debts of accounts receivable is made in accordance with the general model of expected credit losses, please refer to the disclosure of other receivables to disclose related information about bad-debt provisions: □ Applicable √Not applicable By account age 140 深圳中恒华发股份有限公司 2019 年半年度报告全文 RMB/CNY Account age Closing balance Total 0.00 (2)Bad debt provision accrual, collected or reversal in the period Bad debt provision accrual in the period: RMB/CNY Amount changed in the period Category Opening balance Collected or Closing balance Accrual Written-off reversal Including major amount bad debt provision that collected or reversal in the period: RMB/CNY Enterprise Amount collected or reversal Collection by (3)Account receivable actually written-off in the period RMB/CNY Item Amount written-off Including major account receivable written-off : RMB/CNY Amount arising Nature of account Amount Causes of Procedures of Enterprise from related receivable written-off written-off written-off transactions (Y/N) Explanation on account receivable written-off: (4)Top 5 account receivables at ending balance by arrears party (5)Assets and liabilities resulted by account receivable transfer and continues involvement Other explanation: 2. Other account receivable RMB/CNY Item Closing balance Opening balance Other account receivable 111,782,724.70 99,155,253.08 Total 111,782,724.70 99,155,253.08 141 深圳中恒华发股份有限公司 2019 年半年度报告全文 (1)Interest receivable 1)Category of interest receivable RMB/CNY Item Closing balance Opening balance 2)Significant overdue interest Whether impairment Borrower Closing balance Overdue time Overdue reason occurs and judgment basis Other explanation: 3)Accrual of bad debt provision □ Applicable √Not applicable (2)Dividend receivable 1)Category of dividend receivable RMB/CNY Item (or invested enterprise) Closing balance Opening balance 2)Important dividend receivable with account age over one year RMB/CNY Whether impairment Item (or invested Reasons for Closing balance Account age occurs and judgment enterprise) un-collection basis 3)Accrual of bad debt provision □ Applicable √Not applicable Other explanation: (3)Other account receivable 1)Other account receivable by nature RMB/CNY Nature Closing book balance Opening book balance Margin deposit 720,065.04 720,065.04 Borrow money 1,475,463.06 2,013,402.14 Intercourse funds 119,568,896.93 110,451,250.82 Rental income 9,088,088.00 5,857,777.46 Total 130,852,513.03 119,042,495.46 2)Accrual of bad debt provision RMB/CNY 142 深圳中恒华发股份有限公司 2019 年半年度报告全文 Phase I Phase II Phase III Expected credit losses for Expected credit losses for Expected credit Bad debt provision the entire duration the entire duration (with Total losses over next 12 (without credit credit impairment months impairment occurred) occurred) Balance on Jan. 1, 19,069,788.33 19,069,788.33 2019 Balance of Jan. 1, 2019 —— —— —— —— in the period Balance on Jun. 30, 19,069,788.33 19,069,788.33 2019 Change of book balance of loss provision with amount has major changes in the period □ Applicable √Not applicable By account age RMB/CNY Account age Closing balance Within one year(One year included) 111,723,124.99 111,723,124.99 1-2 years 59,599.71 Total 111,782,724.70 3)Bad debt provision accrual, collected or reversal in the period Bad debt provision accrual in the period: RMB/CNY Amount changed in the period Category Opening balance Closing balance Accrual Collected or reversal Nil Including important bad debt provision that collected or reversal in the period: RMB/CNY Enterprise Amount collected or reversal Collection by 4)Other account receivable actually written-off in the period RMB/CNY Item Amount written-off Including important other account receivable written-off in the period: RMB/CNY Nature of other Amount arising Amount Causes of Procedures of Enterprise account from related written-off written-off written-off receivable transactions (Y/N) Explanation on other account receivable written-off: 143 深圳中恒华发股份有限公司 2019 年半年度报告全文 5) Top 5 other account receivables at ending balance by arrears party RMB/CNY Ratio in total Closing balance of Enterprise Nature Closing balance Account age ending balance of bad debt reserve other receivables Hengfa Technology Intercourse funds 91,887,895.78 Within one year 70.22% Company Zhongheng Huafa Intercourse funds 20,186,113.28 Within 2 years 15.43% Property HUAFA Lease Intercourse funds 4,558,859.15 Over 3 years 3.48% 4,558,859.15 Company Lease fee Portman 4,021,734.22 Over 3 years 3.07% 4,021,734.22 receivable etc Shenzhen Jifang Lease fee 1,380,608.00 Within one year 1.06% Investment Co., Ltd receivable etc Total -- 122,035,210.43 -- 93.26% 8,580,593.37 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 (1)Investment for subsidiary RMB/CNY Changes in the period Closing Opening Closing The invested Accrual of balance of balance Additional Negative balance entity impairment Other impairment (Book value) investment investment (Book value) provision provision HUAFA Lease 0.00 0.00 600,000.00 Company HUAFA 1,000,000.00 1,000,000.00 Property 144 深圳中恒华发股份有限公司 2019 年半年度报告全文 Company Hengfa 183,608,900. 183,608,900. Technology 00 00 Company Huafa Trading 0.00 Company HUAFA Hengtian 1,000,000.00 1,000,000.00 Company HUAFA Hengtai 1,000,000.00 1,000,000.00 Company 186,608,900. 186,608,900. Total 600,000.00 00 00 4. Operating income and cost RMB/CNY Current period Last period Item Income Cost Income Cost Other business 18,041,135.31 3,172,031.59 16,961,088.74 2,510,518.82 Total 18,041,135.31 3,172,031.59 16,961,088.74 2,510,518.82 Whether implemented the new revenue standards □Yes √No Other explanation: Nil XV. Supplementary Information 1. Current non-recurring gains/losses √ Applicable □Not applicable RMB/CNY Item Amount Note Gains/losses from the disposal of 129,039.57 non-current asset Governmental subsidy reckoned into current gains/losses (not including the 223,300.00 subsidy enjoyed in quota or ration according to national standards, which are 145 深圳中恒华发股份有限公司 2019 年半年度报告全文 closely relevant to enterprise’s business) Gain/loss of entrusted investment or assets 74,936.14 management Other non-operating income and expenditure except for the aforementioned 9,458.00 items Less: Impact on income tax 54,234.64 Total 382,499.07 -- 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. ROE 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 stockholders of the 0.79% 0.0091 0.0091 Company Net profits belong to common stock stockholders of the 0.68% 0.0078 0.0078 Company after deducting nonrecurring gains and losses 146 深圳中恒华发股份有限公司 2019 年半年度报告全文 Section XI. 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. 147