Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 April 2021 1 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Section I. Important Notes Board of Directors and the Supervisory Committee of Shenzhen Zhongheng Huafa Co., Ltd (hereinafter referred to as the Company) and its directors, supervisors and senior executives should guarantee the reality, accuracy and completion of the quarterly report, there are no any fictitious statements, misleading statements or important omissions carried in this report, and shall take legal responsibilities, individual and/or joint. All Directors are attended the Board Meeting for Quarterly Report deliberation. Li Zhongqiu, person in charge of the Company, Yang Bin, person in charger of accounting works and Wu Ai’jie, person in charger of accounting organ (accounting officer) hereby confirm that the Financial Statement of this Quarterly Report is authentic, accurate and complete. 2 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Section II. Basic situation of the Company I. Main accounting data and financial indexes Whether it has retroactive adjustment or re-statement on previous accounting data □Yes √ No At the same period of last Changes of this period over Current period year same period of last year Operating income (RMB) 190,936,203.57 87,800,584.55 117.47% Net profit attributable to shareholders of 5,557,677.31 -400,741.17 1,489.06% the listed company (RMB) Net profit attributable to shareholders of the listed company after deducting 5,476,703.89 -208,179.52 2,735.02% non-recurring gains and losses (RMB) Net cash flow arising from operating -5,125,776.38 7,931,308.59 -164.63% activities (RMB) Basic earnings per share (RMB/Share) 0.0197 -0.0014 1,507.14% Diluted earnings per share (RMB/Share) 0.0197 -0.0014 1,507.14% Weighted average ROE 1.64% -0.12% 1.76% Changes of this period-end At the end of the reporting At the end of last year over same period-end of last period year Total assets (RMB) 637,523,241.97 627,779,621.06 1.55% Net assets attributable to shareholder of 341,806,414.60 336,248,737.29 1.65% listed company (RMB) Items and amount of non-recurring gains and losses √ Applicable □ Not applicable In RMB Amount from year-begin to Item Note period-end Gains/losses from the disposal of non-current asset (including the -6,163.53 write-off that accrued for impairment of assets) Governmental subsidy reckoned into current gains/losses (not including the subsidy enjoyed in quota or ration according to 6,000.00 national standards, which are closely relevant to enterprise’s business) Gain or loss on the investment or management of assets 71,186.44 3 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Other non-operating income and expenditure except for the 10,677.58 aforementioned items Less: impact on income tax 727.07 Total 80,973.42 -- Concerning the extraordinary profit (gain)/loss defined by Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, and the items defined as recurring profit (gain)/loss according to the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, explain reasons □ Applicable √ Not applicable In reporting period, the Company has no particular about items defined as recurring profit (gain)/loss according to the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss II. Total number of shareholders at the end of this report period and top ten shareholders 1. Total number of common shareholders at the end of this report period and top ten common shareholders In shares Total preference shareholders Total common stock shareholders in with voting rights recovered at 22,456 0 reporting period-end end of reporting period (if applicable) Top ten shareholders Amount of Number of share pledged/frozen Shareholder’s Nature of Proportion of Amount of shares restricted shares name shareholder shares held held State of share Amount held Wuhan Domestic Pledged 116,100,000 Zhongheng non-state-owned 42.13% 119,289,894 0 Frozen 119,289,894 Group legal person SEG (HONG Pledged 0 Overseas legal KONG) CO., 5.85% 16,569,560 0 person Frozen 0 LTD. GOOD HOPE Pledged 0 CORNER Overseas legal 2.50% 7,072,000 0 INVESTMENTS person Frozen 0 LTD. Changjiang Pledged 0 Securities Overseas legal Brokerage 1.89% 5,355,249 0 person Frozen 0 (Hongkong) Co., Ltd. 4 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Guoyuan Pledged 0 Securities Overseas legal 1.37% 3,870,117 0 Brokerage (Hong person Frozen 0 Kong) Limited Overseas nature Pledged 0 Li Zhongqiu 1.00% 2,830,000 0 person Frozen 0 China Merchants Pledged 0 State-owned legal Securities Hong 0.79% 2,230,608 0 person Frozen 0 Kong Co., Ltd. LI SHERYN Overseas nature Pledged 0 0.51% 1,446,100 0 ZHAN MING person Frozen 0 Shengyin Pledged 0 Overseas legal Investment Co., 0.50% 1,408,600 0 person Frozen 0 Ltd. Domestic nature Pledged 0 # Xu Xinfen 0.45% 1,288,000 0 person Frozen 0 Top ten shareholders with unrestricted shares held Type of shares Shareholder’s name Amount of unrestricted shares held Type Amount RMB common Wuhan Zhongheng Group 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 7,072,000 listed foreign 7,072,000 INVESTMENTS LTD. shares Domestically Changjiang Securities Brokerage 5,355,249 listed foreign 5,355,249 (Hongkong) Co., Ltd. shares Domestically Guoyuan Securities Brokerage 3,870,117 listed foreign 3,870,117 (Hong Kong) Limited shares Domestically Li Zhongqiu 2,830,000 listed foreign 2,830,000 shares Domestically China Merchants Securities Hong 2,230,608 listed foreign 2,230,608 Kong Co., Ltd. shares 5 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Domestically LI SHERYN ZHAN MING 1,446,100 listed foreign 1,446,100 shares Domestically Shengyin Investment Co., Ltd. 1,408,600 listed foreign 1,408,600 shares RMB common # Xu Xinfen 1,288,000 1,288,000 share Among the top ten shareholders, Li Zhongqiu is the actual controller of Wuhan Zhongheng New Science & Technology Industrial Group Co., Ltd. and is a party acting in Explanation on associated concert.Shengyin Investment Co., Ltd. is an overseas wholly-owned subsidiary of Wuhan relationship among the aforesaid Zhongheng group. shareholders The Company neither knew whether there exists associated relationship among the other shareholders, nor they belong to consistent actors that are prescribed in Measures for the Administration of Disclosure of Shareholder Equity Changes of Listed Companies. Explanation on top 10 common shareholders involving margin N/A business (if applicable) Whether top ten common shareholders or top ten common shareholders with un-restrict shares held have a buy-back agreement dealing in reporting period □ Yes √ No The top ten common shareholders or top ten common shareholders with un-restrict shares held of the Company have no buy-back agreement dealing in reporting period. 2. Total shareholders with preferred stock held and shares held by top ten shareholders with preferred stock held □ Applicable √ Not applicable 6 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Section III. Significant Events I. Particulars about material changes in items of main accounting statement and financial index and explanations of reasons √Applicable □Not applicable Item March 31, 2021 January 1, 2021 Y-o-y Reasons of changes changes Other receivables 2,060,681.11 4,466,949.96 -53.87% Decrease in current accounts Inventory 103,732,453.57 70,502,773.52 47.13% Stocking in this period Other current assets The tax to be deducted is deducted for 1,129,263.49 4,255,643.19 -73.46% the current period. Long-term prepaid Cloud service fee amortization 19,361.35 77,445.31 -75.00% expenses Short-term loans Short-term bank loans were increased 20,921,296.00 12,527,808.00 67.00% in the current period. Contract liabilities The deposit received in advance has 171,293.92 287,140.66 -40.34% decreased during the period. Employee The prepaid wages and expenses are compensation 3,106,406.38 5,737,366.59 -45.86% paid in the current period payable Other payables 18,556,536.88 27,608,281.01 -32.79% Decrease in current accounts Interest payable Short-term loans increased in the 63,086.88 26,335.66 139.55% current period. Item January to March January to March Y-o-y Reasons of changes 2021 2020 changes Operating income 190,936,203.57 87,800,584.55 117.47% Increase in orders this period Operating cost 160,692,426.33 73,672,446.25 118.12% Increase in orders this period Sales expense 9,604,962.16 3,448,537.85 178.52% Increase in orders this period R&D expenses Increased in R&D investment in this 1,990,208.94 908,285.77 119.12% period Other income Amortization of deferred income for 119,520.00 64,770.00 84.53% the current period Investment income Increase in financial income during 71,186.44 37,415.02 90.26% the current period Non-operating Government subsidy income from the 19,464.75 5,492.44 254.39% income previous period Non-operating Liquidated damages occurred in the 8,950.00 263,835.56 -96.61% expenses previous period 7 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Income tax expense 1,360,875.84 -85,032.71 -1700.41% Increase in profit for the period Item January to March January to March Y-o-y Reasons of changes 2021 2020 changes Cash received from Increase in sales collection in this the sale of goods period 118,847,638.92 86,584,529.58 37.26% and the provision of labor services Cash paid for Increase in orders this period purchasing goods 90,764,568.41 56,760,923.41 59.91% and receiving labor services Cash paid to and for Increase in orders this period 18,034,045.23 8,467,600.61 112.98% employees Taxes paid 8,114,109.92 2,351,100.26 245.12% Increase in orders this period Cash received from Margin interest increased in this 71,186.44 37,415.02 90.26% investment income period Net cash received Disposal of old equipment in the from the disposal of previous period fixed assets, 13,000.00 91,000.00 -85.71% intangible assets and other long-term assets Cash paid for the Purchase production equipment in purchase and this period construction of fixed 1,624,675.50 467,211.58 247.74% assets, intangible assets and other long-term assets Other cash paid Bank wealth management decreased relating to investing - 25,000,000.00 -100.00% in this period activities Cash received from Increase in short-term loans 20,710,525.00 6,725,056.80 207.96% loans Other cash paid Increase acceptance margin in this relating to financing 6,408,886.53 - period activities Influence on cash The impact of exchange rate and cash equivalents fluctuations in the current period -124,286.41 32,336.78 484.35% due to fluctuation in exchange rate 8 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 II. Analysis and explanation of significant events and their influence and solutions √ Applicable □Not applicable (i) The Company signed Asset Exchange Contract with Wuhan Zhongheng New Science & Technology Industrial Group Co., Ltd (hereinafter referred to as 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 of 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 Wuhan Zhongheng Group, Shenzhen Vanke Real Estate Co., Ltd. (hereinafter referred to as “Shenzhen Vanke”), and Shenzhen Vanke Guangming Real Estate Development Co., Ltd. (hereinafter referred to as “Vanke Guangming”). On 12 September 2016, 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. Shenzhen Court of International Arbitration (SCIA) has given a ruling in August 2017. On August 29, 2018, the court accepted the compulsory execution application of Shenzhen Vanke. In October 2019, as a number of outsiders filed an “execution objection” and applied for “no execution” to Shenzhen Intermediate People’s Court, the Shenzhen Intermediate People’s Court ruled to terminate the enforcement procedure on March 20, 2020. If the “execution objection” and “no execution” proposed by 9 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 outsiders are rejected according to law, Shenzhen Vanke may continue to apply to the Shenzhen Intermediate People’s Court to resume execution. In mid April 2020, Heng semiconductor sued the company in Shenzhen intermediate people's court, requiring the company to transfer the above two pieces of land and compensate for the economic loss of 52 million yuan. As of the disclosure date of this report, the case has not yet been concluded.Progress of the case found more in the Notices released on Juchao website dated 14 Sept. 2016, 1 Nov. 2016, 16 Nov. 2016, on 18 Feb. 2017, 24 March 2017, 25 April 2017, 1 July 2017, 18 August 2017, 9 Feb. 2018, 25 Aug. 2018 and 7 Sept. 2018 respectively. (ii) On 31 December 2015, the 88,750,047 shares held by Wuhan Zhongheng Group, are pledge to China Merchants Securities Assets Co., Ltd. with due date of 31 December 2016. 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 date 2 Feb. 2018. Wuhan Zhongheng Group received the first-instance judgment of Guangdong Higher People’s Court to the “pledged securities repurchase dispute” case sued by China Merchants Securities Asset Management Co., Ltd. in March 2021. Wuhan Zhongheng Group refused to accept the judgment and has appealed to the Supreme People's Court, the judgment of first instance has not yet taken effect. For details, please refer to the company announcement issued by the company on www.cninfo.com.cn on March 19, 2021. (iii) 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 by Shenzhen Intermediate People's Court (hereinafter referred to as "Shenzhen Intermediate Court") on September 27, 2016, 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 Juchao Website dated October 27, 2016, January 11, 2019, May 31, 2019 and August 7, 2019. (iv) On September 29, 2016, the company and its controlling shareholder, Wuhan Zhongheng Group, signed the “Agency Contract” with V&T Law Firm. On October 8, 2016, the three parties also signed the “Supplemental Agreement for Agency Contract”, it was agreed that V&T acted as an agent for the company and Wuhan Zhongheng Group to deal with the arbitration case with Shenzhen Vanke. After losing the lawsuit, due to differences in the payment of attorney fees, V&T sued our company and Wuhan Zhongheng Group to the Shenzhen Court of International Arbitration, and applied to the court to seize a bank account under our company’s 10 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 name and part of our company dormitories, please refer to “Other Announcements on the Progress Involving Litigation and Arbitration” (Announcement Numbers: 2018-43, 2019-02) released by our company on Juchao Website dated November 14, 2018 and March 6, 2019. 02. In November 2019, the Shenzhen Court of International Arbitration ruled that the company and Wuhan Zhongheng Group paid the corresponding fees. According to the “Agency Contract” and “Supplemental Agreement for Agency Contract” signed by the three parties, the loss of the arbitrament in this case was borne by Wuhan Zhongheng Group, so it had no impact on the company’s profit. For details, see the company’s “Other Announcements on the Progress Involving Litigation and Arbitration” (Announcement No.: 2019-34) released on Juchao Website dated November 25, 2019. Summary of important issues Disclosure date Interim report disclosure index Implementation progress of shares buy-back □ Applicable √ Not applicable Implementation progress of the reduction of repurchases shares by centralized bidding □ Applicable √ Not applicable III. Commitments completed in Period and those without completed till end of the Period from actual controller, shareholders, related parties, purchaser and companies □ Applicable √ Not applicable The Company has no commitments completed in Period and those without completed till end of the Period from actual controller, shareholders, related parties, purchaser and companies. IV. Financial asset investment 1. Securities investment □ Applicable √ Not applicable No security investment in the Period. 2. Derivative investment □ Applicable √ Not applicable No derivative investment in the Period. V. Progress of investment projects with raised funds □ Applicable √ Not applicable VI. Prediction of business performance from January – June 2021 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 11 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 □ Applicable √ Not applicable VII. Major contracts for daily operations □ Applicable √ Not applicable VIII. Trust financing □ Applicable √ Not applicable No trust financing in the Period. IX. Guarantee outside against the regulation □Applicable √Not applicable The Company had no guarantee outside against the regulation in the period. X. Non-operational fund occupation from controlling shareholders and its related party □ Applicable √ Not applicable The Company had no non-operational fund occupation form controlling shareholders and its related party in the period. XI. Registration form for receiving research, communication and interview in the report period √ Applicable □ Not applicable Main content Reception Type of Index for the interview Date Method Object and information location investors and research provided Understand the company's production and Office of the operation BOD locates in Telephone situation, January 5, 2021 Individual Individual N/A 6/F, Huafa communication litigation Building progress and the progress of urban renewal projects 12 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Section IV. Financial Statement I. Financial statement 1. Consolidate balance sheet Prepared by Shenzhen Zhongheng Huafa Co., Ltd. March 31, 2021 In RMB Item March 31, 2021 March 31, 2020 Current assets: Monetary fund 57,688,251.58 60,968,053.58 Settlement provisions Capital lent Trading financial assets Derivative financial assets Note receivable 9,506,829.34 20,240,464.79 Account receivable 141,260,234.64 128,063,911.79 Receivable financing 9,727,239.72 10,057,385.11 Accounts paid in advance 35,287,786.09 39,643,255.11 Insurance receivable Reinsurance receivables Contract reserve of reinsurance receivable Other account receivable 2,060,681.11 4,466,949.96 Including: Interest receivable Dividend receivable Buying back the sale of financial assets Inventories 103,732,453.57 70,166,013.49 Contractual assets Assets held for sale Non-current asset due within one year Other current assets 1,129,263.49 4,255,643.19 13 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Total current assets 360,392,739.54 337,861,677.02 Non-current assets: Loans and payments on behalf Debt investment Other debt investment Long-term account receivable Long-term equity investment Investment in other equity instrument Other non-current financial assets Investment real estate 46,792,579.70 47,224,662.27 Fixed assets 181,745,798.39 193,605,444.53 Construction in progress 740,000.00 740,000.00 Productive biological asset Oil and gas asset Right-of-use assets Intangible assets 40,383,028.86 40,820,657.80 Expense on Research and Development Goodwill Long-term expenses to be 19,361.35 77,445.31 apportioned Deferred income tax asset 7,383,734.13 7,383,734.13 Other non-current asset 66,000.00 66,000.00 Total non-current asset 277,130,502.43 289,917,944.04 Total assets 637,523,241.97 627,779,621.06 Current liabilities: Short-term loans 20,921,296.00 12,527,808.00 Loan from central bank Capital borrowed Trading financial liability Derivative financial liability Note payable 37,089,784.05 37,416,381.20 Account payable 120,547,983.80 98,318,239.88 Accounts received in advance 14 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Contractual liability 171,293.92 287,140.66 Selling financial asset of repurchase Absorbing deposit and interbank deposit Security trading of agency Security sales of agency Wage payable 3,106,406.38 5,737,366.59 Taxes payable 11,965,705.78 14,204,642.62 Other account payable 18,556,536.88 27,608,281.01 Including: Interest payable 63,086.88 26,335.66 Dividend payable Commission charge and commission payable Reinsurance payable Liability held for sale Non-current liabilities due within 12,000,000.00 12,000,000.00 one year Other current liabilities 9,369,289.56 18,322,972.81 Total current liabilities 233,728,296.37 226,127,947.79 Non-current liabilities: Insurance contract reserve Long-term loans 58,000,000.00 61,000,000.00 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 3,924,120.00 4,043,640.00 Deferred income tax liabilities Other non-current liabilities Total non-current liabilities 61,988,531.00 65,108,051.00 15 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Total liabilities 295,716,827.37 291,530,883.77 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 146,577,771.50 146,577,771.50 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 -165,324,177.15 -170,881,854.46 Total owner’ s equity attributable to 341,806,414.60 336,248,737.29 parent company Minority interests Total owner’ s equity 341,806,414.60 336,248,737.29 Total liabilities and owner’ s equity 637,523,241.97 627,779,621.06 Legal Representative: Li Zhongqiu Person in charge of accounting works: Yang Bin Person in charge of accounting institute: Wu Aijie 2. Balance Sheet of Parent Company In RMB Item March 31, 2021 March 31, 2020 Current assets: Monetary funds 1,575,886.56 966,379.17 Trading financial assets Derivative financial assets Note receivable Account receivable Receivable financing 16 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Accounts paid in advance 665,035.03 73,685.03 Other account receivable 91,466,272.68 93,922,057.92 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 Total current assets 93,722,000.77 94,976,928.62 Non-current assets: Debt investment Other debt investment Long-term receivables Long-term equity investments 186,618,400.00 186,618,400.00 Investment in other equity instrument Other non-current financial assets Investment real estate 23,655,797.76 23,957,898.42 Fixed assets 96,378,435.71 96,610,714.88 Construction in progress 740,000.00 740,000.00 Productive biological assets Oil and natural gas assets Right-of-use assets Intangible assets 4,372,527.09 4,408,763.52 Research and development costs Goodwill Long-term deferred expenses Deferred income tax assets 7,443,826.11 7,443,826.11 Other non-current assets Total non-current assets 319,208,986.67 319,843,364.57 Total assets 412,930,987.44 414,820,293.19 Current liabilities Short-term borrowings 17 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Trading financial liability Derivative financial liability Notes payable Account payable 9,740,367.33 10,745,840.16 Accounts received in advance Contractual liability 70,649.09 79,195.32 Wage payable 818,625.54 1,476,601.12 Taxes payable 8,714,006.22 7,892,878.33 Other accounts payable 19,909,799.93 21,304,919.43 Including: Interest payable Dividend payable Liability held for sale Non-current liabilities due within 12,000,000.00 12,000,000.00 one year Other current liabilities 3,959.77 Total current liabilities 51,253,448.11 53,208,509.15 Non-current liabilities: Long-term loans 58,000,000.00 61,000,000.00 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 58,064,411.00 61,064,411.00 Total liabilities 109,317,859.11 114,272,920.15 Owners’ equity: Share capital 283,161,227.00 283,161,227.00 Other equity instrument 18 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 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 -203,526,963.42 -206,656,480.35 Total owner’s equity 303,613,128.33 300,483,611.40 Total liabilities and owner’s equity 412,930,987.44 414,756,531.55 3. Consolidated Profit Statement In RMB Item Current period Last period I. Total operating income 190,936,203.57 87,800,584.55 Including: Operating income 190,936,203.57 87,800,584.55 Interest income Insurance gained Commission charge and commission income II. Total operating cost 184,218,871.61 88,130,200.33 Including: Operating cost 160,692,426.33 73,672,446.25 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 643,046.97 584,743.27 19 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Sales expense 9,604,962.16 3,448,537.85 Administrative expense 9,403,968.16 8,058,091.66 R&D expense 1,990,208.94 908,285.77 Financial expense 1,884,259.05 1,458,095.53 Including: Interest 1,805,136.09 2,375,650.33 expenses Interest income 107,550.38 128,721.93 Add: other income 119,520.00 64,770.00 Investment income (Loss is 71,186.44 37,415.02 listed with “-”) 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 “-”) 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 (Loss is listed with “-”) Losses of devaluation of asset (Loss is listed with “-”) Income from assets disposal (Loss is listed with “-”) III. Operating profit (Loss is listed with 6,908,038.40 -227,430.76 “-”) Add: Non-operating income 19,464.75 5,492.44 Less: Non-operating expense 8,950.00 263,835.56 IV. Total profit (Loss is listed with “-”) 6,918,553.15 -485,773.88 Less: Income tax expense 1,360,875.84 -85,032.71 V. Net profit (Net loss is listed with “-”) 5,557,677.31 -400,741.17 (i) Classify by business continuity 1.continuous operating net profit 5,557,677.31 -400,741.17 (net loss listed with ‘-”) 20 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 2.termination of net profit (net loss listed with ‘-”) (ii) Classify by ownership 1.Net profit attributable to owner’s 5,557,677.31 -400,741.17 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 (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.Amount of financial assets re-classify to other comprehensive income 4.Credit impairment provision for other debt investment 5.Cash flow hedging reserve 21 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 6.Translation differences arising on translation of foreign currency financial statements 7.Other Net after-tax of other comprehensive income attributable to minority shareholders VII. Total comprehensive income 5,557,677.31 -400,741.17 Total comprehensive income 5,557,677.31 -400,741.17 attributable to owners of parent Company Total comprehensive income attributable to minority shareholders VIII. Earnings per share: (i) Basic earnings per share 0.0197 -0.0014 (ii) Diluted earnings per share 0.0197 -0.0014 Enterprise combine under the same control in the Period, the combined party realized net profit of 1,585,431.59Yuan before combination, and realized-1,894,884.83 Yuan at last period for combined party Legal Representative: Li Zhongqiu Person in charge of accounting works: Yang Bin Person in charge of accounting institute: Wu Aijie 4. Profit Statement of Parent Company In RMB Item Current period Last period I. Operating income 10,890,563.23 7,437,448.02 Less: Operating cost 1,783,550.06 613,839.48 Taxes and surcharge 277,510.56 257,246.31 Sales expenses Administration expenses 2,938,581.71 3,553,655.31 R&D expenses Financial expenses 1,709,732.01 2,015,272.00 Including: interest 1,709,745.85 2,015,830.25 expenses Interest income 503.64 3,734.78 22 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Add: other income Investment income (Loss is listed with “-”) 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 with 4,181,188.89 997,434.92 “-”) Add: Non-operating income 0.35 Less: Non-operating expense 8,500.00 III. Total Profit (Loss is listed with “-”) 4,172,689.24 997,434.92 Less: Income tax 1,043,172.31 249,358.73 IV. Net profit (Net loss is listed with 3,129,516.93 748,076.19 “-”) (i) continuous operating net profit 3,129,516.93 748,076.19 (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 23 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 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.Amount of financial assets re-classify to other comprehensive income 4.Credit impairment provision for other debt investment 5.Cash flow hedging reserve 6.Translation differences arising on translation of foreign currency financial statements 7.Other VI. Total comprehensive income 3,129,516.93 748,076.19 VII. Earnings per share: (i) Basic earnings per share 0.0111 0.0026 (ii) Diluted earnings per share 0.0111 0.0026 5. Consolidated Cash Flow Statement In RMB Item Current period Last period I. Cash flows arising from operating activities: Cash received from selling 118,847,638.92 86,584,529.58 24 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 commodities and providing labor services Net increase of customer deposit and interbank deposit Net increase of loan from central bank Net increase of capital borrowed from other financial institution Cash received from original insurance contract fee Net cash received from reinsurance business Net increase of insured savings and investment 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 1,717,004.00 Other cash received concerning 1,009,951.00 1,372,807.06 operating activities Subtotal of cash inflow arising from 121,574,593.92 87,957,336.64 operating activities Cash paid for purchasing commodities and receiving labor 90,764,568.41 56,760,923.41 service Net increase of customer loans and advances Net increase of deposits in central bank and interbank Cash paid for original insurance contract compensation Net increase of capital lent Cash paid for interest, commission charge and commission 25 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Cash paid for bonus of guarantee slip Cash paid to/for staff and workers 18,034,045.23 8,467,600.61 Taxes paid 8,114,109.92 2,351,100.26 Other cash paid concerning 9,787,646.74 12,446,403.77 operating activities Subtotal of cash outflow arising from 126,700,370.30 80,026,028.05 operating activities Net cash flows arising from operating -5,125,776.38 7,931,308.59 activities II. Cash flows arising from investing activities: Cash received from recovering investment Cash received from investment 71,186.44 37,415.02 income Net cash received from disposal of fixed, intangible and other long-term 13,000.00 91,000.00 assets Net cash received from disposal of subsidiaries and other units Other cash received concerning 25,000,000.00 investing activities Subtotal of cash inflow from investing 84,186.44 25,128,415.02 activities Cash paid for purchasing fixed, 1,624,675.50 467,211.58 intangible and other long-term assets Cash paid for investment Net increase of mortgaged loans Net cash received from subsidiaries and other units obtained Other cash paid concerning 25,000,000.00 investing activities Subtotal of cash outflow from investing 1,624,675.50 25,467,211.58 activities Net cash flows arising from investing -1,540,489.06 -338,796.56 activities III. Cash flows arising from financing 26 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 activities Cash received from absorbing investment Including: Cash received from absorbing minority shareholders’ investment by subsidiaries Cash received from loans 20,710,525.00 6,725,056.80 Other cash received concerning financing activities Subtotal of cash inflow from financing 20,710,525.00 6,725,056.80 activities Cash paid for settling debts 15,419,668.00 20,548,487.80 Cash paid for dividend and profit 1,780,079.26 2,393,884.15 distributing or interest paying Including: Dividend and profit of minority shareholder paid by subsidiaries Other cash paid concerning 6,408,886.53 financing activities Subtotal of cash outflow from financing 23,608,633.79 22,942,371.95 activities Net cash flows arising from financing -2,898,108.79 -16,217,315.15 activities IV. Influence on cash and cash equivalents due to fluctuation in -124,286.41 32,336.78 exchange rate V. Net increase of cash and cash -9,688,660.64 -8,592,466.34 equivalents Add: Balance of cash and cash 30,050,989.33 36,645,061.61 equivalents at the period -begin VI. Balance of cash and cash 20,362,328.69 28,052,595.27 equivalents at the period -end 6. Cash Flow Statement of Parent Company In RMB Item Current period Last period I. Cash flows arising from operating activities: 27 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 Cash received from selling commodities and providing labor 12,621,650.08 9,931,734.48 services Write-back of tax received Other cash received concerning 4,883,321.54 3,939,188.22 operating activities Subtotal of cash inflow arising from 17,504,971.62 13,870,922.70 operating activities Cash paid for purchasing commodities and receiving labor service Cash paid to/for staff and workers 964,773.82 622,769.26 Taxes paid 773,606.33 1,239,019.63 Other cash paid concerning 5,419,192.42 7,205,331.06 operating activities Subtotal of cash outflow arising from 7,157,572.57 9,067,119.95 operating activities Net cash flows arising from operating 10,347,399.05 4,803,802.75 activities II. Cash flows arising from investing activities: Cash received from recovering investment Cash received from investment income Net cash received from disposal of fixed, intangible and other long-term assets Net cash received from disposal of subsidiaries and other units Other cash received concerning investing activities Subtotal of cash inflow from investing activities Cash paid for purchasing fixed, intangible and other long-term assets Cash paid for investment Net cash received from 28 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 subsidiaries and other units obtained Other cash paid concerning investing activities Subtotal of cash outflow from investing activities Net cash flows arising from investing activities III. Cash flows arising from financing activities Cash received from absorbing investment Cash received from loans Other cash received concerning financing activities Subtotal of cash inflow from financing activities Cash paid for settling debts 3,000,000.00 2,000,000.00 Cash paid for dividend and profit 1,710,249.49 2,015,830.25 distributing or interest paying Other cash paid concerning financing activities Subtotal of cash outflow from financing 4,710,249.49 4,015,830.25 activities Net cash flows arising from financing -4,710,249.49 -4,015,830.25 activities IV. Influence on cash and cash equivalents due to fluctuation in exchange rate V. Net increase of cash and cash 5,637,149.56 787,972.50 equivalents Add: Balance of cash and cash 737,682.09 2,046,143.44 equivalents at the period -begin VI. Balance of cash and cash 6,374,831.65 2,834,115.94 equivalents at the period -end 29 Shenzhen Zhongheng Huafa Co., Ltd. First Quarterly Report 2021 II. Explanation on financial statement adjustment 1. Financial statement adjustment at the beginning of the first year when implementation of new leasing rules from 2021 □Applicable √Not applicable 2. Retrospective adjustment of the comparative data for initial new leasing rules from 2021 □Applicable √Not applicable III. Audit report Whether the 1st quarterly report has been audited or not □Yes √ No 1Q report of the Company is unaudited. 30