2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
Securities Code: 000058 200058 Securities Short form : Shen SEG/Shen SEG B Announcement No.:2012-037
SHENZHEN SEG CO., LTD.
2012 Third Quarterly Report
I. Important Notice
The Board of Directors, the Board of Supervisors, Directors, Supervisors and Senior Executives of Shenzhen SEG
Co., Ltd. hereby guarantee that no false or misleading statement or major omission was made to the materials in
this report and that they will assume all the responsibilities, individually and jointly, for the trueness, accuracy and
completeness of its content.
All the directors have attended this board meeting reviewing this quarterly report.
Chairman of the Board Wang Li, the Chief Financial Officer Li Lifu and the responsible person of the accounting
institution (Accountant in charge) Ying Huadong hereby declare that the Financial Statements enclosed in this
quarterly report are true and complete.
II. Company Profile
(I) Major accounting data and financial indexes
Are retroactive adjustments made to previous financial statements?
□ Yes √ No □ Not applicable
Year-on-year increase/decrease
Sep. 30, 2012 Dec. 31, 2011
(%)
Total assets (Yuan) 1,690,579,384.52 1,673,584,777.35 1.02%
Owners’ equity attributable to
shareholders of the listed company 1,194,668,665.74 1,152,695,930.59 3.64%
(Yuan)
Share capital (Shares) 784,799,010.00 784,799,010.00 0%
Net asset per share attributable to
shareholders of the listed company 1.5223 1.4688 3.64%
(Yuan/Share)
Year-on-year
Year-on-year
Jul. - Sep, 2012 increase/decrease Jan. - Sep, 2012
increase/decrease (%)
(%)
Total operating income (Yuan) 117,202,411.01 6.27% 359,191,039.20 14.5%
Net profit attributable to shareholders
13,614,746.47 968.87% 45,235,958.48 63.86%
of the listed company (Yuan)
Net cash flow arising from operating
-- -- -35,864,618.92 -154.72%
activities (Yuan)
Net cash flow per share arising from
-- -- -0.0457 -154.73%
operating activities (Yuan)
Basic earnings per share (Yuan/Share) 0.0173 981.25% 0.0576 63.75%
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2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
Diluted earnings per share (Yuan/Share) 0.0173 981.25% 0.0576 63.75%
Weighted average ROE (%) 1.14% 1.03% 3.85% 1.34%
Weighted average ROE after deducting
1.13% 1.16% 3.76% 1.61%
non-recurring gains and losses (%)
Items of Non-Recurring Gains and Losses and Amounts Deducted
√ Applicable □ Not applicable
Amount from the
beginning of the year
Item Remarks
to the end of report
period
Gains and losses from disposal of non-current assets 1,230.30
Tax refund, reduction or exemption upon approval exceeding
authorized limits or without formal documents
Government subsidiaries recorded into current gains and losses
(except those closely related with corporate business and enjoyed 613,200.00
according to national standards or certain quota)
Fund appropriation charges for non-financial entities recorded into
current gains and losses
Gains from the margin between the investment cost of the
Company for acquisition of subsidiaries, joint ventures and joint
operation enterprises and the recognizable fair value of net assets
of invested units at the time of acquisition
Gains and losses from transfer of non-monetary assets
Gains and losses from entrusting investment or managed assets
Provision for assets impairment withheld for Force Majeure
Gains and losses from debt restructurings
Expenditures for corporate restructuring, such as expenses for
relocation of employees and for integration
Gains and losses from unfairly priced transactions in which the
transaction value exceeds the fair value
Net current gains and losses of a subsidiary in the current period
from the period beginning to the date of merger, formed due to the
merger of the enterprises under the control of a same entity
Gains and losses from contingency items irrelevant with regular
business of the Company
Gains and losses from fair value changes by holding of transaction
financial assets and liabilities, except effective hedging business
related to regular business of the Company, and investment
income from disposal of transaction financial assets and liabilities
as well as financial assets available for sale
Transferred-back impairment provision for accounts receivable for
which separate impairment tests are carried out
Gains and losses from external entrusted loans
Gains and losses from fair value changes of investment properties,
whose subsequent measurement is based on the fair value mode
Influence on current gains and losses by one-off adjustment
according to laws and regulations of tax and accounting and so on.
Trustee fee from entrusted operation
Other non-operating income and expenses except the
1,591,641.92
above-mentioned items
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2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
Other gains and losses fitting the definition of non-recurring gains
and losses
Influenced amount of minority shareholders’ equity -597,956.91
Influenced amount of income tax -551,518.06
Total 1,056,597.25 --
The Company's explanations of "other gains and losses fitting the definition of non-recurring gains and losses"
and the fact that the Company defines items of non-recurring gains and losses as items of recurring gains and
losses based on the nature and features of its businesses are as follows:
Item Amount involved (Yuan) Remarks
(I) Total number of shareholders at the end of the report period and shares held by the top ten
shareholders
Total shareholders at the period
67,411
end
Information on top ten shareholders of unrestricted shares
Unrestricted shares held at the Share type and quantity
Name of shareholder
period end Type Quantity
Shenzhen SEG Group Co., Ltd. 237,359,666 RMB ordinary shares 237,359,666
GUANGZHOU FODAK
ENTERPRISE GROUP CO., 18,880,334 RMB ordinary shares 18,880,334
LTD.
Taifook Securities Company Domestically listed foreign
7,980,784 7,980,784
Limited-Account Client shares
Domestically listed foreign
Gong Qianhua 5,311,520 5,311,520
shares
Domestically listed foreign
Zeng Ying 3,830,800 3,830,800
shares
Tang Lizhu 3,796,200 RMB ordinary shares 3,796,200
GUOTAI JUNAN
Domestically listed foreign
SECURITIES (HONGKONG) 3,760,941 3,760,941
shares
LIMITED
Dalian Huaxin Trust Co., Ltd –
Beta 1 Structured Securities 3,000,000 RMB ordinary shares 3,000,000
Investment Portfolio
Cao Xianhua 2,702,000 RMB ordinary shares 2,702,000
China Merchants Securities Domestically listed foreign
2,467,000 2,467,000
(Hong Kong) Co., Ltd. shares
Information on shareholders
III. Significant Events
(I) Particulars and explanations of material changes in main items of accounting statements and financial
indexes
√ Applicable □ Not applicable
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2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
Percentage of
Item Sep. 30, 2012 Dec. 31, 2011 Difference
change (%)
Monetary capital 413,939,539.53 644,439,198.78 -230,499,659.25 -35.77%
Accounts receivable 17,433,218.69 10,372,667.62 7,060,551.07 68.07%
Dividends receivable - 426,516.21 -426,516.21 -100.00%
Inventory 3,091,942.71 633,555.08 2,458,387.63 388.03%
Other current assets 385,900,000.00 201,000,000.00 184,900,000.00 91.99%
Loans and advances issued 75,830,655.25 3,534,300.00 72,296,355.25 2045.56%
Construction in progress - 42,750.00 -42,750.00 -100.00%
Wages payable 4,095,498.01 10,318,172.65 -6,222,674.64 -60.31%
Taxes payable 22,483,027.62 36,930,773.40 -14,447,745.78 -39.12%
Other current liabilities 586,800.00 - 586,800.00
Retained profits -96,770,409.57 -142,006,368.05 45,235,958.48 -31.85%
1. Main reasons for decrease of monetary capital: a) during the report period, the financial investment increased
by RMB 184.9 million from the year beginning, which led to the decrease in the amount of this item; b)
Shenzhen SEG Credit Co., Ltd. (hereinafter referred to as "SEG Credit"), whose 51.71% equity is held by the
Company, increased by RMB 72.3 million in loans issued in the report period, thus reducing this item.
2. Main reason for increase of accounts receivable: Accounts receivable of SEG Industrial Investment Co., Ltd.
(hereinafter referred to as ―SEG Industrial‖), whose 100% equity is held by the Company, saw a sales
increase in the report period.
3. Main reason for decrease of dividends receivable: the dividend from SEG Logistics was received in the
report period.
4. Main reason for increase of inventory: due to the growth of the trade business of SEG Industrial in the first
three quarters, the increase of channel stores and self-operated business led to the increase of the inventory.
5. Main reason for increase of other current assets: according to the resolution of the 17th General Meeting of
Shareholders (for year 2011), the Company increased the investment on bank financing products.
6. Main reason for increase of loans and advances: the expansion of the small loan business of SEG Credit in
the report period led to the increase of loans, hence the increased amount of this item.
7. Main reason for decrease of construction in progress: in the report period, the completed KOA information
project was transferred to intangible assets for accounting.
8. Main reason for decrease of wages payable: in the report period, the Company paid the wages of December
2011 and the year-end bonus of 2011, which were accrued in the end of 2011, to its employees.
9. Main reason for decrease of taxes payable: in the report period, the Company settled the enterprise income
tax which was accrued in 2011 with the tax authorities.
10. Main reason for increase of other current liabilities: specific-purpose government subsidies for Shenzhen
SEG E-Commerce Co., Ltd. (hereinafter referred to as ―SEG E-Commerce‖) whose 51% equity is held by
the Company were received and confirmed as deferred income in the report period.
11. Main reason for increase of retained profits: the Company’s net profit increased during the report period.
Item Sep. 30, 2012 Sep. 30, 2011 Difference Percentage of change (%)
Operating expense 1,050,800.94 2,104,044.40 -1,053,243.46 -50.06%
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2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
Loss from asset impairment 853,119.74 0.00 853,119.74 -
Investment income 10,059,446.75 -5,227,389.11 15,286,835.86 -
Operating profit 70,567,746.29 46,670,196.64 23,897,549.65 51.21%
Non-operating income 2,251,807.86 608,935.35 1,642,872.51 269.79%
Non-operating expenses 45,735.64 87,447.90 -41,712.26 -47.70%
Gross profit 72,773,818.51 47,191,684.09 25,582,134.42 54.21%
Net profit 54,516,990.11 30,056,563.52 24,460,426.59 81.38%
Net profit attributable to 45,235,958.48 27,606,138.70 17,629,819.78 63.86%
shareholders of the parent
company
Gains and losses of 9,281,031.63 2,450,424.82 6,830,606.81 278.75%
minority shareholders
1. Main reason for decrease of operating expense: the expense of the same period of the previous year included
the operating expense of SEG Logistics. The operating expense saw a 50.06 year-on-year decrease due to the
sale of SEG Logistics at the end of last year.
2. Main reason for increase of asset impairment loss: comparing with the same period of last year, the loan
business of SEG Credit increased in the current report period. The loans impairment provision increased
along with the increase of loan balance.
3. Main reasons for increase of investment income: ①the financing income of RMB 10.42 million was
received in this period; ② Shenzhen SEG Samsung Co., Ltd. (hereinafter referred to as "ST Samsung")
reduced its loss comparing with the same period of last year and the Company’s investment losses reduced
by RMB 6.13 million.
4. Main reasons for increase of operating profits: ① the profits of the Company’s main business—electronics
market and property lease—increased comparing with the same period of last year; ② ST Samsung’s
decrease of loss comparing with the same period of last year reduced the Company’s investment loss; ③ the
bank financing income increased comparing with last year; ④the profits of SEG Credit increased.
5. Main reasons for increase of non-operating income: ① accounts payable of RMB 1.64 million unpaid were
written off in the current report period; ② the Company received government subsidy of RMB 0.61 million,
but did not receive any subsidy in the same period of last year.
6. Main reason for decrease of non-operating expense: the expense of the same period of the previous year
included the non-recurring losses of SEG Logistics. The expense saw a complete year-on-year elimination
due to the sale of 100% stock equity of SEG Logistics at the end of last year.
7. Main reasons for increase of gross profit: the same as Note 4 above.
8. Main reasons for increase of net profit: the same as Note 4 above.
9. Main reasons for increase of net profit attributable to shareholders of the parent company: the same as Note 4
above.
10. Main reasons for increase of gains and losses of minority shareholders: such an increase is derived from the
equity increase of minority shareholders in newly founded invested company, profit increase of the holding
company this year, and the profit increase of minority shareholders counted by equity percentage.
Item Sep 30, 2012 Sep 30, 2011 Difference Percentage of change (%)
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2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
Item Sep 30, 2012 Sep 30, 2011 Difference Percentage of change (%)
Cash received from 12,993,836.74 - 12,993,836.74 -
interest, charges and
commissions
Net increase of loans to 73,162,971.82 - 73,162,971.82 -
customers and advances
Cash received from 2,463,485,190.40 - 2,463,485,190.40 -
withdrawal of investment
Cash received from 14,695,005.57 4,545,000.00 10,150,005.57 223.32%
returns on investments
Net cash received from - 100,170.00 -100,170.00 -100.00%
disposal of fixed assets,
intangible assets and other
long-term assets
Cash paid for purchase 5,944,361.84 20,237,787.63 -14,293,425.79 -70.63%
and construction of fixed
assets, intangible assets
and other long-term assets
Cash paid for investment 2,661,541,027.20 81,000,000.00 2,580,541,027.20 3185.85%
Cash received from - 16,170,000.00 -16,170,000.00 -100.00%
investors
Cash received from - 2,000,000.00 -2,000,000.00 -100.00%
obtainment of loans
Cash paid for distribution 5,330,181.20 3,898,369.30 1,431,811.90 36.73%
of dividends and profit or
repayment of interest
Influence of exchange rate 333.94 8,460.75 -8,126.81 -96.05%
fluctuation on cash
1. Main reasons for increase of cash received from interest, charges and commissions: new business of SEG
Credit increased comparing with the same period of last year and hence the cash inflow of the interests of
Credit increased.
2. Main reasons for increase of net increase of loans to customers and advances: new business of SEG Credit
increased comparing with the same period of last year. The business is stepping on the right track and the
loans are increased.
3. Main reason for increase of cash received from withdrawal of investment: the bank financing investment
business increased comparing to the same period of last year and hence the cash received due to maturity of
financial products was increased.
4. Main reason for increase of cash received from returns on investment: the bank financing investment
business increased comparing to the same period of last year and hence the cash inflow of investment income
was increased.
5. Main reason for decrease of net cash received from disposal of fixed assets, intangible assets and other
long-term assets: the Company disposed of the central air-conditioners and official cars in the same period of
the previous year and hence the long-term assets were reduced during the report period.
6. Main reason for decrease of cash paid for purchase and construction of fixed assets, intangible assets and
other long-term assets: SEG Nanjing Electronics Market Management Co., Ltd. (hereinafter referred to as
"Nanjing SEG") and Shenzhen Mellow Orange Business Hotel Management Co., Ltd. (hereinafter referred to
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2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
as "Bao’an Branch of Mellow Orange Hotel") had large decoration and fixed assets construction cost and
hence the related long-term assets construction was reduced during the report period.
7. Main reason for increase of cash paid for investment: the cash outflow for investment in bank financing
products increased in the report period comparing with the same period of last year.
8. Main reason for decrease of cash received from investors: the Company had invested in SEG E-Commerce,
Nanjing SEG, and Mellow Orange Hotel, Bao’an branch last year and such investments did not happen
during this report period.
9. Main reason for decrease of cash received from obtainment of loans: the Company-controlled SEG Industrial
borrowed a loan of RMB 2 million from the Company’s controlling shareholder, Shenzhen SEG Group Co.,
Ltd., but such a case did not happen during this report period.
10. Main reason for increase of cash paid for distribution of dividends and profit or repayment of interest: the
invested enterprises increased the cash outflow to minority shareholders for distribution of dividends
comparing with the same period of last year.
11. Main reason for decrease of the influence of exchange rate fluctuation on cash: the foreign currency held by
SEG Logistics was reduced and hence the influence of exchange rate fluctuation decreased.
(II) Progress of significant events, their influences, and analysis and explanation of their solutions
1. Qualified opinion
□ Applicable √ Not applicable
2. Company provided capital for the controlling shareholders or associated parties or guarantee for
external parties violating the established procedures
□ Applicable √ Not applicable
3. Signing and implementing important contracts related to daily operation
□ Applicable √ Not applicable
4. Others
√ Applicable □ Not applicable
(1) The third meeting of the fifth Board of Directors on September 27, 2010 reviewed and approved the
Proposal on A Renewal Loan of RMB 36,000,000 to Changsha SEG Development Co., Ltd. For the
purpose of supporting the development of Changsha SEG, making full use of the Company's surplus
fund, enhancing fund using efficiency and ensuring the normal operation of Changsha SEG in its
growth stage, the Board of Directors of the Company agreed to offer a renewal loan of RMB 36,000,000
to Changsha SEG, the term being a year and the interest rate being 5.5755%, for which Changsha
Xinxing Grand Hotel owned by Changsha SEG was again mortgaged to the Company. The matter was
disclosed on China Securities Journal, Securities Times, Securities Daily, Hong Kong Commercial Daily
and the Cninfo Website on September 29, 2010. In accordance with the above-mentioned resolution of
the Board of Directors, the Company signed the loan contract with Changsha SEG, the amount of the
loan being RMB 36,000,000 and the term being from October 25, 2010 to October 24, 2011.During the
loan term, Changsha SEG has repaid RMB 12,000,000 to the Company according to the interest rate
agreed in the loan contract. The Board of Directors of Changsha SEG agreed to renew the loan of RMB
28,000,000 in the form of loan from shareholders and with the term being one year.
For the purpose of supporting the development of Changsha SEG, making full use of the Company's
surplus fund, enhancing fund using efficiency and ensuring the normal operation of Changsha SEG
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2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
Electronics Market in its incubation period, the 14th interim meeting of the fifth Board of Directors of
the Company deliberated and approved the Proposal of Offering a Renewal Loan of RMB 28,000,000 to
Changsha SEG Development Co., Ltd. and agreed to offer a renewal loan of RMB 28,000,000 to
Changsha SEG with the term being one year (from September 25, 2011 to September 24, 2012) and the
interest rate being 6.56% (year-on-year bank loan interest rate), for which Changsha Xinxing Grand
Hotel owned by Changsha SEG was again mortgaged to the Company. In the report period, Changsha
SEG has repaid the principal of RMB 1,000,000 to the Company.
(2) SEG Industrial, the invested enterprise of the Company, is mainly engaged in the property lease, IT
product joint operation, and channel sales. The Company and its shareholder Shenzhen SEG Group Co.,
Ltd. (hereinafter referred as "SEG Group") respectively held 91.7942% and 8.2058% of SEG Industrial.
SEG Group transferred its 8.2058% equity of SEG Industrial by public listing and trading in Shenzhen
United Property and Share Rights Exchange. In accordance with the decision made at the 9th Meeting
of the 5th Board of Directors on July 23, 2012, the Company expressed its intention to purchase the
above equity within the decision-making limit of the Board of Directors as stipulated in Article 110 of
Articles of Association.
(For detailed information, please refer to the Public Notice on the Resolution of the 9th Meeting of the
5th Board of Directors of Shenzhen SEG Co., Ltd. disclosed on China Securities Journal, Securities
Times, Securities Daily, Hong Kong Commercial Daily, and the Cninfo Website on July 24, 2012.)
As evaluated by an agency (the base date of the evaluation was December 31, 2011), the total value for
SEG Industrial was RMB 65,651,700 and the value for the 8.2058% equity held by SEG Group was
about RMB 5,387,200. On July 31, 2012, SEG Group transferred its 8.2058% equity of SEG Industrial
by public listing and trading at a listing price of RMB 5,387,247.20 in Shenzhen United Property and
Share Rights Exchange. As the only transferee, the Company purchased the 8.2058% equity of SEG
Industrial held by SEG Group with RMB 5,387,247.20. The Company and SEG Group signed the
Transfer Contract of State-Owned Property Rights on August 29, 2012. On August 30, 2012, the
Company paid the equity transfer fee of RMB 5,387,247.20. The Company received the Authentication
Certificate for the Property Right Transaction (Authentication Certificate No.: GZ20120906002) from
Shenzhen United Property and Share Rights Exchange on September 12, 2012. The Certificate confirms
that the information provided by the transferor and transferee is true and effective and the transaction
complies with legal procedures. So far, the Company has finished the purchase of SEG Industrial's
equity. (For detailed information, please refer to the Public Notice on the Purchase of 8.2058% Equity
of Shenzhen SEG Industrial Investment Co., Ltd. disclosed on China Securities Journal, Securities
Times, Securities Daily, Hong Kong Commercial Daily, and the Cninfo Website on September 14,
2012.)
(3) The Company's 7th Meeting of 5th Board of Directors held on August 12, 2011 reviewed and approved
the Proposal for a Loan of RMB 22,000,000 to Shenzhen SEG Industrial Investment Co., Ltd. Based on
the requirement of energetically developing innovative business in the Company's "12th Five-year"
strategic development plan and the demand of SEG Industrial (91.79% of its equity is held by the
Company) to expand IT channel and IT retail terminal business, SEG Industrial needed a working
capital of RMB 24,000,000. According to the equity proportion of SEG Industrial held by the Company,
the Company agreed to lend RMB 22,000,000 to SEG Industrial at an interest rate of 6.56% (the same
as the bank loan interest rate at the same period) with the loan term of one year (from August 30, 2011
to August 29, 2012). The loan has not been repaid during the report period. The Company received the
Authentication Certificate for the Property Right Transaction (Authentication Certificate No.:
GZ20120906002) from Shenzhen United Property and Share Rights Exchange on September 12, 2012.
Upon the completion of this equity transaction, the Company holds 100% equity of SEG Industrial. For
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2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
that reason, the Company is considering transferring the loan to the registered capital of SEG Industrial.
(4) As reviewed and approved by the Company's 21st Interim Meeting of the 5th Board of Directors held on
May 10, 2012, the Company and Suzhou Nanhaimingzhu Real Estate Development Co., Ltd. signed the
(Joint Venture) Contract on the Wujiang SEG Electronics Market Project. The two parties agreed to
jointly invest in and set up a limited liability company, with RMB 1,530,000 from SEG according to the
Contract.(For detailed information, please refer to the Public Notice on the Resolution of the 21st
Interim Meeting of the 5th Board of Directors of Shenzhen SEG Co., Ltd. and the Public Notice on the
Investment of Shenzhen SEG Co., Ltd. in Wujiang SEG Electronics Market Project disclosed on China
Securities Journal, Securities Times, Securities Daily, Hong Kong Commercial Daily, and the Cninfo
Website on May 12, 2012.)
(5) The Company's 9th Meeting of the 5th Board of Directors held on July 23, 2012 reviewed and approved
the following three investment proposals: the Proposal for Investment in Ningbo SEG Electronics
Market Project, the Proposal for Investment in Ningbo SEG Digital Square Project, and the Proposal
for Investment in Wuxi SEG Electronics Market Project. (For detailed information, please refer to the
Public Notice on the Resolution of the 9th Meeting of the 5th Board of Directors of Shenzhen SEG Co.,
Ltd. and the Public Notice on Investment in Ningbo SEG Electronics Market Project, Ningbo Digital
Square Project, and Wuxi SEG Electronics Market Project disclosed on China Securities Journal,
Securities Times, Securities Daily, Hong Kong Commercial Daily, and the Cninfo Website on July 24,
2012.)
On July 30, 2012, the Company and Wuxi Xinyuan Construction Development Co., Ltd. signed the
(Joint Venture) Contract for Wuxi SEG Electronics Market Project. The two parties agreed to jointly
invest in and set up a limited liability company, with RMB 1,530,000 from SEG according to the
Contract.
On August 1, 2012, the Company and Ningbo Kaidi Trade Co., Ltd. signed the (Joint Venture) Contract
for Ningbo SEG Electronics Market Project. The two parties agreed to jointly invest in and set up a
limited liability company, with RMB 2,550,000 from SEG according to the Contract.
On August 1, 2012, the Company and Ningbo Xingkai Trading Co., Ltd. signed the (Joint Venture)
Contract for Ningbo SEG Digital Square Project. The two parties agreed to jointly invest in and set up a
limited liability company, with RMB 3,060,000 from SEG according to the Contract. Actually SEG has
already contributed RMB 2,550,000.
(6) Related transactions relating to daily operation
1. As reviewed and approved by the Company's 8th Meeting of the 5th Board of Directors held on
March 23, 2012, the Company needs to rent part of the 8th floor of SEG Plaza from SEG Group as
the temporary warehouse for the Company's commercial tenants of the electronics market in 2012
to operate its business of the electronics market, and shall pay the rent and the property
management fee to SEG Group. The Company's Board of Directors agreed, with associated
directors shunning the voting, that in accordance with the market fair value (but the total amount
should be limited within RMB 1,000,000), the Company may carry out this intercompany
transaction related with daily operation for property lease with SEG Group in 2012. By the end of
the report period, the Company has paid RMB 387,000 in total as rent and property management
fee to SEG Group.
2. As reviewed and approved by the Company's 6th Interim Meeting of the 5th Board of Directors
held on January 26, 2011, in order to solve the issue of horizontal competition between the
Company and SEG Group, its controlling shareholder, SEG Group entrusted the Company to
operate and manage with full authority SEG Communications Market that was under direct
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2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
management of SEG Group. The two parties signed the Entrustment Contract for the Operation
and Management of SEG Communications Market through amicable consultation. For detailed
information, please refer to the Public Notice on the Resolution of the 6th Interim Meeting of the
5th Board of Directors of Shenzhen SEG Co., Ltd. and the Public Notice of Shenzhen SEG Co., Ltd.
on Related Transactions to Solve the Horizontal Competition between the Company and Its
Controlling Shareholder disclosed on China Securities Journal, Securities Times, Securities Daily,
Hong Kong Commercial Daily, and the Cninfo Website on January 28, 2011). SEG Group shall pay
an annual entrusted operation and management fee of RMB 200,000 to the Company. During the
report period, the Company has received the entrusted operation and management fee for SEG
Communications Market of RMB 200,000 for this year.
(For detailed information, refer to the Public Notice on the Resolution of the 8th Interim Meeting of the
5th Board of Directors of Shenzhen SEG Co., Ltd. and the Public Notice of Shenzhen SEG Co., Ltd. on
Estimated Matters Concerning Related Transactions Relating to Daily Operations in 2012 disclosed on
China Securities Journal, Securities Times, Securities Daily, Hong Kong Commercial Daily, and the
Cninfo Website on March 27, 2012).
(7) Litigation issues
Guangzhou Jiajie Technology Co., Ltd. (hereinafter referred to as "Guangzhou Jiajie") signed a
Contract of Purchase with Company-controlled Shenzhen SEG Industrial Investment Co., Ltd.
(hereinafter referred to as "SEG Industrial") on June 25, 2010, prescribing that Guangzhou Jiajie
purchases SYBASE software from SEG Industrial for external sales. Due to the difference of the
representation of the payment terms in the Contract of Purchase separately held by SEG Industrial and
Guangzhou Jiajie, the two parties had a dispute on the issue of payment. The payment conditions in the
Contract of Purchase consist of two optional clauses. The first clause is "Within 60 days after the goods
arriving at the delivery place and passing the power-on acceptance check (that is, before August 30,
2010), the seller shall issue the full VAT invoice to the buyer and the buyer shall make full payment".
The second clause is "The seller shall issue the full VAT invoice to the buyer, and the buyer shall make
full payment within 7 days after receiving full payment from its users". Both clauses were ticked (√) in
the Contract of Purchase held by SEG Industrial. However, only the second clause was ticked (√) in the
Contract of Purchase held by Guangzhou Jiajie. Guangzhou Jiajie sold the SYBASE software to
Guangzhou Yushi Information Technology Co., Ltd. (hereinafter referred to as "Guangzhou Yushi"),
which then sold the software to end users. Because Guangzhou Yushi has not made payment to
Guangzhou Jiajie, the latter filed a lawsuit against the former, but the legal person of Guangzhou Yushi
has migrated to another country. By analyzing the Contract of Purchase held by Guangzhou Jiajie, the
prerequisite for the payment by Guangzhou Jiajie is that Guangzhou Jiajie received the payment from
Guangzhou Yushi. According to the lawyer’s opinion, it is very likely that the payment cannot be
recovered. The amount of the contract is RMB 3,052,571, for which RMB 2,747,313.90, or 90% of the
amount, was accrued as bad debt provision at the end of 2010. The Company sued Guangzhou Jiajie
regarding the dispute. The court opened a session on December 28, 2011 and made the first instance
judgment on February 14, 2012. According to the court verdict, the plaintiff, Shenzhen SEG Industrial
Investment Co., Ltd. won the lawsuit and the defendant, Guangzhou Jiajie Technology Co., Ltd. shall
make a payment of RMB 3,052,571 to SEG Industrial. The court rejected other claims of the plaintiff.
Guangzhou Jiajie Technology Co., Ltd., the defendant, disagreed with the decision and appealed to a
higher court. The second instance of the Jiajie case was called in Shenzhen Intermediate People's Court
on June 25, 2012 and now the Company is waiting for the court to enter the judgment. .
(8) Progress of the Company's internal control regulation construction during the report period
1. Given the regulatory requirements of Shenzhen Securities Regulatory Bureau of China Securities
10
2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
Regulatory Commission and adjustment of internal control audit work of the Company, the
Company changed to implement ―internal control audit on the 2012 annual report‖ instead of
―internal control audit on the 2012 semi-annual report‖. The 2012 Annual Report on Internal
Control made by an internal control audit institution shall be disclosed with the 2012 Annual
Report. After review and approval of the 9th meeting of the 5th Board of Directors of the Company
held on July 23, 2012 and the 1st interim General Meeting of Shareholders in 2012, the Company
agreed to hire Beijing Shu Lun Pan Certified Public Accountants Co., Ltd. as the internal control
audit institution in 2012 with the auditing fee of RMB 300,000 and to terminate the
implementation of Proposal on Appointment of the Auditing Institution for the 2012 Semi-annual
Report and Payment of Auditing Fee approved by the 17th General Meeting of Shareholders
(2011).
2. Beijing Shu Lun Pan Certified Public Accountants Co., Ltd. pre-audited 2012 internal control plans
and implementation of the Company. The Auditing Department of the Company organized
corrections for problems identified in the pre-auditing and tracked the progress.
3. The Company organized evaluation on effectiveness of internal control implemented by the
Company and controlled subsidiaries before June 30, 2012 and formulated the 2012 Semi-annual
Self-evaluation Report on Internal Control of Shenzhen SEG, which was approved by the 10th
meeting of the 5th Board of Directors of the Company and published on the Cninfo Website on
August 27, 2012.
4. The Auditing Department of the Company implemented internal control inspection and relevant
training for the third batch of internal control construction companies, including Xi'an Hairong
SEG Electronics Market Co., Ltd. (hereinafter referred to as Xi'an Hairong SEG) and Bao'an
branch of Mellow Orange Hotel. By the end of the report period, the Auditing Department had
finished internal control inspection and made reports for the two companies and the latter had
made corrections on the problems identified.
5. The Auditing Department of the Company implemented internal control inspection for SEG
E-Commerce and Shenzhen SEG Baohua Corporation Development Co., Ltd. (hereinafter referred
to as SEG Baohua), made reports and urged them to complete correction plans. Relevant problems
are being corrected.
By the end of this report period, the progress of the internal control work had kept pace with the Work
Plan for Internal Control.
(9) The Company was notified on February 28, 2011 by the majority shareholder that the latter was
planning major matters, so the shares of the Company were suspended from March 1, 2011 in order to
prevent abnormal price changes and protect the interests of investors. The trading will be resumed after
relevant announcements are disclosed. The Company was notified on August 9, 2012 at 4 pm by the
majority shareholder that the latter and relevant parties were actively working on the major matters
during suspension period of the Company's shares. But relevant parties decided to terminate aforesaid
matters after careful study due to difficulties in reaching agreement on those matters. Trading of the
shares of the Company was resumed from August 10, 2012. The Public Notice of Shenzhen SEG Co.,
Ltd on Terminating Planning Major Matters and Resuming Share Trading was disclosed on China
Securities Journal, Securities Times, Securities Daily, Hong Kong Commercial Daily, and the Cninfo
Website on August 10, 2012.
11
2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
(III) Commitments made by the shareholders holding more than 5% shares, which were made in or lasted
into the report period
√ Applicable □ Not applicable
Commitment Made by Content Time Duration Fulfillment
Commitment for share reform Not applicable
Commitments in the Acquisition Report
Not applicable
and the Report of Changes on Equity
Commitments made at the time of asset
Not applicable
replacement
According to
Article Five of the
Equity Transfer
Agreement signed
by the Company
with SEG Group
when the
Company was
listed, SEG Group
agreed that the
Company and its
subsidiaries and
associated
companies could
use the eight
trademarks
registered by SEG
Group at the
Commitments
National
Shenzhen SEG were fulfilled in
Commitments at the time of share issuance Trademark July 1, 1996 Not applicable
Group Co., Ltd. the report
Bureau; SEG
period.
Group agreed that
the Company
could use the
aforesaid
trademarks or
similar signs as
the Company’s
logo and use the
trademarks and
signs during its
operation; the
Company needn’t
pay any fee to
SEG Group for
using the
aforesaid
trademarks or
signs.
Other commitments made to the medium
Not applicable
and small shareholders of the Company
Are the commitments fulfilled in time? √ Yes □ No □ Not applicable
Reasons for the unfulfilled and next steps
Are commitments made on horizontal
competition and related transactions?
√ Yes □ No □ Not applicable
Commitment solution period
Shenzhen Securities Regulatory Bureau pointed out that ―There is an issue of horizontal
Solutions competition in the business of electronics markets between the Company and SEG
Group‖ during the spot inspection in 2007; the Company received a Letter of
12
2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
Commitment in writing from SEG Group on September 14, 2007, which said that ―SEG
Group and Shenzhen SEG Co., Ltd. have similar business in electronics markets in
Shenzhen due to historic reasons and the objective background of market development;
the Group hereby promises that it will not individually operate a market in a same city
whose business is similar with that of Shenzhen SEG‖. The aforesaid matter was
disclosed on the China Securities Journal, the Securities Times and the Hong Kong Wen
Wei Po and the Cninfo Website on September 18, 2007.
In order to solve the issue of horizontal competition between the Company and its
controlling shareholder, SEG Group due to historical reasons, the 6th interim meeting of
the 5th Board of Directors held on January 26, 2011 reviewed and approved the
Proposal of Solving the Horizontal Competition between the Company and Its
Controlling Shareholder. After friendly consultation, SEG Group agreed to entrust the
Company to operate and manage SEG Communications Market under the direct
management of SEG Group. Therefore, the two parties have signed the entrustment
operation and management contract: (1) SEG Group has the ownership and the income
right of SEG Communication Market and assumes all creditor's rights and liabilities
incurred during the operation of SEG Communications Market. (2) The management
representative from the Company shall operate and manage SEG Communications
Market during the period of entrusted operation and management, who has full
decision-making power in operation and management of SEG Communications Market.
(3) In accordance with the provisions of the Company on entrusted management of
electronics markets and with full consideration to the maturity of the entrusted market
Commitment fulfillment and whether the market is located in a primary business area, the Company shall collect
from SEG Group the management fee and profit fee as follows based on the market fair
value: the total income of SEG Communications Market in 2010, RMB 20,000,000,
shall be regarded as the base number; the Company shall collect a management fee of
RMB 200,000 should the total income of the market in the current year is equal to or less
than RMB 20,000,000; the Company shall take 20% from the part beyond the base
number apart from the management fee of RMB 200,000 should the total income in the
current year exceed RMB 20,000,000. For the detailed information about the
above-mentioned matter, please refer to the Public Notice of Shenzhen SEG Co., Ltd. on
the Related Transaction for the Purpose of Solving the Issue of Horizontal Competition
between the Company and the Controlling Shareholder that was disclosed on the China
Securities Journal, the Securities Times, the Hong Kong Commercial Daily and the
Cninfo Website on January 28, 2011.The Company had received the timely payment of
the management fee of 2011 and 2012, RMB 200,000 per year, from SEG Group.
Therefore, there is no longer the issue of horizontal competition between the Company
and SEG Group.
(IV) Forecasts on the operating performance of 2012
Warning and reasons for forecasts on loss of the accumulated net profit from the year beginning to the end of next
period or sharp year-on-year changes in net profit
□ Applicable √ Not applicable
(V) Other important events requiring explanations
1. Investment in securities
□ Applicable √ Not applicable
2. Investment in derivatives
□ Applicable √ Not applicable
3. Positions of derivatives at the end of the report period
□ Applicable √ Not applicable
4. Registration form for investigations, communication and interviews in the report period
13
2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
Types of received Main content of discussion and the materials
Time Place Means Received person
person provided
Investors asked for reasons for suspension
July 2, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
July 3, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
July 4, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
July 5, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
July 6, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
July 16, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
July 17, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
July 18, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
July 30, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
July 31, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
Aug 1, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
Aug 2, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
Aug 3, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
Aug 6, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
Aug 7, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
Aug 8, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for suspension
Aug 9, 2012 At the Company Phone call Individual Investor and time for resumption; the Company
provided the suspension notice.
Investors asked for reasons for resumption
Aug 10, 2012 At the Company Phone call Individual Investor and operation of the Company; the Company
provided the resumption notice.
Aug 13, 2012 At the Company Phone call Individual Investor Investors asked for reasons for resumption
14
2012 Third Quarterly Report of Shenzhen SEG Co., Ltd.
Types of received Main content of discussion and the materials
Time Place Means Received person
person provided
and operation of the Company; the Company
provided the resumption notice.
Investors asked for reasons for resumption
Aug 14, 2012 At the Company Phone call Individual Investor and operation of the Company; the Company
provided the resumption notice.
Investors asked for reasons for resumption
Aug 15 2012 At the Company Phone call Individual Investor and operation of the Company; the Company
provided the resumption notice.
Investors asked for reasons for resumption
Aug 20, 2012 At the Company Phone call Individual Investor and operation of the Company; the Company
provided the resumption notice.
Investors asked for reasons for resumption
Aug 21, 2012 At the Company Phone call Individual Investor and operation of the Company; the Company
provided the resumption notice.
Investors asked for reasons for resumption
Aug 24, 2012 At the Company Phone call Individual Investor and operation of the Company; the Company
provided the resumption notice.
Investors asked for reasons for resumption
Aug 29, 2012 At the Company Phone call Individual Investor and operation of the Company; the Company
provided the resumption notice.
Investors asked for reasons for resumption
Aug 30, 2012 At the Company Phone call Individual Investor and operation of the Company; the Company
provided the resumption notice.
Investors asked for reasons for resumption
Aug 31, 2012 At the Company Phone call Individual Investor and operation of the Company; the Company
provided the resumption notice.
Investors asked for the operation of the
Sep 1, 2012 At the Company Phone call Individual Investor Company and the Company provided the
semi-annual report.
Investors asked for the operation of the
Sep 3, 2012 At the Company Phone call Individual Investor Company and the Company provided the
semi-annual report.
Investors asked for the operation of the
Sep 5, 2012 At the Company Phone call Individual Investor Company and the Company provided the
semi-annual report.
Investors asked for the operation of the
Sep 10, 2012 At the Company Phone call Individual Investor Company and the Company provided the
semi-annual report.
Investors asked for the operation of the
Sep 19, 2012 At the Company Phone call Individual Investor Company and the Company provided the
semi-annual report.
5. Bond issuance
Is the Company issuing bonds?
□ Yes √ No
15
