深圳中恒华发股份有限公司 2018 年半年度报告全文英文 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2018 August 2018 1 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 2018 Semi-Annual Report is authentic, accurate and complete. All directors are attended the Board Meeting for report deliberation. Concerning the forward-looking statements with future planning involved in the Report, they do not constitute a substantial commitment for investors. Majority investors are advised to exercise caution of investment risks. Risks factors are being well-described in the Report, please found more in relevant content. The Company has no plan of cash dividends carried out, bonus issued and capitalizing of common reserves either. 2 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Contents Semi-annual Report 2018 ................................................................................................................ 2 Section I Important Notice and Paraphrase .................................................................................... 5 Section II Company Profile and Main Finnaical Indexes .............................................................. 8 Section III Summary of Company Business .................................................................................... 9 Section IV Discussion and Analysis of Operation ......................................................................... 15 Section V Important Events ............................................................................................................ 28 Section VI Changes in shares and particular about shareholders ............................................. 32 Section VII Preferred Stock ............................................................................................................ 33 Section VIII Particulars about Directors, Supervisors and Senior Executives ........................ 34 Section IX Corporate Bonds .......................................................................................................... 35 Section X Financial Report ........................................................................................................... 128 Section XI Documents Available for Reference ............................................................................... 3 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Section II Company Profile and Main Finnaical 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 2017 5 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 2017 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) 340,984,843.24 439,480,144.17 -22.41% Net profit attributable to shareholders of 2,793,133.60 2,146,472.00 30.13% the listed company(RMB) Net profit attributable to shareholders of the listed company after deducting 2,053,467.02 1,477,201.29 39.01% non-recurring gains and losses(RMB) Net cash flow arising from operating -26,671,325.63 -35,397,366.92 24.65% activities(RMB) Basic earnings per share (RMB/Share) 0.0099 0.0076 30.26% Diluted earnings per share (RMB/Share) 0.0099 0.0076 30.26% Return on Equity 0.87% 0.67% 上升 0.2 个百分点 Changes over period-end Period-end Period-end of last year of last year(+,-) Total assets (RMB) 593,599,038.57 629,762,731.38 -5.74% Net assets attributable to shareholder of 323,466,111.62 320,672,978.02 0.87% 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 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 -105,779.36 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 771,800.00 national standards, which are closely relevant to enterprise’s business) Gains/losses from entrusted investment or assets management 245,679.10 Other non-operating income and expenditure except for the -56,944.69 aforementioned items Less: Impact on income tax 115,088.47 Total 739,666.58 -- 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 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Section IV. Discussion and Analysis of Operation 1. Introduction In the first half of 2018, due to the influence of the international and domestic environment, the home appliance industry had some growth but the power was insufficient, the production and assembly of liquid crystal displays, injection-molded parts and foam parts are traditional manufacturing industries which have already entered a mature stage and the demand have reached saturation, the company overcame difficulties and responded positively, through the adjustment of product structure, the operating profit has been guaranteed to increase while the operating income has slightly decreased.During the reporting period, the Company achieved operation reveue of 340.98 million Yuan with a y-o-y declined of 22.41%; operation profit comes to 2.54 million Yuan with 30.73% up from a year earlier; net profit amounted to 2.79 million Yuan, an increased of 30.13% on a y-o-y basis. In first half year, operation revenue from industry prodcution has 323.37 million Yuan in total, a 22.84% declined from a year earlier, operation profit comes to 5.32 million Yuan with a y-o-y growth of 148.14%; the revenue earnes from propety leasing in first half year comes to 16.96 million Yuan, a 12.43% declined over that of last year, and operating profit comes to (2.16) million Yuan with 1.92 million Yuan declined from a year earlier. 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 340,984,843.24 439,480,144.17 -22.41% Operating cost 302,582,979.44 398,913,925.08 -24.15% Sales expenses 8,433,363.31 7,363,051.86 14.54% Administrative 20,400,985.42 24,085,956.74 -15.30% expenses Financial expenses 5,447,070.22 4,914,890.46 10.83% Approved high-tech enterprise in Income tax expenses 463,831.41 723,746.91 -35.91% November 2017, the income tax rate declined Net cash flow from -26,671,325.63 -35,397,366.92 -24.65% operating activities Investment for new Net cash flow from workshop, and renew -6,545,541.50 -3,903,702.73 -67.68% investment activities the aged production equipment Net cash flow from -21,012,832.62 7,520,619.22 -379.40% Bank loans paid in the 9 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 financing activities period Net increase of cash Bank loans paid in the -54,379,579.55 -32,170,554.64 -69.04% and cash equivalent period 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 124,089,200.92 116,216,327.90 6.34% -49.18% -51.29% 4.06% Plastic injection 152,332,605.92 140,589,037.08 7.71% 15.41% 16.81% -1.11% hardware Foam 41,800,980.14 38,233,351.86 8.53% -0.69% 1.96% -2.38% According to products Display 124,089,200.92 116,216,327.90 6.34% -49.18% -51.29% 4.06% Plastic injection 152,332,605.92 140,589,037.08 7.71% 15.41% 16.81% -1.11% hardware Foam 41,800,980.14 38,233,351.86 8.53% -0.69% 1.96% -2.38% According to region Hong Kong 77,232,679.30 73,672,517.63 4.61% -46.95% -48.18% 2.27% Central China 435,123,693.74 400,188,588.15 8.03% 59.58% 57.39% 1.28% III. Analysis of the non-main business □Applicable √ Not applicable IV. Assets and liability 1. Major changes of assets composition In RMB Period-end Period-end last year Ratio Notes of major changes Amount Ratio in Amount Ratio in changes 10 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 total assets total assets 31,174,927.4 65,403,374.3 Monetary fund 5.25% 10.55% -5.30% 9 0 Account 167,657,397. 182,542,130. 28.24% 29.45% -1.21% receivable 69 75 55,600,129.9 37,519,314.3 Inventory 9.37% 6.05% 3.32% 4 4 Investment real 51,546,044.3 29,404,574.4 8.68% 4.74% 3.94% estate 0 4 Long-term equity 0.00% 0.00% 0.00% investment 84,346,192.6 108,018,926. Fix assets 14.21% 17.43% -3.22% 9 67 Construction in 1,179,824.87 0.20% 654,356.00 0.11% 0.09% process Short-term 152,275,976. 85,012,392.0 25.65% 13.72% 11.93% loans 01 0 Long-term 50,850,000.0 0.00% 8.20% -8.20% loans 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 bill Monetary Fund 7,335,941.28 Notes receivable Pledge 8,332,469.80 Accounts receivable Pledge 8,831,544.63 Investment real estate Bank loan secured 39,197,344.30 Fixed assets Bank loan secured 43,965,447.66 Liquidation of fixed Court closure assets 92,857,471.69 11 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Intangible assets Bank loan secured 37,605,499.26 -- Total 238,125,718.62 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. 2. Sales of major equity □ Applicable √Not applicable 12 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 450,381,74 220,913,55 323,374,70 5,318,38 Technolog Subsidiary 181643111 5,149,906.59 well as 1.80 2.90 5.00 9.86 y Company import & export business etc. Leasing Huafa and -2,319,074. -511,272 Property Subsidiary manageme 1000000 413,406.43 649,049.51 -511,272.63 38 .63 Company nt of own property Leasing Huafa and 1,900,692. -5,026,990. Lease Subsidiary manageme 1000000 0.00 0.00 0.00 20 71 Company nt of own property Leasing Huafa and Hengtian manageme 1000000 996,582.86 996,582.86 0.00 -637.34 -637.34 Company nt of own property Leasing Huafa and Hengtai Subsidiary manageme 1000000 997,314.02 997,314.02 0.00 -636.71 -636.71 Company nt of own property Particular about subsidiaries obtained or disposed in report period □Applicable √ Not applicable Explanation Nil 13 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 VIII. Structured vehicle controlled by the Company □ Applicable √Not applicable IX. Prediction of business performance from January – September 2018 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 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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/cninfo-ne w/disclosure/szse_ Annual General AGM 51.64% 2018-05-17 2018-05-18 main/bulletin_deta Meeting of 2017 il/true/120495359 1?announceTime= 2018-05-18 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 The Company has no 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 IV. Appointment and non-reappointment (dismissal) of CPA Whether the financial report has been audited or not □Yes √no Un-audited V. Explanation from Board of Directors and Supervisory Committee for “Qualified Opinion” 15 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 arbitrations √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) In September 2016, Wuhan Made a Zhongheng ruling on Group Co., Ltd. http://ww 16 August and the w.cninfo. 2017; The Company and com.cn/c Company Shenzhen Vanke ninfo-new and were applied for /disclosur controllin arbitration due to Found more in The court e/szse_ma g the dispute case 46,460 N announcement dismissed the 2018-08-25 in/bulletin sharehold of “Contract for of the Company claim _detail/tru er the Cooperative e/120532 propose Operation of the 6846?ann request Old Projects at ounceTim for ruling Huafa Industrial e=2018-0 removal Park, Gongming 8-25 in Feb. Street, 2018 Guangming New District”. In March 2016, In Court decision http://ww Case closed Huafa Property Novembe as Jifang w.cninfo. 1,416.67 N and collected 2016-11-08 suit against the r 2016, Company has to com.cn/c the site in Shenzhen Jifang the paid 27.9023 ninfo-new 16 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Investment Co., Company million Yuan May 2018 /disclosur Ltd. for site win in the (including e/szse_ma occupation, ruling rental, in/bulletin without rental, judged by administrative _detail/tru and utilities paid Shenzhen fee, e/120281 for a long-time Arbitratio compensation, 7664?ann n penalty, ounceTim Commissi lawyer’s fee and e=2016-1 on arbitration fees) 1-08 in total for the Company In March 2016, the Company and Huafa Science & Technology suit against the follow companies, including Shenzhen http://ww Huayongxing w.cninfo. Environmental com.cn/c Technology Co., The first ninfo-new Ltd., Shenzhen instance /disclosur Guangyong decision The second e/szse_ma Breadboard Co., has been instance In publication in/bulletin Ltd., Shenzhen 1,964.92 N issued, maintains the 2016-09-14 of judgment _detail/tru Mingyi second judgment of the e/120270 Electronic Co., instance first 2423?ann Ltd., Shenzhen still in ounceTim Ouruilai trial e=2016-0 Technology Co., 9-14 Ltd and 07:41 Shenzhen Kangzhengxin Technology Co., Ltd., for arrears of rent. and refuse to move the site, forcibly occupied switch board room and other power unit 17 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 under the name of the Company The Company and Huafa http://ww Property suit 2018.3.15 w.cninfo. against Shenzhen - Second com.cn/c Jifang instance ninfo-new investment Co., decide the /disclosur Ltd. and Company e/szse_ma Shenzhen to win; in/bulletin Jianianhua 73.38 N Verdict Case closed 2016-09-14 2018.3.26 _detail/tru Foreign Trade - e/120270 Clothing City Applicati 2423?ann Co., Ltd. for on for ounceTim refusing to paid enforcem e=2016-0 the rents and ent 9-14 administrative 07:41 fee without justified reasons In March 2016, the Company http://ww 2018.3.15 and Huafa w.cninfo. - Second Property suit com.cn/c instance against Shenzhen ninfo-new decide the Huayongxing /disclosur Company Environmental e/szse_ma to win, Technology Co., Applied in in/bulletin 947.26 N and Verdict 2016-09-14 Ltd., and April _detail/tru waiting Shenzhen e/120270 the Yidaxin 2423?ann enforcem Technology Co., ounceTim ent Ltd. for contract e=2016-0 applicatio violation and 9-14 n refuse to move 07:41 the site Other lawsuits □Applicable √ Not applicable IX. Penalty and rectification □Applicable √ Not applicable The Company has no penalty and rectification in the period 18 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 X. Integrity of the company and its controlling shareholders and actual controllers □ Applicable √Not applicable 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 ved relate r disclo party p ction r transa transa ple (in 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 Sharin Synch om.c g the Purch ronize Telegr n/fin same asing HK Purch d with 5,792. 5,792. 48.53 29,29 aphic 2018- alpa contro LCD N —— Yutian ase the 22 22 % 3.65 transf 08-24 ge/2 lling monit marke er 018- shareh ors t 08-2 older 4/12 033 745 88.P DF Hengs Sharin Purch Confir Telegr The http: heng g the Purch asing med 2,732. 2,732. 22.89 22,78 aphic avera 2018- //w N Photo same ase LCD with 35 35 % 3.95 transf ge 08-24 ww. electri contro monit 1% of er marke cnin 19 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 city lling ors curren t price fo.c shareh t refers om.c older marke to the n/fin t price alpa avera of ge/2 ge same 018- price specif 08-2 in icatio 4/12 princi ns 033 ple, which 745 and is 88.P refer search DF to ed both from their throug bargai h the ning world power famou s profes sional marke t surve y comp any websit e http:// www. witsvi ew.co m recog nized author ity in the indust ry and LCD profes sional 20 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 marke t surve y comp any websit e http:// www. witsvi ew.co m http: //w Accor ww. ding cnin to the fo.c Sharin order om.c Hengs g the Purch price, Telegr n/fin heng same asing deduc Purch 1,754. 1,754. 14.70 16,27 aphic 2018- alpa Photo contro LCD ted 1 N —— ase 27 27 % 4.25 transf 08-24 ge/2 electri lling monit Yuan er 018- city shareh ors each 08-2 older for 4/12 operat 033 ion 745 charge 88.P DF http: //w ww. Accor Sales cnin Sharin ding LCD fo.c g the to the overal Telegr om.c same custo HK l 6,323. 6,323. 49.68 38,14 aphic 2018- n/fin contro Sales mer N —— Yutian monit 19 19 % 6.84 transf 08-24 alpa lling sales or er ge/2 shareh order machi 018- older price ne set 08-2 sure 4/12 033 745 21 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 88.P DF 16,60 106,4 Total -- -- -- -- -- -- -- -- 2.03 98.69 Detail of sales return with major N/A amount involved In the reporting, Hengfa Technology purchased LCD from HK Yutian with US$ 9.0679 Report the actual implementation million approximately, 20.15% of the annual amount predicted at the beginning of the of the daily related transactions year; purchased LCD from Hengsheng Photoelectricity with US $ 4.1301 million which were projected about their approximately, 11.8% of the annual amount predicted at the beginning of the year; total amount by types during the purchasing LCD from Hengsheng Photoelectricity with about US $ 2.6517 million, reporting period(if applicable) 10.61% of the annual amount predicted at the beginning of the year; sold LCD whole machine to HK Yutian with US $ 9.9215 million approximately, 16.54% 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 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. 22 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 (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 2018-04- Technology Co., 30,000 3,877.6 liability One year N Y 24 Ltd. guarantee Total amount of actual Total amount of approving occurred guarantee for guarantee for subsidiaries in 30,000 6,267.12 subsidiaries in report period report period (B1) (B2) Total amount of approved Total balance of actual guarantee for subsidiaries at 30,000 guarantee for subsidiaries at 3,877.6 the end of reporting period the end of reporting period 23 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 (B3) (B4) Guarantee of the subsidiaries for the subsidiaries Related Actual date of Comple Guaran Name of the Announc happening Actual te Guarante Guarantee Guarantee tee for Company ement (Date of guarantee implem e limit type term related guaranteed disclosur signing limit entation party e date agreement) or not 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 6,267.12 (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 3,877.6 period (A3+B3+C2) report period (A4+B4+C4) The proportion of the total amount of actually guarantee in 11.99% the net assets of the Company(that is A4+ B4+C4) Including: Explanations on possibly bearing joint and several liquidating responsibilities for undue guarantees (if N/A applicable) Explanation on compound guarantee (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 belongs to the key sewage units released from environmental protection department Not applicable No 24 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 Index Unit of measure Quantity /implementation I. Overall condition —— —— II. Poverty alleviation by items —— —— 1.Industry development —— —— 2.Shift employment —— —— 3. Relocating in other places —— —— 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 25 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 shall obtain the corresponding compensatory consideration for removal from the respectively owned project plots and the respectively contributed and constructed above-ground buildings before the land development, it is estimated that the compensatory consideration obtained by the Company accounts for 50.5% of the total consideration and Wuhan Zhongheng Group accounts for 49.5% by calculation. The sixth extraordinary meeting of the board of directors in 2015 and the third extraordinary general meeting held on September 11, 2015 have considered and adopted the “Proposal on the project promotion and implementation of urban renewal and the progress of related transactions of ‘the updated units at Huafa Area, Gong Ming Street, Guangming New District, Shenzhen’”, the company has signed the “Agreement on the cooperation of urban renewal project of the updated units at Huafa Area, Gong Ming Street, Guangming New District, Shenzhen”, “Contract for the cooperative venture of reconstruction project for Huafa Industrial Park, Gong Ming Street, Guangming New District” and “Agreement on housing acquisition and removal compensation and resettlement” with Wuhan Zhongheng New Technology Industry Group Co., Ltd. (hereinafter referred to as “Wuhan Zhongheng Group”), Shenzhen Vanke Real Estate Co., Ltd. (hereinafter referred to as “Shenzhen Vanke”), and Shenzhen Vanke Guangming Real Estate Development Co., Ltd. (hereinafter referred to as “Vanke Guangming”). On 12 September 2016, the Company received a “Notice of Arbitration No.: SHEN DP20160334” from SCIA, Shenzhen Vanke applied for arbitration in respect of “Agreement on the cooperation of urban renewal project of the updated units at Huafa Area, Gong Ming Street, Guangming New District, Shenzhen” against the Company and Wuhan Zhongheng Group. The arbitration court holds hearings on 12 November 2016 and 13 May 2017. Shenzhen Court of International Arbitration (SCIA) has given a ruling in August 2017, 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 dismissed the claim . Progress of the case found more in the Notices released on Juchao website (www.cninfo.com.cn) dated 14 Sept. 2016, 1 Nov. 2016, 16 Nov. 2016, on 18 Feb. 2017, 24 March 2017, 25 April 2017, 1 July 2017, 18 August 2017 ,9 Feb. 2018 and 25 August 2018 respectively. (ii) On 31 December 2015, the 88,750,047 shares held by Wuhan Zhongheng Group, are pledge to China Merchants Securities Assets Co., Ltd. with due date of 31 December 2016. Wuhan Zhongheng Group deferred the repurchase business day to 30 June 2017. on 1 Feb. 2016, Wuhan Zhongheng Group pledge the 27,349,953 shares held to China Merchants Securities Assets Co., Ltd. with due date of 31 December 2016. The above mentioned shares are deferred for repurchase of stock pledge by Wuhan Zhongheng Group; pledge expired on 31 December 2017. The trading day for repurchase put off to the date when pledge actually removed. Till end of this period released, controlling shareholder still not removed the pledge and the Company has apply by letter, relevant Notice of Presentment on Stock Pledge from Controlling Shareholder was released. Found more in notice released on Juchao website (www.cninfo.com.cn) date 2 Feb. 2018. 26 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 (iii) Our controlling shareholder Wuhan Zhongheng Group holds 116,489,894 shares of the Company, accounting for 41.14% of total share capital. The above shares were judicially sealed on 27 September 2016, shares freeze from 27 September 2016 to 26 September 2018. Details are set out in the announcement published at Juchao information website (www.cninfo.com.cn) on 27 October 2016. (iv) On March 21, 2014, Huafa Property and Shenzhen Jifang Investment Co., Ltd. (hereinafter referred to as "Jifang Investment") signed the "Shenzhen Housing Leasing Contract" and the "Supplemental Agreement on Leasing Contract", which were canceled on February 5, 2016. As Jifang Investment occupied the site, and defaulted rent, management fee and water and electricity bills in the long term, in order to safeguard the legitimate rights and interests, Huafa Property submitted a request for arbitration to Shenzhen Arbitration Commission on March 8, 2016, and received the (2016) SZCZ No. 346 ruling paper from Shenzhen Arbitration Commission in November 2016 which ruled Huafa Property won the lawsuit. See details on the notice published at www.cninfo.com.cn by the company on 8 November 2016. The sites are collected in May 2018 (v) Commitments of Major shareholder to Increase Shareholding On November 20, and November 28, 2017, the controlling shareholders respectively made commitments to increase the shareholding of 2.83 million shares of the company’s B Shares and no less than 2.8 million shares of the company’s A Shares, with a commitment period of 6 months, and later, controlling shareholder applied extending 6 months for commitment period. As of the disclosure date of this report, it’s still in the commitment fulfillment period, and the commitment has not been fulfilled. (vi) Mr. Zhang Guangliu, the company’s director and vice president, has applied for resignation from the company’s director, vice president and special committee member under the board of directors due to a job transfer. The new director’s by-election is still in progress, at present, the company’s board of directors has 5 members, which conforms to the legal minimum number of people. XVII. Significant event of subsidiary of the Company □ Applicable √Not applicable 27 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 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 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 28 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Total preference shareholders Total common stock with voting rights recovered at shareholders in reporting 27,697 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 11,648,989 11,648, 116,489,8 Zhongheng non-state-owned 41.14% 0 0 989 94 Frozen 11,648,989 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 5,355,249 person 49 Frozen 0 (Hong Kong) Co., Ltd. Guoyuan Pledged 0 Securities Overseas legal 3,820,6 Brokerage 1.35% 0 3,820,617 person 17 Frozen 0 (Hong Kong) Co., Ltd. LI SHERYN Overseas nature 1,038,3 Pledged 0 0.37% 0 1,038,300 ZHAN MING person 00 Frozen 0 Zhong Domestic nature Pledged 0 0.34% 959,174 0 959,174 Jiachao person Frozen 0 Li Senzhuang Domestic nature 0.34% 956,600 0 956,600 Pledged 0 29 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 person Frozen 0 Domestic nature Pledged 0 Han Yaming 0.31% 864,200 0 864,200 person Frozen 0 BINGHUA Overseas nature Pledged 0 0.30% 840,313 0 840,313 LIU 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 11,648,989 share Domestically SEG (HONG KONG) CO., LTD. 16,569,560 listed foreign shares Domestically GOOD HOPE CORNER 12,700,000 listed foreign INVESTMENTS LTD shares Domestically Changjiang Securities Brokerage 5,355,249 listed foreign (Hong Kong) Co., Ltd. shares Domestically Guoyuan Securities Brokerage 3,820,617 listed foreign (Hong Kong) Co., Ltd. shares Domestically LI SHERYN ZHAN MING 1,038,300 listed foreign shares RMB common Zhong Jiachao 959,174 share Li Senzhuang 956,600 Domestically 30 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 listed foreign shares Domestically Han Yaming 864,200 listed foreign shares Domestically BINGHUA LIU 840,313 listed foreign 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 959174 shares of the Company, of shareholders involving margin which, 591274 shares held by normal account, and 367900 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 No changes of actual controllers for the Company in reporting period. 31 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Section VII. Preferred Stock □ Applicable √Not applicable The Company had no preferred stock in the Period. 32 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Section VIII. Particulars about Directors, Supervisors and Senior Executives I. Changes of shares held by directors, supervisors and senior executives □ Applicable √ Not applicable Found more in annual report 2017 for the changes of shares held by directors, supervisors and senior executives II. Changes of directors, supervisors and senior executives √ Applicable □ Not applicable Name Title Type Date Reasons Deputy Zhang president, Election 2018-07-17 Occupation mobility Guangliu director 33 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 34 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 2018-06-30 In RMB Item Closing balance Opening balance Current assets: Monetary funds 31,174,927.49 68,812,495.97 Settlement provisions Capital lent Financial assets measured by fair value and with variation reckoned into current gains/losses Derivative financial liability Notes receivable 24,212,827.29 64,778,266.65 Accounts receivable 167,657,397.69 148,795,998.26 Accounts paid in advance 24,345,708.97 943,328.01 Insurance receivable Reinsurance receivables Contract reserve of reinsurance receivable Interest receivable Dividend receivable Other receivables 9,993,555.22 4,335,729.72 Purchase restituted finance asset 35 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Inventories 55,600,129.94 60,387,021.65 Assets held for sale Non-current asset due within one year Other current assets 46,253.01 52,310.51 Total current assets 313,030,799.61 348,105,150.77 Non-current assets: Loans and payments on behalf Finance asset available for sales Held-to-maturity investment Long-term account receivable Long-term equity investment Investment real estate 51,546,044.30 52,410,958.62 Fix assets 84,346,192.69 83,619,842.39 Construction in progress 1,179,824.87 654,356.00 Engineering material Disposal of fixed asset 92,857,471.69 92,857,471.69 Productive biological asset Oil and gas asset Intangible assets 42,561,503.06 43,307,316.37 Expense on Research and Development Goodwill Long-term expenses to be 774,951.44 141,666.55 apportioned Deferred income tax asset 7,302,250.91 6,731,168.99 Other non-current asset 1,934,800.00 Total non-current asset 280,568,238.96 281,657,580.61 Total assets 593,599,038.57 629,762,731.38 Current liabilities: Short-term loans 152,275,976.01 166,620,264.81 Loan from central bank Absorbing deposit and interbank deposit Capital borrowed Financial liability measured by fair value and with variation reckoned into current gains/losses 36 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Derivative financial liability Notes payable 15,635,598.71 17,810,270.28 Accounts payable 60,514,300.33 84,004,870.73 Accounts received in advance 261,102.28 278,128.18 Selling financial asset of repurchase Commission charge and commission payable Wage payable 3,613,350.12 5,083,357.93 Taxes payable 10,562,817.51 15,136,277.68 Interest payable 136,176.72 164,895.80 Dividend payable Other accounts payable 27,069,194.27 19,927,276.95 Reinsurance payables Insurance contract reserve Security trading of agency Security sales of agency Liability held for sale Non-current liabilities due within 1 year Other current liabilities Total current liabilities 270,068,515.95 309,025,342.36 Non-current liabilities: Long-term loans Bonds payable Including: preferred stock Perpetual capital securities Long-term account payable Long-term wages payable Special accounts payable Projected 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 270,132,926.95 309,089,753.36 37 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Owner’s equity: Share capital 283,161,227.00 283,161,227.00 Other equity instrument Including: preferred stock Perpetual capital securities Capital public reserve 146,587,271.50 146,587,271.50 Less: Inventory shares Other comprehensive income Reasonable reserve Surplus public reserve 77,391,593.25 77,391,593.25 Provision of general risk Retained profit -183,673,980.13 -186,467,113.73 Total owner’s equity attributable to 323,466,111.62 320,672,978.02 parent company Minority interests Total owner’s equity 323,466,111.62 320,672,978.02 Total liabilities and owner’s equity 593,599,038.57 629,762,731.38 Legal representative: Li Zhongqiu 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 Closing balance Opening balance Current assets: Monetary funds 1,454,274.31 25,181,764.87 Financial assets measured by fair value and with variation reckoned into current gains/losses Derivative financial liability Notes receivable Accounts receivable Account paid in advance 53,050.00 Interest receivable Dividends receivable 38 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Other receivables 103,872,467.02 99,922,143.84 Inventories 14,806.50 14,806.50 Assets held for sale Non-current assets maturing within one year Other current assets Total current assets 105,394,597.83 125,118,715.21 Non-current assets: Available-for-sale financial assets Held-to-maturity investments Long-term receivables Long-term equity investment 186,608,900.00 186,608,900.00 Investment real estate 26,978,905.02 27,583,299.22 Fix assets 4,665,395.35 6,821,367.58 Construction in progress 1,172,756.00 654,356.00 Project materials Disposal of fixed assets 92,857,471.69 92,857,471.69 Productive biological assets Oil and natural gas assets Intangible assets 4,771,127.82 4,843,600.68 Research and development costs Goodwill Long-term deferred expenses 116,666.53 141,666.55 Deferred income tax assets 8,091,847.20 7,519,546.71 Other non-current assets Total non-current assets 325,263,069.61 327,030,208.43 Total assets 430,657,667.44 452,148,923.64 Current liabilities: Short-term borrowings 105,000,000.00 120,000,000.00 Financial liability measured by fair value and with variation reckoned into current gains/losses Derivative financial liability Notes payable 39 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Accounts payable 9,740,367.33 10,745,840.16 Accounts received in advance 44,810.00 67,210.00 Wage payable 815,885.20 1,039,196.20 Taxes payable 7,447,979.03 9,305,468.70 Interest payable Dividend payable Other accounts payable 12,801,195.39 14,339,551.78 Liability held for sale Non-current liabilities due within 1 year Other current liabilities Total current liabilities 135,850,236.95 155,497,266.84 Non-current liabilities: Long-term loans Bonds payable Including: preferred stock Perpetual capital securities Long-term account payable Long-term wages payable Special accounts payable Projected 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 135,914,647.95 155,561,677.84 Owners’ equity: Share capita 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 40 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Other comprehensive income Reasonable reserve Surplus reserve 77,391,593.25 77,391,593.25 Retained profit -212,397,072.26 -210,552,845.95 Total owner’s equity 294,743,019.49 296,587,245.80 Total liabilities and owner’s equity 430,657,667.44 452,148,923.64 3. Consolidated Profit Statement In RMB Item Current Period Last Period I. Total operating income 340,984,843.24 439,480,144.17 Including: Operating income 340,984,843.24 439,480,144.17 Interest income Insurance gained Commission charge and commission income II. Total operating cost 338,582,633.28 437,502,286.20 Including: Operating cost 302,582,979.44 398,913,925.08 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 Taxes and surcharge 1,712,293.39 2,317,887.45 Sales expenses 8,433,363.31 7,363,051.86 Administration expenses 20,400,985.42 24,085,956.74 Financial expenses 5,447,070.22 4,914,890.46 Losses of devaluation of asset 5,941.50 -93,425.39 Add: Changing income of fair value(Loss is listed with “-”) 41 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Investment income (Loss is listed 245,679.10 with “-”) Including: Investment income on affiliated company and joint venture Exchange income (Loss is listed with “-”) Assets disposal income (Loss -105,779.36 -33,321.94 is listed with “-”) Other income III. Operating profit (Loss is listed 2,542,109.70 1,944,536.03 with “-”) Add: Non-operating income 887,662.07 925,733.76 Less: Non-operating expense 172,806.76 50.88 IV. Total Profit (Loss is listed with 3,256,965.01 2,870,218.91 “-”) Less: Income tax expense 463,831.41 723,746.91 V. Net profit (Net loss is listed with 2,793,133.60 2,146,472.00 “-”) (i) net profit from continuous 2,793,133.60 2,146,472.00 operation (Net loss is listed with “-”) (ii) net profit from discontinued operation (Net loss is listed with “-”) Net profit attributable to owner’s of 2,793,133.60 2,146,472.00 parent company Minority shareholders’ gains and losses VI. Net after-tax of other comprehensive income Net after-tax of other comprehensive income attributable to owners of parent company (I) Other comprehensive income items which will not be reclassified subsequently to profit of loss 1. Changes as a result of re-measurement of net defined benefit plan liability or asset 2. Share of the other 42 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 comprehensive income of the investee accounted for using equity method which will not be reclassified subsequently to profit and loss (II) Other comprehensive income items which will be reclassified subsequently to profit or loss 1. Share of the other comprehensive income of the investee accounted for using equity method which will be reclassified subsequently to profit or loss 2. Gains or losses arising from changes in fair value of available-for-sale financial assets 3. Gains or losses arising from reclassification of held-to-maturity investment as available-for-sale financial assets 4. The effect hedging portion of gains or losses arising from cash flow hedging instruments 5. Translation differences arising on translation of foreign currency financial statements 6. Other Net after-tax of other comprehensive income attributable to minority shareholders VII. Total comprehensive income 2,793,133.60 2,146,472.00 Total comprehensive income attributable to owners of parent 2,793,133.60 2,146,472.00 Company Total comprehensive income attributable to minority shareholders VIII. Earnings per share: (i) Basic earnings per share 0.0099 0.0076 (ii) Diluted earnings per share 0.0099 0.0076 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 43 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 Current Period Last Period I. Operating income 16,961,088.74 19,368,319.99 Less: Operating cost 2,510,518.82 2,104,257.94 Taxes and surcharge 585,014.62 1,295,896.25 Sales expenses Administration expenses 11,134,855.37 13,448,031.17 Financial expenses 4,888,654.05 2,847,630.46 Losses of devaluation of -93,425.39 asset Add: Changing income of fair value(Loss is listed with “-”) Investment income (Loss is listed with “-”) Including: Investment income on affiliated company and joint venture Assets disposal income (Loss is listed with “-”) Other income II. Operating profit (Loss is listed -2,157,954.12 -234,070.44 with “-”) Add: Non-operating income 50,111.89 Less: Non-operating expense 131,247.82 50.88 III. Total Profit (Loss is listed with -2,289,201.94 -184,009.43 “-”) Less: Income tax expense -444,975.63 -22,646.01 IV. Net profit (Net loss is listed with -1,844,226.31 -161,363.42 “-”) (i) net profit from continuous -1,844,226.31 -161,363.42 operation (Net loss is listed with “-”) (ii) net profit from discontinued operation (Net loss is listed with “-”) 44 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 as a result of re-measurement of net defined benefit plan liability or asset 2. Share of the other comprehensive income of the investee accounted for using equity method which will not be reclassified subsequently to profit and loss (II) Other comprehensive income items which will be reclassified subsequently to profit or loss 1. Share of the other comprehensive income of the investee accounted for using equity method which will be reclassified subsequently to profit or loss 2. Gains or losses arising from changes in fair value of available-for-sale financial assets 3. Gains or losses arising from reclassification of held-to-maturity investment as available-for-sale financial assets 4. The effect hedging portion of gains or losses arising from cash flow hedging instruments 5. Translation differences arising on translation of foreign currency financial statements 6. Other VI. Total comprehensive income -1,844,226.31 -161,363.42 VII. Earnings per share: (i) Basic earnings per share -0.0065 -0.0006 (ii) Diluted earnings per share -0.0065 -0.0006 45 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 5. Consolidated Cash Flow Statement In RMB Item Current Period Last Period I. Cash flows arising from operating activities: Cash received from selling commodities and providing labor 195,284,689.59 245,041,670.12 services Net increase of customer deposit and interbank deposit Net increase of loan from central bank Net increase of capital borrowed from other financial institution Cash received from original insurance contract fee Net cash received from reinsurance business Net increase of insured savings and investment Net increase of amount from disposal financial assets that measured by fair value and with variation reckoned into current gains/losses Cash received from interest, commission charge and commission Net increase of capital borrowed Net increase of returned business capital Write-back of tax received Other cash received concerning 3,010,278.37 1,905,715.83 operating activities Subtotal of cash inflow arising from 198,294,967.96 246,947,385.95 operating activities Cash paid for purchasing commodities and receiving labor 158,655,192.45 216,567,324.72 service Net increase of customer loans 46 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 and advances Net increase of deposits in central bank and interbank Cash paid for original insurance contract compensation Cash paid for interest, commission charge and commission Cash paid for bonus of guarantee slip Cash paid to/for staff and 35,688,181.95 36,300,498.57 workers Taxes paid 12,954,614.98 9,434,091.06 Other cash paid concerning 17,668,304.21 20,042,838.52 operating activities Subtotal of cash outflow arising from 224,966,293.59 282,344,752.87 operating activities Net cash flows arising from operating -26,671,325.63 -35,397,366.92 activities II. Cash flows arising from investing activities: Cash received from recovering 80,000,000.00 investment Cash received from investment 253,638.00 income Net cash received from disposal of fixed, intangible and other 737,982.00 75,901.58 long-term assets Net cash received from disposal of subsidiaries and other units Other cash received concerning investing activities Subtotal of cash inflow from 80,991,620.00 75,901.58 investing activities Cash paid for purchasing fixed, 7,537,161.50 3,979,604.31 intangible and other long-term assets Cash paid for investment 80,000,000.00 Net increase of mortgaged loans Net cash received from 47 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 subsidiaries and other units obtained Other cash paid concerning investing activities Subtotal of cash outflow from 87,537,161.50 3,979,604.31 investing activities Net cash flows arising from investing -6,545,541.50 -3,903,702.73 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 156,361,250.00 99,600,311.57 Cash received from issuing bonds Other cash received concerning financing activities Subtotal of cash inflow from 156,361,250.00 99,600,311.57 financing activities Cash paid for settling debts 172,529,301.86 87,960,209.96 Cash paid for dividend and 4,844,780.76 4,119,482.39 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 177,374,082.62 92,079,692.35 financing activities Net cash flows arising from financing -21,012,832.62 7,520,619.22 activities IV. Influence on cash and cash equivalents due to fluctuation in -149,879.80 -390,104.21 exchange rate V. Net increase of cash and cash -54,379,579.55 -32,170,554.64 equivalents Add: Balance of cash and cash 81,474,974.30 104,015,312.97 48 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 equivalents at the period-begin VI. Balance of cash and cash 27,095,394.75 71,844,758.33 equivalents at the period-end 6. Cash Flow Statement of Parent Company In RMB Item Current Period Last Period I. Cash flows arising from operating activities: Cash received from selling commodities and providing labor 11,824,697.08 10,850,641.39 services Write-back of tax received Other cash received concerning 107,677,057.73 37,579,467.16 operating activities Subtotal of cash inflow arising from 119,501,754.81 48,430,108.55 operating activities Cash paid for purchasing commodities and receiving labor service Cash paid to/for staff and 1,812,043.81 2,524,734.01 workers Taxes paid 3,627,519.72 2,236,783.63 Other cash paid concerning 116,155,663.65 37,794,518.68 operating activities Subtotal of cash outflow arising from 121,595,227.18 42,556,036.32 operating activities Net cash flows arising from operating -2,093,472.37 5,874,072.23 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 49 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 1,377,592.31 intangible and other long-term assets Cash paid for investment Net cash received from subsidiaries and other units Other cash paid concerning investing activities Subtotal of cash outflow from 1,696,400.00 1,377,592.31 investing activities Net cash flows arising from investing -1,696,400.00 -1,377,592.31 activities III. Cash flows arising from financing activities Cash received from absorbing investment Cash received from loans 100,000,000.00 15,000,000.00 Cash received from issuing bonds Other cash received concerning financing activities Subtotal of cash inflow from 100,000,000.00 15,000,000.00 financing activities Cash paid for settling debts 116,054,041.68 15,000,000.00 Cash paid for dividend and 3,884,001.07 2,857,775.00 profit distributing or interest paying Other cash paid concerning financing activities Subtotal of cash outflow from 119,938,042.75 17,857,775.00 financing activities Net cash flows arising from financing -19,938,042.75 -2,857,775.00 activities IV. Influence on cash and cash 424.56 807.57 50 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 equivalents due to fluctuation in exchange rate V. Net increase of cash and cash -23,727,490.56 1,639,512.49 equivalents Add: Balance of cash and cash 25,181,764.87 10,375,152.87 equivalents at the period -begin VI. Balance of cash and cash 1,454,274.31 12,014,665.36 equivalents at the period -end 7. Statement of Changes in Owners’ Equity (Consolidated) Current Period In RMB Current period Owners’ equity attributable to parent company Other equity instrument Capit Other Total Per Mino Less: Provi Shar al comp Reaso Surpl owne Item petu rity Pref Inven sion Retai e publi rehen nable us rs’ al intere erre tory of ned capi c sive reserv reserv equit capi Oth sts d share gener profit tal tal reserv inco e e y er stoc s al risk sec e me k uriti es 283, I. Balance at the 146,5 77,39 -186, 320,6 161, end of the last 87,27 1,593 467,1 72,97 227. year 1.50 .25 13.73 8.02 00 Add: Changes of accounting policy Error correction of the last period Enterprise combine under the same control Other II. Balance at 283, 146,5 77,39 -186, 320,6 51 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 the beginning of 161, 87,27 1,593 467,1 72,97 this year 227. 1.50 .25 13.73 8.02 00 III. Increase/ Decrease in this 2,793 2,793 year (Decrease ,133. ,133. is listed with 60 60 “-”) (i) Total 2,793 2,793 comprehensive ,133. ,133. income 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 52 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 conversed to capital (share capital) 3. Remedying loss with surplus reserve 4. 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 -183, 323,4 161, the end of the 87,27 1,593 673,9 66,11 227. report period 1.50 .25 80.13 1.62 00 Last Period In RMB Last Period Owners’ equity attributable to parent company Other equity instrument Capit Other Total Per Mino Less: Provi Shar al comp Reaso Surpl owne Item petu rity Pref Inven sion Retai e publi rehen nable us rs’ al intere erre tory of ned capi c sive reserv reserv equit capi Oth sts d share gener profit tal tal reserv inco e e y er stoc s al risk sec e me k uriti es 283, I. Balance at the 146,5 77,39 -187, 319,6 161, end of the last 87,27 1,593 441,5 98,56 227. year 1.50 .25 23.12 8.63 00 Add: Changes of accounting policy Error correction of the 53 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 last period Enterprise combine under the same control Other 283, II. Balance at 146,5 77,39 -187, 319,6 161, the beginning of 87,27 1,593 441,5 98,56 227. this year 1.50 .25 23.12 8.63 00 III. Increase/ Decrease in this 974,4 974,4 year (Decrease 09.39 09.39 is listed with “-”) (i) Total 974,4 974,4 comprehensive 09.39 09.39 income (ii) Owners’ devoted and decreased capital 1.Common shares invested by 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 54 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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. 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 -186, 320,6 161, the end of the 87,27 1,593 467,1 72,97 227. report period 1.50 .25 13.73 8.02 00 8. Statement of Changes in Owners’ Equity (Parent Company) Current period In RMB Current period Other equity instrument Perpe Less: Other Share tual Capital Reason Retai Total Item Invento compre Surplus Prefer capita capita public able ned owners red Other ry hensive reserve l l reserve reserve profit ’ equity stock shares income securi ties I. Balance at the 283,1 146,58 -210, 296,58 77,391, end of the last 61,22 7,271.5 552,8 7,245.8 593.25 year 7.00 0 45.95 0 Add: Changes of 55 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 accounting policy Error correction of the last period Other II. Balance at 283,1 146,58 -210, 296,58 77,391, the beginning of 61,22 7,271.5 552,8 7,245.8 593.25 this year 7.00 0 45.95 0 III. Increase/ Decrease in this -1,84 -1,844, year (Decrease 4,226. 226.31 is listed with 31 “-”) (i) Total -1,84 -1,844, comprehensive 4,226. 226.31 income 31 (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. Distribution for owners (or shareholders) 3. Other (IV) Carrying forward internal owners’ equity 1. Capital 56 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 reserves conversed to capital (share capital) 2. Surplus reserves conversed to capital (share capital) 3. Remedying loss with surplus reserve 4. Other (V) Reasonable reserve 1. Withdrawal in the report period 2. Usage in the report period (VI)Others IV. Balance at 283,1 146,58 -212, 294,74 77,391, the end of the 61,22 7,271.5 397,0 3,019.4 593.25 report period 7.00 0 72.26 9 Last period In RMB Last period Other equity instrument Perpe Less: Other Share tual Capital Reason Retai Total Item Invento compre Surplus Prefer capita capita public able ned owners red Other ry hensive reserve l l reserve reserve profit ’ equity stock shares income securi ties I. Balance at the 283,1 146,58 -208, 299,03 77,391, end of the last 61,22 7,271.5 106,9 3,178.3 593.25 year 7.00 0 13.40 5 Add: Changes of accounting policy Error correction of the last period 57 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Other II. Balance at 283,1 146,58 -208, 299,03 77,391, the beginning of 61,22 7,271.5 106,9 3,178.3 593.25 this year 7.00 0 13.40 5 III. Increase/ Decrease in this -2,44 -2,445, year (Decrease 5,932. 932.55 is listed with 55 “-”) (i) Total -2,44 -2,445, comprehensive 5,932. 932.55 income 55 (ii) Owners’ devoted and decreased capital 1.Common shares invested by 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 58 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 conversed to capital (share capital) 3. Remedying loss with surplus reserve 4. Other (V) Reasonable reserve 1. Withdrawal in the report period 2. Usage in the report period (VI)Others IV. Balance at 283,1 146,58 -210, 296,58 77,391, the end of the 61,22 7,271.5 552,8 7,245.8 593.25 report period 7.00 0 45.95 0 III. Company profile 1. The registration place of the enterprise, the form of organization and the headquarters address Shenzh Zhongheng HUAFA Company Limited (hereinafter referred to as Company or the Company), established on 8 December 1981. uniform social cedit 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 283,161,227.00 2. 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 colour TV set, liquid crystal disply, LCD (operates in branch), radio-recorder, sound equipment, electronic eatch, 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 elctronic producs 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 Julin. Setting up branches in capital of the province (Lhasa City excluded) in China and municipality directrly under the central government. Relevant party offering approval reporting of financial statements and date thereof 3. The financial statement has been deliberated and approved by BOD on 24 August 2018. According to Article of Association, the statement shall be submit for deliberation in shareholders general meeting. Consolidate scope in the Period including: parent company – Shenzhen Zhongheng Huafa Company Limited, subsidiary including Shenzhen Huafa Perpoerty Leasing Management Co., Ltd. (no annual inspection in 2011, and business license revoke on 1 April 2014 ), Shenzhen Zhongheng Huafa perperty Co., Ltd., Wuhan Hengfa Technology Co., Ltd., Shenzhen Huafa Hengtian Co., Ltd. and Shenzhen Huafa Hengtai Co., Ltd. more of subsidiaries found in Note VII.-“Equity in other subjects”. 59 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 has 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 charateristic, the Group formulate specific accounting policy and accounting estimation, including trade cycle, recognization and measurement on account bad debt provision of receivables, inventory measurement, classification and depreciation method of fixed assets, intangible assets amortization and recognization 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 30th June 2018 and the operation results as well as cash flow for the first half of 2018. 2. Accounting period The Company’s accounting year is Gregorian calendar year, namely from 1st January to 31st December of every year. 3. Business cycle The Company’s business cycle is one year (12 months) as a normal cycle, and the business cycle is the determining criterion for the liquidity of assets and liabilities of the Company. 4. Bookkeeping standard currency The Renminbi (RMB) is taken as the book-keeping standard currency. 60 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 indentified net assets from acquiree’s, the differences should be recognized as goodwill. If the consolidation cost less than the fair value amount of indentified net assets from acquiree’s, the differences should reckoned into current gains/losses after re-examination. 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) Setoff 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. 61 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 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 foreign trading, shall be converted with the rates of exchange, released by People’s Bank of China at beginning of the current month, when trading 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) reckoned into current gains/losses or recognized as other consolidated 62 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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. The revenue and expenses, shall be converted with the rates of exchange, released by People’s Bank of China at beginning of the current month, when trading occurred. The conversion difference of the foreign currency financial statements is listed specifically in the owners’ equity in the balance sheet. The cash flow of foreign currency, which was recognized by systematic rational method, shall be converted with the rates of exchange, released by People’s Bank of China at beginning of the current month, when trading occurred. 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. Account receivable (1) Account receivables with single major amount and withdrawal bad debt provision independently Book balance of the account receivable with over 0.5 million Criterion or amount standards of major single amount Yuan Withdrawal method for individual bad debt provision accrual Recognized on the difference between the book value and the with major single amount concerned current value of the estimative future cash flow (2) Account receivable with bad debt provision accrual by portfolio Portfolio Accrued method for bad debts Age portfolio Aging of accounts Withdrawing bad bed provision by aging method in portfolio: √ Applicable □ Not applicable Accrued proportion of accounts Accrued proportion of other accounts Account ages receivable receivable 1-2 years 5.00% 5.00% 2-3 years 10.00% 10.00% Over three years 30.00% 30.00% Withdrawing bad bed provision by percentage of total accounts receivable outstanding in portfolio: □ Applicable √ Not applicable Withdrawing bad bed provision by other methods in portfolio: □ Applicable √ Not applicable 63 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 (3) Account receivable with minor single amount but has individual bad debt provision accrual Receivable has minor amount and can not reflect the risk Reasons for individual bad debt prevision accrual characteristic by withdrawing bad debt provision by group Recognized on the difference between the book value and the Accrued method for bad debt provision current value of the estimative future cash flow n11. 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. It mainly consists of the raw material, revolving materials, materials processed on commission, wrappage, consumable low-value product, products in process, homemade semi-finished products and inventory goods etc. (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 12. Long term equity investment (1) Recognition of initial investment cost Initial investment cost of long term equity investment obtained by corporate consolidation: in the case of the consolidation of enterprises under the same control, recognized as the initial cost is the book value of the owners’ equity obtained from the consolidated party; in the case of the consolidation of enterprises not under the same control, recognized as the initial cost is the recognized consolidation cost on the purchase day. As for the long term equity investment obtained by cash payment, the initial investment cost is the actual purchase payment. As for the long term equity investment obtained by the equity securities offering, the initial investment cost is the fair value of the equity securities. As for the long-term equity investment obtained by debt reorganization, initial investment cost of such investment should determine by relevant regulation of the “Accounting Standards for Business Enterprise No.12- Debt Reorganization”; As for the long term equity investment obtained by the exchange of the non-monetary assets and the debts restructuring, the initial investment cost is recognized on the relevant rules in the Principles. (2) Subsequent measurement and profit or loss recognition Where the investor 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 64 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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. 13. Investment real estate Measurement for investment real estate Cost method Depreciation or amortization method The leased buildings in the Company’s investment property adopts straight-line depreciation to calculate and distill depreciation, specific accounting policy are same as part of the fixed assets. The leased land use rights in the investment property and the land use rights to be transferred after appreciation adopt straight-line amortization, specific accounting policy are same as part of the intangible assets. 14. 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 Machine equipment 10 10.00 9.00 depreciation Straight-line Mold equipment 3 10.00 30.00 depreciation 65 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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. 15. Project in progress Project in progress of the Company divided as self-run construction and out-bag construction. The project in progress 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. 16. 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 66 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 return of the temporary investment; As for the appropriation of the general borrowing, the capitalization sum is recognized on the weighted average of, the accumulative assets expenditure above the specific borrowing, and times the capitalization rate of the appropriation; As for the discount or premium of the borrowing, the discount or premium to be diluted in every accounting period is recognized in the actual rate method. The effective interest method is the method for the measurement of the diluted discount or premium or interest expenses on the actual interest rate; and the actual interest rate is the interest rate used in the discount of the future cash flow in the expectant duration period as the current book value of the borrowing. 17. 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 estimative 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 67 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 shall be transferred to intangible assets accounting. 18. Long-term investment 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. 19. Long-term deferred expenditure The Company’s long-term deferred expenditure are expenses paid out and with one year above (1-year included) benefit period. The long-term unamortized expenses are diluted by periods according to the benefit period. As the long-term unamortized expenses cannot enable the accounting period’s beneficiary, all dilution values of the project undiluted yet, are transferred into the current loss/gain. 20. Employees benefits (1) Accounting for short-term benefits In the period of employee services, short-term benefits are actually recognized as liabilities and charged to profit or loss, or if otherwise required or allowed by other accounting standards, to the related costs of assets for the current period. At the time of actual occurrence, The Company’s employee benefits are recorded into the profits and losses of the current year or assets associated costs according to the actual amount. The non-monetary employee benefits are measured at fair value. Regarding to the medical and health insurance, industrial injury 68 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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. 21. Accrual liability The obligation related to contingencies is the current obligation assumed by the company, and performing this obligation may result in an outflow of economic benefits, and this obligation can be determined as the estimated liabilities when the amount can be reliably measured. The Company makes initial measurement in accordance with the best estimate for performing the related current obligation, if the expenditure as needed has a continuous range, and the likelihood of occurrence of various results in this range is the same, the best estimate is determined by the median value within the range; if a number of items are involved, the best estimate is determined by the calculation of various possible outcomes and related probabilities. At the balance sheet date, the book value of estimated liabilities should be rechecked, if there is conclusive evidence indicates that this book value cannot truly reflect the current best estimate, and then the book value should be adjusted in accordance with the current best estimate. 22. Revenue Whether the company needs to comply with the disclosure requirements of the particular industry No 69 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 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. 23. Government subsidy (1) Determination basis and accounting treatment for government grants related to assets Government grant obtained by the Company for the purpose of constructing or otherwise forming long term assets 70 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 is recognized as government grant related to assets. The specific projects for which the government documents have specified the subsidies should be divided according to the relative proportion of the amount paid for forming assets and the amount paid included in costs in the budgeting of the specific project, and the dividing ratio needs to be rechecked on each balance sheet date, and be changed if necessary. Government grants related to assets are recognized as deferred income. The amount recognized as deferred income shall be included in the current profit and loss in a reasonable and systematic way within the useful life of the relevant assets. Those related to the daily activities of the Company are included in other income, and those not related to the daily activities of the Company are included in non-operating income. Government grants measured on the basis of nominal amounts are directly included in the current profit or loss. (2) Determination basis and accounting treatment for government grants related to income The government documents only make general statements on the use, and those not specified as special items are regarded as government grants related to income. Government grants related to income are treated in the following situations respectively: those used to compensate the related expenses or losses of the enterprise in the subsequent period shall be recognized as deferred income and shall be included in the current profit or loss during the period of confirming related expenses. Those used to compensate the occurred related expenses or losses of the enterprise shall be directly included in the current profit and loss. When being included in the current profits and losses, the government grants related to the Company’s daily activities are included in other income; government grants that are not related to the Company’s daily activities are included in non-operating income. 24. 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 assts 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 71 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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. 25. Leasing (1) Accounting treatment for operating lease Accounting treatment for operating lease: Operating lease payments are recognized on a straight-line basis over the term of the relevant lease, and are either included in the cost of related asset or charged to profit or loss for the period. (2) Accounting treatment for finance lease Accounting treatment for finance lease: At the commencement of the lease term, the Group records the leased asset at an amount equal to the lower of the fair value of the leased asset and the present value of the minimum lease payments. The difference between the recorded amounts is accounted for as unrecognized finance charge, using the effective interest method amortization during the lease term. Minimum lease payments deducting unrecognized financing charges are listed as long-term payables. 26. Other important accounting policy and estimation The company does not disclose other important accounting policies and accounting estimates. 27. Changes in important accounting policies and estimates (1) Changes in important accounting policies □Applicable √Not applicable (2) Changes in important accounting estimates □Applicable √Not applicable VI. Taxes 1. Major tax and tax rate Taxes Taxation basis Tax rate VAT Domestic sales revenue 16%, 6%, 5%, 3% Urban maintenance and construction tax Transfer tax payable 7% 72 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Corporate income tax Taxable income 15、25% Educational surtax Transfer tax payable 3% Local educational surtax Transfer tax payable 1.5% Property tax 70% of original value of the property 1.2% Explain the different taxation entity of the enterprise income tax Taxation entity Income tax rate Shenzhen Zhongheng Huafa Co., Ltd. 25% Wuhan Hengfa Technology Co., Ltd. 15% 2. Tax preferences According to the “Measures for the Determination of High-tech Enterprises”, and through the enterprise application, expert review, and public announcement and other procedures, the Company’s wholly-owned subsidiary, Wuhan Hengfa Technology Co., Ltd., has been identified as a high-tech enterprise, and obtained the “High-tech Enterprise Certificate” jointly issued by the Science and Technology Department of Hubei Province, Hubei Provincial Finance Department, Hubei Provincial Office, SAT, and Local Taxation Bureau of Hubei Province on November 28, 2017, the certificate number is GR201742001840, which is valid for 3 years. The applicable corporate income tax rate of the subsidiary Wuhan Hengfa Technology Co., Ltd. for 2017 was 15%. VII. Notes to main items in consolidated financial statement 1. Monetary fund In RMB Item Closing balance Opening balance Cash on hand 270,703.35 170,053.77 Bank deposit 23,568,282.86 66,070,891.82 Other monetary fund 7,335,941.28 2,571,550.38 Total 31,174,927.49 68,812,495.97 Other explanation Other monetary funds are bank acceptance deposits. 2. Note receivable (1) Category In RMB Item Closing balance Opening balance 73 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Bank acceptance bill 21,849,876.46 37,676,025.26 Commercial acceptance bill 2,362,950.83 27,102,241.39 Total 24,212,827.29 64,778,266.65 (2) Note receivable pledged at period-end In RMB Item Amount pledged at period-end Bank acceptance bill 8,332,469.80 Total 8,332,469.80 (3) Note receivable which have endorsed and discount at period-end and has not expired on balance sheet date In RMB Un de-recognization amount at Item De-recognization amount at period-end period-end Bank acceptance bill 32,786,491.34 Commercial acceptance bill 55,168,339.11 Total 87,954,830.45 (4) Notes transfer to account receivable due for failure implementation by drawer at period-end In RMB Item Amount transfer to receivable at period-end Other explanation Nil 3. Account receivable (1) Category of account receivable In RMB Closing balance Opening balance Bad debt Book balance Book balance Bad debt provision Category provision Book Book Amoun Proport Amoun Accrua value Amo Proport Accrual value Amount t ion t l ratio unt ion ratio Account receivable 7,556,3 4.18% 7,556,3 100.00 7,556 4.67% 7,556,3 100.00% 74 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 with single 63.72 63.72 % ,363. 63.72 significant amount 72 and withdrawal bad debt provision separately Account receivable 167,65 167,65 148,8 with bad debt 92.73 91.88 8,352.0 148,795, 7,625.9 228.30 0.00% 7,397.6 04,35 0.01% provision accrual % % 8 998.26 9 9 0.34 by portfolio Accounts with single significant 5,592 amount and bad 5,592,8 5,592,8 100.00 5,592,8 3.09% ,838. 3.45% 100.00% debts provision 38.19 38.19 % 38.19 19 accrued individually 180,80 167,65 161,9 100.00 13,149, 100.00 13,157, 148,795, Total 6,827.9 7,397.6 53,55 % 430.21 % 553.99 998.26 0 9 2.25 Account receivable with major single amount and withdrawal bad debt provision single at period-end: √ Applicable □ Not applicable In RMB Account receivable (by Closing balance units) Account receivable Bad debt reserve Accrual ratio Accrual reasons Shenzhen Portman Bowling Club Co., 2,555,374.75 2,555,374.75 100.00% Un-recyclable Ltd. Hong Kong Haowei 1,870,887.18 1,870,887.18 100.00% Un-recyclable Industry Co. Ltd. TCL ACE ELECTRIC APPLIANCE 1,325,431.75 1,325,431.75 100.00% Un-recyclable (HUIZHOU) CO., LTD. Qingdao Haier Parts 1,225,326.15 1,225,326.15 100.00% Un-recyclable Procurement Co., Ltd. SKYWORTH Multimedia 579,343.89 579,343.89 100.00% Un-recyclable (Shenzhen) Co., Ltd. Total 7,556,363.72 7,556,363.72 -- -- Account receivable with bad debt provision withdrawal by method of account age in portfolio: √ Applicable □ Not applicable 75 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 In RMB Closing balance Account age Account receivable Bad debt provision Accrual ratio Sub-item of within one year Subtotal of within one year 167,655,343.02 2-3 year 2,282.97 228.30 10.00% Over 3 years 0.00 Total 167,657,625.99 228.30 Explanation on portfolio basis: Nil Withdrawing bad bed provision by percentage of total accounts receivable outstanding in portfolio: □ Applicable √ Not applicable Withdrawing bad bed provision by other methods in portfolio: Accounts with single significant amount and bad debts provision accrued individually at period-end Debtor Book balance Bad debt Accrual ratio (%) Reasons Shenzhen Huixin Video 381,168.96 381,168.96 100.00 Uncollectible Technology Co., Ltd. Shenzhen Wandelai Digital 351,813.70 351,813.70 100.00 Uncollectible Technology Co., Ltd. Shenzhen Dalong 344,700.00 344,700.00 100.00 Uncollectible Electronic Co., Ltd. Shenzhen Keya Electronic Co., 332,337.76 332,337.76 100.00 Uncollectible Ltd. Yuehai International 323,405.97 323,405.97 100.00 Uncollectible Shipping Limited Shenzhen Qunping 304,542.95 304,542.95 100.00 Uncollectible Electronic Co., 76 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Ltd. China Galaxy Electronics 288,261.17 288,261.17 100.00 Uncollectible (Hong Kong) Co., Ltd. Dongguan Weite 274,399.80 274,399.80 100.00 Uncollectible Electronic Co., Ltd. Hong Kong New Century 207,409.40 207,409.40 100.00 Uncollectible Electronics Co., Ltd. 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 Electronic 133,485.83 133,485.83 100.00 Uncollectible Co., Ltd. Shenzhen Jifang 15,860.00 15,860.00 100.00 Uncollectible Investment Co., Ltd. Other 1,951,354.35 1,951,354.35 100.00 Uncollectible Total 5,592,838.19 5,592,838.19 77 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 (2) Bad debt Name Closing balance Proportion of provision accrual, switch-back or taken back in the period Bad debt provision accrual was 0.00 Yuan; the amount collected or switches back amounting to 8,123.78 Yuan. Including major amount of bad debt provision that switch-back or taken back in the Period: In RMB Company Amount switch back or taken back Way Nil (3)Account receivable actual charge off in the period In RMB Item 核销金额 Major charge-off for the major receivable: In RMB Resulted by Charge –off Company Nature Amount charge-off Reasons related transaction procedures (Y/N) Explanation: Nil (4) Top five receivables collected by arrears party at ending balance 78 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 the total amount of advance payment (%) Qingdao Haidayuan purchasing Service Co., Ltd. 47.94% 86,684,100.72 Hong Kong Yutian International Investment Co., Ltd. 19.27% 34,850,150.19 View Sonic Technology (China) Co., Ltd. 8.98% 16,244,585.02 TCL Air-Conditioner (Wuhan) Co., Ltd. 10.30% 18,623,391.95 Wuhan Edmund Polytron Technology Co., Ltd. 2.35% 4,239,952.77 Total 88.85% 160,642,180.65 (5) Account receivable derecognition due to financial assets transfer Nil (6) Assets and liabilities resulted by account receivable transfer and continues involvement Nil Other explanation: Nil 4. Prepayments (1) Prepayments listed by account age In RMB Closing balance Opening balance Account age Amount Proportion Amount Proportion Within one year 24,066,072.03 98.85% 937,895.64 99.42% 1-2 year 54,266.97 0.22% 3,732.52 0.40% 2-3 year 225,369.97 0.93% 1,699.85 0.18% Total 24,345,708.97 -- 943,328.01 -- Explanation on prepayments with over one year in age and reasons of un-settle: Nil 79 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 (2) Top 5 prepayments collected by objects at ending balance Ratio in total Company Ending balance prepayments (%) Haier Digital Technology (Qingdao) Co., Ltd. 29.87% 7,271,076.69 Guangdong Yizhimi Precision Injection 17.08% Tech.Co., Ltd 4,158,000.00 Guangzhou Shiyuan Electronic Technology 7.99% Co., Ltd. 1,946,225.29 Kunshan Zhongji Mould Co., Ltd. 7.87% 1,916,600.00 Wuhan Qingkai Construction Group Co., Ltd. 6.34% 1,543,609.80 Total 69.15% 16,835,511.78 Other explanation: Nil 5. Other account receivable (1) Category of other account receivable In RMB Closing balance Opening balance Bad debt Book balance Book balance Bad debt provision Category provision Book Book Amoun Proport Amoun Accrua value Amo Proport Accrual value Amount t ion t l ratio unt ion ratio Other account receivable with single significant 6,722 6,722,6 26.60 6,722,6 100.00 34.28 6,722,6 amount and 0.00 ,602. 100.00% 0.00 02.71 % 02.71 % % 02.71 withdrawal bad 71 debt provision separately Other account 4,528 10,186, 40.31 193,09 9,993,5 23.09 193,093 4,335,72 receivable with bad 1.90% ,823. 4.26% 648.94 % 3.72 55.22 % .72 9.72 debt provision 44 80 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 accrual by portfolio Other account receivable with single minor 8,359 8,359,6 33.08 8,359,6 100.00 42.63 8,359,6 amount but 0.00 ,643. 100.00% 0.00 43.58 % 43.58 % % 43.58 withdrawal single 58 item bad debt provision 19,61 25,268, 100.00 15,275, 9,993,5 100.00 15,275, 4,335,72 Total 1,069 895.23 % 340.01 55.22 % 340.01 9.72 .73 Other account receivable with major single amount and withdrawal bad debt provision single at period-end: √ Applicable □ Not applicable In RMB Closing balance Other account Other account receivable (units) Bad debt provision Accrual ratio Accrual reason receivable Shenzhen Jifang 1,071,160.00 1,071,160.00 100.00% Partly recoverable Investment Co., Ltd. Portman 4,021,734.22 4,021,734.22 100.00% Un-recyclable Without bad debt risk Zhao Baomin 553,901.68 553,901.68 100.00% Un-recyclable Traffic accident 555,785.81 555,785.81 100.00% Un-recyclable compensation Hebei Botou Court 520,021.00 520,021.00 100.00% Un-recyclable Total 6,722,602.71 6,722,602.71 -- -- Other account receivable with bad debt provision withdrawal by method of account age in portfolio: √ Applicable □ Not applicable In RMB Closing balance Account age Other account receivable Bad debt provision Accrual ratio Sub-item of within one year Subtotal of within one year 7,106,228.94 1-2 year 2,943,020.00 151,873.72 5.16% Over 3 years 137,400.00 41,220.00 30.00% Total 10,186,648.94 193,093.72 Explanation on portfolio basis: 81 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Withdrawing bad bed provision by percentage of total other accounts receivable outstanding in portfolio □ Applicable √ Not applicable Withdrawing bad bed provision by other methods in portfolio: √ Applicable □ Not applicable Other account receivable with single minor amount but withdrawal single item bad debt provision at period-end Debtor Book balance Bad debt Accrual ratio Reasons Electricity fee in Gongming canteen Uncollectible 489,214.70 489,214.70 100.00 Jiantao (Fogang) Laminates Co., Ltd. Uncollectible 465,528.10 465,528.10 100.00 Labor union Uncollectible 332,402.55 332,402.55 100.00 Lu Wei Uncollectible 290,000.00 290,000.00 100.00 4/F hotel Dai Qiangbo Uncollectible 194,569.00 194,569.00 100.00 Chuangjing Uncollectible 192,794.00 192,794.00 100.00 Shenzhen Mingli Co., Ltd. Uncollectible 170,394.84 170,394.84 100.00 Other Units Uncollectible 6,224,740.39 6,224,740.39 100.00 Total —— —— 8,359,643.58 8,359,643.58 (2) Bad debt provision accrual, switch-back or taken back in reporting period Bad debt provision accrual was 0.00 Yuan; the amount collected or switches back amounting to 0.00 Yuan. Including major amount of bad debt provision that switch-back or taken back in the Period: In RMB Company Amount switch-back or taken back Way Nil (3) Other receivables actually charge-off during the reporting period In RMB Item Amount charge-off Major amount of other receivable charge-off: In RMB 82 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Resulted by Charge –off Company Nature Amount charge-off Reasons related transaction procedures (Y/N) Explanation: Nil (4) Classify according to nature In RMB Nature Ending book balance Opening book balance Margin 1,793,485.04 1,793,485.04 Borrow money 1,785,713.06 2,190,666.85 Intercourse funds 12,429,737.18 9,081,233.88 Rent receivable 9,088,088.00 5,857,777.46 Other 171,871.95 687,906.50 Total 25,268,895.23 19,611,069.73 (5) Top 5 other receivables collected by arrears party at ending balance In RMB Proportion in total Ending balance of Company Nature Closing balance Account age other receivables bad debt provision at year-end Portman Rent receivable 4,021,734.22 Over 3 years 15.92% 4,021,734.22 Shenzhen Jifang Investment Co., Rent receivable 1,071,160.00 Over one year 4.24% 1,071,160.00 Ltd. Wuwu Branch of Shenzhen Premium for lease 740,909.97 Within one year 2.93% Dachong Industrial Co., Ltd. Zhao Baomin Rent receivable 553,901.68 Over 3 years 2.19% 564,646.35 Traffic accident Intercourse funds 555,785.81 Over 3 years 2.20% 555,785.81 compensation Total -- 6,943,491.68 -- 6,213,326.38 (6) Account receivables related to government subsidies In RMB 83 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Time, amount and Account age at Company Name of subsidy Closing balance basis for recovery period-end expectation Nil (7) Other receivable for termination of confirmation due to the transfer of financial assets Nil (8) The amount of assets and liabilities that are transferred other receivable and continued to be involved Nil Other explanation; Nil 6. Inventory (1)Category of inventory In RMB 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 30,601,378.64 937,858.86 29,663,519.78 29,640,518.78 937,858.86 28,702,659.92 Goods in 739,156.75 739,156.75 119,575.09 119,575.09 process Inventory 23,088,750.36 1,660,379.81 21,428,370.55 29,291,605.18 1,660,379.81 27,631,225.37 goods Revolving 0.00 material Consumptive biological 0.00 assets Assets without settled but completed 0.00 resulted from construction contract Low priced and 721,411.93 85,692.51 635,719.42 587,236.21 85,692.51 501,543.70 easily worn 84 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 articles Homemade semi-finished 3,134,807.69 1,444.25 3,133,363.44 3,433,461.82 1,444.25 3,432,017.57 products Total 58,285,505.37 2,685,375.43 55,600,129.94 63,072,397.08 2,685,375.43 60,387,021.65 Does the Company comply with the disclosure requirement of “Information Disclosure Guidelines of Shenzhen Stock Exchange No.4 – Listed Companies Engaged in Seed Industry and Planting Business” or not No (2) Provision for price fall-down In RMB Current increased Current decreased Opening Closing Item Switch back or balance Accrual Other Other balance Written-off Raw materials 937,858.86 937,858.86 Inventory 1,660,379.81 1,660,379.81 goods Low priced and easily worn 85,692.51 85,692.51 articles Homemade semi-finished 1,444.25 1,444.25 products Work in process-outsour ced Total 2,685,375.43 2,685,375.43 Nil (3) Explanation on capitalization of borrowing costs in ending balance of inventory Nil (4) Assets completed without settle resulted by construction contract at period-end In RMB Item Amount Other explanation: Nil 85 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 7. Other current assets In RMB Item Closing balance Opening balance Value-added tax to be deducted 3,938.71 9,996.21 Advance payment of income tax 42,314.30 42,314.30 Total 46,253.01 52,310.51 Other explanation: Nil 8. Investment real estate (1) Investment real estate measured at cost √ Applicable □ Not applicable In RMB Construction in Item House and building Land use right Total process I. Original book value 1.Opening 133,661,686.94 133,661,686.94 balance 2.Current increased (1) outsourcing (2) inventory\fixed assets\construction in process transfer-in (3) increased by combination 3.Current decreased (1) disposal (2) other transfer-out 4.Closing balance 133,661,686.94 133,661,686.94 86 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 II. Accumulated depreciation and accumulated amortization 1.Opening 81,250,728.32 81,250,728.32 balance 2.Current 864,914.32 864,914.32 increased (1) accrual or 867,939.18 867,939.18 amortization 3.Current decreased (1) disposal (2) other transfer-out 4.Closing balance 82,115,642.64 82,115,642.64 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 51,546,044.30 51,546,044.30 value 2. Opening Book 52,410,958.62 52,410,958.62 value 87 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 (2) Investment real estate measure on fair value □ Applicable √ Not applicable (3) Investment real estate without property certification held In RMB Item Book value Reasons without certification Other explanation Nil 9. Fixed assets (1) Fixed assets In RMB Transportat House and Machine Tool Office Mold Instrument Item ion Total building equipment equipment equipment equipment equipment equipment I. Original book value: 65,608,798 80,158,724 6,431,855. 5,467,996. 6,981,463. 14,876,405 3,051,926. 182,577,17 1.Opening .85 .83 00 48 85 .89 44 1.34 balance 1,576,581. 1,894,538. 4,294,466. 8,055,291. 2.Current 84,856.64 204,849.58 17 02 51 92 increased 1,576,581. 1,894,538. 4,294,466. 8,055,291. (1)purchasi 84,856.64 204,849.58 17 02 51 92 ng (2)construc tion in progress transfer-in (3) increased by combinatio n 88 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 2,865,431. 3,041,377. 6,458,274. 3.Current 367,719.13 105,003.18 78,743.40 49 31 51 decreased (1) 2,865,431. 3,041,377. 6,458,274. disposal or 367,719.13 105,003.18 78,743.40 49 31 51 scrapping 65,608,798 78,869,874 6,431,855. 6,994,815. 6,961,317. 16,129,495 3,178,032. 184,174,18 4.Closing .85 .51 00 37 31 .09 62 8.75 balance II. Accumulati ve depreciatio n 1.Opening balance 2.Current increased (1) accrual 3.Current decreased (1) disposal or scrapping 4.Closing balance III. Depreciatio n reserves 14,843,969 58,679,845 3,568,166. 3,108,608. 5,484,551. 10,775,284 2,496,903. 98,957,328 1.Opening .68 .60 13 37 40 .39 38 .95 balance 89 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 2,650,840. 1,839,287. 1,095,405. 6,485,180. 2.Current 332,203.14 372,195.25 142,988.05 52,260.93 26 34 29 26 increased (1) 2,650,840. 1,839,287. 1,095,405. 6,485,180. 332,203.14 372,195.25 142,988.05 52,260.93 accrual 26 34 29 26 2,426,843. 2,737,239. 5,614,513. 3.Current 285,057.98 94,502.91 70,869.05 63 58 15 decreased (1) 2,426,843. 2,737,239. 5,614,513. disposal or 285,057.98 94,502.91 70,869.05 63 58 15 scrapping 17,494,809 58,092,289 3,900,369. 3,195,745. 5,533,036. 9,133,450. 2,478,295. 99,827,996 4.Closing .94 .31 27 64 54 10 26 .06 balance IV. Book value 1. 48,113,988 20,777,585 2,531,485. 3,799,069. 1,428,280. 6,996,044. 84,346,192 Ending 699,737.36 .91 .20 73 73 77 99 .69 Book value 50,764,829 21,478,879 2,863,688. 2,359,388. 1,496,912. 4,101,121. 83,619,842 2.Opening 555,023.06 .17 .23 87 11 45 50 .39 Book value (2) Fixed assets leasing-out by operational lease In RMB Item Ending book value House and building 905,391.76 10. Construction in progress (1) Construction in progress In RMB Closing balance Opening balance Item Impairment Impairment Book balance Book value Book balance Book value provision provision Transformation 654,356.00 654,356.00 654,356.00 654,356.00 90 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 project of Huafa Building Construction of enclosure in Guangming 518,400.00 518,400.00 Huafa Industry Park New injection molding 7,068.87 7,068.87 workshop Total 1,179,824.87 1,179,824.87 654,356.00 654,356.00 (2) change of major construction in process in the period In RMB 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 Transf ormati on project 654,35 654,35 of 6.00 6.00 Huafa Buildi ng Constr uction of enclos ure in 518,40 518,40 Guang 0.00 0.00 ming Huafa Industr y Park 91 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 New injecti on 7,068. 7,068. moldin 87 87 g works hop 654,35 525,46 1,179, Total -- -- -- 6.00 8.87 824.87 11. Disposal of fixed assets In RMB Item Closing balance Opening balance Gongming Huafa Electronic City 92,857,471.69 92,857,471.69 Total 92,857,471.69 92,857,471.69 Other explanation: Assets held for sale transfer-in 12. Intangible assets (1) Intangible assets In RMB Non-patented Item Land use right Patent right Software costs Total technology I. Original book value 1.Opening 55,089,774.36 661,878.97 55,751,653.33 balance 2.Current increased (1) purchasing (2) internal R&D (3) increased by combination 3.Current 92 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 decreased (1) disposal 4.Closing 55,089,774.36 661,878.97 55,751,653.33 balance II. Accumulated amortization 1.Opening 11,992,276.93 452,060.03 12,444,336.96 balance 2.Current 720,870.35 24,942.96 745,813.31 increased (1) accrual 720,870.35 24,942.96 745,813.31 3.Current decreased (1) disposal 4.Closing 12,713,147.28 477,002.99 13,190,150.27 balance III. Depreciation reserves 1.Opening balance 2.Current increased (1) accrual 3.Current decreased (1) disposal 4.Closing balance IV. Book value 1. Ending 42,376,627.08 184,875.98 42,561,503.06 Book value 93 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 2.Opening 43,097,497.43 209,818.94 43,307,316.37 Book value The proportion of intangible assets form by internal R&D in total book value of intangible assets at period-end was 0.00% 13. Long-term deferred expenditure In RMB Amortized in Item Opening balance Current increased Other decreased Closing balance Period Golf membership 141,666.55 25,000.02 116,666.53 fee Cloud service 697,007.55 38,722.64 658,284.91 charge Total 141,666.55 697,007.55 63,722.66 774,951.44 Other explanation Nil 14. Deferred income tax asset /deferred income tax liability (1) Deferred income tax assets un-offset In RMB Closing balance Opening balance Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax differences asset differences asset Provision for 30,230,614.99 7,286,148.16 27,949,536.92 6,715,066.24 impairment of assets Estimated liabilities 64,411.00 16,102.75 64,411.00 16,102.75 Total 30,295,025.99 7,302,250.91 28,013,947.92 6,731,168.99 (2) Deferred income tax liability un-trade off In RMB Closing balance Opening balance Item Taxable temporary Deferred income tax Taxable temporary Deferred income tax differences liabilities differences liabilities (3) Amount of deferred income tax asset and deferred income tax liability after trade-off In RMB 94 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 7,302,250.91 6,731,168.99 asset (4) Deferred income tax asset without confirmed In RMB Item Closing balance Opening balance Deductible temporary difference 3,172,018.51 Deductible loss 525,348.33 525,348.30 Total 525,348.33 3,697,366.81 (5) Deductible losses of deferred income tax asset without confirmed will expired in later year In RMB Year Closing amount Opening amount Note 2018 525,348.33 525,348.33 2019 Total 525,348.33 525,348.33 -- Other explanation: Nil 15. Other non-current assets In RMB Item Closing balance Opening balance Account paid in advance for mould 1,934,800.00 Total 1,934,800.00 Other explanation: Nil 16. Short-term borrowing (1) Category of short-term borrowing In RMB 95 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Item Closing balance Opening balance Loan in pledge 8,500,000.00 8,500,000.00 Guaranteed loan 5,000,000.00 20,000,000.00 Collateral loan 138,775,976.01 138,120,264.81 Total 152,275,976.01 166,620,264.81 Other explanation: Nil 17. Note payable In RMB Category Closing balance Opening balance Bank acceptance bill 15,635,598.71 17,810,270.28 Total 15,635,598.71 17,810,270.28 Totally 0 Yuan due note payable are paid at period-end 18. Account payable (1) Account payable In RMB Item Closing balance Opening balance Within one year (one year included) 50,577,515.81 71,817,382.90 Over one year 9,936,784.52 12,187,487.83 Total 60,514,300.33 84,004,870.73 (2) Major account payable over one year In RMB Item Closing balance Reasons of un-paid or carry-over Shenzhen Yuehai Global Logistics Co., 2,858,885.97 Unsettled Ltd. Taiwan LG Company 1,906,267.50 Unsettled Total 4,765,153.47 -- Other explanation: Nil 96 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 19. Account received in advance (1) Account received in advance In RMB Item Closing balance Opening balance Within one year (one year included) 216,292.28 234,017.18 Over one year 44,810.00 44,111.00 Total 261,102.28 278,128.18 20. Salary payable (1) Salary payable In RMB Increase during the Decrease during this Item Opening balance Closing balance period period I. Short-term 5,088,451.75 31,784,963.64 33,254,971.45 3,618,443.94 compensation II. Post-employment welfare- defined -5,093.82 2,203,579.59 2,203,579.59 -5,093.82 contribution plans III. Dismiss welfare 45,365.00 45,365.00 Total 5,083,357.93 34,033,908.23 35,503,916.04 3,613,350.12 (2) Short-term compensation In RMB Increase during the Decrease during this Item Opening balance Closing balance period period 1. Wages, bonuses, 4,039,310.19 27,586,584.41 29,021,199.18 2,604,695.42 allowancesand subsidies 2. Welfare for workers 27,109.00 2,660,218.57 2,672,033.77 15,293.80 and staff 3. Social insurance 23,041.98 1,301,496.94 1,325,074.78 -535.86 Including: 23,041.98 1,128,989.87 1,152,567.71 -535.86 Medical insurance Work 95,048.43 95,048.43 injury insurance 97 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Maternity 77,458.64 77,458.64 insurance 4. Housing 24,310.00 229,798.32 229,798.32 24,310.00 accumulation fund 5. Labor union expenditure and 974,680.58 6,865.40 6,865.40 974,680.58 personnel education expense Total 5,088,451.75 31,784,963.64 33,254,971.45 3,618,443.94 (3) Defined contribution plans In RMB Increase during the Decrease during this Item Opening balance Closing balance period period 1. Basic endowment -5,093.82 2,129,843.75 2,129,843.75 -5,093.82 insurance 2. Unemployment 73,735.84 73,735.84 insurance Total -5,093.82 2,203,579.59 2,203,579.59 -5,093.82 Other explanation: Nil 21. Tax payable In RMB Item Closing balance Opening balance Value-added tax 3,791,391.72 5,473,037.12 Enterprise income tax 5,323,140.64 5,228,514.39 Individual income tax 33,669.11 20,213.76 Urban maintenance and construction tax 164,194.41 1,447,509.59 House property tax 511,467.49 743,004.72 Land use tax 324,546.95 324,212.74 Education surcharge 67,115.26 621,129.51 Local education surcharge 41,726.83 322,572.35 Dike fee 1,665.00 1,665.00 Stamp tax 28,930.10 34,988.50 Disposal fund of waste electrical 274,970.00 919,430.00 98 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 products Total 10,562,817.51 15,136,277.68 Other explanation: 22. Interest payable In RMB Item Closing balance Opening balance Interest of short-term loans payable 136,176.72 164,895.80 Total 136,176.72 164,895.80 Significant overdue and unpaid interest: In RMB Loan unit Overdue amount Reason for overdue Other explanation: Nil 23. Other payable (1) Classification of other payable according to nature of account In RMB Item Closing balance Opening balance Margin and deposit 8,315,421.11 6,280,204.22 Lease management fee 1,063,840.72 2,307,901.27 Intercourse funds 13,919,880.52 6,534,652.44 After sale and repairmen 1,726,191.16 2,384,774.18 Other 2,043,860.76 2,419,744.84 Total 27,069,194.27 19,927,276.95 (2) Significant other payable with over one year age In RMB Item Closing balance Reasons of un-paid or carry-over Shenzhen SED Property Development 1,244,058.55 Unsettled Co., Ltd. Shenzhen Huayongxing Environmental 1,000,000.00 Deposit Protection Technology Co., Ltd. Linghang Technology (Shenzhen) Co., 656,345.28 Unsettled 99 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Ltd. Shenzhen Tongxing Electronics Co., Ltd. 578,259.83 Unsettled Shenzhen Yongdasheng Investment 558,970.00 Deposit Development Co., Ltd. Total 4,037,633.66 -- Other explanation Nil 24. Accrued liabilities In RMB Item Closing balance Opening balance Causes Pending action 64,411.00 64,411.00 Total 64,411.00 64,411.00 -- Other explanations, including important assumptions and estimation about important estimated liabilities: Business and labor disputes 25. 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: Ended as 30 June 2018, the shares of the Company held by controlling shareholder has 116,100,000 shares in status of pledge, taking 41% of the total share capital; mortgagee is China Merchants Securities Assets Management Co., Ltd. Shares in judicial freeze amounted as 116,489,894 shares. The mortgage expired on 31 December 2017. The prompted notice on pledge from controlling shareholder was released on 1 Feb. 2018 26. Capital public reserve In RMB 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) 100 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 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 27. Surplus reserves In RMB Increase during the Decrease during this Item Opening balance Closing balance period period Statutory surplus 21,322,617.25 21,322,617.25 reserves Discretionary surplus 56,068,976.00 56,068,976.00 reserve Total 77,391,593.25 77,391,593.25 Other explanation, including changes and reasons for changes: Nil 28. Retained profit In RMB Item Current period Last period Retained profit at the end of the previous period -186,467,113.73 -187,441,523.12 before adjustment Retained profit at period-begin after adjustment -186,467,113.73 -187,441,523.12 Add: net profit attributable to owners of the 2,793,133.60 974,409.39 parent company Retained profit at period-end -183,673,980.13 -186,467,113.73 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 2,530,667.50 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 29. Operating income and cost In RMB Current Period Last Period Item Income Cost Income Cost 101 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Main business 318,222,786.98 295,038,716.84 418,264,065.34 396,452,152.81 Other business 22,762,056.26 7,544,262.60 21,216,078.83 2,461,772.27 Total 340,984,843.24 302,582,979.44 439,480,144.17 398,913,925.08 31. Tax and surcharges In RMB Item Current Period Last Period City maintenance and construction tax 266,947.39 171,863.36 Educational surtax 159,757.95 99,530.65 House property tax 232,452.12 1,349,909.12 Land use tax 663,931.20 432,592.87 Stamp tax 217,911.90 245,831.90 Local education development fee 166,492.83 14,603.93 Vehicle use tax 4,800.00 3,555.62 Total 1,712,293.39 2,317,887.45 Other explanation: Nil 31. Sales expenses In RMB Item Current Period Last Period Employee compensation 2,301,867.88 2,485,833.89 Transportation fee 2,334,595.10 2,120,964.03 Commodity inspection fee 335,545.03 425,265.68 Customs fee 84,390.47 10,754.07 Commodity loss 1,556,975.69 486,106.38 Other 1,819,989.14 1,834,127.81 Total 8,433,363.31 7,363,051.86 Other explanation: Nil 32. Administrative expenses In RMB Item Current Period Last Period 102 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Salary 4,210,697.93 4,544,763.62 Depreciation charge 2,586,727.68 2,821,716.89 Social insurance premium 1,219,441.85 1,744,892.34 Entertainment expenses 1,336,624.80 1,480,848.53 Taxes and surcharges 0.00 0.00 Employee benefits 900,960.35 1,210,380.49 Travel expenses 1,086,267.27 2,451,878.65 Amortization of intangible assets 745,813.31 710,910.93 Transportation fee 1,047,578.29 552,799.31 Consulting fee 565,076.31 1,201,427.16 Security fee 710,066.72 1,010,168.29 Repairs fee 839,233.34 957,282.03 Audit fee 624,271.85 972,000.00 Office allowance 527,020.48 397,708.36 Communication fee 166,858.35 148,788.78 Amortization of low cost and short lived 488,293.61 174,265.51 articles Securities information disclosure fee 188,679.24 560,425.00 Litigation fee 0.00 10.00 Staff education and labor union 35,034.65 53,821.70 expenditure Water and electricity fee 272,971.66 149,863.85 Lease fee 2,298,165.79 2,246,800.90 Environment protection costs 90,598.66 127,614.00 Insurance fee 164,030.73 50,736.43 Other expenses 296,572.55 516,853.97 Total 20,400,985.42 24,085,956.74 Other explanation: Nil 33. Financial expenses In RMB Item Current Period Last Period Interest costs 5,989,883.31 4,180,114.84 Less: interest income 349,858.59 794,663.73 103 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Add: exchange loss -297,171.10 1,209,235.54 Add: Other expense 104,216.60 320,203.81 Total 5,447,070.22 4,914,890.46 Other explanation: Nil 34. Losses on assets impairment In RMB Item Current Period Last Period I. Bad debt losses 5,941.50 -93,425.39 Total 5,941.50 -93,425.39 Other explanation: 35. Gains on investment In RMB Item Current Period Last Period Investment income generated by financial 245,679.10 products Total 245,679.10 Other explanation: Nil 36. Asset disposal income In RMB Source of asset disposal income Current Period Last Period Income from fixed assets disposal 205,240.98 1,549.73 37. Non-operating income In RMB Amount reckoned in current Item Current Period Last Period non-recurring gains/losses Government subsidy 771,800.00 802,269.68 771,800.00 Receive donations 51,500.00 Unable to pay 7,130.19 Penalty revenue 48,833.89 104 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Fine income 115,862.07 16,000.00 Total 887,662.07 925,733.76 Government subsidy reckoned into current gains/losses: In RMB 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 for research Economic and Technology & developme innovation Informatio nt, Income-rel platform n Bureau Subsidy N Y 300,000.00 technical ated subsidy for of Caidian reforming 2017 District, and Wuhan reconstruct ion Subsidy obtained for conforms Business Caidian with the developme Bureau of local Income-rel Reward N Y 150,000.00 nt guidance Finance, support ated fund Wuhan policy for investment incentive to encourage investment Subsidy obtained Wuhan for Science & conforms Technolog Nurturing with the y Board Income-rel enterprise Subsidy local N Y 50,000.00 (Wuhan ated subsidy support Intellectual policy for Property investment Office) incentive to encourage 105 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 investment Subsidy obtained Treasury for Municipal receipts & conforms foreign payments with the economic sub-branch local Income-rel Reward N Y 271,800.00 & trade of Wuhan support ated funds for Municipal policy for 2018 Finance investment Bureau incentive to encourage investment Total -- -- -- -- -- 771,800.00 -- Other explanation: Nil 38. Non-operating expenditure In RMB Amount included in current Item Current Period Last Period non-recurring profits or losses Penalty expenditure 40,000.00 40,000.00 Other 132,857.64 50.88 132,857.64 Total 172,806.76 50.88 Other explanation: Nil 39. Income tax expenses (1) Statement of income tax expense In RMB Item Current Period Last Period Current income tax expense 908,807.04 746,392.92 Deferred income tax expense -444,975.63 -22,646.01 Total 463,831.41 723,746.91 (2) Adjustment on accounting profit and income tax expenses In RMB 106 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Item Current Period Total profit 3,256,965.01 Income tax based on statutory/applicable rate 814,241.25 Impact by different tax rate applied by subsidies -605,871.37 Impact by the deductible losses of the un-recognized previous 127,324.86 deferred income tax Impact on deductible temporary differences or losses deductible which was un-recognized as deferred income tax 128,136.67 assets Income tax expense 463,831.41 Other explanation Nil 40. Items of statement of cash flow (1) Other cash received in relation to operation activities In RMB Item Current Period Last Period Unit intercourse account 1,042,828.59 614,876.45 Collection management fee and utilities 601,727.14 159,474.66 etc. Repayment from employees 22,608.36 23,555.74 Margin 500,000.00 15,271.20 Interest income 71,314.28 290,268.10 Government grants 771,800.00 802,269.68 Total 3,010,278.37 1,905,715.83 Explanation on other cash received in relation to operation activities: Including collecting water & electricity charges and management fees, government grants, margin and other intercourse funds (2) Other cash paid in relation to operation activities In RMB Item Current Period Last Period Unit intercourse account 1,840,448.01 412,358.54 Advances to employees 1,046,817.78 3,937,524.56 Litigation fee 249,530.00 Margin, deposit 831,867.00 441,370.00 107 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Entertainment expense 1,166,779.68 1,220,133.12 Water and electricity 2,270,904.17 1,623,214.94 Travel expenses 849,867.40 1,394,764.69 Traffic expenses 2,336,595.10 2,120,964.03 Car fare 620,026.07 739,779.60 Repairs 965,726.34 956,708.92 Audit fees, consulting fees 1,037,410.89 2,686,552.16 Security 218,400.00 218,400.00 Financial institutions handling fee 103,694.09 213,790.21 Office expenses 408,916.56 457,621.51 Communication fee 195,355.57 153,528.16 Lease fee 2,418,018.66 2,233,640.64 Other 1,107,946.89 1,232,487.44 Total 17,668,304.21 20,042,838.52 Explanation on other cash paid in relation to operation activities: Including management expenses, sales expenses, individual intercourse fund, margin, collecting water & electricity charges and management fees 41. Supplementary information to statement of cash flow (1) Supplementary information to statement of cash flow In RMB Supplementary information Current Period Last Period 1. Net profit adjusted to cash flow of -- -- operation activities: Net profit 2,793,133.60 2,146,472.00 Depreciation of fixed assets, consumption of oil assets and depreciation of productive 7,322,855.85 6,822,408.28 biology assets Amortization of intangible assets 709,576.88 710,910.93 Amortization of long-term deferred 63,722.66 35,450.04 expenses Loss from disposal of fixed assets, intangible assets and other long-term 333,454.38 227,675.02 assets(gain is listed with “-”) Loss from discarding fixed assets as 34,871.67 useless (gain is listed with “-”) 108 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Financial expenses (gain is listed with “-”) 5,536,037.89 5,488,969.99 Investment loss (income is listed with “-”) -245,679.10 Decrease of deferred income tax assets 1,218.57 (increase is listed with “-”) Decrease of inventory (increase is listed 4,786,891.71 -5,264,207.79 with “-”) Decrease of operating receivable accounts -15,034,088.55 -74,799,461.03 (increase is listed with “-”) Increase of operating payable accounts -32,938,449.52 29,199,543.97 (decrease is listed with “-”) Net cash flow arising from operating -26,671,325.63 -35,397,366.92 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 23,838,986.21 59,595,073.48 Less: Balance of cash at period-begin 66,240,945.59 91,310,804.48 Add: Balance of cash equivalent at 3,256,408.54 12,249,684.85 period-end Less: Balance of cash equivalent at 15,234,028.71 12,704,508.49 period-begin Net increasing of cash and cash -54,379,579.55 -32,170,554.64 equivalents (2) Constitution of cash and cash equivalent: In RMB Item Closing balance Opening balance Ⅰ. Cash 23,838,986.21 66,240,945.59 Including: Cash on hand 270,703.35 170,053.77 Bank deposit available for payment 23,568,282.86 66,070,891.82 at any time II. Cash equivalent 3,256,408.54 15,234,028.71 Note receivable due within three months 3,256,408.54 15,234,028.71 Ⅲ. Balance of cash and cash equivalent at 27,095,394.75 81,474,974.30 period-end Other explanation: Monetary fund at year-end-other monetary fund refers to the bank acceptance bond 7,335,941.28 Yuan, which is not belonging to the 109 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 cash and cash equivalent. At end of the year, among the note receivable due within 3 months, the 3,432,776.86 Yuan are used for pledge, which is not belongs to cash and cash equivalent. 42. Assets with ownership or use right restricted In RMB Item Ending book value Restriction reasons Monetary Fund 7,335,941.28 Bank acceptance bill Notes receivable 8,332,469.80 Pledge Fixed assets 43,965,447.66 Bank loan secured Intangible assets 37,605,499.26 Bank loan secured Accounts receivable 8,831,544.63 Pledge Investment real estate 39,197,344.30 Bank loan secured Liquidation of fixed assets 92,857,471.69 Court closure Total 238,125,718.62 -- Other explanation: Nil 43. Item of foreign currency (1) Item of foreign currency In RMB Closing balance of foreign Ending RMB balance Item Rate of conversion currency converted Including: USD 8,129.64 6.6157 53,783.26 HKD 32.65 0.7997 26.11 Including: USD 5,498,355.82 6.6157 36,375,472.60 Advance account Including: USD 54,448.00 6.6157 360,211.63 Short term loan Including: USD 3,593,871.55 6.6157 23,775,976.01 Account payable Including: USD 3,058,003.88 6.6157 20,230,836.27 Other explanation: Nil 110 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 (2) Explanation on foreign operational entity, including as for the major foreign operational entity, disclosed main operation place, book-keeping currency and basis for selection; if the book-keeping currency changed, explain reasons □ Applicable √ Not applicable VIII. Equity in other entity 1. Equity in subsidiary (1) Constitute of enterprise group Main operation Registered Share-holding ratio Subsidiary Business nature Acquired way place place Directly Indirectly Property Investment Huafa Lease Shenzhen Shenzhen 60.00% management establishment Property Investment Huafa Property Shenzhen Shenzhen 100.00% management establishment Hengfa Production and Investment Wuhan Wuhan 100.00% Technology sales establishment Property Investment Huafa Hengtian Shenzhen Shenzhen 100.00% management establishment Property Investment Huafa Hengtai Shenzhen Shenzhen 100.00% management establishment 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 Controlling basis for the structuring entity included in consolidated range: Nil Basis on determining to be an agent or consignor: Nil Other explanation: Nil IX. Related party and related transactions 1. Parent company of the enterprise Parent company Registration place Business nature Registered capital Share-holding Voting right ratio 111 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 ratio on the on the enterprise enterprise for parent company Production and Wuhan Zhongheng sales, real estate New Science & development and Technology Wuhan 34.5 million Yuan 41.14% 41.14% sales, housing Industrial Group leasing and Co., Ltd. management Explanation on parent company of the enterprise Nil The ultimate control of the enterprise is Li Zhongqiu. Other explanation: Nil 2. Subsidiary of the Enterprise Found more in VIII. Equity in other entity in the Note 3. Other related party Other related party Relationship with the Enterprise Control by same controlling shareholder and ultimate Shenzhen Zhongheng Huafa Science and Technology Co., Ltd. controller Control by same controlling shareholder and ultimate Wuhan Hengsheng Yutian Industrial Co., Ltd. controller Control by same controlling shareholder and ultimate Wuhan Hengsheng Photoelectricity Industry Co., Ltd. controller Control by same controlling shareholder and ultimate Hong Kong Yutian International Investment Co., Ltd. controller Control by same controlling shareholder and ultimate Wuhan New Oriental Real Estate Development Co., Ltd. controller Control by same controlling shareholder and ultimate Wuhan Zhongheng Property Management Co., Ltd. controller Control by same controlling shareholder and ultimate Wuhan Optical Valley Display System Co., Ltd. controller Control by same controlling shareholder and ultimate Wuhan Yutian Xingye Property Co., Ltd. controller Control by same controlling shareholder and ultimate Wuhan Yutian Dongfang Property Co., Ltd. controller 112 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Control by same controlling shareholder and ultimate Wuhan Xiahua Zhongheng Electronics Co. Ltd. controller Control by same controlling shareholder and ultimate Wuhan Zhongheng Yutian Trade 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 In RMB Whether over the Trading limit Related party Content Current Period approved limited or Last Period approved not (Y/N) Hong Kong Yutian International Purchase good 57,922,243.81 292,936,500.00 N 108,075,657.11 Investment Co., Ltd. Wuhan Hengsheng Purchase good 44,866,194.55 390,582,000.00 N 60,462,785.68 Photoelectricity 113 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Industry Co., Ltd. Goods sold/labor service providing In RMB Related party Content Current Period Last Period Hong Kong Yutian International Investment Co., Sales of good 63,231,882.88 99,543,022.00 Ltd. Wuhan Hengsheng Photoelectricity Industry Co., Sales of good 2,772,074.10 1,237,955.69 Ltd. Explanation on goods purchasing, labor service providing and receiving Nil (2) Related guarantee As the guarantor In RMB Completed or not Secured party Amount guarantee Start End (Y/N) Hengfa Technology 50,000,000.00 2017-11-20 2018-11-20 N Hengfa Technology 30,000,000.00 2018-03-14 2020-03-14 N As the secured party In RMB Completed or not Guarantor Amount guarantee Start End (Y/N) Li Zhongqiu 20,000,000.00 2017-12-08 2018-12-07 N Li Zhongqiu 100,000,000.00 2018-07-13 2019-07-12 N Explanation on related guarantee Nil (3) Remuneration of key manager In RMB Item Current Period Last Period Total Remuneration 784,673.68 744,034.16 114 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 5. Receivable/payable items of related parties (1) Receivables In RMB Closing balance Opening balance Item Related party Book balance Bad debt reserves Book balance Bad debt reserves Hong Kong Yutian Accounts International 34,850,150.19 41,299,300.89 receivable Investment Co., Ltd. Hong Kong Yutian International Advance payment 20,591,047.90 8,873,087.08 Investment Co., Ltd. (2) Payables In RMB Item Related party Ending book balance Opening book balance Wuhan Hengsheng Accounts payable Photoelectricity Industry Co., 871,821.45 4,333,021.63 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. X. 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 Minimum leasing payment operating lease contract First year after balance sheet date 3,847,599.84 115 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Second year after balance sheet date 3,847,599.84 Third year after balance sheet date 502,325.53 Total 8,197,525.21 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. On May 22, 2018, the arbitration was held, but no verdict was issued. 2. Other pending lawsuit Cause Litigious Amount Types of litigations, times and explaination of Case No. Note party object action (2016) Defendant: Yue0304 Shenzhen -----2016.03.08(People’s Court of Futian Disctrict, Shenzhen) accept the case MC No.: Jifang 5870; (2017) Investment Yue 03 MZ Dispute Litigation Co., Ltd. and No.: 22027; over amount: Shenzhen (2018) Yue -----2016.03.24 Application for bankaccount preservation of 550,000 Yuan leasing 733800 Carnival 0304 Z No.: contracts Yuan Foreigning 10334 Trade ----- Date of first instance opening: 2017.3.7 ----- Date of second instance Clothing City opening :2017.11.9 Co., Ltd . -----2018.3.15 (verdict of the 2nd instance effective) 116 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 2018.3.26 Application for enforcement 2018.5.16: enforcement by Shenzhen intermediate’s court for expelling Jifang Defendant: Dispute 2016 Yue Litigation ----2016.03.23 (Pepole’s Court of Baoan District, Shenzhen) accept the case Shenzhen over 0306 MC amount: Huayongxing leasing No. 6180 9.4726 Enviornmental (Pepole’s Court of Baoan District, Shenzhen) Application for bankaccount contracts million Technology preservation of 8 million Yuan (in payment) Yuan Co., Ltd. -----2017.3.20 Opening a trail Shenzhen Yidaxing Technology The trial has come out, and applying enforcement Co., Ltd. Defendant: ----2016.03.24(Pepole’s Court of Baoan District, Shenzhen) accept the case Shenzhen -----2016.04.11(Pepole’s Court of Baoan District, Shenzhen) Application for Huayongxing bankaccount preservation of 17 million Yuan Enviornmental Technology Co., Ltd., ------2017.2.14 Opening a trail Shenzhen Guangyong Breadboard Litigation Co., Ltd., Dispute 2016 Yue amount: Shenzhen over 0306 MC 19.6492 Mingyi leasing No. 6229 million Electric Co., contracts Yuan Ltd., Verdict comes out and come into effect on 20 August 2018, waiting for Shenzhen application for enforcement Ouruilai Technology Co., Ltd. and Shenzhen Kangzhengxin Technology Co., Ltd. Defendant: Wuhan Zhongheng Litigation ----2018.3.12. we received the arbitration application of V&T Law Firm from Dispute New Case No.: amount: Shenzhen International Arbitration Commission, we have entrusted lawyers over Technology SHEN 19.402 to respond to the suits and filed a counterclaim against V&T Law Firm, there agency Industrial DX20180087 million is no notice of hearing at present. contract Group Co., Yuan ltd. and Shenzhen 117 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Zhongheng Huawa Co., Ltd. Plaintiff: V&T LAW FIRM (2) For the important contingency not necessary to disclosed by the Company, explained reasons The Company has no important contingency that need to disclosed 3. Other Nil XI. Other important events 1. Other (i) concerning the ruling of Southern International Arbitration Shen [2017] No. D376 from Southern China International Economic & Trade Arbitration Commission, the Company applying for cancellating the ruling (1) Arbitration In August 2015, Shenzhen HUAFA and Wuhan Zhongheng New Technology Industry Group Co., Ltd. (hereinafter referred to as “Wuhan Zhongheng”) signed the “Cooperation Agreement on Urban Renewal Project of Update Units at Huafa Industrial Park, Gongming Street, Guangming New District, Shenzhen”. As Shenzhen HUAFA and Wuhan Zhongheng planned to cooperate with Shenzhen Vanke Real Estate CO., Ltd. (hereinafter referred to as “Shenzhen Vanke”) on the Huafa urban renewal project (hereinafter referred to as “Huafa Renovation Project) at Gongming Street, Guangming New District, Shenzhen, both parties appointed that Shenzhen HUAFA entrusted Wuhan Zhongheng to represent it in this cooperation, and established project company - Shenzhen Vanke Guangming Real Estate Co., Ltd. (hereinafter referred to as “Vanke Guangming”) as the subject of project implementation with Shenzhen Vanke; Vanke Guangming signed “Demolition Compensation Agreement” with Shenzhen HUAFA and Wuhan Zhongheng, and paid the compensation for demolition. On August 21, 2015, Shenzhen HUAFA, Wuhan Zhongheng and Shenzhen Vanke signed the “Cooperative Operation Contract of Renovation Project at Huafa Industrial Park, Gongming Street, Guangming New District”(hereinafter referred to as “Cooperative Operation Contract”), the contract refined and appointed the cooperation model and operating steps of both sides. And then Shenzhen HUAFA, Wuhan Zhongheng and Shenzhen Vanke signed the “Agreement on the Housing Acquisition and Removal Compensation and Settlement”. After signing the above agreement, Shenzhen Vanke paid the cooperation price of 600 million Yuan to Wuhan Zhongheng through Vanke Guangming. In September 2016, Shenzhen Vanke filed an arbitration to South China International Economic and Trade Arbitration Commission (hereinafter referred to as “South China Arbitration”) as Shenzhen HUAFA and Wuhan Zhongheng violated the appointment of “Cooperative Operation Contract” and handled the “Confirmation of Subject of Reconstruction Implementation” at an overdue time, and required Shenzhen HUAFA and Wuhan Zhongheng to pay liquidated damages and attorneys' fees of RMB 464.60 million. 118 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 While filing the arbitration, Shenzhen Vanke also applied for property preservation of 400 million Yuan of property under the name of Shenzhen Huafa and Wuhan Zhongheng to Shenzhen Intermediate People’s Court. According to the ruling of Shenzhen Intermediate People's Court and “Notification of Sealing up, Seizing and Freezing Assets” (The reference numbers are (2016) Yue 03 Cai Bao No. 51, (2016) Yue 03 Cai Bao No. 53), the 27 house properties (Note: the property within the scope of Huafa renovation project) under the name of Shenzhen HUAFA and 116,489,894 shares (Note: of which 116,100,000 shares have been pledged) of Shenzhen HUAFA stock held by Wuhan Zhongheng were frozen. (2) Progress of arbitration On November 12, 2016, the arbitration court held a hearing on this case. In December 2016, Wuhan Zhongheng to Shenzhen HUAFA issued a “Commitment Letter” which included that if the arbitration (Note: the case) ruled in favor of Shenzhen Vanke, the loss of arbitration caused by the contract disputes should be fully assumed by our company. In the above contingent losses, if the judicial decision ruled your company to pay the compensation in advance, our company promised to pay your company in cash within one month, if our company could not pay on time due to uncontrollable factors, our company would like to pay the corresponding interest according to the benchmark interest rate of bank loans in the corresponding period. Because the plots in the renovation project placed in our company hadn’t been applied for transfer procedures and were still under your company’s name (Note: based on the “Asset Replacement Contract” signed by Wuhan Zhongheng and Shenzhen HUAFA on April 29, 2009), therefore, there was no risk of compliance, at the same time, our company promised to give priority to paying the above compensation with the compensation for demolition of renovation project. On March 14, 2017, Shenzhen HUAFA received the “Decision of Arbitrator not Granting Avoiding” issued by South China Arbitration, which rejected the application for avoiding of chief arbitrator proposed by Shenzhen Vanke. On March 15, 2017, Shenzhen HUAFA received the “Letter About the Resignation of the Chief Arbitrator of No. SHEN DP20160334 Case” signed by the chief arbitrator and forwarded by South China Arbitration. On March 20, 2017, Shenzhen HUAFA received the “Letter About the Resignation of the Arbitrator of No. SHEN DP20160334 Case” forwarded by South China Arbitration, the arbitrator selected by Shenzhen Vanke said to resign from the arbitrator of this case due to physical reasons. The deadline for giving a ruling to this case was originally scheduled on February 12, 2017. According to the “Decision of Adjourning the Ruling” issued by South China Arbitration on February 10, 2017, the deadline for giving a ruling to this case shall be prolonged to May 12, 2017. Due to the changes in the members of above arbitration court, this case needs South China Arbitration to reassign the chief arbitrator and Shenzhen Vanke to reselect the arbitrators. According to the provisions of article 32 of the Arbitration Rules of South China Arbitration, after constituting the new arbitration court, it shall decide whether all or part of the hearing procedures that have been carried out before need to be reopened; if the arbitration court decides to reopen all hearing procedures, then the deadline for giving a ruling shall be calculated from the date that the arbitration court decides to reopen the hearing procedures. On August 16, 2017, South China International Economic and Trade Arbitration Commission made the “Arbitral Award” SCIA [2017] D376, according to the arbitral award, the applicant and counterclaim respondent in arbitration case SCIA [2017] D376 were Shenzhen Vanke Real Estate Co., Ltd. (hereinafter referred to as “Applicant” and “Vanke”). The first respondent and the first applicant for counterclaim were Wuhan Zhongheng New Technology Industry Group Co., Ltd. (hereinafter referred to as “Wuhan Zhongheng” and “First Respondent”). The second respondent and the second applicant for counterclaim were Zhongheng Huafa. The award results were as follows: ① The first respondent and the second respondent pay liquidated damages to the applicant with a base number of RMB 600 million, calculating by the annual interest rate of 36% from October 1, 2015 to November 11, 2016; ②The first respondent and the second respondent pay the lawyer fees of RMB 1.4 million to the applicant due to the case; ③The first respondent and the second respondent pay the property preservation fees of RMB 10,000 to the applicant; ④The arbitration fees for this request and case was RMB 3,101,515.00, the first respondent and the second respondent should bear 119 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 70%, i.e. RMB 2,171,060.50, and the applicant should bear 30%, i.e. RMB 930,454.50. The applicant had already paid the arbitration fees in full amount for this request which could be used as the arbitration fees of this case and request and shall not be refunded. The first respondent and the second respondent should directly pay RMB 2,171,060.50 to the applicant; The arbitration fee of counterclaim in this case was RMB 76,050 which was undertaken by the first respondent and the second respondent at their own expense. The first respondent and the second respondent paid the arbitration fees in full amount for this request which could be used as the arbitration fees of this case and request and shall not be refunded; The actual expenses of the arbitrators in this case amounted to RMB 7,754.90, the first respondent and the second respondent assumed 70%, i.e. RMB 5,428.43, and the applicant assumed 30%, i.e. RMB 2,326.47; the above actual expenses of the arbitrators had been paid by the Commission, so the first respondent and the second respondent and the applicant should directly pay RMB 5,428.43 and RMB 2,326.47 respectively to the Commission; ⑤ Reject the applicant’s other arbitration requests; ⑥Reject the arbitration counterclaims of the first respondent and the second respondent. In summary, Wuhan Zhongheng and Shenzhen Huafa should pay liquidated damages, interest, lawyer fees, property preservation fees, and arbitration fees for this request to Vanke and pay actual expenses of the arbitrators in this case and pay the actual expenses incurred by the arbitrators in this case to South China International Economic and Trade Arbitration Commission. (3) The response of the company’s management and the identification of the event The company engaged lawyers to make an independent investigation and judgment on the event, and issued special legal opinion that the reasons of Wuhan Zhongheng resulted in a failure of a net handover, the corresponding urban renewal functional department could not issue the corresponding demolition documents, which in turn made the project company fail to be confirmed as the subject of implementation, and finally and directly made the subject of implementation fail to get the “Land Value Payment Notification” and sign the “Land Use Rights Transfer Contract”. Therefore, Wuhan Zhongheng should bear all responsibilities for faults in response to the breach of contract. Wuhan Zhongheng issued the Commitment Letter in December 2016, pledged that if the arbitration judged Vanke to win the case, Wuhan Zhongheng should bear all arbitration losses caused by the contract dispute; after the award came into effect, Wuhan Zhongheng issued the Confirmation Letter again on November 23, 2017 to divide the duty of performance of the award; the independent directors of the company issued independent opinions after careful study that Wuhan Zhongheng should bear the arbitration losses in full; the management of the company also made an investigation and affirmed that Wuhan Zhongheng should bear all liability for satisfaction on the Award HNGZSC [2017] D376, and the award amount should be paid by Wuhan Zhongheng in full. At present, the company has filed an application for revoking the Award HNGZSC [2017] D376 to Shenzhen Intermediate People’s Court, and Shenzhen Intermediate People’s Court has officially accepted the case on February 7, 2018, the case number was (2018) Yue 03 MT 113. On June 16,2018,the court ruled against the company’s claims. XII. Principle notes of financial statements of parent company 1. Accounts receivable (1) Category of account receivable In RMB Closing balance Opening balance Category Bad debt Book Book Book balance Book balance Bad debt reserves reserves value value 120 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Amoun Amoun Accrua Amo Accrual Ratio Ratio Amount t t l ratio unt ratio Account receivable with single 5,094 significant amount 5,000,9 48.58 5,000,9 100.00 49.05 5,094,4 ,414. 100.00% and withdrawal 88.97 % 88.97 % % 14.36 36 bad debt provision separately Accounts with single significant 5,292 amount and bad 5,292,4 50.12 5,292,4 100.00 50.95 5,292,4 ,435. 100.00% debts provision 35.32 % 35.32 % % 35.32 32 accrued individually 10,38 10,293, 100.00 10,293, 100.00 10,386, Total 6,849 424.29 % 424.29 % 849.68 .68 Account receivable with major single amount and withdrawal bad debt provision single at period-end: √ Applicable □ Not applicable In RMB Account receivable (by Closing balance unit) Accounts receivable Bad debt reserve Provision ratio Provision reason TCL ACE ELECTRIC APPLIANCE 1,325,431.75 1,325,431.75 100.00% Un-recyclable (HUIZHOU) CO., LTD. SKYWORTH Multimedia (Shenzhen) 579,343.89 579,343.89 100.00% Un-recyclable Co., Ltd. Hong Kong Haowei 1,870,887.18 1,870,887.18 100.00% Un-recyclable Industry Co. Ltd. Qingdao Haier Parts 1,225,326.15 1,225,326.15 100.00% Un-recyclable Procurement Co., Ltd. Total 5,000,988.97 5,000,988.97 -- -- Account receivable with bad debt provision withdrawal by method of account age in portfolio: □ Applicable √ Not applicable In combination, withdrawal proportion of bad debt provision based on balance proportion for account receivable: □ Applicable √ Not applicable In combination, withdrawal proportion of bad debt provision based on other methods for account receivable: Accounts with single significant amount and bad debts provision accrued individually at period-end Debtor Book balance Bad debt Accrual ratio Reasons 121 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Shenzhen Huixin Video Technology 381,168.96 381,168.96 100.00 Un-recyclable Co., Ltd. Shenzhen Wandelai Digital 351,813.70 351,813.70 100.00 Un-recyclable Technology Co., Ltd. Shenzhen Dalong Electronic Co., Ltd. 344,700.00 344,700.00 100.00 Un-recyclable Shenzhen Keya Electronic Co., Ltd. 332,337.76 332,337.76 100.00 Un-recyclable Shenzhen Qunping Electronic Co., 304,542.95 304,542.95 100.00 Un-recyclable Ltd. China Galaxy Electronics (Hong 288,261.17 288,261.17 100.00 Un-recyclable Kong) Co., Ltd. Dongguan Weite Electronic Co., Ltd. 274,399.80 274,399.80 100.00 Un-recyclable Hong Kong New Century Electronics 207,409.40 207,409.40 100.00 Un-recyclable Co., Ltd. Shenyang Beitai Electronic Co., Ltd. 203,304.02 203,304.02 100.00 Un-recyclable Beijing Xinfang Weiye Technology 193,000.00 193,000.00 100.00 Un-recyclable Co., Ltd. TCL Electronics (Hong Kong) Co., 145,087.14 145,087.14 100.00 Un-recyclable Ltd. Huizhou TCL Xinte Electronics Co., 142,707.14 142,707.14 100.00 Un-recyclable Ltd. SkyWorth – RGB Electronic Co., Ltd. 133,485.83 133,485.83 100.00 Un-recyclable Other 1,990,217.45 1,990,217.45 100.00 Un-recyclable Total 5,292,435.32 5,292,435.32 —— —— (2)Top five receivables collected by arrears party at ending balance Company Closing balance Ratio in total account Balance of bad debt receivable (%) provision Hong Kong Haowei Industry Co. Ltd. 1,870,887.18 18.18 1,870,887.18 TCL ACE ELECTRIC APPLIANCE 1,325,431.75 12.88 1,325,431.75 (HUIZHOU) CO., LTD. Qingdao Haier Parts Procurement Co., 1,225,326.15 11.90 1,225,326.15 Ltd. SKYWORTH Multimedia (Shenzhen) 579,343.89 5.63 579,343.89 Co., Ltd. Shenzhen Huixin Video Technology 381,168.96 3.70 381,168.96 Co., Ltd. Total 5,382,157.93 52.29 5,382,157.93 122 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 2. Other accounts receivable (1) Category of other account receivable In RMB Closing balance Opening balance Bad debt Book balance Book balance Bad debt reserves Category reserves Book Book Amoun Amoun Accrua value Amo Accrual value Ratio Ratio Amount t t l ratio unt ratio Other account receivable with single significant 11,28 11,281, 11,281, 100.00 11,281, amount and 9.17% 0.00 1,461 9.48% 100.00% 0.00 461.86 461.86 % 461.86 withdrawal bad .86 debt provision separately Other account receivable with bad 103,97 103,87 100,0 84.54 102,10 84.02 102,100 99,922,1 debt provision 4,567.0 0.10% 2,467.0 24,24 0.10% % 0.00 % .00 43.84 accrual by 2 2 3.84 portfolio Other account receivable with single minor 7,736 7,736,7 7,736,7 100.00 7,736,7 amount but 6.29% 0.00 ,789. 6.50% 100.00% 0.00 89.76 89.76 % 89.76 withdrawal single 76 item bad debt provision 122,99 103,87 119,0 100.00 19,120, 100.00 19,120, 99,922,1 Total 2,818.6 2,467.0 42,49 % 351.62 % 351.62 43.84 4 2 5.46 Other account receivable with major single amount and withdrawal bad debt provision single at period-end: √ Applicable □ Not applicable In RMB Closing balance Other account Other account receivable (units) Bad debt provision Accrual ratio Accrual reason receivable Shenzhen Jifang 1,071,160.00 1,071,160.00 100.00% Un-recyclable Investment Co., Ltd. 123 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Huafa Lease 4,558,859.15 4,558,859.15 100.00% Un-recyclable Portman 4,021,734.22 4,021,734.22 100.00% Un-recyclable Zhao Baomin 553,901.68 553,901.68 100.00% Un-recyclable Traffic accident 555,785.81 555,785.81 100.00% Un-recyclable compensation Hebei Botou Court 520,021.00 520,021.00 100.00% Un-recyclable Total 11,281,461.86 11,281,461.86 -- -- Other account receivable with bad debt provision withdrawal by method of account age in portfolio: √ Applicable □ Not applicable In RMB Closing balance Account age Other receivable Bad debt reserves Accrual ratio Sub-item of within one year Subtotal of within one year 101,967,567.02 1-2 year 2,000,000.00 100,000.00 5.00% Over 3 years 7,000.00 2,100.00 30.00% Total 103,974,567.02 102,100.00 Explanation on portfolio basis: Nil In combination, withdrawal proportion of bad debt provision based on balance proportion for other account receivable: □ Applicable √ Not applicable In combination, withdrawal proportion of bad debt provision based on other methods for other account receivable: √ Applicable □ Not applicable Other account receivable with single minor amount but withdrawal single item bad debt provision at period-end Debtor Book balance Bad debt Accrual ratio (%) Reasons Electricity fee in Gongming 489,214.70 489,214.70 100.00 Un-recyclable canteen Jiantao (Fogang) Laminates Co., 465,528.10 465,528.10 100.00 Un-recyclable Ltd. Labor union 332,402.55 332,402.55 100.00 Un-recyclable Lu Wei 290,000.00 290,000.00 100.00 Un-recyclable 4/F hotel Dai Qiangbo 194,569.00 194,569.00 100.00 Un-recyclable Chuangjing 192,794.00 192,794.00 100.00 Un-recyclable Shenzhen Mingli Co., Ltd. 170,394.84 170,394.84 100.00 Un-recyclable Other Units 5,601,886.57 5,601,886.57 100.00 Un-recyclable Total 7,736,789.76 7,736,789.76 —— —— 124 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 (2) Other receivables by nature In RMB Nature Ending book balance Opening book balance Margin and deposit 720,065.04 720,065.04 Borrow money 1,475,463.06 2,013,402.14 Intercourse funds 111,709,202.54 110,451,250.82 Rent income 9,088,088.00 5,857,777.46 Total 122,992,818.64 119,042,495.46 (3) Top 5 other receivables collected by arrears party at ending balance In RMB Proportion in total Ending balance of Company Nature Closing balance Account age other receivables bad debt provision at year-end Hengfa Technology Intercourse funds 94,141,963.46 Within one year 76.54% Shenzhen Jifang Investment Co., Lease receivable 7,949,760.00 Within one year 6.46% 1,071,160.00 Ltd. Huafa Lease Intercourse funds 4,558,859.15 Over 3 years 3.71% 4,558,859.15 Portman Lease receivable 4,021,734.22 Over 3 years 3.27% 4,021,734.22 Wuwu Branch of Shenzhen Dachong Premium for lease 641,266.64 Within one year 0.52% Industrial Co., Ltd. Total -- 111,313,583.47 -- 90.50% 9,651,753.37 3. Long-term equity investment In RMB 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 187,208,900.00 600,000.00 186,608,900.00 187,208,900.00 600,000.00 186,608,900.00 125 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 (1) Investment for subsidiary In RMB Decrease Ending balance The invested Opening Increase during Closing Impairment during this of impairment entity balance the period balance accrual period provision Huafa Lease 600,000.00 600,000.00 600,000.00 Huafa Property 1,000,000.00 1,000,000.00 Hengfa 183,608,900.0 183,608,900.0 Technology 0 0 Huafa Hengtian 1,000,000.00 1,000,000.00 Huafa Hengtai 1,000,000.00 1,000,000.00 187,208,900.0 187,208,900.0 Total 600,000.00 0 0 4. Operating income and cost In RMB Current Period Last Period Item Income Cost Income Cost Other business 16,961,088.74 2,510,518.82 19,368,319.99 2,104,257.94 Total 16,961,088.74 2,510,518.82 19,368,319.99 2,104,257.94 Other explanation: Nil XIII. Supplementary Information 1. Current non-recurring gains/losses √ Applicable □ Not applicable In RMB Item Amount Note Gains/losses from the disposal of -105,779.36 non-current asset Governmental subsidy reckoned into current gains/losses (not including the subsidy enjoyed in quota or ration 771,800.00 according to national standards, which are closely relevant to enterprise’s business) 126 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Profit and loss of assets delegation on 245,679.10 others’ investment or management Other non-operating income and expenditure except for the aforementioned -56,944.69 items Less: impact on income tax 115,088.47 Total 739,666.58 -- Concerning the extraordinary profit (gain)/loss defined by Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, and the items defined as recurring profit (gain)/loss according to the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, explain reasons □ Applicable √ Not applicable 2. REO and earnings per share Earnings per share Profits during report period Weighted average ROE Basic EPS Diluted EPS (RMB/Share) (RMB/Share) Net profits belong to common stock stockholders of the 0.87% 0.0099 0.0099 Company Net profits belong to common stock stockholders of the 0.64% 0.0073 0.0073 Company after deducting nonrecurring gains and losses 127 深圳中恒华发股份有限公司 2018 年半年度报告全文英文 Section XI. Documents available for reference I. Text of the Semi-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. 128