ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 SHENZHEN SPECIAL ECONOMIC ZONE REAL ESTATE & PROPERTIES (GROUP) CO., LTD. INTERIM REPORT 2018 2018-066 August 2018 1 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Part I Important Notes, Table of Contents and Definitions The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors, supervisors and senior management of ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee the factuality, accuracy and completeness of the contents of this Report and its summary, and shall be jointly and severally liable for any misrepresentations, misleading statements or material omissions therein. Zhou Jianguo, chairman of the Company’s Board, Chen Maozheng, the Company’s General Manager, Tang Xiaoping, the Company’s head for financial affairs, and Qiao Yanjun, head of the Company’s financial department (equivalent to financial manager) hereby guarantee that the Financial Statements carried in this Report are factual, accurate and complete. All the Company’s directors have attended the Board meeting for the review of this Report and its summary. The Company discusses the “risks facing the Company and countermeasures” under the same heading in item X under “Part IV Operating Performance Discussion and Analysis” of this Report. The Company has no interim dividend plan, either in the form of cash or stock. This Report and its summary have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese versions shall prevail. 2 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Table of Contents Interim Report 2018........................................................................................................................... 1 Part I Important Notes, Table of Contents and Definitions ........................................................... 2 Part II Corporate Information and Key Financial Information ................................................... 5 Part III Business Summary ............................................................................................................... 8 Part IV Operating Performance Discussion and Analysis ........................................................... 10 Part V Significant Events ................................................................................................................ 22 Part VI Share Changes and Shareholder Information ................................................................. 29 Part VII Preferred Shares ............................................................................................................... 34 Part VIII Directors, Supervisors and Senior Management.......................................................... 35 Part IX Corporate Bonds ................................................................................................................ 36 Part X Financial Report .................................................................................................................. 37 Part XI Documents Available for Reference ................................................................................ 131 3 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Definitions Term Definition ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. “SPG”, the “Company”, the “Group” or “we” and its consolidated subsidiaries, except where the context otherwise requires Holding Company Shenzhen Investment Holdings Co., Ltd. The “Reporting Period” or “Current Period” The period from 1 January 2018 to 30 June 2018 Expressed in the Chinese currency of Renminbi, expressed in ten thousand RMB, RMB’0,000 Renminbi 4 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Part II Corporate Information and Key Financial Information I Corporate Information Stock name SPG, SPG-B Stock code 000029, 200029 Changed stock name (if any) --- Stock exchange for stock Shenzhen Stock Exchange listing Company name in Chinese 深圳经济特区房地产(集团)股份有限公司 Abbr. (if any) 深房集团 Company name in English (if ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. any) Abbr. (if any) SPG Legal representative Zhou Jianguo II Contact Information Board Secretary Securities Representative Name Tang Xiaoping Luo Yi 47/F, SPG Plaza, Renmin South Road, 47/F, SPG Plaza, Renmin South Road, Address Shenzhen, Guangdong, P.R.China Shenzhen, Guangdong, P.R.China Tel. (86 755)82293000-4638 (86 755)82293000-4715 Fax (86 755)82294024 (86 755)82294024 Email address tangxiaoping0086@126.com spg@163.net III Other Information 1. Contact Information of the Company Indicate by tick mark whether any change occurred to the registered address, office address and their zip codes, website address and email address of the Company in the Reporting Period. □ Applicable √ Not applicable No change occurred to the said information in the Reporting Period, which can be found in the 2017 Annual Report. 2. Media for Information Disclosure and Place where this Report is Kept Indicate by tick mark whether any change occurred to the information disclosure media and the place for keeping the Company’s 5 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 periodic reports in the Reporting Period. □ Applicable √ Not applicable The newspapers designated by the Company for information disclosure, the website designated by the CSRC for disclosing the Company’s periodic reports and the place for keeping such reports did not change in the Reporting Period. The said information can be found in the 2017 Annual Report. IV Key Financial Information Indicate by tick mark whether there is any retrospectively restated datum in the table below. □ Yes √ No H1 2018 H1 2017 Change (%) Operating revenue (RMB) 1,317,541,631.35 731,306,982.03 80.16% Net profit attributable to the listed company’s shareholders 329,066,084.53 137,226,601.84 139.80% (RMB) Net profit attributable to the listed company’s shareholders before 329,143,873.10 137,080,046.11 140.11% exceptional items (RMB) Net cash generated from/used in operating activities (RMB) 594,728,129.67 -97,700,697.19 708.72% Basic earnings per share (RMB/share) 0.3253 0.1356 139.90% Diluted earnings per share (RMB/share) 0.3253 0.1356 139.90% Weighted average return on equity (%) 11.00% 5.06% 5.94% 30 June 2018 31 December 2017 Change (%) Total assets (RMB) 4,516,278,981.14 3,989,263,981.96 13.21% Equity attributable to the listed company’s shareholders (RMB) 3,156,821,917.54 2,828,242,120.98 11.62% V Accounting Data Differences under Chinese Accounting Standards (CAS) and International Financial Reporting Standards (IFRS) and Foreign Accounting Standards 1. Net Profit and Equiy Differences under CAS and IFRS √ Applicable □ Not applicable Unit: RMB Net profit attributable to the listed company’s Equity attributable to the listed company’s shareholders shareholders H1 2018 H1 2017 Ending amount Beginning amount Under CAS 329,066,084.53 137,226,601.84 3,156,821,917.54 2,828,242,120.98 Adjustments as per IFRS Under IFRS 329,066,084.53 137,226,601.84 3,156,821,917.54 2,828,242,120.98 6 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 2. Net Profit and Equity Differences under CAS and Foreign Accounting Standards □ Applicable √ Not applicable No such differences for the Reporting Period. 3. Reasons for Accounting Data Differences Above □ Applicable √ Not applicable XI Exceptional Gains and Losses √ Applicable □ Not applicable Unit: RMB Item Reporting Period Note Gain or loss on disposal of non-current assets (inclusive of -19,011.53 impairment allowance write-offs) Non-operating income and expense other than above -84,706.57 Less: Income tax effects -25,929.53 Total -77,788.57 -- Explanation of why the Company classifies a gain/loss item as exceptional according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/Loss Items, or reclassifies any exceptional item listed in the said explanatory announcement as recurrent: □ Applicable √ Not applicable No such cases for the Reporting Period. 7 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Part III Business Summary I Core Business Scope of the Company in Reporting Period Is the Company subject to any disclosure requirements for special industries? No. Focused on residential property development, the Company has been seeing increasing brand effects with great effort spent on project quality and progress, as well as on premium projects. The Company primarily develops and sells residential properties in two cities, Shenzhen and Shantou. The Cuilinyuan project and the Chuanqi Jingyuan project (formerly known as the “Tianju Jingtian Apartment Block” project), both located in Shenzhen, as well as the Shantou-based Tianyuewan Phase I project have finished filing of completion and acceptance. Also, the development progress of the Chuanqi Donghu Mingyuan project is in line with the schedule, with the main frame of its Tower A completed to the 27th floor and Tower B roofed. As for sales, the Chuanqishan project has been almost sold out; the Chuanqi Shanglin project has been sold out; approximately 70% of the Cuilinyuan project has been sold; and the Tianyuewan Phase I project has sold about 20% of its residential units. II Material Changes in Major Assets 1. Material Changes in Major Assets Major assets Reason for material changes Equity assets No material change Fixed assets No material change Ending amount (as at 30 June 2018) down by RMB55,200.00 (or 100%) from beginning Intangible assets amount (as at 31 December 2017), primarily driven by end of Kingdee software’s amortization Construction in progress No material change Ending amount down by RMB5,921,287.00 (or 100%) from beginning amount, primarily Notes receivable driven by payment collection by a curtain wall engineering branch of subsidiary Shenzhen Zhentong Engineering Co., Ltd. (“Zhentong Engineering”) Ending amount up by RMB199,022,291.19 (or 145.17%) from beginning amount, Accounts receivable primarily driven by house mortgage payments which bank has issued commitment letter for but has not yet paid Ending amount down by RMB5,088,009.96 (or 84.23%) from beginning amount, Prepayments primarily driven by decrease in prepayments by subsidiary Zhentong Engineering for 8 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 engineering materials Ending amount up by RMB592,844,561.90 (or 5214.32%) from beginning amount, Other current assets primarily driven by a 600 million half-year structured bank deposit Ending amount down by RMB52,833,113.08 (or 50.70%) from beginning amount, Short-term borrowings primarily driven by repayment of credit borrowing by Zhentong Engineering and decrease in its curtain wall engineering branch’s secured borrowing Ending amount up by RMB117,690,793.37 (or 136.61%) from beginning amount, Taxes payable primarily driven by provisions for turnover tax and corporate income tax as a result of sales growth in H1 2018 Ending amount up by RMB259,023,243.84 (or 69.08%) from beginning amount, Other payables primarily driven by accrued value added tax on land made on property sales carried forward to Reporting Period Ending amount down by RMB46,226,800.00 (or 72.23%) from beginning amount, Current portion of non-current liabilities primarily driven by repayment of mature bank loans Ending amount down by RMB64,216,500.00 (or 78.31%) from beginning amount, Long-term borrowings primarily driven by paying back bank loans ahead of schedule 2. Major Assets Overseas □ Applicable √ Not applicable III Core Competitiveness Analysis Is the Company subject to any disclosure requirements for special industries? No. As one of the earliest real estate listed companies in Shenzhen, the Company has a history over 30 years in real estate development in Shenzhen and rich experience in the main business of real estate development. In recent years, thanks to the experience learned from the Shenzhen-located Chuanqishan project, Chuanqi Shanglin project, Cuilinyuan project, Chuanqi Jingyuan project and Chuanqi Donghu Mingyuan project, as well as from the Shantou-located projects, the Company accelerates the establishment of a modern enterprise HR management system and works hard in building a professional and high-quality development team. It also keeps improving the management mechanism and processes for project development. As a result, the professionalism and management capability of the Company have improved significantly; planning, construction, cost control, marketing capability and brand image have been effectively enhanced; and the operational capability in the main business of real estate keeps increasing, along with the core competitiveness. As of the Reporting Period (inclusive), the Company has been honored jointly by the Guangdong Provincial Enterprise Confederation and the Guangdong Provincial Association of Entrepreneurs as a “Most Honest Enterprise in Guangdong Province” for seven years in a row. 9 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Part IV Operating Performance Discussion and Analysis I Overview (I) Operating Results of Reporting Period 2018 marks the first year for the nationwide practice of the Spirit of the 19th National Congress of the Communist Party of China, an important year for the Company’s 13th five-year plan for development, as well as a key year for the Company’s major assets restructuring programme. The focus of China’s economic growth is shifting from high speed to high quality. In the first half of the year, great international economic uncertainty, stricter financial regulation and continued domestic government controls weighed on the real estate sector. Under such circumstances, in addition to carrying forward its major assets restructuring programme, the Company adhered to the thinking of “Carefully Draw up Development Strategies, Particularly Focus on Core Business, Strictly Control Costs and Continuously Improve Management Capability” and put greater efforts into promoting project construction and marketing, so as to achieve stable development. In the Reporting Period, the Company made a concerted effort to overcome difficulties and steadily promote project construction. As a result, for this period, the Company achieved operating revenue of RMB1,318 million, up 80.16% compared to the same period of last year; profit before taxation of RMB440 million, representing a year-on-year growth of 138.76%; and net profit attributable to the listed company’s shareholders of RMB329 million, increasing 139.80% from a year earlier. As at 30 June 2018, net assets attributable to the listed company’s shareholders were equal to RMB3,157 million, an 11.62% rise compared to the end of last year. 1. Focused on residential property development, the Company has been building a professional and high-quality development team, as well as improving the management mechanism and processes for project development. As a result, the operational capability in the core business of real estate keeps increasing, along with the core competitiveness. During the Reporting Period, the key projects of the Company were mostly located in Shenzhen and Shantou. The Company paid close attention to product quality and progress, and adjusted marketing strategies in a timely manner. As a result, project development and sales progress basically met expectations, and the core business was in good order and health. 2. The Company’s main real estate projects under construction and available for sale during the Reporting Period included the Shenzhen-based Cuilinyuan, Chuanqi Jingyuan, and Chuanqi Donghu Mingyuan projects, as well as the Shantou-located Tianyuewan project, etc., with details as follows: The Floor area Expected total Accumulated Locati Compa Site area Completed Project Usage Status with plot investment investment on ny’s (㎡) floor area(㎡) ratio (㎡) (RMB’0,000) (RMB’0,000) stake Cuilinyuan Shenzh Residen Available 100% 16,424.29 60,450 60,450 57,000 47,777 10 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 en tial for sale Chuanqi Shenzh Rental Under 49% 4,243.34 42,412 42,412 24,865 17,904 Jingyuan en construct ion Tianyuewan Shanto Residen Available 100% 31,167.50 153,578.51 153,578.51 79,801 81,047 Phase I u tial for sale Chuanqi Shenzh Residen Under 100% 5,889.7 34,072.60 0 51,000 22,621 Donghu en tial construct Mingyuan ion 3. Land bank for future development by the end of the Reporting Period: Project Location Land area(㎡) Floor area with plot ratio (㎡) Tianyuewan Phase II Shantou 33,362 127,661 Xinfeng Building Shantou 5,920 26,640 Total 39,282 154,301 Note: The Company's real estate projects do not involve primary land development. (II) Operation Review for H1 2018 1. The Company’s fundamentals remain positive with a reasonable debt structure and a healthy financial condition. During the Reporting Period, macro-economy was facing downward pressure, and real estate control continued. The Company's real estate development and sales mainly concentrate in Shenzhen and Shantou. The sales revenue and profits in the region of Shenzhen, where overall sales are good, accounted for more than 90%. Thus, the future destocking pressure mainly lies in the Shantou region. Financing of the Company: (1) Borrowings secured by accounts receivable Item Ending balance (RMB’0,000) Secured borrowings 5,137.45 As at 30 June 2018, Zhentong Engineering had RMB51.3745 million of accounts-receivable-secured short-term borrowings. (2) Bank borrowings Including: Total amount Including: amount due Lender Start date End date Interest rate long-term of borrowing within one year borrowing Chinese 7 May 2015 6 May 2020 110% of 3,555.67 1,778.35 1,777.32 Merchantile Bank, benchmark Shenzhen branch interest rate Total 3,555.67 1,778.35 1,777.32 11 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 2. The major property developments proceed smoothly. The Company has further improved the development and management system, attached importance to construction safety and tightened cost control. During the Reporting Period, the overall progress of the Company’s property developments was in line with the schedule. (1) The Chuanqi Shanglin project was sold out, and the Cuilinyuan project has finished filing of completion and acceptance, as well as move-in formalities. (2) The Chuanqi Jingyuan project (formerly known as the “Tianju Jingtian Apartment Block” project) has finished filing of completion, is currently being fully furbished and is expected to be ready for sale by the end of this year. (3) The Chuanqi Donghu Mingyuan project has the main frame of its Tower A completed to the 27th floor and Tower B roofed. The project is expected to be ready for sale by the end of this year. (4) The Shantou-based Tianyuewan Phase I project has finished filing of completion, with homebuyers moving in and the road to the north of the project expected to be completed by the local government at the end of this year. (5) Operating divisions, product categories or operating segments that accounted for more than 10% of the Company’s operating revenue or operation profit: Unit: RMB’0,000 YoY change in Operating Gross profit YoY change in cost YoY change in gross Cost of sales operating revenue revenue margin (%) of sales (%) profit margin (%) (%) By operating division Real estate 104,628 30,282 71.06% 164.76% 52.95% 21.16% Engineering 15,064 14,409 4.35% -34.52% -35.54% 1.51% construction By product category Residential 104,628 30,282 71.06% 179.84% 57.58% 22.46% units Shops -100.00% -100.00% -72.69% By operating segment Guangdong 127,343 49,636 61.02% 80.64% 5.90% 27.51% province 3. Real estate sales basically met expectations. The Company kept an eye on policy and market dynamics, and adjusted marketing strategies based on regulatory policies and market changes. Project sales basically met the expectations. The Chuanqishan project has been almost sold out; the Chuanqi Shanglin project has been sold out; approximately 70% of the Cuilinyuan project has been sold; and the Tianyuewan Phase I project has sold about 20% of its residential units. (1) Sales of major real estate projects carried forward to the Reporting Period: Unit: RMB’0,000 Location Operating Cost of sales Gross profit margin Gross profit margin 12 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 revenue (%) Cuilinyuan Shenzhen 102,558 28,856 73,702 71.86 Tianyuewan Phase Shenzhen 1,224 978 246 20.10 I Yuejing Dongfang Shantou 465 288 177 38.06 Jinyedao Shantou 381 212 169 44.36 Total 104,628 30,334 74,294 71.01 (2) Real Estate sales during the Reporting Period: Unit: square meters Floor area The Area actually available for Settled area in No. Project Open time Company’s Location sold in Current sale at Current Period stake Period year-beginning 1 Cuilinyuan June 2017 100% Shenzhen 37,148 21,113 30,475 2 Tianyuewan October 2016 100% Shantou 137,508 9,779 2,232 Phase I 3 Yuejing December 2013 100% Shantou 980 51 621 Dongfang 4 Jinyedao July 1996 100% Shantou 2,794 26 427 Total 178,430 30,969 33,755 4. Real estate rental of the Company is stable with steadily rising rental prices as well as good occupancy rates and rent collection rates. The major properties for rental are as follows: Unit: square meters Occupan Land Location Name of building Rentable area Rented area Usage The Company’s stake cy rate ownership Shenzhen Real Estate 3,413.88 3,413.88 100% Commerci The Company 100% Mansion al Shenzhen North Block of 4,819.71 4819.71 100% Commerci The Company 100% Guoshang al Mansion Shenzhen Petrel Building 22,475.47 22,475.47 100% Commerci The Company 100% al Shenzhen SPG Plaza 61,005.94 52348.14 89.3% Office The Company 100% SPG Plaza 19,913.30 19913.30 100% Commerci The Company 100% Podium al 13 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Shenzhen Wenjin Garden 3,531.60 3,531.60 100% Commerci The Company 100% al Total 115,159.90 106,502.10 5. The assets restructuring programme has been carried forward. The Company’s major assets restructuring plan is subject to further communications and improvements with the regulators. Due diligence material update, additional audit and assessment, etc. are underway. 6. The talent team has been enhanced. With great importance attached to building a professional team, the Company has promoted certain young talent as middle management and brought in a group of professionals and university graduates. These moves have ensured a stable talent team during the assets restructuring. II Analysis of Core Businesses See “I Overview” above. Year-on-year changes in key financial data: Unit: RMB H1 2018 H1 2017 Change (%) Main reason for change Operating revenue 1,317,541,631.35 731,306,982.03 80.16% Increase in property sales carryforwards Cost of sales 540,417,491.41 494,949,797.89 9.19% Increase in property sales carryforwards Increases in property sales commissions Selling expense 37,167,133.77 6,832,803.76 443.95% and advertising expense Staff re-deploy on completion of Administrative expense 31,736,200.85 24,719,238.69 28.39% Cuilinyuan project Decrease in interest expense on borrowings Finance costs -8,611,669.10 -2,635,571.58 -226.75% and increase in interest income from term deposits Income tax expense 111,169,717.28 47,173,139.72 135.66% A rise in profits Net cash generated Increase in cash proceeds from sale of from/used in operating 594,728,129.67 -97,700,697.19 708.72% commodities and rendering of services activities Net cash generated 600 million half-year structured bank from/used in investing -599,344,168.71 424,910.51 -141,151.86% deposit activities Net cash generated from/used in financing -133,528,938.06 -4,191,437.88 -3,085.75% Increase in cash repayment of borrowings activities Net increase in cash and Joint effects of cash proceeds from sale of -138,128,390.84 -101,713,852.56 -35.80% cash equivalents commodities and rendering of services, 14 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 and structured bank deposit Provisions for value added tax and surtax, as well as accrued value added tax on land Taxes and surtaxes 277,340,490.76 23,913,311.23 1,059.77% made on property sales carried forward to Reporting Period Major changes in the profit structure or sources of the Company in the Reporting Period: □ Applicable √ Not applicable No such cases in the Reporting Period. Breakdown of main business: Unit: RMB Year-on-year Year-on-year Year-on-year Operating increase/decrease increase/decrease Cost of sales Gross profit rate increase/decrease revenue of operating of gross profit of cost of sales revenue rate By business segment Real estate 1,046,284,161.25 302,815,653.15 71.06% 164.76% 52.95% 21.16% Construction 150,642,530.35 144,088,214.48 4.35% -34.52% -35.54% 1.51% service Rental service 34,955,530.61 16,019,002.54 54.17% -12.24% 16.35% -11.26% Property management 75,192,293.43 68,281,932.01 9.19% 8.47% 5.60% 2.47% service Other 13,770,810.85 10,240,743.17 25.63% 2.32% 3.07% -0.54% Subtotal 1,320,845,326.49 541,445,545.35 59.01% 76.61% 6.19% 27.19% Less: offset internal -3,303,695.14 -1,028,053.94 68.88% -80.05% -93.12% 59.12% transactions Total 1,317,541,631.35 540,417,491.41 58.98% 80.16% 9.19% 26.66% By product Housing units 1,046,284,161.25 302,815,653.15 71.06% 179.84% 57.58% 22.46% Shops -100.00% -100.00% -72.69% Other products 274,561,165.24 238,629,892.20 13.09% -22.15% -23.49% 1.52% Subtotal 1,320,845,326.49 541,445,545.35 59.01% 76.61% 6.19% 27.19% Less: offset internal -3,303,695.14 -1,028,053.94 68.88% -80.05% -93.12% 59.12% transactions Total 1,317,541,631.35 540,417,491.41 58.98% 80.16% 9.19% 26.66% By geographic segment 15 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Guangdong 1,273,425,789.87 496,360,343.04 61.02% 80.64% 5.90% 27.51% Province Other regions in 47,131,738.79 45,085,202.31 4.34% 10.61% 9.43% 1.04% China Overseas 287,797.83 100.00% -5.36% 0.00% Subtotal 1,320,845,326.49 541,445,545.35 59.01% 76.61% 6.19% 27.19% Less: offset internal -3,303,695.14 -1,028,053.94 68.88% -80.05% -93.12% 59.12% transactions Total 1,317,541,631.35 540,417,491.41 58.98% 80.16% 9.19% 26.66% III Non-Core Business Analysis □ Applicable √ Not applicable IV Analysis of Assets and Liabilities 1. Significant Changes in Asset Composition Unit: RMB End of Reporting Period End of the same period of last Increase/decrea Proportion to Proportion to Notes to significant changes Amount Amount se in proportion total assets total assets 1,164,343,471. Monetary funds 1,068,660,665.62 23.66% 30.68% -7.02% 84 Accounts 336,114,447.24 7.44% 183,877,575.95 4.84% 2.60% receivable 1,765,951,891. Caused by carry-over of real Inventories 1,677,853,797.04 37.15% 46.53% -9.38% 14 estate Caused by the transfer of Investment 635,361,225.57 14.07% 405,102,784.35 10.67% 3.40% inventories to investment property property Long-term equity 29,888,661.65 0.66% 37,447,267.61 0.99% -0.33% investments Fixed assets 35,921,711.70 0.80% 42,507,617.00 1.12% -0.32% Short-term Caused by repayment of 51,374,540.56 1.14% 143,560,032.01 3.78% -2.64% borrowings borrowings Long-term Caused by repayment of 17,783,500.00 0.39% 114,000,000.00 3.00% -2.61% borrowings borrowings 16 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Caused by the purchase of Other current 604,214,106.70 13.38% 14,568,268.07 0.38% 13.00% bank structured deposits of assets RMB600,000,000 2. Assets and Liabilities Measured at Fair Value □ Applicable √ Not applicable 3. Assets with Restricted Rights as of the End of the Reporting Period Item Ending carrying value Reason for restriction Accounts receivable 51,374,540.56 As pledges for short-term borrowings Investment property (SPG Plaza) 22,972,285.00 As mortgages for long-term borrowings Total 74,346,825.56 -- V Investment Analysis 1. Total Investments Made □ Applicable √ Not applicable 2. Significant Equity Investments Made in the Reporting Period □ Applicable √ Not applicable 3. Significant Non-equity Investments Ongoing in the Reporting Period □ Applicable √ Not applicable 4. Financial Investments (1) Securities Investments □ Applicable √ Not applicable No such cases in this Reporting Period (2) Investment in Derivative Financial Instruments □ Applicable √ Not applicable No such cases in this Reporting Period 17 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 VI Sale of Major Assets and Equity Interests 1. Sale of Major Assets □ Applicable √ Not applicable No such cases in this Reporting Period. 2. Sale of Major Equity Interests □ Applicable √ Not applicable VII Analysis on Majority-owned and Joint Stock Companies √ Applicable □ Not applicable Main subsidiaries and joint stock companies with an over 10% influence on the Company’s net profit Unit: RMB Relationship Main Company Registered Operating Operating with the business Total assets Net assets Net profit name capital revenue profit Company scope Shenzhen SPG Development 30,000,000.0 1,289,181,11 442,215,293. 1,025,584,99 435,633,32 Longgang Subsidiary 326,764,331.46 of real estate 0 4.06 92 5.24 4.28 Development Co., Ltd. Shantou SEZ, Wellam FTY, Development 91,226,120.4 251,802,753. 147,307,510. -805,739.6 Subsidiary 8,461,588.82 -619,301.86 Building of real estate 4 52 14 1 Development , Co., Ltd. Shantou Huafeng Real Development 30,000,000.0 900,260,407. 12,237,577.1 -21,879,04 Estate Subsidiary 59,779.45 -16,409,085.97 of real estate 0 77 9 5.02 Development Co., Ltd. Great Wall 18,637,645.4 -83,452,473. Estate Co., Subsidiary Lease 2,051,146.00 287,797.83 -68,120.84 -68,120.84 1 92 Inc. (U.S.) Shenzhen Installation Zhentong 10,000,000.0 321,621,992. 24,882,772.6 151,004,540. 1,532,801. Subsidiary and 1,249,956.42 Engineering 0 58 1 11 76 construction Co., Ltd. 18 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Shenzhen Property Property 106,039,411. 25,201,866.9 75,911,564.4 3,226,848. Subsidiary 7,250,000.00 2,391,888.45 Management management 33 1 3 50 Co., Ltd. Shenzhen 30,000,000.0 47,676,213.1 41,550,137.6 12,700,962.7 Petrel Hotel Subsidiary Hotel Service 904,354.11 658,792.03 0 1 2 3 Co., Ltd. Shenzhen Huazhan Construction Construction Subsidiary 8,000,000.00 9,248,413.58 8,750,164.47 1,910,711.35 156,774.43 137,177.63 supervision Supervision Co., Ltd. Subsidiaries obtained or disposed in this Reporting Period □ Applicable √ Not applicable Information on main majority-owned and joint stock companies 1. Except the Company, the subordinate subsidiaries engaged in real estate development mainly include: (1) Shenzhen SPG Longgang Development Co., Ltd., Shantou SEZ, Wellam FTY, Building Development, Co., Ltd. and Shantou Huafeng Real Estate Development Co., Ltd. The Cuilinyuan (south district of Shanglin Garden Project) developed by Longgang Company began to presell in June 2017. Until now, it has been accumulatively sold 70%. It was completed in May 2018. During the Reporting Period, it has been carried forward RMB1025.58 million, accounting for 78.84% of the Company’s operating revenue. The net profit generated from it was RMB326.76 million, accounting for 99.30% of the Company’s net profit. (2) There is only little remaining buildings for Jinye Island and Yuejing Dongfang Project developed by Shantou Wellam Company. The carried forward sales of the Yuejing Dongfang Project was of RMB4.65 million in the Reporting Period with overall carried forward rate of sales 96%, and the carried forward sales of Jinye Island was of RMB3.81 million in the Reporting Period with overall carried forward rate of sales 98%. (3) Shantou Huafeng Company took the responsibility of developing the Tianyuewan Project (namely the Shantou Jingzaiwan Project), of which the Phase I was opened to sale in October 2016, and it was completed in December 2017 with accumulated sales of 21%. The carried forward sales of it in the Reporting Period was of RMB12.24 million. The net profit generated from it was of RMB-16.41 million which was mainly from interest expense. 2. Shenzhen Zhentong Engineering Co., Ltd. was engaged in the business of building installation and maintenance with operating revenue in the Reporting Period of RMB151 million accounting for 11.46% of total operating revenue of the Company. 3. The operating revenue of Shenzhen Property Management Co., Ltd. in the Reporting Period was of RMB75.91 million accounting for 5.76% of total operating revenue of the Company. VIII Structured Entities Controlled by the Company □ Applicable √ Not applicable IX Performance Forecast for January-September 2018 Warning of possible loss or considerable year-on-year change in the accumulative net profit made during the period-beginning to the end of the next Reporting Period, as well as the reasons: 19 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 √ Applicable □ Not applicable Forecast: Considerable increase at the same direction Type of the forecast data: Interval number January-Septe January-September 2018 +/- (%) mber 2017 Forecast accumulative net 36,000 -- 40,000 14,961 Increase 140.63% -- 167.36% profit (RMB'0,000) Basic earnings per share 0.3559 -- 0.3954 0.1479 Increase 140.60% -- 167.34% (RMB/share) Notes to the forecast The sales of carry forward of the real estate of the Company increased year-on-year. X Risks Facing the Company and Countermeasures 1. Risks Facing the Company: (1) Risks from macroeconomic environment. Since this year, Chinese government has been adhering to the general principle of seeking progress while maintaining stability, implementing new development concepts, practicing the requirement of high-quality development and focusing on the supply-side structural reform. Against this background, the economy in the first half of the year maintained an overall stable trend with good momentum. However, given that the Sino-US trading dispute is still going on, and that the global economic situation remains complicated and severe, the downward pressure on the economy is difficult to relieve in a short term. (2) Risks from policy on real estate industry. Against the convening of the 19th National Congress of the Communist Party of China, the Chinese government shows a clear attitude that “Houses are for living in, not for speculating on”. The continuous implementation of real estate macro-control policy curbs people’s investment demands at a large degree, and potential customers are increasingly taking a wait-and-see attitude, which generates a certain impact on the development and sales of main business of the Company. (3) Risks from development and operation of main business. At present the Company holds limited land reserve for not increasing its land reserve for a long time, which is influenced by the major assets restructuring. Moreover, there is a lag in the sales progress of Shantou Tianyuewan Phase I. (4) Potential risks from assets restructuring. The major assets restructuring of the Company is a significant and unprecedented event with complex trading structure for involved in the Shenzhen State-owned Enterprise Reform and with large-scale assets since the underlying assets it plans to purchase are industrial leading assets. Thus, the trading of its shares has been suspended for almost two years since its start of trading on 14 September 2016. At present, matters such as the renewal of diligence materials in restructuring and supplementary audit as well as evaluation are carried out simultaneously. For the uncertainty of related events, investors are reminded of the investment risks. 2. Countermeasures Firstly, the Company will unremittingly pay attention to international and domestic macroeconomic situation and the industrial trend, and then formulate flexible coping strategies. Secondly, the Company will further strengthen its ability to develop main business, raise its management level and make efforts to reinforce the marketing so as to stabilize the fundamental of 20 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 the Company. Thirdly, the Company will increase its land reserve timely and in an appropriate way to maintain the sustainable development of the Company in the future. Fourthly, the Company will enhance the communication with regulators together with parties involved in the restructuring and make full efforts to promote the process of major assets restructuring. 21 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Part V Significant Events I Annual and Extraordinary General Meeting Convened during the Reporting Period 1. General Meeting Convened during the Reporting Period Investor Meeting Type Convened date Disclosure date Index to disclosed information participation ratio Resolutions of 2017 Annual The 2017 Annual Annual General 63.58% 26 April 2018 27 April 2018 General Meeting disclosed on General Meeting Meeting www.cninfo.com.cn Resolutions of the 1st The 1st Extraordinary Extraordinary Extraordinary General Meeting of General Meeting of 63.59% 15 May 2018 16 May 2018 General Meeting 2018 disclosed on 2018 www.cninfo.com.cn 2. Extraordinary General Meeting Convened at Request of Preference Shareholders with Resumed Voting Rights □ Applicable √ Not applicable II Interim Dividend Plan for the Reporting Period □ Applicable √ Not applicable The Company has no interim dividend plan. III Commitments of the Company’s Actual Controller, Shareholders, Related Parties and Acquirer, as well as the Company and Other Commitment Makers, Fulfilled in the Reporting Period or still Ongoing at Period-End □ Applicable √ Not applicable No such cases in the Reporting Period. IV Engagement and Disengagement of CPAs Firm Has the interim financial report been audited? □Yes √ No This interim Report is unaudited. 22 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 V Explanations Given by Board of Directors and Supervisory Committee Regarding “Modified Auditor’s Report” Issued by CPAs Firm for the Reporting Period □ Applicable √ Not applicable VI Explanations Given by Board of Directors Regarding “Modified Auditor’s Report” Issued for Last Year □ Applicable √ Not applicable VII Bankruptcy and Restructuring □ Applicable √ Not applicable No such cases in the Reporting Period. VIII Legal Matters Significant lawsuits or arbitrations: □ Applicable √ Not applicable No such cases in the Reporting Period. Other legal matters: √Applicable □ Not applicable Amount Estimated Index to Lawsuit/arbitr involved Execution of Disclosure liabilities Progress Decision and influence disclosed ation (RMB’0,0 decision date or not information 00) ① Business Tourism The applicant Company had to pay for has received the compensation RMB15.20 RMB36.62 million and million. Now the relevant interest (from Business Annual 14 September 1998 to the Tourism Report 2017 Xi’an Project payment day) to Xi’an Company has 30 March 2,100 No In execution (full text) on Lawsuit Fresh Peak Company no executable 2017 www.cninfo.c within one month after properties and om.cn the judgment entering Xi’an Joint into force. If the Business Commission on Tourism Company failed Commerce has to pay in time, it had to been refusing to pay double debt interests execute the 23 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 to Xi’an Fresh Peak ruling. It is Company for the overdue difficult to period; ② Xi’an Joint recover the rest. Commission on Commerce had jointly and severally obligation of the interests of the compensation; . ③ Business Tourism Company shall bear RMB227,500 of the acceptance fee and the security fee. IX Punishments and Rectifications □ Applicable √ Not applicable No such cases in the Reporting Period. X Credit Conditions of the Company as well as its Controlling Shareholder and Actual Controller □ Applicable √ Not applicable XI Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for Employees □ Applicable √ Not applicable No such cases in the Reporting Period. XII Significant Related Transactions 1. Related Transactions Relevant to Routine Operations □ Applicable √ Not applicable No such cases in the Reporting Period. 2. Related Transactions Regarding Purchase or Sales of Assets or Equity Interests □ Applicable √ Not applicable No such cases in the Reporting Period. 24 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 3. Related Transactions Regarding Joint Investments in Third Parties □ Applicable √ Not applicable No such cases in the Reporting Period. 4. Credits and Liabilities with Related Parties □ Applicable √ Not applicable No such cases in the Reporting Period. 5. Other Significant Related Transactions □ Applicable √ Not applicable No such cases in the Reporting Period. XIII. Particulars about the Non-operating Occupation of Funds by the Controlling Shareholder and Other Related Parties of the Company □ Applicable √ Not applicable The Company was not involved in the non-operating occupation of funds by the controlling shareholder and other related parties during the Reporting Period. XIV. Significant Contracts and Execution 1. Entrustment, Contracting and Leasing (1) Entrustment □ Applicable √ Not applicable No such cases in the Reporting Period. (2) Contracting □ Applicable √ Not applicable No such cases in the Reporting Period. (3) Leasing □ Applicable √ Not applicable 25 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 No such cases in the Reporting Period. 2. Significant Guarantees □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Other Significant Contracts √Applicable □ Not applicable Carryin Assesse Executi Name g value d value Name Index Name Base Transac on as of of the of the of the of Related to of date of Pricing tion Related the end other Signing involve involve evaluati transact Disclos disclose contrac Target evaluati principl price relation of the party of date d assets d assets ve ions or ure date d ting on (if es (RMB’ ship Reporti the (RMB’ (RMB’ agency not informa party any) 0,000) ng contract 0,000) 0,000) (if any) tion Period (if any) (if any) Announ cement on ShenZh Progres en s of Special Shenzh Using Econo en Self-ow mic Structur Branch Implem ned Zone al No of Market enting Funds Real deposit 28 May related 30 May China 60,000 - compar 60,000 No in a to Estate s ( term 2018 relation 2018 Citic ison normal Invest & of 186 ship Bank way into Propert days) Co., Structur ies Ltd al (Group Deposit ) Co., s on Ltd. www.c ninfo.c om.cn XV. Social Responsibilities 1. Significant Environment Protection Indicate by tick mark whether the Company or any of its subsidiaries is a heavily polluting business identified by the environmental 26 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 protection authorities of China No 2. Targeted Measures Taken to Help People Lift Themselves Out of Poverty (1) Plan for Targeted Measures (2) Outline of Targeted Measures in the Reporting Period (3) Effects of Targeted Measures Measurement Indicator Number/Progress unit I. General condition —— —— II. Itemized investment —— —— 1. Out of poverty by industrial development —— —— 2. Out of poverty by transferring employment —— —— 3. Out of poverty by relocating —— —— 4. Out of poverty by education —— —— 5. Out of poverty by improving health —— —— 6. Out of poverty by protecting ecological environment —— —— 7. Subsidy for the poorest —— —— 8. Social poverty alleviation —— —— 9. Other items —— —— III. Received awards(contents and rank) —— —— (4) Subsequent Targeted Measure Plans XVI. Other Significant Events √Applicable□ Not applicable Since Shenzhen Investment Holdings Co., Ltd, the controlling shareholder of the Company, is planning a significant event that involves the Company, the Company’s stock (A-stock: stock name: SPG A, stock code: 000029; B-stock: stock name: SPG B, stock code: 200029) has been suspended since the opening on 14 September 2016. On 30 September 2016, the Company disclosed the Announcement on Share Trading Suspension Due to Major Assets Restructuring (No. 2016-025), and continued the suspension due to major assets restructuring since the market opening on 30 September 2016. The Company is organizing relevant intermediaries to conduct supplementary due diligence on the parties to the restructuring of assets and trading, carry out supplementary audit and evaluation work, and update the major asset restructuring plan or report (draft) and other relevant documents. The 27 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 major assets restructuring of the Company involves in the reform of state-owned enterprises in Shenzhen with proposed purchase of large-scale assets and complex transaction structure. It is a major precedent of certain particularity in the acquisition of asset size and scope. Thus, related job requirements of the restructuring are high, and the Company still needs to communicate with regulatory authorities for further discussion, demonstration and improvement. On the specific circumstances of restructuring of the Company, please keep an eye on the Company's follow-up announcements. To ensure the smooth progress of this major asset restructuring, prevent abnormal fluctuations in the prices of its stocks and protect the rights and interests of its minority shareholders, the Company has applied to the Shenzhen Stock Exchange for continued share trading suspension for no more than 1 month as of 14 August 2018. It is respected that the major assets restructuring plan or report will be disclosed according to the requirements of the Standards for the Contents and Formats of Information Disclosure by Companies Offering Securities to the Public No. 26—Major Assets Restructuring of Listed Companies prior to 14 September 2018. During the continued suspension, the Company will keep promoting the work of this major asset restructuring with parties concerned, paying full attention to the progress of the issue and fulfilling the obligation of timely information disclosure in strict accordance with the provisions and requirements of relevant laws and regulations, that is, the Company will disclose the progress of related matters at least every five trading days. There is considerable uncertainty for the major assets restructuring prepared by the Company. Investors are kindly reminded to pay attention to investment risk. XVII. Significant Events of Subsidiaries □ Applicable √ Not applicable 28 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Part VI Share Changes and Shareholder Information I. Share Changes 1. Share Changes Unit: share Before the change Increase/decrease (+/-) After the change Capitalize Newly Bonus Proportio Amount Proportion d Capital Others Subtotal Amount issue share shares n reserves I. Restricted shares 0 0.00% 0 0 0 0 0 0 0.00% 1.Shares held by the state 0 0.00% 0 0 0 0 0 0 0.00% 2. Shares held by 0 0.00% 0 0 0 0 0 0 0.00% state-own Legal-person 3. Shares held by other 0 0.00% 0 0 0 0 0 0 0.00% domestic investors Among which: shares held 0 0.00% 0 0 0 0 0 0.00% by domestic legal person Shares held by domestic 0 0.00% 0 0 0 0 0 0 0.00% natural person 4.Oversea shareholdings 0 0.00% 0 0 0 0 0 0.00% Among which: shares held 0 0.00% 0 0 0 0 0 0 0.00% by oversea legal person Shares held by oversea 0 0.00% 0 0 0 0 0 0 0.00% natural person II. Shares not subject to 1,011,660, 1,011,660 100.00% 0 0 0 0 0 100.00% trading moratorium 000 ,000 891,660,0 891,660,0 1. RMB ordinary shares 88.14% 0 0 0 0 0 88.14% 00 00 2. Domestically listed 120,000,0 120,000,0 11.86% 0 0 0 0 0 11.86% foreign shares 00 00 3. Oversea listed foreign 0 0.00% 0 0 0 0 0 0 0.00% shares 4. Other 0 0.00% 0 0 0 0 0 0 0.00% 1,011,660, 1,011,660 III. Total shares 100.00% 0 0 0 0 0 100.00% 000 ,000 29 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Reasons for the share changes □ Applicable √ Not applicable Approval of share changes □ Applicable √ Not applicable Transfer of share ownership □ Applicable √ Not applicable Effects of share changes on the basic EPS, diluted EPS, net assets per share attributable to ordinary shareholders of the Company and other financial indexes over the prior year and the prior period □ Applicable √ Not applicable Other contents that the Company considers necessary or is required by the securities regulatory authorities to disclose □ Applicable √ Not applicable 2. Changes in Restricted Shares □ Applicable √ Not applicable II. Issuance and Listing of Securities □ Applicable √ Not applicable III. Total Number of Shareholders and Their Shareholdings Unit: share Total number of preference Total number of ordinary shareholders with resumed 76,443 0 shareholders at the period-end voting rights at the period-end (if any) (see Note 8) Shareholding of ordinary shareholders holding more than 5% shares or the top 10 of ordinary shareholders Number Increase Number Pledged or frozen shares of and of shares Number of Holding shareholdi decrease of held shares held Name of Nature of percentage ng at the shares subject to subject to Status of shareholder shareholder Amount (%) end of the during trading trading shares Reporting Reporting moratoriu moratorium Period Period m Shenzhen State-owned legal 642,884,2 642,884,26 63.55% Investment person 62 2 30 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Holdings Co., Ltd Shandong Gold Financial Holding Capital Management Domestic Co., Ltd. - 10,300,00 non-state-owned 1.02% 10,300,000 Shandong Gold 0 legal person Financial Holding Sustaining Fund 1 Domestic natural Lu Zhigao 0.32% 3,246,949 3,246,949 person Domestic natural Tan Shiqing 0.13% 1,286,701 1,286,701 person Domestic natural Yang Shuilian 0.13% 1,273,700 1,273,700 person Domestic natural Yang Jianxiong 0.12% 1,255,750 1,255,750 person Central Huijin Asset State-owned legal 0.12% 1,165,500 1,165,500 Management person Co., Ltd. Domestic natural Peng Wei 0.11% 1,129,082 1,129,082 person Foreign natural Wu Haoyuan 0.11% 1,109,300 1,109,300 person Guotai Junan Securities Foreign legal 0.10% 1,015,683 1,015,683 (Hong Kong) person Limited Strategic investors or the general legal person due to the placement of new shares become the top 10 N/A ordinary shareholders (if any) (note 3) The Company has found no related parties or acting-in-concert parties as defined in the Explanation on related relationship Administrative Measures for Shareholding Changes in Listed Companies among the or/and persons shareholders above. Particulars about shares held by top 10 ordinary shareholders not subject to trading moratorium 31 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Number of shares held not subject to trading Type of share Name of shareholder moratorium at the end of the period Type of share Amount Shenzhen Investment Holdings Co., RMB ordinary 642,884,262 642,884,262 Ltd shares Shandong Gold Financial Holding Capital Management Co., Ltd. - RMB ordinary 10,300,000 10,300,000 Shandong Gold Financial Holding shares Sustaining Fund 1 RMB ordinary Lu Zhigao 3,246,949 3,246,949 shares RMB ordinary Tan Shiqing 1,286,701 1,286,701 shares RMB ordinary Yang Shuilian 1,273,700 1,273,700 shares Domestically Yang Jianxiong 1,255,750 listed foreign 1,255,750 share Central Huijin Asset Management RMB ordinary 1,165,500 1,165,500 Co., Ltd. shares RMB ordinary Peng Wei 1,129,082 1,129,082 shares Domestically Wu Haoyuan 1,109,300 listed foreign 1,109,300 share Domestically Guotai Junan Securities (Hong 1,015,683 listed foreign 1,015,683 Kong) Limited share Explanation on related relationship among the top ten shareholders of tradable share not subject to trading moratorium, as well as among the The Company has found no related parties or acting-in-concert parties as defined in the top ten shareholders of tradable Administrative Measures for Shareholding Changes in Listed Companies among the share not subject to trading shareholders above. moratorium and top ten shareholders, or explanation on acting-in-concert Particular about shareholder The fourth shareholder holds all his shares in the Company in his accounts of collateral participate in the securities lending securities for margin trading. And the third shareholder holds some of his shares in the and borrowing business (if any) Company in such accounts. (note 4) 32 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Indicate by tick mark whether any of the top ten ordinary shareholders or the top ten non-restricted ordinary shareholders of the Company conducted any promissory repo during the Reporting Period. □ Yea √ No No such cases in the Reporting Period. IV. Change of the Controlling Shareholder or the Actual Controller Change of the controlling shareholder in the Reporting Period □ Applicable √ Not applicable There was no any change of the controlling shareholder of the Company in the Reporting Period. Change of the actual controller in the Reporting Period □ Applicable √ Not applicable There was no any change of the actual controller of the Company in the Reporting Period. 33 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Part VII Preferred Shares □ Applicable √ Not applicable No preferred shares in the Reporting Period. 34 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Part VIII Directors, Supervisors and Senior Management I Changes in Shareholdings of Directors, Supervisors and Senior Management □ Applicable √ Not applicable No such cases in the Reporting Period. For details, see Annual Report 2017. II Changes in Directors, Supervisors and Senior Management √ Applicable □ Not applicable Name Position Type Date Reason Chen Ji Board Secretary Left 26 April 2018 Job change Tang Xiaoping Board Secretary Employed 26 April 2018 Liu Quanmin Independent director Left 15 May 2018 Personal reasons Kang Xiaoyue Independent director Employed 15 May 2018 Wang Xiuyan Supervisor Left 15 May 2018 Retired Ren Wei Supervisor Employed 15 May 2018 35 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Part IX Corporate Bonds Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue before the approval date of this Report or were due but could not be redeemed in full? No 36 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Part X Financial Report I Auditor’s Report Whether the semi-annual report has been audited? □ Yes √ No The semi-annual report of the Company has not been audited. II Financial Statements The unit of the financial statements attached: RMB 1.Consolidated Balance Sheet Prepared by:SHENZHEN SPECIAL ECONOMIC ZONE REAL ESTATE & PROPERTIES (GROUP) Co., Ltd June 30 2018 Currency: RMB Yuan Item Closing balance Opening balance Current Assets: Monetary funds 1,068,660,665.62 1,207,079,090.29 Account receivables 336,114,447.24 137,092,156.05 Prepayments 952,357.55 6,040,367.51 Dividends receivable 1,052,192.76 1,052,192.76 Other receivables 62,528,710.16 75,903,158.62 Inventories 1,677,853,797.04 1,764,086,643.94 Other current assets 604,214,106.70 11,369,544.80 Total current assets 3,751,376,277.07 3,208,544,440.97 Non-current assets Available- for- sale financial assets 17,464,240.74 17,464,240.74 Long-term equity investments 29,888,661.65 29,888,661.65 Investment properties 635,361,225.57 647,297,124.04 Fixed assets 35,921,711.70 37,937,868.71 Intangible assets 55,200.00 Long-term deferred assets 500,320.01 586,350.66 Deferred tax assets 45,766,544.40 47,490,095.19 Total non-current assets 764,902,704.07 780,719,540.99 TOTAL ASSETS 4,516,278,981.14 3,989,263,981.96 Current liabilities: Short-term loans 51,374,540.56 104,207,653.64 Accounts payable 247,315,649.23 190,629,756.30 37 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Deferral 256,368,225.43 332,152,016.54 Employee benefits payable 37,041,729.10 30,516,219.96 Taxes payable 203,844,320.26 86,153,526.89 Interest payables 16,535,277.94 16,535,277.94 Other payables 633,968,332.94 374,945,089.10 Non-current liabilities due within one 17,773,200.00 64,000,000.00 year Total current liabilities 1,464,221,275.46 1,199,139,540.37 Non-current liabilities:: Long-term loans 17,783,500.00 82,000,000.00 Long-term payables 5,900,692.96 8,101,880.05 Total non-current liabilities 23,684,192.96 90,101,880.05 Total liabilities 1,487,905,468.42 1,289,241,420.42 Owners' equity: Share capital 1,011,660,000.00 1,011,660,000.00 Capital reserve 978,244,910.11 978,244,910.11 Less: treasury shares Other comprehensive income 9,559,409.19 10,045,697.16 Surplus reserve 85,666,668.00 85,666,668.00 Undistributed profit 1,071,690,930.24 742,624,845.71 Total owners' equity attributable to 3,156,821,917.54 2,828,242,120.98 parent company Minority interests -128,448,404.82 -128,219,559.44 Total owners’ equity 3,028,373,512.72 2,700,022,561.54 Total liabilities and owners’ equity 4,516,278,981.14 3,989,263,981.96 Legal representative : Zhou Jianguo Person in charge of accounting : Tang Xiaoping Person in charge of accounting organ:Qiao Yanjun 2、Balance Sheet As of 30 June 2018 Prepared by:SHENZHEN SPECIAL ECONOMIC ZONE REAL ESTATE & PROPERTIES (GROUP) Co., Ltd. Currency: RMB Yuan Item Note Closing balance Current assets Monetary funds 477,965,205.73 726,801,673.89 Accounts receivable 4,314,184.42 4,482,074.17 Prepayments 200,000.00 Dividends receivable 169,393,952.18 38 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Other receivables 753,668,682.27 899,872,523.90 Inventories 430,405,017.51 365,067,776.29 Other current assets 600,234,829.12 165,020.02 Total current assets 2,266,787,919.05 2,165,783,020.45 Non-current Assets: Available-for-sale financial assets 12,000,000.00 12,000,000.00 Long-term equity investments 248,870,407.21 248,870,407.21 Investment properties 521,797,432.63 532,414,374.79 Fixed assets 23,118,873.12 24,371,839.21 Intangible assets 55,200.00 Long-term deferred assets 437,960.62 529,905.52 Deferred tax assets 30,620.43 Total non-current assets 806,255,294.01 818,241,726.73 Total Assets 3,073,043,213.06 2,984,024,747.18 Current liabilities: Short-term loans - - Account payable 5,298,907.50 6,803,512.99 Deferral 93,435.00 93,435.00 Employee benefits payable 14,955,449.53 8,761,156.65 Taxes payable 52,167,159.04 52,311,869.66 Interest payable 16,535,277.94 16,535,277.94 Other payables 353,291,934.84 178,195,493.46 Non-current liability due within one yea 17,773,200.00 64,000,000.00 Other current liability - - Total current liabilities 460,115,363.85 326,700,745.70 Non-current liabilities: Long-term loans 17,783,500.00 82,000,000.00 Total non-current liabilities 17,783,500.00 82,000,000.00 Total liabilities 477,898,863.85 408,700,745.70 Owners' equity:: Share capital 1,011,660,000.00 1,011,660,000.00 Capital reserve 978,244,910.11 978,244,910.11 Surplus reserve 62,537,054.59 62,537,054.59 Undistributed profit 542,702,384.51 522,882,036.78 Total owners' equity attributable to 2,595,144,349.21 2,575,324,001.48 parent company Total liabilities and owners' equity 3,073,043,213.06 2,984,024,747.18 39 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 3、Consolidated Income Statemen For the Year 2018 Prepared by: SHENZHEN SPECIAL ECONOMIC ZONE REAL ESTATE& PROPERTIES (GROUP) CO., LTD Currency: RMB Yuan Item Amount for the current period Amount for the prior period Ⅰ. Total operating income 1,317,541,631.35 731,306,982.03 Including: Operating income 1,317,541,631.35 731,306,982.03 Ⅱ. Total operating Costs 878,049,647.69 547,779,579.99 Including: Operating costs 540,417,491.41 494,949,797.89 Tax and surcharge 277,340,490.76 23,913,311.23 Selling expenses 37,167,133.77 6,832,803.76 Administrative expense 31,736,200.85 24,719,238.69 Financial expense -8,611,669.10 -2,635,571.58 Impairment losses of assets Add: Gains from changes in fair value ("-" means loss) Investment income ("-" means loss) 827,100.00 650,000.00 Including: Investment income from associates and joint venture Gains from disposal of asset ("-" means loss) Ⅲ. Operating profit ("-" means loss) 440,319,083.66 184,177,402.04 Add: Non-operating income 95,835.23 317,021.43 Less: Non-operating expenses 199,553.33 121,613.79 Ⅳ .Total profit ("-" means loss) 440,215,365.56 184,372,809.68 Less: Income tax expenses 111,169,717.28 47,173,139.72 Ⅴ Net profit ("-" means loss) 329,045,648.28 137,199,669.96 5.1.Net income from continuing 329,045,648.28 137,199,669.96 operations (“-” for net loss) 5.2. Net income from discontinued operations (“-” for net loss) Net attributable to owners of parent 329,066,084.53 137,226,601.84 company Minority interests -20,436.25 -26,931.88 Ⅵ . After-tax net of other comprehensive -694,697.10 2,051,513.82 incomes After-tax net of other comprehensive incomes owned by owner of the parent -486,287.97 1,436,059.68 company 40 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 6.1 Other comprehensive incomes that cannot be classified into profit and loss in the future 6.2 Other comprehensive incomes that would be classified into profit and loss in -486,287.97 1,436,059.68 the future 6.2.1.Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method 6.2.2. Gains/Losses on changes in fair value of available-for-sale financial assets 6.2.3. Gains/Losses arising from reclassification of held-to-maturity investments to available-for-sale financial assets 6.2.4. Effective gains/losses on cash flow hedges 6.2.5.Translation difference in the foreign -486,287.97 1,436,059.68 currency financial statement 6.2.6. Other Net of tax from other comprehensive -208,409.13 615,454.14 incomes owned by minority stockholders Ⅶ. Total comprehensive income 328,350,951.18 139,251,183.78 Total comprehensive income attributable 328,579,796.56 138,662,661.52 to owners of parent company Total comprehensive income -228,845.38 588,522.26 attributable to minority interests Ⅷ .Earnings per share 8.1 Basic Earnings per share 0.3253 0.1356 8.2 Diluted Earnings per share 0.3253 0.1356 Legal representative:Zhou Jianguo Person in charge of accounting: Tang Xiaoping Person in charge of accounting organ:Qiao Yanjun 4.Income Statement For the Year 2018 Prepared by:SHENZHEN SPECIAL ECONOMIC ZONE REAL ESTATE & PROPERTIES (GROUP) Co., Ltd. Currency: RMB Yuan Item Amount for the current period Amount for the prior period I. Total operating income 29,987,467.51 229,557,159.39 41 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Less: Operating cost 12,583,669.74 111,270,162.44 Tax and surcharge 3,654,804.11 5,845,366.82 Selling expenses 908,158.92 964,585.37 Administrative expense 10,894,513.21 11,294,643.69 Financial expense -23,494,559.62 -12,619,614.38 Impairment losses of assets Add: Gain from changes in fair value ("-" means loss) Investment income ("-" means loss) 827,100.00 170,043,952.18 II. Operating profit ("-" means loss)) 26,267,981.15 282,845,967.63 Add: Non-operating income 34,352.59 2.69 Less: Non-operating expenses 143,299.25 12,574.69 III. Total profit ("-" means loss) 26,159,034.49 282,833,395.63 Less: Income tax expenses 6,338,686.76 28,203,216.91 IV.Net profit ("-" means loss) 19,820,347.73 254,630,178.72 4.1.Net income from continuing 19,820,347.73 254,630,178.72 operations (“-” for net loss) 4.2. Net income from discontinued operations (“-” for net loss) V. Total comprehensive income 19,820,347.73 254,630,178.72 VI. Earnings per share 6.1 Basic Earnings per share 0.0196 0.2517 6.2 Diluted Earnings per share 0.0196 0.2517 5.Consolidated Cash Flow Statement For the Year 2018 Prepared by : SHENZHEN SPECIAL ECONOMIC ZONE REAL ESTATE & PROPERTIES (GROUP) Co., Ltd. Currency: RMB Yuan Items Amount for the current period Amount for the prior period Ⅰ. Cash Flow from Operating Activities: Cash received from sales of goods or 1,082,569,145.05 620,215,163.04 rendering of services Cash received relating to other 86,785,897.61 25,245,970.46 operating activities Sub-total of Cash Inflows 1,169,355,042.66 645,461,133.50 Cash paid for goods and services 359,603,259.50 510,142,331.49 Cash paid to and on behalf of 67,569,589.85 77,473,040.09 employees Cash paid on taxes and levies 89,393,534.10 85,002,656.01 42 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Cash paid relating to other operating 58,060,529.54 70,543,803.10 activities Sub-total of Cash Outflows 574,626,912.99 743,161,830.69 Net Cash Flows from Operating 594,728,129.67 -97,700,697.19 Activities Ⅱ. Cash Flows from Investing Activities: Cash received from return of investments Cash received investing income 827,100.00 650,000.00 Sub-total of Cash Inflows 827,100.00 664,976.00 Cash paid to acquire fixed assets, 171,268.71 240,065.49 intangible assets and other long assets Cash paid on other investing activities 600,000,000.00 Sub-total of Cash Outflows 600,171,268.71 240,065.49 Net Cash Flows from Investing -599,344,168.71 424,910.51 Activities Ⅲ. Cash flow from Financing Activities Cash received from borrowing 20,900,000.00 Sub-total of Cash Inflows 20,900,000.00 Cash repayments on borrowed amounts 131,343,300.00 20,216,016.22 Cash payments for distribution of 2,185,638.06 4,875,421.66 dividends or profits Sub-total of cash Outflows 133,528,938.06 25,091,437.88 Net cash flows from financing activities -133,528,938.06 -4,191,437.88 Ⅳ. Effect of foreign exchange rate on 16,586.26 -246,628.00 cash Ⅴ. Net increase in cash and cash -138,128,390.84 -101,713,852.56 equivalents Add: cash equivalents at the beginning 1,206,789,056.46 1,265,767,290.57 of the period Ⅵ. Cash equivalents at the end of the 1,068,660,665.62 1,164,053,438.01 period 6.Cash Flow Statement For the Year 2018 Prepared by : SHENZHEN SPECIAL ECONOMIC ZONE REAL ESTATE & PROPERTIES (GROUP) Co., Ltd. Currency: RMB Yuan 单位:元 Item Amount for the current period Amount for the prior period Ⅰ. Cash Flow from Operating Activities: 43 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Cash received from sales of goods or 34,592,057.81 98,370,357.73 rendering of services Cash received relating to other 387,291,082.03 11,306,698.94 operating activities Sub-total of cash inflows 421,883,139.84 109,677,056.67 Cash paid for goods and services 53,951,198.75 35,773,557.77 Cash paid to and on behalf of 15,556,181.04 20,853,392.88 employees Cash paid on taxes and levies 13,609,736.21 36,541,949.79 Cash paid relating to other operating 45,617,416.07 7,663,760.55 activities Sub-total of Cash Outflows 128,734,532.07 100,832,660.99 Net Cash Flows from Operating 293,148,607.77 8,844,395.68 Activities Ⅱ. Cash Flows from Investing Activities: Cash received from return of 170,221,052.18 650,000.00 investments Sub-total of Cash Inflows 170,221,052.18 650,000.00 Cash paid to acquire fixed assets, 20,888.00 48,675.00 intangible assets and other long assets Cash paid on other investing activities 600,000,000.00 Sub-total of cash outflows 600,020,888.00 48,675.00 Net Cash Flows from Investing -429,799,835.82 601,325.00 Activities Ⅲ. Cash flow from Financing Activities Sub-total of cash inflows Cash repayments on borrowed amounts 110,443,300.00 15,216,016.22 Cash payments for distribution of 1,728,453.04 4,413,190.66 dividends or profits Cash payments on other financing activities Sub-total of cash Outflows 112,171,753.04 19,629,206.88 Net cash flows from financing activities -112,171,753.04 -19,629,206.88 Ⅳ. Effect of foreign exchange rate on -13,487.07 -15,112.84 cash Ⅴ.Net increase in cash and cash -248,836,468.16 -10,198,599.04 equivalents Add: cash equivalents at the beginning of 726,801,673.89 818,261,250.52 the period Ⅵ. Cash equivalents at the end of the 477,965,205.73 808,062,651.48 period 44 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 7.CONSOLIDATED STATEMENT OF CHANGE IN OWNER'S EQUITY Prepared by:SHENZHEN SPECIAL ECONOMIC ZONE REAL ESTATE & PROPERTIES (GROUP) Co., Ltd. Currency: RMB Yuan January-June 2018 The amount in current year Attribute to the equity of parent company Other equity Items Other Minority Total instruments Less: Generic Undistri Share Capital compre Special Surplus interest owners' Prefer Perpet Treasur risk buted capital Othe reserve y shares hensive reserve reserve s equity e nce ual income reserve profit r shares bonds I. Balance at 1,011, -128,21 2,700,0 978,244 10,045, 85,666, 742,624 the end of last 660,00 9,559.4 22,561. ,910.11 697.16 668.00 ,845.71 period 0.00 4 54 Add: Changes of accounting policies Prior year adjustments Corporate combination under common control Others II. Balance at the 1,011, -128,21 2,700,0 978,244 10,045, 85,666, 742,624 Beginning of the 660,00 9,559.4 22,561. ,910.11 697.16 668.00 ,845.71 Year 0.00 4 54 III.Increase/Decre ase movements in -486,28 329,066 -228,84 328,350 this Year ("-" 7.97 ,084.53 5.38 ,951.18 means loss) (I) Total -486,28 329,066 -228,84 328,350 comprehensive 7.97 ,084.53 5.38 ,951.18 income (II) Capital paid in and reduced by the shareholders (III) Profit distribution 1.Draw statutory surplus reserve 2.Draw generic risk reserve 3.Distribution to shareholders 45 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 4.Others (IV)Internal carry-forward of shareholders’ equity (V) Special Reserve (VI) Others 1,011, 1,071,6 -128,44 3,028,3 IV. Balance at the 978,244 9,559,4 85,666, 660,00 90,930. 8,404.8 73,512. end of the period ,910.11 09.19 668.00 0.00 24 2 72 January-June 2017 Currency: RMB Yuan The amount brought from the previous year Attribute to the equity of parent company Other equity Other Items Less: compre Minority Total instruments Generic Undistri Share Capital Treasur hensive Special Surplus interest owners' Perpet risk buted capital Prefer Othe reserve y s equity e nce ual income reserve reserve reserve profit r shares shares bonds 1,011, -127,89 2,515,9 I.Balance at the 978,244 10,652, 59,394, 583,908 660,00 3,573.2 66,869. end of last period ,910.11 531.69 668.24 ,333.05 0.00 1 88 Add: Changes of accounting policies Prior year adjustments Corporate combination under common control Others II. Balance at the 1,011, -127,89 2,515,9 978,244 10,652, 59,394, 583,908 Beginning of the 660,00 3,573.2 66,869. ,910.11 531.69 668.24 ,333.05 Year 0.00 1 88 III.Increase/Decre ase movements in 1,436,0 137,226 588,522 139,251 this Year ("-" 59.68 ,601.84 .26 ,183.78 means loss) (I) Total 1,436,0 137,226 588,522 139,251 comprehensive 59.68 ,601.84 .26 ,183.78 income (II) Capital paid in 0.00 and reduced by the 46 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 shareholders 3.2.1 Capital increased and 0.00 reduced by owners 3.2.2 Capital increased by holders 0.00 of other equity instruments 3.2.3 Amounts of 0.00 share-based 3.2.4 Other (III) Profit 0.00 distribution 3.3.1.Draw statutory surplus reserve 3.3.2.Draw generic risk reserve 3.3.3.Distribution to shareholders 3.3.4.Others (IV)Internal carry-forward of 0.00 shareholders’ equity 3.4.1 New increase of capital (or share capital) from capital reserve 3.4.2 New increase of capital (or share capital) from surplus reserve 3.4.3 Surplus reserve for making up loss 3.4.4 Other (V) Special 0.00 Reserve 3.5.1Withdrawn for the period 3.5.2 Used in the period 47 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 (VI) Others 1,011, -127,30 2,655,2 978,244 12,088, 59,394, 721,134 IV. Balance at the 660,00 5,050.9 18,053. ,910.11 591.37 668.24 ,934.89 end of the period 0.00 5 66 8.Statement of Changes in Owners’ Equity January-June 2018 Currency: RMB Yuan The amount in current year Other equity Other instruments Less: comprehe Generic Undistri Total Items Share Capital Surplus Prefere Perpet Treasury nsive risk buted owners' capital Othe reserve reserve nce ual shares income reserve profit equity r shares bonds ⅠBalance at the 1,011,66 978,244,9 62,537,05 522,882 2,575,324 End of Last Period 0,000.00 10.11 4.59 ,036.78 ,001.48 Add: Changes of accounting policies Prior year adjustments Others II. Balance at the 1,011,66 978,244,9 62,537,05 522,882 2,575,324 Beginning of the 0,000.00 10.11 4.59 ,036.78 ,001.48 Year III. Increase/Decrease 19,820, 19,820,34 movements in this 347.73 7.73 Year ("-" means loss) (I) Total 19,820, 19,820,34 comprehensive 347.73 7.73 income (II) Capital paid in and reduced by the shareholders 48 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 3.2.1 Capital increased and reduced by owners 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Amounts of share-based 3.2.4 Other (III) Profit distribution 1.Draw statutory surplus reserve 2.Distribution to shareholders 3.Others (IV)Internal carry-forward of shareholders’ equity 3.4.1 New increase of capital (or share capital) from capital reserve 3.4.2 New increase of capital (or share capital) from surplus reserve 3.4.3 Surplus reserve for making up loss 3.4.4 Other (V) Special Reserve 49 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 3.5.1Withdrawn for the period 3.5.2 Used in the period (VI) Others IV. Balance at the 1,011,66 978,244,9 62,537,05 542,702 2,595,144 end of the period 0,000.00 10.11 4.59 ,384.51 ,349.21 January-June 2017 Currency: RMB Yuan The amount brought from the previous year Other equity Other instruments Less: comprehe Generic Undistri Total Items Share Capital Surplus Prefere Perpet Treasury nsive risk buted owners' capital Othe reserve reserve nce ual shares income reserve profit equity r shares bonds ⅠBalance at the 1,011,66 978,244,9 36,265,05 286,434 2,312,604 End of Last Period 0,000.00 10.11 4.83 ,038.90 ,003.84 Add: Changes of accounting policies Prior year adjustments Others II. Balance at the 1,011,66 978,244,9 36,265,05 286,434 2,312,604 Beginning of the 0,000.00 10.11 4.83 ,038.90 ,003.84 Year III. Increase/Decrease 254,630 254,630,1 movements in this ,178.72 78.72 Year ("-" means loss) (I) Total 254,630 254,630,1 comprehensive ,178.72 78.72 income (II) Capital paid in and reduced by the shareholders 3.2.1 Capital increased and reduced by owners 3.2.2 Capital increased by 50 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 holders of other equity instruments 3.2.3 Amounts of share-based 3.2.4 Other (III) Profit distribution 1.Draw statutory surplus reserve 2.Draw generic risk reserve 3.Distribution to shareholders 4.Others (IV)Internal carry-forward of shareholders’ equity 3.4.1 New increase of capital (or share capital) from capital reserve 3.4.2 New increase of capital (or share capital) from surplus reserve 3.4.3 Surplus reserve for making up loss 3.4.4 Other (V) Special Reserve 3.5.1Withdrawn for the period 3.5.2 Used in the period (VI) Others IV. Balance at the 1,011,66 978,244,9 36,265,05 541,064 2,567,234 end of the period 0,000.00 10.11 4.83 ,217.62 ,182.56 Legal representative: Person in charge of accounting: Person in charge of accounting organ 51 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 III General information Shenzhen Special Economic Zone Real Estate and Properties (Group) Co., Ltd. (the “Group” or “the Company”) was established in July 1993, as approved by the Shenzhen Municipal Government with document SFBF (1993) 724. The Company issued A shares on 15th September, 1993 and issued B shares on 10 January 1994. On 31 August 1994, B shares issued were listed in New York Exchange market as class A recommendation. The total share capital are 1,011,660,000 shares, of which, A shares are 891,660,000 shares, and the B shares are 120, 000,000 shares. The company business license registration number is 440301103225878, and the registered capital is RMB 1,011,660,000.00. On 13 October 2004,according to the document No.(2004) 223 “Decision on establishing Shenzhen investment Holding Co., Ltd.” issued by State-Owned Assets Supervision and Administration Commission of Shenzhen Municipal Government, former major shareholder – Shenzhen Construction Investment Holding Company with two other assets management companies merged to form the Shenzhen Investment Holding Co., Ltd. By the State-owned Assets Supervision and Administration Commission of the state council,and quasi-exempt obligations tender offer as approved by China Security Regulatory Committee with document No.(2005)116, this issue of consolidated has been authorized and the registration changing had been done on 15 February 2006. As at the end of the reporting period, Shenzhen Investment Holding Limited holds 642,884,262 shares of the Company (63.55% of the total share capital). The shares are all selling unrestricted shares. Business scope: mainly engaged in real estate development and sales, property leasing and management, retail merchandising and trade, hotel, equipment installation and maintenance, construction, interior decoration and so on. The main products or services provided: commodity housing, property leasing and management, hotel service, construction and installation service, renovation service. The parent of the Company is Shenzhen Investment Holdings Co., Ltd. The Financial statement published on Aug 29th, 2018, which approved by Group’s Board of Directors. 25 units were consolidated into the Group in first half of 2018 for the detail in Note 8 "Equities in other entities". The company did not change the range of consolidation in this period compared with last year. IV The Basis of Preparation of Financial Statements 4.1 The financial statements of the Group have been prepared on the basis of going concern in conformity with the Chinese Accounting Standards for Business Enterprises –The basic standards(Issued by order No.33 of the Ministry of Finance, Revised by order No.76 of the Ministry of Finance), the 42 specified Accounting Standards for Business Enterprise issued and revised by the Ministry of Finance of People’s Republic of China on 15 February, 2006 and thereafter, the guidance for the application of the Accounting Standards for Business Enterprise, the explanation for the Accounting Standards for Business Enterprise and other relevant regulations( thereinafter referred as “Accounting Standards for Business Enterprises”) and Compilation Rules for Information Disclosure by Companies Offering Securities to the Public No.15—General Provisions on Financial Reports (2014 Revision) issued by the China Securities Regulatory Commission (CSRC). According to the relevant accounting regulations of Chinese Accounting Standards for Business Enterprises, the Group has adopted the accrual basis of accounting. The Group adopts the historical cost as the principle of 52 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 measurement in the financial statements except some financial instruments and Investment properties. Non-current assets held for sale are based on lower price between the fair value less estimated expenses and the original book value when they meet the conditions for holding the sale. Provision will be made if any assets impair in accordance with relevant requirements. 4.2 Going concern No significant suspected event or circumstances about the going concern for the past 12 months from the end of the reporting period. V Important accounting policies and estimations The Company and each subsidiary formulated certain specific accounting policies and accounting estimates according to the actual production and operation characteristics and the regulations of the relevant ASBE on the transactions and events of the revenues recognition. For the details, please refer to each description of Notes 5. 28 “Revenues”. For the notes of the significant accounting judgment and estimations made by the management layer, please refer to Notes 5.34 “Significant accounting judgment and estimations”. 5.1 Basis of Preparation The financial statements of the Group are recognized and measured in accordance with the regulations of the Chinese Accounting Standards for Business Enterprises and they give a true and fair view of the financial position, business result and cash flow of the Group as of 30 June 2018. In addition, the financial statements of the Group comply, in all material respects, with the revised disclosure requirements for financial statements and the notes of Compilation Rules for Information Disclosure by Companies Offering Securities to the Public No.15—General Provisions on Financial Reports (2014 Revision) issued by China Securities Regulatory Commission (CSRC). 5.2 Accounting period The accounting period of the Group is classified as interim period and annual period. Interim period refers to the reporting period shorter than a complete annual period. The accounting period of the Group is the calendar year from January 1 to December 31. 5.3 Operating cycle The normal operating cycle refers to period from Group’s buying assets for manufacturing to realizing the cash or cash equivalent .The Group chooses 12 months as an operating cycle. The assets and liabilities are classified as current and non-current according to the operating cycle standards. 5.4 Monetary Unit Renminbi (RMB) is the currency of the primary economic environment in either Group & its domestic subsidiaries or foreign subsidiary in HK. Therefore, the Group, the domestic subsidiaries and foreign 53 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 subsidiary in HK choose RMB as their functional currency. While the Group’s foreign subsidiary in U.S.A. chooses USD dollar as its functional currency on the basis of the primary economic environment it operates. The Group adopts RMB to prepare its functional statements. 5.5 Accounting Treatment Under Common/Non-common control A business combination is a transaction or event that brings together two or more separate entities into one reporting entity. Business combinations involve enterprises under common control and non-common control. (1) Business combination involving entities under common control A business combination involving enterprises under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or parties both before and after the combination, and that control is not transitory. For a business combination involving enterprises under common control, the party that, on the combination date, obtains control of another enterprise participating in the combination is the absorbing party, while that other enterprise participating in the combination is a party being absorbed. Combination date is the date on which the absorbing party effectively obtains control of the party being absorbed. The assets and liabilities obtained are measured at the carrying amounts as recorded by the enterprise being absorbed at the combination date. The difference between the carrying amount of the net assets obtained and the carrying amount of consideration paid for the combination (or the total face value of shares issued) is adjusted to the capital premium (or share premium) in the capital reserve. If the balance of the capital premium (or share premium) is insufficient, any excess is adjusted to retained earnings. The cost of a combination incurred by the absorbing party, including any costs directly attributable to the combination, shall be recognized as an expense through profit or loss for the current period when incurred. (2) Business combination involving entities under non common control A business combination involving enterprises under non common control happens if the combining enterprises are not ultimately controlled by the same party or parties both before and after the business combination. For a business combination not involving enterprises under common control, the party that, on the acquisition date, obtains control of another enterprise participating in the combination is the acquirer, while the other enterprise participating in the combination is the acquiree. Acquisition date is the date on which the acquirer effectively obtains control of the acquiree. For a business combination not involving enterprise under common control, the combination cost including the sum of fair value, on the acquisition date, of the assets given, liabilities incurred or assumed, and equity securities issued by the acquirer. The intermediary expenses incurred by the acquirer in respect of auditing, legal services, valuation and consultancy services etc. and other associated administrative expenses attributable to the business combination are recognized in profit or loss when they are incurred. The transaction cost arose from issuing of equity securities or liability securities should be initially recognized 54 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 as cost of equity securities or liability securities. The contingent consideration related to the combination shall be booked as combination cost at the fair value on the acquisition date. If, within the 12 months after acquisition, new or additional information can prove the existence of related information on acquisition date and the contingent consideration need to be adjusted by relatively adjusting the combination goodwill. Acquirer ‘s combination cost and the obtained identifiable net assets are measured with the fair value on the acquisition date. The excess of the combination cost over the fair value of identifiable net assets on the acquisition date is recorded as goodwill. When the fair value of identifiable assets exceeds the combination cost , first of all, the fair value of items of obtained acquiree’s identifiable assets, liabilities or contingent liabilities and combination cost need to be reassessed. And then, when the combination cost is still less than the fair value of identifiable net assets on the acquisition date after reassess, the difference should be recorded in the current year’s profit and loss. The deductible temporary differences obtained from the acquiree which cannot be recognized as deferred tax assets ,on the acquisition date, because some conditions are not met. Within 12 months after the acquisition ,if new or additional information indicate that the relevant information exist on the acquisition date and the economic benefits related with the deductible temporary difference can be realized, the deferred tax assets should be recognized. The goodwill should be reduced and if the goodwill is less than the deferred tax assets recognized, the rest part should be recorded in the current year profit and loss. For a business combination achieved in stages that involves multiple exchange transactions, according to the “No.5 Inform of Printing and Distributing the Explanation of Accounting Standards issued by the Finance of Ministry (Caikuai [2012] No.19)”and Article 51of “Chinese Accounting Standards for Business Enterprises No.33- Consolidated financial statement”, relating with the judgment standards of package deal( refer to note 4.5(2)), a judgment about whether it is package deal or not should be made. If it is package deal, please refer to the note 4.12 - Long-term equity investment for accounting treatment; if it is not package deal, distinguish them as individual financial statement and consolidated financial statement for accounting treatment. For the individual financial statements, the book value of the long-term equity investment held before the acquisition date plus the newly added equity investment on the acquisition date, and then sum should be recorded as the original investment cost; the long-term equity investment involved with other comprehensive income held before the acquisition date, the way to deal with the investment will be the same with the way the acquiree directly dispose the related assets and liabilities (i.e., under the equity method, beside the portion caused by the acquiree’s recalculated defined benefit plan’s net assets and net liabilities, the rest are transferred into investment income). For the consolidated financial statements, for the shares in acquiree held before the acquisition date, the shares are recalculated according to the fair value on the acquisition date. The difference between the fair 55 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 value and book value should be recorded in the current year investment income; For the shares in the acquiree held before the acquisition date involving other comprehensive income. The way to deal with the other comprehensive income should be the same with the way the acquiree directly dispose the relevant assets and liabilities(i.e., under the equity method, beside the portion of changes caused by the acquiree’s recalculated defined benefit plan’s net assets and net liabilities, the rest are transferred into investment income ). 5.6 Preparation of consolidated financial statements (1)The standards of determining the scope of consolidation The scope of consolidation in the consolidated financial statements is determined on the basis of control. Control is the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its operating activities. The scope of consolidation includes the Group and all of the subsidiaries. Subsidiary is an enterprise or entity under the control of the Group. Once the changes of relevant facts and conditions result in the factors involving with the above definition of the control, the Group will proceed to reassess. (2)The method of preparing the consolidated financial statements The subsidiary of the Group is included in the consolidated financial statements from the date when the control over the net assets and business decisions of the subsidiary is effectively obtained, and excluded from the date when the control ceases. For a subsidiary being disposed of by the Group, the operating results and cash flows before the date of disposal (the date when control is lost) are included in the consolidated income statement and consolidated statement of cash flows, as appropriate. For a subsidiary disposed during the period, no adjustment is made to the opening balance of the consolidated financial statements. For a subsidiary acquired through a business combination not under common control, the operating results and cash flows from the acquisition date (the date when the control is obtained) are included in the consolidated income statement and consolidated statement of cash flows, as appropriate; no adjustment is made to the opening balance and comparative figures in the consolidated financial statements. Where a subsidiary was acquired during the reporting period, through a business combination involving enterprises under common control, the financial statements of the subsidiary are included in the consolidated financial statements. The results of operations and its cash flow are appropriately included in the consolidated balance sheet and the consolidated income statement, respectively, from the beginning of the year to the date of acquisition and the comparative figures of the consolidated financial statements are restated. When the accounting period or accounting policies of a subsidiary are different from those of the Group, the Group makes necessary adjustments to the financial statements of the subsidiary based on the Group’s accounting period or accounting policies. For the subsidiaries acquired through combination involving 56 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 enterprises under non common control, the financial statements should be adjusted based on the fair value of the indentified net assets on the acquisition date. Intra-group balances and transactions, and any unrealized profit or loss arising from intra-group transactions, are eliminated when preparing the consolidated financial statements. Minority interest and the portion in the net profit or loss not attributable to the Group are presented separately in the consolidated balance sheet within shareholders’/ owners’ equity. Net profit or loss attributable to minority shareholders in the subsidiaries is presented separately as minority interest in the consolidated income statement below the net profit line item. When the amount of loss for the current period attributable to the minority shareholders of a subsidiary exceeds the minority shareholders’ portion of the opening balance of [shareholders’] [owners’] equity of the subsidiary, the excess is still allocated against the minority interests. When the Group loses control of a subsidiary due to the disposal of a portion of an equity investment or other reasons, the remaining equity investment is re-measured at its fair value on the date when control is lost. The difference between 1) the total amount of consideration received from the transaction that resulted in the loss of control and the fair value of the remaining equity investment and 2) the carrying amounts of the interest in the former subsidiary’s net assets immediately before the loss of the control is recognized as investment income for the current period when control is lost. The amount recognized in other comprehensive income in relation to the former subsidiary’s equity investment is reclassified as investment income for the current period when control is lost. The retained interest is subsequently measured according to the rules stipulated in the “Chinese Accounting Standards for Business Enterprises No.2—Long-term equity investment” or “Chinese Accounting Standards for Business Enterprises No.22—Determination and measurement of financial instruments” (see note 4.12-Long-term equity investment and 4.9-Financial instruments). The Group’s losing control of subsidiaries through multistep transactions of disposing of the long-term equity investment, need to indentify whether every transaction, involving with disposing of the investment in subsidiary until losing the control, is belonging to package deal. Several transactions should be accounted for as a package deal if conditions and the economic impact of disposal of investments in subsidiaries are in compliance with one or more of the following circumstances: ① These transactions are considered simultaneously or ② these transactions as a whole in order to reach a complete business results; another case of the occurrence of the impact of entering into a transaction depends ③ had at least one other transaction; ④ see a transaction alone is not economical, but, it is economical when other transactions are taken into account. If it is not package deal, every transaction of the non-package deals is treated according to the applicable accounting standards of “partly disposing of the long-term equity investment without losing control ”( refer to 4.12(2) ④ for detail) and “losing the control to subsidiary due to partly disposing the equity investment or other reasons ” (see the former paragraph for details). When every transaction involving with 57 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 disposing of equity investment in subsidiary until losing control is a package deal, they will be treated as a single deal of disposing of the investment in subsidiary until losing control for accounting treatment. But, before the control are lost, the difference between each receipt of every transaction and the related shared proportion of indentified net assets are recognized as other comprehensive income. The other comprehensive income will be transferred into profit and loss in the period when losing control. 5.7 Joint venture arrangement classification& mutual office account treatment Joint venture arrangement is referred to the arrangement that are under common control of two or more participating parties. The Group classifies the joint venture arrangement into mutual office and joint venture, according to the rights shared and obligation undertaken in the joint venture arrangement. Mutual office represents the joint venture arrangement that the Group shares the assets related with arrangement and undertakes the obligations related with the arrangement. Joint venture is referred to the joint venture arrangement that the Group only have the right to the net assets of the arrangement. The Group measures the joint venture investment using the equity method. Please refer to accounting policies listed on note 4.12 (2) ②-long-term equity investment measured using the equity method. As one party of the mutual office, the Group recognizes the separately owned assets and separately assumed obligations, and the proportionate commonly held assets and commonly assumed obligations per the company’s percentage of share interest; recognize the revenue from the selling of the Group’s shared output of the mutual office; recognize the common revenue generated from the selling of the common output of the mutual office according to the Group’s share percentage; recognize the expense separately incurred by the Group and the proportionate expense incurred by the mutual office according to the Group’s share percentage. When the Group sells invest or sell assets to the mutual office as one of the mutual office party (the assets do not constitute a business, the same to below), or buys assets from the mutual office, before the assets are sold to the third party, the Group only recognizes the portion of profit and loss attributable to the other participating parties. According to requirements of Chinese Accounting Standards for Business Enterprises No.8- Asset impairment, when the assets are impaired, for the assets invested or sold to the mutual office by the Group, the Group fully recognizes the impairment loss; for assets that the Group bought from the mutual office, the impairment loss is recognized according to the share percentage by the Group. 5.8 Cash and cash equivalent Cash and cash equivalents of the Group include cash on hand, ready usable deposits and investments having short holding term (normally will be due within three months from the day of purchase), with strong liquidity and easy to be exchanged into certain amount of cash that can be measured reliably and have low risks of change. 5.9 Foreign exchange (1) Translation in foreign exchange transactions The Group’s initial recognition of the foreign currency transactions is recorded by the functional currency 58 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 translated by the spot rate (commonly refer to the middle rate of the daily foreign currency rate publicly released by the People’s Bank of China)on the transaction date. But the Group’s foreign currency exchange and foreign currency exchange relevant transactions, is recorded by the functional currency translated by the exchange rate actually used. (2)Translation method for foreign currency monetary items and non-monetary items. On the balance sheet date, foreign currency monetary items are translated using the spot exchange rate at the balance sheet date. All the exchange differences thus resulted are taken into profit or loss, except for ①those relating to foreign currency borrowings specifically for construction and acquisition of qualifying assets, which are capitalized in accordance with the principle of capitalization of borrowing costs; ②The exchange difference from changes of other account balance of foreign currency monetary items available-for-trade is recorded into other comprehensive income except for amortization cost. When preparing the consolidated financial statements involving with oversea operation, the foreign currency difference caused by the foreign exchange rate changes should be recorded in other comprehensive income, if it substantially constitutes the monetary items related to net investment to the oversea operation. When the oversea operation are disposed, the other comprehensive income should be transferred into current year profit and loss. Non-monetary foreign currency items measured at historical cost shall still be translated at the spot exchange rate prevailing on the transaction date, and the amount denominated in the functional currency is not changed. Non-monetary foreign currency items measured at fair value are translated at the spot exchange rate prevailing at the date when the fair values are determined. The exchange difference thus resulted are recognized in profit or loss for the current period or as other comprehensive income. (3) The translation of financial statement in foreign currency When the consolidated financial statements include foreign operation(s), if there is a foreign currency monetary item constituting a net investment in a foreign operation, exchange difference arising from changes in exchange rates are recognized as “exchange differences arising on translation of financial statements denominated in foreign currencies” are recognized in other comprehensive income, and in profit or loss for the period upon disposal of the foreign operation. The Group translates the financial statements of its foreign operations into RMB by following rules; 1) Assets and liabilities in the balance sheet are translated at the spot exchange rate prevailing on the balance sheet date; All equity items except for retained earnings are translated at the spot exchange rates at the date on which such items occur; 2) Income and expenses in income statement are translated at the spot exchange rates at the date of transaction. 3) The opening undistributed profit is the closing undistributed profit of last period after translation of last 59 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 year. 4) The closing balance of undistributed profit is calculates and presented in the basis of each translated income statements and profit distribution item. 5) The difference between the assets and liabilities and shareholder’s equity shall be booked as translation difference of translating foreign currency financial statements, and shall be presented as other comprehensive income in the separate component of equity in the balance sheet. 6) When losing control over Group’s oversea operation due to disposal, the translation difference of translating foreign currency financial statements related with the oversea operation which is separately presented under the shareholder’s equity section as accumulated other comprehensive income, should be fully or proportionately transferred into the current period profit and loss according to the disposal percentage. 7)Foreign currency cash flows and cash flow of oversea subsidiaries are translated at the spot exchange rates. The effect of exchange rate changes on cash is separately presented as an adjustment item in the cash flow statement. 8)The opening balance and actual figures of last year are displayed as the figures translated last year. 9)When disposing the Group’s all shareholders’ equity of oversea operation or the Group losing control over the oversea operation due to partial disposal of the oversea equity investment or other reasons, the translation difference caused by the translating of foreign currency financial statement related with the oversea operation , which is presented under the equity section on the balance sheet and is attributable to the parent company’s shareholders, should be transferred to the current period profit and loss. 10)When the partial disposal of the equity investment of oversea operation and other reasons cause the share percentage of oversea operation to decrease without making the power of control to disappear, the translation difference of translation foreign currency financial statement related with the part of oversea operation disposed should be attributable to the minority interest and do not transfer to the current period profit and loss. When the oversea operation disposing is a jointly run business or joint venture, the translation difference of translating foreign currency financial statements should be transferred to the current period profit and loss according to the percentage of oversea operation disposal. 5.10 Financial instruments When the Group becomes one party of the financial instrument contract, a financial asset or financial liability should be recognized. The initial measurement of the financial asset and financial liability is based on the fair value. For financial asset and financial liability measured at fair value and designated its changes into current period profit and loss, the related trading expense should be recorded in the profit and loss. For the financial asset and financial liability of other categories, the related trading expense should be recorded as part of initial cost. (1) The method of determining the fair value of financial assets and financial liabilities 60 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Fair value is the price that the market participators can get when selling an assets or need to pay when transferring an obligation incurred in an orderly transaction on the measurement date. When there is active market for the financial instruments, the quotation in the active market is used as the fair value. Quotation in the active market means the price that can be easily and periodically got from the exchange market, broker’s agency, Guild, pricing service organization etc. It represents the actually happened trading price in the fair trading. When there is no active market for the financial instruments, the fair value is determined by the valuation techniques. The valuation techniques include making a reference to the used price in recent market trading among the parties who know the situations and is willing to trade, making a reference to the current fair value that is used by the other substantially similar financial assets, discounting the future cash flow and option pricing model etc. (2) Classification of financial assets All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. On initial recognition, the Group’s financial assets are classified into one of the four categories, including financial assets at fair value though profit or loss, held-to maturity investments, loans and receivables and available-for-sell financial assets. 1) Financial assets at fair value through profit or loss: Including financial assets held-for-trade and financial assets designated at fair value through profit or loss. Financial asset held-for-trade is the financial asset that meets one of the following conditions: A. The financial asset is acquired for the purpose of selling it in a short term; B. The financial asset is a part of a portfolio of identifiable financial instruments that are collectively managed, and there is objective evidence indicating that the enterprise recently manages this portfolio for the purpose of short-term profits; C. The financial asset is a derivative, except for a derivative that is designated and effective hedging instrument, or a financial guarantee contract, or a derivative that is linked to and must be settled by delivery of an unquoted equity instrument (without a quoted price from an active market) whose fair value cannot be reliably measured. For such kind of financial assets, fair values are adopted for subsequent measurement. Financial asset is designated on initial recognition as at fair value through profit or loss only when it meets one of the following conditions: A. The designation eliminates or significantly reduces the inconsistency in the measurement or recognition of relevant gains or losses that would otherwise arise from measuring the financial instruments on different bases. B. A group of financial instruments is managed and its performance is evaluated on a fair value basis, and is reported to the enterprise’s key management personnel. Formal documentation regarding risk management or 61 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 investment strategy has prepared. Financial assets at fair value through profit or loss are subsequently measured at the fair value. Any gains or losses arising from changes in the fair value and any dividends or interest income earned on the financial assets are recognized in the profit or loss. 2) Investment held-to maturity Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity. Such kind of financial assets are subsequently measured at amortized cost using the effective interest method. Gains or losses arising from derecognition, impairment or amortization are recognized in profit or loss for the current period. Effective interest rate is the rate that exactly discounted estimated future cash flows through the expected life of the financial asset or financial liability or, where appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group shall estimate future cash flow considering all contractual terms of the financial asset or financial liability without considering future credit losses, and also consider all fees paid or received between the parties to the contract giving rise to the financial asset and financial liability that are an integral part of the effective interest rate, transaction costs, and premiums or discounts, etc. 3) Loans and receivables Loans and receivables are non-derivative financial assets with fixed determinable payment that are not quoted in an active market. Financial assets classified as loans and receivables by the Group include note receivables, account receivables, interest receivable dividends receivable and other receivables. Loans and receivables are subsequently measured at amortized cost using the effective interest method. Gain or loss arising from derecognition, impairment or amortization is recognized in profit or loss. 4) Financial assets available-for-sell Financial assets available-for-sell include non-derivative financial assets that are designated on initial recognition as available for trade, and financial assets that are not classified as financial assets at fair value through profit or loss, loans and receivables or investment held-to-maturity. Financial assets available-for-trade are subsequently measured at fair value, and gains or losses arising from changes in the fair value are recognized as other comprehensive income and included in the capital reserve, except that impairment losses and exchange differences related to amortized cost of monetary financial assets denominated in foreign currencies are recognized in profit or loss, until the financial assets are derecognized, at which time the gains or losses are released and recognized in profit or loss. Interests obtained and dividends declared by the investee during the period in which the financial assets 62 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 available-for-trade are held, are recognized in investment gains. The Group’s financial liabilities are, on initial recognition, classified into financial liabilities at fair value through profit or loss and other financial liabilities. For financial liabilities at fair value through profit or loss, relevant transaction costs are immediately recognized in profit or loss for the current period, and transaction costs relating to other financial liabilities are included in the initial recognition amounts. (3) Impairment of financial assets (not including account receivables) The Group assesses, at the balance sheet date, the carrying amount of every financial asset except for the financial assets that measured by the fair value. If there is objective evidence indicating a financial asset may be impaired, provision for impairment is recorded. The Group makes an impairment test for a financial asset that is individually significant. For a financial asset that is not individually significant, it is included in a group of financial assets with similar credit risk characteristics and collectively assessed for impairment or individually assessed for impairment. If no objective evidence of impairment incurs for an individually assessed financial asset (whether the financial asset is individually significant or not individually significant), it is included in a group of financial assets with similar credit risk characteristics and collectively assessed for impairment. Assets for which an impairment loss is individually recognized is not included in a group of financial assets with similar credit risk characteristics and collectively assessed for impairment. 1) Impairment on held-to maturity investment, loans and receivables The financial assets measured by cost or amortized cost write down their carrying value by the estimated present value of future cash flow. The difference is recorded as impairment loss. If there is objective evidence to indicate the recovery of value of financial assets after impairment, and it is related with subsequent event after recognition of loss, the impairment loss recorded originally can be reversed. The carrying value of financial assets after impairment loss reversed shall not exceed the amortized cost of the financial assets without provisions of impairment loss on the reserving date. 2) Impairment loss on available-for-trade financial assets When decision is made with all related factors on whether the fall of fair value investment of an equity instrument available-for-trade is significant or non-transient, it indicates impairment of such equity instrument investment, in which, Significant means over 20% of fall in fair value and Non-transient means over 12 months of subsequent fall. When an available-for-trade financial asset is impaired, the cumulative loss arising from declining in fair value that had been recognized in capital reserve shall be removed and recognized in profit or loss. The amount of the cumulative loss that is removed shall be difference between the acquisition cost with deduction of recoverable amount less amortized cost, current fair value and any impairment loss on that financial asset previously recognized in profit or loss. 63 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 If, after an impairment loss has been recognized, there is objective evidence that the value of the financial asset is recovered, and it is objectively related to an event occurring after the impairment loss was recognized, the initial impairment loss can be reversed and the reserved impairment loss on available-for-trade equity instrument is recorded in the profit or loss, the reserved impairment loss on available-for-trade debt instrument is recorded in the current profit or loss. The equity instrument where there is no quoted price in an active market, and whose fair value cannot be reliably measured, or impairment loss on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument shall not be reversed. (4) Recognition and measurement of financial assets transfer The Group derecognizes a financial asset when one of the following conditions is met: 1) The rights to receive cash flows from the asset have expired; 2) The enterprise has transferred its rights to receive cash flows from the asset to a third party under a “pass-through” arrangement; or 3) The enterprise has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. If the enterprise has neither retained all the risks and rewards from the financial asset nor control over the asset, the asset is recognized according to the extent it exists as financial asset, and correspondent liability is recognized. The extent of existence refers the level of risk by the financial asset changes the enterprise is facing. For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, (a). the carrying amount of the financial asset transferred; and (b) the sum of the consideration received from the transfer and any cumulative gain or loss that had been recognized in other comprehensive income, is recognized in profit or loss. If a part of the transferred financial asset qualifies for derecognition, the carrying amount of the transferred financial asset is allocated between the part that continues to be recognized and the part that is derecognized, based on the relative fair value of those parts. The difference between (a) the carrying amount allocated to the part derecognized; and (b) the sum of the consideration received for the part derecognized and any cumulative gain or loss allocated to the part derecognized which has been previously recognized in other comprehensive income, is recognized in profit or loss. For the financial assets sold with recourse and the endorsed, the Group should make a judgment whether the risks and rewards related with the financial assets’ ownership have been almost all transferred. For the financial assets of which the risks and rewards related with its ownership have been, in substantial, all transferred, it should be derecognized. For the financial assets of which the risks and rewards have been, in 64 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 substantial, all retained, it should be not be derecognized. For the financial assets, the related ownership of which have not been neither ,in substantial, all transferred nor retained, the Group need to make a judgment about whether the control over the financial assets have been kept or not and then deal with it according to the standards mentioned in the previous paragraphs. (5) Classification of the financial liabilities and measurement The financial liabilities are classified into financial liabilities measured at fair value with its changes into profit and loss and other financial liabilities. The initial measurement is made at its fair value. For the financial liabilities measured at fair value with its changes into profit and loss, the related trading expense are recorded into current period profit and loss; for other financial liabilities, the related trading expenses are recorded in its initial cost. 1) Financial liabilities measured by the fair value and the changes recorded in profit or loss The classification by which financial liabilities held-for-trade and financial liabilities designated at the initial recognition to be measured by the fair value follows the same criteria as the classification by which financial assets held-for-trade and financial assets designated at the initial recognition to be measured by the fair value and their changes are recorded in the current profit or loss. For the financial liabilities measured by the fair value and changes recorded in the profit or loss, fair values are adopted for subsequent measurement. All the gains or losses on the change of fair value and the expenses on dividends or interests related to these financial liabilities are recognized in profit or loss for the current period. 2) Other financial liabilities Derivative financial liabilities that linked with equity instruments, which do not have a quoted price in an active market and their fair value cannot be measured reliably, is subsequently measured by cost. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Gains or losses arising from derecognition or amortization is recognized in profit or loss for the current period. 3) Financial guarantee contracts For financial guarantee contracts that are not designated as at fair value through profit or loss, or loan commitments not designated as at fair value through profit or loss but to offer at the interest rate lower than market level they are, after initial recognition, subsequently measured at the higher of: (i) the amount determined according to the principles of Accounting Standards for Business Enterprises No. 13 - Contingencies, and (ii) the amount initially recognized less the accumulated amortization determined according to the principles of Accounting Standards for Business Enterprises No. 14 - Revenue. (6) Derecognition The Group derecognizes a financial liability (or part of it) when the underlying present obligation (or part of it) is discharged or cancelled or has expired. An agreement between the Group (an existing borrower) and existing 65 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 lender to replace original financial liability with a new financial liability with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new liability. When the financial liabilities are fully and partially derecognized, the difference between the carrying value of the part derecognized and consideration paid ( including the non-current assets transferred out or new financial liabilities assumed ) should be recorded in the current period profit and loss. 5.11 Account receivables The account receivable by the Group includes account receivables, and other receivables. The Group carries out an inspection on the balance sheet date. Where there is any objective evidence proving that the receivables have been impaired, an impairment provision shall be made: 1) A serious financial difficulty occurs to the issuer or debtor; 2) The debtor breaches any of the contractual stipulations, for example, fails to pay or delays the payment of interests or the principal, etc.; 3) The debtor will probably become bankrupt or carry out other financial reorganizations; 4) Other objective evidences showing the impairment of the receivables. (1)Provisions of bad debts in account receivables that is individually significant. The Group treats account receivables over RMB 5,000,000.00 (including 5,000,000.00) as individually significant item. For an account receivable that is individually significant, the asset is individually assessed for impairment. If there is objective evidence indicating that the asset is impaired. The impairment loss is recognized in the profit and loss at the excess of carrying value over its predicted future cash flow (excluding the non-incurred future credit loss ) discounted with original actual interest rate. (2) Provisions of bad debts for accounts receivables that is individually insignificant. For the accounts receivables that is individually insignificant, if there are signs indicating the impairment, such as long-aging, having a dispute with the obligator or obligator suffering serious financial difficulties, it should be individually tested for impairment. 5.12 Inventories (1) Classification of inventory ①Real estate development products Real estate development inventory is initially measured at cost. Inventories mainly include inventory materials, development products under development (development costs), completed development products, and development products that are temporarily leased for sale. The cost of developing products includes land-transferring fees, expenditures on infrastructure support facility, expenditures on construction and installation project, borrowing costs and other related costs in the process of development before the 66 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 completion of the project. When delivering inventories, the actual cost is determined using the individual identification method. ②Build contracted inventory The construction contract is measured at actual cost, including direct costs and indirect costs incurred from the commencement of the contract to the completion of the contract, and the implementation of the contract. Where travel expenses, tender fees, etc. incurred for the purpose of entering into a contract, which can be separately distinguished and reliably measured and the contract is likely to be concluded, are included in the contract cost when the contract is obtained; if the above conditions are not satisfied, it is included in the current profit or loss. The accumulative costs incurred for the construction in progress contracts and the cumulative gross profits (losses) that have been recognized and the settled amounts are shown in the balance sheet as net offsets. The part of the accumulative cost of the construction-in-progress contract and the accumulatively recognized gross profit (loss) that exceeds the settlement price is listed as inventory; the settlement price of the construction-in-contract exceeds the accumulative cost incurred and accumulatively recognized gross profit ( The sum of losses is shown as advance receipts. (2) Valuation method of inventories upon delivery Inventories are initially carried at the actual cost. Cost of inventories comprises all costs of purchase, costs of conversion and other costs. The actual cost of inventories transferred out is assigned by using weighted average method, and development products by specific identification method. (3) Basis for determining net realizable value of inventories and provision methods for decline in value of inventories Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes. Net realizable value is determined on the basis of clear evidence obtained, and takes into consideration the purpose of holding inventories and effect of post balance sheet events. At the balance sheet date, inventories are measured at the lower of the cost and net realizable value. If the net realizable value is below the cost of inventories, a provision for decline in value of inventories is made. The provision for inventories decline in value is determined by the difference of the cost of individual item less its realizable value. After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written down below cost no longer exist so that the net realizable value of inventories is higher than their cost, the original provision for decline in value is reversed and the reversal is included in profit or loss for the period. (4) Inventory count system is based on the perpetual stock system. 67 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 (5) Amortization method for low cost and short-lived consumable items and packaging materials. Low cost and short-lived consumable items are amortized using immediate write-off method; packaging materials are amortized using immediate write-off method. (6) Cost of land constitutes land development costs for pure land development project. Together with the overall development of the property, its cost is included in housing costs generally based on the actual area. (7)Public Facilities Fee: The cost is the actual construction cost incurred. If several estate projects benefit from the same facility, they stay in the same category. The cost of fee should be measured according to the allocation of sales area. If they got benefit but in different categories, the cost was measured according to the allocation of the area covered. (8)Utility reserve funds:Utility reserve funds were received by the Group and recorded in Long-term payables. The funds were used to maintain and renew communal facilities. (9)Quality Guarantees:Quality Guarantees was put into the account of real estate developing according to the contract amount and also recorded in the accounts payable at the same time. The actual payment incurs after the expiry of guarantee. 5.13 Long-term equity investments The long-term equity investment mentioned in this section is about the equity investment of which the Group has control, common control or significant influences over the investee. For the investments that the Group has no control, common control or significant influences over the investee, they will be recorded as available-for-sale or financial instrument assets measured at fair value with its changes into profit and loss. Please refer to note 4.9-Financial instruments for detail. Common control means the Group’s mutual control to the arrangement according to the related agreement and the arrangement’s activities related decisions can be made only after getting the mutual agreement from other parties sharing the control power. Significant influences represent that the Group has the right to participate in the decision of the financial and operating policies, but cannot control or control together with other parties to make the policy related decision. (1) Determination of investment cost For a business combination involving enterprises under common control, the initial investment cost of the long-term equity investment shall be carrying value of the absorbing party’s share of the shareholder’s of the party being absorbed at the date of combination. For a business combination not involving enterprise under common control, the combination cost including the sum of fair value, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity securities issued by the acquirer. The intermediary expenses incurred by the acquirer in respect of auditing, legal services, valuation and consultancy services etc and other associated administrative expenses attributable to the business combination are recognized in profit or loss when they are incurred. 68 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 The transaction cost for the equity securities or liability securities issued by the acquirer in the business combination shall be recognized as initial amount of equity security or liability. The equity investments other than the long-term equity through combination shall be initially measured by cost. The cost shall be recognized to the difference in the way of acquisition of long-term equity investment. Theses ways include the cash purchase price the Group actually paid, the fair value of equity security issued by the Group, value specified in the investment contract or agreement, the fair value or carrying value of the asset transferred out in the transaction of non-monetary asset exchanges, and the fair value of the long-term equity investment. Expenses, taxes and other necessary expenditures directly attributable to the acquisition of long-term equity investment are taken into investment cost. For the long-term equity investments that the Group can have significant influence or common control on the investee, but cannot control the investee, because of the added investments, the cost of the long-term equity investment should be the sum of original fair value of the investment and the cost of newly added investment. (2) Subsequent measurement Where an investing enterprise can exercise common control or significant influence over the investee, a long-term investment shall be accounted for using the equity method. Besides, the cost method shall be adopted in a long-term equity investment when the Group can exercise control over the investee. 1) Cost method of accounting for long-term equity investments Under the cost method, a long-term equity investment is measured at initial investment cost. Except for cash dividends or profits declared but not yet paid that are included in the price or consideration actually paid upon acquisition of the long-term equity investment, investment income is recognized in the period in accordance with the attributable share of cash dividends or profit distributions declared by the investee. 2) Equity method of accounting for long-term equity investments Where the initial investment cost of a long-term equity investment exceeds the investing enterprise’s interest in the fair values of the investee’s identifiable net assets at the time of acquisition, no adjustment shall be made to the initial investment cost. Where the initial investment cost of a long-term equity investment is less than the investing enterprise’s interest in the fair values of investee’s identifiable net assets at the time of acquisition, the difference shall be charged to profit or loss for the current period, and the cost of the long-term equity investment shall adjusted accordingly. Under the equity method,the Group recognizes its share of the net profit or loss and other comprehensive income of the investee for the period as investment income or loss and other comprehensive income for the period and adjusts the book value of the long-term equity investment simultaneously. The Group reduces the book value of the long-term equity investment, according to the shared profit or cash dividends declared by the investee. For the changes of investee’s equity beside the net profit, other comprehensive income and profit 69 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 distribution, adjust the book value of the long-term equity investment and its capital surplus. When determining the share percentage of investee’s net profit, it should be made based on the fair value of investee’s identifiable assets after adjusting the investee’s net profit on the acquisition date. When the investee’s accounting period and accounting policies are different with the Group’s, the subsidiary’s financial statements should be adjusted according to the Group’s and recognize the investment income and other comprehensive income based on it. Unrealized profits or losses resulting from the Group’s transactions with its associates and joint ventures are recognized as investment income or loss to the extent that those attributable to the Group’s equity interest are eliminated. However, unrealized losses resulting from the Group’s transactions with its investees on the transferred assets, in accordance with "Accounting Standards for Enterprises No. 8 - Impairment of Assets", are not eliminated. When the Group’s assets invested to joint venture and jointly run business are a deal and the Group obtains the long-term equity investment without getting the power of control, the initial cost of the investment is determined by fair value of the assets invested. The difference between the initial cost and the book value of the assets invested should be fully taken into profit and loss. When the Group’s assets sold to joint venture and jointly run business are a deal, the differences between the consideration received and the book value are fully taken into the profit and loss. When the Group’s buying assets from joint venture and jointly run business are a deal, the gain and loss would be fully recognized according to the Accounting Standards for Business Enterprises No.20 -Enterprises combination. When the investee is recognized net losses, reduce the carrying value of long-term equity investments and long-term equity of net investment (in substance) in investee to zero. In addition, the Group has the obligations on additional losses, then the expected obligation as estimated liabilities and included in the current investment losses. Where the net profit from investee units, restoration confirm the amount of revenue sharing after offset the amount of unrecognized loss sharing. For long-term equity investments in associates and joint ventures which had been held by the Group before its first time adoption of Accounting Standards for Business Enterprises, where the initial investment cost of a long-term equity investment exceeds the Group’s interest in the investee’s net assets at the time of acquisition, the excess is amortized and is recognized in profit or loss on a straight line basis over the original remaining life. 3) Acquisition of minority interest The difference between newly increased equity investment due to acquisition of minority interests and portion of net asset cumulatively calculated from the acquisition date is adjusted as capital reserve. If the capital reserve is not sufficient to absorb the difference, the excess are adjusted against retained earnings. 4) Disposal of long-term equity investment Where the parent company disposes long-term investment in a subsidiary without a change in control, the 70 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 difference in the net asset between the amount of disposed long-term investment and the amount of the consideration paid or received is adjusted to the owner’s equity. If the disposal of long-term investment in a subsidiary involves loss of control over the subsidiary, the related accounting policies in Note 4.5 applies. (3) Accounting policies retailed on “the method of preparing consolidated financial statements” On disposal of a long-term equity investment, the difference between the proceeds actually received and receivable and the carrying amount is recognized in profit or loss for the period. For long-term equity investment accounted for using the equity method, when the rest of the long-term equity investment is still accounted for using the equity method after disposal, the other comprehensive income originally recorded into the equity should be dealt with by the same way as the investee’s directly dealing with its assets or liabilities. The other investee equity changes caused beside the net profit, other comprehensive income and profit distribution should be proportionately transferred into current year profit and loss. For long-term equity investment accounted for using the cost method, when the rest of the long-term equity investment is still accounted for using the cost method after disposal, other comprehensive income recognized using the equity method or the method of recognizing and measuring the financial instruments before obtaining the control over the investee should be dealt with as the same way with investee’s direct disposing of its assets and liabilities and be proportionately taken into profit and loss; The other investee equity changes caused beside the net profit, other comprehensive income and profit distribution should be proportionately transferred into current year profit and loss. When the Group loses control over the investee but still can exercise the common control or significant influences over the investee after partial disposal of the long-term equity investment, the equity method should be used to prepare individual financial statements. The rest equity investment is treated as accounted using the equity method upon the acquisition and is adjusted; If no control and significant influences cannot be exercised, the rest equity investments should be recognized and measured by the accounting standards to financial instruments. The difference between the fair value and book value is taken into current profit and loss. For the other comprehensive income recognized under the equity method or the financial instrument related method before obtain the control over investee, it will be treated as the same way with investee’s directly disposing its assets or liabilities when losing the control over investee. The equity changes under equity method caused beside the net profit, other comprehensive income and profit distribution should be transferred into the profit and loss when losing the control over investee. Including, other comprehensive income and other owner’s equity should be proportionately transferred, when the rest equity investment is accounted with equity method; Other comprehensive income and other owner’s equity should be fully transferred, when the rest equity investment is accounted with accounting standards of financial instruments. The Group loses the control and significant influences over the investee, because of disposing of part of long-term equity investment. The difference between fair value and book value on the day when losing the 71 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 control and significant influences over the investee should be taken into profit and loss. Other comprehensive income recognized for the original equity investments under equity method, would be dealt with as the same way with investee’s directly disposing of its assets and liabilities when cease using the equity method. The equity changes caused beside the net profit, other comprehensive income and profit distribution, should be transferred into investment income when cease using the equity method. For the Group’s multiple-step dealing with its long-term equity investments until losing control, if the transactions are package deal, each transaction should be treated as a transaction dealing with its long-term equity investments until losing control, the difference between the consideration received and the book value of the equity investment should be firstly recognized as other comprehensive income before losing control over investee and then all transferred into current profit and loss. 5.14 Investment properties Investment property is property held to earn rental or for capital appreciation or both. It includes a land use right that is leased out, a land use right held for transfer upon capital appreciation, and a building that is leased out. Besides, the Group has buildings empty for operating lease. If there is a written decision from the Board (or similar organization) with clear indication for operating lease and intension that no change shall be made in the near future, the buildings shall be presented as investment properties. An investment property is measured initially at cost. Subsequent expenditures incurred for such investment property are included in the cost of the investment property if it is probable that economic benefits associated with an investment property will flow to the Group and the subsequent expenditures can be measured reliably. Other subsequent expenditures are recognized in profit or loss in the period in which they are incurred. The Group uses the cost method for subsequent measurement of investment property, and adopts a depreciation or amortization policy for the investment property which consistent with that for building or land use rights. Where self-occupied property or inventory converts into investment property, or investment property converts into self-occupied property, the carrying amount before the change shall be accounted as the value after conversion. When an investment property changes into self-occupied property, it should be converted into fixed asset or intangible asset on the date of conversion. When the purpose of a self-occupied property changes into rental earning or capital increase, fixed asset or intangible asset should be converted into an investment property from the date of conversion. Where the cost model is used in the measurement of investment property during the conversion, the carrying amount before the conversion is accounted as the value after conversion. Where the investment property is measured by the fair value after conversion, the fair value at the conversion date is adopted as value after conversion. Where an investment property is disposed or no longer in use permanently and no economic benefits shall be 72 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 obtained from the disposal, derecognized the investment property. The income from sale, transfer or disposal of the investment property is recorded in the profit or loss after deduction of its carrying amount and related tax. 5.15 Fixed assets (1) The conditions of recognition Fixed assets refers to the tangible assets that are held for the sake of producing commodities, rendering labor service, renting or business management and their useful life is in excess of one fiscal year. Fixed assets are only confirmed when their related economic benefits are likely to flow into the company and its cost can be reliably measured. Fixed assets are stated at cost and consider the impact of expected costs of abandoning the initial measurement. (2) The method for depreciation From the following month of state of intended use, depreciation method of the straight-line method is used for different categories of fixed assets to take depreciation. The recognition of the classification, useful life and estimated residual rate are as follows: Category Expected useful life Estimated residual value(%) Depreciation(%) Building & construction 30 5 3.17 Machines & equipments 7 5 13.57 Vehicles 6 5 15.83 Electronic appliances 5 5 19.00 Expected net residual value of fixed assets is the balance of the Group currently obtained from the disposal of the asset less the estimated costs of disposal amount, assuming the asset is out of useful life and state the expected service life in the end. (3) Measurement and recognition of fixed assets impairment For the details of impairment test method and withdrawal method of impairment provision for fixed assets, please refer to Note.4.18 Long-term assets impairment (4) Recognition and measurement of financial lease Finance leases which transfer substantially all the risks and rewards of ownership .Its ownership may be transferred or not eventually .The depreciation policy for assets held under finance leases should be consistent with that for owned assets. If it is reasonable to determine the ownership of the leased asset at the end of the lease term, depreciation is provided within the useful life of the leased asset. Otherwise, the asset should be depreciated over the shorter of the lease term or the life of the asset (5) Others 73 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Subsequent expenditure incurred for a fixed asset that meet the recognition criteria shall be included in the cost of the fixed asset, and the carrying amount of the component of the fixed asset that is replaced shall be derecognized. Otherwise, such expenditure shall be recognized in profit or loss in the period in which they are incurred. A fixed asset is derecognized when it is disposed or no economic benefits will be gained through the use or disposal of the assets.. The revenue from selling or transferring, or disposing a fixed asset is booked into profit and loss after deduction of carrying value and related tax. The Group conducts a review of useful life, expected net realizable value and depreciation methods of the fixed asset at least on an annual base. Any change is regarded as change in accounting estimates. 5.16 Construction in progress Construction in process is measured at actual cost. Actual cost comprises construction costs,borrowing costs that are eligible for capitalization before the fixed assets being ready for their intended us and other relevant costs. Construction in process is transferred to fixed assets when the assets are ready for their intended use. For details of the testing method of impairment and withdraw method of impairment provision on construction in progress, please refer to Note 5. 22 “Long-term assets impairment” 5.17 Borrowing costs (1) The standards for capitalizing the borrowing cost Borrowing costs include interest, amortization of discounts or premiums related to borrowings, ancillary costs incurred in connection with the arrangement of borrowings, and exchange differences arising from foreign currency borrowings. The borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized. The amounts of other borrowing costs incurred are recognized as an expense in the period in which they are incurred. (2) The period of capitalizing the borrowing costs The period of borrowing costs capitalization is calculated from the point when borrowing costs beginning capitalizing to the time stopping capitalizing. The period suspending capitalizing the borrowing costs are excluded. (3) The period suspending capitalizing the borrowing costs Capitalization of borrowing costs is suspended during periods in which the acquisition, construction or production of a qualifying asset is interrupted by activities other than those necessary to prepare the asset for its intended use or sale, when the interruption is for a continuous period of more than 3 months. Borrowing costs incurred during these periods recognized as an expense for the current period until the acquisition, construction or production is resumed. (4) The method for calculating the amount of borrowing cost capitalized 74 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Where funds are borrowed for a specific-purpose, the amount of interest to be capitalized is the actual interest expense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used on the asset or any investment income on the temporary investment of those funds. Where funds are borrowed for a general-purpose, the amount of interest to be capitalized on such borrowings is determined by applying a weighted average interest rate to the weighted average of the excess amounts of accumulated expenditure on the asset over and above the amounts of specific-purpose borrowings. During the capitalization period, exchange differences related to a specific-purpose borrowing denominating in foreign currency are all capitalized. Exchange differences in connection with general-purpose borrowings are recognized in profit or loss in the period in which they are incurred. 5.18 Intangible assets (1) Recognition and calculation of intangible asset The term “intangible asset” refers to the identifiable non-monetary assets without physical shape, possessed or controlled by enterprises. The intangible assets are initially measured by its cost. Expenses related to intangible assets, if the economic benefits related to intangible assets are likely to flow into the enterprise and the cost of intangible assets can be measured reliably, shall be recorded as cost of intangible assets. The expenses other than this shall be booked in the profit or loss when they occur. Land use rights that are purchased by the Group are accounted for as intangible assets. Buildings, such as plants that are developed and constructed by the Group, and relevant land use rights and buildings, are accounted for as intangible assets and fixed assets, respectively. Payments for the land and buildings purchased are allocated between the land use rights and the buildings; if they cannot be reasonably allocated, all of the land use rights and buildings are accounted for as fixed assets. When an intangible asset with a definite useful life is available for use, its original cost less net residual value and any accumulate impairment losses is amortized over its estimated useful life using the straight-line method. An intangible asset with an indefinite useful life is not amortized. For an intangible asset with a definite useful life, the Group reviews the useful life and amortization method at the end of the period, and makes adjustment when necessary.. An additional review is also carried out for useful life of the intangible assets with indefinite useful life. If there is evidence showing the foreseeable limit period of economic benefits generated to the enterprise by the intangible assets, then estimate its useful life and amortize according to the policy of intangible assets with definite useful life. (2) The accounting of expenditures of internally researched and developed project Expenditure on the research phase of an internal research is recognized in profit & loss in the period in which it is incurred. Expenditure during the development phase that meets all of the following conditions at the same time is recognized as intangible asset. Expenditure during development phase that does not meet the following 75 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 conditions is recognized in profit or loss for the period. 1) it is technical feasible to complete the intangible asset so that it will be available for use or sale; 2) the Group has the intention to complete the intangible asset and use or sell it; 3) the Group can demonstrate the ways in which the intangible asset will generate economic benefits including the evidence of the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset; 4) the availability of adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible asset; and 5) the expenditure attributable to the intangible asset during its development phase can be reliably measured. If the expenditures cannot be distinguished between the research phase and development phase, the Group recognizes all of them in profit or loss for the period. (3) Methods of impairment assessment and determining the provision for impairment losses of intangible assets The testing method for intangible assets impairment and the calculation of the provision for impairment is detailed listed on the note 4.18-Long-term assets impairment. 5.19 Long-term deferred assets Long-term deferred assets represent expenses incurred that should be borne and amortized over the current and subsequent period (together of more than one year). Long-term deferred assets are amortized by using straight line method. 5.20 Long-term assets impairment On each balance sheet date, the Group will make judgments to determine whether there are signs for impairment to the fixed assets ,construction in progress, definite intangible assets, investment properties& equity investment in subsidiaries& joint ventures& jointly run business measured using the cost method etc. non-current and non-financial assets. If there are signs for impairment, the impairment should be tested by estimating the recoverable amount. Goodwill, indefinite intangible assets and intangible assets having not reached the usable condition, should be yearly tested for impairment no matter whether there are signs for impairment. The result of impairment test demonstrates that the recoverable amount is less than its carrying amount, the difference will be recorded as provision for impairment and debited as impairment loss. The recoverable amount equals to the greater of 1) fair value less disposal expenses and 2) present value of the predicted future cash flows. The fair value of the assets is determined by the sale contract price of fair trade; When there are no sale contracts but exist active market ,the fair value will be determined with the quotation from the buyer; When 76 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 there exist neither sale contracts nor active market, the assets fair value will be determined by the best information available. The disposal expenses include the legal expenses, related taxes, delivery fees and other direct fees incurred for making the assets reach the salable condition. The present value of the predicted future cash flows is calculated according to the predicted future cash flows generated from the continuous use of the assets and final disposal discounted with the applicable discounted rate. The provision for impairment test should be recognized based on the individual asset. If it is hard to estimate the recoverable amount to individual asset, the recoverable amount of the assets group of which the individual assets are included should be determined. Assets group is the smallest unit that can independently generate the cash inflow. For the goodwill separately displayed on the financial statement, when making the impairment test, the carry value of the goodwill should be allocated to assets group or the group of assets group predicted to be benefit from the synergistic effect from the enterprises combination. When the rest result shows that the recoverable of the assets group or the group of assets group having been allocated with the relevant goodwill is less than the carrying amount, the related impairment loss should be recognized. The impairment losses will firstly reduce the book value of the goodwill allocated and then reduce the book value of each asset of the assets group or the group of assets group according to the percentage of each asset to the assets group or the group of assets group beside the goodwill. The impairment loss of the above assets would not be reversed back once they are recognized. 5.21 Employee Benefits The benefits of employees in the Group include short-term benefits, welfare after demission, demission welfare and other long-term welfare. The short-term benefits include the employees’ salary, bonus, allowance and compensation, employee welfare, medical insurance, maternity insurance, employment injury insurance, housing fund, labor union expense and employee education expense and non-currency welfare etc. The Group recognizes the actually incurred short-term employee benefits as liability during the period when the employees’ services are rendered, the expenses are recorded into the current period profit and loss or related asset costs according to the benefit object. For the non-currency welfare, it is recognized according to its fair value. Welfare after demission mainly includes the defined contribution plan and the defined benefit plan. The defined contribution plan and the defined benefit plan mainly include the basic endowment insurance premium, unemployment insurance expense and pension etc. For the defined contribution plan, the sinking fund deposited to the an independent entity for the service provided by employee in the accounting period on the balance sheet is recognized as the debt and included in the current profit and loss or related asset costs according to the benefit object. When the Group cannot unilaterally withdraw the dismissal welfare provided for the plan on the cancellation of 77 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 labor relationship or layoff proposal, or recognize the cost or expense involved with the recombination of dismissal welfare or payment of such dismissal welfare (whichever is earlier), the employee’s remuneration incurred by dismissal welfare is recognized as the debt and included in the current profits and losses or related assets cost. But when then dismissal is predicted not to be paid in the following 12 months after the report date, it would be classified as other long-term welfare. Employee internal retirement plan is treated as the same way with dismissal welfare mentioned above. The Group would record the relevant salaries and social insurances provided to the employees under the plan into the profits and losses (dismissal welfare) during the period from the day employees not providing the services to the legal retirement day, when the conditions for recognizing the contingency liability are met. Other long-term welfare provided by the Group is referred to as the welfare beside the short-term benefits, welfare after demission, demission welfare. It would be recognized as the requirements of defined contribution plan, when conditions are met. Or else, it would be recorded as defined benefit plan. 5.22 Revenue The real estate construction agreement is in accordance with the definition of the construction contract, for buyers who can specify the main structural elements of real estate design before the start of the construction project, or be able to determine the major changes in structure during the construction process, will be confirmed by the Company of construction services according to the Enterprise Accounting Standards No. 15 - Construction Contract. As purchaser, whose limited ability to influence real estate design (such as only minor changes to the basic design), the company in accordance with the "principles and methods of income accounting standards for Enterprises No. fourteenth - income" about commodity sales confirmation, the relevant revenue recognition combined with the specific conditions of the company real estate sales. The company will confirmed the relevant income and expenses according to the Enterprise Accounting Standards No. 15 - Construction Contract when real estate construction agreement is in accordance with the definition of the construction contract, for buyers who can specify the main structural elements of real estate design before the start of the construction project, or be able to determine the major changes in structure during the construction process. However, when purchaser’s ability to influence real estate design is limited (such as only minor changes to the basic design), the relevant revenue will be confirmed by the company combined with the specific conditions in accordance with the principle of the Enterprise Accounting Standards No. 14 – income (1) Developed products The Group established real estate sales revenue is recognized, must satisfied the following four conditions at the same time: 1). Real estate is completed and accepted; 2). contract of Installment selling is singed and the contractual obligations is performed; 78 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 3). the company no longer retains the continuation management rights nor controls normally associated with the ownership; 4). the amount of income can be reliably measured; 5) the related economic benefits are likely to flow into the company and the cost of the house can be reliably measured (2) Revenue from Installment selling The revenue is recognized by the fair vale about contract or agreement when the selling conditions satisfied the following conditions at the same time: 1). Real estate is completed and accepted; 2). contract of Installment selling is singed and the contractual obligations is performed; 3).the related economic benefits are likely to flow into the company and the cost of the development product can be reliably measured. The difference between the price and the fair value of the contract or agreement is amortized by the actual interest rate during the period of the contract or agreement and be taken into the profit and loss of the current period. (3) Revenue from self-use house selling The sales revenue is confirmed when the following conditions are met: 1) the main risks and rewards of self-use house ownership are transferred to the purchaser;, 2) the company no longer retains the continuation management rights nor controls normally associated with the ownership; 3) the amount of income can be reliably measured; 4) the related economic benefits are likely to flow into the company and the cost of the house can be reliably measured (4)Revenue from rental property The income of rental property is confirmed when the relevant rents or receipt have obtained according to the lease contract. (5) Revenue from construction contracts Where the outcome of a construction contract can be estimated reliably, contract revenue and costs are recognized using the percentage of completion method at the balance sheet date. The stage of completion of a contract is determined using the proportion that actual contract costs incurred to date bears to the estimated total contract costs. The outcome of a construct contract can be measured reliably when the following conditions are met: 1) The total revenue of the contract can be measured reliably; 79 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 2) It is probable that the associated economic benefits will flow to the enterprise; 3) The actual cost of the contract incurred can be determined and measured reliably; 4) The stage of completion of the contract and the costs to be incurred associated with the completion of the contract can be measured reliably. Where the outcome of a construction contract cannot be estimated reliably,4)1.if contract costs are expected to be recoverable, contract revenue is recognized to the extent of contract costs that are expected to be recoverable; and contract costs are recognized as expenses in the period in which they are incurred; 4)2.if contract costs are not expected to be recoverable, they are recognized as expenses immediately when incurred and contract revenue is not recognized. When the uncertainties that prevented the outcome of the construction contract from being estimated reliably no longer exist, revenue and expenses associated with the construction contract are recognized using the percentage of completion method. If the estimated total contract costs exceed total contract revenue, the expected loss is recognized immediately as an expense for the period. (6) Royalty revenue Revenue is confirmed according to the relevant contract or agreement on the accrual basis. (7) Interest income Revenue is confirmed according to the time and actual interest rate in the use of the company's money. (8) Other business income recognition The Group will confirm other business revenue while clauses of the relevant contracts and agreements reveal that economic interests related to transactions may flow into enterprises ,the amount of income and other related or incurred costs can be reliably measured. 5.23 Government Grants Government grants are transfer of monetary assets and non-monetary assets from the government to the Group at no consideration, excluding the capital invested by the government as equity owner. Government grant can be classified as grant related to the assets and grants related to the income. If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If a government grant is in the form of a non-monetary asset, it is measured at fair value. If the fair value cannot be reliably determined, it is measured at a nominal amount. A government grant measured at a nominal amount is recognized immediately in profit or loss for the period. A government grant related to an asset is recognized as deferred income, and evenly amortized to profit or loss over the useful life of the related asset. For a government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent period, the grant is recognized as deferred income, and recognized in profit or loss over the periods in which the related costs are recognized. If 80 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 the grant is a compensation for related expenses or losses already incurred, the grant is recognized immediately in profit or loss for the period. Government grants, including both asset-related and income-related components at the same time,are used to separate into different parts of the accounting process. They are classified as income-related government subsidies while it is difficult to distinguish. Government grants, related to the Company's daily activities, are taken into other income or write down related costs in accordance with the substance of the economic business. Government subsidies that are not related to daily activities are included in non-operating income and expenses. For repayment of a government grant already recognized, if there is a related deferred income, the repayment is offset against the carrying amount of the deferred income, and any excess is recognized in profit or loss for the period. If there is no related deferred income, the repayment is recognized immediately in profit or loss for the period. 5.24 Deferred income tax assets and deferred income tax liabilities At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, according to the requirements of tax laws. The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Group expects at the balance sheet date, to recover the assets or settle the liabilities. For temporary differences between the carrying amount of certain assets or liabilities and their tax base, or between the nil carrying amount of those items that are not recognized as assets or liabilities and their tax base that can be determined according to tax laws, deferred tax assets and liabilities are recognized using the balance sheet liability method. For temporary differences associated with the initial recognition of goodwill and the initial recognition of an asset or liability arising from a transaction (not a business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of transaction, no deferred tax asset or liability is recognized. For taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, no deferred income tax liability related is recognized except where the Group is able to control the timing of reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. All deferred income tax liabilities arising from taxable temporary differences except the ones mentioned above are recognized. For temporary deductible differences associated with the initial recognition of an asset or liability arising from a transaction (not a business combination) that affects neither the accounting profit nor taxable profits (or 81 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 deductible losses) at the time of transaction, no deferred tax asset is recognized. For taxable temporary deductible differences associated with investments in subsidiaries and associates, and interests in joint ventures, no deferred income tax asset related is recognized if it is impossible to reversal the temporary difference in the foreseeable future, or it is not probable to obtain taxable income which can be used for the deduction of the temporary difference in the future. Except mentioned above, the Group recognizes other deferred income tax assets that can deduct temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilized. For the deductible losses and tax credit that can be carried forward, deferred tax assets for deductible temporary differences are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilized. At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates according to tax laws that are expected to apply in the period in which the asset is realized or the liability is settled. At the balance sheet date, the Group reviews the carrying amount of deferred tax assets. If it is no longer probable that sufficient taxable profit will be available in future periods to allow the benefits of the deferred tax assets to be used, the Group reduces the carrying amount of deferred tax assets. The amount of such reduction is reversed when it becomes probable that sufficient taxable profit will be available. 5.25 Leases (1) Operating Lease ①The Group as Lessee under Operating Lease Lease payments under an operating lease are recognized by a lessee on a straight-line basis over the lease term, and either included in the cost of the related asset or charged to profit or loss for the current period. The contingent rents shall be recorded in the profit or loss of the period in which they actually arise. ②The Group as Leaser under Operating Lease Lease income from operating leases shall be recognized by the leaser in profit or loss on a straight-line basis over the lease term. Initial direct cost of significance in amount shall be capitalized when incurred. If another basis is more systematic and rational, that basis may be used. Contingent rents are credited to profit or loss in the period in which they actually arise. (2)Financing Lease ①The Group as Lessee under Operating Lease For an asset that is held under a finance lease, at the lease commencement, the leased asset is recorded at the lower of its fair value at the lease commencement and the present value of the minimum lease payments, and the minimum lease payment is recorded as the carrying amount of the long-term payables; the difference 82 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 between the recorded amount of the leased asset and the recorded amount of the payable is accounted for as unrecognized finance charge, Initial direct costs incurred by the lessee during the process of negotiating and securing the lease agreement shall be added to the amount recognized for the leased asset. The net amount of minimum lease payment deducted by the unrecognized finance shall be separated into long-term liabilities and long-term liability within one year for presentation. Unrecognized finance charge shall be computed by the effective interest method during the lease term. Contingent rent shall be booked into profit or loss when actually incurred. ②The Group as Leaser under Operating Lease For an asset that is leased out under a finance lease, the aggregate of the minimum lease receipts at the inception of the lease and the initial direct costs is recorded as a finance lease receivable, and unguaranteed residual value is recorded at the same time; the difference between the aggregate of the minimum lease receipt, initial direct costs, and unguaranteed residual value, and the aggregate of their present values, is recognized as unearned finance income, which is amortized using the effective interest rate method over each period during the lease term. Finance lease receivable less unearned finance income shall be separated into long-term liabilities and long-term liability within one year for presentation. Unearned finance income shall be computed by the effective interest method during the lease term. Contingent rent shall be credited into profit or loss in which actually incurred. 5.26 Changes in major accounting policies and accounting estimates (1) Changes of accounting policies There were no changes of accounting policies during this period. (2)Changes of accounting estimates There were no changes of main accounting estimations during this period. 4.27 Material accounting judgments and accounting estimations Because of the inherent uncertainties of the operating activities, the Group need to make judgments, estimations and assumptions to the financial statement items whose carrying amount cannot be accurately measured. Those judgments, estimations and assumptions are made based on the management’s historical experience and taking other relevant factors into account. Those judgments, estimations and assumptions would influence the reported amount of revenue, expense, asset and liability and disclosure of the contingency liability on the balance sheet date. However, the actual result caused by the uncertainty of these estimations may be different with the present estimation made by the management, which may cause significant adjustments to the carrying amount of the influenced assets and liabilities in the future. The Group are making periodical review on the judgments, estimations and assumptions mentioned above based on the premise of going concern. For the changes of estimations that only influence the current period, 83 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 the influenced amount will be recognized in the current period. For the changes of estimations that not only influence the current period ,but also affect the future periods, the influenced amount will be recognized in the current period and future period. As of the balance sheet date, the material areas that need to be judged ,estimated and assumed are listed below: (1) Income recognition - construction contract The Company confirm the contract income by the percentage method of completion on the balance sheet date when the result of the construction can be reliably estimated. The percentage of completion is confirmed according to the methods mentioned in Note 4. 25 Income, and is accumulated in the accounting year for each construction contract. Significant judgments need to be made in determining the percentage of completion, the cost of the contract, the total revenue and cost of the contract, and the recoverability of the contract. Project management’s judgments mainly relies on past experience and work. The change in the estimated total revenue and cost of the contract, as well as the estimated alteration of the execution result of the contract, may affect or constitute a major impact on the business income and cost, profit and loss during the current or subsequent period. (2) classification of lease The lease are classified into operating lease and finance lease, according to the “Accounting Standards for Business Enterprise No.21-Lease” .When making the classification, the management need to make analysis and judgment about whether all risk and reward related with the ownership of assets leased out have been substantially transferred to the lessee or not ,or whether all risk and reward related with the ownership of the assets leased have substantially assumed by the Group. (3) The provision for allowance for bad debt The Group applies the allowance method to estimate the bad debt, according to the policy of accounts receivable. The impairment of accounts receivable is based on the evaluation of accounts receivable’s possibility of collection. The difference between the actual result and the original estimation would influence the accounts receivable’s carrying value and cause the balance of allowance for bad debt to increase or reverse back during the period when the estimation is changed. (4) Provision for inventory According to inventory accounting policy, the ending inventory is measured by the lower of cost and net realizable value. When the cost is greater than the net realizable value and the obsolete and unsalable inventory, the inventory falling price reserve shall be withdrawn. Reduce the inventory to the net realizable value is based on the evaluation the salable of the inventory and its net realizable value. Estimates of net realizable value are based on the most reliable evidence available at the time the estimates are made and take into consideration the purpose for which the inventory is held and the influences of events occurring after the 84 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 balance sheet date. The difference between the actual result and original estimation will influence the carrying amount of the inventory and cause the provision for inventory to increase or reverse back during the period when the estimation is changed. (5) The fair value of financial instrument For the financial instrument lacking active trading market, the Group will use several valuation methods to make sure the fair value. The methods include the model to analyze the discounted cash flow etc. The Group will evaluate the following aspects, such as the future cash flow, credit risk, market volatility and the relativity etc. and then choose the applicable discounted rate, when making the evaluation. There are uncertainties for the relevant assumptions whose changes will influence the fair value of financial instrument. (6) Provision for Available- for- sale financial assets The determination to confirm the impairment loss in the profit statement of whether the impairment of Available- for- sale financial assets is largely depends on the judgement and assumption of the management. In the process of judgment and assumptions, the cost and duration of the investment fair value, the financial condition and short-term business prospect of investment targets, including the industry situation, technological change, credit rating, default rate and the risk of hand will be taken into account. (7) Provision for non-current assets The Group will make judgment on the non-current assets beside the financial assets about whether there are signs for impairment on the balance sheet date. For the intangible assets whose life is uncertain, when there are signs for impairment, it should be tested for impairment, beside the yearly impairment test. Other non-current assets beside the financial statement, when there are signs indicating that the carrying value are unrecoverable, it should be tested for impairment. When the carrying value of the asset or asset group is greater than the recoverable amount (i.e., the net value of fair value less the cost of disposal and present value of the predicted future cash flow whichever is higher), it indicates impairment. The net value of fair value less the cost of disposal, is referred to the agreed sale price of similar assets under fair trade or the observable market price, less the incremental cost directly related with the disposal of the assets. The Group need to make significant judgment to the output of assets (or assets group), sale price, relevant operating cost and the discounted rate when estimating the present value of future cash flows. The Group will make use of any relevant material available when estimating the recoverable amount , including the prediction of the output, sale price and relevant operating cost according to reasonable and supportable assumptions. The Group will test the goodwill for impairment at least once a year, which requires to estimate the present value of the future cash flows of the assets and assets group allocated with the goodwill . When estimating 85 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 the present value to the future cash flow, the Group need to estimate the cash flows generating from the assets and assets group, and choose the applicable discount rate to determine the present value. (8) Depreciation and amortization The Group use the straight-line method to depreciate and amortize the investment real estate, fixed assets and intangible assets within the useful life after taking into the consideration of the residual value. By the way, the amount of depreciation and amortization during the report period are determined. The useful life is determined based on past experience and the predicted technical changes of similar assets. If there are significant changes of previous estimations, the depreciation and amortization would be adjusted in the future periods. (9) Deferred tax asset To the degree that there are sufficient taxable profit to make up the deductible losses, the Group will recognize the deferred tax assets for the un-used deductible losses. It requires the management to apply massive judgments to estimate the time and amount the taxable profits will generate in the future period combining with the strategic of tax planning to determine the amount of deferred tax asset. (10) Income tax There are some uncertainties for some trades’ ultimate tax treatment and calculation. Some items need the determination from the tax authorities about whether they are deductible before tax or not. If the ultimate tax determination are different with the originally estimated amount, the difference will influence the current period income tax and the deferred income tax when the tax determination are finally made. VI Principal Taxes Applied Taxes and their rates Category Taxable basis Tax rate Value added tax (“VAT”) Goods sales income, taxi operating income 5%,3%,6% Construction tax Turnover tax 7% Income tax Income tax payable 25% & 16.5% Education surcharge(Local Education Turnover tax 5% surcharge) Progressive rates ranging Land appreciation tax Sales revenue of properties from 30%-60% Property tax The residual value 1.2% *The rate of domestic enterprises is 25%, and the rate of HK enterprises is 16.5%. The company and its subsidiaries provided commodity housing, property leasing and management, hotel service, construction and installation service as main products and services. As the inform, No.36—pilot about business tax replacing with VAT popularized (2016 Revision) ,is issued by Finance and Taxation Ministry , The 86 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 categories and rates of VAT about the company and its subsidiaries are as follow . Tax rate before Business Tax Category of income The way of tax calculation Tax rate Replacing with VAT Sales of properties Simply filling return 5% 5% Construction, installation income Simply filling return 3% 3% Rental income of Property Simply filling return 5% 5% Income of Property Management Filling return generally 6% 5% VII Notes to the Consolidated Financial Statements Unless otherwise noted, the following annotation project (including the main projects annotation of the financial statement of the Company), the period-begin refers to January 1,2018 the period-end refers to June 30, 2018 and this period refers to January – June 2018 with the last period of January – June 2017. 7.1 Monetary funds Item Closing balance Opening balance Cash on hand 72,392.09 56,472.32 Cash in bank 1,068,588,273.53 1,206,732,584.14 Other monetary funds 290,033.83 Total 1,068,660,665.62 1,207,079,090.29 Including amount deposited in the foreign countries 8,105,519.64 8,257,485.53 Note: Other monetary funds that the Group’s ownership are the deposits about letter of guarantee setting up by bank. 7.2 Note receivables (1)Note receivables by types Item Closing balance Opening balance Trade acceptance -- 5,921,287.00 Total -- 5,921,287.00 (2) There are no Note receivables pledged at the period-end (3) There are no Note receivables endorsed or discounted at the period-end and not matured yet on the balance sheet date (4)There are no situations of reclassifying the note receivables to the accounts receivables due to the issuer dishonoring at the end of the year. 7.3 Accounts receivables (1) Accounts receivable by categories Closing balance Category Carrying amount Bad debt provision book value 87 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Amount (%) Amount (%) Accounts receivable of which provision for bad debts is -- -- -- -- of individually significant Accounts receivable of which provision for bad debts is 355,303,762.40 100.00% 19,189,315.16 5.40% 336,114,447.24 of individually insignificant Total 355,303,762.40 100.00% 19,189,315.16 5.40% 336,114,447.24 (Continued) Opening balance Category Carrying amount Bad debt provision book value Amount (%) Amount (%) Accounts receivable of which provision for bad debts is of individually -- -- -- -- -- significant Accounts receivable of which provision for bad debts is of individually 156,335,813.56 100.00% 19,243,657.51 12.31% 137,092,156.05 insignificant Total 156,335,813.56 100.00% 19,243,657.51 12.31% 137,092,156.05 ① Bad debt provision of accounts receivable which is of individually insignificant □ Yes √ No (2)There were no any account receivables which had been accrued fully or large proportion provision but had been fully collected or reversed back in this accounting year. (3) There were no any significant account receivables which had been written off in this accounting year. (4) Top 5 entities with the largest balances of accounts receivable Proportion of the amount to Name of entity Relationship with the Group Amount Age the total AR (%) Corporate unit No.1 Un-related party 76,176,227.77 Within 1 year 22.66 Corporate unit No.2 Un-related party 36,585,691.51 Within 1 year 10.88 Corporate unit No.3 Un-related party 8,931,088.39 Within 1 year 10.88 Corporate unit No.4 Un-related party 7,909,014.55 Within 1 year 2.35 Corporate unit No.5 Un-related party 6,862,127.83 Within 1 year 2.04 Total 136,464,150.05 48.83 Other instructions: Details of pledge of accounts receivable are as follows: Note 7.44 and X(2) 7.4 Prepayments (1) Aging analysis Closing balance Opening balance Aging Amount (%) Amount (%) 88 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Within 1 year 951,595.61 99.92% 3,412,663.50 56.50% 1-2 years 2,626,942.07 43.49% Over 3 years 761.94 0.08% 761.94 0.01% Total 952,357.55 —— 6,040,367.51 —— (2) Top 5 entities with the largest balances of prepayments Name of entity Relationship with the Group Amount Age The reason for Unsettled Legal fees for outstanding Project No.1 Un-related party 200,000.00 Within 1 year cases Project No.2 Un-related party 85,566.00 Within 1 year Unsettled material funds Project No 3 Un-related party 84,511.50 Within 1 year Unsettled material funds Project No.4 Un-related party 74,000.00 Within 1 year Unsettled gas charges Project No 5 Un-related party 40,085.40 Within 1 year Unsettled material funds Total 484,162.90 —— 7.5 Dividends receivables (1) Details of dividends receivable Item(Or name of investee) Closing balance Opening balance Yunnan KunPeng Flight service Co., Ltd 1,052,192.76 1,052,192.76 Total 1,052,192.76 1,052,192.76 (2) Dividends receivable aging over 1year Reasons for Whether the amount is Item(Or name of investee) Closing balance Aging uncollected impaired and the base of amounts judgment Yunnan KunPeng Flight service Co., Ltd 1,052,192.76 Above 5 years Delay to pay No Total 1,052,192.76 7.6 Other receivables (1) Other receivables by categories Closing balance Category Carrying amount Bad debt provision Book value Amount (%) Amount (%) Other receivables of which provision for bad 144,777,268.75 61.22% 144,443,572.49 99.77% 333,696.26 debts is of individually significant Other receivables of which provision for bad 91,695,698.81 38.78% 29,500,684.91 32.17% 62,195,013.90 debts is of individually insignificant Total 236,472,967.56 100.00% 173,944,257.40 73.56% 62,528,710.16 (Continued) 89 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Closing balance Category Carrying amount Bad debt provision Book value Amount (%) Amount (%) Other receivables of which provision for bad 144,777,268.75 58.00% 144,443,572.49 99.77% 333,696.26 debts is of individually significant Other receivables of which provision for bad 105,057,180.46 42.00% 29,487,718.10 28.07% 75,569,462.36 debts is of individually insignificant Total 249,834,449.21 100.00% 173,931,290.59 69.62% 75,903,158.62 ① Bad debt provision of other receivables which is of individually significant □ Yes √ No ② Bad debt provision of other receivables which is of individually insignificant □ Yes √ No (2) There were no any other receivables which had been accrued fully or large proportion provision but had been fully collected or reversed back in this accounting year. (3) There were no any significant account other receivables which had been written off in this accounting year. (4)Other receivables by nature Nature Closing balance Opening balance Other receivables between subsidiaries that are not included in the 129,277,424.93 121,140,372.17 consolidated statement Others 107,195,542.63 128,694,077.04 Total 236,472,967.56 249,834,449.21 (5)Top 5 entities with the largest balances of other receivables Proportion of the Provision for bad Name of entity Nature Amount Age amount to the total debt at year end OR (%) Canada Great Wall( Vancouver) current account 89,035,748.07 Above 5 years 37.65% 89,035,748.07 Co.,Ltd Paklid Limited current account 19,300,627.03 Above 5 years 8.16% 19,300,627.03 Bekaton property Limited * current account 12,559,290.58 Above 5 years 5.31% 12,559,290.58 Guangdong province Huizhou current account 10,465,168.81 Above 5 years 4.43% 10,465,168.81 Luofu Hill Mineral Water Co.,Ltd Shenxi Limited current account 5,464,392.59 Above 5 years 2.31% 5,131,698.60 Total 136,825,227.08 57.86% 136,492,533.09 (6) There were no any other receivables about government subsidies that have been involved. (7) There were no any other receivables due to the transfer of financial assets that have been derecognized. 90 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 (8) There were no any other receivables which had transferred to continued involvement in assets or liabilities. 7.7 Inventory (1) Categories of inventory Closing balance Item Carrying amount Provision for inventories Net carrying amount Non real estate development projects Raw materials 882,110.01 240,000.00 642,110.01 Finished products 329,837.97 38,891.91 290,946.06 Low-value consumable products 0.00 Construction in progress 73,599,891.72 73,599,891.72 Real estate development projects 168,923,076.99 -- -- Real estate developing products 430,944,949.91 430,944,949.91 Real estate developed products 1,003,721,763.95 268,941.60 1,003,452,822.35 Real estate which are going to be developed 168,923,076.99 168,923,076.99 Total 1,678,401,630.55 547,833.51 1,677,853,797.04 (Continued) Opening balance Item Carrying amount Provision for inventories Net carrying amount Non real estate development projects Raw materials 883,896.65 240,000.00 643,896.65 Finished products 350,102.98 38,891.91 311,211.07 Low-value consumable products 0.00 Construction in progress 39,005,838.31 39,005,838.31 Real estate development projects Real estate developing products 804,372,181.70 804,372,181.70 Real estate developed products 751,099,380.82 268,941.60 750,830,439.22 Real estate which are going to be developed 168,923,076.99 168,923,076.99 Total 1,764,634,477.45 547,833.51 1,764,086,643.94 (2)Movement of Provision of inventories Increase Decrease Item Opening balance Closing balance Provision other Reversals Write-off Raw materials 240,000.00 -- -- -- -- 240,000.00 Inventories 38,891.91 -- -- -- -- 38,891.91 Real estate developed products 268,941.60 -- -- -- -- 268,941.60 91 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Total 547,833.51 -- -- -- -- 547,833.51 (3) apitalized borrowing cost at the period-end is RMB 42,245,570.18: Annual Item Opening balance Increase Decrease Closing balanc capitalization rate YueJing dongfang 208,232.32 -- 66,634.34 141,597.98 1.49% Project Shenfang Chuanqishan 720,530.19 -- -- 720,530.19 5.66% Shenfang Shanlin 443,793.86 -- -- 443,793.86 7.10% Garden Shengfang CuiLin 9,165,242.92 3,694,420.78 4,582,621.46 8,277,042.24 3.47% Building TianYue Bay No.1 28,024,892.29 -- 1,582,433.22 26,442,459.07 7.78% ChuanQi DongHu 4,811,327.74 -- -- 4,811,327.74 3.62% Building ChuanQi JingYuan 1,408,819.10 -- -- 1,408,819.10 1.66% Total 44,782,838.42 3,694,420.78 6,231,689.02 42,245,570.18 5.73% (4)Completed and unsettled assets resulting from the construction contract at the end of the period Item Amount Accumulated cost incurred 196,294,762.33 Accumulated gross profit 6,916,325.63 Deduct: Expected loss -- Amount already settled 129,611,196.24 Completed outstanding assets formed by the construction contract 73,599,891.72 7.8 Other current assets Item Closing balance Opening balance Value added tax 3,186,838.82 10,783,474.63 Business tax 166,667.14 401,663.63 City construction surcharge 297,494.42 78,771.08 Education surcharge 144,926.38 Local education surcharge 117,981.55 105,635.46 Embankment Protection Fee 725.66 Increment tax on land value 299,472.73 Bank structured deposits 600,000,000.00 Total 604,214,106.70 11,369,544.80 92 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Instructions: The company signed an agreement with the shenzhen branch of China citic bank co., ltd. to invest 60,000 yuan of its own capital in the 6-month guaranteed floating bank structured deposits on May 28, 2018. 7.9 Available-for-sale financial assets (1) Details of available-for-sale financial assets Closing balance Opening balance Item Book balance Impairment Book value Book balance Impairment Book value Available-for-sale debt -- -- -- -- -- -- instrument Available-for-sale equity 17,464,240.74 -- 17,464,240.74 17,464,240.74 -- 17,464,240.74 instrument Including:measured by fair -- -- -- -- -- -- value Measured by cost 17,464,240.74 -- 17,464,240.74 17,464,240.74 -- 17,464,240.74 Others -- -- -- -- -- -- Total 17,464,240.74 -- 17,464,240.74 17,464,240.74 -- 17,464,240.74 93 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 (2)Available-for-sale financial assets measured by cost at year end Book balance Provision for impairment Proportion rate Curr. year Investee Closing Opening bal. Increase. Decrease Closing bal. Opening bal. increase decrease in investee(%) cash div. bal. Shantou Small &Medium Enterprises 12,000,000.00 -- -- 12,000,000.00 -- -- -- -- 7.14% 827,100.00 Financing Guarantee Co., Ltd Yunnan KunPeng Flight service Co.,Ltd 5,464,240.74 -- -- 5,464,240.74 -- -- -- -- 25.00 -- Total 17,464,240.74 -- -- 17,464,240.74 -- -- -- -- -- 827,100.00 Note: The Group’s shareholding proportion to Yunnan Kunpeng Flight service Co., Ltd is 25%. Because the Group have no participating right to its finance and operating policies, the Group cannot exercise the significant influence on the investee. 7.10 Long-term equity investments (1) Long-term equity investments by types Change amount of this period Invested company Opening balance Additional Negative Profit and loss on investments confirmed Other comprehensive Other equity investment investment with equity method income adjustment change I.Joint ventures Guangdong province Huizhou Luofu Hill Mineral Water Co.,Ltd 9,969,206.09 -- -- -- -- -- Fengkai Xinhua Hotel 9,455,465.38 -- -- -- -- -- Jiangmen Xinjiang Real Estate Co., Ltd 9,037,070.89 -- -- -- -- -- Xi’an Fresh Peak Property Trading Co., Ltd 32,840,729.61 -- -- -- -- -- Dongyi Real Estate Co., Ltd 30,376,084.89 -- -- -- -- -- Subtotal 91,678,556.86 -- -- -- -- -- II.Affiliated enterprises Shenzhen Ronghua JiDian Co.,ltd 1,523,815.70 -- -- - -- -- 94 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Change amount of this period Invested company Opening balance Additional Negative Profit and loss on investments confirmed Other comprehensive Other equity investment investment with equity method income adjustment change Shenzhen Runhua Automobile trading Co.,Ltd 1,445,425.56 -- -- -- -- -- Subtotal 2,969,241.26 -- -- -- -- Total 94,647,798.12 -- - - -- -- (Continuted) Change amount of this period Provision for impairment Invested company Ending balance Invested company Change amount of this period Ending balance balance at the period-end I.Joint ventures Guangdong province Huizhou Luofu Hill Mineral Water Co.,Ltd -- -- -- 9,969,206.09 9,969,206.09 Fengkai Xinhua Hotel -- -- -- 9,455,465.38 9,455,465.38 Jiangmen Xinjiang Real Estate Co., Ltd -- -- -- 9,037,070.89 912,537.16 Xi’an Fresh Peak Property Trading Co., Ltd -- -- -- 32,840,729.61 20,673,831.77 Dongyi Real Estate Co., Ltd -- -- -- 30,376,084.89 21,225,715.87 Subtotal -- -- -- 91,678,556.86 62,236,756.27 II.Affiliated enterprises Shenzhen Ronghua JiDian Co.,ltd -- -- -- 1,523,815.70 1,076,954.64 Shenzhen Runhua Automobile trading Co.,Ltd -- -- -- 1,445,425.56 1,445,425.56 Subtotal -- -- -- 2,969,241.26 2,522,380.20 Total -- -- -- 94,647,798.12 64,759,136.47 other equity investment, are as follow :note 9, 1 "equity in the subsidiary". 95 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 7.11 Investment properties Investment properties measured at cost. Item House& building Land-use right Total I. Original carrying value 1.Opening balance 1,010,636,392.81 100,823,904.75 1,111,460,297.56 2.Increase in the year -- 844,669.17 844,669.17 (1)Outsourcing -- -- -- (2)Carried over from inventory -- -- -- (3)Others -- 844,669.17 -- 3.Decrease in the year -- -- -- 4.Closing balance 1,010,636,392.81 101,668,573.92 1,112,304,966.73 II. Accumulative depreciation& amortization 1.Opening balance 367,283,745.78 -- 367,283,745.78 2.Increase in the year 12,087,308.24 -- 12,087,308.24 (1)Withdrawing or amortization 12,087,308.24 -- 12,087,308.24 (2)Carried over from assets -- -- -- 3.Decrease in the year -- -- -- 4. Closing balance 379,371,054.02 -- 379,371,054.02 III. Provision for impairment 1.Opening balance 14,128,544.62 82,750,883.12 96,879,427.74 2.Increase in the year -- 693,259.40 693,259.40 3.Decrease in the year -- -- -- 4.Closing balance 14,128,544.62 83,444,142.52 97,572,687.14 IV. Book value 1.Closing book value 617,136,794.17 18,224,431.40 635,361,225.57 2.Opening book value 629,224,102.41 18,073,021.63 647,297,124.04 Note:(a) Current year depreciation and amortization is RMB 12,087,308.24;The decrease of original carrying value and provision for impairment of land-use right is caused by the fluctuation of foreign exchange rate when translating the foreign currency financial statements; (b)Among the investment properties, there were house &building with carrying value RMB 22,972,285.00 that were used as mortgage of long-term loans(including the long-term loans that will mature within one year), referring to note 7.78 for details. 96 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 7.12 Fixed assets Transportation Electronic equipment Item Houses& Buildings Total equipment and others I. Original carrying value 1.Opening balance 107,110,751.42 12,270,722.14 14,833,483.00 134,214,956.56 2. Increase in the year -- 349,560.34 315,917.18 665,477.52 (1)Purchasing -- 349,560.34 315,917.18 665,477.52 (2)Transferred from the construction in progress -- -- -- -- 3. Decrease in the year -- 308,022.78 308,022.78 (1)Disposal or discard as useless -- -- 308,022.78 308,022.78 (2)Decrease of cooperation combination -- -- -- -- (3)Transferred to investment property -- -- -- -- 4. Closing balance 107,110,751.42 12,620,282.48 14,841,377.40 134,572,411.30 II. Accumulated depreciation 1.Opening balance 73,640,632.96 10,638,507.53 11,997,947.36 96,277,087.85 2. Increase in the year 1,511,028.82 498,845.79 363,737.14 2,373,611.75 Including:withdrawing 1,511,028.82 498,845.79 363,737.14 2,373,611.75 3. Decrease in the year -- -- -- -- (1)Disposal or discard as useless -- -- -- -- (2)Decrease of corporate combination -- -- -- -- (3)Transferred to investment property -- -- -- -- 4. Closing balance 75,151,661.78 11,137,353.32 12,361,684.50 98,650,699.60 III. Provision for Impairment 1.Opening balance -- -- -- -- 2. Increase in the year -- -- -- -- Including:Withdrawing -- -- -- -- 3. Decrease in the year -- -- -- -- 4. Closing balance -- -- -- -- IV. Book value -- -- -- -- 1. Ending book value 31,959,089.64 1,482,929.16 2,479,692.90 35,921,711.70 2. Beginning book value 33,470,118.46 1,632,214.61 2,835,535.64 37,937,868.71 Note: (1)The depreciation for the current year is RMB 2,373,611.75. There were no constructions in progress transferred to fixed assets during the period. (2)There was no any fixed assets whose ownership are restricted. (3)There was no any fixed assets lying idle temporary. 7.13 Intangible assets Item Software Total 97 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Item Software Total I. Carrying value 1. Opening balance 2,241,800.00 2,241,800.00 2.Increase in the year -- -- (1)Purchased -- -- (2)Internally developed -- -- (3)Increase of corporate combination -- -- 3. Decrease in the year -- -- (1)Disposal -- -- (2)Decrease of corporate combination -- -- 4. Closing balance 2,241,800.00 2,241,800.00 II. Accumulated amortization 1.Opening balance 2,186,600.00 2,186,600.00 2. Increase in the year 55,200.00 55,200.00 Including:withdrawing 55,200.00 55,200.00 3. Decrease in the year -- -- (1)Disposal -- -- (2)Decrease of corporate combination -- -- 4. Closing balance 2,241,800.00 2,241,800.00 III. Provision for impairment -- 1. Opening balance -- -- 2. Increase in the year -- -- Including: withdrawing -- -- 3. Decrease in the year -- -- 4. Closing balance -- -- IV. Book value 1. Ending book value -- -- 2. Beginning book value 55,200.00 55,200.00 7.14 Long-term deferred assets Item Opening balance Increase Amortization Other reductions Closing balance Renovation costs 529,905.52 78,333.61 451,571.91 Others 56,445.14 7,697.04 48,748.10 Total 586,350.66 86,030.65 500,320.01 7.15 Deferred tax assets (1) Recognized deferred tax assets Closing balance Opening balance Item Deferred tax assets Deductible or taxable Deferred tax Deductible or taxable 98 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 temporary differences assets temporary differences Provision for impairment losses of 268,941.60 67,235.40 268,941.60 67,235.40 assets Eliminated unrealized profit when 9,761,284.98 2,440,321.25 30,132,928.99 7,533,232.24 consolidating financial statement Deductible loss 15,099,870.28 3,774,967.57 26,809,694.47 6,702,423.62 Provision for land appreciation tax 14,118,236.27 3,529,559.07 40,166,204.21 10,041,551.05 liquidation reserves Expected profit for advances from 143,817,844.47 35,954,461.11 92,582,611.51 23,145,652.88 customers Total 183,066,177.60 45,766,544.40 189,960,380.78 47,490,095.19 (2) Details of unrecognized deferred tax assets Item Closing balance Opening balance Deductible operating losses 4,194,750.37 4,194,750.37 Bad debt provision 46,673,541.64 46,673,541.64 Provision for impairment of long-term investments 47,660,725.09 47,660,725.09 Provision for impairment of investment properties 24,219,856.94 24,219,856.94 Total 122,748,874.04 122,748,874.04 (3) Unrecognized deductible losses of deferred tax assets will be expire at the end of following years Year Closing balance Opening balance 2018 1,656,431.26 1,656,431.26 2019 107,123.28 107,123.28 2020 9,692,495.52 9,692,495.52 2021 11,349,323.06 11,349,323.06 2022 5,753,184.38 5,753,184.38 Total 28,558,557.50 28,558,557.50 7.16 Short-term loans Item Closing balance Opening balance Pledged Loan 51,374,540.56 83,307,653.64 Credit Loan 20,900,000.00 Total 51,374,540.56 104,207,653.64 Note:(1) (1) Refer to note 6.2/Notes receivable for the details of pledged loan and note 7.44. (2)There was no short term loan overdue which had not repaid 7.17 Accounts payable (1) Details of accounts payable 99 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Item Closing balance Opening balance Within 1 year 145,360,477.82 150,123,930.63 Over 1 year 101,955,171.41 40,505,825.67 Total 247,315,649.23 190,629,756.30 Note: Significant accounts payable aged more than one year is for the unsettled project at the end of the period. 7.18 Advances from customers (1) Details of advances from customers Item Closing balance Opening balance Within one year 216,164,441.03 325,258,418.19 Over one year 40,203,784.40 6,893,598.35 Total 256,368,225.43 332,152,016.54 (2) Completed and unsettled assets resulting from the construction contract at the end of the period Item Amount Accumulated cost incurred 196,294,762.33 Accumulated gross profit 6,916,325.63 Deduct: Expected loss -- Amount already settled 129,611,196.24 Completed outstanding assets formed by the construction contract 73,599,891.72 ○1 Significant advances from customers aged more than one year is the import and export agency business payment and advanced payment from housing buyers, as such receipts have not been transferred to income at the end of the year. ○2 Details of advances from customers Item Closing balance Opening balance Estimated time of completion Jinye Island villa No.10 4,226,985.74 2,899,190.49 Completed Jinye Island villa No.11 90,000.00 1,558,741.91 Completed Yuejing dongfang 2,727,839.06 3,629,283.83 Completed Tianyue Bay No.1 16,153,171.47 8,264,468.87 Completed Shengfang CuiLin Building 231,035,731.00 256,113,269.00 Completed Total 254,233,727.27 272,464,954.10 —— 7.19 Employee benefits payable (1) Details of employee benefits payable Item Opening balance Increase Decrease Closing balance I. Short-term remuneration 30,373,697.09 75,534,726.58 68,959,267.32 36,949,156.35 II. Post-employment benefit-defined 142,522.87 7,407,472.65 7,457,422.77 92,572.75 benefit plans 100 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Item Opening balance Increase Decrease Closing balance Total 30,516,219.96 82,942,199.23 76,416,690.09 37,041,729.10 (2) Details of short-term remuneration Item Opening balance Increase Decrease Closing balance I. Salary, bonus, allowance and subsidies 29,500,700.86 68,150,449.04 61,450,761.97 36,200,387.93 II. Employee welfare 39,600.00 566,582.00 566,582.00 39,600.00 III. Social insurance premium 2,045.09 2,395,896.02 2,395,896.02 2,045.09 Including: Medical insurance premium 1,503.22 2,076,701.87 2,076,701.87 1,503.22 Industries insurance premium 591.04 150,790.17 150,560.01 821.20 Maternity insurance premium -49.17 168,403.98 168,634.14 -279.33 III. Housing fund 124,366.23 3,228,044.38 3,228,044.38 124,366.23 IV. Union expenses and employee education 706,984.91 1,193,755.14 1,317,982.95 582,757.10 expenditure Total 30,373,697.09 75,534,726.58 68,959,267.32 36,949,156.35 101 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 (3) The details of defined contribution plans Item Opening balance Increase Decrease Closing balance I. Basic endowment insurance premium 75,075.11 4,938,829.20 4,938,829.20 75,075.11 II. Unemployment insurance premium 447.60 150,790.17 150,790.17 447.60 III. Company annuity payment 67,000.16 2,317,853.28 2,367,803.40 17,050.04 Total 142,522.87 7,407,472.65 7,457,422.77 92,572.75 Note: The Group participates in the basic endowment insurance and unemployment plan sponsored by the government according to the regulations. Beside the monthly payment mentioned above, the Group undertakes no further payment obligation. The related expenses are recognized in profit and loss or the cost of relevant asset in the current period incurred. 7. 20 Taxes payable Item Closing balance Opening balance VAT 13,047,453.97 3,582,136.09 Corporate income tax 127,808,171.76 28,512,631.43 Individual income tax 803,092.71 1,041,204.75 Urban maintenance & construction tax; 2,234,203.98 Property tax 3,717,315.47 1,975,303.69 Land appreciation tax 53,482,786.37 49,979,273.19 Education surcharge 1,650,112.98 12,493.53 Others 1,101,183.02 1,050,484.21 Total 203,844,320.26 86,153,526.89 7.21 Interest payable Item Closing balance Opening balance Others 16,535,277.94 16,535,277.94 Total 16,535,277.94 16,535,277.94 Note: The balance of “Other” interests payable due to Shenzhen Investment Holdings Co.,Ltd., being accrued for the loans interst. Please refer refer to XI.6 (2) 7.22 Other payables (1)Details of other payables Item Closing balance Opening balance Land appreciation tax accrued 334,810,562.72 176,386,234.44 Payable to related parties 14,398,496.70 11,999,854.37 Deposits 83,126,753.11 79,464,386.67 102 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Others 201,632,520.41 107,094,613.62 Total 633,968,332.94 374,945,089.10 (2)Description of significant other payables aged more than one year Name of entity Amount Reason for overdue Tax accrued- land appreciation tax 334,810,562.72 Unexpired Total 334,810,562.72 —— NOTICE: The Group made provision for LAT, according to Guo Shui Fa [2006] No. 187 "LAT liquidation management issues of real estate development enterprises made by the State Administration of Taxation ". As at June 30, 2018, the closing balance is RMB 334,810,562.72. 7.23 Non-current liabilities due within one year (1)Details of non-current liabilities due within one year Item Closing balance Opening balance Long-term loans due within one year 17,773,200.00 64,000,000.00 Total 17,773,200.00 64,000,000.00 7.24 Long-term loans Item Closing balance Opening balance Loan with mortgage 35,556,700.00 146,000,000.00 Less: long-term loans due within one year 17,773,200.00 64,000,000.00 Total 17,783,500.00 82,000,000.00 Notice: ○1 The total amount of long-term loans on June 30, 2018 is 35,556,700.00 yuan, of which 17,773,200.00 yuan is divided into non-current liabilities due within one year; The remaining 17,783,500.00 yuan is divided into long-term loans. ○2 The 2018 annual interest rate shall be set at 10% higher than the benchmark interest rate of the people's bank of China in the same period. ○3 The classes and the amount of mortgage assets, Please refer refer to note 7.44. 7.25 Long-term payables Details of long-term payables Item Closing balance Opening balance Maintenance fund 5,900,692.96 8,101,880.05 Total 5,900,692.96 8,101,880.05 103 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 7.26 Share capital Changes for the period(+ 、-) Item Opening balance Newly issued Bonus Capitalization of Closing balance Other Subtotal shares issued surplus reserve Total shares 1,011,660,000.00 -- -- -- -- -- 1,011,660,000.00 7.27 Capital surplus Item Opening balance Increase Decrease Closing balance Capital premium 557,433,036.93 -- -- 557,433,036.93 Other capital reserve 420,811,873.18 -- -- 420,811,873.18 Total 978,244,910.11 -- -- 978,244,910.11 7.28 Other comprehensive income Amount incurred this year Less: previous Opening Attributable Attributable Closing Item Accrual before years‘ OCI Less: balance to parent to minority balance income tax transferred to income company shareholders this year P&L in current. tax after tax after tax period I. Other comprehensive income that could -- -- -- -- -- -- -- not be classified into profit and loss in the future II. Other comprehensive income that would be 10,045,697.16 -694,697.10 -486,287.97 -208,409.13 9,559,409.19 classified into profit and loss in the future including:the difference of foreign currency 10,045,697.16 -694,697.10 -486,287.97 -208,409.13 9,559,409.19 financial statement translation Total 10,045,697.16 -694,697.10 -486,287.97 -208,409.13 9,559,409.19 7.29 Surplus reserve Item Opening balance Increase Decrease Closing balance Statutory surplus reserve 85,666,668.00 85,666,668.00 104 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Item Opening balance Increase Decrease Closing balance Total 85,666,668.00 85,666,668.00 Note: According to the Company Law and the company's policy, the company draws 10% of net profit for statutory surplus reserve. It will not be withdrawn if the accumulation amount of statutory surplus reserve exceeds 50% of the registered capital of the company. Discretionary surplus reserve could be withdrawn after the statutory surplus reserve. It can be made up the previous annual loss or increase the capital stock after approval 7.30 Undistributed profit Amount for the current Amount for the prior Item period period Before adjustment: Undistributed profits at the end of prior year 742,624,845.71 583,908,333.05 Adjustment: adjust the beginning undistributed profits (Increase +, decrease -) -- -- After adjustment: Undistributed profits at beginning of year 742,624,845.71 583,908,333.05 Plus: net profit attributable to the shareholders of the parent company in the period 326,066,084.53 137,226,601.84 Less: Appropriation to the statutory surplus reserve -- -- Appropriation to discretionary surplus reserve -- -- Common stock dividends declared -- -- Conversion of ordinary shares’ dividends into share capital -- -- Undistributed profit at the end of the period 1,071,690,930.24 721,134,934.89 7.31 Operating income and costs (1) Operating income and operating costs Amount for the current period Amount for the prior period Item Income Costs Income Costs Principal operating 1,313,971,314.90 538,511,001.68 727,183,146.15 493,647,637.36 Other operating 3,570,316.45 1,906,489.73 4,123,835.88 1,302,160.53 Total 1,317,541,631.35 540,417,491.41 731,306,982.03 494,949,797.89 7.32 Taxes and surcharges Item Amount for the current period Amount for the prior period City construction and maintenance tax 4,283,758.49 2,255,618.74 Education surcharges 1,894,171.09 996,755.33 Property tax 3,525,479.32 3,327,020.32 Land appreciation tax 6,815.23 vehicle and vessel tax 10,200.00 6,000.00 Stamp duty 457,845.20 24,463.50 105 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Item Amount for the current period Amount for the prior period Business tax 1,629,897.12 859,907.11 Land value increment tax 264,344,713.02 15,825,612.34 Local education surcharges 1,186,490.00 606,413.00 Embankment Protection Fee 1,121.29 11,520.89 Total 277,340,490.76 23,913,311.23 Note: Details of business taxes and surcharges please refer to 11.6. 7.33 Selling expenses Item Amount for the current period Amount for the prior period Employee benefits 1,968,446.05 1,707,531.15 Advertising expenses 2,795,656.99 3,847,364.06 Entertainment expenses 445,386.30 448,735.60 Sales agency fees and commissions 30,118,783.25 56,665.76 Others 1,838,861.18 772,507.19 Total 37,167,133.77 6,832,803.76 The Selling expenses incurred in this period was 37,167,133.77 yuan, which increased by 443.95% compared with the same period last year .was due to the depreciation of Cuilinyuan sales agent fees by the sales of a certain proportion of the account 7.34 Administrative expenses Item Amount for the current period Amount for the prior period Employee benefits 20,306,987.57 13,427,835.61 Taxes 355,928.24 642,583.97 Depreciation 1,548,056.87 1,544,544.45 Entertainment expenses 880,424.02 1,099,378.23 Intermediary fee 943,460.89 850,413.87 Travel expense 200,814.85 205,266.91 Administrative expenses 565,594.94 436,364.81 Repair charge 438,716.03 443,258.96 Water and electricity charges 421,746.13 180,904.51 Other amortization 357,994.59 391,561.10 Others 5,716,476.72 5,497,126.27 Total 31,736,200.85 24,719,238.69 7.35 Financial expenses Item Amount for the current period Amount for the prior period 106 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Item Amount for the current period Amount for the prior period Interest expenses 6,711,775.56 19,728,425.13 Less: Interest income 11,769,366.46 7,399,712.00 Less: capitalized interest expenses 3,694,420.78 15,451,618.09 Exchange differences -34,475.31 333,780.08 Less: Capitalized exchange differences Others 174,817.89 153,553.30 Total -8,611,669.10 -2,635,571.58 The amount of financial expenses incurred in the current period was -8,611,669.10 yuan, a decrease of 226.75% compared with the same period last year was due to the interest expense on current loan decreases, while the interest income of time deposit increases 7.36 Investment income Amount for the Amount for the prior Item current period period Investment income from long-term investments under cost method -- -- Investment income from long-term investments under equity method*1 -- -- Investment income on disposal of long-term investments -- -- Investment income from holding trading financial assets -- -- Investment income for the sale of financial assets during the holding period 827,100.00 650,000.00 Total 827,100.00 650,000.00 Investment income for the sale of financial assets during the holding period: Amount for the current Item Amount for the prior period Reasons for changes period Shantou Small &Medium Enterprises Financing Distribution of profit 650,000.00 689,000.00 Guarantee Co., Ltd Total 650,000.00 689,000.00 7.38 Non-operating income Amount for the Amount for the Amount included in non-recurring profit or Item current period prior period loss for the period Total gains on disposal of non-current assets -- -- -- Gains on penalty -- -- -- Government grants unrelated to the Company's daily -- -- -- activities Indemnity 91,835.23 74,635.68 91,835.23 107 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Amount for the Amount for the Amount included in non-recurring profit or Item current period prior period loss for the period Others 4,000.00 242,385.75 4,000.00 Total 95,835.23 317,021.43 —— 7.39 Non-operating expenses Amount for the Amount for the prior Amount included in non-recurring profit or Item current period period loss for the period Donations to third parties 50,000.00 20,851.54 50,000.00 Penalty expense 30,210.47 10,000.00 30,210.47 Compensation expense 10,000.00 0.00 Others 119,342.86 80,762.25 119,342.86 Total 199,553.33 121,613.79 —— 7.40 Income tax expenses (1) Details of income tax expenses Item Amount for the current period Amount for the prior period Current tax expense calculated according to tax laws and 116,979,398.73 48,017,985.19 relevant requirements Deferred income tax expenses -5,809,681.45 -844,845.47 Total 111,169,717.28 47,173,139.72 (2)The process of calculating the income tax based on accounting profit Item Incurred in the current period Consolidated profit this period 440,215,365.56 Income tax calculated at legal or applicable tax rate 110,053,841.39 Impact of various tax rates applicable to subsidiaries -- Adjustment of impact on the income tax in the previous period 1,460.64 Impact of non-taxable income -- Impact of non-deductible cost, expense and loss 1,114,415.25 Impact of deductible losses deferred income tax assets unconfirmed in the previous use period -- Impact of the deductible temporary differences or deductible loss of unconfirmed deferred tax assets of this -- year. Changes of the deferred tax assets/liability caused by the adjustment of tax rate -- Income taxes 111,169,717.28 7.41 Other comprehensive income 108 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Note: Please refer to note 7.28. 7.42 Notes to items in the cash flow statements (1) Other cash receipts relating to operating activities Item Amount for the current period Amount for the prior period Interest income 13,061,210.22 10,938,611.05 Cash pledge and security deposits 4,323,391.76 4,169,257.32 Maintenance fund 6,343,450.31 The collecting and paying on another's behalf 1,651,300.01 1,963,519.00 Others 61,406,545.31 8,174,583.09 Total 86,785,897.61 25,245,970.46 (2) Other cash payments relating to operating activities Item Amount for the current period Amount for the prior period Cash paid to general and administrative expenses 12,874,997.70 11,613,292.21 Cash paid to operating expenses 3,628,291.42 3,233,124.58 Cash pledge and security deposits 4,763,108.22 4,557,072.05 The collecting and paying on another's behalf 161,981.18 724,088.98 Others 36,632,151.02 50,416,225.28 Total 58,060,529.54 70,543,803.10 (4)Cash paid on other investing activities Item Amount for the current period Amount for the prior period Six months of structured deposits 600,000,000.00 Total 600,000,000.00 7.43 Supplementary information to the cash flow statement (1) Supplementary information to the cash flow statement Amount for the current Amount for the prior Item period period I. Reconciliation of net profit to cash flows from operating activities: Net profit 329,045,648.28 137,199,669.96 Add:Provision for asset impairment -- -- 109 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Amount for the current Amount for the prior Item period period Depreciation of fixed assets, bio-assets, and natural gas 13,246,302.18 12,436,112.05 Amortization of intangible assets 55,200.00 254,370.00 Amortization of long-term deferred expense 369,642.72 1,147,347.42 Losses on disposal of fixed assets, intangible assets and other long-term assets(deduct: 24,018.05 gains) Losses on scrapping of fixed assets (deduct: gains) 14,291.75 264.47 Loss of fair value variation (deduct: gains) -- -- Financial expenses (deduct: gains) 3,060,270.68 4,276,807.04 Losses from investments (deduct: gains) -827,100.00 -650,000.00 Decrease in deferred tax assets (deduct: increase)) 1,723,550.79 -844,845.47 Increase in deferred tax liabilities (deduct: decrease) -- -- Decrease in inventories (deduct: increase) 175,982,196.68 -13,302,973.16 Decrease in operating receivables (deduct: increase) -174,638,545.77 -93,695,521.42 Increase in operating payables (deduct: decrease) 246,450,854.80 -144,604,199.24 Others 245,817.56 58,253.11 Net cash flows from operating activities 594,728,129.67 -97,700,697.19 II. Investing and financing activities that do not affect cash receipt and payment Liabilities converted capital -- -- Reclassify convertible bonds to be expired within one year as current liability -- -- Fixed assets subject to finance leases -- -- III. Net increase in cash and cash equivalents: Cash at the end of the period 1,068,660,665.62 1,164,053,438.01 Less: cash at the beginning of the period 1,206,789,056.46 1,265,767,290.57 Add: cash equivalents at the end of the period -- -- Less: cash equivalents at the beginning of the period -- -- Net increase in cash and cash equivalents -138,128,390.84 -101,713,852.56 (2)Information of cash and cash equivalents Amount for the current Amount for the prior Item period period I. Cash 1,068,660,665.62 1,206,789,056.46 Including: Cash on hand 72,392.09 56,472.32 Bank deposits -- -- Other monetary funds -- -- II. Cash equivalents -- -- Including: Investments in debt securities due within three months -- -- III. Closing balance of cash and cash equivalents 1,068,660,665.62 1,206,789,056.46 Including: Cash and cash equivalents using restricted of the parent company or -- -- 110 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Amount for the current Amount for the prior Item period period subsidiary 7.44 Ownership or use-right restricted assets Categories of assets Closing balance The reasons for restriction Accounts receivable 51,374,540.56 Short-term loan mortgaged Investment property( Shenfang square) 22,972,285.00 Long-term loan mortgaged Total 74,346,825.56 —— 7.45 The items of foreign currency (1) Details of items of foreign currency Item Balance of foreign currency at year end Exchange rate Balance of RMB converted Monetary fund Including:USD 62,689.67 6.5957 413,484.39 HKD 9,152,390.70 0.8404 7,692,035.25 HKD 4,905,150.10 0.8404 4,122,484.36 Other accounts receivable Including:USD -- -- -- HKD 25,522,945.11 0.8404 21,450,504.02 Other accounts payable Including:USD -- -- -- HKD 20,097,370.62 0.8404 16,890,634.19 (2)Oversea operating entities The Group’s significant oversea operating entities are American Great Wall Co., Ltd and Fresh Peak Investment Co., Ltd. American Great Wall Co., Ltd chooses the USD as the its functional currency, for its main operating activities are in the USA; Fresh Peak Investment Co., Ltd. chooses the RMB as its functional currency, for it is a investment company and its main operating activities are in the mainland of China. VIII The changes of the scope of consolidation The company did not change the range of consolidation in this period compared with last year IX Equities in other entities. 9.1 Equities in the subsidiaries (1) The formation of the Group 111 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Shareholding proportion Main operating Reg. (%) Name of the subsidiary Business nature Method of acquiring area place Direct Indirect Acquiring through establishment or Shenzhen Petrel Hotel Co. Ltd. Shenzhen Shenzhen Services 68.10 31.90 investment Shenzhen City Property Acquiring through establishment or Shenzhen Shenzhen Services 95.00 5.00 Management Ltd. investment Shenzhen Zhen Tung Acquiring through establishment or Shenzhen Shenzhen Services 73.00 27.00 Engineering Ltd. investment Shenzhen City We Gen Acquiring through establishment or Shenzhen Shenzhen Services 75.00 25.00 Construction Management Ltd. investment Shenzhen City Shenfang Acquiring through establishment or Shenzhen Shenzhen Investment 90.00 10.00 Investment Ltd. investment Shenzhen City Shenfang Free Commecial Acquiring through establishment or Shenzhen Shenzhen 95.00 5.00 Trade Trading Ltd. trade investment Shenzhen City SPG Long Gang Acquiring through establishment or Shenzhen Shenzhen Real estate 95.00 5.00 Development Ltd. investment Shenzhen Special Economic Zone Real Estate (Group) Acquiring through establishment or Guangzhou Guangzhou Real estate 95.00 5.00 Guangzhou Property and Estate investment Co., Ltd. Beijing fresh peak property Acquiring through establishment or development management Beijing Beijing Real estate 75.00 25.00 investment limited company Beijing SPG Property Acquiring through establishment or Beijing Beijing Services 10.00 90.00 Management Limited investment Shenzhen ShenWu Elebator Acquiring through establishment or Shenzhen Shenzhen Services -- 100.00 investment Co.,Ltd Shenzhen Lain Hua Industry and Acquiring through establishment or Shenzhen Shenzhen Services 95.00 5.00 investment Trading Co. Ltd. Investment Acquiring through establishment or Fresh Peak Holding Ltd. HongKong HongKong and 100.00 -- investment management Investment Acquiring through establishment or Wellam Ltd. HongKong HongKong -- 100.00 holding investment Shantou SEZ Wellam Fty Bldg., Acquiring through establishment or ShanTou ShanTou Real estate -- 100.00 Dev. Co. investment Acquiring through establishment or Shantou Huafeng Estate Dev.Co. ShanTou ShanTou Real estate 100.00 -- investment Acquiring through establishment or Great Wall Estate Co., Inc USA USA Real estate 70.00 -- investment Investment Acquiring through establishment or Fresh Peak Holdings Ltd. HongKong HongKong 100.00 -- and investment 112 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Shareholding proportion Main operating Reg. (%) Name of the subsidiary Business nature Method of acquiring area place Direct Indirect management Acquiring through establishment or Fresh Peak Investment Ltd. HongKong HongKong Investment -- 55.00 investment Investment and Acquiring through establishment or Openice Ltd. HongKong HongKong 20.00 80.00 management investment Acquiring through establishment or Barenie Co. Ltd. HongKong HongKong Investment -- 80.00 investment Acquiring through establishment or Keyear Development Ltd. HongKong HongKong Investment -- 100.00 investment Guangzhou Huangpu Xizun real Acquiring through establishment or GuangZhou GuangZhou Real estate -- 100.00 estate limited company investment Fresh Peak Real Estate Dev. Acquiring through establishment or WuHan WuHan Real estate -- 55.00 Construction (Wuhan) Co. Ltd.* investment Shantou Special Economic Zone Subsidiary acquired through emerge Real Estate (Group) Songshan Shantou Shantou Real estate -- 100.00 under non-common control Property and Estate Co., Ltd. Shenzhen Shenfang Department Commecial Acquiring through establishment or Shenzhen Shenzhen 95.00 5.00 Store Co. Ltd.* ① trade investment Acquiring through establishment or Bekaton Property Limited *② Australia Australia Real estate 60.00 -- investment Canada Great Wall ( Vancouver) Acquiring through establishment or Canada Canada Real estate -- 60.00 *② investment Commecial Acquiring through establishment or Paklid Limited *② HongKong HongKong 60.00 40.00 trade investment Guangdong Province Fengkai Lain Feng Cement Manufacturing Guangdong Guangdong Manufacture -- 90.00 Acquiring through establishment or Fengkai Fengkai investment Co., Ltd *③ *① Shenzhen Shenfang Department Store Co. Ltd The shareholders meeting held on October 29 th,2007 passed the resolution to terminate business, liquidation and formed a group to carry out the liquidation procedures. The liquidation group issued a notice of liquidation on December 7 th,2007. According to the principle of “Enterprise Accounting Standards No.33- the Consolidation Financial Statement”, the Store will not be included in the Company’s consolidated financial statement. The book value of the investment account of the Company is zero. *② Bekaton Property Limited ,Canada Great Wall ( Vancouver)and Paklid Limited These 3 subsidiaries were set up overseas in early times. The board of directors passed a resolution to terminate the corporations’ business on Dec.13th, 2000. *③ Guangdong Province Fengkai Lian Feng Cement Manufacturing Co., Ltd 113 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 The total assets (including tangible and intangible assets) of the corporation were auctioned for debt repayment at 22 January 2006. The Company's investment in the company's book value is zero. Except for *①, *②, *③, the above subsidiaries which are not included the company’s consolidated financial statement had ceased operations for many years. And the entities of the corporations didn’t exist. And the Company has no control over its subsidiaries’ businesses. According to the principle of “Enterprise Accounting Standards No.33- the Consolidation Financial Statement”, the corporation will not be included in the Company’s consolidated financial statement. The book value of the investment account of the Company is zero. The following are the details. Accounting Investee Investment cost Opening balance Changes Closing balance Method Paklid Limited Cost Method 201,100.00 201,100.00 -- 201,100.00 Bekaton Property Limited Cost Method 906,630.00 906,630.00 -- 906,630.00 Shenzhen Shenfang Department Store Cost Method 10,000,000.00 10,000,000.00 -- 10,000,000.00 Co. Ltd Shantou Huafeng Building Cost Method 68,731,560.43 58,547,652.25 -- 58,547,652.25 Guangdong Province Fengkai Lain Feng Cost Method 121,265,000.00 56,228,381.64 -- 56,228,381.64 Cement Manufacturing Co., Ltd Total —— 201,104,290.43 125,883,763.89 - 125,883,763.89 (Continued) Increased current year Provision for Current year cash Investee provision for Remarks impairment dividends impairment Paklid Limited 201,100.00 -- -- Bekaton Property Limited 906,630.00 -- -- Shenzhen Shenfang Department Store Co. Ltd 10,000,000.00 -- -- Sahntou Huafeng Building 58,547,652.25 -- -- Guangdong Province Fengkai Lain Feng Cement 56,228,381.64 -- -- Manufacturing Co., Ltd Total 125,883,763.89 -- -- (2)Significant non-wholly owned subsidiary Minority interest Current year profit and loss Current year dividends Minority interest Name of subsidiary share proportion attributable to minority interest distributed to minority equity balance at the (%) shareholders interest shareholders end of the year Great Wall Estate Co., Inc 30.00 -14,445.74 -21,824,034.20 Fresh Peak Investment Ltd. 45.00 -4,358.19 -104,587,105.22 Barenie Co. Ltd. 20.00 -1,632.33 -2,037,265.40 (3) The main financial information of significant non-wholly owned subsidiary 114 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Closing balance Name fo subsidiary Non-current Non-current Current assets Total Assets Current liabilities Total liabilities assets liabilities Great Wall Estate Co., Inc 413,214.01 18,224,431.40 18,637,645.41 102,090,119.33 102,090,119.33 Fresh Peak Investment Ltd. 220,030,064.69 24,793,206.35 244,823,271.04 254,740,948.35 254,740,948.35 Barenie Co. Ltd. 979.31 30,373,713.87 30,374,693.18 32,802,836.67 32,802,836.67 (Continued) Opening balance Name of subsidiary Non-current Non-current Current assets Total Assets Current liabilities Total liabilities assets liabilities Great Wall Estate Co., Inc 479,270.32 18,073,021.63 18,552,291.95 101,241,947.93 101,241,947.93 Fresh Peak Investment Ltd. 220,030,061.97 24,793,206.35 244,823,268.32 254,731,260.77 254,731,260.77 Barenie Co. Ltd. 975.66 30,373,713.87 30,374,689.53 32,794,671.39 32,794,671.39 (Continued) Incurred in current year Incurred in previous year Name of Cash flow Cash flow Total of Total of subsidiary Operating from Operating from Net profit comprehensive Net profit comprehensive income operating income operating income income activities activities Great Wall 287,797.83 -68,120.84 -48,152.47 -68,159.28 204,090.22 -89,772.94 1,961,740.89 -89,839.36 Estate Co., Inc Fresh Peak -9,684.86 -9,684.86 -8,070.14 -8,070.14 Investment Ltd. Barenie Co. Ltd. -8,161.63 -8,161.63 -6,812.65 -6,812.65 9.2 Equities in joint ventures or associated enterprises (1)Insignificant joint ventures or associated enterprises Item Closing balance/Incurred this year Opening balance/Incurred last year Joint ventures*①: Total investment book value 29,441,800.59 29,441,800.59 Totals of the following items calculated per respective shareholding proportion —Net profit -- -- —Other comprehensive income -- -- —Total comprehensive income -- -- Associated enterprises*②: Total investment book value 446,861.06 446,861.06 Totals of the following items calculated per respective shareholding proportion 115 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Item Closing balance/Incurred this year Opening balance/Incurred last year —Net profit -- -- —Other comprehensive income -- -- —Total comprehensive income -- -- *① All of the Group’s joint ventures are insignificant. For details of the joint ventures, please refer to 7.10, including: 1) Guangdong province Huizhou Luofu Hill Mineral Water Co.,Ltd The operting period of the company was form June 5, 1991 to June 4, 2001. And the company had ceased operations because of operating loss for many years. And the Company had been terminated its licenses by law at July 6, 2001 because it failed to pass the annual inspection. Besides, the corporation stopped preparing the financial statement. As of the end of the year, the book value of the investment account of the Company is zero. According to the joint venture agreement, the Company didn’t have the obligation to bear the additional loss. 2)Fengkai Xinghua Hotel The FengKai XingHua Hotel was announced bankruptcy by the Guangdong Province Zhaoqing City second-middle intermediate Peoples’ court with the document (2002) ZHFJPZ No.2. And the corporation had finished the bankruptcy procedure. As of the end of the year, the book value of the investment account of the Company is zero. According to the joint venture agreement, the Company didn’t have the obligation to bear the additional loss. 3)Jiangmen Xinjian Real Estate Co. Ltd., Xi’an Fresh Peak Building Co. Ltd, DongYi Property Co., Ltd The above corporations were the joint ventures set up with the local partners for the properties developing projects. Consider the projects had been stopped, and the joint ventures had closed operating activities for many years with no preparation of financial statements. Already the corresponding provision for the investment of these joint ventures was accrued. Refer to Note 7.10 for details. *② All associated enterprises of the Group are insignificant. For details of associated enterprises, please refer to note 7.10, including: Shenzhen Runhua Automobile Trading Co., Ltd The operating period of this corporation was form Feb 24, 1992 to Feb 24, 1997, and it had ceased operations because of operating loss for many years. Besides, it had been terminated its licenses by law because it failed to pass the annual inspection and no financial statement was prepared afterwards. As the end of the year, the book value of the investment account of the company is zero. According to the associate agreement, the company didn’t have the obligation to bear the additional loss. (2)The excess losses of the joint ventures or associated enterprises incurred. 116 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Accumulated Unrecognized losses Accumulated Name of the joint ventures or associated enterprises unrecognized losses as this year (or shared net unrecognized losses as of the end of last year profit this year) of the end of this year Shenzhen Fresh Peak property consultant Co., Ltd 777,216.47 89,140.82 866,357.29 X The risk associated with financial instruments The company's major financial instruments, including equity investments, loans, accounts receivable, accounts payable, etc., the detailed description of the financial instruments are shown in note six. The risks which associated with these financial instruments and the risk management policies adopted by the company to reduce these risks are described below. The management of the company is responsible for the management and monitoring of these exposures to ensure that these risks are in a limited amount of scope. The company uses sensitivity analysis techniques to analyze the impact of reasonable and possible changes in the risk variables on current profit or loss or shareholder equity. As risk variables rarely occur in isolation, and affect the changes of correlation between these variables for a variable amount of risk will have a significant effect ultimately, so the content is on the assumption that the changes in each variable is in the condition of independence. 10.1 Risk management objectives and policies The aim that company engaged in the risk management is to achieve the right balance between risk and return. It reduce the negative impact on the risk of the company's operating performance to the lowest level and maximize shareholder interests and other interests of investors. The aim that risk management based on the basic strategy of cpmpany’s risk management is to identify and analyze various risks faced by the company. Establishment of appropriate risk limits and risk management, as well as to monitor all kinds of risks that control it in a limited scope timely and reliably. (1)Credit risk The company's credit risk is mainly reflected in the uncollectible accounts receivable. In order to reduce credit risk, the company set up a team wresponsible for determining the credit limit, credit approval, and other monitoring procedures to ensure that the necessary measures to recover overdue debt. In addition, the company reviews the recovery of each individual account receivable on each balance sheet date to ensure that the uncollectible accounts are fully prepared. Therefore, the company's management believes that the company's credit risk has been greatly reduced. The company's liquidity is deposited in a bank with a higher credit rating, so the liquidity of the credit risk is low. (2)Liquidity risk In the management of liquidity risk, the company maintains the concept of management that adequate cash and 117 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 cash equivalents, monitoring it to meet the company's business needs and reducing the impact of cash flow fluctuations. 10.2 The transfer of financial assets Financial assets that have been transferred but not wholly terminated As of 30 June, 2018, the company declared factoring business 51,374,540.56 yuan to the bank in accounts receivable, got RMB 51,374,540.56 yuan of equal value. If it is fail to receive the corresponding accounts from the client, the bank has the right to repay the corresponding accounts to the company.Because the company still bear with these accounts receivable related credit risk, the company should continue to fully recognize the carrying amount of the accounts receivable due to the transfer of payments received and will confirm it as pledge loan. XI Related party relationships and transactions 11.1 Parent of the Company Proportion of the Proportion of the Company’s Place of Company’s voting Name of the parent Business Nature Registered capital ownership interest incorporation power held by the held by the parent parent (%) (%) Guangdong Shenzhen Investment Investment, Real estate province RMB21.58billion 63.55 63.55 Shareholding Co. Ltd development, Guarantee Shenzhen 11.2 Subsidiaries of the Company Please refer to Note IX.1- Equities in the subsidiaries 11.3 Associates and joint ventures of the entity Please refer to Note IX.3 –Equities in joint venture or associated enterprises 11.4 Other related parties of the Company Name of other related party Relationship between other related parties and the Company Shenzhen Jian'an Group Co., Ltd. The same controlling shareholders 11.5 Related party transactions (1)Contracting with related parties List of contracting item Reception Expiration date Basis of pricing Contracting Name of main Type of assets Name of contractor date of of of contracting income recognized contract issuing party under contracting contracting contracting income in the current year 118 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Shenzhen Jian'an Shenzhen Zhen Tung Construction 2012-6-1 Negotiations 1,480,604.70 Group Co., Ltd. Engineering Ltd List of outsourcing item Type of assets Reception Expiration Basis of pricing Contracting Name of main contract issuing Name of contractor under date of date of of contracting income recognized party outsourcing contracting contracting income in the current year Shenzhen City SPG Long Gang Shenzhen Jian'an Construction 2015-9-16 Negotiations 18,344,588.63 Development Ltd. Group Co., Ltd. (2)Borrowing from related party Item Carrying amount Reception date Expiration date Statement Borrowing from: The principal was repaid on December 22th, Shenzhen Investment 16,535,277.94 2006.11.9 2016.12.22 2016. The remaining amount is interest Shareholding Co. Ltd payable. (3) Rewards for the Key Management Personnel Item Reporting period Same period of last year Rewards for the key management 2,321,457.00 3,614,401.00 personnel 11.6 Amounts due from / to related parties (1) Amounts due from related party Closing balance Opening balance Item Carrying Bad debt provision Carrying amount Bad debt provision amount Accounts receivable Shenzhen Fresh Peak property consultant Co.,Ltd 1,143,424.85 -- 1,140,015.16 -- Total 1,143,424.85 -- 1,140,015.16 -- Other receivables Guangdong Province Huizhou Luofu Hill Mineral Water 10,465,168.81 10,465,168.81 10,465,168.81 10,465,168.81 Co., Ltd Shenzhen Runhua Automobile Trading Co., Ltd 3,072,764.42 3,072,764.42 3,072,764.42 3,072,764.42 Canada GreatWall(Vancouver)Co. ,Ltd 89,035,748.07 89,035,748.07 89,035,748.07 89,035,748.07 Bekaton Property Limited 12,559,290.58 12,559,290.58 12,559,290.58 12,559,290.58 Paklid Limited 18,858,628.14 18,858,628.14 18,835,911.09 18,835,911.09 Shenzhen Shenfang Department Store Co. Ltd. 237,648.82 189,179.82 237,648.82 189,179.82 Shenzhen Real Estate Consolidated Service Co., Ltd. 475,223.46 475,223.46 Shenzhen City Shenfang Construction and Decoration 8,419,205.19 8,419,205.19 8,419,205.19 8,419,205.19 Materials Ltd. Shenzhen RongHua JiDian Co.,Ltd 143,123,677.49 142,599,985.03 143,100,960.44 142,577,267.98 119 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Closing balance Opening balance Item Carrying Bad debt provision Carrying amount Bad debt provision amount Xi’an Fresh Peak property management& Trading 10,465,168.81 10,465,168.81 10,465,168.81 10,465,168.81 Co.,Ltd Total 3,072,764.42 3,072,764.42 3,072,764.42 3,072,764.42 (2) Amounts due to related party Item Closing balance Opening balance Accounts receivable Shenzhen Jian'an Group Co., Ltd. 40,071,435.16 5,755,028.65 Total 40,071,435.16 5,755,028.65 Other payables Shenzhen Xin Dongfang Store Ltd. 902,974.64 902,974.64 Guangdong Province Fengkai Lain Feng Cement Manufacturing Co., Ltd. 1,867,348.00 1,867,348.00 Total 2,770,322.64 14,398,496.70 Interest payable: Shenzhen Investment Holding Co.,Ltd 16,535,277.94 16,535,277.94 Total 16,535,277.94 16,535,277.94 XII Commitments and Contingencies 12.1 Significant commitments (1)Capital commitment Item Amount for the current period Amount for the prior period Capital commitments that have been entered into but have not -- -- been recognized in the financial statements - Significant outsourcing contracts 201,539,688.62 245,497,748.08 Total 201,539,688.62 245,497,748.08 (2)There is no any other commitment during this period. 12.2 Contingencies (1)Contingencies arising from pending litigations or arbitrations and their financial effects Xi’an project Lawsuit Xi’an Fresh Peak Holding limited company (hereinafter referred to as “Fresh Peak Company”) was sino-foreign joint venture set up in Xi’an city. The shareholder of the Fresh Peak Company – Hongkong Fresh Peak Co., Ltd was the wholly owned subsidiary of the company. And the Hongkong Fresh Peak Co., Ltd contributed 84% of the Fresh Peak Company’s share- capital in cash. And Xi’an trade building 120 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 which was the enterprise under the Xi’an Joint Commission on Commerce and Trade contributed 16% of the Fresh Peak Company’s share- capital with the land-use right. The core business was property development. And the project was Xi’an Trade Building. The project was started on 1995-11-28. But the project had been stopped in 1996 because of the two parties differences on the operating policy of the project. In 1997, the Xi’an government withdrew the Xi'an Fresh Peak investment project compulsively and assigned the project to Xi’an Business Tourism Co., Ltd (hereinafter referred to as “Business Tourism Company”). But the two parties had insulted a lawsuit on compensation. The ShanXi Province High Peoples Court made a judgement “(2000) SJ-CZ No.25”. The judgement was as follows: 1. Business Tourism Company had to pay for the compensation Rmb 36,620 thousand to Xi’an Fresh Peak Company after the judgment entering into force. If the Business Tourism Company failed to pay in time, it had to pay double debt interests to Xi’an Fresh Peak Company. 2. Xi’an Joint Commission on Commerce had jointly and severally obligation of the interests of the compensation. Untill December 31 th, 2011, the amount of RMB 15,201,000.00 had been called back. Because of Fresh Peak Company’s application, ShanXi Province High Peoples Court resumed the execution on September 5 th, 2011. Now the case is proceeding and there was no any new substantive progress in the reporting period. As at 30 June 2018, the book value of the investment of Xi’an Fresh Peak Company was RMB 12,166,897.84. The provision for investment was Rmb 20,673,831.77. The book balance of assets was RMB 8,419,205.19 which has been taken full provision for impairment loss. (2)Contingent liabilities arising from providing debt guarantees to other entities and their financial effects The Company provided loan guarantees for purchaser of real estate. Up to Jun 30th,2018, the amount and duration of the unsettled guarantee is as follows: Items Duration Unsettled amount (million) Shenfang Chuanqishan From real estate license granted and mortgaged 45,033.00 Shenfang Shanglin Garden From real estate license granted and mortgaged 5,762.00 Total —— 50,795.00 (3)Contingent liabilities Related to the equity joint venture or consortium investment Refer to Note IX “Equities in other entities”. XIII Other material facts On 14 September, 2016, the Group plan the reorganization of material assets.The Group announced it intended to buy 100% stock equity of Evergrande real estate group co., LTD by issue shares or cash payment on 14 October, 2016.Guangzhou chiron real estate co., LTD will become the controlling shareholder of the company after the acquisition The restructuring of material assets is still in process as scheduled by the financial report day. 121 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 XIV Notes to Items in the Financial Statements of the Company 14.1 Accounts receivable (1) Accounts receivable by categories Closing balance Category Carrying amount Bad debt provision Book Value Amount (%) Amount (%) Accounts receivable of which provision for bad debts is -- -- -- -- -- of individually significant Accounts receivable of which provision for bad debts is 11,282,878.44 100.00% 6,968,694.02 61.76% 4,314,184.42 of individually insignificant Total 11,282,878.44 100.00% 6,968,694.02 61.76% 4,314,184.42 (Continued) Closing balance Category Carrying amount Bad debt provision Book Value Amount (%) Amount (%) Accounts receivable of which provision for bad debts is -- -- -- -- -- of individually significant Accounts receivable of which provision for bad debts is 11,450,768.19 100.00% 6,968,694.02 60.86% 4,482,074.17 of individually insignificant Total 11,450,768.19 100.00% 6,968,694.02 60.86% 4,482,074.17 ① Bad debt provision of accounts receivable which is of individually significant Content of accounts Amount of bad Proportion of Carrying amount Reasons for the provision receivable debt provision House pay to be collected 11,074,183.83 6,968,694.02 62.93 A separate provision is established according to the recoverability of each receivable with long Rental to be collected 208,694.61 -- -- aging and little retrievability. Total 11,282,878.44 6,968,694.02 62.93 (2) There were no any account receivables that had been fully or at a great proportion rate accrued for bad debt but had been fully collected or reversed back in the current period. (3) There were no any significant accounts receivables written off in the current period. (4) Top 5 entities with the largest balances of accounts receivable Relationship with the Proportion of the amount to the Name of entity Amount Age Bad debt provision Group total AR (%) Corporation No.1 Un-related party 1,909,626.76 Within 1year 16.92 -- Corporation No.2 Un-related party 1,143,424.85 Within 1year 10.13 -- 122 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Relationship with the Proportion of the amount to the Name of entity Amount Age Bad debt provision Group total AR (%) Individual No.1 Un-related party 1,200,000.00 Within 1year 10.64 1,200,000.00 Individual No.2 Un-related party 876,864.11 Within 1year 7.77 876,864.11 Individual No.3 Un-related party 617,559.26 Within 1year 5.47 617,559.26 Total 5,747,474.98 50.94 2,694,423.37 (5)There were no any account receivables which had been derecognized. 14.2 Other receivables (1) Other receivables by categories Closing balance Category Carrying amount Bad debt provision Book Value Amount (%) Amount (%) Accounts receivable of which provision for bad debts is of 1,526,878,271.80 98.40% 786,391,511.59 51.50% 740,486,760.21 individually significant Accounts receivable of which provision for bad debts is of 24,883,351.78 1.60% 11,701,429.72 47.03% 13,181,922.06 individually insignificant Total 1,551,761,623.58 1.00% 798,092,941.31 51.43% 753,668,682.27 (Continued) Closing balance Category Carrying amount Bad debt provision Book Value Amount (%) Amount (%) Accounts receivable of which provision for bad debts is of 1,677,928,020.15 89.27% 786,391,511.59 46.87% 891,536,508.56 individually significant Accounts receivable of which provision for bad debts is of 20,037,445.06 10.73% 11,701,429.72 58.40% 8,336,015.34 individually insignificant Total 1,697,965,465.21 100.00% 798,092,941.31 47.00% 899,872,523.90 ①Bad debt provision of accounts receivable which is of individually significant Proportion of Content of accounts receivable Carrying amount Amount of bad debt Reasons for the provision provision Other receivables between subsidiaries that are included in consolidated 1,358,567,228.42 658,127,505.34 48.44% A separate provision is statement established according to the recoverability of each receivables Other receivables between subsidiaries with long aging and little that are not included in consolidated 168,311,043.38 128,264,006.25 76.21% retrievability statement Total 1,526,878,271.80 786,391,511.59 -- (2) There were no any other receivables which had been accrued fully or large proportion provision but had 123 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 been fully collected or reversed back in this period.. (3) There were no any other receivables written off in the current period. The detail for other receivables which had been written off (4) Other receivables by nature Nature Closing balance Opening balance Other receivables between subsidiaries that are 1,358,567,228.42 1,553,914,573.46 included in the consolidated statement Other receivables between subsidiaries that are 168,311,043.38 128,834,349.06 not included in the consolidated statement Others 24,883,351.78 15,216,542.69 Total 1,551,761,623.58 1,697,965,465.21 (5) Top 5 entities with the largest balances of other receivables Proportion of the Bad debt provision Relationship Name of Entity Amount Age amount to the total with the Group OR (%)(%) 9,689,866.22 1-2 years Fresh Peak Enterprise Co., Ltd Subsidiary 7,993,662.28 2-3 years 34.92 508,377,320.74 524,161,781.15 Over 3years 73,328,902.56 Within 1 year Shantou Huafeng Estate 170,323,464.83 1-2 years Subsidiary 39.57 -- Development Co., Ltd 43,722,391.26 2-3 years 326,470,754.23 Over 3years American Great Wall Co., Ltd Subsidiary 101,379,954.81 Over 3 years 6.53% 101,379,954.81 Canada Great Subsidiary 89,035,748.07 Over 3 years 5.74% 89,035,748.07 Wall( Vancouver ) Co., Ltd Total 1,346,106,525.41 86.75% 698,793,023.62 14.3 Long-term equity investments (1) Long-term equity investments by types Closing balance Opening balance Item Provision for Provision for Book balance Book value Book balance Book value impairment impairment Investment in 317,578,928.40 69,155,382.25 248,423,546.15 317,578,928.40 69,155,382.25 248,423,546.15 subsidiaries Investment 22,393,912.73 21,947,051.67 446,861.06 22,393,912.73 21,947,051.67 446,861.06 124 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Closing balance Opening balance Item Provision for Provision for Book balance Book value Book balance Book value impairment impairment in associates and joint ventures Total 339,972,841.13 91,102,433.92 248,870,407.21 339,972,841.13 91,102,433.92 248,870,407.21 125 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 (2)investment in subsidiaries Curr. year Curr. year impairment Closing balance of Name of investee Opening balance Curr. year decrease Closing balance Increase provision impairment provision Shenzhen City Property Management Ltd. 12,821,791.52 -- -- 12,821,791.52 -- Shenzhen Petrel Hotel Co. Ltd. 20,605,047.50 -- -- 20,605,047.50 -- Shenzhen City Shenfang Investment Ltd. 9,000,000.00 -- -- 9,000,000.00 -- Fresh Peak Enterprise Ltd. 556,500.00 -- -- 556,500.00 -- Fresh Peak Zhiye Co., Ltd. 22,717,697.73 -- -- 22,717,697.73 -- Shenzhen Special Economic Zone Real Estate (Group) Guangzhou 20,000,000.00 -- -- 20,000,000.00 -- Property and Estate Co., Ltd. Shenzhen Zhen Tung Engineering Ltd 11,332,321.45 -- -- 11,332,321.45 -- American Great Wall Co., Ltd 1,435,802.00 -- -- 1,435,802.00 -- Shenzhen City Shenfang Free Trade Trading Ltd. 4,750,000.00 -- -- 4,750,000.00 -- Shenzhen City Hua Zhan Construction Management Ltd. 6,000,000.00 -- -- 6,000,000.00 -- QiLu Co.,Ltd 212,280.00 -- -- 212,280.00 -- Beijing Shenfang Property Management Co., Ltd. 500,000.00 -- -- 500,000.00 -- Shenzhen Lain Hua Industry and Trading Co., Ltd. 13,458,217.05 -- -- 13,458,217.05 -- Shenzhen City SPG Long Gang Development Ltd. 30,850,000.00 -- -- 30,850,000.00 -- Beijing Fresh Peak Property Development Management Limited Company 64,183,888.90 -- -- 64,183,888.90 -- Shantou City Huafeng Real Estate Devepment Co., Ltd 30,000,000.00 -- -- 30,000,000.00 -- Paklid Limited 201,100.00 -- -- 201,100.00 -- 201,100.00 Bekaton Property Limited 906,630.00 -- -- 906,630.00 -- 906,630.00 Shenzhen Shenfang Department Store Co. Ltd. 9,500,000.00 -- -- 9,500,000.00 -- 9,500,000.00 Shantou Fresh Peak Building 58,547,652.25 -- -- 58,547,652.25 -- 58,547,652.25 Total 317,578,928.40 -- -- 317,578,928.40 -- 69,155,382.25 126 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 (3)Investment in associates and joint ventures Changes in this period Adjustments of Name of investee Opening balance Investment income Changes of Add Reduce other under equity other investment investment comprehensive method equity income I. Joint ventures Guangdong Huizhou Luofu Hill Mineral 9,969,206.09 -- -- -- -- -- Water Co., Ltd Fengkai Xinghua Hotel 9,455,465.38 -- -- -- -- -- Subtotal 19,424,671.47 II. Associates Shenzhen Runhua Automobile Trading 1,445,425.56 -- -- -- -- -- Co., Ltd Shenzhen Ronghua Jidian Co., Ltd 1,523,815.70 -- -- -- -- -- Subtotal 2,969,241.26 -- -- -- -- -- Total 22,393,912.73 -- -- -- -- -- (Continued) Changes in this period Closing balance of Name of investee Cash dividend or profit Provision for Closing balance Others impairment provision declared impairment I. Joint ventures Guangdong Huizhou Luofu Hill Mineral Water -- -- -- 9,969,206.09 9,969,206.09 Co., Ltd Fengkai Xinghua Hotel -- -- -- 9,455,465.38 9,455,465.38 Subtotal -- -- -- 19,424,671.47 19,424,671.47 II. Associates Shenzhen Runhua Automobile Trading Co., Ltd -- -- -- 1,445,425.56 1,445,425.56 Shenzhen Ronghua Jidian Co., Ltd -- -- -- 1,523,815.70 1,076,954.64 Subtotal -- -- -- 2,969,241.26 2,522,380.2 Total -- -- -- 22,393,912.73 21,947,051.67 14.4 Operating income and costs (1) Operating income and operating costs Amount for the current period Amount for the prior period Item Income Costs Income Costs Principal operating 29,987,467.51 12,583,669.74 229,557,159.39 111,270,152.44 127 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Amount for the current period Amount for the prior period Item Income Costs Income Costs Total 29,987,467.51 12,583,669.74 229,557,159.39 111,270,152.44 14.5 Investment income (1) Details of investment income Item Amount for the current period Amount for the prior period Investment income from long-term investments under cost -- 169,393,952.18 method Investment income from long-term investments under equity -- -- method Investment income on disposal of long-term investments -- -- Investment income from available-for-sale financial assets during 827,100.00 650,000.00 the holding period Total 166,511,022.49 746,988.93 128 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 XV. Supplementary Materials 15.1 Breakdown non-recurring profit or loss Items Amount for the current period Statement Profit or loss on disposal of non-current assets -19,011.53 -- Tax refunds or reductions with ultra vires approval or without official approval documents -- -- Government grants recognized in profit or loss (other than grants which are closely related to the Company’s business and are either in fixed -- -- amounts or determined under quantitative methods in accordance with the national standard) Income earned from lending funds to non-financial institutions and recognized in profit or loss -- -- The excess of attributable fair value of identifiable net assets over the consideration paid for the acquisition of subsidiaries, associates and joint -- -- ventures Profit or loss on exchange of non-monetary assets -- -- Profit or loss on entrusted investments or assets management -- -- Impairment losses on assets due to force majeure events, e.g, natural disasters -- -- Profit or loss on debt restructuring -- -- Entity restructuring expenses, e.g., expenditure for layoff of employees, integration expenses, etc. -- -- Profit or loss attributable to the evidently unfair portion of transaction price, being transacted price in excess of fair transaction price, of a transaction -- -- Net profit or loss of subsidiaries from the beginning of the period up to the business combination date recognized as a result of business combination -- -- of enterprises under common control Profit or loss arising from contingencies other than those related to normal operating business -- -- Profit or loss on changes in the fair value of held-for-trade financial assets, and held-for-trade financial liabilities and financial assets -- -- available-for-sale, other than those used in the effective hedging activities relating to normal operating business Reversal of provision for account receivables that are tested for impairment losses individually -- -- Profit or loss on entrusted loans -- -- Profit or loss on changes in the fair value of investment properties that are subsequently measured using the fair value model -- -- 129 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Items Amount for the current period Statement Effects on profit or loss of one-off adjustment to profit or loss for the period according to the period requirements of tax laws and accounting laws and -- -- regulations Custodian fees earned from entrusted operation -- -- Other non-operating income or expenses other than the above -84,706.57 -- Other profit or loss that meets the definition of non-recurring profit or loss -- -- Subtotal -103,718.10 -- Tax effects -25,929.53 -- Effects attributable to minority interests (after tax) -- -- Total -77,788.57 -- 130 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Note:”+” means income or gain and “-” means loss or expense The Group defines items as non-recurring profit or loss items according to “Information Disclosure and Presentation Rules for Companies Making Public Offering of Securities No.1---Non-recurring Profit or Loss”(CSRC No.[2008]43) 15.2 Return rate of net assets and earning per share Weighted return rate Earning per share (yuan / stock)(元/股) Profit the in the reporting year of net assets(%) Basic EPS Diluted EPS Net profit attributable to common stockholders 11.00% 0.3253 0.3253 Less: Net profit attributable to common stockholders 11.00% 0.3254 0.3254 after deducting non-recurring losses 15.3 Differences between amounts prepared under foreign accounting standards and China Accounting Standards (CAS) Differences in the net profit and net assets between those disclosed in the financial statements in compliance with International / Hongkong Finance Reporting Standards and CAS Net profit attributable to shareholders of listed Net assets attributable to shareholders of companies t listed companies Amount for the current Amount for the Amount for the prior Amount for the prior period period current period period In accordance with CASs 329,066,084.53 137,226,601.84 3,156,821,917.54 2,828,242,120.98 In accordance with IFRS 329,066,084.53 137,226,601.84 3,156,821,917.54 2,828,242,120.98 131 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 Part XI Documents Available for Reference 1. The financial statements with the personal signatures and stamps of the Company’s legal representative, head for financial affairs and head of the financial department; and 2. The originals of all the documents and announcements disclosed by the Company on Securities Times, China Securities Journal and Ta Kung Pao during the Reporting Period. 132