2017 Annual Report of China Fangda Group Co., Ltd.
China Fangda Group Co., Ltd.
2017 Annual Report
April 2018
1 2017 Annual Report of China Fangda Group Co., Ltd.
Chapter 1 Important Statement, Table of Contents and Definitions
The members of the Board and the Company guarantee that the announcement is free from any false information, misleading statement or material omission and are jointly and severally liable for the information’s truthfulness, accuracy and integrity.
Mr. Xiong Jianming, the Chairman of Board, Mr. Lin Kebin, the Chief
Financial Officer, and Mr. Wu Bohua, the manager of accounting department declare: the Financial Report carried in this report is authentic and completed.
All the Directors have attended the meeting of the board meeting at which this report was examined.
Forward-looking statements involved in this report including future plans do not make any material promise to investors. Investors should pay attention to investment risks.
The Company needs to comply with disclosure requirements of the
Shenzhen Stock Exchange Industry Information Disclosure Guideline No.6 –
Listed Companies Engaged in Decoration Business and disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline
No.3 – Listed Companies Engaged in Property Development.
The Company has specified market, management and production and operation risks in this report. Please review the potential risks and measures
2 2017 Annual Report of China Fangda Group Co., Ltd. mentioned in the discussion and analysis of future development in IV. Operation
Discussion and Analysis.
The Board meeting reviewed and approved the profit distribution preplan: distributing cash dividend of RMB1.50 (tax included) for each ten shares to all shareholders on the basis of 1,183,642,254 shares of the Company and no dividend share is issued to shareholders. No reserve is capitalized.
3 2017 Annual Report of China Fangda Group Co., Ltd.
Table of Contents
Chapter 1 Important Statement, Table of Contents and Definitions ...... 2 Chapter 2 About the Company and Financial Highlights ...... 7
Chapter 3 Business Introduction...... 12 Chapter 4 Operation Discussion and Analysis...... 18 Chapter 5 Significant Events ...... 43
Chapter 6 Changes in Share Capital and Shareholders ...... 56 Chapter 7 Preferred Shares ...... 65
Chapter 8 Particulars about the Directors, Supervisors, Senior Management and Employees ...... 66 Chapter 9 Corporation Governance ...... 73 X. Information about the Company’s Securities...... 81 Chapter 11 Financial Statements ...... 82
Chapter 12 Documents for Reference...... 210
4 2017 Annual Report of China Fangda Group Co., Ltd.
Refers Terms Description to
Refers Fangda Group, company, the Company China Fangda Group Co., Ltd. to
Refers Articles of Association Articles of Association of China Fangda Group Co., Ltd. to
Refers Meeting of shareholders Meetings of shareholders of China Fangda Group Co., Ltd. to
Refers Board of Directors Board of Directors of China Fangda Group Co., Ltd. to
Refers Supervisory Committee Supervisory Committee of China Fangda Group Co., Ltd. to
Refers Banglin Co. Shenzhen Banglin Technologies Development Co., Ltd. to
Refers Shilihe Co. Shenzhen Shilihe Investment Co., Ltd. to
Refers Shengjiu Co. Shengjiu Investment Ltd. to
Refers Fangda Jianke Shenzhen Fangda Jianke Group Co., Ltd. to
Refers Fangda Automatic Shenzhen Fangda Automation System Co., Ltd. to
Refers Fangda New Material Fangda New Materials (Jiangxi) Co., Ltd. to
Refers Fangda New Resource Shenzhen Fangda New Energy Co., Ltd. to
Refers Fangda Property Shenzhen Fangda Property Development Co., Ltd. to
Refers Chengdu Fangda Jianke Chengda Fangda Construction Technology Co., Ltd. to
Refers Dongguan Fangda New Material Dongguan Fangda New Material Co., Ltd. to
Refers Kechuangyuan Software Shenzhen Qianhai Kechuangyuan Software Co., Ltd. to
Kexunda Co. Refers Shenzhen Kexunda Software Co., Ltd.
5 2017 Annual Report of China Fangda Group Co., Ltd.
to
Refers Fangda Property Shenzhen Fangda Property Management Co., Ltd. to
Refers Jiangxi Property Fangda (Jiangxi) Property Development Co., Ltd. to
Refers Hongjun Investment Company Shenzhen Hongjun Investment Co., Ltd. to
Refers Jianke Australia Fangda Australia Pty Ltd to
Refers Automatic Hong Kong Fangda Automation (Hong Kong) Co., Ltd. to
Refers Shihui International Shihui International Holding Co., Ltd. to
Refers Fangda SOZN Guangdong Fangda SOZN Lighting Co., Ltd. to
Refers Shenyang Decoration Fangda Decoration Engineering (Shenyang) Co., Ltd. to
Refers Shenyang Fangda Shenyang Fangda Semi-conductor Lighting Co., Ltd. to
Refers Shenzhen Woke Shenzhen Woke Semi-conductor Lighting Co., Ltd. to
Refers Fangda Aluminum Jiangxi Fangda New Type Aluminum Co., Ltd. to
Refers CSRC China Securities Regulatory Commission to
Refers SZSE Shenzhen Stock Exchange to
Definitions
6 2017 Annual Report of China Fangda Group Co., Ltd.
Chapter 2 About the Company and Financial Highlights
1. Company profiles
Stock ID Fangda Group, Fangda B Stock code 000055, 200055
Modified stock ID (if any) None
Stock Exchange Shenzhen Stock Exchange
Chinese name China Fangda Group Co., Ltd.
Chinese abbreviation Fangda Group
English name (if any) CHINA FANGDA GROUP CO., LTD.
English abbreviation (if any) CFGC
Legal representative Xiong Jianming
Fangda Technology Building, Kejinan 12th Avenue, High-tech Zone, Hi-tech Park South Zone, Registered address Shenzhen, PR China.
Zip code 518057
20F, Fangda Technology Building, Kejinan 12 th Avenue, High-tech Zone, Hi-tech Park South Zone, Office address Shenzhen, PR China.
Zip code 518057
Website http://www.fangda.com
Email [email protected]
2. Contacts and liaisons
Secretary of the Board Representative of Stock Affairs
Name Zhou Zhigang Guo Linchen
20F, Fangda Technology Building, Kejinan 20F, Fangda Technology Building, Kejinan Address 12th Avenue, High-tech Zone, Hi-tech Park 12th Avenue, High-tech Zone, Hi-tech Park South Zone, Shenzhen, PR China. South Zone, Shenzhen, PR China.
Tel. 86(755) 26788571 ext. 6622 86(755) 26788571 ext. 6622
Fax 86(755)26788353 86(755)26788353
Email [email protected] [email protected]
3. Information disclosure and inquiring
China Securities Journal, Security Times, Shanghai Securities Daily, Hong Press medias of information disclosure Kong Commercial Daily
7 2017 Annual Report of China Fangda Group Co., Ltd.
Website assigned by CSRC to release the online http://www.cninfo.com.cn reports
Place for information inquiry Secretarial Office of the Board
4. Registration changes
Organization code None
Changes in main businesses since the None listing of the Company
Changes in the controlling shareholders (if None any)
5. Other information
Public accountants employed by the Company
Public accountants Grant Thornton (limited liability partnership)
Address 5th Floor, Scitech Place, 22 Jianguomen Wai Avenue, Chaoyang District, Beijing, China
Signing accountant names Chen Zhaoxin, Hu Gaosheng
Sponsor engaged by the Company to perform continued supervision and guide during the reporting period √ Applicable □ Inapplicable
Sponsor name Office address Representatives Period of supervision and guide
China Merchants Securities Co. 38-45F, Jiangsu Building, Yitian August 1, 2016 – December 31, Liang Zhanguo, Ding Yi Ltd. Road, Futian District, Shenzhen 2017
Financial advisor engaged by the Company to perform continued supervision and guide during the reporting period □ Applicable √ Inapplicable
6. Financial Highlight
Whether the Company needs to make retroactive adjustment or restatement of financial data of previous years
□ Yes √ No
2017 2016 Increase/decrease 2015
Turnover (yuan) 2,947,470,813.58 4,203,866,173.72 -29.89% 2,550,467,494.78
Net profit attributable to shareholders of the listed company 1,144,404,441.03 697,956,378.23 63.97% 107,272,369.77 (yuan)
Net profit attributable to the shareholders of the listed company 366,212,412.32 623,075,474.92 -41.23% 29,070,293.64 and after deducting of non-recurring gain/loss (RMB)
8 2017 Annual Report of China Fangda Group Co., Ltd.
Net cash flow generated by 557,833,145.73 465,717,074.92 19.78% -360,115,114.04 business operation (RMB)
Basic earnings per share 0.970 0.600 61.67% 0.09 (yuan/share)
Diluted Earnings per share 0.970 0.600 61.67% 0.09 (yuan/share)
Weighted average net income/asset 41.53% 38.83% 2.70% 8.42% ratio
Increase/decrease from End of 2017 End of 2016 End of 2015 the end of last year
Total asset (RMB) 7,625,422,688.63 6,787,051,278.08 12.35% 4,464,147,811.40
Net profit attributable to the shareholders of the listed company 3,238,939,202.18 2,364,262,560.28 37.00% 1,319,496,334.84 (RMB)
7. Differences in accounting data under domestic and foreign accounting standards
1. Differences in net profits and assets in financial statements disclosed according to the international and Chinese account standards
□ Applicable √ Inapplicable
There is no difference in net profits and assets in financial statements disclosed according to the international and Chinese account standards during the report period.
2. Differences in net profits and assets in financial statements disclosed according to the overseas and Chinese account standards
□ Applicable √ Inapplicable There is no difference in net profits and assets in financial statements disclosed according to the international and Chinese account standards during the report period.
8. Financial highlights by quarters
In RMB
Q1 Q2 Q3 Q4
Turnover 573,546,634.49 826,164,306.80 653,038,212.34 894,721,659.95
Net profit attributable to the 67,759,233.14 160,244,086.30 133,216,451.43 783,184,670.17 shareholders of the listed company
Net profit attributable to the shareholders of the listed company 64,053,467.14 154,445,509.40 127,476,204.06 20,237,231.74 and after deducting of
9 2017 Annual Report of China Fangda Group Co., Ltd. non-recurring gain/loss
Cash flow generated by business -4,846,476.55 220,109,683.90 178,979,877.58 163,590,060.77 operations, net
Where there is difference between the above-mentioned financial data or sum and related financial data in quarter report and interim report disclosed by the Company □ Yes √ No
9. Accidental gain/loss item and amount
√ Applicable □ Inapplicable In RMB
Items 2017 2016 2015 Notes
Non-current asset disposal gain/loss (including the write-off part for which assets 89,483,320.53 -3,080,469.74 -522,948.72 impairment provision is made)
Subsidies accounted into the current income account (except the government subsidy closely related to the enterprise’s business 5,637,910.24 7,571,963.67 2,246,386.84 and based on unified national standard quota)
Gain from entrusted investment or assets 20,455,865.70 1,401,717.08 250,897.54 management
Gain/loss from debt reorganization -3,674,141.05 -2,445,254.63
Gain/loss from change of fair value of transactional financial asset and liabilities, and investment gains from disposal of transactional financial assets and liabilities 2,013,922.62 2,369,839.47 4,341,316.92 and sellable financial assets, other than valid period value instruments related to the Company’s common businesses
Gain/loss from change of fair value of investment property measured at fair value 889,708,083.34 11,558,304.10 85,793,780.49 in follow-up measurement
Other non-business income and expenditures 4,054,553.86 5,857,845.48 7,624,429.39 other than the above
Other gain/loss items satisfying the 58,154,670.60 definition of non-recurring gain/loss account
Less: Influenced amount of income tax 220,906,068.58 6,168,477.85 20,963,417.56
Influenced amount of minority 8,581,417.95 339,234.87 568,368.77 shareholders’ equity (after-tax)
10 2017 Annual Report of China Fangda Group Co., Ltd.
Total 778,192,028.71 74,880,903.31 78,202,076.13 -- Explanation statement should be made for accidental gain/loss items defined and accidental gain/loss items defined as regular gain/loss items according to the Explanation Announcement of Information Disclosure No. 1 - Non-recurring gain/loss mentioned. □ Applicable √ Inapplicable
No circumstance that should be defined as recurrent profit and loss according to Explanation Announcement of Information Disclosure No. 1 - Non-recurring gain/loss occurs in the report period.
11 2017 Annual Report of China Fangda Group Co., Ltd.
Chapter 3 Business Introduction
1. Major businesses of the Company during the report period
Whether the Company needs to comply with disclosure requirements of special industries
Yes Property development and decoration industries The Company must comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.6 – Listed Companies Engaged in Decoration Business.
The Company is headquartered in Nanshan District of Shenzhen and became listed in Shenzhen Stock Exchange on November 29, 1995. Currently, five major business subsidiaries of the Company are national high-tech enterprises with modern production bases in Shenzhen, Shanghai, Chengdu, Nanchang, Dongguan and Foshan. The Company was engaged in the following businesses in the report period. 1. Curtain wall system and material industry (1) Main products and purposes The Company’s main products include energy-saving curtain walls, photo-electricity curtain walls, LED color-display curtain walls and aluminum plate materials. Construction curtain walls are mainly used on high-level buildings, large-area public venues such as airports, stations, cultural centers and exhibition centers, daylighting roof, shaped construction (ball-shaped and clock-shaped buildings) with external retaining and decoration functions. (2) Main business modes, specific risks and changes; The projects implemented by the Company are mainly through the bidding method to obtain contract orders. Project design, material procurement, production and processing, and the construction and installation and after-sales service model are based on the contract orders. The main risk of this mode is that it takes a long period of time from the completion of the order to the completion of the project, and it is highly dependent on raw materials and labor costs. It is greatly affected by the national industrial p olicy, raw material prices, and labor market fluctuations. The Company’s curtain wall products are engineered by itself. The operation mode remained unchanged in the report period. (3) Main business drive See 3. Core competitiveness analysis in this chapter. (4) Development stage of the industry, circle and industry position With the development of the major national strategies such as the construction of Guangdong, Hong Kong, and Macau Bay Area and Xiong'an New District, commercial and office buildings, urban commercial complexes, star-rated hotels and other urban commercial spaces as well as airports, stations, rail transit, museums, libraries, Public spaces such as stadiums, schools, and hospitals have strong demand for curtain walls, and the curtain wall system and material industry still have a good foundation. Over recent years, a series of industry policies will be issued to push forward the industry, providing a gold opportunity for the development of energy-saving curtain wall and material business. The economic development of the first and second tier cities is relatively good, and there is a continuous demand for building curtain walls. Therefore, the market capacity is relatively large and it is also the main area of the curtain wall market competition. There is no obvious periodicity in the curtain wall industry. The Company is a pioneer and first listed company in this industry. Over the past more than 20 years, the Company has undertaken hundreds of large projects and received the highest award in the industry China Construction Luban Award and Zhan Tianyou Civil Engineering Award for many times. The Company has also received nearly 100 provincial and above awards. The
12 2017 Annual Report of China Fangda Group Co., Ltd.
Company has been in the top 10 of ―China's top 100 building curtain wall industry‖ for many years, and has already had strong brand advantages and competitiveness in the industry. The Company has a strong technology lead in the industry with 418 patents, including 26 intention patents and one software copyright. The Company also took part in the preparation of more than 10 national or industry standards including the Public Construction Energy Saving Design Standard, making 9 records among Chinese enterprises. The Company has a Class A qualification for building curtain wall engineering contracting and class A qualification for building curtain wall engineering design. It is the highest level for curtain wall design and construction companies in China. (5) Macroeconomic situation of the industry, the impact of changes in the industrial policy environment on the Company, and the countermeasures taken by the Company 2017 is the ―key year‖ for the successful completion of a well-to-do society. It is also an important year for the continuous deepening of reforms in the construction industry. The state-led industry reforms, top-level design and a series of policies concerning the development of the construction industry continue, and supply-side reforms continue to deepen. Industry development opportunities and challenges coexist. With the continuous strengthening of the national environmental protection policy and t he fluctuation of the price of international energy and metal materials, the price of most of the building materials is rising, which brings big challenge to the curtain wall industry. However, the comprehensive promotion of the construction of the Guangdong, Hong Kong, and Macau Bay Area and the Xiong'an New District has also brought many opportunities to the industry. In 2017, under the influence of the country's economic transformation and innovation, the Company strengthened the management and management of internal risks to improve the quality of project management; on the other hand, it increased the development of BIM technology, prefabricated construction, and intelligent manufacturing. The R&D capability is enhanced to continue to maintain industry leading position. In order to meet the Company's needs for further development, the Company will continue to increase investment, expand production capacity, meet market demand. In 2018, the Company will build Shanghai Songjiang production base, Chengdu Xinjin production base, to increase production, increase income and sustained rapid development. (6) Quality control system, implementation standards, control measures and overall evaluation Quality control system: The Company implements a comprehensive quality management system and has established a quality management system in accordance with ISO9001 from the aspects of design, procurement, storage, production, testing, delivery, installation, and after-sales service, and conduct regular reviews. Implementation of the standard: In the process of building curtain wall business, the Company strictly complies with GB/T21086-2007 "Building Curtain Wall", JG/T231-2007 "Building Glass Lighting Roof" and other national and industrial standards. Control measures: The Company has established complete and effective quality control measures and quality management bodies, and strictly implements various quality management and control measures. Overall evaluation: The Company's products and project quality are in full compliance with the relevant requirements of the relevant national standards and standards, and maintain proper operation, providing customers with stable and reliable qualit y products and engineering. (7) Major project quality problem during the reporting period None.
2. Rail transport equipment business
The Company’s main products in this sector are rail transport screen door systems, which are a necessary part of modern subway system. It is installed at the edge of the subway platform and separates trains from the platform. The Company seeks to win orders through tenders and purchase raw materials and arrange production based on orders. The Company has built a complete industry chain that integrates designing, production, engineering and after-sales services. The operation mode remained unchanged in the report period. The Company has developed rail transport screen door systems with independent intellectual property rights . The Company also prepared the first Rail Transport Station Screen Door Standard. At present, the Company's subway screen doors have covered more than 60% of metropolitan-operated cities in China. The metro and cloud rails of 32 cities around the world have
13 2017 Annual Report of China Fangda Group Co., Ltd. adopted the Fangda screen door systems, making the Company the world's largest supplier of screen doors.
3. New energy industry: Solar PV power generation industry is largely supported by the Chinese government. The Company is one of the first companies that possess intellectual property rights in the designing, production and integration of solar PV systems. In 2017, photovoltaic power stations in Xuanfeng Town, Pingxiang Town, Jiangxi Province, and photovoltaic power stations in t he parks of Jiangxi Isuzu Automobile Co., Ltd. in Nanchang City and Dongguan Songshan Lake Photovoltaic Power Plant all operated steadily with a total power generation capacity of 19,983,900 kilowatt hours, exceeding the designed power generation efficiency. The sales income reached RMB 22,554,600 and operating profit of RMB 14,619,800. In the future, it will still bring long-term, stable income and profits to the Company.
4. Real estate The Company is currently developing three projects: the Fangda Town in Shenzhen Nanshan District, the Fangda Bangshen project in Bao'an District, and the Phoenix Valley Fangda Center in Honggutan, Nanchang. The Fangda Town project has a gross floor area of 212,400 square meters and an available-for-sale area of 93,086.25 square meters. As of the end of 2017, it has sold an area of 70,561.08 square meters. In 2018, it plans to complete the sale of the remaining saleable area of 22,525.17 square meters, and complete the supporting business development of 20,000 square meters and lease of 1# building of about 70,000 square meters. The Fangda Bangshen project is a cooperative development project. The project occupies an area of 20,714.9 square meters. During the reporting period, it is actively applying for establishment of the Shenzhen urban renewal project. The Phoenix Valley Fangda Center in Honggutan, Nanchang is planned to start construction in 2018 and be sold in 2019. The project covers an area of approximat ely 16,608 square meters, a total construction area of 93,439 square meters, and a total gross floor area of 66,434 square meters. The Company will focus on Guangdong, Hong Kong, and Macau Bay Area, focusing on the development of Shenzhen's urban renewal projects. The development of products will be mainly office buildings, supporting businesses, security housing, or residential properties. The Company has established a professional team to operate and manage the Company's businesses and properties.
For a detailed discussion of the Company’s business, please refer to “3. Analysis of Core Competencies” in this section of the report and Chapter VI “Operation Discussion and Analysis”.
2. Major assets change
1. Major assets change
Main assets Major change
Long-term equity investment increased 182.05% year-on-year, mainly due to the increase Equity assets in investment in the current period by an associated company (Jiangxi Business Innovative Property Joint Stock Co., Ltd.).
Fixed assets None
Intangible assets None
Construction in process None
The investment real estate increased by 575.20% year-on-year mainly due to the fact that the property used for rental in Fangda Town was included in the investment real estate Investment real estate according to the actual construction cost when it reached the expected usable status, and was subsequently measured by fair value.
14 2017 Annual Report of China Fangda Group Co., Ltd.
The inventory decreased by 58.83% year-on-year, which was mainly due to the sales carried out by the Fangda Plaza project in the current period, and the property used for Inventory rental in Fangda Town was included in the investment real estate according to the actual construction cost when it reached the scheduled usable condition.
2. Major foreign assets
□ Applicable √ Inapplicable
3. Core Competitiveness Analysis
Whether the Company needs to comply with disclosure requirements of special industries
Yes Property development and decoration industries
The Company must comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.6 – Listed Companies Engaged in Decoration Business.
(1) Curtain wall system and material 1. Expertise and brand competitiveness The Company actively responded to the national supply-side reforms and revitalized real economic policies, persisted in innovation-driven development, and actively developed low-carbon energy-conserving curtain walls, solar photovoltaic curtain walls, and fabricated curtain walls. The number of patents for the curtain wall systems and materials industry reached 418 (includin g 26 invention patents) with one software copyright and active innovation, leading to its brand advantages. It is one of the top end brands of the domestic curtain wall system and material industry. FANGDA is a nationwide well-known trademark in China. 2. Focusing on the high-end market to edge out competitors In the fierce market competition, the Company accurately positions the market in the field of high-end energy-saving curtain wall systems with high requirements for technology and management, and focuses its resources on high-end curtain wall projects. The construction of a number of curtain wall projects won the national "Luban Award", "Zhan Tianyou Civil Engineering Award", "National Quality Engineering Award", "China Construction Engineering Decoration Award", "Magnolia" Award and "Customer Satisfaction Project" awards, and won the title of "China's curtain wall industry's most competitive top 10" and so on. The Company has built a leading brand and created a clear edge in the high-end curtain wall market. 3. Well-developed industry base landscape Thanks to continued investment in facilities, the Company has established a national business landscape with Shenzhen as the headquarters, Dongguan Songshanhu as the base in the south, Beijing in the north, Chengdu in the southwest and Shanghai and Nanchang in the east. The Dongguan Songshanhu and Nanchang bases are the largest and most advanced curtain wall system and material production bases in China and across the world, fueling the Company to increase its market share and competitiveness. 4. General solutions The Company has integrated the design, production, management and engineering of curtain wall systems to enjoy technological, cost, quality and service advantages. (2) Rail transport equipment business 1. National development strategy At present, the 13th Five-Year Plan for several provinces and cities has incorporated rail transit construction into key development projects. With the implementation of major national strategies such as the Guangdong, Hong Kong, and Macao Bay District, Xiong'an New District, and the ―Belt and Road‖ Initiative, the region has radiated into Southeast Asia, South Asia, Central Asia, and West Asia, and has extended to Eastern Europe and North Africa with strong demand for infrastructure construction and
15 2017 Annual Report of China Fangda Group Co., Ltd. interconnection. As the world's largest supplier of rail transit shielding door systems, the Company will also make full use of its advantages in technology, brand, and service to further consolidate and increase its domestic market share, and actively participate in rail transit construction in Guangdong, Hong Kong, Macau Bay and Xiong'an New District. The Company will vigorously expand overseas markets, especially the ―Belt and Road‖ Initiative, maintain the continuity and stability of overseas orders, balance the development of domestic and foreign markets, and continue to ―lead‖ the rail transit industry. 2. Technical advantage Through continued independent innovation, the Company has developed the global leading metro screen door system with full intellectual property right and broken the monopoly of overseas competitors. The Company has also compiled the Rail Transport Station Screen Door Standard, which is the first of its kind in China. The standard was approved in April 2006 and was implemented on March 1, 2007. As the first standard in the industry in China, the standard has played a key role in guiding the development of China’s rail transport screen door industry and enabled the Company a dominant lead in the industry. Currently, the Company has 226 metro screen door patents, including 46 invention patents. The Company also has four computer software copyrights. 3. Brand equity So far, the Company has undertaken railway screen door projects in more than 30 cities including Hong Kong, Singapore, Kuala Lumpur of Malaysia and Noida of India. The Company’s subway screen doors have achieved a 60% coverage rate in cities with metro in China. They have achieved first place in China’s rail transit market share, brand influence, patent ownership, standard formulation, and professional maintenance services. The Company has become the largest railway screen door supplier in the world. 4. Industry chain advantage As the first company to enter the subway screen door industry in China, the Company's subway screen doors have reached to more than 60% of the subway cities in China, and many domestic subway screen doors have entered the maintenance period. The Company actively expands its industrial chain and takes the lead in the domestic market to provide metro maintenance services. The Company has a natural advantage in this high-end service industry. Our screen door system are independently developed by us, thus enabling us to provide prompt, overall, effective and standard maintenance services for our customers without other third parties. As more and more subways are opened, the business volume will continue to increase. During the reporting period, the Company signed the Yungui Station Door Purchase Contract" with Shenzhen BYD Supply Chain Management Co., Ltd., and has signed contracted door products and related services for cloud-railway projects in 8 cities. The Yungui project is one of the strategic directions for BYD Company's future development, and it is also a key point for BYD's efforts. The cooperation between the company and BYD in the construction of the Yungui project has provided new development space for the Company's rail transit industry and expanded the company's industry chain. (3) New energy industry The new energy business mainly comprises solar power PV application, PV construction and LED industry. 1. Technical advantage With more than ten years’ experience in developing solar energy PV power generating curtain wall technology, the Company is the earliest company that masters the intelligent property right in the designing, production and integration of solar energy PV curtain wall systems and is a pioneer in the application of PV curtain wall technology. 2. Relation with other industries Distributed solar power PV power generation is closely related to the Company’s existing businesses. Most distributed solar power PV systems are closely related to construction. Moreover, the Company has more than 10 years' experience in electrical product integration. The Company also has more than 20 years’ experience in construction management and has the level-1 construction curtain wall engineering qualification and electrical installation engineerin g qualification. (4) Real Estate 1. Shenzhen is located in the core area of Guangdong, Hong Kong and Macau Bay District, and the economy continues growing. In recent years, Shenzhen has introduced a series of measures to limit house purchase. However, due to the limited supply
16 2017 Annual Report of China Fangda Group Co., Ltd. of land for development, it is still difficult to stop the rise in prices. Benefited from the rapid economic development of Shenzhen in the core area of Guangdong, Hong Kong, and Macau Bay District, during the reporting period, the sales price of the Company’s Fangda Town project has increased significantly over the previous year. It is expected that the real estate sales and property leasing will continue to contribute profits to the Company in the future. 2. The Company is currently developing three projects: the Fangda Town in Shenzhen Nanshan District, the Fangda Bangshen project in Bao'an District, and the Phoenix Valley Fangda Center in Honggutan, Nanchang. The Fangda Town project and Fangda Bangshen project are located in Shenzhen, the core region of Guangdong, Hong Kong and Macau Bay District. The projects have significant geographical advantages and great regional development potential. The Nanchang Fangda Center project is located in the Phoenix Valley district of Honggutan New District, Nanchang with an outstanding river view. Phoenix Valley is an important part of Honggutan New District in Nanchang. It is a business and office gathering place in Nanchang. The location of the project enjoys significant advantages. There are fewer office and business apartments with first-class river view in the region. The project has obvious competitive advantages.
17 2017 Annual Report of China Fangda Group Co., Ltd.
Chapter 4 Operation Discussion and Analysis
1. Summary
In 2017, the Company closely focused on the annual target and the ―innovation‖ management theme, overcoming various difficulties in the domestic industry market, reducing production capacity, strengthening environmental protection measures and leading to price fluctuations of major raw materials, etc. All works were actively promoted, and operating performance reached new heights, achieving quality and fast growth. During the reporting period, the Company realized an operating income of RMB2,947,470,800, and the net profit attributable to the parent company's owners was RMB1,144,404,400, an increase of 63.97% over the same period of the previous year. The operating cash flow was RMB557,833,100, a year-on-year increase of 19.78%. As of the end of the reporting period, the company had a reserve of 4.064 billion yuan (excluding real estate sales). The construction of Guangdong, Hong Kong, and Macao Bay District has been included in the Party's Nineteenth Congress report and government work report. As an important engine of national economic development, Guangdong, Hong Kong, and Macau Bay District is an important space carrier for the construction of world-class urban agglomerations and participation in global competition. In the future, it will become the fourth largest city in the world with New York Bay, San Francisco Bay Area and Tokyo Bay Area in Japan. The Company is headquartered in Nanshan District, Shenzhen, a key area of Guangdong, Hong Kong, and Macau Bay and has factories in Dongguan and Foshan in the Bay, which is conducive to the Company's active participation in the construction of Guangdong, Hong Kong, and Macao Bay. 1. High-end curtain wall system and material business
When Guangdong, Hong Kong, and Macao Bay became the focus of much attention, the Company took advantage of this rare historical opportunity to make full use of the Company's technology, brand, and other advantages, and actively participate in the construction of Guangdong, Hong Kong, and Macao Bay. Since 2017, in the Guangdong, Hong Kong, and Macau Bay, the Company has won 22 high-end curtain wall projects, such as: Shenzhen International Convention and Exhibition Center, Shenzhen Vanke Binhai Landmark Building, Shenzhen Zhongzhou Binhai Commercial Tower and Apartment, Shenzhen Bay Innovation and Technology Center Project, Guangzhou The total amount of the Kairal Hub International Plaza Tower, the Guangzhou TCL Cloud Computing Industrial Park (Phase II), the Jiangbo Long Technology Park of Zhongshan City, and the Venice Hotel Project of Macao, etc., amounted to RMB 18,388,199,400, which accounts for 111.13% of the company's curtain wall system and material industry sales revenue in 2017. The contract amount of the curtain wall project of the Shenzhen International Convention and Exhibition Center, the largest convention and exhibition center in the world, reached RMB301,764,700, which won the Company an opportunity to actively participate in the construction of the Guangdong, Hong Kong, and Macao Bay. During the reporting period, the Company successfully completed Shenzhen Energy Building, Guangzhou Baosteel Building Project, Hong Kong Chinese University (Shenzhen), Zhuhai R&F Yingkai Plaza, Hainan Heng Dahuahua Island, and Beijing by further optimizing technologies and processes and strengthening on-site management. The completion and delivery of a large number of highly challenging curtain wall projects such as Taihu Vanke, Chengdu World Financial Center, and Suzhou Center Plaza reflected the Company’s strong compliance capabilities. Currently, the Company is an industry leader in terms of the design, production and installation of high-end shaped curtain wall systems. As of the end of the reporting period, the Company's curtain wall systems and materials industry had an order reserve of RMB 2,765,686,400, which accounts for 167.24% of the sales revenue of the curtain wall system and material business in 2017, laying the foundation for the continued development of the Company's high-end curtain wall and material business.
In order to meet the Company's needs for further development, the Company will continue to increase investment, expand
18 2017 Annual Report of China Fangda Group Co., Ltd. production capacity, meet market demand. In 2018, the Company will build Shanghai Songjiang production base, Chengdu Xinjin production base, to increase production, increase income and sustained rapid development. During the reporting period, the Beijing Yanqi Lake International Conference Project, undertaken by the Company, was again the main venue for the 2017 ―Belt and Road‖ international cooperation summit after the 2014 APEC summit; the Xiamen International Conference Center project undertaken by the Company was the main venue of the 2017 BRICS Leaders Meeting. The main venue of the People's Conference attracted the attention of the entire world and made contributions to the country's foreign exchange business, highlighting the extraordinary innovation capability and technical strength of Fangda as a premium supplier of high-end curtain wall systems. Three curtain wall projects such as Shenzhen China CITIC Bank Building, Shenzhen Museum of Contemporary Art and Urban Planning Exhibition Hall, Hexi District General Hospital (Hexi Children's Hospital) won the "Luban Award" of China Construction Engineering; Shenzhen Meilin Center Plaza South, Shenzhen Alibaba The Baba Building curtain wall project won the ―China Architectural Curtain Wall Excellence Project Award‖ and ―Guangdong Provincial Outstanding Building Decoration Engineering Award‖; Shenzhen New Century Wenbo Building Curtain Wall Project won the ―My Favorite Curtain Wall Project‖ Award; Vanke Marina Landmark Building and Vanke Yuncheng Phase III Building #9 won the ―Shenzhen Vanke 2017 Excellence Award‖. These honors highlighted the glory of ―Fangda‖ as the leading brand of high-end energy-saving curtain wall, and also the best returns for customers' trust, further enhancing the equity, influence and competitiveness of Fangda's brand. The Company will continue to exert its brand advantage, make full use of the brand ―Fangda‖, implement a differentiated market strategy, continue to deepen the main battlefield of Guangdong, Hong Kong, and Macao Bay, and form a Dongguan base, a Shanghai base, a Chengdu base, and a Nanchang base nationwide, seize the opportunity to actively participate in the construct ion of Guangdong, Hong Kong, Macao Bay, Xiong'an New District and Hainan Special Zone. 2. Rail transport equipment business
After years of innovation and development, the Company's subway screen door products rely on the advantages of brand, intellectual property, and industry standards. The coverage rate of metro-operated cities in China has reached more than 60%, and the market share has ranked first in China for many years in a row and has become the world's largest rail transit shielding door system supplier. In 2017, Shenzhen Fangda Automatic System Co., Ltd. (hereinafter referred to as Fangda Automation), a fully -owned subsidiary of the Company, won subway station platform screen door projects in Shenzhen subway line No.4 (phase III), No.6, No.10 and No.20, Wuhan subway line No.11 east, No.2 south and No.7 south, Zhengzhou subway line No.5, Hohhot railway line No.1, Shenyang subway line No.10, railway line from Hangzhou to Lin’an；screen door projects in cloud track projects in Xi’an, Guilin, Bengbu, Guang’an, Shantou, Pingshan, Jining, and Anyang; and maintenance projects for Shenzhen subway line No.1, No.2 and No.5, Nanchang railway line No.2, Wuhan railway line No.2, Wuhan-Xianyang railway line and Tianjin subway line No.1. During the reporting period, the Singapore Metro Tuas West Line, Dalian Line 1 Phase 2, Kunming Line 3, Nanchang Line 2, Hefei Line 2, Nanning Line 2 and Xiamen Line 1 will be equipped by the Company’s subway screen doors. Seven subways were opened and operated. As of the end of the reporting period, the Company's railway transportation business has an order reserve of RMB 1,299,240,200 (including an order reserve of RMB 791 million in Guangdong, Hong Kong, and Macau Bay), which is 382.81% of the income from the Company's subway screen door business. During the reporting period, the Company's rail transit screen door maintenance service revenue reached RMB 20,838,800, an increase of 81% over the previous year. As more and more subways are opened and operated, the weight of maintenance services for subway screen doors will continue to increase. During the reporting period, the Company signed the Yungui Station Door Purchase Contract" with Shenzhen BYD Supply Chain Management Co., Ltd., and has signed contracted door products and related services for cloud-railway projects in 8 cities.
3. New energy industry During the reporting period, photovoltaic power stations in Xuanfeng Town, Pingxiang Town, Jiangxi Province, and photovoltaic power stations in the parks of Jiangxi Isuzu Automobile Co., Ltd. in Nanchang City and Dongguan Songshan Lake Photovoltaic Power Plant all operated steadily with a total power generation capacity of 19,983,900 kilowatt hours, exceeding the designed power generation efficiency. The sales income reached RMB 22,554,600 and operating profit of RMB 14,619,800. In the
19 2017 Annual Report of China Fangda Group Co., Ltd. future, it will still bring long-term, stable income and profits to the Company. In view of the better revenue situation of photovoltaic power plants, the Company will expand the new energy photovoltaic industry business in accordance with relevant state policies and in combination with the company's own situation. 4. Real estate (1) Industry de velopment and impacts on the Company's future business and profitability During the reporting period, the Company's real estate projects were mainly in Shenzhen. Shenzhen is located in the core area of Guangdong, Hong Kong and Macau Bay, and the economy continues growing. In recent years, Shenzhen has introduced a series of measures to limit house purchase. However, due to the limited supply of land for development, it is still difficult to stop the rise in prices. Benefited from the rapid economic development of Shenzhen in the core area of Guangdong, Hong Kong, and Macau Bay, during the reporting period, the sales price of the Company’s Fangda Town project has increased significantly over the previous year. In 2018, approximately 78,000 square meters of office building of No. 1 building of Fangda Town Phase II will be fully completed, accepted, and put into use. Apart from its own use, the Company has an area of approximately 70,000 square meters to earn rentals and capital appreciation for holding purposes. According to the current accounting standards and the Company's accounting policies, this part of the real estate will be measured at fair value, which will greatly increase the Company's operating performance and net assets in 2018. It is expected that the real estate sales and property leasing will continue to contribute profits to the Company in the future. (2) Main business model, landscape, market position and competitiveness of the Company
The Company will focus on Guangdong, Hong Kong, and Macau Bay Area, focusing on the development of Shenzhen's urban renewal projects. The development of products will be mainly office buildings, supporting businesses, security housing, or residential properties. The Company has established a professional team to operate and manage the Company's businesses and properties. The Company is currently developing three projects: the Fangda Town in Shenzhen Nanshan District, the Fangda Bangshen project in Bao'an District, and the Phoenix Valley Fangda Center in Honggutan, Nanchang. The Fangda Town project is located in the Dasha River Innovation Corridor in Nanshan District. It is an innovation center in the core area of Guangdong, Hong Kong, and Macau Bay. The location of the project enjoys significant advantages. Fangda Town is a key project in Shenzhen and it is the first group of comprehensive 5A-class office buildings for industrial and commercial reform in Nanshan District. The facilities are well-supported. There is little competition in the area and units of the project were sold quickly. The Fangda Bangshen Project is located in Fuhai Street, Bao'an District, Shenzhen, and is only 3 kilometers away from the International Convention and Exhibition Center under construction in Shenzhen. It is planned to be used for industrial housing, ancillary apartments, and commercial development with great potential. The Phoenix Valley Fangda Center project is located in the south of Huanghe Road in the Phoenix Valley of Honggutan New District, Nanchang, and west of the Qijiang River North Avenue with an excellent river view. Phoenix Valley is an important part of Honggutan New District in Nanchang. It is a business and office gathering place in Nanchang. (3) Land reserve
In 2017, the company newly signed the Fangda Bangshen project. The Fangda Bangshen project is a cooperative development project. The project occupies an area of 20,714.9 square meters. During the reporting period, it is actively applying for est ablishment of the Shenzhen urban renewal project. The Phoenix Valley Fangda Center project in Honggutan, Nanchang is under construction as planned and is planned to be sold in 2019. At present, the Company is actively and orderly progressing several key renovation projects in Shenzhen Nanshan District , Longhua District and Longgang District. The land area of these projects is about 200,000 square meters, and the project is mainly updated for residential, social housing and industrial housing. During the reporting period, the Company did not hold other development projects and land to be developed except for the Shenzhen Fangda Town project, the Shenzhen Fangda Bangshen project and the Nanchang Phoenix Valley Fangda Center project. (4) Real estate development
20 2017 Annual Report of China Fangda Group Co., Ltd.
Project under Interests Starting time Floor area Building are (m2) Finished building Estimated total Invested amount construction percentage (m2) are (m2) investment (in (in RMB100 RMB100 million) million)
Fangda 100% May. 2014 35,397.6 212,400 139,258.30 25 20.65 Town
(5) Project sales in the report period
Project under Interests percentage Sellable area (m2) Sold area (m2) construction
Fangda Town 100% 93,086.25 70,561.08
(6) Real estate lease
Form City Interests percentage Floor area (m2) Lease ratio
Office building Shenzhen 100% 26,040.55 68.45%
Office building Jiangxi 100% 5,387.50 3.42%
Plant Jiangxi 100% 44,771.56 74.45%
Commercial Ningbo 100% 96.75 100% residence
(7) Financing in the report period
Financing Currency Balance (in RMB) Financing cost (interest rate) Due date Pledge source /guarantor
Bank loan RMB 1,093,978,153.39 Interval rate, between 10% 2023-2-11 Pledged by equity in below the benchmark Fangda Real Estate Co., interest rate and 60% above Ltd. and guaranteed by the the benchmark interest rate Company Guarantee on the withdrawal date
(8) Development strategy and operation plan in the next year In the future, the Company will focus on real estate and urban renewal projects in the core areas of Guangdong, Hong Kong, and Macau Bay, and continue to grow and strengthen the Company's real estate business. In 2018, the Company will complete the sales of 22,525.17 square meters of the remaining saleable area of Fangda Town Phase I project, complete the investment promotion of 20,000 square meters of supporting business units; and complete approximately 78,000 square meters of office building #1 of Fangda Town Project. The building is completed and accepted. In addition to its own use, the Company has an area of approximately 70,000 square meters to be leased. For the purpose of holding, according to the current accounting standards and the Company’s accounting policies, this part of the property will be measured at fair value, which will greatly increase the Company's operating performance and net assets in 2018. The Company will start the construction of the Phoenix Valley Fangda Center project in Honggutan, Nanchang with a site area of approximately 16,608 square meters, a total construction area of 93,439 square meters, and a total planned building area of 66,434 square meters; the preparatory work for Shenzhen Fangda Bangshen project will be actively promoted. The Company will focus on key update projects in Shenzhen Nanshan District, Longhua District, Longgang District. It is expected that the company’s real estate sales and property leasing will continue to contribute profits to the company in the future. (9) Bank mortgage loan guarantee provided for commercial housing purchasers
21 2017 Annual Report of China Fangda Group Co., Ltd.
The Group’s property business provides periodic mortgage guarantee for property purchasers. The term of the periodic guarantee lasts from the effectiveness of guarantee contracts to the completion of mortgage registration and transfer of housing ownership certificates to banks. By December 31, 2017, the Company has provided periodic guarantee of RMB396 million. (10) Property management In 2017, the wholly-owned subsidiary Fangda Property passed the ISO9001:2015 quality management system certification. It took over management of Shenzhen Fangda Building and Fangda Dongguan Songshan Lake Base Property and took over the management of Shenzhen Fangda Town. The company will further enhance its management capabilities, strengthen its service quality, and provide various property management services. 5. Innovation During the reporting period, the Company continued to uphold the concept of ―technology -based, innovation-based‖, and applied for a total of 27 new patents, including 6 invention patents and 21 utility model patents. As of the end of the reporting period, the Company obtained a total of 781 patents (of which 107 were invention patents), 4 international PCT patents, 8 software copyrights, and the total number of patents ranked first in the nation's industry. The Company has participated in the preparation of 37 national, industry and corporate standards. During the reporting period, the Company won the Outstanding Contribution Award of the Shenzhen Quality and Powerful City Award, the Shenzhen Intellectual Property Indus Gold Award, the Best Creative Intelligence Award (the Trademark Award), the Company's research and production of ―blue and white porcelain aluminum veneer‖ and ―freeform aluminum alloy sun visors" won the key new product prize of Jiangxi Province. During the reporting period, the Chengdu company was identified as a national high-tech enterprise. At this point, the Company has a total of five subsidiaries of state-level high-tech enterprises. During the reporting period, the Company completed a total of 16 science and technology projects, including 14 new product development projects and 2 technological transformation projects. The Company completed 62 government awards or government funded declarations. The Company will continue to explore the transition from "manufacturing + engineering" to "informational technology services + smart manufacturing" company, making full use of artificial intelligence, Internet +, robots and other ideas and methods, and work hard to achieve high-end curtain wall, aluminum plate, subway screen door assembly system and spare parts standardized to ensure quality and improve efficiency. In addition, the Company's self-developed online upgrade system has enabled the use of screen door control systems in overseas markets to be remotely upgraded through domestic control centers, demonstrating the Company's high technological innovation capabilities. 6. Awards As of the date of disclosure of this report, the Company won the Top 500 Chinese Listed Company Awards, the Best Employ er Enterprise Award in China, the Goodwill Demonstration Enterprise in Guangdong Province, the Contracted and Credited Enterprise in Guangdong Province, the Top 100 Private Enterprises in Guangdong, the Top 500 Enterprises in Guangdong, and Guangdong Top 100 Manufacturing Companies, Shenzhen Famous Brands, Shenzhen Top 100 Enterprises, Shenzhen Advanced Collective, Shenzhen Outstanding Corporate Social Responsibility, Shenzhen Quality Outstanding Contribution Award, Shenzhen Intellectual Property Indus Gold Award - Best Creative Award (Trademarks Awards), Fangda Journal won the Shenzhen 2017 Outstanding Enterprise Newspaper Award. Mr. Xiong Jianming, chairman and president of the Company, was elected as the representative of the 13th National People's Congress and the most responsible entrepreneur in China. Multiple curtain wall projects undertaken by the wholly-owned subsidiary Fangda Jianke won the "Luban Prize" (National Quality Project) for China Construction Engineering, the Chinese Curtain Wall Project, the Chinese Curtain Wall, and the "Magnolia" Award for Shanghai Construction Project (High Quality of the City), Guangdong Province Construction Engineering Goldsmith Award, Guangdong Provincial Construction Engineering Quality Award, Guangdong Provincia l Outstanding Building Decoration Engineering Award, Shenzhen Jinniu Award, Shenzhen Jinpeng Award, and the Company's chief quality officer An Yajun was named one of the Shenzhen's Best Quality officers. The wholly-owned subsidiary Fangda Automation won the Best Urban Rail Transit Platform Door System Award and the
22 2017 Annual Report of China Fangda Group Co., Ltd.
Shenzhen Excellent QCC Achievement Trial Excellence Award; the General Manager Xiong Haigang was named one of Shenzhen's 100 Industry Leaders, and two employees, Huang Liangjiang and Liu Yi, were respectively awarded Review Shenzhen Quality Craftsman and Shenzhen Excellent Quality Manager. The wholly-owned subsidiary Fangda Jiangxi New Material was awarded the title of Jiangxi Provincial Manufacturing Individual Champion, advanced enterprise in Nanchang High-tech Zone, aluminum veneer products won the outstanding quality award in the metal composite industry, and general manager Huang Jing was awarded the 2017 Nanchang High-tech Zone outstanding entrepreneur.
The wholly-owned subsidiary Fangda Real Estate was rated as the 2017 Shenzhen Real Estate Development Industry Development Potential Enterprise and Shenzhen Nanshan Top 100 Taxpayer Enterprise.
The Company must comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.3 – Listed Companies Engaged in Property Development.
2. Main business analysis
1. Summary
For details see Management Discussion and Analysis – 1. Profile
2. Income and costs
(1) Turnover composition
In RMB
2017 2016
Proportion in Proportion in YOY change (% ) Amount Amount operating costs (%) operating costs (%)
Total turnover 2,947,470,813.58 100% 4,203,866,173.72 100% -29.89%
Industry
Metal production 1,653,688,831.23 56.11% 2,042,947,811.82 48.60% -19.05%
Railroad industry 339,399,859.01 11.51% 327,766,817.78 7.80% 3.55%
New energy industry 21,848,200.20 0.74% 29,742,249.70 0.71% -26.54%
Real estate 911,195,066.07 30.91% 1,784,378,167.91 42.45% -48.93%
Others 21,338,857.07 0.72% 19,031,126.51 0.45% 12.13%
Product
Curtain wall system 1,653,688,831.23 56.11% 2,042,947,811.82 48.60% -19.05% and materials
Subway screen door 339,399,859.01 11.51% 327,766,817.78 7.80% 3.55% and service
PV power generation 21,848,200.20 0.74% 29,742,249.70 0.71% -26.54%
23 2017 Annual Report of China Fangda Group Co., Ltd. products
Real estate sales 911,195,066.07 30.91% 1,784,378,167.91 42.45% -48.93%
Others 21,338,857.07 0.72% 19,031,126.51 0.45% 12.13%
District
In China 2,915,698,936.74 98.92% 4,177,161,780.92 99.00% -30.20%
Out of China 31,771,876.84 1.08% 26,704,392.80 1.00% 18.98%
(2) Industries, products or districts that take more than 10% of the Company’s business turnover or profit
√ Applicable □ Inapplicable Whether the Company needs to comply with disclosure requirements of special industries
Yes Property development and decoration industries The Company must comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.6 – Listed Companies Engaged in Decoration Business. In RMB
Year-on-year Year-on-year Year-on-year Turnover Operation cost Gross margin change in change in change in gross operating revenue operating costs margin
Industry
Metal production 1,653,688,831.23 1,471,217,611.24 11.03% -19.05% -15.05% -4.19%
Real estate 911,195,066.07 273,925,459.18 69.94% -48.93% -56.78% 5.46%
Railroad industry 339,399,859.01 246,087,918.18 27.49% 3.55% -2.08% 4.16%
Product
Curtain wall system and 1,653,688,831.23 1,471,217,611.24 11.03% -19.05% -15.05% -4.19% materials
Real estate sales 911,195,066.07 273,925,459.18 69.94% -48.93% -56.78% 5.46%
Metro screen 339,399,859.01 246,087,918.18 27.49% 3.55% -2.08% 4.16% door
District
In China 2,915,698,936.74 1,950,559,930.32 33.10% -30.20% -24.11% -5.37%
Main business statistics adjusted in the recent one year with the statistics criteria adjusted in the report period □ Applicable √ Inapplicable Different business types of the Company
Business type Turnover Operation cost Gross margin
Curtain wall system and 1,653,688,831.23 1,471,217,611.24 11.03% materials
24 2017 Annual Report of China Fangda Group Co., Ltd.
Whether the Company runs business through the Internet □ Yes √ No Whether the Company runs overseas projects □ Yes √ No In RMB Main business statistics adjusted in the recent one year with the statistics criteria adjusted in the report period
□ Applicable √ Inapplicable
(3) The physical sales revenue is high the labor service revenue
□ Yes √ No
(4) Performance of signed major sales contracts in the report period
√ Applicable □ Inapplicable Yes
Property development and decoration industries The Company must comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.6 – Listed Companies Engaged in Decoration Business.
Project amount Cumulative recognized income Amount of unfinished part
Unfinished project 6,098,883,021.38 3,505,054,048.42 2,593,828,972.96
Income Cumulative Balance of Construction Completion Payment Project Project amount recognized in recognized accounts period percentage collection this period income receivable
Shenzhen Hanjing Financial 337,046,144.59 2015 - 2018 73.83% 153,923,117.26 240,397,211.73 182,436,614.80 66,854,058.22 Center curtain wall project
Other note □ Applicable √ Inapplicable
Accumulative Balance of unpaid Accumulative recognized gross Estimated loss Settled amount amount of finished occurred costs margin project
Finished but not 6,409,627,651.24 939,475,640.14 7,205,830,470.80 143,272,820.58 settled project
Other note □ Applicable √ Inapplicable
25 2017 Annual Report of China Fangda Group Co., Ltd.
(5) Operation cost composition
The Company must comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.6 – Listed Companies Engaged in Decoration Business. Main business cost
In RMB
2017 2016 YOY Proportion in Proportion in Cost composition Business type change Amount operating costs Amount operating costs (% ) (%) (%)
Curtain wall system Raw materials 983,487,997.36 66.85% 1,124,832,846.21 64.95% 1.90% and materials
Installation and Curtain wall system 334,781,910.86 22.76% 383,996,594.86 22.17% 0.59% engineering costs and materials
Curtain wall system Labor cost 76,062,568.69 5.17% 85,807,796.60 4.95% 0.22% and materials
Industry In RMB
2017 2016 YOY Proportion in Proportion in Industry Items change Amount operating costs Amount operating costs (% ) (%) (%)
Metal production Raw materials 983,487,997.36 66.85% 1,124,832,846.21 64.95% 1.90%
Installation and Metal production 334,781,910.86 22.76% 383,996,594.86 22.17% 0.59% engineering costs
Metal production Labor cost 76,062,568.69 5.17% 85,807,796.60 4.95% 0.22%
Construction and Real estate 144,887,293.21 52.89% 342,870,138.09 54.13% -1.24% installation cost
Real estate Land cost 71,670,682.41 26.16% 187,932,173.82 29.67% -3.51%
Real estate Loan interest 10,433,871.29 3.81% 27,957,948.15 4.41% -0.60%
Real estate Labor cost 2,950,138.93 1.08% 4,338,667.13 0.68% 0.40%
(6) Change to the consolidation scope in the report period
√ Yes □ No 1. Shenzhen Hongjun Investment Co., Ltd. and Fangda Australia Co., Ltd. were newly established in this period. The two companies are consolidated in this period.
2. In this period, the indirect controlled subsidiary Jiangxi Fangda New Aluminum Co., Ltd. was liquidated, and at the same time, the
26 2017 Annual Report of China Fangda Group Co., Ltd. entire equity of Guangdong Fangda SOZN Lighting Co. was disposed, leading to loss in the control. Therefore, the two subsidiaries are moved out of the consolidation scope in this period.
(7) Major changes or adjustment of business, products or services in the report period
□ Applicable √ Inapplicable
(8) Major sales customers and suppliers
Main customers
Total sales amount to top 5 customers (RMB) 522,731,597.62
Proportion of sales to top 5 customers in the annual sales 17.73%
Percentage of sales of related parties in top 5 customers in 0.00% the annual sales
Information of the Company's top 5 customers
No. Customer Sales (RMB) Percentage in the annual sales
1 No.1 158,540,810.78 5.38%
2 No.2 112,330,859.57 3.81%
3 No.3 91,119,452.06 3.09%
4 No.4 80,884,372.36 2.74%
5 No.5 79,856,102.86 2.71%
Total -- 522,731,597.62 17.73%
Other information about major customers □ Applicable √ Inapplicable Main suppliers
Purchase amount of top 5 suppliers (RMB) 411,128,701.72
Proportion of purchase amount of top 5 suppliers in the total 23.91% annual purchase amount
Percentage of purchasing amount of related parties in top 5 0.00% customers in the annual purchasing amount
Information of the Company’s top 5 suppliers
No. Supplier Purchase amount (RMB) Percentage in the annual purchase amount
1 No.1 154,779,367.29 9.00%
2 No.2 87,210,056.50 5.07%
3 No.3 64,393,833.09 3.74%
4 No.4 56,995,928.49 3.31%
5 No.5 47,749,516.35 2.78%
27 2017 Annual Report of China Fangda Group Co., Ltd.
Total -- 411,128,701.72 23.91%
Other information about major suppliers □ Applicable √ Inapplicable
3. Expenses
In RMB
YOY change 2017 2016 Notes (% )
Sales expense 61,063,948.40 59,273,046.14 3.02%
Administrative 152,816,680.30 171,922,091.39 -11.11% expense
Financial Mainly due to stopping capitalization of interest 67,058,846.06 28,255,397.43 137.33% expenses expense of the phase I of the Fangda Town project
4. R&D investment
√ Applicable □ Inapplicable Over the years the Company has been adhering to the "technology-based, innovation as the source" business philosophy, independent innovation ability and technical level have remained the industry leader. In order to continue to maintain its le ading technological strength and enhance its product market competitiveness, during the reporting period, the Company newly applied for 27 patents, including 6 invention patents and 21 utility model patents. As of the end of the reporting period, the Company obtained a total of 781 patents (of which 107 were invention patents), 4 international PCT patents, 8 software copyrights, and the total number of patents ranked first in the nation's industry. The Company has participated in the preparation of 37 national, industry and corporate standards. During the reporting period, the Company completed a total of 16 science and technology projects, including 14 new product development projects and 2 technological transformation projects. The Company completed 62 government awards or government funded declarations. During the reporting period, the Company won the Outstanding Contribution Award of the Shenzhen Quality and Powerful City Award, the Shenzhen Intellectual Property Indus Gold Award, the Best Creative Intelligence Award (the Trademark Award), the Company's research and production of ―blue and white porcelain aluminum veneer‖ and ―freeform aluminum alloy sun visors" won the key new product prize of Jiangxi Province.
R&D investment
2017 2016 Change
R&D staff number 400 459 -12.85%
R&D staff percentage 18.60% 19.54% -0.94%
R&D investment amount (RMB) 112,793,075.49 113,321,489.31 -0.47%
Investment percentage in operation turnover 3.83% 2.70% 1.13%
Capitalization of R&D investment amount 0.00 0.00 0.00% (RMB)
Percentage of capitalization of R&D 0.00% 0.00% 0.00%
28 2017 Annual Report of China Fangda Group Co., Ltd. investment in the R&D investment
Reason for the increase in the percentage of R&D investment in the business turnover □ Applicable √ Inapplicable Explanation of the increase in the capitalization of R&D investment □ Applicable √ Inapplicable
5. Cash flow
In RMB
Items 2017 2016 YOY change (% )
Sub-total of cash inflow from business 3,549,895,018.15 3,711,200,293.75 -4.35% operations
Sub-total of cash outflow from business 2,992,061,872.42 3,245,483,218.83 -7.81% operations
Cash flow generated by business operations, net 557,833,145.73 465,717,074.92 19.78%
Sub-total of cash inflow generated from 11,213,677,450.42 575,207,720.42 1,849.50% investment
Subtotal of cash outflows 11,602,815,885.41 686,658,608.57 1,589.75%
Cash flow generated by investment activities, -389,138,434.99 -111,450,888.15 249.16% net
Subtotal of cash inflow from financing 978,503,029.59 2,112,174,073.02 -53.67% activities
Subtotal of cash outflow from financing 1,149,248,335.73 1,780,430,997.90 -35.45% activities
Net cash flow generated by financing activities -170,745,306.14 331,743,075.12 -151.47%
Net increase in cash and cash equivalents -4,539,039.85 688,085,331.62 -100.66%
Explanation of major changes in related data from the same period last year √ Applicable □ Inapplicable
Cash inflows and outflows from investing activities increased significantly from the same period last year, mainly due to the rolling use of idle funds to purchase wealth management products during the current period. Explanation of major difference between the cash flow generated by operating activities and the net profit in the year √ Applicable □ Inapplicable During the reporting period, the difference between the net cash flow of operating activities of the company and the net profit of the year was mainly due to the fact that the changes in fair value did not generate cash flow during the current period.
3. Non-core business analysis
√ Applicable □ Inapplicable In RMB
29 2017 Annual Report of China Fangda Group Co., Ltd.
Amount Profit percentage Reason Whether continuous
Mainly due to the transfer of shares of Fangda SOZN during the current period, the difference between the equity obtained from disposal of Investment income 102,891,113.42 7.22% equity and the sum of net assets and No goodwill that the former subsidiary’s continuing calculation from the date of purchase was calculated based on the original shareholding ratio.
It is mainly due to changes in fair Gain/loss caused by value arising from follow-up changes in fair 892,408,648.26 62.63% measurement of fair value of No value commercial real estate of Fangda Plaza project.
Mainly bad debt provision Assets impairment 58,879,269.89 4.13% Yes corresponding to accounts receivable
Non-operating 8,382,787.23 0.59% Mainly waste disposal income No revenue
Non-business 8,073,399.54 0.57% Mainly due to donations No expenses
4. Assets and liabilities
1. Major changes in assets composition
In RMB
End of 2017 End of 2016 Change Proportion in Proportion in Notes Amount Amount (% ) total assets total assets
1,180,398,479. 1,095,229,837. Monetary capital 15.48% 16.14% -0.66% 51 90
Account 1,920,372,426. 2,342,929,628. 25.18% 34.52% -9.34% receivable 16 14
This is mainly due to the sales of Fangda Plaza project realized in the current period, and the fact that the 819,610,960.6 1,990,621,059. Inventory 10.75% 29.33% -18.58% properties used for renting in Fangda 7 27 Town will be included in the investment real estate according to the actual construction costs when they
30 2017 Annual Report of China Fangda Group Co., Ltd.
reach the expected usable status.
The main reason is that the property used for rent in Fangda Town will be included in the investment real estate Investment real 2,253,794,404. 29.56% 333,795,631.30 4.92% 24.64% according to the actual construction estate 55 cost when it reaches the expected usable state, and will be subsequently measured by fair value.
Long-term share 34,142,055.62 0.45% 12,105,030.68 0.18% 0.27% equity investment
468,118,279.1 Fixed assets 6.14% 506,819,266.38 7.47% -1.33% 8
Construction in 2,668,198.62 0.03% 2,537,725.36 0.04% -0.01% process
616,000,000.0 Short-term loans 8.08% 591,000,000.00 8.71% -0.63% 0
893,978,153.3 Long-term loans 11.72% 922,169,568.24 13.59% -1.87% 9
2. Assets and liabilities measured at fair value
√ Applicable □ Inapplicable
In RMB
Accumulative Gain/loss changes in fair Impairment Amount Opening caused by value Amount sold in Closing Items provided in the purchased in amount changes in fair accounting into the period amount period the period value the income account
Financial assets
1. Financial assets measured at fair value with variations accounted into 0.00 0.00 0.00 0.00 0.00 0.00 0.00 current income account (excluding derivative financial assets)
2. Derivative 2,232,200.00 2,371,344.29 0.00 0.00 0.00 2,232,200.00 0.00
31 2017 Annual Report of China Fangda Group Co., Ltd. financial assets
3. Sellable 0.00 0.00 0.00 0.00 0.00 0.00 0.00 financial assets
Subtotal 2,232,200.00 2,371,344.29 0.00 0.00 0.00 2,232,200.00 0.00
Investment real 1,492,278,85 303,090,562.62 878,155,120.90 11,675,404.61 0.00 0.00 0.00 estate 9.69
1,492,278,85 Total 305,322,762.62 882,897,809.48 11,675,404.61 0.00 0.00 2,232,200.00 9.69
Financial 0.00 0.00 0.00 0.00 0.00 0.00 159,000.00 liabilities
Major changes in the assets measurement property of the Company in the report period □ Yes √ No
3. Right restriction of assets at the end of the period
Items Closing book value Reason Monetary capital 249,112,943.96 保证金及专户存款 Fixed assets 52,839,273.10 Loan by pledge Investment real estate 307,321,568.00 Loan by pledge 100% stake in Fangda Property Development held by the 200,000,000.00 Loan by pledge Company Total 809,273,785.06
5. Investment
1. General situation
□ Applicable √ Inapplicable
2. Major equity investment in the report period
□ Applicable √ Inapplicable
3. Major non-equity investment in the report period
□ Applicable √ Inapplicable
32 2017 Annual Report of China Fangda Group Co., Ltd.
4. Financial assets investment
(1) Securities investment
□ Applicable √ Inapplicable The Company made no investment in securities in the report period
(2) Derivative investment
√ Applicable □ Inapplicable In RMB10,000
Proporti on of closing investm Actua Derivati Impairm ent l Initial Amount Closing ve Related Amount ent amount gain/l Relation Initial Start investm sold in investm investm transacti Type End date in this provisio in the oss in ship amount date ent this ent ent on period n (if closing the amount period amount operator any) net report assets in period the report period
Shangha Shanghai i Futures 12,144.6 732.4 None No aluminu 6,220.78 12.09.16 28.02.18 6,220.78 6,075.08 151.25 0.05% Exchang 1 3 m e
12,144.6 732.4 Total 6,220.78 -- -- 6,220.78 6,075.08 151.25 0.05% 1 3
Capital source Self-owned fund
Lawsuit (if any) None
Disclosure date of derivative investment approval by the Board of 31.10.17 Directors (if any)
Disclosure date of derivative investment approval by the Shareholders’ Meeting (if any)
Risk analysis and control measures To prevent the risk of fluctuation of raw material prices, the Company adopted the for the derivative holding in the report aluminum futures exchanged at the domestic futures exchange to provide hedgin g for period (including without limitation aluminum as a raw material for the Company. The Company has set up and implemented the market, liquidity, credit, operation and Provincial Regulations on China Fangda Group Domestic Futures Hedging to prevent risks.
33 2017 Annual Report of China Fangda Group Co., Ltd. legal risks)
Changes in the market price or fair value of the derivative in the report period, the analysis of the derivative’s Fair value of derivatives are measured at open prices in the futures market fair value should disclose the method used and related assumptions and parameters.
Material changes in the accounting policies and rules related to the None derivative in the report period compared to last period
Opinions of independent directors on the Company’s derivative investment None and risk controlling
5. Use of raised capital
√ Applicable □ Inapplicable
(1) Overview
√ Applicable □ Inapplicable In RMB10,000
Amount of Accumulat raised Proportion ive amount Amount of Total capital of of raised Total Total Total of raised Use plan raised Year of accumulati which the capital of accumulati Method of amount of amount capital of of retained capital not fund ve raised purpose which the ve raised fund raising the raised used in which the fund from used in raising capital was purpose capital capital this period purpose financing more than used changed in has been used has been two years the report changed changed period
Private 2016 45,986.92 25,782.75 45,986.92 23,244.4 23,244.4 50.55% 0 None 0 issuing
Total -- 45,986.92 25,782.75 45,986.92 23,244.4 23,244.4 50.55% 0 -- 0
Notes to use of raised capital
34 2017 Annual Report of China Fangda Group Co., Ltd.
I. Use of raised capital (1) Amount of funds actually raised and time for funds to be available The Company received the Reply to the Non-public Share Issuance of Fangda China Group Co., Ltd. (CSRC License [2016] No.825) to allow the Company to issue 32,184,931 shares at the price of RMB14.60/share. A total of RMB469,899,992.60 will be raised. The net amount will be RMB459,869,200 after the issuance expense of RMB10,030,800 is deducted. The fund will be received on July 15, 2016. Grant Thornton (limited liability partnership) will verify the fund and issue the Capital Verification Report [Grant Thornton Verification (2016) 350ZA0055]. The Company will open a special account to save the fund.
2. Use of raised capital 1. The amount used in the previous year as of December 31, 2016, the accumulated RMB72,072,500 was directly invested in the raised investment projects, permanent supplementary liquidity was RMB129,969,200, and temporary supplementary liquidity was RMB200,000,000, and temporary investment in wealth management products is RMB41,000,000. The amount not yet used was RMB16,827,500 (excluding the accumulative interest deducted from the special account storage net RMB593,300). 2. This year's amount of use and current balance in 2017, the Company's use of funds raised by the Company: the Company directly invested raised funds of RMB25,853,500 in projects to be funded by raised fund, the unused funds and completed projects balance funds totaled 232,444,000 million (not including interest income, net income of financial management and handling fees were RMB1,163,900) permanent replenishment of working capital. In summary, as of December 31, 2017, a total of RMB 97,456,000 has been invested, supplemented with circulating funds of RMB 129,699,200, and the balance of unused funds and completed projects has been permanently supplemented with circulating funds of RMB 232,444,000. There is no unused amount. 2. Management of raised capital 2. Management of raised capital
Management of raised fund (1) the Company has formulated the Regulations for Management Raised Fund to comply with related regulations and protect investors’ interests. The Regulations has been reviewed and passed at the 22nd meeting of the 7th Board of Directors held on July 29, 2016. The Company started to manage the raised fund in the special account from July 2016 and signed the Three Party Supervision Agreement for the Raised Fund with the deposit bank to regulate the use and management of the raised fund. By 31.12.17, the Company has strictly complied with the agreement in using and depositing the raised fund.
(2) Special fund storage for raised funds as of December 31, 2017, the Company’s special fund-raising accounts have been
cancelled. The details are as follows: Account Deposit bank Bank account type Cancelling date Special CITIC Bank, Shenzhen OCT Sub-branch 8110 3010 1520 0104 050 account 2017-5-17 Special CCB, Shenzhen OCT Sub-branch 4425 0100 0007 0000 0304 account 2017-4-21 China Merchants Bank, Shenzhen Nanshan Special Sub-branch 7559 3103 9910 803 account 2017-4-27
(2) Promised raised-capital-based projects
√ Applicable □ Inapplicable In RMB10,000
35 2017 Annual Report of China Fangda Group Co., Ltd.
If Investme Date investme Promised Accumul Project promised to be nt when the Whether Any nt project total Adjusted Investme ative Profit invested with the raised progress project the major is investme total nt in the investme realized capital and investment by the become estimate change in changed nt of the investme report nt by the in the of the excessive raised end of the useable profit is the (includin raised nt (1) period end of the period capital period (3) as realized feasibility g partial capital period (2) ＝(2)/(1) proposed change)
Promised investment projects
1. Jiangxi Pingxiang Luxi 13MWp No 10,898 6,750.35 1,700 6,750.35 100.00% 28.06.16 994.15 Yes No distributed PV power plant project
2. Jiangxi Pingxiang Xiangdong 20MWp Inapplica Yes 16,800 201.23 201.23 100.00% Yes distributed PV power ble plant project
3. Phase I of the Jiangxi Nanchang Isuzu Automobile parking lot roof No 3,612 2,794.02 838.35 2,794.02 100.00% 08.05.16 363.8 Yes No 6.3MWp distributed PV power generation project
4. Phase II of the Jiangxi Nanchang Isuzu Automobile Inapplica parking lot roof Yes 1,680 0.00% Yes ble 6.3MWp distributed PV power generation project
5. Replenishing Inapplica No 12,996.92 36,241.32 23,244.4 36,241.32 100.00% No working capital ble
Subtotal of promised -- 45,986.92 45,986.92 25,782.75 45,986.92 -- -- 1,357.95 -- -- investment projects
Investment of excessive raised capital
None
Total -- 45,986.92 45,986.92 25,782.75 45,986.92 -- -- 1,357.95 -- --
Reason or situation that As the national photovoltaic power generation policy has undergone major changes and the expected not on schedule (on revenue has decreased, the Company was reviewed and passed on the 17th and the 22nd Board of specific project) Directors of the Seventh Board of Directors and the 2016 Annual General Meeting on March 17, 2017 and
36 2017 Annual Report of China Fangda Group Co., Ltd.
April 11, 2017, respectively, the "Proposal on Termination of Partially Raised Capital Investment Projects and the Permanent Supplement of Working Capital to Non-Used Partially Raised Funds" and "Proposal on Permanent Supplement of Working Capital to the Surplus Funds of Raised Capital Projects Completed by Investment", decided to terminate the construction of Jiangxi Province. The 20MWp distributed photovoltaic power generation project in Xiangdong District of Pingxiang City and the second phase of the 6.3MWp distributed photovoltaic power generation project in the roof of the Isuzu Motor Park in Nanchang City, Jiangxi Province. The unused funds raised from the two projects will be used to permanently replenish liquidity until the company considers it necessary.
Notes to major changes National PV power generation policies have changed substantially, lowering the estimated profits. in project feasibility
Amount, purpose and Inapplicable use of excessive raised capital
Changes in Inapplicable implementation place of investment funded by raised capital
Applicable
Occurred in the report period
Adjustment of the On March 17, 2017 and April 11, 2017, the Company held the 26th meeting of the 7th Board of Directors implementation way of and 2016 General Shareholders’ Meeting to review the Proposal of Terminating Part of the Raised Fund investment funded by and Using the Residual Raised Fund to Permanently Replenish the Working Capital and Proposal of Using raised capital the Saved Fund of Finished Projects to Permanently Replenish the Working Capital. The balance of raised fund and surplus fund of completed projects of RMB233,607,900 was used to permanently replenish the working capital this year.
Applicable
Where the self-raised funds were invested in advance to raise funds for investment projects, they were verified by the Grant Thornton (Special General Partnership) and issued a ―prepaid capital investment in Initial use of raised advance with self-raised funds‖ (―Grant Thornton Special‖ (2016) No. 350ZA0250). Project Status fund in projects and Qualification Report, on July 29, 2016, the 22nd meeting of the 7th Board of Directors of the Company replacement reviewed and approved the Proposal on Replacing Funds Raised by Advances for Raised Funds in Advance with Proposed Funds, and decided to replace the funds raised. The self-raised funds of RMB 66,449,952.50 were invested in advance to raise funds. On August 3, the Company replaced the self-raised funds of RMB 66,449,952.50 that had been invested in the raised funds project in advance.
Applicable
On December 16, 2016, the Company held the 25th Meeting of the 7th Board of Directors to review and approve the Proposal on Using Part of the Idle Raised Fund to Temporarily Replenish the Working Capital. Idle raised capital used According to the proposal, the Company will use RMB200 million of the idle raised fund to replenish the as working capital working capital for no more than 12 months upon the approval of the proposal by the Board of Directors. When the period expires, the fund will be returned to the account of the raised fund. The Company used RMB200 million to temporarily replenish the working capital on December 19.
37 2017 Annual Report of China Fangda Group Co., Ltd.
Applicable The 13MWp distributed photovoltaic power generation project in Luxi County, Pingxiang City, Jiangxi Province and the 4.3MWp Phase I 6.3MWp distributed photovoltaic power generation project in the Isuzu Surplus of investment Motor Park, Nanchang City, Jiangxi Province have been completed. The fund balances are mainly due to and cause payment of part of the project has not yet reached the payment condition.
Use plan of retained None fund from financing
Problem or situation in using of raised capital None and disclosing
(3) Altering of projects financed by raised capital
□ Applicable √ Inapplicable
None
6. Major assets and equity sales
1. Major assets sales
□ Applicable √ Inapplicable The Company sold no assets in the report period.
2. Major equity sales
√ Applicable □ Inapplicable
The Proporti Whether equity on of Whether it is contribu net the implem ted by profit equity ented Index Equity Relation the contribu involve accordin for Price (in sales Related ship Date of Counter Stock Disposa equity ted by d has g to informat RMB10, Impacts pricing transacti with the disclosu part sold l day to the listed been schedul ion 000) principl on counter re listed Compan complet e, if it is disclosu e party compan ies to ely not re y from equity transferr implem the investm ed ented beginni ents as a accordin
38 2017 Annual Report of China Fangda Group Co., Ltd.
ng of percenta g to the ge of plan, it current total net should period profits explain to the the selling reasons date (in and the ten measure thousan s the d yuan) Compan y has taken
Announ cement The of disposal Resoluti has no ons of significa the 20th Shenzhe nt Meeting n impact 60% of the Jinying on the Non-affi stake in 28.12.1 Negotiat 26.04.1 7th Yingke 200 -488.37 Compan 7.64% No liated Yes Yes Fangda 7 ion 6 Board Electron y's party SOZN of ics Co., business Director Ltd. continui s ty and publishe manage d on ment www.cn stability info.co m.cn
7. Analysis of major joint stock companies
√ Applicable □ Inapplicable Major subsidiaries and joint stock companies affecting more than 10% of the Company’s net profit In RMB
Main Registered Operation Company Type Total assets Net assets Turnover Net profit business capital profit
Subway Fangda 626,399,971.6 311,219,088.4 Subsidiary screen door 105,000,000 339,399,858.81 66,044,548.14 58,327,079.29 Automatic 6 5 and service .00
Fangda 200,000,000 3,496,742,698 1,122,067,305 1,261,910,880 957,540,993.2 Subsidiary Real estate 907,036,386.46 Property .00 .69 .77 .46 9
39 2017 Annual Report of China Fangda Group Co., Ltd.
Acquisition and disposal of subsidiaries in the report period √ Applicable □ Inapplicable
Acquisition and disposal of subsidiaries in Impacts on overall production, operation Company the report period and performance
Shenzhen Hongjun Investment Co., Ltd. Newly set None
Fangda Australia Co., Ltd. Newly set None
Jiangxi Fangda New Type Aluminum Co., Liquidation None Ltd.
Guangdong Fangda SOZN Lighting Co., Transfer None Ltd.
Major joint-stock companies
8. Structural entities controlled by the Company
□ Applicable √ Inapplicable
9. Future Prospect
(1) Competition map and development trend 1. Curtain wall and material system industry
With the development of the major national strategies such as the construction of Guangdong, Hong Kong, and Macau Bay Area and Xiong'an New District, commercial and office buildings, urban commercial complexes, star-rated hotels and other urban commercial spaces as well as airports, stations, rail transit, museums, libraries, Public spaces such as stadiums, schools, and hospitals have strong demand for curtain walls, and the curtain wall system and material industry still have a good foundation. Over recent years, a series of industry policies will be issued to push forward the industry, providing a gold opportunity for the development of energy-saving curtain wall and material business. 2. Rail transport equipment business
According to the 2017 Urban Rail Transit Industry Statistics Report released by the China Urban Rail Transit Association, as of the end of 2017, a total of 34 cities in the Chinese mainland (excluding Hong Kong, Macao, and Taiwan) opened urban rail transit and put into operation, and 165 routes were opened. The length of the operation line is up to 5,033 kilometers. As of the end of 2017, a total of 56 cities in Chinese mainland started construction of urban rail transit (some local government approval projects have not been included in the statistics), a total of 254 urban rail transit lines are under construction, and the length of lines under construction has reached 6,246.3 kilometers, and the number of cities under construction is under construction. The number of lines and the length of lines under construction exceed the scale of operation. At present, the 13th Five-Year Plan for several provinces and cities has incorporated rail transit construction into key development projects. With the implementation of major national strategies such as the Guangdong, Hong Kong, and Macao Bay District, Xiong'an New District, and the ―Belt and Road‖ Initiative, the region has radiated into Southeast Asia, South Asia, Central Asia, and West Asia, and has extended to Eastern Europe and North Africa with strong demand for infrastructure construction and interconnection. Therefore, the rail transit equipment industry will face new and unprecedented opportunities for development. 3. New energy industry In the past year, driven by the multiple factors such as the rush-preemption effect brought about by the adjustment of domestic on-grid PV tariffs, the accelerated expansion of distributed markets and the rapid rise of emerging markets such as India, the
40 2017 Annual Report of China Fangda Group Co., Ltd. development of China's photovoltaic industry has continued to improve, and the industrial scale has steadily increased. The level has significantly increased, the cost has dropped significantly, and the profitability of photovoltaic companies has been high, and the global competitive position has been further consolidated. Looking forward to 2018, the global competitiveness of China's PV companies will be further consolidated, the level of technology will continue to rise, and the production costs will also be further reduced. However, the supply and demand imbalance caused by the slowdown or even decline in the global and China photovoltaic market will increase, and the price competition pressure will increase dramatically. The foreign trade situation is more severe and other challenges. 4. Real estate Shenzhen is located in the core area of Guangdong, Hong Kong and Macau Bay, and the economy continues growing. In recent years, Shenzhen has introduced a series of measures to limit house purchase. However, due to the limited supply of land for development, it is still difficult to stop the rise in prices. Benefiting from the rapid economic development of Shenzhen in the core area of Guangdong, Hong Kong, and Macau, it is expected that there will still be room for development in the real estate industry in Shenzhen and surrounding cities. (2) Company development strategy and business plan
The Company will continue to exert its brand advantage, make full use of the brand ―Fangda‖, implement a differentiated market strategy, continue to deepen the main battlefield of Guangdong, Hong Kong, and Macao Bay, and form a Dongguan base, a Shanghai base, a Chengdu base, and a Nanchang base nationwide, seize the opportunity to actively participate in the construct ion of Guangdong, Hong Kong, Macao Bay, Xiong'an New District and Hainan Special Zone. Further enhance the competitiveness of the Company's high-end energy-saving curtain wall and material industry and rail transit screen door industry. As the world's largest supplier of rail screen door systems, the Company will also take full advantage of technologies, brands, services, etc. to further consolidate and improve the domestic market share, and vigorously expand overseas markets, especially the "Belt and Road" nat ional market, to maintain overseas orders. Continuity and stability will allow the domestic and foreign markets to develop in a balanced manner and continue to ―lead‖ in the rail transit industry. In the new energy industry, given the better earnings of the three solar photovoltaic power stations that have been connected to the grid for power generation, the Company will expand the Company's new energy photovoltaic business in accordance with relevant national policies and in combination with the Company's own situation. In the future, the Company will focus on real estate and urban renewal projects in the core areas of Guangdong, Hong Kong, and Macau Bay, and continue to grow and strengthen the Company's real estate business.
(3) Capital demand and source for projects in progress To realize the business target in 2018, the Company will develop suitable financial and capital plans, accelerate the collection of accounts receivable, sales payment from sales of Fangda Town, expand financing channels, and use share issuance, bank loans and other financing products to meet the demand for capital. (4) Risks and solutions 1. Market risks and measures As the overall designing and engineering quality continues improving in the domestic construction curtain wall industry, curtain wall products will become increasingly standard, intensifying the market competition. In addition, the market concent ration of first- and second-tier cities will increase, and regional competition will become more intense. The Company will continue to adopt a prudent management policy, refined management, and technological innovations to reduce management costs and accelerate the return of funds. Through new technologies and processes, we will improve product quality, lower costs and elevate earnings. While consolidating the domestic market, the Company will step up the efforts in exploring overseas markets, thus elevating our competitiveness in global markets and improving our resistance to risks. 2. Management risks and measures
With an increase in orders in recent years and operation of five industry bases, the Company has continued expanding rapidly in terms of capitalization, business and teams. The organizational structure and management system have become more complicat ed,
41 2017 Annual Report of China Fangda Group Co., Ltd. leading to management risks in industry expansion. The Company will continue to improve the management mode, integrate business management, optimize the business flow, seeking to build a high-efficient and solid management team. We will introduce high-quality, professional technical and management talents in different fields to strengthen the Company's core competitiveness. 3. Production and operation risks and measures The macro-economy and market demand have added to the fluctuation in prices of main raw materials such as aluminum and steel and labor, affecting the Company’s profitability and creating additional production and operation risks for the Company . The Company has sought to lower the purchase and production costs, pay attention to technical R&D, reduce consumption of raw materials, introduce automatic and intelligent production equipment, strengthen staff training to improve working efficiency. 4. Solar PV power plant risks and measures The industry is closely related to policies of the local government. Changes in policies will have large impacts on the industry. The Company will continue paying attentions to the development of the industry. The Company will conduct adequate verification on project feasibility, control costs, quality and schedules strictly, and improve its development, construction and maintenance capabilities.
X. Acceptance of surveys, negotiation and visits
1. Reception of investigations, communications, or interviews in the reporting period
√ Applicable □ Inapplicable
Time/date Way Visitor Disclosure of information
Investor Relationship Record Form on 10.02.17 Onsite investigation Institution www.cninfo.com.cn
Investor Relationship Record Form on 02.08.17 Onsite investigation Institution www.cninfo.com.cn
Investor Relationship Record Form on 16.08.17 Onsite investigation Institution www.cninfo.com.cn
Investor Relationship Record Form on 31.08.17 Onsite investigation Institution www.cninfo.com.cn
Investor Relationship Record Form on 08.09.17 Others Institution www.cninfo.com.cn
Time 5
Number of institutes 15
Number of individuals 0
Number of other visitors 0
Disclosure of any non-public information No
42 2017 Annual Report of China Fangda Group Co., Ltd.
Chapter 5 Significant Events
1. Profit distribution and reserve capitalization plan
Establishment, implementation or adjustment of profit distribution policies especially the cash dividend policy during the report period
√ Applicable □ Inapplicable During the report period, the Company implemented the profit distribution plan for 2016. Approved at the Shareholders' Meeting 2016 held on April 11, 2017, the Company's profit distribution plan for 2016 is distributing a cash dividend of RMB3.50 (tax-included) for every ten shares and transfer five shares for every ten shares to all the shareholders based on a total of 789,094,836 shares on December 31, 2016. No dividend share was issued this year. The plan was implemented on 17.05.17 (see the 2016 Share Equity Distribution Implementation Announce 2017-18).
Explanation of Cash Dividend Distribution Policies
Comply with the Articles of Association or resolution made at Yes the General Shareholders' Meeting
Clear and definite distribution standard and proportion Yes
Decision-making procedure and mechanism Yes
Independent directors fulfill their duties Yes
Middle and small shareholders express their opinions and claims. Yes There rights are well protected.
Cash dividend distribution policies are adjusted or revised Inapplicable according to law
Profit distribution and reserve capitalizing pre-plans or plans over the recent three years (including the reporting period) 2015: A cash dividend of RMB1.00 (including tax) for each ten shares was issued to all shareholders on the basis of 756,909,905 shares with a total amount of RMB 75,690,990.50, on 31.12.15. No dividend share or capitalization share was issued. 2016: A cash dividend of RMB3.50 (including tax) for each ten shares was issued to all shareholders on the basis of 789,094,836 shares with a total amount of RMB 276,183,192.60, on 31.12.16. Five shares were issued for every ten shares to all shareholders through capitalization of capital reserve. No dividend share was issued. 2017: A cash dividend of RMB1.50 (including tax) for each ten shares was issued to all shareholders on the basis of 1,183,642,254 shares with a total amount of RMB 177,546,338.10, on 31.12.17.
43 2017 Annual Report of China Fangda Group Co., Ltd.
No dividend share or capitalization share was issued in the year.
Distribution of cash dividend over the recent three years (including this period) In RMB
Net profit Proportion in the net attributable to project attributable Proportion of cash Cash dividend Cash dividend paid Year shareholders in the to shareholders in dividend paid in (including tax) in other manners consolidated the consolidated other manners financial statements financial statements
2017 177,546,338.10 1,144,404,441.03 15.51% 0.00 0.00%
2016 276,183,192.60 697,956,378.23 39.57% 0.00 0.00%
2015 75,690,990.50 107,272,369.77 70.56% 0.00 0.00%
Cash dividend proposed despite the Company records profits in the report period and a positive undistributed profit/ □ Applicable √ Inapplicable
2. Profit Distribution and Reserve Capitalization Plan in the Report Period
√ Applicable □ Inapplicable
Bonus shares for every ten shares 0
Cash dividend for every ten shares (yuan, 1.50 tax-included)
Shares capitalized for every 10 shares 0
A total number of shares as the distribution basis 1,183,642,254
Total cash dividend (yuan, including tax) 177,546,338.10
Distributable profit (yuan) 586,376,124.33
Proportion of cash dividend in the distributable 100% profit
Cash dividend
The Company is in a fast growth stage. Therefore, the cash dividend will reach 20% of the profit distribution at least.
Details of profit distribution or reserve capitalization plan
The Company plans to distribute a cash dividend of RMB1.50 (including tax) for each ten shares issued to all shareholders on the basis of 1,183,642,254 shares with a total amount of RMB177,546,338.10, on 31.12.17. No dividend share or capitalization share was issued in the year. The plan needs to be reviewed and approved at the General Shareholders' Meeting 2017.
44 2017 Annual Report of China Fangda Group Co., Ltd.
3. Performance of promises
1. Commitments that have been fulfilled and not fulfilled by actual controller, shareholders, related parties, acquirers of the Company
√ Applicable □ Inapplicable
Promised issue Promiser Type Commitment Date Term Fulfillment
Share reform
Commitments made in acquisition reports or equity change reports
Commitments made during assets reorganization
Caitong Fund; Changzhou Investment Group, First Capital Securities, Fullgoal Shares offered Assets in the Management non-public Co., Ltd., Share sales share issuance Commitments made during initial Sinomach restriction in 2015 will 01.08.16 12 months Fulfilled public offering or re-financing Finance Co., commitment be locked for Ltd., 12 months Minsheng from the date Tonghui Asset of listing Management Co., Ltd. and Ping An-UOB Fund Management Co., Ltd.
Share option incentive
Other commitments made to small-to-middle shareholders
Timely fulfillment Yes
2. Explanation and reason of profit forecasts on assets or projects that remain in the report period
□ Applicable √ Inapplicable
45 2017 Annual Report of China Fangda Group Co., Ltd.
4. Non-operating capital use by the controlling shareholder or related parties in the reporting term
□ Applicable √ Inapplicable The controlling shareholder and its affiliates occupied no capital for non-operating purpose of the Company during the report period.
5. Statement of the Board of Directors, Supervisory Committee and Independent Directors (if applicable) on the “non-standard auditors’ report” issued by the CPA on the current report period
□ Applicable √ Inapplicable
6. Statement of changes to accounting policies, estimates and audit methods compared with the financial report of the previous year
√ Applicable □ Inapplicable (1) Changes in accounting policies
Enterprise Accounting Standard No. 42 - Non-current Assets held for sale, disposal group and discontinued operation, classification, measurement and presentation of non-current assets or disposal groups held for sale after May 28, 2017, and the presentation of discontinued operations are regulated, and will be handled in accordance with the future applicable laws; the presentation of financial statements will be revised, and profit and loss from continuing operations and profit and loss from termination of operations shall be listed in the consolidated income statement and profit statement, respectively. The presentation of the comparative statement s has been adjusted accordingly: For the termination of operations presented in the current period, the information originally presented as a profit or loss from continuing operations was re-stated as a discontinued operating profit or loss in the comparative statements.
According to the "Enterprise Accounting Standards No. 16 - Government Subsidies" (2017), the accounting treatment of government subsidies was changed from the total amount method to the net amount method, and the amortization method of deferred income related to government subsidies related to assets was changed from average allocation in service life to reasonable and systematic method of allocation. The representation of government subsidy items was also revised. The government subsidies that have not been amortized on January 1, 2017 and the government subsidies obtained in 2017 should use the revised guidelines. The new disclosure requirements do not need to provide comparative information, and do not adjust the presentation of other incomes in the comparative report accordingly.
According to the ―Notice on Amendments to the Format for Issuing Financial Statements for General Enterprises‖ (Accounting [2017] No. 30), the newly ―asset disposal proceeds‖ item was added to the income statement to reflect the sale of non-current assets classified as held for sale by enterprises (excluding financial instruments, long-term equity investment and investment real estate) or disposal group, disposal profit or loss recognized at the time of disposing of the disposal group, disposal of fixed assets, construction in progress, productive biological assets and intangible assets not treated for sale gains or losses, gains or losses arising from the disposal of non-current assets in debt restructuring and gains or losses arising from the exchange of non-monetary assets. Correspondingly, the item ―including: non-current assets disposal gains‖ and ―including: non-current assets disposal losses‖ were deleted under ―non-operating income‖ and ―non-operating expenses‖. "Non-operating income" and "non-operating expenses" reflect revenues other than operating profits incurred by the Company, mainly including gains and losses from debt restructuring, government subsidies that are unrelated to the Company's daily activities, public welfare donation expenses, extraordinary losses, and profit from disc operations. Loss, donation gains, loss of non-current assets, damages, etc. The presentation of the comparative report
46 2017 Annual Report of China Fangda Group Co., Ltd. was adjusted accordingly.
The above changes in accounting policies have little impact on the Group.
(2) Changes in major accounting estimates
To reflect the Company's financial position and operating results more cautiously, and to meet requirements of business development and enterprise accounting standards, objective and fairly, the Company will make the accounting estimate change of bad debt provision standard for receivables.
(1) Risks of receivables of the Company’s newly added real-estate business are different from risks of other receivables. The Company will change the real-estate business bad debt provision standard and the standard of a single large amount according to the business condition and actual development of the business.
(2) The risk of bad debt for receivables in different ages is different according to the Company’s experience in engineering businesses and actual bad debt condition. The current classification of account aging is inadequate and cannot reflect differ ent credit risks. Therefore, the Company will change the bad debt provision proportion for engineering businesses and the standard of a single large amount.
(3) The classification of the Company’s current aging of other types of business and other receivables for more than three years is not detailed enough. In order to more accurately reflect the Company’s financial status, the division of the above ageing segments has been adjusted.
The changes in accounting estimates have been reviewed and approved by the Company at the 3rd meeting of the 8th Board of Directors held on July 28, 2017. The change took effect from August 1, 2017. The impact of the above changes in accounting estimates on the net profit of the Group for the current period was RMB53.09 million.
7. Statement of retrospective restatement of major accounting errors in the report period
□ Applicable √ Inapplicable No retrospective restatement of major accounting errors in the report period
8. Statement of change in the financial statement consolidation scope compared with the previous financial report
√ Applicable □ Inapplicable 1. Shenzhen Hongjun Investment Co., Ltd. and Fangda Australia Co., Ltd. were newly established in this period. The two companies are consolidated in this period.
2. The subsidiary of the Company Jiangxi Fangda New Aluminum Co., Ltd. controlled indirectly by the Company was liquidized in this period. At the same time, in December 2017, the Company transferred 60% of the indirect controlled stake of Guangdong Fangda SOZN Lighting and lost the control in the company. Therefore, the two subsidiaries are moved out of the consolidation scope in this period.
9. Engaging and dismissing of CPA
CPA engaged currently
47 2017 Annual Report of China Fangda Group Co., Ltd.
Domestic public accountants name Grant Thornton (limited liability partnership)
Remuneration for the domestic public accountants (in 150 RMB10,000)
Consecutive years of service by the domestic public accountants 6
Name of certified accountants of the domestic public accountants Chen Zhaoxin, Hu Gaosheng
Chen Zhaoxin has provided auditing service for 1 year, Hu Consecutive years of service by the domestic public accountants Gaosheng for 3 years
Overseas public accountants name (if any) None
Remuneration for the overseas public accountants (in 0 RMB10,000)
Consecutive years of service by the overseas public accountants None (if any)
Name of certified accountants of the overseas public accountants None (if any)
Consecutive years of service by the domestic public accountants None
Whether the CPA is replaced □ Yes √ No Engaging of internal control audit CPA, financial advisor and sponsor
√ Applicable □ Inapplicable This year, the Company engaged Grand Thornton China (limited liability partnership) as the financial statement and internal control auditing CPA with a fee of RMB1.5 million.
10. Trade suspension and termination after the disclose of the annual report
□ Applicable √ Inapplicable
11. Bankruptcy and capital reorganizing
□ Applicable √ Inapplicable The Company has no bankruptcy or reorganization events in the report period.
12. Significant lawsuit and arbitration
□ Applicable √ Inapplicable
The Company has no significant lawsuit or arbitration affair in the report period.
13. Punishment and rectification
□ Applicable √ Inapplicable
The Company received no penalty and made no correction in the report period.
48 2017 Annual Report of China Fangda Group Co., Ltd.
14. Credibility of the Company, controlling shareholder and actual controller
□ Applicable √ Inapplicable
15. Share incentive schemes, staff shareholding program or other incentive plans
□ Applicable √ Inapplicable
There is no share incentive schemes, staff shareholding program or other incentive plans in the report period
16. Material related transactions
1. Related transactions related to routine operation
□ Applicable √ Inapplicable
The Company made no related transaction related to daily operating in the report period.
2. Related transactions related to assets transactions
□ Applicable √ Inapplicable The Company made no related transaction of assets or equity requisition and sales in the report period.
3. Related transactions related to joint external investment
□ Applicable √ Inapplicable
The Company made no related transaction of joint external investment in the report period.
4. Related credits and debts
□ Applicable √ Inapplicable
The Company had no related debt in the report period.
(5) Other major related transactions
□ Applicable √ Inapplicable The Company has no other significant related transaction in the report period.
17. Significant contracts and performance
1. Asset entrusting, leasing, contracting
(1) Asset entrusting
□ Applicable √ Inapplicable
The Company made no custody in the report period.
49 2017 Annual Report of China Fangda Group Co., Ltd.
(2) Contracting
□ Applicable √ Inapplicable The Company made no contract in the report period
(3) Leasing
√ Applicable □ Inapplicable Leasing
The investment real estate is used as external leasing. The rental income in the report period is RMB24,693,767.83.
Projects that create gains accounting for over 10% of the Company’s total profit in the report period □ Applicable √ Inapplicable The Company leased no projects that create gains accounting for over 10% of the Company’s total profit in the report period.
2. Significant guarantee
√ Applicable □ Inapplicable
(1) Guarantee
In RMB10,000
External guarantees made by the Company and subsidiaries (exclude those made for subsidiaries)
Actual date of Actual Date of Guarantee occurring Type of Complete Related Guarantee provided to amount of Term disclosure amount (signing date of guarantee d or not party guarantee agreements)
Guarantee provided to subsidiaries
Actual date of Actual Date of Guarantee occurring Type of Complete Related Guarantee provided to amount of Term disclosure amount (signing date of guarantee d or not party guarantee agreements)
since engage of contract to Fangda Jianke 26.04.16 48,000 06.07.16 12,031.29 Joint liability No Yes 2 years upon due of debt
since engage of contract to Fangda Jianke 26.04.16 26,000 27.12.16 5,768.53 Joint liability No Yes 2 years upon due of debt
since engage Fangda Jianke 21.03.17 40,000 06.12.17 7,946.76 Joint liability of contract to No Yes 2 years upon
50 2017 Annual Report of China Fangda Group Co., Ltd.
due of debt
since engage of contract to Fangda Jianke 21.03.17 30,000 23.08.17 24,000 Joint liability No Yes 2 years upon due of debt
since engage of contract to Fangda Jianke 26.04.16 18,000 16.02.17 10,543.27 Joint liability No Yes 2 years upon due of debt
since engage of contract to Fangda Jianke 21.03.17 40,000 01.11.17 4,833.7 Joint liability No Yes 2 years upon due of debt
since engage of contract to Fangda Automatic 26.04.16 21,600 06.07.16 1,600 Joint liability No Yes 2 years upon due of debt
since engage of contract to Fangda Automatic 21.03.17 15,000 31.10.17 1,495.22 Joint liability No Yes 2 years upon due of debt
since engage of contract to Fangda Automatic 26.04.16 10,000 27.12.16 622.13 Joint liability No Yes 2 years upon due of debt
since engage of contract to Fangda Automatic 21.03.17 20,000 23.08.17 0 Joint liability No Yes 2 years upon due of debt
since engage of contract to Fangda New Material 21.03.17 8,000 27.05.17 6,116.41 Joint liability No Yes 2 years upon due of debt
since engage of contract to Fangda Property 23.03.13 130,000 03.02.15 109,397.82 Joint liability No Yes 2 years upon due of debt
since engage of contract to The Company 21.03.17 25,000 26.09.17 25,000.00 Joint liability No Yes 2 years upon due of debt
51 2017 Annual Report of China Fangda Group Co., Ltd.
Total of guarantee to Total of guarantee to subsidiaries subsidiaries actually 431,600 97,116.20 approved in the report term (B1) occurred in the report term (B2)
Total of balance of Total of guarantee to subsidiaries guarantee actually provided 431,600 209,355.13 approved as of the report term (B3) to the subsidiaries as of end of report term (B4)
Guarantee provided to subsidiaries
Actual date of Actual Date of Guarantee occurring Type of Complete Related Guarantee provided to amount of Term disclosure amount (signing date of guarantee d or not party guarantee agreements)
Total of guarantee provided by the Company (total of the above three)
Total of guarantee occurred Total of guarantee approved in the 431,600 in the report term 97,116.20 report term (A1+B1+C1) (A2+B2+C2)
Total of guarantee occurred Total of guarantee approved as of 431,600 as of the end of report term 209,355.13 end of report term (A3+B3+C3) (A4+B4+C4)
Percentage of the total guarantee occurred (A4+B4+C4) on net 64.64% asset of the Company
Including:
Guarantees provided to the shareholders, substantial controllers 0 and the related parties (D)
Guarantee provided directly or indirectly to objects with over 70% 0 of liability on asset ratio (E)
Amount of guarantee over 50% of the net asset (F) 47,408.17
Total of the above 3 (D+E+F) 47,408.17
Note of immature guarantee with guarantee liabilities or possible None joint damage liabilities in the report period
Statement of external guarantees violating the procedure (if any) None
Note of compound guarantee
(2) Incompliant external guarantee
□ Applicable √ Inapplicable The Company made no incompliant external guarantee in the report period.
52 2017 Annual Report of China Fangda Group Co., Ltd.
3. Entrusted cash capital management
(1) Wealth management
√ Applicable □ Inapplicable Wealth management during the reporting period In RMB10,000
Due balance to be Type Source of fund Amount Undue balance recovered
Bank financial products Self-owned fund 75,000 40,000 0
Others Self-owned fund 30,000 0 0
Total 105,000 40,000 0
Specific circumstances of high-risk entrusted financing with large individual amount or low security, poor liquidity, and no cost protection
□ Applicable √ Inapplicable Entrusted financial management expected to fail to recover the principal or likely result in impairment
□ Applicable √ Inapplicable
(2) Trusted loans
□ Applicable √ Inapplicable
The Company borrowed no trust loan in the report period.
4. Other significant contract
□ Applicable √ Inapplicable The Company entered into no other significant contract in the report.
XVI Social responsibilities
1. Fulfillment of social responsibilities
During the reporting period, the Company actively assumed social responsibility, paid taxes in accordance with the law, and spent RMB580,000 on environmental protection, creating nearly 10,000 person-time employment opportunities, and investing RMB2.42 million in employee knowledge and skill training. The company has invested RMB112,790,000 to promote development of new draft, technology, product structure and patent according to clean, safety and efficient production to make contribution for environmental protection.
2. Performance of poverty relieving responsibilities
(1) Annual poverty relieving summary
The Company donated totally RMB3,911,000 for targeted poverty in 2017:
53 2017 Annual Report of China Fangda Group Co., Ltd.
(1) Donate RMB600,000 to the Jiangxi CPPCC overseas poverty relief foundation. The donation will be used to build health and family planning service stations for 12 poor villages of Taihe county, Jiangxi. (2) Donate RMB100,000 to the Nanchang Juvenile Development Foundation to set up the Nanchang Sanfeng Charity Foundation. (3) Donate RMB50,000 to the Shenzhen Nanshan District Yuehai Sub-district Federation of Trade Unions for poverty relief of Lianping county, Shenzhen, Guangdong. (4) Donate RMB1,000 to set up the Shenzhen Nanshan District Elder Care Charity Foundation. (5) Donate RMB120,000 to the Tibet Linzhi Cha'yu farm 8th Tibet support team to help build the Cha’yu Farm Primary. (6) Donate RMB10,000 to the Jiangxi Pingxiang Luxi Xuanfeng government for poverty relief and education support. (7) Donate RMB30,000 to two students at Jiangxi Ganzhou Zhanggong district Shahe Lon gcun village. (8) Donate RMB 3 million to the Jiangxi Province Glorious Career Promotion Association to help the old revolutionary areas get rid of poverty, focusing on projects such as photovoltaic power generation in the agrocybe aegerila planting greenhouse in Guangchang County, Jiangxi Province.
(2) Result of targeted poverty alleviation
Item Unit Qty/Description
1. General situation —— ——
Including: 1. Fund (in RMB10,000) 391.1
2. Investment —— ——
1. Industry development poverty relief —— ——
Including: 1.1 Industry development —— Capital earning projects
1.2 Number of industry 1 development projects
1.3 Amount of industry (in RMB10,000) 300 development fund
2. Employment transfer —— ——
3. Relocation —— ——
4. Education —— ——
Including: 4.1 Sponsor to students from (in RMB10,000) 3 poor families
4.2 Number of students Person 2
4.3 Education investment in poor (in RMB10,000) 18 areas
5. Health care support —— ——
6. Eco-protection support —— ——
7. Last-line guarantee —— ——
8. Social poverty relieving —— ——
9. Others —— ——
54 2017 Annual Report of China Fangda Group Co., Ltd.
Including: 9.1 Number of projects 2
9.2 Investment (in RMB10,000) 10.1
3. Prizes —— ——
(3) Further property relief plans
The Company will continue to fulfill its social responsibility for precision poverty alleviation, and make donations from time to time based on business development.
3. Environmental protection
Whether the Company and its subsidiaries are key polluting companies disclosed by the environmental protection authority
No
19. Other material events
√ Applicable □ Inapplicable
The Company must comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.6 – Listed Companies Engaged in Decoration Business. Qualifications in the decoration industry: No. Qualification Effectiveness 1 Construction curtain wall designing class A By April 16, 2020 2 Construction curtain wall contracting class A By 03.02.21 3 Construction decoration contracting class B By 04.03.21 4 Steel structure engineering contracting class B By 04.03.21 5 Construction mechanical and electric equipment By 04.03.21 installation contracting class C 6 City and road lighting engineering contracting class C By 04.03.21
In the report period, the Company’s safety management is normal. The Company pays large attention to employees’ safety awareness and capabilities of emergency processing. The Company has strengthened safety production and investigation of safety risks. The Company has formulated safety management guidelines to guide safety management. There was no significant safety accidents in the report period.
20. Material events of subsidiaries
□ Applicable √ Inapplicable
55 2017 Annual Report of China Fangda Group Co., Ltd.
Chapter 6 Changes in Share Capital and Shareholders
I. Changes in shares
1. Changes in shares
In share
Before the change Change (+,-) After the change
Bon Issued Proportio us Transferred Proportio Amount new Others Subtotal Amount n shar from reserves n shares es
I. Shares with trade 33,156,973 4.20% 16,592,095 -48,331,826 -31,739,731 1,417,242 0.12% restriction conditions
2. State-owned legal 6,438,356 0.82% 3,219,178 -9,657,534 -6,438,356 person shares
3. Other domestic shares 26,718,617 3.39% 13,372,917 -38,674,292 -25,301,375 1,417,242 0.12%
Domestic natural 972,042 0.12% 499,630 -54,430 445,200 1,417,242 0.12% person shares
II. Shares without trading 1,182,225 755,937,863 95.80% 377,955,323 48,331,826 426,287,149 99.88% limited conditions ,012
1. Common shares in 678,298,2 419,986,675 53.22% 209,979,729 48,331,826 258,311,555 57.31% RMB 30
2. Foreign shares in 503,926,7 335,951,188 42.57% 167,975,594 167,975,594 42.57% domestic market 82
1,183,642 III. Total of capital shares 789,094,836 100.00% 394,547,418 0 394,547,418 100.00% ,254
Reasons √ Applicable □ Inapplicable
1. In the report period, the Company implemented the 2016 profit distribution plan to distribute a cash dividend of RMB3.50 (tax included) for every ten shares to all shareholders and issue 5 shares for every 10 shares to all shareholders through capitalization of the reserve based on the total share number of 789,094,836 shares on December 31, 2016. 2. The Company's 2016 profit distribution plan was implemented. The number of A-shares under non-public offering of restricted sales in 2015 increased from 32,184,931 shares to 48,277,396 shares. On August 7, 2017, the restriction period of the above-mentioned shares with sales restriction expired. 3. The former director of the Company, Mr. Wang Shengguo, left office on the expiry of his term of office on April 11, 2017. As of the end of the reporting period, after leaving the Company at the end of the reporting period, 54,430 shares with sales restriction held by Mr. Wang has passed the restriction period.
56 2017 Annual Report of China Fangda Group Co., Ltd.
Approval of the change √ Applicable □ Inapplicable 1. The 2016 profit distribution proposal was reviewed at the 26th meeting of the 7th Board of Directors and 2016 shareholders’ meeting held on March 17, 2017 and April 11, 2017 respectively. 2. The Company received the Reply to the Non-public Share Issuance of Fangda China Group Co., Ltd. (CSRC License [2016] No.825) to allow the Company to issue 32,184,931 shares, which became listed on Shenzhen Stock Exchange on August 1, 2016. On May 17, 2017, the Company's 2016 profit distribution plan was implemented. The number of non-public issuance restricted A shares increased from 32,184,931 to 48,277,396 shares. The sales restriction of the abovementioned shares expired on August 7, 2017. 3. The Proposal on Reelecting the Board of Directors was reviewed at the 26th meeting of the 7th Board of Directors and 2016 shareholders’ meeting held on March 17, 2017 and April 11, 2017 respectively.
Share transfer √ Applicable □ Inapplicable On May 17, 2017, the Company has completed the 2016 profit distribution plan, the total share capital has increased from 789,094,836 shares to 1,183,642,254 shares.
Impacts on financial indicators including basic and diluted earnings per share, net assets per share attributable to common shareholders of the company in the most recent year and period √ Applicable □ Inapplicable 2016 Items Before After 2017 change change Earnings per share (diluted) 0.91 0.60 0.97 Diluted earnings per share (diluted) 0.91 0.60 0.97 Net assets per share (diluted) 3.00 2.00 2.74
Others that need to be disclosed as required by the securities supervisor □ Applicable √ Inapplicable
2. Changes in conditional shares
√ Applicable □ Inapplicable In share
Conditional Conditional shares at Released this Increased this shares at Reason of Shareholder Date of releasing beginning of the period period end of the condition period period
First Capital Securities – Private issuing Guosen Securities – Mutual 6,438,356 9,657,534 3,219,178 0 07.08.17 restriction Win Dayan Quantization
57 2017 Annual Report of China Fangda Group Co., Ltd.
Private Placement Collective Assets Management Program
Ping An Dahua Fund – Ping Private issuing An Bank – Guohai 4,041,098 6,061,647 2,020,549 0 07.08.17 restriction Securities Stock Co., Ltd.
Private issuing Sinomach Finance Co., Ltd. 3,219,178 4,828,767 1,609,589 0 07.08.17 restriction
Changzhou Investment Private issuing 3,219,178 4,828,767 1,609,589 0 07.08.17 Group Co., Ltd. restriction
Fullgoal Assets – China Merchants Securities – Fullgoal Assets – Changtai Private issuing 3,219,178 4,828,767 1,609,589 0 07.08.17 Private Placement Hedging restriction No.2 Assets Management Program
Kunlun Health Insurance Private issuing Co., Ltd, Universal Life 3,212,329 4,818,494 1,606,165 0 07.08.17 restriction Insurance
Ping An Dahua Fund – Ping An Bank – Ping An Dahua Private issuing 958,904 1,438,356 479,452 0 07.08.17 Anying Huifu No.80 Assets restriction Management Program
Caitong Fund – Everbright Bank _ Caitong Fund – Private issuing Fuhua Private Placement 794,520 1,191,780 397,260 0 07.08.17 restriction No.2 Assets Management Program
Ping An Dahua Fund – Ping An Bank – Shenzhe Ping An Private issuing 684,931 1,027,396 342,465 0 07.08.17 Dahua Assets Management restriction Co., Ltd.
Caitong Fund – ICBC Bank – Beijing Yizhuang Private issuing 561,644 842,466 280,822 0 07.08.17 International Investment restriction Development Co., Ltd.
Caitong Fund – Everbright Bank _ Caitong Fund – Private issuing Fuhua Private Placement 561,644 842,466 280,822 0 07.08.17 restriction No.6 Assets Management Program
58 2017 Annual Report of China Fangda Group Co., Ltd.
Caitong Fund – ICBC – Fuchun Private Placement Private issuing 561,644 842,466 280,822 0 07.08.17 Baoli No.1 Assets restriction Management Program
Caitong Fund – ICBC – Fuchun Private Placement Private issuing 561,644 842,466 280,822 0 07.08.17 Baoli No.5 Assets restriction Management Program
Caitong Fund – ICBC – Fuchun Private Placement Private issuing 561,644 842,466 280,822 0 07.08.17 Baoli No.15 Assets restriction Management Program
Subtotal of other Private issuing shareholders participating in 3,589,039 5,383,558 1,794,519 0 07.08.17 restriction private share issuing
Sales with sales The annual sales Xiong Jianming 944,828 0 472,414 1,417,242 restriction held restriction of by management 25% expires
Resigned from Wang Shengguo 27,214 54,430 27,216 0 10.11.17 position
Total 33,156,973 48,331,826 16,592,095 1,417,242 -- --
2. Share placing and listing
1. Securities issuance (excluding preference shares) during the report period
□ Applicable √ Inapplicable
2. Statement of changes in share number and shareholder structure, assets and liabilities structure
√ Applicable □ Inapplicable 1. In the report period, the Company implemented the 2016 profit distribution plan to distribute a cash dividend of RMB3.50 (tax included) for every ten shares to all shareholders and issue 5 shares for every 10 shares to all shareholders through capitalization of the reserve based on the total share number of 789,094,836 shares on December 31, 2016. After the equity distribution was completed, the total share capital of the Company increased from 789,094,836 shares to 1,183,642,254 shares. 2. The Company's 2016 profit distribution plan was implemented. The number of A-shares under non-public offering of restricted sales in 2015 increased from 32,184,931 shares to 48,277,396 shares. On August 7, 2017, the restriction period of the above-mentioned shares with sales restriction expired. 3. The former director of the Company, Mr. Wang Shengguo, left office on the expiry of his term of office on April 11, 2017. As of the end of the reporting period, after leaving the Company at the end of the reporting period, 54,430 shares with sales restriction held by Mr. Wang has passed the restriction period.
59 2017 Annual Report of China Fangda Group Co., Ltd.
3. Current employees’ shares
□ Applicable √ Inapplicable
3. Shareholders and the substantial controller of the Company
1. Shareholders and shareholding
In share
Total number of Total number of shareholders of Number of Number of ordinary share preference shares shareholders of shareholders of shareholders at of which voting common shares preferred stocks of 58,540 the end of the 63,651 0 rights resumed at 0 at the end of which voting rights month before the the end of the the report recovered in the disclosure date of month before the period report period the annual report disclosure date of the annual report
Shareholders holding 5% of the Company's shares or top-10 shareholders
Number Pledging or freezing of shares Amount Sharehold Change held at of shares Nature of ing in the Condition Shareholder the end of without shareholder percentag reporting al shares Share status Amount the sales e period reporting restriction period
Shenzhen Banglin Domestic Technologies 103,161,4 34,387,13 103,161,4 non-state legal 8.72% Pledged 28,820,000 Development Co., 09 6 09 person Ltd.
Shengjiu Foreign legal 90,697,88 33,307,47 90,697,88 7.66% Investment Ltd. person 2 2 2
GUOTAI JUNAN SECURITIES(HO Foreign legal 48,524,22 15,100,42 48,524,22 4.10% NGKONG) person 7 3 7 LIMITED
CITIC Securities Foreign legal 27,220,72 27,220,72 27,220,72 Brokerage (Hong 2.30% person 5 5 5 Kong) Co., Ltd.
Gong Qing Cheng Domestic 26,791,48 26,791,48 Shi Li He non-state legal 2.26% 8,930,496 8 8 Investment person
60 2017 Annual Report of China Fangda Group Co., Ltd.
Management Partnership Enterprise (limited partner)
Shenwan Hongyuan Foreign legal 16,298,43 16,298,43 1.38% 3,580,029 Securities (Hong person 7 7 Kong) Co., Ltd.
China Resource SZITIC Trust – China Resource 15,383,40 15,383,40 15,383,40 Others 1.30% Trust No.13 4 4 4 Collective Trust Program
Yunnan International Trust CO., Ltd. – Juxin 13,229,63 13,229,63 Others 1.12% 5,377,578 No.5 Collective 5 5 Fund Trust Program
Domestic natural 10,000,00 -6,213,50 10,000,00 Zhou Shijian 0.84% person 0 0 0
Yunnan International Trust CO., Ltd. – Yunxia Others 0.73% 8,635,314 8,635,314 8,635,314 No.3 Collective Fund Trust Program
A strategic investor or ordinary legal person becomes the Top10 shareholder None due a stock issue.
Among the shareholders, Shenzhen Banglin Technology Development Co., Ltd. and Shengjiu Investment Co., Ltd. are parties action-in-concert. Shenzhen Banglin Technology Notes to top ten shareholder Development Co., Ltd. and Gong Qing Cheng Shi Li He Investment Management relationship or "action in concert" Partnership Enterprise are related parties. The Company is not notified of other action-in-concert or related parties among the other holders of current shares.
Top 10 holders of unconditional shares
Category of shares
Shareholder Amount of shares without sales restriction Category of Amount shares
Shenzhen Banglin Technologies 103,161,409 RMB common 103,161,409
61 2017 Annual Report of China Fangda Group Co., Ltd.
Development Co., Ltd. shares
Foreign shares Shengjiu Investment Ltd. 90,697,882 listed in domestic 90,697,882 exchanges
GUOTAI JUNAN Foreign shares SECURITIES(HONGKONG) 48,524,227 listed in domestic 48,524,227 LIMITED exchanges
Foreign shares CITIC Securities Brokerage (Hong 27,220,725 listed in domestic 27,220,725 Kong) Co., Ltd. exchanges
Gong Qing Cheng Shi Li He RMB common Investment Management Partnership 26,791,488 26,791,488 shares Enterprise (limited partner)
Foreign shares Shenwan Hongyuan Securities (Hong 16,298,437 listed in domestic 16,298,437 Kong) Co., Ltd. exchanges
China Resource SZITIC Trust – China RMB common Resource Trust No.13 Collective Trust 15,383,404 15,383,404 shares Program
Yunnan International Trust CO., Ltd. – RMB common Juxin No.5 Collective Fund Trust 13,229,635 13,229,635 shares Program
RMB common Zhou Shijian 10,000,000 10,000,000 shares
Yunnan International Trust CO., Ltd. – RMB common Yunxia No.3 Collective Fund Trust 8,635,314 8,635,314 shares Program
No action-in-concert or related parties Among the shareholders, Shenzhen Banglin Technology Development Co., Ltd. and among the top10 unconditional Shengjiu Investment Co., Ltd. are parties action-in-concert. Shenzhen Banglin Technology shareholders and between the top10 Development Co., Ltd. and Gong Qing Cheng Shi Li He Investment Management unconditional shareholders and the Partnership Enterprise are related parties. The Company is not notified of other top10 shareholders action-in-concert or related parties among the other holders of current shares.
Top-10 common share shareholders Zhou Shijian holds 10,000,000 shares of the company through the client credit transaction participating in margin trade guarantee account of GF Securities.
Agreed re-purchasing by the Company’s top 10 shareholders of common shares and top 10 shareholders of unconditional common shares in the report period □ Yes √ No
No agreed re-purchasing by the Company’s top 10 shareholders of common shares and top 10 shareholders of unconditional common shares in the report period
62 2017 Annual Report of China Fangda Group Co., Ltd.
2. Profile of the controlling shareholders
Shareholder nature: natural person holding Type of shareholder: legal person
Legal Name of controlling representative/ Date of Organization code Main business shareholder responsible establishment person
Industrial investment, developing of Shenzhen Banglin electronic products, technical Technologies Development Chen Jinwu 07.06.01 914403007298400552 consulting, domestic commerce, Co., Ltd. material trading
Stock ownership of other domestic and overseas listed company controlled or whose None shares are held by controlling shareholders
Changes in the controlling shareholder in the reporting period □ Applicable √ Inapplicable No change in the controlling shareholder in the report period
3. Substantial controller of the Company
Nature of actual controller: domestic natural person Type of actual controller: natural person
Name of substantial controller Nationality Right of residence in another country or region
Xiong Jianming Chinese Yes
Job and position Chairman of the Board and president of the Company over the past 5 years
Profiles of domestic and overseas listed companies in which the controller held The controller held no share in other listed companies in the last ten years. shares
Change in the actual controller in the report period □ Applicable √ Inapplicable No change in the actual shareholder in the report period 7. Chart of the controlling relationship
63 2017 Annual Report of China Fangda Group Co., Ltd.
Controlling over the Company by the substantial controller through trust or other asset management
□ Applicable √ Inapplicable
4. Other legal person shareholders with over 10% of total shares
□ Applicable √ Inapplicable
5. Conditional decrease of shareholding by controlling shareholder, actual controller, reorganizer and other entities
□ Applicable √ Inapplicable
64 2017 Annual Report of China Fangda Group Co., Ltd.
Chapter 7 Preferred Shares
□ Applicable √ Inapplicable The Company had no preferred share in the report period.
65 2017 Annual Report of China Fangda Group Co., Ltd.
Chapter 8 Particulars about the Directors, Supervisors, Senior
Management and Employees
I. Changes in shareholding of Directors, Supervisors and Senior Management
Number of Decrea Increase Other Number shares sed d shares increase of shares Job Starting date End date of held at shares Name Position Sex Age in this and held at status of the term the term beginning in this period decrease end of the of the period (share) (share) period period (share)
Xiong Chairman, In M 60 20.11.95 11.04.20 1,259,771 629,886 1,889,657 Jianming president office
In Lin Kebin Director M 40 11.04.17 11.04.20 office
Vice In Lin Kebin M 40 06.06.08 11.04.20 president office
Zhou In Director M 55 09.04.07 11.04.20 Zhigang office
Zhou Vice In M 55 11.04.17 11.04.20 Zhigang president office
Zhou Secretary of In M 55 22.10.03 11.04.20 Zhigang the Board office
Xiong In Director M 49 16.04.99 11.04.20 Jianwei office
Guo Independent In M 52 31.03.14 11.04.20 Wanda director office
Independent In Deng Lei M 39 16.02.16 11.04.20 director office
Guo Independent In M 56 11.04.17 11.04.20 Jinlong director office
Supervisory Yin Committee In M 49 31.03.14 11.04.20 Changjian meeting office convener
Dong In Supervisor M 39 11.04.17 11.04.20 Gelin office
66 2017 Annual Report of China Fangda Group Co., Ltd.
In Cao Naisi Supervisor F 39 11.04.17 11.04.20 office
Wei Vice In M 49 29.07.11 11.04.20 Yuexing president office
Independent Resign Lin Bin M 55 31.03.14 11.04.17 director ed
Wang Director, vice Resign M 60 20.11.95 11.04.17 36,286 18,144 54,430 Shengguo president ed
Supervisory Committee Resign Zhen Hua F 58 27.05.05 11.04.17 meeting ed convener
Zen Resign Supervisor M 48 31.03.14 11.04.17 Xiaowu ed
Total ------1,296,057 0 0 648,030 1,944,087
2. Changes in the Directors, Supervisors and Senior Executives
√ Applicable □ Inapplicable
Name Job Type Date Reason
Office term expires and Xiong Jianming Chairman, president Appointed 11.04.17 re-elected
Office term expires and Lin Kebin Director, vice president Appointed 11.04.17 re-elected
Director, vice president secretary of Office term expires and Zhou Zhigang Appointed 11.04.17 the Board re-elected
Office term expires and Xiong Jianwei Director Appointed 11.04.17 re-elected
Office term expires and Guo Wanda Independent director Appointed 11.04.17 re-elected
Office term expires and Deng Lei Independent director Appointed 11.04.17 re-elected
Office term expires and Guo Jinlong Independent director Appointed 11.04.17 re-elected
Supervisory Committee meeting Office term expires and Yin Changjian Appointed 11.04.17 convener re-elected
Office term expires and Dong Gelin Supervisor Appointed 11.04.17 re-elected
Cao Naisi Supervisor Appointed 11.04.17 Office term expires and
67 2017 Annual Report of China Fangda Group Co., Ltd.
re-elected
Office term expires and Wei Yuexing Vice president Appointed 11.04.17 re-elected
Office term expires and Wang Shengguo Director, vice president Leaving office 11.04.17 re-elected
Office term expires and Lin Bin Independent director Leaving office 11.04.17 re-elected
Supervisory Committee meeting Office term expires and Zhen Hua Leaving office 11.04.17 convener re-elected
Office term expires and Zen Xiaowu Supervisor Leaving office 11.04.17 re-elected
Office term expires and Lin Kebin CFO Leaving office 11.04.17 re-elected
3. Office Description
Professional background, work experience and main duties in the Company of existing directors, supervisors and senior managem ent 1. Mr. Xiong Jianming: PHD Management; senior engineer; part-time professor of Beijing Institute of Civil Engineering and Architecture and Nanchang University. He was once employed by Jiangxi Provincial Machinery Design Academe, Administration Bureau of Shekou District of Shenzhen government, etc, deputy to the 10th People’s Congress of Guangdong Province, deputy to the 2nd and 3rd People’s Congress of Shenzhen City. He is now the chairman and CEO of the Company, representative of the 13th National People's Congress and the 6th Shenzhen People's Congress, president of the Shenzhen Semi-conductor Lighting Industry Promotion Association, chairman of Shenzhen Jiangxi Commerce Chamber, chairman of Shenzhen Nanshan District Industry and Commerce Association and honorary chairman of Shenzhen Nanshan District Charity. 2. Mr. Lin Kebin holds a bachelor’s degree. He was once the CFO of the Company and is currently a director and vice president of the Company. 3. Mr. Xiong Jianwei: MBA. He is a director of the Company, Chairman of the Board of Director of Fangda Jianke and a member of the 14th Nanchang CPPCC Standing Committee. 4. Mr. Zhou Zhigang, bachelor’s degree. He is currently a director, vice president, Secretary of Board, and head of the Securities Dept of the Company. 5. Mr. Guo Wanda: He is an Economics Ph. D and researcher. As the executive deputy president of China Development Institute, he has studied in macro-economy, industry policies and enterprise development strategies for years and provided consulting services. He is an independent director of the Company. 6. Mr. Deng Lei is a law Ph. D and post-doctor in the financial securities law of Shenzhen Stock Exchange. He was once the vice director of Corporate Law Affair Commission of Shenzhen Lawyer Association and a senior partner of Guangdong China Commercial Law Firm. He is an independent director of the Company. 7. Mr. Guo Jinlong: Master, Certified Public Accountant of China. He was a member of the fifth session of the CPPCC of Shenzhen City. He is currently the deputy to the sixth session of the People's Congress of Shenzhen, vice chairman of Guangdong Certified Public Accountants Association, partner of ShineWing Certified Public Account, and an independent director of the Company. 8. Yin Changjian holds bachelor's degree and is a CPA. He once served as the director of Audit and Supervision Department of the Company and deputy general manager of Fangda Jianke Company Beijing Branch. He is now the director of the Company's Development Planning Department, the director of the Enterprise Management Department, the Company's employee representative
68 2017 Annual Report of China Fangda Group Co., Ltd. supervisor and the supervisor of the Board of Supervisors. 9. Mr. Dong Gelin: Bachelor degree, senior engineer, former designer of Fangda Jianke, chief engineer of the design institute, assistant to general manager, general manager of Fangda Jianke Beijing Branch, currently serves as deputy general manager of Fangda Jianke and supervisor of the Company. 10. Ms. Cao Naisi: Bachelor's degree, intermediate economist, former securities affairs representative of the company, supervisor of the sixth session of the Supervisory Committee, director of audit supervision department, deputy director of human resources department, general manager of Fangda Jianke Beijing branch, Fangda Jianke South China General Manager of the branch, currently Deputy General Manager of Fangda Jianke, and supervisor of the Company. 11. Mr. Wei Yuexing holds a Bachelor degree and is a senior engineer. He is the vice president of the Company and general manager of Fangda Jianke. Offices held at shareholders entities √ Applicable □ Inapplicable
Whether any End date remuneration is Starting date of the Name Shareholder entity Office of the paid at the term term shareholder entity
Xiong Jianming Shengjiu Investment Ltd. Chairman 06.10.11 No
Gong Qing Cheng Shi Li He Investment Wei Yuexing Management Partnership Enterprise Executive partner 20.12.16 No (limited partner)
Office None description
Offices held at other entities √ Applicable □ Inapplicable
Whether any Starting date of the End date of remuneration is Name Entity name Office term the term paid at the shareholder entity
General development research institute Standing vice Guo Wanda 01.07.07 Yes (Shenzhen, China) president
Shenzhen Baode Technology Group Co., Independent Guo Wanda 06.06.08 Yes Ltd. director
Independent Guo Wanda Hercules Logistics 01.11.13 Yes director
Deng Lei Guangdong China Commercial Law Firm Senior partner 01.11.15 Yes
Independent Deng Lei Wuhan Gaode Infrared Co., Ltd. 23.04.15 Yes director
Independent Deng Lei Shenzhen Haimingrun Industrial Co., Ltd. 18.11.14 Yes director
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ShineWing Certified Public Accountants Guo Jinlong Partner 01.07.06 Yes (limited liability partnership)
Office The above-mentioned three are independent directors of the Company. description
Penalties given by existing securities regulators on directors, supervisors and senior management and those who have resigned in the report period
√ Applicable □ Inapplicable According to the "China Securities Regulatory Commission's Administrative Punishment Decision" (2017) No. 101 of December 6, 2017, ShineWing Certified Public Account (Special General Partnership) (hereinafter referred to as ShineWing) had the following illegal facts: 1. ShineWing violated business rules established legally during the preparation of the IPO (three-year and one period) and the 2014 annual report of Huaiji Dengyun Auto Parts Co., Ltd. 2. ShineWing did not diligently perform their duties and had false records of the audit report issued by Huaiji Dengyun shares in the 2013 annual report. The signed certified public accountant and Mr. Guo Jinlong, an independent director of the Company that issued the audit report, were given warnings and a fine of RMB50,000 yuan.
4. Remunerations of the Directors, Supervisors and Senior Executives
Decision making procedures, basis and actual payment of remunerations of the Directors, Supervisors and Senior Executives
1. Remuneration schemes for directors and supervisors are proposed by the Remuneration and Assessment Committee of the Board, and implemented upon approval of the Board and the Shareholders’ Meetings; the remuneration schemes for executives are approved and implemented by the Board. Remuneration for directors and supervisors are decided by the shareholders’ meeting. Remunerations for executives are composed of wages and performance bonus as decided by the Board. Payment on monthly basis
Remunerations of the Directors, Supervisors and Senior Executives of the Company During the reporting period In RMB10,000
Remuneration Total Name Position Sex Age Job status from related remuneration parties
Chairman, Xiong Jianming M 60 In office 232.86 No president
Director, vice Lin Kebin M 40 In office 110.46 No president
Xiong Jianwei Director M 49 In office 99.49 No
Director, vice Zhou Zhigang president M 55 In office 92.77 No secretary of the
70 2017 Annual Report of China Fangda Group Co., Ltd.
Board
Independent Deng Lei M 39 In office 8 No director
Independent Guo Wanda M 52 In office 8 No director
Independent Guo Jinlong M 56 In office 5.76 No director
Supervisory Yin Changjian Committee M 49 In office 51.77 No meeting convener
Dong Gelin Supervisor M 39 In office 49.64 No
Cao Naisi Supervisor F 39 In office 45.36 No
Wei Yuexing Vice president M 49 In office 98.39 No
Director, vice Wang Shengguo M 60 Resigned 89.35 No president
Independent Lin Bin M 55 Resigned 2.24 No director
Supervisory Zhen Hua Committee F 58 Resigned 0.84 No meeting convener
Zen Xiaowu Supervisor M 48 Resigned 35.47 No
Total ------930.4 --
Equity incentive programs provided for the Directors, and Senior Executives of the Company during the reporting period □ Applicable √ Inapplicable
5. Employees
1. Staff number, professional composition and education
Staff number of the parent 58
Staff number of major subsidiaries 1,685
Total staff number 2,150
Number of employees receiving remuneration in the period 2,150
Resigned and retired staff number to whom the parent and major 0 subsidiaries need to pay remuneration
Professional composition
Categories of professions Number of people
Production 697
71 2017 Annual Report of China Fangda Group Co., Ltd.
Sales & Marketing 83
Technicians 1,242
Finance & Accounting 56
Executive 72
Total 2,150
Education
Categories of education Number of people
High school or below 1,015
College diploma 430
Bachelor 681
Master’s degree 23
Doctor’s degree 1
Total 2,150
2. Remuneration policy
Staff remuneration policy: The Company’s staff remuneration comprises post wage, performance wage, allowance and annual bonus. The Company has set up an economic responsibility assessment system according to the annual operation target and responsibility indicators for all departments. The performance wage is determined by the economic indicators, management indicators, optimization indicators and internal control. The annual bonus is determined by the Company's annual profit and fulfillment of targets set for various departments. The staff remuneration and welfare will be adjusted according to the Company’s business operation and changes in the local standard of living and price index.
3. Training program
Staff training plan: The Company has paid continuous attention to training and development of the staff and introduces innovative learning as part of the long-term strategy. We provide training programs through different channels and in different fields for different employees will help them fulfill their works, including new staff training, on-the-job training, operation and management training programs. These programs have largely elevated capabilities of the staff and underpin the success of the Company.
4. Labor outsourcing
√ Applicable □ Inapplicable
Total number of hours of labor outsourcing 9,551,580.85
Total remuneration paid for labor outsourcing (RMB) 286,547,425.39
72 2017 Annual Report of China Fangda Group Co., Ltd.
Chapter 9 Corporation Governance
1. Overview
During the report period, the Company strictly complied with the Company Law, Securities Law, Governance Standards for Listed Companies, Shenzhen Stock Exchange Share Listing Rules, Operation Regulations for Listed Companies in the Main Board of Shenzhen Stock Exchange, continued to improve the legal person governance structure and has formulated a series of internal management systems covering various aspects. The Company has set up a comprehensive and effective internal control system in important decision making, related transaction decision making, financial management, HR management, administration, purchase, production and sales management, confidentiality and information disclosure.
Major difference between the actual corporate governance and regulations on corporate governance of listed companies issued by CSRC □ Yes √ No There is no major difference between the actual corporate governance and regulations on corporate governance of listed companies issued by CSRC.
2. Independence of the Company from the controlling shareholder in aspects of businesses, personnel, assets, organizations, and accounting
In the aspect of business: the Company has its own purchasing, production, sales, and customer service system which p erforming independently. There is not any material related transactions occurred with the controlling shareholders. In personnel: The labor management, personnel and salary management are operated independently from the controlling shareholder. The senior managements take salaries from the Company and none of them takes senior management position in the controlling party. In assets: The Company owns its production, supplementary production system and accessory equipment independently, and possesses its own industrial properties, non-patent technologies, and trademark. In organization: The production and business operation, executive management, and department setting are completely independent from the controlling shareholder. No situation of combined office exists. The Company adjusts its organizing structure only for its own practical requirement of development and management. In accounting: The company has its own independent accounting and auditing division, established independent and completed accounting system and management rules, has its own bank account, and exercise its liability of taxation independently.
3. Competition
□ Applicable √ Inapplicable
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4. Annual and extraordinary shareholder meetings held during the report period
1. Annual shareholder meeting during the report period
Index for Participation of Meeting Type Date Date of disclosure information investors disclosure
Notice on Resolutions of the Annual 2016 Annual Annual shareholders’ 27.47% 11.04.17 12.04.17 Shareholders’ Shareholder Meeting meeting Meeting (2017-12) released on www.cninfo.com.cn
2. Shareholders of preference shares of which voting right resume convening an extraordinary shareholders’ meeting
□ Applicable √ Inapplicable
5. Performance of independent directors during the report period
1. Independent directors’ presenting of board meetings and shareholders’ meetings in the report period
Independent directors’ presenting of board meetings and shareholders’ meetings in the report period
Time of board Number of Number of Name of Number of Number of Absent for two meetings Presented by board meetings shareholders' independent board meetings board meetings consecutive should have telecom attended by meetings director attended not attended meetings attended proxy attended
Guo Wanda 6 4 2 0 0 No 1
Deng Lei 6 4 2 0 0 No 1
Guo Jinlong 5 2 2 1 0 No 0
Lin Bin 1 1 0 0 0 No 0
Statement for absence for two consecutive board meetings Inapplicable
2. Objection raised by independent directors
Any objection raised by independent directors against the Company’s related issues □ Yes √ No Independent directors made no objection on related issued of the Company in the report period.
74 2017 Annual Report of China Fangda Group Co., Ltd.
3. Other statement for performance of independent directors
Adoption of suggestion proposed by independent directors √ Yes □ No Statement for suggestion adopted or not by the Company During the reporting period, the Company’s independent directors strictly followed the relevant laws, regulations and the ―Articles of Association‖ and paid attention to the Company’s operations, attended the Company’s Board of Directors and shareholders’ meeting, and all the independent directors carefully reviewed the various proposals of the Company’s Board of Directors and performed their duties conscientiously. The development decision has put forward constructive opinions or suggestions, and has issued independent opinions on the improvement of the Company's system and major business management matt ers, corporate guarantees, profit distribution, use of raised funds, etc. Independent directors have adopted the Company’s relevant recommendations. It has played an active role in safeguarding the interests of the Company and small and medium shareholders.
6. Performance of specific committees under the Board
(1) Performance of the Development Strategy Committee During the report period, the Development Strategy Committee of the Company has performed its duties in accordance with the Working Regulations for Development Strategy Committee and played its role in the decision-making process of the Company. Two meetings were convened and details are disclosed as follows: 1. On 17.03.17, the Company held the 6th meeting of the 7th Development Strategy Commission to listen to the report on production and operation in 2016 and production and operation plan for 2017. 2. On 28.07.17, the 1st meeting of the Development Strategy Committee of the 8th term of the Board was held to view the Company’s production and operation in the first half of 2017 and studied the fulfillment of the business plan in the first half of the year and places to be improved in the second half. (2) Performance of the Auditing Committee During the report period, five Auditing Committee meetings are held to review issues including the arrangement of audit, regular financial reports, engaging the CFA, and use of the fund raised. Details of the meetings are disclosed as follows: 1. On 14.03.17, the 13th meeting of the Auditing Committee of the 7th term of the Board was held to review the financial statements with the initial opinion issued by the CFA for 2016 and approve the auditor report issued by the CFA. After the CFA issued to final auditor’s opinion, the Auditing Committee submitted the resolution on the annual financial statements to the Board and issued the summary report on the auditing of the CFA for this year. 2. On 17.03.17, the Company held the 14th audit committee meeting of the 7th Board of Directors to listen to the 2016 financial and internal audit report and approved (1) audited 2016 financial statements; (2) proposal of engaging the auditor in 2017; (3) 2017 internal audit plan; (4) internal control self-evaluation report in 2016; (5) inspection report on the use of the raised fund in 2016 Q4. The audit committee suggests that the internal audit body should increase communication with the audit committee to help the committee better under the Company's condition and make higher requirements on the audit quality. The members of the audit committee gave professional advice on improving the Company's processes, optimizing the system, and risk prevention from various perspectives based on their own experience in different industries. They also put forward higher requirements for the Company's future internal control work. 3. On 21.04.17, the 1st meeting of the Auditing Committee of the 8th term of the Board was held, on which (1) the 2017 Q1 financial statements; (2) inspection report on the use of the raised fund in 2017 Q1 were reviewed. 4. On 26.07.17, the 2nd meeting of the Auditing Committee of the 8th term of the Board was held to review and approve: (1) unaudited 2017 semi-year financial statements; (2) the 2017 semi-year financial performance; (3) the internal audit report for the first
75 2017 Annual Report of China Fangda Group Co., Ltd. half of 2017; (4) inspection report on the use of the raised fund in 2017 Q2. 5. On 27.10.17, the 3rd meeting of the Auditing Committee of the 8th term of the Board on which the unaudited Q3 financial statements were approved. (3) Performance of the Remuneration and Assessment Committee During the reporting period, the Remuneration and Appraisal Committee of the Company’s Board of Directors held the third meeting of the Remuneration and Appraisal Committee of the Seventh Board of Directors on March 17, 2017 in accordance with the ―Regulations of the Remuneration and Appraisal Committee‖ formulated by the Company, and reviewed and approved (1) The Company's proposal for 2016 annual remuneration of directors, supervisors and senior management personnel; (2) The Company's eighth director (including independent directors) and annual supervisory plan for supervisors; (3) The Company's eighth senior management compensation plan.
7. Performance of Supervisory Committee
(1) Risks for the Company discovered by the Supervisory Committee □ Yes √ No
No disagreement with supervisory issues by the Supervisory Committee during the report period. (2) The Supervisory Committee’ Work Report 2017 In 2017, the Supervisory Committee performed its duties and obligations in supervision and protect shareholders’ and the Company’s interests in accordance with the Company Law, Share Listing Rules, Articles of Association and Rules of the Procedure of the Supervisory Committee. The 2017 supervisory committee's work plan is as follows: 1. Opinions (1) Legal compliance In the report period, the Company has been operated in accordance with law. The convening of meeting of the Board and the decision-making process are compliant with law, regulations and Articles of Association; the internal control system is solid. Directors and senior management have performed their obligations. No violation against law, regulations, Articles of Associat ion and interests of the Company and shareholders was discovered. (2) Financial condition During the period, the accounting management has been compliant with the Accounting Law, Enterprise Accounting Standard. No false, misleading statement or significant omission was found in financial statements. The financial reports of the Company reflect the Company’s financial position, operation performance, cash flows and major risks truthfully, accurately and completely. The CPA has issued the standard auditor’s report in 2017, which is objective, fair and truthful. It reflects the Company’s financial position and operation performance. (3) Implementation of internal control The design and operation of the internal control is effective and meets the Company’s management and dev elopment requirements. It can ensure the truthfulness, lawfulness, completeness of the financial materials and ensure the safety and completeness of the Company’s property. In 2017, there was no violation by the Company against the Operation Regulations for Listed Companies in the Main Board of Shenzhen Stock Exchange and the Company’s internal control system. The 2017 Internal Control Self-evaluation Report truthfully and objectively reflects the establishment, implementation and improvement of the Company’s internal control system. There are no significant or important problems in the financial and non-financial reports in the report period. 2. Meetings and resolutions of the supervisory meeting in the report period: Five meetings were held in 2017, four of which are on-site meetings, one is voting through telecommunication. All proposals were approved and disclosed as required:
76 2017 Annual Report of China Fangda Group Co., Ltd.
No. Meeting Date Convening method Topic
1. Review the Company's Supervisory Committee Work Report for 2016； 2. Reviewing the Company's 2016 Annual Report and Summary; 3. Reviewing the Company's 2016 Financial Settlement Report; 4. Reviewing the Company's profit distribution plan for 2016; 5. Reviewing the Company's proposal on engaging the auditor; 6. Reviewing the Company's 2016 Internal Control 15th meeting of Self-assessment report; the 7th 1 17.03.17 On-site 7. Reviewing the Company's raised capital deposit Supervisory and use report for 2016; Committee 8. Reviewing the Company's proposal on terminating projects funded by raised capital and using the balance of the raised capital to permanently replenish the working capital; 9. Reviewing the Company's proposal on using the surplus of the fund for projects funded by the raised capital to permanently replenish the working capital; 10. Reviewing the Company's proposal on changing accounting policies; 11. Reviewing the Company's proposal on re-electing the Supervisory Committee
1st meeting of the 8th Electing Mr. Yin Changjian as the convener of the 2 11.04.17 On-site Supervisory 8th Supervisory Committee of the Company Committee
2nd meeting of the 8th 3 21.04.17 Telecommunication 2017 Q1 Report and Text Supervisory Committee
1. Reviewing the Company's 2017 Interim Report and Summary; 3rd meeting of 2. Reviewing the proposal on changing the the 8th 4 28.07.17 On-site accounting estimate for receivable bad debt Supervisory provision; Committee 3. Reviewing the 2017 Interim Report on Deposit and Use of the Raised Fund
4th meeting of 5 27.10.17 On-site 1. Reviewing the Company's 2017 Q3 report; the 8th
77 2017 Annual Report of China Fangda Group Co., Ltd.
Supervisory 2. Reviewing the change in the government subsidy Committee account policy;
8. Assessment and motivation of senior executives
The Company has implemented a remuneration system that combines post wage and performance bonus. The wages and bonus are determined by on the assessment of senior executives’ innovation capabilities, general quality, performance, fulfillment of profit and payment collection targets according to the Company's annual performance assess and performance assess implementation methods for wholly-owned subsidiaries.
9. Internal control
1. Major problems in internal control discovered in the report period
□ Yes √ No
2. Internal control self-evaluation report
Date of disclosure of the internal control 24.04.18 evaluation report
Disclosure of the internal control www.cninfo.com.cn evaluation report
Percentage of assets in the evaluation scope in the total assets in the consolidated 96.47% financial statements
Percentage of operation income in the evaluation scope in the total operation 97.61% income in the consolidated financial statements
Standard
Type Financial report Non-financial report
I. The following problems are considered I. The following condition indicates major problems: 1. Non-effective control significant problems in the internal environment; 2. corrupt practice by directors, control of non-financial reports: 1. supervisor and senior management, causing Serious violation against national laws, substantial loss and impacts for the regulations or specifications; 2. Serious Standard Company; 3. Substantial mistakes in the business system problems and system financial statements in the period discovered ineffectiveness; 3. Major or important by the CPA, which are not discovered by the problems cannot be corrected; 4. Lack of internal control; 4. Ineffective supervision of internal control and poor management; 5. the internal control by the Company’s Loss of management personnel or key
78 2017 Annual Report of China Fangda Group Co., Ltd.
auditing department II. The following employees; 6. Safety and environmental problems are considered significant accidents that cause major adverse problems: 1 accounting policies are selected impacts; 7. Other situations that cause and used without complying to widely major adverse impacts on the Company. accepted accounting standards; 2. No II. The following situations indicate that anti-corrupt and important balance system there may be significant problems with and control measures are taken; 3. Separate the internal control: 1. business system or multiple problems in the preparation of problems and system ineffectiveness; 2. financial reports, which are serious enough Major or important problems cannot be to affecting the truthfulness and accuracy of corrected; 3. Other situations that cause the reports; no control system is established major adverse impacts on the Company and no related compensation system is III. The following situation indicate implemented for accounts of irregular or likely normal problems in the internal special transactions III. Other problems are control: 1. Problems in the general considered normal problems. business system; 2. Normal problems in the internal control supervision cannot be correctly promptly.
I. Significant problem: 1 mistakes affecting 5% and more of the pre-tax profit and more than RMB5 million in the consolidated statements; 2. Mistakes affecting 5% and more of the consolidated assets and more See the recognition standard of the than RMB5 million. II. Important problem: Standard internal control problems for financial 1. Mistakes affecting 1%-5% of the pre-tax statements profit in the consolidated statements; 2. Mistakes affecting 1%-5% the consolidated assets. III. Normal problem: 1. Mistakes affecting less than 1% of the pre-tax profit and total assets of the consolidate statements.
Significant problems in financial 0 statements
Significant problems in non-financial 0 statements
Important problems in financial statements 0
Important problems in non-financial 0 statements
X. Internal control audit report
√ Applicable □ Inapplicable
Comments in the internal control audit report
We believe that China Fangda Group has maintained effective internal control on financial rep orts according to Basic Regulations
79 2017 Annual Report of China Fangda Group Co., Ltd. on Enterprise Internal Control and related regulations on 31.12.17.
Disclosure of internal auditor’s Disclosed report
Date of disclosure of the internal 24.04.18 control audit report
Source of disclosure of the internal www.cninfo.com.cn control audit report
Opinion type Standard opinion auditor’s report
Problems in non-financial No statements
Non-standard internal control audit report by the CFA □ Yes √ No
Consistency between the internal control audit report and self-evaluation report √ Yes □ No
80 2017 Annual Report of China Fangda Group Co., Ltd.
X. Information about the Company’s Securities
Bonds publicly issued and listed in a securities exchange, immature or not fully paid by the approval date of the annual report No
81 2017 Annual Report of China Fangda Group Co., Ltd.
Chapter 11 Financial Statements
I. Auditor’s report
Type Standard opinion auditor’s report
Issued on 20.04.18
Auditor Grant Thornton (limited liability partnership)
Report No. 致同审字（2018）第 350ZA0141 号
CPA names Chen Zhaoxin, Hu Gaosheng
Auditors’ Report
Auditor’s report
致同审字(2018)第350ZA0141号
To the shareholders of China Fangda Group Co., Ltd.: 1. Auditors’ Opinions We have audited the Financial Statements of China Fangda Group Co., Ltd. (―Fangda Group‖) attached hereafter, including the Balance Sheet and Consolidated Balance Sheet ended 31.12.17 and the Income Statement, Consolidated Income Statement, Cash Flow Statement, Consolidated Cash Flow Statement, Statement on Change of Shareholders’ Equity, Consolidated Statement on Change of Shareholders’ Equity of the year 2017, as well as the Notes to the Financial Statements. We believe that Fangda Group has been following with the Enterprise Accounting Standard in preparing of the Financial Statements. The Financial Statements is reflecting, in all important aspects, the financial situation of Fangda Group as of 31.12.17, and the business performance and cash flow of year 2017. 2. Basis of the Opinions We carried out the auditing works with compliance to Chinese CPA Auditing Standard, The ―CPA's Responsibility for Auditing Financial Statements‖ section of the audit report further elaborated our responsibilities under these guidelines. In accordance with the Code of Ethics for Chinese Certified Public Accountants, we are independent of Fangda Group and perform other professional ethics duties. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 3. Key Audit Matters The key audit matters are the matters that we believe are most important for the audit of the
82 2017 Annual Report of China Fangda Group Co., Ltd. current financial statements based on professional judgment. The response to these matters is based on the overall audit of the financial statements and the formation of an audit opinion. We do not comment on these matters separately. (1) Income recognition For related information disclosure, please refer to Note III, 25, Note III, 30(4), Note V, 39 and Note XIII 2 of the financial statements. 1. Description In 2017, Fangda Group's operating income was RMB2.947 billion, of which construction contract revenue accounted for about 60%, and real estate sales revenue accounted for about 30% of the group's total revenue. Fangda Group confirms revenue for the construction services provided by the construction according to the percentage of completion method when the results of the construction contract can be reliably estimated. Management needs to make a reasonable estimate of the initial total contract revenue and total contract costs for the construction contract and continue to assess and revise it during the contract implementation process, which involves significant accounting estimates of the management. Income from real estate sales is recognized when the contract is signed and performed, project is developed and completed with the record for the completion acceptance, the handover procedure is completed or property is deemed accepted by the customer as per the property sales contract, the payment is received or it is believed that the payment can be received, and the cost can be measured reliably. Therefore, we identify construction contracts and real estate development revenue recognition as key audit matters. 2. Audit response Our audit procedures for the implementation of revenue recognition for construction contracts mainly include: (1) Understand and evaluate the design of internal control related to management contract and construction contract budget and revenue recognition, and test the effectiveness of key control implementation. (2) Obtain a major construction contract, verify the contract revenue, and reviewed key contract terms. Check the construction contract and cost budget information on which management expects total revenue and estimated total cost. (3) Obtain a construction contract ledger and project income cost summary table, perform an analytical review of the project gross profit, and recalculate the construction contract completion percentage and income in the construction contract to verify its accuracy. (4) Select samples to check the project engineering details of the main project, subcontracted labor approval forms, and the owner’s production value approval documents and records to verify the contract costs incurred. (5) A cut-off test procedure is performed to check whether the cost of the relevant contract was
83 2017 Annual Report of China Fangda Group Co., Ltd. recorded in the appropriate accounting period. (6) Select a sample to conduct a site inspection of the progress of the project image to verify the reasonableness of the project's completion schedule. Our audit procedures for the implementation of revenue recognition for property sales income mainly include: (1) Understand and evaluate the design of internal control related to management and property sales income recognition, and test the effectiveness of key control implementation. (2) Obtain major sales contracts and review key contract terms. (3) Sampling check the supporting documents related to revenue confirmation. (4) Implement certification procedures with important customers. (5) A cut-off test procedure is performed to check whether the relevant income was recorded in the appropriate accounting period. (2) Measurement of fair value of investment real estate For related information disclosure, please refer to Note III, 15, Note III, 30(2), Note V, 12 (2), 45 and Note IX 2 of the financial statements. 1. Description As of December 31, 2017, the carrying amount of investment real estate subsequently measured in the consolidated financial statements using the fair value model was RMB1.492 billion, and the gains from changes in fair value realized in the current period were RMB 890 million, with a greater impact on the Group's consolidated statements. The management of Fangda Group (hereinafter referred to as ―the management‖) annually employs a third-party assessment agency with relevant qualifications to evaluate the fair value of the investment real estate. The evaluation adopts the comparison method and the income method to comprehensively analyze various factors that affect the real estate price of the appraisal subject. The assessment of the fair value of investment real estate involves many estimates and assumptions, such as the analysis of the economic environment and future trends of the real estate where the investment real estate is located, discount rates, etc. The changes in estimates and assumptions will have big impacts on the fair value of the investment real estate evaluated. Therefore, we identify the measurement of fair value of investment real estate as a key audit matter. 2. Audit response Our audit procedures for the measurement of fair value of investment real estate mainly include: (1) Assess the competency, professional quality, independence and objectivity of third-party assessment agencies employed by the management. (2) Obtain the assessment report, selected major or typical samples, and use our real estate appraisal experts to review and review the assessment methods and assumptions used in the assessment report and the rationality of the selected key assessment parameters. Check the accuracy and relevance of the data used by the management in valuation.
84 2017 Annual Report of China Fangda Group Co., Ltd.
(3) Review the measurement, presentation and disclosure of fair value of investment real estate in the financial statements. 4. Other information The management of Fangda Group (hereinafter referred to as management) is responsible for other information. The other information includes the information covered in Fangda Group's 2017 annual report, but does not include the financial statements and our audit report. Our audit opinions published in the financial statements do not cover other information and we do not publish any form of assurance conclusion on other information. In connection with our audit of the financial statements, our responsibility is to read other information. In the process, we consider whether there is a material inconsistency or other material misstatement of other information whether it is in the financial statements or what we have learned during the audit process. Based on the work we have performed, if we determine that there is a material misstatement of other information, we should report that fact. In this regard, we have nothing to report. 5. Executives’ responsibilities on the Financial Statements (1) Preparing these financial statements according to the Accounting Standards for Business Enterprises and presenting them fairly; (2) designing, implementing and maintaining necessary internal control to make sure that these financial statements are free from material misstatement, whether due to fraud or error. In the preparation of the financial statements, the management is responsible for assessing Fangda Group's ability to continue as a going concern, disclosing issues related to going concern (if applicable), and applying the going concern assumption unless management plans to liquidate Fangda Group, terminate operations or there are no other realistic choices. The management is responsible for overseeing the financial reporting process of Fangda Group. 6. Auditor's responsibility for auditing financial statements Our objective is to obtain reasonable assurance as to whether the entire financial statements are free from material misstatement due to fraud or error and to issue an audit report containing audit opinions. Reasonable assurance is a high level of assurance, but it does not guarantee that an audit performed in accordance with auditing standards can always be discovered when a major misstatement exists. The report may be due to fraud or mistakes, and if a reasonable expectation of misstatement alone or aggregated may affect the economic decision-making made by users of financial statements based on the financial statements, the misstatement is generally considered to be material. In the process of conducting audit work in accordance with auditing standards, we use professional judgment and maintain professional suspicion. At the same time, we also perform the following tasks: (1) Identify and assess risks of material misstatement of financial statements due to fraud or errors, design and implement audit procedures to address these risks, and obtain adequate and
85 2017 Annual Report of China Fangda Group Co., Ltd. appropriate audit evidence as a basis for issuing audit opinions. Since fraud may involve collusion, falsification, intentional omission, misrepresentation or override of internal controls, the risk of failing to detect a material misstatement due to fraud is higher than the risk of failing to detect a material misstatement due to an error. (2) Understand audit-related internal controls to design appropriate audit procedures. (3) Evaluate the appropriateness of accounting policies adopted by the management and the reasonableness of accounting estimates and related disclosures. (4) Conclude on the appropriateness of management's use of continuing operations assumptions. At the same time, based on the audit evidence obtained, it concludes that whether there are major uncertainties in the matters or circumstances that may cause major doubts about the ability of the Company’s continuing operations. If we conclude that there are significant uncertainties, the auditing standards require us to request the users of the report to pay attention to the relevant disclosures in the financial statements in the audit report; if the disclosure is not sufficient, we should publish non-unqualified opinions. Our conclusions are based on the information available as of the date of the audit report. However, future events or circumstances may result in Fangda Group's inability to continue operating. (5) Evaluate the overall presentation, structure, and content (including disclosure) of the financial statements and evaluate whether the financial statements fairly reflect the relevant transactions and events. (6) Obtain sufficient and appropriate audit evidence on the financial information of entity or business activities in Fangda Group to express opinions on the financial statements. We are responsible for directing, supervising and executing group audits and assume full responsibility for audit opinions. We communicate with the governance team on planned audit scope, timing, and major audit findings, including communication of the internal control deficiencies that we identified during the audit. We also provide a statement to the management on compliance with ethical requirements related to independence, and communicate with the management on all relationships and other matters that may reasonably be considered to affect our independence, as well as related preventive measures (if applicable). From the matters passed with the management, we determine which items are most important for the audit of the financial statements of the current period and thus constitute the key audit matters. We describe these matters in our audit report, unless laws and regulations prohibit the public disclosure of these matters, or in rare cases, if it is reasonably expected that the negative consequences of communicating something in the audit report will outweigh the benefits in the public interest, we determine that such matter should not be communicated in the audit report.
86 2017 Annual Report of China Fangda Group Co., Ltd.
Grand Thornton CPA CPA China (limited liability partnership) (project partner)
CPA China
Beijing, China April 30, 2018
II. Financial statements
Unit for statements in notes to financial statements: RMB yuan
1. Consolidated Balance Sheet
Prepared by: China Fangda Group Co., Ltd.
In RMB
Items Closing balance Opening balance
Current asset:
Monetary capital 1,180,398,479.51 1,095,229,837.90
Settlement provision
Outgoing call loan
Financial assets measured at fair value with variations accounted into current income account
Derivative financial assets 2,232,200.00
Notes receivable 39,636,437.20 18,898,106.11
Account receivable 1,920,372,426.16 2,342,929,628.14
Prepayment 54,680,269.84 31,526,326.25
Insurance receivable
Reinsurance receivable
Provisions of reinsurance contracts receivable
Interest receivable 3,829,315.07 302,950.68
Dividend receivable
Other receivables 57,075,357.62 57,378,994.72
87 2017 Annual Report of China Fangda Group Co., Ltd.
Repurchasing of financial assets
Inventory 819,610,960.67 1,990,621,059.27
Assets held for sales
Non-current assets due in 1 year
Other current assets 439,890,493.06 62,206,574.33
Total current assets 4,515,493,739.13 5,601,325,677.40
Non-current assets:
Loan and advancement provided
Sellable financial assets 28,562,575.67 28,562,575.67
Investment held until mature
Long-term receivable
Long-term share equity investment 34,142,055.62 12,105,030.68
Investment real estate 2,253,794,404.55 333,795,631.30
Fixed assets 468,118,279.18 506,819,266.38
Construction in process 2,668,198.62 2,537,725.36
Engineering materials
Disposal of fixed assets
Productive biological assets
Gas & petrol
Intangible assets 58,869,444.53 60,228,652.69
R&D expense
Goodwill
Long-term amortizable expenses 2,046,202.29 3,695,766.33
Deferred income tax assets 230,597,590.58 176,796,698.56
Other non-current assets 31,130,198.46 61,184,253.71
Total of non-current assets 3,109,928,949.50 1,185,725,600.68
Total of assets 7,625,422,688.63 6,787,051,278.08
Current liabilities
Short-term loans 616,000,000.00 591,000,000.00
Loans from Central Bank
Deposit received and held for others
Call loan received
Financial liabilities measured at fair value with variations accounted into
88 2017 Annual Report of China Fangda Group Co., Ltd. current income account
Derivative financial liabilities 159,000.00
Notes payable 532,921,025.48 557,301,320.45
Account payable 946,392,258.92 1,275,255,961.34
Prepayment received 175,351,686.45 285,905,444.13
Selling of repurchased financial assets
Fees and commissions payable
Employees’ wage payable 40,399,130.75 41,972,342.66
Taxes payable 136,955,516.44 192,236,574.40
Interest payable 2,425,311.97 2,634,979.47
Dividend payable
Other payables 501,189,510.69 366,182,799.41
Reinsurance fee payable
Insurance contract provision
Entrusted trading of securities
Entrusted selling of securities
Liabilities held for sales
Non-current liabilities due in 1 200,000,000.00 year
Other current liabilities 9,531,014.81 35,148,084.44
Total current liabilities 3,161,324,455.51 3,347,637,506.30
Non-current liabilities:
Long-term loans 893,978,153.39 922,169,568.24
Bond payable
Including: preferred stock
Perpetual bond
Long-term payable
Long-term employees’ wage payable
Special payables
Anticipated liabilities 6,368,353.05 3,156,625.24
Deferred earning 10,489,483.94 11,567,224.78
Deferred income tax liabilities 314,323,040.56 200,207,003.35
Other non-current liabilities
89 2017 Annual Report of China Fangda Group Co., Ltd.
Total of non-current liabilities 1,225,159,030.94 1,137,100,421.61
Total liabilities 4,386,483,486.45 4,484,737,927.91
Owner’s equity:
Share capital 1,183,642,254.00 789,094,836.00
Other equity tools
Including: preferred stock
Perpetual bond
Capital reserves 72,829,484.96 467,376,902.96
Less: Shares in stock
Other miscellaneous income 8,585,847.99 2,130,454.52
Special reserves
Surplus reserves 110,690,396.65 88,839,790.50
Common risk provisions
Retained profit 1,863,191,218.58 1,016,820,576.30
Total of owner’s equity belong to the 3,238,939,202.18 2,364,262,560.28 parent company
Minor shareholders’ equity -61,949,210.11
Total of owners’ equity 3,238,939,202.18 2,302,313,350.17
Total of liabilities and owner’s interest 7,625,422,688.63 6,787,051,278.08
Legal representative: Xiong Jianming CFO: Lin Kebing Accounting Manager: Wu Bohua
2. Balance Sheet of the Parent Company
In RMB
Items Closing balance Opening balance
Current asset:
Monetary capital 310,299,329.68 81,148,314.87
Financial assets measured at fair value with variations accounted into current income account
Derivative financial assets
Notes receivable
Account receivable 408,154.54 454,140.85
Prepayment 349,740.31 110,132.27
Interest receivable 1,020,000.00
90 2017 Annual Report of China Fangda Group Co., Ltd.
Dividend receivable 150,000,000.00 430,000,000.00
Other receivables 672,773,780.45 459,354,983.42
Inventory
Assets held for sales
Non-current assets due in 1 year
Other current assets 100,176,058.36 334,228.97
Total current assets 1,235,027,063.34 971,401,800.38
Non-current assets:
Sellable financial assets 28,562,575.67 28,562,575.67
Investment held until mature
Long-term receivable
Long-term share equity investment 925,349,494.35 897,444,525.03
Investment real estate 307,321,568.00 296,740,660.63
Fixed assets 55,816,611.77 55,081,689.15
Construction in process
Engineering materials
Disposal of fixed assets
Productive biological assets
Gas & petrol
Intangible assets 2,293,133.59 1,531,179.93
R&D expense
Goodwill
Long-term amortizable expenses 460,000.00 252,857.40
Deferred income tax assets 23,409,576.18 57,076,777.66
Other non-current assets 120,000,000.00
Total of non-current assets 1,343,212,959.56 1,456,690,265.47
Total of assets 2,578,240,022.90 2,428,092,065.85
Current liabilities
Short-term loans 250,000,000.00 190,000,000.00
Financial liabilities measured at fair value with variations accounted into current income account
Derivative financial liabilities
Notes payable 33,692,909.97
Account payable 606,941.85 606,941.85
91 2017 Annual Report of China Fangda Group Co., Ltd.
Prepayment received 721,888.86 965,234.08
Employees’ wage payable 2,151,237.91 2,338,896.51
Taxes payable 11,721,681.36 460,424.30
Interest payable 365,520.83 288,513.75
Dividend payable
Other payables 287,607,287.54 65,436,929.77
Liabilities held for sales
Non-current liabilities due in 1 year
Other current liabilities
Total current liabilities 553,174,558.35 293,789,850.23
Non-current liabilities:
Long-term loans
Bond payable
Including: preferred stock
Perpetual bond
Long-term payable
Long-term employees’ wage payable
Special payables
Anticipated liabilities
Deferred earning
Deferred income tax liabilities 63,864,007.22 124,088,349.06
Other non-current liabilities
Total of non-current liabilities 63,864,007.22 124,088,349.06
Total liabilities 617,038,565.57 417,878,199.29
Owner’s equity:
Share capital 1,183,642,254.00 789,094,836.00
Other equity tools
Including: preferred stock
Perpetual bond
Capital reserves 71,736,128.89 466,283,546.89
Less: Shares in stock 0.00
Other miscellaneous income 8,756,553.46 91,831.63
Special reserves
92 2017 Annual Report of China Fangda Group Co., Ltd.
Surplus reserves 110,690,396.65 88,839,790.50
Retained profit 586,376,124.33 665,903,861.54
Total of owners’ equity 1,961,201,457.33 2,010,213,866.56
Total of liabilities and owner’s interest 2,578,240,022.90 2,428,092,065.85
3. Consolidated Income Statement
In RMB
Items Amount occurred in the current period Occurred in previous period
1. Total revenue 2,947,470,813.58 4,203,866,173.72
Incl. Business income 2,947,470,813.58 4,203,866,173.72
Interest income
Insurance fee earned
Fee and commission received
2. Total business cost 2,529,847,562.87 3,433,363,681.99
Incl. Business cost 1,998,238,889.21 2,595,170,483.35
Interest expense
Fee and commission paid
Insurance discharge payment
Net claim amount paid
Net insurance policy reserves provided
Insurance policy dividend paid
Reinsurance expenses
Taxes and surcharges 191,789,929.01 380,834,706.42
Sales expense 61,063,948.40 59,273,046.14
Administrative expense 152,816,680.30 171,922,091.39
Financial expenses 67,058,846.06 28,255,397.43
Asset impairment loss 58,879,269.89 197,907,957.26
Plus: gains from change of fair value 892,408,648.26 16,862,823.13 ("-" for loss)
Investment gains ("-" for loss) 102,891,113.42 61,228,848.36
Incl. Investment gains from -2,162,975.06 -1,384,650.25 affiliates and joint ventures
93 2017 Annual Report of China Fangda Group Co., Ltd.
Exchange gains ("-" for loss)
Investment gains ("-" for loss) 5,027,717.19 -1,960,467.09
Other gains 6,582,481.58
3. Operational profit ("-" for loss) 1,424,533,211.16 846,633,696.13
Plus: non-operational income 8,382,787.23 18,217,491.06
Less: non-operational expenditure 8,073,399.54 4,875,428.76
4. Gross profit ("-" for loss) 1,424,842,598.85 859,975,758.43
Less: Income tax expenses 273,795,377.34 203,985,326.44
5. Net profit ("-" for net loss) 1,151,047,221.51 655,990,431.99
(1) Net profit from continuous 1,128,107,423.83 764,894,738.52 operation ("-" for net loss)
(2) Net profit from discontinuous 22,939,797.68 -108,904,306.53 operation ("-" for net loss)
Net profit attributable to the owners 1,144,404,441.03 697,956,378.23 of parent company
Minor shareholders’ equity 6,642,780.48 -41,965,946.24
6. After-tax net amount of other misc. 6,455,393.47 2,038,622.89 incomes
After-tax net amount of other misc. 6,455,393.47 2,038,622.89 incomes attributed to parent's owner
(1) Other misc. incomes that cannot be re-classified into gain and loss
1. Change in net liabilities or assets due to re-measurement set benefit program
2. Shares enjoyed in other misc. incomes that cannot be reclassified into gain and loss by the invested entity under the equity law
(2) Other misc. incomes that will be 6,455,393.47 2,038,622.89 re-classified into gain and loss
1. Shares enjoyed in other misc. incomes that cannot be reclassified into gain and loss by the invested entity under the equity law
2．Change in the fair value of financial asset for sale
3 Held-to-mature investment
94 2017 Annual Report of China Fangda Group Co., Ltd. reclassified as gain and loss in the financial assets for sales
4. Effective part in the gain -1,959,992.79 1,840,142.79 and loss of arbitrage of cash flow
5. Translation difference of -249,335.57 198,480.10 foreign exchange statement
6. Others 8,664,721.83
After-tax net of other misc. income attributed to minority shareholders
7. Total of misc. incomes 1,157,502,614.98 658,029,054.88
Total of misc. incomes attributable 1,150,859,834.50 699,995,001.12 to the owners of the parent company
Total misc gains attributable to the 6,642,780.48 -41,965,946.24 minor shareholders
8. Earnings per share:
(1) Basic earnings per share 0.970 0.600
(2) Diluted earnings per share 0.970 0.600
Net profit contributed by entities merged under common control in the report period was RMB0.00, net profit realized by parties merged during the previous period is RMB0.00.
Legal representative: Xiong Jianming CFO: Lin Kebing Accounting Manager: Wu Bohua
4. Income Statement of the Parent Company
In RMB
Items Amount occurred in the current period Occurred in previous period
1. Turnover 29,333,583.31 34,208,627.97
Less: Operation cost 2,041,826.84 8,308,449.63
Taxes and surcharges 1,329,711.99 2,093,529.75
Sales expense
Administrative expense 26,156,987.68 24,802,740.83
Financial expenses -508,902.33 7,625,177.79
Asset impairment loss -39,145,789.67 80,645,069.52
Plus: gains from change of fair 1,820,847.37 11,896,250.38 value ("-" for loss)
Investment gains ("-" for loss) 158,138,502.44 428,620,774.41
Incl. Investment gains from -2,142,252.28 -1,384,650.25 affiliates and joint ventures
95 2017 Annual Report of China Fangda Group Co., Ltd.
Investment gains ("-" for loss) -3,913.82 1,794.87
Other gains 819,420.96
2. Operational profit ("-" for loss) 200,234,605.75 351,252,480.11
Plus: non-operational income 3,065,841.55 10,028,412.69
Less: non-operational expenditure 3,164,398.33 111,955.73
3. Gross profit ("-" for loss) 200,136,048.97 361,168,937.07
Less: Income tax expenses -18,370,012.57 -15,993,422.84
4. Net profit ("-" for net loss) 218,506,061.54 377,162,359.91
(1) Net profit from continuous 218,506,061.54 377,162,359.91 operation ("-" for net loss)
(2) Net profit from discontinuous 0.00 operation ("-" for net loss)
5. After-tax net amount of other misc. 8,664,721.83 0.00 incomes
(1) Other misc. incomes that cannot be re-classified into gain and loss
1. Change in net liabilities or assets due to re-measurement set benefit program
2. Shares enjoyed in other misc. incomes that cannot be reclassified into gain and loss by the invested entity under the equity law
(2) Other misc. incomes that will 8,664,721.83 be re-classified into gain and loss
1. Shares enjoyed in other misc. incomes that cannot be reclassified into gain and loss by the invested entity under the equity law
2．Change in the fair value of financial asset for sale
3 Held-to-mature investment reclassified as gain and loss in the financial assets for sales
4. Effective part in the gain and loss of arbitrage of cash flow
5. Translation difference of
96 2017 Annual Report of China Fangda Group Co., Ltd. foreign exchange statement
6. Others 8,664,721.83
6. Total of misc. incomes 227,170,783.37 377,162,359.91
7. Earnings per share:
(1) Basic earnings per share
(2) Diluted earnings per share
5. Consolidated Cash Flow Statement
In RMB
Items Amount occurred in the current period Occurred in previous period
1. Net cash flow from business operations:
Cash received from sales of 3,418,351,614.70 3,561,159,973.46 products and providing of services
Net increase of customer deposits and capital kept for brother company
Net increase of loans from central bank
Net increase of inter-bank loans from other financial bodies
Cash received against original insurance contract
Net cash received from reinsurance business
Net increase of client deposit and investment
Increase in proposal of financial assets measured at fair value with variations accounted into current income account
Cash received as interest, processing fee, and commission
Net increase of inter-bank fund received
Net increase of repurchasing business
Tax refunded 3,804,545.99 1,289,574.20
97 2017 Annual Report of China Fangda Group Co., Ltd.
Other cash received from business 127,738,857.46 148,750,746.09 operation
Sub-total of cash inflow from business 3,549,895,018.15 3,711,200,293.75 operations
Cash paid for purchasing products 2,001,850,190.24 2,574,194,385.29 and services
Net increase of client trade and advance
Net increase of savings in central bank and brother company
Cash paid for original contract claim
Cash paid for interest, processing fee and commission
Cash paid for policy dividend
Cash paid to and for the staff 253,752,112.76 242,199,199.79
Taxes paid 474,915,595.80 261,263,312.43
Other cash paid for business 261,543,973.62 167,826,321.32 activities
Sub-total of cash outflow from business 2,992,061,872.42 3,245,483,218.83 operations
Cash flow generated by business 557,833,145.73 465,717,074.92 operations, net
2. Cash flow generated by investment:
Cash received from investment 11,062,067,410.96 556,946,806.49 recovery
Cash received as investment profit 135,457,226.80 4,177,483.53
Net cash retrieved from disposal of fixed assets, intangible assets, and other 15,664,032.91 14,083,430.40 long-term assets
Net cash received from disposal of 488,779.75 subsidiaries or other operational units
Other investment-related cash received
Sub-total of cash inflow generated from 11,213,677,450.42 575,207,720.42 investment
Cash paid for construction of fixed 39,773,885.41 96,992,511.42 assets, intangible assets and other
98 2017 Annual Report of China Fangda Group Co., Ltd. long-term assets
Cash paid as investment 11,563,042,000.00 587,000,000.00
Net increase of loan against pledge
Net cash paid for acquiring subsidiaries and other operational units
Other cash paid for investment 2,666,097.15
Subtotal of cash outflows 11,602,815,885.41 686,658,608.57
Cash flow generated by investment -389,138,434.99 -111,450,888.15 activities, net
3. Cash flow generated by financing activities:
Cash received from investment 460,899,992.60
Incl. Cash received from investment attracted by subsidiaries from minority shareholders
Cash received from borrowed 978,503,029.59 1,597,773,986.18 loans
Cash received from bond placing
Other cash received from financing 53,500,094.24 activities
Subtotal of cash inflow from financing 978,503,029.59 2,112,174,073.02 activities
Cash paid to repay debts 790,000,000.00 1,626,425,600.00
Cash paid as dividend, profit, or 359,248,335.73 152,697,478.73 interests
Incl. Dividend and profit paid by subsidiaries to minority shareholders
Other cash paid for financing 1,307,919.17 activities
Subtotal of cash outflow from financing 1,149,248,335.73 1,780,430,997.90 activities
Net cash flow generated by financing -170,745,306.14 331,743,075.12 activities
4. Influence of exchange rate changes -2,488,444.45 2,076,069.73 on cash and cash equivalents
5. Net increase in cash and cash -4,539,039.85 688,085,331.62 equivalents
Plus: Balance of cash and cash 935,824,575.40 247,739,243.78
99 2017 Annual Report of China Fangda Group Co., Ltd. equivalents at the beginning of term
6. Balance of cash and cash equivalents 931,285,535.55 935,824,575.40 at the end of the period
6. Cash Flow Statement of the Parent Company
In RMB
Items Amount occurred in the current period Occurred in previous period
1. Net cash flow from business operations:
Cash received from sales of 26,119,015.91 41,662,670.48 products and providing of services
Tax refunded
Other cash received from business 1,250,545,372.09 2,230,632,211.84 operation
Sub-total of cash inflow from business 1,276,664,388.00 2,272,294,882.32 operations
Cash paid for purchasing products 36,569,179.86 9,897,439.60 and services
Cash paid to and for the staff 16,683,356.55 12,981,383.71
Taxes paid 2,804,616.75 3,958,332.35
Other cash paid for business 1,184,826,856.40 2,414,510,247.91 activities
Sub-total of cash outflow from business 1,240,884,009.56 2,441,347,403.57 operations
Cash flow generated by business 35,780,378.44 -169,052,521.25 operations, net
2. Cash flow generated by investment:
Cash received from investment 3,757,868,645.34 161,000,000.00 recovery
Cash received as investment profit 514,225,411.35 8,991,698.17
Net cash retrieved from disposal of fixed assets, intangible assets, and other 4,002,100.00 long-term assets
Net cash received from disposal of subsidiaries or other operational units
Other investment-related cash received
100 2017 Annual Report of China Fangda Group Co., Ltd.
Sub-total of cash inflow generated from 4,272,094,056.69 173,993,798.17 investment
Cash paid for construction of fixed assets, intangible assets and other 1,850,897.55 281,433.15 long-term assets
Cash paid as investment 3,846,012,000.00 64,000,000.00
Net cash paid for acquiring subsidiaries and other operational units
Other cash paid for investment
Subtotal of cash outflows 3,847,862,897.55 64,281,433.15
Cash flow generated by investment 424,231,159.14 109,712,365.02 activities, net
3. Cash flow generated by financing activities:
Cash received from investment 460,899,992.60
Cash received from borrowed 250,000,000.00 440,000,000.00 loans
Cash received from bond placing
Other cash received from financing 94.24 activities
Subtotal of cash inflow from financing 250,000,000.00 900,900,086.84 activities
Cash paid to repay debts 190,000,000.00 698,425,600.00
Cash paid as dividend, profit, or 284,121,945.63 93,249,879.82 interests
Other cash paid for financing 1,307,919.17 activities
Subtotal of cash outflow from financing 474,121,945.63 792,983,398.99 activities
Net cash flow generated by financing -224,121,945.63 107,916,687.85 activities
4. Influence of exchange rate changes 4.86 70.42 on cash and cash equivalents
5. Net increase in cash and cash 235,889,596.81 48,576,602.04 equivalents
Plus: Balance of cash and cash 74,159,732.87 25,583,130.83 equivalents at the beginning of term
6. Balance of cash and cash equivalents 310,049,329.68 74,159,732.87
101 2017 Annual Report of China Fangda Group Co., Ltd. at the end of the period
7. Statement of Change in Owners’ Equity (Consolidated)
Amount of the Current Term In RMB
Current period
Owners’ Equity Attributable to the Parent Company Minor Other equity tools Other Commo Total of Items Less: shareho owners’ Share Prefer Perpet Capital miscella Special Surplus n risk Retaine Other Shares lders’ capital red ual reserves neous reserves reserves provisio d profit equity s in stock equity share bond income ns
789,09 1,016,8 2,302,3 1. Balance at the 467,376 2,130,4 88,839, -61,949, 4,836. 20,576. 13,350. end of last year ,902.96 54.52 790.50 210.11 00 30 17
Plus: Changes in accounting policies
Correction of previous errors
Consolidation of entities under common control
Others
2. Balance at the 789,09 1,016,8 2,302,3 467,376 2,130,4 88,839, -61,949, beginning of 4,836. 20,576. 13,350. ,902.96 54.52 790.50 210.11 current year 00 30 17
3. Amount of 394,54 -394,54 change in current 6,455,3 21,850, 846,370 61,949, 936,625 7,418. 7,418.0 term ("-" for 93.47 606.15 ,642.28 210.11 ,852.01 00 0 decrease)
1,144,4 1,157,5 (1) Total of misc. 6,455,3 6,642,7 04,441. 02,614. incomes 93.47 80.48 03 98
(2) Investment or 55,306, 55,306, decreasing of 429.63 429.63 capital by owners
102 2017 Annual Report of China Fangda Group Co., Ltd.
1. Common shares contributed by shareholders
2. Capital contributed by other equity instrument holders
3. Amount of shares paid and accounted as owners’ equity
55,306, 55,306, 4. Others 429.63 429.63
-298,03 -276,18 (3) Profit 21,850, 3,798.7 3,192.6 allotment 606.15 5 0
1. Providing of 21,850, -21,850, surplus reserves 606.15 606.15
2. Common risk provision
3. Allotment to the -276,18 -276,18 owners (or 3,192.6 3,192.6 shareholders) 0 0
4. Others
(4) Internal 394,54 -394,54 transferring of 7,418. 7,418.0 owners’ equity 00 0
1. Capitalizing of 394,54 -394,54 capital reserves (or 7,418. 7,418.0 to capital shares) 00 0
2. Capitalizing of surplus reserves
(or to capital shares)
3. Making up losses by surplus reserves
4. Others
(5) Special reserves
103 2017 Annual Report of China Fangda Group Co., Ltd.
1. Provided this year
2. Used this term
(6) Others
1,183, 1,863,1 3,238,9 4. Balance at the 72,829, 8,585,8 110,690 642,25 91,218. 39,202. end of this period 484.96 47.99 ,396.65 4.00 58 18
Amount of the Previous Term In RMB
Last period
Owners’ Equity Attributable to the Parent Company Minor Other equity tools Total of Items Other Commo Less: shareho Share Prefer Perpet Capital miscella Special Surplus n risk Retaine owners’ Other Shares lders’ capital red ual reserves neous reserves reserves provisio d profit equity s in stock equity share bond income ns
756,90 1,334,0 1. Balance at the 79,099, 91,831. 51,123, 432,271 14,546, 9,905. 43,084. end of last year 619.14 63 554.51 ,424.56 750.03 00 87
Plus: Changes in accounting policies
Correction of previous errors
Consolidation of entities under common control
Others
2. Balance at the 756,90 1,334,0 79,099, 91,831. 51,123, 432,271 14,546, beginning of 9,905. 43,084. 619.14 63 554.51 ,424.56 750.03 current year 00 87
3. Amount of 32,184 change in current 388,277 2,038,6 37,716, 584,549 -76,495 968,270 ,931.0 term ("-" for ,283.82 22.89 235.99 ,151.74 ,960.14 ,265.30 0 decrease)
(1) Total of misc. 2,038,6 697,956 -41,965 658,029 incomes 22.89 ,378.23 ,946.24 ,054.88
104 2017 Annual Report of China Fangda Group Co., Ltd.
(2) Investment or 32,184 427,684 -34,530 425,339 decreasing of ,931.0 ,583.13 ,013.90 ,500.23 capital by owners 0
1. Common shares 32,184 427,684 459,869 contributed by ,931.0 ,488.89 ,419.89 shareholders 0
2. Capital contributed by other equity instrument holders
3. Amount of shares paid and accounted as owners’ equity
-34,530 -34,529, 4. Others 94.24 ,013.90 919.66
-113,40 (3) Profit 37,716, -75,690, 7,226.4 allotment 235.99 990.50 9
1. Providing of 37,716, -37,716, surplus reserves 235.99 235.99
2. Common risk provision
3. Allotment to the -75,690, -75,690, owners (or 990.50 990.50 shareholders)
4. Others
(4) Internal transferring of owners’ equity
1. Capitalizing of capital reserves (or to capital shares)
2. Capitalizing of surplus reserves
(or to capital shares)
3. Making up losses by surplus reserves
105 2017 Annual Report of China Fangda Group Co., Ltd.
4. Others
(5) Special reserves
1. Provided this year
2. Used this term
-39,407, -39,407, (6) Others 299.31 299.31
789,09 1,016,8 2,302,3 4. Balance at the 467,376 2,130,4 88,839, -61,949 4,836. 20,576. 13,350. end of this period ,902.96 54.52 790.50 ,210.11 00 30 17
8. Statement of Change in Owners’ Equity (Parent Company)
Amount of the Current Term
In RMB
Current period
Other equity tools Other Less: Total of Items Share Capital miscellan Special Surplus Retaine Preferre Perpetu Shares in owners’ capital Others reserves eous reserves reserves d profit d share al bond stock equity income
1. Balance at the 789,094, 466,283,5 88,839,79 665,903 2,010,213 91,831.63 end of last year 836.00 46.89 0.50 ,861.54 ,866.56
Plus: Changes in accounting policies
Correction of previous errors
Others
2. Balance at the 789,094, 466,283,5 88,839,79 665,903 2,010,213 beginning of 91,831.63 836.00 46.89 0.50 ,861.54 ,866.56 current year
3. Amount of change in current 394,547, -394,547, 8,664,721 21,850,60 -79,527, -49,012,4 term ("-" for 418.00 418.00 .83 6.15 737.21 09.23 decrease)
(1) Total of misc. 8,664,721 218,506 227,170,7 incomes .83 ,061.54 83.37
106 2017 Annual Report of China Fangda Group Co., Ltd.
(2) Investment or decreasing of capital by owners
1. Common shares contributed by shareholders
2. Capital contributed by other equity instrument holders
3. Amount of shares paid and accounted as owners’ equity
4. Others
-298,03 (3) Profit 21,850,60 -276,183, 3,798.7 allotment 6.15 192.60 5
1. Providing of 21,850,60 -21,850, surplus reserves 6.15 606.15
2. Allotment to the -276,18 -276,183, owners (or 3,192.6 192.60 shareholders) 0
3. Others
(4) Internal 394,547, -394,547, transferring of 418.00 418.00 owners’ equity
1. Capitalizing of 394,547, -394,547, capital reserves (or 418.00 418.00 to capital shares)
2. Capitalizing of surplus reserves
(or to capital shares)
3. Making up losses by surplus reserves
4. Others
(5) Special reserves
107 2017 Annual Report of China Fangda Group Co., Ltd.
1. Provided this year
2. Used this term
(6) Others
4. Balance at the 1,183,64 71,736,12 8,756,553 110,690,3 586,376 1,961,201 end of this period 2,254.00 8.89 .46 96.65 ,124.33 ,457.33
Amount of the Previous Term
In RMB
Last period
Other equity tools Other Less: Total of Items Share Capital miscellan Special Surplus Retaine Preferre Perpetu Shares in owners’ capital Others reserves eous reserves reserves d profit d share al bond stock equity income
1. Balance at the 756,909, 38,598,96 51,123,55 402,148 1,248,872 91,831.63 end of last year 905.00 3.76 4.51 ,728.12 ,983.02
Plus: Changes in accounting policies
Correction of previous errors
Others
2. Balance at the 756,909, 38,598,96 51,123,55 402,148 1,248,872 beginning of 91,831.63 905.00 3.76 4.51 ,728.12 ,983.02 current year
3. Amount of change in current 32,184,9 427,684,5 37,716,23 263,755 761,340,8 term ("-" for 31.00 83.13 5.99 ,133.42 83.54 decrease)
(1) Total of misc. 377,162 377,162,3 incomes ,359.91 59.91
(2) Investment or 32,184,9 427,684,5 459,869,5 decreasing of 31.00 83.13 14.13 capital by owners
1. Common shares 32,184,9 427,684,4 459,869,4 contributed by 31.00 88.89 19.89 shareholders
2. Capital
108 2017 Annual Report of China Fangda Group Co., Ltd. contributed by other equity instrument holders
3. Amount of shares paid and accounted as owners’ equity
4. Others 94.24 94.24
-113,40 (3) Profit 37,716,23 -75,690,9 7,226.4 allotment 5.99 90.50 9
1. Providing of 37,716,23 -37,716, surplus reserves 5.99 235.99
2. Allotment to the -75,690, -75,690,9 owners (or 990.50 90.50 shareholders)
3. Others
(4) Internal transferring of owners’ equity
1. Capitalizing of capital reserves (or to capital shares)
2. Capitalizing of surplus reserves
(or to capital shares)
3. Making up losses by surplus reserves
4. Others
(5) Special reserves
1. Provided this year
2. Used this term
(6) Others
4. Balance at the 789,094, 466,283,5 88,839,79 665,903 2,010,213 91,831.63 end of this period 836.00 46.89 0.50 ,861.54 ,866.56
109 2017 Annual Report of China Fangda Group Co., Ltd.
III. General Information
China Fangda Group Co., Ltd. (the ―Company‖ or the ―Group‖) is a joint stock company registered in Shenzhen, Guangdong and was approved by the Government of Shenzhen with Document 深府办函 (1995) 194号, and was founded, on the basis of Shenzhen Fangda Construction Material Co., Ltd., by way of share issuing in October 1995. The unified social credit code is: 91440300192448589C; registered address: Fangda Building, Kejinan Road 12, High-tech Zone, Shenzhen. Mr. Xiong Jianming is the legal representative.
The Company issued foreign currency shares (B shares) and local currency shares (A shares) and listed in November 1995 and Ap ril 1996 respectively in Shenzhen Stock Exchange. The Company received the Reply to the Non-public Share Issuance of Fangda China Group Co., Ltd. (CSRC License [2016] No.825) to allow the Company to conduct non-public issuance of 32,184,931 A-shares in June 20116. According to the profit distribution plan for 2016 approved by the 2016 general shareholders' meeting, the Company issued five shares for every ten shares to all shareholders through surplus capitalization based on the total 789,094,836 shares on December 31, 2016. The registered capital of the Company is RMB1,183,642,254.00.
The Company has established a corporate governance structure that comprises shareholders’ meeting, board of directors and supervisory committee. Currently, the Company sets up the President Office, Administrative Department, HR Department, Enterprise Management Department, Financial Department, Audit and Supervisory Department, Securities Department, Technology Department and IT Department and has established subsidiaries including Fangda Decoration, Fangda Automatic, Fangda New Material, Fangda Property and Fangda New Energy.
The business nature and main business operations of the Company and subsidiaries (―the Group‖) include (1) production and sales of curtain wall materials, design, production and installation of construction curtain walls; (2) assembly and production of subway screen doors; (3) development and operation of real estate projects on land, of which rights have been obtained lawfully; (4) R&D, installation and sales of PV devices, design and installation of PV power plants.
The financial statements and notes are approved at the 7th meeting of the 8th term of the Board held on 20.04.18
The consolidation scope for the consolidated financial statements includes the Company and all subsidiaries. Two subsidiaries are newly consolidated in this period. Two subsidiaries are no longer consolidated. Jiangxi Fangda New Aluminum Co., Ltd. was cancelled. Shares in Guangdong Fangda SOZN Lighting Co., Ltd. were transferred. See Note VIII Change to consolidation scope and Note IX Interests in other entities.
IV. Basis for the preparation of financial statements
1. Preparation basis
The financial statements are prepared according to the enterprise financial standard and guidelines, interpretation and other related regulations (―the Standard‖) issued by the Ministry of Finance. In addition, the Group also complies with the "Regulations on the Compilation and Submission of Information Disclosures by Companies That Offer Securities to the Public No. 15 - General Provisions on Financial Reporting" (revised in 2014) and the "Rules for the Compilation and Submission of Information Disclosures to Companies That Publicly Issue Securities" No. 11 - Special Provisions on the Notes to the Financial Statements of Companies Engaged in Real Estate Development Disclosure of Financial Information.
110 2017 Annual Report of China Fangda Group Co., Ltd.
The Group prepares the financial statements based on continuous operation.
The Group's auditing is based on the accrual basis. Except for some financial instruments and property held for investment, the financial statements are prepared based on historical costs. In case of any asset impairment, the impairment provision will be made as required.
2. Continuous operation
The Company assessed the continuing operations capability of the Comp any for the 12 months from the end of the reporting period. No matters were found that would affect the Company's ability to continue as a going concern. It is reasonable for the Company to prepare financial statements based on continuing operations.
V. Significant Account Policies and Estimates
Whether the Company needs to comply with disclosure requirements of special industries
Yes Property development and decoration industries
Specific accounting policy and estimate prompt: The Group determines the accounting policies and income recognition policies for investment real estate according to the production and business features. For details, see Note V. 13 and Note V. 22.
1. Statement of compliance to the Enterprise Accounting Standard
The financial report and statements are prepared with compliance to the requirement of the Enterprise Accounting Standard. They reflect the financial position as of 31.12.17, and business performance and cash flow situation in Year 2017 of the Company frankly and completely.
2. Fiscal Period
The fiscal year of the Group is the solar calendar year that is from January 1 to December 31.
3. Operation period
The operation period of the Group is 12 months.
111 2017 Annual Report of China Fangda Group Co., Ltd.
4. Bookkeeping standard money
The Company, domestic subsidiaries and overseas subsidiary Shihui International Holding Co., Ltd. use RMB as bookkeeping standard money. Overseas subsidiaries Automatic System (Hong Kong) Co., Ltd. and Fangda Australia Pty Ltd use HKD and AUD as bookkeeping standard money respectively. The Group prepares financial statements in RMB.
5. Accounting treatment of the entities under common and different control
(1) Consolidation of entities under common control
Assets and liabilities obtained by the merging party are calculated at their book valu e with the merged parties at the merger day in the consolidated financial statement of the merging party in addition to the adjustment made given the difference in accounting p olicies. The differences between the book value of net assets and the book value of consideration price (or the total of face value of share issued) are adjusted to the capital reserve (share capital premium). If the share capital premium is not enough to offset the difference, it will be adjusted to the retained gains.
Enterprise merger under common control through multiple transactions
In separate financial statements, the initial investment cost is the book value of the merged party’s net assets that can be shared by the merging party in the consolidate financial statements of the final controlling party according to the shareholding percentage on the merging date; adjust the capital surplus (share premium) according to the difference between the initial investment cost and the book value of the held investment before merger plus the book value of the consideration paid on the merger date. Where the capital surplus falls short, the retained income should be adjusted.
In consolidated financial statements, assets and liabilities obtained by the merging party from the merged party should be measured at the book value in the final controlling party’s consolidated financial statements other than the adjustment made due to differences in accounting policies; adjust the capital surplus (share premium) according to the difference between the initial investment cost and the book value of the held investment before merger plus the book value of the consideration paid on the merger date. Where the c apital surplus falls short, the retained income should be adjusted. Changes in recognized related profit and loss, other misc. incomes and other owner's equity between the later one of the date when the original stock equity was obtained and the date when the merged party and merging party become under the common control should respectively write down the retained profit in beginning of the report period or current period’s profit or loss.
(2) Consolidation of entities under different control
For merger of entities under different control, the merger cost is the fair value of the asset paid, liability undertaken, and equity securities issued for exchanging of control power over the entities at the day of acquisition. On the acquisition day, the as sets and liabilities (if any) acquired by the Group from the acquired party are recognized on the fair valu e.
If the merger costs exceed the fair value of the recognizable net assets of the acquired party in the merger, it is recognized as goodwill and measured based the costs after the accumulative impairment provision is deducted; if the fair value exceeds t he costs, it is included in the income statement for the period after being re-examined.
Where there is new or further evidence on the condition existing on the acquisition date 12 months later and adjustment needs to be made, the good will should be adjusted and merged.
112 2017 Annual Report of China Fangda Group Co., Ltd.
(3) Treatment of related transaction fee in enterprise merger
Agency expenses and other administrative expenses such as auditing, legal consulting, or appraisal services occurred relating to the merger of entities are accounted into current income account when occurred. The transaction fees of equity certificates or liability certificates issued by the purchaser for payment for the acquisition are accounted at the initial amount of the certificates.
6. Preparation of Consolidated Financial Statements
(1) Consolidation scope
The consolidate scope of consolidated financial statements is determined based on control. Control means the power possessed by the Group on invested entities to share variable returns by participating in related activities of the invested entities and to impact the amount of the returns by using the power. Subsidiaries are enterprises controlled by the Company.
(2) Preparation of Consolidated Financial Statements
The consolidated financial statements are prepared by the Company based on financial statements of the Company and subsidiaries and according to other related information. During preparation of consolidated financial statements, the accounting policies and period of the Company and subsidiaries must be the same. Major transactions and balances between companies are offset.
Subsidiaries and businesses increased because of merger of enterprises under the common control during the report period are deemed consolidated into the consolidate scope from the date of becoming controlled by the final party. The operating result and cash flows of the subsidiaries and businesses from the date of becoming controlled by the final party should be incorporated into the consolidate income statement and consolidate cash flow statement.
For subsidiaries and businesses increased because of merger of enterprises not under the common control, their incomes, expenses and profits between the date of acquisition and end of the report period should be incorporated into the consolidated income statement, and the cash flows should be incorporated into the consolidated cash flow statement.
The part of the shareholders’ equity in subsidiaries not owned the Company are separately listed under the shareholders’ equity as minority shareholders’ equity in the consolidated balance sheet. The part of the subsidiaries’ net profits and losses for the current period that belongs to minority shareholders is listed as minority shareholders’ profits and losses under net profit in the consolidated income statement. If the losses of subsidiaries shared by the minority shareholders exceed the part of the owners’ equity of the subsidiaries at the beginning of the period, the excessive part will offset the minority shareholders’ equity.
(3) Acquisition of subsidiary minority interests
The difference between the investment cost of the long-term equity obtained from acquisition of minority interests and the share of net assets in the subsidiary calculated continuously based on the increased shareholding percentage, and the difference between the disposal income obtained from the partial disposal of the subsidiary’s equity investment without losing the control power and the share of net assets in the subsidiary calculated continuously based on the increased shareholding percentage should be adjusted and consolidated in the capital surplus in the consolidated balance sheet. Where the capital surplus falls short, the retained income should be adjusted.
(4) Treatment of loss of subsidiaries’ control power
113 2017 Annual Report of China Fangda Group Co., Ltd.
For loss of control over subsidiaries due to disposal of partial equity investment or other reasons, the remaining equity should be re-measured at the fair value on the date of loss of the control power; the sum of the consideration obtained from the disposal of stock equity and the fair value of the remaining equity, minus the sum of the share of the net assets’ book value calculated continuously from the acquisition date according to the original shareholding percentage and the goodwill should be recorded in the investment gain of the current period of the loss of control power.
Other misc. incomes related to the equity investment in the original subsidiary is transferred to the current period’s profit and loss when the control power is lost, except for the other misc. incomes generated by re-measurement and resetting of earning plan or change in the net assets by the invested party.
7. Recognition of cash and cash equivalents
Cash refers to cash on hand and deposits that can be used at any time for payment. Cash equivalent refers to the investments with short term, strong liquidity and small risk of value fluctuation that are held by the Group and easily converted into cash with known amount.
8. Foreign exchange business and foreign exchange statement translation
(1) Foreign currencies
Trades of the Group made in foreign currencies are translated into RMB basing on the spot exchange rate on the date when the trade is conducted.
At the balance sheet date, foreign currency items are translated on the spot exchange rate of the balance sheet date. The exchange differences caused by the difference in exchange rates on the balance sheet date and initial recognizing date or previous balance sheet date are included in the current profits and losses. Non-monetary items accounted in foreign currency and on historical costs are exchanged with the spot exchange rate on the transaction date. Non-monetary items accounted in foreign currency and on fair value are exchanged with the spot exchange rate on the determination date of the fair value. The exchange difference between the accounting standard-currency amount and the original accounting standard-currency amount are included in the current profits and losses.
(2) Translation of foreign exchange statement
On the balance sheet date, when foreign currency financial statements of overseas subsidiaries are converted, the assets and liabilities items in the balance sheet are converted using the spot exchange rate on the balance sheet date. The shareholders’ equity items are calculated as ―undistributed profits‖, except for other items. The spot exchange rate on the date of occurrence is used for conversion.
The income and expense items in the income statement are translated using the exchange rate that is determined by the system’s reasonable method and approximate to the spot exchange rate on the transaction date.
All items in the cash flow statement are converted according to the exchange rate that is determined by the system's reasonable method and approximate to the spot exchange rate on the day the cash flow occurs. The impact of changes in exchange rates on cash is used as a reconciliation item, which is separately presented in the cash flow statement ―Items Affecting Exchange Rate Movements
114 2017 Annual Report of China Fangda Group Co., Ltd. on Cash and Cash Equivalents‖.
The difference arising from the translation of the financial statements is reflected in the "Other comprehensive income" item under the shareholders' equity item in the balance sheet.
When foreign operations are disposed of and the control rights are lost, the difference in foreign currency statements related to the overseas operations that are listed in the shareholders' equity items in the balance sheet is transferred to the profit or loss for the current period, either in whole or in proportion to the disposal of the foreign operations.
9. Financial instrument
Financial instrument refers to a company’s financial assets and contracts that form other units of financial liabilities or equity instruments.
(1) Recognition and derecognition of financial instrument
The Group recognizes a financial asset or liability when it becomes one party in the financial instrument contract.
Financial asset is derecognized when:
(1) The contractual right to receive the cash flows of the financial assets is terminated;
(2) The financial asset is transferred and meets the following derecognition condition.
When partial or all of the current responsibilities attached to such financial liabilities, the partial or all of the financial liabilities are derecognized. When the Group (debtor) and creditor enter into an agreement to replace the existing financial liabilities by undertaking new financial liabilities and the contract terms for the new financial liabilities are essentially different from those for the existing one, the existing financial liabilities will be derecognized and new financial liabilities will be recognized.
Financial asset transactions in regular ways are recognized and de-recognized on the transaction date.
(2) Classification and measurement of financial assets
Financial assets of the Group are categorized as: financial assets measured at fair value with variations accounted into current income account, receivables and financial assets available for sales. Financial assets are measured at the fair value at the initial recognition. For financial assets measured at fair value with variations accounted into current income account, related transaction expenses are accounted into the current income. For other financial assets, the related transaction expenses are accounted into the initial recognized amounts.
Financial assets measured at fair value with variations accounted into current income account
It includes transactional financial assets and financial assets measured by fair value and with variations accounted into current gain/loss account at initial recognition. The financial assets are further measured by fair value with the gain/loss created by variations in fair value and related dividends and interest accounted into the current gain/loss account.
Receivables
115 2017 Annual Report of China Fangda Group Co., Ltd.
Receivables refer to non-derivative financial assets without quotations but with fixed recoverable amount or can be confirmed, including receivable accounts and other receivables (Note V. 10).Receivables adopt the effective interest method and are further measured by amortized cost. Gain/loss generated at final recognition, impairment or amortization is accounted into the current gain/loss account.
Sellable financial assets
Sellable financial asset refers to those sellable non-derivate financial assets recognized initially and financial assets other than the above-mentioned types of financial assets. Sellable financial assets are further measured by fair value and the premium/discount is amortized by the effective interest method and recognized as interest income. Other than the exchange difference of impairment loss and foreign exchange monetary financial assets, which is recognized as current gain and loss, the variations in fair value of sellable financial assets is recognized as other comprehensive gain. When it is derecognized and transferred out, it is accounted into the current gain/loss account. Dividends and interest income related to sellable financial assets are accounted into the current gain/loss account.
Equity instrument investment without quotation in an active market and whose fair value cannot be reliably measured and derivative financial assets that are linked to the equity instrument and that need to be settled through delivery of the equity instruments are measured by costs.
(3) Classification and measurement of financial liabilities
The Group’s financial liabilities are mainly other financial liabilities
Other financial liabilities adopt the effective interest method and are further measured by amortized cost. Gain/loss generat ed at final recognition or amortization is accounted into the current gain/loss account.
Differences between financial liabilities and equity instruments
Financial liabilities is liabilities that meet one of the following conditions:
(1) contractual obligation to deliver cash or other financial assets to other parties.
(2) under potential adverse conditions, the contractual obligation to exchange financial assets or financial liabilities with other parties.
(3) In the future, a non-derivative instrument contract that can be settled with the company's own equity instruments will be used, and the company will deliver a variable amount of its own equity instruments based on the contract.
(4) Derivatives contracts that may be settled with the company's own equity instruments or may be settled in the future, except for a derivative contract that exchanges a fixed amount of its own equity instruments for a fixed amount of cash or other financial assets.
Equity instruments refer to contracts that prove the ownership of a company’s remaining equity in assets after deducting all liabilities.
If the Group cannot unconditionally avoid the performance of a contractual obligation by delivering cash or other financial assets, the contractual obligation is in line with the definition of financial liabilities.
If a financial instrument is required to be settled with or can be settled with the Group's own equity instruments, the Group 's own equity instrument used to settle the instrument needs to be considered as a substitut e for cash or other financial assets or for the
116 2017 Annual Report of China Fangda Group Co., Ltd. holder of the instrument to enjoy the remaining equity in the assets after all liabilities are deducted. If it is the former, the instrument is the financial liabilities of the Group; if it is the latter, the instrument is the equity instrument of the Group.
(4) Derivative financial instruments and embedded derivatives
The Group's derivative financial instruments include futures contracts. It is initially measured at the fair value at the dat e of signing the derivative transaction contract and is subsequently measured at its fair value. Derivative financial instruments with a posit ive fair value are recognized as asset, and instruments with a negative fair value are recognized as liabilities. Any gains or losses arising from changes in fair value that do not meet the hedge accounting requirements are directly charged to profit or loss for the current period.
For hybrid instruments containing embedded derivatives, if there are no financial assets or financial liabilities that are not designated as measured at fair value and their changes are recorded as profit or loss for the current period, there is no close relationship between the embedded derivatives and the principal contract in terms of economic characteristics and risks with same conditions as embedded derivatives, the separately existing tools are in accordance with the definition of the derivatives, the embedded derivatives are split from the hybrid tools and processed as separate derivative financial instruments. If it is not possible to separately measure the embedded derivative instrument at the time of acquisition or on the subsequent balance sheet date, the entire hybrid instrument is designated as financial asset or financial liabilities that are measured at its fair value and whose changes are recorded as profit or loss for the current period.
(5) Fair value of financial instrument
Fair value is the price that can be obtained from selling an asset or paid for transferring liabilities in an orderly transaction on the measurement date.
The Group measures the related assets or liabilities at fair value, assuming that the orderly sale of assets or transfer of liabilities is carried out in the main market of the relevant assets or liabilities; if there is no major market, the Group assumes that the transaction is the most advantageous in the relevant assets or liabilities. The major market (or the most advantageous market) is the trading market that the Group can enter on the measurement date. The Group uses assumptions that market participants use to maximize their economic benefits when pricing the asset or liability.
For financial assets or liabilities in an active market, the Group determines their fair value based on quotations in the act ive market. If there is no active market, the Company uses evaluation techniques to determine the fair value.
For the measurement of non-financial assets at fair value, the ability of market participants to use the assets for optimal purposes to generate economic benefits, or the ability to sell the assets to other market participants that can be used for optimal purposes to generate economic benefits.
The Group uses valuation techniques that are applicable in the current circumstances and have sufficient available data and other information to support the use of the relevant observable input values prioritized. Unobservable input values are used only when the observable input value cannot be obtained or is not feasible.
For assets and liabilities that are measured or disclosed at fair value in the financial statements, based on the lowest level input value that is of significance to the overall fair value measurement, the level of fair value to which they belong is determined: The input value at the first level can be calculated at the measurement date. Unadjusted quotes for the same assets or liabilities that have been obtained in active markets; input values at the second level are input values that are directly or indirectly observable for the underlying assets or liabilities other than those entered at the first level; Level 3 inputs are Unobservable inputs to relat ed assets or liabilities.
At each balance sheet date, the Group reassesses the assets and liabilities that are continuously measured at fair value and confirmed in the financial statements to determine whether there is a conversion between the fair value measurement levels.
(6) Impairment of financial assets
Financial assets measured at fair value with variations accounted into current income account. The Group checks the book value of
117 2017 Annual Report of China Fangda Group Co., Ltd. financial assets on the balance sheet date. Impairment provision will be made in case of objective evidence proving impairment to the financial assets. Objective evidence proving impairment to the financial assets refers to events actually occur after the initial recognition of financial assets, with influence on the estimated future cash flows of the financial assets and can be reliably measured by the Group.
Objective evidence proving impairment to the financial assets includes the following observable situations:
① Severe financial difficulties in the issuer or debtor;
② The debtor violates the contract or defaults or delays the payment of the interest or principal;
③ The Group makes compromise to the debtor with financial difficulties due to economic or legal consideration;
④ The debtor may go bankruptcy or conduct other financial reorganization;
⑤ The financial assets can no longer be traded in an active market due to material financial difficulties in the issuer;
⑥ It cannot be recognized whether the cash flow of an asset in a group of financial assets has decreased. However, according to open data, it can be evaluated that the estimated future cash flow of the group of financial assets has decreased and the decrease can be measured, including:
- The payment capacity of the debtor of the financial assets continues weakening;
- Situations that may lead to the payment failure of the financial assets happen in the country or region where the debtor is located;
⑦ Significant adverse changes occurs to the technical, market, economic or legal environment of the debtor, leading to that the equity instrument investor may not be able to recover the investment;
⑧ Other objective evidence that can prove the impairment of the financial assets
Financial assets measured at amortized cost
If there is objective evidence proving impairment to the financial assets, the book value of the financial assets will be written down to the present value of the estimated future cash flow (excluding undiscovered future credit loss). The write-down amount is accounted into the current gain/loss account. The present value of the estimated future cash flow is determined by the original effective discount rate with the value of the guarantee considered.
Conduct impairment test separately for major financial assets. If there is objective evidence suggesting impairment, determine the impairment loss and account it into the current gain/loss account. For financial assets with insignificant single amounts, impairment tests are conducted separately or included in the portfolio of financial assets with similar credit risk characteristics. Tes t financial assets without impairment separately (including major and minor financial assets) and conduct impairment test in the financial assets combination with similar credit risk features. Conduct impairment test for financial assets separately recognized as impaired excluding financial assets combination with similar credit risk features.
After the Group recognizes impair loss to financial assets measured by amortized cost, if there is object evidence suggesting that the value of the financial assets is restored objectively due to an event after the loss, the recognized impairment loss can be reversed and accounted into the current gain/loss account. The book value after the reversal must not exceed the amortized cost of the financial assets on the reversal date assuming that no impairment provision was made.
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(7) Transfer of financial assets
The transfer of financial assets refers to transferring or delivering the financial assets to another party (receiver) other than the issuing party of the financial assets.
Recognition of the financial asset is terminated as soon as all of the risks and rewards attached to the financial asset have been transferred to the receiver. Whereas if all of the risks and rewards attached to the financial assets are reserved, recognition of the financial asset shall not be terminated.
When the Group neither transfers nor reserve almost all risks and rewards attached to the financial assets, it will be handled as: When the controlling power over the financial asset is given up, the financial assets will be derecognized and the generated assets and liabilities will be recognized; when the controlling power is not given up, financial asset and related liability shall be recognized according to the extend the Company is involving in the financial asset.
(8) Deduction of financial assets and liabilities
When the Group has the legal right to deduct recognized financial assets and liabilities, can exercise the legal right, and t he Group plans to settle them in net, liquidate and repay the financial assets and liabilities, the amount after the deduction will be presented in the balance sheet. Exception for the deducted part, other financial assets and liabilities are separately presented in the balance sheet.
10. Receivables
(1) Receivables with major individual amount and bad debt provision provided individually
For the current year, the Company recognizes project receivables over RMB10 million (inclusive) as ―individual receivable with large amount‖ while recognizes product receivables over RMB2 Judging basis or standard of major individual amount million (included) as ―individual receivable with large amount‖ and other receivables over RMB1 million (included) as ―individual receivable with large amount‖.
The Company performs impairment examination individually on each large amount receivables, and recognizes impairment and Provision method for account receivable with major individual provides bad debt provision when the impairment is recognized amount and bad debt provision provided individually based on objective evidence. Those not impaired are accounted along with the minor amount receivables and recognized in risk groups.
(2) Recognition and providing of bad debt provisions on groups
Group Method of bad debt provision
Account age Aging method
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Receivables within consolidation, receivables of real estate property sold with bank mortgage and accounts between the Other method Company and partners
Receivables adopting the aging method in the group: √ Applicable □ Inapplicable
Providing rate for receivable account Providing rate for Age Engineering Real estate Others other receivables
Within 1 year (inclusive) 1.00% 1.00% 3.00% 3.00%
1-2 years 5.00% 5.00% 10.00% 10.00%
2-3 years 20.00% 10.00% 30.00% 30.00%
3-4 years 30.00% 30.00% 50.00% 50.00%
4-5 years 50.00% 50.00% 80.00% 80.00%
Over 5 years 100.00% 100.00% 100.00% 100.00%
Receivables adopting the balance percentage method in the group □ Applicable √ Inapplicable Receivables adopting other methods in the group
□ Applicable √ Inapplicable
(3) Receivables with not major individual amount and bad debt provision provided individually
The Company must comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.6 – Listed Companies Engaged in Decoration Business.
Reasons for separate bad debt provision Long account age or deterioration of customer creditability
According to the difference between the present value of future Method of bad debt provision cash flow and the book value
11. Inventories
Whether the Company needs to comply with disclosure requirements of special industries Yes Property development and decoration industries (1) Classification of inventories
The Group’s inventories include purchased materials, raw materials, low-value consumables, packing materials, OEM materials, products in process, semi-finished goods, finished goods, inventory, development costs, development products and construction in process.
(2) Pricing of delivering inventory
Inventories are measured at cost when procured. Raw materials, products in process, commodity stocks in transit and self-made semi-finished products are measured by the weighted average method.
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Construction contracts are measured by the effective cost, including direct and indirect expenses generated before the contracts are fulfilled. Costs generated and recognized accumulatively by construction in process and settled payment are listed in the balance sheet as offset net amounts. The excessive part of the sum of the generated costs and recognized gross profit (loss) over the settled payment is listed inventories; the excessive part of the settled payment over the sum of the generated costs and recognized gross profit (loss) is listed as the prepayment received.
Travel and bidding expenses generated by execution of contracts, if they can be separated and reliably measured and it is likely to enter into contracts, are accounted as the contract cost when the contracts are entered into; or into the current gain/loss a ccount if the conditions are not met.
The development costs include land transfer payment, infrastructure and facility costs, installation engineering costs, borrows before completion of the development and other costs during the development process. The actual costs of the development product is priced using the separate pricing method.
(3) Recognition of inventory realizable value and providing of impairment provision
The realizable net value of inventory is the estimated sales prices of the inventory less costs to be incurred until the completion, estimated sales expense and taxes. The realizable net value of inventory should be recognized based on solid evidence with the purpose of the inventory and after-balance-sheet-date events taken into consideration.
If the inventory cost is higher than the realizable net value on the balance sheet date, the inventory depreciation provision should be made. The Group makes inventory depreciation provision for separate or a type of inventory. If factors affecting the inventory value disappear on the balance sheet date, the depreciation provision made should be reversed to the original value.
(4) Inventory system
The Group uses perpetual inventory system.
(5) Amortizing of low-value consumables and packaging materials
Low-value consumables are amortized on on-off amortization basis at using.
12. Long-term share equity investment
The Group's long-term equity investment includes control on invested entities and significant impacts on equity investment. Invested entities on which the Group has significant impacts are associates of the Group.
(1) Recognition of initial investment costs
Long-term equity investment generated by enterprise merger: for long-term equity investment obtained by merger of enterprises under common control, the obtained share of book value of the interests of the merged party’s owner in the consolidate financial statements on the merger date is the investment costs; for long-term equity investment obtained by merger of enterprises not under common control, the merger cost is the investment cost.
For long-term equity investment obtained by cash, the actually paid consideration is the initial investment cost.
(2) Subsequent measurement and recognition of gain/loss
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Investments by the Company in subsidiaries are calculated using the cost method; in joint ventures are calculated using the equity method.
For the long-term equity investment measured on the cost basis, except for the announced cash dividend or profit included in the practical cost or price when the investment was made, the cash dividends or profit distributed by the invested entity are recognized as investment gains in the current gain/loss account.
When the equity method is used to measure long-term equity investment, the investment cost will not be adjusted if the investment cost of the long-term equity investment is larger than the share of fair value of the recognizable assets of the invested entity. When it is smaller than the share of fair value of the recognizable assets of the invested entity, the book value will be adjusted and the difference is included in the current gains of the investment.
When the equity method is used, the current investment gain is the share of the net gain realized in the current year that can be shared or borne, recognized as investment gain and other misc. income. The book value of the long-term equity investment is adjusted accordingly. The book value of the long-term equity investment should be accordingly decreased based on the share of profit or cash dividend announced by the invested entity; according to other changes in the owner’s equity except for net profit and loss, other misc income and profit distribution of the invested entity, adjust the book value of the long-term equity investment and record it in the capital surplus (other capital surplus). When the share of the net gains that can be enjoyed is recognized, it is recognized after the net profit of the invested entity is adjusted based on the fair value of the recognizable assets of the invested entity according to the Company's accounting policies and accounting period.
Where substantial influence on invested entities is imposed or joint control is implemented due to increase in investment, the sum of the fair value of the original equity and increased investment on the conversion date is the initial investment cost under the equity method. The difference between the fair value and book value of the original equity on the conversion date and the accumulative change in the fair value originally accounted in other misc. income should be transferred into the profit and loss of the current period using the equity method.
Where joint control or substantial influence on invested entities is lost due to disposal of part of investment, the remainin g equity after the disposal should be treated according to the Enterprise Accounting Standard No.22 – Recognition and Measurement of Financial Instruments from the date of losing the joint control or substantial influence. The difference between the fair value and book value should be accounted the profit and loss of the current period. For other misc. incomes of original share equity investment determined using the equity method, when the equity method is no longer used, it should be treated based on the same basis of the treatment of related assets or liability of the invested entities; the other owners' interests related to the original share equity investment should be transferred to gain/loss of the current period.
Where the disposal of part of the equity investment leads to loss of control on the invested entity, and the remaining equity after the disposal can impose common control or significant impacts on the invested entity, use the equity method and make adjustment as if the equity method was used when the remaining equity was acquired. If not, perform accounting treatment according to provisions in the Enterprise Accounting Standard No.22 – Recognition and Measurement of Financial Tools. The difference between the fair value and book value on the date of losing control should be transferred into the profit and loss of this period.
Where the Company’s shareholding decreases and the Company loses the control due to increased investment by another investor, but the Company can still impose common control or significant impacts on the invested entity, the share of increased net assets of the invested entity that can be shared by the Company should be calculated based on the new shareholding, the difference betw een the net assets and original book value of the original long-term equity investment should be recorded in the profit and loss of this period and adjusted as if equity method was used when it was acquired according to the new shareholding proportion.
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Internal transaction gain not realized between the Company and affiliates is measured according to the shareholding proportion and the investment gains is recognized after deduction. The unrealized internal transaction loss between the Company and the invested entity is the impairment loss of transferred assets and should not be written off.
(3) Basis for recognition of major influence on invested entities
Major influence refers to the power to participate in decision-making of financial and operation policies of a company, but cannot control or jointly control the making of the policies. When considering whether the Company can impose significant impacts on the invested entity, impacts of conversion of shares with voting rights held directly or indirectly by the investor and voting rights that can be executed in this period held by the investor and other party into shares of the invested entity should be considered.
When Company directly or indirectly holds 20% (inclusive) but less than 50% of the shares with voting rights of the invested entity, it is generally considered that the Company can impose significant impacts unless there is clear evidence proving that the Company shall not participate in the production and business decision making of the company; when the Company holds less than 20% of the shares with voting rights, it is generally not considered that the Company has significant impacts on the invested entity, unless there is clear evidence proving the contrary.
(4) Equity investment held for sale
For the remaining equity investments not classified as assets held for sale, the equity method is adopted for accounting treatment.
Equity investments classified as held for sale to associates that are no longer eligible to hold classified assets for sale are retrospectively adjusted using the equity method starting from the date that they are classified as held for sale.
(5) Impairment examination and providing of impairment provision
See Note V. 18 for the assets impairment provision method for investment in subsidiaries and joint ventures.
13. Investment real estates
Measuring mode of investment real estate Measurement at fair value Basis of choosing the measurement at fair value
Investment real estates of the Group are buildings leased.
For investment real estates with an active real estate transaction market and the Group can obtain market price and other information of same or similar real estates to reasonably estimate the investment real estates’ fair value, the Group will use the fair v alue mode to measure the investment real estate subsequently. Variations in fair value are accounted into the current gain/loss account.
The fair value of investment real estate is determined with reference to the current market prices of same or similar real estates in active markets; when no such price is available, with reference to the recent transaction prices and consideration of factors includin g transaction background, date and district to reasonably estimate the fair value; or based on the estimated lease gains and present value of related cash flows.
For investment real estate under construction (including investment real estate under construction for the first time), if the fair value
123 2017 Annual Report of China Fangda Group Co., Ltd. cannot be reliably determined but the expected fair value of the real estate after completion is continuously and reliably obtained, the investment real estate under construction is measured by cost. When the fair value can be measured reliably or after completion (the earlier one), it is measured at fair value. For an investment real estate whose fair value is proven unable to be obtained continuously and reliably by objective evidence, the real estate will be measured at cost basis until it is disposed and no residual value remains as assumed.
The difference of the proceeds from sales, transfer, retirement or destruction of investment real estates with book value and related taxes deducted is accounted into the current gain/loss account.
Investment real estate that use the cost method for further measurement adopt the straight -line depreciation provision method. See Note V. 18 for the provision method.
14. Fixed assets
(1) Recognition conditions
Fixed assets is defined as the tangible assets which are held for the purpose of producing goods, providing services, lease or for operation & management, and have more than one accounting year of service life. The fixed assets can only be recognized hen economic interests related to the fixed assets are very likely to flow into the company and the costs of the fixed assets can be reliably measured. The Group measures fixed assets at the actual costs when the fixed assets are obtained
(2) Depreciation method
Annual depreciation Type (2) Depreciation method Service year Residual rate rate %
Houses & buildings Average age 35-45 10% 2%-2.57%
Mechanical equipment Average age 10 10% 9%
Transportation facilities Average age 5 10% 18%
Electronics and other Average age 5 10% 18% devices
PV power plants Average age 20 5% 4.75%
15. Construction in process
Whether the Company needs to comply with disclosure requirements of special industries
Yes Property development and decoration industries
The Group recognizes the cost of construction in process according to the actual construction expense, including necessary engineering expenses, borrowing costs to be capitalized before the engineering reaches the preset service condition and other related costs.
Construction in process will be transferred to fixed assets when it reaches the preset service condition.
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See Note V. 18 for the provision method for construction in process.
16. Borrowing expenses
(1) Recognition principles for capitalization of borrowing expenses
Borrowing expenses occurred to the Group that can be accounted as purchasing or production of asset satisfying the conditions of capitalizing, are capitalized and accounted as cost of related asset. Borrowing expenses start to be capitalized when all of the followings are satisfied:
(1) Asset expense has already occurred. Asset expenses include cash payment, non-cash asset transferring, or undertaking of debt with interest done for purchasing or producing of assets;
(2) The borrowing expense has already occurred;
(3) Purchasing or production activity, which is necessary for the asset to reach the useful status, has already started.
(2) During borrowing expense capitalization
When the asset satisfying the capitalizing conditions has reached its usable or sellable status, capitalizing of borrowing expenses shall be terminated. Borrowing expenses incurred after assets that meet capitalization conditions reach the service or sales conditions are accounted into the current gain/loss account according to the actual amounts.
If the construction or production of assets satisfying the capitalizing conditions is suspended abnormally for over 3 months, capitalizing of borrowing expenses shall be suspended. During the normal suspension period, borrowing expenses will be capitalized continuously.
(3) Calculation of the capitalization amount of borrowing expense
Interest expenses generated by special borrowings less the interests income obtained from the deposit of unused borrowings or investment gains from temporary investment is capitalized; the capitalization amount for general borrowing is determined based on the capitalization rate which is the exceeding part of the accumulative assets expense over weighted average of the assets expense of the special borrowing/used general borrowing. The capitalization ratio is the weighted average interest rate of general borrowings.
In the capitalization period, the exchange difference of special borrowings in foreign currencies should be fully capitalized. The exchange difference should be recorded in the profit and loss of this period.
17. Intangible assets
(1) Pricing method, service life and depreciation test
The Group’s intangible assets include land using rights, trademarks, patent, special technologies, and software.
Intangible assets are initially measured at costs and the useful life will be determined when obtained. Where the useful life is limited,
125 2017 Annual Report of China Fangda Group Co., Ltd. the intangible assets will be amortized within the predicted useful life by using the amortization method that can reflect predicted realization way of the economic benefit of the assets; whether the realization way cannot be reliably confirmed, use the straight-line method. If the useful life is uncertain, the intangible assets are not amortized.
Intangible assets with limited useful life are amortized as followings:
Type Useful life Basis of amortization Land using right Beneficial age Average age Trademarks and patents 10 years Average age Proprietary technology 10 years Average age Software 5, 10 years Average age
At the end of each year, the Group will reexamine the useful life and amortization basis of intangible assets with limited useful life. If they change, adjust the prediction and handle it according to accounting estimate changes.
On the balance sheet day, if the intangible assets become unlikely to bring future economic benefits for the Group, transfer all the intangible assets’ book value into the current gain/loss account.
See Note V. 18 for the impairment provision method for intangible assets.
(2) Accounting policies for internal R&D expenses
The Group divides internal R&D project expenses into research and development expenses.
The research expenses are accounted the current gain/loss account.
Development expenses can only be capitalized when the following conditions are satisfied: the technology is feasible for use or sales; there is the intention to use or sell the intangible assets; it can be proven that the product generated by the intangible assets is demanded or the intangible assets in demanded; if the intangible is used internally, it can be proven that it is useful; with necessary technical and financial resources and other resources to complete the development of the intangible assets and the intangible assets can be used or sold; the development expense can be reliably measured. If not, the development expense is accounted into the current gain/loss account.
If a research project meets the above-mentioned conditions and passes the technical and economic feasibility study, the project will enter the development stage.
Expenses in the development stage capitalized are listed as development expense on the balance sheet and transferred to intangible assets when the project reaches the useful condition.
18. Assets impairment
The Group uses the cost mode to continue measuring the assets impairment to investment real estate, fixed assets construction in progress, intangible assets and goodwill (except for the inventories, investment real estate measured by the fair value mode, deferred income tax assets and financial assets). The method is determined as follows:
The Group judges whether there is a sign of impairment to assets on the balance sheet day. If such sign exists, the Group estimates the recoverable amount and conducts the impairment test. Impairment test is conducted annually for goodwill generated by mergers
126 2017 Annual Report of China Fangda Group Co., Ltd. and intangible assets that have not reached the useful condition no matter whether the impairment sign exists.
The recoverable amount is determined by the higher of the net of fair value minus disposal expense and the present value of t he predicted future cash flow. The Group estimates the recoverable amount on the individual asset item basis; whether it is hard to estimate the recoverable amount on the individual asset item basis, determine the recoverable amount based on the asset group that the assets belong to. The assets group is determined by whether the main cash flow generated by the group is independent from those generated by other assets or assets groups.
When the recoverable amount of the assets or assets group is lower than its book value, the Group writes down the book value to the recoverable amount, the write-down amount is accounted into the current income account and the assets impairment provision is made.
For goodwill impairment test, the book value of goodwill generated by mergers is amortized through reasonable measures since the purchase day to related asset groups; those cannot be amortized to related assets groups are amortized to related combination of asset groups. The related asset groups or combination of asset groups refer to those that can benefit from the synergistic effect of mergers and must not exceed to the reporting range determined by the Group.
When the impairment test is conducted, if there is sign of impairment to the asset group or combination of asset groups relat ed to goodwill, first perform impair test for asset group or combination of asset groups without goodwill and calculate the recoverable amount and recognize the related impairment loss. Then conduct impairment test on those with goodwill, compare the book value with recoverable amount. If the recoverable amount is lower than the book value, recognize the impairment loss of the goodwill.
Once recognized, the asset impairment loss cannot be written back in subsequent accounting period.
19. Long-term amortizable expenses
The Group’s long-term amortizable expenses are measured at the actual costs and amortized averagely based on the beneficial term. For long-term amortizable expenses that are not beneficial in the subsequent account periods, the residual value is fully accounted into the current gain/loss account.
20. Staff remuneration
(1) Accounting of operational leasing
The Group pays for the medical insurance, job injury insurance and breeding insurance and housing fund according to employees ’ wages and bonus and recognizes them as liabilities, which are recorded into the profit and loss or related assets costs in the current period. If the liabilities cannot be fully paid within 12 months upon the end of the report period in which the employees provide service, and the financial impacts are substantial, the liabilities should be measured at the discounted amount.
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(2) Accounting of post-employment welfare
The post-employment welfare of the Group is a defined plan, which means that the Company does not need to assume any responsibility after making fixed contribution to an independent fund. The defined plan includes basic pension and unemployment insurance. The contribution of the plan is recognized as liabilities and recorded in the profit and loss of this period or related assets costs.
(3) Accounting of dismiss welfare
Where the Group provides dismiss welfare for employees, the staff remuneration liabilities is recognized on the earlier one of the following two date: when the Group cannot cancel the dismiss welfare provided for termination of employment or layoff; when the Group recognizes the costs or expenses of reorganization related to the payment of dismiss welfare.
21. Anticipated liabilities
When responsibilities occurred in connection to contingent issues, and all of the following conditions are satisfied, they are recognized as expectable liability in the balance sheet:
(1) This responsibility is a current responsibility undertaken by the Group;
(2) Execution of this responsibility may cause financial benefit outflow from the Group;
(3) Amount of the liability can be reliably measured.
Expected liabilities are initially measured at the best estimation on the expenses to exercise the current responsibility. The book value of expected liability is revised at balance sheet day, and adjustment will be made to reflect current best estimation.
22. Revenue
Whether the Company needs to comply with disclosure requirements of special industries Yes Property development and decoration industries
The Company must comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.6 – Listed Companies Engaged in Decoration Business. (1) General principles
1. Sales of goods
When all of the following conditions are satisfied, the sales of goods are recognized as sales income according to the contract amount received or receivable from the buyer: (1) Main risks and rewards attached to the ownership of the goods have been transferred to the buyer; (2) No succeeding power of administration or effective control is reserved which are usually attached to ownership; (3)
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Amount received can be reliably measured; (4) Related financial benefit may inflow to the Company; (5) Relative costs, occurred or will occur, can be reliably measured.
2. Providing of labor service
If they are not in the same year, then use the estimation on percentage basis when it is possible.
The completion percentage is the costs occurred on the total cost.
The reliable estimation of the result of providing of labor service must meet the following conditions: A. the revenue can be reliably measured; B. the economic benefit is very likely to flow into the company; C. the completion can be determined reliably; D. costs incurred or will be incurred can be reliably measured.
If the result cannot be reliably estimated, use the service cost amount of the compensation obtained or will be obtained to recognize the revenue of the providing of labor service and recognize the incurred labor service cost as the current expense. If no compensation can be obtained for incurred labor service cost, no revenue can be recognized.
3. Demising of asset using rights
The revenue is recognized when the financial benefit in connection with the demising of asset using right was received and the amount can be reliably measured.
4. Construction contracts
On the balance sheet day, the Group recognizes the contract income and costs using the completion percentage method if the result of the construction contract can be reliably estimated. If not, such contracts are treated differently. If the contract cost can be recovered, the revenue is recognized according to the actual contract costs that can be recovered and the contract cost is recognized as the current expense; if not, the contract cost is recognized as the current expense and no revenue is recognized.
If the estimated total costs exceed the total revenue, the Group recognizes the estimated loss as the current expense.
The competition percentage is determined by the share of the costs incurred in the total cost.
The reliable estimation of the result of a construction contract must meet the following conditions: A. the revenue can be reliably measured; B. the economic benefit is very likely to flow into the company; C. the completion cost can be clearly distinguished and determined reliably; D. the completion and costs that will be incurred for completion of the contract can be reliably recognized.
(2) Specific revenue recognition method
① Construction contracts
Metro screen door projects of the Company and Shenzhen Fangda Automatic System, and curtain wall project of Fangda Jianke are individual construction contracts. They are accounted by the following means:
Construction contracts completed within a fiscal year are recognized for their income and cost upon completion.
Income and expenses of the construction contracts carried over-year are recognized on percentage basis at balance sheet day when all of the following conditions are satisfied: contract income can be reliably measured, relative financial benefit can inflow to the
129 2017 Annual Report of China Fangda Group Co., Ltd.
Company; progress of the project and costs to complete the contract can be reliably recognized; cost occurred to complete the contract can be clearly distinguished and reliably measured, which enables comparing of actual cost with predicted cost.
Contract costs are direct and indirect expenses occurred since the date when the contract is engaged till the completion day. The competition percentage is determined by the share of the costs incurred in the total cost.
Construction contracts completed in current term are recognized for income according to the actual total income of the contract less income recognized in previous terms; meanwhile, the total costs of the contract less costs recognized in previous terms are recognized as current contract costs. If the total contract cost is predicted to be greater than the predicted total income, the predicted loss shall be recognized as current cost instantly.
Parts of the curtain wall project under Fangda Jianke are outsourced, and administrative fees are collected at the agreed rate. For these construction contracts, income will be recognized when ongoing payment for the project is received and corresponding costs are transferred.
② Sales product
Revenue of products for domestic sales is recognized when the Group delivers the products and receives the sales payment or obtains the payment voucher; revenue for products for overseas sales is recognized at departure of the products.
③ Real estate sales
Income from real estate sales is recognized when the contract is signed and performed, project is developed and completed with the record for the completion acceptance, the handover procedure is completed or property is deemed accepted by the customer as p er the property sales contract, the payment is received or it is believed that the payment can be received, and the cost can be measured reliably.
23. Government subsidy
(1) Judgment basis and accounting treatment of assets-related government subsidy
Government subsidy is only recognized when the required conditions are met and the subsidy is received.
When a government subsidy is monetary capital, it is measured at the received or receivable amount. None monetary capital are measured at fair value; if no reliable fair value available, recognized at RMB1.
Government subsidies related to assets are obtained by the Group to purchase, build or formulate in other manners long-term assets; or subsidies related to benefits.
For subsidies that can formulate long-term assets without clear government regulations, the part of the subsidies corresponding to the asset value will be measured as assets-related government subsidies, while the rest of them will be measured as benefit-related government subsidies. Where it is difficult to distinguish them from each them, the whole subsidies will be measured as benefit-related government subsidies.
If the asset-related government subsidy is recognized as deferred gain, should be recorded in gain and loss in the service life.
130 2017 Annual Report of China Fangda Group Co., Ltd.
(2) Judgment basis and accounting treatment of return-related government subsidy
If a government subsidy related to income is used to compensate for related costs or losses that have occurred, it shall be included in the current profit or loss or write-down related costs; if it is used to compensate for the related costs or losses in the subsequent period, it shall be included in the deferred income. During the period in which the related cost, expense or loss is recogniz ed, it is included in the current profit or loss or the relevant cost is written off. Government subsidy measured at the nominal amount is accounted into current income account. The Group adopts a consistent approach to the same or similar government subsidies.
Government subsidy related to routine operations should be recorded in other gains or offset related cost. Government subsidy not related to routine operations should be recorded in non-operating income or expense.
When a confirmed government subsidy needs to be returned, the book value of the asset is adjusted against the book value of the relevant asset at initial recognition. If there is a related deferred income balance, the book balance of the related deferred income is written off and the excess is credited to the current profit or loss; In other cases, it is directly included in the current profit and loss.
The policy-based preferential loan obtained has interest subsidy. If the government allocates the interest-subsidy funds to the lending bank, the loan amount actually received will be used as the entry value of the loan, and the borrowing cost will be calculated based on the loan principal and policy-based preferential interest rate. If the government allocates the interest-bearing funds directly to the Group, discount interest will offset the borrowing costs.
24. Differed income tax assets and differed income tax liabilities
Income tax includes current and deferred income tax. Except for the adjustment goodwill generated by mergers or deferred inco me tax related to transactions or events directly accounted into the owners’ equity, income tax is accounted as income tax expense into the current gain/loss account.
The Group uses the temporary difference between the book value of the assets and liabilities on the balance sheet day and the tax base and the liabilities method to recognize the deferred income tax.
The taxable temporary difference recognizes the related deferred income tax liabilities, unless the taxable temporary difference is created by the following transactions:
(1) Initial recognition of goodwill, or of assets or liabilities generated in transactions with the following features: the t ransaction is not a merger and the transaction does not affect the accounting profit or taxable proceeds;
(2) For taxable temporary difference related to investment in subsidiaries and affiliates, the reversal timing for the temporary difference can be controlled and the difference is unlikely to be reversed in the foreseeable future.
For deductible temporary difference, deductible loss and tax deduction that can be accounted in subsequent years, the Group recognizes the incurred deferred income tax assets to the extent to the future income tax proceeds that is very likely to be received for deducting deductible temporary difference, deductible loss and tax deduction, unless the deductible temporary difference is generated in following transactions:
(1) the transaction is not a merger and the transaction does not affect the accounting profit or taxable proceeds;
(2) for the taxable temporary difference related to investment in subsidiaries and affiliates, the corresponding deferred income tax assets are recognized when the following condition is met: the temporary difference is very likely to be reversed in the foreseeable
131 2017 Annual Report of China Fangda Group Co., Ltd. future and it is very likely to receive the taxable proceeds that can be used to deduct the deductible temporary difference.
On the balance sheet day, the Group measures the deferred income tax assets and liabilities with the tax rate applicable during the predicted period during which the assets are recovered or the liabilities are paid off and reflects the income tax influence of the assets recovery and liabilities repayment way on the balance sheet day.
On the balance sheet day, the Group re-examines the book value of the deferred income tax assets. If it is unlikely to have adequate taxable proceeds to reduce the benefits of the deferred income tax assets, less the deferred income tax assets’ book value. When there is adequate taxable proceeds, the lessened amount will be reversed.
25. Leasing
(1) Accounting of operational leasing
The Group transfers all the risks and rewards attached to the asset at substantially transferred to the lessee, it is recognized as financial leasing, and the others are operational leasing. The Group's lease forms are mainly operating leases.
(1) The Group is the leasor
Rentals from operational leasing are recognized as current gains on straight basis to the periods of leasing. Initial direct expenses are recorded to current income account.
(2) The Group is the leasee
Rentals in operational leasing are recorded to relative capital cost or current income account on straight basis to the periods of leasing. Initial direct expenses are recorded to current income account.
26. Other significant accounting policies and estimates
The Group continuously reviews significant accounting judgment and estimate adopted for the reasonable forecast of future events based on its historical experience and other factors.
Significant accounting judgment and assumptions that may lead to major adjustment of the book value of assets and liabilities in the next accounting year are listed as follows:
(1) Goodwill impairment
The Group judges whether there is impairment to goodwill at least annually. This required valuation of the use value of the asset groups with goodwill. While estimating the use value, the Group needs to estimate the cash flow from the asset group in the future and choose the proper discount rate to calculate the present value of the future cash flow.
(2) Estimate of fair value
The Group uses fair value to measure investment real estate and needs to estimate the fair value of investment real estate at least quarterly. This requires the management to reasonably estimate the fair value of the investment real estate with the help of valuation
132 2017 Annual Report of China Fangda Group Co., Ltd. experts.
(3) Deferred income tax assets
If there is adequate taxable profit to deduct the loss, the deferred income tax assets should be recognized by all the unused tax loss. This requires the management to make a lot of judgment to forecast the time and amount of future taxable profit and determine the amount of the deferred tax assets based on the taxation strategy.
(4) Construction contracts
The Group recognizes income based on the completion of individual construction contract. The management determines the completion percentage based on the actual cost in the total budget and forecasts the contract income. The starting and completion dates of construction contracts fall in different account periods. The Group will review and adjust contract income and cost estimation in budgets (if the actual contract income is less than the estimate or actual contract cost, contract estimation loss provision will be made).
(5) Development cost
For property that has been handed over with income recognized, but whose public facilities have not been constructed or not been completed, the management will estimate the development cost for the part that has not been started according to the budget to reflect the operation result of the property sales.
(6) Accounting of hedging
When the hedge relationship begins, the Group specifies the hedge relationship in writing to specify the follow: risks management target and hedging strategy; nature of the hedged item and quantity; nature and quantity of hedging instruments, nature and identification of hedged risks; evaluation of the hedging effectiveness, including the economic relationship between the hedged item and hedging instrument, hedging ratio, analysis of the hedging ineffectiveness source; the beginning date of the specified hedging relationship.
Cash flow hedging
During the existence of the hedging relationship, the part of the cumulative gain or loss of the hedging instrument within the change to the current value of the cumulative cash flow of the hedged item is included into other misc. incomes. The part that is lower or larger than the cash flow change is included into the gain or loss of the current period.
When the hedging relationship ends and related inventory is recognized, the hedging instrument gain or loss recognized in ―Other misc. income hedging reserve‖ will be transferred to ―Raw materials‖.
27. Major changes in accounting policies and estimates
(1) Changes in accounting policies
√ Applicable □ Inapplicable
Account policy changes and reasons Approval procedure Notes
According to the "Enterprise Accounting Standards No. 16 - Government Subsidies" (2017), 4th meeting of the 8th
133 2017 Annual Report of China Fangda Group Co., Ltd. the accounting treatment of government subsidies was changed from the total amount method Supervisory to the net amount method, and the amortization method of deferred income related to Committee government subsidies related to assets was changed from average allocation in service life to reasonable and systematic method of allocation. The representation of government subsidy items was also revised. The government subsidies that have not been amortized on January 1, 2017 and the government subsidies obtained in 2017 should use the revised guidelines. The new disclosure requirements do not need to provide comparative information, and do not adjust the presentation of other incomes in the comparative report accordingly.
Enterprise Accounting Standard No. 42 - Non-current Assets held for sale, disposal group and discontinued operation, classification, measurement and presentation of non-current assets or disposal groups held for sale after May 28, 2017, and the presentation of discontinued operations are regulated, and will be handled in accordance with the future applicable laws; the presentation of financial statements will be revised, and profit and loss from continuing 7th meeting of the 8th operations and profit and loss from termination of operations shall be listed in the consolidated Supervisory income statement and profit statement, respectively. The presentation of the comparative Committee statements has been adjusted accordingly: For the termination of operations presented in the current period, the information originally presented as a profit or loss from continuing operations was re-stated as a discontinued operating profit or loss in the comparative statements.
According to the ―Notice on Amendments to the Format for Issuing Financial Statements for General Enterprises‖ (Accounting [2017] No. 30), the newly ―asset disposal proceeds‖ item was added to the income statement to reflect the sale of non-current assets classified as held for sale by enterprises (excluding financial instruments, long-term equity investment and investment real estate) or disposal group, disposal profit or loss recognized at the time of disposing of the disposal group, disposal of fixed assets, construction in progress, productive biological assets and intangible assets not treated for sale gains or losses, gains or losses arising 7th meeting of the 8th from the disposal of non-current assets in debt restructuring and gains or losses arising from Supervisory the exchange of non-monetary assets. Correspondingly, the item ―including: non-current assets Committee disposal gains‖ and ―including: non-current assets disposal losses‖ were deleted under ―non-operating income‖ and ―non-operating expenses‖. "Non-operating income" and "non-operating expenses" reflect revenues other than operating profits incurred by the Company, mainly including gains and losses from debt restructuring, government subsidies that are unrelated to the Company's daily activities, public welfare donation expenses, extraordinary losses, and profit from disc operations. Loss, donation gains, loss of non-current assets, damages, etc. The presentation of the comparative report was adjusted accordingly. The above changes in accounting policies have little impact on the Group.
(2) Changes in major accounting estimates
√ Applicable □ Inapplicable
Account policy changes and Approval procedure Effective time Notes
134 2017 Annual Report of China Fangda Group Co., Ltd.
reasons
To reflect the Company's financial position and operating results more cautiously, and to meet requirements of business development and enterprise accounting standards, objective and fairly, the Company will make the accounting estimate 3rd meeting of the 8th change of bad debt provision 01.08.17 Supervisory Committee standard for receivables. The change will become valid on August 1, 2017. For details, please read the Notice on the Accounting Estimate Change of Bad Debt Provision Standard for Receivables released on the same date.
Changes in the accounting estimates affected by this accounting item and the impact amount are as follows: Amount affected in items of related financial reports Affected item as of December 31, 2017/2017 Account receivable 68,924,798.26 Other receivables -5,380,145.47 Deferred income tax assets -10,450,024.69 Surplus reserves -3,476.23 Retained profit 53,098,104.33 Asset impairment loss -63,544,652.79 Income tax expenses 10,450,024.69 Net profit attributable to the shareholders of the parent company 53,094,628.10
VI. Taxation
1. Major taxes and tax rates
Tax Tax basis Tax rate
VAT Taxable income 3%、5%、6%、11%、13%、17%
City maintenance and construction tax Taxable turnover 1%、5%、7%
Enterprise income tax Taxable turnover See the following table
Education surtax Taxable turnover 3%
Local education surtax Taxable turnover 2%
Tax rates applicable for different tax payers
135 2017 Annual Report of China Fangda Group Co., Ltd.
Tax payer Income tax rate
The Company 25%
Shenzhen Fangda Jianke Co., Ltd. (hereinafter Fangda Jianke) 15%
Shenzhen Fangda Automatic System Co., Ltd. (hereinafter 15% Fangda Automatic)
Fangda New Material (Jiangxi) Co., Ltd. (hereinafter Fangda 15% New Material)
Jiangxi Fangda New Type Aluminum Co., Ltd. (hereinafter 25% Fangda Aluminum)
Dongguan Fangda New Material Co., Ltd. (hereinafter 15% Dongguan New Material)
Shenzhen Kexunda Software Co., Ltd. (hereinafter Kexunda) 25%
Chengdu Fangda Construction Technology Co., Ltd. (hereinafter 15% Chengdu Fangda)
Fangda Decoration Engineering (Shenyang) Co., Ltd. 25% (hereinafter Shenyang Decoration)
Shenzhen Fangda Property Development Co., Ltd. (hereinafter 25% Fangda Property Development)
Shenzhen Fangda New Energy Co., Ltd. (hereinafter Fangda 25% New Energy)
Gangdong Fangda SOZN Lighting Co., Ltd. (hereinafter Fangda 25% SOZN)
Shenzhen Fangda Property Development Co., Ltd. (hereinafter 25% Fangda Property Development)
Jiangxi Fangda Property Development Co., Ltd. (hereinafter 25% Jiangxi Property Development)
Pingxiang Fangda Luxin New Energy Co., Ltd. (hereinafter 25% Luxin New Energy)
Pingxiang Xiangdong Fangda New Energy Co., Ltd. (hereinafter 25% Xiangdong New Energy)
Nanchang Xinjian Fangda New Energy Co., Ltd. (hereinafter 25% Xinjian New Energy)
Dongguan Fangda New Energy Co., Ltd. (hereinafter Dongguan 25% New Energy)
Shenzhen QIanhai Kechuangyuan Software Co., Lt.d (hereinafter 15% Kechuangyuan Software)
Fangda Automatic (Hong Kong) Co., Ltd. (hereinafter 16.50% Automation Hong Kong)
136 2017 Annual Report of China Fangda Group Co., Ltd.
Shihui International Holding Co., Ltd. (hereinafter Shihui 16.50% International)
Shenzhen Hongjun Investment Co., Ltd. 25%
Fangda Australia Pty Ltd (hereinafter Jianke Australia) 30%
2. Tax preference
(1) According to the Certification of High-tech Enterprise issued by Shenzhen Commission of Technological Innovation, Shenzhen Commission of Finance, Shenzhen National Tax Bureau, and Shenzhen Local Tax Bureau on 19.06.15, Fangda Jianke was entitled to enjoy a tax preference of enterprise income tax of 15% for three years (2015-2017) since the qualifications were awarded.
(2) According to the Certification of High-tech Enterprise issued by Shenzhen Commission of Technological Innovation, Shenzhen Commission of Finance, Shenzhen National Tax Bureau, and Shenzhen Local Tax Bureau on 19.06.15, Fangda Decoration was entitled to enjoy a tax preference of enterprise income tax of 15% for three years (2015-2017) since the qualifications were awarded.
(3) According to the Certification of High-tech Enterprise issued by Jiangxi Ministry of Science and Technology, Jiangxi Ministry of Finance, Jiangxi National Tax Bureau, and Jiangxi Local Tax Bureau on 25.09.15, Fangda New Material was entitled to enjoy a t ax preference of enterprise income tax of 15% for three years (2015-2017) since the qualifications were awarded.
(4) On December 25, 2013, Kexunda was certified by Shenzhen Nanshan National Tax Bureau as a software and integrated circuit designer according to the Shenzhen National Tax Reduction Registration [2013] No.739 and will enjoy exemption from the enterprise income tax for two years and 50% reduction of the same tax for another three years from the year that the company starts making a net profit. Kexunda started making profits in 2013 and therefore starts to enjoy the exemption. Kexunda entered the semi-exemption period in 2015.
(5) On November 7, 2014, Chengdu Fangda was certified by Sichuan Xinjin National Tax Bureau as an encouraged industry company in the west China (Xin Jin National Tax Doc. [zzy024]) and started to enjoy a tax rate of 15%.
(6) On 02.11.15, Dongguan New Energy was certified by Dongguan National Tax Bureau Songshanhu branch as the national supported public infrastructure project according to the Song Shan Hu Tax Doc [2015] 3305. The company is exempted from enterprise income tax for three years and half exempted for another three years. In 2015, the company entered the exemption period.
(7) On 02.03.16, according to the document issued by Luxi National Tax Bureau, the PV power generation project undertaken by Pingxiang Fangda Luxin New Energy Co., Ltd, became the infrastructure project supported by the central government. The company enjoys a three-year enterprise income tax relief and 50% reduction for another three years. In 2016, the company entered the exemption period.
(8) On 02.06.16, according to the document issued by Nanchang Xinjian District National Tax Bureau, the PV power generation project undertaken by subsidiary Xinjian New Energy Company, became the infrastructure project supported by the central government. The company enjoys a three-year enterprise income tax relief and 50% reduction for another three years. In 2016, the company entered the exemption period.
(9) On 10.03.17, according to the registration to Shenzhen National Tax Bureau, subsidiary Kechuangyuan Software became a newly established software and integrated circuit designing company and can enjoy the two-year full exemption and three-year half-exemption of the enterprise income tax from the first year that the company records profit. Kexunda started making profits in 2016 and therefore starts to enjoy the exemption.
137 2017 Annual Report of China Fangda Group Co., Ltd.
(10) According to the Certification of High-tech Enterprise issued by Guangdong Ministry of Science and Technology, Guangdong Ministry of Finance, Guangdong National Tax Bureau, and Guangdong Local Tax Bureau on 25.09.15, Dongguan New Material was entitled to enjoy a tax preference of enterprise income tax of 15% for three years (2016-2018) since the qualifications were awarded.
VII. Notes to the consolidated financial statements
1. Monetary capital
In RMB
Items Closing balance Opening balance
Inventory cash: 42,636.09 11,625.54
Bank deposits 923,163,199.39 932,709,227.42
Other monetary capital 257,192,644.03 162,508,984.94
Total 1,180,398,479.51 1,095,229,837.90
Including: total amount deposited in 24,527,445.09 27,553,060.26 overseas
Other note (1) The closing balance of the book value of the other monetary capital is RMB257,192,644.03 mainly the futures, bank acceptance bill and guarantee deposit and investment. (2) The deposit and frozen deposit shall not be treated as cash and cash equivalent in the preparation of cash flow statements.
2. Financial assets measured at fair value with variations accounted into current income account
In RMB
Items Closing balance Opening balance
None
3. Derivative financial assets
√ Applicable □ Inapplicable In RMB
Items Closing balance Opening balance
Futures contracts 2,232,200.00
Total 2,232,200.00
Others:
138 2017 Annual Report of China Fangda Group Co., Ltd.
4. Notes receivable
(1) Classification of notes receivable
In RMB
Items Closing balance Opening balance
Bank acceptance 12,376,780.96 11,819,567.96
Commercial acceptance 27,259,656.24 7,078,538.15
Total 39,636,437.20 18,898,106.11
(2) The Group has no endorsed or discounted immature receivable notes at the end of the period.
In RMB
Items De-recognized amount Not de-recognized amount
Bank acceptance 85,674,785.04
Commercial acceptance 8,966,861.59
Total 94,641,646.63
Other note There is no objective evidence that the Group’s bills receivable are impaired and no provision for impairment of bills receivable has been accrued.
Bank acceptance bills used for endorsement or discounting are accepted by banks with higher credit ratings, the risk of credit risk and deferred payment is small, and the interest rate risk related to the bills has been transferred to banks, and the main risks and rewards on the ownership of the bills can be judged Transfer, so the termination of confirmation.
5. Account receivable
(1) Account receivable disclosed by categories
In RMB
Closing balance Opening balance
Remaining book Remaining book Bad debt provision Bad debt provision Type value Book value Book value Proportio Provision value Proportio Provision Amount Amount Amount Amount n rate n rate
Recognition and 2,573,1 2,123,26 202,895, 1,920,372 230,259,2 2,342,929,6 providing of bad debt 99.38% 9.56% 88,876. 98.35% 8.95% 8,342.78 916.62 ,426.16 48.17 28.14 provisions on groups 31
Account receivable 13,339,6 0.62% 13,339,6 100.00% 43,290, 1.65% 43,290,08 100.00% 0.00
139 2017 Annual Report of China Fangda Group Co., Ltd. with minor individual 59.73 59.73 086.64 6.64 amount and bad debt provision provided individually
2,616,4 2,136,60 216,235, 1,920,372 273,549,3 2,342,929,6 Total 100.00% 10.12% 78,962. 100.00% 10.45% 8,002.51 576.35 ,426.16 34.81 28.14 95
Account receivable with major individual amount and bad debt provision provided individually at the end of the period: □ Applicable √ Inapplicable In the group, the account receivable of which bad debt provision is made through the account aging method:
√ Applicable □ Inapplicable In RMB
Closing balance Age Account receivable Bad debt provision Provision rate
Sub-item of within 1 year
Less than 1 year 984,591,278.62 11,633,960.33 1.18%
Subtotal for less than 1 year 984,591,278.62 11,633,960.33 1.18%
1-2 years 600,749,666.72 30,751,974.81 5.12%
2-3 years 308,450,295.06 62,128,109.75 20.14%
3-4 years 98,684,305.24 29,769,355.47 30.17%
4-5 years 46,128,901.11 23,088,620.23 50.05%
Over 5 years 45,523,896.03 45,523,896.03 100.00%
Total 2,084,128,342.78 202,895,916.62 9.74%
Group recognition basis: The Company must comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.6 – Listed Companies Engaged in Decoration Business. Account receivable adopting the balance percentage method in the group □ Applicable √ Inapplicable Account receivable adopting other methods in the group:
At the end of the period, the balance of receivables from the real estate properties sold by bank mortgage payment was RMB39,140,000.00. Because the risk of bad debts was extremely small, no provision for bad debts was made.
(2) Bad debt provision made, returned or recovered in the period
A bad debt provision of RMB117,090.96 was made in the period. RMB19,500,377.90 was recovered or reversed.
(3) Written-off account receivable during the period
In RMB
140 2017 Annual Report of China Fangda Group Co., Ltd.
Items Amount
Account receivable written off 11,482,088.73
(4) Balance of top 5 accounts receivable at the end of the period
The total balance of top-five accounts receivable at the end of the period is RMB274,458,979.85, accounting for 12.85% of the total remaining balance of all accounts receivable. The bad debt provision made at the end of the period is RMB15,743,277.44.
(5) Receivables derecognized due to transfer of financial assets
141 2017 Annual Report of China Fangda Group Co., Ltd.
Gain or loss related to the Items Way of transfer De-recognized amount de-recognition Customer 1 Factoring 2,512,252.43 133,510.29 Customer 2 Factoring 10,141,866.67 609,521.31 Customer 3 Factoring 43,469,999.20 2,521,337.02 Customer 4 Factoring 7,925,315.49 374,015.45 Customer 5 Factoring 43,395,000.00 2,466,366.53 Total 107,444,433.79 6,104,750.60
6. Prepayment
(1) Account age of prepayments
In RMB
Closing balance Opening balance Age Amount Proportion Amount Proportion
Less than 1 year 45,346,974.64 82.93% 28,442,485.03 90.22%
1-2 years 7,891,890.96 14.43% 1,224,651.51 3.88%
2-3 years 679,375.39 1.24% 540,874.20 1.72%
Over 3 years 762,028.85 1.40% 1,318,315.51 4.18%
Total 54,680,269.84 -- 31,526,326.25 --
Explanation of non-settlement of significant prepayments with an accounting age of more than 1 year:
Items Closing amount Reason Shenzhen Hongtao Decoration Engineering Co., 5,135,316.31 Not mature Ltd.
(2) Balance of top 5 prepayments at the end of the period
The total balance of top-five prepayments at the end of the period is RMB36,403,435.52, accounting for 66.58% of the total remaining balance of all accounts receivable. The bad debt provision made at the end of the period is RMB0.
Others:
142 2017 Annual Report of China Fangda Group Co., Ltd.
7. Receivable interest
(1) Receivable interest
In RMB
Items Closing balance Opening balance
Bank financial products 3,829,315.07 302,950.68
Total 3,829,315.07 302,950.68
8. Other receivables
(1) Other receivables disclosed by categories
In RMB
Closing balance Opening balance
Remaining book Remaining book Bad debt provision Bad debt provision Type value Book value Book value Proportio Provision value Proportio Provision Amount Amount Amount Amount n rate n rate
Other receivables with major individual 69,380,5 69,380,5 amount and bad debt 48.04% 100.00% 48.52 48.52 provision provided individually
(2) Recognition and 74,563,7 17,681,7 56,881,95 67,471, 10,092,25 57,378,994. providing of bad debt 51.62% 23.71% 98.79% 14.96% 29.50 70.19 9.31 244.99 0.27 72 provisions on groups
Other receivables with minor individual 495,772. 302,374. 193,398.3 825,887 825,887.0 amount and bad debt 0.34% 60.99% 1.21% 100.00% 0.00 63 32 1 .03 3 provision provided individually
144,440, 87,364,6 57,075,35 68,297, 10,918,13 57,378,994. Total 100.00% 60.49% 100.00% 15.99% 050.65 93.03 7.62 132.02 7.30 72
Other receivables with major individual amount and bad debt provision provided individually at the end of the period: √ Applicable □ Inapplicable In RMB
Other receivables (by Closing balance entity) Other receivables Bad debt provision Provision rate Reason
Fangda SOZN 69,380,548.52 69,380,548.52 100.00% For the details of the
143 2017 Annual Report of China Fangda Group Co., Ltd.
Company's debt owed by Fangda SOZN, please refer to Notes XV, 3, Note.
Total 69,380,548.52 69,380,548.52 -- --
In the group, the other receivables of which bad debt provision are made through the account aging method: √ Applicable □ Inapplicable In RMB
Closing balance Age Other receivables Bad debt provision Provision rate
Sub-item of within 1 year
Less than 1 year 39,202,297.23 1,176,068.91 3.00%
Subtotal for less than 1 year 39,202,297.23 1,176,068.91 3.00%
1-2 years 9,455,897.97 945,589.79 10.00%
2-3 years 13,864,005.71 4,159,201.71 30.00%
3-4 years 900,203.60 450,101.81 50.00%
4-5 years 952,585.14 762,068.12 80.00%
Over 5 years 10,188,739.85 10,188,739.85 100.00%
Total 74,563,729.50 17,681,770.19 23.71%
Group recognition basis: Other receivables adopting the balance percentage method in the group: □ Applicable √ Inapplicable
Other receivables adopting other methods in the group □ Applicable √ Inapplicable
(2) Bad debt provision made, returned or recovered in the period
A bad debt provision of RMB78,379,647.79 was made in the period. RMB was recovered or reversed.
(3) Other receivable written off in the current period
In RMB
Items Amount
Other receivable written off 1,205,114.58
(4) Other receivables are disclosed by nature
In RMB
144 2017 Annual Report of China Fangda Group Co., Ltd.
By nature Closing balance of book value Opening balance of book value
Deposit 48,666,321.95 35,468,468.79
Construction borrowing and advanced 8,721,385.12 16,300,394.58 payment
Staff borrowing and petty cash 5,532,782.96 2,954,984.22
Receivable refund of VAT 445,607.69 1,949,939.35
Fangda SOZN 69,380,548.52
Others 11,693,404.41 11,623,345.08
Total 144,440,050.65 68,297,132.02
(5) Balance of top 5 other receivables at the end of the period
In RMB
Balance of bad debt Entity By nature Closing balance Age Percentage (%) provision at the end of the period
Debt from original Fangda SOZN 69,380,548.52 2-3 years 48.03% 69,380,548.52 subsidiary
Bangshen Electronics Deposit 20,000,000.00 Less than 1 year 13.85% 600,000.00 (Shenzhen) Co., Ltd.
Lanzhou Railway Deposit 6,931,316.60 2-3 years 4.80% 2,079,394.98 Transport Co., Ltd.
Advanced Wang Weihong 4,944,388.15 Above four years 3.42% 4,873,952.52 construction fee
Advanced Xin Song 2,620,327.61 Over 5 years 1.81% 2,620,327.61 construction fee
Total -- 103,876,580.88 -- 71.91% 79,554,223.63
9. Inventories
Whether the Company needs to comply with disclosure requirements of the real estate industry. Yes
(1) Classification of inventories
The Company must comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.3 – Listed Companies Engaged in Property Development. Classified by nature: In RMB
145 2017 Annual Report of China Fangda Group Co., Ltd.
Closing balance Opening balance
Items Remaining book Depreciation Remaining book Depreciation Book value Book value value provision value provision
Development cost 209,395,947.66 209,395,947.66 1,116,777,166.82 1,116,777,166.82
Development 337,505,615.12 337,505,615.12 579,792,563.00 579,792,563.00 products
Raw materials 60,999,279.59 55,182.86 60,944,096.73 83,474,670.86 1,776,760.32 81,697,910.54
Product in 31,718,230.82 31,718,230.82 16,439,362.04 16,439,362.04 process
Finished goods in 11,569,608.79 11,569,608.79 8,845,931.76 8,845,931.76 stock
Assets unsettled for finished 166,288,661.69 166,288,661.69 186,288,217.00 186,288,217.00 construction contracts
Low price 41,725.37 41,725.37 73,018.52 73,018.52 consumable
OEM materials 2,147,074.49 2,147,074.49 2,206,059.11 1,499,169.52 706,889.59
Goods delivered 35,068,431.20 35,068,431.20 0.00
Total 819,666,143.53 55,182.86 819,610,960.67 2,028,965,420.31 38,344,361.04 1,990,621,059.27
Development cost and capitalization rate of its interest are disclosed as follows: In RMB
Transferr Increase Including: ed to Estimated Other (develop Accumula capitalize Estimated developm Starting total Opening decrease ment Closing tive d interest Capital Project finish ent time investmen balance in this cost) in balance capitalize for the source time product in t period this d interest current this period period period
Fangda 2,500,000 916,817,9 2,225,29 1,010,28 95,691,7 111,000, 20,766,4 01.05.14 31.08.18 0.00 Town ,000.00 36.27 2.23 4,433.81 89.77 636.14 62.22
Jiangxi Phoenix 600,000,0 199,959,2 9,436,717 209,395,9 31.12.19 Land 00.00 30.55 .11 47.66 project
3,100,000 1,116,777 2,225,29 1,010,28 105,128, 209,395, 111,000, 20,766,46 Total ------,000.00 ,166.82 2.23 4,433.81 506.88 947.66 636.14 2.22
Disclose the main project information of "Development Products" according to the following format: In RMB
146 2017 Annual Report of China Fangda Group Co., Ltd.
Including: Accumulative Completion Opening capitalized Project Increase Decrease Closing balance capitalized time balance interest for the interest current period
Phase I of 579,792,563.0 244,512,240. Fangda 29.12.16 2,225,292.23 337,505,615.12 69,129,130.15 0.00 0 11 Town
579,792,563.0 244,512,240. Total -- 2,225,292.23 337,505,615.12 69,129,130.15 0.00 0 11
(2) Inventory depreciation provision
The inventory depreciation provision is disclosed as follows: Classified by nature: In RMB
Increase in this period Decrease in this period Opening Closing Items Recover or Notes balance Provision Others Others balance write-off
1,776,760. Raw materials 1,721,577.46 55,182.86 32
35,068,431 Goods delivered 35,068,431.20 .20
1,499,169. OEM materials 1,499,169.52 52
38,344,361 Total 38,289,178.18 55,182.86 -- .04
(3) Capitalization rate of interest in the closing inventory balance
The balance at the end of the period includes capitalization of borrowing expense of Fangda Town project of RMB12,130,244.45. The capitalization amount of cumulative borrowing expenses is RMB111,000,636.14, of which RMB20,766,462.22 occurred in this year.
(4) Assets unsettled for finished construction contracts at the end of the period
In RMB
Items Amount
Accumulative occurred costs 6,582,453,411.26
Accumulative recognized gross margin 968,676,416.49
147 2017 Annual Report of China Fangda Group Co., Ltd.
Settled amount 7,384,841,166.06
Assets unsettled for finished construction contracts 166,288,661.69
Others: Whether Company needs to comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.4 – Listed Companies Engaged in Seed and Plantation Business No
10. Other current assets
In RMB
Items Closing balance Opening balance
Input tax to be deducted 31,554,835.73 14,896,029.18
Bank financial products 400,000,000.00 41,000,000.00
Prepaid income tax 5,861,896.52 433,807.84
Prepaid VAT 2,233,706.21 4,726,521.18
Prepaid business tax 1,150,216.13
Other prepaid taxes 11,502.34
Tax to be input 228,552.26
Total 439,890,493.06 62,206,574.33
Others:
11. Sellable financial assets
(1) Sellable financial assets
In RMB
Closing balance Opening balance
Items Remaining Impairment Remaining Impairment Book value Book value book value provision book value provision
Sellable equity 28,562,575.67 28,562,575.67 28,562,575.67 28,562,575.67 instruments:
Measured at cost 28,562,575.67 28,562,575.67 28,562,575.67 28,562,575.67
Total 28,562,575.67 28,562,575.67 28,562,575.67 28,562,575.67
(2) Sellable financial assets messaged at costs at the end of the period
In RMB
Invested Remaining book value Impairment provision Shareholdi Cash
148 2017 Annual Report of China Fangda Group Co., Ltd.
entity Beginning Beginning ng in the dividend Closing Closing of the Increase Decrease of the Increase Decrease invested in the balance balance period period entity period
Shenyang 28,562,575 28,562,575 64.58% Fangda .67 .67
28,562,575 28,562,575 Total -- .67 .67
12. Long-term share equity investment
In RMB
Change (+,-) Balance Investme of Other nt gain Cash impairme Decrease miscellan Invested Opening Increased and loss Other dividend Impairme Closing nt d eous entity balance investmen recognize equity or profit nt Others balance provision investmen income t d using change announce provision at the end t adjustmen the equity d of the t method period
2. Associate
Shenzhen Ganshang Joint 8,600,939 -128,579. 8,472,360
Investme .78 07 .71 nt Co., Ltd.
Shenzhen Huihai Yirong 3,504,090 5,000,000 -2,034,39 6,469,694
Internet .90 .00 5.99 .91 Service Co., Ltd.
Jiangxi Business Innovativ e 19,200,00 19,200,00
Property 0.00 0.00 Joint Stock Co., Ltd.
149 2017 Annual Report of China Fangda Group Co., Ltd.
12,105,03 24,200,00 -2,162,97 34,142,05 Subtotal 0.68 0.00 5.06 5.62
12,105,03 24,200,00 -2,162,97 34,142,05 Total 0.68 0.00 5.06 5.62
Other note (1) The new contributed capital of RMB5 million paid to Shenzhen Huihai Yirong Internet Financial Service Co., Ltd. in this y ear. The shareholding remains 10% with one director appointed in the board of directors. (2) In this period, the subsidiary Hongjun Investment added a new investment of RMB 19.22 million to Jiangxi Business Innovative Property Joint Stock Co., Ltd., holding 10% of the shares and appointing a director on the board of directors.
13. Investment real estates
(1) Investment real estate measured at costs
√ Applicable □ Inapplicable
Items Houses & buildings Land using right Construction in process Total
I. Book value
1. Opening balance 38,146,315.13 38,146,315.13
2. Increase in this 740,240,011.01 740,240,011.01 period
(1) External purchase
(2) Transfer-in from inventory\fixed 740,240,011.01 740,240,011.01 assets\construction in progress
3. Decrease in this 10,415,743.51 10,415,743.51 period
(1) Purchase
Other transfer-out 10,415,743.51 10,415,743.51
4. Closing balance 767,970,582.63 767,970,582.63
II. Accumulative depreciation and amortization
1. Opening balance 7,441,246.45 7,441,246.45
2. Increase in this 2,221,110.79 2,221,110.79 period
(1) Provision or 976,508.42 976,508.42
150 2017 Annual Report of China Fangda Group Co., Ltd. amortization
(2) Fixed assets 1,244,602.37 1,244,602.37
3. Decrease in this 3,207,319.47 3,207,319.47 period
(1) Purchase
Other transfer-out 3,207,319.47 3,207,319.47
4. Closing balance 6,455,037.77 6,455,037.77
III. Impairment provision
1. Opening balance
2. Increase in this period
(1) Provision
3. Decrease in this period
(1) Purchase
Other transfer-out
4. Closing balance
IV. Book value
1. Closing book 761,515,544.86 761,515,544.86 value
2. Opening book 30,705,068.68 30,705,068.68 value
(2) Investment real estate measured at fair value
√ Applicable □ Inapplicable In RMB
Items Houses & buildings Land using right Construction in process Total
I. Opening balance 303,090,562.62 303,090,562.62
II. Change in this period
Add: external purchase
Transfer-in from inventory\fixed 312,819,561.72 312,819,561.72 assets\construction in progress
151 2017 Annual Report of China Fangda Group Co., Ltd.
Increase due to enterprise merger
Less: disposal 694,455.99 694,455.99
Other 12,644,892.00 12,644,892.00 transfer-out
Change in fair value 889,708,083.34 889,708,083.34
III. Closing balance 1,492,278,859.69 1,492,278,859.69
The Company must comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.3 – Listed Companies Engaged in Property Development. Disclosure of investment real estate measured at fair value by projects In RMB
Rental Building income in Opening Closing fair Change in fair Reason for the Project Location area the report fair value value value change and report period
The fair value of the investment real estate is determined based on Shenzhen 21,275,619. 296,740,66 Wenji Land and Fangda Town Shenzhen 18739.12 307,321,568.00 3.57% 10 0.63 Property Evaluation Doc. 深文集评字 (2018)A 第 SZ0003 号 Real Estate Valuation Report.
The fair value of the investment real estate is determined based on Shenzhen Commercial podium of 1,183,330,834.6 Wenji Land and Shenzhen 22565.42 0.00 0.00 Fangda Town 9 Property Evaluation Doc. 深文集评字 (2018)A 第 SZ0003 号 Real Estate Valuation Report.
21,275,619. 296,740,66 1,490,652,402.6 Total —— 41304.54 402.34% —— 10 0.63 9
Whether there is new investment real estate measured at fair value in the report period √ Yes □ No Newly-added investment real estate measured by fair value in the current period:
In RMB
152 2017 Annual Report of China Fangda Group Co., Ltd.
Original Original book Recorded fair Difference handling method Project accounting Closing fair value value value and basis method
The difference is included in the gains and losses from changes in fair value. The newly added investment property is self-constructed Commercial podium of Measured at property that is expected to 318,620,802.43 318,620,802.43 1,183,330,834.69 Fangda Town cost be used for lease. The initial measurement is based on the actual cost. Changes in subsequent valuations are accounted for as changes in fair value.
Total —— 318,620,802.43 318,620,802.43 1,183,330,834.69 ——
(3) Investment real estate without ownership certificate
In RMB
Items Book value Reason
Commercial podium of Fangda Town 1,183,330,834.69 Under initial registration
Not completed (since it will be used for rental after completion, it will be included Building 1# of Fangda Town 736,254,110.98 in the investment real estate according to the cost)
14. Fixed assets
(1) Fixed assets
In RMB
Houses & Mechanical Transport Electronics and Items PV power plants Total buildings equipment equipment other devices
I. Original book value:
1. Opening 347,001,165.39 131,259,721.22 140,152,751.11 22,912,617.28 53,220,973.99 694,547,228.99 balance
2. Increase in 23,060,635.51 583,213.01 1,218,598.28 1,598,466.21 26,460,913.01 this period
(1) Purchase 583,213.01 1,218,598.28 1,598,466.21 3,400,277.50
153 2017 Annual Report of China Fangda Group Co., Ltd.
(2) Transfer-in of construction in progress
(3) Increase due to enterprise merger
Investment real 23,060,635.51 23,060,635.51 estate transfer-in
3. Decrease in 17,524,389.77 1,621,084.41 21,694,888.88 3,817,141.73 7,102,409.61 51,759,914.40 this period
(1) Disposal 2,346,572.05 16,319,765.73 2,108,471.45 960,405.19 21,735,214.42 or retirement
(2) Investment real estate 15,177,817.72 15,177,817.72 transfer-out
(3) Decrease due to enterprise 5,375,123.15 1,708,670.28 6,142,004.42 13,225,797.85 merger
(4) Other 1,621,084.41 1,621,084.41 decrease
4. Closing 352,537,411.13 129,638,636.81 119,041,075.24 20,314,073.83 47,717,030.59 669,248,227.60 balance
II. Accumulative depreciation
1. Opening 46,654,415.08 3,656,903.15 98,355,644.79 14,205,751.83 23,500,858.26 186,373,573.11 balance
2. Increase in 12,323,196.05 6,239,133.45 6,106,821.18 2,079,812.77 3,738,903.18 30,487,866.63 this period
(1) Provision 9,115,876.58 6,239,133.45 6,106,821.18 2,079,812.77 3,736,265.44 27,277,909.42
(2) Investment real estate 3,207,319.47 3,207,319.47 transfer-in
(3) Other 2,637.74 2,637.74 increases
3. Decrease in 2,690,105.92 8,825,417.48 2,392,260.39 3,178,097.03 17,085,880.82 this period
(1) Disposal 105,575.42 5,921,405.17 1,412,740.23 819,068.29 8,258,789.11 or retirement
154 2017 Annual Report of China Fangda Group Co., Ltd.
(2) Investment real estate 2,584,530.50 2,584,530.50 transfer-out
(3) Decrease due to enterprise 2,904,012.31 979,520.16 2,359,028.74 6,242,561.21 merger
4. Closing 56,287,505.21 9,896,036.60 95,637,048.49 13,893,304.21 24,061,664.41 199,775,558.92 balance
III. Impairment provision
1. Opening 0.00 0.00 1,354,389.50 0.00 1,354,389.50 balance
2. Increase in this period
(1) Provision
3. Decrease in this period
(1) Disposal or retirement
4. Closing 1,354,389.50 1,354,389.50 balance
IV. Book value
1. Closing 296,249,905.92 119,742,600.21 22,049,637.25 6,420,769.62 23,655,366.18 468,118,279.18 book value
2. Opening 300,346,750.31 127,602,818.07 40,442,716.82 8,706,865.45 29,720,115.73 506,819,266.38 book value
(2) Fixed assets without ownership certificate
In RMB
Items Book value Reason
Houses in Urumuqi for offsetting debt 538,924.59 Historical reasons
Yuehai Office Building C 502 142,776.45 Historical reasons
Other note
(1) On 31.12.17, the cumulative depreciation of the original value of RMB60,287,329.40 in the Group’s houses and buildings is RMB7,448,056.30. The net value of RMB52,839,273.10 has been pledged to Shenzhen OCT branch of China Construction Bank. The relevant borrowing has been repaid, but the pledge has not been released.
155 2017 Annual Report of China Fangda Group Co., Ltd.
(2) The reduction of fixed assets in the current period of business combination is no longer controlled by t he other party, Fangda SOZN. The corresponding fixed assets are no longer included in the consolidated statement.
15. Construction in process
(1) Construction in progress
In RMB
Closing balance Opening balance
Items Remaining book Impairment Remaining book Impairment Book value Book value value provision value provision
PV power 1,703,080.57 1,703,080.57 1,703,080.57 1,703,080.57 generation project
Chengda Fangda’s Xinjin energy-saving 965,118.05 965,118.05 834,644.79 834,644.79 green curtain wall project
Total 2,668,198.62 2,668,198.62 2,537,725.36 2,537,725.36
(2) Changes in major construction in process in this period
In RMB
Proporti Includin Amount on of g: transfer-i accumul Accumul Other capitaliz Increase n to ative ative Interest Opening decrease Closing Project ed Capital Project Budget in this fixed engineeri capitaliz capitaliz balance in this balance progress interest source period assets in ng ed ation rate period for the this investme interest current period nt in the period budget
Chengda Fangda’s Xinjin Prelimin energy-s 35,000,0 834,644. 130,473. 965,118. ary 2.76% Others aving 00.00 79 26 05 preparati green on curtain wall
156 2017 Annual Report of China Fangda Group Co., Ltd. project
Xiabu 20MWp PV 168,000, 1,703,08 1,703,08 Ground 1.01% Others power 000.00 0.57 0.57 leveling plant project
203,000, 2,537,72 130,473. 2,668,19 Total ------000.00 5.36 26 8.62
16. Intangible assets
(1) Intangible assets
In RMB
Unpatented Items Land using right Patent Computer software Total technologies
I. Book value
1. Opening 56,096,540.74 12,651,019.88 5,628,187.03 7,904,764.64 82,280,512.29 balance
2. Increase in 401,000.00 2,076,625.81 91,701.34 1,476,537.32 4,045,864.47 this period
(1) Purchase 401,000.00 2,076,625.81 91,701.34 1,476,537.32 4,045,864.47
(2) Internal
R&D
(3) Increase due to enterprise merger
3. Decrease in this 4,269,374.39 1,452,543.16 5,721,917.55 period
(1) Purchase 1,452,543.16 1,452,543.16
(2) Other 4,269,374.39 decrease
4. Closing 56,497,540.74 10,458,271.30 5,719,888.37 7,928,758.80 80,604,459.21 balance
II. Accumulative amortization
1. Opening 7,679,687.72 5,317,275.59 3,813,648.81 5,241,247.48 22,051,859.60
157 2017 Annual Report of China Fangda Group Co., Ltd. balance
2. Increase in 1,136,666.55 629,323.94 852,989.77 758,139.54 3,377,119.80 this period
(1) Provision 1,136,666.55 629,323.94 852,989.77 758,139.54 3,377,119.80
3. Decrease in 2,241,421.56 1,452,543.16 3,693,964.72 this period
(1) Purchase 1,452,543.16 1,452,543.16
(1) Other 2,241,421.56 2,241,421.56 decrease
4. Closing 8,816,354.27 3,705,177.97 4,666,638.58 4,546,843.86 21,735,014.68 balance
III. Impairment provision
1. Opening balance
2. Increase in this period
(1) Provision
3. Decrease in this period
(1) Purchase
4. Closing balance
IV. Book value
1. Closing book 47,681,186.47 6,753,093.33 1,053,249.79 3,381,914.94 58,869,444.53 value
2. Opening 48,416,853.02 7,333,744.29 1,814,538.22 2,663,517.16 60,228,652.69 book value
Intangible asset formed by internal R&D of the period takes up 2.19% in the closing total book value of intangible assets.
(2) Failure to obtain the land use right certificates
In RMB
Items Book value Reason
None
158 2017 Annual Report of China Fangda Group Co., Ltd.
Others: The reduction of intangible assets in the current period of business combination is the loss of control in Fangda SOZN. The corresponding intangible assets are no longer included in the consolidated statement.
17. Goodwill
(1) Original book value of goodwill
In RMB
Invested entity or Opening balance Increase Decrease Closing balance item of goodwill
Fangda SOZN 26,279,395.89 26,279,395.89 0.00
Total 26,279,395.89 26,279,395.89 0.00
(2) Goodwill impairment provision
In RMB
Invested entity or Opening balance Increase Decrease Closing balance item of goodwill
Fangda SOZN 26,279,395.89 26,279,395.89 0.00
Total 26,279,395.89 26,279,395.89 0.00
Test process of goodwill impairment, parameters and recognition method of goodwill impairment loss:
The Company acquired the 60% control power over Fangda SOZN by merger of enterprise under common control in August 2014. The difference between the initial investment cost of RMB48 million and recognizable fair value of the investee has formed the goodwill of RMB26,279,395.89. Due to the inability to pay off debts and substantially ceased operations, the Company has made a full provision for impairment of goodwill in previous years. In the current period, the Company has transferred the entire shareholding of Fangda SOZN.
Other note
18. Long-term amortizable expenses
In RMB
Increase in this Amortized amount Items Opening balance Other decrease Closing balance period in this period
Jinshan factory renovation of 192,280.34 192,280.34 Fangda Decoration Shanghai Branch
Epoxy floor 634,517.63 634,517.63
159 2017 Annual Report of China Fangda Group Co., Ltd.
Kingdee aftersales 48,217.98 48,217.98 service
Xuanfeng Chayuan village and Zhuyuan 1,309,034.90 56,101.56 1,252,933.34 village land transfer compensation
Expense of renovation of leased fixed assets by 111,474.45 111,474.45 Fangda Property Development
Dongguan separation 155,634.49 77,817.36 77,817.13 project
Fangda Hi-Tech Park plant No.3 255,483.50 255,483.50 renovation
Upgrading of workshop rented by 161,009.56 161,009.56 Fangda Decoration Nanchang Branch
Anti-junk email 0.00 module service fee
Great Wall broadband network 14,700.04 4,900.08 9,799.96 fee
Fangda Building Floor #5 wiring 7,604.64 7,604.64 project
Huawei storage device maintenance 4,639.50 4,639.50 fee
Membership fee 199,999.92 360,000.00 99,999.92 460,000.00
Temporary sales center construction 495,469.58 982,607.50 1,232,425.22 245,651.86 cost
Subscription of newspaper and 105,699.80 105,699.80 magazines
Total 3,695,766.33 1,342,607.50 2,992,171.54 2,046,202.29
Other note
160 2017 Annual Report of China Fangda Group Co., Ltd.
19. Differed income tax assets and differed income tax liabilities
(1) Non-deducted deferred income tax assets
In RMB
Closing balance Opening balance
Items Deductible temporary Deferred income tax Deductible temporary Deferred income tax difference assets difference assets
Assets impairment 384,353,309.47 73,519,373.35 334,020,087.32 65,372,067.16 provision
Deductible loss 27,076,168.17 5,825,923.08 79,647,747.51 19,403,071.58
Donation 700,000.00 175,000.00
Unrealizable gross profit 159,943,328.49 39,138,879.86 59,313,354.67 13,083,940.06
Reserved expense 1,931,083.44 289,662.51 3,245,302.51 486,795.38
Deferred earning 2,343,160.67 351,474.11 1,963,532.75 474,053.75
Anticipated liabilities 6,368,353.05 955,252.96 3,156,625.24 473,493.79
Arbitrage gain and loss 159,000.00 23,850.00
Adjustment of fair value 309,641.05 46,446.16 327,320.67 49,098.10 of investment real estate
Provided unpaid taxes 441,086,914.18 110,271,728.55 309,816,714.95 77,454,178.74
Total 1,024,270,958.52 230,597,590.58 791,490,685.62 176,796,698.56
(2) Non-deducted deferred income tax liabilities
In RMB
Closing balance Opening balance
Items Taxable temporary Deferred income tax Taxable temporary Deferred income tax difference liabilities difference liabilities
Gain/loss caused by 1,143,654,805.86 285,913,701.47 304,518,955.06 76,129,738.77 changes in fair value
Estimated gross margin when Fangda Town records income, but does 113,637,356.36 28,409,339.09 495,010,133.99 123,752,533.50 not reach the taxable income level
Arbitrage gain and loss 2,164,873.87 324,731.08
Total 1,257,292,162.22 314,323,040.56 801,693,962.92 200,207,003.35
161 2017 Annual Report of China Fangda Group Co., Ltd.
(3) Net deferred income tax assets or liabilities listed
In RMB
Offset balance of Deferred income tax Offset balance of Deferred income tax deferred income tax assets and liabilities at deferred income tax Items assets and liabilities at assets or liabilities after the beginning of the assets or liabilities after the end of the period offsetting period offsetting
Deferred income tax 230,597,590.58 176,796,698.56 assets
Deferred income tax 314,323,040.56 200,207,003.35 liabilities
(4) Details of unrecognized deferred income tax assets
In RMB
Items Closing balance Opening balance
Deductible temporary difference 946,030.45 69,882,888.12
Deductible loss 5,506,383.60 103,119,540.05
Total 6,452,414.05 173,002,428.17
(5) Deductible losses of the un-recognized deferred income tax asset will expire in the following years
In RMB
Year Closing amount Opening amount Notes
2017 1,476,671.03
2018 58,067.78
2019
2020 80,885,430.25
2021 772,174.85 20,699,370.99
2022 4,734,208.75
Total 5,506,383.60 103,119,540.05 --
Others: In the reporting period, the loss of control over Fangda SOZN, a subsidiary of the Company, and the cancellation of Fangda Aluminum, a subsidiary, caused a significant reduction in the deductible losses of deferred income tax assets that were not recognized at the end of the period.
20. Other non-current assets
In RMB
162 2017 Annual Report of China Fangda Group Co., Ltd.
Items Closing balance Opening balance
Prepaid house and equipment amount 31,130,198.46 61,184,253.71
Total 31,130,198.46 61,184,253.71
Others: The closing balance of other non-current assets is mainly the prepaid house payment of Fangda Jianke.
21. Short-term borrowings
(1) Classification of short-term borrowings
In RMB
Items Closing balance Opening balance
Guarantee loan 416,000,000.00 591,000,000.00
Discount borrowing of acceptance bills 200,000,000.00
Total 616,000,000.00 591,000,000.00
Notes to classification of short-term borrowings
22. Derivative financial liabilities
√ Applicable □ Inapplicable In RMB
Items Closing balance Opening balance
Futures contracts 159,000.00
Total 159,000.00
Others:
23. Notes payable
In RMB
Type Closing balance Opening balance
Commercial acceptance 62,954,258.46 88,302,684.45
Bank acceptance 469,966,767.02 468,998,636.00
Total 532,921,025.48 557,301,320.45
The total amount of payable bills that have matured but not been paid at the end of the period is RMB7,463,586.17.
163 2017 Annual Report of China Fangda Group Co., Ltd.
24. Account payable
(1) Account payable
In RMB
Items Closing balance Opening balance
Account repayable and engineering 610,735,320.33 861,679,467.39 repayable
Construction payable 34,924,745.05 64,941,147.47
Payable installation and implementation 297,174,327.49 342,832,605.32 fees
Others 3,557,866.05 5,802,741.16
Total 946,392,258.92 1,275,255,961.34
(2) Significant payables aging more than 1 year
In RMB
Items Closing balance Reason
Supplier 1 80,038,525.28 Not mature
Supplier 2 29,419,488.18 Not mature
Supplier 3 8,239,280.17 Not mature
Supplier 4 7,370,908.84 Not mature
Supplier 5 6,919,569.94 Not mature
Total 131,987,772.41 --
Others:
25. Prepayment received
(1) Prepayment received
In RMB
Items Closing balance Opening balance
Curtain wall and screen door engineering 89,485,775.55 82,684,893.50 payment
Material loan 5,227,948.87 3,096,489.93
Real estate sales payment 78,377,257.88 198,135,269.02
Others 2,260,704.15 1,988,791.68
Total 175,351,686.45 285,905,444.13
164 2017 Annual Report of China Fangda Group Co., Ltd.
(2) Assets settled for unfinished construction contracts at the end of the period
In RMB
Items Amount
Accumulative occurred costs 6,582,453,411.26
Accumulative recognized gross margin 968,676,416.49
Settled amount 7,384,841,166.06
Projects unsettled for finished construction contracts 166,288,661.69
Others: The Company must comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.3 – Listed Companies Engaged in Property Development. Payment received from top 5 presales projects:
In RMB
No. Project Opening balance Closing balance Estimated finish time Presales percentage
1 Fangda Town 198,135,269.02 78,377,257.88 31.08.18 100.00%
26. Employees’ wage payable
1. Employees’ wage payable
In RMB
Items Opening balance Increase Decrease Closing balance
1. Short-term 41,965,384.45 243,389,592.69 244,967,457.98 40,387,519.16 remuneration
2. Retirement pension program-defined 6,958.21 12,292,685.49 12,288,032.11 11,611.59 contribution plan
3. Dismiss compensation 326,277.86 326,277.86
Total 41,972,342.66 256,008,556.04 257,581,767.95 40,399,130.75
(2) Short-term remuneration
In RMB
Items Opening balance Increase Decrease Closing balance
1. Wage, bonus, 39,824,961.13 225,532,377.94 226,577,957.33 38,779,381.74 allowance and subsidies
2. Employee welfare 6,055,330.04 6,055,330.04
3. Social insurance 74,574.19 5,432,165.56 5,506,739.75
165 2017 Annual Report of China Fangda Group Co., Ltd.
Including: 74,056.97 4,258,585.15 4,332,642.12 medical insurance
Labor injury 515.52 726,077.11 726,592.63 insurance
Breeding 1.70 447,503.30 447,505.00 insurance
4. Housing fund 99,320.00 5,478,630.74 5,512,479.74 65,471.00
5. Labor union budget 1,966,529.13 891,088.41 1,314,951.12 1,542,666.42 and staff education fund
Total 41,965,384.45 243,389,592.69 244,967,457.98 40,387,519.16
(3) Defined contribution plan
In RMB
Items Opening balance Increase Decrease Closing balance
1. Basic pension 6,436.75 11,798,388.99 11,793,214.15 11,611.59
2. Unemployment 521.46 494,296.50 494,817.96 insurance
Total 6,958.21 12,292,685.49 12,288,032.11 11,611.59
Others:
27. Taxes payable
In RMB
Items Closing balance Opening balance
VAT 12,300,790.83 46,317,900.91
Enterprise income tax 114,953,308.81 130,608,894.15
Personal income tax 1,183,514.25 1,440,370.54
City maintenance and construction tax 1,881,115.36 4,160,327.99
Land using tax 333,906.32 684,277.95
Property tax 1,432,301.04 2,140,282.85
Education surtax 896,603.56 1,963,232.23
Local education surtax 460,806.13 1,106,894.43
Deed tax 3,429,437.28 3,429,437.28
Others 83,732.86 384,956.07
Total 136,955,516.44 192,236,574.40
Others:
166 2017 Annual Report of China Fangda Group Co., Ltd.
28. Interest payable
In RMB
Items Closing balance Opening balance
Long-term borrowing with interest installment and repayment of principal 1,822,719.47 1,753,879.87 upon maturity
Short-term borrowing interests payable 602,592.50 881,099.60
Total 2,425,311.97 2,634,979.47
29. Other payables
(1) Other payables presented by nature
In RMB
Items Closing balance Opening balance
Performance and quality deposit 20,867,337.69 10,596,919.41
Deposit 8,047,165.84 8,104,969.14
Reserved expense 11,466,723.82 14,327,754.95
Fangda Town pledge 100,000.00 100,000.00
Lawsuit indemnity 0.00
Tax withheld 441,086,914.18 309,816,714.95
Others 19,621,369.16 23,236,440.96
Total 501,189,510.69 366,182,799.41
Other note
1. The tax withheld is the land VAT that needs to be settled and paid for the property delivered of the Fangda Town developed by Fangda Property.
2. The major other payables aged over 1 year at the end of the year are mainly the land value-added tax of RMB275,186,551.15, which is not yet settled.
30. Non-current liabilities due within 1 year
In RMB
Items Closing balance Opening balance
Long-term loans due within 1 year 200,000,000.00
Total 200,000,000.00
167 2017 Annual Report of China Fangda Group Co., Ltd.
31. Other current liabilities
In RMB
Items Closing balance Opening balance
Substituted money on VAT 9,531,014.81 35,148,084.44
Total 9,531,014.81 35,148,084.44
32. Long-term borrowings
(1) Classification of long-term borrowings
In RMB
Items Closing balance Opening balance
Loan by pledge 893,978,153.39 922,169,568.24
Total 893,978,153.39 922,169,568.24
Notes to classification of long-term borrowings:
The above-mentioned borrowing is the 100% stock pledging of Fangda Property Development held by the Company. Other note, including interest rate range:
The interest rate of long-term borrowings ranges between 5.39% and 6.785%.
33. Anticipated liabilities
In RMB
Items Closing balance Opening balance Reason
Others 6,368,353.05 3,156,625.24
Total 6,368,353.05 3,156,625.24 --
34. Deferred earning
In RMB
Items Opening balance Increase Decrease Closing balance Reason
Government subsidy 11,567,224.78 666,282.50 1,744,023.34 10,489,483.94 Assets-related
Total 11,567,224.78 666,282.50 1,744,023.34 10,489,483.94 --
Items involving government subsidies: In RMB
Amount Other misc. Related to Opening Amount of included in gains Costs offset Closing Liabilities Other change assets/earnin balance new subsidy non-operatin recorded in in the period balance g g revenue this period
168 2017 Annual Report of China Fangda Group Co., Ltd.
Major investment project prize from Industry and Trade Assets-relate 1,795,238.30 57,142.80 1,738,095.50 Development d Division of Dongguan Finance Bureau
Massive production project of air-breathing Assets-relate 7,641,830.27 123,987.24 7,517,843.03 double-layer d hollow glass energy-savin g curtain call
Railway transport screen door controlling Assets-relate 168,294.45 43,229.28 125,065.17 system and d information transmission technology
LED production expansion Assets-relate 1,493,111.71 381,219.96 -1,111,891.75 technology d renovation project
Distributed PV power generation project subsidy Assets-relate 468,750.05 24,999.96 443,750.09 sponsored by d Dongguan Reform and Development Commission
169 2017 Annual Report of China Fangda Group Co., Ltd.
Luxi county Xuanfeng town Assets-relate government 186,282.50 1,552.35 184,730.15 d business introduction subsidy
Shenzhen SME Service Bureau Assets-relate 480,000.00 480,000.00 enterprise IT d construction subsidy
11,567,224.7 10,489,483.9 Total 666,282.50 632,131.59 -1,111,891.75 -- 8 4
Others:
(1) The Dongguan Finance Bureau Industry and Trade Development Division major subsidy project is a subsidized project not stipulated in Dongguan Financial Circular [2013] No.779. As the project has formed into long-term assets, the Company treats it as an assets-related government subsidy.
(2) The massive production project of air-breathing double-layer hollow glass energy-saving curtain wall is a subsided project stipulated in Guangdong Financial Doc [2013] No.183. As the project has formed into long-term assets, the Company treats it as an assets-related government subsidy.
(3) The railway transport screen door controlling system and information transmission technology is a subsidized project stip ulated in Shenzhen Tech Innovation [2013] No.242. RMB300,000 is used to purchase equipment and RMB900,000 is used to purchase materials and for travel fees. As the project has formed into long-term assets, the Company treats RMB300,000 as assets-related government subsidy and RMB900,000 as earning-related government subsidy.
(4) The subsidy for LED product capital expansion or technologically innovative project is the subsidy fund obtained by subsidiary Fangda SOZN according to Notice on Applying for 2015 Foshan Technology Development Fund and Parent Fund (Zhongshan Ke Fa (2015) No.104), Notice on Zhongshan Technology Development Fund Regulations (Zhong Ke Fa (2015) No.95) and Notice on Zhongshan Patent Fund Use Regulations (Zhong Ke Fa (2015) No.96). Other decrease is attributable to the loss of control in Fangda SOZN, which is no longer consolidated in financial statements.
(5) The Dongguan Municipal Development and Reform Commission on the organization of the Dongguan City distributed photovoltaic power generation subsidy program is based on the "Don gguan Municipal Development and Reform Commission's Circular on Organizing the Application of Dongguan Distributed PV Generation Capital Subsidy Project" for various types of buildings and structures using distributed photovoltaic power generation projects. Owners, according to the installed capacity of 250,000 yuan / MW for a one-time grant, the maximum subsidy for a single project does not exceed 2 million yuan, because the project is related to assets, the company will use it as a government subsidy related to assets.
(6) The Xuanfeng Town Government Investment Promotion Subsidy Project of Luxi County promoted the development of the local economy. Xuanfeng Town Government of Luxi County introduced Luxin New Energy Company's solar photovoltaic power
170 2017 Annual Report of China Fangda Group Co., Ltd. generation project and gave Luxin New Energy Corporation subsidies for obtaining state-owned construction land use rights. As this project is related to assets, the Company regards it as a government grant related to the assets.
(7) The subsidy project of the Shenzhen Municipal Bureau of Small and Medium-sized Enterprises Service Enterprise Informatization Project is based on the relevant provisions of the Interim Measures for the Management of Special Funds for t he Development of Private and Small and Medium-sized Enterprises in Shenzhen (SCC (2012) No. 177) issued by the Shenzhen Municipal Bureau of Small and Medium Business Administration. In 2017, the special fund enterprise informationization project subsidies, because the project is related to assets, the company will use it as a government grant related to assets.
35. Capital share
In RMB
Change (+,-) Opening Closing Issued new Transferred balance Bonus shares Others Subtotal balance shares from reserves
Total of capital 1,183,642,254. 789,094,836.00 394,547,418.00 394,547,418.00 shares 00
Others: (1) By 31.12.17, the Company has 1,417,242 restricted shares, of which 1,417,242 shares are held by senior management natural person.
Approved at the Shareholders' Meeting 2016 held on April 11, 2017, the Company's profit distribution plan for 2016 is distributing a cash dividend of RMB3.50 (tax-included) for every ten shares and transfer five shares for every ten shares to all the shareholders based on a total of 789,094,836 shares on December 31, 2016. No dividend share was issued this year.
36. Capital reserve
In RMB
Items Opening balance Increase Decrease Closing balance
Capital premium (share 465,922,805.61 394,547,418.00 71,375,387.61 capital premium)
Other capital reserves 1,454,097.35 1,454,097.35
Total 467,376,902.96 394,547,418.00 72,829,484.96
Other note, including explanation about the reason of the change: The decrease in the share premium during the current period was due to the transfer of capital reserve of RMB394,547,418.00 during the reporting period.
37. Other miscellaneous income
In RMB
Opening Amount occurred in the current period Closing Items balance Amount Less: amount Less: After-tax After-tax balance
171 2017 Annual Report of China Fangda Group Co., Ltd.
before written into Income tax amount amount income tax other gains expenses attributed to attributed to and transferred the parent minority into gain/loss shareholder in previous s terms
2. Other misc. incomes that will be 11,162,626. 2,867,090.6 6,455,393.4 8,585,847 2,130,454.52 1,840,142.79 re-classified into gain and loss 87 1 7 .99
Effective part in the gain and -1,959,992. -119,850. 1,840,142.79 -141,000.00 1,840,142.79 -21,150.00 loss of arbitrage of cash flow 79 00
Translation difference of -50,855.4 198,480.10 -249,335.57 -249,335.57 foreign exchange statement 7
Investment real estate measured at 11,552,962. 2,888,240.6 8,664,721.8 8,756,553 91,831.63 fair value 44 1 3 .46
11,162,626. 2,867,090.6 6,455,393.4 8,585,847 Other miscellaneous income 2,130,454.52 1,840,142.79 87 1 7 .99
38. Surplus reserves
In RMB
Items Opening balance Increase Decrease Closing balance
Statutory surplus 88,839,790.50 21,850,606.15 110,690,396.65 reserves
Total 88,839,790.50 21,850,606.15 110,690,396.65
39. Retained profit
In RMB
Items Current period Last period
Adjustment on retained profit of previous period 1,016,820,576.30 432,271,424.56
Retained profit adjusted at beginning of year 1,016,820,576.30 432,271,424.56
Plus: Net profit attributable to owners of the 1,144,404,441.03 697,956,378.23 parent
Less: Statutory surplus reserves 21,850,606.15 37,716,235.99
Common share dividend payable 276,183,192.60 75,690,990.50
Closing retained profit 1,863,191,218.58 1,016,820,576.30
Details of retained profit adjusted at beginning of the period 1) Retrospective adjustment due to adopting of the Enterprise Accounting Standard and related regulations, included the retained profit by RMB0.
172 2017 Annual Report of China Fangda Group Co., Ltd.
2) Variation of accounting policies, influenced the retained profit by RMB0. 3) Correction of material accounting errors, influenced the retained profit by RMB0. 4) Change of consolidation range caused by merger of entities under common control, influenced the retained profit by RMB0. 5) Other adjustment influenced the retained profit by RMB0.
40. Operational revenue and costs
In RMB
Amount occurred in the current period Occurred in previous period Items Income Cost Income Cost
Main business 2,900,462,349.88 1,977,766,793.96 4,125,885,820.70 2,535,301,290.92
Other businesses 47,008,463.70 20,472,095.25 77,980,353.02 59,869,192.43
Total 2,947,470,813.58 1,998,238,889.21 4,203,866,173.72 2,595,170,483.35
The Company must comply with disclosure requirements of the Shenzhen Stock Exchange Industry Information Disclosure Guideline No.3 – Listed Companies Engaged in Property Development. Top-5 projects in terms of income received and recognized in the reporting period:
In RMB
No. Project Balance
1 Fangda Town 911,195,066.07
41. Taxes and surcharges
In RMB
Items Amount occurred in the current period Occurred in previous period
City maintenance and construction tax 7,814,008.40 11,735,072.37
Education surtax 7,797,178.90 8,599,067.72
Property tax 4,118,281.19 3,408,074.24
Land using tax 1,432,280.19 1,188,786.11
Stamp tax 1,357,531.03 1,663,716.30
Business tax 1,061,489.31 6,231,233.83
Land VAT 167,899,723.69 347,775,304.93
Others 309,436.30 233,450.92
Total 191,789,929.01 380,834,706.42
42. Sales expense
In RMB
Items Amount occurred in the current period Occurred in previous period
173 2017 Annual Report of China Fangda Group Co., Ltd.
Labor costs 22,338,575.61 23,832,334.36
Freight and miscellaneous charges 6,023,654.97 7,560,644.12
Travel expense 4,918,740.99 5,091,669.45
Entertainment expense 1,918,141.04 2,037,341.10
Material consumption 1,034,700.68 403,618.10
Office costs 2,182,168.26 2,536,314.14
Rental 848,873.82 1,773,733.94
Advertisement and promotion fee 5,698,609.97 9,100,791.63
Sales agency fee 14,032,712.93 3,574,466.62
Others 2,067,770.13 3,362,132.68
Total 61,063,948.40 59,273,046.14
Others: The increase in sales agency fees for the current period was due to the increase in commissions paid by the subsidiary, Fangda Property, to various sales channels and to the agency companies.
43. Management expenses
In RMB
Items Amount occurred in the current period Occurred in previous period
Labor costs 81,335,907.43 78,910,083.71
Depreciation and amortization 15,437,399.78 19,641,826.87
Agencies 6,206,988.31 2,719,764.57
Tax 3,426,306.86
Maintenance costs 7,676,857.59 7,328,236.95
Water and electricity 656,735.35 892,352.37
Office expense 3,428,451.92 3,606,589.30
Travel expense 2,887,763.45 4,034,018.87
R&D 17,997,202.77 22,757,378.01
Entertainment expense 2,896,590.12 2,748,111.05
Rental 2,531,368.11 4,147,170.84
Lawsuit 237,815.52 2,260,015.75
Material consumption 313,727.03 457,209.56
Property management fee 1,978,270.47 2,834,001.28
Waste loss 5,996,649.87
Others 9,231,602.45 10,162,375.53
Total 152,816,680.30 171,922,091.39
174 2017 Annual Report of China Fangda Group Co., Ltd.
Others:
1. The increase in intermediary expenses in the current period was mainly due to the increase in investment consulting fees p aid by the Company and its subsidiary Fangda Property.
2. The decrease in waste charges during the period was mainly due to the fact that Fangda SOZN, a subsidiary of the Company, was stopped in the current period, and there was no loss of waste products.
44. Financial expenses
In RMB
Items Amount occurred in the current period Occurred in previous period
Interest expense 89,495,390.12 82,558,159.00
Less: interest capitalization 20,766,462.22 45,862,952.52
Less: Interest income 7,781,596.28 6,701,201.41
Less: discount government subsidies 1,786,400.00
Acceptant discount 3,384,259.28 3,504.16
Exchange gain/loss 3,305,715.16 -3,282,947.53
Commission charges and others 1,207,940.00 1,540,835.73
Total 67,058,846.06 28,255,397.43
45. Assets impairment loss
In RMB
Items Amount occurred in the current period Occurred in previous period
1. Bad debt loss 58,879,269.89 117,097,192.87
2. Inventory depreciation loss 29,306,243.12
7. Fixed assets impairment loss 26,409,144.27
12. Intangible assets impairment loss 5,268,680.03
13. Goodwill impairment loss 19,826,696.97
Total 58,879,269.89 197,907,957.26
Others:
Bad debt loss decreases due to changes in accounting estimates in the reporting period.
46. Income from fair value fluctuation
In RMB
Source of income from fluctuation of fair Amount occurred in the current period Occurred in previous period value
175 2017 Annual Report of China Fangda Group Co., Ltd.
Financial assets measured at fair value with variations accounted into current -1,099,400.09 income account
Investment real estate measured at fair 890,037,303.97 17,550,094.59 value
Effective part in the gain and loss of 2,371,344.29 412,128.63 arbitrage of cash flow
Total 892,408,648.26 16,862,823.13
47. Investment income
In RMB
Items Amount occurred in the current period Occurred in previous period
Gains from long-term equity investment -2,162,975.06 -1,384,650.25 measured by equity
Investment gain obtained from disposal of 84,959,644.45 long-term equity investment
Investment gain obtained from disposal of financial assets measured at fair value with 122,438,379.65 variations accounted into current income account
Investment gain obtained from disposal of financial assets measured at fair value with -122,795,801.32 3,057,110.93 variations accounted into current income account
Gain from re-measurement of remaining shares at fair value after loss of the control 58,154,670.60 power
Investment gain of financial products 20,455,865.70 1,401,717.08
Others -4,000.00
Total 102,891,113.42 61,228,848.36
Others:
The investment gains from disposal of long-term equity investment are the gain of RMB84,959,644.45 from the disposal of the long-term equity investment in Fangda SOZN.
48. Assets disposal gains
In RMB
Source Amount occurred in the current period Occurred in previous period
176 2017 Annual Report of China Fangda Group Co., Ltd.
Gain and loss from disposal of fixed assets 5,027,717.19 -2,006,620.94 ("-" for loss)
Gain and loss from disposal of intangible 46,153.85 assets ("-" for loss)
Total 5,027,717.19 -1,960,467.09
49. Other gains
In RMB
Source Amount occurred in the current period Occurred in previous period
LED production expansion technology 381,219.96 renovation project
Luxi county Xuanfeng town government 1,552.35 business introduction subsidy
Major investment project prize from Industry and Trade Development Division 57,142.80 of Dongguan Finance Bureau
Distributed PV power generation project subsidy sponsored by Dongguan Reform 24,999.96 and Development Commission
Railway transport screen door controlling system and information transmission 43,229.28 technology
Massive production project of air-breathing double-layer hollow glass 123,987.24 energy-saving curtain call
Technology achievement subsidies 100,000.00
VAT rebated into revenue 2,730,971.34
Nanchang Financial Bureau municipal-level enterprise technology 50,000.00 prize
Intellectual property right project subsidy for 2017 by Shenzhen market and quality 100,000.00 supervision and management committee
Industry upgrade and transformation subsidy for 2017 by Shenzhen Economic 1,000,000.00 and Trade Information Commission
Industry growth subsidy 680,000.00
Hi-tech enterprise development fund 300,000.00
177 2017 Annual Report of China Fangda Group Co., Ltd.
Hi-tech enterprise prize 300,000.00
Employment subsidy 504,878.65
Others 184,500.00
Total 6,582,481.58
50. Non-business income
In RMB
Amount occurred in the current Amount accounted into the Items Occurred in previous period period current accidental gain/loss
Government subsidy 7,571,963.67
Penalty income 363,980.93 239,809.06 363,980.93
Payable account not able to be 3,208,403.38 534,238.75 3,208,403.38 paid
VAT rebated into revenue 2,852,268.61
Others 4,810,402.92 7,019,210.97 4,810,402.92
Total 8,382,787.23 18,217,491.06 8,382,787.23
Others:
1. The amount of RMB3,157,115.36 in unpaid dues was due to cancellation of the subsidiary Fangda Aluminum.
2. Major projects are disclosed as follows:
The large amount in others is the income from disposal of waste of RMB4,382,529.31.
51. Non-business expenses
In RMB
Amount occurred in the current Amount accounted into the Items Occurred in previous period period current accidental gain/loss
Loss from debt reorganization 3,674,141.05 2,445,254.63 3,674,141.05
Donation 3,911,000.00 1,459,000.00 3,911,000.00
Loss from retirement of 71,025.12 494,760.83 71,025.12 damaged non-current assets
Penalty and overdue fine 203,328.43 202,334.32 203,328.43
Others 213,904.94 274,078.98 213,904.94
Total 8,073,399.54 4,875,428.76 8,073,399.54
178 2017 Annual Report of China Fangda Group Co., Ltd.
52. Income tax expenses
(1) Details about income tax expense
In RMB
Items Amount occurred in the current period Occurred in previous period
Income tax expenses in this period 216,022,591.68 187,967,710.56
Deferred income tax expenses 57,772,785.66 16,017,615.88
Total 273,795,377.34 203,985,326.44
(2) Adjustment process of accounting profit and income tax expense
In RMB
Items Amount occurred in the current period
Total profit 1,424,842,598.85
Income tax expenses calculated based on the legal (or applicable) 356,210,649.70 tax rates
Impacts of different tax rates applicable for some subsidiaries -14,602,781.31
Impacts of income tax before adjustment 327,493.19
Impact of non-taxable income -30,609,594.93
Impacts of non-deductible cost, expense and loss 618,004.92
Impacts of using deductible loss of unrecognized deferred -16,046,556.32 income tax assets
Deductible temporary difference and deductible loss of 674,095.36 unrecognized deferred income tax assets
Profits and losses from associates accounted for using the equity 540,743.77 method
Impact of tax rate change on the opening balance of deferred 1,427,418.03 income tax
Taxation impact of R&D expense and (presented with ―-‖) -896,117.63
Others -23,847,977.44
Income tax expenses 273,795,377.34
Other note The other projects were mainly related to the gains from the disposal of the shares held by Fangda SOZN, a subsidiary held by the company, of RMB-23,739,911.11.
53. Other miscellaneous income
See Note VII 37.
179 2017 Annual Report of China Fangda Group Co., Ltd.
54. Notes to the cash flow statement
(1) Other cash inflow related to operation
In RMB
Items Amount occurred in the current period Occurred in previous period
Interest income 6,851,168.02 6,701,201.41
Subsidy income 6,184,809.73 8,024,105.44
Retrieving of deposits for exchange bills 20,929,073.67 89,667,363.82
Retrieving of bidding deposits 72,013,587.39 26,828,027.88
Other operating accounts 21,760,218.65 17,530,047.54
Total 127,738,857.46 148,750,746.09
Notes to other cash inflow related to operation:
(2) Other cash paid related to operation
In RMB
Items Amount occurred in the current period Occurred in previous period
Sales expense 25,196,863.33 13,114,184.67
Administrative expense 29,288,934.10 30,155,561.02
Bidding deposit paid 71,049,500.84 95,015,574.87
Net draft deposit net paid 110,475,014.30 6,738,582.00
Other trades 25,533,661.05 22,802,418.76
Total 261,543,973.62 167,826,321.32
(3) Other cash paid related to investment activities
In RMB
Items Amount occurred in the current period Occurred in previous period
Bidding deposit paid related to 2,650,000.00 construction projects
Net cash from disposal of subsidiaries 16,097.15
Total 2,666,097.15
(4) Other cash received related to financing
In RMB
Items Amount occurred in the current period Occurred in previous period
180 2017 Annual Report of China Fangda Group Co., Ltd.
Fractional historical dividend 94.24
Financing deposit 53,500,000.00
Total 53,500,094.24
(5) Other cash paid related to financing
In RMB
Items Amount occurred in the current period Occurred in previous period
Financing commissioning and 1,307,919.17 intermediary cost
Total 1,307,919.17
55. Supplementary data of cash flow statement
(1) Supplementary data of cash flow statement
In RMB
Supplementary information Amount of the Current Term Amount of the Previous Term
1. Net profit adjusted to cash flow of -- -- business operation
Net profit 1,151,047,221.51 655,990,431.99
Plus: Asset impairment provision 58,879,269.89 197,907,957.26
Fixed asset depreciation, gas and petrol 28,254,417.84 28,600,241.74 depreciation, production goods depreciation
Amortization of intangible assets 3,377,119.80 3,723,769.63
Amortization of long-term amortizable 2,992,171.54 4,573,606.05 expenses
Loss from disposal of fixed assets, intangible assets, and other long-term assets (―-― for -4,594,701.20 4,843,433.36 gains)
Loss from fixed asset discard (―-― for gains) 71,025.12 98,653.04
Loss from fair value fluctuation (―-― for -892,079,427.63 -10,401,660.45 gains)
Financial expenses (―-― for gains) 68,088,240.21 32,931,793.50
Investment losses (―-― for gains) -102,891,113.42 -61,228,848.36
Decrease of deferred income tax asset -53,779,742.02 -110,869,888.04 (―-― for increase)
181 2017 Annual Report of China Fangda Group Co., Ltd.
Increase of deferred income tax asset (―-― for 111,552,527.68 126,887,503.93 increase)
Decrease of inventory (―-― for increase) 163,916,553.77 -627,473,046.34
Decrease of operational receivable items 346,476,038.35 -879,090,079.01 (―-― for increase)
Increase of operational receivable items -233,040,368.34 1,159,551,630.20 (―-― for decrease)
Others -90,436,087.37 -60,328,423.58
Cash flow generated by business operations, 557,833,145.73 465,717,074.92 net
2. Major investment and financing operation -- -- not involving with cash
3. Net change of cash and cash equivalents -- --
Balance of cash at period end 931,285,535.55 935,824,575.40
Less: Initial balance of cash 935,824,575.40 247,739,243.78
Net increase in cash and cash equivalents -4,539,039.85 688,085,331.62
(2) Net cash from disposal of subsidiaries received in this period
In RMB
Amount
Cash and cash equivalent received from disposal of subsidiaries in 500,000.00 the period
Including: --
Fangda SOZN 500,000.00
Less: cash and cash equivalent held by subsidiaries on the date of 11,220.25 losing control power
Including: --
Fangda SOZN 11,220.25
Including: --
Net cash received from disposal of subsidiaries 488,779.75
Others:
Note: During the reporting period, the entire shareholding of Fangda SOZN, a subsidiary held by the Company, was transferred and no control was exercised.
(3) Composition of cash and cash equivalents
In RMB
182 2017 Annual Report of China Fangda Group Co., Ltd.
Items Closing balance Opening balance
I. Cash 931,285,535.55 935,824,575.40
Including: Cash in stock 42,636.09 11,625.54
Bank savings can be used at any time 921,773,052.65 931,980,821.51
Other monetary capital can be used at 9,469,846.81 3,832,128.35 any time
II. Balance of cash and cash equivalents at 931,285,535.55 935,824,575.40 the end of the period
56. Ownership- or use-right-restricted assets
In RMB
Items Closing book value Reason
Monetary capital 249,112,943.96 Deposit and special account deposit
Fixed assets 52,839,273.10 Loan by pledge
Investment real estate 307,321,568.00 Loan by pledge
100% stake in Fangda Property 200,000,000.00 Loan by pledge Development held by the Company
Total 809,273,785.06 --
57. Foreign currency monetary items
(1) Foreign currency monetary items
In RMB
Closing foreign currency Items Exchange rate Closing RMB balance balance
Monetary capital -- -- 39,713,343.50
Including: USD 913,634.49 6.5342 5,969,870.48
HK Dollar 35,870,866.13 0.83591 29,984,815.71
AUD 151,715.27 5.0928 772,655.53
SGD 611,497.16 4.8831 2,986,001.78
Account receivable -- -- 61,198,347.63
Including: USD 9,154,193.57 6.5342 59,815,331.63
SGD 283,225.00 4.8831 1,383,016.00
Other receivables -- -- 151,577.39
Including: USD 13,682.31 6.5342 89,402.95
183 2017 Annual Report of China Fangda Group Co., Ltd.
HK Dollar 72,710.00 0.83591 60,779.01
AUD 274.00 5.0928 1,395.43
Account payable -- -- 108,637.61
Including: USD 16,626.00 6.5342 108,637.61
Employees’ wage payable -- -- 334,851.65
Including: HKD 320,709.68 0.83591 268,084.43
AUD 13,110.12 5.0928 66,767.22
Other payables -- -- 13,721.82
Including: USD 2,100.00 6.5342 13,721.82
(2) The note of overseas operating entities should include the main operation places, book keeping currencies and selection basis. Where the book keeping currency is changed, the reason should also be explained.
□ Applicable √ Inapplicable
58. Hedging
Hedging items and related tools, qualitative and quantitative information about hedging risks:
Hedging type Hedged item Hedging instrument Hedged risk Cash flow hedging Aluminum plate futures transaction Aluminum futures contract Rise on raw material prices, causing purchase cost increase
VIII. Change to Consolidation Scope
1. Disposal of subsidiaries
Single disposal of a subsidiary that may lead to loss of control √ Yes □ No
In RMB
The The The fair Regainin Determin The Proporti differenc book value of g gains ation of amount on of e value of the or losses the fair of other Equity Time remainin Equity Time of between the remainin arising value of compreh Compan disposal Disposal determin g stocks disposal loss of the remainin g equity from the ensive y proportio manner ation at the amount control disposal g equity at the re-measu remainin income n basis date of price and at the date of rement g equity related to loss of the share date of loss of of the at the the control of the loss of control remainin date of atomic
184 2017 Annual Report of China Fangda Group Co., Ltd.
subsidiar control g equity loss of company y's net at fair control 's equity assets at value rights investme the level and its nt of the main transferr consolid assumpti ed to ated ons investme financial nt gains statemen and t losses correspo nding to the disposal of the investme nt
Day of receiving Fangda 2,000,00 84,959,6 60.00% Transfer 31.12.17 the SOZN 0.00 44.45 transfer payment
Others: Disposal of a subsidiary in multiple steps that lead to loss of control in the report period □ Yes √ No
2. Change to the consolidation scope for other reasons
Change in the consolidation scope due to other reasons (such as new subsidiaries and liquidation of subsidiaries) and the situations: 1. Shenzhen Hongjun Investment Co., Ltd. and Fangda Australia Co., Ltd. were newly established in this period. The two companies are consolidated in this period.
2. In this period, the indirect controlled subsidiary Jiangxi Fangda New Aluminum Co., Ltd. was liquidated, and at the same time, the entire equity of Guangdong Fangda SOZN Lighting Co. was disposed, leading to loss in the control. Therefore, the two subsidiaries are moved out of the consolidation scope in this period.
IX. Equity in Other Entities
1. Interests in subsidiaries
(1) Group Composition
Company Place of business Registered Business Shareholding percentage Obtaining method
185 2017 Annual Report of China Fangda Group Co., Ltd.
address Direct Indirect
Designing, manufacturing, Fangda Jianke Shenzhen Shenzhen 98.39% 1.61% Incorporation and installation of curtain walls
Production, processing and Fangda Shenzhen Shenzhen installation of 14.00% 86.00% Incorporation Automatic subway screen doors
Production and sales of new-type materials Fangda New Nanchang Nanchang composite 75.00% 25.00% Incorporation Material materials and production of curtain walls
Design, production, sales Fangda and installation of Nanchang Nanchang 99.00% 1.00% Incorporation Aluminum aluminum materials, doors and windows
Computer Kexunda Shenzhen Shenzhen software 100.00% Incorporation development
Real estate Fangda Property Shenzhen Shenzhen development and 100.00% Incorporation operation
Design and Fangda New Shenzhen Shenzhen construction of 100.00% Incorporation Energy PV power plants
Trusted processing of Chengdu Fangda Chengdu Chengdu 100.00% Incorporation building curtain wall materials
Shihui International Virgin Islands Virgin Islands Investment 100.00% Incorporation Holding Co., Ltd.
Dongguan New Installation and Dongguan Dongguan 100.00% Incorporation Material sales of building
186 2017 Annual Report of China Fangda Group Co., Ltd.
curtain walls
Designing, Shenyang manufacturing, Shenyang Shenyang 100.00% Incorporation Decoration and installation of curtain walls
Production and Consolidation of Fangda SOZN Zhongshan Zhongshan sales of light 60.00% entities not under products common control
Fangda Property Property Shenzhen Shenzhen 100.00% Incorporation Management management
Jiangxi Fangda Real estate Property Nanchang Nanchang development and 100.00% Incorporation Development Co., operation Ltd.
Pingxiang Fangda Design and Luxin New Pingxiang Pingxiang construction of 100.00% Incorporation Energy Co., Ltd. PV power plants
Pingxiang Design and Xiangdong Pingxiang Pingxiang construction of 100.00% Incorporation Fangda New PV power plants Energy Co., Ltd.
Nanchang Xinjian Design and Fangda New Nanchang Nanchang construction of 100.00% Incorporation Energy Co., Ltd. PV power plants
Dongguan Design and Fangda New Dongguan Dongguan construction of 100.00% Incorporation Energy Co., Ltd. PV power plants
Kechuangyuan Software Shenzhen Shenzhen 100.00% Incorporation Software development
Fangda Automation Metro screen Hong Kong Hong Kong 100.00% Incorporation (Hong Kong) Co., door Ltd.
Hongjun Investment Shenzhen Shenzhen Investment 98.00% 2.00% Incorporation Company
Designing, manufacturing, Jianke Australia Australia Australia 100.00% Incorporation and installation of curtain walls
Note to the difference between shareholdings in subsidiaries and percentage of votes:
187 2017 Annual Report of China Fangda Group Co., Ltd.
Basis for holding half or less votes but controlling invested entities, and holding half or more votes but not controlling invested entities: Basis for control of structural entities incorporated in the consolidation scope:
Basis for recognizing a company as an agent or consigner: Others:
Fangda Aluminum was liquidated and canceled in the reporting period. The Company has transferred all equity in Fangda SOZN and has lost control in Fangda SOZN. Shenyang Decoration has finished liquidation. The industry and commerce canceling process has not been finished yet by the reporting date.
2. Interests in joint ventures or associates
(1) Financial summary of insignificant joint ventures and associates
In RMB
Closing balance/amount occurred in this Opening balance/amount occurred in
period previous period
Joint venture: -- --
Total shareholding -- --
Associate: -- --
Total book value of investment 34,142,055.62 12,105,030.68
Total shareholding -- --
Net profit -2,162,975.06 -1,384,650.25
Total of misc. incomes -2,162,975.06 -1,384,650.25
X. Risks of Financial Tools
Major financial tools of the Group include monetary fund, accounts receivable, receivable bills, other receivables, other current assets, financial assets measured at fair value and whose change recorded in the profit and loss of this period, accounts payable, interest payable, payable bills, other payables, short-term borrowings, other current liabilities, non-current liabilities due within one year and long-term borrowings. Details about the Group's financial instruments are disclosed in related notes. The following e xplains risks related to the financial instruments and risk management policies adopted by the Group to lower the risks. The management of the Group manages and monitor the risks to ensure that the risks are within the acceptable range.
1. Risk management target and policy
The target of the risk management is to balance between risk and benefit and lower financial risks’ impacts on the Group’s financial performance. Based on the target, the Group has formulated risk management policy to identify and analyz e risks facing the Group and set an appropriate acceptable level and internal control procedures to monitor the risks. The Group regularly reviews the risk management policies and related internal control system to suit the market status and changes in the Group’s operating activities. The internal auditing department of the Group will regularly or randomly check the implementation of the internal control system.
Risks caused by the Group’s financial instruments are credit risk, liquidity risk and market risk (including interest, exchange rate and product price/equity tool price risks).
188 2017 Annual Report of China Fangda Group Co., Ltd.
(1) Credit risk
Credit risk is caused by the failure of one party of a financial instrument in performing its obligations, causing the risk of financial loss for the other party.
The Group manages credit risks through classification. The credit risk is mainly caused by bank deposit and receivables.
The Group’s bank deposit is mainly deposited in state-owned banks and large-sized listed banks. The credit risk caused by bank deposited is minor.
For receivables, the Group sets up related policies to control the credit risk. The Group set the credit line and term for debtors according to their financial status, external rating, and possibility of getting third-party guarantee, credit record and other factors. The Group regularly monitors debtors’ credit record. For those with poor credit record, the Group will send written payment reminders, shorten or cancel credit term to lower the general credit risk.
The largest credit risk facing the Group is the book value of each financial asset on the balance sheet. The Group makes no guarantee that may cause the Group credit risks.
Among the Group’s receivables, accounts receivable from top 5 customers account for 12.85% of the total accounts receivable (2016: 23.59%); among other receivables, other receivables from top 5 customers account for 71.91% of the total other receivables (2016: 35.93%).
(2) Liquidity risk
Liquidity risk is the risk of capital shortage when the Group needs to pay cash or settled with other financial assets.
The Group keeps adequate cash and cash equivalent, and monitors the level to ensure that the cash and cash equivalent can meet the operation needs. The management of the Group monitors the use of bank loans and ensures that they are used as agreed. The Group also obtains guarantee from financial institutions for adequate standby fund to meet short-term and long-term capital demand.
The Group can also use fund generated by operating activities and bank and other loans. On December 31, 2017, the total credit line of the Group was RMB4,456,000,000, with RMB2,538,021,800 unused (December 31, 2016: RMB2,345,596,800).
Financial liabilities and excluded guarantees held by the Group by undiscounted residual contract cash flow (in RMB10,000) at the end of the period:
Closing amount Assets Less than 1 year Within 1-3 years Over 3 years Total Financial liabilities: Short-term loans 61,600.00 61,600.00 Notes payable 53,292.10 53,292.10 Account payable 87,896.56 6,732.71 9.96 94,639.23 Employees’ wage payable 4,039.91 4,039.91 Interest payable 242.53 242.53 Other payables 15,533.63 31,241.89 3,343.43 50,118.95 Non-current liabilities due in 1 20,000.00 20,000.00 year
189 2017 Annual Report of China Fangda Group Co., Ltd.
Other current liabilities 953.10 953.10 Long-term loans 80,000.00 9,397.82 89,397.82 Total liabilities 243,557.83 117,974.60 12,751.21 374,283.64
Financial liabilities and excluded guarantees held by the Group by undiscounted residual contract cash flow (in RMB10,000) at the beginning of the period:
Opening amount Assets Less than 1 year Within 1-3 years Over 3 years Total Financial liabilities: Short-term loans 59,100.00 59,100.00 Notes payable 55,730.13 55,730.13 Account payable 113,483.10 14,042.50 127,525.60 Interest payable 263.50 263.50 Other payables 5,636.61 30,981.67 36,618.28 Non-current liabilities due in 1 year 3,514.81 3,514.81 Long-term payable 20,000.00 72,216.96 92,216.96 Total liabilities 237,728.15 65,024.17 72,216.96 374,969.28
(3) Market risk
Market risk of financial instrument is caused by changes in the fair value of financial instruments or future cash flow, including interest risk, exchange rate and other price risks.
Interest rate risk is caused by fluctuation of the fair value or future cash flow of financial instruments caused by changes in the market interest rate. The interest rate risk can be caused by recognized interest-bearing financial instruments and unrecognized financial instruments.
The Group's interest rate risk is mainly caused by short-term borrowings, other current liabilities and long-term borrowings. Financial liabilities with floating interest rate cause cash flow interest rate risk for the Group. Financial liabilities with fixed interest rate cause fair value interest rate risk for the Group. The Group decides the proportion between fixed interest rate and floating interest rate according to the market environment and regularly reviews and monitors the combination of fixed and floating interest rate instruments. All financial liabilities of the Group at the end of the period bear fixed interest rates.
The Group pays close attention to the risks of changing interest rates. The Group adopts no hedging policies currently. The management is responsible for monitoring the interest risks. As fixed deposits are short-term borrowing, the interest rate risk of the fair value of bank deposit is minor.
As there is no floating interest rate borrowing during the current period, if the borrowing rate calculated with floating interest rate rises or falls by 50 basis points, while other factors remain unchanged, the Group's net profit and shareholders' equity will remain unchanged on December 31, 2017 (December 31, 2016: RMB 0.00).
Exchange rate risk
Exchange rate risk is caused by fluctuation of the fair value or future cash flow of financial instruments caused by changes in the foreign exchange rates. The exchange rate risk can be caused by financial instruments priced in foreign currencies.
190 2017 Annual Report of China Fangda Group Co., Ltd.
The principal operations of the Group are located in the territory of China. Except for subsidiaries established in Hong Kong and Australia which hold foreign currency as assets in settlement currency, the principal business is settled in RMB. The proport ion of foreign assets and liabilities held by the Group in the overall assets and liabilities is not significant. Therefore, the market risk of foreign exchange changes undertaken by the Company is not significant.
See Note VII. 57 Foreign Currency Item Note for the Group’s financial assets and liabilities priced in foreign currencies.
Other price risks
Other price risks refer to risks of fluctuations caused by changes to market prices, regardless of whether the changes are caused by factors related to a single financial tool or issuer, or factors related to all similar financial tools traded in the market. Other price risks come from changes in product prices or equity tool prices.
The Group's investment in financial assets classified as fair value through changes in fair value through profit or loss, and investment properties measured in fair value are measured at fair value on the balance sheet date. Therefore, the Group bears risks of changes in the securities market and real estate market prices.
The Group closely follows impacts of price changes to the Company’s securities investment price and real estate price risks. The Group takes no measure to prevent other price risks currently. The management is responsible for monitoring the other price risks.
2. Capital management
The Group’s capital management aims to ensure continuous operation of the Group, provide returns for shareholders, help other interested parties make benefit, and maintain the best capital structure and lower capital cost.
The Group may adjust the dividend distributed to shareholders, issue new shares or sell assets to maintain or adjust the capital structure.
The Group monitors the capital structure based on the assets/liability ratio. On 31.12.17, the Group’s assets/liability ratio is 57.52% (31.12.16: 66.08%).
XI. Fair Value
1. Closing fair value of assets and liabilities measured at fair value
In RMB
Closing fair value Items First level fair value Second level fair value Third level fair value Total
1. Continuous fair value ------measurement
2. Leased building 1,492,278,859.69 1,492,278,859.69
Total assets measured at 1,492,278,859.69 1,492,278,859.69 fair value continuously
191 2017 Annual Report of China Fangda Group Co., Ltd.
Derivative 159,000.00 159,000.00 financial liabilities
Total assets measured at 159,000.00 159,000.00 fair value continuously
2. Discontinuous fair ------value measurement
2. Recognition basis of market value of continuous and discontinuous items measured at first level fair value
The Group determines the fair value using quotation in an active market for financial instruments traded in an active market;
Valuation technique and qualitative and quantitative information for key parameters of continuous and discontinuous second level fair value items
For investment in real estate similar with real estate transaction, the Group uses valuation techniques to determine its fair value. The technique is comparison method. Inputs include transaction date, status, region and other factors.
4. Switch between different levels, switch reason and switching time policy
In the period, there is no switch in the financial assets measured at fair value between the first and second level or transfer in or out of the third level.
5. Fair value of financial assets and liabilities not measured at fair value
Financial assets and liabilities measured at amortized cost include: monetary capital, bills receivable, accounts receivable, other receivables, short-term borrowings, notes payable, accounts payables, other payables, and long-term payables.
The difference between book value and fair value of financial assets and liabilities not measured at fair value is small.
XII. Related Parties and Transactions
1. Parent of the Company
Share of the parent Voting power of the Parent Registered address Business Registered capital co. in the Company parent company
Shenzhen Banglin Technologies Shenzhen Industrial investment 30,000,000.00 8.72% 8.72% Development Co., Ltd.
Shengjiu Investment Hong Kong Industrial investment HKD1.00 7.66% 7.66%
192 2017 Annual Report of China Fangda Group Co., Ltd.
Ltd.
Gong Qing Cheng Shi Li He Investment Management Jiujiang Industrial investment 19,780,992.00 2.26% 2.26% Partnership Enterprise (limited partner)
Particulars about the parent of the Company 1. All of the investors of Shenzhen Banglin Technology Development Co., Ltd. – the holding shareholder of the Company, are natural persons. Among them, Chairman Xiong Jianming is holding 85% of the shares, and Mr. Xiong Xi – son of Mr. Xiong Jianming, is holding 15% of the shares. 2. Shenzhen Shilihe Investment Co., Ltd. was renamed as Gongqingcheng Shilihe Investment Management Partnership (Limited Partnership). 3. Among the top 10 shareholders, Shenzhen Banglin Technology Development Co., Ltd. and Shengjiu Investment Co., Ltd. are parties action-in-concert. Shenzhen Banglin Technology Development Co., Ltd. and Gong Qing Cheng Shi Li He Investment Management Partnership Enterprise are related parties. The Company is not notified of other action-in-concert or related parties among the other holders of current shares.
The final controller of the Company is Xiong Jianming. Others:
2. Subsidiaries of the Company
See Note IX. 1.
3. Joint ventures and associates
See Note IX. 2 for details of significant joint ventures and associates of the Company. Information about other joint ventures or associates with related transactions in this period or with balance generated by related transactions in previous period:
Joint venture or associate Relationship with the Company
Shenzhen Ganshang Joint Investment Co., Ltd. Associate
Shenzhen Huihai Yirong Internet Service Co., Ltd. Associate
Jiangxi Business Innovative Property Joint Stock Co., Ltd. Associate
4. Other associates
Other related parties Relationship with the Company
Directors, manager, CFO and secretary of the Board of Directors Key management
Shenzhen Qijian Technology Co., Ltd. Common actual controller
193 2017 Annual Report of China Fangda Group Co., Ltd.
5. Related transactions
(1) Related transactions for purchase and sale of goods, provision and acceptance of services
Purchasing of goods and services In RMB
Amount occurred Whether the Occurred in previous Affiliated party Related transaction in the current Approved amount transaction amount is period period exceeded
None
Sales of goods and services
In RMB
Amount occurred in the Affiliated party Related transaction Occurred in previous period current period
Shenzhen Qijian Technology Property service and sales of 20,126.65 Co., Ltd. goods
Shenzhen Ganshang Joint Property service and sales of 8,434.81 Investment Co., Ltd. goods
Notes about related transactions for purchase and sale of goods, provision and acceptance of services
(2) Related leasing
The Company is the leasor: In RMB
Name of the leasee Category of asset for lease Rental recognized in the period Rental recognized in the period
Shenzhen Ganshang Joint Houses & buildings 125,775.90 121,988.10 Investment Co., Ltd.
Shenzhen Qijian Technology Houses & buildings 179,744.00 Co., Ltd.
(3) Related guarantees
The Company is the guarantor:
In RMB
Beneficiary party Amount guaranteed Start date Due date Completed or not
Fangda Jianke 48,000.00 06.07.16 15.07.18 No
Fangda Jianke 40,000.00 06.12.17 06.12.18 No
Fangda Jianke 30,000.00 23.08.17 22.08.18 No
Fangda Jianke 40,000.00 01.11.17 01.11.18 No
194 2017 Annual Report of China Fangda Group Co., Ltd.
Fangda Jianke 18,000.00 16.02.17 15.02.18 No
Fangda Jianke 26,000.00 27.12.16 30.06.18 No
Fangda Automatic 21,600.00 06.07.16 05.07.18 No
Fangda Automatic 15,000.00 31.10.17 31.10.18 No
Fangda Automatic 20,000.00 23.08.17 22.08.18 No
Fangda Automatic 10,000.00 27.12.16 30.06.18 No
Fangda Property 130,000.00 03.02.15 02.02.23 No
Jiangxi New Material 8,000.00 27.05.17 26.05.18 No
No
The Company is the guarantied party: In RMB
Guarantor Amount guaranteed Start date Due date Completed or not
Fangda Jianke 25,000.00 26.09.17 26.09.18 No
Note to related guarantees
The above-mentioned guarantees are all associated guarantees within interested entities of the Group.
(4) Remuneration of key management
In RMB
Items Amount occurred in the current period Occurred in previous period
Directors, supervisors and senior 9,281,475.55 7,214,700.62 management
6. Receivable and payables due with related parties
(1) Receivable interest
In RMB
Closing balance Opening balance
Project Affiliated party Remaining book Remaining book Bad debt provision Bad debt provision value value
Other receivables Shenzhen Woke 865,802.94 86,580.29 867,442.94 25,974.09
Other receivables Shenyang Fangda 42,877.00 1,286.31
Account receivable Qijian Technology 735.00 7.35
(2) Receivable interest
In RMB
195 2017 Annual Report of China Fangda Group Co., Ltd.
Project Affiliated party Closing balance of book value Opening balance of book value
Other payables Shenyang Fangda 7,908.80
XIII. Contingent events
1. Major commitments
Major commitments that exist on the balance sheet day On November 6, 2017, Fangda Real Estate Co., Ltd., a subsidiary of the Company, and Bangshen Electronics (Shenzhen) Co., Ltd. signed the ―Joint Development Agreement on Fangda Bangshen Industrial Park (Temporary Name) Urban Renewal Project‖, and the two parties agreed to develop cooperatively. In order to develop urban renewing projects such as a ―renovation project‖, Fangda Real Estate provided Party A with property compensation through renovating and renovating the property allocation terms agreed upon by both parties, and obtained independent development rights of the project. As of December 31, 2017, Fangda Real Estate has paid a deposit of RMB 20,000,000.
The Company has no other commitments that should be disclosed by 31.12.17.
2. Contingencies
(1) Significant contingencies on the balance sheet date
(1) Contingent liabilities formed by material lawsuit or arbitration, and their influences on the financial position
In June 2015, Fangda Jianke filed a lawsuit against Wang Weihong, requiring an indemnity of RMB23 million and de-freezing of the amount RMB23 million by the bank. By the report date, the lawsuit remain pending.
(2) Pending major lawsuits
On September 6, 2017, Chenghua District People's Court of Chengdu Municipality sentenced Sichuan Chuta Hengyuan Industrial Co., Ltd. to pay construction money to Fangda Jianke within 10 days from the date of the verdict 川0108民初1828号 RMB10,242,182.99. As of the date of this report, Fangda Jianke has applied for execution and has not received the relevant payment.
(3) Contingent liabilities formed by providing of guarantee to other companies’ debts and their influences on financial situation
By December 31, 2017, the Company has provided loan guarantees for the following entities: Name of guaranteed entity Guarantee Amount (in Start date End date RMB10,000) Fangda Automatic Guarantee 1,600.00 2017-12-13 2018-12-12 Fangda Jianke Guarantee 20,000.00 2017-8-31 2018-8-31 Fangda Jianke Guarantee 10,000.00 2017-9-13 2018-9-13 Fangda New Material Guarantee 5,000.00 2017-6-19 2018-6-18 Fangda Property Pledge guarantee 2,761.20 2015-2-12 2023-2-11 Fangda Property Pledge guarantee 7,009.77 2015-4-23 2023-2-11 Fangda Property Pledge guarantee 4,334.40 2015-6-8 2023-2-11 Fangda Property Pledge guarantee 426.63 2015-8-21 2023-2-11
196 2017 Annual Report of China Fangda Group Co., Ltd.
Fangda Property Pledge guarantee 3,525.73 2015-9-11 2023-2-11 Fangda Property Pledge guarantee 518.82 2015-9-23 2023-2-11 Fangda Property Pledge guarantee 480 2015-10-14 2023-2-11 Fangda Property Pledge guarantee 3,433.95 2015-11-6 2023-2-11 Fangda Property Pledge guarantee 545.76 2015-11-20 2023-2-11 Fangda Property Pledge guarantee 2388.91 2015-12-9 2023-2-11 Fangda Property Pledge guarantee 4,614.39 2015-12-28 2023-2-11 Fangda Property Pledge guarantee 4241.27 2016-1-26 2023-2-11 Fangda Property Pledge guarantee 4,260.74 2016-1-29 2023-2-11 Fangda Property Pledge guarantee 343.47 2016-3-28 2023-2-11 Fangda Property Pledge guarantee 3,615.06 2016-4-27 2023-2-11 Fangda Property Pledge guarantee 1,157.69 2016-5-22 2023-2-11 Fangda Property Pledge guarantee 414.66 2016-5-30 2023-2-11 Fangda Property Pledge guarantee 3,113.99 2016-6-13 2023-2-11 Fangda Property Pledge guarantee 1,465.99 2016-6-24 2023-2-11 Fangda Property Pledge guarantee 4415.64 2016-7-26 2023-2-11 Fangda Property Pledge guarantee 4,813.23 2016-8-15 2023-2-11 Fangda Property Pledge guarantee 5,519.40 2016-9-7 2023-2-11 Fangda Property Pledge guarantee 15,048.01 2016-10-8 2023-2-11 Fangda Property Pledge guarantee 7,628.15 2016-11-7 2023-2-11 Fangda Property Pledge guarantee 6,140.11 2016-11-30 2023-2-11 Fangda Property Pledge guarantee 9,889.21 2017-1-19 2023-2-11 Fangda Property Pledge guarantee 1,830.24 2017-5-31 2023-2-11 Fangda Property Pledge guarantee 2,581.45 2017-6-28 2023-2-11 Fangda Property Pledge guarantee 2,879.95 2017-8-30 2023-2-11 Total 145,997.82
Note: Contingent liabilities caused by guarantees provided for other entities are all related guarantees between interested entities in the Group.
(4) Providing guarantee for property purchasers
The Group’s property business provides periodic mortgage guarantee for property purchasers. The term of the periodic guarantee lasts from the effectiveness of guarantee contracts to the completion of mortgage registration and transfer of housing ownership certificates to banks. By December 31, 2017, the Company has provided periodic guarantee of RMB396 million.
On 31.12.17, the Company has no other contingent events that should be disclosed.
(2) Significant contingent events that do not need to be disclosed should be explained
No such significant contingent event
197 2017 Annual Report of China Fangda Group Co., Ltd.
XIV. Post-balance-sheet events
1. Profit distribution
In RMB
Profit or dividend to be distributed 177,546,338.10
Profit or dividend approved to be distributed 177,546,338.10
2. Notes to other issues in post balance sheet period
In 2013, Fangda Jianke filed a lawsuit to Shenyang Middle People’s Court again Shenyang Lidu Commerce Co., Ltd., requiring construction payment and loss of RMB9,375,483.47 and the interest. On February 11, 2018, the two parties reached a settlement through the civil mediation book of Liaoning Higher People's Court (2016) Liao Min Zhong No. 998 Civil Litigation Paper. Shenyang Lidu Commerce Co., Ltd. actually paid Fangda Jianke RMB1,870,240.00 yuan. On March 15, 2018, the subsidiary Fangda Jianke actually received RMB1,870,240.00. On 20.04.18, the Company has no other contingent events that should be disclosed.
XV. Other material events
1. Suspension of operations
In RMB
Suspended operation profit Income tax Items Income Expense Total profit Net profit attributable to the expenses owners of parent company
Suspension of -22,939,797.68 22,939,797.68 22,939,797.68 16,297,017.20 operations
Other note (1) Fangda Aluminum has ceased normal operations in 2011 and was cancelled on December 29, 2017. Shenyang Decoration has finished liquidation. The industry and commerce canceling process has not been finished yet by the reporting date. The Company has transferred all equity in Fangda SOZN and has lost control in Fangda SOZN.
(2) The discontinued operating net profit for 2017 includes: Shenyang Decoration's net profit for the current period of RMB -8,074.07, Fangda Aluminum’s net profit for the period of RMB 6,340,920.55, and Fangda SOZN’s net profit for the period of RMB 16,606,951.20.
(3) The net profit from suspended business in 2016 includes: the net profit of RMB-34,466,097.73 of Shenyang Fangda and its subsidiaries, RMB14,534.16 of Hong Kong Jiajun and RMB-13,623.03 of Fangda Aluminium, a net profit of RMB-43,983.88 from Shenyang Decoration and a net profit of RMB-74,395,136.05 from Fangda SOZN.
198 2017 Annual Report of China Fangda Group Co., Ltd.
2. Segment information
(1) Recognition basis and accounting policy for segment report
The Group divides its businesses into five reporting segments. The reporting segments are determined based on financial information required by routine internal management. The Group’s management regularly review the operating results of the reporting segments to determine resource distribution and evaluate their performance.
The reporting segments are:
(1) Curtain wall segment, production and sales of curtain wall materials, construction curtain wall design, production and installation;
(2) Rail transport segment: assembly and processing of metro screen doors;
(3) Real estate segment: development and operating of real estate on land of which land use right is legally obtained by the Company; property management;
(4) New energy segment, R&D, installation and sales of PV devices, design and construct ion of PV power plants; R&D, design, production, sales and installation of light accessories, and other lights, LED products and hardware.
(5) Others
The segment report information is disclosed based on the accounting policies and measurement standards used by the segments when reporting to the management. The policies and standards should be consistent with those used in preparing the financial statement.
(2) Financial information
In RMB
Offset between Items Curtain wall Rail transport Real estate New energy Others Total segments
1,655,994,799. 2,947,470,813. Turnover 339,399,859.01 914,822,378.87 22,554,588.30 29,327,716.61 14,628,528.37 16 58
Including: external 1,653,688,831. 2,947,470,813. 339,399,859.01 911,195,066.07 21,848,200.20 21,338,857.07 transaction 23 58 income
Inter-segment transaction 2,305,967.93 3,627,312.80 706,388.10 7,988,859.54 14,628,528.37 income
Including: 1,630,744,173. 2,900,462,349. major business 336,674,910.58 914,822,378.87 22,554,588.30 4,333,700.90 03 88 turnover
Operation cost 1,473,523,579. 246,106,664.12 297,698,007.68 7,535,695.83 2,041,826.84 28,666,884.43 1,998,238,889.
199 2017 Annual Report of China Fangda Group Co., Ltd.
17 21
Including: 1,453,633,762. 1,977,766,793. major business 245,621,615.56 297,698,007.68 7,535,695.83 26,722,287.44 33 96 cost
-641,959,639.8 -165,417,937.8 -165,475,494.0 -475,301,286.7 Operation cost 166,003,263.83 22,905,151.48 -22,307,618.41 0 9 0 9
Operating 1,259,084,010. 1,424,533,211. 16,467,956.16 70,388,043.41 37,326,510.88 192,703,827.66 151,437,137.94 profit/(loss) 99 16
3,215,679,308. 3,500,088,530. 2,599,090,236. 2,483,627,104. 7,625,422,688. Total assets 612,947,617.80 181,244,100.32 02 22 95 68 63
2,261,771,551. 2,382,722,726. 1,275,179,447. 4,386,483,486. Total liabilities 267,578,953.60 115,143,262.12 634,446,440.41 37 23 28 45
3. Major transactions and events with impacts on investors’ decisions
1. Acquisition of Fangda SOZN, repurchasing of shares and debt payment agreement, and debt settlement agreement
(1) About the acquisition
Fangda New Energy entered into an investment agreement with Luo Huichi on July 18, 2014. According to the agreement, Fangda Energy and Shenzhen Jinma Yinke entered into a share transfer agreement on July 29, 2014. Luo Huichi makes contribution to a newly established company with limited liability using fixed assets, intangible assets, sales network and teams in three companies under her actual control: Zhongshan SOZN Lighting, Zhongshan Henglan Tengding Lighting Factory, Shenzhen Jinma Yinke. After confirming the Target Company’s assets, both parties entered into the stock transfer and capital increment agreement, under which the Company acquires 60% stack in the Target Company by acquiring stocks and injecting capital.
Fangda New Energy made the share transfer payment of RMB12 million as agreed and provided interest -free loans of RMB30 million to Fangda SOZN. Fangda SOZN did not fulfill 90% of the sales or net profit target in 2015.
(2) Equity repurchases, creditor's rights and debt payment agreements and debt settlement agreement.
On 22.04.16, the Company, Fangda New Energy, Fangda SOZN, Shenzhen Jinma Yinke Electronics Co., Ltd., Luo Huichi and Jin Yaping (spouse of Luo Huichi) signed the Stock Repurchasing and Debt Payment Agreement. According to the agreement, Shenzhen Jinma Yinke shall pay RMB12 million to repurchase the 60% stake in Fangda SOZN held by Fangda New Energy and all parties are released from all rights and obligations under the Investment Agreement. All parties agree, if Fangda SOZN repays the debt of RMB23 million within the agreed period, the Company and Fangda New Energy shall give up all remaining debt on Fangda SOZN. The agreement was approved at the 20th meeting of the 7th Board of Directors held on April 22, 2016 and comes into effect after being approved at the 2015 General Shareholders’ Meeting.
As Jinma Yingke failed to make the repurchase payment as agreed, Fangda New Energy filed proceedings to the Shenzhen Nanshan District People's Court and applied for property preservation of RMB2 million on August 30, 2016 to require Jinma Yin gke to make the share transfer payment of RMB12 million and make the penalty. On November 21, 2016, Fangda New Energy and Jinma Yingke reached the dispute settlement agreement and agreed to make the share repurchasing payments of RMB2 million before December 5, 2016, March 30, 2017, and June 30, 2017 and make the share repurchasing payment of RMB6 million before December 30, 2017. As of December 1, 2017, Fangda New Energy Co., Ltd. has received a share repurchase fee of RMB 1.6 million.
200 2017 Annual Report of China Fangda Group Co., Ltd.
As Jinma Yingke failed to make the share repurchasing payments, the Company filed proceeding to Shenzhen Nanshan District People’s Court on September 1, 2016 to require Luo Huichi and Jin Yaping to assume joint liability and make the principal pay ment of RMB15,158,586.39 and interest.
On December 1, 2017, the Company and Luo Huichi, Jin Yaping, and Fangda SOZN signed the Debtors and Debt Restructuring Agreement. According to the (2016) civil judgment of Guangdong 0305 People's Early 10459 Case, Luo Huichi and Jin Yaping shall assume RMB15,158,586.39 of guarantee responsibility and liquidated damages, case acceptance fees, and maintenance fees to the Company. In view of the fact that Fang Daosuo Zheng, Luo Huichi, and Jin Yaping were unable to repay funds in a timely manner, after the parties negotiated, the following arrangements for debt reorganization were implemented: The company granted an exemption to the claims of RMB24,746,465.97 yuan to Fangda SOZN. After the exemption, the remaining debt of the company owned by the other company, Daoshenzheng, was RMB 13,150,000.00. Luo Huichi was jointly and severally liable for the above-mentioned residual claim of RMB 13,150,000.00 of the company. Jin Yaping had 30% joint guarantee responsibility for Luo Huichi with joint guarantee responsibility. The remaining claims are repaid monthly in six years from January 2018. As of the date of this report, 40,000 yuan has been received. According to the debt restructuring agreement and Fangda SOZN's position, the Company wrote off the debt of RMB24,746,465.97 and made full provision for the remaining debt of RMB13,150,000.00.
On December 1, 2017, The Company and Jinma Yingke, Luo Huichi, Jin Yaping, and Fangda SOZN signed the "Agreement on Implementation of Reconciliation", and according to (2016) Guangdong 0305 Civil Decree No. 10401, Jinma Yingke confirmed that it must pay equity to Fangda New Energy a transfer amount of RMB 12 million, liquidated damages, case acceptance fee, and maintenance fee. Fangda New Energy agreed that after receiving a total of RMB 2 million in equity transfer fees paid by Jinma Yingke Company, it will transfer the 60% stake in Fangda SOZN to Jinma Yingke at the same time, and it also exempts Jinma Yingke from the payment of the remaining stock rights and all liquidated damages, case acceptance fees, and maintenance fees. In view of the fact that Fangda SOZN was unable to repay the loan, Fangda New Energy agreed to waive Fangda SOZN's debt of RMB56,220,793.94 after Fangda New Energy transferred Fangda SOZN’s 60% equity to Jinma Yingke and completed the industrial and commercial change procedure. On February 13, 2018, Fangda SOZN had completed the formalities for the above-mentioned equity industrial and commercial changes. According to the implementation of the above-mentioned implementation of the settlement agreement and the actual situation of Fangda SOZN, Fangda New Energy made full provision for the above-mentioned debt of RMB56,220,793.94 and other disbursement expenses of RMB9,754.58. At the same time, as of December 31, 2017, Fangda New Energy has received a total of RMB2 million yuan equity transfer payments from Jinma Yingke. On December 31, 2017, the Group lost control of Fangda SOZN, and it is no longer included in the consolidated statement of the current period. T he disposal price and the disposal of the investment correspond to the consolidated financial statement at the level of the subsidiary’s net assets. The difference between the shares of RMB 84,959,644.45 is included in the investment income for the period of loss of control.
XVI. Notes to Financial Statements of the Parent
1. Account receivable
(1) Account receivable disclosed by categories
In RMB
Closing balance Opening balance
Remaining book Remaining book Type Bad debt provision Book Bad debt provision value value Book value value Amount Proportio Amount Provision Amount Proportio Amount Provision
201 2017 Annual Report of China Fangda Group Co., Ltd.
n rate n rate
Recognition and 420,777. 12,623.3 408,154.5 468,186 providing of bad debt 100.00% 3.00% 100.00% 14,045.59 3.00% 454,140.85 88 4 4 .44 provisions on groups
420,777. 12,623.3 408,154.5 468,186 Total 100.00% 3.00% 100.00% 14,045.59 3.00% 454,140.85 88 4 4 .44
Account receivable with major individual amount and bad debt provision provided individually at the end of the period: □ Applicable √ Inapplicable In the group, the account receivable of which bad debt provision is made through the account aging method:
√ Applicable □ Inapplicable In RMB
Closing balance Age Account receivable Bad debt provision Provision rate
Sub-item of within 1 year
Less than 1 year 420,777.88 12,623.34 3.00%
Subtotal for less than 1 year 420,777.88 12,623.34 3.00%
Total 420,777.88 12,623.34 3.00%
Group recognition basis: Account receivable adopting the balance percentage method in the group □ Applicable √ Inapplicable Account receivable adopting other methods in the group:
(2) Bad debt provision made, returned or recovered in the period
A bad debt provision of RMB117,090.96 was made in the period. RMB1,422.25 was recovered or reversed.
(3) Balance of top 5 accounts receivable at the end of the period
The total balance of top-five accounts receivable at the end of the period is RMB363,672.05, accounting for 86.43% of the total remaining balance of all accounts receivable. The bad debt provision made at the end of the period is RMB10,910.16.
2. Other receivables
(1) Other receivables disclosed by categories
In RMB
Closing balance Opening balance
Remaining book Remaining book Type Bad debt provision Book Bad debt provision value value Book value value Amount Proportio Amount Provision Amount Proportio Amount Provision
202 2017 Annual Report of China Fangda Group Co., Ltd.
n rate n rate
Other receivables with major individual 13,150,0 13,150,0 77,261, 77,261,42 amount and bad debt 1.92% 100.00% 14.40% 100.00% 00.00 00.00 420.29 0.29 provision provided individually
(2) Recognition and 672,959, 186,183. 672,773,7 459,434 459,354,98 providing of bad debt 98.08% 0.03% 85.60% 79,545.24 0.02% 963.61 16 80.45 ,528.66 3.42 provisions on groups
686,109, 13,336,1 672,773,7 536,695 77,340,96 459,354,98 Total 100.00% 1.94% 100.00% 14.41% 963.61 83.16 80.45 ,948.95 5.53 3.42
Other receivables with major individual amount and bad debt provision provided individually at the end of the period: √ Applicable □ Inapplicable In RMB
Other receivables (by Closing balance entity) Other receivables Bad debt provision Provision rate Reason
Cannot be recovered Fangda SOZN 13,150,000.00 13,150,000.00 100.00% because of insolvency
Total 13,150,000.00 13,150,000.00 -- --
In the group, the other receivables of which bad debt provision are made through the account aging method: √ Applicable □ Inapplicable In RMB
Closing balance Age Other receivables Bad debt provision Provision rate
Sub-item of within 1 year
Less than 1 year 96,777.72 2,903.33 3.00%
Subtotal for less than 1 year 96,777.72 2,903.33 3.00%
1-2 years 865,802.94 86,580.29 10.00%
4-5 years 20,000.00 16,000.00 80.00%
Over 5 years 80,699.54 80,699.54 100.00%
Total 1,063,280.20 186,183.16 17.51%
Group recognition basis:
Other receivables adopting the balance percentage method in the group: □ Applicable √ Inapplicable
Other receivables adopting other methods in the group □ Applicable √ Inapplicable
203 2017 Annual Report of China Fangda Group Co., Ltd.
(2) Bad debt provision made, returned or recovered in the period
A bad debt provision of RMB220,586.92 was made in the period. RMB39,364,954.34 was recovered or reversed.
(3) Other receivable written off in the current period
In RMB
Items Amount
Other receivable written off 24,860,414.95
Including significant other receivable: In RMB
Writing-off Entity Nature Amount Reason Related transaction procedure
Operating The borrower is Debt restructuring Fangda SOZN borrowing from 24,860,414.95 No insolvent. agreement previous subsidiary
Total -- 24,860,414.95 ------
Notes to written-off other receivables:
(4) Other receivables are disclosed by nature
In RMB
By nature Closing balance of book value Opening balance of book value
Associate accounts 671,896,683.41 535,629,171.29
Deposit
Other trades 14,213,280.20 1,066,777.66
Total 686,109,963.61 536,695,948.95
(5) Balance of top 5 other receivables at the end of the period
In RMB
Balance of bad debt Entity By nature Closing balance Age Percentage (%) provision at the end of the period
Fangda Jianke Associate accounts 509,794,895.73 Less than 1 year 74.30%
Fangda New Energy Associate accounts 39,454,651.64 Less than 1 year 5.75%
Fangda New Energy Associate accounts 41,674,416.54 1-2 years 6.07%
Fangda Property Associate accounts 33,425,037.26 Less than 1 year 4.87%
Fangda Property Associate accounts 9,323.39 1-2 years 0.00%
204 2017 Annual Report of China Fangda Group Co., Ltd.
Shihui International Associate accounts 30,430,197.80 2-3 years 4.44%
Shihui International Associate accounts 20,271.90 3-4 years 0.00%
Fangda SOZN Associate accounts 13,150,000.00 2-3 years 1.92% 13,150,000.00
Total -- 667,958,794.26 -- 97.35% 13,150,000.00
3. Long-term share equity investment
In RMB
Closing balance Opening balance
Items Remaining book Impairment Remaining book Impairment Book value Book value value provision value provision
Investment in 925,349,494.35 925,349,494.35 905,139,494.35 19,800,000.00 885,339,494.35 subsidiaries
Investment in associates and 12,105,030.68 12,105,030.68 joint ventures
Total 925,349,494.35 925,349,494.35 917,244,525.03 19,800,000.00 897,444,525.03
(1) Investment in subsidiaries
In RMB
Balance of Provision made in impairment Invested entity Opening balance Increase Decrease Closing balance this period provision at the end of the period
Fangda Jianke 491,950,000.00 491,950,000.00
Fangda Aluminum 19,800,000.00 19,800,000.00 0.00 0.00 0.00
Fangda Automatic 18,831,241.35 18,831,241.35
Fangda New 74,496,600.00 74,496,600.00 Material
Fangda Property 200,000,000.00 200,000,000.00
Shihui International 61,653.00 61,653.00 Holding Co., Ltd.
Fangda New 100,000,000.00 100,000,000.00 Energy
Hongjun Investment 40,010,000.00 40,010,000.00 Company
205 2017 Annual Report of China Fangda Group Co., Ltd.
Total 905,139,494.35 40,010,000.00 19,800,000.00 925,349,494.35
(2) Investment in associates and joint ventures
In RMB
Change (+,-) Balance
Investme of Other nt gain Cash impairme Decrease miscellan Invested Opening Increased and loss Other dividend Impairme Closing nt d eous entity balance investmen recognize equity or profit nt Others balance provision investmen income t d using change announce provision at the end t adjustmen the equity d of the t method period
1. Joint venture
2. Associate
Shenzhen Ganshang Joint 8,600,939 8,493,083 -107,856.
Investme .78 .49 29 nt Co., Ltd.
Shenzhen Huihai Yirong 3,504,090 5,000,000 6,469,694 -2,034,39
Internet .90 .00 .91 5.99 Service Co., Ltd.
12,105,03 5,000,000 14,962,77 -2,142,25 Subtotal 0.68 .00 8.40 2.28
12,105,03 5,000,000 14,962,77 -2,142,25 Total 0.68 .00 8.40 2.28
(3) Others
The Company transferred all the equity held in Ganshang Joint Investment and Huihai Yirong Company to the subsidiary Hongjun Investment.
4. Operational revenue and costs
In RMB
Items Amount occurred in the current period Occurred in previous period
206 2017 Annual Report of China Fangda Group Co., Ltd.
Income Cost Income Cost
Other businesses 29,333,583.31 2,041,826.84 34,208,627.97 8,308,449.63
Total 29,333,583.31 2,041,826.84 34,208,627.97 8,308,449.63
Others:
5. Investment income
In RMB
Items Amount occurred in the current period Occurred in previous period
Gains from long-term equity investment 150,000,000.00 430,000,000.00 measured by costs
Gains from long-term equity investment -2,142,252.28 -1,384,650.25 measured by equity
Investment gain obtained from disposal of 5,037,221.60 long-term equity investment
Investment gain obtained from disposal of financial assets measured at fair value with 77,348,884.05 variations accounted into current income account
Investment gain obtained from disposal of financial assets measured at fair value with -77,045,286.87 variations accounted into current income account
Investment gain of financial products 4,941,935.94
Others -2,000.00 5,424.66
Total 158,138,502.44 428,620,774.41
XVII. Supplementary Materials
1. Detailed accidental gain/loss
√ Applicable □ Inapplicable In RMB
Items Amount Notes
Gain/loss of non-current assets 89,483,320.53
Subsidies accounted into the current income account (except the government subsidy 5,637,910.24 closely related to the enterprise’s business and based on unified national standard
207 2017 Annual Report of China Fangda Group Co., Ltd. quota)
Gain from entrusted investment or assets 20,455,865.70 management
Gain/loss from debt reorganization -3,674,141.05
Gain/loss from change of fair value of transactional financial asset and liabilities, and investment gains from disposal of transactional financial assets and liabilities 2,013,922.62 and sellable financial assets, other than valid period value instruments related to the Company’s common businesses
Gain/loss from change of fair value of investment property measured at fair value 889,708,083.34 in follow-up measurement
Other non-business income and expenditures 4,054,553.86 other than the above
Less: Influenced amount of income tax 220,906,068.58
Influenced amount of minority 8,581,417.95 shareholders’ equity
Total 778,192,028.71 -- Explanation statement should be made for accidental gain/loss items defined and accidental gain/loss items defined as regular gain/loss items according to the Explanation Announcement of Information Disclosure No. 1 - Non-recurring gain/loss mentioned. □ Applicable √ Inapplicable
2. Net income on asset ratio and earning per share
Earnings per share
Profit of the report period Weighted average net income/asset ratio Basic earnings per share Diluted Earnings per (yuan/share) share (yuan/share)
Net profit attributable to common 41.53% 0.970 0.970 shareholders of the Company
Net profit attributable to the common owners of the PLC after 13.29% 0.31 0.31 deducting of non-recurring gains/losses
208 2017 Annual Report of China Fangda Group Co., Ltd.
3. Differences in accounting data under domestic and foreign accounting standards
(1) Differences in net profits and assets in financial statements disclosed according to the international and Chinese account standards
□ Applicable √ Inapplicable
(2) Differences in net profits and assets in financial statements disclosed according to the international and Chinese account standards
□ Applicable √ Inapplicable
209 2017 Annual Report of China Fangda Group Co., Ltd.
Chapter 12 Documents for Reference
1. The Annual Report 2017 and the Summary with signature of the legal representative (Chinese and English); 2. Accounting Statements with signatures and seals of the legal representative and financial principal and chief of accounting department; 3. Original copy of the Auditors’ Report under the seal of the CPA and signed by and under the seal of certified accountants. 4. Originals of all documents and manuscripts of Public Notices of the Company disclosed in public in the newspapers as designated by China Securities Regulatory Commission.
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