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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾

SHENZHEN TELLUS HOLDING CO., LTD

Semi-Annual Report 2017

August 2017

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Section I. Important Notice, Contents and Paraphrase

Board of Directors, Supervisory Committee, all directors, supervisors and senior

executives of Shenzhen Tellus Holding Co., Ltd. (hereinafter referred to as the

Company) hereby confirm that there are no any fictitious statements, misleading

statements, or important omissions carried in this report, and shall take all

responsibilities, individual and/or joint, for the reality, accuracy and completion

of the whole contents.

Lv Hang, Principal of the Company, Yang Jianping, person in charge of

accounting works and Liu Yuhong, person in charge of accounting organ

(accounting principal) hereby confirm that the Financial Report of

Semi-Annual Report 2017 is authentic, accurate and complete.

All directors are attended the Board Meeting for report deliberation.

Securities Times, Hong Kong Commercial Daily and Juchao Website

(www.cninfo.com.cn) are the media for information disclosure appointed by the

Company, all information under the name of the Company disclosed on the

above said media shall prevail. Concerning the forward-looking statements with

future planning involved in the Report, they do not constitute a substantial

commitment for investors, and investors are advised to exercise caution of

investment risks.

The Company has no plan of cash dividends carried out, bonus issued and

capitalizing of common reserves either.

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Contents

Section I Important Notice, Contents and Paraphrase ............................................................................................... 2

Section II Company Profile and Main Finnaical Indexes .......................................................................................... 5

Section III Summary of Company Business .............................................................................................................. 8

Section IV Discussion and Analysis of the Operation ............................................................................................. 10

Section V Important Events ..................................................................................................................................... 20

Section VI Changes in shares and particular about shareholders ............................................................................ 32

Section VII Preferred Stock ..................................................................................................................................... 36

Section VIII Particulars about Directors, Supervisors and Senior Executives ........................................................ 37

Section IX Corporate Bonds .................................................................................................................................... 38

Section X Financial Report ...................................................................................................................................... 39

Section XI Notes to financial statement .................................................................................................................. 61

Section XII Documents available for reference¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­..157

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Paraphrase

Items Refers to Contents

CSRC Refers to China Securities Regulatory Commission

SZ Exchange Refers to Shenzhen Stock Exchange

Shenzhen Branch of China Securities Depository & Clearing

Shenzhen Branch of SD&C Refers to

Corporation Limited

Company, the Company, our Company, Tellus

Refers to Shenzhen Tellus Holding Co., Ltd.

Group

Reporting period, this reporting period Refers to January to June of 2017

Auto Industry and Trade Co., Refers to Shenzhen Auto Industry and Trade Corporation

Zhongtian Company Refers to Shenzhen Zhongtian Industrial Co,. Ltd.

SDG Property Refers to Shenzhen SDG Property Management Co., Ltd.

Tellus Property Refers to Shenzhen SDG Tellus Property Management Co., Ltd.

Tellus Starlight Jinzun Refers to Anhui Tellus Starlight Jinzun Jewelry Co., Ltd.

Tellus Starlight Refers to Anhui Tellus Starlight Jewelry Investment Co., Ltd.

SDG Refers to Shenzhen Special Development Group Co., Ltd.

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Section II Company Profile and Main Finnaical Indexes

I. Company information

Short form of the stock Tellus-A, Tellus-B Stock code 000025, 200025

Stock exchange for listing Shenzhen Stock Exchange

Name of the Company (in

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾

Chinese)

Short form of the Company

ÌØÁ¦ A

(in Chinese)

Foreign name of the Company

Shenzhen Tellus Holding Co., Ltd

(if applicable)

Legal representative Lv Hang

II. Person/Way to contact

Secretary of the Board Rep. of security affairs

Name Qi Peng Sun Bolun

15/F, CNNC Building, Shennan Middle 15/F, CNNC Building, Shennan Middle

Contact add.

Road, Futian District, Shenzhen Road, Futian District, Shenzhen

Tel. (0755) 83989378 (0755) 83989339

Fax. (0755) 83989386 (0755) 83989386

E-mail ir@tellus.cn sunbl@tellus.cn

III. Others

1. Way of contact

Whether registrations address, offices address and codes as well as website and email of the Company changed in reporting period or

not

¡õ Applicable ¡Ì Not applicable

Registrations address, offices address and codes as well as website and email of the Company has no change in reporting period,

found more details in Annual Report 2016.

2. Information disclosure and preparation place

Whether information disclosure and preparation place changed in reporting period or not

¡õ Applicable ¡Ì Not applicable

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

The newspaper appointed for information disclosure, website for semi-annual report publish appointed by CSRC and preparation

place for semi-annual report have no change in reporting period, found more details in Annual Report 2016

IV. Main accounting data and financial indexes

Whether it has retroactive adjustment or re-statement on previous accounting data or not

¡õ Yes ¡Ì No

Current period Same period of last year Changes over last year

Operating income (RMB) 160,984,104.56 157,147,166.48 2.44%

Net profit attributable to shareholders of

24,596,905.09 17,747,952.63 38.59%

the listed Company(RMB)

Net profit attributable to shareholders of

the listed Company after deducting 17,705,046.11 15,449,772.01 14.60%

non-recurring gains and losses(RMB)

Net cash flow arising from operating

7,380,561.40 23,971,506.36 -69.21%

activities(RMB)

Basic earnings per share (RMB/Share) 0.0827 0.0597 38.53%

Diluted earnings per share (RMB/Share) 0.0827 0.0597 38.53%

Weighted average ROE 2.71% 2.02% 0.69%

Changes over period-end of

Period-end Period-end of last year

last year

Total assets (RMB) 1,217,998,855.68 1,189,001,074.98 2.44%

Net assets attributable to shareholder of

920,993,189.04 895,362,614.95 2.86%

listed Company (RMB)

V. Difference of the accounting data under accounting rules in and out of China

1. Difference of the net profit and net assets disclosed in financial report, under both IAS (International

Accounting Standards) and Chinese GAAP (Generally Accepted Accounting Principles)

¡õ Applicable ¡Ì Not applicable

The Company had no difference of the net profit or net assets disclosed in financial report, under either IAS (International

Accounting Standards) or Chinese GAAP (Generally Accepted Accounting Principles) in the period.

2. Difference of the net profit and net assets disclosed in financial report, under both foreign accounting

rules and Chinese GAAP (Generally Accepted Accounting Principles)

¡õ Applicable ¡Ì Not applicable

The Company had no difference of the net profit or net assets disclosed in financial report, under either foreign accounting rules or

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Chinese GAAP (Generally Accepted Accounting Principles) in the period.

VI. Items and amounts of extraordinary profit (gains)/loss

¡ÌApplicable ¡õ Not applicable

In RMB

Item Amount Note

Gains/losses from the disposal of non-current asset (including the Including: income from equity

4,967,267.25

write-off that accrued for impairment of assets) transfer 4.92 million Yuan

Gains/losses from entrust investment or assets management 1,790,968.34 Income from financing products

Restoring of receivable impairment provision that tested

5,884.91

individually

Other non-operating income and expenditure except for the

261,331.17

aforementioned items

Less: Impact on income tax 30,378.16

Impact on minority shareholders¡¯ equity (post-tax) 103,214.53

Total 6,891,858.98 --

Concerning the extraordinary profit (gain)/loss defined by Q&A Announcement No.1 on Information Disclosure for Companies

Offering Their Securities to the Public --- Extraordinary Profit/loss, and the items defined as recurring profit (gain)/loss according to

the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their

Securities to the Public --- Extraordinary Profit/loss, explain reasons

¡õ Applicable ¡Ì Not applicable

In reporting period, the Company has no particular about items defined as recurring profit (gain)/loss according to the lists of

extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to

the Public --- Extraordinary Profit/loss

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Section III Summary of Company Business

I. Main businesses of the Company in the reporting period

Does the Company need to comply with the disclosure requirements of the special industry

No

The main business of the company during the reporting period was auto sales; auto testing, maintenance and

accessories sales; property leasing and service business. During the reporting period, under the leadership of the

Board of Directors, the company took innovation-driven development as the guiding principle, actively promoted

the company's strategic transformation in accordance with the company's strategic planning, ensured the sound

development of existing main business, accelerated to implement the new business model and ensured the smooth

implementation of strategic transformation through the overall allocation of resources.

II. Major changes in main assets

1. Major changes in main assets

Major assets Note of major changes

Equity assets No major change

Fixed assets No major change

Intangible assets No major change

Book value of the construction in progress till end of 30 June 2017 amounting to

Construction in progress 354,723,200 Yuan, an increase of 11,357,900 Yuan from a year earlier with 3.31% up.

Mainly due to the continuous input on Shuibei Jewelry Building

Book value of other current assets till end of 30 June 2017 amounting to 185,824,000

Other current assets Yuan, an increase of 95,700,100 Yuan from a year earlier with 106.19% up, mainly

because financing products purchased in the period increased.

2. Main overseas assets

¡õ Applicable ¡Ì Not applicable

III. Core Competitiveness Analysis

Does the Company need to comply with the disclosure requirements of the special industry

No

1. Rich resources accumulation: Shenzhen jewelry market shares account for over 70% of the national jewelry

industry, Shuibei area is the core gathering area of Shenzhen jewelry industry and forms a huge domestic gold

jewelry enterprises cluster which covers the entire industry chain, including raw materials purchase, production

and processing, and wholesale sales, and has established good cooperation relationships with many jewelry

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enterprises by providing various stable services for many leading enterprises in jewelry industry in Shenzhen over

the years. Therefore, with the help of resources at the leading jewelry enterprises with whom the company has

established strategic partnership, the company can gather jewelry enterprises and attract talents to enter Shuibei

industry park project.

2. Low-cost funds access: in recent years, the macro economy has continued the downturn, the macroeconomic

downturn has caused a certain impact on the jewelry wholesale and retail industry, and the bank credit tightening

has caused continuous tension to the capital chain of jewelry wholesaler and retailer. As a listed company, the

company has diversified and low-cost financing channels; as a state-owned listed company with lower

asset-liability ratio, the company has low bank loan costs. Smooth financing channels and lower capital costs

provide strong financial supports for the company's transformation development and platform layout.

3. Clear strategic blueprint for third-party service providers: stay out of the competition among jewelers, drop out

of the third-party service positioning of specific management jewelry products, avoid the conflicts of interest

between the company and jewelry enterprises, which is helpful for the company to give full play to its own

advantages, establish in-depth relations with numerous jewelry brands and operators, integrate the entire industry

chain resources, and provide full services.

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Section IV Discussion and Analysis of the Operation

1. Introduction

During the reporting period, under the general background of continued downturn in the marketing environment,

the Company achieved good operating results by innovating ideas, integrating business, exploring the greatest

potential of stock business, and giving play to the basic support role of the original business, and the total profit

and the net profit attributable to the parent company raised substantially over the same period last year. From

January to June 2017, the company achieved operating income of RMB 160,984,100, an increase of RMB

3,836,900 or 2.44% compared with RMB 157,147,200 in the same period of last year; the total profit was RMB

24,025,100, an increase of RMB 5,457,700 or 29.39% compared with RMB 18,567,400 in the same period of last

year; net profit attributable to the parent company was RMB 24,596,900, an increase of RMB 6,849,000 or

38.59% compared with RMB 17,748,000 in the same period of last year. The main reason for the increase of the

total profit and the net profit attributable to the parent company over the same period last year was because of the

increase in the property leasing income and the investment income from equity transfer.

On the basis of the steady and healthy development of the current main business, the transformation of Tellus

Group has also entered the implementation stage. During the reporting period, Anhui Tellus Starlight Jinzun

Jewelry Co., Ltd. which was established for entering the retail market of jewelry market has been opened for

business; Sichuan Tellus Jewelry Technology Co., Ltd., the regional channel platform project of jewelry market

channel, has completed the industrial and commercial registration, and shall carry out business soon; Tellus

Shuibei Jewelry Building phase I project which aimed at the jewelry physical platform has entered the investment

attraction stage and is predicted to put into use before the end of 2017. In the second half of 2017, Tellus Group

will continue to explore new ideas, develop steadily, and strive to complete the annual economic indicators.

II. Main business analysis

See the ¨DI-Introduction¡¬ in ¨DDiscussion and Analysis of the Operation¡¬

Change of main financial data on a y-o-y basis

In RMB

Current period Same period of last year y-o-y changes (+,-) Reasons

Revenue from vehicle

sales increased from a

year earlier, particularly

Operation revenue 160,984,104.56 157,147,166.48 2.44%

the high and mid grade

vehicles; and rental

revenue increased

Operating costs increased

for the vehicle sales

Operation costs 118,024,813.96 112,822,380.88 4.61%

increased, and

furthermore, leasing

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costs from the new Tellus

Starlight Company

increased from a year

earlier

Sales expense 6,883,605.25 7,399,760.23 -6.98%

Management expense 19,352,021.76 20,805,027.12 -6.98%

Interest expenditure

Financial expense 26,460.54 289,000.78 -90.84% declined after SDG loans

are paid

Income tax expense 623,687.09 597,869.12 4.32%

The new Tellus Starlight

paid margins of the

goods to Chow Tai Fook

Net cash flow arising and at end of May in the

7,380,561.40 23,971,506.36 -69.21%

from operation activities period, the net cash flow

from operation declined

for the property company

transferred

Net cash flow arising Financing products

from investment -84,354,916.88 24,320,840.63 investment increased

activities from a year earlier

Loans of engineering

increased and minority

investment for Tellus

Net cash flow arising Starlight Company

21,709,660.64 -16,495,591.67

from financing activities increased in the period;

while loans interest paid

to SDG at same period of

last year

Net increase of cash and

-55,264,848.22 31,796,882.13

cash equivalent

Earnings from

Investment earnings 9,636,578.24 5,100,570.96 88.93% subsidiary¡¯s equity

transfer increased

Major changes on profit composition or profit resources in reporting period

¡õ Applicable ¡Ì Not applicable

No major changes on profit composition or profit resources occurred in reporting period

Constitution of main business

In RMB

Increase or Increase or Increase or

Operating

Operating cost Gross profit ratio decrease of decrease of decrease of gross

revenue

operating revenue operating cost profit ratio over

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over same period over same period same period of

of last year of last year last year

According to industries

Auto sales 74,929,639.26 73,852,237.08 1.44% 10.96% 11.28% -0.28%

Auto inspection

and maintenance

24,232,935.05 18,604,006.02 23.23% -8.99% -10.55% 1.35%

and accessories

sales

Rental and

58,726,081.12 22,176,416.41 62.24% -1.75% -10.25% 3.58%

service

Jewelry business 432,616.24 2,538,282.27 -486.73% -486.73%

According to products

Auto sales 74,929,639.26 73,852,237.08 1.44% 10.96% 11.28% -0.28%

Auto inspection

and maintenance

24,232,935.05 18,604,006.02 23.23% -8.99% -10.55% 1.35%

and accessories

sales

Rental and

58,726,081.12 22,176,416.41 62.24% -1.75% -10.25% 3.58%

service

Jewelry business 432,616.24 2,538,282.27 -486.73% -486.73%

According to region

Shenzhen 157,888,655.43 114,632,659.51 27.40% 2.58% 2.47% 0.08%

Anhui 432,616.24 2,538,282.27 -486.73%

III. Analysis of non-main business

¡ÌApplicable ¡õ Not applicable

In RMB

Amount Ratio in total profit Note Whether be sustainable

The investment income from

disposal equity of Property

Company in the year and

Investment earnings 4,916,001.05 20.46% N

loss from equity transfer of

share holding corporation

Biske

Assets impairment -189,620.97 -0.79%

Non-operation

319,517.17 1.33%

revenue

Non-operation 6,919.80 0.03%

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

expenditure

IV. Assets and liability

1. Major changes of assets composition

In RMB

Period-end Period-end of last year

Ratio

Ratio in total Ratio in total Notes of major changes

Amount Amount changes

assets assets

153,232,791.8 More financing products and

Monetary fund 12.58% 190,981,593.06 16.36% -3.78%

8 engineering input increased

Account

2,221,154.93 0.18% 1,664,778.74 0.14% 0.04%

receivable

Inventory 7,989,799.13 0.66% 9,179,418.55 0.79% -0.13%

Investment real

75,475,007.05 6.20% 79,847,555.27 6.84% -0.64%

estate

Change of the investment earnings that

Long-term equity 198,496,585.9

16.30% 216,689,503.20 18.56% -2.26% accrual by equity method from shares

investment 1

holding corporation

124,060,216.9

Fix assets 10.19% 132,707,486.29 11.37% -1.18%

4

Construction in 354,723,231.1 Investment for 1st phase of Shuibei

29.12% 314,412,966.77 26.93% 2.19%

process 6 Jewelry Building increased

Short-term loans 50,000,000.00 4.11% 4.11% Bank credit increased

Long-term loans 27,600,000.00 2.27% 2.27% Loans for engineering increased

Other current 185,823,991.9

15.26% 110,319,674.72 9.45% 5.81% Financing products increased

assets 3

Intangible assets 53,042,802.82 4.35% 54,296,001.28 4.65% -0.30%

Other account 114,778,401.1

9.42% 179,682,571.96 15.39% -5.97% Loans from SDG decreased

payables 9

2. Assets and liability measured by fair value

¡õApplicable ¡Ì Not applicable

3. Right of the assets restrained till end of the Period

Item Book value at period-end Restriction reasons

Monetary fund 30,000,000.00 structured financing products over

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3 months

Investment real estate 45,656,477.74 £¨1£©

Fixed assets 1,580,835.53 £¨1£©

Intangible assets 50,752,685.52 £¨2£©

Long-term equity investment 75,219,913.29 £¨3£©

Total 203,209,912.08

(1)In order to meet the needs of operation and construction, the Company signed a comprehensive credit contract

(No. 2014SYJTZZ007) with China Citic Bank Jingtian Sub-branch on August 28, 2014, the credit amount was

RMB 211,000,000.00, and at the same time signed a highest mortgage contract (No. 2014SYJTZDZ008) by

taking the book assets of Shenzhen SDG Tellus Real Estate Co., Ltd. as the mortgage with amount of RMB

50,293,453.68, and signed a highest mortgage contract (No. 2014SYJTZDZ007) by taking the book assets of the

Company as the mortgage with amount of RMB 117,706,546.32, and accordingly signed a loan contract (No.

2014SYJTDZ0012) on August 28, 2014 with loan amount of RMB 157,500,000.00 and loan period from August

28, 2014 to on August 28, 2017, the repayment method was paying interest monthly and returning 8% of principal

for every half year after offering loans, and the balance should be paid off at a time once due, up to June 30, 2017,

the loans were returned, but the assets were still in mortgage because the loan commitment was still valid.

(2) In order to meet the project construction needs of Tellus Shuibei Jewelry Building, Shenzhen Zhongtian

Industrial Co., Ltd., a subsidiary of the Company, took the land (No. SFDZ2000609764) of this project as the

mortgage and signed a loan contract (DJ2014G250TB) with China Construction Bank Shuibei Jewelry

Sub-branch on June 24, 2014 with loan amount of RMB 300 million and loan term from June 24, 2014 to June 23,

2024, and the Company provided the joint liability guaranty (BJ2014G250TB), up to June 30, 2017, Shenzhen

Zhongtian Industrial Co., Ltd. borrowed RMB 27,600,000.00 from the bank.

(3)The Company signed a Pledge Contract with Zung Fu Automobile Management (Shenzhen) Co., Ltd.

(hereinafter referred to as ¨DZung Fu Shenzhen¡¬) which agreed that from the establishment of the Company¡¯s joint

venture Shenzhen Zung Fu Tellus Automobile Service Co., Ltd. (hereinafter referred to as ¨DZung Fu Tellus¡¬) to

the expiration date of the joint venture contract between the Company and Zung Fu Shenzhen, Zung Fu Shenzhen

provided loans to Zung Fu Tellus by entrusted loan, and Zung Fu Tellus asked for loans to banks or other

financial enterprises and Zung Fu Shenzhen provided guarantee for it, if the total amount of above loans was no

more than RMB 100 million, Zung Fu Shenzhen would undertake 35% of the liabilities caused by above loans

according to the equity ratio, and agree the Company to pledge its 35% equity stake of Zung Fu Tellus to Zung Fu

Shenzhen as the corresponding counter guarantee of above loans.

V. Investment

1. Overall situation

¡õApplicable ¡Ì Not applicable

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

2. The major equity investment obtained in the reporting period

¡õApplicable ¡Ì Not applicable

3. The major non-equity investment doing in the reporting period

¡õApplicable ¡Ì Not applicable

4. Financial assets investment

(1) Securities investment

¡õ Applicable ¡Ì Not applicable

The Company had no securities investment in the reporting period.

(2) Derivative investment

¡õ Applicable ¡Ì Not applicable

The Company has no derivatives investment in the Period

VI. Sales of major assets and equity

1. Sales of major assets

¡õ Applicable ¡Ì Not applicable

The Company had no sales of major assets in the reporting period.

2. Sales of major equity

¡ÌApplicable ¡õ Not applicable

Net

profit

contribu

Whether

ted by

Ratio of implem

the The Equity

the net ented as

equity influenc Whether have

Trading profit Relation schedul

to listed e of to be a ownersh

price (in contribu Pricing ship ed, Disclos

Counter Equity Date on compan equity related ip Disclos

10 ted by principl with the explain ure

party on sale sale y (from sales to transacti transfer ure date

thousan equity e counter reasons index

period-b the on complet

d Yuan) sales in party and

egin to compan (Y/N) ed

total net counter

date on y (Y/N)

profit measure

sale) (in

if not

10

thousan

d Yuan)

Shenzhe 100% The Accordi SDG Notice

n SDG equity transacti ng to Property No:

Complet

Property of on¡¯s the has the 2017-0

2017-05 ed as 2017-05

Manage Shenzhe 1,415 25 pricing 21.58% Assets Y same Y 39 on

-25 schedul -26

ment n SDG basis Apprais controlli Securit

e

Co., Tellus based al ng ies

Ltd. Property on the Report sharehol Times,

15

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Manage appraisa [Guo der as Hong

ment l Zhong the Kong

Co., conclusi Lian Compan Comm

Ltd. on, after Apprais y, it has ercial

equity al Zi a related Daily

transferr (2017) relations and

ed, No. hip with Juchao

Tellus 3-0058 the Websit

Property issued Compan e

will not by Guo y (www.

included ZHong cninfo.

in the Lian com.cn

consolid Assets )

ation Apprais

stateme al Land

nt any and

more. Real

The Estate

Compan Apprais

y, by al Co.,

initial Ltd.,

calculati who has

on, the

earns qualific

approxi ation for

mately perform

5.05 ing

million related

Yuan business

from of

this securitie

transacti s and

on, futures,

which the

shows a assessm

positive ent

impact based

on on

operatio asset-ba

n sed

perform approac

ance for h and

year of income

2017. approac

h.

VII. Analysis of main Holding Company and stock-jointly companies

¡ÌApplicable ¡õ Not applicable

Particular about main subsidiaries and stock-jointly companies net profit over 10%

In RMB

Company Main Register Operating Operating

Type Industry Total assets Net Assets Net profit

name business capital revenue profit

Shenzhen Own

Auto property

RMB 58.96 286,537,25 248,268,63 9,741,743.0 1,251,680

Industry Subsidiary Commerce leasing and 865,680.72

million 1.74 3.32 7 .23

and Trade sales of

Corporation auto and

16

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

accessories

Auto

Shenzhen

maintenanc

SD Huari

Service e and US$ 5 75,743,190. 28,892,660. 17,870,512.

Automobile Subsidiary -5,163.39 146,386.14

industry production million 68 36 30

Enterprise

and sales of

Co.Limited

accessories

Shenzhen

RMB

Zhongtian Service Property 425,673,91 282,517,63 1,589,953.3 -881,245.

Subsidiary 267.25 -882,202.36

Industrial industry rental 3.34 2.25 2 76

million

Co,. Ltd.

Shenzhen

Huari

Toyota Sales of RMB 2 45,085,172. -4,130,784. 97,707,246. 171,752.3

Subsidiary Commerce 204,462.59

Automobile automobile million 36 29 23 0

Sales Co.

Ltd

Shenzhen

Manufactur

Xinyongton

e of

g Auto

Service inspection RMB 19.61 10,578,172. 3,598,514.9 2,301,999.0 578,273.2

Vehicle Subsidiary 452,026.51

industry equipment million 81 1 5 9

Inspection

for motor

Equipment

vehicle

Co., Ltd.

Shenzhen

Tellus

Inspection

Xinyongton

Service and repair RMB 32.90 85,455,484. 49,541,290. 6,148,572.3 2,017,047

g Subsidiary 1,909,938.96

industry of motor million 28 74 9 .00

Automobile

vehicle

Developme

nt Co. Ltd

Anhui

Tellus

Starlight Sales Retail of RMB 9.8 14,455,973. 12,477,568. -2,243,90

Subsidiary 432,616.24 -2,243,908.10

Jewelry industry jewelry million 67 14 8.10

Investment

Co., Ltd.

Shenzhen

Car sales

Zung Fu

Joint stock Service and RMB 30 372,867,46 216,285,30 602,080,90 31,936,10 24,584,092.9

Tellus

Company industry maintenanc million 3.47 3.21 7.00 5.58 6

Automobile

e

Service Co.,

17

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Ltd.

Manufactur

Shenzhen

e and

Dongfeng Joint stock Manufactur RMB 100 537,123,54 132,294,33 249,209,51 -12,315,0

maintenanc -9,138,940.53

Automobile Company ing industry million 4.17 7.69 5.73 05.42

e of

Co., Ltd.

automobile

Shenzhen Property

Tellus managemen RMB

Joint stock Service 446,185,83 107,752,43 19,777,905. -6,609,39

Gman t; own 123,704,96 -6,609,390.37

Company industry 2.21 6.26 85 0.37

Investment property 0

Co., Ltd. leasing

Particular about subsidiaries obtained or disposed in report period

¡ÌApplicable ¡õ Not applicable

Impact on overall operation and

Name Way to obtained and dispose in the Period

performance

The transaction¡¯s pricing basis based on

the appraisal conclusion, after equity

transferred, Tellus Property will not

included in the consolidation statement any

more. The Company, by initial calculation,

will earns approximately 5.05 million Yuan

Shenzhen SDG Tellus Property Subsidy disposal by equity transfer

from this transaction, which shows a

Management Co., Ltd. agreement

positive impact on operation performance

for year of 2017. Found more in relevant

notice (Notice No.: 2017-039) released on

Securities Times, Hong Kong Commercial

Daily and Juchao Website

(www.cninfo.com.cn)

VIII. Structured vehicle controlled by the Company

¡õApplicable ¡Ì Not applicable

IX. Prediction of business performance from January ¨C September 2017

Estimation on accumulative net profit from the beginning of the year to the end of next report period to be loss probably or the

warning of its material change compared with the corresponding period of the last year and explanation on reason

¡õApplicable ¡Ì Not applicable

X. Risks and countermeasures

1. Construction in progress: the project construction and development plans and completion plans may be affected

by the following force majeure factors:

18

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

(1) Changes in laws and regulations may have an impact on the project development;

(2) The license procedures processing of the audit institutions to the development project may have an impact on

the development progress of the project;

(3) The demolition progress of the project involving demolition may have an impact on the project progress;

(4) Significant weather changes may have an impact on the project progress;

(5) Other unpredictable major events may have impacts on the project progress.

2. Existing business: the current situation of jewelry industry is grim, although the company¡¯s operating

performance is in an opposite trend and has turned losses into gains, the relevant industry has not yet formed core

competitiveness, before the jewelry project producing benefits, the company still needs to rely on the existing

business to maintain profitability, and faces greater operating pressure. The company will be market-oriented,

optimize and adjust the main business structure, fully revitalize its own resources, improve business management

and cost control level, and enhance the profitability of existing main businesses.

3. Transformational business: through the repeated market researches in the past two years, the company has a

more clear understanding about the characteristics of jewelry industry, the core links of industrial chain and the

corporate pain point, and begins to try to implement the transformational business. But the market research still

has some limitations, and there are large uncertainties whether the platform can graft the jewelry financial services

to leverage the entire supply chain. From the external environment, it is still a serious year for the shuffling of

jewelry industry, and there are still uncertainties whether the industry can bottom out. In this regard, the company

will strengthen the transformation faith, carefully lay out, seek the industry value depression at the low-tide period,

strengthen the risk control, build operation teams and regulatory agencies based on the company's own staff, and

ensure that the landed projects are efficient and controllable.

19

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Section V. Important Events

I. AGM and extraordinary general meeting

1. AGM held in the period

Participation ratio

Meeting Type Holding date Disclosure date Index

for investors

Notice No.:

2017-029 on

Securities Times,

Annual General Hong Kong

AGM 73.01% 2017-05-04 2017-05-05

Meeting of 2016 Commercial Daily

and Juchao Website

(www.cninfo.com.cn

)

Notice No.:

2017-036 on

Securities Times,

First Extraordinary Extraordinary

Hong Kong

Shareholders Shareholders 73.01% 2017-05-25 2017-05-26

Commercial Daily

Meeting of 2017 Meeting

and Juchao Website

(www.cninfo.com.cn

)

2. Request for extraordinary general meeting by preferred stockholders with rights to vote

¡õApplicable ¡Ì Not applicable

II. Profit distribution plan and capitalizing of common reserves in the period

¡õ Applicable ¡Ì Not applicable

There are no cash dividend, bonus and capitalizing of common reserves carried out in the semi-annual

III. Commitments that actual controller, shareholder, related parties, buyer and committed

party as the Company etc. have fulfilled during the reporting period and have not yet fulfilled

by the end of reporting period

¡õ Applicable ¡Ì Not applicable

There are no commitments that the actual controller, shareholder, related parties, buyer and committed party as the Company etc.

have fulfilled during the reporting period and have not yet fulfilled by the end of reporting period

20

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

IV. Appointment and non-reappointment (dismissal) of CPA

Whether the semi-annual financial report had been audited

¡õYes ¡Ì No

The semi-annual report was not audited

V. Explanation on ¡°Qualified Opinion¡± from CPA by the Board and Supervisory Committee

¡õ Applicable ¡Ì Not applicable

VI. Explanation from the Board for ¡°Qualified Opinion¡± of last year¡¯s

¡õ Applicable ¡Ì Not applicable

VII. Bankruptcy reorganization

¡õ Applicable ¡Ì Not applicable

No bankruptcy reorganization in Period.

VIII. Lawsuits

Material lawsuits and arbitration

¡õ Applicable ¡Ì Not applicable

No material lawsuits and arbitration in the reporting

Other lawsuits

¡õApplicable ¡Ì Not applicable

Found more in Note X. Commitment and contingency in the Section XI ¨DNotes to Financial Statement¡¬ .

IX. Penalty and rectification

¡õ Applicable ¡Ì Not applicable

No penalty and rectification for the Company in reporting period.

X. Integrity of the Company and its controlling shareholders and actual controllers

¡õApplicable ¡Ì Not applicable

XI. Implementation of the company¡¯s stock incentive plan, employee stock ownership plan or

other employee incentives

¡õApplicable ¡Ì Not applicable

21

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Nil

XII. Major related transaction

1. Related transaction with routine operation concerned

¡ÌApplicable ¡õ Not applicable

Whether

Trading

Related over the

Content transacti Proporti limit Clearing Availabl Index

Type of approve Date of

of Pricing Related on on in approve form for e similar of

Related Relation related

related principl transacti amount similar d related disclosu

party ship transacti

transacti e on price (in 10 transacti d (in 10 transacti market disclos

on limited re

on thousan ons (%) thousan on price ure

d Yuan) or not

d Yuan)

(Y/N)

Notice

No.:

2017-0

17 on

Securit

ies

Shenzhe

Director Times,

n Zung

/Supervi Hong

Fu By

sor/ SE Routine Referen Kong

Tellus contract

serves related Housing ce to 2017-04 Comm

Automo 265 265 5.90% 265 N or 265

director transacti lease market -08 ercial

bile agreeme

of the ons price Daily

Service nt

compan and

Co.,

y Juchao

Ltd.

Websit

e

(www.

cninfo.

com.c

n)

Total -- -- 265 -- 265 -- -- -- -- --

Detail of sales return with major

N/A

amount involved

Report the actual implementation of

the normal related transactions which

were projected about their total Performing normally

amount by types during the reporting

period(if applicable)

Reasons for major differences

Not applicable

between trading price and market

22

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

reference price (if applicable)

2. Related transactions by assets acquisition and sold

¡õ Applicable ¡Ì Not applicable

No related transactions by assets acquisition and sold for the Company in reporting period

3. Main related transactions of mutual investment outside

¡õ Applicable ¡Ì Not applicable

No main related transactions of mutual investment outside for the Company in reporting period

4. Contact of related credit and debt

¡ÌApplicable ¡õ Not applicable

Whether has non-operational contact of credit and debts or not

¡ÌYes ¡õNo

C

Debts payable to related party:

Balance at Current Current Current Balance at

period-begin newly added recovery interest period-end

Related party Relationship Causes Interest rate

(10 thousand (10 thousand (10 thousand (10 thousand (10 thousand

Yuan) Yuan) Yuan) Yuan) Yuan)

Shenzhen

Intercourse

Special

Majority funds and

Development 3,186 32 3,218

shareholder loans

Group Co.,

interests

Ltd.

Shenzhen

Special

Majority

Development Loans 1,879 4 26 1,874

shareholder

Group Co.,

Ltd.

Impact on operation results

Total profit decreased 260,000 Yuan due to the interest expenses increased in the Year

and financial status

5. Other related transactions

¡ÌApplicable ¡õ Not applicable

In order to centralize the resources and promote the strategy transformation of the company, the company signed a

Property Rights Transfer Contract with Shenzhen SDG Property Management Co., Ltd., and transferred 100%

equity stake of Shenzhen SDG Tellus Property Management Co., Ltd. held by the Company to SDG Property

Company by agreement transfer, and the transfer price was RMB 14.15 million. SDG Property Management and

the Company were controlled by the same controlling shareholder and had a related relation. See details on the

relevant announcement the company published on Securities Times, Hong Kong Commercial Daily and

23

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

www.cninfo.com.cn., the announcement No. is 2017-039.

Relevant inquiry for the major related transactions

Notice name Date for disclosure Website disclosed

Equity Transfer of Shenzhen SDG Tellus Securities Times, Hong Kong Commercial

Property Management Co., Ltd. and Related 2017-05-26 Daily and Juchao Website

Transactions (www.cninfo.com.cn)

XIII. Non-business capital occupying by controlling shareholders and its related parties

¡õ Applicable ¡Ì Not applicable

No non-business capital occupied by controlling shareholders and its related parties in Period

XIV. Significant contract and implementations

1. Trusteeship, contract and leasing

(1) Trusteeship

¡õ Applicable ¡Ì Not applicable

No trusteeship for the Company in reporting period

(2) Contract

¡õ Applicable ¡Ì Not applicable

No contract for the Company in reporting period

(3) Leasing

¡õ Applicable ¡Ì Not applicable

No leasing for the Company in reporting period

2. Major guarantees

¡ÌApplicable ¡õ Not applicable

(1) Guarantees

In 10 thousand Yuan

Particulars about the external guarantee of the Company (Barring the guarantee for subsidiaries)

Related Guarante

Actual date of

Name of the Announce e for

Guarantee happening (Date Actual Guarantee Guarantee Implemen

Company ment related

limit of signing guarantee limit type term ted (Y/N)

guaranteed disclosure party

agreement)

date (Y/N)

Shenzhen Zung Fu To the expire

2014-09-30 3,500 2007-04-17 3,500 Pledge N Y

Tellus Automobile date of joint

24

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Service Co., Ltd. venture

contract

Total actual occurred external

Total approving external

0 guarantee in report period 3,500

guarantee in report period (A1)

(A2)

Total approved external Total actual balance of

guarantee at the end of report 3,500 external guarantee at the end 3,500

period ( A3) of report period (A4)

Guarantee of the Company and the subsidiaries

Guarante

Related

Actual date of e for

Name of the Announce Implemen

Guarantee happening (Date Actual Guarantee Guarantee

Company ment related

limit of signing guarantee limit type term ted (Y/N)

guaranteed disclosure

agreement) party

date

(Y/N)

Shenzhen 24 June 2014

Joint liability

Zhongtian 2014-05-07 30,000 2014-06-24 30,000 to 23 June N Y

guaranty

Industrial Co,. Ltd. 2024

Total amount of actual

Total amount of approving

occurred guarantee for

guarantee for subsidiaries in 0 30,000

subsidiaries in report period

report period (B1)

(B2)

Total balance of actual

Total amount of approved

guarantee for subsidiaries at

guarantee for subsidiaries at the 30,000 30,000

the end of reporting period

end of reporting period (B3)

(B4)

Guarantee of the subsidiaries and the subsidiaries

Guarante

Related

Actual date of e for

Name of the Announce Implemen

Guarantee happening (Date Actual Guarantee Guarantee

Company ment related

limit of signing guarantee limit type term ted (Y/N)

guaranteed disclosure

agreement) party

date

(Y/N)

Total amount of actual

Total amount of approving

occurred guarantee for

guarantee for subsidiaries in 0 0

subsidiaries in report period

report period (C1)

(C2)

Total balance of actual

Total amount of approved

guarantee for subsidiaries at

guarantee for subsidiaries at the 0 0

the end of reporting period

end of reporting period (C3)

(C4)

Total amount of guarantee of the Company( total of three abovementioned guarantee)

Total amount of approving Total amount of actual

guarantee in report period 0 occurred guarantee in report 33,500

(A1+B1+C1) period (A2+B2+C2)

Total amount of approved Total balance of actual

guarantee at the end of report 33,500 guarantee at the end of report 33,500

period (A3+B3+C3) period (A4+B4+C4)

The proportion of the total amount of actually guarantee in the

36.37%

net assets of the Company (that is A4+ B4+C4)

Including:

25

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Amount of guarantee for shareholders, actual controller and its

0

related parties(D)

The debts guarantee amount provided for the guaranteed

parties whose assets-liability ratio exceed 70% directly or 0

indirectly(E)

Proportion of total amount of guarantee in net assets of the

0

Company exceed 50%(F)

Total amount of the aforesaid three guarantees(D+E+F) 0

Explanations on possibly bearing joint and several liquidating

N/A

responsibilities for undue guarantees (if applicable)

Explanations on external guarantee against regulated

N/A

procedures (if applicable)

Explanation on guarantee with composite way

(2)Guarantee outside against the regulation

¡õApplicable ¡Ì Not applicable

No guarantee outside against the regulation in Period.

(3) Entrust others to cash asset management

The

Amount Actual Actual

Amount actual

of amount reporting of

connec of amount

Payment impairm Projecte of profit profits and

ted product entruste Expiration of

Trustee Start date determinatio ent d and loss losses

transac type d date principal

n method provisio earnings during during the

tion financin recovere

n (if reporting reporting

g d in this

any) period period

period

Everbright

Bank, Guarant Repayment

Limited by eed 2016.10.1 of principal

no 2,000 2017.1.14 2,000 14.03 14.03 14.03

Share Ltd, floating 4 and interest

Shenzhen income at maturity

branch

Societe

Generale

Guarant Repayment

Bank,

eed 2016.11.2 of principal

Limited by no 4,000 2017.2.22 4,000 33.04 33.04 33.04

floating 4 and interest

Share Ltd,

income at maturity

Shenzhen

branch

26

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Everbright

Bank, Repayment

Guarant

Limited by of principal

no eed 2,000 2016.12.2 2017.3.2 2,000 14.75 14.75 14.75

Share Ltd, and interest

income

Shenzhen at maturity

branch

CITIC Bank

Shenzhen Guarant Repayment

branch of eed of principal

no 1,000 2016 .12.7 2017.3.8 1,000 7.48 7.48 7.48

Limited by floating and interest

Share Ltd income at maturity

King

CITIC Bank, Guarant

Repayment

Limited by eed

of principal

Share Ltd, no 3,000 2017.1.6 3,000 27.3 27.3 27.3

2017.4.7

and interest

Shenzhen

at maturity

branch

CITIC Bank, Guarant

Repayment

Limited by eed

of principal

Share Ltd, no 2,000 2017.1.6 2,000 18.2 18.2 18.2

2017.4.7

and interest

Shenzhen

at maturity

branch

CITIC Bank, Guarant

Repayment

Limited by eed

of principal

Share Ltd, no 3,000 2017.1.18 2017.4.19 3,000 27.3 27.3 27.3

and interest

Shenzhen

at maturity

branch

Everbright

Bank, Repayment

Guarant

Limited by of principal

no eed 2,000 2017.1.18 2017.4.18 2,000 17.5 17.5 17.5

Share Ltd, and interest

income

Shenzhen at maturity

branch

China Guarant

Merchants eed

Repayment

Bank,

of principal

Limited by no 1,000 2017.2.14 2017.5.19 1,000 7.72 7.72 7.72

and interest

Share Ltd,

at maturity

Shenzhen,

Luohu branch

Industrial Guarant Repayment

no 3,000 2017.2.23 2017.5.24 3,000 30.33 30.33 30.33

Bank, eed of principal

27

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Limited by and interest

Share Ltd, at maturity

Shenzhen

Cheonan

subbranch

Everbright

Bank, Repayment

Guarant

Limited by of principal

no eed 1,000 2017.2.24 2017.5.24 1,000 9.38 9.38 9.38

Share Ltd, and interest

income

Shenzhen at maturity

branch

Everbright

Bank, Repayment

Guarant

Limited by of principal

no eed 2,000 2017.3.3 2,000 18.78 18.78 18.78

Share Ltd, 2017.6.3

and interest

income

Shenzhen at maturity

branch

CITIC Bank, Guarant

Repayment

Limited by eed

of principal

Share Ltd, no 1,000 2017.3.17 2017.6.28 1,000 10.44 10.44 10.44

and interest

Shenzhen

at maturity

branch

Industrial Guarant

Bank, eed

Repayment

Limited by

of principal

Share Ltd, no 3,000 2017.4.13 2017.7.12 0 31.41 0 0

and interest

Shenzhen

at maturity

Cheonan

subbranch

CITIC Bank, Guarant

Repayment

Limited by eed

of principal

Share Ltd, no 2,000 2017.4.14 2017.7.26 0 20.94 0 0

and interest

Shenzhen

at maturity

branch

Industrial Guarant

Bank, eed

Repayment

Limited by

of principal

Share Ltd, no 2,000 2017.4.21 2017.7.20 0 20.94 0 0

and interest

Shenzhen

at maturity

Cheonan

subbranch

CITIC Bank no Guarant 2,000 2017.4.21 2017.8.2 Repayment 0 22.01 0 0

28

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Shenzhen eed of principal

branch of floating and interest

Limited by income at maturity

Share Ltd

King

Everbright

Bank, Repayment

Guarant

Limited by of principal

no eed 1,000 20174.21 2017.7.21 0 9.63 0 0

Share Ltd, and interest

income

Shenzhen at maturity

branch

Bank of Guarant

Repayment

Shenzhen eed

of principal

Jiangsu no 1,000 20175.25 T+0 0 0 0

and interest

Branch Sales

at maturity

Department

Industrial Guarant

Bank, eed

Repayment

Limited by

of principal

Share Ltd, no 3,000 2017.6.5 2017.9.4 0 33.75 0 0

and interest

Shenzhen

at maturity

Cheonan

subbranch

Everbright

Bank, Repayment

Guarant

Limited by of principal

no eed 2,000 2017.6 .14 2017.9.14 0 22.25 0 0

Share Ltd, and interest

income

Shenzhen at maturity

branch

Total 43,000 -- -- -- 27,000 397.18 236.25 --

Capital resource

Idle raised funds and Part of its own funds

Principal uncollected for

overdue and accumulated

earnings 0

s

Lawsuit involved (if

applicable) Not applicable

Disclosure date for approval

2016.4.29¡¢2017.4.8

from the Board for trust

29

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

financing (if applicable)

Disclosure date for approval

from board of shareholders for

trust financing (if applicable) 2016.5.21¡¢2017.5.5

Yes, the decision-making process that the Company uses idle raised funds and part of the

self-owned fund to purchase financial products meets the "Articles of Association", "Raised Funds

Trust financing plan in the Management System" and other relevant provisions. Using idle raised funds to purchase financial

future products is implemented in the premise of not affecting the main business. A certain amount of

investment income can be obtained by properly investing in the low-risk financial products so as to

improve the Company's capital usage efficiency.

(4)Other material contracts

¡õ Applicable ¡Ì Not applicable

No other material contracts for the Company in reporting period

XV. Social responsibility

1. Targeted poverty alleviation social responsibility

(1) Summary of the targeted poverty alleviation for the half year

During the reporting period, the company participated in the targeted poverty alleviation at Libai Village,

Shangguan Town, Dongyuan County, Heyuan City, Guangdong Province. The Company sent representatives to

stay at the village to complete the identification, approval, archiving work by visiting the poor households, went to

the surrounding villages and towns for investigation and study, and made preparation for establishing help

programs and developing the various industries for the village to be helped.

(2)Targeted poverty alleviation for the first half of 2017

The second half of 2017, the company plans to develop accurate poverty alleviation plan, to participate in the

improvement of infrastructure construction to help the village, to improve the village appearance and other initiatives and

helping promote the economic development of the region.

2. Material environmental protection

The listed Company and its subsidiary whether belongs to the key sewage units released from environmental protection department

No

30

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

XVI. Explanation on other significant events

¡õApplicable ¡Ì Not applicable

Nil

XVII. Significant event of subsidiary of the Company

¡õApplicable ¡Ì Not applicable

31

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Section VI. Changes in Shares and Particulars about Shareholders

I. Changes in Share Capital

1. Changes in Share Capital

In Share

Before change Increase/decrease in this time (+ , - ) After change

Capitalizat

Bonus ion of

Amount Ratio New issue Other Subtotal Amount Ratio

share public

reserve

77,000,00 77,000,00

I. Restricted shares 25.90% 25.90%

0 0

2. State-owned corporation

6,000,000 2.02% 6,000,000 2.02%

shares

71,000,00 71,000,00

3. Other domestic shares 23.88% 23.88%

0 0

Including: domestic legal 71,000,00 71,000,00

23.88% 23.88%

person¡¯s shares 0 0

220,281,6 220,281,6

II. Un-restricted shares 74.10% 74.10%

00 00

193,881,6 193,881,6

1. RMB ordinary shares 65.22% 65.22%

00 00

2. Domestically listed 26,400,00 26,400,00

8.88% 8.88%

foreign shares 0 0

297,281,6 297,281,6

III. Total shares 100.00% 100.00%

00 00

Reasons for share changed

¡õApplicable ¡Ì Not applicable

Approval of share changed

¡õApplicable ¡Ì Not applicable

Ownership transfer of share changes

¡õApplicable ¡Ì Not applicable

Influence on the basic EPS and diluted EPS as well as other financial indexes of net assets per share attributable to common

shareholders of Company in latest year and period

¡õApplicable ¡Ì Not applicable

32

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Other information necessary to disclose for the Company or need to disclosed under requirement from security regulators

¡õApplicable ¡Ì Not applicable

2. Changes of restricted shares

¡õApplicable ¡Ì Not applicable

II. Securities issuance and listing

¡õApplicable ¡Ì Not applicable

III. Amount of shareholders of the Company and particulars about shares holding

In Share

Total preference shareholders

Total common stock

with voting rights recovered at

shareholders in reporting 65,094 0

end of reporting period (if

period-end

applicable) (found in note8)

Particulars about shares held above 5% by common shareholders or top ten common shareholders

Total Number of share pledged/frozen

Amount

sharehold Amount of

Changes in of

Proportion ers at un-restricte

Full name of Nature of

of shares report restricted

Shareholders shareholder the end of d shares State of share

held Amount

period shares

report held

held

period

Shenzhen

Special State-owned 145,925,2 139,925,25

49.09% 6,000,000

Development corporation 56 6

Group Co., Ltd.

Shenzhen

Capital Fortune

Jewelry

Domestic non

Industry 71,000,00 71,000,00

state-owned 23.88%

Investment 0 0

corporate

Enterprise

(limited

partnership)

GUOTAI

JUNAN

Foreign

SECURITIES( 0.88% 1,241,440 1,241,440

corporation

HONGKONG)

LIMITED

33

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Domestic nature

Li Guangxin 0.26% 761,161 761,161

person

Weng Foreign nature

0.19% 579,528 579,528

Zhengwen person

Domestic nature

He Xing 0.10% 300,100 300,100

person

Foreign nature

Zeng Huiming 0.09% 270,000 270,000

person

Domestic nature

Huang Chuyun 0.09% 266,500 266,500

person

Agricultural

Bank of China

Other 0.08% 242,400 242,400

Ltd. ¨C CSI 500

ETF

Domestic nature

Lin Fengfang 0.07% 216,933 216,933

person

Strategy investors or general

corporation comes top 10

N/A

shareholders due to rights issue (if

applicable) (see note3)

Among the top ten shareholders, there exists no associated relationship between the

Explanation on associated state-owned legal person¡¯s shareholders SDG, Ltd and other shareholders, and they do not

relationship among the top ten belong to the consistent actionist regulated by the Management Measure of Information

shareholders or consistent action Disclosure on Change of Shareholding for Listed Companies. For the other shareholders of

circulation share, the Company is unknown whether they belong to the consistent actionist.

Particular about top ten shareholders with un-restrict shares held

Type of shares

Shareholders¡¯ name Amount of un-restrict shares held at Period-end

Type Amount

Shenzhen Special Development RMB ordinary

139,925,256

Group Co., Ltd. shares

GUOTAI JUNAN Domestically

SECURITIES(HONGKONG) 1,241,440 listed foreign

LIMITED shares

Domestically

Li Guangxin 761,161 listed foreign

shares

Domestically

Weng Zhengwen 579,528 listed foreign

shares

34

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Domestically

He Xing 300,100 listed foreign

shares

Domestically

Zeng Huiming 270,000 listed foreign

shares

Domestically

Huang Chuyun 266,500 listed foreign

shares

Agricultural Bank of China Ltd. ¨C RMB ordinary

242,400

CSI 500 ETF shares

Domestically

Lin Fengfang 216,933 listed foreign

shares

Domestically

Liu Jun 195,100 listed foreign

shares

Expiation on associated relationship

Among the top ten shareholders, there exists no associated relationship between the

or consistent actors within the top

state-owned legal person¡¯s shareholders SDG and other shareholders, and they do not belong

10 un-restrict shareholders and

to the consistent actionist regulated by the Management Measure of Information Disclosure on

between top 10 un-restrict

Change of Shareholding for Listed Companies. For the other shareholders of circulation share,

shareholders and top 10

the Company is unknown whether they belong to the consistent actionist.

shareholders

Explanation on shareholders

involving margin business about top

ten common shareholders with N/A

un-restrict shares held(if applicable)

(see note 4)

Whether top ten common stock shareholders or top ten common stock shareholders with un-restrict shares held have a buy-back

agreement dealing in reporting period

¡õ Yes ¡Ì No

The top ten common stock shareholders or top ten common stock shareholders with un-restrict shares held of the Company have no

buy-back agreement dealing in reporting period.

IV. Changes of controlling shareholders or actual controller

Changes of controlling shareholders in reporting period

¡õ Applicable ¡Ì Not applicable

Changes of controlling shareholders had no change in reporting period.

Changes of actual controller in reporting period

¡õ Applicable ¡Ì Not applicable

Changes of actual controller in reporting period had no change in reporting period.

35

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Section VII. Preferred Stock

¡õ Applicable ¡Ì Not applicable

The Company had no preferred stock in the reporting.

36

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Section VIII. Directors, Supervisors and Senior Executives

I. Changes of shares held by directors, supervisors and senior executives

¡õApplicable ¡Ì Not applicable

Found more in annual report 2016 for the changes of shares held by directors, supervisors and senior executives

II. Resignation and dismissal of directors, supervisors and senior executives

¡ÌApplicable ¡õ Not applicable

Title Type Date Reasons

Name

Li Miao Supervisor Leave office 2017-05-04 Resigned supervisor for career move

Chen Yangsheng Supervisor Election 2017-05-04 Elected as supervisor in shareholders meeting

Ke Wensheng Staff supervisor Leave office 2017-04-06 Resigned supervisor for career move

Liu Yuhong Staff supervisor Election 2017-04-06 Elected as staff supervisor

37

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Section IX Corporate Bond

Whether the Company has a corporation bonds that issuance publicly and listed on stock exchange and without due on the date when

semi-annual report approved for released or fail to cash in full on due

No

38

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Section X Financial Report

I. Audit reports

Whether the semi-annual report was audited or not

¡õ Yes ¡Ì No

The financial report of this semi-annual report was unaudited

II. Financial statements

Units in Notes of Financial Statements is RMB

1. Consolidated Balance Sheet

Prepared by Shen Zhen Tellus Holding Co., Ltd

2017-06-30

In RMB

Item Closing balance Opening balance

Current assets:

Monetary funds 153,232,791.88 218,497,640.10

Settlement provisions

Capital lent

Financial assets measured by fair

value and with variation reckoned into

current gains/losses

Derivative financial liability

Notes receivable

Accounts receivable 2,221,154.93 113,736.64

Accounts paid in advance 8,771,027.57 8,436,668.35

Insurance receivable

Reinsurance receivables

Contract reserve of reinsurance

receivable

Interest receivable 118,000.00 172,055.56

Dividend receivable

Other receivables 17,508,786.88 16,586,387.45

Purchase restituted finance asset

Inventories 7,989,799.13 11,038,915.69

Divided into assets held for sale

Non-current asset due within one

year

39

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Other current assets 185,823,991.93 90,123,901.32

Total current assets 375,665,552.32 344,969,305.11

Non-current assets:

Loans and payments on behalf

Finance asset available for sales 10,176,617.20 10,478,985.77

Held-to-maturity investment

Long-term account receivable

Long-term equity investment 198,496,585.91 203,633,308.06

Investment property 75,475,007.05 77,602,248.53

Fixed assets 124,060,216.94 129,226,236.16

Construction in progress 354,723,231.16 343,365,313.46

Engineering material

Disposal of fixed asset

Productive biological asset

Oil and gas asset

Intangible assets 53,042,802.82 53,739,118.72

Expense on Research and

Development

Goodwill

Long-term expenses to be

1,845,342.27 1,437,761.31

apportioned

Deferred income tax asset 24,413,500.01 24,448,797.86

Other non-current asset 100,000.00 100,000.00

Total non-current asset 842,333,303.36 844,031,769.87

Total assets 1,217,998,855.68 1,189,001,074.98

Current liabilities:

Short-term loans 50,000,000.00 50,000,000.00

Loan from central bank

Absorbing deposit and interbank

deposit

Capital borrowed

Financial liability measured by fair

value and with variation reckoned into

current gains/losses

Derivative financial liability

Notes payable

Accounts payable 22,195,793.29 23,599,227.33

Accounts received in advance 11,203,114.07 11,930,493.02

Selling financial asset of

40

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

repurchase

Commission charge and

commission payable

Wage payable 23,210,374.12 27,144,631.18

Taxes payable 9,340,563.46 10,081,678.60

Interest payable 94,347.00 77,826.33

Dividend payable

Other accounts payable 114,778,401.19 126,045,854.54

Reinsurance payables

Insurance contract reserve

Security trading of agency

Security sales of agency

Divided into liability held for sale

Non-current liabilities due within 1

year

Other current liabilities

Total current liabilities 230,822,593.13 248,879,711.00

Non-current liabilities:

Long-term loans 27,600,000.00 12,000,000.00

Bonds payable

Including: preferred stock

Perpetual capital

securities

Long-term account payable 3,920,160.36 3,920,160.36

Long-term wages payable

Special accounts payable

Accrual liabilities 434,487.74 1,192,618.90

Deferred income

Deferred income tax liabilities 110,024.04 232,711.06

Other non-current liabilities 14,468,198.45 14,239,537.48

Total non-current liabilities 46,532,870.59 31,585,027.80

Total liabilities 277,355,463.72 280,464,738.80

Owner¡¯s equity:

Share capital 297,281,600.00 297,281,600.00

Other equity instrument

Including: preferred stock

Perpetual capital

securities

Capital public reserve 565,226,274.51 564,192,605.51

41

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Less: Inventory shares

Other comprehensive income

Reasonable reserve

Surplus public reserve 2,952,586.32 2,952,586.32

Provision of general risk

Retained profit 55,532,728.21 30,935,823.12

Total owner¡¯s equity attributable to

920,993,189.04 895,362,614.95

parent company

Minority interests 19,650,202.92 13,173,721.23

Total owner¡¯s equity 940,643,391.96 908,536,336.18

Total liabilities and owner¡¯s equity 1,217,998,855.68 1,189,001,074.98

Legal Representative: Lv Hang Person in charge of Accounting Works:Yang Jianping

Person in charge of Accounting Institution: Liu Yuhong

2. Balance Sheet of Parent Company

In RMB

Item Closing balance Opening balance

Current assets:

Monetary funds 105,697,579.64 150,800,890.39

Financial assets measured by fair

value and with variation reckoned into

current gains/losses

Derivative financial liability

Notes receivable

Accounts receivable

Account paid in advance 21,000.00 32,280.00

Interest receivable 118,000.00 172,055.56

Dividends receivable

Other receivables 98,341,250.33 98,999,650.03

Inventories

Divided into assets held for sale

Non-current assets maturing within

one year

Other current assets 170,000,000.00 90,000,000.00

Total current assets 374,177,829.97 340,004,875.98

Non-current assets:

Available-for-sale financial assets 10,176,617.20 10,176,617.20

42

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Held-to-maturity investments

Long-term receivables

Long-term equity investments 680,829,138.92 686,225,666.43

Investment real estate 48,298,436.85 49,847,406.09

Fixed assets 16,063,024.44 16,497,899.89

Construction in progress 911,072.59 373,191.69

Project materials

Disposal of fixed assets

Productive biological assets

Oil and natural gas assets

Intangible assets 411,230.25 484,538.73

Research and development costs

Goodwill

Long-term deferred expenses 256,747.22 239,924.49

Deferred income tax assets 13,888,782.94 13,908,254.04

Other non-current assets

Total non-current assets 770,835,050.41 777,753,498.56

Total assets 1,145,012,880.38 1,117,758,374.54

Current liabilities:

Short-term borrowings 50,000,000.00 50,000,000.00

Financial liability measured by fair

value and with variation reckoned into

current gains/losses

Derivative financial liability

Notes payable

Accounts payable

Accounts received in advance 2,523,809.60

Wage payable 6,578,609.50 7,713,651.26

Taxes payable 1,623,330.66 524,089.23

Interest payable 54,375.00 66,458.33

Dividend payable

Other accounts payable 252,122,572.01 253,475,259.99

Divided into liability held for sale

Non-current liabilities due within 1

year

Other current liabilities

43

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Total current liabilities 312,902,696.77 311,779,458.81

Non-current liabilities:

Long-term loans

Bonds payable

Including: preferred stock

Perpetual capital

securities

Long-term account payable

Long-term wages payable

Special accounts payable

Accrual liabilities

Deferred income

Deferred income tax liabilities

Other non-current liabilities

Total non-current liabilities

Total liabilities 312,902,696.77 311,779,458.81

Owners¡¯ equity:

Share capita 297,281,600.00 297,281,600.00

Other equity instrument

Including: preferred stock

Perpetual capital

securities

Capital public reserve 562,032,851.23 560,999,182.23

Less: Inventory shares

Other comprehensive income

Reasonable reserve

Surplus reserve 2,952,586.32 2,952,586.32

Retained profit -30,156,853.94 -55,254,452.82

Total owner¡¯s equity 832,110,183.61 805,978,915.73

Total liabilities and owner¡¯s equity 1,145,012,880.38 1,117,758,374.54

3. Consolidated Profit Statement

In RMB

Item Current Period Last Period

I. Total operating income 160,984,104.56 157,147,166.48

Including: Operating income 160,984,104.56 157,147,166.48

Interest income

44

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Insurance gained

Commission charge and commission

income

II. Total operating cost 146,908,206.30 143,719,895.22

Including: Operating cost 118,024,813.96 112,822,380.88

Interest expense

Commission charge and commission

expense

Cash surrender value

Net amount of expense of

compensation

Net amount of withdrawal of

insurance contract reserve

Bonus expense of guarantee slip

Reinsurance expense

Tax and extras 2,810,925.76 2,403,726.21

Sales expenses 6,883,605.25 7,399,760.23

Administration expenses 19,352,021.76 20,805,027.12

Financial expenses 26,460.54 289,000.78

Losses of devaluation of asset -189,620.97

Add: Changing income of fair

value(Loss is listed with ¨D-¡¬)

Investment income (Loss is listed

9,636,578.24 5,100,570.96

with ¨D-¡¬)

Including: Investment income

2,929,608.85 2,808,781.91

on affiliated company and joint venture

Exchange income (Loss is

listed with ¨D-¡¬)

Other income

III. Operating profit (Loss is listed with

23,712,476.50 18,527,842.22

¨D-¡¬)

Add: Non-operating income 319,517.17 45,280.90

Including: Disposal gains of

58,186.00 28,104.37

non-current asset

Less: Non-operating expense 6,919.80 5,764.84

Including: Disposal loss of

6,919.80 1,237.84

non-current asset

IV. Total Profit (Loss is listed with ¨D-¡¬) 24,025,073.87 18,567,358.28

Less: Income tax expense 623,687.09 597,869.12

45

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

V. Net profit (Net loss is listed with ¨D-¡¬) 23,401,386.78 17,969,489.16

Net profit attributable to owner¡¯s of

24,596,905.09 17,747,952.63

parent company

Minority shareholders¡¯ gains and

-1,195,518.31 221,536.53

losses

VI. Net after-tax of other comprehensive

income

Net after-tax of other comprehensive

income attributable to owners of parent

company

(I) Other comprehensive income

items which will not be reclassified

subsequently to profit of loss

1. Changes as a result of

re-measurement of net defined benefit

plan liability or asset

2. Share of the other

comprehensive income of the investee

accounted for using equity method which

will not be reclassified subsequently to

profit and loss

(II) Other comprehensive income

items which will be reclassified

subsequently to profit or loss

1. Share of the other

comprehensive income of the investee

accounted for using equity method which

will be reclassified subsequently to profit

or loss

2. Gains or losses arising

from changes in fair value of

available-for-sale financial assets

3. Gains or losses arising

from reclassification of held-to-maturity

investment as available-for-sale financial

assets

4. The effect hedging portion

of gains or losses arising from cash flow

hedging instruments

5. Translation differences

arising on translation of foreign currency

financial statements

46

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

6. Other

Net after-tax of other comprehensive

income attributable to minority

shareholders

VII. Total comprehensive income 23,401,386.78 17,969,489.16

Total comprehensive income

24,596,905.09 17,747,952.63

attributable to owners of parent Company

Total comprehensive income

-1,195,518.31 221,536.53

attributable to minority shareholders

VIII. Earnings per share:

(i) Basic earnings per share 0.0827 0.0597

(ii) Diluted earnings per share 0.0827 0.0597

Enterprise combine under the same control in the Period, the combined party realized net profit of 0 Yuan before

combination, and realized 0 Yuan at last period for combined party

Legal Representative: Lv Hang Person in charge of Accounting Works:Yang Jianping

Person in charge of Accounting Institution: Liu Yuhong

4. Profit Statement of Parent Company

In RMB

Item Current Period Last Period

I. Operating income 21,455,828.43 21,654,258.03

Less: Operating cost 1,800,520.02 1,787,004.39

Tax and extras 852,504.05 794,738.55

Sales expenses

Administration expenses 8,630,924.30 9,195,278.67

Financial expenses -315,599.87 53,700.38

Losses of devaluation of asset -189,620.97

Add: Changing income of fair

value(Loss is listed with ¨D-¡¬)

Investment income (Loss is

14,439,969.08 4,753,088.69

listed with ¨D-¡¬)

Including: Investment income

5,721,803.49 2,579,910.59

on affiliated company and joint venture

Other income

II. Operating profit (Loss is listed

25,117,069.98 14,576,624.73

with ¨D-¡¬)

Add: Non-operating income 0.01

Including: Disposal gains of

47

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

non-current asset

Less: Non-operating expense

Including: Disposal loss of

non-current asset

III. Total Profit (Loss is listed with

25,117,069.98 14,576,624.74

¨D-¡¬)

Less: Income tax expense 19,471.10 19,471.10

IV. Net profit (Net loss is listed with

25,097,598.88 14,557,153.64

¨D-¡¬)

V. Net after-tax of other comprehensive

income

(I) Other comprehensive income

items which will not be reclassified

subsequently to profit of loss

1. Changes as a result of

re-measurement of net defined benefit

plan liability or asset

2. Share of the other

comprehensive income of the investee

accounted for using equity method

which will not be reclassified

subsequently to profit and loss

(II) Other comprehensive income

items which will be reclassified

subsequently to profit or loss

1. Share of the other

comprehensive income of the investee

accounted for using equity method

which will be reclassified subsequently

to profit or loss

2. Gains or losses arising

from changes in fair value of

available-for-sale financial assets

3. Gains or losses arising

from reclassification of held-to-maturity

investment as available-for-sale

financial assets

4. The effect hedging

portion of gains or losses arising from

cash flow hedging instruments

5. Translation differences

arising on translation of foreign

48

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

currency financial statements

6. Other

VI. Total comprehensive income 25,097,598.88 14,557,153.64

VII. Earnings per share:

(i) Basic earnings per share 0.0844 0.0490

(ii) Diluted earnings per share 0.0844 0.0490

5. Consolidated Cash Flow Statement

In RMB

Item Current Period Last Period

I. Cash flows arising from operating

activities:

Cash received from selling

commodities and providing labor 172,205,464.81 158,112,964.06

services

Net increase of customer deposit

and interbank deposit

Net increase of loan from central

bank

Net increase of capital borrowed

from other financial institution

Cash received from original

insurance contract fee

Net cash received from reinsurance

business

Net increase of insured savings and

investment

Net increase of amount from

disposal financial assets that measured

by fair value and with variation

reckoned into current gains/losses

Cash received from interest,

commission charge and commission

Net increase of capital borrowed

Net increase of returned business

capital

Write-back of tax received

Other cash received concerning

17,681,721.14 22,370,091.90

operating activities

Subtotal of cash inflow arising from 189,887,185.95 180,483,055.96

49

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

operating activities

Cash paid for purchasing

commodities and receiving labor 100,485,791.06 88,512,297.28

service

Net increase of customer loans and

advances

Net increase of deposits in central

bank and interbank

Cash paid for original insurance

contract compensation

Cash paid for interest, commission

charge and commission

Cash paid for bonus of guarantee

slip

Cash paid to/for staff and workers 30,466,874.43 29,272,522.61

Taxes paid 12,522,480.67 13,224,238.25

Other cash paid concerning

39,031,478.39 25,502,491.46

operating activities

Subtotal of cash outflow arising from

182,506,624.55 156,511,549.60

operating activities

Net cash flows arising from operating

7,380,561.40 23,971,506.36

activities

II. Cash flows arising from investing

activities:

Cash received from recovering

237,000,000.00 165,500,000.00

investment

Cash received from investment

10,890,968.34 8,591,789.05

income

Net cash received from disposal of

fixed, intangible and other long-term 272,340.00

assets

Net cash received from disposal of

2,343,240.90

subsidiaries and other units

Other cash received concerning

investing activities

Subtotal of cash inflow from investing

250,506,549.24 174,091,789.05

activities

Cash paid for purchasing fixed,

12,861,466.12 38,970,948.42

intangible and other long-term assets

Cash paid for investment 322,000,000.00 110,800,000.00

Net increase of mortgaged loans

50

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Net cash received from

subsidiaries and other units obtained

Other cash paid concerning

investing activities

Subtotal of cash outflow from investing

334,861,466.12 149,770,948.42

activities

Net cash flows arising from investing

-84,354,916.88 24,320,840.63

activities

III. Cash flows arising from financing

activities

Cash received from absorbing

7,672,000.00

investment

Including: Cash received from

absorbing minority shareholders¡¯ 7,672,000.00

investment by subsidiaries

Cash received from loans 15,600,000.00

Cash received from issuing bonds

Other cash received concerning

financing activities

Subtotal of cash inflow from financing

23,272,000.00

activities

Cash paid for settling debts

Cash paid for dividend and profit

1,562,339.36 16,495,591.67

distributing or interest paying

Including: Dividend and profit of

minority shareholder paid by

subsidiaries

Other cash paid concerning

financing activities

Subtotal of cash outflow from financing

1,562,339.36 16,495,591.67

activities

Net cash flows arising from financing

21,709,660.64 -16,495,591.67

activities

IV. Influence on cash and cash

equivalents due to fluctuation in -153.38 126.81

exchange rate

V. Net increase of cash and cash

-55,264,848.22 31,796,882.13

equivalents

Add: Balance of cash and cash

178,497,640.10 159,184,710.93

equivalents at the period -begin

VI. Balance of cash and cash 123,232,791.88 190,981,593.06

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

equivalents at the period -end

6. Cash Flow Statement of Parent Company

In RMB

Item Current Period Last Period

I. Cash flows arising from operating

activities:

Cash received from selling

commodities and providing labor 32,112,173.50 30,405,761.68

services

Write-back of tax received

Other cash received concerning

4,567,298.11 24,198,098.94

operating activities

Subtotal of cash inflow arising from

36,679,471.61 54,603,860.62

operating activities

Cash paid for purchasing

commodities and receiving labor

service

Cash paid to/for staff and workers 8,371,531.53 7,686,514.98

Taxes paid 1,808,421.17 1,923,502.73

Other cash paid concerning

11,123,303.80 23,114,646.01

operating activities

Subtotal of cash outflow arising from

21,303,256.50 32,724,663.72

operating activities

Net cash flows arising from operating

15,376,215.11 21,879,196.90

activities

II. Cash flows arising from investing

activities:

Cash received from recovering

220,000,000.00 135,000,000.00

investment

Cash received from investment

10,718,165.59 8,473,178.10

income

Net cash received from disposal of

fixed, intangible and other long-term

assets

Net cash received from disposal of

14,150,000.00

subsidiaries and other units

Other cash received concerning

investing activities

Subtotal of cash inflow from investing 244,868,165.59 143,473,178.10

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

activities

Cash paid for purchasing fixed,

250,108.10 205,838.02

intangible and other long-term assets

Cash paid for investment 293,998,000.00 100,000,000.00

Net cash received from

subsidiaries and other units

Other cash paid concerning

investing activities

Subtotal of cash outflow from investing

294,248,108.10 100,205,838.02

activities

Net cash flows arising from investing

-49,379,942.51 43,267,340.08

activities

III. Cash flows arising from financing

activities

Cash received from absorbing

investment

Cash received from loans

Cash received from issuing bonds

Other cash received concerning

financing activities

Subtotal of cash inflow from financing

activities

Cash paid for settling debts

Cash paid for dividend and profit

1,099,583.35 16,495,591.67

distributing or interest paying

Other cash paid concerning

financing activities

Subtotal of cash outflow from financing

1,099,583.35 16,495,591.67

activities

Net cash flows arising from financing

-1,099,583.35 -16,495,591.67

activities

IV. Influence on cash and cash

equivalents due to fluctuation in

exchange rate

V. Net increase of cash and cash

-35,103,310.75 48,650,945.31

equivalents

Add: Balance of cash and cash

110,800,890.39 80,301,551.68

equivalents at the period -begin

VI. Balance of cash and cash

75,697,579.64 128,952,496.99

equivalents at the period -end

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

7. Statement of Changes in Owners¡¯ Equity (Consolidated)

Current Period

In RMB

Current period

Owners¡¯ equity attributable to parent company

Other equity

instrument

Item Perpet Less: Other Provisio Minorit Total

Reason

Share ual Capital Invento compre Surplus n of Retaine y owners¡¯

Prefer able interests equity

capital capita reserve ry hensive reserve general d profit

red Other reserve

l shares income risk

stock

securi

ties

297,28

I. Balance at the 564,192 2,952,5 30,935, 13,173, 908,536

1,600.

end of the last year ,605.51 86.32 823.12 721.23 ,336.18

00

Add:

Changes of

accounting policy

Error

correction of the

last period

Enterprise

combine under

the same control

Other

II. Balance at the 297,28

564,192 2,952,5 30,935, 13,173, 908,536

beginning of this 1,600.

,605.51 86.32 823.12 721.23 ,336.18

year 00

III. Increase/

Decrease in this 1,033,6 24,596, 6,476,4 32,107,

year (Decrease is 69.00 905.09 81.69 055.78

listed with ¨D-¡¬)

(i) Total

24,596, -1,195,5 23,401,

comprehensive

905.09 18.31 386.78

income

(ii) Owners¡¯

7,672,0 7,672,0

devoted and

00.00 00.00

decreased capital

1.Common shares

7,672,0 7,672,0

invested by

00.00 00.00

shareholders

2. Capital invested

by holders of other

equity instruments

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

3.Amount

reckoned into

owners equity with

share-based

payment

4£®Other

(III) Profit

distribution

1. Withdrawal of

surplus reserves

2. Withdrawal of

general risk

provisions

3. Distribution for

owners (or

shareholders)

4. Other

(IV) Carrying

forward internal

owners¡¯ equity

1. Capital reserves

conversed to

capital (share

capital)

2. Surplus reserves

conversed to

capital (share

capital)

3. Remedying loss

with surplus

reserve

4. Other

(V) Reasonable

reserve

1. Withdrawal in

the report period

2. Usage in the

report period

1,033,6 1,033,6

(VI)Others

69.00 69.00

IV. Balance at the 297,28

565,226 2,952,5 55,532, 19,650, 940,643

end of the report 1,600.

,274.51 86.32 728.21 202.92 ,391.96

period 00

Last Period

In RMB

Item Last Period

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Owners¡¯ equity attributable to parent company

Other equity

instrument

Minorit

Perpet Less: Other Provisio Total

Reason y

Share ual Capital Invento compre Surplus n of Retaine owners¡¯

Prefer able interest

capital reserve ry hensive reserve general d profit s equity

capita

red Other reserve

l shares income risk

stock

securi

ties

297,28

I. Balance at the 564,192 2,952,5 3,742,2 10,419, 878,588

1,600.

end of the last year ,605.51 86.32 60.49 351.32 ,403.64

00

Add:

Changes of

accounting policy

Error

correction of the

last period

Enterprise

combine under the

same control

Other

II. Balance at the 297,28

564,192 2,952,5 3,742,2 10,419, 878,588

beginning of this 1,600.

,605.51 86.32 60.49 351.32 ,403.64

year 00

III. Increase/

Decrease in this 17,747, 221,536 17,969,

year (Decrease is 952.63 .53 489.16

listed with ¨D-¡¬)

(i) Total

17,747, 221,536 17,969,

comprehensive

952.63 .53 489.16

income

(ii) Owners¡¯

devoted and

decreased capital

1.Common shares

invested by

shareholders

2. Capital invested

by holders of other

equity instruments

3. Amount

reckoned into

owners equity with

share-based

payment

4 Other

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

(III) Profit

distribution

1. Withdrawal of

surplus reserves

2. Withdrawal of

general risk

provisions

3. Distribution for

owners (or

shareholders)

4. Other

(IV) Carrying

forward internal

owners¡¯ equity

1. Capital reserves

conversed to

capital (share

capital)

2. Surplus reserves

conversed to

capital (share

capital)

3. Remedying loss

with surplus

reserve

4. Other

(V) Reasonable

reserve

1. Withdrawal in

the report period

2. Usage in the

report period

(VI)Others

IV. Balance at the 297,28

564,192 2,952,5 21,490, 10,640, 896,557

end of the report 1,600.

,605.51 86.32 213.12 887.85 ,892.80

period 00

8. Statement of Changes in Owners¡¯ Equity (Parent Company)

Current Period

In RMB

Current period

Other equity instrument

Perpetu Other

Less: Total

Item Share al Capital comprehe Reasonab Surplus Retaine

Preferre Inventory owners¡¯

capital capital Other reserve nsive le reserve reserve d profit

d stock shares equity

securiti income

es

I. Balance at the 297,281, 560,999,1 2,952,586 -55,254, 805,978,9

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

end of the last year 600.00 82.23 .32 452.82 15.73

Add: Changes

of accounting

policy

Error

correction of the

last period

Other

II. Balance at the

297,281, 560,999,1 2,952,586 -55,254, 805,978,9

beginning of this

600.00 82.23 .32 452.82 15.73

year

III. Increase/

Decrease in this 1,033,669 25,097, 26,131,26

year (Decrease is .00 598.88 7.88

listed with ¨D-¡¬)

(i) Total

25,097, 25,097,59

comprehensive

598.88 8.88

income

(ii) Owners¡¯

devoted and

decreased capital

1.Common shares

invested by

shareholders

2. Capital invested

by holders of other

equity instruments

3. Amount

reckoned into

owners equity with

share-based

payment

4. Other

(III) Profit

distribution

1. Withdrawal of

surplus reserves

2. Distribution for

owners (or

shareholders)

3. Other

(IV) Carrying

forward internal

owners¡¯ equity

1. Capital reserves

conversed to

capital (share

capital)

2. Surplus reserves

conversed to

58

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

capital (share

capital)

3. Remedying loss

with surplus

reserve

4. Other

(V) Reasonable

reserve

1. Withdrawal in

the report period

2. Usage in the

report period

1,033,669 1,033,669

(VI)Others

.00 .00

IV. Balance at the

297,281, 562,032,8 2,952,586 -30,156, 832,110,1

end of the report

600.00 51.23 .32 853.94 83.61

period

Last period

In RMB

Last period

Other equity instrument

Perpetu Other

Less: Total

Item Share al Capital comprehe Reasonab Surplus Retaine

Preferre Inventory owners¡¯

capital capital Other reserve nsive le reserve reserve d profit

d stock shares equity

securiti income

es

I. Balance at the 297,281, 560,999,1 2,952,586 -91,388, 769,844,4

end of the last year 600.00 82.23 .32 913.41 55.14

Add: Changes

of accounting

policy

Error

correction of the

last period

Other

II. Balance at the

297,281, 560,999,1 2,952,586 -91,388, 769,844,4

beginning of this

600.00 82.23 .32 913.41 55.14

year

III. Increase/

Decrease in this 14,557, 14,557,15

year (Decrease is 153.64 3.64

listed with ¨D-¡¬)

(i) Total

14,557, 14,557,15

comprehensive

153.64 3.64

income

(ii) Owners¡¯

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

devoted and

decreased capital

1.Common shares

invested by

shareholders

2. Capital invested

by holders of other

equity instruments

3. Amount

reckoned into

owners equity with

share-based

payment

4. Other

(III) Profit

distribution

1. Withdrawal of

surplus reserves

2. Distribution for

owners (or

shareholders)

3. Other

(IV) Carrying

forward internal

owners¡¯ equity

1. Capital reserves

conversed to

capital (share

capital)

2. Surplus reserves

conversed to

capital (share

capital)

3. Remedying loss

with surplus

reserve

4. Other

(V) Reasonable

reserve

1. Withdrawal in

the report period

2. Usage in the

report period

(VI)Others

IV. Balance at the

297,281, 560,999,1 2,952,586 -76,831, 784,401,6

end of the report

600.00 82.23 .32 759.77 08.78

period

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Section XI Notes to Financial Statement

(The unit is RMB unless otherwise specified)

I. Company profiles

1. Company profile

Chinese name of the Company: ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾

Foreign name of the Company: Shenzhen Tellus Holding Co.,Ltd

Registered address of the Company: 3/F, Tellus Building, Shuibei 2nd Road, Luohu District, Shenzhen, Guangdong

Province.

Office address of the Company: 15/F, Zhonghe Building, Shennan Middle Road, Futian District, Shenzhen

Stock exchange for listing: Shenzhen Stock Exchange

Short form of the stock and Stock code: Tellus-A(000025),Tellus-B(200025)

Registered capital: RMB 297,280,000.00

Legal representative: Lv Hang

Unified social credit code: 91440300192192210U

2. Business nature, operating scope and major products and services of the Company

Business nature: wholesale industry of energy, materials and machinery electronic equipments.

Operating scope: mainly engaged in provision of auto related comprehensive services, including sales and maintenance of

autos, production of detection equipments, and property leasing and management.

Major products and services: sales, detection and maintenance of autos and components, property leasing and service.

3. The history of the Company

Shenzhen Testrite Group Co., Ltd. (hereinafter referred to as the Company), previously known as Shenzhen Machinery

Industry Company, was incorporated on 10 November 1986. In 1992, as authorized by the reply relating to Shenzhen

Machinery Industry Company transforming to Shenzhen Testrite Machinery Co., Ltd.(SFBF[1991]1012) issued by the

Office of Shenzhen People Government, Shenzhen Machinery Industry Company was transformed to Shenzhen Testrite

Machinery Co., Ltd. in 1993, as authorized by the reply relating to Shenzhen Testrite Machinery Co., Ltd. transforming to

a public company (SFBF[1992]1850) issued by the Office of Shenzhen People Government and the reply relating to

issuance of stocks by Shenzhen Testrite Machinery and Electric Co., Ltd. (SRYFZ[1993]092) issued by Shenzhen branch

of People¡¯s Bank of China, Shenzhen Testrite Machinery Co., Ltd. changed to be a public company and made the initial

public offering. The name of the Company changed to Shenzhen Testrite Machinery and Electric Co., Ltd., with a total

share capital of 166,880,000 shares, among which, 120,900,000 shares were converted from the original assets and

45,980,000 shares were newly issued. The newly issued shares comprises of 25,980,000 RMB ordinary shares (A shares)

and 20,000,000 RMB special shares (B shares). In June 1993, as approved by the reply relating to listing of Shenzhen

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Testrite Machinery and Electric Co., Ltd. (SZBF[1993]34) issued by Shenzhen Securities Management Office and the

Listing Grant issued by Shenzhen Stock Exchange(SZSZ[1993]22), Shenzhen Testrite Machinery and Electric Co., Ltd.

was listed on Shenzhen Stock Exchange. On 15 March 1993, being approved by branch of Shenzhen Special Economic

Zone of People¡¯s Bank of China ¨DShen Ren Yin Fu Zi (1993) No.: 092¡¬, the Company released 25.98 million registered

common A shares with RMB 1.00 par value as well as 20 million B shares. And the Company renamed as Shenzhen Tellus

Holding Co., Ltd. instead of Shenzhen Testrite Machinery Co., Ltd. dated 30 June 1994 after approval from the Shenzhen

Administration for Industry and commerce.

Capital structure of the Company while initial public offering:

Type Amount (Share) Ratio (%)

I. Non-tradable share

Including: State shares 120,900,000 72.45

Total non-tradable shares 120,900,000 72.45

II. Outstanding shares

1. Tradable A-Share 25,980,000 15.57

2. Tradable B-Share 20,000,000 11.98

Total tradable shares 45,980,000 27.55

Total 166,880,000 100.00

All previous changes in the share capital after the public issue of the Company:

(1) Bonus shares in 1993

The Company held the resolution of annual shareholders' general meeting of 1993, distribute dividend of 0.5 Yuan in cash

for every 10 shares and 2 more bonus shares to all shareholders based on the Company¡¯s total share capital of 166,880,000

shares on 31st, Dec., 1993, and the Company¡¯s total share capital changed to 200,256,000 shares.

On 22nd April 1994, Shenzhen Securities Regulatory Office approved the stock dividend scheme of the Company. After the

implementation of the stock dividend program, the ownership structure of the Company became as follows:

Type Amount (Share) Ratio (%)

State-owned corporate shares 145,080,000 72.45

Domestic public shares 31,176,000 15.57

RMB special stock (B-Share) 24,000,000 11.98

Total 200,256,000 100.00

(2) Bonus shares and capitalization in 1994

On 28th May 1995, the shareholders' general meeting of the Group approved the bonus share and capitalization program

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

proposed by the board of directors. The Company distributes 0.5 bonus shares to every 10 shares with 0.5 more shares

increased for 0.5 Yuan dividend in cash to all shareholders based on the Company¡¯s total share capital of 200,256,000

shares on 31st, Dec., 1994, and the Company¡¯s total share capital changed to 220,281,600 shares.

Equity structure of the Company after bonus scheme implemented:

Type Amount (Share) Ratio (%)

State-owned corporate shares 159,588,000 72.45

Domestic public shares 34,293,600 15.57

RMB special stock (B-Share) 26,400,000 11.98

Total 220,281,600 100.00

(3) The changes of controlling shareholders in 1997

On 31st March 1997, in accordance with the approval of ¨DShenfuhan [1997] No.19¡¬ and ¨DZhengjianhan [1997] No.5¡¬, the

People's Government of SZ Municipality and China Securities Regulatory Commission agreed Shenzhen Investment and

Management Company to transfer its 159,588,000 shares of State shares to ¨DShenzhen Special Development Group Co.,

Ltd¡¬ (hereinafter referred to as ¨DSDG¡¬), which took proportion of 72.45% in the total share capital.

(4) Reform of non-tradable shares in 2006

In December 2005, Shenzhen State-owned Assets Supervision and Administration Commission approved the non-tradable

shares reform program of Shenzhen Tellus (Group) Ltd. which reported by the Company¡¯s non-tradable shareholders -

Shenzhen Special Development Group Co., Ltd.

On 4th January 2006, SDG paid 13,717,440 shares of stock to the shareholders of A shares in circulation as the

consideration of the non-tradable shares reform, and SDG held 66.22% of the Company¡¯s total share capital after the

non-tradable shares reform. After the implementation of the non-tradable shares reform program, the ownership structure

of the company became as follows:

Type Amount (Share) Ratio (%)

State-owned corporate shares 145,870,560 66.22

Domestic public shares 48,011,040 21.80

RMB special stock (B-Share) 26,400,000 11.98

Total 220,281,600 100.00

(5) Non-public RMB common stock offer in 2015

In accordance with the provisions of the Company¡¯s 19th extraordinary meeting of the 7th session of board of directors on

April 21, 2014 and the resolutions of the fourth extraordinary general meeting of 2014 on June 3, 2014, the non-public

offering of RMB ordinary shares (A shares) that the Company issues to Shenzhen SDG Co., Ltd. and Shenzhen CMAF

Jewelry Industry Investment Company (limited partnership) should not exceed 77,000,000 shares, of which the par value is

1 Yuan per share, the total raised funds are no more than RMB 646,800,000.00 Yuan, the issuance objects are all subscribed

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

by cash.

On May 19, 2014, State-owned Assets Supervision and Administration Commission of the People's Government of

Shenzhen Municipality issued ¨DReply to issues related to non-public offering of shares of Shenzhen Test Rite (Group) Co.,

Ltd. from SASAC of Shenzhen Municipality¡¬ (SGZWH No. [2014]237) which agreed the Company¡¯s plan for non-public

offering of shares. The Company¡¯s non-public offering has obtained the ¨DApproval for non-public offering of shares of

Shenzhen Test Rite (Group) Co., Ltd.¡¬ (CSRC License No. [2015]173) approved by China Securities Regulatory

Commission, which agrees the Company to issue the non-public offering of RMB ordinary shares (A shares) not exceeding

77,000,000 new shares. The registered capital is RMB 297,281,600.00 after change, and the company¡¯s ownership

structure is as follows:

Type Amount (Share) Ratio (%)

State-owned corporate shares 151,870,560 51.09

Domestic public shares 119,011,040 40.03

RMB special stock (B-Share) 26,400,000 8.88

Total 297,281,600 100.00

(6) Reducing stock by controlling shareholder in 2016

In accordance with the Announcement on Reducing Share Holding of Controlling Shareholder the company disclosed on

June 1, 2016, from May 4, 2016 to May 31, 2016, Shenzhen SDG Co., Ltd. totally reduced 2,972,537 shares of the

company¡¯s unrestricted outstanding shares by concentrated bidding, accounting for 1% of the company¡¯s total share capital.

On September 30, 2016, the company received a Letter About Reducing Test Rite A Shares and Completing the Share

Holding Reducing Plan from SDG, from September 29, 2016 to September 29, 2016, SDG totally reduced 2,972,767

shares of the company¡¯s unrestricted outstanding shares by concentrated bidding, accounting for 1% of the company¡¯s total

share capital. Up to September 29, 2016, SDG completed the share holding reducing plan. The company's equity structure

was as follows:

Type Amount (Share) Ratio (%)

State-owned corporate shares 145,925,256 49.09

Domestic public shares 124,956,344 42.03

RMB special stock (B-Share) 26,400,000 8.88

Total 297,281,600 100.00

As of 30 June 2017, the Company have 297,281,600 shares offered in total, found more in 31 of Note VI.

4. Consolidation scope of the Company in the year

Totally 15 companies included in the consolidation scope for the first half Year of 2017, found more in ¨DEquity in other

entity¡¬ in the Note VIII. One company deducted in consolidation range in the Year.

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

5. Relevant party offering approval reporting of financial statements and date thereof

This financial statement is approved for disclosure by resolution from the Board dated 30 August 2017.

II. Basis Preparation of the Financial Statements

The financial statements of the Group is prepared based on the going-concern assumption in accordance with the actually

occurred transactions and events, the ¨DAccounting standards for Business Enterprise-Basic rules¡¬ (ministry of finance

order No. 33 issued, ministry of finance No.76 revised), the ¨DAccounting Standards for Business Enterprises ¨C Basic

Standards¡¬ and 41 specific accounting standards promulgated by the ministry of finance on 15 th, Feb., 2006, the

subsequently promulgated application guide and interpretation of the accounting standards for business enterprises and

other relevant provisions (hereinafter collectively referred to as ¨DASBE¡¬), and China Securities Regulatory Commission

¨Dinformation disclosure regulations No.15 for the companies publicly issuing securities - general provisions of financial

reports¡¬ (2014 Revision).

According to the relevant requirements under the Accounting Standards for Business Enterprises, the Company has

adopted the accrual basis as its basis of accounting. Except for certain financial instruments, historical costs have been

adopted as the basis of measurement in these Financial Statements. Non-current assets held for sale are recorded at the

lower of fair value less predicted expenses and the original carrying value when the assets satisfy such conditions for sale.

Provisions of corresponding impairment losses are recognized in respect of any impairment of assets.

III. Statement of Compliance with the Accounting Standards for Business Enterprises

The financial statements prepared by the Groups meet the requirements of the Accounting Standards for Business

Enterprises, truthfully and completely reflect the financial situation of the Company on 30 th, June 2017 and the business

performance and cash flow in January to June of 2017. In addition, the financial statements of the Company and the Group

meet the disclosure requirements of ¨DPreparation Regulation of Information Disclosure for Enterprise with Security Issued

Publicly No.15¡ªGeneral Rules of Financial Report¡¬ revised by China Securities Regulatory Commission in all significant

aspects in 2014.

IV. Main accounting policy and estimate

The Company and its subsidiaries determine specific accounting policies and accounting estimation based on their actual

production characteristics according to the relevant requirements under the Accounting Standards for Business Enterprises.

Details relating to significant accounting judgment and estimation made by the management, please refer to note IV(29)

¨DSignificant accounting judgment and estimation¡¬.

1. Fiscal period

The accounting period of the Group includes annual and interim, accounting interim refers to the reporting period shorter

than a complete fiscal year. The fiscal year of the Group adopts the Gregorian calendar, i.e. from 1 January to 31 December

for each year.

2. Business cycle

Normal business cycle is the period from purchasing assets used for process by the Company to the cash and cash

equivalent achieved.

The Company¡¯s normal business cycle was one-year (12 months), and as the determining criterion of the liquidity for

assets and liabilities.

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ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

3. Book-keeping currency

RMB is the currency in the major economic environment of the Company and its sub-company which take RMB as the

book-keeping currency. The Group adopts RMB as the currency when preparing this financial statement.

4. The accounting treatment of business merger under the common control and the different control.

Business merger refers to the transactions or matters that two or more than two individual enterprises form a reporting

entity. Business combination is at least subject to the following conditions: to acquire controlling right upon another or

multiple enterprises (or business); enterprises to be combined must constitute business. In case that an acquirer obtains

controlling right upon another or multiple enterprises which do not constitute business, the transaction shall not constitute

business combination.

When acquirer acquires a group of assets or net assets which don¡¯t constitute business, the acquisition costs shall be

allocated into various identifiable assets or liabilities based on their fair value as of the acquisition date. Where there are

specific identifiable assets which cannot be substituted taking substantial proportion in a group of assets or net assets and

the future cash flow of the acquiree also highly depends on such specific identifiable assets, the remaining amount between

acquisition costs less fair value of other identifiable assets shall be entirely recorded in such specific identifiable assets.

Business merger includes the business merger under the common control and the different control.

(1) Business merger under the common control

Business merger under the common control means the enterprises participated in the merger are subject to the ultimate

control of the same party or the same multi-party before and after the merger, and the control is not temporary. For the

business merger under the same control, the party obtains the control rights of other enterprises participated in the merger

on the merger date is the merging party, and other enterprises participated in the merger are the merged party. The merger

date refers to the date that the merging party obtains the control rights of the merged party.

The assets and liabilities of the merging party should be measured in accordance with the book value of the combined party

on the combining date. The balance between the book value of the net asset obtained by the merging party and the book

value of the merger consideration (or the total face value of the issued shares) paid by the merging party, and adjust the

capital reserve (share premium); for the capital reserve (share premium) insufficient to reduce, adjust the retained earnings.

All direct expenses the merging party spent for the business merger are included in the current profit and loss when the

business merger occurred.

(2) Business merger under the different control

Business merger under the different control means the enterprises participated in the merger are not subject to the ultimate

control of the same party or the same multi-party before and after the merger. For the business merger under the different

control, the party obtains the control rights of other enterprises participated in the merger on the acquisition date is the

acquirer, and other enterprises participated in the merger are the acquiree. The acquisition date refers to the date that the

acquirer obtains the control rights of the acquiree.

As for the business merger under the different control, the merger costs contain the assets paid by the acquirer for obtaining

the control rights of the acquiree on the acquisition date, the liabilities incurred or assumed, and the fair value of the issued

equity securities. The intermediary fees such as auditing, legal services and consulting services costs and other

administrative costs incurred by the business merger are charged to the current profit and loss. The transaction costs of the

equity securities or debt securities issued as the combination consideration by the acquirer are reckoned in the initially

recognized amount of the equity securities or debt securities. As for the involved or existing consideration reckoned in the

merger costs in accordance with the fair value on the acquisition date, correspondingly adjust the consolidated goodwill for

these needs to be adjusted or possess consideration because new or further evidence appears for the situations existing on

the acquisition date within 12 months after the acquisition date The merger costs of the acquirer and the net identifiable

assets obtained in the merger are reckoned in accordance with the fair value on the acquisition date. The balance of which

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the merger costs are more than the net identifiable assets¡¯ fair value share of the acquiree obtained in the merger on the

acquisition date is recognized as goodwill. For those whose merger costs are less than the net identifiable assets¡¯ fair value

share of the acquiree obtained in the merger, recheck the obtained identifiable assets, liabilities, and the fair value with

contingent liability of the acquiree, and the measurement of the merger costs at first, while for those whose merger costs

are still less than the net identifiable assets¡¯ fair value share of the acquiree obtained in the merge after rechecking, reckon

its the balance in the current profit and loss.

For the deductable temporary difference obtained by the acquirer from the acquiree that is not confirmed because of not

meeting the assets confirmation requirements of the deferred income taxes on the acquisition date, if there is new or further

information states that the relevant conditions on the acquisition date has already existed and the economic interests on the

acquisition date brought by the deductable temporary difference can be realized by the acquiree within 12 months after the

acquisition date, then confirm the relevant deferred income tax assets, and decrease the goodwill, as for the goodwill

insufficient for reducing, confirm the difference to be the current profit and loss; except for the above-mentioned cases,

reckon those deferred income tax assets related to the business merger in the current profit and loss.

For a business combination not involving enterprises under common control and achieved in stages, the company shall

determine whether the business combination shall be regarded as ¨Da bundle of transactions¡¬ in accordance with

¨DInterpretation 5 on Accounting Standards for Business Enterprises¡¬ (Cai Kuai 2012 No. 19) and clause 51 of ASBE 33-

Consolidated Financial Statements relating to judgment standard for ¨Da bundle of transactions¡¬(please refer to this Note IV

5(2)). When the business combination is regarded as ¨Da bundle of transactions¡¬, the accounting treatment for the business

combination shall be in accordance with the previous paragraphs and Note IV 13 ¨Dlong term equity investment¡¬; when the

business combination is not regarded as ¨Da bundle of transactions¡¬, the accounting treatment should be different when

comes to individual financial report and consolidated financial report.

In the individual financial statements, the initial cost of the investment shall be the sum of the carrying amount of its

previously-held equity interest in the acquiree prior to the acquisition date and the amount of additional investment made to

the acquiree at the acquisition date. Other comprehensive income involved in the previously-held equity interest of the

acquiree prior to the acquisition date shall be subject to accounting treatment on the same basis adopted by the acquiree in

its direct disposal of related assets or liabilities (which are reclassified as investment income during the period , net of the

audited changing corresponding shares resulted from the net liability and net assets re-measured and set by acquiree

according to equity method ).

In the consolidate financial statements, the previously-held equity interest of the acquire is re-measured according to the

fair value at the acquisition date; the difference between the fair value and the carrying amount is recognized as investment

income for the current period; the amount recognized in other comprehensive income relating to the previously-held equity

interest in the acquire shall be subject to accounting treatment on the same basis adopted by the acquire in its direct

disposal of related assets or liabilities (which are reclassified as investment income during the period, net of the audited

changing corresponding shares resulted from the net liability and net assets re-measured and set by acquire according to

equity method).

5. Preparing method of consolidated financial statements

(1) Determinate principles of range for consolidation financial statement

The scope of consolidated financial statements is determined based on control. Control is the power to govern the investees

so as to obtain benefits from their operating activities by the involvement in the relevant activities of the investee. The

scope of consolidation comprises the Company and all of its subsidiaries. Subsidiaries are the entities controlled by the

Company.

Once relevant elements involved in the above definition of control change due to alteration of relevant facts or situations,

the Company will make evaluation again.

(2) Preparing method of consolidated financial statements

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Since the date of gaining the net assets and the actual control rights of the production and operation decision-making of the

subsidiaries, the Group has started to bring it into the consolidation scope; stop to bring into the consolidation scope since

the date of losing the actual control rights. As for the disposed subsidiaries, the business performance and cash flow before

the disposal have been suitably included in the consolidated income statement and the consolidated cash flow statement; as

for the subsidiaries currently disposed; don¡¯t adjust the opening balance of the consolidated balance sheet. For the

subsidiaries increased by the business merger under the different control, the business performance and cash flow after its

acquisition date have been suitably included in the consolidated income statement and the consolidated cash flow statement,

and don¡¯t adjust the opening balance and correlation date of the combined financial statement. For the subsidiaries

increased by the business merger under the common control, the business performance and cash flow from the beginning

period of the merger to its merger date have been suitably included in the consolidated income statement and the

consolidated cash flow statement, and adjust the correlation date of the combined financial statement at the same time.

When preparing the consolidated financial statements, for the accounting policies adopted by the subsidiaries and the

Company being inconsistent during the accounting time period, adjust in accordance with the accounting policies of the

Company and the financial statements of the subsidiaries during the accounting time period. As for the subsidiaries

obtained by the business merger under the different control, adjust the financial statements based on the fair value of the

net identifiable assets on the acquisition date.

All significant intra-group current account balances, transactions and unrealized profits are offset in the preparation of

consolidated financial statements.

The stockholders' equity of the subsidiaries and the shares not belong to the Company in the current net profit or loss are

respectively served as the separate presentation in the stockholders' equity and net profits of the minority interest and

minority interest income in the consolidated financial statements. The shares of the current net profit or loss of the

subsidiaries that belong to the minority interest are listed under net profit item in the consolidated profit statement as

¨Dminority interest income¡¬ item. Reduce the minority interest for those that the subsidiaries¡¯ losses shared by the minority

shareholders exceed the shares that the minority shareholders gained from the owner's equity at the beginning period of this

subsidiary.

When losing the control rights of the original sub companies because of disposing some equity investment or other reasons,

re-measure the residual equity in accordance with its fair value on the date of losing the control rights. Use the sum of the

consideration obtained by disposing the stock rights and the fair value of the residual equity to minus the balance among

the net assets¡¯ shares of the original sub companies continuously calculated since the acquisition date in accordance with

the original shareholding ratio, and then reckon in the current investment income when losing the control rights. The other

consolidated incomes related to the equity investment of the original sub companies, It shall be subject to accounting

treatment on the same basis adopted by the acquiree in its direct disposal of related assets or liabilities during the period

when the control ceases (which are reclassified as investment income for the current period, other than changes resulting

from re-measuring net liability or net assets under defined benefit plan of the original subsidiary). Thereafter, do the

follow-up measurement for this part¡¯s residual equity in accordance with the relevant provisions of ¨DAccounting Standards

for Business Enterprises No.2 - long-term equity investment¡¬ or ¨DAccounting Standards for Business Enterprises No.22 -

financial instruments recognition and measure¡¯, refer to the Note IV 13 ¨Dlong-term equity investment¡¬ or the Note IV 9

¨Dfinancial instruments¡¬ for details.

The company shall determine whether loss of control arising from disposal in a series of transactions should be regarded as

a bundle of transactions. When the economic effects and terms and conditions of the disposal transactions met one or more

of the following situations, the transactions shall normally be accounted for as a bundle of transactions: (i) The transactions

are entered into after considering the mutual consequences of each individual transaction; (ii) The transactions need to be

considered as a whole in order to achieve a deal in commercial sense; (iii) The occurrence of an individual transaction

depends on the occurrence of one or more individual transactions in the series; (iv) The result of an individual transaction

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is not economical, but it would be economical after taking into account of other transactions in the series. When the

transactions are not regarded as a bundle of transactions, the individual transactions shall be accounted as ¨Ddisposal of a

portion of an interest in a subsidiary which does not lead to loss of control¡¬) (for details, please refer to Note IV 13(2)¢Ü)

and ¨Ddisposal of a portion of an interest in a subsidiary which lead to loss of control¡¬ (details are set out in previous

paragraph). When the transactions are regarded as a bundle of transactions, the transactions shall be accounted as a single

disposal transaction; however, the difference between the consideration received from disposal and the share of net assets

disposed in each individual transactions before loss of control shall be recognized as other comprehensive income, and

reclassified as profit or loss arising from the loss of control when control is lost.

6. Classification of joint arrangement and accounting for joint operations

A joint arrangement refers to an arrangement jointly controlled by two or more parties. In accordance with the Company¡¯s

rights and obligations under a joint arrangement, the Company classifies joint arrangements into: joint ventures and joint

operations. Joint operations refer to a joint arrangement during which the Company is entitled to relevant assets and

obligations of this arrangement. Joint ventures refer to a joint arrangement during which the Company only is entitled to

net assets of this arrangement.

Investment in joint venture is accounted for using the equity method accounting to the accounting policies referred to Note

IV 13(2)¢Ú¨DLong-term equity investment accounted for using the equity method¡¬.

The Company shall, as a joint venture, recognize the assets held and obligations assumed solely by the Company, and

recognize assets held and obligations assumed jointly by the Company in appropriation to the share of the Company;

recognize revenue from disposal of the share of joint operations of the Company; recognize fees solely occurred by

Company and recognize fees from joint operations in appropriation to the share of the Company.

When the Company, as a joint venture, invests or sells assets to or purchase assets (the assets dose not constitute a business,

the same below) from joint operations, the Company shall only recognize the part of profit or lost from this transaction

attributable to other parties of joint operations before these assets are sold to a third party. In case of an impairment loss

incurred on these assets which meets the requirements as set out in ¨DAccounting Standards for Business Enterprises No. 8 ¨C

Asset Impairment¡¬, the Company shall recognize the full amount of this loss in relation to its investment in or sale of assets

to joint operations, or recognize the loss according to the Company¡¯s share of commitment in relation to the its purchase of

assets from joint operations.

7. Determination criteria of cash and cash equivalent

Cash and cash equivalent of the Company including stock cash, deposits available for payment at any

time and the investment held by the Company with the follow characters obtained at the same time: short

term (expire within 3 months commencing from purchase day), active liquidity, easy to convert to

already-known cash, and small value change risks.

8. Foreign Currency Operations and translation of foreign currency statements

(1) Basis for translation of foreign currency transactions

The foreign currency transactions of the Company, when initially recognized, are translated into functional currency at the

prevailing spot exchange rate on the date of exchange (usually refers to the middle rate of the exchange rate for the day as

quoted by the People¡¯s Bank of China, the same below) while the Company¡¯s foreign currency exchange operations and

transactions in connection with foreign currency exchange shall be translated into functional currency at the exchange rate

actually adopted.

(2) Basis for translation of foreign currency monetary items and foreign currency non-monetary items

On the balance sheet date, foreign currency monetary items shall be translated at the spot exchange rate

on the balance sheet date. All differences are included in the consolidated income statement, except for:

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¢Ù the differences arising from foreign currency borrowings related to the acquisition or construction of

fixed assets which are qualified for capitalization; and ¢Ú except for other carrying amounts of the

amortization costs, the differences arising from changes of the foreign currency items available for sale.

When preparing consolidated financial statement involving overseas operation, in case there is foreign currency monetary

items which substantially constitute net investment in overseas operation, the exchange difference arising from exchange

rate fluctuation shall be included in other comprehensive income; and shall transfer to gains and losses from disposal for

the current period when the overseas operation is disposed of.

The foreign currency non-monetary items measured at historical cost shall still be measured by the

functional currency translated at the spot exchange rate on the date of the transaction. Foreign currency

non-monetary items measured at fair value are translated at the spot exchange rate on the date of

determination of the fair value. The difference between the amounts of reporting currency before and

after the translation will be treated as changes in fair value (including changes in foreign exchange rates)

and recognized in profit or loss for the period or recognized as other consolidated income.

(3) Translation of foreign currency financial statement

When preparing consolidated financial statement involving overseas operation, in case there is foreign currency monetary

items which substantially constitute net investment in overseas operation, the exchange difference arising from exchange

rate fluctuation shall be included in other comprehensive income as ¨Dtranslation difference of foreign currency statement¡¬;

and shall transfer to gains and losses from disposal for the current period when the overseas operation is disposed of.

Foreign currency financial statement for overseas operation is translated into RMB statement by the following means:

assets and liabilities in balance sheet are translated at the spot rate as of balance sheet date; owner¡¯s equity items (other

than undistributed profit) are translated at the spot rate prevailing on the date of occurrence. Income and expense items in

profit statement are translated at the spot rate prevailing on the date of transactions. Beginning undistributed profit

represents the translated ending undistributed profit of previous year; ending undistributed profit is allocated and stated as

several items upon translation. Upon translation, difference between assets, liabilities and shareholders¡¯ equity items shall

be recorded as foreign currency financial statement translation difference and recognized as other comprehensive income.

In case of disposal of overseas operation where control is lost, foreign currency financial statement translation difference

relating to the overseas operation as stated under shareholders¡¯ equity in balance sheet shall be transferred to current gains

and losses of disposal in full or under the proportion it disposes.

Foreign currency cash flow and cash flow of overseas subsidiary are translated at the spot rate prevailing on the date of

occurrence of cash flow. Influence over cash from exchange rate fluctuation is taken as adjustment items to separately

stated in cash flow statement.

The beginning figure and previous year actual figures are stated at the translated figures in previous year financial

statement.

If the Company loses control over overseas operation due to disposal of all the owners¡¯ equity or part equity investment in

the overseas operation or other reasons, foreign currency financial statement translation difference relating to the overseas

operation attributable to owners¡¯ equity of parent company as stated under shareholders¡¯ equity in balance sheet shall be

transferred to current gains and losses of disposal in full.

If the Company reduces equity proportion while not loses control over overseas operation due to disposal of part equity

investment in the overseas operation or other reasons, foreign currency financial statement translation difference relating to

the disposed part will be vested to minority interests and will not transfer to current gains and losses. When disposing part

equity interests of overseas operation which is associate or joint venture, foreign currency financial statement translation

difference relating to the overseas operation shall transfer to current disposal gains and losses according to the disposed

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proportion.

9. Financial instruments

(1) Method of determination of the fair value for financial assets and financial liabilities

Fair value represents the price that market participator can receive for disposal of an asset or he should pay for transfer of a

liability in an orderly transaction happened on the measurement date. Financial instruments exist in an active market. Fair

value is determined based on the quoted price in such market. An active market refers to where pricing is easily and

regularly obtained from exchanges, brokers, industrial organizations and price-fixing service organizations, representing

the actual price of a market transaction that takes place in a fair deal. While financial instruments do not exist in an active

market, the fair value is determined using valuation techniques. Valuation technologies include reference to be familiar

with situation and prices reached in recent market transactions entered into by both willing parties, reference to present fair

values of similar other financial instruments, cash flow discounting method and option pricing models.

(2) Classification, recognition and measurement of the financial assets

Financial asset or financial liability is recognized when the Company becomes a party to financial instrument contract.

Financial assets and liabilities are initially measured at fair value. For financial assets and financial liabilities classified as

fair value through profit or loss, relevant transaction costs are directly recognized in profit or loss for the period. For

financial assets and financial liabilities classified as other categories, relevant transaction costs are included in the amount

initially recognized.

¢ÙFinancial assets carried at fair value through profit or loss for the current period

They include financial assets held for trading and financial assets designated as at fair value through

profit or loss for the current period.

Financial assets may be classified as financial assets held for trading if one of the following conditions is

met: A. the financial assets is acquired or incurred principally for the purpose of selling it in the near term;

B. the financial assets is part of a portfolio of identified financial instruments that are managed together

and for which there is objective evidence of a recent pattern of short-term profit taking; or C. the

financial assets is a derivative, excluding the derivatives designated as effective hedging instruments, the

derivatives classified as financial guarantee contract, and the derivatives linked to an equity instrument

investment which has no quoted price in an active market nor a reliably measured fair value and are

required to be settled through that equity instrument.

A financial asset may be designated as at FVTPL upon initial recognition only when one of the following

conditions is satisfied: A. Such designation eliminates or significantly reduces a measurement or

recognition inconsistency that would otherwise result from measuring assets or recognizing the gains or

losses on them on different bases; or B. The financial asset forms part of a group of financial assets or a

group of financial assets and financial liabilities, which is managed and its performance is evaluated on a

fair value basis, in accordance with the Group¡¯s documented risk management or investment strategy,

and information about the grouping is reported to key management personnel on that basis.

Financial assets carried at fair value through profit or loss for the current period is subsequently measured

at fair value. The gain or loss arising from changes in fair value and dividends and interest income related

to such financial assets are charged to profit or loss for the current period.

¢ÚHeld-to-maturity investments

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They are non-derivative financial assets with fixed maturity dates and fixed or determinable payments

that the Group has positive intent and ability to hold to maturity.

Held-to-maturity investments are subsequently measured at amortized cost using the effective interest

method. Gain or loss on derecognition, impairment or amortization is recognized through profit or loss

for the current period.

The effective interest method is a method of calculating the amortized cost of a financial asset and of

allocating interest income or expense over each period based on the effective interest of a financial asset

or a financial liability (including a group of financial assets or financial liabilities). The effective interest

is the rate that discounts future cash flows from the financial asset or financial liability over its expected

life or (where appropriate) a shorter period to the carrying amount of the financial asset or financial

liability.

In calculating the effective interest rate, the Group will estimate the future cash flows (excluding future

credit losses) by taking into account all contract terms relating to the financial assets or financial

liabilities whilst considering various fees, transaction costs and discounts or premiums which are part of

the effective interest rate paid or received between the parties to the financial assets or financial liabilities

contracts.

¢Û Loans and receivable

They are non-derivative financial assets with fixed or determinable payments that are not quoted in an

active market. Financial assets, including bills receivable, accounts receivable, interest receivable,

dividends receivable and other receivables, are classified as loans and receivables by the Group.

Loans and receivables are subsequently measured at amortized cost using the effective interest method.

Gain or loss arising from derecognition, impairment or amortization is recognized in current profit or

loss.

¢ÜAvailable-for-sale financial assets

They include non-derivative financial assets that are designated in this category on initial recognition,

and the financial assets other than the financial assets at fair value through profit and loss, loans and

receivables and held-to-maturity investments.

The closing cost of available-for-sale debt instruments are determined based on amortized cost method, which means the

amount of initial recognition less the amount of principle already repaid, add or less the accumulated amortized amount

arising from the difference between the amount due on maturity and the amount initially recognized using effective interest

rate method, and less the amount of impairment losses recognized. The closing cost of available-for-sale equity instruments

is equal to its initial acquisition cost.

Available-for-sale financial assets are subsequently measured at fair value. The gain or loss on change in

fair value are recognized as other comprehensive income, except for impairment loss and exchange

differences arising from foreign monetary financial assets and amortized cost which are accounted for

through profit or loss for the current period. The financial assets will be transferred out of the financial

assets on derecognition and accounted for through profit or loss for the current period.

However, equity instrument investment which is not quoted in active market and whose fair value cannot be measured

reliably, and derivative financial asset which is linked to the equity instrument and whose settlement is conditional upon

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delivery of the equity instrument, shall be subsequently measured at cost.

Interests received from available-for-sale financial assets held and the cash dividends declared by the

investee are recognized as investment income.

(3) Impairment of financial assets

In addition to financial assets at fair value through profit or loss for the current period, the Group reviews

the book value of other financial assets at each balance sheet date and provide for impairment where

there is objective evidence that financial assets are impaired.

For a financial asset that is individually significant, the Group assesses the asset individually for

impairment. For a financial asset that is not individually significant, the Group assess the asset

individually for impairment or include the asset in a group of financial assets with similar credit risk

characteristics and collectively assess them for impairment. If it is determined that no objective evidence

of impairment exists for an individually assessed financial asset, whether the financial asset is

individually significant or not, the financial asset is included in a group of financial assets with similar

credit risk characteristics and collectively assessed for impairment. Financial assets for which an

impairment loss is individually recognized are not included in the collective assessment for impairment.

¢ÙImpairment of held-to-maturity investments, loans and receivables

The carrying amount of financial assets measured at costs or amortized costs are subsequently reduced to

the present value discounted from its projected future cash flow. The reduced amount is recognized as

impairment loss and recorded as profit or loss for the period. After recognition of the impairment loss

from financial assets, if there is objective evidence showing recovery in value of such financial assets

impaired and which is related to any event occurring after such recognition, the impairment loss

originally recognized shall be reversed to the extent that the carrying value of the financial assets upon

reversal will not exceed the amortized cost as at the reversal date assuming there is no provision for

impairment.

¢ÚImpairment of available-for-sale financial assets

In the event that decline in fair value of the available-for-sale equity instrument investment is regarded as ¨Dsevere decline¡¬

or ¨Dnon-temporary decline¡¬ on the basis of comprehensive related factors, it indicates that there is impairment loss of the

available-for-sale equity instrument investment.

The company¡¯s standards to judge if the fair value of available for sale equity instruments investment has a ¨Dsevere¡¬

depreciation is that if the fair value of a single available for sale financial asset has a sharp fall which exceeds 50% of its

holding cost, then this available for sale financial asset is affirmed to have a severe decrease in value and should have the

provision for asset impairment to confirm the impairment loss.

The company¡¯s standards to judge if the fair value of available for sale equity instruments investment has a

¨Dnon-temporary" depreciation is that if the fair value of a single available for sale financial asset has a sharp fall and this

downtrend is predicted to be non-temporary with the duration over a year that cannot be fundamentally changed in the

whole holding period, then this available for sale financial asset is affirmed to have a non-temporary decrease in value and

should have the provision for asset impairment to confirm the impairment loss.

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When the available-for-sale financial assets impair, the accumulated loss originally included in the capital

reserve arising from the decrease in fair value was transferred out from the capital reserve and included in

the profit or loss for the period. The accumulated loss that transferred out from the capital reserve is the

balance of the acquired initial cost of asset, after deduction of the principal recovered, amortized amounts,

current fair value and the impairment loss originally included in the profit or loss.

After recognition of the impairment loss, if there is objective evidence showing recovery in value of such

financial assets impaired and which is related to any event occurring after such recognition in subsequent

periods, the impairment loss originally recognized shall be reversed. The impairment loss reversal of the

available-for-sale equity instrument will be recognized as other consolidated income, and the impairment

loss reversal of the available-for-sale debt instrument will be included in the profit or loss for the period.

When an equity investment that is not quoted in an active market and the fair value of which cannot be

measured reliably, or the impairment loss of a derivative financial asset linked to the equity instrument

that shall be settled by delivery of that equity instrument, then it will not be reversed.

(4) Recognition and measurement of transfers of financial asset

Financial asset that satisfied any of the following criteria shall be derecognized: ¢Ùthe contract right to

recover the cash flows of the financial asset has terminated; ¢Ú the financial asset, along with

substantially all the risk and return arising from the ownership of the financial asset, has been transferred

to the transferee; and ¢Û the financial asset has been transferred to the transferee, and the transferor has

given up the control on such financial asset, though it does not assign maintain substantially all the risk

and return arising from the ownership of the financial asset.

When the entity does not either assign or maintain substantially all the risk and return arising from the

ownership of the financial asset and does not give up the control on such financial asset, to the extent of

its continuous involvement in the financial asset, the entity recognizes it as a related financial asset and

recognizes the relevant liability accordingly. The extent of the continuous involvement is the extent to

which the entity exposes to changes in the value of such financial assets.

On derecognition of a financial asset, the difference between the following amounts is recognized in

profit or loss for the current period: the carrying amount and the sum of the consideration received and

any accumulated gain or loss that had been recognized directly in equity.

If a part of the financial assets qualifies for derecognition, the carrying amount of the financial asset is

allocated between the part that continues to be recognized and the part that qualifies for derecognition,

based on the fair values of the respective parts. The difference between the following amounts is

recognized in profit or loss for the period: the sum of the consideration received and the carrying amount

of the part that qualifies for derecognition and the aforementioned carrying amount.

For financial assets that are transferred with recourse or endorsement, the Company needs to determine whether the risk

and rewards of ownership of the financial asset have been substantially transferred. If the risk and rewards of ownership of

the financial asset have been substantially transferred, the financial assets shall be derecognized. If the risk and rewards of

ownership of the financial assets have been retained, the financial assets shall not be derecognized. If the Company neither

transfers nor retains substantially all the risks and rewards of ownership of the financial assets, the Company shall assess

whether the control over the financial assets is retained, and the financial assets shall be accounted for according to the

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above paragraphs.

(5) Classification and measurement of financial liabilities

At initial recognition, financial liabilities are classified either as ¨Dfinancial liabilities at fair value through

profit or loss¡¬ or ¨Dother financial liabilities¡¬. Financial liabilities are initially recognized at fair value. For

financial liabilities classified as fair value through profit or loss, relevant transaction costs are directly

recognized in profit or loss for the period. For financial liabilities classified as other categories, relevant

transaction costs are included in the amount initially recognized.

¢Ù Financial liabilities at fair value through profit or loss for the period

The criteria for a financial liability to be classified as held for trading and designated as at financial

liabilities at fair value through profit or loss are the same as those for a financial asset to be classified as

held for trading and designated as at financial assets at fair value through profit or loss.

Financial liabilities at fair value through profit or loss for the period are subsequently measured at fair

value. The gain or loss arising from changes in fair value and dividends and interest income related to

such financial liabilities are included into the current profit or loss.

¢Ú Other financial liabilities

Derivative financial liabilities which are linked to equity instruments that are not quoted in an active

market and the fair value of which cannot be measured reliably measured, and which shall be settled by

delivery of equity instruments are subsequently measured at cost. Other financial liabilities are

subsequently measured at amortized cost using the effective interest method. Gains or losses arising from

derecognition or amortization is recognized in profit or loss for the current period.

¢ÛFinancial guarantee contract

Financial guarantee contract in respect of financial liabilities not designed at fair value through profit or loss shall be

initially measured at fair value, and subsequently measured at the lower between the amount determined under Accounting

Standards for Enterprises No.13-Contingent issues and its initial measurement amount less accumulative amortization

determined under Accounting Standards for Enterprises No.14-Revenue.

(6) Derecognition of financial liabilities

Financial liabilities are derecognized in full or in part only when the present obligation is discharged in full or in part. An

agreement is entered between the Group (debtor) and a creditor to replace the original financial liabilities with new

financial liabilities with substantially different terms, derecognize the original financial liabilities as well as recognize the

new financial liabilities.

When financial liabilities is derecognized in full or in part, the difference between the carrying amount of

the financial liabilities derecognized and the consideration paid (including transferred non-cash assets or

new financial liability) is recognized in profit or loss for the current period.

(7) Derivatives and embedded derivatives

Derivatives are initially measured at fair value as of the execution date of relevant contract, and subsequently measured at

fair value. Change of fair value of derivatives is recorded in profit or loss for the period.

In respect of mixed instruments containing embedded derivatives, if they are financial assets or financial liabilities not

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designated at fair value through profit or loss, and there is no close relation between embedded derivatives and such main

contract in terms of economic characteristics and risk, separate instrument shares the same conditions with embedded

derivatives and meets definition of derivatives, the embedded derivatives are split off from the mixed instruments and

accounted for as separate derivative financial instrument. If an embedded derivative instrument cannot be measured

separately upon acquisition or at subsequent balance sheet date, the mixed instruments shall be taken in its entirety as

financial assets or financial liabilities designated at fair value through profit or loss.

(8) Offset of Financial Assets and Financial Liabilities

If the Group owns the legitimate rights of offsetting the recognized financial assets and financial

liabilities, which are enforceable currently, and the Group plans to realize the financial assets or to clear

off the financial liabilities by net amount method, the amount of the offsetting financial assets and

financial liabilities shall be reported in the balance sheep. Otherwise, financial assets and financial

liabilities are presented separately in the balance sheet without offsetting.

(9) Equity instruments

Equity instruments are any contract that evidences a residual interest in the assets of an entity after deducting all of its

liabilities. The Company issues (including refinancing), repurchases, sells or cancels equity instruments as movement of

equity. No fair value change of equity instrument would be recognized by the Company. Transaction fees relating to equity

transactions are deducted from equity.

The distribution (excluding the dividends) to the equity instrument holders by the Group shall reduce the

shareholder¡¯s equity. The Group shall not recognize the changes of the equity instruments¡¯ fair value.

10. Account receivable

Account receivable including receivables and other account receivables etc.

(1) Recognition standards for bad debt provision

On balance sheet date, the Company examined book value of the account receivable, if the followed objective evidence has

been show for impairment occurred, impairment provision shall withdrawal: ¢Ùthe debtor has serious financial difficulties;

¢Údebtor violated the terms of the contract (such as interest or principal payment default or overdue etc.); ¢Ûdebtor

probably close down or exercise other financial restructuring; and ¢Üother objective evidence showing impairment

occurred on receivables.

(2) Withdrawal method for bad debt provision

¢ÙRecognition criteria and depreciation method for account receivable with large single amount and accrued for provision

of bad debt on a single basis

Account receivable with over RMB one million and other account receivable with over RMB 500,000 are recognized as

account receivable with large single amount.

The Company exercise impairment test separately on account receivable with large single amount, if no impairment been

found in financial assets after separate testing, they shall be included in portfolios of accounts receivable with similar credit

risk features for impairment tests.

For accounts receivable with confirmed impairment losses after separate tests, they shall not be included in portfolios of

accounts receivable with similar credit risk features for impairment tests.

¢ÚRecognition criteria and depreciation method for account receivable with accrued for provision of bad debt on credit risk

portfolio basis

A. Recognition basis for credit risk characteristics portfolio

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As for the account receivable with minor single amount and those with major amount without impairment had been found

after testing on a single basis, the Company grouping the financial assets according to similarity and relativity of the credit

risk characteristics. The credit risk characteristics usually reflect the repaying capability for all due amount from debtors, in

line with the terms of the contract, and related with the measurement of future cash flow on assets which has been

examined.

Recognition basis for different portfolio:

Item Basis

Age portfolio Divide the portfolio on the age of account receivable as a credit risk characteristics

B. Depreciation method for bad debt provision recognized by credit risk characteristics portfolio

At the time of impairment testing, the bad debt amount will recognized by the estimated losses, according to historical

losses experience, which has been occurred in account receivable portfolio, and current economic status as well as

portfolio structure and similar credit risk characteristics (debt paying capability for debtor based on terms of the contract).

Depreciation method of bad debt provision in different portfolio:

Item Depreciation method

Age portfolio Accrual bad debt provision by aging of accounts

a. Depreciation method of bad debt provision by aging of accounts in portfolio

Accrual ratio of account Accrual ratio of other

Age

receivable (%) receivables (%)

Within 1 year (including one year, the same below) No accrual No accrual

1-2 years 5 5

2-3 years 20 20

Over 3 years 50 50

¢ÛAccounts receivable that are individually insignificant but with bad debt provision provided on an individual basis:

Account receivable with RMB one million at most and other account receivable with RMB 500,000 at most are recognized

as account receivable with insignificant single amount.

As for the account receivable with insignificant single amount but with followed features, exercise impairment separately,

if there has evidence of impairment, provision for bad debts shall be made at the difference of present value of estimated

future cash flows in short of their book values, and shall be recognized as impairment losses: account receivable with

dispute and arbitration involved or exist with the counter party; receivables which has obvious evidence that the debtor

probably unable to performed payment obligations etc.

(3) Reversal of bad debt provisions

If there is evidence showing that the value of the account receivable has been recovered, and that the

recovery is objectively related to events after recognition of the loss, the originally recognized

impairment loss should be reversed and included in current profit and loss. However, the book values

after such reversal shall not exceed the amortized costs of the account receivable on the reversal date,

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assuming there is no provision for impairment.

11. Inventories

(1) Classification of inventories

Inventory including raw materials, stock commodity and low value consumables etc.

(2) Pricing for inventories delivered and obtained

Inventories are priced at actual costs when acquired. Inventory cost includes procurement cost, processing cost and other

costs. Raw materials and inventory commodities are measured under weighted average method when applied for use and

delivered.

(3) Recognition for net realizable value of inventories and withdrawal method for inventory impairment provision

Net realizable value refers to the amount resulted by inventory¡¯s estimated sale price minor the cost, which is going to

occurred till end of the completion, estimated sales expenses and relevant taxes, in daily activities. At the time of

recognizing the net realizable value for inventory, on basis of unambiguous evidence, take the purpose of inventory held

and influence of events after the balance sheet date into account at the same time.

On balance sheet date, measure of the inventory is made as the lower of their cost and or net realizable

values. Provision for inventory depreciation reserve are made while the net realizable values below the

cost. Inventory falling price reserves withdrawal usually base on the difference of the cost of single

inventory which over the net realizable value. As for inventories with numerous quantity and low unit

price, inventory depreciation provision is made based on categories of inventories.

After inventory impairment provision, if any factor rendering write-downs of the inventories has been

eliminated as net realizable value higher than its book value resulted, the amounts written down are

recovered and reversed from the inventory depreciation reserve, which has been provided for. The

reversed amounts are included into the current profit and loss.

(4) Inventory system was the perpetual inventory system.

(5) Low value consumptions and packing materials are amortized under amortization method when applied for use.

12. Classified as assets held for sale

If a non-current asset can be promptly sold at its existing status only according to the practice terms in connection with

disposal of this kind of assets, and the Company has already made resolution on disposal of the non-current asset and

entered into irrevocable transfer agreement with the transferee, and this transfer will be completed within one year, then the

non-current asset would be calculated as non-current asset held for sale which would be not applicable to depreciation or

amortization since the date of classification as asset held for sale, and would be measured at the lower of its carrying value

less disposal cost and fair value less disposal cost. Non-current asset held for sale consists of single item asset and disposal

group. If a disposal group is a group of assets as defined by No.8 of Business Accounting Standards-Assets Impairment,

and goodwill arising from business combination shall be allocated to the group of assets under this accounting principle, or

the disposal group constitutes one operation of the group of assets, then the disposal group includes the goodwill arising

from business combination.

For single non-current asset and asset in disposal group classified as assets held for sale, they shall be presented in balance

sheet separately as current assets. For liabilities in disposal group relating to the transferred assets classified as assets held

for sale, they shall be presented in balance sheet separately as current liabilities.

If an asset or disposal group classified as held for sale no longer meets the recognition condition as non-current asset held

for sale, the Company will cease such recognition and measure the asset at the lower of (1)the carrying value of the asset or

disposal group prior to being classified as held for sale, based on the amount adjusted with the depreciation, amortization

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or impairment which should have been recognized assuming it had not been classified as held for sale; (2)the recoverable

amount on the date when the Company decides to cease disposal.

13. Long-term equity investments

Long-term equity investments under this section refer to long-term equity investments in which the Company has control,

joint control or significant influence over the investee. Long-term equity investment without control or joint control or

significant influence of the Group is accounted for as available-for-sale financial assets or financial assets measured at fair

value with any change in fair value charged to profit or loss. Details on its accounting policy please refer to Note 9.

¨DFinancial instruments¡¬ under section IV.

Joint control is the Company¡¯s contractually agreed sharing of control over an arrangement, which relevant activities of

such arrangement must be decided by unanimously agreement from parties who share control. Significant influence is the

power of the Company to participate in the financial and operating policy decisions of an investee, but to fail to control or

joint control the formulation of such policies together with other parties.

(1) Determination of investment cost

For a long-term equity investment acquired through a business combination involving enterprises under common control,

the initial investment cost of the long-term equity investment shall be the absorbing party¡¯s share of the carrying amount of

the owner¡¯s equity under the consolidated financial statements of the ultimate controlling party on the date of combination.

The difference between the initial cost of the long-term equity investment and the cash paid, non-cash assets transferred as

well as the book value of the debts borne by the absorbing party shall offset against the capital reserve. If the capital

reserve is insufficient to offset, the retained earnings shall be adjusted. If the consideration of the merger is satisfied by

issue of equity securities, the initial investment cost of the long-term equity investment shall be the absorbing party¡¯s share

of the carrying amount of the owner¡¯s equity under the consolidated financial statements of the ultimate controlling party

on the date of combination. With the total face value of the shares issued as share capital, the difference between the initial

cost of the long-term equity investment and total face value of the shares issued shall be used to offset against the capital

reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted. For business combination

resulted in an enterprise under common control by acquiring equity of the absorbing party under common control through a

stage-up approach with several transactions, these transactions will be judged whether they shall be treat as ¨Dtransactions in

a basket¡¬. If they belong to ¨Dtransactions in a basket¡¬, these transactions will be accounted for a transaction in obtaining

control. If they are not belong to ¨Dtransactions in a basket¡¬, the initial investment cost of the long-term equity investment

shall be the absorbing party¡¯s share of the carrying amount of the owner¡¯s equity under the consolidated financial

statements of the ultimate controlling party on the date of combination. The difference between the initial cost of the

long-term equity investment and the aggregate of the carrying amount of the long-term equity investment before merging

and the carrying amount the additional consideration paid for further share acquisition on the date of combination shall

offset against the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted. Other

comprehensive income recognized as a result of the previously held equity investment accounted for using equity method

on the date of combination or recognized for available-for-sale financial assets will not be accounted for.

For a long-term equity investment acquired through a business combination involving enterprises not under common

control, the initial investment cost of the long-term equity investment shall be the cost of combination on the date of

acquisition. Cost of combination includes the aggregate fair value of assets paid by the acquirer, liabilities incurred or

borne and equity securities issued. For business combination resulted in an enterprise not under common control by

acquiring equity of the acquiree under common control through a stage-up approach with several transactions, these

transactions will be judged whether they shall be treat as ¨Dtransactions in a basket¡¬. If they belong to ¨Dtransactions in a

basket¡¬, these transactions will be accounted for a transaction in obtaining control. If they are not belong to ¨Dtransactions in

a basket¡¬, the initial investment cost of the long-term equity investment accounted for using cost method shall be the

aggregate of the carrying amount of equity investment previously held by the acquiree and the additional investment cost.

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For previously held equity accounted for using equity method, relevant other comprehensive income will not be accounted

for. For previously held equity investment classified as available-for-sale financial asset, the difference between its fair

value and carrying amount, as well as the accumulated movement in fair value previously included in the other

comprehensive income shall be transferred to profit or loss for the current period.

Agent fees incurred by the absorbing party or acquirer for the acquisition such as audit, legal service, and valuation and

consultation fees, and other related administration expenses are charged to profit or loss in the current period at the time

such expenses incurred.

The long-term equity investment acquired through means other than a business combination shall be initially measured at

its cost. Such cost is depended upon the acquired means of long-term equity investments, which is recognized based on the

purchase cost actually paid by the Company in cash, the fair value of equity securities issued by the Group, the agreed

value of investment contract or agreement, the fair value or original carrying amounts of the non-monetary asset exchange

transaction which the asset will be transferred out of the Company, and the fair value of long-term equity investment itself.

The costs, taxes and other necessary expenses that are directly attributable to the acquisition of the long-term equity

investments are also included in the investment cost. For additional equity investment made in order to obtain significant

influence or common control over investee without resulted in control, the relevant cost for long-term equity investment

shall be the aggregate of fair value of previously held equity investment and additional investment cost determined

according to ¨DAccounting Standard for Business Enterprises No. 22 ¨C Recognition and measurement of Financial

Instruments¡¬.

(2) Subsequent measurement and income recognition method

Long term equity investment by which the Company has common control (other than that constituting joint operation) or

significant influence in investee is measured under equity method. In addition, long term equity investment by which the

Company is able to exercise control in investee is measured under cost method in financial statements.

¢ÙLong term equity investment measured under cost method

Under cost method, long term equity investment is measured at initial investment cost, and cost of long term equity

investment shall be adjusted in case of adding or recovering investment. Other than the price actually paid when obtaining

investment or cash dividends or distribution declared but not paid in consideration, investment income for the period would

be recognized based on the cash dividend or distribution declared by the investee.

¢Ú Long-term equity investments accounted for using the equity method

Under the equity method, where the initial investment cost of a long-term equity investment exceeds the

investor¡¯s interest in the fair value of the investee¡¯s identifiable net assets at the acquisition date, no

adjustment shall be made to the initial investment cost. Where the initial investment cost is less than the

investor¡¯s interest in the fair value of the investee¡¯s identifiable net assets at the acquisition date, the

difference shall be charged to profit or loss for the current period, and the cost of the long term equity

investment shall be adjusted accordingly.

Under the equity method, investment gain and other comprehensive income shall be recognized based on the Group¡¯s share

of the net profits or losses and other comprehensive income made by the investee, respectively. Meanwhile, the carrying

amount of long-term equity investment shall be adjusted. The carrying amount of long-term equity investment shall be

reduced based on the Group¡¯s share of profit or cash dividend distributed by the investee. In respect of the other movement

of net profit or loss, other comprehensive income and profit distribution of investee, the carrying value of long-term equity

investment shall be adjusted and included in the capital reserves. The Group shall recognize its share of the investee¡¯s net

profits or losses based on the fair values of the investee¡¯s individual separately identifiable assets at the time of acquisition,

after making appropriate adjustments thereto. In the event of inconformity between the accounting policies and accounting

periods of the investee and the Company, the financial statements of the investee shall be adjusted in conformity with the

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accounting policies and accounting periods of the Company. Investment gain and other comprehensive income shall be

recognized accordingly. In respect of the transactions between the Group and its associates and joint ventures in which the

assets disposed of or sold are not classified as operation, the share of unrealized gain or loss arising from inter-group

transactions shall be eliminated by the portion attributable to the Company. Investment gain shall be recognized

accordingly. However, any unrealized loss arising from inter-group transactions between the Group and an investee is not

eliminated to the extent that the loss is impairment loss of the transferred assets. In the event that the Group disposed of an

asset classified as operation to its joint ventures or associates, which resulted in acquisition of long-term equity investment

by the investor without obtaining control, the initial investment cost of additional long-term equity investment shall be the

fair value of disposed operation. The difference between initial investment cost and the carrying value of disposed

operation will be fully included in profit or loss for the current period. In the event that the Group sold an asset classified as

operation to its associates or joint ventures, the difference between the carrying value of consideration received and

operation shall be fully included in profit or loss for the current period. In the event that the Company acquired an asset

which formed an operation from its associates or joint ventures, relevant transaction shall be accounted for in accordance

with ¨DAccounting Standards for Business Enterprises No. 20 ¨DBusiness combination¡¬. All profit or loss related to the

transaction shall be accounted for.

The Group¡¯s share of net losses of the investee shall be recognized to the extent that the carrying amount

of the long-term equity investment together with any long-term interests that in substance form part of the

investor¡¯s net investment in the investee are reduced to zero. If the Group has to assume additional

obligations, the estimated obligation assumed shall be provided for and charged to the profit or loss as

investment loss for the period. Where the investee is making profits in subsequent periods, the Group

shall resume recognizing its share of profits after setting off against the share of unrecognized losses.

If there is debit variation in relation to the long-term equity investments in associates and joint venture

held prior to first adoption of the Accounting Standards for Business Enterprises by the Group on 1

January 2007, the amounts amortized over the original residual term using the straight-line method is

included in the profit or loss for the period.

¢ÛAcquisition of minority interests

Upon the preparation of the consolidated financial statements, since acquisition of minority interests

increased of long-term equity investment which was compared to fair value of identifiable net assets

recognized which are measured based on the continuous measurement since the acquisition date (or

combination date) of subsidiaries attributable to the Group calculated according to the proportion of

newly acquired shares, the difference of which recognized as adjusted capital surplus, capital surplus

insufficient to set off impairment and adjusted retained earnings.

¢ÜDisposal of long-term equity investments

In these consolidated financial statements, where the parent company disposes of a portion of the long

term equity investments in a subsidiary without a change in control, the difference between disposal cost

and disposal of long-term equity investments relative to the net assets of the subsidiary is charged to the

shareholders¡¯ equity. As for the disposal of a portion of the long term equity investments in a subsidiary

by the parent company leading to lose of control over such subsidiary, it shall be accounted for under the

relevant accounting policies described in Note IV.5-(2) Headed ¨Dpreparation methods for consolidated

financial statements¡¬.

On disposal of a long-term equity investment otherwise, the difference between the carrying amount of the investment and

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the actual consideration paid is recognized through profit or loss in the current period.

In respect of long-term equity investment at equity with the remaining equity interest after disposal also accounted for

using equity method, other comprehensive income previously under owners¡¯ equity shall be accounted for in accordance

with the same accounting treatment for direct disposal of relevant asset or liability by investee on pro rata basis at the time

of disposal. The owners¡¯ equity recognized for the movement of other owners¡¯ equity (excluding net profit or loss, other

comprehensive income and profit distribution of investee) shall be transferred to profit or loss for the current period on pro

rata basis.

In respect of long-term equity investment at cost with the remaining equity interest after disposal is also accounted for at

cost, other comprehensive income recognized due to measurement at equity or recognition and measurement for financial

instruments prior to obtaining control over investee shall be accounted for in accordance with the same accounting

treatment for direct disposal of relevant asset or liability by investee and carried forward to current gains and losses on pro

rata basis. The movement of other owners¡¯ equity (excluding net profit or loss, other comprehensive income and profit

distribution of investee) shall be transferred to profit or loss for the current period on pro rata basis.

In the event of loss of control over investee due to partial disposal of equity investment by the Group, in preparing separate

financial statements, the remaining equity interest which can apply common control or impose significant influence over

the investee after disposal shall be accounted for using equity method. Such remaining equity interest shall be treated as

accounting for using equity method since it is obtained and adjustment was made accordingly. For remaining equity

interest which cannot apply common control or impose significant influence over the investee after disposal, it shall be

accounted for using the recognition and measurement standard of financial instruments. The difference between its fair

value and carrying amount as at the date of losing control shall be included in profit or loss for the current period. In

respect of other comprehensive income recognized using equity method or the recognition and measurement standard of

financial instruments before the Group obtained control over the investee, it shall be accounted for in accordance with the

same accounting treatment for direct disposal of relevant asset or liability by investee at the time when the control over

investee is lost. Movement of other owners¡¯ equity (excluding net profit or loss, other comprehensive income and profit

distribution under net asset of investee accounted for and recognized using equity method) shall be transferred to profit or

loss for the current period at the time when the control over investee is lost. Of which, for the remaining equity interest

after disposal accounted for using equity method, other comprehensive income and other owners¡¯ equity shall be

transferred on pro rata basis. For the remaining equity interest after disposal accounted for using the recognition and

measurement standard of financial instruments, other comprehensive income and other owners¡¯ equity shall be fully

transferred.

In the event of loss of common control or significant influence over investee due to partial disposal of equity investment by

the Group, the remaining equity interest after disposal shall be accounted for using the recognition and measurement

standard of financial instruments. The difference between its fair value and carrying amount as at the date of losing

common control or significant influence shall be included in profit or loss for the current period. In respect of other

comprehensive income recognized under previous equity investment using equity method, it shall be accounted for in

accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee at the time when

equity method was ceased to be used. Movement of other owners¡¯ equity (excluding net profit or loss, other comprehensive

income and profit distribution under net asset of investee accounted for and recognized using equity method) shall be

transferred to profit or loss for the current period at the time when equity method was ceased to be used.

The Group disposes its equity investment in subsidiary by a stage-up approach with several transactions until the control

over the subsidiary is lost. If the said transactions belong to ¨Dtransactions in a basket¡¬, each transaction shall be accounted

for as a single transaction of disposing equity investment of subsidiary and loss of control. The difference between the

disposal consideration for each transaction and the carrying amount of the corresponding long-term equity investment of

disposed equity interest before loss of control shall initially recognized as other comprehensive income, and subsequently

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transferred to profit or loss arising from loss of control for the current period upon loss of control.

14. Investment real estate

Investment real estate is the real estate that held by the Company for purpose of obtaining rent or capital appreciation or

both purpose received. Investment real estate including rented land use right, land use right held ready for transfer after

appreciation and rented buildings etc.

The investment real estate shall be measured initially at the cost. The subsequent spending related to the investment real

estate, if it is very likely for the related economic interest to flow in and its cost can be reliably measured, shall be included

in the cost for the investment real estate. Other subsequent spending shall be included in the current profit or loss when

occurring.

The Company applies the cost model for subsequent measurement of investment real estate, and depreciates and amortizes

it as per the policy consistent to those for the houses and buildings and land use right.

For details about the methods for impairment testing of the investment real estate and for accrual of impairment provision,

see Note IV 20 ¨DImpairment of long term assets¡¬.

Where property for own use or inventory transfers to investment property, or investment property transfers to property for

own use, carrying value before such transfer shall be taken as book value after such transfer.

In the event that an investment property is converted to an owner-occupied property, such property shall become fixed

assets or intangible assets since the date of its conversion. In the event that an owner-occupied property is converted to real

estate held to earn rentals or for capital appreciation, such fixed assets or intangible assets shall become an investment

property since the date of its conversion. Upon the conversion, investment property which is measured at cost is accounted

for with the carrying value prior to conversion, and investment property which is measured at fair value is accounted for

with the fair value as of the conversion date.

If an investment property is disposed of or if it withdraws permanently from use and no economic benefit will be obtained

from the disposal, the recognition of it as an investment property shall be terminated. When an investment property is sold,

transferred, retired or damaged, the amount of proceeds on disposal of the property net of the carrying amount and related

tax and surcharges is recognized in profit or loss for the current period.

15. Fixed assets

(1) Recognition criteria of fixed assets

Fixed assets refer to the tangible assets held for the purpose of producing commodities, rendering services, renting or

business management with useful lives exceeding one fiscal year. Fixed assets are only recognized when the relevant

economic benefits are likely to inflow to the Company and their cost can be measured reliably. Fixed assets are initially

measured at cost taking into account predicted disposal expenses.

(2) Depreciation method of fixed assets

The initial measurement of a fixed assets shall be made at its cost and consider expected discard expenses factors

alternatives. Accrual depreciation of fixed assets shall be made based on straight-line depreciation within the service life

since the second month, when the fixed assets reached its expected condition for use. Service life, estimated net residual

value and annual depreciation rate for vary fixed assets are as:

Annual depreciation rate

Type Depreciation term (year) Residual rate (%)

(%)

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House and buildings 35 3 2.77

Machinery equipment 12 3 8.08

Transportation equipment 7 3 13.86

Electronic equipment 7 3 13.86

Office and other equipment 7 3 13.86

Decoration charge for 10 0 10.00

self-owned houses

Estimated net residual value is the amount obtained from disposal of such fixed assets after estimated disposal expense

deducted, on assumption basis of the fixed assets has full estimated service life and in an anticipating condition of service

life terminated.

(3) Impairment test method and accrual of depreciation reserves for fixed asset

Impairment test method and accrual of depreciation reserves for fixed asset please found in ¨D20. Impairment of non-current

and non-financial assets¡¬ in Note IV.

(4) Others

As for the subsequent expenditure related to fixed assets, if the economic benefits related to the fixed

assets is probable to flow into the Company and its cost could be measured reliably, then the expenditure

shall be included in costs of the fixed assets, and the carrying value of the replaced portion shall be

derecognized. Other subsequent expenditures other than this shall be included in profits or losses of the

period when occurred.

The disposal income from disposal, transfer, dumping or damage of fixed assets less its carrying value

and related tax expenses shall be recorded in profits or losses of the period.

The Company, at least, re-reviews the use of life, projected net residual value and depreciation method of

fixed assets at the end of year. For any change of the above factor, it shall be dealt as change of

accounting estimation.

16. Construction-in-progress

Cost of construction-in-progress should recognized by the actual construction costs, including vary construction costs

during the period of construction, the capitalized borrowing costs prior to the expected conditions for use and other

relevant expenses etc. The construction-in-progress should carry forward as fixed assets after reached the expected

conditions for use.

Impairment test method and impairment provision method for the construction-in-progress found in ¨D20.impairment of

non-current/non-financial assets¡¬ in Note IV.

17. Borrowing costs

Borrowing costs include interest, amortization of discounts or premiums related to borrowings, ancillary

costs incurred in connection with the arrangement of borrowings, and exchange differences arising from

foreign currency borrowings. For borrowing costs that are directly attributable to the acquisition,

construction or production of a qualifying asset, when expenditures for the asset and borrowing costs are

being incurred, activities relating to the acquisition, construction or production of the asset that are

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necessary to prepare the asset for its intended use or sale have commenced, such borrowing costs shall be

capitalized as part of the cost of that asset; and capitalization shall discontinue when the qualifying asset

is ready for its intended use or sale. Other borrowing costs shall be recognized as expense in the period in

which they are incurred.

Where funds are borrowed for a specific purpose, the amount of interest to be capitalized shall be the

actual interest expense incurred on that borrowing for the period less any bank interest earned from

depositing the borrowed funds before being used into banks or any investment income on the temporary

investment of those funds. Where funds are borrowed for general purpose, the Group shall determine the

amount of interest to be capitalized on such borrowings by applying a capitalization rate to the weighted

average of the excess amounts of cumulative expenditures on the asset over and above the amounts of

specific-purpose borrowings. The capitalization rate shall be the weighted average of the interest rates

applicable to the general-purpose borrowings.

During the capitalization period, exchange differences related to the principal and interest on a specific

purpose borrowing denominated in foreign currency shall be capitalized as part of the cost of the

qualifying asset. Exchange differences related to general-purpose borrowings denominated in foreign

currency shall be included in profit or loss for the current period.

Qualifying assets are assets (fixed assets, investment property, inventories, etc) that necessarily take a

substantial period of time for acquisition, construction or production to get ready for their intended use or

sale.

Capitalization of borrowing costs shall be suspended during periods in which the acquisition,

construction or production of a qualifying asset is interrupted abnormally, when the interruption is for a

continuous period of more than 3 months, until the acquisition, construction or production of the

qualifying asset is resumed.

18. Intangible assets

(1) Intangible assets

An intangible asset is an identifiable non-monetary asset without physical substance owned or controlled

by the Group.

An intangible asset shall be initially measured at cost. The expenditures incurred on an intangible asset

shall be recognized as cost of the intangible asset only if it is probable that economic benefits associated

with the asset will flow to the Group and the cost of the asset can be measured reliably. Other

expenditures on an item asset shall be charged to profit or loss when incurred.

Land use right acquired shall normally be recognized as an intangible asset. Self-constructed buildings (e.g. plants), related

land use right and the buildings shall be separately accounted for as an intangible asset and fixed asset. For buildings and

structures purchased, the purchase consideration shall be allocated among the land use right and the buildings on a

reasonable basis. In case there is difficulty in making a reasonable allocation, the consideration shall be recognized in full

as fixed assets.

An intangible asset with a finite useful life shall be stated at cost less estimated net residual value and any accumulated

impairment loss provision and amortized using the straight-line method over its useful life when the asset is available for

use. Intangible assets with indefinite life are not amortized.

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The Group shall review the useful life of intangible asset with an infinite useful life and the amortization

method applied at period-end. A change in the useful life or amortization method used shall be accounted

for as a change in accounting estimate. For an intangible asset with an indefinite useful life, the Group

shall review the useful life of the asset. If there is evidence indicating that the period during which the

intangible assets brings in economic benefits to the Group can be predicted, the Group shall estimate the

useful life of that asset and make amortization under the amortization policies applicable to intangible

assets with finite useful life.

(2) Research and development expenditures

Research and development expenditure of the Group was divided into expenses incurred during the research phase and

expenses incurred during the development phase.

Expenses incurred during the research phase are recognized as profit or loss in the current period.

Expenses incurred during the development phase that satisfy the following conditions are recognized as intangible assets,

while those that do not satisfy the following conditions are accounted for in the profit or loss for the current period:

¢Ùit is technically feasible that the intangible asset can be used or sold upon completion;

¢Úthere is intention to complete the intangible asset for use or sale;

¢Ûthe intangible asset can produce economic benefits, including there is evidence that the products produced using the

intangible asset has a market or the intangible asset itself has a market; if the intangible asset is for internal use, there is

evidence that there exists usage for the intangible asset;

¢Üthere is sufficient support in terms of technology, financial resources and other resources in order to complete the

development of the intangible asset, and there is capability to use or sell the intangible asset;

¢Ýthe expenses attributable to the development phase of the intangible asset can be measured reliably.

If the expenses incurred during the research phase and the development phase cannot be distinguished separately, all

development expenses incurred are accounted for in the profit or loss for the current period.

(3) Intangible assets impairment test method and their impairment provision

The method for impairment test and impairment provision of intangible assets is detailed in Note IV. 20

¨DImpairment of non-current non-monetary financial asset¡¬.

19. Long-term prepaid expenses

Long-term prepaid expenses refer to the general expenses that occurred but shall be amortized over one year in reporting

period and later period. Long-term prepaid expenses shall amortized by straight-line method in expected benefit period.

20. Long-term assets impairment

The Group will judge if there is any indication of impairment as at the balance sheet date in respect of

long-term investments such as fixed assets, construction in progress, intangible assets with a finite useful

life, investment properties measured at cost, and long-term equity investments in subsidiaries, joint

controlled entities and associates. If there is any evidence indicating that an asset may be impaired,

recoverable amount shall be estimated for impairment test. Goodwill, intangible assets with an indefinite

useful life and intangible assets beyond working conditions will be tested for impairment annually,

regardless of whether there is any indication of impairment.

If the impairment test result shows that the recoverable amount of an asset is less than its carrying amount,

the impairment provision will be made according to the difference and recognized as an impairment loss.

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The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present

value of the future cash flows expected to be derived from the asset. An asset¡¯s fair value is the price in a

sale agreement in an arm¡¯s length transaction. If there is no sale agreement but the asset is traded in an

active market, fair value shall be determined based on the bid price. If there is neither sale agreement nor

active market for an asset, fair value shall be based on the best available information. Costs of disposal

are expenses attributable to disposal of the asset, including legal fee, relevant tax and surcharges,

transportation fee and direct expenses incurred to prepare the asset for its intended sale. The present value

of the future cash flows expected to be derived from the asset over the course of continued use and final

disposal is determined as the amount discounted using an appropriately selected discount rate. Provisions

for assets impairment shall be made and recognized for the individual asset. If it is not possible to

estimate the recoverable amount of the individual asset, the Group shall determine the recoverable

amount of the asset group to which the asset belongs. The asset group is the smallest group of assets

capable of generating cash flows independently.

For the purpose of impairment testing, the carrying amount of goodwill presented separately in the financial statements

shall be allocated to the asset groups or group of assets benefiting from synergy of business combination. If the recoverable

amount is less than the carrying amount, the Group shall recognize an impairment loss. The amount of impairment loss

shall first reduce the carrying amount of any goodwill allocated to the asset group or set of asset groups, and then reduce

the carrying amount of other assets (other than goodwill) within the asset group or set of asset groups, pro rata on the basis

of the carrying amount of each asset.

An impairment loss recognized on the aforesaid assets shall not be reversed in a subsequent period in

respect of the restorable value.

21. Staff remuneration

Staff remuneration includes short term staff remuneration, post office benefit, dismissal benefit, among

which:

Short term staff remuneration mainly consists of salary, bonus, allowance and subsidy, staff benefits,

medical insurance, maternity insurance, work related injury insurance, housing funds, labor unit fee and

education fee, non-monetary benefits, etc. short term staff remuneration actually happened during the

accounting period in which staff provides services to the Company is recognized as liability, and shall be

included in current gains and losses or relevant asset cost. Non-monetary benefits are measured at fair

value.

Post office benefits mainly consist of defined withdraw plan and defined benefit plan. Defined withdraw plan mainly

includes basic pension insurance, unemployment insurance and annuity, and the contribution payable is included in

relevant asset cost or current gains and losses when occurs. Our defined benefit plan mainly relates to retirement benefits.

The Company engaged independent actuary to make estimation on demographic variables and financial variables under

predicted accumulative benefits unit method with unbiased and consistent actuary assumption, measure liabilities arising

from defined benefit plan and determine vesting periods of various liabilities. On balance sheet date, the Company

presented liabilities arising from defined benefit plan at present value, and recorded service costs as profit or loss for the

period.

When the Company terminates the employment relationship with employees before the end of the employment contracts or

provides compensation as an offer to encourage employees to accept voluntary redundancy, the Company shall recognize

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employee compensation liabilities arising from compensation for staff dismissal and included in profit or loss for the

current period, when the Company cannot revoke unilaterally compensation for dismissal due to the cancellation of labor

relationship plans and employee redundant proposals; and the Company recognize cost and expenses related to payment of

compensation for dismissal and restructuring, whichever is earlier. However, if the compensation for termination of

employment is not expected to be fully paid within 12 months from the reporting period, it shall be accounted for other

long-term staff remuneration.

Employee internal retirement plans is to use the same principle to deal with termination benefits. The group will pay staff

salary, social insurance and others from the date they stop providing service to their retire-day. This amount shall be

included in the current profits and losses (termination benefits), only when it meets the projected liabilities confirmation

conditions.

For other long-term employee benefits provided by the Company to its employees, if satisfy with the established withdraw

plan, then the benefits are accounted for under the established withdraw plan, otherwise accounted for under defined

benefit scheme.

22. Accrual liability

The obligation pertinent to contingencies shall be recognized as accrual liability when the following conditions are

satisfied simultaneously: (1) That obligation is a current obligation of the Group; (2) It is likely to cause any economic

benefit to flow out of the enterprise as a result of performance of the obligation; and (3) The amount of the obligation can

be measured in a reliable way.

At the balance sheet date, considering matters related to risks, uncertainties and time value of money and other factors, the

expected liabilities are measured in accordance with the best estimate of the necessary expenses for the performance of the

current obligation.

If the expenditure required paying all or part of the expected liabilities was compensated by the third party, and the amount

of compensation basically can be sure when received, it could be recognized as a separate asset. But the amount of

compensation confirmed couldn¡¯t be more than the book value of the estimated debts.

23. Income

(1) Income of commodities sales

When the transfer of significant risks and rewards of ownership of the goods to the buyer is done, when the right of

management usually associated with ownership is not reserved, when we didn¡¯t effectively control the goods sold, the

amount of revenue can be measured reliably. The associated economic benefits are likely to flow into the enterprise. And

the related costs incurred or to be incurred can be measured in a reliable way. Thus we realize sales income.

The company engages in sales of cars, confirming income after the vehicle delivery to customers according to agreement,

payment received or the rights to receive payment.

(2) Income from providing labor

On condition that provision of services trade results can be reliably estimated, we confirm income from providing labor on

the balance sheet date according to the percentage of completion. The Company calculates the completion schedule

through the ratio of the costs incurred taking up of the estimated total cost.

The results of labor transaction provided can be estimated reliably only when simultaneously: ¢Ùthe amount of revenue can

be measured reliably; ¢Úthe economic interests are likely to flow into the enterprise; ¢Ûthe degree of completion can be

reliably determined; ¢Ücost occurred and to be occurred can be reliably measured.

If the service transaction results couldn¡¯t be able to reliably estimated, labor income will be calculated according to

according to amount of labor costs which has occurred and is expected to be t compensated, and labor costs occurred

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would be included as expenses of the current period. Labor cost occurred which cannot be compensated will not be

included as revenue.

The Company engages in car repair services, confirming income after the car repair service is delivered to customers

according to agreement, payment received or the rights to receive payment.

(3) Use fee income

According to the relevant contract or agreement, revenue is recognized in accordance with the accrual basis.

(4) Interest income

Interest income is confirmed in accordance with time and actual interest others make use of the monetary capital of the

group

24. Government subsidy

A government subsidy means the monetary or non-monetary assets obtained free by the Group from the government, but

excluding the capital invested by the government as the owner of the enterprise. Government subsidies consist of the

government subsidies pertinent to assets and government subsidies pertinent to income. Government grant obtained by the

Company for the purpose of constructing or otherwise forming long term assets is recognized as government grant related

to assets, and other government grants are recognized as those related to income. If government document fails to identify

specific grantee, government grants will be categorized into government grants related to income or assets respectively

under the below method: (1) in case government document indicates the specific project applicable to the grant, such

categorization shall be made based on the respective proportion of expenditures to form assets or be recorded as expenses

in budget for the specific project. The allocation proportion will be reviewed on each balance sheet date, and is subject to

necessary alteration; (2) in case government document only indicate general purpose of such grant instead of specific

project, the grant shall be viewed as government grant related to income.

The government subsidy with monetary assets concerned should be measured by the actual received or receivable amount

while non-monetary assets government subsidy measured by fair value; if without realizable fair value obtained, measured

by nominal amount instead. The government subsidy with nominal amount measured should reckon into current gains and

losses.

Government grants are generally recognized when received and measured at the amount actually received, but are

measured at the amount likely to be received when there is conclusive evidence at the end of the accounting period that the

Group will meet related requirements of such grants and will be able to receive the grants. The government grants so

measured should also satisfy the following conditions: (1) the amount of the grants be confirmed with competent

authorities in written form or reasonably deduced from related requirements under financial fund management measures

officially released without material

uncertainties; (2) the grants be given based on financial support projects and fund management policies officially published

and voluntarily disclosed by local financial authorities in accordance with the requirements under disclosure of government

information, where such policies should be open to any company satisfying conditions required and not specifically for

certain companies; (3) the date of payment be specified in related documents and the payment thereof be covered by

corresponding budget to ensure such grants will be paid on time as specified; and (4)other relevant conditions which shall

be met based on the specific situations of the Company and the subject matter.

Asset-related government subsidies are recognized as deferred income and accounted into the current gains/losses equally

within service life for the relevant assets. The government subsidies pertinent to incomes, which are used for compensating

the related future expenses or losses of the enterprise shall be recognized as deferred income and should reckoned into

current gains/losses in period of when relevant expenses are recognized; if used for compensating the occurred relevant

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expenses and losses, reckoned into current gains/losses directly.

As for the recognized government subsidy needs to return, if there has relevant balance of deferred incomes, relevant book

balance of the deferred income should be written down, and the exceeded part should included in the current gains/losses;

if there has no relevant balance of deferred incomes, reckoned into current gains/losses directly.

25. Deferred income tax assets and deferred income tax liabilities

(1) The current income tax

At the balance sheet date, for the current income tax liabilities (or assets) arising during the current and previous periods,

current income tax should be calculated in line with expected payable (or return) income tax amount in accordance with

the provisions of the tax law. Calculation of the current income tax expenses on the basis of the computation of taxable

income is adjusted to the pre-tax accounting profit according to the relevant provisions of the tax law.

(2) The deferred income tax assets and deferred income tax liabilities

As for the balance between the book value of some assets and liabilities and the tax base, and those temporary difference

arisen from balance which is not recognized as an asset or liability but whose difference between the book value and tax

base could be calculable in accordance with the provisions of the tax law, we adopt debt method of balance sheet to

recognize deferred income tax assets and deferred income tax liabilities.

As for taxable temporary differences which is arisen from initial recognition of goodwill, and those related to initial

recognition of assets or liabilities arisen during trade with neither merging nor those which won¡¯t affect the accounting

profit and taxable income (or deductible loss), related deferred tax liabilities will not be confirmed. In addition, as for

temporary differences taxable related to subsidiary companies, associated enterprises and joint venture investment, if the

group is able to control the reversal time of the temporary difference, and the temporary differences in the foreseeable

future probably will not be reversed, we also could not confirm the deferred income tax liabilities. In addition to the above

condition, the group could confirm all the other deferred income tax liabilities arising from taxable temporary differences.

As for deductible temporary differences related to initial reorganization of asset or liability arising from trades with neither

merge nor those which won¡¯t affect the accounting profit and taxable income (or deductible loss), we¡¯ll not recognize

relevant deferred income tax assets. In addition, as for deductible temporary differences related to subsidiary companies,

associated enterprises and joint venture investment, if the temporary differences in the foreseeable future probably will not

be reversed, we also could not confirm the deferred income tax assets. In addition to the above condition, the group could

confirm all the other deferred income tax assets arising from deductible temporary differences within benchmark of income

of taxable deductible temporary differences.

As for deductible loss or tax deduction which to be reversed in the following years, we confirm the corresponding deferred

income tax assets within benchmark of future taxable income to be likely deducted for deductible loss and tax deduction.

On the balance sheet date, the deferred income tax assets and liabilities are measured according to the provisions of the tax

law, in accordance with the applicable tax rate during related assets to be expected recovery or related liabilities to be paid

off.

At the balance sheet date, we recheck the book value of deferred income tax assets. If in future it is unlikely to obtain

adequate taxable income to offset the benefit of the deferred income tax asset, then we write down the book value of

deferred income tax assets. When it is probable to obtain adequate taxable income, amount written down shall be reversed.

(3) The income tax expenses

The income tax expense included the current income tax and deferred income tax.

In addition to trades and current income tax and deferred income tax related to projects which are included in other

comprehensive income or directly included in owners¡¯ interest, as well as the book value whose goodwill arranged in line

with deferred income tax arising from enterprises combination, all the other current income tax and deferred income tax

expenses or income will be included in current profit and loss.

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(4) Offset of income tax

When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to realize the assets

and settle the liabilities simultaneously, current tax assets and current tax liabilities are offset and presented on a net basis.

When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred tax assets and

deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or

different taxable entities which intend either to settle current tax assets and liabilities on a net basis or to realize the assets

and liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are

expected to be reversed, deferred tax assets and deferred tax liabilities are offset and presented on a net basis.

26. Leasing

Finance lease transfers substantially all the risks and rewards related to the ownership of an asset. Its ownership may

eventually transfer, also may not. While all the other leases are classified as operating leases.

(1) The Company keeps record of lease business as lessee

Rental expense of operating lease is included in the relevant asset costs or current profits and losses through the

straight-line method during every period. Initial direct costs shall be included in profit or loss for the current period. Or rent

to the actual shall be included in the current profits and losses.

(2) The Company keeps record of lease business as lessor

Rental income of operating lease is included in the relevant asset costs or current profits and losses through the

straight-line method during every period. The larger amount of initial direct costs shall be capitalized when it is created,

and shall be included in the current profits and losses during the lease period in accordance with same basic as the

confirmed amount by stages. The other small amount of initial direct costs shall be included in the current profits and

losses when it¡¯s created. Or rent to the actual shall be included in the current profits and losses.

(3) Financing lease business with the Group recorded as lessee

On the beginning date of the lease, the entry value of leased asset shall be at the lower of the fair value of the leased asset

and the present value of minimum lease payment at the beginning date of the lease. Minimum lease payment shall be the

entry value of long-term accounts payable, with difference recognized as unrecognized financing expenses. In addition,

initial direct costs attributable to leased items incurred during the process of lease negotiation and signing of lease

agreement shall be included in the value of leased assets. The balance of minimum lease payment after deducting

unrecognized financing expenses shall be accounted for long-term liability and long-term liability due within one year.

Unrecognized financing expenses shall be recognized as financing expenses for the current period using effective interest

method during the leasing period. Contingent rent shall be included in profit or loss for the current period at the time it

incurred.

(4) Financing lease business with the Group recorded as lessor

On the beginning date of the lease, the entry value of lease receivable shall be the aggregate of minimum lease receivable

and initial direct costs at the beginning date of the lease. The unsecured balance shall be recorded. The aggregate of

minimum lease receivable, initial direct costs and unsecured balance and the different between their present value shall be

recognized as unrealized financing income. The balance of lease receivable after deducting unrecognized financing income

shall be accounted for long-term debt and long-term debt due within one year.

Unrecognized financing income shall be recognized as financing income for the current period using effective interest

method during the leasing period. Contingent rent shall be included in profit or loss for the current period at the time it

incurred.

27. Other significant accounting policies and accounting estimation

(1) Discontinued operation

Discontinued operation refers to the operation disposed or classified as held-for-sale by the Company and presented

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separately under operation segments and financial statements, which has fulfilled one of the following criteria: ¢Ù it

represents an independent key operation or key operating region; ¢Ú it is part of the proposed disposal plan on an

independent key operation or proposed disposal in key operating region; or ¢Û it only establishes for acquisition of

subsidiary through disposal.

Accounting for discontinued operation is set out in note IV 12 ¨Dclassified as assets held for sale¡¬.

(2) Repurchase of shares

Share repurchase consideration paid and transaction costs to reduce the owner¡¯s equity, repurchase, transfer or cancellation

of Chenming Paper¡¯s shares, the gains or losses are not recognized.

In respect of transfer of treasury shares, the difference between the actual amount received and the carrying amount of

treasury shares shall be included in capital reserve. When insufficient to dilute, capital reserve will be offset against the

surplus reserve and retained profits. Treasury shares are cancelled at par value and by the number of shares cancelled to

reduce the share capital. The difference between the book balance and the nominal value of the treasury shares shall be

offset against the capital reserve. When insufficient to dilute, capital reserve will be offset against the surplus reserve and

retained profits.

(3) Assets securitization

Partial assets (¨Dtrust properties¡¬) of the Company are securitized. Relevant assets are operated by special purpose vehicles

on trust. The special purpose vehicles issue superior assets supporting securities to investors and the Company holds

subordinated assets supporting securities. The subordinated ones are not allowed to transfer prior to completion of

repayment of principal and interest of superior ones. As assets service provider, the Company provides assets maintenance

and normal management, determination of annual assets disposal plan, preparation and implementation of assets disposal

plan, execution of relevant assets disposal agreement and regular preparation of assets service report. In addition, as

liquidity supporting institution, the Company shall provide liquidity support where principal of superior assets supporting

securities aren¡¯t paid in full, to make up shortage of interest or principal. Trust properties, after being applied to pay trust

taxes and associate expenses, are preferentially used to repay the principal and interests of superior assets supporting

securities, and the remaining trust properties after full settlement of such principal and interests are recorded as income of

subordinated assets supporting securities and vested by the Company. The Company actually keeps nearly all the risks and

rewards of trust properties, thus it doesn¡¯t derecognize trust properties. Besides, the Company owns effective control over

special purpose vehicle which is included in consolidated financial statements.

When applying accounting policies in relation to securitization of financial assets, the Company has considered the risks

and rewards of assets transferred to other entity as well as the level of control that the Company can exercise in respect of

such entity:

- In case that the Company has transferred nearly all the risks and rewards of ownership of financial assets, the Company

derecognizes such financial assets;

- In case that the Company keeps nearly all the risks and rewards of ownership of financial assets, the Company continues

to recognize such financial assets;

- In case that the Company doesn¡¯t transfer or keep nearly all the risks and rewards of ownership of financial assets, the

Company considers whether it owns control over such financial assets. If the Company maintains no control, it will

derecognize such assets, and recognize the rights and liabilities occurred or kept during transfer as assets or liabilities

respectively. If the Company maintains control, it will recognize such financial assets based on the continuous

involvement level in respect of such assets.

28. Changes of major accounting policies and accounting estimation

(1) Changes of accounting policy

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No accounting policy changed in reporting period.

(2) Changes of accounting estimate

No accounting estimate changed in reporting period.

29. Major accounting judgment and estimate

The Company need make judgment, estimation and hypothesis to book value of those unaccountable items in sheet due to

inner uncertainties of operating activities in the process of using accounting policies. These judgments, estimates and

assumptions are made in line with the Company's past management experience, and in consideration of other relevant

factors. These judgments, estimates and assumptions will affect disclosure of amount of income, expenses, assets and

liabilities as well as contingent liability on the balance sheet day. However, the uncertainties in these estimates may cause

significant adjustments to book value of those asset or liability affected in the future.

The Company rechecks regularly the judgment, estimation and hypothesis based on sustainable management. As for a

change affecting only the current period, the amount shall be confirmed only in the current period; for those not only

affecting the current but the future, the amount shall be confirmed in the current and future period.

At the balance sheet date, the Company needs to determine amount of items of the financial statements, estimation and

hypothesis shown as the following important areas:

(1) Provision for bad debts

The Company accounts for the allowance for bad debt losses according to the receivable accounting policies. Accounts

receivable is the valuation of accounts receivable can be recovered based on. Identification of devaluation of accounts

receivable needs judgments and estimates of management level. Difference between actual results and the original

estimates impact reversal of the book value accounts receivable and accounts receivable for provision for bad debts during

the estimation was changing.

(2) Provision of inventory devaluation

According to the inventory accounting policies, the Company shall accrue inventory devaluation provision as for inventory

whose cost is higher than net realizable and those obsolete or unmarketable in accordance with the lower one in cost and

net realizable value. Write-down of inventories to net realizable value is to assess the salability and net amount of prospect

realization. Identification of inventory impairment requires management¡¯s judgment and estimation after their obtaining

conclusive evidence and consideration of the purpose for holding inventories, events effects occurring after balance sheet

date. The difference between actual results and original estimates will affect the reversal of book value and devaluation

provision of inventories during the estimation was changing.

(3) Financial assets available for sale

In respect of impairment of available-for-sale financial assets, whether impairment loss shall be recognized in income

statement significantly depends on the judgments and assumptions of the management. While making judgments and

assumptions, the Company shall assess the excess of cost of the investee¡¯s identifiable net assets attributable to the

investment over fair value and the duration, and financial condition and short term business outlook of the investee,

including industry situation, technical reform, credit rating, default rate and risks from counterparties.

(4) Long-term provision for asset impairment

The Company has checked if there is any sign that the long-term asset except for the financial assets may have the

impairment at the balance sheet date. For the intangible assets with uncertain service life, in addition to the annual

impairment test, make the impairment test when it has signs of impairment. Proceed with the impairment test when there is

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any sign indicates that the book amounts of other long-term assets except for the financial assets are uncollectible

When the book value of the asset or group of assets exceeds its recoverable amount, i.e. the higher one between the net

amount after subtracting the disposal costs from the fair value and the present value of the future cash flow, it indicates

impairment occurs.

The net amount after subtracting the disposal costs from the fair value is determined by subtracting the incremental costs

directly attributable to this disposal of assets from the sales agreement price similar to assets in fair dealing or the

observable market price.

When predicting the present value of future cash flows, it is required to make significant judgments to the output, selling

price and related operating expenses of this asset or group of assets and the discount rate used for calculating the present

value. The Company shall adopt all available related data when predicting the recoverable amounts, including making

predictions about the relevant output, selling price and related operating expenses based on reasonable and supportable

assumptions.

(5) Depreciation and amortization

For the investment real estate, fixed assets and intangible assets, the Company takes a straight-line depreciation and

amortization within service life in consideration of its residual value. The Company regularly review service life, thus

determine the depreciation and amortization amount in each reporting period. Life is determined based on past experience

of similar assets and technology update is expected. If the previous estimate changes, we will adjust depreciation and

amortization expense in future periods.

(6) The deferred income tax assets

Within the limits that it is very likely to have sufficient taxable profits to offset losses, the Company confirms deferred

income tax assets using all unused tax losses. This requires the management to use a lot of judgment to estimate the time

and amount of future taxable profits, combined with the tax planning strategy, thus confirm the amount of deferred income

tax assets.

(7) The income tax

During ordinary course of business, uncertainty exists in final tax treatment and calculation of a part of trading. Whether

part of the project is in pre tax expenses requires approval of tax authorities. If the final confirmation of these tax matters

differs from an initial estimate, the difference will affect current income tax and deferred income tax during the final

period.

(8) Accrual liabilities

The Company estimates and accrues corresponding provision for product quality guarantee, expected contract loss, penalty

for late delivery and others in accordance with terms of the contract, existing knowledge and experience. When such

contingencies has formed a present obligation, and the performance of the current obligation is likely to lead to the outflow

of economic benefits of the Company, the Company recognizes the best estimate of required expense when performing

current obligation as accrual liability. The recognition and measurement of debt is largely dependent on the judgment of

management. In the process of judgment the Company needs to assess the contingent risks, uncertainties and money and

the time value and other factors.

V. Taxation

94

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1. Main tax and tax rate

Type Tax rate

Calculate and pay added-value tax for rent and water fee income respectively by 5%

and 3% charge rate; automobile and parts sales, automobile maintenance, jewelry

VAT *1 retail, electric charge by 17%, and calculate output tax for property management fee

by 6% tax rate, and calculate and pay added-value tax by the balance after deducting

the input tax allowed to be deducted in the current period.

The property management fee and rental before 1 May 2016 will paying business

Operation tax

tax by 5% of the turnover

Consumption duty 5% of the sales revenue of jewelry taxable consumer goods

City maintaining & construction

Calculated and paid on 7% of the turnover tax actually paid

tax

Education surcharge Calculated and paid on 3% of the turnover tax actually paid

Local education surcharge Calculated and paid on 2% of the turnover tax actually paid

Corporation income tax *2 Calculated and paid on 25% of the taxable income amount and tax by the levy rate

* 1. The Company's property management fee income and property lease were originally levied the business tax by 5% tax

rate, which was changed to levy the VAT since May 1, 2016 in accordance with the relevant provisions of the Notice on

Comprehensively Piloting the Change of Business Tax to VAT (CS No. [2016] 36), the tax rate of property management

fee was 6%, and the property lease needed to pay VAT by 5% tax rate.

* 2. The Company and its subsidiaries in addition to Shenzhen New Yongtong Dongxiao Vehicle Inspection Co., Ltd.

should be levied the tax by the approved collection rate, i.e. by 25% tax rate in 2017.

VI. Enterprise consolidation and consolidated financial statements

Unless otherwise stated, the follow notes (including the items of financial statement of the Company), year-begin refers to

1st January 2017 while period-end refers to 30th June 2017.

1. Monetary fund

Item Period-end balance Balance at year-begin

Stock cash 67,334.26 96,167.91

Bank deposits: 153,165,457.62 218,401,472.19

Total 153,232,791.88 218,497,640.10

As of 30 June 2017, the monetary fund with right of use limited amounting to 30,000,000.00 Yuan, refers to the structured

deposit with 3 months. Same deposit at last year has balance of 40,000,000.00 Yuan.

2. Accounts receivable

(1) Accounts receivable by category

Category Period-end balance

95

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Book balance Bad debt reserve

Book value

Amount Ratio (%) Amount Accrual ratio (%)

Account receivable with single

significant amount and withdrawal bad 22,512,414.52 44.13 22,512,414.52 100.00

debt provision separately

Receivables with bad debt provision

2,221,154.93 4.35 2,221,154.93

accrual by credit portfolio

Accounts with single significant

amount and bad debts provision 26,282,070.64 51.52 26,282,070.64 100.00

accrued individually

Total 51,015,640.09 100.00 48,794,485.16 95.65 2,221,154.93

(Cont.)

Balance at year-begin

Book balance Bad debt reserve

Category

Accrual ratio Book value

Amount Ratio (%) Amount

(%)

Account receivable with single

significant amount and withdrawal bad 22,512,414.52 46.03 22,512,414.52 100.00

debt provision separately

Receivables with bad debt provision

113,736.64 0.23 113,736.64

accrual by credit portfolio

Accounts with single significant

amount and bad debts provision 26,282,070.64 53.74 26,282,070.64 100.00

accrued individually

Total 48,908,221.80 100.00 48,794,485.16 99.77 113,736.64

¢Ù Account receivable with single significant amount and withdrawal bad debt

provision separately at period end

Period-end balance

Account receivable(units) Account Bad debt Accrual

Accrual reasons

receivable reserve ratio

Shenzhen Jinlu Industry and Trade Co., 9,846,607.00 9,846,607.00 100.00 Has greater uncertainty in

96

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Period-end balance

Account receivable(units) Account Bad debt Accrual

Accrual reasons

receivable reserve ratio

Ltd. collection

Guangdong Zhanjiang Sanxing Auto 4,060,329.44 4,060,329.44 100.00 Not expected to collected due to

Service Co., Ltd. long account age

2,380,760.40 2,380,760.40 100.00 Not expected to collected due to

Wang Changlong long account age

Huizhou Jiandacheng Daoqiao 2,021,657.70 2,021,657.70 100.00

Less likely to collection

Engineering Company

1,862,000.00 1,862,000.00 100.00 Not expected to collected due to

Guangdong Materials Group Corp long account age

1,191,059.98 1,191,059.98 100.00 Not expected to collected due to

Jiangling Automobile Factory long account age

1,150,000.00 1,150,000.00 100.00 Not expected to collected due to

Yangjiang Auto Trade Co., Ltd. long account age

Total 22,512,414.52 22,512,414.52 100.00

¢Ú Account receivable provided for bad debt reserve under aging analysis method in

the groups

Period-end balance

A/C age

Account receivable Bad debt reserve Accrual ratio (%)

Within 1 year 2,221,154.93

Total 2,221,154.93

(2)Bad debt provision accrual collected or switch back

Bad debt provision accrual was 0 Yuan; the amount collected or switches back amounting to 0 Yuan.

(3)Top 5 account receivables at ending balance by arrears party

Proportion

in total

Relationship with

Name of the company Amount Terms account

the Company

receivables

(%)

Shenzhen Jinlu Industry and Trade Co., Ltd. Non-related party 9,846,607.00 Over 3 years 19.30

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Guangdong Zhanjiang Sanxing Auto Service Co., Ltd. Non-related party 4,060,329.44 Over 3 years 7.96

Wang Changlong Non-related party 2,380,760.40 Over 3 years 4.67

Huizhou Jiandacheng Daoqiao Engineering Company Non-related party 2,021,657.70 Over 3 years 3.96

Guangdong Materials Group Corp Non-related party 1,862,000.00 Over 3 years 3.65

Total 20,171,354.54 39.54

(4)Account receivable derecognition due to financial assets transfer

The Company has no account receivable derecognition due to financial assets transfer

in the Period.

(5)Assets and liabilities resulted by account receivable transfer and continues

involvement

The Company has no assets and liabilities resulted by account receivable transfer and

continues involvement in the Period.

3. Advance payment

(1)Advance payment by age

Period-end balance Balance at year-begin

A/C age

Amount Ratio (%) Amount Ratio (%)

Within 1 year 8,627,722.80 98.37 8,259,644.18 97.90

1-2 years 68,400.90 0.81

2-3 years 68,400.90 0.78

Over 3 years 74,903.87 0.85 108,623.27 1.29

Total 8,771,027.57 100.00 8,436,668.35 100.00

(2)Top 5 advance payment at ending balance by prepayment object

Total year-end balance of top five advance payment by prepayment object amounting to 8,729,227.63Yuan, takes 99.52

percent of the total advance payment at year-end.

4. Interest receivable

(1) Interest receivable by category

Item Period-end balance Balance at year-begin

Structured deposit 118,000.00 172,055.56

Total 118,000.00 172,055.56

5. Other accounts receivable

(1) Other accounts receivable by category

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Period-end balance

Category Book balance Bad debt reserve

Book value

Amount Ratio (%) Amount Accrual ratio (%)

Other account receivable with single

significant amount and withdrawal bad 39,194,955.77 55.23 39,194,955.77 100.00

debt provision separately

Other receivables with bad debt

21,162,072.06 29.82 3,653,285.18 17.26 17,508,786.88

provision accrual by credit portfolio

Other accounts with single significant

amount and bad debts provision accrued 10,614,976.75 14.95 10,614,976.75 100.00

individually

Total 70,972,004.58 100.00 53,463,217.70 75.33 17,508,786.88

(Cont.)

Balance at year-begin

Category Book balance Bad debt reserve

Book value

Amount Ratio (%) Amount Accrual ratio (%)

Other account receivable with single

significant amount and withdrawal bad 39,200,840.68 55.76 39,200,840.68 100.00

debt provision separately

Other receivables with bad debt

20,423,595.69 29.05 3,837,208.24 18.79 16,586,387.45

provision accrual by credit portfolio

Other accounts with single significant

amount and bad debts provision accrued 10,678,096.75 15.19 10,678,096.75 100.00

individually

Total 70,302,533.12 100.00 53,716,145.67 76.41 16,586,387.45

¢Ù Other receivable with single significant amount and withdrawal bad debt provision

separately at end of period

Account receivable(units) Period-end balance

99

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Account Accru

Bad debt reserve Accrual reasons

receivable al ratio

9,832,956.37 The Company has revoked, and

Zhongqi South China Auto Sales Company 9,832,956.37 100.00

estimated of uncollectible amount

South Industry & TRADE Shenzhen 7,359,060.75 The Company has revoked, and

7,359,060.75 100.00

Industrial Company estimated of uncollectible amount

5,000,000.00 Win a lawsuit, no executable assets

Shenzhen Zhonghao (Group) Co., Ltd. 5,000,000.00 100.00

from adversary

2,706,983.51 Not expected to collected due to

Gold Beili Electrical Appliances Company 2,706,983.51 100.00

long account age

2,418,512.90 The Company has revoked, and

Shenzhen Xinxingtai Trade Co., Ltd. 2,418,512.90 100.00

estimated of uncollectible amount

Shenzhen Petrochemical Group 1,912,849.63 1,912,849.63 100.00 Less likely to collection

Shenzhen SDG Huatong Industrial Package 1,212,373.79 The Company has revoked, and

1,212,373.79 100.00

Co., Ltd. estimated of uncollectible amount

1,023,560.00 The Company has revoked, and

Shenzhen Jinhe Standard Mould Co., ltd. 1,023,560.00 100.00

estimated of uncollectible amount

Heyuan Dongfeng Technology Service 930,000.00 The company has revoked, and

930,000.00 100.00

station estimated of uncollectible amount

906,024.60 Not expected to collected due to

Shenzhen Nuoer Electrical Co., Ltd. 906,024.60 100.00

long account age

Shenzhen South Great Wall Investment 819,460.91 Has greater uncertainty in collection

819,460.91 100.00

Holding Co., Ltd.

660,790.09 The Company has revoked, and

Shenzhen Xiandao New Materials Company 660,790.09 100.00

estimated of uncollectible amount

Shenzhen Baodong Property Development 609,773.00 Not expected to collected due to

609,773.00 100.00

Company long account age

3,802,610.22 Not expected to collected due to

Others 3,802,610.22 100.00

long account age

Total 39,194,955.77 39,194,955.77 100.00

100

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¢Ú In combination, other accounts receivable whose bad debts provision was accrued

by age analysis

Period-end balance

A/C age

Other accounts receivable Bad debt reserve Accrual ratio (%)

Within 1 year 12,424,797.34

1-2 years 1,537,777.10 76,888.86 5.00

2-3 years 77,841.64 15,568.33 20.00

Over 3 years 7,121,655.98 3,560,827.99 50.00

Total 21,162,072.06 3,653,285.18 17.26

(2)Bad debt provision accrual collected or switch back

The amount of the allowance for bad debts is 189,620.97 yuan.; and the bad debt reserve reduced 63,307.00 Yuan for

subsiddiary transfer ¨C Shenzhen SDG Tellus Property Management Co., Ltd.

(3)Classification of other receivables by nature

Nature Closing book balance Book balance at year-begin

Intercourse accounts of related units 5,003,096.14 4,960,425.05

receivable

Other intercourse 65,968,908.44 65,342,108.07

Total 70,972,004.58 70,302,533.12

(4)Top 5 other receivables at ending balance by arrears party

Ratio in total ending Period-end

Period-end

Name of the company Nature A/C age balance of other balance of bad

balance

receivables(%) debt reserves

Zhongqi South China Auto Sales Intercourse 9,832,956.37 Over 3 13.85 9,832,956.37

Company funds years

South Industry & TRADE Shenzhen Intercourse 7,359,060.75 Over 3 10.37 7,359,060.75

Industrial Company funds years

Intercourse Over 3 7.05

Shenzhen Zhonghao (Group) Co., Ltd. funds 5,000,000.00 years 5,000,000.00

Shenzhen Kaifeng Special Vehicles Intercourse Over 3 6.22

Industry Co., Ltd. funds 4,413,728.50 years 2,206,864.25

101

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Ratio in total ending Period-end

Period-end

Name of the company Nature A/C age balance of other balance of bad

balance

receivables(%) debt reserves

Gold Beili Electrical Appliances Intercourse 2,706,983.51 Over 3 3.81 2,706,983.51

Company funds years

Total 29,312,729.13 41.30 27,105,864.88

6. Inventory

(1) Inventory classification

Period-end balance

Item

Book balance Depreciation reserve Book value

Raw materials 15,301,274.91 14,771,812.17 529,462.74

Low value consumable

Stock products 22,324,176.80 14,863,840.41 7,460,336.39

Total 37,625,451.71 29,635,652.58 7,989,799.13

(Cont.)

Balance at year-begin

Item

Book balance Depreciation reserve Book value

Raw materials 15,237,602.35 14,771,812.17 465,790.18

Low value consumable 855.67 855.67

Stock products 25,436,110.25 14,863,840.41 10,572,269.84

Total 40,674,568.27 29,635,652.58 11,038,915.69

(2) Inventory depreciation reserve

Increase in

the current Decrease in the current period

Item Balance at year-begin period Period-end balance

Switch back or

Accrual Other Other

write-off

Raw materials 14,771,812.17 14,771,812.17

Low value consumable

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Stock products 14,863,840.41 14,863,840.41

Total 29,635,652.58 29,635,652.58

(3)Accrual basis for inventory depreciation reserve and reason of switch back or

write-off in the year

Reasons of switch-back

Accrual basis for inventory Reasons of write-off for inventory

Item for inventory falling

impairment provision falling price reserves

price reserves

Its net realizable value is lower The products with depreciation

Stock products

than cost of inventory reserves accrual have been sell

7. Other current assets

Item Period-end balance Balance at year-begin

Input tax ready for deducted 823,991.93 123,901.32

Financial products 185,000,000.00 90,000,000.00

Total 185,823,991.93 90,123,901.32

8. Financial assets available for sale

(1) Particular about financial assets available for sale

Period-end balance Balance at year-begin

Item Depreciation Depreciation

Book balance Book value Book balance Book value

reserves reserves

Equity instrument

18,302,857.20 8,126,240.00 10,176,617.20 18,605,225.77 8,126,240.00 10,478,985.77

available for sale

Including: measured by

fair value

Measured by cost 18,302,857.20 8,126,240.00 10,176,617.20 18,605,225.77 8,126,240.00 10,478,985.77

Total 18,302,857.20 8,126,240.00 10,176,617.20 18,605,225.77 8,126,240.00 10,478,985.77

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(2)Financial assets available for sale measured by cost at period-end

Book balance Depreciation reserves Ratio of

Increas Increas share-holdin

The invested entity Decreas g in

ed in Decreased ed in

At year-begin At period-end At year-begin ed in At period-end invested

the in the year the

the year entity (%)

year year

China Pudong Development Machinery

10,176,617.20 10,176,617.20 4.94

Industry Co., Ltd.

Shenzhen Jingwei Industrial Co., Ltd. 4,000,000.00 4,000,000.00 4,000,000.00 4,000,000.00 12.50

Shenzhen (Masco) Co., Ltd. 825,000.00 825,000.00 825,000.00 825,000.00 7.00

Wuhan Weite Hotel 640,000.00 640,000.00 640,000.00 640,000.00

Shenzhen Petrochemical Group 700,000.00 700,000.00 700,000.00 700,000.00 10 Íò¹É

Shenzhen Shuntian Electro car Technology

600,000.00 600,000.00 600,000.00 600,000.00 11.10

Development Co., Ltd.

Shenzhen Jinhe Standard Mould Co., ltd. 453,440.00 453,440.00 453,440.00 453,440.00 15.00

Shenzhen China Auto Training Center 600,000.00 600,000.00 600,000.00 600,000.00 6.25

Dratini 162,000.00 162,000.00 162,000.00 162,000.00 6.25

Shenzhen Bisike Machinery Transport Co., Ltd. 302,368.57 302,368.57

Rishen International Co., Ltd. 145,800.00 145,800.00 145,800.00 145,800.00 7.50

Total 18,605,225.77 302,368.57 18,302,857.20 8,126,240.00 8,126,240.00

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(3)Changes of impairment in Year

Equity instrument Debt instrument

Type Total

available for sale available for sale

Balance of impairment accrual at year-begin 8,126,240.00 8,126,240.00

Accrual

Including: transfer-in from other

comprehensive income

Decreased in the year

Including: switch back due to fair value

rebound at period-end

Balance of impairment accrual at year-end 8,126,240.00 8,126,240.00

9. Held-to-maturity investment

(1) Held-to-maturity investment

Period-end balance Balance at year-begin

Item Depreciation Depreciation

Book balance Book value Book balance Book value

reserves reserves

Treasury 20,000.00 20,000.00 20,000.00 20,000.00

Total 20,000.00 20,000.00 20,000.00 20,000.00

10. Long-term account receivable

(1) Long-term account receivable

Period-end balance Balance at year-begin Range

of

Item Depreciation Book Depreciation Book

Book balance Book balance discou

reserves value reserves value

nt rate

Other:

Essentially constitute a

long-term equity for net

2,179,203.68 2,179,203.68 2,179,203.68 2,179,203.68

investment of invested

company

Including: Shenzhen

Tellus Auto Service Chain 2,179,203.68 2,179,203.68 2,179,203.68 2,179,203.68

Co., Ltd. *

Total 2,179,203.68 2,179,203.68 2,179,203.68 2,179,203.68

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* Notes: the Company is an associate of the Company, thus the non-operating receivables by the Company substantially

constitute net investments in investee. Till the end of this reporting period, the total liabilities exceeded total assets, and

owners¡¯ equity was negative. Carrying value of the long term equity investment in the company has been less to nil. This

company ceased operation in this reporting period. Considering the actual conditions of this company, the Company made

bad debt provision in full for this long term receivables.

11. Long-term equity investment

+,-

Other

Balance at Capita comprehe

The invested entity Investment Other

Additional l nsive

year-begin gains recognized equity

investment reducti income

under equity change

on adjustmen

t

I. Joint venture

Shenzhen Tellus Gman Investment Co., Ltd 57,180,913.33 -3,304,695.19

Shenzhen Tellus Hang Investment Co., Ltd. 10,583,444.88 140,991.05

Subtotal 67,764,358.21 -3,163,704.14

II. Associated enterprise

Shenzhen Xinglong Machinery Mould Co., Ltd. 15,878,254.74 4,219,677.45 -2,904,933.36

Shenzhen Tellus Auto Service Chain Co., Ltd.

Shenzhen Zung Fu Tellus Auto Service Co., Ltd. 75,715,480.75 8,604,432.54

Shenzhen Auto Industry Imp& Exp Co., Ltd. 8,427,067.20 -319,129.32

Shenzhen Dongfeng Auto Co., Ltd. 35,476,407.97 -2,485,088.04

Shenzhen New Yongtong Technology Co., Ltd. 368,948.94 14,812.97

Shenzhen New Yongtong Oil Pump 127,836.59

Environment Protection Co., Ltd.

Shenzhen New Yongtong Consultant Co., Ltd. 41,556.83

Shenzhen New Yongtong Auto Service Co., Ltd. 2,790.25 -2,790.25

Shenzhen New Yongtong Dongxiao Auto Parts

Sales Co., LTd.

Shenzhen Yongtong Xinda Inspection Equipment

Co., Ltd.

Hunan Changyang Industrial Co., Ltd.*¢Ù 1,810,540.70

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+,-

Other

Balance at Capita comprehe

The invested entity Investment Other

Additional l nsive

year-begin gains recognized equity

investment reducti income

under equity change

on adjustmen

t

Shenzhen Jiecheng Electronic Co., Ltd*¢Ù 3,225,000.00

Shenzhen Xiandao New Materials Company*¢Ù 4,751,621.62

China Auto Industrial Shenzhen Trading 400,000.00

Company*¢Ù

Shenzhen General Standard Co., Ltd.*¢Ù 500,000.00

Shenzhen Huoju Spark Plug Industry Co., Ltd. 17,849.20

Zhongqi South China Auto Sales Company*¢Ù 2,250,000.00

Shenzhen Bailiyuan Power Supply Co., Ltd*¢Ù 1,320,000.00

Shenzhen Yimin Auto Trading Co., Ltd*¢Ù 200,001.10

Subtotal 150,513,355.89 4,219,677.45 2,907,304.54

III. Other equity investment

Shenzhen Hanli Hi-Tech Ceramics Co., Ltd.*¢Ú 1,956,000.00

Shenzhen South Auto Maintenance Center*¢Ú 6,700,000.00

Subtotal 8,656,000.00

Total 226,933,714.10 4,219,677.45 -256,399.60

(Cont.)

+,- Period-end

Cash dividend or Accrual Period-end balance

The invested entity Othe

profit announced provisio balance depreciation

r

to issued n reserves

I. Joint venture

Shenzhen Tellus Gman Investment Co., Ltd 53,876,218.14

Shenzhen Tellus Hang Investment Co., Ltd. 10,724,435.93

Subtotal 64,600,654.07

II. Associated enterprise

Shenzhen Xinglong Machinery Mould Co., Ltd. 17,192,998.83

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Shenzhen Tellus Auto Service Chain Co., Ltd.

Shenzhen Zung Fu Tellus Auto Service Co., Ltd. 9,100,000.00 75,219,913.29

Shenzhen Auto Industry Imp& Exp Co., Ltd. 8,107,937.88

Shenzhen Dongfeng Auto Co., Ltd. 32,991,319.93

Shenzhen New Yongtong Technology Co., Ltd. 383,761.91

Shenzhen New Yongtong Oil Pump Environment 127,836.59 127,836.59

Protection Co., Ltd.

Shenzhen New Yongtong Consultant Co., Ltd. 41,556.83 41,556.83

Shenzhen New Yongtong Auto Service Co., Ltd.

Shenzhen Xinyongtong Dongxiao Auto Parts Sales Co.,

LTd.

Shenzhen Yongtong Xinda Inspection Equipment Co.,

Ltd.

Hunan Changyang Industrial Co., Ltd.*¢Ù 1,810,540.70 1,810,540.70

Shenzhen Jiecheng Electronic Co., Ltd*¢Ù 3,225,000.00 3,225,000.00

Shenzhen Xiandao New Materials Company*¢Ù 4,751,621.62 4,751,621.62

China Auto Industrial Shenzhen Trading Company*¢Ù 400,000.00 400,000.00

Shenzhen General Standard Co., Ltd.*¢Ù 500,000.00 500,000.00

Shenzhen Huoju Spark Plug Industry Co., Ltd. 17,849.20 17,849.20

Shenzhen Zhongqi South China Auto Sales Company*¢Ù 2,250,000.00 2,250,000.00

Shenzhen Bailiyuan Power Supply Co., Ltd*¢Ù 1,320,000.00 1,320,000.00

Shenzhen Yimin Auto Trading Co., Ltd*¢Ù 200,001.10 200,001.10

Subtotal 9,100,000.00 148,540,337.88 14,644,406.04

III. Other equity investment

Shenzhen Hanli Hi-Tech Ceramics Co., Ltd.*¢Ú 1,956,000.00 1,956,000.00

Shenzhen South Auto Maintenance Center*¢Ú 6,700,000.00 6,700,000.00

Subtotal 8,656,000.00 8,656,000.00

Total 9,100,000.00 221,796,991.95 23,300,406.04

Note: *¢ÙIndustry and commerce registration of the enterprise have been revoked, the long-term equity investment for the

above mentioned enterprise have accrual for depreciation reserves in total.

Note: more details of *¢ÚOther equity investment can be seen in Note VIII-1 ¨DEquity of subsidiaries¡¬.

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12. Investment real estate

(1) Investment real estate measured at cost

Item House and building Total

I. Original book value

1¡¢Balance at year-begin 160,870,656.51 160,870,656.51

2¡¢Increase in the current period 446,468.61 446,468.61

(1) Newly increased 446,468.61 446,468.61

3¡¢Decrease in the current period

(1) Disposal

4¡¢Period-end balance 161,317,125.12 161,317,125.12

II. Accumulated depreciation and accumulated amortization

1¡¢Balance at year-begin 83,268,407.98 83,268,407.98

2¡¢Increase in the current period 2,573,710.09 2,573,710.09

(1) Accrual or amortization 2,573,710.09 2,573,710.09

3¡¢Decrease in the current period

(1) Disposal

4¡¢Period-end balance 85,842,118.07 85,842,118.07

III.Depreciation reserves

IV. Book value

1. Ending book value 75,475,007.05 75,475,007.05

2. Book value at year-begin 77,602,248.53 77,602,248.53

(2) Investment real estate with ownership restricted

Up to 30 June 2017, investment real estate with ownership restricted found more in Note VI-47

(3) Investment real estate with certificate of title im-completed

There are no investment real estate with certificate of title im-completed up to 30 June 2017

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13. Fixed assets

(1) Fixed assets

Machinery Transportation Office and other Renovation costs of

Item House and buildings Electronic equipment Total

equipment equipment equipment self-owned housing

I. Original book value

1. Balance at year-begin 271,459,922.00 17,638,367.72 6,214,055.64 12,659,097.05 4,757,968.36 3,056,469.95 315,785,880.72

2.Increase in the current period 85,351.12 117,116.96 304,213.21 506,681.29

(1) Purchase 85,351.12 117,116.96 304,213.21 506,681.29

3. Decrease in the current period 446,468.61 640,163.70 682,922.47 1,434,114.23 938,407.83 358,757.96 4,500,834.80

(1) Disposal or scrapping 540,922.47 315,954.21 856,876.68

(2)Other 446,468.61 640,163.70 142,000.00 1,118,160.02 938,407.83 358,757.96 3,643,958.12

4. Period-end balance 271,013,453.39 16,998,204.02 5,616,484.29 11,342,099.78 4,123,773.74 2,697,711.99 311,791,727.21

II. Accumulated depreciation

1. .Balance at year-begin 147,097,591.99 13,133,465.78 4,438,240.34 9,693,651.39 3,938,766.93 2,775,087.22 181,076,803.65

2. Increase in the current period 3,570,866.64 160,257.03 202,401.02 282,664.57 87,773.96 4,303,963.22

(1) Accrual 3,570,866.64 160,257.03 202,401.02 282,664.57 87,773.96 4,303,963.22

3. Decrease in the current period 322,215.25 344,476.51 569,114.81 985,065.84 552,467.14 358,757.96 3,132,097.51

(1) Disposal or scrapping 500,480.22 36,915.82 25,066.35 562,462.39

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Machinery Transportation Office and other Renovation costs of

Item House and buildings Electronic equipment Total

equipment equipment equipment self-owned housing

(2)Other 322,215.25 344,476.51 68,634.59 948,150.02 527,400.79 358,757.96 2,569,635.12

4. Period-end balance 150,346,243.38 12,949,246.30 4,071,526.55 8,991,250.12 3,474,073.75 2,416,329.26 182,248,669.36

III.Depreciation reserves

1. Balance at year-begin 3,555,385.70 1,552,359.79 6,165.00 17,984.71 69,562.98 281,382.73 5,482,840.91

2. Increase in the current period

(1) Accrual

3. Decrease in the current period

(1) Disposal or scrapping

4. Period-end balance 3,555,385.70 1,552,359.79 6,165.00 17,984.71 69,562.98 281,382.73 5,482,840.91

IV. Book value

1. Ending book value 117,111,824.31 2,496,597.93 1,538,792.74 2,332,864.95 580,137.01 124,060,216.94

2. Book value at year-begin 120,806,944.31 2,952,542.15 1,769,650.30 2,947,460.95 749,638.45 129,226,236.16

Note: Depreciation in this period amounting to RMB 4,303,963.22. Transfer from construction in progress to fixed assets amounting as RMB 0.00 in this year.

Decrease of fixed assets in the period mainly due to the equity of subsidiary Shenzhen SDG Tellus Property Management Co., Ltd. transfer in the period

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(2) Temporary idle fixed asset

The Company had no temporary idle fixed asset end as 30 June 2017.

(3) Certificate of title un-completed

Item Book value Reasons

1,205,848.98 A failure to carry out the property certificate is

Shuibei Zhongtian Comprehensive Build caused by issues rooted in history

Hostel of People North Road 5,902.41 A failure to carry out the property certificate is

caused by issues rooted in history

Songquan Apartment (mixed) 39,164.42 A failure to carry out the property certificate is

caused by issues rooted in history

Tellus Building underground parking 10,788,443.42 Parking lot is un-able to carried out the

certificate

Tellus Building transformation layer 1,930,274.00 Un-able to carried out the certificate

Trade department warehouse 96,789.01 A failure to carry out the property certificate is

caused by issues rooted in history

Warehouse 993,456.97 A failure to carry out the property certificate is

caused by issues rooted in history

1#,2# and 3-5/F 3# plant of Taoyuan Road 4,418,379.76 A failure to carry out the property certificate is

caused by issues rooted in history

41,054,829.73 A failure to carry out the property certificate is

Yongtong Building caused by issues rooted in history

16# Taohua Garden 1,803,617.16 A failure to carry out the property certificate is

caused by issues rooted in history

Automotive building 18,830,674.99 A failure to carry out the property certificate is

caused by issues rooted in history

1,123,843.41 A failure to carry out the property certificate is

First floor of Bao¡¯an commercial-residence build caused by issues rooted in history

5,451,530.91 A failure to carry out the property certificate is

Nuclear Office build caused by issues rooted in history

Total 87,742,755.17

(4) Fixed assets with restriction in ownership

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Up to 30 June 2017, more details of fixed assets with restriction in ownership can be seen in Note VI-47.

14. Construction in process

(1) Basic situation of construction in process

Period-end balance Balance at year-begin

Item Depreciation Depreciation

Book balance Book value Book balance Book value

reserves reserves

Shuibei Jewelry Building 354,723,231.1 354,723,231.1 343,365,313.4 343,365,313.4

etc. 6 6 6 6

354,723,231.1 354,723,231.1 343,365,313.4 343,365,313.4

Total

6 6 6 6

(2) Changes of major projects under construction

Other

Balance at Increased in the Transfer to fixed

Item Budget decrease in Period-end balance

year-begin year assets in the year

the year

Shuibei Jewelry 360.96 Million 343,365,313.46 10,446,845.11 353,812,158.57

Building Yuan

Total 343,365,313.46 10,446,845.11 353,812,158.57

(Cont.)

Proportion of project Interest

Accumulated Including: interest Capital

Item investment in budget Progress amount of interest capitalized amount capitalization rate of

capitalization of the year source

the year (%)

(%)

Shuibei Jewelry 98.02% 98.02% 15,826,987.02 720,020.72

5.22 Self-raised

Building

Total 98.02% 98.02% 15,826,987.02 720,020.72 5.22

(3) Accrual of depreciation reserves of construction in process in the Year

Up to 30 June 2017, the construction in process of the Company has no impairment evidence

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15. Intangible assets

(1) Particular about intangible assets

Item Land use right Trademark right Software Total

I. Original book value

1. Balance at year-begin 56,252,774.80 95,800.00 1,070,185.00 57,418,759.80

2. Increase in the current period

(1) Purchase

3. Decrease in the current period

(1) Disposal

4. Period-end balance 56,252,774.80 95,800.00 1,070,185.00 57,418,759.80

II. accumulated amortization

1. Balance at year-begin 3,052,194.81 68,924.87 558,521.40 3,679,641.08

2. Increase in the current period 609,507.42 4,789.98 82,018.50 696,315.90

(1) Accrual 609,507.42 4,789.98 82,018.50 696,315.90

3. Decrease in the current period

(1) Disposal

4. Period-end balance 3,661,702.23 73,714.85 640,539.90 4,375,956.98

III.Depreciation reserves

IV. Book value

1. Ending book value 52,591,072.57 22,085.15 429,645.10 53,042,802.82

2. Book value at year-begin 53,200,579.99 26,875.13 511,663.60 53,739,118.72

Note: The amount amortized in this year accounting as RMB 696,315.90.

(2) Up to 30 June 2017, details of intangible assets restricted in aspect of ownership or use of rights can be seen in Note VI-47.

(3)Up to 30 June 2017, the Company has no intangible assets with un-confirmed service life

16. Long-term deferred expense

Balance at Increase in the Amortization during

Item Other decrease Closing amount

year-begin current period this year

Decoration charge 1,437,761.31 1,534,382.62 381,828.78 744,972.88 1,845,342.27

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Balance at Increase in the Amortization during

Item Other decrease Closing amount

year-begin current period this year

Total 1,437,761.31 1,534,382.62 381,828.78 744,972.88 1,845,342.27

17. Deferred income tax assets/ deferred income tax liabilities

(1) Details of recognized deferred income tax assets

Period-end balance Balance at year-begin

Deductible temporary Deductible

Item Deferred income tax Deferred income tax

difference temporary difference

assets assets

Provision of assets impairment 78,513,371.60 19,628,342.90 78,576,678.60 19,644,169.65

Equity investment difference 14,844,139.32 3,711,034.83 14,844,139.31 3,711,034.83

Un-realized transaction profit with 4,296,489.12 4,374,373.52

1,074,122.28 1,093,593.38

affiliated companies

Total 97,654,000.04 24,413,500.01 97,795,191.43 24,448,797.86

(2) Details of recognized deferred income tax liabilities

Period-end balance Balance at year-begin

Item Taxable temporary Deferred income tax Taxable temporary Deferred income tax

differences liabilities differences liabilities

Depreciation of fixed assets 440,096.16 110,024.04 930,844.24 232,711.06

Total 440,096.16 110,024.04 930,844.24 232,711.06

(3) Details of unrecognized deferred income tax assets

Item Period-end balance Balance at year-begin

Deductible temporary difference 101,206,474.29 103,706,658.55

Offset-able losses 40,352,154.22 39,164,563.93

Total 141,558,628.51 142,871,222.48

(4) Offset-able losses of the unrecognized deferred income tax assets will expire the following year

Year Period-end balance Balance at year-begin Note

2017 5,875,485.17

2018 15,579,607.94 15,020,960.85

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2019 15,973,786.46 14,499,089.58

2020 507,700.61 507,700.61

2021 4,824,496.17 3,261,327.72

2020 3,466,563.04

Total 40,352,154.22 39,164,563.93

18. Other non current assets

Item Period-end balance Balance at year-begin

Other 100,000.00 100,000.00

Total 100,000.00 100,000.00

19. Details of asset impairment provision

Decreased in the

Amount at Provision in the year Closing

Item

year-begin period Written amount

Other

back

104,689,834.51 189,620.9 63,307.0 104,436,906.5

I. Bad debt reserve

7 0 4

II. Held-to-maturity investment 20,000.00 20,000.00

impairment provision

29,635,652.58

III. Inventory impairment provision

29,635,652.58

IV.Long-term equity investment impairment 23,300,406.04

provision 23,300,406.04

V. Fixed assets impairment provision 5,482,840.91 5,482,840.91

VI. Financial assets depreciation reserves available 8,126,240.00 8,126,240.00

for sale

171,254,974.04 189,620.9 63,307.0 171,002,046.0

Total

7 0 7

Other decreased refers to the bad debt reserves have 63,307.00 Yuan deduction for transferring subsidiary Shenzhen SDG Tellus

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Property Management Co., Ltd.

20. Short-term loans

(1)category

Item Period-end balance Balance at year-begin

Debt of honor 50,000,000.00 50,000,000.00

Total 50,000,000.00 50,000,000.00

(2) No un-settlement short-term loans due in the period

21. Account payable

(1) Account payable

Item Period-end balance Balance at year-begin

Account payables 22,195,793.29 23,599,227.33

Total 22,195,793.29 23,599,227.33

(2) Major account payable with over one year age

Item Period-end balance Unsettled reasons

Shenzhen SDG Real Estate Co., Ltd. 6,054,855.46 Not paid from related company

Total 6,054,855.46

22. Account received in advance

(1) Account received in advance

Item Period-end balance Balance at year-begin

Within 1 year 10,144,741.49 10,872,120.44

1-2 years 345,811.38

2-3 years 345,811.38

Over 3 years 712,561.20 712,561.20

Total 11,203,114.07 11,930,493.02

Notes: payments in advance over three years mainly represent those by our subsidiary Shenzhen New Yongtong Automobile

Detection equipments Co., Ltd. due to that installment and commissioning of equipments have not been inspected and accepted by

clients, the payments are not carried forward accordingly.

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23. Wages payable

(1) Wages payable

Decreased in the

Increased in the year

Item Balance at year-begin year Period-end balance

I. Short-term compensation

25,209,472.43 27,541,228.54 30,810,742.75 21,939,958.22

II. Post-employment welfare- defined

1,935,158.75 3,363,037.53 4,027,780.38 1,270,415.90

contribution plans

III. Compensation from labor

relationship dismissed

IV. Other welfare due within one

year

Total 27,144,631.18 30,904,266.07 34,838,523.13 23,210,374.12

(2) Short-term compensation

Decreased in the

Increased in the year

Item Balance at year-begin year Period-end balance

1. Wages,bonuses,allowances and subsidies

22,876,175.76 23,578,708.90 26,716,100.56 19,738,784.10

2. Welfare for workers and staff

372,445.00 372,445.00

3. Social insurance

8,030.90 1,206,437.69 1,205,845.47 8,623.12

Including: Medical insurance

7,002.85 1,056,947.68 1,056,429.17 7,521.36

Work injury insurance

456.99 64,390.42 64,363.96 483.45

Maternity insurance

571.06 85,099.59 85,052.34 618.31

4. Housing accumulation fund

2,094,682.39 1,739,959.05 1,738,404.32 2,096,237.12

5. Labor union expenditure and

230,583.38 643,677.90 777,947.40 96,313.88

personnel education expense

6. Short-term compensated absences

7. Short-term profit sharing plan

8. Other

Total 25,209,472.43 27,541,228.54 30,810,742.75 21,939,958.22

(3) Defined contribution plans

Decreased in

Item Balance at year-begin Increased in the year Period-end balance

the year

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Decreased in

Item Balance at year-begin Increased in the year Period-end balance

the year

1. Basic endowment insurance 143,967.68 2,614,335.71 2,631,221.36 127,082.03

2. Unemployment insurance 1,133.94 59,078.96 59,005.70 1,207.20

3. Enterprise annuity 1,790,057.13 689,622.86 1,337,553.32 1,142,126.67

Total 1,935,158.75 3,363,037.53 4,027,780.38 1,270,415.90

24. Tax payable

Item Period-end balance Balance at year-begin

Value-added tax 581,172.02 979,259.98

Business tax 8,825.60

Enterprise income tax 964,981.43 1,951,517.14

Individual income tax 1,082,028.34 260,584.17

Urban maintenance and construction tax 100,931.76 179,827.99

Property right tax 895,432.45 864,954.73

land VAT 5,362,682.64 5,362,682.64

Land use tax 220,338.33 241,516.81

Educational surtax 114,091.47 168,983.23

Other 10,079.42 72,351.91

Total 9,340,563.46 10,081,678.60

25. Interest payable

Item Period-end balance Balance at year-begin

Interest payable of short-term loans 54,375.00 66,458.33

Interest of long-term loans with interest-installment and principal paid on due 39,972.00 11,368.00

Total 94,347.00 77,826.33

26. Other payable

(1) Classification of other payable according to nature of account

Item Period-end balance Balance at year-begin

Relevance contact, borrowings and interests 56,892,514.68 56,774,469.90

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Item Period-end balance Balance at year-begin

Deposit and margin 13,103,828.65 16,252,470.66

Other 44,782,057.86 53,018,913.98

Total 114,778,401.19 126,045,854.54

(2) Significant other payable with over one year age

Item Period-end balance Reasons of un-paid or carry-over

Shenzhen SDG Co., Ltd. 50,603,246.05 Term of repayment has not been regulated by parent company

Total 50,603,246.05

27. Long-term loans

Item Period-end balance Balance at year-begin

Mortgage loan 27,600,000.00 12,000,000.00

Total 27,600,000.00 12,000,000.00

28. Long-term account payable

Item Period-end balance Balance at year-begin

Deposit of staff residence 3,908,848.40 3,908,848.40

Allocation for technology innovation projects 11,311.96 11,311.96

Total 3,920,160.36 3,920,160.36

29. Accrual liability

Period-end

Item Balance at year-begin Reasons

balance

Found more in 2-¢Ý¢Þ in Note X. Commitment and

Pending litigation 434,487.74 1,192,618.90

contingency

Total 434,487.74 1,192,618.90

30. Other non-current liability

Item Closing amount Amount at year-begin

Rental received in advance 14,468,198.45 14,239,537.48

Total 14,468,198.45 14,239,537.48

Notes: other non-current liability refers to the rental received in advance from Shuibei Jewelry Building, the income was

subsequently measured at amortized cost at effective rate.

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31. Share capital

Increased/decreased (+,-) in the Period

Shares

Balance at converted

Item New shares Bonus Period-end balance

year-begin from Other Subtotal

issued shares

public

reserve

I. Restricted shares

1. State-owned shares

2. State-owned legal

person¡¯s shares 6,000,000.00 6,000,000.00

3.Other domestic shares

Including: Domestic legal 71,000,000.00 71,000,000.00

person¡¯s shares

Domestic natural person¡¯s

shares

4. Foreign shares

Including: Foreign legal

person¡¯s shares

Foreign natural person¡¯s

shares

Total restricted shares 77,000,000.00 77,000,000.00

II. Unrestricted shares

1. RMB Ordinary shares 193,881,600.00 193,881,600.00

2. Domestically listed

foreign shares 26,400,000.00 26,400,000.00

3. Overseas listed foreign

shares

4. Others

Total unrestricted shares 220,281,600.00 220,281,600.00

III. Total shares 297,281,600.00 297,281,600.00

32. Capital reserves

Item Balance at year-begin Increased in the year Decreased in the year Period-end balance

Capital premium 559,544,773.35 559,544,773.35

Other capital reserve 4,647,832.16 1,033,669.00 5,681,501.16

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Total 564,192,605.51 1,033,669.00 565,226,274.51

33. Surplus reserves

Item Balance at year-begin Increased in the year Decreased in the year Period-end balance

Statutory surplus reserves 2,952,586.32 2,952,586.32

Total 2,952,586.32 2,952,586.32

34. Retained profits

Item The period Last year

Undistributed profits at the end of last year before adjustment 30,935,823.12 3,742,260.49

Adjust the total undistributed profits at the beginning of the year (Increase +, Decrease -)

Undistributed profits at the beginning of the year after adjustment 30,935,823.12 3,742,260.49

Add: The net profits belong to shareholders of patent company of this year 24,596,905.09 27,193,562.63

Less: Withdraw statutory surplus reserves

Withdraw free surplus reserves

Withdrawal of general risk provisions

Common stock dividends payable

Common stock dividends transferred to capital stock

Retained profits at end of the period 55,532,728.21 30,935,823.12

35. Operating income and cost

Jan.- Jun.2017 Jan.- Jun.2016

Item

Income Cost Income Cost

Main operating 158,321,271.67 117,170,941.78 153,921,452.19 111,871,099.40

Other operating 2,662,832.89 853,872.18 3,225,714.29 951,281.48

Total 160,984,104.56 118,024,813.96 157,147,166.48 112,822,380.88

36. Tax and surcharges

Item Jan.- Jun.2017 Jan.- Jun.2016

Consumption tax 21,580.86

Business tax 1,724,935.71

City maintenance and construction tax 368,816.45 401,069.68

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Item Jan.- Jun.2017 Jan.- Jun.2016

Education surcharge 254,567.79 277,720.82

Land use right 312,379.03

Property tax 1,792,852.09

Other taxes 60,729.54

Total 2,810,925.76 2,403,726.21

Note: ¢Ù See details about the payment standards of business tax and additional on Note V. Taxes.

¢Ú According to the relevant provisions of the notification about VAT Accounting Treatment Regulations (CK No. [2016] 22) issued

by the Ministry of Finance, after the comprehensive trial implementation of business tax to added-value tax, the subject title of

¨Dbusiness tax and additional¡¬ should be adjusted to be ¨Dtax and additional¡¬, this subject accounts the consumption tax, urban

maintenance and construction tax, resource tax, education surcharge and property tax, land use tax, travel tax, stamp duty and other

related taxes and fees generated from the business operation; ¨Dbusiness tax and additional¡¬ item in the profit statement was adjusted

to be ¨Dtax and additional¡¬ item. The property tax, land use tax, travel tax, stamp duty and other related taxes and fees of the Company

were originally listed in the management fees, and started to be listed in this subject since May 1, 2016.

37. Sales expenses

Item Jan.- Jun.2017 Jan.- Jun.2016

Employee compensation 4,628,353.86 4,695,023.72

Advertising and exhibition expenses 110,070.26 164,859.10

Depreciation and amortization 451,080.13 398,391.34

Office expenses 411,090.60 422,227.60

Utilities 150,135.43 142,347.99

Transportation and business trip cost 189,297.19 252,965.15

Other 943,577.78 1,323,945.33

Total 6,883,605.25 7,399,760.23

38. Administration expense

Item Jan.- Jun.2017 Jan.- Jun.2016

Employee compensation 14,072,858.71 13,469,076.10

Taxes 1,489,743.87

Office expenses 1,384,396.56 1,276,135.32

Transportation and business trip cost 626,527.69 423,970.13

123

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Item Jan.- Jun.2017 Jan.- Jun.2016

Business entertainment expenses 376,655.28 363,685.60

Depreciation and amortization 959,488.65 838,535.59

Consulting and service expenses 898,254.97 1,090,214.77

Other 1,033,839.90 1,853,665.74

Total 19,352,021.76 20,805,027.12

39. Financial expenses

Item Jan.- Jun.2017 Jan.- Jun.2016

Interest expenses 2,069,420.04 2,202,107.56

Less: Interest income 1,396,595.43 1,584,498.59

Less: interest capitalized amount 720,020.72 567,873.61

Exchange gains and losses -81,475.00 44,675.69

Other 155,131.65 194,589.73

Total 26,460.54 289,000.78

40. Assets impairment loss

Item Jan.- Jun.2017 Jan.- Jun.2016

Bad debt loss -189,620.97

Total -189,620.97

41. Investment income

Item Jan.- Jun.2017 Jan.- Jun.2016

Income of long-term equity investment 2,929,608.85 2,808,781.91

calculated based on equity

Income of disposal of long-term equity 4,916,001.05

investment

Investment income of financial products during 1,790,968.34 2,291,789.05

the holding period

Total 9,636,578.24 5,100,570.96

42. Non-operating income

124

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Amount reckoned into current

Item Jan.- Jun.2017 Jan.- Jun.2016

non-recurring gains/losses

Non-current assets disposal gains 58,186.00 28,104.37 58,186.00

Including: fixed assets disposal gains 58,186.00 28,104.37 58,186.00

Other 261,331.17 17,176.53 261,331.17

Total 319,517.17 45,280.90 319,517.17

43. Non-operating expenditure

Amount reckoned into current

Item Jan.- Jun.2017 Jan.- Jun.2016

non-recurring gains/losses

Non-current assets disposal losses 6,919.80 1,237.84 6,919.80

Including: fixed assets disposal losses 6,919.80 1,237.84 6,919.80

Other 4,527.00

Total 6,919.80 5,764.84 6,919.80

44. Income tax expense

(1) Statement of income tax expense

Item Jan.- Jun.2017 Jan.- Jun.2016

Current income tax expense 1,077,177.35 701,085.04

Deferred income tax expense -103,215.92 -103,215.92

Adjustment for precious period -350,274.34

Total 623,687.09 597,869.12

(2) Adjustment on accounting profit and income tax expenses

Item Jan.- Jun.2017

Total profit

24,025,073.87

Income tax measured by statutory/applicable tax rate

6,006,268.47

Impact by different tax rate applied by subsidies

Adjusted the previous income tax

-350,274.34

Impact by non-taxable revenue

Impact on cost, expenses and losses that unable to deducted

-808,604.16

125

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Impact by the deductible losses of the un-recognized previous deferred income tax

-5,090,343.66

The deductible temporary differences or deductible losses of the un-recognized deferred income

866,640.77

tax assets in the Period

Change of the balance of deferred income tax assets/liabilities at period-begin resulted by tax rate

adjustment

Income tax expense 623,687.09

45. Notes to statement of cash flow

(1) Other cash received in relation to operation activities

Item Jan.- Jun.2017 Jan.- Jun.2016

Intercourse funds and others 16,403,125.71 20,785,593.31

Interest income 1,278,595.43 1,584,498.59

Total 17,681,721.14 22,370,091.90

(2) Other cash paid in relation to operation activities

Item Jan.- Jun.2017 Jan.- Jun.2016

Expenses of operation management cash paid 6,123,845.66 7,268,703.14

Intercourse funds and other 32,907,632.73 18,233,788.32

Total 39,031,478.39 25,502,491.46

46. Supplementary information to statement of cash flow

(1) Supplementary information to statement of cash flow

Supplementary information Jan.- Jun.2017 Jan.- Jun.2016

1. Net profit adjusted to cash flow of operation activities:

Net profit

23,401,386.78 17,969,489.16

Add: Provision of assets impairment

-189,620.97

Depreciation of fixed assets, consumption of oil assets and depreciation of

productive biology assets 6,493,475.89 6,600,980.21

Amortization of intangible assets

696,315.90 99,401.25

Amortization of long-term deferred expenses

381,828.78 279,461.61

Loss from disposal of fixed assets, intangible assets and other long-term

-57,116.20 -23,466.53

assets(gain is listed with ¨D-¡¬)

126

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Supplementary information Jan.- Jun.2017 Jan.- Jun.2016

Loss of disposing fixed assets(gain is listed with ¨D-¡¬)

5,850.00

Loss from change of fair value(gain is listed with ¨D-¡¬)

Financial expenses (gain is listed with ¨D-¡¬)

1,267,924.32 1,678,909.64

Investment loss (gain is listed with ¨D-¡¬)

-9,636,578.24 -5,100,570.96

Decrease of deferred income tax asset( (increase is listed with ¨D-¡¬)

35,297.85 19,471.10

Increase of deferred income tax liability (decrease is listed with ¨D-¡¬)

-122,687.02 -122,687.02

Decrease of inventory (increase is listed with ¨D-¡¬)

3,049,116.56 6,971,918.06

Decrease of operating receivable accounts (increase is listed with ¨D-¡¬)

-3,111,248.97 -2,280,192.36

Increase of operating payable accounts (decrease is listed with ¨D-¡¬)

-14,833,383.28 -2,121,207.80

Other

Net cash flow arising from operating activities

7,380,561.40 23,971,506.36

2. Material investment and financing not involved in cash flow

Debt transfer to capital

Convertible bonds due within one year

Fixed assets financing lease-in

3. Net change of cash and cash equivalents:

Balance of cash at period end

123,232,791.88 190,981,593.06

Less: Balance of cash equivalent at year-begin

178,497,640.10 159,184,710.93

Add: Closing balance of cash equivalents

Less: Opening balance of cash equivalents

Net increasing of cash and cash equivalents

-55,264,848.22 31,796,882.13

(2) Constitution of cash and cash equivalent

Period-end Balance at

Item

balance year-begin

123,232,791.8 178,497,640.1

I. Cash

8 0

Including: stock cash

67,334.26 96,167.91

127

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Period-end Balance at

Item

balance year-begin

Bank deposit available for payment at any time 123,165,457.6 178,401,472.1

2 9

Other monetary fund available for payment at any time

II. Cash equivalent

Including: bond investment matured within 3 months

123,232,791.8 178,497,640.1

II. Balance of cash and cash equivalent at year-end

8 0

Including: Cash and cash equivalent with restriction used by parent company or subsidiary in the

Group

Note: cash and cash equivalent excluding the cash and cash equivalent with use-restricted concerned of the parent company or

subsidiaries in the Group

47. Assets with ownership or use right restricted

Item Book value at Period-end Reason

Monetary fund 30,000,000.00 Found in Note VI-1

Investment real estate 45,656,477.74

Fixed assets 1,580,835.53

Intangible assets 50,752,685.52

Long-term equity investment 75,219,913.29 ¼û¸½×¢¾Å¡¢5¡¢(2)

Total 203,209,912.08

(1) In order to meet needs in operation and construction, the Company signed the comprehensive credit contract (2014 SYJTZZ

No.007) with credit amount of 211,000,000.00 Yuan with China Citic Bank Jingtian Branch on August 28, 2014, and signed the

highest mortgage contract (2014 SYJTZDZ No.008) by taking the book assets with the amount of 50,293,453.68 Yuan of Shenzhen

SDG Testrite Real Estate Co. Ltd. as the mortgage, and also signed the highest mortgage contract (2014 SYJTZDZ No.007) by taking

the book assets with the amount of 117,706,546.32 Yuan of the Company as the mortgage, and hereby signed the loan contract (2014

SYJTDZ No.0012) with the amount of 157,500,000.00 Yuan and the length of maturity from August 28, 2014 to August 28, 2017 on

August 28, 2014, the mode of repayment is to pay interest monthly and return 8% of principal semiannually after the loan origination

and pay the balance at one time once due, up to June 30, 2017, this loan has been returned, but the assets are still in the state of

mortgage because the credit ceiling still in period of validity.

(2)The land of this project (SFDZ No. 2000609764) needs to be mortgaged in order to satisfy the requirements for the

implementation of Testrite Shuibei Jewelry Building project, the Company¡¯s subsidiary Shenzhen Zhongtian Industry Co., Ltd.

signed the loan contract (Mortgage & Loan 2014 Gu 250 Tianbei) with borrowing amount of 0.3 billion Yuan and loan term from

June 24, 2014 to June 23, 2024 with China Construction Bank Shuibei Branch on June 24, 2014, and the Company providing the

128

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

joint liability guaranty (Guarantee and loan 2014 Gu 250 Tianbei). Up to June 30, 2017, loans of 27,600,000.00 Yuan from the bank

under the name of Shenzhen Zhongtian Industrial Co., Ltd.

48. Item of foreign currency

(1) Item of foreign currency

Closing balance of foreign

Item Rate of conversion Ending RMB balance converted

currency

Monetary fund

Including: USD 856.00 6.7744 5,798.89

HKD

VII. Changes of consolidation range

1.Enterprise merger under the different control

The Company had no enterprise merger under the different control in Period.

2.Enterprise merger under the same control

The Company had no enterprise merger under the same control in Period.

3.Reverse purchase

The Company had no reverse purchase in Period.

4.Disposal of subsidiaries

The Company has one subsidiary (Shenzhen Tellus SDG Property Management Co., Ltd. ) disposed by negotiating transfer in the

period, after equity transfer, Tellus Property is excluding in consolidation statement of the Company.

5. Change of consolidation range from other reasons

Nil

VIII. Equity in other entity

1. Equity in subsidiary

(1) Constitute of enterprise group

Main Share-holding ratio

Registered

Subsidiary operation Business nature (%) Acquired way

place

place

Directly Indirectly

Shenzhen Tellus New Yongtong Automobile Service Obtained by

Shenzhen Shenzhen 100.00

Development Co. Ltd*1 industry establishment or

129

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Main Share-holding ratio

Registered

Subsidiary operation Business nature (%) Acquired way

place

place

Directly Indirectly

investment

Obtained by

Shenzhen Dongchang Yongtong Motor Service

Shenzhen Shenzhen 95.00 establishment or

Vehicle Detection Co., Ltd. industry

investment

Obtained by

Shenzhen New Yongtong Dongxiao Vehicle Service

Shenzhen Shenzhen 95.00 establishment or

Inspection Co., Ltd. industry

investment

Obtained by

Shenzhen Bao¡¯an Shiquan Industrial Co., Ltd Shenzhen Shenzhen Commerce 100.00 establishment or

investment

Obtained by

Shenzhen SDG Tellus Real Estate Co., Ltd Shenzhen Shenzhen Manufacture 100.00 establishment or

investment

Obtained by

Shenzhen Tellus Real Estate Exchange Co. Service

Shenzhen Shenzhen 100.00 establishment or

Ltd industry

investment

Obtained by

Shenzhen New Yongtong Automobile Service

Shenzhen Shenzhen 51.00 establishment or

Inspection Equipment Co. Ltd industry

investment

Obtained by

Shenzhen Automobile Industry Trading

Shenzhen Shenzhen Commerce 100.00 establishment or

General Company*1

investment

Obtained by

Shenzhen Automotive Industry Supply Service

Shenzhen Shenzhen 100.00 establishment or

Corporation industry

investment

Obtained by

Shenzhen SDG Huari Automobile Enterprise Service

Shenzhen Shenzhen 60.00 establishment or

Co.Limited industry

investment

Shenzhen Huari Anxin Automobile Inspection Shenzhen Shenzhen Service 100.00 Obtained by

130

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Main Share-holding ratio

Registered

Subsidiary operation Business nature (%) Acquired way

place

place

Directly Indirectly

Ltd industry establishment or

investment

Obtained by

Service

Shenzhen Zhongtian Industrial Co., Ltd. Shenzhen Shenzhen 100.00 establishment or

industry

investment

Obtained by

Shenzhen Huari TOYOTA Automobile Sales

Shenzhen Shenzhen Commerce 60.00 establishment or

Service Co., Ltd.

investment

Obtained by

Shenzhen Hanli Hi-Tech Ceramics Co., Ceramic

Shenzhen Shenzhen 80.00 establishment or

Ltd.*2 technology

investment

Obtained by

Vehicle

Shenzhen South Auto Maintenance Center*2 Shenzhen Shenzhen 100.00 establishment or

maintenance

investment

Obtained by

Anhui Tellus Starlight Jewelry Investment

Hefei Hefei Commerce 51.00 establishment or

Co., Ltd.

investment

Obtained by

Anhui Tellus Starlight Junzun Jewelry Co.,

Hefei Hefei Commerce 60.00 establishment or

Ltd.

investment

Note: * 1 Due to the execution case of dedicated funds for housing public facilities of Fu Yi Ya Ju, the court froze the business

registration information or equity of the companies, and the freezing time limit was until August 12, 2017. See details about the

execution case on Note X. 2.

* 2 The operating period of Shenzhen Hanli Hi-Tech Ceramics Co., Ltd. was from September 21, 1993 to September 21, 1998, and

the operating period of Shenzhen South Auto Maintenance Center was from July 12, 1994 to July 2002 11, these companies have

ceased to operate for many years and have been revoked the industrial and commercial registration because they did not participate in

the annual inspection of industry and commerce. The Company has not been able to exercise effective control over such companies

which should not be included in the consolidated scope of the consolidated financial statements of the Company, and the book value

of the Company's investment in such companies and the net value of the net investment in these companies was zero.

(2) Important non-wholly-owned subsidiary

131

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Gains/losses

Dividend announced

Share-holding ratio of attributable to Ending equity of

to distribute for

Subsidiary minority (%) minority in the minority

minority in the Period

Period

Shenzhen Huari Toyota Automobile Co. Ltd 40% 81,785.04 -1,652,313.72

Shenzhen SDG Huari Automobile Enterprise

40% 58,554.46 11,557,064.14

Co.Limited

(3) Main finance of the important non-wholly-owned subsidiary

Period-end balance

Subsidiary Non-current Non-current

Current assets Total assets Current liability Total liability

assets liability

Shenzhen Huari Toyota

43,666,739.87 1,418,432.49 45,085,172.36 49,215,956.65 49,215,956.65

Automobile Co. Ltd

Shenzhen SDG Huari

Automobile Enterprise 45,009,780.56 30,733,410.12 75,743,190.68 46,306,018.54 544,511.78 46,850,530.32

Co.Limited

(Cont.)

Balance at year-begin

Subsidiary Non-current Non-current

Current assets Total assets Current liability Total liability

assets liability

Shenzhen Huari

Toyota Automobile 40,898,136.14 1,571,594.67 42,469,730.81 46,804,977.69 46,804,977.69

Co. Ltd

Shenzhen SDG Huari

Automobile

42,822,752.85 31,691,585.09 74,514,337.94 45,100,864.92 667,198.80 45,768,063.72

Enterprise

Co.Limited

132

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Jan.- Jun.2017 Jan.- Jun.2016

Subsidiar Total Cash flow from Total Cash flow from

y Business income Net profit comprehensi operating Business income Net profit comprehensiv operating

ve income activities e income activities

Shenzhen

Huari

Toyota 97,707,246.23 204,462.59 204,462.59 967,416.91 94,044,194.14 -19,548.04 -19,548.04 211,114.88

Automobi

le Co. Ltd

Shenzhen

SDG

Huari

Automobi

le 17,870,512.30 146,386.14 146,386.14 -2,957,442.18 19,299,222.50 101,794.49 101,794.49 2,163,653.64

Enterpris

e

Co.Limite

d

(4) Material limits on using group assets or discharging group debts

There is no material limit on using group assets or discharging group debts by our subsidiaries.

2. Transactions leading to change of owner¡¯s equity while not resulting in loss of control in

subsidiary

There is no transaction by the Company leading to change of owner¡¯s equity while not resulting in

loss of control in subsidiary.

3. Equity in joint venture and cooperative enterprise

(1) Important cooperative enterprise

Share-holding ratio Accounting

Main (%) treatment on

Registered

Name operation Business nature

place investment for joint

place

Directly Indirectly venture and

cooperative

133

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

enterprise

Affiliation:

Shenzhen Zung Fu Tellus Auto Sales and maintain of

Shenzhen Shenzhen

Benz 35.00 Equity method

Service Co., Ltd.

Auto manufacture and

Shenzhen Shenzhen

Shenzhen Dongfeng Auto Co., Ltd. maintain 25.00 Equity method

Joint venture:

Investment in industry

Shenzhen Tellus Gman Investment and property

Shenzhen Shenzhen

management and 50.00 Equity method

Co., Ltd

leasing

(2) Main financial information of the important joint venture

2017-6-30 / Jan.- Jun.2017 2016-12-31/ Jan.- Jun.2016

Shenzhen

Item Shenzhen Zung Fu Tellus Shenzhen Zung Fu Tellus Shenzhen Dongfeng

Dongfeng Auto

Auto Service Co., Ltd. Auto Service Co., Ltd. Auto Co., Ltd.

Co., Ltd.

Current assets

351,648,271.11 385,507,565.21 380,939,942.00 433,147,120.64

Non -current assets

21,219,192.36 151,615,978.96 22,120,081.00 154,874,554.92

Total assets 372,867,463.47 537,123,544.17 403,060,023.00 588,021,675.56

Current liabilities 156,582,160.26 337,636,227.33 186,730,078.00 376,098,044.69

Non ¨Ccurrent liabilities

67,192,979.15 68,990,352.65

Total liabilities

156,582,160.26 404,829,206.48 186,730,078.00 445,088,397.34

Minority shareholders¡¯ equity

329,057.95 1,027,646.31

Attributable to parent company

shareholders¡¯ equity 216,285,303.21 131,965,279.74 216,329,945.00 141,905,631.91

Share of net assets calculated by

shareholding ratio 75,699,856.12 32,991,319.93 75,715,480.75 35,476,407.97

Adjustment items

--Goodwill

134

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2017-6-30 / Jan.- Jun.2017 2016-12-31/ Jan.- Jun.2016

Shenzhen

Item Shenzhen Zung Fu Tellus Shenzhen Zung Fu Tellus Shenzhen Dongfeng

Dongfeng Auto

Auto Service Co., Ltd. Auto Service Co., Ltd. Auto Co., Ltd.

Co., Ltd.

--Unrealized profit of internal

trading

¡ªOther

-479,942.83

Book value of equity investment

75,219,913.29 32,991,319.93 75,715,480.75 35,476,407.97

in joint ventures

Fair value of the equity

investment of affiliation with

public offers concerned

Operation income

602,080,907.00 249,209,515.73 509,511,244.05 254,428,669.06

Net profit

24,584,092.96 -9,138,940.53 6,120,624.89 2,210,135.53

Net profit of the termination of

operation

Other comprehensive income

Total comprehensive income

24,584,092.96 -9,138,940.53 6,120,624.89 2,210,135.53

Dividends received from

9,100,000.00 6,300,000.00

affiliation in the year

(3) Main financial information of the important cooperative enterprise

Shenzhen Tellus Gman Investment Co., Ltd

Item

2017-6-30 / Jan.- Jun.2017 2016-12-31/ Jan.- Jun.2016

Current assets

24,183,364.59 28,920,938.79

Including: cash and cash equivalents

14,238,992.04 18,429,108.04

Non -current assets

422,002,467.62 422,125,153.92

Total assets

446,185,832.21 451,046,092.71

135

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

Shenzhen Tellus Gman Investment Co., Ltd

Item

2017-6-30 / Jan.- Jun.2017 2016-12-31/ Jan.- Jun.2016

Current liabilities

46,433,395.95 55,664,266.08

Non ¨Ccurrent liabilities

292,000,000.00 281,020,000.00

Total liabilities

338,433,395.95 336,684,266.08

Minority shareholders¡¯ equity

Attributable to parent company shareholders¡¯ equity

107,752,436.26 114,361,826.63

Share of net assets calculated by shareholding ratio

53,876,218.14 57,180,913.32

Adjustment items

--Goodwill

--Unrealized profit of internal trading

¡ªOther

Book value of equity investment in joint ventures

53,876,218.14 57,180,913.32

Fair value of the equity investment of joint ventures with

public offers concerned

Operation income 19,777,905.85

Financial expense

10,275,774.46 -27,701.41

Income tax expense

Net profit

-6,609,390.37 27,701.41

Net profit of the termination of operation

Other comprehensive income

Total comprehensive income

-6,609,390.37 27,701.41

Dividends received from joint venture in the year

136

ÉîÛÚÊÐÌØÁ¦(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2017 Äê°ëÄê¶È±¨¸æÈ«ÎÄ

(4) Summary financial information of not important joint venture and cooperative enterprise

Item 2017-6-30 / Jan.- Jun.2017 2016-12-31/ Jan.- Jun.2016

Joint ventures:

Total investment of book value 10,724,435.93 10,583,444.89

Total amount of the follow items calculated by share-holding

ratio

¡ªnet profit 140,991.04 345,955.27

¡ªOther comprehensive income

¡ªTotal comprehensive income 140,991.04 345,955.27

affiliation:

Total investment of book value 25,684,698.62 24,677,061.13

Total amount of the follow items calculated by share-holding

ratio

¡ªnet profit 1,007,637.49 -360,487.61

¡ªOther comprehensive income

¡ªTotal comprehensive income 1,007,637.49 -360,487.61

(5) Excess deficit from joint venture or affiliated business

Cumulative losses Losses of last year Cumulative losses

Name un-recognized in un-recognized (or net profit un-recognized at current

last year shares in the Year ) period-end

Shenzhen Tellus Auto Service Chain Co., Ltd. 97,868.99 136.42 98,005.41

Shenzhen Xinyongtong Dongxiao Auto Parts Sales

758,585.00 179,199.78 937,784.78

Co., LTd.

Shenzhen Yongtong Xinda Inspection Equipment Co.,

381,557.52 -62,529.86 319,027.66

Ltd.

Shenzhen New Yongtong Auto Service Co., Ltd. 55,106.12 55,106.12

4. Important co-management

No co-management in the Period.

137

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IX. Related party and related transactions

1. Parent company of the enterprise

Share-holding ratio

Registration Registered Voting right ratio on the

Parent company Business nature on the enterprise for

place capital enterprise (%)

parent company (%)

Development and

operation of real

2,582,820,000

Shenzhen SDG Co., Ltd. Shenzhen estate and 49.09 49.09

Yuan

domestic

commerce

Note: Ultimate controller of the Company is SASAC of Shenzhen.

2. Subsidiary of the Company

Found more in Note VIII-1.

3. Details of joint-venture and affiliated enterprise of the Company

Found more in Note VIII-3.

4. Particulars about other related parties

Other related parties Relationship with the Company

Shenzhen SDG Swan Industrial Company Ltd. Subsidiary of parent company

Shenzhen Machinery Equipment Imp & Exp. Company Subsidiary of parent company

Shenzhen SDG Real Estate Co., Ltd. Subsidiary of parent company

Hong Kong Yujia Investment Co, Ltd. Subsidiary of parent company

Shenzhen Tellus Real Estate Yueyang Co., Subsidiary of parent company

Shenzhen SDG Development Center Construction Supervision Subsidiary of parent company

Co., Ltd.

Shenzhen Tellus Yangchun Real Estate Co., Ltd. Subsidiary of parent company

Shenzhen Longgang Tellus Real Estate Co., Ltd. Subsidiary of parent company

Shenzhen SDG Property Management Co., Ltd. Subsidiary of parent company

5. Related transaction

(1) Related lease

¢ÙAs a lessor for the Company

Lessee Assets type Lease income in Lease income in

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recognized in recognized in Jan.-

Jan.- Jun. 2017 Jun. 2016

Shenzhen Zung Fu Tellus Auto Service Co., Ltd. House leasing 2,523,809.60 2,523,809.42

Shenzhen New Yongtong Auto Service Co., Ltd. House leasing 134,586.67 203,557.22

Shenzhen Xinyongtong Dongxiao Auto Parts Sales Co., LTd. House leasing 95,190.49 144,933.34

(2) Related guarantee

¢ÙThe Company serves as guarantor

The Company entered into pledge contract with Zung Fu Auto Management (Shenzhen) Co., Ltd. (hereinafter referred to as Zung Fu

Shenzhen), pursuant to which, during the period from establishment of our associate company Shenzhen Renhu Tellus Auto Service

Co., Ltd. (hereinafter referred to as Renhu Tellus) to the expiration date of the joint venture contract between the Company and

Renhe Shenzhen, provided that Zung Fu Shenzhen provides borrowings to Zung Fu Tellus under entrusted loan, Zung Fu Tellus

makes borrows from bank or other financial institutions and guaranteed by Zung Fu Shenzhen, and the total borrowings shall not

exceed RMB100 million, the Company bears 35% of the obligations arising from above borrowings according to its shareholding

proportion. It was agreed for the Company to pledge 35% equity interests held in Zung Fu Tellus to Zung Fu Shenzhen as counter

guarantee for the above borrowings.

Other than the above guarantee, the Company¡¯s provision of guarantees as guarantor all relates to such guarantees provided to

subsidiaries.

(3) Engagement of related parties to provide labor services

Zhongtian Industrial selected construction supervision institution for Tellus Shuibei Project through public bidding. On 14 May 2013,

SDG Supervision obtained letter of acceptance (No. 20130514002C) issued by Shenzhen Construction Project Trading Service

Center, and became the construction supervision institution for Tellus Shuibei Project through public bidding.

In May 2013, Zhongtian Industrial signed Supervision Contract in respect of Tellus Shuibei Jewelry Building Project with SDG

Supervision, pursuant to which, Zhongtian Industrial engaged SDG Supervision to exercise supervision in respect of Tellus Shuibei

Jewelry Building Project. The supervision fee was RMB 5,041,900. As at 30 June 2017, an aggregate of RMB 4,637,200 has been

paid.

(4) Related fund occupation expenses

Related party Content Jan.- Jun.2017 Jan.- Jun.2016

Borrow-in:

Shenzhen SDG Co., Ltd. Fund occupation expenses 1,634,233.95

Borrow-out:

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Shenzhen Xinglong Machinery Mould Co., Ltd. Fund occupation expenses 37,708.32 38,013.32

(5) Remuneration of key manager

Item Jan.- Jun.2017 Jan.- Jun.2016

Remuneration of key manager 4.19 million Yuan 2.81 million Yuan

Note: The year-end bonus for year of 2016 are paid in the Year, part of the bonus are paid last year, rests of the bonus will pay in

second half of 2017

(6) Related transaction from equity transfer

The Company signed a Property Rights Transfer Contract with Shenzhen SDG Property Management Co., Ltd. (hereinafter referred

to as SDG Property Company) on May 31, 2017, which transferred 100% equity stake of Shenzhen SDG Tellus Property

Management Co., Ltd. held by the Company to SDG Property Company by agreement transfer, and the transfer price was RMB 14.15

million. Up to June 30, 2017, SDG Property Company has received all transferred money, and the transfer was completed.

6. Receivable/payable items of related parties

(1) Receivable item

Period-end balance Balance at year-begin

Item Book balance Bad debt Book balance Bad debt

reserve reserve

Account receivable:

Shenzhen New Yongtong Auto Service Co., Ltd. 927,602.00 927,602.00 960,731.00 927,602.00

Shenzhen Xinyongtong Dongxiao Auto Parts Sales Co., LTd. 680,400.00 680,400.00 704,700.00 680,400.00

Total 1,608,002.00 1,608,002.00 1,665,431.00 1,608,002.00

Other account receivable:

Shenzhen Tellus Auto Service Chain Co., Ltd. 1,359,297.00 1,359,297.00 1,359,297.00 1,359,297.00

Shenzhen New Yongtong Technology Co., Ltd. 116,480.22 58,240.11 116,480.22 58,240.11

Shenzhen Yongtong Xinda Inspection Equipment Co., Ltd. 527,361.24 522,398.47 522,398.47 522,398.47

Shenzhen Xiandao New Material Co., Ltd. 660,790.09 660,790.09 660,790.09 660,790.09

Shenzhen Xinglong Machinery Mould Co., Ltd. 2,224,391.26 1,016,991.08 2,186,682.94 998,136.92

Shenzhen Tellus New Yongtong Auto Service Co., ltd. 114,776.33 114,776.33 114,776.33 114,776.33

Total 5,003,096.14 3,732,493.08 4,960,425.05 3,713,638.92

Long-term account receivables

Shenzhen Tellus Auto Service Chain Co., Ltd. 2,179,203.68 2,179,203.68 2,179,203.68 2,179,203.68

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Period-end balance Balance at year-begin

Item Book balance Bad debt Book balance Bad debt

reserve reserve

Total 2,179,203.68 2,179,203.68 2,179,203.68 2,179,203.68

(2) Payable item

Item Period-end balance Balance at year-begin

Account received in advance:

Shenzhen Zung Fu Tellus Auto Service Co., Ltd. 2,523,809.60

Total 2,523,809.60

Account payable:

Shenzhen SDG Real Estate Co., Ltd. 6,054,855.46 6,054,855.46

Shenzhen Machinery Equipment Imp & Exp. Company 45,300.00 45,300.00

Total 6,100,155.46 6,100,155.46

Other account payable:

Shenzhen SDG Real Estate Co., Ltd. 335,701.34 335,701.34

Hong Kong Yujia Investment Co, Ltd. 2,031,576.35 2,171,300.16

Shenzhen SDG Swan Industrial Company Ltd. 20,703.25 20,703.25

Shenzhen Machinery Equipment Imp & Exp. Company 1,554,196.80 1,576,424.94

Shenzhen SDG Co., Ltd. 50,925,608.78 50,645,612.05

Shenzhen Longgang Tellus Real Estate Co., Ltd. 1,095,742.50 1,095,742.50

Shenzhen Tellus Yangchun Real Estate Co., Ltd. 476,217.49 476,217.49

Shenzhen Xinglong Machinery Mould Co., Ltd. 78,515.56 78,515.56

Shenzhen New Yongtong Technology Co., Ltd. 320,000.00 320,000.00

Shenzhen Tellus Hang Investment Co., Ltd. 29,912.61 29,912.61

Shenzhen Yongtong Xinda Inspection Equipment Co., Ltd. 24,340.00 24,340.00

Total 56,892,514.68 56,774,469.90

X. Commitment or contingency

1. Important commitments

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(1) Capital commitments

Item Period-end balance Balance at year-begin

Signed without recognized in financial statement

¡ªPurchase and construction of long-term assets 77,873,064.21 126,313,353.45

commitment

Total 77,873,064.21 126,313,353.45

2. Contingency

(1) Contingent liability and its financial influence formed by un-settle lawsuits or arbitration

¢ÙIn October 2005, a lawsuit was brought before Shenzhen Luo Hu District People¡¯s Court by the Company,

which was the recognizer of Jintian Industrial (Group) Co., Ltd. (¨DJintian¡¬) to require Jintian to redress RMB

4,081,830 (principal: RMB 3,000,000, interest: RMB 1,051,380, legal fare: RMB 25,160 and executive fare:

RMB 5,290). Shenzhen Intermediate People¡¯s Court had adjudged that the Company won the lawsuit and the

forcible execution had been applied by the Company. As for the deducted amount in previous years, the Company

has counted as debt losses. The lawsuit has not executed yet till the date when the Report approved.

In April 2006, Shenzhen Development Bank brought an accusation against Jintian¡¯s overdue loan two million U.S. dollars and the

Company who guaranteed for this loan. The company took on the principal and all interest. After that, the Company appealed to

Shenzhen Luohu District People's Court, asking Jintian to repay 2,960,490 U.S. dollars and interest. In 2008, it reached Shen Luo

No.937 Civil Reconciliation Agreement (2008) after the mediating action taken by Shenzhen Luohu District People's Court. The

agreement is as follows: If Jintian repay 2,960,490 U.S. dollars before October 31, 2008, the company will exempt all the interest. If

Jintian can not settle the amount on time, it will pay the penalty in accordance with the People's Bank of China RMB benchmark

lending rate over the same period. At present, the implementation of property has new progress, and our attorney agent is negotiating

and drafting the pay-off plan with Jintian Company. Jintian Company is handling the bankruptcy reorganization and pay-off

procedures.

On January 29, 2016, Shenzhen Intermediate People's Court ruled that the reorganization plan of Jintian Company was completed

and the bankruptcy proceedings were terminated, Jintian Company was re-allocating to the creditors, including the Company,

according to the reorganization plan. Up to the approval date of this financial report, the Company has not yet received the allocated

property.

¢ÚSubsidiary of the Company Shenzhen SD Tellus Real Estate Company (¨DTellus Real Estate Company¡¬) entered

into the ¨DContract of Liyehui Food Street Co-operation in Buji Town¡¬ with Shenzhen Jinlu Industrial & Trading

Company (¨DJinlu Company¡¬) on 29 November 1994. In accordance with the Contract, on the foundation of

¨DCooperative Development Contract of Liyehui Food Street in Buji Town¡¬ signed between the Jinlu Company and

land providers -- Shenzhen Real Estate Management Branch Bureau of Guangzhou Military Region (¨DReal Estate

Management Branch Bureau¡¬) and People¡¯s Liberation Army Unit 75731 (¨D Unit 75731¡¬), construction funds 10

million Yuan invested by Tellus Real Estate, received fixed floor area of 6,000 M2 property, and Jinlu Company

promise to delivered the completed building and ancillary facility at the end of November 1995. Tellus Real Estate

Company have invested a total of 9,822,500.00 Yuan in cooperative development up to 31 December 1996,

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however, Tellus Real Estate Company failed to get the property should enjoy on the agreed date for property hand

over. Tellus Real Estate Company institute an action at law to the Court, requesting Jinlu Company pay back the

9.8 million Yuan investment and interests immediately and shoulder all the Court Costs, Real Estate Management

Branch Bureau and Unit 75731 were sentence to be the defendant pursuant to the law in trial. On 18 March 2003,

in line with the Written Judgment (2000) Shen Zhong Fa Fang Chu Zi No. 101 by Shenzhen Intermediate People¡¯s

Court, the above mentioned ¨DCooperative Contract¡¬ is valid, identified as nature of cooperative housing, the two

parties continue to perform the contract and legitimate mechanism should be follow if any disputes arising from

executing the Contract by parties in the Contract.

In March 2005, as a joint plaintiff, Tellus Real Estate Company and Jinlu Company start a suit to Real Estate

Management Branch Bureau and Unit 75731(Communication Equipment Repair Institute of Guangzhou Military

Region), requesting two defendants performing cooperative contract, and delivered 11,845 M2(approximately

11,851,357 Yuan in value) property of Liyehui Food Street to two plaintiff, moreover, pay for the rental income

5,034,664.94 Yuan in total due to two plaintiff since 1998. Meanwhile, Tellus Real Estate Company and Jinlu

Company entered into an agreement, that is, due to the self-executing or mandatory enforcement by the Court,

concerning the Liyehui Food Street property taken back in lawsuit, Tellus Real Estate Company received a fixed

property of 6,000 M2, rests of the property belongs to Jinlu Company and Tellus Real Estate Company owns all

property while less than 6,000 M2; the income deserved in the lawsuit should be allocated according to 5:5

ratio by two parties, and as for this lawsuit, which have its first trial in Shenzhen Intermediate People¡¯s Court in

August 2010, because details of a case is complex, the case did not judge in court.

In 2011, Tellus Real Estate Company received a civil ruling paper (2005) Shen Zhong Fa Min Chu Zi No. 82 from

Shenzhen Intermediate People¡¯s Court, that is, ¨DPeople¡¯s Court has no right to judged how to allocate the building

and its working interest¡¬, because Liyehui Food Street property ¨Dis part of the illegal building¡¬, reject the Tellus

Real Estate Company and Jinlu Company¡¯s claim in aspect of the property delivery and rental allocation of

Liyehui Food Street. The cooperative development fund invested for Tellus Real Estate Company has been

provision for bad debts in total in previous year by the Company.

¢ÛIn 2014, our subsidiary Shenzhen Auto Industrial Trading General Company (hereinafter referred to as Auto

Industrial Trading Company) was served with a summon from people¡¯s court in Futian district, Shenzhen,

pursuant to which, Shenzhen branch of China Huarong Asset Management Co., Ltd. (¨DHuarong Shenzhen¡¬) sued

Auto Industrial Trading Company for joint settlement responsibility in respect of the debt disputes between

Shenzhen Guangming Watch Co., Ltd. (¨DGuangming Watch¡¬) and its creditors.

Pursuant to the civil verdict (SFFJCZD No.801(1997)) issued by people¡¯s court in Futian district, Shenzhen on 24

November 1997, Guangming Watch shall repay RMB700,000 and interests thereof to Shenzhen Futian branch of

China CITIC Bank. Guangming Watch failed to discharge debts after such verdict, and Shenzhen Futian branch of

China CITIC Bank applied for compulsive execution and recovered an amount of RMB561,398.30. later, due to

that there was no property available for execution, people¡¯s court in Futian district of Shenzhen issued civil verdict

(SFFZZD No.102(1998)) to suspend execution on 10 December 1998. In July, the original creditor Shenzhen

Futian branch of China CITIC Bank transferred the above creditor¡¯s right (namely outstanding principal of

RMB350,000 million and relevant interests) to Huarong Shenzhen.

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Guangming Watch was an associate company of Auto Industrial Trading Company with a shareholding of 10% in

1990. Guangming Watch has been deregistered with Shenzhen Business and Commerce Bureau on 28 February

2002. Huarong Shenzhen sued Guangming Watch and Auto Industrial Trading Company at people¡¯s court in

Futian district of Shenzhen in May 2014, requesting to obtain all the interests of Guangming Watch under the civil

verdict (SFFJCZD No.801(1997)), and request an order for Auto Industrial Trading Company to take joint

settlement responsibility for the above debts on the grounds that failure of Guangming Watch to settle debts

resulted in prejudice in creditors¡¯ right by shareholders. Up to the approval date of the financial report, the case

has not been ruled yet.

¢Ü The Company¡¯s subsidiary, Shenzhen Automobile Industry and Trade Co., Ltd (hereinafter referred to as "Automobile Industry

and Trade Company") got shares in Shenzhen Guangming Watch Co., Ltd. (hereinafter referred to as "Guangming Watch Company",

Automobile Industry and Trade Company holds 10% of shares) in 1990, this company loaned RMB 2 million from China

Construction Bank on December 12, 1990 with time limit of nine months, Guangming Watch Company repaid RMB 100,000 in

October 1992, but the balance was still in arrears. Shenzhen Bao'an District People's Court (1996) BFJZ No. 183 paper of civil

judgment determined Guangming Watch Company to repay the loan of RMB 1.9 million and the interests to China Construction

Bank, Shenzhen Intermediate People's Court (1996) SZFJYZZ No. 563 paper of civil judgment¡¯ final judgment affirmed the original

judgment. After the judgment, Guangming Watch Company didn¡¯t perform the obligations, so China Construction Bank applied for

compulsory execution and got repayment of 1.64 million Yuan, but later due to no property for execution, Bao'an District People's

Court (1997) SBFZZ No. 220 civil ruling paper had the verdict for termination of execution on May 20, 2003. In June 2004, the

original creditor CCB transferred the above-mentioned creditor's rights to Assets Management Company, after several transfers,

Ezhou Liantai Investment and Consulting Co., Ltd. put forward the creditor's rights in April 2008.

Guangming Watch Company has been revoked license by Shenzhen Industrial and Commercial Bureau on February 28, 2002. Ezhou

Liantai Investment and Consulting Co., Ltd. submitted the case of Guangming Watch Company and Automobile Industry and Trade

Company to Shenzhen Futian District People's Court in May 2012, requesting to order Guangming Watch Company to pay off 3.607

million Yuan and the interests from May 11, 2012 to the actual repayment date, and requesting to order Automobile Industry and

Trade Company to assume the joint liability for above-mentioned debts by the reason of Automobile Industry and Trade Company

being its last shareholder, not setting up a liquidation team for liquidation within the legal time limit, and assuming the joint liability

for debts.

In 2013, Shenzhen Futian District People's Court (2012) SFFMECZ No. 4328 paper of civil judgment determined Automobile

Industry and Trade Company to assume the joint liability for debts in (1996) SZFJYZZ No. 563 paper of civil judgment to the

accused, Guangming Watch Company. Automobile Industry and Trade Company appealed, on December 12, 2013, Shenzhen

Intermediate People's Court (2013) SZFSZZ No. 1677 civil judgment¡¯s final judgment affirmed the original judgment. Automobile

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Industry and Trade Company accrued the payable joint liability funds of 2,130,200 Yuan in 2013.

Hua Rong District People's Court of Ezhou City (2008) HMCZ No. 57 civil judgment determined the accused Ezhou Liantai

Investment and Consulting Co., Ltd. to pay the accuser Huizhou Lamei Information Consulting Co., Ltd. assignment of claims and

liquidated damages and also bear the legal fare. In the executing process, on April 14, 2015, Hua Rong District People's Court of

Ezhou City (2015) EHRZYZ No. 0005 execution ruling added Automobile Industry and Trade Company as the person subject to

enforcement and ordered Automobile Industry and Trade Company to pay the object funds of 4,170,859.54 Yuan. Hua Rong District

People's Court of Ezhou City held that the object Guangming Watch Company should perform is the loan principal of 1.9 million

Yuan and the promissory loan interest of 331,785.60 Yuan from November 21, 1995 to January 22, 1997, with a total of 2,231,785.60

Yuan. Shenzhen Bao¡¯an District People's Court has executed 1,641,888.10 Yuan, deducting the litigation fee of 21,700 Yuan and

execution fee of 28,500 Yuan, up to March 25, 2002, there were still object funds of 1,161,725.65 Yuan and debt interest of

1,274,604.31 Yuan during the delay in performance calculated by the principle of repayment of principal with interest and debt

interest of 1,734,529.5 Yuan caused by delay in performance from March 25, 2002 to March 30, 2009, principal and interest

amounting to 4,170,859.54 Yuan. Automobile Industry and Trade Company proposed an opposition to execution that Automobile

Industry and Trade Company should assume the joint liability for the debts of 258,111.90 Yuan and the interest to be assumed by

Guangming Watch Company, and (1996) BFJZ No. 183 litigation fee of 21,700 Yuan, and (1997) SBFZZ No. 220 case execution fee

of 28,500 Yuan.

Ezhou City Intermediate People's Court held that the surplus creditor's rights was non liquet after Shenzhen Bao'an District People's

Court¡¯s execution of (1996) SZFJYZZ No. 563 civil judgment, both parties had large difference in opinion whether the executed 1.64

million Yuan was just principal or principal and interest, which was difficult to be determined, therefore, Ezhou City Intermediate

People's Court (2015) EHRZYZ No. 00005 execution ruling was repealed and returned for re-examination.

On July 12, 2017, the Higher People's Court of Guangdong Province issued the Civil Judgment No. (2016) YMZ 205 and upheld the

Civil Judgment No. (2013) SZFSZZ 1677 of Shenzhen Intermediate People's Court, and this judgment was the final judgment.

¢Ý Shenzhen Futian District Construction Bureau made a Written Decision on Paying the Dedicated Funds for Housing Public

Facilities No. SFJJJ (2010) 115 to three construction units of Fu Yi Ya Ju, including Shenzhen Automobile Industry Trading General

Company, Shenzhen Fuyida Investment and Development Co., Ltd., and Wenzhou Huaou Real Estate Development Co., Ltd. in

October 2010, and ordered the three companies to pay the dedicated funds for housing public facilities of a total of RMB

2,161,910.40 within the time limit. The Company and Shenzhen Fuyida Investment and Development Co., Ltd. have paid their shares,

but Wenzhou Huaou Real Estate Development Co., Ltd. has not yet paid. Shenzhen Futian District Construction Bureau applied to

Futian District People's Court to force the respondents (above three companies) to fulfill all obligations determined by the written

decision.

In May 2017, the Company actually paid the joint liability loss related to the execution case of RMB 758,131.16. After paying the

remaining execution funds of the maintenance funds for the real estate, the Housing and Construction Bureau requested our company

to pay the interest penalty for the case. Up to June 30, 2017, the Company has been communicating with Futian District Housing and

Construction Bureau and the executive board of Futian District People's Court on whether the interest penalty should be paid and the

specific amount.

Influenced by this case, (2015) SFFZHZ No. 452 executed the case, froze and sealed up the following business registration

information, equity and assets:

The business registration information of Shenzhen Automobile Industry Trading General Company was frozen;

35.75% equity stake of Shenzhen Automobile Industry Import and Export Co., Ltd. held by Shenzhen Automobile Industry Trading

General Company was frozen;

25% equity stake of Shenzhen Dongfeng Motor Co., Ltd. held by Shenzhen Automobile Industry Trading General Company was

frozen;

95% equity stake of Shenzhen Tellus Yongtong Automobile Development Co., Ltd. held by Shenzhen Automobile Industry Trading

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General Company was frozen;

The property located at 5B, Building 4, Weipeng Garden, Futian District of Shenzhen Automobile Industry Trading General

Company was seized.

¢Þ Shenzhen Nigang Industrial Co., Ltd. prosecuted the attribution of land parcel No. H403-0054(B) to Shenzhen People's Court of

Luohu District in 2016, and the first instance of Shenzhen People's Court of Luohu District judged that the Company should return

the land area of 1,585.84 square meters and pay the land use fee of RMB 347,271.74 and then return RMB 7,268 per month to the

plaintiff. The Company appealed to the Higher People's Court of Guangdong Province, up to June 30, 2017, the Company has

counted and withdrawn the losses related to the litigation of RMB 434,487.74.

XI. Events occurring after the balance sheet date

1. Profit distribution

The Company has no plan of cash dividends carried out and capitalizing of common reserves either

XII. Other important events

1. Previous accounting errors collection

The Company had no previous accounting errors collection in Period.

2. Debt restructuring

The Company had no debt restructuring in Period.

3. Assets replacement

The Company had no non-monetary assets change in Period.

4. Segment

Financial information for reportable segment

Jan.- Jun.2017

Auto maintenance Leasing and Jewelry Offset of

Item Auto sales Total

and repair services segment

operation

Main operating revenue

81,828,629.57 30,933,280.83 59,669,477.32 432,616.24 -14,542,732.29 158,321,271.67

Main operating cost

80,552,582.86 25,502,996.33 23,195,618.35 2,538,282.27 -14,618,538.03 117,170,941.78

Total assets

32,917,126.16 98,657,932.40 1,983,022,242.18 14,455,973.67 -911,054,418.73 1,217,998,855.68

Total liabilities

46,119,475.69 60,693,706.80 556,102,721.70 1,978,405.53 -387,538,846.00 277,355,463.72

Jan.- Jun.2016

Auto Offset of segment

Auto sales

Item maintenance and Leasing and services Total

repair

Main operating revenue

67,525,711.38 42,408,814.86 62,272,010.17 -18,285,084.22 153,921,452.19

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Auto Offset of segment

Auto sales

Item maintenance and Leasing and services Total

repair

Main operating cost

66,364,064.95 36,582,170.38 27,209,948.29 -18,285,084.22 111,871,099.40

Total assets

24,632,259.44 92,225,788.83 1,962,620,091.40 -912,148,674.84 1,167,329,464.83

Total liabilities

39,554,548.10 53,603,597.08 565,862,967.94 -388,249,541.09 270,771,572.03

XIII. Principle notes of financial statements of parent company

1. Account receivable

(1) Accounts receivable by category

Period-end balance

Book balance Bad debt reserve

Category Book

Ratio

Amount Amount Ratio (%) value

(%)

Account receivable with single significant amount and withdrawal bad debt provision

separately

Receivables with bad debt provision accrual by credit portfolio

Accounts with single significant amount and bad debts provision accrued individually 484,803.08 100.00 484,803.08 100.00

Total 484,803.08 100.00 484,803.08 100.00

(Cont.)

Balance at year-begin

Book balance Bad debt reserve

Category Book

Ratio

Amount Amount Ratio (%) value

(%)

Account receivable with single significant amount and withdrawal bad debt provision

separately

Receivables with bad debt provision accrual by credit portfolio

Accounts with single significant amount and bad debts provision accrued individually 484,803.08 100.00 484,803.08 100.00

Total 484,803.08 100.00 484,803.08 100.00

2. Other accounts receivable

(1) Classification

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Period-end balance

Category Book balance Bad debt reserve

Book value

Amount Ratio (%) Amount Ratio (%)

Other account receivable with single

significant amount and withdrawal bad 12,256,478.81 10.80 12,256,478.81 100.00

debt provision separately

Other receivables with bad debt

99,388,668.03 87.56 1,047,417.70 1.05 98,341,250.33

provision accrual by credit portfolio

Other accounts with single significant

amount and bad debts provision 1,858,735.58 1.64 1,858,735.58 100.00

accrued individually

Total 113,503,882.42 100.00 15,162,632.09 13.36 98,341,250.33

(Cont.)

Balance at year-begin

Category Book balance Bad debt reserve

Book value

Amount Ratio (%) Amount Ratio (%)

Other account receivable with single

significant amount and withdrawal bad 12,262,363.72 10.72 12,262,363.72 100.00

debt provision separately

Other receivables with bad debt

100,230,803.79 87.65 1,231,153.76 1.23 98,999,650.03

provision accrual by credit portfolio

Other accounts with single significant

amount and bad debts provision 1,858,735.58 1.63 1,858,735.58 100.00

accrued individually

Total 114,351,903.09 100.00 15,352,253.06 13.43 98,999,650.03

¢ÙOther receivable with single significant amount and withdrawal bad debt provision separately at

end of period

Other receivable(By unit) Period-end balance

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Bad debt

Other receivable Accrual ratio (%) Accrual reasons

reserve

Shenzhen Zhonghao (Group) Co., Ltd. 5,000,000.00 5,000,000.00 100.00 Win a lawsuit, no executable

assets from adversary

Gold Beili Electrical Appliances Company 2,706,983.51 2,706,983.51 100.00 Not expected to collected due to

long account age

Shenzhen Petrochemical Group 1,912,849.63 1,912,849.63 100.00 Less likely to collection

Huatong Package Co., Ltd. Not expected to collected due to

1,212,373.79 1,212,373.79 100.00

long account age

Shenzhen Xiandao New Materials Not expected to collected due to

660,790.09 660,790.09 100.00

Company long account age

Other_VAT(trade department) 763,481.79 763,481.79 Not expected to collected due to

100.00

long account age

Total 12,256,478.81 12,256,478.81

¢Û In combination, other accounts receivable whose bad debts provision was accrued by age

analysis

Period-end balance

A/C age

Other receivable Bad debt reserve Accrual ratio

Within 1 year 97,012,445.28

1-2 years 261,958.19 13,097.91 5.00

2-3 years 76,041.64 15,208.33 20.00

Over 3 years 2,038,222.92 1,019,111.46 50.00

Total 99,388,668.03 1,047,417.70 1.05

(2)Bad debt provision accrual collected or switch back

Amount of bad debt reserve switch back in the year amounted as 189,620.97 Yuan

(3)Classification of other receivables by nature

Nature Closing book balance Book balance at year-begin

Intercourse funds receivable between inner 96,807,496.08 97,287,270.49

units

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Intercourse accounts of related units 2,885,181.35 2,883,953.25

receivable

Other 13,811,204.99 14,180,679.35

Total 113,503,882.42 114,351,903.09

(4)Top 5 other receivables at ending balance by arrears party

Ratio in total ending Bad debt

Period-end balance of other reserve

Name of the company Nature A/C age

balance receivables(%) Period-end

balance

Intercourse Over 3 4.41

Shenzhen Zhonghao (Group) Co., Ltd. 5,000,000.00 5,000,000.00

funds years

Gold Beili Electrical AppliancesIntercourse Over 3 2.38

2,706,983.51 2,706,983.51

Company funds years

Intercourse Over 3

Shenzhen Petrochemical Group 1,912,849.63 1.69 1,912,849.63

funds years

Intercourse Over 3 1.07

Huatong Package Co., Ltd. 1,212,373.79 1,212,373.79

funds years

Shenzhen Xinglong Machinery MouldIntercourse Over one 1.96

2,224,391.26 1,016,991.08

Co., Ltd. funds year

Total 13,056,598.19 11.50 11,849,198.01

(5) Account receivable with government grand involved

No account receivable with government grand involved of the Company at period-end.

(6) Other account receivable derecognition due to financial assets transfer

No other account receivable derecognition due to financial assets transfer of the Company in

Period.

(7) Assets and liabilities resulted by other account receivable transfer and continues involvement

No assets or liabilities resulted by other account receivable transfer and continues involvement of

the Company in Period.

3. Long-term equity investment

(1) Category of Long-term equity investment

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Period-end balance Balance at year-begin

Depreciati

Item Book Book Depreciation

on Book value Book value

balance balance reserves

reserves

525,771,572. 1,956,000.0 523,815,572. 528,823,572. 526,867,572.

Investment for subsidiary 1,956,000.00

73 0 73 73 73

Investment for associates and joint 166,800,728. 9,787,162.3 157,013,566. 169,145,256. 159,358,093.

9,787,162.32

venture

51 2 19 02 70

692,572,301. 11,743,162. 680,829,138. 697,968,828. 686,225,666.

Total 11,743,162.32

24 32 92 75 43

(2) Investment for subsidiary

Depreciat

Period-end

ion

Balance at Increased in the Decreased in the balance of

The invested entity Period-end balance reserves

year-begin period period depreciation

accrual in

reserves

the period

Shenzhen SDG Tellus

31,152,888.87 31,152,888.87

Real Estate Co., Ltd

Shenzhen Tellus Real

2,000,000.00 2,000,000.00

Estate Exchange Co. Ltd

Shenzhen SDG Tellus

Property Management 7,050,000.00 7,050,000.00

Co., Ltd*

Shenzhen Tellus New

Yongtong Automobile 57,672,885.22 57,672,885.22

Development Co. Ltd

Shenzhen Zhongtian

270,708,622.90 270,708,622.90

Industrial Co., Ltd.

Shenzhen Automobile

Industry Trading General 126,251,071.57 126,251,071.57

Company

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Depreciat

Period-end

ion

Balance at Increased in the Decreased in the balance of

The invested entity Period-end balance reserves

year-begin period period depreciation

accrual in

reserves

the period

Shenzhen SDG Huari

Automobile Enterprise 19,224,692.65 19,224,692.65

Co.Limited

Shenzhen Huari

TOYOTA Automobile 1,807,411.52 1,807,411.52

Sales Service Co., Ltd.

Shenzhen New Yongtong

Automobile Inspection 10,000,000.00 10,000,000.00

Equipment Co. Ltd

Shenzhen Hanli Hi-Tech

1,956,000.00 1,956,000.00 1,956,000.00

Ceramics Co., Ltd.*

Anhui Tellus Starlight

Jewelry Investment Co., 1,000,000.00 3,998000.00 4,998,000.00

Ltd.

Total 528,823,572.73 3,998000.00 7,050,000.00 525,771,572.73 1,956,000.00

Note: more details of * Shenzhen hanli Hi-Tech Ceramics Co., Ltd. can be seen in Note VIII-1 ¨DEquity of subsidiaries¡¬.

*Shenzhen SDG Tellus Property Management Co., Ltd found more in Note VII- 4.Disposal of subsidiary

(3) Investment for associates and joint venture

+,-

Other

Balance at Capita

Investment comprehe Other

The invested entity Additional l

year-begin gains recognized nsive equity

investment reducti

under equity income change

on

adjustment

I. Joint venture

Shenzhen Tellus Gman Investment Co., Ltd 57,180,913.33 -3,304,695.19

Shenzhen Tellus Hang Investment Co., Ltd. 10,583,444.88 140,991.05

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+,-

Other

Balance at Capita

Investment comprehe Other

The invested entity Additional l

year-begin gains recognized nsive equity

investment reducti

under equity income change

on

adjustment

Subtotal 67,764,358.21 -3,163,704.14

II. Associated enterprise

Shenzhen Xinglong Machinery Mould Co.,

15,878,254.74 4,219,677.45 -2,904,933.36

Ltd.

Shenzhen Tellus Auto Service Chain Co.,

Ltd.

Shenzhen Zung Fu Tellus Auto Service Co.,

75,715,480.75 8,604,432.54

Ltd.

Hunan Changyang Industrial Co., Ltd.* 1,810,540.70

Shenzhen Jiecheng Electronic Co., Ltd* 3,225,000.00

Shenzhen Xiandao New Materials 4,751,621.62

Company*

Subtotal 101,380,897.81 4,219,677.45 5,699,499.18

Total 169,145,256.02 4,219,677.45 2,535,795.04

(Cont.)

+,-

Cash dividend Period-end balance of

The invested entity or profit Period-end balance

Impairment accrual Other depreciation reserves

announced to

issued

I. Joint venture

Shenzhen Tellus Gman

53,876,218.14

Investment Co., Ltd

Shenzhen Tellus Hang

10,724,435.93

Investment Co., Ltd.

Subtotal 64,600,654.07

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+,-

Cash dividend Period-end balance of

The invested entity or profit Period-end balance

Impairment accrual Other depreciation reserves

announced to

issued

II. Associated enterprise

Shenzhen Xinglong

17,192,998.83

Machinery Mould Co., Ltd.

Shenzhen Tellus Auto

Service Chain Co., Ltd.

Shenzhen Zung Fu Tellus

9,100,000.00 75,219,913.29

Auto Service Co., Ltd.

Hunan Changyang Industrial 1,810,540.70 1,810,540.70

Co., Ltd.*

Shenzhen Jiecheng 3,225,000.00 3,225,000.00

Electronic Co., Ltd*

Shenzhen Xiandao New 4,751,621.62 4,751,621.62

Materials Company*

Subtotal 9,100,000.00 102,200,074.44 9,787,162.32

Total 9,100,000.00 166,800,728.51 9,787,162.32

4. Operating income and operating cost

Jan.- Jun.2017 Jan.- Jun.2016

Item

Income Cost Income Cost

Main business 21,455,828.43 1,800,520.02 21,654,258.03 1,787,004.39

Total 21,455,828.43 1,800,520.02 21,654,258.03 1,787,004.39

5. Investment income

Item Jan.- Jun.2017 Jan.- Jun.2016

Long-term equity investment measured by costs

Long-term equity investment measured by 5,721,803.49 2,579,910.59

equity

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Item Jan.- Jun.2017 Jan.- Jun.2016

Investment income from disposal of long-term 7,100,000.00

equity investment

Investment income of financial products during 1,618,165.59 2,173,178.10

the holding period

Total 14,439,969.08 4,753,088.69

XIV. Supplementary Information

1. Details of non-recurring gains and losses in Year

Item Amount Note

Including: equity tra

Gains/losses from disposal of non-current asset 4,967,267.25 nsfer income 4.92

million Yuan

Tax refund or mitigate due to examination-and-approval beyond power or without official

approval document or accident

Government subsidies included in current gains and loss (excluding those closely in

accordance with corporation business and enjoyed according to fixed amount under

national united standard)

Capital occupancy expense, collected from non-financial enterprises and recorded in

current gains and losses

Income from the exceeding part between investment cost of the Company paid for

obtaining subsidiaries, associates and joint-ventures and recognizable net assets fair value

attributable to the Company when acquiring the investment

Gains and losses from exchange of non-monetary assets

Income from

Gains and losses from assets under trusted investment or management 1,790,968.34

financial products

Various provision for impairment of assets withdrew due to act of God, such as natural

disaster

Gains and losses from debt restructuring

Enterprise reorganization expense, such as expenses from staffing and integrated cost etc.

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Item Amount Note

Gains and losses of the part arising from transaction in which price is not fair and

exceeding fair value

Current net gains and losses occurred from period-begin to combination day by

subsidiaries resulting from business combination under common control

Gains and losses arising from contingent proceedings irrelevant to normal operation of the

Company

Except for effective hedge business relevant to normal operation of the Company, gains and

losses arising from fair value change of tradable financial assets and tradable financial

liabilities, and investment income from disposal of tradable financial assets, tradable

financial liabilities and financial assets available for sale

Switch-back of provision of impairment of account receivable which are treated with

separate depreciation test 5,884.91

Gains and losses obtained from external trusted loans

Gains and losses arising from change of fair value of investment real estate whose follow-up

measurement are conducted according to fair value pattern

Affect on current gains and losses after an one-time adjustment according to requirements

of laws and regulations regarding to taxation and accounting

Trust fee obtained from trust operation

Other non-operating income and expenditure except for the aforementioned ones 261,331.17

Other gains and losses items complying with definition for non-current gains and losses

Subtotal 7,025,451.67

Affect on income tax

30,378.16

Affect on minority equity(after tax)

103,214.53

Total 6,891,858.98

Note: as for the numbers of non-recurring gains/losses, ¨D+¡¬ stands for income or earnings,¡¬-¨Dstands for losses or expenses

The Company recognizes non-recurring profit or loss items according to Information Disclosure Explanatory Document

Announcement No.1 for Public Listed Issuer- Non-recurring Profit or Loss (ZJHGG[2008]43).

2. REO and earnings per share

Weighted average Earnings per share

Profits during report period

ROE (%) Basic EPS Diluted EPS

Net profits belong to common stock stockholders of the Company 2.71 0.0827 0.0827

Net profits belong to common stock stockholders of the Company

1.95 0.0596 0.0596

after deducting nonrecurring gains and losses

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Section XII Documents Available for Reference

(I) Financial statement carrying the signatures and seals of the legal person, principal of the accounting works and

person in charge of accounting organ (accounting Supervisor);

(II) Original documents of the Company and manuscripts of public notices that disclosed in the press designated

by CSRC in the report period.

157