Zhong Fa Zhan : INTERIM REPORT 2016/17

INTERIM REPORT‌‌‌‌‌‌‌ 2016/17

Contents

Corporate Information 2

Management Discussion and Analysis 3

Corporate Governance and Other Information 7

Report on Review of Condensed Consolidated Financial Statements 12

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income 13

Condensed Consolidated Statement of Financial Position 14

Condensed Consolidated Statement of Changes in Equity 15

Condensed Consolidated Statement of Cash Flows 16

Notes to the Condensed Consolidated Financial Statements 17

CORPORATE INFORMATION

Board of Directors

Executive Directors

Mr. Wu Hao (Chairman)

Mr. Hu Yangjun Mr. Hu Yishi

Mr. Chan Wing Yuen, Hubert (Chief Executive)

Ms. Kwong Wai Man, Karina (Chief Financial Officer)

Non-executive Director

Mr. Li Wei Qi, Jacky

Independent non-executive Directors

Mr. Wu Chi Keung

Mr. Heung Chee Hang, Eric Ms. Kwok Pui Ha

Audit Committee

Mr. Wu Chi Keung (Chairman) Mr. Heung Chee Hang, Eric Ms. Kwok Pui Ha

Remuneration Committee

Mr. Wu Chi Keung (Chairman) Mr. Chan Wing Yuen, Hubert Mr. Heung Chee Hang, Eric

Nomination Committee

Mr. Wu Chi Keung (Chairman) Mr. Chan Wing Yuen, Hubert Ms. Kwok Pui Ha

Company Secretary

Mr. Chow Chi Shing

Head Office and Principal Place of Business in Hong Kong

23/F., Chinachem Century Tower 178 Gloucester Road

Wanchai Hong Kong

Registered Office

Cricket Square Hutchins Drive

P.O. Box 2681

Grand Cayman KY1-1111 Cayman Islands

Principal Share Registrar

Royal Bank of Canada Trust Company (Cayman) Limited 4th Floor, Royal Bank House

24 Shedden Road, George Town Grand Cayman KY1-1110 Cayman Islands

Hong Kong Branch Share Registrar and Transfer Office

Tricor Investor Services Limited Level 22, Hopewell Centre 183 Queen's Road East

Hong Kong

Principal Bankers

The Hong Kong and Shanghai Banking Corporation Limited Hang Seng Bank Limited

Shanghai Pudong Development Bank

Legal Advisers

K&L Gates

Angela Ho & Associates

Auditor

Deloitte Touche Tohmatsu

Company Website

www.475hk.com

Stock Code

00475

2 ZHONG FA ZHAN HOLDINGS LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS

Business Review

During the six months ended 30 September 2016 (the "Review Period"), the Group mainly engaged in domestic jewelry wholesale business in the PRC. Given the continued slowdown of the Chinese economy, as well as the more volatile Renminbi exchange rate dampening consumer confidence and weighing on development of the luxury goods market, operating conditions of the business segment further deteriorated. To cope with the severe business environment, the management stepped up effort in exploring other business opportunities with huge potential in its bid to expand the Group's income sources.

In view of the growing demand for green energy across the globe, plus the mainland government having put forward various policies conducive to environmental protection and energy saving as well as pollution and emission reduction, the management sees green energy related business as a rising industry. As such, the Group ventured into solar energy business last July. Meanwhile, the Group has established close partnership with renowned enterprises, such as Suncool AB, a leading energy conservation technologies development company in Sweden. Suncool AB has a solid foundation as its controlling shareholders include Stiftelsen Industrifonden, a Swedish governmental venture capital fund and leading investor in green technology.

Suncool AB also became a shareholder of the Group last July after signing a subscription agreement with the Group. The management believes the two parties will continue to strengthen cooperation and work together to promote development of the new energy business in the PRC. The Group has been granted the exclusive rights and permission by Suncool AB to use solar heating and cooling collector production technologies with Suncool AB's CoolStore proprietary products at the core to promote solar-powered interior climate solutions and products in the Greater China region. In addition, China-UK Low Carbon Enterprise (Jiangyin) Investment Management Ltd entered into a consultation agreement with the Group to provide consultation services to the Group.

During the Review Period, a team of the Group's senior technicians received professional training from Suncool AB in Sweden. Subsequently, Suncool AB also sent several senior technical consultants to the PRC to transfer technology and knowledge to the Yuyao team and assist in the localization of CoolStore cooling pipes and collectors for use in Greater China. The Yuyao team has since mastered the relevant technologies and is currently working on optimizing and testing products to make sure they meet the needs of and specifications required by the PRC market. In the meantime, the two parties continue their pursuit of research and development with the goal of enhancing the efficiency of, hence helping to optimize, the entire solar heating and cooling system.

The temporary production line currently rented short-term by the Group has begun trial production. To boost sales at product launch, the Group has been active in approaching potential customers, such as educational institutions, government entities, hotel chains, hospitals, medicine suppliers and those in the cold chain logistics sectors, to strengthen education on energy conservation and emission reduction and promote the significant benefits of the Group's products. As for the leased factory at Yuyao, construction is still in progress and is expected to be completed in 2017. By then, it will be used as the production arm of the solar energy business of the Group.

2016/17 Interim Report 3