FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
FIYTA Precision Technology Co., Ltd.
2019 Annual Report
March, 2020
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Section 1 Important Notice, Table of Contents and DefinitionThe Board of Directors, the Supervisory Committee, directors, supervisors and senior executives hereby individually andcollectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirmthat there are neither material omissions nor errors which would render any statement misleading.
Huang Yongfeng, the Company leader, Chen Zhuo, chief financial officer, and Tian Hui, the manager of the accountingdepartment (treasurer) hereby confirm the authenticity and completeness of the financial report enclosed in this AnnualReport.
All the directors attended the board meeting for reviewing the Annual Report.
Any perspective description, such as the future plan, development strategy, etc. involved in the Annual Report shall notconstitute the Company’s substantial commitment to the investors and the investors should please pay attention to theirinvestment risks.
In this report, the Company has described in detail the existing macro-economic risks as well as operation risks. Investorsare advised to refer to the contents concerning risk factors possibly to be confronted with and the countermeasures inthe Company's future development prospect in Section 4 Discussion and Analysis of the Management
The profit distribution preplan reviewed and approved by the Board of Directors is summarized as follows: With the totalcapital stock as at the date of record as the base, the Company would distribute cash dividend at the rate of CNY 2 forevery 10 shares (with tax inclusive), bonus share at the rate of 0 share for every 10 shares (with tax inclusive) to the wholeshareholders and shall capitalize no reserve.
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Table of Contents
Section 1 Important Notice, Table of Contents and DefinitionSection 2 Company Profile and Financial HighlightsSection 3 Business SummaryChapter 4 Discussion and Analysis of the OperationSection 5 Significant EventsSection 6 Change of Shares and Particulars about ShareholdersSection 7 About the Preferred SharesSection 8 About the Convertible BondsSection 9 Directors, Supervisors, Senior Executives and EmployeesChapter 10 Corporate GovernanceSection 11 Bond Related InformationSection 12 Financial ReportSection 13 Documents Available for Inspection
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Definitions
| Terms to be defined | Refers to | Definition |
| This Company, the Company or FIYTA | Refers to | FIYTA Precision Technology Co., Ltd. |
| AVIC | Refers to | Aviation Industry Corporation of China, Ltd. |
| AVIC International | Refers to | AVIC International Holding Corporation |
| AVIC International Shenzhen | Refers to | AVIC International Shenzhen Co., Ltd. |
| AVIC IHL | Refers to | AVIC International Holding Limited |
| The Sales Co. | Refers to | FIYTA Sales Co., Ltd. |
| Harmony | Refers to | Shenzhen Harmony World Watches Center Co., Ltd. |
| Precision Technology Co. | Refers to | Shenzhen FIYTA Precision Technology Co., Ltd. |
| Science & Technology Development Co. | Refers to | Shenzhen FIYTA Technology Development Co., Ltd. |
| the Hong Kong Co. | Refers to | FIYTA (Hong Kong) Limited |
| SHIYUEHUI | Refers to | Shiyuehui Boutique (Shenzhen) Co., Ltd. |
| Hengdarui | Refers to | Liaoning Hengdarui Commerce & Trade Co., Ltd. |
| Harbin Co. | Refers to | Harbin Harmony World Watch Distribution Co., Ltd. |
| CMPO | Refers to | China Merchants Property Operation & Service Co., Ltd. |
| Rainbow Ltd. | Refers to | Rainbow Department Store Co., Ltd. |
| Shennan Circuit | Refers to | Shennan Circuit Co., Ltd. |
| AVIC Property | Refers to | AVIC Property Management Co., Ltd. |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Section 2 Company Profile and Financial HighlightsI. Company Information
| Short form of the stock | FIYTA and FIYTA B | Stock Code | 000026 and 200026 |
| Short form of the stock after the change (if any) | FIYTA | ||
| Stock Exchange Listed with | Shenzhen Stock Exchange | ||
| Company Name in Chinese | FIYTA Precision Technology Co., Ltd. | ||
| Abbreviation of the Company Name in Chinese | 飞亚达公司 | ||
| Company name in English (if any) | FIYTA Precision Technology Co., Ltd. | ||
| Abbreviation of the Company name in English (if any) | FIYTA | ||
| Legal Representative | Huang Yongfeng | ||
| Registered address: | FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen | ||
| Postal Code of the Registered Address | 518057 | ||
| Office Address | 20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen | ||
| Postal Code of the Registered Address | 518057 | ||
| Website: | www.fiytagroup.com | ||
| E-mail: | investor@fiyta.com.cn | ||
II. Liaison Persons and Communication Information
| Secretary of the Board | Securities Affairs Representative | |
| Name | Pan Bo | Zhang Yong |
| Liaison Address | 18th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen | 20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen |
| Tel. | 0755-86013669 | 0755-86013669 |
| Fax | 0755-83348369 | 0755-83348369 |
| investor@fiyta.com.cn | investor@fiyta.com.cn |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
III. Information Disclosure and Place where the Regular Reports are Prepared
| Name of the media chosen by the Company for disclosing information | Securities Times and Hong Kong Commercial Daily |
| Internet Web Site Designated by China Securities Regulatory Commission for Publishing the annual report: | www.cninfo.com.cn |
| Place where the Company’s Annual Report was prepared and is placed for inquiry | The Company's Strategic Operation Department |
IV. Changes in Registration
| Organization Code | 91440300192189783K |
| Changes in principal business activities since listing (if any) | No change |
| Changes in the controlling shareholder over the past years (if any) | No change |
V. Other Relevant InformationThe CPAs appointed by the Company
| Name of the CPAs | Grant Thornton LLP |
| Office address | 5/F, SciTech Building, No.22 JianGuoMenWai Avenue, Chaoyang District, Beijing |
| Names of the CPAs as the authorized signatories | Dong Xu, Meng Junfeng |
The sponsor performing persistent supervision duties engaged by the Company in the reporting periodInapplicableThe financial advisor performing persistent supervision duties engaged by the Company in the reporting periodInapplicableVI. Summary of Accounting/Financial DataDoes the Company need to make retroactive adjustment or restatement of the accounting data of the previous years?No
| 2019 | 2018 | Increase/decrease in the reporting year over the previous year | 2017 | |
| Turnover in CNY | 3,704,210,734.90 | 3,400,450,599.90 | 8.93% | 3,345,809,703.98 |
| Net profit attributable to the Company’s shareholders, in CNY | 215,909,014.15 | 183,835,095.29 | 17.45% | 140,216,258.28 |
| Net profit attributable to the Company’s shareholders less the non-recurring items, in CNY | 199,678,661.09 | 162,758,061.00 | 22.68% | 123,918,527.75 |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Net cash flows arising from operating activities, in CNY | 444,820,768.61 | 331,627,789.62 | 34.13% | 564,954,561.97 |
| Basic earnings per share (CNY/share) | 0.4943 | 0.4190 | 17.97% | 0.3196 |
| Diluted earnings per share (CNY/share) | 0.4943 | 0.4190 | 17.97% | 0.3196 |
| Return on equity, weighted average (%) | 8.21% | 7.30% | 0.91% | 5.79% |
| End of 2019 | End of 2018 | Increase/decrease of the end of the reporting year over the end of the previous year | End of 2017 | |
| Total assets, in CNY | 3,760,923,285.37 | 3,599,691,650.26 | 4.48% | 3,579,789,692.90 |
| Net assets attributable to the Company’s shareholders (owner’s equity attributable to the Company’s shareholders, in CNY) | 2,654,533,766.99 | 2,570,134,782.90 | 3.28% | 2,467,967,361.20 |
VII. Discrepancy in accounting data between IAS and CAS
1. Differences in the net profit disclosed in the financial report & the net assets attributable to the Company’s shareholdersrespectively according to the IAS and the CAS.Inapplicable
2. Differences in the net profit disclosed in the financial report & the net assets attributable to the Company’s shareholdersaccording to both the IAS and the CASInapplicableVIII. Financial Data Summary based on Quarters
In CNY
| The first quarter | The second quarter | The third quarter | The fourth quarter | |
| Turnover | 893,389,751.73 | 891,646,268.50 | 954,666,662.24 | 964,508,052.43 |
| Net profit attributable to the Company’s shareholders | 64,359,084.46 | 59,136,376.44 | 55,235,304.48 | 37,178,248.77 |
| Net profit less the non-recurring profit/loss attributable to the Company’s shareholders | 61,517,359.28 | 52,109,787.41 | 55,447,049.05 | 30,604,465.35 |
| Net cash flows arising from operating activities | 10,730,388.47 | 148,284,261.90 | 145,713,264.14 | 140,092,854.10 |
Are the above financial indicators or their totals significantly different from the financial indicators disclosed by theCompany in the quarterly and semi-annual reports?No
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
IX. Extraordinary items and amount
In CNY
| Items | Amount in 2019 | Amount in 2018 | Amount in 2017 | Note |
| Gain/loss from disposal of non-current assets, including the part offset from the provision for impairment of assets. | -926,118.60 | -180,302.24 | 7,321,993.36 | |
| The government subsidies included in the profits and losses of the current period ( (excluding government grants which are closely related to the Company’s business and conform with the national standard amount or quantity) | 18,428,906.18 | 19,375,618.48 | 17,508,255.98 | |
| Reversal of the impairment provision for receivables and contract assets which have been tested individually for impairment | 7,533,121.86 | 1,903,056.74 | ||
| Other non-operating income and expenses other than the aforesaid items | 3,353,916.43 | 792,842.56 | 1,238,972.99 | |
| Less: Amount affected by the income tax | 4,626,350.95 | 6,444,246.37 | 8,669,699.37 | |
| Amount affected by the minority shareholders (after tax) | 3,004,849.17 | |||
| Total | 16,230,353.06 | 21,077,034.29 | 16,297,730.53 | -- |
For the Company’s non-recurring gain/loss items as defined in the Explanatory Announcement No. 1 on InformationDisclosure for Companies Offering their Securities to the Public – Non-recurring Gains and Losses and its non-recurringgain/loss items as illustrated in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offeringtheir Securities to the Public – Non-recurring Gains and Losses which have been defined as recurring gains and losses, itis necessary to explain the reason.Inapplicable
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Section 3 Business Summary
I. Main business the Company operated in the reporting period
(1) Principal Business and Operation Model
FIYTA is engaged in main business of watch brand management and brand watch retails. In respect of the technologicalnature, it belongs to precision technology industry. Depending on its accumulated technology and industrial advantages inthe high-end precision technology field, the Company is also actively exploring business growth opportunities in new fieldssuch as precision technology and smart watches.
(2) Development Status of the Industry and the Company's Position Therein
Watches bear both characteristics of precision technology and fashion: high-end watchmaking is supported by precisiontechnology, material technology and craftsmanship as the core. In addition, it is necessary to meet consumers' demandsfor brands, aesthetics and artistic and cultural connotation. The global watch industry has developed for more than twohundred years, and it has a long history. Technological innovation and design creativity have always pushed the brandforward.
Globally, the high-end luxury watch market is mainly controlled by the Swiss watch brands, which are mainly concentratedin brand groups such as Swatch, Richemont, LVMH and Kering. In addition, independent brands such as Patek, Philippeand Rolex also have great influence. In the medium and low end market, it is mainly composed of partial Swiss watchbrands, Japanese brands, fashion brands and home-made brands, with fashion style and classic style as the maindirection. In recent years, smart watches have developed rapidly, and have won the favor of tech-savvy and sports-savvycitizens.
According to the "China Luxury Consumption Report 2019" released by McKinsey China, Chinese’s luxury consumptionlast year at home and abroad reached CNY 770 billion, accounting for one-third of global luxury consumption. From 2012to 2018, more than half of the growth in the global luxury market came from China. Based on the Swiss export marketstatistics, Mainland China ranked the third; Hong Kong has ranked the first for a long time, which shows that Chinesepeople still mainly consume foreign-made watches, and the domestic market has great potential for growth. According toan estimate made by the Chinese Academy of Industry Economy Research, the home-made watch market size is aboutCNY 70 billion.
The Brand "FIYTA" is one of China's most well-known watch brands that have grown up under the market economy afterChina’s reform and opening-up, and its sales scale has always been at the forefront of the market. The Company hasalways practiced the original intention of building an international watch brand, relying on the precision manufacturetechnology, brand influence and channel deep ploughing in the aviation industry, and continued to innovate andbreakthrough. The Brand "FIYTA" is one of the world's three major space watch brands. In 2017, the brand was selectedin the "Made in China" brand plan by the Ministry of Commerce; "FIYTA won the "China Grand Awards for Industry" in2018, and was honorably put on the "70 Top Brands for the 70th Anniversary of the Founding of New China" list in 2019,and honorably won the "People's Ingenuity Brand Award 2019".
At the same time, the Company introduced Swiss watches to the domestic market earlier, and met the diversifieddemands of consumers for watch brands through the HARMONY watch retail business channel. After more than twodecades’ development, Harmony World Watches has been operating brand watch retail business in more than 60 citiesacross the country and has nearly 200 chain stores. It has established aboundant brand resources and good operating
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
ability, and its market share ranks domestically forefront in the watch retail industry.
II. Significant Movements in Prime Assets
1. Significant Movements in Prime Assets
Inapplicable
2. Major Overseas Assets
Inapplicable
III. Analysis on Core CompetitivenessI. Adhering to Brand Leadership and Enjoying Rich Experience in Brand ManagementSince its establishment, FIYTA has always adhered to the brand leadership and has taken it as its own duty to createoutstanding domestic brands. It has achieved a number of firsts in brand building in the industry, marketingcommunications, product design, etc. and has a solid brand operation foundation. In the 1990s, with the CCTV newsbroadcast announcing "FIYTA Telling Time for you", the Company successfully established the popularity and influence ofthe FIYTA Brand in China; the Company actively promoted the development of globalization and by participating in thepreparation of international standards ,entered BASELWORLD etc., strengthen exchanges and interactions withoutstanding Swiss brands, played an active role on the world watch stage, and persistently increased global influence.
II. Construction of Deep Ploughed Channel and Creating Excellent Channel Management AbilityFIYTA persistently constructed the deep ploughed channel, and provided a continuous source of power for branddevelopment with high-quality channels and refined operation capability. The Company has formed a global sales networkwith the domestic market as its core, and FIYTA brand channels have been distributed in more than 30 countries andregions around the world, with more than 3,000 business outlets; Harmony World Watches has deeply ploughed andupgraded its retail services channels, and has established strategic cooperative relations with domestic high-endshopping malls and department store chain entities; in recent years, the Company has also made great efforts to promotethe expansion of e-commerce channels and achieved full coverage of cooperation on mainstream e-commerce platforms.The Company has always devoted itself to building the ability of outstanding channel operation, powerful team, excellentservices, and providing customers with the best consumption experience in all aspects. The “Three-Level Marketing”,“Perfect Sales”, “Outstanding Operation” etc. have already been deposited as the core base work logic of channeloperation. At the same time, the Company is accelerating digital construction, actively embracing the development of thetimes and keeping up with changes in consumer spending habits.
III. Building the Advantages of the Leading Core technology Based on Precision TechnologyRelying on the precision manufacturing technology, material technology and talent advantages of the aviation industry,FIYTA is continuously committed to building the strength of precision technology; has successively built advanced R & D,production technology and manufacturing technology platforms, and has established R & D and production bases inShenzhen and Switzerland respectively; and has established professional watchmaking capabilities, includingself-made driving units of watches and key components manufacturing, space watch research and development andhigh-end watchmaking techniques, etc., and achieved continuous breakthroughs in research and development andapplication of new materials, new processes and new technologies. Up to now, the Company has 2 national high-techenterprises, a national enterprise technology center and a national industrial design center, and is a national technologyinnovation demonstration enterprise, has been granted 446 patents, including 4 honorable mentions of the Chinese
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
patents, 1 gold award of China Design and 4 honorable mentions of China design; the Company has taken lead inpreparation of up to 55% of the national watch industry standards and has actively participated in preparation of theinternational industrial standards and took lead and participated in preparation of many international standards.
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Chapter 4 Discussion and Analysis of the OperationI. GeneralIn 2019, the growth of domestic retail consumption slowed down and was clearly differentiated. Domestic brandsencountered pressure from consumer upgrading, channel upgrading, and smart wears, etc. Facing the challenges, theCompany took “cost reduction and efficiency improvement” and “innovation and development” as its main line, calmlyresponded to the downward pressure on the market, and jointly promoted continuous breakthroughs in operatingperformance to further enhance its competitiveness. In the reporting period, the Company realized revenue amounting toCNY 3,704.2107 million with year-on-year growth of 8.93% and realized total profit amounting to CNY 276.2336 millionwith a year-on-year growth of 19.48%. The Company once again achieved a historical record in revenue and total profit.During the reporting period, the Company carried out the following key work.I. Making solid progress in improving quality and efficiency, and achieving further breakthrough in high-qualitydevelopmentDuring the reporting period, the Company focused on strengthening cost control, lean supply chain construction, and soon to solidly promote cost reduction and efficiency, continued to optimize the organization's operating model, and activelypromoted the construction of driving power mechanism and full coverage. Thanks to the implementation of various tasksto improve quality and efficiency, the Company has continuously improved its efficiency is assets, operation, personnel,and organization. During the reporting period, the Company's inventory turnover rate reached 1.23 times, an increase of
0.13 times over the same period last year; the core channel yield increased by more than 10% year-on-year, and percapita profit increased by more than 20% year-on-year. While continuing to make breakthrough in high-qualitydevelopment, the Company has further strengthened its organizational capabilities.
II. Promoting the Reshaping of the Brand "FIYTA" and Further Enhancing Brand InfluenceDuring the reporting period, the Brand “FIYTA” followed the trend of consumption upgrading, continued to focus oncustomer demand, concentrated itself on professional watchmaking, refined aesthetics and Chinese culture, strengthenedthe brand's core DNA, and actively promoted the brand reshaping around the "Brand Power, Product Power, and ChannelPower" . The reporting period was the 9th consecutive year when the Brand “FIYTA” participated in BASELWORLD. TheCompany continued to exhibit a number of heavyweight new products in the same hall with the internationally renownedbrands in Hall 1; also successfully held the "FIYTA" Time Medal Brand Ceremony to further convey the professionalwatchmaking spirit and independent aesthetic design brand concept to consumers and partners, continued to deduct theartistic exploration of "Flying", and interpreted the extraordinary spiritual outlook of making progress; launched insuccession new products such as the “Master Series” Dunhuang-themed wristwatch, “Mach series” "J-20" joint limitationedition watch, "Attack-11" joint design wristwatch, Heartstring Series, and “Good Character” Series, etc. which have beenreally loved by consumers. In 2019, the Brand “FIYTA” was also the only watch brand listed on the "70 Brands at the 70thAnniversary of the Founding of New China" and won the "People's Ingenuity Brand Award 2019". The brand has beencontinuously improved in the industry status and brand influence.
III. Further Strengthening Investment in R & D and design, and Continuing to Build Technological Hard PowerDuring the reporting period, the Company further increased investment in R&D technology around the design anddevelopment of its own driving units, manufacture of key components, R & D and application of new materials, and theconstruction of high-end watchmaking processes, enhanced core technology advantages, and shortened the gap with the
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
global advanced level. In 2019, the Company continued to make breakthroughs in independent R & D of the driving unitsand application of new materials, launched in succession three self-developed driving units, and realized batch applicationof such new materials as Grade-5 titanium, Damask steel, etc. The Company applied for 37 patents throughout the year,including 26 invention and utility model patents, and took a lead or participated in the formulation and revision of 4 nationaland industry standards. The company was identified as the "National Intellectual Property Advantageous DemonstrationEnterprise in 2019".
IV. Consolidating Channel Advantages and Continuing to Promote Channel Upgrading and EfficiencyImprovementDuring the reporting period, the Company continued to promote the adjustment and upgrading of watch retail channelsand the enhancement of efficiency. The Company actively promoted own brand retail channels to be stationed in shoppingmalls, “HARMONY” seized the growth opportunities of domestic medium and high-end watch brands at the price of overCNY 10,000, continued to strengthen the core business district layout, enhanced excellent operations and the single storeoutput, average customer unit price, sales gross profit rates have steadily increased. Meanwhile, the Company is alsorapidly promoting the pilot application of digital retail solutions to accelerate the digitization of stores, membership,merchandise and management.
V. Cultivating New Growth Points, and Continuing to Maintain Rapid Growth of New BusinessesDuring the reporting period, the Company continued to promote the development of precision technology business andthe exploration of smart watch business, relying on the precision technology advantages accumulated by professionalwatchmaking and a relatively mature industrial foundation. In 2019, the Company continued deep ploughing of the coremarket of precision technology business, opened business cooperation with leading companies in various industries, andits operating income increased by 29% year-on-year; the Company continued to invest resources to accelerate the smartwatch business layout. The "Jeep" brand smart watches and professional teams jointly promoted iterative productdevelopment and technology upgrading. The Company launched three new products, including smart whole realm F02,F02 ESIM version and strong battery life A01, of which the ESIM version has become first smart watches officially certifiedby China Unicom, and has laid a technological advantage in the field of communications. The Company has continued tomaintain quick growth in smart watch business. The Company continued to maintain a quick growth in its smart watchbusiness.Movement of the Major Financial Items in 2019:
Balance sheet items
| Items | Ending balance | Opening balance | Variation proportion | Cause of the movement |
| Monetary capital | 316,668,565.09 | 164,828,059.97 | 92.12% | Increase of the net flow-in mainly from operating activities. |
| Notes receivable | 10,596,431.31 | 7,051,846.85 | 50.26% | Increase of the receivables arising from growth of the precision technology business scale. |
| Construction-in-process | - | 12,041,126.00 | -100.00% | Mainly due to the construction-in-process converted into fixed assets. |
| Advance receipts: | 23,433,463.57 | 16,459,445.00 | 42.37% | Mainly due to the increase of the payments received and influence of partial outstanding receivables. |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Taxes payable | 24,064,803.00 | 55,923,171.92 | -56.97% | Mainly due to the influence from the increase of procurements and the tax policy at the end of the year. |
| Other payables | 119,616,721.63 | 71,819,930.30 | 66.55% | Mainly due to the increase of the equity incentive money payable to employees, refurbishment deposit and the down payment for lease. |
| Other comprehensive income | -940,209.09 | -5,442,139.78 | 82.72% | Mainly due to movement of the translation balance of foreign currency statements |
Profit Statement Items
| Items | Amount incurred in the reporting period | Amount incurred in the previous period | Variation proportion | Cause of the movement |
| Return on Investment | 1,787,907.10 | 1,001,545.06 | 78.51% | Mainly due to the influence from the profit increase of Shanghai Watch Industry in the current year. |
| Loss from impairment of credit | -16,640,961.07 | 0 | Inapplicable | Mainly due to the influence from the implementation of the new financial instrument standards. |
| Loss from impairment of assets | -4,295,134.47 | -3,264,956.18 | 31.55% | Mainly due to the decrease of the provision for the price falling of inventories and influence from the presentation caused by the implementation of the new financial instrument standards in the current year. |
| Income from disposal of assets | -926,118.60 | -181,302.24 | -410.81% | Mainly due to the loss arising from the disposal of the auxiliary facilities and equipment of Xi’an FIYTA Building in the current year. |
| Non-operating income | 4,754,105.30 | 1,446,357.53 | 228.70% | mainly due to increase of the compensation received by some “HARMONY” stores in the reporting year. |
| Non-operating expenditures | 1,400,188.87 | 652,514.97 | 114.58% | Mainly due to increase of the loss arising from adjustment of partial stores. |
Cash Flow Statement Items
| Items | Amount incurred in the reporting period | Amount incurred in the previous period | Variation proportion | Cause of the movement |
| Other operation activity related cash receipts | 93,832,379.85 | 49,628,593.69 | 89.07% | Mainly due to the increase of the property margin received in the current year. |
| Net cash flows arising from operating activities | 444,820,768.61 | 331,627,789.62 | 34.13% | Mainly due to increase of the recoveries arising from the sales growth in the current year and at |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| the same time decrease of the tax payment. | ||||
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 626,107.64 | 53,280.03 | 1075.13% | Mainly due to increase of the fixed assets disposed in the current year. |
| Net cash flow arising from capital-raising activities | -126,755,283.74 | -207,831,024.31 | 39.01% | Mainly due to decrease of repayment of the bank loans over the same period of the previous year in the current year. |
| Influence of the change of exchange rate on the cash and cash equivalent | 468,366.93 | 702,253.60 | -33.31% | Mainly due to the influence of the change of exchange rate. |
| Net increase of cash and cash equivalents | 152,470,505.12 | -22,324,831.35 | 782.96% | Mainly due to net flow-in of operating activities and at the same time decrease of repayment of the bank loans over the same period of the previous year in the current year. |
| Ending balance of cash and cash equivalents | 315,093,565.09 | 162,623,059.97 | 93.76% | Mainly due to net flow-in of operating activities and at the same time decrease of repayment of the bank loans over the same period of the previous year in the current year. |
II. Analysis on the Principal Business
2. Revenue and Costs
(1) Composition of Revenues
In CNY
| 2019 | 2018 | Year-on-year increase/decrease | |||
| Amount | Proportion in the revenue | Amount | Proportion in the revenue | ||
| Total operating revenue | 3,704,210,734.90 | 100% | 3,400,450,599.90 | 100% | 8.93% |
| Based on sectors | |||||
| Watches | 3,463,608,966.45 | 93.50% | 3,193,280,311.30 | 93.91% | 8.47% |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Precision technology business | 91,341,945.34 | 2.47% | 70,742,449.85 | 2.08% | 29.12% |
| Leases | 132,005,033.07 | 3.56% | 118,323,969.04 | 3.48% | 11.56% |
| Others | 17,254,790.04 | 0.47% | 18,103,869.71 | 0.53% | -4.69% |
| Based on products | |||||
| Watch brand business | 1,110,678,489.04 | 29.98% | 1,102,309,603.80 | 32.42% | 0.76% |
| Watch retail and services | 2,352,930,477.41 | 63.52% | 2,090,970,707.50 | 61.49% | 12.53% |
| Precision technology business | 91,341,945.34 | 2.47% | 70,742,449.85 | 2.08% | 29.12% |
| Leases | 132,005,033.07 | 3.56% | 118,323,969.04 | 3.48% | 11.56% |
| Others | 17,254,790.04 | 0.47% | 18,103,869.71 | 0.53% | -4.69% |
| Based on regions | |||||
| South China | 1,823,927,995.51 | 49.24% | 1,536,911,140.58 | 45.20% | 18.67% |
| Northwest China | 586,521,631.97 | 15.83% | 588,628,213.03 | 17.31% | -0.36% |
| Northeast China | 204,386,707.45 | 5.52% | 249,884,958.89 | 7.35% | -18.21% |
| East China | 502,541,659.80 | 13.57% | 439,292,101.70 | 12.92% | 14.40% |
| Northeast China | 230,662,172.16 | 6.23% | 269,671,243.83 | 7.93% | -14.47% |
| Southwest China | 356,170,568.01 | 9.62% | 316,062,941.87 | 9.29% | 12.69% |
(2) Sector(s), Product(s) or Region(s) Taking over 10% of the Operating Revenue or Operating Profit
In CNY
| Operating revenue | Operating cost | Gross profit rate | Year-on-year increase/decrease of operating revenue over the previous year | Year-on-year increase/decrease of operating costs over the previous year | Year-on-year increase/decrease of gross profit rate over the previous year | |
| Based on sectors | ||||||
| Watches | 3,463,608,966.45 | 2,109,978,800.45 | 39.08% | 8.47% | 10.41% | -1.08% |
| Precision technology business | 91,341,945.34 | 73,717,603.23 | 19.29% | 29.12% | 24.03% | 3.30% |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Leases | 132,005,033.07 | 28,178,169.64 | 78.65% | 11.56% | 25.38% | -2.36% |
| Others | 17,254,790.04 | 5,333,158.72 | 69.09% | -4.69% | 490.00% | -25.92% |
| Based on products | ||||||
| Watch brand business | 1,110,678,489.04 | 330,952,343.65 | 70.20% | 0.76% | -0.95% | 0.51% |
| Watch retail and services | 2,352,930,477.41 | 1,779,026,456.80 | 24.39% | 12.53% | 12.82% | -0.20% |
| Precision technology business | 91,341,945.34 | 73,717,603.23 | 19.29% | 29.12% | 24.03% | 3.30% |
| Leases | 132,005,033.07 | 28,178,169.64 | 78.65% | 11.56% | 25.38% | -2.36% |
| Others | 17,254,790.04 | 5,333,158.72 | 69.09% | -4.69% | 490.00% | -25.92% |
| Based on regions | ||||||
| South China | 1,823,927,995.50 | 1,097,057,005.31 | 39.85% | 18.67% | 25.29% | -3.18% |
| Northwest China | 586,521,631.97 | 340,309,728.35 | 41.98% | -0.36% | -3.72% | 2.03% |
| Northeast China | 204,386,707.45 | 118,165,568.05 | 42.19% | -18.21% | -13.85% | -2.92% |
| East China | 502,541,659.80 | 280,319,276.42 | 44.22% | 14.40% | 6.99% | 3.86% |
| Northeast China | 230,662,172.16 | 163,383,316.18 | 29.17% | -14.47% | -12.90% | -1.27% |
| Southwest China | 356,170,568.01 | 217,972,837.73 | 38.80% | 12.69% | 22.46% | -4.88% |
While adjustment of the statistical caliber for the principal business data took place in the reporting period, the principalbusiness data with the statistical caliber adjusted at the end of the reporting period in the latest year.Inapplicable
(3) Is the physical sales income greater than the service income
Yes
| Classified based on sectors | Items | In CNY | 2019 | 2018 | Year-on-year increase/decrease |
| Brand watches | Sales volume | pcs | 1,027,428 | 1,032,886 | -0.53% |
| Output | pcs | 783,328 | 1,085,929 | -27.87% | |
| Inventory | pcs | 1,092,662 | 1,326,997 | -17.66% |
Note to the cause of the year-on-year movement of the relevant data by over 30%Inapplicable
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
(4) Implementation of Important Sale Contracts Concluded at the End of the Reporting PeriodInapplicable
(5) Composition of Operating Costs
Classified based on sectors and products
In CNY
| Classified based on sectors | Items | 2019 | 2018 | Year-on-year increase/decrease | ||
| Amount | Proportion in operating costs | Amount | Proportion in operating costs | |||
| Watches | Goods purchase cost | 1,779,026,456.80 | 80.24% | 1,576,862,763.43 | 79.09% | 12.82% |
| Raw materials | 299,121,692.67 | 13.49% | 298,467,328.86 | 14.97% | 0.22% | |
| Labor costs | 25,707,020.23 | 1.16% | 25,602,142.25 | 1.28% | 0.41% | |
| Depreciation expense | 920,871.70 | 0.04% | 1,124,500.75 | 0.06% | -18.11% | |
| Water and electricity fees | 463,093.67 | 0.02% | 582,727.38 | 0.03% | -20.53% | |
| Rent | 474,202.58 | 0.02% | 2,100,422.82 | 0.11% | -77.42% | |
| Others | 4,265,462.80 | 0.19% | 6,258,567.16 | 0.31% | -31.85% | |
| Precision technology business | Raw materials | 53,786,506.65 | 2.43% | 39,129,570.45 | 1.96% | 37.46% |
| Labor costs | 13,444,932.42 | 0.61% | 12,770,838.35 | 0.64% | 5.28% | |
| Depreciation expense | 1,478,005.14 | 0.07% | 1,440,723.29 | 0.07% | 2.59% | |
| Water and electricity fees | 760,873.00 | 0.03% | 1,443,140.38 | 0.07% | -47.28% | |
| Rent | 11,389.02 | 0.00% | 275,118.68 | 0.01% | -95.86% | |
| Others | 4,235,897.00 | 0.19% | 4,373,549.85 | 0.22% | -3.15% | |
| Leases | Depreciation expense | 14,296,604.24 | 0.64% | 13,170,394.47 | 0.66% | 8.55% |
| Labor costs | 3,012,991.57 | 0.14% | 2,983,488.04 | 0.15% | 0.99% | |
| Others | 10,868,573.83 | 0.49% | 6,320,565.41 | 0.32% | 71.96% | |
| Others | Purchase cost | 5,333,158.72 | 0.24% | 903,932.64 | 0.05% | 490.00% |
In CNY
| Classified based on products | Items | 2019 | 2018 | Year-on-year increase/decrease | ||
| Amount | Proportion in operating costs | Amount | Proportion in operating costs | |||
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Watch brand business | Raw materials | 299,121,692.67 | 13.49% | 298,467,328.86 | 14.97% | 0.22% |
| Labor costs | 25,707,020.23 | 1.16% | 25,602,142.25 | 1.28% | 0.41% | |
| Depreciation expense | 920,871.70 | 0.04% | 1,124,500.75 | 0.06% | -18.11% | |
| Water and electricity fees | 463,093.67 | 0.02% | 582,727.38 | 0.03% | -20.53% | |
| Rent | 474,202.58 | 0.02% | 2,100,422.82 | 0.11% | -77.42% | |
| Others | 4,265,462.80 | 0.19% | 6,258,567.16 | 0.31% | -31.85% | |
| Watch retail and services | Goods purchase cost | 1,779,026,456.80 | 80.24% | 1,576,862,763.43 | 79.09% | 12.82% |
| Precision technology business | Raw materials | 53,786,506.65 | 2.43% | 39,129,570.45 | 1.96% | 37.46% |
| Labor costs | 13,444,932.42 | 0.61% | 12,770,838.35 | 0.64% | 5.28% | |
| Depreciation expense | 1,478,005.14 | 0.07% | 1,440,723.29 | 0.07% | 2.59% | |
| Water and electricity fees | 760,873.00 | 0.03% | 1,443,140.38 | 0.07% | -47.28% | |
| Rent | 11,389.02 | 0.00% | 275,118.68 | 0.01% | -95.86% | |
| Others | 4,235,897.00 | 0.19% | 4,373,549.85 | 0.22% | -3.15% | |
| Leases | Depreciation expense | 14,296,604.24 | 0.64% | 13,170,394.47 | 0.66% | 8.55% |
| Labor costs | 3,012,991.57 | 0.14% | 2,983,488.04 | 0.15% | 0.99% | |
| Others | 10,868,573.83 | 0.49% | 6,320,565.41 | 0.32% | 71.96% | |
| Others | Purchase cost | 5,333,158.72 | 0.24% | 903,932.64 | 0.05% | 490.00% |
NoteInapplicable
(6) Is there any change in the consolidation scope in the reporting periodNo
(7) Is there any significant change or adjustment related situation taken place in the Company’sbusiness, products or services in the reporting period
Inapplicable
(8) Major sales customers and major suppliers
Information about the major sales customers
| Total sales to the top five customers, in CNY | 530,793,966.40 |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Proportion of the total sales to the top five customers in the total sales of the year | 14.33% |
| Proportion of the total sales to the related parties in the top five customers in the total sales of the year | 1.99% |
Information of the top 5 customers
| No. | Customers | Sales (in CNY) | Proportion in the total sales of the year |
| 1 | No. 1 | 209,811,676.89 | 5.66% |
| 2 | No. 2 | 89,619,644.27 | 2.42% |
| 3 | No. 3 | 82,366,986.57 | 2.22% |
| 4 | No. 4 | 75,354,578.53 | 2.03% |
| 5 | No. 5 | 73,641,080.14 | 1.99% |
| Total | -- | 530,793,966.40 | 14.33% |
Other Information about the major customersInapplicableMajor suppliers
| Total amount of purchase from top five suppliers, in CNY | 1,541,389,456.67 |
| Proportion of the purchase amount from the top five suppliers in the Company’s total purchase amount | 68.84% |
| Proportion of the purchase amount from the related parties in the top five suppliers in the Company’s total purchase amount | 0.00% |
Information about the top 5 suppliers
| No. | Suppliers | Purchase amount, in CNY | Proportion in the total purchases of the year (%) |
| 1 | No. 1 | 719,330,483.52 | 32.12% |
| 2 | No. 2 | 376,061,627.53 | 16.79% |
| 3 | No. 3 | 185,872,844.80 | 8.30% |
| 4 | No. 4 | 149,488,963.15 | 6.68% |
| 5 | No. 5 | 110,635,537.67 | 4.94% |
| Total | -- | 1,541,389,456.67 | 68.84% |
Other information about the major suppliersInapplicable
3. Expenses
In CNY
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| 2019 | 2018 | Year-on-year increase/decrease | Note to significant changes | |
| Sales costs | 865,792,078.61 | 856,970,173.10 | 1.03% | Inapplicable |
| Administrative expenses | 240,619,989.04 | 219,162,525.85 | 9.79% | Inapplicable |
| Financial expenses | 32,815,277.57 | 35,916,240.16 | -8.63% | Inapplicable |
| R & D expenditures | 45,057,740.25 | 47,350,342.82 | -4.84% | Inapplicable |
4. Investment in R & D
Investment in R & D was mainly for consolidating the Company's leading position in self-dependent innovation in China'swatch brands and professional capacity construction of precision technology. The Company continuously increasedinvestment in personnel, equipment, raw materials, etc. for such key technology fields as space watches, driving units ofmechanical watches, industrial design, smart watches, research on application of new materials, etc., and had made anumber of scientific research achievements.
In 2019, the Company’s total investment in R & D amounted to CNY 45,057,740.25, taking 1.70% of the net assets asaudited in the most recent period and taking 1.22% of the operation revenue as audited in the most recent period. Duringthe reporting period, the Company applied for 37 patents, of which 26 were patents of invention and utility models and wasrecognized as a “National Intellectual Property Advantageous and Demonstration Enterprise in 2019”. As of the end of2019, the Company has won 4 honorable mentions of China Invention Patent , 1 gold award of China Design and 6honorable mentions of China Design; lead and participated in formulation and revision of 4 national and industrystandards, and issued 5 national standards and 4 industry standards formulated or revised by the Company as a leader ora participant.Investment in R & D
| 2019 | 2018 | Variation proportion | |
| Number of R & D staff (persons) | 55 | 47 | 17.02% |
| Proportion of R & D staff in total employees | 1.10% | 0.91% | 0.19% |
| Amount of investment in R & D, in CNY | 45,057,740.25 | 47,350,342.82 | -4.84% |
| Proportion of investment in R & D in operating revenue | 1.22% | 1.39% | -0.17% |
| Amount of capitalized investment in R & D (in CNY) | 0.00 | 0.00 | 0.00% |
| Proportion of capitalized investment in R & D in the total investment in R & D | 0.00% | 0.00% | 0.00% |
Cause(s) of significant change of the total investment in R & D in the operating revenueInapplicable
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Note to the cause of significant change in the capitalization rate of investment in R & D and note to the reasonabilityInapplicable
5. Cash Flow
In CNY
| Items | 2019 | 2018 | Year-on-year increase/decrease |
| Subtotal of cash flow in from operating activity | 4,157,510,367.81 | 3,864,826,375.05 | 7.57% |
| Subtotal of cash flow out from operating activity | 3,712,689,599.20 | 3,533,198,585.43 | 5.08% |
| Net cash flows arising from operating activities | 444,820,768.61 | 331,627,789.62 | 34.13% |
| Subtotal of cash flow in from investment activity | 626,107.64 | 53,280.03 | 1,075.13% |
| Subtotal of cash flow out from investment activity | 166,689,454.32 | 146,877,130.29 | 13.49% |
| Net cash flows arising from investment activities | -166,063,346.68 | -146,823,850.26 | 13.10% |
| Subtotal of cash flow in from fund raising activity | 718,848,326.76 | 741,192,340.23 | -3.01% |
| Sub-total cash flow paid for financing activities | 845,603,610.50 | 949,023,364.54 | -10.90% |
| Net cash flow arising from capital-raising activities | -126,755,283.74 | -207,831,024.31 | -39.01% |
| Net increase of cash and cash equivalents | 152,470,505.12 | -22,324,831.35 | 782.96% |
Note to the major influencing factors for the significant change in the relevant year-on-year data
1. Net cash flow arising from operating activities amounting to CNY 444,820,768.61 was mainly due to increase of therecovered receivables brought about from revenue growth in the reporting year; and in addition, the tax paymentdecreased due to the tax rate deduction; in the reporting year, the Company realized the net cash flow from operatingactivities greater than the net profit of the Company.
2. Net cash flow arising from investment activities amounted to CNY -166,063,346.68 in the reporting year, while it wasCNY -146,823,850.26 in the same period of the previous year, increased by increased by CNY 19,239,496.42. It wasmainly due to increase of the renewed investment in stores and counters in the reporting year over the same period of theprevious year.
3. Net cash flow arising from investment activities amounted to CNY -126,755,283.74 in the reporting year, while it was
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
CNY -207,831,024.31 in the same period of the previous year, decreased by increased by CNY 81,075,740.57. It wasmainly due to increase of the bank loans, the equity incentice payment received and the payment for B-shares buy-back.
4. The net increase in cash and cash equivalents in the reporting year was RMB 152,470,505.12, which was mainly due tothe increase in sales income in the reporting year and the increase of operating cash inflows brought by the current taxpolicy.
Note to the cause of significant difference between the net cash flow arising from the Company's business activities andthe net profit of the reporting year during the reporting period.Inapplicable
III. Analysis on Non-Principal BusinessesInapplicable
IV. Assets and Liabilities
1. Significant Changes in Assets Composition
In CNY
| End of 2019 | Beginning of 2019 | Increase/decrease in proportion | Note to significant changes | |||
| Amount | Proportion in total assets | Amount | Proportion in total assets | |||
| Monetary fund | 316,668,565.09 | 8.42% | 164,828,059.97 | 4.58% | 3.84% | Inapplicable |
| Accounts receivable | 397,471,106.98 | 10.57% | 370,545,656.61 | 10.29% | 0.28% | Inapplicable |
| Inventories | 1,808,820,089.92 | 48.11% | 1,782,306,301.70 | 49.51% | -1.40% | Inapplicable |
| Investment-oriented real estate | 407,503,307.24 | 10.84% | 377,319,433.03 | 10.48% | 0.36% | Inapplicable |
| Long-term equity investment | 46,423,837.85 | 1.23% | 44,881,063.15 | 1.25% | -0.02% | Inapplicable |
| Fixed assets | 363,997,098.94 | 9.68% | 425,649,562.85 | 11.82% | -2.14% | Inapplicable |
| Construction-in-process | 0.00 | 0.00% | 12,041,126.00 | 0.33% | -0.33% | Inapplicable |
| Short term loans | 567,908,833.21 | 15.11% | 547,118,452.97 | 15.20% | -0.09% | Inapplicable |
| Long-term borrowings | 4,321,680.00 | 0.11% | 4,517,110.00 | 0.13% | -0.02% | Inapplicable |
2. Assets and liabilities measured based on fair value
Inapplicable
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
3. Restriction on rights in the assets ended the reporting period
A property owned by Switzerland based Montres Chouriet SA with net value of CNY 14,303,281.92 was used as acollateral for the overseas long term loan amounting to CNY 4,321,680.00.
V. Investment
1. General
Inapplicable
2. Significant Equity Investment Acquired in the Reporting Period
Inapplicable
3. Significant non-equity investment in process in the reporting period
In CNY
| Project name | Way of investment | Is it an investment in fixed assets? | Industry involved by the investment project | Amount invested during the reporting period | Accumulative amount actually invested by the end of the reporting period | Capital source | Project progress | Predicted earning | Earnings accumulatively realized by the end of the reporting period | Cause of the failure in arriving at the planned progress and predicted earnings | Date of disclosure (if any) | Disclosure index (if any) |
| FIYTA Watch Building supporting works | Self-built | Yes | F521 comprehensive retail | 1,538,869.57 | 13,579,995.57 | Self-owned capital | 100.00% | 0.00 | 0.00 | Inapplicable | March 10, 2017 | http://www.cninfo.com.cn/ |
| Total | -- | -- | -- | 1,538,869.57 | 13,579,995.57 | -- | -- | 0.00 | 0.00 | -- | -- | -- |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Note: The 13th session of the Eighth Board of Directors reviewed and approved the proposal for increase of theinvestment in the construction project of FIYTA Watch R&D and Manufacture Center by CNY 34.0509 million. For thedetail, refer to Announcement of the Resolution of the 13th Session of the Eighth Board of Directors 2017-003. Ended thereporting period, the accumulative amount of investment in the project was CNY 13.5799 million.
4. Financial assets investment
(1) Portfolio investment
Inapplicable
(2) Investment in derivatives
Inapplicable
5. Application of the raised capital
InapplicableVI. Sales of Significant Assets and Equity
1. Sales of Significant Assets
Inapplicable
2. Sales of Significant Equity
InapplicableVII. Analysis on Principal Subsidiaries and Mutual Shareholding Companies
Particulars about the principal subsidiaries and mutual shareholding companies which may affect the Company’s net profitby over 10%.
In CNY
| Company name | Company type | Main businesses | Registered capital | Total assets | Net assets | Turnover | Operating profit | Net profit |
| Shenzhen Harmony World Watches Center Co., Ltd. | Subsidiaries | Purchase & sale and repairing service of watches and components | 600,000,000 | 1,623,987,672.56 | 805,951,349.68 | 2,392,437,239.57 | 134,785,193.44 | 101,671,961.28 |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| FIYTA Sales Co., Ltd. | Subsidiaries | Design, R & D and sales of watches and components & parts | 450,000,000 | 576,676,896.21 | 404,471,429.53 | 996,867,641.17 | 3,573,262.01 | 1,221,729.19 |
| Shenzhen FIYTA Precision Technology Co., Ltd. | Subsidiary | Manufacture and production of watches and components | 10,000,000 | 254,579,034.20 | 106,651,495.44 | 307,732,689.14 | 31,748,219.71 | 29,488,676.36 |
| Shenzhen FIYTA Technology Development Co., Ltd. | Subsidiary | Production and machining of sophisticated components and parts | 10,000,000 | 99,019,753.80 | 77,342,234.06 | 130,557,299.76 | 11,023,085.05 | 10,361,038.37 |
| FIYTA (Hong Kong) Limited | Subsidiary | Trading of watches and accessories and investment | 137,737,520 | 254,914,114.17 | 182,699,439.44 | 118,849,208.03 | 11,819,796.82 | 9,987,282.65 |
| Shiyuehui Boutique (Shenzhen) Co., Ltd. | Subsidiary | Design, R & D and sales of watches and components & parts | 5,000,000 | 27,020,978.17 | -3,988,745.98 | 13,986,701.46 | -1,982,917.31 | -196,647.46 |
| Liaoning Hengdarui Commerce & Trade Co., Ltd. | Subsidiary | Purchase & sale of watches and components & parts | 51,000,000 | 139,696,558.87 | 41,352,198.31 | 9,018,870.04 | 1,718,936.53 | 1,289,204.26 |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Harbin Harmony World Watch Distribution Co., Ltd. | Subsidiary | Purchase & sale of watches and components & parts | 500,000 | 3,691,064.55 | 3,677,292.18 | 4,004,580.34 | 75,288.34 | 44,880.75 |
| Emile Chouriet (Shenzhen) Limited | Subsidiary | Design, R & D and sales of watches and components & parts | 41,355,200 | 126,875,780.95 | 63,589,446.61 | 94,330,651.06 | 779,924.42 | 581,630.22 |
| Shanghai Watch Industry Co., Ltd. | Mutual shareholding company | Production and sales of watches and components & parts | 15,350,000 | 130,653,631.79 | 107,992,125.18 | 101,660,357.29 | 8,268,038.55 | 6,171,098.80 |
Acquisition and disposal of subsidiaries in the reporting periodInapplicableNote to the principal mutual shareholding companiesInapplicable
VIII. Structurized Entities Controlled by the CompanyInapplicable
IX. Expectation on future development of companyI. Development trend of the industryLooking forward to the future, innovation-driven, high-quality, brand and personalization shall continue to lead themainstream of watch consumption, consumer capacity expansion, technology upgrading, the rise of made-in-China andChina's smart manufacturing shall also accelerate the development of watch industry. The symbolization presentation ofthe quality living of consumers shall further occupy the mind of consumers, and the growth prospects are expectable;fashion products and smart watches will further develop and evolve, and continue to win the favor of specific consumergroups; compared with Swiss brands, although domestic brands still have significant gap in professional watchmakingand brand influence, they also have great potential and prospects. On the one hand, they shall benefit from thecontinuous improvement of China's quality manufacture capacity and level driven by technology and innovation; on theone hand, made-in-China and Chinese brands incorporated with more Chinese culture shall further demonstrate "culturalconfidence" and further win the favor of Chinese and global consumers. In addition, the Internet has brought aboutchanges in commercial ecology and models. New retail formats and new way of play shall also provide more and moredirect motivation for consumption. In view of the above judgment, the Company is constantly optimistic about thedevelopment of the industry as well as the long-term development prospects of the Company's watch brand business and
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
famous brand watch retail business.
The Company has achieved continuous growth in operating scale and profitability in the past three years, and 2020 shallbe a year full of expectations. However, the novel coronavirus outbreak at the beginning of the year produced a seriousimpact on the market. The Company has actively taken various measures to respond and further promoted the change ofbusiness model and the growth of team capabilities. The Company is expecting the business to be recovered to thenormal operating level in the second quarter; however there still exist uncertain factors, and the Company shall pay closeattention to them and respond.
II. Development StrategyFor more than 30 years, the Company has always focused on the watch business. Relying on aviation precisionmanufacture and technology innovation, the professional watchmaking ability with high-end precision technology as itscore has become an important kernel of the differentiated competitiveness of the Brand “FIYTA”. The Company takes the"inheritance of ‘serving the country with aviation’ and implement the" big country brand "strategy as the goal of the wholeCompany's common struggle for a long period of time. The Company has continuouly taken the improvement of itshigh-end precision manufacture capability and enhancement of technology innovation as the base, increased investmentin R&D technology, strengthened independent driving core design and development, key component manufacture,material R&D and application, high-end watchmaking technology, digitalization and other professional capacity building,formed the advantages of core technology, and comprehensively strengthened brand power, product power, and channelpower as the core comprehensive and differentiated competitiom to realize the transformation and upgrading of brandbusiness. At the same time, the Company will also accelerate the development of precision technology business andsmart wear business based on the core capability of precision technology, cultivate new business growth points, andpromote the Company's overall business to transform and upgrade towards high-end precision technology.
III. Key Work in 2020
1. Continuing to take "brand power, product power, channel power" as the core to strengthen the advantage ofcompetitionIn 2020, the Company shall continue to make solid efforts in product planning, terminal image, marketing methods, trafficconversion and customer service, create distinctive characteristics of the brand, and strengthen "brand influence";continue to optimize the whole process of product R & D, design, technology, quality, and supply chain, and strengthen"product competitiveness"; focus on promoting the adjustment of channel structure and the improvement of storeoperation ability, promote the station of high-quality channels in shopping malls, etc., empower first-line store operations,strengthen refined operations, and practically improve "channel connectivity".
2. Strengthening Investment in Precision Technology and Constructing Hard Core StrengthIn 2020, the Company shall continue to increase investment in R & D and design, continue to improve the Company'stechnology level, and achieve technology breakthroughs in key areas such as independent driving unit design anddevelopment, manufacture of key components, R&D of new materials, and building high-end watchmaking processcapability, and consolidate the Company's core competitive advantages, gradually narrow the gap with Swiss advancedwatchmaking technology, and provide sustainable driving force for the brand and the Company's sustainabledevelopment.
3. Embracing the Development of the Times and Accelerating Digital Transformation
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
In 2020, the Company shall continue to accelerate the digital transformation of its core business. The Company shallquickly create a customer-centered digital operation system, promote the digitalization of members, products, stores, andmanagement, and use membership operations as an important support for brand building, product development, andchannel operations; use digitalization to promote operational excellence and provide customers with better qualityproducts and services. At the same time, the Company shall accelerate embracement of various new retail forms such as"live webcasting" in the Internet era. With the help of information technology, it will continue to innovate retail models andservice models, and actively promote the establishment of a full-scenario, highly efficient retail and service network.
4. Accelerating Innovation Drive and Actively Cultivating New Growth PointsIn 2020, the Company shall continue to rely on precision technology as its core watchmaking technology and industrialfoundation, and inject more resources and energy to accelerate the cultivation of new growth points. The Company shallcontinue to promote precision technology business to accelerate technological upgrading, make deep ploughing of thecore market and cover new target market areas; the “Jeep” brand smart watch business will be based on customerdemand research, strengthen product technology development, and continue to introduce products with more productswith technology advanced superiority, gradually increase the scale and build influence in the industry.
IV. Capital Necessary for Future DevelopmentAccording to the Company's business development plan and financial budget planning in 2020 and for the purpose ofsatisfying the demand on investment and operation capital and at the same time timely seizing the developmentopportunity possibly brought about from the market change, the Company plans to apply for financing credit line withamount not exceeding CNY 1.2 billion by various means, including credit, guarantee, loan to subsidiaries, mortgage, etc.in 2020.
V. Risks Possibly to be Confronted with
1. The sudden outbreak of COVID-19 in early 2020 shall have a serious negative impact on the industry. Facing theepidemic, the Company has quickly adjusted its operating strategy, adhered to the value creation orientation,implemented multiple measures, practiced limit cost control and strengthened cash flow management. During theepidemic, the Company has promoted whole-staff marketing, actively established direct linkage with customers throughWeChat and live broadcast, and increased investment in e-commerce channels to minimize market impact. The Companyhas also actively organized epidemic prevention and control, proactively communicates with supply chain and businesspartners, strives for support from all parties, helps each other, and overcomes difficulties together. The Company, as anorganization affiliated to AVIC and acting as the representative of all AVIC subsidiries, donated CNY 50 million to HubeiProvince, and sent 39 medical team members to undertake social responsibilities. Starting from March, as the stores havereturned to work, the market has also gradually got recovered. It is expected that the business shall be recovered to thenormal operating level in the second quarter; however there still exist uncertain factors, and the Company shall pay closeattention to them and respond.
2. With the rapid development of information technology and the rise of the Internet economy, change in the retail formatshall be intensified, and channel competition for consumers shall become more intense. The Company shall continue tostrengthen research on consumer shopping psychology and shopping behavior, accelerate digital transformation andomni-channel construction, and actively explore new models such as "live webcasting".
3. Smart wear is currently at a stage of rapid development. With the rapid development and deep application of 5G,
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
flexible display, and the Internet of Things technology, the functions of smart wear products will become more and moreabundant in the future, and the application scenarios will become more diversified. The Company firmly believes in theimportance of traditional watches to the customers, and has also accelerated the exploration and development of smartwatch business.
X. Statement of Such Activities as Reception of Survey, Communications, Interview, etc.
1. Registration Form of the Activities, such as Reception of Survey, Communications, Interviews, etc. in theReporting Period
| Reception time | Way of reception | Types of Visitors Received | Index of Basic Information on the Investigation and Survey | |
| June 19, 2019 | Field survey | Institution | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 | |
| December 23, 2019 | Field survey | Institution | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 | |
| December 24, 2019 | Field survey | Institution | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 | |
| Number of reception | 3 | |||
| Number of institutions received | 16 | |||
| Number of persons received | 17 | |||
| Number of other visitors received | 0 | |||
| Is there any important information disclosed, revealed or leaked to the public? | No | |||
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Section 5 Significant Events
I. Profit Distribution for Common Stock and Conversion of Capital Reserve into Share CapitalPreparation, Implementation or Adjustment of the Policy for Common Stock Profit Distribution, Especially the Policy forCash Dividend Distribution in the Reporting Period
The Company's 2018 Profit Distribution Plan was reviewed and approved at the 6th session of the Ninth Board ofDirectors held on March 13, 2019 and 2018 Annual General Meeting held on , June 19, 2019. It was resolved that with theCompany’s total share capital of 438,744,881 shares as at December 31, 2018 as the base, the Company would distributecash dividend at the rate of CNY 2.00 for every 10 shares (with tax inclusive), bonus share at the rate of 0 share for every10 shares (with tax inclusive) to the whole shareholders and capitalize no capital reserve to the whole shareholders.
In view of the impact of the completion of the granting of A-share restricted stock and the repurchase of domestically listedforeign shares (B shares), the final implementation plan for the 2018 annual equity distribution is: based on the number ofthe Company's allocable number of shares being 436,968,881, the Company would distribute cash dividend to allshareholders at the rate of CNY 2.008128 for every 10 shares (with tax inclusive) , 0 bonus shares and would not convertany capital reserve into capital.
The implementation of the profit distribution plan was finished on August 14, 2019. For the detail, refer to theAnnouncement on Implementation of the Profit Distribution for Year 2018 (2019-040).
| Special Note to Cash Dividend Distribution Policy | |
| Does it comply with the Articles of Association or the resolution of the General Meeting? | Yes |
| Are the dividend distribution standard and proportions explicit and clear? | Yes |
| Are the relevant decision-making procedures and mechanism complete? | Yes |
| Have the independent directors done their duties and brought their role into full play? | Yes |
| Do minority shareholders have opportunity to fully express their opinions and claims? Has their legal interest been fully protected? | Yes |
| In case the cash dividend distribution policy has been adjusted or altered, do the conditions and procedures comply with the law and are they transparent? | Inapplicable |
The profit distribution plan or proposal and the preplan or proposal of conversion of the capital reserve into share capital inthe past three years (with the reporting period inclusive):
According to the provisions concerning cash dividend distribution in the Articles of Association, the Company preparedspecific cash dividend distribution plan after the Board of Directors and the Shareholders’ General Meeting have reviewed
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
strictly according to the requirements. In the past three years, the Company has well implemented the cash dividenddistribution policy, fully asked for the independent directors’ opinions, effectively ensured the minority shareholders’ benefitand made timely and accurate disclosure in its annual report and the relevant media.
Profit Distribution Plan in 2017: With the total share capital of 438,744,881 shares as at December 31, 2017 as the base,the Company distributed to the whole shareholders cash dividend at CNY 2.00 for every 10 shares (with tax inclusive), 0bonus share for every 10 shares; converted no reserve into share capital.
Profit Distribution Plan in 2018: With the total share capital of 438,744,881 shares as at December 31, 2018 as the base,the Company distributed to the whole shareholders cash dividend at CNY 2.00 for every 10 shares (with tax inclusive), 0bonus share for every 10 shares; converted no reserve into share capital.
(1) As of the date of application for equity distribution, the Company implemented 2018 A-share restricted stock incentiveplan (the first phase), and granted 4,224,000 A-share restricted shares to 128 incentive objects. Upon completion of thegranting and registration for listing, the Company’s share capital increased to 442,968,881 shares.
(2) The Company has repurchased 6,000,000 shares of domestically listed foreign shares (B shares) through the specialaccount for repurchase. According to the relevant provisions of the Implementation Rules of Shenzhen Stock Exchangeon Repurchase of Shares by Listed Companies, the Company’s repurchased shares in the special account would not bequalified for participating in this equity distribution.
In view of the above reasons, the base of the shares available for distribution in the Company's equity distribution in2018 can be adjusted to 436,968,881 shares. According to the relevant provisions of the Main Board InformationDisclosure Memorandum of Shenzhen Stock Exchange No. 1-Issues Related to Regular Report Disclosure, in compliancewith the principle of the total amount of cash dividends remaining unchanged, the Company's final implementation plan forthe 2018 annual equity distribution is: based on the Company's distributable shares of 436,968,881 shares, the Companywould distribute to all shareholders at CNY 2.008128 in cash (including tax) for every 10 shares, 0 bonus shares andwould convert no public reserve into capital.
Profit Distribution Plan in 2019: As of the disclosure date, the Company's total share capital was 442,968,881 shares, andthe Company's total capital base for profit distribution would not exceed 442,968,881 shares in maximum.
(1) According to the Company's "Proposal on the Repurchase of the Company's Partial Domestically Listed ForeignShares (B Shares)", the Company would, within the validity period stipulated in the repurchase program (April 23, 2019 toApril 23, 2020), continuously implement the B share repurchase. It is expected that by the time of implementing the profitdistribution plan, the Company's repurchase period would expire and the cancellation of the repurchased shares would becompleted. At that time, the total share capital base would decrease.
(2) According to the “Proposal for Repurchase and Cancellation of the Partially Restricted Shares Involved in 2018 AShare Restricted Stock Incentive Plan (Phase 1)” approved at the 15th and 16th Sessions of the Ninth Board of Directors,the Company is going to repurchase and cancel a total of 67,000 A-share restricted shares that have been granted withthe restriction not released to the three former original incentive objects who have left the Company in the 2018 A-share
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
restricted stock incentive plan (Phase 1). This matter needs to be submitted to the Company's General Meeting forconsideration and implementation. It is expected that by the time the profit distribution plan is implemented, the Companyhas completed the relevant repurchase cancellation procedures, at which time the total share capital base will be reduced.In the event of subsequent departure of other incentive objects, the Company shall conduct repurchase-cancellation inaccordance with regulations, and the Company's total share capital shall be reduced.
For these reasons, with the total capital stock as at the date of record as the base, the Company would distribute cashdividend at the rate of CNY 2.00 for every 10 shares (with tax inclusive), with the total cash dividend to be distributed notexceeding CNY 88,593,776.2 , and no bonus share to the whole shareholders and would capitalize no reserve.
(3) According to the "Implementation Rules of Shenzhen Stock Exchange on the Repurchase of Shares by ListedCompanies", if a listed company has repurchased the shares by means of centralized competitive bidding with theconsideration in cash, the amount paid for the repurchase in the very year shall be deemed as cash dividends which shallbe put in the calculation based on the relevant proportion of cash dividends for the year. By the end of the reporting period,the Company accumulatively repurchased 10,010,000 shares of the Company’s own stock by means of the centralizedcompetitive bidding through its special securities account for repurchase, has already paid total amount ofHK$ 60,289,369.30 (excluding the stamp duty, commission and other trading costs equal to CNY 53,524,330.10). Thisamount of money shall be included in the cash dividend distribution in 2019.
The accumulative amount of cash dividend distributed in the past three years took 176.93% of the annual average netprofit in the past three years, which complies with the rules and regulations.
Statement of cash dividends distributed in the past three years (with the reporting period inclusive)
In CNY
| Year of Dividend Distribution | Amount of Cash Dividend (including tax) | Net profit attributable to the Company’s shareholders in the consolidated statements of the year of dividend distribution | Ratio of the net profit attributable to the Company’s shareholders taken in the consolidated statements | Amount of cash dividend distributed in other way(s) (such as shares repurchased) | Proportion of the cash dividend distributed in other way(s) in the net profit attributable to the Company’s shareholders of ordinary shares in the consolidated statements | Total amount of cash dividend (including other way(s)) | Ratio of the total amount of cash dividend (including other way(s)) in the net profit attributable to the Company’s shareholders of ordinary shares in the consolidated statements |
| 2019 | 88,593,776.20 | 215,909,014.15 | 41.03% | 53,524,330.10 | 24.79% | 142,118,106.30 | 65.82% |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| 2018 | 87,748,976.20 | 183,835,095.29 | 47.73% | 0.00 | 0.00% | 87,748,976.20 | 47.73% |
| 2017 | 87,748,976.20 | 140,216,258.28 | 62.58% | 0.00 | 0.00% | 87,748,976.20 | 62.58% |
In the reporting period, both the Company’s profit and the parent company’s profit available for shareholders of ordinaryshares were positive but no common stock cash dividend distribution proposal has been put forward.InapplicableII. Profit Distribution and Conversion of Capital Reserve into Share Capital in the Reporting Period
| Bonus shares distributed at the rate of ___ (share) for every 10 shares | 0 |
| Dividend distributed at the rate of CNY___ for every 10 shares (with tax inclusive) | 2 |
| Number of shares converted for every 10 shares (shares) | 0 |
| Share capital base for the dividend distribution preplan (shares) | Based on the total number of shares on the date of record when the profit distribution plan is implemented in the future |
| Total cash dividend distributed (with tax inclusive) | 88,593,776.20 |
| Amount of cash dividend distributed in other way(s) (such as shares repurchased) | 53,524,330.10 |
| Total amount of cash dividend (including other way(s)) | 142,118,106.30 |
| Profit available for distribution (CNY) | 710,223,150.82 |
| Proportion of the cash dividend in the total profit available for distribution (%) | 100% |
| Cash Dividend Distribution for the Reporting Year | |
| Others | |
| Detailed information for profit distribution or conversion of capital reserve into share capital preplan | |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| (1) According to the Company's "Proposal on the Repurchase of the Company's Partial Domestically Listed Foreign Shares (B Shares)", the Company would, within the validity period stipulated in the repurchase program (April 23, 2019 to April 23, 2020), continuously implement the B share repurchase. It is expected that by the time of implementing the profit distribution plan, the Company's repurchase period would expire and the cancellation of the repurchased shares would be completed. At that time, the total share capital base would decrease. (2) According to the “Proposal for Repurchase and Cancellation of the Partially Restricted Shares Involved in 2018 A Share Restricted Stock Incentive Plan (Phase 1)” approved at the 15th and 16th Sessions of the Ninth Board of Directors, the Company is going to repurchase and cancel a total of 67,000 A-share restricted shares that have been granted with the restriction not released to the three former original incentive objects who have left the Company in the 2018 A-share restricted stock incentive plan (Phase 1). This matter needs to be submitted to the Company's General Meeting for consideration and implementation. It is expected that by the time the profit distribution plan is implemented, the Company has completed the relevant repurchase cancellation procedures, at which time the total share capital base will be reduced. In the event of subsequent departure of other incentive objects, the Company shall conduct repurchase-cancellation in accordance with regulations, and the Company's total share capital shall be reduced. The profit distribution plan is subject to review and approval of the General Meeting before implementation. |
III. Implementation of Commitments
1. Commitments finished in implementation by the Company, shareholders, actual controller, acquirer, directors,supervisors, senior executives or other related parties in the reporting period and commitments unfinished inimplementation at the end of the reporting periodInapplicable
2. There existed profit anticipation for the Company’s assets or projects while the reporting period was still within theduration of the profit anticipation. The Company made explanation on whether the assets or projects reached theanticipated profit and the causeInapplicable
IV. Non-operational Occupancy of the Company’s Capital by the Controlling Shareholder and its Related PartiesInapplicable
V. Explanation of the Board of Directors, the Supervisory Committee and Independent Directors (if any) on the“Qualified Auditor’s Report” issued by the CPAs in the Reporting PeriodInapplicable
VI. Explanation on the Changes in the Accounting Policy, Accounting Estimate, and Accounting Method inComparison with the Financial Report of the Previous YearThe Ministry of Finance issued a series of new standards for financial instruments on March 31, 2017 and May 2, 2017,
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
and required domestic listed companies to take effect from January 1, 2019. According to the regulations, the Companywould implement the aforesaid new rules and make change of the corresponding accounting policies. However, this wouldproduce no significant impact on the Company's current and previous net profit, total assets and net assets. For details,please refer to the “Announcement on Change of the Accounting Policies 2019-026” disclosed by the Company on theSecurities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn/ on April 23, 2019.On April 30, 2019, the Ministry of Finance promulgated the “Circular on Amending and Issuing the General CorporateFinancial Statement Templates for the Year 2019” (CAI KUAI [2019] No. 6) (hereinafter referred to as the “AmendmentCircular”), according to which general corporate financial statement templates should be amended and non-financialenterprises are required to implement the Accounting Standards for Business Enterprises to compile the 2019 interimfinancial statements and annual financial statements, as well as financial statements for subsequent periods, inaccordance with the requirements of the Accounting Standards for Business Enterprises and the Amendment Circular.According to the regulations, the Company would implement the aforesaid new rules and make change of thecorresponding accounting policies. However, this would produce no significant impact on the Company's current andprevious net profit, total assets and net assets. For details, please refer to the “Announcement on Change of theAccounting Policies 2019-044” disclosed by the Company on the Securities Times, Hong Kong Commercial Daily andhttp://www.cninfo.com.cn/ on August 15, 2019.
VII. Explanation on Serious Accounting Errors Occurred in the Reporting Period Necessary to be RestatedRetrospectivelyInapplicable
VIII. Explanation on the Changes in the Scope of the Consolidated Statements in Comparison with the FinancialReport of the Previous YearInapplicable
IX. Engagement/Disengagement of CPAsCPAs currently engaged by the Company
| Name of the domestic CPAs | Grant Thornton LLP |
| Remuneration to the domestic CPAs (in CNY 10,000) | 110 |
| Successive years of the domestic CPAs offering auditing services | 1 |
| Name of the certified public accountants from the domestic CPAs | Dong Xu, Meng Junfeng |
| Successive years of the domestic CPAs offering auditing services | 1 |
Has the CPAs been changed for the reporting period?Yes
Has the CPAs been replaced during the auditing?No
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Have the examination and approval procedures been implemented in replacing the CPAsYes
Detailed explanation on the replacement/change of the CPAsThe 12th session of the Ninth Board of Directors held on October 16, 2019 and the 3rd Extraordinary General Meeting in2019 held on December 30, 2019 reviewed and approved the Proposal on the Replacement of the Accounting Firm,according to which the Company would appoint Grant Thornton LLP as the Company’s auditor of the Financial Report2019 and the internal control auditor to replace Ruihua Certified Public Accountants LLP for a term of one year. For details,please refer to the “Announcement on the Change of the CPAs 2019-055” disclosed by the Company on the SecuritiesTimes, Hong Kong Commercial Daily and http://www.cninfo.com.cn/ on October 18, 2019.
Employment of CPAs, financial consultant or sponsor for auditing the internal controlDuring the reporting period, the Company paid the audit fee amounting to CNY 700,000.00 for auditing the financial reportand CNY 300,000.00 for auditing the internal control to Ruihua Certified Public Accountants LLP,
X. Listing Suspension or Delisting Possibly to be Confronted with after Disclosure of the Annual ReportInapplicable
XI. Matters concerning Bankruptcy ReorganizationInapplicable
XII. Significant Lawsuits and ArbitrationsInapplicable
XIII. Penalty and RectificationInapplicable
XIV. Integrity of the Company and its Controlling Shareholder and Actual ControllerInapplicable
XV. Implementation of the Company’s Equity Incentive Plan, Employee Stock Ownership Plan or other EmployeeIncentive MeasuresThe 3rd session of the Ninth Board of Directors held on November 12, 2018 and 2019 1st Extraordinary General Meetingheld on January 11, 2019 decided to start 2018 A-Share Restrictive Stock Incentive Program (Phase I), which was later onreviewed and approved at the 5th session of the Ninth Board of Directors held on January 11, 2019, and the Companyeventually granted 4.224 million restrictive A-shares to 128 persons eligible for the incentive。 For the detail, refer to therelevant announcement disclosed in the Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn onJanuary 12, 2019. This part of A-share restricted stock was all granted and registered for listing by January 30, 2019.As three original incentive objects of the above incentive plan, namely Wu Yue (27,000 shares granted), Yang Shuzhi(20,000 shares granted), Lin Yichao (20,000 shares granted) have resigned, according to the 2018 A-Share RestrictedStock Incentive Plan (Phase I) (Draft Revision), they have no longer met the incentive conditions. The 15th session of
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
the Ninth Board of Directors held on January 10, 2020 and the 16th Session of the Board of Directors held on March 18,2020 reviewed and approved the "Proposal on the Repurchase and Cancellation of Partial Restricted Shares in the 2018A-Share Restricted Stock Incentive Plan (Phase I), according to which the Company was going to repurchase and cancell67,000 A-share restricted shares held by the aforesaid three incentive objects, already granted but not yet lifted. The saidrepurchase proposal is still necessary to be submitted to the General Meeting for approval before implementation.
XVI. Significant Related Transactions
1. Related Transactions Related with Day-to-Day Operations
Inapplicable
2. Related transactions concerning acquisition and sales of assets or equity
Inapplicable
3. Related transactions concerning joint investment in foreign countries
Inapplicable
4. Current Associated Rights of Credit and Liabilities
Does there exist non-operating current associated rights of credit and liabilitiesNo
5. Other Significant Related Transactions
The 6th session of the Ninth Board of Directors held on March 13, 2019 and 2018 Annual General Meeting held on June19, 2019 reviewed and approved the Proposal on Prediction of Regular Related Transactions in 2019. For the detail, referto the Announcement on the Resolution of the 6th Session of the Ninth Board of Directors No. 2019-012, theAnnouncement on the Resolution of 2018 Annual General Meeting No. 2019-036 and the Announcement on thePrediction of the Regular Related Transactions in 2019 No. 2019-014. During the reporting period, the cumulativetransaction amount of the Company's related transactions related to its daily operations was within the expected range ofthe year.
Inquiry on the website for disclosing the provisional report concerning significant related transactions
| Description of the provisional announcements | Date of disclosure | Disclosure website |
| Announcement on the Resolution of the 6th Session of the Ninth Board of Directors, 2019-012 | March 15, 2019 | www.cninfo.com.cn |
| Announcement of the Prediction of the Regular Related Transactions in 2019, 2019-012 | March 15, 2019 | www.cninfo.com.cn |
| Announcement on the Resolution of 2018 Annual General Meeting, 2019-036 | Thursday, June 20, 2019 | www.cninfo.com.cn |
XVII. Important Contracts and Implementation
1. Custody, Contacting and Leases
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
(1) Custody
Inapplicable
(2) Contracting
Inapplicable
(3) Leases
Inapplicable
2. Significant Guarantees
(1) Guarantees
In CNY 10,000
| Outward guarantees Offered by the Company and its Subsidiaries (excluding guarantee to the subsidiaries) | ||||||||
| Names of Guarantees | Date of the announcement on the guarantee line | Guarantee line | Date of occurrence | Actual amount of guarantee | Type of guarantee | Guarantee period | Implementation status | Guarantee to related party? |
| Inapplicable | ||||||||
| Total amount of outward guarantee approved in the report period (A1) | 0 | Total amount of outward guarantee actually incurred in the report period (A2) | 0 | |||||
| Total amount of outward guarantee already approved at the end of the report period (A3) | 0 | Total ending balance of outward guarantee at the end of the report period (A4) | 0 | |||||
| Guarantee to the subsidiaries | ||||||||
| Names of Guarantees | Date of the announcement on the guarantee line | Guarantee line | Date of occurrence | Actual amount of guarantee | Type of guarantee | Guarantee period | Implementation status | Guarantee to related party? |
| Harmony | March 15, 2019 | 20,000 | Monday, December 30, 2019 | 10,000 | Guarantee with joint responsibility | 1 year | No | No |
| the Hong Kong Co. | March 15, 2019 | 3,583.12 | Saturday, April 20, 2019 | 1,701.98 | Guarantee with joint responsibility | 1 year | No | No |
| the Hong Kong Co. | March 15, 2019 | Thursday, August 22, 2019 | 360.14 | Guarantee with joint responsibility | 1 year | No | No | |
| the Hong Kong Co. | March 15, 2019 | Monday, September 23, 2019 | 360.14 | Guarantee with joint responsibility | 1 year | No | No | |
| the Hong Kong Co. | March 15, 2019 | Thursday, October 31, 2019 | 288.11 | Guarantee with joint responsibility | 1 year | No | No | |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Total guarantee quota to the subsidiaries approved in the reporting period (B1) | 23,583.12 | Total amount of guarantee to the subsidiaries actually incurred in the reporting period (B2) | 12,710.37 | |||||
| Total guarantee quota to the subsidiaries approved at the end of the reporting period (B3) | 23,583.12 | Total balance of actual guarantee to the subsidiaries at the end of the reporting period (B4) | 12,710.37 | |||||
| Guarantee among the subsidiaries | ||||||||
| Names of Guarantees | Date of the announcement on the guarantee line | Guarantee line | Date of occurrence | Actual amount of guarantee | Type of guarantee | Guarantee period | Implementation status | Guarantee to related party? |
| Inapplicable | ||||||||
| Total guarantee quota to the subsidiaries approved in the reporting period (C1) | 0 | Total amount of guarantee to the subsidiaries actually incurred in the reporting period (C2) | 0 | |||||
| Total guarantee quota to the subsidiaries approved at the end of the reporting period (C3) | 0 | Total balance of actual guarantee to the subsidiaries at the end of the reporting period (C4) | 0 | |||||
| Total amount of guarantees (i.e. Total of the previous three major items) | ||||||||
| Total guarantee quota to the subsidiaries approved in the reporting period (A1) | 23,583.12 | Total amount of outward guarantee actually incurred in the report period (A2) | 12,710.37 | |||||
| Total amount of guarantees already approved at the end of the report period (A3) | 23,583.12 | Total ending balance of guarantees at the end of the report period (A4) | 12,710.37 | |||||
| Proportion of the actual guarantees in the Company’s net assets (namely A4+B4 + C4) | 4.79% | |||||||
| where | ||||||||
| Amount of guarantees offered to the shareholders, actual controller and its related parties (D) | 0 | |||||||
| Amount of guarantee for liabilities directly or indirectly offered to the guarantees with the asset-liability ratio exceeding 70% (E) | 0 | |||||||
| Guarantee with total amount exceeding 50% of the net assets (F) | 0 | |||||||
| Total amount of the aforesaid three guarantees (D+E+F) | 0 | |||||||
| For the guarantee not yet due, guarantee responsibility incurred in the reporting period or description of the possible related discharge duty (if any) | Inapplicable | |||||||
| Note to the outward guarantee against the established procedures (if any) | Inapplicable | |||||||
Description of the guarantee with complex methodInapplicable
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
(2) Outward guarantee against regulations
Inapplicable
3. Entrusting a Third Party to Manage the Cash Assets
(1) Finance Management on Commission
Inapplicable
(2) Entrusted Loan
Inapplicable
4. Other Important Contracts
Inapplicable
XVIII Social Responsibilities
1. Implementation of social responsibilities
"The Social Responsibility Report " was already published on www.cninfo.com.cn on March 20, 2020.
2. Implementation of the social responsibility of precise poverty relief
During the reporting period of half a year, the Company had neither precise poverty relief work nor follow-up precisepoverty relief plan necessary to be carried out.
3. Environmental Protection
Does the Company or any of its subsidiaries belong to a key pollutant discharging unit as announced to the public by theenvironmental protection authority?Yes
| Name of the Company or its Subsidiary | Description of the major pollutants or specific pollutant | Way of discharging | Number of discharging outlets | Distribution of the discharging outlets | Discharging concentration | Pollutant Discharge Standards in Force | Total discharge volume | Total discharge volume verified | Over-discharging |
| Shanghai Watch Industry Co., Ltd. | Nickel and chromium effluent | Intermittent and interruption | 1 | At the port of effluent treatment equipment | Nickel ﹤0.01, chromium ﹤0.01 | Nickel:0.1; chromium:0.3 | 2640 tons/year | 3960 tons/year | None |
Construction and operation of the pollution prevention and control facilitiesShanghai Watch Co., Ltd. reconstructed the clean production facility in 2016 and added 2 sets of equipment in 2018 forthe purpose of ensuring discharging of nickel and chromium effluent to comply with the Emission Standard of Pollutantsfor Electroplating during 2018. Up to now, the facility has been operating normally and its emission has never exceededthe limit as specified by the standard. The Company's online monitoring terminal has been docked with the governmentmonitoring platform for timely testing. It complies with the standard in terms of emission factors.
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Environmental impact assessment on construction projects and other environmental protection administrativelicensing
In 2018 Yangpu District Environmental Protection Bureau of Shanghai organized and held the Clean Production Auditingand Assessment Seminar of Shanghai Watch Co., Ltd. where the company's clean production work was assessed,audited and approved. Shanghai Watch Co., Ltd. has passed the pollution discharge verification organized by YangpuDistrict Environmental Protection Bureau of Shanghai and has received the Pollutant Discharge Permit issued by thesaid authority.
Contingency Plan for Emergent Environmental IncidentsShanghai Watch Co., Ltd. prepared the Emergency Response Plan against Emergent Environmental Incidents andregularly organizes training and exercise every year. The aforesaid plan has been approved and filed for record byYangpu District Environmental Protection Bureau of Shanghai and has been published on the Environmental InformationDisclosure Platform of Enterprises and Institutions of Shanghai.
Environment Self-Monitoring ProgramYangpu District Environmental Protection Bureau of Shanghai conducts supervision once every quarter. The companyentrusts Shanghai Light Industry Environment Protection and Pressure Vessel Monitoring General Station, a competentindependent agent, to conduct the monitoring every year. The company is itself equipped with monitoring instruments andconducts self-monitoring at least 4 times every month.
Other environment information necessary to be disclosedThe company has disclosed the concerned information on the Environmental Information Disclosure Platform ofEnterprises and Institutions of Shanghai according to the requirements of the local environmental protection authorities.Website name: http://xxgk.eic.sh.cn.Other information in connection with the environmental protectionNone
XIX. Notes to Other Significant Events
1. Change the Company Name and the Abbreviation of A-share Securities
The 14th Session of the Ninth Board of Directors held on December 9, 2019 and the 3rd Extraordinary General Meeting2019 held on December 30, 2019 reviewed and approved the Proposal on Change of the Company Name to FIYTAPrecision Technology Co., Ltd. and the abbreviation of its A-share securities to FIYTA. For the detail, refer to the"Announcement on Resolutions of the 14th Session of the Ninth Board of Directors 2019-062" and "Announcement onResolutions of the 3rd Extraordinary General Meeting 2019-066” and" Announcement on Change of the Company Nameand the Abbreviation of A-share Securities 2020-006" disclosed in the Securities Times, Hong Kong Commercial Daily andhttp://www.cninfo.com.cn.
2. Change of the Controlling Shareholder’s Equity
On October 2, 2019, the Company received a notice from AVIC International Holdings Limited, the Company’s controllingshareholder, according to which AVIC International Holding Corporation, AVIC International Shenzhen Company Limited
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
and AVIC International Holdings Limited were going to be merged. Up to now, the implementation of the acquisition andmerger has not been completed. After the completion of the merger, AVIC International will directly hold 162,977,327shares of the Company (taking 36.79% of the total shares of the Company) and become the Company's controllingshareholder. The ultimate actual controller of the Company remains unchanged. For details of the progress, refer to theAnnouncement on Changes in the Controlling Shareholder’s Equity 2019-049, the Summary of Acquisition Report2019-050, and the Announcement on the Application of the Actual Controller for Prolonging the Reply to the ExemptionOffer Acquisition Feed-back Opinions 2020-002 and the Announcement on the Application of AVIC International HoldingCorporation for the Reply to the Exemption Offer Acquisition Feed-back Opinions 2020-008 “ disclosed on the SecuritiesTimes, Hong Kong Commercial Daily and http://www.cninfo.com.cn.
3. Amendment of the Articles of Association
The 6th Session of the Ninth Board of Directors held by the Company on March 13, 2019, the 9th Session of the NinthBoard of Directors held on June 6, 2019, and the 13th Session of the Ninth Board of Directors held on November 19, 2019,the 14th Session of the Ninth Board of Directors held on December 9, 2019, the 2018 Annual General Meeting held onJune 19, 2019, and 2019 3rd Extraordinary General Meeting held on December 30, 2019 respectively reviewed andapproved the "Proposal on Amendment of the Articles of Association". For the detail, refer to the relevant announcementsdisclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn.
4. Matters concerning Repurchase of the Company’s Partial Domestically Listed Foreign Shares (B Shares)The 7th session of the Ninth Board of Directors held on April 4, 2019 and 2019 2nd Extraordinary General Meeting held onApril 23, 2019, reviewed and approved the “Proposal for the Repurchase of Partial Domestically Listed Foreign Shares(B-shares) in the Company, and subsequently the Company disclosed the repurchase report and published a series ofannouncements on the progress in accordance with relevant regulations. For detail of the above, please refer to therelevant announcements disclosed by the Company in the Securities Times, Hong Kong Commercial Daily andwww.cninfo.com.cn.
5. Appointment of Directors, Supervisors and Senior Executives
2019 1st Staff Representative Congress held on April 12, 2019 reviewed and approved the Proposal on Election of theStaff Representative Supervisor of the Ninth Supervisory Committee; Mr. Fang Jiasheng was elected the staffrepresentative supervisor of the Ninth Supervisory Committee. For the detail, refer to the Announcement on theResolution of the Staff Representative Congress No. 2019-021 disclosed on the Securities Times, Hong KongCommercial Daily and www.cninfo.com.cn.
The 11th session of the Ninth Board of Directors held on September 29, 2019 reviewed and approved the Proposal onAppointment of Deputy GMs of the Company; Mr. Tang Haiyuan and Mr. Xu Chuangyue were appointed as deputy GMs ofthe Company. For the detail, refer to the Announcement on the Resolution of the 11th session of the Ninth Board ofDirectors No. 2019-047 disclosed on the Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn.
The 13th session of the Ninth Board of Directors held on November 19, 2019 reviewed and approved the Proposal on theChange of the Secretary of the Board, and Mr. Pan Bo was appointed as the Secretary of the Board. For the detail, referto the Announcement on the Resolution of the 13th session of the Ninth Board of Directors No. 2019-059 disclosed on theSecurities Times, Hong Kong Commercial Daily and www.cninfo.com.cn.
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
XX. Significant Events of the Company's SubsidiariesInapplicable
Section 6 Change of Shares and Particulars about Shareholders
I. Change of Shares
1. Change of Shares
In shares
| Before the change | Increase / Decrease (+/ -) | After the change | |||||||
| Quantity | Proportion | New issuing | Bonus shares | Shares converted from reserve | Others | Sub-total | Quantity | Proportion | |
| I. Restricted shares | 380,513 | 0.09% | 4,224,000 | 4,224,000 | 4,604,513 | 1.04% | |||
| 1. Shares held by the state | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| 2. State corporate shares | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| 3. Other domestic shares | 380,513 | 0.09% | 4,224,000 | 4,224,000 | 4,604,513 | 1.04% | |||
| Including: Domestic corporate shares | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| Shares held by domestic natural persons | 380,513 | 0.09% | 4,224,000 | 4,224,000 | 4,604,513 | 1.04% | |||
| 4、Foreign invested shares | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| Including: Foreign corporate shares | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| Shares held by foreign natural persons | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| II. Unrestricted shares | 438,364,368 | 99.91% | 0 | 0 | 438,364,368 | 98.96% | |||
| 1. CNY ordinary shares | 356,716,368 | 81.30% | 0 | 0 | 356,716,368 | 80.53% | |||
| 2. Foreign invested shares listed in Mainland China | 81,648,000 | 18.61% | 0 | 0 | 81,648,000 | 18.43% | |||
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| 3. Foreign invested shares listed abroad | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| 4. Others | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| III. Total shares | 438,744,881 | 100.00% | 4,224,000 | 4,224,000 | 442,968,881 | 100.00% |
Cause of the change of sharesDuring the reporting period, the Company finished awarding the A-share restricted stock as specified in its stock incentiveprogram (Phase I) and registering the same for listing. Upon completion of the share awarding, the Company's totalcapital stock increased to 442,968,881 shares.
Approval of Change of the SharesThe 3rd session of the Ninth Board of Directors and 2019 1st Extraordinary General Meeting held respectively onNovember 12, 2018 and January 11, 2019 decided to start 2018 A-Share Restricted Stock Incentive Program (Phase I).The 5th session of the Ninth Board of Directors held on January 11, 2019 decided to award 4.224 million A-sharerestricted shares to 128 persons eligible for the incentive.
Transfer of the Shares ChangedThe persons eligible for the incentive in the Company's 2018 A-Share Restricted Stock Incentive Program (Phase I) havehandled the procedures for registration with China Securities Depository and Clearing Corporation Limited (CSDC)Shenzhen Office.
The 6th session of the Ninth Board of Directors held on March 13, 2019 reviewed and approved the Proposal forAmendment of the Articles of Association, according to which the Company’s registered capital has been changed fromCNY438,744,881 into CNY 442,968,881.
Progress of implementation of the stock repurchaseThe 7th session of the Ninth Board of Directors held on April 4, 2019 and 2019 2nd Extraordinary General Meeting held onApril 23, 2019, reviewed and approved the “Proposal for the Repurchase of Partial Domestically Listed Foreign Shares inthe Company (B-shares), and subsequently the Company disclosed the repurchase report and published a series ofannouncements on the progress in accordance with relevant regulations. For detail of the above, please refer to therelevant announcements disclosed by the Company in the Securities Times, Hong Kong Commercial Daily andwww.cninfo.com.cn.
As of the end of the reporting period, the Company repurchased 10,010,000 shares in the Company by way of centralizedbidding, accounting for 2.26% of the Company's total capital stock; the highest transaction price of the repurchasedshares was HK$6.29 per share, and the lowest transaction price was HK$5.71/share, the total amount paid has beenHK$60,289,369.30 (excluding stamp duty, commission, etc.) The Company’s repurchase of the shares was in compliancewith the relevant laws and regulations and in line with the Company's established repurchase program.
Progress of implementation of reduction of the holding size of the shares repurchased by centralized biddingInapplicable
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Influence of the change of the shares upon such financial indicators as the basic EPS and diluted EPS, net asset valueper share attributable to the common stockholders in the past year and the latest periodDuring the reporting period, the Company finished awarding the 2018 A-share Restricted Stock Incentive Program (PhaseI); and the earnings per share and return on equity at the end of the reporting period were calculated by weighted average.
| Net return on equity, weighted average (%) | Earnings per share | |
| Basic earnings per share (CNY/share) | Diluted earnings per share (CNY/share) | |
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| 8.21% | 7.30% | 0.4943 | 0.4190 | 0.4943 | 0.4190 |
Other information the Company considers necessary or required by the securities regulatory authority to be disclosed.Inapplicable
2. Change of the Restricted Shares
In shares
| Names of the Shareholders | Number of restricted shares at the beginning of the reporting period | Number of restricted shares increased in the reporting period | Number of restricted shares relieved in the reporting period | Number of restricted shares at the end of the reporting period | Cause of restriction | Date of relieving the restriction |
| Huang Yongfeng | 60,000 | 100,000 | 0 | 160,000 | Locked shares for senior executives and restricted shares as the granted locked shares | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Chen Libin | 60,000 | 100,000 | 0 | 160,000 | Locked shares for senior executives and restricted shares as the granted locked shares | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Lu Bingqiang | 72,233 | 24,078 | 0 | 96,311 | Locked shares for senior executives | To be unlocked subject to the conditions of the locked shares for senior executives |
| Lu Wanjun | 37,500 | 80,000 | 0 | 117,500 | Locked shares for senior executives and restricted shares as the granted locked shares | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Liu Xiaoming | 37,500 | 80,000 | 0 | 117,500 | Locked shares for senior executives and restricted shares as the granted locked shares | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Pan Bo | 37,500 | 80,000 | 0 | 117,500 | Locked shares for senior executives and restricted shares as the granted locked shares | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Li Ming | 37,530 | 80,000 | 0 | 117,530 | Locked shares for senior executives and restricted shares as the granted locked shares | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Chen Zhuo | 38,250 | 80,000 | 0 | 118,250 | Locked shares for senior executives and restricted shares as the granted locked shares | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Tang Haiyuan | 0 | 60,000 | 0 | 60,000 | Restricted shares as the granted locked shares | To be unlocked subject to the conditions as specified in the measures for the Company’s equity incentive management |
| Xu Chuangyue | 0 | 50,000 | 0 | 50,000 | Restricted shares as the granted locked shares | To be unlocked subject to the conditions as specified in the measures for the Company’s equity incentive management |
| Other persons eligible for the incentive of A-share restricted stock (119 persons) | 0 | 3,514,000 | 0 | 3,514,000 | Restricted shares as the granted locked shares | To be unlocked subject to the conditions as specified in the measures for the Company’s equity incentive management |
| Total | 380,513 | 4,248,078 | 0 | 4,628,591 | -- | -- |
II. Issuing and Listing
1. Issuing of securities (with preferred stock exclusive) in the reporting period
| Description of the stock and its derivative securities | Issuing date | Issuing price (or interest rate) | Issuing quantity | Date of listing | Quantity approved for listing for trading | Expiry date of trading |
| Stock category | ||||||
| A-share ordinary shares | January 11, 2019 | 4.40 | 4,224,000 | January 30, 2019 | ||
| Convertible corporate bonds, convertible corporate bonds for separate transactions, debentures | ||||||
| Other derivative securities | ||||||
Issuing of securities (with preferred stock exclusive) in the reporting periodThe 3rd session of the Ninth Board of Directors and 2019 1st Extraordinary General Meeting held respectively onNovember 12, 2018 and January 11, 2019 decided to start 2018 A-Share Restricted Stock Incentive Program (Phase I),
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
which was later on reviewed and approved at the 5th session of the Ninth Board of Directors held on January 11, 2019,and the Company eventually granted 4.224 million restricted A-shares to 128 persons eligible for the incentive. Thegranting date of this part of the restricted stock was January 11, 2019; on January 30, 2019, the granting was completedand the stock was registered for listing. For the detail, refer to the Announcement on the Completion of Granting theRestricted A-Shares according to the Incentive Program (Phase I) No. 2019-009 disclosed in the Securities Times, HongKong Commercial Daily and www.cninfo.com.
2. Note to changes of the company’s total shares and the structure of shareholders as well as the structure ofassets and liabilitiesDuring the reporting period, the persons eligible for the incentive in the Company's 2018 A-Share Restricted StockIncentive Program (Phase I) have handled the procedures for registration with China Securities Depository and ClearingCorporation Limited (CSDC) Shenzhen Office. The Company’s total shares have changed from 438,744,881 shares to442,968,881 shares.
3. Existing Employee Shares
Inapplicable
III. Shareholders and Actual Controlling Shareholder
1. Number of Shareholders and Shareholding
In shares
| Total common shareholders at the end of the reporting period | 43,540 | Total common shareholders at the end of the month before the date of disclosing the annual report | 39,155 | Total preference shareholders with the voting power recovered at the end of the reporting period (if any) (Refer to Note 8) | 0 | Total preference shareholders with the voting power recovered at the end of the month before the day of disclosing the Annual Report (if any) (Refer to Note 8) | 0 | |||||||
| Shares held by the shareholders holding over 5% shares or the top ten shareholders | ||||||||||||||
| Names of the Shareholders | Nature of the shareholder | Shareholding proportion | Number of shares held at the end of the reporting period | Increase/decrease in the reporting period | Number of the restricted shares held | Quantity of unrestricted shares held | Pledging or freezing | |||||||
| Status of the shares | Quantity | |||||||||||||
| AVIC International Holding Limited | State corporate | 36.79% | 162,977,327 | 0 | 0 | 162,977,327 | ||||||||
| #Yang Zugui | Domestic natural person | 3.39% | 15,023,406 | -2,990,100 | 0 | 15,023,406 | ||||||||
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Basic Endowment Insurance Fund Portfolio 1005 | State-owned legal person | 0.43% | 1,882,800 | 1,882,800 | 0 | 1,882,800 | ||
| Huang Haitang | Domestic natural person | 0.36% | 1,610,000 | 1,610,000 | 0 | 1,610,000 | ||
| Na Zhizhong | Domestic natural person | 0.34% | 1,495,000 | 1,495,000 | 0 | 1,495,000 | ||
| High-Flyer Asset Management (Zhejiang) Co., Ltd. - High-Flyer Quant Qingxi No. 2 Private-equity Fund | Domestic non-state-owned legal person | 0.26% | 1,149,993 | 1,149,993 | 0 | 1,149,993 | ||
| # Liang Lu | Domestic natural person | 0.23% | 1,030,700 | 1,030,700 | 0 | 1,030,700 | ||
| Zhang Linling | Domestic natural person | 0.23% | 1,000,000 | 1,000,000 | 0 | 1,000,000 |
| Domestic non-state-owned legal person | 0.18% | 811,600 | 811,600 | 0 | 811,600 | |||
| Liang Shaoyun | Domestic natural person | 0.18% | 781,312 | 0 | 0 | 781,312 | ||
| About the fact that a strategic investor or ordinary corporate became one of the top ten shareholders due to placement of new shares (if any) (Refer to Note 3) | Inapplicable | |||||||
| Explanation on associated relationship or consistent action of the above shareholders | Inapplicable | |||||||
| Shares held by top 10 shareholders of unrestricted shares | ||||||||
| Names of the Shareholders | Quantity of unrestricted shares held at the end of the reporting period | Share type | ||||||
| Share type | Quantity | |||||||
| AVIC International Holding Limited | 162,977,327 | CNY ordinary shares | 162,977,327 | |||||
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| #Yang Zugui | 15,023,406 | CNY ordinary shares | 15,023,406 |
| Basic Endowment Insurance Fund Portfolio 1005 | 1,882,800 | CNY ordinary shares | 1,882,800 |
| Huang Haitang | 1,610,000 | CNY ordinary shares | 1,610,000 |
| Na Zhizhong | 1,495,000 | CNY ordinary shares | 1,495,000 |
| High-Flyer Asset Management (Zhejiang) Co., Ltd. - High-Flyer Quant Qingxi No. 2 Private-equity Fund | 1,149,993 | CNY ordinary shares | 1,149,993 |
| # Liang Lu | 1,030,700 | CNY ordinary shares | 1,030,700 |
| Zhang Linling | 1,000,000 | CNY ordinary shares | 1,000,000 |
| Industrial and Commercial Bank of China Co., Ltd. - HUITIANFU Technology Innovation Flexible Configuration Mixed Securities Investment Fund | 811,600 | CNY ordinary shares | 811,600 |
| Liang Shaoyun | 781,312 | CNY ordinary shares | 781,312 |
| Explanation to the associated relationship or consistent action among the top 10 shareholders of non-restricted negotiable shares and that between the top 10 shareholders of non-restricted negotiable shares and top 10 shareholders. | Inapplicable | ||
| Note to the top 10 shareholders involved in margin financing & securities lending (if any) (Refer to Note 4) | Inapplicable | ||
Did the top ten common shareholders or top ten shareholders of unrestricted common shares conduct contractualrepurchase during the reporting period?No
2. Controlling Shareholder
Nature of the controlling shareholder: State-owned shareholding directly under the central government
Type of the controlling shareholder: corporate
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Name of the Controlling Shareholder | Legal Representative /Leader | Date of incorporation | Organization Code | Leading business activities |
| AVIC International Holding Limited | Liu Hongde | June 20, 1997 | 91440300279351229A | Investment in industries (specific projects are subject to application for approval); domestic trade, material supply and distribution (with commodities for exclusive operation, exclusive control and monopoly exclusive); import and export. |
| Equity in other domestic and foreign listed companies held by the controlling shareholder by means of control and mutual shareholding in the reporting period. | AVIC International holds 14.24% equity in Tianma Micro-electronics Co., Ltd. (SHEN TIANMA A 000050) and 69.05% equity in Shennan Circuits Company Limited (SHENNAN CIRCUITS 002916). | |||
Change of the controlling shareholder in the reporting periodInapplicable
3. Actual Controller and its Concerted Parties
Nature of the actual controller: State-owned assets regulatory agency directly under the central government
Type of the actual controller: corporate
| Name of the Actual Controller | Legal Representative /Leader | Date of incorporation | Organization Code | Leading business activities |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| AVIC International Holding Corporation | Liu Hongde | April 12, 1983 | 911100001000009992 | Import & export; warehousing; investment and management of industry, hotel, property, real estate industry; development, sales and maintenance of new energy equipment; exhibitions; technology transfer and technical services related to the above businesses; dispatching contract workers required for overseas projects; sales of precursor chemicals. |
| Equity in other domestic and foreign listed companies controlled by the actual controller in the reporting period | AVIC International holds 37.50% equity in AVIC International Holdings Limited (0161.HK) and 8.40% equity in Tianma Micro-electronics Co., Ltd. (SHEN TIANMA A 000050). | |||
Change of the actual controller in the reporting periodInapplicableBlock Diagram of the Ownership and Control Relations between the Company and the Actual Controller
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| 100% 91.14% 8.86% 100% 37.50% 33.93% 36.79% |
The actual controller controls the Company by means of trust or managing the assets in other ways:
Inapplicable
4. Other Corporate Shareholder Holding over 10% of the Company’s Shares
Inapplicable
5. Shareholding Reduction Restriction on the Controlling Shareholder, the Actual Controller, the ReorganizingParty and other Committing PartyInapplicable
State-owned Assets Supervision and Administration
Commission of the State Council
Aviation Industry Corporation of China
Aviation Industry Corporation of China
AVIC International Holding Corporation
AVIC International Holding CorporationAVIC International Shenzhen Company Limited
AVIC International Shenzhen Company Limited
AVIC International Holdings Limited
AVIC International Holdings LimitedFIYTA Precision Technology Co., Ltd.
FIYTA Precision Technology Co., Ltd.AVIC CCB Aviation Industry Equity Investment (Tianjin)Co., Ltd.
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Section 7 About the Preferred SharesInapplicable
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Section 8 About the Convertible BondsInapplicable
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Section 9 Directors, Supervisors, Senior Executives and Employees
I. Change in Shares Held by Directors, Supervisors and Senior Executives
| Name | Title | Office Status | Gender | Age | Starting date of tenure | Expiry date of tenure | Number of shares held at the beginning of the reporting period (shares) | Shareholding increased in the reporting period (shares) | Shareholding decreased in the reporting period (shares) | Other increase/decrease (shares) | Number of shares held at end of the reporting period (shares) |
| Huang Yongfeng | Chairman | In office | Male | 46 | September 11, 2018 | September 11, 2021 | 80,000 | 100,000 | 0 | 0 | 180,000 |
| Wang Mingchuan | Director | In office | Male | 54 | September 11, 2018 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Fu Debin | Director | In office | Male | 43 | September 11, 2018 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Xiao Zhanglin | Director | In office | Male | 44 | September 11, 2018 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Wang Bo | Director | In office | Male | 41 | September 11, 2018 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Chen Libin | Director & GM | In office | Male | 56 | September 11, 2018 | September 11, 2021 | 80,000 | 100,000 | 0 | 0 | 180,000 |
| Wang Jianxin | Independent director | In office | Male | 50 | September 11, 2018 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Zhong Hongming | Independent director | In office | Male | 45 | September 11, 2018 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Tang Xiaofei | Independent director | In office | Male | 46 | September 11, 2018 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Wang Baoying | Chairman of the Supervisory Committee | In office | Male | 56 | September 11, 2018 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Sheng Qing | Supervisor | In office | Female | 44 | September 11, 2018 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Fang Jiasheng | Supervisor | In office | Male | 33 | April 12, 2019 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Lu Wanjun | Deputy GM | In office | Male | 53 | October 08, 2018 | October 08, 2021 | 50,000 | 80,000 | 0 | 0 | 130,000 |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Liu Xiaoming | Deputy GM | In office | Male | 49 | October 08, 2018 | October 08, 2021 | 50,000 | 80,000 | 0 | 0 | 130,000 |
| Pan Bo | Deputy GM and Secretary of the Board | In office | Male | 44 | October 08, 2018 | October 08, 2021 | 50,000 | 80,000 | 0 | 0 | 130,000 |
| Li Ming | Deputy GM | In office | Male | 47 | October 08, 2018 | October 08, 2021 | 50,040 | 80,000 | 0 | 0 | 130,040 |
| Chen Zhuo | Chief Accountant | In office | Male | 44 | October 08, 2018 | October 08, 2021 | 51,000 | 80,000 | 0 | 0 | 131,000 |
| Tang Haiyuan | Deputy GM | In office | Male | 47 | September 29, 2019 | October 08, 2021 | 0 | 60,000 | 0 | 0 | 60,000 |
| Xu Chuangyue | Deputy GM | In office | Male | 41 | September 29, 2019 | October 08, 2021 | 0 | 50,000 | 0 | 0 | 50,000 |
| Zou Zhixiang | Supervisor | Retired | Male | 36 | September 11, 2018 | April 10, 2019 | 0 | 0 | 0 | 0 | 0 |
| Lu Bingqiang | Deputy GM | Retired | Male | 59 | October 08, 2018 | October 08, 2019 | 96,311 | 0 | 0 | 0 | 96,311 |
| Total | -- | -- | -- | -- | -- | -- | 507,351 | 710,000 | 0 | 0 | 1,217,351 |
II. Personnel Change in Directors, Supervisors and Senior Executives
| Name | Office Taken | Type | Date: | Cause |
| Fang Jiasheng | Supervisor | Appointment & removal | April 12, 2019 | Elected a staff representative supervisor at 2019 1st Staff Representative Congress. |
| Tang Haiyuan | Deputy GM | Appointment & removal | September 29, 2019 | Reviewed and approved at 11th Session of the Ninth Board of Directors, he was appointed as a deputy GM of the Company. |
| Xu Chuangyue | Deputy GM | Appointment & removal | September 29, 2019 | Reviewed and approved at 11th Session of the Ninth Board of Directors, he was appointed as a deputy GM of the Company. |
| Pan Bo | Secretary of the Board | Appointment & removal | November 19, 2019 | Reviewed and approved at 13th Session of the Ninth Board of Directors, he was appointed as the Secretary of the Board of the Company. |
| Zou Zhixiang | Supervisor | Retired | April 10, 2019 | He resigned the office of staff representative supervisor of the Ninth Supervisory Committee due to personal reason. |
| Lu Bingqiang | Deputy GM | dismissal | October 08, 2019 | He resigned the office of a deputy GM of the Company due to job change. |
| Lu Wanjun | Secretary of the Board | dismissal | November 18, 2019 | He resigned the office of the Secretary of the Board of the Company due to job change. |
III. Profile of Senior ExecutivesProfessional Background, CV and Major Duties of Directors, Supervisors and Senior Executives in Office
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Mr. Huang Yongfeng, born in May, 1974, senior engineer, master of management engineering of Beijing University ofAeronautics & Astronautics, and EMBA of China Europe International Business School. He is now the Secretary of theCPC Committee and Chairman of the Board of the Company. Mr. Huang used to be the chairman and general manager ofAVIC INTL Zhuhai Co., Ltd., assistant to the general manager of AVIC International Holding Corporation, deputy generalmanager, assistant to the general manager, manager of the enterprise strategy and management department of AVICInternational Shenzhen Co., Ltd., director of AVIC Sunda Holding Company Limited, director of Rainbow DepartmentStore Co., Ltd., director of Tianma Microelectronics Co., Ltd. and chairman of Shenzhen Zhongshi Mechanical EquipmentCo., Ltd.
Mr. Wang Mingchuan, born in December 1966, senior accountant, master of management engineering of Tongji University,and EMBA of China Europe International Business School. He is a director of the Company, deputy GM, chief accountantand director of AVIC International Shenzhen Co., Ltd., a director of Tianma Microelectronics Co., Ltd., a director ofRainbow Department Store Co., Ltd. and a director of Shennan Circuits Co., Ltd. He used to be a financial supervisor ofthe financial division of Chengdu Engine Company, manager of the financial department of Shenzhen ShenrongEngineering Plastic Company, manager of the comprehensive management department and chief financial officer ofShenzhen CATIC Trading Co., Ltd., manager of the financial and audit department, manager of the financial departmentand vice chief accountant of AVIC International Shenzhen Co., Ltd. and chief of the financial department and vice chiefaccountant of AVIC International Holding Corporation and a director of AVIC Sunda Holding Company Limited.
Mr. Fu Debin, born in February 1977, master of engineering and doctor of engineering of Beijing University of Aeronautics& Astronautics. He is a director in office of the Company and the head of H.R. department of AVIC International HoldingCorporation, a director of AVIC International Shenzhen Co., Ltd., a director of Tianma Microelectronics Co., Ltd. and adirector of Shennan Circuits Co., Ltd. He used to be the head of the administration and management department anddeputy head of the management department of AVIC International Holding Corporation, deputy director of the party policyoffice and deputy secretary of the general Party branch of Power School of Beijing University of Aeronautics &Astronautics.
Mr. Xiao Zhanglin, born in January 1976, senior engineer, MBA of Shanghai Jiaotong University. He is a director in officeof the Company, the supervisor of the planning and operation department of AVIC International Shenzhen Co., Ltd., thesecretary of AVIC International Holding Corporation, a director of Shennan Circuits Co., Ltd, a director of RainbowDepartment Store Co., Ltd., a director of AVIC East China Optoelectronics Co., Ltd a director of Shenzhen AeroFasteners MFG Co., Ltd., a director of Shenzhen Grand Skylight Hotel Management Company Limited and a director ofShenzhen Shanghai Hotel. Mr. Xiao used to be the chief of the retail and high-end consumer goods office, deputy sectionchief of the strategy development department of AVIC International Holding Corporation and the assistant to the sectionchief of the enterprise strategy and management department of AVIC International Shenzhen Co., Ltd., a director ofTianma Microelectronics Co., Ltd.and a director of AVIC Sunda Holding Company Limited.
Mr. Wang Bo, born in July, 1979, MBA of Renmin University of China. He is a director of the Company, section chief of theHR department of AVIC International Shenzhen Co., Ltd., a director of Shennan Circuits Co., Ltd, a director of ShenzhenAero Fasteners MFG Co., Ltd., a director of Shenzhen Grand Skylight Hotel Management Company Limited. Mr. Wangused to be the manager and controller of the HR department of AVIC Real Estate Co., Ltd. And deputy supervisor of theHR department of AVIC International Holding Corporation.
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Mr. Chen Libin, born in June 1964, master of economics of the Party School of Guangdong Provincial CPC Committeeand EMBA of Sun Yat-Sen University. He is a director in office, Vice Secretary of the CPC Committee and the GM of theCompany. Mr. Chen used to be the deputy General Manager and Secretary of the Board of the Company, deputy sectionchief and section chief of the Party’s affairs of the Party-masses Work Department and senior commissioner, deputymanager and manager of the enterprise culture department of AVIC International Shenzhen Co., Ltd.
Mr. Wang Jianxin, born in June, 1970, graduated from Zhongnan University of Economics and Law, a Chinese CPA. Mr.Wang is a partner of ShineWing Certified Public Accountants (Special General Partnership) and independent director ofChongqing Fuling Zhacai Group Co.,Ltd.
Mr. Zhong Hongming, born in January 1975, graduated from Renmin University of China, PhD of law and post-doctor. Mr.Zhong is an associate research fellow of Law Research Institute of Sichuan Academy of Social Sciences and concurrentlya director of China Securities Law Research Council, an independent director of Mango Excellent Media Co., Ltd. andDAGANG Holding Group Co., Ltd.
Mr. Tang Xiaofei, born in May, 1974, graduated from Southwest Jiaotong University, professor and doctorial tutor. Mr. Tangis a professor and doctorial tutor of the Business School of Southwest Jiaotong University, director of Urban BrandStrategy Research Institute of Southwest University of Finance and Economics, enjoying the title of Outstanding Talent ofthe New Century granted by the Ministry of Education, Secretary-general and executive council member of theInternational Brand Strategy Society, a council member of Chinese Association of Market Development, consultant ofAPEX Ogilvy, expert consultant of brand development of Chengdu Municipal Government, expert of Chengdu FamousTrademark Determination Board, executive director of CCTV WDY, independent director of Sichuan LanguangDevelopment Co., Ltd.
Mr. Wang Baoying, born in July, 1964, senior engineer at research fellow level, bachelor of Beijing University ofAeronautics & Astronautics, EMBA of China Europe International Business School. He is the Chairman of the SupervisoryCommittee, managing director of AVIC International Shenzhen Co., Ltd., the chairman of the supervisory committee ofTianma Microelectronics Co., Ltd., the chairman of the supervisory committee of Rainbow Department Store Co., Ltd. andthe chairman of the supervisory committee of Shennan Circuits Co., Ltd. He used to be a director of the Company,section-chief of AVIC Tianjin Aviation Electro-mechanical Co., Ltd., deputy GM of Shenzhen Rainbow Department StoreCo., Ltd., first deputy GM of Shenzhen Nam Kwong (Group) Company Limited, manager of the enterprise strategy andmanagement department and assistant of the GM of CATIC Shenzhen, executive director of AVIC International HoldingLimited.
Ms. Sheng Qing, born in April, 1976, accountant, bachelor of international accounting specialization of Jiangxi Universityof Finance and Economics, master of organization and HR management of the University of Hong Kong. She is themanager of the discipline inspection, supervision and audit department of the Company. She used to be a supervisor ofthe Eighth Supervisory Committee, assistant to manager, deputy manager and manager of HR department and seniorbusiness manager of the audit department of the Company.
Mr. Fang Jiasheng, born in December, 1987, accountant and bachelor of financial management of South China NormalUniversity. He is now the assistant to the manager of the descipline inspection, audit and law department of the Company.
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
He used to be the assistant to the manager of the financial department, senior financial manager, finan cial manager andfinancial supervisor.
Mr. Lu Wanjun, born in February, 1967, accountant, EMBA of Sino-European International Management Institute. Mr. Lu isthe Secretary of Committee for Discipline Inspection, a deputy GM of the Company. He used to be the assistant to the GMof the Company, executive deputy GM and deputy GM, the assistant to the GM and concurrently the manager of thefinancial department of Shenzhen Harmony World Watches Center Co., Ltd.
Mr. Liu Xiaoming, born in 1971, engineer, economist, bachelor of mechanical engineering of Beijing University ofAeronautics & Astronautics, and EMBA of China Europe International Business School. He is a deputy GM of theCompany, the managing director of Shenzhen Harmony World Watches Center Co., Ltd. He used to be the assistant tothe GM of the Company, a deputy GM and the assistant to the GM of Shenzhen Harmony World Watches Center Co., Ltd.
Mr. Pan Bo, born in March, 1976, engineer, bachelor of electromechanical engineering of Beijing University of Aeronautics& Astronautics, and EMBA of China Europe International Business School. Mr. Pan is a deputy GM, the Secretary of theBoard and the GM of the Brand Project Department of the Company. Mr. Pan used to be the assistant to the GM of theCompany, executive deputy GM, deputy GM, the assistant to the GM, manager of the sales department, manager of thelogistic department, manager of the after-sale department, etc. of FIYTA Sales Co., Ltd.
Mr. Li Ming, born in September, 1973, bachelor of marketing of Zhongnan University of Economics and Law and EMBA ofChina Europe International Business School. He is now a deputy GM of the Company. Mr. Li used to be the assistant tothe GM and chief HR officer of the Company, a deputy GM, the assistant to the GM and manger of the HR department ofShenzhen Harmony World Watches Center Co., Ltd.; chief HR officer and the GM of the marketing center of ChinaNetcom Shenzhen; manager of big customer market planning of China Telecom Shenzhen.
Mr. Chen Zhuo, born in September, 1976, senior accountant, bachelor of accounting of Central University of Finance andEconomics, MBA of Wuhan University and EMBA of China Europe International Business School. He is the chiefaccountant of the Company. Mr. Chen used to be a supervisor and the assistant to the GM of the Company, the managerof the strategy and information department, deputy manager of the strategy and information department and securitiesaffairs representative of the Company, a deputy GM, the assistant to the GM and the manager of the financial informationdepartment of FIYTA Sales Co., Ltd.
Mr. Tang Haiyuan, born in February, 1973, senior engineer, bachelor of plastic molding technology and equipment of HefeiUniversity of Technology, and EMBA of China Europe International Business School. He is a deputy GM of the Companyand the GM of Shenzhen FIYTA Technology Development Co., Ltd. Mr. Tang used to work for Shenzhen FIYTASophisticated Timepieces Manufacture Co., Ltd., taking the offices of the GM, a deputy GM, the assistant to the GM, andthe manager of its product quality department, manager and deputy manager of the engineering and technical department;also work for Shenzhen FIYTA Technology Development Co., Ltd., taking offices of the assistant to the GM and themanager of the technical department.
Mr. Xu Chuangyue, born in November, 1979, bachelor of international economics and trading of Beijing Wuzi Universityand EMBA of China Europe International Business School. He is now a deputy GM of the Company. Mr.Xu used to work inFIYTA Sales Co., Ltd. taking the office of a deputy GM, in Shiyuehui Boutique (Shenzhen) Co., Ltd., taking the offices of
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
the GM, the assistant to GM of the sales department, the manager of the market department, the manager of Xi'an Branchand the business manager of Beijing Branch.
Office taking in shareholder companies
| Names of the persons in office | Names of the Shareholders | Titles engaged in the shareholders | Starting date of tenure | Expiry date of tenure | Does he/she receive remuneration or allowance from the shareholder |
| Wang Mingchuan | AVIC International Shenzhen Co., Ltd. | Deputy GM and Chief Accountant | January 23, 2017 | Yes | |
| Fu Debin | AVIC International Holding Corporation | Head of the HR Dept. | July 01, 2016 | Yes | |
| Xiao Zhanglin | AVIC International Holding Limited | Company secretary | February 05, 2018 | Yes | |
| Wang Bo | AVIC International Shenzhen Co., Ltd. | Head of the HR Dept. | April 25, 2017 | Yes | |
| Wang Baoying | AVIC International Shenzhen Co., Ltd. | Special commissioner | April 11, 2017 | Yes | |
| Explanation on the office taking in shareholder companies | Inapplicable | ||||
Office taking in other organizations
| Names of the persons in office | Names of other organizations | Titles engaged in the other organizations | Starting date of tenure | Expiry date of tenure | Does he/she receive remuneration or allowance from other organizations |
| Wang Jianxin | Shine Wing Certified Public Accountants | Partner | December 01, 2006 | Yes | |
| Zhong Hongming | Law Research Institute of Sichuan Academy of Social Sciences | Associate research fellow | November 24, 2017 | Yes |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Tang Xiaofei | Business School of Southwest Jiaotong University | Doctorial tutor | September 1, 2008 | Yes | |
| Tang Xiaofei | Business School of Southwest Jiaotong University | Professor | December 1, 2011 | Yes | |
| Explanation on the office taking in other organizations | Inapplicable | ||||
Punishment imposed by the securities regulatory authority on the directors, supervisors and senior executives both inoffice and having left their posts in the reporting period.Inapplicable
IV. Remuneration to Directors, Supervisors and Senior ExecutivesDecision-making procedures, basis for determining the remuneration and actual payment to directors, supervisors andsenior executive to directors, supervisors and senior executives:
The Company practiced the annual salary system for its directors and senior executives. The annual salary structureconsists of the basic annual salary and performance based annual salary. The assessment of senior executives isconducted according to the Measures for Administration of the Remuneration to Senior Executives.
Remuneration to Directors, Supervisors and Senior Executives during the Reporting Period
In CNY 10,000
| Name | Title | Gender | Age | Office Status | Total pretax remuneration received from the Company | Is the remuneration from one of the Company's related parties |
| Huang Yongfeng | Chairman | Male | 46 | In office | 197.92 | No |
| Wang Mingchuan | Director | Male | 54 | In office | 0 | Yes |
| Fu Debin | Director | Male | 43 | In office | 0 | Yes |
| Xiao Zhanglin | Director | Male | 44 | In office | 0 | Yes |
| Wang Bo | Director | Male | 41 | In office | 0 | Yes |
| Chen Libin | Director & GM | Male | 56 | In office | 170.98 | No |
| Wang Jianxin | Independent director | Male | 50 | In office | 9 | No |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Zhong Hongming | Independent director | Male | 45 | In office | 9 | No |
| Tang Xiaofei | Independent director | Male | 46 | In office | 9 | No |
| Wang Baoying | Chairman of the Supervisory Committee | Male | 56 | In office | 0 | Yes |
| Sheng Qing | Supervisor | Female | 44 | In office | 88.93 | No |
| Fang Jiasheng | Supervisor | Male | 33 | In office | 36 | No |
| Lu Wanjun | Deputy GM | Male | 53 | In office | 159.44 | No |
| Liu Xiaoming | Deputy GM | Male | 49 | In office | 182.52 | No |
| Pan Bo | Deputy GM and Secretary of the Board | Male | 44 | In office | 162.15 | No |
| Li Ming | Deputy GM | Male | 47 | In office | 164.44 | No |
| Chen Zhuo | Chief Accountant | Male | 44 | In office | 164.44 | No |
| Tang Haiyuan | Deputy GM | Male | 47 | In office | 161.52 | No |
| Xu Chuangyue | Deputy GM | Male | 41 | In office | 99.81 | No |
| Zou Zhixiang | Supervisor | Male | 36 | Retired | 14.91 | No |
| Lu Bingqiang | Deputy GM | Male | 59 | Retired | 154.44 | No |
| Total | -- | -- | -- | -- | 1,784.5 | -- |
Equity incentive to directors and senior executives of the Company during the reporting period
In shares
| Name | Title | Number of vested shares during the reporting period | Number of striked shares during the reporting period | Strike price and the number of striked shares during the reporting period (CNY/share) | Market price at the end of the reporting period (CNY/share) | Quantity of restricted shares held at the beginning of the reporting period | Quantity of the locked shares in the reporting period | Quantity of restricted shares newly granted during the reporting period | Price of the restricted shares granted (CNY/share) | Quantity of restricted shares held at the end of the reporting period |
| Huang Yongfeng | Chairman | 0 | 0 | 0 | 11.09 | 0 | 0 | 100,000 | 4.40 | 100,000 |
| Chen Libin | Director & GM | 0 | 0 | 0 | 11.09 | 0 | 0 | 100,000 | 4.40 | 100,000 |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Lu Wanjun | Deputy GM | 0 | 0 | 0 | 11.09 | 0 | 0 | 80,000 | 4.40 | 80,000 |
| Liu Xiaoming | Deputy GM | 0 | 0 | 0 | 11.09 | 0 | 0 | 80,000 | 4.40 | 80,000 |
| Pan Bo | Deputy GM and Secretary of the Board | 0 | 0 | 0 | 11.09 | 0 | 0 | 80,000 | 4.40 | 80,000 |
| Li Ming | Deputy GM | 0 | 0 | 0 | 11.09 | 0 | 0 | 80,000 | 4.40 | 80,000 |
| Chen Zhuo | Chief Accountant | 0 | 0 | 0 | 11.09 | 0 | 0 | 80,000 | 4.40 | 80,000 |
| Tang Haiyuan | Deputy GM | 0 | 0 | 0 | 11.09 | 0 | 0 | 60,000 | 4.40 | 60,000 |
| Xu Chuangyue | Deputy GM | 0 | 0 | 0 | 11.09 | 0 | 0 | 50,000 | 4.40 | 50,000 |
| Total | -- | 0 | 0 | -- | -- | 0 | 0 | 710,000 | -- | 710,000 |
| Remarks (if any) | Granting of the A-share restricted stock to aforesaid persons was completed on January 11, 2019. , and it is still in the lockup period (two years) according to the regulations. | |||||||||
V. Employees
1. Number, Job Composition and Education Background of Employees
| Number of employees working for the parent company | 146 |
| Number of employees working for the major subsidiaries | 4,848 |
| Total employees on active duty | 4,994 |
| Total employees receiving remuneration in the reporting period | 4,994 |
| Number of the retired employees for whom the parent company and the major subsidiaries need to share the pension | 0 |
| Job Composition | |
| Job Composition Categories | Number of persons involved in the job composition |
| Production | 335 |
| Sales | 3,763 |
| Technical | 364 |
| Financial | 119 |
| Administrative | 413 |
| Total | 4,994 |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Education background | |
| Education levels | Number of persons |
| Master's degree or higher | 72 |
| Undergraduate | 731 |
| Junior college | 1,232 |
| Below junior college | 2,959 |
| Total | 4,994 |
2. Remuneration Policy for Staff
FIYTA's remuneration policy follows hierarchical management, budget control, performance-orientation, efficiency priority,fairness, positive incentives, and long-term principles. The Company has established a remuneration system with theassessment based annual salary system for medium and senior executives, performance-based salary systems for basicstaff, and the production & performance jointly related payroll systems for production operators in accordance with thenational laws, regulations and policies. The following administrative measures have been taken in implementation of theremuneration policy.
Classification and grading management: The Company has established a differentiated, standardized, andmarket-oriented salary framework system that matches the job sequence and job level according to theprofessional/occupational development system of employees.
Total budget management: According to the strategic layout of the Company's development, with comprehensiveconsideration of factors such as hard labor cost growth, market salary level, labor cost profit margins, total profit, and percapita profit growth, etc., the Company controls total salary and has achieved the management goal of benefit-orientation,positive incentive, classification management and adjusted distribution.
Focusing on value creation, value evaluation, and value sharing management: The Company has established aperformance evaluation and evaluation system that is consistent with strategic development goal, with economic valueand social value as the main body, and closely link it with employees’ compensation, having formed a salary distributionmechanism with decrease of the employees’ payroll correspondingly linked with the decrease of the enterprise revenueand employees’ personal performance and tilting towards the key value positions.
3. Training Program
(I) Organized learning, talent training, and ecological cycle developmentThe Company is concentrated on watch industry, insists on the principle of guiding various businesses with the brandstrategy, takes a broad view of the world and has established its vision of “becoming a leading internationalized watchbrand enterprise”. While speeding up development, the Company firmly believes that “to build brand is to integrate thebrand work and life style”, the core speciality of the organization and staff and the qualification of the staff as brandpersonnel are the key elements determining the future development. For this purpose, in respect of employee training, theCompany has established FIYTA College and takes the college as an important base for popularizing and implementingthe enterprise culture, promoting practice of the strategy and supporting development of the front-line professional talentdevelopment. Based on the college, the Company constructs a training system of various talents, focuses on theechelon leadership, cultivating young generations, and professional ability training.
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
(II) Construction of a Talent Team of Front-line Talents, Experts and LeadersIn terms of front-line talent training, taking business managers and shopping guide positions as the starting point, andfocusing on "operational excellence" and "excellent sales" for terminal-output product-oriented training programs,gradually creating learning programs with FIYTA characteristics. In terms of professional talent training, the Company haspromoted various talent training systems of the Company through the projects such as the "craftsman reservoir" and LeanSix Sigma training, etc. With regard to the training of echelon management talents, through the design of echelontraining projects such as the three-year run-up plan for newcomers, the training of medium and senior managementpersonnel, and the training of potential talents, the Company's management echelon talent construction work will beconsolidated to help the Company become a learning organization with strong vitality.
4. Labor Outsourcing
Inapplicable
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Chapter 10 Corporate GovernanceI. GeneralIn year 2019, the Company kept improving the Company’s corporate governance structure strictly according to the PRCCompany Law, the PRC Securities Law and the regulations of China Securities Regulatory Commission concerninggovernance of listed companies, and tried to enhance construction of modern enterprise system, upgraded the level ofregulatory operation of the Company. As a result, there was no discrepancy between the situation of the Company’scorporate governance and the regulatory documents of China Securities Regulatory Commission concerning governanceof listed companies.
The Company established and improved relatively standardized corporate governance structure and rules of proceduresstrictly according to law, rules and regulations, including the PRC Company Law, and the Articles of Association of theCompany, formed a decision-making and operation management system with the Shareholders’ Meeting, the Board ofDirectors, the Supervisory Committee and the management of the Company as the principal structure. They implementedtheir respective duties according to the PRC Company Law and the Articles of Association.
The General Meeting is the Company’s supreme organ and has the power of deciding the Company’s operation policyand investment plan, reviewing and approving the Company’s annual financial budget scheme, settlement scheme, profitdistribution plan, loss make-up plan, change of the application of the proceeds raised through issuing, etc., makesresolution on increase and decrease of the Company’s registered capital, issuing bond, etc., election and replacement ofdirectors, non-staff supervisors and decision on their remuneration and way of payment.
The Board of Directors is the Company’s decision-making organ, takes charge of implementing the decisions made by theShareholders’ General Meeting, assumes responsibility to the Shareholders’ General Meeting and reports the work to it.Within the authorization from the General Meeting, decides the Company’s external investment, acquisition and sales ofassets, assets pledge, external guarantee, related transactions, etc., decides establishment of the Company’s internalmanagement organs, engagement and disengagement of the Company’s general manager, the Board secretary andother senior executives, etc. The Board of Directors consists of nine directors, including three independent directors. TheBoard of Directors has established three subordinate special committees, namely the Strategy Committee, the AuditCommittee and Nomination, Emolument and Assessment Committee.
The Supervisory Committee is the Company’s supervisory organ in charge of supervising the directors, managers andother senior executives in performing duties according to the law and proposes dismissal of any director or seniorexecutive who breaches the law, the administrative rules and regulations, the Articles of Association or resolutions of theGeneral Meeting. The Supervisory Committee consists of three supervisors including two staff supervisors.
The management assumes responsibility to the Board of Directors and the General Manager takes full responsibility forthe Company’s routine operation and management and development under the leadership of the Board of Directors,supervises the work of every functional department, assesses the work result of each functional department andcoordinate the relationship of all departments.
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Does there exist any difference in compliance with the corporate governance, the PRC Company Law and the relevantprovisions of CSRC.No
II. Independence in Business, Personnel, Assets, Organization, Finance, etc. from the Controlling ShareholdersThe Company is independent in business, personnel, assets, organization and finance from its controlling shareholder.The Company has complete and independent business and the ability of autonomous operation.
Business: The Company is mainly engaged in timepiece businesses and has independent production, auxiliary productionsystem and complementary facilities, and possesses its own procurement and sales systems. There exists no competitionin the same sector between the Company and its controlling shareholder.
Personnel: The Company is completely independent in organization and has sound systems in labor, personnel andsalaries management. Except Mr. Wang Mingchuan, Mr. Fu Debin,Mr. Xiao Zhanglin and Mr. Wang Bo, the four directors,and Mr. Wang Baoying, the chairman of the Supervisory Committee, none of other senior executives takes any concurrentoffice in the shareholders and none of the financial staff works concurrently for any related parties.
Assets: The assets of the Company and its controlling shareholder are highly distinct. The Company enjoys the corporateownership over its assets and the assets are completely independent from its controlling shareholder. In addition, theCompany enjoys sole ownership of such trademarks as FIYTA, HARMONY, etc.
Organization: The Board of Directors, the Supervisory Committee and the other internal organs are well established andwork independently. There exist neither subordinate relations between the controlling shareholder/its functionaldepartments nor doing joint office work. The controlling shareholder enjoys its rights and undertakes the correspondingobligations according to the law and has never been involved in any action which directly or indirectly interferes theCompany’s business activities surpassing the authority of the General Meeting.
Finance: The Company has established independent financial department, worked out sound and independent financialand accounting system and financial management system and independently opened bank accounts. The controllingshareholder has never interfered the Company in its financial and accounting activities.
III. Horizontal CompetitionsInapplicable
IV. Annual General Meeting and Extraordinary General Meetings in the Reporting Period
1. General Meetings
| Sessions | Meeting type | Proportion of attendance of the investors | Meeting date | Date of disclosure | Disclosure index |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| 2019 1st Extraordinary General Meeting | Extraordinary General Meeting | 40.01% | January 11, 2019 | January 12, 2019 | http://www.cninfo.com.cn/ |
| 2019 2nd Extraordinary General Meeting | Extraordinary General Meeting | 37.40% | April 23, 2019 | April 24, 2019 | http://www.cninfo.com.cn/ |
| 2018 Annual general meeting | Annual general meeting | 38.22% | June 19, 2019 | June 20, 2019 | http://www.cninfo.com.cn/ |
| 2019 3rd Extraordinary General Meeting | Extraordinary General Meeting | 41.23% | December 30, 2019 | December 31, 2019 | http://www.cninfo.com.cn/ |
2. Extraordinary general meeting requested for holding by the preferred shareholders with the voting powerrecovered.Inapplicable
V. Duty Performance of Independent Directors in the Reporting Period
1. Attendance for Board Meetings and General Meetings
| Attendance for Board Meetings and General Meetings | |||||||
| Names of independent director | Number of Board meetings which should be be attended in the reporting period | Number of Spot Attendances | Number of Meetings Attended by Communication | Number of attendances of board meeting by representative | Number of absence | Failure to personally attend board meetings successively twice | Number of attendance of the General Meeting |
| Wang Jianxin | 10 | 2 | 8 | 0 | 0 | No | 4 |
| Zhong Hongming | 10 | 2 | 8 | 0 | 0 | No | 0 |
| Tang Xiaofei | 10 | 2 | 8 | 0 | 0 | No | 0 |
Note to failure to attend the board meeting successively twiceInapplicable
2. Objection of independent directors on some relevant issues
Have the independent directors proposed any objection on the relevant issues of the CompanyNo
3. Other Note to Duty Performance of Independent Directors
Have the independent directors' recommendations to the Company been acceptedNo
The independent directors' recommendations to the Company been accepted or explain the reason if any
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
recommendation has not been acceptedInapplicable
VI Duty Performance of Special Committees under the Board of Directors in the Reporting PeriodSummary Report on Performances of the Strategy Committee of the Board of DirectorsDuring the reporting period, the Strategy Committee performed its duties strictly according to the law and regulations, theArticles of Association and the Rules for Implementation of the Strategy Committee of the Board of Directors, continued todo research work on the strategic planning for the Company’s long term development and supervised the Company inimplementation of various strategies. The Strategy Committee held its first meeting of year 2019 on March 13, 2019. Themeeting reviewed and approved the Work Report of the Board of Directors of Year 2018 and the Profit Distribution for Year2018; the second meeting of the Strategy Committee for year 2019 was held on December 9, 2019. The meetingreviewed and approved the proposal for the planned change of the company name and the abbreviation of A-share.
Summary Report on Performances of the Audit Committee of the Board of Directors:
In accordance with the Rules on the Contents and Format of Information Disclosure of Companies that Publicly OfferSecurities No. 2 (Contents and Format of Annual Reports) (Revision 2017) promulgated by China Securities RegulatoryCommission, the Basic Regulations on Enterprise Internal Control, Memorandum of Mainboard Information Disclosure No.1 – Relevant Information to be Disclosed in the Regular Report promulgated by Shenzhen Stock Exchange and theCompany’s Enforcement Regulations of the Special Committees of the Board of Directors, the Audit Committee of theBoard of Directors carried out comprehensive examination of the Company's financial report and internal control auditwork of year 2019. The following is the summary of the performances of the Audit Committee and the work of GrantThornton LLP (hereinafter referred to as the “CPAs”):
1. Determination of the Overall Audit Plan
On December 2, 2019, the Audit Committee reviewed the Report of FIYTA on Arrangement of the Audit Work of 2019submitted by the CPAs and determined the time schedule of the audit work of 2019.
2. Supervision of the Audit Work
On December 6, 2019, the CPAs formally entered the Company and started the audit work. During the auditing, the AuditCommittee frequently urged the CPAs to complete the audit work according to the time schedule of audit so as to ensuretimely disclosure of the Company’s annual report and relevant documents. On January 20, 2020, the Audit Committeereviewed the Report on the Progress of the Audit Work of 2019 submitted by the CPAs.
3. Collecting General Information of the Company in the Reporting Period and Reviewing the FinancialStatements Prepared by the Company and Progress of Internal Control ImplementationOn January 20, 2020, the Audit Committee heard the management’s overall report on the production and operation andprogress of significant events during the reporting period and reviewed 2019 Financial and Accounting Statementsprepared by the Company and heard the progress of implementation of the Company’s internal control. In its opinion, thedata in the financial and accounting statements prepared by the Company basically reflected the financial position andoperation results of the Company as ended at December 31, 2019, and approved to carry out the audit work for year 2019with the financial statements as the base. The internal control implementation work carried out by the Company has beenduly carried forward according to the Company Law, the Securities Law, Basic Standards for Enterprise Internal Control
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
and other relevant laws and regulations. It has basically reflected the Company’s internal control construction work endedDecember 31, 2019 and approved to prepare the Self-Assessment Report on the Internal Control on this basis and carryout the internal control audit work in 2019.
4. Preliminary Auditor’s Opinions after Reviewing the Financial and Accounting StatementsOn March 16, 2020, the CPAs issued a preliminary auditor’s opinions on the financial and accounting statements andinternal control assessment, and the Audit Committee once again reviewed the Company’s financial and accountingstatements and internal control assessment report as preliminarily audited by the CPAs. In the opinion of the AuditCommittee, these financial statements truly, accurately and completely reflected the financial position and operation resultof the Company ended December 31, 2019 and approved 2019 Annual Report and Summary prepared on the basis ofthese statements. The said internal control assessment report has truly, accurately and entirely reflected the Company’sachievement in internal control construction ended December 31, 2019 and approved to complete the internal controlassessment report and internal control audit report based on said report. Meanwhile, the audit committee demanded theCPAs to complete the audit work according to the plan as soon as possible so as to ensure the Company to disclose 2019Annual Report as scheduled.
5. Summary Work after the Formal Report
On March 13, 2020, the CPAs completed the auditing procedures as scheduled and issued a standard unqualifiedauditor’s report and other relevant documents to the Audit Committee. The Audit Committee held 2020 1st Session of theAudit Committee on the very day and concluded a resolution and submitted it to the Board of Directors for review; and atthe same time submitted the Summary Report on the Performances of the Audit Committee and the Audit Work of theCertified Public Accountants in 2019. In the opinion of the Audit Committee, Grant Thornton LLP, the domestic andinternational auditor engaged by the Company faithfully performed the duties in process of offering audit performancesaccording to the professional principle of independence, objectiveness and fairness and did a good job in auditing 2019Annual Accounting Statements and the internal control auditing.
6. CPAs’ Performance of Basic Principle of the Professional Ethics
(1) Independence
None of the staff from the CPAs worked for the Company; the CPAs received neither cash nor economic interest in anyother form from the Company other than the statutory audit fee. There existed neither direct or indirect mutual investmentbetween the CPAs and the Company nor close operation relationship; there existed no self-assessment on theCompany’s audit work and there existed no related relation between the member of the auditing team and theCompany’s decision makers; the CPAs and the auditing staff kept independence both in form and substance in theauditing work and complied with the requirement on keeping independence as specified in the basic principle of theprofessional ethics.
(2) Professional Competence
All the members of the auditing team possessed the professional knowledge and relevant professional qualificationcertificates necessary for the auditing work, were competent for the auditing work and at the same time maintainednecessary attention and professional cautiousness.
Summary Report on Performance of the Committee of Nomination, Remuneration and Assessment of the Board
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
of DirectorsDuring the reporting period, the Committee of Nomination, Remuneration and Assessment of the Board of Directorsperformed its functions strictly according to the law and regulations, the Articles of Association and the Rules forImplementation of the Committees of Nomination, Remuneration and Assessment of the Board of Directors. 2019 1stsession of the Committees of Nomination, Remuneration and Assessment held on January 11, 2019 reviewed andapproved the proposals on the adjustment of the name list of the incentive objects of the initial granting and the numberinvolved in the initial granting and the proposal of granting restricted shares to the incentive objects in the Company’s2018 A-share restricted stock incentive plan (Phase I); 2019 2nd session of the Committees of Nomination, Remunerationand Assessment held on March 13, 2019 reviewed and approved the proposal on finalizing the remuneration to thedirectors and senior executives in year 2018; 2018 3rd session of the Committee of Nomination, Remuneration andAssessment held on September 29, 2019 reviewed and approved the proposal on the appointment of deputy GMs; 20184th session of the Committee of Nomination, Remuneration and Assessment held on November 19, 2019 reviewed andapproved the proposal on the replacement of the Secretary of the Board.
VII. Work Summary of the Supervisory CommitteeDid the Supervisory Committee find any risk existing in performing the supervision activities in the reporting periodNo
VIII. Assessment and Incentive Mechanism for Senior Executives
(1) Assessment of Senior Executives
In order to give full play to and mobilize the enthusiasm and creativity of the Company's senior executives, to betterimprove the Company's operating ability, economic benefit and ensure the realization of the Company's strategic goals,based on the establishment of an incentive and constraint mechanism compatible with the modern enterprise system,relying on balanced score card strategy management instrument, which decomposes the Company's strategy to variousdepartments and positions through the balanced scorecard to determine the performance indicators and action plans ofsenior executives, and conduct strategic review and assessment on a quarterly basis, based on the results of theassessment and performance completion determine the total salary and whether to renew their offices.
The assessment of the annual salary to the GM is conducted in accordance with the assessment measures formulated bythe shareholder organization, and the assessment basis is mainly based on a series of indicator systems formulatedbased on the balanced scorecard. The assessment of other senior executives of the Company was conducted inaccordance with the indicators in the balanced scorecard formulated at the beginning of the year, and job description wasconducted at the end of the year.
(2) Incentive to Senior Executives
The 3rd session of the Ninth Board of Directors and 2019 1st Extraordinary General Meeting held respectively onNovember 12, 2018 and January 11, 2019 decided to start 2018 A-Share Restricted Stock Incentive Program (Phase I),which was later on reviewed and approved at the 5th session of the Ninth Board of Directors held on January 11, 2019,and the Company eventually granted 4.224 million restricted A-shares to 128 persons eligible for the incentive, including 7directors and senior executives, with total 600,00 shares of A-share restricted stock, taking 0.14% of the Company's totalcapital stock with the detail as follows:
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Name | Title | Quantity of restricted shares received (in 10,000 shares) | Proportion in the total quantity granted (%) | Proportion in the total capital stock (%) |
| Huang Yongfeng | Chairman | 10 | 2.37% | 0.02% |
| Chen Libin | Director & GM | 10 | 2.37% | 0.02% |
| Lu Wanjun | Deputy GM | 8 | 1.89% | 0.02% |
| Liu Xiaoming | Deputy GM | 8 | 1.89% | 0.02% |
| Pan Bo | Deputy GM and Secretary of the Board | 8 | 1.89% | 0.02% |
| Li Ming | Deputy GM | 8 | 1.89% | 0.02% |
| Chen Zhuo | Chief Accountant | 8 | 1.89% | 0.02% |
| (121 persons) | 362.4 | 85.81% | 0.83% |
| Total (128 persons) | 422.4 | 100% | 0.97% |
The price of this part of restricted shares granted was CNY 4.40/share; the granting date was January 11, 2019 (Thelock-up period of these restricted shares was two years commencing from the date of granting) . By January 30 2019, thework of granting the shares and registration for listing was completed.Reviewed and approved at the 11th Session of the Ninth Board of Directors, Mr. Tang Haiyuan (holding 60,000 shares ofthe Company’s A-share restricted stock) and Mr. Xu Chuangyue (holding 50,000 shares of the Company’s A-sharerestricted stock) were appointed as deputy GMs of the Company
IX. Internal Control
1. Particular case found involving material defects in the internal control during the reporting periodNo
2. Self-assessment Report of the Internal Control
| Date of disclosing the full text of the internal control assessment report | March 20, 2020 |
| Index of disclosure of the full text of the internal control assessment report | www.cninfo.com.cn |
| Proportion of the total assets of the organizations involved in the assessment in the total assets of the Company’s consolidated financial statements | 100.00% |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Proportion of the operation revenue of the entitled involved in the assessment in the total operation revenue of the Company’s consolidated financial statements | 100.00% | |
| Criteria for affirming the defects | ||
| Categories | Financial report | Non-financial Report |
| Qualitative criteria | ① The defect involving fraud of the directors, supervisors and senior executives;② correction of the financial statements already published;③ the CPA found that there existed serious misstatement in the financial statements of the reporting period while the internal control failed to find the misstatement in process of operation;④ the Company's auditing committee and supervision and audit department conducted ineffective supervision of the internal control. | ① seriously violating the PRC laws, administrative regulations and normative documents; ② "decision on major issues, important officer appointment and/or removal and arrangement of important projects as well as application of big sum of fund have not undergone collective decision-making procedures; ③ serious running off of officers and technicians of the key positions; ④ there is no system control available for the Company’s production and operation practice or the system no longer works; ⑤ the internal control for information disclosure no longer works, having caused the Company censured publicly by the regulatory authority; ⑥the results of the internal control assessments, especially the material defects or important defects have not been rectified. |
| Quantitative criterion | ① Material defects：Misstatement≥ 5% of the pre-tax profit；② Important defects：1% of profit before tax ≤ Misstatement＜5% of profit before tax; ③ Common defects：Misstatement＜1% of profit before tax. | ① Material defects：Misstatement≥ 5% of the pre-tax profit；② Important defects：1% of profit before tax ≤ Misstatement＜5% of profit before tax; ③ Common defects：Misstatement＜1% of profit before tax. |
| Number of material defects in the financial statements (pcs) | 0 | |
| Number of material defects in the non-financial statements (pcs) | 0 | |
| Number of important defects in the financial report (pcs) | 0 | |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Number of important defects in the financial report (pcs) | 0 |
X. Internal Control Audit Report
| Deliberation Opinions in the Internal Control Audit Report | |
| In our opinion, the Company maintained effective internal control on the financial report in all material aspects according to the Basic Regulations for Enterprise Internal Control and the relevant provisions ended December 31, 2019. | |
| Disclosure of the internal control audit report | Disclosed |
| Date of disclosing the full text of the internal control assessment report | March 20, 2020 |
| Index of disclosing the full text of the internal control audit report | www.cninfo.com.cn |
| Type of the onions in the internal control audit report | Standard unqualified auditor’s report |
| Are there any material defects in the non-financial report | No |
Has the CPAs issued a qualified auditor’s report of internal controlNo
Does the internal control audit report issued by the CPAs agree with the self-assessment report of the Board of DirectorsYes
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Section 11 Bond Related InformationDid there exist any company bonds which were issued to the public and listed with the stock exchange for trading and wasdue by the date when the Annual Report was approved for issuing or failed to be fully cashed by the end of the reportingperiod.No
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Section 12 Financial Report
Auditor’s Report
GTCNSZ(2020)NO.110ZA3105
To the Shareholders of FIYTA Precision Technology Co., Ltd.:
OpinionWe have audited the financial statements of FIYTA Precision Technology Co., Ltd. (“FIYTALtd.” or the “Company”), which comprise the consolidated and Company balance sheets asat 31 December 2019, and the consolidated and Company income statements,consolidated and Company cash flow statements and consolidated and Companystatements of changes in shareholders’ equity for the year then ended, and notes to thefinancial statements.In our opinion, the accompanying financial statements present fairly, in all material respects,the consolidated and Company financial positions of FIYTA Ltd. as at 31 December 2019,and their financial performance and its their cash flows for the year then ended inaccordance with Accounting Standards for Business Enterprises.Basis for OpinionWe conducted our audit in accordance with China Standards on Auditing. Ourresponsibilities under those standards are further described in the Auditors’ Responsibilitiesfor the Audit of the Financial Statements section of our report. We are independent of theFIYTA Ltd. and have fulfilled our other ethical responsibilities in accordance with the Code ofEthics for Chinese Certified Public Accountants. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit MattersKey audit matters are those matters that, in our professional judgment, were of mostsignificance in our audit of the financial statements of the current period. These matters were
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
addressed in the context of our audit of the financial statements as a whole, and in formingour opinion thereon, and we do not provide a separate opinion on these matters.
1. Existence of inventory and its net realizable value
Refer to Note III 12 and Note V 6 for detailed information.
(1) Description
As at 31 December 2019, the book balance, provision for decline in value, and carryingamount of inventory were RMB1,892.03 million, RMB83.21 million and RMB1,808.82 millionrespectively.(i) As the main business of FIYTA Ltd is selling FIYTA brand watches and other branded
watches, the main inventory of FIYTA Ltd are finished watches and watchcomponents. The inventories are distributed in stores, regional warehouses, resellers’warehouses and the Company’s warehouses which caused difficulty in inventoryphysical observation;(ii) The management of FIYTA Ltd measures inventory at lower of cost and net realizable
value (NRV) at balance sheet date. Where the cost of an inventory exceeds its NRV,the difference is recognized as provision for decline in value. The determination ofNRV involves significant judgment and estimates by the Management.Inventory value is significant to the Company’s assets and it requires significant judgementby the Management, as a result, we identified existence of inventory and its net realizablevalue as key audit matters.
(2) How our audit addressed the key audit matter
(i) Understanding, evaluating and testing the design and operating effectiveness of
internal controls of procument and payment, production and storage, and theprovision for decline in value of inventory;(ii) Understanding and evaluating the appropriateness of the Company’s policy in
provision for decline in value;(iii) Understanding and inquiring the locations of inventory storage, measurement method
of inventory so as to determining the scope of inventory physical observation;(iv) Discussing physical inventory count status with the Management and attending the
physical inventory count and conducting observation and test count on site to check
the quantity of the inventories and observe their condition. Circulating confirmations
and inspecting contracts, goods delivery notes and account statements for those
inventories not in the scope of physical observation and stored in reseller's
warehouses;
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
(v) Obtaining the ageing report of inventory and taking into consideration of inventory
condition in order to perform analytical review on the ageing, and analyze thereasonableness of provision for decline in value together with ;(vi) Reviewing and evaluating the appropriateness of significant estimates made by the
Management in determining the NRV of inventory;(vii) Obtaining the calculation of provision for decline in value of inventory, reviewing
whether the provision was made in compliance with relevant accounting policies and
performing recalculation of provision. Checking the movements of prior year’s
provision and analyzing whether the provision was adequately accrued in prior
period.(viii) Tracing samples of large purchases in current period to their corresponding contracts
and tax invoices, and inspecting their purchase requisition form and goods receipt
notes.Based on audit work conducted above, we believe that the presentation and disclosure ofinventory and the judgment on NRV made by the management is supportable.
2. Revenue recognition
Refer to Note III 25 and Note V 33 for detailed information.
(1) Description
In 2019, the Company’s income from main business was RMB3,686.96 million TheCompany’s revenue mainly comes from sales of FIYTA brand watches and distribution ofother branded watches. Except for small amount of sales by direct sales and consignmentsales of FIYTA brand watches, most of the sales of FIYTA brand watches and other brandedwatches are sold through shops in department store and on-line shops. Refer to Note III 25for accounting policy relating to revenue recognition.Operating revenue represents major line item in income statement and is main source ofprofit, the accuracy and completeness of revenue recognition have significant impact to theCompany’s profit, as a result, we identified revenue recognition as a key audit matter.
(2) How our audit addressed the key audit matter
(i) Understanding, evaluating and testing the design and operating effectiveness of
internal controls relating to revenue recognition;(ii) Obtaining and understanding accounting policies relating to revenue recognition, and
reviewing whether the policies are complied with the accounting standards and are
consistently adopted.(iii) Selecting samples from current year’s transaction record, and tracing them to
supporting documents such as contract, tax invoice and goods dispatch note;
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
(iv) In connection with audit of accounts receivable, selecting major customers and
confirming corresponding sales in current year and year end balance;(v) Conducting cut-off test to revenue recognized before and after the balance sheet date
to evaluate whether the revenue was recorded in appropriate accounting period;Based on audit work conducted above, we believe that the Company’s revenue recognitionis in conformity to its revenue recognition policy.Other InformationThe management of FIYTA Ltd are responsible for the Other Information. The OtherInformation comprises all of the information included in the Company’s 2019 annual reportother than the financial statements and our auditors’ report thereon.Our opinion expressed on the financial statements does not cover the Other Information andwe do not express any form of assurance conclusion thereon.In connection with our audit of the financial statements, our responsibility is to read the OtherInformation and, in doing so, consider whether the Other Information is materiallyinconsistent with the financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated.If, based on the work we have performed, we conclude that there is a material misstatementof this Other Information, we are required to report that fact. We have nothing to report in thisregard.Responsibilities of the Management and those Charged with Governance for theFinancial StatementsThe management of the FIYTA Ltd (the “Management”) is responsible for the preparation ofthe financial statements that give a fair view in accordance with Accounting Standards forBusiness Enterprises and for the design, implementation and maintenance of such internalcontrols as the Management determine is necessary to enable the preparation of financialstatements that are free from material misstatement, whether due to fraud or error.In preparing the financial statements, the Management is responsible for assessing theCompany’s ability to continue as a going concern, disclosing, as applicable, matters relatedto going concern and using the going concern basis of accounting unless the Managementeither intend to liquidate the Company or to cease operations, or have no realistic alternativebut to do so.Those who charged with governance is responsible for overseeing the Company’s financialreporting process.
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Auditors’ Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statementsas a whole are free from material misstatement, whether due to fraud or error, and to issuean auditors’ report that includes our opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with ChinaStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individually or inthe aggregate, they could reasonably be expected to influence the economic decisions ofusers taken on the basis of these financial statements.As part of an audit in accordance with China Standards on Auditing, we exerciseprofessional judgment and maintain professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the financial statements,whether due to fraud or error, design and perform audit procedures responsive to thoserisks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error, as fraud may involve collusion, forgery,intentional omissions, misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances.
3. Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the Management.
4. Conclude on the appropriateness of the Management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company’sability to continue as a going concern. If we conclude that a material uncertainty exists,we are required, according to China Standards on Auditing, to draw attention in ourauditors’ report to the related disclosures in the financial statements or, if suchdisclosures are inadequate, to modify our opinion. Our conclusions are based on theaudit evidence obtained up to the date of our auditors’ report. However, future events orconditions may cause the Company to cease to continue as a going concern.
5. Evaluate the overall presentation, structure and content of the financial statements,including the disclosures, and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
6. Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within FIYTA Ltd to express an opinion on the financialstatements. We are responsible for the direction, supervision and performance of the
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
group audit. We remain solely responsible for our audit opinion.We communicate with those charged with governance regarding, among other matters, theplanned scope and timing of the audit and significant audit findings, including any significantdeficiencies in internal control that we identify during our audit.We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence, and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence, and where applicable, related safeguards.From the matters communicated with those charged with governance, we determine thosematters that were of most significance in the audit of the financial statements of the currentperiod and are therefore the key audit matters. We describe these matters in our auditor’sreport unless law or regulation precludes public disclosure about the matter or when, inextremely rare circumstances, we determine that a matter should not be communicated inour report because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.
| China ·Beijing | (Engagement partner) Auditor's signature and stamp | |
| 18 March 2020 | ||
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Consolidated and Company Balance Sheet | |||
| as at 31 December 2019 | |||
| Long-term equity investmentsV. 946,423,837.85 1,380,895,239.27 44,881,063.15 1,376,129,654.08 Other equity instrument investmentsV. 1085,000.00 85,000.00 Investment propertiesV. 11407,503,307.24 329,970,083.18 377,319,433.03 297,042,937.87 Fixed assetsV. 12363,997,098.94 238,594,698.50 425,649,562.85 297,517,472.81 Construction in progressV. 13- - 12,041,126.00 12,041,126.00 Intangible assetsV. 1438,711,821.26 30,925,974.54 43,545,477.61 35,337,052.82 Development costs- - - - Goodwill- - - - Long-term deferred expensesV. 15152,587,491.33 12,106,759.98 128,572,545.15 4,500,638.97 Deferred tax assetsV. 1683,739,383.37 1,125,840.75 100,675,706.09 952,857.33 Other non-current assetsV. 177,373,248.48 4,707,236.86 8,949,160.42 4,493,971.35 Total non-current assets1,100,421,188.47 1,998,410,833.08 1,141,719,074.30 2,028,100,711.23 Total assets3,760,923,285.37 3,067,960,180.38 3,599,691,650.26 3,046,834,465.19 | |||
| Item | Note | As at 31/12/2019 | As at 31/12/2018 |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| Consolidated and Company Balance Sheet (continued) | |||
| as at 31 December 2019 | |||
| 3,760,923,285.37 3,067,960,180.38 3,599,691,650.26 3,046,834,465.19 Legal representative: | |||
| Item | Note | As at 31/12/2019 | As at 31/12/2018 |
| The person in charge of accounting affairs: | The head of the accounting department: | ||
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Prepared by: FIYTA Precision Technology Co., Ltd.Expressed in RMB
ConsolidatedCompany ConsolidatedCompanyI.Operating incomeV.333,704,210,734.90 140,511,246.61 3,400,450,599.90 130,901,823.99Less:operating costsV.332,217,207,732.04 21,776,539.35 1,993,809,774.20 19,010,293.07Taxes and surchargesV.3428,192,789.55 4,623,611.23 33,769,344.40 4,340,938.33Selling and distribution expensesV.35865,792,078.61 1,130,383.07 856,970,173.10 -
| Consolidated and Company Income Statement | |||
| For the year ended 31 December 2019 | |||
| VII.Earnings per share:(1) Basic earnings per share0.4943 0.4190 (2)Diluted earnings per share0.4943 0.4190 Legal representative: | |||
| Item | Note | Year ended 31/12/2019 | Year ended 31/12/2018 |
| The person in charge of accounting affairs: | The head of the accounting department: | ||
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
Prepared by: FIYTA Precision Technology Co., Ltd.Expressed in RMB
ConsolidatedCompany ConsolidatedCompanyI.Cash flows from operating activities
| Cash received from sales of goods and rendering of services4,058,167,395.57 129,299,543.07 3,810,404,536.16 116,016,128.07 | |
| Cash received from refund of taxes5,510,592.39 301,416.23 4,793,245.20 - | |
| Cash received from other operating activitiesV.4793,832,379.85 3,935,449,332.96 49,628,593.69 3,085,141,911.13 | |
| Subtotal of cash inflows from operating activities4,157,510,367.81 4,065,050,292.26 3,864,826,375.05 3,201,158,039.20 | |
| Cash paid for purchasing goods and services2,398,294,588.87 - 2,189,921,981.01 300,000.00 | |
| Cash paid to and for employees584,435,566.86 74,123,969.83 583,417,253.40 58,785,131.65 | |
| Cash paid for tax and surcharges241,905,980.66 12,227,836.75 305,622,391.83 10,909,143.22 | |
| Cash paid for other operating activitiesV.47488,053,462.81 3,807,983,200.74 454,236,959.19 3,050,352,344.19 | |
| Subtotal of cash outflows in operating activities3,712,689,599.20 3,894,335,007.32 3,533,198,585.43 3,120,346,619.06 | |
| Net cash flows from operating activities444,820,768.61 170,715,284.94 331,627,789.62 80,811,420.14 | |
| II. Cash flows from investing activities | |
| Cash received from disposal of investments- - - - | |
| Cash received from returns on investments- 113,000,000.00 - 143,000,000.00 | |
| Net cash received from disposal of fixed assets, intangible assets and otherlong-term assets | |
| VI.Cash and cash equivalent at end of yearV.48315,093,565.09 269,098,346.02 162,623,059.97 134,970,466.27 Legal representative: | ||
| Year ended 31/12/2018 | ||
| The person in charge of accounting affairs: | The head of the accounting department: | |
Consolidated and Company Cash Flow Statement
Item
| Item | Note | Year ended 31/12/2019 |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| IV.Balance at end of current year442,968,881.00 1,081,230,215.32 71,267,118.78 -940,209.09 - 235,701,180.14 966,840,818.40 5,910.84 2,654,539,677.83 Legal representative:The person in charge of accounting affairs:The head of the accounting department: | Consolidated Statement of Changes in Shareholders’ Equity | |||||||||||||||||
| Item | Year ended 31/12/2019 | |||||||||||||||||
| Total shareholders’ equity attributable to shareholders of the parent company | Non-controllinginterests | Total | ||||||||||||||||
| Share capital | Capital reserve | Less: treasuryshares | Othercomprehensiveincome | Specificreserve | Surplus reserve | Retained earnings | ||||||||||||
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| IV.Balance at end of current year438,744,881.00 1,062,455,644.22 - -5,442,139.78 - 223,015,793.80 851,360,603.66 5,781.64 2,570,140,564.54 Legal representative:The person in charge of accounting affairs:The head of the accounting department: | Consolidated Statement of Changes in Shareholders’ Equity | |||||||||||||||||
| Item | Year ended 31/12/2018 | |||||||||||||||||
| Total shareholders’ equity attributable to shareholders of the parent company | Non-controllinginterests | Total | ||||||||||||||||
| Share capital | Capital reserve | Less: treasuryshares | Othercomprehensiveincome | Specificreserve | Surplus reserve | Retained earnings | ||||||||||||
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| 6. Others- - - - - - - - (V)Specific Reserve- - - - - - - - 1. Appropriation during the year - - - - - - - - 2.Utilisation during the year- - - - - - - - (VI)Others- - - - - - - - IV.Balance at end of current year442,968,881.00 1,086,885,756.42 71,267,118.78 - - 235,701,180.14 710,223,150.82 2,404,511,849.60 Legal representative:The person in charge of accounting affairs:The head of the accounting department: | |
| Year ended 31/12/2019 | |
Statement of Changes in Shareholders’ Equity
Item
ItemShare capital
| Share capital | Capital reserve | Less: treasuryshares | Othercomprehensiveincome | Specificreserve | Surplus reserve | Retained earnings | Total |
FIYTA Precision Technology Co., Ltd. 2019 Annual Report, Full Text
| 6. Others- - - - - - - - (V)Specific Reserve- - - - - - - - 1. Appropriation during the year - - - - - - - - 2.Utilisation during the year- - - - - - - - (VI)Others- - - - - - - - IV.Balance at end of current year438,744,881.00 1,068,111,185.32 - - - 223,015,793.80 683,798,086.83 2,413,669,946.95 Legal representative:The person in charge of accounting affairs:The head of the accounting department: | |
| Year ended 31/12/2018 | |
Statement of Changes in Shareholders’ Equity
Item
ItemShare capital
| Share capital | Capital reserve | Less:treasuryshares | Othercomprehensiveincome | Specificreserve | Surplus reserve | Retainedearnings | Total |
Notes to the Financial StatementsI. Company status
1. Company’s profile
FIYTA Precision Technology Co., Ltd. (the “Company”) was founded, under the approval of Shen Fu Ban Fu (1992) 1259 issued by theGeneral Office of Shenzhen Municipal Government, through the restructuring of former Shenzhen FIYTA Time Industrial Company by thepromoter of China National Aero-Technology Import and Export Shenzhen Industry & Trade Center (name changed to “China NationalAero-Technology Shenzhen Co., Ltd” lately) on 25 December 1992, and the name changed to “Shenzhen FIYTA Holdings Limited”. Theheadquarters is located at FIYTA Hi-Tech Building, Gao Xin Nan Yi Dao, Nanshan District, Shenzhen, Guangdong Province.Pursuant to the approval of Shen Ren Yin Fu Zi (1993) 070 issued by the People’s Bank of China Shenzhen Special Economic ZoneBranch, the Company issued Renminbi ordinary shares (A shares) and Renminbi special shares (B shares) publicly on 10 March 1993. On3 June 1993, both the Company’s A shares and B shares were listed and traded on Shenzhen Stock Exchange pursuant to the approval ofShen Zheng Ban Fu[1993]20 issued by Shenzhen Securities Regulatory Office and Shen Zheng Shi Zi (1993)16 issued by ShenzhenStock Exchange.On 30 January 1997, the company name changed to Shenzhen FIYTA Holdings Limited with the approval of Shenzhen MunicipalAdministration for Industry and Commerce.On 4 July 1997, China National Aero-Technology Shenzhen Co., Ltd. ("CATIC Shenzhen Company") transferred 72,360,000 corporateshares (accounting for 52.24% of the Company's total share capital) to Shenzhen China Aviation Group Company Limited (previouslyknown as "Shenzhen China Aviation Industry Company Limited", hereinafter referred to as "China National Aviation Group") according toshare transfer agreement signed by both parties. As a result, the Company’s controlling shareholder changed from CATIC ShenzhenCompany to China National Aviation Group.On 26 October 2007, the Company implemented split-share reform. Under the prerequisite of maintaining the Company's total of249,317,999 shares unchanged, the Company's shareholders of non-tradable shares paid 3.1 shares per 10 tradable shares to all thetradable share shareholders registered on registration date designated by the split-share reform program. At that point, after the reform,the shares held by China National Aviation Group reduced to 44.69% from 52.24%.On 29 February 2008, due to expanding the scope of business, the Company’s corporate business license was altered from Shen Si Zi No.4403011001583 to No. 440301103196089 with the approval of Shenzhen Municipal Administration for Industry and Commerce.With the approval of “Reply of China Securities Regulatory Commission (CSRC) to the Approval of Private Placement of Shenzhen FIYTAHoldings Limited” (Zheng Jian Xu Ke [2010]1703) and “Reply of State-owned Assets Supervision and Administration Commission of theState Council (SASAC) on Issues in Private Placement of Shenzhen FIYTA Holdings Limited” (SASAC (2010)430) in 2010, the Company isapproved to issue not more than 50,000,000 ordinary shares (A shares) by private placement. After the completion of the placement on 9December 2010, the Company’s registered capital increased to RMB280,548,479.00 and the equity capital of the Company held by ChinaNational Aviation Group reduced to 41.49%.On 3 March 2011, the company name changed to FIYTA Holdings Limited with the approval of Shenzhen Municipal Administration for
Industry and Commerce. On 8 April 2011, the Company increased its share capital by 4 shares for every 10 shares by capitalizing thecapital reserve on the basis of total shares of 280,548,479 as at 31 December 2010. Total shares of the Company changed to 392,767,870shares after the increase.On 11 November 2015, with the approval of China Securities Regulatory Commission (CSRC) “Reply of non-public offering of stocks ofShenzhen FIYTA Holdings Limited” (ZhengJianXuKe[2015]2588) and the approval of State-owned Assets Supervision and AdministrationCommission of the State Council (SASAC) “Reply of non-public offering of stocks of Shenzhen FIYTA Holdings Limited”(SASAC(2015)415), the Company was approved to issue not more than 46,911,649 ordinary shares (A shares) through non-public offering.After the completion of the non-public offering of shares on 22 December 2015, the Company’s registered capital was increased toRMB438,744,881.00 and the equity capital of the Company held by China National Aviation Group reduced to 37.15%.On 4 January 2019, pursuant to the approval by “Reply to approval of Implementation of First Phase of Restricted Share Incentive plan ofFIYTA (Group) Holding Ltd.” (GuoZi KaoFen [2018] No. 936) issued by SASAC, and approved by the board of directors and shareholder’sgeneral meeting, the Company implemented the incentive plan. On 11 January 2019, the restricted share incentive plan (first phase)granted a total of 4,224,000 restricted A-shares to 128 incentive individuals. As a result, the Company’s registered capital increased toRMB442,968,881.00 and the equity capital held by China National Aviation Group decreased to 36.79%.As of 31 December 2019, total outstanding shares issued by the Company was 442,968,881 shares. Refer to Note V. 27 “Share capital” fordetails.According to the “Proposal of Change the Company’s name and initials for A share stock” approved by the 3rd extraordinary shareholder’smeeting in 2019, and upon examination and approval by Shenzhen Administration for Industry and Commerce, the Company’s name waschanged from “FIYTA (Group) Co., Ltd. to “FIYTA Precision Technology Co., Ltd.” since 9 January 2020.Corporate governance established by the Company includes General Meeting of Shareholders, Board of Directors, Board of Supervisors,Strategy Committee, Audit Committee, and Nomination, Remuneration and Evaluation Committee. The Company’s functional departmentsinclude Administration, Party Affairs, Inspection and Audit, Finance, Human Resources, Strategy and Operating, Data and Information, andProperty Management departments.The business scope of the Company and its subsidiaries (collectively as “the Group”) mainly includes: producing and selling of analogueindication mechanical watches, quartz watches and its movements, components, various timing devices, processing and wholesaling karatgold jewellery watches, intelligent watches; domestic commercial and material supply and distributing business (excluding goods underexclusive operational rights, special control and exclusive sales); property management and leasing; providing design service; research,design, production, sales and technical support for precise watches and components; import and export business (according to Shen MaoGuan Deng Zheng Zi No.2007-072). The legal representative of the Company is Huang Yongfeng.The financial statements have been approved and authorised for issue by the 16
th
meeting of the 9
th
Board of Directors on 18 March 2020.
2. Scope of consolidation
There are 11 subsidiaries that are included in the Company’s scope of consolidation for year 2019, see Note VII “Interests in other entities”for detail. No changes in scope of consolidation in 2019.
II. Basis of preparationThe financial statement is prepared in accordance with the requirements of Accounting Standards for Business Enterprises and associatedapplication guidance, illustrations to the standards and related pronouncements (collectively known as “Accounting Standards for BusinessEnterprises” or “CAS”). These financial statements also comply with the disclosure requirements of “Regulation on the Preparation ofInformation Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” (revised in 2014)issued by China Securities Regulatory Commission (CSRC).The financial statements of the Company have been prepared on going concern basis.Accrual basis is adopted for the Group’s accounting activity. Except for some financial instruments, the financial statements are measuredusing historical cost. In case of impairment occurred on assets, provisions for impairment are provided for in accordance with relatedregulations.III. Significant accounting policies and accounting estimatesBased on actual business characteristics, the Group determined fixed asset depreciation, intangible assets amortization and revenuerecognition policies. Refer to Note III 15, Note III 18 and Note III 25 for specific accounting policies.
1. Statement of compliance with corporate accounting standards
The financial statements of the Company have been prepared in accordance with the requirements of Accounting Standards for BusinessEnterprises. These financial statements present truly and completely the financial position as at 31 December 2019, the results ofoperations and the cash flows for the year then ended of the Company.
2. Accounting period
The accounting period of the Company is the calendar year, i.e. from 1 January to 31 December of each year.
3. Operating cycle
The operating cycle of the Company is 12 months.
4. Recording currency
The Company and its domestic subsidiaries adopt Renminbi (“RMB”) as the recording currency.Except for the Swiss-based subsidiary Montres Chouriet SA (the “Swiss Company”) , which is a subsidiary of FIYTA (Hong Kong) Limited(FIYTA Hong Kong), uses Swiss Franc as the recording currency according to the main economic environment where the Swiss Companyoperated, all other subsidiaries outside the mainland China, including FIYTA Hong Kong and its subsidiary Station 68 Limited (Station 68)use Hong Kong Dollar (“HKD”) as the recording currency and translate to Renminbi when preparing financial statements. The currencyused in preparing the Group’s financial statements is Renminbi.
5. Accounting treatment for business combinations involving entities under common control and not under common control
(1) Business combination involving entities under common control
For a business combination involving enterprises under common control, the assets acquired and liabilities assumed are measured basedon their carrying amounts in the consolidated financial statements of the ultimate controlling party at the combination date, except for
adjustments due to different accounting policies. The difference between the carrying amount of the net assets acquired and theconsideration paid for the combination (or the total par value of shares issued) is adjusted against share premium in the capital reserve,with any excess adjusted against retained earnings.
Business combinations involving entities under common control achieved in stages that involves multiple transactionsIn the separate financial statements, initial investment cost is the acquirer’s share of the carrying amount of the net assets of the acquireein the consolidated financial statements of the ultimate controlling party at the combination date. The difference between the initialinvestment cost and the sum of carrying amount of investment prior to combination date and carrying amount of new considerations paidfor the combination at the combination date is adjusted to capital reserve (share premium). If the capital reserve is not sufficient to absorbthe difference, any excess is adjusted against retained earnings.In the consolidated financial statements, assets acquired and liabilities assumed by acquirer in a business combination are measured attheir carrying amount as recorded in the consolidated financial statements of the ultimate controlling party at the combination date, exceptfor adjustments due to different accounting policies. The difference between the carrying amount of the net assets acquired and the sum ofcarrying amount of investment prior to combination date and carrying amount of new considerations paid for the combination at thecombination date is adjusted to capital reserve (share premium). If the capital reserve is not sufficient to absorb the difference, any excessis adjusted against retained earnings. The profit or loss, other comprehensive income and changes in other owner’s equity recognized bythe acquirer during the period from the later of initial investment date and the date that the acquirer and acquiree both under commonultimate control to the combination date are offset the opening retained earnings or profit for loss for the current period in the comparativestatements.
(2) Business combinations involving entities not under common control
For business combinations involving enterprises not under common control, the consideration costs include acquisition-date fair value ofassets transferred, liabilities incurred or assumed and equity securities issued by the acquirer in exchange for control of the acquiree. Atthe acquisition date, the acquired assets, liabilities and contingent liabilities of the acquiree are measured at their fair value. The acquiree’sidentifiable asset, liabilities and contingent liabilities, are recognised at their acquisition-date fair value.Where the combination cost exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference isrecognised as goodwill, and subsequently measured on the basis of its cost less accumulated impairment provisions. Where thecombination cost is less than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference is recognised inprofit or loss for the current period after reassessment.
Business combinations involving entities not under common control achieved in stages that involves multiple transactionsIn the separate financial statements, the initial investment cost is the sum of the carrying amount of equity investment of the acquiree heldprior to the acquisition date and additional investment cost at the acquisition date. When the previously-held equity investment which was
accounted for under the equity method before the acquisition date, any other comprehensive income previously recognized is not adjustedon acquisition date. When the investment is disposed of in later date, the amount that was recognized in other comprehensive income isrecognized on the same basis as would be required if the investee had disposed directly of the related assets or liabilities. The owners’equity recognized as the changes of the investee’s other owners’ equity except for net profit or loss, other comprehensive income andprofit distribution, are transferred to profit or loss for the current period when disposing the investment. When the previously-held equityinvestment which was measured at fair value before the acquisition date, the accumulated changes in fair value included in othercomprehensive income is transferred to profit or loss for the current period upon commencement of the cost method.In the consolidated financial statements, the combination cost is the sum of the consideration paid at the acquisition date and the fair valueof equity investment of the acquiree held prior to the acquisition date. The cost of equity investment of the acquiree held prior to theacquisition date is re-measured at the fair value at the acquisition date, the difference between the fair value and carrying value isrecognized as profit or loss for the current period. Other comprehensive income and changes of other owners’ equity from the equityinterest held in the acquiree prior to the acquisition date are transferred to profit or loss for the current period, except for othercomprehensive income resulted in the change of net liabilities or assets in the investee’s re-measurement of defined benefit plan.
(3) Transaction costs for business combination
The overhead for the business combination, including the expenses for audit, legal services, valuation advisory, and other administrativeexpenses, are recorded in profit or loss for the current period when incurred. The transaction costs of equity or debt securities issued asthe considerations of business combination are included in the initial recognition amount of the equity or debt securities.
6. Consolidated financial statements
(1) Scope of consolidated financial statements
The scope of consolidated financial statements is based on control. Control exists when the Company has power over the investee;exposure, or rights to variable returns from its involvement with the investee and has the ability to affect its returns through its power overthe investee. A subsidiary is an entity that is controlled by the Company (including enterprise, a portion of an investee as a deemedseparate component, and structured entity controlled by the enterprise).
(2) Basis of preparation of consolidated financial statements
The consolidated financial statements are prepared by the Company based on the financial statements of the Company and itssubsidiaries and other relevant information. When preparing consolidated financial statements, the accounting policies and accountingperiods of the subsidiaries should be consistent with those established by the Company, and all significant intra-group balances andtransactions are eliminated.Where a subsidiary or business has been acquired through a business combination involving enterprises under common control in thereporting period, the subsidiary or business is deemed to be included in the consolidated financial statements from the date they arecontrolled by the ultimate controlling party. Their operating results and cash flows are included in the consolidated income statement andconsolidated cash flow statement respectively from the date they are controlled by the ultimate controlling party.Where a subsidiary or business has been acquired through a business combination not involving enterprises under common control in the
reporting period, the operating results and cash flow of the subsidiary or business after the acquisition date are included in theconsolidated income statement and consolidated cash flow statement respectively.The portion of a subsidiary’s equity that is not attributable to the parent is treated as non-controlling interests and presented separately inthe consolidated balance sheet within shareholders’ equity. The portion of net profit or loss of subsidiaries for the period attributable tonon-controlling interests is presented separately in the consolidated income statement below the “net profit” line item. When the amount ofloss for the current period attributable to the non-controlling shareholders of a subsidiary exceeds the non-controlling shareholders’ shareof the opening owners’ equity of the subsidiary, the excess is still allocated against the non-controlling interests.
(3) Acquiring non-controlling interests of subsidiary
Where the Company acquires a non-controlling interest from a subsidiary’s non-controlling shareholders or disposes of a portion of aninterest in a subsidiary without a change in control, the transaction is treated as equity transaction, and the book value of shareholder’sequity attributed to the Company and to the non-controlling interest is adjusted to reflect the change in the Company’s interest in thesubsidiaries. The difference between the proportion interests of the subsidiary’s net assets being acquired or disposed and the amount ofthe consideration paid or received is adjusted to the capital reserve in the consolidated balance sheet, with any excess adjusted toretained earnings.
(4) Losing control over the subsidiary
When the Company loses control over a subsidiary because of disposing part of equity investment or other reasons, the remaining part ofthe equity investment is re-measured at fair value at the date when the control is lost. A gain or loss is recognised in the current period andis calculated by the aggregate of consideration received in disposal and the fair value of remaining part of the equity investment deductingthe share of net assets in proportion to previous shareholding percentage in the former subsidiary since acquisition date and the goodwill.Other comprehensive income related to the former subsidiary is transferred to profit or loss when the control is lost, except for thecomprehensive income arising from the movement of net liabilities or assets in the former subsidiary’s re-measurement of defined benefitplan.
7. Joint arrangement classification and accounting treatment for joint operation
A joint arrangement is an arrangement of which two or more parties have joint control. The Company classifies joint arrangements into jointoperations and joint ventures.
(1) Joint operations
A joint operation is a joint arrangement whereby the joint operators have rights to the assets, and obligations for the liabilities, relating tothe arrangement.The Company recognizes the following items relating to its interest in a joint operation, and account for them in accordance with relevantaccounting standards:
A、its solely-held assets, and its share of any assets held jointly;B、its solely-assumed liabilities, and its share of any liabilities assumed jointly;C、its revenue from the sale of its share of the output arising from the joint operation;
D、its share of the revenue from the sale of the output by the joint operation; andE、its solely-incurred expenses, and its share of any expenses incurred jointly.
(2) Joint ventures
A joint venture is a joint arrangement whereby the joint investors have rights to the net assets of the arrangement.The Company adopts equity method under long-term equity investment in accounting for its investment in joint venture.
8. Cash and cash equivalents
Cash comprises cash in hand and deposits that can be readily withdrawn on demand. Cash equivalents include short-term, highly liquidinvestments that are readily convertible to known amounts of cash and are subject to an insignificant risk of change in value.
9. Foreign currency transactions and translation of foreign currency financial statements
(1) Foreign currency transactions
Foreign currency transactions are translated into the functional currency of the Company, using the exchange rates prevailing at the datesof the transactions.Monetary items denominated in foreign currencies are translated to Renminbi at the spot exchange rate at the balance sheet date. Theresulting exchange differences between the spot exchange rate on balance sheet date and the spot exchange rate on initial recognition oron the previous balance sheet date are recognised in profit or loss. Non-monetary items that are measured at historical cost in foreigncurrencies are translated to Renminbi using the exchange rate at the transaction date. Non-monetary items that are measured at fair valuein foreign currencies are translated using the exchange rate at the date the fair value is determined. The resulting exchange differencesare recognised in profit or loss.
(2) Translation of foreign currency financial statements
When translating the foreign currency financial statements of overseas subsidiaries, assets and liabilities of foreign operation aretranslated to Renminbi at the spot exchange rate at the balance sheet date. Equity items, excluding “retained earnings”, are translated toRenminbi at the spot exchange rates at the transaction dates.Income and expenses of foreign operation are translated to Renminbi at the spot exchange rates.Cash flow statement of foreign operation is translated to Renminbi at the spot exchange rates [the rates determined under a systematicand rational method that approximate the spot exchange rates] at the cash flow occurrence dates. Effect of foreign exchange rate changeson cash and cash equivalents is presented separately as “Effect of foreign exchange rate changes on cash and cash equivalents” in thecash flow statement.The resulting translation differences are recognised in other comprehensive income in shareholders’ equity of balance sheet.The translation differences accumulated in shareholders’ equity with respect to a foreign operation are transferred to profit or loss in theperiod when the foreign operation is disposed.
10. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or an equity instrument of otherparties.
(1) Recognition and derecognition of financial instruments
A financial asset or financial liability is recognised when the Group becomes one party of financial instrument contracts.If one of the following conditions is met, the financial assets are terminated:
① The right of the contract to receive the cash flows of financial assets terminates
② The financial asset has been transferred, and is in accordance with the following conditions for derecognition.If the obligations of financial liability have been discharged in total or in part, derecognize all or part of it. If the Group (debtor) makes anagreement with the creditor to replace the current financial liability of assuming new financial liability which contract provisions are differentin substance, derecognize the current financial liability and meanwhile recognize as the new financial liability.If the financial assets are traded in regular ways, they are recognised and derecognised at the transaction date.
(2) Classification and measurement of financial assets
Financial assets are classified into the following three categories depends on the Group’s business mode of managing financial assets andcash flow characteristics of financial assets: financial assets measured at amortized cost, financial assets at fair value through othercomprehensive income and financial assets at fair value through profit or loss.Financial assets measured at amortised costThe Group shall classify financial assets that meet the following conditions and are not designated as financial assets at fair value throughprofit or loss as financial assets measured at amortized cost:
? The Group’s business model for managing the financial assets is to collect contractual cash flows;? The terms of the financial asset contract stipulate that cash flows generated on a specific date are only payments of principal and interestbased on the amount of outstanding principal.After initial recognition, the real interest rate method is used to measure the amortized cost of such financial assets. Profits or lossesarising from financial assets measured at amortized costs and not part of any hedging relationship are included in current profits andlosses when the recognition is terminated, amortized or impaired according to the real interest rate.
Financial assets at fair value through other comprehensive incomeThe Group shall classify financial assets that meet the following conditions and are not designated as financial assets measured at fairvalue and whose changes are recorded in current profits and losses as financial assets measured at fair value through othercomprehensive income:
? The Group’s business model for managing the financial assets is both to collect contractual cash flows and to sell the financial assets;? The terms of the financial asset contract stipulate that cash flows generated on a specific date are only payments of principal and interestbased on the amount of outstanding principal.After initial recognition, financial assets are subsequently measured at fair value. Interest, impairment losses or gains and exchange gains
calculated by the effective interest rate method are recognised in profit or loss, while other gains or losses are recognised in othercomprehensive gains. When derecognized, the accumulated gains or losses previously recognised in other comprehensive gains aretransferred from other comprehensive gains and recorded in current profits and losses.Financial assets at fair value through profit or lossIn addition to the above financial assets which are measured at amortized cost or at fair value through other comprehensive income, theGroup classifies all other financial assets as financial assets at fair value through profit or loss. When initial recognition, in order toeliminate or significantly reduce accounting mismatches, the Group irrevocably designates some financial assets that should have beenmeasured at amortized cost or at fair value through other comprehensive gains as financial assets at fair value through profit or loss.After initial recognition, the financial assets are subsequently measured at fair value, and the profits or losses (including interest anddividend income) generated from which are recognised in profit or loss, unless the financial assets are part of the hedging relationship.However, for non-tradable equity instrument investment, when initially recognized, the Group irrevocably designates them as financialassets at fair value through other comprehensive gains. The designation is made on the basis of individual investment, and the relevantinvestment conforms to the definition of equity instruments from the issuer’s point of view.After initial recognition, financial assets are subsequently measured at fair value. Dividend income that meets the requirements isrecognised in profit and loss, and other gains or losses and changes in fair value are recognised in other comprehensive gains. Whenderecognized, the accumulated gains or losses previously recognised in other comprehensive gains are transferred from othercomprehensive gains to retained earnings.The business model of managing financial assets refers to how the group manages financial assets to generate cash flow. The businessmodel decides whether the source of cash flow of financial assets managed by the Group is to collect contract cash flow, sell financialassets or both of them. Based on objective facts and the specific business objectives of financial assets management decided by keymanagers, the Group determines the business model of financial assets management.The Group evaluates the characteristics of the contract cash flow of financial assets to determine whether the contract cash flow generatedby the relevant financial assets on a specific date is only to pay principal and interest based on the amount of unpaid principal. Amongthem, principal refers to the fair value of financial assets at the time of initial confirmation; interest includes the consideration of time valueof money, credit risk related to the amount of unpaid principal in a specific period, and other basic borrowing risks, costs and profits. Inaddition, the Group evaluates the terms and conditions of the contracts that may lead to changes in the time distribution or amount of cashflow in financial asset contracts to determine whether they meet the requirements of the above contract cash flow characteristics.Only when the Group changes its business model of managing financial assets, all the financial assets affected shall be reclassified on thefirst day of the first reporting period after the business model changes, otherwise, financial assets shall not be reclassified after initialconfirmation.Financial assets are measured at fair value at initial recognition. For financial assets at fair value through profits and losses, the relatedtransaction costs are directly recognized through profits and losses, and the related transaction costs of other types of financial assets areincluded in the initial recognition amounts.
(3) Classification and measurement of financial liabilities
On initial recognition, financial liabilities are classified as: financial liabilities at fair value through profit or loss (FVTPL), and financialliabilities measured at amortized cost. For financial liabilities not classified as at fair value through profit or loss, the transaction costs arerecognised in the initially recognised amount.Financial liabilities at fair value through profits and lossesFinancial liabilities at FVTPL include transaction financial liabilities and financial liabilities designated as at fair value through profit or lossin the initial recognition. Such financial liabilities are subsequently measured at fair value, all gains and losses arising from changes in fairvalue and dividend and interest expense relative to the financial liabilities are recognised in profit or loss for the current period.Financial liabilities measured at amortized costOther financial liabilities are subsequently measured at amortized cost using the effective interest method; gains and losses arising fromderecognition or amortization is recognised in profit or loss for the current period.Distinction between financial liabilities and equity instrumentsThe financial liability is the liability that meets one of following criteria:
① Contractual obligation to deliver cash or other financial instruments to another entity.
② Under potential adverse condition, contractual obligation to exchange financial assets or financial liabilities with other parties.
③ A contract that will or may be settled in the entity’s own equity instruments and is a non-derivative for which the entity is or may beobliged to deliver a variable number of the entity’s own equity instruments.
④ A derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixednumber of the entity’s own equity instruments.An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.If the group cannot unconditionally avoid fulfilling a contractual obligation by delivering cash or other financial assets, the contractualobligation meets the definition of financial liability.If a financial instrument must or are able to be settled by the group’s own equity instrument, the group should consider whether the group’sequity instrument as the settlement instrument is a substitute of cash or other financial assets or the residual interest in the assets of anentity after deducting all of its liabilities. If the former, the tool is the group’s financial liability; if the latter, the tool is the equity instrument ofthe group.
(4) Fair value of financial instruments
Refer to Note III. 11 for determining the fair value of financial assets and financial liabilities.
(5) Impairment of financial assets
On the basis of expected credit losses, the Group performs impairment assessment on the following items and confirms the loss provision.? financial assets measured at amortized cost;? debt investments at fair value through other comprehensive income;
Measurement of expected credit lossesThe expected credit losses refer to the weighted average of the credit losses of financial instruments that are weighted by the risk ofdefault. Credit loss refers to the difference between all contractual cash flows receivable from the contract and all cash flows expected tobe received by the Group at the original effective interest rate, that is, the present value of all cash shortages.The Group separately measures the expected credit losses of financial instruments at different stages. The credit risk on a financialinstrument has not increased significantly since initial recognition, which is in the first stage. The Group shall measure the loss allowancefor that financial instrument at an amount equal to 12-month expected credit losses. If the credit risk of financial instruments has increasedsignificantly since the initial recognition, but no credit impairment has occurred, which is in the second stage. The Group shall measure theloss allowance for a financial instrument at an amount equal to the lifetime expected credit losses. If the financial instrument has occurredcredit impairment since initial recognition, which is in the third stage, and the Group shall measure the loss allowance for a financialinstrument at an amount equal to the lifetime expected credit losses.For financial instruments with lower credit risk at the balance sheet date, the Group assumes that their credit risk has not increasedsignificantly since the initial recognition, and shall measure the loss allowance for that financial instrument at an amount equal to 12-monthexpected credit losses.The lifetime expected credit losses, refer to the expected credit losses caused by all possible defaults during the whole expected lifetime.The 12-month expected credit losses, refer to the expected credit losses caused by all possible defaults during the 12-month after balancesheet date (if the expected duration of financial instrument is less than 12 months, then for the expected duration), which is part of thelifetime expected credit losses.When measure the expected credit loss, the longest contract period (including the option of renewal) that the group needs to consider isthe longest contract period the enterprise facing credit risk.For financial instruments in the first stages, second stages and with lower credit risk, the Group calculates interest income on the basis oftheir book balances without deduction of impairment provisions and actual interest rates. For financial instruments in the third stage, theGroup calculates interest income according to their book balance minus the impairment provision and the actual interest rate.For bills receivable, accounts receivable and contract assets, whether or not there are significant financing elements, the Group shallalways measure the loss allowance for them at an amount equal to the lifetime expected credit losses.According to the characteristics of credit risk, the group divides and combines bills receivable and accounts receivable, contract assets andleased receivables. On the basis of the combination, the group calculates the expected credit losses. The basis of determining thecombination is as follows:
A﹑ Bills receivable? Bill receivable group 1: Bank acceptance bills? Bill receivable group 2: Trade acceptance billsB﹑ Accounts receivable? Accounts receivable group 1: Amount receivables of related parties
? Accounts receivable group 2: Amount receivables of other customersFor the accounts receivable and bills receivable divided into groups, the group, taking into consideration of historical credit losses, currentsituation and forecast of future economic situation, prepares a comparison table between the ageing of accounts receivable and thelifetime expected credit losses rate to calculate the expected credit losses.Other receivablesAccording to the characteristics of credit risk, the group divides other receivables into group. On the basis of the combination, the groupcalculates the expected credit losses. The basis of determining the combination is as follows:
? Other receivables group 1: Receivables of down payment and guarantee? Other receivables group 2: Petty cash for employees? Other receivables group 3: Social security payment paid on-behalf of employees? Other receivables group 4: Receivables from related parties in scope of consolidation? Other receivables group 5: OthersFor other receivables that divided into groups, the Group calculates the expected credit losses through the exposure on risk of default andexpected credit losses rate in the next 12 months or the lifetime of receivables.Debt investments and other debt investmentsFor debt investments and other debt investments, the Group calculates the expected credit losses through risk of default and expectedcredit losses rate in the next 12 months or the lifetime. according to the nature of the investment, the types of counterparty and riskexposure.Assessment of significant increase of credit riskBy comparing the default risk of financial instruments on balance sheet day with that on initial recognition day, the Group determines therelative change of default risk of financial instruments during the expected life of financial instruments, to evaluate whether the credit risk offinancial instruments has increased significantly since the initial recognition.To determine whether credit risk has increased significantly since the initial recognition., the Group considers reasonable and validinformation, including forward-looking information, that can be obtained without unnecessary additional costs or efforts. Informationconsidered by the Group includes:
? The debtor can’t pay principal and interest on the expiration date of the contract;? Serious deterioration of external or internal credit ratings (if any) of financial instruments that have occurred or are expected to occur;? Serious deterioration of the debtor’s operating results that have occurred or are expected to occur;? Changes in the existing or anticipated technological, market, economic or legal environment will have a significant negative impact on thedebtor’s repayment capacity.According to the nature of financial instruments, the Group evaluates whether credit risk has increased significantly on the basis of a singlefinancial instrument or a combination of financial instruments. When assessing on the basis of the combination of financial instruments, the
Group can classify financial instruments based on common credit risk characteristics, such as overdue information and credit risk rating.Financial assets that have occurred credit impairmentOn the balance sheet date, the Group assesses whether credit impairment has occurred in financial assets measured at amortized costand debt investments measured at fair value through other comprehensive income. When one or more events adversely affect theexpected future cash flow of a financial asset occur, the financial asset becomes a financial asset with credit impairment. Evidence ofcredit impairment of financial assets includes the following observable information:
? Significant financial difficulties occur to the issuer or debtor;? The debtor breaches any of the contractual stipulations, for example, fails to pay or delays the payment of interests or the principal, etc.;? For economic or contractual considerations related to the financial difficulties of the debtor, the Group grants concessions to the debtorthat will not be made under any other circumstances.? The debtor is probable to go bankrupt or undergo other financial restructuring.? Financial difficulties of issuer or debtor lead to the disappearance of financial assets active market.Presentation of expected credit losses allowanceIn order to reflect the changes happened to the credit risk of financial instruments since the initial recognition, the Group recalculates theexpected credit losses on each balance sheet day. The increase or reversal of the loss provision resulting therefrom is recognised as animpairment loss or gain in the current profit or loss. For financial assets measured at amortized cost, loss provision offsets the carryingamount of the financial assets shown on the balance sheet; for debt investments measured at fair value through other comprehensiveincome, the Group recognizes its loss provision through other comprehensive income and does not offset the financial assets’ carryingamount.Write offIf the Group no longer reasonably expects that the financial assets contract cash flow can be recovered fully or partially, the financialassets book balance will be reduced directly. Such reduction constitutes the derecognition of the financial assets. What usually occurswhen the Group determines that the debtor has no assets or sources of income to generate sufficient cash flows to pay the amount to bereduced. However, in accordance with the Group’s procedures for recovering due payment, the financial assets reduced may still beaffected by enforcement activities.If the reduced financial assets are recovered later, the returns as impairment losses shall be included in the profits and losses of therecovery period.
(6) Transfer of financial assets
Transfer of financial assets refers to the transference or deliverance of financial assets to the other party (the transferee) other than theissuer of financial assets.The Group derecognizes a financial asset only if it transfers substantially all the risks and rewards of ownership of the financial asset to thetransferee; the Group should not derecognize a financial asset if it retains substantially all the risks and rewards of ownership of thefinancial asset.
The Group neither transfers nor retains substantially all the risks and rewards of ownership, shows as the following circumstances: if theGroup has forgone control over the financial assets, derecognize the financial assets and verify the assets and liabilities; if the Groupretains its control of the financial asset, the financial asset is recognized to the extent of its continuing involvement in the transferredfinancial asset and recognize an associated liability is recognized.
(7) Offsetting financial assets and financial liabilities
When the Group has the legal rights to offset the recognized financial assets and financial liabilities and is capable to carry it out, theGroup plans to settlement or realize the financial assets and pay off the financial liabilities in net amount, the financial assets and financialliabilities shall be presented in the balance sheet at net amount. Except this, financial assets and financial liabilities shall be listedseparately in balance sheet and are not allowed to offset.
(8) Financial instruments that subject to foreign exchange rate volatility risks
Foreign exchange rate risk refers to risk of the fair value or future cash flows varies because of changes in foreign exchange. Foreignexchange rate risk arises from financial instruments that denominated in foreign currencies other than the recording currency. Theoverseas subsidiary of the Company mainly uses Hong Kong Dollar and Swiss Franc for settlement. The Company’s monetary assets andliabilities that are denominated in foreign currencies are all subject to the impact of foreign exchange rate volatility.
11. Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date.The Company measures related assets or liabilities at fair value assuming the assets or liabilities are exchanged in an orderly transactionin the principal market; in the absence of a principal market, assuming the assets or liabilities are exchanged in an orderly transaction inthe most advantageous market. Principal market (or the most advantageous market) is the market that the Company can normally enterinto a transaction on measurement date. The Company adopts the presumptions that would be used by market participants in achievingthe maximized economic value of the assets or liabilities.For financial assets or financial liabilities with active markets, the Company uses the quoted prices in active markets as their fair value.Otherwise, the Company uses valuation technique to determine their fair value.Fair value measurement of a non-financial asset takes into account market participants’ ability to generate economic benefits using theasset in its best way or by selling it to another market participant that would best use the asset.The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measurefair value, maximizing the use of relevant observable inputs, and using unobservable inputs only if the observable inputs aren’t available orimpractical.Fair value level for assets and liabilities measured or disclosed at fair value in the financial statements are determined according to thesignificant lowest level input to the entire measurement: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assetsor liabilities that the Company can access at the measurement date; Level 2 inputs are inputs other than quoted prices included within
Level 1 that are observable for the assets or liabilities, either directly or indirectly; Level 3 inputs are unobservable inputs for the assets orliabilities.At the balance sheet date, the Company re-values assets and liabilities being measured at fair value continuously in the financialstatements to determine whether to change the levels of fair value measurement.
12. Inventories
(1) Classification
Inventories include raw materials, work in progress, and finished goods.
(2) Measurement method of cost of inventories
Inventories are initially measured at cost. Raw materials and finished goods are calculated using weighted average method (except forbranded watches) and specific identification method (for branded watches).
(3) Basis for determining the net realisable value and method for provision for obsolete inventoriesNet realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and theestimated costs necessary to make the sale and relevant taxes. The net realisable value is measured based on the verified evidences andconsiderations for the purpose of holding inventories and the effect of post balance sheet events.Any excess of the cost over the net realisable value of inventories is recognised as a provision for obsolete inventories, and is recognisedin profit or loss. The Company usually recognises provision for decline in value of inventories by a single (type, group) inventory item. If thefactors caused the value of inventory previously written-down have disappeared, the provision for decline in value of inventories previouslymade is reversed.
(4) Inventory count system
The Company maintains a perpetual inventory system.
(5) Amortization methods of low-value consumables and packaging materials
Low-value consumables and packaging materials are charged to profit or loss when they are used.
13. Long-term equity investments
Long-term equity investments include equity investments in subsidiaries and equity investments in joint ventures and associates. Anassociate is an enterprise over which the Company has significant influence.
(1) Determination of initial investment cost
The initial cost of a long-term equity investment acquired through a business combination involving enterprises under common control isthe Company’s share of the carrying amount of the subsidiary’s equity in the consolidated financial statements of the ultimate controllingparty at the combination date. For a long-term equity investment obtained through a business combination not involving enterprises undercommon control, the initial cost is the combination cost.A long-term equity investment acquired other than through a business combination: A long-term equity investment acquired other than
through a business combination is initially recognised at the amount of cash paid if the Company acquires the investment by cash, or atthe fair value of the equity securities issued if an investment is acquired by issuing equity securities.
(2) Subsequent measurement and recognition of profit or loss
Long-term equity investments in subsidiaries are accounted for using the cost method. An investment in a joint venture or an associate isaccounted for using the equity method for subsequent measurement.For a long-term equity investment which is accounted for using the cost method, Except for cash dividends or profit distributions declaredbut not yet distributed that have been included in the price or consideration paid in obtaining the investments, the Company recognises itsshare of the cash dividends or profit distributions declared by the investee as investment income for the current period.For a long-term equity investment which is accounted for using the equity method, where the initial cost of a long-term equity investmentexceeds the Company’s interest in the fair value of the investee’s identifiable net assets at the date of acquisition, the investment is initiallyrecognised at cost. Where the initial investment cost is less than the Company’s interest in the fair value of the investee’s identifiable netassets at the date of acquisition, the investment is initially recognised at the investor’s share of the fair value of the investee’s identifiablenet assets, and the difference is recognised in profit or loss.Under the equity method, the Company recognises its share of the investee’s profit or loss and other comprehensive income as investmentincome or losses and other comprehensive income respectively, and adjusts the carrying amount of the investment accordingly. Once theinvestee declares any cash dividends or profit distributions, the carrying amount of the investment is reduced by the amount attributable tothe Company. Changes in the Company’s share of the investee’s owners’ equity, other than those arising from the investee’s net profit orloss, other comprehensive income or profit distribution (referred to as “other changes in owners’ equity”), is recognised directly in theCompany’s equity, and the carrying amount of the investment is adjusted accordingly. In calculating its share of the investee’s net profits orlosses, other comprehensive income and other changes in owners’ equity, the Group recognises investment income and othercomprehensive income after making appropriate adjustments to align the accounting policies or accounting periods with those of theGroup based on the fair value of the investee’s identifiable net assets at the date of acquisition.When the Company becomes capable of exercising joint control or significant influence (but not control) over an investee due to additionalinvestment or other reasons, the Company uses the fair value of the previously-held equity investment, together with additional investmentcost, as the initial investment cost under the equity method. The difference between the fair value and carrying amount of thepreviously-held equity investment, and the accumulated changes in fair value included in other comprehensive income, shall be transferredto profit or loss for the current period upon commencement of the equity method.When the Company can no longer exercise joint control of or significant influence over an investee due to partial disposal of the equityinvestment or other reasons, the remaining equity investment shall be accounting for using Accounting Standard for Business EnterprisesNo. 22 - Recognition and Measurement of Financial Instruments, and the difference between the fair value and the carrying amount of theremaining equity investment shall be charged to profit or loss for the current period at the date of the loss of joint control or significantinfluence. Any other comprehensive income previously recognised under the equity method shall be accounted for on the same basis aswould have been required if the Company had directly disposed of the related assets or liabilities for the current period upondiscontinuation of the equity method. Other movement of owner’s equity related to original equity investment is transferred to profit or loss
for the current period.When the Company can no longer exercise control over an investee due to partial disposal of the equity investment or other reasons, andthe remaining equity after disposal can exercise joint control of or significant influence over an investee, the remaining equity is adjusted asusing equity method from acquisition. When the remaining equity can no longer exercise joint control of or significant influence over aninvestee, the remaining equity investment shall be accounted for using Accounting Standard for Business Enterprises No. 22-Recognitionand Measurement of Financial Instruments, and the difference between the fair value and the carrying amount of the remaining equityinvestment shall be charged to profit or loss for the current period at the date of loss of control.When the Company can no longer exercise control over an investee due to new capital injection by other investors, and the Company canexercise joint control of or significant influence over an investee, the Company recognizes its share of the investee’s new added net assetsusing new shareholding percentage. The difference between its new share of the investee’s new added net assets and its decreasedshareholding percentage of the original investment is recognized in profit or loss. And the Company adjusts to the equity method using thenew shareholding percentage as if it uses the equity method since it obtains the investment.Unrealised profits and losses resulting from transactions between the Company and its associates or joint ventures are eliminated to theextent of the Company’s interest in the associates or joint ventures. Unrealised losses resulting from transactions between the Companyand its associates or joint ventures are eliminated in the same way as unrealised gains but only to the extent that there is no impairment.
(3) Criteria for determining the existence of joint control or significant influence over an investeeJoint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activitiesrequire the unanimous consent of the parties sharing control. When assessing whether the Company can exercise joint control over aninvestee, the Company first considers whether no single participant party is in a position to control the investee’s related activitiesunilaterally, and then considers whether strategic decisions relating to the investee’s related activities require the unanimous consent of allparticipant parties that sharing of control. All the parties, or a group of the parties, control the arrangement collectively when they must acttogether to direct the relevant activities. When more than one combination of the parties can control an arrangement collectively, jointcontrol does not exist. A party that holds only protective rights does not have joint control of the arrangement.Significant influence is the power to participate in the financial and operating policy decisions of an investee but does not have control orjoint control over those policies. When determining whether the Company can exercise significant influence over an investee, the effect ofpotential voting rights (for example, warrants, share options and convertible bonds) held by the Company or other parties that are currentlyexercisable or convertible shall be considered.When the Company, directly or indirectly through subsidiaries, owns 20% of the investee (including 20%) or more but less than 50% of thevoting shares, it has significant influence over the investee unless there is clear evidence to show that in this case the Company cannotparticipate in the production and business decisions of the investee, and cannot form a significant influence. When the Company owns lessthan 20% of the voting shares, generally it does not have significant influence over the investee, unless there is clear evidence to showthat in this case the Company can participate in the production and business decisions of the investee so as to form a significant influence.
(4) Method of impairment testing and impairment provision
For investments in subsidiaries, associates and joint ventures, refer to Note III. 20 for the Company’s method of asset impairment.
14. Investment property
Investment properties are properties held either to earn rental income or for capital appreciation or for both. The Company’s investmentproperties include leased land use rights, land use right held and provided for to transfer after appreciation and leased building andconstruction.Investment properties are initially measured at acquisition cost, and depreciated or amortized using the same policy as that for fixed assetsor intangible assets.For the impairment of the investment properties accounted for using the cost model, refer to Note III.20.Gains or losses arising from the sale, transfer, retirement or disposal of an item of investment property are determined as the differenceamong the net disposal proceeds, the carrying amount of the item, related taxes and surcharges, and are recognised in profit or loss forcurrent period.Depreciation method of investment property is the same as fixed assets. Refer to Note III. 15 for details.
15. Fixed assets
(1) Recognition of fixed assets
Fixed assets represent the tangible assets held by the Company for use in production of goods, use in supply of services, rental or foradministrative purposes with useful lives over one accounting year.Fixed assets are only recognised when its related economic benefits are likely to flow to the Company and its cost can be reliablymeasured.Fixed asset is initially measured at cost.
(2) Depreciation of fixed assets
The cost of a fixed asset is depreciated using the straight-line method since the state of intended use, unless the fixed asset is classifiedas held for sale. Not considering impairment provision, the estimated useful lives, residual value rates and depreciation rates of each classof fixed assets are as follows:
Class
| Class | (years) | Residual value rate % | Depreciation rate % |
| Property and plant | 20-35 | 5.00 | 4.80-2.70 |
| Machinery and equipment | 10 | 5.00-10.00 | 9.50-9.00 |
| Electronic equipment | 5 | 5.00 | 19.00 |
| Motor vehicles | 5 | 5.00 | 19.00 |
| Others | 5 | 5.00 | 19.00 |
For impaired fixed assets, cumulative amount of impairment provision is deducted in determining the depreciation rate.
(3) For the impairment of the fixed assets, please refer to Note III. 20.
(4) Useful lives, estimated residual values and depreciation methods are reviewed at least at each year-end.The Company adjusts the useful lives of fixed assets if their expected useful lives are different with the original estimates and adjusts theestimated net residual values if they are different from the original estimates.
(5) Overhaul costs
Overhaul costs occurred in regular inspection are recognized in the cost if there is undoubted evidence to confirm that this part meets therecognition criteria of fixed assets, otherwise, the overhaul costs are recognized in profit or loss for the current period. Depreciation isprovided during the period of regular overhaul.
16. Construction in progress
Construction in progress is recognized based on the actual construction cost, including all expenditures incurred for construction projects,capitalised borrowing costs and any other costs directly attributable to bringing the asset to working condition for its intended use.Construction in progress is transferred to fixed asset when it is ready for its intended use.For the impairment of construction in progress, please refer to Note III. 20.
17. Borrowing costs
(1) Capitalisation criteria
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset shall be capitalised as partof the cost of that asset. Other borrowing costs are expensed in profit or loss as incurred. The capitalisation of borrowing costs shallcommence only when the following criteria are met:
① capital expenditures have been incurred, including expenditures that have resulted in payment of cash, transfer of other assets or theassumption of interest-bearing liabilities;
② borrowing costs have been incurred;
③ the activities that are necessary to prepare the asset for its intended use or sale have commenced.
(2) Capitalisation period
The capitalisation of borrowing costs ceases when the asset under acquisition or construction becomes ready for its intended use, theborrowing costs incurred thereafter are recognised in profit or loss for the current period.Capitalisation of borrowing costs is suspended during periods in which the acquisition or construction of a fixed asset is interruptedabnormally and the interruption lasts for more than 3 months, until the acquisition or construction is resumed.
(3) Capitalisation rate of borrowing costs and calculation basis of capitalised amount
For interest expense actually incurred on specific borrowings, the eligible capitalised amount is the net amount of the borrowing costs afterdeducting any investment income earned before some or all of the funds are used for expenditures on the qualifying asset. To the extentthat the Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Company shall determine theamount of borrowing costs eligible for capitalisation by applying a capitalisation rate to the expenditures on that asset, the capitalisationrate shall be the weighted average of the borrowing costs applicable to the borrowings of the Company that are outstanding during theperiod, other than borrowings specifically for the purpose of obtaining a qualifying asset.
In the capitalisation period, exchange differences of specific borrowings in foreign currency shall be capitalised; exchange differences ofgeneral borrowings in foreign currency is recognised in profit or loss for the current period.
18. Intangible assets
Intangible assets include software patent rights etc.Intangible assets are stated at actual cost upon acquisition and the useful economic lives are determined at the point of acquisition.When the useful life is finite, amortisation method shall reflect the pattern in which the asset’s economic benefits are expected to berealised. If the pattern cannot be determined reliably, the straight-line method shall be used. An intangible asset with an indefiniteuseful life shall not be amortised.Amortisation method for intangible assets with finite useful lives is as follows:
Categories
| Categories | Useful life (years) | Amortisation methods | Remarks |
| Land use right | 50 | Straight-line method | |
| Software system | 5 | Straight-line method | |
| Brand usage right | 5-10 | Straight-line method |
The Company shall review the useful life and amortisation method of an intangible asset with a finite useful life at least at each year end.Changes of useful life and amortisation method shall be accounted for as a change in accounting estimate.An intangible asset shall be derecognised in profit or loss when it is not expected to generate future economic benefits.For the impairment of intangible assets, please refer to Note III. 20.
19. Research and development expenditure
Expenditure on an internal research and development project is classified into expenditure incurred during the research phase andexpenditure incurred during the development phase.Expenditure during the research phase is expensed when incurred.Expenditure during the development phase is capitalised if the product or process is technically and commercially feasible; the Companyintends to complete the development; the intangible asset can generate economic benefits, including there is evidence that the productsproduced using the intangible asset has a market or the intangible asset itself has a market; if the intangible asset is for internal use, thereis evidence that there is usage for the intangible asset; there is sufficient support in terms of technology, financial resources and otherresources in order to complete the development and use or sell the intangible asset; and development costs can be measured reliably.Other development expenditure is recognised as an expense in the period in which it is incurred.Research and development projects of the Company will enter into the development phase when they meet the above conditions,technical and economic feasibility research is finished and necessary approval of the project is obtained.Capitalised expenditure on the development phase is presented as “development costs” in the balance sheet, and is transferred tointangible assets when the project is completed to its intended use.
20. Impairment of assets
The impairment of long-term equity investments in subsidiaries, associates and joint ventures, investment properties measured using acost model, fixed assets, construction in progress, and intangible assets (excluding inventories, investment property measured using a fairvalue model, deferred tax assets and financial assets) is determined as follows:
At each balance sheet date, the Company determines whether there is any indication of impairment. If any indication exists, therecoverable amount of the asset is estimated. In addition, the Company estimates the recoverable amounts of goodwill, intangible assetswith indefinite useful lives and intangible assets not ready for use at each year-end, irrespective of whether there is any indication ofimpairment.The recoverable amount of an asset is the higher of its fair value less costs to sell and its present value of expected future cash flows. Therecoverable amount is estimated for each individual asset. If it is not possible to estimate the recoverable amount of each individual asset,the Company determines the recoverable amount for the asset group to which the asset belongs. An asset group is the smallestidentifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or asset groups.An impairment loss is recognised in profit or loss when the recoverable amount of an asset is less than its carrying amount. A provision forimpairment of the asset is recognised accordingly.For goodwill impairment test, the carrying amount of goodwill arising from a business combination is allocated reasonably to the relevantasset group since the acquisition date. If the carrying amount of goodwill is unable to be allocated to asset group, the carrying amount ofgoodwill will be allocated to asset portfolio. Asset group or portfolio of asset group is asset group or portfolio of asset group which can bebenefit from synergies of a business combination and is not greater than the reportable segment of the Company.In impairment testing, if impairment indication exists in asset group or portfolio of asset group containing allocated goodwill, impairmenttest is first conducted for asset group or portfolio of asset group that does not contain goodwill, and corresponding recoverable amount isestimated and any impairment loss is recognized. Then impairment test is conducted for asset group or portfolio of asset groupcontaining goodwill by comparing its carrying amount and its recoverable amount. If the recoverable amount is less than the carryingamount, impairment loss of goodwill is recognized.Once an impairment loss is recognised, it is not reversed in a subsequent period.
21. Long-term deferred expenses
Long-term deferred expenses are recorded at the actual cost, and amortized using a straight-line method within the benefit period. Forlong-term deferred expense that cannot bring benefit in future period, the Company recognized its amortised cost in profit or loss for thecurrent period.
22. Employee benefits
(1) Scope of employee benefits
Employee benefits refer to all forms of consideration or compensation given by the Company in exchange for service rendered byemployees or for the termination of employment relationship. Employee benefits include short-term employee benefits, post-employmentbenefits, termination benefits and other long-term employee benefits. Benefits provided to the Company’s spouse, children, dependents,family members of deceased employees or other beneficiaries are also part of the employee benefits.
According to liquidity, employee benefits are presented as “employee benefits payable” and “long-term employee benefits payable” on thebalance sheet.
(2) Short-term employee benefits
In the current period, the Company has accrued for the actual wages, bonuses, medical insurance for employees based on standard rate,work injury insurance and maternity insurance and other social insurance and housing fund incurred and these are recognised as liabilitiesand corresponding costs in the profit or loss. If these liabilities are not expected to be fully paid 12 months after the end of the reportingperiod in which employee renders the service to the Company, and if the financial impact is significant, these liabilities shall be discountedusing the net present value method.
(3) Post-employment benefits
Post-employment benefit plan includes defined contribution plans and defined benefit plans. Defined contribution plans arepost-employment benefit plans under which an enterprise pays fixed contributions into a separate fund and will have no future obligationsto pay the contributions. Defined benefit plans are post-employment benefit plans other than defined contribution plans.Defined contribution plansDefined contribution plans include primary endowment insurance, unemployment insurance and enterprise annuity plan.Besides basic pension insurance, the Company establishes corporate annuity plans in accordance with the related policies of corporatepension regulations. Employees can join the pension plan voluntarily. The Company has no other significant commitment of employees’social security.The Company shall recognise, in the accounting period in which an employee provides service, the contribution payable to a definedcontribution plan as a liability, with a corresponding charge to the profit or loss for the current period or the cost of a relevant asset.Defined benefit planAt each balance sheet date, actuarial calculation and valuation shall be carried out by independent actuary for defined benefit plan todetermine the cost of welfare using estimated cumulative welfare unit method. Employee benefit cost resulted from the Group’s definedbenefit plan including the followings:
① Service cost, which includes service cost for current period, prior period and gain or losses on settlement. Service cost forcurrent period refers to the increase in amount of present value of liability of defined benefit plan resulted from service providedby employees in current period. Service cost for prior period refers to changes in amount of present value of liability of definedbenefit plan related to prior period due to alteration of the plan.
② Net interest of defined benefit plan net liability or net asset include interest gain of plan asset, interest expenses of definedbenefit plan liability and interest affected by the upper limit of asset.
③ Changes due to re-measurement of defined benefit plan net liability or net asset
Unless other accounting standards allow or permit the employee welfare cost to be charged into asset cost, the Company shall charge theitem ① and ② above into current period profit or loss. Item ③ shall be included in other comprehensive income and will cannot berecycled into profit or loss in later accounting periods and when the plan is terminated, the portion that previously recorded in other
comprehensive shall be transferred into retained earnings in all.
(4) Termination benefits
The Company provides for termination benefits to the employees and shall recognise an employee benefits liability for termination benefits,with a corresponding charge to the profit or loss for the current period, at the earlier of the following dates: When the Company cannotunilaterally withdraw the offer of the termination benefits because of an employment termination plan or a redundancy proposal; or whenthe Company recognises the costs or expenses relating to a restructuring that involves the payment of the termination benefits.When adopting employee internal retirement plan, the economic compensation before the official retirement date shall be included in astermination benefits. The salary for internal retired employee and social security payments from the date when the employee ceasesservice to the date of officially retired shall be charged to current profit or loss one-off. Economic compensation after official retirement shallbe dealt as post-employment benefits.
(5) Other long-term employee benefits
Other long-term employee benefits provided by the Company to the employees satisfied the conditions for classifying as a definedcontribution plan; those benefits shall be accounted for in accordance with the above requirements relating to defined contribution plan.When the benefits satisfied a defined benefit plan, it shall be accounted for in accordance with the above requirements relating to definedbenefit plan, but the movement of net liabilities or assets in re-measurement of defined benefit plan shall be recorded in profit or loss forthe current period or cost of relevant assets.
23. Provisions
A provision is recognised for an obligation related to a contingency if all the following conditions are satisfied:
(1) the Company has a present obligation;
(2) it is probable that an outflow of economic benefits will be required to settle the obligation; and
(3) the amount of the obligation can be estimated reliably.
A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation. Factors pertainingto a contingency such as the risks, uncertainties and time value of money are taken into account as a whole in reaching the best estimate.Where the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows. TheCompany reviews the carrying amount of a provision at the balance sheet date and adjusts the carrying amount to the current bestestimate.If all or part of the expenditure necessary for settling the provision is expected to be compensated by a third party, the amount ofcompensation is separately recognized as an asset when it is basically certain to be received. The recognized compensation amount shallnot exceed the carrying amount of the provision.
24. Share-based payment
(1) Types of share-based payment
Share-based payments are divided into equity-settled share-based payments and cash-settled share-based payments.
(2) Method of determining share-based payment
The Company determining the fair value of equity instruments such as share options granted which has active markets using publicquotation. If no active markets exist, option pricing model shall be used to determine its fair value. The following factors shall be consideredwhen selecting option pricing models: A. Exercising price of option, B. Valid period of option, C. Current price of the target share, D.Share’s estimated volatility rate, E. estimated share dividend and F. risk-free interest rate during the valid period.
(3) Evidence of determining the best estimate of exercisable equity instruments
On each balance sheet date during the vesting period, the Company makes the best estimate based on the latest information on thechanges in the number of employees with vesting rights, and corrects the number of equity instruments that are expected to be exercised.On the exercise date, the number of final estimated exercisable equity instrument shall be the same as actual exercisable equityinstrument.
(4) Accounting treatment for implementation, modifying and terminating of the share-based payment planEquity settled share-based payment is measured using fair value of equity instruments granted to employees. If the option can beexercised immediately after the grant, the relevant costs or expenses are included in the grant date, and the capital reserve are increasedaccordingly. If the option can only be exercised after completing the service within the vesting period or meeting the required performanceconditions, the amount of the fair value shall be charged to cost or expenses and capital reserve based on straight-line method duringthe vesting period using the best estimate of the amount of exercisable equity instrument. No changes to related cost or expenses andequity after the exercisable date.The cash-settled share-based payment is measured at the fair value of the liabilities determined by the Company based on shares or otherequity instruments. If the right can be exercise immediately after the grant, the relevant costs or expenses are included in the grant date,and the liabilities are increased accordingly. If the option can only be exercised after completing the service within the vesting period ormeeting the required performance conditions, the service obtained by the Company in current period shall be charged to profit or lossbased on fair value of the liabilities undertake by the Company, calculated on the basis of the best estimation of the exercisable option oneach balance sheet date of the vesting period. The liabilities shall be increased accordingly. The fair value of the liability is re-measured ateach balance sheet date and settlement date before the settlement of related liabilities, the changes are included in the current profit andloss.When the Group changes the share-based payment plan, if the modification increases the fair value of the granted equity instruments, theincrease in the fair value of the equity instruments is recognized accordingly. The increase in the fair value of equity instruments refers tothe difference between the fair value, measured on the modification date, of the equity instruments before and after the modification. If themodification reduces the total fair value of the share-based payment or adopts other methods that are not in favour of employees, theaccounting treatment of it will not be changed, as if the modification never happened unless the Group cancelled part or all of the grantedequity instruments.During the vesting period, if the granted equity instrument is cancelled, the Company shall treat the cancelled equity instrument asaccelerated exercise, and shall immediately charge the amount that should be recognized in the remaining vesting period into the current
profit and loss and adjusting the capital reserves at the same time. If the employee or other party can choose to meet the non-vestingconditions but fails during the vesting period, the Group will treat it as a cancellation of the equity instrument.
25. Revenue
(1) General principle
①Sale of goods
Revenue is recognised when all the following conditions are satisfied: significant risks and rewards of ownership of goods have beentransferred to the buyer; the Company retains neither continuing managerial involvement to the degree usually associated with ownershipnor effective control over the goods sold; it is probable that the economic benefits will flow to the Company; and the revenue and costs canbe measured reliably.
②Rendering of services
Where the outcome of a transaction involving the rendering of services can be estimated reliably, revenue is recognised by reference tothe stage of completion.The stage of completion is based on the proportion of costs incurred to date to the estimated total progress of work performed to the totalservices to be performed.Rendering of services can be estimated reliably when all the following conditions are satisfied:
A. The revenue can be measured reliably;B. It is probable that the economic benefits will flow to the Company;C. The stage of completion can be measured reliably;D. The costs incurred and to be incurred in the transaction can be measured reliably.Where the outcome cannot be estimated reliably, revenues are recognised to the extent of the costs incurred that are expected to berecoverable, and an equivalent amount is charged to profit or loss as service cost; otherwise, the costs incurred are recognised in profit orloss and no service revenue is recognised.
③Revenue from rendering usage rights
The revenue is recognized when the economic benefits related to transfer of the right to use assets can flow in and the amount of revenuecan be measured reliably.
(2) Specific revenue recognition method
The watches sold by the Company includes two types, one is the self-manufactured FIYTA watch, the sales of which is managed bybranch offices and provincial-level sale sections by regions set up by Sales Company, a subsidiary of the Company. The other is brandwatches, the sales of which are controlled by Shenzhen HARMONY World Watch Center Co., Ltd., a subsidiary of the Company, and theCompany act as agent. Regarding to sales modes, a portion of the sales of self-manufactured FIYTA watches is sold through direct salesto customer and consignment sales while most of the self-manufactured FIYTA watches and brand watches are sold under two salesmodes, namely exclusive shop 、shop-in-shop and On-line shop. Detailed method of revenue recognition as follows:
① Direct sales to the customer
Under direct sales to the customer mode, the Company delivers products to customers and recognizes revenue after customer inspectionand acceptance.
② Exclusive shop
Under exclusive shop mode, the Company delivers products to customers and recognizes revenue after customer inspection, acceptanceand pay.
③ Shop-in-shop
Under shop-in-shop mode, the Company delivers products to customers, sales staff issues sales memo to retail customers and recognizessales revenue after customer inspection and acceptance and the department store collects the payment from the customer.
④On-line shop
Under on-line shop mode, the Company recognizes revenue when it delivers products to customer and the customer confirmed receivingand the Company receives payment.
⑤Consignment sales
Under consignment sales mode, the Company receives the detail of the sales list from distributors and recognizes revenue while issuinginvoice to distributors.
26. Government grants
A government grant is recognised when there is reasonable assurance that the grant will be received and that the Group will comply withthe conditions attaching to the grant.If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If a governmentgrant is in the form of a transfer of a non-monetary asset, it is measured at fair value. If fair value cannot be reliably determined, it ismeasured at a nominal amount of RMB 1.Government grants related to assets are grants whose primary condition is that the Group qualifying for them should purchase, constructor otherwise acquire long-term assets. Government grants related to income are grants other than those related to assets.For government grants with unspecified purpose, the amount of grants used to form a long-term asset is regarded as government grantsrelated to an asset, the remaining amount of grants is regarded as government grants related to income. If it is not possible to distinguish,the amount of grants is treated as government grants related to income. A government grant related to an asset is offset against thecarrying amount of the related asset, or recognised as deferred income and amortised to profit or loss over the useful life of the relatedasset on a reasonable and systematic manner. A grant that compensates the Group for expenses or losses already incurred is recognisedin profit or loss or offset against related expenses directly. A grant that compensates the Group for expenses or losses to be incurred in thefuture is recognised as deferred income, and included in profit or loss or offset against related expenses in the periods in which theexpenses or losses are recognised.A grant related to ordinary activities is recognised as other income or offset against related expenses based on the economic substance. Agrant not related to ordinary activities is recognised as non-operating income.
When a recognised government grant is reversed, carrying amount of the related asset is adjusted if the grant was initially recognized asoffset against the carrying amount of the related asset. If there is balance of relevant deferred income, it is offset against the carryingamount of relevant deferred income. Any excess of the reversal to the carrying amount of deferred income is recognised in profit or loss forthe current period. For other circumstances, reversal is directly recognized in profit or loss for the current period.
27. Deferred tax assets and deferred tax liabilities
Income tax comprises of current tax and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent thatthey relate to transactions or items recognised directly in equity and goodwill arising from a business combination.Deferred tax assets and deferred tax liabilities arise from deductible and taxable temporary differences respectively, being the differencesbetween the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases.All the taxable temporary differences are recognized as deferred tax liabilities except for those incurred in the following transactions:
(1) initial recognition of goodwill, or assets or liabilities in a transaction that is not a business combination and that affects neither
accounting profit nor taxable profit (or deductible loss);
(2) taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, and the Company is able to
control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in theforeseeable future.The Company recognises a deferred tax asset for deductible temporary differences, deductible losses and tax credits carried forward tosubsequent periods, to the extent that it is probable that future taxable profits will be available against which deductible temporarydifferences, deductible losses and tax credits can be utilised, except for those incurred in the following transactions:
(1) a transaction that is not a business combination and that affects neither accounting profit nor taxable profit (or deductible loss);
(2) deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, the corresponding
deferred tax asset is recognized when both of the following conditions are satisfied: it is probable that the temporary difference willreverse in the foreseeable future; and it is probable that taxable profits will be available in the future against which the temporarydifference can be utilized.At the balance sheet date, deferred tax is measured based on the tax consequences that would follow from the expected manner ofrecovery or settlement of the carrying amount of the assets and liabilities, using tax rates enacted at the reporting date that are expected tobe applied in the period when the asset is recovered or the liability is settled.The carrying amount of a deferred tax asset is reviewed at each balance sheet date, and is reduced to the extent that it is no longerprobable that the related tax benefits will be utilised. Such reduction is reversed to the extent that it becomes probable that sufficienttaxable profits will be available.
28. Operating leases
The Company’s lease is operating lease
(1) As a lessor
Income derived from operating leases is recognized in profit or loss using the straight-line method over the lease term. Initial direct costs
are charged to profit or loss immediately.
(2) As a lessee
Rental payments under operating leases are recognized as part of the cost of another related asset or as expenses on a straight-line basisover the lease term. Initial direct costs are charged to profit or loss immediately.
29. Re-purchase of shares
Before written-off or transfer, the shares that the Company re-purchased are dealt as treasury shares. All expenses incurred for there-purchase are charged in the cost of treasury shares. Consideration and transaction expenses paid during the share re-purchase shalldecrease shareholder’s equity. No gain or losses shall be recognized during re-purchase, transfer or written-off of the Company’s shares.If the treasury shares is transferred, the difference between amount actually received and the share’s carrying amount shall be charged tocapital reserve, if the capital reserve is not sufficient to offset, surplus reserve and retained earing shall be offset. If the treasury share is towritten-off, the share capital shall be decreased based on the face value of shares and the difference between the carrying amount and itsface value shall offset the capital reserve. If the capital reserve is not sufficient to offset, deducting surplus reserve and retained earnings.
30. Restricted share
Under the share option incentive plan, the Company grants restricted shares to the incentive individuals who will subscribe the shares first.If the unlocking condition is not reached subsequently, the Company will re-purchase the shares according to the price previously agreed.If the shares issued under the incentive plan has gone through capital increase filing procedures, the Company recognizes share capitaland capital reserve (share premium) based on consideration received from the employees and, at the same time, recognizes treasuryshares and other payables for the re-purchase obligation.
31. Significant accounting estimates and judgments
The Group gives continuous assessment of the reasonable expectations of future events and the critical accounting estimates and keyassumptions based on its historical experience and other factors. The critical accounting estimates and key assumptions that are likely tolead to significant adjusted risks of the carrying amount of assets and liabilities for the next financial year are listed as follows:
Classification of financial assetsThe Group’s major judgments in determining the classification of financial assets include the analysis of business models and thecharacteristics of contract cash flows.At the level of financial asset groups, the Group determines the business model for managing financial assets, taking into account factorssuch as the way to evaluate and report financial assets performance to key managers, the risks affecting financial assets performance andtheir management methods, and the way in which relevant business managers are paid.In assessing whether the contract cash flow of financial assets is consistent with the basic lending arrangements, the Group has thefollowing judgments: whether the principal’s time distribution or amount may change during the lifetime for early repayment and otherreasons; whether the interest only includes the time value of money, credit risk, other basic lending risks and the consideration of cost andprofit. For example, does the amount of advance payment only reflect the unpaid principal and interest based on the unpaid principal, and
reasonable compensation paid for the early termination of the contract.Measurement of Expected Credit Loss of ReceivablesThe Group calculates the expected credit losses of accounts receivable by default risk exposure and expected credit losses rate ofaccounts receivable, and determines the expected credit losses rate based on default probability and default loss rate. In determining theexpected credit losses rate, the Group uses internal historical credit loss and other data, and adjusts the historical data with currentsituation and forward-looking information. In considering forward-looking information, the indicators used by the Group include the risks ofeconomic downturn, external market environment, technological environment and changes in customer conditions. The Group regularlymonitors and reviews assumptions related to the calculation of expected credit losses.Accrual of provision for obsolete inventoriesThe Group recognises provision for obsolete inventories based on the lower of cost of inventory and its net realisable value. In determiningthe net realisable value of inventories, the management uses judgments to estimate the selling price, cost to complete production, sellingexpenses and associated taxes.Deferred income tax assetsDeferred tax assets relating to certain temporary differences and tax losses are recognised as management considers it is probable thatfuture taxable profit will be available against which the temporary differences or tax losses can be utilised. The management needssignificant judgment to estimate the time and extent of the future taxable profits and tax planning strategy to recognise the appropriateamount of deferred income tax assets. Where the expectation is different from the original estimate of the future taxable profits, suchdifferences will impact the recognition of deferred tax assets and taxation in the years when the estimates are changed.
32. Changes in significant accounting policies and accounting estimates
(1) Changes in significant accounting policies
① New financial instrument standards
In 2017, the Ministry of Finance have issued “Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement ofFinancial Instruments (Revised)”,“Accounting Standards for Business Enterprises No. 23 - Finance Asset Transfer (Revised)”, “AccountingStandards for Business Enterprises No.24 - Hedge Accounting(Revised)”, “Accounting Standards for Business Enterprises No.37 -Financial Instruments Presentation (Revised)”(hereinafter referred to as the “New Financial Instruments Standards”). The Group hasimplemented the New Financial Instruments Standards since 1 January 2019 after the approval of the board of directors, and adjusted therelevant accounting policies. Refer to Note III. 10 for accounting policies after the adjustment.According to the new financial instruments standards, financial assets are classified into the following three categories depends on theGroup’s business mode of managing financial assets and cash flow characteristics of financial assets: (1) financial assets measured atamortized cost, (2) financial assets at fair value through other comprehensive income, and (3) financial assets at fair value through profit orloss. For hybrid contract, if the main contract belongs to financial assets, the embedded derivative should not be separated from the hybridcontract, and should be applied to the relevant standards in the corresponding classification of financial assets to as a whole.Except for financial guarantee contract liabilities, the adoption of new financial instrument standards has no significant impact on the
accounting policy of the Group’s financial liabilities.
On 1 January 2019, the Group neither designated any financial assets or liabilities as financial assets or liabilities measured at fair valuethrough profits and losses, nor revoked its previous designation.The New Financial Instruments Standards replaces the method of recognizing impairment provision according to actual impairment lossstipulated in the original financial instrument standard with the method of “expected credit losses method”. The “expected credit lossesmethod” model requires continuous assessment of the credit risk of financial assets. Therefore, under the New Financial InstrumentsStandards, the Group’s credit loss is recognised earlier than the original financial instrument standards.On the basis of expected credit losses, the Group performs impairment assessment on the following items and recognises the lossallowance.? Financial assets measured at amortized cost;? Debt investments at fair value through other comprehensive income;In accordance with the provisions of the New Financial Instruments Standards, except in certain specific cases, the Group retrospectivelyadjusts the classification and measurement of financial instruments (including impairment), and calculates the difference between theoriginal carrying value of financial instruments and the new carrying value on the date of implementation of the New Financial InstrumentsStandards (i.e. 1 January 2019) into the retained earnings or other comprehensive earnings at the beginning of 2019. At the same time,the Group did not adjust the comparative financial statements data.
On 1 January, 2019, the results of classification and measurement of financial assets in accordance with the previous financial instrument standards and the New Financial Instruments Standards are as follows:
Previous financial instrument standards
| Previous financial instrument standards | New financial instrument standards | ||||
| Item | Categories | Carrying value | Item | Categories | Carrying value |
| Available-for-sale financial assets | Measured at cost (equity instrument) | 85,000.00 | Other equity instrument investment | Fair value through other comprehensive income | 85,000.00 |
| Bill receivable | Amortized cost | 7,051,846.85 | Bill receivable | Amortized cost | 7,051,846.85 |
| Receivables financing | Fair value through other comprehensive income | - | |||
| Accounts receivable | Amortized cost | 370,545,656.61 | Accounts receivable | Amortized cost | 370,545,656.61 |
| Receivables financing | Fair value through other comprehensive income | - | |||
| Other receivables | Amortized cost | 45,870,582.26 | Other current assets | Amortized cost | - |
| Other receivables | Amortized cost | 45,870,582.26 | |||
On 1 January 2019, the adjustment table of the financial instruments classification and carrying value, at the implementation of the NewFinancial Instruments Standards, were as follows:
Item
| Item | Pre-adjustment carrying value (31 December 2018 | Reclassification | Remeasurement | Adjusted carrying value (January 1, 2019) |
| Assets: | ||||
| Bill receivables | 7,051,846.85 | -- | -- | 7,051,846.85 |
| Accounts receivables | 370,545,656.61 | -- | -- | 370,545,656.61 |
| Other receivables | 45,870,582.26 | -- | -- | 45,870,582.26 |
| Available-for-sale financial assets | 85,000.00 | -85,000.00 | - | - |
| Other equity instrument investments | -- | 85,000.00 | - | 85,000.00 |
| Shareholder’s equity | ||||
| Capital reserve | 1,062,455,644.22 | -- | -- | 1,062,455,644.22 |
| Other comprehensive income | -5,442,139.78 | -- | -- | -5,442,139.78 |
| Surplus reserve | 223,015,793.80 | -- | -- | 223,015,793.80 |
| Undistributed profit | 851,360,603.66 | -- | -- | 851,360,603.66 |
| Minority interests | 5,781.64 | -- | -- | 5,781.64 |
The reconciliation of bad debt provision accrued by the Group at the end of 2018 based on previous financial instrument standards andcredit losses recognized at the beginning of 2019 based on New Financial Instruments Standards are presented as follows:
| Category | Pre-adjustment carrying value (31 December 2018 | Reclassification | Remeasurement | Adjusted carrying value (January 1, 2019) |
| Bad debt provision for accounts receivable | 12,688,807.19 | -- | -- | 12,688,807.19 |
| Bad debt provision for other receivables | 10,037,542.11 | -- | -- | 10,037,542.11 |
② Financial statements format
According to “the Announcement of the revision of general enterprise financial statements format for 2018” (Accounting [2018] No. 15)
issued by MOF, the Group revised the financial statement format as follows:
A﹑Balance sheetAdded line item of “financial assets held for sale”, “debt investment”, “other debt investment”, “other equity instrument investment”, “othernon-current financial asset” and “financial liability held for sale”. Deleted line item of “financial assets at fair value through profit or loss”,“available-for-sale” financial assets, “held-to-maturity” financial assets and “financial liabilities at fair value through profit or loss”;Divided “bills and accounts receivable” into “bills receivable” and “accounts receivable”;Divided “bills and accounts payable” into “bills payable” and “accounts payable”;Added “receivables financing” item.B. Income statementAdded sub-item of “Gain from de-recognition of financial assets measured at amortized cost” under “investment gain” item.Added “Gain from net exposure hedging” item.Added “credit impairment loss” item. “Changes of re-measurement in net liabilities or net assets of defined benefit plans” is replaced by“The amount of changes of re-measurement in defined benefit plans”. “Share of other comprehensive income to in the investee cannot bereclassified into profit or loss under equity method” is changed to “other comprehensive income that cannot be transferred to profit or lossunder the equity method”. Added “Fair value changes in the entity’s own credit risk”. “Share of other comprehensive income in the investeeshall be reclassified into profit or loss under equity method” is changed to “Transfer of other comprehensive income into profits or lossesunder equity method”. Added “fair value changes of other debt investment”, “Re other comprehensive income due to reclassification offinancial assets” and “credit impairment allowance of other debt investments”. Deleted “gain or losses from fair value changes ofavailable-for-sale financial assets and “gains from reclassification of held-to-maturity investment to available-for-sale financial asset”. “Theeffective portion of gain or losses of cash flows hedge” is changed to “reserve of cash flows hedge”.C. Statement of changes in shareholder’s equityUnder the “internal transfer of shareholders’ equity” line item, the original “Changes of re-measurement in net liabilities or net assets ofdefined benefit plans” was changed to “Change in amount of defined benefit plans transfer to retained earnings”. Added “transfer of othercomprehensive income into retained earnings”.The Group adjusted comparative figures for comparable periods in accordance with CaiKuai [2019] No. 6.The revision of the financial statement format has no impact on the Group’s total assets, total liabilities, net profit and other comprehensiveincome.
(2) Changes in accounting estimates
The Group has no significant changes in accounting estimates in current reporting period.
(3) Adjustement of beginning balance of financial statements on the first year adoption of the New Financial Instruments StandardsBecause of the implementation of New Financial Instruments Standards, the Company reclassified the presentation of “available-for-sale”line item to “other equity instrument investment” and the amount is RMB85,000. No changes to other financial statement line items.
IV. Taxation
1. Main types of taxes and corresponding tax rates
Tax type
| Tax type | Tax basis | Tax rate % |
| VAT (note (1)) | Taxable revenue | 16、13、10、9、6、5 |
| Consumption tax | Taxable income | 20 |
| Urban maintenance and construction tax | Turnover tax payable | 5、7 |
| Property tax (note (2)) | Original cost of property or rental income | 1.2、12 |
| Corporate income tax | Taxable income | Refer to Note (3) for details |
Note (1): Value-added taxValue-added tax rate originally applied to 16%, 10% when the Company have VAT taxable sales or import goods. According to“Announcement of the Ministry of Finance and the State Administration of Taxation and General Administration of Customs RegardingPolicies of Deepening Reform of Value-added Tax” ((2019) No. 39), applicable tax rate adjusted to 13% and 9% respectively since 1 April2019.Other taxable income arising from the Company is calculated on the basis of the applicable tax rate.Note (2): Property TaxIn accordance with Article 5 of “Notice to Publish “Reply to Issues Related to Property Tax and Vehicle and Vessel Usage Tax””, Shen DiShui Fa (1999) No.374 issued by Shenzhen Local Taxation Bureau, property leased out by manufacturing or business entity are taxed at
1.2% on the bases of 70% of the original cost of the property.
Properties of the Company that situated in Shenzhen are taxed according to this notice. Properties situated in other cities are taxedaccording to local regulations.Note (3): Corporate income tax
| Name of entity subject to corporate income tax | Applicable tax rate |
| The Company(Note ①②⑤) | 25.00 |
| Shenzhen HARMONY World Watch Center Co., Ltd. (HARMONY Company) (Note ①⑤) | 25.00 |
| Shenzhen FIYTA Precision Timer Manufacturing Co., Ltd. (Manufacturing Company) (Note ②③) | 15.00 |
| FIYTA Hong Kong(Note ④) | 16.50 |
| Station 68(Note ④) | 16.50 |
| Shenzhen FIYTA Technology Development Co., Ltd (Technology Company) (Note ②③) | 15.00 |
| TEMPORAL (Shenzhen) Co., Ltd. (TEMPORAL Company) (Note ⑤) | 25.00 |
| Harbin Harmony World Watches Distribution Co., Ltd. (Harbin Company) (Note ⑤) | 20.00 |
| Emile Choureit Timing (Shenzhen) Ltd. (Emile Choureit Shenzhen Company) (Note ⑤) | 25.00 |
| FIYTA Sales Co., Ltd (Sales Company) (Note ①⑤) | 25.00 |
| Liaoning Hengdarui Commercial & Trade Co., Ltd (Hengdarui Company) (Note ⑤) | 25.00 |
Swiss Company(Note ⑥)
| Swiss Company(Note ⑥) | 30.00 |
Note ①:According to the regulations stated in Guo Shui Fa (2008) No. 28, “Interim Administration Method for Levy of Corporate IncomeTax to Enterprise that Operates Cross-regionally”, the head office of the Company and its branch offices, the head office of HARMONYCompany and its branch offices, and the head office of Sales Company and its branch offices adopt tax submission method of “unifiedcalculation, managing by classes, pre-paid in its registered place, settlement in total, and adjustment by finance authorities” starting from 1January 2008. Branch offices mentioned above share 50% of the enterprise income tax and prepay locally; and 50% will be prepaid by thehead offices mentioned above.Note ②: According to “Notice of the Ministry of Finance, the State Administration of Taxation and Ministry of Science on Improving thePre-tax Super Deduction Ratio of Research and Development Expenses” (Cai Shui (2018) No. 99), if the research and development costs,which were incurred for developing new technologies, new products, and new processes by the Company, the Manufacturing Companyand the Technology Company, are not capitalized as intangible assets but charged to current profits and losses, all of these entities canenjoy a 75% super deduction on top of the R&D expenses that allowed to deduct before income tax during the period from 1 January 2018to 31 December 2020.Note ③:The Company enjoyed for “Reduction and Exemption in Corporate Income Tax Rate for High and New Technology Enterprisesthat Require Key Support from the State”.Note ④: These companies are registered in Hong Kong and the income tax rate of Hong Kong applicable is 16.50% this year.Note ⑤: According to the People's Republic of China Enterprise Income Tax Law, the income tax rate is 25% for residential enterprisessince 1 January 2008.Note ⑥: The comprehensive tax rate of 30% is applicable for Swiss Company as it registered in Switzerland.Note ⑦ According to “Notice of Ministry of Finance and State Administration of Taxation on implementation of the Inclusive Income TaxDeduction and Exemption Policies for Small Low-Profit Enterprises” (Cai Shui (2019) No.13), the portion of annual taxable income of smalllow-profit enterprise that is below RMB1,000,000.00, it is not taxed at 25% and will be taxed at a rate of 20%.
2. Preferential treatment and corresponding approval
(1) According to clause 2 in Shen Dishui Fa (2003) No. 676 “Notice of Forwarding State Administration of Taxation on Policies Related toProperty Tax and Urban Lan Usage Tax”, for newly constructed or purchased property by tax payer, property tax is exempted for 3years from the next month it is constructed or purchased. The property tax for FIYTA Watch Building owned by the Company locatedin Shenzhen Guangming New District is exempted for 3 years from the next month when construction is completed.
(2) According to “Notice of Ministry of Finance and State Administration of Taxation in Extending Expiration Period of Utilizing Losses for
High-Tech Enterprises and Scientific Oriented Medium and Small Enterprises” (Cai Shui [2018] No. 76), unutilized losses incurred inprior 5 years before obtaining the status of High and New Tech Enterprise can be carried forward and utilized in future years. Thelongest period was extended from 5 years to 10 years.
V. Notes to the consolidated financial statements
1. Cash at bank and on hand
Item
| Item | As at 31/12/2019 | As at 31/12/2018 | ||||
| Foreign currency amount | Exchange rate | RMB equivalent | Foreign currency amount | Exchange rate | RMB equivalent | |
| Cash on hand： | -- | -- | 229,258.38 | -- | -- | 420,783.85 |
| RMB | -- | -- | 179,848.59 | -- | -- | 393,789.09 |
| HKD | 2,018.63 | 0.8958 | 1,808.24 | 2,018.63 | 0.8762 | 1,768.72 |
| USD | 605.00 | 6.9762 | 4,220.60 | 105.00 | 6.8632 | 720.64 |
| EUR | 1,453.19 | 7.8749 | 11,443.74 | 1,041.45 | 7.8473 | 8,172.57 |
| CHF | 4,434.00 | 7.2028 | 31,937.21 | 2,350.25 | 6.9494 | 16,332.83 |
| Cash at bank: | -- | -- | 285,306,297.62 | -- | -- | 160,135,454.62 |
| RMB | -- | -- | 255,981,925.11 | -- | -- | 148,287,154.41 |
| HKD | 9,732,871.02 | 0.8887 | 8,649,900.97 | 3,644,178.41 | 0.8762 | 3,193,027.05 |
| USD | 2,558,762.50 | 6.9287 | 17,728,876.60 | 634,426.28 | 6.8632 | 4,354,194.44 |
| EUR | 59,904.49 | 7.9290 | 474,983.98 | 902.13 | 7.8473 | 7,079.28 |
| CHF | 343,007.02 | 7.2028 | 2,470,610.96 | 617,894.99 | 6.9494 | 4,293,999.44 |
| Including: deposit in finance company | -- | -- | 237,118,456.45 | -- | -- | 128,255,699.54 |
| RMB | -- | -- | 237,118,456.45 | -- | -- | 128,255,699.54 |
| Other monetary funds: | -- | -- | 31,133,009.09 | -- | -- | 4,271,821.50 |
| RMB | -- | -- | 31,133,009.09 | -- | -- | 4,271,821.50 |
| Total | -- | -- | 316,668,565.09 | -- | -- | 164,828,059.97 |
| Including: Total overseas deposits | -- | -- | 3,641,389.51 | -- | -- | 9,192,653.31 |
Details of other monetary funds:
| Item | 2019.12.31 | 2018.12.31 |
| Security deposit for letter of guarantee | 1,575,000.00 | 1,575,000.00 |
| Balance in investment account | 26,448,679.71 | - |
| Others | 3,109,329.38 | 2,696,821.50 |
| Total | 31,133,009.09 | 4,271,821.50 |
At the end of year, the Group does not have balance of cash or other monetary funds that are restricted because being pledged as security,guaranteed or blocked frozen or overseas balances that have restriction on remittance back to the home country except for securitydeposit for letter of guarantee mentioned above.
2. Bill receivables
Type
| Type | 2019.12.31 | 2018.12.31 | ||||
| Book value | Provision | Carrying amount | Book value | Provision | Carrying amount | |
| Bank acceptance bills | 6,187,353.98 | - | 6,187,353.98 | - | - | - |
| Commercial acceptance bills | 4,626,260.06 | 217,182.73 | 4,409,077.33 | 7,051,846.85 | - | 7,051,846.85 |
| Total | 10,813,614.04 | 217,182.73 | 10,596,431.31 | 7,051,846.85 | - | 7,051,846.85 |
Note:
(1) There is no pledge of notes at the end of the period.
(2) The is no endorsed bills that is not yet due at the end of the period.
(3) Bill receivable that transferred to receivables due to issuer’s default at the end of the period.
| Type | Amount transferred to accounts receivable |
| Commercial acceptance bills | 300,000.00 |
(4) Classification based on method of accrual of bad debt provision.
| Type | 2019.12.31 | 2019.01.01 | ||||||||
| Book value | Provision | Carrying amount | Book value | Provision | Carrying amount | |||||
| Amount | Percentage (%) | Amount | ECL rate (%) | Amount | Percentage (%) | Amount | ECL rate (%) | |||
| Standalone accrual | - | - | - | - | - | - | - | - | - | - |
| Accrued based on group | 10,813,614.04 | 100.00 | 217,182.73 | 2.01 | 10,596,431.31 | 7,051,846.85 | 100.00 | - | - | 7,051,846.85 |
| including | ||||||||||
| Commercial acceptance bills | 4,626,260.06 | 42.78 | 217,182.73 | 4.69 | 4,409,077.33 | 7,051,846.85 | 100.00 | - | - | 7,051,846.85 |
| Bank acceptance bills | 6,187,353.98 | 57.22 | - | - | 6,187,353.98 | - | - | - | - | - |
| Total | 10,813,614.04 | 100.00 | 217,182.73 | 2.01 | 10,596,431.31 | 7,051,846.85 | 100.00 | - | - | 7,051,846.85 |
Bad debt provision accrued based on groups:
Item: Commercial acceptance bills
| Name | 2019.12.31 | ||
| Bill receivables | Bad debt provision | ECL rate (%) | |
| Within 1 year | 4,626,260.06 | 217,182.73 | 4.69 |
(5) Status of accrual, retrieved or reversal of bad deb
| Amount of bed debt provision | |
| 2018.12.31 | - |
Adjustment for first implementation of new financial instrument standards
| Adjustment for first implementation of new financial instrument standards | - |
| 2019.01.01 | - |
| Accrual | 217,182.73 |
| Reversal | - |
| Written-off | - |
| 2019.12.31 | 217,182.73 |
3. Accounts receivable
(1) Presentation by ageing
| Ageing | 2019.12.31 | 2018.12.31 |
| Within 1 year | 412,028,202.94 | 368,270,203.02 |
| 1-2 years | 9,278,600.90 | 10,632,348.03 |
| 2-3 years | 1,196,515.64 | 3,091,413.67 |
| Over 3 years | 4,013,110.09 | 1,240,499.08 |
| Subtotal | 426,516,429.57 | 383,234,463.80 |
| Less: provision for bad debt | 29,045,322.59 | 12,688,807.19 |
| Total | 397,471,106.98 | 370,545,656.61 |
(2) Presentation by method of providing bad debt
| Category | 2019.12.31 | ||||
| Book value | Bad debt provision | Carrying amount | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Individually significant and assessed for impairment individually | 24,140,377.57 | 5.66 | 17,562,041.15 | 72.75 | 6,578,336.42 |
| Collectively assessed for impairment based on credit risk characteristics | 402,376,052.00 | 94.34 | 11,483,281.44 | 2.85 | 390,892,770.56 |
| Receivables from other customers | 402,376,052.00 | 94.34 | 11,483,281.44 | 2.85 | 390,892,770.56 |
| Total | 426,516,429.57 | 100.00 | 29,045,322.59 | 6.81 | 397,471,106.98 |
(continued)
| Category | 2019.01.01 | ||||
| Book value | Bad debt provision | Carrying amount | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Individually significant and assessed for impairment individually | 1,799,519.78 | 0.47 | 1,799,519.78 | 100.00 | - |
| Collectively assessed for impairment based on credit risk characteristics | 381,434,944.02 | 99.53 | 10,889,287.41 | 2.85 | 370,545,656.61 |
Receivables from othercustomers
| Receivables from other customers | 381,434,944.02 | 99.53 | 10,889,287.41 | 2.85 | 370,545,656.61 |
| Total | 383,234,463.80 | 100.00 | 12,688,807.19 | 3.31 | 370,545,656.61 |
Specific bad debt provision provided
| Category | 2019.12.31 | |||
| Book value | Bad debt provision | ECL rate (%) | Reason | |
| Receivables from other customers | 24,140,377.57 | 17,562,041.15 | 72.75 | Unable to recover |
Bad debt provision based on groupsGroup: Receivables from other customers
| Category | 2019.12.31 | ||
| Accounts receivable | Bad debt provision | ECL rate (%) | |
| Within 1 year | 398,474,804.41 | 11,042,487.31 | 2.77 |
| 1-2 years | 3,639,298.75 | 269,502.55 | 7.41 |
| 2-3 years | 122,592.64 | 31,935.38 | 26.05 |
| Over 3 years | 139,356.20 | 139,356.20 | 100.00 |
| Total | 402,376,052.00 | 11,483,281.44 | 2.85 |
Bad debt provision as of 31 December 2018:
| Category | 2018.12.31 | ||||
| Book value | Percentage (%) | Bad debt provision | Percentage of providing (%) | Carrying amount | |
| Individually significant and assessed for impairment individually | 1,702,371.94 | 0.44 | 1,702,371.94 | 100.00 | - |
| Collectively assessed for impairment based on credit risk characteristics | |||||
| Including: ageing group | 189,655,491.08 | 49.49 | 10,889,287.41 | 5.74 | 178,766,203.67 |
| Specific receivables group | 191,779,452.94 | 50.04 | - | - | 191,779,452.94 |
| Subtotal of groups | 381,434,944.02 | 99.53 | 10,889,287.41 | 2.85 | 370,545,656.61 |
| Individually insignificant but assessed for impairment individually | 97,147.84 | 0.03 | 97,147.84 | 100.00 | - |
| Total | 383,234,463.80 | 100.00 | 12,688,807.19 | 3.31 | 370,545,656.61 |
(3) Addition, recovery or reversals of provision during the year:
| Bad debt provision | |
| 2018.12.31 | 12,688,807.19 |
| Adjustment amount for the first implementation of the new financial instrument standards | - |
| 2019.01.01 | 12,688,807.19 |
| Addition | 16,613,020.51 |
| Reversal | 266,383.33 |
| Written-off | - |
| Others | 9,878.22 |
| 2019.12.31 | 29,045,322.59 |
(4) There were no receivables that are written-off during the period.
(5) Top five accounts receivable are analyzed as follows:
The total amount of receivables from top five accounts amounts to RMB108,313,007.08, accounted for 25.39% of total balance ofaccounts receivable as of the period end. Corresponding bad debt provision accrued is RMB2,040,175.21.
4. Prepayments
(1) Presented by ageing
| Ageing | 2019.12.31 | 2018.12.31 | ||
| Amount | Percentage (%) | Amount | Percentage (%) | |
| Within 1 year | 10,221,061.48 | 94.23 | 12,886,273.93 | 94.29 |
| 1-2 years | 284,733.40 | 2.62 | - | - |
| Over 2 years | 342,167.40 | 3.15 | 780,542.40 | 5.71 |
| Total | 10,847,962.28 | 100.00 | 13,666,816.33 | 100.00 |
(2) Top 5 prepayment accounts as of period end
Total amount of prepayments to top five accounts amounts to RMB7,084,498.24, accounted for 65.31% of total balance of prepayments asof the period end.
5. Other receivable
| Item | 2019.12.31 | 2018.12.31 |
| Interest receivable | - | - |
| Dividends receivable | - | - |
| Other receivables | 47,239,844.58 | 45,870,582.26 |
| Total | 47,239,844.58 | 45,870,582.26 |
(1) Other receivables
① Presented by ageing
Ageing
| Ageing | 2019.12.31 | 2018.12.31 |
| Within 1 year | 49,453,416.07 | 46,770,037.27 |
| 1-2 years | 11,101.80 | 1,438,499.45 |
| 2-3 years | 186,180.00 | 1,365,400.00 |
| Over 3 years | 7,933,538.12 | 6,334,187.65 |
| Subtotal | 57,584,235.99 | 55,908,124.37 |
| Less: bad debt provision | 10,344,391.41 | 10,037,542.11 |
| Total | 47,239,844.58 | 45,870,582.26 |
② Presented by nature
| Item | 2019.12.31 | 2018.12.31 | ||||
| Book value | Provision | Carrying amount | Book value | Provision | Carrying amount | |
| Petty cash | 2,147,617.27 | - | 2,147,617.27 | 2,478,447.48 | - | 2,478,447.48 |
| Security deposit | 45,014,657.70 | 3,093,646.11 | 41,921,011.59 | 38,091,767.87 | 3,201,718.39 | 34,890,049.48 |
| Promotion expense | 2,518,891.09 | 579,905.66 | 1,938,985.43 | 7,827,524.03 | 391,376.20 | 7,436,147.83 |
| Others | 7,903,069.93 | 6,670,839.64 | 1,232,230.29 | 7,510,384.99 | 6,444,447.52 | 1,065,937.47 |
| Total | 57,584,235.99 | 10,344,391.41 | 47,239,844.58 | 55,908,124.37 | 10,037,542.11 | 45,870,582.26 |
③ Status of bad debt provision
Bad debt provision at the first stage as of period end:
| Category | Book value | ECL rate in next 12 month (%) | Bad debt Provision | Carrying amount | Reason |
| Individually significant and assessed for impairment individually | - | - | - | - | |
| Collectively assessed for impairment based on credit risk characteristics | 49,690,747.87 | 4.93 | 2,450,903.29 | 47,239,844.58 | |
| Petty cash | 2,147,617.27 | - | - | 2,147,617.27 | |
| Security deposit | 44,214,657.70 | 5.19 | 2,293,646.11 | 41,921,011.59 | |
| Social security payment on-behalf | 526,453.88 | - | - | 526,453.88 | |
| Others | 2,802,019.02 | 5.61 | 157,257.18 | 2,644,761.84 | |
| Total | 49,690,747.87 | 4.93 | 2,450,903.29 | 47,239,844.58 |
As of the period end, the Company does not have other receivables at the second stage.Bad debt provision at the third stage as of the period end:
| Category | Book value | ECL rate of the life time receivables (%) | Provision | amount | reason |
| Individually significant and assessed for impairment individually | |||||
| Beat Blattman Marketing | 4,189,004.42 | 100.00 | 4,189,004.42 | - | Chances of recovery is remote |
Liberty Time Center GmbH
| Liberty Time Center GmbH | 2,333,707.20 | 100.00 | 2,333,707.20 | - | Chances of recovery is remote |
| China Resources (Chong Qing) Industrial Co., Ltd. | 800,000.00 | 100.00 | 800,000.00 | - | Chances of recovery is remote |
| Huaming Hang Co., Ltd. | 480,000.00 | 100.00 | 480,000.00 | - | Unable to recover |
| Others | 90,776.50 | 100.00 | 90,776.50 | - | Unable to recover |
| Total | 7,893,488.12 | 100.00 | 7,893,488.12 | - | —— |
Bad debt provision as of 31 December 2018:
| Category | 2018.12.31 | ||||
| Book value | Percentage (%) | Bad debt provision | Percentage of providing (%) | Carrying amount | |
| Individually significant and assessed for impairment individually | 7,093,237.65 | 12.69 | 7,093,237.65 | 100.00 | - |
| Collectively assessed for impairment based on credit risk characteristics | |||||
| Including: ageing group | 45,771,039.24 | 81.87 | 2,378,904.46 | 5.20 | 43,392,134.78 |
| Specific receivables group | 2,478,447.48 | 4.43 | - | - | 2,478,447.48 |
| Subtotal of groups | 48,249,486.72 | 86.30 | 2,378,904.46 | 4.93 | 45,870,582.26 |
| Individually insignificant but assessed for impairment individually | 565,400.00 | 1.01 | 565,400.00 | 100.00 | - |
| Total | 55,908,124.37 | 100.00 | 10,037,542.11 | 17.95 | 45,870,582.26 |
④ Addition, recovery or reversals of provision during the year
| Bad debt provision | 1st stage | 2nd stage | 3rd stage | Total |
| ECL in next 12 month | ECL for the life time of receivables (no impairment yet) | ECL for the life time of receivables (impaired) | ||
| 2,378,904.46 | - | 7,658,637.65 | 10,037,542.11 | |
| Adjustment amount for the first implementation of the new financial instrument standards | - | - | - | - |
| 2019.01.01 | 2,378,904.46 | - | 7,658,637.65 | 10,037,542.11 |
| Current period | ||||
| --transferred to 2nd stage | - | - | - | - |
| -- transferred to 3rd stage | -5,376.50 | - | 5,376.50 | - |
| --Reversed to 2nd stage | - | - | - | - |
| --Reversed to 3rd stage | - | - | - | - |
| Accrued | 132,893.73 | - | - | 132,893.73 |
| Reversed | 55,752.57 | - | - | 55,752.57 |
| Realized | - | - | - | - |
Written-off
| Written-off | - | - | - | - |
| Other changes | 234.17 | - | 229,473.97 | 229,708.14 |
| Balance as of 2019.12.31 | 2,450,903.29 | - | 7,893,488.12 | 10,344,391.41 |
⑤ There was no other receivables that are written-off during the period.
⑥ Top five other receivable are analyzed as follows:
The total amount of other receivables from top five accounts amounts to RMB23,576,874.51, accounted for 40.94% of total balance ofother receivable as of the period end. Corresponding bad debt provision accrued is RMB8,127,554.59.
6. Inventory
(1) Category
| Item | 2019.12.31 | 2018.12.31 | ||||
| Book value | Provision | Carrying amount | Book value | Provision | Carrying amount | |
| Raw material | 195,644,341.20 | 21,197,269.90 | 174,447,071.30 | 183,679,226.95 | 28,296,729.51 | 155,382,497.44 |
| WIP | 11,707,382.99 | - | 11,707,382.99 | 10,787,777.81 | - | 10,787,777.81 |
| Stored goods | 1,684,674,585.69 | 62,008,950.06 | 1,622,665,635.63 | 1,675,548,898.56 | 59,412,872.11 | 1,616,136,026.45 |
| Total | 1,892,026,309.88 | 83,206,219.96 | 1,808,820,089.92 | 1,870,015,903.32 | 87,709,601.62 | 1,782,306,301.70 |
(2) Provision for inventory
| Item | 2019.01.01 | Increase | Decrease | 2019.12.31 | ||
| Accrual | Others | Reverse or realized | Others | |||
| Raw material | 28,296,729.51 | 1,727,018.41 | 321,750.41 | 9,148,228.43 | - | 21,197,269.90 |
| Stored goods | 59,412,872.11 | 2,568,116.07 | 27,961.88 | - | - | 62,008,950.06 |
| Total | 87,709,601.62 | 4,295,134.48 | 349,712.29 | 9,148,228.43 | - | 83,206,219.96 |
Provision for inventory (continued)
| Item | Evidence of determine NRV and future selling cost | Reason for reversal or realized |
| Raw material | Estimated selling price less estimated cost to complete and selling and distribution expenses and associated taxes | Disposed |
| Stored goods | Estimated selling price less estimated selling and distributing expenses and associated taxes | sold |
7. Other current assets
Item
| Item | 2019.12.31 | 2018.12.31 |
| VAT prepaid | 4,255,892.19 | 7,272,789.77 |
| Input VAT | 47,626,820.11 | 45,171,658.90 |
| Prepaid corporate income tax | 1,313,954.49 | 7,846,471.11 |
| Others | 15,661,429.95 | 13,412,392.46 |
| Total | 68,858,096.74 | 73,703,312.24 |
8. Available-for-sale financial assets
| Item | 2019.12.31 | 2018.12.31 | ||||
| Book value | Provision | Carrying amount | Book value | Provision | Carrying amount | |
| Available-for-sale financial asset | —— | —— | —— | 385,000.00 | 300,000.00 | 85,000.00 |
| Measured at cost | —— | —— | —— | 385,000.00 | 300,000.00 | 85,000.00 |
9. Long-term equity investment
Investee
| Investee | 2019.01.01 | Changes during the period | 2019.12.31 | Balance of impairment provision as of period end | |||||||
| Addition/new | Withdrawn | Investment gains and losses recognised by equity method | Adjustment of other comprehensive income | Changes in other equity | Cash dividend declared | Impairment provision | Others | ||||
| ① Associate | |||||||||||
| Shanghai Watch Co., Ltd. (Shanghai Watch) | 44,881,063.15 | - | - | 1,542,774.70 | - | - | - | - | - | 46,423,837.85 | - |
10. Other equity instrument investment
| Item | 2019.12.31 | 2018.12.31 |
| Shenzhen Zhonghang Culture Co. Ltd | - | —— |
| Xi’an Tangcheng Limited | 85,000.00 | —— |
| Total | 85,000.00 | —— |
Because the equity investment to Shenzhen Zhonghang Culture Co. Ltd and Xi’an Tangcheng Limited is based on long term holding forstrategic purpose, the Group designated them as fair value through other comprehensive income.
11. Investment properties
| Item | Property and plant |
| I. Original cost | |
| 1.2018.12.31 | 546,695,433.81 |
| 2.addition | 57,191,213.54 |
| (1) purchase | - |
| (2) transferred from inventory/CIP | 57,191,213.54 |
| (3) increased due to business combination | - |
| 3.Decrease | - |
| (1) Disposal | - |
| (2) Others | - |
| 4.2019.12.31 | 603,886,647.35 |
| II.Accumulated depreciation | |
| 1.2018.12.31 | 169,376,000.78 |
| 2.Addition | 27,007,339.33 |
| (1) accrual | 13,704,422.70 |
| (2) business combination | - |
| (3) Others | 13,302,916.63 |
| 3.Decrease | - |
| (1) Disposal | - |
| (2) Others | - |
| 4.2019.12.31 | 196,383,340.11 |
| 三、Impairment provision | |
| 1.2018.12.31 | - |
| 2.Increase | - |
| (1) Accrual | - |
| (2) Others | - |
| 3、Decrease | - |
| (1) Disposal | - |
| (2) Others | - |
| 4.2019.12.31 | - |
| IV.Carrying amount | |
| 1.2019.12.31 | 407,503,307.24 |
| 2.2018.12.31 | 377,319,433.03 |
Note:
(1)Reason of the investment properties without the certificate for property right:
As of 31 December 2019, there was no investment property without the certificate for property right.
(2) Changes of purpose of property
During the reporting period, certain self-use property of the Group were changed to lease out and they were transferred from fixed assets toinvestment properties measured at cost model.
12. Fixed assets
| Item | 2019.12.31 | 2018.12.31 |
| Fixed asset | 363,997,098.94 | 425,649,562.85 |
| Fixed asset disposal | - | - |
| Total | 363,997,098.94 | 425,649,562.85 |
(1) Fixed asset
①Status
| Item | Property and buildings | Machinery | Transportation vehicles | Electronic devices | Other equipment | Total |
| I. Total cost | ||||||
| 1.2018.12.31 | 458,621,315.96 | 80,799,655.00 | 15,572,717.72 | 44,137,536.41 | 58,422,164.62 | 657,553,389.71 |
| 2. Additions | 11,735,172.54 | 9,191,908.86 | 763,979.65 | 2,859,430.11 | 4,194,666.50 | 28,745,157.66 |
| (1) Purchasing | 244,585.68 | 7,337,542.92 | 763,979.65 | 2,494,316.65 | 2,209,983.31 | 13,050,408.21 |
| (2) Transfer from construction in progress | 9,887,489.97 | 1,023,760.56 | - | 347,820.61 | 1,860,829.46 | 13,119,900.60 |
| (3) Increase due to business combination | - | - | - | - | - | - |
| (4) Others | 1,603,096.89 | 830,605.38 | - | 17,292.85 | 123,853.73 | 2,574,848.85 |
| 3. Decrease | 70,472,306.13 | 1,414,588.09 | 978,818.00 | 1,512,268.86 | 16,354,078.93 | 90,732,060.01 |
| (1) Disposal or retired | 13,281,092.59 | 1,414,588.09 | 978,818.00 | 1,512,268.86 | 16,354,078.93 | 33,540,846.47 |
| (2) transferred into investment property | 57,191,213.54 | - | - | - | - | 57,191,213.54 |
| 4.2019.12.31 | 399,884,182.37 | 88,576,975.77 | 15,357,879.37 | 45,484,697.66 | 46,262,752.19 | 595,566,487.36 |
| II. Accumulated depreciation | ||||||
| 1.2018.12.31 | 97,899,718.69 | 43,012,974.47 | 13,664,912.06 | 28,707,685.36 | 48,618,536.28 | 231,903,826.86 |
| 2.increase | 14,553,080.62 | 7,430,970.23 | 747,205.85 | 4,846,289.12 | 4,122,796.00 | 31,700,341.82 |
| (1) accrual | 13,881,041.32 | 7,016,135.34 | 747,205.85 | 4,834,941.77 | 4,022,372.19 | 30,501,696.47 |
| (2) others | 672,039.30 | 414,834.89 | - | 11,347.35 | 100,423.81 | 1,198,645.35 |
| 3.Decrease | 13,318,042.52 | 1,118,076.16 | 919,427.10 | 1,369,639.50 | 15,309,594.98 | 32,034,780.26 |
| (1) disposal or retirement | 15,125.89 | 1,118,076.16 | 919,427.10 | 1,369,639.50 | 15,309,594.98 | 18,731,863.63 |
| (2) transferred into investment properties | 13,302,916.63 | - | - | - | - | 13,302,916.63 |
| 4.2019.12.31 | 99,134,756.79 | 49,325,868.54 | 13,492,690.81 | 32,184,334.98 | 37,431,737.30 | 231,569,388.42 |
| III. Impairment provision | ||||||
| 1.2018.12.31 | - | - | - | - | - | - |
| 2.Increase | - | - | - | - | - | - |
| (1) accrual | - | - | - | - | - | - |
| (2) others | - | - | - | - | - | - |
| 3.Decrease | - | - | - | - | - | - |
| (1) disposal or retirement | - | - | - | - | - | - |
| (2) Others | - | - | - | - | - | - |
| 4.2019.12.31 | - | - | - | - | - | - |
| IV.Carrying amount | ||||||
| 1.2019.12.31 | 300,749,425.58 | 39,251,107.23 | 1,865,188.56 | 13,300,362.68 | 8,831,014.89 | 363,997,098.94 |
| 2.2018.12.31 | 360,721,597.27 | 37,786,680.53 | 1,907,805.66 | 15,429,851.05 | 9,803,628.34 | 425,649,562.85 |
Note:
①As of the period, fixed assets used to pledge for the Group’s loan amounted to RMB14,303,281.92.
②Fixed assets that do not have certificate for property right
| Item | Book value | Reason for not having certificate for property rights |
| Office rooms of Harbin Branch | 255,135.96 | Issues relating to property right |
13. Construction in progress
| Item | 2019.12.31 | 2018.12.31 |
| Construction in progress | - | 12,041,126.00 |
| Construction materials | - | - |
| Total | - | 12,041,126.00 |
(1) Construction in progress
①Details
| Item | 2019.12.31 | 2018.12.31 | ||||
| Book value | Provision | Carrying amount | Book value | Provision | Carrying amount | |
| Clock & Watch base in Guangming New District auxiliary projects | - | - | - | 12,041,126.00 | - | 12,041,126.00 |
② Changes to major construction in progress projects
| Name | 2019.01.01 | Addition | Transferred to fixed asset | Other decrease | Capitalization of interest | Including: capitalized in current year | Rate of capitalization in current year (%) | 2019.12.31 |
| Clock & Watch base in Guangming New District auxiliary projects | 12,041,126.00 | 1,232,979.46 | 13,119,900.60 | 154,204.86 | - | - | - | - |
Changes to major construction in progress projects(continued)：
| Name | budget | Percentage of investment to budget (%) | Progress | Source of funding |
| Clock & Watch base in Guangming New District auxiliary projects | 34,050,900.00 | 38.98% | 100.00% | Self-raised |
14. Intangible assets
| Item | Land-use right | Software system | Right to use trademarks | Total |
| I. Total original cost | ||||
| 1.2018.12.31 | 34,933,822.40 | 23,887,215.08 | 10,093,308.61 | 68,914,346.09 |
| 2. Additions | - | 226,911.28 | 1,837,222.77 | 2,064,134.05 |
| (1) Purchase | - | 226,911.28 | 1,837,222.77 | 2,064,134.05 |
| (2) Internal R&D | - | - | - | - |
| (3) Increased due to business combination | - | - | - | - |
| (4) Others | - | - | - | - |
| 3. Decreases | - | - | - | - |
| (1) Disposal | - | - | - | - |
| (2) Others | - | - | - | - |
| 4.2019.12.31 | 34,933,822.40 | 24,114,126.36 | 11,930,531.38 | 70,978,480.14 |
| II. Total accumulated amortization | ||||
| 1.2018.12.31 | 13,581,708.89 | 8,076,111.69 | 3,711,047.90 | 25,368,868.48 |
| 2. Additions | 733,553.28 | 4,372,411.78 | 1,791,825.34 | 6,897,790.40 |
| (1) Accrual | 733,553.28 | 4,372,411.78 | 1,791,825.34 | 6,897,790.40 |
| (2) others | - | - | - | - |
| 3. Decreases | - | - | - | - |
| (1) Disposal | - | - | - | - |
| (2) other | - | - | - | - |
| 4. 2019.12.31 | 14,315,262.17 | 12,448,523.47 | 5,502,873.24 | 32,266,658.88 |
| III. Total impairment provision | ||||
| 1.2018.12.31 | - | - | - | - |
| 2. Additions | - | - | - | - |
| (1) Accrual | - | - | - | - |
| (2) other | - | - | - | - |
| 3.decrease | - | - | - | - |
| (1) disposal | - | - | - | - |
| (2) others | - | - | - | - |
| 4.2019.12.31 | - | - | - | - |
| IV. Total carrying amount | ||||
| 1.2019.12.31 | 20,618,560.23 | 11,665,602.89 | 6,427,658.14 | 38,711,821.26 |
| 2.2018.12.31 | 21,352,113.51 | 15,811,103.39 | 6,382,260.71 | 43,545,477.61 |
15. Long-term deferred expenses
| Item | 2018.12.31 | Addition | Decrease | 2019.12.31 | |
| Amortized | Others | ||||
| Counter fabrication expenses | 49,305,000.11 | 42,163,751.28 | 49,506,803.50 | - | 41,961,947.89 |
| Renovation expenses | 74,651,287.13 | 66,284,944.54 | 45,670,030.81 | - | 95,266,200.86 |
| Others | 4,616,257.91 | 18,447,813.57 | 7,704,728.90 | - | 15,359,342.58 |
| Total | 128,572,545.15 | 126,896,509.39 | 102,881,563.21 | - | 152,587,491.33 |
16. Deferred income tax assets/Deferred income tax liabilities
(1) Detail of deferred income tax before offsetting
| Item | 2019.12.31 | 2018.12.31 | ||
| Deductible temporary differences | Deferred income tax asset | Deductible temporary differences | Deferred income tax asset | |
| Deferred tax asset: | ||||
| Impairment provision | 100,912,679.00 | 22,188,996.64 | 79,775,704.17 | 17,676,690.28 |
| Unrealized profit for related party transactions | 179,676,673.34 | 44,654,504.04 | 272,840,911.63 | 67,717,517.83 |
| Deferred income | 3,046,090.60 | 761,522.65 | 3,672,855.36 | 918,213.84 |
| Deductible losses | 50,678,682.32 | 12,074,057.61 | 61,529,125.81 | 14,363,284.14 |
| Restricted shares | 4,440,625.91 | 1,062,967.67 | - | - |
| Advertisement expenses that allowed to deduct in future years | 14,988,443.65 | 2,997,334.76 | - | - |
| Subtotal | 353,743,194.82 | 83,739,383.37 | 417,818,596.97 | 100,675,706.09 |
| Deferred tax liability | ||||
| One-off deduction of fixed asset before Corporate income tax | 8,374,949.93 | 1,256,242.49 | - | - |
| Subtotal | 8,374,949.93 | 1,256,242.49 | - | - |
(2) Details of deductible temporary difference and deductible losses that does not recognize as deferred income tax asset
| Item | 2019.12.31 | 2018.12.31 |
| Impairment provision | 22,200,437.70 | 30,660,246.75 |
| Deductible losses | 64,205,351.75 | 65,181,936.05 |
| Total | 86,405,789.45 | 95,842,182.80 |
Note: Deductible losses of Swiss Company, which are subsidiaries of the Company, is not recognized as deferred income tax asset as it’suncertain that the companies can get sufficient taxable income in future. Hong Kong Company, a subsidiary of the Company, does not need torecognize the deferred income tax assets for impairment provision according to the local tax policy.
(3) Deductible losses that are not recognized as deferred tax asset will due in the following years:
| Year | 2019.12.31 | 2018.12.31 | Note |
| 2019 | —— | - | |
| 2020 | - | - | |
| 2021 | - | - | |
| 2022 | - | 3,393,863.46 | |
| 2023 | 2,417,279.16 | 7,798,677.32 | |
| 2024 | 7,798,677.32 | 11,684,299.22 | |
| 2025 | 11,684,299.22 | 18,449,678.50 | |
| 2026 | 18,449,678.50 | 23,855,417.55 | |
| 2027 | 23,855,417.55 | - | |
| 2028 | - | - | |
| 2029 | - | - | |
| 2030 | - | —— | |
| Total | 64,205,351.75 | 65,181,936.05 |
17. Other non-current assets
| Item | 2019.12.31 | 2018.12.31 |
| Prepayment for construction and equipment | 7,373,248.48 | 8,949,160.42 |
18. Short-term loans
| Item | 2019.12.31 | 2018.12.31 |
| Guaranteed loans | 37,271,502.38 | 187,118,452.97 |
| Credit loans | 530,637,330.83 | 360,000,000.00 |
| Total | 567,908,833.21 | 547,118,452.97 |
Refer to Note XII. 2 for details of guaranteed loans between parent companies and subsidiaries.
19. Accounts payable
| Item | 2019.12.31 | 2018.12.31 |
| Trade payables | 254,887,129.91 | 188,957,240.00 |
| Payables for material purchased | 11,932,722.53 | 18,632,180.36 |
| Payables for project | 12,952,934.93 | 52,324,191.98 |
| Total | 279,772,787.37 | 259,913,612.34 |
20. Advances from customer
| Item | 2019.12.31 | 2018.12.31 |
| Advances received for trade | 19,999,056.53 | 14,822,924.98 |
| Rental received | 3,434,407.04 | 1,636,520.02 |
| Total | 23,433,463.57 | 16,459,445.00 |
21. Employee benefit payable
| Item | 2018.12.31 | Accrued | Decrease | 2019.12.31 |
| Short-term employee benefits | 63,805,261.48 | 549,103,500.51 | 537,474,216.99 | 75,434,545.00 |
| Post-employment benefits - defined contribution plans | 5,973,776.35 | 44,528,366.42 | 43,434,631.25 | 7,067,511.52 |
| Termination benefits | - | 3,627,507.77 | 3,526,718.62 | 100,789.15 |
| (1) Other benefits due within one year | - | - | - | - |
| Total | 69,779,037.83 | 597,259,374.70 | 584,435,566.86 | 82,602,845.67 |
(1) Short-term employee benefits
| Item | 2018.12.31 | Accrued | Decrease | 2019.12.31 |
| Salaries, bonus, allowances | 63,306,958.06 | 493,200,688.43 | 481,587,869.68 | 74,919,776.81 |
| Staff welfare | - | 10,123,091.04 | 10,123,091.04 | - |
| Social insurances | - | 20,177,698.15 | 20,177,698.15 | - |
| Including:1.Medical insurance | - | 17,960,886.79 | 17,960,886.79 | - |
| 2.Work-related injury insurance | - | 674,579.45 | 674,579.45 | - |
| 3.Maternity insurance | - | 1,542,231.91 | 1,542,231.91 | - |
| Housing Fund | - | 17,858,952.38 | 17,858,952.38 | - |
| Labor union fees and education fee | 498,303.42 | 7,743,070.51 | 7,726,605.74 | 514,768.19 |
| Short-term paid absences | - | - | - | - |
| Short-term profit –sharing plan | - | - | - | - |
| Non-monetary benefits | - | - | - | - |
| Other short-term employee benefits | - | - | - | - |
| Total | 63,805,261.48 | 549,103,500.51 | 537,474,216.99 | 75,434,545.00 |
(2) Defined contribution plans
| Item | 2018.12.31 | Accrued | Decrease | 2019.12.31 |
| Post-employment benefits | 5,973,776.35 | 44,528,366.42 | 43,434,631.25 | 7,067,511.52 |
| Including: 1.Basic pension insurance | 473,306.78 | 40,186,669.43 | 40,404,404.74 | 255,571.47 |
| 2.Unemployment insurance | - | 1,117,187.90 | 1,117,187.90 | - |
| 3.Annuity | 5,500,469.57 | 3,224,509.09 | 1,913,038.61 | 6,811,940.05 |
| 4.Others | - | - | - | - |
| Total | 5,973,776.35 | 44,528,366.42 | 43,434,631.25 | 7,067,511.52 |
22. Taxes payable
| Taxes | 2019.12.31 | 2018.12.31 |
| VAT | 6,929,833.12 | 32,344,121.18 |
| Corporate income tax | 15,512,840.60 | 21,599,264.54 |
| Individual income tax | 1,227,923.78 | 998,190.73 |
| Urban maintenance and construction tax | 91,612.52 | 321,914.01 |
| Educational surcharges | 65,887.11 | 229,955.09 |
| Others | 236,705.87 | 429,726.37 |
| Total | 24,064,803.00 | 55,923,171.92 |
23. Other payables
| Item | 2019.12.31 | 2018.12.31 |
| Interests payable | - | 772,351.26 |
| Dividends payable | 848,233.27 | - |
| Other payables | 118,768,488.36 | 71,047,579.04 |
| Total | 119,616,721.63 | 71,819,930.30 |
(1) Interests payable
| Item | 2019.12.31 | 2018.12.31 |
| Interests for short-term loan | - | 772,351.26 |
(2) Dividends payable
| Item | 2019.12.31 | 2018.12.31 |
| Dividends for ordinary shares | 848,233.27 | - |
(3) Other payables
| Item | 2019.12.31 | 2018.12.31 |
| Security deposit | 45,114,205.97 | 22,954,307.95 |
| Shop activity fund | 16,636,771.40 | 17,461,589.65 |
| Personal accounts payable | 1,321,518.82 | 3,058,122.71 |
| Decoration expenses | 4,556,469.41 | 6,096,460.99 |
| Repurchase liability for restricted shares | 17,737,366.73 | - |
| Other | 33,402,156.03 | 21,477,097.74 |
| Total | 118,768,488.36 | 71,047,579.04 |
24. Non-current liabilities due within one year
| Item | 2019.12.31 | 2018.12.31 |
| Long-term loan due within one year | 360,140.00 | 347,470.00 |
(1) Long-term loan due within one year
| Item | 2019.12.31 | 2018.12.31 |
| Long-term loan due within one year | 360,140.00 | 347,470.00 |
See Note V.25 for type and amount of mortgaged assets.
25. Long-term loan
| Item | 2019.12.31 | Interests rate | 2018.12.31 | Interests rate |
| Mortgage loans | 4,681,820.00 | 3.00% | 4,864,580.00 | 3.00% |
| Total | 4,681,820.00 | 4,864,580.00 | ||
| Less: Long-term loan due within one year | 360,140.00 | 347,470.00 | ||
| Total | 4,321,680.00 | 4,517,110.00 |
As of 31 December 2019, the carrying amount of fixed assets used in mortgage for the Group’s loan amounted to RMB14,303,281.92.
26. Deferred income
| Item | 2018.12.31 | Addition | Decrease | 2019.12.31 | Reason |
| Government grant | 3,672,855.36 | - | 626,764.76 | 3,046,090.60 | Criteria of recognizing gain is not reached |
See Note XIV. 1 Government grant for details of government grants that are included in deferred income.
27. Share capital
| Item | 2018.12.31 | Movements (+、-) | 2019.12.31 | ||||
| Newly issued | Bonus share | Capitalization of capital reserves | Others | subtotal | |||
| Total shares | 438,744,881 | 4,224,000 | - | - | - | 4,224,000 | 442,968,881 |
On 11 January 2019, the restricted share incentive plan (first phase) had granted a total of 4,224,000 restricted A-shares to 128 incentiveindividuals. As a result, the Company’s registered capital increased by RMB4,224,000.00 and capital reserve increased byRMB14,361,600.00. See Note V. 28 Capital reserve for detail.
28. Capital reserve
| Item | 2018.12.31 | Increase | Decrease | 2019.12.31 |
| Share premium | 1,047,963,195.57 | 14,361,600.00 | 27,654.81 | 1,062,297,140.76 |
| Other capital reserve | 14,492,448.65 | 4,440,625.91 | - | 18,933,074.56 |
| Total | 1,062,455,644.22 | 18,802,225.91 | 27,654.81 | 1,081,230,215.32 |
Note:
(1) On 4 January 2019, pursuant to the examination and approval given by SASAC under “Reply to Examination and approval ofImplementation of First Phase of Restricted Share Incentive plan of FIYTA (Group) Holding Ltd.” (GuoZi KaoFen [2018] No. 936), andapproved by the board of directors and shareholder’s general meeting, the Company implemented the incentive plan. On 11 January 2019,the restricted share incentive plan (first phase) had granted a total of 4,224,000 restricted A-shares to 128 incentive individuals. Totalconsideration received from subscription of restricted shares was RMB18,585,600.00, of which RMB4,224,000.0 increased share capital ofthe Company and RMB14,361,600.00 increased the capital reserve of the Company. At the same time the Company recognized restrictedshare re-purchase liability as other payables of RMB18,585,600.00 and increased treasury shares of RMB18,585,600.00 accordingly. In2019, the Group increased RMB4,440,625.91 in capital reserve and charged the amount to related cost or expenses in exchange of theincentive individuals’ service.
(2) Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the 7th meeting of the 9th Board of Directorsand the 2nd extraordinary shareholder’s meeting of 2019, the Company repurchased B Shares of 10,010,000 in total as of 31 December2019. Total consideration paid was RMB 53,524,330.10. Trading fee paid was RMB 27,654.81, which was deducted from capital reserve.
29. Treasury shares
| Item | 2018.12.31 | Increase | Decrease | 2019.12.31 |
| Treasury shares | - | 71,267,118.78 | - | 71,267,118.78 |
Note:
(1) The Company repurchased B Shares of 10,010,000 in total as of 31 December 2019. Total consideration paid was RMB 53,524,330.10,which increased the amount of treasury shares.
(2) As described in Note V. 28 Capital reserve (1), the Group recognized restricted shares re-purchase obligation and the treasury shareincreased by RMB18,585,600.00 accordingly.
(3) According to 2018 profit distribution proposal that had been passed on 2018 shareholder’s meeting on 19 June 2019, the Companydistributed cash dividend of RMB2.008128 (tax inclusive) for every 10 shares held by shareholders based on the total 436,968,881 shares.A-share registration date was 9 August 2019. The Company granted total 4,224,000 A shares to employee on 11 January 2019. Afterdeducting 27,000 shares that cannot be exercised in future, the cash dividend of the rest of 4,197,000.00 shares deducted treasury sharesaccordingly.
30. Other comprehensive income
| Item | Movements in 2019 | ||||||
| Before tax | Less: recorded in other comprehensive income in prior period and transferred to profit or loss in current period | Less: tax expenses | Attribute to parent company after tax | Attribute to minority shareholders after tax | |||
| I. Other comprehensive income items which will not be reclassified subsequently to profit or loss | - | - | - | - | - | - | - |
| II. Other comprehensive income items which may be reclassified subsequently to profit or loss | |||||||
| Including: translation difference of foreign currency financial statements | -5,442,139.78 | 4,502,059.89 | - | - | 4,501,930.69 | 129.20 | -940,209.09 |
| Total other comprehensive income | -5,442,139.78 | 4,502,059.89 | - | - | 4,501,930.69 | 129.20 | -940,209.09 |
Note: Net-of-tax amount of other comprehensive income during the year 2019 is RMB4,502,059.89, in which net-of-tax amount of othercomprehensive income attributable to shareholders of the Company is RMB4,501,930.69, and net-of-tax amount of other comprehensiveincome attributable to non-controlling interests is RMB129.20.
31. Surplus reserve
| Item | 2018.12.31 | Increase | Decrease | 2019.12.31 |
| Statutory surplus reserve | 161,030,899.80 | 12,685,386.34 | - | 173,716,286.14 |
| Discretionary surplus reserve | 61,984,894.00 | - | - | 61,984,894.00 |
| Total | 223,015,793.80 | 12,685,386.34 | - | 235,701,180.14 |
Note: According to the Company Law and Articles of Association, the Company draws statutory surplus reserve at 10% of net profit. If thestatutory surplus reserve is over 50% of the Company’s registered capital, drawing of statutory surplus reserve will be stopped.The Company can draw discretionary surplus reserve after drawing statutory surplus reserve. If approved, discretionary surplus reservecan be used to make up for losses in previous years or increase share capital.
32. Undistributed profit
| Item | 2019 | 2018 |
| Undistributed profit at the end of prior year before adjustments | 851,360,603.66 | 771,484,565.02 |
| Adjustments to undistributed profit at the beginning of year | - | - |
| Undistributed profit at the beginning of year after adjustment | 851,360,603.66 | 771,484,565.02 |
| Plus: Net profit attributable to the owner of the parent company for the year | 215,909,014.15 | 183,835,095.29 |
| Less: statutory surplus reserve drawn | 12,685,386.34 | 16,210,080.45 |
| Dividends payable to ordinary shares | 87,743,413.07 | 87,748,976.20 |
| Undistributed profit at the end of year | 966,840,818.40 | 851,360,603.66 |
| Including: appropriation to surplus reserves made by the Company’s subsidiaries attributable to the Company | 10,229,847.23 | 9,410,363.47 |
33. Operating income and operating cost
| Item | 2019 | 2018 | ||
| Operating income | Operating cost | Operating income | Operating cost | |
| Main business | 3,686,955,944.86 | 2,211,874,573.32 | 3,382,346,730.19 | 1,992,905,841.56 |
| Other business | 17,254,790.04 | 5,333,158.72 | 18,103,869.71 | 903,932.64 |
| Total | 3,704,210,734.90 | 2,217,207,732.04 | 3,400,450,599.90 | 1,993,809,774.20 |
(1) Main business presented by industry
| Industry | 2019 | 2018 | ||
| Operating income | Operating cost | Operating income | Operating cost | |
| Watch | 3,463,608,966.45 | 2,109,978,800.45 | 3,193,280,311.30 | 1,910,998,452.65 |
| Precision manufacturing | 91,341,945.34 | 73,717,603.23 | 70,742,449.85 | 59,432,940.99 |
| Lease | 132,005,033.07 | 28,178,169.64 | 118,323,969.04 | 22,474,447.92 |
| Total | 3,686,955,944.86 | 2,211,874,573.32 | 3,382,346,730.19 | 1,992,905,841.56 |
(2) Main business presented by product
| Product | 2019 | 2018 | ||
| Operating income | Operating cost | Operating income | Operating cost | |
| Watch retail and service | 2,352,930,477.41 | 1,779,026,456.80 | 2,090,970,707.50 | 1,576,862,763.43 |
| Branded watch retail | 1,110,678,489.04 | 330,952,343.65 | 1,102,309,603.80 | 334,135,689.22 |
| Precision manufacturing | 91,341,945.34 | 73,717,603.23 | 70,742,449.85 | 59,432,940.99 |
| Lease | 132,005,033.07 | 28,178,169.64 | 118,323,969.04 | 22,474,447.92 |
| Total | 3,686,955,944.86 | 2,211,874,573.32 | 3,382,346,730.19 | 1,992,905,841.56 |
(3) Main business presented by geographical area
| Area | 2019 | 2018 | ||
| Operating income | Operating cost | Operating income | Operating cost | |
| Southern China | 1,806,673,205.47 | 1,091,723,846.59 | 1,518,807,270.87 | 874,695,822.56 |
| Northwest China | 586,521,631.97 | 340,309,728.35 | 588,628,213.03 | 353,457,194.81 |
| Northern China | 204,386,707.45 | 118,165,568.05 | 249,884,958.89 | 137,166,812.45 |
| Eastern China | 502,541,659.80 | 280,319,276.42 | 439,292,101.70 | 262,001,509.80 |
| North-east China | 230,662,172.16 | 163,383,316.18 | 269,671,243.83 | 187,589,738.67 |
| Southwest China | 356,170,568.01 | 217,972,837.73 | 316,062,941.87 | 177,994,763.27 |
| Total | 3,686,955,944.86 | 2,211,874,573.32 | 3,382,346,730.19 | 1,992,905,841.56 |
34. Taxes and surcharges
| Item | 2019 | 2018 |
| Urban maintenance and construction tax | 11,435,460.45 | 14,746,181.35 |
| Educational surcharge | 4,891,150.79 | 6,338,803.59 |
| Local educational surcharge | 3,216,962.37 | 4,221,251.51 |
| Property tax | 4,037,914.43 | 3,858,983.33 |
| Land use tax | 391,201.52 | 387,741.44 |
| Stamp duty | 2,384,290.09 | 2,216,200.85 |
| Others | 1,835,809.90 | 2,000,182.33 |
| Total | 28,192,789.55 | 33,769,344.40 |
Note: The criteria of business taxes and surcharges accrued and paid refer to Note IV. Taxation.
35. Selling and distribution expenses
| Item | 2019 | 2018 |
| Salary | 359,640,526.77 | 351,918,381.60 |
| Department store expense and rental | 181,211,260.52 | 137,788,340.17 |
| Market promotion expenses | 155,102,618.44 | 186,814,362.00 |
| Depreciation and amortization | 92,468,987.37 | 91,887,577.80 |
| Packaging expenses | 11,125,541.27 | 17,013,895.11 |
| Utilities and property management expenses | 19,283,177.10 | 18,464,692.62 |
| Shipping fees | 14,689,427.89 | 12,444,864.89 |
| Office expenses | 5,827,092.35 | 10,934,189.89 |
| Travel expenses | 10,479,738.66 | 12,076,624.12 |
| Entertainment expenses | 4,549,777.07 | 5,035,117.75 |
| Others | 11,413,931.17 | 12,592,127.15 |
| Total | 865,792,078.61 | 856,970,173.10 |
36. Administration expenses
| Item | 2019 | 2018 |
| Salary | 170,242,331.00 | 160,762,765.81 |
| Depreciation and amortization | 30,001,693.96 | 23,465,976.86 |
| Travel expenses | 7,543,194.55 | 7,436,745.07 |
| Office expenses | 3,966,450.49 | 4,411,920.54 |
| Agents fees | 5,146,625.69 | 7,322,437.54 |
| Rental and utilities | 6,140,097.22 | 3,943,256.92 |
| Others | 17,579,596.13 | 11,819,423.11 |
| Total | 240,619,989.04 | 219,162,525.85 |
37. R&D expenses
| Item | 2019 | 2018 |
| Salary | 25,225,831.95 | 27,781,676.08 |
| Material and mould | 1,654,367.12 | 3,872,770.91 |
| Sample fee | 1,874,392.46 | 2,042,439.14 |
| Depreciation and amortization | 5,120,979.03 | 4,869,828.83 |
| Technical cooperation fee | 5,488,880.26 | 1,254,524.99 |
| Others | 5,693,289.43 | 7,529,102.87 |
| Total | 45,057,740.25 | 47,350,342.82 |
38. Financial expense
| Item | 2019 | 2018 |
| Total interest expenses | 23,975,351.93 | 27,552,558.81 |
| Less: Interest capitalization | - | - |
| Interest income | 1,956,316.52 | 2,269,447.05 |
| Exchange gain | -2,920.03 | 713,080.72 |
| Bank charges | 10,799,162.19 | 9,920,047.68 |
| Total | 32,815,277.57 | 35,916,240.16 |
39. Other income
| Item | 2019 | 2018 | Asset or income related |
| Headquarters enterprise award | 4,843,500.00 | - | income related |
| Corporate Research and Development Funding | 3,156,000.00 | 1,890,000.00 | income related |
| Special subsidy to promoting consuming | 1,655,200.00 | - | income related |
| Economic development special fund of Guangming District to support intellectual property right, standardization certification project | 1,033,000.00 | - | income related |
| Subsidy to support major enterprise to expanding production and improving efficiency | 1,000,000.00 | - | income related |
| Subsidy to support innovation development for business and trading | 712,664.00 | - | income related |
| Subsidy to support investment in R&D and domestic economic and trading exhibition | 669,545.00 | 1,268,000.00 | income related |
| Special fund of Nanshan district to support self-innovation industry development | 718,600.00 | 2,246,200.00 | income related |
| Examine intellectual property right using big data | 500,000.00 | - | income related |
| Commission on IIT payment | 469,005.01 | - | income related |
| Shenzhen Standard Special Fund | 543,000.00 | 496,000.00 | income related |
| Subsidy for SME to expanding market | 387,940.49 | - | income related |
| Shenzhen Science and Technology Award | 300,000.00 | - | income related |
| Expanding production and improving efficiency | 300,000.00 | - | income related |
| State certified R&D center | 293,147.06 | 488,578.43 | income related |
| Subsidy to projects of economic development special fund | 286,000.00 | - | income related |
| Subsidy for stabilizing job position | 209,468.63 | 229,106.17 | income related |
| Special fund for Shenzhen industrial designing | 203,066.21 | 1,066,988.78 | income related |
| Self-innovative industry development subsidy | 200,000.00 | - | income related |
| The 20th Guangdong Provincial China Patent Award | 150,000.00 | - | income related |
| Associated award to the 20th Guangdong Provincial China Patent Award | 150,000.00 | - | income related |
| Provincial industry and information special subsidy | 130,551.49 | 137,615.17 | income related |
| Basel watch fair subsidy | 114,333.32 | - | income related |
| Maternity insurance | 100,789.68 | - | income related |
| Nanshan Economic Promoting Bureau subsidy for SME | 100,000.00 | - | income related |
| Promotion of human resource quality | 100,000.00 | 100,000.00 | income related |
| Subsidy to promoting international operating ability | 31,163.00 | 60,000.00 | income related |
| State level high and new technology certificate subsidy | 30,000.00 | - | income related |
| Short term export credit insurance | 20,200.00 | 57,605.00 | income related |
| Expanding domestic marketing from Shenzhen SME Affairs Department | 14,670.00 | - | income related |
| Subsidy for Disabled person | 7,062.29 | 8,882.30 | income related |
| Watch fair subsidy from Guangming District | - | 50,000.00 | income related |
| Shenzhen Patent Award | - | 2,000.00 | income related |
| Special fund for industry transformation and upgrading | - | 500,000.00 | income related |
| Special fund for application of industry transformation and upgrading | - | 4,480,000.00 | income related |
| Merging of industrialization and information | - | 400,000.00 | income related |
| Domestic marketing expanding for example enterprise practicing innovation | - | 128,920.00 | income related |
| Foreign trade subsidy for Basel watch fair | - | 779,907.74 | income related |
| High and new tech enterprise in Baoan District | - | 30,000.00 | income related |
| 2nd International Brand Week Guangming Branch | - | 28,301.89 | income related |
| 18th China Appearance Designing Excellence award | - | 250,000.00 | income related |
| Domestic innovation patent annual subscription fee subsidy | - | 2,000.00 | income related |
| Import exhibition participating | - | 6,154.00 | income related |
| Economic and trade commission service industry special development fund | - | 1,000,000.00 | income related |
| Crystal Products Exhibition Special Funding | - | 103,267.00 | income related |
| Corporate R&D Funding by Science and Technology Commission | - | 1,155,000.00 | income related |
| Creating excellence and rating funding project by Economic Promotion Bureau, Nanshan District | - | 200,000.00 | income related |
| Funding for Informatization and Industrialization Integration project by Economic Promotion Bureau, Nanshan District | - | 100,000.00 | income related |
| Project funded by Commerce Circulation Industry | - | 360,800.00 | income related |
| Patent subsidy by Shenzhen Municipal Market and Quality Supervision and Administration Committee, 2017 | - | 10,000.00 | income related |
| The 19th China Patent Award of the Market and Quality Committee | - | 330,000.00 | income related |
| Funds on Enterprise Intellectual Property Management Standards Certification by Market Supervision Committee | - | 200,000.00 | income related |
| Demonstration special fund, financial aid project in exhibition industry, for small and micro enterprise entrepreneurship innovation base | - | 159,810.00 | income related |
| Watch exhibition subsidy of small and micro enterprises | - | 128,008.00 | income related |
| Government exhibition industry special fund | - | 128,008.00 | income related |
| China Light Industry Federation's international standards funding | - | 16,000.00 | income related |
| 16-26 batch special subsidy for Central Foreign Trade and Economic | - | 60,000.00 | income related |
| Government special subsidy fund for central foreign economic and trade projects | - | 114,466.00 | income related |
| Key technology research and development project of DF101 aircraft benchmark timing system | - | 480,000.00 | income related |
| Development Special Fund for Independent Innovation Industry, Nanshan District | - | 124,000.00 | income related |
| Total | 18,428,906.18 | 19,375,618.48 | —— |
Note: Refer to Note XIV. 1 Government grant for detailed information.
40. Investment gain
| Item | 2019 | 2018 |
| Gain from long-term equity investments accounted for using the equity method | 1,787,907.10 | 1,001,545.06 |
41. Credit impairment loss (“- “for loss)
| Item | 2019 | 2018 |
| Bad debt for bill receivable | -217,182.73 | —— |
| Bad debt for accounts receivable | -16,346,637.18 | —— |
| Bad debt for other receivables | -77,141.16 | —— |
| Total | -16,640,961.07 | —— |
42. Asset impairment loss (“-“ for loss)
| Item | 2019 | 2018 |
| Bad debt loss | —— | 5,488,944.07 |
| Inventory impairment loss | -4,295,134.48 | -8,753,900.25 |
| Total | -4,295,134.48 | -3,264,956.18 |
43. Gains from assets disposal
| Item | 2019 | 2018 |
| Gains from assets disposal (“-“ for loss) | -926,118.60 | -181,302.24 |
44. Non-operating income
| Item | 2019 | 2018 | Amount included in non-recurring gains or losses for the year ended 31/12/2019 |
| Gain from non-current asset scrap | - | 1,000.00 | - |
| Compensation | 2,700,000.00 | - | 2,700,000.00 |
| Payables cannot be paid | 275,162.46 | 2,810.50 | 275,162.46 |
| Others | 1,778,942.84 | 1,442,547.03 | 1,778,942.84 |
| Total | 4,754,105.30 | 1,446,357.53 | 4,754,105.30 |
45. Non-operating expenses
| Item | 2019 | 2018 | Amount included in non-recurring gains or losses for the year ended 31/12/2019 |
| Fine | 44,727.07 | 154,626.88 | 44,727.07 |
| Donation | 200,000.00 | 380,000.00 | 200,000.00 |
| Others | 1,155,461.80 | 117,888.09 | 1,155,461.80 |
| Total | 1,400,188.87 | 652,514.97 | 1,400,188.87 |
46. Income expenses
(1) Details of income expenses
| Item | 2019 | 2018 |
| Current tax expense for the year based on tax law and regulations | 42,132,064.04 | 42,131,613.05 |
| Changes in deferred tax assets/liabilities | 18,192,565.21 | 5,230,238.71 |
| Total | 60,324,629.25 | 47,361,851.76 |
(2) Reconciliation between income tax expenses and accounting profit is as follows:
| Item | 2019 | 2018 |
| Profits before tax | 276,233,643.40 | 231,196,947.05 |
| Income tax calculated based on statutory tax rate | 69,058,410.86 | 57,799,236.76 |
| Effect of different tax rates applied by subsidiaries | -4,251,519.66 | -12,360,815.15 |
| Adjustment to income tax of previous years | 965,521.61 | 413,122.52 |
| Effect of gains or losses from joint ventures and associates accounted for using the equity method | -385,693.68 | -250,386.27 |
| Effect of non-taxable income (use “- “for presentation) | - | - |
| Effect of non-deductible costs, expenses and losses | 1,178,297.49 | 1,286,216.68 |
| Effect on opening balance of deferred tax due to changes in tax rate | - | - |
| Effect of using the deductible temporary differences or deductible losses for which no deferred tax asset was recognized in previous (use “-“ for presentation) | - | -250,920.28 |
| Effect of deductible temporary differences or deductible losses for which no deferred tax asset was recognized this year | 174,634.92 | 7,158,514.85 |
| Effect of research and development expenses super deduction (use “-“ for presentation) | -6,415,022.29 | -6,433,117.35 |
| Others | - | - |
| Income tax expenses | 60,324,629.25 | 47,361,851.76 |
47. Notes to cash flow statement
(1) Cash received from other operating activities
| Item | 2019 | 2018 |
| Government grant | 17,802,141.42 | 17,144,473.84 |
| Promotion expenses | 14,023,190.48 | 7,388,696.14 |
| Security deposit | 31,127,235.94 | 9,977,697.98 |
| Interest income | 1,956,316.52 | 2,269,447.05 |
| Return of petty cash | 3,817,075.69 | 4,066,408.69 |
| Penalty | 4,298,036.35 | - |
| Legal action security | 8,958,057.64 | - |
| Others | 11,850,325.81 | 8,781,869.99 |
| Total | 93,832,379.85 | 49,628,593.69 |
(2) Cash paid for other operating activities
| Item | 2019 | 2018 |
| Current period expenses | 478,806,783.39 | 415,838,192.35 |
| Security deposit | 4,393,654.88 | 19,915,997.96 |
| Petty cash advanced to employee | 734,763.81 | 5,131,463.98 |
| Others | 4,118,260.73 | 13,351,304.90 |
| Total | 488,053,462.81 | 454,236,959.19 |
(3) Cash paid for other financing activities
| Item | 2019 | 2018 |
| Cash paid for re-purchase of shares | 53,117,325.02 | - |
48. Supplement to cash flow statement
(1) Supplement to cash flow statement
| Item | 2019 | 2018 |
| 1、Reconciliation of net profit/loss to cash flows from operating activities： | ||
| Net profit | 215,909,014.15 | 183,835,095.29 |
| Add: Impairment for assets | 4,295,134.48 | 3,264,956.18 |
| Credit impairment loss | 16,640,961.07 | —— |
| Depreciation of fixed assets, and investment property | 44,206,119.17 | 44,860,943.06 |
| Intangible asset amortization | 6,897,790.40 | 5,285,858.86 |
| Amortization of long-term deferred expenses | 102,881,563.21 | 88,256,496.82 |
| Loss on disposal of fixed assets, intangible assets, and other long-term assets (“-“ for gain) | 926,118.60 | 181,302.24 |
| Loss on scrap of fixed assets (“-“ for gain) | - | -1,000.00 |
| Loss on changes of fair value (“-“ for gain) | - | - |
| Financial expenses (“-“ for income) | 23,975,351.93 | 27,552,558.81 |
| Investment loss (“-“ for gain) | -1,787,907.10 | -1,001,545.06 |
| Decrease in deferred tax assets (“-“ for increase) | 16,936,322.72 | 5,230,238.71 |
| Increase in deferred tax liabilities (“-“ for decrease) | 1,256,242.49 | - |
| Decrease in inventories (“-“ for increase) | -30,808,922.70 | 30,900,223.04 |
| Decrease in operating receivables (“-“ for increase) | -41,745,826.01 | -36,309,812.09 |
| Increase in operating payables (“-“ for decrease) | 85,238,806.20 | -20,427,526.24 |
| Others | - | - |
| Net cash flows from operating activities | 444,820,768.61 | 331,627,789.62 |
| 2. Significant investment or financing activities not involving cash: | ||
| Debts converted to capital | - | |
| Convertible debts mature within one year | - | |
| Fixed assets acquired under finance leases | - | |
| 3. Net changes in cash and cash equivalents: | ||
| Cash at end of year | 315,093,565.09 | 162,623,059.97 |
| Less: cash at beginning of year | 162,623,059.97 | 184,947,891.32 |
| Plus: cash equivalents at end of year | - | - |
| Less: cash equivalents at beginning of year | - | - |
| Net increase in cash and cash equivalents | 152,470,505.12 | -22,324,831.35 |
(2) Cash and cash equivalents
| Item | 31/12/2019 | 31/12/2018 |
| I. Cash | 315,093,565.09 | 162,623,059.97 |
| Incl. Cash on hand | 229,258.38 | 420,783.85 |
| Bank deposit available for immediate payment | 285,306,297.62 | 160,135,454.62 |
| Other monetary funds available for immediate payment | 29,558,009.09 | 2,066,821.50 |
| II. Cash equivalents | - | - |
| Including Bond investment due in three months | - | - |
| III. Cash and cash equivalents at the end of year | 315,093,565.09 | 162,623,059.97 |
| Including Restricted cash and cash equivalents for the Company and its subsidiaries | 3,641,389.51 | 9,192,653.31 |
49. Assets of restricted ownership or use rights
| Item | Carrying amount as at 31 Dec 2019 | Reason |
| Cash in banks | 1,575,000.00 | Security deposit for letter of guarantee |
| Fixed assets | 14,303,281.92 | Pledged |
| Total | 15,878,281.92 | —— |
50. Monetary item denominated in foreign currency
(1) Monetary item denominated in foreign currency
| Item | Balance denominated in foreign currency as at 31 Dec 2019 | Exchange rate | Balance translated in RMB as at 31 Dec 2019 |
| Cash and bank balances | |||
| Including: HKD | 9,734,889.65 | 0.8887 | 8,651,709.21 |
| USD | 2,559,367.50 | 6.9287 | 17,733,097.20 |
| EUR | 61,357.68 | 7.9277 | 486,427.72 |
| CHF | 347,441.02 | 7.2028 | 2,502,548.17 |
| Accounts receivable | |||
| Including: HKD | 2,178,760.46 | 0.89578 | 1,951,690.04 |
| USD | 4,054,616.59 | 6.9762 | 28,285,816.26 |
| EUR | 393,890.14 | 7.8155 | 3,078,448.39 |
| CHF | 3,602,942.07 | 7.2028 | 25,951,271.14 |
| Other receivables | |||
| Including: HKD | 138,711.23 | 0.89578 | 124,254.75 |
| EUR | 4,250.00 | 7.8155 | 33,215.88 |
| CHF | 905,580.00 | 7.2028 | 6,522,711.62 |
| Short-term loan | |||
| Including: HKD | 19,123,916.44 | 0.89578 | 17,130,821.87 |
| CHF | 1,406,035.62 | 7.2028 | 10,127,393.36 |
| Accounts payable | |||
| Including: HKD | 2,527,248.49 | 0.89578 | 2,263,858.65 |
| CHF | 305,396.81 | 7.2028 | 2,199,712.14 |
| Non-current liability that due in one year | |||
| Including: CHF | 50,000.00 | 7.2028 | 360,140.00 |
| Long-term loan | |||
| Including: CHF | 600,000.00 | 7.2028 | 4,321,680.00 |
(2) Overseas operational entity
For main business location and recording currency of important overseas operational entity, refer to Note III. 4.
VI. Changes to the scope of consolidationIn 2019, there was no changes to the scope of consolidation.VII. Interests in other entities
1. Equity in subsidiary
| Name of subsidiary | Main business location | Place of registration | Nature of business | Shareholding ratio% | Ways acquired | |
| Direct | Indirect | |||||
| HARMONY Company | Shenzhen | Shenzhen | Commerce | 100.00 | - | Establishment or investment |
| Manufacturing Company | Shenzhen | Shenzhen | Commerce | 90.00 | 10.00 | Establishment or investment |
| FIYTA Hong Kong | Hong Kong | Hong Kong | Commerce | 100.00 | - | Establishment or investment |
| Station 68 | Hong Kong | Hong Kong | Manufacture | - | 60.00 | Establishment or investment |
| Harbin Company | Harbin | Harbin | Commerce | 100.00 | - | Establishment or investment |
| Technology Company | Shenzhen | Shenzhen | Commerce | 100.00 | - | Establishment or investment |
| TEMPORAL Company | Shenzhen | Shenzhen | Commerce | 100.00 | - | Establishment or investment |
| Emile Choureit Shenzhen Company | Shenzhen | Shenzhen | Commerce | 100.00 | - | Business combination under common control |
| FIYTA Sales Company | Shenzhen | Shenzhen | Commerce | 100.00 | - | Business combination not under common control |
| Hengdarui Company | Shenyang | Shenyang | Commerce | 100.00 | - | Establishment or investment |
| Swiss Company | Switzerland | Switzerland | Commerce | - | 100.00 | Establishment or investment |
2. Equity in joint arrangement or associates
(1) Significant associates
| Name | Principal place of business | Registration place | Business nature | Shareholding ratio (%) | Accounting treatment for associates | |
| Direct | Indirect | |||||
| Shanghai Watch | Shanghai | Shanghai | Manufacture | 25.00 | - | Equity method |
(2) Principal financial information of significant associate company:
| Item | 2019.12.31 | 2018.12.31 |
| Current assets | 117,096,911.21 | 99,901,286.09 |
| Non-current assets | 13,556,720.58 | 15,459,207.08 |
| Total assets | 130,653,631.79 | 115,360,493.17 |
| Current liabilities | 22,661,506.61 | 10,833,917.48 |
| Non-current liabilities | 7,978,869.84 | 10,684,419.15 |
| Total liabilities | 30,640,376.45 | 21,518,336.63 |
| Net assets | 100,013,255.34 | 93,842,156.54 |
| Including: minority shareholder’s interest | - | - |
| Owners’ equity attributable to parent company | 100,013,255.34 | 93,842,156.54 |
| Owners’ equity attributable to parent company | 25,003,313.84 | 23,460,539.14 |
| Adjustment matters | ||
| - Goodwill | - | - |
| - Unrealized profit or losses from internal transaction | - | - |
| - impairment provisions | - | - |
| - Others | - | - |
| Carrying value of investment to associates | 46,423,837.85 | 44,881,063.15 |
| Fair value of equity investment that has public quotation | - | - |
Continued:
| Item | 2019 | 2018 |
| Operating income | 101,660,357.29 | 97,282,978.95 |
| Net profit | 6,171,098.80 | 4,006,180.22 |
| Net profit from discontinued operation | - | - |
| Other comprehensive income | - | - |
| Total comprehensive income | 6,171,098.80 | 4,006,180.22 |
| Dividends received from associated company during the year | - | - |
VIII. Risk management to financial instrumentMain financial instruments of the Company include cash at bank and in hand, bills receivable, accounts receivable, other receivables, otherequity instruments investment, accounts payable, other payables, short-term loans, non-current liabilities due within one year andlong-term loans. Details of financial instruments refer to related notes. The risks associated with these financial instruments and the riskmanagement policies adopted by the Company to mitigate these risks are described below. The management of the Company managesand monitors these exposures to ensure that the above risks are controlled in a limited extent.
1. Risk management goals and policies
The goal of risk management is to keep proper balance between risk and profit, to reduce negative influence of financial risk to financialperformance of the Company to the minimum and maximize the benefit of shareholders and other equity investors. Based on the goal, thefundamental risk management policies of the Company are to identify and analyse risks the Company faces, set proper acceptable risk
level to manage risk, supervise various risk reliably and timely and control risk within limited range.Risks associated with the financial instrument mainly include credit risk, liquidity risk, market risk (including exchange rate risk, interest raterisk and commodity price risk).The board of director is responsible to plan and establish the Group’s risk management structure, make risk management policies andrelated guidelines, and supervise the implementation of risk management. The Group has already made risk management risks to identifyand analyse risks that the Group face. These policies mentioned specific risks, covering market, credit risk and liquidity risk etc. The Groupregularly assesses market environment and the operation changes to determine if to make alteration to risk management policy andsystems. The Group’s risk management is implemented by Risk Management Committee according to the approval of the board ofdirectors. Risk Management Committee work closely with other business department of the Group to identify, evaluating and avoidingcertain risks. The Group’s internal audit department will audit the risk management control and procedures regularly and report the result toaudit committee of the Group.The Group spreads risks through diverse investment and business lines, and through making risk management policy to reduce risks ofsingle industry, specific area and counterpart.
(1) Credit risks
Credit risk refers to risk associated with the default of contract obligation of a transaction counterparty.The Group manages credit risk based category. Credit risks mainly arose from bank deposit, bills receivable, accounts receivable, andother receivables.The Group’s bank deposit mainly deposits in banks with good reputation and with higher credit rating. The Group anticipated that the bankdeposit does not have significant credit risk.For bill receivable, accounts receivables and other receivables, the Group set related policies to control exposure of credit risks. The Groupevaluate client’s credit quality and set related credit period based on the client’s financial status, credit records and other factors such ascurrent market situation etc. The Group keep monitor the client’s credit record and for client with deteriorate credit records, the Group willensure the credit risk is under control in whole by means of written notice of payment collection, shorten or cancel credit period.The Group’s debtor spread over different industry and area. The Group continued to assess the credit evaluation to receivables andpurchase credit guarantee insurance if necessary.The biggest credit risk exposure of the Group is the carrying amount of each financial assets in the balance sheet. The Group also facescredit risks because of providing financial guarantee. Refer to Note XII. 2 for details.The amount of top 5 accounts receivable of the Group accounted for 25.39% (2018: 21.95%) of the Group’s total accounts receivables.The amount of top 5 other receivable of the Group accounted for 40.94% (2018: 22.73%) of the Group’s total other receivables.
(2) Liquidity risk
Liquidity risk refers to the risks that the Group will not be able to meet its obligations associated with its financial liabilities that are settledby delivering cash or other financial assets.Regarding to the management of liquidity risk, the subsidiaries of the Group are responsible for cash flow forecast. The Group’s finance
center monitors cash and cash equivalents to meet operational needs at group level based on subsidiaries’ cash forecast. The Group setup cash pool with major banks to arrange the Group’s cash and ensure that each subsidiary has sufficient cash reserve to fulfil paymentliability. Besides, the Group also signed facility agreement with banks to support the Group to fulfil liabilities fall due.Operating cash were generated from daily operation and bank loan. As of 31 December 2019, the Group’s unused bank loan credit isRMB1,970.39 million (2018: 1,981.03 million)As at the period end, the financial liabilities of the Group at the reporting date are analysed by their maturity date as below at theirundiscounted contractual cash flows (in ten thousand RMB):
| Item | 2019.12.31 | ||||
| year | 1-2 years | 2-3 years | Over 3 years | Total | |
| Financial liabilities: | |||||
| Short-term loans | 57,945.57 | - | - | - | 57,945.57 |
| Accounts payable | 27,977.28 | - | - | - | 27,977.28 |
| Other payables | 11,961.66 | - | - | 84.82 | 12,046.48 |
| Non-current liabilities due in one year | 37.09 | - | - | - | 37.09 |
| Long-term loans | 12.97 | 11.89 | 441.62 | - | 466.48 |
| Total financial liabilities | 97,934.57 | 11.89 | 441.62 | 84.82 | 98,472.90 |
As at the beginning of the period, the financial liabilities of the Group at the reporting date are analysed by their maturity date as below attheir undiscounted contractual cash flows (in ten thousand RMB):
| Item | 2018.12.31 | ||||
| Within 1 year | 1-2 years | 2-3 years | Over 3 years | Total | |
| Financial liabilities: | |||||
| Short-term loans | 56,116.70 | - | - | - | 56,116.70 |
| Accounts payable | 25,991.36 | - | - | - | 25,991.36 |
| Other payables | 7,181.99 | - | - | - | 7,181.99 |
| Non-current liabilities due in one year | 35.79 | - | - | - | 35.79 |
| Long-term loans | 13.55 | 47.26 | 46.22 | 391.01 | 498.04 |
| Total financial liabilities | 89,339.39 | 47.26 | 46.22 | 391.01 | 89,823.88 |
The financial liabilities disclosed above are based on cash flows that are not discounted and may differ from the carrying amount of the lineitems.
(3) Market risk
Market risk includes interest rate risk and currency risk, refers to the risk that the fair value or future cash flow of a financial instrument willbe fluctuated due to the changes in market price.Interest risk
Interest rate risk refers to the risk that the fair value or future cash flow of a financial instrument will be fluctuated due to the floating rate.Interest rate risk arises from recognised interest-bearing financial instrument and unrecognised financial instrument (e.g. loancommitments).The Group’s interest rate risk arises from cash and cash equivalents, borrowings and interest-bearing liabilities. Financial liabilities issuedat floating rate expose the Group to cash flow interest rate risk. Financial liabilities issued at fixed rate expose the Group to fair valueinterest rate risk. The Group determines the relative proportions of its fixed rate and floating rate contracts depending on the prevailingmarket conditions and to maintain an appropriate combination of financial instruments at fixed rate and floating rate through regularreviews and monitors.The Group’s finance department continuously monitors the interest rate position of the Group. The Group did not enter into any interestrate hedging arrangements. But the management is responsible to monitor the risks of interest rate and consider to hedge significantinterest risk if necessary. Increase in interest rates will increase the cost of new borrowing and the interest expenses with respect to theGroup’s outstanding floating rate interest-bearing borrowings, and therefore could have a material adverse effect on the Group’s financialresult. The management will make adjustments with reference to the latest market conditions. These adjustments may include enter intointerest swap agreement to mitigate its exposure to the interest rate risk.Interest bearing financial instrument held by the Group are as follows (in ten thousand RMB):
| Item | 2019 | 2018 | ||
| Fixed interest rate | ||||
| Financial liability | ||||
| Including: short term loans | 48,710.37 | 54,711.85 | ||
| Long term loans | 468.18 | 486.46 | ||
| Subtotal | 49,178.55 | 55,198.31 | ||
| Floating interest rate: | ||||
| Financial liabilities | ||||
| Including: short term loans | 8,000.00 | - | ||
| Total | 57,178.55 | 55,198.31 | ||
As at 31 December 2019, it is estimated that a general increase or decrease 50 basis points in the borrowings with floating interest rates,with all other variables held constant, the Group’s net profit and shareholder’s equity for the year will decrease or increase byapproximately RMB400 thousand (2018: no floating interest rate loan).The financial instruments held by the Group at the reporting date expose the Group to fair value interest rate risk. This sensitivity analysisas above has been determined assuming that the change in interest rates had occurred at the reporting date and arisen from therecalculation of the above financial instrument issued at new interest rates. The non-derivative tools issued at floating interest rate held bythe Group at the reporting date expose the Group to cash flow interest rate risk. The effect to the net profit and shareholder’s equityillustrated in the sensitivity analysis as above is arisen from the effect to the annual estimate amount of interest expenses or revenue at thefloating interest rate. The analysis is performed on the same basis for last year.
Exchange rate riskExchange risk refers to the risk that the fair value or future cash flows of a financial instrument will be fluctuated due to the changes inforeign currency rates. Foreign currency risk arises on financial instruments that are denominated in a currency other than the functionalcurrency in which they are measured.The Group’s exchange risk mainly are financial position and cash flow that are affected by foreign exchange fluctuation. The Group’s majoroperational activities are carried out in the PRC except for Swiss company which held currency of CHF and Hong Kong company whichuses HKD for settlement. But risks also exist for the Group’s asset and liability denominated in foreign currency and future foreignexchange transaction.The following table details the financial assets and liabilities held by the Group which denominated in foreign currencies and amounted toRMB as at 31 December 2019 are as follows (in RMB ten thousands):
| Item | Liabilities denominated in foreign currency | Asset denominated in foreign currency | ||
| 31 Dec 2019 | 31 Dec 2018 | 31 Dec 2019 | 31 Dec 2018 | |
| USD | - | - | 4,601.89 | 907.81 |
| HKD | 1,939.47 | 3,160.74 | 1,072.77 | 872.08 |
| CHF | 1,700.89 | 1,852.08 | 3,497.65 | 1,189.40 |
| EUR | - | - | 359.81 | 31.75 |
| Total | 3,640.36 | 5,012.82 | 9,532.12 | 3,001.04 |
The Company closely monitors the impact of exchange rate changes on the Company's foreign exchange risk. The Company has nottaken any measures to avoid foreign exchange risks.As at 31 December 2019, for cash balances, bank loans and other financial instruments that denominated in foreign currency, if Renminbiappreciate or depreciate of 5% to foreign currency (mainly USD, HKD and CHF) and other factors remain unchanged, the shareholder’sequity and net profit will increase or decrease about RMB 2.9459 million (31 Dec 2018:1.0059 million.
2. Capital management
The objective of the Group’s capital risk management is to safeguard the Group’s ability to continue as a going concern in order to providereturns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.In order to maintain or adjust the capital structure, the Group may adjust the number of dividends paid to shareholders, return capital toshareholders, issue new shares or disposes assets to reduce its liabilities.The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net liabilities divided by total capital. As at 31December 2019, the Group’s gearing ratio is 29.42% (31 December 2018: 28.60%).IX. Fair valueThe level in which fair value measurement is categorised is determined by the level of the fair value hierarchy of the lowest level input thatis significant to the entire fair value measurement. The levels are defined as follows:
Level 1 inputs: unadjusted quoted prices in active markets that are observable at the measurement date for identical assets or
liabilities.Level 2 inputs: inputs other than Level 1 inputs that are either directly or indirectly observable for underlying assets or liabilities.Level 3 inputs: inputs that are unobservable for underlying assets or liabilities.
(1) Fair value of assets and liabilities measured at fair value
As at 31/12/2019, assets and liabilities measured at fair value are shown as follows:
| Item | Level 1 fair value measurement | Level 2 fair value measurement | Level 3 fair value measurement | Total |
| I.Recurring fair value measurement | ||||
| (I) other equity instrument investment | - | - | 85,000.00 | 85,000.00 |
There have been no transfers between level 1 and level 2 and no transfer into or out of Level 3 during the year ended 31 December 2019.
(2) Fair values of assets and liabilities not measured at fair value
Financial assets and financial liabilities measured at amortized cost include: cash at bank and on hand, notes receivable, accountsreceivable, other receivables, short-term loans, accounts payable, other payables, long-term loans due within one year, and long-termloans.The difference between fair value and carrying amount of the above financial assets and liabilities that measured at cost is insignificant.X. Related party and related transaction
1. The parent company of the Company
| Name | Registration place | Type of business | Registered capital | Shareholding ratio of parent company to the Company % | Ratio of vote right of parent company to the Company% |
| China National Aviation Group | Shenzhen | Investment in industries, domestic trade, material supply and distribution | 1,166,161,996 | 36.79 | 36.79 |
Note: CATIC Shenzhen Company holds 36.85% shareholding of China National Aviation Group. CATIC Shenzhen Company is a whollyowned subsidiary of China Aero Space International Holdings Limited (CASI), and China Aviation Industry Corporation (AVIC) directlyholds 91.13% (ultimate beneficiary shares 91.897%) of the equity of CASI. Therefore, the ultimate controlling party of the Company isAVIC.
2. Subsidiaries
Details of subsidiaries refer to Note VII.1.
3. Joint venture and association
Details of joint ventures and associates refer to NoteVII.2.
4. Other related parties
| Name | Relationship with the Company |
| Shenzhen CATIC Property Management Limited (CATIC Property Management) | Associate company of the controlling shareholder |
| Shenzhen CATIC Building Equipment Co., Ltd. (CATIC Building Company) | Associate company of the controlling shareholder |
| China Merchants Property Operation & Service Co., Ltd (China Merchants Property OS) | Associate company of the controlling shareholder |
| CATIC Guanlan Property Development Co., Ltd. （CATIC Guanlan Property） | Associate company of the controlling shareholder |
| Shenzhen CATIC Jiufang Asset Management Limited (CATIC Jiufang Asset Mgmt Company) | Associate company of the controlling shareholder |
| Shenzhen CATIC City Investment Co., Ltd (CATIC City Investment) | Associate company of the controlling shareholder |
| Ganzhou CATIC 9 Square Trading Co, Ltd (Ganzhou 9 Square Company) | Associate company of the controlling shareholder |
| CATIC City Estate (Kunshan) Co, Ltd (Kunshan Company) | Associate company of the controlling shareholder |
| Shenzhen AVIC Security Service Co., Ltd (AVIC Security Service) | Associate company of the controlling shareholder |
| Shenzhen AVIC Property Asset Management Co., Ltd. (AVIC Property Asset Management) | Associate company of the controlling shareholder |
| Jiujiang 9 Square Business Management Co., Ltd (Jiufang Business Management) | Associate company of the controlling shareholder |
| Shenzhen CATIC Property Development Co., Ltd (CATIC Property) | Associate company of the controlling shareholder |
| Rainbow Department Store Co., Ltd. and its associated companies (Rainbow Department Store) | Controlled by the same party |
| Shennan Circuits Co., Ltd. and its associated companies (Shennan Circuits) | Controlled by the same party |
| Shenzhen CATIC City Real Estate Development Co., Ltd. (CATIC City Real Estate Company) | Controlled by the same party |
| Shenzhen CATIC Huacheng Real Estate Development Co, Ltd (CATIC Huacheng Company) | Controlled by the same party |
| Shenzhen CATIC City Parking Management Co, Ltd (CATIC City Parking Management Company) | Controlled by the same party |
| Shenzhen CATIC Technical Testing Institute (CATIC Technical Testing Institute) | Controlled by the same party |
| Tianma Micro-electronics Co., Ltd. (Tianma) | Controlled by the same party |
| AVIC Securities Co., Ltd. (AVIC Securities Company) | Controlled by the same party |
| Xi’an Skytel Hotel Co., Ltd. (Skytel Hotel) | Controlled by the same party |
| CATIC Changtai Investment Development Co., Ltd. (CATIC Changtai Company) | Controlled by the same party |
| AVIC Training Center | Controlled by the same party |
| Shenzhen Grand Skylight Hotel Management Co., Ltd (Grand Skylight Hotel Management Company) | Controlled by the same party |
| AVIC Finance Co., Ltd. (AVIC Finance Company) | Controlled by the same party |
| Shenzhen CATIC Grand Skylight Hotel Co., Ltd (Grand Skylight Hotel) | Controlled by the same party |
| Gongqingcheng CATIC Culture Investment Co., Ltd (Gongqingcheng CATIC Culture Investment Company) | Controlled by the same party |
| AVIC-INTL Project Engineering Co., Ltd (AVIC-INTL Project Engineering Company) | Controlled by the same party |
| Huang Yongfeng | Key management member |
| Wang Mingchuan | Key management member |
| Fu Debin | Key management member |
| Xiao Zhanglin | Key management member |
| Wang Bo | Key management member |
| Chen Libin | Key management member |
| Wang Jianxin | Key management member |
| Zhong Hongming | Key management member |
| Tang Xiaofei | Key management member |
| Wang Baoying | Key management member |
| Sheng Qing | Key management member |
| Fang Jiasheng | Key management member |
| Lu Wanjun | Key management member |
| Liu Xiaoming | Key management member |
| Pan Bo | Key management member |
| Li Ming | Key management member |
| Chen Zhuo | Key management member |
| Tang Haiyuan | Key management member |
| Xu Chuangyue | Key management member |
| Zou Zhixiang | Key management member |
| Lu Bingqiang | Key management member |
5. Related party transactions
(1) Related purchase and sales
①Purchase good and receiving service
| Related party | Nature of transaction | 2019 | 2018 |
| CATIC Property Management | Property management | 11,480,515.57 | 8,208,102.96 |
| Rainbow Department Store | Department store expenses/ Commodity purchase | 5,646,879.21 | 5,865,816.91 |
| AVIC Training Center | Training fee | 159,408.67 | 273,596.25 |
| Shennan Circuits | Material purchase | - | 29,914.50 |
| Ganzhou 9 Square Company | Department store expense | 185,711.09 | 177,372.93 |
| CATIC City Estate (Kunshan) Company | Department store expense | 39,921.62 | 76,674.66 |
| Jiufang Business Management | Department store expense | 54,731.80 | 58,322.11 |
| AVIC | Purchase of goods | 415,077.98 | - |
| AVIC Information Center | Training expenses | 1,603.77 | - |
| Shanghai Watch | Purchase of goods | 6,048.24 | - |
| Tianma | Purchase of goods | 969,091.14 | - |
| CATIC Building Company | Renovation | 17,390.67 | - |
| Skytel Hotel | Maintenance and management fee | 28,886.00 | - |
| CATIC City Real Estate Company | Department store expense | 76,275.91 | - |
The pricing strategy for Group’s related transaction are based on market price.
② Sale of goods and providing services
| Related party | Nature of transaction | 2019 | 2018 |
| Rainbow Department Store | Product and service | 73,641,080.14 | 71,764,856.50 |
| Grand Skylight Hotel Management Company | Sale of product | - | 5,982.91 |
| Ganzhou 9 Square Company | Product and service | 93,750.40 | 960,563.85 |
| Shennan Circuit | Sale of material and providing service | 10,573,861.17 | 5,883,132.72 |
| Gongqingcheng CATIC Culture Investment Company | Sale of product | - | 655,161.45 |
| CASI | Sale of product | - | 10,215.52 |
| CATIC City Real Estate Company | Sale of product | - | 4,051.28 |
| AVIC-INTL Project Engineering Company | Sale of product | - | 15,351.72 |
| CATIC Property Management | Share of Utilities and management fee | 12,506,097.43 | 3,670,113.63 |
| Grand Skylight Hotel | Sale of product | 140,867.25 | - |
| Shanghai Watch | Sale of product | 4,821,299.97 | - |
| AVIC Training Center | Others | 3,270.80 | - |
The pricing strategy for Group’s related transaction are based on market price.
(2) Related party lease
①The Company as a lessor
| Lessee | Type of leased assets | Recognized rental income in current year | Recognized rental income in prior year |
| CATIC Property Management | Property | 3,972,425.13 | 3,327,785.46 |
| China Merchants Property OS | Property | 1,887,345.86 | 1,813,948.87 |
| Skytel Hotel | Property | 2,793,650.79 | 4,190,476.18 |
| CATIC City Investment) | Property | 271,560.56 | 364,293.91 |
| AVIC Securities Company | Property | 1,280,028.55 | 1,231,342.83 |
| CATIC City Real Estate Company | Property | 304,781.46 | 342,330.05 |
| Rainbow Department Store | Property | 684,393.11 | 529,166.26 |
| CATIC Huacheng Company | Property | 239,471.14 | 257,234.48 |
| CATIC 9 Square Asset Mgmt Company | Property | 2,023,126.13 | 1,560,410.13 |
| AVIC Security Service | Property | 1,438,139.41 | 1,160,868.75 |
| CATIC Guanlan Property | Property | 135,780.28 | 119,748.00 |
| AVIC Property Asset Management | Property | - | 57,154.70 |
| CATIC Property Management | Property | 272,692.07 | 165,612.56 |
| CATIC City Parking Management Company | Property | - | 9,916.44 |
The pricing strategy for Group’s related transaction are based on market price.
② The Company as lessee
| Lessor | Type of leased assets | Rental expenses charged in current year | Rental expenses charged in prior year |
| Ganzhou 9 Square Company | Property | 894,582.84 | 894,582.84 |
| Kunshan Company | Property | 132,960.04 | 156,942.79 |
| Jiufang Business Management | Property | 320,208.22 | 337,541.02 |
| CATIC City Real Estate Company | Property | 285,668.33 | - |
The pricing strategy for Group’s related transaction are based on market price.
(3) Related party funds lending
| Related Party | Amount | starting date | Expiring date | Note |
| Borrowing: | ||||
| AVIC Finance Company | 150,000,000.00 | 2018-5-14 | 2019-5-14 | |
| AVIC Finance Company | 50,000,000.00 | 2019-3-26 | 2020-3-26 | |
| AVIC Finance Company | 100,000,000.00 | 2019-4-2 | 2020-4-2 | |
| AVIC Finance Company | 60,000,000.00 | 2019-8-1 | 2019-10-25 | |
| AVIC Finance Company | 60,000,000.00 | 2019-10-25 | 2020-10-25 |
Note: The Company paid interest to AVIC Finance Company up to RMB 6,980,130.55 during the year.
(4) Remuneration to key management
The Company has 21 (including resigned) key management personnel in 2019, and 22 (including resigned) key management personnel in2018. Information about remuneration is as follows:
| Item | 2019 | 2018 | ||
| Remuneration to key management | 17,845,000.00 | 13,123,100.00 | ||
(5) Other related party transactions
The year-end balance of the Company’s cash was RMB237,118,456.45, which was deposited with AVIC Finance Company. Interestsreceived from the deposit during the year were RMB362,818.00.
6. Receivables from and payables to related parties
(1) Receivables
| Item | Related party | 2019.12.31 | 2018.12.31 | ||
| Carrying amount | Bad debt provision | Carrying amount | Bad debt provision | ||
| Bill receivable | |||||
| Shennan Circuit | 2,263,719.32 | - | - | - | |
| Accounts receivable | |||||
| Rainbow Department Store | 6,387,871.47 | 318,754.79 | 2,305,867.79 | 115,293.39 | |
| Shennan Circuit | 1,704,634.58 | 85,061.27 | 1,659,077.38 | 82,953.87 | |
| Ganzhou 9 Square Company | - | - | 4,000.00 | 200.00 | |
| Gongqingcheng CATIC Culture Investment Company | - | - | 28,269.36 | 1,413.47 | |
| Jiufang Business Management | - | - | 4,288.00 | 214.40 | |
| AVIC Securities Company | - | - | 101,428.57 | 5,071.43 | |
| CATIC City Real Estate Company | - | - | 3.00 | 0.15 | |
| CATIC 9 Square Asset Mgmt Company | - | - | 33,331.01 | 1,666.55 | |
| CATIC Guanlan Property | - | - | 8,315.43 | 415.77 | |
| CATIC Property | - | - | 148,915.46 | 7,445.77 | |
| CATIC Property Management | - | - | 0.52 | 0.03 | |
| Shanghai Watch | 140,000.00 | 6,986.00 | - | - | |
| Other receivables | |||||
| Rainbow Department Store | 975,867.00 | 50,647.50 | 761,860.00 | 38,093.00 | |
| CATIC Property Management | - | - | 10,100.00 | 505.00 | |
| Ganzhou 9 Square Company | 122,665.60 | 6,366.34 | 122,665.60 | 6,133.28 | |
| Kunshan Company | 32,000.00 | 1,660.80 | 50,400.00 | 2,520.00 | |
| Skytel Hotel | - | - | 32,000.00 | 1,600.00 | |
| Gongqingcheng CATIC Culture Investment Company | - | - | 5,500.00 | 275.00 | |
| Jiufang Business Management | 50,000.00 | 2,595.00 | 50,000.00 | 2,500.00 | |
| CATIC City Real Estate Company | 59,923.00 | 3,110.00 | 54,923.00 | 2,746.15 | |
| China National Aviation Group | 11,101.80 | 576.18 | 11,101.80 | 555.09 | |
| Prepayment: | |||||
| Tianma | 31,309.90 | - | - | - |
(2) Payables to related parties
| Item | Related party | 2019.12.31 | 2018.12.31 |
| Accounts payables: | |||
| CATIC Building Company | 23,300.97 | 24,000.00 | |
| CATIC Property Management | - | 40,821.05 | |
| Tianma | 3,415.84 | - | |
| Other payables: | CATIC Property Management | 1,237,403.65 | 1,131,164.13 |
| CATIC Property | 442,407.92 | 442,407.92 | |
| CATIC City Investment | 309,732.00 | 309,732.00 | |
| AVIC Securities Company) | 213,000.00 | 213,000.00 | |
| CATIC Building Company | 54,691.44 | 116,960.23 | |
| CATIC City Real Estate Company | 99,052.32 | 99,052.32 |
| CATIC Huacheng Company | 73,819.68 | 73,819.68 | |
| CATIC Jiufang Asset Mgmt Company | 378,483.84 | 378,483.84 | |
| Rainbow Department Store | 155,672.90 | 60,000.00 | |
| CATIC Changtai Company | - | 4,064.81 | |
| CATIC Property | 51,014.88 | 51,014.88 | |
| CATIC Guanlan Property | 25,401.60 | 25,401.60 | |
| AVIC Security Service | 226,603.44 | 10,533.44 | |
| Ganzhou 9 Square Company | - | 3,446.22 | |
| Shennan Circuits | - | 150,000.00 | |
| Skytel Hotel | 28,886.00 | - |
XI. Share-based payments
1. General information about share-based payments
| Total equity instruments granted by the Company in current period | 4,224,000 |
| Total equity instruments exercised by the Company in current period | 4,224,000 |
| Total equity instruments voided in current period | - |
| Scope of outstanding share option exercise price and remaining contract term | First phase restricted share exercise price: RMB4.4/share, remaining term 48 months. |
| Scope of outstanding other equity instrument exercise price and remaining contract term. | Not applicable |
2. Equity settled share-based payment
| Method of determining fair value of equity instrument on grant date | Close price of share on grant date |
| Evidence to determine the number of exercisable equity instrument | Term of employee service, status of target completion, and personal performance assessment |
| Reasons for significant difference between current period estimation and prior period estimation. | NIL |
| Accumulated amount charged to capital reserve for equity settled share-based payment | 18,802,225.91 |
| Total expenses for equity settled share-based payment recognized in current period | 4,440,625.91 |
XII. Commitment and contingency
1. Significant commitments
(1) Operating lease commitments
As at the balance sheet date, the total future minimum lease payments under non-cancellable operating leases were payable as follows:
| The total future minimum lease payments under non-cancellable operating leases | 2019.12.31 | 2018.12.31 |
| Within 1 year | 69,420,770.36 | 54,382,100.37 |
| 1-2 years | 40,749,688.35 | 28,501,337.58 |
| 2-3 years | 15,620,420.28 | 12,406,400.37 |
| After 3 years | 11,333,148.34 | 9,533,027.43 |
| Total | 137,124,027.33 | 104,822,865.75 |
(2) Other commitments
As at 31 December 2019, the Group does not have other commitments that required to disclose.
2. Contingencies
(1) Contingent liabilities arising from guarantee provided to other entities and related financial effects.
As at 31 December 2019, the intra-Group guarantees is as followings (in RMB Ten thousands):
| Guarantee | Guarantor | Guaranteed matter | Credit line granted | Credit line used | Period |
| FIYTA Hong Kong | The Company | Loan | 3,583.12 | 2,710.37 | 2018-7-1 to 2020-5-31 |
| FIYTA Hong Kong | The Company | Loan | 7,166.24 | - | 2018-12-17 to 2020-11-12 |
| The Company | HARMONY Company | Loan | 30,000.00 | 1,000.00 | 2018-12-4 to 2020-3-8 |
| HARMONY Company | The Company | Guarantee letter | 10,000.00 | 10,000.00 | 2019-12-30 to 2020-12-29 |
| Total | —— | —— | 50,749.36 | 13,710.37 | —— |
(2) Other contingent liabilities
As at 31 December 2019, the Group does not have other contingent liabilities that required to disclose.XIII. Post balance sheet date events
1. Profit appropriations after the balance sheet date
| Profit distributions or dividends proposed | Cash dividend of RMB2.00 (tax inclusive) for every 10 shares held |
2. Other events after the balance sheet date
(1) Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the 7th meeting of the 9th Board of Directors on
4 April 2019 and the 2nd extraordinary shareholder’s meeting of 2019 on 23 April 2019, the Company repurchased B Shares of 13,470,000
in total as of 18 March 2020, accounted for 3.04% of the Company’s total shares. The highest deal price was HKD6.56 and the lowest was
HKD5.71. Total consideration paid was HKD 81,883,172.32 (excluding stamp duty and commission).
(2) Since the outbreak of Novel Coronavirus Pneumonia in the beginning of 2020, the Company has actively responded and strictly
implemented various regulation and requirements pronounced by the China Communist Party and national government authorities at all
level for virus epidemic prevention and control in order achieve operation production while preventing the epidemic. In responding to the
outbreak of epidemic, the Company has quickly adjusted the operating strategies, promoted full marketing and increased investment in
e-commerce to minimize market impact.The epidemic would have certain impact on the business operations and overall ecomonic operartion of the entire country andconsequently have impact to the Company’s merchandise retail and manufacturing businesses to a certain extent. The degree of impact isuncertain as of now and is subjected to the development of epidemic prevention, duration of the epidemic and implementation of all kindsof control measures. The Company will closely monitor, evaluate and actively address the impact of the epidemic to the Group’s financialposition, as well as the operating performance.
(3) Financing and guarantee after the balance sheet date
① On 18 March 2020, pursuant to approval by the 16th meeting the 9th Board of directors, the Company proposed to apply for financingfacility of no more than RMB1,200 million by means of credit, pledge and mortgage. The resolution is pending for approval by theshareholder’s meeting.
②On 18 March 2020, pursuant to approval by the 16th meeting the 9th Board of directors, the Company proposed to provide guaranteefor the Company’s wholly-owned subsidiary to borrow from banks of no more than RMB1,000 million. The credit line is included in theactual usage limit of RMB1,200 million mentioned above. The resolution is waiting approval from the shareholder’s meeting.
(4) As at 18 March 2020, the Group does not have other post-balance sheet events that requires to disclose.XIV. Other Significant matters
1. Government grant
(1) Government grants recognized in deferred income, and subsequently measured using the gross presentation method
| Item | Type | As at 31/12/2018 | Additions during the year | Recognition in profit and loss | Other changes | As at 31/12/2019 | Presentation item recognized in profit and loss | Related to asset/income |
| Special fund for Shenzhen industrial design industry development (A) | State treasury | 933,011.22 | - | 203,066.21 | - | 729,945.01 | Other income | Asset related |
| Funding project for construction of National Enterprise Technology Center (B) | State treasury | 1,511,421.57 | - | 293,147.06 | - | 1,218,274.51 | Other income | Asset related |
| 2017 Provincial Specialized Fund for Industrial and Information Technology (C) | State treasury | 1,162,384.83 | - | 130,551.49 | - | 1,031,833.34 | Other income | Income related |
| Special funds for consumer goods standards and quality improvement | State treasury | 66,037.74 | - | - | - | 66,037.74 | —— | Income related |
| Total | —— | 3,672,855.36 | - | 626,764.76 | - | 3,046,090.60 | —— | —— |
Note:
A. Special fund for Shenzhen industrial design industry development was obtained according to the Shen Jingmao Xinxi Jishu Zi (2013)
No. 227 - Operating Specification for Affirmation and Fund Plan of Shenzhen Industrial Design Center (Trial) which is jointly issuedby Economy, Trade and Information Commission of Shenzhen Municipality and Finance Commission of Shenzhen Municipality.B. Funding project for construction of Shenzhen Enterprise Technology Center was obtained according to the Notice for the 1stSupportive Project in 2015 of Funding Project for Construction of Shenzhen Enterprise Technology Center which was issued byShenzhen Development and Reform Commission (Shen Jing Mao Xin Xi Yu[2015] No. 129).C. According to the Notice of Guangdong Provincial Economic and Information Technology Commission on Doing a Good Job ofApplying for Provincial Special Projects in Production and Service Industry in 2017 (the Circular of the Ministry of Economic Affairsand Information Technology of Guangdong Province and Guangdong Provincial Department of Finance) Guangdong Letter ofManufacture [2016] No. 53) obtained provincial 2017 special funds for industrial and informatization.
(2) Government grants recognized in profit and loss using gross method
| Item | Type | Recognised in profit and loss for the year ended 31/12/2018 | Recognised in profit and loss for the year ended 31/12/2019 | Presentation item recognized in profit and loss | Related to asset/income |
| Headquarters enterprise award (A) | State treasury | - | 4,843,500.00 | Other income | Income related |
| Corporate Research and Development Funding (B) | State treasury | 1,890,000.00 | 3,156,000.00 | Other income | Income related |
| Special subsidy to promoting consuming (C) | State treasury | - | 1,655,200.00 | Other income | Income related |
| Economic development special fund of Guangming District to support intellectual property right, standardization certification project (D) | State treasury | - | 1,033,000.00 | Other income | Income related |
| Subsidy to support major enterprise to expanding production and improving efficiency (E) | State treasury | - | 1,000,000.00 | Other income | Income related |
| Subsidy to support innovation development for business and trading (F) | State treasury | - | 712,664.00 | Other income | Income related |
| Subsidy to support investment in R&D and domestic economic and trading exhibition (G) | State treasury | 1,268,000.00 | 669,545.00 | Other income | Income related |
| Special fund of Nanshan district to support self-innovation industry development (H) | State treasury | 2,246,200.00 | 718,600.00 | Other income | Income related |
| Examine intellectual property right using big | State treasury | - | 500,000.00 | Other income | Income related |
| data (I) | |||||
| Commission on IIT payment | State treasury | - | 469,005.01 | Other income | Income related |
| Shenzhen Standard Special Fund (J) | State treasury | 496,000.00 | 543,000.00 | Other income | Income related |
| Subsidy for SME to expanding market (K) | State treasury | - | 387,940.49 | Other income | Income related |
| Shenzhen Science and Technology Award (L) | State treasury | - | 300,000.00 | Other income | Income related |
| Expanding production and improving efficiency (M) | State treasury | - | 300,000.00 | Other income | Income related |
| Subsidy to projects of economic development special fund (N) | State treasury | - | 286,000.00 | Other income | Income related |
| Subsidy for stabilizing job position | State treasury | 229,106.17 | 209,468.63 | Other income | Income related |
| Self-innovative industry development subsidy (O) | State treasury | - | 200,000.00 | Other income | Income related |
| The 20th Guangdong Provincial China Patent Award (P) | State treasury | - | 150,000.00 | Other income | Income related |
| Associated award to The 20th Guangdong Provincial China Patent Award (Q) | State treasury | - | 150,000.00 | Other income | Income related |
| Basel watch fair subsidy | State treasury | - | 114,333.32 | Other income | Income related |
| Maternity insurance | State treasury | - | 100,789.68 | Other income | Income related |
| Nanshan Economic Promoting Bureau subsidy for SME (R) | State treasury | - | 100,000.00 | Other income | Income related |
| Promotion of human resource quality | State treasury | 100,000.00 | 100,000.00 | Other income | Income related |
| Subsidy to promoting international operating ability (S) | State treasury | 60,000.00 | 31,163.00 | Other income | Income related |
| State level high and new technology certificate subsidy (T) | State treasury | - | 30,000.00 | Other income | Income related |
| Short term export credit insurance | State treasury | 57,605.00 | 20,200.00 | Other income | Income related |
| Expanding domestic marketing from Shenzhen SME Affairs Department (V) | State treasury | - | 14,670.00 | Other income | Income related |
| Subsidy for Disabled person (W) | State treasury | 8,882.30 | 7,062.29 | Other income | Income related |
| Watch fair subsidy from Guangming District | State treasury | 50,000.00 | - | Other income | Income related |
| Shenzhen Patent Award | State treasury | 2,000.00 | - | Other income | Income related |
| Special fund for industry transformation and upgrading | State treasury | 500,000.00 | - | Other income | Income related |
| Special fund for application of industry transformation and upgrading | State treasury | 4,480,000.00 | - | Other income | Income related |
| Merging of industrialization and information | State treasury | 400,000.00 | - | Other income | Income related |
| Domestic marketing expanding for example enterprise practicing innovation | State treasury | 128,920.00 | - | Other income | Income related |
| Foreign trade subsidy for Basel watch fair | State treasury | 779,907.74 | - | Other income | Income related |
| High and new tech enterprise in Baoan District | State treasury | 30,000.00 | - | Other income | Income related |
| 2nd International Brand Week Guangming Branch | State treasury | 28,301.89 | - | Other income | Income related |
| 18th China Appearance Designing Excellence award | State treasury | 250,000.00 | - | Other income | Income related |
| Domestic innovation patent annual subscription fee subsidy | State treasury | 2,000.00 | - | Other income | Income related |
| Import exhibition participating | State treasury | 6,154.00 | - | Other income | Income related |
| Economic and trade commission service industry special development fund | State treasury | 1,000,000.00 | - | Other income | Income related |
| Crystal Products Exhibition Special Funding | State treasury | 103,267.00 | - | Other income | Income related |
| Corporate R&D Funding by Science and Technology Commission | State treasury | 1,155,000.00 | - | Other income | Income related |
| Creating excellence and rating funding project by Economic Promotion Bureau, Nanshan District | State treasury | 200,000.00 | - | Other income | Income related |
| Funding for Informatization and Industrialization Integration project by Economic Promotion Bureau, Nanshan District | State treasury | 100,000.00 | - | Other income | Income related |
| Project funded by Commerce Circulation Industry | State treasury | 360,800.00 | - | Other income | Income related |
| Patent subsidy by Shenzhen Municipal Market and Quality Supervision and Administration Committee, 2017 | State treasury | 10,000.00 | - | Other income | Income related |
| The 19th China Patent Award of the Market and Quality Committee | State treasury | 330,000.00 | - | Other income | Income related |
| Funds on Enterprise Intellectual Property Management Standards Certification by Market Supervision Committee | State treasury | 200,000.00 | - | Other income | Income related |
| Demonstration special fund, financial aid project in exhibition industry, for small and micro enterprise entrepreneurship innovation base | State treasury | 159,810.00 | - | Other income | Income related |
| Watch exhibition subsidy of small and micro enterprises | State treasury | 128,008.00 | - | Other income | Income related |
| Government exhibition industry special fund | State treasury | 128,008.00 | - | Other income | Income related |
| China Light Industry Federation's international standards funding | State treasury | 16,000.00 | - | Other income | Income related |
| 16-26 batch special subsidy for Central Foreign Trade and Economic | State treasury | 60,000.00 | - | Other income | Income related |
| Government special subsidy fund for central foreign economic and trade projects | State treasury | 114,466.00 | - | Other income | Income related |
| Key technology research and development project of DF101 aircraft benchmark timing system | State treasury | 480,000.00 | - | Other income | Income related |
| Development Special Fund for Independent Innovation Industry, Nanshan District | State treasury | 124,000.00 | - | Other income | Income related |
| Total | —— | 17,682,436.10 | 17,802,141.42 | —— | —— |
Note:
A. It is the award granted by Development and Reform Commission of Shenzhen Municipality according to “Encourage Headquarters
Enterprise Development” (Shen Fu Gui (2017) No. 7).B. It is obtained according to “Measures to Promoting Science Innovation” (Shen fa (2016) No.7) and “Management Measures of
Shenzhen Science and Technology Research and Development Fund” issued by Shenzhen Finance Committee and Shenzhen
Science and Technology Innovation Committee.C. It is received according to “Notice of Circulating Application Guidance of 2019 Promoting Consuming Supporting Plan” issued by
Shenzhen Bureau of Commerce (Shen Shangwu Shichang Zi (2019) NO. 202).D. It is received according to “Notice of Circulating “Guangming Market Supervision and Management Bureau Regarding 2019
Economic Development Specific Fund to Support Intellectual, standardization Certificate Project” (Shen Shijian Guang (2019) No.
160)E. It is subsidy received for 2019 enterprise expanding capacity and increase efficiency based on “Notice of Publicity Plans to Subsidy
2019 Enterprise Expanding Capacity and Increasing Efficiency” (Shen Gongxin Dianzi Zi (2019) No. 75) issued by Shenzhen
Industrial and Information Bureau.F. It is received based on “Notice of Publicity of 2019 Support Projects of Commerce and Trading Innovation Development” issued by
Shenzhen Bureau of Commerce.G. It is 2018 Guangming New District Economic Development Special Fund for R&D Investment and activity support for Domestic
Trade Exhibition obtained according to "Shenzhen Guangming New District Economic Development Special Fund Management
Measures and Supporting Implementation Rules" (Shen Guang Gui [2017] No. 16) issued by Shenzhen Guangming New District
Management Committee.H. It is received according to “Management Rules of Nanshan District Self-innovation Industrial Development Specific Fund (Trial)” and
“Nanshan District Details of Application of Human Resource Specific Fund under Self Innovation Industrial Development” (Shennan
Fubangui 92019) No.3).I. It is received based on the following notices: “Notice of Circulating “Several Measures to Increase Enterprise Competitive Strength”
issued by Shenzhen Municipal Government (Shen Fa (2019) No. 8), “Notice of Circulating “Application Guideline of Supporting
Enterprise to Improve Competitive Strength”” (Shen Jingmao Xinxi Zi (2017) No. 37.J. The 2017 Shenzhen Standard special funds obtained according to “The Publicity for the 2018 Construction of the Shenzhen
Standard Special Fund Standards Project” issued by Shenzhen Municipal Market and Quality Supervision and Management
Committee.K. It is received according to “Notice of Publicity 2018 Supporting SME to Expanding Market Projects” issued by Shenzhen Bureau of
Commerce.L. It is received based on “Shenzhen Science and Technology Award Management Method” (Shen Fu (2016) No. 87 and associated
application guidelines.M. It is received in accordance with “Shenzhen Guangming New District Economic Development Specific Fund Management Method
and Associated Application Guidelines”.N. It is received in accordance with “Notice of Receiving Application of 2019 Guangming District Economic Development Specific Fund
to Support Enterprise to Get Bigger and Stronger”.
O. It is received in accordance “Notice of Receiving Application the 3rd Batch 0f 2019 Human Resource Sub-fund Subsidy” issued by
Nanshan District Bureau of Human Resources.P. Associated Patent award obtained from Shenzhen Market Supervision and Administration Bureau according to the “Decision on the
Award of the 20th China Patent Award” issued by the State Intellectual Property Office (Guo Zhi Fa Guan Zi [2018] No. 36).Q. Patent award obtained in accordance with “Decision on the Award of the 20th China Patent Award” issued by the State Intellectual
Property Office (Guo Zhi Fa Guan Zi [2018] No. 36).R. It is received from Nanshan District Government about enterprise that reached certain scale. For SME that first time reaches certain
scale, an award of 100 thousand to 500 thousand will granted. It is based on “Nanshan District 2018 Plan to Encourage SME to
Rapidly Grow”.S. It is received based on “Notice on Application Guideline of Organizing and Implementing 2017 Central Foreign Economy and Trade
Development Fund”.T. It is received based on “Notice of Subsidy to 2018 Enterprise Get State High and New Technology Certificate” (Shen Keji Chuagnxin
(2019) No. 160.U. It is short-term export credit insurance subsidy received by “Application Guideline of Shenzhen Nanshan Self-innovation Industrial
Development Specific Fund Economic Development Sub-fund”.V. 2018 Small and Medium Enterprises Development Special Fund (Under “Innovation and Entrepreneurship” Strategy), Enterprise
Domestic Market Development Project Funding, obtained according to the "Interim Measures for the Administration of Special Funds
for the Development of Private and SMEs in Shenzhen" issued by Shenzhen Municipal Commission of Economy, Trade and
Information and Shenzhen Municipal Finance Committee (Shen Jingmao Xinxi Gui [2017] No. 8), and “The Detailed Rules for the
Implementation of the Special Demonstration Fund for the Small and Medium Enterprise Entrepreneurship Innovation Base in
Shenzhen” issued by Shenzhen Economic and Trade and Information Commission (Shen Jingmao Xinxi Zhongxiao Zi [2016] No.
217).
W. It is received based on “Administration Measures for Disabled People Job Position Security Fund”.
2. De-registration of subsidiary
Station 68 is in process of de-registration. As of 31 December 2019, the cancellation is still in process.
3. Others
(1) The proposal about acquiring wholly-owned sub-subsidiary Montres Chouriet SA has been passed in the 16th Board Meeting of theeighth Board of Directors on 2 June 2017. The Company is going to acquire 100% share of Swiss Company, owned by the subsidiary ofthe Company, FIYTA Hong Kong. The consideration of CHF12 million was made on the basis of audited net asset as at 31 December 2016.The acquisition has not been finalized as of 31 December 2019.
(2) On 2 October 2019, CASI signed merger agreement with CATIC Shenzhen and China National Aviation Group. According to theagreement, CASI will absorb CATIC Shenzhen and China National Aviation Group and undertakes all their assets and liabilities. CATICShenzhen and China National Aviation Group will be cancelled. After the merger, CASI will become the controlling shareholder of theCompany. As of 31 December 2019, the deal has not yet been completed.
(3) According to the “Proposal of Change the Company’s name and initials for A share stock” approved by the 3rd extraordinaryshareholder’s meeting in 2019, and upon examination and approval by Shenzhen Administration for Industry and Commerce, theCompany’s name has been changed from “FIYTA (Group) Co., Ltd. to “FIYTA Precision Technology Co., Ltd.” since 9 January 2020.XV. Notes to the Company’s financial statements
1. Accounts receivable
(1) Presented by ageing
| Ageing | 2019.12.31 | 2018.12.31 |
| Within 1 year | 2,997,921.46 | 776,459.35 |
| Subtotal | 2,997,921.46 | 776,459.35 |
| Less: bad debt provision | 149,896.07 | 38,822.97 |
| Total | 2,848,025.39 | 737,636.38 |
(2) Presentation by method of providing bad debt
| Category | 2019.12.31 | ||||
| Book value | Bad debt provision | Carrying amount | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Individually significant and assessed for impairment individually | - | - | - | - | - |
| Collectively assessed for impairment based on credit risk characteristics | |||||
| Receivables from related parties within scope of consolidation | - | - | - | - | - |
| Receivables from other customers | 2,997,921.46 | 100.00 | 149,896.07 | 5.00 | 2,848,025.39 |
| Total | 2,997,921.46 | 100.00 | 149,896.07 | 5.00 | 2,848,025.39 |
(continued)
| Category | 2019.01.01 | ||||
| Book value | Bad debt provision | Carrying amount | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Individually significant and assessed for impairment individually | - | - | - | - | - |
| Collectively assessed for impairment based on credit risk characteristics | |||||
| Receivables from related parties within scope of consolidation | - | - | - | - | - |
| Receivables from other customers | 776,459.35 | 100.00 | 38,822.97 | 5.00 | 737,636.38 |
| Total | 776,459.35 | 100.00 | 38,822.97 | 5.00 | 737,636.38 |
Bad debt provision based on groups
Group: Receivables from other customers
| Category | 2019.12.31 | ||
| Accounts receivable | Bad debt provision | ECL rate (%) | |
| Within 1 year | 2,997,921.46 | 149,896.07 | 5.00 |
Bad debt provision as of 31 December 2018:
| Category | 2018.12.31 | ||||
| Book value | Percentage (%) | Bad debt provision | Percentage of provision (%) | Carrying amount | |
| Individually significant and assessed for impairment individually | - | - | - | - | - |
| Collectively assessed for impairment based on credit risk characteristics | |||||
| Including: ageing group | 776,459.35 | 100.00 | 38,822.97 | 5.00 | 737,636.38 |
| Specific receivables group | - | - | - | - | - |
| Subtotal of groups | 776,459.35 | 100.00 | 38,822.97 | 5.00 | 737,636.38 |
| Individually insignificant but assessed for impairment individually | - | - | - | - | - |
| Total | 776,459.35 | 100.00 | 38,822.97 | 5.00 | 737,636.38 |
(3) Addition, recovery or reversals of provision during the year:
| Bad debt provision | |
| 2018.12.31 | 38,822.97 |
| Adjustment amount for the first implementation of the new financial instrument standards | - |
| 2019.01.01 | 38,822.97 |
| Addition | 111,073.10 |
| Reversal | - |
| Written-off | - |
| 2019.12.31 | 149,896.07 |
(4) There were no receivables that are written-off during the period.
(5) Top five accounts receivable are analyzed as follows:
The total amount of receivables from top five accounts amounts to RMB2,983,039.56, accounted for 99.50% of total balance of accountsreceivable as of the period end. Corresponding bad debt provision accrued is RMB149,151.98.
2. Other receivables
| Item | 2019.12.31 | 2018.12.31 |
| Interest receivable | - | - |
| Dividends receivable | - | - |
| Other receivables | 783,647,732.22 | 870,739,378.37 |
| Total | 783,647,732.22 | 870,739,378.37 |
(1) Other receivables
①Presented by ageing
| Ageing | 2019.12.31 | 2018.12.31 |
| Within 1 year | 673,518,552.61 | 870,591,025.37 |
| 1-2 years | 109,992,510.47 | 208,054.00 |
| 2-3 years | 186,180.00 | - |
| Over 3 years | 40,050.00 | 40,050.00 |
| Subtotal | 783,737,293.08 | 870,839,129.37 |
| Less: bad debt provision | 89,560.86 | 99,751.00 |
| Total | 783,647,732.22 | 870,739,378.37 |
②Presented by nature
| Item | 2019.12.31 | 2018.12.31 | ||||
| Book value | Provision | Carrying amount | Book value | Provision | Carrying amount | |
| Related party balance | 783,005,800.85 | - | 783,005,800.85 | 868,980,990.06 | - | 868,980,990.06 |
| Security deposit | 235,761.90 | 76,355.60 | 159,406.30 | 248,104.00 | 40,830.40 | 207,273.60 |
| Petty cash | - | - | - | 431,623.24 | - | 431,623.24 |
| Others | 495,730.33 | 13,205.26 | 482,525.07 | 1,178,412.07 | 58,920.60 | 1,119,491.47 |
| Total | 783,737,293.08 | 89,560.86 | 783,647,732.22 | 870,839,129.37 | 99,751.00 | 870,739,378.37 |
③Status of bad debt provision
Bad debt provision at the first stage as of period end:
| Category | Book value | ECL rate in next 12 month (%) | Bad debt Provision | Carrying amount | Note |
| Individually significant and assessed for impairment individually | - | - | - | - | |
| Collectively assessed for impairment based on credit risk characteristics | |||||
| Petty cash | - | - | - | - | |
| Security deposit | 235,761.90 | 32.39 | 76,355.60 | 159,406.30 | |
| Social security payment on-behalf | 242,726.90 | - | - | 242,726.90 | |
| Receivables from related party that within consolidation scope | 783,005,800.85 | - | - | 783,005,800.85 | |
| Other receivables | 253,003.43 | 5.22 | 13,205.26 | 239,798.17 |
| Total | 783,737,293.08 | 0.01 | 89,560.86 | 783,647,732.22 |
As of the period end, the Company does not have other receivables at the second stage.As of the period end, the Company does not have other receivables at the third stage.Bad debt provision as of 31 Dec2018:
| Category | 2018.12.31 | ||||
| Book value | Percentage (%) | Bad debt provision | Percentage of providing (%) | Carrying amount | |
| Individually significant and assessed for impairment individually | - | - | - | - | - |
| Collectively assessed for impairment based on credit risk characteristics | |||||
| Including: ageing group | 1,426,516.07 | 0.16 | 99,751.00 | 6.99 | 1,326,765.07 |
| Specific receivables group | 869,412,613.30 | 99.84 | - | - | 869,412,613.30 |
| Subtotal of groups | 870,839,129.37 | 100.00 | 99,751.00 | 0.01 | 870,739,378.37 |
| Individually insignificant but assessed for impairment individually | - | - | - | - | - |
| Total | 870,839,129.37 | 100.00 | 99,751.00 | 0.01 | 870,739,378.37 |
④ Addition, recovery or reversals of provision during the year
| Bad debt provision | 1st stage | 2nd stage | 3rd stage | Total |
| ECL in next 12 month | ECL for the life time of receivables (no impairment yet) | ECL for the life time of receivables (impaired) | ||
| 99,751.00 | - | - | 99,751.00 | |
| Adjustment amount for the first implementation of the new financial instrument standards | - | - | - | - |
| 2019.01.01 | 99,751.00 | - | - | 99,751.00 |
| Current period | ||||
| --transferred to 2nd stage | - | - | - | - |
| -- transferred to 3rd stage | - | - | - | - |
| --Reversed to 2nd stage | - | - | - | - |
| --Reversed to 3rd stage | - | - | - | - |
| Accrued | - | - | - | - |
| Reversed | 10,190.14 | - | - | 10,190.14 |
| Realized | - | - | - | - |
| Written-off | - | - | - | - |
| Other changes | - | - | - | - |
| Balance as of 31 Dec 2019 | 89,560.86 | - | - | 89,560.86 |
⑤There was no other receivables that are written-off during the period.
⑥ Top five other receivable are analyzed as follows:
The total amount of other receivables from top five accounts amounts to RMB783,005,800.85, accounted for99.91% of total balance ofother receivable as of the period end.
3. Long-term equity investment
| Item | 2019.12.31 | 2018.12.31 | ||||
| Book value | Impairment provision | Carrying amount | Book value | Impairment provision | Carrying amount | |
| Investment to subsidiaries | 1,334,471,401.42 | - | 1,334,471,401.42 | 1,331,248,590.93 | - | 1,331,248,590.93 |
| Investment to associates | 46,423,837.85 | - | 46,423,837.85 | 44,881,063.15 | - | 44,881,063.15 |
| Total | 1,380,895,239.27 | - | 1,380,895,239.27 | 1,376,129,654.08 | - | 1,376,129,654.08 |
(1) Investment in subsidiaries
| Investee | 2018.12.31 | Increase | Decrease | 2019.12.31 | Provision | Balance of provision |
| HARMONY Company | 601,307,200.00 | 1,231,561.04 | - | 602,538,761.04 | - | - |
| Haerbin Company | 2,184,484.39 | - | - | 2,184,484.39 | - | - |
| Manufacturing Company | 9,000,000.00 | 344,923.49 | - | 9,344,923.49 | - | - |
| Technology Company | 10,000,000.00 | 126,964.71 | - | 10,126,964.71 | - | - |
| FIYTA Hong Kong | 137,737,520.00 | - | - | 137,737,520.00 | - | - |
| TEMPORAL Company | 5,000,000.00 | - | - | 5,000,000.00 | - | - |
| FIYTA Sales Company | 450,000,000.00 | 1,377,582.46 | - | 451,377,582.46 | - | - |
| Hengdarui Company | 36,867,843.96 | - | - | 36,867,843.96 | - | - |
| Emile Choureit Shenzhen Company | 79,151,542.58 | 141,778.79 | - | 79,293,321.37 | - | - |
| Total | 1,331,248,590.93 | 3,222,810.49 | - | 1,334,471,401.42 | - | - |
(2) Investment in associates
| Investee | 2019.01.01 | Changes during the period | 2019.12.31 | Balance of impairment provision as of period end | |||||||
| Addition/new | Withdrawn | Investment gains and losses confirmed by the equity method | Adjustment of other comprehensive income | Changes in other equity | Cash dividend declared | Impairment provision | Others | ||||
| ① Associate | |||||||||||
| Shanghai Watch Co., Ltd. (Shanghai Watch) | 44,881,063.15 | - | - | 1,542,774.70 | - | - | - | - | - | 46,423,837.85 | - |
4. Operating income and operating cost
| Item | 2019 | 2018 | ||
| Operating income | Operating cost | Operating income | Operating cost | |
| Main business | 140,511,246.61 | 21,776,539.35 | 130,886,023.99 | 19,010,293.07 |
| Other business | - | - | 15,800.00 | - |
| Total | 140,511,246.61 | 21,776,539.35 | 130,901,823.99 | 19,010,293.07 |
5. Investment gain
| Item | 2019 | 2018 |
| Gain from long-term equity investments accounted for using the cost method | 113,000,000.00 | 143,000,000.00 |
| Gain from long-term equity investments accounted for using the equity method | 1,542,774.70 | 1,001,545.06 |
| Total | 114,542,774.70 | 144,001,545.06 |
XVI. Supplimentary information
1、Details of non-recurring gain or loss for the year
| Item | 2019 | Note |
| Disposal gain or loss of non-current assets | -926,118.60 | |
| Overridden approval, or without official approval document, or incidental tax return or exemption | - | |
| Government grants included in current profit or loss (except for the fixed or quantitative government grants, enjoyed in a consecutive way, which closely related to the enterprise businesses and according to nation policies) | 18,428,906.18 | |
| Charges for the possessions of funds collected from non-monetary enterprises | - | |
| Investment cost of subsidiaries, joint venture and cooperative enterprises less than the profit incurred in identifiable net asset fair value of invested unit when investment | - | |
| Profit and loss of non-monetary assets exchange | - | |
| Profit and loss from entrusting others to invest or manage assets | - | |
| Asset impairment provision accrued due to force majeure such as natural disasters | - | |
| Profit and loss of debt restructuring | - | |
| Enterprise restructuring expenses, such as expenses for arranging employees, integrating cost | - | |
| Profit and loss over fair value part accrued in transactions of unreasonable transaction price | - | |
| Current net profit and loss of subsidiaries from business combination under common control from the opening period to combination date | - |
| Profit and loss incurred contingent matters unrelated to normal operating business | - | |
| Except for effective hedging business related to normal operating business, profit and loss from changes in fair value incurred in financial assets and financial liabilities, and the investment gain from disposal of financial assets, financial liabilities and available-for-sale financial assets | - | |
| Gain from disposal of tradable financial asset financial liabilities and debt investment | - | |
| Impairment provision reversal of accounts receivable under standalone impairment test | - | |
| Profit and loss obtained in external entrusting loans | - | |
| Profit and loss incurred in fair value change of investment property subsequently measured in fair value mode | - | |
| Influence on current profit and loss caused by one-off adjustment according to requirements of laws and regulations about taxation and accounting | - | |
| Income from trustee fee obtained by trusting operation | - | |
| Other non-operating income and expenses other than the above items | 3,353,916.43 | |
| Profit and loss items pursuant to the definition of non-recurring profit and loss | - | |
| Subtotal | 20,856,704.01 | |
| Effect of income tax of non-recurring profit or loss | 4,626,350.95 | |
| Net amount of non0recurring profit or loss | 16,230,353.06 | |
| Less: Effect of non-recurring profit or losses attributable to minority shareholders (after tax) | - | |
| attributable to shareholders of the parent company | 16,230,353.06 |
2. Return on Equity (ROE) and Earnings per share (EPS)
| Profit of the reporting period | Weighted average ROE % | EPS | |
| Basic EPS | Diluted EPS | ||
| Net profit attributable to ordinary shareholders of the Company | 8.21 | 0.4943 | 0.4943 |
| Net profit attributable to ordinary shareholders of the Company after deducting non-recurring profit or loss | 7.60 | 0.4570 | 0.4570 |
Section13 Documents Available for Inspection
I. Financial Statements signed by and under the seal of the legal representative, chief accountant and accountingsupervisors;
II. Original of the Auditors’ Report under the seal of the accounting firm and signed by and under the seals ofcertified public accountants.
III. Originals of all documents and manuscripts of announcements of the Company disclosed in Securities Timesand Hong Kong Commercial Daily as designated by China Securities Regulatory Commission.
The Board of DirectorsFIYTA Precision Technology Co., Ltd.
March 20, 2020