读取中,请稍候

00-00 00:00:00
--.--
0.00 (0.000%)
昨收盘:0.000今开盘:0.000最高价:0.000最低价:0.000
成交额:0成交量:0买入价:0.000卖出价:0.000
市盈率:0.000收益率:0.00052周最高:0.00052周最低:0.000
飞亚达B:2021年年度报告(英文版) 下载公告
公告日期:2022-03-10

FIYTA Precision Technology Co., Ltd.

2021 Annual Report

March, 2022

Section 1 Important Notice, Table of Contents and DefinitionThe Board of Directors, the Supervisory Committee, directors, supervisors and senior executives herebyindividually and collectively accept responsibility for the correctness, accuracy and completeness of thecontents of this report and confirm that there are neither material omissions nor errors which would render anystatement misleading.Zhang Xuhua, the Company leader, Song Yaoming, chief financial officer, and Tian Hui, the manager of theaccounting department (treasurer) hereby confirm the authenticity and completeness of the financial reportenclosed in this Annual Report.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 Reportshall not constitute the Company’s substantial commitment to the investors and the investors should please payattention to their investment risks.In this report, the Company has described in detail the existing macro-economic risks as well as operation risks.Investors are advised to refer to the contents concerning the Company's future development prospect in Section3 Discussion and Analysis of the Management.The profit distribution preplan reviewed and approved by the Board of Directors is summarized as follows: basedon the number of shares after deducting the shares in the special securities account for repurchase from thetotal number of shares on the equity registration date when the profit distribution plan is implemented in thefuture, the Company is going to distribute cash dividend to all shareholders at the rate of CNY 3.00 (with taxinclusive) for every 10 shares, and 0 bonus shares (with tax inclusive) shall be distributed and no public reserveshall be capitalized.

Table of Contents

Section 1 Important Notice, Table of Contents and DefinitionSection 2 Company Profile and Financial HighlightsSection 3 Discussion and Analysis by the ManagementSection 4 Corporate GovernanceSection 5 Environment and Social ResponsibilitySection 6 Significant EventsSection 7 Change of the Shares and Particulars about ShareholdersSection 8 About the Preferred SharesSection 9 About BondsSection 10 Financial Report

Documents Available for Inspection

I. Financial Statements signed by and under the seal of the legal representative, chief accountant and accountingsupervisors;

II. The original Auditors’ Report affixed with the seal of the accounting firm, signed by and affixed with the seal of thecertified public accountant.

III. Originals of all documents and manuscripts of all the Company’s documents disclosed to the public during thereporting period.

Definitions

Terms to be definedRefers toDefinition
This Company, the Company or FIYTARefers toFIYTA Precision Technology Co., Ltd.
AVICRefers toAviation Industry Corporation of China, Ltd.
AVIC InternationalRefers toAVIC International Holding Corporation
AVIC International IndustrialRefers toAVIC International Industrial Holding Co., Ltd.
AVIC International ShenzhenRefers toAVIC International Shenzhen Co., Ltd.
AVIC IHLRefers toAVIC International Holding Limited
The Sales Co.Refers toFIYTA Sales Co., Ltd.
HarmonyRefers toShenzhen Harmony World Watches Center Co., Ltd.
Precision Technology Co.Refers toShenzhen FIYTA Precision Technology Co., Ltd.
Science & Technology Development Co.Refers toShenzhen FIYTA Technology Development Co., Ltd.
the Hong Kong Co.Refers toFIYTA (Hong Kong) Limited
SHIYUEHUIRefers toShiyuehui Boutique (Shenzhen) Co., Ltd.
HengdaruiRefers toLiaoning Hengdarui Commerce & Trade Co., Ltd.
Harmony E-Commerce LimitedRefers toShenzhen Harmony E-Commerce Limited
Xunhang Co.Refers toShenzhen XUNHANG Precision Technology Co., Ltd.
HARMONY (Hainan) Co.Refers toHarmony World Watches Center (Hainan) Ltd.
Shanghai Watch IndustryRefers toShanghai Watch Industry Co., Ltd.
Rainbow Ltd.Refers toRainbow Digital Commercial Co., Ltd.
Shennan CircuitRefers toShennan Circuit Co., Ltd.

Section 2 Company Profile and Financial HighlightsI. Company Information

Short form of the stockFIYTA and FIYTA BStock Code000026 and 200026
Stock Exchange Listed withShenzhen Stock Exchange
Company Name in ChineseFIYTA 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 RepresentativeZhang Xuhua
Registered address:FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen
Postal Code of the Registered Address518057
Changes of the Company's Registered AddressOn January 30, 1997, the Company’s registered address was changed from "Building 6, CATIC Zone, Shennan Road Central, Shenzhen" to "Building 6, CATIC Zone, Shennan Road Central, Futian District, Shenzhen"; on April 5, 2000, the registered address was changed to "Fiyta Building, 163 Zhenhua Road, Futian District, Shenzhen"; on February 20, 2004, the registered address was changed to "FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen".
Office Address20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen
Postal Code of the Registered Address518057
Website:www.fiytagroup.com
E-mail:investor@fiyta.com.cn

II. Liaison Persons and Communication Information

Secretary of the BoardSecurities Affairs Representative
NamesSong Yaoming (acting )Xiong Yaojia
Liaison Address20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen18th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen
Tel.0755-860136690755-86013669
Fax0755-833483690755-83348369
Emailinvestor@fiyta.com.cninvestor@fiyta.com.cn

III. Information Disclosure and Place where the Regular Reports are Prepared

The website of the Stock Exchange on which the Company discloses the Annual Reporthttp://www.szse.cn
Names and websites of the media on which the Company discloses the Annual ReportSecurities Times, Hong Kong Commercial Daily, and www.cninfo.com.cn
Place where the Company’s Annual Report was prepared and is placed for inquiryThe Planning & Operation Department of the Company

IV. Changes in Registration

Organization Code91440300192189783K
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 CPAsDa Hua Certified Public Accountants (Special General Partnership)
Office address1101, Building 7, No. 16 Xisi huanzhong Road, Haidian District, Beijing
Names of the CPAs as the authorized signatoriesLong Jiao and Wang Dong

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

20212020Increase/decrease in the reporting year over the previous year2019
Turnover in CNY5,243,733,540.934,243,439,952.5923.57%3,704,210,734.90
Net profit attributable to the Company’s shareholders, in CNY387,840,282.95294,115,156.0431.87%215,909,014.15
Net profit attributable to the Company’s369,418,754.83269,095,012.4137.28%199,678,661.09
shareholders less the non-recurring items, in CNY
Net cash flows arising from operating activities, in CNY547,249,108.45378,210,505.8744.69%444,820,768.61
Basic earning per share (CNY/share)0.90360.676433.59%0.4943
Diluted earning per share (CNY/share)0.90360.676433.59%0.4943
Return on equity, weighted average (%)13.39%10.78%2.61%8.21%
End of 2021End of 2020Increase/decrease of the end of the reporting year over the end of the previous yearEnd of 2019
Total assets, in CNY4,110,579,952.494,018,712,700.182.29%3,760,923,285.37
Net assets attributable to the Company’s shareholders (owner’s equity attributable to the Company’s shareholders, in CNY)3,013,232,642.532,799,948,388.097.62%2,654,533,766.99

The lower of the Company’s net profit before and after the deduction of non-recurring gains and losses in the last threefiscal years is negative, and the auditor's report of the previous year shows that the Company’s going concern ability isuncertain.NoThe lower of the net profit before and after the deduction of the non-recurring gains and losses is negative.NoVII. 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’sshareholders respectively 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’sshareholders respectively according to the IAS and the CAS.InapplicableVIII. Financial Data Summary based on Quarters

In CNY

The first quarterThe second quarterThe third quarterThe fourth quarter
Turnover1,378,277,735.811,399,241,785.531,307,278,222.691,158,935,796.90
Net profit attributable to the Company’s shareholders118,222,042.23115,322,684.32109,034,679.4145,260,876.99
Net profit less the non-recurring profit/loss attributable to the Company’s shareholders113,576,505.85110,219,727.57104,537,027.9441,085,493.47
Net cash flows arising from operating activities28,711,219.83176,443,344.10163,056,189.37179,038,355.15

Are the above financial indicators or their totals significantly different from the financial indicators disclosed by theCompany in the quarterly and semi-annual reports?NoIX. Extraordinary items and amount

In CNY

ItemsAmount in 2021Amount in 2020Amount in 2019Note
Gain/loss from disposal of non-current assets, including the part written-off with the provision for impairment of assets.730,134.87-369,857.30-926,118.60
The government subsidies included in the profits and losses of the current period ( (excluding government grants which are closely related to the Company’s normal business and conform with the national standard amount or quantity)23,476,186.5030,634,128.5718,428,906.18
Reversal of provision for impairment of accounts receivable that has been separately tested for impairment2,225,653.32163,925.30
Other non-operating income and expenses other than the aforesaid items-3,058,731.521,556,300.783,353,916.43
Less: Amount affected by the income tax4,951,715.056,964,353.724,626,350.95
Total18,421,528.1225,020,143.6316,230,353.06--

Details of other gains and losses in compliance with the definition of non-recurring gains and losses.InapplicableExplanation of the non-recurring gains and losses listed in the Explanatory Announcement No.1 on Information Disclosurefor Companies Offering their Securities to the Public - Non-recurring Gains and Losses as recurring gains and lossesInapplicable

Section 3 Discussion and Analysis by the Management

I. About the Industry the Company Engages inAs a representative of precision technology, watches bear diversified attributes of function and art. They carry emotionalneeds such as "love" and "beauty" on the wrist, and are gradually becoming a symbolic representation of consumers'pursuit of quality life.

Watch industry in which the Company engages has experienced flourishing for centuries with continuous appearance,technological innovation and profound historical and cultural accumulation. It has formed a relatively stable industrystructure. The high-end luxury watches mainly represented by Swiss watch brands, mid-end and fashion watchescomposed represented by European and American brands, Japanese brands, and domestic brands are facing the broadglobal watch consumer market.

With the economic growth of China, consumption upgrading and the guidance of consumption policies, the continuousexpansion of the domestic watch consumption market has become a consensus. Even after the impact of COVID-19, itsoverall scale has a compound growth rate of more than 6% in the past five years.

What is noticeable that the expansion of high-net-worth individuals and the change of consumption concept havepromoted the continuous popularization and rejuvenation of domestic mid-to-high-end consumption, and the consumptionof mid-to-high-end watches mainly by Swiss watch brands has performed well. According to the statistics of the SwissWatch Industry Federation , the compound growth rate of Swiss watch exports to Mainland China in the past five years isnearly 20%, and it will hit a record high in 2021. At the same time, driven by the overall improvement of domesticmanufacturing level, digital transformation, cultural self-confidence and return of consumption, the rise of national tideculture, domestic brands in the watch industry have also ushered in new development opportunities, and continue toupgrade quality and personalization .

In August 2021, the tenth meeting of the Central Committee for Financial and Economic Affairs made policy arrangementson promoting common prosperity, further clarifying the expansion of the scale of the middle-income group and optimizingthe income structure.

It is true that economic development and policy dividends have provided many development opportunities for the industrywe are in, but also brought about great challenges.

At present, the mid-to-high-end watch brands dominated by the Swiss watch brand are still the main driving force for thegrowth of the industry, and the top brand effect is significant. Domestic watch brands are facing many challenges in termsof operational capabilities and resource integration capabilities. The rapid development has put forward a new topic ofaccelerating digital transformation for offline physical business; the normalization and periodic repetition of COVID-19 hascaused cyclical fluctuations in the consumer market and consumer confidence.

Year 2021 is the first year of the "14th Five-Year Plan". We are now standing on a new level. Looking back at the past 30years, the Company has always been deeply involved in the watch industry, and has grown into a flagship company in

China's watch industry. The "FIYTA" brand has become one of the most well-known watch brands in China after thereform and opening up, and the market share and comprehensive competitive strength of HARMONY watch retailbusiness rank among the forefront of the domestic watch retail industry. In the face of increasing industry competition, weshall adhere to the "empty cup attitude", face up to the challenges, seize opportunities, and take the initiative toconsolidate and enhance core competitiveness to adapt to market changes.

The road is ahead. We believe that time shall witness our growth.II. Main business the Company operated in the reporting periodWith the establishment and development originated from aviation precision manufacturing and material technology, theCompany is mainly carrying out the activities of watch brand management and luxurious watch retails. From theperspective of technical characteristics, the Company is engaged in precision technology industry.

Since its establishment, relying on the advantages in precision manufacturing technology, material technology and talentsof the aviation industry, the Company has been continuously devoting itself to the building of professional watch-makingcapability and brand operation, has successfully built the "FIYTA" brand and established the brand a leading position inthe domestic industry by virtue of the advantages in technology and quality.

In order to grasp the opportunities in the domestic famous brand watch market and accelerate the breakthrough of its ownbrand, the Company began to expand the retail chain business of famous brand watches in 1997, and is committed tobecoming the most outstanding comprehensive service provider of famous brand watches. The Company has alwaysfocused on strengthening the construction of brand resources and channel resources, deepening the cooperativerelationship between international excellent watch brands and domestic high-end retail channels, refined operations, anddigital development. While expanding the Company’s revenue sources, it has also established stable base are for thedevelopment of its own brand.

Under the general background of industrial upgrading and intelligent manufacturing, the Company relies on high-endprecision manufacturing technology and industrial accumulation, based on the development principle of “technology beinghomologous, the industry being same-rooted and value being co-directional”, and extends the development of precisiontechnology business and smart wears business. At present, these two businesses have begun to take shape.

The Company adheres to the original intention of "Big Country Brand", and relies on precision manufacturing technology,brand influence and channel deep cultivation to promote continuous brand breakthroughs. The Company's sales scale isat the forefront of the industry. Over the years, the Company has achieved a favorable industry recognition and reputation.In 2021, the Company was honorably awarded the titles of "International Reputation Brand", "Top 200 Enterprises inChina's Light Industry", "Top 20 Listed Companies in Governance in the Greater Bay Area in 2021", and was granted"Shenzhen R&D and Standardization Synchronization Demonstration Enterprise Grade A", and its wholly-ownedsubsidiary was elected in the List of Key Technologically Advanced Enterprises in Guangdong Province. Accompanied bythe launch of the "Shenzhou 12" manned spacecraft, the Company has once again helped China's manned spaceflightindustry.III. Analysis on Core Competitiveness(I) Adhering to Brand Leadership and Having Accumulated Rich Experience in Brand Management

Since its establishment, FIYTA has always adhered to brand leadership, with building of a flagship brand in the Chinesewatch industry as its development goal, and has achieved multiple industry firsts in brand building, marketingcommunication, 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; at the beginning of the 21st century, since the Chinese astronauts first entered space, theirprofessional chronographs were all manufactured by FIYTA. “FIYTA” has become one of the world's three biggestaerospace watch brands, and the spirit of professional watchmaking continues to be passed on with the country's mannedaerospace industry. Meanwhile, the Company actively promoted the development of internationalization and byparticipating in the preparation of international standards ,entered BASELWORLD etc., strengthen exchanges andinteractions with outstanding Swiss brands, played an active role on the world watch stage, and persistently increasedglobal influence.

(II) Construction of Deep Ploughed Channel and Creating Excellent Channel Management AbilityFIYTA persistently constructed the deeply ploughed channel, and continuously provided a source of power for branddevelopment with high-quality services and refined operation capability. The Company has formed a globalized salesnetwork centered on the domestic market. FIYTA brand channels have been distributed in more than 30 countries andregions around the world, with more than 3,000 business outlets; HARMONY World Watch Retails have upgraded thedeep ploughed channels with more than 200 business outlets; on the basis of full coverage of cooperation withmainstream e-commerce platforms, the Company focused on promoting the expansion of innovative channels, andstarted trial for the new channels, such as live video, mini programs, etc. The Company has always devoted itself tobuilding the ability of outstanding channel operation, powerful team, excellent services, and providing customers with thebest consumption experience in all aspects. The “Three-Level Marketing”, “Perfect Sales”, “Outstanding Operation” etc.have already been deposited as the core work logic of channel operation.

In recent years, the Company has comprehensively promoted digital construction, made a preliminary result in the digitaltransformation and achieved full coverage of online and offline self-operated stores, and shall provide customers withmore systematic professional services and create more value.

(III) Building the Advantages of the Leading Core technology Based on Precision TechnologyOver more than 30 years, the company has been devoting itself to the building of precision technology research anddevelopment capability, has successively built advanced R & D, production technology and manufacturing technologyplatforms, and has established R & D and production bases in Shenzhen and Switzerland respectively; and hasestablished professional watchmaking capabilities, including self-made driving units of watches and key componentsmanufacturing, space watch research and development and high-end watchmaking techniques, etc., and achievedcontinuous breakthroughs in research and development and application of new materials, new processes and newtechnologies. At present, the Company has 2 national high-tech enterprises, established a national enterprise technologycenter, a national industrial design center, and is a national technological innovation demonstration enterprise. TheCompany has accumulatively applied for 611 patents and been granted 566 patents, including 4 honorable mentions ofthe Chinese patents, 1 gold award of China Design and 5 honorable mentions of China design; the Company has takenlead in preparation of more than 55% of the national watch industry standards and has also actively participated inpreparation of the international industrial standards and took lead and participated in preparation of many internationalstandards.

IV. Analysis on Principal Businesses

1. General

In 2021, the macro economy was full of complexity, and the rebound of consumption gradually slowed down since thethird quarter, and the year-on-year growth rate of total domestic retail sales projected a “high to low” outlook. In the face ofthe complex and changeable consumer market, repeated epidemics in many places and occasional natural disasters andmany other impacts, the Company continued to focus on "Brand Strength, Product Strength, and Channel Strength" onthe premise of strictly preventing and controlling the epidemic and ensuring the health of employees, made every effort topromote high-quality development and the implementation of the strategy of great brand, and cooperated with allemployees to effectively respond to external pressures and challenges, and continued to achieve breakthrough in thebusiness performances. In the reporting period, the Company realized revenue amounting to CNY 5,243.73 million withyear-on-year growth of 23.57% and realized total profit amounting to CNY 502.33 million with a year-on-year growth of

34.51%. The Company realized growth and reached new highs successively for five years. At the same time, theCompany's operational capability and efficiency were further improved. The return on net assets reached 13.39%, anincrease of 2.61 percentage points year-on-year; the inventory turnover rate reached 1.57 times, an increase of 0.22times year-on-year.

(1) Adhered to brand leadership and continued to promote brand building and product operation capabilityDuring the reporting period, the FIYTA brand solidly promoted the integration of products and sales, renewed the brandimage of the terminal, deepened the core DNA of aerospace, and carried out integration of the marketing activities inconjunction with the "Shenzhou 12", "Zhuhai Air Show", "Aerospace Month" and other hot spots. As a result, the revenuefrom aerospace series products increased significantly year-on-year. The Company deeply cultured the core series,optimized the logic of new product development, and significantly improved the success rate of new product development;continued to focus on "excellent operation", "outstanding sales" and CRM system, and solidly promoted refinement inoperation, and achieved an increase in the average unit price per customer by 12% year-on-year. HARMONY continuedto consolidate its operation capability and dig deep into the dimensions of high-quality services, excellent operation, andcustomer research. The average single-store output of the old stores increased by 27.93% year-on-year, the averagecustomer unit price increased by 25.44% year-on-year, and the inventory turnover rate exceeded 2 times.

(2) Accelerated upgrading of channel structure and improved channel layout

During the reporting period, the FIYTA brand steadily promoted the entry of stores in shopping malls, and newly opened100 self-operated stores in shopping malls; deepened online channel operations, and achieved good overall performanceduring the "Double Eleven" period; Harmony steadily promoted high-quality products in the expansion of new stores andthe renovation of old stores with mid-to-high-end channels accounting for more than 55%; actively promoted theinnovative cooperation model of stores, and opened high-end collection stores Time Vallée in cooperation with RichemontGroup in Shenzhen and Dongguan. At the same time, on the basis of the full coverage of the Hainan duty-free system ofits own brand, the Company further improved the strategic layout of Hainan Offshore Duty-free Market by establishing awholly-owned subsidiary in Hainan.

(3) Adhered to innovation-driving, accelerated movement production capacity building and digital transformationDuring the reporting period, the Company continued to promote the watch movement production capacity building, andrealized successful application of some self-developed movements in a series of products such as aerospace watches.The FIYTA brand continued to deepen the operation of the CRM system. Membership recruitment and potential customer

conversion continued to grow steadily, and offline member sales accounted for 94%. The branch cloud store project wasofficially launched, and private domain operations were actively explored. On the basis of the iteration of the digital retailsystem, HARMONY further promoted the integration of online and offline development, and the transaction amount fromrepurchase by regular customers and purchase by potential customers increased significantly, and the total amountaccounted for more than 50% of the overall revenue; new media operations also achieved innovative breakthrough.

(4) Seized market opportunities and accelerated the development of new businessesDuring the reporting period, the Company, on the basis of deep cultivation of optical communications and lasers inprecision technology business, promoted the expansion of new markets and new customers, such as aerospace andmedical equipment in an orderly manner, and some projects entered the stage of batch cooperation; the smart wearablebusiness focused on creating hot-selling products and improving the proportion of self-operated channels. As a result, itsrevenue increased by 70% year-on-year.

Year-on-year Movements of the Key Financial Items are summarized as follows:

Balance sheet items

ItemsEnding balanceOpening balanceVariation proportionCause of the movement
Monetary capital210,254,737.14353,057,285.71-40.45%Mainly due to the impact of short-term loan repayment during the reporting year.
Advance payment for goods7,946,750.8116,612,773.76-52.16%Mainly due to the decrease of advance payment for purchases in HARMONY World Watch Retail
Other non-current assets42,680,753.7813,536,307.13215.31%Mainly due to the increase in advance payments for the purchase of real estate during the reporting year.
Short term loans265,994,595.43542,673,278.09-50.98%Mainly due to the impact of short-term loan repayment during the reporting year.
Notes payable21,223.103,581,360.00-99.41%This was mainly due to the due acceptance of the notes payable of the precision technology business.
Dividends payable5,015,026.301,639,513.77205.88%Mainly due to the increase in dividends payable in the equity incentive during the reporting year.
Deferred income1,792,833.902,916,346.43-38.52%Mainly due to the impact of the write-off of deferred income during the reporting year.
Deferred income tax liability5,236,514.033,067,834.5570.69%Mainly due to the influence from the implementation of the new standards for lease during the reporting year.
Other comprehensive income-7,658,346.40976,871.41-883.97%Mainly due to movement of the translation balance of foreign currency statements

Income statement items from the beginning of the year to the end of the reporting period

ItemsAmount incurred in the reporting periodAmount incurred in the previous periodVariation proportionCause of the movement
Taxes and surcharges37,563,586.8025,444,139.3047.63%Mainly due to the influence of the revenue growth
during the reporting year.
Loss from impairment of assets-25,861,394.56-15,426,526.41-67.64%Mainly due to the increase of the provision for price falling of the brand watch inventory in the reporting year.
Income from disposal of assets730,134.87-369,857.30297.41%Mainly due to the increase in income from disposal of assets related to the implementation of the new lease standards.
Non-operating income627,435.033,111,413.64-79.83%Mainly due to the greater impact from the adjustment of the compensation received by stores in the same period of the previous year.
Income tax expenses114,467,375.8879,338,516.6044.28%The increase in income tax expenses was mainly due to the increase in profit.

Cash flow statement items from the beginning of the year to the end of the reporting period

ItemsAmount incurred in the reporting periodAmount incurred in the previous periodVariation proportionCause of the movement
Various taxes paid346,383,502.98222,180,568.7555.90%Mainly due to the increase in taxes and surcharges due to the increase in income during the reporting year.
Cash paid for purchase/construction of fixed assets, Intangible assets and other long term assets204,422,787.61133,531,954.4753.09%Mainly due to the increase in expenditure on new store additions and improvements during the reporting year.
Cash received from absorbing investment58,216,000.00-100.00%Mainly due to the subscription money received from the implementation of the 2018 A-share Restricted Stock Incentive Plan (Phase II) during the reporting year.
Cash received from loans1,155,724,412.23743,213,671.6555.50%Mainly due to the increase in bank borrowings during the reporting year.
Cash paid for debt repayment1,386,708,158.95768,247,433.1080.50%Mainly due to the increase in debt repayment during the reporting year.
Cash paid for dividend/profit distribution or repayment of interest187,069,913.31106,703,352.7075.32%Mainly due to increase of the cash dividends during the reporting year.
Other fund-raising activity related cash payments124,710,390.5872,317,669.9372.45%Mainly due to the influence from the implementation of the new standards for lease and decrease of payment for repurchase of B-shares during the reporting year.

Influence of the change ofexchange rate on the cashand cash equivalent

Influence of the change of exchange rate on the cash and cash equivalent-1,140,476.33-2,810,603.3259.42%Mainly due to the influence of the change of exchange rate.

2. Revenue and Costs

(1) Composition of Revenues

In CNY

20212020Year-on-year increase/decrease
AmountProportion in the revenueAmountProportion in the revenue
Total operating revenue5,243,733,540.93100%4,243,439,952.59100%23.57%
Based on sectors
Watches4,923,280,724.4893.89%3,970,903,426.3693.58%23.98%
Precision technology business150,094,350.202.86%138,806,456.763.27%8.13%
Leases151,461,309.622.89%117,282,310.322.76%29.14%
Others18,897,156.630.36%16,447,759.150.39%14.89%
Based on products
Watch brand business1,012,443,357.8719.31%970,035,756.2222.86%4.37%
Watch retail and services3,910,837,366.6174.58%3,000,867,670.1470.72%30.32%
Precision technology business150,094,350.202.86%138,806,456.763.27%8.13%
Leases151,461,309.622.89%117,282,310.322.76%29.14%
Others18,897,156.630.36%16,447,759.150.39%14.89%
Based on regions
South China2,685,613,515.7751.21%2,198,531,106.3351.81%22.15%
Northwest China746,028,947.8814.23%601,805,121.8914.18%23.97%
Northeast China249,949,686.954.77%198,893,856.164.69%25.67%
East China732,103,484.6713.96%561,941,020.3613.24%30.28%
Northeast China294,675,252.565.62%233,806,759.675.51%26.03%
Southwest China535,362,653.1010.21%448,462,088.1810.57%19.38%
Distribution model
Direct selling5,047,771,480.3996.26%4,040,253,573.7095.21%1.05%
Distribution195,962,060.543.74%203,186,378.894.79%-1.05%

(2) Sector(s), Product(s), Region(s) and Sales Models Taking over 10% of the Operating Revenue or OperatingProfit

In CNY

TurnoverOperating costGross profit rateYear-on-year increase/decrease of operating revenue over the previous yearYear-on-year increase/decrease of operating costs over the previous yearYear-on-year increase/decrease of gross profit rate over the previous year
Based on sectors
Watches4,923,280,724.483,117,288,604.2136.68%23.98%25.77%-0.90%
Precision technology business150,094,350.20123,279,446.4417.87%8.13%8.38%-0.19%
Leases151,461,309.6242,866,382.3171.70%29.14%5.66%6.29%
Others18,897,156.632,221,796.1788.24%14.89%-65.07%26.91%
Based on products
Watch brand business1,012,443,357.87287,829,118.7671.57%4.37%2.80%0.43%
Watch retail and services3,910,837,366.612,829,459,485.4527.65%30.32%28.70%0.91%
Precision technology business150,094,350.20123,279,446.4417.87%8.13%8.38%-0.19%
Leases151,461,309.6242,866,382.3171.70%29.14%5.66%6.29%
Others18,897,156.632,221,796.1788.24%14.89%-65.07%26.91%
Based on regions
South China2,685,613,515.771,715,184,561.6036.13%22.15%24.34%-1.12%
Northwest China746,028,947.88461,425,308.9538.15%23.97%24.78%-0.40%
Northeast China249,949,686.95143,242,438.8242.69%25.67%23.30%1.10%
East China732,103,484.67440,933,119.2339.77%30.28%26.33%1.88%
Northeast China294,675,252.56203,497,030.8830.94%26.03%25.90%0.08%
Southwest China535,362,653.10321,373,769.6539.97%19.38%22.13%-1.35%
Distribution model
Direct selling5,047,771,480.393,215,136,567.1136.31%24.94%25.61%-0.34%
Distribution195,962,060.5470,519,662.0264.01%-3.56%-11.49%3.23%

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 sectorsItemsIn CNY20212020Year-on-year increase/decrease
Brand watchesSales volumepcs795,178820,987-3.14%
Outputpcs727,091793,206-8.34%
Inventorypcs996,7941,064,881-6.39%

Note to the cause of the year-on-year movement of the relevant data by over 30%Inapplicable

(4) Implementation of Important Sale Contracts and Important Purchase Contracts Concluded during theReporting YearInapplicable

(5) Composition of Operating Costs

Classified based on sectors and products

In CNY

Classified based on sectorsItems20212020Year-on-year increase/decrease
AmountProportion in operating costsAmountProportion in operating costs
WatchesGoods purchase cost2,829,459,485.4586.12%2,198,558,391.9783.30%28.70%
Raw materials256,857,016.257.82%250,957,959.339.51%2.35%
Labor costs24,624,829.030.75%22,639,961.480.86%8.77%
Depreciation expense776,630.560.02%1,290,580.380.05%-39.82%
Water and electricity fees557,212.310.02%576,614.610.02%-3.36%
Rent254,302.700.01%198,298.530.01%28.24%
Others4,759,127.900.14%4,326,929.110.16%9.99%
PrecisionRaw materials88,916,323.842.71%89,561,279.273.39%-0.72%
technology businessLabor costs19,308,218.350.59%15,492,911.020.59%24.63%
Depreciation expense2,929,018.860.09%1,715,869.900.07%70.70%
Water and electricity fees1,185,220.490.04%936,944.230.04%26.50%
Rent127,758.440.00%111,201.560.00%14.89%
Others10,812,906.460.33%5,930,402.440.22%82.33%
LeasesDepreciation expense16,068,736.920.49%16,013,313.840.61%0.35%
Labor costs3,216,088.800.10%2,642,580.580.10%21.70%
Others23,581,556.590.72%21,916,045.930.83%7.60%
OthersPurchase of finished products2,221,796.170.07%6,360,252.900.24%-65.07%

In CNY

Classified based on productsItems20212020Year-on-year increase/decrease
AmountProportion in operating costsAmountProportion in operating costs
Watch brand businessRaw materials256,857,016.257.82%250,957,959.339.51%2.35%
Labor costs24,624,829.030.75%22,639,961.480.86%8.77%
Depreciation expense776,630.560.02%1,290,580.380.05%-39.82%
Water and electricity fees557,212.310.02%576,614.610.02%-3.36%
Rent254,302.700.01%198,298.530.01%28.24%
Others4,759,127.900.14%4,326,929.110.16%9.99%
Watch retail and servicesGoods purchase cost2,829,459,485.4586.12%2,198,558,391.9783.30%28.70%
Precision technology businessRaw materials88,916,323.842.71%89,561,279.273.39%-0.72%
Labor costs19,308,218.350.59%15,492,911.020.59%24.63%
Depreciation expense2,929,018.860.09%1,715,869.900.07%70.70%
Water and electricity fees1,185,220.490.04%936,944.230.04%26.50%
Rent127,758.440.00%111,201.560.00%14.89%
Others10,812,906.460.33%5,930,402.440.22%82.33%
LeasesDepreciation expense16,068,736.920.49%16,013,313.840.61%0.35%
Labor costs3,216,088.800.10%2,642,580.580.10%21.70%
Others23,581,556.590.72%21,916,045.930.83%7.60%
OthersPurchase of finished products2,221,796.170.07%6,360,252.900.24%-65.07%

(6) Is there any change in the consolidation scope in the reporting period

During the reporting period, Shenzhen Xunhang Precision Technology Co., Ltd. and HARMONY World Watch Center(Hainan) Limited, the Company's newly established wholly-owned subsidiaries, were included in the scope of theCompany's consolidated statements; the deregistration of 68 Station Co., Ltd., one of the Company's wholly-ownedsubsidiaries was completed on March 5, 2021, and it has been excluded from the scope of the Company's consolidatedstatements.

(7) Is there any significant change or adjustment related situation taken place in the Company’s business,products or services in the reporting periodInapplicable

(8) Major sales customers and major suppliers

Information about the major sales customers

Total sales to the top five customers, in CNY1,075,275,776.18
Proportion of the total sales to the top five customers in the total sales of the year20.50%
Proportion of the total sales to the related parties in the top five customers in the total sales of the year0.00%

Information of the top 5 customers

No.CustomersSales (in CNY)Proportion in the total sales of the year
1.No. 1401,690,557.557.66%
2.No. 2213,674,973.694.07%
3.No. 3160,522,193.393.06%
4.No. 4152,600,173.292.91%
5No. 5146,787,878.262.80%
Total--1,075,275,776.1820.50%

Other Information about the major customersInapplicableMajor suppliers

Total amount of purchase from top five suppliers, in CNY2,442,268,149.63.
Proportion of the purchase amount from the top five suppliers in71.43%
the Company’s total purchase amount
Proportion of the purchase amount from the related parties in the top five suppliers in the Company’s total purchase amount0.00%

Information about the top 5 suppliers

No.SuppliersPurchase amount, in CNYProportion in the total purchases of the year (%)
1.No. 1843,772,178.1824.68%
2.No. 2649,684,534.9519.00%
3.No. 3429,363,470.5912.56%
4.No. 4259,899,372.307.60%
5No. 5259,548,593.617.59%
Total--2,442,268,149.6371.43%

Other information about the major suppliersInapplicable

3. Expenses

In CNY

20212020Year-on-year increase/decreaseNote to significant changes
Sales costs1,049,898,223.28870,713,899.3220.58%Inapplicable
Administrative expenses261,626,762.41256,559,127.231.98%Inapplicable
Financial expenses34,677,073.6533,449,276.413.67%Inapplicable
R & D expenditures57,802,569.1751,489,323.4912.26%Inapplicable

4. Investment in R & D

Description of the Main R & D ProjectsProject purposeProject progressThe objective to be reachedImpact on the predicted future development of the Company
New series products with the quality of FIYTA BrandInnovative products with the brand characteristics provided to the marketFulfillment of the tasks in the very yearDeveloping multiple series of products with FIYTA brand characteristics, and launching sales as plannedProviding innovative products
Developing new product innovation protection structureImproving new product performances and market competitivenessFulfillment of the tasks in the very yearDevelopment of an innovative structure to improve watch protection performance was completed and it has been applied in watch productsImproving new product performances and market competitiveness
Development ofImproving new productIn processAccording to the needs of brandImproving new product
mechanical watch movements with brand differentiation characteristicsperformances and market competitivenessdifferentiation, developing mechanical watch movements with special functions and indication methodsperformances and market competitiveness
Development of watch for manned spaceflightProviding special equipment watches for the field of manned spaceflightFulfillment of the tasks in the very yearAccording to the requirements of manned space missions, developed and delivered special equipment watchesProviding special equipment watches for the field of manned spaceflight
Smart watch with camera and body sign monitoringImproving new product performances and market competitivenessFulfillment of the tasks in the very yearDevelopment of smart watches with camera function with the capacity of monitoring body sign data which have been launched in the market as plannedImproving new product performances and market competitiveness

R & D Staff

20212020Variation proportion
Number of R & D staff (persons)1281179.40%
Proportion of R & D staff in total employees2.52%2.39%0.13%
Educational background structure of R & D staff——————
Undergraduate6364-1.56%
Master22220.00%
Doctor3250.00%
Junior college and below402937.93%
研发人员年龄构成——————
Below 3047462.17%
30 - 40604630.43%
Over 402125-16.00%

Investment in R & D

20212020Variation proportion
Amount of investment in R & D, in CNY57,802,569.1751,489,323.4912.26%
Proportion of investment in R & D in operating revenue1.10%1.21%-0.11%
Amount of capitalized investment in R & D (in CNY)0.00.0.00.0.00%
Proportion of capitalized investment in R & D in the total0.00%0.00%0.00%

investment in R & D

Reasons and effects of major changes in the composition of the Company's R&D personnelInapplicableCause(s) of significant change of the total investment in R & D in the operating revenueInapplicableNote 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

Items20212020Year-on-year increase/decrease
Subtotal of cash flow in from operating activity5,944,580,198.344,682,489,563.3326.95%
Subtotal of cash flow out from operating activity5,397,331,089.894,304,279,057.4625.39%
Net cash flow arising from operating activities547,249,108.45378,210,505.8744.69%
Subtotal of cash flow in from investment activity59,657.53150,556.62-60.38%
Subtotal of cash flow out from investment activity204,422,787.61133,531,954.4753.09%
Net cash flows arising from investment activities-204,363,130.08-133,381,397.85-53.22%
Subtotal of cash flow in from fund raising activity1,213,940,412.23743,213,671.6563.34%
Sub-total cash flow paid for financing activities1,698,488,462.84947,268,455.7379.30%
Net cash flow arising from capital-raising activities-484,548,050.61-204,054,784.08-137.46%
Net increase of cash and cash equivalents-142,802,548.5737,963,720.62-476.16%

Notes to the major influencing factors for the significant change in the relevant year-on-year data

1. During the reporting year, the net cash flow from operating activities was CNY 547,249,108.45, an increase of CNY169,038,602.58 compared with CNY 378,210,505.87 in the same period last year, mainly due to the implementation of thenew lease standards.

2. Net cash flow arising from investment activities amounted to CNY -204,363,130.08 in the reporting year, while it wasCNY -133,381,397.85 in the same period of the previous year with the payment increased by CNY 70,981,732.23, whichwas mainly due to increase of the increase of payments for refurbishment and improvement of the stores during the

reporting period.

3. Net cash flow arising from financing activities amounting to CNY -484,548,050.61 in the reporting year, a year-on-yearincrease of CNY 280,493,266.53 in comparison with the previous year amounting to CNY -204,054,784.08 was mainlydue to increase of the repayment of bank loans, increase of cash dividends and influence from the implementation of thenew lease standards.

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.InapplicableV. Analysis on Non-Principal BusinessesInapplicableVI. Analysis on Assets and Liabilities

1. Significant Changes in Assets Composition

In CNY

End of 2021Beginning of 2021Increase/decrease in proportionNote to significant changes
AmountProportion in total assetsAmountProportion in total assets
Monetary fund210,254,737.145.11%353,057,285.718.46%-3.35%Inapplicable
Accounts receivable388,885,601.289.46%475,598,684.8811.39%-1.93%Inapplicable
Contract assets0.000.00%0.000.00%0.00%Inapplicable
Inventories2,050,148,750.8949.87%1,931,780,185.8546.28%3.59%Inapplicable
Investment-oriented real estate383,425,916.359.33%398,086,447.789.54%-0.21%Inapplicable
Long-term equity investment55,155,605.311.34%51,400,665.921.23%0.11%Inapplicable
Fixed assets349,495,316.658.50%352,734,280.768.45%0.05%Inapplicable
Construction-in-process0.000.00%0.000.00%0.00%Inapplicable
Use right assets147,932,475.423.60%163,169,400.443.91%-0.31%Inapplicable
Short term loans265,994,595.436.47%542,673,278.0913.00%-6.53%Inapplicable
Contract liabilities22,505,426.650.55%18,213,396.490.44%0.11%Inapplicable
Long-term borrowings0.000.00%4,070,330.000.10%-0.10%Inapplicable
Lease liabilities64,918,722.101.58%77,439,579.301.86%-0.28%Inapplicable

Higher proportion of foreign assets

Inapplicable

2. Assets and liabilities measured based on fair value

Inapplicable

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 11,490,566.65 was used as acollateral for the overseas long term loan amounting to CNY 3,924,900.00.VII. Analysis of Investment Situation

1. General

Amount of investment in the reporting period (CNY)Amount of investment in the same period of the previous year (CNY)Amount of variation
20,000,000.00139,500,000.00-85.66%

Notes: 1. With review and approval of the Company's 23rd Session of the Ninth Board of Directors on December 14, 2020,the Company decided to invest in the establishment of a wholly-owned subsidiary - Shenzhen Xunhang PrecisionTechnology Co., Ltd., with its own capital amounting to CNY10 million. The relevant procedures for establishment andregistration with the authority for industry and commerce were completed on April 7, 2021. For the detail, please refer tothe "Announcement 2021-035 on the Investment and Establishment of Wholly-owned Subsidiaries and Completion ofIndustrial and Commercial Registration" disclosed by the Company on www.cninfo.com.cn;

2. With review and approval of the Company's 29th Session of the Ninth Board of Directors on May 21, 2021, theCompany decided to invest in the establishment of a wholly-owned subsidiary - HARMONY World Watch Center (Hainan)Limited, with its own capital amounting to CNY10 million. The relevant procedures for establishment and registration withthe authority for industry and commerce were completed on June 17, 2021. For the detail, please refer to the"Announcement 2021-058 on the Investment and Establishment of Wholly-owned Subsidiaries and Completion ofIndustrial and Commercial Registration" disclosed by the Company on www.cninfo.com.cn;

2. Significant Equity Investment Acquired in the Reporting Period

Inapplicable

3. Significant non-equity investment in process in the reporting period

Inapplicable

4. Financial assets investment

(1) Portfolio investment

Inapplicable

(2) Investment in derivatives

Inapplicable

5. Application of the raised capital

InapplicableVIII. Sales of Significant Assets and Equity

1. Sales of Significant Assets

Inapplicable

2. Sales of Significant Equity

InapplicableIX. Analysis on Mutual Shareholding CompaniesParticulars about the principal subsidiaries and mutual shareholding companies which may affect the Company’s net profitby over 10%.

In CNY

Company nameCompany typePrincipal businessRegistered capitalTotal assetsNet assetsTurnoverOperating profitNet profit
Shenzhen Harmony World Watches Center Co., Ltd.SubsidiariesPurchase & sale and repairing service of watches and components600,000,0002,102,556,925.631,068,121,963.673,868,319,859.65382,325,720.42289,056,005.29
FIYTA Sales Co., Ltd.SubsidiaryDesign, R & D and sales of watches and components & parts450,000,000506,762,746.87392,336,579.87580,635,486.424,064,580.03-233,569.13
ShenzhenSubsidiaryManufacture100,000,000321,057,850.26169,167,312.11372,362,396.3558,418,500.8553,979,457.58
FIYTA Precision Technology Co., Ltd.and production of watches and components
Shenzhen FIYTA Technology Development Co., Ltd.SubsidiaryProduction and machining of sophisticated components and parts50,000,000188,352,333.30133,415,385.71173,195,343.4713,634,825.7213,094,286.88
FIYTA (Hong Kong) LimitedSubsidiaryTrading of watches and accessories and investment137,737,520229,791,419.84202,225,606.14104,597,635.7514,247,097.4012,930,206.75
Emile Chouriet (Shenzhen) LimitedSubsidiaryDesign, R & D and sales of watches and components & parts41,355,200122,151,707.5159,031,329.02.91,239,738.45.4,216,166.143,138,963.28
Shanghai Watch Industry Co., Ltd.Mutual shareholding companyProduction and sales of watches and components & parts15,350,000160,904,718.18134,940,325.17150,929,452.8715,094,324.1715,019,757.54

Acquisition and disposal of subsidiaries in the reporting period

Company nameWay of acquisition and disposal of subsidiaries in the reporting periodImpact upon the overall production and operation and performances
Shenzhen XUNHANG Precision Technology Co., Ltd.Newly establishedThe establishment of a wholly-owned subsidiary is conducive to promoting the business expansion of smart wearables and precision technology, and will have a positive impact on the long-term development and benefit improvement of the Company.
Harmony World Watches Center (Hainan) Ltd.Newly establishedThe establishment of wholly-owned subsidiaries is conducive to promoting the business development of retail of brand watches, and will have a positive impact on the long-term development and benefit improvement of the Company.
68-Station LimitedDeregistration completedIt does not have a significant impact on the Company's overall production, operation and performance.

Note to the principal mutual shareholding companiesInapplicableX. Structural Subjects Controlled by the CompanyInapplicableXI. Expectation on future development of the Company(I) External Environment and RisksIn 2022, the global political and economic environment shall remain complex and changeable. The COVID-19 epidemichas entered a stage of normalization, and the economic recovery shall gradually become moderate. China's economicdevelopment shall also face the triple pressures of shrinking demand, supply shocks, and weakening expectations. Theconsumer market shall be confronted with profound changes.

Changes in the consumer market have driven continuous innovation in the competition pattern of the watch industry. Theindustry structure has been significantly differentiated. The market share of mid-to-high-end brands has further expanded,and continues to sink to younger consumer groups. Light luxury and niche brands emerge one after another to meet theneeds of consumer segmentation, diversified consumer demand, and further intensified competition of the industry.

At the same time, under the guidance of economic growth and policies, the middle-income group corresponding to thewatch industry continues to expand; increasingly personalized consumer demand provides development space for marketsegmentation; cultural confidence drives the rise of the national tide, and domestic watch brands are receiving theopportunity to overtake on a bend; the rapid development of e-commerce platforms promotes the overall digitaltransformation of retail business, and the integration of online and offline channels; the development of tax-free channelsbrings new opportunities for incremental markets.

Crisis and opportunity coexist. In the journey of people's continuous pursuit for a better life, the Company is firmlyoptimistic about the development prospects of the industry, and shall adhere to the original intention and mission of"creating a quality life", continuously consolidate its core competitiveness, and accelerate business transformation andupgrading.

(II) Key Work in 2022In 2022, the Company shall continue to practice the strategy of "big country brand", continue to promote the creation ofproducts and brands that represent Chinese image, Chinese quality, Chinese technology and Chinese culture, with"focusing on the three forces, strengthening professionalism, and systematically enhancing superiority of competition;conduct digital transformation. , build a hard core, and rapidly promote transformation and upgrading" as the annual worktheme, and solidly promote the following work:

1. Focusing on the three forces, strengthening professionalism, and systematically enhancing superiority of competitionTo establish the high-end Chinese watch brand construction as the lead, with aerospace as the support, solidly promotethe integration of products and sales, build an integrated marketing system, systematically enhance the "brand power";continuously improve product operation efficiency, build and strengthen product life cycle operation management, focuson the core series, strive to create high-quality products, improve product quality management system and after-sales

service system, strictly implement the extended warranty policy, improve "product power"; by applying leverage on thetwo main lines of "operation improvement + structure upgrading", deepen the construction of digital retail system, improvethe operation capacity of individual stores, promote the expansion and upgrading of middle and high-end channelsthrough multiple means, continuously improve the market share of each region, and enhance the "channel power".

2. To conduct digital transformation, build a hard core, and rapidly promote transformation and upgradingContinue to adhere to the long-term investment in digitalization, and gradually establish and deepen the digitalmanagement system of "people, goods, stores, customers and finance"; adhere to the leadership of science andtechnology, accelerate the application of home-made products, improve the localization rate of home-made watchmovements, and continue to explore new materials, new technologies and new processes to be applied in makinghigh-end watches.

3. Driven with innovation, to accelerate the development of new business

In respect of precision technology business, continue to strengthen and expand the fields of superiority, including opticalcommunication, lasers, etc., further expand new markets and develop new customers in aerospace, medical equipment,etc., take technology as the lead, constantly improve the complexity of the process, and further improve the overallsolution capacity; in respect of smart wear business, continue to promote technological innovation, strengthentechnological reserves, accelerate the iteration of new products, and constantly improve the construction of outdoor lightentertainment ecosystem. Meanwhile, continue to explore the layout of "active health", "great pension" and other fields.

4.To consolidate management, strengthen coordination and systematically improve team executionFurther exert the "Iron Army" spirit formed by the operation and counterattack during the Anti-COVID-19, continue to forgethe professional ability of the team, take the "Big Country Brand" strategy as the lead, strengthen the synergy between thebusiness and the team, continuously deepen the full coverage of the power mechanism, and further stimulate theenthusiasm and creativity of the core team, and systematically improve the team execution.XII. Reception of Survey, Communications, Interviews, etc. during the Reporting Period

Reception timePlace of receptionWay of receptionTypes of Visitors ReceivedVisitors ReceivedMain contents discussed and information providedIndex of Basic Information on the Investigation and Survey
March 25, 2021Wechat Mini Program Titled “FIYTA Relationship with InvestorsOthersOthersExtensive investors’ participation in the Company's 2020 Annual Online Performance Presentation by network remotenessIn order to provide investors with a comprehensive and in-depth understanding of the Company’s situation, the Company held a 2020 Online Performance Briefing and conducted communications and exchange with investors on the Company’s 2020 operating status, development strategy, watch brand management business, brand watch retails, and development of precision technology and smart wearables.http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026
April 20, 202120th Floor, FIYTA Technology BuildingField surveyInstitutionTF Securities Co., Ltd., Shanghai Guotai Junan Securities & Assets Management Co., Ltd., Shenzhen Qianhai Shengyao Capital Investment Management Co., Ltd., Shenzhen Qianhai Dengcheng Asset Management Co.,Ltd., Ningbo Deovolente Investment Partnership Enterprise (L.P.), GF Securities Co., Ltd., Rongtong Fund Management Co., Ltd., China Merchants Securities Co., Ltd, Shenzhen Jindou Investment Co., Ltd., Everbright Securities Company Limited, Wanlian Securities Co.,Ltd., China Great Wall Securities Co.,Ltd., Guotai Junan Securities Co.,Ltd., Shenwan HongyuanThe Company conducted communication on management of watch brands, retail of well-known brand watches, development of precision technology business, etc.http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026
Securities Co.Ltd., China International Capital Corporation Limited, Harmony Capital Group, Changjiang Securities Company Limited , ESSENCE SECURITIES Co., Ltd., Penghua Fund Management Co., Ltd., Fullgoal Fund Management Company Limited, Bosera Fund Management Co., Ltd., Hangzhou Mingliang Asset Management Co., Ltd., Shenzhen Haifuling Capital Management Co., Ltd., Shenzhen Qianhai Chengbeile Investment Co., Ltd., Essence Fund Management Co., Ltd. and PA asset
August 20, 2021TeleconferenceTelephone communicationInstitutionTF Securities Co., Wanlian Securities Co.,Ltd., Shenwan Hongyuan Securities Co. Ltd., FOUNDER SECURITIES CO.,LTD., Guolian Securities Co., Ltd., Huatai Securities Co., Ltd., China Merchants Securities Co., Ltd., Soochow Securities Co., Ltd., Guotai Junan Securities Co.,Ltd., China Life Insurance Company Limited, Penghua Fund Management Co., Ltd., China Universal Asset Management Co.,Ltd., Hua An Fund Management Co., Ltd., Tianjin State-owned Capital Investment And Management Co., Ltd., Youngy Investment Holding Group Co. Ltd., Yuancheng Investment Management Co., Ltd. , China International Capital Corporation Limited, Shenzhen Kangrui Capital Management Co., Ltd. , Shanghai Premium Bright Global Captial Co.,Ltd. and Shanghai Tourmaline Asset Management CO.,Ltd.The Company conducted communication on management of watch brands, retail of well-known brand watches, development of precision technology business, etc.http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026

Section 4 Corporate GovernanceI. GeneralIn year 2021, 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 power organ and has the power of deciding the Company’s operation policy andinvestment 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, the equity incentiveplan, etc., make resolutions on the Company's increase or decrease of registered capital, issuance of corporate bondsand bond-like financing instruments, merger, division, dissolution, liquidation or change of company form, formulate orapprove the Company's articles of association and amendments to the articles of association, elect and replace thedirectors and supervisors serving as employee representatives and decide matters concerning the remuneration ofdirectors and supervisors.

The Board of Directors plays the role of "setting strategies, making decisions, and preventing risks", and is responsible forimplementing the resolutions of the general meetings of shareholders, convening and reporting to the general meeting of

shareholders. Within the authorization from the General Meeting, decides the Company’s external investment, acquisitionand sales of assets, assets pledge, external guarantee, related transactions, etc., decides establishment of theCompany’s internal management organs and branches, engagement and disengagement of the Company’s generalmanager, the Board secretary and other senior executives, etc. The Board of Directors consists of nine directors, includingthree independent directors. The Board of Directors has established three subordinate special committees, namely theStrategy Committee, the Audit Committee and Nomination, Emolument and Assessment Committee.

The Supervisory Committee is the Company’s supervisory organ in charge of reviewing the Company's regular reports,examining the Company's financial affairs, supervising the directors and senior executives in performing duties accordingto the law and proposes dismissal of any director or senior executive who breaches the law, the administrative rules andregulations, the Articles of Association or resolutions of the General Meeting, etc. The Supervisory Committee consists ofthree supervisors including one staff supervisor.

The management is responsible for "seeking operation, carrying out implementation, and strengthening management".The General Manager is responsible to the Board of Directors, presides over the production, operation and managementof the Company under the leadership of the Board of Directors, organizes the implementation of resolutions of the Boardof Directors, reports work to the Board of Directors, and organizes the implementation of the Company's annualdevelopment plan, operation and management; plans and formulates the Company's investment plan and investmentplan, annual financial budget plan, final account plan, profit distribution plan and loss recovery plan and the Company'splan for increasing or decreasing registered capital, etc.

Whether there is a material difference between the actual situation of corporate governance and laws, administrativeregulations and regulations on the governance of listed companies issued by the China Securities RegulatoryCommission.NoII. Independence in securing the Company's assets, personnel, finance, organization, business, etc. relative tothe controlling shareholder and actual controllerThe 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. Xiao Yi, Mr. Xiao Zhanglin, Mr. Li Peiyin and Mr. Deng Jianghu as directors, and Mr.Zheng Qiyuan, the chairman of the Supervisory Committee, and Ms. Cao Zhen as supervisor, none of other seniorexecutives takes any concurrent office in the shareholders and none of the financial staff works concurrently for anyrelated 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, the

Company 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 CompetitionsInapplicableIV. Annual General Meeting and Extraordinary General Meetings in the Reporting Period

1. General Meetings

SessionsMeeting typeProportion of attendance of the investorsMeeting dateDate of disclosureResolutions of the meetings
2021 1st Extraordinary General MeetingExtraordinary General Meeting38.17%January 06, 2021January 07, 2021Announcement on the Resolution of 2021 1st Extraordinary General Meeting, 2021-002
2021 2nd Extraordinary General MeetingExtraordinary General Meeting40.45%February 24, 2021February 25, 2021Announcement on the Resolution of 2021 2nd Extraordinary General Meeting, 2021-023
2020 Annual General MeetingAnnual General Meeting44.48%May 07, 2021May 08, 2021Announcement on the Resolution of 2020 Annual General Meeting, 2021-045
2021 3rd Extraordinary General MeetingExtraordinary General Meeting37.53%July 01, 2021July 02, 2021Announcement on the Resolution of 2021 3rd Extraordinary General Meeting, 2021-059
2021 4th Extraordinary General MeetingExtraordinary General Meeting47.37%September 08, 2021September 09, 2021Announcement on the Resolution of 2021 4th Extraordinary General Meeting, 2021-087
2021 5th Extraordinary General MeetingExtraordinary General Meeting38.41%November 30, 2021December 01, 2021Announcement on the Resolution of 2021 5th Extraordinary General Meeting, 2021-101

2. Extraordinary general meeting requested for holding by the preferred shareholders with the voting power

recovered.Inapplicable

V. Directors, Supervisors and Senior Executives

1. Basic information

NameTitleOffice StatusGenderAgeStarting date of tenureExpiry date of tenureNumber of shares held at the beginning of the reporting period (shares)Stock optionNumber of restricted shares granted (shares)Shareholding increased in the reporting period (shares)Shareholding decreased in the reporting period (shares)Change of other increase/decrease (shares)Number of shares held at end of the reporting period (shares)Cause of increase/decrease of shares
Zhang XuhuaChairman of the BoardIn officeMale45July 01, 2021September 08, 20240000000
Xiao YiDirectorIn officeMale48February 24, 2021September 08, 20240000000
Xiao ZhanglinDirectorIn officeMale46September 20, 2017September 08, 20240000000
Li PeiyinDirectorIn officeMale36February 24, 2021September 08, 20240000000
Deng JianghuDirectorIn officeMale38September 08, 2021September 08, 202433,000080,0000-10,989-102,01101. 2018 A-Share Restricted Stock Incentive Plan (Phase II) granted 80,000 restricted shares 2. Before he became a director, he reduced his holdings of A shares by 10,989 shares; 3. After leaving office, 102,011 restricted A shares were repurchased and canceled.
Pan BoDirectorIn officeMale46February 24, 2021September 08, 2024130,0000150,000000280,0002018 A-Share Restricted Stock Incentive Plan (Phase II) granted 150,000 restricted shares
General ManagerIn officeMaleJanuary 15, 2021September 08, 2024
Wang JianxinIndependent DirectorIn officeMale52September 11, 2018September 08, 20240000000
Zhong HongmingIndependent DirectorIn officeMale47September 11, 2018September 08, 20240000000
Tang XiaofeiIndependent DirectorIn officeMale48September 11, 2018September 08, 20240000000
Zheng QiyuanChairman of the Supervisory CommitteeIn officeMale59March 08, 2021September 08, 20240000000
Cao ZhenSupervisorIn officeFemale51February 24, 2021September 08, 20240000000
Hu JingSupervisorIn officeFemale51September 07, 2021September 08, 20249,000000009,000
Lu WanjunDeputy GMIn officeMale55August 08, 2014September 08, 2024130,0000150,000000280,0002018 A-Share Restricted Stock Incentive Plan (Phase II) granted 150,000 restricted shares
Chief Law AdviserIn officeMaleOctober 25, 2021September 08, 2024
Liu XiaomingDeputy GMIn officeMale51October 17, 2016September 08, 2024130,0000150,000000280,0002018 A-Share Restricted Stock Incentive Plan (Phase II) granted 150,000 restricted shares
Li MingDeputy GMIn officeMale49October 17, 2016September 08, 2024130,0400150,000000280,0402018 A-Share Restricted Stock Incentive Plan (Phase II) granted 150,000 restricted shares
Song YaomingChief AccountantIn officeMale55February 06, 2022September 08, 20240000000
Tang HaiyuanDeputy GMIn officeMale49September 29, 2019September 08, 202460,0000150,000000210,0002018 A-Share Restricted Stock Incentive Plan (Phase II) granted 150,000 restricted shares
Huang YongfengChairman of the BoardRetiredMale48September 08, 2017June 11, 2021180,0000000-66,700113,300After leaving office, 66,700 restricted A shares were repurchased and canceled.
Wang MingchuanDirectorRetiredMale56May 21, 2009February 02, 20210000000
Fu DebinDirectorRetiredMale45December 09, 2016February 02, 20210000000
Wang BoDirectorRetiredMale43September 20, 2017February 02, 20210000000
Chen LibinDirectorRetiredMale58May 31, 2017February 02, 2021180,0000180,000000360,0002018 A-Share Restricted Stock Incentive Plan (Phase II) granted 180,000 restricted shares
General ManagerRetiredMaleMarch 08, 2017January 15, 2021
Wang BaoyingChairman of the Supervisory CommitteeRetiredMale58June 02, 2017February 24, 20210000000
Sheng QingSupervisorRetiredFemale46September 11, 2018September 07, 20210000000
Fang JiashengSupervisorRetiredMale36April 12, 2019February 24, 20210000000
Chen ZhuoChief AccountantRetiredMale46October 17, 2016January 28, 2022131,0000150,000000281,0002018 A-Share Restricted Stock Incentive Plan (Phase II) granted 150,000 restricted shares
Secretary of the BoardRetiredMaleJanuary 15, 2021January 28, 2022
Xu ChuangyueDeputy GMRetiredMale43September 29, 2019February 03, 202150,0000150,00000-183,35016,6501. 2018 A-Share Restricted Stock Incentive Plan (Phase II) granted 150,000 restricted shares 2. After leaving office, 183,350 restricted A shares were repurchased and canceled.
Total------------1,163,04001,310,0000-10,989-352,0612,109,990

During the reporting period, is there any resignation of directors and supervisors and dismissal of senior executivesduring their term of office?In January 2021, the Company received written resignation reports from Mr. Chen Libin, the managing director, and Mr.Pan Bo, the deputy general manager and secretary of the Board of Directors. Mr. Chen Libin resigned from the position ofGeneral Manager of the Company due to work reasons and continued to hold other positions in the Company after hisresignation; Mr. Pan Bo resigned from the positions of deputy General Manager and Board Secretary of the Company dueto work reason, and continued to hold other positions in the Company after his resignation.

In February 2021, the Company received written resignation reports submitted by directors Mr. Wang Mingchuan, Mr. FuDebin, Mr. Wang Bo and Mr. Chen Libin, supervisors Mr. Wang Baoying, Mr. Fang Jiasheng and deputy General ManagerMr. Xu Chuangyue. Mr. Wang Mingchuan, Mr. Fu Debin and Mr. Wang Bo resigned as directors of the Company due towork reason, and no longer hold any positions in the Company after their resignation; Mr. Chen Libin resigned as directorof the Company due to work reason, and continued to hold other positions in the Company after his resignation; Mr. WangBaoying resigned from the positions of supervisor and Chairman of the Supervisory Committee of the Company due towork reason, and no longer holds any positions in the Company after his resignation; Mr. Fang Jiasheng resigned from theposition of supervisor of the Company due to work reason, and continued to hold other positions in the Company afterresignation; Mr. Xu Chuangyue resigned from the position of deputy General Manager of the Company for personalreason and no longer hold any position in the Company after the resignation.

The Company received a written resignation report submitted by Mr. Huang Yongfeng, the Chairman of the Board , inJune 2021. Mr. Huang Yongfeng resigned as director and Chairman of the Company due to work reason, and no longerholds any position in the Company after his resignation.

During the reporting period, the Company has completed the by-election of directors and supervisors and the appointmentof senior executives on schedule in accordance with relevant laws and regulations. The independent directors checkedthe reasons for the resignation of the Chairman and the General Manager, and expressed their independent opinions onthe changes of directors and senior executives.Personnel Change in Directors, Supervisors and Senior Executives

NameOffice TakenTypeDateCause
Zhang XuhuaChairman of the BoardBeing electedSeptember 08, 2021Appointed as the Chairman of the Board at the 1st session of the Tenth Board of Directors.
Chairman of the BoardBeing electedJuly 01, 2021Appointed as the Chairman of the Board at the 31st session of the Ninth Board of Directors.
DirectorBeing electedSeptember 08, 2021Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting.
DirectorBeing electedJuly 01, 2021Elected as a director of the Tenth Board of Directors of the Company at the 30th session of the Ninth Board of Directors and the 2021 3rd Extraordinary General Meeting.
Xiao YiDirectorBeing electedSeptember 08, 2021Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting.
DirectorBeing electedFebruary 24, 2021Elected as a director of the Ninth Board of Directors of the Company at the 26th session of the Ninth Board of Directors and the 2021 2nd Extraordinary General Meeting.
Xiao ZhanglinDirectorBeing electedSeptember 08, 2021Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting.
Li PeiyinDirectorBeing electedSeptember 08, 2021Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting.
DirectorBeing electedFebruary 24, 2021Elected as a director of the Ninth Board of Directors of the Company at the 26th session of the Ninth Board of Directors and the 2021 2nd Extraordinary General Meeting.
Deng JianghuDirectorBeing electedSeptember 08, 2021Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting.
Pan BoDirectorBeing electedSeptember 08, 2021Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting.
General ManagerBeing appointedSeptember 08, 2021Appointed as the General Manager of the Company at the 1st session of the Tenth Board of Directors.
DirectorBeing electedFebruary 24, 2021Elected as a director of the Company at the 26th session of the Ninth Board of Directors and the 2021 2nd Extraordinary General Meeting.
General ManagerBeing appointedJanuary 15, 2021Appointed as the GM at the 25th session of the Ninth Board of Directors.
Deputy GM and the Secretary of the BoardTerminationJanuary 14, 2021resigned as Deputy GM of the Company and the Secretary of the Board due to the work reason.
Wang JianxinIndependent DirectorBeing electedSeptember 08, 2021Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting.
Zhong HongmingIndependent DirectorBeing electedSeptember 08, 2021Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting.
Tang XiaofeiIndependent DirectorBeing electedSeptember 08, 2021Elected as a director of the Tenth Board of Directors of the Company at the 32nd session of the Ninth Board of Directors and the 2021 4th Extraordinary General Meeting.
Zheng QiyuanChairman of the Supervisory CommitteeBeing electedSeptember 08, 2021Appointed as the Chairman of the Supervisory Committee at the 1st session of the Tenth Board of Directors.
SupervisorBeing electedSeptember 08, 2021Appointed as a supervisor of the Tenth Supervisory Committee at the 28th session of the Ninth Supervisory Committee and 2021 4th Extraordinary General Meeting.
Chairman of the Supervisory CommitteeBeing electedMarch 08, 2021Elected the Chairman of the Ninth Supervisory Committee at the 24th session of the Ninth Supervisory Committee.
SupervisorBeing electedFebruary 24, 2021Appointed as a supervisor of the Ninth Supervisory Committee at the 23rd session of the Ninth Supervisory Committee and 2021 2nd Extraordinary General Meeting.
Cao ZhenSupervisorBeing electedSeptember 08, 2021Appointed as a supervisor of the Tenth Supervisory Committee at the 28th session of the Ninth Supervisory Committee and 2021 4th Extraordinary General Meeting.
SupervisorBeing electedFebruary 24, 2021Appointed as a supervisor of the Ninth Supervisory Committee at the 23rd session of the Ninth Supervisory Committee and 2021 2nd Extraordinary General Meeting.
Hu JingSupervisorBeing electedSeptember 07, 2021Elected a staff representative supervisor of the Tenth Supervisory Committee of the Company at 2021 1st Staff Representative Conference.
Lu WanjunChief Law AdviserBeing appointedOctober 25, 2021Appointed as the Chief Law Adviser of the Company at the 2nd session of the Tenth Board of Directors.
Deputy GMBeing appointedSeptember 08, 2021Appointed as deputy General Manager of the Company at the 1st session of the Tenth Board of Directors.
Liu XiaomingDeputy GMBeing appointedSeptember 08, 2021Appointed as deputy General Manager of the Company at the 1st session of the Tenth Board of Directors.
Li MingDeputy GMBeing appointedSeptember 08, 2021Appointed as deputy General Manager of the Company at the 1st session of the Tenth Board of Directors.
Song YaomingChief AccountantBeing appointedFebruary 06, 2022Appointed as the Chief Accountant of the Company at the 6th session of the Tenth Board of Directors.
Tang HaiyuanDeputy GMBeing appointedSeptember 08, 2021Appointed as deputy General Manager of the Company at the 1st session of the Tenth Board of Directors.
Huang YongfengChairman of the BoardRetiredJune 11, 2021resigned as director and Chairman of the Company due to work reason.
WangDirectorRetiredFebruary 02, 2021resigned as a director of the Company due to work reason.
Mingchuan
Fu DebinDirectorRetiredFebruary 02, 2021resigned as a director of the Company due to work reason.
Wang BoDirectorRetiredFebruary 02, 2021resigned as a director of the Company due to work reason.
Zhang ZhibiaoDirectorRetired upon office expirySeptember 08, 2021Retired upon expiry of the Ninth Board of Directors.
DirectorBeing electedFebruary 24, 2021Elected as a director of the Ninth Board of Directors of the Company at the 26th session of the Ninth Board of Directors and the 2021 2nd Extraordinary General Meeting.
Chen LibinDirectorRetiredFebruary 02, 2021resigned as a director of the Company due to work reason.
General ManagerTerminationJanuary 15, 2021resigned as the GM of the Company due to the work reason.
Wang BaoyingSupervisor and Chairman of the Supervisory CommitteeRetiredFebruary 24, 2021resigned as a supervisor of the Company and the Chairman of the Supervisory Committee due to work reason.
Sheng QingSupervisorRetired upon office expirySeptember 07, 2021Retired upon expiry of the Ninth Supervisory Committee.
Fang JiashengSupervisorRetiredFebruary 24, 2021resigned as a supervisor of the Company due to work reason.
Chen ZhuoChief Accountant & Secretary of the BoardBeing appointedSeptember 08, 2021Appointed as the Chief Accountant and the Board Secretary of the Company at the 1st session of the Tenth Board of Directors.
Secretary of the BoardBeing appointedJanuary 15, 2021Appointed as the Secretary of the Board at the 25th session of the Ninth Board of Directors.
Xu ChuangyueDeputy GMTerminationFebruary 03, 2021resigned as deputy GM of the Company due to the personal reason.

2. Incumbency

Professional Background, CV and Major Duties of Directors, Supervisors and Senior Executives in OfficeMr. Zhang Xuhua, born in March, 1977, holding master degree and EMBA of China Europe International Business School.He is now the Chairman of the Company. Mr. Zhang used to be the managing director, deputy GM, assistant to the GM,GM of the business department of the shopping center of Rainbow Digital Commercial Co.,Ltd., the GM of ChengduCompany, the GM of the business department of the shopping center, the GM of Chengdu Company, the GM of theMerchandise Center, the GM, manager of the procurement department, the supervisor of the merchants department ofDreams-On Department Store; staff of the market department of Vanke Industry Co., Ltd.

Mr. Xiao Yi, male, born in March 1974, MBA of the Economic Management College of Beijing University of Aeronautics &Astronautics. Currently, he is a director of the Company, the Director of Organization Department/Human ResourcesDepartment of the CPC Committee of AVIC International Holding Corporation, a director of Tianma Microelectronics Co.,Ltd., a director of Shennan Circuit Co., Ltd., a director of AVIC International Holding (Zhuhai) Co., Ltd., a director of AVICInternational Economic and Trade Development Co., Ltd. He used to be the deputy manager and manager of thecomprehensive management department of AVIC International Holding Corporation.

Mr. Xiao Zhanglin, born in January 1976, senior engineer, MBA of Shanghai Jiao Tong University. Mr. Xiao is a director ofthe Company, the chief of the planning and operation department of AVIC International Holding Corporation, a director ofShennan Circuit Co., Ltd. and a director of Rainbow Department Store Co., Ltd. He used to be deputy chief of the strategydevelopment department and deputy chief of the operation and management department of AVIC International HoldingCorporation, the secretary of AVIC International Holding Limited, a director of Tianma Micro-electronics Co., Ltd. and adirector of AVIC Sunda Holding Company Limited.

Mr. Li Peiyin , born in September, 1986, Master of Accounting of Xiamen University, MBA of Missouri State University, CPAand senior accountant. Mr. Xiao is a director of the Company, the deputy chief of the financial management department

of AVIC International Holding Corporation (executive), a director of Shennan Circuit Co., Ltd. and a director of RainbowDepartment Store Co., Ltd. He used to be the business manager, the assistant to the chief and the deputy chief of theFinancial Management Department of AVIC International Holding Corporation.

Mr. Deng Jianghu, born in July 1984, graduated from Northeast Normal University with a master's degree in businessadministration. He is a director of the Company, and deputy manager of the Planning & Development Department of AVICInternational Holding Corporation (executive) and a director of Tianma Micro-electronics Co., Ltd. He used to be deputymanager and manager of the planning and operation department of the Company, director of modern service office ofAVIC International Shenzhen Co., Ltd., senior project manager of the operation management department of AVICInternational Holding Co., Ltd., a commissioner of the strategic management and senior commissioner of the StrategicDevelopment Department of Shennan Circuit Co., Ltd.

Mr. Pan Bo, born in March, 1976, bachelor of electromechanical engineering of Beijing University of Aeronautics &Astronautics, and EMBA of China Europe International Business School. He is the Managing Director of the Company. Mr.Pan used to be a deputy GM, the secretary of the board, and the assistant to the GM of the Company, the GM, deputy GM,the assistant to the GM, manager of the sales department, manager of the logistics department, manager of the after-saleservice department of FIYTA Sales Co., Ltd.

Mr. Zheng Qiyuan, born in July, 1963, MBA of the Economic Management College of Beijing University of Aeronautics &Astronautics, MBA of Paris Business School; senior engineer. Mr.Zheng is the Chairman of the Supervisory Committee ofthe Company and and a full-time director and supervisor of AVIC International Holding Corporation. Mr. Zheng used tobe the secretary of the Ministry of Aviation Industry,chief staff of the Planning Department of the Ministry of AviationIndustry, deputy chief and chief of the Planning Department of AVIC Corporation, deputy manager and manager of theBidding Center of AVIC Corporation, deputy manager and manager of AVIC International Economic & Trade DevelopmentLimited, a commissioner of AVIC International Holding Corporation, Chief Business Officer of AVIC International (HK)Group Limited, GM of AVIC International (HK) Trading Limited.

Ms. Cao Zhen, born in October, 1971, EMBA of China Europe International Business School. Ms. Cao is a supervisor ofthe Company, vice-secretary of the Discipline Inspection Commission and the chief of the Discipline InspectionDepartment of AVIC International Holding Corporation. Ms. Cao used to be the chief editor, deputy manager and managerof the administrative management department, the secretary of the Board, the assistant to the GM of AVIC News of AVICInternational Shenzhen Company Limited, the manager of the enterprise culture department of AVIC International HoldingCorporation,the chief of the CPC Construction and Ideological and Political Work Department, the discipline secretary andthe chairman of the trade union of AVIC International Shenzhen Company Limited, deputy leader of the disciplineinspection team and the chief of the discipline inspection, supervision and audit department of AVIC International HoldingCorporation.

Ms. Hu Jing, born in September, 1971, is an intermediate accountant and holds a bachelor's degree in accounting fromJiangxi University of Finance and Economics. He is currently the fund supervisor the financial department and a staffrepresentative supervisor of the Company. She used to be the senior business manager of the audit department and thetax supervisor of the finance department of the Company.

Mr. Lu Wanjun, born in February, 1967, accountant and EMBA of China Europe International Business School. He is nowa deputy GM and chief law adviser of the Company. He used to be the assistant to the GM of the Company, executive

deputy GM and deputy GM, the assistant to the GM and concurrently the manager of the financial department ofShenzhen 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 now a deputy GM of theCompany. He used to be the assistant to the GM of the Company, a deputy GM and the assistant to the GM of ShenzhenHarmony World Watches Center 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. Song Yaoming, born in July, 1967, accountant, master of economics of Shaanxi College of Finance and Economicsand EMBA of China Europe International Business School. He is now the chief accountant of the Company. He used to bethe deputy general manager and chief accountant of Rainbow Digital Commercial Co., Ltd., director of Shenzhen AoxuanInvestment Co., Ltd., director of Shenzhen Aoer Investment Development Co., Ltd., and deputy manager and accountantof the financial department of Shenyang FAW Jinbei Automobile 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 now a deputy GM of theCompany. Mr. Tang used to work for Shenzhen FIYTA Sophisticated Timepieces Manufacture Co., Ltd., taking the officesof the GM, a deputy GM, the assistant to the GM, and the manager of its quality department, manager and deputymanager of the engineering and technical department; also work for Shenzhen FIYTA Technology Development Co., Ltd.,taking offices of the assistant to the GM and the manager of the technical department.

Office taking in shareholder companies

Names of the persons in officeNames of the ShareholdersTitles engaged in the shareholdersStarting date of tenureExpiry date of tenureDoes he/she receive remuneration or allowance from the shareholder
Xiao YiAVIC International Holding CorporationChief of the CPC Organization Department/Human Resource DepartmentYes
Xiao ZhanglinAVIC International Holding CorporationChief of the Operation and Management DepartmentYes
Li PeiyinAVIC International Holding CorporationDeputy chief of the financial management department (presiding the work)Yes
Deng JianghuAVIC International Holding CorporationDeputy chief of the planning & development department (executive)Yes
Zheng QiyuanAVIC International Holding CorporationFull-time independent supervisorYes
Cao ZhenAVIC International Holding CorporationVice-secretary of the discipline inspection committee and the chief of the discipline inspection departmentYes

Office taking in other organizations

Names of the persons in officeNames of the other organizationsTitles engaged in other organizationsStarting date of tenureExpiry date of tenureDoes he/she receive remuneration or allowance from other organization
Xiao YiTianma Micro-electronics Co., Ltd.DirectorFebruary 26, 2021No
Shennan Circuit Co., Ltd.DirectorApril 06, 2021No
AVIC IHL (Zhuhai)DirectorDecember 27, 2021No
AVIC International Economic & Trade Development LimitedDirectorDecember 27, 2021No
Xiao ZhanglinShennan Circuit Co., Ltd.DirectorJune 18, 2015No
Rainbow Digital Commercial Co., Ltd.DirectorSeptember 27, 2017No
Li PeiyinRainbow Digital Commercial Co., Ltd.DirectorFebruary 24, 2021No
Shennan Circuit Co., Ltd.DirectorApril 06, 2021No
Deng JianghuTianma Micro-electronics Co., Ltd.DirectorNovember 29, 2021No

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

3. Remuneration to Directors, Supervisors and Senior Executives

Decision-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

NameTitleGenderAgeOffice StatusTotal pretax remuneration received from the CompanyIs the remuneration from one of the Company's related parties
Zhang XuhuaChairman of the BoardMale45In office42.27No
Xiao YiDirectorMale48In office0Yes
Xiao ZhanglinDirectorMale46In office0Yes
Li PeiyinDirectorMale36In office0Yes
Deng JianghuDirectorMale38In office83.91Yes
Pan BoManaging DirectorMale46In office232.22No
Wang JianxinIndependent DirectorMale52In office9No
Zhong HongmingIndependent DirectorMale47In office9No
Tang XiaofeiIndependent DirectorMale48In office9No
Zheng QiyuanChairman of the Supervisory CommitteeMale59In office0Yes
Cao ZhenSupervisorFemale51In office0Yes
Hu JingSupervisorFemale51In office37.24No
Lu Wanjundeputy GM and chief law adviserMale55In office198.94No
Liu XiaomingDeputy GMMale51In office247.94No
Li MingDeputy GMMale49In office189.94No
Tang HaiyuanDeputy GMMale49In office201.97No
Huang YongfengChairman of the BoardMale48Retired184.75Yes
Wang MingchuanDirectorMale56Retired0Yes
Fu DebinDirectorMale45Retired0Yes
Wang BoDirectorMale43Retired0Yes
Chen LibinManaging DirectorMale58Retired180.5No
Wang BaoyingChairman of the Supervisory CommitteeMale58RetiredYes
Sheng QingSupervisorFemale46Retired120.67No
Fang JiashengSupervisorMale35Retired49.75No
Chen ZhuoChief Accountant & Secretary of the BoardMale46Retired198.94No
Xu ChuangyueDeputy GMMale43Retired72.68No
Total--------2,068.72--

VI. Duty Performance of Directors in the Reporting Period

1. Board Meetings

SessionsMeeting dateDate of disclosureResolutions of the meetings
25th session of the Ninth Board of Directors.January 15, 2021January 16, 2021Announcement on the Resolution of the 25th Session of the Ninth Board of Directors, 2021-006
26th session of the Ninth Board of Directors.February 04, 2021February 05, 2021Announcement on the Resolution of the 26th Session of the Ninth Board of Directors, 2021-015
27th session of the Ninth Board of DirectorsMarch 08, 2021March 10, 2021Announcement on the Resolution of the 27th Session of the Ninth Board of Directors, 2021-026
28th session of the Ninth Board of DirectorsApril 12, 2021April 13, 2021Announcement on the Resolution of the 28th Session of the Ninth Board of Directors, 2021-037
29th session of the Ninth Board of DirectorsMay 21, 2021May 22, 2021Announcement on the Resolution of the 29th Session of the Ninth Board of Directors, 2021-048
30th session of the Ninth Board of DirectorsJune 11, 2021June 15, 2021Announcement on the Resolution of the 30th Session of the Ninth Board of Directors, 2021-052
31st session of the Ninth Board of DirectorsJuly 01, 2021July 02, 2021Announcement on the Resolution of the 31st Session of the Ninth Board of Directors, 2021-062
32nd session of the Ninth Board of DirectorsAugust 18, 2021August 20, 2021Announcement on the Resolution of the 32nd Session of the Ninth Board of Directors, 2021-072
1st session of the Tenth Board of DirectorsSeptember 08, 2021September 09, 2021Announcement on the Resolution of the 1st Session of the Tenth Board of Directors, 2021-085
2nd session of the Tenth Board of DirectorsOctober 25, 2021October 26, 2021Announcement on the Resolution of the 2nd Session of the Tenth Board of Directors, 2021-090
3rd session of the Tenth Board of DirectorsNovember 12, 2021November 13, 2021Announcement on the Resolution of the 3rd Session of the Tenth Board of Directors, 2021-097
4th session of the Tenth Board of DirectorsDecember 28, 2021December 29, 2021Announcement on the Resolution of the 4th Session of the Tenth Board of Directors, 2021-104

2. Attendance of Directors for Board Meetings and General Meetings

Attendance of Directors for Board Meetings and General Meetings
Names of DirectorsNumber of Board meetings which should be be attended in the reporting periodNumber of Spot AttendancesNumber of Meetings Attended by CommunicationNumber of attendances of board meeting by proxyNumber of absenceFailure to personally attend board meetings successively twiceNumber of attendance of the General Meeting
Zhang Xuhua61500No1
Xiao Yi102800No0
Xiao Zhanglin1221000No0
Li Peiyin102800No0
Deng Jianghu41300No0
Pan Bo102800No5
Wang Jianxin1221000No6
Zhong Hongming1221000No0
Tang Xiaofei1221000No0

Note to failure to attend the board meeting successively twiceInapplicable

3. Objection of directors on some relevant issues

Have the directors proposed any objection on the relevant issues of the CompanyNo

4. Other Note to Duty Performance of Directors

Have the directors' recommendations to the Company been acceptedYesExplanation on why the directors' recommendations have been accepted or not been acceptedDuring the reporting period, the Board of Directors gave full play to the role of "setting strategies, making decisions, and

preventing risks". The directors of the Company attended Board Meetings on time in strict accordance with the "CompanyLaw", "Code of Corporate Governance for Listed Companies" and other laws and regulations and the "Articles ofAssociation", diligently and conscientiously performed duties and rights of directors, and fully deliberated, madesuggestions and voted on the resolutions of the Board of Directors. The Company fully considered and adopted theconstructive opinions put forward by directors in terms of business development decision-making, internal systemconstruction, personnel appointment and dismissal, external investment, and implementation of equity incentive plans.VII. Duty Performance of Special Committees under the Board of Directors in the Reporting Period

Names of Special CommitteesAbout the membersNumber of meetings heldMeeting dateDescription of meetingsImportant comments and suggestions madeOther duty performancesSpecific objections (if any)
Strategy CommitteeChairman of the committee: Zhang Xuhua Committee members: Xiao Zhanglin, Deng Jianghu, Pan Bo and Tang Xiaofei2March 08, 2021Reviewed and approved 2020 Annual Work Report of the Board of Directors and the Company's 2020 Profit Distribution Proposal.During the reporting period, the members of the Strategy Committee conducted in-depth discussions and analysis on the Company's operating conditions and development prospects, proposed valuable suggestions and opinions for the Company's development strategy, and provided strong support for the scientific decision-making of the Board of Directors.
May 21, 2021Reviewed and approved the proposal on investing in the establishment of a wholly-owned subsidiary.
Audit CommitteeChairman of the committee: Wang Jianxin; members: Li Peiyin, Xiao Zhanglin and Tang Xiaofei4March 08, 2021Reviewed and approved 2020 Annual Report, 2020 Annual Internal Control Self-assessment Report, the 2020 Annual Internal Audit Work Report, the Changes in Accounting Policies, the Provision for Impairment ofDuring the reporting period, in line with the principle of diligently performing duties and seeking truth from facts, members of the Audit Committee provided advice and suggestions in guiding internal audit work, supervising and evaluating external audit institutions, and establishing effective
Assets and the Write-off of Bad Debts in Year 2020, etc.internal control mechanisms, and actively safeguarded the interests of the Company and all shareholders.

April 12, 2021

April 12, 2021Reviewed and approved the Company's 2021 1st Quarter Report and summary, and the 2021 1st Quarter Audit Work Report of the Discipline Inspection and Law Department
August 18, 2021Reviewed and approved the Company's 2021 Semi-annual Report and Summary, and such proposals as the change of accounting firm, and the signing of a financial service agreement with AVIC Finance Co., Ltd.
October 25, 2021Reviewed and approved the Company's 2021 3rd Quarterly Report and the proposal of repurchase of the Company's partial domestically listed foreign shares (B shares).
Committee of Nomination, Remuneration andChairman of the Committee: Zhong Hongming;10January 15, 2021Reviewed and approved the Proposals onDuring the reporting period, the members of the Nomination,
Assessment of the Board of Directorsmembers: Xiao Yi, Xiao Zhanglin, Wang Jianxin and Tang XiaofeiAdjusting the List of Incentive Objects of the Company's 2018 A-share Restricted Stock Incentive Plan (Phase II), the Number of Grants and the Granting of Restricted Shares and the Appointment of the Company's General Manager and Secretary of the Board.Remuneration and Assessment Committee prudently discussed and judged the qualifications of nominated directors and senior executives, carefully reviewed the implementation of the Company's equity incentive plan and the directors’ remuneration assessment plan, etc., and effectively fulfilled relevant responsibilities.
February 04, 2021Reviewed and approved the proposal on the proposed change of directors and the repurchase and cancellation of some restricted shares.
March 08, 2021Reviewed and approved the proposal on the remuneration of directors and senior executives in 2020 and the adjustment of various special committees of the Board.
April 12, 2021Reviewed and approved the proposal on the repurchase and cancellation of some restricted shares.
June 11, 2021Reviewed and
approved the proposal on the proposed change of directors and the repurchase and cancellation of some restricted shares.
July 01, 2021Reviewed and approved the proposal on electing the Chairman of the Company, adjusting the members of the Strategy Committee of the Board of Directors, and repurchase and cancellation of some restricted shares.
August 18, 2021Reviewed and approved the proposal on the election of directors for the new Board of Directors and repurchase and cancellation of some restricted shares.
September 08, 2021Reviewed and approved the proposals on the election of the Chairman of the Company, adjusting the members of the strategy committee of the Board, and repurchase and cancellation of
some restricted shares.
October 25, 2021Reviewed and approved the proposal on the appointment of the Chief Law Adviser of the Company.
December 28, 2021Reviewed and approved the proposal on the achievement of the release of restrictions during the second release period of the 2018 A-share Restricted Stock Incentive Plan (Phase I).

VIII. Work Summary of the Supervisory CommitteeDid the Supervisory Committee find any risk involved in performing the supervision activities in the reporting periodNoIX. Employees

1. Number, Job Composition and Education Background of Employees

Number of employees working for the parent company at the end of the reporting period (persons)129
Number of employees working for the major subsidiaries at the end of the reporting period (persons)4,952
Total of employees at the end of the reporting period (persons)5,081
Total employees receiving remuneration in the reporting period (persons)5,081
Number of the retired employees for whom the parent company and the major subsidiaries need to share the pension (persons)0
Job Composition
Job Composition CategoriesNumber of persons involved in the job composition
Production372
Sales3,745
Technical399
Financial142
Administrative423
Total5,081
Education background
Education levelsNumber of persons
Master's degree or higher91
Undergraduate731
Junior college1,336
Below junior college2,923
Total5,081

2. Remuneration Policy

The Company has worked out its remuneration policy by taking its business development planning and managementpractice into consideration and based on the principles of focusing on the values, creating and sharing core concepts,following hierarchical management, budget control, performance orientation, efficiency priority, fairness, positiveincentives, and long-term attention. The Company has established a remuneration system with the assessment basedannual salary system for medium and senior executives, performance-based salary systems for staff positions, and theproduction & performance jointly related payroll systems for production operators in accordance with the national laws,regulations and policies. The following administrative measures have been taken in implementation of the remunerationpolicy:

Total salary management: the Company has prepared an annual remuneration budget based on the annual businessplanning, adjusted and controlled the total remuneration with such factors as the market remuneration level, organizationefficiency, adjustment of the talent team, etc., and has achieved the management goal of benefit-orientation, positiveincentive, classification management and adjusted distribution;

Classification and grading of the 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;

With value as the key link, co-creating and sharing: the Company designs the incentive system according to theclosed-loop value chain of value creation, evaluation and distribution. Through the establishment of value evaluationsystem and real-time incentive system consistent with the strategic development goals, the Company has formed acompensation along with the Company's benefits and personal performance, incremental compensation to the core keypositions, excellent talent incentive mechanism.

3. Training Program

(I) Building a team of high-quality professional talents and improve the readiness of talents for key positionsIn respect of training, the Company, relying on FIYTA Training Center, focused on the training of echelon talents, built atalent reserve pool, and improved the organization's talent readiness; created a learning atmosphere within theorganization, and promoted the construction of a professional talent learning system through the projects such as"Outstanding Craftsman Reservoir" and "Lean Six Sigma".

(II) Consolidating the terminal business talent training system, and building a strong terminal professional teamIn terms of terminal business talent training, the Company is building a customer-oriented terminal retail post trainingsystem, has strengthened the training of business personnel through the “bullseye training model”, optimized learningcontents, strengthened learning methods, and used "double excellence" as a starting point to consolidate the businessechelon management and operation ability.

(III) With the project-based talent training system to create sustainable trainingCultivate talents by means of project management method and logic, follow the 721 rules to design training programs,introduce conceptual tools such as experience extraction, action learning, performance improvement, and situationalassessment, and precipitate star training programs such as "Nova Program", "Aerospace Learning Month", "Star Theory",etc.

(IV) Carrying out targeted training in close combination with business strategic prioritiesThe training contents closely match the Company's strategic direction and business focus, and continue to promoteexcellent sales ability improvement training to empower terminals; according to the needs of market development, timelyconduct training such as new media operation training, brand strategic positioning training, etc., to help improve brandmanagement capabilities and strategic transformation innovation.

4. Labor Outsourcing

InapplicableX. Profit Distribution and Reserve CapitalizationPreparation, Implementation or Adjustment of the Policy for Profit Distribution, Especially the Policy for Cash DividendDistribution in the Reporting Period

The Company's 2020 Profit Distribution Plan was reviewed and approved at the 27th session of the Ninth Board ofDirectors held on March 8, 2021 and 2020 Annual General Meeting held on May 7, 2021 for review. It was resolved thatwith the Company’s total share capital as at the date of record for future implementation of the profit distribution plan asthe base, the Company distributed cash dividend at the rate of CNY 4.00 for every 10 shares (with tax inclusive) with thetotal cash dividend distributed not exceeding CNY 174,300,752.40, distribute bonus share at the rate of 0 share for every10 shares to the whole shareholders and capitalized no reserve.

According to relevant laws and regulations, the Company's B shares held by the Company through the special securitiesaccount for repurchase did not have the right to participate in the profit distribution. In accordance with the principle that

the amount of cash dividends remained unchanged, the final implementation plan of the Company's equity distribution in2020 was as follows: with the Company's existing share capital amounting to 426,556,436 shares involved in thedistribution (the total share capital of 435,550,522 shares on the equity registration date deducting the repurchasedshares in the special securities account for repurchase totaling 8,994,086 shares) as the base, the Company distributedthe cash dividend at the rate of CNY 4.084341(with tax inclusive) to all shareholders for every 10 shares, distributed 0bonus shares, and capitalized no reserve.

The profit distribution plan was implemented on June 3, 2021. For the detail, please refer to the “Announcement on theImplementation of 2020 Annual Equity Distribution 2021-050”disclosed by the Company on www.cninfo.com.cn.

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

In the reporting period, both the Company’s profit and the parent company’s profit available for shareholders were positivebut no cash dividend distribution proposal has been put forward.InapplicableProfit Distribution and Conversion of Capital Reserve into Share Capital in the Reporting Period

Bonus shares distributed at the rate of ___ (share) for every 10 shares0
Dividend distributed at the rate of CNY___ for every 10 shares (with tax inclusive)3.00
Share capital base for the dividend distribution preplan (shares)426,051,015
Total cash dividend distributed (with tax inclusive)127,815,304.50
Amount of cash dividend distributed in other way(s) (such as shares repurchased)4,653,185.52
Total amount of cash dividend (including other way(s)) (CNY)132,468,490.02
Profit available for distribution (CNY)834,920,189.09
Proportion of the cash dividend in the total profit available for distribution (with other method inclusive)100%
Cash Dividend Distribution for the Reporting Year
Others
Detailed information for profit distribution or conversion of capital reserve into share capital preplan
The Company's 2021 Profit Distribution Plan was reviewed and approved at the 6th session of the Tenth Board of Directors held on March 8, 2022. The Company plans to take the number of shares after deduction of the shares in the special securities account for repurchase from the total number of shares on the equity registration date as the base when the profit distribution plan is implemented in the future and distributes cash dividend at rate of CNY 3.00 (with tax inclusive) for every 10 shares to all shareholders, and distribute 0 bonus share, and capitalize no reserve. From the time of disclosing this profit distribution plan to that prior to the implementation, in the event of share repurchase, the Company intends to adjust the total distribution amount in accordance with the principle of fixed distribution ratio. The profit distribution plan is subject to review and approval of the General Meeting before implementation.

XI. Implementation of the Company’s Equity Incentive Plan, Employee Stock Ownership Plan or other EmployeeIncentive Measures

1. Equity incentive

1. A-Share Restricted Shares Incentive Plan 2018(Phase 1)

The 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 Restricted Stock Incentive Plan (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 restricted A-shares to 128 persons eligible for the incentive. These restricted shares wereawarded at price of CNY 4.40/share and were entirely awarded and registered for trading by January 30, 2019, For thedetail, refer to the relevant announcement disclosed in the Securities Times, Hong Kong Commercial Daily andhttp://www.cninfo.com.cn. on January 12, 2019. The specific implementation during the reporting period is summarized asfollows:

Reviewed and approved at the 24th session of the Ninth Board of Directors, the conditions for the release of the restrictionfor sales in the first release period of the Company's 2018 A-share Restricted Stock Incentive Plan (Phase I) weresatisfied, the 1.357641 million A-share restricted shares involved were listed for trading on February 1, 2021. For thedetail, refer to the relevant announcement disclosed in the Securities Times, Hong Kong Commercial Daily andhttp://www.cninfo.com.cn. on January 12, 2021.

Reviewed and approved at the 26th session of the Ninth Board of Directors and 2021 2nd Extraordinary General Meeting,the Company decided to repurchase and cancel the 51,359 restricted A-shares which were already granted to but with therestriction not yet relieved held by 1 retired and 1 deceased incentive objects. For the detail, refer to the relevantannouncement disclosed in http://www.cninfo.com.cn. respectively on February 5, 2021 and February 25, 2021.

Reviewed and approved at the 28th session of the Ninth Board of Directors and 2020 Annual General Meeting, theCompany decided to repurchase and cancel the 40,020 restricted A-shares which were already granted to but with therestriction not yet relieved held by 2 retired incentive objects. For the detail, refer to the relevant announcement disclosed

in http://www.cninfo.com.cn. respectively on April 13, 2021 and May 8, 2021.

Reviewed and approved at the 30th session of the Ninth Board of Directors and 2021 3rd Extraordinary General Meeting,the Company decided to repurchase and cancel the 33,350 restricted A-shares which were already granted to but with therestriction not yet relieved held by 1 retired incentive objects. For the detail, refer to the relevant announcement disclosedin http://www.cninfo.com.cn. respectively on June 15, 2021 and July 2, 2021.

Reviewed and approved at the 31st session of the Ninth Board of Directors, the 32nd session of the Ninth Board ofDirectors and 2021 4th Extraordinary General Meeting, the Company decided to repurchase and cancel the 102,051restricted A-shares which were already granted to but with the restriction not yet relieved held by 3 retired incentiveobjects. For the detail, refer to the relevant announcement disclosed in http://www.cninfo.com.cn. respectively on July 2,2021, August 29, 2021 and September 9, 2021.

Reviewed and approved at the 4th session of the Tenth Board of Directors, the conditions for the release of the restrictionfor sales in the second release period of the Company's 2018 A-share Restricted Stock Incentive Plan (Phase I) weresatisfied, the 1.244421 million A-share restricted shares involved were listed for trading on February 7, 2022. For thedetail, refer to the relevant announcement disclosed in http://www.cninfo.com.cn. on January 28, 2022.

2. A-Share Restricted Shares Incentive Plan 2018(Phase 2)

The 23rd session of the Ninth Board of Directors held on December 4, 2020 and 2021 1st Extraordinary General Meetingheld on January 6, 2021 decided to start 2018 A-Share Restricted Stock Incentive Plan (Phase II), which was later onreviewed and approved at the 25th session of the Ninth Board of Directors held on January 15, 2021, and the Companyeventually granted 7.66 million restricted A-shares to 135 persons eligible for the incentive. These restricted shares wereawarded at price of CNY 7.60/share and were entirely awarded and registered for trading by January 29, 2021. For thedetail, refer to the relevant announcement disclosed in http://www.cninfo.com.cn. on January 16, 2021. The specificimplementation during the reporting period is summarized as follows:

Reviewed and approved at the 26th session of the Ninth Board of Directors and 2021 2nd Extraordinary General Meeting,the Company decided to repurchase and cancel the 150,000 restricted A-shares which were already granted to but withthe restriction not yet relieved held by 1 retired incentive object. For the detail, refer to the relevant announcementdisclosed in http://www.cninfo.com.cn. respectively on February 5, 2021 and February 25, 2021.

Reviewed and approved at the 28th session of the Ninth Board of Directors and 2020 Annual General Meeting, theCompany decided to repurchase and cancel the 120,000 restricted A-shares which were already granted to but with therestriction not yet relieved held by 3 retired incentive objects. For the detail, refer to the relevant announcement disclosedin http://www.cninfo.com.cn. respectively on April 13, 2021 and May 8, 2021.

Reviewed and approved at the 30th session of the Ninth Board of Directors and 2021 3rd Extraordinary General Meeting,the Company decided to repurchase and cancel the 100,000 restricted A-shares which were already granted to but withthe restriction not yet relieved held by 1 retired incentive objects. For the detail, refer to the relevant announcementdisclosed in http://www.cninfo.com.cn. respectively on June 15, 2021 and July 2, 2021.

Reviewed and approved at the 32nd session of the Ninth Board of Directors and 2021 4th Extraordinary GeneralMeeting, the Company decided to repurchase and cancel the 110,000 restricted A-shares which were already granted to

but with the restriction not yet relieved held by 2 retired incentive objects. For the detail, refer to the relevantannouncement disclosed in http://www.cninfo.com.cn. respectively on August 20, 2021 and September 9, 2021.

Equity incentive to directors and senior executives of the Company

In shares

NamesTitleNumber of vested shares during the reporting periodNumber of strike shares during the reporting periodStrike price and the number of strike 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 periodQuantity of the shares unlocked in the reporting periodQuantity of restricted shares newly granted during the reporting periodPrice of the restricted shares granted (CNY/share)Quantity of restricted shares held at the end of the reporting period
Zhang XuhuaChairman of the Board0000000
Xiao YiDirector0000000
Xiao ZhanglinDirector0000000
Li PeiyinDirector0000000
Deng JianghuDirector00033,00010,98980,0007.600
Pan BoManaging Director00080,00026,640150,0007.60203,360
Wang JianxinIndependent Director0000000
Zhong HongmingIndependent Director0000000
Tang XiaofeiIndependent Director0000000
Lu Wanjundeputy GM and chief law adviser00080,00026,640150,0007.60203,360
Liu XiaomingDeputy GM00080,00026,640150,0007.60203,360
Li MingDeputy GM00080,00026,640150,0007.60203,360
Tang HaiyuanDeputy GM00060,00019,980150,0007.60190,020
Huang Yongfeng (Retired)Chairman of the Board000100,00033,30000
Chen Libin (retired)Managing Director000100,00033,300180,0007.60246,700
Chen ZhuoChief00080,00026,640150,0007.60203,360
(retired)Accountant & Secretary of the Board
Xu Chuangyue (retired)Deputy GM00050,00016,650150,0007.600
Total--00----743,000247,4191,310,000--1,453,520
Remarks (If any)According to the relevant regulations of the Company's equity incentive plan, since Mr. Deng Jianghu, Mr. Huang Yongfeng and Mr. Xu Chuangyue are the original incentive objects who have resigned, the Company has respectively granted but not yet lifted the restrictions on their holdings during the reporting period. The relevant repurchase and cancellation procedures have been completed.

Assessment and Incentive Mechanism for Senior ExecutivesIn order to establish and improve the Company's incentive and restraint mechanism for senior executives, give full play toand mobilize the enthusiasm of the Company's executives, improve the Company's operational capabilities and economicbenefits, and ensure the realization of the company's strategic goals, the Company continuously improved the work oftenure and contractual management of executives. With year/tenure as a period, the Company carried out theassessment of business performance objectives, and continued to promote the implementation of the rigid realization ofrewards and punishments based on the assessment results, reflecting the strong incentives and hard constraints ofremuneration, adhered to performance orientation, and strengthened effective incentives for accurate assessments.

2. Implementation of the Employee Stock Ownership Plan

Inapplicable

3. Other employee incentive measures

InapplicableXII. Construction and Implementation of the Internal Control System during the Reporting Period

1. Construction and Implementation of the Internal Control System

In order to strengthen the Company's internal control, promote the Company's standardized operation and healthydevelopment, and protect the legitimate rights and interests of shareholders, the Company has established and improvedthe Company's internal control system in accordance with the "Company Law", "Securities Law" and other laws andregulations, and has conducted effective implementation.

During the reporting period, the Company continued to promote the work related to the integration and optimization ofinternal control, risk management and compliance management supervision. The Company did not have any significantdefects and shortcomings in the internal control.

2. Particular case found involving material defects in the internal control during the reporting periodNo

XIII. Management and Control of the Subsidiaries during the Reporting PeriodInapplicableXIV. Internal Control Self-assessment Report or Internal Control Audit Report

1. Self-assessment Report of the Internal Control

Date of disclosing the full text of the internal control assessment reportMarch 10, 2022
Index of disclosure of the full text of the internal control assessment reportwww.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 statements100.00%
Proportion of the operation revenue of the entitled involved in the assessment in the total operation revenue of the Company’s consolidated financial statements100.00%
Criteria for affirming the defects
CategoriesFinancial reportNon-financial Report
Qualitative criteria① The defects involves fraud by directors, supervisors and senior managers; ② Correction of published financial statements; ③ Certified public accountants found that there was a material misstatement in the financial statements of the current period, while internal control failed to find the misstatement in the operation process; ④ The Company’s audit committee and the discipline inspection, audit and law department conducted ineffective supervision over the internal control.① Serious violation of national laws, administrative regulations and normative documents; ②”Decision-making of major issues, appointment and removal of important cadres, arrangement of important projects, use of large funds” failed to undergo collective decision-making process; ③Serious loss of key officers and technical personnel; ④ Lack of rules and regulations for control of or expiry of the system of rules and regulations to important businesses of the Company’s production and operation; ⑤ Expiry of the internal control of information disclosure resulted in public censure to the Company by the regulatory authority; ⑥ The result of the assessment of the internal control showed extraordinary defect
or serious defect has not be rectified.
Quantitative criteria① Material defect: misstatement ≥ 5% of the pre-tax profit ② Important defect: 1% of the pre-tax profit≤misstatement< 5% of the pre-tax profit ③ General defect: misstatement<1% of pre-tax profit① Material defect: misstatement ≥ 5% of the pre-tax profit ② Important defect: 1% of the pre-tax profit≤misstatement< 5% of the pre-tax profit ③ General defect: misstatement<1% of pre-tax profit
Number of material defects in financial reports (pcs)0
Number of material defects in non-financial reports (pcs)0
Number of important defects in financial reports (pcs)0
Number of important defects in non-financial reports (pcs)0

2. Internal Control Audit Report

Deliberation Opinions in the Internal Control Audit Report
In our opinion, the Company maintained effective internal control over its financial report in all major aspects in accordance with the Basic Standard for Enterprise Internal Control and other relevant regulations as at December 31, 2021.
Disclosure of the internal control audit reportDisclosed
Date of disclosing the full text of the internal control assessment reportMarch 10, 2022
Index of disclosing the full text of the internal control audit reportwww.cninfo.com.cn
Type of the onions in the internal control audit reportStandard unqualified auditor’s report
Are there any material defects in the non-financial reportNo

Has the CPAs issued a qualified auditor’s report of internal controlNoDoes the internal control audit report issued by the CPAs agree with the self-assessment report of the Board of DirectorsYes

XV. Rectification of the Problems Found in the Self-inspection during the Special Campaign to Improve theGovernance of Listed CompaniesDuring the reporting period, in accordance with the spirit of the CSRC’s “Announcement on Launching Special Campaignto Improve the Governance of Listed Companies” (CSRC Announcement [2020] No. 69) and other documents, theCompany fully completed the special self-inspection work according to the special self-inspection list for governance of alisted company. Through this self-inspection, the Company believes that that the Company complies with therequirements specified in the "Company Law", "Code of Corporate Governance for Listed Companies.", "the Guidelineson the Bylaws of Listed Companies" and other laws and regulations in its overall company governance with quitecomplete governance structure and law-compliance operation.

The two problems existing in the Company and the rectification as following:

1. Some directors, supervisors and senior executives of the Company failed to attend the General Meeting ofShareholders due to work arrangements and failed to implement the regulations for the application for leave.

Rectification: From the end of the self-inspection work to the end of the reporting period, the Company held 4 generalmeetings of shareholders. The directors, supervisors and senior executives who were unable to attend (or attend asnon-voting delegates) the meeting due to work arrangements have all signed the application for leave.

2. There were 8 defects found in the Company's Self-assessment of the Internal Control in 2019 with the defect level asgeneral defects.

Rectification: The Company has completed the rectification of the above 8 general defects in 2020, and there were nomajor defects in the Company's internal control.

Section 5 Environment and Social ResponsibilityI. Significant Issues concerning Environmental ProtectionDoes 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 SubsidiaryDescription of the major pollutants or specific pollutantWay of dischargingNumber of discharging outletsDistribution of the discharging outletsDischarging concentrationPollutant Discharge Standards in ForceTotal discharge volumeTotal discharge volume verifiedOver-discharging
Shanghai Watch Industry Co., Ltd.Nickel and chromium effluentIntermittent and interruption1At the port of effluent treatment equipmentNickel ﹤0.03, chromium ﹤0.01Nickel: 0.1; chromium: 0.1406 tons/year650 tons/yearNone

Construction and operation of the pollution prevention and control facilitiesShanghai Watch Co., Ltd. reconstructed the waste water treatment facility in 2016 and added 2 sets of equipment in 2018for the purpose of ensuring discharging of nickel and chromium effluent to comply with the Emission Standard ofPollutants for Electroplating during 2018. Up to now, the facility has been operating normally and its emission has neverexceeded the limit as specified by the standard. The Company's online monitoring terminal has been docked with thegovernment monitoring platform for timely testing. It complies with the standard in terms of emission factors.

In order to implement the requirements of the Ministry of Ecology and Environment for energy saving and consumptionreduction, the Company newly added a set of membrane filtration heavy metal device during the reporting year. As aresult, its electroplating wastewater has reached the standard for clean water after the treatment. Therefore, the Companyreuses a part of the water (recycling) , so that the total wastewater discharge last year was reduced by about 244 tons,and the recycling rate was about 37%.

In compliance with the Document of Shanghai Municipal Bureau of Ecology and Environment, HU HUAN GUI (2020) No.6, the primary pollutant wastewater should comply with the general principle of “the water which should be classified mustbe classified; the water which can be classified must be classified”. The Company started to entrust the municipalengineering department to arrange and improve the Company’s existing wastewater pipelines commencing from August,2020, separate, collect and treat the domestic sewage and electroplating effluent.

Environmental impact assessment on construction projects and other environmental protection administrative licensingIn 2018,Yangpu District Bureau of Ecology and Environment of Shanghai organized and held the Clean ProductionAuditing and Assessment Seminar of Shanghai Watch Co., Ltd. where the Company's clean production work wasassessed, audited and approved. Shanghai Watch Co., Ltd.has passed the pollution discharge verification organized byYangpu District Bureau of Ecology and Environment of Shanghai and has received the Pollutant Discharge Permitissued by the said authority at the end of 2019. Since the individual non-heavy pollutant factors originally approved in the"Pollutant Discharge Permit" did not belong to the Company's discharge scope, the Company requested to change the

"Pollutant Discharge Permit", which was now been re-examined by the Yangpu District Bureau of Ecology andEnvironment and was issued on October 20, 2021.

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 Bureau of Ecology and Environment of Shanghai and has been published on the EnvironmentalInformation Disclosure Platform of Enterprises and Institutions of Shanghai.

Environment Self-Monitoring ProgramYangpu District Bureau of Ecology and Environment of Shanghai monitors the Company once a quarter. The Companyentrusted a qualified third-party organization (Shanghai Textile Energy Conservation Center) to monitor and issuemonitoring report every six months. The Company is equipped with online monitoring instruments and communicates withthe district bureau of ecology and environment. The platforms of the bureau and the district government are connected tothe Internet to transmit the concentration data of heavy pollution factors 24 hours a day.

Administrative penalties for environmental issues during the reporting periodInapplicable

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: https://e2.sthj.sh.gov.cn.

Measures taken to reduce carbon emissions during the reporting period and their effectInapplicable

Other information in connection with the environmental protectionInapplicableII. Social ResponsibilitiesFor the detail, please refer to the "2021 Corporate Social Responsibility Report" disclosed by the Company on March 10,2022 on www.cninfo.com.cn.III. Consolidating and Expanding the Achievements of Poverty Alleviation and Rural RevitalizationDuring the reporting period, the Company actively responded to national policies and participated in targeted povertyalleviation and rural revitalization through various means. Through the “LOVE?AVIATION”, the aviation industry lovesupport platform the Company has purchased "LOVE?AVIATION" agricultural products during the Dragon Boat Festival,Mid-Autumn Festival and other traditional Chinese festivals to help poverty-stricken counties in Guizhou etc. in getting ridof poverty; carried out culturally characteristic poverty alleviation activities. On August 3, 2021, the "Children EnjoyingBeautiful Time" Hand-in-Hand Summer Camp jointly organized by Shenzhen Chenghan Public Welfare Foundation and

Gansu Aesthetic Education Promotion Association invited more than 50 teachers and students from Linxia, GansuProvince to enter the Park of FIYTA Clock Building and hold a "Hand-in-Hand Summer Camp" and the “Love being onlyBecause of You" theme public welfare activities were successfully held.

Section 6 Significant EventsI. Implementation of Commitments

1. Commitments made by the Company's actual controller, shareholders, related parties, acquirers, the Companyand other relevant parties fulfilled during the reporting period and not fulfilled as of the end of the reportingperiodInapplicable

2. There existed profit anticipation for the Company’s assets or projects while the reporting period was stillwithin the duration of the profit anticipation. The Company made explanation on whether the assets or projectsreached the anticipated profit and the causeInapplicableII. Non-operational Occupancy of the Company’s Capital by the Controlling Shareholder and its Related PartiesInapplicableIII. Outward guarantee against regulationsInapplicableIV. Explanation of the Board of Directors on the Qualified Auditors' Report for the Latest Period Issued by theCPAsInapplicableV. 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 PeriodInapplicableVI. Explanation of changes in accounting policies, accounting estimates or correction of significant accountingerrors compared with the financial report of the previous yearThe Ministry of Finance revised and issued the "Accounting Standards for Enterprises No. 21-Leases" on December 7,2018. According to the requirement of the Ministry of Finance, a company which is listed both at home and abroad orlisted overseas and prepares its financial statements according to the International Financial Reports Standards or theAccounting Standards for Enterprises started implementing the said accounting standards commencing from January 1,2019; other enterprises implementing the accounting standards for enterprises started the implementation commencingfrom January 1, 2021. The Company as a domestically listed company started implementing the new lease standards

commencing from January 1, 2021 according to the aforesaid standards and circular promulgated by the Ministry ofFinance. For details, please refer to the “Announcement on Change of the Accounting Policies 2021-030” disclosed onthe Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn/ on March 20, 2021.VII. Explanation on the Changes in the Scope of the Consolidated Statements in Comparison with the FinancialReport of the Previous YearDuring the reporting period, Shenzhen Xunhang Precision Technology Co., Ltd. and HARMONY World Watch Center(Hainan) Limited, the Company's newly established wholly-owned subsidiaries, were included in the scope of theCompany's consolidated statements; the deregistration of 68 Station Co., Ltd., one of the Company's wholly-ownedsubsidiaries, was completed on March 5, 2021, and it has been excluded from the scope of the Company's consolidatedstatements.VIII. Engagement/Disengagement of CPAsCPAs currently engaged by the Company

Name of the domestic CPAsDa Hua Certified Public Accountants (Special General Partnership)
Remuneration to the domestic CPAs (in CNY 10,000)120
Successive years of the domestic CPAs offering auditing services1
Name of the certified public accountants from the domestic CPAsLong Jiao and Wang Dong
Successive years of the domestic CPAs offering auditing services1

Has the CPAs been changed for the reporting period?Yes

Has the CPAs been replaced during the auditing?No

Have the examination and approval procedures been implemented in replacing the CPAsYes

Detailed explanation on the replacement/change of the CPAsThe 32nd Session of the Ninth Board of Directors held on August 18, 2021 and 2021 4th Extraordinary General Meetingheld on September 8, 2021 reviewed and approved the "Proposal on Change of the Accounting Firm". As the employmentterm of Grant Thornton LLP as the Company's auditor expired, the Company decided to employ Da Hua Certified PublicAccountants as the Company's auditor of the financial statements and internal control of year 2021. For details, pleaserefer to the “Announcement on the Change of the CPAs 2021-077” disclosed by the Company onhttp://www.cninfo.com.cn/ on August 20, 2021.

Employment of CPAs, financial consultant or sponsor for auditing the internal controlAfter review and approval at the Company's 4th Extraordinary General Meeting, the Company appointed Da Hua CertifiedPublic Accountants (Special General Partnership) as the auditor of Company's 2021 annual financial statements and

internal control.IX. Delisting Possibly to be Confronted with after Disclosure of the Annual ReportInapplicableX. Matters concerning Bankruptcy ReorganizationInapplicableXI. Significant Lawsuits and ArbitrationsInapplicableXII. Penalty and RectificationInapplicableXIII. Integrity of the Company, its Controlling Shareholder and Actual ControllerInapplicableXIV. 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

Inapplicable

5. Transactions with the finance company with incidence relation

Deposit business

Related partiesIncidence relationMaximum deposit limit perDeposit interest rangeOpening balance (CNY 10,000)Amount incurred in the reporting periodEnding balance (CNY 10,000)
day (CNY 10,000)Total amount deposited during the reporting period (in CNY 10,000)Total amount withdrawn during the reporting period (in CNY 10,000)
AVIC Finance Co., Ltd.Finance company with incidence relation80,0001.665%28,353.23313,638.76327,213.3914,778.60

Loan business

Related partiesIncidence relationLoan amount (CNY 10,000)Loan interest rate rangeOpening balance (CNY 10,000)Amount incurred in the reporting periodEnding balance (CNY 10,000)
Total loan during the reporting period (in CNY 10,000)Total repayments during the reporting period (in CNY 10,000)
AVIC Finance Co., Ltd.Finance company with incidence relation30,0003.65%020,00020,0000

Credit extension and other financial businessInapplicable

6. Transactions between the finance company controlled by the Company and the related partiesInapplicable

7. Other Significant Related Transactions

The 27th session of the Ninth Board of Directors held on March 18, 2021 and 2020 Annual General Meeting held on May7, 2021 reviewed and approved the Proposal on Prediction of Regular Related Transactions in 2021. For the detail, referto the Announcement on the Resolution of the 27th Session of the Ninth Board of Directors No. 2021-026, theAnnouncement on the Prediction of the Regular Related Transactions in 2021 No. 2021-029 and the Announcement onthe Resolution of 2020 Annual General Meeting No. 2021-045. During the reporting period, the cumulative transactionamount of the Company's related transactions related to its daily operations was within the expected range of the year.

The 32nd Session of the Ninth Board of Directors held on August 18, 2021 and 2021 4th Extraordinary General Meetingheld on September 8, 2021, reviewed and approved the "Proposal for Signing Financial Service Agreement with AVICFinance Co., Ltd. The Company decided to terminate the original contract with the AVIC Finance Ltd. and sign newFinancial Services Agreement. For the detail, refer to the Announcement of the Resolution of the 32nd Session of theNinth Board of Directors No. 2021-072, the Announcement on the Related Transaction in Connection with SigningFinancial Service Agreement with AVIC Finance Co., Ltd. No. 2021-078 and the Announcement on the Resolution of 0214th Extraordinary General Meeting No. 2021-087.

Inquiry on the website for disclosing the provisional report concerning significant related transactions

Description of the provisional announcementsDate of disclosureDisclosure website
Announcement on the Resolution of the 27th Session of the Ninth Board of Directors, 2021-026March 10, 2021www.cninfo.com.cn
Announcement of the Prediction of the Regular Related Transactions in 2021, 2021-029March 10, 2021www.cninfo.com.cn
Announcement on the Resolution of 2020 Annual General Meeting, 2021-045May 08, 2021www.cninfo.com.cn
Announcement on the Resolution of the 32nd Session of the Ninth Board of Directors, 2021-072August 20, 2021www.cninfo.com.cn

the Announcement on the Related Transaction inConnection with Signing Financial Service Agreement withAVIC Finance Co., Ltd. No. 2021-078

August 20, 2021www.cninfo.com.cn
Announcement on the Resolution of 2021 4th Extraordinary General Meeting, 2021-087September 09, 2021www.cninfo.com.cn

XV. Important Contracts and Implementation

1. Custody, Contacting and Leases

(1) Custody

Inapplicable

(2) Contracting

Inapplicable

(3) Leases

Inapplicable

2. Significant Guarantees

In CNY 10,000

Outward guarantees Offered by the Company and its Subsidiaries (excluding guarantee to the subsidiaries)
Names of GuaranteesDate of the announcement on the guarantee lineGuarantee lineDate of occurrenceActual amount of guaranteeType of guaranteeCollateral (if any)Counter guarantee (if any)Guarantee periodImplementation statusGuarantee to related party?
Inapplicable
Total amount of outward guarantee approved in the report period (A1)0Total 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)0Total ending balance of outward guarantee at the end of the report period (A4)0
Guarantee to the subsidiaries
Names of GuaranteesDate of the announcement on the guarantee lineGuarantee lineDate of occurrenceActual amount of guaranteeType of guaranteeCollateral (if any)Counter guarantee (if any)Guarantee periodImplementation statusGuarantee to related party?
HarmonyMarch 10, 202115,000December 23, 202115,000Guarantee with joint responsibility1 yearNoNo
the Technology Co.March 10, 20213,000June 23, 2021289Guarantee with joint responsibility1 yearNoNo
the Technology Co.March 10, 20214,000April 01, 20211,284Guarantee with joint responsibility1 yearNoNo
the Hong Kong Co.March 10, 20213,270.40Guarantee with joint responsibility1 yearNoNo
Total guarantee quota to the subsidiaries approved in the reporting period (B1)25,270.4Total amount of guarantee to the subsidiaries actually incurred in the reporting period (B2)16,573
Total guarantee quota to the subsidiaries approved at the end of the reporting period (B3)25,270.4Total balance of actual guarantee to the subsidiaries at the end of the reporting period (B4)16,573
Guarantee among the subsidiaries
Names of GuaranteesDate of the announcement on the guarantee lineGuarantee lineDate of occurrenceActual amount of guaranteeType of guaranteeCollateral (if any)Counter guarantee (if any)Guarantee periodImplementation statusGuarantee to related party?
Inapplicable
Total guarantee quota to the subsidiaries approved in the reporting period (C1)0Total 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)0Total 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+B1+C1)25,270.4Total amount of outward guarantee actually incurred in the report period (A2+B2+C2)16,573
Total amount of guarantees already approved at the end of the report period (A3+B3+C3)25,270.4Total ending balance of guarantees at the end of the report period (A4+B4+C4)16,573
Proportion of the actual guarantees in the Company’s net assets (namely A4+B4 + C4)5.50%
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 contract not yet due, guarantee responsibility incurred in the reporting period or there is evidence showing the 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

3. Entrusting a Third Party to Manage the Cash Assets

(1) Finance Management on Commission

Inapplicable

(2) Entrusted Loan

Inapplicable

4. Other Important Contracts

InapplicableXVI. Notes to Other Significant Events

1. Amendment of the Company's Rules and Regulations

Authorized by 2021 1st Extraordinary General Meeting, the 26th session of the Ninth Board of Directors held on February4, 2021 reviewed and approved the "Proposal on the Amendment of the Articles of Association". For the detail, refer to theAmendment of the Articles of Association disclosed in http://www.cninfo.com.cn. on February 5, 2021.

The 3rd session of the Tenth Board of Directors held on November 12, 2021 and 2021 5th Extraordinary General Meetingheld on November 30, 2021, reviewed and approved the Proposal on the Amendment of the "Articles of Association", " theProposal on the Amendment of the Rules of Procedures for the General Meetings ","the Proposal on the Amendment ofthe Rules of Procedures of Board Meetings ". For the detail, refer to the relevant announcement disclosed inhttp://www.cninfo.com.cn. on November 13, 2021.

2. Repurchase of Partial Domestically Listed Foreign Investment Shares (B-Shares)The Company’s 2nd Session of the Tenth Board of Directors held on October 25, 2021 and 2021 5th ExtraordinaryGeneral Meeting held on November 30, 2021 reviewed and approved the “Proposal for the Repurchase of PartialDomestically Listed Foreign Shares (B-Shares). For the detail, refer to the Report on the Repurchase of PartialDomestically Listed Foreign Shares (B-Shares) No. 2021-102.XVII. Significant Events of the Company's SubsidiariesInapplicable

Section 7 Change of the Shares and Particulars about ShareholdersI. Change of the Shares

1. Change of the Shares

In shares

Before the changeIncrease/decrease (+, -) involved in the changeAfter the change
QuantityProportionNew issuingBonus sharesShares converted from reserveOthersSub-totalQuantityProportion
I. Restricted shares4,457,5131.04%7,660,000-1,982,0295,677,97110,135,4842.38%
1. Shares held by the state00.00%00000.00%
2. State corporate shares00.00%00000.00%
3. Other domestic shares4,457,5131.04%7,660,000-1,982,0295,677,97110,135,4842.38%
Including: Domestic corporate shares00.00%00000.00%
Shares held by domestic natural persons4,457,5131.04%7,660,000-1,982,0295,677,97110,135,4842.38%
4. Foreign invested shares00.00%00000.00%
Including: Foreign corporate shares00.00%00000.00%
Shares held by foreign natural persons00.00%00000.00%
II. Unrestricted shares423,634,36898.96%0-7,718,837-7,718,837415,915,53197.62%
1. CNY ordinary shares356,716,36883.33%01,275,2491,275,249357,991,61784.03%
2. Foreign invested shares listed in Mainland China66,918,00015.63%0-8,994,086-8,994,08657,923,91413.60%
3. Foreign invested shares listed abroad00.00%00000.00%
4. Others00.00%00000.00%
III. Total shares428,091,881100.00%7,660,000-9,700,866-2,040,866426,051,015100.00%

Cause of the change of sharesDuring the reporting period, the Company’s 2018 A-share Restricted Stock Incentive Plan (Phase II) was completed ingranting and registered for listing on January 29, 2021. 7,660,000 shares were granted.

As in the Company's 2018 A-share Restricted Stock Incentive Plan (Phase I) and 2018 A-share Restricted Stock IncentivePlan (Phase II), 8 original incentive objects resigned and one passed away, they were no longer eligible for incentives.The Company has repurchased and canceled the 706,780 restricted A-shares that it had granted but had not yet lifted therestriction on sales in accordance with the provisions of the incentive plan.

According to the Company’s Proposal for the Repurchase of Partial Domestically Listed Foreign Shares (B-Shares) by theCompany, the Company repurchased 8,994,086 B-shares in total during the period from July 23, 2020 to July 22, 2021.This part of the B-shares were canceled on August 3, 2021.

Due to the above reason, the Company's total shares changed from 428,091,881 shares to 426,051,015 shares.

Approval of the Change of the Shares2021 1st Extraordinary General Meeting held on January 6, 2021 reviewed and approved 2018 Restricted A-ShareIncentive Plan (Phase II) (Draft) and the summary, which was later on reviewed and approved at the 25th session of theNinth Board of Directors held on January 15, 2021, and the Company eventually granted 7.66 million restrictive A-sharesto 135 persons eligible for the incentive.

The Company's 2021 2nd Extraordinary General Meeting held on February 24, 2021 authorized the Board of Directorsof the Company to repurchase and cancel 201,359 A-share restricted shares with the restriction not yet relieved that hadbeen granted to and held by the former incentive objects one of whom had resigned and another of whom had passedaway.

The Company's 2020 Annual General Meeting held on May 7, 2021 authorized the Board of Directors of the Company torepurchase and cancel 160,020 A-share restricted shares with the restriction not yet relieved that had been granted to andheld by the former incentive objects three of whom had resigned and another of whom had passed away.

The Company's 2021 3rd Extraordinary General Meeting held on July 01, 2021 authorized the Board of Directors of theCompany to repurchase and cancel 133,350 A-share restricted shares with the restriction not yet relieved that had beengranted to and held by a retired former incentive object.

The Company's 2021 4th Extraordinary General Meeting held on September 8, 2021 authorized the Board of Directors ofthe Company to repurchase and cancel 212,051 A-share restricted shares with the restriction not yet relieved that hadbeen granted to and held by three retired former incentive object.

The Company held 2020 2nd Extraordinary General Meeting on July 23, 2020, authorized the Company's Board ofDirectors to fully handle matters related to the cancellation of the repurchased shares after the repurchase of somedomestically listed foreign shares (B-shares) was completed.

Transfer of the Shares ChangedVerified by China Securities Depository & Clearing Corporation Limited Shenzhen Branch, the transfer of the Company'sshare changes in the reporting period is as follows:

1. The Company's 2018 A-share Restricted Stock Incentive Plan (Phase II) was completed on January 29, 2021. As aresult, 7,660,000 shares were granted.

2. The Company completed the repurchase and cancellation of A-share restricted shares on April 23, 2021, July 6, 2021,August 24, 2021 and November 3, 2021. Total repurchase logout 706,780 shares A Shares restrictive stock.

3. As at August 3, 2021, the Company completed repurchase and cancellation of 8,994,086 domestically listed foreignshares (B-shares).

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 period

Net return on equity, weighted average (%)Earnings per share
Basic earning per share (CNY/share)Diluted earning per share (CNY/share)
202120202021202020212020
13.39%10.78%0.90360.67640.90360.6764

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 ShareholdersNumber of restricted shares at the beginning of the reporting periodNumber of restricted shares increased in the reporting periodNumber of restricted shares relieved in the reporting periodNumber of restricted shares at the end of the reporting periodCause of restrictionDate of relieving the restriction
Chen Libin (retired)160,000180,00033,300306,700Locked shares for the retired senior executivesTo be unlocked subject to the conditions of the locked shares for the retired senior executives
Chen Zhuo (retired)118,250156,64026,640248,250Locked and not yet unlocked restricted shares held by the senior executivesAs of the disclosure date, the Company intended to repurchase 176,720 restricted A-shares in accordance with the regulations, and the remaining shares shall be unlocked according to the conditions for unlocking the locked shares held by the retired senior
executives.
Li Ming117,530156,64026,640247,530Locked and not yet unlocked restricted shares held by the senior executivesTo be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management
Pan Bo117,500156,64026,640247,500Locked and not yet unlocked restricted shares held by the senior executivesTo be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management
Lu Wanjun117,500156,64026,640247,500Locked and not yet unlocked restricted shares held by the senior executivesTo be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management
Liu Xiaoming117,500156,64026,640247,500Locked and not yet unlocked restricted shares held by the senior executivesTo be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management
Tang Haiyuan60,000154,98019,980195,000Locked and not yet unlocked restricted shares held by the senior executivesTo be unlocked subject to the conditions of the locked shares for senior executives and the measures for the
Company’s equity incentive management
Bao Xianyong60,000120,00019,980160,020Not yet unlocked restricted sharesTo be unlocked subject to the measures for the Company’s equity incentive management
Sun Lei60,000120,00019,980160,020Not yet unlocked restricted sharesTo be unlocked subject to the measures for the Company’s equity incentive management
Sheng Li60,000120,00019,980160,020Not yet unlocked restricted sharesTo be unlocked subject to the measures for the Company’s equity incentive management
Other shareholders3,469,2336,264,2121,111,2217,915,444Locked and not yet unlocked restricted shares held by the retired senior executivesTo be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management
Total4,457,5137,742,3921,357,64110,135,484----

II. Issuing and Listing

1. Issuing of securities (with preferred stock exclusive) in the reporting period

Description of the stock and its derivative securitiesDate of issuingIssuing price (or interest rate)Quantity issuedDate of listingQuantity approved for being listed for tradingExpiry date of tradingDisclosure indexDate of disclosure
Type of stock
A-sharesJanuary 15,7.607,660,000January 29,http://www.cninfoJanuary 28,
20212021.com.cn/2021

Note to issuing of securities (with preferred stock exclusive) in the reporting periodThe 23rd session of the Ninth Board of Directors held on December 4, 2020 and 2021 1st Extraordinary General Meetingheld on January 6, 2021 decided to start 2018 A-Share Restricted Stock Incentive Plan (Phase 2), which was later onreviewed and approved at the 25th session of the Ninth Board of Directors held on January 15, 2021, and the Companyeventually granted 7.66 million restricted A-shares to 135 persons eligible for the incentive. This part of restricted A-shareswas all granted by January 15, 2021 and registered for listing by January 29, 2021. For the detail, please refer to the"Announcement on Completion of the Grant Involved in the 2018 A-Share Restricted Stock Incentive Plan (Phase II)2021-011” disclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn.

2. Note to changes of the company’s total shares and the structure of shareholders as well as the structure ofassets and liabilitiesSame as the description in “the Cause of the Change of Shares”.

3. Existing Employee Shares

InapplicableIII. Shareholders and Actual Controlling Shareholder

1. Number of Shareholders and Shareholding

In shares

Total common shareholders at the end of the reporting period34,412Total common shareholders at the end of the month prior to the date of disclosing the annual report34,634Total preference shareholders with the voting power recovered at the end of the reporting period (if any) (Refer to Note 8)0Total 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 ShareholdersNature of the shareholderShareholding proportionNumber of shares held at the end of the reporting periodIncrease/decrease in the reporting periodNumber of the restricted shares heldQuantity of unrestricted shares heldPledging, marking or freezing
Status of the sharesQuantity
AVIC International Holding LimitedState corporate38.25%162,977,327-0162,977,327
Guoxin Investment Co., Ltd.State corporate1.82%7,739,8987,739,89807,739,898
Construction Bank of China - Penghua Huizhi Optimized Hybrid Securities Investment FundDomestic non-state-owned legal person1.10%4,679,4944,679,49404,679,494
Construction Bank of China - Penghua Value Superiority Hybrid Securities Investment Fund (LOF)Domestic non-state-owned legal person0.60%2,556,742-4,915,69302,556,742
Qiu HongDomestic natural person0.54%2,300,000700,00002,300,000
China Ifund Asset Management Co., Ltd. - Ifund All-Weather No. 2 Phase G Private Equity Securities Investment FundDomestic non-state-owned legal person0.43%1,841,7161,841,71601,841,716
SOCIETE GENERALEForeign corporate0.30%1,265,8001,024,30001,265,800
Zhang YinnanDomestic natural person0.28%1,195,1281,195,12801,195,128
Chen HaoDomestic natural person0.24%1,041,143-24,25701,041,143
Chen ChuDomestic natural person0.24%1,004,400508,59901,004,400
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 shareholdersInapplicable
Note to the aforesaid shareholders involving entrusting/being entrusted with voting power and the waiver of voting powerAmong the above shareholders, AVIC International Holding Limited authorized representatives to exercise its voting power on behalf at the Company’s 2021 1st Extraordinary General Meeting, 2021 2nd Extraordinary General Meeting, 2020 Annual General Meeting, 2021 3rd Extraordinary General Meeting, 2021 4th Extraordinary General Meeting and 2021 5th Extraordinary General Meeting with the number of shares they represented was always 162,977,327. For the detail of the result of the aforesaid voting, refer to the relevant announcement disclosed in http://www.cninfo.com.cn.
There is a special repurchase account among the top 10 shareholders (if any) (see Note 10) Special note to the designated repurchaseInapplicable
account in top 10 shareholders (if any) (Refer to Note 11)
Shares held by top 10 shareholders of unrestricted shares
Names of the ShareholdersQuantity of unrestricted shares held at the end of the reporting periodShare type
Share typeQuantity
AVIC International Holding Limited162,977,327CNY ordinary shares162,977,327
Guoxin Investment Co., Ltd.7,739,898CNY ordinary shares7,739,898
Construction Bank of China - Penghua Huizhi Optimized Hybrid Securities Investment Fund4,679,494CNY ordinary shares4,679,494
Construction Bank of China - Penghua Value Superiority Hybrid Securities Investment Fund (LOF)2,556,742CNY ordinary shares2,556,742
Qiu Hong2,300,000CNY ordinary shares2,300,000
China Ifund Asset Management Co., Ltd. - Ifund All-Weather No. 2 Phase G Private Equity Securities Investment Fund1,841,716CNY ordinary shares1,841,716
SOCIETE GENERALE1,265,800CNY ordinary shares1,265,800
Zhang Yinnan1,195,128Domestically listed foreign shares1,195,128
Chen Hao1,041,143CNY ordinary shares1,041,143
Chen Chu1,004,400CNY ordinary shares1,004,400
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 common 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 governmentType of the controlling shareholder: corporate

Name of the ControllingLegal RepresentativeDate of incorporationOrganization CodeLeading business activities
Shareholder/Leader
AVIC International Holding LimitedLi BinJune 20, 199791440300279351229AInvestment 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 (excluding items prohibited by laws and regulations and the decisions of the State Council; for the above items subject to approval, relevant approval must be obtained prior to operation).
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 Holdings Limited holds 11.86% equity in Tianma Micro-electronics Co., Ltd. (000050.SZ) and 67.05% equity in Shennan Circuits Company Limited (002916.SZ).

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 governmentType of the actual controller: corporate

Name of the Actual ControllerLegal Representative /LeaderDate of incorporationOrganization CodeLeading business activities
Aviation Industry Corporation of China, Ltd.Tan RuisongNovember 06, 200891110000710935732KOperating state-owned assets within the scope of authorization of the State Council; military aircraft and engines, guided weapons, military gas turbines, weapons and equipment supporting systems and products research, design, development, testing, production, sales, maintenance, guarantees and services, etc.; investment and management of finance, lease, general aviation services, transportation, medical care, engineering
survey and design, engineering contracting and construction, real estate development and other industries; design, research, development, testing, production, sales and maintenance services of civil aircraft and engines, airborne equipment and systems, gas turbines, automobiles and motorcycles and engines (including parts and components), refrigeration equipment, electronic products, environmental protection equipment and new energy equipment; equipment leasing; engineering survey and design; project contracting and construction; real estate development and operation; technology transfer and technical services related to the above businesses; import and export business; technical development and sales of ships; engineering equipment technology development; technology development of new energy products. (The company independently chooses operational projects according to law, carries out business activities; the projects must be approved according to the law by the competent authorities before carrying out business activities based on the approved contents; the company must not engage in any business activities prohibited or restricted by the local market industrial policy.)
Equity in other domestic and foreign listed companies controlled by the actual controller in the reporting period.In addition to holding the Company's equity, AVIC, directly or indirectly, holds or controls the shares of domestic and foreign listed companies: holding 50% equity in AVICOPTER PLC (600038.SH), 48% equity in Jiangxi Hongdu Aviation Industry Co., Ltd. (600316.SH), 66% in China Avionics Systems Co., Ltd. (600372.SH), 69% in AVIC Shenyang Aircraft Company Limited (600760.SH), 55% in AVIC Xi’an Aircraft Industry Group Co., Ltd. (000768.SZ), 38% in AVIC Heavy Machinery Co., Ltd. (600765.SH), 52% in AVIC Electromechanical Systems Co., Ltd., (002013.SZ), 46% in Guizhou Guihang Automotive Components Co., Ltd. (600523.SH), 51% in Sichuan Chengfei Integration Technology Corp. Ltd. (002190.SZ), 40% in AVIC Jonhon Optronic Technology Co.,Ltd. (002179.SZ), 54% in AVIC Electronic Measuring Instruments Company Limited (300114.SZ), 50% in AVIC Industry-finance Holdings Co., Ltd. (600705.SH), 64% in Shennan Circuit Co., Ltd. (002916.SZ), 28% in Tianma Microelectronics Co., Ltd. (000050.SZ), 43% in Rainbow Digital Commercial Co., Ltd. (002419.SZ), 40% in Baosheng Science And Technology Innovation Co., Ltd. (600973.SH), 47% in AVIC Forstar S&t Co., Ltd (835640.BJ), 62% in AVICHINA INDUSTRY & TECHNOLOGY COMPANY LIMITED (2357.HK), 46% in Continental Aerospace Technologies Holding Limited (0232.HK), 65% in Nexteer Automotive Group Limited (1316.HK), 89% in KHD Humboldt Wedag

International AG (KWG:GR), 55% in FACC AG (AT00000F ACC2), 56% in HEFEI JIANGHANG AIRCRAFT EQUIPMENTCO., LTD. (688586.SH), 45% in AVIC Aviation High-Technology Co., Ltd. (600862.SH).

Note: According to the relevant provisions of Standards for the Contents and Formats of Information Disclosure byCompanies Offering Securities to the Public No. 1—— Prospectus promulgated by the Securities Regulatory Commission,it is believed that the Company's actual controller is traced upstream from AVIC International Holding Corporation toAviation Industry Corporation of China, Ltd. The number and proportion of shares in the Company controlled by AVICInternational Holding Corporation and Aviation Industry Corporation of China, Ltd. remain unchanged.

Change of the actual controller in the reporting periodInapplicable

Block Diagram of the Ownership and Control Relations between the Company and the Actual Controller

100%

91.14% 8.86%

100% 100%

66.07% 33.93%

38.25%

State-owned Assets Supervision and Administration

Commission of the State CouncilAviation Industry Corporation of China

Aviation Industry Corporation of ChinaAVIC CCB Aviation Industry Equity Investment (Tianjin) Co., Ltd.

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 International Industrial Holding Co., Ltd.

The actual controller controls the Company by means of trust or managing the assets in other ways:

Inapplicable

4. The number of shares pledged by the Company's controlling shareholder or the first major shareholder and itspersons acting in concert having accounted for 80% of the shares held by themInapplicable

5. Other Corporate Shareholder Holding over 10% of the Company’s Shares

Inapplicable

6. Shareholding Reduction Restriction on the Controlling Shareholder, the Actual Controller, the ReorganizingParty and other Committing PartyInapplicableIV. Specific implementation of the repurchase of shares during the reporting periodProgress of implementation of the stock repurchase

Proposal disclosure timeNumber of shares to be repurchasedProportion in the total share capitalAmount for the planned repurchaseDuration for the planned repurchasePurpose of repurchaseNumber of shares already repurchased (shares)Proportion of the number of shares repurchased in the target shares involved in the equity incentive plan (if any)
July 07, 202013.02 million shares to 26.04 million shares3.04% to 6.08%No lower than CNY 80 million but not exceeding CNY 160 millionJuly 23, 2020 to July 22, 2021Canceled according to the law and the registered capital decreased8,994,086
October 27, 20217.46 million shares to 14.92 million shares1.75% to 3.5%No lower than CNY 50 million but not exceeding CNY 100 millionNovember 30, 2021 to November 29, 2022Canceled according to the law and the registered capital decreased0

Progress of implementation of reduction of the holding size of the shares repurchased by centralized biddingInapplicable

Section 8 About the Preferred SharesInapplicable

Section 9 About BondsInapplicable

Independent Auditor’s Report

D.H.S.Z.[2022]003511

To the Shareholders of FIYTA Precision Technology Co., Ltd.:

I.Audit Opinion

We have audited the accompanying financial statements of FIYTA Precision TechnologyCo., Ltd. (herein after “FIYTA Ltd.” or the Company) , which comprise the consolidated andthe parent company’s balance sheet as at 31 December 2021, the consolidated and theparent company’s statement of comprehensive income, the consolidated and the parentcompany’s cash flow statements and the consolidated and the parent company’s statementof changes in equity for the year then ended, and notes to the financial statements.In our opinion, the accompanying financial statements present in all material respects inaccordance with the requirements of Accounting Standards for Business Enterprises, andfairly reflect FIYTA Ltd.’s financial position at 31 December 2021 and the financialperformance and cash flows for the year then ended.II.Basis for Audit Opinion

We conducted our audit in accordance with CICPA Standards on Auditing (“CSAs”) . In‘IV. Certified Public Accountant’s Responsibilities for the Audit of FinancialStatements’ of this report, our responsibilities under these standards are described. Thosestandards require that we comply with CICPA professional ethical requirements, that we areindependent from FIYTA Ltd. and have fulfilled all other ethical obligations. We believe thatwe have obtained sufficient and appropriate audit evidence as basis of for our opinion.

III.Key Audit Matters

Key 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 matterswere addressed in the context of our audit of the financial statements as a whole, and informing our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined the following key audit matters that need to be communicated inaudit report.

(I) Existence of inventory and its net realizable value

1. Description

As at 31 December 2021, the book balance, provision for decline in value, and carryingamount of inventory were RMB2,162.56 million, RMB112.41 million and RMB2,050.15million respectively. The carrying amount of inventory accounts for 49.87% of the totalassets of the Company.(i) As the main business of FIYTA Ltd is selling FIYTA brand watches and other brandedwatches, the main inventory of FIYTA Ltd are finished watches and watch components. Theinventories are distributed in stores, regional warehouses, resellers’ warehouses and theCompany’s warehouses which caused difficulty in inventory physical observation;(ii) The management of FIYTA Ltd measures inventory at lower of cost and netrealizable value (NRV) at balance sheet date. Where the cost of an inventory exceeds itsNRV, 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 significantjudgement by the Management, as a result, we identified existence of inventory and its netrealizable value as key audit matters.

2. How our audit addressed the key audit matter

Major audit procedures we have conducted include:

(i) Understanding, evaluating and testing the design and operating effectiveness ofinternal controls of procurement and payment, production and storage, and the provision fordecline in value of inventory;

(ii) Using the work of experts to conduct IT audit to information system and evaluatingthe authenticity and accuracy of business data which related to financial statements.

(iii) Understanding and evaluating the appropriateness of the Company’s policy inprovision for decline in value;

(iv) Understanding and inquiring the locations of inventory storage, measurementmethod of inventory so as to determining the scope of inventory physical observation;

(v) Discussing physical inventory count status with the Management and attending thephysical inventory count and conducting observation and test count on site to check thequantity of the inventories and observe their condition.

(vi) Obtaining the ageing report of inventory and taking into consideration of inventorycondition in order to perform analytical review on the ageing as well as analyze thereasonableness of provision for decline in value;

(vii) Reviewing and evaluating the appropriateness of significant estimates made by the

Management in determining the NRV of inventory;

(viii) Obtaining the calculation of provision for decline in value of inventory, reviewingwhether the provision was made in compliance with relevant accounting policies andperforming recalculation of provision. Checking the movements of prior year’s provision andanalyzing whether the provision was adequately accrued in prior period.(ix) Tracing samples of large purchases in current period to their correspondingcontracts and tax invoices, and inspecting their purchase requisition form and goods receiptnotes.

Based on audit work conducted above, we believe that the inventory exists and themeasurement is reasonable stated according to the Company’s policies.

(II) Revenue recognition

1. Description

In 2021, the Company’s income from main business was RMB5,243.73 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 IV 31for accounting policy relating to revenue recognition.

Operating revenue represents major line item in income statement and is main sourceof profit, the accuracy and completeness of revenue recognition have significant impact tothe Company’s profit, as a result, we identified revenue recognition as a key audit matter.

2. How our audit addressed the key audit matter

Major audit procedures we have conducted include:

(i) Understanding, evaluating and testing the design and operating effectiveness ofinternal controls relating to revenue recognition;

(ii) Using the work of experts to conduct IT audit to information system and evaluatingthe authenticity and accuracy of business data which related to financial statements.

(iii) Obtaining and understanding accounting policies relating to revenuerecognition, and reviewing and evaluating whether the point in time of control right transfer,measurement of transaction price and accounting for special transactions are complied withthe accounting standards;

(iv) Selecting samples from current year’s transaction records, and tracing them tosupporting documents such as contract, tax invoice and goods dispatch note (if applicable)and courier waybill (if applicable) ;

(v) In connection with audit of accounts receivable, selecting major customers andconfirming corresponding sales in current year and year-end balance;(vi) Conducting cut-off test to revenue recognized before and after the balancesheet date by selecting samples to check supporting documents such as contract, taxinvoice and goods dispatch note (if applicable) and courier waybill (if applicable) to evaluatewhether the revenue was recorded in appropriate accounting period;Based on audit work conducted above, we believe that the Company’s revenuerecognition is in conformity to its revenue recognition policy.IV.Other Information

The management of FIYTA Ltd (the “Management”) are responsible for the OtherInformation. The Other Information comprises all of the information included in theCompany’s annual report other than the financial statements and our auditors’ reportthereon.

Our opinion expressed on the financial statements does not cover the Other Informationand we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read theOther Information 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 materialmisstatement of this Other Information, we are required to report that fact. We have nothingto report in this regard.

V.Responsibilities of the Management and those Charged withGovernance for the Financial Statements

The Management of the Company is responsible for the preparation of the financialstatements that give a fair view in accordance with Accounting Standards for BusinessEnterprises and for the design, implementation and maintenance of such internal controls asthe Management determine is necessary to enable the preparation of financial statementsthat 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 alternative

but to do so.Those who charged with governance is responsible for overseeing the Company’sfinancial reporting process.VI.Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement, whether due to fraud or error,and to issue an auditors’ report that includes our opinion. Reasonable assurance is a highlevel of assurance, 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 those risks,and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.The risk of not detecting a material misstatement resulting from fraud is higher than for oneresulting 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 designaudit 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 concernbasis of accounting and, based on the audit evidence obtained, whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a material uncertaintyexists, 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 such disclosuresare inadequate, to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditors’ report. However, future events or conditions maycause 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 theentities or business activities within FIYTA Ltd to express an opinion on the financialstatements. We are responsible for the direction, supervision and performance of the groupaudit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters,the planned scope and timing of the audit and significant audit findings, including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence, and to communicatewith them all 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 determinethose matters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor’s report unless law or regulation precludes public disclosure about the matter orwhen, in extremely rare circumstances, we determine that a matter should not becommunicated in our report because the adverse consequences of doing so wouldreasonably be expected to outweigh the public interest benefits of such communication.

Da Hua Certified Public Accountants (Special General Partnership)CICPA:
Beijing, ChinaLong Jiao
CICPA
Wang Dong
8 March 2022
Consolidated Balance Sheet
As at 31 December 2021
Prepared by: FIYTA Precision Technology Co., Ltd.(Unless otherwise indicated, the currency is expressed in RMB)
[English Translation for Reference Only]
AssetsNote VIClosing BalanceClosing Balance of prior period
Current assets:
Monetary fundsnote 1210,254,737.14353,057,285.71
Financial assets held for trading
Derivative financial assets
Notes receivablenote 261,258,145.8048,192,442.15
Accounts receivablenote 3388,885,601.28475,598,684.88
Accounts receivable financing
Prepaymentsnote 47,946,750.8116,612,773.76
Other receivablesnote 561,553,267.8252,902,779.63
Inventoriesnote 62,050,148,750.891,931,780,185.85
Contract assets
Held-for-sale assets
Current portion of non-current assets
Other current assetsnote 772,698,692.7275,935,141.76
Total current assets2,852,745,946.462,954,079,293.74
Non-current assets:
Debt investments
Other debt investments
Long-term receivables
Long-term equity investmentsnote 855,155,605.3151,400,665.92
Investment in other equity instrumentsnote 985,000.0085,000.00
Other non-current financial assets
Investment propertiesnote 10383,425,916.35398,086,447.78
Fixed assetsnote 11349,495,316.65352,734,280.76
Construction in progress
Right-of-use assetsnote 12147,932,475.42
Intangible assetsnote 1334,035,330.4337,859,316.51
Long-term deferred expensesnote 14163,790,333.44130,017,587.99
Deferred tax assetsnote 1581,233,274.6580,913,800.35
Other non-current assetsnote 1642,680,753.7813,536,307.13
Total non-current assets1,257,834,006.031,064,633,406.44
Total assets4,110,579,952.494,018,712,700.18
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative: Zhang XuhuaFinance Officer (CFO):Song YaomingFinancial Manager:Tian Hui
Consolidated Balance Sheet (Continued)
As at 31 December 2021
Prepared by: FIYTA Precision Technology Co., Ltd.(Unless otherwise indicated, the currency is expressed in RMB)
Liability and EquityNote VIClosing BalanceClosing Balance of prior period
Current liabilities:
Short-term borrowingsnote 17265,994,595.43542,673,278.09
Financial liabilities held for trading
Derivative financial liabilities
Notes payablenote 1821,223.103,581,360.00
Accounts payablenote 19254,588,895.34301,211,515.39
Payments received in advancenote 2011,025,664.729,991,850.67
Contract liabilitiesnote 2122,505,426.6518,213,396.49
Employee benefits payablenote 22145,936,150.06132,853,462.20
Tax payablesnote 2367,769,880.0168,925,271.90
Other payablesnote 24167,808,759.95128,577,597.94
Held-for-sale liabilities
Current portion of non-current liabilitiesnote 2586,949,906.35370,030.00
Other current liabilitiesnote 262,798,738.322,299,755.09
Total current liabilities1,025,399,239.931,208,697,517.77
Non-current liabilities:
Long-term borrowingsnote 274,070,330.00
Bonds payable
Including: Preferred stock
Including: Perpetual debt
Lease liabilitiesnote 2864,918,722.10
Long-term payables
Long-term employee benefits payable
Provisions
Deferred incomenote 291,792,833.902,916,346.43
Deferred tax liabilitiesnote 155,236,514.033,067,834.55
Other non-current liabilities
Total non-current liabilities71,948,070.0310,054,510.98
Total liabilities1,097,347,309.961,218,752,028.75
Equity:
Share capitalnote 30426,051,015.00428,091,881.00
Other equity instruments
Including: Preferred stock
Including: Perpetual debt
Capital reservesnote 311,040,908,194.131,021,490,387.78
Less: Treasury stocknote 3260,585,678.9261,633,530.48
Other comprehensive incomenote 33-7,658,346.40976,871.41
Special reservesnote 341,062,731.13
Surplus reservenote 35275,010,401.50246,531,866.87
Retained earningsnote 361,338,444,326.091,164,490,911.51
Equity attributable to parent company3,013,232,642.532,799,948,388.09
Non-controlling interests12,283.34
Total owners' equity3,013,232,642.532,799,960,671.43
Total liabilities and owners' equity4,110,579,952.494,018,712,700.18
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative: Zhang XuhuaFinance Officer (CFO):Song YaomingFinancial Manager:Tian Hui
Parent Company's Balance Sheet
As at 31 December 2021
Prepared by: FIYTA Precision Technology Co., Ltd.(Unless otherwise indicated, the currency is expressed in RMB)
AssetsNote XVIIClosing BalanceClosing Balance of prior period
Current assets:
Monetary funds171,022,392.92292,055,169.74
Financial assets held for trading
Derivative financial assets
Notes receivable
Accounts receivablenote 1129,880.481,464,798.79
Accounts receivable financing
Prepayments
Other receivablesnote 2717,183,139.00621,512,680.69
Inventories
Contract assets
Held-for-sale assets
Current portion of non-current assets
Other current assets13,389,835.1311,655,617.82
Total current assets901,725,247.53926,688,267.04
Non-current assets:
Debt investments
Other debt investments
Long-term receivables
Long-term equity investmentsnote 31,542,067,945.031,529,415,188.28
Investment in other equity instruments85,000.0085,000.00
Other non-current financial assets
Investment properties311,379,234.57323,296,494.84
Fixed assets222,462,397.20224,709,747.39
Construction in progress
Productive biological assets
Oil and gas assets
Right-of-use assets
Intangible assets23,910,597.3927,347,950.13
Development expenditure
Goodwill
Long-term deferred expenses9,966,739.1011,980,697.97
Deferred tax assets1,671,761.281,380,180.94
Other non-current assets1,435,800.93473,312.35
Total non-current assets2,112,979,475.502,118,688,571.90
Total assets3,014,704,723.033,045,376,838.94
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative: Zhang XuhuaFinance Officer (CFO): Song YaomingFinancial Manager: Tian Hui
Parent Company's Balance Sheet (Continued)
As at 31 December 2021
Prepared by: FIYTA Precision Technology Co., Ltd.(Unless otherwise indicated, the currency is expressed in RMB)
Liability and EquityNote XVIIClosing BalanceClosing Balance of prior period
Current liabilities:
Short-term borrowings250,256,666.67400,425,930.05
Financial liabilities held for trading
Derivative financial liabilities
Notes payable
Accounts payable1,232,967.421,481,135.49
Payments received in advance11,025,664.729,991,850.67
Contract liabilities37,735.85
Employee benefits payable24,758,938.8925,256,531.70
Tax payables2,676,682.582,778,265.84
Other payables230,594,166.14240,824,305.37
Held-for-sale liabilities
Current portion of non-current liabilities
Other current liabilities2,264.15
Total current liabilities520,545,086.42680,798,019.12
Non-current liabilities:
Long-term borrowings
Bonds payable
Including: Preferred stock
Including: Perpetual debt
Lease liabilities
Long-term payables
Long-term employee benefits payable
Provisions
Deferred income1,792,833.902,377,718.35
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities1,792,833.902,377,718.35
Total liabilities522,337,920.32683,175,737.47
Equity:
Share capital426,051,015.00428,091,881.00
Other equity instruments
Including: Preferred stock
Including: Perpetual debt
Capital reserves1,045,449,410.671,027,145,928.88
Less: Treasury stock60,585,678.9261,633,530.48
Other comprehensive income
Special reserves
Surplus reserve275,010,401.50246,531,866.87
Retained earnings806,441,654.46722,064,955.20
Total owners' equity2,492,366,802.712,362,201,101.47
Total liabilities and owners' equity3,014,704,723.033,045,376,838.94
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative: Zhang XuhuaFinance Officer (CFO):Song YaomingFinancial Manager:Tian Hui
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
Prepared by: FIYTA Precision Technology Co., Ltd.(Unless otherwise indicated, the currency is expressed in RMB)
ItemsNote VICurrent PeriodPrior Period
1. Operating revenuenote 375,243,733,540.934,243,439,952.59
Less:Operating costsnote 373,285,656,229.132,639,229,537.06
Taxes and surchargesnote 3837,563,586.8025,444,139.30
Selling expensesnote 391,049,898,223.28870,713,899.32
Administrative expensesnote 40261,626,762.41256,559,127.23
Research and development expensesnote 4157,802,569.1751,489,323.49
Finance expensesnote 4234,677,073.6533,449,276.41
Including: Interest expenses23,159,963.7421,315,119.78
Interest income3,589,649.854,941,334.19
Add:Other incomenote 4321,328,673.2125,170,397.09
Income from investmentsnote 443,754,939.395,072,577.64
Including: Investment income from associates and joint ventures3,754,939.395,072,577.64
Derecognition of financial assets at amortized cost
Gains or losses from net exposure hedging
Gains or losses from changes in fair values
Credit impairment lossesnote 45-11,075,001.77-9,096,922.74
Impairment lossesnote 46-25,861,394.56-15,426,526.41
Gains or losses from asset disposalsnote 47730,134.87-369,857.30
2. Operating profit505,386,447.63371,904,318.06
Add: Non-operating incomenote 48627,435.033,111,413.64
Less: Non-operating expensesnote 493,686,166.551,555,112.86
3. Profit before tax502,327,716.11373,460,618.84
Less: Income taxnote 50114,467,375.8879,338,516.60
4. Net profit387,860,340.23294,122,102.24
Including: Net profit realized before business combinations under common control
I. Net profit classified by going concern
Net profit from continuing operations387,860,340.23294,122,102.24
Net profit from discontinuing operations
II. Net profit classified by ownership
Net profit attributable to parent company387,840,282.95294,115,156.04
Net profit attributable to non-controlling interests20,057.286,946.20
5. Other comprehensive income after tax-8,635,217.811,916,506.80
Other comprehensive income after tax attributable to parent company-8,635,217.811,917,080.50
I. Items of other comprehensive income that will not be reclassified to profit or loss
i.Changes in remeasurement of defined benefit plans
ii.Other comprehensive income that cannot be transferred to profit or loss under the equity method
iii.Changes in fair value of investments in equity instruments
iv.Changes in fair value of the Company's own credit risk
II. Items of other comprehensive income that will be reclassified to profit or loss-8,635,217.811,917,080.50
i.Other comprehensive income that can be transferred to profit or loss under the equity method
ii.Changes in fair value of other debt investments
iii.Amount of financial assets reclassified into other comprehensive income
iv.Provisions for credit impairment of other debt investments
v.The effective portion of gains or losses arising from cash flow hedging
vi.Translation differences arising from financial statements in foreign currencies-8,635,217.811,917,080.50
Other comprehensive income attributable to non-controlling interests after tax-573.70
6. Total comprehensive income379,225,122.42296,038,609.04
Total comprehensive income attributable to parent company379,205,065.14296,032,236.54
Total comprehensive income attributable to non-controlling interests20,057.286,372.50
7. Earnings per share
I. Basic earnings per share0.900.68
II. Diluted earnings per share0.900.68
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative:Zhang XuhuaFinance Officer (CFO):Song YaomingFinancial Manager:Tian Hui
Parent Company's Statement of Comprehensive Income
For the year ended 31 December 2021
Prepared by: FIYTA Precision Technology Co., Ltd.(Unless otherwise indicated, the currency is expressed in RMB)
ItemsNote XVIICurrent PeriodPrior Period
1. Operating revenuenote 4179,455,712.71137,381,795.95
Less:Operating costsnote 438,852,252.3236,497,097.45
Taxes and surcharges7,760,628.424,435,717.73
Selling expenses6,483,523.471,579,092.51
Administrative expenses72,514,603.8176,604,523.40
Research and development expenses21,461,359.3619,933,292.70
Finance expenses3,650,109.373,127,102.39
Including: Interest expenses6,662,862.526,230,252.39
Interest income3,158,156.744,609,988.68
Add:Other income2,603,212.279,324,872.59
Income from investmentsnote 5263,673,435.95104,976,828.07
Including: Investment income from associates and joint ventures3,754,939.394,976,828.07
Derecognition of financial assets at amortized cost
Gains or losses from net exposure hedging
Gains or losses from changes in fair values
Credit impairment losses192,081.60-158,252.51
Impairment losses
Gains or losses from asset disposals-63,188.36-25,000.50
2. Operating profit295,138,777.42109,323,417.42
Add: Non-operating income41,001.96259,345.80
Less: Non-operating expenses216,805.5715,864.83
3. Profit before tax294,962,973.81109,566,898.39
Less: Income tax7,887,674.191,260,031.08
4. Net profit287,075,299.62108,306,867.31
Net profit from continuing operations287,075,299.62108,306,867.31
Net profit from discontinuing operations
5. Other comprehensive income after tax
I. Items of other comprehensive income that will not be reclassified to profit or loss
i.Changes in remeasurement of defined benefit plans
ii.Other comprehensive income that cannot be transferred to profit or loss under the equity method
iii.Changes in fair value of investments in equity instruments
iv.Changes in fair value of the Company's own credit risk
II. Items of other comprehensive income that will be reclassified to profit or loss
i.Other comprehensive income that can be transferred to profit or loss under the equity method
ii.Changes in fair value of other debt investments
iii.Amount of financial assets reclassified into other comprehensive income
iv.Provisions for credit impairment of other debt investments
v.The effective portion of gains or losses arising from cash flow hedging
vi.Translation differences arising from financial statements in foreign currencies
6. Total comprehensive income287,075,299.62108,306,867.31
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative: Zhang XuhuaFinance Officer (CFO):Song YaomingFinancial Manager:Tian Hui
Consolidated Cash Flows Statement
For the year ended 31 December 2021
Prepared by: FIYTA Precision Technology Co., Ltd.(Unless otherwise indicated, the currency is expressed in RMB)
ItemsNote VICurrent PeriodPrior Period
1. Cash flows from operating activities
Cash received from sales and services5,857,726,359.184,602,638,695.31
Tax and surcharge refunds1,466,381.601,849,055.57
Other cash receipts related to operating activitiesnote 5185,387,457.5678,001,812.45
Total cash inflows from operating activities5,944,580,198.344,682,489,563.33
Cash paid for goods and services3,862,745,653.013,046,261,111.48
Cash paid to and for employees710,102,185.80578,179,070.15
Taxes and surcharges paid346,383,502.98222,180,568.75
Other cash payments related to operating activitiesnote 51478,099,748.10457,658,307.08
Total cash outflows from operating activities5,397,331,089.894,304,279,057.46
Net cash flows from operating activities547,249,108.45378,210,505.87
2. Cash flows from investing activities
Cash received from withdrawal of investments
Cash received from investment income
Net proceeds from disposals of fixed assets, intangible assets and other long-term assets59,657.53150,556.62
Net proceeds from disposal of subsidiaries and other business units
Other cash receipts related to investing activities
Total cash inflows from investing activities59,657.53150,556.62
Cash paid for fixed assets, intangible assets and other long-term assets204,422,787.61133,531,954.47
Cash paid for investments
Net cash paid for acquiring subsidiaries and other business units
Other cash payments related to investing activities
Total cash outflows from investing activities204,422,787.61133,531,954.47
Net cash flows from investing activities-204,363,130.08-133,381,397.85
3. Cash flows from financing activities
Cash received from investments by others58,216,000.00
Including: Cash received by subsidiaries from non-controlling investors
Cash received from borrowings1,155,724,412.23743,213,671.65
Other cash receipts related to other financing activities
Total cash inflows from financing activities1,213,940,412.23743,213,671.65
Cash repayments for debts1,386,708,158.95768,247,433.10
Cash paid for distribution of dividends and profit and for interest expenses187,069,913.31106,703,352.70
Including: Dividends or profit paid by subsidiaries to non-controlling investors
Other cash payments related to financing activitiesnote 51124,710,390.5872,317,669.93
Total cash outflows from financing activities1,698,488,462.84947,268,455.73
Net cash flows from financing activities-484,548,050.61-204,054,784.08
4. Effect of changes in foreign exchange rates on cash and cash equivalents-1,140,476.33-2,810,603.32
5. Net increase in cash and cash equivalents-142,802,548.5737,963,720.62
Add: Opening balance of cash and cash equivalents353,057,285.71315,093,565.09
6. Closing balance of cash and cash equivalentsnote 52210,254,737.14353,057,285.71
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative:Zhang XuhuaFinance Officer (CFO):Song YaomingFinancial Manager:Tianhui
Parent Company's Cash Flows Statement
For the year ended 31 December 2021
Prepared by: FIYTA Precision Technology Co., Ltd.(Unless otherwise indicated, the currency is expressed in RMB)
ItemsNote XVIICurrent PeriodPrior Period
1. Cash flows from operating activities
Cash received from sales and services183,608,762.33178,808,738.19
Tax and surcharge refunds
Other cash receipts related to operating activities5,194,227,139.684,238,779,521.46
Total cash inflows from operating activities5,377,835,902.014,417,588,259.65
Cash paid for goods and services
Cash paid to and for employees68,672,552.4061,903,446.81
Taxes and surcharges paid22,768,419.519,345,329.15
Other cash payments related to operating activities5,359,975,023.493,948,860,602.89
Total cash outflows from operating activities5,451,415,995.404,020,109,378.85
Net cash flows from operating activities-73,580,093.39397,478,880.80
2. Cash flows from investing activities
Cash received from withdrawal of investments
Cash received from investment income259,918,496.56100,000,000.00
Net proceeds from disposals of fixed assets, intangible assets and other long-term assets5,740.001,630.00
Net proceeds from disposal of subsidiaries and other business units
Other cash receipts related to investing activities
Total cash inflows from investing activities259,924,236.56100,001,630.00
Cash paid for fixed assets, intangible assets and other long-term assets21,039,730.2617,398,218.00
Cash paid for investments139,500,000.00
Net cash paid for acquiring subsidiaries and other business units
Other cash payments related to investing activities
Total cash outflows from investing activities21,039,730.26156,898,218.00
Net cash flows from investing activities238,884,506.30-56,896,588.00
3. Cash flows from financing activities
Cash received from investments by others58,216,000.00
Cash received from borrowings1,110,000,000.00601,000,000.00
Other cash receipts related to other financing activities
Total cash inflows from financing activities1,168,216,000.00601,000,000.00
Cash repayments for debts1,260,000,000.00741,000,000.00
Cash paid for distribution of dividends and profit and for interest expenses185,045,678.32104,195,155.07
Other cash payments related to financing activities9,178,101.5172,317,669.93
Total cash outflows from financing activities1,454,223,779.83917,512,825.00
Net cash flows from financing activities-286,007,779.83-316,512,825.00
4. Effect of changes in foreign exchange rates on cash and cash equivalents-329,409.90-1,112,644.08
5. Net increase in cash and cash equivalents-121,032,776.8222,956,823.72
Add: Opening balance of cash and cash equivalents292,055,169.74269,098,346.02
6. Closing balance of cash and cash equivalents171,022,392.92292,055,169.74
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative: Zhang XuhuaFinance Officer (CFO): Song YaomingFinancial Manager:Tianhui
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Prepared by: FIYTA Precision Technology Co., Ltd.(Unless otherwise indicated, the currency is expressed in RMB)
ItemsCurrent Period
Equity attributable to parent companyNon-controlling interestsTotal shareholders' equity
Share capitalCapital reservesLess: Treasury stockOther comprehensive incomeSpecial reservesSurplus reservesRetained earnings
1. Closing balance of last year428,091,881.001,021,490,387.7861,633,530.48976,871.41246,531,866.871,164,490,911.5112,283.342,799,960,671.43
Add: Increase/decrease due to changes in accounting policies-11,188,268.01-11,188,268.01
Increase/decrease due to corrections of errors in prior period
Business combination under common control
Others
2. Opening balance of current year428,091,881.001,021,490,387.7861,633,530.48976,871.41246,531,866.871,153,302,643.5012,283.342,788,772,403.42
3. Increase/decrease for current year-2,040,866.0019,417,806.35-1,047,851.56-8,635,217.811,062,731.1328,478,534.63185,141,682.59-12,283.34224,460,239.11
I. Total comprehensive income-8,635,217.81387,840,282.9520,057.28379,225,122.42
II. Owner's contributions to and withdrawals of capital-2,040,866.0019,417,806.35-1,047,851.56-32,340.6218,392,451.29
i. Common stock contributed/paid-in capital by shareholders/owners-8,994,086.00-41,132,596.76-45,368,941.80-4,757,740.96
ii. Capital contributed by other equity instruments holders
iii. Share-based payments to owners' equity6,953,220.0060,553,780.1144,321,090.2423,185,909.87
iv. Others-3,377.00-32,340.62-35,717.62
III. Profits distribution28,478,534.63-202,698,600.36-174,220,065.73
i. Appropriation of surplus reserve28,478,534.63-28,478,534.63
ii. Distribution to owners-174,220,065.73-174,220,065.73
iii. Others
IV. Transfers within owners' equity
i. Capital reserves transferred to paid-in capital
ii. Surplus reserve transferred to paid-in capital
iii. Use of surplus reserve to cover previous losses
iv. Changes in remeasurement of defined benefit plans transferred to retained earnings
v. Other comprehensive income transferred to retained earnings
vi. Others
V. Special reserves1,062,731.131,062,731.13
i. Appropriated during current year1,421,605.681,421,605.68
ii. Used during current year-358,874.55-358,874.55
VI. Others
4. Closing balance of current year426,051,015.001,040,908,194.1360,585,678.92-7,658,346.401,062,731.13275,010,401.501,338,444,326.093,013,232,642.53
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative:Zhang XuhuaFinance Officer (CFO):Song YaomingFinancial Manager:Tian Hui
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
ItemsPrior Period
Equity attributable to parent companyNon-controlling interestsTotal shareholders' equity
Share capitalCapital reservesLess: Treasury stockOther comprehensive incomeSpecial reservesSurplus reservesRetained earnings
1. Closing balance of last year442,968,881.001,081,230,215.3271,267,118.78-940,209.09235,701,180.14966,840,818.405,910.842,654,539,677.83
Add: Increase/decrease due to changes in accounting policies
Increase/decrease due to corrections of errors in prior period
Business combination under common control
Others
2. Opening balance of current year442,968,881.001,081,230,215.3271,267,118.78-940,209.09235,701,180.14966,840,818.405,910.842,654,539,677.83
3. Increase/decrease for current year-14,877,000.00-59,739,827.54-9,633,588.301,917,080.5010,830,686.73197,650,093.116,372.50145,420,993.60
I. Total comprehensive income1,917,080.50294,115,156.046,372.50296,038,609.04
II. Owner's contributions to and withdrawals of capital-14,877,000.00-59,739,827.54-9,633,588.30-64,983,239.24
i. Common stock contributed/paid-in capital by shareholders/owners-14,877,000.00-65,264,104.92-8,802,188.30-71,338,916.62
ii. Capital contributed by other equity instruments holders
iii. Share-based payments to owners' equity5,570,601.49-831,400.006,402,001.49
iv. Others-46,324.11-46,324.11
III. Profits distribution10,830,686.73-96,465,062.93-85,634,376.20
i. Appropriation of surplus reserve10,830,686.73-10,830,686.73
ii. Distribution to owners-85,634,376.20-85,634,376.20
iii. Others
IV. Transfers within owners' equity
i. Capital reserves transferred to paid-in capital
ii. Surplus reserve transferred to paid-in capital
iii. Use of surplus reserve to cover previous losses
iv. Changes in remeasurement of defined benefit plans transferred to retained earnings
v. Other comprehensive income transferred to retained earnings
vi. Others
V. Special reserves
i. Appropriated during current year
ii. Used during current year
VI. Others
4. Closing balance of current year428,091,881.001,021,490,387.7861,633,530.48976,871.41246,531,866.871,164,490,911.5112,283.342,799,960,671.43
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative: Zhang Xuhua Finance Officer (CFO):Song YaomingFinancial Manager:Tian Hui
Parent Company's Statement of Changes in Equity
For the year ended 31 December 2021
Prepared by: FIYTA Precision Technology Co., Ltd.(Unless otherwise indicated, the currency is expressed in RMB)
ItemsCurrent Period
Share capitalCapital reservesLess: Treasury stockOther comprehensive incomeSpecial reservesSurplus reservesRetained earningsTotal shareholders' equity
1. Closing balance of last year428,091,881.001,027,145,928.8861,633,530.48246,531,866.87722,064,955.202,362,201,101.47
Add: Increase/decrease due to changes in accounting policies
Increase/decrease due to corrections of errors in prior period
Others
2. Opening balance of current year428,091,881.001,027,145,928.8861,633,530.48246,531,866.87722,064,955.202,362,201,101.47
3. Increase/decrease for current year-2,040,866.0018,303,481.79-1,047,851.5628,478,534.6384,376,699.26130,165,701.24
I. Total comprehensive income287,075,299.62287,075,299.62
II. Owner's contributions to and withdrawals of capital-2,040,866.0018,303,481.79-1,047,851.5617,310,467.35
i. Common stock contributed/paid-in capital by shareholders/owners-8,994,086.00-41,132,596.76-45,368,941.80-4,757,740.96
ii. Capital contributed by other equity instruments holders
iii. Share-based payments to owners' equity6,953,220.0059,439,455.5544,321,090.2422,071,585.31
iv. Others-3,377.00-3,377.00
III. Profits distribution28,478,534.63-202,698,600.36-174,220,065.73
i. Appropriation of surplus reserve28,478,534.63-28,478,534.63
ii. Distribution to owners-174,220,065.73-174,220,065.73
iii. Others
IV. Transfers within owners' equity
i. Capital reserves transferred to paid-in capital
ii. Surplus reserve transferred to paid-in capital
iii. Use of surplus reserve to cover previous losses
iv. Changes in remeasurement of defined benefit plans transferred to retained earnings
v. Other comprehensive income transferred to retained earnings
vi. Others
V. Special reserves
i. Appropriated during current year
ii. Used during current year
VI. Others
4. Closing balance of current year426,051,015.001,045,449,410.6760,585,678.92275,010,401.50806,441,654.462,492,366,802.71
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative: Zhang XuhuaFinance Officer (CFO):Song YaomingFinancial Manager:Tian Hui
Parent Company's Statement of Changes in Equity
For the year ended 31 December 2021
Prepared by: FIYTA Precision Technology Co., Ltd.(Unless otherwise indicated, the currency is expressed in RMB)
ItemsPrior Period
Share capitalCapital reservesLess: Treasury stockOther comprehensive incomeSpecial reservesSurplus reservesRetained earningsTotal shareholders' equity
1. Closing balance of last year442,968,881.001,086,885,756.4271,267,118.78235,701,180.14710,223,150.821,961,542,968.60
Add: Increase/decrease due to changes in accounting policies
Increase/decrease due to corrections of errors in prior period
Others
2. Opening balance of current year442,968,881.001,086,885,756.4271,267,118.78235,701,180.14710,223,150.822,404,511,849.60
3. Increase/decrease for current year-14,877,000.00-59,739,827.54-9,633,588.3010,830,686.7311,841,804.38-42,310,748.13
I. Total comprehensive income108,306,867.31108,306,867.31
II. Owner's contributions to and withdrawals of capital-14,877,000.00-59,739,827.54-9,633,588.30-64,983,239.24
i. Common stock contributed/paid-in capital by shareholders/owners-14,877,000.00-65,264,104.92-8,802,188.30-71,338,916.62
ii. Capital contributed by other equity instruments holders
iii. Share-based payments to owners' equity5,570,601.49-831,400.006,402,001.49
iv. Others-46,324.11-46,324.11
III. Profits distribution10,830,686.73-96,465,062.93-85,634,376.20
i. Appropriation of surplus reserve10,830,686.73-10,830,686.73
ii. Distribution to owners-85,634,376.20-85,634,376.20
iii. Others
IV. Transfers within owners' equity
i. Capital reserves transferred to paid-in capital
ii. Surplus reserve transferred to paid-in capital
iii. Use of surplus reserve to cover previous losses
iv. Changes in remeasurement of defined benefit plans transferred to retained earnings
v. Other comprehensive income transferred to retained earnings
vi. Others
V. Special reserves
i. Appropriated during current year
ii. Used during current year
VI. Others
4. Closing balance of current year428,091,881.001,027,145,928.8861,633,530.48246,531,866.87722,064,955.202,362,201,101.47
(Attached notes to statements are part of the consolidated financial statements)
Legal Representative: Zhang XuhuaFinance Officer (CFO):Song YaomingFinancial Manager:Tian Hui

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 114

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

I. Company status

1. Registered place, organization and address of headquarters

FIYTA Precision Technology Co., Ltd. (the “Company”) was founded, under the approval of Shen FuBan Fu (1992) 1259 issued by the General Office of Shenzhen Municipal Government, through therestructuring of former Shenzhen FIYTA Time Industrial Company by the promoter of China NationalAero-Technology Import and Export Shenzhen Industry & Trade Center (name changed to “ChinaNational Aero-Technology Shenzhen Co., Ltd” lately) on 25 December 1992. On 3 June 1993, both theCompany was listed on Shenzhen Stock Exchange. The Company holds business license with theUnified Social Credit Code of 91440300192189783K.As at 31 December 2021, the outstanding shares issued by the Company was 426.05 million sharesand the registered capital was RMB426.05 million after a series of share dividend, right offering, sharecapital conversion from retained earnings, and issuing of new shares. The Company’s registered addressis FIYTA Hi-Tech Building, Gao Xin Nan Yi Dao, Nanshan District, Shenzhen, Guangdong Province,where the Company’s headquarters locates. The parent company of the Company is CATIC ShenzhenHoldings Limited (CATIC Shenzhen) and the ultimate controlling party of the Company is Aviation IndustryCorporation of China, Ltd. (AVIC) .

2. Nature of the Company’s business and main operating activities

The business nature and main operating activities of the Company and its subsidiaries mainly include:

producing and selling of analogue indication mechanical watches, quartz watches and its movements,components, various timing devices, processing and wholesaling karat gold jewelry watches, intelligentwatches; 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 watchesand components; import and export business (according to Shen Mao Guan Deng Zheng ZiNo.2007-072) .

3. Authorization for issue

The financial statements have been approved and authorized for issue by the Board of Directors on 8March 2022.

II. Scope of consolidation

There were 13 subsidiaries that are included in the Company’s scope of consolidation for year 2021,see Note VIII for details. Comparing to prior year, the entities that were included in the consolidationincreased by 2 and decreased by 1. The Changes include:

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 115

1. Subsidiaries that were newly included in the consolidation

NameReasons for change
Harmony World Watch Center (Hainan) Co., Ltd.Incorporated by investment
Shenzhen Xunhang Precision Technology Co., Ltd.Incorporated by investment

2. Subsidiary that was excluded out of the consolidation

NameReasons for change
Station 68 Ltd.Deregistered on 5 March 2021

III. Basis of preparation

1. Basis of preparation

The financial statement is prepared in accordance with the requirements of Accounting Standards forBusiness Enterprises and associated application guidance, illustrations to the standards and relatedpronouncements (collectively known as “Accounting Standards for Business Enterprises” or “CAS”) .These financial statements also comply with the disclosure requirements of “Regulation on thePreparation of Information Disclosure of Companies Issuing Public Shares, No. 15: GeneralRequirements for Financial Reports” (revised in 2014) issued by China Securities RegulatoryCommission (CSRC) .

2. Going concern

The Company assesses the going concern ability to the extent of 12 month after the balancesheet date. No issues that would result in significant doubt about the Company’s going concern is noted.As a result, the financial statements of the Company have been prepared on going concern basis.

3. Basis and principles of accounting

Accrual basis is adopted for the Group’s accounting activity. Except for some financial instruments,the financial statements are measured using historical cost. In case of impairment occurred on assets,provisions for impairment are provided for in accordance with related regulations.

IV. Significant accounting policies and accounting estimates

1. Highlight to specific accounting policies and estimates

(1) The Company make specific accounting policies and estimates according to its nature of business.Accounting policies and estimates mainly includes: method of estimated credit loss accrual (Note IV. 12,Note IV. 13 and Note IV. 14) , measurement of inventory (Note IV. 15) , depreciation of investmentproperty and fixed asset and amortization of intangible asset (Note IV. 18, Note IV. 19 and Note IV. 23) ,revenue (Note IV, 31) etc.

(2) Based on historical experience and other factors including reasonable estimation to future events,the Company continues to evaluate significant accounting estimates and key assumptions. If materialchanges to following accounting estimate and key assumption incurred, material impact would happenedto the carrying value of the Company’s assets and liabilities in coming accounting year.

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 116

1) Measurement of Expected Credit Loss of accounts receivable and other receivablesThe management estimates impairment loss provision to accounts receivable and other receivablesbased on the judgments to estimated credit loss of accounts receivable and other receivables. If anyevents occurred that indicated the Company may not be able to recover the balance amount, estimationis needed in provision accrual. If the expected number is different with the estimated figure, the differencewill affect the carrying value of accounts receivable and other receivables and the impairment lossexpenses in corresponding accounting period.

2) Impairment to inventory. The Company recognizes provision for obsolete inventories based on theexcess of the cost of inventory over its net realizable value. In determining the net realizable value ofinventories, the management uses significant judgments to estimate the selling price, cost to finishmanufacturing, and selling expenses and associated taxes. If the management revises estimated sellingprice and cost to finish manufacturing and selling expenses, the NAV estimation would be affected andthe difference would have an effect to the inventory provision.

3) Estimation of long-term asset impairment. When evaluating whether there is impairment tolong-term asset, the management mainly considers the following: (a) whether the events affect the assetimpairment have already incurred; (b) whether the discounted cash flow from continue usage of the assetor disposal is lower than its carrying amount; and (c) whether major assumption used in estimating thefuture cash flow is appropriate.

Changes to related assumption adopted in determining impairment such as profitability, discountingrate and growth rate may have material impact to the present value used in impairment test and result inimpairment to above mentioned long-term assets.

(a) Depreciation and amortization. The estimated residual value and useful life of investment property,fixed asset and intangible asset that used by the Company are based on historical actual useful life andactual residual value of assets with similar nature or functions. In the process of using such assets,estimated useful life and residual value may vary depending on the economic environment, technologicalenvironment and other environment that the assets located. If there is difference between the expectationand previous estimation, proper adjustments will be made by the management.

(b) Share-based payments. The management makes best estimation based on up-to-date number ofemployees who have exercisable shares and adjusting the number of exercisable equity instrument oneach balance sheet date in the vesting period. If there is difference between current year exercisableemployee and previous estimation, proper adjustments will be made by the management.

(c) Deferred tax asset. Deferred tax asset of taxable losses shall be recognized to the extent thatthere will have sufficient taxable income to offset. This involves significant judgments to estimate thetiming and amount of future taxable profit and taking into consideration of tax planning so as to determinethe amount of deferred tax asset.

(d) Corporate income tax. The final tax treatment of many transaction and events are with uncertaintyin the normal course of operation. Significant judgments involves in accrual of corporate income tax. If

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 117

there is difference between the final discretion and the amount recorded in books, the difference will affectthe amount of tax in the period of final discretion.

2. Statement of compliance with Accounting Standards for Business EnterprisesThe financial statements of the Company have been prepared in accordance with the requirementsof Accounting Standards for Business Enterprises. These financial statements present truly andcompletely the financial position as at 31 December 2021, the results of operations and the cash flows forthe year then ended of the Company.

3. Accounting period

The accounting period of the Company is the calendar year, i.e. from 1 January to 31 December ofeach year.

4. Operating cycle

The operating cycle refer to the period from purchasing assets for process to realizing cash or cashequivalent. The Company’s operating cycle is 12 months which is also used as standard to determine theliquidity of asset and liabilities.

5. Recording currency

The Company and its domestic subsidiaries adopt Renminbi (“RMB”) as the recording currency.FIYTA (Hong Kong) Limited (“FIYTA Hong Kong”) , a subsidiary of the Company outside mainland China,and Station 68 Limited (“Station 68”) , a subsidiary of FIYTA Hong Kong, use Hong Kong Dollar (“HKD”)as the recording currency according to the main economic environment where the companies operated in.Montres Chouriet SA, a subsidiary of FIYTA Hong Kong (“Swiss Company”) , uses Swiss Franc as therecording currency according to the main economic environment where the Swiss Company operated in.The recording currencies mentioned above will be translated to Renminbi when preparing financialstatements. The currency used in preparing the Group’s financial statements is Renminbi.

6. Accounting treatment for business combinations involving entities under commoncontrol and not under common control

(1) If a business combination is achieved through multiple steps, of which the terms,condition and economical effect is in line with one or more criteria as followed, the multipletransactions shall be dealt with as one-basket transaction.

1) the transactions were entered into at the same time or by considering each other’s influence;

2) a complete business result can only be achieved by combining all these transactions together;

3) the performing of one transaction is depended on at least one other transaction;

4) a transaction is not economical if it is considered stand along but it will become economical if it isconsidered in combination with other transactions.

(2) Business combination involving entities under common control

For a business combination involving enterprises under common control, the assets acquired andliabilities assumed are measured based on their carrying amounts in the consolidated financialstatements of the ultimate controlling party at the combination date, except for adjustments due todifferent accounting policies. The difference between the carrying amount of the net assets acquired and

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 118

the consideration paid for the combination (or the total par value of shares issued) is adjusted againstshare premium in the capital reserve, with any excess adjusted against retained earnings.If there is contingent consideration and provision or assets are required to be recognized, thedifference between the provision or assets and the contingent consideration shall adjust the capitalreserve, with any excess adjusted against retained earnings.If business combinations involving entities under common control achieved in stages that involvesmultiple transactions belongs to one-basket transaction, all transactions shall be dealt with as onetransaction. If not, the accounting treatment is as follows: Initial investment cost is the acquirer’s share ofthe carrying amount of the net assets of the acquiree in the consolidated financial statements of theultimate controlling party at the combination date. The difference between the initial investment cost andthe sum of carrying amount of investment prior to combination date and carrying amount of newconsiderations paid for the combination at the combination date is adjusted to capital reserve (sharepremium) . If the capital reserve is not sufficient to absorb the difference, any excess is adjusted againstretained earnings. he 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 paidfor the combination at the combination date is adjusted to capital reserve (share premium) . If the capitalreserve is not sufficient to absorb the difference, any excess is adjusted against retained earnings. Theprofit or loss, other comprehensive income and changes in other owner’s equity recognized by theacquirer during the period from the later of initial investment date and the date that the acquirer andacquiree both under common ultimate control to the combination date are offset the opening retainedearnings or profit for loss for the current period in the comparative statements.

(3) Business combinations involving entities not under common controlThe purchase date refers to the date that the Company actually acquired control over the acquire i.e.the date when the control over the acquiree’s net assets or decision of business operation has beentransferred to the Company. If the Company fulfills the following conditions at the same time, it isconsidered that the control has been transferred:

① the contract or agreement of business combination has been approved by internal powerdepartment;

② related matters has been approved by state supervisory authorities, if needed;

③ procedures of asset transfer has been completed;

④ the Company has been made majority of payments and has the ability and plan to make theresidual payments;

⑤ the Company is in substances acquired the business and operating policies and enjoyedcorresponding interests and undertaking risks of the acquire.

On the purchase date, assets transferred, liabilities incurred or assumed as the consideration paidshall be measured at fair value. The difference between the fair value and carrying amount shall becharged to current period profit or loss.

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 119

Where the combination cost exceeds the acquirer’s interest in the fair value of the acquiree’sidentifiable net assets, the difference is recognized as goodwill, and subsequently measured on the basisof its cost less accumulated impairment provisions. Where the combination cost is less than the acquirer’sinterest in the fair value of the acquiree’s identifiable net assets, the difference is recognized in profit orloss for the current period after reassessment.If business combinations involving entities not under common control achieved in stages thatinvolves multiple transactions belong to one-basket transaction, all the transactions shall be treated asone. Otherwise, it shall be treated as follows: In the separate financial statements, the initial investmentcost is the sum of the carrying amount of equity investment of the acquiree held prior to the acquisitiondate and additional investment cost at the acquisition date. When the previously-held equity investmentwhich was accounted for under the e Accounting treatment for business combinations involving entitiesunder common control and not under common control equity method before the acquisition date, anyother comprehensive income previously recognized is not adjusted on acquisition date. When theinvestment 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 relatedassets or liabilities. The owners’ equity recognized as the changes of the investee’s other owners’ equityexcept for net profit or loss, other comprehensive income and profit distribution, are transferred to profit orloss for the current period when disposing the investment. When the previously-held equity investmentwhich was measured at fair value before the acquisition date, the accumulated changes in fair valueincluded in other comprehensive income is transferred to profit or loss for the current period uponcommencement of the cost method.

(4) Transaction costs for business combination

The overhead for the business combination, including the expenses for audit, legal services,valuation advisory, and other administrative expenses, are recorded in profit or loss for the current periodwhen incurred. The transaction costs of equity or debt securities issued as the considerations of businesscombination are included in the initial recognition amount of the equity or debt securities.

7. Consolidated financial statements

(1) Scope of consolidation

The scope of consolidated financial statements is based on control. All subsidiaries (includingstandalone entity that controlled by the Company) are all included in the scope of consolidation.

(2) Procedures of consolidation

The consolidated financial statements are prepared by the Company based on the financialstatements of the Company and its subsidiaries and other relevant information. The whole enterprise isconsidered as one accounting body when preparing consolidated financial statement and reflect thewhole group’s financial position, performance and cash flow according to unified accounting policiesbased on accounting standards.

All subsidiaries that are included in the scope of consolidation adopt same accounting policies, and

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 120

accounting period. If there are differences, the subsidiaries shall adjust its policies and accounting periodaccordingly.

When preparing consolidated financial statements, the accounting policies and accounting periods ofthe subsidiaries should be consistent with those established by the Company, and all significantintra-group balances and transactions are eliminated. If the treatment based on enterprise group angle isdifferent with the angle from subsidiaries’, it shall be treated based on enterprise group angle.

The portion of a subsidiary’s equity that is not attributable to the parent is treated as non-controllinginterests and presented separately in the consolidated balance sheet within shareholders’ equity. Theportion of net profit or loss of subsidiaries for the period attributable to non-controlling interests ispresented separately in the consolidated income statement below the “net profit” line item. When theamount of loss for the current period attributable to the non-controlling shareholders of a subsidiaryexceeds the non-controlling shareholders’ share of the opening owners’ equity of the subsidiary, theexcess is still allocated against the non-controlling interests.

Where a subsidiary or business has been acquired through a business combination involvingenterprises under common control in the reporting period, the subsidiary or business is deemed to beincluded in the consolidated financial statements from the date they are controlled by the ultimatecontrolling party. Their operating results and cash flows are included in the consolidated incomestatement and consolidated cash flow statement respectively from the date they are controlled by theultimate controlling party.

Where a subsidiary or business has been acquired through a business combination not involvingenterprises under common control in the reporting period, the financial statements of subsidiaries shall beadjusted on the basis of fair value of identifiable net assets on purchase date.

1) Addition of subsidiaries or business operation

Where a subsidiary or business has been acquired through a business combination involvingenterprises under common control in the reporting period, the subsidiary or business is deemed to beincluded in the consolidated financial statements from the date they are controlled by the ultimatecontrolling party. Their operating results and cash flows are included in the consolidated incomestatement and consolidated cash flow statement respectively from the date they are controlled by theultimate controlling party.

If the Company can exert control over the investee under common control because of addition ofinvestment, adjustments shall be made as if all the combining party are at the current condition in theangle of ultimate controlled party. Equity investment held before acquired control, profit or loss, othercomprehensive income and other net asset changes that have already recognized between the later ofacquiring original equity and the date under common control, and combination date shall offset openingretained earnings or current period profit or loss respectively.

In the reporting period, if there is subsidiary or business addition involving entities not under commoncontrol, no adjustments shall be made to the consolidated balance sheet. The revenue, expenses and

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 121

profit from the purchasing date to period end shall be included in consolidated income statement. Thecash flows from the purchasing date to period end shall be included in consolidated cash flow statement.Where a subsidiary or business has been acquired through a business combination not involvingenterprises under common control by means of investment addition in the reporting period, equity heldbefore the purchase date shall be re-measured at fair value. Difference between the fair value and thecarrying amount shall be charged to current period investment gain. Changes related to equity methodsuch as other comprehensive income and other equity changes beside net profit, other comprehensiveincome and profit distribution shall be transferred to current period investment gain.

2) Disposal subsidiary or businessa) General principalIn the reporting period, if the Company dispose of subsidiary or business, the subsidiary’s revenue,expenses, profit and cash flows from the beginning of the period to the disposal date shall be included inconsolidated financial statements.When the Company loses control over a subsidiary because of disposing part of equity investment orother reasons, the remaining part of the equity investment is re-measured at fair value at the date whenthe control is lost. A gain or loss is recognized in the current period and is calculated by the aggregate ofconsideration 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 sinceacquisition date and the goodwill.

2) Disposal of subsidiary through multiple steps

In the event that the Company losses control over a subsidiary through multiple transactions, if one ormore conditions below are fulfilled, it shall be treated as one-basket transaction:

a) the transactions were entered into at the same time or by considering each other’s influence;

b) a complete business result can only be achieved by combining all these transactions together;

c) the performing of one transaction is depended on at least one other transaction;

d) a transaction is not economical if it is considered stand along but it will become economical if it isconsidered in combination with other transactions.

If the disposal was categorized as one-basket transaction, the Company dealt with all transactions asone transaction that resulted in lost control over subsidiary. But, before losing control, the differencebetween disposal consideration and the portion of net asset of the disposal part shall be recognized inother comprehensive income each time of disposal and charged to income statement in whole in theperiod loss control.

If the disposal does not belong to one-basket transaction, the accounting treatment before lostcontrol shall be in accordance with policies of disposal equity but not losing control. At the time control lost,deal with as normal subsidiary disposal.

3) Acquiring non-controlling interests of subsidiary

Where the Company acquires a non-controlling interest from a subsidiary’s non-controlling

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 122

shareholders, the book value of shareholder’s equity attributed to the Company and to the non-controllinginterest is adjusted to reflect the change in the Company’s interest in the subsidiaries. The differencebetween the proportion interests of the subsidiary’s net assets being acquired or disposed and theamount of the consideration paid or received is adjusted to the capital reserve in the consolidated balancesheet, with any excess adjusted to retained earnings.

8. Joint arrangement classification and accounting treatment for joint operation

(1) Classification

The Company classifies joint arrangements into joint operations and joint ventures based on thestructure, legal form, terms and conditions in the arrangement, and other related facts.Joint operations means joint arrangement that does not realized through independent entity. Jointarrangement that realized through independent entity is normally recognized as joint venture but it alsocan be classified as joint operation if clear evidence showed that one of the following condition is met:

1) The legal form of an joint arrangement showed that the joint parties enjoyed rights over relatedassets and undertake liability respectively;2) The contract showed that the joint parties enjoyed rights over related assets and undertake liabilityrespectively;3) Other facts and situation indicated that the joint parties enjoyed rights over related assets andundertake liability respectively;

(2) Accounting treatment to joint operation

The Company recognizes the following items relating to its interest in a joint operation, and accountfor them in accordance with relevant accounting standards:

1) its solely-held assets, and its share of any assets held jointly;

2) its solely-assumed liabilities, and its share of any liabilities assumed jointly;

3) its revenue from the sale of its share of the output arising from the joint operation;

4) its share of the revenue from the sale of the output by the joint operation; and

5) its solely-incurred expenses, and its share of any expenses incurred jointly.

The Company contribute or disposal of assets (except that asset constitute business) . Before theseassets are sold to third party, the Company only recognizes the portion of profit or losses that attributes tothe other party. If the assets incurred impairment, the Company recognizes losses in full.

For the assets purchased from joint operation (except that constitutes business) , before it is sold tothird party, only the portion that attributable to the other parties. If assets incurred impairment, theCompany recognizes losses based on its share.

The Company does not enjoy joint control to joint operation. If the Company enjoys joint operation’sasset and undertaking related liabilities, the accounting treatment is the same. Otherwise, it shall beaccounted for based on accounting standards.

9. Cash and cash equivalents

When preparing cash flow statement, the Company recognizes cash in hand and bank deposit that

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 123

available for payment as cash. Cash equivalents include short-term, highly liquid investments that arereadily convertible to known amounts of cash and are subject to an insignificant risk of change in value.

10. 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 theexchange rates prevailing at the dates of the transactions.Monetary items denominated in foreign currencies are translated to Renminbi at the spot exchangerate at the balance sheet date. The resulting exchange differences between the spot exchange rate onbalance sheet date and the spot exchange rate on initial recognition or on the previous balance sheetdate are recognized 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 value in foreign currencies are translated using theexchange rate at the date the fair value is determined. The resulting exchange differences are recognizedin profit or loss.

(2) Translation of foreign currency financial statements

When translating the foreign currency financial statements of overseas subsidiaries, assets andliabilities of foreign operation are translated to Renminbi at the spot exchange rate at the balance sheetdate. Equity items, excluding “retained earnings”, are translated to Renminbi at the spot exchange ratesat the transaction dates.

When disposing overseas operations, foreign translation difference that related to the overseasbusiness shall be charged to current period profit or losses from other comprehensive income. If thedisposal resulted in decrease in shareholding but still maintain control, the translation difference will beincluded in non-controlling interest. If the disposal related to associate entity or joint venture entities, thetranslation difference will be included in current period profit or loss.

11. Financial instruments

The Company recognizes financial assets or financial liabilities when the Company become a party ofthe financial instruments.

Effective interest rate method refer to calculating the amortized cost of financial assets or liabilitiesand amortizes interest income or expenses into corresponding accounting period accordingly.

Effective interest rate refers to the interest that is used to discount the estimated future cash flows ofexisting financial assets or financial liabilities to its amortized cost. When determining the effective interestrate, the cash flow is estimated taking consideration of all contractual terms of financial assets or financialliabilities but does not including estimated credit loss.

Amortized cost of financial assets or financial liabilities is the initial recognition amount deductprincipal and add or less accumulated amortization to the difference between initial recognition and theamount at maturity and less accumulated loss provision (for financial assets only) .

(1) Recognition and derecognition of financial instruments

Financial assets are classified into the following three categories depends on the Company’s

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 124

business mode of managing financial assets and cash flow characteristics of financial assets

1) Financial assets measured at amortized cost

2) Financial assets at fair value through other comprehensive income

3) Financial assets at fair value through profit or loss

Financial assets are measured at fair value at initial recognition. But it is recognized using tradingprice for accounts receivable or notes receivable arose from sale of goods or providing of service thatdoes not including material financing component or does not consider financing component within oneyear.For financial assets at fair value through profit or loss, the related transaction costs are directlyrecognized through profit or loss, and the related transaction costs of other types of financial assets areincluded in the initial recognition amounts.Only when the Company changes its business model of managing financial assets, all the financialassets affected shall be reclassified on the first day of the first reporting period after the business modelchanges.1) Financial assets measured at amortized costThe Company shall classify financial assets that meet the following conditions and are notdesignated as financial assets at fair value through profit or loss as financial assets measured atamortized cost: The Company’s business model for managing the financial assets is to collect contractualcash flows; The terms of the financial asset contract stipulate that cash flows generated on a specific dateare only payments of principal and interest based on the amount of outstanding principal. Financial assetsmeasured at amortized cost of the Company includes cash and bank balances, notes receivable,accounts receivables and other receivables.After initial recognition, the effective interest rate method is used to measure the amortized cost ofsuch financial assets. Profits or losses arising from financial assets measured at amortized costs and notpart of any hedging relationship are included in current profit or loss when the recognition is terminated,amortized or impaired according to the effective interest rate.a) for financial assets that already impaired when it is acquired, the Company determines its interestincome using adjusted effective interest rate based on its amortized cost.b) for financial assets that does not impaired when it is acquired but impaired latterly, the Companydetermines its interest income using adjusted effective interest rate based on its amortized cost. If there isno credit impairment in later period due to changes to risk factors, the Company uses effective interestrate times of carrying amount of the financial asset to determine interest income. 2) Financial assets at fairvalue through other comprehensive income

The Company shall classify financial assets that meet the following conditions and are notdesignated as financial assets measured at fair value and whose changes are recorded in current profit orloss as financial assets measured at fair value through other comprehensive income: The Group’sbusiness model for managing the financial assets is both to collect contractual cash flows and to sell the

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 125

financial assets, and the terms of the financial asset contract stipulate that cash flows generated on aspecific date are only payments of principal and interest based on the amount of outstanding principal.

After initial recognition, financial assets are subsequently measured at fair value. Interest, impairmentlosses or gains and exchange gains calculated by the effective interest rate method are recognized inprofit or loss, while other gains or losses are recognized in other comprehensive income. Whenderecognized, the accumulated gains or losses previously recognized in other comprehensive income aretransferred from other comprehensive income and recorded in current profit or loss.

3) Financial assets designated as fair value through other comprehensive income

At initial recognition, the Company may designate non-trading equity instrument investments asfinancial assets at fair value through other comprehensive income, presented as other equity instrumentinvestment, and recognize dividend income when the conditions are met (the designation cannot berevoked once it is made) .

The fair value changes of this kind of financial asset shall be included in other comprehensive incomeand no impairment provision is needed. When de-recognizing the financial asset, accumulated gain orloss in other comprehensive income shall be transferred out of other comprehensive income and chargedto retained earnings. During the investing period when the Company holds equity instruments, theCompany recognizes dividends in current period profit or loss when the right of receiving dividends isconfirmed and the associated economic benefit is probable to flow into the Company and that the amountcan be measured reliably. The Company treated this kind of financial instrument under other equityinvestment.

The designated equity instrument investment does not belong to the following: the purpose ofobtaining the financial asset is mainly for the recent sale; it is part of the identifiable financial assetinstrument combination under centralized management at initial recognition, and there is objectiveevidence that the short-term gain actually exists in the near future; it is a derivative (except for derivativesthat meet the definition of a financial guarantee contract and are designated as effective hedginginstruments) .

4) Financial assets at fair value through profit or loss

The financial assets other than financial assets measured at amortized cost and financial assets atfair value through other comprehensive income are classified as financial assets at fair value throughprofit or loss.

After initial recognition, the financial assets are subsequently measured at fair value, and the profitsor losses generated from which are recognized in profit or loss.

The Company present the financial assets as financial asset held for trade, other non-currentfinancial assets.

5) Financial assets designated at fair value through profit or loss.

At initial recognition, if the accounting mismatch can be eliminated or significantly reduced, thefinancial assets can be designated as financial assets at fair value through profit or loss.

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 126

If the hybrid contract includes one or more embedded derivatives and the main contract does notbelong to the above financial assets, the Company may designate the whole as a financial instrument thatis measured at fair value through profit or loss, except in the following cases:

a) Embedded derivatives do not materially change the cash flow of a hybrid contract

b) When it is first determined whether a similar hybrid contract requires a spin-off, there is little needfor analysis to make it clear that the embedded derivatives it contains should not be split. If theprepayment right of the embedded loan allows the holder to repay the loan in advance with an amountclose to the amortized cost, the prepayment right does not need to be split.

After initial recognition, the financial assets are subsequently measured at fair value, and the profitsor losses generated from which are recognized in profit or loss.

The Company present the financial assets as financial asset held for trade, other non-currentfinancial assets.

(2) Classification and measurement of financial liabilities

The Company categorizes financial liabilities into financial liabilities and equity instrument based onthe contract terms and economical nature rather than solely on its legal form. Financial liabilities initiallyrecognized as financial liabilities at fair value through profit or loss, other financial liabilities and derivativeinstrument designated as effective hedging instrument.

The financial liabilities of the Company are initially measured at fair value. The related transactioncosts of financial liabilities at fair value through profit or loss are directly recognized in profit or loss. Therelated transaction costs of other categories of financial liabilities are included in the initial recognitionamount.

Subsequent measurement of financial liabilities depends on its category:

1) Financial liabilities at fair value through profit or loss

This category includes financial liabilities held for trade (including derivatives that are financialliabilities) and financial liabilities designated at fair value through profit or loss.

At initial recognition, in order to provide more relevant accounting information, the Companyclassifies financial liabilities that meet one of the following conditions as financial liabilities at fair valuethrough profit or loss (the designation cannot be revoked once it is made) : the aim of undertaking relatedfinancial liabilities is to sell or repurchase in the short run; it is part of identifiable financial instruments andthere is objective evidence indicated that the enterprise adopts short-term profitability mode; belong toderivative instrument except for derivative instrument designated as effective hedging instrument andfinancial guarantee contract. Financial liabilities held for trade are measured at fair value subsequentlyand all fair value changes except for hedging accounting shall be included in current period profit or loss.

At initial recognition, in order to provide more relevant accounting information, the Companyclassifies financial liabilities that meet one of the following conditions as financial liabilities designated atfair value through profit or loss (the designation cannot be revoked once it is made) :

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 127

a) accounting mismatches can be eliminated or significantly reduced.b) management and performance evaluation of financial liability portfolios or combinations of financialassets and financial liabilities based on fair value according to corporate risk management or investmentstrategies as stated in formal written documents, and report to key management personnel on this basis.When the Company initially recognizes a financial liability and designates it at fair value through profitor loss according to stipulations of standards, the changes in the fair value of the financial liability arisingfrom changes in the company’s own credit risk are included in other comprehensive income, and otherchanges in fair value are recognized in profit or loss for the period. However, if the accounting causes orexpands the accounting mismatch in profit or loss, the entire gain or loss of the financial liability (includingthe affected amount from changes in the company’s own credit risk) is included in the current profit orloss.

2) Other financial liabilities

Except for the following items, the Company classifies financial liabilities as financial liabilitiesmeasured at amortized cost:

a) Financial liabilities at fair value through profit or loss.

b) The transfer of financial assets does not meet the conditions for derecognition or financial liabilitiesarising from the continued involvement in the transferred financial assets.

c) Financial guarantee contracts that are not in the first two categories of this article, and loancommitments granted at a rate lower than market interest rates and that are not in the first category of thisarticle

Financial guarantee contracts that are not designated as financial liabilities measured at fair valuethrough profit or loss are initially recognized at fair value. Subsequent to initial recognition, thesubsequent measurement is determined according to the higher loss allowance of contingent liabilitiesunder expected credit loss model and the initial recognition amount deducting by the accumulatedamortization.

(3) Derecognition of financial instruments

1) If a financial asset meets one of the following conditions, it shall be derecognized:

a) The contractual right to receive the cash flow of the financial asset is terminated.

b) The financial asset has been transferred, and the transfer meets the requirements of the“Accounting Standards for Business Enterprises No. 23 – Transfer of Financial Assets” regardingderecognition of financial assets.

2) Conditions of derecognition of financial liabilities

If the current obligation of a financial liability (or a part thereof) has been discharged, the financialliability (or such part of financial liability) is derecognized.

When the Company and the lender sign an agreement to replace the original financial liability with anew financial liability, and the new financial liability is substantially different from the original financialliability, the original financial liability is derecognized and a new financial liability is recognized. The

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 128

difference between the carrying amount and the consideration paid (including the transferred non-cashassets or liabilities assumed) is recognized in profit or lossIf the Company repurchases part of the financial liabilities, the carrying amount of the financialliabilities as a whole is allocated based on the proportion of the fair value of the continuing recognitionportion and the derecognition portion on the repurchase date. The difference between the carryingamount assigned to the derecognition portion and the consideration paid (including the transferrednon-cash assets or liabilities assumed) shall be included in the current profit or loss.

(4) Recognition basis and measurement for transfer of financial assetsIn the event of transfer of financial assets, the Company assesses the extent to which it retains therisks and rewards of ownership of the financial assets and treats them in the following cases:

1) If almost all risks and rewards of ownership of financial assets are transferred, the financial assetsare derecognized and the rights and obligations arising from or retained in the transfer are separatelyrecognized as assets or liabilities.

2) If almost all the risks and rewards of ownership of financial assets are retained, the financial assetsshall continue to be recognized

3) If there is neither transfer nor retention of almost all risks and rewards of ownership of financialassets (i.e., other than (1) and (2) of this article) , then depending on whether or not they retain controlover financial assets

a) If there is neither transfer nor retention of almost all risks and rewards of ownership of financialassets (i.e., other than (1) and (2) of this article) , then depending on whether or not they retain controlover financial assets

b) If there is neither transfer nor retention of almost all risks and rewards of ownership of financialassets (i.e., other than (1) and (2) of this article) , then depending on whether or not they retain controlover financial assets.

When judging whether the transfer of financial assets satisfies the conditions for derecognition above,the principle of substance over form is adopted. The Company divides the transfer of financial assets intothe overall transfer and partial transfer of financial assets:

1) If the overall transfer of financial assets meets the conditions for derecognition, the differencebetween the following is included in the current profit or loss

a) The carrying amount of the transferred financial assets on the date of derecognition.

b) The sum of the consideration received in respect of the transfer of financial assets and the amountcorresponding to the derecognized portion in the accumulated changes in the fair value originally anddirectly recognized in other comprehensive income (the financial assets involved in the transfer aremeasured at fair value through other comprehensive income)

If the transfer of a financial asset does not meet the conditions for derecognition, the financial assetwill continue to be recognized and the consideration received is recognized as a financial liability

(5) Method for determining the fair value of financial assets and financial liabilities

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 129

The fair value of financial assets or financial liabilities with active market is determined by activemarket quotations; active market quotations include quotations that are readily and regularly availablefrom exchanges, dealers, brokers, industry groups, pricing agencies or regulatory authorities for relatedassets or liabilities, and represent actual and frequently occurring market transactions on a fair tradebasis. The fair value of financial assets initially acquired or derived or financial liabilities assumed shallbe determined on the basis of the market transaction price. The fair value of financial assets or financialliabilities without active market is determined using valuation techniques. In valuation, the Companyadopts valuation techniques that are applicable under current circumstances and that are supported byadequate available data and other information, selects inputs with consistent asset or liabilitycharacteristics considered by market participants in trading related asset or liability, and uses relevantobservable inputs where possible. Unobservable inputs are used where the relevant observable inputsare not available or are impracticable.

(6) Provision for impairment of financial assets

Based on the expected credit losses, the Company assesses the expected credit losses of thefinancial assets measured at amortized cost and financial assets at fair value through othercomprehensive income, lease receivables, contract assets, loan commitment and financial liabilities thatare not measured at fair value through profit or loss, and financial guarantee contract etc., and makesimpairment accounting and recognizes loss provisions.

The expected credit loss refers to the weighted average of the credit losses of financial instrumentsthat are weighted by the risk of default. Credit loss refers to the difference between all contractual cashflows discounted at the original effective interest rate and receivable from the contract and all cash flowsexpected to be received by the Company, and the present value of all cash shortages. For financial assetsthat have been purchased or generated with credit impairment, loss provision is recognized only for thecumulative changes in lifetime expected credit losses after the initial recognition on the balance sheetdate.

For accounts receivable, contract assets, and lease receivables, the Company shall always measurethe loss allowance for them at an amount equal to the lifetime expected credit losses.

For financial assets that have been purchased or generated with credit impairment, loss provision isrecognized only for the cumulative changes in lifetime expected credit losses after the initial recognitionon the balance sheet date. On each balance sheet date, the amount of changes in lifetime expectedcredit losses is included in profit or loss as an impairment loss or gain. Even if the lifetime expected creditloss determined on the balance sheet date is less than the expected credit loss reflected in the estimatedcash flow at the initial recognition, the positive change in expected credit loss is also recognized as animpairment gain

Except for the provision for loss of financial instruments in item (3) of this article, the Companyassesses whether the credit risk of the relevant financial instruments has increased significantly since theinitial recognition on each balance sheet date, and separately measures its loss provision, recognizes

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 130

expected credit loss and its changes based on the following circumstances:

a) If the credit risk of the financial instruments has increased significantly since the initial recognition,the loss provision is measured at the amount equivalent to the lifetime expected credit loss of the financialinstruments, regardless of whether the basis the Company assesses the credit losses is on individualfinancial instrument or a combination of financial instruments, and the increase or reversal of the lossprovision resulting therefrom should be included in the current profit or loss as an impairment loss or gain

b) If the credit risk of the financial instruments has not increased significantly since the initialrecognition, the loss provision is measured at the amount equivalent to the expected credit loss of thefinancial instruments in the next 12 months, regardless of whether the basis the Company assesses thecredit loss is on individual financial instrument or the combination of financial instruments, and theincrease or reversal of the loss provision resulting therefrom shall be included in the current profit or lossas an impairment loss or gain.

For financial instruments in the third stage, the Company measures loss provision on the basis oflife-time expected credit loss and calculating interest income according to their book balance minus theimpairment provision and the actual interest rate.

Incremental or reversal of credit loss provision shall be included in current profit or loss as impairmentloss or gain. Except for financial asset at fair value through other comprehensive income, credit lossprovision is to offset the carrying amount of financial assets. For financial assets at fair value throughother comprehensive income, the credit loss provision is recognized in other comprehensive income andwill not offset the financial asset’s carrying amount in balance sheet.

If the Company recognized credit loss provision in prior accounting period in terms of life-time creditloss, but on current period balance sheet date, the associated financial asset does not belong to thesituation of risk increased after the initial recognition, the Company shall accrue credit loss provision forthis financial asset based on the next 12 month expected credit loss. Difference arose from abovechanges shall be included in current period profit or loss as impairment gain.

1) Assessment of significant increase of credit risk

By comparing the default risk of financial instruments on balance sheet day with that on initialrecognition day, the Company determines the relative change of default risk of financial instrumentsduring the expected life of financial instruments, to evaluate whether the credit risk of financialinstruments has increased significantly since the initial recognition.

To determine whether credit risk has increased significantly since the initial recognition, factorsconsidered by the Company includes:

a) Whether there is serious deterioration of the debtor’s operating results that have occurred or are

expected to occur;

b) Changes in the existing or anticipated technological, market, economic or legal environment willhave a significant negative impact on the debtor’s repayment capacity.

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 131

c) Serious deterioration of external or internal credit ratings (if any) of financial instruments thathave occurred or are expected to occur;d) Whether the expected performance and repayment of debtor changes significantly.e) Whether the Company changed the way of managing financial assets.On the balance sheet date, if the Company assesses that the financial instrument only has lowerlevel of credit risk, the Company assumes that the credit risk associated with the financial instrumentdoes not increased after the initial recognition. If the default rate of a financial instrument is low and thedebtor’s ability to fulfill its cash flow liability is strong, the financial instrument will be regarded with lowercredit risk even if there will be adverse changed in economic and operating environment in long-termwhich may not necessarily decrease the debtor’s ability of fulfilling its cash flow liabilities.2) Provision for impairment of financial assetsWhen one or more events that adversely affect the expected future cash flows of a financial assetoccur, the financial asset becomes a financial asset that has suffered credit impairment. Evidence thatcredit impairment has occurred in a financial asset includes the following observable information:

a) significant financial difficulties of the issuer or debtor;b) the debtor breaches the contract, such as failure to pay or delay in the payment of interest orprincipal;

c) the creditor gives the debtor a concession which would not have been made under any othercircumstances for economic or contractual considerations relating to the financial difficulties of the debtor;

d) the debtor is likely to go bankrupt or carry out other financial restructurings;

e) the financial difficulties of the issuer or the debtor cause the active market of the financial asset todisappear;

f) purchase or source a financial asset at a substantial discount that reflects the fact that credit losseshave occurred.

The credit impairment of financial assets may be caused by the joint action of multiple events, andmay not be caused by separately identifiable event

Determining expected credit loss (ECL)

The Company evaluates ECL based on single or portfolio of financial instrument. When evaluatingECL, the Company considers past events, current situation and future economic condition.

The Company categorizes financial instrument into different portfolios based on common credit riskcharacteristics. Common credit risk characteristics includes: types of financial instruments, agingportfolio, settlement period, debtor’s industries etc… Refer to accounting policies of financial instrumentsfor standard for single evaluation and credit risk characteristics.

The Company uses the following way to determine the ECL of financial instruments:

a) For financial assets, credit loss is the present value of difference between all contractual cashflows receivable from the contract and all cash flows expected to be received by the Company.

b) For lease receivable, credit loss is the present value of difference between all contractual cash

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 132

flows receivable from the contract and all cash flows expected to be received by the Company.c) For financial guarantee contract, credit loss is the present value of expected payment amount dueto credit losses happened to the owner of the contract and less any amount that the Company expected toreceive from the contract owner, debtor or other parties.d) For financial assets that already impaired on balance sheet date but not impaired when purchasing,the credit loss is the difference of carrying amount and present value of future cash flows discounted atoriginal effective interest rate.Factors that the Company measures ECL of financial instrument includes: assessing a series ofpossible results and to determine a weighted average amount without bias; time value of money;information of past event, current situation and future economic condition forecast that can be obtainedwithout paying extra cost or efforts on balance sheet date.3) Write offIf the Company no longer reasonably expects that the financial assets contract cash flow can berecovered fully or partially, the financial assets book balance will be reduced directly. Such reductionconstitutes the derecognition of the financial assets.

(7) Offset of financial assets and financial liabilities

Financial assets and financial liabilities are presented separately in the balance sheet and are notoffset. However, if all of the following conditions are met, the net amount offset by each other ispresented in the balance sheet:

1) The Company has a statutory right to offset the recognized amount, and such legal right iscurrently enforceable;

2) The Company plans to settle in net amount or to realize the financial assets and settle the financialliabilities at the same time.

12. Bill receivables

Refer to Note XI. 6 Financial instrument impairment for details of ECL determination and accountingmethod to bill receivable.

If the Company has sufficient evidence to evaluate the ECL of bill receivable on single basis, it will beassessed on single basis.

If there is not sufficient evidence to evaluate the ECL on single basis, the Company will makejudgment based on historical loss experience, current situation and future economic situation, andclassifying the bill receivable into different portfolios. The basis for portfolios is determined as follows:

PortfolioBasismethod
Risk-free banker’s acceptance noteThe issuer has higher level of credit rating and no default in past and has strong ability to fulfil its contractual cash follow obligationReferencing historical impairment experience and taking into consideration of current situation and estimation of future conditions
Business acceptance noteBill receivables with same aging have similar credit risk characteristicsBased on aging analysis

13. Accounts receivables

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 133

Refer to Note XI. 6 Financial instrument impairment for details of ECL determination and accountingmethod to accounts receivable.If the Company has sufficient evidence to evaluate the ECL of account receivable on single basis, itwill be assessed on single basis.If there is not sufficient evidence to evaluate the ECL on single basis, the Company will makejudgment based on historical loss experience, current situation and future economic situation, andclassifying the account receivable into different portfolios. The basis for portfolios is determined asfollows:

PortfolioBasismethod
Receivables for related parties in scope of consolidationAccount receivables for related parties in scope of consolidation have similar credit risk characteristicsReferencing historical impairment experience and taking into consideration of current situation and estimation of future conditions
Accounts receivables from other partiesAccount receivables with same aging have similar credit risk characteristicsBased on aging analysis

14. Other receivables

Refer to Note XI. 6 Financial instrument impairment for details of ECL determination and accountingmethod to other receivables.

If the Company has sufficient evidence to evaluate the ECL of other receivables on single basis, it willbe assessed on single basis.

If there is not sufficient evidence to evaluate the ECL on single basis, the Company will makejudgment based on historical loss experience, current situation and future economic situation, andclassifying the other receivable into different portfolios. The basis for portfolios is determined as follows:

PortfolioBasismethod
Receivables of down payment and guaranteeThe portfolio has similar credit risk characteristicsBased on aging and ECL rate
Petty cash for employeesThe portfolio has similar credit risk characteristicsReferencing historical impairment experience and taking into consideration of current situation and estimation of future conditions
Social security payment paid on-behalf of employeesThe portfolio has similar credit risk characteristicsReferencing historical impairment experience and taking into consideration of current situation and estimation of future conditions
Receivables from related parties within scope of consolidationThe portfolio has similar credit risk characteristicsReferencing historical impairment experience and taking into consideration of current situation and estimation of future conditions
OthersThe portfolio has similar credit risk characteristicsBased on aging and ECL rate

15. Inventory

(1) Classification

Inventory refers to the finished products or commodities that the Company holds for sale in its dailyactivities, semi-products in the production process, materials and consumables used in the production

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 134

process or the provision of labour services. Inventories include raw materials, work in progress, andfinished goods.

(2) Valuation method of inventory

When inventory is acquired, it is initially measured at cost, including procurement costs, processingcosts and other costs. When the inventory is issued, it is measured by the weighted average method(except for branded watches) and specific identification method (for branded watches) .

(3) Basis for determining the net realizable value and method for provision for obsoleteinventories

After the inventory is thoroughly inspected at the end of the period, the provision shall be provided oradjusted at the lower of the cost of the inventory and its net realizable value. The net realizable value ofinventory of goods directly used for sale, such as finished goods, stocked goods and materials for sale inthe normal production and operation process, is determined by the estimated selling price of the inventoryminus the estimated selling expenses and related taxes; net realizable value of inventory of materials thatneed to be processed is determined based on the estimated selling price of the finished productsproduced minus the estimated cost till completion, estimated selling expenses and related taxes and feesin the normal production and operation process; the net realizable value of the inventory held for theexecution of a sales contract or labour contract is calculated on the basis of the contract price. If thequantity of the inventory held exceeds the quantity ordered by the sales contract, the net realizable valueof the excess inventory is calculated based on the general sales price.

The provision is accrued according to the individual inventory project at the end of the period; but fora large number of inventories with lower unit price, the provision is accrued according to the category ofinventory; for those related to the product series produced and sold in the same region, have the same orsimilar end use or purpose and that are difficult to measure separately from other projects, they arecombined for provision for inventory depreciation

If the influencing factors of the write-down of inventory value have disappeared, the amount of writedown will be restored and will be reversed within the amount of the provision for decline in value of theinventory that has been accrued. The amount of the reversal is included in the current profit or loss

(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.

16. Contract assets

The Company has the right to receive the consideration for the transfer of goods to the customers. Ifthe right depends on factors other than the passage of time, it is recognized as a contract asset. If theCompany has the right (only depends on passage of time) to receive consideration from client, accountsreceivable shall be recognized.

Refer to Note XI 6 for impairment to contract asset.

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 135

17. Long-term Equity Investment

(1) Determination of investment cost

1) For the long-term equity investment formed by business combination, the specific accountingpolicies are detailed in the accounting treatment of business combination under common control and notunder common control as set out in this Note VI.

2) Long-term equity investment obtained by other means

The initial investment cost of the long-term equity investment obtained by cash payment is the actualpurchase price. The initial investment cost includes expenses directly related to the acquisition oflong-term equity investments, taxes and other necessary expenses

The initial investment cost of the long-term equity investment obtained by issuing equity securities isthe fair value of the issued equity securities; the transaction cost incurred in the issuance or acquisition ofits own equity instruments is deducted from equity if it is directly attributable to equity transactions.

Under the premise that the non-monetary asset exchange has the commercial substance and the fairvalue of the assets received or surrendered can be reliably measured, the initial investment cost of thelong-term equity investment exchanged for non-monetary assets is determined based on the fair value ofthe assets exchanged and relevant taxes payable, unless there is conclusive evidence that the fair valueof the assets transferred is more reliable; for the exchange of non-monetary asset that does not meet theabove premise, the initial investment cost of long-term equity investment is the carrying amount of theassets exchanged and the related taxes and fees payable.

The initial investment cost of a long-term equity investment obtained through debt restructuringincludes the fair value of the waived debt, taxes that can be directly attributable to the asset and othercosts

(2) Subsequent measurement and profit and loss recognition

1) Cost method

The long-term equity investment that the Company can control over the investee is accounted forusing the cost method, and the cost of the long-term equity investment is adjusted by adding orrecovering the investment according to the initial investment cost. Except for the actual payment or thecash dividends or profits included in the consideration that have been announced but not yet paid at thetime of acquiring the investment, the Company recognizes the current investment income according toits share of cash dividends or profits declared to be distributed by the investee.

2) Equity method

The Company’s long-term equity investments in associates and joint ventures are accounted forusing the equity method, and some of the equity investments in associates that are indirectly held byventure capital institutions, mutual funds, trust companies or similar entities including investment-linkedinsurance funds are measured at fair value through profit or loss. When the initial investment cost of along-term equity investment is greater than the investment, the initial investment cost of the long-termequity investment shall not be adjusted by the difference between the fair value of the identifiable net

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 136

assets of the investee; if the initial investment cost is less than the investment, the difference betweenthe fair value of the identifiable net assets of the investee should be included in the current profit or lossAfter obtaining the long-term equity investment, the Company shall recognize the investment incomeand other comprehensive income according to the share of net profit and loss and other comprehensiveincome realized by the investee that is entitled or should be shared respectively, and adjust the carryingamount of the long-term equity investment; and reduces the carrying amount of the long-term equityinvestment based on portion of the profit or cash dividend declared to be distributed by the investee; andfor other changes in the owners’ equity other than the net profit or loss, other comprehensive income andprofit distribution of the investee, the carrying amount of the long-term equity investment is adjusted andincluded in the owners’ equity.

When recognizing the share of the net profit or loss of the investee, the Company shall adjust andrecognize the net profit of the investee based on the fair value of the identifiable assets of the investee atthe time of obtaining the investment. The unrealized internal transaction gains and losses between theCompany and the associates and joint ventures shall be offset against the portion attributable to theCompany in accordance with the proportion to be enjoyed, on the basis of which the investment gainsand losses are recognized.When the Company recognizes the losses incurred by the investee that it should bear, it shall dealwith it in the following order: Firstly, offset the carrying amount of the long-term equity investment.Secondly, if the carrying amount of the long-term equity investment is not enough to be offset, theinvestment loss will continue to be recognized to the extent of carrying amount of other long-term equitythat virtually constitutes a net investment in the investee, and the carrying amount of the long-termreceivables is offset. Finally, after the above-mentioned treatment, if the enterprise still bears additionalobligations in accordance with the investment contract or agreement, the projected liabilities arerecognized according to the estimated obligations and included in the current investment losses. If theinvestee realizes profit in the future period, after deducting the unrecognized loss share, and the reductionof book balance of the recognized projected liabilities and recovery of other long-term equity that virtuallyconstitutes a net investment in the investee and carrying amount of long-term equity investment asopposite to the order above, the Company shall restore the investment income.

(3) Conversion of accounting methods for long-term equity investment

1) Fair value measurement to equity method accounting

If the equity investment originally held by the Company that does not have control, joint control orsignificant influence on the investee, which is accounted for according to the recognition andmeasurement criteria of financial instruments, can exert significant influence on the investee or jointlycontrol but does not constitute control over it due to additional investment and otherwise, its initialinvestment cost shall be the sum of the fair value of the equity investment originally held in accordancewith the “Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement ofFinancial Instruments” and new investment cost after being accounted for under the equity method.

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 137

If the initial investment cost accounted for under the equity method is less than the fair value share ofthe identifiable net assets of the investee on the additional investment date determined by the newshareholding ratio after the additional investment, the carrying amount of the long-term equity investmentis adjusted and included in the current non-operating income.

2) Fair value measurement or equity method accounting to cost method accounting

If the equity investment originally held by the Company, that does not have control, joint control orsignificant influence on the investee and which is accounted for in accordance with the financialinstrument recognition and measurement criteria, or the long-term equity investment originally held inassociates or joint venture, can exercise control over the investee not under common control due toadditional investment or otherwise, in the preparation of individual financial statements, the sum of thecarrying amount of the equity investment originally held plus the new investment cost shall be regarded asthe initial investment cost after being accounted for under the cost method.

The other comprehensive income recognized by the equity method in respect of the equityinvestment originally held before the purchase date is accounted for on the same basis as the investeedirectly disposes of the relevant assets or liabilities when the investment is disposed of.

If the equity investment held before the purchase date is accounted for in accordance with therelevant provisions of the “Accounting Standards for Business Enterprises No. 22 – Recognition andMeasurement of Financial Instruments”, the cumulative fair value changes originally included in othercomprehensive income are transferred to current profit or loss when the cost method is adopted.

3) Equity method accounting to fair value measurement

If the Company loses joint control or significant influence on the investee due to the disposal of part ofthe equity investment or otherwise, the remaining equity after disposal shall be accounted for according tothe “Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement of FinancialInstruments”. The difference between the fair value and the carrying amount on the date of losing jointcontrol or significant impact is recognized in profit or loss.

The other comprehensive income recognized in respect of the original equity investment using theequity method is accounted for on the same basis as the investee directly disposes of the relevant asset

4) Cost method to equity method

Where the Company loses control over the investee due to the disposal of part of the equityinvestment, etc., in the preparation of individual financial statements, if the remaining equity after disposalcan exercise joint control or significant influence on the investee, the equity method is adopted foraccounting, and the remaining equity is deemed to be adjusted under the equity method when it isacquired.

5) Cost method to fair value measurement

Where the Company loses control over the investee due to the disposal of part of the equityinvestment, etc., in the preparation of individual financial statements, if the remaining equity after disposalcannot jointly control or exert significant influence on the investee, the relevant provisions of the

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 138

“Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement of FinancialInstruments” are adopted. The difference between the fair value and the carrying amount on the date ofloss of control is recognized in profit or loss for the current period.

(4) Disposal of long-term equity investment

For the disposal of long-term equity investment, the difference between the carrying amount and theactual purchase price shall be included in the current profit or loss. For the long-term equity investmentaccounted for using the equity method, when the investment is disposed of, the part that is originallyincluded in the other comprehensive income is accounted for in the same proportion based on the samebasis as the investee directly disposes of the relevant assets or liabilities.If the terms, conditions and economic impact of each transaction on disposal of the equity investmentin a subsidiary satisfy one or more of the following cases, the multiple transactions are treated as apackage transaction:

1) The transactions are made simultaneously or with consideration of each other’s influence;

2) The transactions as a whole can achieve a complete business outcome;

3) The occurrence of a transaction depends on the occurrence of at least one other transaction;

4) A transaction is uneconomic alone, but it is economic when considered together with othertransactions

Where the loss of control over the original subsidiary due to disposal of part of the equity investmentor otherwise which is not a package transaction, the individual financial statements and consolidatedfinancial statements shall be classified for relevant accounting treatment:

a) In the individual financial statements, the difference between the carrying amount of the disposedequity and the actual purchase price is included in the current profit or loss. If the remaining equity afterdisposal can exert joint control or significant influence on the investee, it shall be accounted for under theequity method, and the residual equity shall be deemed to be adjusted by equity method when it isacquired; if the remaining equity after disposal cannot exert joint control or significant influence over theinvestee, it shall be accounted for by the relevant provisions of the “Accounting Standards for BusinessEnterprises No. 22 – Recognition and Measurement of Financial Instruments”, and the differencebetween the fair value and the carrying amount on the date of loss of control is included in the currentprofit or loss.

b) In the consolidated financial statements, for each transaction before the loss of control over thesubsidiary, capital reserve (share premium) is adjusted for the difference between the disposal price andthe share of the net assets corresponding to the disposed long-term equity investment that the subsidiaryhas continuously calculated from the date of purchase or the merger date; if the capital reserve isinsufficient to offset, the retained earnings will be adjusted; when the control of the subsidiary is lost, theremaining equity shall be re-measured according to its fair value on the date of loss of control. The sum ofthe consideration for the disposal of the equity and the fair value of the remaining equity, less the share ofthe net assets that that the original subsidiary has continuously calculated from the date of purchase

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 139

calculated based on the original shareholding, is included in the investment income for the period of lossof control, while reducing goodwill. Other comprehensive income related to the original subsidiary’s equityinvestment will be converted into current investment income when control is lost.If each transaction on disposal of the equity investment in a subsidiary until the loss of control is apackage transaction, each transaction is accounted for as a transaction to dispose of the equityinvestment in the subsidiary with loss of control, which is distinguished between individual financialstatements and consolidated financial statements:

a) In the individual financial statements, the difference between each disposal price and the carryingamount of the long-term equity investment corresponding to the disposed equity before the loss of controlis recognized as other comprehensive income, and when the control is lost, it is transferred to profit orloss for the period of the loss of control.

b) In the consolidated financial statements, the difference between each disposal price and thedisposal investment that has the share of the net assets of the subsidiary before the loss of control isrecognized as other comprehensive income, and transferred to profit or loss for the period of the loss ofcontrol.

(5) Judging criteria for joint control and significant influence

If the Company collectively controls an arrangement with other parties in accordance with therelevant agreement, and the activity decision that has a significant impact on the return of thearrangement needs to be unanimously agreed upon by the parties sharing the control, it is consideredthat the Company and other parties jointly control an arrangement, which is a joint arrangement.

If the joint arrangement is reached through a separate entity and it determines that the Company hasrights to the net assets of the separate entity in accordance with the relevant agreement, the separateentity is regarded as a joint venture and is accounted for using the equity method. If it is judged accordingto the relevant agreement that the Company does not have rights to the net assets of the separate entity,the separate entity acts as a joint operation, and the Company recognizes the items related to the shareof the interests of the joint operation and conducts accounting treatment in accordance with the relevantASBEs.

Significant influence refers to the investor’s power to participate in the decision-making of thefinancial and operating policies of the investee, but it cannot control or jointly control the formulation ofthese policies with other parties. The Company has a significant influence on the investee under one ormore of the following situations and taking into account all facts and circumstances: (1) it is representedon the board of directors or similar authorities of the investee; (2) it involves in the formulation of financialand operating policy of the investee; (3) it has important transactions with the investee; (4) it dispatchesmanagement personnel to the investee; (5) it provides key technical information to the investee.

18. Investment Property

Investment property refers to property held for the purpose of earning rent or capital appreciation, orboth, including leased land use rights, land use rights held and prepared for transfer after appreciation,

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 140

and leased buildings. Besides, for empty constructions that the Company held for rent lately but with thewritten resolution from the board stated that it will be used as operating lease and that intention will notbe changed in short-term, it can be treated as investment property.

The Company’s investment property is recorded at its cost, and the cost of purchased investmentproperty includes the purchase price, related taxes and other expenses directly attributable to the asset;the cost of self-built investment property is composed of the necessary expenses incurred before theasset is ready for expected use.

The Company adopts the cost model for subsequent measurement of investment property, anddepreciates or amortizes buildings and land use rights according to their estimated service life and netresidual value. Expected useful life, residual value and annual depreciation rate are as follows:

CategoryEstimated useful life (years)Residual value rate %Depreciation rate %
Property20-355.004.80-2.70

When the use of investment property is changed to self-use, the Company converts the investmentproperty into fixed assets or intangible assets from the date of change. When the use of self-use propertychanges to rental earning or capital appreciation, the Company converts fixed assets or intangible assetsinto investment property from the date of change. When a conversion occurs, the carrying amount beforeconversion is used as the converted value

The investment property is derecognized when the investment property is disposed of, orpermanently withdrawn from use and is not expected to obtain economic benefits from its disposal. Theamount of disposal income from the sale, transfer, retirement or damage of the investment property afterdeducting its carrying amount and related taxes and expenses is recognized in profit or loss for thecurrent period.

19. Fixed assets

(1) Recognition conditions of fixed assets

Fixed assets refer to tangible assets held for the purpose of producing goods, providing labourservices, renting or operating management, and having a useful life of more than one fiscal year. Fixedassets are recognized when they meet all of the following conditions:

1) the economic benefits associated with the fixed assets are likely to flow into the enterprise;

2) the cost of the fixed assets can be reliably measured.

(2) Initial measurement of fixed assets

The fixed assets of the Company are initially measured at cost.

1) The cost of outsourcing fixed assets includes the purchase price, import duties and other relatedtaxes and fees, as well as other expenses that can be directly attributed to the assets before they reachtheir intended usable state.

2) The cost of self-built fixed assets is determined by the necessary expenditures incurred before theassets reach their expected usable state.

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 141

3) For fixed assets invested by investors, the value agreed in the investment contract or agreement isregarded as the book value, but the value agreed in the contract or agreement is not accounted for at fairvalue.

4) If the payment for the purchase of fixed assets is delayed beyond the normal credit conditions, andis of a financing nature in essence, the cost of fixed assets is determined on the basis of the present valueof the purchase price. The difference between the actual payment and the present value of the purchaseprice is recorded in the current profit or loss during the credit period, except where it should be capitalized.

(3) Subsequent measurement and disposal of fixed assets

1) Depreciation of fixed assets

Depreciation of fixed assets is accrued over the estimated useful life based on its recorded value lessthe estimated net residual value. The fixed assets that have been provided for impairment losses aredepreciated in the future period based on the carrying amount after deducting the impairment provisionand the remaining useful life.

The Company determines the service life and estimated net residual value of fixed assets based onthe nature and use of fixed assets. At the end of the year, the service life, the estimated net residualvalue and the depreciation method of the fixed assets are reviewed. If there is a difference from theoriginal estimate, corresponding adjustments will be made.

The depreciation method, depreciation period and annual depreciation rate of various fixed assetsare as follows.

ClassMethod of depreciationEstimated useful life (years)Residual value rate %Depreciation rate %
Property and plantStraight-line20-355.004.80-2.70
Machinery and equipmentStraight-line105.00-10.009.50-9.00
Electronic equipmentStraight-line55.0019.00
Motor vehiclesStraight-line55.0019.00
OthersStraight-line55.0019.00

2) Subsequent expenditures on fixed assets

Subsequent expenditures related to fixed assets that meet the conditions for recognition of fixedassets are included in the cost of fixed assets; those that do not meet the conditions for recognition offixed assets are included in the current profit or loss when they occur.

3) Disposal of fixed assets

When a fixed asset is disposed of or no economic benefit is expected to result from its use or disposal,the fixed asset is derecognized. The amount of disposal income from sale, transfer, retirement ordamage of the fixed asset after deducting its book value and related taxes is included into the currentprofit or loss.

20. Construction in Progress

(1) Initial measurement of construction in progress

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 142

The self-built construction in progress of the Company is measured at the actual cost, which isdetermined by the necessary expenses incurred before the construction of the asset reaches theintended usable condition, including the cost of engineering materials, labour costs and relevant taxespayable, capitalized borrowing costs and indirect costs that should be apportioned. The Company’sconstruction in progress is classified into projects when in accounting

(2) Criteria for and time point of construction in progress to convert into fixed asset

The total expenditure incurred before the construction in progress project is constructed to reach theintended usable condition shall be recorded as the book value of the fixed assets. For the construction inprogress built which has reached the intended usable condition, but has not yet completed the finalaccounts, since the date of reaching expected use condition, according to the project budget, cost oractual project costs, it shall be converted into fixed assets at the estimated value, and fixed assets shallbe depreciated in accordance with the depreciation policy of the Company for fixed assets. After thecompletion of the final accounts, the original estimated value shall be adjusted according to the actualcost, but the original depreciation amount shall not be adjusted.

21. Borrowing Costs

(1) Recognition principle for capitalization of borrowing costs

If the borrowing costs of the Company can be directly attributable to the acquisition and constructionor production of assets eligible for capitalization, it shall start capitalization and be included in the cost ofrelevant assets in the case of eligible for capitalization; other borrowing costs shall be recognized asexpenses at the time of occurrence and shall be included in the current profit or loss.

Assets that are eligible for capitalization are assets that require a long period of time to purchase orproduce activities to achieve fixed assets, investment property and inventory that are available forintended use or sale.

Borrowing costs begin to capitalize when all of the following conditions are met:

1) Assets expenditure has occurred, including expenditure incurred in the form of cash payment,transfer of non-cash assets or assuming of interest-bearing debt for the acquisition and construction orproduction of assets eligible for capitalization;

2) Borrowing costs have already occurred;

3) The purchase and construction or production activities necessary for the assets to reach theintended use or saleable status have started.

(2) Capitalization period of borrowing costs

The period of capitalization refers to the period from the point of time when the borrowing costs arecapitalized to the point of time where the capitalization is stopped, excluding the period during which theborrowing costs are suspended from capitalization.

The borrowing costs shall cease to be capitalized when the assets acquired or produced that meetthe conditions for capitalization are ready for intended use or sale.

When a part of the assets purchased or produced that meet the capitalization conditions are

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 143

completed and can be used alone, such part of the assets shall stop capitalization of borrowing costs.Where each part of the assets purchased or produced is completed separately, but must wait until thewhole is completed or can be sold externally, the capitalization of the borrowing costs shall be stoppedwhen the assets are completed as a whole.

(3) Suspension of capitalization period

If the assets that meet the capitalization conditions are interrupted abnormally during the constructionor production process and the interruption time lasts for more than 3 months, the capitalization ofborrowing costs shall be suspended; the borrowing costs shall continue to be capitalized if the acquisitionor production of assets eligible for capitalization is necessary to meet the required usable status or theavailability of sales. The borrowing costs incurred during the interruption are recognized as profit or lossfor the current period and the borrowing costs continue to be capitalized until the acquisition or productionof assets is resumed.

(4) Calculation for capitalization amount of borrowing costs

Interest charges on special borrowings (excluding interest income on unused borrowings depositedin the bank, or investment income on temporary investment) and their ancillary expenses shall becapitalized before the assets purchased or produced that meet the capitalization conditions are ready forintended use or sale.

The amount of capitalized interest on general borrowings is calculated by the weighted average ofthe excess portion of the accumulative asset expenditures over the special borrowings multiplied by thecapitalization rate of general borrowings. The capitalization rate is determined based on the weightedaverage interest rate of general borrowings.

Where there is a discount or premium in the borrowings, the interest amount shall be adjusted inaccordance with the effective interest rate method to determine the discount or premium amount that shallbe amortized during each accounting period.

22. Right-of-use Assets

The Company initially measures the right-to-use assets at cost, which includes:

(1) initial measurement amount of lease liabilities;

(2) lease payments made before or at the beginning of the lease term, and deduction of therelevant amount of rental incentives if any;

(3) initial direct expenses incurred by the Company;

(4) expected costs to be incurred by the Company for dismantling and removing leased assets,restoring the site of leased assets or restoring leased assets to the state agreed in the lease terms(excluding costs incurred for the production of inventory)After the beginning of the lease term, the Company adopts the cost model for subsequentmeasurement of the right-of-use assetsIf it is reasonably certain to obtain the ownership of the leased assets at the expiration of the leaseterm, the Company shall depreciate the leased assets within the remaining useful life of the leased

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 144

assets. If it is not reasonably certain to obtain the ownership of the leased assets at the expiration of thelease term, the Company shall depreciate the leased assets within the shorter of the lease term and theremaining useful life of the leased assets. For the right-of-use assets with impairment provision,depreciation shall be calculated based on the book value after deduction of impairment provision inaccording with the above principles in future periods.

23. Intangible Assets and Development Expenditure

Intangible assets refer to the identifiable non-monetary assets owned or controlled by the Companywhich have no physical form, including land use rights, software and trademark use rights.

(1) Initial measurement of intangible assets

The cost of externally purchased intangible assets includes the purchase price, relevant taxation andother expenses directly attributable to bringing the assets to expected usage. If payment for the purchaseprice of intangible assets is delayed beyond normal credit conditions and is in fact financing in nature, thecost of the intangible assets is determined based on the present value of the purchase price.

For intangible asset obtained through debt restructuring for offsetting the debt of the debtor, its initialmeasurement cost includes the fair value of the waived creditor’s rights and taxes and other costs directlyattributable to bringing the asset to expected usage. The difference between the fair value of the waivedcreditor’s rights and the carrying amount shall be recognized in profit or loss for the period.

The book value of intangible asset received in exchange for non-monetary asset is based on the fairvalue of the asset surrendered and relevant taxes payable, provided that the exchange of nonmonetaryasset has a commercial substance and the fair value of both the asset received and the assetsurrendered can be reliably measured, except there is definite evidence that the fair value of the assetreceived is more reliable; for exchange of non-monetary asset that cannot satisfy the above conditions,the cost of the intangible asset received is based on the carrying amount of the asset surrendered andrelevant taxes payable, and no profit or loss is recognized.

For intangible asset obtained through business absorption or combination under common control, itsbook value is determined by the carrying amount of the combined party; for intangible asset obtainedthrough business absorption or merger not under common control, its book value is determined by the fairvalue of the intangible asset.

The cost of an internally developed intangible asset includes the materials consumed in developingthe intangible asset, labour costs, registration fees, amortization of other patented rights and licensedrights used during the development process, interest expenses meeting capitalization conditions, andother direct costs for bringing the intangible asset to expected usage.

(2) Subsequent measurement of intangible assets

The Company determines the useful life of intangible assets on acquisition, which are classified asintangible assets with limited useful life and indefinite useful life.

1) Intangible assets with a limited useful life

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 145

Intangible assets with a limited useful life are depreciated using straight line method over the termduring which they bring economic benefits to the Company. The estimated life and basis for the intangibleassets with a limited useful life are as follows:

ItemEstimated useful lifeAmortization method
Land use right50Straight-line
Software systems5Straight-line
Right to use the trademark5-10Straight-line

The useful life and depreciation method of intangible assets with a limited useful life are reassessedat the end of each period. If there is a difference from the original estimate, corresponding adjustmentswill be made.

Upon re-assessment, there was no difference in the useful life and depreciation method of intangibleassets from the previous estimates at the end of the period.

(3) Specific basis for determining the research stage and developmentstage of internal research and development projects of the Company

Research stage: a stage of scheduled innovative investigations and research activities for theacquisition and understanding of new scientific or technical knowledge.

Development stage: before the commercial production or use, the research results or otherknowledge will be applied to a plan or design to produce new or substantial improvements in materials,devices, products and other activities.

The expenditure of the research stage of the internal research and development project is included inthe current profit or loss at the time of occurrence

(4) Specific standard for capitalization of expenditure in the developmentstage

The expenditure of an internal research and development project in the development stage isrecognized as an intangible asset when meeting all of the following conditions:

1) It is technically feasible to complete the intangible asset so that it can be used or sold;

2) With an intention to complete the intangible asset and to use or sell it;

3) The way the intangible asset generates economic benefits can prove the existence of a market forthe products produced using the intangible asset or a market for the intangible asset itself, and if theintangible asset will be used internally, its usefulness can be proven;

4) Having sufficient technical, financial resources and other resource support to complete thedevelopment of the intangible asset, and having the ability to use or sell the intangible asset;

5) Expenditure attributable to the development stage of the intangible asset can be reliablymeasured.

Expenditures incurred in the development stage that do not meet the above conditions shall beincluded in the current profit or loss at the time of occurrence. The development expenditures which havebeen included in the profit or loss in the previous periods will not be recognized as an asset in the future

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 146

period. The capitalized expenditures in the development phase are shown in the balance sheet asdevelopment expenditures and are converted into intangible assets from the date of the project’s intendeduse.

24. Impairment on Long-term Assets

On the balance sheet date, the Company determines whether there may be a sign of impairment onlong-term assets. If there is a sign of impairment on long-term assets, the recoverable amount isestimated on the basis of a single asset. If it is difficult to estimate the recoverable amount of a singleasset, then determine the recoverable amount of the asset group on the basis of the asset group to whichthe asset belongs.

The estimated recoverable amount of an asset is the higher of its fair value less the cost of disposaland the present value of the expected future cash flow of the asset.

The measurement results of recoverable amount show that when the recoverable amount of anlong-term asset is lower than its book value, the book value of the long-term asset is reduced to itsrecoverable amount. The reduced amount is recognized as an impairment loss on the asset and includedin the current profit or loss, at the same time, asset impairment provision will be made accordingly. Assetimpairment loss shall not be reversed during the subsequent accounting period once recognized.

After the asset impairment loss is recognized, the depreciation or amortization expenses of theimpaired assets will be adjusted accordingly in the future period, so that the assets’ book value afteradjustment (deducting the estimated net residual value) will be systematically apportioned over theremaining useful life of the assets.

No matter whether there is any sign of impairment or not, the impairment test is carried out everyyear for goodwill and intangible assets with an indefinite useful life arising from an enterprise merger.

In the impairment test of goodwill, the book value of goodwill would be apportioned to asset group orportfolio of asset group expected to benefit from the synergy effect of an enterprise merger. When takingan impairment test on the relevant asset group or portfolio of asset group containing goodwill, if there is asign of impairment on the asset group or portfolio of asset group related to the goodwill, the Company firstcalculates the recoverable amount after testing the asset group or portfolio of asset group which does notcontain the goodwill for impairment, and then compares it with the related book value to recognize thecorresponding impairment loss. Next, the Company conducts an impairment test on the asset group orportfolio of asset group which contains the goodwill and compares the book value of the related assetgroup or portfolio of asset group (book value includes the share of goodwill) with the recoverable amount.If the recoverable amount of the related asset group or portfolio of asset group is lower than the bookvalue, the Company will recognize the impairment loss of goodwill.

25. Long-term Deferred Expenses

(1) Amortization method

Long-term deferred expenses refer to expenses that have already been spent by the Company, butshall be apportioned in the current period and the future periods and the benefit period is over 1 year.

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 147

Long-term deferred expenses are amortized in benefit period

(2) Amortization period

CategoryAmortization periodNote
Counter fabrication expenses2-3
Decoration expenses3-5
Others2-3

26. Contract liabilities

The obligation to transfer goods to a customer for which consideration has been received orreceivable is recognized in part as a contract liability

27. Employee Remuneration

Employee remuneration refers to the various forms of remuneration or compensation given by theCompany to obtain the services provided by the employees or to terminate the labour relationship.Employee remuneration includes short-term remuneration, post-employment benefits, terminationbenefits and other long-term employee benefits.

(1) Short-term remuneration

Short-term remuneration refers to the employee compensation other than post-employment benefitsand termination benefits required to be fully paid by the Company within 12 months after the end of theannual reporting period in which the employees render relevant services. During the accounting period inwhich the employees render services, the Company recognizes the short-term remuneration payable asliabilities and includes the same in related asset costs or expenses according to the object which benefitsfrom the services rendered by employees.

(2) Post-employment benefits

Post-employment benefits refer to various forms of remuneration and benefits other than short-termremuneration and termination benefits provided by the Company after the retirement of employees ortermination of labour relationship with the Company in exchange for the services rendered by employees.

The Company’s post-employment benefits is defined contribution plan.

Defined contribution plan of the post-employment benefits mainly refers to the social basicendowment insurance, unemployment insurance, etc. organized and implemented by local labour andsocial security institutions; in addition to social basic endowment insurance and unemployment insurance,employees who retire after 1 January 2009 can voluntarily participate in the Company’s enterprise annuityplan. During the accounting period when employees render services to the Company, amount payablecalculated by the defined contribution plan is recognized as a liability and included in the current profit orloss or related asset costs.

The Company will no longer have any other payment obligations after making the above-mentionedpayments on a regular basis in accordance with the standards and annuity plans prescribed by the State.

(3) Termination benefits

Termination benefits refer to the compensation paid to an employee when the Company terminates

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 148

the employment relationship with the employee before the expiry of the employment contract or providescompensation as an offer to encourage the employee to accept voluntary redundancy. The Companyrecognizes the liabilities arising from the compensation paid to terminate the employment relationshipwith employees and includes the same in the current profit or loss at the earlier date of the following: 1)when the Company cannot reverse the termination benefits due to the plan of cancelling the labourrelationship or the termination benefits provided by the advice of reducing staff; and 2) the Companyrecognizes the cost or expense relative to the payment of termination benefits of restructuring into thecurrent profit or loss.The Company provides internal retirement benefits to employees who accept internal retirementarrangements. The internal retirement benefits refer to the remuneration and the social insurancepremiums paid to the employees who have not reached the retirement age set by the State, andvoluntarily withdrew from the job after approval of the Company’s management. The Company paysinternal retired benefits to an internal retired employee from the day when the internal retirementarrangement begins till the employee reaches the normal retirement age. For internal retirement benefits,the Company conducts accounting treatment in contrast to the termination benefits. When the relatedrecognition conditions of termination benefits are met, the Company will recognize the remuneration andthe social insurance premiums of the internal retired employee to be paid during the period between theemployee’s termination of service and normal retirement date as liabilities and include the same in thecurrent profit or loss in one time. Changes in actuarial assumptions of internal retirement benefits anddifferences arising from the adjustment of welfare standards are included in current profit or loss whenincurred.

(4) Other long-term employee benefits

Other long-term employee benefits refer to all employee benefits except for short-term remuneration,post-employment benefits, and termination benefits. For other long-term employee benefits that meet theconditions of the defined contribution plan, during the accounting period in which the employees provideservices for the Company, the amount that should be paid is recognized as a liability and is included in thecurrent profit or loss or related asset costs. In addition to the above situations, other long-term employeebenefits are actuarially calculated by the independent actuary using the expected cumulative welfare unitmethod on the balance sheet date, and the welfare obligations arising from the defined benefit plans areattributed to the period during which the employees provide services and are included in the current profitor loss or related asset costs.

28. Projected liabilities

(1) Basis for recognition of projected liabilities

The Company will recognize projected liabilities if the obligation relating to contingent matters meetsall of the following conditions:

This obligation is a present obligation assumed by the Company;

The fulfillment of this obligation will probably cause the outflow of economic benefits from the

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 149

Company;The amount of this obligation can be measured reliably.

(2) Measurement method of projected liabilities

The initial measurement of projected liabilities of the Company is based on the best estimate of theexpenditure required for the performance of the related present obligations.

When determining the best estimate, the Company comprehensively considers the risks,uncertainties relating to the contingent matters and time value of currency. If the time value of currencyhas a great influence, the Company determines the best estimate by discounting the related future cashoutflows.

The best estimate is determined in different situations as follow:

If there is a continuous range (or interval) of the required expenditure and the probability of theoccurrence of all the results in the range is the same, the best estimate is determined according to themedian value of the range, which is the average of the upper and lower limit.

Where there is not a continuous range (or interval) of the required expenditure, or there is acontinuous range, but the probability of the occurrence of all the results in the range is different, if thecontingencies involve a single project, the best estimate is determined by the amount which is most likelyto occur; if the contingencies involve a number of projects, the best estimate is determined based onvarious possible results and related probability calculation.

If all or part of the expenses of the Company required to settle projected liabilities are expected to becompensated by a third party and it is basically certain to receive the amount of compensation, it isindependently recognized as an asset. The amount of compensation recognized will not exceed the bookvalue of the projected liabilities.

29. Lease liabilities

The Company initially measures the lease liabilities according to the present value of the unpaidlease payments at the beginning of the lease term. In calculating the present value of lease payments, theCompany adopts the interest rate implicit in the lease as the discount rate. If it is impossible to determinethe interest rate implicit in the lease, the incremental borrowing rate of the Company shall be used as thediscount rate. Lease payments include:

(1) Fixed payments and substantive fixed payments after deducting the relevant amount of leaseincentives;

(2) Variable lease payments depending on an index or rate;

(3) Where the Company reasonably determines that the option will be exercised, the amount of thelease payment includes the exercise price of purchase option;

(4) Where the lease term reflects that the Company will exercise the option to terminate the lease, theamount of the lease payment includes the amount to be paid for the exercise of the option to terminate thelease;

(5) Expected payments based on the guaranteed residual value provided by the Company.

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 150

The Company calculates the interest charges of the lease liabilities for each period of the lease termat a fixed discount rate and includes the same in the profit or loss of the current period or the related assetcosts.Variable lease payments not included in the measurement of lease liabilities shall be included in thecurrent profit or loss or the related asset costs when they actually occur.

30. Share-based payment

(1) Category of share-based payment

The Company’s share-based payments include equity-settled share-based payments and cashsettled share-based payments.

(2) Recognition method of fair value of equity instrument

For options and other equity instruments granted by the Company with an active market, the fairvalue is determined at the active market quotations. For options and other equity instruments granted bythe Company with no active market, option pricing model shall be used to estimate the fair value of theequity instruments. Factors as follows shall be taken into account using option pricing models: theexercise price of the option, the validity of the option, the current price of the target share, the expectedvolatility of the share price, predicted dividend of the share and risk-free rate of the option within thevalidity period.

In determining the fair value of the equity instruments at the date of grant, the Company shallconsider the impact of market conditions in the vesting conditions and non-vesting conditions stated in theshare-based payment agreement. If there are no vesting conditions in the share-based payments, as longas the employees or other parties satisfy the non-market conditions in all of the vesting conditions (suchas term of service) , the Company shall recognize the services rendered as an expense accordingly.

(3) Recognition basis for the best estimate of exercisable equity instruments

On each balance sheet date within the vesting period, the estimated number of exercisable equityinstruments is amended based on the best estimate made by the Company according to the latestavailable subsequent information as to changes in the number of employees with exercisable rights. As atthe exercise date, the final estimated number of exercisable equity instruments should equal the actualnumber of exercisable equity instruments.

(4) Accounting treatment

Equity-settled share-based payments are measured at the fair value of the equity instrumentsgranted to employees. For those exercisable immediately after the grant, they shall be included in therelevant costs or expenses at the fair value of equity instruments at the grant date with an increase incapital reserve accordingly. For those exercisable only after provision of services or satisfaction ofprescribed performance conditions within the vesting period, on each balance sheet date within thevesting period, the Company will recognize the services received in the current period in related costs orexpenses and capital reserves at the fair value of equity instruments on the grant date based on the best

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 151

estimate of the number of exercisable equity instruments. After the vesting period, relevant costs orexpenses and total owners’ equity which have been recognized will not be adjusted.Cash-settled share-based payments are calculated by the fair value of liabilities assumed inaccordance with the Company’s shares or other equity instruments. For those exercisable immediatelyafter the grant, they shall be included in the relevant costs or expenses at the fair value of the liabilitiesassumed by the Company at the grant date with an increase in liabilities accordingly. For cash-settledshare-based payments exercisable only after provision of services or satisfaction of prescribedperformance conditions within the vesting period, on each balance sheet date within the vesting period,the Company will recognize the services received in the current period in costs or expenses andcorresponding liabilities at the amount of fair value of the liabilities assumed by the Company based onthe best estimate of the number of exercisable equity instruments. At each balance sheet date and thesettlement date prior to the settlement of relevant liabilities, the fair value of the liabilities is re-measuredthrough profit or loss.

During the vesting period, if the equity instruments granted are cancelled, the Company will treat thecancelled equity instruments granted as accelerated vesting, and the amount within the remaining periodshould be recognized immediately in profit or loss while recognizing the capital reverse. If employees orother parties can meet non-vesting conditions but do not meet within the vesting period, the Company willtreat it as cancelled equity instruments granted.

31. Revenue

The Company’s revenue mainly come from:

(1) Sales of watch

(2) Precision manufacturing

(3) Property leasing

(1) General principal of revenue recognition

The Group recognizes revenue when the contract performance obligations have been fulfilled i.e. thecustomer has gained control over the relevant goods or services.

Performance obligations means the Company’s commitment to transfer identifiable goods or serviceto clients.

Obtaining control of the relevant goods means that it is able to dominate the use of the goods andderive almost all economic benefits therefrom.

The Company assesses contracts at the beginning date of a contract to identify each performanceobligations contained in a contract and to determine whether each performance obligation is to befinished over a period of time or at a point of time. The Company satisfies a performance obligation overtime if one of the following criteria is met; or otherwise, a performance obligation is satisfied at a certainpoint in time: 1) the customer simultaneously receives and consumes the benefits provided by theCompany’s performance as the Company performs; 2) the customer can control the goods underconstruction during the Company’s performance; 3) the Company’s performance does not create goods

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 152

with an alternative use to it and the Company has a right to payment for performance completed to datethroughout the contract term. Otherwise, the Company recognizes revenue at the point of time.For performance obligation satisfied over time, the Company recognizes revenue over time bymeasuring the progress towards complete satisfaction of that performance obligation. When theoutcome of that performance obligation cannot be measured reasonably, but the Company expects torecover the costs incurred in satisfying the performance obligation, the Company recognizes revenueonly to the extent of the amount of costs incurred until it can reasonably measure the outcome of theperformance obligation

(2) Detailed method for revenue recognition

The Company has three main business sectors: sales of watch, precision manufacturing andproperty leasing. Based on the Company’s business mode and terms of settlement, the Company setdetailed method of revenue recognition method as follows:

1) Sales of watch

Sale of watch belongs to fulfilling performance obligations at a point of time.

① Online sales

Revenue shall be recognized at the point that the goods are dispatched and the customer confirmedreceived the goods.

② Offline sales

Revenue shall be recognized at the point when the goods are delivered and payment by customer iscollected.

③ Consignment sale

The Company recognizes revenue when the Company receives the detail of the sales list fromdistributors and confirms that the control over goods ownership were transferred to the purchaser.

④ Sale of consigned goods from others

Under Sale of consigned goods from others, the Group recognizes revenue in net amount when itdelivered consigned sale goods to customer and confirms that control over the ownership of goods weretransferred to the purchaser.

2) Precision manufacturing

Precision manufacturing business belongs to fulfilling performance obligations at a point of time.Revenue from domestic sales shall be recognized when the goods are delivered and the economicbenefit associated with the goods is probable to flow into the Company. Revenue from export shall berecognized when the following criteria is satisfied: The Company declared the good at custom; obtainedbill of lading; the right of collecting payment is obtained and its probable that the economic benefitassociated with the goods flows into the Company.

3) Property leasing

Refer to Note IV 35. (4) for details.

(3) Revenue treatment principles for specific transactions

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 153

1) Contracts with sales return provisions

When the customer obtains control of the relevant goods, revenue is recognized based on theamount of consideration expected to be received due to the transfer of goods to the customers (exclusiveof the amount expected to be refunded due to the return of sales) , while liability is recognized based onthe amount expected to be refunded due to the return of sales.The carrying amount of goods expected to be returned at sales of goods, after deduction of costsexpected to incur for recovery of such goods (including impairment of value of the returned goods) , willbe accounted for under the item of “Right of return assets”.

2) Contracts with quality assurance provisions

The Company assesses whether a separate service is rendered in respect of the quality assurancebesides guaranteeing the sales of goods to customers are in line with the designated standards. Whenadditional service is provided by the Company, it is considered as a single performance obligation andunder accounting treatment according to the standards on revenue; otherwise, quality assuranceobligations will be under accounting treatment according to the accounting standards on contingentmatters

32. Contract costs

(1) Contract performance cost

The Company recognizes the cost of contract performance as an asset for the cost of performing thecontract as meeting all of the following conditions:

1) The cost is directly related to a current or expected contract, including direct labour, directmaterials, manufacturing expenses (or similar expenses) , costs clearly to be borne by the customer, andother costs incurred solely for the contract;

2) This cost increases the resources that the company will use to fulfill its performance obligations inthe future.

3) The cost is expected to be recovered

The asset will be presented under inventory or other non-current assets based on the length of itsamortization period.

(2) Contract obtainment cost

If the incremental cost of the Company is expected to be recovered, the contract acquisition cost isrecognized as an asset. Incremental cost refers to the cost that the Company will not occur withoutobtaining a contract, such as sales commission. For the amortization period not exceeding one year, it isincluded in the current profit or loss when it occurs.

(3) Amortization of contract costs The Company recognizes the contract performance cost and thecontract acquisition cost on the same basis as the commodity income related to the contract cost asset,and amortizes it at the time when the performance obligation is performed or in accordance with theperformance of the performance obligation, and is included in the current profit or loss.

(4) Contract cost impairment For assets related to contract costs, if the book value is higher than the

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 154

difference between the remaining consideration expected to be received by the Company for transfer ofthe goods related to the assets and the estimated cost of transferring the relevant goods, the excessshould be depreciated and confirmed as an asset impairment loss

If the factors caused impairment changed after impairment provision is accrued, impairment provisionshall be reversed and included in current period profit or loss but the carrying amount of asset after thereversal shall not exceed the carrying amount at the reversal date as if there was no impair.

33. Government Subsidies

1. Classification

Government subsidies refer to monetary and non-monetary assets received from the governmentwithout compensation, however excluding the capital invested by the government as a corporate owner.According to the subsidy objects stipulated in the documents of relevant government, governmentsubsidies are divided into subsidies related to assets and subsidies related to income.

Government subsidies related to assets are obtained by the Company for the purposes of acquiring,constructing or otherwise forming long-term assets. Government subsidies related to income refer to thegovernment subsidies other than those related to assets

2. Recognition of government subsidies

Where evidence shows that the Company complies with relevant conditions of policies for financialsupports and is expected to receive the financial support funds at the end of the period, the amountreceivable is recognized as government subsidies. Otherwise, the government subsidy is recognizedupon actual receipt.

Government subsidies in the form of monetary assets are stated at the amount received orreceivable. Government subsidies in the form of non-monetary assets are measured at fair value; if fairvalue cannot be reliably obtained, a nominal amount (RMB1) is used. Government subsidies that aremeasured at nominal amount shall be recognized in the current profit or loss directly.

3. Accounting treatment

The Company determines whether a government subsidy shall use gross method or net methodbased on its economical substance. In general, only one method is used for one category or similargovernment subsidy and it shall be used in a consistent way.

Government subsidies related to assets are recognized as deferred income, and are recognized,under reasonable and systematic approach, in profit and loss in each period over the useful life of theconstructed or purchased assets;

Government subsidies related to income aiming at compensating for relevant expenses or losses tobe incurred by the enterprise in subsequent periods are recognized as deferred income, and arerecognized in current profit or loss when relevant expenses or losses are recognized. Governmentsubsidies aiming at compensating for relevant expenses or losses of the enterprise that are alreadyincurred are charged to current profit or loss once received.

Government subsidies related to daily activities of enterprises are included in other income;

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 155

government subsidies that are not related to daily activities of enterprises are included in non-operatingincome and expense.Government subsidies related to the discount interest received from policy-related preferential loansoffset the relevant borrowing costs; if the policy-based preferential interest rate loan provided by thelending bank is obtained, the borrowing amount actually received shall be taken as the recording value ofthe borrowings, and borrowing cost should be calculated using the preferential interest rate according tothe loan principal and the policy.When it is required to return recognized government subsidy, if such subsidy is used to write downthe carrying value of relevant assets on initial recognition, the carrying value of the relevant assets shallbe adjusted; if there is balance of relevant deferred income, it shall be written down to the book balance ofrelevant deferred income, and the excess is included in the current profit or loss; where there is norelevant deferred income, it shall be directly included in the current profit or loss

34. Deferred Income Tax Assets and Deferred Income Tax LiabilitiesDeferred income tax assets and deferred income tax liabilities are measured and recognized basedon the difference (temporary difference) between the taxable base of assets and liabilities and book value.On balance sheet date, the deferred income tax assets and deferred income tax liabilities are measuredat the applicable tax rate during the period when it is expected to recover such assets or settle suchliabilities.

(1) Criteria for recognition of deferred income tax assets

The Company recognizes deferred income tax assets arising from deductible temporary difference tothe extent it is probably that future taxable amount will be available against which the deductibletemporary difference can be utilized, and deductible losses and taxes can be carried forward tosubsequent years. However, the deferred income tax assets arising from the initial recognition of assetsor liabilities in a transaction with the following features are not recognized: 1) the transaction is not abusiness combination; 2) neither the accounting profit or the taxable income or deductible losses will beaffected when the transaction occurs.For deductible temporary difference in relation to investment in the associates, correspondingdeferred income tax assets are recognized in the following conditions: the temporary difference isprobably reversed in a foreseeable future and it is likely that taxable income is obtained for deduction ofthe deductible temporary difference in the future.

(2) Criteria for recognition of deferred income tax liabilities

The Company recognizes deferred income tax liabilities on the temporary difference between thetaxable but not yet paid taxation in the current and previous periods, excluding:

1) temporary difference arising from the initial recognition of goodwill;

2) a transaction or event arising from non-business combination, and neither the accounting profit orthe taxable income (or deductible losses) will be affected when the transaction or event occurs;

3) for taxable temporary difference in relation to investment in subsidiaries or associates, the time for

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 156

reversal of the temporary difference can be controlled and the temporary difference is probably notreversed in a foreseeable future

(3) When all of the following conditions are satisfied, deferred income tax assetsand deferred income tax liabilities shall be presented on a net basis

1) An enterprise has the statutory right to settle the current income tax assets and current income taxliabilities at their net amounts;

2) The deferred income tax assets and deferred income tax liabilities relate to income taxes levied bythe same taxation authority on either the same taxable entity or different taxable entities which intendeither to settle current income tax assets and current income tax liabilities on a net basis, or to realize theassets and settle the liabilities simultaneously, in each future period in which significant amounts ofdeferred tax assets or liabilities are expected to be recovered or settled.

35. Lease

On the commencement date of the contract, the Company evaluates whether the contract is a leaseor contains a lease. If one party to a contract gives up the right to control the use of one or moreidentifiable assets for a period of time in exchange for consideration, the contract is a lease or contains alease.

(1) Splitting a lease contract

When the contract contains a number of separate leases, the Company will split the contract intoseparate leases for accounting individually.

When the contract contains both leasing and non-leasing parts, the Company will split the leasingand non-leasing parts. The leasing part shall be accounted for in accordance with the lease standards,and the non-leasing part shall be accounted for in accordance with other applicable accountingstandards for business enterprises

(2) Combination of lease contracts

When two or more lease-containing contracts concluded by the Company with the same trader or itsrelated parties at the same time or at a similar time meet one of the following conditions, the Companyshall merge them into one contract for accounting:

1) Such two or more contracts are concluded for general commercial purposes and constitute apackage of transactions. If these are not considered as a whole, these overall commercial purposescannot be recognized.

2) The amount of consideration for a contract in such two or more contracts depends on the pricing orperformance of other contracts.

3) The right-of-use assets transferred by such two or more contracts together constitute a separatelease

(3) Accounting treatment for the Company as a lessee

On the commencement date of lease term, the Company recognizes right-of-use assets and lease

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 157

liabilities for leases, in addition to short-term leases and low-value asset leases with simplified treatment

(1) Short-term lease and low value lease

Short-term lease refers to a lease that does not include purchase options and has a lease term notexceeding 12 months. Low-value asset lease refers to the lease with lower value when a single leasedasset is a new assetThe Company does not recognize right-of-use assets and lease liabilities for short-term lease and lowvalue lease. The payment of such leases shall be charged to profit or loss using straight-line method orother systematic method.

(2) Refer to Note IV. 22 and Note IV. 29 for accounting policies for right-of-use assets and leaseliabilities.

(4) Accounting treatment for the Company as a lessor

1) Classification of leases

The Company divides leases into financial leases and operating leases on the start date of the lease.Financial lease refers to a lease that essentially transfers almost all of the risks and rewards related tothe ownership of leased assets. Its ownership may or may not be transferred eventually. Operatingleases refer to leases other than financial leases.

If a lease has one or more of the following characteristics, the Company usually classifies it as afinancial lease:

1) At the expiry of the lease term, the ownership of the leased assets is transferred to the lessee.

2) The lessee has the option to purchase the leased assets, and the purchase price set by the lesseeis low enough compared with the expected fair value of the leased assets when exercising the option.Therefore, it can be reasonably determined on the lease start date that the lessee will exercise the option.

3) Although the ownership of the assets is not transferred, the lease term accounts for the majority ofthe life of the leased assets.

4) On the commencement date of the lease, the present value of the lease receipts is almost equal tothe fair value of the leased assets.

5) The nature of leased assets is special. If there is no major transformation, only the lessee can usethem

If one or more of the following conditions exist in a lease, it may also be classified as a financiallease:

1) If the lessee stops the lease, the lessee shall bear the losses caused by the termination of thelease to the lessor.

2) The profits or losses caused by the fluctuation of the fair value of the balance of assets belong tothe lessee.

3) The lessee can continue to lease far below the market level for the next period.

(2) Accounting treatment for financial leases

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 158

On the commencement date of lease term, the Company recognizes the financial lease receivable onthe financial leases and derecognizes the financial lease assets.When the initial measurement of the financial lease receivable is made, the book value of thefinancial lease receivable is the sum of the unsecured balance and the present value of lease receiptsthat have not yet been received at the beginning of the lease term discounted at the interest rate implicit inthe lease. The lease receipts include:

1) Fixed payments and substantive fixed payments after deducting the relevant amount of leaseincentives;

2) Variable lease payments depending on an index or rate;

3) In the case of reasonably determining that the lessee will exercise the purchase option, the leasereceipts include the exercise price of purchase option;

4) If the lease term reflects that the lessee will exercise the option to terminate the lease, the leasereceipts include the amount to be paid by the lessee in exercising the option to terminate the lease;

5) Guarantee residual value provided to the lessor by the lessee, the party concerned with the lesseeand an independent third party with financial capacity to fulfill the guarantee obligation

The Company calculates and recognizes the interest income for each period of the lease term basedon the fixed interest rate implicit in the lease, and the variable lease payments which are obtained and notincluded in the net rental investment amount are included in the profit or loss of the period when theyactually occur.

(3) Accounting treatment for operating leases

The Company adopts the straight line method or other systematic and reasonable method torecognize the lease receipts from operating leases as rental income during each period of the lease term.Capitalization of the initial direct expenses incurred in connection with operating leases shall beapportioned on the same basis as the recognition of rental income during the lease term, and shall berecorded in the profit or loss of the current period. Variable lease payments obtained in connection withoperating leases that are not incorporated in the lease receipts shall be incorporated in the profit or loss ofthe period when they actually occur.

36. Termination of business

The Company recognizes components as termination of business components if one of the followingcondition is met and that the component has already been disposed or classified as held-for-sale assetsand identifiable.

(1) The component represents a stand along major business or a stand along major area inconducting business.

(2) The component is part of plan connecting to disposal of a stand along major business or majorarea of conducting business.

(3) The component is a subsidiary that obtained specifically for resale.

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 159

Operating profit or loss such as the impairment loss and the amount of reversal shall be presented inincome statement as profit or loss from terminated business.

37. 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 the re-purchase are charged in the cost of treasury shares. Consideration andtransaction expenses paid during the share re-purchase shall decrease shareholder’s equity. No gain orlosses 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’scarrying amount shall be charged to capital reserve, if the capital reserve is not sufficient to offset, surplusreserve and retained earing shall be offset. If the treasury share is to written-off, the share capital shall bedecreased based on the face value of shares and the difference between the carrying amount and its facevalue shall offset the capital reserve. If the capital reserve is not sufficient to offset, deducting surplusreserve and retained earnings.

38. Changes in significant accounting policies and accounting estimates

(1) Changes in significant accounting policies

Details of and reasons for the changes in accounting policiesApproval processNote
Accounting Standards for Business Enterprises No. 21 – LeasesApproved by the 27th meeting of the 9th Session of the Board

Other explanations:

Impact on the Company from the adoption of the new lease standard

The Company adopts Accounting Standards for Business Enterprises No. 21 – Leases from 1January 2021. Refer to Note IV for details of revised accounting policies.

For a contract which has existed before the initial execution date, the Company does not re-evaluatewhether it is a lease or contains a lease at the initial execution date, and does not adopt the accountingpolicies below for the contract which is not identified as containing a lease under the original leasestandards before the initial execution date, and adopts the accounting policies below only for the contractwhich is identified as a lease under the original lease standards before the initial execution date and thecontract whose commencement date is later than the initial execution date

Under the new lease standard, the Company choose to adjust the balance of retained earnings andother related items in the financial statements at the beginning of the year of initial adoption of suchstandard (1 January 2021) based on the cumulative effect of initial adoption of such standard, with noadjustment to the information for the comparable period.

Upon adoption of the new lease standard, related items in the balance sheet as of 1 January 2021are affected as follows:

Item31 December 2020Cumulated affect (note)1 January 2021
Other current assets75,935,141.76-8,078,503.0967,856,638.67
Right-of-use assets163,169,400.44163,169,400.44

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 160

Item31 December 2020Cumulated affect (note)1 January 2021
Total assets4,018,712,700.18155,090,897.354,173,803,597.53
Non-current liabilities due within one year370,030.0088,839,586.0689,209,616.06
Lease liabilities77,439,579.3077,439,579.30
Total liabilities1,218,752,028.75166,279,165.361,385,031,194.11
Undistributed profit1,164,490,911.51-11,188,268.011,153,302,643.50
Total shareholders’ equity2,799,960,671.43-11,188,268.012,788,772,403.42

Note: Only financial statement items that affected are list in above table, as a result, the figure ofsubtotal and total cannot be calculated based on figures list above.

1) Weighted average incremental loan interest rate for adopted by the Company:

On 1 January 2021, The Company recognized lease liability of RMB166,279,165.36 and right-of-useasset of 163,169,400.44. For operating lease on the adoption date, the Company used the discountedvalue based on incremental loan interest rate to measure lease liabilities. The weighted averageincremental loan interest rate is 4.40%.

a) Difference of present value of minimum lease payment disclosed at the end of prior period andpresent value of lease liabilities on the first adoption date:

The difference of lease liability recognized on 1 January 2021 and material lease commitmentdisclosed in 2020 financial statement is as follows:

Item1 January 2021Note
1. Operating lease commitment as at 31 December 2020138,864,123.57
Lease liability discounted using incremental loan interest on the adoption date122,851,148.71
Plus: option to renew44,798,990.43
Less: exemption – short-term lease1,370,973.78
Lease liability recognized related to previous operating lease166,279,165.36
2. Lease liabilities at 1 January 2021166,279,165.36
Including: current liabilities88,839,586.06
Non-current liabilities77,439,579.30

(2) Changes in accounting estimates

There were no changes in significant accounting estimates during the reporting period.

V. Taxes

1. Main types of taxes and corresponding tax rates

Tax typeBasisTax ratenote
VATDomestic sales, providing manufacturing and repairing services13%
Property leasing9%
Other taxable services6%
Simplified method5%

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 161

Tax typeBasisTax ratenote
Consumption taxLuxury watches20%
Urban maintenance and construction taxTurnover tax payable7%、5%
Corporate income taxTaxable incomeSee below table
Property tax70% or 80% of the original cost of property or rental income1.2%、12%

Corporate income tax of different entities:

Name of entitiesCIT rate
Shenzhen HARMONY World Watch Center Co., Ltd.(①)25%
FIYTA Sales Co., Ltd.(①)25%
Shenzhen FIYTA Precision Technology Co., Ltd.(②③)15%
Shenzhen FIYTA Technology Development Co., Ltd.(②③)15%
HARMONY World Watch Center(Hainan) Co., Ltd.(⑥)20%
Shenzhen Xunhang Precision Technology Co., Ltd.25%
Emile Choureit Timing (Shenzhen) Ltd.25%
Liaoning Hengdarui Commercial & Trade Co., Ltd.25%
EMPORAL (Shenzhen) Co., Ltd.25%
Shenzhen Harmony E-commerce Co., Ltd.(⑥)20%
FIYTA (Hong Kong) Ltd.(④)16.5%
Montres Chouriet SA(⑤)30%
Station 68(④)16.5%

Note ①:According to the regulations stated in “Interim Administration Method for Levy of CorporateIncome Tax to Enterprise that Operates Cross-regionally”, the head office of the Company and its branchoffices, the head office of HARMONY Company and its branch offices, and the head office of SalesCompany and its branch offices adopt tax submission method of “unified calculation, managing byclasses, pre-paid in its registered place, settlement in total, and adjustment by finance authorities”.Branch offices mentioned above share 50% of the enterprise income tax and prepay locally; and 50% willbe prepaid by the head offices mentioned above.Note ②: According to “Notice of the Ministry of Finance, the State Administration of Taxation andMinistry of Science on Further Perfection of the Pre-tax Super Deduction Ratio of Research andDevelopment Expenses” (Cai Shui (2021) No. 13) , if the research and development costs, which wereincurred for developing new technologies, new products, and new processes by the Company, thePrecision Technology Company and the Technology Company, are not capitalized as intangible assetsbut charged to current profit or loss, all of these entities can enjoy a 100% super deduction on top of the

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 162

R&D expenses that allowed to deduct before income tax since 1 January 2021.

Note ③:The Company enjoyed for “Reduction and Exemption in Corporate Income Tax Rate for Highand New Technology Enterprises that Require Key Support from the State”.Note ④: These companies are registered in Hong Kong and the income tax rate of Hong Kongapplicable is 16.50% this year.Note ⑤: The comprehensive tax rate of 30% is applicable for Swiss Company as it registered inSwitzerland.

Note ⑥ These companies are small and low-profit enterprises, which enjoy 20% tax rate.

2. Preferential treatment and corresponding approval

According to “Proclamation of Ministry of Finance and State Administration of Taxation in ImplementingPreferential Tax Rate to Small and Low Profit Enterprises and Sole-proprietors” (Caishui (2021) No.12) and“Notice of Ministry of Finance and State Administration of Taxation on Implementation of the Inclusive IncomeTax Deduction and Exemption Policies for Small Low-Profit Enterprises” (Cai Shui (2019) No.13) , the portion ofannual taxable income of small low-profit enterprise that is below RMB1,000,000.00 will be included in taxableincome at 12.5% and to be taxed at a rate of 20%; and for annual taxable income that is greater thanRMB1,000,000.00 but not exceeding RMB3,000,000.00, of which 50% will be included in taxable income andto be taxed at 20%.

According to “Notice of Ministry of Finance and State Administration of Taxation in Extending ExpirationPeriod of Utilizing Losses for High-Tech Enterprises and Scientific Oriented Medium and Small Enterprises”(Cai Shui [2018] No. 76) , unutilized losses incurred in prior 5 years before obtaining the status of High andNew Tech Enterprise can be carried forward and utilized in future years. The longest period was extended from5 years to 10 years.

VI. Notes to main items of the consolidated financial statements

(Unless otherwise indicated, the currency unit is Renminbi Yuan and the opening balance refers to thebalance as at 1 January 2021)

Note 1. Monetary funds

ItemClosing balanceOpening balance
Cash on hand108,612.08183,759.72
Cash at bank188,908,798.10346,055,209.29
Other monetary funds21,237,326.966,818,316.70
Total210,254,737.14353,057,285.71
Including: Total overseas deposits1,724,651.933,412,028.94
Including: deposit in finance company147,786,041.19283,532,347.79

Deposit in finance company mainly deposited with AVIC Finance Co., Ltd.

As at 31 December 2021, the Company does not have balance of cash or other monetary funds thatare restricted because being pledged as security, guaranteed or blocked frozen or overseas balances

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 163

that have restriction on remittance back to the home country.

Cash with restricted usage is as follows:

ItemClosing balanceOpening balance
Overseas deposit with restrictions remitting back1,724,651.933,412,028.94

Note 2. Bill receivable1. Presented by category

ItemClosing balanceOpening balance
Bank acceptance bills2,989,331.7016,813,464.36
Commercial acceptance bills58,268,814.1031,378,977.79
Total61,258,145.8048,192,442.15

2. Presented by ECL types

TypeClosing balance
Carrying amountProvisionBook value
AmountPercentage (%)AmountPercentage (%)
Notes receivable that provided expected credit losses on single basis
Notes receivable that provided expected credit losses on single basis64,324,925.49100.003,066,779.694.7761,258,145.80
Including: Commercial acceptance bills61,335,593.7995.353,066,779.695.0058,268,814.10
Risk-free Bank acceptance bills2,989,331.704.652,989,331.70
Total64,324,925.49100.003,066,779.694.7761,258,145.80

Continued

TypeOpening balance
Carrying amountProvisionBook value
AmountPercentage (%)AmountPercentage (%)
Notes receivable that provided expected credit losses on single basis
Notes receivable that provided expected credit losses on single basis49,843,967.32100.001,651,525.173.3148,192,442.15
Including: Commercial acceptance bills33,030,502.9666.271,651,525.175.0031,378,977.79
Risk-free Bank acceptance bills16,813,464.3633.73--16,813,464.36
Total49,843,967.32100.001,651,525.173.3148,192,442.15

3. Notes receivable with expected credit loss provided based on credit risk characteristicportfolio

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 164

PortfolioClosing balance
Carrying amountProvisionPercentage (%)
Bank acceptance bills61,335,593.793,066,779.695.00
Commercial acceptance bills2,989,331.70
Total64,324,925.493,066,779.694.77

4. Bad debt movements in current period

TypesOpening balanceMovementsClosing balance
AccrualReceived or reversalWritten-offOther changes
Notes receivable that provided expected credit losses on single basis
Notes receivable that provided expected credit losses on single basis1,651,525.171,415,254.523,066,779.69
Including: Commercial acceptance bills1,651,525.171,415,254.523,066,779.69
Risk-free Bank acceptance bills
Total1,651,525.171,415,254.523,066,779.69

5. Bills have been endorsed but not yet due at the end of the period.

ItemAmount de-recognizedAmount not de-recognized
Bank acceptance bills3,064,791.21
Commercial acceptance bills15,737,928.76
Total3,064,791.2115,737,928.76

6. Bill receivable that transferred to receivables due to issuer’s default at the end of theperiod

ItemAmount transferred to accounts receivable
Commercial acceptance bills918,150.83

Note 3. Accounts receivable1. Presentation by aging

AgingClosing balanceOpening balance
Within 1 year411,327,173.23489,913,393.98
1-2 years4,211,418.2410,509,894.86
2-3 years7,582,641.506,142,706.69
Over 3 years8,867,120.132,882,615.92
Subtotal431,988,353.10509,448,611.45
Less: provision for bad debt43,102,751.8233,849,926.57
Total388,885,601.28475,598,684.88

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 165

2. Presentation by method of providing bad debt

CategoryClosing balance
Carrying amountBad debt provisionBook value
AmountPercentage (%)AmountECL rate (%)
Accounts receivable that provided expected credit losses on single basis41,742,982.679.6632,056,051.6776.799,686,931.00
Accounts receivable that provided expected credit losses on portfolio basis`390,245,370.4390.3411,046,700.152.83379,198,670.28
Including: Receivable from other customers390,245,370.4390.3411,046,700.152.83379,198,670.28
Total431,988,353.10100.0043,102,751.829.98388,885,601.28

Continued

CategoryOpening balance
Carrying amountBad debt provisionBook value
AmountPercentage (%)AmountECL rate (%)
Accounts receivable that provided expected credit losses on single basis21,208,447.134.1619,133,975.4390.222,074,471.70
Accounts receivable that provided expected credit losses on portfolio basis`488,240,164.3295.8414,715,951.143.01473,524,213.18
Including: Receivable from other customers488,240,164.3295.8414,715,951.143.01473,524,213.18
Total509,448,611.45100.0033,849,926.576.64475,598,684.88

3. Accounts receivable that provided expected credit losses on single basisincluded in the closing balance

NameClosing balance
Carrying amountBad debt provisionECL rate (%)Reasons
Receivable from other customers41,742,982.6732,056,051.6776.79Chances of recovery is remote

4. In the portfolio, accounts receivable with expected credit loss provided based oncredit risk characteristic portfolioPortfolio of receivable from other customers

AgingClosing balance
Carrying amountBad debt provisionECL rate (%)
Within 1 year388,921,400.9410,135,084.142.61
1-2 years215,868.2521,586.8310.00
2-3 years439,498.81221,426.7550.38
Over 3 years668,602.43668,602.43100.00
Total390,245,370.4311,046,700.152.83

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 166

5. Movements of provision during the period

TypesOpening balanceMovements during the periodClosing balance
AccrualRecovered or reversedWritten-offOther movements
Accounts receivable that provided expected credit losses on single basis19,133,975.4314,695,144.561,773,068.3232,056,051.67
Accounts receivable that provided expected credit losses on portfolio basis`14,715,951.14259,752.803,906,028.92-22,974.8711,046,700.15
Including: Receivable from other customers14,715,951.14259,752.803,906,028.92-22,974.8711,046,700.15
Total33,849,926.5714,954,897.365,679,097.24-22,974.8743,102,751.82

Including: main recovery of bad debt provision in current period:

NameAmountWay of recoveryNote
Hunan Chongsheng Jingzhu Group Co., Ltd.1,063,041.16Bank transfer

6. No actual write-off of accounts receivable during the current period7. Top 5 receivable accounts

NameClosing balanceProportion in total closing balance of accounts receivable (%)Bad debt provision
Top 5 receivables accounts in total153,286,032.1935.4817,111,402.62

Note 4. Prepayments1. Presentation of prepayments by aging

AgingClosing balanceOpening balance
AmountPercentage (%)AmountPercentage (%)
Within one year7,946,750.81100.0016,612,773.76100.00

2. Top 5 prepayments

NameClosing balanceProportion in total closing balance of prepayments (%)
Top 5 prepayments in total3,930,082.1649.46

Note 5. Other receivables

1. Presentation of other receivables by aging

AgingClosing balanceOpening balance

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 167

AgingClosing balanceOpening balance
Within one year64,697,975.5855,677,698.47
1 - 2 years655,341.52662,641.27
2- 3 years484,750.0511,101.80
Over 3 years135,480.00588,065.00
Subtotal65,973,547.1556,939,506.54
Less: bad debt provision4,420,279.334,036,726.91
Total61,553,267.8252,902,779.63

2. Presented by nature

NatureClosing balanceOpening balance
Security deposit55,467,644.1245,500,721.00
Petty cash2,556,673.372,438,803.09
Others7,949,229.668,999,982.45
Total65,973,547.1556,939,506.54

3. Presented according to three stages of financial assets impairment

ItemClosing balanceOpening balance
Carrying amountBad debt provisionBook valueCarrying amountBad debt provisionBook value
First stage64,508,342.253,055,122.4361,453,219.8255,271,836.642,369,057.0152,902,779.63
Second stage
Third stage1,465,204.901,365,156.90100,048.001,667,669.901,667,669.90
Total65,973,547.154,420,279.3361,553,267.8256,939,506.544,036,726.9152,902,779.63

4. Presented by bad debt provision method

categoryClosing balance
Carrying amountBad debt provisionBook value
AmountPercentage (%)AmountECL rate (%)
Other receivables that provided expected credit losses on single basis1,465,204.902.221,365,156.9093.17100,048.00
Other receivables that provided expected credit losses on portfolio basis64,508,342.2597.783,055,122.434.7461,453,219.82
Including: Security deposit portfolio55,467,644.1284.082,781,540.055.0152,686,104.07
Petty cash portfolio2,556,673.373.88--2,556,673.37
Social security payment on-behalf portfolio483,396.420.73--483,396.42
Portfolio of others6,000,628.349.09273,582.384.565,727,045.96
Total65,973,547.15100.004,420,279.336.7061,553,267.82

Continued

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 168

CategoryOpening balance
Carrying amountBad debt provisionBook value
AmountPercentage (%)AmountECL rate (%)
Other receivables that provided expected credit losses on single basis1,667,669.902.931,667,669.90100.00
Other receivables that provided expected credit losses on portfolio basis55,271,836.6497.072,369,057.014.2952,902,779.63
Including: Security deposit portfolio45,500,721.0079.912,281,728.515.0143,218,992.49
Petty cash portfolio2,438,803.094.282,438,803.09
Social security payment on-behalf portfolio792,711.421.39792,711.42
Portfolio of others6,539,601.1311.4987,328.501.346,452,272.63
Total56,939,506.54100.004,036,726.917.0952,902,779.63

5. Other receivables that provided expected credit losses on single basis included in the

closing balance

NameClosing balance
Carrying amountBad debt provisionECL rate (%)Reason
Receivable from others1,465,204.901,365,156.9093.17Chances of recovery is remote

6. In the portfolio, other receivables with expected credit loss provided based oncredit risk characteristic portfolio

(1) Security deposit portfolio

AgingClosing balance
Carrying amountBad debt provisionECL rate (%)
Within 1 year55,427,594.122,741,490.054.95
1 - 2 years
2- 3 years
Over 3 years40,050.0040,050.00100.00
Total55,467,644.122,781,540.055.01

(2) Petty cash portfolio

AgingClosing balance
Carrying amountBad debt provisionECL rate (%)
Within 1 year2,536,236.70
1 - 2 years6,311.62
2- 3 years14,125.05
Over 3 years
Total2,556,673.37

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 169

(3) Social security payment on-behalf portfolio

AgingClosing balance
Carrying amountBad debt provisionECL rate (%)
Within 1 year483,396.42

(4) Portfolio of others

AgingClosing balance
Carrying amountBad debt provisionECL rate (%)
Within 1 year6,000,628.34273,582.384.56

7. Bad debt provision status

Bad debt provisionFirst stageSecond stageThird stageTotal
Expected credit losses over the next 12 monthsLifetime expected credit losses (no credit impairment occurred)Lifetime expected credit losses (credit impairment occurred)
Opening balance2,369,057.011,667,669.904,036,726.91
Opening balance movements in current period-12,506.0012,506.00
—Transfer into the second stage
—Transfer into the third stage-12,506.0012,506.00
—Reverse back to the second stage
—Reverse back to the first stage
Accrual during the period781,582.86137,566.00919,148.86
Reversed during the period82,616.73452,585.00535,201.73
Recovered during the period
Written-off during the period
Other movements-394.71-394.71
Closing balance3,055,122.431,365,156.904,420,279.33

8. No other receivables were written-off during the period.9. Top 5 other receivable accounts

NameClosing balanceProportion to closing balance of other receivables (%)Closing balance of bad debts provision
Top 5 other receivables in total22,453,594.7234.031,125,982.07

Note 6. Inventory1. Classification

ItemClosing balanceOpening balance

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 170

Carrying amountProvisionBook valueCarrying amountProvisionBook value
Raw material181,764,220.9017,693,135.85164,071,085.05179,270,879.5619,017,726.57160,253,152.99
WIP20,682,530.5820,682,530.5812,570,005.9512,570,005.95
Stored goods1,960,110,199.4894,715,064.221,865,395,135.261,837,664,688.0178,707,661.101,758,957,026.91
Total2,162,556,950.96112,408,200.072,050,148,750.892,029,505,573.5297,725,387.671,931,780,185.85

2. Provision for inventory

ItemOpening balanceIncrease in current periodDecrease in current periodClosing balance
AccrualOtherReversedRealizedOthers
Raw material19,017,726.57132,907.161,088,930.94368,566.9417,693,135.85
Stored goods78,707,661.1026,817,418.3410,775,684.0634,331.1694,715,064.22
Total97,725,387.6726,950,325.501,088,930.9410,775,684.06402,898.10112,408,200.07

Notes to provision for inventory

ItemEvidence of determine NRV and future selling costReason for reversal or realized
Raw materialEstimated selling price less estimated cost to complete and selling and distribution expenses and associated taxesFactors that caused impairment has been disappeared and the NAV is higher than its carrying amount
Stored goodsEstimated selling price less estimated selling and distributing expenses and associated taxesInventory that already provided for was sold or used in current period.

Note 7. Other current assets

ItemClosing balanceOpening balance
Input VAT20,468,630.6515,817,909.96
Input VAT not yet certified41,895,970.1943,400,801.73
Prepaid corporate income tax2,459,142.7525,684.51
Others7,874,949.138,612,242.47
Total72,698,692.7267,856,638.67

Note 8. Long-term equity investment

InvesteeOpening balanceMovements during the period
Addition/new investmentWithdrawnInvestment gains and losses recognized by equity methodAdjustment of other comprehensive income
Associate
Shanghai Watch Co., Ltd. (Shanghai Watch)51,400,665.923,754,939.39

Continued

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 171

InvesteeMovements during the periodClosing balanceClosing balance of inventory
Changes in other equityCash dividend declaredImpairment provisionOthers
Associate
Shanghai Watch55,155,605.31

Note 9. Other equity instrument investments

1. Details of other equity instrument investments

ItemClosing balanceOpening balance
Xi’an Tangcheng Limited85,000.0085,000.00

Note 10. Investment property1. Details of investment property

ItemProperty
I. Original cost
1. Opening balance609,605,406.79
2. Addition1,281,008.88
Purchase
Transferred from fixed assets1,281,008.88
Other reasons
3. Decrease
Disposal
Other reasons
4. Closing balance610,886,415.67
II. Accumulated depreciation
1. Opening balance211,518,959.01
2. Increased in current period15,941,540.31
Accrual15,941,540.31
Transferred from fixed assets
Other reasons
3. Decreased in current period
Disposal
Other reasons
4. Closing balance227,460,499.32
III. Impairment provision
1. Opening balance
2. Increased in current period
Accrual

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 172

ItemProperty
Transferred from fixed assets
Other reasons
3. Decreased in current period
Disposal
Other reasons
4. Closing balance
IV. Book value
1. Carrying amount at end of the period383,425,916.35
2. Carrying amount at opening of the period398,086,447.78

2. Notes to investment propertyDuring the reporting period, certain self-use property of the Company were changed to lease out andthey were transferred from fixed assets to investment properties measured at cost model.

Note 11. Fixed assets

1. Status of fixed assets

ItemProperty and buildingsMachineryTransportation vehiclesElectronic devicesOther equipmentTotal
I. Original cost
1. Opening balance399,020,198.97101,896,803.9815,166,013.4245,435,251.5345,782,206.31607,300,474.21
2. Increased in current period13,096,971.227,074,376.88678,419.963,474,487.122,202,046.6726,526,301.85
Re-classification
Purchased13,096,971.227,074,376.88678,419.963,474,487.122,202,046.6726,526,301.85
Transferred from CIP
Translation difference
Other increase
3. Decrease in current period3,929,461.131,503,080.001,063,923.002,592,290.121,096,983.0410,185,737.29
Disposal or retired210,534.001,063,923.002,549,005.02981,082.284,804,544.30
Transferred to investment property1,281,008.881,281,008.88
Translation difference2,648,452.251,292,546.0043,285.10115,900.764,100,184.11
Other decrease
4. Closing balance408,187,709.06107,468,100.8614,780,510.3846,317,448.5346,887,269.94623,641,038.77
II. Accumulated depreciation
1. Opening balance111,755,686.2456,383,949.0413,429,376.6334,165,037.8638,832,143.68254,566,193.45

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 173

ItemProperty and buildingsMachineryTransportation vehiclesElectronic devicesOther equipmentTotal
2. Increased in current period11,861,411.827,755,938.59428,821.034,106,119.292,310,544.4026,462,835.13
Re-classification
Accrual11,861,411.827,755,938.59428,821.034,106,119.292,310,544.4026,462,835.13
Translation difference
Other increase
3. Decrease in current period1,467,532.881,100,152.511,010,726.852,374,651.49930,242.736,883,306.46
Disposal or retired199,668.691,010,726.852,345,731.03826,766.354,382,892.92
Transferred to investment property
Translation difference1,467,532.88900,483.8228,920.46103,476.382,500,413.54
Other decrease
4. Closing balance122,149,565.1863,039,735.1212,847,470.8135,896,505.6640,212,445.35274,145,722.12
III. Impairment provision
1. Opening balance
2. Increase in current period
Re-classification
Accrual
Other increase
3. Decrease in current period
Disposal or retired
Transferred into investment property
Other decrease
4. Closing balance
IV. Book value
1. Carrying amount at end of period286,038,143.8844,428,365.741,933,039.5710,420,942.876,674,824.59349,495,316.65
2. Carrying amount at beginning of period287,264,512.7345,512,854.941,736,636.7911,270,213.676,950,062.63352,734,280.76

Note: As of the period, fixed assets used to pledge for the Company’s loan amounted to

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 174

RMB11,490,566.65.

2. Fixed assets that do not have certificate for property right

ItemBook valueReason for not having certificate for property rights
Property255,135.96Issues relating to property right
Property3,067,640.30Not yet completed

Note 12. Right-of-use assets

ItemProperty
I. Original cost
1. Opening balance250,970,274.22
2. Increase in current period98,622,544.53
Re-classification
Lease98,622,544.53
Other increase
3. Decrease in current period36,014,185.11
Maturity of lease term
Other decrease36,014,185.11
4. Closing balance313,578,633.64
II. Accumulated depreciation
1. Opening balance87,800,873.78
2. Increase in the period100,275,414.73
Reclassification
Accrual100,275,414.73
Other increase
3. Decrease in the period22,430,130.29
Maturity of lease term
Other decrease22,430,130.29
4. Closing balance165,646,158.22
III. Impairment provision
1. Opening balance
2. Increase in the period
Reclassification
Accrual
Other increase
3. Decrease in the period
Maturity of lease term
Other decrease
4. Closing balance

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 175

ItemProperty
IV. Book value
1. Carrying amount at end of period147,932,475.42
2. Carrying amount at beginning of period163,169,400.44

Note 13. Intangible assets1. Status

ItemLand-use rightSoftware systemRight to use trademarksTotal
I. Original cost
1. Opening balance34,933,822.4029,134,692.8014,068,906.8678,137,422.06
2. Increase in the period1,151,727.411,186,718.722,338,446.13
Purchase1,151,727.411,186,718.722,338,446.13
Internal R&D
Other source
3. Decrease in the period
Disposal
Other reasons
4. Closing balance34,933,822.4030,286,420.2115,255,625.5880,475,868.19
II. Accumulated amortization
1. Opening balance15,048,815.4518,612,740.916,616,549.1940,278,105.55
2. Increase in the period733,553.284,165,730.971,263,147.966,162,432.21
Accrual733,553.284,165,730.971,263,147.966,162,432.21
Other reasons
3. Decrease in the period
Disposal
Other reasons
4. Closing balance15,782,368.7322,778,471.887,879,697.1546,440,537.76
III. Impairment provision
1. Opening balance
2. Increase in the period
Accrual
Other reasons
3. Decrease in the period
Transfer
Other reasons

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 176

ItemLand-use rightSoftware systemRight to use trademarksTotal
Other transfer
4. Closing balance
IV. Book value
1. Book value at end of the period19,151,453.677,507,948.337,375,928.4334,035,330.43
2. Book value at beginning of the period19,885,006.9510,521,951.897,452,357.6737,859,316.51

Note 14. Long-term deferred expenses

ItemOpening balanceIncreaseAmortizedOther decreaseClosing balance
Counter fabrication expenses25,146,766.7137,577,009.8034,160,604.7928,563,171.72
Renovation expenses98,681,716.4683,147,472.6061,133,283.16120,695,905.90
Others6,189,104.8216,981,131.748,638,980.7414,531,255.82
Total130,017,587.99137,705,614.14103,932,868.69163,790,333.44

Note 15. Deferred tax assets and deferred tax liabilities1. Detail of deferred tax assets before offsetting

ItemClosing balanceOpening balance
Deductible temporary differenceDeferred tax assetsDeductible temporary differenceDeferred tax assets
Impairment provision148,079,831.1431,562,627.52122,763,597.4424,130,990.19
Unrealized profit for related party transactions96,716,186.6124,021,244.01135,402,764.8633,674,974.92
Deductible losses62,781,216.2315,188,881.5664,27s2,084.4215,216,766.23
Restricted shares17,502,152.624,121,326.7710,011,227.402,398,201.09
Advertisement expenses that allowed to deduct in future years11,503,471.122,219,622.4918,840,253.363,378,321.23
Lease liabilities147,888,578.2636,972,144.57
Others9,993,278.102,498,319.538,458,186.732,114,546.69
Total494,464,714.08116,584,166.45359,748,114.2180,913,800.35

2. Detail of deferred tax liabilities before offsetting

ItemClosing balanceOpening balance
taxable temporary differenceDeferred tax liabilitiesTaxable temporary differenceDeferred tax liabilities
One-off deduction of fixed asset before Corporate income tax24,113,302.983,616,995.4520,452,230.393,067,834.55
Right-of-use asset147,881,641.5136,970,410.38
Total171,994,944.4940,587,405.8320,452,230.393,067,834.55

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 177

3. Net-off of deferred tax asset or liabilities

ItemAmount off-set at current periodClosing balance of deferred tax asset or liability after off-setAmount off-set at prior periodOpening balance of deferred tax asset or liability after off-set
deferred tax asset35,350,891.8081,233,274.6580,913,800.35
deferred tax liabilities35,350,891.805,236,514.033,067,834.55

4. Details of deductible temporary difference and deductible losses that does not

recognize as deferred income tax asset

ItemClosing balanceOpening balance
Impairment provision15,218,179.7714,790,427.78
Deductible losses54,139,145.4561,104,363.07
Total69,357,325.2275,894,790.85

Note: Deductible losses of Swiss Company, which are subsidiaries of the Company, is not recognized asdeferred income tax asset as it’s uncertain that the companies can get sufficient taxable income in future. HongKong Company, a subsidiary of the Company, does not need to recognize the deferred income tax assets forimpairment provision according to the local tax policy.

5. Deductible losses that are not recognized as deferred tax asset will due in thefollowing years:

YearClosing balanceOpening balanceNote
2021
2022
2023149,750.187,114,967.80
202411,684,299.2211,684,299.22
202518,449,678.5018,449,678.50
202623,855,417.5523,855,417.55
Total54,139,145.4561,104,363.07

Note 16. Other non-current assets

ItemClosing balanceOpening balance
Carrying amountProvisionBook valueCarrying amountProvisionBook value
Prepayment for construction and equipment42,680,753.7842,680,753.7813,536,307.1313,536,307.13

Note 17. Short-term loan

ItemClosing balanceOpening balance
Guaranteed loans15,737,928.76142,195,227.88
Credit loans250,000,000.00400,000,000.00

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 178

ItemClosing balanceOpening balance
Accrued interest payable256,666.67478,050.21
Total265,994,595.43542,673,278.09

Note 18. Notes payable

TypesClosing balanceOpening balance
Commercial bills payable21,223.103,581,360.00

Note 19. Account payables

ItemClosing balanceOpening balance
Trade payables232,841,934.81284,050,848.79
Payables for material purchased20,513,993.1115,679,531.11
Payables for project1,232,967.421,481,135.49
Total254,588,895.34301,211,515.39

Note 20. Advances from customer

ItemClosing balanceOpening balance
Rental received in advance11,025,664.729,991,850.67

Note 21. Contract liabilities

ItemClosing balanceOpening balance
Advances for goods received22,505,426.6518,213,396.49

Note 22. Employee remuneration payable1. Status

ItemOpening balanceIncreaseDecreaseClosing balance
Short-term employee benefits125,981,238.62671,171,231.14662,456,183.27134,696,286.49
Post-employment benefits - defined contribution plans6,767,477.5848,794,359.9646,097,963.359,463,874.19
Termination benefits104,746.003,396,691.071,725,447.691,775,989.38
Total132,853,462.20723,362,282.17710,279,594.31145,936,150.06

2. Short-term employee benefits

ItemOpening balanceIncreaseDecreaseClosing balance
Salaries, bonus, allowances125,136,477.65608,818,494.84600,136,279.73133,818,692.76
Staff welfare3,805.4611,377,936.4611,381,033.12708.80
Social insurances22,210,707.3822,190,086.7220,620.66
Including:1.Medical insurance20,788,454.2520,767,833.5920,620.66
2. Supplementary medical insurance26,898.0026,898.00

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 179

3.Work-related injury insurance782,748.63782,748.63
4.Maternity insurance612,606.50612,606.50
Housing Fund2,932.0019,839,787.3019,815,615.3027,104.00
Labor union fees and education fee838,023.518,924,305.168,933,168.40829,160.27
Short-term paid absences
Other short-term employee benefits
Total125,981,238.62671,171,231.14662,456,183.27134,696,286.49

3. Defined contribution plans

ItemOpening balanceIncreaseDecreaseClosing balance
Basic pension insurance295,976.4540,964,893.1541,034,054.05226,815.55
Unemployment insurance437.761,210,037.851,210,475.61
Annuity6,471,063.376,619,428.963,853,433.699,237,058.64
Total6,767,477.5848,794,359.9646,097,963.359,463,874.19

Note 23. Taxes payable

ItemClosing balanceOpening balance
VAT46,711,341.1636,028,888.63
Corporate income tax15,663,227.6829,488,177.68
Individual income tax1,568,912.161,609,420.04
Urban maintenance and construction tax1,624,353.62631,469.18
Educational surcharges1,161,292.58450,946.60
Others1,040,752.81716,369.77
Total67,769,880.0168,925,271.90

Note 24. Other payables

ItemClosing balanceOpening balance
Dividends payable5,015,026.301,639,513.77
Other payables162,793,733.65126,938,084.17
Total167,808,759.95128,577,597.94

Note: Other payables in above table refers to other payables excluding interest payable anddividends payable.

1. Dividends payable

ItemClosing balanceOpening balanceReasons for not being paid
Dividends for ordinary shares5,015,026.301,639,513.77unlock

2. Other payables

(1) Other payables by nature

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 180

NatureClosing balanceOpening balance
Security deposit33,536,237.4446,419,944.64
Shop activity fund19,208,694.8621,861,578.14
Decoration expenses10,201,524.917,481,768.84
Repurchase liability for restricted shares60,585,678.9216,299,166.73
Other39,261,597.5234,875,625.82
Total162,793,733.65126,938,084.17

(2) Material other receivables with aging over 1 year

NameClosing balanceReasons for not being paid
Huazhu Hotel Management Co., Ltd4,600,000.00Undue
Shenzhen Coman Medical Equipment Co., Ltd.1,676,337.60Undue
Bilin Venture Capital (Shenzhen) Partnership LLP1,442,275.27Undue
Yading (Shenzhen) Industrial Co., Ltd.1,332,652.89Undue
Total9,051,265.76

Note 25. Non-current liabilities due within one year

ItemClosing balanceOpening balance
Long-term loan due within one year3,924,900.00370,030.00
Lease liabilities due in one year83,025,006.3588,839,586.06
Total86,949,906.3589,209,616.06

Note 26. Other current liabilities

ItemClosing balanceOpening balance
Output VAT not yet realized2,798,738.322,299,755.09

Note 27. Long-term loan

CategoryClosing balanceOpening balance
Mortgage loans3,924,900.004,440,360.00
Less: Long-term loan due within one year3,924,900.00370,030.00
Total4,070,330.00

As of 31 December 2021, the carrying amount of fixed assets used in mortgage for the Company’s loanamounted to RMB11,490,566.65.

Note 28. Lease liabilities

Residual lease termClosing balanceOpening balance
Within 1 year87,412,539.3594,225,765.63
1 - 2 years45,978,062.2260,405,317.90
2 - 3 years13,813,526.7016,268,969.19

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 181

Over 3 years7,720,317.072,896,760.13
Total lease payables154,924,445.34173,796,812.85
Less: financing expense not realized6,980,716.897,517,647.49
PV of lease payables147,943,728.45166,279,165.36
Less: lease liabilities due in one year83,025,006.3588,839,586.06
Total64,918,722.1077,439,579.30

Interest expenses for lease liabilities recognized in current period was RMB6,486,982.37.

Note 29. Deferred income

ItemOpening balanceIncreaseDecreaseClosing balanceReason
Asset related government subsidy2,377,718.35584,884.451,792,833.90See below table
income related government subsidy538,628.08538,628.08See below table
Total2,916,346.431,123,512.531,792,833.90

1. Deferred income related to government subsidy

Note 30. Share capital

ItemOpening balanceMovements: increase(+) , decrease(-)Closing balance
Newly issuedBonus shareCapitalization of capital reservesOthersSubtotal
Total shares428,091,8817,660,000-9,700,866-2,040,866426,051,015

Notes to movements:

1. On 15 December 2020, pursuant to the examination and approval given by AVIC under “Reply toExamination and approval of Implementation of Second Phase of Restricted Share Incentive plan of

ItemOpening balanceAdditionInclude in non-operating income in current periodInclude in other gains in current periodOffsetting expense or costClosing balanceRelated to asset /income
Special fund for Shenzhen industrial design industry development551,309.04161,185.89390,123.15Asset related
Funding project for construction of National Enterprise Technology Center925,127.45293,147.06631,980.39Asset related
Provincial Specialized Fund for Industrial and Information901,281.86130,551.50770,730.36Asset related
Others538,628.08538,628.08-Income related
Total2,916,346.431,123,512.531,792,833.90

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 182

FIYTA Precision Technology Co., Ltd.” (Ren Zi [2020] No. 35) , and approved by the board of directorsand shareholder’s general meeting, the Company implemented the incentive plan. On 15 January 2021,the restricted share incentive plan (second phase) had granted restricted A-shares of 7,660,000 sharesto 135 incentive individuals.

2. Pursuant to the resolution of “Proposal of repurchase and de-registration part of restricted sharesauthorized under 2018 A-share Restricted Share Incentive Plan (First Phase) ”, and the resolution of““Proposal of repurchase and de-registration part of restricted shares authorized under 2018 A-shareRestricted Share Incentive Plan (Second Phase) ”, the Company repurchased and de-registered, in 2021,706,780 A-share restricted shares that had been authorized but still under restriction period. Thoseshares were owned by 9 former incentive object that are resigned.

3. Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the 19thmeeting of the 9th Board of Directors and the 2nd extraordinary shareholder’s meeting of 2020, theCompany was authorized to repurchase B Shares, using the Company’s fund, to reduce the registeredcapital. On 3 August 2021, confirmed by China Securities Depository and Clearing Co., Ltd ShenzhenBranch, the Company de-registered 8,994,086 B-shares.

Note 31. Capital reserve

ItemOpening balanceIncreaseDecreaseClosing balance
Share premium996,986,711.7354,257,795.8441,135,973.761,010,108,533.81
Other capital reserve24,503,676.0513,667,981.687,371,997.4130,799,660.32
Total1,021,490,387.7867,925,777.5248,507,971.171,040,908,194.13

Notes to capital reserve

1. On 15 December 2020, pursuant to the examination and approval given by AVIC under “Reply toExamination and approval of Implementation of Second Phase of Restricted Share Incentive plan ofFIYTA Precision Technology Co., Ltd.” (Ren Zi [2020] No. 35) , and approved by the board of directorsand shareholder’s general meeting, the Company implemented the incentive plan. On 15 January 2021,the restricted share incentive plan (second phase) had granted restricted A-shares of 7,660,000 sharesto 135 incentive individuals. The Company received share purchase payment of RMB58,216,000.00.Amongst, share capital increase by RMB7,660,000, and capital reserve increased by 50,556,000.00. Atthe same time, recognized share repurchase obligation in other payables amounting toRMB58,216,000.00 and corresponding treasury shares of RMB58,216,000.00. In 2021, the Companycharged RMB12,106,904.32 into cost or expenses in change of incentive personnel’s service andincreased the capital reserve by the same amount accordingly.

2. Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the 19thmeeting of the 9th Board of Directors and the 2nd extraordinary shareholder’s meeting of 2020, theCompany was authorized to repurchase B Shares, using the Company’s fund, to reduce the registeredcapital. On 3 August 2021, confirmed by China Securities Depository and Clearing Co., Ltd ShenzhenBranch, the Company de-registered 8,994,086 B-shares, which in turn decreased the capital reserve by

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 183

RMB41,132,596.76.

3. Pursuant to the resolution of “Proposal of repurchase and de-registration part of restricted sharesauthorized under 2018 A-share Restricted Share Incentive Plan (First Phase) ”, and the resolution of““Proposal of repurchase and de-registration part of restricted shares authorized under 2018 A-shareRestricted Share Incentive Plan (Second Phase) ”, the Company repurchased and de-registered, in 2021,706,780 A-share restricted shares that had been authorized but still under restriction period. Thoseshares were owned by 9 former incentive object that are resigned. Capital reserve of RMB3,670,201.57was deducted accordingly.

4. Differences, caused by fair value different when unlock the restricted shares, between CITdeducted amount and cost or expenses recognized in vesting period increased the capital reserve byRMB1,561,077.36.

5. Pursuant to “The Resolution of Plan of Re-purchase B Shares” which was approved on the 19thmeeting of the 9th Board of Directors and the 2nd extraordinary shareholder’s meeting of 2020, theCompany incurred transaction cost of RMB 3,377 for the repurchase. The expenses of RMB3,377 wasdeducted from capital reserve.

Note 32. Treasury shares

ItemOpening balanceIncreaseDecreaseClosing balance
Share repurchase45,368,941.804,757,740.9650,126,682.76
Share based payment16,264,588.6858,216,000.0013,894,909.7660,585,678.92
Total61,633,530.4862,973,740.9664,021,592.5260,585,678.92

Notes to treasury shares:

1. As described in Note VI. 31. 1, the treasury shares increased by RMB58,216,000.00 due to issueof restricted shares.

2. As described in Note VI. 31. 2, the treasury shares decreased by RMB50,126,682.76 due tore-purchase of B-share.

3. As described in Note VI. 31. 3, the treasury shares decreased by RMB4,376,981.57 due tore-purchase of restricted shares. And cash dividend to the remaining restricted shares decreasedtreasury shares by RMB4,088,467.68.

4. In 2021, the Company re-purchased B-share of 847,685 shares. Consideration paid wasHKD5,691,273.88 (excluding trading fee) , equivalent to RMB4,757,740.96. The treasury shareincreased by 4,757,740.96.

5. On 29 December 2021, Pursuant to the “Resolution of Fulfilling Unlocking Condition for the 2018A-Share Restricted Share Incentive Plan (First Phase) ” passed on the 24th meeting of the 9th Board,the first unlocking condition was met. Based on the authorization of the General Meeting, the Board liftedrestriction for 122 incentive individuals. The corresponding shares can be traded on 1 February 2021, ofwhich the cash dividend decreased treasury shares by RMB5,429,460.51.

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 184

Note 33. Other Comprehensive income

ItemOpening balanceAmount in current periodClosing balance
Pre-tax amountLess: recorded in OCI in prior period and transferred to profit or loss in current periodLess: recorded in OCI in prior period and transferred to financial assets at amortized costLess: reserve of hedging transferred to related assets or liabilitiesLess: CITAttribute to parent company after taxAttribute to non-controlling shareholders after taxLess: movements of defied benefit planLess: recorded in OCI in prior period and transferred to retained earnings in current period
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
translation difference976,871.41-8,635,217.81-8,635,217.81-7,658,346.40

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 185

Note 34. Specific reserve

ItemOpening balanceIncreaseDecreaseClosing balance
Safety production fee1,421,605.68358,874.551,062,731.13

Note 35. Surplus reserve

ItemOpening balanceIncreaseDecreaseClosing balance
Statutory surplus reserve184,546,972.8728,478,534.63213,025,507.50
Discretionary surplus reserve61,984,894.0061,984,894.00
Total246,531,866.8728,478,534.63275,010,401.50

Notes to surplus reserve:

Note: According to the Company Law and Articles of Association, the Company draws statutorysurplus reserve at 10% of net profit. If the statutory surplus reserve is over 50% of the Company’sregistered capital, drawing of statutory surplus reserve will be stopped.The Company can draw discretionary surplus reserve after drawing statutory surplus reserve. Ifapproved, discretionary surplus reserve can be used to make up for losses in previous years or increaseshare capital.

Note 36. Undistributed profit

ItemCurrent periodPrior period
Undistributed profit at the end of prior year before adjustments1,164,490,911.51966,840,818.40
Adjustments to undistributed profit at the beginning of year (“+” for increase and “-“ for decrease)-11,188,268.01
Undistributed profit at the beginning of year after adjustment1,153,302,643.50966,840,818.40
Plus: Net profit attributable to the owner of the parent company for the year387,840,282.95294,115,156.04
Less: statutory surplus reserve drawn28,478,534.6310,830,686.73
Dividends payable to ordinary shares174,220,065.7385,634,376.20
Undistributed profit at the end of year1,338,444,326.091,164,490,911.51

Notes to adjusting undistributed profit at the beginning of year

Opening undistributed profit was adjusted by -11,188,268.01 because of change in accountingpolicies. Refer to Note IV. 38 for details.

Note 37. Operating income and operating cost

1.Operatingincome and operatingcost

ItemAmount in current periodAmount in prior period

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 186

ItemAmount in current periodAmount in prior period
RevenueCostRevenueCost
Main business5,224,836,384.303,283,434,432.964,226,992,193.442,632,869,284.16
Other business18,897,156.632,221,796.1716,447,759.156,360,252.90

2.Revenuegenerated bycontract

Types of contractAmount in current periodAmount in prior period
I. Types of goods
Watch business4,923,280,724.483,970,903,426.36
Precision manufacturing150,094,350.20138,806,456.76
Other business18,897,156.6316,447,759.15
II. Categorized based on timing of goods transfer
At a point of time5,078,899,659.724,115,090,762.09
During a period of time13,372,571.5911,066,880.18

Note: revenue generated by contract does not include lease income of RMB151,461,309.62 which isregulated under “CAS No.21 – Lease”.

Note 38. Tax and surcharges

ItemAmount in current periodAmount in prior period
Urban maintenance and construction tax13,898,225.1610,068,664.42
Educational surcharge5,907,693.684,314,874.91
Local education surcharges3,923,712.572,840,421.94
Property tax7,224,965.664,094,171.89
Stamp duty4,156,804.983,347,384.62
Others2,452,184.75778,621.52
Total37,563,586.8025,444,139.30

Note 39. Selling and distribution expenses

ItemAmount in current periodAmount in prior period
Salary433,505,654.18359,485,012.85
Department store expense and rental189,748,898.49225,399,141.62
Market promotion expenses161,389,740.20129,846,038.05
Depreciation and amortization191,787,912.3593,520,422.84
Packaging expenses8,739,319.168,931,806.05
Utilities and property management expenses22,588,777.2619,596,237.03
Shipping fees8,530,775.415,316,601.90

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 187

ItemAmount in current periodAmount in prior period
Office expenses7,446,024.765,894,271.36
Travel expenses7,279,500.396,384,080.73
Entertainment expenses4,046,655.863,437,118.33
Others14,834,965.2212,903,168.56
Total1,049,898,223.28870,713,899.32

Note 40. Administrative expenses

ItemAmount in current periodAmount in prior period
Salary202,675,218.51196,350,562.99
Depreciation and amortization24,544,056.6925,865,228.70
Travel expenses3,980,000.383,537,267.52
Office expenses5,390,287.094,446,219.38
Agents fees3,342,562.005,371,712.37
Rental and utilities852,555.311,007,513.11
Entertainment expenses1,494,588.121,269,440.44
Vehicle and transportation expenses1,718,083.111,781,896.05
Telecommunication expenses983,910.061,009,390.54
Others16,645,501.1415,919,896.13
Total261,626,762.41256,559,127.23

Note 41. R&D expenses

ItemAmount in current periodAmount in prior period
Salary40,498,469.5132,217,390.03
Sample and material expenses1,557,455.431,561,063.66
Molding expenses744,578.81986,988.83
Depreciation and amortization6,048,741.966,397,967.06
Technical cooperation fee2,480,127.694,768,053.72
Others6,473,195.775,557,860.19
Total57,802,569.1751,489,323.49

Note 42. Financial expenses

ItemAmount in current periodAmount in prior period
Interest expenses23,159,963.7421,315,119.78
Less: Interest income3,589,649.854,941,334.19
Exchange gain or losses634,406.963,896,579.87
Bank charges14,472,352.8013,178,910.95
Total34,677,073.6533,449,276.41

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 188

Note 43. Other income1. Details

Sources of other incomeAmount in current periodAmount in prior period
Government subsidy21,328,673.2125,170,397.09

2. Government subsidy included in other income

ItemAmount in current periodAmount in prior periodAsset or income related
Quality and Branding Promotion Subsidy for 2020 Technique Multiplication Subsidy Plan1,960,000.002,400,000.00Income related
Provincial industry and information special subsidy130,551.50130,551.48Asset related
Subsidy to promote consumption420,000.00Income related
High precision watch technology innovation project-160,000.00Income related
Commission on IIT payment502,644.31370,789.08Income related
Guangming District specific subsidy for online market expanding200,000.00Income related
State certified R&D center293,147.06293,147.06Asset related
Other subsidies711,026.01813,731.50Income related
R&D project subsidy378,000.00355,000.00Income related
2019 Shenzhen Standard Special Fund836,705.00979,160.00Income related
Shenzhen post-doctoral subsidy550,000.00Income related
Special fund for Shenzhen industrial designing161,185.89178,635.97Asset related
Corporate Research and Development Funding756,000.00571,000.00Income related
Special fund of Nanshan district to support self-innovation industry development4,913,900.004,526,600.00Income related
Subsidy to assist high quality development of fashion industry3,730,000.00Income related
Subsidy for stabilizing job position833,013.443,743,398.00Income related
Subsidy to support sales promotion3,500,000.001,000,000.00Income related
Government subsidy for R&D project200,000.00Income related
Training subsidy322,500.00611,500.00Income related
Economic development special fund of Guangming District to support intellectual property right, standardization certification project1,090,000.00677,000.00Income related
2019 Nanshan District self-innovation industry development subsidy209,500.00Income related
Subsidy for SME to expanding market176,920.00Income related
Plan to subsidy industrial internet development520,000.00Income related
Guangdong Provincial Science and Technology Innovation Strategy Fund1,000,000.00Income related
Nanshan Industrial and Information Bureau subsidy for rental100,000.00Income related
Social insurance subsidy101,300.00Income related

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 189

Headquarters enterprise award2,872,900.00Income related
Special fund of Nanshan district Industrial and Information Bureau to support trading industry2,592,300.00Income related
Special subsidy to Shenzhen intelligence property right area300,000.00Income related
Associate subsidy to China patent excellence award200,000.00Income related
Central government foreign trade development special fund446,964.00Income related
Total21,328,673.2125,170,397.09

Note 44. Investment gain

ItemAmount in current periodAmount in prior period
Gain from long-term equity investments accounted for using equity method3,754,939.395,072,577.64

Note 45. Credit impairment loss

ItemAmount in current periodAmount in prior period
Bad debt loss-11,075,001.77-9,096,922.74

Note 46. Asset impairment loss

ItemAmount in current periodAmount in prior period
Inventory decline in value-25,861,394.56-15,426,526.41

Note 47. Gains from assets disposal

ItemAmount in current periodAmount in prior period
Gains (losses) from assets disposal-134,543.49-369,857.30
Gains (losses) from right-of-use assets disposal864,678.36
Total730,134.87-369,857.30

Note 48. Non-operating income

ItemAmount in current periodAmount in prior periodAmount included in non-recurring gains or losses in current period
Compensation113,138.611,769,663.80113,138.61
Payables cannot be paid383,893.25633,022.50383,893.25
Others130,403.17708,727.34130,403.17
Total627,435.033,111,413.64627,435.03

Note 49. Non-operating expense

ItemAmount in current periodAmount in prior periodAmount included in non-recurring gains or losses in current period
Donation300,000.00300,000.00
Fine and penalty for late payment698,864.041,032.09698,864.04

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 190

ItemAmount in current periodAmount in prior periodAmount included in non-recurring gains or losses in current period
Payment for breach of agreement2,507,649.06331,373.752,507,649.06
Others179,653.451,222,707.02179,653.45
Total3,686,166.551,555,112.863,686,166.55

Note 50. CIT expenses1. Details

ItemAmount in current periodAmount in prior period
Current tax expense for the year based on tax law and regulations112,084,704.7082,548,458.59
Changes in deferred tax assets/liabilities2,382,671.18-3,209,941.99
Total114,467,375.8879,338,516.60

2. Reconciliation between income tax expenses and accounting profit is as follows:

ItemAmount in current period
Profits before tax502,327,716.11
Income tax calculated based on statutory tax rate125,581,929.05
Effect of different tax rates applied by subsidiaries-7,919,551.34
Adjustment to income tax of previous years765,383.02
Effect of non-taxable income-946,628.62
Effect of non-deductible costs, expenses and losses4,388,679.47
Effect of using the deductible temporary differences or deductible losses for which no deferred tax asset was recognized in prior period-604,278.27
Effect of deductible temporary differences or deductible losses for which no deferred tax asset was recognized this year
Effect of research and development expenses super deduction-6,798,157.43
Others
Income tax expenses114,467,375.88

Note 51. Notes to cash flow statement1. Cash received from other operating activities

ItemAmount in current periodAmount in prior period
Security deposit12,286,247.5916,369,729.33
Government subsidy22,985,857.3229,643,860.40
Promotion expenses13,582,651.8112,486,890.27
Interest income3,589,649.854,941,334.19
Return of petty cash7,070,953.205,503,961.77
Others25,872,097.799,056,036.49
Total85,387,457.5678,001,812.45

2. Cash paid for other operating activities

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 191

ItemAmount in current periodAmount in prior period
Security deposit27,774,098.0113,371,641.24
Petty cash advanced to employee11,532,694.338,618,216.90
Current period expenses436,157,747.82433,410,006.32
Others2,635,207.942,258,442.62
Total478,099,748.10457,658,307.08

3. Cash paid for other financing activities

ItemAmount in current periodAmount in prior period
Lease payment115,532,289.07
Cash paid for re-purchase of shares9,178,101.5172,317,669.93
Total124,710,390.5872,317,669.93

Note 52. Supplement information to cash flow statement1. Supplement to cash flow statement

ItemAmount in current periodAmount in prior period
1. Reconciliation of net profit/loss to cash flows from operating activities:
Net profit387,860,340.23294,122,102.24
Add: Credit impairment loss11,075,001.779,096,922.74
Impairment for assets25,861,394.5615,426,526.41
Depreciation of fixed assets, and investment property42,404,375.4442,147,350.05
Depreciation of right-of-use assets100,275,414.73
Intangible asset amortization6,162,432.218,011,446.67
Amortization of long-term deferred expenses103,932,868.69107,402,300.57
Loss on disposal of fixed assets, intangible assets, and other long-term assets (“-“ for gain)-730,134.87369,857.30
Loss on scrap of fixed assets (“-“ for gain)
Loss on changes of fair value (“-“ for gain)
Financial expenses (“-“ for income)23,159,963.7421,315,119.78
Investment loss (“-“ for gain)-3,754,939.39-5,072,577.64
Decrease in deferred tax assets (“-“ for increase)-319,474.302,825,583.02
Increase in deferred tax liabilities (“-“ for decrease)2,168,679.481,811,592.06
Decrease in inventories (“-“ for increase)-133,051,377.44-137,479,263.64
Decrease in operating receivables (“-“ for increase)59,770,087.01-137,884,765.44
Increase in operating payables (“-“ for decrease)-77,565,523.41156,118,311.75
Others
Net cash flows from operating activities547,249,108.45378,210,505.87
2. Significant investment or financing activities not involving cash:

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 192

ItemAmount in current periodAmount in prior period
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 year210,254,737.14353,057,285.71
Less: cash at beginning of year353,057,285.71315,093,565.09
Plus: cash equivalents at end of year
Less: cash equivalents at beginning of year
Net increase in cash and cash equivalents-142,802,548.5737,963,720.62

2. Total cash outflows related to leaseTotal cash outflows related to lease amounted to RMB115,532,289.07.

3. Cash and cash equivalents

ItemClosing balanceOpening balance
I. Cash210,254,737.14353,057,285.71
Incl. Cash on hand108,612.08183,759.72
Bank deposit available for immediate payment188,908,798.10346,055,209.29
Other monetary funds available for immediate payment21,237,326.966,818,316.70
II. Cash equivalents
Including Bond investment due in three months
III. Cash and cash equivalents at the end of year210,254,737.14353,057,285.71
Including Restricted cash and cash equivalents for the Company and its subsidiaries1,724,651.933,412,028.94

Note 53. Assets with restricted ownership or usage rights

ItemBalanceReasons
Bill receivables15,737,928.76Bill discounted
Fixed asset11,490,566.65Pledged
Total27,228,495.41

Note 54. Monetary items denominated in foreign currency

1. Monetary items denominated in foreign currency

ItemBalance denominated in foreign currency as at 31 Dec 2021Exchange rateBalance translated in RMB as at 31 Dec 2021
Monetary fund8,514,180.39
HKD218.630.8176178.75
USD1,019,499.316.37576,500,021.75

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 193

ItemBalance denominated in foreign currency as at 31 Dec 2021Exchange rateBalance translated in RMB as at 31 Dec 2021
EUR277,768.927.21972,005,408.28
CHF1,226.156.97768,571.61
Accounts receivable6,478,102.53
HKD1,321,668.610.81761,080,596.26
USD727,349.656.37574,637,364.76
EUR91,897.197.2197663,470.14
CHF13,854.536.977696,671.37
Other receivables98,186.34
HKD120,090.920.817698,186.34
Accounts payable1,232,833.10
HKD459,366.530.8176375,578.07
CHF122,858.156.9776857,255.03
Other payables232,536.98
HID284,414.110.8176232,536.98
Long-term loan (including due in one year)3,924,900.00
CHF562,500.006.97763,924,900.00

2. Overseas operational entity

For main business location and recording currency of important overseas operating entities, refer to NoteIV. 5.

Note 55. Government subsidy1. Status

Types of government subsidyAmount in current periodAmount included in current period profit or lossnote
Subsidy included in deferred income1,123,512.53Note VI 29

Subsidy included in other income

Subsidy included in other income20,365,160.6820,365,160.68Note VI 43
Subsidy used to offset cost or expenses2,620,696.642,620,696.64Note 2 below
Less: subsidy returned633,183.35633,183.35Note 3 below

Total

Total22,352,673.9723,476,186.50

2. Subsidy used to offset cost or expenses

ItemTypeAmount in current periodAmount in prior periodCost or expenses offset
subsidized interestState treasury2,170,134.644,603,207.48Financial expenses

Subsidy for electricity expenses

Subsidy for electricity expensesState treasury450,562.00860,524.00Administrative expenses
Total2,620,696.645,463,731.48

FIYTA Precision Technology Co., Ltd.Notes to the Financial StatementsFor the year ended 31 December 2021

Notes to the financial statements – Page 194

3. Subsidy returned

ItemTypeAmount in current periodAmount in prior periodReasons for return

Over disbursement of subsidy andits interest

Over disbursement of subsidy and its interestIncome related160,000.00Over disbursement

Subsidized interest

Subsidized interestIncome related473,183.35Not qualified
Total633,183.35

VII. Changes to the scope of consolidationRefer to Note II Scope of consolidation for information about entities that newly included or excludedin the consolidation scope.VIII. Interests in other entities

1. Equity in subsidiary

(1) Composition of enterprise group

NamePlace of operationPlace of registrationNature of businessShareholding ratio (%)Ways acquired
DirectIndirect
Shenzhen Harmony World Watch Center Co., Ltd.ShenzhenShenzhenCommerce100.00incorporated or investment
FIYTA Sales Co., Ltd.ShenzhenShenzhenCommerce100.00incorporated or investment
Shenzhen FIYTA Precision Technology Co., Ltd.ShenzhenShenzhenCommerce90.0010.00incorporated or investment
Shenzhen FIYTA Technology Development Co., Ltd.ShenzhenShenzhenmanufacturing100.00incorporated or investment
Harmony World Watch Center (Hainan) Co., Ltd.SanyaSanyaCommerce100.00incorporated or investment
Shenzhen Xunhang Precision Technology Co., Ltd.ShenzhenShenzhenmanufacturing100.00incorporated or investment
Emile Choureit Timing (Shenzhen) Ltd.ShenzhenShenzhenCommerce100.00incorporated or investment
Liaoning Hengdarui Commercial & Trade Co., Ltd.ShenyangShenyangCommerce100.00Business combination under common control
TEMPORAL (Shenzhen) Co., Ltd.ShenzhenShenzhenCommerce100.00incorporated or investment
Shenzhen Harmony E-commerce Co., Ltd.ShenzhenShenzhenCommerce100.00incorporated or investment
FIYTA (Hong Kong) Ltd.Hong KongHong KongCommerce100.00incorporated or investment
Montres Chouriet SASwissSwissmanufacturing100.00Business combination not under common control
Station 68Hong KongHong KongCommerce60.00incorporated or investment

2. Equity in joint arrangement or associates

(1) Significant associates

NamePlace of operationPlace of registrationNature of businessShareholding ratio (%)Accounting treatment
DirectIndirect
Shanghai Watch Co., Ltd.ShanghaiShanghaiCommercial25%Equity method

FIYTA Precision Technology Co., Ltd.Notes to the Fi