FIYTA Precision Technology Co., Ltd.
2020 Annual Report
March, 2021
Section 1 Important Notice, Table of Contents and Definition
The Board of Directors, the Supervisory Committee, directors, supervisors and senior executives hereby individually andcollectively accept responsibility for the correctness, accuracy and completeness of the contents of this report andconfirm that there are neither material omissions nor errors which would render any statement misleading.Huang Yongfeng, the Company leader, Chen Zhuo, chief financial officer, and Tian Hui, the manager of the accountingdepartment (treasurer) hereby confirm the authenticity and completeness of the financial report enclosed in this AnnualReport.All the directors attended the board meeting for reviewing the Annual Report.Any perspective description, such as the future plan, development strategy, etc. involved in the Annual Report shall notconstitute the Company’s substantial commitment to the investors and the investors should please pay attention to theirinvestment risks.In this report, the Company has described in detail the existing macro-economic risks as well as operation risks.Investors are advised to refer to the contents concerning risk factors possibly to be confronted with and thecountermeasures in the Company's future development prospect in Section 4 Discussion and Analysis of theManagementThe profit distribution preplan reviewed and approved by the Board of Directors is summarized as follows: With the totalcapital stock as at the date of record as the base, the Company would distribute cash dividend at the rate of CNY 4 forevery 10 shares (with tax inclusive), bonus share at the rate of 0 share for every 10 shares (with tax inclusive) to thewhole shareholders and shall capitalize no reserve.
Table of Contents
Section 1 Important Notice, Table of Contents and DefinitionSection 2 Company Profile and Financial HighlightsSection 3 Business SummaryChapter 4 Discussion and Analysis of the OperationSection 5 Significant EventsSection 6 Change of Shares and Particulars about ShareholdersSection 7 About the Preferred SharesSection 8 About the Convertible BondsSection 9 Directors, Supervisors, Senior Executives and EmployeesChapter 10 Corporate GovernanceSection 11 Bond Related InformationSection 12 Financial ReportSection 13 Documents Available for Inspection
Definitions
| Terms to be defined | Refers to | Definition |
| This Company, the Company or FIYTA | Refers to | FIYTA Precision Technology Co., Ltd. |
| AVIC | Refers to | Aviation Industry Corporation of China, Ltd. |
| AVIC International | Refers to | AVIC International Holding Corporation |
| AVIC International Shenzhen | Refers to | AVIC International Shenzhen Co., Ltd. |
| AVIC IHL | Refers to | AVIC International Holdings Limited |
| The Sales Co. | Refers to | FIYTA Sales Co., Ltd. |
| Harmony | Refers to | Shenzhen Harmony World Watches Center Co., Ltd. |
| Precision Technology Co. | Refers to | Shenzhen FIYTA Precision Technology Co., Ltd. |
| Science & Technology Development Co. | Refers to | Shenzhen FIYTA Technology Development Co., Ltd. |
| the Hong Kong Co. | Refers to | FIYTA (Hong Kong) Limited |
| SHIYUEHUI | Refers to | Shiyuehui Boutique (Shenzhen) Co., Ltd. |
| Hengdarui | Refers to | Liaoning Hengdarui Commerce & Trade Co., Ltd. |
| Harmony E-Commerce Limited | Refers to | Shenzhen Harmony E-Commerce Limited |
| Shanghai Watch Industry | Refers to | Shanghai Watch Industry Co., Ltd. |
| Rainbow Ltd. | Refers to | Rainbow Digital Commercial Co., Ltd. |
| Shennan Circuit | Refers to | Shennan Circuit Co., Ltd. |
Section 2 Company Profile and Financial Highlights
I. Company Information
| Short form of the stock | FIYTA and FIYTA B | Stock Code | 000026 and 200026 |
| Stock Exchange Listed with | Shenzhen Stock Exchange | ||
| Company Name in Chinese | FIYTA Precision Technology Co., Ltd. | ||
| Abbreviation of the Company Name in Chinese | 飞亚达公司 | ||
| Company name in English (if any) | FIYTA Precision Technology Co., Ltd. | ||
| Abbreviation of the Company name in English (if any) | FIYTA | ||
| Legal Representative | Huang Yongfeng | ||
| Registered address: | FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen | ||
| Postal Code of the Registered Address | 518057 | ||
| Office Address | 20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen | ||
| Postal Code of the Registered Address | 518057 | ||
| Website: | www.fiytagroup.com | ||
| E-mail: | investor@fiyta.com.cn | ||
| Secretary of the Board | Securities Affairs Representative | |
| Names | Chen Zhuo | Xiong Yaojia |
| Liaison Address | 20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen | 18th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen |
| Tel. | 0755-86013669 | 0755-86013669 |
| Fax | 0755-83348369 | 0755-83348369 |
| investor@fiyta.com.cn | investor@fiyta.com.cn |
| Names of the media chosen by the Company for disclosing information | Securities Times and Hong Kong Commercial Daily |
| Internet Web Site Designated by China Securities Regulatory Commission for Publishing the annual report: | www.cninfo.com.cn |
| Place where the Company’s Annual Report was prepared and is placed for inquiry | Company Planning & Operation Department |
| Organization Code | 91440300192189783K |
| Changes in principal business activities since listing (if any) | No change |
| Changes in the controlling shareholder over the past years (if any) | No change |
| Name of the CPAs | Grant Thornton LLP |
| Office address | 5/F, SciTech Building, No.22 JianGuoMenWai Avenue, Chaoyang District, Beijing |
| Names of the CPAs as the authorized signatories | Dong Xu, Meng Junfeng |
| 2020 | 2019 | Increase/decrease in the reporting year over the previous year | 2018 | |
| Turnover in CNY | 4,243,439,952.59 | 3,704,210,734.90 | 14.56% | 3,400,450,599.90 |
| Net profit attributable to the Company’s shareholders, in CNY | 294,115,156.04 | 215,909,014.15 | 36.22% | 183,835,095.29 |
| Net profit attributable to the Company’s shareholders less the non-recurring items, in CNY | 269,095,012.41 | 199,678,661.09 | 34.76% | 162,758,061.00 |
| Net cash flows arising from operating activities, in CNY | 378,210,505.87 | 444,820,768.61 | -14.97% | 331,627,789.62 |
| Basic earning per share (CNY/share) | 0.6764 | 0.4943 | 36.84% | 0.4190 |
| Diluted earning per share (CNY/share) | 0.6764 | 0.4943 | 36.84% | 0.4190 |
| Return on equity, weighted average (%) | 10.78% | 8.21% | 2.57% | 7.30% |
| End of 2020 | End of 2019 | Increase/decrease of the end of the reporting year over the end of the previous year | End of 2018 | |
| Total assets, in CNY | 4,018,712,700.18 | 3,760,923,285.37 | 6.85% | 3,599,691,650.26 |
| Net assets attributable to the Company’s shareholders (owner’s equity attributable to the Company’s shareholders, in CNY) | 2,799,948,388.09 | 2,654,533,766.99 | 5.48% | 2,570,134,782.90 |
| The first quarter | The second quarter | The third quarter | The fourth quarter | |
| Turnover | 588,361,057.06 | 993,473,657.97 | 1,362,598,720.97 | 1,299,006,516.59 |
| Net profit attributable to the Company’s shareholders | -12,974,795.53 | 90,713,701.83 | 137,048,377.83 | 79,327,871.91 |
| Net profit less the non-recurring profit/loss attributable to the Company’s shareholders | -13,738,773.72 | 82,408,251.17 | 129,723,577.01 | 70,701,957.95 |
| Net cash flows arising from operating activities | -106,747,751.88 | 210,392,987.15 | 112,503,592.52 | 162,061,678.08 |
IX. Extraordinary items and amount
In CNY
| Items | Amount in 2020 | Amount in 2019 | Amount in 2018 | Note |
| Gain/loss from disposal of non-current assets, including the part written-off with the provision for impairment of assets. | -369,857.30 | -926,118.60 | -180,302.24 | |
| The government subsidies included in the profits and losses of the current period ( (excluding government grants which are closely related to the Company’s business and conform with the national standard amount or quantity) | 30,634,128.57 | 18,428,906.18 | 19,375,618.48 | |
| Reversal of the impairment provision for receivables and contract assets which have been tested individually for impairment | 163,925.30 | 0.00 | 7,533,121.86 | |
| Non-operating income and expenses other than the aforesaid items | 1,556,300.78 | 3,353,916.43 | 792,842.56 | |
| Other gains and losses in compliance with the definition of non-recurring gains and losses. | 0.00 | |||
| Less: Amount affected by the income tax | 6,964,353.72 | 4,626,350.95 | 6,444,246.37 | |
| Total | 25,020,143.63 | 16,230,353.06 | 21,077,034.29 | -- |
Section 3 Business Summary
I. Principal business the Company operated in the reporting period
(1) Principal Business and Operation Model
With 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.Over the past three decades or more, relying on the advantages in precision manufacturing technology, materialtechnology and talents of the aviation industry, the Company has been continuously devoting itself to the building ofprofessional watch-making capability and brand operation, has successfully built the "FIYTA" brand and established thebrand a leading position in the domestic industry by virtue of the advantages in technology and quality, and hascultivated brands of different styles such as "Emile Chouriet ", "JONAS&VERUS ", "Beijing" and "JEEP" to meet theneeds of market segments.In 1997, in order to grasp the opportunities in the domestic famous watch market and accelerate the breakthrough of itsown brand, the Company developed the retail business of famous watches. As one of the first explorers of brand watchretail chain business, the Company has been focusing on strengthening the construction of both brand and channelresources, refining operations, and has established stable cooperation with international outstanding famous watchbrands and domestic high-end channels, which is contributing to the company’s revenue and profit while providing asource of growth, it has also established a stable base for the growth and development of its own brands.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 “technologybeing homologous, the industry being same-rooted and value being co-directional”, and extends the development ofprecision technology business and smart wearable business. At present, these two businesses have begun to takeshape.
(2) Development Status of the Industry and the Company's Position Therein
Watches bear both characteristics of precision technology and fashion: high-end watch-making is supported by precisiontechnology, material technology and craftsmanship as the core. In addition, it is necessary to meet consumers' demandsfor brands, aesthetics and artistic and cultural connotation. The global watch industry has developed for more than twohundred years, and it has a long history. Technological innovation and design creativity have always pushed the brandforward.Globally, the high-end luxury watch market is mainly occupied by the Swiss watch brands. Middle-end and fashionwatches mainly consist of European and American brands, Japanese brands and domestic brands. In recent years,smart watches are developing rapidly, and have won the favor of tech-savvy, sports-savvy and fashion-savvy citizens.Today, the increase in national disposable income, the people’s yearning for a better life, and the demand for high-qualitylife are driving consumption upgrading; in addition, with the effective advancement of tariff reduction, China's domesticwatch consumer market is ushering in a new development opportunity and the Company keeps optimistic about themarket development potential. In the past year 2020, affected by COVID-19, the global watch industry experienced asevere test of growth pressure. With China’s effective control over the pandemic, the rapid growth of luxury goodsconsumption, and the rise of duty-free shopping on Hainan offshore island, China outshone all the other countries in theworld in performance of the high-end luxury watch retail industry. According to the data disclosed by the Federation ofthe Swiss Watch Industry FH, the export volume of Swiss watches in 2020 dropped by 21.8% year-on-year, but theexport to mainland China began to increase commencing from June, 2020 with a year-on-year growth by 20%. This wasthe first time for mainland China to be the world's largest market of Swiss watches. These data are the best evidence ofthe strong consumption power of Chinese consumers.
The company has focused on the watch industry. After years of hard work, it has grown into the flagship enterprise ofChinese watches, and has been ranked first in China's watch industry for many consecutive years. The Brand "FIYTA" isone of China's most well-known watch brands that have grown up under the market economy after China’s reform andopening-up. The Company has adhered to the original intention of "Big Country Brand", relying on precisionmanufacturing technology, brand perception and deep cultivation of channels to promote continuous brandbreakthroughs, and its sales scale ranks among the top in the industry. In 2017, the Brand was selected as the uniquewatch brand in the country in the "Made-in-China" Brand Plan by the Ministry of Commerce; "FIYTA won the "ChinaGrand Awards for Industry" in 2018, and was honorably put on the "70 Top Brands for the 70th Anniversary of theFounding of New China" List in 2019, and honorably won the "People's Ingenuity Brand Award 2019".2020, theCompany honorably won the title of “the 40 Brand Makers in the Past 40 Years of Shenzhen”; Sun Lei, the Company’schief designer, won the title of “40 Persons of Innovation and Entrepreneurship and Model Worker.” After more than twodecades’ development, Harmony World Watches has been operating brand watch retail business in more than 60 citiesacross the country and has nearly 200 chain stores. It has established abound brand and channel resources and goodoperating ability, and its market share ranks domestically forefront in the watch retail industry.II. Significant Movements in Prime Assets
1. Significant Movements in Prime Assets
| Major assets | Note to the significant changes |
| Equity assets | Inapplicable |
| Fixed assets | Inapplicable |
| Intangible assets | Inapplicable |
| Construction-in-process | Inapplicable |
started 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 base work logic of channel operation.In recent years, the Company has comprehensively promoted digital construction, achieved full coverage of online andoffline self-operated stores, and shall provide customers with more systematic professional services and create morevalue.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 watch-making capabilities, including self-made driving units of watches and key componentsmanufacturing, space watch research and development and high-end watch-making 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 558 patents and been granted 509 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.
Section 4 Discussion and Analysis of the OperationI. General2020 is an extraordinary year. The sudden pandemics of COVID-19 has brought a huge impact to the Company'sbusiness. The Company suffered a quarterly loss in its operation result in the first quarter. In the face of unprecedentedchallenge, the Company actively responded and quickly launched the "Wartime Command System", mobilized allemployees to prevent and control the epidemic, and at the same time, fully promoted the operational counterattack,controlled costs and expenses, and captured market opportunity through innovations such as live video and communitymarketing, accelerated digital transformation, and established close relationships with customers. With gradual recoveryof the market, the Company’s operating performances turned better and better continuously. In the second half year, theCompany seized the opportunity of the explosive growth of the high-end luxury watch business after the epidemic in thecountry was basically brought under control, actively deployed new growth opportunities in Hainan’s tax-free channels,and continued to accelerate internal capacity building and the cultivation of new growth points. As a result, the Companyrealized a big growth on year-on-year basis in the whole year. In the reporting period, the Company realized revenueamounting to CNY 4243.44 million with year-on-year growth of 14.56% and realized total profit amounting to CNY
373.4606 million with a year-on-year growth of 35.20%. The Company has also made further breakthrough in high-quality development with the efficiency and performance indicator rapidly improved, the return on net assets hasincreased to 10.78% with the year-on-year growth of 2.57%, and the inventory turnover rate has reached 1.35 times, anincrease of 0.17 times over the previous year. With the joint efforts of the team, the Company has achieved sustainedand rapid growth in operating profit for 4 consecutive years.During the reporting period, the Company carried out the following key work.I. Promoting the epidemic prevention and control work steadily, and having achieve "zero suspicion and zerodiagnosis" throughout the yearAfter the outbreak of COVID-19, the Company’s management team took the lead in commanding, followed the overalldeployment of the CPC Central Committee and authorities, refined the deployment of prevention and control strategiesbased on the situation at different stages of epidemic prevention and control, implemented responsibilities at all levels,and achieved "zero suspicion and zero diagnosis" prevention and control performance, implemented the obligation andresponsibilities of a central enterprise with practical actions, and ensured the safety of employees’ lives and theCompany’s assets.II. Activating the "wartime command system” and having demonstrated strong "combat power”During the reporting period, in the face of the severe market environment, the Company established a "wartimecommand system", quickly adjusted the status of the team, actively organized the resumption of work and production,strictly controlled internal costs, lean management, and seized market opportunity externally and actively expandedcommunity marketing through WeChat, live video and other methods, adapted itself to the market situation andcompetitive situation in an innovative way after the epidemic, and promoted business breakthrough through multiplechannels and multi ways. From the basic zero revenue in February to the profit-making in the main business in March,the Company achieved year-on-year profit growth in April, hit a new high in monthly revenue in August. The Companyachieved one step at a time, with strong combat effectiveness, it has achieved growth against trend in operatingperformance in a down-to-earth way, which has demonstrated powerful market recovery and adjustment and adaptationcapability, and further improved the ability of the team.III. Continuously tamping the basic management and persistently consolidating the core competitionadvantagesDuring the reporting period, the Company continued to build professional capabilities around the“brand power, productpower, and channel power” to strengthen the advantage of the core competition.
During the reporting period, the Company continued to build professional capabilities around the “brand power, productpower, and channel power” to strengthen the advantage of the core competitiveness. Under the severe situation of theoff-line sales once returning to zero for a time, the Company deepened the integration of products and sales. With thebrand of “FIYTA”, the livestreaming hosted by “Gao Yuanyuan X Viya” set the highest sales record of watch category inTmall single store livestreaming; the Company focused on improvement of product efficiency with the core series. Thenew products, such as Four-Leaf clover and Xtreme Series, were launched in the market as scheduled. Professionalseries products such as "Mars-500" and "Attack-11" are favored by consumers; the Company promoted theimplementation of the "Excellent Operation, Excellent Sales" project in a solid way; and the per unit yield of self-operatedstores continued to increase. The sales began to rebound steadily in the third quarter. HARMONY World Watch Retailseized the opportunity, continuously deepened and refined store operations. In the second quarter, it began to achieveyear-on-year sales growth, with an average monthly growth of more than 50%.IV. Continuously promoting channel upgrading and reserving the core kinetic energy for future developmentDuring the reporting period, the Company paid close attention to changes in consumption trends and market conditions,and continued to promote channel optimization, adjustment and upgrading. The retail business of “HARMONY” WorldWatches Retail focused on core cities and core business area, systematically counted future opportunities, drew astrategic channel map, promoted channel entry in an orderly manner, and further increased the number of high-endbrand accounts. While maintaining endogenous growth, it was also actively exploring extensional expansion model andaccelerated the coverage of target channels. “FIYTA” Brand reshaped the image of the terminal and actively promotedthe entry of shopping malls and also achieved good results. During the reporting period, the Company actively seized theopportunity in Hainan’s existing duty-free channel market, accelerated the entry and sales of its own brands, and activelyexplored channel development opportunities.V. Breakthrough in digital transformation and initial results of membership operationDuring the reporting period, the Company was persistently building a customer-centered digital operation system. Thefull implementation and popularization of the "HARMONY" Digital Retail System effectively promoted customer valuemining and operational efficiency improvement. The on-line and off-line service interactions were realized. Potentialcustomer transactions and repurchases of regular customers made important contribution to the growth of salesthroughout the year. During the Pandemic of COVID-19, the system has provided a strong guarantee for making up theincome gap. The own-brand membership management system was also officially launched in September and fullcoverage of all self-run stores both online and offline was realized, which laid the foundation for in-depth operations withfocus on "people, goods, and markets".VI. Accelerating the cultivation of new growth points and transforming and upgrading to high-end precisiontechnologyDuring the reporting period, the Company continued to promote the development of precision technology business andsmart wearables business. The precision technology business accelerated the expansion of the medical and aerospacemarkets on the basis of deep cultivating optical communications and lasers, and initiated cooperation with corecustomers in related fields. The revenue increased by more than 50% year-on-year; the smart wearable businesscompleted its own R&D team formation. The new products of "Little Red Watch" and "Black Knight" came into the marketsmoothly; more than 100,000 smart watches were sold during the “Double Eleven” activities.Balance sheet items
| Items | Ending balance | Opening balance | Variation proportion | Cause of the movement |
| Notes receivable | 48,192,442.15 | 10,596,431.31 | 354.80% | Mainly due to the influence from the growth of the precision technology business scale and the bill payment term. |
| Advance payment for goods | 16,612,773.76 | 10,847,962.28 | 53.14% | Mainly due to the increase of advance payment for purchases for HARMONY World Watch Retail |
| Other non-current assets | 13,536,307.13 | 7,373,248.48 | 83.59% | Mainly due to the increase of advance payment for refurbishment for HARMONY World Watch Retail |
| Notes payable | 3,581,360.00 | - | - | Mainly due to the impact of the new bill payable business in the precision technology business in the reporting year. |
| Advance receipts | 9,991,850.67 | 23,433,463.57 | -57.36% | Mainly due to the impact of the adjustment of presentation in accordance with the requirements of the new revenue standard in the reporting year. |
| Contract liabilities | 18,213,396.49 | - | - | Mainly due to the impact of the adjustment of presentation in accordance with the requirements of the new revenue standard in the reporting year. |
| Payroll payable to the employees | 132,853,462.20 | 82,602,845.67 | 60.83% | Mainly due to the growth in performance in the reporting year and the issuance of excess incentives. |
| Payable taxes | 68,925,271.90 | 24,064,803.00 | 186.42% | Mainly due to the increase in taxes and fees payable due to the increase in income in the reporting year and the greater impact |
| of retainment in the same period last year. | ||||
| Dividends payable | 1,639,513.77 | 848,233.27 | 93.29% | Mainly due to the increase in dividends payable in the equity incentive part of the current year. |
| Other current liabilities | 2,299,755.09 | - | - | Mainly due to the impact of the tax part of the contract liabilities in accordance with the requirements of the new income standards in the reporting year. |
| Deferred income tax liability | 3,067,834.55 | 1,256,242.49 | 144.21% | Mainly due to the impact of a one-off pre-tax deduction of fixed assets. |
| Other comprehensive income | 976,871.41 | -940,209.09 | 203.90% | Mainly due to movement of the translation balance of foreign currency statements |
| Items | Amount incurred in the reporting period | Amount incurred in the previous period | Variation proportion | Cause of the movement |
| Interest income | 4,941,334.19 | 1,956,334.31 | 152.58% | Mainly due to the impact of the increase in the stock of monetary funds in the current year. |
| Other income | 25,170,397.09 | 18,428,906.18 | 36.58% | Mainly due to the increase in government subsidies received in the reporting year. |
| Return on Investment | 5,072,577.64 | 1,787,907.10 | 183.72% | Mainly due to the influence from the profit increase of Shanghai Watch Industry in the current year. |
| Loss from impairment of credit | -9,096,922.74 | -16,640,961.07 | 45.33% | Mainly due to the decrease in bad debt provision for individual accounts receivable in the current year. |
| Loss from impairment of assets | -15,426,526.41 | -4,295,134.47 | -259.16% | Mainly due to the increase in the price falling of the proprietary-brand inventory. |
| Income from disposal of assets | -369,857.30 | -926,118.60 | 60.06% | Mainly due to big loss from the auxiliary facilities and equipment of Xi'an FIYTA Building in the same period last year. |
| Non-operating income | 3,111,413.64 | 4,754,105.30 | -34.55% | Mainly due to the greater impact of the adjustment of the compensation received by some of HARMONY's stores in the same period last year. |
| Income tax expenses | 79,338,516.60 | 60,324,629.25 | 31.52% | The increase in income tax expenses was mainly due to the increase in profit. |
| Items | Amount incurred in the reporting period | Amount incurred in the previous period | Variation proportion | Cause of the movement |
| Rebated taxes received | 1,849,055.57 | 5,510,592.39 | -66.45% | Mainly due to the reduction in export tax rebates caused by the reduction in export business affected by the overseas pandemic in the current year. |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 150,556.62 | 626,107.64 | -75.95% | Mainly due to decrease of the fixed assets disposed in the current year. |
| Cash received from absorbing investment | - | 18,585,600.00 | -100.00% | Mainly due to the implementation of equity incentives in the same period and received subscription payments last year, but none in the current year. |
| Cash paid for other financing activities | 72,317,669.93 | 53,117,325.02 | 36.15% | Mainly due increase of B-shares repurchased. |
| Influence of the change of exchange rate on the cash and cash equivalent | -2,810,603.32 | 468,366.93 | -700.09% | Mainly due to the influence of the change of exchange rate. |
| 2020 | 2019 | Year-on-year increase/decrease | |||
| Amount | Proportion in the revenue | Amount | Proportion in the revenue | ||
| Total operating revenue | 4,243,439,952.59 | 100% | 3,704,210,734.90 | 100% | 14.56% |
| Based on sectors | |||||
| Watches | 3,970,903,426.36 | 93.58% | 3,463,608,966.45 | 93.50% | 14.65% |
| Precision technology business | 138,806,456.76 | 3.27% | 91,341,945.34 | 2.47% | 51.96% |
| Leases | 117,282,310.32 | 2.76% | 132,005,033.07 | 3.56% | -11.15% |
| Others | 16,447,759.15 | 0.39% | 17,254,790.04 | 0.47% | -4.68% |
| Based on products | |||||
| Watch brand business | 970,035,756.22 | 22.86% | 1,110,678,489.04 | 29.98% | -12.66% |
| Watch retail and services | 3,000,867,670.14 | 70.72% | 2,352,930,477.41 | 63.52% | 27.54% |
| Precision technology business | 138,806,456.76 | 3.27% | 91,341,945.34 | 2.47% | 51.96% |
| Leases | 117,282,310.32 | 2.76% | 132,005,033.07 | 3.56% | -11.15% |
| Others | 16,447,759.15 | 0.39% | 17,254,790.04 | 0.47% | -4.68% |
| Based on regions | |||||
| South China | 2,198,531,106.33 | 51.81% | 1,823,927,995.51 | 49.24% | 20.54% |
| Northwest China | 601,805,121.89 | 14.18% | 586,521,631.97 | 15.83% | 2.61% |
| Northeast China | 198,893,856.16 | 4.69% | 204,386,707.45 | 5.52% | -2.69% |
| East China | 561,941,020.36 | 13.24% | 502,541,659.80 | 13.57% | 11.82% |
| Northeast China | 233,806,759.67 | 5.51% | 230,662,172.16 | 6.23% | 1.36% |
| Southwest China | 448,462,088.18 | 10.57% | 356,170,568.01 | 9.62% | 25.91% |
| Turnover | Operating cost | Gross profit rate | Year-on-year increase/decrease of operating revenue over the previous year | Year-on-year increase/decrease of operating costs over the previous year | Year-on-year increase/decrease of gross profit rate over the previous year | |
| Based on sectors | ||||||
| Watches | 3,970,903,426.36 | 2,478,548,735.40 | 37.58% | 14.65% | 17.47% | -1.50% |
| Precision technology business | 138,806,456.76 | 113,748,608.41 | 18.05% | 51.96% | 54.30% | -1.24% |
| Leases | 117,282,310.32 | 40,571,940.35 | 65.41% | -11.15% | 43.98% | -13.25% |
| Others | 16,447,759.15 | 6,360,252.90 | 61.33% | -4.68% | 19.26% | -7.76% |
| Based on products | ||||||
| Watch brand business | 970,035,756.22 | 279,990,343.43 | 71.14% | -12.66% | -15.40% | 0.93% |
| Watch retail and services | 3,000,867,670.14 | 2,198,558,391.97 | 26.74% | 27.54% | 23.58% | 2.34% |
| Precision technology business | 138,806,456.76 | 113,748,608.41 | 18.05% | 51.96% | 54.30% | -1.24% |
| Leases | 117,282,310.32 | 40,571,940.35 | 65.41% | -11.15% | 43.98% | -13.25% |
| Others | 16,447,759.15 | 6,360,252.90 | 61.33% | -4.68% | 19.26% | -7.76% |
| Based on regions | ||||||
| South China | 2,198,531,106.33 | 1,379,454,259.35 | 37.26% | 20.54% | 25.74% | -2.60% |
| Northwest China | 601,805,121.89 | 369,787,266.01 | 38.55% | 2.61% | 8.66% | -3.42% |
| Northeast China | 198,893,856.16 | 116,170,996.21 | 41.59% | -2.69% | -1.69% | -0.59% |
| East China | 561,941,020.36 | 349,031,725.16 | 37.89% | 11.82% | 24.51% | -6.33% |
| Northeast China | 233,806,759.67 | 161,639,375.02 | 30.87% | 1.36% | -1.07% | 1.70% |
| Southwest China | 448,462,088.18 | 263,145,915.33 | 41.32% | 25.91% | 20.72% | 2.52% |
| Classified based on sectors | Items | In CNY | 2020 | 2019 | Year-on-year increase/decrease |
| Brand watches | Sales volume | pcs | 820,987 | 1,027,428 | -20.09% |
| Output | pcs | 793,206 | 783,328 | 1.26% | |
| Inventory | pcs | 1,064,881 | 1,092,662 | -2.54% |
| Classified based on sectors | Items | 2020 | 2019 | Year-on-year increase/decrease | ||
| Amount | Proportion in operating costs | Amount | Proportion in operating costs | |||
| Watches | Goods purchase cost | 2,198,558,391.97 | 83.30% | 1,779,026,456.80 | 80.24% | 23.58% |
| Raw materials | 250,957,959.33 | 9.51% | 299,121,692.67 | 13.49% | -16.10% | |
| Labor costs | 22,639,961.48 | 0.86% | 25,707,020.23 | 1.16% | -11.93% | |
| Depreciation expense | 1,290,580.38 | 0.05% | 920,871.70 | 0.04% | 40.15% | |
| Water and electricity fees | 576,614.61 | 0.02% | 463,093.67 | 0.02% | 24.51% | |
| Rent | 198,298.53 | 0.01% | 474,202.58 | 0.02% | -58.18% | |
| Others | 4,326,929.11 | 0.16% | 4,265,462.80 | 0.19% | 1.44% | |
| Precision technology business | Raw materials | 89,561,279.27 | 3.39% | 53,786,506.65 | 2.43% | 66.51% |
| Labor costs | 15,492,911.02 | 0.59% | 13,444,932.42 | 0.61% | 15.23% | |
| Depreciation expense | 1,715,869.90 | 0.07% | 1,478,005.14 | 0.07% | 16.09% | |
| Water and electricity fees | 936,944.23 | 0.04% | 760,873.00 | 0.03% | 23.14% | |
| Rent | 111,201.56 | 0.00% | 11,389.02 | 0.00% | 876.39% | |
| Others | 5,930,402.44 | 0.22% | 4,235,897.00 | 0.19% | 40.00% | |
| Leases | Depreciation expense | 16,013,313.84 | 0.61% | 14,296,604.24 | 0.64% | 12.01% |
| Labor costs | 2,642,580.58 | 0.10% | 3,012,991.57 | 0.14% | -12.29% | |
| Others | 21,916,045.93 | 0.83% | 10,868,573.83 | 0.49% | 101.65% | |
| Others | Purchase cost | 6,360,252.90 | 0.24% | 5,333,158.72 | 0.24% | 19.26% |
| Classified based on products | Items | 2020 | 2019 | Year-on-year increase/decrease | ||
| Amount | Proportion in operating costs | Amount | Proportion in operating costs | |||
| Watch brand business | Raw materials | 250,957,959.33 | 9.51% | 299,121,692.67 | 13.49% | -16.10% |
| Labor costs | 22,639,961.48 | 0.86% | 25,707,020.23 | 1.16% | -11.93% | |
| Depreciation expense | 1,290,580.38 | 0.05% | 920,871.70 | 0.04% | 40.15% | |
| Water and electricity fees | 576,614.61 | 0.02% | 463,093.67 | 0.02% | 24.51% | |
| Rent | 198,298.53 | 0.01% | 474,202.58 | 0.02% | -58.18% | |
| Others | 4,326,929.11 | 0.16% | 4,265,462.80 | 0.19% | 1.44% | |
| Watch retail and services | Goods purchase cost | 2,198,558,391.97 | 83.30% | 1,779,026,456.80 | 80.24% | 23.58% |
| Precision technology | Raw materials | 89,561,279.27 | 3.39% | 53,786,506.65 | 2.43% | 66.51% |
| business | Labor costs | 15,492,911.02 | 0.59% | 13,444,932.42 | 0.61% | 15.23% |
| Depreciation expense | 1,715,869.90 | 0.07% | 1,478,005.14 | 0.07% | 16.09% | |
| Water and electricity fees | 936,944.23 | 0.04% | 760,873.00 | 0.03% | 23.14% | |
| Rent | 111,201.56 | 0.00% | 11,389.02 | 0.00% | 876.39% | |
| Others | 5,930,402.44 | 0.22% | 4,235,897.00 | 0.19% | 40.00% | |
| Leases | Depreciation expense | 16,013,313.84 | 0.61% | 14,296,604.24 | 0.64% | 12.01% |
| Labor costs | 2,642,580.58 | 0.10% | 3,012,991.57 | 0.14% | -12.29% | |
| Others | 21,916,045.93 | 0.83% | 10,868,573.83 | 0.49% | 101.65% | |
| Others | Purchase cost | 6,360,252.90 | 0.24% | 5,333,158.72 | 0.24% | 19.26% |
| Total sales to the top five customers, in CNY | 793,076,242.10 |
| Proportion of the total sales to the top five customers in the total sales of the year | 18.69% |
| Proportion of the total sales to the related parties in the top five customers in the total sales of the year | 0.00% |
| No. | Customers | Sales (in CNY) | Proportion in the total sales of the year |
| 1 | No. 1 | 316,092,550.43 | 7.45% |
| 2 | No. 2 | 150,789,882.00 | 3.55% |
| 3 | No. 3 | 116,465,800.58 | 2.74% |
| 4 | No. 4 | 105,902,072.12 | 2.50% |
| 5 | No. 5 | 103,825,936.97 | 2.45% |
| Total | -- | 793,076,242.10 | 18.69% |
Major suppliers
| Total amount of purchase from top five suppliers, in CNY | 1,901,830,932.90 |
| Proportion of the purchase amount from the top five suppliers in the Company’s total purchase amount | 68.49% |
| Proportion of the purchase amount from the related parties in the top five suppliers in the Company’s total purchase amount | 0.00% |
| No. | Suppliers | Purchase amount, in CNY | Proportion in the total purchases of the year (%) |
| 1 | No. 1 | 835,143,338.28 | 30.08% |
| 2 | No. 2 | 394,122,512.72 | 14.19% |
| 3 | No. 3 | 252,040,548.41 | 9.08% |
| 4 | No. 4 | 233,222,529.80 | 8.40% |
| 5 | No. 5 | 187,302,003.69 | 6.75% |
| Total | -- | 1,901,830,932.90 | 68.49% |
| 2020 | 2019 | Year-on-year increase/decrease | Note to significant changes | |
| Sales costs | 870,713,899.32 | 865,792,078.61 | 0.57% | Inapplicable |
| Administrative expenses | 256,559,127.23 | 240,619,989.04 | 6.62% | Inapplicable |
| Financial expenses | 33,449,276.41 | 32,815,277.57 | 1.93% | Inapplicable |
| R & D expenditures | 51,489,323.49 | 45,057,740.25 | 14.27% | Inapplicable |
the accumulation of innovation mechanism, innovation ability, innovation talents and innovation achievements, theCompany has been recognized as an enterprise with superiority in intellectual property at national level in addition to thetitles of the "National Enterprise Technology Center for Accreditation", "National Industrial Design Center" and "NationalTechnology Innovation Demonstration Enterprise".
Investment in R & D
| 2020 | 2019 | Variation proportion | |
| Number of R & D staff (persons) | 58 | 55 | 5.45% |
| Proportion of R & D staff in total employees | 1.18% | 1.10% | 0.08% |
| Amount of investment in R & D, in CNY | 51,489,323.49 | 45,057,740.25 | 14.27% |
| Proportion of investment in R & D in operating revenue | 1.21% | 1.22% | -0.01% |
| Amount of capitalized investment in R & D (in CNY) | 0.00 | 0.00 | 0.00% |
| Proportion of capitalized investment in R & D in the total investment in R & D | 0.00% | 0.00% | 0.00% |
| Items | 2020 | 2019 | Year-on-year increase/decrease |
| Subtotal of cash flow in from operating activity | 4,682,489,563.33 | 4,157,510,367.81 | 12.63% |
| Subtotal of cash flow out from operating activity | 4,304,279,057.46 | 3,712,689,599.20 | 15.93% |
| Net cash flow arising from operating activities | 378,210,505.87 | 444,820,768.61 | -14.97% |
| Subtotal of cash flow in from investment activity | 150,556.62 | 626,107.64 | -75.95% |
| Subtotal of cash flow out from investment activity | 133,531,954.47 | 166,689,454.32 | -19.89% |
| Net cash flows arising from investment activities | -133,381,397.85 | -166,063,346.68 | -19.68% |
| Subtotal of cash flow in from fund raising activity | 743,213,671.65 | 718,848,326.76 | 3.39% |
| Sub-total cash flow paid for financing activities | 947,268,455.73 | 845,603,610.50 | 12.02% |
| Net cash flow arising from capital-raising activities | -204,054,784.08 | -126,755,283.74 | 60.98% |
| Net increase of cash and cash equivalents | 37,963,720.62 | 152,470,505.12 | -75.10% |
| End of 2020 | Beginning of 2020 | Increase/decrease in proportion | Note to significant changes | |||
| Amount | Proportion in total assets | Amount | Proportion in total assets | |||
| Monetary fund | 353,057,285.71 | 8.79% | 316,668,565.09 | 8.42% | 0.37% | Inapplicable |
| Accounts receivable | 475,598,684.89 | 11.83% | 397,471,106.98 | 10.57% | 1.26% | Inapplicable |
| Inventories | 1,931,780,185.85 | 48.07% | 1,808,820,089.92 | 48.10% | -0.03% | Inapplicable |
| Investment-oriented real estate | 398,086,447.78 | 9.91% | 407,503,307.24 | 10.84% | -0.93% | Inapplicable |
| Long-term equity investment | 51,400,665.92 | 1.28% | 46,423,837.85 | 1.23% | 0.05% | Inapplicable |
| Fixed assets | 352,734,280.76 | 8.78% | 363,997,098.94 | 9.68% | -0.90% | Inapplicable |
| Short term loans | 542,673,278.09 | 13.50% | 567,908,833.21 | 15.10% | -1.60% | Inapplicable |
| Long-term borrowings | 4,070,330.00 | 0.10% | 4,321,680.00 | 0.11% | -0.01% | 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 13,441,613.2 was used as acollateral for the overseas long term loan amounting to CNY 4,070,330.00.V. Investment
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 |
| 139,500,000.00 | 0.00 | 100.00% |
In CNY
| Company name | Company type | Principal business | Registered capital | Total assets | Net assets | Turnover | Operating profit | Net profit |
| Shenzhen Harmony World Watches Center Co., Ltd. | Subsidiaries | Purchase & sale and repairing service of watches and components | 600,000,000 | 1,872,531,386.05 | 909,806,638.88 | 2,988,916,368.26 | 242,765,902.85 | 182,326,839.05 |
| FIYTA Sales Co., Ltd. | Subsidiary | Design, R & D and sales of watches and components & parts | 450,000,000 | 613,384,970.16 | 390,941,692.32 | 516,455,170.73 | -18,885,348.17 | -15,282,974.47 |
| Shenzhen FIYTA Precision Technology Co., Ltd. | Subsidiary | Manufacture and production of watches and components | 100,000,000 | 380,728,155.21 | 264,949,431.18 | 501,248,791.25 | 76,691,131.96 | 67,842,354.18 |
| Shenzhen FIYTA Technology Development Co., Ltd. | Subsidiary | Production and machining of sophisticated components and parts | 50,000,000 | 171,890,633.16 | 118,704,721.47 | 163,533,818.78 | 11,997,378.38 | 11,243,899.59 |
| FIYTA (Hong Kong) Limited | Subsidiary | Trading of watches and accessories and investment | 137,737,520 | 245,079,582.50 | 199,324,329.81 | 102,497,627.67 | 17,412,906.01 | 14,987,003.85 |
| Shiyuehui Boutique (Shenzhen) Co., Ltd. | Subsidiary | Design, R & D and sales of watches and components & parts | 5,000,000 | 46,639,986.23 | -3,147,245.07 | 16,907,500.74 | 1,169,756.35 | 841,500.91 |
| Liaoning Hengdarui Commerce & Trade Co., Ltd. | Subsidiary | Purchase & sale of watches and components & parts | 51,000,000 | 135,784,477.86 | 42,304,571.28 | 8,307,801.99 | 1,269,830.63 | 952,372.97 |
| Shenzhen Harmony E-Commerce Limited | Subsidiary | Purchase & sale of watches and components & parts | 10,000,000 | 13,581,535.33 | 13,218,443.00 | 66,825.10 | 43,066.94 | 41,150.82 |
| Emile Chouriet (Shenzhen) Limited | Subsidiary | Design, R & D and sales of watches and components & parts | 41,355,200 | 110,356,093.35 | 55,197,428.59 | 77,916,505.74 | 1,924,473.04 | 1,420,717.84 |
| Shanghai Watch Industry Co., Ltd. | Mutual shareholding company | Production and sales of watches and components & parts | 15,350,000 | 155,920,380.87 | 119,920,567.63 | 96,146,565.15 | 20,602,896.80 | 19,907,312.29 |
| Company name | Way of acquisition and disposal of subsidiaries in the reporting period | Impact upon the overall production and operation and performances |
| Shenzhen Xunhang Precision Technology Co., Ltd. (Ended the reporting period, the said company has not yet completed the registration with the administration for industry and commerce and is subject to the final approval by the authority of industry and commerce. | Newly established | The 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. |
becoming the choice of more and more consumers. Watches are a symbolic presentation of consumers’ quality of life.Under the background of China’s continuous economic growth, consumption upgrading, the rise of Generation-Zconsumers (born after 1995), the “dual cycle” and tariff adjustments shall all provide sufficient power for the developmentof the industry. The Company is firmly optimistic about the long-term growth and development potential of the industry.In 2021, benefited from the remarkable result of China's COVID-19 prevention and control, China's economy is expectedto achieve a full recovery and rapid growth of rebound from which the watch consumption industry the Company isengaged in shall also be benefited. From the view of trend, the industry has shown structural changes after the pandemic.It is expected that the market share of high-end brands shall further increase, the competition of mid-end and fashionbrands shall become more intense, and the high-quality resources of the channel industry shall also tend to beconcentrated. The evolution of the duty-free policy of Hainan Island shall also have a significant impact on the channelstructure. The Company is at the forefront of the industry in the distribution of high-end luxury watches and its proprietarybrand business, can better cope with the impact of changes in the market structure and grasp the overall opportunities ofthe development of the industry. The Company shall conduct in-depth research on the industry change trend, andrespond timely to various market segments and seize growth opportunities.From the view of long term, the Company is confident in the development of its own brand. There is still a large gapbetween domestically produced watches and superior Swiss watch brands in terms of design, watch-making technology,and brand influence. However, thanks to the continuous improvement of China's manufacturing level and the drive of“self-confidence in culture”, Chinese consumers’ increasing sense of national pride shall also help the development ofbrands with local characteristics, and domestic watch brands shall also usher in new development opportunities.The two new growth points of precision technology business and smart wearable business are also on the track ofaccelerated growth. The Company shall accelerate capacity building, actively seize development opportunities, andcontinue to promote customer expansion, product research and development, technology upgrading, and scaleexpansion in related fields.II. Development StrategyLooking forward to the future, as a leading company in the watch industry, the Company shall adhere to its originalaspiration for development, practice the strategy of "Big Country Brand", and continue to promote the creation ofproducts and brands that represent China's identity, Chinese quality, Chinese technology and Chinese culture; promotethe Company's high-quality development and transformation , focus on brand power, product power, and channel power,and comprehensively create the advantage of differentiated competition; enhance high-end precision technologyinnovation and research and development capabilities, strengthen self-centered design and development and key watch-making capability; accelerate digital transformation and business model innovation, and deepen customer value work;continue to cultivate and promote the development of precision technology and smart wearable business and form a newbusiness growth point for the Company. In the process of carrying forward these strategic measures, the Company shallalways keep an eye on the goal of "value creation", realize the Company's long-term sustainable and healthy growth, andis committed to creating greater value for shareholders.III. Key Work in 2021
1.Tamping the basic management and consolidating the advantage of core competitivenessThe Company shall continue to improve brand professional operation capabilities, strengthen core DNA creation of thebrand and transmission, strengthen product sales integration, and continue to improve "Brand Power"; focus on full lifecycle management, optimize product planning and development, supply chain management, efficiency improvement, andpremium capacity improvement, focus on the core series to create explosive products, strengthen “product power”;continue to promote deep and detailed channel operations, and continue to improve customer satisfaction and storeyields with competitive images and products, and excellent store and after-sales service experience, and effectivelyimprove the “channel power”.
2. Grasping market opportunities and accelerating channel adjustment and upgradingRelying on existing successful practices, the Company's proprietary brands continue to promote the entry and layout ofshopping centers; the retail business of HARMONY World Watch Retail shall strengthen the construction of brandresources and channel resources, and “locate” in a planned, rhythmic and strategic way around the “Channel Map”; atthe same time, the Company shall continue to keep a close eye on business opportunities such as duty-free shopping onHainan Islands, explore and innovate models, and promote channel layout.
3. Embracing the Development of the Times and Accelerating Steadily Digital TransformationThe Company shall continue to accelerate the digital transformation of its core business, continue to strengthenmembership operation capability, and provide customers with better products and services with precise insights into
product development, marketing activities, and store operations; continue to advance the exploration of new retailchannels and actively promote the creation of a full-scenario, high-efficiency retail and service network.
4.Focusing on precision technology, strengthening investment and enhancing strengthThe Company shall continue to adhere to innovation-drive and technology-drive, strengthen the building of watch-makingcapability, improve the Company's technological level, and strive to continue to make breakthroughs in key links such asindependent driving unit design and development, key components manufacturing, new material development andapplication, and high-end watch-making process capacity building, etc.
5. Accelerating Innovation Drive and Actively Cultivating New Growth Points
The Company shall accelerate innovation drive and actively cultivate new growth points The precision technologybusiness shall accelerate the business expansion in new fields such as medical and aviation, and continue to improvethe technical level and solution capacity building; the JEEP smart watch business shall continue to explore the fields of“active health”, “grand pension”, aerospace, etc., and continue to introduce products with more competitive power andaccelerate business scale breakthrough.
6.Strengthening Team Building and Creating a Highly Effective Team
The future is always full of challenges. The Company firmly believes that only a combative and competitive team mayachieve success in the future. The Company shall continue to forge a team with high professional capability and efficientexecution ability, consolidate an “Iron Army” team; continue to deepen the full coverage of the power mechanism, andfurther stimulate the enthusiasm and creativity of the core team to deal with many uncertain factors in the future.IV. Capital Necessary for Future DevelopmentAccording to the Company's business development plan and financial budget planning in 2021 and for the purpose ofsatisfying the demand on investment and operation capital and at the same time timely seizing the developmentopportunity possibly brought about from the market change, the Company plans to apply for financing credit line withamount not exceeding CNY 1.2 billion by various means, including credit, guarantee, loan to subsidiaries, mortgage, etc.in 2021.V. Risks Possibly to be Confronted with
1. The domestic and international pandemic situation still being confronted with many uncertaintiesLooking forward to Year 2021, the repeated outbreaks of COVID-19 shall continue to bring about many uncertain factorsto the development of the domestic economy and the growth of the watch industry. The Company shall seize thehistorical development opportunity of winning back consumers and the rise of domestic brands to promote the stablegrowth of the Company.
2. The continuous evolution of the domestic competition pattern and increasing pressure of competitionThe Company also clearly realizes that under the general situation of rapid domestic consumption development, beingconfronted with the continuous pressure from duty-free imported goods on Hainan Island, changes in consumption habits,changes in industry concentration, etc., the Company needs to adhere to innovation-drive, promote the consolidation ofcore competitive advantages, strengthen key resource capability and actively respond to market changes.X. Statement of Such Activities as Reception of Survey, Communications, Interview, etc.
1. Registration Form of the Activities, such as Reception of Survey, Communications, Interviews, etc. in theReporting Period
| Reception time | Place of reception | Way of reception | Types of Visitors Received | Visitors Received | Main contents discussed and information provided | Index of Basic Information on the Investigation and Survey |
| January 08, 2020 | The Company | Field survey | Institution | Great Wall Fund Management Co., Ltd. And China Universal Asset Management Co., Ltd. | The Company conducted communication on FIYTA Brand upgrading, sales of HARMONY World Watch and development of smart watches and new business of precision technology with investors. | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 |
| May 12, 2020 | Teleconference | Telephone communication | Institution | Zhongtai Securities Co., Ltd., China Merchants Fund Management Co., Ltd., Huashang Fund Management Co., Ltd., Bosera Asset Management | The Company conducted communication on development of smart watch | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz000002 |
| Co., Ltd. and ABC-CA Fund Management Co.,Ltd. | business with investors | 6 | |||||
| August 19, 2020 | The Company | Field survey | Institution | Changjiang Securities Co., Ltd., Hunan Yuancheng Investment Management Co., Ltd., Shenzhen Zhongna Bojin Investment Management Co., Ltd., CITIC Securities Co., Ltd., Shenzhen Hengwin Fidelity Asset Management Co., Ltd., Zhuhai Hengqin Chengle Hui Capital Management Co., Ltd., Infore Capital Management Co., Ltd., Avic Fund Management Co.,Ltd., Shenzhen Shanshi Fund Management Co., Ltd., TruValue Asset Management Co., Ltd., JX Asset Management Co., Ltd., Shenzhen Minsen Investment Co., Ltd., Avic Fund Management Co., Ltd. | The Company conducted communication on FIYTA Brand upgrading, sales of HARMONY World Watch and development of smart watches and new business of precision technology with investors. | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 | |
| August 21, 2020 | The Company | Field survey | Institution | China Merchants Fund Management Co., Ltd., Ping An Fund Management Company Limited, Shanghai Chongshan Investment Co., Ltd., Shenzhen Upright Asset Management Co., Ltd., Shenzhen KWT Investment Co., Ltd., Shanghai Huahong Asset Management Co., Ltd., Shenzhen Qianhai Yunxi Fund Management Co., Ltd., Shenzhen Haifuling Capital Management Co., Ltd., Shanghai Sunshine Capital Management Co., Ltd., Penghua Fund Management Co., Ltd., Bosera Funds Management Co., Ltd., Shenzhen Qianhai Chengbeile Investment Co., Ltd., and Dongxin Holding Co., Ltd. | The Company conducted communication on FIYTA Brand upgrading, sales of HARMONY World Watch and development of smart watches and new business of precision technology with investors. | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 | |
| August 25, 2020 | The Company | Field survey | Institution | Shenzhen Upright Asset Management Co., Ltd., Shanghai Huahong Asset Management Co., Ltd., and Southern Fund Management Co., Ltd. | The Company conducted communication on FIYTA Brand upgrading, sales of HARMONY World Watch and development of smart watches and new business of precision technology with investors. | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 | |
| October 27, 2020 | The Company | Field survey | Institution | Wanlian Securities Co., Ltd., Great Wall Securities Co., Ltd., Shenzhen Haifuling Capital Management Co., Ltd., Shenzhen Qianhai Chengbeile Investment Co., Ltd., and Dongxin Holding Co., Ltd., Shenzhen Qianhai Quanda Investment Co., Ltd., China Merchants Securities Co., Ltd., Zhuhai Hengqin Changlehui Capital Management Co., Ltd., Minsheng Securities Co., Ltd., Pingan Fund Management Co., Ltd., Guotai Junan Securities Co., Ltd., UBS SDIC Fund Management Co., Ltd., Morning Bell Asset Management Co.,Ltd., Shenzhen Jinyou Chuangzhi Asset Management Co., Ltd., Shenzhen Maoyuan Wealth Management Co., Ltd., Shenzhen Zhengdetai Investment Co., Ltd., Guosen Securities Co., Ltd., Great Wall Fund Management Co., Ltd., Shenzhen Qianhai SUNFO Capital Management Group Limited, Shenwan Hongyuan Securities Co., Ltd. and China Merchants Fund Management Co., Ltd. | The Company conducted communication on FIYTA Brand upgrading, sales of HARMONY World Watch and development of smart watches and new business of precision technology with investors. | http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000026&orgId=gssz0000026 | |
| Number of reception | 6 | ||||||
| Number of institutions received | 69 | ||||||
| Number of persons received | 73 | ||||||
| Number of other visitors received | 0 | ||||||
| Is there any important information disclosed, revealed or leaked to the public? | No | ||||||
Section 5 Significant EventsI. Profit Distribution for Common Stock and Conversion of Capital Reserve into Share CapitalPreparation, Implementation or Adjustment of the Policy for Common Stock Profit Distribution, Especially the Policy forCash Dividend Distribution in the Reporting Period
The Company's 2019 Profit Distribution Plan was reviewed and approved at the 16th session of the Ninth Board ofDirectors held on March 18, 2020 and is going to be brought to 2019 Annual General Meeting for review. It was dissolvedthat with the Company’s total share capital as at the date of record for future implementation of the profit distribution planas the base, the Company shall distribute cash dividend at the rate of CNY 2.00 for every 10 shares (with tax inclusive)with the total cash dividend not exceeding CNY 88,593,776.2, distribute bonus share at the rate of 0 share for every 10shares to the whole shareholders and capitalize no reserve into capital.
In view of the fact that the total share capital of the Company decreased from 442,968,881 shares to 428,171,881 sharesduring the period from the disclosure to the implementation. The Company adjusted the total amount of distribution inaccordance with the principle of fixed distribution proportion. The final implementation plan for the 2019 annual equitydistribution is: based on the number of the Company's capital stock being 428,171,881 shares, the Company woulddistribute cash dividend to all shareholders at the rate of CNY 2.00 for every 10 shares (with tax inclusive) , 0 bonusshares and would not convert any capital reserve into capital.
The implementation of the profit distribution plan was finished on July 3, 2020. For the detail, refer to the Announcementon Implementation of the Profit Distribution for Year 2019 (2020-034).
| 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 |
dividend distribution policy, fully asked for the independent directors’ opinions, effectively ensured the minorityshareholders’ benefit and made timely and accurate disclosure in its annual report and the relevant media.
Profit Distribution Plan in 2018: With the total share capital of 438,744,881 shares as at December 31, 2018 as thebase, the Company distributed to the whole shareholders cash dividend at CNY 2.00 for every 10 shares (with taxinclusive), 0 bonus share for every 10 shares; converted no reserve into share capital.
(1) As of the date of application for equity distribution, the Company implemented 2018 Restricted A-Share incentivescheme (the first phase), and granted 4,224,000 restricted A-shares to 128 participants. Upon completion of the grantingand registration for listing, the Company’s share capital increased to 442,968,881 shares.
(2) The Company has repurchased 6,000,000 shares of domestically listed foreign shares (B shares) through the specialaccount for repurchase. According to the relevant provisions of the Implementation Rules of Shenzhen Stock Exchangeon Repurchase of Shares by Listed Companies, the Company’s repurchased shares in the special account would not bequalified for participating in this equity distribution.In view of the above reason, the base of the shares available for dividend distribution in the Company's equity in 2018was adjusted to 436,968,881 shares. According to the relevant provisions of the Guidelines of Shenzhen StockExchange on Business Handling No. 2 - Issues Related to Regular Report Disclosure, in compliance with the principle ofthe total amount of cash dividends remaining unchanged, the Company's final implementation plan for the 2018 annualequity distribution was: based on the Company's number of shares for distribution being 436,968,881 shares, theCompany distributed cash dividend to all shareholders at CNY2.008128 in cash (including tax) for every 10 shares, and 0bonus shares and would convert no public reserve into capital.
Profit Distribution Plan in 2019: Based on the profit distribution plan reviewed and approved by 2019 Annual GeneralMeeting, it was decided that with the Company’s total share capital as at the date of record for future implementation ofthe profit distribution plan as the base, the Company would distribute cash dividend at the rate of CNY 2.00 for every 10shares (with tax inclusive) with the total cash dividend not exceeding CNY 88,593,776.2, distribute bonus share at therate of 0 share for every 10 shares to the whole shareholders and capitalize no reserve into capital. Ended the date ofdisclosing the Profit Distribution Plan 2019, the Company’s total capital stock was 442,968,881 shares.
(1) According to the Company's "Proposal on the Repurchase of the Company's Partial Domestically Listed ForeignShares (B Shares)", the Company would, within the validity period stipulated in the repurchase program (April 23, 2019to April 23, 2020), continuously implement the B share repurchase. The shares repurchased are used to reduce theCompany’s registered capital. Ended the date of implementing the profit distribution plan, the Company’s repurchaseterm expired. The Company completed the procedures for cancellation of the shares repurchased (14,730,000 shares).The Company’s total capital stock was reduced from 442,968,881 shares to 428,238,881 shares.
(2) According to the “Proposal for Repurchase and Cancellation of the Partially Restricted Shares Involved in 2018 AShare Restricted Stock Incentive scheme (Phase I)” approved at the 15th and 16th Sessions of the Ninth Board ofDirectors, the Company repurchased and canceled a total of 67,000 Restricted A-shares that were granted with therestriction not released to the three former original participants who have left the Company in the 2018 restricted A-shareincentive scheme (Phase I). This matter was reviewed and approved at the Company's 2020 1st Extraordinary GeneralMeeting. By the date of implementing the profit distribution plan, the Company had completed the procedures for
cancellation of the shares repurchased. The Company’s total capital stock was reduced from 428,238,881 shares to428,171,881 shares.
In view of the above reason, the base of the shares available for dividend distribution in the Company's equity distributionfor 2019 was adjusted to 428,171,881 shares. The Company's final implementation plan for the 2019 annual equitydistribution was: based on the Company's number of shares available for distribution being 428,171,881 shares, theCompany distributed cash dividend to all shareholders at CNY 2.00 (with tax inclusive) for every 10 shares and 0 bonusshare; and would convert no public reserve into capital.
(3) According to the "Implementation Rules of Shenzhen Stock Exchange on the Repurchase of Shares by ListedCompanies", if a listed company has repurchased the shares by means of centralized competitive bidding with theconsideration in cash, the amount paid for the repurchase in the very year shall be deemed as cash dividends whichshall be put in the calculation based on the relevant proportion of cash dividends for the year. During the reporting period,the Company accumulatively repurchased 10,010,000 shares of the Company’s own stock by means of the centralizedcompetitive bidding through its special securities account for repurchase, has already paid total amount ofHK$ 60,289,369.30 (excluding the stamp duty, commission and other trading costs equal to CNY 53,524,330.10). Thisamount of money was included in the cash dividend distribution in 2019.
Profit Distribution Plan in 2020: As of the disclosure date, the Company's total share capital was 435,751,881 shares,and the Company's total capital base for profit distribution must not exceed 435,751,881 shares in maximum.
(1) According to the Company's "Proposal on the Repurchase of the Company's Partial Domestically Listed ForeignShares (B Shares) 2020-038", the Company would, within the validity period stipulated in the repurchase program (July23, 2020 to July 23, 2021), continuously implement the B share repurchase. It is expected that by the time ofimplementing the profit distribution plan, the Company's repurchase period would expire and the cancellation of therepurchased shares would be completed. At that time, the total share capital base would decrease.
(2) According to the “Proposal for Repurchase and Cancellation of the Partial Restricted Shares Involved in 2018Restricted A-Share Incentive scheme (Phase I)” and the “Proposal for Repurchase and Cancellation of the PartialRestricted Shares Involved in 2018 Restricted A-Share Incentive scheme (Phase II) reviewed and approved at 2021 2ndExtraordinary General Meeting, the Company intended to repurchase and cancel a total of 51,359 restricted A-share thatwere granted with the restriction but not yet released to the one retired and one deceased participants in the 2018Restricted A-shares Incentive scheme (Phase I); and intended to repurchase and cancel a total 150,000 restricted A-shares held by and granted with restriction not yet released to one retired participant in the 2018 Restricted A-sharesIncentive scheme (Phase II); It is expected that when the profit distribution plan is implemented, the Company shall havecompleted the above Restricted A-Share repurchase and cancellation procedures, then the total capital stock base shallbe reduced. In the event of subsequent departure of other participants, the Company shall conduct repurchase-cancellation in accordance with regulations,and the Company's total share capital shall be reduced.
For these reasons, with the total capital stock as at the date of record as the base, the Company would distribute cashdividend at the rate of CNY 4.00 for every 10 shares (with tax inclusive), with the total cash dividend to be distributed notexceeding CNY 174,300,752.40 , and no bonus share to the whole shareholders and would capitalize no reserve.
(3) According to the "Implementation Rules of Shenzhen Stock Exchange on the Repurchase of Shares by ListedCompanies", if a listed company has repurchased the shares by means of centralized competitive bidding with theconsideration in cash, the amount paid for the repurchase in the very year shall be deemed as cash dividends whichshall be put in the calculation based on the relevant proportion of cash dividends for the year. During the reporting period,the Company accumulatively repurchased 12,866,401 shares (where, 4,720,000 shares were involved in the firstrepurchase plan, and 8,146,401 shares in the second) of the Company’s own stock by means of the centralizedcompetitive bidding through its special securities account for repurchase, has already paid total amount ofHK$ 81,319,545.03 (excluding the stamp duty, commission and other trading costs equal to CNY 71,338,916.62). Thisamount of money was included in the cash dividend distribution in 2020.
The accumulative amount of cash dividend distributed in the past three years took 204.31% of the annual average netprofit in the past three years, which complies with the rules and regulations.
Statement of cash dividends distributed in the past three years (with the reporting period inclusive)
In CNY
| Year of Dividend Distribution | Amount of Cash Dividend (including tax) | Net profit attributable to the Company’s shareholders in the consolidated statements of the year of dividend distribution | Ratio of the net profit attributable to the Company’s shareholders taken in the consolidated statements | Amount of cash dividend distributed in other way(s) (such as shares repurchased) | Proportion of the cash dividend distributed in other way(s) in the net profit attributable to the Company’s shareholders of ordinary shares in the consolidated statements | Total amount of cash dividend (including other way(s)) | Ratio of the total amount of cash dividend (including other way(s)) in the net profit attributable to the Company’s shareholders of ordinary shares in the consolidated statements |
| 2020 | 174,300,752.40 | 294,115,156.04 | 59.26% | 71,338,916.62 | 24.26% | 245,639,669.02 | 83.52% |
| 2019 | 85,634,376.20 | 215,909,014.15 | 39.66% | 53,524,330.10 | 24.79% | 139,158,706.30 | 64.45% |
| 2018 | 87,748,976.20 | 183,835,095.29 | 47.73% | 0.00 | 0.00% | 87,748,976.20 | 47.73% |
| Bonus shares distributed at the rate of ___ (share) for every 10 shares | 0 |
| Dividend distributed at the rate of CNY___ for every 10 shares (with tax inclusive) | 4 |
| Number of shares converted for every 10 shares (shares) | 0 |
| Share capital base for the dividend distribution preplan (shares) | Based on the total number of shares on the date of record when the profit distribution plan is implemented in the future |
| Total cash dividend distributed (with tax inclusive) | 174,300,752.40 |
| Amount of cash dividend distributed in other way(s) (such as shares repurchased) | 71,338,916.62 |
| Total amount of cash dividend (including other way(s)) | 245,639,669.02 |
| Profit available for distribution (CNY) | 722,064,955.20 |
| Proportion of the cash dividend in the total profit available for distribution (%) | 100% |
| Cash Dividend Distribution for the Reporting Year | |
| Others | |
| Detailed information for profit distribution or conversion of capital reserve into share capital preplan | |
| The Company's 2020 Profit Distribution Plan was reviewed and approved at the 27th session of the Ninth Board of Directors held on March 8, 2021 and is going to be brought to 2020 Annual General Meeting for review. It was planned that with the Company’s total share capital as at the date of record for future implementation of the profit distribution plan as the base, the Company shall distribute cash dividend at the rate of CNY 4.00 for every 10 shares (with tax inclusive) with the total cash | |
dividend distributed not exceeding CNY 174,300,752.40, distribute bonus share at the rate of 0 share for every 10 shares to the whole shareholders and capitalize noreserve into capital. The reasons are as follows:
(1) According to the Company's "Proposal on the Repurchase of the Company's Partial Domestically Listed Foreign Shares (B Shares) 2020-038", the Companywould, within the validity period stipulated in the repurchase program (July 23, 2020 to July 23, 2021), continuously implement the B share repurchase. It is expectedthat by the time of implementing the profit distribution plan, the Company's repurchase period would expire and the cancellation of the repurchased shares would becompleted. At that time, the total share capital base would decrease.
(2) According to the “Proposal for Repurchase and Cancellation of the Partial Restricted Shares Involved in 2018 Restricted A-Share Incentive scheme (Phase I)”approved at the 26th Sessions of the Ninth Board of Directors, the Company intended to repurchase and cancel a total of 51,359 Restricted A-shares that weregranted with the restriction but not yet released to the one retired and one deceased participants in the 2018 Restricted A-Share incentive scheme (Phase I). Thismatter was reviewed and approved at the Company's 2021 2nd Extraordinary General Meeting.According to the “Proposal for Repurchase and Cancellation of the Partial Restricted Shares Involved in 2018 A Share Restricted Stock Incentive scheme (Phase II)”approved at the 26th Session of the Ninth Board of Directors, the Company intended to repurchase and cancel a total of 150,000 Restricted A-shares that weregranted with the restriction buy not yet released to one retired former incentive object in the 2018 Restricted A-Share incentive scheme (Phase II). This matter wasreviewed and approved at the Company's 2021 2nd Extraordinary General Meeting.It is expected that when the profit distribution plan is implemented, the Company shall have completed the above Restricted A-Share repurchase and cancellationprocedures, then the total capital stock base shall be reduced. In the event of subsequent departure of other participants, the Company shall conduct repurchase-cancellation in accordance with regulations, and the Company's total share capital shall be reduced.The profit distribution plan is subject to review and approval of the General Meeting before implementation.
III. Implementation of Commitments
1. Commitments finished in implementation by the Company, shareholders, actual controller, acquirer, directors,supervisors, senior executives or other related parties in the reporting period and commitments unfinished inimplementation at the end of the reporting periodInapplicable
2. There existed profit anticipation for the Company’s assets or projects while the reporting period was stillwithin the duration of the profit anticipation. The Company made explanation on whether the assets or projectsreached the anticipated profit and the causeInapplicableIV. Non-operational Occupancy of the Company’s Capital by the Controlling Shareholder and its Related PartiesInapplicableV. 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 on the Changes in the Accounting Policy, Accounting Estimate, and Accounting Method inComparison with the Financial Report of the Previous YearThe Ministry of Finance revised and issued the "Accounting Standards for Enterprises No. 14-Revenues" on July 5, 2017.According to the requirement of the Ministry of Finance, a company which is listed both at home and abroad or listedoverseas 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 1,2018; other domestically listed enterprises started the implementation commencing from January 1, 2020; non-listedcompanies started the implementation commencing from January 1, 2021.
On September 19, 2019, the Ministry of Finance promulgated the “Circular on Amending and Issuing the GeneralCorporate Financial Statement Templates for the Year 2019” (CAI KUAI [2019] No. 16), according to which the Companyamended its general corporate financial statement templates; and prepared the consolidated financial statements foryear 2019 and the consolidated financial statements for the subsequent periods in accordance with the accountingstandards and the Amendment Circular.
According to the concerned requirements of the aforesaid accounting standards and the consolidated financial statementtemplates,the Company implemented the aforesaid new rules and prepared the consolidated financial statements foryear 2019 and the consolidated financial statements for the subsequent periods according to the relevant provisions. Fordetails, please refer to the “Announcement on Change of the Accounting Policies 2020-015” disclosed by the Companyon the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn/ on March 20, 2020.
The Ministry of Finance revised and issued the "Accounting Standards for Enterprises No. 21-Revenues” (CAI KUAI[2018] No. 35) on December 7, 2018. According to the requirement of the Ministry of Finance, a company which is listedboth at home and abroad or listed overseas and prepares its financial statements according to the International FinancialReports Standards or the Accounting Standards for Enterprises started implementing the said accounting standardscommencing from January 1, 2019; other domestically listed enterprises started the implementation commencing fromJanuary 1, 2021. The Company as a domestically listed company started implementing the new lease standardscommencing 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 bythe Company on the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn/ on March 10, 2021.VII. Explanation on Serious Accounting Errors Occurred in the Reporting Period Necessary to be RestatedRetrospectivelyInapplicableVIII. Explanation on the Changes in the Scope of the Consolidated Statements in Comparison with the FinancialReport of the Previous YearInapplicableIX. Engagement/Disengagement of CPAsCPAs currently engaged by the Company
| Name of the domestic CPAs | Grant Thornton LLP |
| Remuneration to the domestic CPAs (in CNY 10,000) | 120 |
| Successive years of the domestic CPAs offering auditing services | 2 |
| Name of the certified public accountants from the domestic CPAs | Dong Xu and Meng Junfeng |
| Successive years of the domestic CPAs offering auditing services | 2 |
Employment of CPAs, financial consultant or sponsor for auditing the internal controlThe 16th session of the Ninth Board of Directors of the Company held on March 18, 2020 and 2019 Annual GeneralMeeting held on June 4, 2020 reviewed and approved the ``Proposal for the Payment of the Audit Fee for Year 2019 andthe Reappointment of the Company's Auditor for Year 2020. The Company decided to reappoint Grant Thornton CertifiedPublic Accountants LLP as the Company's auditor for auditing its financial report and internal control for year 2020 for aterm of one year. For the detail, please refer to the “Announcement on the Reappointment of the Company’s Auditor forYear 2020, 2020-017” disclosed by the Company on the Securities Times, Hong Kong Commercial Daily andhttp://www.cninfo.com.cn/ on March 20, 2020.
During the reporting period, the Company paid the audit fee amounting to CNY 800,000.00 for auditing the financialreport and CNY 300,000.00 for auditing the internal control for year 2019 to Grant Thornton Certified Public AccountantsLLP.X. Delisting Possibly to be Confronted with after Disclosure of the Annual ReportInapplicableXI. Matters concerning Bankruptcy ReorganizationInapplicableXII. Significant Lawsuits and ArbitrationsInapplicableXIII. Penalty and RectificationInapplicableXIV. Integrity of the Company and its Controlling Shareholder and Actual ControllerInapplicableXV. Implementation of the Company’s Equity Incentive Scheme, Employee Stock Ownership Scheme or otherEmployee Incentive Measures
1. Restricted A-Share Incentive Scheme 2018(Phase I)
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 Restricted A-Share Incentive Scheme (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. For the detail, refer to therelevant announcements disclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn.
on January 12, 2019. This part of Restricted A-Share was all granted and registered for listing by January 30, 2019.
The Company held the 24th session of the Ninth Board of Directors on December 29, 2020, and believed that it has beenmatured for relieving the restriction conditions in the first restriction relief period of the Restricted A-Share incentiveScheme (Phase I) in 2018. With the exception of 147,000 shares held by 6 retired former participants with the restrictionunreleased which have been repurchased and canceled by the Company, the Company has handled the matterconcerning the restriction for the 122 participants in compliance with the condition for relieving the restriction for sale.The total number of Restricted A-Share involved in relieving the restriction is 1,357,641 shares. This part of the restrictedshares with the restriction released got listed for trading on February 1, 2021. For the detail, refer to the relevantannouncements disclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn. onJanuary 29, 2021.
The 26th session of the Ninth Board of Directors held on February 4, 2021 and 2021 2nd Extraordinary General Meetingheld on February 24, 2021 decided to repurchase and cancel the 51,359 restricted A-shares which were already grantedto but with the restriction not yet released and held by1 retired and 1 deceased participants. For the detail, refer to therelevant announcement disclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn.respectively on February 5, 2021 and February 25, 2021.
2. Restricted A-Share Incentive Scheme 2018(Phase II)
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 Restricted A-Share Incentive Scheme (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. For the detail, refer to therelevant announcements disclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn.on January 16, 2021. This part of Restricted A-Share was all granted and registered for listing by January 29, 2021.
The 26th session of the Ninth Board of Directors held on February 4, 2021 and 2021 2nd Extraordinary General Meetingheld on February 24, 2021 decided to repurchase and cancel the 150,000 restricted A-shares which were alreadygranted to but with the restriction not yet released and held by1 retired participants. For the detail, refer to the relevantannouncement disclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn.respectively on February 5, 2021 and February 25, 2021.XVI. Significant Related Transactions
1. Related Transactions Related with Day-to-Day Operations
Inapplicable
2. Related transactions concerning acquisition and sales of assets or equity
Inapplicable
3. Related transactions concerning joint investment in foreign countries
Inapplicable
4. Current Associated Rights of Credit and Liabilities
Inapplicable
5. Other Significant Related Transactions
The 16th session of the Ninth Board of Directors held on March 18, 2020 and 2019 Annual General Meeting held onJune 4, 2020 reviewed and approved the Proposal on Prediction of Regular Related Transactions in 2020. For the detail,refer to the Announcement on the Resolution of the 16th Session of the Ninth Board of Directors No. 2020-011, theAnnouncement on the Prediction of the Regular Related Transactions in 2020 No. 2020-014 and the Announcement onthe Resolution of 2020 Annual General Meeting No. 2020-031. 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.
Inquiry on the website for disclosing the provisional report concerning significant related transactions
| Description of the provisional announcements | Date of disclosure | Disclosure website |
| Announcement on the Resolution of the 16th Session of the Ninth Board of Directors, 2020-011 | March 20, 2020 | www.cninfo.com.cn |
| Announcement of the Prediction of the Regular Related Transactions in 2020, 2020-014 | March 20, 2020 | www.cninfo.com.cn |
| Announcement on the Resolution of 2019 Annual General Meeting, 2020-031 | June 05, 2020 | www.cninfo.com.cn |
2. Significant Guarantees
(1) Guarantees
In CNY 10,000
| Outward guarantees Offered by the Company and its Subsidiaries (excluding guarantee to the subsidiaries) | ||||||||
| Names of Guarantees | Date of the announcement on the guarantee line | Guarantee line | Date of occurrence | Actual amount of guarantee | Type of guarantee | Guarantee period | Implementation status | Guarantee to related party? |
| Inapplicable | ||||||||
| Guarantee to the subsidiaries | ||||||||
| Names of Guarantees | Date of the announcement on the guarantee line | Guarantee line | Date of occurrence | Actual amount of guarantee | Type of guarantee | Guarantee period | Implementation status | Guarantee to related party? |
| Harmony | December 30, 2020 | 20,000 | December 30, 2020 | 10,000 | Guarantee with joint responsibility | 1 year | No | No |
| Harmony | May 12, 2020 | 10,000 | September 10, 2020 | 10,000 | Guarantee with joint responsibility | 1 year | No | No |
| Harmony | May 12, 2020 | 5,000 | September 15, 2020 | 5,000 | Guarantee with joint responsibility | 1 year | No | No |
| the Hong Kong Co. | August 03, 2020 | 3,366.56 | October 29, 2020 | 296.02 | Guarantee with joint responsibility | 1 year | No | No |
| Total guarantee quota to the subsidiaries approved in the reporting period (B1) | 38,366.56 | Total amount of guarantee to the subsidiaries actually incurred in the reporting period (B2) | 25,296.02 | |||||
| Total guarantee quota to the subsidiaries approved at the end of the reporting period (B3) | 38,366.56 | Total balance of actual guarantee to the subsidiaries at the end of the reporting period (B4) | 25,296.02 | |||||
| Guarantee among the subsidiaries | ||||||||
| Names of Guarantees | Date of the announcement on the guarantee line | Guarantee line | Date of occurrence | Actual amount of guarantee | Type of guarantee | Guarantee period | Implementation status | Guarantee to related party? |
| Inapplicable | ||||||||
| Total guarantee quota to the subsidiaries approved in the reporting period (C1) | 0 | Total amount of guarantee to the subsidiaries actually incurred in the reporting period (C2) | 0 | |||||
| Total guarantee quota to the subsidiaries approved at the end of the reporting period (C3) | 0 | Total balance of actual guarantee to the subsidiaries at the end of the reporting period (C4) | 0 | |||||
| Total amount of guarantees (i.e. Total of the previous three major items) | ||||||||
| Total guarantee quota to the subsidiaries approved in the reporting period (A1) | 38,366.56 | Total amount of outward guarantee actually incurred in the report period (A2) | 25,296.02 | |||||
| Total amount of guarantees already approved at the end of the report period (A3) | 38,366.56 | Total ending balance of guarantees at the end of the report period (A4) | 25,296.02 | |||||
| Proportion of the actual guarantees in the Company’s net assets (namely A4+B4 + C4) | 9.03% | |||||||
| where | ||||||||
| Amount of guarantees offered to the shareholders, actual controller and its related parties (D) | 0 | |||||||
| Amount of guarantee for liabilities directly or indirectly offered to the guarantees with the asset-liability ratio exceeding 70% (E) | 0 | |||||||
| Guarantee with total amount exceeding 50% of the net assets (F) | 0 | |||||||
| Total amount of the aforesaid three guarantees (D+E+F) | 0 | |||||||
| For the guarantee not yet due, guarantee responsibility incurred in the reporting period or description of the possible related discharge duty (if any) | Inapplicable | |||||||
| Note to the outward guarantee against the established procedures (if any) | Inapplicable | |||||||
3. Entrusting a Third Party to Manage the Cash Assets
(1) Finance Management on Commission
Inapplicable
(2) Entrusted Loan
Inapplicable
4. Important contracts for day-to-day operation
Inapplicable
5. Other Important Contracts
InapplicableXVIII. Social Responsibilities
1. Implementation of social responsibilities
"The Social Responsibility Report " was already published on www.cninfo.com.cn on March 10, 2021.
2. Implementation of the social responsibility of precise poverty relief
During the reporting period of half a year, the Company had neither precise poverty relief work nor follow-up precisepoverty relief plan necessary to be carried out.
3. Environmental Protection
Does the Company or any of its subsidiaries belong to a key pollutant discharging unit as announced to the public by theenvironmental protection authority?
Yes
| Name of the Company or its Subsidiary | Description of the major pollutants or specific pollutant | Way of discharging | Number of discharging outlets | Distribution of the discharging outlets | Discharging concentration | Pollutant Discharge Standards in Force | Total discharge volume | Total discharge volume verified | Over-discharging |
| Shanghai Watch Industry Co., Ltd. | Nickel and chromium effluent | Intermittent and interruption | 1 | At the port of effluent treatment equipment | Nickel ﹤0.03, chromium ﹤0.01 | Nickel:0.1; chromium:0.1 | 1640 tons/year | 2960 tons/year | None |
the limit as specified by the standard. The Company's online monitoring terminal has been docked with the governmentmonitoring platform for timely testing. It complies with the standard in terms of emission factors.
In order to implement the requirements of the Eco-Environment Bureau for energy saving and consumption reduction,the Company has basically reached the standard for clean water after treatment of the wastewater from electroplating.Therefore, the Company recycled part of the water and reduced the total annual discharge by about 1,000 tons eachyear.
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 classifiedmust be 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 Environmental Protection Bureau 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 Environmental Protection Bureau of Shanghai and has received the Pollutant Discharge Permit issued bythe said authority at the end of 2019.
Contingency Plan for Emergent Environmental IncidentsShanghai Watch Co., Ltd. prepared the Emergency Response Plan against Emergent Environmental Incidents andregularly organizes training and exercise every year. The aforesaid plan has been approved and filed for record byYangpu District Environmental Protection Bureau of Shanghai and has been published on the Environmental InformationDisclosure Platform of Enterprises and Institutions of Shanghai.
Environment Self-Monitoring ProgramYangpu District Environmental Protection Bureau of Shanghai conducted supervision once every quarter. The Companyentrusted Shanghai Light Industry Environment Protection and Pressure Vessel Monitoring General Station, a competentindependent agent, to conduct the monitoring every half a year. The Company was itself equipped with monitoringinstruments and conducted self-monitoring at least 4 times every month.
Other environment information necessary to be disclosedThe company has disclosed the concerned information on the Environmental Information Disclosure Platform ofEnterprises and Institutions of Shanghai according to the requirements of the local environmental protection authorities.Website name: http://xxgk.eic.sh.cn.
Other information in connection with the environmental protectionNone
XIX. Notes to Other Significant Events
1. Amendment of the Company’s Internal Rules and Regulations
At the 18th session of the Ninth Board of Directors held on May 11, 2020, the Company reviewed and approved the"Proposal for Amending the Implementation Rules of the Special Committees of the Board of Directors". For the detail,refer to the relevant announcement of the Company disclosed in the Securities Times, Hong Kong Commercial Daily andand http://www.cninfo.com.cn. on May 13, 2020.
At the 18th session of the Ninth Board of Directors held on May 11, 2020, the Company reviewed and approved the"Proposal for Amending the Articles of Association". For the detail, refer to the relevant announcements of the Companydisclosed in the Securities Times, Hong Kong Commercial Daily and and http://www.cninfo.com.cn. on May 13, 2020 andJune 5, 2020.
At the 20th session of the Ninth Board of Directors held on July 28, 2020, the Company reviewed and approved the"Proposal for Amending the Investment Management System” and the “Proposal for Amending the Internal ControlSystem”. For the detail, refer to the relevant announcement of the Company disclosed in the Securities Times, HongKong Commercial Daily and and http://www.cninfo.com.cn. on July 30, 2020.
2. Repurchase of Partial Domestically Listed Foreign Investment Shares (B-Shares)The Company’s 7th Session of the Ninth Board of Directors held on April 4, 2019 and 2019 2nd Extraordinary GeneralMeeting held on April 23, 2019 reviewed and approved the “Proposal on Repurchase of Certain Domestically ListedForeign Investment Shares of the Company (B- Shares), and subsequently disclosed the repurchase report and series ofprogress announcements in accordance with relevant regulations. Ended April 29, 2020, the repurchase of the shareswas finished in implementation. For the detail, please refer to the “Announcement on the Completion of the Cancellationof Certain Domestically Listed Foreign Investment Shares (B-Shares) as Repurchased and the Change of theCompany’s Shares 2020-026” disclosed in the Securities Times, Hong Kong Commercial Daily andhttp://www.cninfo.com.cn on April 30, 2020.
The Company’s 19th Session of the Ninth Board of Directors held on July 6, 2020 and 2020 2nd Extraordinary GeneralMeeting held on July 23, 2020 reviewed and approved the “Proposal on Repurchase of Certain Domestically ListedForeign Investment Shares of the Company (B- Shares), and subsequently disclosed the repurchase report and series ofprogress announcements in accordance with relevant regulations. Ended the reporting period, the Company alreadyrepurchased 8,146,401 shares. For the detail, refer to the relevant announcement disclosed in the Securities Times,Hong Kong Commercial Daily and http://www.cninfo.com.cn.
3. Capital increase to wholly-owned subsidiaries
The Company's 20th session of the Ninth Board of Directors held on July 28, 2020 reviewed and approved the "Proposalon Capital Increase to Shenzhen Fiyta Precision Technology Ltd., One of the Company's Wholly-owned Subsidiaries",the "Proposal on Capital Increase to Shenzhen Fiyta Precision Technology Development Ltd., One of the Company'sWholly-owned Subsidiaries", and the "Proposal on Capital Increase to Shenzhen Harmony E-Commerce Co., Ltd., Oneof the Company’s Wholly-owned Subsidiaries, and decided to increase capital to the above three wholly-ownedsubsidiaries by CNY 90 million and CNY 40 million and CNY 9.5 million respectively. For the detail, refer to the relevant
announcement disclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn. On July30, 2020.
4. Investment for Establishment of Wholly-owned Subsidiary
The Company's 23rd Session of the Ninth Board of Directors held on December 4, 2020, reviewed and approved the"Proposal on the Establishment of a Wholly Owned Subsidiary" and decided to invest in the establishment of a wholly-owned subsidiary with its own capital amounting to CNY10 million. (Shenzhen Xunhang Precision Technology Co., Ltd.,tentatively named, subject to the registered name of the with the administration for industry and commerce). For thedetail, please refer to the“Announcement on Investment and Establishment of a Wholly Owned Subsidiary 2020-072”disclosed in the Securities Times, Hong Kong Commercial Daily and www.cninfo.com on December 5, 2020 . As of theend of the reporting period, this wholly-owned subsidiary has not yet completed the registration with the administrationfor industry and commerce, and the Company shall perform its subsequent information disclosure obligations inaccordance with relevant regulations.XX. Significant Events of the Company’s SubsidiariesInapplicable
Section 6 Change of the Shares and Particulars about ShareholdersI. Change of the Shares
1. Change of the Shares
In shares
| Before the change | Increase/decrease (+, -) involved in the change | After the change | |||||||
| Quantity | Proportion | New issuing | Bonus shares | Shares converted from reserve | Others | Sub-total | Quantity | Proportion | |
| I. Restricted shares | 4,604,513 | 1.04% | -147,000 | -147,000 | 4,457,513 | 1.04% | |||
| 1. Shares held by the state | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| 2. State corporate shares | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| 3. Other domestic shares | 4,604,513 | 1.04% | -147,000 | -147,000 | 4,457,513 | 1.04% | |||
| Including: Domestic corporate shares | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| Shares held by domestic natural persons | 4,604,513 | 1.04% | -147,000 | -147,000 | 4,457,513 | 1.04% | |||
| 4. Foreign invested shares | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| Including: Foreign corporate shares | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| Shares held by foreign natural persons | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| II. Unrestricted shares | 438,364,368 | 98.96% | -14,730,000 | -14,730,000 | 423,634,368 | 98.96% | |||
| 1. CNY ordinary shares | 356,716,368 | 80.53% | 0 | 0 | 356,716,368 | 83.33% | |||
| 2. Foreign invested shares listed in Mainland China | 81,648,000 | 18.43% | -14,730,000 | -14,730,000 | 66,918,000 | 15.63% | |||
| 3. Foreign invested shares listed | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| abroad | |||||||||
| 4. Others | 0 | 0.00% | 0 | 0 | 0 | 0.00% | |||
| III. Total shares | 442,968,881 | 100.00% | -14,877,000 | -14,877,000 | 428,091,881 | 100.00% |
During the reporting period, the Company completed the cancellation of a total of 14,730,000 domestically listed foreignshares (B-shares) with CSDC Shenzhen Office on April 29, 2020.
Progress of implementation of the stock repurchaseThe Company’s 7th Session of the Ninth Board of Directors held on April 4, 2019 and 2019 2nd Extraordinary GeneralMeeting held on April 23, 2019 reviewed and approved the “Proposal for the Repurchase of Partial Domestically ListedForeign Shares (B-Shares), according to which the Company was approved to repurchase part of the company'sdomestically listed foreign shares (B-shares) through a centralized bidding with its own fund to repurchase part of theCompany's domestically listed foreign shares (B-shares) through centralized bidding to reduce the registered capital.During the reporting period, the repurchase of the aforesaid shares was completed in implementation. The Companyrepurchased 14,730,000 domestically listed foreign shares (B- shares) through centralized bidding by means of thespecial account for the securities repurchased and completed the cancellation.
The Company’s 19th Session of the Ninth Board of Directors held on July 6, 2020 and 2020 2nd Extraordinary GeneralMeeting held on July 23, 2020 reviewed and approved the “Proposal on Repurchase of Partial Domestically ListedForeign Shares (B- Shares), and subsequently disclosed the repurchase report and series of progress announcements inaccordance with relevant regulations. For the detail, please refer to the relevant announcements disclosed on theSecurities Times, Hong Kong Commercial Daily and www.cninfo.com. Ended the reporting period, the Companyaccumulatively repurchased 8,146,401 shares in the Company through a centralized bidding method with the specialaccount for the securities repurchased, accounting for 1.90% of the company’s total share capital. The highesttransaction price of the repurchased shares was HK$6.74 per share, and the lowest transaction price was HK$5.93./share, the total amount paid was HK$ 52,515,985.20 (with the trading costs, such as stamp duty, commission, etc.exclusive, it is equivalent approximately to CNY 44,199,553.78).
Progress of implementation of reduction of the holding size of the shares repurchased by centralized biddingInapplicable
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
During the reporting period, the Company carried out repurchase and cancellation of the partial restricted shares in the2018 Restricted A-Share Incentive Program (Phase I) and repurchased and canceled the B-shares as repurchased; andthe earnings per share and return on equity at the end of the reporting period were calculated by weighted average.
| Net return on equity, weighted average (%) | Earnings per share | ||||
| Basic earning per share (CNY/share) | Diluted earning per share (CNY/share) | ||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| 10.78% | 8.21% | 0.6764 | 0.4943 | 0.6764 | 0.4943 |
2. Change of the Restricted Shares
In shares
| Names of the Shareholders | Number of restricted shares at the beginning of the reporting period | Number of restricted shares increased in the reporting period | Number of restricted shares released in the reporting period | Number of restricted shares at the end of the reporting period | Cause of restriction | Date of relieving the restriction |
| Huang Yongfeng | 160,000 | 0 | 0 | 160,000 | Locked shares for senior executives and restricted shares as the granted locked shares | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Pan Bo | 117,500 | 0 | 0 | 117,500 | Locked shares for senior executives and restricted shares as the granted locked shares | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Lu Wanjun | 117,500 | 0 | 0 | 117,500 | Locked shares for senior executives and restricted shares as the granted locked shares | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Liu Xiaoming | 117,500 | 0 | 0 | 117,500 | Locked shares for senior executives and restricted shares as the granted locked shares | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Li Ming | 117,530 | 0 | 0 | 117,530 | Locked shares for senior executives and restricted shares as the granted locked shares | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Chen Zhuo | 118,250 | 0 | 0 | 118,250 | Locked shares for senior executives and restricted shares as the granted locked shares | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Tang Haiyuan | 60,000 | 0 | 0 | 60,000 | Restricted shares as the granted locked shares | To be unlocked subject to the measures for the Company’s equity incentive management |
| Chen Libin (retired) | 160,000 | 0 | 0 | 160,000 | Locked shares for senior executives and restricted shares as the granted locked shares | To be unlocked subject to the conditions of the locked shares for senior executives and the measures for the Company’s equity incentive management |
| Lu Bingqiang (retired) | 96,311 | 0 | 24,078 | 72,233 | Locked shares for senior executives | To be unlocked subject to the conditions of the locked shares for senior executives |
| Xu Chuangyue (retired) | 50,000 | 0 | 0 | 50,000 | Restricted shares as the granted locked shares | To be unlocked subject to the measures for the Company’s equity incentive management |
| Other persons eligible for the incentive of Restricted A-Share (Note) | 3,514,000 | 0 | 0 | 3,367,000 | Restricted shares as the granted locked shares | To be unlocked subject to the measures for the Company’s equity incentive management |
| Total | 4,628,591 | 0 | 24,078 | 4,457,513 | -- | -- |
Note: During the reporting period, the Company repurchased and canceled 147,000 shares held by the 6 originalparticipants with the restriction not yet released. Therefore, the number of restricted shares at the end of the perioddecreased by 147,000 shares compared with the beginning of the period.II. Issuing and Listing
1. Issuing of securities (with preferred stock exclusive) in the reporting periodInapplicable
2. Note to changes of the company’s total shares and the structure of shareholders as well as the structure ofassets and liabilitiesDuring the reporting period, 6 original participants of the 2018 Restricted A-Share incentive scheme (Phase I) no longermet the incentive conditions due to their retirement. According to the provisions of the incentive scheme, the Companyrepurchased and canceled 147,000 Restricted A-shares that have been granted but whose restriction has not beenreleased.
According to the Company’s “Proposal for the Repurchase of Partial Domestically Listed Foreign Shares (B-Shares) bythe Company 2019-017”, the Company repurchased 14,730,000 B-shares in total during the period from April 23, 2019 toApril 23, 2020. Part of the B-shares were cancelled on April 29, 2020.
Due to the above reason, the Company's total shares changed from 442,968,881 shares to 428,091,881 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 period | 29,546 | Total common shareholders at the end of the month before the date of disclosing the annual report | 30,247 | Total preference shareholders with the voting power recovered at the end of the reporting period (if any) | 0 |
| 0 | ||||||||
| Shares held by the shareholders holding over 5% shares or the top ten shareholders | ||||||||
| Names of the Shareholders | Nature of the shareholder | Shareholding proportion | Number of shares held at the end of the reporting period | Increase/decrease in the reporting period | Number of the restricted shares held | Quantity of unrestricted shares held | Pledging or freezing | |
| Status of the shares | Quantity | |||||||
| AVIC International Holdings Limited | State corporate | 38.07% | 162,977,327 | 0.00 | 0.00 | 162,977,327 | ||
| Construction Bank of China - Penghua Value Superiority Hybrid | Domestic non-state-owned legal person | 1.75% | 7,472,435 | 7,472,435 | 0.00 | 7,472,435 | ||
| Securities Investment Fund (LOF) | ||||||||
| Construction Bank of China - Penghua High Quality Growth Hybrid Securities Investment Fund | Domestic non-state-owned legal person | 1.23% | 5,250,906 | 5,250,906 | 0.00 | 5,250,906 | ||
| UBS AG | Foreign corporate | 1.04% | 4,461,801 | 4,271,445 | 0.00 | 4,461,801 | ||
| Construction Bank of China - Penghua Selected Growth Hybrid Securities Investment Fund | Domestic non-state-owned legal person | 0.54% | 2,322,734 | 2,322,734 | 0.00 | 2,322,734 | ||
| Basic Endowment Insurance Fund Portfolio 904 | Domestic non-state-owned legal person | 0.46% | 1,988,500 | 1,988,500 | 0.00 | 1,988,500 | ||
| MORGAN STANLEY & CO. INTERNATIONAL PLC. | Foreign corporate | 0.44% | 1,894,750 | 1,894,700 | 0.00 | 1,894,750 | ||
| Construction Bank of China - Penghua Hongjia Flexible Configuration Hybrid Securities Investment Fund | Domestic non-state-owned legal person | 0.40% | 1,714,400 | 1,714,400 | 0.00 | 1,714,400 | ||
| # Chi Dexuan | Domestic natural person | 0.40% | 1,703,500 | 1,703,500 | 0.00 | 1,703,500 | ||
| Qiu Hong | Domestic natural person | 0.37% | 1,600,000 | 1,600,000 | 0.00 | 1,600,000 |
| Inapplicable | |||
| Explanation on associated relationship or consistent action of the above shareholders | Inapplicable | ||
| Note to the aforesaid shareholders involving entrusting/being entrusted with voting power and the waiver of voting power | Among the above shareholders, AVIC International Holdings Limited authorized representatives to exercise voting rights on their behalf in the company’s 2020 1st Extraordinary General Meeting, 2020 2nd Extraordinary General Meeting, 2019 Annual General Meeting and 2020 3rd Extraordinary General Meeting. The number of representative shares is 162,977,327 shares. For the detail of the result of the aforesaid voting, refer to the relevant announcement disclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn. | ||
| Shares held by top 10 shareholders of unrestricted shares | |||
| Names of the Shareholders | Quantity of unrestricted shares held at the end of the reporting period | Share type | |
| Share type | Quantity | ||
| AVIC International Holdings Limited | 162,977,327 | CNY ordinary shares | 162,977,327 |
| Construction Bank of China - Penghua Value Superiority Hybrid Securities Investment Fund (LOF) | 7,472,435 | CNY ordinary shares | 7,472,435 |
| Construction Bank of China - Penghua High Quality Growth Hybrid Securities Investment Fund | 5,250,906 | CNY ordinary shares | 5,250,906 |
| UBS AG | 4,461,801 | CNY ordinary shares | 4,461,801 |
| Construction Bank of China - Penghua Selected Growth Hybrid Securities Investment Fund | 2,322,734 | CNY ordinary shares | 2,322,734 |
| Basic Endowment Insurance Fund Portfolio 904 | 1,988,500 | CNY ordinary shares | 1,988,500 |
| MORGAN STANLEY & CO. INTERNATIONAL PLC. | 1,894,750 | CNY ordinary shares | 1,894,750 |
| Construction Bank of China - Penghua Hongjia Flexible Configuration Hybrid Securities Investment Fund | 1,714,400 | CNY ordinary shares | 1,714,400 |
| # Chi Dexuan | 1,703,500 | CNY ordinary shares | 1,703,500 |
| Qiu Hong | 1,600,000 | CNY ordinary shares | 1,600,000 |
| 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) | Among the above shareholders, Chi Dexuan purchased 1,703,500 shares through the customer credit transaction guarantee securities account of Huaxin Securities Co., Ltd. | ||
repurchase during the reporting period?No
2. Controlling Shareholder
Nature of the controlling shareholder: State-owned shareholding directly under the central government
Type of the controlling shareholder: corporate
| Name of the Controlling Shareholder | Legal Representative /Leader | Date of incorporation | Organization Code | Leading business activities |
| AVIC International Holdings Limited | Fu Fangxing | June 20, 1997 | 91440300279351229A | Investment in industries (specific projects are subject to application for approval); domestic trade, material supply and distribution (with commodities for exclusive operation, exclusive control and monopoly exclusive); import and export. |
| Equity in other domestic and foreign listed companies held by the controlling shareholder by means of control and mutual shareholding in the reporting period. | AVIC International Holdings Limited holds 11.86% equity in Tianma Micro-electronics Co., Ltd. (SHEN TIANMA A 000050) and 67.05% equity in Shennan Circuits Company Limited (SHENNAN CIRCUITS 002916). | |||
| Name of the Actual Controller | Legal Representative /Leader | Date of incorporation | Organization Code | Leading business activities |
| AVIC International Holding Corporation | Lai Weixuan | April 12, 1983 | 911100001000009992 | Import & export; warehousing; investment and management of industry, hotel, property, real estate industry; development, sales and maintenance of new energy equipment; exhibitions; sales of communications equipment, computers, software and ancillary equipment; technology service, technology development, technology consultation, technology transfer and technology promotion; satellite communications services; information system integration service; software development; dispatching contract workers abroad to carry out overseas projects ; sales of precursor chemicals and other hazardous chemicals; telecommunications services; Internet information services. |
| Equity in other domestic and foreign listed companies controlled by the actual controller in the reporting period. | AVIC International holds 66.07% equity in AVIC International Holdings Limited and 7% equity in SHEN TIANMA (000050). | |||
100%
91.14% 8.86%
100%
66.07% 33.93%
38.07%
The actual controller controls the Company by means of trust or managing the assets in other ways:
Inapplicable
4. Other Corporate Shareholder Holding over 10% of the Company’s Shares
Inapplicable
5. Shareholding Reduction Restriction on the Controlling Shareholder, the Actual Controller, the ReorganizingParty and other Committing PartyInapplicable
State-owned Assets Supervision and Administration
Commission of the State CouncilAviation Industry Corporation of China
Aviation Industry Corporation of China
AVIC CCB Aviation Industry Equity Investment (Tianjin)Co., Ltd.
AVIC 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.
Section 7 About the Preferred Shares
Inapplicable
Section 8 About the Convertible BondsInapplicable
Section 9 Directors, Supervisors, Senior Executives and Employees
I. Change in Shares Held by Directors, Supervisors and Senior Executives
| Names | Title | Office Status | Gender | Age | Starting date of tenure | Expiry date of tenure | Number of shares held at the beginning of the reporting period (shares) | Shareholding increased in the reporting period (shares) | Shareholding decreased in the reporting period (shares) | Change of other increase/decrease (shares) | Number of shares held at end of the reporting period (shares) |
| Huang Yongfeng | Chairman of the Board | In office | Male | 47 | September 11, 2018 | September 11, 2021 | 180,000 | 0 | 0 | 0 | 180,000 |
| Zhang Zhibiao | Director | In office | Male | 48 | February 24, 2021 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Xiao Yi | Director | In office | Male | 47 | February 24, 2021 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Xiao Zhanglin | Director | In office | Male | 45 | September 11, 2018 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Li Peiyin | Director | In office | Male | 35 | February 24, 2021 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Pan Bo | Managing Director | In office | Male | 45 | February 24, 2021 | September 11, 2021 | 130,000 | 0 | 0 | 0 | 130,000 |
| Wang Jianxin | Independent Director | In office | Male | 51 | September 11, 2018 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Zhong Hongming | Independent Director | In office | Male | 46 | September 11, 2018 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Tang Xiaofei | Independent Director | In office | Male | 47 | September 11, 2018 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Zheng Qiyuan | Chairman of the Supervisory Committee | In office | Male | 58 | February 24, 2021 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Cao Zhen | Supervisor | In office | Female | 50 | February 24, 2021 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Sheng Qing | Supervisor | In office | Female | 45 | September 11, 2018 | September 11, 2021 | 0 | 0 | 0 | 0 | 0 |
| Lu Wanjun | Deputy GM | In office | Male | 54 | October 08, 2018 | September 11, 2021 | 130,000 | 0 | 0 | 0 | 130,000 |
| Liu Xiaoming | Deputy GM | In office | Male | 50 | October 08, 2018 | September 11, 2021 | 130,000 | 0 | 0 | 0 | 130,000 |
| Li Ming | Deputy GM | In office | Male | 48 | October 08, 2018 | September 11, 2021 | 130,040 | 0 | 0 | 0 | 130,040 |
| Chen Zhuo | Chief Accountant & Secretary of the Board | In office | Male | 45 | October 08, 2018 | September 11, 2021 | 131,000 | 0 | 0 | 0 | 131,000 |
| Tang Haiyuan | Deputy GM | In office | Male | 48 | September 29, 2019 | September 11, 2021 | 60,000 | 0 | 0 | 0 | 60,000 |
| Wang Mingchuan | Director | Retired | Male | 55 | September 11, 2018 | February 02, 2021 | 0 | 0 | 0 | 0 | 0 |
| Fu Debin | Director | Retired | Male | 44 | September 11, 2018 | February 02, 2021 | 0 | 0 | 0 | 0 | 0 |
| Wang Bo | Director | Retired | Male | 42 | September 11, 2018 | February 02, 2021 | 0 | 0 | 0 | 0 | 0 |
| Chen Libin | Managing Director | Retired | Male | 57 | September 11, 2018 | February 02, 2021 | 180,000 | 0 | 0 | 0 | 180,000 |
| Wang Baoying | Chairman of the Supervisory Committee | Retired | Male | 57 | September 11, 2018 | February 24, 2021 | 0 | 0 | 0 | 0 | 0 |
| Fang Jiasheng | Supervisor | Retired | Male | 35 | April 12, 2019 | February 24, 2021 | 0 | 0 | 0 | 0 | 0 |
| Xu Chuangyue | Deputy GM | Retired | Male | 42 | September 29, 2019 | February 03, 2021 | 50,000 | 0 | 0 | 0 | 50,000 |
| Total | -- | -- | -- | -- | -- | -- | 1,121,040 | 0 | 0 | 0 | 1,121,040 |
| Names | Office Taken | Type | Date | Cause |
| Zhang Zhibiao | Director | Appointment & removal | February 24, 2021 | Appointed as a non-independent director of the Ninth Board of Directors at the 26th session of the Ninth Board of Directors and 2021 2nd Extraordinary General Meeting. |
| Xiao Yi | Director | Appointment & removal | February 24, 2021 | Appointed as a non-independent director of the Ninth Board of Directors at the 26th session of the Ninth Board of Directors and 2021 2nd Extraordinary General Meeting. |
| Li Peiyin | Director | Appointment & removal | February 24, 2021 | Appointed as a non-independent director of the Ninth Board of Directors at the 26th session of the Ninth Board of Directors and 2021 2nd Extraordinary General Meeting. |
| Pan Bo | Director | Appointment & removal | February 24, 2021 | Appointed as a non-independent director of the Ninth Board of Directors at the 26th session of the Ninth Board of Directors and 2021 2nd Extraordinary General Meeting. |
| Zheng Qiyuan | Supervisor | Appointment & removal | February 24, 2021 | Appointed as a supervisor of non-independent director of the Ninth Supervisory Committee at the 23rd session of the Ninth Supervisory Committee and 2021 2nd Extraordinary General Meeting. |
| Zheng Qiyuan | Chairman of the Supervisory Committee | Appointment & removal | March 08, 2021 | Appointed as the Chairman of the Ninth Supervisory Committee at the 24th session of the Ninth Supervisory Committee. |
| Cao Zhen | Supervisor | Appointment & removal | February 24, 2021 | Appointed as a supervisor of non-independent director of the Ninth Supervisory Committee at the 23rd session of the Ninth Supervisory Committee and 2021 2nd Extraordinary General Meeting. |
| Pan Bo | GM | Appointment & removal | January 15, 2021 | Appointed as the GM at the 25th session of the Ninth Board of Directors. |
| Chen Zhuo | Secretary of the Board | Appointment & removal | January 15, 2021 | Appointed as the Secretary of the Board at the 25th session of the Ninth Board of Directors. |
| Wang Mingchuan | Director | Retired | February 02, 2021 | resigned as a director, a member of the Strategy Committee and Audit Committee of the of the Ninth Board of Directors due to the job transfer. He no longer holds any position in the Company after his resignation. |
| Fu Debin | Director | Retired | February 02, 2021 | Resigned as a director, a member of the Nomination, Remuneration and Assessment Committee of the of the Ninth Board of Directors due to the job transfer. He no longer holds any position in the Company after his resignation. |
| Wang Bo | Director | Retired | February 02, 2021 | Resigned as a director, a member of the Nomination, Remuneration and Assessment Committee of the of the Ninth Board of Directors due to the job transfer. He no longer holds any position in the Company after his resignation. |
| Chen Libin | Director | Retired | February 02, 2021 | resigned as a director, a member of the Strategy Committee and Audit Committee of the of the Ninth Board of Directors due to the job transfer. He no longer holds any position in the Company after his resignation. |
| Wang Baoying | Chairman of the Supervisory Committee | Retired | February 24, 2021 | resigned as a supervisor and the chairman of the Ninth Supervisory Committee due to the job transfer. He no longer holds any position in the Company after his resignation. |
| Fang Jiasheng | Supervisor | Retired | February 24, 2021 | resigned as a supervisor of the Ninth Supervisory Committee due to the job transfer. He no longer holds any position in the Company after his resignation. |
| Chen Libin | GM | Termination | January 14, 2021 | resigned as the GM of the Company. He still holds other positions in the Company after his resignation. |
| Pan Bo | Deputy GM and the Secretary of the Board | Termination | January 14, 2021 | resigned as Deputy GM of the Company and the Secretary of the Board. He still holds other positions in the Company after his resignation. |
| Xu Chuangyue | Deputy GM | Termination | February 03, 2021 | resigned as Deputy GM of the Company. He no longer holds any position in the Company after his resignation. |
I. About Senior ExecutivesProfessional Background, CV and Major Duties of Directors, Supervisors and Senior Executives in Office
Mr. Huang Yongfeng, born in May, 1974, senior engineer, master of management engineering of the EconomicManagement College of Beijing University of Aeronautics & Astronautics, and EMBA of China Europe InternationalBusiness School. He is now Chairman of the Board of the Company and deputy GM of AVIC International HoldingCorporation. Mr. Huang used to be the chairman and general manager of AVIC INTL Zhuhai Co., Ltd., assistant to thegeneral manager of AVIC International Holding Corporation, deputy general manager, assistant to the general manager,manager of the enterprise strategy and management department of AVIC International Shenzhen Co., Ltd., director ofAVIC Sunda Holding Company Limited, director of Rainbow Department Store Co., Ltd., director of TianmaMicroelectronics Co., Ltd. and chairman of Shenzhen Zhongshi Mechanical Equipment Co., Ltd.
Mr. Zhang Zhibiao, born in October, 1973, Master. Mr.Zhang is a director of the Company, and the Manager of thePlanning & Development Department of AVIC International Holding Corporation. He used to be the assistant to the GM ofAVIC Securities Co., Ltd., the director of the Institute of Finance, the chief of the comprehensive managementdepartment and the chief of the operation management department of AVIC International Holding Corporation.
Mr. Xiao Yi, male, born in March 1974, MBA of the Economic Management College of Beijing University of Aeronautics &Astronautics. Mr.Xiao is a director of the Company, the director of the Organization Department and the director of theHuman Resource Department of AVIC International Holding Corporation. Mr. Xiao used to be the project manager of theTechnology Transfer Center of Beijing Beihang Assets Operation Co.,Ltd., the comprehensive secretary of themanagement department, the assistant to the director of the administrative management department, the deputy directorand director of the comprehensive 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 thestrategy development department and deputy chief of the operation and management department of AVIC InternationalHolding Corporation, the secretary of AVIC International Holdings Limited, a director of Tianma Micro-electronics Co., Ltd.and a director of AVIC Sunda Holding Company Limited.
Mr. Li Peiyin , born in September, 1986, Master of Accounting of Xiamen University, MBA of Missouri State University,CPA and senior accountant. Mr.Li is a director of the Company, and deputy manager of the Financial ManagementDepartment of AVIC International Holding Corporation (presiding the work). He used to be the business manager, theassistant to the chief and the deputy chief of the Financial Management Department of AVIC International HoldingCorporation.
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-sale service department of FIYTA Sales Co., Ltd.
Mr. Wang Jianxin, born in June, 1970, graduated from Zhongnan University of Economics and Law, a Chinese CPA. Mr.Wang is an independent director of the Company and a partner of ShineWing Certified Public Accountants (SpecialGeneral Partnership) and independent director of Chongqing Fuling Zhacai GroupMr. Zhong Hongming, born in January 1975, PhD of Civil and Commercial Law in Renmin University of China and post-doctor of Civil and Commercial Law in SouthwestUniversity Political Science and Law. He is an independent director ofthe Company, an associate research fellow of Law Research Institute of Sichuan Academy of Social Sciences andconcurrently a director of China Securities Law Research Council, and an independent director of Mango ExcellentMedia Co., Ltd.
Mr. Tang Xiaofei, born in May, 1974, graduated from Southwest Jiaotong University, professor and doctorial tutor. Mr.Tang is an independent director of the Company, a professor and doctorial tutor of the Business School of SouthwestJiaotong University, director of Urban Brand Strategy Research Institute of Southwest University of Finance andEconomics, enjoying the title of Outstanding Talent of the New Century granted by the Ministry of Education, a councilmember of the Chinese Association of Market Development, an expert consultant of brand development of ChengduMunicipal Government, expert of Chengdu Famous Trademark Determination Board ,an independent director of SichuanLanguang Development Co., Ltd. , the chief expert of Inquiry Platform for Chinese Enterprises of Chengdu ZhongzhiZhongcheng, and a consultant of APEX Ogilvy.
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 & TradeDevelopment Limited, a commissioner of AVIC International Holding Corporation, Chief Business Officer of AVICInternational (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 andmanager of the administrative management department, the secretary of the Board, the assistant to the GM of AVICNews of AVIC International Shenzhen Company Limited, the manager of the enterprise culture department of AVICInternational Holding Corporation,the chief of the CPC Construction and Ideological and Political Work Department,thediscipline secretary and the chairman of the trade union of AVIC International Shenzhen Company Limited, deputy leaderof the discipline inspection team and the chief of the discipline inspection, supervision and audit department of AVICInternational Holding Corporation.
Ms. Sheng Qing, born in April, 1976, accountant, bachelor of international accounting specialization of Jiangxi Universityof Finance and Economics, master of organization and HR management of the University of Hong Kong. She is asupervisor of the Company and the manager of the discipline inspection, supervision,audit and law department of the
Company. She used to be a supervisor of the Eighth Supervisory Committee, assistant to manager, deputy manager andmanager of HR department and senior business manager of the supervision and audit department of the Company.
Mr. Lu Wanjun, born in February, 1967, accountant and EMBA of China Europe International Business School. Mr. Lu isthe Secretary of Committee for Discipline Inspection, a deputy GM of the Company. He used to be the assistant to theGM of the Company, executive deputy GM and deputy GM, the assistant to the GM and concurrently the manager of thefinancial department of Shenzhen Harmony World Watches Center Co., Ltd.
Mr. Liu Xiaoming, born in 1971, engineer, economist, bachelor of mechanical engineering of Beijing University ofAeronautics & Astronautics, and EMBA of China Europe International Business School. He is a deputy GM of theCompany,and the managing director of Shenzhen Harmony World Watches Center Co., Ltd. He used to be the assistantto the GM of the Company, a deputy GM and the assistant to the GM of Shenzhen Harmony World Watches Center Co.,Ltd.
Mr. Li Ming, born in September, 1973, bachelor of marketing of Zhongnan University of Economics and Law and EMBAof China Europe International Business School. He is now a deputy GM of the Company. Mr. Li used to be the assistantto the GM and chief HR officer of the Company, a deputy GM, the assistant to the GM and manger of the HR departmentof Shenzhen Harmony World Watches Center Co., Ltd.; chief HR officer and the GM of the marketing center of ChinaNetcom Shenzhen; manager of big customer market planning of China Telecom Shenzhen.
Mr. Chen Zhuo, born in September, 1976, senior accountant, bachelor of accounting of Central University of Finance andEconomics, MBA of Wuhan University and EMBA of China Europe International Business School. He is the chiefaccountant and concurrently the Secretary of the Board of the Company. Mr. Chen used to be a supervisor and theassistant to the GM of the Company, the manager of the strategy and information department, deputy manager of thestrategy and information department and securities affairs representative of the Company, a deputy GM, the assistant tothe GM and the manager of the financial information department of FIYTA Sales Co., Ltd.
Mr. Tang Haiyuan, born in February, 1973, senior engineer, bachelor of plastic molding technology and equipment ofHefei University of Technology, and EMBA of China Europe International Business School. He is a deputy GM of theCompany and the GM of Shenzhen FIYTA Technology Development Co., Ltd. Mr. Tang used to work for Shenzhen FIYTASophisticated Timepieces Manufacture Co., Ltd., taking the offices of the GM, a deputy GM, the assistant to the GM, andthe manager of its quality department, manager and deputy manager of the engineering and technical department; alsowork for Shenzhen FIYTA Technology Development Co., Ltd., taking offices of the assistant to the GM and the managerof the technical department.
Office taking in shareholder companies
| Names of the persons in office | Names of the Shareholders | Titles engaged in the shareholders | Starting date of tenure | Expiry date of tenure | Does he/she receive remuneration or allowance from the shareholder |
| Huang Yongfeng | AVIC International Holding Corporation | Deputy GM | No | ||
| Zhang Zhibiao | AVIC International Holding Corporation | Planning & Development Department | Yes | ||
| Xiao Yi | AVIC International Holding Corporation | Chief of the CPC Organization Department | Yes |
| and the director of the Human Resource Department | |||||
| Xiao Zhanglin | AVIC International Holding Corporation | Chief of the Operation and Management Department | Yes | ||
| Li Peiyin | AVIC International Holding Corporation | Deputy chief of the financial management department (presiding the work) | Yes | ||
| Zheng Qiyuan | AVIC International Holding Corporation | Full-time independent supervisor | Yes | ||
| Cao Zhen | AVIC International Holding Corporation | Vice-secretary of the discipline inspection committee and the chief of the discipline inspection department | Yes | ||
| Office taking in shareholder companies | Inapplicable | ||||
| Names of the persons in office | Names of the other organizations | Titles engaged in other organizations | Starting date of tenure | Expiry date of tenure | Does he/she receive remuneration or allowance from other organization |
| Wang Jianxin | SHINEWING Certified Public Accountants LLP | Partnership | December 01, 2006 | Yes | |
| Zhong Hongming | Institute of Law of Sichuan Academy of Social Sciences | Associate research fellow | November 24, 2017 | Yes | |
| Zhong Hongming | Mango Excellent Media Co., Ltd. | Independent Director | June 14, 2017 | Yes | |
| Zhong Hongming | Dagang Holding Group Co., Ltd. | Independent Director | October 27, 2017 | December 02, 2020 | Yes |
| Tang Xiaofei | The School of Business Administration of Southwest University of Finance Economics | Doctorial tutor | September 01, 2008 | Yes | |
| Tang Xiaofei | The School of Business Administration of Southwest University of Finance Economics | Professor | December 01, 2011 | Yes | |
| Office taking in other organizations | Inapplicable | ||||
| Names | Title | Gender | Age | Office Status | Total pretax remuneration received from the Company | Is the remuneration from one of the Company's related parties |
| Huang Yongfeng | Chairman of the Board | Male | 47 | In office | 220.00 | No |
| Zhang Zhibiao | Director | Male | 48 | In office | 0 | Yes |
| Xiao Yi | Director | Male | 47 | In office | 0 | Yes |
| Xiao Zhanglin | Director | Male | 45 | In office | 0 | Yes |
| Li Peiyin | Director | Male | 35 | In office | 0 | Yes |
| Pan Bo | Managing Director | Male | 45 | In office | 187.33 | No |
| Wang Jianxin | Independent Director | Male | 51 | In office | 9.00 | No |
| Zhong Hongming | Independent Director | Male | 46 | In office | 9.00 | No |
| Tang Xiaofei | Independent Director | Male | 47 | In office | 9.00 | No |
| Zheng Qiyuan | Chairman of the Supervisory Committee | Male | 58 | In office | 0 | Yes |
| Cao Zhen | Supervisor | Female | 50 | In office | 0 | Yes |
| Sheng Qing | Supervisor | Female | 45 | In office | 97.07 | No |
| Lu Wanjun | Deputy GM | Male | 54 | In office | 177.40 | No |
| Liu Xiaoming | Deputy GM | Male | 50 | In office | 206.15 | No |
| Li Ming | Deputy GM | Male | 48 | In office | 182.40 | No |
| Chen Zhuo | Chief Accountant & Secretary of the Board | Male | 45 | In office | 182.40 | No |
| Tang Haiyuan | Deputy GM | Male | 48 | In office | 176.89 | No |
| Wang Mingchuan | Director | Male | 55 | Retired | 0 | Yes |
| Fu Debin | Director | Male | 44 | Retired | 0 | Yes |
| Wang Bo | Director | Male | 42 | Retired | 0 | Yes |
| Chen Libin | Managing Director | Male | 57 | Retired | 190.92 | No |
| Wang Baoying | Chairman of the Supervisory Committee | Male | 57 | Retired | 0 | Yes |
| Fang Jiasheng | Supervisor | Male | 35 | Retired | 40.71 | No |
| Xu Chuangyue | Deputy GM | Male | 42 | Retired | 164.53 | No |
| Total | -- | -- | -- | -- | 1,852.80 | -- |
| Names | Title | Number of vested shares during the reporting period | Number of striked shares during the reporting period | Strike price and the number of striked shares during the reporting period (CNY/share) | Market price at the end of the reporting period (CNY/share) | Quantity of restricted shares held at the beginning of the reporting period | Quantity of the shares unlocked in the reporting period | Quantity of restricted shares newly granted during the reporting period | Price of the restricted shares granted (CNY/share) | Quantity of restricted shares held at the end of the reporting period |
| Huang Yongfeng | Chairman of the Board | 0 | 0 | 0 | 11.43 | 100,000 | 0 | 0 | 4.40 | 100,000 |
| Pan Bo | Managing Director | 0 | 0 | 0 | 11.43 | 80,000 | 0 | 0 | 4.40 | 80,000 |
| Lu Wanjun | Deputy GM | 0 | 0 | 0 | 11.43 | 80,000 | 0 | 0 | 4.40 | 80,000 |
| Liu Xiaoming | Deputy GM | 0 | 0 | 0 | 11.43 | 80,000 | 0 | 0 | 4.40 | 80,000 |
| Li Ming | Deputy GM | 0 | 0 | 0 | 11.43 | 80,000 | 0 | 0 | 4.40 | 80,000 |
| Chen Zhuo | Chief Accountant & Secretary of the Board | 0 | 0 | 0 | 11.43 | 80,000 | 0 | 0 | 4.40 | 80,000 |
| Tang Haiyuan | Deputy GM | 0 | 0 | 0 | 11.43 | 60,000 | 0 | 0 | 4.40 | 60,000 |
| Chen Libin | Managing Director | 0 | 0 | 0 | 11.43 | 100,000 | 0 | 0 | 4.40 | 100,000 |
| (retired) | ||||||||||
| Xu Chuangyue | Deputy GM (retired) | 0 | 0 | 0 | 11.43 | 50,000 | 0 | 0 | 4.40 | 50,000 |
| Total | -- | 0 | 0 | -- | -- | 710,000 | 0 | 0 | -- | 710,000 |
| Remarks (If any) | Granting of the Restricted A-Share to aforesaid persons was completed on January 30, 2019; ended the reporting period, the shares were still in the lockup period (two years) according to the regulations. | |||||||||
| Number of employees working for the parent company | 134 |
| Number of employees working for the major subsidiaries | 4,767 |
| Total employees on active duty | 4,901 |
| Total employees receiving remuneration in the reporting period | 4,901 |
| Number of the retired employees for whom the parent company and the major subsidiaries need to share the pension | 0 |
| Job Composition | |
| Job Composition Categories | Number of persons involved in the job composition |
| Production | 380 |
| Sales | 3,542 |
| Technical | 362 |
| Financial | 162 |
| Administrative | 455 |
| Total | 4,901 |
| Education background | |
| Education levels | Number of persons |
| Master's degree or higher | 73 |
| Undergraduate | 716 |
| Junior college | 1,295 |
| Below junior college | 2,817 |
| Total | 4,901 |
Total budget 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;
Being value-oriented and creating shared value: The Company designs a remuneration incentive system in accordancewith the closed-loop value chain of value creation-value evaluation-value distribution. With value creation as the key link,the Company has established incentive mechanism with the features of the remuneration to employees fluctuatingdepending on the Company's business achievement and personal performances while in favor of the core and keytalents through the establishment of value assessment system in compliance with the strategy development goal and thereal-time incentive system.
3. Training Program
Building a team of high-quality professional talents and improve the readiness of talents for key positionsThe Company focuses on the watch industry and has established the strategic goal of "Inheriting AVIC’s Spirit of Servingthe Country and Practicing the Great Brand". The brand strategy of the great brand is promoting the businesstransformation and upgrading. With the rapid business development, the Company has higher requirements on thepreparation of business leaders, key technical personnel and talents for the specialized posts. Therefore, in terms of stafftraining, the Company relies on FIYTA College to focus on echelon talent training, build a talent reserve pool, andimprove the readiness of talents in the organization.In the training of talents for key posts, the Company strengthens thelearning of professional ability of key posts, extracts the knowledge and experience of the posts, and creates a learningatmosphere within the organization. The Company carries forward the construction of the professional post talent trainingsystem through the "Master Craftsmen Reservoir", "Lean Six Sigma" and other projects.
Strengthening knowledge management ability and precipitating the intra-company lecturer teamThe Company has built an intra-company lecturer system, extracted position experts and key staff’s job experience,converted personal experience in the organization into organizational experience, and improved the overall professionalcapabilities of the team. With each department and each business type as a unit, the lecturer activities are carried out,and excellent internal courses are selected through the "whoever learns better can be the teacher" to form a learningsystem for each post in the Company.
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.
4. Labor Outsourcing
Inapplicable
Section 10 Corporate GovernanceI. GeneralIn year 2020, 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. Theyimplemented their respective duties according to the PRC Company Law and the Articles of Association.
The General Meeting is the Company’s supreme organ and has the power of deciding the Company’s operation policyand investment plan, reviewing and approving the Company’s annual financial budget scheme, settlement scheme, profitdistribution plan, loss make-up plan, change of the application of the proceeds raised through issuing, etc., makesresolution on increase and decrease of the Company’s registered capital, issuing bond, etc., election and replacement ofdirectors, non-staff supervisors and decision on their remuneration and way of payment. 。
The Board of Directors is the Company’s decision-making organ, takes charge of implementing the decisions made bythe Shareholders’ General Meeting, assumes responsibility to the Shareholders’ General Meeting and reports the work toit. Within the authorization from the General Meeting, decides the Company’s external investment, acquisition and salesof assets, assets pledge, external guarantee, related transactions, etc., decides establishment of the Company’s internalmanagement organs, engagement and disengagement of the Company’s general manager, the Board secretary andother senior executives, etc. The Board of Directors consists of nine directors, including three independent directors. TheBoard of Directors has established three subordinate special committees, namely the Strategy Committee, the AuditCommittee and Nomination, Emolument and Assessment Committee.
The Supervisory Committee is the Company’s supervisory organ in charge of supervising the directors, managers andother senior executives in performing duties according to the law and proposes dismissal of any director or seniorexecutive who breaches the law, the administrative rules and regulations, the Articles of Association or resolutions of theGeneral Meeting. The Supervisory Committee consists of three supervisors including one staff supervisor.
The management assumes responsibility to the Board of Directors and the General Manager takes full responsibility forthe Company’s routine operation and management and development under the leadership of the Board of Directors,supervises the work of every functional department, assesses the work result of each functional department andcoordinate the relationship of all departments.Does there exist any difference in compliance with the corporate governance, the PRC Company Law and the relevant
provisions of CSRC.NoII. Independence in Business, Personnel, Assets, Organization, Finance, etc. from the Controlling ShareholdersThe Company is independent in business, personnel, assets, organization and finance from its controlling shareholder.The Company has completed and independent business and the ability of autonomous operation.
Business: The Company is mainly engaged in timepiece businesses and has independent production, auxiliaryproduction system and complementary facilities, and possesses its own procurement and sales systems. There exists nocompetition in 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. Huang Yongfeng, Mr. Zhang Zhibiao, Mr. Xiao Yi, Mr. Xiao Zhanglin and Mr. Li Peiyin,the five directors, and Mr. Zheng Qiyuan, the chairman of the Supervisory Committee, and Ms. Cao Zhen as supervisor,none of other senior executives takes any concurrent office in the shareholders and none of the financial staff worksconcurrently for any related parties.
Assets: The assets of the Company and its controlling shareholder are highly distinct. The Company enjoys thecorporate ownership over its assets and the assets are completely independent from its controlling shareholder. Inaddition, 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
| Sessions | Meeting type | Proportion of attendance of the investors | Meeting date | Date of disclosure | Disclosure index |
| 2020 1st Extraordinary General Meeting | Extraordinary General Meeting | 36.96% | April 13, 2020 | April 14, 2020 | http://www.cninfo.com.cn/ |
| 2019 Annual General Meeting | Annual General Meeting | 38.61% | June 04, 2020 | June 05, 2020 | http://www.cninfo.com.cn/ |
| 2020 2nd Extraordinary General Meeting | Extraordinary General Meeting | 38.16% | July 23, 2020 | July 24, 2020 | http://www.cninfo.com.cn/ |
| 2020 3rd Extraordinary General Meeting | Extraordinary General Meeting | 38.17% | September 15, 2020 | September 16, 2020 | http://www.cninfo.com.cn/ |
| Attendance of Independent Directors for Board Meetings and General Meetings | |||||||
| Names of Independent Directors | Number of Board meetings which should be be attended in the reporting period | Number of Spot Attendances | Number of Meetings Attended by Communication | Number of attendances of board meeting by proxy | Number of absence | Failure to personally attend board meetings successively twice | Number of attendance of the General Meeting |
| Wang Jianxin | 10 | 0 | 10 | 0 | 0 | No | 4 |
| Zhong Hongming | 10 | 0 | 10 | 0 | 0 | No | 0 |
| Tang Xiaofei | 10 | 0 | 10 | 0 | 0 | No | 0 |
development and corporate governance.VI. Duty Performance of Special Committees under the Board of Directors in the Reporting PeriodSummary Report on Performances of the Strategy Committee of the Board of Directors:
During the reporting period, the Strategy Committee performed its duties strictly according to the law and regulations, theArticles of Association and the Rules for Implementation of the Special Committees of the Board of Directors, continuedto do research work on the strategic planning for the Company’s long term development and supervised the Company inimplementation of various strategies. The Strategy Committee held 2 meetings. The two meetings reviewed andapproved the Work Report of the Board of Directors of Year 2019 and the Profit Distribution for Year 2019 and incrementof capital to its solely-owned subsidiaries.
Summary Report on Performances of the Audit Committee of the Board of Directors:
During the reporting period, the Audit Committee performed its duties strictly according to the law and regulations, theArticles of Association and the Rules for Implementation of the Special Committees of the Board of Directors. Thecommittee held altogether 6 meetings which reviewed and approved 2019 Annual Report, the Internal Control Self-Assessment Report for Year 2019, 2019 Internal Audit Report, 2020 1st Quarterly Report, 2020 Semi-annual Report,2020 3rd Quarterly Report, the Proposal for Repurchase of Partial Domestically Listed Foreign Shares (B-shares) andthe Proposal for Increment of Capital in the Solely-owned Subsidiaries, etc.
Summary Report on Performance of the Committee of Nomination, Remuneration and Assessment of the Boardof DirectorsDuring the reporting period, the Committee of Nomination, Remuneration and Assessment performed its duties strictlyaccording to the law and regulations, the Articles of Association and the Rules for Implementation of the SpecialCommittees of the Board of Directors. The committee held altogether 7 meetings which reviewed and approved theProposal for Repurchasing and Canceling Partial Restricted Shares Involved in 2018 Restricted A-Share Incentivescheme (Phase I),the Proposal for the Remuneration to Directors and Senior Executives and Change of the SecuritiesAffairs Representative for Year 2019, 2018 Restricted A-Share Incentive scheme (Phase II) (Draft) and the summary, theMeasures for Implementation, Assessment and Management of 2018 Restricted A-Share Incentive scheme (PhaseII),and the release conditions for the first release period of 2018 Restricted A-Share Incentive Scheme (Phase I) havebeen satisfied, etc.VII. Work Summary of the Supervisory CommitteeDid the Supervisory Committee find any risk involved in performing the supervision activities in the reporting periodNoVIII. Assessment and Incentive Mechanism for Senior Executives
1. Assessment of Senior Executives
In order to give full play to and mobilize the enthusiasm and creativity of the Company's senior executives, to betterimprove the Company's operating ability, economic benefit and ensure the realization of the Company's strategic goals,based on the establishment of an incentive and constraint mechanism compatible with the modern enterprise system,the
Company conducts comprehensive assessments according to the annual business performance and the work objectivesof the senior executives in charge of the respective work, and conducts strategic review and assessment on a quarterlybasis, based on the results of the assessment and performance completion and determine the total remuneration andwhether to renew their offices.
2. Incentive to Senior Executives
(1) 2018 Restricted A-Share Incentive Scheme (Phase I)
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 Restricted A-Share Incentive scheme (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 shareswere awarded at price of CNY 4.40/share and were entirely awarded and registered for trading by January 30, 2019, Ofthem, 9 persons were directors and senior executives. They were awarded total 710,000 shares of Restricted A-Share,taking 0.1618% of the Company's total capital stock.
The 24th session of the Ninth Board of Directors held on December 29, 2020 reviewed and approved the Proposal onthe Release Conditions having been Satisfied for the First Release Period of 2018 Restricted A-Share Incentive Scheme(Phase I). According to the incentive scheme, the release conditions for the first release period of 2018 Restricted A-Share Incentive Scheme (Phase I) have been satisfied. Authorized by 2019 1st Extraordinary General Meeting, theBoard of Directors decided that the Company was to release the restriction for the participants in compliance with therelease conditions. The number of restricted shares to be released this time accounted for 33.3% of the restricted shares.Among them, the number of restricted shares granted to 9 directors and senior executives totaled 710,000 shares. Thetotal number of the restricted shares which can be released this time was 236,430 shares, accounting for 0.0552% of theCompany's total share capital.
| Names | Title | Number of restricted shares awarded (in 10,000 shares) | Number of restricted shares to be released this time (in 10,000 shares) | Remaining number of restricted shares not to be released (in 10,000 shares) | Proportion of restricted shares to be released this time in the Company’s total share capital (%) |
| Huang Yongfeng | Chairman of the Board | 10 | 3.33 | 6.67 | 0.0078 |
| Pan Bo | Managing Director | 8 | 2.664 | 5.336 | 0.0062 |
| Lu Wanjun | Deputy GM | 8 | 2.664 | 5.336 | 0.0062 |
| Liu Xiaoming | Deputy GM | 8 | 2.664 | 5.336 | 0.0062 |
| Li Ming | Deputy GM | 8 | 2.664 | 5.336 | 0.0062 |
| Chen Zhuo | Chief Accountant & Secretary of the Board | 8 | 2.664 | 5.336 | 0.0062 |
| Tang Haiyuan | Deputy GM | 6 | 1.998 | 4.002 | 0.0047 |
| Chen Libin | Managing Director (retired) | 10 | 3.33 | 6.67 | 0.0078 |
| Xu Chuangyue | Deputy GM (retired) | 5 | 1.665 | 3.335 | 0.0039 |
| Core personnel of management, business, professions and technology (113 persons) | 336.7 | 112.1211 | 224.5789 | 0.2619 | |
| Total (122 persons) | 407.7 | 135.7641 | 271.9359 | 0.3171 | |
awarded at price of CNY 7.60/share and were entirely awarded and registered for trading by January 29, 2021. Of them,8 persons were directors and senior executives. They were awarded total 1.23 million restricted A-shares, taking 0.2873%of the Company's total capital stock, with the detail as follows:
| Names | Title | Number of restricted shares awarded (in 10,000 shares) | Proportion of the awarded equity In the total equity | Proportion of the awarded equity in the total capital stock |
| Pan Bo | Managing Director | 15 | 1.96% | 0.35 |
| Lu Wanjun | Deputy GM | 15 | 1.96% | 0.35 |
| Liu Xiaoming | Deputy GM | 15 | 1.96% | 0.35 |
| Li Ming | Deputy GM | 15 | 1.96% | 0.35 |
| Chen Zhuo | Chief Accountant & Secretary of the Board | 15 | 1.96% | 0.35 |
| Tang Haiyuan | Deputy GM | 15 | 1.96% | 0.35 |
| Chen Libin | Managing Director (retired) | 18 | 2.35% | 0.42 |
| Xu Chuangyue | Deputy GM (retired) | 15 | 1.96% | 0.35 |
| Other core personnel of management, sales, professions and technology (127 persons) | 643 | 83.93% | 15.02 | |
| Total (135 persons) | 766 | 100% | 17.89‰（1.79%） | |
| Date of disclosing the full text of the internal control assessment report | March 10, 2021 | |
| Index of disclosure of the full text of the internal control assessment report | www.cninfo.com.cn | |
| Proportion of the total assets of the organizations involved in the assessment in the total assets of the Company’s consolidated financial statements | 100.00% | |
| Proportion of the operation revenue of the entitled involved in the assessment in the total operation revenue of the Company’s consolidated financial statements | 100.00% | |
| Criteria for affirming the defects | ||
| Categories | Financial report | Non-financial Report |
| Qualitative criteria | ① The defect involving fraud of the directors, supervisors and senior executives; ② correction of the financial statements already published;③ the CPA found that there existed serious misstatement in the financial statements of the reporting period while the internal control failed to find the misstatement in process of operation; ④ the Company's auditing committee and supervision and audit department conducted ineffective supervision of the internal control. | ① seriously violating the PRC laws, administrative regulations and normative documents; ② "decision on major issues, important officer appointment and/or removal and arrangement of important projects as well as application of big sum of fund have not undergone collective decision-making procedures; ③ serious running off of officers and technicians of the key positions; ④ there is no system control available for the Company’s production and operation practice or the system no longer works; ⑤ the internal control for information disclosure no longer works, having caused the Company censured publicly by the regulatory authority; ⑥the results of the internal control assessments, especially the material defects or |
| important defects have not been rectified. | ||
| Quantitative criteria | ① Material defects：Misstatement≥ 5% of the pre-tax profit；② Important defects：1% of profit before tax ≤ Misstatement＜5% of profit before tax; ③ Common defects：Misstatement＜1% of profit before tax. | ① Material defects：Misstatement≥ 5% of the pre-tax profit；② Important defects：1% of profit before tax ≤ Misstatement＜5% of profit before tax; ③ Common defects：Misstatement＜1% of profit before tax. |
| Number of material defects in the financial statements (pcs) | 0 | |
| Number of material defects in the non-financial statements (pcs) | 0 | |
| Number of important defects in the financial report (pcs) | 0 | |
| Number of important defects in the non-financial statements (pcs) | 0 | |
| 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, 2020. | |
| Disclosure of the internal control audit report | Disclosed |
| Date of disclosing the full text of the internal control assessment report | March 10, 2021 |
| Index of disclosing the full text of the internal control audit report | www.cninfo.com.cn |
| Type of the onions in the internal control audit report | Standard unqualified auditor’s report |
| Are there any material defects in the non-financial report | No |
Section 12 Financial Report
Auditor’s Report
GTCNSZ(2021)NO.110A002280
To All Shareholders of FIYTA Precision Technology Co., Ltd.:
OpinionWe have audited the financial statements of FIYTA Precision Technology Co., Ltd.(“FIYTA Ltd.” or the “Company”), which comprise the consolidated and Company balancesheets as at 31 December 2020, and the consolidated and Company income statements,consolidated and Company cash flow statements and consolidated and Companystatements of changes in shareholders’ equity for the year then ended, and notes to thefinancial statements.In our opinion, the accompanying financial statements present fairly, in all materialrespects, the consolidated and Company financial positions of FIYTA Ltd. as at 31December 2020, and their financial performance and their cash flows for the year thenended in accordance with Accounting Standards for Business Enterprises.Basis for OpinionWe conducted our audit in accordance with China Standards on Auditing. Ourresponsibilities under those standards are further described in the Auditors’Responsibilities for the Audit of the Financial Statements section of our report. We areindependent of the FIYTA Ltd. and have fulfilled our other ethical responsibilities inaccordance with the Code of Ethics for Chinese Certified Public Accountants. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.Key Audit MattersKey audit matters are those matters that, in our professional judgment, were of mostsignificance in our audit of the financial statements of the current period. These matters
were 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.
1. Existence of inventory and its net realizable value
Refer to Note III 12 and Note V 6 for detailed information.
(1) Description
As at 31 December 2020, the book balance, provision for decline in value, and carryingamount of inventory were RMB 2,029.51 million, RMB97.73 million and RMB 1,931.78million respectively. The carrying amount of inventory accounts for 48.07% of the totalassets of the Company.(i) As the main business of FIYTA Ltd is selling FIYTA brand watches and other
branded watches, the main inventory of FIYTA Ltd are finished watches and watchcomponents. The inventories are distributed in stores, regional warehouses,resellers’ warehouses and the Company’s warehouses which caused difficulty ininventory physical observation;(ii) The management of FIYTA Ltd measures inventory at lower of cost and net
realizable value (NRV) at balance sheet date. Where the cost of an inventoryexceeds its NRV, the difference is recognized as provision for decline in value. Thedetermination of NRV involves significant judgment and estimates by theManagement.Inventory value is significant to the Company’s assets and it requires significant judgementby the Management, as a result, we identified existence of inventory and its net realizablevalue as key audit matters.
(2) How our audit addressed the key audit matter
(i) Understanding, evaluating and testing the design and operating effectiveness of
internal controls of procurement and payment, production and storage, and theprovision for decline in value of inventory;(ii) Understanding and evaluating the appropriateness of the Company’s policy in
provision for decline in value;(iii) Understanding and inquiring the locations of inventory storage, measurement
method of inventory so as to determining the scope of inventory physical
observation;(iv) Discussing physical inventory count status with the Management and attending the
physical inventory count and conducting observation and test count on site to check
the quantity of the inventories and observe their condition.(v) Obtaining the ageing report of inventory and taking into consideration of inventory
condition in order to perform analytical review on the ageing as well as analyze the
reasonableness of provision for decline in value;(vi) Reviewing and evaluating the appropriateness of significant estimates made by the
Management in determining the NRV of inventory;(vii) Obtaining the calculation of provision for decline in value of inventory, reviewing
whether the provision was made in compliance with relevant accounting policies
and performing recalculation of provision. Checking the movements of prior year’s
provision and analyzing whether the provision was adequately accrued in prior
period.(viii) Tracing samples of large purchases in current period to their corresponding
contracts and tax invoices, and inspecting their purchase requisition form and
goods receipt notes.Based on audit work conducted above, we believe that the presentation and disclosure ofinventory and the judgment on NRV made by the management is supportable.
2. Revenue recognition
Refer to Note III 25 and Note V 34 for detailed information.
(1) Description
In 2020, the Company’s income from main business was RMB4,226.99 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 otherbranded watches are sold through shops in department store and on-line shops. Refer toNote III 25 for accounting policy relating to revenue recognition.Operating revenue represents major line item in income statement and is main source ofprofit, the accuracy and completeness of revenue recognition have significant impact 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
(i) Understanding, evaluating and testing the design and operating effectiveness of
internal controls relating to revenue recognition;(ii) Obtaining and understanding accounting policies relating to revenue recognition,
and reviewing and evaluating whether the point in time of control right transfer,
measurement of transaction price and accounting for special transactions are
complied with the accounting standards;(iii) Selecting samples from current year’s transaction records, and tracing them to
supporting documents such as contract, tax invoice and goods dispatch note (if
applicable) and courier waybill (if applicable);(iv) In connection with audit of accounts receivable, selecting major customers and
confirming corresponding sales in current year and year-end balance;(v) Conducting cut-off test to revenue recognized before and after the balance sheet
date by selecting samples to check supporting documents such as contract, tax
invoice and goods dispatch note (if applicable) and courier waybill (if applicable) to
evaluate whether 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.Other InformationThe management of FIYTA Ltd (the “Management”) are responsible for the OtherInformation. The Other Information comprises all of the information included in theCompany’s 2020 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 havenothing to report in this regard.Responsibilities of the Management and those Charged with Governance for theFinancial StatementsThe Management is responsible for the preparation of the financial statements that give afair view in accordance with Accounting Standards for Business Enterprises and for thedesign, implementation and maintenance of such internal controls as the Managementdetermine is necessary to enable the preparation of financial statements that are free frommaterial 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, mattersrelated to going concern and using the going concern basis of accounting unless theManagement either intend to liquidate the Company or to cease operations, or have norealistic alternative but to do so.Those who charged with governance is responsible for overseeing the Company’sfinancial reporting process.Auditors’ Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statementsas a whole are free from material misstatement, whether due to fraud or error, and to issuean auditors’ report that includes our opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with ChinaStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individually orin the aggregate, they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.As part of an audit in accordance with China Standards on Auditing, we exerciseprofessional judgment and maintain professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the financial statements,whether due to fraud or error, design and perform audit procedures responsive to thoserisks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error, as fraud may involve collusion, forgery,intentional omissions, misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances.
3. Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the Management.
4. Conclude on the appropriateness of the Management’s use of the going concern basisof 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 materialuncertainty exists, we are required, according to China Standards on Auditing, to drawattention in our auditors’ report to the related disclosures in the financial statements or,if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditors’ report. However, futureevents or conditions may cause the Company to cease to continue as a going concern.
5. Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent theunderlying transactions 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 thegroup audit. 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 have compliedwith relevant ethical requirements regarding independence, and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence, and where applicable, related safeguards.From the matters communicated with those charged with governance, we determine thosematters that were of most significance in the audit of the financial statements of the currentperiod and are therefore the key audit matters. We describe these matters in our auditor’sreport unless law or regulation precludes public disclosure about the matter or when, inextremely rare circumstances, we determine that a matter should not be communicated inour report because the adverse consequences of doing so would reasonably be expectedto outweigh the public interest benefits of such communication.
| Grant Thornton China ·Beijing | Auditor's signature and stamp (Engagement partner) Auditor's signature and stamp | |
| 8 March 2021 | ||
| Consolidated and Company Balance Sheet | |||||
| as at 31 December 2020 | |||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | Expressed in RMB | ||||
| Item | Note | As at 31/12/2020 | As at 31/12/2019 | ||
| Consolidated | Company | Consolidated | Company | ||
| Current assets: | |||||
| Cash at bank and on hand | V. 1 | 353,057,285.71 | 292,055,169.74 | 316,668,565.09 | 270,673,346.02 |
| Financial assets held for trading | - | - | - | - | |
| Bills receivable | V. 2 | 48,192,442.15 | - | 10,596,431.31 | - |
| Accounts receivable | V. 3 | 475,598,684.88 | 1,464,798.79 | 397,471,106.98 | 2,848,025.39 |
| Accounts receivable financing | - | - | - | - | |
| Prepayments | V. 4 | 16,612,773.76 | - | 10,847,962.28 | - |
| Other receivables | V. 5 | 52,902,779.63 | 621,512,680.69 | 47,239,844.58 | 783,647,732.22 |
| including: interests receivables | - | - | - | - | |
| dividend receivables | - | - | - | - | |
| Inventories | V. 6 | 1,931,780,185.85 | - | 1,808,820,089.92 | - |
| Contract assset | - | - | Not applicable | Not applicable | |
| Assets held for sale | - | - | - | - | |
| Non-current assets due within one year | - | - | - | - | |
| Other current assets | V. 7 | 75,935,141.76 | 11,655,617.82 | 68,858,096.74 | 12,380,243.67 |
| Total current assets | 2,954,079,293.74 | 926,688,267.04 | 2,660,502,096.90 | 1,069,549,347.30 | |
| Non-current assets: | |||||
| Debt investment | - | - | - | - | |
| Other debt investment | - | - | - | - | |
| Long-term receivable | - | - | - | - | |
| Long-term equity investments | V. 8 | 51,400,665.92 | 1,529,415,188.28 | 46,423,837.85 | 1,380,895,239.27 |
| Other equity instrument investments | V. 9 | 85,000.00 | 85,000.00 | 85,000.00 | 85,000.00 |
| Other non-current financial assets | - | - | - | - | |
| Investment properties | V. 10 | 398,086,447.78 | 323,296,494.84 | 407,503,307.24 | 329,970,083.18 |
| Fixed assets | V. 11 | 352,734,280.76 | 224,709,747.39 | 363,997,098.94 | 238,594,698.50 |
| Construction in progress | - | - | - | - | |
| Intangible assets | V. 12 | 37,859,316.51 | 27,347,950.13 | 38,711,821.26 | 30,925,974.54 |
| Development costs | - | - | - | - | |
| Goodwill | - | - | - | - | |
| Long-term deferred expenses | V. 13 | 130,017,587.99 | 11,980,697.97 | 152,587,491.33 | 12,106,759.98 |
| Deferred tax assets | V. 14 | 80,913,800.35 | 1,380,180.94 | 83,739,383.37 | 1,125,840.75 |
| Other non-current assets | V. 15 | 13,536,307.13 | 473,312.35 | 7,373,248.48 | 4,707,236.86 |
| Total non-current assets | 1,064,633,406.44 | 2,118,688,571.90 | 1,100,421,188.47 | 1,998,410,833.08 | |
| Total assets | 4,018,712,700.18 | 3,045,376,838.94 | 3,760,923,285.37 | 3,067,960,180.38 |
| Consolidated and Company Balance Sheet (continued) | |||||
| as at 31 December 2020 | |||||
| Item | Note | As at 31/12/2020 | As at 31/12/2019 | ||
| Consolidated | Company | Consolidated | Company | ||
| Current liabilities: | |||||
| Short-term loans | V. 16 | 542,673,278.09 | 400,425,930.05 | 567,908,833.21 | 540,650,622.50 |
| Financial liabilities held for trading | - | - | - | - | |
| Bills payable | V. 17 | 3,581,360.00 | - | - | - |
| Accounts payable | V. 18 | 301,211,515.39 | 1,481,135.49 | 279,772,787.37 | 12,952,934.93 |
| Advances from customers | V. 19 | 9,991,850.67 | 9,991,850.67 | 23,433,463.57 | 3,434,407.04 |
| Contract liabilitites | V. 20 | 18,213,396.49 | 37,735.85 | Not applicable | Not applicable |
| Employee remuneration payable | V. 21 | 132,853,462.20 | 25,256,531.70 | 82,602,845.67 | 19,019,554.57 |
| Taxes payable | V. 22 | 68,925,271.90 | 2,778,265.84 | 24,064,803.00 | 1,713,130.68 |
| Other payables | V. 23 | 128,577,597.94 | 240,824,305.37 | 119,616,721.63 | 82,631,590.46 |
| including: interest payables | - | - | - | - | |
| dividend payables | 1,639,513.77 | 1,639,513.77 | 848,233.27 | 848,233.27 | |
| Liabilities held for sale | - | - | - | - | |
| Non-current liabilities due within one year | V. 24 | 370,030.00 | - | 360,140.00 | - |
| Other current liabilities | V. 25 | 2,299,755.09 | 2,264.15 | - | - |
| Total current liabilities | 1,208,697,517.77 | 680,798,019.12 | 1,097,759,594.45 | 660,402,240.18 | |
| Non-current liabilities: | |||||
| Long-term loans | V. 26 | 4,070,330.00 | - | 4,321,680.00 | - |
| Bonds payable | - | - | - | - | |
| Long-term payables | - | - | |||
| Provisions | - | - | - | - | |
| Deferred income | V. 27 | 2,916,346.43 | 2,377,718.35 | 3,046,090.60 | 3,046,090.60 |
| Deferred tax liabilities | V. 14 | 3,067,834.55 | - | 1,256,242.49 | - |
| Other non-current liabilities | - | - | - | - | |
| Total non-current liabilities | 10,054,510.98 | 2,377,718.35 | 8,624,013.09 | 3,046,090.60 | |
| Total liabilities | 1,218,752,028.75 | 683,175,737.47 | 1,106,383,607.54 | 663,448,330.78 | |
| Shareholder's equity: | |||||
| Share capital | V. 28 | 428,091,881.00 | 428,091,881.00 | 442,968,881.00 | 442,968,881.00 |
| Capital reserve | V. 29 | 1,021,490,387.78 | 1,027,145,928.88 | 1,081,230,215.32 | 1,086,885,756.42 |
| Less: treasury shares | V. 30 | 61,633,530.48 | 61,633,530.48 | 71,267,118.78 | 71,267,118.78 |
| Other comprehensive income | V. 31 | 976,871.41 | - | -940,209.09 | - |
| Specific reserve | - | - | - | - | |
| Surplus reserve | V. 32 | 246,531,866.87 | 246,531,866.87 | 235,701,180.14 | 235,701,180.14 |
| Undistributed profit | V. 33 | 1,164,490,911.51 | 722,064,955.20 | 966,840,818.40 | 710,223,150.82 |
| Total equity attributable to shareholders of the Company | 2,799,948,388.09 | 2,362,201,101.47 | 2,654,533,766.99 | 2,404,511,849.60 | |
| Non-controlling interests | 12,283.34 | - | 5,910.84 | - | |
| Total shareholders' equity | 2,799,960,671.43 | 2,362,201,101.47 | 2,654,539,677.83 | 2,404,511,849.60 | |
| Total liabilities and shareholders' equity | 4,018,712,700.18 | 3,045,376,838.94 | 3,760,923,285.37 | 3,067,960,180.38 | |
| Consolidated and Company Income Statement | |||||
| For the year ended 31 December 2020 | |||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | Expressed in RMB | ||||
| Item | Note | Year ended 31/12/2020 | Year ended 31/12/2019 | ||
| Consolidated | Company | Consolidated | Company | ||
| I.Operating income | V. 34 | 4,243,439,952.59 | 137,381,795.95 | 3,704,210,734.90 | 140,511,246.61 |
| Less:operating costs | V. 34 | 2,639,229,537.06 | 36,497,097.45 | 2,217,207,732.04 | 21,776,539.35 |
| Taxes and surcharges | V. 35 | 25,444,139.30 | 4,435,717.73 | 28,192,789.55 | 4,623,611.23 |
| Selling and distribution expenses | V. 36 | 870,713,899.32 | 1,579,092.51 | 865,792,078.61 | 1,130,383.07 |
| General and administrative expenses | V. 37 | 256,559,127.23 | 76,604,523.40 | 240,619,989.04 | 84,134,946.30 |
| Research and development expenses | V. 38 | 51,489,323.49 | 19,933,292.70 | 45,057,740.25 | 17,580,327.66 |
| Financial expenses | V. 39 | 33,449,276.41 | 3,127,102.39 | 32,815,277.57 | 7,037,707.90 |
| Including: Interest expenses | 21,315,119.78 | 6,230,252.39 | 23,975,351.93 | 8,393,727.80 | |
| Interest income | 4,941,334.19 | 4,609,988.68 | 1,956,316.52 | 1,696,829.44 | |
| Add: Other income | V. 40 | 25,170,397.09 | 9,324,872.59 | 18,428,906.18 | 9,066,722.30 |
| Investment income ("-" for losses) | V. 41 | 5,072,577.64 | 104,976,828.07 | 1,787,907.10 | 114,542,774.70 |
| Including: Income from investment in associates and joint ventures ("-" for losses) | 5,072,577.64 | 4,976,828.07 | 1,787,907.10 | 1,542,774.70 | |
| Gain from de-recognition of financial assets measured at amortized costs ("-" for losses) | - | - | - | - | |
| Gain from net exposure hedging ("-" for losses) | - | - | - | - | |
| Gain from fair value changes ("-" for losses) | - | - | - | - | |
| Credit impairment losses ("-" for losses) | V. 42 | -9,096,922.74 | -158,252.51 | -16,640,961.07 | -100,882.96 |
| Asset impairment losses ("-" for losses) | V. 43 | -15,426,526.41 | - | -4,295,134.48 | - |
| Gains from assets disposal ("-" for losses) | V. 44 | -369,857.30 | -25,000.50 | -926,118.60 | -537,935.27 |
| II.Operating profit ("-" for losses) | 371,904,318.06 | 109,323,417.42 | 272,879,726.97 | 127,198,409.87 | |
| Add: Non-operating income | V. 45 | 3,111,413.64 | 259,345.80 | 4,754,105.30 | 88,886.65 |
| Less: Non-operating expenses | V. 46 | 1,555,112.86 | 15,864.83 | 1,400,188.87 | 210,174.24 |
| III.Profit before income tax ("-" for losses) | 373,460,618.84 | 109,566,898.39 | 276,233,643.40 | 127,077,122.28 | |
| Less: Income tax expenses | V. 47 | 79,338,516.60 | 1,260,031.08 | 60,324,629.25 | 223,258.88 |
| IV.Net profit for the year ("-" for net losses) | 294,122,102.24 | 108,306,867.31 | 215,909,014.15 | 126,853,863.40 | |
| (1) Classification according to operation continuity | |||||
| Including: Net profit from continuing operations ("-" for net loss) | 294,122,102.24 | 108,306,867.31 | 215,909,014.15 | 126,853,863.40 | |
| Net profit from discontinued operations ("-" for net loss) | - | - | - | - | |
| (2) Classification according to ownership | |||||
| Including: attributable to shareholders of the Company ("-" for net loss) | 294,115,156.04 | 108,306,867.31 | 215,909,014.15 | 126,853,863.40 | |
| attributable to non-controlling interests ("-" for net loss) | 6,946.20 | - | - | - | |
| V.Other comprehensive income, net of tax | 1,916,506.80 | - | 4,502,059.89 | - | |
| Other comprehensive income (net of tax) attributable to shareholders of the company | 1,917,080.50 | - | 4,501,930.69 | - | |
| A.Items that will not be reclassified to profit or loss | - | - | - | - | |
| B. Items that may be reclassified to profit or loss | 1,917,080.50 | - | 4,501,930.69 | - | |
| a. Translation differences arising from translation of foreign currency financial statements | 1,917,080.50 | - | 4,501,930.69 | - | |
| b. Others | - | - | - | - | |
| Other comprehensive income (net of tax) attributable to non-controlling interests | -573.70 | - | 129.20 | - | |
| VI.Total comprehensive income for the year | 296,038,609.04 | 108,306,867.31 | 220,411,074.04 | 126,853,863.40 | |
| Attributable to: Shareholders of the Company | 296,032,236.54 | 108,306,867.31 | 220,410,944.84 | 126,853,863.40 |
| Non-controlling interests | 6,372.50 | - | 129.20 | - | |
| VII.Earnings per share: | |||||
| (1) Basic earnings per share | 0.6764 | 0.4943 | |||
| (2) Diluted earnings per share | 0.6764 | 0.4943 | |||
| Consolidated and Company Cash Flow Statement | |||||
| For the year ended 31 December 2020 | |||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | Expressed in RMB | ||||
| Item | Note | Year ended 31/12/2020 | Year ended 31/12/2019 | ||
| Consolidated | Company | Consolidated | Company | ||
| I.Cash flows from operating activities | |||||
| Cash received from sales of goods and rendering of services | 4,602,638,695.31 | 178,808,738.19 | 4,058,167,395.57 | 129,299,543.07 | |
| Cash received from refund of taxes | 1,849,055.57 | - | 5,510,592.39 | 301,416.23 | |
| Cash received from other operating activities | V. 48 | 78,001,812.45 | 4,238,779,521.46 | 93,832,379.85 | 3,935,449,332.96 |
| Subtotal of cash inflows from operating activities | 4,682,489,563.33 | 4,417,588,259.65 | 4,157,510,367.81 | 4,065,050,292.26 | |
| Cash paid for purchasing goods and services | 3,046,261,111.48 | - | 2,398,294,588.87 | - | |
| Cash paid to and for employees | 578,179,070.15 | 61,903,446.81 | 584,435,566.86 | 74,123,969.83 | |
| Cash paid for tax and surcharges | 222,180,568.75 | 9,345,329.15 | 241,905,980.66 | 12,227,836.75 | |
| Cash paid for other operating activities | V. 48 | 457,658,307.08 | 3,948,860,602.89 | 488,053,462.81 | 3,807,983,200.74 |
| Subtotal of cash outflows in operating activities | 4,304,279,057.46 | 4,020,109,378.85 | 3,712,689,599.20 | 3,894,335,007.32 | |
| Net cash flows from operating activities | 378,210,505.87 | 397,478,880.80 | 444,820,768.61 | 170,715,284.94 | |
| II. Cash flows from investing activities | |||||
| Cash received from disposal of investments | - | - | - | - | |
| Cash received from returns on investments | - | 100,000,000.00 | - | 113,000,000.00 | |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 150,556.62 | 1,630.00 | 626,107.64 | 134,060.00 | |
| Net cash received from disposal of subsidiaries and other business units | - | - | - | - | |
| Cash received from other investing activities | - | - | - | - | |
| Subtotal of cash inflows from investing activities | 150,556.62 | 100,001,630.00 | 626,107.64 | 113,134,060.00 | |
| Cash paid to acquire fixed assets, intangible assets and other long-term assets | 133,531,954.47 | 17,398,218.00 | 166,689,454.32 | 40,173,154.98 | |
| Cash paid to acquire investments | - | 139,500,000.00 | - | - | |
| Net cash paid to acquire subsidiaries and other business units | - | - | - | - | |
| Cash paid for other investing activities | - | - | - | - | |
| Subtotal of cash outflows in investing activities | 133,531,954.47 | 156,898,218.00 | 166,689,454.32 | 40,173,154.98 | |
| Net cash flows from investing activities | -133,381,397.85 | -56,896,588.00 | -166,063,346.68 | 72,960,905.02 | |
| III. Cash flows from financing activities： | |||||
| Cash received from capital contributions | - | - | 18,585,600.00 | 18,585,600.00 | |
| Including: Cash received from capital contributions by non-controlling intetests of subsidiaries | - | - | - | - | |
| Cash received from loans | 743,213,671.65 | 601,000,000.00 | 700,262,726.76 | 670,000,000.00 | |
| Cash received from other financing activities | - | - | - | - | |
| Sub-total of cash inflows from financing activities | 743,213,671.65 | 601,000,000.00 | 718,848,326.76 | 688,585,600.00 | |
| Cash repayments of borrowings | 768,247,433.10 | 741,000,000.00 | 681,461,355.87 | 635,000,000.00 | |
| Cash paid for dividends and profits distribution and interests | 106,703,352.70 | 104,195,155.07 | 111,024,929.61 | 110,048,303.96 | |
| Including: Cash payments for dividends or profit to non-controlling intetests of subsidiaries | - | - | - | - | |
| Cash paid for other financing activities | V. 48 | 72,317,669.93 | 72,317,669.93 | 53,117,325.02 | 53,117,325.02 |
| Sub-total of cash outflows in financing activities | 947,268,455.73 | 917,512,825.00 | 845,603,610.50 | 798,165,628.98 | |
| Net cash flows from financing activities | -204,054,784.08 | -316,512,825.00 | -126,755,283.74 | -109,580,028.98 | |
| IV. Effect of foreign exchange rate changes on cash and cash equivalents | -2,810,603.32 | -1,112,644.08 | 468,366.93 | 31,718.77 | |
| V. Net increase in cash and cash equivalents | 37,963,720.62 | 22,956,823.72 | 152,470,505.12 | 134,127,879.75 | |
| Add: cash and cash equivalents at beginning of year | 315,093,565.09 | 269,098,346.02 | 162,623,059.97 | 134,970,466.27 | |
| VI.Cash and cash equivalent at end of year | 353,057,285.71 | 292,055,169.74 | 315,093,565.09 | 269,098,346.02 | |
| Consolidated Statement of Changes in Shareholders' Equity | |||||||||
| For the year ended 31 December 2020 | |||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | Expressed in RMB | ||||||||
| Item | Year ended 31/12/2020 | ||||||||
| Total shareholders’ equity attributable to shareholders of the parent company | Non-controlling interests | Total | |||||||
| Share capital | Capital reserve | Less: treasury shares | Other comprehensive income | Specific reserve | Surplus reserve | Undistributed profit | |||
| I. Balance at the end of prior year | 442,968,881.00 | 1,081,230,215.32 | 71,267,118.78 | -940,209.09 | - | 235,701,180.14 | 966,840,818.40 | 5,910.84 | 2,654,539,677.83 | |
| Add：Changes in accounting policies | - | - | - | - | - | - | - | - | - | |
| Correction of prior period errors | - | - | - | - | - | - | - | - | - | |
| Business combination involving enterprises under common control | - | - | - | - | - | - | - | - | - | |
| Others | - | - | - | - | - | - | - | - | - | |
| II. Balance at the beginning of current year | 442,968,881.00 | 1,081,230,215.32 | 71,267,118.78 | -940,209.09 | - | 235,701,180.14 | 966,840,818.40 | 5,910.84 | 2,654,539,677.83 | |
| III.Changes in equity during the year( "- "for | -14,877,000.00 | -59,739,827.54 | -9,633,588.30 | 1,917,080.50 | - | 10,830,686.73 | 197,650,093.11 | 6,372.50 | 145,420,993.60 |
| decrease) | ||||||||||
| (I)Total comprehensive income | - | - | - | 1,917,080.50 | - | - | 294,115,156.04 | 6,372.50 | 296,038,609.04 | |
| (II)Shareholders' contributions and decrease of capital | -14,877,000.00 | -59,739,827.54 | -9,633,588.30 | - | - | - | - | - | -64,983,239.24 | |
| 1.Contribution by ordinary shareholders | -14,877,000.00 | -65,264,104.92 | -8,802,188.30 | - | - | - | - | - | -71,338,916.62 | |
| 2.Increase in shareholders' equity resulted from share-based payments | - | 5,570,601.49 | -831,400.00 | - | - | - | - | - | 6,402,001.49 | |
| 3. Others | - | -46,324.11 | - | - | - | - | - | - | -46,324.11 | |
| (III) Appropriation of profits | - | - | - | - | - | 10,830,686.73 | -96,465,062.93 | - | -85,634,376.20 | |
| 1. Appropriation for surplus reserves | - | - | - | - | - | 10,830,686.73 | -10,830,686.73 | - | - | |
| 2. Distributions to shareholders | - | - | - | - | - | - | -85,634,376.20 | - | -85,634,376.20 | |
| 3. Others | - | - | - | - | - | - | - | - | - | |
| (IV) Transfer within equity | - | - | - | - | - | - | - | - | - | |
| 1.Share capital increased by capital reserves transfer | - | - | - | - | - | - | - | - | - | |
| 2.Share capital increased by surplus reserves transfer | - | - | - | - | - | - | - | - | - |
| 3.Transfer of surplus reserve to offset losses | - | - | - | - | - | - | - | - | - | |
| 4. Other comprehensive income transferred to retained earning | - | - | - | - | - | - | - | - | ||
| 5. Others | - | - | - | - | - | - | - | - | - | |
| (V)Specific Reserve | - | - | - | - | - | - | - | - | - | |
| 1. Appropriation during the year | - | - | - | - | - | - | - | - | - | |
| 2.Utilisation during the year | - | - | - | - | - | - | - | - | - | |
| (VI)Others | - | - | - | - | - | - | - | - | - | |
| IV.Balance at end of current year | 428,091,881.00 | 1,021,490,387.78 | 61,633,530.48 | 976,871.41 | - | 246,531,866.87 | 1,164,490,911.51 | 12,283.34 | 2,799,960,671.43 | |
| Consolidated Statement of Changes in Shareholder's Equity | |||||||||
| For the year ended 31 December 2020 | |||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | Expressed in RMB | ||||||||
| Item | Year ended 31/12/2019 | ||||||||
| Total shareholders’ equity attributable to shareholders of the parent company | Non-controlling interests | Total | |||||||
| Share capital | Capital reserve | Less: treasury shares | Other comprehensive income | Specific reserve | Surplus reserve | Undistributed profit | |||
| I. Balance at the end of prior year | 438,744,881.00 | 1,062,455,644.22 | - | -5,442,139.78 | - | 223,015,793.80 | 851,360,603.66 | 5,781.64 | 2,570,140,564.54 | |
| Add：Changes in accounting policies | - | - | - | - | - | - | - | - | - | |
| Correction of prior period errors | - | - | - | - | - | - | - | - | - | |
| Business combination involving enterprises under common control | - | - | - | - | - | - | - | - | - | |
| Others | - | - | - | - | - | - | - | - | - | |
| II. Balance at the beginning of current year | 438,744,881.00 | 1,062,455,644.22 | - | -5,442,139.78 | - | 223,015,793.80 | 851,360,603.66 | 5,781.64 | 2,570,140,564.54 | |
| III.Changes in equity during the year( "- "for decrease) | 4,224,000.00 | 18,774,571.10 | 71,267,118.78 | 4,501,930.69 | - | 12,685,386.34 | 115,480,214.74 | 129.20 | 84,399,113.29 | |
| (I)Total comprehensive income | - | - | - | 4,501,930.69 | - | - | 215,909,014.15 | 129.20 | 220,411,074.04 | |
| (II)Shareholders' contributions and decrease of capital | 4,224,000.00 | 18,774,571.10 | 71,267,118.78 | - | - | - | - | - | -48,268,547.68 |
| 1.Contribution by ordinary shareholders | 4,224,000.00 | 14,361,600.00 | 71,267,118.78 | - | - | - | - | -52,681,518.78 | ||
| 2.Increase in shareholders' equity resulted from share-based payments | - | 4,440,625.91 | - | - | - | - | - | - | 4,440,625.91 | |
| 3. Others | - | -27,654.81 | - | - | - | - | - | - | -27,654.81 | |
| (III) Appropriation of profits | - | - | - | - | - | 12,685,386.34 | -100,428,799.41 | - | -87,743,413.07 | |
| 1. Appropriation for surplus reserves | - | - | - | - | - | 12,685,386.34 | -12,685,386.34 | - | - | |
| 2. Distributions to shareholders | - | - | - | - | - | - | -87,743,413.07 | - | -87,743,413.07 | |
| 3. Others | - | - | - | - | - | - | - | - | - | |
| (IV) Transfer within equity | - | - | - | - | - | - | - | - | - | |
| 1.Share capital increased by capital reserves transfer | - | - | - | - | - | - | - | - | - | |
| 2.Share capital increased by surplus reserves transfer | - | - | - | - | - | - | - | - | - | |
| 3.Transfer of surplus reserve to offset losses | - | - | - | - | - | - | - | - | - | |
| 4. Other comprehensive income transferred to retained earning | - | - | - | - | - | - | - | - | - | |
| 5. Others | - | - | - | - | - | - | - | - | - | |
| (V)Specific Reserve | - | - | - | - | - | - | - | - | - | |
| 1. Appropriation during the year | - | - | - | - | - | - | - | - | - | |
| 2.Utilisation during the year | - | - | - | - | - | - | - | - | - |
| (VI)Others | - | - | - | - | - | - | - | - | - | |
| IV.Balance at end of current year | 442,968,881.00 | 1,081,230,215.32 | 71,267,118.78 | -940,209.09 | - | 235,701,180.14 | 966,840,818.40 | 5,910.84 | 2,654,539,677.83 | |
| Statement of Changes in Shareholders' Equity | ||||||||
| For the year ended 31 December 2020 | ||||||||
| Prepared by: FIYTA Precision Technology Co., Ltd. | Expressed in RMB | |||||||
| Item | Year ended 31/12/2019 | |||||||
| Share capital | Capital reserve | Less: treasury shares | Other comprehensive income | Specific reserve | Surplus reserve | Undistributed profit | Total | |
| I. Balance at the end of prior year | 438,744,881.00 | 1,068,111,185.32 | - | - | - | 223,015,793.80 | 683,798,086.83 | 2,413,669,946.95 | |
| Add：Changes in accounting policies | - | - | - | - | - | - | - | - | |
| Correction of prior period errors | - | - | - | - | - | - | - | - | |
| Others | - | - | - | - | - | - | - | - | |
| II. Balance at the beginning of current year | 438,744,881.00 | 1,068,111,185.32 | - | - | - | 223,015,793.80 | 683,798,086.83 | 2,413,669,946.95 | |
| III.Changes in equity during the year( "- "for decrease) | 4,224,000.00 | 18,774,571.10 | 71,267,118.78 | - | - | 12,685,386.34 | 26,425,063.99 | -9,158,097.35 | |
| (I)Total comprehensive income | - | - | - | - | - | - | 126,853,863.40 | 126,853,863.40 | |
| (II)Shareholders' contributions and decrease of capital | 4,224,000.00 | 18,774,571.10 | 71,267,118.78 | - | - | - | - | -48,268,547.68 | |
| 1.Contribution by ordinary shareholders | 4,224,000.00 | 14,361,600.00 | 71,267,118.78 | - | - | - | - | -52,681,518.78 |
| 2.Increase in shareholders' equity resulted from share-based payments | - | 4,440,625.91 | - | - | - | - | - | 4,440,625.91 | |
| 3. Others | - | -27,654.81 | - | - | - | - | - | -27,654.81 | |
| (III) Appropriation of profits | - | - | - | - | - | 12,685,386.34 | -100,428,799.41 | -87,743,413.07 | |
| 1. Appropriation for surplus reserves | - | - | - | - | - | 12,685,386.34 | -12,685,386.34 | - | |
| 2. Distributions to shareholders | - | - | - | - | - | - | -87,743,413.07 | -87,743,413.07 | |
| 3. Others | - | - | - | - | - | - | - | - | |
| (IV) Transfer within equity | - | - | - | - | - | - | - | - | |
| 1.Share capital increased by capital reserves transfer | - | - | - | - | - | - | - | - | |
| 2.Share capital increased by surplus reserves transfer | - | - | - | - | - | - | - | - | |
| 3.Transfer of surplus reserve to offset losses | - | - | - | - | - | - | - | - | |
| 4. Other comprehensive income transferred to retained earning | - | - | - | - | - | - | - | - | |
| 5. Others | - | - | - | - | - | - | - | - | |
| (V)Specific Reserve | - | - | - | - | - | - | - | - | |
| 1. Appropriation during the year | - | - | - | - | - | - | - | - | |
| 2.Utilisation during the year | - | - | - | - | - | - | - | - | |
| (VI)Others | - | - | - | - | - | - | - | - | |
| IV.Balance at end of current year | 442,968,881.00 | 1,086,885,756.42 | 71,267,118.78 | - | - | 235,701,180.14 | 710,223,150.82 | 2,404,511,849.60 |
Notes to the Financial StatementsI. Company status
1. Company’s profile
FIYTA Precision Technology Co., Ltd. (the “Company”) was founded, under the approval of Shen Fu Ban Fu (1992) 1259 issued bythe General Office of Shenzhen Municipal Government, through the restructuring of former Shenzhen FIYTA Time IndustrialCompany by the promoter of China National Aero-Technology Import and Export Shenzhen Industry & Trade Center (name changedto “China National Aero-Technology Shenzhen Co., Ltd” lately) on 25 December 1992, and the name changed to “Shenzhen FIYTAHoldings Limited”. The headquarters is located at FIYTA Hi-Tech Building, Gao Xin Nan Yi Dao, Nanshan District, Shenzhen,Guangdong Province.Pursuant to the approval of Shen Ren Yin Fu Zi (1993) 070 issued by the People’s Bank of China Shenzhen Special Economic ZoneBranch, the Company issued Renminbi ordinary shares (A shares) and Renminbi special shares (B shares) publicly on 10 March1993. On 3 June 1993, both the Company’s A shares and B shares were listed and traded on Shenzhen Stock Exchange pursuant tothe approval of Shen Zheng Ban Fu (1993] 20 issued by Shenzhen Securities Regulatory Office and Shen Zheng Shi Zi (1993)16issued by Shenzhen Stock Exchange.On 30 January 1997, the Company name changed to Shenzhen FIYTA Holdings Limited with the approval of Shenzhen MunicipalAdministration for Industry and Commerce.On 4 July 1997, China National Aero-Technology Shenzhen Co., Ltd. ("CATIC Shenzhen Company") transferred 72,360,000corporate shares (accounting for 52.24% of the Company's total share capital) to Shenzhen China Aviation Group Company Limited(previously known as "Shenzhen China Aviation Industry Company Limited", hereinafter referred to as "China National AviationGroup") according to share transfer agreement signed by both parties. As a result, the Company’s controlling shareholder changedfrom CATIC Shenzhen Company to China National Aviation Group.On 26 October 2007, the Company implemented split-share reform. Under the prerequisite of maintaining the Company's total of249,317,999 shares unchanged, the Company's shareholders of non-tradable shares paid 3.1 shares per 10 tradable shares to allthe tradable share shareholders registered on registration date designated by the split-share reform program. At that point, after thereform, the shares held by China National Aviation Group reduced from 52.24% to 44.69%.On 29 February 2008, due to expanding the scope of business, the Company’s corporate business license was altered from Shen SiZi No. 4403011001583 to No. 440301103196089 with the approval of Shenzhen Municipal Administration for Industry andCommerce.With the approval of “Reply of China Securities Regulatory Commission (CSRC) to the Approval of Private Placement of ShenzhenFIYTA Holdings Limited” (Zheng Jian Xu Ke [2010]1703) and “Reply of State-owned Assets Supervision and AdministrationCommission of the State Council (SASAC) on Issues in Private Placement of Shenzhen FIYTA Holdings Limited” (SASAC (2010)430)in 2010, the Company is approved to issue not more than 50,000,000 ordinary shares (A shares) by private placement. After thecompletion of the placement on 9 December 2010, the Company’s registered capital increased to RMB280,548,479.00 and theequity capital of the Company held by China National Aviation Group reduced to 41.49%.
On 3 March 2011, the Company name changed to FIYTA Holdings Limited with the approval of Shenzhen Municipal Administrationfor Industry and Commerce. On 8 April 2011, the Company increased its share capital by 4 shares for every 10 shares by capitalizingthe capital reserve on the basis of total shares of 280,548,479 as at 31 December 2010. Total shares of the Company changed to392,767,870 shares after the increase.On 11 November 2015, with the approval of China Securities Regulatory Commission (CSRC) “Reply of non-public offering of stocksof Shenzhen FIYTA Holdings Limited” (ZhengJianXuKe[2015]2588) and the approval of State-owned Assets Supervision andAdministration Commission of the State Council (SASAC) “Reply of non-public offering of stocks of Shenzhen FIYTA HoldingsLimited” (SASAC(2015)415), the Company was approved to issue not more than 46,911,649 ordinary shares (A shares) throughnon-public offering. After the completion of the non-public offering of shares on 22 December 2015, the Company’s registered capitalwas increased to RMB438,744,881.00 and the equity capital of the Company held by China National Aviation Group reduced to
37.15%.
On 4 January 2019, pursuant to the approval by “Reply to approval of Implementation of First Phase of Restricted Share Incentiveplan of FIYTA (Group) Holding Ltd.” (GuoZi KaoFen [2018] No. 936) issued by SASAC, and approved by the board of directors andshareholder’s general meeting, the Company implemented the incentive plan. On 11 January 2019, the restricted share incentiveplan (first phase) granted a total of 4,224,000 restricted A-shares to 128 incentive individuals. As a result, the Company’s registeredcapital increased to RMB442,968,881.00 and the equity capital held by China National Aviation Group decreased to 36.79%.According to the “Proposal of Change the Company’s name and initials for A share stock” approved by the 3rd extraordinaryshareholder’s meeting in 2019, and upon examination and approval by Shenzhen Administration for Industry and Commerce, theCompany’s name was changed from “FIYTA (Group) Co., Ltd. to “FIYTA Precision Technology Co., Ltd.” since 9 January 2020.On 29 April 2020, under the review and confirmation by China Securities Depository and Clearing Co., Ltd Shenzhen Branch, theCompany de-registered 14,730,000 shares of B-share that were repurchased previously.Pursuant to the resolution of “Proposal of repurchase and de-registration part of restricted shares authorised under 2018 A-shareRestricted Share Incentive Plan (First Phase)”, in 2020, the Company repurchased and de-registered 147,000 A-share restrictedshares that had been authorised but still under restriction period. Those shares were owned by 6 former incentive individuals that areresigned. After the change, the Company’s registered capital reduced to RMB428,091,881.00.As of 31 December 2020, total outstanding shares issued by the Company was 428,091,881.00 shares. Refer to Note V. 28 “Sharecapital” for details.Corporate governance established by the Company includes General Meeting of Shareholders, Board of Directors, Board ofSupervisors, Strategy Committee, Audit Committee, and Nomination, Remuneration and Evaluation Committee. The Company’sfunctional departments include Administration, Party Affairs, Inspection and Audit and Legal, Finance, Human Resources, Strategyand Operating, Data and Information, and Property Management departments.The business nature and main operation activities of the Company and its subsidiaries (collectively as “the Group”) mainly includes:
producing and selling of analogue indication mechanical watches, quartz watches and its movements, components, various timingdevices, processing and wholesaling karat gold jewellery watches, intelligent watches; domestic commercial and material supply anddistributing business (excluding goods under exclusive operational rights, special control and exclusive sales); property management
and leasing; providing design service; research, design, production, sales and technical support for precise watches andcomponents; import and export business (according to Shen Mao Guan Deng Zheng Zi No.2007-072). The legal representative ofthe Company is Huang Yongfeng.The financial statements have been approved and authorised for issue by the 27
th meeting of the 9
thBoard of Directors on 8 March2021.
2. Scope of consolidation
There are 11 subsidiaries that are included in the Company’s scope of consolidation for year 2020, see Note VII “Interests in otherentities” for detail. No changes in scope of consolidation in 2020.II. Basis of preparationThe financial statement is prepared in accordance with the requirements of Accounting Standards for Business Enterprises andassociated application guidance, illustrations to the standards and related pronouncements (collectively known as “AccountingStandards for Business Enterprises” or “CAS”). These financial statements also comply with the disclosure requirements of“Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements forFinancial Reports” (revised in 2014) issued by China Securities Regulatory Commission (CSRC).The financial statements of the Company have been prepared on going concern basis.Accrual basis is adopted for the Group’s accounting activity. Except for some financial instruments, the financial statements aremeasured using historical cost. In case of impairment occurred on assets, provisions for impairment are provided for in accordancewith related regulations.III. Significant accounting policies and accounting estimatesBased on actual business characteristics, the Group determined fixed asset depreciation, intangible assets amortization and revenuerecognition policies. Refer to Note III 15, Note III 18 and Note III 25 for specific accounting policies.
1. Statement of compliance with Accounting Standards for Business Enterprises
The financial statements of the Company have been prepared in accordance with the requirements of Accounting Standards forBusiness Enterprises. These financial statements present truly and completely the financial position as at 31 December 2020, theresults of operations and the cash flows for the year then ended of the Company.
2. Accounting period
The accounting period of the Company is the calendar year, i.e. from 1 January to 31 December of each year.
3. Operating cycle
The operating cycle of the Company is 12 months.
4. Recording currency
The Company and its domestic subsidiaries adopt Renminbi (“RMB”) as the recording currency.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 maineconomic environment where the companies operated in. Montres Chouriet SA, a subsidiary of FIYTA Hong Kong (“Swiss
Company”), uses Swiss Franc as the recording currency according to the main economic environment where the Swiss Companyoperated in. The recording currencies mentioned above will be translated to Renminbi when preparing financial statements. Thecurrency used in preparing the Group’s financial statements is Renminbi.
5. Accounting treatment for business combinations involving entities under common control and not under common control
(1) Business combination involving entities under common control
For a business combination involving enterprises under common control, the assets acquired and liabilities assumed are measuredbased on their carrying amounts in the consolidated financial statements of the ultimate controlling party at the combination date,except for adjustments due to different accounting policies. The difference between the carrying amount of the net assets acquiredand the consideration paid for the combination (or the total par value of shares issued) is adjusted against share premium in thecapital reserve, with any excess adjusted against retained earnings.Business combinations involving entities under common control achieved in stages that involves multiple transactionsIn the separate financial statements, initial investment cost is the acquirer’s share of the carrying amount of the net assets of theacquiree in the consolidated financial statements of the ultimate controlling party at the combination date. The difference betweenthe initial investment cost and the 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 (share premium). If the capital reserveis not sufficient to absorb the difference, any excess is adjusted against retained earnings.In the consolidated financial statements, assets acquired and liabilities assumed by acquirer in a business combination aremeasured at their carrying amount as recorded in the consolidated financial statements of the ultimate controlling party at thecombination date, except for adjustments due to different accounting policies. The difference between the carrying amount of the netassets acquired and the sum of carrying amount of investment prior to combination date and carrying amount of new considerationspaid for the combination at the combination date is adjusted to capital reserve (share premium). If the capital reserve is not sufficientto absorb the difference, any excess is adjusted against retained earnings. The profit or loss, other comprehensive income andchanges in other owner’s equity recognized by the acquirer during the period from the later of initial investment date and the datethat the acquirer and acquiree both under common ultimate control to the combination date are offset the opening retained earningsor profit for loss for the current period in the comparative statements.
(2) Business combinations involving entities not under common control
For business combinations involving enterprises not under common control, the consideration costs include acquisition-date fairvalue of assets transferred, liabilities incurred or assumed and equity securities issued by the acquirer in exchange for control of theacquiree. At the acquisition date, the acquired assets, liabilities and contingent liabilities of the acquiree are measured at their fairvalue. The acquiree’s identifiable asset, liabilities and contingent liabilities, are recognised at their acquisition-date fair value.Where the combination cost exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference isrecognised as goodwill, and subsequently measured on the basis of its cost less accumulated impairment provisions. Where thecombination cost is less than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference isrecognised in profit or loss for the current period after reassessment.
Business combinations involving entities not under common control achieved in stages that involves multiple transactionsIn the separate financial statements, the initial investment cost is the sum of the carrying amount of equity investment of the acquireeheld prior to the acquisition date and additional investment cost at the acquisition date. When the previously-held equity investmentwhich was accounted for under the equity method before the acquisition date, any other comprehensive income previouslyrecognized is not adjusted on acquisition date. When the investment is disposed of in later date, the amount that was recognized inother comprehensive income is recognized on the same basis as would be required if the investee had disposed directly of therelated assets or liabilities. The owners’ equity recognized as the changes of the investee’s other owners’ equity except for net profitor loss, other comprehensive income and profit distribution, are transferred to profit or loss for the current period when disposing theinvestment. When the previously-held equity investment which was measured at fair value before the acquisition date, theaccumulated changes in fair value included in other comprehensive income is transferred to profit or loss for the current period uponcommencement of the cost method.In the consolidated financial statements, the combination cost is the sum of the consideration paid at the acquisition date and the fairvalue of equity investment of the acquiree held prior to the acquisition date. The cost of equity investment of the acquiree held priorto the acquisition date is re-measured at the fair value at the acquisition date, the difference between the fair value and carryingvalue is recognized as profit or loss for the current period. Other comprehensive income and changes of other owners’ equity fromthe equity interest held in the acquiree prior to the acquisition date are transferred to profit or loss for the current period, except forother comprehensive income resulted in the change of net liabilities or assets in the investee’s re-measurement of defined benefitplan.
(3) Transaction costs for business combination
The overhead for the business combination, including the expenses for audit, legal services, valuation advisory, and otheradministrative expenses, are recorded in profit or loss for the current period when incurred. The transaction costs of equity or debtsecurities issued as the considerations of business combination are included in the initial recognition amount of the equity or debtsecurities.
6. Consolidated financial statements
(1) Scope of consolidated financial statements
The scope of consolidated financial statements is based on control. Control exists when the Company has power over the investee;exposure, or rights to variable returns from its involvement with the investee and has the ability to affect its returns through its powerover the investee. A subsidiary is an entity that is controlled by the Company (including enterprise, a portion of an investee as adeemed separate component, and structured entity controlled by the enterprise).
(2) Basis of preparation of consolidated financial statements
The consolidated financial statements are prepared by the Company based on the financial statements of the Company and itssubsidiaries and other relevant information. When preparing consolidated financial statements, the accounting policies andaccounting periods of the subsidiaries should be consistent with those established by the Company, and all significant intra-groupbalances and transactions are eliminated.
Where a subsidiary or business has been acquired through a business combination involving enterprises under common control inthe reporting period, the subsidiary or business is deemed to be included in the consolidated financial statements from the date theyare controlled by the ultimate controlling 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 the ultimate controlling party.Where a subsidiary or business has been acquired through a business combination not involving enterprises under common controlin the reporting period, the operating results and cash flow of the subsidiary or business after the acquisition date are included in theconsolidated income statement and consolidated cash flow statement respectively.The portion of a subsidiary’s equity that is not attributable to the parent is treated as non-controlling interests and presentedseparately in the consolidated balance sheet within shareholders’ equity. The portion of net profit or loss of subsidiaries for the periodattributable to non-controlling interests is presented separately in the consolidated income statement below the “net profit” line item.When the amount of loss for the current period attributable to the non-controlling shareholders of a subsidiary exceeds the non-controlling shareholders’ share of the opening owners’ equity of the subsidiary, the excess is still allocated against the non-controllinginterests.
(3) Acquiring non-controlling interests of subsidiary
Where the Company acquires a non-controlling interest from a subsidiary’s non-controlling shareholders or disposes of a portion ofan interest in a subsidiary without a change in control, the transaction is treated as equity transaction, and the book value ofshareholder’s equity attributed to the Company and to the non-controlling interest is adjusted to reflect the change in the Company’sinterest in the subsidiaries. The difference between the proportion interests of the subsidiary’s net assets being acquired or disposedand the amount of the consideration paid or received is adjusted to the capital reserve in the consolidated balance sheet, with anyexcess adjusted to retained earnings.
(4) Losing control over the subsidiary
When the Company loses control over a subsidiary because of disposing part of equity investment or other reasons, the remainingpart of the equity investment is re-measured at fair value at the date when the control is lost. A gain or loss is recognised in thecurrent period and is calculated by the aggregate of consideration received in disposal and the fair value of remaining part of theequity investment deducting the share of net assets in proportion to previous shareholding percentage in the former subsidiary sinceacquisition date and the goodwill.Other comprehensive income related to the former subsidiary is transferred to profit or loss when the control is lost, except for thecomprehensive income arising from the movement of net liabilities or assets in the former subsidiary’s re-measurement of definedbenefit plan.
7. Joint arrangement classification and accounting treatment for joint operation
A joint arrangement is an arrangement of which two or more parties have joint control. The Company classifies joint arrangementsinto joint operations and joint ventures.
(1) Joint operations
A joint operation is a joint arrangement whereby the joint operators have rights to the assets, and obligations for the liabilities,
relating to the arrangement.The Company recognizes the following items relating to its interest in a joint operation, and account for them in accordance withrelevant accounting standards:
A. its solely-held assets, and its share of any assets held jointly;B. its solely-assumed liabilities, and its share of any liabilities assumed jointly;C. its revenue from the sale of its share of the output arising from the joint operation;D. its share of the revenue from the sale of the output by the joint operation; andE. its solely-incurred expenses, and its share of any expenses incurred jointly.
(2) Joint ventures
A joint venture is a joint arrangement whereby the joint investors have rights to the net assets of the arrangement.The Company adopts equity method under long-term equity investment in accounting for its investment in joint venture.
8. Cash and cash equivalents
Cash comprises cash in hand and deposits that can be readily withdrawn on demand. Cash equivalents include short-term, highlyliquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of change in value.
9. Foreign currency transactions and translation of foreign currency financial statements
(1) Foreign currency transactions
Foreign currency transactions are translated into the functional currency of the Company, using the exchange rates prevailing at thedates of the transactions.Monetary items denominated in foreign currencies are translated to Renminbi at the spot exchange rate at the balance sheet date.The resulting exchange differences between the spot exchange rate on balance sheet date and the spot exchange rate on initialrecognition or on the previous balance sheet date are recognised in profit or loss. Non-monetary items that are measured athistorical cost in foreign currencies are translated to Renminbi using the exchange rate at the transaction date. Non-monetary itemsthat are measured at fair value in foreign currencies are translated using the exchange rate at the date the fair value is determined.The resulting exchange differences are recognised in profit or loss.
(2) Translation of foreign currency financial statements
When translating the foreign currency financial statements of overseas subsidiaries, assets and liabilities of foreign operation aretranslated to Renminbi at the spot exchange rate at the balance sheet date. Equity items, excluding “retained earnings”, aretranslated to Renminbi at the spot exchange rates at the transaction dates.Income and expenses of foreign operation are translated to Renminbi at the spot exchange rates.Cash flow statement of foreign operation is translated to Renminbi at the spot exchange rates at the cash flow occurrence dates.Effect of foreign exchange rate changes on cash and cash equivalents is presented separately as “Effect of foreign exchange ratechanges on cash and cash equivalents” in the cash flow statement.The resulting translation differences are recognised in other comprehensive income in shareholders’ equity of balance sheet.
The translation differences accumulated in shareholders’ equity with respect to a foreign operation are transferred to profit or loss inthe period when the foreign operation is disposed.
10. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or an equity instrument ofother parties.
(1) Recognition and derecognition of financial instruments
A financial asset or financial liability is recognised when the Group becomes one party of financial instrument contracts.If one of the following conditions is met, the financial assets are terminated:
① The right of the contract to receive the cash flows of financial assets terminates
② The financial asset has been transferred, and is in accordance with the following conditions for derecognition.If the obligations of financial liability have been discharged in total or in part, derecognize all or part of it. If the Group (debtor) makesan agreement with the creditor to replace the current financial liability of assuming new financial liability which contract provisions aredifferent in substance, derecognize the current financial liability and meanwhile recognize as the new financial liability.If the financial assets are traded in regular ways, they are recognised and derecognised at the transaction date.
(2) Classification and measurement of financial assets
Financial assets are classified into the following three categories depends on the Group’s business mode of managing financialassets and cash flow characteristics of financial assets: financial assets measured at amortized cost, financial assets at fair valuethrough other comprehensive income and financial assets at fair value through profit or loss.Financial assets measured at amortised costThe Group shall classify financial assets that meet the following conditions and are not designated as financial assets at fair valuethrough profit or loss as financial assets measured at amortized cost:
? The Group’s business model for managing the financial assets is to collect contractual cash flows;? The terms of the financial asset contract stipulate that cash flows generated on a specific date are only payments of principal andinterest based on the amount of outstanding principal.After initial recognition, the effective interest rate method is used to measure the amortized cost of such financial assets. Profits orlosses arising from financial assets measured at amortized costs and not part of any hedging relationship are included in currentprofit or loss when the recognition is terminated, amortized or impaired according to the effective interest rate.Financial assets at fair value through other comprehensive incomeThe Group shall classify financial assets that meet the following conditions and are not designated as financial assets measured atfair value and whose changes are recorded in current profit or loss as financial assets measured at fair value through othercomprehensive income:
? The Group’s business model for managing the financial assets is both to collect contractual cash flows and to sell the financialassets;
? The terms of the financial asset contract stipulate that cash flows generated on a specific date are only payments of principal andinterest based on the amount of outstanding principal.After initial recognition, financial assets are subsequently measured at fair value. Interest, impairment losses or gains and exchangegains calculated by the effective interest rate method are recognised in profit or loss, while other gains or losses are recognised inother comprehensive income. When derecognized, the accumulated gains or losses previously recognised in other comprehensiveincome are transferred from other comprehensive income and recorded in current profit or loss.Financial assets at fair value through profit or lossIn addition to the above financial assets which are measured at amortized cost or at fair value through other comprehensive income,the Group classifies all other financial assets as financial assets at fair value through profit or loss. When initial recognition, in orderto eliminate or significantly reduce accounting mismatches, the Group irrevocably designates some financial assets that should havebeen measured at amortized cost or at fair value through other comprehensive income as financial assets at fair value through profitor loss.After initial recognition, the financial assets are subsequently measured at fair value, and the profits or losses (including interest anddividend income) generated from which are recognised in profit or loss, unless the financial assets are part of the hedgingrelationship.However, for non-tradable equity instrument investment, when initially recognized, the Group irrevocably designates them asfinancial assets at fair value through other comprehensive income. The designation is made on the basis of individual investment,and the relevant investment conforms to the definition of equity instruments from the issuer’s point of view.After initial recognition, financial assets are subsequently measured at fair value. Dividend income that meets the requirements isrecognised in profit and loss, and other gains or losses and changes in fair value are recognised in other comprehensive income.When derecognized, the accumulated gains or losses previously recognised in other comprehensive income are transferred fromother comprehensive income to retained earnings.The business model of managing financial assets refers to how the group manages financial assets to generate cash flow. Thebusiness model decides whether the source of cash flow of financial assets managed by the Group is to collect contract cash flow,sell financial assets or both of them. Based on objective facts and the specific business objectives of financial assets managementdecided by key managers, the Group determines the business model of financial assets management.The Group evaluates the characteristics of the contract cash flow of financial assets to determine whether the contract cash flowgenerated by the relevant financial assets on a specific date is only to pay principal and interest based on the amount of unpaidprincipal. Among them, principal refers to the fair value of financial assets at the time of initial confirmation; interest includes theconsideration of time value of money, credit risk related to the amount of unpaid principal in a specific period, and other basicborrowing risks, costs and profits. In addition, the Group evaluates the terms and conditions of the contracts that may lead tochanges in the time distribution or amount of cash flow in financial asset contracts to determine whether they meet the requirementsof the above contract cash flow characteristics.Only when the Group changes its business model of managing financial assets, all the financial assets affected shall be reclassified
on the first day of the first reporting period after the business model changes, otherwise, financial assets shall not be reclassifiedafter initial confirmation.Financial assets are measured at fair value at initial recognition. For financial assets at fair value through profit or loss, the relatedtransaction costs are directly recognized through profit or loss, and the related transaction costs of other types of financial assets areincluded in the initial recognition amounts.
(3) Classification and measurement of financial liabilities
On initial recognition, financial liabilities are classified as: financial liabilities at fair value through profit or loss (FVTPL), and financialliabilities measured at amortized cost. For financial liabilities not classified as at fair value through profit or loss, the transaction costsare recognised in the initially recognised amount.Financial liabilities at fair value through profit or lossFinancial liabilities at FVTPL include transaction financial liabilities and financial liabilities designated as at fair value through profit orloss in the initial recognition. Such financial liabilities are subsequently measured at fair value, all gains and losses arising fromchanges in fair value and dividend and interest expense relative to the financial liabilities are recognised in profit or loss for thecurrent period.Financial liabilities measured at amortized costOther financial liabilities are subsequently measured at amortized cost using the effective interest method; gains and losses arisingfrom derecognition or amortization is recognised in profit or loss for the current period.Financial guarantee contractFinancial guarantee contracts that are not designated as financial liabilities measured at fair value through profit or loss are initiallyrecognised at fair value. Subsequent to initial recognition, the subsequent measurement is determined according to the higher lossallowance of contingent liabilities under expected credit loss model and the initial recognition amount deducting by the accumulatedamortization.Distinction between financial liabilities and equity instrumentsThe financial liability is the liability that meets one of following criteria:
① Contractual obligation to deliver cash or other financial instruments to another entity.
② Under potential adverse condition, contractual obligation to exchange financial assets or financial liabilities with other parties.
③ A contract that will or may be settled in the entity’s own equity instruments and is a non-derivative for which the entity is or may beobliged to deliver a variable number of the entity’s own equity instruments.
④ A derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixednumber of the entity’s own equity instruments.An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.If the group cannot unconditionally avoid fulfilling a contractual obligation by delivering cash or other financial assets, the contractualobligation meets the definition of financial liability.If a financial instrument must or are able to be settled by the group’s own equity instrument, the group should consider whether the
group’s equity instrument as the settlement instrument is a substitute of cash or other financial assets or the residual interest in theassets of an entity after deducting all of its liabilities. If the former, the tool is the group’s financial liability; if the latter, the tool is theequity instrument of the group.
(4) Fair value of financial instruments
Refer to Note III. 11 for determining the fair value of financial assets and financial liabilities.
(5) Impairment of financial assets
On the basis of expected credit losses (“ECL”), the Group performs impairment assessment on the following items and recognisesthe loss provision.? financial assets measured at amortized cost;? accounts receivable and debt investments at fair value through other comprehensive income;? Contract assets that are defined in Accounting Standards for Business Enterprises 14 – Revenue;? Lease receivables;? Financial guarantee contract (except measured at fair value through profit or loss or formed by continuing involvement of
transferred financial assets or the transfer does not qualify for derecognition).Measurement of expected credit lossesThe expected credit losses refer to the weighted average of the credit losses of financial instruments that are weighted by the risk ofdefault. Credit loss refers to the difference between all contractual cash flows receivable from the contract and all cash flowsexpected to be received by the Group at the original effective interest rate, that is, the present value of all cash shortages.The Group considers reasonable and basis information about past events, current situation and forecast of future economic situationto calculate expected credit losses. Expected credit losses are a probability-weighted estimate of the difference between the cashflows in accordance with the contract and the cash flows expect to receive by the risk of default.The Group separately measures the expected credit losses of financial instruments at different stages. The credit risk on a financialinstrument has not increased significantly since initial recognition, which is in the first stage. The Group shall measure the lossallowance for that financial instrument at an amount equal to 12-month expected credit losses. If the credit risk of financialinstruments has increased significantly since the initial recognition, but no credit impairment has occurred, which is in the secondstage. The Group shall measure the loss allowance for a financial instrument at an amount equal to the lifetime expected creditlosses. If the financial instrument has occurred credit impairment since initial recognition, which is in the third stage, and the Groupshall measure the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses.For financial instruments with lower credit risk at the balance sheet date, the Group assumes that their credit risk has not increasedsignificantly since the initial recognition, and shall measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses.The lifetime expected credit losses, refer to the expected credit losses caused by all possible defaults during the whole expectedlifetime. The 12-month expected credit losses, refer to the expected credit losses caused by all possible defaults during the 12-monthafter balance sheet date (if the expected duration of financial instrument is less than 12 months, then for the expected duration),
which is part of the lifetime expected credit losses.When measure the expected credit loss, the longest contract period (including the option of renewal) that the group needs toconsider is the longest contract period the enterprise facing credit risk.For financial instruments in the first stages, second stages and with lower credit risk, the Group calculates interest income on thebasis of their book balances without deduction of impairment provisions and actual interest rates. For financial instruments in thethird stage, the Group calculates interest income according to their book balance minus the impairment provision and the actualinterest rate.For bills receivable, accounts receivable and contract assets, whether or not there are significant financing elements, the Group shallalways measure the loss allowance for them at an amount equal to the lifetime expected credit losses.According to the characteristics of credit risk, the Group divides and combines bills receivable and accounts receivable, contractassets and leased receivables. On the basis of the combination, the Group calculates the expected credit losses. The basis ofdetermining the combination is as follows:
A. Bills receivable? Bill receivable group 1: Bank acceptance bills? Bill receivable group 2: Trade acceptance billsB. Accounts receivable? Accounts receivable group 1: Account receivables from related parties that are within the scope of consolidation? Accounts receivable group 2: Amount receivables of other customersC. Contract asset? Contract assets group 1: product salesFor bills receivables and contract assets that are divided into groups, the Group refers to historical credit losses, with the currentsituation and the forecast of future economic situation, in calculation of the expected credit losses through the exposure on defaultand the lifetime expected credit losses rate.For accounts receivable that is divided into groups, the Group refers to the historical credit losses, combines the current situationwith the forecast of future economic situation, and compiles a comparison table between the ageing of accounts receivable and thelifetime expected credit losses rate to calculate the expected credit losses.Other receivablesAccording to the characteristics of credit risk, the Group divides other receivables into groups. On the basis of the combination, theGroup calculates the expected credit losses. The basis of determining the combination is as follows:
? Other receivables group 1: Receivables of down payment and guarantee? Other receivables group 2: Petty cash for employees? Other receivables group 3: Social security payment paid on-behalf of employees? Other receivables group 4: Receivables from related parties within scope of consolidation? Other receivables group 5: Others
For other receivables that divided into groups, the Group calculates the expected credit losses through the exposure on risk ofdefault and expected credit losses rate in the next 12 months or the lifetime of receivables.Debt investments and other debt investmentsFor debt investments and other debt investments, the Group calculates the expected credit losses through risk of default andexpected credit losses rate in the next 12 months or the lifetime, according to the nature of the investment, the types of counterpartyand risk exposure.Assessment of significant increase of credit riskBy comparing the default risk of financial instruments on balance sheet day with that on initial recognition day, the Group determinesthe relative change of default risk of financial instruments during the expected life of financial instruments, to evaluate whether thecredit risk of financial instruments has increased significantly since the initial recognition.To determine whether credit risk has increased significantly since the initial recognition, the Group considers reasonable and validinformation, including forward-looking information that can be obtained without unnecessary additional costs or efforts. Informationconsidered by the Group includes:
? The debtor can’t pay principal and interest on the expiration date of the contract;? Serious deterioration of external or internal credit ratings (if any) of financial instruments that have occurred or are expected tooccur;? Serious deterioration of the debtor’s operating results that have occurred or are expected to occur;? Changes in the existing or anticipated technological, market, economic or legal environment will have a significant negative impacton the debtor’s repayment capacity.According to the nature of financial instruments, the Group evaluates whether credit risk has increased significantly on the basis of asingle financial instrument or a combination of financial instruments. When assessing on the basis of the combination of financialinstruments, the Group can classify financial instruments based on common credit risk characteristics, such as overdue informationand credit risk rating.Financial assets that have occurred credit impairmentOn the balance sheet date, the Group assesses whether credit impairment has occurred in financial assets measured at amortizedcost and debt investments measured at fair value through other comprehensive income. When one or more events adversely affectthe expected future cash flow of a financial asset occur, the financial asset becomes a financial asset with credit impairment.Evidence of credit impairment of financial assets includes the following observable information:
? Significant financial difficulties occur to the issuer or debtor;? The debtor breaches any of the contractual stipulations, for example, fails to pay or delays the payment of interests or the principal,etc.;? For economic or contractual considerations related to the financial difficulties of the debtor, the Group grants concessions to thedebtor that will not be made under any other circumstances.? The debtor is probable to go bankrupt or undergo other financial restructuring.
? Financial difficulties of issuer or debtor lead to the disappearance of financial assets active market.Presentation of expected credit losses allowanceIn order to reflect the changes happened to the credit risk of financial instruments since the initial recognition, the Group recalculatesthe expected credit losses on each balance sheet day. The increase or reversal of the loss provision resulting therefrom isrecognised as an impairment loss or gain in the current profit or loss. For financial assets measured at amortized cost, loss provisionoffsets the carrying amount of the financial assets shown on the balance sheet; for debt investments measured at fair value throughother comprehensive income, the Group recognizes its loss provision through other comprehensive income and does not offset thefinancial assets’ carrying amount.Write offIf the Group no longer reasonably expects that the financial assets contract cash flow can be recovered fully or partially, the financialassets book balance will be reduced directly. Such reduction constitutes the derecognition of the financial assets. What usuallyoccurs when the Group determines that the debtor has no assets or sources of income to generate sufficient cash flows to pay theamount to be reduced. However, in accordance with the Group’s procedures for recovering due payment, the financial assetsreduced may still be affected by enforcement activities.If the reduced financial assets are recovered later, the returns as impairment losses shall be included in the profit or loss of therecovery period.
(6) Transfer of financial assets
Transfer of financial assets refers to the transference or deliverance of financial assets to the other party (the transferee) other thanthe issuer of financial assets.The Group derecognizes a financial asset only if it transfers substantially all the risks and rewards of ownership of the financial assetto the transferee; the Group should not derecognize a financial asset if it retains substantially all the risks and rewards of ownershipof the financial asset.The Group neither transfers nor retains substantially all the risks and rewards of ownership, shows as the following circumstances: ifthe Group has forgone control over the financial assets, derecognize the financial assets and verify the assets and liabilities; if theGroup retains its control of the financial asset, the financial asset is recognized to the extent of its continuing involvement in thetransferred financial asset and recognize an associated liability is recognized.
(7) Offsetting financial assets and financial liabilities
When the Group has the legal rights to offset the recognized financial assets and financial liabilities and is capable to carry it out, theGroup plans to settlement or realize the financial assets and pay off the financial liabilities in net amount, the financial assets andfinancial liabilities shall be presented in the balance sheet at net amount. Except this, financial assets and financial liabilities shall bepresented separately in balance sheet and are not allowed to offset.
11. Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date.
The Group measures related assets or liabilities at fair value assuming the assets or liabilities are exchanged in an orderlytransaction in the principal market; in the absence of a principal market, assuming the assets or liabilities are exchanged in anorderly transaction in the most advantageous market. Principal market (or the most advantageous market) is the market that theGroup can normally enter into a transaction on measurement date. The Group adopts the presumptions that would be used bymarket participants in achieving the maximized economic value of the assets or liabilities.For financial assets or financial liabilities with active markets, the Group uses the quoted prices in active markets as their fair value.Otherwise, the Group uses valuation technique to determine their fair value.Fair value measurement of a non-financial asset takes into account market participants’ ability to generate economic benefits usingthe asset in its best way or by selling it to another market participant that would best use the asset.The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available tomeasure fair value, maximizing the use of relevant observable inputs, and using unobservable inputs only if the observable inputsaren’t available or impractical.Fair value level for assets and liabilities measured or disclosed at fair value in the financial statements are determined according tothe significant lowest level input to the entire measurement: Level 1 inputs are quoted prices (unadjusted) in active markets foridentical assets or liabilities that the Group can access at the measurement date; Level 2 inputs are inputs other than quoted pricesincluded within Level 1 that are observable for the assets or liabilities, either directly or indirectly; Level 3 inputs are unobservableinputs for the assets or liabilities.At the balance sheet date, the Group re-values assets and liabilities being measured at fair value continuously in the financialstatements to determine whether to change the levels of fair value measurement.
12. Inventories
(1) Classification
Inventories include raw materials, work in progress, and finished goods.
(2) Measurement method of cost of inventories
Inventories are initially measured at cost. Raw materials and finished goods are calculated using weighted average method (exceptfor branded watches) and specific identification method (for branded watches).
(3) Basis for determining the net realisable value and method for provision for obsolete inventoriesNet realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and theestimated costs necessary to make the sale and relevant taxes. The net realisable value is measured based on the verifiedevidences and considerations for the purpose of holding inventories and the effect of post balance sheet events.Any excess of the cost over the net realisable value of inventories is recognised as a provision for obsolete inventories, and isrecognised in profit or loss. The Company usually recognises provision for decline in value of inventories by a single (type, group)inventory item. If the factors caused the value of inventory previously written-down have disappeared, the provision for decline invalue of inventories previously made is reversed.
(4) Inventory count system
The Company maintains a perpetual inventory system.
(5) Amortization methods of low-value consumables and packaging materials
Low-value consumables and packaging materials are charged to profit or loss when they are used.
13. Long-term equity investments
Long-term equity investments include equity investments in subsidiaries and equity investments in joint ventures and associates. Anassociate is an enterprise over which the Company has significant influence.
(1) Determination of initial investment cost
The initial cost of a long-term equity investment acquired through a business combination involving enterprises under commoncontrol is the Company’s share of the carrying amount of the subsidiary’s equity in the consolidated financial statements of theultimate controlling party at the combination date. For a long-term equity investment obtained through a business combination notinvolving enterprises under common control, the initial cost is the combination cost.A long-term equity investment acquired other than through a business combination: A long-term equity investment acquired otherthan through a business combination is initially recognised at the amount of cash paid if the Company acquires the investment bycash, or at the fair value of the equity securities issued if an investment is acquired by issuing equity securities.
(2) Subsequent measurement and recognition of profit or loss
Long-term equity investments in subsidiaries are accounted for using the cost method. An investment in a joint venture or anassociate is accounted for using the equity method for subsequent measurement.For a long-term equity investment which is accounted for using the cost method, Except for cash dividends or profit distributionsdeclared but not yet distributed that have been included in the price or consideration paid in obtaining the investments, the Companyrecognises its share of the cash dividends or profit distributions declared by the investee as investment income for the current period.For a long-term equity investment which is accounted for using the equity method, where the initial cost of a long-term equityinvestment exceeds the Company’s interest in the fair value of the investee’s identifiable net assets at the date of acquisition, theinvestment is initially recognised at cost. Where the initial investment cost is less than the Company’s interest in the fair value of theinvestee’s identifiable net assets at the date of acquisition, the investment is initially recognised at the investor’s share of the fairvalue of the investee’s identifiable net assets, and the difference is recognised in profit or loss.Under the equity method, the Company recognises its share of the investee’s profit or loss and other comprehensive income asinvestment income or losses and other comprehensive income respectively, and adjusts the carrying amount of the investmentaccordingly. Once the investee declares any cash dividends or profit distributions, the carrying amount of the investment is reducedby the amount attributable to the Company. Changes in the Company’s share of the investee’s owners’ equity, other than thosearising from the investee’s net profit or loss, other comprehensive income or profit distribution (referred to as “other changes inowners’ equity”), is recognised directly in the Company’s equity, and the carrying amount of the investment is adjusted accordingly. Incalculating its share of the investee’s net profits or losses, other comprehensive income and other changes in owners’ equity, theGroup recognises investment income and other comprehensive income after making appropriate adjustments to align the accountingpolicies or accounting periods with those of the Group based on the fair value of the investee’s identifiable net assets at the date of
acquisition.When the Company becomes capable of exercising joint control or significant influence (but not control) over an investee due toadditional investment or other reasons, the Company uses the fair value of the previously-held equity investment, together withadditional investment cost, as the initial investment cost under the equity method. The difference between the fair value and carryingamount of the previously-held equity investment, and the accumulated changes in fair value included in other comprehensive income,shall be transferred to profit or loss for the current period upon commencement of the equity method.When the Company can no longer exercise joint control of or significant influence over an investee due to partial disposal of theequity investment or other reasons, the remaining equity investment shall be accounting for using Accounting Standard for BusinessEnterprises No. 22 - Recognition and Measurement of Financial Instruments, and the difference between the fair value and thecarrying amount of the remaining equity investment shall be charged to profit or loss for the current period at the date of the loss ofjoint control or significant influence. Any other comprehensive income previously recognised under the equity method shall beaccounted for on the same basis as would have been required if the Company had directly disposed of the related assets or liabilitiesfor the current period upon discontinuation of the equity method. Other movement of owner’s equity related to original equityinvestment is transferred to profit or loss for the current period.When the Company can no longer exercise control over an investee due to partial disposal of the equity investment or other reasons,and the remaining equity after disposal can exercise joint control of or significant influence over an investee, the remaining equity isadjusted as using equity method from acquisition. When the remaining equity can no longer exercise joint control of or significantinfluence over an investee, the remaining equity investment shall be accounted for using Accounting Standard for BusinessEnterprises No. 22-Recognition and Measurement of Financial Instruments, and the difference between the fair value and thecarrying amount of the remaining equity investment shall be charged to profit or loss for the current period at the date of loss ofcontrol.When the Company can no longer exercise control over an investee due to new capital injection by other investors, and theCompany can exercise joint control of or significant influence over an investee, the Company recognizes its share of the investee’snew added net assets using new shareholding percentage. The difference between its new share of the investee’s new added netassets and its decreased shareholding percentage of the original investment is recognized in profit or loss. And the Company adjuststo the equity method using the new shareholding percentage as if it uses the equity method since it obtains the investment.Unrealised profit or loss resulting from transactions between the Company and its associates or joint ventures are eliminated to theextent of the Company’s interest in the associates or joint ventures. Unrealised losses resulting from transactions between theCompany and its associates or joint ventures are eliminated in the same way as unrealised gains but only to the extent that there isno impairment.
(3) Criteria for determining the existence of joint control or significant influence over an investeeJoint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevantactivities require the unanimous consent of the parties sharing control. When assessing whether the Company can exercise jointcontrol over an investee, the Company first considers whether no single participant party is in a position to control the investee’s
related activities unilaterally, and then considers whether strategic decisions relating to the investee’s related activities require theunanimous consent of all participant parties that sharing of control. All the parties, or a group of the parties, control the arrangementcollectively when they must act together to direct the relevant activities. When more than one combination of the parties can controlan arrangement collectively, joint control does not exist. A party that holds only protective rights does not have joint control of thearrangement.Significant influence is the power to participate in the financial and operating policy decisions of an investee but does not havecontrol or joint control over those policies. When determining whether the Company can exercise significant influence over aninvestee, the effect of potential voting rights (for example, warrants, share options and convertible bonds) held by the Company orother parties that are currently exercisable or convertible shall be considered.When the Company, directly or indirectly through subsidiaries, owns 20% of the investee (including 20%) or more but less than 50%of the voting shares, it has significant influence over the investee unless there is clear evidence to show that in this case theCompany cannot participate in the production and business decisions of the investee, and cannot form a significant influence. Whenthe Company owns less than 20% of the voting shares, generally it does not have significant influence over the investee, unlessthere is clear evidence to show that in this case the Company can participate in the production and business decisions of theinvestee so as to form a significant influence.
(4) Method of impairment testing and impairment provision
For investments in subsidiaries, associates and joint ventures, refer to Note III. 20 for the method of asset impairment.
14. Investment property
Investment properties are properties held either to earn rental income or for capital appreciation or for both. The Company’sinvestment properties include leased land use rights, land use right held and provided for to transfer after appreciation and leasedbuilding and construction.Investment properties are initially measured at acquisition cost, and depreciated or amortized using the same policy as that for fixedassets or intangible assets.For the impairment of the investment properties accounted for using the cost model, refer to Note III.20.Gains or losses arising from the sale, transfer, retirement or disposal of an item of investment property are determined as thedifference among the net disposal proceeds, the carrying amount of the item, related taxes and surcharges, and are recognised inprofit or loss for current period.Depreciation method of investment property is the same as fixed assets. Refer to Note III. 15 for details.
15. Fixed assets
(1) Recognition of fixed assets
Fixed assets represent the tangible assets held by the Company for use in production of goods, use in supply of services, rental orfor administrative purposes with useful lives over one accounting year.Fixed assets are only recognised when its related economic benefits are likely to flow to the Company and its cost can be reliablymeasured.
Fixed asset is initially measured at cost.
(2) Depreciation of fixed assets
The cost of a fixed asset is depreciated using the straight-line method since the state of intended use, unless the fixed asset isclassified as held for sale. Not considering impairment provision, the estimated useful lives, residual value rates and depreciationrates of each class of fixed assets are as follows:
| Class | Estimated useful life (years) | Residual value rate % | Depreciation rate % |
| Property and plant | 20-35 | 5.00 | 4.80-2.70 |
| Machinery and equipment | 10 | 5.00-10.00 | 9.50-9.00 |
| Electronic equipment | 5 | 5.00 | 19.00 |
| Motor vehicles | 5 | 5.00 | 19.00 |
| Others | 5 | 5.00 | 19.00 |
② borrowing costs have been incurred;
③ the activities that are necessary to prepare the asset for its intended use or sale have commenced.
(2) Capitalisation period
The capitalisation of borrowing costs ceases when the asset under acquisition or construction becomes ready for its intended use,the borrowing costs incurred thereafter are recognised in profit or loss for the current period.Capitalisation of borrowing costs is suspended during periods in which the acquisition or construction of a fixed asset is interruptedabnormally and the interruption lasts for more than 3 months, until the acquisition or construction is resumed.
(3) Capitalisation rate of borrowing costs and calculation basis of capitalised amountFor interest expense actually incurred on specific borrowings, the eligible capitalised amount is the net amount of the borrowingcosts after deducting any investment income earned before some or all of the funds are used for expenditures on the qualifying asset.To the extent that the Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Companyshall determine the amount of borrowing costs eligible for capitalisation by applying a capitalisation rate to the expenditures on thatasset, the capitalisation rate shall be the weighted average of the borrowing costs applicable to the borrowings of the Company thatare outstanding during the period, other than borrowings specifically for the purpose of obtaining a qualifying asset.In the capitalisation period, exchange differences of specific borrowings in foreign currency shall be capitalised; exchangedifferences of general borrowings in foreign currency is recognised in profit or loss for the current period.
18. Intangible assets
Intangible assets include land use right, software systems and right to use the trademark etc.Intangible assets are stated at actual cost upon acquisition and the useful economic lives are determined at the point of acquisition.When the useful life is finite, amortisation method shall reflect the pattern in which the asset’s economic benefits are expected to berealised. If the pattern cannot be determined reliably, the straight-line method shall be used. An intangible asset with an indefiniteuseful life shall not be amortised.Amortisation method for intangible assets with finite useful lives is as follows:
| Categories | Useful life (years) | Amortisation methods | Remarks |
| Land use right | 50 | Straight-line method | |
| Software systems | 5 | Straight-line method | |
| Right to use the trademark | 5-10 | Straight-line method |
Expenditure during the research phase is expensed when incurred.Expenditure during the development phase is capitalised if the product or process is technically and commercially feasible; theGroup intends to complete the development; the intangible asset can generate economic benefits, including there is evidence thatthe products produced using the intangible asset has a market or the intangible asset itself has a market; if the intangible asset is forinternal use, there is evidence that there is usage for the intangible asset; there is sufficient support in terms of technology, financialresources and other resources in order to complete the development and use or sell the intangible asset; and development costs canbe measured reliably. Other development expenditure is recognised as an expense in the period in which it is incurred.Research and development projects of the Group will enter into the development phase when they meet the above conditions,technical and economic feasibility research is finished and necessary approval of the project is obtained.Capitalised expenditure on the development phase is presented as “development costs” in the balance sheet, and is transferred tointangible assets when the project is completed to its intended use.
20. Impairment of assets
The impairment of long-term equity investments in subsidiaries, associates and joint ventures, investment properties measured usinga cost model, fixed assets, construction in progress, and intangible assets (excluding inventories, deferred tax assets and financialassets) is determined as follows:
At each balance sheet date, the Group determines whether there is any indication of impairment. If any indication exists, therecoverable amount of the asset is estimated. In addition, the Group estimates the recoverable amounts of goodwill, intangibleassets with indefinite useful lives and intangible assets not ready for use at each year-end, irrespective of whether there is anyindication of impairment.The recoverable amount of an asset is the higher of its fair value less costs to sell and its present value of expected future cash flows.The recoverable amount is estimated for each individual asset. If it is not possible to estimate the recoverable amount of eachindividual asset, the Company determines the recoverable amount for the asset group to which the asset belongs. An asset group isthe smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from otherassets or asset groups.An impairment loss is recognised in profit or loss when the recoverable amount of an asset is less than its carrying amount. Aprovision for impairment of the asset is recognised accordingly.For goodwill impairment test, the carrying amount of goodwill arising from a business combination is allocated reasonably to therelevant asset group since the acquisition date. If the carrying amount of goodwill is unable to be allocated to asset group, thecarrying amount of goodwill will be allocated to asset portfolio. Asset group or portfolio of asset group is asset group or portfolio ofasset group which can be benefit from synergies of a business combination and is not greater than the reportable segment of theCompany.In impairment testing, if impairment indication exists in asset group or portfolio of asset group containing allocated goodwill,impairment test is first conducted for asset group or portfolio of asset group that does not contain goodwill, and correspondingrecoverable amount is estimated and any impairment loss is recognized. Then impairment test is conducted for asset group or
portfolio of asset group containing goodwill by comparing its carrying amount and its recoverable amount. If the recoverable amountis less than the carrying amount, impairment loss of goodwill is recognized.Once an impairment loss is recognised, it is not reversed in a subsequent period.
21. Long-term deferred expenses
Long-term deferred expenses are recorded at the actual cost, and amortized using a straight-line method within the benefit period.For long-term deferred expense that cannot bring benefit in future period, the Company recognized its amortised cost in profit or lossfor the current period.
22. Employee benefits
(1) Scope of employee benefits
Employee benefits refer to all forms of consideration or compensation given by the Company in exchange for service rendered byemployees or for the termination of employment relationship. Employee benefits include short-term employee benefits, post-employment benefits, termination benefits and other long-term employee benefits. Benefits provided to the Company’s spouse,children, dependents, family members of deceased employees or other beneficiaries are also part of the employee benefits.According to liquidity, employee benefits are presented as “employee benefits payable” and “long-term employee benefits payable”on the balance sheet.
(2) Short-term employee benefits
In the current period, the Company has accrued for the actual wages, bonuses, medical insurance for employees based on standardrate, work injury insurance and maternity insurance and other social insurance and housing fund incurred and these are recognisedas liabilities and corresponding costs in the profit or loss. If these liabilities are not expected to be fully paid 12 months after the endof the reporting period in which employee renders the service to the Company, and if the financial impact is significant, theseliabilities shall be discounted using the net present value method.
(3) Post-employment benefits
Post-employment benefit plan includes defined contribution plans and defined benefit plans. Defined contribution plans are post-employment benefit plans under which an enterprise pays fixed contributions into a separate fund and will have no future obligationsto pay the contributions. Defined benefit plans are post-employment benefit plans other than defined contribution plans.Defined contribution plansDefined contribution plans include primary endowment insurance, unemployment insurance and enterprise annuity plan.Besides basic pension insurance, the Company establishes corporate annuity plans in accordance with the related policies ofcorporate pension regulations. Employees can join the pension plan voluntarily. The Company has no other significant commitmentof employees’ social security.The Company shall recognise, in the accounting period in which an employee provides service, the contribution payable to a definedcontribution plan as a liability, with a corresponding charge to the profit or loss for the current period or the cost of a relevant asset.Defined benefit planAt each balance sheet date, actuarial calculation and valuation shall be carried out by independent actuary for defined benefit plan to
determine the cost of welfare using estimated cumulative welfare unit method. Employee benefit cost resulted from the Group’sdefined benefit plan including the followings:
① Service cost, which includes service cost for current period, prior period and gain or losses on settlement. Service cost forcurrent period refers to the increase in amount of present value of liability of defined benefit plan resulted from service providedby employees in current period. Service cost for prior period refers to changes in amount of present value of liability of definedbenefit plan related to prior period due to alteration of the plan.
② Net interest of defined benefit plan net liability or net asset include interest gain of plan asset, interest expenses of definedbenefit plan liability and interest affected by the upper limit of asset.
③ Changes due to re-measurement of defined benefit plan net liability or net asset
Unless other accounting standards allow or permit the employee welfare cost to be charged into asset cost, the Company shallcharge the item ① and ② above into current period profit or loss. Item ③ shall be included in other comprehensive income and willcannot be recycled into profit or loss in later accounting periods and when the plan is terminated, the portion that previously recordedin other comprehensive shall be transferred into retained earnings in all.
(4) Termination benefits
The Company provides for termination benefits to the employees and shall recognise an employee benefits liability for terminationbenefits, with a corresponding charge to the profit or loss for the current period, at the earlier of the following dates: When theCompany cannot unilaterally withdraw the offer of the termination benefits because of an employment termination plan or aredundancy proposal; or when the Company recognises the costs or expenses relating to a restructuring that involves the paymentof the termination benefits.When adopting employee internal retirement plan, the economic compensation before the official retirement date shall be included inas termination benefits. The salary for internal retired employee and social security payments from the date when the employeeceases service to the date of officially retired shall be charged to current profit or loss one-off. Economic compensation after officialretirement shall be dealt as post-employment benefits.
(5) Other long-term employee benefits
Other long-term employee benefits provided by the Company to the employees satisfied the conditions for classifying as a definedcontribution plan; those benefits shall be accounted for in accordance with the above requirements relating to defined contributionplan. When the benefits satisfied a defined benefit plan, it shall be accounted for in accordance with the above requirements relatingto defined benefit plan, but the movement of net liabilities or assets in re-measurement of defined benefit plan shall be recorded inprofit or loss for the current period or cost of relevant assets.
23. Provisions
A provision is recognised for an obligation related to a contingency if all the following conditions are satisfied:
(1) the Company has a present obligation;
(2) it is probable that an outflow of economic benefits will be required to settle the obligation; and
(3) the amount of the obligation can be estimated reliably.
A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation. Factorspertaining to a contingency such as the risks, uncertainties and time value of money are taken into account as a whole in reachingthe best estimate. Where the effect of the time value of money is material, provisions are determined by discounting the expectedfuture cash flows. The Company reviews the carrying amount of a provision at the balance sheet date and adjusts the carryingamount to the current best estimate.If all or part of the expenditure necessary for settling the provision is expected to be compensated by a third party, the amount ofcompensation is separately recognized as an asset when it is basically certain to be received. The recognized compensation amountshall not exceed the carrying amount of the provision.
24. Share-based payment
(1) Types of share-based payment
Share-based payments are divided into equity-settled share-based payments and cash-settled share-based payments.
(2) Method of determining share-based payment
The Company determining the fair value of equity instruments such as share options granted which has active markets using publicquotation. If no active markets exist, option pricing model shall be used to determine its fair value. The following factors shall beconsidered when selecting option pricing models: A. Exercising price of option, B. Valid period of option, C. Current price of the targetshare, D. Share’s estimated volatility rate, E. estimated share dividend and F. risk-free interest rate during the valid period.
(3) Evidence of determining the best estimate of exercisable equity instruments
On each balance sheet date during the vesting period, the Company makes the best estimate based on the latest information on thechanges in the number of employees with vesting rights, and corrects the number of equity instruments that are expected to beexercised. On the exercise date, the number of final estimated exercisable equity instrument shall be the same as actual exercisableequity instrument.
(4) Accounting treatment for implementation, modifying and terminating of the share-based payment planEquity settled share-based payment is measured using fair value of equity instruments granted to employees. If the option can beexercised immediately after the grant, the relevant costs or expenses are included in the grant date, and the capital reserve areincreased accordingly. If the option can only be exercised after completing the service within the vesting period or meeting therequired performance conditions, the amount of the fair value shall be charged to cost or expenses and capital reserve based onstraight-line method during the vesting period using the best estimate of the amount of exercisable equity instrument. No changes torelated cost or expenses and equity after the exercisable date.The cash-settled share-based payment is measured at the fair value of the liabilities determined by the Company based on shares orother equity instruments. If the right can be exercise immediately after the grant, the relevant costs or expenses are included in thegrant date, and the liabilities are increased accordingly. If the option can only be exercised after completing the service within thevesting period or meeting the required performance conditions, the service obtained by the Company in current period shall becharged to profit or loss based on fair value of the liabilities undertake by the Company, calculated on the basis of the best estimationof the exercisable option on each balance sheet date of the vesting period. The liabilities shall be increased accordingly. The fair
value of the liability is re-measured at each balance sheet date and settlement date before the settlement of related liabilities, thechanges are included in the current profit and loss.When the Group changes the share-based payment plan, if the modification increases the fair value of the granted equityinstruments, the increase in the fair value of the equity instruments is recognized accordingly. The increase in the fair value of equityinstruments refers to the difference between the fair value, measured on the modification date, of the equity instruments before andafter the modification. If the modification reduces the total fair value of the share-based payment or adopts other methods that arenot in favour of employees, the accounting treatment of it will not be changed, as if the modification never happened unless theGroup cancelled part or all of the granted equity instruments.During the vesting period, if the granted equity instrument is cancelled, the Company shall treat the cancelled equity instrument asaccelerated exercise, and shall immediately charge the amount that should be recognized in the remaining vesting period into thecurrent profit and loss and adjusting the capital reserves at the same time. If the employee or other party can choose to meet thenon-vesting conditions but fails during the vesting period, the Group will treat it as a cancellation of the equity instrument.
25. Revenue
(1) General principle
The Group recognises revenue when the contract performance obligations have been fulfilled i.e. the customer has gained controlover the relevant goods or services.If two or more performance obligations are included in the contract, the Group shall, on the commencement date of the contract,apportion the transaction price to the individual performance obligations according to the relative proportion of the individual sellingprices of the commodities or services promised by the individual performance obligations, and measure the income according to thetransaction price apportioned to the individual performance obligations.If one of the following conditions is met, the Group shall be obliged to fulfil its performance obligations over a certain period;otherwise, it shall be obliged to fulfil its performance obligations at a certain point:
① The customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs;or
② The Group’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
③ The commodities produced by the Group in the course of its performance are irreplaceable and the Group has the right to collectpayments for the part of performance that has been completed so far during the entire contract period.For performance obligation that is to be fulfilled over a period of time, the Group recognises revenue based on the progress of theperformance obligations that have been fulfilled throughout the contract period. When the progress of the performance obligationcannot be reasonably measured, if the cost incurred is expected to be recovered, the revenue shall be recognised according to theamount of cost incurred, until the progress can be reasonably determined.For performance obligation that is to be fulfilled at certain point, the Group recognizes revenue when the customer gains control of
the relevant goods or services. When making judgement on whether customers have gained control of the relevant goods andservices, the Group considers the following signs:
① The Group has obtained the current collection rights, the customer has obtained the current payment obligation.
② The Group have transferred the legal ownership of the commodity to the customer, the customer has obtained the legalownership of the commodity.
③ The Group has transferred the physical commodity to the customer, the customer has possessed the commodity in kind.
④ The Group has transferred the ownership and accompanying risk and payment of goods to the customer, the customer hasobtained the ownership and accompanying risk and payment of goods.
⑤ The customer has accepted the goods or services.
⑥ Other signs that customers have acquired the control of goods.
The Group has transferred goods or services to its customers and has the right to receive consideration (which depends on factorsother than the passage of time) as its contract assets, which are deducted on the basis of expected credit losses(refer to Note III. 10
(5)). The unconditional (time-dependent) right to collect consideration from customers is shown as accounts receivable. Theobligation to transfer goods or services to the customer after consideration received or receivable is shown as contract liabilities.Contract assets and contract liabilities under the same contract shall be shown in net amount, if the net amount is debit balance,according to their liquidity, which shall be presented in the “contract assets” or “other non-current assets” project; if the net amount iscredit balance, according to its liquidity, which shall be presented in the “contract liabilities” or “other non-current liabilities” project.
(2) The specific methods
① Normal sale of goods
Revenue shall be recognised at the point that the goods are delivered to the customer and the good receive notes with customer’ssignature are obtained, and the customer gained control over the ownership of goods according to sales contract signed by bothparties.
② Direct sales
a. off-line retail sale: under direct sale mode, revenue shall be recognized at the point when the goods are delivered and payment bycustomer is collected.b. online retail sale: under e-commerce retail sale mode, revenue shall be recognized at the point that the goods are dispatched andthe customer confirmed received the goods.
③ Association with department store
Under this mode, the goods are delivered to customers after sales staff issues sales memo to retail customers who will carried outinspection and accept the goods. The department store then collects the payment from the customer. At this point, the Grouprecognizes revenue.
④ Consignment sale
Under consignment sales mode, the Group recognizes revenue when the Group receives the detail of the sales list from distributorsand confirms that the control over goods ownership were transferred to the purchaser.
⑤ Sale of consigned goods from others
Under Sale of consigned goods from others, the Group recognizes revenue in net amount when it delivered consigned sale goods tocustomer and confirms that control over the ownership of goods were transferred to the purchaser.
26. Contract cost
Contract costs include incremental costs incurred to obtain a contract and costs to fulfil a contract.Incremental costs incurred to obtain a contract refer to the costs (such as sales commissions) that the Group will not incur withoutobtaining contracts. If the cost is expected to be recovered, the Group shall recognizes it as an asset as contract acquisition cost.Expenditures incurred by the Group for the purpose of obtaining contracts, other than incremental costs expected to be recovered,are recorded in current profit or loss when incurred.The costs to fulfil a contract, which does not fall within the scope of other Accounting Standards for Business Enterprises such asinventory and meets the following conditions at the same time, the Group recognizes it as an asset for the costs to fulfil a contract:
① This cost is directly related to a current or expected contract, including direct labor cost, direct materials cost, manufacturing costs(or similar costs), costs clearly borne by the customer, and other costs incurred solely for the contract;
② This cost increases the group’s future resources for fulfilling its performance obligations;
③ The cost is expected to be recovered.
Assets recognized from contract acquisition cost and contract performance cost (hereinafter referred to as “assets related to contractcost”) are amortized on the same basis as revenue recognition of goods or services related to the assets and are recorded in currentprofit or loss. If the amortization period does not exceed one year, the profit or loss of the current period shall be included when itoccurs.When the carrying amount of the assets related to contract cost is higher than the difference between the following two items, theGroup shall make provision for impairment in excess of the assets and shall consider the impairment loss of the assets as follows:
① The residual consideration that the Group expect to obtain for transferring goods or services related to the asset;
② The cost estimated to be incurred for transferring the relevant goods or services.
The contract performance cost recognized as assets shall be presented in the “inventory” project, if the amortization period is notexceeding one year or a normal business cycle at initial recognition, and shall be presented in the “other non-current assets” project,if the amortization period exceeding one year or a normal business cycle at initial recognition.The contract acquisition cost recognized as assets shall be presented in the “other current assets” project, if the amortization periodis not exceeding one year or a normal business cycle at initial recognition, and shall be presented in the “other non-current assets”project, if the amortization period exceeding one year or a normal business cycle at initial recognition.
27. Government grants
A government grant is recognised when there is reasonable assurance that the grant will be received and that the Group will complywith the conditions attaching to the grant.If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If agovernment grant is in the form of a transfer of a non-monetary asset, it is measured at fair value. If fair value cannot be reliably
determined, it is measured at a nominal amount of RMB 1.Government grants related to assets are grants whose primary condition is that the Group qualifying for them should purchase,construct or otherwise acquire long-term assets. Government grants related to income are grants other than those related to assets.For government grants with unspecified purpose, the amount of grants used to form a long-term asset is regarded as governmentgrants related to an asset, the remaining amount of grants is regarded as government grants related to income. If it is not possible todistinguish, the amount of grants is treated as government grants related to income.A government grant related to an asset is offset against the carrying amount of the related asset, or recognised as deferred incomeand amortised to profit or loss over the useful life of the related asset on a reasonable and systematic manner. A grant thatcompensates the Group for expenses or losses already incurred is recognised in profit or loss or offset against related expensesdirectly. A grant that compensates the Group for expenses or losses to be incurred in the future is recognised as deferred income,and included in profit or loss or offset against related expenses in the periods in which the expenses or losses are recognised.A grant related to ordinary activities is recognised as other income or offset against related expenses based on the economicsubstance. A grant not related to ordinary activities is recognised as non-operating income.When a recognised government grant is to be returned, carrying amount of the related asset is adjusted if the grant was initiallyrecognized as offset against the carrying amount of the related asset. If there is balance of relevant deferred income, it is offsetagainst the carrying amount of relevant deferred income. Any excess of the reversal to the carrying amount of deferred income isrecognised in profit or loss for the current period. For other circumstances, reversal is directly recognized in profit or loss for thecurrent period.Preferential subsidized interest received by the Group is accounted for in following ways: if the finance authority distributessubsidized interest to the bank that providing the loan, the Group accounted for the loan based on actual amount of loan receivedand consequently calculating borrowing expenses based on the principal amount and preferential subsidized interest. If the financeauthority distributes subsidized interest to the Group, the borrowing expenses will be off-set by the amount of subsidized interestreceived.
28. Deferred tax assets and deferred tax liabilities
Income tax comprises of current tax and deferred tax. Current tax and deferred tax are recognised in profit or loss except to theextent that they relate to transactions or items recognised directly in equity and goodwill arising from a business combination.Deferred tax assets and deferred tax liabilities arise from deductible and taxable temporary differences respectively, being thedifferences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases.All the taxable temporary differences are recognized as deferred tax liabilities except for those incurred in the following transactions:
(1) initial recognition of goodwill, or assets or liabilities in a transaction that is not a business combination and that affects neitheraccounting profit nor taxable profit (or deductible loss);
(2) taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, and the Company isable to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will notreverse in the foreseeable future.
The Company recognises a deferred tax asset for deductible temporary differences, deductible losses and tax credits carried forwardto subsequent periods, to the extent that it is probable that future taxable profits will be available against which deductible temporarydifferences, deductible losses and tax credits can be utilised, except for those incurred in the following transactions:
(1) a transaction that is not a business combination and that affects neither accounting profit nor taxable profit (or deductible loss);
(2) deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, the correspondingdeferred tax asset is recognized when both of the following conditions are satisfied: it is probable that the temporary differencewill reverse in the foreseeable future; and it is probable that taxable profits will be available in the future against which thetemporary difference can be utilized.At the balance sheet date, deferred tax is measured based on the tax consequences that would follow from the expected manner ofrecovery or settlement of the carrying amount of the assets and liabilities, using tax rates enacted at the reporting date that areexpected to be applied in the period when the asset is recovered or the liability is settled.The carrying amount of a deferred tax asset is reviewed at each balance sheet date, and is reduced to the extent that it is no longerprobable that the related tax benefits will be utilised. Such reduction is reversed to the extent that it becomes probable that sufficienttaxable profits will be available.
29. Operating leases and financing leases
When the Group is a lessor, a finance lease is a lease that transfers in substance all the risks and rewards incidental to ownership ofan asset. An operating lease is a lease other than a finance lease.
(1) As a lessor
Income derived from operating leases is recognized in profit or loss using the straight-line method over the lease term. Initial directcosts are charged to profit or loss immediately.
(2) As a lessee
In finance leases, at the commencement of the lease, the Group recognizes the lower of the fair value of leased asset and thepresent value of minimum lease payments as the book value of the leased asset. Present value of minimum lease payments isrecognized as long-term payables. The difference between the fair value of lease asset and the present value of minimum leasepayments is accounted for as unrecognized finance charge. Initial direct costs are recognized in the carrying amount of leasedassets. Unrecognized finance charge is amortized over the lease period by effective interest method and finance expenses isrecognized in profit or loss for the current period. The Group adopts the same depreciation policy of with self-owned fixed assets incalculating the depreciation charge.Rental payments under operating leases are recognized as part of the cost of another related asset or as expenses on a straight-linebasis over the lease term. Initial direct costs are charged to profit or loss immediately.
(3) Rent concessions arising as a direct consequence of Covid-19 pandemic
For rent concession modification to current lease agreement that agreed by the Group with the lessee or lessor as a directconsequence of Covid-19 pandemic, the Group adopts simplified method to leases of property and plant if the following conditionsare met:
① the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, theconsideration for the lease immediately preceding the change. Both discounted and not discounted lease payment are acceptable;
② any reduction in lease payments affects only payments originally due on or before 30 June 2021
③ there is no substantive change to other terms and conditions of the lease
The Group does not evaluate whether there is lease modification.As a lessee, the Group treat operating lease the same way before the rent concession and accounting the rental of originalagreement in relevant asset or expense. If rent concession occurs, the Group treat the rental reduced as contingent rental and offsetcost or expenses during the concession period. If the payment of rental was deferred in timing, the Group recognizes rental payablein the period that should make the payment and offsetting the payable at the time when making actual payment. As a lessee, theGroup treat finance lease the same way before the rent concession and accounting the unrecognized financing expense as currentperiod finance expense using the same discount rate before the rent concession. If rent concession occurs, the Group treat therental reduced as contingent rental and offset cost or expenses and adjusting long-term payables accordingly at the time that originallease payment obligation is released as a result of concluding concession agreement etc. Unrecognised finance expense shall alsobe adjusted if the discount rate used is the rate before the rent concession. If the payment of rental was deferred in timing, the Groupoffset the long-term payables that previous recognised at the time when making actual payment.As a lessor, the Group treat operating lease the same way before the rent concession and accounting the rental of originalagreement as rental income. If rent concession occurs, the Group treat the rental reduced as contingent rental and offset rentalincome during the concession period. If the payment of rental was deferred in timing, the Group recognizes rental receivable in theperiod that should make the payment and offsetting the receivable at the time when actually collected. As a lessor, the Group treatfinance lease the same way before the rent concession and accounting the unrecognized financing income as current period financeincome using the same lease inherent interest rate before the rent concession. If rent concession occurs, the Group treat the rentalreduced as contingent rental and offset rental income that recognized previously at the time that original lease payment obligation isreleased as a result of concluding concession agreement etc. If rental income is not sufficient to offset, investment gain shall beadjusted. At the same time, adjusting long-term receivables accordingly. Unrecognised finance income shall also be adjusted if thediscount rate used is the rate before the rent concession. If the payment of rental was deferred in timing, the Group offset the long-term receivables that previous recognised at the time when the rental is actually collected.
30. Re-purchase of shares
Before written-off or transfer, the shares that the Company re-purchased are dealt as treasury shares. All expenses incurred for there-purchase are charged in the cost of treasury shares. Consideration and transaction expenses paid during the share re-purchaseshall decrease shareholder’s equity. No gain or losses shall be recognized during re-purchase, transfer or written-off of theCompany’s shares.If the treasury shares is transferred, the difference between amount actually received and the share’s carrying amount shall becharged to capital reserve, if the capital reserve is not sufficient to offset, surplus reserve and retained earing shall be offset. If thetreasury share is to written-off, the share capital shall be decreased based on the face value of shares and the difference between
the carrying amount and its face value shall offset the capital reserve. If the capital reserve is not sufficient to offset, deductingsurplus reserve and retained earnings.
31. Restricted share
Under the share option incentive plan, the Company grants restricted shares to the incentive individuals who will subscribe theshares first. If the unlocking condition is not reached subsequently, the Company will re-purchase the shares according to the pricepreviously agreed. If the shares issued under the incentive plan has gone through capital increase filing procedures, the Companyrecognizes share capital and capital reserve (share premium) based on consideration received from the employees and, at the sametime, recognizes treasury shares and other payables for the re-purchase obligation.
32. Significant accounting estimates and judgments
The Group gives continuous assessment of the reasonable expectations of future events and the critical accounting estimates andkey assumptions based on its historical experience and other factors. The critical accounting estimates and key assumptions that arelikely to lead to significant adjusted risks of the carrying amount of assets and liabilities for the next financial year are presented asfollows:
Classification of financial assetsThe Group’s major judgments in determining the classification of financial assets include the analysis of business models and thecharacteristics of contract cash flows.At the level of financial asset groups, the Group determines the business model for managing financial assets, taking into accountfactors such as the way to evaluate and report financial assets performance to key managers, the risks affecting financial assetsperformance and their management methods, and the way in which relevant business managers are paid.In assessing whether the contract cash flow of financial assets is consistent with the basic lending arrangements, the Group has thefollowing judgments: whether the principal’s time distribution or amount may change during the lifetime for early repayment and otherreasons; whether the interest only includes the time value of money, credit risk, other basic lending risks and the consideration ofcost and profit. For example, does the amount of advance payment only reflect the unpaid principal and interest based on the unpaidprincipal, and reasonable compensation paid for the early termination of the contract.Measurement of Expected Credit Loss of ReceivablesThe Group calculates the expected credit losses of accounts receivable by default risk exposure and expected credit losses rate ofaccounts receivable, and determines the expected credit losses rate based on default probability and default loss rate. Indetermining the expected credit losses rate, the Group uses internal historical credit loss and other data, and adjusts the historicaldata with current situation and forward-looking information. In considering forward-looking information, the indicators used by theGroup include the risks of economic downturn, external market environment, technological environment and changes in customerconditions. The Group regularly monitors and reviews assumptions related to the calculation of expected credit losses.
Provision for decline in value of inventoriesThe Group recognises provision for obsolete inventories based on the excess of the cost of inventory over its net realisable value. In
determining the net realisable value of inventories, the management uses significant judgments to estimate the selling price, cost tofinish manufacturing, and selling expenses and associated taxes.Deferred income tax assetsDeferred tax assets relating to certain temporary differences and tax losses are recognised as management considers it is probablethat future taxable profit will be available against which the temporary differences or tax losses can be utilised. The managementneeds significant judgment to estimate the time and extent of the future taxable profits and tax planning strategy to recognise theappropriate amount of deferred income tax assets. Where the expectation is different from the original estimate of the future taxableprofits, such differences will impact the recognition of deferred tax assets and taxation in the years when the estimates are changed.
33. Changes in significant accounting policies and accounting estimates
(1) Changes in significant accounting policies
① New revenue standard
The Ministry of Finance have issued “the Accounting Standards for Business Enterprises No. 14 - Revenue (Revised)” (hereinafterreferred to as the “New Revenue Standards”). The Group has implemented the Accounting Standards since January 1, 2020, andadjusted the relevant contents of accounting policies.The Group recognize revenue when the contract performance obligations have been fulfilled, the customer has gained control of therelevant goods and services. When certain condition is met, the Group shall be obliged to fulfil its performance obligations within acertain period, otherwise, it shall be obliged to fulfil its performance obligations at a certain point. If two or more performanceobligations are included in the contract, the Group shall, on the commencement date of the contract, apportion the transaction priceto the individual performance obligations according to the relative proportion of the individual selling prices of the commodities orservices promised by the individual performance obligations, and measure the income according to the transaction price apportionedto the individual performance obligations.The Group has adjusted the related accounting policies in accordance with the specific provisions of the new revenue standards onspecific matters or transactions. For example: contract cost, quality assurance, the distinction between the principal responsibleperson and the agent, the treatment of advances from customers, etc.The right to receive consideration for transferring goods to the customer, which depends on factors other than the passage of time,shall be presented as contract assets. The obligation to transfer goods to the customer after consideration received or receivableshall be presented as contract liabilities.Based on the cumulative impact of initial adoption of new revenue standards, the Group adjusted the retained earnings and otherrelated items in the financial statements at the beginning of 2020 without adjusting the comparative financial statements data. Thenew revenue standards have no significant impact on consolidated financial statements shareholders’ equity. The firstimplementation of the new revenue standards has the following impact on other related items of the financial statements:
| Details of and the reasons for the changes in accounting policies | Affected items in the financial statements | Amounts of adjustments (1 January, 2020) |
| As a result of the implementation of the new revenue standards, the Group will include the right to collect consideration related to sale of goods and provision of services that do not satisfy the unconditional right to receive payment as contract assets; the Group will reclassify the advance from customers from sales of goods and provision of services to contract liabilities. | contract liabilities | 17,698,280.12 |
| Other current liabilities | 2,300,776.41 | |
| Advance payment | -19,999,056.53 |
| Balance sheet items affected | Amounts affected (31 December, 2020) |
| Contract liabilities | 18,213,396.49 |
| Other current liabilities | 2,299,755.09 |
| Advance receipts | -20,513,151.58 |
| Income statement items affected | Amounts affected (for the year ended 31 December 2020) |
| Revenue | -29,996,402.36 |
| Cost of sales | -22,007,232.98 |
| Selling and distributing expenses | -7,989,169.38 |
The Group adopted simplified method for rent concession related to lease of property and plant since 1 January 2020 (refer to NoteIII. 29 (3) for detail) and recognise related rental concession into profit or loss at the period of concession or the point that reachagreement to relief and release related rights and obligations. As a lessee, the impact of above treatment to current period profitbefore tax is RMB11,408,913.44. As a lessor, the impact of above treatment to current period profit before tax is - RMB15,091,785.03.Rent concession occurred before 1 January 2020 of the Group does not applicable for the simplified method above.
(2) Significant changes in accounting estimates
The Group has no significant changes in accounting estimates this year.
(3) At the initial adoption of new revenue standard, the adjustments to relevant items of financial statements at the beginning of theinitial adoption year is as follow:
Consolidated balance sheet
| Item | As at 31/12/2019 | 2020.01.01 | Amount adjusted |
| Current assets: | |||
| Cash at bank and on hand | 316,668,565.09 | 316,668,565.09 | - |
| Financial assets held for trading | - | - | - |
| Bill receivable | 10,596,431.31 | 10,596,431.31 | - |
| Accounts receivable | 397,471,106.98 | 397,471,106.98 | - |
| Accounts receivable financing | - | - | - |
| Prepayments | 10,847,962.28 | 10,847,962.28 | - |
| Other receivable | 47,239,844.58 | 47,239,844.58 | - |
| Including: interest receivable | - | - | - |
| Dividend receivable | - | - | - |
| Inventory | 1,808,820,089.92 | 1,808,820,089.92 | - |
| Contract asset | Not applicable | - | - |
| Non-current assets due in one year | - | - | - |
| Other current assets | 68,858,096.74 | 68,858,096.74 | - |
| Total current assets | 2,660,502,096.90 | 2,660,502,096.90 | - |
| Non-current assets | |||
| Debt investments | - | - | - |
| Other debt investments | - | - | - |
| Long-term equity investments | 46,423,837.85 | 46,423,837.85 | - |
| Other equity investments | 85,000.00 | 85,000.00 | - |
| Other non-current financial assets | - | - | - |
| Investment properties | 407,503,307.24 | 407,503,307.24 | - |
| Fixed assets | 363,997,098.94 | 363,997,098.94 | - |
| Construction-in-progress | - | - | - |
| Intangible assets | 38,711,821.26 | 38,711,821.26 | - |
| Long-term deferred expenses | 152,587,491.33 | 152,587,491.33 | - |
| Deferred tax assets | 83,739,383.37 | 83,739,383.37 | - |
| Other non-current assets | 7,373,248.48 | 7,373,248.48 | - |
| Total non-current assets | 1,100,421,188.47 | 1,100,421,188.47 | - |
| Total assets | 3,760,923,285.37 | 3,760,923,285.37 | - |
| Current liabilities | |||
| Short-term loan | 567,908,833.21 | 567,908,833.21 | - |
| Financial liability held for trading | - | - | - |
| Bill payable | - | - | - |
| Accounts payable | 279,772,787.37 | 279,772,787.37 | - |
| Advanced payments | 23,433,463.57 | 3,434,407.04 | -19,999,056.53 |
| Contract liabilities | Not applicable | 17,698,280.12 | 17,698,280.12 |
| Employee remuneration payable | 82,602,845.67 | 82,602,845.67 | - |
| Item | As at 31/12/2019 | 2020.01.01 | Amount adjusted |
| Taxes payable | 24,064,803.00 | 24,064,803.00 | - |
| Other payables | 119,616,721.63 | 119,616,721.63 | - |
| Including: interest payable | - | - | - |
| Dividend payable | 848,233.27 | 848,233.27 | - |
| Non-current liabilities due in one year | 360,140.00 | 360,140.00 | - |
| Other current liabilities | - | 2,300,776.41 | 2,300,776.41 |
| Total current liabilities | 1,097,759,594.45 | 1,097,759,594.45 | - |
| Non-current liabilities | |||
| Long-term loan | 4,321,680.00 | 4,321,680.00 | - |
| Provisions | - | - | - |
| Deferred income | 3,046,090.60 | 3,046,090.60 | - |
| Deferred tax liabilities | 1,256,242.49 | 1,256,242.49 | - |
| Other non-current liabilities | - | - | - |
| Non-current liabilities | 8,624,013.09 | 8,624,013.09 | - |
| Total liabilities | 1,106,383,607.54 | 1,106,383,607.54 | - |
| Shareholder’s equity | |||
| Share capital | 442,968,881.00 | 442,968,881.00 | - |
| Capital reserve | 1,081,230,215.32 | 1,081,230,215.32 | - |
| Less: treasury shares | 71,267,118.78 | 71,267,118.78 | - |
| Other comprehensive income | -940,209.09 | -940,209.09 | - |
| Special reserves | - | - | - |
| Surplus reserve | 235,701,180.14 | 235,701,180.14 | - |
| Undistributed profit | 966,840,818.40 | 966,840,818.40 | - |
| Shareholder’s equity attributable to the owners of parent company | 2,654,533,766.99 | 2,654,533,766.99 | - |
| Minority shareholder’s interest | 5,910.84 | 5,910.84 | - |
| Total shareholder’s equity | 2,654,539,677.83 | 2,654,539,677.83 | - |
| Liability and shareholder’s equity | 3,760,923,285.37 | 3,760,923,285.37 | - |
| Item | As at 31/12/2019 | 2020.01.01 | Amount adjusted |
| Current assets: | |||
| Cash at bank and on hand | 270,673,346.02 | 270,673,346.02 | - |
| Financial assets held for trading | - | - | - |
| Bill receivable | - | - | - |
| Accounts receivable | 2,848,025.39 | 2,848,025.39 | - |
| Accounts receivable financing | - | - | - |
| Prepayments | - | - | - |
| Other receivable | 783,647,732.22 | 783,647,732.22 | - |
| Including: interest receivable | - | - | - |
| Dividend receivable | - | - | - |
| Inventory | - | - | - |
| Contract asset | Not applicable | - | - |
| Non-current assets due in one year | - | - | - |
| Other current assets | 12,380,243.67 | 12,380,243.67 | - |
| Total current assets | 1,069,549,347.30 | 1,069,549,347.30 | - |
| Non-current assets | - | ||
| Debt investments | - | - | - |
| Other debt investments | - | - | - |
| Long-term equity investments | 1,380,895,239.27 | 1,380,895,239.27 | - |
| Other equity investments | 85,000.00 | 85,000.00 | - |
| Other non-current financial assets | - | - | - |
| Investment property | 329,970,083.18 | 329,970,083.18 | - |
| Fixed assets | 238,594,698.50 | 238,594,698.50 | - |
| Construction-in-progress | - | - | - |
| Intangible assets | 30,925,974.54 | 30,925,974.54 | - |
| Item | As at 31/12/2019 | 2020.01.01 | Amount adjusted |
| Long-term deferred expenses | 12,106,759.98 | 12,106,759.98 | - |
| Deferred tax assets | 1,125,840.75 | 1,125,840.75 | - |
| Other non-current assets | 4,707,236.86 | 4,707,236.86 | - |
| Total non-current assets | 1,998,410,833.08 | 1,998,410,833.08 | - |
| Total assets | 3,067,960,180.38 | 3,067,960,180.38 | - |
| Current liabilities | |||
| Short-term loan | 540,650,622.50 | 540,650,622.50 | - |
| Financial liabilities held for trading | - | - | - |
| Bill payable | - | - | - |
| Accounts payable | 12,952,934.93 | 12,952,934.93 | - |
| Advanced payments | 3,434,407.04 | 3,434,407.04 | - |
| Contract liabilities | N.A. | - | - |
| Employee remuneration payable | 19,019,554.57 | 19,019,554.57 | - |
| Taxes payable | 1,713,130.68 | 1,713,130.68 | - |
| Other payables | 82,631,590.46 | 82,631,590.46 | - |
| Including: interest payable | - | - | - |
| Dividend payable | 848,233.27 | 848,233.27 | - |
| Non-current liabilities due in one year | - | - | - |
| Other current liabilities | - | - | - |
| Total current liabilities | 660,402,240.18 | 660,402,240.18 | - |
| Non-current liabilities | |||
| Long-term loans | - | - | - |
| Provisions | - | - | - |
| Deferred income | 3,046,090.60 | 3,046,090.60 | - |
| Deferred tax liabilities | - | - | - |
| Other non-current liabilities | - | - | - |
| Non-current liabilities | 3,046,090.60 | 3,046,090.60 | - |
| Total liabilities | 663,448,330.78 | 663,448,330.78 | - |
| Shareholder’s equity | |||
| Share capital | 442,968,881.00 | 442,968,881.00 | - |
| Capital reserve | 1,086,885,756.42 | 1,086,885,756.42 | - |
| Less: treasury shares | 71,267,118.78 | 71,267,118.78 | - |
| Other comprehensive income | - | - | - |
| Surplus reserve | 235,701,180.14 | 235,701,180.14 | - |
| Undistributed profit | 710,223,150.82 | 710,223,150.82 | - |
| Total shareholder’s equity | 2,404,511,849.60 | 2,404,511,849.60 | - |
| Liability and shareholder’s equity | 3,067,960,180.38 | 3,067,960,180.38 | - |
| Tax type | Tax basis | Tax rate % |
| VAT | Taxable revenue | 13, 9, 6 or 5 |
| Consumption tax | Taxable income | 20 |
| Urban maintenance and construction tax | Turnover tax payable | 7 or 5 |
| Property tax (note (1)) | Original cost of property or rental income | 1.2 or 12 |
| Corporate income tax | Taxable income | Note (2) |
taxed at 1.2% on the bases of 70% of the original cost of the property.Properties of the Company that situated in Shenzhen are taxed according to this notice. Properties situated in other cities are taxedaccording to local regulations.Note (2) Corporate income tax (‘CIT”)
| Name of entity subject to corporate income tax | Applicable tax rate |
| The Company (Note ①⑤) | 25.00 |
| Shenzhen HARMONY World Watch Center Co., Ltd. (HARMONY Company) (note ①⑤) | 25.00 |
| Shenzhen FIYTA Precision Technology Co., Ltd. (Precision Technology Company) (note ②③) | 15.00 |
| FIYTA Hong Kong (note ④) | 16.50 |
| Station 68 (note ④) | 16.50 |
| Shenzhen FIYTA Technology Development Co., Ltd (Technology Company) (note ②③) | 15.00 |
| TEMPORAL (Shenzhen) Co., Ltd. (TEMPORAL Company) (note ⑤) | 25.00 |
| Shenzhen Harmony E-commerce Co., Ltd. (E-commerce Company) (note ⑦) | 20.00 |
| Emile Choureit Timing (Shenzhen) Ltd. (Emile Choureit Shenzhen Company) (note⑤) | 25.00 |
| FIYTA Sales Co., Ltd (Sales Company) (note ①⑤) | 25.00 |
| Liaoning Hengdarui Commercial & Trade Co., Ltd (Hengdarui Company) (note ⑤) | 25.00 |
| Montres Chouriet SA (Swiss Company) (note ⑥) | 30.00 |
Note ⑦ According to “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 of annual taxableincome of small low-profit enterprise that is below RMB1,000,000.00, it is not taxed at 25% and will be taxed at a rate of 20%.
2. Preferential treatment and corresponding approval
(1) According to “Notice of Ministry of Finance and State Administration of Taxation in Extending Expiration Period of Utilizing
Losses for High-Tech Enterprises and Scientific Oriented Medium and Small Enterprises” (Cai Shui [2018] No. 76), unutilizedlosses incurred in prior 5 years before obtaining the status of High and New Tech Enterprise can be carried forward and utilizedin future years. The longest period was extended from 5 years to 10 years.V. Notes to the consolidated financial statements
1. Cash at bank and on hand
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Cash on hand | 183,759.72 | 229,258.38 |
| Cash at bank | 62,522,861.50 | 48,187,841.17 |
| Deposit in finance company | 283,532,347.79 | 237,118,456.45 |
| Other monetary funds | 6,818,316.70 | 31,133,009.09 |
| Total | 353,057,285.71 | 316,668,565.09 |
| Including: Total overseas deposits | 3,412,028.94 | 3,641,389.51 |
| Type | As at 31/12/2020 | As at 31/12/2019 | ||||
| Carrying amount | Provision | Book value | Carrying amount | Provision | Book value | |
| Bank acceptance bills | 16,813,464.36 | - | 16,813,464.36 | 6,187,353.98 | - | 6,187,353.98 |
| Commercial acceptance bills | 33,030,502.96 | 1,651,525.17 | 31,378,977.79 | 4,626,260.06 | 217,182.73 | 4,409,077.33 |
| Total | 49,843,967.32 | 1,651,525.17 | 48,192,442.15 | 10,813,614.04 | 217,182.73 | 10,596,431.31 |
| Type | Amount de-recognised | Amount not de-recognised |
| Bank acceptance bills | - | 3,697,813.75 |
| Commercial acceptance bills | - | 13,107,174.13 |
| Total | - | 16,804,987.88 |
(3) Bill receivable that transferred to receivables due to issuer’s default at the end of the period.
| Type | Amount transferred to accounts receivable |
| Commercial acceptance bills | 231,503.50 |
| Type | As at 31/12/2020 | As at 31/12/2019 | ||||||||
| Book value | Provision | Book value | Book value | Provision | Book value | |||||
| Amount | Percentage (%) | Amount | ECL rate (%) | Amount | Percentage (%) | Amount | ECL rate (%) | |||
| Standalone accrual | - | - | - | - | - | - | - | - | - | - |
| Accrued based on group | 49,843,967.32 | 100.00 | 1,651,525.17 | 3.31 | 48,192,442.15 | 10,813,614.04 | 100.00 | 217,182.73 | 2.01 | 10,596,431.31 |
| including | ||||||||||
| Commercial acceptance bills | 33,030,502.96 | 66.27 | 1,651,525.17 | 5.00 | 31,378,977.79 | 4,626,260.06 | 42.78 | 217,182.73 | 4.69 | 4,409,077.33 |
| Bank acceptance bills | 16,813,464.36 | 33.73 | - | - | 16,813,464.36 | 6,187,353.98 | 57.22 | - | - | 6,187,353.98 |
| Total | 49,843,967.32 | 100.00 | 1,651,525.17 | 3.31 | 48,192,442.15 | 10,813,614.04 | 100.00 | 217,182.73 | 2.01 | 10,596,431.31 |
| Name | As at 31/12/2020 | As at 31/12/2019 | ||||
| Bill receivables | Bad debt provision | ECL rate (%) | Bill receivables | Bad debt provision | ECL rate (%) | |
| Within 1 year | 33,030,502.96 | 1,651,525.17 | 5.00 | 4,626,260.06 | 217,182.73 | 4.69 |
| Item | Amount of bed debt provision |
| As at 31/12/2019 | 217,182.73 |
| Accrual | 1,434,342.44 |
| Reversal | - |
| Written-off | - |
| Recycled | - |
| Other | - |
| As at 31/12/2020 | 1,651,525.17 |
| Ageing | As at 31/12/2020 | As at 31/12/2019 |
| Within 1 year | 489,913,393.98 | 412,028,202.94 |
| 1-2 years | 10,509,894.86 | 9,278,600.90 |
| 2-3 years | 6,142,706.69 | 1,196,515.64 |
| Over 3 years | 2,882,615.92 | 4,013,110.09 |
| Subtotal | 509,448,611.45 | 426,516,429.57 |
| Less: provision for bad debt | 33,849,926.57 | 29,045,322.59 |
| Total | 475,598,684.88 | 397,471,106.98 |
| Category | As at 31/12/2020 | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Individually significant and assessed for impairment individually | 21,208,447.13 | 4.16 | 19,133,975.43 | 90.22 | 2,074,471.70 |
| Collectively assessed for impairment based on credit risk characteristics | 488,240,164.32 | 95.84 | 14,715,951.14 | 3.01 | 473,524,213.18 |
| Receivables from other customers | |||||
| Individually significant and assessed for impairment individually | 488,240,164.32 | 95.84 | 14,715,951.14 | 3.01 | 473,524,213.18 |
| Total | 509,448,611.45 | 100.00 | 33,849,926.57 | 6.64 | 475,598,684.88 |
| Category | As at 31/12/2019 | ||||
| Carrying amount | Bad debt provision | Book value | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Individually significant and assessed for impairment individually | 24,140,377.57 | 5.66 | 17,562,041.15 | 72.75 | 6,578,336.42 |
| Collectively assessed for impairment based on credit risk characteristics | 402,376,052.00 | 94.34 | 11,483,281.44 | 2.85 | 390,892,770.56 |
| Receivables from other customers | |||||
| Individually significant and assessed for impairment individually | 402,376,052.00 | 94.34 | 11,483,281.44 | 2.85 | 390,892,770.56 |
| Total | 426,516,429.57 | 100.00 | 29,045,322.59 | 6.81 | 397,471,106.98 |
| Category | As at 31/12/2020 | As at 31/12/2019 | |||||
| Carrying amount | Provision | ECL rate (%) | Carrying amount | Provision | ECL rate (%) | Reason | |
| Receivables from other | 21,208,447.13 | 19,133,975.43 | 90.22 | 24,140,377.57 | 17,562,041.15 | 72.75 | Unable to recover |
customers
Bad debt provision based on groupsGroup: Receivables from other customers
| Category | As at 31/12/2020 | As at 31/12/2019 | ||||
| Accounts receivable | Bad debt provision | ECL rate (%) | Accounts receivable | Bad debt provision | ECL rate (%) | |
| Within 1 year | 485,986,184.98 | 13,631,026.91 | 2.80 | 398,474,804.41 | 11,042,487.31 | 2.77 |
| 1-2 years | 1,578,878.25 | 409,823.14 | 25.96 | 3,639,298.75 | 269,502.55 | 7.41 |
| 2-3 years | 513,744.00 | 513,744.00 | 100.00 | 122,592.64 | 31,935.38 | 26.05 |
| Over 3 years | 161,357.09 | 161,357.09 | 100.00 | 139,356.20 | 139,356.20 | 100.00 |
| Total | 488,240,164.32 | 14,715,951.14 | 3.01 | 402,376,052.00 | 11,483,281.44 | 2.85 |
| Bad debt provision | |
| As at 31/12/2019 | 29,045,322.59 |
| Adjustment amount for initial adoption of new revenue standard | - |
| 2020.01.01 | 29,045,322.59 |
| Accrual | 6,813,816.36 |
| Recovery or reversals | 187,236.30 |
| Written-off | 1,799,519.78 |
| Transferred | - |
| Other | -22,456.30 |
| As at 31/12/2020 | 33,849,926.57 |
| Item | Amount |
| Written-off of accounts receivable | 1,799,519.78 |
| Name | Nature | Amount | Reason | Procedures followed | Whether it involves related party transaction |
| Xi’an Shiji Jinhua Qujiang Shopping Mall Co., Ltd. | Trade receivable | 1,702,371.94 | Unable to recover | Approved | No |
(5) Top five accounts receivable are analyzed as follows:
The total amount of receivables from top five accounts amounts to RMB159,372,167.34, accounted for 31.28% of total balance ofaccounts receivable as of the period end. Corresponding bad debt provision accrued is RMB4,797,102.24.
4. Prepayments
(1) Presented by ageing
| Ageing | As at 31/12/2020 | As at 31/12/2019 | ||
| Amount | Percentage % | Amount | Percentage % | |
| Within 1 year | 16,612,773.76 | 100.00 | 10,221,061.48 | 94.23 |
| 1-2 years | - | - | 284,733.40 | 2.62 |
| Over 2 years | - | - | 342,167.40 | 3.15 |
| Total | 16,612,773.76 | 100.00 | 10,847,962.28 | 100.00 |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Interest receivable | - | - |
| Dividends receivable | - | - |
| Other receivables | 52,902,779.63 | 47,239,844.58 |
| Total | 52,902,779.63 | 47,239,844.58 |
| Ageing | As at 31/12/2020 | As at 31/12/2019 |
| Within 1 year | 55,677,698.47 | 49,453,416.07 |
| 1-2 years | 662,641.27 | 11,101.80 |
| 2-3 years | 11,101.80 | 186,180.00 |
| Over 3 years | 588,065.00 | 7,933,538.12 |
| Subtotal | 56,939,506.54 | 57,584,235.99 |
| Less: bad debt provision | 4,036,726.91 | 10,344,391.41 |
| Total | 52,902,779.63 | 47,239,844.58 |
| Item | As at 31/12/2020 | As at 31/12/2019 | ||||
| Book value | Provision | Carrying amount | Book value | Provision | Carrying amount | |
| Petty cash | 2,438,803.09 | - | 2,438,803.09 | 2,147,617.27 | - | 2,147,617.27 |
| Security deposit | 45,981,846.00 | 2,762,853.51 | 43,218,992.49 | 45,014,657.70 | 3,093,646.11 | 41,921,011.59 |
| Social security payment on-behalf | 792,711.42 | - | 792,711.42 | 526,453.88 | - | 526,453.88 |
| Others | 7,726,146.03 | 1,273,873.40 | 6,452,272.63 | 9,895,507.14 | 7,250,745.30 | 2,644,761.84 |
| Total | 56,939,506.54 | 4,036,726.91 | 52,902,779.63 | 57,584,235.99 | 10,344,391.41 | 47,239,844.58 |
| Category | Book value | ECL rate in next 12 month (%) | Bad debt Provision | Carrying amount | Note |
| Individually significant and assessed for impairment individually | - | - | - | - | |
| Collectively assessed for impairment based on credit risk characteristics | 55,271,836.64 | 4.29 | 2,369,057.01 | 52,902,779.63 | |
| Petty cash | 2,438,803.09 | - | - | 2,438,803.09 | |
| Security deposit | 45,500,721.00 | 5.01 | 2,281,728.51 | 43,218,992.49 | |
| Social security payment on-behalf | 792,711.42 | - | - | 792,711.42 | |
| Others | 6,539,601.13 | 1.34 | 87,328.50 | 6,452,272.63 | |
| Total | 55,271,836.64 | 4.29 | 2,369,057.01 | 52,902,779.63 |
| Category | Book value | ECL rate of the life time receivables (%) | Provision | Carrying amount | reason |
| Individually significant and assessed for impairment individually | |||||
| Huaming Hang Co., Ltd. | 480,000.00 | 100.00 | 480,000.00 | - | Chances of recovery is remote |
| Beijing Konggang Runze Exhibition Co., Ltd. | 470,625.00 | 100.00 | 470,625.00 | - | Chances of recovery is remote |
| SwissTech (Shenzhen) Co., Ltd. | 649,029.90 | 100.00 | 649,029.90 | - | Chances of recovery is remote |
| Others | 68,015.00 | 100.00 | 68,015.00 | - | Chances of recovery is remote |
| Total | 1,667,669.90 | 100.00 | 1,667,669.90 | - | —— |
| Category | Book value | ECL rate of the life time receivables (%) | Provision | Carrying amount | Note |
| Individually significant and assessed for impairment individually | - | - | - | - | |
| Collectively assessed for impairment based on credit risk characteristics | 49,690,747.87 | 4.93 | 2,450,903.29 | 47,239,844.58 | |
| Petty cash | 2,147,617.27 | - | - | 2,147,617.27 | |
| Security deposit | 44,214,657.70 | 5.19 | 2,293,646.11 | 41,921,011.59 | |
| Social security payment on-behalf | 526,453.88 | - | - | 526,453.88 | |
| Others | 2,802,019.02 | 5.61 | 157,257.18 | 2,644,761.84 | |
| Total | 49,690,747.87 | 4.93 | 2,450,903.29 | 47,239,844.58 |
| Category | Book value | ECL rate of the life time receivables (%) | Provision | Carrying amount | reason |
| Individually significant and assessed for impairment individually | |||||
| Beat Blattman Marketing | 4,189,004.42 | 100.00 | 4,189,004.42 | - | Chances of recovery is remote |
| Liberty Time Center GmbH | 2,333,707.20 | 100.00 | 2,333,707.20 | - | Chances of recovery is remote |
| China Resources (Chong Qing) Industrial Co., Ltd. | 800,000.00 | 100.00 | 800,000.00 | - | Chances of recovery is remote |
| Huaming Hang Co., Ltd. | 480,000.00 | 100.00 | 480,000.00 | - | Unable to recover |
| Others | 90,776.50 | 100.00 | 90,776.50 | - | Unable to recover |
| Total | 7,893,488.12 | 100.00 | 7,893,488.12 | - | —— |
| Bad debt provision | 1st stage | 2nd stage | 3rd stage | Total |
| ECL in next 12 month | ECL for the life time of receivables (no impairment yet) | ECL for the life time of receivables (impaired) | ||
| Balance as at 31 December 2019 | 2,450,903.29 | - | 7,893,488.12 | 10,344,391.41 |
| Current period | ||||
| --transferred to 2nd stage | - | - | - | - |
| -- transferred to 3rd stage | -1,119,654.90 | - | 1,119,654.90 | - |
| --Reversed to 2nd stage | - | - | - | - |
| --Reversed to 3rd stage | - | - | - | - |
| Accrued | 1,054,047.15 | - | - | 1,054,047.15 |
| Reversed | 15,285.41 | - | 2,761.50 | 18,046.91 |
| Realized | - | - | - | - |
| Written-off | - | - | 7,342,711.62 | 7,342,711.62 |
| Other changes | -953.12 | - | - | -953.12 |
| Balance as of 31 December 2020 | 2,369,057.01 | - | 1,667,669.90 | 4,036,726.91 |
| Item | Amount |
| Other receivables that actually written-off | 7,342,711.62 |
| Name | Nature | Amount | Reason | Procedures | Whether it involves related party transaction |
| Beat Blattman Marketing | Prepayment | 4,189,004.42 | Unable to recover | Approved | No |
| Liberty Time Center GmbH | Prepayment | 2,333,707.20 | Unable to recover | Approved | No |
| China Resources (Chong Qing) Industrial Co., Ltd. | Deposit | 800,000.00 | Unable to recover | Approved | No |
| Total | —— | 7,322,711.62 | —— | —— | —— |
| Item | As at 31/12/2020 | As at 31/12/2019 | ||||
| Book value | Provision | Carrying amount | Book value | Provision | Carrying amount | |
| Raw material | 179,270,879.56 | 19,017,726.57 | 160,253,152.99 | 195,644,341.20 | 21,197,269.90 | 174,447,071.30 |
| WIP | 12,570,005.95 | - | 12,570,005.95 | 11,707,382.99 | - | 11,707,382.99 |
| Stored goods | 1,837,664,688.01 | 78,707,661.10 | 1,758,957,026.91 | 1,684,674,585.69 | 62,008,950.06 | 1,622,665,635.63 |
| Total | 2,029,505,573.52 | 97,725,387.67 | 1,931,780,185.85 | 1,892,026,309.88 | 83,206,219.96 | 1,808,820,089.92 |
| Item | 2020.01.01 | Increase | Decrease | As at 31/12/2020 | ||
| Accrual | Others | Reverse or realized | Others | |||
| Raw material | 21,197,269.90 | - | - | 1,349,501.13 | 830,042.20 | 19,017,726.57 |
| Merchandises | 62,008,950.06 | 16,776,027.54 | - | - | 77,316.50 | 78,707,661.10 |
| Total | 83,206,219.96 | 16,776,027.54 | - | 1,349,501.13 | 907,358.70 | 97,725,387.67 |
| Item | Evidence of determine NRV and future selling cost | Reason for reversal or realized |
| Raw material | Estimated selling price less estimated cost to complete and selling and distribution expenses and associated taxes | Disposed |
| Merchandises | Estimated selling price less estimated selling and distributing expenses and associated taxes | Sold |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Input VAT | 59,218,711.69 | 47,626,820.11 |
| Prepaid corporate income tax | 25,684.51 | 1,313,954.49 |
| Others | 16,690,745.56 | 19,917,322.14 |
| Total | 75,935,141.76 | 68,858,096.74 |
8. Long-term equity investment
| Investee | As at 31/12/2019 | Changes during the period | As at 31/12/2020 | Balance of impairment provision as of year end | |||||||
| Addition/new investment | Withdrawn | Investment gains and losses recognised by equity method | Adjustment of other comprehensive income | Changes in other equity | Cash dividend declared | Impairment provision | Others | ||||
| Associate | |||||||||||
| Shanghai Watch Co., Ltd. (Shanghai Watch) | 46,423,837.85 | - | - | 4,976,828.07 | - | - | - | - | - | 51,400,665.92 | - |
9. Other equity instrument investment
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Shenzhen Zhonghang Culture Co. Ltd | - | - |
| Xi’an Tangcheng Limited | 85,000.00 | 85,000.00 |
| Total | 85,000.00 | 85,000.00 |
| Item | Property and plant |
| I. Original cost | |
| 1.As at 31/12/2019 | 603,886,647.35 |
| 2.addition | 5,718,759.44 |
| (1) purchase | - |
| (2) transferred from inventory/CIP | 5,718,759.44 |
| (3) increased due to business combination | - |
| 3.Decrease | - |
| (1) Disposal | - |
| (2) Others | - |
| 4.As at 31/12/2020 | 609,605,406.79 |
| II. Accumulated depreciation | |
| 1.As at 31/12/2019 | 196,383,340.11 |
| 2.Addition | 15,135,618.90 |
| (1) accrual | 14,201,033.04 |
| (2) business combination | - |
| (3) Others | 934,585.86 |
| 3.Decrease | - |
| (1) Disposal | - |
| (2) Others | - |
| 4.As at 31/12/2020 | 211,518,959.01 |
| III. Impairment provision | |
| 1.As at 31/12/2019 | - |
| 2.Increase | - |
| (1) Accrual | - |
| (2) Others | - |
| 3、Decrease | - |
| (1) Disposal | - |
| (2) Others | - |
| 4.As at 31/12/2020 | - |
| IV. Carrying amount | |
| 1.As at 31/12/2020 | 398,086,447.78 |
| 2.As at 31/12/2019 | 407,503,307.24 |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Fixed asset | 352,734,280.76 | 363,997,098.94 |
| Fixed asset disposal | - | - |
| Total | 352,734,280.76 | 363,997,098.94 |
| Item | Property and buildings | Machinery | Transportation vehicles | Electronic devices | Other equipment | Total |
| I. Total cost | ||||||
| 1.As at 31/12/2019 | 399,884,182.37 | 88,576,975.77 | 15,357,879.37 | 45,484,697.66 | 46,262,752.19 | 595,566,487.36 |
| 2. Additions | 5,031,946.21 | 14,185,665.19 | 291,938.05 | 2,883,838.19 | 1,206,627.46 | 23,600,015.10 |
| (1) Purchasing | 3,803,273.74 | 13,563,231.62 | 291,938.05 | 2,863,667.79 | 1,150,661.76 | 21,672,772.96 |
| (2) Transfer from construction in progress | - | - | - | - | - | - |
| (3) Others | 1,228,672.47 | 622,433.57 | - | 20,170.40 | 55,965.70 | 1,927,242.14 |
| 3. Decrease | 5,895,929.61 | 865,836.98 | 483,804.00 | 2,933,284.32 | 1,687,173.34 | 11,866,028.25 |
| (1) Disposal or retired | - | 792,659.12 | 483,804.00 | 2,932,518.78 | 1,687,173.34 | 5,896,155.24 |
| (2) transferred into investment property | 5,718,759.44 | - | - | - | - | 5,718,759.44 |
| (3) Others | 177,170.17 | 73,177.86 | - | 765.54 | - | 251,113.57 |
| 4.As at 31/12/2020 | 399,020,198.97 | 101,896,803.98 | 15,166,013.42 | 45,435,251.53 | 45,782,206.31 | 607,300,474.21 |
| II. Accumulated depreciation | ||||||
| 1.As at 31/12/2019 | 99,134,756.79 | 49,325,868.54 | 13,492,690.81 | 32,184,334.98 | 37,431,737.30 | 231,569,388.42 |
| 2.increase | 13,666,448.03 | 7,620,683.90 | 396,299.62 | 4,507,211.15 | 2,780,144.56 | 28,970,787.26 |
| (1) accrual | 13,373,223.07 | 6,967,947.86 | 396,299.62 | 4,428,701.90 | 2,780,144.56 | 27,946,317.01 |
| (2) others | 293,224.96 | 652,736.04 | - | 78,509.25 | - | 1,024,470.25 |
| 3.Decrease | 1,045,518.58 | 562,603.40 | 459,613.80 | 2,526,508.27 | 1,379,738.18 | 5,973,982.23 |
| (1) disposal or retirement | - | 496,815.85 | 459,613.80 | 2,525,781.00 | 1,379,738.18 | 4,861,948.83 |
| (2) transferred into investment properties | 1,045,518.58 | 65,787.55 | - | 727.27 | - | 1,112,033.40 |
| 4.As at 31/12/2020 | 111,755,686.24 | 56,383,949.04 | 13,429,376.63 | 34,165,037.86 | 38,832,143.68 | 254,566,193.45 |
| III. Impairment provision | ||||||
| 1.As at 31/12/2019 | - | - | - | - | - | - |
| 2.Increase | - | - | - | - | - | - |
| (1) accrual | - | - | - | - | - | - |
| (2) others | - | - | - | - | - | - |
| 3.Decrease | - | - | - | - | - | - |
| (1) disposal or retirement | - | - | - | - | - | - |
| (2) Others | - | - | - | - | - | - |
| 4.As at 31/12/2020 | - | - | - | - | - | - |
| IV. Carrying amount | ||||||
| 1.As at 31/12/2020 | 287,264,512.73 | 45,512,854.94 | 1,736,636.79 | 11,270,213.67 | 6,950,062.63 | 352,734,280.76 |
| 2.As at 31/12/2019 | 300,749,425.58 | 39,251,107.23 | 1,865,188.56 | 13,300,362.68 | 8,831,014.89 | 363,997,098.94 |
| Item | Carrying amount | Reason for not having certificate for property rights |
| Office rooms of Harbin Branch | 255,135.96 | Issues relating to property right |
12. Intangible asset
(1) Status
| Item | Land-use right | Software system | Right to use trademarks | Total |
| I. Total original cost | ||||
| 1.As at 31/12/2019 | 34,933,822.40 | 24,114,126.36 | 11,930,531.38 | 70,978,480.14 |
| 2. Additions | - | 5,020,566.44 | 2,138,375.48 | 7,158,941.92 |
| (1) Purchase | - | 5,020,566.44 | 2,138,375.48 | 7,158,941.92 |
| (2) Internal R&D | - | - | - | - |
| (3) Increased due to business combination | - | - | - | - |
| (4) Others | - | - | - | - |
| 3. Decreases | - | - | - | - |
| (1) Disposal | - | - | - | - |
| (2) Others | - | - | - | - |
| 4. As at 31/12/2020 | 34,933,822.40 | 29,134,692.80 | 14,068,906.86 | 78,137,422.06 |
| II. Total accumulated amortization | ||||
| 1. As at 31/12/2019 | 14,315,262.17 | 12,448,523.47 | 5,502,873.24 | 32,266,658.88 |
| 2. Additions | 733,553.28 | 6,164,217.44 | 1,113,675.95 | 8,011,446.67 |
| (1) Accrual | 733,553.28 | 6,164,217.44 | 1,113,675.95 | 8,011,446.67 |
| (2) others | - | - | - | - |
| 3. Decreases | - | - | - | - |
| (1) Disposal | - | - | - | - |
| (2) other | - | - | - | - |
| 4. As at 31/12/2020 | 15,048,815.45 | 18,612,740.91 | 6,616,549.19 | 40,278,105.55 |
| III. Total impairment provision | ||||
| 1. As at 31/12/2019 | - | - | - | - |
| 2. Additions | - | - | - | - |
| (1) Accrual | - | - | - | - |
| (2) other | - | - | - | - |
| 3. Decrease | - | - | - | - |
| (1) disposal | - | - | - | - |
| (2) others | - | - | - | - |
| 4. As at 31/12/2020 | - | - | - | - |
| IV. Total carrying amount | ||||
| 1. As at 31/12/2020 | 19,885,006.95 | 10,521,951.89 | 7,452,357.67 | 37,859,316.51 |
| 2. As at 31/12/2019 | 20,618,560.23 | 11,665,602.89 | 6,427,658.14 | 38,711,821.26 |
13. Long-term deferred expenses
| Item | As at 31/12/2019 | Increase | Decrease | As at 31/12/2020 | |
| Amortized | Others | ||||
| Counter fabrication expenses | 41,961,947.89 | 30,796,935.58 | 47,612,116.76 | - | 25,146,766.71 |
| Renovation expenses | 95,266,200.86 | 54,035,461.65 | 50,619,946.05 | - | 98,681,716.46 |
| Others | 15,359,342.58 | - | 9,170,237.76 | - | 6,189,104.82 |
| Total | 152,587,491.33 | 84,832,397.23 | 107,402,300.57 | - | 130,017,587.99 |
| Item | As at 31/12/2020 | As at 31/12/2019 | ||
| Deductible/Taxable temporary difference | DTA/DTL | Deductible/Taxable temporary difference | DTA/DTL | |
| Deferred tax asset: | ||||
| Impairment provision | 122,763,597.44 | 24,130,990.19 | 100,912,679.00 | 22,188,996.64 |
| Unrealized profit for related party transactions | 135,402,764.86 | 33,674,974.92 | 179,676,673.34 | 44,654,504.04 |
| Deductible losses | 64,272,084.42 | 15,216,766.23 | 50,678,682.32 | 12,074,057.61 |
| Restricted shares | 10,011,227.40 | 2,398,201.09 | 4,440,625.91 | 1,062,967.67 |
| Advertisement expenses that allowed to deduct in future years | 18,840,253.36 | 3,378,321.23 | 14,988,443.65 | 2,997,334.76 |
| Others | 8,458,186.73 | 2,114,546.69 | 3,046,090.60 | 761,522.65 |
| Subtotal | 359,748,114.21 | 80,913,800.35 | 353,743,194.82 | 83,739,383.37 |
| Deferred tax liability | ||||
| One-off deduction of fixed asset before Corporate income tax | 20,452,230.39 | 3,067,834.55 | 8,374,949.93 | 1,256,242.49 |
| Subtotal | 20,452,230.39 | 3,067,834.55 | 8,374,949.93 | 1,256,242.49 |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Impairment provision | 14,790,427.78 | 22,200,437.70 |
| Deductible losses | 61,104,363.07 | 64,205,351.75 |
| Total | 75,894,790.85 | 86,405,789.45 |
(3) Deductible losses that are not recognized as deferred tax asset will due in the following years:
| Year | As at 31/12/2020 | As at 31/12/2019 | Note |
| 2020 | - | - | |
| 2021 | - | - | |
| 2022 | - | - | |
| 2023 | - | 2,417,279.16 | |
| 2024 | 7,114,967.80 | 7,798,677.32 | |
| 2025 | 11,684,299.22 | 11,684,299.22 | |
| 2026 | 18,449,678.50 | 18,449,678.50 | |
| 2027 | 23,855,417.55 | 23,855,417.55 | |
| 2028 | - | - | |
| 2029 | - | - | |
| 2030 | - | - | |
| 2031 | - | —— | |
| Total | 61,104,363.07 | 64,205,351.75 |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Prepayment for construction and equipment | 13,536,307.13 | 7,373,248.48 |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Guaranteed loans | 142,247,348.04 | 37,271,502.38 |
| Credit loans | 400,425,930.05 | 530,637,330.83 |
| Total | 542,673,278.09 | 567,908,833.21 |
| Type | As at 31/12/2020 | As at 31/12/2019 |
| Commercial bills payable | 3,581,360.00 | - |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Trade payables | 284,050,848.79 | 254,887,129.91 |
| Payables for material purchased | 15,679,531.11 | 11,932,722.53 |
| Payables for project | 1,481,135.49 | 12,952,934.93 |
| Total | 301,211,515.39 | 279,772,787.37 |
19. Advances from customer
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Advances received for trade | —— | 19,999,056.53 |
| Rental received | 9,991,850.67 | 3,434,407.04 |
| Total | 9,991,850.67 | 23,433,463.57 |
| Item | As at 31/12/2020 | 2020.01.01 | As at 31/12/2019 |
| Contract liabilities | 18,213,396.49 | 17,698,280.12 | —— |
| Less: contract liabilities that are included in non-current liabilities | - | - | —— |
| Total | 18,213,396.49 | 17,698,280.12 | —— |
| Item | As at 31/12/2019 | Increase | Decrease | As at 31/12/2020 |
| Short-term employee benefits | 75,434,545.00 | 610,053,139.26 | 559,506,445.64 | 125,981,238.62 |
| Post-employment benefits - defined contribution plans | 7,067,511.52 | 15,809,654.89 | 16,109,688.83 | 6,767,477.58 |
| Termination benefits | 100,789.15 | 2,471,591.42 | 2,467,634.57 | 104,746.00 |
| Other benefits due within one year | - | - | - | - |
| Total | 82,602,845.67 | 628,334,385.57 | 578,083,769.04 | 132,853,462.20 |
| Item | As at 31/12/2019 | Accrued | Paid | As at 31/12/2020 |
| Salaries, bonus, allowances | 74,919,776.81 | 557,277,615.35 | 507,060,914.51 | 125,136,477.65 |
| Staff welfare | - | 10,994,982.07 | 10,991,176.61 | 3,805.46 |
| Social insurances | - | 16,737,415.16 | 16,737,415.16 | - |
| Including:1.Medical insurance | - | 15,781,783.37 | 15,781,783.37 | - |
| 2.Work-related injury insurance | - | 158,613.03 | 158,613.03 | - |
| 3.Maternity insurance | - | 797,018.76 | 797,018.76 | - |
| Housing Fund | - | 17,616,853.88 | 17,613,921.88 | 2,932.00 |
| Labor union fees and education fee | 514,768.19 | 7,426,272.80 | 7,103,017.48 | 838,023.51 |
| Short-term paid absences | - | - | - | - |
| Short-term profit –sharing plan | - | - | - | - |
| Non-monetary benefits | - | - | - | - |
| Other short-term employee benefits | - | - | - | - |
| Total | 75,434,545.00 | 610,053,139.26 | 559,506,445.64 | 125,981,238.62 |
(2) Defined contribution plans
| Item | As at 31/12/2019 | Accrued | Paid | As at 31/12/2020 |
| Post-employment benefits | 7,067,511.52 | 15,809,654.89 | 16,109,688.83 | 6,767,477.58 |
| Including: 1.Basic pension insurance | 255,571.47 | 9,262,583.57 | 9,222,178.59 | 295,976.45 |
| 2.Unemployment insurance | - | 195,627.59 | 195,189.83 | 437.76 |
| 3.Annuity | 6,811,940.05 | 6,351,443.73 | 6,692,320.41 | 6,471,063.37 |
| 4.Others | - | - | - | - |
| Total | 7,067,511.52 | 15,809,654.89 | 16,109,688.83 | 6,767,477.58 |
| Taxes | As at 31/12/2020 | As at 31/12/2019 |
| VAT | 36,028,888.63 | 6,929,833.12 |
| Corporate income tax | 29,488,177.68 | 15,512,840.60 |
| Individual income tax | 1,609,420.04 | 1,227,923.78 |
| Urban maintenance and construction tax | 631,469.18 | 91,612.52 |
| Educational surcharges | 450,946.60 | 65,887.11 |
| Others | 716,369.77 | 236,705.87 |
| Total | 68,925,271.90 | 24,064,803.00 |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Interest payable | - | - |
| Dividends payable | 1,639,513.77 | 848,233.27 |
| Other payables | 126,938,084.17 | 118,768,488.36 |
| Total | 128,577,597.94 | 119,616,721.63 |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Dividends for ordinary shares | 1,639,513.77 | 848,233.27 |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Security deposit | 46,419,944.64 | 45,114,205.97 |
| Shop activity fund | 21,861,578.14 | 16,636,771.40 |
| Personal accounts payable | 137,818.57 | 1,321,518.82 |
| Decoration expenses | 7,481,768.84 | 4,556,469.41 |
| Repurchase liability for restricted shares | 16,299,166.73 | 17,737,366.73 |
| Other | 34,737,807.25 | 33,402,156.03 |
| Total | 126,938,084.17 | 118,768,488.36 |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Mortgage loans | 370,030.00 | 360,140.00 |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Long-term loan due within one year | 370,030.00 | 360,140.00 |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Output VAT tax not realized | 2,299,755.09 | —— |
| Item | As at 31/12/2020 | Interest rate | As at 31/12/2019 | Interest rate |
| Mortgage loans | 4,440,360.00 | 3.00% | 4,681,820.00 | 3.00% |
| Subtotal | 4,440,360.00 | —— | 4,681,820.00 | —— |
| Less: Long-term loan due within one year | 370,030.00 | 3.00% | 360,140.00 | 3.00% |
| Total | 4,070,330.00 | —— | 4,321,680.00 | —— |
| Item | As at 31/12/2019 | Addition | Decrease | As at 31/12/2020 | Reason |
| Government grant | 3,046,090.60 | 609,576.69 | 739,320.86 | 2,916,346.43 | Criteria of recognizing gain is not reached |
| Total | As at | Movements(+, -) | As at 31/12/2020 |
| 31/12/2019 | Newly issued | Bonus share | Capitalization of capital reserves | Others | subtotal | ||
| Total shares | 442,968,881 | -14,877,000 | - | - | - | -14,877,000 | 428,091,881 |
| Item | As at 31/12/2019 | Increase | Decrease | As at 31/12/2020 |
| Share premium | 1,062,297,140.76 | - | 65,310,429.03 | 996,986,711.73 |
| Other capital reserve | 18,933,074.56 | 5,570,601.49 | - | 24,503,676.05 |
| Total | 1,081,230,215.32 | 5,570,601.49 | 65,310,429.03 | 1,021,490,387.78 |
| Item | As at 31/12/2019 | Increase | Decrease | As at 31/12/2020 |
| Treasury shares | 71,267,118.78 | 71,338,916.62 | 80,972,504.92 | 61,633,530.48 |
| Item | As at 31/12/2019 | Movements in 2020 | As at 31/12/2020 | ||||
| Pre-tax movements | Less: recorded in other comprehensive income in prior period and transferred to profit or loss in current period | Less: CIT | Attribute to parent company after tax | Attribute to minority shareholders after tax | |||
| I. Other comprehensive income items which will not be reclassified subsequently to profit or loss | - | - | - | - | - | - | - |
| II. Other comprehensive income items which may be reclassified subsequently to profit or loss | |||||||
| Including: translation difference of foreign currency financial statements | -940,209.09 | 1,916,506.80 | - | - | 1,917,080.50 | -573.70 | 976,871.41 |
| Total | -940,209.09 | 1,916,506.80 | - | - | 1,917,080.50 | -573.70 | 976,871.41 |
| Item | As at 31/12/2019 | Increase | Decrease | As at 31/12/2020 |
| Statutory surplus reserve | 173,716,286.14 | 10,830,686.73 | - | 184,546,972.87 |
| Discretionary surplus reserve | 61,984,894.00 | - | - | 61,984,894.00 |
| Total | 235,701,180.14 | 10,830,686.73 | - | 246,531,866.87 |
| Item | 2020 | 2019 | Note |
| Undistributed profit at the end of prior year before adjustments | 966,840,818.40 | 851,360,603.66 | -- |
| Adjustments to undistributed profit at the beginning of year | - | - | -- |
| Undistributed profit at the beginning of year after adjustment | 966,840,818.40 | 851,360,603.66 | |
| Plus: Net profit attributable to the owner of the parent company for the year | 294,115,156.04 | 215,909,014.15 | -- |
| Less: statutory surplus reserve drawn | 10,830,686.73 | 12,685,386.34 | |
| Dividends payable to ordinary shares | 85,634,376.20 | 87,743,413.07 | |
| Undistributed profit at the end of year | 1,164,490,911.51 | 966,840,818.40 | |
| Including: appropriation to surplus reserves made by the Company’s subsidiaries attributable to the Company | 26,409,371.15 | 10,229,847.23 |
| Item | 2020 | 2019 | ||
| Operating income | Operating cost | Operating income | Operating cost | |
| Main business | 4,226,992,193.44 | 2,632,869,284.16 | 3,686,955,944.86 | 2,211,874,573.32 |
| Other business | 16,447,759.15 | 6,360,252.90 | 17,254,790.04 | 5,333,158.72 |
| Total | 4,243,439,952.59 | 2,639,229,537.06 | 3,704,210,734.90 | 2,217,207,732.04 |
| Industry | 2020 | 2019 | ||||||
| Operating income | Operating cost | Operating income | Operating cost | |||||
| Main business | ||||||||
| Watch | 3,970,903,426.36 | 2,478,548,735.40 | 3,463,608,966.45 | 2,109,978,800.45 | ||||
| Precision manufacturing | 138,806,456.76 | 113,748,608.41 | 91,341,945.34 | 73,717,603.23 | ||||
| Lease | 117,282,310.32 | 40,571,940.35 | 132,005,033.07 | 28,178,169.64 | ||||
| Subtotal | 4,226,992,193.44 | 2,632,869,284.16 | 3,686,955,944.86 | 2,211,874,573.32 | ||||
| Other business | ||||||||
| Others | 16,447,759.15 | 6,360,252.90 | 17,254,790.04 | 5,333,158.72 | ||||
| subtotal | 16,447,759.15 | 6,360,252.90 | 17,254,790.04 | 5,333,158.72 | ||||
| Total | 4,243,439,952.59 | 2,639,229,537.06 | 3,704,210,734.90 | 2,217,207,732.04 | ||||
| Item | 2020 | |||
| Watch sales | Precision manufacturing | Others | Total | |
| Main business | ||||
| Including: recognise at a point of time | 3,970,903,426.36 | 138,806,456.76 | - | 4,109,709,883.12 |
| Recognise over a period of time | - | - | - | - |
| Other business | ||||
| Others | - | - | 16,447,759.15 | 16,447,759.15 |
| Total | 3,970,903,426.36 | 138,806,456.76 | 16,447,759.15 | 4,126,157,642.27 |
| Item | 2020 | 2019 |
| Urban maintenance and construction tax | 10,068,664.42 | 11,435,460.45 |
| Educational surcharge | 4,314,874.91 | 4,891,150.79 |
| Local educational surcharge | 2,840,421.94 | 3,216,962.37 |
| Property tax | 4,094,171.89 | 4,037,914.43 |
| Land use tax | 314,851.20 | 391,201.52 |
| Stamp duty | 2,715,802.17 | 2,384,290.09 |
| Others | 1,095,352.77 | 1,835,809.90 |
| Total | 25,444,139.30 | 28,192,789.55 |
| Item | 2020 | 2019 |
| Salary | 359,485,012.85 | 359,640,526.77 |
| Department store expense and rental | 225,399,141.62 | 181,211,260.52 |
| Market promotion expenses | 129,846,038.05 | 155,102,618.44 |
| Depreciation and amortization | 93,520,422.84 | 92,468,987.37 |
| Packaging expenses | 8,931,806.05 | 11,125,541.27 |
| Utilities and property management expenses | 19,596,237.03 | 19,283,177.10 |
| Shipping fees | 5,316,601.90 | 14,689,427.89 |
| Office expenses | 5,894,271.36 | 5,827,092.35 |
| Travel expenses | 6,384,080.73 | 10,479,738.66 |
| Entertainment expenses | 3,437,118.33 | 4,549,777.07 |
| Others | 12,903,168.56 | 11,413,931.17 |
| Total | 870,713,899.32 | 865,792,078.61 |
| Item | 2020 | 2019 |
| Salary | 196,350,562.99 | 170,242,331.00 |
| Depreciation and amortization | 25,865,228.70 | 30,001,693.96 |
| Travel expenses | 3,537,267.52 | 7,543,194.55 |
| Office expenses | 4,446,219.38 | 3,966,450.49 |
| Agents fees | 5,371,712.37 | 5,146,625.69 |
| Rental and utilities | 1,007,513.11 | 6,140,097.22 |
| Others | 19,980,623.16 | 17,579,596.13 |
| Total | 256,559,127.23 | 240,619,989.04 |
| Item | 2020 | 2019 |
| Salary | 32,217,390.03 | 25,225,831.95 |
| Material and mould | 1,517,998.88 | 1,654,367.12 |
| Sample fee | 1,434,612.19 | 1,874,392.46 |
| Depreciation and amortization | 6,397,967.06 | 5,120,979.03 |
| Technical cooperation fee | 4,768,053.72 | 5,488,880.26 |
| Others | 5,153,301.61 | 5,693,289.43 |
| Total | 51,489,323.49 | 45,057,740.25 |
| Item | 2020 | 2019 |
| Total interest expenses | 21,315,119.78 | 23,975,351.93 |
| Less: Interest capitalization | - | - |
| Interest income | 4,941,334.19 | 1,956,316.52 |
| Exchange gain | 3,896,579.87 | -2,920.03 |
| Bank charges | 13,178,910.95 | 10,799,162.19 |
| Total | 33,449,276.41 | 32,815,277.57 |
| Item | 2020 | 2019 | Asset or income related |
| Special fund of Nanshan district to support self-innovation industry development | 4,526,600.00 | 918,600.00 | income related |
| Subsidy for stabilizing job position | 3,743,398.00 | 209,468.63 | income related |
| Headquarters enterprise award | 2,872,900.00 | 4,843,500.00 | income related |
| Special fund of Nanshan district Industrial and Information Bureau to support trading industry | 2,592,300.00 | - | income related |
| Quality and Branding Promotion Subsidy for 2020 Technique Multiplication Subsidy Plan | 2,400,000.00 | - | income related |
| Guangdong Provincial Science and Technology Innovation Strategy Fund | 1,000,000.00 | - | income related |
| Subsidy to support sales promotion | 1,000,000.00 | - | income related |
| 2019 Shenzhen Standard Special Fund | 979,160.00 | - | income related |
| Economic development special fund of Guangming District to support intellectual property right, standardization certification project | 677,000.00 | 1,033,000.00 | income related |
| Training subsidy | 611,500.00 | - | income related |
| Chengdu Social Insurance Management Bureau Subsidy to stabilize job position | 70,948.61 | - | income related |
| Corporate Research and Development Funding | 571,000.00 | 3,156,000.00 | income related |
| Plan to subsidy industrial internet development | 520,000.00 | - | income related |
| Central government foreign trade development special fund | 446,964.00 | - | income related |
| Commission on IIT payment | 370,789.08 | 469,005.01 | income related |
| R&D project subsidy | 355,000.00 | - | income related |
| Special subsidy to Shenzhen intelligence property right area | 300,000.00 | - | income related |
| State certified R&D center | 293,147.06 | 293,147.06 | Asset related |
| 2019 Nanshan District self-innovation industry development subsidy | 209,500.00 | - | income related |
| Associate subsidy to China patent excellence award | 200,000.00 | 300,000.00 | income related |
| Special fund for Shenzhen industrial designing | 178,635.97 | 203,066.21 | Asset related |
| Subsidy for SME to expanding market | 176,920.00 | 387,940.49 | income related |
| Provincial industry and information special subsidy | 130,551.48 | 130,551.49 | Asset related |
| Social insurance subsidy | 101,300.00 | - | income related |
| Nanshan Industrial and Information Bureau subsidy for rental | 100,000.00 | - | income related |
| Overseas exhibition key support project | 72,105.56 | - | income related |
| Promoting of consumable product standard and quality | 66,037.74 | - | income related |
| Maternity insurance | 56,449.40 | 100,789.68 | income related |
| State level high and new technology certificate subsidy | 50,000.00 | 30,000.00 | income related |
| Short term export credit insurance | 42,723.00 | 20,200.00 | income related |
| Special subsidy to promoting consuming | - | 1,655,200.00 | income related |
| Subsidy to projects of economic development special fund | - | 286,000.00 | income related |
| Subsidy to support investment in R&D and domestic economic and trading exhibition | - | 669,545.00 | income related |
| Nanshan Economic Promoting Bureau subsidy for SME | - | 100,000.00 | income related |
| Expanding production and improving efficiency | - | 300,000.00 | income related |
| Promotion of human resource quality | - | 100,000.00 | income related |
| Subsidy to support innovation development for business and trading | - | 712,664.00 | income related |
| Shenzhen Standard Special Fund | - | 543,000.00 | income related |
| Shenzhen Science and Technology Award | - | 300,000.00 | income related |
| Examine intellectual property right using big data | - | 500,000.00 | income related |
| Basel watch fair subsidy | - | 114,333.32 | income related |
| Subsidy to support major enterprise to expanding production and improving efficiency | - | 1,000,000.00 | income related |
| Other subsidies | 455,467.19 | 52,895.29 | income related |
| Total | 25,170,397.09 | 18,428,906.18 | —— |
| Item | 2020 | 2019 |
| Gain from long-term equity investments accounted for using the equity method | 5,072,577.64 | 1,787,907.10 |
| Item | 2020 | 2019 |
| Bad debt for bills receivable | -1,434,342.44 | -217,182.73 |
| Bad debt for accounts receivable | -6,626,580.06 | - 16,346,637.18 |
| Bad debt for other receivables | -1,036,000.24 | -77,141.16 |
| Total | -9,096,922.74 | - 16,640,961.07 |
| Item | 2020 | 2019 |
| Inventory decline in value | -15,426,526.41 | -4,295,134.48 |
| Item | 2020 | 2019 |
| Gains from assets disposal (“-“ for loss) | -369,857.30 | -926,118.60 |
| Item | 2020 | 2019 | Amount included in non-recurring gains or losses in current period |
| Compensation | 1,751,149.83 | 2,700,000.00 | 1,751,149.83 |
| Payables cannot be paid | 448,719.74 | 275,162.46 | 448,719.74 |
| Others | 911,544.07 | 1,778,942.84 | 911,544.07 |
| Total | 3,111,413.64 | 4,754,105.30 | 3,111,413.64 |
| Item | 2020 | 2019 | Amount included in non-recurring gains or losses in current period |
| Fine | 1,032.13 | 44,727.07 | 1,032.13 |
| Donation | - | 200,000.00 | - |
| Liquidated damages | 525,343.36 | 383,283.33 | 525,343.36 |
| Others | 1,028,737.37 | 772,178.47 | 1,028,737.37 |
| Total | 1,555,112.86 | 1,400,188.87 | 1,555,112.86 |
| Item | 2020 | 2019 |
| Current tax expense for the year based on tax law and regulations | 74,701,341.52 | 42,132,064.04 |
| Changes in deferred tax assets/liabilities | 4,637,175.08 | 18,192,565.21 |
| Total | 79,338,516.60 | 60,324,629.25 |
| Item | 2020 | 2019 |
| Profits before tax | 373,460,618.84 | 276,233,643.40 |
| Income tax calculated based on statutory tax rate | 93,365,154.71 | 69,058,410.86 |
| Effect of different tax rates applied by subsidiaries | -10,089,238.59 | -4,251,519.66 |
| Adjustment to income tax of previous years | 966,634.19 | 965,521.61 |
| Effect of gains or losses from joint ventures and associates accounted for using the equity method | -1,244,207.02 | -385,693.68 |
| Effect of non-taxable income (use “- “for presentation) | - | - |
| Effect of non-deductible costs, expenses and losses | 863,320.48 | 1,178,297.49 |
| Effect on opening balance of deferred tax due to changes in tax rate | - | - |
| Effect of using the deductible temporary differences or deductible losses for which no deferred tax asset was recognized in previous (use “-“ for presentation) | -683,495.29 | - |
| Effect of deductible temporary differences or deductible losses for which no deferred tax asset was recognized this year | - | 174,634.92 |
| Effect of research and development expenses super deduction (use “-“ for presentation) | -3,839,651.88 | -6,415,022.29 |
| Others | - | - |
| Income tax expenses | 79,338,516.60 | 60,324,629.25 |
| Item | 2020 | 2019 |
| Government grant | 29,643,860.40 | 17,802,141.42 |
| Promotion expenses | 12,486,890.27 | 14,023,190.48 |
| Security deposit | 16,369,729.33 | 31,127,235.94 |
| Interest income | 4,941,334.19 | 1,956,316.52 |
| Return of petty cash | 5,503,961.77 | 3,817,075.69 |
| Penalty | 631,987.23 | 4,298,036.35 |
| Legal action security | - | 8,958,057.64 |
| Others | 8,424,049.26 | 11,850,325.81 |
| Total | 78,001,812.45 | 93,832,379.85 |
| Item | 2020 | 2019 |
| Current period expenses | 433,410,006.32 | 478,806,783.39 |
| Security deposit | 13,371,641.24 | 4,393,654.88 |
| Petty cash advanced to employee | 8,618,216.90 | 734,763.81 |
| Others | 2,258,442.62 | 4,118,260.73 |
| Total | 457,658,307.08 | 488,053,462.81 |
| Item | 2020 | 2019 |
| Cash paid for re-purchase of shares | 72,317,669.93 | 53,117,325.02 |
| Item | 2020 | 2019 |
| 1. Reconciliation of net profit/loss to cash flows from operating activities： | ||
| Net profit | 294,122,102.24 | 215,909,014.15 |
| Add: Impairment for assets | 15,426,526.41 | 4,295,134.48 |
| Credit impairment loss | 9,096,922.74 | 16,640,961.07 |
| Depreciation of fixed assets, and investment property | 42,147,350.05 | 44,206,119.17 |
| Intangible asset amortization | 8,011,446.67 | 6,897,790.40 |
| Amortization of long-term deferred expenses | 107,402,300.57 | 102,881,563.21 |
| Loss on disposal of fixed assets, intangible assets, and other long-term assets (“-“ for gain) | 369,857.30 | 926,118.60 |
| Loss on scrap of fixed assets (“-“ for gain) | - | - |
| Loss on changes of fair value (“-“ for gain) | - | - |
| Financial expenses (“-“ for income) | 21,315,119.78 | 23,975,351.93 |
| Investment loss (“-“ for gain) | -5,072,577.64 | -1,787,907.10 |
| Decrease in deferred tax assets (“-“ for increase) | 2,825,583.02 | 16,936,322.72 |
| Increase in deferred tax liabilities (“-“ for decrease) | 1,811,592.06 | 1,256,242.49 |
| Decrease in inventories (“-“ for increase) | -137,479,263.64 | -30,808,922.70 |
| Decrease in operating receivables (“-“ for increase) | -137,884,765.44 | -41,745,826.01 |
| Increase in operating payables (“-“ for decrease) | 156,118,311.75 | 85,238,806.20 |
| Others | - | - |
| Net cash flows from operating activities | 378,210,505.87 | 444,820,768.61 |
| 2. Significant investment or financing activities not involving cash: | ||
| Debts converted to capital | - | - |
| Convertible debts mature within one year | - | - |
| Fixed assets acquired under finance leases | - | - |
| 3. Net changes in cash and cash equivalents: | ||
| Cash at end of year | 353,057,285.71 | 315,093,565.09 |
| Less: cash at beginning of year | 315,093,565.09 | 162,623,059.97 |
| Plus: cash equivalents at end of year | - | - |
| Less: cash equivalents at beginning of year | - | - |
| Net increase in cash and cash equivalents | 37,963,720.62 | 152,470,505.12 |
| Item | 31/12/2020 | 31/12/2019 |
| I. Cash | 353,057,285.71 | 315,093,565.09 |
| Incl. Cash on hand | 183,759.72 | 229,258.38 |
| Bank deposit available for immediate payment | 346,055,209.29 | 285,306,297.62 |
| Other monetary funds available for immediate payment | 6,818,316.70 | 29,558,009.09 |
| II. Cash equivalents | - | - |
| Including Bond investment due in three months | - | - |
| III. Cash and cash equivalents at the end of year | 353,057,285.71 | 315,093,565.09 |
| Including Restricted cash and cash equivalents for the Company and its subsidiaries | 3,412,028.94 | 3,641,389.51 |
| Item | Carrying amount as at 31 Dec 2020 | Reason |
| Fixed assets | 13,441,613.20 | Mortgaged |
| Bills receivable | 16,804,987.88 | Factored |
| Total | 30,246,601.08 | —— |
| Item | Balance denominated in foreign currency as at 31 Dec 2020 | Exchange rate | Balance translated in RMB as at 31 Dec 2020 |
| Cash and bank balances | |||
| Including: HKD | 19,526,414.16 | 0.8416 | 16,434,216.67 |
| USD | 3,191,547.66 | 6.5249 | 20,824,529.31 |
| EUR | 99,692.46 | 8.0250 | 800,031.99 |
| CHF | 426,309.51 | 7.4006 | 3,150,097.52 |
| Accounts receivable | |||
| Including: HKD | 1,405,271.07 | 0.8416 | 1,182,676.13 |
| USD | 434,640.09 | 6.5249 | 2,835,983.12 |
| EUR | 104,833.90 | 8.0250 | 841,292.05 |
| CHF | 2,242,072.50 | 7.4006 | 16,592,681.74 |
| Other receivables | |||
| Including: HKD | 146,580.92 | 0.8416 | 123,362.50 |
| Short-term loans | |||
| Including: CHF | 401,295.41 | 7.4006 | 2,969,826.81 |
| Accounts payable | |||
| Including: HKD | 2,134,375.70 | 0.8416 | 1,796,290.59 |
| CHF | 357,717.33 | 7.4006 | 2,647,322.87 |
| Non-current liabilities due within one year | |||
| Including: CHF | 50,000.00 | 7.4006 | 370,030.00 |
| Long-term loans | |||
| Including: CHF | 550,000.00 | 7.4006 | 4,070,330.00 |
| Item | Type | As at 31/12/2019 | Additions during the year | Recognition in profit and loss | Other changes | As at 31/12/2020 | Income statement item that recognized in | Related to asset/income |
| Special fund for Shenzhen industrial design industry development (A) | State treasury | 729,945.01 | - | 178,635.97 | - | 551,309.04 | Other income | Asset related |
| Funding project for construction of National Enterprise Technology Center (B) | State treasury | 1,218,274.51 | - | 293,147.06 | - | 925,127.45 | Other income | Asset related |
| 2017 Provincial Specialized Fund for Industrial and Information Technology (C) | State treasury | 1,031,833.34 | - | 130,551.48 | - | 901,281.86 | Other income | Income related |
| Special funds for consumer goods standards and quality improvement | State treasury | 66,037.74 | - | 66,037.74 | - | - | Other income | Income related |
| Others | State treasury | - | 609,576.69 | 70,948.61 | - | 538,628.08 | Other income | Income related |
| Total | 3,046,090.60 | 609,576.69 | 739,320.86 | - | 2,916,346.43 |
| Item | Type | Recognised in profit and loss for the year ended 31/12/2019 | Recognised in profit and loss for the year ended 31/12/2020 | Presentation item recognized in profit and loss | Related to asset/income |
| Special fund of Nanshan district to support self-innovation industry development(A) | State treasury | 918,600.00 | 4,526,600.00 | Other income | Income related |
| Subsidy for stabilizing job position | State treasury | 209,468.63 | 3,743,398.00 | Other income | Income related |
| Headquarters enterprise award(B) | State treasury | 4,843,500.00 | 2,872,900.00 | Other income | Income related |
| Special fund of Nanshan District Industrial and Information Bureau to support trading industry(C) | State treasury | - | 2,592,300.00 | Other income | Income related |
| Quality and Branding Promotion Subsidy for 2020 Technique Multiplication Subsidy Plan (D) | State treasury | - | 2,400,000.00 | Other income | Income related |
| Guangdong Provincial Science and Technology Innovation Strategy Fund(E) | State treasury | - | 1,000,000.00 | Other income | Income related |
| Subsidy to support sales promotion(F) | State treasury | - | 1,000,000.00 | Other income | Income related |
| 2019 Shenzhen Standard Special Fund(G) | State treasury | - | 979,160.00 | Other income | Income related |
| Economic development special fund of Guangming District to support intellectual property right, standardization certification project(H) | State treasury | 1,033,000.00 | 677,000.00 | Other income | Income related |
| Training subsidy(I) | State treasury | - | 611,500.00 | Other income | Income related |
| Corporate Research and Development Funding(J) | State treasury | 3,156,000.00 | 571,000.00 | Other income | Income related |
| Plan to subsidy industrial internet development(K) | State treasury | - | 520,000.00 | Other income | Income related |
| Central government foreign trade development special fund(L) | State treasury | - | 446,964.00 | Other income | Income related |
| Commission on IIT payment | State treasury | 469,005.01 | 370,789.08 | Other income | Income related |
| R&D project subsidy(M) | State treasury | - | 355,000.00 | Other income | Income related |
| Special subsidy to Shenzhen intelligence property right area(N) | State treasury | - | 300,000.00 | Other income | Income related |
| 2019 Nanshan District self-innovation industry development subsidy(O) | State treasury | - | 209,500.00 | Other income | Income related |
| Associate subsidy to China patent excellence award(P) | State treasury | 300,000.00 | 200,000.00 | Other income | Income related |
| Subsidy for SME to expanding market(Q) | State treasury | 387,940.49 | 176,920.00 | Other income | Income related |
| Social insurance subsidy(R) | State treasury | - | 101,300.00 | Other income | Income related |
| Nanshan Industrial and Information Bureau subsidy to lease(S) | State treasury | - | 100,000.00 | Other income | Income related |
| Overseas exhibition key support project(T) | State treasury | - | 72,105.56 | Other income | Income related |
| Maternity insurance | State treasury | 100,789.68 | 56,449.40 | Other income | Income related |
| State level high and new technology certificate subsidy(U) | State treasury | 30,000.00 | 50,000.00 | Other income | Income related |
| Short term export credit insurance(V) | State treasury | 20,200.00 | 42,723.00 | Other income | Income related |
| Special subsidy to promoting consumption | State treasury | 1,655,200.00 | - | Other income | Income related |
| Subsidy to projects of | State treasury | 286,000.00 | - | Other income | Income related |
| economic development special fund | |||||
| Subsidy to support investment in R&D and domestic economic and trading exhibition | State treasury | 669,545.00 | - | Other income | Income related |
| Nanshan Economic Promoting Bureau subsidy for SME | State treasury | 100,000.00 | - | Other income | Income related |
| Expanding production and improving efficiency | State treasury | 300,000.00 | - | Other income | Income related |
| Promotion of human resource quality | State treasury | 100,000.00 | - | Other income | Income related |
| Subsidy to support innovation development for business and trading | State treasury | 712,664.00 | - | Other income | Income related |
| Shenzhen Standard Special Fund | State treasury | 543,000.00 | - | Other income | Income related |
| Shenzhen Science and Technology Award | State treasury | 300,000.00 | - | Other income | Income related |
| Examine intellectual property right using big data | State treasury | 500,000.00 | - | Other income | Income related |
| Basel watch fair subsidy | State treasury | 114,333.32 | - | Other income | Income related |
| Subsidy to support major enterprise to expanding production and improving efficiency | State treasury | 1,000,000.00 | - | Other income | Income related |
| Special fund for Shenzhen industrial design industry development | State treasury | 203,066.21 | 178,635.97 | Other income | Asset related |
| Funding project for construction of National Enterprise Technology Center | State treasury | 293,147.06 | 293,147.06 | Other income | Asset related |
| 2017 Provincial Specialized Fund for Industrial and Information Technology | State treasury | 130,551.49 | 130,551.48 | Other income | Income related |
| Special funds for consumer goods standards and quality improvement | State treasury | - | 66,037.74 | Other income | Income related |
| Other subsidies | State treasury | 52,895.29 | 526,415.80 | Other income | Income related |
| Total | —— | 18,428,906.18 | 25,170,397.09 | —— | —— |
Shenzhen Technique Improvement Special Project” (Shen Gongxin Gui (2019) No. 3.E. It is 2020 provincial science and technology innovation strategy project fund obtained according to “Notice of Department ofScience and Technology of Guangdong Province Regarding Circulating Guideline of 2020-2021 Science and TechnologyCooperation Platform”F. It is award of promoting consuming received according to “Various Measures to Promoting Growth of Consuming” (Shen FuHan (2018) No. 392.G. It is special fund award received from Shenzhen standard area 2019 according to “Operating Guideline of Shenzhen Standard
Area Special Fund Award of Shenzhen Municipal Market Supervision and Management Bureau” (Shen Shi Jian Gui (2019) No.
2).
H. It is based on the "Guangming District Economic Development Special Fund Management Measures" (Shenguang Fugui [2019]
No. 14), "Shenzhen Guangming District Intellectual Property, Standardization, Measurement Certification, Quality Support
Operating Regulations" (Shenzhen Jianguang [2020] No. 122) and "Notice of Guangming Supervision Bureau of Shenzhen
Municipal Market Supervision Administration on Printing and Distributing "Guidelines for Application of Special Funds for
Economic Development of Shenzhen Municipal Market Supervision Bureau Guangming Supervision Bureau in Support of
Intellectual Property, Standardization, and Measurement Certification Projects>" (Shenzhen City Supervision Bureau) Guang
[2019] No. 160) and other documents stipulate that the Group received special support funds for economic development, the
Guangdong Industry Fair exhibition subsidy funds, the Guangxi Fair subsidy funds, the national high-certified enterprise
subsidies, and the Swiss Basel World participation in the Guangming District enterprise qualification awards, etc. .I. It is based on the "Notice of the Guangdong Provincial Department of Human Resources and Social Security and the
Guangdong Provincial Department of Finance on Doing a Good Job in Training Vocational Training Work" (Yue Ren She Gui
[2020] No. 38) and the "Resolution To do a good job in the relevant provisions of the "Notice on Vocational Training Work for
Workers", the 6th batch of vocational skills promotion (for worker training) subsidies in Nanshan District in 2020 has been
obtained..J. It is obtained according to “Measures to Promoting Science Innovation” (Shen fa (2016) No.7) and “Management Measures of
Shenzhen Science and Technology Research and Development Fund” issued by Shenzhen Finance Committee and Shenzhen
Science and Technology Innovation Committee.K. It is subsidy received according to “Notice of Circulating Shenzhen Industrial Internet Development Action Plan (2018-2020)
and Associated Measures” (Shen Fu Ban Gui (2018) No. 7.L. It is foreign trade development special fund received according to “Notice of Key Work of 2019 Foreign Trade Development
Special Fund” (Cai Xing (2019) No. 137.M. It is obtained according to “Measures to Administrate Shenzhen R&D Funded Project and Hi-Tech Enterprise Foster Project”
issued by Shenzhen Science and Technology Innovation Committee.N. It is China Patent Award and award to State Intellectual Property Right Advantage Enterprise obtained according to “Shenzhen
Municipal Treasury Special Fund Administration Measures” (Shen fu Gui (2018) No. 2), “Shenzhen Municipal Market
Supervision and Administration Special Fund Administration Measures” (Shen Shi Jian Gui (2020) No. 3, and “Shenzhen
Municipal Market Supervision and Administration Special Fund to Intellectual Property Right Area” (Shen Shi JianGui (2019)
No. 10.O. It is 2019 Nanshan patent supporting special fund received according to “Administration Measures to Nanshan Self-innovation
Industrial Development Special Fund” (Shennan Fuban Gui (2019) No. 2 and “Implementation Details of Nanshan Self-
innovation Industrial Development Special Fund”.P. It is associated patent award obtained from Shenzhen Market Supervision and Administration Bureau according to the
“Decision on the Award of the 20th China Patent Award” issued by the State Intellectual Property Office (Guo Zhi Fa Guan Zi
[2018] No. 36).Q. It is 2020 domestic market expanding subsidy fund received according to “Administration Measures to Shenzhen Private and
SME Development Special Fund” (Shen Jingmao Xinxi Gui (2017) No. 8) and “Operating Guideline to Supporting Plan of
Shenzhen Private and SME” (Shen Gongxin Gui (2019) No. 13.R. It is social insurance subsidy received according to “Notice of Application of Implementing Supporting Enterprise and
Stabalizing Job Positions ‘Four Increase’ Enterprise Social Insurance”.
S. It is rental subsidy received according to “Notice of Circulating Supporting Measures to Jointly Go Through COVID-19Pandemic”.T. It is subsidy received to support 2019 Swiss Basel World Watch and Jewelry Exhibition according to “Various Measure to
Support Enterprise to Improve Competitive Strength” (Shen Fa (2016) No. 8, “Notice of Circulating Measures to StabalizeForeign Trade, Adjusting Structure and Improve Quality” (Shen Fu (2017) No. 63).U. It is award for obtaining High and New Technology Certificate according to “Administration Measures to Subsidy ShenzhenR&D Funded Project and Hi-Tech Enterprise Foster Project” (Shen Keji Chuangxin Gui (2019) No.5 and “Notice of Distributing2019 State Hi- and New Technology Certification Fund”.V. It is short-term export insurance subsidy received according to “Shenzhen Foreign Trade Improving and Structure Adjusting
Measures” (Shen Fu (2017 No. 63).
(3) Government grant presented using net method
| Item | Type | Amount in prior period | Amount in current period | Offset item | Asset/income related |
| Subsidized interest (A) | State treasury | - | 4,603,207.48 | Finance expense | Income related |
| Subsidy to electricity fee (B) | State treasury | 865,721.20 | 860,524.00 | Administration expenses | Income related |
| Total | —— | 865,721.20 | 5,463,731.48 | —— | —— |
| Name of subsidiary | Main business location | Place of registration | Nature of business | Shareholding ratio% | Ways acquired | |
| Direct | Indirect | |||||
| HARMONY Company | Shenzhen | Shenzhen | Commerce | 100.00 | - | Establishment or investment |
| Precision Technology Company | Shenzhen | Shenzhen | Manufacture | 99.00 | 1.00 | Establishment or investment |
| FIYTA Hong Kong | Hong Kong | Hong Kong | Commerce | 100.00 | - | Establishment or investment |
| Station 68 | Hong Kong | Hong Kong | Commerce | - | 60.00 | Establishment or investment |
| E-commerce Company | Shenzhen | Shenzhen | Commerce | 100.00 | - | Establishment or investment |
| Technology Company | Shenzhen | Shenzhen | Manufacture | 100.00 | - | Establishment or investment |
| TEMPORAL Company | Shenzhen | Shenzhen | Commerce | 100.00 | - | Establishment or investment |
| Emile Choureit Shenzhen Company | Shenzhen | Shenzhen | Commerce | 100.00 | - | Establishment or investment |
| FIYTA Sales Company | Shenzhen | Shenzhen | Commerce | 100.00 | - | Establishment or investment |
| Hengdarui Company | Shenyang | Shenyang | Commerce | 100.00 | - | Business combination under common control |
| Swiss Company | Switzerland | Switzerland | Commerce | - | 100.00 | Business combination not under common control |
| Name | Principal place of business | Registration place | Business nature | Shareholding ratio (%) | Accounting treatment for associates | |
| Direct | Indirect | |||||
| Shanghai Watch | Shanghai | Shanghai | Manufacture | 25.00 | - | Equity method |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Current assets | 142,137,359.85 | 117,096,911.21 |
| Non-current assets | 13,783,021.02 | 13,556,720.58 |
| Total assets | 155,920,380.87 | 130,653,631.79 |
| Current liabilities | 35,999,813.24 | 22,661,506.61 |
| Non-current liabilities | - | 7,978,869.84 |
| Total liabilities | 35,999,813.24 | 30,640,376.45 |
| Net assets | 119,920,567.63 | 100,013,255.34 |
| Including: minority shareholder’s interest | - | - |
| Owners’ equity attributable to parent company | 119,920,567.63 | 100,013,255.34 |
| Portion of net asset calculated based on shareholding | 29,980,141.91 | 25,003,313.84 |
| Adjustment matters | ||
| - Goodwill | - | - |
| - Unrealized profit or losses from internal transaction | - | - |
| - impairment provisions | - | - |
| - Others | - | - |
| Carrying value of investment to associates | 51,400,665.92 | 46,423,837.85 |
| Fair value of equity investment that has public quotation | - | - |
Continued:
| Item | 2020 | 2019 |
| Operating income | 96,146,565.15 | 101,660,357.29 |
| Net profit | 19,907,312.29 | 6,171,098.80 |
| Net profit from discontinued operation | - | - |
| Other comprehensive income | - | - |
| Total comprehensive income | 19,907,312.29 | 6,171,098.80 |
| Dividends received from associated company during the year | - | - |
evaluating and avoiding certain risks. The Group’s internal audit department will audit the risk management control and proceduresregularly and report the result to audit committee of the Group.The Group spreads risks through diverse investment and business lines, and through making risk management policy to reduce risksof single industry, specific area and counterpart.
(1) Credit risks
Credit risk refers to risk associated with the default of contract obligation of a transaction counterparty.The Group manages credit risk based category. Credit risks mainly arose from bank deposit, bills receivable, accounts receivable,and other receivables.The Group’s bank deposit mainly deposits in banks with good reputation and with higher credit rating. The Group anticipated that thebank deposit does not have significant credit risk.For bill receivable, accounts receivables and other receivables, the Group set related policies to control exposure of credit risks. TheGroup evaluate client’s credit quality and set related credit period based on the client’s financial status, credit records and otherfactors such as current market situation etc. The Group keep monitor the client’s credit record and for client with deteriorate creditrecords, the Group will ensure the credit risk is under control in whole by means of written notice of payment collection, shorten orcancel credit period.The Group’s debtor spread over different industry and area. The Group continued to assess the credit evaluation to receivables andpurchase credit guarantee insurance if necessary.The biggest credit risk exposure of the Group is the carrying amount of each financial assets in the balance sheet. The Group alsofaces credit risks because of providing financial guarantee. Refer to Note XII. 2 for details.The amount of top 5 accounts receivable of the Group accounted for 31.28% (2019: 25.39%) of the Group’s total accountsreceivables. The amount of top 5 other receivable of the Group accounted for 34.96% (2019: 40.94%) of the Group’s total otherreceivables.
(2) Liquidity risk
Liquidity risk refers to the risks that the Group will not be able to meet its obligations associated with its financial liabilities that aresettled by delivering cash or other financial assets.Regarding to the management of liquidity risk, the subsidiaries of the Group are responsible for cash flow forecast. The Group’sfinance center monitors cash and cash equivalents to meet operational needs at group level based on subsidiaries’ cash forecast.The Group set up cash pool with major banks to arrange the Group’s cash and ensure that each subsidiary has sufficient cashreserve to fulfil payment liability. Besides, the Group also signed facility agreement with banks to support the Group to fulfil liabilitiesfall due.Operating cash were generated from daily operation and bank loan. As of 31 December 2020, the Group’s unused bank loan creditis RMB1,104.43million (2019: 1,970.39 million)As at the period end, the financial liabilities of the Group at the reporting date are analysed by their maturity date as below at theirundiscounted contractual cash flows (in ten thousand RMB):
| Item | As at 31/12/2020 | ||||
| Within 1 year | 1-2 years | 2-3 years | Over 3 years | Total | |
| Financial liabilities: | |||||
| Short-term loans | 55,023.98 | - | - | - | 55,023.98 |
| Bills payable | 358.14 | - | - | - | 358.14 |
| Accounts payable | 30,121.15 | - | - | - | 30,121.15 |
| Other payables | 12,693.81 | - | 163.95 | - | 12,857.76 |
| Non-current liabilities due in one year | 38.11 | - | - | - | 38.11 |
| Long-term loans | 13.33 | 419.24 | - | - | 432.57 |
| Total financial liabilities | 98,248.52 | 419.24 | 163.95 | - | 98,831.71 |
| Item | As at 31/12/2019 | ||||
| Within 1 year | 1-2 years | 2-3 years | Over 3 years | Total | |
| Financial liabilities: | |||||
| Short-term loans | 57,945.57 | - | - | - | 57,945.57 |
| Accounts payable | 27,977.28 | - | - | - | 27,977.28 |
| Other payables | 11,876.85 | - | - | 84.82 | 11,961.67 |
| Non-current liabilities due in one year | 37.09 | - | - | - | 37.09 |
| Long-term loans | 12.97 | 11.89 | 441.62 | - | 466.48 |
| Total financial liabilities | 97,849.76 | 11.89 | 441.62 | 84.82 | 98,388.09 |
and to maintain an appropriate combination of financial instruments at fixed rate and floating rate through regular reviews andmonitors.The Group’s finance department continuously monitors the interest rate position of the Group. The Group did not enter into anyinterest rate hedging arrangements. But the management is responsible to monitor the risks of interest rate and consider to hedgesignificant interest risk if necessary. Increase in interest rates will increase the cost of new borrowing and the interest expenses withrespect to the Group’s outstanding floating rate interest-bearing borrowings, and therefore could have a material adverse effect onthe Group’s financial result. The management will make adjustments with reference to the latest market conditions. Theseadjustments may include enter into interest swap agreement to mitigate its exposure to the interest rate risk.Interest bearing financial instrument held by the Group are as follows (in ten thousand RMB):
| Item | 2020 | 2019 | |
| Fixed interest rate | |||
| Financial liabilities | |||
| Including: short term loans | 27,539.02 | 48,710.37 | |
| Long term loans | 444.04 | 468.18 | |
| Subtotal | 27,983.06 | 49,178.55 | |
| Floating interest rate: | |||
| Financial liabilities | |||
| Including: short term loans | 25,000.00 | 8,000.00 | |
| Total | 52,983.06 | 57,178.55 | |
Company which uses HKD for settlement. But risks also exist for the Group’s asset and liability denominated in foreign currency andfuture foreign exchange transaction.The following table details the financial assets and liabilities held by the Group which denominated in foreign currencies andtranslated to RMB as at 31 December 2020 are as follows (in RMB ten thousands):
| Item | Liabilities denominated in foreign currency | Asset denominated in foreign currency | ||
| 31/12/2020 | 31/12/2019 | 31/12/2020 | 31/12/2019 | |
| USD | - | - | 2,366.05 | 4,601.89 |
| HKD | 179.63 | 1,939.47 | 1,774.03 | 1,072.77 |
| CHF | 1,005.75 | 1,700.89 | 1,974.28 | 3,497.65 |
| EUR | - | - | 164.13 | 359.81 |
| Total | 1,185.38 | 3,640.36 | 6,278.49 | 9,532.12 |
1. Fair value of assets and liabilities measured at fair value
As at 31 December 2020, assets and liabilities measured at fair value are shown as follows:
| Item | Level 1 fair value measurement | Level 2 fair value measurement | Level 3 fair value measurement | Total |
| I.Recurring fair value measurement | ||||
| (I) other equity instrument investment | - | - | 85,000.00 | 85,000.00 |
| Name | Registration place | Type of business | Registered capital (in ten thousand RMB) | Shareholding ratio of parent company to the Company % | Ratio of vote right of parent company to the Company% |
| China National Aviation Group | Shenzhen | Investment in industries, domestic trade, material supply and distribution | 116,616.20 | 38.07 | 38.07 |
| Name | Relationship with the Group |
| Shenzhen CATIC Property Management Limited (CATIC Property Management) | Associate company of the controlling shareholder |
| Shenzhen CATIC Building Equipment Co., Ltd. (CATIC Building Company) | Associate company of the controlling shareholder |
| Shenzhen CATIC Nanguang Elevator Engineering Co., Ltd. (CATIC Nanguang) | Associate company of the controlling shareholder |
| China Merchants Property Operation & Service Co., Ltd (China Merchants Property OS) | Associate company of the controlling shareholder |
| CATIC Guanlan Property Development Co., Ltd. (CATIC Guanlan Property) | Associate company of the controlling shareholder |
| China Merchants Jiufang Asset Management Limited (CATIC Jiufang Asset Mgmt Company) | Associate company of the controlling shareholder |
| Shenzhen CATIC City Investment Co., Ltd (CATIC City Investment) | Associate company of the controlling shareholder |
| Ganzhou CATIC 9 Square Trading Co, Ltd (Ganzhou 9 Square Company) | Associate company of the controlling shareholder |
| CATIC City Estate (Kunshan) Co, Ltd (Kunshan Company) | Associate company of the controlling shareholder |
| Shenzhen AVIC Security Service Co., Ltd (AVIC Security Service) | Associate company of the controlling shareholder |
| Jiujiang 9 Square Business Management Co., Ltd (Jiujiang 9 Square Business Management) | Associate company of the controlling shareholder |
| Shenzhen CATIC Property Development Co., Ltd (CATIC Property) | Associate company of the controlling shareholder |
| AVIC Shanxi Bocheng Aviation Instrument Co., Ltd. (AVIC Baocheng) | Controlled by the same party |
| Rainbow Digital Science Co., Ltd. and its associated companies (Rainbow Company) | Controlled by the same party |
| Shennan Circuits Co., Ltd. and its associated companies (Shennan Circuits) | Controlled by the same party |
| AVIC Lutong Co., Ltd.(AVIC Lutong) | Controlled by the same party |
| AVIC International Aero-Development Corporation(AVIC Int’l Aero Development) | Controlled by the same party |
| AVIC Huadong Photoelectric Co., Ltd.(AVIC Huadong Photoelectric) | Controlled by the same party |
| AVIC Xi’an Flight Automatic Control Research Institute(AVIC Xi’an Flight Institute) | Controlled by the same party |
| AVIC Jincheng Nanjing Engineering Institute of Aircraft System(AVIC Jincheng Nanjing Institute) | Controlled by the same party |
| AVIC Supply and Distribution Co., Ltd.(AVIC Supply and Distribution) | Controlled by the same party |
| Hubei AVIC Ye Steel Special Steel Sales Co., Ltd.(Hubei AVIC Ye Steel) | Controlled by the same party |
| AVIC (Chengdu) Drone System Co., Ltd. (AVIC Drone) | Controlled by the same party |
| AVIC Harbin Aircraft Industry Group Co., Ltd.(Harbin Aircraft) | Controlled by the same party |
| Shenzhen Grand Skylight Hotel Management Co., Ltd (Grand Skylight Hotel Management Company) | Controlled by the same party |
| Shenzhen CATIC City Real Estate Development Co., Ltd. (CATIC City Real Estate Company) | Controlled by the same party |
| Shenzhen CATIC Huacheng Real Estate Development Co, Ltd (CATIC Huacheng Company) | Controlled by the same party |
| Tianma Micro-electronics Co., Ltd. (Tianma) | Controlled by the same party |
| AVIC Securities Co., Ltd. (AVIC Securities Company) | Controlled by the same party |
| Xi’an Skytel Hotel Co., Ltd. (Skytel Hotel) | Controlled by the same party |
| AVIC Training Center | Controlled by the same party |
| AVIC Finance Co., Ltd. (AVIC Finance Company) | Controlled by the same party |
| Shenzhen CATIC Grand Skylight Hotel Co., Ltd (Grand Skylight Hotel) | Controlled by the same party |
| Gongqingcheng CATIC Culture Investment Co., Ltd (Gongqingcheng CATIC Culture Investment Company) | Controlled by the same party |
| Company directors, managers, CFO, and secretary of the board | Key management member |
| Related party | Nature of transaction | 2020 | 2019 |
| CATIC Property Management | Property management | 11,112,069.09 | 11,480,515.57 |
| Rainbow Company | Department store expenses/ Commodity purchase | 4,841,752.49 | 5,327,244.54 |
| AVIC Training Center | Training fee | 150,000.00 | 159,408.67 |
| Ganzhou 9 Square Company | Department store expense | 182,754.97 | 185,711.09 |
| CATIC City Estate (Kunshan) Company | Department store expense | 50,277.87 | 39,921.62 |
| Jiufang Business Management | Department store expense | 84,262.98 | 54,731.80 |
| AVIC | Purchase of goods | - | 415,077.98 |
| AVIC Information Center | Training expenses | - | 1,603.77 |
| Shanghai Watch | Purchase of goods | - | 6,048.24 |
| Tianma | Purchase of goods | 538,699.11 | 969,091.14 |
| CATIC Building Company | Renovation | 114,002.02 | 17,390.67 |
| Skytel Hotel | Maintenance and management fee | - | 28,886.00 |
| CATIC City Real Estate Company | Department store expense | - | 76,275.91 |
| CATIC Shenzhen Company | Purchase of goods | 451,327.43 | - |
| AVIC Nanguang Company | Elevator maintenance | 245,660.40 | - |
| Related party | Nature of transaction | 2020 | 2019 |
| Rainbow Company | Product and service | 75,021,802.86 | 73,641,080.14 |
| Grand Skylight Hotel Management Company | Sale of product | 17,610.62 | - |
| Ganzhou 9 Square Company | Product and service | - | 93,750.40 |
| Shennan Circuit | Sale of material and providing service | 13,308,898.52 | 10,573,861.17 |
| Gongqingcheng CATIC Culture Investment Company | Sale of product | 398,249.10 | - |
| CASI | Sale of product | 87,484.05 | - |
| CATIC Property Management | Share of Utilities and management fee | 3,406,116.73 | 12,506,097.43 |
| Grand Skylight Hotel | Sale of product | - | 140,867.25 |
| Shanghai Watch | Sale of product | 1,839,880.53 | 4,821,299.97 |
| AVIC Training Center | Others | 2,180.53 | 3,270.80 |
| Harbin Aircraft | Sale of product | 36,398.23 | - |
| AVIC | Sale of product | 84,132.74 | - |
| Hubei AVIC Ye Steel | Sale of product | 17,212.39 | - |
| AVIC Huadong Photoelectric | Sale of product | 266,371.68 | - |
| AVIC Supply and Distribution | Sale of product | 41,504.42 | - |
| AVIC Int’l Aero Development | Sale of product | 140,884.96 | - |
| AVIC Lutong | Sale of product | 14,123.89 | - |
| AVIC Jincheng Nanjing Institute | Sale of product | 176,991.15 | - |
| AVIC Drone | Sale of product | 33,021.24 | - |
| AVIC Xi’an Flight Institute | Sale of product | 7,061.95 | - |
| Jiujiang 9 Square Business Management | Sale of product | 45,374.42 | - |
| Lessee | Type of leased assets | Recognized rental income in current year | Recognized rental income in prior year |
| CATIC Property Management | Property | 6,864,598.93 | 3,972,425.13 |
| China Merchants Property OS | Property | 1,981,713.13 | 1,887,345.86 |
| Skytel Hotel | Property | - | 2,793,650.79 |
| CATIC City Investment) | Property | 285,138.58 | 271,560.56 |
| AVIC Securities Company | Property | 1,328,714.31 | 1,280,028.55 |
| CATIC City Real Estate Company | Property | - | 304,781.46 |
| Rainbow Company | Property | 1,428,372.22 | 684,393.11 |
| CATIC Huacheng Company | Property | - | 239,471.14 |
| CATIC 9 Square Asset Mgmt Company | Property | 1,829,906.11 | 2,023,126.13 |
| AVIC Security Service | Property | 902,359.45 | 1,438,139.41 |
| CATIC Guanlan Property | Property | 142,569.29 | 135,780.28 |
| CATIC Property | Property | 286,326.66 | 272,692.07 |
| Lessor | Type of leased assets | Rental expenses charged in current year | Rental expenses charged in prior year |
| Ganzhou 9 Square Company | Property | 913,674.48 | 894,582.84 |
| Kunshan Company | Property | 111,047.63 | 132,960.04 |
| Jiufang Business Management | Property | 431,504.72 | 320,208.22 |
| CATIC City Real Estate Company | Property | - | 285,668.33 |
| Related Party | Amount | starting date | Expiring date | Note |
| Borrowing from: | ||||
| AVIC Finance Company | 50,000,000.00 | 2019-3-26 | 2020-3-26 | |
| AVIC Finance Company | 50,000,000.00 | 2020-3-26 | 2020-6-23 | |
| AVIC Finance Company | 100,000,000.00 | 2019-4-2 | 2020-4-1 | |
| AVIC Finance Company | 100,000,000.00 | 2020-4-1 | 2020-12-28 | |
| AVIC Finance Company | 60,000,000.00 | 2019-10-25 | 2020-6-9 | |
| AVIC Finance Company | 50,000,000.00 | 2019-3-26 | 2020-3-26 |
The Company has 19 key management personnel in 2020, and 21 (including resigned) key management personnel in 2019.Information about remuneration is as follows:
| Item | 2020 | 2019 | ||
| Remuneration to key management | 17,150,200.00 | 17,845,000.00 | ||
| Item | Related party | As at 31/12/2020 | As at 31/12/2019 | ||
| Carrying amount | Bad debt provision | Carrying amount | Bad debt provision | ||
| Bills receivable | |||||
| Shennan Circuit | 5,083,025.01 | - | 2,263,719.32 | - | |
| Shanxi Bocheng | 50,000.00 | 2,500.00 | - | - | |
| Accounts receivable | |||||
| Rainbow Company | 9,489,446.66 | 285,632.34 | 6,387,871.47 | 318,754.79 | |
| Shennan Circuit | 1,370,425.31 | 41,249.80 | 1,704,634.58 | 85,061.27 | |
| Gongqingcheng CATIC Culture Investment Company | 58,834.76 | - | - | - | |
| CATIC Property Management | 40,947.74 | - | - | - | |
| Shanghai Watch | - | - | 140,000.00 | 6,986.00 | |
| Harbin Aircraft | 20,130.00 | 605.91 | - | - | |
| AVIC Security Service | 0.27 | 0.01 | - | - | |
| Other receivables: | |||||
| Rainbow Company | 1,064,073.00 | 45,648.73 | 975,867.00 | 50,647.50 | |
| Ganzhou 9 Square Company | 189,432.77 | 8,126.67 | 122,665.60 | 6,366.34 | |
| Kunshan Company | 40,000.00 | 1,716.00 | 32,000.00 | 1,660.80 | |
| Gongqingcheng CATIC Culture Investment Company | 7,462.00 | 320.12 | - | - | |
| Jiufang Business Management | 50,000.00 | 2,145.00 | 50,000.00 | 2,595.00 | |
| China National Aviation Group | 11,101.80 | 476.27 | 11,101.80 | 576.18 | |
| CATIC City Real Estate Company | - | - | 59,923.00 | 3,110.00 | |
| AVIC Training Center | 2,464.00 | 74.17 | - | - | |
| Prepayment | |||||
| Tianma | - | - | 31,309.90 | - |
| Item | Related party | As at 31/12/2020 | As at 31/12/2019 |
| Accounts payable: | |||
| CATIC Building Company | - | 23,300.97 | |
| Tianma | - | 3,415.84 | |
| Other payables: | CATIC Property Management | 1,717,018.14 | 1,237,403.65 |
| China Merchants Property OS | 442,407.92 | 442,407.92 | |
| CATIC City Investment | 309,732.00 | 309,732.00 | |
| AVIC Securities Company | 238,560.00 | 213,000.00 | |
| CATIC Building Company | 47,732.93 | 54,691.44 | |
| CATIC City Real Estate Company | - | 99,052.32 | |
| CATIC Huacheng Company | - | 73,819.68 | |
| CATIC Jiufang Asset Mgmt Company | - | 378,483.84 | |
| Rainbow Company | 257,490.98 | 155,672.90 | |
| CATIC Property | 51,014.88 | 51,014.88 | |
| CATIC Guanlan Property | 25,401.60 | 25,401.60 | |
| AVIC Security Service | 226,603.44 | 226,603.44 | |
| Skytel Hotel | - | 28,886.00 | |
| CATIC Nanguang | 25,179.84 | - | |
| Advances from customer | AVIC Huadong Photoelectric | 10,500.00 | - |
| General information about share-based payments | - |
| General information about share-based payments | - |
| Total equity instruments voided in current period | - |
| Scope of outstanding share option exercise price and remaining contract term | First phase restricted share exercise price: RMB4.4/share. The remaining of restricted 4.077 million shares will be unlocked by 33.33% each in January 2021, January 2022 and January 2023. |
| Scope of outstanding other equity instrument exercise price and remaining contract term. | Not applicable |
| Method of determining fair value of equity instrument on grant date | Close price of share on grant date |
| Evidence to determine the number of exercisable equity instrument | Term of employee service, status of target completion, and personal performance assessment |
| Reasons for significant difference between current period estimation and prior period estimation | NIL |
| Accumulated amount charged to capital reserve for equity settled share-based payment | 10,011,227.40 |
| Total expenses for equity settled share-based payment recognized in current period | 5,570,601.49 |
| The total future minimum lease payments under non-cancellable operating leases | As at 31/12/2020 | As at 31/12/2019 |
| Within 1 year | 81,612,695.21 | 69,420,770.36 |
| 1-2 years | 37,104,794.98 | 40,749,688.35 |
| 2-3 years | 16,579,529.38 | 15,620,420.28 |
| After 3 years | 3,567,104.00 | 11,333,148.34 |
| Total | 138,864,123.57 | 137,124,027.33 |
| Guarantee | Guarantor | Guaranteed matter | Credit line granted | Period of credit line granted | Credit line used | Period of guarantee |
| FIYTA Hong Kong | The Company | Loan | 3,366.56 | From 2020-5-31 to 2022-5-31 | 296.02 | From 2020-5-31 to 2022-5-31 |
| HARMONY Company | The Company | Loan | 5,000.00 | From 2020-4-20 to 2021-4-20 | 4,000.00 | 3 years after the day that contracted liability is fulfilled. |
| HARMONY Company | The Company | Guarantee letter | 5,000.00 | From 2020-9-23 to 2021-12-22 | 5,000.00 | From 2020-10-1 to 2021-12-31 |
| HARMONY Company | The Company | Single Guarantee letter | —— | —— | 10,000.00 | From 2020-12-30 to 2021-12-29 |
| Sales Company | The Company | Loan | 5,000.00 | From 2020-4-23 to 2021-4-23 | 5,000.00 | 3 years after the day that contracted liability |
| is fulfilled. | ||||||
| Technology Company | The Company | Loan | 3,000.00 | From 2020-4-28 to 2021-4-20 | 243.00 | 2 years after the day that contracted liability is fulfilled. |
| Technology Company | The Company | Bill discounted | —— | —— | 423.38 | From 2020-10-15 to 2021-2-25 |
| Technology Company | The Company | Bill discounted | —— | —— | 887.33 | From 2020-10-15 to 2021-5-31 |
| Precision Technology Company | The Company | Loan | 3,000.00 | From 2020-4-23 to 2021-4-23 | 3,000.00 | 2 years after the day that contracted liability is fulfilled. |
| Total | —— | —— | 24,366.56 | —— | 28,849.73 | —— |
| Profit distributions or dividends proposed | Cash dividend of RMB4.00 (tax inclusive) for every 10 shares held |
guarantee for the Company’s wholly-owned subsidiary to borrow from banks of no more than RMB800 million. The credit line isincluded in the actual usage limit of RMB1,200 million mentioned above. The resolution is waiting approval from the shareholder’smeeting.
(4) De-registration of subsidiary
On 5 March 2021, the Company received the de-registration notice of Station 68 from Hong Kong Companies Registry. Station 68cancelled its registration.
(5) Others
As at 8 March 2021, the Company does not have other post-balance sheet events that require to disclose.XIV. Other Significant mattersAs at 8 March 2021, the Company does not have other significant matters that require to disclose.XV. Notes to the Company’s financial statements
1. Accounts receivable
(1) Presented by ageing
| Ageing | As at 31/12/2020 | As at 31/12/2019 |
| Within 1 year | 1,633,186.27 | 2,997,921.46 |
| Over 1 year | 143,415.84 | - |
| Subtotal | 1,776,602.11 | 2,997,921.46 |
| Less: bad debt provision | 311,803.32 | 149,896.07 |
| Total | 1,464,798.79 | 2,848,025.39 |
| Category | As at 31/12/2020 | ||||
| Book value | Bad debt provision | Carrying amount | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Individually significant and assessed for impairment individually | - | - | - | - | - |
| Collectively assessed for impairment based on credit risk characteristics | 1,776,602.11 | 100.00 | 311,803.32 | 17.55 | 1,464,798.79 |
| Receivables from related parties within scope of consolidation | - | - | - | - | - |
| Receivables from other customers | 1,776,602.11 | 100.00 | 311,803.32 | 17.55 | 1,464,798.79 |
| Total | 1,776,602.11 | 100.00 | 311,803.32 | 17.55 | 1,464,798.79 |
| Category | As at 31/12/2019 |
| Book value | Bad debt provision | Carrying amount | |||
| Amount | Percentage (%) | Amount | ECL rate (%) | ||
| Individually significant and assessed for impairment individually | - | - | - | - | - |
| Collectively assessed for impairment based on credit risk characteristics | 2,997,921.46 | 100.00 | 149,896.07 | 5.00 | 2,848,025.39 |
| Receivables from related parties within scope of consolidation | - | - | - | - | - |
| Receivables from other customers | 2,997,921.46 | 100.00 | 149,896.07 | 5.00 | 2,848,025.39 |
| Total | 2,997,921.46 | 100.00 | 149,896.07 | 5.00 | 2,848,025.39 |
| Item | As at 31/12/2020 | ||
| Accounts receivable | Bad debt provision | ECL rate (%) | |
| Within 1 year | 1,633,186.27 | 168,387.48 | 10.31 |
| Over 1 year | 143,415.84 | 143,415.84 | 100.00 |
| Total | 1,776,602.11 | 311,803.32 | 17.55 |
| Item | Bad debt provision |
| As at 31/12/2019 | 149,896.07 |
| Adjustment amount for initial adoption of new revenue standards | - |
| 2020.01.01 | 149,896.07 |
| Accrual | 161,907.25 |
| Reversal | - |
| Written-off | - |
| As at 31/12/2020 | 311,803.32 |
| Item | As at 31/12/2020 | As at 31/12/2019 |
| Interest receivable | - | - |
| Dividends receivable | - | - |
| Other receivables | 621,512,680.69 | 783,647,732.22 |
| Total | 621,512,680.69 | 783,647,732.22 |
| Ageing | As at 31/12/2020 | As at 31/12/2019 |
| Within 1 year | 621,369,363.48 | 673,518,552.61 |
| 1-2 years | 177,475.90 | 109,992,510.47 |
| 2-3 years | 11,697.43 | 186,180.00 |
| Over 3 years | 40,050.00 | 40,050.00 |
| Subtotal | 621,598,586.81 | 783,737,293.08 |
| Less: bad debt provision | 85,906.12 | 89,560.86 |
| Total | 621,512,680.69 | 783,647,732.22 |
| Item | As at 31/12/2020 | As at 31/12/2019 | ||||
| Book value | Provision | Carrying amount | Book value | Provision | Carrying amount | |
| Related party balance | 620,792,324.27 | - | 620,792,324.27 | 783,005,800.85 | - | 783,005,800.85 |
| Security deposit | 217,525.90 | 45,116.69 | 172,409.21 | 235,761.90 | 76,355.60 | 159,406.30 |
| Social security payment on-behalf | 392,074.21 | - | 392,074.21 | 242,726.90 | - | 242,726.90 |
| Others | 196,662.43 | 40,789.43 | 155,873.00 | 253,003.43 | 13,205.26 | 239,798.17 |
| Total | 621,598,586.81 | 85,906.12 | 621,512,680.69 | 783,737,293.08 | 89,560.86 | 783,647,732.22 |
| Category | Book value | ECL rate in next 12 month (%) | Bad debt Provision | Carrying amount | Note |
| Individually significant and assessed for impairment individually | - | - | - | - | |
| Collectively assessed for impairment based on credit risk characteristics | |||||
| Petty cash | - | - | - | - |
| Security deposit | 217,525.90 | 20.74 | 45,116.69 | 172,409.21 | |
| Social security payment on-behalf | 392,074.21 | - | - | 392,074.21 | |
| Receivables from related party that within consolidation scope | 620,792,324.27 | - | - | 620,792,324.27 | |
| Other receivables | 196,662.43 | 20.74 | 40,789.43 | 155,873.00 | |
| Total | 621,598,586.81 | 0.01 | 85,906.12 | 621,512,680.69 |
| Category | Book value | ECL rate in next 12 month (%) | Bad debt Provision | Carrying amount | Note |
| Individually significant and assessed for impairment individually | - | - | - | - | |
| Collectively assessed for impairment based on credit risk characteristics | |||||
| Petty cash | - | - | - | - | |
| Security deposit | 235,761.90 | 32.39 | 76,355.60 | 159,406.30 | |
| Social security payment on-behalf | 242,726.90 | - | - | 242,726.90 | |
| Receivables from related party that within consolidation scope | 783,005,800.85 | - | - | 783,005,800.85 | |
| Other receivables | 253,003.43 | 5.22 | 13,205.26 | 239,798.17 | |
| Total | 783,737,293.08 | 0.01 | 89,560.86 | 783,647,732.22 |
| Bad debt provision | 1st stage | 2nd stage | 3rd stage | Total |
| ECL in next 12 month | ECL for the life time of receivables (no impairment yet) | ECL for the life time of receivables (impaired) | ||
| Balance as at 31 December 2019 | 89,560.86 | - | - | 89,560.86 |
| In current period | ||||
| --transferred to 2nd stage | - | - | - | - |
| -- transferred to 3rd stage | - | - | - | - |
| --Reversed to 2nd stage | - | - | - | - |
| --Reversed to 3rd stage | - | - | - | - |
| Accrued | - | - | - | - |
| Reversed | 3,654.74 | - | - | 3,654.74 |
| Realized | - | - | - | - |
| Written-off | - | - | - | - |
| Other changes | - | - | - | - |
| Balance as at 31 December 2020 | 85,906.12 | - | - | 85,906.12 |
| Item | As at 31/12/2020 | As at 31/12/2019 | ||||
| Book value | Impairment provision | Carrying amount | Book value | Impairment provision | Carrying amount | |
| Investment to subsidiaries | 1,478,014,522.36 | - | 1,478,014,522.36 | 1,334,471,401.42 | - | 1,334,471,401.42 |
| Investment to associates | 51,400,665.92 | - | 51,400,665.92 | 46,423,837.85 | - | 46,423,837.85 |
| Total | 1,529,415,188.28 | - | 1,529,415,188.28 | 1,380,895,239.27 | - | 1,380,895,239.27 |
| Investee | As at 31/12/2019 | Increase | Decrease | As at 31/12/2020 | Provision | Balance of provision |
| HARMONY Company | 602,538,761.04 | 1,528,450.16 | - | 604,067,211.20 | - | - |
| E-commerce Company | 2,184,484.39 | 9,500,000.00 | - | 11,684,484.39 | - | - |
| Precision Technology Company | 9,344,923.49 | 90,455,581.56 | - | 99,800,505.05 | - | - |
| Technology Company | 10,126,964.71 | 40,118,587.82 | - | 50,245,552.53 | - | - |
| FIYTA Hong Kong | 137,737,520.00 | - | - | 137,737,520.00 | - | - |
| TEMPORAL Company | 5,000,000.00 | - | - | 5,000,000.00 | - | - |
| FIYTA Sales Company | 451,377,582.46 | 1,753,237.26 | - | 453,130,819.72 | - | - |
| Hengdarui Company | 36,867,843.96 | - | - | 36,867,843.96 | - | - |
| Emile Choureit Shenzhen Company | 79,293,321.37 | 187,264.14 | - | 79,480,585.51 | - | - |
| Total | 1,334,471,401.42 | 143,543,120.94 | - | 1,478,014,522.36 | - | - |
(2) Investment in subsidiaries
| Investee | As at 31/12/2019 | Changes during the period | As at 31/12/2020 | Balance of impairment provision as of period end | |||||||
| Addition/new investment | Withdrawn | Investment gains and losses confirmed by the equity method | Adjustment of other comprehensive income | Changes in other equity | Cash dividend declared | Impairment provision | Others | ||||
| Associate | |||||||||||
| Shanghai Watch | 46,423,837.85 | - | - | 4,976,828.07 | - | - | - | - | - | 51,400,665.92 | - |
4. Operating income and operating cost
| Item | 2020 | 2019 | ||
| Operating income | Operating cost | Operating income | Operating cost | |
| Main business | 134,821,552.25 | 36,497,097.45 | 140,511,246.61 | 21,776,539.35 |
| Other business | 2,560,243.70 | - | - | - |
| Total | 137,381,795.95 | 36,497,097.45 | 140,511,246.61 | 21,776,539.35 |
| Item | 2020 | 2019 |
| Gain from long-term equity investments accounted for using the cost method | 100,000,000.00 | 113,000,000.00 |
| Gain from long-term equity investments accounted for using the equity method | 4,976,828.07 | 1,542,774.70 |
| Total | 104,976,828.07 | 114,542,774.70 |
| Item | 2020 | Note |
| Disposal gain or loss of non-current assets | -369,857.30 | |
| Overridden approval, or without official approval document, or incidental tax return or exemption | - | |
| Government grants included in current profit or loss (except for the fixed or quantitative government grants, enjoyed in a consecutive way, which closely related to the enterprise businesses and according to nation policies) | 30,634,128.57 | |
| Charges for the possessions of funds collected from non-monetary enterprises | - | |
| Gain from investment in subsidiaries, joint venture and cooperative enterprises when cost of investment is less than the profit incurred in identifiable net asset fair value of invested unit when investment | - | |
| Profit and loss of non-monetary assets exchange | - | |
| Profit and loss from entrusting others to invest or manage assets | - | |
| Asset impairment provision accrued due to force majeure such as natural disasters | - | |
| Profit and loss of debt restructuring | - | |
| Enterprise restructuring expenses, such as expenses for arranging employees, integrating cost | - | |
| Profit and loss over fair value part accrued in transactions of unreasonable transaction price | - |
| Current net profit and loss of subsidiaries from business combination under common control from the opening period to combination date | - | |
| Profit and loss incurred contingent matters unrelated to normal operating business | - | |
| Except for effective hedging business related to normal operating business, profit and loss from changes in fair value incurred in financial assets and financial liabilities, and the investment gain from disposal of financial assets, financial liabilities and available-for-sale financial assets | - | |
| Gain from disposal of tradable financial asset financial liabilities and debt investment | - | |
| Impairment provision reversal of accounts receivable under standalone impairment test | 163,925.30 | |
| Profit and loss obtained in external entrusting loans | - | |
| Profit and loss incurred in fair value change of investment property subsequently measured in fair value mode | - | |
| Influence on current profit and loss caused by one-off adjustment according to requirements of laws and regulations about taxation and accounting | - | |
| Income from trustee fee obtained by trusting operation | - | |
| Other non-operating income and expenses other than the above items | 1,556,300.78 | |
| Profit and loss items pursuant to the definition of non-recurring profit and loss | - | |
| Subtotal | 31,984,497.35 | |
| Effect of income tax of non-recurring profit or loss | 6,964,353.72 | |
| Net amount of non-recurring profit or loss | 25,020,143.63 | |
| Less: Effect of non-recurring profit or losses attributable to minority shareholders (after tax) | - | |
| Non-recurring profit or loss attributable to shareholders of the parent company | 25,020,143.63 |
2. Return on Equity (ROE) and Earnings per share (EPS)
| Profit of the reporting period | Weighted average ROE % | EPS | |
| Basic EPS | Diluted EPS | ||
| Net profit attributable to ordinary shareholders of the Company | 10.78 | 0.6764 | 0.6764 |
| Net profit attributable to ordinary shareholders of the Company after deducting non-recurring profit or loss | 9.87 | 0.6187 | 0.6187 |
Section13 Documents Available for InspectionI. Financial Statements signed by and under the seal of the legal representative, chiefaccountant and accounting supervisors;
II. Original of the Auditors’ Report under the seal of the accounting firm and signed by andunder the seals of certified public accountants.
III. Originals of all documents and manuscripts of announcements of the Companydisclosed in Securities Times and Hong Kong Commercial Daily as designated by ChinaSecurities Regulatory Commission.
Board of Directors ofFIYTA Precision Technology Co., Ltd.
10 March 2021