FIYTA HOLDINGS LTD.
2017 Annual Report
March 2018
Section 1 Important Notice, Table of Contents and Definition
The Board of Directors, the Supervisory Committee, directors, supervisors and senior executives hereby
individually and collectively accept responsibility for the correctness, accuracy and completeness of the
contents of this report and confirm 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 accounting department (treasurer) hereby confirm the authenticity and completeness of the financial
report enclosed in this Annual Report.
With the exception of the following directors, all the other directors personally attended the Board
Meeting for reviewing the Annual Report.
Posts of the directors Cause of failure in
Names of the directors failed in
failed in attending the attending the meeting Names of the attorneys
attending the meeting personally
meeting personally personally
Wang Mingchuan Director Business trip Chen Libin
Xiao Zhanglin Director Business trip Wang Bo
Any perspective description, such as future plan, development strategy, etc. involved in the Annual
Report shall not constitute the Company’s substantial commitment to the investors and the investors
should please pay attention to their investment risks.
In the Report, the Company has presented in detail the potential risks existing in the macro economy
and operation. Investors are advised to read carefully the contents concerning risk factors possibly to be
confronted with in the Company’s future development prospects and the countermeasures in Section 4
Management Discussion and Analysis.
The profit distribution preplan reviewed and approved by the said board meeting is summarized as
follows: with the Company’s total share capital being 438,744,881 shares as the base, the Company
would distribute cash dividend at the rate of CNY 2.00 for every 10 shares (with tax inclusive) and bonus
share at the rate of 0 share (with tax inclusive) to the whole shareholders and no reserves would be
converted into share capital.
Table of Contents
Section 1 Important Notice, Table of Contents and Definitions
Section 2 Company Profile and Financial Highlights
Section 3 Business Summary
Section 4 Discussion and Analysis of the Management
Section 5 Significant Events
Section 6 Changes in Shares and Particulars about the Shareholders
Section 7 About the Preferred Shares
Section 8 Directors, Supervisors, Officers and Employees
Section 9 Corporate Governance
Section 10 Bond Related Information
Section 11 Financial Report
Section 12 List of Documents Available for Inspection
Definitions
Terms to be defined Definition
This Company, the Company or FIYTA Refers to FIYTA Holdings Ltd.
AVIC International Refers to AVIC International Holding Corporation
the Sales Co. Refers to FIYTA Sales Co., Ltd.
Harmony Refers to Shenzhen Harmony World Watches Center Co., Ltd.
the Manufacture Co. Refers to Shenzhen FIYTA Sophisticated Timepieces Manufacture Co., Ltd.
the Technology Co. Refers to Shenzhen FIYTA Technology Development Co., Ltd.
the Hong Kong Co. Refers to FIYTA (Hong Kong) Limited
SHIYUEHUI Refers to Shiyuehui Boutique (Shenzhen) Co., Ltd.
HENGDARUI. Refers to Liaoning Hengdarui Commerce & Trade Co., Ltd.
Harbin Co. Refers to Harbin Harmony World Watch Distribution Co., Ltd.
Rainbow Ltd. Refers to Rainbow Department Store Co., Ltd.
AVIC Real Estate Refers to AVIC Real Estate Co., Ltd.
AVIC Property Refers to AVIC Property Management Co., Ltd.
Section 2 Company Profile and Financial Highlights
I. Company Profile
Short form of the stock: FIYTA A, FIYTA B Stock Codes: 000026 and 200026
Stock Exchange Listed with Shenzhen Stock Exchange
Company Name In Chinese FIYTA Holdings Ltd.
Abbreviation of Registered Company
飞亚达公司
Name in Chinese
Company name in foreign language (if
FIYTA HOLDINGS LTD.
any)
Short form of the Company name in
FIYTA
foreign language (if any)）
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 Office Address 518057
Internet Web Site www.fiytagroup.com
E-mail investor@fiyta.com.cn
II. Liaison Persons and Communication Information
Secretary of the Board Securities Affairs Representative
Names Lu Wanjun Zhang Yong
20th Floor, FIYTA Technology Building, Gaoxin S. Road 20th Floor, FIYTA Technology Building, Gaoxin S. Road
Liaison Address
One, Nanshan District, Shenzhen One, Nanshan District, Shenzhen
Tel. 0755－86013669 0755－86013669
Fax 0755－83348369 0755－83348369
E-mail investor@fiyta.com.cn investor@fiyta.com.cn
III. Information Disclosure and Place where the Regular Reports are Prepared
Securities Times
Newspapers Designated for Disclosing the Information:
and Hong Kong Commercial Daily
Internet Web Site Designated by China Securities Regulatory www.cninfo.com.cn
Commission for Publishing the annual report:
Place of the Company’s Annual Report Prepared for inquiry Board Secretary Office
IV. Changes in Registration
Organization Code 91440300192189783K
The 13th session of the Eighth Board of Directors and 2016 Annual General Meeting reviewed and approved the
Proposal for Amendment of the Articles of Association in which \"design service\" was to be added in the Company's
business scope. After the amendment, the Company's business scope would be: production and sales of various
Changes in principal business activities since listing (if
pointer type quartz watches and the driving units, components and parts, various timing instruments, machining and
any)
wholesale of K gold ornament watches; domestic commerce and supply and marketing of materials (excluding the
goods subject to monopoly, exclusive control or monopolization); property management and property lease; design
service; self-managed import and export.
Changes in the controlling shareholder over the past
No change
years (if any)
V. Other Relevant Information
CPAs appointed
Name of the CPAs Ruihua Certified Public Accountants (Special General Partnership)
Office address 9/F, Taiping Finance Tower, Futian District, Shenzhen
Names of the CPAs as the authorized
Xing Xiangzong and Liu Xin
signatories
The sponsor performing persistent supervision duties engaged by the Company in the reporting period
Name of the Sponsor Office Address Representatives Duration of persistent supervision
Huachuang Building, 216 Zhonghua N.
Huachuang Securities Co., Ltd. Li Xiumin and Huang Junyi January 15, 2016 to December 31, 2017
Road, Guiyang, Guizhou Province
The financial advisor performing persistent supervision duties engaged by the Company in the reporting period
Inapplicable
VI. Summary of Accounting/Financial Data
Does the Company need to make retroactive adjustment or restatement of the accounting data of the previous years?
No
Year-on-year
2017 2016
increase/decrease
Operation revenues in CNY 3,345,809,703.98 2,993,864,561.43 11.76% 3,162,196,212.90
Net profit attributable to the Company’s
140,216,258.28 110,662,681.59 26.71% 121,702,057.44
shareholders, in CNY
Net profit attributable to the Company’s
123,918,527.75 97,200,540.64 27.49% 113,441,715.91
shareholders less the non-recurring items, in
CNY
Net cash flows arising from operating activities,
564,954,561.97 455,759,094.15 23.96% 396,236,992.41
in CNY
Basic earning per share (CNY/share) 0.3196 0.2522 26.72% 0.3099
Diluted earning per share (CNY/share) 0.3196 0.2522 26.72% 0.3099
Return on equity, weighted average (%) 5.79% 4.74% 1.05% 7.24%
Increase/decrease at the end
End of 2017 End of 2016 of the year over the end of the End of 2015
previous year
Total assets, in CNY 3,579,789,692.90 4,004,897,562.72 -10.61% 4,246,670,045.02
Net assets attributable to the Company’s
shareholders (owner’s equity attributable to the 2,467,967,361.20 2,371,370,535.17 4.07% 2,299,215,650.21
Company’s shareholders, in CNY)
VII. Difference in the Accounting Data based respectively on the Chinese Accounting Standards
(CAS) and International Accounting Standards (IAS)
(I) Differences in the net profit disclosed in the financial report & the net assets attributable to the Company’s shareholders
respectively according to the IAS and the CAS.
Inapplicable
(II) Didfferences in the net profit disclosed in the financial report & the net assets attributable to the Company’s
shareholders according to both the IAS and the CAS
Inapplicable
VIII. Financial Data Summary based on Quarters
In CNY
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Operating revenue 817,002,183.65 782,538,960.70 876,113,517.26 870,155,042.37
Net profit attributable to the Company’s
45,319,028.27 41,389,796.49 49,839,227.96 3,668,205.56
shareholders
Net profit attributable to the Company’s
shareholders less the non-recurring profit and 45,377,622.54 40,560,834.40 49,457,070.83 -10,049,707.46
loss
Net cash flows arising from operating activities 122,917,899.12 153,797,761.41 86,600,298.96 201,638,602.48
Does there exist significant difference in the foregoing financial data or their total sum from the relevant financial data as
disclosed in the quarterly reports and/or semi-annual report.
No
IX. Non-recurring gain/loss items and amount involved
in CNY
Items Amount in 2017 Amount in 2016 Amount in 2015 Note
Gain/loss from disposal of non-current assets, including the
7,321,993.36 -660,129.92 34,435.32 Inapplicable
part offset from the provision for impairment of assets.
Government subsidy credited to the current gain and loss
(except the government subsidies closely related with the
Company’s business and enjoyable according to the unified 17,508,255.98 17,234,482.25 10,889,579.23 Inapplicable
standard quota or fixed amount specified by the central
government).
Reversal of the provision for impairment of accounts
receivable which have undergone impairment testing 1,903,056.74 0.00 0.00 Inapplicable
individually
Operating income and expenses other than the aforesaid
1,238,972.99 935,294.98 -17,790.06 Inapplicable
items
Less: Amount affected by the income tax 8,669,699.37 4,047,506.36 2,645,882.96 Inapplicable
Amount affected by minority equity (after tax) 3,004,849.17 0.00 0.00 Inapplicable
Total 16,297,730.53 13,462,140.95 8,260,341.53 --
For the Company’s non-recurring gain/loss items as defined in the Explanatory Announcement No. 1 on Information
Disclosure for Companies Offering their Securities to the Public – Non-recurring Gains and Losses and its non-recurring
gain/loss items as illustrated in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering
their Securities to the Public – Non-recurring Gains and Losses which have been defined as recurring gains and losses, it
is necessary to explain the reason.
Inapplicable
Section 3 Business Summary
I. Principal Businesses in the Reporting Period
Does the Company need to comply with the requirements on information disclosure for special industries?
No
(1) Principal Businesses and Business Model
FIYTA has been concentrating itself in watch industry under the strategy of brand building and has formed a proprietary
product brand cluster represented by FIYTA watch and watch retail network brand represented by HARMONY; has been
continuously improving watch R & D, design and precision manufacture, enthusiastically carrying forward integration and
upgrading of the key value chain, has preliminarily reached the vertical integration based brand development strategy
(2) Development Status of Watch Industry and the Company's Position in the Industry
In the reporting year, the revival of the global economy experienced frequent secret worry and China's domestic GDP
growth rate turned to \"medium-high speed\" from the previous \"high speed\". Facing the complicated and uncertain
macro-environment and market change, the Company kept \"deep ploughing\" in its principal business, fully excavated the
market potential, actively coped with the market challenge, accelerated business transformation and management
upgrading and achieved remarkable economic performance. In 2017, the Company set a new historical record in
operation revenues. The Company achieved good growth in the business of its own proprietary product brands
represented by FIYTA watches and watch retail channels represented by HARMONY: where revenues from the business
of FIYTA watches had a year-on-year growth of 9.21% and that from the business of HARMONY had a year-on-year
growth of 13.36%. After three decades' courageous advance, FIYTA has successfully become a leader of China's watch
industry.
II. Significant Changes in the Prime Assets
1. Significant Changes in the Prime Assets
Inapplicable
2. Prime Assets Abroad
Inapplicable
III. Analysis on Core Competitiveness
Does the Company need to comply with the requirements on disclosure for special industries
No
FIYTA’s core competitiveness mainly consists of the ability to build brand, ability to offer top quality services, ability of
product innovation, ability of knowledge management and ability of management of strategic human resources. After
three decades' continuous development, the Company has established a brand building management system based on
\"4P+C\" for brand construction, ensured constant healthy development of proprietary brands; through unceasing
innovation and continuous accumulation, the Company has formed customer-oriented services and \"three-tier marketing\"
service system as experienced and ensured the high quality services to be effectively implemented and constantly
improved the customers' satisfaction; by continuously learning international outstanding brands, the Company has
created a professional R & D and design team with international vision and powerful aesthetic judgment; the ability of
product innovation has been continuously enhanced, the products have won international and domestic big prizes; the
Company always implements the strategy of building \"brand people\" in the practice of the Company's strategy
development, continuously energizes the team, has developed a \"brand people\" team choosing and following what is
good, being created to beauty, pursuance for excellence, and constantly perfecting themselves, and better supported the
continuous development of the brands. In order to satisfy the requirements on management and operation, the Company
has attached importance on construction of the craftsmanship spirit. The Company has constructed the management
innovation system with customers' demand as the original point and the knowledge management platform based on the
entire personnel, decentralization and interaction so as to promote various management results and innovation and
creativity to be fully shared and used for reference internally.
The Company is a national technological innovation demonstration enterprise, has established a national industrial design
center and an enterprise technology center recognized by the state. All our manufacture enterprises are national hi-tech
enterprises. In addition, the Company has participated in preparation or revision of a number of national and industrial
standards. In the reporting year, the Company took lead in and participated in amendment of and completed seven
national, industrial standards and technical specifications of Shenzhen Municipality. In the reporting year, the Company
published three national standards prepared or amended with the Company playing the leading role. In 2017, the
Company was recognized as a unit integrating and implementing the standards for informationization and industrialization
by the Ministry of Industry and Information Technology
In addition to the continuous consolidation of the aforesaid core competitiveness, during the reporting period, the
Company achieved great success in construction of the platform of science and technology and scientific and
technological innovation. The Company was elected intellectual property demonstration enterprise of Guangdong
Province and successfully certified for the implementation of the standards for intellectual property management system.
In 2017, the Company was awarded 1 honorable mention of Chinese patent award, \"Shenzhen Gift\" of the Year
2017-2018, the silver award of “the 3nd China (Blue Light CupZhangzhou) Horologe Design Competition, 2017 Designer
Recommendation Award and Shenzhen Enterprise Innovation (China) Record. In the reporting year, the Company
applied for 11 patents for invention, and 14 utility model patents and 34 design patents, accumulatively granted 2 patents
for invention, 14 utility model patents and 26 design patents.
Section 4 Discussion and Analysis of the Management
I. General
In 2017, facing the external economic environment of gradual revival but full of uncertainty, the Company insisted on the
idea of development and brand strategy, practiced the Company's value of \"customer orientation, good faith, cooperation,
learning and innovation and high speed\" with performance improvement as its objective, continued to work hard on the
principal business, unceasingly optimized the organization structure, improved the process system, actively carried
forward business innovation, strived to realize elaborated operation, constantly enhanced output of individual shops; with
customer study as the original point, initiatively seized the very good opportunity of consumption upgrading, carried out
marketing and brand upgrading work of various forms and full of productivity and the brand value and market share had
been elevated steadily; with creating a customer-oriented organization as the orientation, pressed close in depth to and
understood customers' demands, spared no effort in creating value for customers, effectively established a new type of
customer relations. In the reporting period, with joint effort of the Company's whole colleagues, the Company realized
sales revenue in the whole amounting to CNY 3,345.8097 million, a year-on-year growth of 11.76%; realized net profit
attributable to the shareholders of the Company amounting to CNY 140.2163 million, a year-on-year growth of 26.71%.
The net cash flow created from the operation activities amounted to CNY 564.9546 million.
During the reporting period, the Company seized the opportunity of consumption upgrading in the business of FIYTA
brand and other own proprietary brands, focused on the work of customer study and per unit yield raising, promoted
resource integration and efficiency improvement, and achieved a preliminary result in multiple brand and entire channel
strategy. With the joint effort of various links of research, design, production and sales of FIYTA watch, the Company kept
improving the “4P+C” brand construction system, the operation efficiency got improved step by step, the costumer
satisfaction and brand reputation were constantly enhanced and the brand competitiveness were gradually manifested,
and it was chosen as \"a made-in-China product\" by the Ministry of Commerce\"; the Company achieved plentiful fruits in
new product development; on the basis of continuous development and plentiful serial products, the Company launched
new Young+ series and achieved a good market echo; the sales proportion of Star series continuously increased,
differentiated competitiveness and brand imprinting got enhanced; the channel quality was improved continuously, and
the average per unit yield was growing continuously, the total number of the domestic channels was 3,100; a good result
was achieved in brand internationalization and FIYTA Brand has successfully entered 32 countries/regions, and the
number of the overseas channels increased by more than 180, and the overseas sales income increased by a big margin;
the e-commerce business developed steadily and realized a turnover amounting to CNY 94.42 million with year-on-year
growth of 18%. Under the logistic system of three-stage network structure, FIYTA Brand products have covered the
central warehousing centers, local warehousing centers of different cities, and shops. While the Company has not
established any transportation logistic, it has realized butt joint with the information system of logistic enterprises. In
addition, with continuous growth of sales orders, FIYTA Brand for the first time operated AI warehousing robot project. As
a result, the order processing and delivery efficiency was improved by a double or more. Meanwhile, the Company's
strategy for high-end brands, fashion brands, VERUS, JEEP, etc. and Beijing Watch development was actively carried
forward. During the reporting period, FIYTA Watch business realized a turnover amounting to CNY 979.906 million with a
year-on-year growth of 9.21%.
During the reporting period, Harmony World Watch Center closely centered on the work theme of \"recasting the
foundation, conducting deep ploughing operaion, customer study and innovation and development\", constantly improved
its earning power, carried out the customer study work in depth, carried forward transformation and upgrading of the
business models. Harmony World Watch Center kept deep ploughing and digging the potential according to the \" Three
Tier Marketing\" management system, conducted more effective retail operation, greatly improved the per unit yield,
achieved a big profit growth; constantly optimized the stock structure, continuously reduced the inventory volume, greatly
improved the stock turnover; conducted continual optimization of the existing channels, further enhanced the channel
quality, optimized the famous brand watches by 186 channels, of which 17 channels were newly opened, 60 channels
were closed and adjusted; kept carrying forward the business model transition from \"famous brand watch retail service
supplier\" to \"famous brand comprehensive service supplier\", constructed \"new retail\" business model of online and offline
integration by means of informatization technology, broadened the business development scene. During the reporting
period, Harmony realized a turnover amounting to CNY 2,237.3583 million with a year-on-year growth of 13.36%; kept fast
and steady growth in famous brand watch repairing services and e-commerce channels.
Changes in major financial items in 2017 are as follows:
Increase/dec
rease
Statement Items 2017 2016 Notes to the movements
movement
(%)
Balance sheet items
Mainly due to return of the bank loans and the raised capital
Monetary capital 187,152,891.32 428,802,755.81 -56.35%
being put into application during the reporting year.
Mainly due to return of partial bank loans with self-raised fund
Short term borrowings 525,990,510.00 1,098,438,070.00 -52.11%
during the reporting year.
Mainly due to that with growth of profit in the reporting year,
Payroll payable 71,564,367.14 45,254,585.69 58.14% bonus payable to the sales persons increased, and the year-end
bonus payable to employees increased also.
Mainly due to decrease of the corresponding minority
Minority shareholders' shareholders' equity resulted from decrease of assets as Station
5,515.78 3,577,654.56 -99.85%
equity 68 Ltd. entered the process of cancellation liquidation during the
reporting year.
Profit statement items
Loss from impairment of Mainly due to increase of the provision for price falling of
62,427,499.61 29,377,884.40 112.50%
assets inventories during the reporting year.
Income from disposal of Mainly due to Station 68 Ltd's disposal of overseas
7,321,993.36 -520,920.33 -1505.59%
assets non-operation real estate.
Mainly due to that based on the requirements on modification of
the accounting standards in the reporting year, the operation
based government subsidy was counted to \"other income\"
Other income 17,508,255.98 0.00 100% instead of \"non-operating income\" as did previously. However, it
is unnecessary to make retroactive adjustment of the
comparative statement of the same period, and the government
subsidy involved amounting to CNY 17,234,482.25.
Mainly due to that according to the changed requirements of the
Non-operating income 2,607,653.91 18,574,739.04 -85.96% accounting standards during the reporting year, the operation
related government subsidy was counted to the item of \"other
income\" instead of the item of \"non-operating income\"
previously. However, it was unnecessary to recount and adjust
the comparative statements of the same period and the
government subsidy involved amounted to CNY 17,234,482.25.
Mainly due to disposal of non-operating real estate in the
Minority shareholders'
2,400,100.92 -287,834.29 -933.85% reporting year as Station 68 Ltd. enter the process of
gains/losses
cancellation liquidation in the reporting year.
Other comprehensive
-28,676.16 5,617,505.89 -100.51% Mainly due to influence from fluctuation of the exchange rate.
income, net after tax
Cash flow statement items
Rebated taxes and dues Mainly due to increase of the export rebates during the reporting
886,252.20 6,421.29 13701.78%
received year.
Cash from return on Mainly due to the dividend from Shanghai Watch Industry Co.,
0.00 383,750.00 -100.00%
investment obtained Ltd. for the same period of the previous year.
Net cash recovered from
disposal of fixed assets, Mainly due to disposal of overseas non-operating real estate by
10,678,135.25 4,150,363.94 157.28%
intangible assets and Station 68 Ltd. during the reporting year.
other long term asses
Mainly due to decrease of the size of bank loans due to
Cash received from the
575,282,350.00 1,405,213,268.91 -59.06% increase of cash flow-in for business activities during the
borrowings as obtained
reporting year.
Cash paid in connection Mainly due to return of the capital invested by the shareholders
with other fund-raising 3,376,589.16 992,669.19 240.15% as Station 68 Ltd. entered the process of cancellation liquidation
activities during the reporting year.
II. Analysis of the Principal Business
1. General
Refer to the relevant details in \"I. General\" of \"Discussion and Analysis of the Management\".
2. Revenues and Costs
(1) Composition of Operation Revenues
In CNY
2017
Year-on-year
Proportion in the operating Proportion in the operating
Amount Amount increase/decrease
revenues revenues
Total operating revenues 3,345,809,703.98 100% 2,993,864,561.43 100% 11.76%
Classified based on sectors
Watches 3,217,264,256.67 96.16% 2,871,027,139.99 95.90% 12.06%
Lease 109,451,504.76 3.27% 99,036,108.21 3.30% 10.52%
Others 19,093,942.55 0.57% 23,801,313.23 0.80% -19.78%
Classified based on products
Famous brand watches 2,237,358,253.15 66.87% 1,973,725,639.76 65.94% 13.36%
Fiyta watch 979,906,003.52 29.29% 897,301,500.23 29.96% 9.21%
Lease 109,451,504.76 3.27% 99,036,108.21 3.30% 10.52%
Others 19,093,942.55 0.57% 23,801,313.23 0.80% -19.78%
Classified based on regions
South China 1,131,001,582.43 33.80% 996,436,356.08 33.28% 13.50%
Northwest China 543,837,252.49 16.25% 489,661,181.56 16.35% 11.06%
North China 511,436,952.26 15.29% 470,509,053.79 15.72% 8.70%
East China 483,210,740.06 14.44% 424,998,042.02 14.20% 13.70%
Northeast China 309,313,118.19 9.24% 275,092,433.66 9.19% 12.44%
Southwest China 367,010,058.55 10.97% 337,167,494.32 11.26% 8.85%
(2) Sector(s), Product(s) or Region(s) Taking over 10% of the Operating Revenue or Operating Profit
Does the Company need to comply with the requirements on information disclosure for special industries?
No
In CNY
Year-on-year Year-on-year Year-on-year
increase/decrease of increase/decrease of increase/decrease of
Operating revenue Operating costs Gross profit rate
operating revenue over operating costs over gross profit rate over
the previous year the previous year the previous year
Classified based on sectors
Watches 3,217,264,256.67 1,965,169,699.03 38.92% 12.06% 11.95% 0.06%
Lease 109,451,504.76 17,785,254.56 83.75% 10.52% 31.31% -2.57%
Others 19,093,942.55 3,697,637.98 80.63% -19.78% -4.85% -3.04%
Classified based on products
Famous brand watches 2,237,358,253.15 1,652,049,037.83 26.16% 13.36% 12.59% 0.50%
Fiyta 979,906,003.52 313,120,661.20 68.05% 9.21% 8.70% 0.15%
Lease 109,451,504.76 17,785,254.56 83.75% 10.52% 31.31% -2.57%
Others 19,093,942.55 3,697,637.98 80.63% -19.78% -4.85% -3.04%
Classified based on regions
South China 1,131,001,582.43 573,523,268.60 49.29% 13.50% 13.56% -0.02%
Northwest China 543,837,252.49 344,027,944.99 36.74% 11.06% 9.65% 0.82%
North China 511,436,952.26 335,026,858.97 34.49% 8.70% 10.38% -1.00%
East China 483,210,740.06 293,552,413.42 39.25% 13.70% 13.63% 0.03%
Northeast China 309,313,118.19 200,465,533.04 35.19% 12.44% 16.05% -2.02%
Southwest China 367,010,058.55 240,056,572.55 34.59% 8.85% 9.41% -0.34%
While adjustment of the statistical caliber for the principal business data took place in the reporting period, the principal
business data with the statistical caliber adjusted at the end of the reporting period.
Inapplicable
(3) Is the income from sales in kind greater than service revenue
Yes
Year-on-year
Classified based on sectors Items Unit 2017
increase/decrease
Sales volume pcs 1,020,979 975,070 4.71%
FIYTA watches Output pcs 1,055,054 872,116 20.98%
Stock pcs 931,255 897,180 3.80%
Causes of the change in the year-on-year data by over 30%
Inapplicable
(4) Implementation of Important Sale Contracts Concluded at the End of the Reporting Period
Inapplicable
(5) Composition of Operating Costs
Classified based on sectors and products
In CNY
2017
Year-on-year
Classified based on sectors Items Proportion in the operating Proportion in the operating
Amount Amount increase/decrease
costs costs
Merchandise procurement
1,652,049,037.82 83.16% 1,467,331,518.39 82.77% 12.59%
cost
Raw materials 274,742,242.00 13.83% 255,161,011.83 14.39% 7.67%
Labor cost 26,922,224.76 1.36% 23,587,107.98 1.33% 14.14%
Watches
Depreciation cost 2,021,219.55 0.10% 2,084,515.81 0.12% -3.04%
Utilities 1,652,226.24 0.08% 1,462,288.72 0.08% 12.99%
Rental fee 807,588.81 0.04% 2,408,563.43 0.14% -66.47%
Others 6,975,159.84 0.35% 3,346,677.57 0.19% 108.42%
Depreciation cost 10,568,722.86 0.53% 9,144,044.91 0.52% 15.58%
Lease
Labor cost 2,992,768.29 0.15% 1,540,446.00 0.09% 94.28%
Others 4,223,763.41 0.21% 2,859,571.24 0.16% 47.71%
Others Procurement cost 3,697,637.98 0.19% 3,885,972.13 0.22% -4.85%
Classified based on products
In CNY
2017
Classified based on Year-on-year
Items Proportion in the operating Proportion in the operating
products Amount Amount increase/decrease
costs costs
Merchandise procurement
Famous brand watches 1,652,049,037.82 83.16% 1,467,331,518.39 82.77% 12.59%
cost
Raw materials 274,742,242.00 13.83% 255,161,011.83 14.39% 7.67%
Labor cost 26,922,224.76 1.36% 23,587,107.98 1.33% 14.14%
Depreciation fee 2,021,219.55 0.10% 2,084,515.81 0.12% -3.04%
FIYTA watches
Utilities 1,652,226.24 0.08% 1,462,288.72 0.08% 12.99%
Rental fee 807,588.81 0.04% 2,408,563.43 0.14% -66.47%
Others 6,975,159.84 0.35% 3,346,677.57 0.19% 108.42%
Depreciation fee 10,568,722.86 0.53% 9,144,044.91 0.52% 15.58%
Lease Labor cost 2,992,768.29 0.15% 1,540,446.00 0.09% 94.28%
Others 4,223,763.41 0.21% 2,859,571.24 0.16% 47.71%
Others Procurement cost 3,697,637.98 0.19% 3,885,972.13 0.22% -4.85%
Note:
Inapplicable
(6) Is there any change in the consolidation scope in the reporting year
yes
Beijing Henglianda Horologe Co., Ltd., Harmony World Watch International Co., Ltd. and Beijing Cultural Communication
Co., Ltd., three of Harmony's solely funded subsidiaries, have been cancelled, and were not brought into the consolidation
scope of the Company at the end of the reporting year.
(7) Is there any significant change or adjustment related situation taken place in the Company’s business,
products or services in the reporting year
Inapplicable
(8) Major trade debtors and major suppliers
Information about the major trade debtors
Total sales to the top five customers, in CNY 543,973,630.14
Proportion of the total sales to the top five customers in the total sales of the 16.26%
year,
Proportion of the sales volume to the top five customers in the total sales to
2.31%
the related parties in the year
Information of the top 5 customers
No. Customers Sales (in CNY) Proportion in the total sales of the year
1 China Resources (Shenzhen) Co., Ltd. 166,016,415.38 4.96%
2 VIP.COM 151,290,982.62 4.52%
3 Rainbow Department Store Co., Ltd. 77,301,661.83 2.31%
4 Pinghe Tong (China) Ltd. 75,205,747.97 2.25%
5 Yongan Department Store Co., Ltd. 74,158,822.34 2.22%
Total -- 543,973,630.14 16.26%
Other Information about the major customers
Of the top five customers, Rainbow Supermarket is one of the controlled subsidiaries of AVIC International Holding
Corporation and is one of the Company’s related legal persons.
Top 5 suppliers
Total amount of purchase from top five suppliers, in CNY 1,171,803,885.06
Proportion of the purchase amount from the top five suppliers in the
66.16%
Company’s total purchase amount
Proportion of purchase amount from the top 5 suppliers in the total purchase
0.00%
amount from the related parties in the year
Information about the top 5 suppliers
No. Suppliers Purchase amount, in CNY Proportion in the total purchases of the year (%)
1 SMH Swiss Watch Trading (Shanghai) Co., Ltd. 612,602,454.29 30.84%
2 Ningbo Shangheng Watches Co., Ltd. 292,592,366.59 14.73%
3 Rolex (Guangzhou) Ltd,. 115,523,901.01 5.82%
4 Lifeng Commerce Co., Ltd. 87,168,140.34 4.39%
5 Jiaxing Hengdieli Commerce & Trade Co., Ltd. 63,917,022.83 3.22%
Total -- 1,171,803,885.06 58.98%
Other information about the major suppliers
Inapplicable
3. Expenses
In CNY
Year-on-year
2017 2016 Note to significant changes
increase/decrease
Sales expenses 811,437,932.01 760,530,356.03 6.69% Inapplicable
Administrative expenses 240,043,481.59 201,274,142.02 19.26% Inapplicable
Financial expenses 49,186,742.91 68,887,564.91 -28.60% Inapplicable
4. Investment in R & D
The Company has always attached importance on technology innovation work all the time, enhances its core
competitiveness through innovation of the technology with own intellectual property, consolidate its leading position of
self-innovation in China’s clock and watch brands so as to realize its vision of becoming an international brand and
improve its international competitiveness in the industry. In year 2017, the Company’s total investment in R & D amounted
to CNY 49,453,899.35, a 18.43% growth over the previous year, taking 2% of the net assets as audited in the most recent
period and taking 1.48% of the operation revenue as audited in the most recent period. The growth of the R & D budget in
2017 was mainly for consolidating the Company's leading position in self-dependent innovation in China's watch brands.
The Company increased investment in such key technology fields as space watches, driving units of mechanical watches,
industrial design, intelligent watches, research on application of new materials, etc., greatly increased personnel,
equipment, research budget, etc., and achieved a number of scientific research achievements. In 2017, the Company
applied for 59 patents for invention and utility models, increased nearly by 50% over the previous year. By virtue of the
accumulation in innovation mechanism, innovation ability, innovative talents and innovation achievements, etc., in addition
to the existing titles of \"National Certified Enterprise Technology Center\", \"National Industrial Design Center\", \"National
Technology Innovation Demonstration Enterprise\", the Company has been elected an Intellectual Property Demonstration
Enterprise of Guangdong Province and has been successfully certified for implementing the standards for intellectual
property management system.
Information of Investment in R & D
2017 2016 Proportion of movements
Number of R & D staff (persons) 45 43 4.65%
Proportion of R & D staff in total
0.84% 0.81% 0.03%
employees
Amount of investment in R & D, in
49,453,899.35 41,757,819.70 18.43%
CNY
Proportion of investment in R & D
1.48% 1.39% 0.09%
in operating revenue
Amount of capitalized investment
0.00 0.00 0.00%
in R & D (in CNY)
Proportion of capitalized
investment in R & D in the total 0.00% 0.00% 0.00%
investment in R & D
Cause(s) of significant change of the total investment in R & D in the operating revenue
Inapplicable
Note to the cause of significant change in the capitalization rate of investment in R & D and note to the reasonability
Inapplicable
5. Cash flow
In CNY
Items 2017 2016 Year-on-year increase/decrease
Sub-total of cash flow received
3,849,407,740.68 3,450,624,235.76 11.56%
from operation activities
Subtotal of cash flow paid for
3,284,453,178.71 2,994,865,141.61 9.67%
operating activities
Net cash flow arising from
564,954,561.97 455,759,094.15 23.96%
operating activities
Sub-total of cash flow-in received
10,448,081.56 4,534,113.94 130.43%
from investing activities
Sub-total of cash flow paid for
136,914,522.99 189,744,095.04 -27.84%
investment activities
Net cash flow arising from
-126,466,441.43 -185,209,981.10 -31.72%
investment activities
Sub-total cash flow received from
575,282,350.00 1,405,213,268.91 -59.06%
financing activities
Sub-total cash flow paid for
1,255,793,728.74 1,887,826,066.63 -33.48%
financing activities
Net cash flow arising from
-680,511,378.74 -482,612,797.72 41.01%
financing activities
Net increase in cash and cash
-242,279,864.49 -210,160,120.12 15.28%
equivalents
Note to the major influence factors for the significant change in the relevant year-on-year data
Net cash flow-in arising from investment activities:
During the reporting period, growth of cash flow-in from investment activities by 130.43% on year-on-year basis was
mainly due to income from disposal of the non-operating real estate of Station 68 Ltd.
Cash flow-in arising from financing activities:
During the reporting period, a drop of cash flow-in from financing activities by 59.06% was mainly due to decrease of bank
loans during the reporting year.
Cause(s) of significant difference in the net cash flow arising from the operating activities and the net profit in the reporting
year
Inapplicable
III. Analysis on Non-Principal Businesses
Inapplicable
IV. Assets and Liabilities
1. Significant Changes in Assets Composition
In CNY
End of 2017 End of 2016 Proportion
Proportion in total increased/decre Note to significant changes
Amount
assets ased
Monetary capital 187,152,891.32 5.23% 428,802,755.81 10.71% -5.48% Inapplicable
Accounts receivable 326,254,624.94 9.11% 306,671,021.69 7.66% 1.45% Inapplicable
Inventories 1,820,526,676.26 50.86% 1,997,097,192.38 49.87% 0.99% Inapplicable
Investment based real
305,493,987.77 8.53% 244,202,635.09 6.10% 2.43% Inapplicable
estate
Long term equity
43,879,518.09 1.23% 43,423,624.87 1.08% 0.15% Inapplicable
investment
Fixed assets 523,699,592.65 14.63% 611,204,169.03 15.26% -0.63% Inapplicable
Construction-in-process 10,947,300.53 0.31% 0.00% 0.31% Inapplicable
Short term loan 525,990,510.00 14.69% 1,098,438,070.00 27.43% -12.74% Inapplicable
Long term loan 79,870,353.00 2.23% 115,301,048.00 2.88% -0.65% Inapplicable
2. Assets and liabilities measured based on fair value
Inapplicable
3. Restriction on rights in the assets ended the reporting period
A real estate owned by Switzerland based Montres Chouriet SA with net value amounting to CNY 15,524,849.62 元 was
used as collateral for the overseas long term loan amounting to CNY 5,008,425.00.
V. Investment
1. General
Investment volume during the reporting Investment volume in the same period
Amount of variation
period (in CNY) of previous year (in CNY)
10,947,300.53 0.00 100.00%
2. Significant equity investment acquired in the reporting period
Inapplicable
3. Significant non-equity investment in process in the reporting period
In CNY
Accumulativ Cause of
Income
e amount failure in
Amount accumulativ
The industry actually realizing the Date of
Is it a fixed invested in ely realized Disclosure
Project Way of in which the invested by Source of Project Anticipated planned disclosure
asset the by the end index (if
name investment project is the end of fund progress income progress (if any)
investment reporting of the any)
involved the and
period reporting
reporting anticipated
period
period income
FIYTA
Watch R&D
and http://www.c
Self- Manufactur 10,947,300. 10,947,300. Self-raised March 10,
Manufactur Yes 100.00% 0.00 0.00 Inapplicable ninfo.com.c
construction e 53 53 fund
e Center n/
construction
project
10,947,300. 10,947,300.
Total -- -- -- -- -- 0.00 0.00 -- -- --
53
Note: During the reporting period, the Company increased investment amounting to CNY 3,405.09 in the construction
project of FIYTA Horologe R & D and Manufacture Center. The relevant transaction was reviewed and approved at the
13th Session of the Eighth Board of Directors. For the detail, refer to the Announcement on the Resolution of the 13th
Session of the Eighth Board of Directors 2017-003. The investment actually increased during the reporting period
amounted to CNY 10.9473 million.
4. Financial assets investment
(1) Portfolio investment
Inapplicable
(2) Investment in derivatives
Inapplicable
5. Application of the raised capital
(1) General application of the raised capital
In CNY 10,000
Total raised Proportion of
Total
capital whose Total the total
Total amount accumulative
application accumulative accumulative Application Amount of the
of raised amount of Total raised
Total capital purpose has raised capital raised capital and status of raised capital
Year of raising Way of raising capital used in raised capital capital not yet
raised been changed whose whose the raised idled for more
the reporting used used
in the application application capital unused than 2 years
period accumulated
reporting purpose has purpose has
period been changed been changed
Non-public
2015 issuing of 60,000 7,612.19 55,462.87 0 0 0.00% 3,116.23 Inapplicable
A-shares
Total -- 60,000 7,612.19 55,462.87 0 0 0.00% 3,116.23 --
Note to General Application of the Raised Capital
The Company held the 18th session of the Seventh Board of Directors and 2014 Annual General Meeting respectively on April 16, 2015 and June 17, 2015. The meetings
reviewed and approved the Proposal on the Plan for Non-public Issuing of A-shares to the Specified Investors, etc., according to which the Company planned to issue in a
non-public way A-shares to no more than 10 (with 10 inclusive) specified investors with the total raised capital not exceeding CNY 600 million, which would be applied for four
projects, including the project of launching new FIYTA watches and supplement the working capital. The application for non-public issuing of A-shares was reviewed and
approved by CSRC Securities Issuance Examination Committee (CSIEC) on October 30, 2015. On November 17, 2015, the Company received Official Reply to FIYTA
Holdings Ltd. on Approval for Non-public Issuing ( ZHENG JIAN XU KE [2015] No. 2588 which authorized the Company to issue no more than 46,911,649 new shares in
non-public way. The actual number of A-shares actually issued in the non-public issuing activity was 45,977,011 shares and the raised capital amounted to CNY 599 million.
After deduction of the underwriting fee, the raised capital amounted to RMB 585 million. After deduction of the issuing costs, the net raised capital amounting to CNY583
million was remitted to the bank account designated by the Company on December 18, 2015. Grant Thornton Certified Public Accountants (Special General Partnership)
issued the Capital Verification Reports ZHI TONG YAN ZI (2015) No. 441ZC0653, ZHI TONG YAN ZI (2015) No. 441ZC0652 respectively for the raised capital. Up to now, the
capital raised from non-public issuing of A-shares is going to be applied for the originally designated application purpose and there exists no such a case that the application
purpose has been changed. The concerned follow-up commitments have been completed in implementation.
(2) Promised Projects with Raised Capital
In CNY 10,000
Has
Has the Amount Investment Date when
Total Total Has the significant
project been Amount accumulative progress by the project Result
Promised investment projects promised investment predicted change
changed invested in ly invested the end of has reached realized in
and investment with the investment after operation taken place
(including the report up to the end the report the predicted the reporting
over-raised capital with raised adjustment result been in the
partial period of the report period (%) applicable period
capital (1) reached? feasibility of
change) period (2) (3) = (2)/(1) status
the project?
Investment projects as promised
Project of Launching New
No 18,000 18,000 0 18,000 100.00% - 7,106.48 Yes No
FIYTA Watches
FIYTA E-commerce project No 12,000 12,000 3,527.65 10,545.41 87.88% - 2,907.47 Yes No
FIYTA Brand Marketing
No 10,000 10,000 1,948.83 10,000 100.00% - - Yes No
Promotion Project
Technical Service Website
No 5,000 5,000 2,135.71 3,449.34 68.99% - 252.00 Yes No
Construction Project
Replenishing working capital No 15,000 15,000 0 13,468.12 89.79% - - Yes No
Subtotal of investment projects
-- 60,000 60,000 7,612.19 55,462.87 -- -- 10,265.95 -- --
as committed
Intended investment with the over-raised capital
Inapplicable
Total -- 60,000 60,000 7,612.19 55,462.87 -- -- 10,265.95 -- --
Cause of failure to satisfy the
plan progress or predicted
Inapplicable
revenue and the cause (based
on specific project)
Note to the significant change
Inapplicable
in the feasibility of a project
Amount, application and Inapplicable
application progress of the
over-raised capital
Inapplicable
Change of the site for
implementation of the project
invested with the raised capital
Inapplicable
Adjustment of the way of
implementation of the project
invested with the raised capital
Applicable
Earlier investment in and The Company provided CNY 63.5839 million of the self-raised fund in the project to be invested with the raised capital. After the raised capital
replacement of the project was available for the project, according to the special auditor's report and the resolution of the Board of Directors and as agreed by the
invested with the raised capital sponsor, the raised capital was applied in the project respectively on January 20, 2016 and January 21, 2016 and the self-raised fund as
invested previously was replaced.
The idled raised capital used to Inapplicable
replenish working capital for
time being
Amount of the balance of the Inapplicable
raised capital incurred in
project implementation and the
cause
Application of the raised capital
not yet used and the Ended December 31, 2017, the raised fund not yet applied was all deposited in the special account of the Company.
whereabouts
Application of the raised capital
and the existing problems not Inapplicable
disclosed or other situation
(3) Change of the Projects Invested with the Raised Capital
Inapplicable
VI. Sales of Significant Assets and Equity
1. Sales of Significant Assets
Inapplicable
2. Sales of Significant Equity
Inapplicable
VII. Analysis on Principal Subsidiaries and Mutual Shareholding Companies
Particulars about the principal subsidiaries and mutual shareholding companies which may affect the Company’s net profit
by over 10%.
In CNY
Net assets (CNY) Operating profit (in
Company Names Company type Principal business Registered capital Total assets, in CNY Turnover in CNY Net profit (in CNY)
CNY)
Wholesale, retail
and repairing
services of watches
and components.
Import & export
Shenzhen Harmony (based on SHEN
World Watches Subsidiary MAO JIN ZHUN ZI 600,000,000 1,514,388,825.77 713,372,551.39 2,158,916,496.94 78,796,699.89 60,071,040.49
Center Co., Ltd. NO. [2001] No.
2204; sales of
general
merchandise,
jewelry, diamond
ornaments,
leatherwares, pens,
ties, tie clips,
electronic products,
communication
equipment; domestic
trading; property
management;
advertising
business.
Design, R & D and
sales of watches,
timing instruments,
and spare and
FIYTA Sales Co., accessory parts;
Subsidiary 450,000,000 753,621,949.18 412,252,770.40 1,053,736,320.13 2,081,948.36 758,136.37
Ltd. sales of jewelry
and ornaments;
import & export of
watches and
repairing services.
R & D, design and
sales of various
watches and driving
units, watchcases,
watchbands, and
other spare and
accessory parts;
sales of
sophisticated
timepieces and their
Shenzhen FIYTA
pare and accessory
Sophisticated
parts; wholesale of
Timepieces Subsidiary 10,000,000 254,658,532.92 146,900,215.29 505,682,315.49 139,017,586.65 119,104,502.12
K gold ornaments
Manufacture Co.,
and
Ltd.
watches,superhard
materials (hard alloy,
sophisticated
ceramics) spare and
accessory parts; and
development
of technology for the
aforesaid products
and
supporting business;
import & export.
Production of
various watches and
driving units,
watchcases,
watchbands and
other spare and
accessory parts;
production of
sophisticated
timepieces and their
sophisticated spare
and accessory parts;
processing of K gold
ornamental watches,
superhard material
(hard alloy,
sophisticated
ceramics) spare and
accessory parts; and
repairing of the
aforesaid products.
R&D, production
sales of watches
(excluding the
products in the
catalogue of
measuring
instruments under
control according to
the law); production
Shenzhen FIYTA & machining and
Technology sales of
Subsidiary 10,000,000 69,703,376.40 59,301,921.84 57,589,966.82 104,720.87 586,856.80
Development Co., sophisticated parts
Ltd. and technology
development;
investment and
initiation of industrial
entities (application
shall be submitted
for a specific
project); domestic
commerce,
materials supply and
sales.
Trading of watches
FIYTA (Hong Kong)
Subsidiary and accessories and 137,737,520 262,275,920.38 174,604,010.57 122,310,797.71 -23,426,911.94 -24,474,526.78
Limited
investment.
General business
activities:
Design, R & D, sales
of timing instruments
and spare and
accessory parts;
brand planning,
design, R&D, sales
and wholesale of
general
merchandise,
jewelry, ornaments
Shiyuehui Boutique and gifts (with the
Subsidiary 5,000,000 23,811,807.07 -3,539,864.50 15,736,072.35 -7,253,666.09 -6,511,873.61
(Shenzhen) Co., Ltd. restricted items
exclusive); brand
planning; advertising
business; import &
export. production of
timing instruments
and spare and
accessory parts;
production of
general
merchandise,
jewelry, ornaments,
gifts.
Wholesale, retail
and repairing
services of watches
and accessories;
sales of electronic
Liaoning Hengdarui products,
Commerce & Trade Subsidiary communication 51,000,000 150,708,758.60 39,148,781.80 9,578,233.56 2,280,937.84 2,280,937.84
Co., Ltd. equipment and
materials,
instruments and
meters, office
equipment, general
merchandise,
jewelry, handicrafts,
toys, metal
materials;
conference services;
property
management;
property lease. (For
the projects subject
to approval
according to the law,
the business
activities shall not be
carried out before
approval by the
competent
authority.)
Wholesale and retail
of watches and
accessories, general
merchandise,
jewelry,
leatherwares,
Harbin Harmony
stationery articles,
World Watch Subsidiary 500,000 52,897,952.76 3,565,980.60 53,905,339.82 1,316,874.23 820,001.41
costume; watch
Distribution Co., Ltd.
repairing; design,
manufacture,
agency, distribution
of domestic
advertising
business.
Wholesale, import
&export of watches
and accessories,
jewelry, ornaments
(excluding loose
Emile Chouriet diamond and gold,
(Shenzhen) Limited Subsidiary palladium material) 41,355,200 118,697,552.54 79,504,109.70 86,481,221.87 554,652.05 352,567.12
and the relevant
supporting
businesses
(For the
commodities not
subject to
administration of
state-run trade,
quota or license, it is
necessary to make
application
according to the
relevant regulations
of the government);
after-sale repairing
services of watches.
Production (outward
processing) and
sales of watches,
watch driving units,
watch parts,
Mutual shareholding
Shanghai Watch sophisticated
company 15,350,000 105,550,671.08 100,022,697.16 79,475,581.06 2,454,432.56 1,823,572.89
Industry Co., Ltd. instruments and
accessories;
goods import &
export and
technology import &
export.
Subsidiaries acquired and disposed in the reporting period
Ways of acquisition and disposal during the reporting Influence on the overall production and operation and
Company Names
period performances
The transaction is a business integration inside the
Company, is favorable for giving play to the Company's
The Company acquired 100% equity in
internal coordinative effect and carrying forward the
Liaoning Hengdarui Commerce & Trade Co., Ltd. held by
Liaoning Hengdarui Commerce & Trade Co., Ltd. Company's overall development strategy. This
Shenzhen Harmony World Watches Center Co., Ltd., one
transaction involves consolidation of enterprises under
of the Company's solely funded subsidiaries.
the common control and shall not result in any actual
influence on the Company's consolidated statements.
The transaction is a business integration inside the
The Company acquired 75% equity in Harbin Harmony Company, is favorable for giving play to the Company's
World Watch Distribution Co., Ltd. held by Shenzhen internal coordinative effect and carrying forward the
Harbin Harmony World Watch Distribution Co., Ltd. Harmony World Watches Center Co., one of the Company's overall development strategy. This
Company's solely funded subsidiaries. The Company transaction involves consolidation of enterprises under
now holds 100% equity. the common control and shall not result in any actual
influence on the Company's consolidated statements.
The Company acquired 100% equity in Emile Chouriet The transaction is a business integration inside the
Emile Chouriet (Shenzhen) Limited (Shenzhen) Limited held by FIYTA (Hong Kong) Limited, Company, is favorable for giving play to the Company's
one of the Company's solely funded subsidiaries internal coordinative effect and carrying forward the
Company's overall development strategy. This
transaction involves consolidation of enterprises under
the common control and shall not result in any actual
influence on the Company's consolidated statements.
Particulars about the principal holding and mutual shareholding companies
Inapplicable
VIII. Structuralized Entities Controlled by the Company
Inapplicable
IX. Development Prospect
(I) Development Trend of the Industry
In 2018, there exists a lot of uncertainty in the market environment. Under the general background of consumption
upgrading, tended rational growth of luxury goods industry shall be a big probability event. Watch, as a special commodity
integrated with artistry, aesthetic appreciation, emotion and culture, has always been an important representative of
high-end fashion and quality consumption. We are keeping an optimistic judgment on the long term development of the
brand watch market. The Company shall enjoys a broad development prospect no matter in development of own
proprietary brands with FIYTA watches as principal or development of HARMONY world watch business with
comprehensive services of wristwatches as the principal.
(II) Development Strategy
The Company's long term strategy: holding fast to business philosophy, taking the brand strategy as the guide, carry
forward upgrading of the key value chain integration by means of the business model of \"product + channel\" so as to
gradually form a vertical integration strategy with core speciality, keeping a foothold on the domestic market, continuously
extending the international cooperation and promoting internationalized development. In 2018, the Company shall keep
insisting on the brand development strategy, stick to innovative development to build FIYTA into a leading international
watch brand management and retail enterprise.
(III) Summary of Operation Plan in 2018
In 2018, the Company shall focus on the following work centering on the annual subject terms of \"brand elevation, quality
and performance improvement and innovative development\".
First of all, to reinforce and upgrade FIYTA brand identity, raise per unit shop yield by means online and offline product
differentiation arrangement, enhance the channel control power and competitive position and realize effective profit
growth by improving the product quality and accelerating product launching response speed.
Secondly, to dig deep the brand value, enrich and expand the differentiated brand groups, enlarge the influence in the
objective customer groups and market share and realize sustainable performance growth.
Thirdly, HARMONY world watch business shall keep customer study in depth, reinforce basic operation, continuously
improve per unit shop yield, improve capital turnover efficiency, steadily carry forward channel and brand optimization in
compliance with the market demand; further propel implementation of the strategy of \"being a comprehensive service
supplier of famous brand watches\", and perfect the \"new retail\" business model characterized by online and offline
integration.
Fourthly, constantly enhance construction of the professional platform capacity to serve the proprietary brand in a precise
and effective way; constantly improve the core capability in respect of design, driving unit technology, high-end
manufacture, etc.
Fifthly, to be actively involved in such fields as smart watches, etc. and explore new growth opportunities.
(IV) Capital Necessary for Future Development
According to the Company's business development plan and the financial budget planning in 2018, the Company plans to
apply for financing credit line not exceeding CNY 900 million with the relevant bank(s) by means of credit, guarantee, loan
from subsidiaries, collateral, etc. in order to satisfy the capital demand for investment and business operation and at the
same time seize the development opportunity brought about from the change of the market in a timely way.
(V) Risks Possibly to be Confronted with
1. Under the trend of consumption upgrading, the growth of horologe industry tends to be steady. However, it should still
face the uncertainty. To deal with the accelerated change of the preferences of the consumer groups and customers, the
Company still need to enhance the core competitiveness and business transformation.
2. Under the background of consumption upgrading and 90's generation becoming the main force of consumption, high
quality focused, personalized and young people oriented brands shall become the consumption trend, consumer groups
and demands shall become diversified gradually. It is urgent for the Company to build and enhance the brand promotion
ability.
3. Facing the market environment of highly changeable patterns of consumption and scenes, the Company needs to
continuously adjust the business structure, optimize allocation of resources, construct online and offline retail, and spare
no effort to develop new retail ways and channels and promote permeation and integration of the Internet technology and
offline channels.
4. The Company is in process of continuously perfecting the internal cooperation mechanism and communication
mechanism between various business segments and it is still necessary to adjust the organization structure applicable to
the business development and improve the organization effect.
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 the
Reporting Period
Reception time Way of reception Types of visitors received Index of basic information of survey
February 15, 2017 Field survey Institution http://irm.cninfo.com.cn/ircs/ssgs/co
mpanyIrmForSzse.do?stockcode=00
http://irm.cninfo.com.cn/ircs/ssgs/co
March 15, 2017 Field survey Institution mpanyIrmForSzse.do?stockcode=00
http://irm.cninfo.com.cn/ircs/ssgs/co
April 21, 2017 Field survey Institution mpanyIrmForSzse.do?stockcode=00
http://irm.cninfo.com.cn/ircs/ssgs/co
October 25, 2017 Field survey Institution mpanyIrmForSzse.do?stockcode=00
Number of reception
Number of institutions received
Number of persons received
Number of other visitors received
Is there any important information disclosed,
No
revealed or leaked to the public?
Section 5 Significant Events
I. Profit Distribution for Common Stock and Conversion of Capital Reserve into Share Capital
Preparation, Implementation or Adjustment of the Policy for Common Stock Profit Distribution, Especially the Policy for
Cash Dividend Distribution
The Company's 2016 Annual Profit Distribution Plan was reviewed and approved at the 13th session of the Eighth Board
of Directors held on March 8, 2017 and 2016 General Meeting held on May 31, 2017. It was resolved that with the total
share capital of 438,744,881 shares as at December 31, 2016 as the base, the Company distributed to the whole
shareholders cash dividend at CNY 1.00 for every 10 shares (with tax inclusive), 0 bonus share for every 10 shares; and
converted no reserve into share capital. The implementation of the profit distribution plan was finished on June 26, 2017.
For the detail, refer to the Announcement on Implementation of the Profit Distribution for Year 2015 (2017-027).
Special Note to Cash Dividend Distribution Policy
Does it comply with the Articles of Association or the resolution of the General
Yes
Meeting?
Are the profit distribution criteria and proportions definite and clear? Yes
Are the relevant decision-making process and mechanism complete? Yes
Do independent directors do their best in performing their duties and bring their duties
Yes
into due play?
Do minority shareholders have opportunity to make full expression of their opinions
Yes
and appeal? Have their lawful rights and interests been fully protected?
In case of adjustment or variation of the cash dividend distribution policy, do the
Inapplicable
conditions and procedures comply with the regulations and transparent?
The profit distribution preplan or proposal and the preplan or proposal of conversion of the capital reserve into share
capital in the past three years (with the reporting period inclusive):
According to the provisions concerning cash dividend distribution in the Articles of Association, the Company prepared
specific cash dividend distribution plan after the Board of Directors and the Shareholders’ General Meeting have reviewed
strictly according to the requirements. In the past three years, the Company has well implemented the cash dividend
distribution policy, fully asked for the independent directors’ opinions, effectively ensured the minority shareholders’
benefit and made timely and accurate disclosure in its annual report and the relevant media,
Profit Distribution Plan in 2015: With the total share capital of 438,744,881 shares as at January 15, 2016 as the base, the
Company is going to distribute to the whole shareholders cash dividend at CNY 1.00 for every 10 shares (with tax
inclusive), 0 bonus share for every 10 shares; converted no reserve into share capital.
Profit Distribution Plan in 2016: With the total share capital of 438,744,881 shares as at December 31, 2016 as the base,
the Company is going to distribute to the whole shareholders cash dividend at CNY 1.00 for every 10 shares (with tax
inclusive), 0 bonus share for every 10 shares; converted no reserve into share capital.
Profit Distribution Plan in 2017: With the total share capital of 438,744,881 shares as at December 31, 2017 as the base,
the Company is going to distribute to the whole shareholders cash dividend at CNY 2.00 for every 10 shares (with tax
inclusive), 0 bonus share for every 10 shares; convert no reserve into share capital.
The accumulative amount of cash dividend distributed in the past three years took 141.31% of the annual average net
profit 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
Net profit attributable to the Ratio of the net profit
Company’s shareholders in attributable to the Proportion of the cash
Year of Dividend Amount of Cash Dividend Amount of cash dividend
the consolidated statements Company’s shareholders dividend distributed in other
Distribution (including tax) distributed in other way(s)
of the year of dividend taken in the consolidated way(s)
distribution statements
2017 87,748,976.20 140,216,258.28 62.58% 0.00 0.00%
2016 43,874,488.10 110,662,681.59 39.65% 0.00 0.00%
2015 43,874,488.10 121,702,057.44 36.05% 0.00 0.00%
In the reporting period, both the Company’s profit and the parent company’s profit available for shareholders of common
stock were positive but no common stock cash dividend distribution proposal has been put forward.
Inapplicable
II. Preplan for Profit Distribution and Conversion of Capital Reserve into Share Capital in the Reporting Period
Bonus shares distributed at the rate of ___ (share) for every 10
shares
Dividend distributed at the rate of CNY___ for every 10 shares (with
2.00
tax inclusive)
Number of shares converted for every 10 shares (shares)
Share capital base for the dividend distribution preplan (shares) 438,744,881
Total cash dividend distributed (with tax inclusive) 87,748,976.20
Profit available for distribution (CNY) 625,656,338.99
Proportion of the cash dividend in the total profit available for
100.00%
distribution (%)
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 profit distribution plan for 2017 was reviewed and approved at the 24th session of the Eighth Board of Directors held on March 8, 2018 and is going to be
submitted to 2017 Annual General Meeting for review. According to the plan, the Company is going to distribute cash dividend at the rate of CNY 2.00 for every 10 shares (with
tax inclusive) and 0 bonus share to the whole shareholders with the total share capital as at December 31, 2017 totaling 438,744,881 shares as the base; and no public
reserve is going to be converted into share capital. 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 in
implementation at the end of the reporting period
Commitment Commitment Commitment Implementation
Commitments Promiser Description
type time deadline status
Commitment for Equity Separation Reform
Commitments in the acquisition report or the
written report on change of equity
Commitment made at the time of asset
reorganization
Caitong Fund
Management Co.,
Ltd. ;MANULIFE
TEDA Fund
Management Co,
Ltd. ;Xizang The expected subscribers
Investment Co., of the said non-public
Ltd. ;Golden Eagle issuing including Caitong
Asset Management Fund Management Co.,
Co.,Ltd ;Sws Mu Ltd.; MANULIFE TEDA
Fund Management Fund Management Co,
Co., Ltd. Ltd.;
Commitment Xizang Investment Co.,
Caitong
on restricted Ltd.; Golden Eagle January 15, Completed in
Commitment made at IPO or re-financing Fund Management 1 year
sales of Asset Management Co.,Ltd 2016 implementation
Co., Ltd.;
shares .; Sws Mu Fund
MANULIFE TEDA
Management Co., Ltd.
Fund
committed that the shares
Management Co,
subscribed from the said
Ltd.;
non-public issuing must not
Xizang Investment
be transferred within 12
Co., Ltd.;
months commencing from
Golden Eagle
the listing of the shares.
Asset Management
Co.,
Ltd.; Sws Mu Fund
Management Co.,
Ltd
Equity incentive commitment
Huang Yongfeng, Commitment The said directors and December 16, in process of
Other commitments to the minority shareholders 6 months
Chen Libin, Lu on restricted senior executives 2017 implementation
Bingqiang, Lu sales of increased holding of the
Wanjun, Liu shares Company's shares and
Xiaoming, Pan Bo, committed that within six
Li Ming and Chen months of the increase
Zhuo they shall not reduce the
holding size initiatively,
shall not be engaged in
any inside trading, trading
the shares during
sensitive period or short
swing trading
Have the commitments been implemented in a
Yes
timely way
If the commitment has not been implemented at
the end of the reporting period, it is necessary to
Inapplicable
explain the specific reason of failure in
implementation and the future work plan.
2. There existed profit anticipation for the Company’s assets or projects while the reporting period was still
within the duration of the profit anticipation. The Company made explanation on whether the assets or projects
reached the anticipated profit and the cause
Inapplicable
IV. Non-operational Occupancy of the Company’s Capital by the Controlling Shareholder and its Related Parties
Inapplicable
V. Explanation of the Board of Directors, the Supervisory Committee and Independent Directors (if any) on the
“Qualified Auditor’s Report” issued by the CPAs in the Reporting Period
Inapplicable
VI. Explanation on the Changes in the Accounting Policy, Accounting Estimate, and Accounting Method in
Comparison with the Financial Report of the Previous Year
Inapplicable
VII. Explanation on Serious Accounting Errors Occurred in the Reporting Period Necessary to be Restated
Retrospectively
Inapplicable
VIII. Explanation on the Changes in the Scope of the Consolidated Statements in Comparison with the Financial
Report of the Previous Year.
Reviewed and approved at the 15th Session of the Eighth Board of Directors, Beijing Henglianda Horologe Co., Ltd.,
Harmony World Watch International Co., Ltd. and Beijing Cultural Communication Co., Ltd., three of Harmony's solely
funded subsidiaries, had been cancelled, and were not brought into the consolidation scope of the Company at the end of
the reporting year.
IX. Engagement/Disengagement of CPAs
CPAs currently engaged
Name of the domestic CPAs Ruihua Certified Public Accountants (Special General Partnership)
Remuneration to the domestic CPAs (in CNY10,000)
Successive years of the domestic CPAs offering auditing services 2
Name of the certified public accountants from the domestic CPAs Xing Xiangzong and Liu Xin
Has the CPAs been changed for the reporting period?
No
Employment of CPAs, financial consultant or sponsor for auditing the internal control
The 22nd Session of the Eighth Board of Directors held on October 30, 2017 and 2017 4th Extraordinary General Meeting
held on November 17, 2017 reviewed and approved the Proposal for Renewing Ruihua Certified Public Accountants
(Special General Partnership) as the Company's Auditor for Year 2017, decided to renew Ruihua Certified Public
Accountants (Special General Partnership) as the Company's external and internal control auditor for year 2017 for a term
of one year. During the reporting period, the Company paid the audit fee amounting to CNY 700,000.00 to Ruihua
Certified Public Accountants (Special General Partnership) for auditing the financial report and CNY 300,000.00 for
auditing the internal control.
X. Listing Suspension or Delisting Possibly to be Confronted with after Disclosure of the Annual
Report
Inapplicable
XI. Matters concerning Bankruptcy Reorganization
Inapplicable
XII. Significant Lawsuits and Arbitrations
Inapplicable
XIII. Penalty and Rectification
Inapplicable
XIV. Integrity of the Company and its Controlling Shareholder and Actual Controller
Inapplicable
XV. Implementation of the Company’s Equity Incentive Plan, Employee Stock Ownership Plan or
other Employee Incentive Measures
Inapplicable
XVI. Significant Related Transactions
1. Related Transactions Related with Day-to-Day Operations
Proportion Transactio
Principle of Amount of Has the Way of
Description Price of in the n quota as
Type of pricing of the related approved settlement
Related of Related related amount of approved Market Disclosure Disclosure
Relationship related the related transaction quota been for the
Parties Transaction transaction the similar (in price date index
parties transaction (in CNY exceeded? related
s s transaction CNY10,00
s 10,000) transaction
s (%) 0)
Income Bank
Common from Sales of Market Inapplicabl account Inapplicabl March 10, www.cninf
Rainbow Ltd. 7,730.17 2.31% 9,000 No
controller principal goods price e transferenc e 2017 o.com.cn
business e
Shenzhen
Grand Income Bank
Skylight Common from Sales of Market Inapplicabl account Inapplicabl March 10, www.cninf
0.68 0.00% 500 No
Hotel controller principal goods price e transferenc e 2017 o.com.cn
Management business e
Co., Ltd.
Ganzhou
Income Bank
CATIC
Common from Sales of Market Inapplicabl account Inapplicabl March 10, www.cninf
Jiufang 176.34 0.05% 0 No
controller principal goods price e transferenc e 2017 o.com.cn
Commerce
business e
Co., Ltd.
Income Bank
Shennan
Common from Sales of Market Inapplicabl account Inapplicabl March 10, www.cninf
Circuit Co., 381.01 10.92% 1,500 No
controller principal goods price e transferenc e 2017 o.com.cn
Ltd.
business e
Income Bank
AVIC Common from Property Market Inapplicabl account Inapplicabl March 10, www.cninf
668.04 6.10% 1,800 No
Property controller principal lease price e transferenc e 2017 o.com.cn
business e
Income Bank
Xi'an Tianyue
Common from Property Market Inapplicabl account Inapplicabl March 10, www.cninf
Hotel Co., 419.05 3.83% 0 No
controller principal lease price e transferenc e 2017 o.com.cn
Ltd.
business e
Income Bank
AVIC Real Common from Property Market Inapplicabl account Inapplicabl March 10, www.cninf
171.94 1.57% 0 No
Estate controller principal lease price e transferenc e 2017 o.com.cn
business e
Shenzhen Income Bank
CATIC City Common from Property Market Inapplicabl account Inapplicabl March 10, www.cninf
115.45 1.05% 0 No
Investment controller principal lease price e transferenc e 2017 o.com.cn
Co., Ltd. business e
Income Bank
CATIC
Common from Property Market Inapplicabl account Inapplicabl March 10, www.cninf
Securities 118.27 1.08% 130 No
controller principal lease price e transferenc e 2017 o.com.cn
Co., Ltd.
business e
Shenzhen
CATIC City Income Bank
Property Common from Property Market Inapplicabl account Inapplicabl March 10, www.cninf
70.21 0.64% 0 No
Industry controller principal lease price e transferenc e 2017 o.com.cn
Development business e
Co., Ltd.
Income Bank
Common from Property Market Inapplicabl account Inapplicabl March 10, www.cninf
Rainbow Ltd. 53.27 0.49% 0 No
controller principal lease price e transferenc e 2017 o.com.cn
business e
Shenzhen
CATIC City
Income Bank
Huacheng
Common from Property Market Inapplicabl account Inapplicabl March 10, www.cninf
Property 40.41 0.37% 0 No
controller principal lease price e transferenc e 2017 o.com.cn
Industry
business e
Development
Co., Ltd.
Shenzhen
CATIC Income Bank
Jiufang Common from Property Market Inapplicabl account Inapplicabl March 10, www.cninf
39.29 0.36% 0 No
Assets controller principal lease price e transferenc e 2017 o.com.cn
Management business e
Co., Ltd.
CATIC Public Income Bank
Common Property Market Inapplicabl Inapplicabl March 10, www.cninf
Security from 61.9 0.57% 0 No account
controller lease price e e 2017 o.com.cn
Service Co. principal transferenc
business e
Shenzhen
CATIC Income Bank
Guanlan Common from Property Market Inapplicabl account Inapplicabl March 10, www.cninf
9.8 0.09% 0 No
Real Estate controller principal lease price e transferenc e 2017 o.com.cn
Development business e
Co., Ltd.
AVIC
Income Bank
Property
Common from Property Market Inapplicabl account Inapplicabl March 10, www.cninf
Assets 13.23 0.12% 0 No
controller principal lease price e transferenc e 2017 o.com.cn
Management
business e
Co.
Shenzhen Income Bank
CATIC City Common from Property Market Inapplicabl account Inapplicabl March 10, www.cninf
2.71 0.02% 0 No
Development controller principal lease price e transferenc e 2017 o.com.cn
Co., Ltd. business e
Income Bank
AVIC
Common from Property Market Inapplicabl account Inapplicabl March 10, www.cninf
Property 8.12 0.07% 0 No
controller principal lease price e transferenc e 2017 o.com.cn
CBD Branch
business e
Ganzhou
Bank
CATIC
Common Selling Property Market Inapplicabl account Inapplicabl March 10, www.cninf
Jiufang 105.39 1.48% 300 No
controller expenses lease price e transferenc e 2017 o.com.cn
Commerce
e
Co., Ltd.
Shenzhen
CATIC Bank
Changtai Common Selling Property Market Inapplicabl account Inapplicabl March 10, www.cninf
24.43 0.34% 0 No
Investment controller expenses lease price e transferenc e 2017 o.com.cn
Development e
Co., Ltd.
CATIC City Bank
Property Common Selling Property Market Inapplicabl account Inapplicabl March 10, www.cninf
21.16 0.30% 0 No
(Kunshan) controller expenses lease price e transferenc e 2017 o.com.cn
Co., Ltd. e
Jiujiang
Bank
Jiufang
Common Selling Property Market Inapplicabl account Inapplicabl March 10, www.cninf
Commerce 33.4 0.47% 0 No
controller expenses lease price e transferenc e 2017 o.com.cn
Management
e
Co.
Administr Property Bank
AVIC Common Market Inapplicabl 824.39 100.00% 800 Yes Inapplicabl March 10, www.cninf
ation manageme account
Property controller expenses nt fee price e transferenc e 2017 o.com.cn
e
Bank
Common Selling Shopping Market Inapplicabl account Inapplicabl March 10, www.cninf
Rainbow Ltd. 586.89 9.57% 600 No
controller expenses mall fee price e transferenc e 2017 o.com.cn
e
Long
Shenzhen
term Bank
CATIC
Common expenses Project Market Inapplicabl account Inapplicabl March 10, www.cninf
Building 0 0.00% 500 No
controller to be fund price e transferenc e 2017 o.com.cn
Technology
apportion e
Co., Ltd.
ed
Shenzhen
Bank
CATIC Group Administr
Common Market Inapplicabl account Inapplicabl March 10, www.cninf
Enterprise ation Training fee 0 0.00% 50 No
controller price e transferenc e 2017 o.com.cn
Training expenses
e
Center
Shenzhen Bank
CATIC Common R&D Market Inapplicabl account Inapplicabl March 10, www.cninf
Testing fee 0.32 0.01% 0 Yes
Technical controller expenses price e transferenc e 2017 o.com.cn
Testing Office e
Bank
Shennan Procureme
Common R&D Market Inapplicabl account Inapplicabl March 10, www.cninf
Circuit Co., nt of 0.43 0.01% 0 Yes
controller expenses price e transferenc e 2017 o.com.cn
Ltd. materials
e
Total -- -- 11,676.3 -- 15,180 -- -- -- -- --
Details of the rejection of the goods already sold in
Inapplicable
big amount
The 13th session of the Eighth Board of Directors and 2016 Annual General Meeting reviewed and approved the Prediction
of the Regular Related Transactions in 2017. It is predicted that the total amount of the related transactions between the
In case the total amount of the regular related
Company and the Related Parties would not exceed CNY 151.80 million in Year 2017 while the amount of the related
transaction incurred in the reporting period has
transactions actually incurred in the reporting year was CNY 116.763 million, which has not exceeded the predicted
been predicted based on categories, state the
amount. Where the advances paid to AVIC Property by the Company for the property management fee did not exceed
actual implementation of the in the reporting period
CNY 8 million while the amount of the related transactions actually incurred was CNY 8.2439 million of which the
(if any)
exceeded part has not reached the approved amount. The amount of related transactions between the Company and
Shenzhen CATIC Technical Testing Office for the testing fee, Shennan Circuit Co., Ltd. for procurement of materials has
not reached the approved amount either.
Cause of the big difference between the
transaction price and the market reference price. (if Inapplicable
applicable)
2. Related transactions concerning acquisition and sales of assets or equity
Inapplicable
3. Related transactions concerning joint investment in foreign countries
Inapplicable
4. Current Associated Rights of Credit and Liabilities
Does there exist any non-operating current associated rights of credit and liabilities.
No
5. Other Significant Related Transactions
The 18th Session of the Eighth Board of Directors held on August 11, 2017 and 2017 2nd Extraordinary General Meeting
held on August 31, 2017 reviewed and approved the Proposal for Concluding the Financial Service Agreement with AVIC
Finance Co., Ltd. and decided to terminate the original agreement with AVIC Finance Co., Ltd. and signed a new
Financial Service Agreement. For the Detail, refer to the Announcement on Resolution of the 18th Session of the Eighth
Board of Directors 2017-033, the Announcement on the Financial Service Agreement with AVIC Finance Co., Ltd. a
Related Transaction, 2017-036 and the Announcement on Resolution of 2017 2nd Extraordinary General Meeting,
2017-040.
The 23rd Session of the Eighth Board of Directors held on December 28, 2017 and 2018 1st Extraordinary General
Meeting held on January 16, 2018 reviewed and approved the Proposal for Concluding the Predicted Framework Contract
as a Regular Related Transaction from 2018 to 2020 with Rainbow Department Store Co., Ltd. The Company and its
controlled subsidiaries decided to renew the Framework Contract as a Regular Related Transaction from 2018 to 2020
with Rainbow Department Store Co., Ltd. For the detail, refer to the Announcement on the Resolutions of the 23rd
Session of the Eighth Board of Directors 2017-054 and the Announcement on Concluding the Predicted Framework
Contract as a Regular Related Transaction from 2018 to 2020 with Rainbow Department Store Co., Ltd. 2017-056 and the
Announcement on Resolution of 2018 1st Extraordinary General Meeting 2018-002.
Inquiry on the website for disclosing the provisional report concerning significant related transactions
Description of the provisional announcement Date of disclosure Disclosure website
Announcement on the Resolution of the 18th Session of the
August 15, 2017 www.cninfo.com.cn
Eighth Board of Directors, 2017-033
Announcement on the Financial Service Agreement with AVIC
August 15, 2017 www.cninfo.com.cn
Finance Co., Ltd. a Related Transaction, 2017-036
Announcement on Resolution of 2017 2nd Extraordinary
September 1, 2017 www.cninfo.com.cn
General Meeting, 2017-040
Announcement on the Resolutions of the 23rd Session of the
December 29, 2017 www.cninfo.com.cn
Eighth Board of Directors 2017-054
Announcement on Concluding the Predicted Framework
December 29, 2017 www.cninfo.com.cn
Contract as a Regular Related Transaction from 2018 to 2020
with Rainbow Department Store Co., Ltd. 2017-056
Announcement on Resolution of 2018 1st Extraordinary
January 17, 2018 www.cninfo.com.cn
General Meeting 2018-002
XVII. Important Contracts and Implementation
1. Custody, Contacting and Leases
(1) Custody
Inapplicable
(2) Contracting
Inapplicable
(3) Leases
Inapplicable
2. Significant Guarantees
(1) Guarantees
In CNY 10,000
Outward guarantees Offerred by the Company and its Subsidiaries (excluding guarantee to the subsidiaries)
Date of the
Date of occurrence Guarantee to
announcement Actual amount of Type of Implementati
Names of Gurantees Guarantee line (date of agreement Guarantee period related
on the guarantee guarantee on status
execution) party?
guarantee line
Inapplicable
Total amount of outward guarantee
Total amount of outward guarantee approved
0 actually incurred in the report period
in the report period (A1)
(A2)
Total ending balance of outward
Total amount of outward guarantee already
0 guarantee at the end of the report
approved at the end of the report period (A3)
period (A4)
Guarantees between the Company and its Subsidiaries
Date of the
Date of occurrence Guarantee to
announcement Actual amount of Type of Implementati
Names of Guarantees Guarantee line (date of agreement Guarantee period related
on the guarantee guarantee on status
execution) party?
guarantee line
Guarantee with
FIYTA (Hong Kong) Limited March 10, 2017 6,683.64 August 30, 2017 919.5 One year No No
joint responsibility
Guarantee with
FIYTA (Hong Kong) Limited March 10, 2017 12,538.65 June 27, 2017 4,179.55 One year No No
joint responsibility
Shenzhen Harmony World Guarantee with
March 10, 2017 8,000 December 30, 2017 7,500 One year No No
Watches Center Co., Ltd. joint responsibility
Shenzhen Harmony World Guarantee with
March 10, 2017 30,000 June 29, 2017 500 One year No No
Watches Center Co., Ltd. joint responsibility
Total guarantee quota to the subsidiaries Total amount of guarantee to the
approved in the reporting period (B1) 57,222.29 subsidiaries actually incurred in the 13,099.05
reporting period (B2)
Total guarantee quota to the subsidiaries Total balance of actual guarantee to
approved at the end of the reporting period 57,222.29 the subsidiaries at the end of the 13,099.05
(B3) reporting period (B4)
Guarantees between Subsidiaries
Date of the
Date of occurrence Guarantee to
announcement Actual amount of Implementati
Names of Guarantees Guarantee line (date of agreement Type of guarantee Guarantee period related
on the guarantee on status
execution) party?
guarantee line
Inapplicable
Total guarantee quota to the subsidiaries Total amount of guarantee to the
approved in the reporting period (C1) 0 subsidiaries actually incurred in the
reporting period (C2)
Total guarantee quota to the subsidiaries Total balance of actual guarantee to
approved at the end of the reporting period 0 the subsidiaries at the end of the
(C3) reporting period (C4)
The Company’s total guarantee (i.e. total of the first three main items)
Total amount of guarantee actually
Total guarantee quota approved in the
57,222.29 incurred in the reporting period 13,099.05
reporting period (A1+B1+C1)
(A2+B2+C2)
Total balance of the actual guarantee
Total guarantee quota already approved at the
57,222.29 at the end of the reporting period 13,099.05
end of the reporting period (A3+B3+C3)
(A4+B4+C4)
Proportion of the actual guarantees in the Company’s net assets (namely A4+B4 + C4) 5.31%
Including
Amount of guarantees offered to the shareholders, actual controller and its related
parties (D)
Amount of guarantee for liabilities directly or indirectly offered to the guarantees with the
asset-liability ratio exceeding 70% (E)
Guarantee with total amount exceeding 50% of the net assets (F)
Total amount of the aforesaid three guarantees (D+E+F)
For the guarantee not yet due, guarantee responsibility incurred in the reporting period
Inapplicable
or description of the possible related discharge duty (if any)
Note to the outward guarantee against the established procedures (if any) Inapplicable
Description of the guarantee with complex method
Inapplicable
(2) Outward guarantee against regulations
3. Entrusting other Person to Manage the Cash Assets
(1) Finance Management on Commission
Inapplicable
(2) Entrusted Loan
Inapplicable
4. Other Major Contracts
Inapplicable
XVIII Social Responsibilities
1. Implementation of social responsibilities
\"The Social Responsibility Report \" was published on www.cninfo.com.cn on March 10, 2018.
2. Implementation of the social responsibility of precise poverty relief
During the reporting period, the Company did not carry out any precise poverty relief for time being and there was no
follow-up precise poverty relief plan available.
3. Environmental Protection
Does the Company or any of its subsidiaries belong to a key pollutant discharging unit as announced to the public by the
environmental protection authority?
No
XIX. Notes to Other Significant Events
1. About Non-public Issuing of A-shares
The Company held the 18th session of the Seventh Board of Directors and 2014 Annual General Meeting respectively on
April 16, 2015 and June 17, 2015. The meetings respectively reviewed and approved the Plan for Non-public Issuing of
A-shares to the Specified Investors.
The Application for the non-public issuing of A-shares was approved the Issuance Examination Commission by CSRC on
October 30, 2015 and the Company received the Official Reply of CSRC on Non-public Issuing of A-shares by Fiyta
Holdings Ltd. (ZHENG JIAN XU KE [2015] No. 2588) according to which the Company was approved to issue no more
than 46,911,649 new shares to the designated investors. The Company actually issued 45,977,011 new shares. By
January 16, 2017, the restriction on sales of the aforesaid shares was terminated.
2. Amendment of the Articles of Association
The 13th Session of the Eighth Board of Directors held on March 8, 2017 and 2016 Annual General Meeting held on May
31, 2017 reviewed and approved the Proposal on Amendment of the Articles of Association. For the detail, refer to the
Announcement on the Resolution of the 13th Session of the Eighth Board of Directors No. 2017-003, the Announcement
on the Resolution of 2016 Annual General Meeting No. 2017-019 and the Proposal on Amendment of the Articles of
Association disclosed on the Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn.
The 16th Session of the Eighth Board of Directors held on June 2, 2017 and 2017 1st Extraordinary General Meeting held
on June 30, 2017 reviewed and approved the Proposal on Amendment of the Articles of Association. For the detail, refer
to the Announcement on the Resolution of the 16th Session of the Eighth Board of Directors No. 2017-020, the
Announcement on the Resolution of 2017 1st Extraordinary General Meeting No. 2017-029 and the Proposal on
Amendment of the Articles of Association disclosed on the Securities Times, Hong Kong Commercial Daily and
www.cninfo.com.cn.
3. Change of Directors, Supervisors and Senior Executives
The 13th Session of the Eighth Board of Directors held on March 8, 2017 reviewed and approved the Proposal on Change
of the Chairman of the Board and the Proposal on Change of the General Manager and Mr. Xu Dongsheng, one of the
Company directors, was appointed as the Chairman of the Board, Mr. Chen Libin was recommended to take the office of
the General Manager of the Company. For the detail, refer to the Announcement on the Resolution of the 13th Session of
the Eighth Board of Directors No. 2017-003 disclosed on the Securities Times, Hong Kong Commercial Daily and
www.cninfo.com.cn.
The 15th Session of the Eighth Board of Directors held on May 8, 2017 and 2016 Annual General Meeting held on May 31,
2017 reviewed and approved the Proposal on Nominating Mr. Chen Libin as director candidate, For the detail, refer to the
Announcement on the Resolution of the 15th Session of the Eighth Board of Directors No. 2017-008 and the Resolution of
2017 1st Extraordinary General Meeting No. 2017-019 disclosed on the Securities Times, Hong Kong Commercial Daily
and www.cninfo.com.cn.
The 11th Session of the Eighth Supervisory Committee held on March 10, 2017 and 2016 Annual General Meeting held on
May 31, 2017 reviewed and approved the Proposal on Change of the Supervisor of the Company according to which Mr.
Wang Baoying was elected supervisor of the Comapny. For the detail, refer to the Announcement on the Resolution of the
11th Session of the Eighth Supervisory Committee No. 2017-015 and the Resolution of 2016 Annual General Meeting No.
2017-019 disclosed on the Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn.
In August, 2017, Mr. Xu Dongsheng submitted resignation of director, Chairman of the Board and chairman of the strategic
committee of the Eighth Board of Directors of the Company due to job change. After the resignation, Mr. Xu would no
longer hold any post in the Company. For the detail, refer to the Announcement on Resignation of the Chairman of the
Board No. 2017- 032 as disclosed on the Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn.
The 17th Session of the Eighth Board of Directors held on August 8, 2017 and 2017 2nd Extraordinary General Meeting
held on August 31, 2017 reviewed and approved the Proposal for Nominating Mr. Huang Yongfeng as Director Candidate
and Mr. Huang Yongfeng was elected director of the Eighth Board of Directors. For the detail, refer to the Announcement
of the Resolution of the 17th Session of the Eighth Board of Directors 2017-031 and Announcement on Resolution of 2017
2nd Extraordinary General Meeting, 2017-040 disclosed on the Securities Times, Hong Kong Commercial Daily and
www.cninfo.com.cn.
The 19th Session of the Eighth Board of Directors held on September 4, 2017 and 2017 3rd Extraordinary General
Meeting held on September 4, 2017 reviewed and approved the Proposal for Nominating Mr. Xiao Zhanglin as Director
Candidate and the Proposal for Nominating Mr. Wang Bo as Director Candidate, and Mr. Xiao Zhanglin and Mr. Wang Bo
were elected directors of the Eighth Board of Directors. For the detail, refer to the Announcement of the Resolution of the
19th Session of the Eighth Board of Directors 2017-041 and the Announcement of the Resolution of 2017 3rd
Extraordinary General Meeting 2017-045 disclosed on the Securities Times, Hong Kong Commercial Daily and
www.cninfo.com.cn.
The 20th Session of the Eighth Board of Directors held on September 8, 2017 reviewed and approved the Resolution on
Election of the Chairman of the Board of the Company. Mr. Huang Yongfeng was elected Chairman of the Eighth Board of
Directors. For the detail, refer to the Announcement of the Resolution of the 20th Session of the Eighth Board of Directors
2017-044.
4. Preparation of the Program for Return to Shareholders
The 16th Session of the Eighth Board of Directors held on June 2, 2017 reviewed and approved the Program for Return to
Shareholders. For the detail, refer Announcement on the Resolution of the 16th Session of the Eighth Board of Directors
No. 2017-020 and the Program for Return to Shareholders as disclosed on the Securities Times, Hong Kong Commercial
Daily and www.cninfo.com.cn.
5. Special Work of Carrying out the \"Blue Sky Action\" for Protection of Investors
With a view to implementing the relevant provisions specified in the Circular of China Securities Regulatory Commission
Shenzhen Office on Continuously Carrying out in a Deep-going Way the 'Blue Sky Action', Special Work of Protecting
Investors, further enhancing protection of investors, establish and improve the management mechanism of return to
investors so as to help investors in setting up the idea of rational investment and long term investment, improving their risk
awareness and self-protection ability, promoting maximization of the shareholders' value. The Company concluded the
Proposal for Continuously Carrying out in a Deep-going Way the 'Blue Sky Action 2017', Special Work of Protecting
Investors in July 2017 and worked out the Final Report on the Proposal for Continuously Carrying out in a Deep-going
Way the 'Blue Sky Action 2017', and shall strictly implement the said proposal and steadily promote the work of protecting
investors in future.
XX. Significant Events of the Company's Subsidiaries
Inapplicable
Section 6 Change of Shares and Particulars about Shareholders
I. Change of Shares
1. Change of Shares
In shares
Before the change Increase / Decrease (+/ -) After the change
Shares
Proportion Proportion
Quantity New issuing Bonus shares converted Others Sub-total Quantity
(%) (%)
from reserve
I. Restricted shares 46,026,744 10.49% -45,646,231 -45,646,231 380,513 0.09%
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 46,026,744 10.49% -45,646,231 -45,646,231 380,513 0.09%
Including: Domestic corporate shares 45,977,011 10.48% -45,977,011 -45,977,011 0 0.00%
Shares held by domestic natural
49,733 0.01% 330,780 330,780 380,513 0.09%
persons
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
0 0.00% 0 0 0 0.00%
persons
II. Unrestricted shares 392,718,137 89.51% 45,646,231 45,646,231 438,364,368 99.91%
1. CNY ordinary shares 311,070,137 70.90% 45,646,231 45,646,231 356,716,368 81.30%
2. Foreign invested shares listed in
81,648,000 18.61% 0 0 81,648,000 18.61%
Mainland China
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 438,744,881 100.00% 0 0 438,744,881 100.00%
Causes of Change of Shares
In 2015, the Company issued 45,977,011 shares by non-public issuing which got listed with Shenzhen Stock Exchange
on January 15, 2016. The new shares were not allowed for trading or assignment within 12 months commencing from the
first day of listing. On January 16, 2017, the restriction on sales of the shares involved in the said non-public issuing was
released. Thus, the number of newly increased negotiable shares was 45,977,011 shares, of which 441,040 shares were
additionally held by directors and senior executives on December 14 and 15, 2017 and 75% of them were locked shares
and the number of the newly increased restricted shares was 330,780 shares. Ended the day of disclosing this report, the
sum of the Company's shares was 438,744,881 shares, of which 380,513 shares were restricted shares and 438,364,368
shares were unrestricted shares.
Approval of Change of the Shares
The Company held the 18th session of the Seventh Board of Directors and 2014 Annual General Meeting respectively on
April 16, 2015 and June 17, 2015. The meetings reviewed and approved the proposal on non-public issuing of A-shares to
the designated investors.
The application for non-public issuing of A-shares was approved by CSRC Securities Issuance Examination Committee
on October 30, 2015; on November 17, 2015, the Company received Official Reply to FIYTA Holdings Ltd. on Approval for
Non-public Issuing ( ZHENG JIAN XU KE [2015] No. 2588 on November 17, 2015, according to which the Company was
approved to issue new shares with size not exceeding 46,911,649 shares. The Company actually issued 45,977,011 new
shares. As at January 16, 2017, the restriction on sales over the non-publically issued shares was released.
Transfer in Change of Shares
Inapplicable
Influence of the change of the shares upon such financial indicators as the basic EPS and diluted EPS, net asset value
per share attributable to the common stockholders in the past year and the latest period
Inapplicable
Other information the Company considers necessary or required by the securities regulatory authority to be disclosed
Inapplicable
2. Change of Restricted Shares
In shares
Number of restricted Number of restricted
Number of restricted Number of shares Date of releasing of
shares increased in the shares at the end of the
Shareholders shares at the beginning released from trading Causes of restriction trading restriction
reporting period reporting period
of the reporting period restrictions
Raised capital from
Golden Eagle Asset
4,674,329 4,674,329 0 0 non-public issuing of January 16, 2017
Management Co., Ltd
A-shares
Raised capital from
Caitong Fund
12,590,027 12,590,027 0 0 non-public issuing of January 16, 2017
Management Co., Ltd.
A-shares
Raised capital from
Sws Mu Fund
8,429,118 8,429,118 0 0 non-public issuing of January 16, 2017
Management Co., Ltd.
A-shares
Raised capital from
Xizang Investment Co.,
4,976,551 4,976,551 0 0 non-public issuing of January 16, 2017
Ltd.
A-shares
Raised capital from
MANULIFE TEDA Fund
15,306,986 15,306,986 0 0 non-public issuing of January 16, 2017
Management Co, Ltd.
A-shares
holding totally 80,000
Restricted shares for shares, 75% of which
Huang Yongfeng 0 0 60,000 60,000
senior executives totaling 60,000 shares
were restricted shares
holding totally 80,000
Restricted shares for shares, 75% of which
Chen Libin 0 0 60,000 60,000
senior executives totaling 60,000 shares
were restricted shares
holding totally 96,311
Restricted shares for shares, 75% of which
Lu Bingqiang 49,733 0 22,500 72,233
senior executives totaling 72,233 shares
were restricted shares
holding totally 50,000
Restricted shares for shares, 75% of which
Lu Wanjun 0 0 37,500 37,500
senior executives totaling 37,500 shares
were restricted shares
holding totally 50,000
Restricted shares for shares, 75% of which
Liu Xiaoming 0 0 37,500 37,500
senior executives totaling 37,500 shares
were restricted shares
holding totally 50,000
Restricted shares for shares, 75% of which
Pan Bo 0 0 37,500 37,500
senior executives totaling 37,500 shares
were restricted shares
holding totally 50,040
Restricted shares for shares, 75% of which
Li Ming 0 0 37,530 37,530
senior executives totaling 37,530 shares
were restricted shares
holding totally 51,000
Restricted shares for shares, 75% of which
Chen Zhuo 0 0 38,250 38,250
senior executives totaling 38,250 shares
were restricted shares
Total 46,026,744 45,977,011 330,780 380,513 -- --
II. Issuing and Listing
1. Issuing of securities (with preferred stock exclusive) in the reporting period
Inapplicable
2. Note to changes of the company’s total shares and the structure of shareholders as well as the structure of
assets and liabilities
Inapplicable
3. Existing Employee Shares
Inapplicable
III. Shareholders and Actual Controlling Shareholder
1. Number of Shareholders and Share Held by them
In shares
Total preference
Total common Total preference shareholders with the
shareholders at the shareholders with the voting power not
Total common
end of the month voting power recovered recovered at the end of
shareholders in the 35,156 33,796 0
before the date of at the end of the the month before the
reporting period
disclosing the annual reporting period (if any) day of disclosing the
report (Refer to Note 8) annual report (if any)
(Refer to Note 8)
Shares held by the shareholders holding over 5% shares or the top ten shareholders
Shares held Pledging or freezing
Quantity at Increase/dec Number of the
by the top Number of
Shares held by the top the end of rease in the non-restricted
Shareholder names ten the restricted
ten shareholders the reporting reporting shares held Status of the shares Quantity
shareholders shares held
period period
(%)
CATIC Shenzhen
State-owned corporate 37.15% 162,977,327 0 0 162,977,327
Holdings Limited
Chongqing International
Domestic
Trust Co., Ltd. -
non-state-owned 2.15% 9,421,680 918,900 0 9,421,680
RONGXINTONG Series
corporate
Unitrust No.10
#Yang Zugui Domestic natural person 2.09% 9,163,469 1,909,400 0 9,163,469
Chongqing International Domestic
Trust Co., Ltd. - YUXIN non-state-owned 2.07% 9,103,318 0 0 9,103,318
Trust No.2 corporate
MANULIFE TEDA Fund
Domestic
－ Minsheng Bank－
non-state-owned 1.15% 5,043,559 0 0 5,043,559
MANULIFE TEDA Value
corporate
Growth Oriented
Additional Issue No. 351
Assets Management
Program
Xizang Investment Co.,
State-owned corporate 1.13% 4,976,551 0 0 4,976,551
Ltd.
Domestic
Guangdong Junye
non-state-owned 1.12% 4,924,710 1,577,500 0 4,924,710
Investment Co., Ltd.
corporate
Golden Eagle Fund-
Minsheng Bank-Golden
Domestic
Eagle Wenshi Junye
non-state-owned 0.77% 3,369,329 -1,305,000 0 3,369,329
Flexible Disposition No. 3
corporate
Assets Management
Program
Shenzhen Heli Fengyuan Domestic
Commerce & Trade Co., non-state-owned 0.75% 3,300,000 -14,781 0 3,300,000
Ltd. corporate
Shenzhen Qianye Domestic
Huirong Investment Co., non-state-owned 0.68% 3,000,000 -76,400 0 3,000,000
Ltd. corporate
Of the top 10 shareholders, MANULIFE TEDA Fund - Minsheng Bank － MANULIFE TEDA Value Growth Oriented
Additional Issue No. 351 Assets Management Program, Xizang Investment Co., Ltd. 及 Golden Eagle Fund- Minsheng
About the fact that a strategic investor or ordinary
Bank-Golden Eagle Wenshi Junye Flexible Disposition No. 3 Assets Management Program are all the shareholders that
corporate became one of the top ten shareholders
have participated in the Company's non-public issuing; the new shares subscribed by them got listed with Shenzhen
due to placement of new shares (if any) (Refer to
Stock Exchange on January 15, 2016; of them, the restricted shares were not allowed to be listed for trading or assigned
Note 3)
within 12 months commencing from the first day of listing. The aforesaid restriction on sales has been released since
January 16, 2017.
Of the top 10 shareholders, both Chongqing International Trust Co., Ltd. - RONGXINTONG Series Unitrust No.10 and
Explanation on associated relationship or
Chongqing International Trust Co., Ltd. - YUXIN Trust No.2 are subordinate to Chongqing International Trust Co., Ltd. and
consistent action of the above shareholders
both are holding totally 18,524,998 shares in the Company, taking 4.22% of the Company's total shares.
Shareholding of top 10 shareholders of unrestricted shares
Quantity of unrestricted shares held at the end of the reporting period Share type
Shareholder’s Name
Share type Quantity
CATIC Shenzhen Holdings Limited 162,977,327 A-shares 162,977,327
Chongqing International Trust Co., Ltd. -
9,421,680 A-shares 9,421,680
RONGXINTONG Series Unitrust No.10
#Yang Zugui 9,163,469 A-shares 9,163,469
Chongqing International Trust Co., Ltd. - YUXIN
9,103,318 A-shares 9,103,318
Trust No.2
MANULIFE TEDA Fund－ Minsheng Bank－ 5,043,559 A-shares 5,043,559
MANULIFE TEDA Value Growth Oriented Additional
Issue No. 351 Assets Management Program
Xizang Investment Co., Ltd. 4,976,551 A-shares 4,976,551
Guangdong Junye Investment Co., Ltd. 4,924,710 A-shares 4,924,710
Golden Eagle Fund- Minsheng Bank-Golden Eagle
Wenshi Junye Flexible Disposition No. 3 Assets 3,369,329 A-shares 3,369,329
Management Program
Shenzhen Heli Fengyuan Commerce & Trade Co.,
3,300,000 A-shares 3,300,000
Ltd.
Shenzhen Qianye Huirong Investment Co., Ltd. 3,000,000 A-shares 3,000,000
Explanation to the associated relationship or
consistent action among the top 10 shareholders Of the top 10 shareholders, both Chongqing International Trust Co., Ltd. - RONGXINTONG Series Unitrust No.10 and
of non-restricted negotiable shares and that Chongqing International Trust Co., Ltd. - YUXIN Trust No.2 are subordinate to Chongqing International Trust Co., Ltd. and
between the top 10 shareholders of non-restricted both are holding totally 18,524,998 shares in the Company, taking 4.22% of the Company's total shares.
negotiable shares and top 10 shareholders.
Note to the top 10 shareholders involved in margin
financing & securities lending (if any) (Refer to Note Inapplicable
4)
Did the top ten common shareholders or top ten shareholders of unrestricted common shares conduct contractual repurchase during the reporting
period?
No
2. Controlling Shareholder
Nature of the controlling shareholder: State-owned holding directly under the central government
Type of the controlling shareholder: corporate
Legal Representative
Name of the Controlling Shareholder Date of incorporation Organization code Principal business activities
/Leader
Investing and initiating entities
(separate application is to be
submitted for a specific project);
domestic commerce, supply and
sales of goods and materials
(excluding the goods for exclusive
sale, under special control and
CATIC Shenzhen Holdings Limited Liu Hongde June 20, 1997 91440300279351229A
monopolized goods); import and
export (excluding the goods
forbidden by law, administrative rules
and regulations, decision of the State
Council; the restrictive goods is not
allowed for operation until permit is
granted).
Equity in other domestic and foreign
listed companies held by the controlling CATIC Shenzhen Holdings Limited is holding 37.15% equity in FIYTA Holdings Ltd. (FIYTA A 000026 and FIYTA B 200026) , 22.35%
shareholder by means of control and equity in CATIC Real Estate Co., Ltd. (CATIC Real Estate 000043), 20.81% equity in Tianma Micro-electronics Co., Ltd. (SHEN
mutual shareholding in the reporting TIANMA A 000050) and 73.87% equity in AVIC International Maritime Holdings Limited (a Singapore listed company, O2I).
period.
Change of the controlling shareholder in the reporting period
Inapplicable
3. Actual Controller
Nature of the actual controller: State-owned assets regulatory agency directly under the central government
Type of the actual controller: corporate
Legal Representative
Name of the Actual Controller Date of incorporation Organization code Principal business activities
/Leader
International aviation, trading and logistic,
retail and high-end consumption goods,
AVIC International Holding Corporation Liu Hongde April 12, 1983
real estate and hotel, electronics and
hi-tech, resource development, etc.
Equity in other domestic and foreign listed
companies held by the actual controler by AVIC International Holdings Limited is holding 37.50% equity in CATIC Shenzhen Holdings Limited (HK.0161) and 8.17% equity in
means of control and mutual shareholding Tianma Micro-electronics Co., Ltd. (SHEN TIANMA A 000050).
in the reporting period
Change of the actual controller in the reporting period
Inapplicable
Block Diagram of the Ownership and Control Relations between the Company and the Actual Controller
State-owned Assets Supervision and Administration
Commission of the State Council
100%
National Council for Beijing Putuo Hanhua Aviation Industry AVIC CCB Aviation Industry
Social Security Fund Investment Management Corporation of China Equity Investment (Tianjin) Co.,
14.31% 14.31% 62.52% 8.86%
AVIC International Holding Corporation
100%
AVIC International Shenzhen Company Limited
37.50%
33.93%
CATIC Shenzhen Holdings Limited
37.15%
Fiyta Holdings Ltd.
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 Reorganizing
Party and other Committing Party
Inapplicable
Section 7 About the Preferred Shares
Inapplicable
Section 8 Directors, Supervisors, Officers and Employees
I. Change in Shares Held by Directors, Supervisors and Senior Executives
Number of Volume of
Volume of Number of
shares shares
shares sold Other shares held
acquired at acquired
Starting date Expiry date during the increase/decr at end of the
Names Positions Office Status Gender Age end of the during the
of tenure of tenure reporting ease reporting
reporting reporting
period(share (shares) period
period(share period(share
s) (shares)
s) s)
Huang September 8, August 31,
Chairman In office Male 44 0 80,000 0 0 80,000
Yongfeng 2017
Wang August 31, August 31,
Director In office Male 52 0 0 0 0
Mingchuan 2015
December 9, August 31,
Fu Debin Director In office Male 41 0 0 0 0
2016
Xiao September August 31,
Director In office Male 42 0 0 0 0
Zhanglin 20, 2017 2018
September August 31,
Wang Bo Director In office Male 39 0 0 0 0
20, 2017 2018
Managing May 31, August 31,
Chen Libin In office Male 54 0 80,000 0 0 80,000
Director 2017
Zhang Independent August 31, August 31,
In office Male 62 0 0 0 0
Hongguang Director 2015
Zhang Independent August 31, August 31,
In office Male 52 0 0 0 0
Shunwen Director 2015
Independent August 31, August 31,
Wang Yan In office Male 61 0 0 0 0
Director 2015
Chairman of
Wang the May 31, August 31,
In office Male 54 0 0 0 0
Baoying Supervisory 2017
Committee
May 14, August 31,
Sheng Qing 监事 In office Female 42 0 0 0 0
2016
October 14, August 31,
Wang Jingqi 监事 In office Male 38 0 0 0 0
2016
Deputy
September August 31,
Lu Bingqiang General In office Male 57 66,311 30,000 0 0 96,311
28, 2015 2018
Manager
Deputy
General
September August 31,
Lu Wanjun Manager、 In office Male 51 0 50,000 0 0 50,000
28, 2015
Secretary of
the Board
Deputy
October 17, August 31,
Liu Xiaoming General In office Male 47 0 50,000 0 0 50,000
2016
Manager
Deputy
October 17, August 31,
Pan Bo General In office Male 42 0 50,000 0 0 50,000
2016
Manager
Deputy
October 17, August 31,
Li Ming General In office Male 45 0 50,040 0 0 50,040
2016
Manager
Chief October 14, August 31,
Chen Zhuo In office Male 42 0 51,000 0 0 51,000
Accountant 2016
Diao September March 8,
Chairman Retired Male 54 0 0 0 0
Weicheng 28, 2015
Xu March 8, August 8,
Chairman Retired Male 52 0 0 0 0
Dongsheng 2017
August 31, August 28,
Zhong Sijun Director Retired Male 42 0 0 0 0
2015
August 31, August 28,
Cao Zhen Director Retired Female 47 0 0 0 0
2015
Chairman of
the August 31,
Sui Yong Retired Male 60 May 5, 2017 0 0 0 0
Supervisory
Committee
Total -- -- -- -- -- -- 66,311 441,040 0 0 507,351
II. Change of Directors, Supervisors and/or Senior Executives
Names Office Taken Type Date Causes
Appointment & Elected director of the Eighth Board of Directors at the 17th Session of the
Huang Yongfeng Director August 31, 2017
removal Eighth Board of Directors and 2017 2nd Extraordinary General Meeting.
Appointment & Elected Chairman of the Eighth Board of Directors at the 20th Session of the
Huang Yongfeng Chairman September 8, 2017
removal Eighth Board of Directors.
Appointment & Elected Director of the Eighth Board of Directors at the 19th Session of the
Xiao Zhanglin Director September 20, 2017
removal Eighth Board of Directors and 2017 3rd Extraordinary General Meeting.
Wang Bo Director Appointment & September 20, 2017 Elected Director of the Eighth Board of Directors at the 19th Session of the
removal Eighth Board of Directors and 2017 3rd Extraordinary General Meeting.
Appointment & Elected Director of the Eighth Board of Directors at the 15th Session of the
Chen Libin Director May 31, 2017
removal Eighth Board of Directors and 2016 Annual General Meeting.
Appointment & Elected General Manager of the Company at the 13th Session of the Eighth
Chen Libin General Manager March 8, 2017
removal Board of Directors
Appointment & Elected Supervisor of the Eighth Supervisory Committee at the 8th Session
Wang Baoying Supervisor May 31, 2017
removal of the Eighth Supervisory Committee and 2016 Annual General Meeting.
Chairman of the
Appointment & Elected the Chairman of the Eighth Supervisory Committee at the 13th
Wang Baoying Supervisory August 28,2017
removal session of the Eighth Supervisory Committee
Committee
Resigned Director and Chairman of the Eighth Board of Directors and the
Diao Weicheng Chairman Retired March 8, 2017 Chairman of the Strategy Committee due to job change. Mr. Diao no long
takes any office in the Company after his resignation.
Resigned Director and Chairman of the Eighth Board of Directors and the
Xu Dongsheng Chairman Retired August 8, 2017
Chairman of the Strategy Committee due to job change.
Resigned Director of the Eighth Board of Directors and a member of the
Zhong Sijun Director Retired August 28, 20170 Strategy Committee and a member of the Auditing Committee due to job
change
Resigned Director of the Eighth Board of Directors and a member of the
Cao Zhen Director Retired August 28, 2017 Strategy Committee and a member of the Nomination, Remuneration and
Assessment Committee due to job change
Chairman of the
Resigned Supervisor and the Chairman of the Supervisory Committee of the
Sui Yong Supervisory Retired May 5, 2017
Company due to job change.
Committee
Deputy General
Chen Libin Dismissal March 8, 2017 Resigned Deputy General Manager of the Company due to job transfer.
Manager
III. Profile of Senior Executives
Professional 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 Beijing University of
Aeronautics & Astronautics, and EMBA of China Europe International Business School. He is now the Secretary of the
CPC Committee and Chairman of the Board of the Company. Mr. Huang used to be the chairman and general manager of
AVIC INTL Zhuhai Co., Ltd., assistant to the general 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., the secretary of the board of CATIC Shenzhen Holdings Limited, Director of the Sixth
and Seventh Board of Directors of the Company, director of AVIC Real Estate Co., Ltd., director of Rainbow Department
Store Co., Ltd., director of Tianma Microelectronics Co., Ltd. and chairman of Shenzhen Zhongshi Mechanical Equipment
Co., Ltd.
Mr. Wang Mingchuan, born in December 1966, senior accountant, master of management engineering of Tongji University.
Mr. Wang is a director of the Company, Deputy GM and Chief accountant of AVIC International Shenzhen Co., Ltd.,
director of Tianma Microelectronics Co., Ltd., director of AVIC Real Estate Co., Ltd. and director of Rainbow Department
Store Co., Ltd. and a director of Shennan Circuit Co., Ltd. He used to be a financial supervisor of the financial division of
Chengdu Engine Company, manager of the financial department of Shenzhen Shenrong Engineering Plastic Company,
manager of the comprehensive management department and chief financial officer of Shenzhen CATIC Trading Co., Ltd.,
manager of the financial and audit department, manager of the financial department and vice chief accountant of AVIC
International Shenzhen Co., Ltd. and vice chief accountant of AVIC International Holding Corporation.
Mr. Fu Debin, born in February 1977, master of engineering and doctor of engineering of Beijing University of Aeronautics
& Astronautics. He is a director in office of the Company and the head of H.R. department of AVIC International Holding
Corporation, a director of Tianma Microelectronics Co., Ltd. and a director of Shennan Circuit Co., Ltd. He used to be the
head of the administration and management department and deputy head of the management department of AVIC
International Holding Corporation, deputy director of the party policy office and deputy secretary of the general Party
branch of Power School of Beijing University of Aeronautics & Astronautics.
Mr. Xiao Zhanglin, born in January 1976, senior engineer, MBA of Shanghai Jiaotong University. He is a director in office
of the Company, head of the planning and operation department of AVIC International Shenzhen Co., Ltd., a director of
AVIC Real Estate Co., Ltd, a director of Tianma Microelectronics Co., Ltd., a director of Rainbow Department Store Co.,
Ltd., a director of Shenzhen Aero Fasteners MFG Co., Ltd., a director of AVIC INTL Shenzhen Trading Co., Ltd. Mr. Xiao
used to be the chief of the retail and high-end consumer goods office, deputy section chief of the strategy development
department of AVIC International Holding Corporation and AVIC INTL Shenzhen Trading Co., Ltd. and the assistant to the
section chief of the enterprise strategy and management department of AVIC International Shenzhen Co., Ltd.
Mr. Wang Bo, born in July, 1979, MBA of Renmin University of China. He is a director in office of the Company, section
chief of the HR department of AVIC International Shenzhen Co., Ltd., a director of Shennan Circuits Co., Ltd, a director of
Shenzhen Aero Fasteners MFG Co., Ltd., a director of Shenzhen Grand Skylight Hotel Management Company Limited
and a director of AVIC INTL Shenzhen Trading Co., Ltd. Mr. Wang used to be deputy section chief of the HR department
of AVIC International Holding Corporation, a director of AVIC INTL Guangzhou Co., Ltd., and a director of AVIC INTL
Zhuhai Co., Ltd.
Mr. Chen Libin, born in June 1964, master of economics of the Party School of Guangdong Provincial CPC Committee
and EMBA of Sun Yat-Sen University. He is a director in office, Vice Secretary of the CPC Committee and the GM of the
Company. Mr. Chen used to be the deputy General Manager and Secretary of the Board of the Company, deputy section
chief and section chief of the Party’s affairs of the Party-masses Work Department and senior commissioner, deputy
manager and manager of the enterprise culture department of CATIC Shenzhen.
Mr. Zhang Hongguang, born in March 1956, senior engineer, bachelor of light industry machinery of Dalian Polytechnic
University. He is now an independent director of the Company, vice president of China Timepieces Association. He used
to be the GM of Shenzhen Qixin Construction Group, manager of Shenzhen Xinghua Co., Ltd. and deputy chief of the
education department of the Ministry of Light Industry.
Mr. Zhang Shunwen, born in May, 1966, senior accountant, a Chinese CPA, and master of Zhongnan University of
Economics and Law. He is now an independent director of the Company, a partner of Lixin Certified Public Accountants
(special general partnership), an expert member of the Third Assessment Committee of Guangdong Senior Accountants,
vice president of Shenzhen Service Trade Association, practicing tutor of College of Economics of Shenzhen University,
independent director of Henan Zhongyuan Air Cylinder Parts Co., Ltd., Shenzhen Special Economic Zone Real
Estate&Properties (Group).Co.,Ltd. and Shenzhen Mingdiao Decoration Co., Ltd. and Shenzhen HTI Group Co., Ltd. He
used to be a vice president of Shenzhen Association of CPAs and a member of CPPCC of Shenzhen Municipality.
Mr. Wang Yan, born in February 1957, senior economist, master of business administration of State University of New
York. He is now an independent director of the Company, professor of Intellectual Property Academy of South China
University of Technology, deputy director of South China Training Base of the State Intellectual Property Bureau,
independent director of Shenzhen Maxonic Automation Control Co., Ltd. He used to be a deputy director of the Intellectual
Property Bureau of Shenzhen Municipality, associate professor of the management school of Southwest University of
Political Science and Law, senior executive of First State China Fund Management Co., Ltd., chief economist of the
domestic listing company of China Merchants Group (China Merchants Harbor Service), and the assistant to the director
of the Management Department of the State Intellectual Property Bureau.
Mr. Wang Baoying, born in July, 1964, senior engineer at research fellow level, bachelor of Beijing University of
Aeronautics & Astronautics, EMBA of China Europe International Business School. He is the Chairman of the Supervisory
Committee, managing director of AVIC International Shenzhen Co., Ltd., the chairman of the supervisory committee of
Tianma Microelectronics Co., Ltd., the chairman of the supervisory committee of Rainbow Department Store Co., Ltd. and
the chairman of the supervisory committee of Shennan Circuit Co., Ltd. He used to be a director of the Company,
section-chief of AVIC Tianjin Aviation Electro-mechanical Co., Ltd., deputy GM of Shenzhen Rainbow Department Store
Co., Ltd., first deputy GM of Shenzhen Nam Kwong (Group) Company Limited, manager of the enterprise strategy and
management department and assistant of the GM of CATIC Shenzhen, executive director of CATIC Shenzhen Holdings
Limited, managing director of Shenzhen AVIC Resources Co., Ltd., managing director of AVIC New Energy Development
Co., Ltd. and managing director of AVIC International Holding Corporation.
Ms. Sheng Qing, born in April, 1976, accountant, senior HR administrator, master of organization and HR management of
the University of Hong Kong, bachelor of international accounting specialization of Jiangxi University of Finance and
Economics. She is a supervisor in office of the Company, manager of the supervision and audit department of the
Company. She used to be senior business manager of the audit department and manager of HR department of the
Company.
Mr. Wang Jingqi, born in October, 1980, master of Tianjin University. Mr. Wang is a supervisor in office of the Company,
assistant to the GM of FIYTA Sales Co., Ltd. He used to be a deputy manager of the HR Department of the Company, the
assistant to the GM and manager of the basic support department of FIYTA Technology Development Co., Ltd.
Mr. Lu Bingqiang, born in December 1961, senior economist, bechalor of Guangzhou Jinan University. Mr. Lu is deputy
GM of the Company and Managing Director of FIYTA (Hong Kong) Limited. He used to be the assistant to the GM and
director of the Company, and GM and chairman of Shenzhen Harmony World Watches Center, the president secretary of
AVIC International Shenzhen Co., Ltd.
Mr. Lu Wanjun, born in February, 1967, accountant, EMBA of Sino-European International Management Institute. Mr. Lu is
now a deputy GM and the Secretary of the Board of the Company. He used to be the assistant to the GM of the Company,
executive deputy GM and deputy GM, the assistant to the GM and concurrently the manager of the financial department
of Shenzhen Harmony World Watches Center Co., Ltd.
Mr. Liu Xiaoming, born in 1971, engineer, economist, bachelor of mechanical engineering of Beijing University of
Aeronautics & Astronautics, and EMBA of China Europe International Business School. He is a deputy GM of the
Company, the managing director of Shenzhen Harmony World Watches Center Co., Ltd. He used to be the assistant to
the GM of the Company and the assistant to a deputy GM and the GM of Shenzhen Harmony World Watches Center Co.,
Ltd.
Mr. Pan Bo, born in March, 1976, bachelor of electromechanical engineering of Beijing University of Aeronautics &
Astronautics, and EMBA of China Europe International Business School. He is now a deputy GM of the Company, the GM
of FIYTA Brand, the managing director of FIYTA Sales Co., Ltd. Mr. Pan used to be the assistant to the GM of the
Company, executive deputy GM, deputy GM, the assistant to the GM, manager of the sales department, manager of the
logistic department, manager of the after-sale department, etc. of FIYTA Sales Co., Ltd.
Mr. Li Ming, born in September, 1973, bachelor of marketing of Zhongnan University of Economics and Law and EMBA of
China Europe International Business School. He is a deputy GM of the Company. Mr. Li used to be the assistant to the
GM and chief HR officer of the Company, a deputy GM, the assistant to the GM and manger of the HR department of
Shenzhen Harmony World Watches Center Co., Ltd.; chief HR officer and the GM of the marketing center of China
Netcom Shenzhen; manager of big customer market planning of China Telecom Shenzhen.
Mr. Chen Zhuo, born in September 1976, accountant, MBA of Wuhan University, EMBA of China Europe International
Business School. He is the chief accountant of the Company. Mr. Chen used to be a supervisor, the assistant to the GM,
manager of the strategy and information department, deputy manager of the strategy and information department and
securities affairs representative of the Company, deputy GM and manager of the financial information department of
FIYTA Sales Co., Ltd.
Office taking in shareholder companies
Does he/she receive
remuneration or
Names of the Titles engaged in Starting date of Expiry date of office
Names of the Shareholders allowance from the
persons in office the shareholders office term term
shareholder?
Deputy Chief
Wang Mingchuan AVIC International Holding Corporation November 3, 2010 Yes
Accountant
Wang Mingchuan AVIC International Shenzhen Co., Ltd. Chief Accountant January 23, 2017 Yes
Head of the HR
Fu Debin AVIC International Holding Corporation July 1, 2016 Yes
Dept.
Head of the
Xiao Zhanglin AVIC International Shenzhen Co., Ltd. Planning and August 22, 2017 Yes
Operation Dept.
Head of the HR
Wang Bo AVIC International Shenzhen Co., Ltd. April 25, 2017 Yes
Dept.
Wang Baoying AVIC International Shenzhen Co., Ltd. Specialized April 11, 2017 Yes
director
Explanation to the
office taking in
Inapplicable
shareholder
companies
Offices Taken in Other Organizations
Does he/she receive
Titles engaged in
Names of the Starting date of office Expiry date of office remuneration or
Names of Other Organizations the other
persons in office term term allowance from other
organizations
organization?
Zhang Hongguang China Timepieces Association Vice chairman January 1, 2010 Yes
Lixin Certified Public Accountants (Special Ordinary
Zhang Shunwen Partner January 1, 2011 Yes
Partnership)
Intellectual Property Academy of South China University of
Wang Yan Full-time professor August 1, 2010 Yes
Technology
Explanation to the
office taking in other Inapplicable
organizations
Punishment imposed by the securities regulatory authority on the directors, supervisors and senior executives both in
office and having left their posts in the reporting period.
Inapplicable
IV. Remuneration to Directors, Supervisors and Senior Executives
1. Decision-making procedures of the remuneration to directors, supervisors and senior executives: Remuneration to
directors and supervisors was reviewed and approved by the Company’s General Meeting and remuneration to senior
executives was reviewed and approved by the Board of Directors.
2. Basis for determining the remuneration to directors, supervisors and senior executives:
(1) Basis for Determining Remuneration to Directors: Remuneration to the directors appointed by the controlling
shareholder is determined and distributed by the controlling shareholder. Allowance to independent directors is subject to
the proposal prepared by the Board of Directors and reviewed and approved by the General Meeting and disclosed in the
Company’s annual report. Except the aforesaid allowance, independent directors received no extra and undisclosed
benefit from the Company, the Company’s principal shareholders or other organization or personnel with stakeholding.
(2) Basis for Determining Remuneration to Supervisors: Remuneration to the supervisors appointed by the controlling
shareholder is determined and distributed by the controlling shareholder. Remuneration to the staff representative
supervisor is determined by the Company based on the specific job he/she is engaged in.
(3) Basis for Determining Remuneration to senior executives: The Company practiced annual salary system for
remuneration to senior executives. The annual salary system consists of basic annual salary and performance annual
salary. The composition of the scheme of annual salary to senior executives is based on the operation result of the
Company and reference to the average salary level of the industry. The Company constantly improves the Measures for
Administration of the Remuneration to Senior Executives, insists on the principle of distribution on the basis of work with
consideration of power, responsibilities and benefit with the principal orientation of \"being market based\", \"being full
amount based\" and \"being broadband based\".
3. Actual payment of the remuneration to directors, supervisors and senior executives:
The Company practiced the annual salary system for its senior executives. The annual salary structure consists of the
basic annual salary and performance based annual salary. The annual salary assessment for the GM was carried out
according to the assessment methods worked out by the shareholder. The assessment basis is mainly in accordance with
a series of indicators systems prepared based on the balance scorecard. The assessment for other senior executives was
conducted based on the indicators in the balance scorecard prepared at year beginning and the work report at year end.
Remuneration to directors, supervisors and senior executives in the reporting period
In CNY10,000
Remuneration
Total remuneration
actually received at
Names Positions Gender Age Office Status received from the
the end of the
Company
reporting period
Huang Yongfeng Chairman Male 44 In office 41.68 No
Wang Mingchuan Director Male 52 In office 0 Yes
Fu Debin Director Male 41 In office 0 Yes
Xiao Zhanglin Director Male 42 In office 0 Yes
Wang Bo Director Male 39 In office 0 Yes
Chen Libin Managing Director Male 54 In office 144.45 No
Zhang Hongguang Independent Director Male 62 In office 9 No
Zhang Shunwen Independent Director Male 52 In office 9 No
Wang Yan Independent Director Male 61 In office 9 No
Chairman of the
Wang Baoying Male 54 In office No
Supervisory Committee
Sheng Qing Supervisor Female 42 In office 94.76 No
Wang Jingqi Supervisor Male 38 In office 72.11 No
Deputy General
Lu Bingqiang Male 57 In office 139.38 No
Manager
Deputy General
Lu Wanjun Manager、Secretary of Male 51 In office 138.72 No
the Board
Deputy General
Liu Xiaoming Male 47 In office 154.68 No
Manager
Deputy General
Pan Bo Male 42 In office 152.04 No
Manager
Deputy General
Li Ming Male 45 In office 138.56 No
Manager
Chen Zhuo Chief Accountant Male 42 In office 140.94 No
Diao Weicheng Chairman Male 55 Retired 0 Yes
Xu Dongsheng Chairman Male 52 Retired 112.17 No
Zhong Sijun Director Male 42 Retired 0 Yes
Cao Zhen Director Female 47 Retired 0 Yes
Chairman of the
Sui Yong Male 60 Retired Yes
Supervisory Committee
Total -- -- -- -- 1356.49 --
Incentive equity to directors, supervisors or/and senior executives in the reporting period
Inapplicable
V. Employees
1. Number, Job Composition and Education Background of Employees
Number of employees working for the parent company
Number of employees working for the major subsidiaries 5,246
Total employees on active duty 5,362
Total employees receiving remuneration in the reporting period 5,362
Number of the retired employees for whom the parent company and the major
subsidiaries need to share the pension
Job Composition
Job Composition Categories Number of persons involved in the job composition
Production
Sales 4,007
Technical
Financial
Administrative
Total 5,362
Education background
Education levels Number of persons
Master's degree or higher
Undergraduate
Junior college 1,358
Below junior college 2,998
Total 5,362
2. Remuneration Policy for Staff
The Company’s remuneration policy is based on strategy, market, performances and job value. The Company has
established a remuneration and benefit system with external competitiveness and internal fairness according to the
Company’s strategic target, ensuring the attractiveness to high quality talents of the industry, retaining the core and key
talents of the Company, activating the human resource, mobilizing staff’s enthusiasm and improving the Company’s core
competitiveness.
3. Training Program
The Company is concentrated on watch industry, insists on the principle of guiding various businesses with the brand
strategy, takes a broad view of the world and has established its vision of “moulding an international brand and becoming
a globalized enterprise”. While speeding up development, the Company firmly believes that “to build brand is to integrate
the brand work and life style”, the core speciality of the organization and staff and the qualification of the staff as brand
personnel are the key elements determining the future development. For the purpose of creating the core competitiveness
based on “brand building”, meeting the strategy challenge, promoting realization of the long and short term plan, the
Company determined the talent standard and qualification model based on the brand strategy by means of strategy
analysis, internal and external environment analysis, talent supply analysis and employees’ ability gap analysis, kept
building a training system integrated with talent development model, improved comprehensive, multi-level, targeted and
comprehensive accomplishment bearing, promoted overall and quick growth of employees and senior officers and
enhanced the Company’s core competitiveness.
4. Labor Outsourcing
Inapplicable
Section 9 Corporate Governance
I. General
In year 2017, the Company kept improving the Company’s corporate governance structure strictly according to the PRC
Company Law, the PRC Securities Law and the regulations of China Securities Regulatory Commission concerning
governance of listed companies, and tried to enhance construction of modern enterprise system, upgraded the level of
regulatory operation of the Company. As a result, there was no discrepancy between the situation of the Company’s
corporate governance and the regulatory documents of China Securities Regulatory Commission concerning governance
of listed companies.
The Company established and improved relatively standardized corporate governance structure and rules of procedures
strictly according to law, rules and regulations, including the PRC Company Law, and the Articles of Association of the
Company, formed a decision-making and operation management system with the Shareholders’ Meeting, the Board of
Directors, the Supervisory Committee and the management of the Company as the principal structure. They implemented
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 policy
and investment plan, reviewing and approving the Company’s annual financial budget scheme, settlement scheme, profit
distribution plan, loss make-up plan, change of the application of the proceeds raised through issuing, etc., makes
resolution on increase and decrease of the Company’s registered capital, issuing bond, etc., election and replacement of
directors, non-staff supervisors and decision on their remuneration and way of payment.
The Board of Directors is the Company’s decision-making organ, takes charge of implementing the decisions made by the
Shareholders’ General Meeting, assumes responsibility to the Shareholders’ General Meeting and reports the work to it;
within the authorization from the General Meeting, decides the Company’s external investment, acquisition and sales of
assets, assets pledge, external guarantee, related transactions, etc., decides establishment of the Company’s internal
management organs, engagement and disengagement of the Company’s general manager, the Board secretary and
other senior executives, etc. The Board of Directors consists of nine directors, including three independent directors.
The Board of Directors has established three subordinate special committees, namely the Strategy Committee, the Audit
Committee and Nomination, Emolument and Assessment Committee.
The Supervisory Committee is the Company’s supervisory organ in charge of supervising the directors, managers and
other senior executives in performing duties according to the law and proposes dismissal of any director or senior
executive who breaches the law, the administrative rules and regulations, the Articles of Association or the General
Meeting’s resolutions. The Supervisory Committee consists of three supervisors including two staff supervisors.
The management assumes responsibility to the Board of Directors and the General Manager takes full responsibility for
the 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 and
coordinate 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.
No
II. Independence in Business, Personnel, Assets, Organization, Finance, etc. from the Controlling Shareholders
The Company is independent in business, personnel, assets, organization and finance from its controlling shareholder.
The Company has complete and independent business and the ability of autonomous operation.
Business. The Company is mainly engaged in timepiece businesses and has independent production, auxiliary production
system and complementary facilities, and possesses its own procurement and sales systems. There exists no competition
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 and
salaries management. Except Mr. Lai Weixuan, the Chairman, Mr. Wang Mingchuan, Mr. Huang Yongfeng, Mr. Wu
Xiaohua and Madam Wang Xiaohua, the four directors, and Mr. Sui Yong, the chairman of the Supervisory Committee,
none of other senior executives takes any concurrent office in the shareholders and none of the financial staff works
concurrently for any related parties.
Assets: The assets of the Company and its controlling shareholder are highly distinct. The Company enjoys the corporate
ownership over its assets and the assets are completely independent from its controlling shareholder. In addition, the
Company enjoys sole ownership of such trademarks as FIYTA, HARMONY, etc.
Organization: The Company has established its own intra-company organizations independent from the controlling
shareholder. The Board, the Supervisory Committee and the other internal departments and offices work independently.
There exist neither subordinate relations between the controlling shareholder/its functional departments nor doing joint
office work. The controlling shareholder enjoys its rights and undertakes the corresponding obligations according to the
law and has never been involved in any action which directly or indirectly interferes the Company’s business activities
surpassing the authority of the General Meeting.
Finance: The Company has established independent financial department, worked out sound and independent financial
and accounting system and financial management system and independently opened bank accounts. The controlling
shareholder has never interfered the Company in its financial and accounting activities.
III. Horizontal Competitions
Inapplicable
IV. Annual General Meeting and Extraordinary General Meetings in the Reporting Period
1. General Meetings in the Reporting Period
Proportion of investors in
Sessions Meeting Types Meeting date Disclosure date Disclosure index
total participants
2016 Annual General
Annual General Meeting 38.18% May 31, 2017 June 1, 2017 http://www.cninfo.com.cn/
Meeting
2017 1st Extraordinary Extraordinary General
37.86% June 30, 3017 July 1, 2017 http://www.cninfo.com.cn/
General Meeting Meeting
2017 2nd Extraordinary Extraordinary General
38.67% August 31, 2017 September 1, 2017 http://www.cninfo.com.cn/
General Meeting Meeting
2017 3rd Extraordinary Extraordinary General
37.85% September 20, 2017 September 21, 2017 http://www.cninfo.com.cn/
General Meeting Meeting
2017 4th Extraordinary Extraordinary General
38.00% November 17, 2017 November 18, 2017 http://www.cninfo.com.cn/
General Meeting Meeting
2. Request by the Preference Shareholders with the Vote Recovered for an Extraordinary General Meeting
Inapplicable
V. Duty Performance of Independent Directors in the Reporting Period
1. Attendance for Board Meetings and General Meetings
Inapplicable
Independent Directors’ Attendance for Board Meetings
Number of Board Failure to personally
Number of Meetings Number of
meetings necessary to Number of Spot attend board meetings
Independent directors Attended by attendances by Number of Absence
be attended in the Attendances successively twice
Communication representative
reporting period (Yes/No)
Zhang Hongguang 11 2 9 0 0 No
Zhang Shunwen 11 2 9 0 0 No
Wang Yan 11 2 9 0 0 No
Number of general meetings attended by
independent directors as non-voting delegates
Notes to Failure to Personally Attend Board Meetings Successively Twice
Inapplicable
2. Objection of independent directors on some relevant issues
Inapplicable
3. Other Note to Duty Performance of Independent Directors
Inapplicable
VI Duty Performance of Special Committees under the Board of Directors in the Reporting Period
Summary 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, the
Articles of Association and the Rules for Implementation of the Strategy Committee of the Board of Directors, continued to
do research work on the strategic planning for the Company’s long term development and supervised the Company in
implementation of various strategies. The Strategy Committee held its first meeting of year 2016 on March 8, 2017. The
meeting reviewed and approved the Work Report of the Board of Directors in Year 2016 and the Profit Distribution for Year
2016, the matter concerning increase of investment in the project of constructing FIYTA Horologe R & D and Manufacture
Center; the second meeting of the Strategy Committee for year 2017 was held on May 31, 2017. The meeting reviewed
and approved the plan for return to shareholders and amendment of the Articles of Association.
Summary Report on Performances of the Audit Committee of the Board of Directors
In accordance with the Rules on the Content and Format of Information Disclosure of Companies that Publicly Offer
Securities No. 2 (Contents and Format of Annual Reports) (Revision 2017) promulgated by China Securities Regulatory
Commission, the Basic Regulations on Enterprise Internal Control, Memorandum of Mainboard Information Disclosure No.
1 – Relevant Information to be Disclosed in the Regular Report promulgated by Shenzhen Stock Exchange and the
Company’s Enforcement Regulations of the Special Committees of the Board of Directors, the Audit Committee of the
Board of Directors carried out comprehensive examination of the Company's financial report and internal control audit
work for year 2017. The following is the summary of the performances of the Audit Committee and the work of Ruihua
Certified Public Accountants (Special General Partnership) (hereinafter referred to as the “CPAs”):
1. Collecting General Information of the Company in the Reporting Period and Reviewing the Financial Statements
Prepared by the Company and Progress of Internal Control Implementation
On January 16, 2018, the Audit Committee heard the management’s overall report on the production and operation and
progress of significant events during the reporting period and reviewed 2017 Financial and Accounting Statements
prepared by the Company and heard the progress of implementation of the Company’s internal control. In its opinion, the
data in the financial and accounting statements prepared by the Company basically reflected the financial position and
operation results of the Company as ended at December 31, 2017, and approved to carry out the audit work for the year
2015 with the financial statements as the base. The internal control implementation work carried out by the Company has
been duly carried forward according to the Company Law, the Securities Law, Basic Standards for Enterprise Internal
Control and other relevant laws and regulations. It has basically reflected the Company’s internal control construction
work ended December 31, 2017 and approved to prepare the Self-Assessment Report on the Internal Control on this
basis and carry out the internal control audit work in 2017.
2. Decision on Overall Audit Plan
Before the CPAs started auditing, the audit committee, after consultation with the CPAs, decided the time schedule of the
audit work in 2017.
3. Supervision of the Audit Work
On January 19, 2018, the CPAs formally started the audit work. During the auditing, the Audit Committee frequently urged
the CPAs to complete the audit work according to the time schedule of audit so as to ensure timely disclosure of the
Company’s annual report and relevant documents.
4. Preliminary Auditor’s Opinions after Reviewing the Financial and Accounting Statements
On February 28, 2018, the CPAs issued a preliminary auditor’s opinions on the financial and accounting statements and
internal control assessment, and the Audit Committee once again reviewed the Company’s financial and accounting
statements and internal control assessment report as preliminarily audited by the CPAs. In the opinion of the Audit
Committee, these financial statements truly, accurately and completely reflected the financial position and operation result
of the Company ended December 31, 2017 and approved 2017 Annual Report and Summary prepared on the basis of
these statements. The said internal control assessment report has truly, accurately and entirely reflected the Company’s
achievement in internal control construction ended December 31, 2017 and approved to complete the internal control
assessment report and internal control audit report based on said report. Meanwhile, the audit committee demanded the
CPAs to complete the audit work according to the plan as soon as possible so as to ensure the Company to disclose 2017
Annual Report as scheduled.
5. Summary Work after the Formal Report
On March 8, 2018, the CPAs completed the auditing procedures as scheduled and issued a standard unqualified auditor’s
report and other relevant documents to the Audit Committee. The Audit Committee held 2018 1st Session of the Audit
Committee on the very day and concluded a resolution and submitted it to the Board of Directors for review; and at the
same time submitted the Summary Report on the Performances of the Audit Committee and the Audit Work of the
Certified Public Accountants in 2017. In the opinion of the Audit Committee, Ruihua Certified Public Accountants (Special
General Partnership), the domestic and international auditor engaged by the Company faithfully performed the duties in
process of offering audit performances according to the professional principle of independence, objectiveness and
fairness and did a good job in auditing 2017 Annual Accounting Statements and the internal control auditing.
6. CPAs’ Performance of Basic Principle of the Professional Ethics
(1) Independence
None of the staff from the CPAs worked for the Company; the CPAs received neither cash nor economic interest in any
other form from the Company other than the statutory audit fee. There existed neither direct or indirect mutual investment
between the CPAs and the Company nor close operation relationship; there existed no self-assessment on the
Company’s audit work and there existed no related relation between the member of the auditing team and the
Company’s decision makers; the CPAs and the auditing staff kept independence both in form and substance in the
auditing work and complied with the requirement on keeping independence as specified in the basic principle of the
professional ethics.
(2) Professional Competence
All the members of the auditing team possessed the professional knowledge and relevant professional qualification
certificates necessary for the auditing work, were competent for the auditing work and at the same time maintained
necessary attention and professional cautiousness.
Summary Report on Performance of the Committee of Nomination, Remuneration and Assessment of the Board
of Directors
In the reporting period, the Committee of Nomination, Remuneration and Assessment of the Board of Directors performed
its functions strictly according to the law and regulations, the Articles of Association and the Rules for Implementation of
the Committees of Nomination, Remuneration and Assessment of the Board of Directors. 2017 1st session of the
Committees of Nomination, Remuneration and Assessment held on March 8, 2017 reviewed and approved the proposals
on emoluments to the senior executives for year 2016, change of the Chairman of the Board, change of the General
Manager, adjustment of members of the special committees under the Board of Directors; 2017 2nd session of the
Committee of Nomination, Remuneration and Assessment held on May 8, 2018 reviewed and approved the proposal on
nominating Chen Libin as Director Candidate; 2017 3rd session of the Committee of Nomination, Remuneration and
Assessment held on August 8, 2017 reviewed and approved the proposal on nominating Mr. Huang Yongfeng as Director
Candidate; 2017 4th session of the Committee of Nomination, Remuneration and Assessment held on September 4, 2017
reviewed and approved the proposal on nominating Mr. Wang Bo as Director Candidate and nominating Mr. Xiao Zhanglin
as Director Candidate; 2017 5th session of the Committees of Nomination, Remuneration and Assessment held on
September 8, 2017 reviewed and approved the new election of the Chairman of the Board and adjustment of members of
various special committees under Board of Directors; 2017 6th session of the Committees of Nomination, Remuneration
and Assessment held on October 18, 2017 reviewed and approved the adjustment of members of various special
committees under Board of Directors.
VII. Work Summary of the Supervisory Committee
Did the Supervisory Committee find any risk existing in performing the supervision activities in the reporting period
No
VIII. Assessment and Incentive Mechanism for Senior Executives
In order to give full pal to and mobilize the senior executives' working enthusiasm and creativity and better improve the
Company's operation capacity and economic benefit and ensure realization of the Company's strategic target, based on
establishment of the incentive and binding mechanism matched to the modern enterprise mechanism and relying on the
BSC strategic management tool, the Company's strategy is decomposed layer upon layer to various departments and
posts so as to determine the senior executives' performance indicators and action plan, and make strategy review and
assessment regularly on quarterly basis and decide the total remuneration and renewal of employment according to the
assessment result and completion of the performance targets.
The annual salary assessment for the GM was carried out according to the assessment methods worked out by the
shareholder. The assessment basis is mainly based on a series of indicators systems prepared based on the balance
scorecard, in which the performance indicators of the surplus revenue rate were the main indicators. The assessment for
other senior executives was conducted based on the indicators in the balance scorecard prepared at year beginning and
the work report and assessment were carried out at year end.
IX. Internal Control
1. No particular case found which involved material defects in the internal control during the reporting period
No
2. Self-assessment Report of the Internal Control
Date of disclosing the full text of the internal control
March 10, 2018
assessment report
Index of disclosure of the full text of the internal control
www.cninfo.com.cn
assessment report
Proportion of the total assets of the organizations
involved in the assessment in the total assets of the 99.00%
Company’s consolidated financial statements
Proportion of the operation revenue of the entitled
involved in the assessment in the total operation revenue 99.00%
of the Company’s consolidated financial statements
Criteria for affirming the defects
Categories Financial Report Non-financial Report
(1) seriously violating the PRC laws, administrative
regulations and normative documents; (2) \"decision on
major issues, important officer appointment and/or
(1) The defect involving fraud of the directors, supervisors removal and arrangement of important projects as well
and senior executives; (2) correction of the financial as application of big sum of fund have not undergone
statements already published; (3) The CPA found that there collective decision-making procedures; (3) serious
existed serious misstatement in the financial statements of running off of officers and technicians of the key
Qualitative criteria the reporting period while the internal control failed to find positions; (4) there is no system control available for
the misstatement in process of operation; (4) The the Company’s production and operation practice or
Company's auditing committee and supervision and audit the system no longer works; (5) the internal control for
department conducted ineffective supervision of the internal information disclosure no longer works, having caused
control. the Company censured publicly by the regulatory
authority; (6) the results of the internal control
assessments, especially the material defects or
important defects have not been rectified.
(1)Material defects: 5% of misstatement ≥Profit before
(1) Material defects ： Misstatement≥ 5% of the pre-tax
tax; (2)Important defects: 1% of profit before tax
profit ； (2)Important defects ： 1% of profit before tax ≤
Quantitative criterion ≤Misstatement ＜ 5% of profit before tax ； (3)
Misstatement ＜ 5% of profit before tax; (3)Common
Common defects：Misstatement＜1% if Profit before
defects：Misstatement＜1% of profit before tax.
tax.
Number of material defects in the financial statements
(pcs)
Number of material defects in the non-financial
statements (pcs)
Number of important defects in the financial report (pcs)
Number of important defects in the non-financial report
(pcs)
X. Internal Control Audit Report
Deliberation Opinions in the Internal Control Audit Report
In our opinion, FIYTA Holdings Limited maintained effective internal control on the financial report in all material aspect according to the Basic Regulations for Enterprise
Internal Control and the relevant provisions ended December 31, 2017.
Disclosure of the internal control audit report Disclosed
Date of disclosing the full text of the internal
March 10, 2018
control audit report
Index of disclosing the full text of the internal
www.cninfo.com.cn
control audit report
Type of the onions in the internal control audit
Standard unqualified auditor’s report
report
Are there any material defects in the
No
non-financial report
Has the CPAs issued a qualified auditor’s report of internal control.
No
Does the internal control audit report issued by the CPAs agree with the self-assessment report of the Board of Directors
Yes
Section 10 Bond Related Information
Were there any bonds which have been publically issued and listed with the stock exchange but have not
yet been due or have not been entirely cashed despite that they have been due by the day when this
Annual Report is approved for issuing?
No
Section 11 Financial Report
通讯地址：北京市东城区永定门西滨河路 8 号院 7 号楼中海地产广场西塔 5-11 层
Postal Address:5-11/F,West Tower of China Overseas Property Plaza, Building 7,NO.8,Yongdingmen
Xibinhe Road, Dongcheng District, Beijing
邮政编码（Post Code）：100077
电话（Tel）：+86(10)88095588 传真（Fax）：+86(10)88091199
AUDITORS’ REPORT
Ruihua Shen Zi [2018] No.48460008
To the shareholders of FIYTA Holdings Ltd.:
I. Opinion
We have audited the financial statements of FIYTA Holdings Ltd. (“FIYTA Ltd.” or the
“Company”), which comprise the consolidated and the company’s balance sheet as at 31
December 2017, the consolidated and the company’s income statement, the consolidated
and the company’s cash flow statement for the year then ended and consolidated and the
company’s statement of changes in shareholders’ equity, and notes to the financial
statements.
In our opinion, the financial statements give a fair presentation of the consolidated and the
company’s financial position of FIYTA Ltd. as at 31 December 2017, and of its
consolidated and the company’s financial performance and its consolidated and the
company’s cash flows for the year then ended in all material aspects in accordance with
Accounting Standards for Business Enterprises.
II. Basis for Opinion
We conducted our audit in accordance with China Standards on Auditing. Our
responsibilities under those standards are further described in the Auditors’
Responsibilities for the Audit of the Financial Statements section of our report. We are
independent of the FIYTA Ltd. in accordance with the Code of Ethics for Chinese Certified
Public Accountants, and we have fulfilled our other ethical responsibilities in professional
ethics. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
III. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most
significance 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 in
(forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matters that need to communicate in our audit report are identified as follows:
1. Provision for inventory
(1) Description
As described in Note VI. 6 Inventory, the carrying value and provision of inventory were
RMB1,918,030,167.95 and RMB97,503,491.69 respectively as at 31 December 2017.
The management of FIYTA Ltd measures inventory at lower of cost and net realizable
value (NRV) at balance sheet date. Where the cost of an inventory exceeds its NRV, the
difference is recognized as provision. The accrual of inventory provision has significant
impact to the financial statement, as a result, we identified inventory provision as a key
audit matter.
(2) How our audit addressed the key audit matter
(i) Understanding, assessing and testing the design and operating effectiveness of
internal controls relating to procedures of making inventory provision;
(ii) Understanding and evaluating the appropriateness of the Company’s inventory
provision policy;
(iii) Conducting inventory observation procedure and observing the quantity and condition
of inventory;
(iv) Obtaining the aging report of inventory and checking and examining the sufficiency of
provision accrual for inventories with long aging.
(v) Obtaining schedule of inventory provision calculation and reviewing whether the
provision was made according to relating accounting policies. Reviewing whether key
assumptions relating to inventory provision accrual made by the management was
reasonable and re-calculating the provision.
(vi) Examining current year changes of inventory provision made in prior year and
analyzing reasonableness of the change.
(vii) Checking the sufficiency and appropriateness of presentation and disclosure of
information relating to inventory provision.
2. Revenue recognition
(1) Description
The Company’s revenue mainly comes from sales of FIYTA brand watches and
distribution of branded watches. FIYTA brand watches and branded watches are mainly
sold through shops in department store except for minor direct sale and consignment sale.
Refer to Note IV. 23 for accounting policies relating to revenue recognition.
As described in Note VI. 34 Operating revenue and operating cost, the Company’s
revenue from sales of watches was RMB3,217,264,256.67 in year 2017. Operating
revenue represents major line item in income statement and is main source of profit.
Accuracy and completeness of revenue recognition have significant impact to the
(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, assessing and testing the design and operating effectiveness of
internal controls relating to revenue recognition;
(ii) Evaluating whether the condition, method and timing of revenue recognition is in
conformance with principle of Accounting Standards for Business Enterprises;
(iii) Selecting samples from current year’s transaction record, agreeing supporting
documents such as sales voucher/purchase order, receipt, goods dispatch note, delivery
note, invoice and list of consignment sales to evaluate accuracy of revenue recognition;
(iv) In connection with audit of accounts receivable, selecting major customers and
confirming corresponding sales in current year to evaluate the completeness of revenue
recognition;
(v) Conducting cut-off test to sales transactions before and after the balance sheet date to
evaluate whether revenue was recorded in appropriate accounting period;
(vi) Checking the sufficiency and appropriateness of presentation and disclosure of
information relating to revenue recognition.
IV. Other Information
The management of FIYTA Ltd are responsible for the other information. The other
information comprises all of the information included in the Company’s 2017 annual report
other than the financial statements and our auditors’ report thereon.
Our opinion expressed on the financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
V. Responsibilities of the Management and those Charged with Governance for the
Financial Statements
The management of the FIYTA Ltd (the “Management”) is responsible for the preparation
of the financial statements that give a fair view in accordance with Accounting Standards
for Business Enterprises and design, implementing and maintaining necessary internal
controls to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Management is responsible for assessing the
(Company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the
Management either intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
Those who charged with governance is responsible for overseeing the Company’s
financial reporting process.
VI. Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditors’ report that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in accordance with China
Standards on Auditing will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of these financial statements.
As part of an audit in accordance with China Standards on Auditing, we exercise
professional judgment and maintain professional skepticism throughout the audit. We
also:
1. Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the Management.
4. Conclude on the appropriateness of the Management’s use of the going concern
basis of accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on the
Company’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required, according to China Standards on Auditing, to draw
attention in 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, future
events 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 the
underlying transactions and events in a manner that achieves fair presentation.
6. Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within FIYTA Ltd to express an opinion on the financial
statements. We are responsible for the direction, supervision and performance of the
group 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 any
significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied
with relevant ethical requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the financial statements of the
current period and are therefore the key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
(Ruihua Certified Public Chinese CPA:Xing Xiangzong
Accountants (Engagement Partner)
(Special General Partnership)
Beijing, China
Chinese CPA:Liu Xin
08 March, 2018
Consolidated Balance Sheet
as at 31 December 2017
Prepared by: FIYTA Holdings Ltd. Monetary Unit: RMB Yuan
Item Note 31 Dec 2017 31 Dec 2016
Current assets
Cash and bank balances VI. 1 187,152,891.32 428,802,755.81
Fair value through profit or loss financial - -
assets
Derivative financial assets - -
Notes receivable VI. 2 9,693,883.68 7,662,556.28
Accounts receivable VI. 3 326,254,624.94 306,671,021.69
Prepayments VI. 4 24,663,314.53 33,709,656.73
Interest receivable - -
Dividends receivable - -
Other receivables VI. 5 34,990,539.09 33,393,017.28
Inventories VI. 6 1,820,526,676.26 1,997,097,192.38
Assets held for sale - -
Non-current assets due within one year - -
Other current assets VI. 7 24,616,815.21 20,344,532.09
Total current assets 2,427,898,745.03 2,827,680,732.26
Non-current assets:
Available-for-sale financial assets VI. 8 85,000.00 85,000.00
Held-to-maturity investments - -
Long-term receivables - -
Long-term equity investments VI. 9 43,879,518.09 43,423,624.87
Investment properties VI. 10 305,493,987.77 244,202,635.09
Fixed assets VI. 11 523,699,592.65 611,204,169.03
Construction-in-progress VI. 12 10,947,300.53 -
Intangible assets VI. 13 44,223,280.21 38,751,903.42
Development expenditures - -
Goodwill - -
Long-term deferred expenses VI. 14 109,409,785.49 133,688,403.88
Deferred tax assets VI. 15 105,905,944.80 95,179,575.26
Other non-current assets VI. 16 8,246,538.33 10,681,518.91
Total non-current assets 1,151,890,947.87 1,177,216,830.46
Total assets 3,579,789,692.90 4,004,897,562.72
Consolidated Balance Sheet (continued)
as at 31 December 2017
Prepared by: FIYTA Holdings Ltd. Monetary Unit: RMB Yuan
Item Note 31 Dec 2017 31 Dec 2016
Current liabilities
Short-term loans VI. 17 525,990,510.00 1,098,438,070.0
- 0-
Fair value through profit or loss financial liabilities
Deriative finance liabilities - -
Notes payable - -
Accounts payable VI. 18 263,256,495.65 215,422,089.74
Advances from customer VI. 19 15,141,587.79 13,902,703.90
Employee benefits payable VI. 20 71,564,367.14 45,254,585.69
Taxes payable VI. 21 55,857,236.59 50,945,289.31
Interest payable VI. 22 1,464,729.11 2,475,969.65
Dividends payable
Other payables VI. 23 57,767,536.64 53,733,080.99
Held for sale liabilities
Non-current liabilities due within one year VI. 24 35,000,000.00 26,117,387.52
Other current liabilities VI. 25 2,379,148.19
Total current liabilities 1,026,042,462.92 1,508,668,324.99
Non-current liabilities:
Long-term loan VI. 26 79,870,353.00 115,301,048.00
Estimated liabilities
Deferred income VI. 28 5,904,000.00 5,980,000.00
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities 85,774,353.00 121,281,048.00
Total liabilities 1,111,816,815.92 1,629,949,372.99
Shareholders’ equity:
Share capital VI. 29 438,744,881.00 438,744,881.00
Other equity instruments
Incl: preferential share
Perpetual debt
Capital reserve VI. 30 1,062,455,644.22 1,062,455,644.22
Less: treasury stock
Other comprehensive income VI. 31 -11,523,442.39 -11,778,498.24
Special reserves
Surplus reserve VI. 32 206,805,713.35 193,961,700.45
General risk reserve
Undistributed profit VI. 33 771,484,565.02 687,986,807.74
Total shareholders’ equity attributable to shareholders
2,467,967,361.20 2,371,370,535.17
of the parent company
Minority shareholders’ interests 5,515.78 3,577,654.56
Total shareholders’ equity 2,467,972,876.98 2,374,948,189.73
Total liabilities and shareholders’ equity 3,579,789,692.90 4,004,897,562.72
Legal Representative:Huang Yongfeng Principal in charge of accounting:Chen Zhuo Head of accounting
department:Tian Hui
Consolidated Income Statement
for the Year Ended 31 December 2017
Prepared by: FIYTA Holdings Ltd. Monetary Unit: RMB Yuan
Item Note 2017
s
I.Total Revenue 3,345,809,703.98 2,993,864,561.43
Incl. Operating income VI. 3,345,809,703.98 2,993,864,561.43
II. Total Cost 3,182,619,506.27 2,866,928,721.59
Incl. Operating cost VI. 1,986,652,591.57 1,772,811,718.01
Tax and surcharges VI. 32,871,258.58 34,047,056.22
Selling and distribution expenses VI. 811,437,932.01 760,530,356.03
Administrative expenses VI. 240,043,481.59 201,274,142.02
Financial expenses VI. 49,186,742.91 68,887,564.91
Asset impairment loss VI. 62,427,499.61 29,377,884.40
Plus: gain (loss) from changes in fair value - -
Investment gain VI. 455,893.22 446,593.23
Incl. gain from investment in associates and jointly controlled 455,893.22 585,802.82
enterprises
gain (loss) from asset disposal VI. 7,321,993.36 (520,920.33)
other gains VI. 17,508,255.98 -
III. Operating profit (loss) 188,476,340.27 126,861,512.74
Plus: Non-operating income VI. 2,607,653.91 18,574,739.04
Incl. gain from demaged or scrap of non-current assets - -
Less: Non-operating expenses VI. 1,368,680.92 404,961.81
Incl. loss from demaged or scrap of non-current assets - -
IV. Profit before income tax 189,715,313.26 145,031,289.97
Less: Income tax VI. 47,098,954.06 34,656,442.67
V. Net profit 45 142,616,359.20 110,374,847.30
(I) Categorized by going concern
1.Net profit from continuing operations 142,616,359.20 110,374,847.30
2.Net profit from discontinued operations - -
(II) Categorized by ownership
1.Profit (loss) attributable to minority shareholders 2,400,100.92 (287,834.29)
2.Net profit attributable to shareholders of the parent company 140,216,258.28 110,662,681.59
VI. After-tax other comprehensive income VI. (28,676.16) 5,617,505.89
After-tax other comprehensive income attributable to
255,055.85 5,366,691.47
shareholders of parent company
(I) Other comprehensive income that cannot be re-classified
- -
into profit or loss in future
1. Net liability or net asset changes due to
- -
re-measurement of defined contribution plan
2. Portion enjoyed in the investee's comprehensive income
- -
which cannot be reclassified to profit or loss under equity
(II) Comprehensive income that can be reclassified in profit or VI. 255,055.85 5,366,691.47
loss in future
1. Portion enjoyed in the investee's comprehensive income
which can be - -
2. Profit or loss from changes of fair value of available-for-sale - -
financial assets
3. Profit or loss from reclassification from held-to-maturity to
- -
available-for-sale financial assets
4. Profit or loss of effective part of a cash flow hedge - -
5. Exchange translation difference of financial statement
VI. 255,055.85 5,366,691.47
denominated in foreign
6. Others - -
After-tax other comprehensive income attributable to minority VI. (283,732.01) 250,814.42
shareholdersother comprehensive income
VII. Total 31 142,587,683.04 115,992,353.19
Total comprehensive income attributable to
140,471,314.13 116,029,373.06
shareholders of the parent company
Total comprehensive income attributable to minority 2,116,368.91 (37,019.87)
shareholders
VIII. Earnings per share
(I) Basic EPS 0.3196 0.2522
(II) Diluted EPS 0.3196 0.2522
Legal Representative:Huang Yongfeng Principal in charge of accounting:Chen Zhuo Head of
accounting department:Tian Hui
Consolidated Cash Flow Statement
for the Year Ended 31 December 2017
Prepared by: FIYTA Holdings Ltd. Monetary Unit: RMB Yuan
Item Notes 2017
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of 3,799,342,84 3,399,049,587.48
services from refund of taxes 3.85 6,421.29
Cash received from other operating activities VI. 47 49,178,644 51,568,226.99
Subtotal of cash inflows from operating .63
3,849,407,74 3,450,624,235.76
Cash paidactivities
for purchasing goods and services 0.68
2,070,318,09 1,875,799,503.14
Cash paid to and for employees 7.62
516,928,806.69 493,983,490.08
Cash paid for taxes and surcharges 285,279,057.38 279,007,317.31
Cash paid for other operating activities VI. 47 411,927,217.02 346,074,831.08
Subtotal of cash outflows in operating activities 3,284,453,178.71 2,994,865,141.61
Net cash flows from operating activities 564,954,561.97 455,759,094.15
II. Cash flows from investing activities
Cash received from disposal of investments - -
Cash received from returns on investments - 383,750.00
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets 10,678,135.25 4,150,363.94
Cash received from disposal of subsidiaries and other (230,053.69) -
business units
Net cash received from other investing activities - -
Subtotal of cash inflows from investing 10,448,081.56 4,534,113.94
Cash paidactivities fixed assets, intangible assets and
to acquire
136,914,522.99 189,744,095.04
other long-term
Cash paid to acquire investments - -
Net cash paid to acquire subsidiaries and other business - -
units paid for other investing activities
Cash - -
Subtotal of cash outflows in investing 136,914,522.99 189,744,095.04
activitiescash flows from investing activities
Net (126,466,441.43) (185,209,981.10)
III. Cash flows from financing activities：
Cash received from capital contributions - -
Including: Cash received from capital contributions by
minority - -
Cash received from loans 575,282,350.00 1,405,213,268.91
Cash received from issuing of bonds - -
Cash received from other financing activities - -
Sub-total of cash inflows from financing 575,282,350.00 1,405,213,268.91
activities
Cash repayments of borrowings 1,167,061,934.80 1,765,309,978.60
Cash payments for dividends and profits distribution and 85,355,204.78 121,523,418.84
interests
Including: Cash payments for dividends or profit to minority
shareholders - -
Cash payments to other financing activities VI. 47 3,376,589.16 992,669.19
Sub-total of cash outflows in financing 1,255,793,728.74 1,887,826,066.63
activitiescash flows from financing activities
Net (680,511,378.74) (482,612,797.72)
IV. Effect of foreign exchange rate changes on cash
and cash (256,606.29) 1,903,564.55
V. Net increase in cash and cash equivalents VI. 4 (242,279,864.49) (210,160,120.12)
Plus: cash and cash equivalents at the beginning of year 8 427,227,755.81 637,387,875.93
VI. Cash and cash equivalents at the end of year VI. 48 184,947,891.32 427,227,755.81
Legal Representative:Huang Yongfeng Principal in charge of accounting:Chen Zhuo Head of accounting
department:Tian Hui
Consolidated Statement of Changes in Shareholders’ Equity (continued)
for the Year Ended 31 December 2017
Monetary Unit: RMB
Prepared by: FIYTA Holdings Ltd.
Yuan
Total shareholders’ equity attributable to shareholders of the parent company
Item Less: Total
Other Genera Minority
Share Capital treasur Special Surplus Undistribut shareholders'
comprehensi l risk interest
capital reserve y reserve Reserve ed profit equity
ve income reserve
stocks
438,744,881 1,062,455,644 687,986,807 3,577,654.5 2,374,948,189.
I. Balance at the end of prior year .00 .22
- (11,778,498.2 - 193,961,700.45 -
.74 6
4)
Add: Changes in accounting policies - - - - - - - - - -
Correction of prior period errors - - - - - - - - - -
Consolidation under common control - - - - - - - - - -
Others - - - - - - - - - -
438,744,881 1,062,455,644 (11,778,498.2 687,986,807 3,577,654.5 2,374,948,189.
II. Balance at the beginning of current year .00 .22
-
4)
- 193,961,700.45 -
.74 6
III. Changes in equity for the year ( \"- \" for 83,497,757. (3,572,138.
- - - 255,055.85 - 12,844,012.90 - 93,024,687.25
decrease) 28 78)
140,216,258 2,116,368.9
(I) Total comprehensive income for the year - - - 255,055.85 - -
.28
142,587,683.04
(II) Shareholders'contributions and withdraw of (5,688,507.
- - - - - - - - (5,688,507.69)
capital 69)
1. Common shares contribution by the
- - - - - - - - - -
shareholders
2. Other equity holders’ contribution - - - - - - - - - -
3. Increase in shareholders' equity resulted from
- - - - - - - - - -
share-based payments
(5,688,507.
4. Others - - - - - - - - (5,688,507.69)
69)
(56,718,501. (43,874,488.10
(III) Appropriation of profits - - - - - 12,844,012.90 -
00)
-
)
(12,844,012.
1. Make surplus reserves - - - - - 12,844,012.90 -
90)
- -
2. Make general risk reserve - - - - - - - - - -
3. Distributions to shareholders - - - - - - - (43,874,488. - (43,874,488.10
10) )
4. Others - - - - - - - - - -
(IV) Transfer within equity - - - - - - - - - -
1. Capitalization of capital reserves - - - - - - - - - -
2. Capitalization of surplus reserves - - - - - - - - - -
3. Offsetting losses using surplus reserves - - - - - - - - - -
4. Others - - - - - - - - - -
(V) Special Reserve - - - - - - - - - -
1. Accrued for the year - - - - - - - - - -
2. Use for the year - - - - - - - - - -
(VI) Others - - - - - - - - - -
438,744,881 1,062,455,644 (11,523,442.3 771,484,565 2,467,972,876.
IV. Balance at the end of current year .00 .22
-
9)
- 206,805,713.35 -
.02
5,515.78
Legal Representative:Huang Yongfeng Principal in charge of accounting:Chen Zhuo Head of accounting department:Tian Hui
Consolidated Statement of Changes in Shareholders’ Equity (continued)
for the Year Ended 31 December 2017
Monetary Unit: RMB
Prepared by: FIYTA Holdings Ltd.
Yuan
Total shareholders’ equity attributable to shareholders of the parent company
Minority Total
Item
Less: Other shareholders' shareholders'
Special General Undistributed
Share capital Capital reserve treasury comprehensive Surplus Reserve risk interest equity
reserve profit
stocks income reserve
I. Balance at the end of prior year 438,744,881.00 1,062,455,644.22 - (17,145,189.71) - 179,743,077.15 - 635,417,237.55 3,614,674.43 2,302,830,324.64
Add: Changes in accounting policies - - - - - - - - - -
Correction of prior period errors - - - - - - - - - -
Consolidation under common control - - - - - - - - - -
Others - - - - - - - - - -
II. Balance at the beginning of current year 438,744,881.00 1,062,455,644.22 - (17,145,189.71) - 179,743,077.15 - 635,417,237.55 3,614,674.43 2,302,830,324.64
III. Changes in equity for the year ( \"- \" for - - - 5,366,691.47 - 14,218,623.30 - 52,569,570.19 (37,019.87) 72,117,865.09
decrease)
(I) Total comprehensive income for the year - - - 5,366,691.47 - - - 110,662,681.59 (37,019.87) 115,992,353.19
(II) Shareholders'contributions and withdraw of - - - - - - - - - -
capital
1. Common shares contribution by the - - - - - - - - - -
shareholders
2. Other equity holders’ contribution - - - - - - - - - -
3. Increase in shareholders' equity resulted from
- - - - - - - - - -
share-based payments
3. Others - - - - - - - - - -
(II) Appropriation of profits - - - - - 14,218,623.30 - (58,093,111.40) - (43,874,488.10)
1. Make surplus reserves - - - - - 14,218,623.30 - (14,218,623.30) - -
2. Make general risk reserve - - - - - - - - - -
3. Distributions to shareholders - - - - - - - (43,874,488.10) - (43,874,488.10)
4. Others - - - - - - - - - -
(IV) Transfer within equity - - - - - - - - - -
1. Capitalization of capital reserves - - - - - - - - - -
2. Capitalization of surplus reserves - - - - - - - - - -
3. Offsetting losses using surplus reserves - - - - - - - - - -
4. Others - - - - - - - - - -
(V) Special Reserve - - - - - - - - - -
1. Accrued for the year - - - - - - - - - -
2. Used for the year - - - - - - - - - -
(VI) Others - - - - - - - - - -
IV. Balance at the end of current year 438,744,881.00 1,062,455,644.22 - (11,778,498.24) - 193,961,700.45 - 687,986,807.74 3,577,654.56 2,374,948,189.73
Legal Representative:Huang Yongfeng Principal in charge of accounting:Chen Zhuo Head of accounting department:Tian Hui
Balance Sheet
as at 31 December 2017
Prepared by: FIYTA Holdings Ltd. Monetary Unit: RMB Yuan
Item Note 31 Dec 2017 31 Dec 2016
Current assets
Cash and bank balances 131,163,944.43 270,947,926.47
Fair value through profit or loss financial asset - -
Derivative financial assets - -
Notes receivable - -
Accounts receivable XV. 1 6,832,006.11 255,995.64
Prepayments - -
Interest receivable - -
Dividends receivable - -
Other receivables XV. 2 831,952,437.86 1,191,947,054.57
Inventories - -
Assets held for sale - -
Non-current assets due within one year - -
Other current assets 9,089,170.12 5,805,712.39
Total current assets 979,037,558.52 1,468,956,689.07
Non-current assets:
Available-for-sale financial assets 85,000.00 85,000.00
Held-to-maturity investments - -
Long-term receivables - -
Long-term equity investment XV. 3 1,375,128,109.02 1,256,593,344.87
Investment property 270,241,724.52 207,804,447.15
Fixed assets 340,765,873.45 414,581,425.11
Construction-in-progress 10,947,300.53 -
Construction materials - -
Disposal of fixed assets - -
Productive biological assets - -
Oil and gas assets - -
Intangible assets 36,932,963.95 32,438,001.77
Development expenditures - -
Goodwill - -
Long-term deferred expenses 4,418,287.94 5,721,622.60
Deferred tax assets 1,499,126.32 1,502,555.54
Other non-current assets 2,687,910.84 10,681,518.91
Total non-current assets 2,042,706,296.57 1,929,407,915.95
Total assets 3,021,743,855.09 3,398,364,605.02
Balance Sheet (continued)
as at 31 December 2017
Prepared by: FIYTA Holdings Ltd. Monetary Unit: RMB Yuan
Item Note 31 Dec 2017 31 Dec 2016
Current liabilities:
Short-term loans 470,000,000.00 908,000,000.00
Fair value through profit or loss financial liabilities - -
Derivative financial liabilities - -
Notes payable - -
Accounts payable 60,520,874.66 77,826,174.63
Advances from customer 4,212,930.07 2,767,858.84
Employee benefits payable 9,291,422.00 8,020,288.56
Taxes payable 1,038,481.26 2,883,511.63
Interest payable 929,155.39 1,312,644.11
Dividends payable - -
Other payables 20,666,945.05 18,959,721.51
Held-for-sale liabilities - -
Non-current liabilities due within one year 35,000,000.00 8,000,000.00
Other current liabilities - -
Total current liabilities 601,659,808.43 1,027,770,199.28
Non-current liabilities:
Long-term loan 74,861,928.00 109,861,928.00
Estimated liabilities - -
Deferred income 5,904,000.00 5,980,000.00
Deferred tax liabilities - -
Other non-current liabilities - -
Total non-current liabilities 80,765,928.00 115,841,928.00
Total liabilities 682,425,736.43 1,143,612,127.28
Shareholders’ equity -
Share capital 438,744,881.00 438,744,881.00
Other equity instrument - -
Incl: preferential share - -
Perpetual debt - -
Capital reserve 1,068,111,185.32 1,068,111,185.32
Less: treasury stocks - -
Other comprehensive income - -
Special reserves - -
Surplus reserve 206,805,713.35 193,961,700.45
General risk reserve - -
Undistributed profit 625,656,338.99 553,934,710.97
Total shareholders’ equity 2,339,318,118.66 2,254,752,477.74
Total liabilities and shareholders’ equity 3,021,743,855.09 3,398,364,605.02
Legal Representative:Huang Yongfeng Principal in charge of accounting:Chen Zhuo Head of accounting
department:Tian Hui
Income Statement
for the Year Ended 31 December 2017
Prepared by: FIYTA Holdings Ltd. Monetary Unit: RMB Yuan
Item Note 2017
I. Operating revenue XV. 4 117,746,387.79 98,387,059.04
Less: operating cost XV. 4 17,785,254.56 13,573,121.98
Tax and surcharges 4,244,709.29 5,612,327.76
Selling and distribution expenses 5,024,222.36 -
Administrative expenses 80,955,927.37 62,135,280.94
Financial expenses 11,051,564.46 14,080,570.16
Impairment loss 62,283.14 2,669.72
Plus: gain on changes of fair value - -
Investment income XV. 5 117,455,893.22 135,930,463.18
Incl. income from investment in associates
and jointly controlled enterprises 455,893.22 585,802.82
Gain (loss) from disposal asset (54,661.87) (60,571.59)
Others 11,482,400.00 -
II. Operating profit 127,506,057.96 138,852,980.07
Plus: Non-operating income 231,994.49 3,480,145.59
Incl. gains from disposal of non-current assets - -
Less: Non-operating expenses 320,029.00 300,000.00
Incl. losses from disposal of non-current assets - -
III. Profit before income tax 127,418,023.45 142,033,125.66
Less: Income tax (1,022,105.57) (153,107.31)
IV. Net profit 128,440,129.02 142,186,232.97
1. Net profit from continuing operations 128,440,129.02 142,186,232.97
2. Net profit from discontinued operations - -
V. Other comprehensive income - -
1. Other comprehensive income that cannot be
- -
re-classified into
(1) Net liability or net asset changes due to
- -
re-measurement of
(2) Portion enjoyed in the investee's comprehensive
income - -
2. Comprehensive income that can be reclassified in
- -
profit or
(1) Portion enjoyed in the investee's comprehensive
income - -
which can be reclassified to profit or loss under
(2) Profit or loss from changes of fair value of
available for sale financial asset - -
(3) Profit or loss from reclassification from
held-to-maturity to available for sale - -
(4) Profit or loss of effective part of a cash flow hedge - -
5. Exchange translation difference of financial
- -
statement
(6) Others - -
VI. Total comprehensive income 128,440,129.02 142,186,232.97
Legal Representative:Huang Yongfeng Principal in charge of accounting:Chen Zhuo Head of accounting
department:Tian Hui
Cash Flow Statement
for the Year Ended 31 December 2017
Prepared by: FIYTA Holdings Ltd. Monetary Unit: RMB
Yuan
Item Note 2017
I. Cash flows from operating activities:
Cash received from sales of goods and rendering of services 118,206,419.70 101,146,875.41
Cash received from refund of taxes - -
Cash received from other operating activities 938,657,962.92 1,771,270,749.83
Subtotal of cash inflows from operating 1,056,864,382.62 1,872,417,625.24
Cash paidactivities
for purchasing goods and services - 34,000.00
Cash paid to and for employees 52,908,089.08 54,565,535.75
Cash paid for taxes and surcharges 13,645,601.66 8,610,117.24
Cash paid for other operating activities 560,857,112.69 1,396,061,933.91
Subtotal of cash outflows in operating activities 627,410,803.43 1,459,271,586.90
Net cash flows from operating activities 429,453,579.19 413,146,038.34
II. Cash flows from investing activities
Cash received from returns on investments - -
Cash received from returns on investments 117,000,000.00 135,728,410.36
Net cash received from disposal of fixed assets, intangible
assets and 30,112.00 5,600.00
Cash received from disposal of subsidiaries and other - -
business units
Net cash received from other investing activities - -
Subtotal of cash inflows from investing activities 117,030,112.00 135,734,010.36
Cash paid to acquire fixed assets, intangible assets and
other long-term 47,230,065.02 97,544,258.42
Cash paid to acquire investments - 442,270,000.00
Net cash paid to acquire subsidiaries and other business 114,299,236.67 -
units paid for other investing activities
Cash - -
Subtotal of cash outflows in investing activities 161,529,301.69 539,814,258.42
Net cash flows from investing activities (44,499,189.69) (404,080,248.06)
III. Cash flows from financing activities：
Cash received from capital contributions - -
Cash received from loans 540,000,000.00 1,211,500,000.00
Cash received from bonds - -
Cash received from other financing activities - -
Sub-total of cash inflows from financing 540,000,000.00 1,211,500,000.00
activities
Cash repayments of borrowings 986,000,000.00 1,354,000,000.00
Cash payments for interest expenses and distribution of
dividends or profits 79,277,672.20 108,495,019.43
Cash payments to other financing activities - 992,669.19
Sub-total of cash outflows in financing activities 1,065,277,672.20 1,463,487,688.62
Net cash flows from financing activities (525,277,672.20) (251,987,688.62)
IV. Effect of foreign exchange rate changes on cash and
cash (90,699.34) -
V. Net increase in cash and cash equivalents (140,413,982.04) (242,921,898.34)
Plus: cash and cash equivalents at the beginning of year 269,372,926.47 512,294,824.81
VI. Cash and cash equivalents at the end of year 128,958,944.43 269,372,926.47
Legal Representative:Huang Yongfeng Principal in charge of accounting:Chen Zhuo Head of accounting
department:Tian Hui
Statement of Changes in Shareholders’ Equity
for the Year Ended 31 December 2017
Prepared by: FIYTA Holdings Ltd. Monetary Unit: RMB Yuan
Item Other equity instruments Other
Less: General risk Total
Share capital Capital reserve comprehensi Special Surplus Undistributed
Preferential Perpetual Others treasury reserve shareholders'
ve reserve Reserve profit
share debt stocks equity
I. Balance at the end of prior year 438,744,881.00 - - - 1,068,111,185.32 - - - 193,961,700.45 - 553,934,710.97 2,254,752,477.74
Add: Changes in accounting policies - - - - - - - - - - - -
Correction of prior period errors - - - - - - - - - - - -
Others - - - - - - - - - - - -
II. Balance at the beginning of 438,744,881.00 - - - 1,068,111,185.32 - - - 193,961,700.45 - 553,934,710.97 2,254,752,477.74
current year
III. Changes in equity for the
year ( \"- \"for decrease) - - - - - - - - 12,844,012.90 - 71,721,628.02 84,565,640.92
(I) Total comprehensive income - - - - - - - - - - 128,440,129.02 128,440,129.02
for the year
(II) Shareholders'
contributions and withdraw of - - - - - - - - - - - -
capital
1. Common shares contribution
by the shareholders - - - - - - - - - - - -
2. Other equity holders’ contribution - - - - - - - - - - - -
3. Increase in shareholders' equity
resulted from share-based - - - - - - - - - - - -
4. Others - - - - - - - - - - - -
(III) Appropriation of profits - - - - - - - - 12,844,012.90 - (56,718,501.00) (43,874,488.10)
1. Make surplus reserves - - - - - - - - 12,844,012.90 - (12,844,012.90) -
2. Make general risk reserve - - - - - - - - - - - -
3. Distributions to shareholders - - - - - - - - - - (43,874,488.10) (43,874,488.10)
4. Others - - - - - - - - - - - -
(IV) Transfer within equity - - - - - - - - - - - -
1. Capitalization of capital reserves - - - - - - - - - - - -
2. Capitalization of surplus reserves - - - - - - - - - - - -
3. Offsetting losses using surplus - - - - - - - - - - - -
reserves
4. Others - - - - - - - - - - - -
(V) Special Reserve - - - - - - - - - - - -
1. Accrued for the year - - - - - - - - - - - -
2. Used for the year - - - - - - - - - - - -
(VI) Others - - - - - - - - - - - -
IV. Balance at the end of current 438,744,881.00 - - - 1,068,111,185.32 - - - 206,805,713.35 - 625,656,338.99 2,339,318,118.66
year
Legal Representative:Huang Yongfeng Principal in charge of accounting:Chen Zhuo Head of accounting department:Tian Hui
Statement of Changes in Shareholders’ Equity (continued)
for the Year Ended 31 December 2017
Prepared by: FIYTA Holdings Ltd. Monetary Unit: RMB Yuan
Item Other equity instruments Less: Other General risk Total
Share capital Capital reserve treasury comprehensiv Special Surplus Undistributed shareholders'
Preferential Perpetual Others reserve Reserve reserve profit
share debt stocks e equity
income
I. Balance at the end of prior year 438,744,881.00 - - - 1,068,111,185.32 - - - 179,743,077.15 - 469,841,589.40 2,156,440,732.87
Add: Changes in accounting policies - - - - - - - - - - - -
Correction of prior period errors - - - - - - - - - - - -
Others - - - - - - - - - - - -
II. Balance at the beginning of 438,744,881.00 - - - 1,068,111,185.32 - - - 179,743,077.15 - 469,841,589.40 2,156,440,732.87
current year
III. Changes in equity for the
year ( \"- \"for decrease) - - - - - - - - 14,218,623.30 - 84,093,121.57 98,311,744.87
(I)Total comprehensive income
for the year - - - - - - - - - - 142,186,232.97 142,186,232.97
(II) Shareholders'
contributions and withdraw of - - - - - - - - - - - -
capital
1. Common shares contribution
by the shareholders - - - - - - - - - - - -
2. Other equity holders’ contribution - - - - - - - - - - - -
3. Increase in shareholders' equity
resulted from share-based payments - - - - - - - - - - - -
4. Others - - - - - - - - - - - -
(III) Appropriation of profits - - - - - - - - 14,218,623.30 - (58,093,111.40) (43,874,488.10)
1. Make surplus reserves - - - - - - - - 14,218,623.30 - (14,218,623.30) -
2. Make general risk reserve - - - - - - - - - - - -
3. Distributions to shareholders - - - - - - - - - - (43,874,488.10) (43,874,488.10)
4. Others - - - - - - - - - - - -
(IV) Transfer within equity - - - - - - - - - - - -
1. Capitalization of capital reserves - - - - - - - - - - - -
2. Capitalization of surplus reserves - - - - - - - - - - - -
3. Offsetting losses using surplus - - - - - - - - - - - -
reserves
4. Others - - - - - - - - - - - -
(V)Special Reserve - - - - - - - - - - - -
1. Accrued for the year - - - - - - - - - - - -
2. Used for the year - - - - - - - - - - - -
(VI) Others - - - - - - - - - - - -
IV. Balance at the end of current 438,744,881.00 - - - 1,068,111,185.32 - - - 193,961,700.45 - 553,934,710.97 2,254,752,477.74
year
Legal Representative:Huang Yongfeng Principal in charge of accounting:Chen Zhuo Head of accounting department:Tian Hui
FIYTA Holdings Ltd.
Notes to the Financial Statements
for the Year Ended 31 December 2017
(Expressed in RMB Yuan unless otherwise indicated)
I. Company status
FIYTA Holdings Ltd. (the “Company”) was founded, under the approval of Shen Fu Ban Fu (1992) 1259
issued by the General Office of Shenzhen Municipal Government, through the restructuring of former
Shenzhen FIYTA Time Industrial Company by the promoter of China National Aero-Technology Import
and Export Shenzhen Industry & Trade Center (name changed to “China National Aero-Technology
Shenzhen Co., Ltd” lately) on 25 December 1992, and the name changed to “Shenzhen FIYTA Holdings
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 Zone Branch, the Company issued Renminbi ordinary shares (A shares)
and Renminbi special shares (B shares) publicly on 10 March 1993. On 3 June 1993, both the
Company’s A shares and B shares were listed and traded on Shenzhen Stock Exchange pursuant to the
approval of Shen Zheng Ban Fu[1993]20 issued by Shenzhen Securities Regulatory Office and Shen
Zheng Shi Zi (1993)16 issued by Shenzhen Stock Exchange.
On 30 January 1997, the company name changed to Shenzhen FIYTA Holdings Limited with the
approval of Shenzhen Municipal Administration for Industry and Commerce.
On 4 July 1997, China National Aero-Technology Shenzhen Co., Ltd. (\"CATIC Shenzhen Company\")
transferred 72,360,000 corporate 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 Aviation Group\") according to
share transfer agreement signed by both parties. As a result, the Company’s controlling shareholder
changed from CATIC Shenzhen Company to China National Aviation Group.
On 26 October 2007, the Company implemented split-share reform. Under the premise of maintaining
the Company's total of 249,317,999 shares unchanged, the Company's shareholders of non-tradable
shares paid 3.1 shares per 10 tradable shares to all the tradable share shareholders registered on option
registration date designated by the split-share reform program. At that point, after the reform, the shares
held by China National Aviation Group reduced to 44.69% from 52.24%.
On 29 February 2008, due to expanding the scope of business, the Company’s corporate business
license was altered from Shen Si Zi No. 4403011001583 to No. 440301103196089 with the approval of
Shenzhen Municipal Administration for Industry and Commerce.
With the approval of “Reply of China Securities Regulatory Commission (CSRC) to the Approval of
Private Placement of Shenzhen FIYTA Holdings Limited” (Zheng Jian Xu Ke [2010]1703) and “Reply of
State-owned Assets Supervision and Administration Commission 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 the completion of the placement on 9 December 2010, the Company’s registered
capital increased to RMB280,548,479.00 and the equity 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 Administration for Industry and Commerce.
On 8 April 2011, the Company increased its share capital by 4 shares for every 10 shares by capitalizing
the capital reserves on the basis of total shares of 280,548,479 as at 31 December 2010. Total shares of
the Company changed to 392,767,870 shares after the increase.
On 11 November 2015, with the approval of China Securities Regulatory Commission (CSRC) “Reply of
non-public offering of stocks of Shenzhen FIYTA Holdings Limited” (ZhengJianXuKe[2015]2588) and the
approval of State-owned Assets Supervision and Administration Commission of the State Council
(SASAC) “Reply of non-public offering of stocks of Shenzhen FIYTA Holdings Limited”
(SASAC(2015)415), the Company was approved to issue not more than 46,911,649 ordinary shares (A
shares) through non-public offering. After the completion of the non-public offering of stocks on 22
December 2015, the Company’s registered capital was increased to RMB438,744,881.00 and the equity
capital of the Company held by China National Aviation Group reduced to 37.15%.
As at 31 December 2017, the Company has accumulatively issued 438,744,881 shares in total (refer to
Notes VI. 29 “Share capital” for detail).
Corporate governance institutions that were established by the Company include General Meeting of
Shareholders, Board of Directors, Board of Supervisors, Strategy Committee, Audit Committee, and
Nomination, Remuneration and Evaluation Committee. The Company’s functional departments include
Administration, Party Affairs, Supervision and Audit, Finance, Human Resources, Strategy and
Development, Data and Information, Innovative Design Center, R&D Department and Property
Management departments.
The financial statements have been approved and authorised for issue by the Board of Directors of the
Company on 8 March 2018.
There are 12 subsidiaries that are included in the Company’s scope of consolidation for year 2017, see
Note VIII “Equity in other entities” for detail. Comparing with prior year, the status of changes in scope of
consolidation is: zero addition and three decrease. See Note VII “Changes in scope of consolidation” for
detail.
The business scope of the Company and its subsidiaries mainly includes: producing and selling of
analogue quartz watches and its movements, components, various timing devices, processing and
wholesaling karat gold jewellery watches (production sites are to be declared separately); domestic
commercial and material supply and distributing business (excluding goods under exclusive operational
rights, special control and exclusive sales); property management and leasing. Import and export
business of self-design and construction; import and export business (according to Shen Mao Guan
Deng Zheng Zi No.2007-072).The legal representative of the Company is Huang Yongfeng.
II. Basis of preparation
The financial statements of the Company have been prepared based on going concern assumption and
based on actual transactions and events occurred. It is prepared in accordance with the requirements of
“Accounting Standards for Business Enterprises - Basic Standard” (promulgated under Decree No. 33 of
the Ministry of Finance and revised under Decree No. 76 of the Ministry of Finance) and 42 Specific
Standards issued and revised by the Ministry of Finance on and after 15 February 2006, and application
guidance, illustrations to the standards and related pronouncements (collectively known as “Accounting
Standards 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 for Financial Reports” (revised in 2014) issued by
China Securities Regulatory Commission (CSRC).
According to Accounting Standards for Business Enterprises, accrual basis is adopted for the
Company’s accounting activity. Except for some financial instruments, the financial statements are
measured using historical cost. In case of impairment occurred on assets, provisions for impairment are
provided for in accordance with related rules.
III. Statement of compliance
The financial statements of the Company have been prepared in accordance with the requirements of
Accounting Standards for Business Enterprises. These financial statements present truly and completely
the financial position as at 31 December 2017, the results of operations and the cash flows for the year
then ended of the Company. In addition, the financial statements of the Company comply with, in all
material respects, the disclosure requirements for financial statements and notes to the financial
statements under “Regulation on the Preparation of Information Disclosures of Companies Issuing
Public Shares, No. 15: General Requirements for Financial Reports” as revised by CSRC in 2014.
IV. Significant accounting policies and estimates
The Company and each subsidiaries determines specific accounting policies and estimates for revenue
recognition, depreciation of fixed asset, amortization of intangible assets and R&D expenses according
to the characteristics of their production and operation and based on CAS. Refer to Notes IV. 23
“Revenue”, Note IV 15 “Fixed Asset”, Note IV 18 (1) “Intangible Asset” and Note IV 18 (2) “R&D
Expenses” for detail. For explanation of significant accounting judgement and estimate made by the
management, refer to Note IV 29 “Significant accounting judgement and estimate” for detail.
1. Accounting period
The accounting period of the Company includes accounting year and interim accounting period. An
interim period refers to a reporting period which is shorter than a full accounting year. The accounting
year of the Company is the calendar year, i.e. from 1 January to 31 December of each year.
2. Operating cycle
Normal operating cycle refer to the period start from purchasing asset for manufacturing until realization
of cash or cash equivalent. The operating cycle of the Company is 12 months, which is the basis for
distinguishing liquidity of assets and liabilities.
3. Recording currency
Renminbi (RMB) is the functional currency of the main economic environment in which the Company
and its domestic subsidiaries operate. The Company and its domestic subsidiaries adopt Renminbi as
the recording currency.
Except for the Swiss-based subsidiary Montres Chouriet SA (the “Swiss Company”) , which is a
subsidiary of FIYTA (Hong Kong) Limited (FIYTA Hong Kong), uses Swiss Franc as the recording
currency according to the main economic environment where the Swiss Company operated, all other
subsidiaries outside the mainland China, including HARMONY World Watches International Limited
(World Watches International), a subsidiary of Shenzhen HARMONY World Watches Center Co., Ltd
(HARMONY Company), FIYTA Hong Kong and its subsidiary Station 68 Limited (Station 68) use Hong
Kong Dollar (HKD) as the recording currency and translate to Renminbi when preparing financial
statements.
The currency used in preparing the Company’s financial statements is Renminbi.
4. Accounting treatment for business combinations involving entities under
common control and not under common control
Business combination refers to transactions or events that combine two or more separate enterprises
and form one reporting entity. Business combinations are classified into business combinations involving
enterprises under common control and business combinations involving enterprises not under common
control.
(1) Business combination involving entities under common control
If the enterprises involved in a combination are subject to control of the same party or parties both before
and after the combination, and that control is not temporary in nature, it is business combination under
common control. The party who obtains control over other participating enterprises on the combination
date is the combining party, and the other participating enterprises are combined parties in a business
combination under common control. Combination date means the date on which the combining party
actually obtains control over the combined parties.
Assets and liabilities that the combining party obtained are measured using book value of the combined
party’s accounts on combination date. Difference between book value of net assets the combining party
obtained and book value of combination consideration paid (or the aggregate nominal amount of shares
issued) is recognized in capital reserve (share premium). If the capital reserve (share premium) is
insufficient to offset, retained earnings will be adjusted accordingly.
All direct expenses incurred by the acquirer in relation to the combination are included in the current
profit or loss at the time such expenses incurred.
(2) Business combinations involving entities not under common control
If the enterprises involved in a combination are not subject to control of the same party or parties both
before and after the combination, it is the business combination involving entities not under common
control. The party who obtains control over the other participating enterprises on acquisition date is the
acquirer, and the other participating enterprises are the acquiree in a business combination not under
common control. The acquisition date is the date on which the acquirer actually obtains the control over
the acquirees.
As for business combinations involving enterprises not under common control, combination cost
includes assets paid, liabilities incurred or assumed, and the fair value of equity securities issued by the
acquirer to obtain control over the acquiree on the acquisition date. Fees for auditing, legal service,
evaluation and consultation, and other administrative expenses incurred for the combination are
recognized in profit or loss in the period in which such expenses incurred. Transaction costs incurred by
the acquirer for issuing equity securities or debt securities as combination consideration are recognized
in initial recognition amount of equity securities or debt securities. Contingent consideration, if any, is
included in acquisition cost at its fair value on the acquisition date. If, within 12 months, new or further
evidence revealed regarding conditions that already existed on acquisition date, the contingent
consideration required to be adjusted, adjusting the goodwill arising from the acquisition accordingly. For
acquisition that realized step by step through multiple transfer transactions, the equity of the acquiree
held by the acquirer before the acquisition date are re-measured using fair value on the acquisition date.
Any difference between the fair value and its carrying amount is recognized as investment income and
transfer other comprehensive income related to this part of equity to investment gain in the period where
the acquisition date falls. The acquisition cost is the aggregate of fair value of acquiree’s equity held by
the acquirer before the acquisition date and fair value of additional equity acquired on the acquisition
date.
Acquisition cost incurred by the acquirer and identifiable net assets acquired in the acquisition are
measured at fair value on the acquisition date. If the acquisition cost is greater than the fair value of the
part of identifiable net assets acquired on the acquisition date, the difference is recognized as goodwill. If
the acquisition cost is lesser than the fair value of the part of identifiable net assets acquired on the
acquisition date, review the fair value of each identifiable asset, liability and contingent liability that
acquired and the calculation of acquisition cost. If, after the review, the acquisition cost is still lesser than
the fair value of the part of identifiable net assets acquired, the difference is recognized in profit or loss in
corresponding period.
Deductible temporary differences that the acquirer obtained from the acquiree, which are not recognized
on acquisition date due to the conditions of recognition as deferred tax assets are not fulfilled, are
recognized as deferred tax assets and correspondingly deduct goodwill if new or further evidence shows,
within 12 months after the acquisition date, that relevant conditions exist on the acquisition date and it is
probable that the economic benefit arising from the deductible temporary differences on acquisition date
can be realized. If the goodwill is insufficient to the deduction, the excess part is recognized in profit or
loss in corresponding period. Deferred tax assets recognized in relation to acquisition that other than the
circumstances mentioned above are recognized in profit or loss in corresponding period.
For business combination involving entities not under common control that achieved in stages that
involves multiple transactions, judgement of whether a transaction belongs to “a basket transaction”
requires to be carried out in accordance with the “Notice of the Ministry of Finance on Circulating the
Fifth Interpretation to Accounting Standards for Business Enterprise” (Cai Kuai (2012) No. 19) and
criteria of “a basket transaction” stated in clause 51 of “Accounting Standards for Business Enterprise No.
33 – Financial Statements Consolidation” (see Note IV 5 (2) for detail). If it is “a basket transaction”, the
accounting treatment shall be referred to descriptions in above paragraphs and Note IV 13 “Long-term
equity investment”. If it isn’t “a basket transaction”, the accounting treatment shall be differentiated for
individual and consolidated financial statements.
In the individual financial statements, the initial investment cost is the sum of the carrying amount of
equity investment of the acquiree held prior to the acquisition date and the additional investment cost at
the acquisition date. When disposing an equity held prior the acquisition date that involving other
comprehensive income, the other comprehensive income shall be accounted for on the same basis as
would have been required if the investee had directly disposed of the related assets or liabilities (i.e.
except for the portion resulted from changes in re-measuring the acquiree’s net liability or net asset of a
defined benefit plan according to equity method accounting, the rest shall be recorded in current period
investment gain).
In the consolidated financial statements, the cost of equity investment of the acquiree held prior to the
acquisition date is re-measured at the fair value on the acquisition date, the difference between the fair
value and carrying value is recognized as investment gain for the current period.
For an equity held prior the acquisition date that involving other comprehensive income, the other
comprehensive income shall be accounted for on the same basis as would have been required if the
investee had directly disposed of the related assets or liabilities (i.e. except for the portion resulted from
changes in re-measuring the acquiree’s net liability or net asset of a defined benefit plan according to
equity method accounting, the rest shall be recorded in current period investment gain).
5. Method of preparing consolidated financial statements
(1) Principles in determining the scope of the consolidation
The scope of consolidation is determined on the basis of control. Control refers to the right that the
Company is able to make decision on financial and operational policies of the invested company, and
receiving benefits from the business activities conducted by the invested company. The scope of the
consolidation includes the Company and all its subsidiaries. Subsidiary means enterprise or entity that is
controlled by the Company.
The Company will re-evaluate the scope of consolidation once related facts and situation changes,
which in turn results in changes to key factors that define control.
(2) Method of preparing consolidated financial statements
The Group begins to include a subsidiary in the scope of consolidation from the date that the Company
acquires the net assets and effective control over the operation and business decisions of the subsidiary.
A subsidiary is excluded out of the scope of the Group’s consolidation from the date the Company losses
effective control over it. For subsidiary that is disposed, the operating performance and cash flows
before the disposal date are properly included in the consolidated income statement and consolidated
cash flow statement. The opening balance of the consolidated balance sheet is not adjusted if the
disposal occurs in the same period. The business performance and cash flows of the addition of
subsidiary through combination involving entities not under common control after the acquisition date
have been properly included in the consolidated income statement and consolidated cash flow
statement, and no adjustments are made to the opening balance and comparative figures of the
consolidated financial statements. For addition of subsidiary through combination involving entities
under common control, the business performance and cash flows from the beginning of the period to the
combination date are properly included in the consolidated income statement and consolidated cash
flow statement, and the opening and comparative figures of the consolidated financial statements are
adjusted at the same time.
If the accounting policies or accounting period adopted by the subsidiary are not in line with the
Company, necessary adjustments are made to the financial statements of the subsidiary according to
the Company’s accounting policies and period when preparing consolidated financial statements. If the
subsidiary is acquired through combinations involving entities not under common control, the
adjustments are made based on the fair value of its identifiable net assets on the acquisition date.
All material intra-group current account balances, transactions and unrealized profits are offset when
preparing the consolidated financial statements.
The part of subsidiary shareholders’ equity and current period net profit or loss that do not attribute to the
Company are presented separately under shareholders’ equity and net profit in consolidated financial
statements as minority shareholders’ equity and minority shareholders’ profit or loss respectively. Portion
of subsidiaries’ current net profit or loss attributable to minority shareholder’s equity are presented under
the title of “minority shareholders’ profit or loss” under net profit in consolidated income statement. If
subsidiary’s losses that attributable to minority shareholders exceed the opening owners’ equity
attributable to minority shareholders, minority shareholders’ equity is deducted.
If the Company losses control over a subsidiary due to partial disposal of equity investment or other
reasons, the remaining equity is measured at fair value on the date when the control lost. The difference
between the sum of consideration received for disposal of equity interest and the fair value of remaining
equity interest less the net assets attributable to the Company calculated continuously since the
purchase date based on shareholding percentage before disposal are recognized in investment gain in
the period when the control lost. Other comprehensive income related to equity investment in the
subsidiary is transferred to investment gain at the time control lost. The remaining equity interests are
measured subsequently according to “CAS No. 2 – Long-term Equity Investment” or “CAS No. 22 –
Recognition and measurement of Financial Instrument”. See Note IV. 9 “Financial instrument” or Note IV.
13 “Long-term equity investment” for details.
If the Company losses control over a subsidiary step by step through multiple disposal transactions,
judgment of whether these transactions belong to “a basket transaction”. It’s typically considered to
account the multiple transaction as “a basket transaction” if the terms, conditions or economic effects of
each of the transactions meet one or more criteria list below:
a. The transactions are entered into at the same time or in contemplation of each other;
b. The transactions together can achieve a complete commercial effect;
c. The occurrence of one transaction is dependent on the occurrence of at least one other transaction;
d. One transaction is not economically justified, but it is economically justified when considered together
with other transactions.
If the transactions do not belong to a basket transaction, each transactions shall be accounted for as a
disposal transaction that does not resulted in loss of control (refer to Note IV. 13 (2) ④ for detail) and
applicable principle of loss of control over a subsidiary because of partial disposal of equity investment
or other reason (refer to previous paragraph). However, the difference between each consideration
received for disposal and portion of net asset related to the disposal shall be accounted as other
comprehensive income in consolidated financial statement and charged to profit or loss at the time
control losses and in the period of loss of control.
6. Categorizing of joint arrangement and accounting treatment for joint operation
A joint arrangement is an arrangement of which two or more parties have joint control. The Company
classifies joint arrangements into joint operations and joint ventures. 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. A joint venture is a joint arrangement whereby the joint ventures have rights
to the net assets of the arrangement.
The Company adopts equity method to joint venture investment and accounted for in accordance with
accounting policies stated in Note IV 13 (2) ② “Long-term investment accounted for using equity
method”.
As a party in a joint operation, the Company recognize the followings: asset held independently; liability
undertaken independently; the Company’s share of asset held commonly and liability undertaken
commonly; revenue from selling output of the joint operation that enjoyed by the Company; revenue from
selling output of the joint operation based on the Company’s share; expenses incurred independently by
the Company and common expenses incurred and shall be borne by the Company according to its
shares.
When the Company, as a party in a joint operation, invest or sell asset (the asset does not constitute
business) to the joint operation or purchase asset from the joint operation, the Company only recognize
the portion of profit or loss that attribute to other parties in the joint operation arises from the transaction
before the asset is sold to third party. If the asset impaired according to “CAS No. 8 – Asset impairment”,
the Company recognize the loss in full if the asset is invested or sold to the joint operation by the
Company, or only recognize the portion attributable to the Company should be recognized if the asset is
purchased by the Company from the joint operation.
7. Determination of cash and cash equivalents
The Company's cash and cash equivalents include cash on hand, deposit that can be used for
immediate payment, and Company’s investments that are with characteristics of short term (generally
matures in three months from the date of purchase), highly liquid, readily convertible to known amount of
cash, and with insignificant risks of changes in value.
8. Foreign currency transactions and financial statements translation
(1) Translation of foreign currency transactions
Initial recognition of foreign currency transactions incurred by the Company are translated to recording
currency using the spot exchange rate at the trading date (usually refers to middle rate of foreign
exchange rate on that day published by the People's Bank of China). For foreign currency exchange
transactions and transactions related to foreign currency exchange, they are translated into recording
currency using actual exchange rate.
(2) Translation of monetary items and non-monetary items denominated in foreign currencies
At the balance sheet date, monetary items denominated in foreign currencies are translated using the
spot rate at the balance sheet date. Translation differences arising from the translation are recognized in
current profit or loss except for capitalized exchange difference attributable to assets purchased or
constructed, which can be capitalized, using foreign currency specified loan and amortized cost of
available for sale monetary items denominated in foreign currency. The exchange difference arose from
the two scenario mentioned above shall be treated under the principal of capitalizing of borrowing cost
and charged to other comprehensive income respectively.
In preparing of the consolidated financial statements involving overseas operations, if there is any
foreign-currency monetary item constituting substantially net investment in overseas operation, the
exchange difference arising from exchange rate variation is recognized in other comprehensive income
and will be charged to profit or loss at the period the investment is disposed.
Non-monetary items denominated in foreign currencies that are measured using historical costs are still
measured using recording currency translated at the spot rate at transaction date. Non-monetary items
denominated in foreign currency which are measured using fair value are translated at spot rate of the
day the fair value is determined. The differences between amount of recording currency after the
translation and the original amount of recording currency are treated as changes in fair value (including
exchange rate change) and are recognized in current profit or loss or recognized in capital reserves as
other comprehensive income.
(3) Translation of financial statements prepared in foreign currencies
In preparing of the consolidated financial statements involving overseas operations, if there is any
foreign-currency monetary item constituting substantially net investment in overseas operation, the
exchange difference arising from exchange rate variation is recognized as “translation difference” under
owners’ equity in balance sheet. In case of disposal of overseas operation, it is charged to the profit and
loss of the period.
Financial statements of foreign businesses that denominated in foreign currencies are translated to
financial statements in RMB using following rules: asset and liability items in balance sheet are
translated using the spot rate on balance sheet date; except for “undistributed profit”, all other items in
owners’ equity are translated using the spot rate on the date the corresponding transactions occurred.
Revenue and expenses items in income statement are translated using the average rate on the
transaction date. The undistributed profit at the beginning of the year is the year-end balance translated
at the prior year. The undistributed profit at the year-end is presented using translated items in profit
distribution. Difference between the translated assets and sum of liabilities and owners’ equity is
recognized in other comprehensive income as translation differences and is presented separately under
owners’ equity in balance sheet. When disposing overseas operations and losing controls over the
operations, relevant translation differences which are originally presented under owners’ equity are
charged to profit or loss entirely or proportionately according to percentage of disposal.
Cash flows denominated in foreign currency and cash flows of subsidiaries outside Mainland China are
translated using the average exchange rate on the date when cash flows occur. The amount of cash
changes due to exchange rate variations are recognized as adjustment item and presented in the cash
flow statement separately.
The balance at the beginning of the year and amount actually incurred prior year are presented using
figures in prior year’s translated financial statements.
All foreign exchange translation difference of an oversea investment recorded under equity and
attributable to the shareholders of the parent company shall be charged to current period profit or loss
when the Company losses control over this oversea investment due to disposal of all equity owned or
partial disposal or other reasons.
If the equity holding in an oversea investment decreased but still maintain control due to partial disposal
or other reasons, foreign exchange translation difference related to the part disposed shall be included
as minority shareholders’ interest and should not be charged to current period profit or loss. If the partial
disposal is for oversea associate or joint ventured enterprise, foreign exchange difference related to the
oversea operation shall be charged to profit or loss when the disposal occurred based on the percentage
disposed.
9. Financial instruments
A financial asset or financial liability is recognized when the Company becomes one party of financial
instrument contracts. Financial asset and financial liability are initially recognized at fair value.
Transaction expenses for fair value through profit or loss financial asset and liability shall be charged to
the profit or loss directly. Transaction expenses for financial asset and liability other than that shall be
included in the initial recognition amount.
(1) Determination of fair values for financial assets and financial liabilities
Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s length transaction. If there is an active market for a financial
instrument, the quoted price in the active market shall be used to establish the fair value of the financial
instruments. Quoted prices from an active market are prices that are readily and regularly available from
an exchange, broker, industry association or pricing service agency etc… and represent prices used in
actual market transactions on an arm’s length basis. If no active market exists for a financial instrument,
the Group establishes fair values by using valuation techniques. Valuation techniques include using the
prices quoted in latest market transactions between knowledgeable, willing parties for reference,
referencing to the current fair value of another instrument that is substantially the same in nature,
discounted cash flow method and option pricing model, etc...
(2) Classification, recognition and measurement of financial assets
Financial assets which are traded in conventional manner are recognized or derecognized on the
transaction date. On initial recognition, financial assets are classified into fair value through profit or loss
financial assets, held-to-maturity financial assets, loans and receivables, and available-for-sale financial
assets.
1 Fair value through profit or loss financial asset
Fair value through profit or loss financial asset includes financial asset held for trade and designated
upon initial recognition as at fair value through profit or loss.
Financial asset meet one of the following criteria is categorized as financial asset held for trade: A. the
purpose of acquiring the financial asset is for selling in short-term; B. belongs to identifiable financial
instrument portfolio that is centralized managed and objective evidence proofed that the Company
manages the portfolio in a manner to make profit in short-term; C. belongs to derivative instrument
except for derivative instruments that are designated as effective hedging tools, financial guarantee
contract or connected with equity instrument investment that do not have quotation in an active market
and that the fair value cannot be measured reliably and the settlement of derivative instrument must
involve delivery of this equity instrument.
Financial asset can be recognized initially as designated fair value through profit or loss financial asset if
one of the following conditions is met: A. the designation can eliminate or reduce significantly the
situation of inconsistency in recognition or measurement of profit or loss caused by different
measurement basis; B. the official documents of the Company’s risk management or investment
strategy state that the financial asset portfolio or portfolio combines financial asset and financial liability
that contains the financial asset are managed, evaluated and reported to key management based on fair
value.
Fair value through profit or loss financial asset is measured consequently using fair value. Profit or loss
arose from changes in fair value and dividend and interest income related to the asset are recorded in
current period profit or loss.
② Held-to-maturity investment
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments
and fixed maturity dates that the Company has the positive intention and ability to hold to maturity.
Held-to-maturity investments are subsequently measured at amortized cost using the effective interest
method; gains and losses arising from de-recognition, impairment or amortization is recognized in profit
or loss for the current period.
Effective interest rate method refers to the method that calculates amortized cost and interest income or
expenses for each period based on actual interest rate of a financial asset or financial liability (or a group
of financial asset or financial liability). Effective interest rate is the rate that used to discount future cash
flows of a financial asset or financial liability in its holding period or a shorter time applicable to its current
book value.
When calculating effective interest, the Company estimates future cash flows (do not consider future
credit loss) based on all contractual terms of the financial asset or financial liability, and taking into
consideration of expenses, transaction fee and discount or premium, which consist part of the actual
interest rate, that are paid to or received from different parties of the financial asset or financial liability
contract.
③ Loan and receivables
Loan and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. The Company’s assets fall under this category include notes receivable,
accounts receivable, interest receivable, dividends receivable and other receivables etc…
Loan and receivables are subsequently measured at amortized cost using the effective interest method;
gains and losses arising from de-recognition, impairment or amortization is recognized in profit or loss
for the current period.
④ Available-for-sale financial asset (AFS financial asset)
AFS financial assets are those non-derivative financial assets that are designated as available for sale
and those financial assets in addition to those above mentioned.
The cost of AFS debt instrument investment at period end is determined according to amortized cost, i.e.
the initial recognized amount minus principal repaid plus or minus the accumulated amortization of
difference between initial recognized amount and amount at the maturity date, and minus impairment
loss incurred. The cost of AFS equity instrument at period end is the initial cost when it is acquired.
AFS financial assets are subsequently measured at fair value. Gain and losses arising from changes in
fair value of AFS financial assets (other than impairment losses and foreign exchange gains and losses
resulted from foreign currency monetary assets which are recognized in profit or loss for the current
period) are recognized as other comprehensive income, until the financial assets are derecognized, are
transferred to profit or loss for the current period. Equity instrument investment with no quoted price in
active markets and with not reliably measured fair value, and derivative financial assets for the equity
instrument and settled by paying the equity instrument are subsequently measured at cost.
Interest income and dividends related to the AFS financial assets are recognized as investment gain for
the current period.
(3) Impairment of financial assets
The Company assesses the carrying amount of financial assets at each balance sheet date other than
those at fair value through profit or loss, if there is objective evidence that financial assets are impaired,
the Company determines the amount of impairment loss.
The Company conducts impairment test on individually significant financial assets separately. Financial
assets that are not individually significant in amount are tested for impairment separately or grouped into
different asset portfolios based on similarity and correlation of the credit risk characteristics. Financial
assets that are not impaired after standalone impairment tests will be tested again by including it in a
portfolio of financial assets with similar credit risk characteristics. Financial assets that have been
impaired in standalone test will not be tested again by including it in a portfolio of financial assets with
similar credit risk characteristics.
① Impairment to held-to-maturity, loan and receivables
The carrying amount of financial assets that are measured at cost or amortized cost shall be reduced to
the present value of estimated future cash flows. The amount reduced shall be recognized as
impairment loss and charged to current period profit or loss. If there is objective evidence shows that the
value of the financial asset recovered after impairment loss was recognized, and the recovery is
connected with matters happened after the recognition of impairment loss, the loss recognized
previously could be reversed. The carrying amount after the reversal shall not exceed the amortized cost
at the reversal date as if there is no impairment before.
② Available-for-sale financial assets
It indicated that impairment incurred to the AFS financial asset if the air value decrease is judged as
severe and not temporary by considering all relevant factors.
If AFS financial assets are impaired, accumulated losses due to decreases in fair value previously
recognized directly in other comprehensive income are reversed and charged to profit or loss for the
current period. The reversed accumulated losses are the asset's initial acquisition costs after deducting
amounts recovered and amortized, current fair value and impairment losses previously recognized in
profit or loss.
If, in a subsequent period, the fair value of financial assets increases and the increase can be related
objectively to an event occurring after the impairment was recognized, the previously recognized
impairment losses can be reversed. The reversal of impairment losses of AFS equity instruments are to
be included in other comprehensive income and the AFS debt instrument impairments are to be
reversed through current period profit or loss.
The impairment for derivative financial asset that do not have quotation in an active market and that the
fair value cannot be measured reliably and the settlement of derivative instrument must involve delivery
of this equity instrument are not allowed to be reversed.
(4) Condition of recognition and measurement of transfer of financial assets
Financial asset is derecognized if one of the following conditions is satisfied: ① the contractual rights of
receiving cash flows from the financial asset is terminated; ② financial asset has been transferred,
and substantially all risks and reward associated with the ownership of the financial asset have been
transferred to transferee; ③ the financial asset has been transferred. The enterprise neither transfers
nor retains substantially all the risks and rewards associated with the ownership of the financial asset,
but it has not retained control over the financial asset.
If the enterprise neither transfers nor retains substantially all the risks and rewards associated with the
ownership of a financial asset, and it retains control over the financial asset, it recognizes the financial
asset to the extent of its continuing involvement in the transferred financial asset and recognizing
associated liability. The extent of continuing involvement in the transferred asset is the extent to which
the enterprise is exposed to risks of changes in the value of the transferred asset.
For an entire transfer of a financial asset that satisfies the de-recognition criteria, the difference between
the carrying amount of the financial asset transferred and the sum of the consideration received from the
transfer and any cumulative gain or loss that had been recognized in other comprehensive income is
recognized in current profit or loss.
If a part of the transferred financial asset qualifies for de-recognition, the carrying amount of the
transferred financial asset in its entirety shall be allocated between the part that is derecognized and the
remaining portion proportionately based on the relative fair value of each part. The difference between
the carrying amount allocated to the part derecognized and the sum of the consideration received for the
part derecognized and any cumulative gain or loss attributable to it that had been recognized in other
comprehensive income is recognized in current profit or loss.
For financial asset sold with recourse or endorsed, it needs to assure that almost all risk and rewards
associated with the financial asset have been transferred. If almost all risk and rewards associated with
the financial asset have been transferred to the recipient, the financial asset shall be de-recognized. If
the Company retains almost all risk and rewards associated with the financial asset, it shall not be
de-recognized. If the Company neither transfers nor retains almost all risk and rewards associated with
the financial asset, judgment of whether the Company retains control over the asset needs to be carried
out and it shall be accounted for based on principals stated in above paragraphs.
(5) Classification and measurement of financial liabilities
On initial recognition, financial liabilities are classified in financial liabilities at fair value through profit or
loss and other financial liabilities. A financial liability is initially recognized at fair value. Transaction costs
for financial liability at fair value through profit or loss are charged to current profit or loss. Transaction
costs for other financial liabilities are included in their initial recognition amounts.
1 Fair value through profit or loss financial liability
The condition of categorizing fair value through profit or loss financial liability and designated as fair
value through profit or loss financial liability is the same as fair value through profit or loss financial asset
and designated fair value through profit or loss asset.
Fair value through profit or loss financial liability is measured subsequently using fair value and gain or
losses resulted from changes in fair value and dividend or interest payment related to the financial
liability shall be charged to current period profit or loss.
2 Other financial liability
Derivative financial liabilities, which connected with equity instrument without quotation in an active
market and that the fair value cannot be measured reliably and the settlement of such financial liabilities
require delivery of the equity instrument, are measured subsequently at cost. Other financial liabilities
are measured at amortized cost using effective interest rate method. Gain or losses arising from
derecognizing or amortization are charged to current profit or loss.
3 Financial guarantee contract
Financial guarantee contracts that are not belong to financial liabilities designated as fair value and
record changes in profit or loss are initially recognized at fair value, and initially recognized at the
determined amount in accordance with the \"CAS No. 13 - Contingencies\" and the higher of the initial
balance after deducting the accumulated amortization according to the \"CAS No. 14 - Income\".
(6) De-recognition of financial liability
A financial liability or part of it can only be derecognized only when the present obligations are fully or
partly discharged. If an agreement between the Company (the debtor) and creditor indicates that the
present financial liability are to be replaced with a new financial liability which has substantially different
terms compare with the present financial liability, the present financial liability is derecognized and the
new financial liability is recognized.
When a financial liability is entirely or partly derecognized, the difference between the carrying amount of
the derecognized financial liability and the consideration paid (including any non-cash assets transferred
or new financial liabilities undertook) is charged to current profit or loss.
(7) Derivative instrument and embedded derivative instrument
Derivative financial instruments of the Company are initially measured at the fair value of the date a
derivative contract entered into and subsequently measured at their fair value. Gain or losses arising
from changes in fair value of derivative instrument that designated hedging instrument and highly
effective are charged to profit or loss based on hedging accounting. Any gains or losses arising from
changes in fair value which do not meet the requirements of hedge accounting are directly recognized to
profit or loss for the current period.
For hybrid instrument with embedded derivative, where financial assets or liabilities not designated as
fair value through profit or loss, the economic features and risks of the embedded derivative are not
closely related to that of the host contract, and a similar instrument with the same terms as the
embedded derivative would meet the definition of a derivative, then embedded derivative is separated
from hybrid instrument and accounted for as a derivative. If embedded derivative is unable to measure
separately either at acquisition or subsequently at balance sheet date, hybrid instrument as a whole is
designated as financial assets or liabilities at fair value through profit or loss.
(8) Offsetting of financial assets and financial liabilities
Financial assets and financial liabilities can be presented in the balance sheet using net figure after
offsetting only when the Group has the legal rights to offset the financial assets and liabilities that are
already recognized and plans to execute such rights, and the Group intends to settle corresponding
financial assets and liabilities on net basis or to realize the financial asset and settle the financial liability
simultaneously. Other than situations mentioned above, financial assets and liabilities are presented
separately in balance sheet and cannot be offset.
(9) Equity Instrument
An equity instrument is a contract that evidences any residual interest in the assets of the Group after
deducting all of its liabilities. The equity instrument will increase the owners’ equity by deducting
transaction costs from consideration received for the issuance of the equity instrument.
All kinds of distributions to the owners of equity instrument (excluding stock dividends) decrease the
owners’ equity. The Group does not recognize fair value changes for equity instrument.
10. Accounts receivable
Receivables include accounts receivable and other receivables.
(1) Recognition principle for bad debts provision
The Company examines, at the balance sheet date, the carrying amounts of receivables and impairment
provision is recognized if following objective evidences that indicating impairment to receivables occurs:
① severe financial difficulties of the debtor; ② a breach of contract by the debtor (such as a default or
breach of contract in interest or principle repayments); ③ it is probable that the debtor will be
bankrupted or conduct other financial reorganization; and ④ other objective evidences indicating there
is an impairment of the receivables.
(2) Method of recognizing bad debt provision
① Determination and providing bad debt provision for receivables which are individually significant in
amount and provided for bad debt individually
The Company identifies single accounts receivable item that above RMB800,000.00 (inclusive) and
single other receivable item that above RMB500,000.00 (inclusive) as receivables that individually
significant in amount.
The Company conducts impairment test on individually significant receivables separately. Financial
assets that are not impaired after standalone impairment tests will be tested again by including it in a
portfolio of financial assets with similar credit risk characteristics. Receivables that have been impaired
in standalone test will not be tested again by including it in a portfolio of financial assets with similar
credit risk characteristics.
② Determination of receivables that recognize bad debt provision under credit risk portfolio and bad
debt provision recognition.
A. Basis of determining portfolio with similar credit risk characteristics
Receivables that are not individually significant in amount and receivables that are individually significant
in amount but not impaired after individual impairment test are grouped into different asset portfolios
based on similarity and correlation of the credit risk characteristics. These credit risk characteristics
reflect the ability of the debtor to repay all amounts due according to terms of contracts related to the
assets under test and are in connection with estimation of future cash flows expected to be generated by
these assets.
Basis of portfolio determination
Item Basis of portfolio determination
Portfolio of aging Based on aging of receivables
Receivables from petty cash advanced to employees, from
subsidiaries of the Company and sales revenue between the
Portfolio of specific accounts
last settlement date with the department store and the balance
sheet date
B. Recognizing bad debt provision based on credit risk portfolio
If the impairment test is carried out for a portfolio of assets, the amount of bad debt provision is
recognized based on the structure of the portfolio and similar credit risk characteristics (the ability of
repayment by the debtor according to contract terms) by assessing historical experience on assets
impairment with similar credit risk characteristics, current economic condition, and losses that are
already exist in the portfolio.
Method of recognizing bad debt provision for different portfolios
Item Method
Portfolio of aging Analyzing the aging of receivables
No bad debt provision is recognized as the risk of impairment
Portfolio of specific accounts
does not exist according to its credit risk characteristics
a. Recognizing bad debt provision based on aging analysis method within the portfolio
Percentage of provision Percentage of provision
Aging recognized for accounts recognized for other
receivable (%) receivables (%)
Within 1 year (inclusive) 5
1-2 years (inclusive) 10
2-3 years (inclusive) 30
Above 3 years 50
b. Recognizing bad debt provision using other method within the portfolio
Percentage of provision Percentage of provision
Name of portfolio recognized for accounts recognized for other
receivable (%) receivables (%)
No bad debt provision is recognized as the risk of impairment
Portfolio of specific accounts
does not exist according to its credit risk characteristics
Based on historical experience, the Group’s receivables from petty cash advanced to employees, from
subsidiaries of the Company and sales revenue between the last settlement date of the same
department store and the balance sheet date are with high recoverability and low possibility of incurring
bad debt, as a result, no bad debt provisions are provided for such receivables.
③ Receivables that are insignificant in amount individually but recognize bad debt provision individually
The Company conducts impairment test to receivables that insignificant in amount individually but with
the following characteristics: receivables that involving dispute or legal case, arbitration with the other
party; obvious indicators show that it is probable that the debtor is unable to fulfil the repayment
obligation. Standalone impairment test is carried out for this kind of receivables. If any objective
evidence indicate that the receivables impaired, impairment losses are recognized based on the
difference between the carrying amount and the present value of estimated future cash flows. Bad debt
provision is recognized accordingly.
(3) Reversal of bad debt provision
If, subsequent to the recognition of an impairment loss on a receivable, there are objective evidences of
a recovery in value of the receivable and the recovery is related objectively to events occurred after the
impairment was recognized, the impairment loss recognized previously is reversed and recognized in
profit or loss. The carrying amount after the reversal shall not exceed the amortized cost of the
receivable on the reversal date as if there is no impairment previously.
Accounts receivable transferred by the Company to financial institutions without recourse, the difference
between transaction amount minus the carrying amount of receivable and related transaction taxes and
fees is charged to current period profit or loss.
11. Inventory
(1) Classification of inventory
Inventory mainly includes raw material, work-in-process and stored goods.
(2) Costing method of acquiring and delivering of inventory
The inventory is valued using actual cost when it is acquired. The cost of inventory includes cost of
purchase, manufacturing cost and other costs. Costing methods used for inventory usage and shipment
include: weighted average costing (except for branded watches), specific identification method (for
stored goods of branded watches).
(3) Determination of net realizable value of the inventory and method of recognizing impairment
provision
Net realizable value (NRV) equals to estimated selling price less estimated costs of completion,
estimated selling costs and related taxes in the ordinary course of business. The determination of net
realizable value of the inventory is based on reliable evidence and taking into consideration of the intents
of holding the inventory and impacts of events after the balances sheet date. In particular: (a) the NRV of
inventories that are available for sale such as finished goods and materials held for trading are
determined using the estimated selling price less estimated selling expenses and related taxes if the
business is in the ordinary course of operation; (b) the NRV of materials that need to be processed are
determined using estimated selling price of finished goods which is manufactured from the material less
estimated cost of completion, estimated selling expenses and related taxes if the business is in the
ordinary course of operation.
The Company recognizes inventory impairment provision for FIYTA brand watches based on models.
Impairment provisions for branded watches are recognized by specific item.
Impairment provisions for raw materials of FIYTA watches are recognized by categories based on
terminal selling status of FIYTA finished watches taking into considerations of the exchangeability of the
spare parts and the special usage of materials.
If, after the impairment provision is recognized, the influence conditions are no longer exist and as a
result, the NRV of the inventory is higher than its carrying amount, the impairment provision recognized
previously can be reversed. The amount reversed is to be recognized in current profit or loss.
(4) The inventory system is perpetual inventory system
(5) Amortization of low-value consumables and packaging material
The low-value consumables and packaging material are amortized using one-off method at the time it is
used.
12. Asset held for sale and disposal group
If the Company mainly recovers a non-current asset or disposal group by disposal (including
non-monetary transaction with commercial substance, the same below) rather than continuously usage.
The asset is then classified as assets held for sale. The following conditions are to be met at the same
time: A non-current asset or disposal group can be immediately sold under current conditions based on
the practice of selling such assets or disposal group in a similar transaction; the Company has already
decided on the sales plan and has been confirmed the purchase commitment; the sale is expected to be
completed within one year. Among them, the disposal group refers to a group of assets that are disposed
of by the sale or other means together in a transaction, and the liabilities directly related to these assets
transferred in the transaction. The disposal group belongs to the asset group or the asset group
combination in accordance with \"CAS No. 8 –Asset impairment\" to share the goodwill acquired in the
business combination, the disposal group shall include the goodwill allocated to the disposal group.
When the Company initially measures or re-measures the non-current assets held for sale and the
disposal group on the balance sheet date, if the book value is higher than the net amount after the fair
value minus the selling expenses, then the book value is reduced to the net amount after deducting the
selling expenses from the fair value shall be recognized as the asset impairment loss and recorded in
the current profits and losses, and at the same time, provision shall be made for the impairment of
assets held for sale. For the disposal group, the recognized impairment loss on assets is offset against
the carrying amount of the goodwill in the disposal group, and then reduced in proportion to the
applicable \"CAS No. 42 - Non-current Assets Held for Sale , Disposal Group and Discontinued
Operations\" (\"Held-for-Sale Standard\") measurement requirements of the non-current assets of the book
value. On the subsequent balance sheet date, if the fair value minus the selling expenses increases, the
amount previously written-down should be restored and the applicable sale-for-sale criterion should be
applied after classification as held-for-sale category reversal of the amount of the asset impairment loss
recognized in the measurement of non-current assets shall be recorded into the profits and losses of the
current period; and according to the book value of the non-current assets held by the disposal group
other than goodwill, the carrying amount of the goodwill that has been offset against and the non-current
assets subject to the measurement of the held for sale criteria cannot be reversed .
Non-current assets held for sale or disposal of non-current assets in the disposal group are not subject
to depreciation or amortization. The interest on liabilities held in the disposal group for sale and other
expenses are continuously recognized.
Non-current assets or disposal group no longer meet the classified conditions for holding the sale
category, the Company will no longer be classified as held for sale or remove non-current assets from
held-for-sale disposal group, and shall be measured at the lower of the following: (1) The carrying
amount before classification as held for sale is adjusted according to the depreciation, amortization or
impairment that should be recognized if it is not classified as held for sale; (2) recoverable amount.
13. Long-term equity investment
Long-term equity investment refers to equity investments where the Company has control, joint control
or significant influence over, an investee. Equity investment where the Company cannot control, joint
control or exercise significant influence over the investee, shall be accounted for as AFS financial asset
or Fair value through profit or loss financial asset, of which the accounting policies are stated in Note IV 9
“Financial instrument”.
Joint control means jointly control of a certain business activity according to the agreement of contract. It
exists only when the agreement on important accounting and business policies that needs to be reached
between investors who share the control rights. Significant influence means participation in decision
making to a company’s finance and business policies, but could not control or jointly control with other
parties to the policy making.
(1) Determination of investment cost
For a long-term equity investment acquired through a business combination involving entities under
common control, the investment cost of the long-term equity investment is the attributable share of the
carrying amount of the shareholders' equity of the acquiree at the date of combination. The difference
between the initial cost of the long-term equity investment and the payment in cash, non-cash assets
transferred as well as the book value of the debts borne by the acquirer shall offset against the capital
reserve. If the capital reserve is insufficient to deduct, retained earnings shall be adjusted. If the
consideration is paid by issuing equity securities, it shall, on the date of acquisition, regard the share of
the book value of the shareholder's equity of the acquiree on the consolidated financial statement of the
ultimate control party as the initial cost of the long-term equity investment. The total face value of the
stocks issued shall be regarded as the capital stock, while the difference between the initial cost of the
long-term equity investment and total face value of the shares issued shall offset against the capital
reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. The
equities of the combined party which respectively acquired through multiple transaction under the same
control that ultimately form into the combination of the enterprises under the common control, should be
disposed according whether belongs to a basket transaction. If it belongs to a basket transaction, each
transaction shall be accounted for by the Company as a transaction of acquiring the control right. If not
belongs to package deal, it shall, on the date of merger, regard the enjoyed share of the book value of
the shareholder's equity of the merged enterprise on the consolidated financial statement of the ultimate
control party as the initial cost of the long-term equity investment, and as for the difference between the
initial investment cost of the long-term equity investment and sum of the book value of the long-term
equity investment before the combination and the book value of the consideration of the new payment
that further required on the combination date, should adjust the capital reserve. If the capital reserve is
insufficient to dilute, the retained earnings shall be adjusted. The equity investment held before the
combination date which adopted the equity method for accounting, or the other comprehensive income
confirmed for the available-for-sale financial assets, should not have any accounting disposal for the
moment.
For the long-term investment required acquired from the business combination involving entities not
under common control, the initial investment cost regarded as long-term equity investment on the
purchasing date according to the combination cost, the combination costs shall be the sum of the fair
values of the assets paid, the liabilities incurred or assumed and the equity securities issued by the
Company. The equity of the acquirees which respectively acquired through multiple transactions that
ultimately form into the combination of the entities under common control, should be disposed according
whether belongs to a basket transaction. If it belongs to a basket transaction, each transaction would be
accounted for by the Company as a transaction of acquiring the control right. If it does not belong to a
basket transaction, the sum of the book value of the original held equity investment of the acquirees and
the newly added investment cost should be regarded as the initial investment cost of the long-term
equity investment that changed to be accounted by cost method. If the original held equity is calculated
by cost method, the other relevant comprehensive income would not have any accounting disposal for
the moment. If the original held equity investment is the financial assets available for sale, its difference
between the fair value and the book value as well as the accumulative changes of the fair value that
include in the other comprehensive income, should transfer into the current gains and losses.
Agent fees incurred by the acquirer for the business combination such as audit, legal service, and
valuation and consultation fees, and other related administration expenses are charged to current profit
or loss at the time such expenses incurred.
Equity investments that other than the kind originated from business combinations are measured at cost
initially. The investment cost differs based on ways of acquiring the long-term equity investment. It can
be determined based on cash consideration actually paid by the Company, fair value of equity securities
issued by the Company, value stimulated in investment contract or agreement reached, fair value or
carrying amount of assets that is exchanged in a non-monetary asset transfer transaction, or the fair
value of the long-term equity investment itself. Expenses that directly related to the acquisition of the
long-term equity investment, taxes and other necessary expenditure are included in the investment cost.
Cost for long-term equity investment that has significant influences over the investees because of
addition of the investment or execute joint control, shall be accounted for based on the sum of the fair
value of the equity investment original held according to “CAS No.22 – Recognition and Measurement of
Financial Instrument” and the newly added investment cost.
(2) Subsequent measurement and recognition of gain or losses
Equity method is used for measurement of long-term equity investment if there is common control
(except joint operation) with or significant influence over the invested entity. Cost method is used for
measurement of long-term equity investment if there is control over the invested entity.
① Long-term equity investments that are measured using cost method
Under cost method, long-term equity investment is measured at initial investment cost. Current period
investment gain or losses are recognized according to the cash dividend or profit distribution that is
announced by the invested entity, except for cash dividend or profit distribution that is already
announced but not distributed which is included in the consideration that actually paid.
② Long-term equity investments that are measured using equity method
If the initial investment cost of a long-term equity investment, which is measured using equity method, is
greater than the portion of fair value of the identifiable net assets of the invested entity attributable to the
Company, the initial investment cost of the long-term equity investment is not adjusted. Otherwise, the
difference is charged to current profit or loss, and the cost of long-term equity investment is adjusted
accordingly.
When measured by adopting equity method, respectively recognize investment income and other
comprehensive income according to the net gains and losses as well as the portion of other
comprehensive income which should be enjoyed or be shared, and at the same time adjust the book
value of the long-term equity investment; corresponding reduce the book value of the long-term equity
investment according to profits which be declared to distribute by the investees or the portion of the
calculation of cash dividends which should be enjoyed; for the other changes except for the net gains
and losses, other comprehensive income and the owners’ equity except for the profits distribution of the
investees, should adjust the book value of the long-term equity investment as well as include in the
capital reserve. The investing enterprise shall, on the ground of the fair value of all identifiable assets of
the invested entity when it obtains the investment, recognize the attributable share of the net profits and
losses of the invested entity after it adjusts the net profits of the invested entity. If the accounting policies
adopted by the investees is not accord with that of the Company, should be adjusted according to the
accounting policies of the Company and the financial statement of the investees during the accounting
period and according which to recognize the investment income as well as other comprehensive income.
For the transaction happened between the Company and associated enterprises as well as joint
ventures, if the assets launched or sold not form into business, the portion of the unrealized gains and
losses of the internal transaction, which belongs to the Group according to the calculation of the enjoyed
proportion, should recognize the investment gains and losses on the basis. But the losses of the
unrealized internal transaction happened between the Company and the investees which belongs to the
impairment losses of the transferred assets, should not be neutralized. The assets launched by the
Company to the associated enterprises or the joint ventures if could form into business, the long-term
equity investment without control right which acquired by the investors, should regard the fair value of
the launched business as the initial investment cost the newly added long-term equity investment, and
for the difference between the initial investment cost and the book value of the launched business,
should be included into the current gains and losses with full amount. The assets sold by the Company
to the associated enterprises or the joint ventures if could form into business, the difference between the
acquired consideration and the book value of the business should be included in the current gains and
losses with full amount. The assets purchased by the Company to the associated enterprises or the joint
ventures if could form into business, should be accounting disposed according to the CAS - No. 20 –
“Business Combination”, and should be recognized gains or losses related to the transaction with full
amount.
The Company shall recognize the net losses of the invested enterprise until the book value of the
long-term equity investment and other long-term rights and interests which substantially form the net
investment made to the invested entity are reduced to zero. However, if the Company has the obligation
to undertake extra losses, it shall be recognized as the estimated liabilities in accordance with the
estimated duties and then recorded into investment losses at current period. If the invested entity
realizes any net profits later, the Company shall, after the amount of its attributable share of profits
offsets against its attributable share of the un-recognized losses, resume recognizing its attributable
share of profits.
③ Purchasing minority equity
When preparing consolidated financial statements, the difference, resulted from addition of long-term
equity investment and shares of net assets calculated continuously since acquisition date (or
combination date) according to new shareholding, is adjusted to capital reserve. If the capital reserve is
insufficient to offset, adjusting retained earnings.
④ Disposal of long-term equity investment
In consolidated financial statements, the parent company can dispose part of the long-term equity
investment to a subsidiary given that the parent does not lose control over the subsidiary. The difference
between consideration received for the disposal and the part of net assets disposed attributable to the
parent is recognized in owners’ equity. If the parent company losses control over a subsidiary because of
long-term equity investment disposal, the accounting treatment shall refer to accounting policies stated
in Note IV. 5 (2) – “Preparing consolidated financial statements”.
For long-term equity investment disposal other than situations mentioned above, the difference of
carrying amount of disposed equity and the consideration actually received is charged to current profit or
loss.
For the long-term equity investment measured by adopting equity method, if the remained equity after
disposal still adopts the equity method for measurement, the other comprehensive income originally
recorded into owners’ equity should adopt the same basis of the accounting disposal of the relevant
assets or liabilities directly disposed by the investees according to the corresponding proportion. The
owners’ equity recognized owning to the changes of the other owners’ equity except for the net gains
and losses, other comprehensive income and the profits distribution of the investees, should be
transferred into the current gains and losses according to the proportion.
For the long-term equity investment which adopts the cost method of measurement, if the remained
equity still adopt the cost method, the other comprehensive income recognized owning to adopting the
equity method for measurement or the recognition and measurement standards of financial instrument
before acquiring the control of the investees, should adopt the same basis of the accounting disposal of
the relevant assets or liabilities directly disposed by the investees and should be carried forward into the
current gains and losses according to the proportion; the changes of the other owners’ equity except for
the net gains and losses, other comprehensive income and the profits distribution among the net assets
of the investees which recognized by adopting the equity method for measurement, should be carried
forward into the current gains and losses according to the proportion.
If the Company lost control over the investee by disposing part of the equity investment and the
remained equity after disposal could execute joint control or significant influences over the investees, it
should change to measure by equity method when preparing the individual financial statement and
should adjust the measurement of the remained equity to equity method as adopted since the time
acquired. If the remaining equity after disposal could not execute joint control or significant influences on
the investees, it should change the accounting disposal according to the relevant regulations of the
recognition and measurement standards of financial instrument, and its difference between the fair value
and book value on the date lose the control right should be included in the current gains and losses. For
the other comprehensive income recognized by adopting equity method for measurement or the
recognition and measurement standards of financial instrument before the Company acquired the
control of the investees, should execute the accounting disposal by adopting the same basis of the
accounting disposal of the relevant assets or liabilities directly disposed by the investees when lose the
control of them, while the changes of the other owners’ equity except for the net gains and losses, other
comprehensive income and the profits distribution among the net assets of the investees which
recognized by adopting the equity method for measurement, should be carried forward into the current
gains and losses according to the proportion. Of which, for the disposed remained equity which adopted
the equity method for measurement, the other comprehensive income and the other owners’ equity
should be carried forward according to the proportion; for the disposed remained equity which changed
to execute the accounting disposal according to the recognition and measurement standards of financial
instrument, the other comprehensive income and the other owners’ equity should be charged to profit or
loss in full.
For those the Company lost the control of the investees by disposing part of the equity investment, the
disposed remained equity should change to calculate according to the recognition and measurement
standards of financial instrument, and difference between the fair value and book value on the date lose
the control right should be included in the current gains and losses. For the other comprehensive income
recognized from the original equity investment by adopting the equity method, should execute the
accounting disposal by adopting the same basis of the accounting disposal of the relevant assets or
liabilities directly disposed by the investees when terminate the equity method for measurement, while
for the owners’ equity recognized owning to the changes of the other owner’s equity except for the net
gains and losses, other comprehensive income and the profits distribution of the investees, should be
transferred into the current investment income with full amount when terminate adopting the equity
method.
The Company respectively disposes the equity investment of the subsidiaries through multiple
transactions until lose the control right, if the above transactions belongs to the package deal, should
execute the accounting disposal by regarding each transaction as a deal of disposing the equity
investment of the subsidiaries until lose the control right, while the difference between each expenses of
the disposal and the book value of the long-term equity investment in accord with the disposed equity
before losing the control right, should firstly be recognized as other comprehensive income then be
transferred into the current gains and losses of losing the control right along until the time when lose it.
14. Investment property
Investment property is property held to earn rentals or for capital appreciation or both. It includes
buildings that are already leased out.
An investment property is measured initially at cost. If it is probable that the benefit related to subsequent
expenditures incurred for an investment property will flow into the Company and that the cost can be
measured reliably, the expenditure is included in the cost of investment property. Other subsequent
expenditures are charged to profit or loss in the period in which they are incurred.
The Company adopts cost method for subsequent measurement to investment property. Depreciation or
amortization policy for investment properties are the same as the one for plants and buildings or land
use rights.
Please refer to Note IV. 20 “Impairment of Long-term assets” for details of impairment test and
impairment provision recognition for investment property.
If the usage of a property changed from self-use to investment or vice versa, the carrying amount before
change shall be used as initial recognition amount after the change.
When the usage of the property changed from investment property to self-use property, the property is
transferred from investment property to fixed asset or intangible asset on the changing date. If the usage
of the property changes from self-use to earn rental or capital appreciation, the property is switched to
investment property from fixed asset or intangible asset. If it switched to investment property that
measured using cost method, it is recognized using the carrying amount before the switch. If it switched
to investment property that measured using fair value method, it is recognized using the fair value on the
switching date.
The investment property is derecognized when it is disposed or ceased usage permanently and it is
estimated that no benefit can be obtained from the disposal. Disposal income arising from selling,
transfer, disposing and damaging the investment property, less its carrying amount and taxes related to
the disposal, is recognized in profit or loss.
15. Fixed asset
(1) Recognition principles
Fixed assets refer to tangible assets that are held for the purpose of goods production, providing
services, lease, or for administrative purposes with useful life of more than one accounting year. Fixed
asset is recognized only when the economic benefit associated with the fixed asset is probable to flow
into the Company and the cost can be measured reliably. Fixed asset is recognized initially at cost by
considering estimated disposal expenses.
(2) Depreciation method
The fixed asset is depreciated on straight-line basis over its estimated useful life from the next month
after it reached estimated useful condition. The useful lives, estimated residual ratios and annual
depreciation rates for each category of fixed assets are as follows:
Estimated
Estimated Annual
Method of net residual
Categories useful lives depreciation
depreciation value ratios
(year) rates (%)
(%)
Plants and buildings straight-line 20-35 5.00 2.70-4.80
Machinery equipment straight-line 10 5.00-10.00 9.00-9.50
Electronics devices straight-line 5 5.00 19.00
Transportation vehicles straight-line 5 5.00 19.00
Other equipment straight-line 5 5.00 19.00
Estimated net residual value of a fixed asset is the estimated amount that the Group would currently
obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset’s useful life
is passed and in the condition expected at the end of its useful life.
(3) Impairment test and impairment provision recognition for fixed asset
For impairment test and impairment provision recognition for fixed asset, please refer to Note IV. 20
“Impairment of Long-term asset”.
(4) Recognition basis and pricing method of financing leased fixed assets
A financing lease is a lease that transfers all the risks and rewards incidental to the ownership of the
asset in substance and the ownership may or may not eventually be transferred. The depreciation
accrued method of the fixed assets rented out under financing leases using a same policy as its own
fixed assets. If it is reasonably certain that the ownership of the leased asset can be acquired when the
lease term expires, depreciation is accrued over the useful life of the leased asset. If it cannot
reasonably determine that the ownership of the leased asset can be acquired when the lease term
expires, the depreciation will be accrued in the shorter of lease term and the useful life of leased asset.
(5) Others
Subsequent expenditure in relation to fixed asset is recognized in the cost of the fixed asset and
derecognizing the carrying amount of the part replaced if it is probable that the economic benefit related
to the fixed asset will flow in the entity and the cost can be measured reliably. Subsequent expenditures
other than this are charged to current profit or loss.
When a fixed asset is sold, transferred, retired or damaged, the disposal proceed net of the carrying
amount and related taxes is charged in profit or loss for the current period.
The Company conduct reviews to the useful life, estimated net residual rate and depreciation method at
least at each end of the accounting year. Any changes will be treated as changes in accounting
estimates.
16. Construction in progress
Construction in progress is measured at actual project expenditure which includes construction
expenditures, capitalized borrowing costs before the project reaches estimated useful condition and
other related expenses. Construction in progress is transferred to fixed asset when the asset reaches its
estimated useful condition.
For impairment test and impairment provision recognition for construction in progress, please refer to
Note IV. 20 “Impairment of Long-term asset”.
17. Borrowing cost
Borrowing cost includes loan interest, associated expenses incurred in connection with the arrangement
of borrowings and exchange difference arising from foreign currency loans. Borrowing costs that are
directly attributable to the acquisition, construction or production of a qualifying asset can be capitalized
starting from the time the necessary acquisition or production for bringing the asset to its estimated
useful or sellable condition started, and given that the capital expenditure and borrowing cost have been
incurred. The capitalization stops when the asset reaches its estimated useful or sellable conditions.
Other borrowing costs are charged to profit or loss at the time they are incurred.
The interest expenses actually incurred current-period special borrowing less unused borrowing funds in
bank interest earned or investment income on the temporary investment of those funds, the above
mentioned amount shall be capitalized. The weighted average asset disbursement of general borrowing
multiplies the capitalization rate to determine the amount of capitalization based on the accumulative
asset disbursements of special loans. The capitalization rate is the weighted average interest rate of the
general borrowing.
During the capitalization period, exchange differences on foreign currency borrowings are all capitalized;
Exchange differences on foreign currency borrowings are generally included into current profit or loss.
The assets which have qualified condition of capitalization is the assets necessarily take a substantial
period of time after the acquisition, construction or production activities in order to achieve their intended
use or sale of fixed assets, investment property, inventories and other assets.
If the process of acquiring, constructing or producing of the assets that are capable for capitalization is
interrupted abnormally and the interruption lasts more than three months, the capitalization of borrowing
costs shall be suspended until the acquisition, construction or production resumes.
18. Intangible assets
(1) Intangible assets
An Intangible asset is the identifiable non-monetary asset without physical substances that is owned or
controlled by the Company.
An intangible asset is initially measured at its cost. Expenditures related to the intangible asset are
included in its cost if it is probable that the related economic benefit will flow into the Company and the
cost can be measured reliably. Other expenditures apart from this will be charged to profit or loss in
corresponding period at the time it incurred.
Land use right is generally accounted for as intangible asset. When the plants or buildings are
constructed by the Group, expenditures on the land use right and on the buildings shall be recognized as
the intangible asset and the fixed asset respectively. When the plants or buildings are purchased, the
consideration paid shall be allocated between the land use right and the buildings. If it can be allocated
reasonably, recognize entirely as fixed assets.
An intangible asset with a finite useful life shall be amortized by using the straight-line method over its
estimated useful life when it is available for use. The depreciable amount of an intangible asset is its cost
less estimated residual value and impairment provision. An intangible asset with an indefinite useful life
is not amortized.
Method of amortization for intangible asset with finite useful life is as follows:
Category Useful life (year) Method of amortization
Land use right 50 straight-line
Software 5 straight-line
Brand use right 5-10 straight-line
For an intangible asset with a finite useful life, its useful life and amortize method are reviewed at
the end of each accounting period. Any changes will be treated under changes in accounting estimates.
Besides, the useful life of the intangible assets with indefinite useful life will be reviewed at the end of
each accounting period. If there is evidence indicating that it is foreseeable that the period during which
the economic benefit associated with the asset would flow into the entity, its useful life will be estimated
and the asset will be amortized in accordance to the amortization policies applicable for an intangible
asset with finite useful life.
(2) Research and development expenditure
The Company’s expenditure on internal research and development projects are classified into
expenditure on the research phase and expenditure on the development phase.
Expenditure on the research phase is recognized in profit or loss in the period in which it is incurred.
Expenditure on the development phase is capitalized and recognized as intangible asset only when all of
the following conditions are satisfied. Expenditures on the development phase, failing to meet the below
conditions, are recognized in profit or loss in the period it is incurred:
① The technical feasibility of completing the intangible asset so that it will be available for use or sale;
② The intention to complete the intangible asset and use or sell it;
③ The intangible asset will generate economic benefits. Among other things, the Company can
demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself
or, if it is to be used internally, the usefulness of the intangible asset;
④ The availability of adequate technical, financial and other resources to complete the development
and the ability to use or sell the intangible asset; and
⑤ The expenditure attributable to the intangible asset during its development phase can be measured
reliably.
Expenditures which cannot be divided into expenditures on research phase and expenditures on
development phase are charged entirely in current profit or loss.
If the Company’s R&D projects fulfil above criteria and filed for approval after technology and economic
feasibility study, the projects will be in development phase.
Capitalized development expenditure are shown as Development expenditure and will be transferred
into Intangible asset at the date it reaches the estimated useful condition.
(3) Impairment test and impairment provision recognition for intangible assets
For impairment test and impairment provision recognition for intangible asset, please refer to Note IV. 20
“Impairment of Long-term asset”.
19. Long-term deferred expenses
Long-term deferred expenses refer to expenditures which are incurred but shall be expensed over the
beneficiary period of more than one year. The Company’s long-term deferred expenses mainly include
counter fabrication and decoration expenses. Long-term deferred expenses shall be amortized on
straight-line basis over its beneficiary period.
20. Impairment of Long-term assets
The Group assesses, on balance sheet date, whether there are indicators for impairment to fixed assets,
construction in process, intangible assets with finite useful life, investment property measured at cost,
and long-term equity investment to subsidiaries, joint ventured companies and associated companies. If
there are any indictors of impairment, recoverable amount is estimated and impairment test is conducted.
Impairment tests are conducted each year to goodwill, intangible assets that with indefinite useful life
and intangible assets that have not reached its useful condition despite whether there is indicators of
impairment.
If the recoverable amount of an asset is less than its carrying amount in the impairment test, provision for
impairment shall be made for the difference and recognized as an impairment loss. The recoverable
amount of an asset is the higher of its fair value less costs to sell and the present value of the future cash
flows expected to be derived from the asset. The fair value of an asset is determined according to the
price in a sale agreement in an arm’s length transaction. If there is no sale agreement but an active
market for the asset, the fair value shall be determined according to the current bid price. If there is no
sale agreement or active market for the asset, the fair value shall be based on the best information
available. Costs of disposal include legal costs related to the disposal of the asset, related taxes, cost of
removing the asset and direct cost to bring the asset into its condition of sale. The present value of
expected future cash flows of an asset shall be determined by estimating the future cash flows to be
derived from continuing use of the asset and from its ultimate disposal and applying the appropriate
discount rate to those future cash flows. Provision for impairment shall be made and recognized on an
individual basis. If it is not possible to estimate the recoverable amount of the individual asset, the
Company shall determine the recoverable amount of the asset group to which the asset belongs. An
asset group is the minimum group of assets which can generate cash flows independently.
When conducting impairment test on goodwill, which is presented separately in balance sheet, the
carrying amount of goodwill will be allocated to asset group or combination of asset group which are
expected to enjoy benefit from the synergy effect in a business combination. If the test results indicate
that the recoverable amount of the asset group or combination of asset group, which consist goodwill
allocated, is lower than its carrying amount, impairment loss is recognized accordingly. The impairment
loss reduces the carrying amount of goodwill that allocated to the asset group or combination of asset
group. If the goodwill is insufficient to deduct, then offsetting other assets within the asset group or
combination of asset group proportionately based on the weight of the carrying amount of assets other
than goodwill in the asset group or combination of group.
Once an impairment loss is recognized, it shall not be reversed in subsequent periods.
21. Employee remuneration
Employee remuneration include short-term employee remuneration, post-employment benefits and
termination benefits.
Short-term remuneration mainly includes employee salary, bonus, allowance, employee welfare,
maternity insurance, work injury insurance, housing fund, labor union fee, employee education fund and
non-monetary welfare etc… The Company recognize short-term remuneration as liabilities through profit
or loss or related cost of assets for the financial year in which the employees render the related services.
Non-monetary welfare is measured at fair value.
Post-employment benefit mainly include basic endowment insurance, unemployment insurance and
annuity etc… Post-employment benefit plan includes defined contribution plans. Defined contribution
plans are post-employment benefit plans under which an entity pays fixed contributions into an escrow
fund and the amount shall be charged to cost of related asset or current period profit or loss.
When the Company terminates the employment relationship with employees before the employment
contracts expire or provides compensation as an offer to encourage employees to accept voluntary
redundancy, a provision shall be recognized at the date earlier of the Company cannot unilaterally
withdraw from the termination plan or the redundancy offer and the Company determined the
reconstruction cost related with the payment of termination benefit. Termination benefit shall be
recognized as employee remuneration payable and charged to the profit or loss for the current
accounting period. If the termination benefit cannot be paid within 12 month after the balance sheet date,
it shall be treated as long-term employee remuneration.
The earlier retirement plan shall be accounted for in accordance with the accounting principles for
compensation for termination of employment. The salaries or wages and the social contributions to be
paid for the employees who retire before schedule from the date on which the employees stop rendering
services to the Company to the scheduled retirement date, shall be recognized (as compensation for
termination of employment) in the current profit or loss if the recognition principles for provisions are
satisfied.
If other long-term employee welfare provided by the Company meets the criteria of defined contribution
plan, it shall be accounted for according to defined contribution plan, otherwise, defined benefit plan
accounting treatment is applicable.
22. Provisions
A provision is recognized when obligation related to contingencies satisfies following condition: (1) the
obligation is a present obligation of the Company; (2) it is probable that an outflow of economic benefits
will be required to settle the obligation; and (3) and the amount of the obligation can be measured
reliably.
At the balance sheet date, a provision shall be initially measured at the best estimate of the expenditure
required to settle the related present obligation, taking the risks, uncertainties and time value of money
that related to the contingencies into consideration.
When all or part of the expenditure that needed for settling a provision is expected to be reimbursed by a
third party, the reimbursement shall be recognized as an asset separately only when it is virtually certain
that reimbursement will be received. The amount recognized for the reimbursement shall not exceed the
carrying amount of the provision.
23. Revenue
(1) General principal
① Revenue from sale of goods
Revenue from the sale of goods shall be recognized only when all of the following conditions are
satisfied: (a) significant risk and rewards of ownership of the goods have been transferred to the buyer;
(b) the seller retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold; (c)the amount of revenue can be measured reliably;
(d) it is probable that the associated economic benefits will flow to the seller, and (e) the associated costs
incurred or to be incurred can be measured reliably.
② Revenue from rendering of service
When the outcome of a transaction involving the rendering of services can be estimated reliably,
revenue associated with the transaction are recognized using the percentage of completion method on
balance sheet date. The percentage of completion is calculated based on the proportion of services
performed to date to the total volume of services to be performed.
The outcome of a transaction involving the rendering of services can be estimated reliably when all of
the following conditions are satisfied: (a) the amount of revenue can be measured reliably; (b) it is
probable that the associated economic benefits will flow to the entity: (c) the percentage of completion
can be measured reliably; and (d) the costs incurred and to be incurred for the transaction can be
measured reliably.
When the outcome of a transaction involving the rendering of services cannot be estimated reliably,
revenue shall be recognized to the extent of costs incurred and expected to be recovered. Costs of
service provided are charged to the current profit or loss as service costs. If the costs incurred are not
expected to be recoverable, no revenue is recognized.
③ Revenue from rendering usage rights
The revenue is recognized on accrual basis and based on related contracts or agreements.
④ Interest income
The interest income shall be calculated based on the tenure of the Company’s monetary funds used by
others and the actual interest rates used.
(2) Detailed method of revenue recognition
The watches sold by the Company includes two types, one is the self-manufactured FIYTA watch, the
sales of which is managed by branch offices and provincial-level sale sections by regions set up by
Sales Company, a subsidiary of the Company. The other is brand watches, the sales of which are
controlled by HARMONY Company, a subsidiary of the Company, and the Company act as agent
Regarding to sales modes, a portion of the sales of self-manufactured FIYTA watches is sold through
direct sales to customer and consignment sales while most of the self-manufactured FIYTA watches and
brand watches are sold under two sales modes, namely exclusive shop and shop-in-shop. Detailed
method of revenue recognition as follows:
1 Direct sales to the customer
Under direct sales to the customer mode, the Company delivers products to customers and recognizes
sales income after customer inspection and acceptance.
2 Exclusive shop
Under exclusive shop mode, the Company delivers products to customers and recognizes sales income
after customer inspection, acceptance and pay.
3 Shop-in-shop
Under shop-in-shop mode, the Company delivers products to customers, sales staff issues notes to
retail customers and recognizes sales revenue after customer inspection and acceptance and the
department store collects the payment from the customer.
4 Consignment sales
Under consignment sales mode, the Company receives the detail of the sales list from distributors and
recognizes revenue while issuing invoice to distributors.
24. Government grants
Government grants are monetary assets or non-monetary assets obtained by the Company from the
government free of charge. It does not include capital contributions from the government as an owner.
Government grants are classified into government grants related to assets and government grants
related to income. The Company defines the government grants obtained for the acquisition or other
formation of long-term assets as the government grants related to the assets; the remaining government
grants are defined as the government grants related to income. If the government documents do not
clearly define the object of subsidy, the subsidy shall be divided into the government grant related to
income and the government grant related to assets in the following ways: (1) If the government
document specifies the specific project for which the subsidy is targeted, the budget of the project will be
divided into the relative proportion of the expenditure amount of the assets and the expenses included in
the expenses, and the division ratio shall be reviewed on each balance sheet date and changed when
necessary; (2) If the government documents use only for general statement, and not specify a specific
project, it will be as income-related government grants. If a government grant is in form of monetary
asset, it is measured at the amount received or receivable. If a government grant is in the form of
non-monetary asset, is measured at fair value. If the fair value cannot be measured reliably, it is
measured at a nominal amount and recognize directly in the current profit or loss.
The Company usually confirms and measures government grants according to the actual amount
received. However, when there is conclusive evidence that can meet the financial support policies and
regulations related to the conditions expected to be able to receive financial support funds for the end of
the year, it will measure according to the actual amount received. The government grants measured
according to the receivable amount shall meet the following conditions at the same time: (1) The amount
of the grants receivable has been authorized by the government department to issue the documents or
can be reasonably measured according to the relevant provisions of the formally promulgated financial
capital management measures; (2) It is based on the financial support items formally promulgated by the
local finance department and proactively disclosed in accordance with the provisions of the \"Regulations
Governing the Disclosure of Government Information\" and the fiscal fund management measures, and
the management measures should be generalized (any eligible enterprises can apply), rather than
specifically for a specific company; (3) the relevant grant approval has been clearly committed to the
deadline for disbursement, and the disbursement of funds has corresponding budget as a guarantee, so
that it can reasonably ensure that it can be received within the prescribed time limit; (4) Other relevant
conditions (if any) that should be satisfied according to the Company and the specific circumstances of
the grants.
A government grant related to asset is recognized as deferred income, and evenly amortized and
charged to profit or loss over its useful life. If a government grant related to income is used to
compensate related expenses and losses in subsequent periods, it is recognized as deferred income. If
it is used to compensate related expenses and losses that are already incurred, it is charged to current
profit or loss directly.
Government grants including assets-related parts and income-related parts at the same time should be
treated separately. If it is difficult to distinguish them, they will be classified as income-related
government grants completely.
The government grants related to the daily activities of the Company are included in other gain or offset
the related costs according to the essence of the economic business. The government grants that are
not related to the daily activities are included in the non-operating income and expenses.
If a government grant already recognized needs to be repaid, the carrying amount of related deferred
income, if any, is to be reduced. Any excess are charged to current profit or loss. If there is no deferred
income, the repayment is charged to current profit or loss directly.
25. Deferred tax asset / deferred tax liability
(1) Current period corporate income tax
At the balance sheet date, current income tax liabilities (or assets) for the current period and prior
periods shall be measured at the amount expected to be paid (refunded) according to the requirement of
taxation laws. The taxable income used to calculate current period income tax expenses is calculated by
making corresponding adjustments to current period profit before tax in accordance with relevant
taxation regulations.
(2) Deferred tax asset and deferred tax liability
Temporary differences can be recognized as deferred tax asset and deferred tax liability using balance
sheet liability method. Temporary differences arise from: the difference between the carrying amount and
tax base of certain assets and liabilities; the difference between the carrying amount and the tax base of
an item which are not recognized as assets and liabilities but its tax base can be determined according
to relevant taxation laws.
A deferred tax liability shall not be recognized for the taxable temporary differences arising from the
following events: (a) the initial recognition of goodwill; (b) the initial recognition of an asset or liability in a
transaction which contains both of the following characteristics: (i) the transaction is not a business
combination; (ii) at the time of the transaction, it affects neither accounting profit nor taxable profit (or
deductible loss). For taxable temporary differences associated with investment in subsidiaries,
associates and interests in jointly controlled enterprises, a deferred tax liability shall not be recognized if
both of the following conditions are satisfied: (a) the Company is able to control the timing of the reversal
of the temporary differences; and (b) it is probable that the temporary difference will not reverse in the
foreseeable future. Except for exceptions mentioned above, the Company recognizes all other taxable
temporary difference as deferred tax liability.
A deferred tax asset shall not be recognized for the deductible temporary differences associated with the
initial recognition of an asset or liability in a transaction which contains both of the following
characteristics: (a) the transaction is not a business combination; (b) at the time of the transaction, it
affects neither accounting profit nor taxable profit (or deductible loss). For deductible temporary
differences associated with investment in subsidiaries, associates and interests in jointly controlled
enterprises, a deferred tax asset shall not be recognized if one of the following conditions is satisfied: (a)
it is probable that the temporary difference will not reverse in the foreseeable future; and (b) taxable
profits will not be available in the future, against which the temporary difference can be utilized. Except
for exceptions mentioned above, the Company recognizes deductible temporary difference as deferred
tax asset to the extent of the future taxable profit which is probably achieved by the Company.
A deferred tax asset shall be recognized for the carry forward of unused deductible losses and tax
credits to the extent that it is probable that future taxable profit will be available against which the
deductible losses and tax credits can be utilized.
At the balance sheet date, deferred tax assets and deferred tax liabilities shall be measured at the tax
rates that are expected to apply to the period when the asset is realized or the liability is settled,
according to the requirement of tax laws.
At the balance sheet date, the carrying amount of a deferred tax asset shall be reviewed. The Company
shall reduce the carrying amount of a deferred tax asset to the extent that it is no longer probable that
sufficient taxable profit will be available in future periods to allow the benefit of the deferred tax asset to
be utilized. Any such reduction in amount shall be reversed to the extent that it becomes probable that
sufficient taxable profit will be available.
(3) Corporate income tax
The corporate income tax includes current period income tax and deferred income tax.
The current income tax and deferred income tax shall be recognized in the current profit or loss except
for: (a) the income tax arising from events or transactions which are recognized in the comprehensive
income or owners’ equity are recognized in the comprehensive income or owners’ equity accordingly;
and (b) the income tax arising from business combinations which are adjusted to the carrying amount of
goodwill.
(4) Offsetting of income tax
When legal right to netting settlement is owned, net settlement or intent to acquire the assets and settle
the liabilities happen simultaneously, the Group had net current tax assets against current tax liabilities
are netting presentation after offset.
When the legal right to offset current tax assets against current tax liabilities is owned and the deferred
tax assets and deferred tax liabilities relate to the same taxation authority on the same taxable income
levied by or related to different taxable entities, but within the reverse period of significant amounts of
deferred tax assets and liabilities in each future period, and the tax payer's intention to offset current tax
assets and liabilities or both to obtain assets or repay debts, the deferred income tax and deferred tax
assets and liabilities of the Group to netting presentation after offset.
26. Leasing
A finance lease is a lease that transfers substantially all the risks and rewards associated with the
ownership of an asset. Title of the asset may or may not eventually be transferred. An operating lease is
a lease other than a finance lease.
(1) Accounting treatment for the Company as lessee under operating leases
Lease payments under an operating lease are recognized as cost of relevant assets or charged to profit
or loss for the current period on straight-line basis over the lease term. Initial direct costs incurred are
charged to profit or loss for the current period directly. Contingent rentals are charged to profit or loss in
the period in which they are actually incurred.
(2) Accounting treatment for the Company as lessor under operating leases
Lease receipts under an operating lease are recognized by the in the current profit or loss on a
straight-line basis over the lease term. Significant initial direct costs are capitalized when they are
incurred, and are recognized in profit or loss over the lease term on the basis on which the lease income
is recognized. Insignificant initial direct costs shall be charged to the current profit or loss directly.
Contingent rentals are charged to profit or loss in the period in which they are actually incurred.
(3) Accounting treatment for the Company as lessee under finance leases
On the lease beginning date, the Company shall record the lower one of the fair value of the leased
asset and the present value of the minimum lease payments on the lease beginning date as the entering
value in an account, recognize the amount of the minimum lease payments as the entering value in an
account of long-term account payable, and treat the balance between the recorded amount of the leased
asset and the long-term account payable as unrecognized financing charges. Besides, the initial direct
costs directly attributable to the leased item incurred during the process of lease negotiating and signing
the leasing agreement shall be recorded in the asset value of the current period. The balance through
deducting unrecognized financing charges from the minimum lease payments shall be respectively
stated in long-term liabilities and long-term liabilities due within 1 year.
Unrecognized financing charges shall be adopted by the effective interest rate method in the lease term,
so as to calculate and recognize current financing charges. The contingent rents shall be recorded into
the profits and losses of the current period in which they actually arise.
(4) Accounting treatment for the Company as lessor under finance leases
On the beginning date of the lease term, the Company shall recognize the sum of the minimum lease
receipts on the lease beginning date and the initial direct costs as the entering value in an account of the
financing lease values receivable, and record the unguaranteed residual value at the same time. The
balance between the sum of the minimum lease receipts, the initial direct costs and the unguaranteed
residual value and the sum of their present values shall be recognized as unrealized financing income.
The balance through deducting unrealized financing incomes from the finance lease accounts receivable
shall be respectively stated in long-term claims and long-term claims due within 1 year.
Unrecognized financing incomes shall be adopted by the effective interest rate method in the lease term,
so as to calculate and recognize current financing revenues. The contingent rents shall be recorded into
the profits and losses of the current period in which they actually arise.
27. Other main accounting policies and estimates
Discontinued operation
Discontinued operation refer to the components that can be separated and disposed of or classified as
held for sale separately by one of the following conditions: ① The component represents an
independent main business or a separate main operation area; ② This component is part of a related
plan to be disposed of by an independent major business or a separate major operating area; ③ This
component is a subsidiary acquired exclusively for resale.
Refer to Note IV.12 \"Description of Assets Held-for-Sale and Disposal Group\" for details of accounting
treatment of discontinued operations.
28. Changes in main accounting policies and estimates
(1) Change of accounting policies
① Changes in accounting policies due to the implementation of new CAS
On April 28, 2017, the Ministry of Finance released \"CAS No. 42 - Non-current Assets Held-for-Sale,
Disposal Group and Discontinued Operations\" with Cai Kuai [2017] No. 13 and implemented it on May
28, 2017. On May 10, 2017, the Ministry of Finance released \"CAS No. 16 - Government Grants (2017
Amendment) \"with Cai Kuai [2017] No. 15, and implemented it on June 12, 2017 .The Company started
to implement the above two accounting standards in accordance with the time required by the Ministry of
Finance.
The \"CAS NO.42 - Non-current Assets Held for Sale, Disposal Group and Discontinued Operations\"
standard regulates the classification, measurement and presentation of non-current assets held for sale
or disposal group and the presentation of the discontinued operations.
Before the implementation of \"CAS No. 16 - Government Grants (Revised in 2017) \", the government
grants obtained will be included in non-operating income; government grants related to assets are
recognized as deferred income, the average amortization is included in the profits and losses within the
useful life of the asset of the current period. After the implementation of \"CAS No. 16 - Government
Grants (Revised in 2017) \", government grants related to daily activities incurred after January 1, 2017
are included in other gain; grants other than those relating to daily activities ,recorded in non-operating
income and expenditure.
② Other changes of accounting policies
There was no any other change of accounting policies of the Company in the reporting period.
(2) Change of accounting estimates
There was no any change of accounting estimate of the Company in the reporting period.
29. Significant accounting judgments and estimates
When adopting the accounting policies, the Company needs to make judgments, estimates and
assumptions for the carrying amount of items which are presented in financial statements and cannot be
measured accurately due to internal uncertainties of business. The judgments, estimates and
assumptions that are made according to historical experience of the management and with
consideration of other relevant factors will have effects on the reported amounts of revenue, expenses,
assets as well as liabilities and the disclosure of contingent liabilities at the balance sheet date. The
uncertainties of these estimates will probably result in significant adjustments on the carrying amounts of
assets or liabilities which will be affected by those judgments, estimates and assumptions in future
accounting periods.
The judgments, estimates and assumptions are reviewed by the Company periodically on going concern
basis. If the changes in accounting estimates affect current period only, the amounts affected are
recognized in current period. If the change affects both current and future periods, the amounts affected
are recognized in the current accounting period as well as subsequent accounting periods.
At the balance sheet date, significant areas that require the Company to make judgments, estimates and
assumptions to the amounts of financial statements items are as follows:
(1) Bad debt provision recognition
The allowance method is adopted by the Company to account for losses on bad debts in accordance
with the accounting policies for receivables. Impairment of accounts receivable is made based on
estimation of its recoverability, which requires the management to make judgments and estimates. The
difference between the actual outcome and the estimates will have effects on the carrying amounts of
accounts receivable and on provision or reversal of the provision for bad debts of the accounting period
in which the estimates will be changed.
(2) Provision for impairment of inventories
According to the accounting policies of inventories, it is measured at lower of cost and the net realizable
value (NRV). For inventory cost that is higher than its NRV and obsolete and slow moving inventory,
impairment provision shall be accrued. Evaluating the impairment of inventories needed the
management level gain the valid evidence and take full consideration of the purpose of inventories,
influence of events after balance sheet date and other factors, and then made relevant judgments and
estimates. The actual amount and the difference of previous estimate would affect the book value of
inventories and the accrual and reversal of provision.
(3) The impairment of available-for-sale financial assets
Whether an available-for-sale financial asset is impaired relies largely on the judgment and assumption
of the management, so as to decide whether recognized the impairment losses in the income statement.
During the process of making the judgment and assumption, the Company needed to appraise the
balance of the cost of the investment exceeding its fair value and the continuous period, the financial
status and business forecast in a short period, including the industrial situation, technical reform, credit
level, default rate and risk of counterparty.
(4) Impairment provision for long-term asset
At the balance sheet date, the Company judges whether there are indicators of impairment for
non-current assets other than financial assets. For an intangible asset with an indefinite useful life except
for annually impairment test, an impairment test will be conducted if there are any indicators of
impairment occur. For non-current assets other than financial assets, an impairment test shall be made if
there are evidences indicating the carrying amounts cannot be recovered in full amount.
An asset or asset group is impaired when its carrying amount is higher than its recoverable amount i.e.
the higher of its fair value less the disposal expenses and the present value of the estimated future cash
flows.
The net amount of fair value less the disposal expenses are determined with reference to the quoted
price of similar assets in a sales agreement in an arm’s length transaction or an observable market price
less incremental costs directly attributable to disposal of the asset.
When estimating the present value of future cash flows, significant judgments are involved to the
production output, selling price, relevant business costs of the asset (or asset group) and the discount
rate adopted in calculating the present value. In estimating the recoverable amount, the Company will
adopt all information available, such as forecasts for the production output, the selling price and relevant
business costs, which are made according to reasonable and supportive assumptions.
The Company conducts impairment test to goodwill at least once a year. This requires estimating the
present value of future cash flows of asset group or combination of asset group to which goodwill has
been allocated. In estimating the present value of future cash flows, the Company needs estimate future
cash flows generated from the asset group or the combination of asset groups and choose appropriate
discount rates.
(5) Depreciation and amortization
Taking the residual value into consideration, an investment property, fixed asset and intangible asset are
depreciated or amortized on a straight-line basis over its useful life. The Company reviews the useful life
periodically to determine the amount of depreciation or amortization which shall be recognized in each
accounting period. The useful life is determined according to historical experience of similar assets and
technological renovation estimated. The amount of depreciation or amortization shall be adjusted in
future accounting periods if there are material changes in estimates made before.
(6) Deferred income tax asset
A deferred tax asset shall be recognized for the unused deductible losses to the extent that it is probable
that future taxable profit will be available against which the deductible losses can be utilized. Taking the
taxation planning into consideration, the management of the Company is required to make significant
amount of judgments to estimate the time and the amount of future taxable profit in order to determine
the amount of deferred income tax assets to be recognized.
(7) Corporate income tax
For some transactions in the Company’s ordinary course of business, uncertainties exist in their tax
treatment and calculation. An approval from the tax authority is needed to determine whether an item is
deductible before tax. If the final confirmation from the tax authority differs with the original estimation,
the difference will have effects on the current income tax and deferred income tax of the period in which
the final confirmation is made by the tax authority.
(8) After-sale quality warranty
The Company estimates and accrue related provision on its after-sale quality warranty commitment to
customers with respect to the goods sold, estimated onerous contract and penalty for delay in delivery
based on contract terms, current knowledge and historical experience. In case that the contingent event
becomes a current obligation and performance of the current obligation may be very likely to cause
economic benefit flow out of the Company, the Company recognizes provision based on the best
estimates for fulfilling the related current obligation. Recognition and measurement of contingent liability
is largely depend on the management’s judgment. In the course of making judgement, the Company
need to evaluate factors of risk, uncertainty and time value of money related to the contingent event.
The Company will make provision for after sale quality commitment for product sold, maintenance and
re-fabrication of product sold. When accruing the provision, it needs to consider the recent maintenance
data which may not be likely to reflect the future maintenance situations. Any increase or reduction of the
provision may possibly affect the profit or loss in future years.
V. Taxation
1. Main taxes and tax rates
Tax Tax rate
Output tax is calculated at 5%、6%、11%、17% of taxable income and VAT
Value-added tax（Note（1））
is paid after offset the output tax with input tax allowed at current period
Consumption tax is applicable for imported or manufactured luxury watches
Consumption tax
with unit price above 10,000 (inclusive).
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