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飞亚达B:2019年半年度报告(英文版) 查看PDF原文

公告日期:2019年08月15日
FIYTA HOLDINGS LTD. 2019 Semi-annual Report August, 2019 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. All the directors attended the board meeting for reviewing the Annual Report. Any perspective description, such as the future plan, development strategy, etc. involved in the Annual Report shall not constitute the Company’s substantial commitment to the investors and the investors should please pay attention to their investment risks. In this report, the Company has described in detail the existing macro-economic risks as well as operation risks. Investors are advised to refer to the contents concerning risk factors possibly to be confronted with and the countermeasures in the Company's future development prospect in Section 4 Discussion and Analysis of the Management The Company intends neither to distribute any cash dividend or bonus shares nor to convert any reserve into share capital. Table of Contents Section 1 Important Notice, Table of Contents and Definition 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 Change of Shares and Particulars about Shareholders Section 7 About the Preferred Shares Section 8 Directors, Supervisors, Senior Executives and Employees Section 9 Corporate Bonds Section10 Financial Report Section11 Documents Available for Inspection Definitions Terms to be defined Refers to Definition This Company, the Company or FIYTA Refers to FIYTAHOLDINGS LTD. AVIC Refers to Aviation Industry Corporation of China, Ltd. AVIC International Refers to AVIC International Holding Corporation AVIC International Shenzhen Refers to AVIC International Shenzhen Co., Ltd. AVIC IHL Refers to AVIC International Holding Limited The Sales Co. Refers to FIYTASales Co., Ltd. Harmony Refers to Shenzhen Harmony World Watches Center Co., Ltd. the Manufacture Co. Refers to Shenzhen FIYTASophisticated Timepieces Manufacture Co., Ltd. the Technology Co. Refers to Shenzhen FIYTATechnology 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. AVIC SUNDA Refers to AVIC SUNDACo., Ltd. Rainbow Ltd. Refers to Rainbow Department Store Co., Ltd. Shennan Circuit Refers to Shennan Circuit Co., Ltd. AVIC Property Refers to AVIC Property Management Co., Ltd. Section 2 Company Profile and Financial Highlights I. Company Profile Short form of the stock: FIYTAA, FIYTA B Stock Codes: 000026 and 200026 Stock Exchange Listed with Shenzhen Stock Exchange Company Name in Chinese FIYTAHOLDINGS LTD. Abbreviation of Registered 飞亚达公司 Company Name in Chinese Company name in English (if any) FIYTA HOLDINGS LTD. Abbreviation of the Company FIYTA name in English (if any) Legal Representative Huang Yongfeng II. Liaison Persons and Communication Information Secretary of the Board SecuritiesAffairs Representative Name Lu Wanjun Zhang Yong LiaisonAddress 20th Floor, FIYTATechnology Building, Gaoxin 20th Floor, FIYTATechnology Building, Gaoxin S. Road One, Nanshan District, Shenzhen S. Road One, Nanshan District, Shenzhen Tel. 0755-86013669 0755-86013669 Fax 0755-83348369 0755-83348369 Email investor@fiyta.com.cn investor@fiyta.com.cn III. Other Information 1. Way of Communication There is no change in the registered address, office address and post code, company website, email during the reporting period. For the detail, refer to 2018 Annual Report. 2. Information Disclosure and Place where the Regular Reports are Prepared Newspapers designated for disclosing the information, Internet web site designated by China Securities Regulatory Commission for publishing the Semi-annual Report, place of the Company’s Semi-annual Report prepared for inquiry, for the detail, refer to 2018 Annual Report. IV. Summary of Accounting/Financial Data Does the Company need to make retroactive adjustment or restatement of the accounting data of the previous years No Reporting period Same period of the previous Year-on-year increase/decrease in year the reporting period Revenue in CNY 1,785,036,020.23. 1,695,891,432.72. 5.26% Net profit attributable to the Company’s 123,495,460.90. 112,367,921.44. 9.90% shareholders, in CNY Net profit attributable to the Company’s shareholders less the non-recurring items, in 113,627,146.69. 99,759,371.16. 13.90% CNY Net cash flows arising from operating activities, 159,014,650.37. 224,672,274.09. -29.22% in CNY Basic earning per share (CNY/share) 0.2788. 0.2561. 8.86% Diluted earning per share (CNY/share) 0.2788. 0.2561. 8.86% Return on equity, weighted average 4.69% 4.45% 0.24% Increase/decrease at the end of End of the reporting period End of the previous year the year over the end of the previous year Total assets (in CNY) 3,660,456,223.27. 3,599,691,650.26. 1.69% Net profit attributable to the Company’s 2,683,297,649.42. 2,570,134,782.90. 4.40% shareholders, in CNY The cause of the change in the accounting policy and the correction of the accounting errors are based on the Circular on Revising and Issuing the 2018 Versions of General Corporate Financial Statement Templates and the Interpretation of the Relevant Issues in the 2018 Versions of General Corporate Financial Statement Templates promulgated by the Ministry of Finance: the item of R & D Expenses is to be added to the Statement of Profit, the R & D expenses in the first half of 2018 increased by CNY 21,285,926.02 and the administrative expenses decreased by CNY 21,285,926.02. V. Difference in the Accounting Data based respectively on the Chinese Accounting Standards (CAS) and International Accounting Standards (IAS) 1. 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 2. Differences 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 VI. Non-recurring gain/loss items and the amount involved In CNY Items Amount Note Gain/loss from disposal of non-current assets, including the part offset It refers to the loss from disposal of from the provision for impairment of assets. -212,010.13 fixed assets, such as the obsolete production equipment The government subsidies included in the profits and losses of the For detail, refer to the supplementary current period ( (excluding government grants which are closely related 13,045,742.36 description of the government to the Company’s business and conform with the national standard subsidy counted to the current profit amount or quantity) and loss, Note VII.67. Other non-operating income and expenses other than the aforesaid It mainly refers to the security deposit items -230,194.27 due to the advance withdrawal of the shops in some channels, etc. Less:Amount affected by the income tax 2,735,223.75 Total 9,868,314.21 -- 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. Main business the Company operated in the reporting period Does the Company need to comply with the disclosure requirements of special industry No During the reporting period, the Company took “creating quality life” as its mission, focused on watch business, insisted on the brand strategy, adhered to the innovation development, complied with the consumption grading trend, continuously carried forward the work of improving the brand with FIYTA brand as the core, seized the opportunity of the growth of medium- and high-end brands, continued to propel the work of channel upgrading and service improvement with HARMONY as the core. During the reporting period, there was no significant change in the Company's main business and business model, industry development status and the status of the Company's industry. For detail, please refer to 2018 Annual Report. II. Significant Movements in Prime Assets 1. Significant Movements in Prime Assets Inapplicable 2. Major Overseas Assets Inapplicable III. Analysis on Core Competitiveness Does the Company need to comply with the disclosure requirements of special industry No I. Unique Business Layout of “Watch Brand Management + Watch Retail Services” in the Industry Incorporated in 1987, FIYTA experienced over three decades’ accumulation and innovation breakthrough, constructed the brand management business with FIYTA Brand as the core and watch retail business with Harmony as the core and the two businesses supplemented each other and developed in a coordinated way; both take the leading position in the domestic market at present. The unique business layout of “Watch Brand Management + Watch Retail Services” have provided a guarantee for the Company's sustainable development and “becoming a leading internationalized watch brand enterprise”. II. Profound Brand Management Experience and Clear Segmented Market Positioning With reference to the experience of brand management experience of various world watches distributed by HARMONY retail business as well as its own FIYTA Brand molding experience, the Company took a lead in constructing multi-brand tribe with watch brands of FIYTA, EMILE CHOURIET, JONAS&VERUS, Jeep and BEIJING as the key brands, constantly constructed brand identities of professional watch manufacture, classic and elegance, young fashion, intelligence and outdoors, oriental aethetics, etc. These brands have become the leading brands in the segmented market. III. National Watch Base and First Class Product Design Ability The Company is a national technological innovation demonstration enterprise, national industrial design center and national technology certification center for enterprises, and an organization integrating and implementing the standards for informationization and industrialization by the Ministry of Industry and Information Technology. All its subordinative manufacturers are national hi-tech enterprises; has constructed its professional watch manufacture ability in respect of driving unit manufacture, space watch development, high-end watch manufacture techniques, etc. Meanwhile, the Company has kept a leading position in the industry in terms of product quality and creative design ability. IV. High Quality Brand, Channel Resources and Nationwide Retail Service Network In watch retail business with HARMONY as the core, the Company has established close cooperative relationship with a great many world top brands and mainstream brands, including Omega, Breguet, Blancpain, Glashutte Original, Jaquet Droz, Longines, Tissot, etc. subordinate to Swatch Group; Rolex and TUDOR subordinate to Rolex; A.LANGE & SOHNE,JAEGER LE-COULTRE,CARTIER,PIAGET, IWC, etc. subordinate to Richemont Group; GIRARD PERREGAUX and ULYSSE NARDIN subordinate to Kering Group; as well as such independent brands as CHOPARD, Bucherer, BREITLING, etc. The Company has also established strategic cooperative relationship with various high grade shopping malls, such as MIXC as well as various high grade department stores in China, possesses top quality brands and channel resources in the industry. The Company has established nationwide watch retail service network. V. Profound Industrial Management Experience and Sustainable Talents Reserve The Company constantly enhanced construction of the “Brand People” team, continuously improved the profession and comprehensive qualification of the team, actively created a team atmosphere of progressiveness, struggle, continuous improvement and devotion to work. The major members of the management and business backbones of the Company have been engaged in watch industry for long time and have rich experience in brand management and channel operation, enjoy good professional qualification and have profound understanding of watch industry. In addition, the Company has established long term and stable enterprise-school cooperative relationship with various famous colleges and universities in China. The Company is able to continuously and steadily obtain a great number of high quality professionals and infuse new blood for the Company's development. The Company has continued to hold the honorable title of “Yearly Best Employer”granted by Internal Association of Human Resources and CHINACHR.COM successively for 12 years. Section 4 Discussion and Analysis of the Management I. General In the first half of 2019, the domestic economy still faced a quite high downward pressure due to the complexity of the external political and economic environment and depressed consumption, and the watch industry was also confronted with big growth pressure. During the reporting period, facing the severe market pressure, the Company seized the opportunity of consumption upgrading, continued to promote upgrading of brand improvement and better customer services, further strengthened the refined management and professional operation capabilities; the Company still achieved steady growth in operating performance, and continuous improvement of the operational efficiency. In the first half of 2019, the Company realized revenue amounting to CNY 1,785.036 million with year-on-year growth of 5.26% and realized total profit amounting to CNY 164.1106 million with a year-on-year growth of 12.53%. During the reporting period, the Company carried out the following key work. I. Continuing to carry forward “FIYTA” Brand upgrading and operation efficiency improvement During the reporting period, the Company took the customers’ demand as the origin and continued to carry forward “FIYTA” Brand upgrading centering on the operation work, including product, channel, marketing, etc. During the first half of 2019, “FIYTA” Brand continued to enhance the professional watch-making spirit and the independent aesthetic design brand conception, launched in succession a number of new products, including the Master Series DUNHUANG Themed wristwatches, MACH Series “J-20” jointly limited wristwatch and “Heartstrings” series wristwatches, etc. and achieved breakthrough in application of new materials, such as Damascus steel, Grade 5 titanium, etc.; continued to reinforce improvement of whole-channel operation ability, promoted off-line channel structure optimization and identity upgrading; promoted adjustment of e-commerce operation pattern, quickened on-line business development; continued to participate in such important activities of the industry, including Baselworld 2019, Watch & Clock Fair China, China Brand Day, etc. and improved the brand identity and industry influence, additionally appointed “Feng Shaofeng” as brand spokesman and increased the interaction of the brand, consumers and new media. At the same time, the Company spared no efforts to improve the efficiency of brand business operations. In the first half of 2019, the Company achieved positive results in its brand business in terms of product quality, inventory turnover rate, cost control, channel operation quality, etc. II. Continuing to carry forward retail service network optimization and customer service improvement During the reporting period, although the overall watch market was under pressure, yet the medium- and high-end brand watches with unit price exceeding CNY 10,000 were still favored by more consumers and a high growth rate and a favorable trend were achieved. Harmony World Watches retail services grasped the growth opportunity of mid-to-high-end watch brands, strengthened resource integration and operation improvement, continued to strengthen cooperation with international brands and mid-to-high-end retail channels, promoted brand upgrading and channel upgrading, and continuously increased customer unit prices; at the same time, continued to obtain international on-line watch brand authorization, newly set up Tissot and Mido JD franchise houses, Mido Tmall franchise house, and enriched on-line watch retail service network. During the reporting period, Harmony World Watches Retail Service continued to deepen the improvement of customer service segmentation, accelerated the promotion of smart retail projects, and continued to promote the business development of technical services. III. Insisting on Innovation Development and Maintaining Quick Development of New Businesses During the reporting period, under the macro background of industrial upgrading and intelligent manufacturing, the Company continued to promote the rapid growth of precision manufacturing business by vigorously developing markets such as laser devices and electronic circuits, relying on national high-tech enterprises and more mature precision manufacturing industry bases. In the first half of 2019, revenue from precision manufacturing business increased by 41% year-on-year. At the same time, the Company continued to accelerate the layout of smart wear business. In the first half of 2019, the Company continued to integrate resources for its "Jeep" brand smart watches, deepened technical cooperation, and quickly deployed serialized iterative products, and continued to maintain a good sales situation for its smart watches. IV. Implementing the “Repurchase” Program and Improving the Value for the Shareholders During the reporting period, the Company continued to increase its interaction with the capital market in multiple dimensions, convey the intrinsic value of the Company, promoted the annual distribution of equity, and continued to keep high rate of distribution to investors. The accumulative cash dividend distributed took 151.39% of the annual average net profit in the past three years. At the same time, in order to boost confidence in the capital market and realized maximization of the value for shareholders, based on the confidence in the Company's future development prospects and recognition of the Company's value, the Company initiated the repurchase of some domestically listed foreign shares (B shares) in April 2019. In the first half of 2019, the Company successfully carried out the “repurchase” program and applied approximately HK$16 million to repurchase 2.7 million shares of B shares through centralized bidding. II. Analysis on the Main Business Refer to “I. General” of “Discussion and Analysis of Business Conditions” Movements of the Key Financial Items are summarized as follows: In CNY Reporting period Same period of the previous Year-on-year Cause of the movement year increase/decrease Operating revenue 1,785,036,020.23. 1,695,891,432.72. 5.26% Inapplicable Operating cost 1,051,504,075.22. 976,325,736.35. 7.70% Inapplicable Sales costs 415,776,028.95. 422,113,041.69. -1.50% Inapplicable Administrative expenses 116,352,835.42. 104,242,391.69. 11.62% Inapplicable Financial expenses 16,238,965.89. 18,147,791.49. -10.52% Inapplicable Income tax expenses 40,615,187.57. 33,463,799.72. 21.37% Inapplicable R&D input 19,526,410.93. 21,285,926.02. -8.27% Inapplicable Net cash flows arising from 159,014,650.37. 224,672,274.09. -29.22% Inapplicable operating activities It was mainly the big year-on-year increase of the Net cash flow arising from amount of investment in investment activities -89,214,047.63. -52,512,866.91. -69.89% fixed assets of which the main fixed asset was the project of FIYTAWatch Building. Net cash flow arising from It was mainly affected by fund-raising activities -8,308,417.60. -78,421,466.76. 89.41% the size of the interest-bearing liabilities. In addition to the influence Net increase of cash and 61,693,492.45. 93,856,380.26. -34.27% of the movements of net cash equivalents cash flow from investment and fund-raising activities, the year-on-year drop of net cash flow from operational activities was mainly to big increase of payment for purchase of goods in the current year and at the same time the year-on-year decrease of the tax payment. Significant change in profit composition or profit sources during the reporting period. Inapplicable Composition of the principal business In CNY Year-on-year Year-on-year Year-on-year increase/decrease increase/decrease increase/decrease Operating revenue Operating cost Gross profit rate of operating of operating costs of gross profit rate revenue over the over the previous over the previous previous year year year Based on sectors Watches 1,677,850,539.71. 1,012,115,145.40. 39.68% 4.56% 7.24% -3.67% Sophisticated 30,391,092.59. 22,479,136.85. 26.03% 41.00% 25.16% 56.15% manufacture Leases 67,373,825.03. 14,594,714.60. 78.34% 17.09% 27.02% -2.12% Others 9,420,562.90. 2,315,078.37. 75.43% -21.85% -24.97% 1.37% Based on products Watch retail and 1,148,901,685.86. 856,306,726.29. 25.47% 12.43% 11.58% 2.28% services Watch brand 528,948,853.85. 155,808,419.11. 70.54% -9.26% -11.66% 1.15% business Sophisticated 30,391,092.59. 22,479,136.85. 26.03% 41.00% 25.16% 56.15% manufacture Leases 67,373,825.03. 14,594,714.60. 78.34% 17.09% 27.02% -2.12% Others 9,420,562.90. 2,315,078.37. 75.43% -21.85% -24.97% 1.37% Based on regions South China 816,517,312.49. 469,110,834.06. 42.55% 7.43% 14.90% -8.07% Northwest China 307,450,222.84. 182,162,158.51. 40.75% -0.53% -3.40% 4.52% Northeast China 115,213,698.49. 65,074,970.17. 43.52% -5.71% -5.07% -0.87% East China 241,568,771.25. 136,301,563.48. 43.58% 14.55% 13.60% 1.09% Northeast China 130,823,214.98. 91,567,691.46. 30.01% -7.04% -5.34% -4.01% Southwest China 173,462,800.18. 107,286,857.54. 38.15% 13.41% 13.90% -0.70% III. Analysis on Non-Principal Businesses Inapplicable IV. Assets and Liabilities 1. Significant Changes in Assets Composition In CNY End of the reporting period End of the same period of the previous year Proportion Note to significant increased/d changes Amount Proportion in total Amount Proportion in total ecreased assets assets Monetary fund 226,521,552.42. 6.19% 281,009,271.58. 7.74% -1.55% Inapplicable Accounts receivable 448,122,115.59. 12.24% 378,420,568.27. 10.43% 1.81% Inapplicable Inventories 1,727,402,092.53. 47.19% 1,735,371,328.09. 47.82% -0.63% Inapplicable Investment-oriented 370,467,221.69. 10.12% 348,258,775.18. 9.60% 0.52% Inapplicable real estate Long-term equity 46,412,373.21. 1.27% 43,972,531.47. 1.21% 0.06% Inapplicable investment Fixed assets 414,522,443.81. 11.32% 463,913,136.18. 12.78% -1.46% Inapplicable Construction-in-progre 12,886,665.68. 0.35% 12,515,382.25. 0.34% 0.01% Inapplicable ss Short term loans 550,078,332.26. 15.03% 479,917,100.00. 13.22% 1.81% Inapplicable Long-term borrowings 4,409,875.00. 0.12% 62,153,235.50. 1.71% -1.59% Inapplicable 2. Assets and liabilities measured based on fair value Inapplicable 3. Restriction on rights in the assets ended the reporting period A property owned by Switzerland based Montres Chouriet SA with net value of CNY 14,609,376.25 was used as a collateral for the overseas long term loan amounting to CNY 4,762,665. V. Analysis on Investment Situation 1. General Inapplicable 2. Significant Equity Investment Acquired in the Reporting Period Inapplicable 3. Significant non-equity investment in process in the reporting period In CNY Cause of Earnings the failure accumulati Industry Accumulative in arriving Is it an Capita vely involved by Amount invested amount actually at the Date of Disclosure Way of investment l Project Predicted realized by Project name the during the invested by the end planned disclosure index (if investment in fixed sourc progress earning the end of investment reporting period of the reporting progress (if any) any) assets? e the project period and reporting predicted period earnings FIYTAWatch Self-ra http://www Manufactur Inapplicabl March 10, Building Self-built Yes 845,539.68. 12,886,665.68. ised 100.00% 0.00. 0.00. .cninfo.co e e 2017 supporting works fund m.cn/ Total -- -- -- 845,539.68. 12,886,665.68. -- -- 0.00. 0.00. -- -- -- Note: The 13th session of the Eighth Board of Directors reviewed and approved the proposal for increase of the investment in the construction project of FIYTA Watch R&D and Manufacture Center by CNY 34.0509 million. For the detail, refer to Announcement of the Resolution of the 13th Session of the Eighth Board of Directors 2017-003. Ended the reporting period, the accumulative amount of investment in the project was CNY 12.8867 million. 4. Financial assets investment (1) Portfolio investment Inapplicable (2) Investment in derivatives 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 Company names Company types Main businesses Registered capital Total assets Net assets Operating Operation profit Net profit revenue Purchase & sale and repairing Harmony Subsidiary service of 600,000,000.00. 1,515,431,759.32. 827,413,622.38. 1,133,190,847.40. 76,045,481.67. 56,365,795.02. watches and components Design, R & D and sales of The Sales Co. Subsidiary watches and 450,000,000.00. 723,240,434.21. 428,379,872.88. 472,115,784.65. 35,508,212.17. 26,507,755.00. components & parts Manufacture and the Manufacture Subsidiary production of 10,000,000.00. 199,980,604.47. 130,364,497.84. 153,878,112.47. 4,134,787.54. 3,546,602.25. Co. watches and components Production and the Technology machining of Co. Subsidiary sophisticated 10,000,000.00. 94,563,187.08. 71,220,817.63. 60,984,287.88. 5,068,978.93. 4,366,586.65. components and parts Trading of the Hong Kong Subsidiary watches and 137,737,520.00. 245,689,063.38. 167,165,669.55. 51,523,590.87. -719,413.83. -1,675,458.41. Co. accessories and investment Design, R & D and sales of SHIYUEHUI Subsidiary watches and 5,000,000.00. 23,786,257.00. -5,545,352.53. 6,577,281.80. -1,251,382.15. -1,753,254.01. components & parts Purchase & sale Hengdarui Subsidiary of watches and 51,000,000.00. 141,084,798.58. 40,686,466.62. 4,469,139.71. 832,719.83. 623,468.85. components & parts Purchase & sale Harbin Co. Subsidiary of watches and 500,000.00. 372,386.95. 2,542,158.28. 4,004,580.34. -1,073,617.93. -1,090,253.15. components & parts Design, R & D Emile Chouriet and sales of (Shenzhen) Subsidiary watches and 41,355,200.00. 118,143,314.55. 59,961,106.60. 38,513,285.69. -3,855,800.00. -2,904,931.00. Limited components & parts Production and Shanghai Watch Mutual shareholding sales of watches 15,350,000.00. 124,205,651.35. 111,158,121.40. 57,039,155.07. 8,098,631.62. 6,125,240.23. Industry Co., Ltd. company and components & parts Acquisition and disposal of subsidiaries in the reporting period Inapplicable Note to the principal mutual shareholding companies Inapplicable VIII. Structurized Entities Controlled by the Company Inapplicable IX. Prediction of the Performances from January to September, 2019 Inapplicable X. Risks Possibly to be Confronted with 1.Risk from the fluctuation of the macro-economy and the countermeasures As a timepiece product with aesthetic, fashion characteristics and cultural connotations, watches are high-end quality consumer products, are quite significantly affected by the fluctuation of the macro economy. At present, the domestic macroeconomic instability factors are increasing, and the Company's performance may possibly fluctuate. The Company shall continue to strengthen the unique business layout of the industry - “watch brand management + watch retail service”, actively foster the development of new growth momentum while continuing to enhance business management capability, and strive to achieve steady growth in business performance. 2. Risk from the intensified industry competition and the countermeasures Thanks to the increase in disposable income of domestic residents, high-quality consumer demand continues to heat up, and the watch industry has received more attention as a typical representative of high-quality consumer goods. At this stage, more domestic and foreign brands are entering the Chinese watch consumption market. At the same time, smart watches that stack technologies such as Internet of Things, artificial intelligence, and communication are also active. The competition in the watch industry is intensifying, and the original competitive landscape faces more challenges. The Company shall continue to promote multi-brand community construction and omni-channel network construction, aiming at the individual needs of different consumer groups, deepen the development opportunity of market segments, and accelerate development of the new business of smart wears. 3. Risk from the brand building the countermeasures Brand-building is a continuous and systematic project that needs to be adhered to and continuously invested. Due to fluctuation in business performance, intensified market competition and increased personalized consumer demand, the Company shall be confronted with more challenges in brand-building with FIYTA as the core. The Company shall take the customers’ requirements as the guide, adhere to the brand spirit, integrate innovative elements, and continue to i nvest in products, channels, marketing and brand team , and strive to build various brands with FIYTA as the core into make the most popular segments of the brands with “FIYTA” as the core into main brands most welcome by the consumers in the segmented field. Section 5 Significant Events I. General Meeting and Extraordinary General Meetings 1. General Meetings Proportion of attendance of Sessions Meeting type Meeting date Date of disclosure Disclosure index the investors 2019 1st Extraordinary Extraordinary General 40.01% January 11, 2019 January 12, 2019 http://www.cninfo.com.cn/ General Meeting Meeting 2019 2nd Extraordinary Extraordinary General 37.40% April 23, 2019 April 24, 2019 http://www.cninfo.com.cn/ General Meeting Meeting 2018Annual general Annual general meeting 38.22% June 19, 2019 June 20, 2019 http://www.cninfo.com.cn/ meeting 2. Extraordinary general meeting requested for holding by the preferred shareholders with the voting power recovered. Inapplicable II. Profit Distribution and Conversion of Capital Reserve into Share Capital in the Reporting Period Inapplicable III. Commitments finished in implementation by the Company's actual controller, shareholders, related parties, acquirer, the Company, etc. in the reporting period and commitments unfinished in implementation at the end of the reporting period Inapplicable IV. Engagement/Disengagement of CPAs Has the financial resport to the Semi-Annual Report been audited No V. Explanation of the Board of Directors and the Supervisory Committee on the Qualified Auditors' Report for the reporting period issued by the CPAs Inapplicable VI. Explanation of the Board of Directors on the Qualified Auditors' Report for the previous year issued by the CPAs Inapplicable VII. Matters concerning Bankruptcy Reorganization Inapplicable VIII. Lawsuits Inapplicable IX. Penalty and Rectification Inapplicable X. Integrity of the Company, its Controlling Shareholder and Actual Controller Inapplicable XI. Implementation of the Company’s Equity Incentive Plan, Employee Stock Ownership Plan or other Employee Incentive Measures The 3rd session of the Ninth Board of Directors and 2019 1st Extraordinary General Meeting held respectively on November 12, 2018 and January 11, 2019 decided to start 2018 A-Share Restricted Stock Incentive Program (Phase I), which was later on reviewed and approved at the 5th session of the Ninth Board of Directors held on January 11, 2019, and the Company eventually granted 4.224 million restricted A-shares to 128 persons eligible for the incentive. For the detail, refer to the relevant announcement disclosed in the Securities Times,Hong Kong Commercial Daily and www.cninfo.com.cn on January 12, 2019. This part of A-share restricted shares was all granted and registered for listing by January 30, 2019. XII. Significant Related Transactions 1. Related Transactions Related with Day-to-Day Operations Inapplicable 2. Related transactions concerning acquisition and sales of assets or equity Inapplicable 3. Related transactions concerning joint investment in foreign countries Inapplicable 4. Current Associated Rights of Credit and Liabilities Does there exist non-operating current associated rights of credit and liabilities No 5. Other Significant Related Transactions The 6th session of the Ninth Board of Directors held on March 13, 2019 and 2018 Annual General Meeting held on June 19, 2019 approved the Proposal on Prediction of Regular Related Transactions in 2019. For the detail, refer to the Announcement on the Resolution of the 6th Session of the Ninth Board of Directors No. 2019-012, the Announcement on the Resolution of 2018 Annual General Meeting No. 2019-036 and the Announcement on the Prediction of the Regular Related Transactions in 2019 No. 2019-014. During the reporting period, the cumulative transaction amount of the Company's related transactions related to its daily operations was within the expected range of the year. Inquiry on the website for disclosing the provisional report concerning significant related transactions Description of the provisional announcements Date of disclosure Disclosure website Announcement on the Resolution of the 6th Session of the March 15, 2019 www.cninfo.com.cn Ninth Board of Directors, 2019-012 Announcement of the Prediction of the Regular Related March 15, 2019 www.cninfo.com.cn Transactions in 2019, 2019-012 Announcement on the Resolution of 2018Annual General June 20, 2019 www.cninfo.com.cn Meeting, 2019-036 XIII. The Company's Funds Occupied by its Controlling Shareholder or/and Related Parties for Non-operating Purpose Inapplicable XIV. 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 Offered by the Company and its Subsidiaries (excluding guarantee to the 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 amount of outward guarantee Total amount of outward guarantee 0. 0. approved in the report period (A1) actually incurred in the report period (A2) Total amount of outward guarantee already Total ending balance of outward approved at the end of the report period 0. guarantee at the end of the report period 0. (A3) (A4) Guarantee to the subsidiaries Names of Guarantees Date of the Guarantee line Date of occurrence Actual amount of Type of guarantee Guarantee period Implementati Guarantee to announcement (date of agreement guarantee on status related on the execution) party? guarantee line March 10, Guarantee with Harmony 20,000. December 30, 2018 8,000. 1 year No No 2018 joint responsibility March 10, Guarantee with the Hong Kong Co. 3,513. September 10, 2018 353. 1 year No No 2018 joint responsibility the Hong Kong Co. March 10, Guarantee with 0. October 15, 2018 353. 1 year No No 2018 joint responsibility the Hong Kong Co. March 10, Guarantee with 0. November 13, 2018 282. 1 year No No 2018 joint responsibility the Hong Kong Co. March 15, Guarantee with 0. April 20, 2019 2,020. 1 year No No 2019 joint responsibility Total amount of guarantee to the Total guarantee quota to the subsidiaries 0. subsidiaries actually incurred in the 2,020. approved in the reporting period (B1) reporting period (B2) Total guarantee quota to the subsidiaries Total balance of actual guarantee to the approved at the end of the reporting period 23,513. subsidiaries at the end of the reporting 11,008. (B3) period (B4) Guarantee among the 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 amount of guarantee to the Total guarantee quota to the subsidiaries 0. subsidiaries actually incurred in the 0. approved in the reporting period (C1) reporting period (C2) Total guarantee quota to the subsidiaries Total balance of actual guarantee to the approved at the end of the reporting period 0. subsidiaries at the end of the reporting 0. (C3) period (C4) Total amount of guarantees (i.e. Total of the previous three major items) Total guarantee quota to the subsidiaries Total amount of outward guarantee 0. 2,020. approved in the reporting period (A1) actually incurred in the report period (A2) Total amount of guarantees already Total ending balance of guarantees at approved at the end of the report period 23,513. 11,008. the end of the report period (A4) (A3) Proportion of the actual guarantees in the Company’s net assets (namelyA4+B4 + 4.10% C4) in which Amount of guarantees offered to the shareholders, actual controller and its related 0. parties (D) Amount of guarantee for liabilities directly or indirectly offered to the guarantees 0. with the asset-liability ratio exceeding 70% (E) Guarantee with total amount exceeding 50% of the net assets (F) 0. Total amount of the aforesaid three guarantees (D+E+F) 0. Note to the undue guarantee which may bring about joint responsibility for Inapplicable discharging (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 Inapplicable 3. Other Important Contracts Inapplicable XV. Social Responsibilities 1. Significant Issues concerning 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? Yes Description of Pollutant Name of the the major Number of Distribution of Way of Discharging Discharge Total discharge Total discharge Company or its pollutants or discharging the discharging Over-discharging discharging concentration Standards in volume volume verified Subsidiary specific outlets outlets Force pollutant At the port of Nickel ﹤0.01, Shanghai Watch Nickel and Intermittent and effluent chromium ﹤ Nickel:0.1; Industry Co., chromium 1. 2640 tons/year 3960 tons/year None interruption treatment chromium:0.3 Ltd. effluent 0.01 equipment Construction and operation of the pollution prevention and control facilities Shanghai Watch Co., Ltd. reconstructed the clean production facility in 2016 and added 2 sets of equipment in 2018 for the purpose of ensuring discharging of nickel and chromium effluent to comply with the Emission Standard of Pollutants for Electroplating during 2018. Up to now, the facility has been operating normally and its emission has never exceeded the limit as specified by the standard. The Company's online monitoring terminal has been docked with the government monitoring platform for timely testing. It complies with the standard in terms of emission factors. Environmental impact assessment on construction projects and other environmental protection administrative licensing In 2018 Yangpu District Environmental Protection Bureau of Shanghai organized and held the Clean Production Auditing and Assessment Seminar of Shanghai Watch Co., Ltd. where the company's clean production work was assessed, audited and approved. Shanghai Watch Co., Ltd. has passed the emission certification conducted by Yangpu Environmental Protection Bureau, Shanghai with the emission certification notice number: YANG HUAN JIAN HUAN JIAN FEI HE ZI [2007] No. 05363. In accordance with the provisions of Shanghai Environmental Protection Bureau, the Company applied for the pollutant discharging licence before the end of 2019. At present, the Company is making the relevant preparation work for application for the pollutant discharging licence. Contingency Plan for Emergent Environmental Incidents Shanghai Watch Co., Ltd. prepared the Emergency Response Plan against Emergent Environmental Incidents and regularly organizes training and exercise every year. The aforesaid plan has been approved and filed for record by Yangpu District Environmental Protection Bureau of Shanghai and has been published on the Environmental Information Disclosure Platform of Enterprises and Institutions of Shanghai. Environment Self-Monitoring Program Yangpu District Environmental Protection Bureau of Shanghai conducts supervision once every quarter. The company entrusts Shanghai Light Industry Environment Protection and Pressure Vessel Monitoring General Station, a competent independent agent, to conduct the monitoring every year. The company is itself equipped with monitoring instruments and conducts self-monitoring at least 4 times every month. Other environment information necessary to be disclosed The company has disclosed the concerned information on the Environmental Information Disclosure Platform of Enterprises and Institutions of Shanghai according to the requirements of the local environmental protection authorities. Website name: http://xxgk.eic.sh.cn. Other information in connection with the environmental protection None 2. Implementation of the social responsibility of precise poverty relief During the reporting period of half a year, the Company had neither precise poverty relief work nor follow-up precise poverty relief plan to be carried out. XVI. Notes to Other Significant Events 1. Amendment of the Articles of Association The 6th Session of the Ninth Board of Directors held on March 13, 2019 , the 9th Session of the Ninth Board of Directors held on June 6, 2019 and 2018 Annual General Meeting held on June 19, 2019 reviewed and approved the Proposal on Amendment of the Articles of Association. For the detail, refer to the Announcement on the Resolution of the 6th Session of the Ninth Board of Directors,2019-012, the 9th Session of the Ninth Board of Directors,2019-032 and the Announcement on the Resolution of 2018 Annual General Meeting No. 2019-036 and the Proposal on Amendment of the Articles of Association disclosed on the Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn. 2. Matters concerning Repurchase of the Company’s Partial Domestically Listed Foreign Shares (B Shares) The 7th session of the Ninth Board of Directors held on April 4, 2019 and 2019 2nd Extraordinary General Meeting held on April 23, 2019, reviewed and approved the “Proposal for the Repurchase of Partial Domestically Listed Foreign Shares in the Company (B-shares), and subsequently the Company disclosed the repurchase report and published a series of announcements on the progress in accordance with relevant regulations. For detail of the above, please refer to the relevant announcements disclosed by the Company in the Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn. 3. Election for the Staff Representative Supervisor 2019 1st Staff Representative Congress held on April 12, 2019 reviewed and approved the Proposal on Elec tion of the Staff Representative Supervisor of the Ninth Supervisory Committee; Mr. Fang Jiasheng was elected the staff representative supervisor the Ninth Supervisory Committee. For the detail, refer to the Announcement on the Resolution of the Staff Representative Congress No. 2019-021 disclosed on the Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn. XVII. 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 Quantity Proportion New issuing Bonus shares converted Others Sub-total Quantity Proportion from reserve I. Restricted shares 380,513. 0.09% 4,224,000. 4,224,000. 4,604,513. 1.04% 1. Shares held by the state 0. 0.00% 0. 0. 0. 0.00% 2. State corporate shares 0. 0.00% 0. 0. 0. 0.00% 3. Other domestic shares 380,513. 0.09% 4,224,000. 4,224,000. 4,604,513. 1.04% Including: Domestic corporate 0. 0.00% 0. 0. 0. 0.00% shares Shares held by domestic 380,513. 0.09% 4,224,000. 4,224,000. 4,604,513. 1.04% natural 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 0. 0.00% 0. 0. 0. 0.00% natural persons II. Unrestricted shares 438,364,368. 99.91% 0. 0. 438,364,368. 98.96% 1. CNYordinary shares 356,716,368. 81.30% 0. 0. 356,716,368. 80.53% 2. Foreign invested shares listed in 81,648,000. 18.61% 0. 0. 81,648,000. 18.43% 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% 4,224,000. 4,224,000. 442,968,881. 100.00% Cause of the change of shares During the reporting period, the Company finished awarding the A-share restrictive stock as specified in its stock incentive program (Phase I) and registering the same for listing. Upon completion of the share awarding, the Company's total capital stock increased to 442,968,881 shares. Approval of Change of the Shares The 3rd session of the Ninth Board of Directors and 2019 1st Extraordinary General Meeting held respectively on November 12, 2018 and January 11, 2019 decided to start 2018 A-Share Restrictive Stock Incentive Program (Phase I). The 5th session of the Ninth Board of Directors held on January 11, 2019 decided to award 4.224 million A-share restricted shares to 128 persons eligible for the incentive. Transfer of the Shares Changed The persons eligible for the incentive in the Company's 2018 A-Share Restrictive Stock Incentive Program (Phase I) have handled the procedures for registration with China Securities Depository and Clearing Corporation Limited (CSDC) Shenzhen Office. The 6th session of the Ninth Board of Directors held on March 13, 2019 reviewed and approved the Proposal for Amendment of the Articles of Association, according to which the Company’s registered capital has been changed from CNY438,744,881 into CNY 442,968,881. Progress of implementation of the stock repurchase The 7th session of the Ninth Board of Directors held on April 4, 2019 and 2019 2nd Extraordinary General Meeting held on April 23, 2019, reviewed and approved the “Proposal for the Repurchase of Partial Domestically Listed Foreign Shares in the Company (B-shares), and subsequently the Company disclosed the repurchase report and published a series of announcements on the progress in accordance with relevant regulations. For detail of the above, please refer to the relevant announcements disclosed by the Company in the Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn. As of the end of the reporting period, the Company repurchased 2,700,000 shares in the Company by way of centralized bidding, accounting for 0.61% of the Company's total capital stock; the highest transaction price of the repurchased shares was HK$6.06 per share, and the lowest transaction price was HK$5.85/shares, the total amount paid has been HK$16,228,291.65 (excluding transaction fees such as stamp duty, commission, etc.) The Company’s repurchase of the shares was in compliance with the relevant laws and regulations and in line with the Company's established repurchase program. Progress of implementation of reduction of the holding size of the shares repurchased by centralized bidding 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 During the reporting period, the Company finished awarding the 2018 A-share Restrictive Stock Incentive Program (Phase I); and the earnings per share and return on equity at the end of the reporting period were calculated by weighted average. Net return on equity, weighted average (%) Earnings per share Basic earnings per share (CNY/share) Diluted earnings per share (CNY/share) The first half year of The first half year of 2018 The first half year of 2019 The first half year of 2018 The first half year of 2019 The first half year of 2018 2019 4.69% 4.45% 0.2788 0.2561 0.2788 0.2561 Other information the Company considers necessary or required by the securities regulatory authority to be disclosed. Inapplicable 2. Change of the Restricted Shares In shares Number of restricted Number of restricted Number of restricted Number of restricted Names of the shares at the Date of relieving the shares relieved in the shares increased in shares at the end of Cause of restriction Shareholders beginning of the restriction reporting period the reporting period the reporting period reporting period To be unlocked subject to the conditions of the Locked shares for senior locked shares for senior Huang executives and restricted shares 60,000 0 100,000 160,000 executives and the Yongfeng as the granted locked shares measures for the Company’s equity incentive management To be unlocked subject to the conditions of the Locked shares for senior locked shares for senior Chen Libin 60,000 0 100,000 160,000 executives and restricted shares executives and the as the granted locked shares measures for the Company’s equity incentive management To be unlocked subject to Locked shares for senior the conditions of the Lu Bingqiang 72,233 0 0 72,233 executives locked shares for senior executives To be unlocked subject to the conditions of the Locked shares for senior locked shares for senior Lu Wanjun 37,500 0 80,000 117,500 executives and restricted shares executives and the as the granted locked shares measures for the Company’s equity incentive management To be unlocked subject to the conditions of the Locked shares for senior locked shares for senior Liu Xiaoming 37,500 0 80,000 117,500 executives and restricted shares executives and the as the granted locked shares measures for the Company’s equity incentive management Pan Bo 37,500 0 80,000 117,500 Locked shares for senior To be unlocked subject to executives and restricted shares the conditions of the as the granted locked shares locked shares for senior executives and the measures for the Company’s equity incentive management To be unlocked subject to the conditions of the Locked shares for senior locked shares for senior Li Ming 37,530 0 80,000 117,530 executives and restricted shares executives and the as the granted locked shares measures for the Company’s equity incentive management To be unlocked subject to the conditions of the Locked shares for senior locked shares for senior Chen Zhuo 38,250 0 80,000 118,250 executives and restricted shares executives and the as the granted locked shares measures for the Company’s equity incentive management To be unlocked subject to the conditions of the Locked shares for senior locked shares for senior Sheng Li 0 0 60,000 60,000 executives and restricted shares executives and the as the granted locked shares measures for the Company’s equity incentive management To be unlocked subject to the conditions of the Locked shares for senior locked shares for senior Bao Xianyong 0 0 60,000 60,000 executives and restricted shares executives and the as the granted locked shares measures for the Company’s equity incentive management To be unlocked subject to Other persons the conditions of the eligible for the Locked shares for senior locked shares for senior incentive of 0 0 3,504,000 3,504,000 executives and restricted shares executives and the A-share as the granted locked shares measures for the restrictive stock Company’s equity (119 persons) incentive management Total 380,513 0 4,224,000 4,604,513 -- -- II. Issuing and Listing Description of the Quantity approved stock and its Issuing price (or Expiry date of Issuing date Issuing quantity Date of listing for listing for Disclosure index Date of disclosure derivative interest rate) trading trading securities Stock category A-share ordinary January 11, January 30, www.cninfo.com.c January 29, 4.40. 4,224,000. - - shares 2019 2019 n 2019 Description of securities issuing during the reporting period The 3rd session of the Ninth Board of Directors held on November 12, 2018 and 2019 1st Extraordinary General Meeting held on January 11, 2019 decided to start 2018 A-Share Restrictive Stock Incentive Program (Phase I), which was later on reviewed and approved at the 5th session of the Ninth Board of Directors held on January 11, 2019, and the Company eventually granted 4.224 million restrictive A-shares to 128 persons eligible for the incentive。 The granting date of this part of the restrictive stock was January 30, 2019; on January 30, 3019, the granting was completed and the stock was registered for listing. For the detail, refer to the Announcement on the Completion of Granting the Restrictive A-Shares according to the Incensive Program (Phase I) No. 2019-009 disclosed in the Securities Times, Hong Kong Commercial Daily and www.cninfo.com. III. Number of Shareholders and Shareholding In shares Total preference shareholders with the voting Total common shareholders at the end of 33,105. power recovered at the end of the reporting 0. the reporting period period (if any) (Refer to Note 8) Shares held by the common shareholders holding over 5% shares or the top 10 common shareholders Number of Pledging or freezing common Number of Number of the Increase/decrease Names of the Nature of the Shareholding shares held the restricted unrestricted in the reporting Status of the Shareholders shareholder proportion at the end of common common shares Quantity period shares the reporting shares held held period AVIC International State corporate 36.79% 162,977,327. 0. 0. 162,977,327. Holding Limited Domestic natural #Yang Zugui 3.32% 14,709,417. 1,600,500. 0. 14,709,417. persons National Social State-owned legal Security Fund 114 1.92% 8,483,232. -1,174,512. 0. 8,483,232. person Portfolio BANK OF Domestic 0.62% 2,741,301. 209,100. 0. 2,741,301. COMMUNICATIONS non-state-owned CO.,LTD - corporate CHANGXIN QUANTIFIED PIONEER EQUITY FUND Shenzhen Heli Domestic Fengyuan Commerce non-state-owned 0.61% 2,704,000. 0. 0. 2,704,000. &Trade Co., Ltd. corporate Xizang Investment State-owned legal 0.51% 2,271,251. -2,705,300. 0. 2,271,251. Co., Ltd. person Domestic natural Li Changqiang 0.32% 1,398,000. 1,398,000. 0. 1,398,000. persons Domestic natural # Chen Chu 0.31% 1,365,219. 867,924. 0. 1,365,219. persons Domestic natural Zeng Yanhong 0.30% 1,350,000. 250,000. 0. 1,350,000. persons Vanguard Investment Australia Ltd. - Domestic Vanguard Emerging non-state-owned 0.27% 1,190,485. 0. 0. 1,190,485. Market Stock Index corporate Fund (Stock Exchange) About the fact that a strategic investor or ordinary corporate became one of the top ten Inapplicable common shareholders due to placement of new shares (if any) (Refer to Note 3) Explanation on associated relationship or Inapplicable consistent action of the above shareholders Shares held by top 10 shareholders of unrestricted shares Share type Names of the Shareholders Quantity of unrestricted shares held at the end of the reporting period Share type Quantity AVIC International Holding Limited 162,977,327. CNYordinary shares 162,977,327. #Yang Zugui 14,709,417. CNYordinary shares 14,709,417. National Social Security Fund 114 Portfolio 8,483,232. CNYordinary shares 8,483,232. BANK OF COMMUNICATIONS CO.,LTD - CHANGXIN QUANTIFIED PIONEER EQUITY 2,741,301. CNYordinary shares 2,741,301. FUND Shenzhen Heli Fengyuan Commerce & Trade 2,704,000. CNYordinary shares 2,704,000. Co., Ltd. Xizang Investment Co., Ltd. 2,271,251. CNYordinary shares 2,271,251. Li Changqiang 1,398,000. CNYordinary shares 1,398,000. # Chen Chu 1,365,219. CNYordinary shares 1,365,219. Zeng Yanhong 1,350,000. CNYordinary shares 1,350,000. Vanguard InvestmentAustralia Ltd. - Vanguard Emerging Market Stock Index Fund (Stock 1,190,485. CNYordinary shares 1,190,485. Exchange) Note to the associated relationship or consistent action among the top 10 shareholders of non-restricted common shares Inapplicable and that between the top 10 shareholders of non-restricted common shares and top 10 common shareholders. Note to the top 10 common shareholders involved in margin financing & securities lending Inapplicable (if any) (Refer to Note 4) Did the top ten common shareholders or top ten shareholders of unrestricted common shares conduct contractual repurchase during the reporting period? No IV. Change of the Controlling Shareholder or Actual Controller Inapplicable Section 7 About the Preferred Shares Inapplicable Section 8 Directors, Supervisors, Senior Executives and Employees I. Change in Shares Held by Directors, Supervisors and Senior Executives Number of Number of Number of Number of Shareholding Shareholding restricted shares Number of restricted shares held at shares held at restricted shares Office increased in decreased in granted at the shares granted at the Name Title the beginning end of the granted during the Status the reporting the reporting beginning of the end of the reporting of the reporting reporting reporting period period (shares) period (shares) reporting period period (shares) period (shares) period (shares) (shares) (shares) Huang Chairman In office 80,000. 0. 0. 80,000. 0. 100,000. 100,000. Yongfeng Wang Director In office 0. 0. 0. 0. 0. 0. 0. Mingchuan Fu Debin Director In office 0. 0. 0. 0. 0. 0. 0. Xiao Zhanglin Director In office 0. 0. 0. 0. 0. 0. 0. Wang Bo Director In office 0. 0. 0. 0. 0. 0. 0. Chen Libin Director & GM In office 80,000. 0. 0. 80,000. 0. 100,000. 100,000. Wang Jianxin Independent director In office 0. 0. 0. 0. 0. 0. 0. Zhong Independent director In office 0. 0. 0. 0. 0. 0. 0. Hongming Tang Xiaofei Independent director In office 0. 0. 0. 0. 0. 0. 0. Chairman of the Wang Baoying Supervisory In office 0. 0. 0. 0. 0. 0. 0. Committee Sheng Qing Supervisor In office 0. 0. 0. 0. 0. 0. 0. Fang Jiasheng Supervisor In office 0. 0. 0. 0. 0. 0. 0. Lu Bingqiang Deputy GM In office 96,311. 0. 0. 96,311. 0. 0. 0. Deputy GM and Lu Wanjun Secretary of the In office 50,000. 0. 0. 50,000. 0. 80,000. 80,000. Board Liu Xiaoming Deputy GM In office 50,000. 0. 0. 50,000. 0. 80,000. 80,000. Pan Bo Deputy GM In office 50,000. 0. 0. 50,000. 0. 80,000. 80,000. Li Ming Deputy GM In office 50,040. 0. 0. 50,040. 0. 80,000. 80,000. Chen Zhuo ChiefAccountant In office 51,000. 0. 0. 51,000. 0. 80,000. 80,000. Zou Zhixiang Supervisor Retired 0. 0. 0. 0. 0. 0. 0. Total -- -- 507,351. 0. 0. 507,351. 0. 600,000. 600,000. II. Personnel Change in Directors, Supervisors and Senior Executives Name Office Taken Type Date: Cause Fang Supervisor Elected April 12, 2019 Elected a staff representative supervisor at 2019 1st Staff Representative Jiasheng Congress. Zou Supervisor Retired April 10, 2019 Decided to resign the office of staff representative supervisor of the Ninth Zhixiang Supervisory Committee due to personal reason. Section 9 Corporate Bonds Did there exist any company bonds which were issued to the public and listed with the stock exchange for trading and was due by the date when the Semi-annual Report was approved for issuing or failed to be fully cashed by the end of the reporting period? No Section 10 Financial Report I. Auditors’ Report Has the semi-annual report been audited No II. Financial Statements The currency applied in the financial notes and statements is Renminbi (CNY) 1. Consolidated Balance Sheet Prepared by FIYTA HOLDINGS LTD. In CNY Items June 30, 2019 December 31, 2018 Current assets: Monetary capital 226,521,552.42 164,828,059.97 Settlement reserve Inter-bank lending Transactional financial assets Financial assets which are measured at their fair values and the variation of which is counted to the profit and loss of the current period Derivative financial assets Notes receivable 9,940,991.52 7,051,846.85 Accounts receivable 448,122,115.59 370,545,656.61 Financing with accounts receivable Advance payment 25,833,366.51 13,666,816.33 Receivable premium Reinsurance accounts receivable Reserve for reinsurance contract receivable Other receivables 62,591,073.25 45,870,582.26 Including: Interest receivable Dividends receivable Redemptory monetary capital for sale Inventories 1,727,402,092.53 1,782,306,301.70 Contract assets Held-for-sale assets Non-current assets due within a year Other current assets 46,066,469.94 73,703,312.24 Total current assets 2,546,477,661.76 2,457,972,575.96 Non-current assets: Loan issuing and advance in cash Equity investment Available-for-sale financial assets 85,000.00 Other equity investment Held-to-due investments Long term accounts receivable Long-term equity investment 46,412,373.21 44,881,063.15 Investment in other equity instruments 85,000.00 Other non-current financial assets Investment-oriented real estate 370,467,221.69 377,319,433.03 Fixed assets 414,522,443.81 425,649,562.85 Construction-in-progress 12,886,665.68 12,041,126.00 Productive biological asset Oil and gas assets Use right assets Intangible assets 41,477,871.11 43,545,477.61 Development expenses Goodwill Long-term expenses to be apportioned 137,535,709.85 128,572,545.15 Deferred income tax asset 83,293,488.15 100,675,706.09 Other non-current assets 7,297,788.01 8,949,160.42 Total non-current assets 1,113,978,561.51 1,141,719,074.30 Total assets 3,660,456,223.27 3,599,691,650.26 Current liabilities: Short term borrowings 550,078,332.26 547,118,452.97 Borrowings from central bank Loans from other banks Transactional financial liabilities Financial liabilities which are measured at their fair values and the variation of which is counted to the current profit and loss Derivative financial liabilities Notes payable Accounts payable 227,682,547.55 259,913,612.34 Advance Receipts 18,022,460.66 16,459,445.00 Money from sale of the repurchased financial assets Deposits taking and interbank placement Acting trading securities Income from securities underwriting on commission Payroll payable to the employees 48,582,058.35 69,779,037.83 Taxes payable 32,037,984.80 55,923,171.92 Other payables 92,313,874.56 71,819,930.30 Including: interest payable 740,561.84 772,351.26 Dividends payable Service charge and commission payable Payable reinsurance Contract liabilities Held-for-sale liabilities Non-current liabilities due within a year 352,790.00 347,470.00 Other current liabilities Total current liabilities 969,070,048.18 1,021,361,120.36 Non-current liabilities: Reserve for insurance contract Long-term borrowings 4,409,875.00 4,517,110.00 Bonds payable Including: preferred shares Perpetual bond Lease liabilities Long-term accounts payable Long term payroll payable to the employees Estimated liabilities Deferred income 3,672,855.36 3,672,855.36 Deferred income tax liability Other non-current liabilities Total non-current liabilities 8,082,730.36 8,189,965.36 Total liabilities 977,152,778.54 1,029,551,085.72 Owner’s equity: Capital stock 442,968,881.00 438,744,881.00 Other equity instruments Including: preferred shares Perpetual bond Capital Reserve 1,079,051,841.53 1,062,455,644.22 Less: shares in stock 32,902,198.89 Other comprehensive income -3,692,732.58 -5,442,139.78 Special reserve Surplus Reserve 223,015,793.80 223,015,793.80 Reserve against general risks Retained earnings 974,856,064.56 851,360,603.66 Total owners’ equity attributable to the parent 2,683,297,649.42 2,570,134,782.90 company Minority shareholders’ equity 5,795.31 5,781.64 Total owner’s equity 2,683,303,444.73 2,570,140,564.54 Total liabilities and owners’ equity 3,660,456,223.27 3,599,691,650.26 Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo Person in charge of the Accounting Department: Tian Hui 2. Balance Sheet (Parent Company) In CNY Items June 30, 2019 December 31, 2018 Current assets: Monetary capital 184,867,858.11 137,175,466.27 Transactional financial assets Financial assets which are measured at their fair values and the variation of which is counted to the profit and loss of the current period Derivative financial assets Notes receivable Accounts receivable 2,232,719.12 737,636.38 Financing with accounts receivable Advance payment Other receivables 802,334,152.26 870,739,378.37 Including: Interest receivable Dividends receivable Inventories Contract assets Held-for-sale assets Non-current assets due within a year Other current assets 11,816,267.04 10,081,272.94 Total current assets 1,001,250,996.53 1,018,733,753.96 Non-current assets: Equity investment Available-for-sale financial assets 85,000.00 Other equity investment Held-to-due investments Long term accounts receivable Long-term equity investment 1,377,660,964.14 1,376,129,654.08 Investment in other equity instruments 85,000.00 Other non-current financial assets Investment-oriented real estate 291,562,362.07 297,042,937.87 Fixed assets 290,346,866.97 297,517,472.81 Construction-in-progress 12,886,665.68 12,041,126.00 Productive biological asset Oil and gas assets Use right assets Intangible assets 33,070,715.48 35,337,052.82 Development expenses Goodwill Long-term expenses to be apportioned 9,247,782.11 4,500,638.97 Deferred income tax asset 969,058.32 952,857.33 Other non-current assets 2,486,782.05 4,493,971.35 Total non-current assets 2,018,316,196.82 2,028,100,711.23 Total assets 3,019,567,193.35 3,046,834,465.19 Current liabilities: Short term borrowings 520,000,000.00 505,000,000.00 Transactional financial liabilities Financial liabilities which are measured at their fair values and the variation of which is counted to the current profit and loss Derivative financial liabilities Notes payable Accounts payable 26,696,117.76 52,324,191.98 Advance Receipts 3,252,081.05 1,636,520.02 Contract liabilities Payroll payable to the employees 9,867,650.25 11,589,634.34 Taxes payable 3,611,483.28 943,919.26 Other payables 45,726,573.85 57,997,397.28 Including: interest payable 579,338.91 685,419.80 Dividends payable Held-for-sale liabilities Non-current liabilities due within a year Other current liabilities Total current liabilities 609,153,906.19 629,491,662.88 Non-current liabilities: Long-term borrowings Bonds payable Including: preferred shares Perpetual bond Lease liabilities Long-term accounts payable Long term payroll payable to the employees Estimated liabilities Deferred income 3,672,855.36 3,672,855.36 Deferred income tax liability Other non-current liabilities Total non-current liabilities 3,672,855.36 3,672,855.36 Total liabilities 612,826,761.55 633,164,518.24 Owner’s equity: Capital stock 442,968,881.00 438,744,881.00 Other equity instruments Including: preferred shares Perpetual bond Capital Reserve 1,084,707,382.63 1,068,111,185.32 Less: shares in stock 32,902,198.89 Other comprehensive income Special reserve Surplus Reserve 223,015,793.80 223,015,793.80 Retained earnings 688,950,573.26 683,798,086.83 Total owner’s equity 2,406,740,431.80 2,413,669,946.95 Total liabilities and owners’ equity 3,019,567,193.35 3,046,834,465.19 Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo Person in charge of the Accounting Department: Tian Hui 3. Consolidated Profit Statement In CNY Items The first half year of 2019 The first half year of 2018 I. Turnover 1,785,036,020.23 1,695,891,432.72 Including: operating income 1,785,036,020.23 1,695,891,432.72 Interest income Earned insurance premium Service charge and commission income II. Total operating costs 1,634,493,191.74 1,559,905,673.67 Including: Operating costs 1,051,504,075.22 976,325,736.35 Interest payment Service charge and commission payment Surrender Value Compensation expenses, net Provision of reserve for insurance contract, net Payment of policy dividend Reinsurance expenses Taxes and surcharges 15,094,875.33 17,790,786.43 Sales costs 415,776,028.95 422,113,041.69 Administrative expenses 116,352,835.42 104,242,391.69 R & D expenditures 19,526,410.93 21,285,926.02 Financial expenses 16,238,965.89 18,147,791.49 Where: Interest cost 12,023,843.93 14,273,043.13 Interest income -908,850.92 -1,079,587.08 Plus: Other income 13,045,742.36 6,497,018.80 Investment income (loss is stated with “-”) 1,531,310.06 93,013.38 Including: return on investment in associate and joint 1,531,310.06 93,013.38 venture Gain from the derecognition of the financial assets measured at amortised cost (loss is stated with “-”) Exchange income (loss stated with “-“) Net exposure hedge income (loss stated with “-“) Income from change of fair value (loss is stated with “-”) Loss from impairment of credit (loss is stated with “-”) -3,081,768.89 5,178,800.41 Loss from impairment of assets (loss is stated with “-”) 2,514,740.86 -1,765,800.30 Income from disposal of assets (loss is stated with “-“) -212,010.13 -54,407.16 III. Operating Profit (loss is stated with “-“) 164,340,842.75 145,934,384.18 Plus: Non-operating income 294,311.70 363,859.51 Less: Non-operating expenses 524,505.98 466,522.53 IV. Total profit (total loss is stated with “-”) 164,110,648.47 145,831,721.16 Less: Income tax expense 40,615,187.57 33,463,799.72 V. Net Profit (net loss is stated with “-“) 123,495,460.90 112,367,921.44 (I) Classification based on operation sustainability 1. Net Profit from sustainable operation (net loss is 123,495,460.90 112,367,921.44 stated with “-”) 2. Net Profit from termination of operation (net loss is stated with “-”) (II) Classification by ownership 1. Net profit attributable to the parent company’s 123,495,460.90 112,367,921.44 owner 2. Minority shareholders’ gain/loss VI. Net of other comprehensive income after tax 1,749,420.87 -1,392,954.99 Net of other comprehensive income after tax attributable 1,749,407.20 -1,392,919.75 to the parent company’s owner (I) Other comprehensive income which cannot be re-classified into gain and loss 1. Movement of the net liabilities and net assets re-measured for setting the beneficial plan 2. Other comprehensive income which cannot be converted into gain and loss based on the equity method 3. Movement of the fair value of the investment in other equity instruments 4. Movement of the fair value of the Company’s own credit risk 5. Others (II) Other comprehensive income which shall be 1,749,407.20 -1,392,919.75 re-classified into gain and loss 1. Other comprehensive income which can be converted into gain and loss based on the equity method 2. Movement of the fair value of the investment in other debt instruments 3. Gain/loss from change in the fair value of the financial assets available for sale 4.Amount of the reclassified financial assets counted to the other comprehensive income 5. Gain/loss from which the held-to-maturity investment is re-classified as available-for-sale financial assets 6. Provision for impairment of the credit of the other debt investment 7. Reserve for cash flow hedge 8. Conversion difference in foreign currency statements 1,749,407.20 -1,392,919.75 9. Others Net amount of other comprehensive income after tax 13.67 -35.24 attributable to minority shareholders VII. Total comprehensive income 125,244,881.77 110,974,966.45 Total comprehensive income attributable to the parent 125,244,868.10 110,975,001.69 company’s owner Total comprehensive income attributable to minority 13.67 -35.24 shareholders VIII. Earnings per share: (I) Basic earnings per share 0.2788 0.2561 (II) Diluted earnings per share 0.2788 0.2561 Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo Person in charge of the Accounting Department: Tian Hui 4. Statement of Profit, Parent Company In CNY Items The first half year of 2019 The first half year of 2018 I. Operating revenue 64,124,939.95 56,119,634.18 Less: Operating cost 11,807,925.90 9,578,544.70 Taxes and surcharges 2,257,018.92 2,206,362.07 Sales costs 582,036.03 Administrative expenses 39,783,149.16 31,314,977.66 R & D expenditures 9,146,589.64 10,322,178.15 Financial expenses 3,247,689.32 3,554,000.36 Where: Interest cost 4,007,526.54 4,234,698.63 Interest income -776,046.44 -710,762.21 Plus: Other income 7,743,695.89 1,598,000.00 Investment income (loss is stated with “-”) 1,531,310.06 93,013.38 Including: return on investment in associate and joint 1,531,310.06 93,013.38 venture Gain from the derecognition of the financial assets measured at amortised cost (loss is stated with “-”) Net exposure hedge income (loss stated with “-“) Income from change of fair value (loss is stated with “-”) Loss from impairment of credit (loss is stated with “-”) 64,803.91 Loss from impairment of assets (loss is stated with “-”) Income from disposal of assets (loss is stated with “-“) -2,074.20 -13,917.68 II. Operating Profit (loss is stated with “-“) 6,508,658.82 820,666.94 Plus: Non-operating income 18,000.00 9,480.00 Less: Non-operating expenses 200,000.00 446,782.07 III. Total profit (total loss is stated with “-“) 6,326,658.82 383,364.87 Less: Income tax expense 1,174,172.39 -169,477.50 IV. Net Profit (net loss is stated with “-“) 5,152,486.43 552,842.37 (I) Net Profit from sustainable operation (net loss is stated with 5,152,486.43 552,842.37 “-”) (II) Net Profit from termination of operation (net loss is stated with “-”) V. Net of other comprehensive income after tax (I) Other comprehensive income which cannot be re-classified into gain and loss 1. Movement of the net liabilities and net assets re-measured for setting the beneficial plan 2. Other comprehensive income which cannot be converted into gain and loss based on the equity method 3. Movement of the fair value of the investment in other equity instruments 4. Movement of the fair value of the Company’s own credit risk 5. Others (II) Other comprehensive income which shall be re-classified into gain and loss 1. Other comprehensive income which can be converted into gain and loss based on the equity method 2. Movement of the fair value of the investment in other debt instruments 3. Gain/loss from change in the fair value of the financial assets available for sale 4.Amount of the reclassified financial assets counted to the other comprehensive income 5. Gain/loss from which the held-to-maturity investment is re-classified as available-for-sale financial assets 6. Provision for impairment of the credit of the other debt investment 7. Reserve for cash flow hedge 8. Conversion difference in foreign currency statements 9. Others VI. Total comprehensive income 5,152,486.43 552,842.37 VII. Earnings per share: (I) Basic earnings per share 0.0116 0.0013 (II) Diluted earnings per share 0.0116 0.0013 Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo Person in charge of the Accounting Department: Tian Hui 5. Consolidated Cash Flow Statement In CNY Items The first half year of 2019 The first half year of 2018 I. Cash flows arising from operating activities: Cash received from sales of goods and supply of labor 1,913,555,960.34 1,905,278,291.59 service Net increase of customers’ deposit and due from banks Net increase of borrowings from the central bank Net increase of borrowings from other financial institutions Cash received from the premium of the original insurance contract Net cash received from the reinsurance business Net increase of the reserve from policy holders and investment Cash received from interest, service charge and commission Net increase of loan from other banks Net increase of fund from repurchase business Net cash received from securities trading on commission Rebated taxes received 3,160,067.59 185,691.63 Other operation activity related cash receipts 40,976,127.91 25,022,648.38 Subtotal of cash flow in from operating activity 1,957,692,155.84 1,930,486,631.60 Cash paid for purchase of goods and reception of 1,116,738,134.87 1,010,882,821.40 labor services Net increase of loans and advances to customers Net increase of due from central bank and due from other banks Cash from payment for settlement of the original insurance contract Net increase of the financial assets held for trading purpose Net increase of the lending capital Cash paid for interest, service charge and commission Cash for payment of policy dividend Cash paid to and for staff 314,068,308.62 308,576,830.37 Taxes paid 130,569,918.63 169,009,260.06 Other business activity related cash payments 237,301,143.35 217,345,445.68 Subtotal of cash flow out from operating activity 1,798,677,505.47 1,705,814,357.51 Net cash flows arising from operating activities 159,014,650.37 224,672,274.09 II. Cash flow arising from investment activities: Cash received from recovery of investment Cash received from investment income Net cash from disposal of fixed assets,intangible 84,258.51 6,872.90 assets and recovery of other long term assets Net cash received from disposal of subsidiaries and other operating units Other investment related cash receipts Subtotal of cash flow in from investment activity 84,258.51 6,872.90 Cash paid for purchase/construction of fixed assets, 89,298,306.14 52,519,739.81 Intangible assets and other long term assets Cash paid for investment Net increase of the pledged loan Net cash paid for acquisition of subsidiaries and other operation units Other investment related cash payments Subtotal of cash flow out from investment activity 89,298,306.14 52,519,739.81 Net cash flow arising from investment activities: -89,214,047.63 -52,512,866.91 III. Cash flow arising from fund-raising activities: Cash received from absorbing investment 18,585,600.00 Incl.: Cash received from the subsidiaries’ absorption of minority shareholders’ investment Cash received from loans 330,176,520.00 384,997,200.00 Cash received from bond issuing Other fund-raising related cash receipts Subtotal of cash flow in from fund raising activity 348,762,120.00 384,997,200.00 Cash paid for debt repayment 327,486,253.30 448,409,609.38 Cash paid for dividend/profit distribution or repayment 12,018,884.30 15,009,057.38 of interest Including: Dividend and profit paid by the subsidiaries to minority shareholders Cash paid for other financing activities 17,565,400.00 Sub-total cash flow paid for financing activities 357,070,537.60 463,418,666.76 Net cash flow arising from fund-raising activities -8,308,417.60 -78,421,466.76 IV. Change of exchange rate influencing the cash and cash 201,307.31 118,439.84 equivalent V. Net increase of cash and cash equivalents 61,693,492.45 93,856,380.26 Plus: Opening balance of cash and cash equivalents 162,623,059.97 184,947,891.32 VI. Ending balance of cash and cash equivalents 224,316,552.42 278,804,271.58 Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo Person in charge of the Accounting Department: Tian Hui 6. Cash Flow Statement, Parent Company In CNY Items The first half year of 2019 The first half year of 2018 I. Cash flows arising from operating activities: Cash received from sales of goods and supply of labor 66,872,263.13 56,758,456.16 service Rebated taxes received Other operation activity related cash receipts 1,733,050,857.61 1,204,947,705.78 Subtotal of cash flow in from operating activity 1,799,923,120.74 1,261,706,161.94 Cash paid for purchase of goods and reception of labor services Cash paid to and for staff 42,848,757.99 33,422,054.30 Taxes paid 5,460,385.81 4,702,936.63 Other business activity related cash payments 1,676,610,396.74 1,045,289,650.60 Subtotal of cash flow out from operating activity 1,724,919,540.54 1,083,414,641.53 Net cash flows arising from operating activities 75,003,580.20 178,291,520.41 II. Cash flow arising from investment activities: Cash received from recovery of investment Cash received from investment income Net cash from disposal of fixed assets,intangible 23,000.00 assets and recovery of other long term assets Net cash received from disposal of subsidiaries and other operating units Other investment related cash receipts Subtotal of cash flow in from investment activity 23,000.00 Cash paid for purchase/construction of fixed assets, 31,845,425.44 9,442,405.28 Intangible assets and other long term assets Cash paid for investment Net cash paid for acquisition of subsidiaries and other operation units Other investment related cash payments Subtotal of cash flow out from investment activity 31,845,425.44 9,442,405.28 Net cash flow arising from investment activities: -31,822,425.44 -9,442,405.28 III. Cash flow arising from fund-raising activities: Cash received from absorbing investment 18,585,600.00 Cash received from loans 310,000,000.00 360,000,000.00 Cash received from bond issuing Other fund-raising related cash receipts Subtotal of cash flow in from fund raising activity 328,585,600.00 360,000,000.00 Cash paid for debt repayment 295,000,000.00 392,500,000.00 Cash paid for dividend/profit distribution or repayment 11,510,341.40 14,108,861.83 of interest Cash paid for other financing activities 17,565,400.00 Sub-total cash flow paid for financing activities 324,075,741.40 406,608,861.83 Net cash flow arising from fund-raising activities 4,509,858.60 -46,608,861.83 IV. Change of exchange rate influencing the cash and cash 1,378.48 -5,683.55 equivalent V. Net increase of cash and cash equivalents 47,692,391.84 122,234,569.75 Plus: Opening balance of cash and cash equivalents 134,970,466.27 128,958,944.43 VI. Ending balance of cash and cash equivalents 182,662,858.11 251,193,514.18 Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo Person in charge of the Accounting Department: Tian Hui 7. Consolidated Statement of Changes in Owner’s Equity Amount in the reporting period In CNY The first half year of 2019 Owners’equity attributable to the parent company Minority Items Other equity instruments Other Provision Total Less: sharehol Capital Preferr Perpet Capital compreh Special Surplus for Retained owner’s shares in Others Sub-total ders’ stock ed ual Others Reserve ensive reserve Reserve general earnings equity stock equity shares bond income risks 438,74 I. Ending balance of 1,062,45 -5,442,13 223,015, 851,360, 2,570,13 2,570,14 4,881.0 5,781.64 the previous year 5,644.22 9.78 793.80 603.66 4,782.90 0,564.54 0 Plus: Change in accounting policy Correction of previous errors Consolidation of enterprises under the same control Others 438,74 II. Opening balance 1,062,45 -5,442,13 223,015, 851,360, 2,570,13 2,570,14 4,881.0 5,781.64 of the reporting year 5,644.22 9.78 793.80 603.66 4,782.90 0,564.54 0 III. Decrease/increase of the report year 4,224,0 16,596,1 32,902,1 1,749,40 123,495, 113,162, 113,162, 13.67 (decrease is stated 00.00 97.31 98.89 7.20 460.90 866.52 880.19 with “-“) (I) Total 1,749,40 123,495, 125,244, 125,244, comprehensive 13.67 7.20 460.90 868.10 881.77 income (II) Owners’input and 4,224,0 16,596,1 32,902,1 -12,082,0 -12,082,0 decrease of capital 00.00 97.31 98.89 01.58 01.58 1. Common shares 4,224,0 16,596,1 18,585,6 2,234,59 2,234,59 contributed by the 00.00 97.31 00.00 7.31 7.31 owner 2. Capital contributed by other equity instruments holders 3.Amount of payment for shares counted to owners’equity 14,316,5 -14,316,5 -14,316,5 4. Others 98.89 98.89 98.89 (III) Profit Distribution 1. Provision of surplus reserve 2. Provision for general risks 3. Distributions to the owners (or shareholders) 4. Others (IV) Internal carry-over of owners’ equity 1. Conversion of capital reserve into capital (or capital stock) 2. Conversion of surplus reserve into capital (or capital stock) 3. Loss made up for with surplus reserve 4. Setting of the amount involved in the movement of the beneficial plan carried over to the retained earnings 5. Other comprehensive income carried-over to the retained earnings 6. Others (V) Special reserve 1. Provision in the reporting period 2.Applied in the reporting period (VI) Others 442,96 IV. Ending balance of 1,079,05 32,902,1 -3,692,73 223,015, 974,856, 2,683,29 2,683,30 8,881.0 5,795.31 the reporting period 1,841.53 98.89 2.58 793.80 064.56 7,649.42 3,444.73 0 Amount in the previous period In CNY The first half year of 2018 Owners’equity attributable to the parent company Other equity Items Other Provision Minority Total instruments Less: Capital Capital compreh Special Surplus for Retained sharehold owner’s Preferr Perpet shares in Others Sub-total ers’equity equity stock Reserve ensive reserve Reserve general earnings ed ual Others stock income risks shares bond 438,74 I. Ending balance of 1,062,45 -11,523,4 206,805, 771,484, 2,467,96 2,467,972, 4,881.0 5,515.78 the previous year 5,644.22 42.39 713.35 565.02 7,361.20 876.98 0 Plus: Change in accounting policy Correction of previous errors Consolidation of enterprises under the same control Others 438,74 II. Opening balance 1,062,45 -11,523,4 206,805, 771,484, 2,467,96 2,467,972, 4,881.0 5,515.78 of the reporting year 5,644.22 42.39 713.35 565.02 7,361.20 876.98 0 III. -1,392,91 112,367, 110,975, 110,974,9 -35.24 Decrease/increase 9.75 921.44 001.69 66.45 of the report year (decrease is stated with “-“) (I) Total -1,392,91 112,367, 110,975, 110,974,9 comprehensive -35.24 9.75 921.44 001.69 66.45 income (II) Owners’input and decrease of capital 1. Common shares contributed by the owner 2. Capital contributed by other equity instruments holders 3.Amount of payment for shares counted to owners’ equity 4. Others (III) Profit Distribution 1. Provision of surplus reserve 2. Provision for general risks 3. Distributions to the owners (or shareholders) 4. Others (IV) Internal carry-over of owners’ equity 1. Conversion of capital reserve into capital (or capital stock) 2. Conversion of surplus reserve into capital (or capital stock) 3. Loss made up for with surplus reserve 4. Setting of the amount involved in the movement of the beneficial plan carried over to the retained earnings 5. Other comprehensive income carried-over to the retained earnings 6. Others (V) Special reserve 1. Provision in the reporting period 2.Applied in the reporting period (VI) Others IV. Ending balance 438,74 1,062,45 -12,916,3 206,805, 883,852, 2,578,94 2,578,947, of the reporting 4,881.0 5,480.54 5,644.22 62.14 713.35 486.46 2,362.89 843.43 period 0 Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo Person in charge of the Accounting Department: Tian Hui 8. Consolidated Statement of Changes in Owner’s Equity, Parent Company Amount in the reporting period In CNY The first half year of 2019 Other equity instruments Less: Other Items Capital Capital Special Surplus Retained Total owners’ Preferred Perpetual shares in comprehen Others stock Others Reserve reserve Reserve earnings equity shares bond stock sive income I. Ending balance of 438,744,8 1,068,111,1 223,015,79 683,798,0 2,413,669,946 the previous year 81.00 85.32 3.80 86.83 .95 Plus: Change in accounting policy Correction of previous errors Others II. Opening balance of 438,744,8 1,068,111,1 223,015,79 683,798,0 2,413,669,946 the reporting year 81.00 85.32 3.80 86.83 .95 III. Decrease/increase of the report year 4,224,000 16,596,197. 32,902,198. 5,152,486 -6,929,515.15 (decrease is stated .00 31 89 .43 with “-“) (I) Total 5,152,486 comprehensive 5,152,486.43 .43 income (II) Owners’input and 4,224,000 16,596,197. 32,902,198. -12,082,001.5 decrease of capital .00 31 89 8 1. Common shares 4,224,000 16,596,197. 18,585,600. contributed by the 2,234,597.31 .00 31 00 owner 2. Capital contributed by other equity instruments holders 3.Amount of payment for shares counted to owners’equity 14,316,598. -14,316,598.8 4. Others 89 9 (III) Profit Distribution 1. Provision of surplus reserve 2. Distributions to the owners (or shareholders) 3. Others (IV) Internal carry-over of owners’equity 1. Conversion of capital reserve into capital (or capital stock) 2. Conversion of surplus reserve into capital (or capital stock) 3. Loss made up for with surplus reserve 4. Setting of the amount involved in the movement of the beneficial plan carried over to the retained earnings 5. Other comprehensive income carried-over to the retained earnings 6. Others (V) Special reserve 1. Provision in the reporting period 2.Applied in the reporting period (VI) Others IV. Ending balance of 442,968,8 1,084,707,3 32,902,198. 223,015,79 688,950,5 2,406,740,431 the reporting period 81.00 82.63 89 3.80 73.26 .80 Amount in the previous period In CNY The first half year of 2018 Other equity instruments Other Items Less: Capital Capital comprehen Special Surplus Retained Total owners’ Preferred Perpetua shares in Others stock Others Reserve sive reserve Reserve earnings equity shares l bond stock income I. Ending balance of 438,744, 1,068,111, 206,805,7 625,656,338. 2,339,318,118. the previous year 881.00 185.32 13.35 99 66 Plus: Change in accounting policy Correction of previous errors Others II. Opening balance 438,744, 1,068,111, 206,805,7 625,656,338. 2,339,318,118. of the reporting year 881.00 185.32 13.35 99 66 III. Decrease/increase of the report year 552,842.37 552,842.37 (decrease is stated with “-“) (I) Total comprehensive 552,842.37 552,842.37 income (II) Owners’input and decrease of capital 1. Common shares contributed by the owner 2. Capital contributed by other equity instruments holders 3.Amount of payment for shares counted to owners’ equity 4. Others (III) Profit Distribution 1. Provision of surplus reserve 2. Distributions to the owners (or shareholders) 3. Others (IV) Internal carry-over of owners’ equity 1. Conversion of capital reserve into capital (or capital stock) 2. Conversion of surplus reserve into capital (or capital stock) 3. Loss made up for with surplus reserve 4. Setting of the amount involved in the movement of the beneficial plan carried over to the retained earnings 5. Other comprehensive income carried-over to the retained earnings 6. Others (V) Special reserve 1. Provision in the reporting period 2.Applied in the reporting period (VI) Others IV. Ending balance of 438,744, 1,068,111, 206,805,7 626,209,181. 2,339,870,961. the reporting period 881.00 185.32 13.35 36 03 Legal representative: Huang Yongfeng Chief Financial Officer: Chen Zhuo Person in charge of the Accounting Department: Tian Hui III. Company Profile Fiyta Holdings Ltd. (hereinafter referred to as the Company) was reorganized, incorporated and renamed from Shenzhen Fiyta Timer Industry Company on December 25 1992 with approval by the General Office of Shenzhen Municipal People’s Government with Document SHEN FU BAN FU [1992] No. 1259 and with China National Aero-Technology Import & Export Corporation Shenzhen Industry & Trade Center (which was renamed as AVIC International Shenzhen Company Limited) as the sponsor. The Company's head office is located at the 20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen, Guangdong Province. On March 10, 1993, the Company, with approval by the People’s Bank of China Shenzhen Special Economic Zone Branch [SHEN REN YIN FU ZI (1993) No. 070], issued publically domestic CNY based common shares (A-shares) and CNY based special shares (B-shares). In accordance with the Approval Document of Shenzhen Municipal Securities Regulatory Office SHEN ZHENG BAN FU [1993] No. 20 and the Approval Document of Shenzhen Stock Exchange SHEN ZHENG SHI ZI (1993) No. 16, the Company’s A-shares and B-shares were all listed with Shenzhen Stock Exchange for trading commencing from June 3, 1993. On January 30, 1997, with approval by Shenzhen Municipal Administration for Industry and Commerce, the Company was renamed as Shenzhen Fiyta Holdings Ltd. On July 4, 1997, according to the equity assignment agreement between China National Aero-Technology Corporation Shenzhen (CATIC Shenzhen Corporation) and CATIC Shenzhen Holdings Limited (with original name of Shenzhen CATIC Group Co., Ltd. (hereinafter referred to as CATIC Shenzhen), CATIC Shenzhen Corporation assigned 72.36 million corporate shares (taking 52.24% of the Company’s total shares) to CATIC Shenzhen. From then on, the Company’s controlling shareholder turned to be CATIC Shenzhen from CATIC Shenzhen Corporation. On October 26, 2007, the Company implemented the equity separation reform, according to which the shareholder of the Company’s non-negotiable shares would pay shares to the whole shareholders of negotiable shares registered on the equity record day as designated in the equity separation reform plan at the rate of 3.1 shares for every 10 shares held by them while the Company’s total 249,317,999 shares remained unchanged. So far, after the equity separation reform, the proportion of the Company’s shares held by CATIC Shenzhen reduced from 52.24% to 44.69%. On February 29, 2008, due to expansion of the Company’s business scope and with approval by Shenzhen Municipal Administration for Industry and Commerce, the Company’s enterprise corporate business licence number was changed from 4403011001583 into 440301103196089. In 2010, approved by China Securities Regulatory Commission (CSRC) with the Official Reply on Approval of Non -public Issuing of Shenzhen Fiyta Holdings Ltd., ZHENG JIAN XU KE [2010] No. 1703 and the Official Reply on the Issue of Non-Public Issuing of Shenzhen Fiyta Holdings Ltd. by State-owned Assets Supervision and Administration Commission of the State Council [2010] No. 430, the Company was approved to non-publically issue no more than 50 million common shares (A-shares). After completion of non-public issuing on December 9, 2010, the Company’s registered capital increased to CNY 280,548,479.00 and CATIC Shenzhen holds 41.49% of the Company’s equity based capital. On March 3, 2011, with approval by Shenzhen Municipal Administration for Industry and Commerce, the Company was renamed as Shenzhen Fiyta Holdings Ltd. On April 8, 2011, the Company took the total capital stock of 280,548,479 shares as the base, converted its capital reserve into capital stock at the rate of 4 shares for every 10 shares. After the conversion, the Company’s total capital stock became 392,767,870 shares. On November 11, 2015, approved by China Securities Regulatory Commission (CSRC) with the Official Reply on Approval of Non-public Issuing of Fiyta Holdings Ltd., ZHENG JIAN XU KE [2015] No. 2588 and the Official Reply on the Issue of Non-Public Issuing of Fiyta Holdings Ltd. by State-owned Assets Supervision and Administration Commission of the State Council [2015] No. 415, the Company was approved to non-publically issue no more than 46,911,649 common shares (A-shares). After completion of non-public issuing on December 22, 2015, the Company’s registered capital increased to CNY 438,744,881.00 and AVIC IHL holds 37.15% of the Company’s equity based capital. On December 20, 2018, approved by State-owned Assets Supervision and Administration Commission of the State Council with the Official Reply on Fiyta Holdings Ltd. to Implement the Restrictive Stock Incentive Program (Phase I), GUO ZI KAO FEN [2018] No. 936, the Company awarded A-share restrict stock by less than 4.277 million shares. After completion of implementation of the A-share Restrictive Stock Incentive Program (Phase I) by January 30, 2019, the Company’s registered capital increased to CNY 442,968,881 and AVIC IHL holds 36.79% of the Company’s equity based capital. Ended June 30, 2019, the Company accumulatively issued altogether 442,968,881 shares of capital stock. For the detail, refer to Note VII. 53 “Share Capital”. The Company has established the Shareholders’ General Meeting, the Board of Directors, the Supervisory Committee, the Audit Committee, the Strategy Committee and the Nomination, Remuneration and Assessment Committee as the governance organs, etc. The Company has also established a number of functional departments, including comprehensive management department, the Party construction work department, department of discipline inspection, supervision and audit, financial department, human resource department, strategy operation department, data & information department, innovation & design center, R & D department, property operation department, etc. The principal business activities of the Company and its subsidiaries (collectively the Group) are: production and sales of various pointer type mechanical watches, quartz watches and their driving units, spares and parts, various timing apparatus, processing and wholesale of K gold watches and ornament watches; domestic trade, materials supply and sales (excluding the commodities for exclusive operation, exclusive control and monopoly); property management and lease; design service; self-run import & export business (implemented according to the Document SHEN MAO GUAN DENG ZHENG ZI No. 2007-072). The Company's legal representative is Huang Yongfeng. The financial statements were approved and issued through the resolution of the Board of Directors dated August 13, 2019. There were 11 subsidiaries consolidated during the reporting period. For the detail, refer to Note IX. "Equity in Other Entities". The consolidation scope of the reporting year is the same as that of the previous year. For the detail, refer to Note VIII "Change of the Consolidation Scope". IV. Basis for preparation of the financial statements 1. Preparation Basis The financial statements are prepared with the going-concern assumption as the base and the transactions and matters actually occurred in accordance with the Accounting Standards for Business Enterprises - Basic Standards promulgated by the Ministry of Finance (issued by Order 33 of the Ministry of Finance and revised according to Order 76 of the Ministry of Finance), 42 specific accounting standards promulgated and revised on February 15, 2006 and afterwards, and their application guidelines, interpretations and other relevant requirements (collectively, "Accounting Standards for Enterprises"). Besides, the Company discloses the relevant financial information in accordance with Compilation Rules for Information Disclosure by Companies Offering Securities to the Public No.15-General Provisions on Financial Reports (2014 Revision) In accordance with the Enterprise Accounting Standards, the Company follows the accrual basis of accounting. With the exception of some financial instruments, these financial statements are measured based on the historic cost basis. If impaired, the assets shall provide for impairment in accordance with the relevant regulations. 2. Operation on Going Concern Basis The financial statements of the Company have been prepared on going concern basis. V. Important accounting policies and accounting estimates Presentation on specific accounting policies and accounting estimates: The Company and its subsidiaries have made a few of specific accounting policies and accounting estimates about cognition of revenue, depreciation of fixed assets, amortization of intangible assets, R & D expenditures and other transactions and matters in accordance with the actual operation and management characteristics and based on relevant provisions of accounting standards for business enterprises. For the detail, refer to various descriptions stated in Note V.39 "Revenue", Note V.24 "Fixed assets", Note V.30(1) "Intangible Assets", Note V.30(2) “R & D expenditure" for details. 1. Statement on complying with the accounting standards for business enterprise The Company declares that the financial statements prepared by the Company comply with requirements of the enterprise accounting standards, truly and completely reflect the concerned information, including the Company’s financial position as at June 30, 2019 and operation achievements, cash flow, etc. from January to June, 2019. In addition, the Company's financial statements are in conformity with the disclosure requirements of Compilation Rules for Information Disclosure by Companies Offering Securities to the Public No. 15 - General Provisions for Financing Reporting as amended in 2014 by China Securities Regulatory Commission on relevant financial statements and their notes in all important aspects. 2. Fiscal period The accounting period adopted by the Company is from January 1 to December 31 of the Gregorian calendar. 3. Business Cycle The Company's operating cycle is 12 months. 4. Recording Currency Renminbi is the currency for the major economic environment where the Company and its domestic subsidiaries are managed, and the Company and its domestic subsidiaries take Renminbi as the standard currency for accounting. Except Switzerland based Montres Chouriet SA Company (hereinafter referred to as the "Swiss Company"), an overseas subsidiary of FIYTA Hong Kong Co., Ltd. (hereinafter referred to as "FIYTA HK"), has determined Swiss Franc as its recording currency for accounting in accordance with the currencies available in its major economic environment where it is operated. The other overseas subsidiaries, including FIYTA HK, Station-68 Limited (hereinafter referred to as “Station-68”), another subsidiary of FIYTA HK, have determined Hong Kong currency as their recording currency for accounting in accordance with the currencies available in their major economic environment where they are operated. Hong Kong currency will be converted into Renminbi while in preparing its financial statements. The currency the Company takes in preparation of these financial statements is Renminbi. 5. The accounting treatment on consolidation of the enterprises under the same control and not under the same control Merger of enterprises refers to the transaction or matter that two or more independent enterprises are merged into a reporting entity. The merger of enterprises includes merger under the same control and the merger not under the same control. (1) Merger of enterprises under the same control The enterprise participating in merger is under the final control of the same party or parties and such control is not temporary, this is the merger of enterprises under the same control. In the merger of enterprises under the same control, the party that obtains the control right to the other enterprises participating in merger on the date of merger is the merging party and the other enterprises participating in the merger are the merged party. The date of merger refers to the date when the merging party has actually obtained the control right to the merged party. The assets and liabilities acquired by the merging party are measured at the book value on the merged party on the date of merger. If the book value of net assets acquired by the merging party is different with the book value paid fo r merger consideration (or sum of book value of issued shares), the capital reserve (premium on stock capital) shall be adjusted; if the capital reserve (premium on stock capital) is not sufficient to be written down, the retained earnings shall be adjusted. Various direct expenses incurred by the merging party for merger of enterprises are included in the current profits and losses at the time of occurrence. (2) Merger of enterprises not under the same control The enterprises to be merged, if not under the final control by the same party or parties before or after merger, refer to the merger of enterprises not under the same control. For the merger of enterprises not under the same control, the party acquiring the control right to the other enterprises involved with the merger on the date of purchase is the purchasing party and the other enterprises involved with the merger are the purchased party. The date of purchase refers to the date when the purchasing party actually acquires the control right to the purchased party. For the merger of enterprises not under the same control, the merger costs contain the assets paid by the purchasing party on the date of purchase for acquiring the control right to the purchased party, the liabilities incurred or underta ken and the fair value of the issued equity securities are the commission incurred for merger of enterprises and involved with audit, legal service, evaluation, consultation and etc., as well as other overhead expenses, are included in the current profits and losses at the time of occurrence. The transaction costs of equity securities or debt securities issued as merger consideration by the purchasing party are included in the initial confirmation amount of equity securities or debt securities. The contingent consideration involved is included into the merger costs at the fair value on its purchase date. If it is necessary to adjust the contingent consideration because any new or further evidence for the existing situation on the purchase date appears within 12 months after the purchase date, the merged goodwill shall be modified accordingly. The merger costs incurred and the net identifiable assets acquired in the merger by the purchasing party are measured at the fair value on the purchase date. The difference that the merger costs are larger than the fair value of the net identifiable assets of the purchased party on the purchase date as acquired in the merger is confirmed as the goodwill. If the merger costs are less than the fair value of the net identifiable assets of the purchased party as acquired in the merger, the fair value of various identifiable assets, liabilities and contingent liabilities of the purchased party and measurement of merger costs are first checked, and if the merger costs are less than the fair value of net identifiable assets of the purchased party acquired in the merger, the difference is included in the current profits and losses. If the deductable temporary difference of the purchased party acquired by the purchasing party is not confirmed for it does not conform to the confirmation conditions of deferred tax assets on the date of purchase, but new or further information obtained within 12 months after the date of purchase shows the existence of relevant situation on the date of purchase and it is expected that the economic interest arising from deductable temporary difference of the purchased party on the date of purchase could be realized, the relevant deferred tax assets are confirmed and the goodwill is reduced synchronously. If the goodwill is not sufficient to be written down, the difference is confirmed as the current profits and losses; except the above situation, if the deferred tax assets involved with merger of enterprises are confirmed, it is included in the current profits and losses. For the merger of enterprises not under the same control as realized in steps through several transactions, whether the several transactions are "package deals" is judged in accordance with the Notice of the Ministry of Finance on Issuing the Explanation No. 5 of Accounting Standards for Business Enterprises (Cai Kuai [2012]19) and the judgment standard on “package deals” in article 51 of Accounting Standards for Business Enterprises No. 33 - Consolidated Financial Statements (see the Note 5.6(2)). If they are package deals, they are treated with reference to the description of various paragraphs in front of this part and the Note V.22 “Long-term Equity Investment”; if they are not package deals, individual financial statements and consolidated financial statements shall undergo separately relevant accounting treatment: In individual financial statements, the sum of the book value of the equity investment of the purchased party as held before the date of purchase and the newly increased investment costs on the date of purchase is used as the initial investment costs of the investment; if the equity of the purchased party as held before the date of purchase is involved with other comprehensive income, while this investment is being disposed, other comprehensive incomes related to it are made accounting treatment on the same basis as the purchased party directly disposing relevant assets or liabilities (namely, except the purchased party measures again the corresponding share in the change caused by the net liabilities or net assets of the set benefit plan according to the equity method, the others are included in the current profits and losses). In the consolidated financial statements, the equity of the purchased party as held before the da te of purchase is measured again at the fair value on the date of purchase of such equity, and the difference between the fair value and its book value is included in the current profits and losses; if the equity of the purchased party as held before the date of purchase is involved with other comprehensive incomes, other comprehensive incomes related to it shall be made accounting treatment on the same basis as the purchased party directly disposing relevant assets or liabilities (namely, except the purchased party measures again the corresponding share in the change caused by the net liabilities or net assets of the set benefit plan according to the equity method, the others are included in the current profits and losses). 6. Method of preparing consolidated financial statements (1) Principle of determining the scope of consolidated financial statements The consolidation scope of the consolidated financial statements is determined on the basis of control. Control refers to, the Company owns the power to the purchased party, enjoys variable return by participating in the relevant activities of the purchased party and is able to impact the amount of return by using the power to the purchased party. The scope of consolidation includes the Company and all of its subsidiaries. A subsidiary refers to the entity under control of the Company. Once the change of relevant facts and situations causes the change of relevant factors involved with the above definition of control, the Company will make new evaluation. (2) Method of preparing consolidated financial statements As of the date when the actual control right to the net assets, production and management decision of subsidiary is acquired, the Company starts to put it into the scope of consolidation; ceases to contain it in the scope of consolidation from the date of losing the actual control right. For any subsidiary disposed, its operation result and cash flow before disposal date have been properly contained in the consolidated profit statement and consolidated cash flow; any subsidiary disposed in the current period is not modified the beginning number of the balance sheet. For any subsidiary increasing due to merger of enterprises not under the same control, its operation result and cash flow after the date of purchase have been properly contained in the consolidated profit statement and consolidated cash flow, and the beginning number and comparison number of the consolidated financial statements are not modified. For any subsidiary increasing due to merger of enterprises under the same control, its operation result and cash flow from the beginning of the current consolidation period to the date of consolidation have been properly contained in the consolidated profit statement and consolidated cash flow, and the comparison numbers of the consolidated financial statement are synchronously modified. While preparing the consolidated financial statements, if the accounting policies or accounting period adopted by any subsidiary and the Company are not consistent, necessary modification shall be made to the subsidiary's financial statements based on the Company's accounting policies and accounting period. For any subsidiary acquired from merger of enterprises not under the same control, its financial statements are modified on the basis of the fair value of net identifiable assets on the date of purchase. All major current account balances, transactions and unrealized profit in the Company are set off in preparation of consolidated financial statements. In the stockholder's equity and current net profit or loss of a subsidiary, the parts not owned by the Company are solely listed under the stockholder's equity and net profit in the consolidated financial statements separately as minority equity and minority interest. If the loss of subsidiary shared by minority shareholders exceeds the share enjoyed by minority shareholders in the shareholders' equity of the subsidiary in the beginning, it still writes down the minority equity. When the loss in a subsidiary shared by minority shareholders exceeded the share in the shareholders’ equity enjoyable by the minority shareholders at the beginning of the reporting period, the minority shareholders’ equity should be written down. When the control right to the original subsidiary is lost due to disposal of partial equity investment or other reasons, the residual equity is measured again at its fair value on the date of losing the control right. The sum of the consideration acquired from disposal of equity and the fair value of residual equity is minus the share of net assets of the original subsidiary as continually calculated from the date of purchase at the original shareholding ratio, such difference is included in the investment income in the current period of losing the control right. Other comprehensive incomes related to equity investment of the original subsidiary shall be made accounting treatment on the same basis as the purchased party directly disposing relevant assets or liabilities when the control right is lost (namely, except the original subsidiary measures again the change caused by the net liabilities or net assets of the set benefit plan according to the equity method, the others are included in the current profits and losses). Thereafter, such part of the residual equity is made subsequent measurement in accordance with the Accounting Standards for Business Enterprises No. 2 - Long-term Equity Investment or Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments and other relevant provisions. See the Note V.22 "Long-term Equity Investment" or the Note V.10 “Financial Instruments”. If the Company disposes the investment on the subsidiary's equity in steps through several transactions and until loses the control right, whether the various transactions disposing the investment on the subsidiary's equity until losing the control right are package deals shall be distinguished. If the terms, conditions and economic impact of various transactions disposing the investment on the subsidiary's equity conform to one or more of the following circumstances, it is usually indicated that several transactions shall be made accounting treatment as package deal:① these transactions are concluded synchronously or in consideration of mutual impact; ② these transactions can wholly reach a complete commercial result; ③ Occurrence of a transaction lies on occurrence of at least another transaction; ④ A transaction may be uneconomic separately, but it is economical if the transaction is considered with other ones. If they are not package deals, each transaction thereof shall undergo accounting treatment in accordance with the principle applicable for “partially disposing long-term equity investment on subsidiary in the case of not losing control power”(for the detail, refer to Note V.22. (2) and ④,) and “losing control power to the original subsidiary due to disposal of partial equity investment or other reasons”(for the detail, refer to the above paragraph) as appropriate. If the various transactions disposing the investment on the subsidiary's equity until losing control power are package deals, various transactions undergo accounting treatment as a transaction of disposing the subsidiary and losing control power; however, before losing control power, the difference between every disposal amount and the share of the subsidiary's net assets enjoyed corresponding to disposal of investment is recognized as other comprehensive income in the consolidated financial statements, and is included in the current profit and loss corresponding to loss of control power. 7. Classification of joint venture arrangements and accounting treatment method of joint management Joint venture arrangement refers to an arrangement that two or more participants jointly control. In accordance with the rights enjoyed and obligations undertaken in the joint venture arrangement, the Company classifies joint venture arrangements into joint management and joint venture. Joint management refers to the joint venture arrangement that the Company enjoys the relevant assets of the arrangement and undertakes the relevant liabilities of the arrangement. Joint venture refers to the joint venture arrangement that the Company only enjoys rights to the net assets of the arrangement. The Company's investment in a joint venture is measured with equity method and is treated in accordance with the accounting policies as stated in the Note V.22(2) ② "Long-term equity investment measured with equity method". As a joint venture in the joint management, the Company confirms the assets solely held, liabilities solely undertaken and the assets jointly held and liabilities jointly undertaken as confirmed according to the Company's share; confirms the income arising from sale of the joint management's output share enjoyed by the Company; confirms the income arising from sale of output if confirming joint management according to the Company's share; confirms the expenses solely incurred by the Company, and the expenses incurred if confirming joint management according to the Company's share. When the Company as a joint venture delivers or sells assets to the joint management (the assets do not constitute business, same as below), or the joint management purchases assets, before such assets are sold to a third party, the Company only confirms the parts in the profit and loss arising from such transaction and belonging to other participants of the joint management. If occurrence of such assets is in conformity with the impairment loss as stated in the Accounting Standards for Business Enterprises No. 8 - Impairment of Assets, in the event that the Company delivers or sells assets to the joint management, the Company fully confirms the loss; in the event that the Company purchases assets from the joint management, the Company confirms the loss according to its share undertaken. 8. Standard for confirming cash and cash equivalent The cash and cash equivalent of the Company include the cash on hand, the deposit that can be used for payment at any time, and the investment held by the Company, which has short term (generally becomes mature within three months from the date of purchase), good liquidity and is easy to be converted into known amount of cash and with low risk in change of value. 9. Foreign currency transactions and translation of foreign currency statements (1) Translation methods for foreign currency transactions The foreign currency transactions occurred in the Company, at the time of initial recognition, shall be translated into the amount of bookkeeping base currency at the spot exchange rate (generally refer to the medium price of the foreign exchange quotation as declared by the People's Bank of China) on the date of transaction, but any foreign currency exchanging business or any transaction related to exchange of foreign currency occurred by the Company shall be translated into the amount of bookkeeping base currency at the actual exchange rate. (2) Translation methods for monetary items in foreign currency and nonmonetary items in foreign currency The balance of foreign currency monetary items are translated at the spot exchange rate on the balance sheet date and the exchange differences arising therefrom shall be included in the current profit and loss, except ① those exchange differences arising from the special borrowings of foreign currency related to the acquired and constructed assets qualified for capitalization that will be capitalized at the borrowing expenses. ② (only applicable to the existing hedging caculated according to the hedge accounting method) the balance of exchange used in the hedging instrument with effective hedging of net investment in foreign business (such balance is counted to other comprehensive income until the disposed net investment is recognized as the current gain and loss); and ③ those arising from the other changes in the balance other than amortized cost of available-for-sale monetary items denominated in foreign currency are recognized in the other comprehensive income. If preparation of consolidated financial statements is involved with overseas operation and any monetary item in foreign currency substantially constitutes net investment to overseas operation, the balance of exchange arising from change of exchange rate is included in other comprehensive incomes; when overseas operation is disposed, it is transferred into the current profits and losses from disposal. The foreign currency non-monetary items measured based on the historical cost is still measured by means of the amount of the recording currency translated based on the spot rate incurred on the day when the transaction takes place. The non-monetary items in foreign currency measured at fair value are translated at the exchange rate on the date of recognizing fair value, and the difference between the amount in bookkeeping base currency and the previous amount in bookkeeping base currency after translated is treated as change of fair value (including change of exchange rate) and included in the current profits and losses or recognized as other comprehensive incomes. (3) Method of Translation for the Statements in Foreign Currency In preparation of consolidated financial statements concerning overseas business, in case there exist any foreign currency monetary items which substantially form net investment in overseas business, the exchange differences arising from fluctuation in exchange rates are recognized as other comprehensive income as " tralsation differences in foreign currency statements"; and are counted to the current profit and loss when the overseas businesses are disposed. The financial statements in foreign currency for overseas operation are translated into the statements in Renminbi according to the following method: the items of assets and liabilities in the balance sheet are translated at the spot exchange rate on the date of balance sheet; in the items of stockholder's equity, except the item of “retained earnings”, other items are translated at the spot exchange rate at the time of occurrence. The items of incomes and expens es in the profit statement are translated at the current average exchange rate on the transaction occurring date. The undistributed profit at the beginning of the year is the undistributed profit at the ending of the previous year after translated; the undistributed profit at the ending of the year is listed according to the calculation of translated profit distributed on various items; after translated, the difference between the sum of assets items and liabilities items and the sum of stockholder's equity items is the translated difference of statements in foreign currency and is recognized as other comprehensive incomes. If overseas operation is disposed and the control right is lost, the translated difference of foreign currency statements as listed under the item of stockholder's equity in balance sheet and related to overseas operation is transferred fully or at the ratio of disposing the overseas operation into the current profits and losses from disposal. The cash flow in foreign currency and cash flow of overseas subsidiaries are translated at the current average exchange rate on the cash flow occurring date. The amount affected by the change of the exchange rate on cash is used as the adjustment item and is separately presented on the cash flow statement. The amount of cash impacted by change of exchange rate is used as the modification item and solely listed in the cash flow statement. The number in the beginning of the year and the actual number in the previous year are listed according to the amount after the financial statements for the previous year are translated. While disposing all owners' equity of the Company in overseas operation or losing the control right to overseas operation due to disposal of partial equity investment or other reasons, the foreign current statements attributive to the owners' equity of the parent company, as listed under the item of stockholder's equity in balance sheet and related to overseas operation, are translated into difference and fully transferred into the current profits and losses from disposal. When the ratio of holding overseas operation equity caused by disposal of partial equity investment or other reasons reduces but the control right to overseas operation is not lost, the translated difference of foreign currency statements related to the overseas operation disposing part is attributive to minority equity and not transferred into the current profits and losses. When the disposal of overseas operation is involved with the partial equity of a joint venture or a cooperative enterprise, the translated difference of foreign currency statements related to the overseas operation is transferred at the ratio of disposing the overseas operation into the current profits and losses from disposal. 10. Financial instruments (1) Recognition and derecognition of financial instruments A financial asset or financial liability is recognized when the Company becomes a party to a financial instrument contract. The financial assets purchased or sold in any conventional manner are recognized and derecognized based on the accounting of the trading day. The financial assets purchased or sold in any conventional manner refers to reception or delivery of the financial assets within the time limit as specified in the regulations or conventions. A trading day refers to the day when the Company commits to buy or sell a financial asset. A financial asset (or a part of financial assets or a part of a similar financial asset group) is derecognized, namely writte n off from its account and balance sheet when the following conditions are satisfied: ① the rights to receive cash flows from the financial assets have expired; or ② the Bank has transferred its rights to receive cash flows from the assets; or has retained its rights to receive cash flows from the assets but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; and (a) the Bank has transferred substantially all the risks and rewards of ownership of the financial asset; or (b) the Bank has neither transferred nor retained substantially all the risks and rewards of ownership of the financial asset, but has transferred control of the asset. (2) Classification and measurement of financial assets The financial assets of the Company are classified at the initial recognition according to the business model of the Company's management of financial assets and the contractual cash flow characteristics of the financial assets: financial assets measured at amortized cost, financial assets measured at fair value and whose movement is counted in the other comprehensive income and financial assets measured at fair value and whose movement is counted in the current profit and loss. The successive measure of financial assets depends on their classification The Company classifies financial assets according to the business model of the Company's management of financial assets and the cash flow characteristics of financial assets. ① Financial assets measured based on the amortized cost Financial assets are classified into financial assets measured at amortized cost if the financial assets meet the following conditions: the business model for the management of the financial assets takes collection of the contractual cash flows as the objective; according to the contractual terms of the financial asset, the cash flow created on the specific date is exclusively for payment of the principal and the interest based on the outstanding amount of the principal The effective interest method is applied for this class of financial assets and the successive measurement is conducted according to the amortized cost,and the gains or losses generated from the amortization or impairment are counted to in the current profit and loss. ② Debt instrument investment measured at fair value with the change counted in the other comprehensive income A financial asset is classified as a financial asset measured at fair value and whose change is counted to other comprehensive income it meets the following conditions: the business model for the management of the financial asset takes collection of the contractual cash flows as the objective; according to the contractual terms of the financial asset, the cash flow created on the specific date is exclusively for payment of the principal and the interest based on the outstanding amount of the principal. For such class of financial asset, the fair value is used for the successive measurement。 Its discount or premium is amortized by using the effective interest method and recognized as interest income or expense。 Except for the impairment loss and the exchange differences of foreign currency monetary financial assets recognized as the current profit or loss, the change in the fair value of such financial assets is recognised in other comprehensive income until such a financial asset is derecognised and its accumulated profit or loss is transferred to the current profit or loss. The interest income related to such type of financial asset is counted to the current profit and loss. ③ Equity instrument investment measured at fair value with the change counted in the other comprehensive income The Company irrevocably chooses to designate partial non-tradable equity instrument investments as financial asset measured at fair value with its change counted to the other comprehensive income and the relevant dividend income counted to the current profit or loss and the change in the fair value recognized as other comprehensive income until the financial asset is derecognised and its accumulated profit or loss is transferred to the retained earnings. ④ The financial asset measured at fair values with the change counted to the current profit and loss The financial assets other than those measured at the amortized cost as well as at fair value with the change counted to the other comprehensive income are classified as the financial assets measured at fair value with the change counted to the current profit and loss. At the time of the initial recognition, for the purpose of eliminating or significantly reducing accounting mismatching, it is possible to designate the financial assets as that measured at fair value with the change counted to the current profit and loss. For such class of financial asset, the fair value is used for the successive measurement and all the change in the fair value is counted to the current profit and loss. All the affected relevant financial assets are reclassified if and only if the Company changes the business model for managing financial assets. For the financial assets measured at fair value with the change counted to the current profits and losses, the relevant transaction expenses are directly included in the current profit and loss; the relevant transaction expenses for other categories of financial assets are counted to the amount of the initial recognition. (3) Classification and measurement of financial liabilities In the initial recognition, financial liabilities are classified as the financial liabilities measured at the amortized cost and that measured at fair value with the change counted to the current profit and loss. The financial liabilities that meet one of the following conditions can be designated as the financial liabilities measured at fair value with the change counted to the current profit or loss: ① the designation may eliminate or significantly reduce the accounting mismatching; ② to conduct management and performance assessment for financial liability portfolios or combination of financial assets and financial liabilities based on fair value according to the Company’s risk management or investment strategies as stated in the formal written documents, and to report to the key management personnel on the basis of this; ③ the financial liabilities including the embedded derivatives that need to be split separately. Classification of the financial liabilities determined by the Company at the time of the initial recognition. For the financi al assets measured at fair value with the change counted to the current profits and losses, the relevant transaction expenses are directly included in the current profit and loss; the relevant transaction expenses for other financial liabilities are counted to the amount of the initial recognition. The successive measurement of financial liabilities depends on their classification: ① Financial liabilities measured based on the amortized cost The effective interest method is applied for this category of financial liabilities and the successive measurement is conducted according to the amortized cost. ② The financial liabilities measured at fair values with the change counted to the current profit and loss Financial liabilities measured at their fair values with the change counted to the current profits and losses include transactional financial liabilities (including the derivative instruments belonging to financial liabilities) and the financi al liabilities measured at fair value with the change counted to the current profits and losses directly designated at the initial recognition. (4) Offsetting of financial instruments When the following condition is satisfied at the same time, the financial assets and financial liabilities are presented in the balance sheet with the net amount after offsetting each other: there is a statutory right to offset the confirmed amount, and the legal right is currently enforceable; it is planned to make settlement with net amount, or the financial asset is realized and the financial liability is paid off at the same time. (5) Impairment of financial assets ① The Company recognizes loss provision based on expected credit losses for financial assets measured at amortized cost, debt instrument investments and financial guarantee contracts measured at fair value with the changes counted to the other comprehensive income. The Company confirms the expected credit loss by considering reasonable and evidenced information about past events, current conditions, forecasting the future economic conditions, taking the risk of default as the weight, calculating the probability weighted amount of the present value of the difference between the cash flow receivable from the contract and the cash flow expected to be received. On each balance sheet day, the Company measures the expected credit losses of financial instruments at different stages. If the credit risk has not increased significantly since the initial recognition, the financial instrument is at the first stage, and the Company measures the provision for the loss according to the expected credit loss within the next 12 months; if the credit risk has increased significantly since the initial confirmation but impairment of the credit has not yet occurred, the financial instrument is at the second stage, the Company measures the provision for the loss according to the expected credit loss of the financial instrument for the entire duration; if the credit impairment has taken place since the initial recognition, the financial instrument is at the third stage and the Company provides reserve for the expected credit loss of the financial instrument for the entire duration. For financial instruments with lower credit risk on the balance sheet day, the Company assumes that its credit risk has not increased significantly since the initial recognition, and measures the provision for the loss according to the expected credit losses in the next 12 months. For the financial instrument at the first stage or the second stage or with lower credit risk, the Company calculates the interest income. Based on the book balance without deduction of the provision for the impairment and the actual interest rate. F or the financial instrument at the third stage, the Company calculates the interest income according to the book balance less the amortized cost after provision for the impairment and the actual interest rate. ② For receivables, regardless of whether there exists a significant financing component, the Company considers all reasonable and evidence-based information, including forward-looking information, to estimate the expected credit losses of the aforesaid receivables in a single or combined manner and to adopt the simplified model of the expected credit losses, always measures provision for loss based on expected credit losses for the entire duration. Provision method is as follows: (a) At the end of the reporting period, the Company conducts separate impairment testing on the receivables if there is objective evidence proving that such receivables have experienced impairment. Loss for impairment is recognized and provision for bad debt is made based on the difference of the present value of the estimated future cash flows lower than their carrying amount. (b) When the information of the expected credit loss of a single financing asset cannot be assessed with reasonable cost, the Company divides the receivables portfolio according to the credit risk characteristics and calculates the expected credit losses on a portfolio basis. For receivables classified as risk portfolios, the Company calculates the expected credit losses with reference to the historical experience of credit loss with consideration of the present situation and the prediction of the future economic condition by using the impairment provision model. The Company counts the provision for loss made or reversed to the current profit and loss (6) Transfer of financial assets If substantially all of risks and remunerations on the ownership of the financial asset have been transferred to the transferee, the financial asset's recognition is terminated; if substantially all of risks and remunerations on the ownership of the financial asset are kept, the financial asset's recognition is not terminated. If the enterprise has neither transferred nor kept substantially all of risks and remunerations on the ownership of the financial asset, treatment is made respectively based on the following conditions: in case control over the financial asset has been given up, recognition of that financial asset as well and the assets and liabilities generated are terminated; in case control over the financial asset has not been given up, relevant financial assets are recognized based on the extent continually involved with the transferred financial asset, and relevant liabilities are recognized accordingly. In the transferred financial asset continues to be involved by providing financial guarantee, the ass et formed by continuous involvement is recognized based on the lower of the book value of the financial asset and the amount of the financial guarantee. The amount of the financial guarantee refers to the maximum amount in the consideration received and required to be repaid. 11. Notes receivable Refer to Note 10. Financial Instrument Item (5) 12. Accounts receivable Refer to Note 10. Financial Instrument Item (5) 13. Financing with accounts receivable Inapplicable 14. Other receivables Refer to Note 10. Financial Instrument Item (5) 15. Inventories Does the Company need to comply with the requirements on information disclosure for special industries? No (1) Classification of Inventories Inventories mainly consist of raw materials, products-in-process, commodity stocks, etc. (2) Pricing of Inventories Acquired and Delivered Inventories delivered are priced based on the actual cost. Costs of inventories which consist of purchase cost, Raw materials, products-in-process and merchandise inventory are priced respectively according to the weighted average (with brand world watch stocks exclusive), specific identification (for famous brand watch stocks) at the time of delivery. (3) Determination of the net realizable value of inventories and the method for provision for price falling of inventories The net realizable value of the inventories refers to the amount of the estimated sales price of the inventory less the estimated sales costs to incur at the time of completion, sales expenses and relevant taxes in process of normal production and operation. In determining the net realizable value of inventory, with the obtained valid evidence as the base, the purpose of holding the inventory and the influence from the events after the balance sheet day is taken into consideration at the same time.. On the balance sheet day, inventories are measured based on the lower of the cost and the net realizable value. When the net realizable value is lower than the costs, reserve for price falling of inventories is provided. in which ① For the inventories directly for sale, including the finished products and the materials for sale, in process of normal production and operation, the realizable net value is the amount of the estimated sales price of the inventories less the estimated sales costs and the relevant taxes; ② For the material inventories necessary to be processed, the realizable net value is the amount of the estimated sales price of the finished products produced in process of normal production and operation less the costs predicted to incur at the time of finishing the work, the estimated sales expenses and the relevant taxes. The Company provides reserve for price falling of the inventories classified based on the models of self-made watch inventories. For the famous brand watches in distribution, reserve for price falling of inventories is provided based on the individual items. For the raw materials for FIYTA watches, based on the terminal sales status of FIYTA finished watches, reserve for price falling of inventories is provided with interchangeability of spares and parts and specialized classification of applications of materials taken into consideration. After provision for price falling of inventories, in case the influencing element for previous reduction of the inventory value has disappeared, causing the realizable net value of the inventory higher than the carrying value, the provision for price falling of the inventory originally made can be reversed and the reversed amount is charged to the current gain and loss. (4) The inventory system for the inventories is the perpetual inventory system (5) Amortization of low value consumables and packing materials Low value consumables and packing materials are amortized in lump sum at the time of reception. 16. Contract assets Inapplicable 17. Contract cost Inapplicable 18. Classified as assets held for sale The Company shall classify a non-current asset or disposal group as held for sale if its carrying amount will be recovered principally through a sale transaction (including a non-monetary asset exchange of commercial substance, the same below) rather than through continuous use. Non-current assets or disposal group classified as held for sale shall meet the following criteria: disposable immediately under current conditions based on similar transactions for disposals of such assets or practices for the disposal group; a decision has been made on a plan for disposal and an undertaking to purchase has been obtained, and the disposal is expected to be completed within a year. Where, the disposal group refers to a group of assets which are disposed altogether by sale or other way as a whole in a transaction as well as a liability transferred in the transaction with direct connection with these these assets. For an asset group or asset group portfolio attributable to the disposal group where the goodwill has been apportioned at the time of entity consolidation according to the Standards for Enterprise Accounting No. 8 - Impairment of Assets, the disposal group should be included in the goodwill apportioned to the disposal group. When the Company initially measures or re-measures the held-for-sale non-current assets and disposal group on the balance sheet date, if the book value is higher than the fair value less the sales expenses, the book value is reduced to the net amount of the fair value less the sales expenses, the amount of the write-down is recognized as the asset impairment loss, which is included in the current profit and loss, and the provision for impairment of assets held for sale is made. For the disposal group, the loss from impairment of the assets as recognized first offsets the carrying value of the goodwill in the disposal group and then offsets the carrying value of various non-current assets in the disposal group in compliance with the measurement provisions as specified in the Standard for Enterprise Accounting No. 42 - Held-for-Sale Non-current Assets, Disposal Group and Termination of Operation (hereinafter referred to as the “Standard for Holding for Sale). In case the net amount of the fair value of the held-for-sale disposal group less the sales expense increases after the balance sheet day, the amount previously written down should be recovered and reversed within the amount of loss from the impairment of the assets recognized as the non-current assets according to the provisions applicable to the measurement based on the standards for holding-for-sale after being classified as the category of holding-for-sale and the amount reversed is counted to the current profit and loss;and the book value increases based on the proportions of the book value of each non-current asset accounted for in the disposal group except for the goodwill; the book value of the goodwill already written down and loss from the impairment of the assets recognized as the non-current assets according to the provisions applicable to the measurement based on the standards for holding-for-sale after being classified as the category of holding-for-sale must not be reversed. No depreciation or amortization is provided for a non-current asset in the non-current assets or disposal groups held for sale. Interest and other expenses attributable to the liabilities of a disposal group held for sale shall continue to be recognized. When a non-current asset or disposal group no longer satisfies the conditions for classification of the held-for-sale, the Company no longer classifies it as held-for-sale category or removes the non-current asset from the held-for-sale disposal group, and measures it based on the lower of the two: (1) for the book value before classification as the held-for-sale, the amount after the adjustment for depreciation, amortization or impairment which should be recognized under the condition in which it is assumed not to be classified as held-for-sale; (2) recoverable amount. 19. Equity investment Inapplicable 20. Other equity investment Inapplicable 21. Long term accounts receivable Inapplicable 22. Long-term equity investments The long-term equity investment as stated in this part refers to the long term equity investment with control over, joint control over or significant influence upon the investees. The long term equity investment without control over, joint control over or significant influence upon the investees in the Company are taken as available-for-sale financial assets or the financial assets which are measured based on the fair value and their changes are counted to the current profit and loss. For the detail of the accounting policy, refer to Note V. 10 "Financial Instruments". Joint control refers to the joint control over some arrangement made by the Company according to the relevant agreement and the relevant activities for the arrangement must be jointly decided by all the parties sharing the control power. Significant influence refers to the Company's power of participation in making an investee's financial and operation policies but the Company cannot control or jointly control with other parties to make these policies. (1) Determination of Investment Costs For the long term equity investment acquired through consolidation of enterprises under the common control, the share of the book value of the consolidatee's owner's equity as at the date of consolidation in the eventual controller's financial statements is taken as the initial investment cost of the long term equity investment. The balance among the initial investment cost of the long term equity investment and the cash as paid, non-cash asset as assigned and the book value of the liabilities as assumed is used for adjustment of the capital reserve; in case the capital reserve is not enough for writing-down, the retained earnings is adjusted. Where the equity securities are issued as the consolidation consideration, the share of the book value of the shareholders' equity in the ultimate controlling party's consolidated financial statements on the consolidation day is the initial investment cost of the long-term equity investment, and the total carrying amount of the issued shares is taken as the share capital, the difference between the initial investment cost of the long-term equity investment and the total carrying amount of the shares issued is used to adjust the capital reserve; if the capital reserve is insufficient to offset, the retained earnings are adjusted. The equity which is acquired in steps through a number of transactions and eventually forms consolidation of enterprises not under the common control shall be treated depending on whether it belongs to "one package deal": if it belongs to "one package deal", all the transactions shall be taken as a transaction for acquiring the control power for accounting treatment. If it does not belong to“one package deal”, the share of the book value of the shareholders’ equity in the consolidatee enjoyable in the eventual controller's consolidated financial statements as at the consolidation day is taken as the initial investment cost of the long term equity investment; the difference between the initial investment cost of the long term equity investment and the sum of the book value of the long term equity investment before the consolidation plus the book value of the consideration newly paid for further acquiring the shares on the consolidation day is used to adjust the capital reserve; if the capital reserve is not enough for writing down, the retained earnings should be adjusted. For the equity investment held before the date of consolidati on or the other comprehensive income as recognized from the available-for-sale financial assets, no accounting treatment shall be taken for time being. For the long term equity investment acquired through consolidation of enterprises not under the common control, the consolidation cost as at the acquisition date is taken as the initial investment cost of the long term equity investment. The consolidation cost is the sum of the assets paid to the buyer, the liabilities incurred or assumed, and the fair value of the equity securities as issued. The equity which is acquired in steps through a number of transactions and eventually forms consolidation of enterprises not under the common control shall be treated depending on whether it belongs to "one package deal": if it belongs to "one package deal", all the transactions shall be taken as a transaction for acquiring the control power for accounting treatment. If it does not belong to "one package deal", the sum of the book value of the equity investment in the purchasee originally held plus the newly increased investment cost shall be taken as the initial investment cost of the long term equity investment calculated according to the cost method. In case the equity originally held is calculated based on the equity method, the relevant other comprehensive income shall not undergo accounting treatment for time being. If the equity investment originally held is an available-for-sale financial asset, the balance between its fair value and the book value and the accumulative movement of the fair value originally counted to other comprehensive income are transferred to the current profit and loss. Intermediary fees in connection with audit, law service, appraisal and consulting, etc. incurred to the consolidator or purchaser and other relevant administrative fees shall be counted to the current profit and income at the time of incurrence. The equity investment other than the long term equity investment formed from the enterprise consolidation which is initially measured based on the cost, such costs are recognized in such ways as the fair value of the equity securities issued by the Company, the value as specified in the investment contract or agreement, the fair value or the original book value of the assets exchanged out in the non-monetary asset exchange transactions, or the own fair value of the long term equity investment, etc. depending on the ways of acquirement of the long term equity investment. The expenses, taxes and other necessary expenditures directly in connection with the acquirement of the long term equity investment are counted to the investment costs. For the long term equity investment resulted from the additional investment which may bring out significant influence upon or joint control over the investee but shall not constitute control, the cost of the long term equity investment is the sum of the fair value of the equity investment originally held as determined according to the Accounting Standards for Enterprises No. 22 - Recognition and Measurement of Financial Instruments plus the cost of the newly increased investment. (2)Subsequent measurement and recognition of gains and losses The long-term equity investment with joint control (excluding the composition of the joint operators) or significant influence on the investee is accounted by using the equity method. and also for the long term equity investment in whi ch the Company's financial statements can implement control over the investee by calculation based on the cost method. ① Long term equity investment calculated based on the cost method In calculation by cost method, the long term equity investment is valuated according to the initial investment cost, and for additional or recovery of investment, the cost of the long term equity investment is adjusted. Except that the actual payment or consideration paid at the time of acquiring the investment contains the cash dividend or profit already announced but not yet distributed, the return on the investment in the reporting period is recognized based on the cash dividend or profit already announced for distribution by the investee. ② Long term equity investment calculated based on the equity method When the calculation based on the equity method is used, if the initial investment cost of the long term equity investment is greater than the share of the fair value of net identifiable assets enjoyable in the investee, the initial investment cost of the long term equity investment shall not be adjusted; when the initial investment cost is less than the share of the fair value of net identifiable assets enjoyable in the investee, the balance is counted to the current profit and loss and at the same time the cost of the long term equity investment is adjusted. When the equity method is used for calculation, the net gains and losses realized by the investee and the share of the other comprehensive income enjoyable or sharable shall be respectively used to recognize the return on investment and other comprehensive income and at the same time the book value of the long term equity investment is adjusted; according to the profit announced for distribution by the investee or the part of the cash dividend enjoyable upon calculation, the book value of the long term equity investment is reduced correspondingly. For other change in the net profit and loss, other comprehensive income and owner's equity other than the profit distribution, the book value of the long term equity investment is adjusted and counted to the capital reserve. In determining the net profit and loss in the investee enjoyable, with the fair value of various identifiable assets, etc. in the investee when the investment is acquired as the base, the net profit of the investee is recognized after adjustment. When the accounting policy and fiscal period adopted by the investee is different from that of the Company, the investee's financial statements are adjusted according to the accounting policy and fiscal period adopted by the Company and the return on the investment and other comprehensive income are recognized on this basis. For the transactions between the Company and its associates or joint ventures, in case the assets provided or sold do not constitute business, the part calculated based on the proportion of the unrealized internal transaction gains and losses attributable to the Company shall be offset and the gains and losses on the investment shall be recognized on this basis. However, the loss from no internal transaction between the Company and an investee shall not be offset if the loss belongs to impairment of the assets assigned. In case the assets invested in a joint venture or an associate constitutes business and the investor has acquired the long term equity investment therefrom but has not achieved the control power, the fair value of the business provided shall be taken as the initial investment cost of the newly added long term equity investment, the balance between the initial investment cost and the book value of the business provided shall all be counted to the current gains and losses. In case assets sold by the Company to its joint ventures or associates constitute business, the balance between the consideration acquired and the book value of the business shall all be counted to the current gains and losses. In case the asset provided to the Company by its joint venture or the associate constitutes business, accounting treatment shall be conducted according to the Enterprise Accounting Standards No. 20 - Enterprise Consolidation and all the amount shall be recognized as the transaction related gains and losses. In determining the part of the net loss incurred to the investee to be shared by the Company, the book value of the long term equity investment and other long term equity which has substantially constituted net investment in the investee shall be reduced to the limit of zero. In addition, in case the Company is obliged for extra loss in an investee, the predicted liabilities shall be recognized according to the obligation predicted to assume and counted to the current gains and losses in the investment. In case an investee realizes net profit in subsequent periods, the Company shall recover recognition of the part of income enjoyable after the recognized part of the loss shared by the Company has been made up for with the part of the benefit enjoyable. For the long-term equity investment in the associated enterprises and joint ventures held by the Company for the first time before the implementation of the new accounting standards, if there exists a debit balance of the equity investment related to the investment, the amount of the straight-line amortization of the original residual maturity is counted to the current profit and loss. ③ Acquisition of minority equity In preparation of the consolidated financial statements, the balance between the long term equity investment newly increased resulted from purchase of minority equity and the share of the net asset continuously calculated commencing from the date of purchase (or date of consolidation) enjoyable by the subsidiary shall be used to adjust the capital reserve. In case the capital reserve is not enough for writing-down, the retained earnings shall be adjusted. ④ Disposal of long term equity investment In a consolidated financial statement, the parent company has partially disposed the long term equity investment in its subsidiary without losing its control power, the difference between the disposal income of the amount enjoyable in the subsidiary’s net assets corresponding to the long term equity investment disposed is counted to the owner’s equity. In case that the parent company has partially disposed the long term equity investment in its subsidiary has caused the parent company to have lost the control power over the subsidiary, it should be treated according to the accounting policy as specified in the “method for preparation of consolidated financial statements” of Note V. 5.(2). If a long term equity investment is disposed under other situation, for the equity disposed, the difference between its book value and the consideration actually obtained is counted to the current gains and losses. For the long term equity investment calculated based on the equity method, the other comprehensive income part which was originally counted to the owner’s equity undergoes accounting treatment according to the corresponding proportion by using the same base for direct disposal of the relevant assets or liabilities used by the investee. The owner's equity recognized due to change of the other owners' equity of the investee with the net gains and loss, other comprehensive income and profit distribution exclusive is carried over into the current gains and losses based on the proportions. For the long term equity investment, in case the remaining equity after disposal still needs to be calculated according to the cost method, the other comprehensive income calculated by the equity method or calculated and recognized based on the standards for recognition and measurement of financial instruments undergoes the accounting treatment by using the same base as the investee has adopted for direct disposal of the relevant assets or liabilities and carried over to the current gains and losses according to the proportion; movement of all other owners' equity calculated and determined by using the equity method with the net gains and losses in the investee's net assets as determined, other comprehensive income and profit distribution exclusive is carried over to the current gains and losses according to the proportion. In case the Company has lost the control over an investee due to disposal of partial equity, in preparation of individual financial statements, the remaining equity after disposal can still implement joint control over or significant influence on the investee; the equity method is applied for calculation instead and the said remaining equity is adjusted as if the equity method was used for calculation commencing from the time of its acquisition; in case the remaining equity after the adjustment can no longer implement joint control over or significant influence on the investee, the accounting treatment shall be conducted according to the provisions concerning recognition and measurement of financial instruments; the balance between the fair value as at the day of losing the control power and the book value is counted to the current gains and losses. The other comprehensive income calculated by means of the equity method or calculated and recognized according to the standards for recognition and measurement of financial instruments undergoes accounting treatment on the same base as the investee has lost control and the investee directly disposes the relevant assets or liabilities. The movement of the other owner's equity in the investee's net assets calculated and recognized by means of the equity method is carried over into the current gains and losses at the time of losing the control over the investee with the exception of the net gains and profit, other comprehensive income and profit distribution. Where, for the remaining equity after disposal calculated by means of equity method, the other comprehensive income and other owner's equity are carried over according to the proportion; in case the remaining equity after disposal is recognized and measured based on the financial instruments, the other comprehensive income and other owner's equity are all carried over. In case the Company has lost the joint control over or significant influence on the investee due to disposal of partial equity, the remaining equity after disposal is calculated according to the standards for recognition and measurement of financial instruments while the balance between the fair value and the book value as at the day when the Company lost its joint control or significant influence is counted to the current gains and losses. The other comprehensive income from the original equity investment calculated and recognized by means of the equity method undergoes accounting treatment by using the same base as the investee directly disposes the relevant assets or liabilities when the calculation based on teh equity method is terminated; the owner's equity recognized due to the movement of other owner's equity with the investee's net gains and losses, other comprehensive income and profit distribution exclusive is all transferred into the current return on investment when the equity method is stopped. The Company disposes the equity investment in a subsidiary in steps through a number of transactions until it has lost the control power. If the aforesaid transaction belongs to a one-package transaction, the transactions shall undergo accounting treatment as a transaction in which the equity investment in a subsidiary is disposed and the control power is lost. The balance between the first disposal consideration prior to loss of the control power the book value of the long term equity investment corresponding to the equity disposed is recognized as other comprehensive income first and then all transferred into the current gains and losses from loss of the control power. 23. Investment based real estate Measurement model for investment real estate Measured based on the cost method Depreciation or amortization method Investment based real estate refers to the real estate held by the Company which creates rental or added value of capital or both, including housing and building already let out. Including the land use right which has already been let out, the land use right held and to be assigned after appreciation, building which has been leased out, etc. In addition, if the Board of Directors (or similar institution) has a written resolution on the vacant buildings held by the Company for the purpose of operating the lease, it is clearly stated that they will be used for operating leases and that the intention to hold is no longer changed in the short term and they are presented as investment-oriented real estate. Investment-oriented real estate is initially measured according to the cost Investment based real estate is initially measured based on the cost. The follow-expenses in connection with the investment based real estate are recorded in the investment based real estate costs in case the relevant economic benefit may flow into the Company while the costs can be reliably measured. Other follow-up expenses are recorded in the current gain and loss at the time of incurrence. Other follow-up expenses are recorded in the current gain and loss at the time of incurrence. The Company adopts the cost model to make follow-up measurement of the investment based real estate and makes depreciation or amortization according to the policy of coincidence with housing and building or land use right. About the impairment test method and method for provision for impairment of the investment-oriented real estate. For the detail, refer to Note V.31 “Impairment of Long Term Assets”. When the self-use real estate is transferred into the investment based real estate or the investment based real estate is transferred into the self-use real estate, the book value prior to the transfer is taken as the entry value after the transfer. When the application of the investment based real estate is for self-use, the investment based real estate is transferred to fixed asset or intangible asset commencing from the date of change. When the application of the self-use real estate is changed into earning rental or increase of capital value, commencing from the date of change, the fixed asset or intangible asset are transferred into investment based real estate. When conversion takes place, for the investment based real estate measured by means of the cost module instead, the book value before conversion shall be taken as the entry value after the conversion; for the investment based real estate measured by means of fair value instead, the fair value as at the conversion date shall be taken as the entry value after conversion. When the investment based real estate is disposed or permanently withdrawn from use and it is predicted that it is unable to earn economic benefit, the recognition of the investment based real estate is terminated. The income from disposal of investment based real estate, including sale, assignment, discarding or damage, is charged to the current gain and loss after deduction of the book value and the relevant taxes. 24. Fixed asset (1) Recognition of fixed assets Fixed assets are tangible assets that are held for use in the production or supply of services, for rental to others, or for administrative purposes and have useful lives more than one accounting year. A fixed asset shall be recognized only when it is probable that economic benefits associated with the asset will flow into the enterprise and the cost of the asset can be measured reliably. A fixed asset shall be initially measured at actual cost. (2) Depreciation methods Categories Depreciation methods Depreciation life Residual rate Yearly depreciation Plant & buildings Average service life method 20 -35 5.00 2.70-4.80 Machinery & equipment Average service life method 10 5.00-10.00 9.00-9.50 Electronic equipment Average service life method 5 5.00 19.00 Motor vehicle Average service life method 5 5.00 19.00 Other equipment Average service life method 5 5.00 19.00 Other fixed assets mainly including some tools, furniture. (3) Basis for recognizing the fixed assets under financing lease, Pricing and Depreciation Methods The "finance lease" shall refer to a lease that has transferred in substance all the risks and rewards related to the ownership of an asset. The ownership of it may or may not eventually be transferred. For the fixed assets rented by means of financing lease, depreciation of the rented assets is provided according to the policy identical to the proprietary assets. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires, the leased asset shall be fully depreciated over its useful life. If it is not reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over the shorter one of the lease term or its useful life. 25. Construction-in-process The cost of construction-in-process is determined according to the actual expenditure incurred for the construction, including all necessary construction expenditures incurred during the construction period, borrowing costs that shall be capitalized before the construction reaches the condition for intended use and other relevant expenses. Construction-in-process is transferred to fixed assets when the asset is ready for its intended use. For provision for impairment of construction-in-process and the method for provision for impairment, refer to Note V.31 “Impairment of Long Term Assets”. 26. Borrowing Costs Borrowing costs include interest on borrowings, amortization of depreciation or premium, auxiliary expenses and balance of exchange resulted from foreign currency loan, etc. he borrowing costs from acquisition or production of the assets or borrowing expenses result therefrom directly attributable to compliance with the condition of capitalization starts to be capitalized when the expense of the asset has incurred, borrowing costs have incurred and the acquisition and construction or production activities necessary to let the asset reach the predicted applicable or sellable status; when the assets acquired, constructed or produced in compliance with capitalization have reached the predicted applicable status or sellable status, the capitalization stops. The other borrowing costs are recognized as expenses in the period of incurrence. Interest expenses of special borrowings incurred actually for the current period less interest income from borrowings at bank or investment income from temporary investments is capitalized; capitalization amount is determined as accumulative asset expenditure of general borrowings over weighted average asset expenditure of special borrowings multiples capitalization rate of general borrowings. Capitalization rate is determined as calculating weighted average interest rate of general borrowings. In the capitalization period, exchange differences of special borrowings in foreign currency is totally capitalized; exchange differences of general borrowings in foreign currency is recognized in profit or loss for the current period. The assets in compliance with the capitalization conditions refer to such assets as fixed assets, investment based real estate, inventories, etc. which need to undergo long time of acquisition or construction or production activities before they can reach the predicted applicable or sellable status. Capitalization of borrowing costs is suspended during periods in which the acquisition, construction or production of a qualifying asset is interrupted abnormally and when the interruption is for a continuous period of more than 3 months until the acquisition or construction or production activities of the assets restart. 27. Biological Assets Inapplicable 28. Oil and Gas Assets Inapplicable 29. Use right assets Inapplicable 30. Intangible assets (1) Pricing Method, Service Life and Impairment Test An intangible asset refers to a recognizable non-monetary asset without physical form possessed by or under the control of the Company. Intangible assets are initially measured according to cots. The expenditure in connection with intangible assets is recorded in the costs of the intangible assets in case the relevant economic benefit may flow into the Company while the costs can be reliably measured. Other expenses are recorded in the current gain and loss at the time of incurrence. The land use right acquired is usually calculated as intangible asset. For the buildings, such as factory building, constructed independently, the expenses in connection with the land use right and the construction cost of such building are calculated as intangible asset and fixed assets. For purchased housing and buildings, the relevant costs are distributed between the land use right and buildings; in case it is difficult to distribution rationally, they shall all be handled as fixed assets. An intangible asset with limited service life is amortized in average by using the straight-line method over the predicted service life with its original value less the predicted residual value and the accumulated amount of the reserve for impairment already provided commencing from the time of availability for use. The intangible asse t with unidentified service life would not be amortized. The method for amortization of intangible assets with limited service life is as follows: Categories Useful Life (Year) Amortization Method Land use right 50 Straight-line method Software system 5 Straight-line method Trademark rights 5-10 Straight-line method At the end of a year, the Company rechecks the service life of the intangible asset and the amortization method. The change incurred is treated as change of accounting estimation. In addition, the Company also rechecks the service life of the intangible assets with indefinite service life, In case there is evidence showing that the time limit in which such intangible asset may bring about economic interest to the Company is predictable, the service life has to be estimated and the amortization is conducted according to the amortization policy of intangible assets with limited service life. About the impairment test method and method for provision for impairment of the intangible assets. For the detail, refer to Note V.31 “Impairment of Long Term Assets”. (2) Accounting policy for internal research and development expenditure Expenditure on an internal research and development project is classified into expenditure on the research phase and expenditure on the development phase. Expenditure on the research phase is recognized in profit or loss when incurred. Expenditure on the development phase is capitalized only when the Company can satisfy all of the following conditions: ① the technical feasibility of completing the intangible asset so that it will be available for use or sale; ② its intention to complete the intangible asset is to use or sell it; how the intangible asset will generate economic benefits; ③ Way of intangible assets producing economic interest, including those that 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; ⑤ Its ability to measure reliably the expenditure attributable to the intangible asset during its development phase. If it is impossible to distinguish research stage expenses and development stage expenses, the R & D expenses as incurred shall be all charged to the current gains and losses. 31. Impairment of long term assets For non-current and non-financial assets such as fixed assets, construction-in-process, intangible assets with limited service life, investment based real estate measured based on the cost model, the long term equity investment in subsidiaries, joint ventures and associates, etc., the Company make judgment on whether there exists any sign of impairment on balance sheet day. In case there exists a sign of impairment, the Company estimates the recoverable amount and makes impairment test. For goodwill and the intangible assets with the service life undetermined and the intangible assets which have not reached applicable status, regardless whether there exists sign of impairment, the Company makes impairment test every year. In case impairment test result shows that the recoverable amount of asset is lower than the book value, provision for impairment is made based on the difference and is regarded in the loss for impairment. The recoverable amount is determined based on the higher of the net amount of the fair value of the asset less the expense of disposal and the present value of the predicted future cash flow of the asset. The fair value of assets is determined based on the sales agreement price in fair transaction; in case there is no sales agreement but does exist active market of asset, the fair value is determined according to the buyer’s offer of the asset; in case there exists neither sales agreement nor active market of asset, the fair value of assets is estimated based on the best information obtainable. The disposal expenses include legal expenses, relevant taxes, handling fee and direct expenses incurred before the asset reaches the sellable status in connection with disposal of the assets. For the present value of the predicted future cash flow of assets, with reference to the predicted future cash flow generated in process of sustained use and final disposal, a proper discount rate is chosen to determine the amount after the discount. Provision for impairment of asset is calculated and recognized based on the individual asset. In case it is difficult to make estimation of the recoverable amount of individual asset, the recoverable amount of asset group is determined based on the asset group which the asset belongs to. The asset group is the minimum grouping of assets which can independently produce cash flow in. For the goodwill separately stated in the financial statements, at the time of impairment testing, the book value of the goodwill is apportioned to the asset group or combination of asset groups of assets benefited from the synergistic effect of enterprise consolidation. In case the testing result shows that the recoverable amount of an asset group or combination of asset groups which contain apportioned goodwill is lower than their book value, the corresponding impairment loss is recognized. The amount of the impairment loss first offsets and is apportioned to the book value of the goodwill of the asset group or combination of asset groups, and then offset the book value of other assets according to the proportions of other various assets in the book value with the exception of goodwill in the asset group or combination of asset groups. The impairment loss of the aforesaid assets, once recognized, shall not be reversed as the recovered part in subsequent periods. 32. Long term expenses to be apportioned Long term expenses to be apportioned refer to various expenses which have already incurred but should be borne in the reporting period and subsequent periods with the apportioning term exceeding one year. The Company's long term expenses to be apportioned include the special counter fabrication cost, repairing fee, etc. Long term expenses to be apportioned are amortized according to the straight-line method in the predicted beneficial period. 33. Contract liabilities Inapplicable 34. Employees’ Wages and Salaries (1) Accounting treatment of short term salaries Short term salaries mainly include wages, bonus, allowances and subsidy, welfare expenses to employees, medical insurance premium, birth insurance premium, work related injury insurance premium, housing fund, labor union dues and employees' personnel education fund, non-monetary welfare, etc. The Company recognizes the short term salaries to incur during the fiscal periods when employees offer services to the Company as liabilities and count the same to the current gains and losses or the relevant cost of assets. Of them, non-monetary welfare is measured based on the fair value. (2) Post-employment benefits The post-employment benefits mainly include the basic endowment insurance, unemployment insurance, annuity, etc. Post-employment benefit program includes defined contribution plan. In case the defined contribution plan is used, the corresponding contributable amount is counted to the corresponding asset cost or the current gains and losses at the time of incurrence. (3) Dismissal welfare In case the labor relationship with an employment is terminated prior to the expiry of an employee's labor contract, or in case the Company proposes a compensation plan for encouraging employees to volunteerly accept lay-off, the liability of remuneration to employees arising from post-service benefit is recognized in the current gains and losses at the earlier of the following conditions: when the Company cannot unilaterally withdraw the offer of post-service benefit provided for the purpose of the plan of termination of the labor relationship or proposal of lay-off, and when the Company recognizes any related restructuring costs or expenses in connection with the payment of the post-service benefit. However, if the termination benefits are predicted to be unable to be fully paid within 12 months after termination of the annual reporting period, it shall be handled according to the other long term payroll to employees. (4) Other long term employees' welfare The internal retirement program for employees is handled based on the same principle as that for the aforesaid Dismissal welfare. The Company plans to count the salaries paid to the internally retired employees and their social insurance premium paid by the Company from the date when the concerned employees stops offering services to the Company to the time of their official retirement to the current gains and losses (post-service benefit ) when they comply with the conditions for recognizing the predicted liabilities. Other long term employees' welfare provided by the Company to its employees shall undergo the accounting treatment according to the defined contribution plan as long as it complies with the defined contribution plan. With the exception of this, it shall undergo accounting treatment according to the defined beneficial plan. 35. Lease liabilities Inapplicable 36. Predicted liabilities Predicted liabilities are recognized when an obligation in connection with contingencies complies with the following conditions: (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; (3) The amount of the obligation can be measured reliably. On the balance sheet day, with consideration of such factors as contingency related risk, uncertainty and the time value of money, etc., the predicted liabilities are measured according to the best estimated amount necessary to be paid in implementation of the relevant current obligation. If the expenses for clearing of predictive liability is fully or partially compensated by a third party, and the compensated amount can be definitely received, it is recognized separated as asset. The compensated amount shall not be greater than the carrying amount of the predictive liability. (1) Loss contract A loss contract is a contract in which the cost unavoidably exceeds the expected economic interest in implementing the contract obligations. If the contract to be executed becomes a loss contract, and the obligation arising from the loss contract satisfies the conditions for the confirmation of the above-mentioned estimated liabilities, the part of the contract’s estimated loss that exceeds the recognized impairment loss (if any) of the contracted asset is recognized as the estimated liability. (2) Obligation of reorganization For a reorganization plan that is detailed, formal, and has been announced to the public, the estimated liabilities are determined based on the direct expenses related to the reorganization, subject to the recognition conditions of the aforementioned estimated liabilities. 37. Share-based payment (1) Accounting treatment method for the share-based payment Share-based payment is a transaction that grants an equity instrument or assumes a liability determined on the basis of an equity instrument in order to obtain services from employees or other parties. Share-based payments are divided into equity-settled share-based payment and cash-settled share-based payment. ① An equity-settled share-based payment Share-based payment settled with equity in exchange for services provided by employees is measured with the fair value of the employee's equity instruments at the grant date. This amount of the fair value, if the right cannot be exercised until the vesting period comes to an end or until the prescribed performance conditions are met, with the best estimate of the quantity of the exercisable equity instrument as the base within the vesting period, is counted to the relevant cost or expense calculated based on the straight-line method/when the right is exercisable immediately after granting, it is counted to the relevant cost or expenses on the date of the grant and the capital reserve increases correspondingly. On each balance sheet day during the vesting period, the Company may make best estimate based on the subsequent information, such as the movement of the number of employees eligible for exercising the wrights as latest obtained and the number of the equity instrument of the predicted exercisable is corrected. The influence of the aforesaid estimate is counted to the current relevant cost or expense and the capital reserve is adjusted correspondingly. Share-based payment in exchange for services from other parties: if the fair value of the services from other parties can be reliably measured, the share-based payment is measured according to the fair value of the services from other parties as at the date of the acquisition. If the fair value of the services from other parties cannot be reliably measured while the fair value of the equity instrument can be reliably measured, the share-based payment is measured according to the fair value of the equity instrument as at the date of the acquisition of the service and counted to the relevant cost or expense and the shareholder's equity increases correspondingly. ② Cash-settled share-based payment The cash-settled share-based payment is measured at the fair value of the liabilities assumed by the Company determined and based on shares and other equity instruments. If the right is exercisable immediately after the grant, the cash-settled share-based payment is counted in the relevant costs or expenses on the date of the grant date, and the liabilities increase accordingly; if the services within the waiting period must be completed or the required performance conditions are met, the fair value of the liabilities assumed by the Company is based on the best estimate of the vesting rights on each balance sheet day of the waiting period. The services obtained in the current period are included in the cost or expense, and the liabilities increase accordingly. The fair value of the liabilities is re-measured and the movement is counted in the current profits and losses on each balance sheet day and settlement day before the settlement of related liabilities. (2) Relevant accounting treatment for amendment or termination of the share-based payment plan When the Company amends the share-based payment plan, if the amendment increases the fair value of the equity instruments granted, the increase of the services obtained is recognized accordingly based on the increase of the fair value of the equity instruments. Increase of the fair value of the equity instrument refers to the difference between the fair value of the equity instrument on the amendment day before and after the amendment. If the modification reduces the total fair value of the share-based payment or adopts any other method unfavorable to the employees, the service obtained will continue to undergo accounting treatment, unless the Company cancels part or all of the granted equity instruments. If the Company cancels the granted equity instrument during the vesting period, the Company shall treat it as accelerated vesting, the amount which should be recognized during the remaining vesting period is counted to the current profit and loss immediately and at the same time the capital reserve is recognized. If an employee or other party can choose to meet the non-vesting conditions but fails to meet the vesting period, the Company treats it as a cancellation of the granted equity instrument. (3) Accounting treating involving the share-based payment transaction of the Company, the Company’s shareholders or actual controller In respect of the share-based payment transaction between the Company and the Company's shareholders or its actual controller, of the settlement enterprise and the enterprise receiving services, one is in the Company, and the other is outside the Company, and the accounting is carried out in the Company's consolidated financial statements according to the following provisions: ① In case the settlement enterprise conducts the settlement with its own equity instrument, the share-based payment transaction shall be treated as equity-settled share-based payment; otherwise, it shall be treated as a cash-settled share-based payment. In case the settlement enterprise is the investor of the enterprise receiving services, the fair value of the equity instrument as at the granting date or the fair value of the liabilities necessary to be assumed is recognized as the long term equity investment in the enterprise receiving the services; at the same time the capital reserve (other capital reserve) or liabilities is recognized. ① In case the enterprise receiving services has no obligation of settlement or what it grants its employees is its own equity instrument, the share-based payment transaction shall be treated as equity-settled share-based payment; in case the enterprise receiving services have the settlement obligation and what it grants its employees equity instrument of not its own, such share-based payment transaction shall be treated as a cash-settled share-based payment. In case the share-based payment transaction takes place among the enterprises within the Company while the enterprise receiving the service and the settlement enterprise are not the same enterprise, the respective confirmation and measurement of the share-based payment transaction in the individual financial statements of the enterprise receiving the services and the settlement enterprise are treated with reference to the above principles. 38. Other financial instruments, such as preferred shares, perpetual liabilities, etc. Inapplicable 39. Revenue Does the Company need to comply with the requirements on information disclosure for special industries? No Has the new standard for income been implemented No (1) General Principle ① Sale of goods Revenue from the sale of goods is recognized only when all of the following conditions are satisfied: the Company has transferred to the buyer the significant risks and rewards of ownership of the goods, the Company retains neither continuing managerial involvement nor effective control over the goods sold, and related income has been achieved or evidences of receivable have been obtained, and the associated costs can be measured reliably. ②Providing of services Where the outcome of a transaction involving the provision of services can be estimated reliably, at the end of the period, revenue associated with the transaction is recognized using the percentage of completion method. The stage of completion of a transaction involving the providing of services is determined according to the proportion of the services performed to the total services to be performed. Reliable measurement of the result of the labor service transaction provided refers to that it can satisfy at the same time: ①. The amount of revenue can be measured reliably; ②. The associated economic benefits are likely to flow into the enterprise; ③. The stage of completion of the transaction can be measured reliably; ④. The costs incurred and to be incurred in the transaction can be measured reliably. If the outcome of a transaction involving the providing of services can’t be estimated reliably, the revenue of providing of services is recognized at the service cost that incurred and is estimated to obtain compensation and the service cost incurred is recognized in profit or loss for the current period. If the service cost incurred is estimated to obtain compensation, revenue isn’t recognized. When a contract or agreement signed between the Company and other enterprise covers sales of goods and supply of labor service, in case the part of sales of goods and the part of providing labor service are distinguishable and can be measured separately, the part of sales of goods and the part of providing labor service should be treated separately; in case the part of sales of goods and the part of providing labor service cannot be distinguished or cannot be separately measured despite that they are distinguishable, all the contract shall be treated as sales of goods. ③ Royalty revenue Revenue is recognized on accrual basis according to the relevant contract or agreement. 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. 40. Government subsidies Government subsidy refers to the monetary asset and non-monetary asset obtained free by the Company from the government, excluding the capital invested by the government in the corresponding owner's equity enjoyable by the government as the investor. Government subsidy consists of asset-related government subsidy and income-related government subsidy. The government subsidy related to assets refers to government subsidy obtained by the Company for the purpose of purchasing or constructing or otherwise forming long-term assets in other way; the remaining government subsidy refers to the government subsidy related to the income. If the government documents do not clearly define the object of subsidy, the subsidy shall be divided into the government subsidy related to income and the government subsidy 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. The government subsidy measured at a nominal amount is directly counted to the current profit and loss. The Company usually confirms and measures government grants according to the actual amount received. If there is evidence at the end of the period that the Company can meet the relevant conditions stipulated by the financial support policy and is expected to receive financial support funds, the government subsidy will be recognized according to the receivable amount. 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 departm ent 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 and charged to current profit or loss when recognize the relevant cost and expense or loss; 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 subsidy related to the daily activities of the Company are included in other income; the government subsidy not related to the daily activities of the Company are included in the non-operating income and expenditure. 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. 41. Deferred income tax asset/deferred income tax liability (1) Income tax in the reporting period At the balance sheet date, the current income tax liabilities (or asset) formed in the reporting period and previous periods are measured based on the income tax amount predicted payable (or returnable) as calculated according to the tax law. The taxable income amount based on which the current income tax expense is calculated is worked out after the corresponding adjustment of the pretax accounting profit during the reporting period according to the relevant provisions of the tax law. (2) Deferred income tax asset and deferred income tax liability The balance between the book value of some assets and liability items and their tax base and the provisional difference arising from the balance between the book value of the items which have not been taken as asset and liability but may be determined as tax base according to the tax law are recognized as deferred income tax asset and deferred income tax liability by means of the debt method based on balance sheet. The taxable provisional difference which is connected with the initial recognition of goodwill and the initial recognition of the asset or liability arising from the transaction which is neither enterprise consolidation nor influences the accounting profit and taxable income amount (or may be used to offset loss) at the time of incurrence are not recognized as relevant deferred income tax liability. In addition, as to the taxable provisional difference in connection with investment in the subsidiaries, associates and joint ventures, if the Company can control the time of reversal of the provisional difference while such provisional difference may be possibly unable to be reversed in the foreseeable future and the relevant deferred income tax liability shall not be recognized either. With the exception of the aforesaid situation, the Company recognizes the deferred income tax liability arising from other taxable provisional difference. The offsetable provisional difference which is connected with the initial recognition of the asset or liability (or may be used to offset loss) arising from the transaction which is neither enterprise consolidation nor influences the accounting profit and taxable income amount is not recognized as the relevant deferred income tax asset. In addition the offsetable provisional difference in connection with investment in the subsidiaries, associates and joint ventures, in case such provisional difference may be possibly unable to be reversed in the foreseeable future, or it is not highly possible to obtain taxable income amount which can be used to offset the offsetable provincial difference in future, shall not be recognized as the relevant deferred income tax asset. With the exception of the aforesaid situation, the Company recognizes the deferred income tax asset arising from the other offsetable provisional difference only with the taxable income amount which may possibly be obtainable for offsetting the offsetable provisional difference. For the offsetable loss and tax payment write-down which may be carried over to the future years, only the future taxable income amount which may be obtainable and used to offset the offsetable loss and write down the tax payment may be recognized as the corresponding deferred income tax asset. At the balance sheet date, deferred tax assets and deferred tax liabilities are 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 tax law. At the balance sheet date, the Company reviews the carrying amount of a deferred tax asset. If it is probable that sufficient taxable profits will not be available in future to allow the benefit of the deferred tax asset to be utilized, the carrying amount of the deferred tax asset is reduced. Any such reduction in amount is reversed when it becomes probable that sufficient taxable profits will be available. (3) Income tax expense Income tax expense includes the current income tax and deferred income tax. Except that the current income tax and deferred income tax in connection with other comprehensive income or the transactions and matters which are directly stated in the shareholders' equity are counted to the other comprehensive income or shareholder's equity and the deferred income tax arising from enterprise consolidation is used to adjusted the book value of goodwill, all the other current income tax and deferred income tax expenses or income are counted to the current gains and losses. (4) Income Tax Offsetting In case the Company has legal right to make netting and is desirous to make netting or obtain assets and settle liabilities at the same time, the Company may present the net amount after offsetting the current income tax liabilities with the current income tax assets. In case the Company has legal right to settle the current income tax asset and current income tax liability in net while the deferred income tax asset and the deferred income tax liability are related to the income tax which is collected by the same tax collection and administration authority from the same tax payer or related to the different tax payer, but during the period in future when each significant deferred income tax asset and liability are reversed, the Company present the deferred income tax asset and deferred income tax liability in net after offsetting when it involves the tax payer's desire to settle the current income tax asset and liability or obtaining asset and satisfying liability in net. 42. Lease (1) Accounting process for operating lease The "finance lease" shall refer to a lease that has transferred in substance all the risks and rewards related to the ownership of an asset. The ownership of it may or may not eventually be transferred. Other lease except the financing lease is operational lease ① The Company records the operational lease business as the tenant Rental payment of operational lease is recorded in the relevant asset cost or current gain and loss based on the straight line method over various fiscal periods within the lease term. The initial direct expense is recorded in the current gain and loss. Contingent rental is recorded in the current gain and loss when it actually incurs. ② The Company records the operational lease business as the lessor The rental income of the operational lease is recorded in the current gain and loss according to the straight line method in different periods within the lease term. The initial direct expense with bigger amount is capitalized at the time of incurrence and is recorded in the current gain and loss periodically according to the same base in recognizing the rental income during the lease term; other initial direct expense with smaller amount is recorded in the current gain and loss at the time of incurrence. Contingent rental is recorded in the current gain and loss when it actually incurs. (2) Accounting treatment method for finance lease ① As lessor At the beginning date of lease period, the Company will recognize the lower of the fair value of the lease asset at the beginning of the lease and the present value of the minimum amount of rent payment as the entry value of rent asset; takes the minimum rent payment as the entry value of long term account payable and its balance as the unrecognized financial charges. In addition, when the lease negotiation takes place in the same process of conclusion of lease contract, the initial direct expenses attributable to lease item are also counted to the value of rent asset. The balance of the minimum rent payment amount less the unrecognized financial charges is respectively stated on the long term liabilities and the long term liabilities due within a year. Unrecognized financial charges are recognized in the current financing expenses by using the actual interest rate method within the lease term. Contingent rental is recorded in the current gain and loss when it actually incurs. ② As lessee As at the beginning date of lease period, the Company takes the sum of the minimum amount of the rent collected at the beginning of the lease and the initial direct expense as the entry value of the finance lease receivable and at the same time records the unsecured residual value; the recognizes the balance of the sum of the minimum rent collection amount, initial direct expenses and unsecured residual value and the sum of its present value as the unrealized financing income. The balance between the receivable rent from finance lease less the unrealized revenue of financing is respectively presented in the long term claim and the long term claim due within a year. The unrecognized financial charges are calculated by means of the actual interest rate method within the lease term and recognized as the current financial expenses. Contingent rental is recorded in the current gain and loss when it actually incurs. 43. Other important accounting policy and accounting estimate Operation termination Operation termination refers to the components which can satisfy one of the following conditions, can be separately distinguished and have been disposed or classified as the category of held-for-sale by the Company: ① this component represents an independent major business or an independent major operation region; ② this component is a part of a related plan for an independent principal business or an independent principal operation region; ③ this component is a subsidiary acquired exclusively for resale. About the accounting treatment method for operation termination, refer to the relevant description of Note V.18 “Held-for-sale assets and disposal group” 44. Changes in significant accounting policies and accounting estimates (1) Change in significant accounting policies Contents and cause of the change in the Examination and approval Time of starting the procedures application Remarks accounting policy On March 31, 2017, the Ministry of Finance revised theAccounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments, theAccounting Standards for Business Enterprises No. 23 - Transfer of Financial Assets and theAccounting Standards for The change in the relevant Business Enterprises No. 24 - Hedging accounting policy was Accounting CAI KUAI (2017) No. 7, 8 and 9 approved at the 8th session January 1, 2019 For the detail, refer to respectively; on May 2, 2017, the Ministry of the Ninth Board of Explanation I of Finance revised the theAccounting Directors of the Company on Standards for Business Enterprises No. 37 April 19, 2019. - Presentation of Financial Instruments. In process of preparing the financial statements of the first half of 2019, the Company implemented the relevant accounting standards and made treatment according to the relevant connecting provisions. OnApril 30, 2019, the Ministry of Finance revised the Circular on Issuing the Amended General Corporate Financial Statement Templates for the Year 2019 CAI KUAI (2019) No. 6, according to which the items ofAccounts Receivable and The change in the relevant Notes Receivable are split into “Accounts accounting policy was Receivable” and “Notes Receivable”; approved at the 10th session For the detail, refer to “Accounts Payable and Notes Payable” are of the Ninth Board of April 30, 2019 Explanation II split into “Accounts Payable” and “Notes Directors of the Company on Payable”; the presentation details of the April 13, 2019. items of “Interest Income”, “Other Income”, “Income from Disposal ofAssets”, “Non-operating Income” and “Non-operating Expenses” under the items of “Other Receivables”, “Non-current Assets due in a Year”, “Other Payables”, “Deferred Income”, “R & D Expenses,” and “Financial Expenses” have been specified or revised. For the enterprises that have implemented the new standards for financial instruments, the item “Receivables Financing” is added to reflect the notes receivable and accounts receivable that are measured at fair value under the new standards for financial instruments and whose changes are included in other comprehensive income. The newly added “the Income from Derecognition of FinancialAssets Measured at theAmortized Cost” is used to reflect the profit or loss arising from the derecognition of financial assets measured at amortized cost. For the change of the aforesaid presented items, the Company adopts the retrospective adjustment method to make accounting changes, and retrospectively adjusts the data in comparable accounting periods. Explanation I: Influence from the implementation of the new standards for financial instruments The main impacts of the change in the accounting policies arising from the above new standards for financial instrument on the financial statements of January 1, 2019 are as follows: Consolidated Financial Statements: Book value as presented Book value as presented according to the original Reclassified according to the new standards standards (December 31, (January 1, 2019) 2018) Available-for-sale financial assets 85,000.00 -85,000.00 Investment in other equity instruments 85,000.00 85,000.00 Financial Statements, Parent Company Book value as presented Book value as presented according to the original Reclassified according to the new standards standards (December 31, (January 1, 2019) 2018) Available-for-sale financial assets 85,000.00 -85,000.00 Investment in other equity instruments 85,000.00 85,000.00 Explanation II: In accordance with the Circular on Revising and Issuing the 2019 Versions of General Corporate Financial Statement Templates (CAI KUAI [2019] No. 6], the accounting policy for these financial statement templated has been updated. In addition to the change of the items involved in the aforesaid standard, other statement items and the corresponding amount affected are as follows: Description of the statement items affected Amount affected Administrative expenses in the half year of 2018 (consolidated financial Reduced by CNY statements) 21,285,926.02 Increased by CNY R & D expenses in the half year of 2018 (consolidated financial statements) 21,285,926.02 Administrative expenses in the half year of 2018 (the parent company's Reduced by CNY financial statements) 10,322,178.15 R & D expenses in the half year of 2018 (the parent company's financial Increased by CNY statements) 10,322,178.15 Notes receivable and accounts receivable as at December 31, 2018 Reduced by CNY (consolidated financial statements) 377,597,503.46 Increased by CNY Notes receivable as at December 31, 2018 (consolidated financial statements) 7,051,846.85 Accounts receivable and accounts receivable as at December 31, 2018 Increased by CNY (consolidated financial statements) 370,545,656.61 Notes payable and accounts payable as at December 31, 2018 (consolidated Reduced by CNY financial statements) 259,913,612.34 Accounts payable as at December 31, 2018 (consolidated financial Increased by CNY statements) 259,913,612.34 Notes receivable and accounts receivable as at December 31, 2018 (the Reduced by CNY parent company's financial statements) 737,636.38 Accounts receivable as at December 31, 2018 (the parent company's financial Increased by CNY statements) 737,636.38 Notes payable and accounts payable as at December 31, 2018 (the Reduced by CNY Company's financial statements) 52,324,191.98 Increased by CNY Notes payable as at December 31, 2018 (the Company's financial statements) 52,324,191.98 Note: Explanation on the names and amount of the statement items significantly affected. (2) Change in significant accounting estimates Inapplicable (3) Adjustment of the relevant financial statements at the current year beginning according to the new standards for financial instruments, the new standards for revenues and the new standards for lease initially implemented Consolidated Balance Sheet In CNY Items December 31, 2018 January 01, 2019 Amount involved in the adjustment Current assets: Monetary capital 164,828,059.97 164,828,059.97 Settlement reserve Inter-bank lending Transactional financial assets The financial assets measured at fair values with the change counted to the current profit and loss Derivative financial assets Notes receivable 7,051,846.85 7,051,846.85 Accounts receivable 370,545,656.61 370,545,656.61 Financing with accounts receivable Advance payment 13,666,816.33 13,666,816.33 Receivable premium Reinsurance accounts receivable Reserve for reinsurance contract receivable Other receivables 45,870,582.26 45,870,582.26 Including: Interest receivable Dividends receivable Redemptory monetary capital for sale Inventories 1,782,306,301.70 1,782,306,301.70 Contract assets Held-for-sale assets Non-current assets due within a year Other current assets 73,703,312.24 73,703,312.24 Total current assets 2,457,972,575.96 2,457,972,575.96 Non-current assets: Loan issuing and advance in cash Equity investment Available-for-sale financial assets 85,000.00 -85,000.00 Other equity investment Held-to-due investments Long term accounts receivable Long-term equity investment 44,881,063.15 44,881,063.15 Investment in other equity 85,000.00 85,000.00 instruments Other non-current financial assets Investment-oriented real estate 377,319,433.03 377,319,433.03 Fixed assets 425,649,562.85 425,649,562.85 Construction-in-progress 12,041,126.00 12,041,126.00 Productive biological asset Oil and gas assets Use right assets Intangible assets 43,545,477.61 43,545,477.61 Development expenses Goodwill Long-term expenses to be 128,572,545.15 128,572,545.15 apportioned Deferred income tax asset 100,675,706.09 100,675,706.09 Other non-current assets 8,949,160.42 8,949,160.42 Total non-current assets 1,141,719,074.30 1,141,719,074.30 Total assets 3,599,691,650.26 3,599,691,650.26 Current liabilities: Short term borrowings 547,118,452.97 547,118,452.97 Borrowings from central bank Loans from other banks Transactional financial liabilities The financial liabilities measured at fair values with the change counted to the current profit and loss Derivative financial liabilities Notes payable Accounts payable 259,913,612.34 259,913,612.34 Advance receipts 16,459,445.00 16,459,445.00 Money from sale of the repurchased financial assets Deposits taking and interbank placement Acting trading securities Income from securities underwriting on commission Payroll payable to the employees 69,779,037.83 69,779,037.83 Taxes payable 55,923,171.92 55,923,171.92 Other payables 71,819,930.30 71,819,930.30 Including: interest payable 772,351.26 772,351.26 Dividends payable Service charge and commission payable Payable reinsurance Contract liabilities Held-for-sale liabilities Non-current liabilities due within a 347,470.00 347,470.00 year Other current liabilities Total current liabilities 1,021,361,120.36 1,021,361,120.36 Non-current liabilities: Reserve for insurance contract Long-term borrowings 4,517,110.00 4,517,110.00 Bonds payable Including: preferred shares Perpetual bond Lease liabilities Long-term accounts payable Long term payroll payable to the employees Estimated liabilities Deferred income 3,672,855.36 3,672,855.36 Deferred income tax liability Other non-current liabilities Total non-current liabilities 8,189,965.36 8,189,965.36 Total liabilities 1,029,551,085.72 1,029,551,085.72 Owner’s equity: Capital stock 438,744,881.00 438,744,881.00 Other equity instruments Including: preferred shares Perpetual bond Capital Reserve 1,062,455,644.22 1,062,455,644.22 Less: shares in stock Other comprehensive income -5,442,139.78 -5,442,139.78 Special reserve Surplus Reserve 223,015,793.80 223,015,793.80 Reserve against general risks Retained earnings 851,360,603.66 851,360,603.66 Total owners’equity attributable to the 2,570,134,782.90 2,570,134,782.90 parent company Minority shareholders’equity 5,781.64 5,781.64 Total owner’s equity 2,570,140,564.54 2,570,140,564.54 Total liabilities and owners’equity 3,599,691,650.26 3,599,691,650.26 Note to the Adjustment In March 2017, the Ministry of Finance promulgated the Circular on Printing and Issuing the Revised “Accounting Standards for Enterprises No.22–Recognition and Measurement of Financial Instruments”, the Circular on Printing and Issuing the Revised “Accounting Standards for Enterprises No.23–Transfer of Financial Assets”, the Circular on Printing and Issuing the Revised “Accounting Standards for Enterprises No.24–Hedging”; on May 2, 2017, the Ministry of Finance promulgated the Circular on Printing and Issuing the Revised “Accounting Standards for Enterprises No. 37–Presentation of Financial Instruments” and on June 15, 2018, Notice by the Ministry of Finance of Revising and Issuing the Format of 2018 Consolidated Financial Statements asked the listed companies of A-shares to implement the updated standards for financial instruments series and the new format of presentation commencing from January 1, 2019. In accordance with the requirements of the updated standards for new financial instrument series, the Company adjusted the “available-for-sale financial assets” to “investment in other equity instruments” based on the business model of the Company's management of financial assets and the contractual cash flow characteristics of financial assets. Balance Sheet, Parent Company In CNY Items Monday, December 31, 2018 January 01, 2019 Amount involved in the adjustment Current assets: Monetary capital 137,175,466.27 137,175,466.27 Transactional financial assets The financial assets measured at fair values with the change counted to the current profit and loss Derivative financial assets Notes receivable Accounts receivable 737,636.38 737,636.38 Financing with accounts receivable Advance payment Other receivables 870,739,378.37 870,739,378.37 Including: Interest receivable Dividends receivable Inventories Contract assets Held-for-sale assets Non-current assets due within a year Other current assets 10,081,272.94 10,081,272.94 Total current assets 1,018,733,753.96 1,018,733,753.96 Non-current assets: Equity investment Available-for-sale financial assets 85,000.00 -85,000.00 Other equity investment Held-to-due investments Long term accounts receivable Long-term equity investment 1,376,129,654.08 1,376,129,654.08 Investment in other equity 85,000.00 85,000.00 instruments Other non-current financial assets Investment-oriented real estate 297,042,937.87 297,042,937.87 Fixed assets 297,517,472.81 297,517,472.81 Construction-in-progress 12,041,126.00 12,041,126.00 Productive biological asset Oil and gas assets Use right assets Intangible assets 35,337,052.82 35,337,052.82 Development expenses Goodwill Long-term expenses to be 4,500,638.97 4,500,638.97 apportioned Deferred income tax asset 952,857.33 952,857.33 Other non-current assets 4,493,971.35 4,493,971.35 Total non-current assets 2,028,100,711.23 2,028,100,711.23 Total assets 3,046,834,465.19 3,046,834,465.19 Current liabilities: Short term borrowings 505,000,000.00 505,000,000.00 Transactional financial liabilities The financial liabilities measured at fair values with the change counted to the current profit and loss Derivative financial liabilities Notes payable Accounts payable 52,324,191.98 52,324,191.98 Advance receipts 1,636,520.02 1,636,520.02 Contract liabilities Payroll payable to the employees 11,589,634.34 11,589,634.34 Taxes payable 943,919.26 943,919.26 Other payables 57,997,397.28 57,997,397.28 Including: interest payable 685,419.80 685,419.80 Dividends payable Held-for-sale liabilities Non-current liabilities due within a year Other current liabilities Total current liabilities 629,491,662.88 629,491,662.88 Non-current liabilities: Long-term borrowings Bonds payable Including: preferred shares Perpetual bond Lease liabilities Long-term accounts payable Long term payroll payable to the employees Estimated liabilities Deferred income 3,672,855.36 3,672,855.36 Deferred income tax liability Other non-current liabilities Total non-current liabilities 3,672,855.36 3,672,855.36 Total liabilities 633,164,518.24 633,164,518.24 Owner’s equity: Capital stock 438,744,881.00 438,744,881.00 Other equity instruments Including: preferred shares Perpetual bond Capital Reserve 1,068,111,185.32 1,068,111,185.32 Less: shares in stock Other comprehensive income Special reserve Surplus Reserve 223,015,793.80 223,015,793.80 Retained earnings 683,798,086.83 683,798,086.83 Total owner’s equity 2,413,669,946.95 2,413,669,946.95 Total liabilities and owners’equity 3,046,834,465.19 3,046,834,465.19 Note to the Adjustment In March 2017, the Ministry of Finance promulgated the Circular on Printing and Issuing the Revised “Accounting Standards for Enterprises No.22–Recognition and Measurement of Financial Instruments”, the Circular on Printing and Issuing th Revised “Accounting Standards for Enterprises No.23–Transfer of Financial Assets”, the Circular on Printing and Issuing the Revised “Accounting Standards for Enterprises No.24–Hedging”; on May 2, 2017, the Ministry of Finance promulgated the Circular on Printing and Issuing the Revised “Accounting Standards for Enterprises No. 37–Presentation of Financial Instruments” and on June 15, 2018, Notice by the Ministry of Finance of Revising and Issuing the Format of 2018 Consolidated Financial Statements asked the listed companies of A-shares to implement the updated standards for financial instruments series and the new format of presentation commencing from January 1, 2019. In accordance with the requirements of the updated standards for new financial instrument series, the Company adjusted the “available-for-sale financial assets” to “investment in other equity instruments” based on the business model of the Company's management of financial assets and the contractual cash flow characteristics of financial assets. (4) Note to the retroactive adjustment of the previous comparative data according to the new standards from financial instruments and the new standards for lease initially implemented Items to be adjusted Amount involved in the adjustment Add the item of credit impairment loss to the income statement, and reclassifyDuring the reporting period, the credit impairment loss amounted to CNY part of the impairment loss of assets related to receivables to the credit-3,081,768.89, the asset impairment loss of the previous period was adjusted impairment loss down by CNY -5,178,800.41 and credit impairment loss was adjusted up by CNY5,178,800.41. Note: When the Company makes retrospective adjustment of the amount involved in the first implementation of the new accounting standards and adjusts the comparison data of the previous period, it was necessary to disclose the name and adjustment amount of the financial statement items involved in the adjustment. 45. Others Inapplicable VI. Taxation 1. Types of major taxes and tax rates Type of taxes Tax basis Tax rates For taxable income, the output VAT is calculated based on the rate of 13% and the Value-added tax VAT is calculated and paid based on the 13% difference after deduction of the input VAT offsetable in the very period. For the high-grade watch at the price higher Consumption tax than CNY 10,000 (with CNY 10,000 inclusive) 20% imported or produced, the consumption tax is calculated and payable. Urban maintenance and construction tax The urban maintenance and construction tax is 7% based on 7% of the turnover tax actually paid Corporation income tax Taxable income amount 15%-30% Real estate tax 1.2% of 70% of the cost of the property or 12% 1.2% and 12% of the rental income In case there exist taxpayers subject to different corporate income tax rates, disclose the information. Taxpayers Income tax rates The Company (Notes① and ②) 25% Harmony (Notes①) 25% the Manufacture Co. (Notes② and ③) 15% FIYTAHong Kong (Note ④) 16.5% Station-68 (Note ④) 16.5% the Technology Co. (Notes② and ③) 15% SHIYUEHUI (Note ⑤) 25% Harbin Co. (Note ⑤) 25% Emile Chouriet (Shenzhen) Limited (Note ⑤) 25% The Sales Co. (Notes① and ⑤) 25% Hengdarui (Note ⑤) 25% Switzerland Company (Note ⑥) 30% 2. Tax Preferences (1) Enterprise Income Tax Note ①: According to the regulations stated in GuoShuiFa (2008) No. 28, “Interim Administration Method for Levy of Corporate Income Tax to Enterprise that Operates Cross-regionally”, the head office of the Company and its branch offices, the head office of HARMONY Company and its branch offices adopt tax submission method of “unified calculation, managing by classes, pre-paid in its registered place, settlement in total, and adjustment by finance authorities” starting from 1 January 2008. 50% is shared and prepaid by branches and 50% is prepaid by the headquarters. Note ②: According to the Notice of Improving R & D Expense Pre-tax Weighted Deduction Policy (CAI SHUI (2015) No. 119 promulgated by the Science and Technology Department of State Administration of Taxation, the R & D expenses arising from development of new technology, new products and new process in the Company, the Manufacture Company and the Technology Company may enjoy 50% weighted deduction as the R & D expenses based on the specified deduction according to fact as long as they have not formed intangible assets and counted to the current gains and loss; Note ③: The company enjoys the “income tax rate exclusion of high-tech enterprises enjoying the key support from the state”; Note ④: These companies are registered in Hong Kong and the income tax rate of Hong Kong applicable is 16.50% this year; Note ⑤: According to the People's Republic of China Enterprise Income Tax Law, the income tax rate is 25% for residential enterprises since 1 January 2008; Note ⑥: The tax rate of 30% is applicable for Swiss companies as it was registered in Switzerland. (2) Property tax According to Article 2 of the Circular on Transmission of the Provisions on the Policy in Connection with the Property Tax and Urban Land Use Tax Promulgated by the State Administration of Taxation (SHEN DI SHUI FA [2003] No. 676: for the new properties newly constructed or purchased by taxpayers, the property tax may be exempted for three years commencing from the next month after completion of the construction or purchase. Our FIYTA Watch Building located at Guangming New Zone of Shenzhen enjoys exemption from the property tax for three years commencing from the next month of completion of the construction. 3. Others Inapplicable VII. Notes to items of consolidated financial statements 1. Monetary capital In CNY Items Ending balance Opening balance Cash in stock 225,027.58 420,783.85 Bank deposit 223,207,376.62 160,135,454.62 Other Monetary Funds 3,089,148.22 4,271,821.50 Total 226,521,552.42 164,828,059.97 Including: total amount deposited overseas 8,012,479.02 9,192,653.31 Other notes Of other monetary fund, CNY 1,575,000.00 (December 31, 2018: CNY 1,575,000.00) was the margin deposits deposited by the Company for application to banks for unconditional and irrevocable letter of guarantee, of which CNY 630,000.00 was judicially frozen due to litigation matters. 2. Transactional financial assets Inapplicable 3. Derivative financial assets Inapplicable 4. Notes receivable (1) Presentation of classification of notes receivable In CNY Items Ending balance Opening balance Bank acceptance 2,105,700.57 0.00 Trade acceptance 7,835,290.95 7,051,846.85 Total 9,940,991.52 7,051,846.85 (2) Bad debt provision accrual, received or reversed in the reporting period Inapplicable (3) Notes receivable already pledged by the Company at the end of the reporting period Inapplicable (4) Endorsed or discounted notes receivable at the end of the reproting period, but not yet due on the balance sheet date Inapplicable (5) Notes transferred to receivables due to issuer’s default at the end of the reporting period Inapplicable (6) Notes receivable actually written off in current period Inapplicable 5. Accounts receivable (1) Accounts receivables disclosed by types In CNY Ending balance Opening balance Book balance Bad debt reserve Book balance Bad debt reserve Categories Provision Book value Provision Book value Amount Proportion Amount Amount Proportion Amount proportion proportion Accounts receivable for which bad debt reserve has 1,799,519.78 0.39% 1,799,519.78 100.00% 0.00 1,799,519.78 0.47% 1,799,519.78 100.00% 0.00 been provided based on individual items in which Accounts receivable with significant single amount 1,702,371.94 0.37% 1,702,371.94 100.00% 0.00 1,702,371.94 0.44% 1,702,371.94 100.00% 0.00 and provision of bad debt reserve on individual basis Accounts receivable with insignificant single amount 97,147.84 0.02% 97,147.84 100.00% 0.00 97,147.84 0.03% 97,147.84 100.00% 0.00 and provision of bad debt reserve on individual basis Accounts receivable for which bad debt reserve has 461,793,096. 13,670,980.9 448,122,115. 381,434,944. 10,889,287.4 99.61% 2.96% 99.53% 2.85% 370,545,656.61 been provided based on 56 7 59 02 1 portfolios in which Group of aging 251,194,196. 54.18% 13,670,980.9 5.44% 237,523,215. 189,655,491. 49.49% 10,889,287.4 5.74% 178,766,203.67 43 7 46 08 1 210,598,900. 210,598,900. 191,779,452. Specific fund portfolio 45.43% 0.00 0.00 50.04% 0.00 0.00 191,779,452.94 13 13 94 463,592,616. 15,470,500.7 448,122,115. 383,234,463. 12,688,807.1 Total 100.00% 3.34% 100.00% 3.31% 370,545,656.61 34 5 59 80 9 Provision for bad debt based on individual items: Accounts receivable with significant single amount and provision of bad debt reserve on separate basis In CNY Ending balance Name Book balance Bad debt reserve Provision proportion Provision reason Xi'an Century Ginwa Due poor operation of the Qujiang Shopping Center 1,702,371.94 1,702,371.94 100.00% shopping mall, it is less Co., Ltd. likely to recover payment for goods Total 1,702,371.94 1,702,371.94 -- -- Provision for bad debt based on individual items: Accounts receivable with insignificant single amount but provision of bad debt reserve on separate basis In CNY Ending balance Name Book balance Bad debt reserve Provision proportion Provision reason Shenzhen Number One 97,147.84 97,147.84 100.00% Unrecoverable Shop Co., Ltd. Total 97,147.84 97,147.84 -- -- Provision for bad debt based on portfolio: Specific fund portfolio In CNY Ending balance Name Book balance Bad debt reserve Provision proportion Specific fund portfolio 210,598,900.13 0.00 0.00 Total 210,598,900.13 0.00 -- Note to the basis for determining the combination: Based on historical experience, the Company’s receivables due from petty cash paid to employees, receivables due from subsidiaries of the Company and accounts receivable for the sales 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. For the provision for bad debts of accounts receivable made according to the general model of the expected credit losses, please refer to the relevant information about the disclosure of provision for bad debt in the way of disclosing other receivables: Bad debt reserve The 1st stage The 2nd stage The 3rd stage Total Predicted credit loss in the Predicted credit loss in the whole Predicted credit loss in the whole future 12 months duration (no credit impairment taken duration (credit impairment already place) taken place) Balance as at January 1, 2019 12,688,807.19 12,688,807.19 Balance as at January 1, 2019 —— —— —— —— during the reporting period -- transferred to the 2nd stage -- transferred to the 3rd stage -- reversed to the 2nd stage -- reversed to the 1st stage Provision in the reporting period 2,819,885.29 2,819,885.29 Reversal in the reporting period 38,191.73 38,191.73 Charged-off in the reporting period Written-off in the reporting period Other changes Balance as at June 30, 2019 15,470,500.75 15,470,500.75 Disclosed based on aging In CNY Aging Ending balance Within 1 year (with 1 year inclusive) 244,101,929.86 1 to 2 years 4,476,538.60 2 to 3 years 1,322,754.44 Over 3 years 1,292,973.53 Total 251,194,196.43 (2) Provision, recovery or reversal of reserve for bad debts during the reporting period Provision for bad debt during the reporting period In CNY Amount of movement during the reporting period Categories Opening balance Amount recovered or Ending balance Provision reversed Written-off Accounts receivable with significant single amount and provision 1,702,371.94 0.00 0.00 0.00 1,702,371.94 of bad debt reserve on separate basis Accounts receivable with insignificant amount and provision 97,147.84 0.00 0.00 0.00 97,147.84 of bad debt reserve on separate basis Group of aging 10,889,287.41 2,819,885.29 38,191.73 0.00 13,670,980.97 Total 12,688,807.19 2,819,885.29 38,191.73 0.00 15,470,500.75 (3) Accounts receivable actually written off in current period Inapplicable (4) Accounts receivable due from the top five debtors are as follows: Total accounts receivable due from the top five debtors of the Company in the current period is CNY51,743,736.88, accounting for 11.16% of the total accounts receivable as at the end of the current period and the total provision for bad and doubtful debts made as at the end of the current period is CNY2,587,186.85. (5) Accounts receivable terminated for recognition due to transfer of financial assets Inapplicable (6) Amount of assets, liabilities formed by transfer of accounts receivable and continuing to be involved Inapplicable 6. Financing with accounts receivable Inapplicable 7. Advance payments (1) Advance payments are presented based on ages In CNY Ending balance Opening balance Aging Amount Proportion Amount Proportion Within 1 year 21,301,410.87 82.46% 12,886,273.93 94.29% 1 to 2 years 2,868,479.09 11.10% 0.00 0.00 2 to 3 years 1,014,446.65 3.93% 780,542.40 5.71% Over 3 years 649,029.90 2.51% 0.00 0.00 Total 25,833,366.51 -- 13,666,816.33 -- (2) Advance payment to the top five payees of the ending balance collected based on the payees of the advance payment Inapplicable 8. Other receivables In CNY Items Ending balance Opening balance Other receivables 62,591,073.25 45,870,582.26 Total 62,591,073.25 45,870,582.26 (1) Interest receivable Inapplicable (2) Dividends receivable Inapplicable (3) Other receivables 1) Classification of other receivables based on nature of payment In CNY Nature of Payment Ending book balance Opening book balance Reserve for employees 5,096,955.76 2,478,447.48 Collateral and Deposit 42,447,660.48 38,091,767.87 Commodity promotion 1,959,416.00 7,827,524.03 Guarantee for property suit 8,958,057.64 0.00 Repurchase payment from securities brokers 3,327,401.11 0.00 Others 11,236,826.69 7,510,384.99 Total 73,026,317.68 55,908,124.37 2) Provision for bad debts The 1st stage The 2nd stage The 3rd stage Bad debt reserve Predicted credit loss in the whole Predicted credit loss in the whole Total Predicted credit loss in the duration (no credit impairment taken duration (credit impairment already future 12 months place) taken place) Balance as at January 1, 2019 10,037,542.11 10,037,542.11 Balance as at January 1, 2019 —— —— —— —— during the reporting period -- transferred to the 2nd stage -- transferred to the 3rd stage -- reversed to the 2nd stage -- reversed to the 1st stage Provision in the reporting period 453,051.98 453,051.98 Reversal in the reporting period 55,349.66 55,349.66 Charged-off in the reporting period Written-off in the reporting period Other changes Balance as at Sunday, June 30, 10,435,244.43 10,435,244.43 2019 Disclosed based on aging In CNY Aging Ending balance Within 1 year (with 1 year inclusive) 58,700,727.02 1 to 2 years 6,429,749.30 2 to 3 years 6,489,591.36 Over 3 years 1,406,250.00 Total 73,026,317.68 3) Provision, recovery or reversal of reserve for bad debts during the reporting period Provision for bad debt during the reporting period In CNY Amount of movement during the reporting period Categories Opening balance Amount recovered or Ending balance Provision reversed Other receivables with significant single amount 7,093,237.65 96,353.71 0.00 7,189,591.36 and provision of bad debt reserve on individual basis Other receivables with insignificant single amount 565,400.00 0.00 0.00 565,400.00 but provision of bad debt reserve on individual basis Group of aging 2,378,904.46 356,698.27 55,349.66 2,680,253.07 Total 10,037,542.11 453,051.98 55,349.66 10,435,244.43 4) Accounts receivable actually written off in the reporting period Inapplicable 5) Other receivables owed by the top five debtors based on the ending balance In CNY Proportion in total Ending balance of the Company name Nature of Payment Ending balance Aging ending balance of provision for bad debts other receivables Beat Blattman Payment for goods 4,103,512.16 Over 3 years 5.62% 4,103,512.16 Marketing China Resources Deposit in security 3,059,224.00 Within 1 year 4.19% 152,961.20 (Shenzhen) Co., Ltd Liberty Time Center Payment for goods 2,286,079.20 Over 3 years 3.13% 2,286,079.20 GmbH CHINARESOURCES SUN HUNG KAI PROPERTIES Deposit in security 1,672,563.00 Within 1 year 2.29% 83,628.15 (HANGZHOU) LIMITED Shenzhen Yitian Deposit in security 1,145,523.00 Within 1 year 1.57% 57,276.15 Holiday Plaza Co,. Ltd. Total -- 12,266,901.36 -- 16.80% 6,683,456.86 6) Accounts receivable involving government subsidy Inapplicable 7) Other receivables with recognition terminated due to transfer of financial assets Inapplicable 8) Amount of assets and liabilities formed through transfer of other receivables and continuing to be involved Inapplicable 9. Inventories Has the new standard for income been implemented No (1) Classification of inventories In CNY Ending balance Opening balance Items Provision for price Provision for price Book balance falling Book value Book balance falling Book value Raw materials 167,245,372.54 28,350,027.04 138,895,345.50 183,679,226.95 28,296,729.51 155,382,497.44 Products in process 10,557,912.97 0.00 10,557,912.97 10,787,777.81 0.00 10,787,777.81 Commodities in 1,634,849,921.44 56,901,087.38 1,577,948,834.06 1,675,548,898.56 59,412,872.11 1,616,136,026.45 stock Total 1,812,653,206.95 85,251,114.42 1,727,402,092.53 1,870,015,903.32 87,709,601.62 1,782,306,301.70 Does the Company need to comply with the requirements on disclosure according to the Guidance of Shenzhen Stock Exchange on Disclosure of Information of the Industry Engaged in No. 4 - Listed Companies Engaged in Seed Industry, Cultivation? No (2) Reserve for Price Falling of Inventories In CNY Increase in the reporting period Decrease in the reporting period Items Opening balance Reversal or Ending balance Provision Others Offset Others Raw materials 28,296,729.51 0.00 53,297.53 0.00 0.00 28,350,027.04 Commodities in 59,412,872.11 0.00 2,956.13 2,514,740.86 0.00 56,901,087.38 stock Total 87,709,601.62 0.00 56,253.66 2,514,740.86 0.00 85,251,114.42 (3) Note to the amount of capitalized borrowing costs involved in the ending balance of inventories Inapplicable (4) Assets already completed but not yet settled formed in the construction contract at the end of the reporting period Inapplicable 10. Contract assets Inapplicable 11. Classified as assets held for sale Inapplicable 12. Non-current assets due within a year Inapplicable 13. Other current assets Has the new standard for income been implemented No In CNY Items Ending balance Opening balance Input VAT to be offset 33,834,787.17 52,444,448.67 Income tax paid in advance 543,648.10 7,846,471.11 Others 11,688,034.67 13,412,392.46 Total 46,066,469.94 73,703,312.24 14. Equity investment Inapplicable 15. Other equity investment Inapplicable 16. Long term accounts receivable (1) About long term accounts receivable Inapplicable (2) Long term account receivable with recognition terminated due to transfer of financial assets Inapplicable (3) Amount of assets and liabilities formed through transfer of long term account receivable and continuing to be involved Inapplicable 17. Long-term equity investments In CNY Increase/ Decrease (+ / -) in the reporting period Income from Announced Ending equity Other for balance of Opening Ending Investees Additional Decrease of investment comprehensive Other equity distributing Provision for the provision balance Others balance investment investment recognized income movement cash impairment for under equity adjustment dividend or impairment method profit I. Joint Venture II.Associates Shanghai Watch Industry Co., 44,881,063.15 0.00 0.00 1,531,310.06 0.00 0.00 0.00 0.00 0.00 46,412,373.21 0.00 Ltd. (Shanghai Watch) Sub-total 44,881,063.15 0.00 0.00 1,531,310.06 0.00 0.00 0.0 0.00 0.00 46,412,373.21 0.00 Total 44,881,063.15 0.00 0.00 1,531,310.06 0.00 0.00 0.00 0.00 0.00 46,412,373.21 0.00 18. Investment in other equity instruments Inapplicable 19. Other non-current financial assets Inapplicable 20. Investment based real estate (1) Investment property measured based on the cost method In CNY Items Plant and buildings Land use right Construction-in-process Total I. Original book value 546,695,433.81 0.00 0.00 546,695,433.81 1. Opening balance 546,695,433.81 0.00 0.00 546,695,433.81 2. Increase in the reporting period (1) Purchased (2) Inventories\fixed assets/construction- in – process transferred in (3) Increase of enterprise consolidation 3.Amount decreased in the reporting period (1) Disposal (2) Other transfer out 4. Ending balance 546,695,433.81 0.00 0.00 546,695,433.81 II.Accumulative depreciation and accumulative amortization 1. Opening balance 169,376,000.78 0.00 0.00 169,376,000.78 2. Increase in the reporting period 6,852,211.34 0.00 0.00 6,852,211.34 (1) Provision or amortization 6,852,211.34 0.00 0.00 6,852,211.34 3.Amount decreased in the reporting period (1) Disposal (2) Other transfer out 4. Ending balance 176,228,212.12 0.00 0.00 176,228,212.12 III. Provision for impairment 1. Opening balance 2. Increase in the reporting period (1) Provision 3.Amount decreased in the reporting period (1) Disposal (2) Other transfer out 4. Ending balance IV. Book value 1.Book value at the end of the 370,467,221.69 0.00 0.00 370,467,221.69 reporting period 2.Book value at the beginning of 377,319,433.03 0.00 0.00 377,319,433.03 the reporting period (2) Investment property measured based on fair value Inapplicable (3) Investment property that does not have certificate for property right Inapplicable 21. Fixed asset In CNY Items Ending balance Opening balance Fixed assets 414,522,443.81 425,649,562.85 Total 414,522,443.81 425,649,562.85 (1) About fixed assets In CNY Items Plant & buildings Machinery & equipment Motor vehicle Electronic equipment Other equipment Total I. Original book value 1. Opening balance 458,621,315.96 80,799,655.00 15,572,717.72 44,137,536.41 58,422,164.62 657,553,389.71 2. Increase in the 652,992.91 2,232,519.28 0.00 397,625.55 1,186,820.07 4,469,957.81 reporting period (1) Purchase 652,992.91 2,232,519.28 0.00 397,625.55 1,186,820.07 4,469,957.81 (2) Construction-in-process transferred in (3) Increase of enterprise consolidation 3.Amount decreased in the 68,681.52 959,530.62 706,638.00 734,427.91 1,293,798.83 3,763,076.88 reporting period (1) Disposal or 68,681.52 959,530.62 706,638.00 734,427.91 1,293,798.83 3,763,076.88 scrapping 4. Ending balance 459,205,627.35 82,072,643.66 14,866,079.72 43,800,734.05 58,315,185.86 658,260,270.64 II.Accumulative depreciation 1. Opening balance 97,899,718.69 43,012,974.47 13,664,912.06 28,707,685.36 48,618,536.28 231,903,826.86 2. Increase in the 7,193,596.75 3,569,439.07 356,775.98 2,382,887.27 1,515,801.29 15,018,500.36 reporting period (1) Provision 7,193,596.75 3,569,439.07 356,775.98 2,382,887.27 1,515,801.29 15,018,500.36 3.Amount decreased in the 14,817.35 670,153.70 671,306.10 642,750.80 1,185,472.44 3,184,500.39 reporting period (1) Disposal or 14,817.35 670,153.70 671,306.10 642,750.80 1,185,472.44 3,184,500.39 scrapping 4. Ending balance 105,078,498.09 45,912,259.84 13,350,381.94 30,447,821.83 48,948,865.13 243,737,826.83 III. Provision for impairment 1. Opening balance 2. Increase in the reporting period (1) Provision 3.Amount decreased in the reporting period (1) Disposal or scrapping 4. Ending balance IV. Book value 1.Book value at the end of the reporting 354,127,129.26 36,160,383.82 1,515,697.78 13,352,912.22 9,366,320.73 414,522,443.81 period 2.Book value at the beginning of the 360,721,597.27 37,786,680.53 1,907,805.66 15,429,851.05 9,803,628.34 425,649,562.85 reporting period (2) About temporarily idle fixed assets Inapplicable (3) Fixed assets rented through finance lease Inapplicable (4) Fixed assets leased through operating lease Inapplicable (5) Fixed assets that do not have certificate for property right In CNY Items Book value The reason why the property ownership certificate has not been granted Office occupancy of Harbin Office 263,188.43 There existed problem in ownership Property belonging to Zhengzhou Office 5,986,023.77 In process of handling the procedures (6) Disposal of fixed assets Inapplicable 22. Construction-in-process In CNY Items Ending balance Opening balance Construction-in-progress 12,886,665.68 12,041,126.00 Total 12,886,665.68 12,041,126.00 (1)About construction in progress In CNY Items Ending balance Opening balance Book balance Impairment reserve Book value Book balance Impairment reserve Book value FIYTAWatch Building supporting 12,886,665.68 0.00 12,886,665.68 12,041,126.00 0.00 12,041,126.00 works Total 12,886,665.68 0.00 12,886,665.68 12,041,126.00 0.00 12,041,126.00 (2) Movements of important construction-in-progress projects in the reporting period In CNY Including: Transferred Proportion of Accumulativ amount of Other Interest Increase in into the the e amount the decreases capitalizatio Project Opening the fixed assets Ending accumulative Project involved in capitalized Capital Budget in the n rate in the name balance reporting in the balance engineering progress interest interest in source reporting reporting period current input in the capitalizatio the year period period budget n reporting period FIYTA Watch 34,050,900. 12,041,126. 12,886,665. Self-raised Building 845,539.68 0.00 0.00 37.85% 100% 0.00 0.00 0.00 00 00 68 fund supporting works 34,050,900. 12,041,126. 12,886,665. Total 845,539.68 0.00 0.00 -- -- 0.00 0.00 0.00 -- 00 00 68 (3) Provision for impairment of construction in progress in the current period Inapplicable (4) Engineering materials Inapplicable 23. Productive biological asset (1) Productive biological asset by using the cost measurement model Inapplicable (2) Productive biological asset by using the fair value measurement model Inapplicable 24. Oil and Gas Assets Inapplicable 25. Use right assets Inapplicable 26. Intangible assets (1) About the intangible assets In CNY Items Land use right Patent Right Non-patent technology Software system Trademark rights Total I. Original book value 1. Opening 34,933,822.40 0.00 0.00 23,887,215.08 10,093,308.61 68,914,346.09 balance 2. Increase in the 0.00 0.00 93,469.34 871,572.00 965,041.34 reporting period (1) Purchase 0.00 0.00 93,469.34 871,572.00 965,041.34 (2) Internal R & D (3) Increase of enterprise consolidation 3.Amount decreased in the reporting period (1) Disposal 4. Ending balance II.Accumulative amortization 1. Opening 13,581,708.89 0.00 0.00 8,076,111.69 3,711,047.90 25,368,868.48 balance 2. Increase in the 366,776.65 0.00 0.00 2,206,057.05 459,814.14 3,032,647.84 reporting period (1) Provision 366,776.65 0.00 0.00 2,206,057.05 459,814.14 3,032,647.84 3.Amount decreased in the reporting period (1) Disposal 4. Ending balance 13,948,485.54 0.00 0.00 10,282,168.74 4,170,862.04 28,401,516.32 III. Provision for impairment 1. Opening balance 2. Increase in the reporting period (1) Provision 3.Amount decreased in the reporting period (1) Disposal 4. Ending balance IV. Book value 1.Book value at the end of the reporting 20,985,336.86 0.00 0.00 13,698,515.68 6,794,018.57 41,477,871.11 period 2.Book value at the beginning of the 21,352,113.51 0.00 0.00 15,811,103.39 6,382,260.71 43,545,477.61 reporting period (2) About the land use right that does not have certificate of title Inapplicable 27. Development expenditure Inapplicable 28. Goodwill (1) Original book value of the goodwill Inapplicable (2) Provision for impairment of the goodwill Inapplicable 29. Long term expenses to be apportioned In CNY Items Opening balance Increase in the Amount amortized in Other decrease Ending balance reporting period the reporting period Charge of fabrication of 49,305,000.10 14,718,343.28 20,893,290.14 0.00 43,130,053.24 special counters Refurbishment 74,651,287.13 21,714,834.94 14,319,441.48 0.00 82,046,680.59 expenses Market promotion 0.00 9,245,282.81 2,083,333.34 0.00 7,161,949.47 Others 4,616,257.92 1,740,660.12 1,159,891.49 0.00 5,197,026.55 Total 128,572,545.15 47,419,121.15 38,455,956.45 0.00 137,535,709.85 30. Deferred income tax asset/deferred income tax liability (1) Deferred income tax asset without offsetting In CNY Ending balance Opening balance Items Offsetable provisional Offsetable provisional difference Deferred income tax asset difference Deferred income tax asset Asset impairment reserve 64,862,735.35 17,749,843.25 79,775,704.17 17,676,690.28 Unrealized profit from the 294,735,562.07 59,547,817.25 272,840,911.63 67,717,517.83 intracompany transactions Offsetable loss 23,096,749.97 5,077,613.81 61,529,125.81 14,363,284.14 Deferred income 3,672,855.36 918,213.84 3,672,855.36 918,213.84 Total 386,367,902.75 83,293,488.15 417,818,596.97 100,675,706.09 (2) Deferred income tax liabilities without offsetting Inapplicable (3) Deferred income tax asset or liabilities stated with net amount after offsetting In CNY Amount mutually offset Amount mutually offset between the deferred Ending balance of the between the deferred Opening balance of the Items income tax assets and deferred income tax asset income tax assets and deferred income tax asset liabilities at the end of the or liabilities after offsetting liabilities at the beginning of or liabilities after offsetting reporting period the reporting period Deferred income tax asset 0.00 83,293,488.15 0.00 100,675,706.09 (4) Statement of deferred income tax asset not recognized In CNY Items Ending balance Opening balance Offsetable provisional difference 0.00 0.00 Offsetable loss 69,044,760.33 65,181,936.05 Provision for impairment of assets 30,788,147.42 30,660,246.75 Total 99,832,907.75 95,842,182.80 Note: The Swiss Co., one of the Company’s sub-subsidiaries, has not recognized the deferred income tax income as it is indefinite whether it can obtain enough amount of taxable income in future. Offsetable loss of the income tax assets: FIYTA Hong Kong, one of the Company's subsidiaries, is not necessary to recognize the deferred income tax asset for provision for impairment of assets according to the local tax policy (5) Unrecognized deferred income tax asset available for offsetting loss is going to expire in the following years Inapplicable 31. Other non-current assets Has the new standard for income been implemented No In CNY Items Ending balance Opening balance Advance payment for engineering works and 7,297,788.01 8,949,160.42 equipment Total 7,297,788.01 8,949,160.42 32. Short term loans (1) Classification of short-term loans In CNY Items Ending balance Opening balance Secured loan 30,078,332.26 187,118,452.97 Credit loan 520,000,000.00 360,000,000.00 Total 550,078,332.26 547,118,452.97 (2)Short-term loans overdue but still remaining outstanding Inapplicable 33. Transactional financial liabilities Inapplicable 34. Derivative financial liabilities Inapplicable 35. Notes payable Inapplicable 36. Accounts payable (1) Statement of accounts payable In CNY Items Ending balance Opening balance Payment for goods 146,930,733.24 188,957,240.00 Payment for materials 54,055,696.55 18,632,180.36 Engineering fees 26,696,117.76 52,324,191.98 Total 227,682,547.55 259,913,612.34 (2) Significant accounts payable with age exceeding 1 year Inapplicable 37. Advance Receipts (1) Statement of advances from customers In CNY Items Ending balance Opening balance Payment for goods 14,770,379.61 14,822,924.98 Rent 3,252,081.05 1,636,520.02 Total 18,022,460.66 16,459,445.00 (2) Significant advances from customers with age exceeding 1 year Inapplicable 38. Contract liabilities Inapplicable 39. Employee remuneration payable (1) Statement of employee remuneration payable In CNY Items Opening balance Increase in the reporting Decrease in the reporting Ending balance period period I. Short term remuneration 63,805,316.88 272,491,338.67 292,637,143.21 43,659,512.34 II. Post-employment benefit program - defined 5,973,720.95 22,090,963.73 23,142,138.67 4,922,546.01 contribution plan. Total 69,779,037.83 294,582,302.40 315,779,281.88 48,582,058.35 (2) Presentation of short term remuneration In CNY Items Opening balance Increase in the reporting Decrease in the reporting Ending balance period period 1. Salaries, bonus, 63,307,013.46 242,746,533.20 262,946,115.16 43,107,431.50 allowances and subsidies 2. Staff’s welfare 0.00 5,795,147.74 5,795,147.74 0.00 3. Social security premium 0.00 9,967,657.28 9,916,381.28 51,276.00 Including: medical 0.00 8,869,151.88 8,827,318.88 41,833.00 insurance premium Work injury 0.00 357,040.05 350,766.05 6,274.00 insurance Maternity 0.00 741,465.35 738,296.35 3,169.00 Insurance 4. Public reserve for 0.00 8,518,713.97 8,518,713.97 0.00 housing 5. Trade union fund and 498,303.42 3,849,765.11 3,847,263.69 500,804.84 staff education fund 6. Short-term paid leave 0.00 1,613,521.37 1,613,521.37 0.00 Total 63,805,316.88 272,491,338.67 292,637,143.21 43,659,512.34 (3) Presentation of the defined contribution plan In CNY Items Opening balance Increase in the reporting Decrease in the reporting Ending balance period period 1. Basic endowment 473,251.38 20,675,747.29 21,030,867.66 118,131.01 insurance premium 2. Unemployment insurance 0.00 552,469.46 548,054.46 4,415.00 premium 3. Contribution to the 5,500,469.57 862,746.98 1,563,216.55 4,800,000.00 enterprise annuity scheme Total 5,973,720.95 22,090,963.73 23,142,138.67 4,922,546.01 40. Taxes payable In CNY Items Ending balance Opening balance Value-added tax 12,738,306.56 32,344,121.18 Consumption tax -153,015.94 0.00 Enterprise Income Tax 15,900,477.46 21,599,264.54 Individual income tax 1,812,507.91 998,190.73 Urban maintenance and construction tax 366,990.40 321,914.01 Real estate tax 1,370,185.18 248,795.56 Education Surcharge 262,286.98 229,955.09 Others -259,753.75 180,930.81 Total 32,037,984.80 55,923,171.92 41. Other payables In CNY Items Ending balance Opening balance Interest payable 740,561.84 772,351.26 Other payables 91,573,312.72 71,047,579.04 Total 92,313,874.56 71,819,930.30 (1) Interest payable In CNY Items Ending balance Opening balance Interest payable for short term loan 740,561.84 772,351.26 Total 740,561.84 772,351.26 (2) Dividend payable Inapplicable (3) Other payables 1) Other payments stated based on nature of fund In CNY Items Ending balance Opening balance Collateral and Deposit 33,429,349.06 22,954,307.95 Fund for shop-front activities 1,939,718.66 17,461,589.65 Personal account payable 20,580,376.18 3,058,122.71 Refurbishment 5,100,755.67 6,096,460.99 Down payment 387,531.46 612,659.73 Others 30,135,581.69 20,864,438.01 Total 91,573,312.72 71,047,579.04 2) Other payables in significant amount and with aging over 1 year In CNY Items Ending balance Cause of failure in repayment or carry-over Shenzhen Tencent Computer System Co., Ltd . 4,693,429.16 Deposit for property lease Shenzhen Qianhai Zubao Network Technology 1,877,815.24 Deposit for property lease Co., Ltd. SHENZHEN COMEN MEDICAL 1,059,236.96 Deposit for property lease INSTRUMENTS CO., LTD. Shenzhen Zhongshen Commercial Property 903,166.80 Deposit for property lease Service Co., Ltd. Oracle Research & Development 804,000.00 Deposit for property lease Center(Shenzhen) Co.,Ltd Total 9,337,648.16 -- 42. Held-for-sale liabilities Inapplicable 43. Non-current liabilities due within a year In CNY Items Ending balance Opening balance Long-term liabilities due within a year 352,790.00 347,470.00 Total 352,790.00 347,470.00 44. Other current liabilities Inapplicable 45. Long-term Loan (1) Classification of Long-term Borrowings In CNY Items Ending balance Opening balance Mortgage loan 4,409,875.00 4,517,110.00 Total 4,409,875.00 4,517,110.00 Notes to classification of long term borrowings: (1) The Company has no overdue and outstanding long term borrowing. (2) The Company has no secured borrowings in the balance of the long term borrowings during the reporting period Other notes, including the interest rate interval: The interest rate of long term borrowings is 3.00%. 46. Bonds Payable (1) Bonds payable Inapplicable (2) Increase/Decrease of bonds payable (excluding other financial instruments classified as financial liabilities, such as preferred shares, perpetual bonds, etc.) Inapplicable (3) Note to the conditions and time of share conversion of convertible company bonds Inapplicable (4) Note to other financial instruments classified as financial liabilities Inapplicable 47. Lease liabilities Inapplicable 48. Long term accounts payable Inapplicable (1) Long term accounts payable stated based on the nature Inapplicable (2) Special accounts payable Inapplicable 49. Long term payroll payable (1) Statement of long term payroll payable Inapplicable (2) Change of defined benefit plans Inapplicable 50. Predicted liabilities Inapplicable 51. Deferred income In CNY Items Opening balance Increase in the Decrease in the Ending balance Cause of formation reporting period reporting period Government subsidies 3,672,855.36 0.00 0.00 3,672,855.36 Income to be recognized Total 3,672,855.36 0.00 0.00 3,672,855.36 -- Items involving government subsidies: In CNY Amount counted Amount of newly Amount counted Amount offsetting to the Related with added subsidy in to the other costs and Liabilities Opening balance non-operating Other changes Ending balance assets/related the reporting income in the expenses in the income in the with income period reporting period reporting period reporting period Special purpose fund of Shenzhen Related with industrial design 933,011.22 0.00 0.00 0.00 0.00 0.00 933,011.22 assets development (Note (1)) Funding project for construction of enterprise Related with 1,511,421.57 0.00 0.00 0.00 0.00 0.00 1,511,421.57 technology center assets designated by the state (Note (2)) Special purpose 1,162,384.83 0.00 0.00 0.00 0.00 0.00 1,162,384.83 Related with fund for 2017 income Industry and Informationization at Provincial Level (Note (3)) Special fund for upgrading Related with standard and 66,037.74 0.00 0.00 0.00 0.00 0.00 66,037.74 assets quality of consumer goods Other notes: Note (1): It is the special fund for development of industrial design in Shenzhen obtained according to the Operation Instructions on Certification and Financial Support Program for Industrial Design Centers in Shenzhen (Trial Implementation) SHEN JING MAO IT Zi [2013] No. 227 jointly promulgated by Economy, Trade and Information Commission of Shenzhen Municipality and Finance Commission of Shenzhen Municipality; Note (2) : It is the fund from the financial support for construction of enterprise technology centers in Shenzhen obtained according to the Circular of Development and Reform Commission of Shenzhen Municipality on Issuing the First Batch of Supporting Program of Financial Support Fund for Construction of Enterprise Technology Centers in Shenzhen in 2015 (SHEN JING MAO XINXI YU [2015] No. 129 on October 28, 2015; Note (3): The special purpose fund obtained according to the Circular of the Economic and Information Commission of Guangdong Province on Doing a Good Job in Submission to the Special Project Library of Production and Services at Provincial Level in 2017 (YUE JING XIN SHENG CHAN HAN (2016) No. 53) jointly promulgated by the Economic & Information Commission of Guangdong Province and the Finance Department of Guangdong Province. 52. Other non-current liabilities Inapplicable 53. Capital stock In CNY Increase / Decrease (+/ -) Opening balance Shares converted Ending balance New issuing Bonus shares Others Sub-total from reserve Total Shares 438,744,881.00 4,224,000.00 0.00 0.00 0.00 4,224,000.00 442,968,881.00 Other notes: Approved by the 3rd session of the Ninth Board of Directors held on November 12, 2018 and 2019 1st Extraordinary General Meeting held on January 11, 2019, the Company decided to grant 4.224 million restrictive A-shares to 128 persons eligible for the incentive at the price of CNY 4.40 per share. This part of A-share restrictive stock was all granted and registered for listing by the end of the reporting period. The total consideration of the shares granted to the persons eligible for the incentive received by the Company amounted to CNY 18,585,600.00, including the increased capital stock amounted to CNY 4,224,000.00. 54. Other equity instruments (1) Basic information on the outstanding other financial instruments, including preferred shares, perpetual bonds, etc. at the end of the reporting period Inapplicable (2)Movement of the outstanding other financial instruments, including preferred shares, perpetual bonds, etc. at the end of the reporting period Inapplicable 55. Capital reserve In CNY Items Opening balance Increase in the reporting Decrease in the reporting Ending balance period period Capital premium (capital 1,047,963,195.57 14,361,600.00 0.00 1,062,324,795.57 stock premium) Other capital reserve 14,492,448.65 2,234,597.31 0.00 16,727,045.96 Total 1,062,455,644.22 16,596,197.31 0.00 1,079,051,841.53 Other notes, including the note to its increase/decrease and the cause(s) of its movement in the reporting period: Approved by the 3rd session of the Ninth Board of Directors held on November 12, 2018 and 2019 1st Extraordinary General Meeting held on January 11, 2019, the Company decided to grant 4.224 million restrictive A-shares to 128 persons eligible for the incentive at the price of CNY 4.40 per share. This part of A-share restrictive stock was all granted and registered for listing by the end of the reporting period. The total consideration of the shares granted to the persons eligible for the incentive received by the Company amounted to CNY 18,585,600.00, including the increased capital stock amounted to CNY 4,224,000.00; the increased capital reserve (capital stock premium) amounted to CNY 14,361,600.00. The increase of other capital reserve was the amount of the expenses recognized in the reporting period. 56. Treasury shares In CNY Items Opening balance Increase in the reporting Decrease in the reporting Ending balance period period Shares in stock 0.00 32,902,198.89 0.00 32,902,198.89 Total 0.00 32,902,198.89 0.00 32,902,198.89 Other notes, including the note to its increase/decrease and the cause(s) of its movement in the reporting period: The increase of the shares in stock during the reporting period consisted of two parts. One part was the consideration from the subscription of the employees’ restrictive shares received totaling CNY 18,585,600.00 and the other part was the amount from the repurchase of B-shares totaling CNY 14,316,598.89. 57. Other comprehensive income In CNY Amount incurred in the reporting period Less: the Less: the amount amount counted to counted to the profit the retained and loss earnings during the during the reporting reporting Less: Amount incurred Attributable Items Opening balance period period Income Attributable to the Ending balance before income tax to minority which had which had tax parent company in the reporting shareholder been been expens after tax period s after tax counted to counted to e the other the other comprehens comprehens ive income ive income in the in the previous previous period. period. I. Other comprehensive income which 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 cannot be re-classified into profit and loss II. Other comprehensive income which shall -5,442,139.78 1,749,407.20 0.00 0.00 0.00 1,749,407.20 13.67 -3,692,732.58 be re-classified into profit and loss Conversion difference in foreign -5,442,139.78 1,749,407.20 0.00 0.00 0.00 1,749,407.20 13.67 -3,692,732.58 currency statements Total other comprehensive income -5,442,139.78 1,749,407.20 0.00 0.00 0.00 1,749,407.20 13.67 -3,692,732.58 58. Special reserve Inapplicable 59. Surplus Reserve In CNY Items Opening balance Increase in the reporting Decrease in the reporting Ending balance period period Statutory surplus reserve 161,030,899.80 0.00 0.00 161,030,899.80 Discretionary surplus 61,984,894.00 0.00 0.00 61,984,894.00 reserve Total 223,015,793.80 0.00 0.00 223,015,793.80 60. Retained earnings In CNY Items Reporting period Previous period Before adjustment: Retained earnings at the end of the previous 851,360,603.66 771,484,565.02 period After adjustment: Retained earnings at the beginning of the 0.00 771,484,565.02 reporting period Plus: Net profit attributable to the parent company’s owner in the 123,495,460.90 183,835,095.29 report period Less: Provision of statutory surplus public reserve 0.00 16,210,080.45 Dividends of common shares payable 0.00 87,748,976.20 Retained earnings at the end of the reporting period 974,856,064.56 851,360,603.66 61. Operation Income and Costs In CNY Amount incurred in the reporting period Amount incurred in the previous period Items Income Costs Income Costs Principal business 1,775,615,457.33 1,049,188,996.85 1,683,836,915.14 973,240,076.81 Other businesses 9,420,562.90 2,315,078.37 12,054,517.58 3,085,659.54 Total 1,785,036,020.23 1,051,504,075.22 1,695,891,432.72 976,325,736.35 Has the new standard for income been implemented No 62. Business Taxes and Surcharges In CNY Items Amount incurred in the reporting period Amount incurred in the previous period Consumption tax 184,399.06 35,185.87 Urban maintenance and construction tax 6,395,004.36 8,003,388.87 Education Surcharge 4,548,531.69 5,707,461.48 Real estate tax 1,886,754.77 1,987,807.87 Land use tax 211,126.82 189,899.66 Tax on using vehicle and boat 1,035.00 375.00 Stamp duty 1,102,915.98 990,689.30 Others 765,107.65 875,978.38 Total 15,094,875.33 17,790,786.43 63. Sales expenses In CNY Items Amount incurred in the reporting period Amount incurred in the previous period Salaries & bonus 145,512,139.90 139,546,287.86 Employees’ welfare 3,159,080.44 3,138,963.39 Public reserve for housing 5,750,656.98 5,500,716.30 Social security premium 22,997,809.84 20,980,632.82 Shopping mall and rental fees 83,986,057.93 64,037,045.34 Advertising, exhibition and market promotion 72,972,500.97 97,597,459.44 fee Depreciation and amortization 43,315,834.35 39,426,656.57 Packing expenses 5,502,133.20 8,692,707.95 Water & power supply and property 9,561,119.07 6,745,296.70 management fee Freight 6,971,013.87 5,646,078.77 Office expenses 2,779,674.92 4,263,061.96 Business travel expenses 4,887,148.59 5,097,034.58 Others 8,380,858.89 21,441,100.01 Total 415,776,028.95 422,113,041.69 64. Administrative expenses In CNY Items Amount incurred in the reporting period Amount incurred in the previous period Salaries & bonus 67,718,045.37 63,138,017.67 Social security premium 5,755,767.56 5,047,581.22 Depreciation and amortization 14,295,251.10 12,160,071.63 Enterprise annuity 1,125,994.66 625,494.72 Labor union dues 2,630,194.16 2,603,067.32 Training fee 518,230.67 1,199,149.56 Business travel expenses 3,353,907.41 3,182,680.24 Office expenses 1,688,108.77 1,870,367.44 Public reserve for housing 2,077,719.29 2,048,849.77 Service fee to intermediary agencies 1,625,961.96 1,792,807.55 Employees’ welfare 1,790,667.18 1,385,238.49 Others 13,772,987.29 9,189,066.08 Total 116,352,835.42 104,242,391.69 65. R & D expenditures In CNY Items Amount incurred in the reporting period Amount incurred in the previous period Salaries & bonus 10,860,114.59 10,517,474.56 Employees’ welfare 205,127.58 307,905.39 Social security premium 924,124.54 992,592.32 Public reserve for housing 304,138.80 336,550.86 Cost of materials 63,256.68 2,478,026.50 Payment for samples 868,357.42 1,146,145.67 Processing charges - 15,226.36 Depreciation and amortization 2,627,949.69 2,356,002.47 Technical cooperation fee 560,030.37 604,801.61 Others 3,113,311.26 2,531,200.28 Total 19,526,410.93 21,285,926.02 66. Financial expenses In CNY Items Amount incurred in the reporting period Amount incurred in the previous period Interest payment 12,023,843.93 14,273,043.13 Less: capitalized interest 0.00 0.00 Less: Interest income 908,850.92 1,079,587.08 Exchange gain & loss -134,740.68 33,652.69 Financial service charges and miscellaneous 5,258,713.56 4,920,682.75 Total 16,238,965.89 18,147,791.49 67. Other income In CNY Source of arising of other income Amount incurred in the reporting period Amount incurred in the previous period Government subsidies 13,045,742.36 6,497,018.80 Total 13,045,742.36 6,497,018.80 68. Return on investment In CNY Items Amount incurred in the reporting period Amount incurred in the previous period Income from long term equity investment based on 1,531,310.06 93,013.38 equity method Total 1,531,310.06 93,013.38 69. Net exposure hedge income Inapplicable 70. Income from change of the fair value Inapplicable 71. Loss from impairment of credit Items Amount incurred in the reporting period Amount incurred in the previous period Provision for bad debt of other receivables -301,318.07 -253,014.23 Loss from bad debt of accounts receivable -2,780,450.82 5,431,814.64 Total -3,081,768.89 5,178,800.41 72. Loss from impairment of assets Has the new standard for income been implemented No In CNY Items Amount incurred in the reporting period Amount incurred in the previous period I. Loss from impairment of assets II. Loss from price falling of inventories 2,514,740.86 -1,765,800.30 Total 2,514,740.8 -1,765,800.30 73. Income from disposal of assets In CNY Source of income from disposal of assets Amount incurred in the reporting period Amount incurred in the previous period Profit from disposal of assets 1,720.00 3,490.00 Loss from disposal of assets -213,730.13 -57,897.16 74. Non-operating expenses In CNY Items Amount incurred in the reporting Amount incurred in the previous Amount counted to the current period period non-operating gain and loss Disposal of account payable 212,175.93 52,506.24 212,175.93 impossible to be paid Others 82,135.77 311,353.27 82,135.77 Total 294,311.70 363,859.51 294,311.70 75. Non-operating expenditure In CNY Items Amount incurred in the reporting Amount incurred in the previous Amount counted to the current period period non-operating gain and loss Outward donation 200,000.00 380,000.00 200,000.00 Others 324,505.98 86,522.53 324,505.98 Total 524,505.98 466,522.53 524,505.98 76. Income tax expense (1) Statement of income tax expense In CNY Items Amount incurred in the reporting period Amount incurred in the previous period Income tax expense in the reporting period 22,066,289.48 34,026,742.02 Deferred income tax expense 18,548,898.09 -562,942.30 Total 40,615,187.57 33,463,799.72 (2) Process of adjustment of accounting profit and income tax expense In CNY Items Amount incurred in the reporting period Total profit 164,110,648.47 Income tax expense calculated based on the statutory/ applicable tax 41,027,662.12 rate Influence of different tax rates applicable to subsidiaries -3,658,836.86 Influence of adjustment of the income tax in the previous period 414,337.14 Influence of the non-offsetable costs, expenses and loss 1,425,382.35 Influence from the offsetable provisional difference or offsetable loss of the unrecognized deferred income tax asset at the end of the reporting 1,797,934.13 period Profit and loss of the joint ventures and associated calculated based on -382,827.52 the equity method Others -8,463.80 Income tax expenses 40,615,187.57 77. Other comprehensive income For the detail, refer to Note 57. 78. Cash Flow Statement Items (1) Other operation activities related cash receipts In CNY Items Amount incurred in the reporting period Amount incurred in the previous period Commodity promotion fee 7,326,827.42 6,072,093.46 Government subsidies 13,045,742.36 6,497,018.80 Cash deposit 6,493,217.88 4,350,761.76 Interest income 908,850.92 1,079,587.08 Reserve 687,618.62 1,406,129.93 Others 12,513,870.71 5,617,057.35 Total 40,976,127.91 25,022,648.38 (2) Other cash paid in connection with operation activities In CNY Items Amount incurred in the reporting period Amount incurred in the previous period Market promotion 55,480,743.21 66,401,628.85 Rent 54,742,365.90 39,732,881.18 Shopping mall fees 30,786,192.52 26,461,676.31 Advertisement fee 11,083,207.52 11,176,335.56 Packing expenses 5,703,500.29 8,883,462.57 Business travel expenses 8,284,981.38 8,333,226.89 Water and electricity fees 6,714,986.63 7,029,160.13 R & D expenses 4,322,224.36 6,759,781.73 Office expenses 5,207,489.18 6,534,273.39 Freight 7,747,014.23 6,018,407.34 Exhibition fee 6,546,230.71 5,974,002.19 Property management fee 7,982,065.97 4,228,170.40 Business entertainment 2,683,582.53 2,830,040.57 Service fee to intermediary agencies 2,043,210.38 2,156,715.09 Others 27,973,348.54 14,825,683.48 Total 237,301,143.35 217,345,445.68 (3) Other investment activities related cash receipts Inapplicable (4) Other investment activities related cash payments Inapplicable (5) Other fund-raising activities related cash receipts Inapplicable (6) Other fund-raising activities related cash payments In CNY Items Amount incurred in the reporting period Amount incurred in the previous period Others 17,565,400.00 0.00 Total 17,565,400.00 0.00 Note to the cash paid for other fund raising related activities: The amount incurred in the reporting period was the payment for repurchase of B-shares. 79. Supplementary information of the cash flow statement (1) Supplementary information of the cash flow statement In CNY Supplementary information Amount in the reporting period Amount in the previous period 1. Net cash flows arising from adjustment of net -- -- profit into operating activities: Net profit 123,495,460.90 112,367,921.44 Plus: Provision for impairment of assets 567,028.03 -14,525,567.48 Depreciation of fixed assets, depletion of oil and gas asset, depreciation of productive biological 21,385,076.08 21,080,763.14 asset Amortization of intangible assets 3,291,008.97 2,430,354.87 Amortization of the long-term expenses to be 46,754,405.36 40,947,482.90 apportioned Loss (income is stated in “-”) from disposal of fixed assets, intangible assets and other long 212,010.13 54,407.16 term assets Financial expenses (income is stated with “-”) 12,023,843.93 14,273,043.13 Investment loss (income is stated with “-”) -1,531,310.06 -93,013.38 Decrease of the deferred income tax asset 17,382,217.94 -562,942.30 (increase is stated with “_”) Decrease of inventories (Increase is stated with 57,362,696.37 94,502,115.24 “-”) Decrease of operative items receivable (Increase -112,532,040.70 -56,854,840.95 is stated with “-”) Increase of operative items payable (Decrease is -9,395,746.59 11,052,550.32 stated with “-”) Net cash flows arising from operating activities 159,014,650.37 224,672,274.09 2. Significant investment and fund-raising activities with no cash income and expenses -- -- involved: 3. Net change in cash and cash equivalents: -- -- Ending cash balance 224,316,552.42 278,804,271.58 Less: Opening balance of cash 162,623,059.97 184,947,891.32 Net increase of cash and cash equivalents 61,693,492.45 93,856,380.26 (2) Net cash paid for acquisition of subsidiary in the reporting period Inapplicable (3) Net cash received from disposal of subsidiary in the reporting period Inapplicable (4) Composition of cash and cash equivalents In CNY Items Ending balance Opening balance I. Cash 224,316,552.42 162,623,059.97 Including: Cash in stock 225,027.58 420,783.85 Bank deposit available for payment at 223,207,376.62 160,135,454.62 any time Other monetary fund used for payment at 884,148.22 2,066,821.50 any time II. Cash equivalents 224,316,552.42 162,623,059.97 III. Ending balance of cash and cash equivalents 224,316,552.42 162,623,059.97 Including: cash and cash equivalents restricted for use from the parent company or other 2,205,000.00 2,205,000.00 subsidiaries of the Group 80. Notes to items of statement of change in owner’s equity Inapplicable 81. Assets restricted in ownership or use right In CNY Items Book value at the end of the reporting period Cause of restriction L/G cash deposit: CNY1,575,000.00; judicially frozen Monetary fund 2,205,000.00 fund: CNY630,000.00. Fixed assets 14,609,376.25 Security guarantee Other receivables 8,958,057.64 Guarantee for property suit Total 25,772,433.89 -- 82. Foreign currency monetary items (1) Foreign currency monetary items Items Ending balance of foreign currency Conversion rate Ending balance of Renminbi converted Monetary capital -- -- 19,563,618.98 Including: USD 1,544,000.97 6.87470 10,614,543.46 Euro 5,335.38 7.81700 41,706.67 HKD 8,474,774.02 0.87966 7,454,919.72 CHF 206,348.97 7.03880 1,452,449.13 Accounts receivable -- -- 19,722,262.85 Including: USD 1,666,823.49 6.87470 11,458,911.45 Euro 38,235.40 7.81700 298,886.12 HKD 8,181,240.80 0.87966 7,196,710.28 CHF 109,074.70 7.03880 767,755.00 Long-term Loan -- -- 4,409,875.00 Including: USD 0.00 0.00 0.00 Euro 0.00 0.00 0.00 HKD 0.00 0.00 0.00 CHF 625,000.00 7.03880 4,409,875.00 Advance payments 7,691,652.56 Including: HKD 567,280.00 0.87966 499,013.52 CHF 742,779.63 7.03880 5,228,277.26 JPYen 30,781,650.00 0.06382 1,964,361.78 Other receivables 6,622,119.65 Including: HKD 281,839.74 0.87966 247,923.15 CHF 905,580.00 7.03880 6,374,196.50 Accounts payable 5,839,977.02 Including: USD 3,144.30 6.87470 21,616.12 HKD 6,459,259.72 0.87966 5,681,952.41 CHF 19,379.51 7.03880 136,408.49 Advance receipt 1,903,605.64 Including: USD 265,931.77 6.87470 1,828,201.14 HKD 85,720.05 0.87966 75,404.50 Other payables 1,289,717.20 Including: USD 25,326.00 6.87470 174,108.65 HKD 498,843.80 0.87966 438,812.94 CHF 96,152.13 7.03880 676,795.61 Short term loans 30,086,500.00 Including: HKD 23,000,000.00 0.87966 20,232,180.00 CHF 1,400,000.00 7.03880 9,854,320.00 Non-current liabilities due within a year Including: CHF 50,000.00 7.03880 352,790.00 (2) Note to overseas operating entities, including important overseas operating entities, which should be disclosed about its principal business place, function currency for bookkeeping and basis for the choice. In case of any change in function currency, the cause should be disclosed. Inapplicable 83. Hedging Inapplicable 84. Government subsidies (1) Basic information of government subsidies In CNY Categories Amount Items presented Amount counted to the current profit and loss Allowance for BaselWorld from Shenzhen Watch & Clock 114,333.32 Other income 114,333.32 Association Financial support in 2018 from 435,000.00 Other income 435,000.00 Shenzhen Standardization Special Fund Industrial Standard in 2018 (Note (1)) Financial support of Shenzhen Intellectual Property Big Data 500,000.00 Other income 500,000.00 Testing Platform (Note (2)) 2018 R & D Financial Support from Shenzhen Science & Technology 1,191,000.00 Other income 1,191,000.00 Innovation Commission (Note (3)) 2018 Self-innovation Industry Development Financial Support 593,600.00 Other income 593,600.00 from Shenzhen Science & Technology Innovation Commission SupplementaryAward of the 20th China PatentAward of Guangdong 150,000.00 Other income 150,000.00 Intellectual Property 2018 Head Office Enterprise ContributionAward from Development and Reform 4,843,500.00 Other income 4,843,500.00 Commission of Shenzhen Municipality (Note (4)) Subsidy of the Talent Qualification Improvement Engineering Project 25,000.00 Other income 25,000.00 of the Human Resource Bureau of Nanshan District, Shenzhen Allowance for the supporting project of commerce & trade 712,664.00 Other income 712,664.00 circulation innovation development (Note (5)) Financial support from the Special Fund of Shenzhen Standards 233,000.00 Other income 233,000.00 in 2018 2018 R & D financial support from the municipal bureau (Note 961,000.00 Other income 961,000.00 (6)) Bonus of the R & D Financial Support Projects of Guangming 351,000.00 Other income 351,000.00 District 2018 Special fund for the Economic Development of Guangdong 300,000.00 Other income 300,000.00 District 2019 Financial support for the production capacity expansion and efficiency improvement of the key industrial 1,000,000.00 Other income 1,000,000.00 enterprises from the Science and Technology Innovation Commission in 2018 (Note (7)) Special financial support for the standards of the Market and 108,000.00 Other income 108,000.00 Quality Supervision Commission Allowance for the Endowment and Medical Insurance for the Disabled in the Second Half of 2018 from the 3,651.47 Other income 3,651.47 United Front and Social Construction Bureau of Guangming District Birth allowance from the Social Security Bureau of Shenzhen 65,323.57 Other income 65,323.57 Municipality R & D financial support from 258,000.00 Other income 258,000.00 Guangming District in 2017 Domestic market development subsidy of Small and Medium-sized 14,670.00 Other income 14,670.00 Enterprises Division of Shenzhen Municipality SupplementaryAward of the 20th China PatentAward of Guangdong 150,000.00 Other income 150,000.00 Province - Shenzhen Market Supervision Financial support from the Finance Bureau of Guangming District on 286,000.00 Other income 286,000.00 Making Enterprises in Guangming District Bigger and Stronger Shenzhen R & D Financial Support in 2018 (expenses in 2017) (Note 550,000.00 Other income 550,000.00 (8)) Allowance for the talents’ quality 100,000.00 Other income 100,000.00 improvement project Bonus for encouraging medium-sized and small 100,000.00 Other income 100,000.00 enterprises from Ecomomic Promotion Bureau of Nanshan District Total 13,045,742.36 13,045,742.36 Note (1): It refers to the financial support from the government according to the “Measures for Management of the Special Fund for Developing Shenzhen Standards in Shenzhen” and the “Operating Instructions on Financial Support with the Special Fund for Developing Shenzhen Standards in Shenzhen” (SHEN SHI ZHI (2019) No. 17) promulgated by Market and Quality Supervision Commission of Shenzhen Municipality. Note (2): It refers to the special fund obtained according to the “Circular on Application for the Financial Support for the Intellectual Property Big Data Monitoring in Shenzhen during 2018 - 2019” promulgated by Market and Quality Supervision Commission of Shenzhen Municipality. Note (3): It refers to the bonus from of the governmental financial support bonus obtained according to the “Announcement of the First Enterprises to be Financially Supported for the Enterprise R & D Financial Support Program in 2018” promulgated by Science & Technology Innovation Commission of Shenzhen Municipality. Note (4): It refers to the governmental financial support obtained according to the “Measures for Implementation of Encouraging Development of Head Office Enterprises in Shenzhen” promulgated by Development and Reform Commission of Shenzhen Municipality (SHEN FU GUI (2017) No. 7). Note (5): It refers to the governmental financial support according to the “Program for Supporting Commerce & Trade Circulation Innovation Development 2019” promulgated by Shenzhen Municipal Commission of Economy and Informatization. Note (6): It refers to the bonus from of the governmental financial support bonus obtained according to the “Announcement of the First Enterprises to be Financially Supported for the Enterprise R & D Financial Support Program in 2018” promulgated by Science & Technology Innovation Commission of Shenzhen Municipality. Note (7): It refers to the governmental financial support obtained according to the “Circular on Instructions for Application for Projects to be Awarded for Production Capacity Expansion and Efficiency Improvement of the Key Industrial Enterprises in 2018” promulgated by Shenzhen Municipal Commission of Economy and Informatization. Note (8): It refers to the bonus from of the governmental financial support bonus obtained according to the “Announcement of the First Enterprises to be Financially Supported for the Enterprise R & D Financial Support Program in 2018” promulgated by Science & Technology Innovation Commission of Shenzhen Municipality. (2) Refunding of the government subsidies Inapplicable 85. Others Inapplicable VIII. Change in consolidation scope 1. Consolidation of enterprises not under the same control (1) Consolidation of enterprises not under common control during the reporting period Inapplicable (2) Consolidation cost and goodwill Inapplicable (3) Purchasee's distinguishable assets and liabilities as at the date of purchase Inapplicable (4) Profit or loss of the equity held before the date of purchase arising from re-measurement based on the fair value Inapplicable (5) Note to the consolidation consideration or the fair value of the distinguishable assets and liabilities of the purchasee which cannot be reasonably identified as at the date of purchase or at the end of the very period of consolidation Inapplicable (6) Other notes Inapplicable 2. Consolidation of enterprises under the same control (1) Consolidation of enterprises not under common control during the reporting period Inapplicable (2) Consolidation cost Inapplicable (3) Book value of the consolidatee's assets and liabilities as at the date of consolidation Inapplicable 3. Counter purchase Inapplicable 4. Disposal of subsidiaries Inapplicable 5. Change of consolidation scope due to other reason Inapplicable 6. Others Inapplicable IX. Equity in other entities 1. Equity in a subsidiary (1) Composition of an enterprise group Shareholding proportion Subsidiaries Main business location Place of registration Nature of business Way of acquisition Direct Indirect Establishment or Harmony Shenzhen Shenzhen Commerce 100.00% investment Establishment or the Manufacture Co. Shenzhen Shenzhen Manufacture 90.00% 10.00% investment Establishment or the Hong Kong Co. Hong Kong Hong Kong Commerce 100.00% investment Establishment or Station-68 Co. Hong Kong Hong Kong Commerce 60.00% investment Establishment or Harbin Co. Harbin Harbin Commerce 100.00% investment Establishment or the Technology Co. Shenzhen Shenzhen Manufacture 100.00% investment Establishment or SHIYUEHUI Shenzhen Shenzhen Commerce 100.00% investment Emile Chouriet Establishment or Shenzhen Shenzhen Commerce 100.00% (Shenzhen) Limited investment Establishment or The Sales Co. Shenzhen Shenzhen Commerce 100.00% investment Consolidation of Hengdarui Shenyang Shenyang Commerce 100.00% enterprises under the same control Consolidation of Switzerland Company Switzerland Switzerland Commerce 100.00% enterprises not under the same control (2) Important non-wholly-owned subsidiaries Inapplicable (3) Key financial information of important non-wholly-owned subsidiaries Inapplicable (4) Significant restriction on use of enterprise group’s assets and paying off the enterprise group’s liabilities Inapplicable (5) Financial support or other support provided to the structured entities incorporated in the scope of consolidated financial statements Inapplicable 2. Transaction with a subsidiary with the share of the owner’s equity changed but still under control (1)Note to change in the share of the owner's equity in subsidiaries Inapplicable (2) Affect of the transaction on the minority equity and owner's equity attributable to the parent company Inapplicable 3. Equity in joint venture arrangement or associates (1) Important joint ventures or associates Name of joint venture Main business Place of registration Nature of business Shareholding proportion Accounting or associate location treatment method for investment in Direct Indirect joint ventures or associates Shanghai Watch Shanghai Shanghai Manufacture 25.00% Equity method Industry Co., Ltd. (2) Key financial information of important joint ventures Inapplicable (3) Key financial information of important associates In CNY Ending balance/amount incurred in the Opening balance/amount incurred in the reporting period reporting period Current assets 108,665,233.95 99,901,286.09 Non-current assets 15,540,417.40 15,459,207.08 Total assets 124,205,651.35 115,360,493.17 Current liabilities 13,047,529.95 10,833,917.48 Total liabilities 13,047,529.95 10,833,917.48 Equity attributable to the parent company’s 111,158,121.40 104,526,575.69 shareholders Share of net assets calculated according to the 27,789,530.35 26,131,643.92 shareholding proportion Book value of the equity investment in 46,412,373.21 44,881,063.15 associates Revenue 57,039,155.07 46,323,386.37 Net profit 6,125,240.23 372,053.52 Total comprehensive income 6,125,240.23 372,053.52 (4) Financial information summary of unimportant joint ventures and associates Inapplicable (5) Note to significant restriction on the competence of a joint venture or an associate in transferring funds to the Company Inapplicable (6) Excessive loss incurred to a joint venture or an associate Inapplicable (7) Unrecognized commitment in connection with investment in a joint venture Inapplicable (8) Contingent liabilities in connection with investment in joint ventures or associates Inapplicable 4. Important joint operation Inapplicable 5. Equity in the structurized entities not incorporated in the consolidated financial statements Inapplicable 6. Others Inapplicable X. Financial instruments and risk management The Company's major financial instruments include monetary funds, notes receivable and accounts receivable, other receivables, available-for-sale financial assets, equity investment, notes payable and accounts payable, other payables, borrowings, etc. For details of financial instruments, please refer to the relevant items in Note VI. The risks involved in these financial instruments and the Company’s risk control policies aiming at reducing these risks are stated as follows. The Company’s management conducts management and monitoring of these risk exposures so as to ensure risks to be controlled within a specific limitation. The Company used the sensitivity analysis technique to analyze the possible influence of the reasonable and possible change of the risk variables upon the current profit and loss or shareholders’ equity. Since any risk variables seldom happen individually, relativity between variables will cause significant influences on the ultimate impacted amount of the change in a risk variable, so the following statement is based on supposition that each variable happens independently. (I) Risk management goals and policies The goal of risk management is to keep proper balance between risk and profit, to reduce negative influence of financial risk to financial performance of the Company, lower the negative influence of the risks upon the Company's business performance to the minimum and maximize the interest of the shareholders and its other equity investors. Based on this goal, the basic strategy of risk management for the Company is to ascertain and analyze all the risks that the Group confronts, establish appropriate bottom line for risk-taking, and manage the risks accordingly, in the meantime supervise all the risks in a timely and reliable manner, controlling the risks within the limited scope. 1. Market Risks (1) Foreign exchange risk Foreign exchange risk refers to the risk arising from the loss on exchange rate changes. The Company is mainly exposed to foreign exchange risk that relates to Hong Kong dollars, Swiss Franc. Except a number of the Company's subsidiaries that conduct procurement and sales in Hong Kong Dollars and Swiss Franc, the principal business activities of the Company’s principal business activities are settled in Renminbi. As at 30 June 2019, except the balance of the aforesaid assets or liabilities which are stated in Hong Kong dollar, Swiss Franc, US dollar, etc., the balance of the financial assets and financial liabilities of the Company are all in Renminbi. Foreign exchange risks arising from the balance of assets and liabilities of such foreign currencies may have an impact on the operating results of the Company. Items Ending balance Opening balance Monetary fund 19,563,618.98 11,875,297.06 Notes receivable and accounts receivable 19,722,262.85 11,545,880.33 Advance payment for goods 7,691,652.56 4,733,540.86 Other receivables 6,622,119.65 6,589,218.31 Notes payable and accounts payable 5,839,977.02 2,655,278.19 Advance from customers 1,903,605.64 65,276.30 Other payables 1,289,717.20 489,881.07 Short term loans 30,086,500.00 42,118,460.00 Non-current liabilities due within a year 352,790.00 347,470.00 Long-term Loan 4,409,875.00 4,517,110.00 The Company paid close attention to the influence from the movement of exchange rate upon the Company. The Company has not taken any measures to avoid foreign exchange risks. Sensitivity analysis on foreign exchange risks: Assumption for sensitivity analysis on foreign exchange risks: both the net investment hedge of the overseas business and cash flow hedge are highly effective. On the basis of the aforesaid assumption, while the other variables remain unchanged, the pre-tax influence of the reasonable change of the exchange rate possibly incurred upon the current income and loss and shareholders’ equity is as follows: End of the reporting period End of the same period of the previous year Items Change of the exchange rate Influence upon the Influence upon the Influence upon the Influence upon the profit shareholders’ equity profit shareholders’ equity Appreciation against 978,180.95 978,180.95 483,724.43 483,724.43 Renminbi by 5% Monetary fund Depreciation against -978,180.95 -978,180.95 -483,724.43 -483,724.43 Renminbi by 5% Notes receivable and accounts Appreciation against 986,113.14 986,113.14 846,483.91 846,483.91 receivable Renminbi by 5% Depreciation against -986,113.14 -986,113.14 -846,483.91 -846,483.91 Renminbi by 5% Appreciation against 384,582.63 384,582.63 598,990.31 598,990.31 Renminbi by 5% Advance payment for goods Depreciation against -384,582.63 -384,582.63 -598,990.31 -598,990.31 Renminbi by 5% Appreciation against 331,105.98 331,105.98 312,581.81 312,581.81 Renminbi by 5% Other receivables Depreciation against -331,105.98 -331,105.98 -312,581.81 -312,581.81 Renminbi by 5% Appreciation against 291,998.85 291,998.85 494,013.75 494,013.75 Notes payable and accounts Renminbi by 5% payable Depreciation against -291,998.85 -291,998.85 -494,013.75 -494,013.75 Renminbi by 5% Appreciation against 95,180.28 95,180.28 9,193.71 9,193.71 Renminbi by 5% Advance from customers Depreciation against -95,180.28 -95,180.28 -9,193.71 -9,193.71 Renminbi by 5% Appreciation against 64,485.86 64,485.86 23,904.05 23,904.05 Renminbi by 5% Other payables Depreciation against -64,485.86 -64,485.86 -23,904.05 -23,904.05 Renminbi by 5% Appreciation against 1,504,325.00 1,504,325.00 1,264,650.00 1,264,650.00 Renminbi by 5% Short term loans Depreciation against -1,504,325.00 -1,504,325.00 -1,264,650.00 -1,264,650.00 Renminbi by 5% Appreciation against 17,639.50 17,639.50 - - Non-current liabilities due within Renminbi by 5% a year Depreciation against -17,639.50 -17,639.50 - - Renminbi by 5% Appreciation against 220,493.75 220,493.75 240,518.75 240,518.75 Renminbi by 5% Long-term borrowings Depreciation against -220,493.75 -220,493.75 -240,518.75 -240,518.75 Renminbi by 5% (2) Interest rate risk - risk from change of the cash flow The Company’s risk of movement in the cash flow of financial instrument arising from change of the interest rate is mainly related with the bank loan of the fluctuating interest rate. The Company's policy is to maintain the fluctuating interest rate of these loans. Sensitivity analysis on interest rate risks: Sensitivity analysis on interest rate risks is based on the following assumption: Influence of the change of market interest rate upon the interest income or expenses of the financial instruments with variable interest rates; For the financial instrument with fixed interest rate measured based on the fair value, the change of the interest rate only impact its interest income or expenses; For the derivative financial instrument designated as arbitrage tool, the change of the market interest rate impacts its fair value and all the interest rate hedging is predicted to be highly valid; The market interest rate as at the balance sheet day uses the discounted cash flow technique to calculate the change of the fair value of the financial instrument and other financial assets and liabilities. On the basis of the aforesaid assumption, while the other variables remain unchanged, the pre-tax influence of the reasonable change of the interest rate possibly incurred upon the current income and loss and shareholders’ equity is as follows: As at June 30, 2019, the Company had no borrowings calculated based on the floating interest rate. (3) Other price risks The investment classified as the available-for-sale financial asset held by the Company is measured at the cost value as at the balance sheet date. Therefore, there exists no price risk necessary to be disclosed in the Company. 2. Credit risk As at June 30, 2019, the maximum credit risk exposure possibly arising from the financial loss to the Company was mainly from the loss arising from failure of the other party to the contract in implementing the obligations which caused loss from generation of the Company's financial assets, which specifically included: the carrying amount of the financial asses recognized in the consolidated balance sheet. The Company provided no other guarantee which may render the Company bear the credit risk. For the purpose of lowering the credit risk, the Company may possibly access to the guarantee, credit record and other elements from the third party based on the debtor's financial status, independent rating and other elements, such as assessment of the debtor’s credit qualification, such as the current market situation and specifying the corresponding debt limit and credit term. The Company conducts regular supervision over the debtors’ credit records and may take the measures of written reminders, shortening the credit period or canceling the credit period, etc. against the debtors with poor credit record so as to ensure the Company’s overall credit risk to be within the controllable scope. In addition, the Company examines the recovery of the accounts receivable on each balance sheet date so as to ensure to provide sufficient bad debt reserve for the accounts impossible to be recovered. Therefore, in the opinion of the Company's management, the credit risk borne by the Company has been greatly reduced. The Company's working capital is deposited in banks with higher credit ratings, so the credit risk of liquid funds is relatively low. In the Company's accounts receivable, the accounts receivable owed by the top five customers took 11.16% of the Company's total accounts receivable; in the Company's other receivables, the total other receivables owed by the top five customers took 16.8% of the Company's total other receivables. 3. Liquidity risk In management of the liquidity risk, the Company kept the cash and cash equivalent as sufficient as the management considered necessary and conducted supervision over the same so as to satisfy the Company's business requirements and reduced the impact from the fluctuation of cash flow. The Company's management conducted monitoring over the application of the bank loans and ensured its compliance with the loan agreements. The Company took the capital arising from its business and bank loans as the major capital source. As at June 30,2019, the amount of the bank loan not yet used by the Company was CNY 1,527.61 million (December 31,2018: CNY 1,981.03 million). The expiry of the remaining contract obligations for the financial assets and liabilities held by the Company not discounted is analyzed as follows: (in CNY 10,000) Items Within 1 year 1 to 2 years 2-3 years Over 3 years Total Financial assets: Monetary fund 22,652.16 - - - 22,652.16 Notes receivable and accounts receivable 47173.41 - - - 47173.41 Where: Notes receivable 994.10 - - - 994.10 Accounts receivable 46,179.31 - - - 46,179.31 Other receivables 6,527.13 - - - 6,527.13 Total financial assets 76,352.70 - - - 76,352.70 Financial liabilities: Short term loans 55,007.83 - - - 55,007.83 Notes payable and accounts payable 22,768.25 - - - 22,768.25 Including: accounts payable 22,768.25 - - - 22,768.25 Other payables 9231.39 - - - 9231.39 Including: interest payable 74.06 - - - 74.06 Other payables 9,157.33 - - - 9,157.33 Non-current liabilities due within a year 35.28 - - - 35.28 Long-term Loan - 440.99 440.99 Financial guarantee 11,007.83 - - - 11,007.83 Total financial liabilities and contingent 174,403.28 - - 440.99 174,844.27 liabilities XI. Disclosure of Fair Value 1. Fair value at the end of the reporting period of the assets and liabilities measured based on the fair value Inapplicable 2. Basis for determining the market price of the items measured based on the continuous and non-continuous first level fair value Inapplicable 3. Items measured based on the continuous or uncontinuous 2nd level fair value, valuation technique as used, nature of important parameters and quantitative information Inapplicable 4. Items measured based on the continuous or uncontinuous 3rd level fair value, valuation technique as used, nature of important parameters and quantitative information Inapplicable 5. Items measured based on the continuous 3rd level fair value, sensitivity analysis on adjusted information and unobservable parameters between the book value at beginning and end of the period Inapplicable 6. In case items measured based on fair value are converted between different levels incurred in the current period, state the cause of conversion and determine conversion time point Inapplicable 7. Change of valuation technique incurred in the current period and cause of such change Inapplicable 8. Fair value of financial assets and financial liabilities not measured at fair value Inapplicable 9. Others Inapplicable XII. Related parties and transactions 1. Details of the parent company of the Company Shareholding ratio of the Ratio of vote right of the Name of the parent Place of registration Nature of business Registered capital parent company in the parent company in the company Company Company Investment in industries, AVIC International Holding domestic trade, material Shenzhen 36.79% 36.79% Limited supply and distribution; 1,166,161,996 import and export. Note to the parent company: The proportion of the equity held by AVIC International Shenzhen Co., Ltd. in AVIC International Holdings Limited is 33.93%. AVIC International Shenzhen is a wholly owned subsidiary of AVIC International Holdings Limited (AVIC IHL). China Aviation Industry Corporation (AVIC) directly holds 62.52% of the equity of AVIC IHL. Therefore, the Company’s eventual controller is AVIC. Therefore, the eventual controller of the Company is AVIC. 2. Subsidiaries of the Company Refer to Note IX. 1 for details of subsidiaries of the Company. 3. Joint venture and association of the Company Refer to NOTE IX.3 for details of the Company's major joint ventures or associates. 4. Other related parties of the Company Names of other related parties Relationship between other related parties and the Company AVIC Property Management Co., Ltd. (AVIC Property) Controlled by the same party ShenzhenAVIC Building Technology Co., Ltd. (AVIC Building Co.) Controlled by the same party Rainbow Department Store Co., Ltd. (RAINBOW) Controlled by the same party Shennan Circuit Co., Ltd. (Shennan Circuit) Controlled by the same party AVIC SUNDACo., Ltd. (AVIC SUNDA) Controlled by the same party AVIC Securities Co., Ltd. (AVIC Securities) Controlled by the same party Xi’an Skytel Hotel Co., Ltd. (Skytel Hotel) Controlled by the same party ShenzhenAVIC City Property Development Co., Ltd.(AVIC City Property) Controlled by the same party ShenzhenAVIC Development Co., Ltd. (AVIC City Development) Controlled by the same party ShenzhenAVIC Guanlan Real Estate Development Co., Ltd. (AVIC Controlled by the same party Guanlan Real Estate) ShenzhenAVIC Changtai Investment Development Co., Ltd. (AVIC Controlled by the same party Changtai) ShenzhenAVIC 9 SquareAssets Management Co., Ltd. (9 Square Controlled by the same party Asset) ShenzhenAVIC City Investment Co., Ltd.(AVIC City Investment) Controlled by the same party Shenzhen CATIC Group Enterprise Training Center (CATIC Training Controlled by the same party Center) Ganzhou CATIC 9 Square Commerce Co., Ltd. (Ganzhou 9 Square) Controlled by the same party AVIC City Property (Kunshan) Co., Ltd. (AVIC City Property (Kunshan) ) Controlled by the same party ShenzhenAVIC Huacheng Property Development Co., Ltd.(AVIC Controlled by the same party Huacheng Property) AVIC Finance Co., Ltd. (AVIC Finance ) Controlled by the same party ShenzhenAVIC Security Service Co., Ltd. (AVIC Security Service) Controlled by the same party ShenzhenAVIC PropertyAsset Management Co., Ltd. (AVIC Property Controlled by the same party Asset Management) Jiujiang 9 Square Commerce Management Co., Ltd. (9 Square Commerce Controlled by the same party Management) ShenzhenAVIC Grand Skylight Hotel Management Co., Ltd. (Grand Controlled by the same party Skylight Hotel) ShenzhenAVIC City Parking Lots Management Co., Ltd. (AVIC Parking Controlled by the same party Lots Management) ShenzhenAVIC Grand Skylight Hotel Management Co., Ltd. (Grand Controlled by the same party Skylight Hotel) Shenzhen CATIC Technical Testing Office (CATIC Technical Testing) Controlled by the same party Gongqingcheng CATIC Cultural Investment Co., Ltd. (Gongqingcheng Controlled by the same party CATIC Cultural Investment) AVIC International Complete Set Equipment Co., Ltd. (AVIC Complete Set Controlled by the same party Equipment) ShenzhenAVIC Real Estate Development Co., Ltd. (AVIC Real Estate) Controlled by the same party JiujiangAVIC City Real Estate Development Co., Ltd. (JiujiangAVIC Real Controlled by the same party Estate) ShenzhenAVIC PropertyAsset Management Co., Ltd. (AVIC Property Controlled by the same party Asset Management) ShenzhenAVIC Nanguang Elevator Co., Ltd. (AVIC Nanguang ) Controlled by the same party ShenzhenAVIC Curtain Wall Engineering Co., Ltd. (AVIC Curtain Wall Controlled by the same party Engineering ) Huang Yongfeng Asenior executive Wang Mingchuan Asenior executive Fu Debin Asenior executive Xiao Zhanglin Asenior executive Wang Bo Asenior executive Chen Libin Asenior executive Wang Jianxin Asenior executive Zhong Hongming Asenior executive Tang Xiaofei Asenior executive Wang Baoying Asenior executive Sheng Qing Asenior executive Fang Jiasheng Asenior executive Lu Bingqiang Asenior executive Lu Wanjun Asenior executive Liu Xiaoming Asenior executive Pan Bo Asenior executive Li Ming Asenior executive Chen Zhuo Asenior executive Zou Zhixiang Asenior executive 5. Related transactions (1) Related transactions of purchase and sale of commodities and supply and acceptance of labor services Statement of purchase of commodities and acceptance of labor services In CNY Description of Related Amount incurred in the Transaction quota Has it exceeded the Amount incurred Related parties Transactions reporting period as approved transaction quota in the previous period AVIC Property Reception of services 4,665,553.46 10,000,000.00 No 2,966,178.17 Rainbow Ltd. Shopping mall 3,005,499.82 8,000,000.00 No 2,554,556.27 fees/purchase of goods ShenzhenAVIC Group Training fee 0.00 500,000.00 No 144,548.39 Enterprise Training Center Statement of sales of goods/supply of labor services In CNY Related parties Description of Related Amount incurred in the reporting Amount incurred in the previous period Transactions period Rainbow Ltd. Products and labor services 35,273,411.88 35,060,373.29 Shennan Circuit Products and labor services 4,656,548.21 3,300,322.92 Ganzhou 9 Square Products and labor services 68,392.00 701,423.33 Shenzhen Grand Skylight Hotel Products and labor services 0.00 5,982.90 Management Co., Ltd. (2) Related entrusted management/contracted and mandatory management/contracting Inapplicable (3) Related lease The Company as lessor: In CNY Names of lessees Categories of leasehold properties Rental income recognized in the Rental income recognized in the current period previous period AVIC Property Housing 9,236,271.13 3,786,677.96 Tianyue Hotel Housing 2,095,238.09 1,746,031.74 9 SquareAssets Housing 993,238.13 579,564.39 AVIC SUNDA Housing 926,577.86 898,931.71 CATIC Public Security Service Co. Housing 706,043.41 0.00 AVIC Securities Housing 527,428.55 608,571.42 Rainbow Ltd. Housing 289,764.58 229,327.58 Guanlan Real Estate Housing 172,145.99 53,919.42 AVIC City Property Co., Ltd. Housing 149,630.10 187,965.57 AVIC Real Estate Development Housing 133,876.07 33,406.82 AVIC City Investment Housing 133,320.56 232,636.75 AVIC Huacheng Property Housing 117,566.50 143,684.84 AVIC City Development Housing 0.00 2,428.57 The Company as lessee: In CNY Names of lessees Categories of leasehold properties Rental fee recognized in the Rental fee recognized in the current period previous period Ganzhou 9 Square Housing 538,609.84 544,600.15 JiujiangAVIC Real Estate Housing 191,570.45 201,501.48 AVIC City Property (Kunshan) Housing 87,666.38 110,753.27 AVIC City Property Co., Ltd. Housing 203,568.04 0.00 (4) Related guarantee The Company as a guarantor In CNY Guarantees Amount guaranteed Effective date Expiring date Is the guarantee finished the Hong Kong Co. 30,078,332.26 July 24, 2018 May 31, 2020 No Harmony 80,000,000.00 December 30, 2018 December 29, 2019 No The Company as a guarantee In CNY Guarantors Amount guaranteed Effective date Expiring date Is the guarantee finished Harmony 60,000,000.00 December 04, 2018 March 08, 2020 No (5) Borrowings and lendings among related parties In CNY Related parties Borrowing amount Starting date Due date Note Borrowed from AVIC Financial Co. 100,000,000.00 April 02, 2019 April 02, 2020 AVIC Financial Co. 50,000,000.00 March 26, 2019 March 26, 2020 Lending (6) Assets assignment and liabilities reorganization of related parties Inapplicable (7)Remuneration to senior executives Inapplicable (8) Other related transactions Inapplicable 6. Accounts receivable from and payable to related parties (1) Receivables In CNY Ending balance Opening balance Project name Related parties Book balance Bad debt reserve Book balance Bad debt reserve Accounts receivable: Rainbow Ltd. 7,724,759.31 386,237.97 2,205,867.79 115,293.39 AVIC City Property 46,669.00 2,333.45 3.00 0.15 Co., Ltd. Shennan Circuit 2,972,141.83 148,607.09 1,659,077.38 82,953.87 Ganzhou 9 Square 0.00 0.00 4,000.00 200.00 Gongqingcheng CATIC 0.00 0.00 28,269.36 1,413.47 Cultural Investment 9 Square Commerce 0.00 0.00 4,288.00 214.40 Management Co., Ltd. AVIC Securities 0.00 0.00 101,428.57 5,071.43 9 SquareAssets 0.00 0.00 33,331.01 1,666.55 Guanlan Real Estate 0.00 0.00 8,315.43 415.77 AVIC SUNDA 0.00 0.00 148,915.46 7,445.77 AVIC Property 0.52 0.03 0.52 0.03 Total 10,743,570.66 537,178.54 4,293,496.52 214,674.83 Notes receivable: Shennan Circuit 1,357,388.98 0.00 2,398,579.72 0.00 Total 1,357,388.98 0.00 2,398,579.72 0.00 Other receivables: Rainbow Ltd. 905,787.00 45,289.35 761,860.00 38,093.00 AVIC Property 464,011.74 23,200.59 10,100.00 505.00 Ganzhou 9 Square 122,666.00 6,133.30 122,665.60 6,133.28 AVIC City Property 50,400.00 2,520.00 50,400.00 2,520.00 (Kunshan) 9 Square Commerce 50,000.00 2,500.00 50,000.00 2,500.00 Management Co., Ltd. AVIC City Property 59,923.00 2,996.15 54,923.00 2,746.15 Co., Ltd. AVIC IHL 11,101.80 555.09 11,101.80 555.09 AVIC Training Center 16,000.00 800.00 0.00 0.00 Grand Skylight Hotel 0.00 0.00 32,000.00 1,600.00 Gongqingcheng CATIC 0.00 0.00 5,500.00 275.00 Cultural Investment Total - 1,679,889.54 83,994.48 1,098,550.40 54,927.52 (2) Payables In CNY Project name Related parties Ending book balance Opening book balance Accounts payable: AVIC Building Co. 0.00 24,000.00 AVIC Property 0.00 40,821.05 Total 0.00 64,821.05 Advance receipts: Rainbow Ltd. 0.00 0.00 AVIC SUNDA 160,128.00 0.00 CATIC Public Security Service Co. 122,016.00 0.00 AVIC Property 1,756.40 0.00 Total 283,900.40 0.00 Other payables: AVIC Property 960,753.30 1,131,164.13 AVIC SUNDA 442,407.92 442,407.92 AVIC City Investment 309,732.00 309,732.00 AVIC Securities 213,000.00 213,000.00 AVIC Building Co. 117,888.63 116,960.23 AVIC City Property Co., Ltd. 99,052.32 99,052.32 AVIC Huacheng Property 73,819.68 73,819.68 9 SquareAssets 378,483.84 378,483.84 Rainbow Ltd. 96,465.30 60,000.00 AVIC Changtai 0.00 4,064.81 AVIC Real Estate 51,014.88 51,014.88 Guanlan Real Estate 25,401.60 25,401.60 CATIC Public Security Service Co. 10,533.44 10,533.44 Ganzhou 9 Square 4,909.00 3,446.22 Shennan Circuit 0.00 150,000.00 9 Square Commerce Management Co., 1,135.00 0.00 Ltd. Total 2,784,596.91 3,069,081.07 7. Related parties’ commitments Inapplicable 8. Others Inapplicable XIII. Stock payment 1. General In CNY Total amount of various equity instruments granted by the Company during the reporting period 4,224,000.00 Total amount of various equity instruments of the Company exercisable during the reporting period 0.00 Total amount of various equity instruments of the Company expired during the reporting period 0.00 The scope of the exercise price of stock options issued at the end of the reporting period and the Inapplicable remaining time of the contract The granting price of theA-share restrictive stock incentive plan in 2018 (Phase I) was CNY4.40 per share. The restricted period is from January The scope of the exercise price of other equity instruments issued at the end of the reporting 11, 2019 to January 11, 2021 and the unlocking period is from January 11, period and the remaining time of the contract 2021 to January 11, 2024 (it is necessary to satisfy the vested unlocking conditions). Other notes: Approved by the 3rd session of the Ninth Board of Directors held on November 12, 2018 and 2019 1st Extraordinary General Meeting held on January 11, 2019, the Company decided to grant 4.224 million restrictive A-shares to 128 persons eligible for the incentive at the price of CNY 4.40 per share. This part of A-share restrictive stock was all granted and registered for listing by the end of the reporting period. The total consideration of the shares granted to the persons eligible for the incentive received by the Company amounted to CNY 18,585,600.00, including the increased capital stock amounted to CNY 4,224,000.00; the increased capital reserve (capital stock premium) amounted to CNY 14,361,600.00. The valid term of the incentive plan is 5 years (60 months), including the 2 years (24 months) of the lock-up period and 3 years of unlocking period (36 months). 2. Stock payment for equity settlement In CNY Method for determining the fair value of equity instruments Fair value of the restrictive stock = closing price as at the date of authorization granted - granting price - costs of the restrictive factors Basis for determining the quantity of exercisable equity Predicted exercisable quantity of the equity incentive shares as at the balance instruments sheet day Cause of significant difference between the estimation of the Nil reporting period and that of the previous period Accumulated amount of the equity-settled share-based payment 16,596,197.31 counted to the capital reserve Total expenses recognized in the equity-settled share-based 2,234,597.31 payment during the reporting period 3. Stock payment for cash settlement Inapplicable 4. Correction and termination of stock payment Inapplicable 5. Others Inapplicable XIV. Commitments and contingencies 1. Important commitments Important commitments existing as at the balance sheet date (1) Operating lease commitment Implementation of irrevocable operating lease contract signed by the Company ended the balance sheet date is as follows: Items Ending balance Opening balance Minimum rent payment for irrevocable operational lease: 1st year after the balance sheet day 59,257,332.36 54,382,100.37 2nd year after the balance sheet day 33,741,124.09 28,501,337.58 3rd year after the balance sheet day 1,4659709.91 12,406,400.37 Subsequent years 6,968,712.39 9,533,027.43 Total 114,626,878.74 104,822,865.75 (2) Other commitments Ended June 30, 2019, there was no other commitments necessary to be disclosed. 2. Contingencies (1) Significant contingencies existing as at the balance sheet day Nil (2) Important contingencies unnecessary to be disclosed but necessary to be explained There existed no such contingencies necessary to be disclosed in the Company. 3. Others Inapplicable XV. Events after balance sheet day Significant non-adjustment events Inapplicable 2. Profit distribution In CNY Profit or dividend to be distributed 87,748,976.20 Profit or dividend announced to be distributed after review and approval 87,748,976.20 3. Sales return Inapplicable 4. Note to other matters after the balance sheet date Inapplicable XVI. Other significant events 1. Correction of the accounting errors in the previous period (1) Retroactive restatement Inapplicable (2) Prospective application Inapplicable 2.Liabilities restructuring Inapplicable 3. Replacement of assets (1) Non-monetary assets exchange Inapplicable (2) Other assets exchange Inapplicable 4. Pension plan Inapplicable 5. Discontinuing operation Inapplicable 6. Segment information (1) Basis for determining the reporting segments and accounting policy Inapplicable (2) Financial information of the reporting segments Inapplicable (3) In case there is no reporting segment or the total assets and liabilities of the reporting segments cannot be disclosed, explain the reason Inapplicable (4) Other notes Inapplicable 7. Other significant transactions and matters that may affect investors' decision making Inapplicable 8. Others Inapplicable XVII. Notes to the parent company’s financial statements 1. Accounts receivable (1) Accounts receivables disclosed by types In CNY Ending balance Opening balance Book balance Bad debt reserve Book balance Bad debt reserve Categories Provision Book value Provision Book value Amount Proportion Amount Amount Proportion Amount proportion proportion in which Accounts receivable for which bad debt reserve 2,350,230.66 100.00% 117,511.54 5.00% 2,232,719.12 776,459.35 100.00% 38,822.97 5.00% 737,636.38 has been provided based on portfolios in which Group of aging 2,350,230.66 100.00% 117,511.54 5.00% 2,232,719.12 776,459.35 100.00% 38,822.97 5.00% 737,636.38 Total 2,350,230.66 100.00% 117,511.54 5.00% 2,232,719.12 776,459.35 100.00% 38,822.97 5.00% 737,636.38 Individual provision for bad and doubtful debts: Inapplicable Total provision for bad and doubtful debts based on portfolio: CNY 117,511.54 In CNY Ending balance Name Book balance Bad debt reserve Provision proportion Group of aging 2,350,230.66 117,511.54 5.00% Total 2,350,230.66 117,511.54 -- Note to the basis for determining the combination: In the portfolio, the account receivable for which provision for bad debt is made based on balance percentage: (2) Provision, recovery or reversal of reserve for bad debts during the reporting period Provision for bad debt during the reporting period In CNY Amount of movement during the reporting period Categories Opening balance Amount recovered or Ending balance Provision reversed Written-off Group of aging 38,822.97 78,688.57 0.00 0.00 117,511.54 Total 38,822.97 78,688.57 0.00 0.00 117,511.54 (3) Accounts receivable actually written off in current period Inapplicable (4) Accounts receivable owed by the top five debtors based on the ending balance Bad debt reserve at Nature of Proportion Are they related No. Names of the debtors Amount Aging the end of the Payment taken parties reporting period 1 Shenzhen Zhongshen Commercial Property Service Co., Ltd. Rent 909,993.48Within 1 year 38.72% 45,499.67 No 2 ICBC Shenzhen Branch Rent 661,473.12Within 1 year 28.15% 33,073.66 No 3 Shenzhen Goodfamily Sports Equipment Chain Store Co., Rent 356,020.60Within 1 year 15.15% 17,801.03 No Ltd. 4 Bravo Tech (Shenzhen) Limited Rent 313,391.69Within 1 year 13.33% 15,669.58 No 5 Rainbow Ltd. Rent 99,343.20Within 1 year 4.23% 4,967.16 Yes (5) Account receivable with recognition terminated due to transfer of financial assets Inapplicable (6) Amount of assets and liabilities formed through transfer of long term account receivable and continuing to be involved Inapplicable 2. Other receivables In CNY Items Ending balance Opening balance Other receivables 802,334,152.26 870,739,378.37 Total 802,334,152.26 870,739,378.37 (1) Interest receivable Inapplicable (2) Dividends receivable Inapplicable (3) Other receivables 1) Classification of other receivables based on nature of payment In CNY Nature of Payment Ending book balance Opening book balance Dealings among related parties within the 797,642,912.65 869,342,613.30 consolidation scope Reserve 76,233.69 70,000.00 Cash deposit and deposit in security 257,635.90 248,104.00 Others 4,443,236.36 1,178,412.07 Total 802,420,018.60 870,839,129.37 2) Provision for bad debts Disclosed based on aging In CNY Aging Ending balance Within 1 year (with 1 year inclusive) 878,515.24 1 to 2 years 219,155.80 Over 3 years 40,050.00 Total 1,137,721.04 3) Provision, recovery or reversal of reserve for bad debts during the reporting period Provision for bad debt during the reporting period In CNY Amount of movement during the reporting period Categories Opening balance Amount recovered or Ending balance Provision reversed Group of aging 99,751.00 1,355.09 15,239.75 85,866.34 Total 99,751.00 1,355.09 15,239.75 85,866.34 4) Accounts receivable actually written off in the reporting period Inapplicable 5) Other receivables owed by the top five debtors based on the ending balance In CNY Nature of Proportion in total Ending balance of the Company name Payment Ending balance Aging ending balance of other provision for bad debts receivables Inter-company Harmony current 464,511,889.07 Within 1 year 57.89% 0.00 account Inter-company The Sales Co. current 192,510,054.01 Within 1 year 23.99% 0.00 account Inter-company Hengdarui current 98,030,500.00 Within 1 year 12.22% 0.00 account Inter-company SHIYUEHUI current 22,846,703.45 Within 1 year 2.85% 0.00 account Emile Chouriet (Shenzhen) Inter-company Limited current 19,743,766.12 Within 1 year 2.46% 0.00 account Total -- 797,642,912.65 -- 99.40% 0.00 6) Accounts receivable involving government subsidy Inapplicable 3. Long-term equity investments In CNY Ending balance Opening balance Items Book balance Impairment reserve Book value Book balance Impairment reserve Book value Investment in 1,331,248,590.93 0.00 1,331,248,590.93 1,331,248,590.93 0.00 1,331,248,590.93 subsidiaries Investment in associates and joint 46,412,373.21 0.00 46,412,373.21 44,881,063.15 0.00 44,881,063.15 ventures Total 1,377,660,964.14 0.00 1,377,660,964.14 1,376,129,654.08 0.00 1,376,129,654.08 (1) Investment in subsidiaries In CNY Provision for Increase in the Decrease in the Ending balance of the Investees Opening balance Ending balance impairment in the reporting period reporting period provision for impairment reporting period Harmony 601,307,200.00 0.00 0.00 601,307,200.00 0.00 0.00 The Sales Co. 450,000,000.00 0.00 0.00 450,000,000.00 0.00 0.00 the Manufacture Co. 9,000,000.00 0.00 0.00 9,000,000.00 0.00 0.00 the Technology Co. 10,000,000.00 0.00 0.00 10,000,000.00 0.00 0.00 FIYTA(Hong Kong) 137,737,520.00 0.00 0.00 137,737,520.00 0.00 0.00 Limited SHIYUEHUI 5,000,000.00 0.00 0.00 5,000,000.00 0.00 0.00 Harbin Harmony World 2,184,484.39 0.00 0.00 2,184,484.39 0.00 0.00 Watch Co., Ltd. Hengdarui 36,867,843.96 0.00 0.00 36,867,843.96 0.00 0.00 Emile Chouriet 79,151,542.58 0.00 0.00 79,151,542.58 0.00 0.00 (Shenzhen) Limited Total 1,331,248,590.93 0.00 0.00 1,331,248,590.93 0.00 0.00 (2) Investment in associates and joint ventures In CNY Increase/ Decrease (+ / -) in the reporting period Income from Announced Ending equity Other for balance of Opening Ending Investees Additional Decrease of investment comprehensive Other equity distributing Provision for the provision balance Others balance investment investment recognized income movement cash impairment for under equity adjustment dividend or impairment method profit I. Joint Venture II.Associates Shanghai Watch 44,881,063.15 0.00 0.00 1,531,310.06 0.00 0.00 0.00 0.00 0.00 46,412,373.21 0.00 Industry Co., Ltd. Sub-total 44,881,063.15 0.00 0.00 1,531,310.06 0.00 0.00 0.00 0.00 0.00 46,412,373.21 0.00 Total 44,881,063.15 0.00 0.00 1,531,310.06 0.00 0.00 0.00 0.00 0.00 46,412,373.21 0.00 (3) Other notes Inapplicable 4. Operation Income and Costs In CNY Amount incurred in the reporting period Amount incurred in the previous period Items Income Costs Income Costs Principal business 64,124,939.95 11,807,925.90 56,119,634.18 9,578,544.70 Other businesses 0.00 0.00 0.00 0.00 Total 64,124,939.95 11,807,925.90 56,119,634.18 9,578,544.70 Has the new standard for income been implemented No 5. Return on investment In CNY Items Amount incurred in the reporting period Amount incurred in the previous period Income from long term equity investment based 1,531,310.06 93,013.38 on equity method Total 1,531,310.06 93,013.38 6. Others Inapplicable XVIII. Supplementary information 1. Statement of non-recurring gains and losses in the reporting period In CNY Items Amount Note It refers to the loss from disposal of fixed 1. Gain/Loss from disposal of non-current assets -212,010.13 assets, such as the obsolete production equipment The government subsidies included in the profits and For detail, refer to the supplementary 13,045,742.36 losses of the current period ( (excluding government grants description of the government subsidy counted which are closely related to the Company’s business and to the current profit and loss, Note VII.67. conform with the national standard amount or quantity) It mainly refers to the security deposit due to Other non-operating income and expenses other than the -230,194.27 the advance withdrawal of the shops in some aforesaid items channels, etc. Less:Amount affected by the income tax 2,735,223.75 Total 9,868,314.21 -- 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 2. ROE and EPS Earnings per share Profit in the reporting period Return on equity, weighted average Basic earnings per share Diluted earnings per share (CNY/share) (CNY/share) Net profit attributable to the Company’s 4.69% 0.2788 0.2788 shareholders of ordinary shares Net profit attributable to the Company’s shareholders of ordinary shares less 4.32% 0.2565 0.2565 non-recurring gains and loss 3. Discrepancy in accounting data between IAS and CAS (1) Discrepancy in net profit and net assets as disclosed in the financial report respectively according to IAS and CAS Inapplicable (2) Discrepancy in net profit and net assets as disclosed in the financial report respectively according to the accounting standards outside Mainland China and CAS Inapplicable (3) Note to the discrepancy in accounting data under the accounting standards outside Mainland China. In case the discrepancy in data which have been audited by an overseas auditing agent has been adjusted, please specify the name of the overseas auditing agent. Inapplicable 4. Others Inapplicable Section11 Documents Available for Inspection I. Financial statements signed by and under the seal of the legal representative, the chief financial officer and the person in charge of the accounting office. II. Originals of all documents and manuscripts of announcements of the Company disclosed in Securities Times and Hong Kong Commercial Daily as designated by China Securities Regulatory Commission. FIYTA HOLDINGS LTD. Board of Directors August 15, 2019
飞亚达B 200026
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