深圳市飞亚达（集团）股份有限公司
SHENZHEN FIYTA HOLDINGS LTD.
2009 Semi-Annual Report （Full Text）
August 19, 20092
Table of Contents
Chapter 1 Important Notice, Definition and Table of Contents..……….……page03
Chapter 2 Company Information………………………………………………….page04
Chapter 3 Chang in Capital Stock and Shareholders……………………….. page06
Chapter 4 Directors, Supervisors and Senior Executives………………….. page10
Chapter 5 Report of the Board of Directors…………………………………….page12
Chapter 6 Significant Events……………………………………………………. .Page17
Chapter 7 Financial Report (Unaudited)……………………………………….. Page22
Chapter 8 Documents Available for Inspection………………………………. Page233
Chapter 1 Important Notice, Definition and Table of Contents
I. Important Notice
The Board of Directors, the Supervisory Committee, directors, supervisors and senior executives
of the Company hereby confirm that there are no important omissions, fictitious statements or
serious misleading information carried in this report, and shall take all responsibilities, individually
and/or jointly, for the authenticity, accuracy and completeness of the whole contents. No director,
supervisor or any senior executive has expressed that he/she is not sure for the authenticity,
accuracy or completeness of this annual report or has any objection against the same.
The semi-annual report has not been audited.
Mr. Wu Guangquan, the Chairman of the Board, Mr. Xu Dongsheng, the Managing Director, Mr. Li
Dehua, Deputy General Manager and Chief Financial Officer and Mr. Hu Xinglong, Manager of
the Financial Department, hereby ensure the accuracy and completeness of the financial report
enclosed in this semi-annual report.
II. Definitions
In this report, unless the context otherwise required, the following names in abbreviation shall
refer to the following organizations:
The Company or Fiyta: Shenzhen Fiyta Holdings Co., Ltd.
CATIC Shenzhen Corporation: China National Aero-Technology Corporation Shenzhen
Shenzhen CATIC Group: Shenzhen CATIC Group Co., Ltd.
Harmony: Shenzhen Harmony World Watches Center Co., Ltd.
Rainbow Supermarket: Shenzhen Rainbow Supermarket Co., Ltd.
CATIC Property: Shenzhen CATIC Property Management Co., Ltd.
CATIC Real Estate: Shenzhen CATIC Real Estate Development Co.4
Chapter 2 Company Information
I. Company Profile
1. Company Name in Chinese: 深圳市飞亚达（集团）股份有限公司
In English: SHENZHEN FIYTA HOLDINGS LTD
Short Form in Chinese: 飞亚达公司
Short Form in English: FIYTA
2. Stock Exchange Listed with: Shenzhen Stock Exchange
Short Form & Code of the Stock: FIYTA A 000026
FIYTA B 200026
3. Registered Office Address: FIYTA Technology Building, Gaoxin S. Road One, Nanshan
District, Shenzhen
Office Address: 20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan
District, Shenzhen
Postal Code: 518057
Internet Web Site: http:// www. fiytagroup.com.cn
E-mail : szfiyta@public.szptt.net.cn
4. Legal Representative: Mr. Wu Guangquan
5. Secretary of the Board: Mr. Chen Libin
Securities Affairs Representative: Mr. Zhang Yong
Liaison Address: 20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan
District, Shenzhen
Tel : 0755－86013669 86013992
Fax: 0755－83348369
E-mail: investor@fiyta.com.cn
6. Newspapers Designated for Disclosing the Information: Securities Times, Hong Kong
Commercial Daily
Internet Website for publishing this semi-annual report: http://www.cninfo.com.cn
Internet Website for publishing this semi-annual report: http://www.cninfo.com.cn
7. Other Relevant Information:
(1) Date of first registration: March 30, 1990
Date of change in registration: January 30, 1997
Registration with: Shenzhen Municipal Administration for Industry and Commerce.
(2) Business License No.: 440301103196089
Taxation Registration No.: 440301192189783
Organization Code: 19218978-3
Certified public accountant engaged
Types Name Office address
Stock A
and
Stock B
RSM China CPAs
8th – 9th Floors, Block A,
International Enterprise
Building, No. 35 Jinrong
Avenue, Xicheng District,
Beijing
II. Financial Highlights
In RMB5
End of the report
period
End of the
previous year
Increase/decrease of the
end of the report period
vs the end of the
previous year (%)
Total assets 1,447,309,146.52 1,441,187,545.35 0.42%
Owner’s equity attributable to the
Company’s shareholders
676,508,808.70 670,923,545.85 0.83%
Capital stock 249,317,999.00 249,317,999.00 0.00%
Net asset per share attributable to the
Company’s shareholders (RMB/share)
2.713 2.691 0.83%
Report period
(Jan. to Jun.)
Same Period of the
Previous Year
Year-on-year
increase/decrease (%)
Gross Revenue 572,693,689.88 518,549,352.19 10.44%
Operating profit 32,387,858.65 47,164,479.84 -31.33%
Total profit 34,520,507.09 47,532,712.16 -27.38%
Net profit attributable to the Company’s
shareholders
27,167,061.42 38,419,239.04 -29.29%
Net profit attributable to the Company’s
shareholders less extraordinary items
25,460,942.67 38,117,288.54 -33.20%
Basic earning per share (RMB/share) 0.109 0.154 -29.22%
Diluted earning per share (RMB/share) 0.109 0.154 -29.22%
Net assets-income ratio (%) 4.02% 5.94% -1.92%
Net cash flow from operating activities 80,330,737.00 -79,463,641.65
Net cash flows per share arising from
operating activities (RMB/share)
0.32 -0.326
Chapter 3 Change in Capital Stock and Particulars about the Shareholders
I. Change in Capital Stock
1. Change in the Company’s capital stock ended June 30, 2009 is as follows:
In shares
Before the change Increase / Decrease (+/ -) After the change
Quantity
Proporti
on
New
issuing
Bonus
issue
Shares
convert
ed from
reserve
Others
Sub-t
otal
Quantity
Proporti
on
I. Restricted
shares
111,451,025 44.70% 111,451,025 44.70%
1. State shares
2. State
corporate shares
111,415,501 44.69% 111,415,501 44.69%
3. Other
domestic shares
Including:
Domestic
non-state owned
corporate
shares
Domestic
natural person
shares
4. Foreign
shares
Including:
Foreign
corporate shares
Overseas
natural person
shares
5. Senior
executive shares
35,524 0.01% 35,524 0.01%
II. Unrestricted
shares
137,866,974 55.30% 137,866,974 55.30%
1. RMB ordinary
shares
79,546,974 31.91% 79,546,974 31.91%
2. Foreign
shares listed
domestically
58,320,000 23.39% 58,320,000 23.39%
3. Foreign invested
shares listed out of
Mainland China
4. Others7
III. Total Shares 249,317,999
100.00
%
249,317,999
100.00
%
Change of the shares with sales restriction:
Shareholders
Number of
restricted
shares at
year
beginning
Number of
shares
discharged for
restriction
Increase of
restricted
shares
Number of
restricted
shares at
year end
Causes of
restriction
Date of discharging
Shenzhen
CATIC Group
Co., Ltd.
111,415,501 0 0 111,415,501
Equity
separation
reform
November 9, 2010
Lu Bingqiang 35,524 0 0 35,524
Senior
executives’
restricted
shares
－
Total 111,451,025 0 0 111,451,025 － －
2. Issuing and Listing
(1) Within three years prior to the end of the report period, the Company had not issued any
shares or derivatives.
(2) In the report period, the Company never conducted such activities as distributing bonus shares,
converting public reserve into share capital, share allotment, new issuing, stock absorption and
combination, converting convertible bonds into shares, capital reduction, issuing or listing
employee shares or shares of the Company’s employees or any other activity which caused
change in total shares and the structure.
(3) At present, there are no employees’ shares in the Company.
II. Shareholders
1. Ended June 30, 2009, there were totally 27,474 shareholders in the Company: including 17,730
shareholders of A shares (including one senior executive); 9,744 shareholders of B shares.
2. Shares held by the Company’s top ten shareholders
Shareholding of the top 10 shareholders ended June 30, 2009:
Total number of Shareholders 27,474
Shareholding of top 10 shareholders
Shareholders
Shareholder
type
Holding rate
Total shares
held
Quantity of
restricted
shares
Quantity
of
shares
pledged
or
frozen
Shenzhen CATIC Group
Co., Ltd.
State-owned
corporate
shares
44.69% 111,415,501 111,415,501 0
Industrial and Commercial
Bank of China – E-Fund
Domestic
non-state
2.23% 5,551,957 0 08
Value Growth Mixed
Securities Investment Fund
owned
corporate
Chen Yanhong
Domestic
natural
person
1.46% 3,630,461 0 0
LEHMAN BROTHERS
INTERNATIONAL
(EUROPE)
Overseas
corporate
1.01% 2,511,883 0 0
Ge Yingqing
Domestic
natural
person
0.96% 2,389,781 0 0
UBS AG
Overseas
corporate
0.85% 2,108,280 0 0
HANG SENG CONSUMER
SECTOR FLEXIPOWER
FUND
Overseas
corporate 0.61% 1,522,200 0 0
Agriculture Bank of China
-Bank of Communications
Schroder Selected Stock
Securities Investment Fund
Domestic
non-state
owned
corporate
shares
0.57% 1,412,384 0 0
SBCI FINANCE ASIA LTD
A/C SBC HONG KONG
Overseas
corporate
0.37% 926,580 0 0
GUOTAI JUNAN
SECURITIES(HONGKONG)
LIMITED
Overseas
corporate
0.36% 896,079 0 0
Shareholding of top 10 shareholders of unrestricted shares
Shareholders Quantity of tradable share Share type
Industrial and Commercial
Bank of China – E-Fund
Value Growth Mixed
Securities Investment Fund
5,551,957
RMB ordinary
shares (A
Shares)
Chen Yanhong 3,630,461 A Shares
LEHMAN BROTHERS
INTERNATIONAL
(EUROPE)
2,511,883 A Shares
Ge Yingqing 2,389,781 A Shares
UBS AG 2,108,280 A Shares
HANG SENG CONSUMER
SECTOR FLEXIPOWER
FUND
1,522,200
Foreign shares
listed
domestically (B
shares)
Agriculture Bank of China
-Bank of Communications
Schroder Selected Stock
Securities Investment Fund
1,412,384 A Shares
SBCI FINANCE ASIA LTD
A/C SBC HONG KONG
926,580 B shares
GUOTAI JUNAN 896,079 B shares9
SECURITIES(HONGKONG)
LIMITED
Zhang Xiaozhai 780,000 B shares
Explain to the association
relation or acting in concert
of the above shareholders
The Company has never found any business relations among them
or any evidence proving that they belong to the persons of concerted
action as specified in the Measures on Listed Companies on
Disclosing the Shareholding Information.
In the report period, there was no change in increase/decrease of the shares held by Shenzhen
CATIC Group Co., Ltd., a shareholder holding over 5% of the Company’s shares and there was
no hypothecation, freezing or custody of any of the shares either.
3. About the Controlling Shareholder
Shenzhen CATIC Group Co., Ltd. was founded in June, 1997, with total registered capital of RMB
678.90909 million and its legal representative is Wu Guangquan. Shenzhen CATIC Group Co.,
Ltd. is a diversified holding company, engaged in the business of manufacture and sales of LCD,
PCB, medium and high grade watches, and agriculture related resources, etc. through its
subsidiaries. The Group was listed with Hong Kong Stock Exchange in September 1997.
4. Eventual Controller
CATIC Shenzhen Corporation, legal representative: Wu Guangquan; date of incorporation:
December 1, 1982; registered capital: RMB 1000 million; principal business: import and export of
commodities and technologies other than those exported exclusively by the central government or
under the control by the central government, compensation trade as importer/exporter as well as
agent; invest to set up economic entities; domestic commerce and supply and sale of goods and
materials (excluding the commodities monopolized for operation, under control of and for
exclusive sale by the central government); sales of home-made automobiles (with cars exclusive);
development of real estate.
According to the unified arrangement of Aviation Industry Corporation of China and China
National Aviation Technology Import and Export Corp for the system reform, approved by
Shenzhen Municipal Administration for Industry and Commerce, CATIC Shenzhen Corporation
has been changed from a state owned enterprise into a company with limited liabilities solely
invested by China National Aviation Technology Import and Export Corp. CATIC Shenzhen
Corporation changed its registration with Shenzhen Municipal Administration for Industry and
Commerce on January 8, 2009 with registered capital of RMB 1 billion with its domicile, legal
representative and business scope remaining unchanged.
Controller of the eventual controller: CATIC International Holdings Limited was incorporated in
1983 with registered capital of RMB 5000 million, legal representative: Fu Shula, licenced
businesses: supply of labor services to the engineering projects carried out abroad; sales of
methylbenzene, acetone, methyl ethyl ketone, piperidine, ether, potassium permanganate,
chloroform, sulfuric acid, hydrochloric acid, acetic anhydride, combustible liquid, combustible solid,
articles inflammable naturally and with moisture, oxidizer and organic peroxide, toxic and
corrosive goods; insurance for motor vehicles, assets of enterprises, household property and
cargo freight. General business scope: import and export; warehousing; industrial, hotel, property
and real estate development investment and management; development, sales and maintenance
services of new energy equipment; exhibition; technology licencing and technical services in
connection with the aforesaid services.
The eventual controller of CATIC Shenzhen Corporation, the Company’s eventual controller is
State-owned Assets Supervision and Administration Commission of the State Council.10
5. Block Diagram of the Ownership and Control Relationship between the Company and eventual
controller
Chapter 4 Directors, Supervisors, Senior Executives
I. Change in the Company’s Shares
Of the directors, supervisors and senior executives in current office, only Deputy General
Manager Mr. Lu Bingqiang holds 47,365 shares in which no change took place in the report
period.
II. The Company has not yet started implementation of any equity incentive program. In the
report period, there was no director, supervisor or senior executive held any of the
Company’s stock option or restricted shares.
III. New Engagement or Disengagement of Directors, Supervisors and Senior Executives
1. Election for the New Board of Directors and the New Supervisory Committee
On May 21, 2009, the Company’s 2008 Annual General Meeting reviewed and approved the
proposal on election for the New Board of Directors and the New Supervisory Committee,
according to which Mr. Wu Guangquan, Mr. Lai Weixuan, Mr. Xu Dongsheng, Mr. Chen Hongliang,
Mr. Wang Mingchuan and Mr. Huang Yongfeng were elected directors of the Sixth Board of
Directors; Mr. Guo Wanda, Madam Ji Qin and Mr. Mai Jianguang were elected independent
directors of the Sixth Board of Directors; Mr. Huang Gaojian was elected supervisor of the Sixth
Supervisory Committee and formed the Sixth Supervisory Committee together with Mr. Zhang
Songhua and Mr. Tang Boxue, the two staff representative supervisors.
The announcement of the aforesaid information was published on Securities Times, Hong Kong
Commercial Daily and http://www.cninfo.com.cn. on May 22, 2009).
State-owned Assets Supervision and Administration
Commission of the State Council
100%
Aviation Industry Corporation of China
100%
CATIC International Holdings Limited
100%
CATIC Shenzhen Corporation
58.60%
Shenzhen CATIC Group Co., Ltd.
44.69%
SHENZHEN FIYTA HOLDINGS LTD.11
2. Engagement of Senior Executives
On June 15, 2009, the 1st meeting of the Sixth Board of Directors elected Mr. Wu Guangquan
Chairman of the Board and Mr. Lai Weixuan vice Chairman of the Board. Mr. Xu Dongsheng
was engaged as General Manager of the Company, Mr. Chen Libin, Mr. Lu Bingqiang, Mr. Li
Dehua, Mr. Li Bei and Madam Fang Juan were engaged as deputy general managers and Mr. Li
Dehua was engaged as chief accountant (concurrently). The 1st meeting of the Sixth Supervisory
Committee elected Mr. Huang Gaojian Chairman of the Supervisory Committee.
The announcement of the aforesaid information was published on Securities Times, Hong Kong
Commercial Daily and http://www.cninfo.com.cn. on June 17, 2009).12
Chapter 5 Report of the Board of Directors
I. Operation Review
(I) General
The macro economic situation in the first half year of 2009 was gradually turning better.
However, the market of high-end consumer goods, especially the demand on the luxuries
the Company is engaged in still remains quite soft. Facing the sustainable influence of the
financial crisis, the Company is insisting on the principle of using the brand strategy to
guide the work and steady development, attaches close attention to the change of the
market, takes definite measures and enthusiastically pursues the development of the
relevant business; propels the implementation of the strategy by means of enhancing the
internal management, deepening the administration, reducing the costs, saving the
expenses, reinforcing cooperation, utilizing flexibly the resources, etc. In the report period,
the Company realized a turnover of RMB 572.69 million, a 10.44 % year-on-year growth.
Impacted by the intensified market competition of the famous brand watches, the Company
realized a total profit of RMB 34.52 million, a 27.38% year-on-year drop and net profit of RMB
27.17 million, a 29.29% year-on-year drop. （For the detail, refer to the following table. In RMB
10,000）
Jan. to Jun.,
2009
Jan. to Jun.,
2008
Increase/Decrea
se
Increase/Decrea
se Rate (%)
Operation income 57,269 51,855 5,414 10.44%
Total profit 3,452 4,753 -1,301 -27.38%
Net profit 2,717 3,842 -1,125 -29.29%
1. Retail of Famous Brand Watches
In the report period, the Harmony World Watches Center realized a turnover of RMB 449.38
million in retail of famous brand watches, a 12.42% year-on-year growth and realized gross profit
of RMB 23.37 million, a 28.6% year-on-year drop.
Development of business channels: In the report period, the Company sped up development of
the network while keeping steady operation, developed altogether 7 chain strops. At the end of
the period, the Harmony famous brand sales network reached 83 chain shops (with 28
Henglianda shops exclusive). These new shops are: Shanxi International Trade Jijia Franchised
Shop, Shanxi International Trade Glashutte Franchised Shop, Shenzhen Yitian Holiday Plaza,
Beijing Xuanwu Rainbow, Suzhou Rainbow, Taiyuan International Trade Multi-purpose Zone and
Changchun franchised shop, which have effectively improved the Company’s strategic
competition situation; adjusted and closed 3 shops, namely Beijing Lijing shop, Ningbo No. 2
Department Store and Shanghai Cartier shop; meanwhile, the Company continued to reinforce
shop front optimization and upgrading of the existing retail shops and expansion of famous brand
watches, maintain and develop brand resources, and realize quality operation.
Enhancing international cooperation and brand promotion: The Company continued
enhancing and deepening the communication and cooperation with international watch group and
brands. In the report period, leaders from numerous international timepiece groups and brands
visited Harmony; the Company also held a series of brand promotion activities, such as
“Appreciation·Graciousness” famous brand car, famous brand watches and famous villas
appreciation, and enhanced the relationship with various cooperation parties; meanwhile realized
transfer of the supplier of Omega, Rado, Longines to Swatch Group as the director supplier and13
thus Harmony realized a direct cooperation with Swatch Group.
Deepening 3-level marketing and enhancing terminal operation: The Company continued to
enthusiastically pushed on and deepened the theory of “3-level marketing”, continuously detailed
the work at the terminal, carried out the prolonged “customer development month” activity,
focused on development and fostering of VIP customers and supported the steady growth of
sales.
Sales competition and promotion activities: In the report period, the Company held a series of
sales competition activities including “working together to meet challenge”, which powerfully
promoted sales; meanwhile, enhanced the advertisement of HARMONY Brand by means of such
activities.
Reinforcing teamwork construction and enhancing training: The Company unceasingly enhanced
manpower reserve, implemented training programs with greater exertion for shop assistants,
operation managers and management at different levels, improved the staff’s qualification by
means of a series of activities, such as election of sales adviser so as to better promote sales.
2. FIYTA watches
In the report period, the Company continued to deepen the coordination and efficiency
improvement between research, design, production and sales, upgraded the identity of FIYTA
brand and at the same time enhanced overseas development. The Company realized a turnover
of RMB 93.69 million from FIYTA watches, a 16.42% year-on-year growth; realized total profit
amounting to RMB 13.79 million, a 25.14% year-on-year growth.
Development of the domestic and overseas channels: In the report period, the Company kept on
enhancing investment and operation management of the 14 franchised shops, promoted
upgrading of the channel quality, and demonstrated the high quality FIYTA products and brand
identity to more high-end customers; meanwhile, implemented the “Double Hundred Program”,
upgraded and maintained the sales quality of RMB 1 million shops so as to promote channel
optimization and sales improvement; continued to develop overseas channels, conducted
extensive contacts with the related customers. In the report period, the channel development in
Ho Chi Minh City of Vietnam was proceeded successfully and FIYTA watches have been
stationed in a number of key shopping malls in the city. Up to now, FIYTA watches have
entered the overseas markets of Singapore, Canada, Vietnam, etc. and are enjoying favorable
sales situation.
New Product Research and Development and Launching to the Market: The Company has
speeded up carrying forward serialization and standardization of products. In the report period,
“Photographer” series new products were successfully launched to the market. In the previous
two stages of the sales competition (58 days), 1537 watches were sold with sales of RMB 3.55
million. It was another series of products was successfully launched to the market following the
“Impression City”. Meanwhile, the preparatory market test project of launching new products of
the next stage has started.
R & D and Design Award: In the report period, at the Science and Technology Conference of
China National Light Industry Council, FIYTA was honorably rewarded with three awards of
science and technology, of which “Shenzhou No. 7” Space Watch was rewarded with once again
the Special Award of Science & Technology Progress, the supreme award of science and
technology following “Shenzhou No. 5” Space Watch. Space reinforced titanium technology was
rewarded with the second prize of technology invention; FZK-601 watch control system was
rewarded the excellent prize of science and technology innovation. ISO/TC114 International
Timepiece Standardization Conference sponsored by the Company was successfully held in
Shenzhen. In process of ISO/TC114 international conference, in the light of WG5 “Watches Made
of Hard Materials - General Requirements and Test Method proposed by Korea, the international
standard draft formed the proposal of the Chinese delegation with FIYTA as the principal part.
Based on the proposal of the Chinese delegation, delegates from various countries have formed a
preliminary common view on the specification items and definitions of the hard material watches;
there were five recommendations in the Chinese proposal which had been adopted. Since14
participation of this conference, it was the first time for the Chinese delegation enjoying the
leading voice right at the conference.
Brand Promotion: This year, the Company still organized a delegation as usual to participate in
BASEL WORLD 2009 and received distributors and customers from Switzerland, France,
Singapore, etc. and achieved a good result; to support opening of a franchised shop, the
Company conducted big public relation and promotion activities in Ningbo, Miao Pu, a film star
and journalists from numerous media participated in the ceremony; the Company continuously
focused on the terminal promotion. In the report period, the new FIYTA terminal franchised
counters came into being in big shopping malls all over China in the report period.
Sales Competition: In the first half year, the Company carried out promotion activities and sales
competition in a number of themes which have powerfully promoted sales and optimized the
stocks. The customers’ satisfaction level on FIYTA has been continuously improved up to
94.71%.
Enhancing Team Construction and Training: The Company has been continuously exploring new
training models. In the report period, the Company carried out republic relation training and
practical training in a number of regions which have great significance for sales and brand
promotion. Meanwhile, the Company has started implementation of the brand development
based new purchasing guider integration human resource system and the staff’s career promotion
passage have started implementation.
3. Property Management
In the report period, the Company enhanced the customer relationship management of Fiyta
Building, Fiyta Technology Building and Xi’an Chengheng International Hotel Building in order to
ensure that high quality customers would not flow away and ensure higher rental income rate;
upgrade the property management level. The Company enjoyed a favorable operation conditions
of the leased property and realized a turnover of RMB 30.72 million. Unfortunately, affected by
the metro construction and rent withdrawal of partial tenants due to expiry, some vacancy in the
buildings occurred with a drop of 8.68%.
In the report period, the Company further applied the advanced management instruments and
popularized the balance scorecard project in various departments, posts and individuals and even
in performance assessment and management; further propelled 6 Sigma Green Ribbon Project
and Black Ribbon designated training and held basic training for standardized system
popularization. The Company further enhanced the human resource reserve. The Company
completed 2009 campus recruitment in April which took over 50 years and covered 18 key
universities and colleges of Mainland China. The Company further enhanced development of the
relationship with investors and frequently received personal visits and call visits of and from
investors. The Company positively upgraded the employee’s job-respect level and improved the
employees’ satisfaction – the employees’ work respect survey report conducted by Hanweite
Consulting Co. shows that at present FIYTA is in the stage of high efficiency/best employer.
(II) Principal Business and Operation
The Company was mainly engaged in design, development, manufacture, sales and repairing of
clocks and watches and spares and parts, including operation of FIYTA watch products and sales
of world top brand watches through chain shops. In addition, the Company had income from the
properties, including Fiyta Building, Fiyta Technology Building and Xi’an Chengheng International
Hotel building.
1. The Company’s income and profit from principal business are classified as follows:
In RMB 10,000
Sectors Operation
income
Operation
costs
gross profit
rate (%)
Year-on-year
increase/dec
rease of
operating
Year-on-year
increase/dec
rease of
business
Year- on-year
increase/decr
ease of gross
profit rate (%)15
income rate
(%)
cost (%)
Commerce 44,938.38 34,654.83 22.88% 12.42% 14.75% -1.57%
Industry 9,368.67 3,691.26 60.60% 16.42% 9.19% 2.61%
Property Operation 3,072.33 855.43 72.16% -8.68% -13.12% 1.42%
Hotel 648.10 49.15 92.42% 1.73% -5.03% 0.54%
2. Watch business and property take over 10% of the Company’s income as well as the profit from
the principal business
(1) Watches The sales income and sales cost of FIYTA watches and foreign famous watches
are listed as follows:
Table 1: To be presented based on the categories of the products
In RMB 10,000
Products
Operation
income
Operation
costs
gross profit
rate (%)
Year-on-year
increase/dec
rease of
operating
income rate
(%)
Year-on-year
increase/dec
rease of
business
cost (%)
Year- on-year
increase/decr
ease of gross
profit rate (%)
Sales of foreign
famous watches
44,938.38 34,654.83 22.88% 12.42% 14.75% -1.57%
Sales of FIYTA
watches
9,368.67 3,691.26 60.60% 16.42% 9.19% 2.61%
Table 2: Listed according to regions
In RMB 10,000
Regions Operation income
Year-on-year
increase/decrease of
revenue rate (%)
Northeast China 5,603.04 6.20%
North China 8,970.52 1.70%
Northwest China 13,637.51 34.30%
East China 7,762.55 11.50%
Southwest China 3,358.71 50.50%
South China 14,974.73 2.70%
Total 54,307.05 13.10%
(2) Property The Company’s revenue and profit from property operation mainly came from
lease of FIYTA Building, FIYTA Technology Building and Xi’an Chengheng International Hotel
Building.
3. In the report period, no material change took place in the Company’s principal business or its
structure, and earning power of the principal business in comparison with the previous year.
4. In the report period, the Company had no other business activities having major influence on
the Company.
5. Problems existing in the operation, future development prospects and measures
Viewing from the operation situation of the first half year, despite the unfavorable conditions of the
sector on overall basis, the Company still realized a growth of two places. It is really not an easy
job. However, affected by the follow-up financial crisis, the profit dropped. In the second half year,
as the world economy turns better and the domestic stock market and real estate market become
warm up, the Company’s new products have been launched to the market in succession and the16
brands of newly opened shops have been gradually available, and the Company is quite
optimistic in the income and profit plan of the whole year.
In respect of retail of famous brand watches: The Company continues to develop and maintain
channels; while opening new shops, enhanced communication and cooperation with suppliers
and ensured availability of the goods in great demand while taking positive counter-measures,
sped up circulation of inventories and improved the application efficiency of funds. On the other
hand, the Company ensured the steady growth of the matured old shops by means of ensuring
sales management, enriching sales strategy and reinforcing the personnel training which has
promoted rapid growth of the newly opened shops.
Fiyta Watches: The Company continued implementation of the “Double Hundred Program” and
“Simultaneous Action”, guided various work with the brand strategy, enhanced cooperation of the
four departments of R & D, design, production and sales, ensured the speed and success for
launching new products, optimized product structure, promoted steady rise of sales; meanwhile,
sped up circulation of inventories by combination of sales competition and promotion inspiration of
unceasingly weeding through the old to bring forth the new.
Property: The Company enhanced the communication with the relevant management department
and customers, carried out effective letting strategy and improved the lease rate and actual
reception rate of the rental.
II. Investment
(I) In the report period, the Company had not raised any proceeds through share offering
and had no proceeds raised before the report period and carried down to the report period
for application either.
(II) Other Key Projects Invested with Funds not Raised through Share Offering
In the report period, the Company further increased the investment in Harmony World Watches
Chain Shops and 4 new chain shops were added. By the end of the report period, there has been
83 chain shops in big and medium cities all over the country. In the first half year of 2009, the
Company increased the investment by RMB 44.58 million and Harmony realized a turnover of
RMB 449.38 million and profit of RMB 23.37 million.
In the report period, the Company approved to establish FIYTA Technology Development Co.
through its 1st meeting of the Sixth Board of Directors at which the Proposal on Establishment of
FIYTA Technology Development Co. was adopted by voting. The said company is a solely
invested subsidiary with registered capital of RMB 10 million and its temporary name is FIYTA
Technology Development Co. The new company bases itself on a hi-tech enterprise, is a key
research and development platform as well as a platform for conversion of scientific research
achievements of FIYTA Technology Center. It development orientation is to carry out technology
research work and conducts sophisticated machining business and machining watch movements
as supporting service for customers as an important additional service of FIYTA watch industry
and formed a new profit growth point for the purpose of reinforcing the risk resistance in the
Company’s watch industry.
In the report period, the 1st meeting of the Sixth Board of Directors approved through voting the
Proposal on Increasing Investment in FIYTA Hong Kong Limited, according to which the Company
was to increase investment in FIYTA Hong Kong by HK$ 10 million so that the investment has
increased to HK$20 million.
III. Accounting Policies, Change in Accounting Estimate and Correction of the Previous
Material Accounting Errors
There were no change in accounting policy, accounting estimate or serious accounting errors in
the report period17
Chapter 6 Significant Events
I. The Company has conducted standardized operation based on strict criteria and
enthusiastically improved the legal person based administrative structure in accordance
with the relevant provisions of China Securities Regulatory Commission, the Company has.
At present, the Company has fundamentally complied with relevant regulations in its
administration.
II. Profit Distribution Proposal
In the report period, the Company’s 2008 Annual General Meeting approved 2008 Annual Profit
Distribution Proposal, according to which the Company was to distribute cash dividend to the
whole shareholders at rate of RMB 1.00 for every 10 shares (with tax inclusive. After deduction of
the tax, the actual cash dividend distribution rate was RMB 0.90 for every 10 shares to the
personal shareholders of A shares and the investment funds and no tax for the shareholders of B
shares would be deducted for time being) with the existing total capital stock of 249,317,999
shares as the base and the total amount of the cash dividend to be distributed was RMB
24,931,799.90. Cash dividend for B shares was paid in Hong Kong Dollars after conversion from
Renminbi into Hong Kong Dollars based on the average rate (HK$ = RMB0.8802) as published by
Bank of China on the last business day after the resolution of the Shareholders’ General Meeting
(May 22, 2009). The cash dividend distribution for both A and B shares was completed
respectively on July 15, 2009 and July 17, 2009.
Company has neither semiannual profit distribution proposal nor proposal for converting public
reserve into share capital for the middle of 2009.
III. In the report period, the Company has never been involved in any material lawsuit or
arbitration and no previous material lawsuit or arbitration has been extended to the report
period either.
IV. Equity in other listed companies held by the Company
Stock
Code
Short
form of
stock
Initial
investment
amount
Proportio
n in the
investee’s
equity
Book value
at the end of
the period
Gain and
loss in the
report
period
Change in
owner’s equity
in the report
period
Accounti
ng item
Source
of
shares
000543 Wanneng
Power
3,000,000.0
0
0.14% 8,734,000.0
0
0.00 3352800.00
Available
-for-sale
financial
assets
Corporat
e shares
Total
3,000,000.0
0 -
8,734,000.0
0 0.00 3,352,800.00 - -
V. In the report period, the Company has never been involved in any assets acquisition,
sales, absorption or consolidation.
VI. Related transactions
1. Implementation of Routine Related Transactions
(1) Shenzhen CATIC Property Management Co., Ltd., one of the Company’s related corporate
offers property management service for the Company’s FIYTA Building and FIYTA Technology
Building. The price of this related transaction is based on the market price. In the report period,
the Company has paid property management fee and water and electricity charge amounting to
RMB 0.8185 million, which complies with the estimation at the year beginning.
(2) The Company’s FIYTA Building and FIYTA Technology Building offers property lease service to
Shenzhen CATIC Real Estate Development Co., Ltd., Shenzhen Makway Cable TV Devices Co.,18
Ltd., Shenzhen CATIC Property Management Co., Ltd. and Jiangnan Securities Co., Ltd., the
Company’s related corporate companies. Both parties determine the service charge based on the
market price. In the report period, the Company received property rental income amounting to
RMB 2.8803 million, which complied with the amount predicted at year beginning.
(3) The Company sells watches through the franchised counters of Rainbow Supermarket Co.,
Ltd. In the report period, the sales expenses for such franchised counters was RMB 3.1391 million,
which complied with the amount predicted at year beginning.
(4) The Company has entrusted Shenzhen CATIC Hotel Management Co., Ltd. to manage Xi’an
Chengheng Hotel. Both parties determined the transaction price according to the market price. In
the report period, the hotel management charge amounted to RMB0.1296 million, which complied
with the amount predicted at year beginning.
(5) The Company sells odd watches to AVIC International Holding Corporation, the Company’s
controlling shareholder. In the report period, the Company received income from sales of watches
amounting to RMB 0.8203 million, which complied with the budget at year beginning.
The Routine Related Transactions in 2008 and the Proposal on the Predicted Conditions of the
Routine Related Transactions in 2009 was published on Securities Times, Hong Kong
Commercial Daily and http://www.cninfo.com.cn.
2. Liabilities or Guarantees with Related Parties
Ended June 30, 2009, Shenzhen CATIC Group Co., Ltd., the Company’s controlling shareholder
offered guarantee to the Company for the bank credit line amounting to RMB 595 million
accumulatively.
3. There exists no such situation that the Company’s holding shareholder or any of its subsidiaries
has ever occupied the Company’s funds.
VII. Important Contracts and Implementation
1. In the report period, the Company was not involved in such events as keeping as custodian,
contracted or leased any other company’s assets and vice versa in the report period or extended
from the previous years.
2. In the report period, there was no important guarantee incurred previously and extended to the
report period in the Company.
3. In the report period, there was no entrusted asset management incurred previously and
extended to the report period in the Company.
VIII. Commitment by the Shareholder Holding over 5% (with 5% Inclusive) of the
Company’s Shares
The Company started to implement the equity separation reform plan on November 7, 2007. In
the Company’s equity separation reform plan, the commitments made by Shenzhen CATIC Group
Co., Ltd., the shareholder holding over 5% of the Company’s shares, and the implementation are
summarized as follows:
(1) Shenzhen CATIC Group committed that upon completion of the equity separation reform of
FIYTA, the non-negotiable shares held by Shenzhen CATIC Group would not be listed with
Shenzhen Stock Exchange for trading within 36 months after the day when such shares got
approved for listing.
(2) Within 24 months after the 3-year sales restriction term expires, in case Shenzhen CATIC
Group would sell the non-negotiable FIYTA shares it was holding through listing with Shenzhen
Stock Exchange, the sales price must not be lower than RMB 25.00 per share.
Implementation of the commitment: The commitment is in process of implementation.19
Commencing from the date when the equity separation reform was finished to the end of the
report period, Shenzhen CATIC Group has not reduced or assigned any restricted shares held by
Shenzhen CATIC Group.
IX. Special Notice and Independent Opinion of Independent Directors on the Funds
Occupied by the Related Parties and External Guarantees
In accordance with the Establishment of Independent Director Systems by Listed Companies
Guiding Opinion and Code of Corporate Governance for Listed Companies promulgated by China
Securities Regulatory Commission, and Stock Listing Rules of Shenzhen Stock Exchange, as
independent directors of Shenzhen Fiyta Holdings Ltd., we hereby present our special notice and
independent opinions on the accumulative and current external guarantees offered by the
Company and the fund occupancy of the related parties as follows:
In accordance with the Circular on Several Issues Concerning the Regulation of Cash Flows
Between Listed Companies and Their Affiliates and Security Provided to Outside Parties by Listed
Companies (ZHENG JIAN FA (2003) No. 56) and Circular on Regulating the External Guaranties
Provided by. Listed Companies (ZHANG JIAN FA (2005) No. 120, we have made careful and
responsible confirmation and finalization of the external guarantees offered by Shenzhen FIYTA
Holdings Ltd. and the funds occupied by its controlling shareholder and other related parties
based on the position of being responsible to the Company, the whole shareholders and investors
and according to the principle of seeking truth from facts.
Through careful verification, the Company has strictly followed the concerned provision of the
Articles of Association, carefully implemented the Documents ZHENG JIAN FA (2003) and (2005)
No. 120 and strictly controlled the risk from the external guarantee. In the report period, the
Company offered no guarantee to its controlling shareholder or related parties or any other
external guarantee. At the end of the report period, there existed no accumulative guarantee; the
fund dealings with the related parties all belonged to regular operational fund dealings and there
existed no fund occupancy by related parties against the regulations.
X. The financial report has not been audited and no change has been made in the certified
public accountants.
VI Investigation Reception and Interviews
In the report period, the Company implemented the Guidelines of Listed Companies for Fair
Information Disclosure. During reception of the surveys and interviews, the Company and the
obligor for relevant information disclosure have strictly observed the principle of fair information
disclosure without any discrimination policy and had never been engaged in any activity of
revealing, disclosing or letting out in advance any private information to any designated
addressees in a secret way.
Reception of visitors is summarized as follows:
Reception
Time
Reception
place
Way of
reception
Visitor received
Topics and
information furnished20
May 13,
2009 Company Site Survey
Huaxia Fund Management
Co., Ltd.
Development trend
of the domestic
luxury goods sector,
some measures
concerning the
Company’s strategic
development, brand
construction,
terminal
management in the
past three years.
Provision of the
Company’s 2008
Annual Report and
public brochures.
XII. In the report period, the Company, its directors or senior executives had never been
examined or punished by the supervisory/administrative authority.
XIII. Provisional Announcement Information Disclosed in the Report Period
Announc
ement
No.
Announcement
Date
Description
Presses
where the
information
is disclosed
Websites for information
disclosure
2009-00
1
January 13,
2009
《关于实际控制人更
名的公告》
Securities
Times and
Hong Kong
Commercial
Daily
http://www.cninfo.com.cn
2009-00
2
March 26, 2009 《第五届董事会第二
十次会议决议》
Securities
Times and
Hong Kong
Commercial
Daily
http://www.cninfo.com.cn
2009-00
3
March 26, 2009 《第五届监事会第十
五次会议决议》
Securities
Times and
Hong Kong
Commercial
Daily
http://www.cninfo.com.cn
2009-00
4
March 26, 2009
《2008 年年度报告
摘要》
Securities
Times and
Hong Kong
Commercial
Daily
http://www.cninfo.com.cn
2009-00
5
March 26, 2009
《关于2008 年度日
常关联交易执行情况
及2009 年日常关联
交易预计情况的公
告》
Securities
Times and
Hong Kong
Commercial
Daily
http://www.cninfo.com.cn
2009-00
6
April 23, 2009
《第五届董事会第二
十一次会议决议》
Securities
Times and
Hong Kong
http://www.cninfo.com.cn21
Commercial
Daily
2009-00
7
April 23, 2009
《第五届监事会第十
六次会议决议》
Securities
Times and
Hong Kong
Commercial
Daily
http://www.cninfo.com.cn
2009-00
8
April 23, 2009
《2009 年第一季度
报告》
Securities
Times and
Hong Kong
Commercial
Daily
http://www.cninfo.com.cn
2009-00
9
April 23, 2009
《关于召开2008 年
度股东大会的通知》
Securities
Times and
Hong Kong
Commercial
Daily
http://www.cninfo.com.cn
2009-01
0
April 23, 2009
《董事会秘书辞职公
告》
Securities
Times and
Hong Kong
Commercial
Daily
http://www.cninfo.com.cn
2009-01
1
May 15, 2009
《关于撤回非公开发
行股票申请文件的公
告》
Securities
Times and
Hong Kong
Commercial
Daily
http://www.cninfo.com.cn
2009-01
2
May 22, 2009
《2008 年度股东大
会决议公告》
Securities
Times and
Hong Kong
Commercial
Daily
http://www.cninfo.com.cn
2009-01
3
June 17, 2009
《第六届董事会第一
次会议决议公告》
Securities
Times and
Hong Kong
Commercial
Daily
http://www.cninfo.com.cn
2009-01
4
June 17, 2009
《第六届监事会第一
次会议决议公告》
Securities
Times and
Hong Kong
Commercial
Daily
http://www.cninfo.com.cn22
Chapter 7 Financial Report
I. Accounting Statements (Refer to Pages 24 – 34 as attached hereinafter)
II. Accounting Statements (Refer to Pages 35– 92 as attached hereinafter)23
Chapter 8 Documents Available for Inspection
I. Semi-annual Report carried with personal signature of the Chairman of the Board;
II. Financial Statements signed by and under the seal of the Company leader, chief
accountant and accounting supervisors;
III. Originals of all documents and manuscripts of Announcements of the Company
disclosed in public in the newspapers as designated by China Securities Regulatory
Commission;
IV. Articles of Association of the Company.
SHENZHEN FIYTA HOLDINGS LTD.
Board of Directors
August 19, 200924
Attachment: Financial Report (unaudited)
1. Accounting statements
Balance Sheet
Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2009 In RMB
Items
Ending balance Opening balance
Consolidated Parent company: Consolidated Parent company:
Current assets:
Monetary funds 103,063,846.18 56,038,121.73 108,233,795.73 54,938,436.99
Transaction based
financial assets
Notes receivable
Accounts receivable 119,418,604.84 42,277,927.54 100,540,669.65 30,970,485.15
Advances to suppliers 12,809,035.64 20,772,416.86
Interest receivable
Dividend receivable 45,838,566.24 45,838,566.24
Other receivables 18,199,960.30 291,758,688.40 19,547,646.16 328,199,004.65
Reverse repurchase
agreements
Inventories 676,171,074.37 62,664,109.59 677,127,363.08 70,057,384.10
Non-current assets due
within a Year
Other current assets 2,623,608.52
Total current assets 929,662,521.33 498,577,413.50 928,845,500.00 530,003,877.13
Non-Current Assets:
Loan provision and
advances
Available-for-sale
financial assets
8,734,000.00 8,734,000.00 4,543,000.00 4,543,000.00
Held to the due
investment
Long term accounts
receivable
Long-term equity
investment
7,730,996.98 336,433,996.98 7,701,374.39 336,404,374.39
Investment based real
estate
174,675,482.10 174,675,482.10 177,773,318.21 177,773,318.21
Fixed assets: 256,287,119.28 243,222,114.50 262,829,687.92 249,121,975.84
Construction-in-progress
Engineering supplies
Disposal of fixed assets
Intangible assets 13,205,001.24 13,091,801.24 12,896,865.80 12,783,665.80
Development expenses25
Goodwill
Long-term expenses to
be apportioned
46,954,955.32 12,743,634.97 35,880,151.86 10,834,367.04
Deferred income tax 10,059,070.27 3,589,700.58 10,717,647.17 3,940,470.02
Other non-current
assets
Total non-current assets 517,646,625.19 792,490,730.37 512,342,045.35 795,401,171.30
Total assets 1,447,309,146.52 1,291,068,143.87 1,441,187,545.35 1,325,405,048.43
Legal Representative: Wu Guangquan Chief Financial Officer: Li Dehua Manager of the
Accounting Dept: Hu Xinglong
Balance Sheet (Cont’d)
Prepared by: SHENZHEN FIYTA HOLDINGS LTD.
June 30, 2009 In RMB
Current liabilities
Short-term Loan: 495,000,000.00 495,000,000.00 575,000,000.00 575,000,000.00
Transactional financial
liabilities
Notes payable 30,000,000.00 30,000,000.00
Accounts payable 79,384,069.41 17,966,992.19 58,809,238.66 7,827,286.28
Advance receipts 530,173.37 562,299.40 2,092,162.76 318,790.01
Staff’s wages payable 7,346,484.91 1,895,914.53 11,845,608.17 3,946,072.82
Taxes payable -471,086.19 7,724,316.91 -10,317,406.43 7,421,939.59
Interest payable 519,407.17 519,407.17 987,587.50 987,587.50
Dividends payable 25,327,226.66 24,931,799.90 395,426.76
Other payables 37,571,661.38 32,901,235.15 36,863,962.80 31,429,069.07
Non-current Liabilities
due within a Year
Other current liabilities 1,015,846.90 800,000.00 1,546,453.73 800,000.00
Total current liabilities 676,223,783.61 612,301,965.25 677,223,033.95 627,730,745.27
Non-Current Liabilities:
Long-term borrowings 70,000,000.00 70,000,000.00 70,000,000.00 70,000,000.00
Bonds payable
Long term accounts
payable
10,050,000.00 50,000.00 10,050,000.00 50,000.00
Special accounts
payable
Predicted liabilities
Deferred income tax
liability
1,217,986.87 1,209,974.70 371,774.70 371,774.70
Other non-current
liabilities
4,300,000.00 4,300,000.00 4,050,000.00 4,050,000.00
Total non-current liabilities 85,567,986.87 75,559,974.70 84,471,774.70 74,471,774.70
Total liabilities 761,791,770.48 687,861,939.95 761,694,808.65 702,202,519.97
Owners’ equity (or26
shareholders’ equity):
Paid up capital (or
capital stock)
249,317,999.00 249,317,999.00 249,317,999.00 249,317,999.00
Capital reserve 196,434,432.65 196,434,432.65 193,081,632.65 193,081,632.65
Less: shares in stock
Specialized reserve
Surplus reserve 109,362,340.60 109,362,340.60 109,362,340.60 109,362,340.60
General provision for
risk
Retained earnings 122,260,659.27 48,091,431.67 120,025,397.75 71,440,556.21
Cumulative translation
adjustments
-866,622.82 -863,824.15
Total owner’s equity
attributable to the parent
company
676,508,808.70 603,206,203.92 670,923,545.85 623,202,528.46
Minority shareholders’
equity
9,008,567.34 8,569,190.85
Total owners’ equity 685,517,376.04 603,206,203.92 679,492,736.70 623,202,528.46
Total liabilities and owners’
equity
1,447,309,146.52 1,291,068,143.87 1,441,187,545.35 1,325,405,048.43
Legal Representative: Wu Guangquan Chief Financial Officer: Li Dehua Manager of the
Accounting Dept: Hu Xinglong27
Statement of Profit
Prepared by: SHENZHEN FIYTA HOLDINGS LTD. January to June, 2009 In RMB
Items
Amount in the report year Amount in the previous year
Consolidated Parent company: Consolidated Parent company:
I. Total business income 572,693,689.88 128,489,078.35 518,549,352.19 112,967,242.15
Including: business
income
572,693,689.88 128,489,078.35 518,549,352.19 112,967,242.15
II. Total operating cost 540,485,453.82 128,762,852.69 471,375,807.00 101,889,394.43
Including: business
income
381,222,611.23 57,435,195.94 336,077,724.78 44,237,284.50
Business Taxes and
Surcharge
2,891,247.87 2,142,692.02 3,177,518.23 1,852,001.62
Sales expenses 85,428,355.39 37,873,358.67 68,044,662.99 30,315,464.69
Administrative
expenses
48,433,196.51 21,945,915.95 46,871,509.63 23,174,045.12
Financial expenses 20,777,386.61 9,356,090.11 17,204,391.37 2,310,598.50
Loss from
impairment of assets
9,600.00 9,600.00
Add: Income from
change of fair value (loss
is stated with “-“)
Investment income
(loss is stated with “-“)
179,622.59 179,622.59 -9,065.35 -9,065.35
Including: income
from investment in
associates and joint
ventures
179,622.59 179,622.59 -9,065.35 -9,065.35
Exchange income
(loss is stated with “-“)
III. Operating Profit (loss is
stated with “-“)
32,387,858.65 -94,151.75 47,164,479.84 11,068,782.37
Plus: Non-operating
income
2,161,886.01 2,050,430.86 467,575.01 165,138.38
Less: Non-operating
expenses
29,237.57 22,809.31 99,342.69 31,927.66
Including: Loss from
disposal of non-current
assets
0.00 3,795.10 773.64
IV. Total profit (total loss is
stated with “-“)
34,520,507.09 1,933,469.80 47,532,712.16 11,201,993.09
Less: Income tax
expense
6,914,069.18 350,794.44 8,599,329.48 2,005,079.40
V. Net Profit (loss is stated
with “-“)
27,606,437.91 1,582,675.36 38,933,382.68 9,196,913.6928
Net profit attributable
to the parent company’s
owner
27,167,061.42 1,582,675.36 38,419,239.04 9,196,913.69
Minority shareholders’
equity
439,376.49 514,143.64
VI. Earnings per share:
(I) Basic earnings per
share
0.109 0.154
(II) Diluted earnings
per share
0.109 0.154
Legal Representative: Wu Guangquan Chief Financial Officer: Li Dehua Manager of the
Accounting Dept: Hu Xinglong
Cash Flow Statement
Prepared by: SHENZHEN FIYTA HOLDINGS LTD. January to June, 2009 In RMB
Items
Amount in the report year Amount in the previous year
Consolidated
Parent
company:
Consolidated
Parent
company:
I. Net cash flows arising from operating
activities
Cash received from sales of goods
and supply of labor
631,586,117.34 127,026,357.07 613,293,417.98 128,746,736.97
Other operation activity related cash
receipts
2,083,806.62 51,783,802.20 2,309,807.50 30,123,630.57
Subtotal of cash flow in from
operating activity
633,669,923.96 178,810,159.27 615,603,225.48 158,870,367.54
Cash paid for purchase of goods
and reception of labor services
389,016,240.25 36,169,645.43 553,494,298.39 46,118,533.79
Cash paid to and for staff 68,729,730.94 30,958,505.75 58,834,669.62 28,039,538.04
Taxes paid 33,861,350.05 12,637,102.31 27,399,133.53 9,340,011.24
Other business related cash
payments
61,731,865.72 29,145,701.03 55,338,765.59 119,358,667.53
Subtotal of cash flow out from
operating activity
553,339,186.96 108,910,954.52 695,066,867.13 202,856,750.60
Net cash flow from operating
activities
80,330,737.00 69,899,204.75 -79,463,641.65 -43,986,383.06
II. Cash flows arising from investment
activities:
Net amount of cash received from
disposal of fixed assets, intangible
assets and other long term assets
136,700.00 135,000.00 316,100.00 316,000.00
Subtotal of cash flow in from
investment activity
136,700.00 135,000.00 316,100.00 316,000.0029
Cash paid for construction/purchase
of fixed assets, intangible assets and
other long term assets
17,879,527.03 1,639,160.00 108,943,738.51 97,507,370.05
Cash paid for investment 50,000,000.00
Subtotal of cash flow out from
investment activity
17,879,527.03 1,639,160.00 108,943,738.51 147,507,370.05
Net cash flow arising from
investment activities
-17,742,827.03 -1,504,160.00
-108,627,638.5
1
-147,191,370.0
5
III. Cash flows arising from fund raising
activities:
Cash received from borrowings 335,000,000.00 335,000,000.00 310,000,000.00 310,000,000.00
Other fund-raising related cash
receipts
29,119,083.43
Subtotal of cash flow in from fund
raising activity
335,000,000.00 335,000,000.00 339,119,083.43 310,000,000.00
Cash paid for liabilities repayment 385,000,000.00 385,000,000.00 70,000,000.00 70,000,000.00
Cash paid for dividend/profit
distribution or repayment of interest
17,757,859.52 17,295,359.52 38,488,697.48 38,488,697.48
Subtotal of cash flow out from
fund raising activity
402,757,859.52 402,295,359.52 108,488,697.48 108,488,697.48
Net cash flow arising from
fund-raising activities
-67,757,859.52 -67,295,359.52 230,630,385.95 201,511,302.52
IV. Influence from change of exchange
rate upon cash and cash equivalents
V. Net increase of cash and cash
equivalents
-5,169,949.55 1,099,685.23 42,539,105.79 10,333,549.41
Plus: Balance of cash and cash
equivalents at the beginning of the period
108,233,795.73 54,938,436.99 84,043,521.74 46,746,295.03
VI. Balance of cash and cash equivalents
at the end of the period
103,063,846.18 56,038,122.22 126,582,627.53 57,079,844.44
Legal Representative: Wu Guangquan Chief Financial Officer: Li Dehua Manager of the
Accounting Dept: Hu Xinglong30
Statement of Changes in Owner’s Equity
(1)Consolidated Statement of Changes in Owner’s Equity
Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Semi-annual Period of 2009 In RMB
Items
Amount in the report year Amount of Previous Year
Owner’s equity attributable to the parent company
Minority
shareho
lders’
equity
Total
owners’
equity
Owner’s equity attributable to the parent company
Minority
shareho
lders’
equity
Total
owners’
equity
Paid up
capital
(or
capital
stock)
Capital
reserve
Less:
shares
in stock
Speciali
zed
reserve
Surplus
reserve
General
provisio
n for risk
Retaine
d
earning
s
Others
Paid up
capital
(or
capital
stock)
Capital
reserve
Less:
shares
in stock
Speciali
zed
reserve
Surplus
reserve
General
provisio
n for risk
Retaine
d
earning
s
Others
I. Ending balance of the
previous year
249,317
,999.00
193,081
,632.65
109,362
,340.60
120,025
,397.75
-863,82
4.15
8,569,1
90.85
679,492
,736.70
249,317
,999.00
203,323
,132.65
103,575
,024.27
86,222,
040.84
-313,76
8.92
8,468,3
28.93
650,592
,756.77
Plus: Change in accounting
policy
Correction of previous errors
Others
II. Opening balance of the report
year
249,317
,999.00
193,081
,632.65
109,362
,340.60
120,025
,397.75
-863,82
4.15
8,569,1
90.85
679,492
,736.70
249,317
,999.00
203,323
,132.65
103,575
,024.27
86,222,
040.84
-313,76
8.92
8,468,3
28.93
650,592
,756.77
III. Decrease/increase of the
report year (decrease is stated
with “-“)
3,352,8
00.00
2,235,2
61.52
-2,798.6
7
439,376
.49
6,024,6
39.34
-8,289,3
80.00
13,487,
439.14
-568,47
3.64
514,143
.64
5,143,7
29.14
(I) Net profit
27,167,
061.42
439,376
.49
27,606,
437.91
38,419,
239.04
514,143
.64
38,933,
382.68
(II) Gain and loss directly 3,352,8 -2,798.6 3,350,0 -8,289,3 -568,47 -8,857,831
charged to owners’ equity 00.00 7 01.33 80.00 3.64 53.64
1. Net change in fair value
of financial assets available for
sale
4,191,0
00.00
4,191,0
00.00
-10,109,
000.00
-10,109,
000.00
2. Influence from change of
other owners’ equity in the
investees under the equity
method
3. Influence from the
income tax charged to the
owners’ equity
-838,20
0.00
-838,20
0.00
1,819,6
20.00
1,819,6
20.00
4. Others
-2,798.6
7
-2,798.6
7
-568,47
3.64
-568,47
3.64
Subtotal of the above (I) and
(II)
3,352,8
00.00
27,167,
061.42
-2,798.6
7
439,376
.49
30,956,
439.24
-8,289,3
80.00
38,419,
239.04
-568,47
3.64
514,143
.64
30,075,
529.04
(III) Owners’ input and
decrease of capital
1. Capital invested by the
owners
2. Amount of payment for
shares charged to owners’
equity
3. Others
(IV) Retained earnings
-24,931,
799.90
-24,931,
799.90
-24,931,
799.90
-24,931,
799.90
1. Provision of surplus
reserve
2. Provision of general risk32
reserve
3. Distribution to the
owners (or shareholders)
-24,931,
799.90
-24,931,
799.90
-24,931,
799.90
-24,931,
799.90
4. Others
(V) 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 with
surplus reserve
4. Others
IV. Ending balance of the report
year
249,317
,999.00
196,434
,432.65
109,362
,340.60
122,260
,659.27
-866,62
2.82
9,008,5
67.34
685,517
,376.04
249,317
,999.00
195,033
,752.65
103,575
,024.27
99,709,
479.98
-882,24
2.56
8,982,4
72.57
655,736
,485.91
(2)Statement of Change in Owner’s Equity of the Parent Company
Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Semi-annual Period of 2009 In RMB
Items
Amount in the report year Amount of Previous Year
Paid up
capital (or
capital
stock)
Capital
reserve
Less:
shares in
stock
Specialized
reserve
Surplus
reserve
Retained
earnings
Total owners’
equity
Paid up
capital (or
capital
stock)
Capital
reserve
Less:
shares in
stock
Specialized
reserve
Surplus
reserve
Retained
earnings
Total owners’
equity
I. Ending balance of the
previous year
249,317,99
9.00
193,081,63
2.65
109,362,34
0.60
71,440,556.
21
623,202,528.
46
249,317,99
9.00
203,323,13
2.65
103,575,02
4.27
44,286,509.
15
600,502,665.
0733
Plus: Change in accounting
policy
Correction of previous errors
Others
II. Opening balance of the report
year
249,317,99
9.00
193,081,63
2.65
109,362,34
0.60
71,440,556.
21
623,202,528.
46
249,317,99
9.00
203,323,13
2.65
103,575,02
4.27
44,286,509.
15
600,502,665.
07
III. Decrease/increase of the
report year (decrease is stated
with “-“)
3,352,800.0
0
-23,349,124
.54
-19,996,324.
54
-8,289,380.
00
-15,734,886
.21
-24,024,266.
21
(I) Net profit
1,582,675.3
6
1,582,675.36
9,196,913.6
9
9,196,913.69
(II) Gain and loss directly
charged to owners’ equity
3,352,800.0
0
3,352,800.00
-8,289,380.
00
-8,289,380.0
0
1. Net change in fair value
of financial assets available for
sale
4,191,000.0
0
4,191,000.00
-10,109,000
.00
-10,109,000.
00
2. Influence from change of
other owners’ equity in the
investees under the equity
method
3. Influence from the
income tax charged to the
owners’ equity
-838,200.00 -838,200.00
1,819,620.0
0
1,819,620.00
4. Others
Subtotal of the above (I) and
(II)
3,352,800.0
0
1,582,675.3
6
4,935,475.36
-8,289,380.
00
9,196,913.6
9
907,533.69
(III) Owners’ input and
decrease of capital34
1. Capital invested by the
owners
2. Amount of payment for
shares charged to owners’
equity
3. Others
(IV) Retained earnings
-24,931,799
.90
-24,931,799.
90
-24,931,799
.90
-24,931,799.
90
1. Provision of surplus
reserve
2. Distribution to the
owners (or shareholders)
-24,931,799
.90
-24,931,799.
90
-24,931,799
.90
-24,931,799.
90
3. Others
(V) 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 with
surplus reserve
4. Others
IV. Ending balance of the report
year
249,317,99
9.00
196,434,43
2.65
109,362,34
0.60
48,091,431.
67
603,206,203.
92
249,317,99
9.00
195,033,75
2.65
103,575,02
4.27
28,551,622.
94
576,478,398.
8635
II. Notes to the Accounting Statements
(I) Declaration on Adherence to the Accounting Standards for Enterprises
The financial statements the Company has prepared comply with the Accounting Standards for
Enterprises–Basic Standards and other accounting standards, have truly and completely reflected
the Company’s financial position and the consolidated financial position as at June 30, 2009 and
the concerned information, such as the operation result and the consolidated operation result of
the first half year of 2009 as well as the cash flow and the consolidated cash flow of the first half
year of 2009.
(II) Accounting policies
The Company’s financial statements are based on the assumption of continuous operation and
have been recognized and measured according to the actually incurred transactions and matters
pursuant with the Accounting Standards for Enterprises–Basic Standards and other accounting
standards promulgated by the Ministry of Finance of the People’s Republic of China. The financial
statements have been prepared on this basis.
(III) Principal Accounting Policies, Accounting Estimate and Previous Errors
1. Fiscal Year
The Company uses the calendar year for its fiscal year which is from January 1 to December 31.
2. Recording Currency
The Company uses Renminbi as the recording currency.
3. Bookkeeping basis and measurement attribution
The Company takes the accrual system as the bookkeeping basis and usually takes the historical
cost as the measurement attribution; when the amount of the accounting elements as determined
comply with the accounting standards for enterprises and can be reliably measured, the
replacement cost, the net realizable value, present value and fair value may be used for
measurement.
4. Recognition of Cash Equivalent
Cash equivalent refers to the investment held by the Company with short term (due within 3
months from the purchase date), strong liquidity and low risk of value fluctuation that is easy to be
converted into cash of known amount.
5. Foreign Currency Translation
The foreign currency is converted into the recording currency based on the spot rate of the
transaction day (which is the average price of the exchange rates published by the People’s Bank
of China on the very day) in the initial recognition.
For the foreign currency based items on the balance sheet day, the spot rate on the balance sheet
day is used for conversion. The exchange margin arising from therefrom is charged to the current
gain and loss according to the Accounting Standards for Enterprises No. 17 – Borrowing
Expenses except capitalization of the exchange margin arising from borrowings in foreign
currency in connection with the assets which comply with the capitalization conditions in purchase,
construction or production. The non-monetary items in foreign currency measured based on the
historical cost are converted based on the rate of the transaction day without change of the
amount of the functional currency for bookkeeping. The non-monetary items in foreign currency
measured based on the fair value are translated based on the exchange rate of the day when the
fair value is determined and the exchange margin arising therefrom is charged to the current gain
and loss or capital reserve.
6. Financial Assets and Financial Liabilities
(1) Classification of Financial Assets and Financial Liabilities
The Company classifies the acquired financial assets or the borne financial liabilities into the
following types at the time of initial recognition based on its own business characteristics and risk
management requirements: ① Financial assets that are measured at fair value and changes in
the value are charged to current gain and loss or financial liabilities;② Held to maturity36
investments;③ Loans and accounts receivable; ④ Available-for-sale financial assets;⑤ Other
financial liabilities;
(2) Recognition Basis and Measurement Method of Financial Assets and Financial Liabilities
When the Company becomes a party to a financial instrument contract, a financial asset or liability
is recognized. A financial asset or liability is measured based on the fair value when it is
recognized initially.
A financial asset or liability is measured based on the fair value when it is recognized initially; For
the financial assets or liabilities which are measured based on the fair value and whose change is
charged to the current gain and loss, the relevant transaction fee is directly charged to the current
gain and loss; for other types of financial assets, the relevant transaction fee is charged to the
amount as initially determined.
The follow-up measurement method for financial assets and financial liabilities mainly includes:
① The financial assets and financial liabilities are measured based on the fair value and their
change is charged to the current gain and loss and the follow-up measurement is made based on
the fair value and the realized and unrealized gains and losses are charged to the current gain
and loss.
② For the held-to-maturity investment and accounts receivable, actual interest rate method is
used and it is measured based on the amortized cost; The gain or loss arising from termination of
the final recognition, impairment or amortization are all charged to the current gain and loss.
③ Financial assets available for sale undergo follow-up measurement according to the fair value;
the gain or loss formed from change in the fair value is directly charged to the owner’s equity with
loss from impairment and exchange gain and loss formed from monetary assets in foreign
currency exclusive; is transferred out when the recognition of the financial asset is terminated and
charged to the current gain and loss.
④ However, the equity instrument investment active in the market but without quotation whose
fair value cannot be reliably measured and the derivative financial assets which is linked with such
equity instrument and settled through delivery of such equity instrument is measured based on the
cost.
⑤ Follow-up measurement is made for the other financial liabilities based on the amortized cost.
The following cases are exclusive:
A. The derivative financial liabilities linked with the equity instruments which are active in the
market but without quotation and whose fair value cannot be reliably measured and settled by
delivering that equity instrument are measured according to the cost.
B. For the financial guarantee contract of the financial liabilities which are not designated for
measurement based on the fair value and whose change is charged to the current gain and loss,
or for the loan commitment of loan which is not designated for measurement based on the fair
value and whose change is charged to the current gain and loss with the interest rate lower than
that of the market; the follow-up measurement is made based on the higher of the following two
amounts after initial recognition:
a. the amount determined according to the Accounting Standard for Enterprises No. 13 –
Contingencies;
b. the balance of the initially recognized amount less the accumulative amortized amount
determined according to the principle as specified in the Accounting Standards for Enterprises No.
14 – Income.
(3) Determination of the fair value of the principal financial asset and liability
For a financial asset or liability active in the market, its fair value is determined based on the37
quotation of the active market.
For the financial asset or liability not existing in the active market, the fair value is determined by
means of value estimation technique.
(4) Recognition and measurement of the transfer of financial assets
In case the Company has transferred almost all the risks and rewards in connection with the
ownership of a financial asset to the transferee, the financial asset shall no longer be recognized.
In case Company retains almost all the risks and rewards in connection with the ownership of a
financial asset, the financial asset to be transferred shall be further recognized and the received
valuable consideration shall be recognized as a financial liability. In case the Company has
neither transferred nor retained any risks and rewards in connection with the ownership of a
financial asset, it shall be handled respectively based on the following cases:
(1) In case the control over the financial asset has been given up, the financial asset shall be no
longer recognized.
(2) In case the control over the financial asset has not been given up, the relevant financial asset
shall be recognized according to the level of continuous involvement in transfer of the financial
asset and the concerned liability shall be correspondingly recognized.
In case overall transfer of a financial asset satisfies the condition for recognition, the balance
between the following two amounts shall be charged to the current gain and loss: (1) Book value
of the financial asset transferred; (2) Sum of the valuable consideration received due to the
transfer plus the accumulative amount of the change of fair value which was initially directly
charged to the owner’s equity.
In case transfer of partial financial asset satisfies the condition for terminating the recognition, the
book value of overall transfer of financial assets is amortized between the part being terminated
for recognition and that not being terminated for recognition according to their respective relevant
valuable consideration and the discrepancy between the following two amounts is charged to the
current gain and loss. (1) Part of the book value being terminated for recognition. (2) Sum of the
valuable consideration of the part being terminated for recognition and the amount
corresponding to the part being terminated for recognition in the accumulative amount with
change of the fair value directly charged to the owner’s equity.
(5) Impairment test and provision for impairment of financial assets
① Scope of the provision for impairment of financial assets and the objective evidence of
impairment
The Company conducts inspection over the book value of the financial assets other than the
financial assets measured based on fair value and whose change is charged to the current gain
and loss on the balance sheet day; and provides reserve when objective evidence shows that
such financial assets experiences impairment. Objective evidence which shows impairment of
financial assets incurred refers to the items which actually incur after the initial recognition of
financial assets, have influence upon the future predicted cash flow of such financial assets while
the enterprise can make reliable measurement on such influence.
② Impairment test and provision for impairment of financial assets
A. Financial asset measured at amortized cost
In case there is objective evidence showing that the financial asset experiences impairment, the
book value of such financial asset is reduced to the present value of the predictable future cash
flow (excluding the future credit loss not yet incurred), the reduced amount is charged to the
current gain and loss. The present value of the predicted future cash flow is determined based on
the original actual interest rate discount of the financial asset with consideration of the value of the
relevant collateral.
Impairment test is conducted on individual financial assets with individual amount over RMB38
500,000.00 (with RMB 500,000.00). In case there is objective evidence showing that
impairment has actually incurred, loss of impairment is recognized and charged to the current
gain and loss. For a financial asset with not so big amount in single item, impairment test is made
in the financial asset combination with similar credit risk characteristics or impairment test is
conducted individually. For a financial asset which has not been involved in impairment in
separate test (including financial assets with big or not so big amount in single item), the
impairment test is made in the financial assets combination with similar credit risk
characteristics. Financial assets whose loss from impairment has been recognized do not include
the financial assets with similar credit risk characteristics for which impairment test is made in the
combination. For the financial assets measured based on the amortized cost, after the loss from
impairment has been recognized, in case there is objective evidence showing that the value of
such financial asset has been recovered while it has something to do objectively with the matter
occurred after the loss has been recognized, the loss from impairment as previously recognized
shall be reversed and charged to the current gain and loss. However, the book value after the
reversal does not exceed the amortized cost of the financial asset on the reversal date while it is
assumed that no provision for impairment would be made. For the test for impairment of accounts
receivable and the provision method, refer to “Note IV: Accounts Receivable”. B. Financial asset
measured based on the cost.
In case there is objective evidence showing that the financial asset has experienced impairment,
the book value of the financial asset is recognized as impairment loss and charged to the current
gain and loss together with the difference between the present value as determined based on the
market income rate of the similar financial asset against the future cash flow discount. The
impairment loss as incurred shall not be reversed once recognized.
For the long term equity investment which is calculated based on the cost method in accordance
with the Accounting Standards for Enterprises No. 2 – Long Term Equity Investment, and there is
no quotation in the active market and the fair value cannot be reliably measured, the impairment is
treated according to the above principle.
C. Available-for-sale financial assets
In case there is objective evidence showing that the financial asset has experienced impairment,
the accumulative loss directly charged to the capital reserve and formed due to drop of the fair
value is reversed and charged to the current gain and loss. The transferred out accumulated loss
is the balance of the recovered principal less the cost initially acquired available-for-sale financial
asset and amortized amount, the current fair value and the impairment loss originally charged to
the gain and loss.
7. Accounts receivable
(1) The determination criteria of bad debts
The Company conducts inspection of the book value of the accounts receivable on the balance
sheet day, and makes provision for impairment when there exist the following objective evidences
showing that any account receivable has experienced impairment: ① A debtor is involved in
serious financial difficulty; ② A debtor has breached contract (such as default in payment of
interest or principal and overdue, etc.) ③ Debtor may be highly possible to be involved in
bankruptcy or other financial reorganization; ④ Other objective basis which shows impairment of
accounts receivable.
(2) Provision for Bad Debts
On the balance sheet day, the Company conducts separate impairment test on the accounts
receivable with significant individual amount (accounts receivable with individual amount
exceeding RMB 800,000.00 and other payables with individual amount exceeding RMB
500,000.00) and accounts receivable with insignificant individual amount but with greater risk
based on the credit risk characteristics (accounts receivable with age exceeding 4 years). When
there is objective evidence showing that impairment actually incurs, based on the balance of the
present value of the future cash flow lower than the book value, loss for impairment is recognized
and provision for bad debts is made. The difference between the predicted future cash flow of a
short term account receivable and its present value is very small. In recognizing the loss in39
connection with impairment, its predicted future cash flow is discounted. For the accounts
receivable other than the above and the accounts receivable in which no impairment has incurred
after separate testing, they are grouped based on the age, loss for impairment is calculated and
determined according to a certain proportion of the balance combined with the accounts
receivable and provision for bad debt is made. The provision proportions for bad debts are based
on the following:
The Company does not make provision for bad debts for the reserve to employees and the
accounts receivable from the subsidiaries within the consolidation scope.
8. Inventories:
(1) Classification
Inventories are divided into raw materials, easily-consumed products with low value, packing
materials, commodities in stock and work-in-process.
(2) Valuation of Inventories Acquired and Delivered
Inventories are valuated based on the actual cost at the time of acquisition. Inventory costs
include purchase cost, processing cost and other costs; they are valuated based on the weighted
average or individual valuation approach at the time of reception and delivery.
(3) Amortization of low-value consumption goods and packing materials
Low-value consumption articles and packing materials are amortized in lump sum at the time of
requisition.
(4) The stock-taking system for inventories is based on the perpetual stock system.
(5) Recognition and provision of reserve for price falling of inventories
On the balance sheet day, inventories are measured based on the lower of the cost and the net
realizable value.
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, Including:
① For the inventories in stock directly for sale, including finished products, commodities and
materials for sale, etc., their realizable net value is determined based on the amount of the
estimated sales prices of such inventories less the estimated sales expenses and relevant taxes.
② Commodities in stock: Their net realizable value is the amount of the estimated sales price
less the estimated sales expenses and relevant taxes and duties, where for FIYTA watches
made by the Company itself, the net realizable value is determined based on the sales status of
the current year. The proportions of the net realizable value determined based on the sales status
Age
Provision proportion (%)
Within 1 year (with 1 year inclusive, and
the following is the same)
5
1 to 2 years
10
2 to 3 years
30
Over 3 years
5040
are as follows:
For the famous brand watches distributed by the Company, provision for price falling is made
based on the individual inventory items.
On the balance sheet day, in case the inventory cost is higher than the net realizable value,
provision for price falling of inventories is made and charged to the current gain and loss. In case
the factors influencing the value of previous reduced inventories have already disappeared, the
reduced amount is recovered and reversed within the amount of the provision for price falling of
inventories originally made, the reversed amount is charged to the current gain and loss.
9. Long-term equity investment
(1) Initial measurement of long term equity investment
For consolidation of enterprises under the same control, the share of the book value of the
owners’ equity of the consolidatee on the consolidation day is used as the initial investment cost
of the long term equity investment. For the long term equity investment acquired through
consolidation of the enterprises not under the same control, initial measurement is made based
on the determined consolidation costs. For the long term equity investment acquired by other
means, the initial investment cost is made by classification of different ways of acquisition and
based on the actually paid cash, fair value of the equity based security as issued, or the value as
specified in the investment contract or agreement. Initial investment costs include the expenses,
taxes and other necessary expenditures directly connected with the long term equity investment
as acquired.
For the long term equity investment acquired through consolidation of enterprises under the same
control, the share of the book value of the owners’ equity of the consolidatee on the consolidation
day is used as the initial investment cost of the long term equity investment. Difference between
the initial investment cost of long term equity investment and the book value of the consolidation
valuable consideration (or the total book value of the issued shares) is used to adjust the capital
reserve; in case the capital reserve is not enough to be offset, the retained earnings is adjusted.
Various direct expenses incurred to the consolidator during the enterprise consolidation are
charged to the current gain and loss at the time of incurrence; the service charges, commissions
etc. in bond issuing or other liability payment for the enterprise consolidation are charged to the
initially measured amount of the issued bonds and other liabilities; service charges, commissions,
etc. incurred to the equity based securities issued in enterprise consolidation are used to offset
the equity based security premium income; or offset the retained earnings in case the premium
income is not enough for offsetting.
Sales status
Net realizable value proportions
(%)
Commodities in long stock without any
value
0
Commodities in long stock with quality
problem
10
Commodities in long stock without market
20
Commodities with new design but with no
market
45
Commodities with new design but ready to
be eliminated
7041
For the long term equity investment acquired through consolidation of enterprises not under the
same control, the consolidation costs as determined on the acquisition day is used as the initial
investment cost of the long term equity investment; the consolidation costs are the fair value of the
assets paid for, the liabilities incurred or borne acquisition of the control power over the party
acquired on the acquisition day as well as various direct expenses incurred for the enterprise
consolidation. For the enterprise consolidation realized through several times of exchange
transactions in steps, the consolidation cost becomes the sum of the individual transaction costs.
In case arrangement has been made for the future issues which may possibly affect consolidation
costs in the consolidation contract, the amount involved in the future events possibly incurred as
estimated on the acquisition day and affecting the consolidation costs is also charged to the
consolidation costs if it can be reliably measured. Service charges, commissions, etc. for issuing
the bond or other liability payment for enterprise consolidation are charged to the initial
measurement amount of the issued bonds and other liabilities; service charges, commissions, etc.
for issuing equity based security in enterprise consolidation are offset with the premium income of
equity based securities; as well as to offset the retained earnings in case the premium income is
not sufficient for such offsetting.
(2) The follow-up measurement of the long term equity investment and the method for
recognition of investment income
① For a long term equity investment in which the Company can exercise control over the
investee but does not have common control over or significant influence upon the it and there is
no quotation in the active market and the fair value cannot be reliably measured, the Company
adopts the cost method for calculation.
The long term equity investment calculated based on the cost method is price according to the
initial investment cost. For the additional or recovery investment, cost of long term equity
investment is adjusted. The cash dividend or profit announced by the investee for distribution is
recognized as the current investment income. The investment income as recognized is only
restricted in the amount of accumulated net profit distributed created after the investee has
accepted the investment; the obtained profit or cash dividend which exceeds the aforesaid part is
recognized as the recovery of the initial investment cost.
② The long term investment which has common control over or significant influence upon the
investee, the equity method is used for calculation. For the recognizable net asset fair value share
in the investee enjoyable when the initial investment cost of the long term equity investment is
greater than the investment, the initial investment cost of long term equity investment shall not be
adjusted. For the recognizable net asset fair value share in the investee enjoyable when the initial
investment cost of the long term equity investment is smaller than the investment, its difference is
charged to the current gain and loss; at the same time, the cost of long term equity investment is
adjusted at the same time.
After obtaining the long term equity investment calculated based on the equity method, the
investment income is recognized according to the share of the net gain and loss realized by
the investee which the investor should enjoy or share and the book value of the long term
equity investment is adjusted. In recognizing the share enjoyable in an investee’s net gain and
loss, with the fair value of the investee’s distinguishable assets, etc. as the base, according to
the Company’s accounting policy and during the accounting period, offset the gain and loss of
the inside transaction incurred between the associate and joint venture and calculate the part
attributable to the investor (however, in case the loss from the inside transaction belongs to
loss from impairment of asset, it should be recognized fully) and the net profit of the investee is
recognized after adjustment. For a long term equity investment in an associate or joint
venture already held before the first implementation day, in case there exists debit balance in
connection with the equity investment, it is necessary to deduct the credit balance of equity
investment amortized according to the straight line method for the previous remaining term
and recognize the investment gain and loss. Based on the profit announced by the investee for
distribution or the distributable cash dividend as worked out, the book value of the long term42
equity investment is reduced correspondingly. In determining the net loss incurred to an
investee, the minimum decrease of the book value of long term equity inestment and the long
term equity which has substantially composed net investment in the investee is reduced to
zero with the extra loss the Company has obligation to assume exclusive. For the other change
in the owner’s equity of the investee except the net gain and loss, the book value of the long term
equity investment is adjusted and charged to the owner’s equity and transferred to the current gain
and loss based on the corresponding proportion at the time of disposal of the investment.
(3) Basis for determination of the joint control and significant influence
① The basis for determining the joint control mainly includes: any party to a joint venture cannot
solely control the production and operation activities of the joint venture; a decision concerning the
joint venture’s basic operation activities needs to be unanimously approved by all the parties to the
joint venture, etc.
② Basis for determining significant influence mainly includes: when the Company directly holds or
indirectly holds through its subsidiary over 20% (with 20% inclusive) but lower than 50% of the
vote-bearing shares in an investee, it shall be determined that the Company has significant
influence upon the investee unless there is explicit evidence showing that the Company is not
allowed to be involved in decision making of the investee’s production and operation in such a
case and shall not form significant influence upon it. In case the Company only holds below 20%
(with 20% exclusive) of the vote-bearing shares in an investee, it shall not usually be regarded as
having significant influence upon the investee.
10. Investment based real estate
Investment based real estate includes the land use right already leased, the land use right
assigned after holding and being ready for increasing value and the building already leased.
The Company conducts follow-up measurement of investment based real estate by using the cost
model. For the investment based real estate undergoing follow-up measurement by means of cost
model, the depreciation policy and the amortization method are identical to that for the same or
similar type of fixed assets and intangible assets. About the basis and method for provision for
impairment, refer to “Note IV. Impairment of Assets”.
11. Fixed assets:
(1) Conditions for Recognition of Fixed Assets
Fixed assets refer to intangible assets held for the purpose of producing commodities, supplying
labor, lease or operation and management with service life exceeding over one fiscal year. Fixed
assets shall not be recognized until all the following conditions are satisfied: ① The economic
benefit in connection with the fixed assets may possibly flow into the Company; ② the costs of
such fixed assets can be reliably measured.
(2) Classification of fixed assets and depreciation method
Fixed assets are depreciated based on the composite life
method. The service life, the predicted net residual value and
annual depreciation rate of various fixed assets are as
follows:
Assets Service life
Predicted
residual rate (%)
Annual
depreciation
rate (%)
Housing and buildings 20 to 35 5 2.7-4.843
years
Machines & equipment 10 years 5-10 9-9.5
Motor vehicles 5 years 5 19
Electronic equipment 5 years 5 19
Other equipment 5 years 5 19
For a fixed asset whose provision for impairment has been made, depreciation is provided based
on its cost less the predicted net residual value, the mount after depreciation and provision for
impairment and the remaining service life. For a fixed asset which has reached the predicted
service status but for which the completion settlement has not been made, the cost is determined
based on the estimated value and depreciation is provided; after the completion settlement is
made, the previous temporarily estimated value is adjusted according to the actual cost but it is
unnecessary to adjust the depreciation amount already provided.
The service life, predicted net residual value and depreciation method of fixed assets are
rechecked and adjusted when necessary at least at the end of each year.
12. Construction-in-progress
The Company’s construction-in-progress includes building project in construction, installation
works, technical innovation works, overhaul works, etc. Construction-in-progress is stated at
cost.
The construction in progress is charged based on the actual cost and transferred into the fixed
assets after the works has reached the predicted status.
13. Intangible assets
(1) Initial Measurement of Intangible Assets
Intangible assets are initially measured based on the cost.
(2) Follow-up Measurement of Intangible Asset
① Estimation of the service life of intangible assets
For the intangible assets held or controlled by the Company and originated from the contractual
rights or other statutory rights, its service life does not exceed the term of the contractual rights or
other statutory rights. Contractual rights or other statutory rights are extended due to renewal of
the contract when it is due while there is evidence showing that the Company does not have to
pay big amount of cost for the renewal, the renewal term is charged to the service life. In case a
contract or law does not specify the service life, the service life of intangible asset may be
determined with reference to the historical experience or by engaging expert for verification. In
case it is still impossible to reasonably determine the term in which an intangible asset may bring
about economic benefit to the Company, the Company shall take the intangible asset as an
intangible asset with no definite service life.
② Recheck of the service life of intangible asset
The Company rechecks the service life of and amortization method for intangible asset at least at
the end of every year. Adjustment is made when necessary.
③ Amortization of intangible assets
For an intangible asset with limited service life, the Company amortizes it in stages by means of
straight line method within the predicted service life commencing from the very month of
acquisition. No amortization is made for an intangible asset with the service life indefinite but test
for impairment is made at the end of each year.44
14. Research and development expenses
Expenses for the Company’s internal research and development projects are divided into the
expense of the research stage and that for the development stage. The expense of the research
stage refers to the expense incurred in the initiative and planned survey of the Company for the
purpose of acquiring and understanding the new scientific or technical knowledge. The expense
in the research stage of the internal research and development project is charged to the current
gain and loss at the time of incurrence.
Expense in the development stage refers to the expense incurred applying the research result or
other knowledge in some plan or design so as to produce new or substantially improved materials,
device, products, etc. Expenses in the development stage shall not be capitalized until the
following conditions are satisfied at the same time, namely, ① it is feasible technically that an
intangible asset, upon completion, can be put into application or be available for sale;② there is
intention for fulfilling that intangible assets and application or sales;③ the ways of intangible
assets to produce economic benefit, including being able to prove that there exists market for the
products produced by using such intangible assets or there exists market for intangible asset itself;
in case intangible asset shall be used internally, it can be proved useful. ④ There is sufficient
support in terms of technology, financial resource and other resources so as to fulfill the
development of intangible asset and have the ability to use or sell such intangible assets; ⑤
Expenses attributable to the development stage of such intangible assets can be reliably
measured. The development stage expense which does not satisfy the aforesaid conditions is
charged to the current gain and loss at the time of incurrence.
15. Long-term expenses to be proportioned
Long-term expenses to be proportioned refer to various expenses that have already incurred and
shall be borne in the current and future periods with the amortization term of over 1 year (with 1
year exclusive). Long term expenses to be apportioned are entered based on the actual
expenditure and are amortized based on the straight-line method within the beneficial period of
the project.
16. Impairment of Assets
(1) Applicable range
The assets which experience impairment as described in the note mainly include the long term
equity investment (excluding the long term equity investment which does not have the joint control
over or significant influence upon the investee, without quotation in the active market and of which
the fair value cannot be reliably measured), investment based real estate (excluding the
investment based real estate measured with the fair value model), fixed asset,
construction-in-progress; intangible assets (including the capitalized development expense),
asset group and asset group combination, goodwill, etc.
(2) Recognition of the impaired assets possibly incurred
On the balance sheet day, the Company judges if there exists any sign of impairment incurred.
For the intangible assets and goodwill with indefinite service life formed due to enterprise
consolidation, the Company conducts impairment test every year on whether there exists the sign
of impairment. In case there exist the following signs, it shows that the asset may have
experienced impairment:
① The market price of asset falls greatly in the current period and the falling rate is significantly
higher than the predicted falling due to pass of time or normal application;
② The environment of economy, technology or law in which the Company’ operation is involved,
and the market where the asset is involved experiences currently or is going to experience in the
near future so that it produces unfavorable influence upon the Company;
③ The market interest rate or other market investment return rate has been improved in the
current period which affects the discount rate of the present value of the predicted future cash flow
calculated by the Company, causing great drop of the asset recoverable amount;45
④ There is evidence showing that the asset has been obsolete or substantially damaged;
⑤ An asset has been or shall be idled, terminated for application or is planned to be disposed
ahead of the plan;
⑥ Evidence of the Company’s internal report shows that the economic result of an asset has
been lower or shall be lower than that expected, for instance the net cash flow created by an asset
or operation profit (or loss) realized is much lower (or higher) than the predicted amount, etc.;
⑦ Other evidence shows that an asset has possibly shown the sign of impairment.
(3) Measurement of the Recoverable Amount of Assets
In case there exists sign of impairment of the asset, its recoverable amount is estimated. 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.
(4) Recognition of the Loss from Impairment of Assets
The measurement result of the recoverable amount shows that the recoverable amount of the
assets is lower than the book value; the book value is reduced to the recoverable amount; the
reduced amount is recognized as the loss in impairment of assets and charged to the current gain
and loss; and at the same time, provision for impairment of assets is made correspondingly. After
confirmation of loss from impairment of asset, the depreciation of the impaired asset or the
amortization expenses shall be adjusted correspondingly in the future period so that the asset
shall systematically share the book value of the asset after adjustment within the remaining
service life of the asset (less the predicted net residual value). Loss from impairment of any asset,
once confirmed, shall not be reversed in the following accounting period.
(5) Recognition of Assets Group and Disposal of Impairment
In case there is a sign showing that an asset may experience impairment, the Company estimates
its recoverable amount with the individual asset as the base. In case the Company finds it difficult
to estimate the recoverable amount of individual asset, the recoverable amount of the asset group
is determined with the asset group attributable to that asset as the base. Determination of asset
group is based on whether the principal cash flow-in produced by the asset group being
independent on the cash flow-in of other asset or asset group.
In case the recoverable amount of assets group or combination of assets group is lower than its
book value (the headquarters’ assets and goodwill are proportioned to some assets group or
assets group combination, the book value of such assets group or assets group combination
should include the proportioned amount of the headquarters’ assets and goodwill) and the
corresponding loss from impairment is recognized. The amount of the loss from impairment is
first offset down and proportioned to the book value of the goodwill in the assets group or assets
group combination, and then is offset down to the book value of other assets according to the
proportions in the book value of other assets in the assets group or assets group combination
except the goodwill.
(6) Impairment of Goodwill
For the goodwill formed from enterprise consolidation, the Company conducts impairment test at
least once a fiscal year. The book value of the goodwill formed from the consolidation is
apportioned to the relevant assets group according to the reasonable method commencing from
the acquisition day; or apportioned to the relevant assets group combination if it is difficult to be
apportioned to the relevant assets group. The relevant assets group or assets group combination
is the assets group or assets group combination which can benefit from the coordination effect of
the enterprise consolidation but is not greater than the report segment as determined by the
Company.
When impairment test is conducted for the relevant goodwill-bearing assets group or assets group
combination, in case there exists sign of impairment in the assets group or assets group46
combination in connection with goodwill, it is necessary to conduct first the impairment test over
the assets group or assets group combination without goodwill to calculate the recoverable
amount and recognize the corresponding loss from impairment after comparison with the relevant
book value; then conduct the impairment test over the goodwill-bearing assets group or assets
group combination, compare the book value of these relevant assets group or assets group
combination (including the book value part of the goodwill as proportioned) and its recoverable
amount. In case the recoverable amount of the relevant assets group or assets group combination
is lower than its book value, recognize the loss from impairment and make disposal according to
the provisions concerning impairment of assets group as specified in this Note.
17. Predicted liabilities
(1) Principle of recognizing the predicted liabilities
The business in connection with such contingencies as external guarantee, unsettled lawsuit or
arbitration, product quality assurance, staff lay-off plan, loss contract, obligation of reorganization,
obligation of discarding fixed asset, etc. is recognized as liability when it is in compliance with the
all following conditions: ① Such obligation is a present obligation the Company should assume;
② Implementation of such obligation may possibly cause economic loss of the enterprise.③ The
amount involved in such obligation can be reliably counted.
(2) Measurement of Predicted Liabilities
It is predicted that the initial measurement is conducted according to the best estimated amount
necessary to be paid in implementing the current obligation, with the such elements as the risks in
connection with the contingent events, uncertainty and currency time value, etc. taken into
comprehensive consideration. On each balance sheet day, the book value of the predicted
liabilities is rechecked. In case there is conclusive evidence showing that such book value
cannot reflect the current best estimated amount, adjustment is made according to the current
best estimation against the book value.
18. Income
(1) Recognition of Income from Sales of Commodities
The come from sales of commodities is recognized on the following bases: ① when the
significant risks and rewards of ownership have been transferred to the buyer;② The Company
maintains neither managerial involvement to the degree usually associated with ownership, nor
effective control over the goods sold;③ The amount involved can be reliably measured;④ The
relevant economic benefit can highly probably flow into the Company; ⑤ The relevant costs
incurred or to incur can be reliably measured.
(2) Recognition of Income from Supply of Labor Services
The result of transaction of supplying labor services on the balance sheet day can be
reliably estimated and the income from supply of labor service is recognized based on the
percentage of service completion. The Company determined the work progress of the
labor service supply according to the measurement of the completed work.
The Company treats the results of labor service transaction which cannot be reliably
estimated on the balance sheet day respectively according to the following conditions:
① In case the labor service costs already incurred are predicted to be compensable, the
income from supply of labor service is recognized according to the labor service costs
already incurred and the labor service costs are carried over based on the same amount.
② In case the labor costs already incurred are predicted to be unable to get compensated,
the labor costs already incurred shall be charged to the current gain and loss and not labor
income shall be recognized.
(3) Recognition of Income from use right of the assigned asset
① Principle for Recognition of Income from use right of the assigned asset47
Income from the use right of the assigned asset includes interest income, income from use
fee, etc. and shall not be recognized until the following conditions are satisfied at the same
time: A. Economic benefit in connection with the transaction can flow into the Company. B.
The amount of the income can be reliably measured.
② Specific Recognition Method
A. The amount of interest income is determined according to the time when others use the
monetary asset of the Company and calculated according to the actual interest rate.
B. Amount of income from the use fee is determined through calculation of the charging
time as specified in the relevant contract or agreement and method.
19. Lease
(1) Lease Classification
The Company classifies leases into financing lease and operating lease commencing from the
date of lease.
(2) Criteria for recognition of financing lease and operating lease
Financing lease is recognized in case a lease complies with one or more of the following criteria:
① Upon expiry of a lease term, the ownership of the leased asset is transferred to the lessee.
② Lessee has the option to purchase the leased asset and purchase price as ordered is
predicted to be far lower than the fair value of the leased asset in exercising the option; therefore
on the date of starting lease, it may be reasonably determined that the Company may exercise
such option. ③ Even if the ownership of the asset is not to be transferred, the lease term shall
take majority of the service life of the leased asset (which usually refers to 75% or higher). ④
The present value of the lessee’s minimum lease payment on the date of startingteh lease is
almost equal to the fair value of the leased asset on the date of starting lease (which usually refers
to 90% or higher). The present value of the lessor’s minimum lease income on the date of starting
the lease is almost equal to the fair value of the asset on the date of starting the lease. ⑤
Leased asset with special nature can only be used by the Company (or lessee) without big
improvement.
Operating lease refers to the leases other than financing lease.
(3) Major Accounting Treatment of Financing Lease
① Accounting Treatment of Lessee
The Company (the Lessee) takes the lower of the original book value of the leased assets as of
the date of starting the lease and the present value of the lowest lease payment as the entry value
of the rented assets on the date of starting the lease, takes the lowest lease payment as the entry
value of the long term account payable, and states the balance between the two as the
unrecognized financing expenses. The expenses incurred in process of lease negotiation and
execution of lease contract attributable to such initial direct expenses (the same below) as service
charge, counsel fee, travel expenses, stamp duties, etc. are charged to the value of the rented
asset. In calculating the present value of the minimum rental payment, the interest rate within the
lessor’s lease term is used as the discount rate.
Unrecognized financing expenses are calculated based on the actual interest rate within the lease
period and are recognized as the current financing expense.
The Company adopts the depreciation policy in compliance with the self-owned fixed assets to
provide depreciation of leased assets. In case the ownership of the leased assets can be obtained
when the expiry of the lease term can be reasonably determined, depreciation is provided within
the service life of the leased asset. In case the ownership of the leased asset cannot be
reasonably determined as being obtainable upon expiry of the lease term, depreciation of the
lease asset is provided within the shorter term of the lease term and the service life of the lease
asset.48
Contingent rental is charged to the current gain and loss when it actually incurs.
② Accounting Treatment of Lessor
On the date of starting the lease term, the lessor takes the sum of the minimum income from the
lease and the initial direct expenses on the date of starting the lease as the book entry value of
the financing lease receivable and record the unsecured residual value at the same time, and
recognize the minimum lease income, initial direct expense and unsecured surplus value as the
unrealized financing income.
Unrecognized financing income is calculated based on the actual interest rate within the lease
period and are recognized as the current financing income.
Contingent rental is charged to the current gain and loss when it actually incurs.
(4) Major Accounting Treatment of Operating Lease
The rental involved in the operating lease is recognized as the current gain and loss by the
lessor and lessee in different periods within the lease period. The initial direct expenses
incurred to the lessor and lessee are charged to the current gain and loss. Contingent
rental is charged to the current gain and loss when it actually incurs.
20. Governmental subsidy
(1) Conditions for recognition of governmental subsidy
Governmental subsidy is recognized when the following conditions are all satisfied: ①
The Company can satisfy the conditions for governmental subsidy;② The Company is
able to receive governmental subsidy.
(2) Measurement of governmental subsidy
① Governmental subsidy is measured based on the amount received or receivable if it is
monetary asset;or measured based on the fair value if it is non-monetary asset; or
measured based on the nominal amount (RMB 1) if the fair value cannot be reliably
acquired.
② Asset related governmental subsidy is recognized as deferred income, is distributed in
average over the service life of the related assets and charged to the current gain and loss.
However, the governmental subsidy measured based on the nominal amount is directly
charged to the current gain and loss, the income related governmental subsidy is disposed
separately according to the specific conditions; that used to compensate the Company’s
relevant expense or loss in the future is recognized as deferred income and charged to the
current gain and loss during the period for recognition of the relevant expenses; that
used to compensate the Company’s relevant expenses or loss already incurred is directly
charged to the current gain and loss.
③ The governmental subsidy already determined as necessary to be refunded is disposed
separately according to the specific conditions. If there is the deferred income concerned,
the book balance of the deferred income shall be offset against, but the excessive part
shall be charged to the current profits and losses; and If there is no deferred income
concerned , it shall be directly charged to the current profits and losses.
21. Income Tax
(1) Accounting treatment of income tax
The Company adopts the balance sheet liability approach to calculate the income tax.
(2) Temporary discrepancy
Temporary discrepancy includes the margin between the book value of assets and
liabilities and the taxation base as well as the margin between the book value of the items
which have not been recognized as assets and liabilities but can be determined as the
taxation base according to the tax law and the taxation base. Temporary discrepancy is
classified into taxable temporary discrepancy and offsetable temporary discrepancy.49
(3) Recognized deferred income tax asset
For the offsetable temporary discrepancy which can offset loss and taxes in the year
following the carry-over, the Company may highly possibly only use the future taxable
income which can be used for offsetting the offsetable temporary discrepancy, offsettable
loss and tax offsetting to recognize the deferred income tax asset arising therefrom unless
the offsetable temporary discrepancy is generated from the following transactions:
① Such transaction is not enterprise consolidation while occurrence of such transaction
shall neither affect the accounting profit nor influence the taxable income;
② For the offsetable temporary discrepancy in connection with the investment in the
subsidiaries, joint ventures and associates, the corresponding deferred income tax asset
is recognized when all the following conditions are satisfied: Temporary discrepancy may
be highly possibly carried back in the foreseeable future while the taxable income may be
highly possibly acquired for offsetting the offsetable temporary discrepancy in future.
(4) Recognition of Deferred Income Tax Liabilities
All the taxable temporary discrepancy is based on recognition of the deferred income tax liabilities
unless the taxable temporary discrepancy is produced from the following transactions:
① Initial recognition of goodwill or initial recognition of the assets or liabilities arising from the
transactions with the following characteristics; such transaction is not enterprise consolidation and
neither affect accounting profit nor taxable income when such transaction occurs. ② For the
taxable temporary discrepancy in connection with investment in any subsidiary, joint venture or
associate, the reversal time of such temporary discrepancy can be controlled while such
temporary discrepancy cannot be possibly reversed in the foreseeable future.
(5) Impairment of Deferred Income Tax Assets
On the balance sheet day, it is necessary to recheck the book value of the deferred income tax
asset. Should it be impossible to obtain sufficient taxable income to offset the interest of the
deferred income tax asset in future, the book value of the deferred income tax asset should be
reduced. Except the deferred income tax asset which was charged to the owner’s equity at the
previous recognition, the reduced amount should also be charged to the owner’s equity, the
others should be charged to the current income tax expense. When sufficient taxable income
can possibly be obtained, the reduced deferred income tax may be recovered from the book value
of the self-made products.
22. Segment Report
The Company adopts the business segment as the principal report form.
23. Enterprise Consolidation and Consolidated Financial Statements
For the principal accounting policy for the enterprise consolidation and consolidated financial
statements, refer to Note VI.
(IV) Taxes
1 Value-added tax
The Company and its subsidiaries are general VAT payers and the taxable VAT is the balance of
the current output VAT less the offsetable input VAT and the output VAT rate is 17%.
2. Business Tax
The Company and its subsidiaries pays business tax at the rate of 5% of the housing rental
income, income from offering labor service and the income from use of the assigned assets.
3. Consumption tax
For the imported or self-made high-grade watches, the Company and its subsidiaries pay
consumption tax based on 20% of the taxation base.
4. City maintenance & construction tax and education surcharge50
Except the Company and its subsidiaries located in Shenzhen that pay city maintenance &
construction tax based on 1% of the turnover tax and education surcharge at 3% in Shenzhen
according to the Regulations on Several Issues in Connection with Taxation Policy in Shenzhen
Special Economic Zone (Document of Shenzhen Municipal People’s Government SHEN FU
[1988] No. 232), the branches and subsidiaries located outside Shenzhen pay the respective
taxes at the rates as specified by the local authorities.
5. Enterprise income tax
The Company and its Subsidiaries
Income tax rate
of the previous
year
Income tax rate
of the report year
The Company 18% 20%②
Shenzhen Harmony World Watches Center Co., Ltd.
(Harmony)
18% 20%②
Shenzhen FIYTA Sophisticated Timepieces Manufacture Co.,
Ltd. (the Manufacture Co.)
18% 20%②
Shenzhen World Watches Center Co., Ltd. (World
Watches Center)
18% 20%②
Xi’an Haomen Restaurants & Recreation Co., Ltd.
(Haomen)
25% 25%③
FIYTA (Hong Kong) Limited (FIYTA Hong Kong) 16.5% 16.5%①
Xi’an Chengheng Industrial Co., Ltd. (Xi’an Chengheng) 25% 25%③
Shenzhen Feijing Sophisticated Optical Instruments
Manufacture Co., Ltd. (Feijing)
18% 20%②
Beijing Henglianda Timepieces Co., Ltd. (Henglianda) 25% 25%③
Kunming Lishan Department Store Co., Ltd. (Lishan
Department Store)
25% 25%③
Harbin World Watches Distribution Co., Ltd. (Harbin
Co.)
25% 25%③
Note ① : The registration place of FIYTA Hong Kong Limited is Hong Kong and its applicable
profit tax rate in the report year is 16.5%.
② In accordance with the Circular of the State Council on Implementation of the Transitional
Preferential Policy for Enterprise income tax (GUO FA (2007) No. 39), the enterprises previously
enjoyed 15% of the enterprise income tax rate would implement 20% in 2009.
③ In accordance with the Enterprise Income Tax Law of the People’s Republic of China, the
resident and enterprise income tax rate is 25% commencing from January 1, 2008.
6. Real estate tax
According to Article 5 of the Circular of Shenzhen Local Tax Bureau on Printing and
Issuing the Questions and Answers on a Number of Policies on Use of Real Estate Tax and
Vehicle and Vessel Use Tax, a production operator should pay real estate tax based on 70%
of the cost of the real estate at the tax rate of 1.2%. For the properties located in Shenzhen,
the Company pays the real estate tax according to the tax rate as specified in the aforesaid
circular. For the properties located in other cities, the real estate tax is paid based on the
rates specified by the respective local authorities.
(V) Enterprise Consolidation and Consolidated Financial Statements
1. Enterprise Consolidation
(1) Consolidation of Enterprises under the Same Control51
① Specification on Consolidation of Enterprises under Same Control
The judgment basis for consolidation of enterprises under the same control include: ① The
parties to the consolidation are all eventually controlled by the Group Company before and after
the consolidation; ② Before consolidation, the parties to the consolidation have been controlled
by the Group Company usually for over 1 year (with 1 year inclusive). After the consolidation, the
reporting principal as formed has also been controlled by the Group Company for over 1 year
(with 1 year inclusive). When all the above two conditions are satisfied, the Company specifies the
consolidation of the enterprises under the same control.
② Basis for determination of the consolidation day
Consolidation day refers to the date when the Company actually obtains the control power
over the consolidatee; namely the date when the consolidatee’s net assets or the control
power for production and operation decision making is transferred to the Company. The
realization of the control power transfer is recognized when all the following conditions are
satisfied. A. The enterprise consolidation agreement has been approved by the general
meeting. B. The enterprise consolidation has been approved by the authority in charge if
such consolidation is subject to substantial approval by the concerned department of the
state. C. All the parties to the consolidation have handled the necessary procedures of
property handing over. D. The Company has paid the majority of the consolidation
consideration (which usually should exceed 50%) and is able to pay the balance amount. E.
The Company has practically controlled the consolidatee’s financial and operation policy,
and enjoys the corresponding interests and assumes risks.
③ Determination of Consolidation Costs
The asset and liability obtained from the enterprise consolidation should be measured
based on the book value of the consolidating party on the date of consolidation. The
difference between the book value of net asset, the book value of the valuable
consideration from the consolidation as paid obtained by the consolidating party and the
total book value of the issued shares is used to adjust the capital reserve; in case the
capital reserve is not enough to be offset, the retained earnings is adjusted.
④ Method for Disposal of Consolidation Expenses
Various direct expenses incurred in consolidation, including audit, appraisal, law service, etc. paid
for consolidation are charged to the current gain and loss at the time of incurrence. Service
charges, commissions, etc. paid for the bonds issued or other liabilities assumed for the
consolidation, are charged to the amount initially measured for the issued bonds and other
liabilities. Such expenses as service charge, commissions, etc. incurred for issuing equity based
securities in process of consolidation are used to offset the premium income of the equity based
securities; and further offset the retained earnings in case the premium income is not sufficient for
offsetting.
(2) Enterprise consolidation not under the same control
① Basic information of the enterprises involved in consolidation
For the detail about the basic information of the enterprises involved in the consolidation, the
consolidation costs and expenses, refer to Note VI.2.
② Definition of consolidation of the enterprises not under the same control
Consolidation of a party not under the same control refers to an enterprise involved in
consolidation is not under the same eventual control by one party or more before and after
consolidation. In consolidation of the enterprises not under the same control, the party
that has acquired the control power over the other enterprises involved in the
consolidation refers to the purchaser (which refers to the Company) and the other
enterprise(s) involved in the consolidation is/are the purchasee.
③ Basis for determination of the purchase date
Purchase date refers to the date when the Company actually acquires the control power over the
purchasee, i.e. the day when the purchasee transfers the buyer’s net assets or production and52
operation decision making control power to the Company. The basis for determining the
purchase date is the same as that for determining the consolidation day.
④ Determination of Consolidation Costs
The consolidation cost consists of the fair value of the assets paid, liabilities incurred or assumed
and the issued equity based securities for the purpose of acquisition of the control power over the
purchasee and expenses directly in connection with the consolidation on the acquisition day. For
the enterprise consolidation realized through several times of exchange transactions in steps, the
consolidation cost becomes the sum of the individual transaction costs. In case there is no
specific provisions on the future event which may affect the consolidation cost in the consolidation
contract, on the acquisition day, if the estimated future event may possibly happen and the
amount affecting the consolidation cost can be reliably measured, it is also charged to the
consolidation cost.
The distinguishable assets, liabilities or contingent liabilities acquired from the purchasee in
process of consolidation of the enterprise not under the same control are measured based on the
fair value on the acquisition day.
The difference in amount of the consolidation cost greater than the fair value share of the
recognizable net asset is recognized as goodwill. In case the consolidation cost is less than the
share of the faire value of the purchasee’s distinguishable net assets, the Company first of all
rechecks the fair value of the purchasee’s various distinguishable assets, liabilities or contingent
liabilities and measurement of the consolidation costs. In case the consolidation cost is still
smaller than the share of the fair value of the purchasee’s distinguishable net assets acquired in
the consolidation after the recheck, its difference in amount is charged to the current gain and
loss.
⑤ Method for Disposal of Consolidation Expenses
Various direct expenses incurred in consolidation, including audit, appraisal, law service, etc. paid
for consolidation are charged to the enterprise consolidation costs at the time of incurrence.
Service charges, commissions, etc. paid for the bonds issued or other liabilities assumed for the
consolidation, are charged to the amount initially measured for the issued bonds and other
liabilities. Such expenses as service charge, commissions, etc. incurred for issuing equity based
securities in process of consolidation are used to offset the premium income of the equity based
securities; and further offset the retained earnings in case the premium income is not sufficient for
offsetting.
⑥ Amount of goodwill and the method for determination
Goodwill is the difference in amount of the consolidation cost greater than the fair value
share of the recognizable net asset. For the disclosure of goodwill, refer to Note VII. 23.
⑦ Book value and fair value of the consolidation cost and the method for determination of the fair
value
To facilitate the accounting calculation, the book value of the consolidation day is regarded as the
book value of the end of the very month of consolidation. The method for determining the book fair
value on the consolidation date is as follows:
A. Monetary fund is determined based on the book balance on the acquisition day.
B. Accounts receivable, where for the short term accounts receivable, the amount receivable is
usually taken as the fair value; for the long term accounts receivable, the fair value is determined
based on the present value after the proper discount of interest rate. In determining the fair value
of the accounts receivable, it is necessary to take the possibility of incurrence of the bad debt and
relevant collection expenses into consideration.
C. Inventories For the finished products and commodities, it is determined based on the
estimated sales price less the estimated sales expenses, relevant taxes and the profit possibly53
realized in sales of the similar finished product or commodities. For the product in process, it is
determined based on the estimated sales price les the costs to incur up to the completion of the
work, estimated sales expenses, relevant taxes and the profit possibly to be realized as estimated
on the basis of the same or similar products; for the raw materials, it is determined based on the
prevailing replacement costs.
D. Housing and buildings, machines and equipment, other long term assets. Their fair value is
determined based on the market price of the acquisition day as long as there exists active market.
If there does not exist active market but the same or similar type of asset has active market, the
fair value is determined by reference to the market price of the same or similar type of the asset.
In case there exists no active market for the same or similar type of asset, the value estimation
technique is used to determine its fair value.
E. For the fair value of the liabilities incurred or to be assumed due to enterprise consolidation, the
present value of the future cash flow suitable for the interest rate calculation is used as its fair
value.
⑧ The book value and the fair value of the purchasee’s various distinguishable assets and
liabilities of the balance sheet day of the previous accounting period and the acquisition day.
For the detail about the book value and the fair value of the purchasee’s various
distinguishable assets and liabilities of the balance sheet day of the previous accounting
period and the acquisition day, refer to Note VI. 2(1).
⑨ The consolidatee’s financial information
For the purchasee’s income, net profit, cash flow, etc. from the purchase day to the end of the
report period, refer to Note VI. 2 (1).
(3) Absorption and Consolidation
When the Company experiences absorption and consolidation, the method for determination of
the entry value of the assets and liabilities acquired from the consolidation is as follows:
① For the absorption and consolidation of an enterprise under the same control, the Company
enters the assets and liabilities as acquired on the consolidation day based on the consolidatee’s
original book value of the relevant assets and liabilities. If the accounting policy adopted by the
consolidatee is inconsistent with that adopted by the Company, the Company makes adjustment
of the book value of the consolidatee’s relevant assets and liabilities according to the Company’s
accounting policy based on the principle of importance and determines the entry value of the
assets and liabilities acquired from the consolidation on this basis.
② Absorption and consolidation of the enterprise not under the same control The Company
recognizes various distinguishable assets and liabilities in compliance with the recognized
conditions as acquired from the consolidation on the acquisition day as the Company’s assets and
liabilities based on their fair value.
2. Consolidated Financial Statements
(1) Consolidation range
① Recognition principle
The consolidation scope of consolidated financial statements is determined based on control.
Control means that the Company is entitled to determine the investees’ financial and operation
policies and obtain interests from the operation activities of the investees. The Company brings
all the investees whose total vote-bearing capital is held by the Company by over 50% (within
50% inclusive) or below 50% but is under the substantial control by the Company into the
consolidation scope.
② Change in the consolidation scope
There was no change in the consolidation scope in the report period.
(2) Method of preparing the consolidated financial statements
① Method of preparing the consolidated financial statements54
The consolidated financial statements are based on the financial statements of the parent
company and the subsidiaries in the consolidation scope and have been prepared according to
other relevant information, and adjustment of the long term equity investment in the subsidiaries
according to the equity method after offsetting the parent company’s equity based capital
investment and the share in the owner’s equity of the subsidiaries held by the parent company
and significant transactions inside the Company and the internal dealings. Minority
shareholders’ equity In the consolidated balance sheet, the owner’s equity is presented as
“minority shareholders’ equity”. Minority shareholders’ equity In the consolidated statement
of profit, net profit is presented as “minority shareholders’ income”.
② Method for treatment of the increase or disposal of the subsidiaries in the report period
In the report period, the parent company consolidate the increased subsidiaries due to the
enterprises under the same control. In preparation and consolidation of balance sheet, it is
necessary adjust the opening balance of the consolidated balance sheet. For consolidating the
increased subsidiaries not due to the enterprises under the same control, in preparation and
consolidation of balance sheet, it is unnecessary to adjust the opening balance of the
consolidated balance sheet. For the subsidiaries disposed in the report period, the Company did
not adjust the opening balance of the balance sheet in preparing its consolidated balance sheet.
For the increased subsidiaries through consolidation of the enterprises under the same control in
the report period, the parent company consolidates the income, expenses and profit to the
consolidated statement of profit of such subsidiaries from the beginning to the end of the period.
For the increased subsidiaries through consolidation of the enterprises not under the same
control, the parent company consolidates the income, expenses and profit to the consolidated
statement of profit of such subsidiaries from the date of acquisition of the subsidiaries to the end
of the report period. For the subsidiaries disposed in the report period, the parent company
consolidates the income, expenses and profit to the consolidated statement of profit of such
subsidiaries from the beginning of the report period to the date of disposal.
For the increased subsidiaries through consolidation of the enterprises under the same control in
the report period, the parent company consolidates the cash flow to the consolidated statement of
cash flow from the beginning to the end of the period. For the increased subsidiaries through
consolidation of the enterprises not under the same control, the parent company consolidates the
cash flow to the consolidated statement of cash flow of such subsidiaries from the date of
acquisition of the subsidiaries to the end of the report period. For the subsidiaries disposed in the
report period, the parent company consolidates the cash flow of such subsidiaries to the
consolidated statement of cash flow from the beginning of the report period to the date of
disposal.
③ The Accounting Policy of the Parent Company and Subsidiaries and the Different Treatment
Methods during the Accounting Period
In case the accounting policy or fiscal term adopted by the subsidiaries and the Company are not
identical during the accounting period in preparation of the consolidated financial statements,
consolidation is made after necessary adjustment of the subsidiaries’ financial statements in
terms of the Company’s accounting policy or fiscal term; Or subsidiaries are required to prepare
separate financial statements according to the parent company’s accounting policy and the
accounting term.
④ Foreign Currency Translation
The Company translates the financial statements expressed in foreign currency into financial
statements expressed in Renminbi according to the following provisions.
The assets and liabilities in the balance sheet have been translated based on the spot rate on the
balance sheet day. For the owner’s equity type items, except the item of “retained earnings”, the
other items are translated based on the spot exchange rate at the time of incurrence.
The income and expense items in the statement of profit are translated based on the current55
average exchange rate on the date of transaction. The converted difference in the financial
statements expressed in foreign currency produced from the translation according to the
aforesaid method is separately presented under the owner’s equity item in the balance sheet.
The cash flow statement expressed in foreign currency is translated based on the spot exchange
rate on the date of cash flow incurrence. The amount affected by the change of exchange rate
upon cash is used as the adjustment item and is separately presented in the cash flow statement.
(3) Minority shareholders’ equity
Subsidiaries Ending balance Opening balance
Harmony 7,608,567.34 7,169,190.85
World Watches Center 1,400,000.00 1,400,000.00
Total 9,008,567.34
8,569,190.85
(VI) Notes to the principal items on the consolidated statements
The following noted items refer to the balance of the items in the consolidated financial statements
at the beginning of the period as at December 31, 2008 and refer to the balance of the items of the
consolidated financial statements at the end of the period as at June 30, 2009. The amount of the
report period refers to the amount incurred in the items of the consolidated financial statements
from January to June 2009; the amount in the same period of the previous year refers to the
amount incurred in the items of the consolidated financial statements from January to June, 2008.
a) Monetary funds
2. Accounts receivable
(1) Accounts receivable presented based on categories
Items
Currency
Ending balance
Opening balance
Original currency
Excha
nge
rate
Conversion in
RMB
Original
currency
Exchan
ge rate
Conversion in
RMB
Cash on
hand
RMB
566,481.31 1.00 566,481.31 248,851.22 1.00 248,851.22
HK$
8,639.81 0.88 7,615.99 0.51 0.88 0.44
US$
2,061.72 6.83 14,085.46 2,061.72 6.83 14,091.03
Euro
6,348.00 9.64 61,199.79 2703 9.66 26,108.28
Pound
sterling
110.00 11.34 1,247.17 110 9.88 1,086.78
Swiss Franc
3,150.00 6.31 19,887.21 3,150.00 6.38 20,102.36
Singapore
dollars
5,000.00 4.72 23,610.50 5,000.00 4.76 23,808.00
Sub-total
694,127.43 334,048.11
Bank
deposit
RMB
98,123,793.72 1.00 98,123,793.72 104,413,688.13 1.00 104,413,688.13
HK$
2,375,651.81 0.88 2,094,137.07 1,501,447.07 0.88 1,324,126.17
US$
274,940.25 6.83 1,848,275.20 283,930.67 6.83 1,940,552.56
Sub-total
102,066,205.99 107,678,366.86
Other
Monetary
Funds
RMB
303,512.76 1.00 303,512.76 221,380.76 1.00 221,380.76
Total
103,063,846.18 108,233,795.7356
Items
Ending balance
Book balance Proportion
(%)
Provision for
bad debts
Book value
Accounts receivable with significant
single amount 59,999,423.75 36.85 12,906,198.95 47,093,224.80
Accounts receivable with insignificant
single amounts but the grouping has
big risk after grouping based on the
credit risk characteristics.
29,902,314.55 18.37 29,081,558.48 820,756.17
Other insignificant receivables 72,897,391.84 44.78 1,392,767.87 71,504,623.97
Total 162,799,130.14 100.00 43,380,525.30 119,418,604.84
Continued
Items
Opening balance
Book balance Proportion
(%)
Provision for
bad debts Book value
Accounts receivable with significant
single amount 61,219,428.26 42.54 12,906,198.95 48,313,229.31
Accounts receivable with insignificant
single amounts but the grouping has
big risk after grouping based on the
credit risk characteristics.
29,837,240.27 20.73 29,081,558.48 755,681.79
Other insignificant receivables 52,864,526.42 36.73 1,392,767.87 51,471,758.55
Total 143,921,194.95 100.00 43,380,525.30 100,540,669.6
5
(2) Accounts receivable presented based on ages
Age
Opening balance
Amount Proportion (%) Provision for bad debts
Within a year
100,286,297.68 69.68
1,394,093.22
1 to 2 years
956,934.60 0.66
69,660.46
2 to 3 years
1,427,770.09 0.99
713,885.05
Over 3 years
41,250,192.58 28.67
41,202,886.57
Total 143,921,194.95 100.00 43,380,525.30
Age
Ending balance
Amount
Proportion (%)
Provision for bad
debts
Within a year
118,955,062.51
73.07
1,394,093.22
1 to 2 years
714,481.24
0.44
69,660.46
2 to 3 years
1,617,202.48
0.99
713,885.05
Over 3 years
41,512,383.91 25.50
41,202,886.57
Total
162,799,130.14
100.00 43,380,525.3057
(3) Top 5 debtors of the accounts receivable at the end of the report period
Debtors Ending balance
Proportion in the
total accounts
receivable (%)
Outstanding
years
Shenzhen Wanxiangcheng
4,046,083.15 2.49 Within a
year
DAYA BAY NUCLEAR POWER
OPERATIONS AND MANAGEMENT
CO., LTD.
2,626,598.21 1.61 Within a
year
Xi'An Golden Eagle International
Shopping Center
2,375,212.03 1.46 1 年以内
Heilongjiang Jinan Europe Plaza
Development Co., Ltd.
2,150,099.22 1.32 Within a
year
BEIJING URBAN-RURAL TRADE
CENTRE CO., LTD
2,033,710.15 1.25 Over 3 years
Total
13,231,702.76 8.13
(4) The ending balance of the accounts receivable includes the amount receivable from the
related parties is RMB 2,228,832.27, taking 1.37% of the total accounts receivable.
(5) Increase of the ending balance of the accounts receivable over the opening balance
amounting to RMB 18,877,935.19 is mainly due to increase of the sales of the current year.
3. Advance to Suppliers
(1) Statement of advance to suppliers
Age
Ending balance Opening balance
Amount Proportion
(%) Amount Proportion
(%)
Within a year 9,033,919.24 70.53 20,592,356.86 99.13
1 to 2 years 3,775,116.40 29.47 180,060.00 0.87
Total 12,809,035.64 100.00 20,772,416.86 100.00
Note: ① The advance to suppliers with age exceeding 1 year at the year end was mainly the
design consulting fee for the counters in shopping center unsettled in Harmony.
(2) Statement of the advance to supplier with bigger amount
Debtors Ending balance Description
MONTRES CHOURIEF S.A. 4,115,439.87 Advance for purchase
of watches
YiTian (Guangzhou) Design Co. 1,273,981.56 Down Payment for
decoration design
Shanghai Haoshi Decoration Design Engineering
Co., Ltd. 813,880.00 Down Payment for
decoration design
Shanghai Kaichang Decoration Engineering Co.,
Ltd. 563,700.00 Down Payment for
decoration design
Shenzhen Nanshan Bogao Exhibition Furniture
Products Factory 500,000.00 Down Payment for
decoration design
Xi’an Zhongde Buidling Decoration Engineering
Co., Ltd. 469,055.00 Down Payment for
decoration design
(3) In the advance to suppliers at the end of the report year, there was none to any shareholder
holding over 5% (with 5% inclusive) of the Company’s vote-bearing shares.58
4. Other receivables
(1) Other receivables presented based on categories
Items
Opening balance
Book
Balance
Proporti
on (%)
Provision
for bad
debts
Book value
Other receivables with
significant individual
amount
18,159,32
7.42
61.43
9,601,280.
98 8,558,046.4
4
Other receivables with
insignificant amount but
bigger risk of the
combination after
combination based on the
credit risk characteristics
1,370,256.
63
4.64
1,370,256.
63 0.00
Other receivables with
insignificant amount 10,029,51
0.06
33.93
387,596.2
0 9,641,913.8
6
Total
29,559,09
4.11
100.00
11,359,13
3.81 18,199,960.
30
(continued)
Items
Ending balance
Book
Balance
Proporti
on (%)
Provision
for bad
debts
Book value
Other receivables with
significant individual
amount
19,834,73
8.09 64.18 9,601,280.
98 10,233,457.
11
Other receivables with
insignificant amount but
bigger risk of the
combination after
combination based on the
credit risk characteristics
1,370,256.
63 4.43 1,370,256.
63 -
Other receivables with
insignificant amount 9,701,785.
25 31.39 387,596.2
0 9,314,189.0
5
Total 30,906,77
9.97 100.00 11,359,13
3.81 19,547,646.
16
(2) Other receivables presented based on ages
Age
Opening balance
Amount Proportion
(%)
Provision for
bad debts
Within a year 12,372,850.42
41.86 357,762.64
1 to 2 years 4,145,326.01
14.02 451,121.16
2 to 3 years 226,382.47
0.77 15,238.75
Over 3 years 12,814,535.21
43.35 10,535,011.2659
Age
Opening balance
Amount Proportion
(%)
Provision for
bad debts
Total 29,559,094.11
100.00 11,359,133.81
(continued)
Age
Ending balance
Amount Proportion
(%)
Provision for
bad debts
Within a year 12,472,959.7
5 40.36 357,762.64
1 to 2 years 5,583,084.54 18.06 451,121.16
2 to 3 years 123,156.83 0.40 15,238.75
Over 3 years 12,727,578.8
5 41.18 10,535,011.26
Total 30,906,779.9
7 100.00 11,359,133.81
(3) Top five owners of the other receivables at the end of the report period
Debtors Opening
balance
Proportion in
the total of the
other
receivables
(%)
Years of
arrears
Shenzhen Feijing Sophisticated Optical
Instruments Manufacture Co., Ltd.
6,289,537.6
6 21.28 Over 3
years
Shenzhen Yuda Sophisticated Machinery
Co., Ltd.
1,776,600.0
0
6.01 Within a
year
Shenzhen New Longtai Industrial Co.
Ltd.
1,573,876.8
9
5.32 Over 3
years
DTZ Real Estate Consulting (Shanghai)
Co., Ltd.
1,200,000.0
0
4.06 1 to 2
years
Beijing Huafu Jinbao Real Estate
Development Co., Ltd.
1,092,750.0
0
3.70 Within a
year
Total 11,932,764.
55 40.37
(5) Other receivables at year end includes the account receivable from the related parties
amounting to RMB 6,359,759.26, taking 21.52% of the total other receivables.
5. Inventories:
(1) Inventories
Items
Opening balance
Balance
Incl:
capitalization
of borrowing
expenses
Provisions
for price
falling of
inventories
Book value
Raw materials 51,083,296.38 15,457,513.15 35,625,783.2360
Products in
process 2,634,908.48 2,634,908.48
Commodities in
stock
651,067,504.55 13,157,121.89 637,910,382.66
Total 704,785,709.41 28,614,635.04
676,171,074.37
(continued)
Items
Opening balance
Balance
Incl:
capitalization
of borrowing
expenses
Provisions for
price falling of
inventories
Book value
Raw materials 56,426,175.61 - 15,501,511.16 40,924,664.45
Products in process 4,426,826.37 - - 4,426,826.37
Commodities in stock 644,932,994.15 - 13,157,121.89 631,775,872.26
Total 705,785,996.13 - 28,658,633.05 677,127,363.08
(2) Provisions for impairment of inventories
Items
Opening
balance
Amount
provided
in the
period
Decrease in the report period Ending
Rever balance
sal
Amount
written off Total
Raw
materials
15,501,511.
16 43,998.01 15,457,513.
15
Commodit
ies in
stock
13,157,121.
89 13,157,121.
89
Total
28,658,633.
05 43,998.01 28,614,635.
04
6. Available-for-sale financial assets
Items Ending balance Opening balance
Investment in available-for-sale
equity instrument 8,734,000.00 4,543,000.00
Total 8,734,000.00 4,543,000.00
Note: Increase of the available-for-sale financial assets at year end by 92.25% over the year
beginning was due to rise of the fair value of the available-for-sale financial assets at the end of
the period.
7. Long-term equity investment
(1) Statement of long term equity investment
Items Opening
balance
Increase in
the report
period
Decrease in
the report
period
Ending
balance
Investment in
subsidiaries
17,340,000.00 - 17,340,000.0061
Investment to associated
companies
1,815,873.52 29,622.59 - 1,845,496.11
Other equity investment
385,000.00 - 385,000.00
Less: Provision for
impairment of long term
equity investment
11,839,499.13 - 11,839,499.13
Total 7,701,374.39 29,622.59 - 7,730,996.98
(2) Statement in investment in subsidiaries
Investees
Initial
investment
amount
Opening
balance
Increase in
the report
period
Decrease
in the
report
period
Ending
balance
Feijing Co. 6,300,000.
00 6,300,000.
00 - - 6,300,000.
00
Haomen
Co. 11,040,00
0.00 11,040,00
0.00 - 11,040,00
0.00
Total 17,340,00
0.00 17,340,00
0.00 - 17,340,00
0.00
(3) Statement in investment in associates
Investees
Initial
investmen
t amount
Opening
balance
Additional
investment
in the report
period (less:
amount of
the shares
assigned in
the report
year)
Increase/
decrease
of equity
of the
investee
s
Cash
divide
nd
receiv
ed
Ending
balance
Shenzhen
Research
Institute of
Northwest
China
Polytechnic
University
1,500,000.
00 1,815,873.
52
-150,000.00
-
179,622.
59 - 1,845,496.
11
(5) Investment in other long term equity
Investees
Initial
investme
nt amount
Opening
balance
Increa
se in
the
report
period
Decre
ase in
the
report
period
Ending
balance
Xi’an Tangcheng
Joint Stock Co., Ltd. 85,000.0
0
85,000.
00 - - 85,000.00
Shenzhen CATIC
Culture Transmit
Co., Ltd.
300,000.
00
300,000
.00 - - 300,000.00
Total 385,000.
00
385,000
.00 - - 385,000.00
(6) Provision for impairment of long term equity investment62
Investees Opening
balance
Increase in
the report
period
Decrease in the
report period
Ending
balance
Rev
er
s
al
W
rit
eof
f
T
ot
al
Feijing Co. 6,300,000.
00 - - - - 6,300,000.
00
Haomen Co. 5,239,499.
13 - - 5,239,499.
13
Shenzhen
CATIC Culture
Transmit Co.,
Ltd.
300,000.0
0 - - - 300,000.00
Total 11,839,49
9.13 - - - 11,839,499
.13
8. Real Estate Investment
(1) Statement of investment based real estate
Items Opening
balance
Increase in
the report
period
Decrease
in the
report
period
Ending
balance
Investment based real
estate measured
afterwards by means
of cost method
177,773,31
8.21
3,097,836
.11 174,675,48
2.10
Less: Provision for
impairment of
investment based real
estate
- - - -
Total 177,773,31
8.21
3,097,836
.11 174,675,48
2.10
(2) Investment based real estate measured afterwards by means of cost method
Items Opening
balance
Increase in
the report
period
Decrease
in the
report
period
Ending
balance
Cost
Housing and
buildings
231,774,83
2.24 - 231,774,832.2
4
Total
231,774,83
2.24 - 231,774,832.2
4
Accumulative
depreciation
Housing and
buildings
54,001,514.
03
3,097,836.
11 -
57,099,350.14
Total
54,001,514.
03
3,097,836.
11 - 57,099,350.14
Less: Provision for
impairment of - - - -63
Items Opening
balance
Increase in
the report
period
Decrease
in the
report
period
Ending
balance
investment based
real estate
Net value 177,773,31
8.21 - 3,097,836.
11-
174,675,482.1
0
9. Fixed assets
(1) Statement of fixed assets
Items Opening
balance
Increase in
the report
period
Decrease in
the report
period
Ending
balance
Cost
Housing and
buildings 249,567,891.
18 0.00 4,464.17 249,563,427.01
Machines &
equipment 9,368,741.33 23,557.83 0.00 9,392,299.16
Motor
vehicles 9,190,379.32 20,100.00 0.00 9,210,479.32
Electronic
equipment 14,315,453.9
1 628,872.22 3,746.00 14,940,580.13
Other
equipment 32,184,787.3
8 873,230.14 35,766.00 33,022,251.52
Total 314,627,253.
12 1,545,760.19 43,976.17 316,129,037.14
Accumulati
ve
depreciatio
n
Housing and
buildings 17,428,155.7
5 3,437,561.62 0 20,865,717.37
Machines &
equipment 6,848,724.30 243739.87 0.00 7,092,464.17
Motor
vehicles 6,130,356.51 525,733.94 0 6,656,090.45
Electronic
equipment 8,482,995.91 1,129,980.90 3,746.00 9,609,230.81
Other
equipment 10,307,332.7
3 2,743,440.20 32,357.87 13,018,415.06
Total 49,197,565.2
0 8,080,456.53 36,103.87 57,241,917.86
Provision
for
impairment
Housing and
buildings 2,600,000.00 - - 2,600,000.00
Total 2,600,000.00 - - 2,600,000.00
Book value
Housing and
buildings 229,539,735.
43 - - 226,097,709.6464
Items Opening
balance
Increase in
the report
period
Decrease in
the report
period
Ending
balance
Machines &
equipment 2,520,017.03 -
- 2,299,834.99
Motor
vehicles 3,060,022.81 - - 2,554,388.87
Electronic
equipment 5,832,458.00 - - 5,331,349.32
Other
equipment 21,877,454.6
5 - - 20,003,836.46
Total 262,829,687.
92 - - 256,287,119.28
(2) Provisions for devaluation of fixed assets
Items
Opening
balance
Amount
provide
d in the
period
Decrease in the report period
Ending
balance
Amount
of
reversal
Amount
written off Total
Housing and
buildings 2,600,000
.00 - - - - 2,600,00.00
Total 2,600,000
.00 - - - - 2,600,000.00
10. Intangible Assets
(1) Statement of intangible assets
Items Initial cost Opening
balance
Increase
in the
report
period
Trans
fer
out in
the
report
period
Amount
amortize
d in the
period
Accumula
tive
amortizati
on:
Ending
balance
Land use
right 15,487,34
9.60 11,014,38
4.08
172,037.
16
4,645,002
.68 10,842,34
6.92
Software
system 2,002,330.
82 1,389,274.
06
524,570.0
0
78,247.4
1
166,734.1
7
1,835,596.
65
Trademar
k use right 4,096,200.
00 493,207.6
6
233,000.0
0
199,149.
99
3,569,142
.33
527,057.6
7
Total 21,585,88
0.42 12,896,86
5.80
757,570.0
0 0.00 449,434.
56
8,380,879
.18 13,205,00
1.24
11. Goodwill
Items
Ending balance Opening balance
Book
balance
Provision
for
impairment
Book
value
Book
Balance
Provision
for
impairme
nt
Book value
Lishan
Department Store 1,735,756.4
8 1,735,756.4
8 - 1,735,756
.48
1,735,756
.48 -
Total 1,735,756.4
8 1,735,756.4
8 - 1,735,756
.48
1,735,756
.48 -
12. Long-term expenses to be proportioned65
Items Opening
balance
Increase in
the report
period
Transfer
out in the
report
period
Amount
amortized in
the report
period
Ending
balance
Charge of
fabrication
of special
counters
8,554,273.27 3,353,414.19 3,743,015.57 8,164,671.89
Others 27,325,878.59 19,097,726.02 7,633,321.18 38,790,283.43
Total 35,880,151.86 22,451,140.21 11,376,336.75 46,954,955.32
Note: Increase of the long-term expenses to be apportioned at year end by 30.87% over the
year beginning was mainly due to shops newly opened and expenses for refurbishment of
the existing shops in the report year.
13. Deferred income tax asset
(1) Statement of deferred income tax assets:
Items Ending balance Opening balance
Deferred income tax asset formed
due to difference between the
book value of the assets and
taxation base
9,325,466.56 9,553,777.94
Deferred income tax asset formed
due to difference between the
book value of the liabilities and
taxation base
-
Recoverable loss before tax
733,603.71 1,163,869.23
Total 10,059,070.27 10,717,647.17
(2) Statement of provisional discrepancy
Items Ending balance Opening balance
Accounts receivable 3,001,794.91 3,001,794.91
Other receivables 1,065,798.80 1,065,798.80
Provisions for price falling of
inventories 14,977,784.05 14,977,784.05
Offsetting of the internal
unrealized profit 26,638,857.17 27,952,102.67
Deductable loss 3,396,851.30 5,548,178.90
Total 49,081,086.23 52,545,659.33
14. Statement of provision for impairment of assets
Items Opening
balance
Provision or
other increase
in the report
period
Amount
reversed
from the
decrease in
the report
period
Amount
written off
Ending
balance
I. Provision for bad
debts
54,739,659.11 - - 54,739,659.
1166
Items Opening
balance
Provision or
other increase
in the report
period
Amount
reversed
from the
decrease in
the report
period
Amount
written off
Ending
balance
Incl.: Accounts
receivable
43,380,525.30 - - 43,380,525.
30
Other receivables
11,359,133.81 - - 11,359,133.
81
II. Provisions for price
falling of inventories
28,658,633.05 - 43,998.01 28,614,635.
04
Incl: goods in stock
13,157,121.89 - 13,157,121.
89
Raw materials
15,501,511.16 - 43,998.01- 15,457,513.
15
III. Provision for
impairment of long term
equity investment
11,839,499.13 - - 11,839,499.
13
IV. Total provision for
impairment of fixed
assets
2,600,000.00 - - 2,600,000.0
0
Incl.: Housing &
buildings
2,600,000.00 - - 2,600,000.0
0
V. Provision for
impairment of goodwill
1,735,756.48 - - 1,735,756.4
8
Total
99,573,547.77 - 43,998.01 99,529,549.
76
15. Short-term Loan
Types of Borrowings Ending balance Opening balance
Secured borrowings 495,000,000.00 575,000,000.00
Total 495,000,000.00 575,000,000.00
Notes: ① Short term borrowings at year end decreased by 13.91% over year beginning. In the
report period, the Company repaid partial bank loan.
② For the short term loan at year end, Shenzhen CATIC Group offered guarantee to the
Company.
16. Notes payable
Types of Borrowings Ending balance Opening balance
Secured borrowings 30,000,000.00
Total 30,000,000.00
Note: Notes payable refers to the domestic letter of credit with valid term of half a year increased
in the report period.
17. Accounts payable
(1) Statement of accounts payable
Age
Ending balance Opening balance
Amount Proportion
(%) Amount Proporti
on (%)67
Within a year 78,270,841.9
1 98.60 57,418,655.43 97.64
1 to 2 years 763,506.88 0.96 785,074.79 1.33
2 to 3 years 36,571.50 0.05 36,571.50 0.06
Over 3 years 313,149.12 0.39 568,936.94 0.97
Total 79,384,069.4
1 100.00% 58,809,238.66 100.00
(2) Of the accounts payable at the year end, there was none due to any shareholder holding
over 5% (with 5% inclusive) of the Company’s vote-bearing shares.
18. Advance from customers
(1) Statement of accounts receivable
Age
Ending balance Opening balance
Amount Proportion
(%)
Amount Proportion (%)
Within a year
530,173.37 100.00
2,058,162.7
6
98.00
1 to 2 years
34,000.00 2.00
Total 530,173.37 100.00 2,092,162.7
6 100.00
(2) Of the ending balance of the advance from customers, there is none from any shareholder
holding over 5% (with 5% inclusive) of the Company’s vote-bearing shares.
19. Employees’ wages payable
Items Opening
balance
Increase in
the report
year
Decrease in
the report
period
Ending
balance
Salaries, bonus,
allowances, subsidies
9,917,553.3
7
60,367,439.
97
66,358,709.
59 3,926,283.
75
Staff’s welfare 0.00 1,757,797.6
5
1,757,797.6
5 0.00
Social security 0.00 5,069,538.4
4
5,050,249.3
6 19,289.08
Public reserve for housing 988.50 483,215.09 484,203.59 0.00
Trade union fund and staff
education fund
196,320.01 1,807,302.4
0
1,328,624.8
6 674,997.55
Compensation given due to
termination of the labor
service
830,000.00 169,214.32 169,214.32 830,000.00
Supplementation to
endowment insurance
900,746.29 312,358.27 1,213,104.5
6 0.00
Labor insurance premium 0.00 0.00 0.00 0.00
Total 11,845,608.
17
69,966,866.
14
76,361,903.
93 5,450,570.
38
20. Taxes payable
Taxes Ending balance Opening balance
Value-added tax -3,620,127.21 -12,729,991.6468
Business tax 858,366.22 858,407.15
Tax for urban development and
maintenance
44,478.06 123,138.94
Enterprise income tax 1,879,877.08 717,109.28
Individual income tax 223,301.79 273,376.66
Real estate tax 165,644.73 155,120.26
Land use tax - -155.83
Educational Surcharge -149,883.91 97,995.95
Stamp duty 59,099.61 144,279.38
Dyke protection surcharge 28,221.14 43,313.42
Others 39,936.30
Total -471,086.19 -10,317,406.43
21. Interest payable
Creditors Ending balance Opening balance
Bank loan interest payable
519,407.17 987,587.50
Total 519,407.17 987,587.50
22. Dividend payable
Investors Ending balance Opening
balance
Cause of
dividend in
arrears
CATIC Shenzhen
Corporation 395,426.76 395,426.76 Provided but
unpaid
Dividend payable to
Shenzhen CATIC Group
11,141,550.10 Provided but
unpaid
Dividend of A-shares
payable to the public
7,958,249.80 Provided but
unpaid
Dividend of B-shares
payable to the public
5,832,000.00 Provided but
unpaid
Total
25,327,226.66 395,426.76
23. Other payables
(1) Statement of other payables presented based on ages
Ages
Ending balance
Opening balance
Amount Proportion
(%) Amount Proportion
(%)
Within a year 25,760,467.22 68.56 27,264,009.92
73.9669
1 to 2 years 2,996,841.44 7.98 3,053,418.36
8.28
2 to 3 years 3,967,068.55 10.56 907,094.30
2.46
Over 3 years 4,847,284.17 12.90 5,639,440.22
15.30
Total
37,571,661.38 100.00 36,863,962.80
100.00
(2) There was none received in advance from the shareholders that hold more than
5%(including 5%) of the Company’s vote-bearing shares in the other payables at the end of the
period.
(3) There was RMB 1,239,990.87 payable to the related parties in the ending balance of other
receivables.
24. Other current liabilities
Items Ending balance Opening balance
Expenses provided in
advance 1,015,846.90 1,546,453.73
Total 1,015,846.90 1,546,453.73
25. Long-term Loan
Loan supplier
Currency
Conditions
for loan
Ending
balance Opening
balance
Development Bank of
China, Shenzhen
Branch
RMB Secured
loans 70,000,000.00 70,000,000.00
Total 70,000,000.00 70,000,000.00
Note: For the long term loan at the end of the report period, Shenzhen CATIC Group offered
guarantee to the Company.
26. Long term accounts payable
Types Ending balance Opening balance
Beijing Harmony Swiss Watches Co.,
Ltd. 10,000,000.00 注10,000,000.00
FIYTA R & D and Standardized
Synchronization Fund 50,000.00 50,000.00
Total 10,050,000.00 10,050,000.00
Note. Henglianda Co., one of Harmony’s subsidiaries, borrowed fund from Beijing Harmony
Co., its another shareholder.
27. Liabilities of deferred income tax
(1) Statement of deferred income tax liability
Items Ending balance Opening balance
Deferred income tax liability formed
due to difference between the book
value of assets and taxation base
1,217,986.87 371,774.70
Total 1,217,986.87 371,774.70
(2) Statement of temporary discrepancy70
Items Ending balance Opening balance
Other receivables -
Available-for-sale financial assets 5,734,000.00 1,543,000.00
Long-term equity investment 495496.11 315,873.52
Total 6,229,496.11 1,858,873.52
28. Other non-current liabilities
Items Description Ending balance Opening balance
Deferred
income
Fund financed for
construction of enterprise
technology center
3,000,000.00 3,000,000.00
Deferred
income
High precision and
multi-function machinery
watch movement
1,050,000.00 1,050,000.00
Deferred
income Enterprise supporting fund 250,000.00
Total 4,300,000.00 4,050,000.00
29. Capital stock
In shares
Items
Opening balance
Increase/ Decrease (+ / -) in the
report period Ending balance
Amount Proporti
on (%)
New
issuing
Bonu
s
share
s
Shares
convert
ed from
reserve
Othe
rs Amount Proporti
on (%)
I. Restricted shares
1. State corporate
shares
111,415,5
01 44.68
-
-
-
-
111,415,50
1 44.68
2. Other domestic
shares 35,524 0.01
-
-
-
- 35,524 0.01
Domestic natural person
shares 35,524 0.01
-
-
-
- 35,524 0.01
Total restricted shares 111,451,0
25 44.70 -
- -
-
111,451,02
5 44.70
II. Unrestricted shares
1. RMB ordinary shares 79,546,97
4 31.91
-
- -
- 79,546,974 31.91
2. Foreign shares listed
domestically
58,320,00
0 23.39
-
- -
- 58,320,000 23.39
Total unrestricted
shares
137,866,9
74 55.30
-
- -
-
137,866,97
4 55.30
III. Total Shares 249,317,9
99 100.00 - - - - 249,317,99
9 100.00
Note: The above capital stock has been certified by Shekou Zhonghua Certified Public71
Accountants with the Capital Verification Report SHE ZHONG YAN ZI BAO ZI (1998) No. 16 as
filed.
30. Capital public reserve
Items Opening
balance
Increase in
the report
year
Decrease in
the report
period
Ending balance
Share capital
premium 177,354,784.00 - - 177,354,784.00
Other capital
reserve 15,726,848.65 3,352,800.00- 19,079,648.65
Total 193,081,632.65 3,352,800.00- 196,434,432.65
Note: Increase as at the end of the report period over the year beginning was due to change
of the fair value of the available-for-sale financial assets at year end.
31. Surplus public reserve
Items Opening
balance
Increase in
the report
year
Decrease in
the report
period
Ending
balance
Statutory surplus
public reserve
47,377,446.60 -
47,377,446.60
Discretionary surplus
public reserve
61,984,894.00 -
61,984,894.00
Total
109,362,340.6
0
-
109,362,340.6
0
32. Retained earnings
(1) Change of the retained earnings
Items Ending balance Opening balance
Ending balance of the
previous year 120,025,397.75 86,222,040.84
Plus: Change of accounting
policy -
Opening balance of the
report year 120,025,397.75 86,222,040.84
Plus: Consolidated net profit 27,606,437.91 65,018,761.82
Less: Provided statutory
surplus public reserve
5,787,316.33
Distribution to the
shareholders
24,931,799.90(注)
24,931,799.90
Minority shareholders’
gain/loss 439,376.49
496,288.68
Ending balance of the report
year 122,260,659.27 120,025,397.75
Note: Approved through resolution of the General Meeting, the profit for distribution for the
year 2008 is calculated with the issued 249,317,999 shares (with the par value of each share
being RMB 1.00) as the base and cash dividend is to be distributed to the whole shareholders at
the rate of RMB 1.00 per share and the total cash dividend to be distributed shall be RMB
24,931,799.90.
33. Operation Income and Costs
(1) Business income from the principal business and other business income72
Items
Amount in the report
period
Amount of the same period
of the previous year
Principal business income 568,990,789.56 514,747,086.49
Income from other
businesses 3,702,900.32 3,802,265.70
Total 572,693,689.88 518,549,352.19
(2) Principal business cost and other business cost
Items
Amount in the report
period
Amount of the same period
of the previous year
Principal business cost 381,222,611.23 340,697,672.36
Other business cost 1,723,056.21 1,319,542.85
Total 382,945,667.44 342,017,215.21
(3) Income from, costs and profit of the principal businesses presented based on business
categories
Categories
Amount in the report period
Principal
business
income
Principal
business cost Principal
business profit
Sales of famous brand
watches
449,383,751.01
346,548,289.99
102,835,461.02
Sales of FIYTA watches
93,686,737.32
36,912,574.50
56,774,162.82
Property lease
30,723,302.93
8,554,293.37
22,169,009.56
Hotel
6,481,012.78 491,467.85
5,989,544.93
Including: Related
transactions
11,284,014.48 11,284,014.48
Total
568,990,789.56
-
381,222,611.23 187,768,178.33
Categories
Amount of the same period of the previous year
Principal business
income
Principal business
cost Principal
business profit
Sales of famous brand
watches 399,727,928.20 301,994,213.48 97,733,714.72
Sales of FIYTA watches 80,471,897.98 33,806,244.35 46,665,653.63
Property lease 33,642,784.92 9,846,016.45 25,047,139.71
Hotel 6,370,767.80 517,490.49 4,602,906.07
Including: Related
transactions 5,466,292.41 5,466,292.41 0
Total 514,747,086.49 340,697,672.36 174,049,414.13
Notes: ① The year-on-year growth of the income from sales of famous brand watches by
12.42% was mainly due to income from increase of newly opened shops and expanded market
share of the existing shops.
② Year-on-year growth of income from FIYTA watches by 16.42% was mainly due to that the
sales conditions turned better in the report period and the sales price kept steady and even rising.
③ Year-on-year decrease of income from property lease by 8.68% was due to that partial tenants73
withdrew the rent upon expiry and there existed some vacancy which affected somewhat the
rental income.
④ The situation of the hotel operation was quite steady with the year-on-year growth by 1.73%.
(4) In the report period, the turnover from the top five customers was RMB 70,832,327.76, taking
13.76% of the Company’s total turnover.
34. Business Taxes and Surcharge
Items Amount in the report period
Amount of the same
period of the previous
year
Business tax 1,982,762.40 2,121,600.41
Consumption tax 19,553.76 319,377.78
Tax for urban development
and maintenance
309,968.60 249,033.77
Educational Surcharge 416,159.90 338,582.61
Others 162,803.21 148,923.66
Total 2,891,247.87 3,177,518.23
35. Sales expenses
The sales expenses incurred in the report period was RMB 85,428,355.39, increased by RMB
17,383,692.40 over the same period of the previous year in which the amount incurred was RMB
68,044,662.99. It was mainly due to that A. With increase of the sales income, the staff’s salaries,
the advertisement and promotion costs increased correspondingly; B. The decoration charge and
staff’s salaries of the newly opened shops, etc. increased also.
36. Administrative Expenses
The administrative expenses incurred in the report period was RMB 48,433,196.51, increased by
RMB 7,501,177.31 over the same period of the previous year in which the amount incurred was
RMB 40,932,019.20. It was mainly due to increase of the outlets and growth of sales income while
the everyday costs, such as staff’s salaries, rentals, etc. increased correspondingly.
37. Financial expenses
Items Amount in the report period Amount of the same period
of the previous year
Interest payment 18,063,885.15 14,720,545.94
Less: interest income 467,949.61 434,616.49
Plus: Discount expense 0.00 0.00
Plus: exchange losses 20,553.94 61,807.40
Less: Exchange gain 15,433.43 173,861.49
Financial service charge 3,176,330.56 3,026,763.89
Plus: Other expenses 0.00 3,752.12
Total 20,777,386.61 17,204,391.37
38. Loss from impairment of assets74
Items Amount in the report
period
Amount of the same
period of the previous
year
Loss from bad debt 9,600.00
Loss from price falling of
inventories
Loss from impairment of
goodwill
Total 9,600.00
39. Investment income
Investees, Names or Categories Amount in the report
period
Amount of the same
period of the previous
year
(1) Income from investment
in the associates 179,622.59 -9,065.35
Shenzhen Research Institution
of Northwestern Polytechnical
University
-9,065.35
(2) Income from assignment of
the transactional financial
assets
Total 179,622.59 -9,065.35
40. Non-operating income
(1) Statement of non-operating income
Items Amount in the report
period
Amount of the same
period of the previous
year
Income from disposal of
non-current assets 37,338.38
Including: Income from
disposal of fixed assets 37,338.38
Disposal of accounts
payable which are
impossible to be paid
Penalty income 273,756.40 15,000.00
Governmental Subsidies 100,000.00 392,800.00
Indemnity income 226,895.30 20,000.00
Income from reorganization
of liabilities
Others 1,561,234.31 2,436.63
Total 2,161,886.01 467,575.01
(2) Governmental Subsidies
Items Amount in the report period Amount of the same period of the
previous year75
Amount
Including: the
amount charged
to the current
gain and loss
Amount
Including: the
amount charged
to the current
gain and loss
R & D expense 100,000.00 100,000.00
300,000.00 300,000.00
Funds for the project in
technology development
program
Training fees due to the
local authority of labor
Financial subsidies for the
key new products in
Shenzhen
92,800.00 92,800.00
Monetary award from the
local government
Total 100,000.00 100,000.00 392,800.00 392,800.00
Note: In the report period, the governmental subsidy amounting to RMB 100,000.00 was the
watch R & D fund from Shenzhen Municipal Bureau of Science & Technology and Information.
41. Non-operating expenses
Items Amount in the report period
Amount of the same
period of the previous
year
Loss from disposal of
non-current assets 0.00 3,795.10
Penalty payment 0.00 24,000.00
Donation payment 0.00 32,654.00
Extraordinary losses 0.00 0.00
Others 29,237.57 38,893.59
Total 29,237.57 99,342.69
42. Income tax expense
Items Amount in the report
period
Amount of the same
period of the previous
year
Current income tax expense
6,255,492.28
9,962,101.47
Deferred income tax
expense
658,576.90 -1,362,771.98
Total income tax expense 6,914,069.18 8,599,329.49
43. Basic earning per share and diluted earning per share
Items Amount in the report
period
Amount of the same
period of the previous
year
Basic earning per share 0.109 0.154
Diluted earning per share 0.109 0.15476
44. Other operation activity related cash receipts
The items with bigger amount in “other operation activity related cash receipts” are
presented as follows:
Items Amount in the report period
Earnest money 965,465.26
Interest income 467,949.61
Governmental Subsidies 100,000.00
Others 776,392.63
Total 2,083,806.62
45. Other business related cash payments
The items with bigger amount in “other business related cash payments” are presented as
follows:
Items Amount in the report period
Rental expenses 15,626,430.53
Advertisement 5,818,129.68
Sales agency service charge 5,033,475.34
Administrative expenses 2,660,596.18
R & D 4,244,225.01
Business travel 2,255,099.77
Market promotion 5,482,689.50
Refurbishment of franchised counters 3,353,414.19
Packing 1,685,880.43
Bank service charges 3,176,330.56
Transportation 1,468,625.86
Water and electricity 2,605,190.95
Consulting 1,486,636.00
Exhibition 1,351,611.19
Entertainment 1,327,131.68
Meeting 1,114,905.71
Securities 197,422.00
Insurance premium 440,226.2477
Items Amount in the report period
Post and telecommunications 460,374.22
Others 1,943,470.19
Total 61,731,865.23
46. Additional information of the cash flow statement
(1) Information of net cash flows arising from adjustment of net profit into operating activities:
Items
Amount in the
report period
Amount of the same period
of the previous year
1. Net cash flows arising from
adjustment of net profit into operating
activities:
Net profit 27,606,437.91 38,933,382.67
Plus: Provision for impairment of assets
Depreciation of fixed assets 11,178,292.64 11,123,009.45
Amortization of intangible assets 468,408.36 398,122.20
Long-term expenses to be apportioned 10,130,182.49 6,265,779.07
Loss (less: income) from disposal of
fixed assets, intangible assets and other
long term assets
-36,564.72
Losses from rejection of fixed assets
Gain/loss from change of the fair value
Financial expenses 18,063,885.15 15315915.52
Investment loss -179,622.59 9,065.35
Decrease of deferred income tax asset 658,576.90 -2,648,065.31
Increase of deferred income tax liability 846,212.17
Decrease of inventories 956,288.71 -119,608,220.92
Decrease (less: increase) of operative
items receivable 1,792,265.70 -39,592,123.93
Increase (less: decrease) of operative
items payable 8,809,810.05 10,376,058.97
Others
Net cash flow from operating activities 80,330,737.49 -79,463,641.65
2. Investment and fund-raising activities
with no cash income and expenses
involved:
Capital converted from liabilities - -
Convertible company bonds due within a
year - -
Fixed assets rented through financing - -78
Items
Amount in the
report period
Amount of the same period
of the previous year
3. Net increase of cash and cash
equivalents:
Ending cash balance 103,063,846.18 67,373,208.75
Less: Opening cash balance 108,233,795.73 60,226,078.54
Plus: Ending cash equivalent balance - -
Less: Opening cash equivalent balance - -
Net increase in cash and cash
equivalents -5,169,949.55 7,147,130.21
(VII) Notes to the principal items on the parent company’s financial statements
1. Accounts receivable
(1) Accounts receivable presented based on categories
Items
Ending balance
Book balance Proportion
(%)
Provision for
bad debts Book value
Accounts receivable with significant
single amount 13,157,224.37 15.55 12,004,098.9
5 1,153,125.42
Accounts receivable with insignificant
single amounts but the grouping has
big risk after grouping based on the
credit risk characteristics.
29,514,733.86 34.88 29,081,558.4
8 433,175.38
Other insignificant receivables 41,950,991.71 49.57 1,259,364.97 40,691,626.7
4
Total 84,622,949.94 100.00
42,345,022.4
0 42,277,927.5
4
(Continued)
Items
Opening balance
Book balance Proportion
(%)
Provision for
bad debts Book value
Accounts receivable with significant
single amount 12,469,694.66 17.01 12,004,098.9
5 465,595.71
Accounts receivable with insignificant
single amounts but the grouping has big
risk after grouping based on the credit
risk characteristics.
29,837,240.27 40.70 29,081,558.4
8 755,681.79
Other insignificant receivables 31,008,572.62 42.29 1,259,364.97 29,749,207.6
5
Total 73,315,507.55 100.00 42,345,022.4
0 30,970,485.1
5
(2) Accounts receivable presented based on ages
Age
Ending balance
Amount Proportion
(%)
Provision for
bad debts
Within a year 42,093,351.9
3
49.74 1,358,590.32
1 to 2 years 112,386.29
0.13 69,660.4679
Age
Ending balance
Amount Proportion
(%)
Provision for
bad debts
2 to 3 years 1,215,374.28
1.44 713,885.05
Over 3 years 41,201,837.4
4
48.69 40,202,886.57
Total 84,622,949.9
4
100.00 42,345,022.40
Age
Opening balance
Amount Proportion
(%)
Provision for
bad debts
Within a year 28,724,937.4
1 39.18 1,358,590.32
1 to 2 years 2,757,708.13 3.76 69,660.46
2 to 3 years 1,427,770.09 1.95 713,885.05
Over 3 years 40,405,091.9
2 55.11 40,202,886.57
Total 73,315,507.5
5 100.00 42,345,022.40
(3) Top 5 debtors of the accounts receivable at the end of the report period
Debtors Ending
balance
Proportion in
the total
accounts
receivable (%)
Outstanding
years
DAYA BAY NUCLEAR POWER
OPERATIONS AND
MANAGEMENT CO., LTD.
2,626,598.21
3.10 Within a
year
BEIJING URBAN-RURAL
TRADE CENTRE CO., LTD 2,033,710.15
2.40 Over 3
years
Qingdao Harmony Timepieces,
Spectacles & Jewelry Co., Ltd. 1,298,215.01
1.53 Over 3
years
Yingkou Department Store
Timepieces and Sewing
Machines Wholesale Station
982,604.03
1.16 Over 3
years
Jilin Timepieces and
Photographic Equipment
Wholesale Co., Ltd.
890,387.77
1.05 Within a
year
Total 7,831,515.17
9.25
(4) In the balance of the accounts receivable at the end of the report period, there was no arrears
owed by the shareholder holding over 5% ( including 5%) of the Company’s vote-bearing shares.
(5) Increase of the ending balance of the accounts receivable over the opening balance amounting to
RMB 11,307,442.39 is mainly due to increase of the sales of FIYTA watches in the report year.
2. Other receivables
(1) Statement of the other receivables based on categories
Items
Ending balance
Balance Proporti
on (%)
Provision for
bad debts Book value80
Items
Ending balance
Balance Proporti
on (%)
Provision for
bad debts Book value
Other receivables with significant
individual amount 297,382,691.55 98.28
9,214,749.60 288,167,941.
95
Other receivables with insignificant
amount but big risk of combination
based on the credit risk characteristics 1,370,256.63 0.45
1,370,256.63 -
Other receivables with insignificant
amount 3,847,262.50 1.27
256,516.05 3,590,746.45
Total 302,600,210.68 100.00
10,841,522.28 291,758,688.
40
(Continued)
Items
Opening balance
Balance Proporti
on (%)
Provision for
bad debts Book value
Other receivables with significant
individual amount 334,724,349.89 98.73
9,214,749.60 325,509,600.29
Other receivables with insignificant
amount but big risk of combination
based on the credit risk characteristics 1,370,256.63 0.40
1,370,256.63 -
Other receivables with insignificant
amount 2,945,920.41 0.87 256,516.05 2,689,404.36
Total 339,040,526.93 100.00 10,841,522.28 328,199,004.65
(2) Statement of the other receivables based on ages
Ages
Ending balance
Amount Proportion
(%)
Provision for
bad debts
Within a year 289,015,564.
63
95.51 112,586.27
1 to 2 years 2,437,216.55
0.81 178,686.00
2 to 3 years 532,887.16
0.18 15,238.75
Over 3 years 10,614,542.3
4
3.51 10,535,011.26
Total 302,600,210.
68 100.00 10,841,522.28
Ages
Opening balance
Amount Proportion
(%)
Provision for
bad debts
Within a year 324,343,716.
81 95.67 112,586.27
1 to 2 years 1,898,854.44 0.56 178,686.00
2 to 3 years 105,806.83 0.03 15,238.75
Over 3 years 12,692,148.8
5 3.74 10,535,011.2681
Ages
Opening balance
Amount Proportion
(%)
Provision for
bad debts
Total 339,040,526.
93 100.00 10,841,522.28
(3) Top 5 debtors of other receivables at the end of the report period
Debtors Ending
balance
Proportion in
the total other
receivables (%)
Outstanding
years
Harmony
282,134,428.3
9
93.24 Within a year
Feijing Co.
6,289,537.66
2.08 Over 3 years
Shenzhen Yuda Sophisticated
Machinery Co., Ltd.
1,776,600.00
0.59 Within a year
Shenzhen New Longtai
Industrial Co., Ltd.
1,573,876.89
0.52 Over 3 years
Shenzhen Airport Co., Ltd.
713,512.00
0.24 Within a year
Total 292,487,954.9
4 96.66
3. Long-term equity investment
(1) Long-term equity investments are stated as follows:
Items Opening balance Increase Decrease Ending balance
Investment to subsidiaries 346,043,000.00 - 346,043,000.00
Investment to associated
companies 1,815,873.52 179,622.59 150,000.00 1,845,496.11
Other equity investment 385,000.00 - 385,000.00
Less: Provision for impairment
of long-term equity investments 11,839,499.13 - 11,839,499.13
Total 336,404,374.39 179,622.59 150,000.00 336,433,996.98
(2) Investment in Subsidiaries
Investees
Initial
investment
amount
Opening
balance Increase Decrease Ending
balance
Harmony 298,500,000.
00
298,500,000.0
0 - - 298,500,000.
00
Harbin Co. 125,000.00 125,000.00 - - 125,000.00
World Watches Center 1,400,000.00 1,400,000.00 - - 1,400,000.00
Manufacture Co. 9,000,000.00 9,000,000.00 - - 9,000,000.00
Feijing Co. 6,300,000.00 6,300,000.00 - - 6,300,000.00
Haomen Co. 11,040,000.0 11,040,000.00 - - 11,040,000.082
Investees
Initial
investment
amount
Opening
balance Increase Decrease Ending
balance
0 0
FIYTA Hong Kong Limited 9,678,000.00 9,678,000.00 - - 9,678,000.00
Xi’an Chengheng Co. 10,000,000.0
0 10,000,000.00 - - 10,000,000.0
0
Total
346,043,000.
00
346,043,000.0
0 - - 346,043,000.
00
(3) Statement of Investment in Associates
Investees Opening
balance Increase Decrease Ending
balance Register
ed place Activities
Shenzhen Research Institution
of Northwestern Polytechnical
University
1,815,873.52 179,622.59 150,000.00- 1,845,496.11 Shenzhe
n Education, training,
scientific research
Total
1,815,873.52 179,622.59 150,000.00- 1,845,496.11
(4) Other long-term equity investment
Investees
Initial
investment
amount
Opening
balance Increase Decrease Ending
balance
Xi’an Tangcheng Co., Ltd. 85,000.00 85,000.00 - - 85,000.00
Shenzhen CATIC Cultu
Transmit Co., Ltd. 300,000.00 300,000.00 - - 300,000.00
Total 385,000.00 385,000.00 - - 385,000.00
(5) Provision for impairment of long-term equity investments
Investees
Opening
balance
Amount
provided
Decrease in the report period
Ending
balance
Amount
carried
back
Amount
written
off
Total
Feijing Co. 6,300,000.00 - - - - 6,300,000.00
Haomen Co. 5,239,499.13 - - - - 5,239,499.13
Shenzhen CATIC
Culture Transmit
Co., Ltd.
300,000.00 - - - - 300,000.00
Total 11,839,499.13 - - - - 11,839,499.13
4. Operation Income and Costs
(1) Business income from the principal business and other business income
Items Amount in the report period Amount of the same period of
the previous year
Principal business income 124,410,040.25 110,995,625.30
Income from other businesses 4,079,038.10 1,971,616.85
Total business income
128,489,078.35 112,967,242.1583
Items Amount in the report period Amount of the same period of
the previous year
Principal business cost 53,825,023.51 42,925,639.53
Other business cost 3,610,172.43 1,311,644.97
Total operation costs 57,435,195.94 44,237,284.50
(2) Income from, costs and profit of the principal businesses presented based on business
categories
Categories
Amount in the report period
Principal business
income
Principal business
cost Principal business profit
Sales of FIYTA watches 93,686,737.32 45,270,730.14 48,416,007.18
Property lease 30,723,302.93 8,554,293.37 22,169,009.56
Total 124,410,040.25 53,825,023.51 70,585,016.74
Categories
Amount of the same period of the previous year
Principal business
income
Principal business
cost Principal business profit
Sales of FIYTA watches 80,471,897.98 37,449,051.92 43,022,846.06
Property lease 30,523,727.32 5,476,587.61 25,047,139.71
Total 110,995,625.30 42,925,639.53 68,069,985.77
(3) In the report period, the turnover from the top five customers was RMB 14,091,430.42,
taking 12.70% of the Company’s total turnover.
5. Investment income
Investees, Names or Categories Amount in the report
period
Amount of the same
period of the previous
year
Income from assignment of the
transactional financial assets -
Adjustment for associates according
to the equity method 179,622.59 -9,065.35
Dividend from available-for-sale
financial assets -
Dividends from subsidiaries
Total 179,622.59 -9,065.35
6. Statement of Provisions for Impairment of Assets
Items Opening
balance
Amount of
provision or
other
increase in
the report
period
Decrease in the report
period
Ending
Amount balance
carried
back
Amount
written off
I. Provision for bad
debts
53,186,544.68 53,186,544.68
Incl: Accounts
receivable
42,345,022.40 42,345,022.4084
Items Opening
balance
Amount of
provision or
other
increase in
the report
period
Decrease in the report
period
Ending
Amount balance
carried
back
Amount
written off
Other receivables
10,841,522.28 10,841,522.28
II. Provisions for
price falling of
inventories
11,977,449.58 11,977,449.58
including:
commodities in
stock
11,977,449.58 11,977,449.58
III. Provision for
impairment of
long-term equity
investments
11,839,499.13 11,839,499.13
IV. Total provision
for impairment of
fixed assets
2,600,000.00 2,600,000.00
Including: housing
and buildings
2,600,000.00 2,600,000.00
Total
79,603,493.39 79,603,493.39
7. Additional information of the cash flow statement
Items
Amount in the
report period
Amount of the
same period of
the previous
year
1. Net cash flows arising from adjustment of net
profit into operating activities:
Net profit 1,582,675.36 9,196,913.69
Plus: Provision for impairment of assets
Depreciation of fixed assets 9,574,644.53 5,239,061.93
Amortization of intangible assets 468,408.36 398,122.20
Long-term expenses to be apportioned 4,230,997.53 2,796,856.41
Loss (less: income) from disposal of fixed assets,
intangible assets and other long term assets -36,464.72
Losses from rejection of fixed assets
Gain/loss from change of the fair value
Financial expenses 9,484,513.00 1,775,327.00
Investment loss -179,622.59 9,065.35
Decrease of deferred income tax asset 350,769.44
Increase of deferred income tax liability 838,200.00
Decrease of inventories 7,393,274.51 -19,587,133.77
Decrease (less: increase) of operative items
receivable 25,132,873.86 -56,652,242.3985
Items
Amount in the
report period
Amount of the
same period of
the previous
year
Increase (less: decrease) of operative items
payable 11,022,470.26 12,874,111.23
Others
Net cash flow from operating activities 69,899,204.26 -43,986,383.06
2. Investment and fund-raising activities with no
cash income and expenses involved:
Capital converted from liabilities - -
Convertible company bonds due within a year - -
Fixed assets rented through financing - -
3. Net increase of cash and cash equivalents:
Ending cash balance 56,038,121.73 57,079,844.44
Less: Opening cash balance 54,938,436.99 46,746,295.03
Plus: Ending cash equivalent balance - -
Less: Opening cash equivalent balance - -
Net increase in cash and cash equivalents 1,099,684.74 10,333,549.41
(VIII) Related parties and related transactions
1. Relationship with the Related Parties
(1) Criteria for recognition of related parties
Criteria for recognition of related parties: A related party is formed when a party controls or
jointly controls or exerts significant influence upon another party or two or more parties are under
control or joint control or significantly influenced by another party.
(2) The parent company
Parent company Organization
Code Registered
place
Business
activities
Registered
capital
Proportion of
the Company’s
shares held (%)
Proportion of
voting power
over the
Company (%)
Shenzhen
CATIC Group
440301102781041 Shenzhen
Investing to set
up entities,
domestic trade,
materials
supply and
sales
678,909,090.00
44.69
44.69
(3) Subsidiaries
(4) Related parties with non-control relationship
Company Names Relationship Organization code or business
licence
Shenzhen CATIC Property Management Co.,
Ltd. (CATIC Property) Under the same control
19219400-5
Shenzhen CATIC Building Equipment Co., Ltd.
(CATIC Building Co.) Under the same control
44030110274679186
Company Names Relationship Organization code or business
licence
Shenzhen Rainbow Supermarket Co.,
Ltd. (Rainbow Supermarket)
Under the same control
100377
Shenzhen CATIC Electronics Associate of a controlled
subsidiary 4403011152608
Beijing Harmony Co. Associate of a controlled
subsidiary 10125553-9
Shenzhen CATIC Real Estate Development Co.
(CATIC Real Estate)
Shenzhen CATIC Real Estate Co., Ltd.
Under the same control
Under the same control 440301103148532
4403011006250
Shenzhen Makway Cable TV Devices Co., Ltd.
(Makway) Under the same control
440301501124988
South China Securities Ltd. (South China
Securities) Under the same control
3600001132533
CATIC Hotel Co. Under the same control
76197033-5
Shenzhen CATIC Nanguang Elevator Co., Ltd.
(CATIC Nanguang) Under the same control
4403011032584
2. Pricing policy
The pricing policy for the Company’s related transactions is to price according to the
agreement concluded by both parties.
3. Related transactions
(1) Receiving labor services
Related parties
Amount in report year Amount of the same period of the
previous year
Amount
Proportion in
the amount
involved in all
the
Company’s
transactions of
the same type
(%)
Amount
Proportion in
the amount
involved in all
the Company’s
transactions of
the same type
(%)
A. Engineering
B. Property management
CATIC Property
818,474.99 100.00 774,520.46 100.00
C. Lease
CATIC Property
390,225.00 2.8
D. Payment for sales
expenses with designated
counters in the
supermarket
Rainbow Supermarket
3,139,091.66 3.67 3,892,414.08 5.72
E. Payment for the contract
fee
Shenzhen CATIC Electronics
300,000.00 100.00
F. Payment for the hotel
management charge87
Related parties
Amount in report year Amount of the same period of the
previous year
Amount
Proportion in
the amount
involved in all
the
Company’s
transactions of
the same type
(%)
Amount
Proportion in
the amount
involved in all
the Company’s
transactions of
the same type
(%)
CATIC Hotel Co.
129,620.29 100.00 105,316.56- 100.00
Total 4,087,186.94 5,357,159.54
(2) Sales of Goods
Related parties
Amount in report year Amount of the same period of the
previous year
Amount
Proportion in the
amount involved
in all the
Company’s
transactions of
the same type
Amount
Proportion in the
amount involved
in all the
Company’s
transactions of
the same type
CATIC
International
Holdings
820,338.03 0.88%
Total 820,338.03 0.88%
(3) Supply of Lease
Related parties
Amount in report year Amount of the same period of the
previous year
Amount
Proportion in
the amount
involved in all
the
Company’s
transactions of
the same type
(%)
Amount
Proportion in
the amount
involved in all
the Company’s
transactions of
the same type
(%)
Shenzhen CATIC Real Estate
Development Co., Ltd.
946,520.00 3.08% 651,696.00 1.94%
Shenzhen Makway Cable TV
Devices Co., Ltd.
150,738.00 0.49% 150,738.00 0.45%
Shenzhen CATIC Property
Management Co., Ltd.
1,180,080.00 3.84% 1,312,728.00 3.90%
South China Securities Ltd.
389,790.00 1.27% 389,790.00 1.16%
Shenzhen CATIC Real Estate
Co., Ltd.
213,210.00 0.69%
Total 2,880,338.00 9.38% 2,504,952.00 7.45%
(4) Other Related Transactions
Guarantee for loans
Related parties Amount in report year Amount of the same period of the
previous year88
Amount
Proportion in
the amount
involved in all
the Company’s
transactions of
the same type
Amount
Proportion in the
amount involved
in all the
Company’s
transactions of
the same type
Shenzhen CATIC Group
595,000,000.0
0
100.00
580,000,000.00 100.00
Total 595,000,000.0
0
100.00
580,000,000.00 100.00
(5) Balance of Receivables from and Payables to the Related Parties
Related parties Ending balance Opening balance
Accounts receivable
Rainbow Supermarket 2,000,915.07
-
CATIC International Holdings 227,917.20
264,776.50
Total 2,228,832.27 264,776.50
Provision for bad debt from accounts
receivable
Rainbow Supermarket
-
Other receivables
Rainbow Supermarket 70,221.60 -
Feijing Co. 6,289,537.66
6,307,234.57
Total 6,359,759.26 6,307,234.57
Provision for bad debt from other
receivables
Feijing Co. 6,160,145.06
6,160,145.06
Total 6,160,145.06
6,160,145.06
Other payables
Shenzhen CATIC Building Equipment Co., Ltd.
8,227.10 8,227.10
Shenzhen CATIC Nanguang Elevator Co., Ltd.
3,354.90 3,354.90
Shenzhen CATIC Property Management Co.,
Ltd. 368,653.50 37,213.05
Shenzhen CATIC Real Estate Development
Co., Ltd. 85,800.00 85,800.00
Shenzhen CATIC Real Estate Co., Ltd. 424,800.00
-
South China Securities Ltd. 150,000.00 150,000.00
CATIC Hotel Management Co., Ltd. 148,909.37 376,190.4589
Related parties Ending balance Opening balance
Shenzhen Makway Cable TV Devices Co., Ltd. 50,246.00 50,246.00
Total 1,239,990.87
711,031.50
Long term accounts payable
Beijing Harmony Co. 10,000,000.00 10,000,000.00
(IX) Operational Commitment
The minimum rental payment which shall be paid by the Company for the irrevocable
operational lease in the future years.
Remaining time of the lease term Minimum rental payment (RMB10,000)
Within 1 year (including 1 year)
1,609.25
Over 1 year but below 2 years (with 2 years inclusive)
2,677.46
Over 2 years but below 3 years (with 3 years
inclusive)
2,341.31
Over 3 years
7,470.19
Total
14,098.21
Note: Commitment on Irrevocable operational lease mainly refers to the rental the Company
should pay to supermarket and franchised shop premises.
(X) Significant Events in the Report Period
1. Establishment of the Technology Company
On June 15, 2009, the Company approved to establish FIYTA Technology Development Co.
through its 1st meeting of the Sixth Board of Directors at which the Proposal on Establishment of
FIYTA Technology Development Co. was adopted by voting. It is a solely invested subsidiary with
registered capital of RMB 10 million and its temporary name is FIYTA Technology Development
Co. The new company bases itself on a hi-tech enterprise, is a key research and development
platform as well as a platform for conversion of scientific research achievements of FIYTA
Technology Center. It development orientation is to carry out technology research work and
conducts sophisticated machining business and machining watch movements as supporting
service for customers as an important additional service of FIYTA watch industry and formed a
new profit growth point for the purpose of reinforcing the risk resistance in the Company’s watch
industry.
2. Increasing Investment in Hong Kong Co.
On June 15, 2009, the 1st meeting of the Sixth Board of Directors approved the Proposal
on Increasing Investment in FIYTA Hong Kong Limited, according to which the Company was to
increase investment in FIYTA Hong Kong by HK$ 10 million so that the investment has increased
to HK$20 million.
Additional information
I. Non-recurring gains/losses
In accordance with Explanatory Announcement for Information Disclosures by That Make
Public Offering of Securities No. 1: Non-Recurring Gains/Losses promulgated by China Securities
Regulatory Commission (2008), the amounts of non-recurring gains/losses incurred in the
Company in 2009 were as follows:90
Items Amount in the
report period
Amount of the
same period of
the previous
year
Gain/loss from disposal of non-current assets 33,543.28
Tax rebate, exemption or reduction approved by overstepping the
authority or without official approval document -
Governmental subsidy charged to the current gain and loss
(except the governmental subsidies closely related with the
Company’s business and enjoyable according to the unified
standard quota or fixed amount specified by the central
government).
100,000.00 392,800.00
Fund occupancy fee charged to the current gain and loss and
collected by non-financial enterprises (except the fund occupancy
fee collected by non-financial enterprises with qualification for
operation of financial institutions established through approval of
the concerned authority)
-
Gain/loss from that the consolidation cost less than the fair value
of recognizable net assets in the consolidated unit -
Gain and loss from change in the fair value -
Investment gains/losses
Provision for impairment of various assets arising from force
majeure, such as natural disaster -
Gains and losses from debts reorganization -
Enterprise reorganization expenses -
Gains/losses exceeding the fair value arising from transactions
with obviously unfair prices -
Net gain and loss of the subsidiary under the same control and
produced from enterprise consolidation from the year beginning to
the consolidation date
-
Gain and loss from predicted liabilities irrelevant to the Company’s
principal business -
Net income and expense of the business other than the above
items 2,032,648.44 -58,110.96
Other non-recurring gains/losses specified by China Securities
Regulatory Commission -
Sub-total 2,132,648.44 368,232.32
Less: the amount affecting the enterprise income tax -426,529.69 -66,281.82
Net non-recurring gain and loss 1,706,118.75
301,950.50
Net non-recurring gain and loss attributable to minority
shareholders
Net non-recurring gain and loss attributable to shareholders of
ordinary shares 1,706,118.75 301,950.50
Net profit attributable to the Company’s shareholders of ordinary
shares less non-recurring gains and loss 25,460,942.67 38,117,288.54
Proportion in the net profit affected by the net non-recurring gains
and losses (%) 6.28 0.79
II. Relevant Financial Indicators
In accordance with No. 9 Guideline on Contents and Format for Information Disclosure of
Companies That Make Public Offering of Securities ----Calculation and Disclosure of Return on
Equity and Earnings Per Share, the net return on equity and earnings per share of the year 2008
calculated by the Company are presented as follows:91
Profit of the
report period Report period
Net return equity (%) Earnings per share (RMB/share)
Fully diluted Weighted
average
Basic earnings
per share
Diluted earnings
per share
Net profit
attributable to the
Company’s
shareholders of
common shares
Jan. to Jun.,
2009 4.02% 3.95% 0.109 0.109
Jan. to Jun.,
2008 5.94% 6.04% 0.154 0.154
Net profit
attributable to the
shareholders of
ordinary shares
less
non-recurring
gains and loss
Jan. to Jun.,
2009 3.76% 3.70% 0.102 0.102
Jan. to Jun.,
2007 5.89% 5.99% 0.153 0.15392
