飞亚达（集团）股份有限公司
FIYTA HOLDINGS LTD.
Semi-Annual Report 2011 （Full Text）
August 17, 2011
Table of Contents
Chapter 1 Important Notice, Definitions and Table of Contents
Chapter 2 Company Information
Chapter 3 Change in Share Capital and Shares Held by the Principal Shareholders
Chapter 4 Directors, Supervisors, Senior Executives
Chapter 5 Report of the Board of Directors
Chapter 6 Important Events
Chapter 7 Financial Report (Unaudited)
Chapter 8 Documents Available for Inspection
Chapter 1 Important Notice, Definitions 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 senior executive has ever made any statement expressing that
he/she cannot make sure of or has different opinion on the authenticity, correctness or
completeness of this annual report.
This semi-annual report has not been audited.
There exists no deviation between the domestic and international accounting standards in
this semi-annual report.
Mr. Wu Guangquan, the Chairman of the Board, Mr. Xu Dongsheng, the General Manager,
Mr. Li Dehua, Deputy General Manager and Chief Accountant, and Mr. Hu Xinglong, the
Financial Manager hereby make sure the accuracy and completeness of the financial
report enclosed in this semi-annual report.
II. Definitions
The following names in abbreviation shall refer to the following organizations unless the
context hereof otherwise clearly requires:
This Company, the Company or Fiyta: Fiyta Holdings Ltd.
Harmony: Shenzhen Harmony World Watches Center Co., Ltd.
Rainbow Supermarket: Shenzhen Rainbow Supermarket Co., Ltd.
CATIC Real Estate: CATIC Real Estate Co., Ltd.
CATIC Real Estate Development: Shenzhen CATIC Real Estate Development Co., Ltd.
CATIC Property: Shenzhen CATIC Property Management Co., Ltd.
Chapter 2 Company Information
I. Legal Name in Chinese and English, and Short Form:
Company name in Chinese: 飞亚达（集团）股份有限公司
Short Form in Chinese: 飞亚达公司
In English: FIYTA HOLDINGS LTD.
Short Form of the English Name: FIYTA
II. Legal Representative: Mr. Wu Guangquan
III. Secretary of the Board: Mr. Chen Libin
Securities Affairs Representative: Zhang Yong
Liaison Address: 20th Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan
District, Shenzhen
Tel : 0755－86013992 86013669
Fax: 0755－83348369
E-mail: investor@fiyta.com.cn
IV. 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 Website: http:// www.fiytagroup.com
V. 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
Place Where the Semi-Annual Report is Prepared and Placed: Secretariat of the Board
VI. Stock Exchange Listed with: Shenzhen Stock Exchange
Short Form & Code of the Stock: FIYTA A 000026
FIYTA B 200026
VII. Other Relevant Information:
1. Date of the initial registration: March 30, 1990
Date of the latest change of the registration: March 3, 2011
Registration with: Shenzhen Municipal Administration for Industry and Commerce
2. Business License No.: 440301103196089
3. Taxation Registration No.: 440301192189783
4. Organization Code: 19218978-3
5. Certified public accountant engaged
Types Description Office address
8th – 9th Floors, Block A,
Stock A
and RSM China CPAs International Enterprise
Stock B
Building35 Jinrong Dajie,
Xicheng District, Beijing
II. Financial highlights:
In CNY
Increase/decrease
of the report period
End of the report End of the
vs the same period
period previous year
of the previous
year (%)
2,430,200,977.0 2,436,539,054.3
Total assets, in CNY -0.26%
9 9
Owner’s equity attributable to the 1,325,486,367.2 1,265,996,583.6
4.70%
Company’s shareholders, in CNY 9 7
Capital stock, in shares 392,767,870.00 280,548,479.00 40.00%
Net asset per share attributable to the
3.375 4.51 -25.17%
Company’s shareholders (CNY/share)
Same Period of Year-on-year
Report period
the Previous increase/decrease
(Jan. to Jun.)
Year (%)
1,232,010,736.4
Turnover, in CNY 810,811,910.82 51.95%
1
Operating Profit, in CNY
102,601,007.36 44,751,195.21 129.27%
Total profit in CNY 103,969,019.95 51,957,376.73 100.10%
Net profit attributable to the Company’s
85,990,142.75 42,399,471.66 102.81%
shareholders in CNY
Net profit attributable to the Company’s
shareholders less non- recurring 87,145,297.28 36,774,788.99 136.97%
loss/gain, in CNY
Basic earnings per share, in
0.219 0.171 28.07%
CNY/share
Diluted earnings per share
0.219 0.171 28.07%
(CNY/share)
Net assets-income ratio (%), weighted
6.75% 5.62% 1.13%
average
Net assets-income ratio less non-
recurring loss/gain (%), weighted 6.84% 5.00% 1.84%
average
Net cash flows arising from operating
-103,426,718.82 875,685.15 -
activities (CNY)
Net cash flows per share arising from -0.263 0.003 -
operating activities, in CNY/share
Chapter 3 Change in the Capital Stock and Shares Held by the Principal
Shareholders
I. Changes in Shares
1. Changes in the Company’s capital stock ended June 30, 2011 are as follows:
In shares
Before the change Increase/ Decrease (+ / -) After the change
Bon
Shares
Proportio New us Oth Proportio
Q’ty converted Sub-total Q’ty
n issuing shar ers n
from reserve
es
I. Restricted Shares 142,681,505 50.86% 57,072,601 57,072,601 199,754,106 50.86%
1.State owned
shares
2. State corporate
123,645,981 44.07% 49,458,392 49,458,392 173,104,373 44.07%
shares
3. Other domestic
19,000,000 6.77% 7,600,000 7,600,000 26,600,000 6.77%
shares
Including:
Domestic non-state
19,000,000 6.77% 7,600,000 7,600,000 26,600,000 6.77%
owned corporate
shares
Domestic
natural person
shares
4. Foreign shares
Including: Foreign
corporate shares
Overseas
natural person
shares
5. Senior executive
35,524 0.01% 14,209 14,209 49,733 0.01%
shares
II. Unrestricted
137,866,974 49.14% 55,146,790 55,146,790 193,013,764 49.14%
shares
1. CNY ordinary
79,546,974 28.35% 31,818,790 31,818,790 111,365,764 28.35%
shares
2. Foreign invested
shares listed in 58,320,000 20.79% 23,328,000 23,328,000 81,648,000 20.79%
Mainland China
3. Foreign invested
shares listed out of
Mainland China
4. Others
III. Total Shares 280,548,479 100.00% 112,219,391 112,219,391 392,767,870 100.00%
Change in the Restricted Shares:
Number of the
Number of Number of
shares with the Number of
restricted shares restricted shares Causes of sales Date of relieving
Shareholders restriction restricted shares
at year increased this restriction the restriction
relieved this at year end
beginning year
year
Equity November 9,
separation 2012
Shenzhen
reform; New (111,415,501
CATIC Group
116,412,377 0 46,564,950 162,977,327 shares from shares),
Co., Ltd.
non-public December 30,
offering 2013 (4,996,876
shares)
Changzhou New shares
December 30,
Investment from non-public
4,000,000 0 1,600,000 5,600,000 2011
Group Co., Ltd. offering
First State Cinda
New shares
Fund December 30,
from non-public
Management 4,000,000 0 1,600,000 5,600,000 2011
offering
Co. Ltd.,
Bohong Shujun
(Tianjin) Equity New shares
December 30,
Investment Fund from non-public
5,000,000 0 2,000,000 7,000,000 2011
Partnership Co., offering
Ltd.
ICBC Credit
New shares
Suisse Asset December 30,
from non-public
Management 6,000,000 0 2,400,000 8,400,000 2011
offering
Co. Ltd.,
Taikang Assets New shares
December 30,
Management from non-public
4,000,000 0 1,600,000 5,600,000 2011
Co., Ltd. offering
Caitong New shares
December 30,
Securities Co., from non-public
3,233,604 0 1,293,442 4,527,046 2011
Ltd. offering
Senior
Lu Bingqiang executives’
35,524 0 14,209 49,733 -
restricted shares
Total
142,681,505 0 57,072,601 199,754,106 － －
2. Issuing and Listing
(1) In the report period, there were neither newly issued shares nor derivative securities in
the Company. The Company started implementation of the plan of non-public offering of
A-shares of 2010. The plan was reviewed and approved at the 8th meeting of the Sixth
Board of Directors dated April 12, 2010 and was approved by China Securities Regulatory
Commission with the Official Reply on Non-public Offering of Fiyta Holdings Ltd. (ZHENG
JIAN XU KE [2010] No. 1703) on November 29, 2010. The Company issued 31,230,480
new shares by non-public offering and completed the procedures of registration for
custody and sales restriction of the newly issued A shares with China Securities
Depository and Clearing Company Limited Shenzhen Branch on December 14, 2010. The
listing date of the shares subscribed by the designated investors was December 30, 2010.
The sale restriction term of the shares subscribed by Shenzhen CATIC Group Co., Ltd.,
the Company’s controlling shareholder, is 36 months from December 30, 2010 to
December 29, 2013. The sale restriction term of the shares subscribed by Changzhou
Investment Group Co., Ltd., First State Cinda Fund Management Co. Ltd., Bohong Shujun
(Tianjin) Equity Investment Fund Partnership Co., Ltd., ICBC Credit Suisse Asset
Management Co. Ltd., Taikang Assets Management Co., Ltd. and Caitong Securities Co.,
Ltd. is 12 months from December 30, 2010 to December 29, 2011. All the designated
investors subscribed the shares in cash without assets transfer or liabilities transfer
involved.
(2) In the report period, the Company implemented 2010 Annual Equity Distribution Plan
according to which the Company converted its capital reserve into capital stock on
4-for-10 basis. As a result, 112,219,391 shares more were converted. After the conversion,
the Company’s total capital stock became 392,767,870 shares.
(3) At present, there are no employees’ shares in the Company.
II. Shareholders
1. Ended June 30, 2011, there were totally 18,302 shareholders in the Company: including
11,614 shareholders of A shares (including one senior executive); 6,688 shareholders of B
shares.
2. Shares held by the Company’s top ten shareholders
Shares held by top 10 shareholders ended June 30, 2011:
Total Shareholders 18,302
Shareholding of the top 10 shareholders
Shareholding Total shares Quantity of restricted Quantity of shares
Shareholders Shareholder type
proportion held shares held pledged or frozen
State-owned
Shenzhen CATIC Group
corporate 41.49% 162,977,327 162,977,327 0
Co., Ltd.
China Construction Bank –
Domestic
Huaxia Superiority Growth
non-state
Stock Based Securities 3.80% 14,920,073 0 0
corporate
Investment Fund
Industrial and Commercial
Domestic
Bank of China – E-Fund
non-state
Value Growth Mixed 2.55% 10,000,000 0 0
corporate
Securities Investment Fund
China Construction Bank –
Domestic
ICBC Credit Suisse Steady
non-state
Growth Stock Based 2.14% 8,400,000 8,400,000 0
corporate
Securities Investment Fund
Bohong Shujun (Tianjin) Domestic
Equity Investment Fund non-state
1.78% 7,000,000 7,000,000 0
Partnership Co., Ltd. corporate
Changzhou Investment State-owned
Group Co., Ltd. corporate 1.43% 5,600,000 5,600,000 0
China Construction Bank –
Domestic
First State Cinda Leading
non-state
Growth Stock Type 1.39% 5,460,000 5,460,000 0
corporate
Securities Investment Fund
Taikang Life Insurance Domestic
Co.,Ltd. – Toulian – Jinqu non-state
1.25% 4,900,000 4,900,000 0
-019L-TL002 SHEN corporate
Caitong Securities Co., Ltd. State-owned
1.15% 4,527,326 4,527,046 0
corporate
China Merchants Securities Overseas
(HK) Co., Ltd. state-owned 1.11% 4,353,189 0 0
corporate
Shareholding of top 10 shareholders of unrestricted shares
Shareholders Quantity of unrestricted shares held Share type
China Construction Bank – Huaxia
Superiority Growth Stock Based Securities 14,920,073 A Shares
Investment Fund
Industrial and Commercial Bank of China –
E-Fund Value Growth Mixed Securities 10,000,000 A Shares
Investment Fund
China Merchants Securities (HK) Co., Ltd. B shares
4,353,189
B shares
KGI ASIA LIMITED 4,337,622
BANK JULIUS BAER & CO.LTD 3,485,769 B shares
MARTIN CURRIE INVESTMENT
A Shares
MANAGEMENT LIMITED 2,232,959
NOMURA SECURITIES CO. LTD. 1,773,611 A Shares
GSI S/A GOLDEN CHINA PLUS MASTER
1,729,125 B shares
FUND
First Shanghai Securities Co., Ltd. 1,727,719 B shares
Industrial and Commercial Bank of China –
A Shares
Guotou Ruiyin Core Enterprise Stock Based 1,685,633
Securities Investment Fund
Note to the connectivity relations The Company has not found any connectivity relations among the aforesaid
or action in concert of the above shareholders or any persons acting in concert as specified in the Measures for
shareholders Administration of Information on the Shareholder Equity Change of Listed Companies.
Shenzhen CATIC Group Co., Ltd. holds over 5% of the Company’s shares. In the report
period, as the Company implemented the conversion of its capital reserve into capital
stock, the number of shares held by it changed from 116,412,377 shares into 162,977,327
shares. In the report period, none of the shares held by Shenzhen CATIC Group Co., Ltd.
was ever pledged, frozen or mandated.
3. About the Controlling Shareholder
Shenzhen CATIC Group Co., Ltd. was founded in June, 1997, with registered capital of
CNY 673.3671 million, 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. Actual Controller
China National Aero-Technology Import & Export Corporation Shenzhen, was
incorporated on December 1, 1982, with registered capital: CNY 1,000 million, legal
representative: You Lei;licenced business activities: operating import and export business
for other commodities and technologies except for those commodities whose export is
jointly operated under the unified organization or the State and those commodities whose
import is operated by companies checked and ratified by the State as importer and
exporter or agent, compensation trade; investment and initiation of 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); real estate
development.
Controller of the actual controller: CATIC International Holdings Limited was incorporated
in 1983 with registered capital of CNY 8,459 million and its legal representative is Wu
Guangquan. Aviation Industry Corporation of China, Zhongjin Innovation (Tianjin)
Investment Co., Ltd., National Council for Social Security Fund and AVIC CCB Aviation
Industry Equity Investment (Tianjin) Company Limited respectively hold the equity in
CATIC International Holdings Limited by 62.52%, 14.31%、14.31% and 8.86%. Its legal
representative is Wu Guangquan and the licenced businesses are: 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 businesses: import and export; warehousing; industry, hotel,
property, real estate development investment and management; new energy equipment
development, sales and repairing; exhibition; technology transfer and technical services in
connection with the aforesaid business.
The eventual controller of the Company’s actual controller - AVIC International Shenzhen
Company Limited, is the State-owned Assets Supervision and Administration Commission
of the State Council.
5. Block Diagram of the Ownership and Control Relations between the Company and the Actual Controller
Chapter 4 Directors, Supervisors, Senior Executives
1. Change of the Company’s Shares Held by them
Of the Company’s directors, supervisors and senior executives in office, only Mr. Lu
Bingqiang, the deputy general manager, holds the Company’s shares. In the report period,
as the Company implemented the conversion of its capital reserve into capital stock, the number
of shares held by him changed from 47,365 shares into 66,311 shares.
II. The Company has not yet implemented the equity incentive plan. In the report period,
none of the directors, supervisors and senior executives held any of the Company’s stock
option.
III. In the report period there was none of the directors, supervisors or senior executives
newly engaged or disengaged.
Chapter 5 Report of the Board of Directors
I. Operation Review
(I) Operation Summary
In the first half year of 2011, the Company still carried on the corporate philosophy,
insisted on the enterprise values, focused on the creation of the channels for HARMONY
World Watches and construction of the brand for FIYTA products, continuously optimized and
integrated the internal resources, improved the working standards on overall basis, endeavored to
develop the business fields, improved the Company’s competitiveness in the market and earning
power and achieved a big growth in revenue and profit.
1. Retail of Famous Brand Watches
In the report period, HARMONY World Watches focused on Key=BSC2 on overall basis in its
retailing business, overcame difficulties in the work according to the requirements of “high
aspiration, high standard and high performances”, unceasingly optimized and developed
network, enhanced the shop management, achieved great success in practicing the
“marketing at three levels”, orderly implementation of promotion activities, construction
and maintenance of the relationship with the customers, construction and maintenance of
the relationship of key brands and channel cooperation, developing the employees’
working ability and team construction, etc. and realized a high speed growth in the
revenue.
Channel Development and Maintenance: While steadily carrying out the operation, the Company
has continuously speeded up network development, unceasingly improved the management level,
enhanced fostering and construction of the management team, improved the earning power of
new shops and promoted the new shops to tide over the incubation period as quickly as possible.
Meanwhile, the Company has further enhanced the shop optimization and upgrading of the
existing retailers and expansion of the famous brand watches, upgraded the shop identity and
provided consumers with more pleasant shopping environment.
Strengthening the international cooperation and brand promotion: The Company has unceasingly
strengthened and deepened the communications and cooperation with international watch groups
and independent watch brands, kept good cooperative relationship, distributed the watch culture
by means of high-end VIP salon, opening ceremony, theme show, etc., fostered and developed
consumer groups and achieved favorable response in the watch industry as well as all walks of
life. The Company has enthusiastically promoted HARMONY Brand and built HARMONY Brand
from various dimensions, including advertisement in mass media, VIP journal
“HARMONY WORLD”, channel and brand integration, high-end interview, construction of flagship
shops, etc., improved the brand favorite of HARMONY so that the value of HARMONY Brand may
12
be continuously promoted.
Deepening the 3-Level Marketing and Enhancing Terminal Operation: The Company has
continuously enhanced the terminal sales capability, implemented and practiced the principle of
“3-Level Marketing”, paid attention to the sales of watches not on active demand while vigorously
carrying out sales. Through sales competition of watches not on active demand, shops have
carried out a series of sales technique training and VIP activities, promoted sales of the watches
of long accounting age, and improved the inventory carry rate. Meanwhile, the Company
enhanced the repairing service management work and provided the customers with after-sale
services with high quality by means of improvement of the occupational skill and service quality of
the skilled repairers
Reinforcing team construction and improving capabilities on overall basis. The Company has
introduced various professionals through various channels and exerted itself on construction of a
team “with high vision, high standard and high performance”. Meanwhile, the Company has
attached importance on the construction of backup talents and fostering of reserve cadres,
continued to implement the training program for improving the leadership of the shop operation
managers and routine in-service training of salespersons of the shops and employees of different
posts, and enhanced the training certification of the sales consultants.
2. FIYTA watches
In the report period, FIYTA Brand has been insisting on the cultural ideas of progressiveness and
innovation, continuously improving the brand-building model of “4P+C” with international famous
watch brand as the benchmark.
The Company has been unceasingly exploring the price management system applicable to the
brand development, attempting to improve the various kinds of sales channels, and persistently
enhancing the synergistic interaction among departments and business units and construction of
professional team of high competence. In the report period, the revenue experienced a quick
growth.
Channel Expansion: The Company has been implementing enthusiastically the strategy of
channel expansion with the orientation of improving channel distribution and improving channel
quality, further improved the construction of the principal channels including franchise shops,
channels of HARMONY and HENGDELI, channels of department stores (including the imported
brand zones) and dealers, etc., consolidated the cooperation with the customers, speeded up the
layout of retail network in cities of different sizes, uninterruptedly explored and upgraded the sales
management of e-commerce.
Brand Price System and New Products Coming into the Market: The Company has continued to
take the products with high added-value as the identity and leading products for promotion,
unceasingly added vitality to the brand so as to improve the brand image; continued to put in
order the price differences in the series and inter-series and adjust the product price system
based on the market feedback; continued to strengthen the work of new product research and
development, gradually developed core product series with brand characteristics and competitive
advantages and high identification.
Brand Promotion: Aiming at the objective customer base, the Company has classified customers
and brand contact work in all aspects, propagated the core value of “perfect workmanship” and
“progressive improvement” of FIYTA, and carried forward the public relation activities with brand
spokesman and customers’ club as the base; continuously invested brand promotion resources,
equalized the optimized allocation of resources and improved the brand communication efficiency
with interaction of TV advertisement, print media, outdoor advertising and theme based public
activities. In March 2011, FIYTA Brand formally entered Basel No. 1 Exhibition Hall of Basel-World,
Switzerland, becoming the first Chinese watch brand that has entered Basel-World.
Sales Competition: In the first half year, the Company has carried out promotion activities and
sales competition with a number of themes, which have powerfully promoted the sales, optimized
the inventories and FIYTA customers’ satisfaction has been continuously heightened.
13
Strengthening Team Construction: The Company has persistently reinforced the talent training
work aiming at building a professional brand team with high qualification, studiously valuing the
duty and high learning ability; meanwhile, established a rational talent team echelon and
continuously improved the talent reserve, training, professional development, performance
assessment, etc. In the report period, the Company conducted public relations training and
practical training in many regions, powerfully promoted construction of the sales team and brand
promotion work.
3. Fashion Brand
Fashion brand continued to take channel construction as the key work, unceasingly developed
retail network, set up franchise counters in a number of entity shops in first-tier cities in China,
developed number sales channels, including network, credit card, etc. In addition, by means of
the Group’s internal channel resources, a foundation has been laid for development of the market
in future.
4. Property Operation
In the report period, the Company has further enhanced the management of the relations with the
clients of FIYTA Building, FIYTA Technology Building and Xi’an Chengheng International hotel
Building and the revenue has been maintained relatively steadily.
In the report period, the Company has further deepened the application of the advanced
management tool, persistently carried out the management innovation work and improved the
ability of strategic investment management. The Company has enhanced human resource
reserve, implemented the plan of recruiting new staff from key universities and schools and
college students practical training program; at the same time, focus was put on the staff’s
on-service training and internal cultivation work. The Company pays attention to construction of
the relationship with investors, received many investors for the on-site survey and visits by call,
positively constructed the image of the listed company with favorable capital market.
(II) Principal Business and Operation
The Company is mainly engaged in design, development, manufacture, sales and repairing of
timepieces and components, including operation of FIYTA watch products and sales of world top
brand watches; in addition, the Company has income from operation of 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 based on sectors are classified as
follows:
14
In CNY 10,000
Year-on-year Year-on-year
Year- on-year
increase/dec increase/dec
Operating gross profit increase/decr
Sectors Revenue rease of rease of
costs rate (%) ease of gross
revenue rate operating
profit rate (%)
(%) costs (%)
Commerce 101,074.44 75,903.38 24.90% 50.62% 44.77% 3.04%
Industry 20,382.60 7,561.07 62.90% 73.86% 67.51% 1.40%
Property Operation 3,440.49 1,051.64 69.43% 3.87% 3.56% 0.09%
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: Presented based on the categories of the products
In CNY 10,000
Year-on-year
Year-on-year Year- on-year
increase/dec
Operating Gross profit increase/dec increase/decr
Products Revenue rease of
costs rate (%) rease of ease of gross
operating
Revenue (%) profit rate (%)
costs (%)
Sales of foreign
101,074.44 75,903.38 24.90% 50.62% 44.77% 3.04%
famous watches
Sales of FIYTA
20,382.60 7,561.07 62.90% 73.86% 67.51% 1.40%
watches
Table 2: Presented according to regions
In CNY 10,000
Year-on-year
Regions Revenue increase/decrease of
Revenue (%)
Northeast China 11,621.14 41.83%
North China 22,855.51 54.23%
Northwest China 29,768.57 51.88%
Southwest China 8,232.47 69.93%
East China 14,890.88 67.60%
South China 37,750.36 46.33%
(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 report
period.
15
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
In the second half year of 2011, the Company continues to favour the Chinese luxury market,
especially the development of the watch industry, continues to increase the investment in the
principal business. The Company shall steadily speed up construction of HARMONY channels
and strives to realize overall balance of the retail network layout; continues to enhance
communication and interaction with brands and goods suppliers, endeavors to obtain more
supports in resources of strategy and key brands; positively and effectively deploy FIYTA Brand
advertisement and promotion resources, make full use of the proceeds raised through share
offering, expand the advertisement media of CCTV, the Internet, etc. and investment in outdoor
advertisement of the 2nd and 3rd-tier cities and enhance the brand visibility and brand influence;
enrich the channel development ways; and at the same time, carry forward “the brand image
maintenance project” on overall basis while taking colorful marketing and promotion activities;
further speed up construction of the domestic retail network of fashion brands, enrich the contents
of fashion brands and pay attention to introduction of other potential fashion brands.
II. Investments
(I) Proceeds previously raised through share offering extended to the report period
Application of the Proceeds Raised through Share Offering
First Half Year of 2011
Total proceeds raised through share
48,276 Total proceeds invested in the report year 37,522
offering
Total proceeds involved in change of the
-
application in the report period
Total accumulative proceeds involved in
-
change of the application Total proceeds invested accumulatively 39,201
Proportion of the accumulative proceeds
involved in change of the application in the -
total proceeds
Date
whe
n
the
proj
Has
Committed Project Investment ect Benefit Has any
Total Accumulated the
investment change Total progress has realized material
proceeds Amount amount predi
projects and d? investment ended the reac in the change
invested invested in invested at the cted
investment (includin after report hed report taken
as the report end of the result
direction with g the adjustment period（%） the year place in
committe year report period be
over-raised change (1) pred (gross feasibilit
d (2) (3)＝(2)/(1) realiz
proceeds d part) icted profit) y?
ed?
appli
cabl
e
statu
s
Committed
investment
projects
1. Expansion of
HARMONY
world watches
chain network - 41,000 41,000 33,696 34,407 83.92% 2408 Y N
and
improvement
projects
2. Project of new 5,000
FIYTA watches 5,000
- 2,719 3,382 67.64% 1695 Y N
coming into the
market
3. Project of 4,000
FIYTA Brand 4,000
- 1,107 1,412 35.3% - N
marketing
promotion
16
Subtotal of the
committed
- 50,000 50,000 37,522 39,201 78.4% 4103 - -
investment
projects
Description and causes of failure in complying with the
-
schedule and planned benefit
Note to significant change in feasibility of the project -
Amount, application and application progress of the
-
unbooked proceeds
About the change of the implementation site of the
-
projects invested with the proceeds
About the change of the implementation method of the
-
projects invested with the proceeds
The Proposal on Replacement of the Self-raised Fund Invested in the Project Which
should be Invested with the Proceeds Raised through Share Offering with the Proceeds
About the initial investment in the projects planned to be as reviewed and approved at the 19th meeting of the Sixth Board of directors held on
invested with the proceeds and the replacement December 29, 2010 approved to replace CNY 164,703,186.65 of the self-raised fund in
the project which should be invested with the proceeds raised through share offering with
the proceeds amounting to CNY 164,703,186.65 raised through this share offering.
About provisional supplementation of the working capital
-
with the idle proceeds raised through share offering
Amount of balance of the proceeds incurred in process of
-
implementation of the project and the cause
Application and status of the unused proceeds raised
Planned application
through share offering
Application of the proceeds and problems existing in the
No existence
disclosure or other conditions
(II) In the report period, the Company had no material investment with funds raised from
other financing activities.
(1) Establishment of HARMONY World Watches International Limited
The 20th meeting of the Six Board of Directors held on January 13, 2011 reviewed and approved
the Proposal on Establishment of HARMONY Branch in Hong Kong. With a view to further
improving HARMONY’s international influence and speeding up the process of HARMONY to
becoming an internationalized enterprise, the Company decided to set up a HARMONY branch in
Hong Kong as a HARMONY solely funded subsidiary with registered capital of HK$ 10 million and
the company name of “HARMONY World Watches International Limited. The new company
shall enhance development of the overseas famous brand watch market in Hong Kong, etc., bring
about new performance growth for the Company so as to realize the Company’s development
strategic target.
(2) Establishment of FIYTA Sales Co., Ltd.
The 22nd meeting of the Six Board of Directors held on February 25, 2011 reviewed and approved
the Proposal on Establishment of FIYTA Sales Company. With a view to clarifying the business
management structure, seizing the market opportunity, enhancing the strategic layout of the retail
channels of watch industry, promoting quick development of own brand, swift expansion of the
watch business size, improving scale merit and strengthening the anti-risk capability, the
Company decided to invest CNY 50 million to set up FIYTA Sales Co., Ltd., a solely funded
subsidiary, and revoke the existing sales department.
(3) Increasing Capital in Shenzhen Harmony World Watches Center Co., Ltd.
The 22nd meeting of the Six Board of Directors held on February 25, 2011 reviewed and approved
the Proposal on Increasing Capital in Harmony World Watches Center. Shenzhen Harmony
World Watches Center Co., Ltd. is one of the Company’s solely funded subsidiaries and is a
famous world watch retailers having more than 200 chain shops all over China. With quick
expansion of the business size of HARMONY, the existing fund of its own is obviously in shortage.
At present, the registered capital cannot satisfy the requirements of the Company’s normal
operation. Based on the Company’s development strategy and practical requirements, the
Board of Directors approved the Company to increase the registered capital in HARMONY from
the existing CNY 300 million to CNY 600 million.
(4) Montres Chouriet SA to Purchase the Plant
The 25th meeting of the Six Board of Directors held on June 13, 2011 reviewed and approved the
17
Proposal on Montres Chouriet SA to Purchase Plant, and approved Montres Chouriet SA enter
into Plant Purchase Agreement with the Transferor. The total investment in this transaction
amounted to CNY 37.20 million.
III. Accounting Policies, Change in Accounting Estimation and Correction of Material
Accounting Errors
In the report period, there was neither change in the accounting policy or accounting estimation
nor correction of any previous accounting errors.
Chapter 6 Important Events
I. Progress of Implementation of the Company’s Internal Control
With a view to implementing the Basic Regulations of Internal Control of the Enterprises and the
relevant supplementary guiding work and in accordance with the requirements of China Securities
Regulatory Commission and Shenzhen Securities Regulatory Bureau, the Company formally
started the basic rule-compliance project of internal control of the enterprise (hereinafter referred
to as the “Internal Control Project”) in April, 2011.
The Company implemented the internal control project in an orderly way in accordance with the
Guides to the Experimental Work for Key Experimental Companies under the Jurisdiction of
Shenzhen to Implement the Regulations for Internal Control of Enterprises and the Table of the
Implementation Progress of the 54 Experimental Companies in Practicing the Internal Control
under the Jurisdiction of Shenzhen. Ended June 30, 2011, the progress of implementation of the
internal control projects is stated as the following table:
Project implementation Date of
Performance Performance description
description completion
1.0 Engagement of
independent consulting
agency
Union Strength Business Consulting
Engagement of
Co Ltd. (Union Strength) was engaged
independent consulting May 11, 2011 Finished
as the consulting agency of the
agency
internal control project.
2.0. Organization assurance
stage
The person in charge of
The General Manager was appointed
the internal control
2.1 April 6, 2011 Finished as the person in charge of the internal
implementation was
control implementation.
appointed
Leading group for the internal control
implementation project was
The internal control leading established, the group leader was the
group or the similar GM, the deputy leaders were a deputy
2.2 April 6, 2011 Finished
organization was GM and the chief accountant; the
established group members consisted of
supervisor, the secretary of the Board,
leaders of various subsidiaries, etc.
18
The leading group has further
established the working team of
internal control implementation project
and teams of various business
modules;
The leaders of the working teams
The internal control project consist of a deputy GM and the chief
group was established and accountant (concurrently); and the
the members were team members mainly consist of the
2.3 April 6, 2011 Finished
engaged in the internal leaders of various functional
control work on full-time departments; the office is located in
basis. the audit department.
The persons in charge of various
business modules have been
appointed as the leaders of various
business modules and the members
consist of the backbone persons of
different business plates.
3.0 Internal control starting stage
Preparation of the internal
3.1 control implementation The Company announced the
plan and proposal “Proposal on the Implementation Work
April 28, 2011 Finished
Implementation Proposal of Standardizing the Internal Control of
3.2 reviewed and announced Enterprises”
by the Board of Directors
The leading group called together the
working team, module team and
Holding the Project
3.3 May 24, 2011 Finished independent consulting agency to hold
Starting Conference
the internal control project starting
conference.
The Company engaged At the starting meeting, Union
3.4 agent and professionals to May 24, 2011 Finished Strength offered training of internal
offer internal training control knowledge
4.0 Internal control construction
stage – determining the internal
control implementation scope
Defining the internal Defining the internal control scope in
control scope in connection with the financial
4.1 June 30, 2011 Finished
connection with the statements according to the result of
financial statements the financial statements in 2010,
Determining the risk points of the key
points of the internal control and prior
Determining the risk points
4.2 June 30, 2011 Finished control in connection with the financial
of the key and prior control
statements:
1) Defining the key business units;
19
2} Identifying the important accounting
items;
3} Identifying the risks corresponding
to the key accounting items;
4} Defining the important business
process and sub-process;
5} Defining the scope of the internal
control file record and test
implementation at the process level.
The implementation scope
was reviewed and
The implementation scope was
approved by the internal
4.3 June 30, 2011 Finished reviewed and approved by the internal
control leading group, the
control leading group.
audit committee or the
Board of Directors
II. Profit Distribution Proposal and Implementation
In the report period, 2010 Annual Shareholders’ General Meeting held by the Company approved
its 2010 Annual Profit Distribution Proposal. Based on 280,548,479 shares of the total capital
stock ended December 31, 2010, the Company was to distribute cash dividend at the rate of CNY
1.00 for every 10 shares (with tax inclusive) and the total amount of cash dividend as distributed
was CNY28,054,847.90.
Meanwhile, the Company converted its capital reserve into capital stock on 4-for-10 basis. The
total number of the shares converted was 112,219,391 shares. After the conversion, the
Company’s total capital stock turned to be 392,767,870 shares. The cash dividend, bonus
(converted) shares for both A and B shares were distributed respectively on April 27, 2011 and
April 29, 2011.
Company has neither semiannual profit distribution proposal nor proposal for converting public
reserve into share capital for the middle of 2011.
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. There was no equity in other listed companies held by the Company in the report
period.
V. Assets acquisition, sales, absorption or consolidation in the report period
Purchase of Plant by Montres Chouriet SA
The Company reviewed and approved the Proposal on Purchase of Plant by Montres Chouriet SA
at the 25th Meeting of the Sixth Board of Directors held on June 13, 2011. The Company
approved the Plant Purchase Agreement entered into by Montres Chouriet SA, one of the
20
Company’s solely funded subsidiaries and the transferor. The total investment amount involved
in the transaction was CNY 37.2 million. Ended June 30, 2011, Montres Chouriet SA, the
transferor and the local notary public jointly concluded the letter of performance guarantee for
purchase of plant.
The formal plant purchase agreement needs to be subscribed jointly by the three parties, namely
Montres Chouriet SA, the transferor and the local notary public before October 1, 2011. By that
time, Montres Chouriet SA shall pay the balance to the bank account designated by the notary
public, including the balance for purchase of the plant and the notarization charge and the taxes,
and complete the work of transfer and handover of the property.
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
CNY 0.7249 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
CATIC Real Estate Co., Ltd., Shenzhen CATIC Real Estate Development Co., Ltd., Shenzhen
Makway Cable TV Devices Co., Ltd., Shenzhen CATIC Property Management Co., Ltd., CATIC
Securities Co., Ltd. and Shenzhen Grand Skylight Hotel Management, 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 CNY 5.7444 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 CNY 8.3115 million,
which complied with the amount predicted at year beginning.
(4) The Company sells watches in small quantity and offers product processing to AVIC
International Holding Corporation, Aviation Industry Corporation of China and Shenzhen Shennan
Circuits Co., Ltd., the Company’s related corporate. In the report period, the Company received
CNY16.4132 million of different income, which complied with the amount predicted at year
beginning.
The Routine Related Transactions in 2010 and the Proposal on the Predicted Conditions of the
Routine Related Transactions in 2011 were published on Securities Times, Hong Kong
Commercial Daily on March 1, 2011.and http://www.cninfo.com.cn.
2. Liabilities or Guarantees with Related Parties
Ended June 30, 2011, Shenzhen CATIC Group Co., Ltd., the Company’s controlling shareholder
offered guarantee to the Company for the bank credit line amounting to CNY 772 million.
21
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, the Company offered guarantees to Shenzhen Harmony World Watches
Center Co., Ltd. and FIYTA (Hong Kong) Limited for their loans amounting to CNY 68 million and
HK $ 80 million (around CNY66.29 million), taking 5.37% and 5.24% of the Company’s audited
net assets in 2010 respectively. Ended June 30, 2011, the total accumulated amount of external
guarantees offered by the Company and its subsidiaries was CNY 116.37 million, taking 9.19% of
the Company’s audited net assets in 2010. All the external guarantees offered by the Company
are due to the subsidiaries’ production and operation requirements and are the guarantees
offered to the Company’s subsidiaries for their loans.
The Company has neither provided any guarantee to the controlling shareholder or any related
parties nor been involved in any other external guarantee activity. There has been no loss the
Company has to bear due to overdue guarantee, any guarantee in connection of any lawsuit or
being judged as having lost in lawsuit due to guarantee. All the fund dealings with the related
parties belong to normal operation fund dealings, and there existed no such case that a related
party has occupied the Company’s funds against the law.
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
(1) 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:
Shenzhen CATIC Group Co., Ltd. committed that upon completion of the equity separation reform
of FIYTA, the non-negotiable shares held by Shenzhen CATIC Group Co., Ltd. would not be listed
with Shenzhen Stock Exchange for trading within 36 months after the day when such shares got
approved for listing. Within 24 months after the 3-year sales restriction term expires, in case
CATIC Shenzhen Corporation would sell the non-negotiable FIYTA shares it was holding through
listing with Shenzhen Stock Exchange, the sales price must not be lower than CNY 25.00 per
share.
Implementation of the commitment: The commitment is in process of implementation.
Commencing from the date when the equity separation reform was fulfilled to the end of the report
period, Shenzhen CATIC Group Co., Ltd. has not reduced or assigned any restricted shares held
22
by Shenzhen CATIC Group Co., Ltd..
(2) In 2010, the Company started the plan of non-public offering of A shares. The plan was
approved by China Securities Regulatory Commission with the Official Reply on Approval of Fiyta
Holdings Ltd. for Non-public Offering (ZHENG JIAN XU KE [2010] No. 1703) on November 29,
2010. The Company completed the procedures of registration for custody and sales restriction of
the newly issued A shares with China Securities Depository and Clearing Company Limited
Shenzhen Branch on December 14, 2010. The commitments made by Shenzhen CATIC Group
Co., Ltd., the shareholder holding over 5% of the Company’s shares, as one of the target
investors of the share-offering, and the implementation are as follows:
CATIC Group shall not assign the new shares subscribed by it within 36 months commencing
from the date of ending of the non-public offering by Fiyta Holdings Ltd. (from December 30, 2010
to December 29, 2013) according to the law, regulations and regulatory documents, including the
Measures of Administrative Measures for the Issuance of Securities by Listed Companies, Rules
for Implementation of the Non-public Issuing of Shares by Listed Companies, Rules of Shenzhen
Stock Exchange for the Listing of Stocks as well as the Contract for Subscription of the Shares
Non-publically Issued by Fiyta Holdings Ltd.
Status of implementation of the commitment: The commitment is in process of implementation.
(3) Shenzhen CATIC Investment Management Co., Ltd. accepted 25% equity in Shanghai Watch
Industry Co., Ltd. (Shanghai Watch Industry) held by Shanghai Aijian Trust & Investment Co., Ltd. through
assignment in April 2010, becoming the second biggest shareholder of Shanghai Watch Industry. As Shenzhen
CATIC Investment Management Co., Ltd. is the controlled subsidiary of AVIC International Shenzhen
Company Limited. Meanwhile, AVIC International Shenzhen Company Limited is the actual
controller of FIYTA and thus horizontal competition is composed. The background and purpose of
participation in Shanghai Watch Industry by AVIC International Shenzhen Company Limited are to
support the Company in business development and improve the Company’s competitiveness in
stead of being desirous to carry on and participate in the same business as the Company; while
AVIC International Shenzhen Company Limited has issued commitment of avoiding horizontal
competition. Shenzhen CATIC Investment Management Co., Ltd. has also committed that within
or before 2011, it may assign all the equity in Shanghai Watch Industry held by the Company or to
an independent third party in proper opportunity.
Status of implementation of the commitment: The commitment is in process of implementation.
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 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:
23
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 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 inspection, the Company strictly abided by the relevant provisions of the Articles
of Association, carefully implemented the Document ZHENG JIAN FA (2003) No. 56 and (2005)
No. 120, strictly controlled the risks arising from the outward guarantee. In the report period, the
Company offered guarantees to Shenzhen Harmony World Watches Center Co., Ltd. and Fiyta
(Hong Kong) Limited for CNY680 million and HK$80 million (around CNY66.29 million)
respectively, taking 5.37% and 5.24% of the Company’s audited net assets respectively in 2010.
Ended June 30, 2011, the total accumulated amount of external guarantees offered by the
Company and its subsidiaries was CNY 116.37 million, taking 9.19% of the Company’s audited
net assets in 2010. All the external guarantees offered by the Company are due to the
subsidiaries’ production and operation requirements and are the guarantees offered to the
Company’s subsidiaries for their loans. The Company has neither provided any guarantee to
the controlling shareholder or any related parties nor been involved in any other external
guarantee activity. There has been no loss the Company has to bear due to overdue guarantee,
any guarantee in connection of any lawsuit or being judged as having lost in lawsuit due to
guarantee. All the fund dealings with the related parties belong to normal operation fund dealings,
and there existed no such case that a related party has occupied the Company’s funds against the
law.
X. The financial report has not been audited and no change has been made in the certified
public accountants.
XI. 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 Way of Discussion topics and materials
Reception Time Visitors received
place reception furnished
24
Fortis Haitong Investment
Management Co., Ltd.,
CITIC-Prudential Fund Development trend of the
Management Company domestic luxury goods sector,
Ltd., China Nature Asset some measures concerning the
Management Co., Ltd., Company’s strategic
On-Site
January 11, 2011 Company Minsheng Royal Fund development, brand construction,
Survey
Management Co., Ltd., channel management in the past
Dongxing Securities Co., three years. Provision of the
Ltd., Dacheng Fund Company’s public brochures in
Management Co., Ltd., and 2011.
Rongtong Fund
Management Co., Ltd.
Development trend of the
domestic luxury goods sector,
some measures concerning the
Company’s strategic
On-Site Zheshang Securities Co.,
January 14, 2011 Company development, brand construction,
Survey Ltd.
channel management in the past
three years. Provision of the
Company’s public brochures in
2011.
Development trend of the
domestic luxury goods sector,
some measures concerning the
China Merchants Securities
Company’s strategic
On-Site Co., Ltd., Shenzhen
January 18, 2011 Company development, brand construction,
Survey Haiheng Investment Co.,
channel management in the past
Ltd.
three years. Provision of the
Company’s public brochures in
2011.
Development trend of the
domestic luxury goods sector,
some measures concerning the
Shanghai Shenyin & Company’s strategic
On-Site
March 14, 2011 Company Wanguo Securities development, brand construction,
Survey
Research Institute Co., Ltd. channel management in the past
three years. Provision of the
Company’s public brochures in
2011.
Development trend of the
domestic luxury goods sector,
On-Site
April 1, 2011 Company China Securities Co., Ltd. some measures concerning the
Survey
Company’s strategic
development, brand construction,
25
channel management in the past
three years. Provision of the
Company’s public brochures in
2011.
Development trend of the
domestic luxury goods sector,
Shanghai Zexi Investment
some measures concerning the
Management Co., Ltd.,
Company’s strategic
On-Site Guosen Securities Co., Ltd.,
April 20, 2011 Company development, brand construction,
Survey Sealand Securities Co.,
channel management in the past
Ltd., Huaxia Fund
three years. Provision of the
Management Co., Ltd.
Company’s public brochures in
2011.
Development trend of the
domestic luxury goods sector,
some measures concerning the
Company’s strategic
On-Site Xiangcai Securities Co.,
April 28, 2011 Company development, brand construction,
Survey Ltd.
channel management in the past
three years. Provision of the
Company’s public brochures in
2011.
Development trend of the
domestic luxury goods sector,
some measures concerning the
Company’s strategic
On-Site China Galaxy Securities
May 12, 2011 Company development, brand construction,
Survey Co., Ltd.
channel management in the past
three years. Provision of the
Company’s public brochures in
2011.
Development trend of the
domestic luxury goods sector,
some measures concerning the
Company’s strategic
On-Site
May 17, 2011 Company Liuhe Investment Co., Ltd. development, brand construction,
Survey
channel management in the past
three years. Provision of the
Company’s public brochures in
2011.
Development trend of the
domestic luxury goods sector,
On-Site Lion Fund Management
May 18, 2011 Company some measures concerning the
Survey Co., Ltd.
Company’s strategic
development, brand construction,
26
channel management in the past
three years. Provision of the
Company’s public brochures in
2011.
Shenzhen Team-Top
Investment Management
Co., Ltd., Pingan Dawa
Funds Management Co.,
Ltd., Yinhua Fund Development trend of the
Management Co., Ltd., domestic luxury goods sector,
Jiangsu Winlast Investment some measures concerning the
& Development Co., Ltd., Company’s strategic
On-Site
June 9, 2011 Company Beijing Xinyuan Lanzhong development, brand construction,
Survey
Investment Management channel management in the past
Co., Ltd., Guotai Asset three years. Provision of the
Management Co., Ltd., Company’s public brochures in
Orient Securities Assets 2011.
Management Co., Ltd.,
Invesco Great Wall Fund
Management Co., Ltd. and
CITIC Securities Co., Ltd.
XII. In the report period, neither the Company nor any of its directors or senior executives
has ever been checked or punished by the supervisory authority.
XIII. Index of Provisional Announcement Information Disclosed in the Report Period
Public Announcement Press of Internet Websites of
Description
Notice No Date Disclosure Disclosure
Securities
Announcement on the
Times
Resolutions of the 20th
2011-001 January 14, 2011 Hong Kong http://www.cninfo.com.cn
Meeting of the Sixth Board
Commercial
of Directors of FIYTA
Daily
Securities
Announcement on the Times
2011-002 January 18, 2011 Resolutions of 2010 2nd Hong Kong http://www.cninfo.com.cn
Extraordinary Commercial
Shareholders’ Meeting Daily
Securities
Times
Announcement on
2011-003 February 22, 2011 Hong Kong http://www.cninfo.com.cn
Offering Guarantee to
Commercial
HARMONY
Daily
Securities
2011-004 February 22, 2011 http://www.cninfo.com.cn
Announcement on the Times
27
Resolutions of the 21st Hong Kong
Meeting of the Sixth Board Commercial
of Directors of FIYTA Daily
Securities
Announcement on the Times
2011-005 March 1, 2011 Resolutions of the 22nd Hong Kong http://www.cninfo.com.cn
Meeting of the Sixth Board Commercial
of Directors of FIYTA Daily
Securities
Announcement on the Times
2011-006 March 1, 2011 Resolutions of the 11th Hong Kong http://www.cninfo.com.cn
Meeting of the Sixth Commercial
Supervisory Committee
Daily
Securities
Times
2011-007 March 1, 2011 2010 Annual Report, Hong Kong http://www.cninfo.com.cn
Summary Commercial
Daily
Announcement on the
Securities
Implementation of the
Times
Regular Related
2011-008 March 1, 2011 Hong Kong http://www.cninfo.com.cn
Transactions in 2010 and
Commercial
Predictions of the Regular
Daily
Related Transactions in
2011
Securities
Times
Announcement on
2011-009 March 1, 2011 Hong Kong http://www.cninfo.com.cn
Establishment of FIYTA
Commercial
Sales Co., Ltd.
Daily
Securities
Special Report of the
Times
Company on Deposit and
2011-010 March 1, 2011 Hong Kong http://www.cninfo.com.cn
Application of the
Commercial
Proceeds Raised through
Daily
Share Offering in 2010
Securities
Times
Announcement on
2011-011 March 5, 2011 Hong Kong http://www.cninfo.com.cn
Change of the Business
Commercial
Licence
Daily
Securities
2011-012 March 9, 2011 Times http://www.cninfo.com.cn
Indicative Announcement
Hong Kong
28
Commercial
Daily
Securities
Times
2011-013 March 17, 2011 Notice on 2010 Annual Hong Kong http://www.cninfo.com.cn
General Meeting Commercial
Daily
Securities
Resolutions of the
Times
Extraordinary Meeting of
2011-014 March 17, 2011 Hong Kong http://www.cninfo.com.cn
the Sixth Board of
Commercial
Directors of FIYTA
Daily
Securities
Announcement on Times, Hong
2011-015 April 6, 2011 Predicted Growth of the Kong http://www.cninfo.com.cn
Operation Results Commercial
Daily
Securities
Announcement on the Times, Hong
2011-016 April 8, 2011 Resolutions of 2010 Kong http://www.cninfo.com.cn
Annual General Meeting Commercial
Daily
Securities
Times, Hong
Announcement on
2011-017 April 20, 2011 Kong http://www.cninfo.com.cn
Dividend Distribution
Commercial
Daily
Securities
Times, Hong
2011 1st Quarterly Report,
2011-018 April 28, 2011 Kong http://www.cninfo.com.cn
Text
Commercial
Daily
Securities
Announcement on the
Times, Hong
Resolutions of the 23rd
2011-019 April 28, 2011 Kong http://www.cninfo.com.cn
Meeting of the Sixth Board
Commercial
of Directors of FIYTA
Daily
Securities
Announcement on the
Times, Hong
Resolutions of the 12th
2011-020 April 28, 2011 Kong http://www.cninfo.com.cn
Meeting of the Sixth
Commercial
Supervisory Committee
Daily
Announcement on Securities
2011-021 April 28, 2011 Offering Guarantee to Times, Hong http://www.cninfo.com.cn
FIYTA (Hong Kong) Kong
29
Limited Commercial
Daily
Securities
Announcement on the Times, Hong
2011-022 April 29, 2011 Related Transactions of Kong http://www.cninfo.com.cn
FIYTA Commercial
Daily
Securities
Announcement on the
Times, Hong
Resolutions of the 24th
2011-023 April 29, 2011 Kong http://www.cninfo.com.cn
Meeting of the Sixth Board
Commercial
of Directors of FIYTA
Daily
Securities
Announcement on the Times, Hong
Resolutions of the 25th
2011-024 June 14, 2011 Kong http://www.cninfo.com.cn
Meeting of the Sixth Board
of Directors of FIYTA Commercial
Daily
Securities
Announcement on
Times, Hong
Offering Guarantee to
2011-025 June 14, 2011 Kong http://www.cninfo.com.cn
FIYTA (Hong Kong)
Commercial
Limited
Daily
Securities
Announcement on Times, Hong
2011-026 June 14, 2011 Montres Chouriet SA to Kong http://www.cninfo.com.cn
Purchase Plant Commercial
Daily
Section 7 Financial Report
I. Accounting Statements (attached hereinafter)
II. Notes to the Accounting Statements (attached hereinafter)
30
Chapter 8 Documents Available for Inspection
I. Semi-annual Report carried with personal signature of the Chairman of the Board;
II. Financial Report signed by and under the seal of the legal representative, chief
accountant and accounting supervisor;
III. All the originals of the Company’s documents and announcements disclosed in the
newspapers designated by China Securities Regulatory Commission.
IV. Articles of Association of the Company.
Board of Directors of
FIYTA Holdings Ltd.
August 17, 2011
31
FIYTA Holdings Ltd.
Semi-Annual Financial Report 2011
Legal Representative: Wu Guangquan
Chief Accountant: Li Dehua
Person in charge of the accounting department: Hu Xinglong
32
Attachment: Financial Report (Unaudited)
I. Accounting Statements
Balance Sheet
Prepared by FIYTA Holdings Ltd. June 30, 2011 In CNY
Ending balance Opening Balance
Items
Consolidated Parent company Consolidated Parent company
Current assets:
Monetary fund 298,373,212.07 148,907,030.69 613,455,817.52 529,568,738.47
Settlement reserve
Lendings
Held for trading financial
assets
Notes receivable
Accounts receivable 238,457,840.66 71,455,328.46 175,896,199.78 41,753,368.93
Prepayment 24,779,790.36 36,644,253.43
Receivable premium
Reinsurance accounts
receivable
Reserve for reinsurance
contract receivable
Interest receivable 84,383,298.62 50,196,167.69
Dividends receivable
Other receivables 30,183,758.83 475,676,778.79 27,390,628.12 545,533,120.97
Redemptory monetary capital
for sale
Inventories 1,284,088,612.66 174,026,511.09 1,048,392,625.70 103,224,490.80
Non-current assets due within
a year
Other current assets 6,643,386.40 3,946,533.14
Total current assets 1,882,526,600.98 954,448,947.65 1,905,726,057.69 1,270,275,886.86
Non-current assets:
Provision of loans and
advance in cash
Available-for-sale financial
assets
Held-to-due investments
Long term accounts
receivable
Long-term equity investment 1,932,928.17 707,248,128.17 1,981,913.65 354,489,913.65
Investment based real estate 162,284,137.68 162,284,137.68 165,381,973.79 165,381,973.79
33
Fixed assets 247,181,868.71 224,783,029.02 251,742,068.63 228,700,096.61
Construction-in-process 203,000.00 203,000.00 0.00
Engineering supplies
Disposal of fixed assets
Productive biological asset
Oil and gas assets
Intangible assets 19,168,485.61 12,186,271.87 19,237,532.22 12,241,014.82
Development expenses
Goodwill
Long-term expenses to be 83,450,930.94 23,391,567.25 72,152,718.07 21,221,733.80
apportioned
Deferred income tax asset 33,453,025.00 3,926,911.99 20,316,790.34 3,926,911.99
Other non-current assets
Total non-current assets 547,674,376.11 1,134,023,045.98 530,812,996.70 785,961,644.66
Total Assets 2,430,200,977.09 2,088,471,993.63 2,436,539,054.39 2,056,237,531.52
Current liabilities:
Short-term Loan 622,311,000.00 544,000,000.00 728,253,730.00 600,000,000.00
Due to the Central Bank
Deposits taking and
interbank placement
Borrowing capital
Transactional monetary
liabilities
Notes payable
Accounts payable 205,300,470.39 136,714,189.27 156,353,328.00 57,467,235.33
Advance from customers 3,464,531.40 2,939,051.02 8,464,969.63 1,589,073.41
Financial assets sold for
repurchase
Service charge and
commission payable
Accrued payroll 14,047,620.84 1,675,303.84 19,980,930.64 8,500,000.00
Payable taxes 37,468,779.86 9,298,098.25 18,492,700.45 11,056,809.52
Interest payable 1,712,361.62 1,160,498.61 1,202,198.61 1,160,498.61
Dividends payable 0.00 190,263.50
Other payables 32,138,796.96 29,946,083.42 29,418,337.74 22,516,478.86
Payable reinsurance
Reserve for insurance
contract
Acting trading securities
Income from securities
underwriting on commission
Non-current liabilities due
within a year
Other current liabilities 2,645,322.20
34
Total current liabilities 916,443,561.07 725,733,224.41 965,001,780.77 702,290,095.73
Non-current liabilities:
Long-term Loan 181,332,819.80 180,000,000.00 181,440,065.11 180,000,000.00
Bonds payable
Long-term accounts payable
Special accounts payable
Predicted liabilities
Deferred income tax liability 332,776.04 124,482.04 131,259.28 131,259.28
Other non-current liabilities 3,450,000.00 2,950,000.00 2,400,000.00 1,900,000.00
Total non-current liabilities 185,115,595.84 183,074,482.04 183,971,324.39 182,031,259.28
Total Liabilities 1,101,559,156.91 908,807,706.45 1,148,973,105.16 884,321,355.01
Owners’ equity/(or
shareholders’ equity):
Paid-up capital/(or capital 392,767,870.00 392,767,870.00 280,548,479.00 280,548,479.00
stock)
Capital Reserve 530,606,952.78 531,162,493.88 643,381,884.88 643,381,884.88
Less: shares in stock
Special reserve
Surplus Reserve 121,066,992.16 121,066,992.16 121,066,992.16 121,066,992.16
Reserve against general risks
Retained earnings 280,449,864.44 134,666,931.14 222,514,569.59 126,918,820.47
Translation reserve 594,687.91 -1,515,341.96
Total owners’ equity attributable 1,325,486,367.29 1,179,664,287.18 1,265,996,583.67 1,171,916,176.51
to the parent company
Minority shareholders’ equity 3,155,452.89 21,569,365.56
Total owner’s equity 1,328,641,820.18 1,179,664,287.18 1,287,565,949.23 1,171,916,176.51
Total liabilities and owners’ 2,430,200,977.09 2,088,471,993.63 2,436,539,054.39 2,056,237,531.52
equity
Legal representative: Wu Guangquan Chief Financial Officer: Li Dehua Manager of the
Accounting Department: Hu Xinglong
35
Statement of Profit
Prepared by FIYTA Holdings Ltd. January - June, 2011 In CNY
Amount in the report period Amount in the previous period
Items
Consolidated Parent company Consolidated Parent company
I. Turnover 1,232,010,736.41 229,421,696.61 810,811,910.82 151,312,416.02
Including: Revenue 1,232,010,736.41 229,421,696.61 810,811,910.82 151,312,416.02
Interest income
Earned insurance
premium
Service charge and
commission income
II. Total operating costs 1,129,360,743.57 227,590,437.45 766,060,715.61 154,668,313.10
Including: Operating costs 820,486,746.77 108,169,866.25 565,307,056.65 69,292,155.00
Interest expenditure
Service charge and
commission payment
Surrender Value
Compensation
expenses, net
Provision of reserve for
insurance contract, net
Payment of policy
dividend
Reinsurance expenses
Business Taxes and 5,519,125.06 2,491,222.67
3,079,780.59 2,134,996.13
Surcharges
Sales costs 185,744,896.33 75,701,460.95 113,555,280.39 51,090,854.22
Administrative expenses 86,933,806.49 32,034,218.96 62,246,359.77 24,653,838.38
Financial expenses 28,419,718.07 9,193,668.62 21,459,989.06 7,496,469.37
Loss from impairment of 2,256,450.85 0.00
412,249.15
assets
Plus: Income from change in
fair value (loss stated with “-“)
Return on investment -48,985.48 34,138,145.45
13,758,953.80
(loss stated with “-“)
Including: return on -48,985.48 0.00
investment in associate and
joint venture
Exchange income (loss
stated with “-“)
III. Operating profit (loss 102,601,007.36 35,969,404.61 44,751,195.21 10,403,056.72
36
stated with “-“)
Plus: Non-operating income 1,374,365.97 350,853.72 7,835,555.48 7,743,869.98
Less: Non-operating 6,353.38 487.00
629,373.96 569,408.84
expenses
Including: Loss from 0.00 0.00
47,206.42 17,527.99
disposal of non-current assets
IV. Total Profit (total loss stated 103,969,019.95 36,319,771.33
51,957,376.73 17,577,517.86
with “-“)
Less: Income tax expense 17,802,177.43 516,812.76 9,530,853.27 846,332.48
V. Net Profit (net loss stated 86,166,842.52 35,802,958.57
42,426,523.46 16,731,185.38
with “-“)
Net profit attributable to 85,990,142.75 35,802,958.57
42,399,471.66 16,731,185.38
the parent company’s owner
Minority shareholders’ 176,699.77 0
27,051.80 0.00
gain and loss
VI. Earnings per share:
(I) Basic earnings per
0.171
share
(II) Diluted earnings per
0.171
share
VII. Other comprehensive
-18,896.52
income
VIII. Total comprehensive
42,407,626.94 16,731,185.38
income
Total comprehensive
income attributable to the 42,384,518.65 16,731,185.38
parent company’s owner
Total comprehensive income
attributable to the minority
23,108.29
shareholders
Legal representative: Wu Guangquan Chief Financial Officer: Li Dehua Manager of the
Accounting Department: Hu Xinglong
37
Cash Flow Statement
Prepared by FIYTA Holdings Ltd. January - June, 2011 In CNY
Amount in the report period Amount in the previous period
Items
Consolidated Parent company Consolidated Parent company
I. Cash flows arising from
operating activities
Cash received from sales
of goods and supply of labor 1,359,710,881.45 232,850,800.27 909,639,385.70 168,545,107.96
service
Net increase of the
customers’ deposits and
interbank placement
Net increase of borrowings
from the central bank
Net increase of borrowings
from other financial institutions
Cash received from the
premium of the original
insurance contract
Net cash received from the
reinsurance business
Net increase of the
reserve from policy holders and
investment
Net increase from disposal
of the held for trading
financial assets
Charge of cash interest,
service charge and
commission
Net increase of loan from
other banks
Net increase of fund from
repurchase business
Rebated taxes received 217,481.16 623,119.27 623,119.27
Cash received from other
4,483,957.14 86,972,592.72 7,265,097.91 2,305,225.60
operating activities
Sub-total of cash flow
received from operation 1,364,412,319.75 319,823,392.99 917,527,602.88 171,473,452.83
activities
Cash paid for purchase of 1,147,963,105.94 118,780,238.76 696,249,537.70 61,942,930.99
38
goods and reception of labor
services
Net increase of loans and
advances to the customers
Net increase of amounts
due from the central bank and
other banks
Cash from payment for
settlement of the original
insurance contract
Cash for payment of
interest, service charge and
commission
Cash for payment of policy
dividend
Cash paid to and for
127,811,435.42 48,764,907.85 88,324,162.19 36,783,697.63
employees
Taxes paid 75,126,038.21 9,941,251.63 44,399,281.37 11,607,073.29
Cash paid for other
116,938,459.00 55,029,872.30 87,678,936.47 68,508,807.83
operating activities
Subtotal of cash flow
1,467,839,038.57 232,516,270.54 916,651,917.73 178,842,509.74
paid for operating activities
Net cash flow arising
-103,426,718.82 87,307,122.45 875,685.15 -7,369,056.91
from operating activities
II. Cash flows arising from
investing activities:
Cash received from
investment recovery
Cash received from return
11,400,000.00
on investment
Net cash received from
disposal of fixed assets,
86,686.60 86,686.60 15,051,800.00 15,051,700.00
intangible assets and other
long-term assets
Net cash received from
disposal of subsidiaries and
other operating units
Cash received from other
investment related activities
Sub-total of cash flow-in
received from investing 86,686.60 86,686.60 15,051,800.00 26,451,700.00
activities
Cash paid for purchase
and construction of fixed 36,216,149.40 11,525,931.38 29,375,134.72 1,713,022.00
assets, intangible assets and
39
other long term assets
Cash paid for investment 19,107,200.00 7,924,500.00
352,807,200.00
Net increase of the
pledged loan
Net cash paid for
acquisition of subsidiaries and
other operation units
Cash paid for other
investment related activities
Sub-total of cash flow
55,323,349.40 364,333,131.38 37,299,634.72 1,713,022.00
paid for investment activities
Net cash flow arising
-55,236,662.80 -364,246,444.78 -22,247,834.72 24,738,678.00
from investment activities
III. Cash flows arising from
financing activities:
Cash received from
absorbing investment
Incl.: Cash received from
the subsidiaries’ absorption of
minority shareholders’
investment
Cash received from loans 510,311,000.00 392,000,000.00 386,548,610.00 345,000,000.00
Cash received from bond
issuing
Cash received from other
financing activities
Sub-total cash flow
received from financing 510,311,000.00 392,000,000.00 386,548,610.00 345,000,000.00
activities
Cash paid for debt
616,135,405.74 448,000,000.00 335,000,000.00 335,000,000.00
repayment
Cash paid for
dividend/profit distribution or 50,313,122.18 47,490,785.45 16,473,470.97 14,770,376.67
repayment of interest
Including: Dividend and
profit paid by the subsidiaries
to minority shareholders
Cash paid for other
231,600.00 1,000,000.00 1,000,000.00
financing activities 231,600.00
Sub-total cash flow paid
666,680,127.92 495,722,385.45 352,473,470.97 350,770,376.67
for financing activities
Net cash flow arising
-156,369,127.92 -103,722,385.45 34,075,139.03 -5,770,376.67
from financing activities
IV. Change of exchange rate -50,095.91 -42,908.38
40
influencing the cash and cash
equivalent
V. Net increase of cash and
-315,082,605.45 -380,661,707.78 12,660,081.08 11,599,244.42
cash equivalents
Plus: Opening balance of
613,455,817.52 529,568,738.47 95,701,580.19 46,560,890.55
cash and cash equivalents
VI. Ending balance of cash and
298,373,212.07 148,907,030.69 108,361,661.27 58,160,134.97
cash equivalents
Legal representative: Wu Guangquan Chief Financial Officer: Li Dehua Manager of the
Accounting Department: Hu Xinglong
41
Statement of Change in Owner’s Equity
(I) Consolidated Statement of Change in Owner’s Equity
Prepared by FIYTA Holdings Ltd. Semi-Annual 2011 In CNY
Amount in the report period Amount of Previous Year
Owners’ equity attributable to the parent company Owners’ equity attributable to the parent company
Paid-u Reser Minorit Paid-u Reser Minorit
Total Total
p Less: Specia Surplu ve Retain y p Less: Specia Surplu ve Retain y
Items Capital owner’ Capital owner’
capital/ shares l s agains ed shareh capital/ shares l s agains ed shareh
Reser Others s Reser Others s
(or in reserv Reser t earnin olders’ (or in reserv Reser t earnin olders’
ve equity ve equity
capital stock e ve genera gs equity capital stock e ve genera gs equity
stock) l risks stock) l risks
-1,515, 21,569 -879,9 20,411
I. Ending balance of the 280,54 643,38 121,06 222,51 341.96 ,365.5 1,287, 249,31 191,84 115,94 158,57 43.60 ,058.3 735,21
previous year 8,479. 1,884. 6,992. 4,569. 6 565,94 7,999. 7,232. 6,088. 7,089. 0 9,525.
00 88 16 59 9.23 00 65 88 84 07
Plus: Change of the
accounting policy -
Correction of the errors
of the previous period -
Others
-
-1,515, 21,569 -879,9 20,411
II. Opening balance of the 280,54 643,38 121,06 222,51 341.96 ,365.5 1,287, 249,31 191,84 115,94 158,57 43.60 ,058.3 735,21
report year 8,479. 1,884. 6,992. 4,569. 6 565,94 7,999. 7,232. 6,088. 7,089. 0 9,525.
00 88 16 59 9.23 00 65 88 84 07
III. Amount involved in the
42
change of 112,21 -112,7 - - - - 57,935 2,110, -18,41 41,075 31,230 451,53 - - 5,120, - 63,937 -635,3 1,158, 552,34
increase/decrease 9,391. 74,932 ,294.8 029.87 3,912. ,870.9 ,480.0 4,652. 903.28 ,479.7 98.36 307.26 6,424.
(decrease is marked with 00 .10 5 67 5 0 23 5 16
“-“)
-71,88 28,362
85,990 1.16 85,918 93,990 .58 94,018
(I) Net profit
,142.7 ,261.5 ,182.9 ,545.5
5 9 3 1
2,110, -38,95 -635,3 -78,83
(II) Other
029.87 3.64 2,071, 98.36 1.82 -714,2
comprehensive income
076.23 30.18
Sub-total of the above (I) - - - - - - 85,990 2,110, -110,8 87,989 - - - - - - 93,990 -635,3 -50,46 93,304
and (II) ,142.7 029.87 34.80 ,337.8 ,182.9 98.36 9.24 ,315.3
5 2 3 3
1,399,
(III) Owner’s
-555,5 -18,30 -18,85 31,230 451,53 040.00 484,16
investment and decrease
41.10 3,077. 8,618. ,480.0 4,652. 4,172.
of capital
87 97 0 23 23
1,399,
1. Capital provided by - 31,230 451,53 040.00 484,16
the owner ,480.0 4,652. 4,172.
0 23 23
2. Amount of share
payment recorded in the -
owner’s equity
3. Others
-555,5 -18,30 -18,85
43
41.10 3,077. 8,618.
87 97
- - - - - - -28,05 -28,05 - - - - 5,120, - -30,05 - -190,2 -25,12
(IV) Profit Distribution
4,847. 4,847. 903.28 2,703. 63.50 2,063.
90 90 18 40
1. Provision of surplus
- 5,120, -5,120,
reserve
903.28 903.28
2. Provision for
general risks -
-190,2
3. Distribution to the -28,05 -28,05 -24,93 63.50 -25,12
owner (or shareholders) 4,847. 4,847. 1,799. 2,063.
90 90 90 40
4. Others
-
(V) Internal carry-over of 112,21 -112,2 -
owner’s equity 9,391. 19,391
00 .00
1. Increased capital
112,21 -112,2 -
converted from capital
9,391. 19,391
reserve (or capital stock)
00 .00
2. Increased capital
converted from surplus -
reserve (or capital stock)
44
3. Making up Deficit
with Surplus Public -
Reserve
4. Others
-
(VI) Special reserve
-
1. Provision in the
report period -
2. Application in the
report period -
IV. Ending balance of the 392,76 530,60 - - 121,06 - 280,44 594,68 3,155, 1,328, 280,54 643,38 - - 121,06 - 222,51 -1,515, 21,569 1,287,
report period 7,870. 6,952. 6,992. 9,864. 7.91 452.89 641,82 8,479. 1,884. 6,992. 4,569. 341.96 ,365.5 565,94
00 78 16 44 0.18 00 88 16 59 6 9.23
(2) Statement of Change in Owner’s Equity, Parent Company
Prepared by FIYTA Holdings Ltd. Semi-Annual 2011 In CNY
Amount in the report period Amount of Previous Year
Paid-up Reserve Paid-up Reserve
Less: Total Less: Total
Items capital/( Capital Special Surplus against Retained capital/( Capital Special Surplus against Retained
shares owner’s shares owner’s
or capital Reserve reserve Reserve general earnings or capital Reserve reserve Reserve general earnings
in stock equity in stock equity
stock) risks stock) risks
I. Ending balance of the
280,548, 643,381, 121,066, 126,918, 1,171,91 249,317, 191,847, 115,946, 105,762, 662,873,
previous year
479.00 884.88 992.16 820.47 6,176.51 999.00 232.65 088.88 490.87 811.40
Plus: Change of the
45
accounting policy - -
Correction of the errors
of the previous period - -
Others
- -
II. Opening balance of the
280,548, 643,381, - - 121,066, - 126,918, 1,171,91 249,317, 191,847, 115,946, 105,762, 662,873,
report year
479.00 884.88 992.16 820.47 6,176.51 999.00 232.65 088.88 490.87 811.40
III. Amount involved in the
change of 112,219, -112,219 - - - - 7,748,11 7,748,11 31,230,4 451,534, - - 5,120,90 - 21,156,3 509,042,
increase/decrease 391.00 ,391.00 0.67 0.67 80.00 652.23 3.28 29.60 365.11
(decrease is marked with
“-“)
(I) Net profit 35,802,9 35,802,9 51,209,0 51,209,0
58.57 58.57 32.78 32.78
(II) Other
comprehensive income - -
Sub-total of the above (I)
- - - - - - 35,802,9 35,802,9 - - - - - - 51,209,0 51,209,0
and (II)
58.57 58.57 32.78 32.78
(III) Owner’s
investment and decrease - - - - - - - - 31,230,4 451,534, - - - - - 482,765,
of capital 80.00 652.23 132.23
1. Capital provided by
- 31,230,4 451,534, 482,765,
the owner
80.00 652.23 132.23
2. Amount of share
46
payment recorded in the - -
owner’s equity
3. Others
- -
(IV) Profit Distribution - - - - - - -28,054, -28,054, - - - - 5,120,90 - -30,052, -24,931,
847.90 847.90 3.28 703.18 799.90
1. Provision of surplus
- 5,120,90 -5,120,9 -
reserve
3.28 03.28
2. Provision for
general risks - -
3. Distribution to the
-28,054, -28,054, -24,931, -24,931,
owner (or shareholders)
847.90 847.90 799.90 799.90
4. Others
- -
(V) Internal carry-over of
112,219, -112,219 - - - - - - -
owner’s equity
391.00 ,391.00
1. Increased capital
converted from capital 112,219, -112,219 - -
reserve (or capital stock) 391.00 ,391.00
2. Increased capital
converted from surplus - -
reserve (or capital stock)
3. Making up Deficit
with Surplus Public - -
47
Reserve
4. Others
- -
(VI) Special reserve
- -
1. Provision in the
report period - -
2. Application in the
report period - -
IV. Ending balance of the
392,767, 531,162, - - 121,066, - 134,666, 1,179,66 280,548, 643,381, - - 121,066, - 126,918, 1,171,91
report period
870.00 493.88 992.16 931.14 4,287.18 479.00 884.88 992.16 820.47 6,176.51
Legal representative: Wu Guangquan Chief Financial Officer: Li Dehua Manager of the Accounting Department: Hu Xinglong
48
II. Notes to the Accounting Statements
FIYTA Holdings Ltd.
Notes to Semi-annual Financial Statements 2011
(In CNY except otherwise specially expressed)
I. Company Profile
Fiyta Holdings Ltd. (hereinafter referred to as the Company) was reorganized,
incorporated and renamed from Shenzhen Fiyta Timer Industry Company on December 25
1992 with approval by the General Office of Shenzhen Municipal People’s Government
with Document SHEN FU BAN FU [1992] No. 1259 and with China National
Aero-Technology Import & Export Corporation Shenzhen Industry & Trade Center (which
was renamed as China National Aero-Technology Corporation Shenzhen) as the sponsor.
On March 10, 1993, the Company, with approval by the People’s Bank of China Shenzhen Special
Economic Zone Branch [SHEN REN YIN FU ZI (1993) No. 070], issued publically domestic CNY
based common shares (A-shares) and CNY based special shares (B-shares). In accordance
with the Approval Document of Shenzhen Municipal Securities Regulatory Office SHEN ZHENG
BAN FU [1993] No. 20 and the Approval Document of Shenzhen Stock Exchange SHEN ZHENG
SHI ZI (1993) No. 16, the Company’s A-shares and B-shares were all listed with Shenzhen Stock
Exchange for trading commencing from June 3, 1993.
On January 30, 1997, with approval by Shenzhen Municipal Administration for Industry and
Commerce, the Company was renamed as Shenzhen Fiyta Holdings Ltd.
On March 3, 2011, with approval by Shenzhen Municipal Administration for Industry and
Commerce, the Company was renamed as Fiyta Holdings Ltd.
On July 4, 1997, according to the equity assignment agreement between AVIC International
Shenzhen Company Limited ("AVIC Shenzhen") and CATIC SHENZHEN HOLDINGS LIMITED
which was later on renamed as Shenzhen CATIC Group Co., Ltd. (hereinafter referred to as
CATIC Group), AVIC Shenzhen assigned 72.36 million corporate shares (taking 52.24% of the
Company’s total shares) to CATIC Group. From then on, the Company’s controlling shareholder
turned to be CATIC Group instead of AVIC Shenzhen.
On October 26, 2007, the Company implemented the equity separation reform, according to
which the shareholder of the Company’s non-negotiable shares would pay shares to the whole
shareholders of negotiable shares registered on the equity record day as designated in the equity
separation reform plan at the rate of 3.1 shares for every 10 shares held by them while the
Company’s total 249,317,999 shares remained unchanged. So far, after the equity separation
reform, the proportion of the Company’s shares held by CATIC Group has been reduced from
52.24% to 44.69%.
On February 29, 2008, due to expansion of the Company’s business scope and with approval by
Shenzhen Municipal Administration for Industry and Commerce, the Company’s enterprise
corporate business licence number was changed from 4403011001583 into 440301103196089
Approved by China Securities Regulatory Commission (CSRC) with the Official Reply on Approval
of Non-public Issuing of Shenzhen Fiyta Holdings Ltd., ZHENG JIAN XU KE [2010] No. 1703 and
the Official Reply on the Issue of Non-Public Issuing of Shenzhen Fiyta Holdings Ltd. by
State-owned Assets Supervision and Administration Commission of the State Council [2010] No.
430, the Company was approved to non-publically issue no more than 50 million common shares
(A-shares). After completion of non-public issuing, ended December 31, 2010, the Company’s
registered capital increased to CNY 280,548,479.00 and Shenzhen CATIC Group Co., Ltd. holds
41.49% of the Company’s equity based capital.
49
Ended June 30, 2011, the Company’s total capital stock was 392,767,870.00 shares. For the
detail, refer to Note VII.29.
The principal business activities of the Company and its subsidiaries (hereinafter referred to as
the Group) are: production and sales of various pointer type quartz watches and units, spares and
parts, various timing apparatus, processing and wholesale of K gold watches and ornament
watches (for production site, separate application should be submitted); domestic trade, materials
supply and sales (excluding the commodities for exclusive operation, exclusive control and
monopoly); property management and lease. import and export, design and construction; import
and export business (implemented according to Document SHEN MAO GUAN DENG ZHENG ZI
NO. 2007-072). Legal Representative: Wu Guangquan; the Company’s registered office address:
FIYTA Technology Building, Gaoxin S. Road One, Nanshan District, Shenzhen.
The Company has established the Shareholders’ General Meeting, the Board of Directors, the
Supervisory Committee, the Audit Committee, the Strategy Committee and the Nomination,
Remuneration and Assessment Committee as the governance organs, etc. The Company has
also established such function departments as the Comprehensive Administration Department,
Human Resource Department, Finance Department, Audit Department, Securities Department,
Property Department, Sales Department, Research & Development Department, Innovation and
Design Department.
The financial statements were approved by the Board of Directors of the Company for issuing on
August 15, 2011.
II. Basis for Preparation of the Financial Statements
The Group’s financial statements are prepared with the assumption of continuous operation and
according to the actually incurred transactions and matters. According to the Enterprise
Accounting Standards – Basic Standards and 38 Specific Accounting Standards promulgated by
the Ministry of Finance in February 2006 as well as the successively published application guides,
interpretation and other relevant regulations of the enterprise accounting standards (hereinafter all
referred to as the Enterprise Accounting Standards) and the provisions on information disclosure
as specified in the Rules for the Compilation and Submission of Information Disclosure by
Companies That Offer Securities to the Public No.15 – General Provisions of Financial Report
(Revision in 2010) promulgated by China Securities Regulatory Commission.
According to the relevant provisions of the enterprise accounting standards, the Company takes
the accrual basis as the base of accounting. Except some financial instruments, the financial
statements take historical cost as the base of measurement. In case any asset experiences
impairment, provision for the impairment is made according to the relevant provisions.
III. Declaration of Compliance with the Accounting Standards for Enterprises
The financial statements prepared by the Group comply with the enterprise accounting standards,
have truly and fully reflected the financial position of the Company and the Group as at June 30,
2011 and such information as its operation results and cash flow from January to June, 2011.
IV. Principal Accounting Policies and Accounting Estimates
1. Fiscal Year
The Group classifies accounting period into annual and semi-annual periods. A mid-term
accounting period refers to a report period shorter than an entire fiscal year. The Group’s fiscal
year adopts the Gregorian calendar year, namely from January 1 to December 31 of a year.
2. Function currency for bookkeeping
CNY is the currency in the major economic environment where the Company’s and its domestic
subsidiaries’ premises are located. The Company and its domestic subsidiaries take CNY as the
recording currency.
Except Switzerland based Montres Chouriet SA (hereinafter referred to as the Swiss Company), a
subsidiary of FIYTA (Hong Kong) Limited (hereinafter referred to as FIYTA Hong Kong) which
50
takes Swiss Franc as the recording currency according to the major economic environment of the
place where its premises is located, the other overseas subsidiaries, including FIYTA Hong Kong,
68-Station Limited (68-Station), one of FIYTA (Hong Kong) Limited’s subsidiaries, NATURE ART
LTD., an entity controlled by 68-Station for special purpose (Nature Art), PROTOP LTD (PROTOP)
and HARMONY World Watches International Limited, one of HARMONY’s subsidiaries (World
Watches International) take Hong Kong Dollars as its recording currency according to the major
economic environment of the place where their premises are located. The currency adopted by
the Group in preparation of the financial statements is China yuan (CNY).
3. Accounting treatment for enterprise consolidation
Enterprise consolidation refers to a transaction or matter of the principal in a report which consists
of two or more independent enterprises through consolidation. Enterprise consolidation consists
of the consolidation of enterprises under the same control and that not under the same control.
(1) Consolidation of Enterprises under the Same Control
Enterprises involved in the consolidation is eventually controlled by the same party or same
parties before and after the consolidation while such control is not temporary but is consolidation
of enterprises under the same control. Consolidation of enterprises under the same control: the
party that acquires the control over the enterprises involved in the consolidation on the date of
consolidation is the consolidator and the other enterprises involved in the consolidation are the
consolidatees. The date of consolidation refers to the date when the consolidator actually
acquires the control over the consolidates.
The assets and liabilities acquired by the consolidator from the consolidation are measured based
on the book value of the consolidatee on the date of consolidation. The difference between the
book value of net assets acquired by the consolidator, the book value of the consolidate valuable
consideration paid or the total book value of the issued shares was used to adjust the capital
reserve (capital stock premium). In case the capital reserve (capital stock premium) is not
enough to be written-down, the retained earnings are adjusted.
The direct expenses incurred in enterprise consolidation to the consolidating party is recorded in
the current gain and loss.
(2) Enterprise consolidation 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 and the other enterprise(s) involved in the consolidation is/are the purchasee. Date of
purchase refers to the date when the purchaser actually acquires the control over the purchasee.
For the consolidation of enterprises not under the same control, the consolidation costs consist 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
incurred in connection with the consolidation, including the charges for audit, law service,
appraisal and consulting and other administrative costs are recorded in the current gains and
losses. The transaction costs of the equity securities or debt securities issued by the purchaser as
the consolidation consideration are recorded in the initially recognized amount of the equity
securities or debt securities. The consolidation costs which may possibly subject to adjustment
and can be reliably measured are recognized as the contingent consideration and follow-up
measurement may influence the goodwill. The contingent consideration involved is recorded in
the consolidation costs based on the fair value as at the purchase date; for the contingent
consideration necessary to be adjusted against the conditions which already exist as at the
purchase date or further evidence within 12 months after the purchase date, the consolidated
goodwill should be adjusted correspondingly. In case of enterprise consolidation realized by steps
through several exchange transactions, in the Group’s consolidated financial statements, the
equity of the purchasee held before the purchase date shall be re-measured based on the fair
value of the equity as at the purchase date; the difference between the fair value and its book
value is recorded in the current return on investment as at the purchase date; meanwhile, the
51
other comprehensive income in connection with the equity of the purchasee held before the
purchase date shall be converted into the current return on investment; the consolidation cost is
the sum of the fair value of the purchasee’s equity as at the purchase date held before the
purchase date and the fair value of the purchasee’s equity as at the purchase date increased as
at the purchase date. The consolidation cost incurred to the purchaser and the recognizable net
asset acquired from consolidation are measured based on the fair value of the purchase day. The
difference of the consolidation cost greater than the fair value share of the recognizable net asset
on the date of purchase 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 is recorded in the current gain and loss.
In case the purchasee’s offsetable provisional difference acquired by the purchaser is not
recognized due to that it does not comply with the conditions for recognition of the deferred
income tax asset, within 12 months after the purchase date, if the new or further information as
obtained shows that the relevant conditions as at the purchase date already exist, it is predicted
that the economic benefit of the purchasee’s offsetable provisional difference as at the purchase
date can be realized, the relevant deferred income tax asset is recognized; meanwhile, the
goodwill is reduced. In case the goodwill is not enough to be written-down, the difference shall be
recognized as the current gain/loss. Except the aforesaid conditions, the deferred income tax
asset recognized in connection with the enterprise consolidation is recorded in the current
gain/loss.
4. Preparation of Consolidated Financial Statements
(1) Determination of the Consolidation Range of Financial Statements
The consolidation range of consolidated financial statements is determined with control as the
base. Control refers to that the Company is able to decide the financial and operating policy of the
investee, the power against which the Company is able to obtain interest from the operation
activities of the investee. Consolidation range includes the Company and all the subsidiaries. A
subsidiary refers to an enterprise or a body under the Company’s control.
(2) Preparation of Consolidated Financial Statements
The Group consolidates the subsidiaries commencing from the date when the subsidiaries’ net
assets and production and operating decision making power are actually under the Company’s
control. The consolidation shall stop commencing from the date when the actual control authority
is lost. For a subsidiary to be disposed, the operation result and cash flow prior to the day of
disposal have been properly included in the consolidated profit statement and consolidated cash
flow statement; for a subsidiary to be disposed in the current period, the consolidated balance
sheet at the beginning of the period is not adjusted. For the subsidiaries increased through
consolidation of the enterprises not under the same control, the operating results and cash flow
after the purchase date have been properly included in the consolidated profit statement and
consolidated statement of cash flow while the amount at the beginning of the period and
comparative amount in the consolidated financial statements shall not be adjusted. For the
subsidiaries increased through consolidation of the enterprises under the same control, the
operating results and cash flow from the very period of consolidation to the consolidation date
have been properly included in the consolidated profit statement and consolidated statement of
cash flow; moreover, comparative amount in the consolidated financial statements shall be
adjusted at the same time.
In process of preparation of consolidated statements, in case the accounting policy or fiscal term
adopted by the subsidiaries and the Company are not identical, 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. For the
subsidiaries acquired through consolidation of enterprises not under the same control, the
financial statements are adjusted with the fair value of recognizable net assets on the date of
purchase as the base.
52
All the material current account balance, transactions and unrealized profit within the Group are
offset at the time of preparation of the consolidated financial statements.
The part in the subsidiaries’ shareholders’ equity and the net current gain and loss which do not
belong to the part held by the Company are taken as minority equity and minority gain and loss
and are respectively listed under the shareholders’ equity and net profit separately in the
consolidated financial statement. The part of the current net gain and loss of a subsidiary
belonging to minority shareholders’ equity is presented as “minority shareholders’ gain and loss”
under the item of net profit in the consolidated profit statement. In case the loss of a subsidiary
shared by the minority shareholders has exceeded the share of the owners’ equity of the
subsidiary enjoyable by the minority shareholders at the beginning of the period, the minority
shareholders’ equity shall be written-down.
5. Recognition of Cash and Cash Equivalent
The Group’s cash and cash equivalents include cash on hand, deposits which may be used for
payment at any time and investment held by the Group with short term (usually due within three
months commencing from the date of purchase), high liquidity, easy to be turned into cash with
given amount and very small risk of change in value.
6. Transactions in Foreign Currency and Foreign Currency Translation
(1) Translation of Foreign Currency
In initial recognition of a transaction in foreign currency when incurs, the translation into amount in
recording currency based on the spot rate (which usually refers to the average of the foreign
exchange rate published by the People’s Bank of China on the very day of incurrence); however,
the foreign currency exchange business or transaction involved foreign currency exchange
incurred in the Company is converted into amount in recording currency according to the
exchange rate actually adopted.
(2) Translation of monetary items in foreign currency and non-monetary items in foreign currency
On the balance sheet day, for the monetary items in foreign currency, the spot rate on the balance
sheet day is used for translation; the exchange difference arising therefrom shall all recorded in
the current gain/loss.
The foreign currency based non-monetary items measured based on the historical cost is
measured still based on the function currency translated based on the spot exchange rate as of
the date of incurrence of the transaction. For the foreign exchange based non-monetary items
measured based on the fair value, translation is made based on the spot exchange rate as of the
date of determination based on the fair value; the discrepancy between the function currency
amount for bookkeeping after translation and the original function currency for bookkeeping is
recorded in the current gain and loss and is treated as the change of fair value (including
exchange rate change), or recognized as other comprehensive income and recorded in the
capital reserve.
(3) Method of Translation for the Statements in Foreign Currency
In case the preparation of the consolidated financial statements involves overseas operation, if
there is the monetary item in foreign currency which substantially composes net investment for
overseas operation, the exchange difference arising from the change of exchange rate shall be
stated in the item of “the translation difference in foreign currency statement” of the owner’s
equity; in handling the overseas operation, the exchange difference is recorded in the current gain
and loss.
The financial statements in foreign currency for operation outside Mainland China are translated
into statements in China Yuan (CNY) after conversion according to the following methods: all the
asset and liability items in the balance sheet are 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 current average exchange
rate on the date of transaction. The retained earnings at year beginning is the retained profit of the
53
previous year end after translation. The retained profit at year end is calculated and stated based
on the items of the profit distribution after translation. The difference between the asset items and
liability items and the total of the owners’ equity items after translation is recognized as other
comprehensive income and separately stated under the item of shareholders’ equity as the
translation discrepancy of statements in foreign currency. In disposal of operation outside
Mainland China with the control power lost, the difference from translation of statements in foreign
currency stated under the item of owner’s equity in the balance sheet and in connection with
foreign operation is, all or based on the proportion of operation outside mainland China as
disposed, recorded in the disposal of current gain and loss.
Foreign currency cash flow and cash flow of overseas subsidiaries are translated based on the
current average exchange rate as at the date when the cash flow incurs. 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.
The amount at year beginning and actual amount of the previous year are stated based on the
amount of the financial statements of the previous year after translation.
7. Financial instruments
(1) Method for Recognition of the Fair Value of Financial Assets and Financial Liabilities
Fair value refers to the amount involved in the assets exchange or settlement of obligation
conducted between the two parties of transaction familiar with the situation on volunteer basis in a
fair transaction. When there exists active market for financial instruments, the Group determines
the fair value with the quotation in the active market. Quotation in the active market refers to the
price easily and regularly accessible to the exchange, broker, guild, price service agent, etc. and
represents the transaction price actually incurred in the market in fair transaction. In case the
financial instruments do not exist in the active market, the Group uses the value estimation
technique to determine its fair value. The value estimation technique includes the price used in
the latest market transaction conducted by the parties familiar with the situation on volunteer basis
with reference to the current fair value of substantially the same other financial instruments, the
cash flow discount method and option pricing model, etc.
(2) Classification, Recognition and Measurement of Financial Assets
For trading of financial assets in general way, accounting recognition and termination recognition
are conducted on the date of transaction. Financial assets are classified into the following
categories at the time of initial recognition: financial asset measured based on the fair value and
whose change is recorded in the current gain and loss, held-to-maturity investment, loan,
accounts receivable and available for sale asset. Financial asset is measured based on the fair
value at initial recognition. For the financial asset which is measured based on the fair value and
the change is recorded in the current gain and loss, the relevant transaction expenses are directly
recorded in the current gain and loss; for other types of financial asset, the relevant transaction
expenses are recorded in the initially recognized amount. The Group’s financial assets are mainly
the accounts receivable.
Accounts receivable refer to the non-derivative financial assets without quotation in the active
market and the recoverable amount fixed or determinable. The financial assets classified as the
account receivable by the Group include the account receivable and other receivables, etc.
Actual interest rate is used for accounts receivable; the follow-up measurement is made based on
the amortized costs; the dividend or loss arising from the termination recognition, impairment
occurrence or amortization are recorded in the current gain and loss.
(3) Impairment of financial assets
The Group inspects the book value of financial assets on the balance sheet date and makes
provision for impairment when there is objective evidence showing that impairment incurs in the
financial asset.
For provision of the reserve for bad debt of accounts receivable, refer to Note IV. 8.
54
(4) Basis for Recognition of Transfer of Financial Assets and Measurement Method
When a financial asset satisfies one of the following conditions, it is eventually recognized: ①The
contract right for receiving the cash flow of the financial assets is terminated; ② the financial
asset has been transferred while almost all the risks and remuneration in connection with the
ownership of the financial asset has been transferred to the party of transfer in; ③ the financial
assets have been transferred although the enterprise has neither transferred nor retained almost
all the risks and remuneration to the ownership of financial assets but the control over the financial
asset has been given up.
In case the enterprise has neither transferred nor retained all the risks and rewards involved in the
ownership of the financial assets but has not given up the control over the financial assets, the
concerned financial assets can continue to be recognized based on the level of the involved
financial assets transferred and the relevant liabilities shall be recognized correspondingly. The
level of the involved financial assets transferred refers to the level of risks the enterprise is
confronted with in change of the financial asset.
In case the overall transfer of the financial assets can satisfy the conditions of termination of
recognition, the balance between the book value of the financial assets as transferred, the
consideration received due to the transfer and the sum of the accumulative amount of change of
the fair value recorded in other comprehensive income is recorded in the current gain and loss.
If partial transfer of financial assets can satisfy the conditions for termination of recognition, the
book value of the financial assets transferred is apportioned based on its relevant fair value
between the part with recognition terminated and the part with recognition not terminated; and the
difference between the sum of the consideration received due to the transfer and the
accumulative amount involved in change of the fair value of the part with recognition terminated
which should be recorded in the other comprehensive income and the aforesaid book amount as
apportioned is recorded in the current gain and loss.
(5) Classification and Measurement of Financial Liabilities
Financial liabilities are classified into financial liabilities and other financial liabilities which are
measured based on the fair value at the time of initial recognition and whose change is recorded
in the current gain and loss. Financial liabilities are measured based on the fair value at initial
recognition. For the financial liabilities which are measured based on the fair value and the
change is recorded in the current gain and loss, the relevant transaction expenses are directly
recorded in the current gain and loss; for other types of financial liabilities, the relevant transaction
expenses are recorded in the initially recognized amount. The financial liabilities of the Group are
mainly the other financial liabilities.
Other financial liabilities undergo follow-up measurement based on the amortized cost by means
of actual interest rate method; the gain or loss arising from the termination of recognition or
amortization, is recorded in the current gain and loss.
(6) Termination of Recognition of Financial Liabilities
The present obligations of financial liabilities have been entirely or partially been eliminated before
termination of recognition of such financial liabilities or part of them. An agreement is concludd
between the Group (the debtor) and the creditor, the existing financial liabilities are replaced by
means of undertaking the new financial liabilities while the contract articles concerning the new
financial liabilities and the existing financial liabilities are substantially different, the recognition of
the existing financial liabilities are terminated and at the same time the new financial liabilities are
recognized.
In case recognition of financial liabilities is entirely or partially terminated, the difference between
the book value of the part with recognition terminated and the consideration paid (including the
non-cash assets transferred out or the new financial liabilities as undertaken) is recorded in the
current gain and loss.
(7) Offsetting of the financial assets and financial liabilities
55
When the Group has the legal right of setting off the financial assets and financial liabilities
already recognized and may implement such legal rights at present. Meanwhile, when the Group
plans to make settlement with net amount or at the same time realizes the financial assets and
pays off the financial liabilities, the amount after offsetting of the financial assets with the financial
liabilities is presented in the balance sheet. In addition, the financial assets and financial liabilities
are respectively presented in the balance sheet and must not be mutually offset.
(8) Equity Instrument
Equity instrument refers to a contract which can prove to have the Group’s surplus equity in the
assets after deduction of all the liabilities Equity instrument adds the owners’ equity after
receiving the consideration less the transaction costs at the time of issuing.
In providing various distributions (excluding the dividend) to the equity instrument holders, the
owners’ equity is reduced. The Group does not recognize the change of the fair value of the
equity instrument.
8. Accounts Receivable
(1) The determination criteria of bad debts
The Group checks the book value of accounts receivable on the balance sheet day and provides
reserve for impairment in case there exist following objective evidences showing that accounts
receivable have experienced impairment: ① A debtor is involved in serious financial difficulty; ②
The debtor breaches the contract, such as breaching contract in payment of interest or the
principal or delaying the payment, etc.; ③ Debtor may get bankrupt or conduct other financial
reorganization; ④ Other objective basis shows impairment incurred in the account receivable.
(2) Provision for bad debts
Criteria for recognizing the reserve for bad debt of the accounts receivable with significant single
amount and with the reserve for bad debt provided on individual basis and the way of provision
The Group classifies an account receivable with single amount exceeding CNY 800,000.00 and
other receivable with single amount exceeding CNY 500,000.00 as account receivable with
significant single amount.
①The Group tests impairment of individual accounts receivable with significant single amount,
separately tests the financial assets without impairment incurred, including the impairment test of
the portfolio of the financial asset with similar credit risk characteristics. The accounts receivable
in which loss from impairment has been recognized in the individual test shall no longer undergo
impairment test in the portfolio of the accounts receivable with similar credit risk characteristics.
② Basis for determining the accounts receivable with the reserve for bad debt provided based on
grouping of the credit risks and provision of the reserve for bad debt
A. Basis for determining the grouping based on the characteristics of the credit risk
The Group groups the financial assets based on the similarity of the characteristics and relevance
of the credit risks for the accounts receivable with insignificant single amount or with significant
amount but not experiencing impairment through single-item based testing. These credit risks
usually reflect a debtor’s ability to repay all the due amount according to the contract of such
assets and are related with the estimation of the future cash flow of the inspected assets.
Basis on determining different grouping:
Items Basis for determining the grouping
Grouping based on the
Length of the accounting age
accounting age
B. Way of provision for bad debt as determined by grouping based the credit risk characteristics
In making impairment test by grouping, the amount of the reserve for bad debt is determined
56
according to the grouping structure of the accounts receivable and the similar credit risk
characteristics (the debtor’s ability to repay the debt according to the contract) and based on the
historical loss experience, the present economic conditions and the assessment of the loss
already existed in the grouping of the predicted accounts receivable.
Method of provision for bad debt based on different groupings:
Items Way of Provision
Grouping based on the
Provision for bad debt based on aging analysis
account age
Method of grouped provision for bad debts by means of aging analysis
Provision proportion of the Provision proportion of other
Age
accounts receivable (%) receivables (%)
Within 1 year (including 1 year,
5 5
the following is the same)
1 to 2 years 10 10
2 to 3 years 30 30
Over 3 years 50 50
Note: The Company does not provide reserve for bad debts for the reserve due from the
employees, payment due from the subsidiaries in the consolidation range and the sales
revenue from the last settlement day of the supermarket to the balance sheet day in the
accounts receivable.
③ Accounts receivable with insignificant single amount and provision of bad debt reserve on
individual basis
For the accounts receivable with insignificant single amount but having the following
characteristics, the Group makes separate impairment test. In case there is objective
evidence showing that impairment has taken place, according to the balance of the present
value of future cash flow lower than the book value, loss from impairment is recog nized and
the reserve for bad debt is provided, including the account receivable involved with dispute
with the other party or lawsuit or arbitration; the accounts receivable in which there exists
evident indication showing that a debtor may possibly be unable to implement the obligation of
repayment.
(3) Reversal of reserve for bad debt
In case there is objective evidence showing that the value of the account receivable has been
recovered while it is objectively related with matters occurred after recog nition of the loss, the
loss from impairment originally recognized can be reversed and is recorded in the current gain
and loss. However, the book value of such reversal shall not exceed the amortized cost as at the
date of reversal of such account receivable for which it is assumed not provision for impairment
was made.
9. Inventories
(1) Classification of Inventories
Inventories include raw materials, products-in-process, commodity stocks, etc.
(2) Pricing of Inventories Acquired and Delivered
Inventories are priced based on the actual costs at the time of acquisition. Costs of inventories
include purchase cost, processing cost and other costs. Inventories are priced respectively
according to the weighted average (for FIYTA watch stocks), specific identification (for famous
brand watch stocks) and first in first out (for raw materials for FIYTA watches) at the time of
procurement and delivery.
(3) Recognition of the realizable net value of inventories and provision of reserve for price falling
57
The net realizable value of the inventories refers to the amount of the estimated sales prices of
inventories less the estimated costs up to the completion, the estimated sales costs and relevant
taxes in daily activities. In determining the realizable net value of inventories, with the acquired
concrete evidence as the base, the purpose of holding the inventories and the influence from the
events after the balance sheet day are taken into consideration at the same time, Including:
① For the inventories directly for sale, including the finished products and the materials for sale,
in process of normal production and operation, the realizable net value is the amount of the
estimated sales price of the inventories less the estimated sales costs and the relevant taxes;
② For the material inventories necessary to be processed, the realizable net value is the amount
of the estimated sales price of the finished products produced in process of normal production
and operation less the costs predicted to incur at the time of finishing the work, the estimated
sales expenses and the relevant taxes.
The Company provides reserve for price falling of the inventories classified based on the models
of self-made FIYTA watch inventories.
For the famous brand watches in distribution, reserve for price falling of inventories is provided
based on the individual items.
For the raw materials for FIYTA watches, based on the terminal sales status of FIYTA finished
watches, reserve for price falling of inventories is provided with interchangeability of spares and
parts and specialized classification of applications of materials taken into consideration.
The inventories are measured at the lower of cost and net realizable value on the balance sheet
day. Reserve for price falling of inventories is provided when the net realizable value is lower than
the cost.
After reserve for price falling of inventories is provided, if the factors influencing the price falling of
the inventories have disappeared, which causes the realizable net value of the inventories to be
higher than their book value, the reserve for price falling of the inventories provided previously is
reversed, the amount reserved is recorded in the current gain and loss.
(4) The inventory system for the inventories is the perpetual inventory system.
(5) Amortization of low value consumables and packing materials
Low cost and short lived articles and packing materials are amortized in lump sum at the time of
requisition.
10. Long-term equity investment
(1) Determination of investment cost
For long term equity investment formed from enterprise consolidation, such as the long term
equity investment obtained from consolidation of the enterprises under the same control, the
share of the book value of the owners’ equity in the parties consolidated as obtained on the date
of consolidation is taken as the initial investment cost. Through long term equity investment by
means of consolidation of enterprises not under the same control, the enterprise consolidation
costs include the sum of the assets paid by the purchaser, the liabilities incurred or undertaken,
and the fair value of the equity securities issued. The agency fees for audit, legal services,
appraisal and consulting services, etc. incurred in consolidation of enterprises and other relevant
administrative expenses incurred to the purchaser should be recorded in the current gain and loss
at the time of incurrence.
The other equity investment except the long term equity investment formed from enterprise
consolidation is initially measured based on the costs; the cost is determined based on the cash
payment actually paid by the Group, the price as specified in the investment contract or
agreement, etc. depending on the different ways of acquiring the long term equity investment.
Investment costs include the expenses, taxes and other necessary expenditures directly
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connected with the acquisition of the long term equity investment.
(2) The Follow-up Measurement and Gain and Loss Recognition Method
For a long term equity investment which does not have common control over or significant
influence upon the investee 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
investment which has common control over or significant influence upon the investee, the equity
method is used for calculation. The long term equity investment which does not control or
common control over or significant influence upon the investee while the fair value can be reliably
measured can be used as the financial asset available for sale in calculation.
In addition, 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.
① Long term equity investment calculated based on the cost method
In calculation based on the cost method, the long term equity investment is priced based on the
initial investment costs, except the amount actually paid at the time when the investment is
acquired, or the cash dividend or profit already announced but not yet distributed involved in the
consideration, the current return on investment is recognized based on the amount of the cash
dividend or profit announced for distribution by the investee enjoyable by the Company as
investor.
② Long term equity investment calculated based on the equity method
In calculation based on the equity method, when the initial investment cost of the long term equity
investment is greater than the share of the fair value of the distinguishable net assets in the
investee enjoyable at the time of investment, the initial investment cost of the long term equity
investment shall not be adjusted. In case the initial cost of long term equity investment is smaller
than the fair value based share in the investee’s recognizable net assets enjoyable by the
Company, the difference shall be recorded in the current gain and loss and at the same time long
term equity investment cost shall be adjusted
If the equity method is used for calculation, the current investment gain/loss is the share of the net
gain/loss realized in the very year by the investee enjoyable or shareable. In confirming the share
of the net gain and loss enjoyable in the investee, the Group takes the fair value of various
recognizable assets of the investee at the time of obtaining the investment, and recognizes it after
adjustment of the net profit of investee according to the accounting policy of the Group and during
the fiscal period. The part of the inside transaction gain and loss unrealized between the Group,
the associates and joint ventures attributable to the Group is calculated based on the
shareholding proportion and is offset and the investment gain and loss are recognized on this
basis. However, the inside transaction loss unrealized incurred to the Group and the investee
shall not be offset if it belongs to the loss from impairment of the assets as assigned according to
the Enterprise Accounting Standards No. 8 – Impairment of Assets. For other comprehensive
income of the investeess, the book value of the long term equity investment is adjusted
correspondingly and is recognized as other comprehensive income and recorded in the capital
reserve.
In recognizing the net loss shareable incurred to the investee, the book value of the long term
equity investment and the other long term equity which substantially composes the net investment
in the investee is reduced to zero as the maximum. In addition, if the Group has the obligation for
assuming extra loss incurred to the investee, the predicted liability is recognized based on the
predicted obligation to be assumed and is recorded in the current investment loss. In case of the
net profit realized by the investee in the afterwards period, the Group shall restore the recognition
of the share of profit enjoyable after the amount enjoyable has made up for the unrecognized loss.
③ Acquisition of the minority equity
In preparation of the consolidated financial statements, the difference between the long term
59
equity investment newly increased by purchase of minority equity and the enjoyable share of a
subsidiary’s net assets continuously calculated commencing from the date of purchase (or date of
consolidation) based on the newly increased shareholding proportion is used to adjust the capital
reserve; in case the capital reserve is not enough for writing-down, the retained earnings is
adjusted.
(3) Basis for determining the joint control over and significant influence upon an investee
Control refers to that the Group is able to decide the financial and operating policy of another
enterprise, the power against which the Group is able to obtain interest from the operation
activities of that enterprise. Joint control over an investee refers to a joint control over some
economic activity according to the contract. It only exists when the important financial and
production operation decision in connection with the economic activity needs to be unanimously
approved by the investors with the control power. Significant influence upon an enterprise refers
to the power of participating in the decision making of the enterprise’s financial and operation
policies but that it cannot control or jointly control with other party the making of such policies. In
determining if to implement control over or exert significant influence upon an investee, the
potential voting elements, such as the current convertible debentures in the investee held by the
investor and other parties, the warranty available for implementation in the current period, can be
taken into consideration.
(4) Method for impairment testing and provision of reserve for impairment
On every balance sheet day, the Group checks the long term equity investment and makes sure if
there possibly exist any sign of impairment. In case there exists impairment in such assets, their
recoverable amount is estimated. In case the recoverable amount of the asset is lower than its
book value, provision for impairment of the asset is made based on its difference and is recorded
in the current gain and loss.
Loss from impairment of long term equity investment which once is confirmed shall not be
reversed in the afterwards fiscal periods.
11. Investment based real estate
Investment based real estate refers to the real estate held for the purpose of earning rental or
added value of the capital or both. It includes the housing, building, etc. already leased.
Investment based real estate is initially measured based on the cost. The follow-expenses in
connection with the investment based real estate are recorded in the investment based real estate
costs in case the relevant economic benefit may flow into the Company while the costs can be
reliably measured. Other follow-up expenses are recorded in the current gain and loss at the time
of incurrence.
The Group adopts the cost model to make follow-up measurement of the investment based real
estate and makes depreciation according to the policy of coincidence with housing and building.
For the detail about the impairment testing method and provision for the impairment of the
investment based real estate, refer to Note IV.16 “Impairment of Non-current Non-financial
Assets”.
12. 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.
(2) Depreciation of different fixed assets
Fixed assets are initially measured based on the costs with the influence from the predicted
discarding expenses taken into consideration. Commencing from the next month after a fixed
asset has reached the predicted usable status, the average service life method is used to provide
depreciation within the service life. The service life, the predicted net residual value and annual
depreciation rate of various fixed assets are as follows:
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Depreciation Life Residual ratio Annual
Types depreciation
(years) (%)
rate (%)
Housing and buildings 20-35 years 5 2.7-4.8
Machines & equipment 10 years 5-10 9-9.5
Motor vehicle 5 years 5 19
Electronic equipment 5 years 5 19
Other equipment 5 years 5 19
Predicted residual value refers to the amount the Group obtains from the disposal of the
asset less the disposal cost when it is assumed that the predicted service life of a fixed asset
expires and the fixed asset is the predicted status of termination of the service life.
(3) Method for testing the impairment of fixed assets and provision for impairment
For the detail about the impairment testing method and provision for the impairment of fixed
assets, refer to Note IV.16 “Impairment of Non-current Non-financial Assets”.
(4) Other Notes
The follow-up expenses in connection with fixed assets are recorded in the costs of fixed assets if
the economic benefit in connection with the fixed assets can highly probably flow into while the
costs can be reliably measured and the book value of the part replaced is terminated for
recognition. Other follow-up expenses are recorded in the current gain and loss at the time of
incurrence.
The income from disposal of fixed assets, including sale, assignment, discarding or damage, is
recorded in the current gain and loss after deduction of the book value and the relevant taxes.
The Group rechecks the service life, predicted net residual value and depreciation method of fixed
assets at least at the end of a year; in case any change takes place, it is taken as change in
accounting estimation.
13. Loan expenses
Loan expenses include the interest, amortization at discount or at premium and additional
expenses incurred by loans, the exchange difference incurred by foreign exchange loan as well
as the interest, amortization at discount or at premium and exchange difference incurred by
foreign exchange loans. For the loan expenses for purchase and construction or production of an
asset directly attributable to that in compliance with the capitalization conditions, capitalization
starts when the asset expenses have incurred, borrowing expenses have incurred, the purchase
or production activity necessary for the asset to reach the predicted usable or sellable status; The
remaining borrowing expenses are recognized in the very period of incurrence.
The interest cost of the special loan actually incurred in the current period is capitalized after
deduction of the interest income from the unapplied loan deposited with bank or return on the
investment achieved from temporary investment. For general borrowing, the capitalized amount is
determined based on the accumulated asset expenses exceeding the weighted average of the
asset expense of the special borrowing part times the capitalization rate of general borrowings as
occupied. The capitalization rate is determined according to the weighted average interest rate of
general borrowings.
During the capitalization period, the exchange difference of special borrowing in foreign currency
is all capitalized;
Assets in compliance with the capitalization conditions refer to fixed assets, investment based real
estate, inventories, etc. which can reach the predicted application status or status for sale through
a long term of purchase/construction or production activities.
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When the assets in compliance with capitalization conditions have experienced extraordinary
interruption in process of purchase/construction or production while the interruption time
successively exceeds three months, the capitalization of loan expenses suspend until the
purchase of asset or production activity restarts.
14. Intangible assets
(1) Intangible assets
Intangible asset refers to a non-monetary asset held or controlled by the Group with no physical
form recognizable.
Intangible assets are initially measured based on the cost. Expenses in connection with intangible
assets is recorded in the intangible asset cost if the relevant economic benefit may possibly flow
into the Group and its costs may be reliably measured. Other expenditures are recorded in the
current gain and loss at the time of incurrence.
The intangible assets with limited service life are amortized in average by stages by means of the
straight line method within the predicted service life commencing from the time of availability for
application with the original value less the predicted net residual value and the accumulated
amount of the reserve for impairment already provided. An intangible asset with indefinite service
life is not amortized.
At the end of a period, the service life of an intangible asset with limited service life and the
amortization method are rechecked. In case change takes place, it shall be handled as the
change of accounting estimate. In addition, the service life of and intangible asset with indefinite
service life is rechecked. If there is evidence showing that the duration of the economic benefit
brought about by the intangible asset for the enterprise is foreseeable, the estimated service life is
amortized according to the amortization policy of intangible assets with limited service life.
(2) Research and development expenses
Expenses for the Group’s internal research and development projects are divided into the
expenditure of the research stage and that for the development stage.
Expenses for the research stage is recorded in the current gain and loss at the time of incurrence.
The expenses at the development stage which can satisfy the following conditions at the same
time are recognized as intangible asset and that which cannot satisfy the following conditions are
recorded in the current gain and loss at the development stage.
① It is technically feasible to finish such intangible assets so as to make it useable or sellable;
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.
In case it is impossible to distinguish the expenses at the research stage from that at the
development stage, the R & D expenses incurred shall all be recorded in the current gain and
loss.
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(3) Method for testing the impairment of intangible assets and provision for impairment
For the detail about the impairment testing method and provision for the impairment of intangible
assets, refer to Note IV.16 “Impairment of Non-current Non-financial Assets”.
15. Long-term expenses to be apportioned
Long-term expenses to be apportioned 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 amortized based on the straight line
method during the predicted beneficial period and the amortization term is usually 2 – 5 years.
16. Impairment of Non-current Non-financial Assets
For the non-current non-financial assets, including fixed assets, intangible assets with limited
service life, investment based real estate measured based on the cost model, long term equity
investment in subsidiaries, joint ventures and associates, etc., the Group makes judgment on
whether there exists sign of impairment on the balance sheet day. If there does exist sign of
impairment, the recoverable amount is estimated and the impairment test is conducted. For the
goodwill, intangible assets with indefinite service life, the intangible assets which have not yet
reached the serviceable status, regardless whether there exists any sign of impairment,
impairment test is conducted every year.
In case impairment test result shows that the recoverable amount of asset is lower than the book
value, provision for impairment is made based on the difference and is regarded in the loss for
impairment. The recoverable amount is the higher of the net amount of the fair value of the assets
less the disposal expenses and the present value of the predicted future cash flow. The fair value
of assets is determined based on the sales agreement price in fair transaction; in case there is no
sales agreement but does exist active market of asset, the fair value is determined according to
the buyer’s offer of the asset; in case there exists neither sales agreement nor active market of
asset, the fair value of assets is estimated based on the best information obtainable. The disposal
expenses include legal expenses, relevant taxes, handling fee and direct expenses incurred
before the asset reaches the sellable status in connection with disposal of the assets. The present
value the predicted future cash flow of assets: according to the predicted future cash flow created
in process of continuous application and final disposal, choose the proper discount rate to
determine the amount after discount.
Provision for impairment of asset is calculated and recognized based on the individual asset. In
case it is difficult to make estimation of the recoverable amount of individual asset, the
recoverable amount of asset group is determined based on the asset group which the asset
belongs to. The asset group is the minimum grouping of assets which can independently produce
cash flow in.
The loss from impairment shall not reverse the part whose value may be recovered in future once
the impairment of the aforesaid assets is recognized.
17. Predicted Liabilities
Predicted liabilities shall be recognized when the obligation in connection with the contingent
events complies with the following conditions: (1) such an obligation is a current one the Company
should assume; (2) Implementation of such obligation may possibly cause flow-out of economic
benefit ; (3) The amount involved in such obligation can be reliably measured.
On the balance sheet day, with consideration of the risks in connection with the contingent matters,
uncertainty, time value of currency, etc., the predicted liabilities are measured according to the
best estimated amount payable in implementation of the present obligations.
In case the determined liabilities payable should completely or partially be compensated by a third
party, while the amount of compensation can be basically confirmed receivable, it should be
individually recognized as assets. However, the amount of compensation as recognized should
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not exceed the par value of the liabilities as predicted.
18. Revenue
(1) Sales of goods
Sales income is recognized when the major risk and remuneration involved in the ownership of
goods have been transferred to the buyer, with neither the successive management power
general in connection with the ownership retained nor effective control over the goods already
solve; the income amount may be reliably measured, the relevant economic benefit may flow into
the enterprise; the relevant costs incurred or to incur can be reliably measured.
(2) Income from labor services
The results of labor service transactions offered on the balance sheet date can be reliably
estimated, the labor service income is recognized based on the percentage of the work completed.
The completion progress of labor service transaction is determined based on the proportion of the
labor service already provided in the total labor service volume.
Reliable measurement of the result of the labor service transaction provided refers to that it can
satisfy at the same time: ① The amount of the income can be reliably measured; ②The
concerned economic benefit may highly possibly flow into the Company; ③ The completion of
the transaction can be reliably determined; ④ The costs incurred or to incur can be reliably
measured.
In case the result of a labor service transaction cannot be reliably measured, the labor service
income is recognized based on the labor cost which has incurred and is predicted to be
compensable and the labor service cost already incurred is taken as the current expenses. The
labor cost already incurred shall not be recognized as income if it is predicted to be impossible to
be compensated.
(3) Royalty Income
The income is recognized based on accrual basis according to the relevant contract or
agreement.
(4) Interest income
Interest income is determined according to the time the borrowers using the Group’s monetary
fund and the actual interest rate.
(5) Income from properties
The amount of income from lease of properties is determined on the lease date as specified in the
lease contract or agreement (rental-free period should be taken into consideration if there is
rental-free period) and the amount of rental and the income from the properties leased is
recognized when the concerned rental or the evidence of receipt has been received.
19. Government subsidies
Government subsidy refers to monetary asset or non-monetary asst obtained from the
government free of charge but does not include the capital invested by the government as the
Company’s owner. The government subsidy can be divided into the government subsidy in
connection with asset and government subsidy in connection with income.
The governmental subsidy is measured based on the amount received or receivable if it is
monetary asset. The government subsidy is measured based on the fair value if it is a
non-monetary asset; when the fair value cannot be obtained, it is measured based on the
nominated amount. The government subsidy measured based on the nominal amount is directly
recorded in the current gain and loss.
Asset related governmental subsidy is recognized as deferred income, is distributed in average
over the service life of the related assets and recorded in the current gain and loss. The
government subsidy in connection with income is recognized as deferred income if it is used for
compensating the Company’s relevant expenses or losses in the afterward term and is charged to
64
the current gain and loss during the recognition of the relevant expenses; or directly charged to
the current gain and loss if it is used for compensating the relevant expenses or losses already
incurred in the Company.
When the recognized government subsidy needs to be returned, if there exists the relevant
deferred income balance, the book balance of the deferred income should be written-down and
the excessive part is recorded in the current gain and loss; if there exists no relevant deferred gain
and loss, it is directly recorded in the current gain and loss.
20. Deferred income tax asset/deferred income tax liability
(1) Current income tax
The Company measures the current income tax liability or asset formed in the current period or
the previous period according to the predicted payable or reimbursed income tax amount
calculated according to the tax law. The current income tax cost is calculated based on the
amount of taxable income after adjustment of the pre-tax accounting profit in the report year
according to the tax law.
(2) Deferred income tax asset/deferred income tax liability
The difference between the book value of some asset and liability items and the tax base as well
as the provisional discrepancy arising from the difference between the book value of the tax base
items which has not been recognized as asset and liability but can be determined according to the
tax law and the tax base are recognized as deferred income tax asset and deferred income tax
liability by means of the balance sheet liability method.
For the provisional difference of payable taxes in connection with the initial recognition of goodwill
and in connection with the initial recognition of assets or liabilities arising from the transactions
which are neither enterprise consolidation and nor influence the accounting profit and taxable
income amount (or can be used to offset loss) at the time of incurrence, the pertinent deferred
income tax liability shall not be recognized. In addition, for the taxable provisional difference in
connection with investment in subsidiaries, associates and joint ventures, if the Group can control
the time of provisional difference reversal while such provisional difference may not be possibly
reversed in the foreseeable future, the pertinent deferred income tax liability shall not be
recognized either. Except the aforesaid exceptional case, the Group recognizes the deferred
income tax liability arising from the provisional difference of all other payable taxes.
For the offsetable provisional difference in connection with the initial recognition of the asset or
liability arising from the transaction which is neither enterprise consolidation nor may influence the
accounting profit and taxable income amount (or can be used to offset loss), the pertinent
deferred income tax asset shall not be recognized. In addition, for the offsetable provisional
difference in connection with investment in subsidiary, associate and joint venture, if the
provisional difference may not possibly be reservable in the foreseeable future or cannot be
possibly obtained and used for offsetting the taxable income amount of the provisional difference
in future, the pertinent deferred income tax asset shall not be recognized. Except the aforesaid
exceptional case, the Group recognizes the deferred income tax asset arising from the other
offsetable provisional difference within the limit of the taxable income amount which can be used
to offset the offsetable provisional difference.
For the offsetable loss and tax credit in the years after carry-forward, the pertinent deferred
income tax asset is recognized within the limit of the future taxable income amount whch may
possibly be used for offsetting the offsetable loss and tax credit.
On the balance sheet day, the deferred income tax asset and deferred income tax liability are
measured based on the applicable tax rate during the period of predicted recovery of such asset
or discharge of the liabilities according to the tax law.
On the balance sheet day, the book value of the deferred income tax asset is rechecked. In case it
is highly impossible to get enough taxable income amount to offset the interest of the deferred
income tax asset in the future period, the book value of the deferred income tax assets is deduced.
When it is highly possible to get enough taxable income amount, the deducted amount is
65
reversed.
(3) Income tax expenses
Income tax expense includes current income tax and deferred income tax.
Except the transactions which are recognized as the comprehensive income or directly recorded
in the owners’ equity and the mater related current income tax and deferred income tax which is
recorded in other comprehensive income or owners’ equity, as well as the book value of the
goodwill for adjustment of the deferred income tax arising from the enterprise consolidation, the
remaining current income tax and deferred income tax expenses or income are recorded in the
current gain and loss.
21. Lease
Financing lease is actually the lease in which all the risks and remuneration in connection with the
ownership of the asset has been transferred and whose ownership may be either eventually
transferred or possibly not transferred. Operating lease refers to the leases other than financing
lease. The Group’s leases refer to the operational lease.
(1) The Group records the operational lease business as the tenant
Rental payment of operational lease is recorded in the relevant asset cost or current gain and loss
based on the straight line method over various fiscal periods within the lease term. The initial
direct expense is recorded in the current gain and loss. Contingent rental is recorded in the
current gain and loss when it actually incurs.
(2) The Group records the operational lease business as the lessor
The rental income of the operational lease is recorded in the current gain and loss according to
the straight line method in different periods within the lease term. The initial direct expense with
bigger amount is capitalized at the time of incurrence and is recorded in the current gain and loss
periodically according to the same base in recognizing the rental income during the lease term;
other initial direct expense with smaller amount is recorded in the current gain and loss at the time
of incurrence. Contingent rental is recorded in the current gain and loss when it actually incurs.
22. Emolument to Employees
The Group recognizes the accrued payroll as liability during the fiscal periods in which employees
are working for the Group.
The Group joins the social security program for employees established by the local government,
including the basic endowment insurance, medical insurance, housing provident fund and other
social security system; the corresponding expenses are recorded in the relevant asset cost or
current gain and loss at the time of incurrence.
In case the labor relation with an employee is terminated before the labor contract expires, or the
suggestion of compensation is proposed for the purpose of encouraging employees to accept the
lay-off with volunteer, if the Group has already prepared formal plan for terminating the labor
relation or proposed the suggestion of volunteer lay-off and is going to put it into practice while the
Group cannot unilaterally withdraw the plan of terminating the labor relation or suggestion of
lay-off, the predicted liability arising from the compensation for termination of the labor relation
with the employees is recognized and recorded in the current gain and loss.
The early retirement program is handled by using the same principle of the aforesaid lay-off
benefit. The Group records the emolument and paid to the employees of early retirement and their
social security premium from the date of stopping service to the Group to the date of regular
retirement in the current gain and loss (lay-off welfare) when they comply with the conditions for
recognizing the predicted liabilities.
23. Change in the Accounting Estimate
No change has taken place in accounting estimate in the report period.
24. Major Accounting Judgment and Estimation
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In process of applying the accounting policy, due to the inherent uncertainty of the operating
activities, the Group needs to make judgment, estimation and assumption of the book value of the
items in the statements which cannot be accurately measured. These judgment, estimation and
assumption are made based on the past experience of the Group’s management with
consideration of other correlative factors. These judgment, estimation and assumption may
influence the reported amount of income, expenses, assets and liabilities and disclosure of the
contingent liabilities on the balance sheet day. However, the result which causes uncertainty of
these estimates may possibly result in significant adjustment which may influence the book
amount of the assets or liabilities in future.
The Group makes regular recheck of the aforesaid judgment, estimation and assumption on the
basis of continuous operation. In case the change of the accounting estate only influences the
very period of change, the amount influenced is recognized in the very period of change; in case
the change of the accounting estimate not only influences the very period of change but also the
future period, the amount influenced is recognized in the very period of change and the future
period.
On the balance sheet day, the important fields in which the Group needs to make judgment,
estimation and assumption on the amounts of the items in financial statements are as follows:
(1) Provision for bad debts
The Group calculates the loss from bad debt by allowance method according to the accounting
policy on accounts receivable. Impairment of accounts receivable is based on the recoverability of
the accounts receivable through appraisal. Determination of impairment of accounts receivable
demands the management’s judgment and estimation. The discrepancy between the actual
result and the previous estimation shall influence the provision or reversal of the book value of the
accounts receivable and reserve for bad debt receivable during the period of the estimated
change.
(2) Provision for Price Falling of the Inventories of Brand Watches
For distribution of famous brand watches with stock age exceeding three years, in the opinion of
the Group’s management their prices tend to rise, while the famous brand watches enjoy good
sales prospect in future. The Group’s management makes overall recheck of the realizable
value of such famous brand watches at the end of a fiscal period; in the opinion of the Group’s
management, even though the stock age of such famous brand watches has increase somewhat,
the value of the famous brand watches is still entirely recoverable. In case there is sign showing
that the realizable net value of such famous brand watches is lower than the book value, the
Group shall make adjustment during the occurrence of the relevant signs. As the impairment of
such famous brand watches demands the management to make judgment and estimation after
concrete evidence has been acquired and with consideration of such factors as the purpose of
holding the famous brand watches, the influence on the matters after the balance sheet day. The
discrepancy between the actual result and the originally estimated shall influence the provision or
reversal of the value of inventories and reserve for price falling of inventories during the changed
period.
In the opinion of the Group’s management, the provision for price falling of the aforesaid famous
brand watches and the recheck method are proper.
(3) Reserve for impairment of the non-financial non-current assets
On the balance sheet day, the Group judges whether there may possibly exist any sign of possible
impairment of the non-current assets other than financial assets. For the intangible assets with
uncertain service life, except the impairment test conducted each year, when there exists any sign
of impairment, impairment test is also conducted. For the non-current assets other than financial
assets, when there exists sign showing that its book amount is unrecoverable, impairment test is
conducted.
When the book value of assets or asset group is higher than the recoverable amount, i.e. the
higher of the net amount of the fair value less the disposal expenses and the present value of the
predicted future cash flow, it shows that impairment has incurred.
67
The net amount of the fair value less the disposal expenses is determined with reference to the
sales agreement price of the similar assets in fair transaction or the observable market price less
the incremental cost directly attributable to disposal of the assets.
In prediction of the present value of future cash flow, it is necessary to make significant judgment
on the output, sales price, the relevant operation costs of the asset (or asset group) and the used
discount rate in calculating the present value, etc. The Group may use the accessible relevant
information in estimating the recoverable amount, including the prediction of the relevant output,
sales price and relevant operation costs according to the reasonable and supportable
assumption.
The Group tests the goodwill to determine whether impairment takes place at least every year.
This demands prediction of the present value of the future cash flow of the assets or grouping of
asset groups with the goodwill distributed. When prediction is made on the present value of the
future cash flow, the Group needs to predict the cash flow produced by the future asset groups or
grouping of the asset groups; meanwhile proper discount rate is chosen to determine the present
value of future cash flow.
(4) Depreciation and Amortization
The Group provides depreciation and makes amortization of the investment based real estate,
fixed assets and intangible assets based on the straight line method within the service life with
their residual value taken into consideration. The Group rechecks the service life regularly to
determine the amount to be recorded in the depreciation and amortization expenses of each
report period. The service life is determined by the Group according to the past experience on the
similar assets with combination of the updating of the predicted technology. If great change has
taken place in the previous estimation, the depreciation and amortization expenses are adjusted
during the future period.
(5) Development expenses
In determining the capitalized amount, the Group’s management needs to make prediction of the
future cash flow of the relevant assets, applicable discount rate and assumption of the predicted
beneficial period.
(6) Asset of deferred income tax
Within the limit where there is possibly enough taxable profit available for offsetting the loss, the
Group recognizes the deferred income tax asset for all the tax loss not utilized. This demands the
Group’s management to use a lot of judgment to estimate the time when the future taxable profit
may take place and the amount and decide the amount of the deferred income tax asset
necessary to be determined with combination of taxation planning strategy.
(7) Income tax
In normal operating activities, there exists a certain uncertainty in final tax treatment and
calculation in partial transactions in the Group; whether partial items are necessary to be
approved by the tax collection authority for payment before tax, If there exists discrepancy
between the final certification result of these tax affairs and the initially estimated amount, such
discrepancy shall produce influence upon the income tax and deferred income tax of the very
period during the final certification.
(8) After-sale Warranty
The Group is liable for the quality warranty for the commodities sold out and responsible for
compensation for the quality damage arising from the quality defect of the goods, including
repairing, replacement, etc. The Group makes estimation of and provides corresponding reserve
for the after-sale quality repairing commitments offered to the customers for the sold and repairing
of the sold commodities. Such contingent matters have formed a present obligation while
implementation of such present obligation may possibly cause the economic benefit to flow out of
the Group; the Group recognizes the best estimate necessary to be paid in implementing the
present obligations for the contingent matters. On the contrary, when such matter has not yet
formed a present obligation, the Group does not need to make prediction. In process of making
68
judgment, the Group needs to consider the data of the Group’s recent repairing experience.
However, the recent repairing experience may not possibly reflect the futre repairing conditions.
Any increase or decrease of the reserve may all possibly influence the gain and loss of future
years.
(V) Taxes
1. Value-added tax
The Group is a general VAT payer 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 pay 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 surcharge
The Company and its subsidiaries pay the city maintenance construction tax based on 1% or 7%
of the amount of turnover tax and pay the education surcharge based on 3%.
5. Corporate Income Tax
Income tax rate
Income tax rate of
The Company and its Subsidiaries of the previous
the report year
year
The Company (Note ①) and (Note⑤) 24% 22%
Shenzhen Harmony World Watches Center Co., Ltd. (Harmony)
(Note ①)
24% 22%
Shenzhen FIYTA Sophisticated Timepieces Manufacture Co., Ltd.
(the Manufacture Co.) (Note②) (Note ⑤)
15% 15%
Shenzhen World Watches Center Co., Ltd. (World Watches Center)
(Note ①)
24% 22%
FIYTA Hong Kong Limited (Note③) 16.5% 16.5%
68-Station Limited (Note ③) 16.5% 16.5%
LIANGYA (Note ③) 16.5% 16.5%
BAODING (Note ③) 16.5% 16.5%
Shenzhen FIYTA Science & Technology Co., Ltd. (FIYTA Science &
Technology) (Note ④)
25% 25%
Shenzhen Xiangji Trade Co., Ltd. (Xiangji Trade) (Note ④) 25% 25%
Xi’an Chengheng Industrial Co., Ltd. (Xi’an Chengheng) (Note ④) 25% 25%
Beijing Henglianda Timepieces Co., Ltd. (Henglianda) (Note ④) 25% 25%
Kunming Lishan Department Store Co., Ltd. (Lishan Department
Store) (Note ④)
25% 25%
Harbin World Watches Distribution Co., Ltd. (Harbin Co.) (Note ④) 25% 25%
Shenzhen Harmony Culture Communication Co., Ltd. (Culture Co.)
(Note ④)
25% 25%
69
Emile Chouriet (Shenzhen) Co., Ltd. (Emile Chouriet
25% 25%
(Shenzhen) (Note ④)
Montres Chouriet (Swiss Company) Note ⑥) 30% 30%
Harmony World Watches International Limited (World Watches
International) (Not ③)
16.5% -
FIYTA Sales Co., Ltd. (Sales Co.) (Note ④) 25% -
Note ① : In accordance with the Circular of the State Council on Implementation of the
Transitional Preferential Policy of Enterprise Income Tax GUO FA (2007) No. 39 promulgated by
the State Council on December 26, 2007, the enterprises previously enjoying the enterprise
income tax at rate of 15% would implement the rate of 24% in 2011. The place of registration of
such companies’ is Shenzhen and the applicable rate for the current year is 24%.
Note ②: In accordance with the Notice of Nanshan District Local Taxation Bureau, Shenzhen on
Registration for Tax Exemption SHEN DI SHUI JIAN NAN BEI GAO ZI [2009] No. 091026,
commencing from January 1, 2009, the Company would enjoy low rate taxation policy for hi-tech
enterprises necessary of key support from the central government and the enterprise income tax
rate is 15% for a term from January 2009 to December 2011.
Note ③: The company’s place of registration is Hong Kong and it applies the local profit tax of
Hong Kong. In the report year, the applicable tax rate is 16.50%.
Note ④ In accordance with the Enterprise Income Tax Law of the People’s Republic of China,
the tax rate of the income tax on resident enterprises is 25%.
Note ⑤: In accordance with the Circular of the State Administration of Taxation on Issuing the
Measures on Administration of Pre-tax Deduction of the Enterprise Research and Development
Budget (Trial) GUO SHUI FA [2008] No. 116 on December 10, 2008, the Company’s and the
Manufacture Company’s research and development budget for developing new technology, new
products and new process may enjoy 50% additional deduction as research and development
budget in addition to deduction based on actual incurrence according to the provisions concerned
if such budget has not formed intangible asset which should be charged to the current gain and
loss.
Note ⑥: The registration place of the Swiss Company is Switzerland. Based on the applicable tax
rate of the registration place, the tax rate is 30.00%.
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 Group 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.
VI. Enterprise Consolidation and Consolidated Financial Statements
1. Subsidiaries
(1) Subsidiaries Acquired through Establishment or Investment
70
in CNY 10,000
Balance of other
Capital items which
Business
Place of Registered Enterprise Legal Organization actually substantially
Subsidiaries Subsidiary type Nature Business Scope
Registration Capital type representative code contributed composes net
at year end investment in the
subsidiary
Purchase and sales of watches Company
60,000
Harmony Equity-controlled Shenzhen Commerce and spares and parts, repairing with limited Xu Dongsheng 279313935 60,000(CNY) -
(CNY)
service liability
Producing various clocks and
Equity-controlled Company
1,000 watches, movements, spares
Manufacture Co. Shenzhen Manufacture with limited Xu Dongsheng 715210802 1,000(CNY) -
(CNY) and parts, sophisticated
liability
timepieces, and repairing
High grade clocks and watches,
glasses, ornaments, gifts, Company
280
World Watches Center Equity-controlled Shenzhen Commerce general merchandise and with limited Fang Juan 192236228 140(CNY) -
(CNY)
handicrafts (excluding gold and liability
silver jewelry
company with
2,000 2,000
FIYTA Hong Kong Limited Equity-controlled Hong Kong Commerce Trade and investment limited Lu Bingqiang: 37954781 -
(HKD) (HKD)
liability
sales of watches, domestic trade company with
380
68-Station Limited Equity-controlled Hong Kong Commerce limited Xu Liang 50994724 300(HKD) -
(HKD)
liability
Domestic trade (except the
business under monopoly),
timepieces sales, repairing and
after-sale service, hotel
commerce,
management, property Company
catering, 1,000
Xi’an Chengheng Equity-controlled Xi’an management, real estate with limited Xu Dongsheng 668658862X 1,000(CNY) -
recreation (CNY)
development, real estate liability
agency, property lease,
accommodation, catering
service, teahouse service,
pastries processing and sales
Purchase and sales of Company
50
Harbin Co. Equity-controlled Harbin Commerce timepieces and parts; timepiece with limited Lu Bingqiang: 127592103 50(CNY) -
(CNY)
repairing liability
Company
3,000 Sales of timepieces, accessories
Henglianda Equity-controlled Beijing Commerce with limited Zhang Yuping 775466877 1,500(CNY) -
(CNY) and repairing service
liability
R&D, production and sales of
timepieces, production, Company
FIYTA Science & Technology Equity-controlled Shenzhen Manufacture 1,000 machining, sales and technical with limited Xu Dongsheng 69396758X 1,000(CNY) -
(CNY) development of sophisticated liability
parts.
Sales of clocks and watches,
Company
500 gifts, relevant information
Trade Co. Equity-controlled Shenzhen Commerce with limited Xu Dongsheng 697108950 500(CNY) -
(CNY) consulting and other domestic
liability
trade
Company
50 Cultural activity planning,
Cultural Co. (Note ②) Equity-controlled Shenzhen Commerce with limited Fang Juan 562782024 50(CNY) -
(CNY) advertising services
liability
71
Wholesale, import and export of
watches, watch spares and
Emile Chouriet (Shenzhen) Company
500 parts, jewelry, ornaments and
Equity-controlled Shenzhen Commerce with limited Lu Bingqiang: 550312818 500(HKD) -
(Note ③) (HKD) the supplementary business;
liability
after-sale repairing service of
watches.
World Watches International Company
1000 532891780001
Equity-controlled Shenzhen Commerce Retail and repairing services with limited Fang Juan 1000(HKD)
(Note ②) (HKD) 1104
liability
Design, R & D, sales of various
watches, timekeeping
instruments and spares and
parts, sales of jewelry,
Company
5000 ornaments, (except the items
Sales Co. (Note ③) Equity-controlled Shenzhen Commerce with limited Xu Dongsheng 574768692 5000(CNY)
(CNY) forbidden by the law,
liability
administrative regulations, the
decisions of the State Council;
the restrictive items are subject
to the permit)
72
(continued)
In CNY 10,000
Amount in minority
Balance of the owner’s equity of
shareholders’
the parent company offsetting
Are the equity used to
Minority the loss shared by minority
Shareholding Voting power statements write-down
Subsidiaries shareholder shareholders in the report Notes
Proportion (%) proportion (%) consolidated minority
s’ equity period exceeding the share
(Y/N) shareholders’ gain
enjoyed in the owner’s equity at
and loss
year beginning
HARMONY 100.00 100.00 Yes - - - Note ③
Manufacture Co. 100.00 100.00 Yes - - - -
World Watches Center (Note ①) 50.00 50.00 Yes 140.00 - - -
FIYTA Hong Kong Limited 100.00 100.00 Yes - - - -
68-Station Limited 60.00 60.00 Yes 175.55 - - -
Xi’an Chengheng Co. 100.00 100.00 Yes - - - -
Harbin Co. 100.00 100.00 Yes - - - -
Henglianda 100.00 100.00 Yes - - - Note④
FIYTA Science & Technology 100.00 100.00 Yes - - - -
Trade Co. 100.00 100.00 Yes - - - -
Cultural Co. 100.00 100.00 Yes - - - -
Emile Chouriet (Shenzhen) 100.00 100.00 Yes - - - -
World Watches International (Note
100.00 100.00 Yes
①)
Sales Co. (Note ②) 100.00 100.00 Yes
Note ①: HARMONY World Watches International Limited, a subsidiary of Harmony, one of the Company’s subsidiaries, was incorporated in May 2011 with
capital contribution of HKD 10 million.
Note ②: FIYTA Sales Co., Ltd., one of the Company’s subsidiaries, was incorporated in May 2011 with capital contribution of CNY 50 million and operation
term from May 3, 2011 to May 3, 2061.
73
Note ③: In the report period, the Company acquired 0.5% equity in AVIC International Shenzhen Company Limited, a minority shareholder of Harmony, one
of the Company’s subsdiaries and paid equity acquisition consideration amounting to CNY 2.8072 million. Ended the report period, the Company held 100%
equity in Harmony, one of the Company’s subsidiaries;
Note ④: In the report period, Harmony, one of the Company’s subsidiaries, acquired 50% equity in Beijing Hengdeli Watch Co., Ltd., a shareholder of
Henglianda, one of the Company’s subsidiaries and paid equity acquisition consideration amounting to CNY 16.3 million. Ended the report period, Harmony
held 100% equity in Henglianda.
74
(2) Subsidiaries acquired through consolidation of an enterprise not under the same
control
In CNY 10,000
Balance of other
items which
Place of 业务性质 Registere Legal Capital actually
Subsidiary Busines Enterpri Organization substantially
Subsidiaries Registratio Business d capital representativ contributed at
type s Scope se type code composes net
n nature e year end
investment in the
subsidiary
Domes
tic
trade, compa
Lishan
Equity-contr Commer 500(CNY materi ny with
Department Kunming Lu Wanjun 77552086-1 120(CNY) -
olled ce ) als limited
Store
supply liability
and
sales
Produc
tion,
manuf
acture
and compa
Swiss Equity-contr Switzerlan Commer sales ny with
25(CHF) Deper Jean - - -
Company olled d ce of limited
Emile liability
Chouri
et
watche
s
(continued)
in CNY 10,000
Balance of the owner’s
equity of the parent
Amount in minority
company offsetting the
Are the shareholders’ equity
Minority loss shared by minority
Shareholding Voting power statements used to write-down
Subsidiaries shareholders’ shareholders in the Notes
Proportion (%)proportion (%) consolidated minority
equity report period exceeding
(Y/N) shareholders’ gain
the share enjoyed in the
and loss
owner’s equity at year
beginning
Lishan Department
100.00 100.00 Yes - - - -
Store
75
Swiss Company 100.00 100.00 Yes - - - -
2. Operator with the control power formed by special purpose entity
According to the equity trust agreement concluded between 68-Station Limited, one of
FIYTA Hong Kong’s subsidiaries and the trustee of LIANGYA and BAODING, on
December 10, 2009, 68-Station, as the trustor, holds the right to earnings of the shares,
equity, and the relevant rights of LIANGYA and BAODING, and the contractual trustee
agreed to assign their rights at any time according to the trustor’s instructions. 68-Station
thus held the control power over LIANGYA and BAODING which were therefore put in the
consolidation scope of 68-Station.
LIANGYA and BAODING are the suppliers of the Group’s fashion brand watches. The
major business dealings between LIANGYA and BAODING, the special purpose entities
included in the consolidation scope and the Company and the principal assets, liabilities of
LIANGYA and BAODING in the consolidated statements and their year end balance are
as follows:
In CNY
Year end balance of the major
Major business dealings with
Items assets and liabilities recognized in
the Company
the consolidated statements
June, 2011:
Liangya Purchase of fashion brand
watches
Current assets 1,715.00
Current liabilities 30,600.00
Net assets -28,885.00
End of 2010:
LIANGYA Purchase of fashion brand
watches
Current assets 7,585.77
Current liabilities 26,037.54
Net assets -18,451.77
(continued)
In
CNY
Year end balance of the major
Major business dealings with
Items assets and liabilities recognized in
the Company
the consolidated statements
June, 2011:
BAODING Purchase of fashion brand
477,608.42
watches
Current assets 103,740.00
Non-current assets 334,081.84
Current liabilities 247,266.58
Net assets 477,608.42
End of 2010:
76
BAODING Purchase of fashion brand
watches
Current assets 1,341,473.46
Non-current assets 88,272.37
Current liabilities 1,282,385.69
Net assets 147,360.14
3. Note to the change of the consolidation scope
As stated in Note VI.1, in the report year, the Group increased the consolidation scope in
the report period correspondingly due to new establishment of FIYTA Sales Co., Ltd. and
HARMONY World Watches International Limited.
4. Subsidiaries newly listed in the consolidation scope in the report period
Net profit in the report
Description Net asset at year end
year
HARMONY World Watches
8,316,000 -
International Limited
FIYTA Sales Co., Ltd. 50,000,000 -
5. Exchange rates of the major items of the statements of overseas operation entities
Assets and Liabilities
Items
June 30, 2011 December 31, 2010
FIYTA Hong Kong
HKD 1 = CNY0.8316 HKD 1 = CNY0.8509
Limited
Montres Chouriet SA,
S.Fr. 1 = CNY 7.7743 S.FR. 1 = CNY 7.0562
Switzerland
Revenue, Costs and Cash Flow
Items
January - June, 2011 2010
FIYTA Hong Kong
HKD 1 = CNY0.8487 HKD 1 = CNY0.8657
Limited
Montres Chouriet SA,
S.Fr. 1 = CNY 7.2929 S.Fr. 1 = CNY 6.8115
Switzerland
Note: 68-Station is one of the subsidiaries of FIYTA Hong Kong. BAODING and LIANGYA
are the operation entities under control of FIYTA Hong Kong. Their exchange rates and
method are identical to that of FIYTA Hong Kong.
VII. Notes to items in the consolidated financial statements
In the following notes (including the notes to the major items of the parent company’s
financial statements), year beginning refers to December 31, 2010 and the end of the
report period refers to June 30, 2011 unless there is otherwise notice. The report period
refers to January - June, 2011 and the same period of the previous year refers to January
– June, 2010.
1. Monetary funds
Items End of the report period Year beginning
77
Amount in Amount in Conver
Convers Amount in
foreign Amount in CNY foreign sion
ion rate CNY
currency currency rate
Cash in stock:
- CNY 1.0000 - - 261,223.99
2,401,589.03 2,401,589.03
- USD 6.4716 306.00 6.6227 2,026.54
313.14 2,026.54
- HKD 0.8316 1,476.66 0.8509 1,256.49
4,476.33 3,722.52
- Euro 9.3612 3.90 8.8065 34.34
2,016.86 18,880.25
10.218
- GBP 10.3986 110.00 1,124.00
108.09 1,124.00 2
- S.Fr. 7.7743 20,849.31 2,454.05 7.0562 17,316.03
2,681.82
Bank deposit:
281,434,220.9 281,434,220.9 605,847,744.0
- CNY 1.0000 - -
3 3 6
- USD 146,482.34 6.4716 947,975.12 125,038.69 6.6227 828,093.73
7,226,436.4
- HKD 9,956,910.11 0.8316 8,280,166.45 0.8509 6,148,857.42
4
- S.Fr. 653,904.66 7.7743 5,083,651.00 40,091.70 7.0562 282,895.00
Other
Monetary
Funds:
- CNY 179,006.92 179,006.92 - - 65,245.92
298,373,212.0 613,455,817.5
Total
7 2
2. Accounts receivable
(1) Presented based on types of accounts receivable
End of the report period
Book Balance Reserve for bad debt
Categories
Proportion Proportion
Amount (%) Amount (%)
Accounts receivable with significant
10,988,318.4
single amount and provision of bad 3.87 10,988,318.49 100.00
9
debt reserve on individual basis
Accounts receivable for which bad
debt reserve has been provided
78
based on the grouping
Combined based on the 72,880,543.0
4,083,646.82 5.60
accounting age 6 25.69
Grouping of the designated 169,660,944.
accounts 42 59.81
242,541,487.
Sub-total of Groupings 4,083,646.82 1.68
48 85.51
Accounts receivable with
insignificant single amount and 30,114,190.9
10.62 30,114,190.99 100.00
provision of bad debt reserve on 9
individual basis
283,643,996.
Total 100.00 45,186,156.30 15.93
96
(continued)
Year beginning
Book Balance Reserve for bad debt
Categories
Proportion Proportion
Amount (%) Amount (%)
Accounts receivable with significant
10,988,318.4
single amount and provision of bad 4.97 10,988,318.49 100.00
9
debt reserve on individual basis
Accounts receivable for which bad
debt reserve has been provided
based on the grouping
Grouping based on the 51,348,742.2
23.23 4,083,646.82 7.95
accounting age 3
Grouping of the designated 128,631,104.
58.18
accounts 37
179,979,846.
Sub-total of groupings 81.41 4,083,646.82 2.27
60
Accounts receivable with
insignificant single amount and 30,114,190.9
13.62 30,114,190.99 100.00
provision of bad debt reserve on 9
individual basis
238,457,840.
Total 100.00 45,186,156.30 20.44
66
(2) Presented based on age of accounts receivable
End of the report period Year beginning
Items
Amount Proportion (%) Amount Proportion (%)
79
Within 1 year 240,362,003.86 177,775,351.80 80.41
84.74
1 to 2 years 426,479.18 429,855.42 0.19
0.15
2 to 3 years 240,195.77 10,723.48 0.01
0.08
Over 3 years 42,615,318.15 42,866,425.38 19.39
15.02
Total 283,643,996.96 100.00 221,082,356.08 100.00
(3) Provision for bad debt
① Provision for bad debt of the accounts receivable with significant single amount and
provision of bad debt reserve on individual basis
Reserve for bad Provision
Description of accounts receivable Book amount Reasons
debt proportion
Beijing Urban/Rural Trade Center Unrecoverabl
2,033,710.15 2,033,710.15 100.00
Co., Ltd. e
Qingdao Handry Timepieces, Unrecoverabl
1,298,215.01 1,298,215.01 100.00
Glasses and Jewelry Co. e
Timepieces and Sewing Machine Unrecoverabl
982,604.03 982,604.03 100.00
Wholesale Station of Yingkou e
General MerchandisePhotographic Unrecoverabl
890,387.77 890,387.77 100.00
Paraphernalia Wholesale Co. e
Unrecoverabl
Siping No. 1 Department Store 823,302.04 823,302.04 100.00
e
Anshan Timepieces and 807,815.02 807,815.02 100.00 Unrecoverabl
Photographic Equipment Co. e
Unrecoverabl
Customers to be identified 4,152,284.47 4,152,284.47 100.00
e
Total 10,988,318.49 10,988,318.49
② Accounts receivable for which bad debt reserve has been provided based on the
grouping
The accounts receivable for which the bad debt reserve is provided based on the age
analysis:
End of the report period Year beginning
Book Balance Book Balance
Age Reserve for Reserve for
Proportion Proportion
Amount bad debt Amount bad debt
(%) (%)
Within 1 2,447,630.6
70,449,952.21 96.66 49,155,629.05 95.73 2,447,630.62
year 2
80
1 to 2
426,479.18 0.59 43,130.16 418,473.80 0.81 43,130.16
years
2 to 3
240,195.77 0.33 5,361.74 10,723.48 0.02 5,361.74
years
Over 3 1,587,524.3
1,763,915.90 2.42 1,763,915.90 3.44 1,587,524.30
years 0
4,083,646.8
Total 72,880,543.06 100.00 51,348,742.23 100.00 4,083,646.82
2
Note: No reserve for bad debt has been provided for CNY 169,660,944.42 of the accounts
receivable at year end (amount in the same period of the previous year: CNY
128,631,104.37) as described in Note IV. 8.
③ Accounts receivable with insignificant single amount and provision of bad debt reserve
on individual basis
Description of
Reserve for
accounts Book Balance Proportion (%) Provision reason
bad debt
receivable
Doubtful
30,114,190.99 100.00 30,114,190.99 Unrecoverable
accounts/bad debt
For the accounts receivable for which there is obvious sign showing that the customer
obliged for repayment is unable to implement the obligation with the single amount not
exceeding CNY 800,000.00, the Group takes that there exists big risk in recovering
the account receivable from such a customer and provides reserve for bad debt by
100%.
(4) In the report period, there is no account receivable due from the shareholder
holding over 5% (with 5% inclusive) of the Company’s vote-bearing shares.
(5) Top Five Debtors of the Accounts Receivable
Proportion in the
Relationship total of the
Company names Amount Years
with the Group accounts
receivable(%)
Shenzhen China
Resource Co., Ltd. Non-Related Within 1
6,827,950.99 2.86
(Payment with credit Party year
card at Mixc Shop)
Xi’am Golden Eagle
Non-Related Within 1
International Shopping 4,328,436.83 1.82
Party year
Center Co., Ltd.
Shanxi International Non-Related Within 1
3,886,026.85 1.63
Trade Center Co., Ltd. Party year
Fuzhou Grand Ocean Non-Related 3,596,387.14 Within 1 1.51
81
Retail Co., Ltd. Party year
Hunan Hepingtang Non-Related Within 1
3,420,835.65 1.43
Industrial Co., Ltd. Party year
Total 22,059,637.46 9.25
(6) Accounts due from related parties
For the detail, refer to Note VIII.6 Accounts due to and from related parties
(7) Accounts receivable in foreign currency are presented in the original currency and the
exchange rate
End of the report period Year beginning
Items
Exchan Foreign Exchan
Foreign currency ge rate CNY currency ge rate CNY
USD 44,913.38 6.4716 290,661.43 28,229.20 6.6227 186,953.52
1,441,912.5
HKD 274,930.42 0.8316 228,632.14 1,694,573.47 0.8509
7
S.Fr. 13,145.00 7.7655 102,077.50 39,132.00 7.0562 276,123.22
3. Advances to Suppliers
（1） (1) Advances to suppliers presented based on age
End of the report period Year beginning
Age Proportion Proportion
Amount Amount
(%) (%)
Within 1 year 24,747,630.36 99.87 35,747,261.28 97.55
1 to 2 years 32,160.00 0.13 716,932.15 1.96
2 to 3 years 0.00 - - -
Over 3 years 0.00 - 180,060.00 0.49
Total 24,779,790.36 100.00 36,644,253.43 100.00
(2) Top Five Receivers of Advance Payment
Relationship Time of Reason of
Company names Amount
with the Group prepayment unsettlement
82
Shenzhen Borui Non-Related Goods not
5,879,998.76 Within 1 year
Trade Co., Ltd. Party received
Dongguan Junyi
Non-Related Goods not
Precision Hardware 5,047,034.76 Within 1 year
Party received
Products Co., Ltd.
SAN SUN
Non-Related Prepayment for
INDUSTRIAL CO., 3,326,400.00 Within 1 year
Party accessories
LTD.
Shenzhen Youpin
Decoration Non-Related Prepayment for
1,922,100.00 Within 1 year
Engineering Co., Party refurbishment
Ltd.
Shanghai Dongyi
Non-Related Prepayment for
Exhibition Service 1,238,495.79 Within 1 year
Party refurbishment
Co., Ltd.
Total 17,414,029.31
(3) In the report period, there was no advance payment paid to the shareholder
holding over 5% (with 5% inclusive) of the Company’s vote-bearing shares.
(4) Advance payments in foreign currency are presented in the original currency
and at exchange rate.
End of the report period Year beginning
Items Exchan Foreign Exchan
Foreign currency ge rate CNY currency ge rate CNY
HKD 5,136,020.00 0.8316 4,271,114.23 9,583,285.48 0.8509 8,154,417.6
S.Fr. 3,665.00 7.0562 25,860.971
4. Other receivables
(1) Other receivables presented based on categories
End of the report period
Book Balance Reserve for bad debt
Categories
Proportion Proportion
Amount (%) Amount (%)
Other receivables with significant
single amount and provision of bad - - - -
debt reserve on individual basis
Other receivables for which bad debt
reserve has been provided based on - - - -
grouping
Grouping based on the accounting
21,508,097.34 61.79 4,465,791.17 20.76
age
83
Grouping of the designated accounts 13,141,452.66 37.75
Sub-total of Groupings 34,649,550.00 99.55 4,465,791.17 12.89
Other receivables with insignificant
single amount and provision of bad 156,020.47 0.45 156,020.47 100.00
debt reserve on individual basis
Total 34,805,570.47 100.00 4,621,811.64 13.28
(continued)
Year beginning
Book Balance Reserve for bad debt
Categories
Proportion Proportion
Amount (%) Amount (%)
Other receivables with significant
single amount and provision of bad - - - -
debt reserve on individual basis
Other receivables for which bad debt
reserve has been provided based on - - -
grouping
Grouping based on the accounting 19,829,774.4
61.94 4,465,791.17 22.52
age 7
12,026,644.8
Grouping of the designated accounts 37.57
2
31,856,419.2
Sub-total of Groupings 99.51 4,465,791.17 14.02
9
Other receivables with insignificant
single amount and provision of bad 156,020.47 0.49 156,020.47 100.00
debt reserve on individual basis
32,012,439.7
Total 100.00 4,621,811.64 14.44
6
(2) Other receivables presented based on ages
End of the report period Year beginning
Items
Amount Proportion (%) Amount Proportion (%)
Within 1 21,058,359.0
24,442,171.40 70.22 65.78
year 0
1 to 2
1,216,271.96 3.49 5,171,256.90 16.15
years
2 to 3
4,124,803.86 11.86 1,586,857.16 4.96
years
Over 3
5,022,323.25 14.43 4,195,966.70 13.11
years
32,012,439.7
Total 34,805,570.47 100.00 100.00
6
(3) Provision for bad debt
84
① Other receivables for which bad debt reserve has been provided based on grouping
Other receivables for which the bad debt reserve is provided based on the age analysis:
End of the report period Year beginning
Book Balance Book Balance
Age Reserve for Reserve for
Proportion Proportion
Amount bad debt Amount bad debt
(%) (%)
Within 1
14,133,290.32 65.71 707,635.48 13,608,039.14 68.62 707635.48
year
1 to 2 years 2,425,362.77 11.28 65,648.36 1,951,845.20 9.84 65648.36
2 to 3 years 1,024,573.19 4.76 118,779.60 658,162.40 3.32 118779.60
Over 3
3,924,871.06 18.25 3,573,727.73 3,611,727.73 18.22 3,573,727.73
years
Total 21,508,097.34 100.00 4,465,791.17 19,829,774.47 100.00 4,465,791.17
Note: No reserve for bad debt has been provided for CNY 13,141,452.66 of other
receivable at year end (amount in the same period of the previous year: CNY
12,026,644.82) as described in Note IV. 8.
② Other receivables with insignificant single amount and provision of bad debt reserve on
individual basis at year end
Reserve for bad
Other receivables Book Balance Proportion (%) Provision reason
debt
Reserve for
individual
156,020.47 100.00 156,020.47 Unrecoverable
employees of
service termination
For the other receivables in connection with the reserve for individual employees of
service termination, none of single amounts exceeds CNY 500,000.00. However, such
accounts are unrecoverable due to those employees leaving service, the reserve for
bad debt is provided based on 100%.
(4) In the report period, there was no other receivables due from the shareholder
holding over 5% (with 5% inclusive) of the Company’s vote-bearing shares.
(5) Top Five Debtors of the Other Receivables
Proportion in
Relationship
the total of the
Company names with the Amount Years
other
Group
receivables (%)
Shenzhen Yuda Non-Related Within 1 11.33
85
Sophisticated Party 3,942,000.00 year
Machinery Co., Ltd.
Shenzhen New Longtai Non-Related Over 3
4.52
Industrial Co. Ltd. Party 1,573,876.89 years
Shenzhen China
Resource Co., Ltd. Non-Related Within 1
4.51
(Payment with credit Party 1,569,020.00 year
card at Mixc Shop)
Shenzhen Watch & Non-Related Within 1
4.50
Clock Association Party 1,565,112.69 year
Shangyu BuEr
Non-Related Within 1
Precision Machine Co., 4.05
Party 1,408,500.00 year
Ltd.
Total 28.90
10,058,509.58
(6) Accounts due from related parties
For the detail, refer to Note VIII.6 Accounts due to and from related parties
(7) Other receivables in foreign currency are presented in the original currency and
exchange rate
End of the report period Year beginning
Items
Amount in Exchan Conversion in Amount in Exchan Conversion
S.Fr. foreign currency
583,682.96 ge rate
7.7655 CNY
4,532,590.0 foreign
233,056.00 ge rate
7.0562 in CNY
1,644,489.7
0 currency 5
HKD 428,198.67 0.8316 356,090.01 846,168.10 0.8509 720,004.44
5. Inventories
(1) Classification of Inventories
End of the report period
Items Provision for price
Book Balance Book value
falling
Raw materials 82,135,113.25 22,429,279.11 59,705,834.14
Products in process 13,594,755.14 - 13,594,755.14
Commodities in stock
1,225,366,771.62 14,578,748.24 1,210,788,023.38
(Note)
Total 1,321,096,640.01 37,008,027.35 1,284,088,612.66
(continued)
86
Year beginning
Items Provision for price
Book Balance Book value
falling
Raw materials 75,456,394.56 20,429,279.11 55,027,115.45
Products in process 13,299,075.48 - 13,299,075.48
Commodities in
994,388,732.16 14,322,297.39 980,066,434.77
stock
Total 1,083,144,202.20 34,751,576.50 1,048,392,625.70
Note: The balance of the Group’s famous brand watches in stock with age exceeding
three years at year end was CNY 106,293,453.75, taking 8.67% of the balance of the
famous brand watches at year end; the balance of the Group’s famous brand watches in
stock with age exceeding three years at year beginning was CNY 76,417,873.20, taking
8.59% of the balance of the famous brand watches at year end.
(2) Change of reserve for price falling of inventories
Provision in Decrease in the report year
End of the report
Items Year beginning the report Amount of Amount
period
year reversal written off
Raw materials 20,429,279.11 2,000,000.00 - - 22,429,279.11
Commodities in stock 14,322,297.39 256,450.85 - - 14,578,748.24
Total 34,751,576.50 2,256,450.85 - - 37,008,027.35
(3) There were no inventories used as collateral for debt at year end.
6. Other current assets
End of the
Items Description Year beginning
report period
Rentals Rental for shops 3,525,920.98 3,315,176.10
Others 3,117,465.42 631,357.04
Total 6,643,386.40 3,946,533.14
7. Long-term equity investment
(1) Long-term equity investment classification
Decreas
Increase in
Year e in the End of the
Items the report
beginning report report period
year
year
87
48,985.4 1,847,928.1
Investment in associates 1,896,913.65 -
8 7
Other equity investment 385,000.00 - - 385,000.00
Less: Reserve for impairment of
300,000.00 - - 300,000.00
long-term equity investments
48,985.4 1,932,928.1
Total 1,981,913.65 0.00
8 7
(2) Statement of Long Term Equity Investment
Accountin Investm Year Increase/D End of the
Investees
g method ent cost beginning ecrease report period
Shenzhen Research Institute of
Equity
Northwest China Polytechnic 1,350,000.00 1,896,913.65 -48,985.48 1,847,928.17
method
University
Xi’an Tangcheng Joint Stock Cost
85,000.00 85,000.00 - 85,000.00
Co., Ltd. method
Shenzhen CATIC Culture Cost
300,000.00 300,000.00 - 300,000.00
Transmit Co., Ltd. method
Total 2,281,913.65 -48,985.48 2,232,928.17
(continued)
Holding
Holding Note to
proporton
proporton of inconsistence of Provision for Cash
of the
the holding proportion Impairme impairment dividend in
Investees shares in
vote-bearing of the shares in the nt reserve in the report the report
the
shares in the investees with year year
investees
investees voting power
(%)
Shenzhen
Equity distribution
Research
based on 50%
Institute of
proportion
Northwest 45.00 50.00 - - -
according to the
China
agreement of the
Polytechnic
shareholders
University
Xi’an
Tangcheng
0.10 0.10 - - - -
Joint Stock
Co., Ltd.
Shenzhen
CATIC Culture 300,000.0
15.00 15.00 - - -
Transmit Co., 0
Ltd.
300,000.0
- -
Total 0
88
(3) The investee’s ability to transfer the fund to the investor has not been restricted.
(4) Investment in joint ventures and associates
Associates
Voting
Proporti
proportion in
Place of Legal on held
Enterprise Business Registered the investee
Investees Registratio represent by the
type type Capital taken by the
n ative Compa
Company
ny (%)
(%)
Shenzhen
Education,
Research
training
Institute of Shenzhe Zheng
Institution and 3,000,000.00 45 50
Northwest China n Yongan
scientific
Polytechnic
research
University
(continued)
Total
Total net Net profit in Rela
Total assets Total liabilities operation Organizat
Investees assets at the report tions
at year end at year end income in the ion code
year end year hip
report year
Shenzhen
Research
Ass
Institute of 4,752,223.6 4,024,279.5
727,944.15 0 -97,970.95 ociat -
Northwest China 9 4
e
Polytechnic
University
(5) Statement of reserve for impairment of long term equity investment
Increase in
Decrease in End of the report
Items Year beginning the report
report year period
year
Shenzhen CATIC Culture
300,000.00 - - 300,000.00
Communication Co., Ltd.
8. Investment Based Real Estate
(1) Statement of investment based real estate
Year Increase in the Decrease in End of the
Items
beginning report year report year report period
89
Investment based real estate
231,774,832.2
measured afterwards by means - - 231,774,832.24
4
of cost method
Less: Provision for impairment
- -
of investment based real estate
231,774,832.2
Total - - 231,774,832.24
4
(2) Investment based real estate measured based on costs
Year Increase in the Decrease in End of the
Items
beginning report year report year report period
231,774,832.2
I. Total original value - - 231,774,832.24
4
231,774,832.2
Housing and buildings - - 231,774,832.24
4
II. Total accumulative
66,392,858.45 3,097,836.11 - 69,490,694.56
depreciation
Housing and buildings 66,392,858.45 3,097,836.11 69,490,694.56
III. Total reserve for impairment
Housing and buildings
165,381,973.7
IV. Total Book Value 0.00 162,284,137.68
9
165,381,973.7
Housing and buildings 0.00 162,284,137.68
9
9. Fixed assets
(1) Fixed assets
Increase in Decrease
Year End of the
Items the report in report
beginning report period
year year
Cost price
Housing and buildings 241,886,087. 242,049,875.1
226,857.00 63,069.34
44 0
Machines & equipment 20,586,041.3
779,289.99 - 21,365,331.38
9
Motor vehicles 11,911,437.8
1,078,568.00 899,902.13 12,090,103.76
9
Electronic equipment 20,008,458.6
1,658,363.76 35,461.38 21,631,361.01
3
Others 35,327,380.7
947,447.74 86,163.10 36,188,665.35
1
Total 329,719,406. 4,690,526.49 1,084,595.9 333,325,336.6
90
06 5 0
Accumulative
depreciation
Housing and buildings 28,587,807.3
3,684,055.93 - 32,271,863.29
6
Machines & equipment 9,098,765.09 844,791.56 - 9,943,556.65
Motor vehicles 7,238,439.42 603,831.85 854,932.07 6,987,339.20
Electronic equipment 11,819,103.6
1,310,029.80 30,895.64 13,098,237.77
1
Others 21,233,221.9
2,615,446.95 6,197.92 23,842,470.98
5
Total 77,977,337.4
9,058,156.09 892,025.63 86,143,467.89
3
Provisions for
impairment of fixed
assets
Housing and buildings - - - -
Machines & equipment - - - -
Total - - - -
Fixed assets, net 251,742,068. 247,181,868.7
63 1
(2) Fixed assets with ownership restricted
Ended the report period, the housing and buildings with book value of CNY 3,346,473.41
(original value: CNY 3,471,249.10) were used as the collateral for long term loan
amounting to CNY 1,332,819.80.
(3) Fixed assets leased through operational lease
Book value at the end of Book value at year
Types of leased assets for operational lease
the period beginning
Housing and buildings 162,284,137.68 165,774,200.29
Total 162,284,137.68 165,774,200.29
(4) Fixed asset whose property title certificate has not been issued
Cause of failure to get
Estimated time of getting the
Items the property title Book value
property title certificate
certificate
Premises of Harbin Defect existing in the
unknown 392,028.00
Office property title
Total 392,028.00
(5) The original value of the Group’s fixed assets in application without provision of depreciation at
91
year end was CNY 21,439,129.42.
10. Construction in process
Increase in Transfer-in in
Year End of the
Project the report the report Others
beginning report period
year year
Quantity of Decre
fixed assets ase
Project of stall
adjustment of the
169,000.0
ground parking lot of - - - 169,000.00
0
FIYTA Technology
Building
Project of gate
relocation of the parking
- 34,000.00 - - 34,000.00
lot of FIYTA Technology
Building
0.00
203,000.0
Total - - - 203,000.00
0
11. Intangible assets
Increase in the Decrease in End of the
Items Year beginning
report year report year report period
I. Total original book value 29,155,773.85 388,981.20 14,303.66 29,530,451.39
Land use right 15,487,349.60 - - 15,487,349.60
Software system 2,529,964.45 388,981.20 - 2,918,945.65
Trademark use right 11,138,459.80 - 14,303.66 11,124,156.14
II. Total accumulative
9,918,241.63 443,724.15 - 10,361,965.78
amortized amount
Land use right 5,161,114.16 172,037.16 - 5,333,151.32
Software system 766,635.14 271,686.99 - 1,038,322.13
Trademark use right 3,990,492.33 - - 3,990,492.33
III. Total accumulative amount
- - - -
of provision for impairment
Land use right - - - -
Software system - - - -
Trademark use right - - - -
IV. Total Book Value 19,237,532.22 - - 19,168,485.61
Land use right 10,326,235.44 - - 10,154,198.28
92
Increase in the Decrease in End of the
Items Year beginning
report year report year report period
Software system 1,763,329.31 - - 1,880,623.52
Trademark use right 7,147,967.47 - - 7,133,663.81
12. Goodwill
(1) Statement of goodwill
Investee’s name or Increase in End of the Provision for
Year Decrease in
matter resulting in the report report impairment at
beginning report year
goodwill year period year end
Lishan Department 1,735,756.4
1,735,756.48 - - 1,735,756.48
Store 8
(2) Impairment test and provision for impairment of goodwill
For the method for testing impairment of goodwill, refer to Note IV.16.
HARMONY, one of the Company’s subsidiaries acquired 100% equity in Lishan
Department Store on March 31, 2008 with valuable consideration of CNY 1,200,000.00
and the fair value of the recognizable net assets of Lishan Department Store on the
acquisition day was CNY 535,756.48. HARMONY presented the margin amounting to
CNY 1,735,756.48 in the consolidated financial statements as “goodwill”. At the end of
2008, HARMONY made impairment test of the goodwill and charged the loss from
impairment of the goodwill lower than the recoverable amount totaling CNY 1,735,756.48
to the gain and loss of the year 2008.
13. Long-term expenses to be apportioned
Amount
Increase in the
Items Year beginning amortized in the Amount at year end
report year
report year
Cost for making
15,119,640.32 11,270,357.95 6,891,985.56 19,498,012.71
special counters
Refurbishment 52,914,667.85 19,022,667.70 13,450,525.13 58,486,810.42
Speaker fee 3,978,571.35 3,338,547.48 1,989,285.66 5,327,833.17
Others 139,838.55 27,001.71 28,565.62 138,274.64
Total 72,152,718.07 33,658,574.84 22,360,361.97 83,450,930.94
14. Deferred Income Tax Asset/Deferred Income Tax Liability
(1) Deferred Income Tax Asset/Deferred Income Tax Liability Already Recognized
93
Asset of deferred income tax recognized
Year end Year beginning
Offsetable
Provisional
provisional
Items Deferred Deferred income difference
discrepancy and
income tax asset tax asset offsetable and loss
loss offsetable
offsetable
Reserve for
impairment of the 5,651,946.35 26,080,437.76
6,046,757.80 28,336,888.62
assets
Unrealized profit
13,811,119.39 59,466,701.13
offset internally 26,552,542.59 105,509,885.33
Deferred income 99,000.00 600,000.00
99,000.00 600,000.00
Loss deductable 754,724.60 3,882,873.37
754,724.60 3,882,873.37
Total 20,316,790.34 90,030,012.26
33,453,025.00 138,329,647.33
(2) Statement of unrecognized deferred income tax asset
Items Year end Year beginning
Offsetable provisional
58,479,106.68 62,314,863.16
discrepancy
Total 58,479,106.68 62,314,863.16
Note: The reason why the Group has not recognized aforesaid offsetable provisional
discrepancy is that it is uncertain whether enough taxable income amount may be
achieved.
15. Statement of Reserve for Impairment of Assets
Provision in Decrease in report year End of the
Year
Items the report Amount of Amount report
beginning
year reversal written off period
49,807,967.9 49,807,967.
I. Provision for bad debts - -
4 94
II. Provisions for price falling of 34,751,576.5 37,008,027.
2,256,450.85 - -
inventories 0 35
III. Reserve for impairment of
the long term equity investment 300,000.00 - - - 300,000.00
IV. Reserve for impairment of
- - - - -
fixed assets (Note)
V. Reserve for impairment of 1,735,756.4
1,735,756.48 - - -
goodwill 8
94
Provision in Decrease in report year End of the
Year
Items the report Amount of Amount report
beginning
year reversal written off period
86,595,300.9 88,851,751.
Total 2,256,450.85 -
2 77
16. Ownership or the assets with use right restricted
End of the report
Items Cause of being restricted
period
Sub-total of the assets used
3,346,473.41
for security
Housing and buildings 3,346,473.41 Used for mortgage loan
Sub-total of the assets with
the ownership or use right
392,028.00
restricted due to other
reason:
Premises of Harbin Office 392,028.00 Defect existing in the property title
Total 3,738,501.41
17. Short-term Loan
Items End of the report period Year beginning
Secured loan (note) 582,311,000.00 668,253,730.00
Credit borrowing 40,000,000.00 60,000,000.00
Total 622,311,000.00 728,253,730.00
Note: The short term borrowing at year end were guaranteed by CATIC Group for the
Company. For the detail about the related guarantee, refer to Note VIII.5 (4).
18. Accounts payable
(1) Statement of accounts payable
Items End of the report period Year beginning
Trade accounts payable 136,269,519.53 140,330,134.06
Payables for materials 68,819,611.10 15,811,854.18
Engineering warranty fee
211,339.76 211,339.76
payable
Total 205,300,470.39 156,353,328.00
(2) In the report period, there was no account payable due from the shareholder holding
over 5% (with 5% inclusive) of the Company’s vote-bearing shares or any of the related
parties.
95
(3) Note to the accounts payable with big amount with age exceeding 1 year
Reason of remaining
Creditors Amount
outstanding
Failure in
Shenzhen Yikang Watch Co. Ltd. 259,952.74 communication with
the person in charge
Invoice not yet
Guangzhou Non-ferrous Metal 50,140.07
issued
Total 310,092.81
(4) Balances in foreign currency in the accounts receivable are as follows:
End of the report period Year beginning
Amount in Exchan Conversion in Amount in Exchan Conversion in
Items
foreign ge rate CNY foreign ge rate CNY
currency currency
15,002,159.6 17,162,709.2 14,603,749.3
HKD 0.8316 12,475,795.95 0.8509
3 6 1
S.Fr. 21,394.89 7.7655 166,142.00 21,536.00 7.0562 151,962.32
Total 14,755,711.6
12,641,937.95
3
19. Advance receipt
(1) Statement of advance receipt
Item End of the report period Year beginning
Advances on sales 3,464,531.40 8,464,969.63
Total 3,464,531.40 8,464,969.63
(2) In the report period, there was no advance receipt received from the shareholder
holding over 5% (with 5% inclusive) of the Company’s vote-bearing shares.
(3) Advance receipts received from the related parties
For the detail, refer to Note VIII.6 Accounts due to and from related parties
(4) Balances in foreign currency in the advance receipts are as follows:
End of the report period Year beginning
Item Amount in Amount in
Exchan Conversion in Exchan Conversion in
foreign foreign
ge rate CNY ge rate CNY
currency currency
HKD 354,437.69 0.8316 294,750.38 705,530.57 0.8509 600,335.96
96
20. Accrued Payroll
Increase in Decrease in End of the report
Items Year beginning
report year report year period
I. Salaries, bonus,
allowances, 19,810,762.31 107,736,938.57 114,236,045.88 13,311,655.00
subsidies
II. Staff’s welfare - 3,497,224.40 3,497,224.40 -
III. Social security 1,155.32 13,674,934.67 13,093,109.92 582,980.07
Including: 1.
medical insurance 163.90 3,024,459.49 3,024,623.39 -
premium
2. Basic
endowment 972.72 7,644,816.91 7,645,789.63 -
insurance premium
3. Contribution to
- 1,277,641.63 1,222,337.79 55,303.84
the annuity scheme
4. Unemployment
7.45 497,746.64 497,754.09 -
insurance premium
5. Service injury
- 161,646.17 161,646.17 -
insurance premium
6. Maturity
11.25 222,263.04 222,274.29 -
insurance premium
7. Others - 857,474.48 331,384.56 526,089.92
IV. Public reserve
- 3,022,844.11 3,022,844.11 -
for housing
V. Trade union
fund and staff 162,631.26 2,582,268.93 2,591,914.42 152,985.77
education fund
VI. Compensation
given due to
- 2,203.33 2,203.33 -
termination of the
labor service
VII. Others 6,381.75 429,793.36 436,175.11 -
Total 19,980,930.64 130,946,207.37 136,879,517.17 14,047,620.84
21. Taxes payable
Items End of the report period Year beginning
Value-added tax 11,094,602.06 3,388,267.58
Consumption tax 0.00 -
Business tax 506,966.36 551,432.79
Enterprise income tax 24,434,924.30 13,502,946.07
Individual income tax 777,534.31 582,038.39
97
Items End of the report period Year beginning
Urban maintenance and
361,922.63 206,564.52
construction tax
Real estate tax 37,939.92 105,000.00
Education Surcharge 105,851.36 30,206.92
Stamp duty 20,292.35 17,282.43
Dyke protection surcharge 38,139.64 28,004.81
Others 90,606.93 80,956.94
Total 37,468,779.86 18,492,700.45
22. Interest payable
Items End of the report period Year beginning
Bank loan interest payable 1,712,361.62 1,202,198.61
Total 1,712,361.62 1,202,198.61
23．Dividend Payable
End of the report Reason of being overdue
Company names Year beginning
period for 1 year
AVIC International
Shenzhen Company - 190,263.50 -
Limited
Total - 190,263.50
24. Other payables
(1) Statement of Other Payables
Items End of the report period Year beginning
Within 1 year 21,790,673.93 18,685,715.31
1 to 2 years 1,642,319.66 2,997,601.79
2 to 3 years 1,651,054.83 680,766.66
Over 3 years 7,054,748.54 7,054,253.98
Total 32,138,796.96 29,418,337.74
(2) In the report period, there was no account payable due to the shareholder holding more
than 5% (with 5% inclusive) of the Company’s vote-bearing shares.
(3) Accounts due to related parties
For the detail, refer to Note VIII.6 Accounts due to and from related parties
(4) Note to other payables with big amount with age exceeding 1 year
98
Are they to
Reason of
be paid after
Creditors Amount remaining
the balance
outstanding
sheet day?
Shenzhen Tencent Computer System Still in the lease
2,600,000.00 No
Co., Ltd. term
Deposit for food
Zhu Jin 500,000.00 No
coupon
Kejin Biology Recognition (Shenzhen) Still in the lease
454,518.40 No
Co., Ltd. term
Shenzhen YouLiFeng Self-help Kara Still in the lease
432,429.00 No
OK Co., Ltd. term
Shenzhen CATIC Real Estate Co.,
Still in the lease
Ltd. 424,800.00 No
term
Weisheng Electronics (Shenzhen) Still in the lease
337,105.20 No
Co., Ltd. term
Shenzhen Pasta Wang Catering Still in the lease
329,000.00 No
Chain Shop Co., Ltd. term
Still in the lease
Shenzhen Yongantang Chain-
301,644.00 term No
Pharmacy Co., Ltd.
Shenzhen GoodFamily Sports Goods Still in the lease
279,578.00 No
Chain Shop Co., Ltd. term
Oracle Research & Development Still in the lease
238,140.00 No
Center (Shenzhen) Co., Ltd. term
China Merchants Bank Co., Ltd. Still in the lease
211,440.00 No
Shenzhen Hi-tech Park Sub-branch term
Shenzhen Honestar Electronics Co., Still in the lease
218,280.00 No
Ltd. term
Total 6,326,934.60
(5) Note to the other payables with big amount
Creditors End of the report period Description
Shenzhen Tencent Computer
2,600,000.00 Rent deposit
System Co., Ltd.
Citylion International Limited 2,189,507.68 Current accounts
Kejin Biology Recognition
541,122.40 Rent deposit
(Shenzhen) Co., Ltd.
Zhu Jin 500,000.00 Deposit for food coupon
Shenzhen YouLiFeng Self-help 432,429.00 Rent deposit
99
Kara OK Recreation Supermarket
Co., Ltd.
Total 6,263,059.08
(6) Balances in foreign currency in other payables are as follows:
End of the report period Year beginning
Items Amount in Amount in
Exchan Conversion in Exchan Conversion in
foreign foreign
ge rate CNY ge rate CNY
currency currency
HKD 2,632,885.62 0.8316 2,189,507.68 5,543,264.00 0.8509 4,716,763.34
USD 3,697.48 6.4716 23,928.61 3,613.12 6.6227 23,928.61
S.Fr. 88,883.11 7.7743 691,004.00 34,000.00 7.0562 239,910.80
Total 2,904,440.29 4,980,602.75
25. Other current liabilities
End of the report
Items Description Year beginning
period
Accrued supermarket
Accrued expenses - 2,645,322.20
expenses
Total - 2,645,322.20
26. Long-term Loan
(1) Classification of the long term borrowings:
Items End of the report period Year beginning
Secured loan (note ①) 180,000,000.00 180,000,000.00
Mortgage loan (Not ②) 1,332,819.80 1,440,065.11
Total 181,332,819.80 181,440,065.11
Note ①: The long term borrowings at year end were guaranteed by CATIC Group for the
Company. For the detail about the related guarantee, refer to Note VIII.5 (4).
Note ②: The housing and buildings as stated in Note VII.9 were used as the collateral.
(2) Top five lenders of the long term borrowings
Inter End of the report period Year beginning
Date of Date of est Currenc Amount in Amount in Amount in Amount in
Lenders
starting ending rate y foreign function foreign function
% currency currency currency currency
China
Construction 2010-1-21 2012-1-20 4.86 CNY - 90,000,000.00 - 90,000,000.00
Bank Co., Ltd.
100
Shenzhen
Branch
Guangdong
Development
Bank
2009-12-1 2012-12-1 4.86 CNY - 50,000,000.00 - 50,000,000.00
Shenzhen
Donghai
Sub-branch
Sales
Department of
Ningbo Bank 2009-7-15 2012-6-28 4.86 CNY - 20,000,000.00 - 20,000,000.00
Shenzhen
Branch
Sales
Department of
Ningbo Bank 2009-9-3 2012-6-28 4.86 CNY - 20,000,000.00 - 20,000,000.00
Shenzhen
Branch
China
Construction 1,692,402.2
2010-11-30 2017-11-30 4.25 HKD 1,602,717.63 1,332,819.80 1,440,065.11
Bank (Asia) 9
Co., Ltd.
181,440,065.1
181,332,819.80
Total 1
27. Long term accounts payable
Items End of the report period Year beginning
Credit borrowing due to Beijing
- 3,500,000.00
Hengdeli
Total - 3,500,000.00
28. Other Non-current Liabilities
End of the report
Items Description Year beginning
period
Deferred Fund financed for construction of enterprise
1,800,000.00 1,800,000.00
income technology center (Note ①)
Deferred Fund for supporting implementation of
150,000.00 -
income standardization strategy (Note②)
Deferred Budget for the provincial and ministerial IUR
200,000.00 100,000.00
income cooperation commissioner project(Note③ )
101
Specialized financial support to enterprises from
Deferred
Nanshan District against the financial crisis (Note 500,000.00 500,000.00
income
④)
Special fund for cultural industry development of
Deferred
Nanshan District – Shenzhou-7 Space Watch 800,000.00 -
income
Series (Note ⑤)
Total 3,450,000.00 2,400,000.00
Note ①: According to Document SHEN JING MAO FA [2002] No. 93, the Company’s
technology center has been expertised as an Enterprise Technology Center of Shenzhen
and therefore it has obtained a supporting fund amounting to CNY 3,000,000 for
construction of the enterprise technology center. The fund is used for purchasing
equipment.
Note ②: It is the subsidy for implementation of the standardization strategy in accordance
with the Measures for Management of the Fund for Implementation of Standardization
Strategy in Shenzhen (SHEN ZHI JIAN [2008] No. 106) which has been carried over to the
subsidy income in the report year.
Note ③: It is for construction of the Company’s technology commissioner working statin
according to the project of constructing the enterprise technology commissioner working
station, to explore the model of innovation of cooperation of production, academy and
research, achieve the results of cooperation of production, academy and research in the
key technology fields of the working station, including timekeeping, material, digitalized
research, development and manufacture, etc. and make progressive popularization in the
industry, and drive technology progress and industrial development in the sector.
Therefore, the Company shall obtain this financial support and transfer it to the subsidy
income upon acceptance inspection at the end of 2012.
Note ④: Where CNY 300,000 is the financial support fund obtained from the Company
used for development and application of the project of digitalized R & D sytem in the watch
industry according to the project contract of Specialized Financial Support to Enterprises
from Nanshan District against the Financial Crisis with Contract No. NAN KE ZHUAN
2009144 concluded with Nanshan District Bureau of Science and Technology, Shenzhen.
Where CNY 200,000 is the subsidy of intellectual property obtained by the Company
according to the Contract of 2009 Medium-sized and Small Enterprise Supporting
Program of Nanshan District with the Specialized Fund for Supporting Enterprises against
Financial Crisis – Invention Patent Technology Implementation Projects with Contract No.
NAN ZHI FA 2009-2-5 concluded with Nanshan District Bureau of Science and
102
Technology, Shenzhen.
Note ⑤: It is the financial support amounting to CNY800,000.00 obtained according to the
Circular on the Second Financial Support Projects with the Special Fund for Cultural
Industry Development in Nanshan District in 2010, the Document of the Cultural Industry
Development Office of Nanshan District People’s Government, Shenzhen (SHEN NAN
WEN CHAN [2011] No. 86 and the fund was transferred to the subsidy income.
29．Capital Stock
Year beginning End of the report period
B
Shares
on O
Prop New converted Propo
Items us th
Amount ortio issui from public Sub-total Amount rtion
sh er
n% ng reserve %
ar s
es
I. Restricted
Shares
1. State
shares - - - -
2. State
corporate 173,104,373.0
123,645,981.00 44.07% - - 49,458,392.00 - 49,458,392.00 44.07%
shares 0
3. Other
domestic
19,035,524.00 6.79% - - 7,614,209.00 - 7,614,209.00 6.79%
shares 26,649,733.00
Including:
Domestic
19,000,000.00 6.78% - - 7,600,000.00 - 7,600,000.00 6.78%
corporate 26,600,000.00
shares
Domestic
35,524.00 0.01% - - 14,209.00 - 14,209.00 0.01%
natural person 49,733.00
shares
Total restricted 199,754,106.0
142,681,505.00 50.86% - - 57,072,601.00 - 57,072,601.00 50.86%
shares 0
II. Unrestricted
shares
103
1. CNY
111,365,764.0
ordinary 79,546,974.00 28.35% - - 31,818,790.00 - 31,818,790.00 28.35%
0
shares
2. B shares 58,320,000.00 20.79% - - 23,328,000.00 - 23,328,000.00 81,648,000.00 20.79%
Total
193,013,763.0
unrestricted 137,866,974.00 49.14% - - 55,146,789.00 - 55,146,789.00 49.14%
0
shares
III. Total 112,219,391.0 112,219,391.0 392,767,870.0
280,548,479.00 100% - - - 100%
Shares 0 0 0
Note: On April 8, 2011, approved by 2010 Annual Shareholders’ General Meeting, the
Company converted the capital reserve into capital stock on 4-for-10 basis and total
112,219,391 shares were converted into. After the conversion, the Company’s total capital
stock turned to be 392,767,870 shares.
30. Capital reserve
Year Increase in the Decrease in the
Items Year end
beginning report period report period
628,889,436.2
Capital premium - 112,219,391.00 516,670,045.23
3
Other capital reserve 14,492,448.65 - 555,541.10 13,936,907.55
643,381,884.8
Total - 112,774,932.10 530,606,952.78
8
Note: On April 8, 2011, approved by 2010 Annual Shareholders’ General Meeting, the
Company converted the capital reserve into capital stock on 4-for-10 basis and total
112,219,391 shares were converted into, and the capital reserve was reduced by CNY
112,219,391.
31 Surplus Reserve
Increase in the Decrease in the End of the report
Items Year beginning
report period report period period
Statutory surplus
59,082,098.16 - - 59,082,098.16
reserve
Discretionary surplus
61,984,894.00 - - 61,984,894.00
reserve
121,066,992.1
Total - - 121,066,992.16
6
32. Retained earnings
(1) Change of the retained earnings
104
Provision or
End of the report
Items Year beginning distribution
period
proportion
Retained earnings at the end of
the previous year before 222,514,569.59 158,577,089.84
adjustment
Adjustment of retained
- -
earnings at year beginning
Retained earnings at year
222,514,569.59 158,577,089.84
beginning after adjustment
Plus: Net profit attributable to
the parent company’s owners 85,990,142.75 93,990,182.93
in the report year
Less: Provision of statutory
- 5,120,903.28
surplus reserve
Provision of discretionary
- -
surplus reserve
Dividend of ordinary
28,054,847.90 24,931,799.90
shares payable
Retained earnings at year end 280,449,864.44 222,514,569.59
(2) Note to the profit distribution
On April 8, 2011, approved by 2010 Shareholders’ General Meeting, the Company took
the total capital stock of 280,548,479 shares as at December 31, 2010 as the base,
distributed the cash dividend to the whole shareholders at the rate of CNY1.00 (with tax
inclusive) for every 10 shares; the Company totally distributed CNY 28,054,847.90 of cash
dividend.
33. Operation Income and Costs
(1) Revenue and costs
Amount in the same
Items Amount in the report period period of the previous
year
Income from principal business 1,223,457,139.19 804,875,634.44
Income from other business 8,553,597.22 5,936,276.38
Total operation income 1,232,010,736.41 810,811,910.82
Costs of principal business 817,716,151.55 563,084,063.68
Costs of other business 2,770,595.22 2,222,992.97
105
Amount in the same
Items Amount in the report period period of the previous
year
Total operation costs 820,486,746.77 565,307,056.65
(2) Principal Businesses Based on Sectors
Amount in the same period of the
Amount in the report period
Sectors previous year
Revenue Operating costs Revenue Operating costs
Sales of famous
brand watches,
FIYTA watches 1,216,784,372.62 835,673,243.11 788,279,736.35 569,456,580.59
and fashion
brand watches
Lease and
hospitality 34,404,920.13 10,516,401.34 33,123,632.35 10,155,217.35
industry
Sub-total 1,251,189,292.75 846,189,644.45 821,403,368.70 579,611,797.94
Less: Amount
27,732,153.56 28,473,492.90 16,527,734.26 16,527,734.26
offset internally
Total
(3) Principal Businesses Based on Products
Amount in the same period of the
Product names Amount in the report period
previous year
Revenue Operating costs Revenue Operating costs
Famous brand
671,041,497.30 524,319,858.56
watches 1,010,744,436.49 759,033,754.63
Manufacture and
sales of FIYTA 117,238,239.05 45,136,722.03
watches 203,826,024.40 75,610,683.70
Leasehold 34,404,920.13 10,516,401.34 33,123,632.35 10,155,217.35
Fashion brand
- -
watches 2,213,911.73 1,028,804.78
Sub-total 1,251,189,292.75 846,189,644.45 821,403,368.70 579,611,797.94
Less: Amount offset
27,732,153.56 28,473,492.90 16,527,734.26 16,527,734.26
internally
Total 1,223,457,139.19 817,716,151.55 804,875,634.44 563,084,063.68
(4) Principal Business (based on regions)
106
Amount in the same period of the
Amount in the report period
Regions previous year
Revenue Operating costs Revenue Operating costs
Northeast China 116,211,424.07 84,771,953.67 81,938,483.51 61,640,612.11
North China 228,555,105.04 170,977,378.41 148,193,414.76 114,042,752.47
Northwest China 297,685,676.30 216,749,024.10 196,004,881.55 145,657,992.78
Southwest China 82,324,718.58 56,998,772.65 48,445,300.60 32,986,195.55
East China 148,908,755.02 104,190,737.58 88,846,654.19 64,290,037.42
South China 377,503,613.73 212,501,778.03 257,974,634.08 160,994,207.61
Sub-total 1,251,189,292.75 846,189,644.45 821,403,368.70 579,611,797.94
Less: Amount
27,732,153.56 28,473,492.90 16,527,734.26 16,527,734.26
offset internally
Total 1,223,457,139.19 817,716,151.55 804,875,634.44 563,084,063.68
(5) Revenue from the top five customers
Proportion in the operation
Total Revenue from the
Duration income of the same period
top five customers
(%)
January - June, 2011 277,959,023.00 22.72
Jan to Jun, 2010 191,641,050.71 14.56
34. Business Taxes and Surcharges
Amount in the same period
Items Amount in the report period
of the previous year
Consumption tax 144,333.33 26,688.89
Business tax 2,123,084.23 1,860,956.80
Urban maintenance and
2,001,849.77 367,191.29
construction tax
Education surcharge 889,385.27 589,466.09
Others 360,472.46 235,477.52
Total 5,519,125.06 3,079,780.59
Note: For the detail of the rates of various business taxes and surcharges, refer to Note V:
Taxes
35. Sales Costs
Amount in the same period of
Items Amount in the report period
the previous year
107
Wages 63,231,465.33 40,720,438.65
Rental 28,253,930.89 16,796,928.55
Advertisement 24,572,455.95 13,200,279.45
Market promotion 12,116,193.68 7,956,002.78
Long-term expenses to be
10,567,753.46 6,111,840.28
apportioned
Supermarket cost 10,349,802.79 7,406,081.70
Labor insurance 8,396,849.83 4,688,687.80
Administrative expenses 4,417,920.31 1,869,313.30
Water and electricity 4,103,320.59 2,969,388.51
Packing 3,128,053.81 2,327,280.07
Business travel 2,415,843.92 1,077,878.23
Transportation 2,255,029.79 1,426,541.96
Welfare 1,449,950.81 986,744.85
Others 10,486,325.17 6,017,874.26
Total 185,744,896.33 113,555,280.39
36. Administrative Expenses
Amount in the same period of
Items Amount in the report period
the previous year
Wages 40,328,349.00 28,847,583.61
Long-term expenses to be
8,707,184.03 7,529,979.58
apportioned
R & D costs 7,497,115.16 3,893,925.84
Labor insurance 4,096,950.42 2,730,573.95
Depreciation 2,306,542.73 2,482,749.38
Business travel 3,389,135.36 2,481,021.56
Administrative expenses 1,572,313.08 1,585,576.94
Training 1,091,550.55 1,338,010.09
Meeting 2,244,633.39 1,181,095.20
Trade union budget 1,525,665.25 1,175,621.34
Business entertainment 1,435,422.35 1,135,717.69
Welfare 1,221,365.69 1,107,794.08
Others 11,517,579.48 6,756,710.51
Total 86,933,806.49 62,246,359.77
37. Financial expenses
Amount in the same period of
Items Amount in the report period
the previous year
108
Interest payment 22,448,012.25 16,902,537.11
Less: interest income 1,865,047.98 325,877.63
Exchange losses 77,779.02 353,333.91
Financial service charge 7,519,041.15 5,245,738.42
Others 239,933.63 9,074.93
Total 28,419,718.07 21,459,989.06
38. Return on Investment
(1) Statement of Return on Investment
Amount in the same
Amount in the report
Items period of the previous
period
year
Return on long term equity investment based on
-48,985.48 -
equity method
Return on investment from disposal of long-term
- -
equity investment
Return on investment obtained from the
- -
available-for-sale financial assets
Total -48,985.48 -
(2) Return on long term equity investment calculated based on the equity method
Amount in the
Amount in the Cause of increase and
Investees same period of the
report period decrease
previous year
Shenzhen Research
Decrease of net profit of the
Institution of Northwestern -48,985.48 -
investee in the report year
Polytechnical University
Total -48,985.48 -
39. Loss from impairment of assets
Amount in the same
Amount in the report
Items period of the previous
period
year
Loss from price falling of inventories 2,256,450.85 412,249.15
Total 2,256,450.85 412,249.15
40. Non-operating income
109
Amount
Amount in the
recorded in the
Amount in the same period of
Items non-recurring
report period the previous
gain/loss in the
year
report year
Total gains from disposal of non-current asset 50,844.86 6,938,441.32 50,844.86
Including: Income from disposal of fixed
50,844.86 6,938,441.32 50,844.86
assets
Government subsidy (for the detail, refer to the
following table: statement of government 1,026,556.00 720,000.00 1,026,556.00
subsidies)
Indemnity income 30,000.00 84,428.66 -
Others 266,965.11 92,685.50 296,965.11
Total 1,374,365.97 7,835,555.48 1,374,365.97
Where: Statement of Government Subsidies
Amount in the same
Amount in the report
Items period of the previous
period
year
Award of doing bigger and
stronger for trade distribution 300,000.00 -
enterprises
Fund subsidy for financial support
100,000.00 -
of intellectual property sub-item
Standard financial support 100,000.00 -
Quality award from Nanshan
500,000.00 -
District Government
Development fund for medium
26,556.00 -
and small enterprises
Funds for the project in
- 150,000.00
technology development program
Special fund for development of
- 570,000.00
cultural industry
Total 1,026,556.00 720,000.00
41. Non-operating expenses
Amount recorded in
Amount in the same
Amount in the report the non-recurring
Items period of the previous
period gain/loss in the
year
report year
Total loss from disposal of the
487.00 47,206.42 487.00
non-current assets
Including: Loss from disposal 487.00 47,206.42 487.00
110
Amount recorded in
Amount in the same
Amount in the report the non-recurring
Items period of the previous
period gain/loss in the
year
report year
of fixed assets
Penalty payment - 400.00 -
Donation payment - 500,000.00 -
Extraordinary losses - - -
Others 5,866.38 81,767.54 5,866.38
Total 6,353.38 629,373.96 6,353.38
42. Income tax expense
Amount in the same
Amount in the report
Items period of the previous
period
year
The income tax in the report period calculated
30,736,895.33 12,370,589.99
according to the tax law and the relevant provisions.
Adjustment of deferred income tax -12,934,717.90 -2,839,736.72
Total 17,802,177.43 9,530,853.27
43. Basic earning per share and diluted earning per share
Basic earning per share is calculated based on the consolidated net profit attributable to
the Company’s shareholder of ordinary shares divided by the weighted average of the
Company’s ordinary shares issued outside as follows: The number of newly issued
ordinary shares is determined commencing from the date of consideration receivable
(usually the date of issuing) according to the specific articles of the issuing contract.
The numerator of the diluted earnings per share is determined after adjustment of the
following elements with the current net profit attributable to the Company’s shareholders of
ordinary shares: (1) Interest of diluting potential ordinary shares recognized as expenses
in the very period; (2) gain or expense arising at the time of conversion of diluted potential
ordinary shares; and
(3) influence from the aforesaid adjustment of the relevant income tax.
Denominator of the diluted earnings per share is equal to sum of the following two items:
(1) The weighted average of ordinary shares already issued by the parent company in the
basic earnings per share; and (2) weighted average of ordinary shares increased due to
the assumed diluted potential ordinary shares converted into ordinary shares.
111
In calculating the weighted average of the number of the ordinary shares increased due to
conversion of the diluted potential ordinary shares into the issued ordinary shares, the
conversion of the diluted potential ordinary shares incurred in the previous period is
assumed to be conducted at the beginning of the very period; the conversion of the diluted
potential ordinary shares issued in the very period is assumed to be conducted on the
date of issuing.
(1) Basic earnings per share and amount of diluted earnings per share in different periods
are presented:
Amount in the same period of the
Amount in the report period
Profit in the report previous year
period Basic earning Diluted earning Basic earning Diluted earning
per share per share per share per share
Net profit attributable
to the Company’s
0.219 0.219 0.170 0.170
shareholders of
ordinary shares
Net profit attributable
to the Company’s
shareholders of
0.222 0.222 0.148 0.148
ordinary shares less
non-recurring gain
and loss
(2) Process of calculation of basic earnings per share and diluted earnings per share
In the report period, there existed no potential ordinary shares with dilution in the
Company. Therefore, the diluted earning per share is equal to the basic earning per share.
① In calculating the basic earnings per share, the current net profit attributable to
shareholders of ordinary shares is:
in CNY
Items Amount in the same
Amount in the
period of the
report period
previous year
Net profit attributable to the shareholders of ordinary shares 85,990,142.75 42,399,471.66
85,990,142.75
Including: Net profit attributable to continuous operation 42,399,471.66
Net profit attributable to the Company’s shareholders 87,145,297.28 36,774,788.99
112
of ordinary shares less non-recurring gain and loss
Including: Net profit attributable to continuous operation 87,145,297.28 36,774,788.99
② In calculating the earnings per share, denominator was the weighted average of
ordinary shares issued outside and the calculation process is as follows:
in CNY
Items Amount in the report
Year beginning
period
Number of ordinary shares issued outside at
280,548,479.00 249,317,999.00
year beginning
Plus: Number of shares increased from
conversion of reserve into capital stock in the 112,219,391.00 -
report period
Less: Weighted number of ordinary shares
- -
repurchased in the report period
Weighted number of ordinary shares issued
392,767,870.00 249,317,999.00
outside at year end
Basic earning per share =P0÷S
S= S0＋S1＋Si×Mi÷M0–- Sj×Mj÷M0-Sk
Where: P0 is the net profit attributable to the Company’s shareholders of common shares
or the net profit less the non-recurring gain and loss attributable to the shareholders of
common shares. S is the weighted average of ordinary shares issued externally; S0 is the
total number of shares at the beginning of the report period; S1 is the number of shares
increased due to conversion of public reserve into share capital or dividend distribution in
the report period; Si is the number of newly added shares from issuing new shares or
shares converted from bonds in the report period; Sj is the number of shares decreased
due to repurchase in the report period; Sk is the number of shares shrunk in the report
period; M0 is the number of months in a report period; Mi is the accumulative monthly
amount from the next month of increasing shares to the end of the report period; Mj is the
accumulative monthly amount from the next month of decreasing shares to the end of the
report period
44. Other comprehensive income
Amount in the
Amount in the same period of
Items
report period the previous
year
1. Gain/loss from available-for-sale financial assets - -
Less: Influence upon income tax from available-for-sale - -
113
financial assets
Net of the gain/loss credited previously to other
- -
comprehensive gains transferred to the current gains
Sub-total - -
2. Translation difference in financial statements expressed in
2,071,076.23 -18,896.52
foreign currency
Less: Net in disposal of the gain/loss from overseas
- -
operation currently transferred
Sub-total 2,071,076.23 -18,896.52
Total 2,071,076.23 -18,896.52
45. Notes to the items of the cash flow statement:
(1) Major items of other operation activity related cash receipts
Amount in the same
Amount in the report
Items period of the
period
previous year
Commodity promotion - 4,024,872.31
Deposit 198,288.49 931,555.60
Government subsidies 2,376,556.00 720,000.00
Interest income 325,877.63
1,865,047.98
Total 4,439,892.47 6,002,305.54
(2) Major items of other operation activity related cash payments
Items Amount
Rental 28,835,437.43
Advertisement 16,572,455.95
Market promotion 12,116,193.68
Supermarket expenses 10,349,802.79
R&D 10,407,058.02
Administrative expenses 6,233,231.44
Business travel 5,818,295.37
Water and electricity 4,173,211.88
Packing 3,128,053.81
Transportation 2,742,395.46
Entertainment 2,739,048.22
Meeting 2,252,091.39
Trade union budget 1,525,665.25
Insurance premium 1,343,135.88
Exhibition 1,342,203.51
Training 1,091,550.55
114
Post and telecommunications 881,711.85
Securities 752,482.90
Consulting 301,417.50
Total 112,605,442.88
(3) Other financing related cash payments
Amount in the same
Amount in the report
Items period of the
period
previous year
Commission to securities brokers - 1,000,000.00
Others 231,600.00 -
Total 231,600.00 1,000,000.00
46. Supplementary information of the cash flow statement
(1) Information of net cash flows arising from adjustment of net profit into operating
activities:
Amount in the same
Amount of the report
Items period of the previous
Year
year
1. Net cash flows arising from adjustment of net profit
into operating activities:
Net profit 86,166,842.52 42,426,523.46
Plus: Provisions for impairment of assets 2,256,450.85 412,249.15
Depreciation of fixed assets, oil and gas assets,
12,155,992.20 11,291,840.71
production based biological asset
Amortization of intangible assets 443,724.15 408,896.88
Long-term expenses to be apportioned 19,274,937.49 13,641,819.86
Loss (gain) from disposal of fixed assets, intangible
-50,357.86 -6,891,234.90
assets and other long term assets
Losses (gain) on retirement of fixed assets - -
Financial expenses 22,448,012.25 16,902,537.11
Investment loss (gain) 48,985.48 -
Decrease (increase) of deferred income tax asset -13,136,234.66 -2,849,463.09
Increase (decrease) of deferred income tax liability 201,516.76 9,726.36
Decrease (Increase) of inventories -235,695,986.96 -69,377,130.81
Decrease (Increase) of the operative items receivable -48,253,241.92 -31,424,609.33
Increase of operative items payable 50,712,640.88 26,470,146.56
Net cash flow arising from operating activities -103,426,718.82 1,021,301.96
2. Significant investment and fund-raising activities not
involved in cash income and expenses:
115
Amount in the same
Amount of the report
Items period of the previous
Year
year
3. Net change of cash and cash equivalents:
Ending cash balance 298,373,212.07 108,507,278.08
Less: Opening cash balance 613,455,817.52 95,701,580.19
Plus: Ending cash equivalent balance - -
Less: Opening cash equivalent balance - -
Net increase in cash and cash equivalents -315,082,605.45 12,805,697.89
(2) Composition of cash and cash equivalents
Items Year end Year beginning
I. Cash 613,455,817.52
Including: Cash in stock 2,448,191.65 282,981.39
Bank deposit available for payment at
295,746,013.50 613,107,590.21
any time
Other monetary fund available for
179,006.92 65,245.92
payment at any time
Due from central bank available for
- -
payment
Due from banks - -
Call loan to banks - -
II. Cash equivalent
Including: bond investment due within three
- -
months
III. Balance of cash and cash equivalent at the
298,373,212.07 613,455,817.52
end of the report period
VIII. Related parties and related transactions
1. The Company’s parent company
Legal
Parent Place of Business
Relationship Types representati
company Registration nature
ve
Investing and
initiating entities,
Shenzhen domestic
Parent Company Wu
CATIC Group Shenzhen commerce,
company limited Guangquan
Co., Ltd. goods and
materials supply
and sales
(Continued)
116
Proportion of Parent
the parent company’s The
Parent Registered company’s voting power Company’ Organization
company capital shareholding proportion s eventual Code
in the over the controller
Company (%) Company (%)
Shenzhen
CATIC
673,367,090.00 41.49 41.49 219351229
Group Co.,
Ltd. AVIC
Note: The equity proportion in Shenzhen CATIC Group Co., Ltd. held by AVIC
International Shenzhen Company Limited is 58.77%. AVIC International Shenzhen
Company Limited is a solely funded subsidiary of AVIC International Holding Corporation
(AVIC International). Aviation Industry Corporation of China directly holds 62.52% equity
in AVIC International. Therefore, the Company’s eventual controller is Aviation Industry
Corporation of China.
2. Subsidiaries
For the detail, refer to Note VI.1 Subsidiaries
3. Joint Ventures and Associates
For the detail, refer to Note VII.7(4)
4. The Company’s other related parties
Relationship with the Organization
Other related parties
Company Code
Shenzhen CATIC Property Management Co., Ltd. (CATIC under the control of
Property) the same party 19219400-5
Shenzhen CATIC Building Equipment Co., Ltd. (CATIC under the control of
Building) the same party 743201073
under the control of
Rainbow Supermarket Co., Ltd. (Rainbow Supermarket)
the same party 618842912
Associate of a
Shennan Circuit Co., Ltd. (Shennan Circuit)
controlled subsidiary 192195761
Shenzhen CATIC Monitor Technology Co., Ltd. (CATIC under the control of 689407061
117
Monitor) the same party
under the control of
CATIC Real Estate
the same party 279340845
Shenzhen Makway Cable TV Equipment Co., Ltd. under the control of
(Makway) the same party 618810902
under the control of
CATIC Securities Co., Ltd. (CATIC Securities)
the same party 741986153
Shenzhen Grand Skylight Hotel Management Co., under the control of
Ltd. (Hotel Management) the same party 76197033-5
Shenzhen CATIC Nanguang Elevator Co., Ltd. (CATIC under the control of
Nanguang) the same party 192350741
Shenzhen CATIC CITY Property Development Co., Ltd. under the control of
(CATIC CITY Property) the same party 676667833
Shenzhen CATIC CITY Development Co., Ltd. (CATIC under the control of
CITY Development) the same party 192194005
under the control of
CATIC Land Development Co., Ltd. (CATIC Land)
the same party 661015568
CATIC Guanlan Real Estate Development Co., Ltd. under the control of
(Guanlan Rea Estate) the same party 763495945
CATIC Changtai Investment Development Co., Ltd. under the control of
(CATIC Changtai) the same party 732047808
5. Related transactions
(1) Related transactions in connection with acceptance of labor service
Pricing Amount in the same period
Amount in the report period
principle of the previous year
Description
and Proportion
of related Proportion in
decision in the
Related Parties transaction the amount
making amount of
s Amount of the similar Amount
procedur the similar
transactions
es of transactions
(%)
related (%)
118
transactio
ns
Property
Contract
CATIC Property manageme 724,888.81 100.00 868,158.64 100.00
price
nt
Franchise
Rainbow Contract
counter 8,311,541.70 5.70 6,264,615.83 3.71
Supermarket price
sales costs
(2) Related transaction in connection with sales of goods
Pricing Amount incurred in the report Amount incurred in the
principle year previous year
and
Descripti
decision Proportion
on of Proportion in
making in the
Related Parties Related the amount
procedur amount of
Transacti Amount of the similar Amount
es of the similar
ons transactions
related transaction
(%)
transactio s (%)
ns
Aviation Industry Sale of Contract
15,180,771.29 891,336.75 0.12
Corporation goods price 1.28
SHENNAN Sale of Contract
1,232,428.48 173,411.35 7.11
Circuit goods price 12.07
Rainbow Sale of Contract 19,965,503.4
30,948,455.36 2.59
Supermarket goods price 2.61 3
(3) Related Leases
The Group as the lessor
Basis for
determini Rental income
Leased Starting Terminatio
Lessor Lessees ng the recognized in
asset date n date
rental the report period
income
The CATIC Real Contract
Housing 2009-10-1 2011-12-31 1,278,783.00
Company Estate price
CATIC Real
The Contract
Estate Housing 2011-7-01 2012-5-15
Company price 38,115.00
Development
The Contract
Makway Housing 2010-1-1 2012-1-31
Company price 193,806.00
The Contract
CATIC Property Housing 2007-10-1 2012-9-30
Company price 1,180,080.00
119
The CATIC Contract
Housing 2007-9-16 2012-9-15 426,852.00
Company Securities price
The CATIC CITY Contract
Housing 2010-05-01 2012-05-15
Company Property price 10,800.00
The CATIC City Contract
Housing 2010-05-01 2012-05-15 10,800.00
Company Development price
The Contract
CATIC Land Housing 2009-10-1 2011-12-31 7,560.00
Company price
The GUANLAN Real Contract
Housing 2009-10-1 2011-12-31
Company Estate price 45,360.00
The Contract
CATIC Changtai Housing 2009-10-1 2011-12-31
Company price 622,080.00
The Hotel Contract
Housing 2009-08-01 2012-07-31
Company Management price
The Hotel Contract 1,750,000.00
Equipment 2009-08-01 2012-07-31
Company Management price
The Rainbow Contract
Housing 2010-5-01 2013-4-30
Company Supermarket price 180,000.00
(4) Related guarantee
Has the
guarantee
Amount in Guarantee Expiry of
Guarantor Guarantee been
guarantee starting date guarantee
implement
ed
Shenzhen
CATIC Group The Company 100,000,000.00 2011-3-1 2012-4.25 No
Co., Ltd.
Shenzhen
CATIC Group The Company 50,000,000.00 2010-10-14 2011-10-14 No
Co., Ltd.
Shenzhen
CATIC Group The Company 22,000,000.00 2010-10-18 2011-10-18 No
Co., Ltd.
Shenzhen
CATIC Group The Company 272,000,000.00 2011-3-8 2012-3-8 No
Co., Ltd.
Shenzhen
CATIC Group The Company 50,000,000.00 2009-12-1 2012-12-1 No
Co., Ltd.
Shenzhen
CATIC Group The Company 90,000,000.00 2010-2-1 2012-1-20 No
Co., Ltd.
120
Shenzhen
CATIC Group The Company 100,000,000.00 2011-5-5 2011-11-5 No
Co., Ltd.
Shenzhen
CATIC Group The Company 40,000,000.00 2009-7-15 2012-9-3 No
Co., Ltd.
The Company HARMONY 40,000,000.00 2010-10-12 2011-12-6 No
FIYTA Hong
The Company 8,316,000.00 2011-5-13 2012-5-13 No
Kong Limited
Sub-total 772,316,000.00
6. Due to and from Related Parties
(1) Accounts receivable and other receivables from related parties
End of the report period Year beginning
Projects Book Balance Reserve for Book Balance Reserve for
bad debt bad debt
Accounts receivable:
Rainbow Supermarket 2,783,637.98 55,716.41 804,896.91 55,716.41
Shenzhen CATIC Group Co., Ltd. 36,047.40 524,471.00 36,047.40
6,664,946.00
Shennan Circuit - 73,983.60 -
675,533.29
Total 91,763.81 1,403,351.51 91,763.81
10,124,117.27
Other receivables:
CATIC Monitor 102,500.00 5,125.00 102,500.00 5,125.00
Rainbow Supermarket 72,401.60 2,807.08 56,141.60 2,807.08
Shenzhen CATIC Enterprise Group
155,000.00 - - -
Training Center
329,901.6
Total 7,932.08 158,641.60 7,932.08
0
(2) Due to and advance receipts from related parties
Items End of the report period Year beginning
Advance receipts -
AVIC - 2,943,763.91
Total 2,943,763.91
Other payables:
CATIC Building 8,227.10 8,227.10
CATIC Nanguang 3,354.90 3,354.90
CATIC Real Estate 85,800.00 85,800.00
CATIC CITY Property 107,280.00 107,280.00
CATIC CITY Development 107,280.00 107,280.00
121
CATIC Securities 150,000.00 150,000.00
Makway 64,602.00 64,602.00
CATIC Real Estate 424,800.00 424,800.00
Rainbow Supermarket 60,000.00 60,000.00
Total 1,011,344.00 1,011,344.00
Dividends payable:
AVIC International Shenzhen Company
- 190,263.50
Limited
Total - 190,263.50
IX. Contingencies
1. On May 8, 2011, FIYTA Hong Kong, one of the Company’s subsidiaries, and Bank of
China (Hong Kong) Limited entered into a short term loan contract with loan No.
CCMC/CCE（CP）/205/11/100061/00/F/34849, according to which FIYTA Hong Kong
obtained a loan amounting to CNY8,311,000.00 (equal to HKD10,000,000.00) and the
Company offered joint responsibility guarantee for the aforesaid loan.
2. On October 11, 2010, the Company and Jiangsu Bank Co., Ltd. Shenzhen Branch
(Jiangsu Bank Shenzhen Branch) concluded the Maximum Guarantee Contract No.
BZ161409000001, HARMONY, one of the Company’s subsidiaries, offered irrevocable
credit guarantee with amount of CNY 60,000,000.00.
The guarantee contract term is from October 8, 2010 to October 7, 2011. Ended June 30,
2011, HARMONY had borrowed CNY 40,000,000.00 from Jiangsu Bank Shenzhen
Branch.
3. On November 30, 2010, 68-Station, one of the Company’s grandson companies, and
China Construction Bank (Asia) Co., Ltd. concluded a collateral loan contract with loan No.
974928 with 68-Station’s housing and building (with net book value amounting to CNY
3,346,473.41) as collateral. From November 30, 2010 to November 30, 2017, it offered
guarantee for the long term loan amounting to HKD1,710,000.00. Ended June 30, 2011,
the book amount of the long term loan was HKD1602717.63.
X. Commitments
The irrevocable operating lease contracts executed between the Group and external
parties ended June 30, 2011 were as follows:
in CNY
Items End of the Report
Period Year beginning
Minimum rental payment for irrevocable
operating lease:
Within a year 26,503,547.00 39,436,800.00
122
1 to 2 years 46,214,674.00 36,284,300.00
2 to 3 years 34,790,273.00 30,639,000.00
Over 3 years 59,990,333.00 67,876,100.00
Total 167,498,827.00 174,236,200.00
Note: Commitment for irrevocable operation lease is mainly the rental payable by the
Company to the supermarket and franchised shops.
XII. Other Important Matters
1. Acquisition of the Equity of HENGLIANDA
On December 17, 2010, approved with the resolution of the 17th meeting of the Sixth Board
of Directors, the Company planned to acquire 50% equity of HENGLIANDA held by Beijing
Hengdeli Switzerland Clock and Watch Co., Ltd. through HARMONY, one of the Company’s
subsidiaries. Both Parties agreed that with October 31, 2010 as the base date of the equity
assignment, the equity assignment price was CNY16,300,000.00. Upon completion of the
acquisition, HARMONY would hold 100% equity of HENGLIANDA. Ended December 31,
2010, HARMONY had paid CNY4,890,000.00 of the equity assignment consideration.
Ended June 30, 2011, HARMONY had paid the remaining amount CNY 11,410,000.00 and
the procedures for assignment of the equity had been completed.
2. Acquisition of the equity of HARMONY. On August 14, 2010, approved with the resolution
of the 13th meeting of the Sixth Board of Directors, the Company planned to accept 0.50%
equity in HARMONY held by AVIC International Shenzhen Company Limited through
assignment. Both Parties took the appraisal price amounting to CNY 2,807,200.00 as
specified in the Appraisal Report ZHONG LIAN PING BAO ZI [2010] No. 511 issued by
China United Assets Appraisal Co., Ltd. as the equity assignment price. Ended June 30,
2011, the procedures for the equity assignment were completed.
3. Purchase of the Plants in Switzerland and Construction of the Assembling Line
The 25th meeting of the Six Board of Directors held on June 13, 2011 reviewed and
approved the Proposal on Purchase of the Plants of Montres Chouriet SA. The Board of
Directors approved Montres Chouriet SA, a solely funded subsidiary, and the assigner to
conclude the plant purchase agreement. The total investment in this transaction amounted
to CNY 37.20 million. Ended June 30, 2011, Montres Chouriet SA, the assigner and the
local notary public jointly concluded the performance guarantee for plant purchase.
The formal plant purchase agreement should be jointly signed by the three parties, namely,
Montres Chouriet SA, the assigner and the local notary public before October 1, 2011.
During this period, the notary public shall designate the bank account for payment of all the
123
balances, including the outstanding consideration for the plant, notarization charge and
taxes; and ownership transfer and handover work shall be completed.
4. Investment and establishment of a subsidiary (refer to Note VI. 1)
With a view to further improve HARMONY’s international influence, speeding up the
process of turning HARMONY into an internationalized enterprise, in accordance with the
resolution of the 20th meeting of the Sixth Board of Directors held on January 13, 2011, in
the report period, the Company incorporated HARMONY World Watches International
Limited, as a subsidiary of HARMONY in Hong Kong with registered capital of HKD10
million.
For the purpose of clearing the business management structure, seizing the market
opportunity, promoting quick development of own brand and enhancing the strategic
layout of the retail channels of watches and clocks, according to the resolution of the 22nd
meeting of the Sixth Board of Directors held on February 25, 2011, the Company invested
CNY 50 million and incorporated FIYTA Sales Co., Ltd., a solely funded subsidiary.
VIII. Notes to the principal items on the Company’s financial statements
1. Accounts receivable
(1) Presented based on Categories of accounts receivable
End of the report period
Book Balance Reserve for bad debt
Categories
Proportion Proportion
Amount (%) Amount (%)
Accounts receivable with significant
single amount and provision of bad 10,988,318.49 9.58 10,988,318.49 100.00
debt reserve on individual basis
Accounts receivable for which bad
debt reserve has been provided
based on the combination
Combined based on the accounting
26,304,664.62 22.93 2,157,775.72 8.20
age
Grouping of the designated accounts 47,308,439.56 41.24 - -
124
Sub-total of Groupings 73,613,104.18 64.17 2,157,775.72 2.93
Accounts receivable with
insignificant single amount and
30,114,190.99 26.25 30,114,190.99 100.00
provision of bad debt reserve on
individual basis
Total 100.00 43,260,285.20 37.71
114,715,613.66
(continued)
Year beginning
Book Balance Reserve for bad debt
Categories
Proportion Proportion
Amount (%) Amount (%)
Accounts receivable with significant
10,988,318.4
single amount and provision of bad 12.93 10,988,318.49 100.00
9
debt reserve on individual basis
Accounts receivable for which bad
debt reserve has been provided
based on the combination
Combined based on the accounting 13,134,239.2
15.45 2,157,775.72 16.43
age 5
30,776,905.4
Grouping of the designated accounts 36.20 - -
0
43,911,144.6
Sub-total of Groupings 51.65 2,157,775.72 4.91
5
Accounts receivable with
insignificant single amount and 30,114,190.9
35.42 30,114,190.99 100.00
provision of bad debt reserve on 9
individual basis
85,013,654.1
Total 100.00 43,260,285.20 50.89
3
(2) Presented based on age of accounts receivable
End of the report period Year beginning
Items
Amount Proportion (%) Amount Proportion (%)
Within 1 year 65,278,721.22 56.90 35,851,944.24 42.17
1 to 2 years 426,479.18 0.37 128,382.49 0.15
2 to 3 years 240,195.77 0.21 10,723.48 0.01
Over 3 years 48,770,217.49 42.51 49,022,603.92 57.67
Total 114,715,613.66 100.00 85,013,654.13 100.00
(3) Provision for bad debt
① Provision for bad debt of the accounts receivable with significant single amount and
125
provision of bad debt reserve on individual basis
Reserve for Provision
Description of accounts receivable Book Balance Reasons
bad debt proportion
Beijing Urban/Rural Trade Center Unrecoverabl
2,033,710.15 2,033,710.15 100.00
Co., Ltd. e
Qingdao Handry Timepieces, Unrecoverabl
1,298,215.01 1,298,215.01 100.00
Glasses and Jewelry Co. e
Timepieces and Sewing Machine Unrecoverabl
Wholesale Station of Yingkou 982,604.03 982,604.03 100.00 e
General Merchandise Co.
Jilin Timepieces and Photographic Unrecoverabl
890,387.77 890,387.77 100.00
Paraphernalia Wholesale Co. e
Unrecoverabl
Siping No. 1 Department Store 823,302.04 823,302.04 100.00
e
Anshan Timepieces and Unrecoverabl
807,815.02 807,815.02 100.00
Photographic Equipment Co. e
Unrecoverabl
Customers to be identified 4,152,284.47 4,152,284.47 100.00
e
10,988,318.4 10,988,318.4
Total
9 9
② Accounts receivable for which bad debt reserve has been provided based on the
grouping
The accounts receivable for which the bad debt reserve is provided based on the age
analysis:
End of the report period Year beginning
Book Balance Book Balance
Age Reserve for Reserve for
Proportion Proportion
Amount bad debt Amount bad debt
(%) (%)
Within 1
24,305,292.21 92.40 552,051.43 11244045.12 85.61 552,051.43
year
1 to 2
109,024.31 0.41 12,838.25 115554.75 0.88 12,838.25
years
2 to 3
123,440.09 0.47 5,361.74 10723.48 0.08 5,361.74
years
Over 3 1,587,524.3
1,766,908.01 6.72 1763915.90 13.43 1,587,524.30
years 0
2,157,775.7
Total 26,304,664.62 100.00 13,134,239.25 100.00 2,157,775.72
2
126
Note: No reserve for bad debt has been provided for CNY 47,308,439.56 of the accounts
receivable at the end of the report period (amount in the same period of the previous year:
CNY 30,776,905.40) as described in Note IV. 8.
③ At the end of the report period, accounts receivable with insignificant single amount
and provision of bad debt reserve on individual basis
Description of
Reserve for
accounts Book Balance Proportion (%) Provision reason
bad debt
receivable
Doubtful
30,114,190.99 100.00 30,114,190.99 Unrecoverable
accounts/bad debt
For the accounts receivable for which there is obvious sign showing that the customer
obliged for repayment is unable to implement the obligation with the single amount not
exceeding CNY 800,000.00, the Company takes that there exists big risk in recovering
the account receivable from such a customer and provides reserve for bad debt by
100%.
(4) In the report period, there was no account receivable due from the shareholder
holding over 5% (with 5% inclusive) of the Company’s vote-bearing shares.
(5) Top Five Debtors of the Accounts Receivable
Proportion in
Relationship
the total of the
Company names with the Amount Years
accounts
Company
receivable(%)
Within 1
Harmony Subsidiary 6.10
7,003,118.97 year
Beijing Urban/Rural
Non-Related Over 3
Trade Center Co., 2,033,710.15 1.77
Party years
Ltd.
Qingdao Handry
Timepieces, Non-Related Over 3
1,298,215.01 1.13
Glasses and Party years
Jewelry Co.
Timepieces and
Sewing Machine
Non-Related Over 3
Wholesale Station 982,604.03 0.86
Party years
of Yingkou General
Merchandise Co.
Jilin Timepieces and
Photographic Non-Related Over 3
890,387.77 0.78
Paraphernalia Party years
Wholesale Co.
127
Total 12,208,035.93 10.64
(6) Accounts due from related parties
Proportion in the
Relationship with the total of the
Company names Amount
Company accounts
receivable (%)
Harmony Subsidiary 7,003,118.97
FIYTA Hong Kong Subsidiary 835,590.53 6.10
0.73
Limited Supermarket
Rainbow Under the same 2,783,637.98
Shenzhen CATIC Group eventual controller 2.43
Eventual controller 6,664,946.00 5.81
Co., Ltd.
Shennan Circuit Under the same 675,533.29 0.59
Total eventual controller 17,962,826.77
15.66
2. Other receivables
(1) Other receivables presented based on categories
End of the report period
Book Balance Reserve for bad debt
Categories
Proportion Proportion
Amount (%) Amount (%)
Other receivables with significant
single amount and provision of bad - - - -
debt reserve on individual basis
Other receivables for which bad debt
reserve has been provided based on
the grouping
Grouping based on the accounting
11,727,374.9 2.45 3,734,037.03 31.84
age
2
467,683,440.
Grouping of the designated accounts 97.52 - -
90
479,410,815.
Sub-total of Groupings 99.97 3,734,037.03 0.78
82
Other receivables with insignificant
single amount and provision of bad 156,020.47 0.03 156,020.47 100.00
debt reserve on individual basis
479,566,836.
Total 100.00 3,890,057.50 0.81
29
(continued)
Categories Year beginning
128
Book Balance Reserve for bad debt
Proportion Proportion
Amount (%) Amount (%)
Other receivables with significant
single amount and provision of bad - - - -
debt reserve on individual basis
Other receivables for which bad debt
reserve has been provided based on
the grouping
Grouping based on the accounting
8,093,002.32 1.47 3,734,037.03 46.14
age
541,174,155.
Grouping of the designated accounts 98.5 - -
68
549,267,158.
Sub-total of Groupings 99.97 3,734,037.03 0.68
00
Other receivables with insignificant
single amount and provision of bad 156,020.47 0.03 156,020.47 100.00
debt reserve on individual basis
549,423,178.
Total 100.00 3,890,057.50 0.71
47
(2) Other receivables presented based on ages
End of the report period Year beginning
Items
Amount Proportion (%) Amount Proportion (%)
Within 1
473,262,792.36 484,054,173.57 88.10
year 98.69
1 to 2
925,464.42 60,103,955.04 10.94
years 0.19
2 to 3
356,256.26 1,105,813.16 0.20
years 0.07
Over 3
5,022,323.25 4,159,236.70 0.76
years 1.05
Total 479,566,836.29 100.00 549,423,178.47 100.00
(3) Provision for bad debt
① Other receivables for which bad debt reserve has been provided based on grouping
Other receivables for which the bad debt reserve is provided based on the age analysis:
End of the report period Year beginning
Book Balance Book Balance
Age Reserve for Reserve for
Proportion Proportion
Amount bad debt Amount bad debt
(%) (%)
Within 1
6,623,330.99 56.48 38,475.47 3,522,295.59 43.52 38,475.47
year
1 to 2
925,464.42 7.89 3,054.23 611,637.10 7.56 3,054.23
years
129
2 to 3
356,256.26 3.04 118,779.60 348,341.9 4.3 118,779.60
years
Over 3 3,573,727.7
3,822,323.25 32.59 3,610,727.73 44.62 3,573,727.73
years 3
3,734,037.0
Total 11,727,374.92 100.00 8,093,002.32 100.00 3,734,037.03
3
Note: No reserve for bad debt has been provided for CNY 467,683,440.90 of other
receivable at end of the report period (amount in the same period of the previous year:
CNY 541,174,155.68) as described in Note IV. 8.
② Other receivables with insignificant single amount and provision of bad debt reserve on
individual basis at the end of the report period
Reserve for bad
Other receivables Book Balance Proportion (%) Provision reason
debt
Reserve for
individuals of service 156,020.47 100.00 156,020.47 Unrecoverable
termination
For the other receivables in connection with the reserve for individual employees of
service termination, none of single amounts exceeds CNY 500,000. However, such
accounts are unrecoverable due to those employees leaving service, the reserve for
bad debt is provided based on 100%.
(4) In the report period, there was no other receivable due from the shareholder holding
over 5% (with 5% inclusive) of the Company’s vote-bearing shares.
(5) Top Five Debtors of the Other Receivables
Proportion in
Relationship
the total of the
Company names with the Amount Years
other
Company
receivables (%)
386,985,687.4 Within 1
Harmony Subsidiary 80.69
9 year
Emile Chouriet Within 1
Subsidiary 7.27
(Shenzhen) 34,861,214.17 year
Within 1
Manufacture Co. Subsidiary 5.84
27,987,620.04 year
Within 1
Trade Co. Subsidiary 2.21
10,592,437.60 year
FIYTA Science & Within 1
Subsidiary 1.07
Technology 5,148,200.79 year
Total 465,575,160.09 97.08
130
(6) Accounts due from related parties
Proportion in the
Relationship with
Company names Amount total of the other
the Company
receivables (%)
Harmony Subsidiary 386,985,687.49
80.69
Grandson
Henglianda 60,252.10 0.01
company
FIYTA Hong Kong Subsidiary 95,165.00 0.02
Emile Chouriet (Shenzhen) Grandson 34,861,214.17 7.27
Manufacture Co. company
Subsidiary 27,987,620.04
Trade Co. Subsidiary 10,592,437.60 5.84
2.21
FIYTA Science & Subsidiary 5,148,200.79 1.07
Technology
CATIC Monitor Under the same 102,500.00 0.02
Rainbow Supermarket Under controller
eventualthe same 72,401.60 0.02
Shenzhen CATIC Enterprise Under controller
eventual the same 155,000.00 0.03
Group Training Center
Total eventual controller 466,060,478.79 97.18
(7) Other receivables in foreign currency are presented in the original currency and
exchange rate
End of the report period Year beginning
Items
Amount in Exchan Conversion in Amount in Exchan Conversion
HKD foreign currency
5,116.04 ge rate
0.8316 CNY
4,254.50 foreign
8,397.50 ge rate
0.8509 in7,145.43
CNY
currency
S.Fr. 1,815.26 7.7743 14,112.40
3. Long-term equity investment
(1) Long-term equity investment classification
Decreas
Increase in
e in the End of the
Items Year beginning the report
report report period
period
period
352,508,000.0 352,807,200. 705,315,200.
Investment in subsidiaries -
0 00 00
48,985.4
Investment to joint ventures -
1,896,913.65 8 1,847,928.17
Other equity investment - - 385,000.00
385,000.00
Less: reserve for 300,000.00 - -
131
impairment of long-term 300,000.00
equity investments
354,489,913.6 352,807,200. 48,985.4 707,248,128.
Total
5 00 8 17
(2) Statement of Long Term Equity Investment
Accountin Investment Increase/Decre End of the
Investees Year beginning
g method cost ase report period
Cost 298,500,000.0 601,307,200.000
Harmony 298,500,000.00 302,807,200.00
method 0 0
Cost
World Watches Center 1,400,000.00 1,400,000.00 - 1,400,000.0000
method
Cost
Harbin Co. 125,000.00 125,000.00 -
method 125,000.0000
Cost
Manufacture Co. 9,000,000.00 9,000,000.00 -
method 9,000,000.0000
Cost
Xi’an Chengheng 10,000,000.00 10,000,000.00 -
method 10,000,000.0000
FIYTA Science & Cost
10,000,000.00 10,000,000.00 - 10,000,000.0000
Technology method
FIYTA Hong Kong Cost
18,483,000.00 18,483,000.00 -
Limited method 18,483,000.0000
Cost
Trade Co. 5,000,000.00 5,000,000.00 -
method 5,000,000.0000
Cost
FIYTA Sales Co. 50,000,000.00 50,000,000.00
method 50,000,000.0000
Shenzhen Research
Institute of Northwest Equity
1,350,000.00 1,896,913.65 -48,985.48 1,847,928.1700
China Polytechnic method
University
Xi’an Tangcheng Joint Cost
85,000.00 85,000.00 -
Stock Co., Ltd. method 85,000.0000
Shenzhen CATIC
Cost
Culture Communication 300,000.00 300,000.00 -
method 300,000.0000
Co., Ltd.
354,789,913.6 707,548,128.1
352,758,214.52
Total 5 7
(continued)
Holding Holding Note to
proportion proportion of inconsistence of Provision for
Cash dividend
of the the holding proportion Impairme impairment
Investees in the report
shares in vote-bearing of the shares in the nt reserve in the report
period
the shares in the investees with period
investees investees voting power
132
(%)
Harmony 100.00 100.00 - - -
Another
shareholder enjoys
the fixed income
World Watches
50.00 100.00 but does not - - -
Center
participate in
operation
Harbin Co. 100.00 100.00 - - - -
Manufacture Co. 100.00 100.00 - - - 30,786,321.10
Xi’an
100.00 100.00 - - - -
Chengheng
FIYTA Science
100.00 100.00 - - - 3,400,809.83-
& Technology
FIYTA Hong
100.00 100.00 - - - -
Kong Limited
Trade Co. 100.00 100.00 - - - -
FIYTA Sales Co. 100.00 100.00
Shenzhen
According to the
Research
agreement, the
Institute of
45.00 50.00 Company enjoys - - -
Northwest China
dividends based on
Polytechnic
50% equity
University
Xi’an
Tangcheng Joint 0.10 0.10 - - - -
Stock Co., Ltd.
Shenzhen
CATIC Culture 300,000.0
15.00 15.00 - - -
Communication 0
Co., Ltd.
300,000.0
- 34,187,130.93
Total 0
(3) Statement of provision for impairment of long-term equity investments
Items Year beginning Increase in Decrease in End of the
the report the report Report Period
Other long-term equity period period
investment
133
Shenzhen CATIC Culture
300,000.00 - - 300,000.00
Communication Co., Ltd.
4. Operation Revenue and Costs
(1) Operation revenue and costs
Amount in the same
Items Amount in the report period period of the previous
year
Revenue from principal business 226,264,903.90 147,920,077.50
Revenue from other business 3,156,792.71 3,392,338.52
Total operation revenue 229,421,696.61 151,312,416.02
Costs of principal business 105,561,441.74 66,051,538.00
Costs of other business 2,608,424.51 3,240,617.00
Total operation costs 108,169,866.25 69,292,155.00
(2) Principal Businesses Based on Sectors
Amount in the same period of the
Amount in the report period
Sectors previous year
Revenue Operating costs Revenue Operating costs
FIYTA
consumption 191,859,983.77 95,045,040.40 114,796,445.15 55,896,320.65
goods
Leasehold 34,404,920.13 10,516,401.34 33,123,632.35 10,155,217.35
Total 226,264,903.90 105,561,441.74 147,920,077.50 66,051,538.00
(3) Principal Business (based on regions)
Amount in the same period of the
Amount in the report period
Regions previous year
Revenue Operating costs Revenue Operating costs
Northeast China 22,023,685.70 12,310,285.01 12,618,069.27 6,965,750.25
North China 27,379,914.83 13,649,678.30 16,338,778.08 8,028,569.90
Northwest China 22,932,699.13 11,663,574.71 13,307,710.69 6,700,620.83
Southwest China 19,198,777.60 9,667,823.34 12,586,310.47 6,286,065.67
East China 30,067,203.18 15,443,592.46 17,746,755.11 8,972,805.70
South China 104,662,623.45 42,826,487.91 75,322,453.88 29,097,725.66
Total 226,264,903.90 105,561,441.74 147,920,077.50 66,051,538.00
(4) Operation revenue from Top Five Customers:
134
Total operation revenue Proportion in the operation
Duration from the top five revenue of the same period
customers (%)
January - June, 2011 11.10
25,108,711.81
January - June, 2010 19,903,836.50 13.15
5. Return on Investment
(1) Statement of Return on Investment
Amount in the same
Amount in the report
Investees period of the previous
period
year
Return on long term equity investment based on cost
34,187,130.93 13,758,953.80
method
Return on long term equity investment based on
-48,985.48 -
equity method
Return on investment from disposal of long-term
- -
equity investment
Return on investment obtained from the
- -
available-for-sale financial assets
Total 34,138,145.45 13,758,953.80
(2) Return on long term equity investment based on cost method
Amount in the same
Amount in the report
Investees period of the previous
period
year
Shenzhen FIYTA Technology Development Co., Ltd. 3,400,809.83
Shenzhen FIYTA Sophisticated Timepieces Manufacture
30,786,321.10 13,758,953.80
Co., Ltd.
Total 34,187,130.93 13,758,953.80
(3) Return on long term equity investment calculated based on the equity method
Amount in the
Amount in the Cause of increase
Investees same period of the
report period and decrease
previous year
Decrease of net
Shenzhen Research Institution of
profit of the
Northwestern Polytechnical -48,985.48 -
investee in the
University
report year
135
6. Supplementary information of the cash flow statement
Amount in the same
Amount in the report
Items period of the previous
period
year
1. Net cash flows arising from adjustment of net profit
into operating activities:
Net profit 35,802,958.57 16,731,185.38
Plus: Provisions for impairment of assets
Depreciation of fixed assets, oil and gas assets,
9,551,664.64 9,649,031.96
production based biological asset
Amortization of intangible assets 443,724.15 408,896.88
Long-term expenses to be apportioned 6,341,035.05 7,076,735.78
Loss (gain) from disposal of fixed assets, intangible
-50,357.86 -6,920,913.33
assets and other long term assets
Financial expenses 10,183,933.21 7,489,968.00
Investment loss (gain) -34,138,145.45 -13,758,953.80
Decrease (increase) of deferred income tax asset
Increase (decrease) of deferred income tax liability -6,777.24 9,726.36
Decrease (Increase) of inventories -70,802,020.29 -17,640,073.04
Decrease (Increase) of operational receivables 50,537,978.99 -28,187,680.79
Increase of operational payables 79,443,128.68 17,773,019.69
Net cash flow arising from operating activities 87,307,122.45 -7,369,056.91
2. Significant investment and fund-raising activities not
involved in cash income and expenses:
3. Net change of cash and cash equivalents:
Ending cash balance 148,907,030.69 58,160,134.97
Less: Opening cash balance 529,568,738.47 46,560,890.55
Plus: Ending cash equivalent balance - -
Less: Opening cash equivalent balance - -
Net increase in cash and cash equivalents -380,661,707.78 11,599,244.42
XIV. Complementary Information
1. Statement of non-recurring gain and loss
In CNY
Amount in the
Amount in
same period
Items the report
of the previous
period
year
50,357.86
Gain/Loss from disposal of non-current assets 6,891,234.90
136
Tax rebate or reduction with approval by overstepping authority, or without
-
formal approval document
Government subsidy recognized in current gain and loss (excluding those
closely related to the Company’s business and granted under the state’s 1,026,556.00 720,000.00
policies according to certain quota of amount or volume)
Gains/losses from fair value changes of trading financial assets and trading
financial liabilities, and investment income from disposal of trading financial
assets, trading financial liabilities and available-for-sale financial assets, - -
except effective hedging activities related to the Company’s normal
operations
Reversal of provision for impairment of the accounts receivable separately
- -
tested for impairment
Income and expenses from the business other than the above items - -
Other gain and loss items in compliance with definition of non-recurring gains -1,965,352.1
-405,053.38
and losses 2
Sub-total -888,438.26 7,206,181.52
Amount influencing the income tax 266,716.27 1,581,498.85
Amount affected by minority equity (after tax)
-1,155,154.5
Total 5,624,682.67
3
The Group recognizes the non-recurring gain and loss items according to the
Interpretative Announcement on Information Disclosure by Companies that Offer
Securities to the Public No. 1 – Non-Recurring Gains and Losses (CSRC Announcement
[2008] No. 43).
2. Net assets-income ratio and earnings per share
Earning per share, CNY/share
Net assets-income ratio
Profit in the report period
(weighted average) Basic earning per Diluted earning per
share share
Net profit attributable to
the Company’s
6.75% 0.219 0.219
shareholders of ordinary
shares
137
Net profit attributable to
the shareholders of
ordinary shares less 6.84% 0.222 0.222
non-recurring gain and
loss
Note: (1) Weighted average net asset earning rate = P0/(E0＋NP÷2＋Ei×Mi÷M0–- Ej
×Mj÷M0±Ek×Mk÷M0)
Where P0 is the net profit attributable to the shareholders of common shares respectively
corresponding to the net profit attributable to the Company’s shareholders of common
shares after deduction of the non-recurring gain and loss. NP is the net profit attributable
to the shareholders of ordinary shares in the Company. E0 is the net profit at the
beginning of a period attributable to the shareholders of ordinary shares in the Company;
Ei is the newly added net asset attributable to the Company’s shareholders of ordinary
shares arising from issuing of new shares or conversion of debentures into shares; Ej is
the net asset decreased from repurchase or cash dividend, etc. and attributable to the
Company’s shareholders of ordinary shares; M0 is the number of months in a report
period; Mi is the accumulated months from the next month after the new addition of net
asset to the end of a report period; Mi is the number of accumulative months from the next
month after the deduction of net assets to the end of a report period; Ek is the
increase/decrease change arising from other transaction or matters; Mk is the
accumulated months from the next month after change in increase/decrease of other net
asset to the end of the report period.
In case consolidation of an enterprise under the same control took place in the report
period, in calculating the weighted average net asset-income ratio less the non-recurring
gain and loss, the net assets of the consolidatee would be weighted commencing from the
next month after the consolidation date. In calculating the weighted average net
asset-income ratio during the comparative period, the consolidatee’s net profit and net
assets would all be weighted commencing from the next month after the eventual
controller starts implementing control. In calculating the weighted average net
asset-income ratio less the non-recurring gain and loss during the comparative period, the
consolidatee’s net assets would not be weighted for calculation (the weight is zero).
(2) For calculation of basic earnings per share and diluted earnings per share, refer to
Note VII. 42.
3. Notes to the Abnormalities of the Major Items in the Group’s Consolidated
Financial Statements and the Reasons
(1) Items in Balance Sheet
A. Decrease of the monetary funds over the year beginning by CNY 315.08 million and
decrease of cash and cash equivalents in the report period by CNY 315.08 million, where
the net cash flow arising from the operating activities was CNY –103.43 million were
mainly due to that with expansion of the marketing network size of famous brand watches
and FIYTA watches, the purchase cost increased correspondingly and cash outflow
reached CNY 105.50 million. Net cash flow arising from investment activities amounting to
CNY –55.24 million mainly consisted of payment for purchase of fixed assets and
refurbishment of new shops amounting to CNY 36.22 million and payment for purchase of
138
the equity in HENGLIANDA amounting to CNY19.11 million.
Net cash flow arising from financing activities amounting to CNY –164.68 million mainly
consisted of repayment of the bank loan amounting to CNY 114.14 million, payment for
bank loan interest amounting to CNY 22.49 million and payment of the dividends
amounting to CNY 28.05 million.
B. Decrease of the advance payment over the year beginning by CNY 11.86 million
consisted of: advance payment in FIYTA Technology increased by CNY 5.09 million over
the year beginning, that in FIYTA Hong Kong decreased by CNY 3.75 million, that in
HARMONY decreased by CNY 12.38 million and that in XIANGJI decreased by CNY 0.81
million.
C. Increase of accounts receivable by CNY 62.56 million over the year beginning was
mainly due to growth of sales, including that of HARMONY increased by CNY 34.26
million over the year beginning and that of FIYTA Watches increased by CNY 30.10 million
D. Inventories increased by CNY 235.70 million over the year beginning, mainly including:
inventories in HARMONY increased by CNY 149.20 million for its newly opened shops
and increase of brands; goods in stock and raw materials in FIYTA increased by CNY 59
million due to development of new styles and goods allocation.
E. Increase of the long term expenses to be apportioned by CNY 11.30 million over the
year beginning was mainly due to increase of the refurbishment expenses for retail shops,
where HARMONY increased by CNY 5.50 million, FIYTA Hong Kong increased by
CNY2.34 million and XIANGJI increased by CNY1.37 million for refurbishment.
F. Decrease of the short term loans by CNY 105.94 over the year beginning mainly
consists of repayment of the short term loans by the headquarters amounting to CNY
56.00 million, repayment of the short term loans by HARMONY amounting to CNY 50
million.
G. Increase of the payable taxes by CNY 18.98 million over the year beginning mainly
consists of increase of payable taxes in HARMONY by CNY 11.67 million over the year
beginning, decrease of payable taxes in FIYTA Business Division by CNY 2.70 million
139
over the year beginning due to increase of purchases; increase of the payable taxes in
FIYTA Hong Kong by CNY 2.70 million over the year beginning, and increase of the
payable taxes in FIYTA Technology and Manufacture Co. by CNY 7.60 million over the
year beginning.
H. Decrease of capital reserve by CNY 112.77 million over the year beginning was mainly
due to decrease of the capital reserve by CNY 112.22 million resulted from that the
Company conducted conversion of the capital reserve into capital stock on 4-for-10 basis.
I. Decrease of the minority shareholders’ equity by CNY 18.41 million over the year
beginning was mainly due to that the Company acquired the minority shareholders’ equity
in HARMONY and HARMONY acquired minority shareholders’ equity in HENGLIANDA,
one of its subsidiaries.
(2) Profit Statement Items
A. Operation revenue in the report period was CNY 1,232.01 milloin with a year-on-year
growth of 51.95%. The growth was mainly due to that HARMONY increased the revenue
due to increase of the newly opened shops and its existing shops increased revenue
through steady development and optimization of the network sales; in addition, FIYTA
watches experienced a big growth in revenue over the same period of the previous year;
B. The operation costs in the report period amounted to CNY 820.49 million, increased by
45.14% over the same period of the previous year. The growth was mainly due to increase
of the revenue; the difference between its growth proportion and the growth proportion of
the operation revenue was 6.81%. The difference was mainly due to that HARMONY
made good control over the terminal discount and the gross profit rate of FIYTA watches
increased somewhat over the same period of the previous year;
C. The sales costs incurred in the report period amounted to CNY 185.74 million, a
63.57% growth over the same period of the previous year. The growth was mainly due to
corresponding increase of the sales costs with increase of the sales income.
D. The amount of the administrative expenses incurred in the report period was CNY
86.93 million, a 39.66% growth over the same period of the previous year. The growth was
140
mainly due to corresponding growth of emoluments and the relevant expenses resulted
from expansion of the business scope, increase and upgrading of employees.
E. Loss from impairment of assets incurred in the report period amounted to CNY 2.2565
million, increased by CNY 1.8442 million over the same period of the previous year. The
growth was mainly due to the provision for impairment of the inventories of the raw
materials corresponding to the watches with poor realizability in the terminal sales by the
Manufacture Co., one of the Company’s subsidiaries, amounting to CNY2.00 million and
the provision for impairment of the inventories amounting to CNY 0.2565 million by
HARMONY for its famous brand watches according to the Group’s method for
measurement of the reserve for impairment of the inventories;
F. Non-operating revenue incurred in the report period amounted to CNY 1.3744 million,
decreased by 82.46% over the same period of the previous year. The decrease was
mainly due to the income from disposal of fixed assets resulted from the Company’s sale
of Huashun Building in Chengdu in the same period of the previous year.
141
