FIYTA Precision Technology Co., Ltd. 2021 First Quarter Report, Summary Stock Code: 000026; 200026 Short Form of Stock: FIYTA; FIYTA B Announcement No.: 2021-039 FIYTA Precision Technology Co., Ltd. 2021 First Quarter Report, Summary 1 FIYTA Precision Technology Co., Ltd. 2021 First Quarter Report, Summary Section 1 Important Notice, Table of Contents and Definition The Board of Directors, the Supervisory Committee, directors, supervisors and senior executives hereby individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are neither material omissions nor errors which would render any statement misleading. All the directors attended the board meeting for reviewing the Quarter Report. Huang Yongfeng, the Company leader, Chen Zhuo, chief financial officer, and Tian Hui, the manager of the accounting department (treasurer) hereby confirm the authenticity and completeness of the financial report enclosed in this Quarter Report. 2 FIYTA Precision Technology Co., Ltd. 2021 First Quarter Report, Summary Section 2 Company Profile I. Summary of Accounting/Financial Data Does the Company need to make retroactive adjustment or restatement of the accounting data of the previous year No Same period of the previous Year-on-year increase/decrease in the Reporting period year reporting period Operation revenue in CNY 1,378,277,735.81 588,361,057.06 134.26% Net profit attributable to the Company’s 118,222,042.23 -12,974,795.53 1,011.17% shareholders, in CNY Net profit attributable to the Company’s shareholders less the non-recurring items, in 113,576,505.85 -13,738,773.72 926.69% CNY Net cash flows arising from operating activities, 28,711,219.83 -106,747,751.88 126.90% in CNY Basic earning per share (CNY/share) 0.2780 -0.0294 1,045.66% Diluted earning per share (CNY/share) 0.2780 -0.0294 1,045.66% Return on equity, weighted average 4.15% -0.49% 4.64% Increase/decrease at the end of the End of the reporting period End of the previous year year over the end of the previous year Total assets (in CNY) 4,412,065,471.64 4,018,712,700.18 9.79% Net profit attributable to the Company’s 2,911,884,821.93 2,799,948,388.09 4.00% shareholders, in CNY Non-recurring gain/loss items and the amount involved In CNY Amount from year beginning to Items Note the end of the reporting period Gain/loss from disposal of non-current assets, including the part written- 55,838.26 off with the provision for impairment of assets. The government subsidies included in the profits and losses of the current period (excluding government grants which are closely related 6,070,986.55 to the Company’s business and conform with the national standard amount or quantity) Other non-operating income and expenses other than the aforesaid 37,477.18 items Less: Amount affected by the income tax 1,518,765.61 Total 4,645,536.38 -- For the Company’s non-recurring gain/loss items as defined in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering their Securities to the Public – Non-recurring Gains and Losses and its non-recurring gain/loss items as illustrated in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering their Securities to the Public – Non-recurring Gains and Losses which have been defined as recurring gains and losses, it is necessary to explain the reason. Inapplicable II. Total number of shareholders and the statement of the shares held by the top 10 shareholders 1. Total number of the common shareholders and preferred shareholders whose voting rights are restored and shares held by the top 10 shareholders In shares Total common shareholders at the end 28,331 Total preference shareholders with the 0 3 FIYTA Precision Technology Co., Ltd. 2021 First Quarter Report, Summary of the reporting period voting power recovered at the end of the reporting period (if any) Shareholding by top 10 shareholders Number of the Pledging or freezing Names of the Nature of the Shareholding Number of shares restricted shares Status of the Shareholders shareholder proportion held Quantity held shares AVIC International State corporate 37.40% 162,977,327 0 Holding Limited ICBC - Fuguo Tianhui Selected Domestic non- Growth Hybrid state-owned legal 2.75% 12,000,072 0 Securities person Investment Fund (LOF) Construction Bank of China - Penghua Domestic non- Huizhi Optimized state-owned legal 2.11% 9,211,000 0 Hybrid Securities person Investment Fund ICBC - Fuguo Hi- Domestic non- tech Industry state-owned legal 1.80% 7,829,645 0 Hybrid Securities person Investment Fund Construction Bank of China - Penghua Domestic non- High Quality state-owned legal 1.40% 6,103,406 0 Growth Hybrid person Securities Investment Fund Construction Bank of China - Penghua Domestic non- Value Superiority state-owned legal 1.13% 4,943,342 0 Hybrid Securities person Investment Fund (LOF) China Merchants Bank Co., Ltd. - Fuguo Sci-Tech Innovation Theme Domestic non- 3-Year Sealed state-owned legal 0.68% 2,963,991 0 Operation Flexible person Configuration Hybrid Securities Investment Fund Construction Bank Domestic non- of China - Penghua state-owned legal 0.61% 2,645,834 0 Selected Growth person 4 FIYTA Precision Technology Co., Ltd. 2021 First Quarter Report, Summary Hybrid Securities Investment Fund Bank of Communications - Domestic non- CSCL High Quality state-owned legal 0.54% 2,339,400 0 Growth Securities person Investment Fund China Construction Bank Co., Ltd. - Fuguo Sci-Tech Domestic non- Innovation Flexible state-owned legal 0.53% 2,290,460 0 Configuration person Hybrid Securities Investment Fund Shares held by top 10 shareholders of unrestricted shares Share type Names of the Shareholders Quantity of unrestricted shares held Share type Quantity CNY ordinary AVIC International Holding Limited 162,977,327 162,977,327 shares ICBC - Fuguo Tianhui Selected Growth CNY ordinary Hybrid Securities Investment Fund 12,000,072 12,000,072 shares (LOF) Construction Bank of China - Penghua CNY ordinary Huizhi Optimized Hybrid Securities 9,211,000 9,211,000 shares Investment Fund ICBC - Fuguo Hi-tech Industry Hybrid CNY ordinary 7,829,645 7,829,645 Securities Investment Fund shares Construction Bank of China - Penghua CNY ordinary High Quality Growth Hybrid Securities 6,103,406 6,103,406 shares Investment Fund Construction Bank of China - Penghua CNY ordinary Value Superiority Hybrid Securities 4,943,342 4,943,342 shares Investment Fund (LOF) China Merchants Bank Co., Ltd. - Fuguo Sci-Tech Innovation Theme 3- CNY ordinary Year Sealed Operation Flexible 2,963,991 2,963,991 shares Configuration Hybrid Securities Investment Fund Construction Bank of China - Penghua CNY ordinary Selected Growth Hybrid Securities 2,645,834 2,645,834 shares Investment Fund Bank of Communications - CSCL High CNY ordinary Quality Growth Securities Investment 2,339,400 2,339,400 shares Fund China Construction Bank Co., Ltd. - CNY ordinary 2,290,460 2,290,460 Fuguo Sci-Tech Innovation Flexible shares 5 FIYTA Precision Technology Co., Ltd. 2021 First Quarter Report, Summary Configuration Hybrid Securities Investment Fund Explanation on associated relationship or consistent action of the above Inapplicable shareholders Note to the top 10 shareholders involved in margin financing & securities Inapplicable lending (if any) Did the top ten common shareholders or top ten shareholders of unrestricted common shares conduct contractual repurchase during the reporting period? No 2. Total Preference Shareholders and the Shareholding by the Top 10 Preference Shareholders Inapplicable 6 FIYTA Precision Technology Co., Ltd. 2021 First Quarter Report, Summary Section 3 Significant Events I. Financial Data Summary, State ment of Change in the Financial Indicators and the Causes during the Reporting Period (I) Items of assets and liabilities Amount at the Variation End of the Items end of the proportion Cause of the movement previous year reporting period (%) Mainly due to the increase in sales receivables collected from the growth of the operation revenue, the net Monetary capital 515,870,165.61 353,057,285.71 46.12% increase of the bank loans and the increase in subscription payments received for the implementation of the second phase of the equity incentive plan. Mainly due to the influence from the implementation of Use right assets 150,191,634.60 0.00 100% the new standards for lease in the current year. Deferred income tax Mainly due to the influence from the implementation of 112,197,900.00 80,913,800.35 38.66% asset the new standards for lease in the current year. Other non-current Mainly due to decrease of the advance payment for 5,216,861.24 13,536,307.13 -61.46% assets refurbishment of shops. Mainly due to the decrease in pre-collected rent from the Advance receipts: 5,358,910.60 9,991,850.67 -46.37% property lease business. Payroll payable to the Mainly due to the decrease of the payment for the year- 78,191,053.79 132,853,462.20 -41.14% employees end performance bonus during the reporting period. Mainly due to the increase in repurchase obligations Other payables 198,715,349.62 128,577,597.94 54.55% brought about by the implementation of the equity incentive scheme phase II. Mainly due to the influence of the unlocking of the equity Dividends payable 1,069,368.55 1,639,513.77 -34.78% incentive scheme Phase II and payment of part of the dividend. Mainly due to the influence from the implementation of Lease liabilities 152,730,913.89 0.00 100% the new standards for lease in the current year. Deferred income tax Mainly due to the influence from the implementation of 40,474,373.69 3,067,834.55 1219.31% liability the new standards for lease in the current year. Mainly due to the implementation of the equity incentive Shares in stock 119,217,908.46 61,633,530.48 93.43% scheme Phase II. Other comprehensive Mainly due to the influence from the change of the -6,373,398.65 976,871.41 -752.43% income translation balance of foreign currency statements. (II) Profit Statement Items Variation Same period of Items Reporting period proportion Cause of the movement the previous year (%) Mainly due to the growth of the Company's operating Operating revenue 1,378,277,735.81 588,361,057.06 134.26% performance. Taxes and Mainly due to the increase in taxes and dues brought 7,586,076.81 3,674,419.66 106.46% surcharges about from the increase in operation revenue. Mainly due to the corresponding increase in labor and Sales costs 280,821,158.83 183,463,601.55 53.07% channel expenses resulted from growth of the operation 7 FIYTA Precision Technology Co., Ltd. 2021 First Quarter Report, Summary revenue. Mainly due to the increase in R&D personnel and the R&D expenses 13,209,007.18 9,810,864.52 34.64% decrease in labor costs during the epidemic in the same period last year. Mainly due to the increase of the bank service charges Financial expenses 10,191,937.77 7,521,614.69 35.50% brought about from the increase in operation revenue. Mainly due to the increase in government subsidies Other income 6,070,986.55 742,609.63 717.52% received. Mainly due to the increase of gross profit margin brought Total profit 151,948,990.88 -18,524,043.50 920.28% about from the increase in operation revenue. Mainly due to the increase of taxes and fees brought Income tax expenses 33,706,891.38 -5,549,247.97 707.41% about from the growth of total profit. (III) Items of Cash Flow Statement Variation Same period of Items Reporting period proportion Cause of the movement the previous year (%) Net cash flows arising Mainly due to the increase of sales receivables from operating 28,711,219.83 -106,747,751.88 126.90% collected brought about from the increase in operation activities revenue. Net cash flow arising Mainly due to increased investment in refurbishment of from investment -45,193,639.61 -24,341,946.96 -85.66% shops. activities: Mainly due to the net increase of the bank loans and Net cash flows arising 179,702,677.16 82,992,799.27 116.53% the subscription payments received for the from financial activities implementation of the Equity Incentive Plan Phase II. During the first quarter, the domestic mid-to-high-end watch consumption market experienced a continuous growth trend following the second half of last year. According to the statistics of the Swiss Watch Industry FH, the cumulative value of Swiss watch exports to China from January to February increased by 90.38% year-on-year, compared with the increase in 2019 which also reached 47.96%. The Company has always adhered to the concept of high-quality development, continued to tamp basic management, consolidated core competitive advantages, seized market opportunities, and cultivated new growth points. In the first quarter, the operating revenue reached CNY 1.378 billion, a year-on-year growth of 134.26%, and greatly reversed the loss in total profit on year-on-year basis. During the reporting period, the Company continued to focus on the goal of "value creation" and paid close attention to the implementation of the work. Focusing on “brand power, product power, and channel power”, the Company continued to strengthen its core competitive advantages. FIYTA Brand unit price per customer, sales discounts, and gross profit margins continued to increase, series of new products such as MARS 500, Extremity and Heartstrings were successfully launched, and entered shopping mall channels in an orderly way. The year-on-year revenue growth rate reached 58%; on the basis of the continuous improvement of single store output, HARMONY World Watch Retail continued to promote channel expansion. The number of mid-to-high-end channels and brands was further increased. At the same time, it focused on Hainan offshore island tax-free opportunities to promote channel layout. Some duty-free channel projects have been implemented and operation revenue continuously keeps rapid growth. The customer-centric digital operation system has been further implemented, and the contribution to the sales from the potential customer transactions and repurchases of regular customers has been further improved; the new customers of the precision technology business have expanded smoothly, and the operation revenue has grown steadily; the technology reserve and product iteration of the smart wearable business have been propelled in an accelerative way, and the year-on-year operation revenue has experienced a big growth. During the reporting period, the FIYTA brand was selected as one of the 7th "International Reputation Brands" and was honorably listed in the "Shenzhen Gifts". During the 14th Five-Year Plan period, China will accelerate the establishment of a “dual circulation” development pattern in which domestic economic cycle plays a leading role while international economic cycle remains its extension and supplement. 8 FIYTA Precision Technology Co., Ltd. 2021 First Quarter Report, Summary The Company keeps optimistic about the growth prospects of the domestic watch consumer market in the future, and shall actively seize the opportunities of the times, continue to strengthen its core competitive advantages, and accelerate the channel layout and structural upgrade; stick to the original aspiration of development, implement the "Big Country Brand" strategy, strengthen high-end precision technology innovation and R&D investment, accelerate self-centered design and development and key watchmaking capabilities; continue to cultivate and promote the development of precision technology and smart wearable businesses. The Company shall take multiple measures simultaneously to enhance the comprehensive competitiveness of various businesses and continue to push the Company's overall operating performance to a new level. II. Analysis on and explanation of the progress of important issues and their impacts and solutions 1. Matters in Connection with 2018 Restricted A-Share Incentive Scheme (Phase I) The 24th session of the Ninth Board of Directors held on December 29, 2020 reviewed and approved the Proposal on the Release Conditions having been Satisfied for the First Release Period of 2018 Restricted A-Share Incentive Scheme (Phase I). The 1.357641 million restricted shares (accounting for 0.3116% of the Company's total share capital) that could be lifted this time were listed for trading on February 1, 2021. For the details please refer to the "Indicative Announcement on the First Release of the Restricted Sales Period and the Listing of the Restricted Shares for Trading Involved in the 2018 A-Share Restricted Stock Incentive Scheme (Phase I) 2021-012” disclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn. According to the “Proposal for Repurchase and Cancellation of the Partially Restricted Shares Involved in 2018 Restricted A- Share Incentive Scheme (Phase I)” approved at the 26th Sessions of the Ninth Board of Directors held on February 4, 2021 and 2021 2nd Extraordinary General Meeting held on February 24, 2021, the Company decided to repurchase and cancel a total of 51,359 restricted A-shares that were granted with the restriction but not released to the one retired and one deceased incentive objects in the 2018 Restricted A-Share Incentive Scheme (Phase I). For the details please refer to the "Announcement on Repurchase and Cancellation of Partial Restricted Shares Involved in the 2018 A-Share Restricted Stock Incentive Scheme (Phase I) 2021-019” disclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn. 2. Matters in Connection with 2018 Restricted A-Share Incentive Scheme (Phase II) The 23rd session of the Ninth Board of Directors held on December 4, 2020 and 2021 1st Extraordinary General Meeting held on January 6, 2021 decided to start 2018 Restricted A-Share Incentive Scheme (Phase II) (Draft) and the summary, which was later on reviewed and approved at the 25th session of the Ninth Board of Directors held on January 15, 2021, and the Company eventually granted 7.66 million restrictive A-shares to 135 persons eligible for the incentive. This part of restricted A- shares was all granted by January 15, 2021 and registered for listing by January 29, 2021. After the grant, the Company's total share capital increased to 435,751,881 shares. For the details please refer to the "Announcement on Completion of the Grant Involved in the 2018 Restricted A-Share Incentive Scheme (Phase II) 2021-011” disclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn. According to the “Proposal for Repurchase and Cancellation of the Partial Restricted Shares Involved in 2018 Restricted A- Share Incentive Scheme (Phase II)” approved at the 26th Sessions of the Ninth Board of Directors held on February 4, 2021 and 2021 2nd Extraordinary General Meeting held on February 24, 2021, the Company decided to repurchase and cancel a total of 150,000 restricted A-shares that were granted with the restriction but not released to the one retired incentive object in the 2018 Restricted A-Share Incentive Scheme (Phase II). For the details please refer to the "Announcement on Repurchase and Cancellation of Partial Restricted Shares Involved in the 2018 Restricted A-Share Incentive Scheme (Phase II) 2021-020” disclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn. 3. About the Change of Directors, Supervisors and Senior Executives The 25th Session of the Ninth Board of Directors held on January 15, 2021, reviewed and approved the "Proposal on the Appointment of the General Manager of the Company" and the "Proposal on the Appointment of the Secretary of the Board of the Company” according to which Mr. Pan Bo was appointed as the General Manager, Mr. Chen Zhuo was appointed as the Secretary of the Board with the tenure from the date of approval by the Board of Directors to the date of ending of the Ninth Board of Directors. For the detail, please refer to the “Announcement on the Change of the Senior Executives 2021-010” disclosed by the Company on the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn. The 26th session of the Ninth Board of Directors of the Company held on February 4, 2021 and 2021 2nd Extraordinary General Meeting held on February 24, 2021 reviewed and passed the "Proposal on the Proposed Change of Directors” according to which Mr. Zhang Zhibiao, Mr. Xiao Yi, Mr. Li Peiyin and Mr. Pan Bo were elected non-independent directors of the Ninth Board of Directors of the Company with the tenure from the date of the approval by the general meeting to the date of expiry of the Ninth Board of Directors. For the detail, please refer to the “Announcement on the Proposed Change of Directors 2021-017” disclosed by the Company on the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn. The 23rd session of the Ninth Board of Directors of the Company held on February 4, 2021 and 2021 2nd Extraordinary 9 FIYTA Precision Technology Co., Ltd. 2021 First Quarter Report, Summary General Meeting held on February 24, 2021 reviewed and passed the "Proposal on the Proposed Change of Supervisors” according to which Mr. Zheng Qiyuan and Ms. Cao Zhen were elected non-staff supervisors of the Ninth Supervisory Committee the Company with the tenure from the date of the approval by the general meeting to the date of expiry of the Ninth Supervisory Committee. For the detail, please refer to the “Announcement on the Proposed Change of Supervisors 2021-018” disclosed by the Company on the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn. 4. About the Amendment of the Articles of Association The 26th session of the Ninth Board of Directors held on February 4, 2021 reviewed and approved the "Proposal on the Amendment of the Articles of Association" according to which the relevant articles of the Articles of Association concerning the practical situation upon completion of the award based on 2018 Restricted A-Share Incentive Scheme (Phase II) have been updated. For the detail, refer to the Proposal on the Amendment of the Articles of Association disclosed on the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn. 5. About the Change of Accounting Policies The 27th session of the Ninth Board of Directors held on March 8, 2021 reviewed and approved the "Proposal on Change in the Accounting Policies". According to the relevant provisions of the "Accounting Standards for Business Enterprises No. 21 - Lease" revised by the Ministry of Finance, the Company shall implement the updated standards for lease commencing from January 1, 2021. For the detail, please refer to the “Announcement on Change of the Accounting Policies 2021-030” disclosed by the Company on the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn. Overview of the Significant Events Date of disclosure Inquiry Index of the Website Disclosing Interim Reports Announcement on the Resolution of 2021 1st January 07, 2021 www.cninfo.com.cn Extraordinary General Meeting, 2021-002 Announcement on the Change of the Senior Executives of January 16, 2021 www.cninfo.com.cn the Company 2021-010 "Announcement on Completion of the Grant Involved in the 2018 Restricted A-Share Incentive Scheme (Phase II) January 28, 2021 www.cninfo.com.cn 2021-011 "Indicative Announcement on the Listing of the Restricted Shares for Trading Released in the First Release Period January 29, 2021 www.cninfo.com.cn Involved in the 2018 Restricted A-share Incentive Scheme (Phase I) 2021-012” Announcement on the Proposed Change of Directors February 05, 2021 www.cninfo.com.cn 2021-017 Announcement on the Proposed Change of Supervisors February 05, 2021 www.cninfo.com.cn 2021-018 "Announcement on Repurchase and Cancellation of Partial Restricted Shares Involved in the 2018 Restricted February 05, 2021 www.cninfo.com.cn A-Share Incentive Scheme (Phase I) 2021-019” "Announcement on Repurchase and Cancellation of Partial Restricted Shares Involved in the 2018 Restricted February 05, 2021 www.cninfo.com.cn A-Share Incentive Scheme (Phase II) 2021-020” Proposal on the Amendment of the Articles of Association February 05, 2021 www.cninfo.com.cn Announcement on the Resolution of 2021 2nd February 25, 2021 www.cninfo.com.cn Extraordinary General Meeting, 2021-023 Announcement on the Change of Accounting Policies March 10, 2021 www.cninfo.com.cn 2021-030 Progress of implementation of the stock repurchase The 19th Session of the Ninth Board of Directors held on July 6, 2020 and 2020 2nd Extraordinary General Meeting held on July 23, 2020 reviewed and approved the “Proposal on Repurchase of Partial Domestically Listed Foreign Shares (B- Shares)”, and subsequently disclosed the repurchase report and a series of progress announcements in accordance with relevant regulations. For the detail, refer to the relevant announcement disclosed in the Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn. 10 FIYTA Precision Technology Co., Ltd. 2021 First Quarter Report, Summary Ended the reporting period, the Company accumulatively repurchased 8,994,086 shares in the Company through a centralized bidding method with the special account for the securities repurchased , accounting for 2. 06% of the Company’s total share capital. The highest transaction price of the repurchased shares was HK$6.74 per share, and the lowest transaction price was HK$5.93/share, the total amount paid was HK$ 58,207,259.08 (with the stamp duty, commission and other transaction costs exclusive). The repurchase activity complies with the requirements of relevant laws and regulations as well as the Company's established repurchase plan. Progress of implementation of reduction of the holding size of the shares repurchased by centralized bidding Inapplicable III. Commitments finished in imple mentation by the Company's actual controller, shareholders, related parties, acquirer, the Company, etc. in the reporting period and commitments unfinished in imple mentation during the reporting period Inapplicable IV. Financial assets investment 1. Portfolio investment Inapplicable 2. Investment in derivatives Inapplicable V. Progress of the projects invested with the raised capital Inapplicable VI. Prediction of the performances from January to June, 2021 Inapplicable VII. Important contracts for day-to-day operation Inapplicable VIII. Finance manage ment on commission Inapplicable IX. Outward guarantee against regulations Inapplicable XI. Non-operational occupancy of the company’s capital by the controlling shareholder and its related parties Inapplicable XI. Registration form of the activities, such as reception of survey, communications, interviews, etc. during the reporting period Types of Index of Basic Information Reception Place of Way of Main contents discussed and Visitors Visitors Received on the Investigation and time reception reception information provided Received Survey In order to provide investors with a comprehensive and in-depth understanding of the Company’s Extensive investors’ situation, the Company held a 2020 Wechat Mini participation in the Online Performance Briefing and http://irm.cninfo.com.cn/ircs/co Program Titled Company's 2020 conducted communications and March 25, mpany/companyDetail?stockc “FIYTA Others Others Annual Online exchange with investors on the 2021 ode=000026&orgId=gssz0000 Relationship Performance Company’s 2020 operating status, 026 with Investors Presentation by development strategy, watch brand network remoteness business, watch retail service business, and development of precision technology and smart wearables. 11 FIYTA Precision Technology Co., Ltd. 2021 First Quarter Report, Summary Board of Directors of FIYTA Precision Technology Co., Ltd. April 13, 2021 12