China Information Technology Development Limited — Annual Report 2019

Mar 31, 2020

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2019

CHARACTERISTICS OF GEM (THE “GEM”) OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “STOCK EXCHANGE”)

GEM has been positioned as a market designed to accommodate small and mid-sized companies to which a high investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration.

Given that the companies listed on GEM are generally small and mid-sized companies, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this report, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this report.

This report, for which the Directors of China Information Technology Development Limited (the “Company” or “CITD”) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on GEM of the Stock Exchange (the “GEM Listing Rules”) for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this report is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this report misleading.

This report will be available on the Company’s website http://www.citd.com.hk and will remain on the “Latest Company Report” page on the GEM website at http://www.hkgem.com for at least 7 days from the date of its posting.

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 1 ANNUAL REPORT 2019

Contents

	Page
CORPORATE INFORMATION	3
CHAIRMAN’S STATEMENT	5
MANAGEMENT DISCUSSION AND ANALYSIS	8
BIOGRAPHICAL INFORMATION OF DIRECTORS AND SENIOR MANAGEMENT	18
REPORT OF THE DIRECTORS	20
CORPORATE GOVERNANCE REPORT	30
INDEPENDENT AUDITOR’S REPORT	43
AUDITED FINANCIAL STATEMENTS
Consolidated:
Statement of Profit or Loss	47
Statement of Profit or Loss and Other Comprehensive Income	48
Statement of Financial Position	49
Statement of Changes in Equity	51
Statement of Cash Flows	53
Notes to the Consolidated Financial Statements	55
FIVE YEAR FINANCIAL SUMMARY	121
PARTICULARS OF PROPERTY INTERESTS	122

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Corporate Information

EXECUTIVE DIRECTORS

Mr Wong King Shiu, Daniel (Chairman and Chief Executive Officer) Mr Wong Kui Shing, Danny Mr Chan Kai Leung

AUDITOR

ZHONGHUI ANDA CPA Limited

LEGAL ADVISOR

Conyers Dill & Pearman

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr Hung Hing Man Mr Wong Hoi Kuen Dr Chen Shengrong

PRINCIPAL BANKERS

The Hongkong and Shanghai Banking Corporation Limited Public Bank (Hong Kong) Limited DBS Bank (Hong Kong) Limited

COMPANY SECRETARY

Mr Chang Ki Sum Clark

COMPLIANCE OFFICER

Mr Chang Ki Sum Clark

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS

Unit 3308, 33/F Millennium City 6 392 Kwun Tong Road Kwun Tong, Hong Kong

AUTHORISED REPRESENTATIVES

REGISTERED OFFICE

Mr Wong Kui Shing, Danny Mr Chang Ki Sum Clark

NOMINATION COMMITTEE

Mr Hung Hing Man (Chairman) Mr Wong Hoi Kuen Dr Chen Shengrong

REMUNERATION COMMITTEE

Mr Wong Hoi Kuen (Chairman) Mr Hung Hing Man Dr Chen Shengrong

Cricket Square Hutchins Drive, P O Box 2681 Grand Cayman KY1–1111 Cayman Islands

PRINCIPAL SHARE REGISTRAR AND

TRANSFER OFFICE

SMP Partners (Cayman) Limited 3rd Floor 24 Shedden Road, P O Box 1586 Grand Cayman, KY1–1110 Cayman Islands

AUDIT COMMITTEE

Mr Hung Hing Man (Chairman) Mr Wong Hoi Kuen Dr Chen Shengrong

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Corporate Information

H O N G K O N G B R A N C H S H A R E REGISTRAR AND TRANSFER OFFICE

Computershare Hong Kong Investor Services Limited 17th Floor, Hopewell Centre 183 Queen’s Road East, Hong Kong

GEM STOCK CODE

8178

WEB-SITE ADDRESS

www citd com hk

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Chairman’s Statement

Dear Shareholders,

I am pleased to present the annual results of China Information Technology Development Limited (the “Company”) and its subsidiaries (collectively the “Group”) for the year ended 31 December 2019

MARKET OVERVIEW

The global economy ended 2019 on a relatively solid footing with the hope for Brexit and the relieving SinoUS trade conflicts, yet, the economic growth of China has slowed down in 2019 Still within the government’s target of between 6 0% and 6 5%, nonetheless, the Chinese economy grew 6 1%, marking the weakest expansion in 29 years

Meanwhile, economy of Hong Kong was battered by the prolonged social unrest and the external factors like the Sino-US trade war in 2019 GDP tumbled 2 9% in year-on-year terms in the fourth quarter, following Q3’s revised 2 8% decline, which indicated that the economy contracted at the sharpest pace since Q2 2009 in the Q4 in 2019

The economic growth of both Hong Kong and the rest of the world slowed down in 2019, nevertheless, it is encouraging for the information technology (“IT”) industry that the government of Hong Kong as well as the PRC have been emphasizing the development of Guangdong-Hong Kong-Macao Greater Bay Area (“Greater Bay Area”) Hong Kong, known for its status as international financial, transportation, trade centres and aviation hub as well as its renowned professional services, shall bear vital role in facilitating and supporting the economic development of the region, with a view to enhancing the functions of the Greater Bay Area in the country’s two-way opening up

In 2019, the IT development has drifted the opposite way against the situation of the macro-economy Biotechnology, artificial intelligence (“AI”), smart city and financial technologies were identified as the four areas of strength for development in Hong Kong in recent years The expenditure on research and development as a percentage of the gross domestic product is expected to be doubled in five years from 2017 Hong Kong’s innovation and technology sector together with that of Shenzhen, the Shenzhen-Hong Kong technology cluster has ranked the world’s second largest based on the Global Innovation Index 2019

On 4 March 2020, the Chinese Communist Party Politburo Standing Committee meeting further pointed out that the progress for advanced infrastructure including network for 5G and data center etc shall be sped up This further indicates that the Chinese economic investment structure and investment mechanism shall experience changes after the epidemic “New Infrastructure” has become the big word in the economy

As a matter of fact, it is undeniable to us that reliance on IT has increased in every aspects of our lives as well as in business operations of corporations In 2019, big data and AI had continued to steal the spotlight in the industry With abundance of data gathered, it only becomes valuable and insightful information and knowledge when it is effectively and orderly analyzed Big data is hence the goldmine of our times This is especially the case when the 5G network will soon be launched, offering faster speeds and more reliable connections on smartphones and other devices than ever before, continued and increasing deluge of data will drive greater demand for data analytic solution everywhere

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 5 ANNUAL REPORT 2019

Chairman’s Statement

Another emerging trend in the industry, AI is poised to become another key part of our lives and in business In recent year, China has become a focal point on its AI development, There are many reports that China is outpacing the U S in the number of AI startups and AI-related patents created Some experts say that China will be the next global AI superpower

NAVIGATING NEW MARKET TERRAIN

To welcome the huge potential in the market, our subsidiaries, Macro Systems Limited (“Macro Systems”) and DataCube Research Centre Limited (“DataCube”) have continued to dedicate their effort in developing innovative and advanced technology, especially in big data and AI fields while paying close attention to the market conditions

In 2019, we prepared ourselves by disposing non-core businesses so that we can concentrate our resources on the development of Macro Systems and DataCube Aiming to create value and sustainable development for the Group, we cautiously and strategically determine the locations for our future developments Accord with the “Belt and Road Initiative” adopted by the Chinese government and the strategic planning of Greater Bay Area, we had acquired a 19% equity interest in 廣州市德煌投資有限公司 (Guangzhou Dehuang Investment Company Limited[*] ), a company with data centres and data racks located in Nansha District We believe that through this acquisition, we can step into a strategic location that allows us to establish and cement our business in this core area of Greater Bay Area

Apart from the hardware, the Company is more than committed to keep pace with the market trends and excel in our technology and products During the year, we continued to enhance our unique AI Book and our BI Canvas, two of our many innovations Our AI Book is an automated machine learning platform embedded with AI technologies such as deep learning, machine learning, screening, combing and analysing data through four stages AI Book analysis results will then be displayed on the BI Canvas platform, whereby various visual charts are presented to help companies understand business value and trends We also developed an omnichannel consumer portrait product that helps our retail clients to transform from traditional retail model to a omni-channel one The omni-channel consumer portrait grouping can help the clients to analyse the consumer value based on the RFMIS transaction data of the people, then each retail store site and products category can be grouped according to the customers’ loyalty and consumption pattern, thus, assisting the retail clients to efficiently and appropriately allocate their marketing resources to the right target customer groups

Thanks to the hard work of our top-notch data science team and our all-rounded expert term, during the year, we succeeded to extend our client portfolio of DataCube and Macro to a wide spectrum of clients ranging from public transportation, real estates, logistics, energy saving companies to healthcare, financial and banking corporations etc Through these cooperation with different companies, we understand more of the special needs for each industries and each company We tailor and design the products and services that is distinctive to cater the needs of each of our valuable clients

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Chairman’s Statement

PROSPECTS

The year 2020, seemingly dawned in the midst of gloominess of the unstable social sentiment in Hong Kong, coupled with the widespread of Coronavirus in the world Amid the virus concern, the Federal Reserves of the United States, made a very rare move to reduce the benchmark rate a half point, following the Reserve Bank of Australia’s cut on the interest rate in early March 2020 Yet, we are cautiously positive to our long term development of the business With the foundations we laid in 2019, excellent and advanced technology and knowledge we possess, we shall turn the risk we will be facing into opportunities As a socially responsible corporation, it is also a time for us to contribute to the society with our expertise The recent outbreak of novel coronavirus and its suspected spread in certain building in Hong Kong, have proved the importance of an advanced building system in epidemic prevention, the concept of “Epidemic Prevention Building” and the centralised disinfection system We have been cooperating with our client in product research and development and market exploration in areas including Smart City, predictive analysis development and healthcare and epidemic prevention products DataCube shall provide advanced IoT-based machine learning modelling technology and develop predictive analytics modules to strengthen the building maintenance, energy saving and epidemic prevention capabilities of their Building Operating System On the other hand, as an epidemic prevention measure, many companies and even the government departments have decided to implement “work from home” arrangement to minimize the risk of spreading of novel coronavirus in wider community Macro, which has been awarded and certified by more than 120 international organisations and obtained certificates, including ISO 27001 & ISO20000, provides secure and reliable Virtual Desktop Infrastructure (“VDI”) and delivers end-users mobility and access to virtual desktop anytime and anywhere Our VDI ensures high security level to prevent data leakage while enhancing efficient resource sharing and flexible development The demand for remote desktop service shoots up due to the “work from home” arrangement, the number of clients for the VDI services, especially from the banking, finance and insurance sector has increased significantly and we believe that it will have positive impact on the business of the Company

In the years to come, we shall continue to strengthen and build up our core business through Macro and DataCube and seek for potential markets and business opportunities in order to create value and long-term benefits to the sustainable development of the Company as well as to our Shareholders

ACKNOWLEDGEMENTS

The success of the Group is not possible without the support of its shareholders, investors, business associates and customers for their confidence in management’s ability On behalf of the Board, I would like to sincerely extend my appreciation and gratitude Under this difficult operating environment, it is important if not vital that the Group’s directors, management, and staff are dedicated to hurdle hand in hand together through the hard times I would like to thank all directors, management and our staff on their commitment during the year Together, I and our team will be able to see out this turbulent year with progressive success

Wong King Shiu, Daniel Chairman and Chief Executive Officer China Information Technology Development Limited

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Management Discussion and Analysis

BUSINESS REVIEW

CITD Group

Laying solid roots for business

In 2016, the Company placed 1,830,792,000 new shares of the Company to not less than six independent placees at a price of HK$0 13 each and raised a net proceeds of approximately HK$230 million (the “Placement”) It was expected that the net proceeds raised would be utilized as follows: HK$73 million for the refurbishment of and operation of the business in the PRC properties as acquired in the acquisition of Joyunited Investments Limited on 7 April 2016 (“PRC Properties”), the Company would have approximately HK$69 million for the general working capital and approximately HK$88 million for the projects that are currently in progress More details on the Placement had been disclosed in the relevant announcement of the Company dated 8 December 2015 and the circular dated 18 March 2016 The Placement had been completed on 9 May 2016 As at 31 December 2019, the use of net proceeds from the Placement was as follows: (1) approximately HK$73 0 million for refurbishment and other expenses relating to the PRC Properties; (2) approximately HK$63 8 million for investment in Macro China Holding Limited, business development under DataCube Research Centre Limited (“DataCube Research Centre” or “DataCube”), IT business in Japan and a data centre in the PRC; (3) as a result of the loss in book value of the listed securities held by the Group, the Group has not realised those listed securities to settle part of the consideration for the PRC Properties as was planned Instead, approximately HK$24 2 million had been applied to settle the consideration for the PRC Properties; and (4) approximately HK$69 0 million for administrative expenses and other expenses incurred by the Group

Aiming to provide our clients with business agility for their sustainable business development, during the year ended 31 December 2019, the Group had continued to improve ourselves to deliver affordable but advanced and quality services and products to our clients

During the year ended 31 December 2019, the Group has made a momentous step to merge the offices of CITD and Macro in Kwun Tong, together with the solution center in Tsimshatsui and our office in Guangzhou, the Group is more than ready to set off for the journey of business development in 2019 and in the future

On 15 January 2019, the Company entered into a non-legally binding memorandum of understanding (the ”MOU”) with an independent third party in relation to the possible acquisition of certain land and buildings with a data centre located in Nansha District, Guangzhou, the People’s Republic of China (“PRC”) The Company has to pay a refundable deposit of RMB20 million in cash to the independent third party upon signing of the MOU As no formal agreement had been entered into between the Group and the Vendor on or before the date falling 180 days from the date of execution of the MOU (i e 15 July 2019) nor there be an agreement reached in extending the date of entering into the formal agreement in relations thereto, the MOU had automatically lapsed and ceased to have any effect The Group did not pay any deposit in relation to the MOU Details of the MOU and the lapse of MOU are set out in the announcements dated 15 January 2019 and 22 July 2019 respectively

Meanwhile, the Group had made various changes with the vision to equip and strengthen ourselves for the up-coming business developments

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Management Discussion and Analysis

On 21 June 2019, the Company has granted an aggregate of 217,056,000 share options (the “Options”) to the grantees (the “Grantees”) of the Company, to subscribe, in aggregate, for up to 217,056,000 ordinary shares (each a “Share”) of HK$0 1 each in the share capital of the Company subject to acceptance of the Grantees, with an exercise price of HK$0 1 per Share, under the share option scheme (the “Share Option Scheme”) adopted by the Company on 2 August 2012 Among the total of 217,056,000 Options, 60,048,000 Options were granted to the employees of the Company and the remaining 157,008,000 Options were granted to the consultants of the Company The Company believes that human resources are of utmost importance to the success of a business and we believe that the grant of Options can provide incentives for the employees and consultants of the Group to work towards the goal of the Company

On 2 August 2019, Giant Prestige Investments Limited, a direct wholly-owned subsidiary of the Company, as the vendor (the “Vendor”) has entered into an agreement (the “Agreement”) with Winner Sino Corporate Development Limited (the “Purchaser”) and 廣州麓湖錦城置業管理有限公司 (Guangzhou Luhu Jincheng Properties Management Limited*) as the Purchaser’s Guarantor (the “Purchaser’s Guarantor”), pursuant to which the Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase 10 ordinary shares of US$1 00 each in the share capital of the Joyunited Investments Limited (the “Target Company”), representing 100% of the issued share capital of the Target Company and any obligation or liabilities incurred or may be incurred or due or which would fall due by Target Company to the Vendor on or at any time prior to completion of the Agreement at the consideration of RMB260,000,000 (equivalent to approximately HK$295,874,000) in cash (the “Disposal”)

As one or more of the relevant percentage ratios under the GEM Listing Rules in respect of the transactions contemplated under the Agreement exceed 25% but are below 75%, the Disposal constitutes a major transaction for the Company and is therefore subject to the reporting, announcement, circular and shareholders’ approval requirements under Chapter 19 of the GEM Listing Rules Details of the Disposal are set out in the announcement dated 2 August 2019 and the circular dated 4 September 2019 The Disposal has been approved by the shareholders of the Company at the extraordinary general meeting held on 17 October 2019 The completion of the Disposal has not been taken place before the long stop date of 31 October 2019 (the “Long Stop Date”), no such later Long Stop Date can be agreed by the Parties The Board is of the view that as a result of the default by the Purchaser, the Parties failed to complete the Disposal in accordance with the terms of the Agreement after all the conditions precedent have been satisfied The Company has therefore notified the Purchaser of its intention to accept the Purchaser’s repudiation and terminate the Agreement by way of a written notice on 18 December 2019 (the “Termination”) In accordance with the terms of the Agreement, the deposit of RMB13,000,000 (equivalent to approximately HK$14,475,000) paid by the Purchaser to the Vendor has been forfeited in favour of the Vendor The Company and the Vendor will continue with their ownership of 100% equity interest in the Target Company and the Target Group will still be subsidiaries of the Company and the financial results of the Target Group will be consolidated into the consolidated financial statements of the Company The Company has been exploring other potential purchaser(s) for a disposal of the Target Company after the Termination

As there may be a potential litigation risk in relation to the abovementioned matter, the management considered that the deposit of RMB13,000,000 shall be recognised as other payable instead of income for a year for prudence sake

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 9 ANNUAL REPORT 2019

Management Discussion and Analysis

Further to the Group’s strategy to dispose the non-core assets and to pursue the foregoing new business strategy, apart from the abovementioned Disposal, on 19 August 2019, Guangzhou Deyong as vendor, entered into another disposal agreement, pursuant to which 科華恒盛股份有限公司 (Kehua Hengsheng Co , Ltd ), as purchaser, conditionally agreed to acquire and the vendor has conditionally agreed to sell 10% equity interest of 廣州德昇雲計算科技有限公司 (Desheng Cloud Computing Technology Co Ltd ) (“Desheng Cloud Computing”) at the consideration of RMB20,000,000 (equivalent to approximately HK$22,260,000) in cash (“Disposal of Desheng Cloud Computing”) Desheng Cloud Computing was acquired by the Group in February 2018 at the acquisition cost of HK$12,385,000 Considering the volatile global economic situation and the negative impact on the economy brought by the recent social unrest in Hong Kong, the Company believes that the Disposal of Desheng Cloud Computing may allow the Company to realise the investment in the Desheng Cloud Computing with an estimated gain of approximately HK$8,572,000 and further liquidate its resources for maintaining our existing businesses while seeking for new business opportunities With the development of Guangdong-Hong Kong-Macao Greater Bay Area, the Group will continue to seek for investment opportunities that offer synergies to the existing businesses of the Group in strategic locations where the Group can take advantage to expand its client base and reputation in the PRC and further excel and become a comprehensive AI and BI solutions provider Details of the said Disposal of Desheng Cloud Computing are set out in the announcement dated 19 August 2019 The Disposal of Desheng Cloud Computing has been completed on 25 September 2019

On 28 August 2019, an acquisition agreement was entered into between 廣州市德永科技投資有限公司, (Guangzhou Deyong Technology Investment Limited), a company incorporated in the PRC with limited liability (“Guangzhou Deyong”) as the purchaser and an indirect wholly-owned subsidiary of the Company as the vendor, an Independent Third Party and 廣州市德煌投資有限公司 (Guangzhou Dehuang Investment Company Limited), a company incorporated in the PRC with limited liability (“Guangzhou Dehuang”), for the acquisition of a 19% equity interest in Guangzhou Dehuang, a company with data centres and data racks located in Nansha District The consideration of RMB66,341,000 (equivalent to approximately HK$72,842,000) should be satisfied by the promissory note issued on 3 September 2019 by Guangzhou Deyong Completion of the acquisition of interest in Guangzhou Dehuang had taken place on 3 September 2019 Details of the said acquisition and its completion are set out in the announcement dated 28 August 2019 and 4 September 2019 respectively

Nansha District is the core area of Guangdong-Hong Kong-Macao Greater Bay Area and the PRC government may plan to develop Nansha District as a comprehensive transportation hub of the Greater Bay Area The projects for further development of Guangzhou Dehuang and its property have been proposed as the core infrastructure project of Guangzhou Nansha Economic and Technological Development Zone and has been recommended to be granted with the “green channel” so that the process of the project development will be speed up The Group believes that the investment will allow the Company to step into this strategic location in China for development of the business of Macro China and DataCube and provide data modelling, big data analysis as well as AI and BI technology to the clients With the Guangzhou Dehuang acquired, the Group is able to provide more comprehensive and integrated services to our clients all over PRC and Hong Kong and broaden its client base

Meanwhile, the existing business of Macro Systems Limited and its subsidiaries (“Macro Group”) and DataCube Research Centre, continue to bring synergies and refinement to the whole business of the Company

• For identification purposes only

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Management Discussion and Analysis

MACRO

Business Transformation with unimpeded data support and transport

Established in 1997, Macro Systems Limited is a reputable company in providing diverse IT platform, digital solution and business consulting service Holding a vision of “We Make IT Smart”, Macro assists worldwide corporate clients to thrive for business success and perform digital transformation by its comprehensive solution and service portfolio Over the past 23 years, Macro is committed to serving corporate clients with excellent quality which well recognized by the ISO/IEC 27001 international standard and more than 120 global certificates and partnerships

Macro provides enterprises with the end-to-end product set The completed IT platform, from IT Infrastructure, Cloud-ready to the Hybrid cloud platform, offers a stable and reliable foundation to support clients’ business development On top of it, Macro expands clients’ workspace securely by the user-friendly Virtual Desktop Infrastructure (“VDI”) solution It successfully enables end-users to access their office desktop anywhere, anytime and maintain corporate data security and high productivity, especially in the recent circumstance that many enterprises and even the Hong Kong government department office announced the special work arrangement due to the coronavirus outbreak In addition to the product and solution, Macro further completes the business scope by its reputable IT managed service brand, PrimeServe series, to deliver all products and solutions to clients in an easy and hassle-free manner that the quality is well proven by ISO/IEC 20000 international recognition

To achieve the corporate vision, during the year ended 31 December 2019, Macro allied with various top-class industry elites to continuously push the enterprise market’s digital transformation in Hong Kong The effort is well affirmed by the sales and quality awards and partnerships title issued by various world-class partners In 2019, we held hands tightly with our elite partners to organize different activities, such as Solution Experience Tour and various joint-promotion campaigns to penetrate the market deeper More remarkably, during the year, we had involved in the development of the Hwawei Cloud Business These cooperation allowed Macro to extend its business network with different partners who can create synergy to our business More importantly, we gradually established our brand name in the cloud sector

Apart from that, to provide our clients the most updated knowledge and market trend, we regularly organized various seminars and workshops Across different aspects, from fundamental IT platform to work digitalization and even collaborate with the sister company, DataCube, to promote AI technology at our own venue, the Macro Solution Centre at Tsimshatsui Those marketing activities had successfully attracted hundreds of enterprise clients’ participation and in return, generated high exposures among our valuable clients and brought positive influence to the business directly in terms of both business opportunity and long-term clients relationship Macro treasures very much of the communications and aims to maintain close relationships with every clients so that we can understand their technical needs, enabling us to tailor and develop products and services that cater and satisfy In 2019, we succeeded to expand our clienteles range from various industries from banking, consumer goods, food & beverage, hotel and tourism, manufacturing and construction, property developers to public sectors of the Hong Kong Government and non-governmental organizations

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Management Discussion and Analysis

DATACUBE

Polishing data from rocks to diamonds

DataCube Research Centre, founded in 2017, is dedicated to promote data modelling, big data analysis as well as developing related technologies to expedite the adoption and drive the evolution of artificial intelligence and business intelligence (“BI”) and across different industries and regions, so as to provide the technological platform and all related resources to drive the development of Smart Cities in Asia Its services include machine learning model, visualization analytic dashboard, data engineering services (Data cleaning/ ETL/API integration), pre-setting hardware and cloud services DataCube is here to help companies discover emerging trends and hidden insights, and adjust business strategies in an agile manner

AI Book, is an innovative automated machine learning platform developed by DataCube It embeds AI technologies such as deep learning, machine learning screening combing and analyzing data through four states The automatic predictive power based on Internet of Things of AI Book, helps our client to solve complicated business problem and discover the root cause through self-service analytics for optimizing strategy The AI Book analysis result will then be displayed on the BI Canvas platform BI Canvas of DataCube is a self-service business intelligence platform, providing a variety of visual charts to help companies understand business value and trends from the data gathered with AI Book The massive data are transformed into various charts and line graphs in real time mode It is clear and easy to understand and helps decision makers to spot out business value and hidden trends, quickly response to the market and adjust business deployment

During the year ended 31 December 2019, DataCube has kicked off to partner with various powerful vertical software partners with the vision to develop AI+ predictive modules jointly for improving the existing and new projects We had projects with a well-known leading energy AIOT, Energy saving management contract provider for product research and development and market exploration in areas including Smart City, predictive analysis development and healthcare and epidemic prevention products Currently, the product has been developed It will generate more benefits on the data centers of “New Infrastructure” (which consumes huge amount of energy) when the product is finalized and matured At the same time, it contributes to the reduction of carbon emission and environmental protection of the society

We also entered into memorandum of understandings and strategic cooperation agreements with various corporations including public transportation and real estates companies End of last year, DataCube signed an MOU with a reputable public transportation corporation in Hong Kong Aiming for incident prediction and maintenance, we had achieved some actual progress on the project Meanwhile, we had made consent with Huawei that we shall jointly cooperate, to take the abovementioned corporation as application scenarios, to improve the development of the abovementioned intelligent solutions, and create opportunities for entering the Chinese mass transportation market Apart from that, DataCube, as an Advanced Technology Partner of Huawei Cloud, shall also introduce the same to the Smart Campus solution of Huawei Cloud

Besides, in 2019, DataCube had participated in China Hi-Tech Fair, one of the largest technology expo and presented to over 500,000 visitors from all over the world, the latest technology and products DataCube offered

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Management Discussion and Analysis

During the Year, Macro Group has contributed a revenue of approximately HK$52,358,000 to the Group while DataCube had gradually engaged in more projects with different business partners This encouraging result motivates the Directors and the Company to continue developing the business of Macro Group and DataCube

OTHER BUSINESSES

In late March 2019, the Company has entered into a formal sales and purchase agreement (the “Agreement”) with an independent third party (the “Fullpay Seller”) in relation to the acquisition of 51% of the equity interest of FULLPAY K K (FULLPAY 株式會社) (“Fullpay”) at a consideration of HK$15,300,000 (the “Acquisition”) The Company has subscribed 16 67% equity interest of Fullpay in January 2017, therefore upon the Acquisition, the Company owns 67 67% of the equity interest of Fullpay On 31 December 2019, the Company and Fullpay Seller agreed to terminate the Fullpay Agreement and the Fullpay Seller agreed to return the deposit of HK$14,700,000 to the Company

Meanwhile, on 16 December 2019, the Company has entered into a sales and purchase agreement with an independent third party in relation to the disposal of 16 67% of the equity interest of Fullpay at a consideration of HK$1,000,000 As at 31 December 2019, the Company no longer held any interest in Fullpay

Other than the above, during the year, revenue from provision of information technology related services remained as staple income of the Group

FUTURE PROSPECT

Agility for Business Success

What happened in the first few months of 2020 painted despair on the canvas of the year 2020 With the global outbreak of coronavirus, the socio-economic sentiment in general remains pessimistic Nonetheless, with the hard work our Group done in 2019, we believe that we are more than well-equipped to turn the risk we face to opportunities

Leveraging the membership of Hong Kong Smart City Consortium of CITD, we shall cement our brand name in the market and contribute to the establishment of Smart City in both Hong Kong and China by organizing various webinar or workshops to keep our client update with the latest knowledge We shall also participate in large-scale exhibitions and events, like the Cloud Expo 2020 later this year to increase brand awareness, hence further expand our business footprints Encouraged by the Nutanix Master Partner we achieved earlier in 2020, to enhance our competitiveness, we shall continue to strive for partnerships and recognitions

Amid of the social instability and epidemic outbreak, having the mission to bring business agility to our clients, our VDI solution enables our client to continue their operations anywhere, anytime when “work from home” is practicing in many offices in Hong Kong and even government departments Recently, the demand for remote desktop service shoots up due to the “work from home” arrangement, the number of clients for the VDI solution, especially from the banking, finance and insurance sector has increased significantly and we believe that it will have positive impact on the business of the Company Meanwhile, to allow our customers to experience the business agility we bring, the Group will establish a brand-new, scenario driven business agility zone at our solution centre in Tsimshatsui

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Management Discussion and Analysis

Assisting our clients to manage their data and technical matters, we help lay a healthy root for their business to flourish with the data efficiently transmitted, accurately analyzed and insightfully predicted Business strategy and decisions with higher productivity and cost effectiveness can be easily attained without compromising quality In this ever-changing world, especially in the world of IT, we believe that what we built in 2019 not only will create business agility for our clients, but also to the business of the Group Working together with our clients as well as our business partner, the Group believes that we shall bear fruits for our sustainable business in the years to come

FINANCIAL REVIEW

Revenue

The Group’s revenue for 2019 amounted to approximately HK$63,712,000, increased by 23 3% from approximately HK$51,666,000 in 2018 The increase in revenue is mainly attributable to the increase in number of IT projects obtained by Macro Group during the year

Cost of sales and services

The Group had a total cost of sales and services of approximately HK$40,731,000 in 2019, which increased by 30 9%, compared with approximately HK$31,112,000 in 2018 The increase is in line with the increase in number of IT projects during the year

Gross profit

The gross profit of the Group in 2019 amounted to approximately HK$22,981,000 which increased by approximately HK$2,427,000, compared with approximately HK$20,554,000 in 2018 The increase is mainly attributable to more IT projects were obtained during the year The gross profit margin of Macro Group is about 22 2% for the year; whereas, it was about 17 3% in 2018

Other income and gains

During the financial year ended 31 December 2019, the Group generated other income and gains of approximately HK$654,000 (2018: approximately HK$1,169,000) which comprised: (i) dividend income amounted to approximately HK$243,000 (2018: HK$160,000); (ii) gain on disposal of equity investments at fair value through other comprehensive income amounted to approximately HK$nil (2018: HK$65,000); (iii) foreign exchange gain of approximately HK$nil (2018: approximately HK$588,000); (iv) gain on disposal of property, plant and equipment of approximately HK$27,000 (2018: HK$nil) and (v) other miscellaneous items in an aggregate amounted of approximately HK$384,000 (2018: approximately HK$356,000)

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Management Discussion and Analysis

Selling and distribution expenses

The Group’s selling and distribution expenses in 2019 amounted to approximately HK$4,760,000, which decreased by 10 4%, compared with approximately HK$5,314,000 in 2018 The decrease was mainly due to decrease in promotional activities efforts of the Group during the year

Administrative expenses

Administrative expenses of the Group in 2019 were approximately HK$41,757,000, decreased by 0 6%, compared to approximately HK$42,018,000 in 2018 The decrease is mainly due to reduction of unnecessary operation costs and the reduction of rental cost upon merging the offices of CITD and Macro during the year

Gain on disposal of subsidiaries

During 2018, the Group recognized a gain of HK$11,662,000 from disposal of its equity interests in Rosy Beauty Investments Limited (“Rosy Beauty”), Pantosoft and China Information Technology Development Japan K K (“CITDJ”), which were completed on 9 January 2018, 5 June 2018 and 31 August 2018 respectively

Fair value gain/(loss) on investments at fair value through profit or loss

As at 31 December 2019, the Group held an investment portfolio comprising of marketable securities that are listed on the Stock Exchange The financial gain from the portfolio amounted to approximately HK$5,703,000 (2018: loss of approximately HK$19,461,000)

Change in fair value of investment properties

As at 31 December 2019, the Group recorded a decrease in fair value of investment properties of approximately HK$33,196,000 (2018: approximately HK$41,805,000) due to the recession of the property market in the PRC

Finance costs

Finance costs of the Group for 2019 were approximately HK$6,557,000, an increase of approximately HK$1,600,000, comparing to approximately HK$4,957,000 in 2018 The increase is mainly due to the interest on promissory notes issued for acquiring 19% equity interest of Guangzhou Dehuang Investment Company Limited during the year

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 15 ANNUAL REPORT 2019

Management Discussion and Analysis

Loss attributable to owners

The Group’s loss attributable to owners of the Company was approximately HK$80,850,000 for 2019 as compared to approximately HK$75,308,000 in 2018 The increase in loss was mainly due to (i) the recognition of share options granted to employees and consultants for the amount of approximately HK$9,627,000; (ii) the loss on initial recognition of loan receivables of approximately HK$15,249,000; and (iii) the decrease in fair value of investment properties of approximately HK$33,196,000 in 2019

FINANCIAL POSITION

Liquidity and financial resource

As at 31 December 2019, cash and bank balances held by the Group increased from approximately HK$4,658,000 as of 31 December 2018 to approximately HK$4,959,000

As at 31 December 2019, the Group’s total borrowings amounted approximately HK$106,712,000 (2018: approximately HK$52,921,000) The gearing ratio (calculated as total borrowings over total equity) of the Group was 0 28 (2018: 0 12) The increase in total borrowings is mainly due to the issuance of promissory note for acquisition of 19% equity interest in Guangzhou Dehuang during the year

For the year ended 31 December 2019, the Group had capital expenditure of approximately HK$3,176,000 (2018: approximately HK$2,630,000) for addition of property, plant and equipment, and approximately HK$295,000 for further construction works of investment properties (2018: approximately HK$2,550,000 for addition of investment properties by acquisition of a subsidiary and further construction works)

Capital structure

As at 31 December 2019 and as at the date of this report, there are a total of 5,722,159,908 issued shares of the Company

PRINCIPAL RISKS AND UNCERTAINTIES

The Group’s financial condition, results of operations, and business prospects may be affected by a number of risks and uncertainties directly or indirectly pertaining to the Group’s businesses To their best of knowledge and belief, the Directors consider that the followings are the key risks and uncertainties identified by the Group as at the date of this report

Foreign Exchange Rates Risk

The Group has minimal exposure to foreign currency risk as most of its business transactions, assets and liabilities are principally denominated in the functional currencies of the Group entities The Group currently does not have a foreign currency hedging policy in respect of foreign currency transactions, assets and liabilities The Group will monitor its foreign currency exposure closely and will consider hedging significant foreign currency exposure should the need arise

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Management Discussion and Analysis

Liquidity Risk

Liquidity risk is the potential risk that the Group will be unable to meet its obligations when they fall due because of an inability to obtain adequate funding or liquidate assets In managing liquidity risk, the Group’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term

Price Risk

The Group’s financial assets at fair value through profit or loss are measured at fair value at the end of each reporting period Therefore, the Group is exposed to equity security price risk The Directors manage this exposure by maintaining a portfolio of investments with different risk profiles

EMPLOYEES AND REMUNERATION POLICIES

There were a total of 66 employees in the Group as of 31 December 2019 (2018: 59 employees) Total expenses on employee benefits amounted to approximately HK$23,361,000 (2018: approximately HK$25,117,000) of which HK$2,664,000 is related to equity-settled share-based payment for the year ended 31 December 2019 The management believes the remuneration packages offered by the Group to its employees are competitive

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the year ended 31 December 2019, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities

SUBSEQUENT EVENTS

Save as disclosed in this report, there was no other subsequent event after the year ended 31 December 2019

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 17 ANNUAL REPORT 2019

Biographical Information of Directors and Senior Management

EXECUTIVE DIRECTORS

Mr. WONG King Shiu, Daniel , aged 60, has been appointed as the chairman of the Board (the “Chairman”) and chief executive officer (the “Chief Executive Officer”) of the Company with effect from 25 November 2019 He has over 13 years of experience in natural resources industry and served as an executive director in a various natural resources company which is listed in Hong Kong He also has extensive experience in the management and development of natural resources projects in China He is currently an independent non-executive director of Huisheng International Holdings Limited (Stock Code: 1340) He was also an executive director of China Baoli Technologies Holdings Limited (Stock Code: 164) from 13 January 2012 to 3 October 2019 Mr Daniel Wong joined the Group on 16 August 2017

Mr. WONG Kui Shing, Danny , aged 60, holds a Bachelor of Arts degree from the University of Hong Kong He ceased to be the Chairman and Chief Executive Officer on 25 November 2019 He is currently an executive director of Rosedale Hotel Holdings Limited (Stock Code: 1189) and a non-executive director of TFG International Group Limited (Stock Code: 542) Currently, he is also an independent non-executive director of Far East Holdings International Limited (Stock Code: 36) and Tech Pro Technology Development Limited, of which the listing of shares had been cancelled under Rule 6 01A on 2 March 2020 He was an executive director of Huiyin Holdings Group Limited (Stock Code: 1178) from 8 May 2017 to 10 April 2019, executive director of Larry Jewelry International Company Limited (Stock Code: 8351) from 3 October 2016 to 10 October 2019, and executive director of TFG International Group Limited (Stock Code: 542) from 21 August 2015 to 1 February 2019 He was also a vice chief executive officer of InvesTech Holdings Limited (Stock Code: 1087) (“InvesTech Holdings”) from 27 June 2015 to 24 September 2015 He was a non-executive director and a member of the nomination committee of InvesTech Holdings from 24 September 2015 to 1 June 2017 He was a non-executive director of Shi Shi Services Limited (Stock Code: 8181) from 19 October 2015 to 18 January 2017 He was a former executive director and managing director of Emperor Culture Group Limited (Stock Code: 491) In addition, Mr Wong was a former executive director of SMI Holdings Group Limited (Stock Code: 198) He has extensive exposure in the financial and investment fields for over 20 years and is well experienced in the international investment market Mr Wong joined the Group on 26 March 2015

Mr. CHAN Kai Leung , aged 54, holds a BSc (Hons) Degree in Computing and Information Systems from London Metropolitan University He is currently the director and general manager of Macro Systems Limited (“Macro Systems”), the subsidiary of the Company He founded Macro Systems in 1997 and is responsible for providing Macro Systems the vision and leadership and supporting the continuous improvement of overall market strategy, business development and operation Mr Chan has more than 20 years’ experience in information system Mr Chan joined the Group in December 2016 and appointed as an executive Director on 16 August 2017

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Biographical Information of Directors and Senior Management

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. HUNG Hing Man , aged 49, holds a master’s degree in Business Administration from the University of Western Sydney He is a fellow member of the Association of Chartered Certified Accountants, the Hong Kong Institute of Certified Public Accountants and the Taxation Institute of Hong Kong and the Society of Chinese Accountants and Auditors Mr Hung is currently a proprietor of a certified public accountants firm He has extensive working experience in corporate finance, accounting, auditing and taxation sectors Mr Hung is also an independent non-executive director of Heng Tai Consumables Group Limited (Stock Code: 197) since 20 February 2017 and REXLot Holdings Limited (Stock Code: 555) since 1 January 2019 respectively He was an independent non-executive director of the Hong Kong listed company, namely China Baoli Technologies Holdings Limited (Stock Code: 164) from 31 March 2009 to 21 September 2015 and Ping An Securities Group (Holdings) Limited (Stock Code: 231) from 23 September 2009 to 17 November 2015 Mr Hung joined the Group on 24 April 2015

Mr. WONG Hoi Kuen , aged 59, is a practising certified public accountant in Hong Kong and a chartered accountant in the United Kingdom He is a fellow member of The Hong Kong Institute of Certified Public Accountants, The Association of Certified Public Accountants and The Institute of Chartered Accountants in England and Wales

Mr Wong is an independent non-executive director, members of audit committee and nomination committee of Elife Holdings Limited (Stock Code: 223) since 9 May 2011 and an independent non-executive director of REXLot Holdings Limited (Stock code: 555) since 29 June 2018 Mr Wong was also an independent non-executive director, members of audit committee and nomination committee of China Baoli Technologies Holdings Limited (Stock Code: 164) from 13 February 2006 to 16 July 2018 Mr Wong joined the Group on 16 August 2017

Dr. CHEN Shengrong , aged 38, obtained a doctorate degree in Business Administration from the Pacific States University of the USA in 2011 She was an audit manager with Baker Tilly China Certified Public Accountants and had been the vice general manager of New Times Securities Company Limited in charge of risk control From August 2014 to December 2016, Dr Chen served as the vice president of finance of Skyslink New Energy Asset Management Limited Since January 2017, she serves as the vice president of Sky Cloud Green Data Technology Co , Ltd （天之雲綠色數據技術有限責任公司） Dr Chen has extensive experience in internal control of enterprises, risk control in investment businesses, project risk evaluation and assets restructuring management Dr Chen joined the Group on 30 January 2015

COMPANY SECRETARY

Mr. Chang Ki Sum Clark , is a member of The Hong Kong Institute of Certified Public Accountants Mr Chang has 10 years of experience in auditing, accounting and company secretarial matters Mr Chang has obtained his bachelor degree of business administration in accountancy from the City University of Hong Kong in 2009 He is the founder and the managing director of Clark Chang & Co CPA Limited since December 2017 He had worked with Ming Lam Holdings Limited (Stock Code: 1106), a company listed on the Main Board of the Stock Exchange, as company secretary from May 2015 to September 2015 Mr Chang is responsible for company secretarial and overall financial management matters of the Group

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Report of the Directors

The Directors present their report and the audited consolidated financial statements of China Information Technology Development Limited and its subsidiaries for the year ended 31 December 2019

PRINCIPAL ACTIVITIES AND BUSINESS REVIEW

The principal activity of the Company is investment holding Details of the principal activities of the principal subsidiaries are set out in note 40 to the consolidated financial statements There were no significant changes in the nature of the Group’s principal activities during the year

Further discussion and analysis of these activities as required by Schedule 5 to the Hong Kong Companies Ordinance, including a discussion of the principal risks and uncertainties facing the Group and indication of likely future developments in the Group’s businesses and other relevant information, can be found in the Management Discussion and Analysis set out on pages 8 to 17 and the Chairman’s Statement as set out on pages 5 to 7 of this report Such discussion forms part of this Report of the Directors

RESULTS AND DIVIDENDS

The Group’s loss for the year ended 31 December 2019 and the state of affairs of the Group at that date are set out in the consolidated financial statements on pages 47 to 50

The audit committee of the Company (the “Audit Committee”) has reviewed the draft audited consolidated financial statements and annual report before presenting them to the Board for consideration and approval

The Directors do not recommend the payment of a final dividend for the year ended 31 December 2019

SUMMARY FINANCIAL INFORMATION

A summary of the published results and assets, liabilities and non-controlling interests of the Group for the last five financial years, as extracted from the audited consolidated financial statements, is set out on page 121 This summary does not form part of the audited consolidated financial statements

PROPERTY, PLANT AND EQUIPMENT

Details of movements in the property, plant and equipment of the Group during the year are set out in note 16 to the consolidated financial statements

SHARE CAPITAL AND SHARE OPTIONS

Details of movement in the share capital and share options of the Company during the year are set out in note 36 and note 37 to the consolidated financial statements respectively

EQUITY-LINKED AGREEMENTS

Save for the share option scheme adopted by the Company on 2 August 2012 (“Share Option Scheme”) as disclosed in the section headed “Share Options” of this Report of the Directors, the Company has not entered into any equity-linked agreement for the year ended 31 December 2019

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Report of the Directors

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under the Company’s articles of association (the “Articles of Associations”) or the laws of the Cayman Islands which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders

PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY

Neither the Company, nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed securities during the year

RESERVES

Details of movements in the reserves of the Company and the Group during the year are set out in note 39 to the consolidated financial statements and in the consolidated statement of changes in equity respectively

DISTRIBUTABLE RESERVES

As at 31 December 2019, the Company had no reserve available for distribution to shareholders (including share premium account, foreign currency translation reserve and retained earnings) Under the Companies Law (Revised) Chapter 22 of the Cayman Islands, the share premium of the Company is available for paying distributions or dividends to shareholders subject to the provisions of its articles of association and provided that immediately following the distribution or dividend the Company is able to pay its debts as they fall due in the ordinary course of business, in accordance with the Company’s Articles of Association, dividends shall be distributed out of the retained profits or other reserves, including the share premium account, of the Company

MAJOR CUSTOMERS AND SUPPLIERS

In the year under review, sales to the Group’s five largest customers accounted for 30 2% of the total sales for the year and sales to the largest customer included therein amounted to 9 4% Purchases from the Group’s five largest suppliers accounted for 70 4% of the total purchases for the year ended 31 December 2019 and purchase from the largest supplier included therein amounted to 25 8%

None of the Directors or any of their associates or any shareholders of the Company (which, to the best knowledge of the Directors, own more than 5% of the Company’s issued share capital) had any beneficial interest in the Group’s five largest customers and suppliers

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 21 ANNUAL REPORT 2019

Report of the Directors

DIRECTORS

The Directors of the Company during the year and up to the date of this report were:

Executive Directors:

Mr Wong King Shiu, Daniel (appointed as Chairman and Chief Executive Officer on 25 November 2019) Mr Wong Kui Shing, Danny (ceased to be the Chairman and Chief Executive Officer on 25 November 2019) Mr Chan Kai Leung

Mr Tse Chi Wai (retired as executive Director upon the conclusion of the annual general meeting on 28 June 2019 (the “AGM”))

Mr Takashi Togo (retired as executive Director upon the conclusion of the AGM)

Non-executive Director:

Mr Wong Chi Yung (retired as non-executive Director upon the conclusion of the AGM)

Independent non-executive Directors:

Mr Hung Hing Man Mr Wong Hoi Kuen Dr Chen Shengrong

In accordance with Articles 87(1) and 87(2) of the Company’s Articles of Association, one-third of the Directors will retire and, being eligible, will offer themselves for re-election at the forthcoming annual general meeting

CONFIRMATION OF INDEPENDENCE

The Company has received annual confirmations of independence from Mr Hung Hing Man, Mr Wong Hoi Kuen and Dr Chen Shengrong and as at the date of this report still considers them to be independent

DIRECTORS’ AND SENIOR MANAGEMENT’S BIOGRAPHIES

Biographical details of the Directors of the Company and the senior management of the Group are set out on pages 18 to 19 of the annual report

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Report of the Directors

DIRECTORS’ SERVICE CONTRACTS

No Director proposed for re-election at the forthcoming annual general meeting has a service contract with the Company which is not determinable by the Company within one year without payment of compensation, other than statutory compensation

DIRECTORS’ REMUNERATION

The Directors’ fees are subject to shareholders’ approval at general meetings Other emoluments are determined by the Board of Directors with reference to Directors’ duties, responsibilities and performance and the results of the Group as well as the recommendation of the remuneration committee of the Company (the “Remuneration Committee”) Further details of the Directors’ remuneration and the five highest paid individuals are set out in the Note 11 to the consolidated financial statements on pages 91 to 93 of the annual report

PERMITTED INDEMNITY OF DIRECTORS

Pursuant to the Articles of Association, every Director or other senior officer of the Company shall be entitled to be indemnified out of the assets of the Company against all losses or liabilities which he may sustain or incur in or about the execution of the duties of his office or otherwise in relation thereto, and no director or other officer shall be liable for any loss, damages or misfortune which may happen to or be incurred by the Company in the execution of the duties of his office or in relation thereto The Company has arranged appropriate directors’ and officers’ liability insurance coverage for the directors and officers of the Company during the year

DIRECTORS’ MATERIAL INTERESTS IN TRANSACTION, ARRANGEMENT AND CONTRACTS

None of the Directors had a material interest, either directly or indirectly, in any contract of significance to the business of the Group to which the Company, or any of its subsidiaries or fellow subsidiaries was a party during the year

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 23 ANNUAL REPORT 2019

Report of the Directors

DIRECTORS‘ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES AND DEBENTURES

At 31 December 2019, the interests and short positions of the Directors and chief executive of the Company in the share capital and underlying shares of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “SFO”)), as recorded in the register required to be kept by the Company pursuant to section 352 of the SFO, or as otherwise required pursuant to Rules 5 46 to 5 67 of the GEM Listing Rules to be notified to the Company and the Stock Exchange were as follows:

Name Capacity	Nature of Interest Percentage of the Company’s issued share capital Registered Shareholder Underlying Interest (approximate %) (Note a)
Mr Wong Kui Shing, Danny Interest in controlled corporation_(Note b) Beneficial owner Mr Wong King Shiu, Daniel Beneficial owner _Note:	403,971,449 — 7 06% 147,816,000 5,688,000 2 68% 10,008,000 57,000,000 1 17%

(a) The percentage is calculated based on the total number of ordinary shares of the Company in issue as at the date of this report, which was 5,722,159,908 Shares

(b) The 403,971,449 Shares are held by Discover Wide Investments Limited (“Discover Wide”), which is wholly-owned by Mr Wong Kui Shing, Danny Pursuant to the provisions 7 and 8 of Part XV of the SFO, Mr Wong is deemed to have an interest in all shares in which Discover Wide has, or deemed to have an interest

Save as disclosed above and in the section headed “Share Options“, as at 31 December 2019 and as at of the date of this report, none of the Directors or chief executive had registered an interest or a short position in the shares, underlying shares or debentures of the Company or any of its associated corporations that was required to be recorded pursuant to Section 352 of the SFO, or as otherwise required pursuant to Rules 5 46 to 5 67 of the GEM Listing Rules to be notified to the Company and the Stock Exchange

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Report of the Directors

SHARE OPTIONS

On 11 April 2017, the Company granted a total of 571,200,000 Options with rights to subscribe for 571,200,000 ordinary shares of HK$0 1 each in the share capital of the Company under the Share Option Scheme

On 27 September 2017, the Company granted a total of 571,200,000 Options with rights to subscribe 571,200,000 ordinary shares of HK$0 1 each in the share capital of the Company under the Share Option Scheme

On 21 June 2019, the Company granted a total of 217,056,000 Options with rights to subscribe 571,200,000 ordinary shares of HK$0 1 each in the share capital of the Company under the Share Option Scheme

As at the date of this report, details of the Options granted and remain effective are as follows:

Name of Grantees Position held with the Company Date of Grant Exercise period	Number of share options Outstanding as at 1 January 2019 Lapsed during the year Outstanding as at 31 December 2019 Exercise price per share
Directors Mr Wong King Shiu, Daniel Executive Director 27 September 2017 27 September 2017 - 26 September 2027 Mr Wong Kui Shing, Danny Executive Director 11 April 2017 11 April 2017 - 10 April 2027 Mr Chan Kai Leung Executive Director 27 September 2017 27 September 2017 - 26 September 2027 Mr Hung Hing Man Independent non-executive Director 11 April 2017 11 April 2017 - 10 April 2027 Dr Chen Shengrong Independent non-executive Director 11 April 2017 11 April 2017 - 10 April 2027 Mr Wong Hoi Kuen Independent non-executive Director 27 September 2017 27 September 2017 - 26 September 2027 Former Directors Ms Wu Jingjing Executive Director (currently vice president of Business Development Department of the Company) 11 April 2017 11 April 2017 - 10 April 2027 Mr Tse Chi Wai Executive Director (currently consultant of the Company) 11 April 2017 11 April 2017 - 10 April 2027 Mr Takashi Togo Executive Director (currently consultant of the Company) 11 April 2017 11 April 2017 - 10 April 2027 Mr Wong Chi Yung Non-executive Director (currently consultant of the Company) 11 April 2017 11 April 2017 - 10 April 2027	57,000,000 — 57,000,000 HK$0 130 5,688,000 — 5,688,000 HK$0 153 5,016,000 — 5,016,000 HK$0 130 2,016,000 — 2,016,000 HK$0 153 2,016,000 — 2,016,000 HK$0 153 2,016,000 — 2,016,000 HK$0 130 2,016,000 — 2,016,000 HK$0 153 57,000,000 — 57,000,000 HK$0 153 57,000,000 — 57,000,000 HK$0 153 33,000,000 — 33,000,000 HK$0 153
Sub-total	222,768,000 — 222,768,000

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Report of the Directors

Name of Grantees Date of Grant Exercise period	Number of share options Outstanding as at 1 January 2019 Granted on 21 June 2019 Exercised on 11 July 2019 Lapsed during the year Outstanding as at 31 December 2019 Exercise price per share
Other employees 11 April 2017 11 April 2017 - 10 April 2027 27 September 2017 27 September 2017 - 26 September 2027 21 June 2019 21 June 2019 - 20 June 2029 Consultants of the Company 11 April 2017 11 April 2017 - 10 April 2027 27 September 2017 27 September 2017 - 26 September 2027 21 June 2019 21 June 2019 - 20 June 2029	202,968,000 — — — 202,968,000 HK$0 153 334,680,000 — — — 334,680,000 HK$0 130 — 60,048,000 — — 60,048,000 HK$0 100 202,992,000 — — — 202,992,000 HK$0 153 171,000,000 — — — 171,000,000 HK$0 130 — 157,008,000 10,008,000 — 147,000,000 HK$0 100
Total	1,134,408,000 217,056,000 10,008,000 — 1,341,456,000

All the outstanding Options granted on 11 April 2017 are exercisable during the period from date of grant to 10 April 2027 at an exercise price of HK$0 153 per share The closing price per share immediately before the date of grant on 11 April 2017 was HK$0 145

All the outstanding Options granted on 27 September 2017 are exercisable during the period from date of grant to 26 September 2027 at an exercise price of HK$0 130 per share The closing price per share immediately before the date of grant on 27 September 2017 was HK$0 130

All outstanding Options granted on 21 June 2019 are exercisable during the period from date of grant to 20 June 2029 at an exercise price of HK$0 100 per share The closing price per share immediately before the date of grant on 21 June 2019 was HK$0 091

Subsequently, 10,008,000 Options (granted on 21 June 2019) were lapsed in January 2020 and 57,000,000 Options (granted on 27 September 2017) were lapsed in February 2020

Save as disclosed above, none of the outstanding Options were exercised or cancelled or lapsed during the year ended 31 December 2019

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Report of the Directors

SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS IN SHARES AND UNDERLYING SHARES

At 31 December 2019, the following interests of 5% or more of the issued share capital of the Company were recorded in the register of interests required to be kept by the Company pursuant to Section 336 of the SFO:

Long positions in ordinary shares of the Company:

				Percentage of
			Number of	the Company’s
	Capacity and		ordinary	issued share
Name	nature of interest		shares held	capital
				(Note a)
Mr Zhang Rong	Beneficially owner		748,144,000	13 07%
			(Registered
			Shareholder)
Discover Wide Investments Limited	Beneficially owner		403,971,449	7 06%
			(Registered
			Shareholder)

Note:

(a) The percentage is calculated based on the total number of ordinary shares of the Company in issue as at the date of this report, which was 5,722,159,908 Shares

Save as disclosed above, as at 31 December 2019, no person, other than the Directors of the Company, whose interests are set out in the section “Directors’ and Chief Executive’s Interests and Short Positions in Shares and Underlying Shares and Debentures” above, had registered an interest or short position in the shares or underlying shares of the Company that was required to be recorded pursuant to Section 336 of the SFO

ENVIRONMENTAL, SOCIAL AND CORPORATE RESPONSIBILITY

As a responsible corporation, the Group is committed to maintaining the highest environmental and social standards to ensure sustainable development of its business The Group has complied with all relevant laws and regulations in relation to its business including health and safety, workplace conditions, employment and the environment The Group understands a better future depends on everyone’s participation and contribution It has encouraged employees, customers, suppliers and other stakeholders to participate in environmental and social activities which benefit the community as a whole

The details of environmental, social and governance policies and performance of the Group will be disclosed in a standalone Environmental, Social and Governance Report, which will be issued in or before June 2020

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Report of the Directors

COMPLIANCE WITH THE RELEVANT LAWS AND REGULATIONS

As far as the Board and management of the Company are aware, the Group has complied in material respects with the relevant laws and regulations that have a significant impact on the business and operation of the Group During the year under review, there was no material breach of or non-compliance with the applicable laws and regulations by the Group

RELATIONSHIP WITH STAKEHOLDERS

The Group is committed to operate in a sustainable manner while balancing the interests of its various stakeholders including customers, suppliers and employees Through regular stakeholder engagement via different channels, the stakeholders are encouraged to give their opinions regarding the environmental, social and governance policies of the Group

The Group maintains strong relationships with its employees and offers them with safe working environments The Group has enhanced cooperation with its suppliers and has provided high quality products and services to its customers so as to ensure sustainable development

DIRECTORS’ INTEREST IN COMPETING BUSINESS

During the year ended 31 December 2019 and up to the date of this report, the Directors had an interest in any business apart from the Group’s business, which competes or is likely to compete, either directly or indirectly, with the Group’s business that need to be disclosed pursuant to the GEM Listing Rules were as follows:

Name of Director	Name of Company	Name of Company	Nature of Business	Nature of Business	Nature of interest	Nature of interest
Wong Kui Shing, Danny	TFG International Group		Money Lending Business		Non-executive director of
		Limited (“TFG”),				TFG
		Stock Code: 542
	Huiyin Holdings Group		Money Lending Business		Executive director of Huiyin
		Limited (“Huiyin”),				(resigned as director of
		Stock Code: 1178				Huiyin with effect from
						10 April 2019)
Wong King Shiu, Daniel	Huisheng International		Money Lending Business		Independent non-executive
		Holdings Limited				director of Huisheng
		(“Huisheng”),
		Stock Code: 1340

As the Board is independent to the boards of the above mentioned companies, the Group is capable of carrying on its business independently of and at arm’s length, from the business of those companies

During the year and up to the date of this report, save as disclosed above, none of the Directors or the controlling shareholders (as defined in the GEM Listing Rules) of the Company were considered to have interests in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group

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Report of the Directors

SUFFICIENCY OF PUBLIC FLOAT

Based on information that is publicly available to the Company and within the knowledge of the Directors, at least 25% of the Company’s total issued share capital was held by the public as at the date of this report

CORPORATE GOVERNANCE

The Company’s corporate governance report is set out on pages 30 to 42

AUDITORS

ZHONGHUI ANDA CPA Limited retire and a resolution for their reappointment as auditors of the Company will be proposed at the forthcoming annual general meeting

ON BEHALF OF THE BOARD

Mr. Wong King Shiu, Daniel

Chairman and Chief Executive Officer

Hong Kong

27 March 2020

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Corporate Governance Report

INTRODUCTION

The Company has complied with the code provisions (the “Code Provision(s)”) of the Corporate Governance Code and Corporate Governance Report as set out in Appendix 15 of the GEM Listing Rules (the “Code”) for the year ended 31 December 2019, except for the following:

Code Provision A.2.1

Chairman and Chief Executive Officer

Code Provision A 2 1 stipulates the roles of chairman and chief executive should be separate and should not be performed by the same individual

Mr Wong Kui Shing, Danny served as both the Chairman and the Chief Executive Officer until 25 November 2019 Thereafter, Mr Wong King Shiu, Daniel has been appointed as the Chairman and Chief Executive Officer of the Company with effect from 25 November 2019, such practice deviates from code provision A 2 1 of the Code The Board is of the opinion that it is appropriate and in the best interests of the Company for the same person to hold both positions as it helps maintain the continuity of the policies and the stability of the operations of the Company

Code Provision A.2.7

Code Provision A 2 7 stipulates that the chairman should at least annually hold meetings with the non-executive directors (including independent non-executive directors) without the executive directors present

The board meetings of the Company held during the year had included the participation of the executive Directors, yet the non-executive Directors (including independent non-executive Directors) could freely provide their independent opinion to the Board

The Company will endeavor to arrange the meetings for the Chairman with the non-executive Director (including the independent non-executive Directors) so as to comply with the requirement of Code Provision A 2 7

Code Provision A.4.1

Code Provision A 4 1 stipulates that non-executive directors should be appointed for a specific term

None of the non-executive Directors is appointed for a specific term, which constitutes a deviation from Code Provision A 4 1 Nonetheless, in accordance with the Articles of Association of the Company, all non-executive Directors are subject to retirement by rotation The Company considers that there are sufficient measures to ensure the corporate governance standard of the Company is not less exacting than the Code

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Corporate Governance Report

Code Provision E.1.2.

Code Provision E 1 2 of the Code stipulates that the chairman of the board should attend the annual general meeting

Mr Wong Kui Shing, Danny, the then Chairman was unable to attend the annual general meeting on 28 June 2019 (“AGM”) due to other business commitment An executive Director of the Company chaired AGM and answered questions from the shareholders The AGM provides a channel for communication between the Board and the shareholders Other than the AGM, the shareholders may communicate with the Company through the contact information listed on the Company’s website The Company will endeavor to ensure of the attendance of the Directors so as to comply with the requirement of Code Provision E 1 2

BOARD OF DIRECTORS AND ITS RESPONSIBILITIES

The Board, which currently comprises six Directors, including three executive Directors and three independent non-executive Directors The Board is responsible for corporate strategy, annual, interim and quarterly results, succession planning, internal control and risk management, major acquisitions, disposals and capital transactions, and other significant operational and financial matters of the Company Major corporate matters that are specifically delegated by the Board to the management include the preparation of annual, interim and quarterly accounts for board approval before public reporting, execution of business strategies and initiatives adopted by the Board, implementation of adequate systems of risk management and internal controls procedures, and compliance with relevant statutory requirements and rules and regulations

All Directors have given sufficient time and attention to the affairs of the Group Each executive Director and non-executive Director (including the independent non-executive Director) has sufficient experience, knowledge and execution ability to hold the position so as to carry out his duties effectively and efficiently

Upon reasonable request, the Directors are enabled to seek independent professional advice in appropriate circumstances to assist them perform their duties to the Company

The composition of the Board, details of backgrounds and qualifications of all Directors are set out in the “Corporate Information” and “Biographical Details of Directors and Senior Management” sections of this annual report The latest list of Directors setting out their roles and responsibilities is available and accessible at the websites of the Company (http://www citd com hk) and the Stock Exchange (www hkexnews hk)

DIRECTORS’ SECURITIES TRANSACTIONS

The Company has adopted a code of conduct regarding the director’s securities transactions on terms no less exacting than the required standard of dealings as set out in Rules 5 46 to 5 67 of the GEM Listing Rules The Directors have confirmed that they have complied with the GEM Listing Rules throughout the year ended 31 December 2019

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Corporate Governance Report

TRAINING, INDUCTION AND CONTINUING DEVELOPMENT OF DIRECTORS

Each Director receives comprehensive, formal and tailored induction on the first occasion of his appointment so as to ensure the he has appropriate understanding of the business and operations of the Company and that he is fully aware of his responsibilities and obligations under the GEM Listing Rules and relevant regulatory requirements The Company is committed to arranging and funding suitable training to all Directors for their continuous professional development

During the year, each Director is briefed and updated from time to time to ensure that he is fully aware of his responsibilities under the GEM Listing Rules and applicable legal and regulatory requirements and the governance policies of the Group All Directors also understand the importance of continuous professional development and are committed to participating any suitable training to develop and refresh their knowledge and skills

APPOINTMENT, RE-ELECTION AND REMOVAL OF DIRECTORS

The executive Directors and non-executive Directors have not entered into any service contract with the Company with a fixed term, yet all the Directors of the Company are subject to retirement and re-election at the forthcoming general meeting of the Company after his appointment and will also be subject to retirement but rotation and re-election in accordance with the Articles of Associations and the Code

BOARD MEETING

During the year of 2019, the board held totally 15 board meetings and 2 general meetings The attendance of each Director are set out below:

	Attendance/	Attendance/
	Number of	Number of
	board	general
Name of Director	meetings held	meeting held
Executive Directors:
Mr Wong King Shiu, Daniel_(appointed as the Chairman and_
Chief Executive Officer since 25 November 2019)	15/15	2/2
Mr Wong Kui Shing, Danny_(ceased to be the Chairman and_
Chief Executive Officer from 25 November 2019)	6/15	0/2
Mr Chan Kai Leung	15/15	2/2
Mr Tse Chi Wai_(retired upon the conclusion of AGM on 28 June 2019)_	6/6	0/1
Mr Takashi Togo_(retired upon the conclusion of AGM on 28 June 2019)_	0/6	0/1
	Attendance/	Attendance/
	Number of	Number of
	board	general
Name of Director	meetings held	meeting held
Non-executive Director:
Mr Wong Chi Yung_(retired upon the conclusion of AGM on 28 June 2019)_	4/6	0/1

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Corporate Governance Report

	Attendance/	Attendance/
	Number of	Number of
	board	general
Name of Director	meetings held	meeting held
Independent non-executive Directors:
Mr Hung Hing Man	15/15	2/2
Mr Wong Hoi Kuen	15/15	2/2
Dr Chen Shengrong	10/15	0/2

At least 14 days’ notice of a Board meeting is normally given to all Directors who are given an opportunity to include matters for discussion in the agenda The Board’s procedures comply with the Articles of Association, as well as relevant rules and regulations

If a Director has a conflict of interest in relation to a transaction or proposal to be considered by the Board, the individual is required to declare such interest and to abstain from voting The matter is considered at a Board meeting attended by Directors who have no material interest in the transaction

Board minutes of each Board meeting are kept by the Company Secretary and are open for inspection at any reasonable time on reasonable notice by any Director

NON-EXECUTIVE DIRECTORS

The Board fulfilled the requirement of appointing at least three independent non-executive directors and they represented at least one-third of the Board as stipulated by the GEM Listing Rules It met the requirement of having at least one of the independent non-executive directors with appropriate professional qualifications or accounting or related financial management expertise The independent non-executive Directors have appropriate and sufficient experience and qualification to carry out their duties so as to fully represent the interests of the shareholders

The Company has received from each independent non-executive Director an annual confirmation for independence pursuant to Rule 5 09 of the GEM Listing Rules The independent non-executive Directors have confirmed that they are independent

DIRECTORS’ AND OFFICERS’ INSURANCE

The Company has arranged for appropriate liabilities insurance for the Directors to cover their liabilities arising out of corporate activities

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Corporate Governance Report

CORPORATE GOVERNANCE FUNCTION

The Board is responsible for the corporate governance functions, which include but not limited to the following duties:

• (a) To develop and review the Company’s policies and practices on corporate governance;

• (b) To review and monitor the training and conditions professional development of Directors and senior management;

• (c) To review and monitor the Company’s policies and practices on compliance with legal and regulatory requirements;

• (d) To develop, review and monitor the code of conduct applicable to employees and Directors; and

• (e) To review the Company’s compliance with the Code and disclosure in the Corporate Governance Report

During the year, the Board has reviewed and discharged the above corporate governance functions

REMUNERATION COMMITTEE

The Company established a remuneration committee (the “Remuneration Committee”) with written terms of reference in compliance with Rules 5 34 to 5 36 of the GEM Listing Rules

During the year under review, members of the Remuneration Committee are Mr Wong Hoi Kuen (Committee Chairman), Mr Hung Hing Man, Dr Chen Shengrong All of the Remuneration Committee members are independent non-executive Directors

Its main role and function included the recommendations of specific remuneration packages of all executive directors, including benefits in kind, pension rights and compensation payments, any compensation payable for loss or termination of their office or appointment, and making recommendations to the Board on the remuneration of non-executive directors and senior management of the Company The Remuneration Committee will consider factors such as salaries paid by comparable companies, time commitment and responsibilities of the directors, employment conditions elsewhere in the Group and desirability of performance-based remuneration

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Corporate Governance Report

During the year of 2019, 2 Remuneration Committee meetings were held The attendance of each member is set out below:

	Attendance/
	Number of
Name of member	meetings held
Mr Wong Hoi Kuen_(Committee Chairman)_	2/2
Mr Hung Hing Man	2/2
Dr Chen Shengrong	2/2

The works performed by the Remuneration Committee during the year include the following:

• reviewed and determined the policy for the remuneration of Directors and senior management;

• reviewed and recommended the remuneration package of the Directors and senior management of the Company;

• reviewed and approved the terms of executive Directors’ service contract

No Director nor any of his/her associates was involved in deciding his/her own remuneration

For the year, the remuneration payable (including equity-settled share option expense) to a senior management (excluding Directors) fell within the band of HK$nil to HK$500,000

Further details of the remuneration of the Directors and the five highest paid individuals are set out in note 11 to the financial statements

NOMINATION OF DIRECTORS

The Board is empowered under the Company’s Articles of Association to appoint any person as a director either to fill a casual vacancy or, subject to authorisation by the shareholders of the Company in general meeting, as an additional member of the Board The Company has adopted the nomination policy (the “Nomination Policy”) with effect from 1 January 2019 The Nomination Policy sets out the procedures, process and criteria for identifying and recommending candidates for election to the Board of Directors The criteria for recommending the suitable candidates for directorship include (i) reputation for integrity, (ii) qualifications including professional qualifications, skills, knowledge and experience that are relevant to the Company’s business and corporate strategy, (iii) commitment in respect of sufficient time and relevant interest; (iv) diversity in all its aspects, including but not limited to gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service, and (v) such other perspectives appropriate to the Company’s business These factors are for reference only, and not meant to be exhaustive and decisive The nomination committee of the Company (the “Nomination Committee”) has the discretion to nominate and recommend any person, as it considers appropriate to the Board for further approval

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Corporate Governance Report

The Nomination Committee shall review and recommend to the Board on any revisions to the Nomination Policy to ensure its transparent and fair for the election or re-election process of directors, remains relevant to the Company needs and reflects the good corporate governance practice The Nomination Committee will discuss any revisions that may be required, and recommend any such revision to the Board for consideration and approval

During the year ended 31 December 2019, no candidate was nominated for directorship

BOARD DIVERSITY POLICY

The Company recognises that increasing diversity at the Board level will support the attainment of the Company’s strategic objectives and sustainable development The Board has adopted a board diversity policy (the “Board Diversity Policy”) which sets out the approach to achieve and maintain diversity on the Board

Pursuant to the Board Diversity Policy, the Company seeks to achieve Board diversity through the consideration of a number of factors, including but not limited to gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and other qualities

The Company also takes into consideration its own business model and specific needs from time to time in determining the optimal composition of the Board Nomination Committee has considered measurable objectives based on four focus areas: gender, age, professional experience and ethnicity to implement the Board Diversity Policy Such objectives will be reviewed from time to time to ensure their appropriateness and the progress made towards achieving those objectives will be ascertained

Nomination Committee will review the Board Diversity Policy, as appropriate, to ensure its continued effectiveness at least once annually The Board Diversity Policy is available on the website of the Company for public information

NOMINATION COMMITTEE

The Company established a Nomination Committee with written terms of reference in compliance with Code Provisions A 5 1 to A 5 6 of Appendix 15 of the GEM Listing Rules

During the year under review, members of the Nomination Committee are Mr Hung Hing Man (Committee Chairman) Dr Chen Shengrong and Mr Wong Hoi Kuen All of the Nomination Committee members are independent non-executive Directors

The Nomination Committee is responsible for reviewing the structure, size and composition of the Board at least annually, making recommendations on any proposed changes to the Board to complement the Company’s corporate strategy, identifying individuals suitably qualified to become Board members and selecting or making recommendations to the Board on the selection of individuals nominated for directorships, assessing the independence of independent non-executive directors and making recommendations to the Board on the appointment, re-appointment and succession of directors

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Corporate Governance Report

During the year of 2019, 3 Nomination Committee meetings were held The attendance of each member is set out below:

	Attendance/
	Number of
Name of member	meetings held
Mr Hung Hing Man_(Committee Chairman)_	3/3
Mr Wong Hoi Kuen	3/3
Dr Chen Shengrong	3/3

The works performed by the Nomination Committee during the year include the following:

• reviewed the structure, size and composition of the Board according to the board diversity and the development of the Company and the market situation;

• accessed the independence of independent non-executive Directors;

• made recommendations to the Board on the appointment or re-appointment of Directors and succession planning for Directors, in particular the chairman and the chief executive officer of the Company;

• made recommendation for the appointment of Mr Wong King Shiu, Daniel, a current executive Director as the Chairman and Chief Executive Officer of the Company with effect from 25 November 2019, based on the procedures and the process and criteria set out in the Nomination Policy and the business operations and conditions of the Company

AUDIT COMMITTEE

The Company established an audit committee of the Company (the “Audit Committee”) with written terms of reference in compliance with Rules 5 28 and 5 33 of the GEM Listing Rules

During the year under review, members of the Audit Committee are Mr Hung Hing Man (Committee Chairman), Dr Chen Shengrong and Mr Wong Hoi Kuen All of the Audit Committee members are independent non-executive Directors

The duties of the Audit Committee include supervising the financial reporting procedure and reviewing the consolidated financial statements of the Group, examining and monitoring the internal control and risk management systems adopted by the Group and reviewing the relevant work of the Group’s external auditor The Audit Committee had reviewed this annual report and confirmed that it complies with the applicable standard, the GEM Listing Rules and other applicable legal requirements and the adequate disclosures have been made There is no disagreement between the members of the Audit Committee regarding the selection and appointment of external auditors

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Corporate Governance Report

During the year of 2019, 4 Audit Committee meetings were held The attendance of each member is set out below:

	Attendance/
	Number of
Name of member	meetings held
Mr Hung Hing Man_(Committee Chairman)_	4/4
Mr Wong Hoi Kuen	4/4
Dr Chen Shengrong	4/4

The works performed by the Audit Committee during the year include the following:

• reviewed the annual report and the annual results announcement of the Company for the year ended 31 December 2018;

• reviewed the first quarterly report and results announcement of the Company for the three months ended 31 March 2019;

• reviewed the interim report and the interim results announcement of the Company for the six months ended 30 June 2019;

• reviewed the third quarterly report and results announcement of the Company for the nine months ended 30 September 2019;

• reviewed the risk management and internal control systems of the Group;

• reviewed the effectiveness of the internal audit of the Company;

• reviewed the adequacy of resources, staff qualifications and experience, training programmes and budget of the Group’s accounting and financial reporting functions;

• considered the re-election of auditors of the Company and discussing with the auditors about the audit plan

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Corporate Governance Report

FINANCIAL REPORTING

With the assistance of the accounting department of the Company, the Directors acknowledge their responsibility for preparing the financial statements of the Group for the year ended 31 December 2019 and confirm that the financial statements contained herein give a true and fair view of the results and state of affairs of the Group for the year under review The Directors consider that the financial statements have been prepared in conformity with the statutory requirements including the Hong Kong Companies Ordinances and the Listing Rules and the applicable accounting standards including the International Financial Reporting Standards, Hong Kong Financial Reporting Standards These statutory requirements and applicable accounting standards have been consistently used and applied and reasonable judgements and estimates are properly made The Board aims to present a clear and balanced assessments of the Group’s performance in the annual, interim and quarterly reports to the shareholders, and make appropriate disclosure and announcements in a timely manner During the year of 2019, the Board was not aware of any material uncertainties relating to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern

The Directors’ responsibilities for the consolidated financial statements and the responsibilities of the external auditors to the shareholders are set out on page 46

AUDITORS’ REMUNERATION

The Audit Committee is responsible for considering the appointment of the external auditor and reviewing any non-audit functions performed by the external auditor, including whether such non-audit functions could lead to any potential material adverse effect on the Company During the year ended 31 December 2019, the remuneration paid or payable to the external auditors of the Company, ZHONGHUI ANDA CPA Limited, in respect of the audit and non-audit services were as follows:

Services rendered	Fees paid/payable
	(HK$’000)
Audit services	680
Non-audit services	190

The non-audit services provided by ZHONGHUI ANDA CPA Limited to the Group during the year is related to the circular and issuance of comfort letter on capital sufficiency for disposal of 100% equity interest in Joyunited Investments Limited

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Corporate Governance Report

RISK MANAGEMENT AND INTERNAL CONTROL

The main features of the risk management and internal control systems of the Group are to provide a clear governance structure, policies and procedures, as well as reporting mechanism to facilitate the Group to manage its risks across business operations, to safeguard the shareholders’ investment and the Group’s assets and to ensure strict compliance with relevant laws, rules and regulations The Group has established a risk management framework, which consists of the Board, the Audit Committee and the senior management of the Group (“Senior Management”) The Board determines the nature and extent of risks that shall be taken in achieving the Group’s strategic objectives The Audit Committee is responsible for reviewing the effectiveness of the risk management and internal control systems and reporting to the Board The Board, through the Audit Committee, conducts reviews of the effectiveness of such systems at least annually, covering all material controls including financial, operational and compliance controls

The Group has formulated and adopted risk management policy in providing directions in identifying, evaluating and managing significant risks At least on an annual basis, the senior management identifies risks that would adversely affect the achievement of the Group’s objectives, and assesses and prioritizes the identified risks according to a set of standard criteria Risk mitigation plans and risk owners are then established for those risks considered to be significant

In addition, the Group has engaged an independent professional advisor to assist the Board and the Audit Committee in ongoing monitoring of the risk management and internal control systems of the Group and in performing the internal audit functions for the Group Deficiencies in the design and implementation of internal controls are identified and recommendations are proposed for improvement Significant internal control deficiencies are reported to the Audit Committee and the Board on a timely basis to ensure prompt remediation actions are taken

Risk management report and internal control report are submitted to the Audit Committee and the Board at least once a year The Board, through the Audit Committee, had performed annual review on the effectiveness of the Group’s risk management and internal control systems, including but not limited to the Group’s ability to cope with its business transformation and changing external environment; the scope and quality of management’s review on risk management and internal control systems; result of internal audit work; the extent and frequency of communication with the Board in relation to result of risk and internal control review; significant failures or weaknesses identified and their related implications; and status of compliance with the Listing Rules The Board considers the Group’s risk management and internal control systems were effective during the year The risk management and internal control systems of the Group are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss

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COMPANY SECRETARY

Mr Tse Chi Wai, former Director acted as the Company Secretary until his resignation with effect from 18 June 2019 Mr Chang Ki Sum, Clark has been appointed as the Company Secretary with effect from 18 June 2019

As at 31 December 2019, the Company Secretary of the Company, Mr Chang Ki Sum, Clark, fulfilled the requirement under Rules 5 14 and 5 15 of the GEM Listing Rules As an employee of the Company, the Company Secretary supports the Board, ensures good information flow within the Board and Board policy and procedures are followed; advises the Board on governance matters, facilitates induction and monitors the training and continuous professional development of directors He has attained not less than fifteen hours of relevant professional training during the year His biography is set out in the “Biographical Information of Directors and Senior Management” section of this annual report

INSIDE INFORMATION

Guidelines are provided to the Directors, management and relevant staff (likely possessing the unpublished inside information) of the Group to ensure that the inside information of the Group is to be disseminated to the public in equal and timely manner in accordance with the applicable laws and regulations The procedures include, among others, regularly remind the Directors, management and relevant staff about the compliance with the securities dealing restrictions as set out in Rules 5 48 to 5 67 of the GEM Listing Rules and the notification of the blackout period applicable to the publication of the annual, interim and quarterly results of the Company respectively

All Directors and those employees who could have access to, and monitor, the information of the Group are responsible for making appropriate precautions to prevent abuse or misuse of such information Employees of the Group are prohibited from using inside information for their own benefit

SHAREHOLDERS’ RIGHTS

In accordance with the Company’s Article 58, any shareholder or shareholders of the Company holding at the date of deposit of the requisition not less than one-tenth of the paid up capital of the Company carrying the right of voting at general meetings of the Company shall at all times have the right, by written requisition to the Board or the Company Secretary, to require an extraordinary general meeting to be called by the Board for the transaction of any business specified in such requisition; and such meeting shall be held within two months after the deposit of such requisition If within twenty-one days of such deposit the Board fails to proceed to convene such meeting, the requisitionists themselves may do so in the same manner, and all reasonable expenses incurred by the requisitionists as a result of the failure of the Board shall be reimbursed to the requisitionists by the Company

Shareholders may put forward their enquiries about the Company to the Board or the Company Secretary at the Company’s head office in Hong Kong

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DIVIDEND POLICY

The dividend policy of the Company has been adopted on 31 December 2018 which sets out the factors in determination of dividend payment of the Company (the “Dividend Policy”)

Under the Dividend Policy, the declaration and payment of dividends shall be in accordance with the applicable laws and the relevant provisions of articles of association of the Company effective from time to time

In deciding whether to propose a dividend and in determining an appropriate basis for dividend distribution, the Board will take into account, inter alia, the Group’s earnings, reasonable return in investment of the investors and the shareholders in order to provide incentive to them to continue to support the Company in their long-term development, the financial conditions, business plan, future operations and earnings, capital requirement and expenditure plans of the Company, any restrictions on payment of dividends that may be imposed by the Group’s lenders, the general market sentiment and circumstances and any other factors the Board deems appropriate

The Company will continually review the Dividend Policy as appropriate from time to time There is no guarantee that any particular amount of dividends will be distributed for any specific periods

COMMUNICATION WITH SHAREHOLDERS AND INVESTOR RELATIONS

The Board is committed to maintaining a high degree of corporate transparency, as well as establishing a policy of open communication with shareholders having the aim to ensure shareholders be provided with information about the Company and enable them to engage actively with the Company and to exercise their rights

The Company communicates with shareholders and investors through various channels including publication of quarterly, interim and annual reports, announcements, circulars and other corporate information available on the websites of the Hong Kong Stock Exchange and/or the Company

The Company’s general meeting provides valuable opportunities for the Board to have face-to-face communication with the shareholders The Company encourages the participation of the shareholders through annual general meeting and other general meetings where the shareholders exchange views with the Board, and to exercise their rights to vote at meetings

There was no significant change in the Company’s constitutional documents for the year ended 31 December 2019

ENQUIRES TO THE BOARD

Shareholders may at any time send their enquiries and concerns to the Board in writing through the company secretary of the Company whose contact details are as follows:

Unit 3308, 33/F , Millennium City 6, 392 Kwun Tong Road, Kwun Tong, Hong Kong

Shareholders may also make enquiries with the Board at the general meetings of the Company

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Independent Auditor’s Report

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To the shareholders of

China Information Technology Development Limited

(Incorporated in the Cayman Islands with limited liability)

Opinion

We have audited the consolidated financial statements of China Information Technology Development Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 47 to 120, which comprise the consolidated statement of financial position as at 31 December 2019, and the consolidated statement of profit or loss, consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2019, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance

Basis for Opinion

We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters We have determined the matters described below to be the key audit matters to be communicated in our report

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Independent Auditor’s Report

Investment properties

Refer to note 15 to the consolidated financial statements

The Group measured its investment properties at fair value with the changes in fair value recognised in the consolidated profit or loss This fair value measurement is significant to our audit because the balance of investment properties of approximately HK$298,672,000 as at 31 December 2019 and fair value loss of HK$33,196,000 for the year then ended are material to the consolidated financial statements In addition, the Group’s fair value measurement involves application of judgement and is based on assumptions and estimates

Our audit procedures included, among others:

• Assessing the competence, independence and integrity of the external valuer engaged by the Group;

• Obtaining the external valuation report and meeting with the external valuer to discuss and challenge the valuation process, methodologies used and market evidence to support significant judgments and assumptions applied in the valuation model;

• Checking key assumptions and input data in the valuation model to supporting evidence;

• Checking arithmetical accuracy of the valuation model; and

• Assessing the disclosure of the fair value measurement in the consolidated financial statements

We consider that the Group’s fair value measurement of the investment properties is supported by the available evidence

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Independent Auditor’s Report

Loan receivables

Refer to note 23 to the consolidated financial statements

The Group tested the amount of loan receivables from borrowers for impairment This impairment test is significant to our audit because the balance of loan receivables of approximately HK$116,577,000 as at 31 December 2019 is material to the consolidated financial statements In addition, the Group’s impairment test involves application of judgement and is based on estimates

Our audit procedures included, among others:

• Assessing the Group’s procedures on granting credit periods to the borrowers;

• Evaluating the Group’s impairment assessment;

• Obtaining confirmation from the borrowers;

• Assessing aging of the debts; and

• Checking subsequent settlements from the borrowers

We consider that the Group’s impairment test for the loan receivables is supported by the available evidence

Other information

The directors are responsible for the other information The other information comprises all the information in the Company’s annual report, but does not include the consolidated financial statements and our auditor’s report thereon

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact We have nothing to report in this regard

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Responsibilities of Directors for the Consolidated Financial Statements

The directors are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error

In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so

Auditor’s Responsibilities for the Audit of the Consolidated Financial

Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion We report our opinion solely to you, as a body, and for no other purpose We do not assume responsibility towards or accept liability to any other person for the contents of this report Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements

A further description of our responsibilities for the audit of the consolidated financial statements is located at the HKICPA’s website at:

http://www hkicpa org hk/en/standards-and-regulations/standards/auditing-assurance/auditre/ This description forms part of our auditor’s report

ZHONGHUI ANDA CPA Limited

Certified Public Accountants

Fong Tak Ching

Audit Engagement Director Practising Certificate Number P06353 Hong Kong, 27 March 2020

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

46

Consolidated Statement of Profit or Loss

For the year ended 31 December 2019

				2019		2018
		Notes		HK$’000		HK$’000
						(Restated)
INTEREST REVENUE				11,177		14,033
OTHER REVENUE				52,535		37,633
TOTAL REVENUE		6&7		63,712		51,666
Cost of sales and services				(40,731)		(31,112)
Gross profit				22,981		20,554
Bank interest income				13		2
Other income and gains		8		654		1,169
Selling and distribution expenses				(4,760)		(5,314)
Administrative expenses				(41,757)		(42,018)
Gain on disposal of subsidiaries				—		11,662
Loss on initial recognition of loan receivables		32		(15,249)		—
Loss on early redemption of promissory notes		32		(421)		—
Equity-settled share-based payment expenses				(9,627)		—
Fair value gain/(loss) on investments at fair value
through profit or loss				5,703		(19,461)
Change in fair value of investment properties				(33,196)		(41,805)
Finance costs		9		(6,557)		(4,957)
LOSS BEFORE TAX		10		(82,216)		(80,168)
Income tax credit		12		281		1,913
LOSS FOR THE YEAR				(81,935)		(78,255)
Attributable to:
Owners of the Company				(80,850)		(75,308)
Non-controlling interests				(1,085)		(2,947)
				(81,935)		(78,255)
LOSS PER SHARE		14
Basic				HK(1.41) cents		HK(1 32) cents
Diluted				HK(1.41) cents		HK(1 32) cents

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

47

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 December 2019

				2019		2018
				HK$’000		HK$’000
						(Restated)
LOSS FOR THE YEAR				(81,935)		(78,255)
OTHER COMPREHENSIVE INCOME/(LOSS)
Items that may be reclassified to profit or loss:
Exchange differences reclassified to profit or loss
on disposal of subsidiaries				—		(2,986)
Exchange differences on translation of
foreign operations				(5,571)		(12,676)
Items that will not be reclassified to profit or loss:
Change in fair value of equity investments at fair value
through other comprehensive income				4,852		(689)
OTHER COMPREHENSIVE LOSS FOR THE YEAR,
NET OF INCOME TAX				(719)		(16,351)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR				(82,654)		(94,606)
Attributable to:
Owners of the Company				(81,583)		(91,660)
Non-controlling interests				(1,071)		(2,946)
				(82,654)		(94,606)

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Consolidated Statement of Financial Position

At 31 December 2019

		At	At	At
		31 December	31 December	1 January
		2019	2018	2018
	Notes	HK$’000	HK$’000	HK$’000
			(Restated)	(Restated)
NON-CURRENT ASSETS
Investment properties	15	298,672	336,971	395,094
Property, plant and equipment	16	5,601	4,184	12,384
Goodwill	17	3,865	3,865	3,865
Right-of-use assets	18	5,670	3,495	5,191
Other intangible assets	19	5,920	6,702	7,485
Equity investments at fair value through
other comprehensive income	20	9,012	17,197	15,036
Prepayments, deposits and other
receivables	21	1,053	1,568	2,201
Deferred tax assets	22	3,525	3,125	2,386
Loan receivable	23	45,849	10,000	—
Total non-current assets		379,167	387,107	443,642
CURRENT ASSETS
Inventories	24	385	274	704
Trade receivables	25	9,778	3,216	3,178
Contract assets	26	186	14	195
Prepayments, deposits and other
receivables	21	37,692	45,811	41,613
Loan receivables	23	70,728	117,366	111,750
Investments at fair value through
profit or loss	27	45,478	38,012	61,974
Bank and cash balances	28	4,959	4,658	34,118
Total current assets		169,206	209,351	253,532
CURRENT LIABILITIES
Trade payables	29	9,169	2,346	7,563
Contract liabilities	26	4,053	5,016	3,186
Other payables and accruals	30	38,591	86,156	75,830
Current tax liabilities		163	45	531
Bank and other loans	31	40,106	52,921	68,921
Promissory note payables	32	63,553	—	—
Lease liabilities	33	3,045	3,148	3,719
Total current liabilities		158,680	149,632	159,750
NET CURRENT ASSETS		10,526	59,719	93,782

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED

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ANNUAL REPORT 2019

Consolidated Statement of Financial Position (Continued)

At 31 December 2019

				At		At		At
				31 December		31 December		1 January
				2019		2018		2018
		Notes		HK$’000		HK$’000		HK$’000
						(Restated)		(Restated)
TOTAL ASSETS LESS CURRENT
LIABILITIES				389,693		446,826		537,424
NON-CURRENT LIABILITIES
Deferred tax liabilities				—		—		661
Lease liabilities		33		3,085		251		1,634
Loan from a shareholder		34		3,053		—		—
Amount due to a director		35		9,006		—		—
Total non-current liabilities				15,144		251		2,295
NET ASSETS				374,549		446,575		535,129
CAPITAL AND RESERVES
Share capital		36		572,216		571,215		571,215
Reserves		39		(195,919)		(123,963)		(32,303)
Equity attributable to owners of the
Company				376,297		447,252		538,912
Non-controlling interests				(1,748)		(677)		(3,783)
TOTAL EQUITY				374,549		446,575		535,129

Approved by the Board of Directors on 27 March 2020

Wong King Shiu, Daniel

Director

Wong Kui Shing, Danny

Director

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

50

Consolidated Statement of Changes in Equity

For the year ended 31 December 2019

Notes	Attributable to owners of the Company Share Capital Share premium account Share- based payment reserve Foreign currency translation reserve PRC reserve funds Accumulated losses Investment revaluation reserve Total Non- controlling interests Total equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (note 39(a)(ii)) (note 39(a)(v)) (note 39(a)(iii)) (note 39(a)(iv))
At 1 January 2018, as previously reported Effect of changes in accounting policies_(note 2)_	571,215 107,108 81,842 6,195 831 (231,280) 3,160 539,071 (3,780) 535,291 — — — — — (159) — (159) (3) (162)
At 1 January 2018, as restated Loss for the year Other comprehensive income/(loss) for the year: — Exchange differences reclassified to profit or loss on disposal of subsidiaries — Exchange differences on translation of foreign operations — Change in fair value of equity investments at fair value through other comprehensive income	571,215 107,108 81,842 6,195 831 (231,439) 3,160* 538,912 (3,783) 535,129 — — — — — (75,308) — (75,308) (2,947) (78,255) — — — (2,986) — — — (2,986) — (2,986) — — — (12,677) — — — (12,677) 1 (12,676) — — — — — — (689) (689) — (689)
Total comprehensive loss for the year Lapsed of share option 37 Disposal of subsidiaries	— — — (15,663) — (75,308) (689) (91,660) (2,946) (94,606) — — (592) — — 592 — — — — — — — — (831) 831 — — 6,052 6,052
At 31 December 2018, as restated	571,215 107,108 81,250 (9,468) — (305,324) 2,471* 447,252 (677) 446,575

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Consolidated Statement of Changes in Equity (Continued)

For the year ended 31 December 2019

Notes	Attributable to owners of the Company Share Capital Share premium account Share- based payment reserve Foreign currency translation reserve PRC reserve funds Accumulated losses Investment revaluation reserve Total Non- controlling interests Total equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (note 39(a)(ii)) (note 39(a)(v)) (note 39(a)(iii)) (note 39(a)(iv))
At 1 January 2019, as previously reported Effect of changes in accounting policies_(note 2)_	571,215 107,108 81,250 (9,469) — (305,388) 2,471 447,187 (708) 446,479 — — — 1 — 64 — 65 31 96
At 1 January 2019, as restated Loss for the year Other comprehensive income/(loss) for the year: — Exchange differences on translation of foreign operations — Change in fair value of equity investments at fair value through other comprehensive income	571,215 107,108 81,250 (9,468) — (305,324) 2,471* 447,252 (677) 446,575 — — — — — (80,850) — (80,850) (1,085) (81,935) — — — (5,585) — — — (5,585) 14 (5,571) — — — — — — 4,852 4,852 — 4,852
Total comprehensive income/(loss) for the year Equity-settled share-based payment 37 Exercise of share options Disposal of equity investments at fair value through other comprehensive income	— — — (5,585) — (80,850) 4,852 (81,583) (1,071) (82,654) — — 9,627 — — — — 9,627 — 9,627 1,001 443 (443) — — — — 1,001 — 1,001 — — — — — 11,010 (11,010) — — —
At 31 December 2019	572,216 107,551 90,434 (15,053) — (375,164) (3,687)* 376,297 (1,748) 374,549

Note:

• These reserve accounts comprise the consolidated reserve of approximately HK$(195,919,000) (2018: approximately HK$(123,963,000)) in the consolidated statement of financial position

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Consolidated Statement of Cash Flows

For the year ended 31 December 2019

	2019	2018
	HK$’000	HK$’000
		(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax	(82,216)	(80,168)
Adjustments for:
Equity-settled share-base payment expenses	9,627	—
Finance costs	6,557	4,957
Bank interest income	(13)	(2)
Interest revenue	(2,133)	—
Change in fair value of investment properties	33,196	41,805
Gain on disposal of subsidiaries	—	(11,662)
Gain on disposal of property, plant and equipment	(27)	—
Written off of property, plant and equipment	145	—
Fair value (gain)/loss on investments at fair value through
profit or loss	(5,703)	19,461
Dividends received from investments at fair value through
profit or loss	(243)	(160)
Depreciation of property, plant and equipment	1,479	1,331
Depreciation of right-of-use assets	4,600	4,281
Amortisation of other intangible assets	782	783
Gain on disposal of equity investments at fair value through other
comprehensive income	—	(65)
Impairment loss on trade receivables	—	62
Loss on initial recognition of loan receivables	15,249	—
Loss on early redemption of promissory notes	421	—
Operating loss before working capital change	(18,279)	(19,377)
Change in inventories	(111)	82
Change in trade receivables	(6,562)	(2,371)
Change in contract assets	(172)	181
Change in loan receivables	56,638	(15,616)
Change in prepayments, deposits and other receivables	(14,116)	437
Change in investments at fair value through profit or loss	(1,763)	4,501
Change in trade payables	6,823	(1,831)
Change in other payables and accruals	(46,184)	21,387
Change in contract liabilities	(963)	1,836
Cash used in operations	(24,689)	(10,771)
Loan interest paid	(3,337)	(4,730)
Net cash used in operating activities	(28,026)	(15,501)

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Consolidated Statement of Cash Flows (Continued)

For the year ended 31 December 2019

		2019		2018
		HK$’000		HK$’000
				(Restated)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment		(3,175)		(2,630)
Proceeds from disposal of property, plant and equipment		34		—
Payments for construction works of investment properties		(295)		(2,550)
Purchase of equity investments at fair value through other
comprehensive income		—		(12,385)
Proceeds from disposal of subsidiaries		—		14,713
Proceeds from disposal of equity investment at fair value through
other comprehensive income		22,372		4,400
Proceeds from disposal of an associate that was disposed in
previous year		25,750		—
Bank interest received		13		2
Dividends received from investments at fair value through
profit or loss		243		160
Net cash generated from investing activities		44,942		1,710
CASH FLOWS FROM FINANCING ACTIVITIES
Other loans raised		—		910
Repayment of lease liabilities		(4,043)		(4,538)
Lease interest paid		(233)		(227)
Proceeds from issue of shares		1,001		—
Repayment of promissory notes		(11,186)		—
Proceeds from loan from a shareholder and amount due to a director		12,006		—
Repayment of bank and other loans		(12,275)		(10,927)
Net cash used in financing activities		(14,730)		(14,782)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		2,186		(28,573)
Cash and cash equivalents at beginning of year		4,407		33,867
Effect of foreign exchange rate changes		(1,885)		(887)
CASH AND CASH EQUIVALENTS AT END OF YEAR		4,708		4,407
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS
Bank and cash balances other than time deposits		4,708		4,407
Time deposits		251		251
Cash and cash equivalents as stated in the consolidated statement of
financial position		4,959		4,658
Less: Time deposits with maturity of more than three months
when acquired		(251)		(251)
Cash and cash equivalents as stated in the consolidated statement of
cash flows		4,708		4,407

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

1. GENERAL INFORMATION

The Company was incorporated in the Cayman Islands with limited liability The address of its registered office is Cricket Square, Hutchins Drive, P O Box 2681, Grand Cayman KY1-1111, Cayman Islands The address of its principal place of business is Unit 3308, 33/F, Millennium City 6, 392 Kwun Tong Road, Kwun Tong, Hong Kong The Company’s shares are listed on the GEM of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”)

During the year, the Company and its subsidiaries (collectively the “Group”) were principally engaged in provision of system integration and related support services, provision of IT infrastructure solutions and maintenance services, money lending and securities trading

The Company is an investment holding company The principal activities of its principal subsidiaries are set out in note 40 to the consolidated financial statements

2. ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

In the current year, the Group has adopted all the new and revised Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants that are relevant to its operations and effective for its accounting year beginning on 1 January 2019 HKFRSs comprise Hong Kong Financial Reporting Standards; Hong Kong Accounting Standards; and Interpretations The adoption of these new and revised HKFRSs did not result in significant changes to the Group’s accounting policies, presentation of the Group’s consolidated financial statements and amounts reported for the current and prior years except as stated below

HKFRS 16 “Leases”

On adoption of HKFRS 16, the Group recognised right-of-use assets and lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under HKAS 17 “Leases ”

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 55 ANNUAL REPORT 2019

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

2. ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (Continued)

HKFRS 16 “Leases” (Continued)

HKFRS 16 has been applied retrospectively and resulted in changes in the consolidated amounts reported in the financial statements as follows:

	31 December	1 January
	2018	2018
	HK$’000	HK$’000
At 31 December 2018:
Increase in right-of-use assets	3,495	5,191
Increase in lease liabilities	3,399	5,353
Increase in exchange differences on translation of foreign
operation	1	—
Increase/(decrease) in retained earnings	64	(159)
Increase/(decrease) in non-controlling interests	31	(3)
For the year ended 31 December 2018:
Decrease in administrative expenses	484
Increase in lease interests	227
Decrease in loss for the year	257
Decrease in EPS (cents)	—

The Group has not applied the new and revised HKFRSs that have been issued but are not yet effective The Group has already commenced an assessment of the impact of these new and revised HKFRSs but is not yet in a position to state whether these new and revised HKFRSs would have a material impact on its results of operations and financial position

3. SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements have been prepared in accordance with HKFRSs and the applicable disclosures required by the Rules Governing the Listing of Securities on the GEM of The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance

These consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of investments and investment properties which are carried at their fair values

The preparation of consolidated financial statements in conformity with HKFRSs requires the use of certain key assumptions and estimates It also requires the directors to exercise their judgements in the process of applying the accounting policies The areas involving critical judgements and areas where assumptions and estimates are significant to these consolidated financial statements are disclosed in note 4 to these consolidated financial statements

The significant accounting policies applied in the preparation of these consolidated financial statements are set out below

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

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Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Investment properties

Investment properties are land and/or buildings held to earn rentals and/or for capital appreciation An investment property (including property that is being constructed or developed for future use as investment property) is measured initially at its cost including all direct costs attributable to the property

After initial recognition, the investment property is stated at its fair value based on valuation by an external independent valuer Gains or losses arising from changes in fair value of the investment property are recognised in consolidated profit or loss for the period in which they arise

The gain or loss on disposal of an investment property is the difference between the net sales proceeds and the carrying amount of the property, and is recognised in profit or loss

Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to 31 December Subsidiaries are entities over which the Group has control The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity The Group has power over an entity when the Group has existing rights that give it the current ability to direct the relevant activities, i e activities that significantly affect the entity’s returns

When assessing control, the Group considers its potential voting rights as well as potential voting rights held by other parties, to determine whether it has control A potential voting right is considered only if the holder has the practical ability to exercise that right

Subsidiaries are consolidated from the date on which control is transferred to the Group They are deconsolidated from the date the control ceases

The gain or loss on the disposal of a subsidiary that results in a loss of control represents the difference between (i) the fair value of the consideration of the sale plus the fair value of any investment retained in that subsidiary and (ii) the Company’s share of the net assets of that subsidiary plus any remaining goodwill relating to that subsidiary and any related accumulated foreign currency translation reserve

Intragroup transactions, balances and unrealised profits are eliminated Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group

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Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Consolidation (Continued)

Non-controlling interests represent the equity in subsidiaries not attributable, directly or indirectly, to the Company Non-controlling interests are presented in the consolidated statement of financial position and consolidated statement of changes in equity within equity Non-controlling interests are presented in the consolidated statement of profit or loss and consolidated statement of profit or loss and other comprehensive income as an allocation of profit or loss and total comprehensive income for the year between the non-controlling shareholders and owners of the Company

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling shareholders even if this results in the non-controlling interests having a deficit balance

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (i e transactions with owners in their capacity as owners) The carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Company

Business combination and goodwill

The acquisition method is used to account for the acquisition of a subsidiary in a business combination The cost of acquisition is measured at the acquisition-date fair value of the assets given, equity instruments issued, liabilities incurred and contingent consideration Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received Identifiable assets and liabilities of the subsidiary in the acquisition are measured at their acquisitiondate fair values

The excess of the cost of acquisition over the Company’s share of the net fair value of the subsidiary’s identifiable assets and liabilities is recorded as goodwill Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognised in consolidated profit or loss as a gain on bargain purchase which is attributed to the Company

In a business combination achieved in stages, the previously held equity interest in the subsidiary is remeasured at its acquisition-date fair value and the resulting gain or loss is recognised in consolidated profit or loss The fair value is added to the cost of acquisition to calculate the goodwill

If the changes in the value of the previously held equity interest in the subsidiary were recognised in consolidated other comprehensive income (for example, equity investments at fair value through other comprehensive income), the amount that was recognised in other comprehensive income is recognised on the same basis as would be required if the previously held equity interest were disposed of

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Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Business combination and goodwill (Continued)

Goodwill is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired Goodwill is measured at cost less accumulated impairment losses The method of measuring impairment losses of goodwill is the same as that of other assets as stated in the accounting policy below Impairment losses of goodwill are recognised in consolidated profit or loss and are not subsequently reversed Goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the acquisition for the purpose of impairment testing

The non-controlling interests in the subsidiary are initially measured at the non-controlling shareholders’ proportionate share of the net fair value of the subsidiary’s identifiable assets and liabilities at the acquisition date

Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”) The consolidated financial statements are presented in Hong Kong dollars, which is the Company’s functional and presentation currency

(b) Transactions and balances in each entity’s financial statements

Transactions in foreign currencies are translated into the functional currency on initial recognition using the exchange rates prevailing on the transaction dates Monetary assets and liabilities in foreign currencies are translated at the exchange rates at the end of each reporting period Gains and losses resulting from this translation policy are recognised in profit or loss

Non-monetary items that are measured at fair values in foreign currencies are translated using the exchange rates at the dates when the fair values are determined

When a gain or loss on a non-monetary item is recognised in other comprehensive income, any exchange component of that gain or loss is recognised in other comprehensive income When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss

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Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Foreign currency translation (Continued)

(c) Translation on consolidation

The results and financial position of all the Group entities that have a functional currency different from the Company’s presentation currency are translated into the Company’s presentation currency as follows:

• (i) Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

• (ii) Income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the exchange rates on the transaction dates); and

• (iii) All resulting exchange differences are recognised in the foreign currency translation reserve

On consolidation, exchange differences arising from the translation of the net investment in foreign entities and of borrowings are recognised in the foreign currency translation reserve When a foreign operation is sold, such exchange differences are recognised in consolidated profit or loss as part of the gain or loss on disposal

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably All other repairs and maintenance are recognised in consolidated profit or loss during the period in which they are incurred

Depreciation of property, plant and equipment is calculated at rates sufficient to write off their cost less their residual values over the estimated useful lives on a straight-line basis The principal annual rates or useful live are as follows:

Land and building 50 years Leasehold improvements Over the lease terms or 5 years, whichever is shorter Furniture, fixtures and equipment 18% — 30% Motor vehicles 10% — 20%

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Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, plant and equipment (Continued)

The residual values, useful lives and depreciation method are reviewed and adjusted, if appropriate, at the end of each reporting period

The gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in consolidated profit or loss

Leases

The Group as lessee

Leases are recognised as right-of-use assets and corresponding lease liabilities when the leased assets are available for use by the Group Right-of-use assets are stated at cost less accumulated depreciation and impairment losses Depreciation of right-of-use assets is calculated at rates to write off their cost over the shorter of the asset’s useful life and the lease term on a straight-line basis The principal annual rates are as follows:

Land and buildings Over the lease term of 1 year to 3 years

Right-of-use assets are measured at cost comprising the amount of the initial measurement of the lease liabilities, lease payments prepaid, initial direct costs and the restoration costs Lease liabilities include the net present value of the lease payments discounted using the interest rate implicit in the lease if that rate can be determined, or otherwise the Group’s incremental borrowing rate Each lease payment is allocated between the liability and finance cost The finance cost is charged to profit or loss over the lease term so as to produce a constant periodic rate of interest on the remaining balance of the lease liability

Payments associated with short-term leases and leases of low-value assets are recognised as expenses in profit or loss on a straight-line basis over the lease terms Short-term leases are leases with an initial lease term of 12 months or less Low-value assets are assets of value below US$5,000

Customer relationships

Customer relationships are stated at cost less any accumulated impairment losses and are amortised on the straight-line basis over their estimated useful life of 10 years Impairment is reviewed annually or when there is any indication that the customer relationships have suffered an impairment loss

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

61

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Money lending license

Money lending license with indefinite useful life is stated at cost less any impairment losses Impairment is reviewed annually or when there is any indication that the money leading license has suffered an impairment loss

Inventories

Inventories are stated at the lower of cost and net realisable value Cost is determined using the firstin, first-out basis The cost of finished goods comprises raw materials, direct labour and an appropriate proportion of all production overhead expenditure, and where appropriate, subcontracting charges Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale

Recognition and derecognition of financial instruments

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instruments

Financial assets are derecognised when the contractual rights to receive cash flows from the assets expire; the Group transfers substantially all the risks and rewards of ownership of the assets; or the Group neither transfers nor retains substantially all the risks and rewards of ownership of the assets but has not retained control on the assets On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received is recognised in consolidated profit or loss

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires The difference between the carrying amount of the financial liability derecognised and the consideration paid is recognised in consolidated profit or loss

Financial assets

Financial assets are recognised and derecognised on a trade date basis where the purchase or sale of an asset is under a contract whose terms require delivery of the asset within the timeframe established by the market concerned, and are initially recognised at fair value, plus directly attributable transaction costs except in the case of investments at fair value through profit or loss Transaction costs directly attributable to the acquisition of investments at fair value through profit or loss are recognised immediately in profit or loss

Financial assets of the Group are classified under the following categories:

• Financial assets at amortised cost;

• Equity investments at fair value through other comprehensive income; and

• Investments at fair value through profit or loss

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

62

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recognition and derecognition of financial instruments (Continued)

Financial assets (Continued)

• (i) Financial assets at amortised cost

Financial assets (including trade and other receivables) are classified under this category if they satisfy both of the following conditions:

• the assets are held within a business model whose objective is to hold assets in order to collect contractual cash flows; and

• the contractual terms of the assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

They are subsequently measured at amortised cost using the effective interest method less loss allowance for expected credit losses

• (ii) Equity investments at fair value through other comprehensive income

On initial recognition, the Group can make an irrevocable election (on an instrument-byinstrument basis) to designate investments in equity instruments that are not held for trading as at fair value through other comprehensive income

Equity investments at fair value through other comprehensive income are subsequently measured at fair value with gains and losses arising from changes in fair values recognised in other comprehensive income and accumulated in the equity investment revaluation reserve On derecognition of an investment, the cumulative gains or losses previously accumulated in the investment revaluation reserve are not reclassified to profit or loss

Dividends on these investments are recognised in profit or loss, unless the dividends clearly represent a recovery of part of the cost of the investment

• (iii) Investments at fair value through profit or loss

Financial assets are classified under this category if they do not meet the conditions to be measured at amortised cost and the conditions of debt investments at fair value through other comprehensive income unless the Group designates an equity investment that is not held for trading as at fair value through other comprehensive income on initial recognition

Investments at fair value through profit or loss are subsequently measured at fair value with any gains or losses arising from changes in fair values recognised in profit or loss The fair value gains or losses recognised in profit or loss are net of any interest income and dividend income Interest income and dividend income are recognised in profit or loss

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

63

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loss allowances for expected credit losses

The Group recognises loss allowances for expected credit losses on financial assets at amortised cost and contract assets Expected credit losses are the weighted average of credit losses with the respective risks of a default occurring as the weights

At the end of each reporting period, the Group measures the loss allowance for a financial instrument at an amount equal to the expected credit losses that result from all possible default events over the expected life of that financial instrument (“lifetime expected credit losses”) for trade receivables and contract assets, or if the credit risk on that financial instrument has increased significantly since initial recognition

If, at the end of the reporting period, the credit risk on a financial instrument (other than trade receivables and contract assets) has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to the portion of lifetime expected credit losses that represents the expected credit losses that result from default events on that financial instrument that are possible within 12 months after the reporting period

The amount of expected credit losses or reversal to adjust the loss allowance at the end of the reporting period to the required amount is recognised in profit or loss as an impairment gain or loss

Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents represent cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term highly liquid investments which are readily convertible into known amounts of cash and subject to an insignificant risk of change in value Bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents

Financial liabilities and equity instruments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument under HKFRSs An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities The accounting policies adopted for specific financial liabilities and equity instruments are set out below

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

64

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period

Trade and other payables

Trade and other payables are stated initially at their fair value and subsequently measured at amortised cost using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs

Revenue from contracts with customers

Revenue is measured based on the consideration specified in a contract with a customer with reference to the customary business practices and excludes amounts collected on behalf of third parties For a contract where the period between the payment by the customer and the transfer of the promised product or service exceeds one year, the consideration is adjusted for the effect of a significant financing component

The Group recognises revenue when it satisfies a performance obligation by transferring control over a product or service to a customer Depending on the terms of a contract and the laws that apply to that contract, a performance obligation can be satisfied over time or at a point in time A performance obligation is satisfied over time if:

• the customer simultaneously receives and consumes the benefits provided by the Group’s performance;

• the Group’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or

• the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

65

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue from contracts with customers (Continued)

If a performance obligation is satisfied over time, revenue is recognised by reference to the progress towards complete satisfaction of that performance obligation Otherwise, revenue is recognised at a point in time when the customer obtains control of the product or service

Other revenue

Interest income is recognised using the effective interest method

Dividend income is recognised when the shareholders’ rights to receive payment are established

Employee benefits

(a) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognised when they accrue to employees A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the end of the reporting period

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave

(b) Pension obligations

The Group contributes to defined contribution retirement schemes which are available to all employees Contributions to the schemes by the Group and employees are calculated as a percentage of employees’ basic salaries The retirement benefit scheme cost charged to consolidated profit or loss represents contributions payable by the Group to the funds

The Group also participates in a defined contribution retirement scheme organized by the government in the PRC The Group is required to contribute a specific percentage of the payroll of its employees to the retirement scheme The contributions are charged to consolidated profit or loss as they become payable in accordance with the rules of the retirement scheme No forfeited contributions may be used by the employers to reduce the existing level of contributions

(c) Termination benefits

Termination benefits are recognised at the earlier of the dates when the Group can no longer withdraw the offer of those benefits and when the Group recognises restructuring costs and involves the payment of termination benefits

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

66

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Share-based payments

The Group issues equity-settled share-based payments to certain directors, employees and consultants

Equity-settled share-based payments to directors and employees are measured at the fair value (excluding the effect of non market-based vesting conditions) of the equity instruments at the date of grant The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions

Equity-settled share-based payments to consultants are measured at the fair value of the services rendered or if the fair value of the services rendered cannot be reliably measured, at the fair value of the equity instruments granted The fair value is measured at the date the Group receives the services and is recognised as an expense

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets, until such time as the assets are substantially ready for their intended use or sale Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation

To the extent that funds are borrowed generally and used for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation is determined by applying a capitalisation rate to the expenditures on that asset The capitalisation rate is the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset

All other borrowing costs are recognised in consolidated profit or loss in the period in which they are incurred

Taxation

Income tax represents the sum of the current tax and deferred tax

The tax currently payable is based on taxable profit for the year Taxable profit differs from profit recognised in consolidated profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

67

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Taxation (Continued)

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences, unused tax losses or unused tax credits can be utilised Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rates that have been enacted or substantively enacted by the end of the reporting period Deferred tax is recognised in consolidated profit or loss, except when it relates to items recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity

The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities

For the purposes of measuring deferred tax for investment properties that are measured using the fair value model, the carrying amounts of such properties are presumed to be recovered through sale, unless the presumption is rebutted The presumption is rebutted when the investment property is depreciable and is held within a business model of the Group whose business objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale If the presumption is rebutted, deferred tax for such investment properties are measured based on the expected manner as to how the properties will be recovered

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

68

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Segment reporting

Operating segments, and the amounts of each segment item reported in the consolidated financial statements, are identified from the financial information provided regularly to the Group’s most senior executive management for the purpose of allocating resources to, and assessing the performance of the Group’s various lines of business in different geographical locations

Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of productions processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment Operating segments which are not individually material may be aggregated if they share a majority of these criteria

Related parties

A related party is a person or entity that is related to the Group

• (a) A person or a close member of that person’s family is related to the Group if that person:

• (i) has control or joint control over the Group;

• (ii) has significant influence over the Group; or

• (iii) is a member of the key management personnel of the Company or of a parent of the Company

• (b) An entity is related to the Group if any of the following conditions applies:

• (i) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others)

• (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member)

• (iii) Both entities are joint ventures of the same third party

• (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity

• (v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group If the Group is itself such a plan, the sponsoring employers are also related to the Group

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 69 ANNUAL REPORT 2019

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Related parties (Continued)

• (b) An entity is related to the Group if any of the following conditions applies: (Continued)

• (vi) The entity is controlled or jointly controlled by a person identified in (a)

• (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity)

• (viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Company or to a parent of the Company

Impairment of assets

Intangible assets that have an indefinite useful life are reviewed annually for impairment and are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and other intangible assets except goodwill, deferred tax assets, investment properties, investments, inventories and receivables to determine whether there is any indication that those assets have suffered an impairment loss If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs

Recoverable amount is the higher of fair value less costs of disposal and value in use In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount An impairment loss is recognised immediately in consolidated profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset or cash-generating unit in prior years A reversal of an impairment loss is recognised immediately in consolidated profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

70

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group has a present legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow is remote Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow is remote

Events after the reporting period

Events after the reporting period that provide additional information about the Group’s position at the end of the reporting period or those that indicate the going concern assumption is not appropriate are adjusting events and are reflected in the consolidated financial statements Events after the reporting period that are not adjusting events are disclosed in the notes to the consolidated financial statements when material

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 71 ANNUAL REPORT 2019

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

4. KEY ESTIMATES AND CRITICAL JUDGEMENTS

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below

(a) Fair values of investment properties

The Group appointed an independent professional valuer to assess the fair values of the investment properties In determining the fair values, the valuer has utilised a method of valuation which involves certain estimates The directors have exercised their judgement and are satisfied that the method of valuation is reflective of the current market conditions

(b) Provision for impairment of trade, loan and other receivables

The Group makes impairment loss for bad and doubtful debts based on assessments of the recoverability of the trade, loan and other receivables, including the current creditworthiness and the past collection history of each debtor Impairments arise where events or changes in circumstances indicate that the balances may not be collectible The identification of bad and doubtful debts requires the use of judgement and estimates Where the actual result is different from the original estimate, such difference will impact the carrying value of the trade, loan and other receivables and doubtful debt expenses in the year in which such estimate has been changed If the financial conditions of the debtors were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required

(c) Fair value of investment

In the absence of quoted market prices in an active market, the directors estimate the fair value of the Group’s investment in equity investments at fair value through other comprehensive income (the “equity investments”), details of which are set out in note 20 to the financial statements, by considering information from a variety of sources, including the latest published financial information, the historical data on market volatility as well as the price and industry and sector performance of the equity investments

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

72

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

4. KEY ESTIMATES AND CRITICAL JUDGEMENTS (Continued)

Key sources of estimation uncertainty (Continued)

(d) Impairment of non-financial assets (other than goodwill)

The Group assesses whether there are any indicators of impairment for all non-financial assets at the end of each reporting period Non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable An impairment exists when the carrying value of an asset or a cash-generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use The calculation of the fair value less costs of disposal is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing for the asset When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows

(e) Income taxes

The Group is subject to income taxes in Hong Kong, the PRC and Japan Significant estimates are required in determining the provision for income taxes There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made

(f) Property, plant and equipment/other intangible assets and depreciation/amortisation

The Group determines the estimated useful lives, residual values and related depreciation/ amortisation charges for the Group’s property, plant and equipment/other intangible assets This estimate is based on the historical experience of the actual useful lives and residual values of property, plant and equipment/other intangible assets of similar nature and functions The Group will revise the depreciation/amortisation charge where useful lives and residual values are different to those previously estimated, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold

(g) Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cashgenerating unit to which goodwill has been allocated The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

73

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

4. KEY ESTIMATES AND CRITICAL JUDGEMENTS (Continued)

Critical judgements in applying accounting policies

In the process of applying the accounting policies, the directors have made the following judgements that have the most significant effect on the amounts recognised in the consolidated financial statements

Deferred tax for investment properties

For the purposes of measuring deferred tax for investment properties that are measured using the fair value model, the directors have reviewed the Group’s investment property portfolios and concluded that the Group’s investment properties are held under a business model whose objective is to consume substantially all of the economic benefits embodied in the investment properties over time, rather than through sale Therefore, in determining the Group’s deferred tax for investment properties, the directors have rebutted the presumption that investment properties measured using the fair value model are recovered through sale

5. FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: foreign currency risk, price risk, credit risk, liquidity risk and interest rate risk The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance

(a) Foreign currency risk

The Group has minimal exposure to foreign currency risk as most of its business transactions, assets and liabilities are principally denominated in the functional currencies of the Group entities The Group currently does not have a foreign currency hedging policy in respect of foreign currency transactions, assets and liabilities The Group will monitor its foreign currency exposure closely and will consider hedging significant foreign currency exposure should the need arise

(b) Price risk

The Group’s investments at fair value through profit or loss are measured at fair value at the end of each reporting period Therefore, the Group is exposed to equity security price risk The directors manage this exposure by maintaining a portfolio of investments with difference risk profiles

At 31 December 2019, if the share prices of the investments increase/decrease by 10%, loss after tax for the year would have been HK$3,750,000 (2018: HK$3,174,000) lower/higher, arising as a result of the fair value gain/loss of the investments

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

74

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

5. FINANCIAL RISK MANAGEMENT (Continued)

(c) Credit risk

The carrying amount of the cash and bank balances, trade, loan and other receivables and investments included in the consolidated statement of financial position represents the Group’s maximum exposure to credit risk in relation to the Group’s financial assets

The Group has no significant concentrations of credit risk

It has policies in place to ensure that sales and loans are made to customers with an appropriate credit history

The credit risk on cash and bank balances is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies

The credit risk on investments is limited because the counterparties are well-established securities broker firms and issuers in Hong Kong

The Group considers whether there has been a significant increase in credit risk of financial assets on an ongoing basis throughout each reporting period by comparing the risk of a default occurring as at the reporting date with the risk of default as at the date of initial recognition It considers available reasonable and supportive forwarding-looking information Especially the following information is used:

• internal credit rating;

• actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrower’s ability to meet its obligations;

• actual or expected significant changes in the operating results of the borrower;

• significant increases in credit risk on other financial instruments of the same borrower;

• significant changes in the value of the collateral or in the quality of guarantees or credit enhancements; and

• significant changes in the expected performance and behaviour of the borrower, including changes in the payment status of borrowers

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

75

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

5. FINANCIAL RISK MANAGEMENT (Continued)

(c) Credit risk (Continued)

A significant increase in credit risk is presumed if a debtor is more than 30 days past due in making a contractual payment A default on a financial asset is when the counterparty fails to make contractual payments within 60 days of when they fall due

Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the Group The Group normally categorises a loan or receivable for write off when a debtor fails to make contractual payments greater than 360 days past due Where loans or receivables have been written off, the Group, if practicable and economical, continues to engage in enforcement activity to attempt to recover the receivable due

(d) Liquidity risk

The Group’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term The maturity analysis of the Group’s financial liabilities is as follows:

		Less than		Between		Between
		1 year		1 and 2 years		2 and 5 years
		HK$’000		HK$’000		HK$’000
At 31 December 2019
Trade payables		9,169		—		—
Other payables and accruals		38,591		—		—
Bank and other loans		22,472		10,361		9,836
Promissory note payables		69,329		—		—
Loan from a shareholder		—		3,143		—
Amount due to a director		—		9,006		—
		139,561		22,510		9,836
At 31 December 2018
Trade payables		2,346		—		—
Other payables and accruals		86,156		—		—
Bank and other loans		25,961		11,084		20,555
		114,463		11,084		20,555

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

76

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

5. FINANCIAL RISK MANAGEMENT (Continued)

(e) Interest rate risk

At 31 December 2019, the Group’s bank deposits of approximately HK$251,000 (2018: approximately HK$251,000), bank and other loans of approximately HK$11,581,000 (2018: approximately HK$14,215,000), loan from a shareholder of approximately HK$3,053,000 (2018: nil) and promissory note payables of HK$63,553,000 (2018: nil) bear interests at fixed interest rates and therefore are subject to fair value interest rate risks

At 31 December 2019, the Group’s exposure to interest-rate risk arises from its bank deposits of approximately HK$4,708,000 (2018: approximately HK$4,407,000) and bank and other loans of approximately HK$28,525,000 (2018: approximately HK$38,706,000) These deposits and bank and other loans bear interests at variable rates varied with the then prevailing market condition

At 31 December 2019, if interest rates at that date had been 50 basis points lower with all other variables held constant, consolidated loss after tax for the year would have been approximately HK$138,000 (2018: approximately HK$190,000) lower (2018: lower), arising mainly as a result of lower interest expenses on bank loans If interest rates had been 50 basis points higher, with all other variables held constant, consolidated loss after tax for the year would have been approximately HK$119,000 (2018: approximately HK$171,000) higher (2018: higher), arising mainly as a result of higher interest expenses on bank loans

(f) Categories of financial instruments

		2019		2018
		HK$’000		HK$’000
Financial assets:
Equity investments at fair value through other
comprehensive income		9,012		17,197
Investments at fair value through profit or loss
— Mandatorily measured		45,478		38,012
Financial assets at amortised cost
(including bank and cash balances)		168,778		181,247
Financial liabilities:
Financial liabilities at amortised costs		163,478		141,423

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

77

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

5. FINANCIAL RISK MANAGEMENT (Continued)

(g) Fair values

The carrying amounts of the Group’s financial assets and financial liabilities as reflected in the consolidated statement of financial position approximate their respective fair values

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date The following disclosures of fair value measurements use a fair value hierarchy that categorises into three levels the inputs to valuation techniques used to measure fair value:

Level 1 inputs: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date

Level 2 inputs: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly

Level 3 inputs: unobservable inputs for the asset or liability

The Group’s policy is to recognise transfers into and transfers out of any of the three levels as of the date of the event or change in circumstances that caused the transfer

(a) Disclosures of level in fair value hierarchy

	Fair	value measurements using:	value measurements using:
	Level 1	Level 2	Level 3	Total
	HK$’000	HK$’000	HK$’000	HK$’000
At 31 December 2019
Recurring fair value
measurements:
Investments at fair value
through profit or loss
—Listed equity
securities in
Hong Kong	39,885	—	—	39,885
—Investment funds	—	—	5,593	5,593
Equity investments at
fair value through other
comprehensive income
— Private equity
investment	—	—	9,012	9,012
Investment properties
Commercial — PRC	—	—	298,672	298,672
Total recurring fair value
measurement	39,885	—	313,277	353,162

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

78

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

5. FINANCIAL RISK MANAGEMENT (Continued)

(g) Fair values (Continued)

(a) Disclosures of level in fair value hierarchy (Continued)

	Fair	value measurements using:	value measurements using:
	Level 1	Level 2	Level 3	Total
	HK$’000	HK$’000	HK$’000	HK$’000
At 31 December 2018
Recurring fair value
measurements:
Investments at fair value
through profit or loss
— Listed equity securities
in Hong Kong	38,012	—	—	38,012
Equity investments at fair
value through other
comprehensive income
— Private equity
investments	—	—	17,197	17,197
Investment properties
Commercial — PRC	—	—	336,971	336,971
Total recurring fair value
measurement	38,012	—	354,168	392,180

(b) Reconciliation of assets measured at fair value based on level 3:

At 31 December 2019

At 31 December 2019
				Equity
				investments
		Investments		at fair value
		at fair value		through other
		through profit		comprehensive		Investment
Description		or loss		income		properties		Total
		HK$’000		HK$’000		HK$’000		HK$’000
At beginning of year		—		17,197		336,971		354,168
Total gains/(losses) recognised in
— consolidated profit or loss (#)		—		—		(33,196)		(33,196)
— other comprehensive income		—		4,852		—		4,852
Additions		5,593		12,647		295		18,535
Disposal		—		(25,372)		—		(25,372)
Exchange realignment		—		(312)		(5,398)		(5,710)
At end of year		5,593		9,012		298,672		313,277
(#) Include losses for assets held at
end of reporting period		—		—		(33,196)		(33,196)

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

79

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

5. FINANCIAL RISK MANAGEMENT (Continued)

(g) Fair values (Continued)

(b) Reconciliation of assets measured at fair value based on level 3: (Continued)

At 31 December 2018

		Equity
		investments
		at fair value
		through other
		comprehensive		Investment
Description		income		properties		Total
		HK$’000		HK$’000		HK$’000
At beginning of year		15,036		395,094		410,130
Total gains/(losses) recognised in
— consolidated profit or loss (#)		—		(41,805)		(41,805)
— other comprehensive income		(689)		—		(689)
Additions		12,385		2,550		14,935
Disposal		(9,535)		—		(9,535)
Exchange realignment		—		(18,868)		(18,868)
At end of year		17,197		336,971		354,168
(#) Include losses for assets held
at end of reporting period		—		(41,805)		(41,805)

(c) Disclosure of valuation process used by the Group and valuation techniques and inputs used in fair value measurements:

The Group’s chief financial officer is responsible for the fair value measurements of assets and liabilities required for financial reporting purposes, including level 3 fair value measurements The chief financial officer reports directly to the Board of Directors for these fair value measurements Discussions of valuation processes and results are held between the chief financial officer and the Board of Directors at least twice a year

For level 3 fair value measurements, the Group will normally engage external valuation experts with the recognised professional qualifications and recent experience to perform the valuations

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

80

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

5. FINANCIAL RISK MANAGEMENT (Continued)

(g) Fair values (Continued)

• (c) Disclosure of valuation process used by the Group and valuation techniques and inputs used in fair value measurements: (Continued)

As at 31 December 2019

					Effect on
					fair value for
	Valuation		Unobservable		increase of	Fair value
Description	technique		inputs	Range	inputs	HK$’000
Investment properties	Direct comparison		Market price of office	RMB31,000 per	Increase	298,672
	approach			square meter
			Market price of	RMB32,000 per	Increase
			commercial	square meter
			Market price of	RMB190,000 per	Increase
			carpark	unit
			Unexpended	RMB11,184,000	Decrease
			construction cost
Private equity investments	(i)	Investment	Capitalization rate	6 50%	Decrease	9,012
classified as equity		method (for
investments at fair		properties)	Monthly market rent	RMB28 per square	Increase
value through other				meter
comprehensive income
	(ii)	Direct	Market price	RMB1,690 per	Increase
		comparison		square meter
		method (for
		land)	Unexpended	RMB23,000,000	Decrease
			construction cost
	(iii)	Discounted	Discount rate	14 42%	Decrease
		cash flow (for
		financial assets
		and liabilities
		at amortised
		costs)
Investments at fair value	Discounted		Rate of return	2 31%	Increase	5,593
through profit or loss	cash flow

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

81

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

5. FINANCIAL RISK MANAGEMENT (Continued)

• (g) Fair values (Continued)

• (c) Disclosure of valuation process used by the Group and valuation techniques and inputs used in fair value measurements: (Continued)

At 31 December 2018

				Effect on
				fair value for
	Valuation	Unobservable		increase of	Fair value
Description	technique	inputs	Range	inputs	HK$’000
Investment properties	Direct	Market price of office	RMB32,500	Increase	336,971
	comparison		per square meter
	approach
		Market price of	RMB37,500	Increase
		commercial	per square meter
		Market price of	RMB200,000	Increase
		carpark	per unit
		Unexpended	RMB11,567,000	Decrease
		construction cost
Private equity investments	Discounted	Weighted average	13%	Decrease	1,614
classified as equity	cash flow	cost of capital
investments at fair
value through other		Revenue growth rate	15–37%	Increase
comprehensive income		Marketability	21%	Decrease
		discount
Private equity investments	Discounted	Weighted average	16 6%	Decrease	1,995
classified as equity	cash flow	cost of capital
investments at fair
value through other		Revenue growth rate	6–10%	Increase
comprehensive income		Marketability	21%	Decrease
		discount
Private equity investments	Guideline	Price-to-book ratio	3 18	Increase	13,588
classified as equity	publicly-traded
investments at fair	comparable	Price-to-sales ratio	5 29	Increase
value through other comprehensive income	method	Price-to-earnings ratio	53 11	Increase
		Marketability	21%	Decrease
		discount

During the two years, there were no changes in the valuation techniques used

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

82

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

6. OPERATING SEGMENT INFORMATION

The Group has four reportable segments as follows:

• the software development and system integration segment engages in (i) the sale of computer hardware; (ii) the provision of software development services; (iii) the provision of system integration services; and (iv) the provision of technical support and maintenance services;

• provision of IT infrastructure solutions and maintenance services (“IT solutions and maintenance”);

• money lending; and

• Securities trading (“Securities investments”)

The Group’s reportable segments are strategic business units that offer different products and services They are managed separately because each business requires different technology and marketing strategies

The accounting policies of the operating segments are the same as those described in note 3 to the consolidated financial statements Segment profits or losses do not include bank interest income, investment income, finance costs as well as head office and corporate expenses Segment assets do not include other unallocated head office and corporate assets Segment liabilities do not include other loans, current tax liabilities and other unallocated head office and corporate liabilities

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 83 ANNUAL REPORT 2019

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

6. OPERATING SEGMENT INFORMATION (Continued)

		Software	Software	Software
		development and				IT solutions and								Securities
		system integration				maintenance				Money	lending			investments				Total
		2019		2018		2019		2018		2019		2018		2019		2018		2019		2018
		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000
								(Restated)												(Restated)
Segment revenue:
Sales to external customers		—		685		54,668		36,948		9,044		14,033		—		—		63,712		51,666
Segment (loss)/profit		—		(1,746)		(26,296)		(8,432)		458		13,574		5,927		(19,328)		(19,911)		(15,932)
Reconciliation:
Bank interest income																		13		2
Change in fair value of
investment properties																		(33,196)		(41,805)
Gain on disposal of subsidiaries																		—		11,662
Unallocated gains																		—		66
Corporate and other unallocated
expenses																		(22,565)		(29,204)
Finance costs																		(6,557)		(4,957)
Loss before tax																		(82,216)		(80,168)

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

84

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

6. OPERATING SEGMENT INFORMATION (Continued)

		Software	Software	Software
		development and				IT solutions and								Securities
		system integration				maintenance				Money	lending			investments				Total
		2019		2018		2019		2018		2019		2018		2019		2018		2019		2018
		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000
								(Restated)				(Restated)								(Restated)
Segment assets		—		—		89,791		21,145		71,352		128,055		39,947		38,387		201,090		187,587
Reconciliation:
Corporate and other
unallocated assets																		347,283		408,871
Total assets																		548,373		596,458
Segment liabilities		—		—		(80,422)		(8,812)		(226)		(411)		(11,581)		(14,215)		(92,229)		(23,438)
Reconciliation:
Corporate and other
unallocated liabilities																		(81,595)		(126,445)
Total liabilities																		(173,824)		(149,883)
Other segment information:
Depreciation on:
Segment assets		—		12		1,444		1,179		145		51		—		—		1,589		1,242
Corporate and other
unallocated assets																		4,490		4,370
																		6,079		5,612
Amortisation of other
intangible assets on:
Segment assets		—		—		782		783		—		—		—		—		782		783
Bank interest income#		—		1		—		—		—		1		—		—		13		2
Impairment loss on
trade receivables		—		—		—		62		—		—		—		—		—		62
Income tax credit																		281		1,913
Capital expenditure on:
Segment assets																		2,007		297
Corporate and other
unallocated assets																		1,464		4,883
																		3,471		5,180

The amounts of bank interest income exclude non-operating segment

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

85

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

6. OPERATING SEGMENT INFORMATION (Continued)

Geographical information

	Revenue		Non-current	assets
	2019	2018	2019	2018
	HK$’000	HK$’000	HK$’000	HK$’000
				(Restated)
Hong Kong	61,131	50,513	20,345	14,964
PRC except Hong Kong	2,581	1,153	300,424	341,454
Consolidated total	63,712	51,666	320,769	356,418

In presenting the geographical information, revenue is based on the locations of the customers and information about the non-current assets, except equity investments at fair value through other comprehensive income, deferred tax assets, deposit and loan and other receivables classified in accordance with geographical location of the assets at the end of the reporting period

Information about major customers

The Group had no transaction with external customers of the IT Solution and maintenance segment during the year ended 31 December 2019 (2018: one) who contributed over 10% of the Group’s total revenue for the year A summary of revenue earned from each of these major external customers is set out below:

		2019	2018
		HK$’000	HK$’000
Customer	1	3,866*	8,912

• Revenue from customer did not exceed 10% of the total revenue during the year The amount was shown for comparative purpose

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

86

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

7. REVENUE

The Group’s revenue which represents (1) the aggregate of the invoiced value of goods sold, net of value-added tax and government surcharges, and after allowances for returns and trade discounts; (2) an appropriate proportion of contract revenue from the provision of the technical support and maintenance services, net of business tax and government surcharges; (3) an appropriate proportion of contract revenue from the provision of software development and system integration services, net of value-added tax, business tax and government surcharges; and (4) loan interest income are as follows:

		2019		2018
		HK$’000		HK$’000
Sale of computer hardware and software		40,780		24,532
Provision of services		11,755		13,101
Revenue from contracts with customers		52,535		37,633
Loan interest income		11,177		14,033
Total revenue		63,712		51,666
Disaggregation of revenue from contracts with customers:
Geographical markets
Hong Kong		52,086		36,480
PRC except Hong Kong		449		1,153
Total		52,535		37,633
Major products/services
Sale of computer hardware and software		40,780		24,532
Provision of technical support and maintenance services		11,755		13,101
Total		52,535		37,633
Timing of revenue recognition
At a point in time		40,780		24,532
Over time		11,755		13,101
Total		52,535		37,633

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

87

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

7. REVENUE (Continued)

Sale of computer hardware and software

The Group sells computer hardware and software to the customers Sales are recognised when control of the products has transferred, being when the products are delivered to a customer, there is no unfulfilled obligation that could affect the customer’s acceptance of the products and the customer has obtained legal titles to the products

Sales to customers are normally made with credit terms of 30 to 90 days For new customers, deposits or cash on delivery may be required Deposits received are recognised as a contract liability

A receivable is recognised when the products are delivered to the customers as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due

Provision of services

The Group provides software development, system integration, technical support and maintenance services to the customers When the progress towards complete satisfaction of the performance obligations of a contract can be measured reasonably, revenue from the contract and the contract costs are recognised using the percentage of completion method, measured by reference to the percentage of contract costs incurred to date to the estimated total contract costs for the contract This method provides the most reliable estimate of the percentage of completion

When the progress towards complete satisfaction of the performance obligations of a contract cannot be measured reasonably, revenue is recognised only to the extent of contract costs incurred that is expected to be recoverable

The customers pay the contract prices to the Group according to the payment schedules as stipulated in the contracts If the service rendered by the Group exceeds the payments, a contract asset is recognised If the payments exceed the service rendered, a contract liability is recognised

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

88

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

8. OTHER INCOME AND GAINS

	2019	2018
	HK$’000	HK$’000
Dividend income	243	160
Gain on disposal of equity investments at fair value through
other comprehensive income	—	65
Foreign exchange differences, net	—	588
Gain on disposal of property, plant and equipment	27	—
Others	384	356
	654	1,169

9. FINANCE COSTS

An analysis of finance costs is as follows:

	2019	2018
	HK$’000	HK$’000
		(Restated)
Interest on other loans	1,486	2,189
Interest on bank loans	1,904	2,541
Lease interest	233	227
Imputed interest on promissory notes	2,934	—
	6,557	4,957

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

89

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

10. LOSS BEFORE TAX

The Group’s loss before tax is arrived at after charging/(crediting):

	2019	2018
	HK$’000	HK$’000
		(Restated)
Cost of inventories sold	36,037	26,204
Cost of services provided	4,694	4,908
Depreciation of property, plant and equipment	1,479	1,331
Depreciation of right-of-use assets	4,600	4,281
Amortisation of other intangible assets	782	783
Expenses related to short-term leases	211	504
Auditors’ remuneration	680	620
Employee benefit expense (including
directors’ remuneration — note 11):
Salaries, allowances and benefits in kind	19,372	23,876
Pension schemes contribution	1,325	1,241
Equity-settled share-based payment expenses	2,664	—
	23,361	25,117
Equity-settled share-based payment to consultants	6,963	—
Impairment loss on trade receivables	—	62
Written off of property, plant and equipment	145	—
Foreign exchange differences, net	141	(588)
Gain on disposal of property, plant and equipment	(27)	—

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

90

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

11. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

The emoluments of each director were as follows:

(a) Directors’ emoluments

			Salaries,
			allowances
			and	Pension
			benefits	schemes
		Fees	in kind	contribution	Total
	Notes	HK$’000	HK$’000	HK$’000	HK$’000
Year ended 31 December 2019
Executive directors:
Mr Wong Kui Shing, Danny		160	—	18	178
Mr Tse Chi Wai	(ii)	80	423	9	512
Mr Takashi Togo	(ii)	80	120	—	200
Mr Wong King Shiu, Daniel		160	840	18	1,018
Mr Chan Kai Leung		160	984	18	1,162
		640	2,367	63	3,070
Non-Executive director:
Mr Wong Chi Yung	(ii)	80	120	6	206
Independent
non-executive directors:
Dr Chen Shengrong		160	—	—	160
Mr Hung Hing Man		160	—	—	160
Mr Wong Hoi Kuen		160	—	—	160
		480	—	—	480
Total		1,200	2,487	69	3,756

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

91

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

11. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS (Continued)

(a) Directors’ emoluments (Continued)

			Salaries,
			allowances
			and	Pension
			benefits	schemes
		Fees	in kind	contribution	Total
	Notes	HK$’000	HK$’000	HK$’000	HK$’000
Year ended 31 December 2018
Executive directors:
Mr Wong Kui Shing, Danny		120	1,806	18	1,944
Mr Tse Chi Wai	(ii)	360	845	18	1,223
Ms Wu Jingjing	(i)	2	—	—	2
Mr Takashi Togo	(ii)	120	240	—	360
Mr Wong King Shiu, Daniel		120	840	18	978
Mr Chan Kai Leung		120	984	18	1,122
		842	4,715	72	5,629
Non-Executive director:
Mr Wong Chi Yung	(ii)	120	240	12	372
Independent
non-executive directors:
Dr Chen Shengrong		120	—	—	120
Mr Hung Hing Man		120	—	—	120
Mr May Tai Keung, Nicholas	(i)	2	—	—	2
Mr Wong Hoi Kuen		120	—	—	120
		362	—	—	362
Total		1,324	4,955	84	6,363

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

92

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

11. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS (Continued)

(a) Directors’ emoluments (Continued)

Notes:

(i) Resigned on 5 January 2018

(ii) Retired on 28 June 2019

During the year, no emoluments were paid by the Group to any of the directors of the Group as an inducement to join or upon joining the Group or as compensation for loss of office

(b) Employees’ emoluments

The five highest paid individuals in the Group during the year included two (2018: four) directors whose emoluments are reflected in the analysis presented above The emoluments of the remaining three (2018: one) individuals are set out below:

		2019	2018
		HK$’000	HK$’000
Salaries,	allowances and benefits in kind	2,954	924
Pension	schemes contribution	54	18
		3,008	942

Their emoluments were within the following band:

	Number of individuals
	2019	2018
HK$Nil — HK$1,000,000	2	1
HK$1,000,001 — HK$1,500,000	1	—

During the year, no emoluments were paid by the Group to the five highest paid individuals of the Group as an inducement to join or upon joining the Group or as compensation for loss of office

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

93

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

12. INCOME TAX CREDIT

	2019	2018
	HK$’000	HK$’000
Current tax — Hong Kong	19	45
Current tax — PRC	100	—
Overprovision in prior years	—	(531)
Deferred tax credit_(note 22)_	(400)	(1,427)
	(281)	(1,913)

Hong Kong Profits Tax has been provided at a rate of 16 5% on the estimated assessable profit for the year ended 31 December 2019 (2018: 16 5%)

For the year ended 31 December 2019, PRC corporate income tax is provided at 25% based on the assessable profit for the year less allowable losses brought forward No provision for PRC corporate income tax was required since the Group had no assessable profit for the year ended 31 December 2018

The reconciliation between the income tax credit and the product of loss before tax multiplied by tax rates applicable to profit or loss in the respective countries is as follows:

	2019	2018
	HK$’000	HK$’000
		(Restated)
Loss before tax	(82,216)	(80,168)
Tax calculated at domestic tax rates applicable to
profit or loss in the respective countries	(19,244)	(18,182)
Tax effect of income that is not taxable	—	(1,999)
Tax effect of expenses that are not deductible	10,544	2,982
Tax effect of temporary differences not recognised	8,395	9,648
Tax effect of tax losses not recognised	966	6,532
Tax effect of utilisation of tax losses not previously recognised	(883)	(318)
Income tax on concessionary rate_(note)_	(39)	(45)
One-off tax reduction	(20)	—
Overprovision in prior years	—	(531)
Tax credit for the year	(281)	(1,913)

Note: For the year of assessment 2019/20 and 2018/19, a two-tiered profits tax rate was introduced of which one subsidiary of the Group can elect 8 25% tax rate for its first assessable profits of HK$2,000,000

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

94

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

13. DIVIDEND

The directors of the Company did not recommend the payment of any dividend for the years ended 31 December 2019 and 2018

14. LOSS PER SHARE

The calculation of the basic and diluted loss per share attributable to the owners of the Company is based on the following:

		2019		2018
		HK$’000		HK$’000
				(Restated)
Loss for the year attributable to owners of the Company		(80,850)		(75,308)
		2019		2018
Weighted average number of ordinary shares for basic
and diluted loss per share		5,716,895,426		5,712,151,908

The diluted loss per share is the same as the basic loss per share as the computation of diluted loss per share does not assume the exercise of the Company’s share options since their exercise would result in an anti-dilutive effect on loss per share for the years ended 31 December 2019 and 2018

15. INVESTMENT PROPERTIES

	2019	2018
	HK$’000	HK$’000
At 1 January	336,971	395,094
Additions	295	2,550
Fair value loss	(33,196)	(41,805)
Exchange differences	(5,398)	(18,868)
At 31 December	298,672	336,971

Investment properties were revalued at 31 December 2019 and 2018 on the open market value basis by reference to market evidence of recent transactions for similar properties by Roma Appraisals Limited, an independent firm of chartered surveyors

At 31 December 2019, the carrying amount of investment properties of approximately HK$298,672,000 (2018: approximately HK$336,971,000) pledged as security for the Group’s bank loans amounted to approximately HK$28,525,000 (2018: approximately HK$38,706,000)

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

95

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

16. PROPERTY, PLANT AND EQUIPMENT

						Furniture,
		Land and		Leasehold		fixtures and		Motor
		building	improvements			equipment		vehicles		Total
		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000
COST:
At 1 January 2018		9,156		2,183		5,274		1,744		18,357
Exchange realignment		—		27		128		(24)		131
Additions		—		—		342		2,288		2,630
Disposal of subsidiaries		(9,156)		(1,449)		(3,801)		—		(14,406)
At 31 December 2018 and
1 January 2019		—		761		1,943		4,008		6,712
Exchange realignment		—		—		(6)		(7)		(13)
Additions		—		2,135		1,040		—		3,175
Written off		—		(532)		(193)		—		(725)
Disposal		—		—		—		(543)		(543)
At 31 December 2019		—		2,364		2,784		3,458		8,606
ACCUMULATED DEPRECIATION
AND IMPAIRMENT LOSS:
At 1 January 2018		381		1,116		3,789		687		5,973
Exchange realignment		—		27		136		(12)		151
Provided during the year		16		317		390		608		1,331
Disposal of subsidiaries		(397)		(877)		(3,653)		—		(4,927)
At 31 December 2018 and
1 January 2019		—		583		662		1,283		2,528
Exchange realignment		—		—		(1)		(5)		(6)
Provided during the year		—		294		417		768		1,479
Written off		—		(460)		(120)		—		(580)
Eliminated on disposals		—		—		—		(416)		(416)
At 31 December 2019		—		417		958		1,630		3,005
CARRYING AMOUNTS:
At 31 December 2019		—		1,947		1,826		1,828		5,601
At 31 December 2018		—		178		1,281		2,725		4,184

Note: The land and building are situated in Hong Kong

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

96

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

17. GOODWILL

		2019		2018
		HK$’000		HK$’000
Cost
At 1 January and 31 December		3,865		3,865
Carrying amount:
At 31 December		3,865		3,865
		2019		2018
The carrying amount of goodwill had been allocated as follows:		HK$’000		HK$’000
IT solutions and maintenance		3,865		3,865

The recoverable amount of this CGU is determined by reference to the value-in-use approach, which is based on discounted cash flow based on the financial budgets approved by the management covering a 5-year period, and the discount rate of approximately 18 7% (2018: approximately 16 22%) that reflects current market assessment of the time value of money and the risks specific to the CGU Cash flows beyond 5-year period have been extrapolated using a steady 3% (2018: 3%) annual growth rate

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 97 ANNUAL REPORT 2019

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

18. RIGHT-OF-USE ASSETS

Disclosures of lease-related items:

	2019	2018
	HK$’000	HK$’000
		(Restated)
At 31 December:
Right-of-use assets
— Land and buildings	5,670	3,495
The maturity analysis, based on undiscounted cash flows, of the Group’s lease liabilities is as follows:
— Less than 1 year	3,127	3,210
— Between 1 and 2 years	2,403	257
— Between 2 and 5 years	977	12
	6,507	3,479
For the year ended 31 December:
Depreciation charge of right-of-use assets
— Land and buildings	4,600	4,281
Lease interests	233	227
Expenses related to short-term leases	211	504
Total cash outflow for leases	4,487	5,269
Additions to right-of-use assets	6,780	2,582
Lease commitments of short-term leases	30	18

The Group leases various land and buildings Lease agreements are typically made for fixed periods of 1 to 3 years (2018: 1 to 3 years) Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions The lease agreements do not impose any covenants and the leased assets may not be used as security for borrowing purposes

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

98

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

19. OTHER INTANGIBLE ASSETS

				Money
		Customer		lending
		relationships		licence		Total
		HK$’000		HK$’000		HK$’000
		(note (a))		(note (b))
COST:
At 1 January 2018, 31 December 2018,
1 January 2019 and 31 December 2019		7,828		440		8,268
ACCUMULATED AMORTISATION AND
IMPAIRMENT LOSS:
At 1 January 2018		783		—		783
Provided during the year		783		—		783
At 31 December 2018 and 1 January 2019		1,566		—		1,566
Provided during the year		782		—		782
At 31 December 2019		2,348		—		2,348
CARRYING AMOUNTS:
At 31 December 2019		5,480		440		5,920
At 31 December 2018		6,262		440		6,702

Notes:

• (a) The customer relationship arose from the acquisition of 84% equity interest in Macro China Holding Limited The average remaining amortization period of the customer relationship is 7 years (2018: 8 years)

(b) The Group’s money lending license of HK$440,000 (2018: HK$440,000) at 31 December 2019 is assessed as having indefinite useful life because the Group can renew the money lending license without substantial costs

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

99

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

20. EQUITY INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

	2019	2018
	HK$’000	HK$’000
Unlisted equity investments, at fair value	9,012	17,197

The unlisted equity investments are intended to be held for the medium to long-term Designation of these investments as equity investments at fair value through other comprehensive income can avoid the volatility of the fair value changes of these investments to the profit or loss

• (a) As at 31 December 2018, the Group had 19% equity interest in Quality Partner Enterprises Limited (“Quality Partner”), which wholly-owned a licensed company specializing in corporate finance advisory services and a secretarial services company As at 31 December 2018, Quality Partner was measured at fair value of approximately HK$1,995,000

In December 2019, the 19% equity interest in Quality Partner was disposed at a consideration of HK$2,000,000 for raising working capital for the Group

The cumulative gain of the disposal of these investments amounted to HK$1,000,000 was transferred from the equity investment revaluation reserve to retained earnings

• (b) As at 31 December 2018, the Group owns 16 67% equity interests of FULLPAY K K (FULLPAY 株式會 社) (“Fullpay”) As at 31 December 2018, it was measured at fair value of approximately HK$1,614,000 Fullpay is principally engaged in sourcing and provision of electronic fund transfer at point of sale (EFT-POS) terminals and peripheral devices which support WeChat Pay, as well as the provision of relevant EFT-POS installation and system support services, to vendors in Japan

On 16 December 2019, 16 67% equity interest of Fullpay was disposed at a consideration of HK$1,000,000 for raising working capital for the Group

The cumulative loss of the disposal of these investments amounted to HK$341,000 was transferred from the equity investment revaluation reserve to retained earnings

• (c) On 8 February 2018, the Group acquired 10% equity interest of Guangzhou Desheng Cloud Computing Technology Co , Ltd (廣州德昇雲計算科技有限公司) (“Desheng Cloud”), which is incorporated in the PRC, at a consideration of RMB10,000,000 (equivalent to approximately HK$12,385,000) The principal activities of it are provision of data racks services As at 31 December 2018, it was measured at fair value of approximately HK$13,588,000

As at 31 December 2018, the carrying amount of approximately HK$13,588,000 of equity investments in Desheng Cloud was pledged as security to obtain the bank facilities of Desheng Cloud amounted to approximately RMB171,430,000

In August 2019, the 10% equity interest of Desheng Cloud was disposed at a consideration of RMB20,000,000 (equivalent to approximately HK$22,372,000) for raising working capital for the Group

The cumulative gain of the disposal of these investments amounted to HK$10,351,000 was transferred from the equity investment revaluation reserve to retained earnings

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

100

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

20. EQUITY INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (Continued)

• (d) On 28 August 2019, the Group acquired 19% equity interest of Guangzhou Dehuang Investment Company Limited (廣州市德煌投資有限公司) (“Dehuang”), which is incorporated in the PRC and loan receivables with principal amount of RMB51,199,000 (note 23), at a consideration of RMB66,341,000 which is satisfied by issuance of promissory notes to the vendor (note 32) The principal activities of it is provision of business services The principal assets of Dehuang are the two parcels of land and one building with a data centre owned by Dehuang and located in South of Shinan Highway, Nansha District, Guangzhou (廣州市南沙區市南 公路南側) As at 31 December 2019, it was measured at fair value of approximately HK$9,012,000

21. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

				2019		2018
		Notes		HK$’000		HK$’000
Prepayments				1,281		1,372
Deposits and other receivables		(a)(b)		37,464		46,007
				38,745		47,379
Analysed as:
Non-current portion
Prepayments				1,041		1,201
Deposits and other receivables				12		367
				1,053		1,568
Current portion
Prepayments				240		171
Deposits and other receivables		(a)(b)		37,452		45,640
				37,692		45,811
				38,745		47,379

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

101

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

21. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES (Continued)

Notes:

• (a) As at 31 December 2019, included in the other receivables of approximately HK$18,500,000 (2018: HK$44,250,000) is receivables from the purchasers of Faithful Asia Up to the approval date of the consolidated financial statements approximately HK$8,569,000 were settled

• (b) As at 31 December 2019, included in other receivables of approximately HK$14,700,000 is a refundable deposit During 2019, the Group paid refundable deposit of HK$14,700,000 for further acquisition of Fullpay However, the Group decided not to proceed with the acquisition of Fullpay and demanded refund of the deposit

• (c) The movements in the provision for impairment of prepayments, deposits and other receivables during the year are as follows:

	2019	2018
	HK$’000	HK$’000
At 1 January	—	1,273
Disposal of subsidiaries	—	(1,326)
Exchange realignment	—	53
At 31 December	—	—

The above provision for impairment of prepayments, deposits and other receivables is the provision for individually impaired prepayments, deposits and other receivables The Group and the Company do not hold any collateral or other credit enhancements over these balances

22. DEFERRED TAX

The following are the major deferred tax assets/(liabilities) recognised by the Group:

	Change
	in fair
	value of	Other
	investment	intangible
	properties	assets	Tax losses	Total
	HK$’000	HK$’000	HK$’000	HK$’000
At 1 January 2018	(661)	(1,163)	3,549	1,725
Credited to consolidated profit or loss	688	129	610	1,427
Exchange difference	(27)	—	—	(27)
At 31 December 2018 and 1 January 2019	—	(1,034)	4,159	3,125
Credited to consolidated profit or loss	—	129	271	400
At 31 December 2019	—	(905)	4,430	3,525

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

102

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

22. DEFERRED TAX (Continued)

The following is the analysis of the deferred tax balances (after offset) for consolidated statement of financial position purposes:

	2019	2018
	HK$’000	HK$’000
Deferred tax assets	3,525	3,125

The Group has tax losses arising in Hong Kong of approximately HK$124,236,000 (2018: approximately HK$116,724,000) that are available indefinitely and in Mainland China of approximately HK$8,754,000 (2018: approximately HK$15,303,000) that are available for a maximum of five years, for offsetting against future taxable profits of the companies in which the losses arose Deferred tax assets have not been recognised in respect of tax losses of approximately HK$106,145,000 as they have arisen in certain subsidiaries that have been loss-making for some time and it is considered not probable that taxable profits will be available against which tax losses can be utilised

At the end of the reporting period, there is no temporary differences associated with undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognised (2018: HK$nil)

23. LOAN RECEIVABLES

		2019		2018
		HK$’000		HK$’000
Loan receivables		116,577		127,366
Analysed as:
Non-current assets		45,849		10,000
Current assets		70,728		117,366
		116,577		127,366

Notes:

• (a) As at 31 December 2019, loan receivables of approximately HK$20,000,000 (2018: approximately HK$20,000,000) are guaranteed by an independent third party

• (b) As at 31 December 2019, loan receivables of approximately HK$70,728,000 carried at fixed effective interest at 12% per annum and with the terms ranging from 9 months to 3 years As at 31 December 2018, loan receivables of approximately HK$86,000 and HK$127,280,000 carried at fixed effective interest at 9% and 12% per annum respectively and with the terms ranging from 2 months to 2 years

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

103

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

23. LOAN RECEIVABLES (Continued)

Notes: (Continued)

• (c) As at 31 December 2019, included in loan receivables are receivable from Dehuang of approximately HK$45,849,000 (note 32) which is unsecured, non-interest bearing, repayable on 2 September 2021 and measured at amortised cost using effective interest rate of 14 42%

• (d) The directors of the Company monitored the collectability of the loan receivables closely with reference to their respective current creditworthiness and repayment records The management believes that no impairment allowance is necessary in respect of these receivables as they are considered fully recoverable Upon its original maturity and up to the approval date of the consolidated financial statements, approximately HK$6,400,000 were fully settled

The Group applies the simplified approach under HKFRS 9 to provide for expected credit losses using the lifetime expected loss provision for all loan receivables To measure the expected credit losses, loan receivables have been grouped based on shared credit risk characteristics and the days past due The expected credit losses also incorporate forward looking information

24. INVENTORIES

	2019	2018
	HK$’000	HK$’000
Finished goods and merchandises	385	274

25. TRADE RECEIVABLES

	2019	2018
	HK$’000	HK$’000
Trade receivables	9,778	3,278
Impairment	—	(62)
	9,778	3,216

Notes:

(a) The Group has granted credit terms to its customers within 30 to 90 days (2018: ranging from 30 to 90 days) The Group seeks to maintain strict control over its outstanding balances by imposing 2% (2018: 2%) monthly interest charge upon them and requesting payment in advances from certain customers Overdue balances are reviewed by the directors The Group does not hold any collateral or other credit enhancements over its trade receivable balances

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

104

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

25. TRADE RECEIVABLES (Continued)

Notes: (Continued)

(b) The aging analysis of trade receivables, based on the invoice date, and net of allowance, is as follows:

	2019	2018
	HK$’000	HK$’000
Within 1 month	8,400	3,041
1 to 2 months	1,081	124
2 to 3 months	286	8
Over 3 months	11	43
	9,778	3,216

• (c) The movements in the provision for impairment of trade receivables during the year are as follows:

	2019	2018
	HK$’000	HK$’000
At 1 January	62	5,303
Impairment during the year recognised
in consolidated profit or loss	—	62
Amount written off as uncollectible	(62)	—
Disposal of subsidiaries	—	(5,524)
Exchange realignment	—	221
At 31 December	—	62

The above provision for impairment of trade receivables is the provision for individually impaired trade receivables The individually impaired trade receivables relate to customers that were in financial difficulties and only a portion of the receivables is expected to be recovered The Group does not hold any collateral or other credit enhancements over these balances

The Group applies the simplified approach under HKFRS 9 to provide for expected credit losses using the lifetime expected loss provision for all trade receivables To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due The expected credit losses also incorporate forward looking information

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

105

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

25. TRADE RECEIVABLES (Continued)

	Neither			Over
	past	Less than	1 to	3 months	Over
	due nor	1 month	3 months	to 1 year	1 year
	impaired	past due	past due	past due	past due	Total
At 31 December 2019
Weighted average expected
loss rate	0%	0%	0%	0%	0%	0%
Receivable amount (HK$’000)	8,400	1,081	297	—	—	9,778
Loss allowance (HK$’000)	—	—	—	—	—	—
At 31 December 2018
Weighted average expected
loss rate	0%	0%	0%	0%	100%	2%
Receivable amount (HK$’000)	3,036	128	23	29	62	3,278
Loss allowance (HK$’000)	—	—	—	—	62	62

26. CONTRACT ASSETS AND LIABILITIES

Disclosures of revenue-related items:

		As at		As at		As at 1
		31 December		31 December		January
		2019		2018		2018
		HK$’000		HK$’000		HK$’000
Contract assets — provision of technical support
and maintenance services		186		14		195
Contract liabilities — sale of computer hardware and
software		1,809		1,061		93
Contract liabilities — provision of technical support
and maintenance services		2,244		3,955		3,093
Total contract liabilities		4,053		5,016		3,186
Contract receivables (included in trade receivables)		9,778		3,216		3,178

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

106

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

26. CONTRACT ASSETS AND LIABILITIES (Continued)

Disclosures of revenue-related items: (Continued)

						2019			2018
						HK$’000			HK$’000
Transaction prices allocated to performance obligations unsatisfied
at end of year and expected to be recognised as revenue in:
— 2019						—			5,956
— 2020						4,288			32
— 2021						3			—
						4,291			5,988
Year ended 31 December						2019			2018
						HK$’000			HK$’000
Revenue recognised in the year that was included in contract
liabilities at beginning of year						4,961			3,167
Significant changes in contract assets and contract liabilities during			the year:
	2019		2019			2018			2018
	Contract	Contract				Contract			Contract
	assets	liabilities				assets			liabilities
	HK$’000	HK$’000				HK$’000			HK$’000
Increase due to operations in the year	193	51,587				35			39,463
Transfer of contract assets to receivables	(21)				—	(216)			—
Transfer of contract liabilities to revenue	—	(52,550)				—			(37,633)

A contract asset represents the Group’s right to consideration in exchange for products or services that the Group has transferred to a customer

A contract liability represents the Group’s obligation to transfer products or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

107

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

27. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

		2019	2018
	Note	HK$’000	HK$’000
Equity securities listed in Hong Kong, at fair value	(a)	39,885	38,012
Unlisted investment funds, at fair value		5,593	—
		45,478	38,012

Note:

• (a) The investments included above as at 31 December 2019 and 2018 represent investments in listed equity securities that offer the Group the opportunity for return through dividend income and fair value gains They have no fixed maturity or coupon rate

• The fair values of the listed equity securities are determined based on the quoted market prices

28. BANK AND CASH BALANCES

	2019	2018
	HK$’000	HK$’000
Cash and bank balances other than time deposits	4,708	4,407
Time deposits	251	251
	4,959	4,658

Notes:

• (a) As at 31 December 2019, the bank and cash balances of the Group denominated in RMB amounted to approximately HK$1,346,000 (2018: approximately HK$784,000) Conversion of RMB into foreign currencies is subject to the PRC’s Foreign Exchange Control Regulations

• (b) Time deposits are made for varying periods of between three months and one year depending on the immediate cash requirements of the Group, and earn interest at the respective time deposit rates The bank balances and deposits are deposited with creditworthy banks with no recent history of default

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

108

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

29. TRADE PAYABLES

An aging analysis of the Group’s trade payables as at the end of the reporting period, based on the invoice date, is as follows:

	2019	2018
	HK$’000	HK$’000
Within 1 month	4,783	773
1 to 2 months	4,362	397
2 to 3 months	23	1,176
Over 3 months	1	—
	9,169	2,346

30. OTHER PAYABLES AND ACCRUALS

	2019	2018
	HK$’000	HK$’000
Accruals	4,621	4,486
Other payables	33,970	81,670
	38,591	86,156

At 31 December 2019, other payables of HK$Nil (2018: HK$1,000,000) is due to a director, Mr Wong King Shiu, Daniel

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

109

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

31. BANK AND OTHER LOANS

		2019	2018
	Notes	HK$’000	HK$’000
Bank loans:
Mortgage loan	(i)	28,525	38,706
Other loans:
Margin loans	(ii)	11,581	14,215
		40,106	52,921

Notes:

• (i) The mortgage loan has terms of 10 years until 2022 with a repayable on demand clause exercisable by a bank The average interest rate was 5 39% (2018: 5 39%)

The mortgage loan is secured by a charge over the Group’s investment properties with fair value of approximately HK$298,672,000 (2018: approximately HK$336,971,000), and personal guarantee by former shareholders of a subsidiary

• (ii) As at 31 December 2019, the margin loans are secured by the Group’s equity securities listed in Hong Kong with fair value of approximately HK$16,726,000 (2018: approximately HK$25,450,000) and repayable on demand As at 31 December 2019, included in the loans of approximately HK$11,581,000 (2018: approximately HK$14,215,000) is charged at a fixed interest rate of 8 375% (2018: 8 375%) per annum

32. PROMISSORY NOTE PAYABLES

	HK’000
At 1 January 2019	—
Issuance of a promissory note	72,435
Imputed interest	2,934
Repayment of promissory note	(11,186)
Loss on early redemption	421
Exchange realignment	(1,051)
At 31 December 2019	63,553

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

110

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

32. PROMISSORY NOTE PAYABLES (Continued)

On 3 September 2019, the Group issued a promissory note (the “PN”) with fair value of approximately HK$72,435,000 (principal amount of RMB66,341,000) as a consideration for the acquisition of 19% equity interest of Dehuang and a loan receivable with principal amount of RMB51,199,000 (the “Loan Receivable”) On the date of issuance of the PN, (i) the fair value of 19% equity interest in Dehuang and the Loan Receivable; and (ii) the fair value of the PN of approximately HK$72,435,000 allocated to 19% equity interest of Dehuang and the Loan Receivable are as follows:

	Fair value at the
	date of issuance	Fair value of the
	of the PN	PN allocated
	HK$’000	HK$’000
19% equity interest in Dehuang_(note 20(d))_	9,544	12,825
The Loan Receivable_(note 23(c))_	44,361	59,610
	53,905	72,435

Loss on initial recognition of the Loan Receivable of HK$15,249,000 is recognized on the date of issuance of the PN

The promissory note is unsecured, interest bearing at 10% per annum and repayable on 2 September 2020 The fair value of the promissory note approximates its carry amount As at 31 December 2019, the PN is measured at amortised cost using effective interest rate of 14 28%

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

111

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

33. LEASE LIABILITIES

			Present value	of lease
	Lease payments		payments
	2019	2018	2019	2018
	HK$’000	HK$’000	HK$’000	HK$’000
		(Restated)		(Restated)
Within one year	3,127	3,210	3,045	3,148
In the second to fifth years, inclusive	3,380	269	3,085	251
	6,507	3,479
Less: Future finance charges	(377)	(80)
Present value of lease liabilities	6,130	3,399	6,130	3,399
Less: Amount due for settlement within
12 months (shown under current
liabilities)			(3,045)	(3,148)
Amount due for settlement after 12
months			3,085	251

At 31 December 2019, the average effective borrowing rate was 4 75% to 5 25% (2018: 4 75% to 5 25%) Interest rates are fixed at the contract dates and thus expose the Group to fair value interest rate risk

34. LOAN FROM A SHAREHOLDER

As at 31 December 2019, loan from a shareholder is advanced from Mr Zhang Rong and is unsecured, interest bearing at 3% and due for repayment on 1 January 2021

35. AMOUNT DUE TO A DIRECTOR

As at 31 December 2019, the amount is unsecured, interest-free and due for repayment on 1 January 2021

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Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

36. SHARE CAPITAL

				Number	of shares	of shares			Share	capital	capital
				2019			2018		2019		2018
									HK$’000		HK$’000
Authorised:
Ordinary shares of HK$0 10
(2018: HK$0 10) each
At the beginning and at the end
of the year			12,000,000,000		12,000,000,000				1,200,000		1,200,000
				Number	of shares				Share	capital
				2019			2018		2019		2018
									HK$’000		HK$’000
Issued and fully paid:
Ordinary shares of HK$0 10
(2018: HK$0 10) each
At the beginning of the year				5,712,151,908		5,712,151,908			571,215		571,215
Exercise of share options				10,008,000			—		1,001		—
At the end of the year				5,722,159,908		5,712,151,908			572,216		571,215

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maximise the return to the shareholders through the optimisation of the debt and equity balance

The Group sets the amount of capital in proportion to risk The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets In order to maintain or adjust the capital structure, the Group may adjust the payment of dividends, issue new shares, buy-back shares, raise new debts, redeem existing debts or sell assets to reduce debts

The Group monitors capital on the basis of the debt-to-adjusted capital ratio This ratio is calculated as net debt divided by adjusted capital Net debt is calculated as total debts less cash and cash equivalents Adjusted capital comprises all components of equity (i e share capital, share premium, non-controlling interests, retained profits and other reserves) and includes some forms of subordinated debts

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113

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

37. SHARE OPTION SCHEME

The Company operates a share option scheme (the “Scheme”) for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations Eligible participants of the Scheme include the Company’s executive and non-executive directors, full-time employees of the Group, advisers and consultants of the Group The Scheme became effective on 3 August 2012 and, unless otherwise cancelled or amended, will remain in force for 10 years from that date

The maximum number of shares which may be issued upon exercise of all options granted and yet to be granted under the Scheme is currently limited to 30% of the shares of the Company in issue at any time The total number of shares issued and to be issued upon exercise of the options granted and to be granted to each eligible participant in the Scheme in any 12-month period up to the date of the grant is limited to 1% of the aggregate number of issued shares of the Company at any time Any further grant of share options in excess of this limit is subject to shareholders’ approval in a general meeting

Share options granted to a director, chief executive or substantial shareholder of the Company, or to any of their associates, are subject to approval in advance by the independent non-executive directors In addition, any share options granted to a substantial shareholder or an independent non-executive director of the Company, or to any of their associates, in excess of 0 1% of the shares of the Company in issue at any time or with an aggregate value (based on the price of the Company’s shares at the date of the grant) in excess of HK$5 million, within any 12-month period, are subject to shareholders’ approval in advance in a general meeting

The offer of a grant of share options may be accepted within 21 days from the date of offer, upon payment of a nominal consideration of HK$1 in total by the grantee The exercise period of the share options granted is determinable by the directors at their discretion, and commences on the date upon which the options are deemed to be granted and accepted

The exercise price of share options is determinable by the directors, but may not be less than the higher of (i) the Stock Exchange closing price of the Company’s shares on the date of offer of the share options; and (ii) the average Stock Exchange closing price of the Company’s shares for the five trading days immediately preceding the date of offer

Share options do not confer rights on the holders to dividends or to vote at shareholders’ meetings

Details of the specific categories of options are as follows:

Date of grant	Vesting period	Exercise period	Exercise price
			HK$
11 April 2017	11 April 2017	11 April 2017–10 April 2027	0 153
27 September 2017	27 September 2017	27 September 2017–	0 130
		26 September 2027
21 June 2019	21 June 2019	21 June 2019-20 June 2029	0 100

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114

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

37. SHARE OPTION SCHEME (Continued)

For options granted on 11 April 2017, 27 September 2017 and 21 June 2019, if the options remain unexercised after a period of 10 years from the date of grant, the options expire Options are forfeited if the employee leaves the Group

Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:

	2019	2019	2018	2018
	Number of	Weighted	Number of	Weighted
	share	average	share	average
	options	exercise price	options	exercise price
		HK$		HK$
Outstanding at the beginning of the year	1,134,408,000	0.1414	1,140,912,000	0 1415
Granted during the year	217,056,000	0.1000	—	—
Exercised during the year	(10,008,000)	0.1000	—	—
Forfeited during the year	—	—	(6,504,000)	0 1477
Outstanding at the end of the year	1,341,456,000	0.1351	1,134,408,000	0 1414

The estimated fair values of the options granted on 21 June 2019 are approximately HK$9,627,000

These fair values were calculated using Binominal pricing model The inputs into the model are as follows:

	21 June
	2019
Share price at the date of grant	HK$0.090
Exercise price	HK$0.100
Expected volatility	61.94%
Expected life	10 years
Risk free rate	1.47%
Expected dividend yield	0%
Expected Early Exercise Multiple	2.2

Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous 10 years

Share options granted to consultants were incentives for helping the Group expand its business network, acquire and explore new business projects and opportunities The fair value of such benefit could not be estimated reliably and as a result, the fair value is measured by reference to the fair value of share options granted

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115

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

38. STATEMENT OF FINANCIAL POSITION OF THE COMPANY

		At		At		At
		31 December		31 December		1 January
		2019		2018		2018
		HK$’000		HK$’000		HK$’000
				(Restated)		(Restated)
NON-CURRENT ASSETS
Investments in subsidiaries		—		—		1,498
Right-of-use assets		4,848		—		—
Equity investments at fair value through
other comprehensive income		—		1,614		1,341
Total non-current assets		4,848		1,614		2,839
CURRENT ASSETS
Due from subsidiaries		248,767		270,214		285,696
Loan receivables		—		86		13,285
Prepayments, deposits and other
receivables		16,750		360		283
Cash and bank balances		321		1,203		20,161
Total current assets		265,838		271,863		319,425
CURRENT LIABILITIES
Other payables and accruals		5,225		5,846		1,823
Lease liabilities		2,275		—		—
Current tax liabilities		—		—		531
Total current liabilities		7,500		5,846		2,354
NET CURRENT ASSETS		258,338		266,017		317,071
Total assets less current liabilities		263,186		267,631		319,910
NON-CURRENT LIABILITIES
Lease liabilities		3,026		—		—
Due to a director		8,656		—		—
Total non-current liabilities		11,682		—		—
NET ASSETS		251,504		267,631		319,910
CAPITAL AND RESERVES
Share capital		572,216		571,215		571,215
Reserves		(320,712)		(303,584)		(251,305)
TOTAL EQUITY		251,504		267,631		319,910

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116

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

39. RESERVES

(a) Group

• (i) The amounts of the Group’s reserves and movements therein are presented in the consolidated statement of profit or loss and other comprehensive income and consolidated statement of changes in equity

(ii) Share premium account

Under the Companies Law of the Cayman Islands, the funds in the share premium account of the Company are distributable to the shareholders of the Company provided that immediately following the date on which the dividend is proposed to be distributed, the Company will be in a position to pay off its debts as they fall due in the ordinary course of business

(iii) Foreign currency translation reserve

The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations as well as the effective portion of any foreign exchange differences arising from hedges of the net investment in these foreign operations

(iv) The PRC reserve funds

The PRC reserve funds are reserves set aside in accordance with the PRC Companies Law or the Law of the PRC on Joint Ventures Using Chinese and Foreign Investment as applicable to the Group’s subsidiaries None of the Group’s PRC reserve funds as at 31 December 2019 and 2018 were distributable in the form of cash dividends

(v) Share-based payment reserve

The share-based payment reserve represents the fair value of the actual or estimated number of unexercised share options granted to directors, employees and consultants of the Group recognised in accordance with the accounting policy adopted for equity-settled share-based payments in note 3 to the consolidated financial statements

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117

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

39. RESERVES (Continued)

(b) Company

	Share	Share-based		Investment
	premium	payment	Accumulated	revaluation
	account	reserve	losses	reserve	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
At 1 January 2018 as restated	107,108	81,842	(440,255)	—	(251,305)
Loss for the year and
total comprehensive loss for the
year	—	—	(52,552)	273	(52,279)
Lapsed of share option	—	(592)	592	—	—
At 31 December 2018 and
1 January 2019 as restated	107,108	81,250	(492,215)	273	(303,584)
Loss for the year and total
comprehensive loss for the year	—	—	(26,141)	(614)	(26,755)
Disposal of equity investments
at fair value through other
comprehensive income	—	—	(341)	341	—
Equity-settled share-based
payment	—	9,627	—	—	9,627
Exercise of share options	443	(443)	—	—	—
At 31 December 2019	107,551	90,434	(518,697)	—	(320,712)

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118

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

40. INVESTMENTS IN SUBSIDIARIES

Particulars of the principal subsidiaries as at 31 December 2019 are as follows:

		Nominal value
	Place of	of issued and
	incorporation/	paid-up
	registration	capital/	Percentage of
	and	registered	ownership
Company name	operations	capital	interest	Principal activities
China Information	Hong Kong	HK$100	100%	Office management
Technology Development
(Hong Kong) Limited
Macro Systems Limited	Hong Kong	HK$1,050,000	84%	Provision of system
				integration and
				maintenance services
				in Hong Kong
Macro Systems	PRC	HK$1,300,000	84%	Provision of system
(Guangzhou) Co , Ltd **				integration and
				maintenance services
				in the PRC
DataCube Research	Hong Kong	HK$1	100%	Big data application
Centre Limited
Guangzhou Xinfeng	PRC	HK$101,400,000	100%	Assets acquisition,
Investment Consultancy				management and
Company Limited**				consultancy services
Global Shine	Hong Kong	HK$1	100%	Securities trading
Investment Limited
Value Creation Finance Limited	Hong Kong	HK$10,000	100%	Money lending
Guangzhou Deyong Technology	PRC	*	100%	Investment holding
Investment Co , Ltd **

The above list contains the particulars of subsidiaries which principally affected the results, assets or liabilities of the Group

• The amount of registered capital is RMB10 million and it is not yet injected

• ** Wholly-foreign-owned enterprises

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2019

119

Notes to the Consolidated Financial Statements

For the year ended 31 December 2019

41. CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES

The following table shows the Group’s changes in liabilities arising from financing activities during the year:

						Total
						liabilities
	Promissory			Loan	Amount	from
	note	Lease	Bank and	from a	due to a	financing
	payables	liabilities	other loans	shareholder	director	activities
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
At 1 January 2018, as restated	—	5,353	68,921	—	—	74,274
Changes in cash flows	—	(4,765)	(10,017)	—	—	(14,782)
Non-cash changes
— interest charged (restated)	—	227	—	—	—	227
— additions of lease liabilities	—	2,582	—	—	—	2,582
— disposal of subsidiaries	—	—	(3,456)	—	—	(3,456)
— exchange differences	—	2	(2,527)	—	—	(2,525)
At 31 December 2018 and
1 January 2019, as restated	—	3,399	52,921	—	—	56,320
Changes in cash flows	(11,186)	(4,276)	(12,275)	3,000	9,006	(15,731)
Non-cash changes
— interest charged	—	233	—	53	—	286
— additions of lease liabilities	—	6,780	—	—	—	6,780
— issuance of a promissory note	72,435	—	—	—	—	72,435
— imputed interest	2,934	—	—	—	—	2,934
— loss on early redemption	421	—	—	—	—	421
— exchange differences	(1,051)	(6)	(540)	—	—	(1,597)
At 31 December 2019	63,553	6,130	40,106	3,053	9,006	121,848

42. APPROVAL OF FINANCIAL STATEMENTS

These consolidated financial statements were approved and authorised for issue by the Board of Directors on 27 March 2020

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Five Year Financial Summary

31 December 2019

A summary of the results and of the assets, liabilities and non-controlling interests of the Group for the last five financial years, as extracted from the published annual report and audited financial statements is set out below:

				Year ended 31 December	Year ended 31 December	Year ended 31 December	Year ended 31 December	Year ended 31 December
		2019		2018		2017		2016		2015
		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000
				(Restated)
RESULTS
REVENUE		63,712		51,666		48,817		14,221		27,793
Loss before tax		(82,216)		(80,168)		(117,283)		(49,354)		(105,155)
Income tax credit/(expenses)		281		1,913		504		(661)		(531)
LOSS FOR THE YEAR		(81,935)		(78,255)		(116,779)		(50,015)		(105,686)
Attributable to:
Owners of the Company		(80,850)		(75,308)		(112,456)		(48,143)		(105,462)
Non-controlling interests		(1,085)		(2,947)		(4,323)		(1,872)		(224)
		(81,935)		(78,255)		(116,779)		(50,015)		(105,686)

ASSETS, LIABILITIES AND NON-CONTROLLING INTERESTS

				Year ended 31 December	Year ended 31 December	Year ended 31 December	Year ended 31 December	Year ended 31 December
		2019		2018		2017		2016		2015
		HK$’000		HK$’000		HK$’000		HK$’000		HK$’000
				(Restated)
TOTAL ASSETS		548,373		596,458		691,983		685,940		379,124
TOTAL LIABILITIES		(173,824)		(149,883)		(156,692)		(139,603)		(20,409)
NET ASSETS		374,549		446,575		535,291		546,337		358,715
Equity attributable to:
Owners of the Company		376,297		447,252		539,071		547,216		360,021
Non-controlling interests		(1,748)		(677)		(3,780)		(879)		(1,306)
		374,549		446,575		535,291		546,337		358,715

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Particulars of Property Interests

Particulars of property interests held by the Group as at 31 December 2019 are as follows:

		Attributable interest
Location	Tenure	of the Group
Investment properties
A composite building situated	Medium	100%
in No 123 Lu Jing Road,
Tianhe District,
Guangzhou City,
Guangdong Province,
the PRC

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