Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

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(Incorporated in the Cayman Islands with limited liability) (Stock Code: 8178)

2020 ANNUAL RESULTS ANNOUNCEMENT

The board (the “ Board ”) of directors (the “ Directors ”) of China Information Technology Development Limited (the “ Company ”) is pleased to announce the audited consolidated results of the Company and its subsidiaries for the year ended 31 December 2020. This announcement, containing the full text of the 2020 annual report of the Company, complies with the relevant requirements of the Rules Governing the Listing of Securities on the GEM of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) in relation to information to accompany preliminary announcement of annual results.

By order of the Board China Information Technology Development Limited Wong King Shiu, Daniel Chairman and Chief Executive Officer

Hong Kong, 26 March 2021

As at the date of this announcement, the Board comprises Mr. Wong King Shiu, Daniel (Chairman and Chief Executive Officer) and Mr. Wong Kui Shing, Danny as executive Directors; Mr. Hung Hing Man, Mr. Wong Hoi Kuen and Dr. Chen Shengrong as independent non-executive Directors.

This announcement, for which the Directors of the Company collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the GEM of the Stock Exchange 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 announcement 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 announcement misleading.

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

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 (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 Listed Company Information” 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 2020

	Page
CORPORATE INFORMATION	3
CHAIRMAN’S STATEMENT	5
MANAGEMENT DISCUSSION AND ANALYSIS	9
BIOGRAPHICAL INFORMATION OF DIRECTORS AND SENIOR MANAGEMENT	19
DIRECTORS’ REPORT	22
CORPORATE GOVERNANCE REPORT	33
INDEPENDENT AUDITOR’S REPORT	45
AUDITED FINANCIAL STATEMENTS
Consolidated:
Statement of Profit or Loss	49
Statement of Profit or Loss and Other Comprehensive Income	50
Statement of Financial Position	51
Statement of Changes in Equity	53
Statement of Cash Flows	54
Notes to the Consolidated Financial Statements	56
FIVE YEAR FINANCIAL SUMMARY	121
PARTICULARS OF PROPERTY INTERESTS	122

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Corporate Information

EXECUTIVE DIRECTORS

Mr Wong King Shiu, Daniel (Chairman and Chief Executive Officer) Mr Wong Kui Shing, Danny Mr Chan Kai Leung (Resigned on 5 January 2021)

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 King Shiu, Daniel (Appointed on 12 November 2020) Mr Chang Ki Sum Clark Mr Wong Kui Shing, Danny (Resigned on 12 November 2020)

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

Suntera (Cayman) Limited Suite 3204, Unit 2A Block 3, Building D P O Box 1586 Gardenia Court Camana Bay, Grand Cayman KY1-1100, Cayman Islands

AUDIT COMMITTEE

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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

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 Shops 1712-1716,17th Floor Hopewell Centre 183 Queen’s Road East, Hong Kong

GEM STOCK CODE

8178

COMPANY WEBSITE

www citd com hk

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

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 2020

MARKET OVERVIEW

2020 was a turbulent year with novel coronavirus (“COVID-19”) swept in all over the world The global economy was driven to recession when there were stringent lockdowns and travel restrictions in various countries around the world especially in the first half of 2020 The global GDP in 2020 had dropped for 4 36% to USD83,845 billion from USD87,552 billion in 2019 Thousands of businesses have closed their doors, leaving workers unemployed It was no exception to China and Hong Kong that the economies were battered China’s economy shrank by 6 8% in the first quarter of 2020 as COVID-19 hit, with exports and manufacturing plunging In Hong Kong, the real GDP declined by 6 1% when compared to 2019 The unemployment rate increased across almost all the major economic sectors, with a more distinct increase observed in the retail, accommodation and food services sector, from 6 3% in September to November 2020 to 6 6% in October to December 2020 Some companies had become more prudent on their cost control and delayed their projects especially in the first half of 2020 In addition to the impact of COVID-19, the geopolitical tension especially between China and the United States (the “US”) had created instability to the macro-economy, as well as to the development of the IT industry Some countries like the US and Australia had blocked telecom companies from using technological gears from China in next-generation 5G mobile networks, which may illustrate the difficulties faced by Chinese tech companies to enter the overseas markets

Thanks to the containment and precautionary measures alongside the expectation that COVID-19 vaccine will launch soon, some countries like China seemed to have dug its way out of the COVID-19 turmoil in the second half of 2020 According to Chinese government statistics, the Chinese economy expanded 2 3% in 2020 compared to 2019 Whilst in Hong Kong, the decline in real Y-O-Y GDP of 2020 fourth quarter narrowed slightly to 3 0% from 3 6% in the preceding quarter

Instability creates risks as well as opportunities Economies and personal lives have been becoming digital and more automated these years Governments have been supportive to the continuous development of technology industry In the 2020 Policy Address, with the vision to build Hong Kong as an international innovation and technology hub, the Hong Kong Government announced in December 2020, the “Smart City Blueprint for Hong Kong 2 0”, setting out 76 initiatives under six smart areas (i e “Smart Mobility”, “Smart Living”, “Smart Environment”, “Smart People”, “Smart Government” and “Smart Economy”), with a view to addressing the challenges of city management and improving people’s livelihood through innovation and technology The Hong Kong Government planned to increase the grant ceiling under the Technology Voucher Programme to HK$600,000 and raise the Government’s funding ratio to 75% in the 2020–21 Budget to support the industry development In China, Ministry of Industry and Information Technology said in February 2020 that it would support the application of the internet, big data, cloud computing and artificial intelligence (“AI”) in epidemic monitoring, tracing of virus sources, epidemic prevention and treatment, and resource allocation “New Infrastructure”, a concept introduced at China’s Central Economic Work Conference in December 2018, had gained more importance in 2020, especially during the pandemic

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 5 ANNUAL REPORT 2020

Chairman’s Statement

The unprecedent outbreak of COVID-19 had further accelerated the growth momentum of the technology industry The geographical lockdowns and the “work-from-home” arrangements had elevated the demand for virtual desktop infrastructures (“VDI”) To stay the business afloat and act quickly amid of the pandemic, some companies took the chance to enhance or introduce the use of technology in their business, which can further reduce their administration and operational costs while increase productivity Cloud platform for video and audio-conferencing applications for example, were becoming prominent during the pandemic COVID-19 not only reshaped our lives, but also the business model and had somehow made technology a competitive differentiator for businesses

During 2020, the Group has been developing steadily, preparing ourselves to face the challenges ahead while grabbing the golden opportunities for the long term growth of the Group The Group had continued to dedicate its effort in developing innovative and advanced technology especially in AI field while cautiously control and allocate our resources and took appropriate corporate actions according to the market conditions

In 2020, our Group had entered into agreements with various corporates in different industries DataCube Research Centre Limited (DataCube Research Centre or “DataCube”), a subsidiary of the Company, had cooperated with a subsidiary of a listed company in Hong Kong, which is one of the leading energy management contract providers in Hong Kong, for an integrated platform providing solutions ranging from technologies and product customization, investment, development and implementation, to operation and maintenance in the field of renewable energy, energy saving and management We also had negotiations with property developer for various project ideas and collaborations to improve their operation and efficiency For instance, we started the discussion to install a smart system with machine models to automatically analyze the possibility of unethical order stealing of the property agents in the company to help prevent unjust enrichment Through these co-operations, the Group could apply our unique AI Book, AI Manager and BI Canvas technology and services tailor-made to our clients of different industries with the help of our top-notch data science expert term

Apart from that, our subsidiary, Macro Systems Limited (“Macro Systems”) persistently delivered secured and reliable service to our clients with agility During the year, Macro Systems had been awarded IBM PartnerWorld Program “Silver Partner”, VMware Partner Connect Program — Advanced Partner, Nutanix Partner Program “Cloud Champion” and “Master Partner” — The highest tier of partner etc, which are solid testimonies of the high quality service of Macro Systems

Besides, as the demand for VDI shoot up caused by the social distancing measures and work-from-home arrangement, Macro Systems gained more clients, especially from the banking, finance and insurance industries By deploying VDI solutions, we help our clients to enhance security level, prevent data leakage, improve resource efficiency and business mobility 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 The Group was able to further establish our reputation and extend our business footprints in a wider spectrum of clienteles

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Chairman’s Statement

During the year, to allow our customers to experience the business agility we bring, the Group continued to set up a brand new, scenario driven business agility zone at our solution centre in Tsimshatsui This experience zone allows clients to have a first-angle experience of how front line staff can work securely and smartly and perform seamless and agile work from office to anywhere by virtual workspace We believe the experience zone can successfully strengthen clients’ confidence in deploying virtual workspace solution and facilitate the related business project progress

Sustainable business development also lies on a healthy capital structure During the year, we proposed the capital reorganisation (the “Capital Reorganisation”) which involved the (i) share consolidation of which every twenty four issued and unissued existing shares of par value of HK$0 10 each in the share capital of the Company will be consolidated into one consolidated share of par value of HK$2 40 each in the share capital of the Company, (ii) the capital reduction from HK$2 40 to HK$0 01 by cancelling the paid-up capital of the Company to the extent of HK$2 39 on each of the then issued consolidated shares and (iii) the share sub-division, of which each of the authorised but unissued consolidated shares of par value of HK$2 40 each will be sub-divided into two hundred and forty new shares of par value of HK$0 01 each The board lot size for trading in Shares on the Stock Exchange shall also be changed from 24,000 existing shares to 10,000 consolidated shares conditional upon the share consolidation becoming effective The Company believes that it will help maintain the transaction amount for each board lot at a reasonable level and attract more investors, provide flexibility for equity fund raising of the Company in the future and eliminate a substantial amount of the Company’s accumulated losses, hence, allowing greater flexibility for the Company to pay dividends in the future The proposed Capital Reorganisation has been approved by the shareholders of the Company (the “Shareholders”) on 15 January 2021 Further stated in the announcement dated 24 February 2021, the petition hearing for confirmation of capital reduction and share sub-division was held on 23 March 2021 (Cayman Islands time) at the Grand Court of the Cayman Islands The capital reduction and share sub-division are effective from 25 March 2021

PROSPECTS

The impacts of COVID-19 to the world are double-edged On one hand, the restrictive social distancing and quarantine measures cut the physical connections between countries and people Business could not be performed in the way it was Nonetheless, with technologies like cloud platform, Internet of Things (“IOT”), AI and 5G, the boundaries set to curb the pandemic had help created a world with no boundaries People and businesses from anywhere are connected with just a click on the internet It is not impossible to imagine that the reliance of technology shall increase in our post-pandemic “New Normal” lives

Looking ahead, the Company believes that in short term, the economy may remain volatile With the COVID-19 vaccine rolling out, the economy shall gradually recover in long run In addition to the supportive policies from the Hong Kong and Chinese governments, the development of the technology industry is more than positive in the coming years In 2021, we have also kick-started negotiations regarding projects with public transportation organizations The Company shall continue to stay alert to the market conditions and strengthen and build up or core businesses through Macro Systems and DataCube while look for potential cooperation and projects in Hong Kong and China especially in Greater Bay Area

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 7 ANNUAL REPORT 2020

Chairman’s Statement

ACKNOWLEDGMENTS

On behalf of the Board and the management of the Group, I would like to extend heartfelt gratitude to all our dedicated employees for their valuable contributions and commitment for excellent services, and to suppliers, business partners, investors, customers and the Shareholders for their continuous support during the past year In the years to come, the Group shall persistently strive for sustainable growth for the benefit of the Group and our Shareholders

Wong King Shiu, Daniel

Chairman and Chief Executive Officer China Information Technology Development Limited

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Management Discussion and Analysis

BUSINESS REVIEW

CITD Group

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 2020, 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$78 2 million for investment in Macro China Holding Limited, business development under 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$9 8 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

Facing the adversity in 2020, the Group had continued to provide affordable but high quality services to our clients while maintaining a sustainable and healthy development of the Group

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 9 ANNUAL REPORT 2020

Management Discussion and Analysis

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”) The Disposal had then been approved by the shareholders of the Company at the extraordinary general meeting held on 17 October 2019 Yet, as a result of the default by the Purchaser whereby the completion was not taken place before the long stop date of 31 October 2019 (the “Long Stop Date”), 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$14,666,000) paid by the Purchaser to the Vendor has been forfeited in favour of the Vendor (the “Deposit”) 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 In 2019, the management of the Company had considered that the deposit of RMB13,000,000 to be recognised as other payable instead of income for a year for prudence sake As at 31 December 2020, the Company had recognized the Deposit forfeited as other income of the Group

For the year 2020, the Group recorded a revenue of approximately HK$45,694,000, representing a decrease of 28 3% from approximately HK$63,712,000 of last year This was mainly attributable to the decrease in number of IT projects due to the outbreak of COVID-19 Affected by the outbreak of COVID-19, the Company had experienced slight decrease in number of projects as the clients had been more prudent on their spending on technology services or had delayed their project plans Yet, during the COVID-19 pandemic, many enterprises have planned to shift from the traditional business model to online eCommerce model especially with the emerging mobile and AI technologies The reliance and demand for these smart technologies rocketed during 2020 The Group remains optimistic on the future development of the industry notably during the post-pandemic economic recovery

For identification purposes only

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Management Discussion and Analysis

MACRO SYSTEMS

Established in 1997, Macro Systems Limited is a reputable company in providing diverse IT platform, digital solution and business consulting service Macro Systems provides enterprises with the end-to-end product set including the comprehensive IT platform, from infrastructure, Cloud-ready to the Hybrid cloud platform, Macro Systems offers a stable and reliable foundation to support clients’ business development Macro Systems also maintains clients’ workspace securely by the user-friendly VDI solution Holding a vision of “We Make IT Smart”, Macro Systems assists worldwide corporate clients to thrive for business success and perform digital transformation by its comprehensive solution and service portfolio Over the past 24 years, Macro Systems is committed to serving corporate clients with excellent quality which is well recognized by the ISO/IEC 27001 international standard and more than 120 global certificates and partnerships

During the year, Macro Systems allied with various top-class industry elites to continuously push the enterprise market’s digital transformation in Hong Kong Macro Systems has also received certification from Nutanix as their “Nutanix Certified Sales Expert” and gained “Master Partner”, the highest tier of partnership in the Nutanix Partner Program Besides, Macro Systems is awarded “Gold Partner” in Sangfor Technology Channel Partner, IBM PartnerWorld Program “Silver Partner” as well as “VMware Partner Connect Program — Advanced Partner” These awards and partnerships issued by various world-class partners are solid affirmation of our high quality services

In September 2020, we participated as a silver sponsor and a virtual exhibitor in the annual largest exhibition of the technology industry, the Cloud Expo Asia HK 2020 to increase brand awareness, hence further expand our business footprints We showcased our Generation-Z Workspace Solution in the exhibition and introduced how it builds an intelligent workspace to provide a seamless and smart work from home experience

Amid the COVID-19 outbreak, Macro Systems transformed our traditional workshop to online webinars In 2020, we had organized various Webinars together with reputable vendors like Nutanix and Veeam to promote VDI solution as well as AI technology and algorithm To stay connected with our valued customers and strengthen the Company’s reputation with the aim to share our knowledge especially in this difficult time and furthermore, to promote our webinar‘s content to a wider segment, we have rebuilt our YouTube Channel “Macro Channel” In December 2020, we also started our eStore to allow our clients to stay in touch with Macro Systems and understand our products and services conveniently with trials and promotions provided By leveraging various technologies and channels, we believe that these transformed marketing activities can benefit our reputation and sales

During the year, Macro Systems also worked with vendors to launch flash sales programme to help clients quickly deploy suitable remote work solutions In February 2020, Macro Systems partnered with Nutanix to launch the VDI solution sales programme We also partnered with Sangfor to launch virtual desktop assess (VDA) solution sales programme which further expedited the remote work solution deployment by virtual apps Out of our existing virtual workspace solution, Macro Systems partnered with Hitachi Vantara to launch a sales programme for Hitachi Content Platform (HCP) product The cooperation and promotion of associated solutions of digital workspace allowed Macro Systems to extend its business network with different partners who can create synergy and positive impact on our business and brand name in the sector during this dynamic market period

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Management Discussion and Analysis

During the year, we continued to utilise our scenario driven business agility zone at our solution centre in Tsimshatsui to allow our customers to experience the business agility that we bring It allows clients to have a first-angle experience of how work can be performed in a seamless and agile way from office to anywhere by virtual workspace We believe the experience zone can successfully strengthen clients’ confidence in deploying virtual workspace solution and facilitate the related business project progress

DATACUBE

During the year, DataCube Research Centre, with its unique advanced core technologies of AI Book, AI Manager and BI Canvas, has continued to promote data modelling, big data analysis as well as developing related technologies to expedite the adoption and drive the evolution of AI 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 and intelligent manner

In 2020, with the aim to deliver “Affordable AI for every business”, DataCube had utilized our AI Book and BI Canvas to assist our clients in various industries like “Smart Retail”, “Smart Monitoring” and “Smart IoT” Through integration of business data, DataCube helps companies address specific business problems in their industries and enhance corporate risk identification and prediction capabilities through data science, thereby enhancing management capabilities

During the year, DataCube had cooperated with a subsidiary of a listed company in Hong Kong (“Counterparty”, together with DataCube, the “Parties”), which is one of the leading energy management contract providers in Hong Kong, for an integrated platform providing solutions ranging from technologies and product customization, investment, development and implementation, to operation and maintenance in the field of renewable energy, energy saving and management (“Cooperation”) With the excellent data science products and the blooming cooperation ecology of DataCube, the Parties shall cooperate closely in product research and development and market exploration in areas including Smart City, predictive analysis development and healthcare and epidemic prevention products etc

Together with our knowledge in data science and our team of seasoned and professional data scientists and engineers, we believe that not only can the Cooperation bring synergy effect and create business values for both Parties, it allows us to reinforce our technology and knowledge in smart building management system We believe that the Cooperation enables us to establish our competitive edge and reputation in smart building management which is increasingly important in epidemic prevention and public health Whilst developing the smart building epidemic prevention solution in the above Cooperation, as an Advanced Technology Partner of Huawei Cloud, DataCube shall also introduce the same to the Smart Campus solution of Huawei Cloud With the vision to jointly promote the concept of “Epidemic Prevention Building” to Greater China and international markets with our business partners, we shall continue to contribute the value of data science in the establishment of Smart City as well as in healthcare and epidemic prevention areas

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Management Discussion and Analysis

Meanwhile, the Group also had negotiations with property developer for various project ideas and collaborations to improve their operation and efficiency The Group had entered into another pilot project with a corporation which is engaged in the development and sale of properties, property investment, hotel operations and other property development related services globally Pursuant to the project, the Group shall assist to install a smart system with machine models to automatically analyze the possibility of unethical order stealing of the property agents It helps to save the unnecessary cost for commission to freeriding property agents and hence enhance efficiency for reviewing orders and management for potential risk of unjust enrichments

Through these cooperation, our client spectrum is further broadened, covering public transportation and energy services companies to retail and healthcare companies as well as financial institutes and banks etc By understanding more of the needs of different industries, our professional team of data scientists shall continue to develop tailored products and systems that cater to various industries and businesses, providing affordable yet secure and advanced technology to strengthen the business of our clients

During the year, Macro Systems has contributed a revenue of approximately HK$38,508,000 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 Systems and DataCube

FUTURE PROSPECT

Despite the lingering pessimistic sentiments since 2020, the future of the economy and the industry remains positive Robust growth in different technology trends such as cloud technology and AI is expected This is especially the case when the reliance on technology boosted during the COVID-19 pandemic in our lives and businesses The social distancing and lockdown measures turbocharged the growth of online sales for example, created the demand for advanced AI data analysis to allocate resources and spot on target customers more effectively The Company believes that with our team of experienced data scientists and technicians, as well as our innovative technology development, AI Book, AI Manager and BI Canvas specifically, the Group shall gain more business opportunities and benefit from this market trend During the early 2021, we have continuously negotiated with corporations of various industries, including public transportation organization for business opportunities Meanwhile, the demand for remote desktop service rises 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 Group

Nevertheless, concerns over online security issues arise when our lives are shifted online The Group understands that cybersecurity is important, if not essential to our clients Not only does our Group aim to provide innovative and comprehensive products and service to our clients, we work hard to provide our clients with the data security In the years to come, our Group shall continue to bring advanced yet secured IT services to our clients so that they can experience agility in their business without hassle

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Management Discussion and Analysis

With the effort we paid for healthy capital structure and steady business development of the Group in 2020, in early 2021, the Group has started to explore through Macro Systems for various cooperation opportunities including the potential launch of software platform to diversify our product variety as well as our income source Meanwhile, in February 2021, our Group has entered into a strategic cooperation agreement with a renowned nationwide corporate specialized in software development, value-added operations, system integration and cloud operation services By integrating our AI technologies and platform and the products of the counterparty, we shall assist them to deliver efficient but economical AI+HR service to their customers It is believed that through these cooperation, we can discover new clients and markets The Group shall keep alert on the market conditions and trends and look for potential projects, business opportunities and/or collaborations especially on cloud or related IT services for the long term development of the Group

FINANCIAL REVIEW

Revenue

The Group’s revenue for 2020 amounted to approximately HK$45,694,000, decreased by 28 3% from approximately HK$63,712,000 in 2019 The decrease in revenue is mainly attributable to the slowing down of projects caused by the outbreak of COVID-19 pandemic and decrease in loan interest income due to the recovery of some debts during the year

Cost of sales and services

The Group had a total cost of sales and services of approximately HK$29,270,000 in 2020, which decreased by 28 1%, compared with approximately HK$40,731,000 in 2019 The decrease is in line with the decrease in number of IT projects during the year

Gross profit

The gross profit of the Group in 2020 amounted to approximately HK$16,424,000 which decreased by approximately HK$6,557,000, compared with approximately HK$22,981,000 in 2019 The decrease is mainly due to the decrease in loan interest income and the slowing down of projects for the year

Other income and gains

During the financial year ended 31 December 2020, the Group generated other income and gains of approximately HK$18,185,000 (2019: approximately HK$654,000) The increase in other income is mainly due to (i) the government grants under the Employment Support Scheme of approximately HK$2,453,000, and (ii) the recognition of forfeited deposit of approximately HK$14,666,000 as the purchaser of Joyunited Investments Limited failed to complete the Disposal

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Management Discussion and Analysis

Selling and distribution expenses

The Group’s selling and distribution expenses in 2020 amounted to approximately HK$672,000, which decreased by 85 9%, compared with approximately HK$4,760,000 in 2019 The significant decrease was mainly due to the temporary closure of offices in the PRC caused by the COVID-19 pandemic and the control of expenditure during the year

Administrative expenses

Administrative expenses of the Group in 2020 were approximately HK$34,304,000, decreased by 17 8%, compared to approximately HK$41,757,000 in 2019 The decrease is mainly due to reduction of unnecessary operation costs and control of expenditure during the year

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

As at 31 December 2020, the Group held an investment portfolio comprising of marketable securities that are listed on the Stock Exchange The financial loss from the portfolio amounted to approximately HK$2,795,000 (2019: gain of approximately HK$5,703,000)

Change in fair value of investment properties

As at 31 December 2020, the fair value of investment properties remains unchanged (2019: decrease of approximately HK$33,196,000)

Finance costs

Finance costs of the Group for 2020 were approximately HK$11,843,000, an increase of approximately HK$5,286,000, comparing to approximately HK$6,557,000 in 2019 The increase is mainly due to the interest on promissory notes for acquiring 19% equity interest of Guangzhou Dehuang Investment Company Limited

Loss attributable to owners

The Group’s loss attributable to owners of the Company was approximately HK$9,758,000 for 2020 as compared to approximately HK$80,850,000 in 2019 The decrease in loss was mainly due to (i) recognition of forfeited deposit of approximately HK$14,666,000 for the year; (ii) the loss on initial recognition of loan receivables of approximately HK$15,249,000 in 2019; and (iii) the decrease in fair value of investment properties of approximately HK$33,196,000 in 2019

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Management Discussion and Analysis

FINANCIAL POSITION

Liquidity and financial resource

As at 31 December 2020, cash and bank balances held by the Group increased from approximately HK$4,959,000 as of 31 December 2019 to approximately HK$7,904,000

As at 31 December 2020, the Group’s total borrowings amounted approximately HK$104,230,000 (2019: approximately HK$106,712,000) The gearing ratio (calculated as total borrowings over total equity) of the Group was 0 25 (2019: 0 28)

For the year ended 31 December 2020, the Group had capital expenditure of approximately HK$362,000 (2019: approximately HK$3,175,000) for addition of property, plant and equipment, and nil for further construction works of investment properties (2019: approximately HK$295,000 for addition of investment properties by acquisition of a subsidiary and further construction works)

Capital structure

As at 31 December 2020, there are a total of 5,744,191,908 issued shares of the Company of par value of HK$0 10 each

Subsequently on 15 January 2021, an ordinary resolution was passed on share consolidation (“Share Consolidation”), pursuant to it, every 24 issued and unissued existing shares of par value HK$0 10 each in the share capital of the Company will be consolidated into 1 consolidated share of par value HK$2 40 each in the share capital of the Company and the total number of consolidated shares in the issued share capital of the Company immediately following the Share Consolidation would be rounded down to a whole number by cancelling any fraction in the issued share capital of the Company arising from the Share Consolidation 5,504,850,579 shares was cancelled by way of Share Consolidation

As at the date of this report, there are a total of 239,341,329 issued shares of the Company of par value of HK$0 01 each

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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

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 75 employees in the Group as of 31 December 2020 (2019: 66 employees) Total expenses on employee benefits amounted to approximately HK$21,095,000 of which HK$745,000 is related to equity-settled share-based payment for the year ended 31 December 2020 (2019: approximately HK$23,361,000 of which HK$2,664,000 is related to equity-settled share-based payment) 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 2020, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities

SUBSEQUENT EVENTS

Capital Reorganization and Change in Board Lot Size

On 10 December 2020, the Company proposed to implement Capital Reorganisation and change in board lot size The Capital Reorganisation involves share consolidation, capital reduction and share sub-division, details of which are as follows:

Share Consolidation (“Share Consolidation”)

Every twenty four (24) issued and unissued the ordinary share(s) of par value of HK$0 10 each in the share capital of the Company prior to the Capital Reorganisation becoming effective (the “Existing Share(s)”) in the share capital of the Company will be consolidated into one (1) consolidated share of par value of HK$2 40 (the “Consolidated Share(s)) each in the share capital of the Company and the total number of Consolidated Shares in the issued share capital of the Company immediately following the Share Consolidation will be rounded down to a whole number by cancelling any fraction in the issued share capital of the Company arising from the Share Consolidation

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Management Discussion and Analysis

Capital Reduction (“Capital Reduction”)

The Capital Reduction will be implemented upon the Share Consolidation becoming effective, pursuant to which the par value of each of the then issued Consolidated Shares will be reduced from HK$2 40 to HK$0 01 by cancelling the paid-up capital of the Company to the extent of HK$2 39 on each of the then issued Consolidated Shares

Share Sub-division (“Share Sub-division”)

Immediately following the Capital Reduction, each of the authorised but unissued Consolidated Shares of par value of HK$2 40 each will be sub-divided into two hundred and forty (240) New Shares of par value of HK$0 01 each

The Capital Reorganization has been approved by the Shareholders on 15 January 2021 and the Share Consolidation is effective on 19 January 2021 The petition hearing for confirmation of Capital Reduction and Share Sub-division was held on 23 March 2021 (Cayman Islands time) The capital reduction and share sub-division have been effective on 25 March 2021

Change in Board Lot Size

The Board proposed to change the board lot size for trading in Shares on the Stock Exchange from 24,000 Existing Shares to 10,000 Consolidated Shares conditional upon the Share Consolidation becoming effective Upon the Capital Reduction and Share Sub-division becoming effective, the board lot size for trading in Shares will remain at 10,000 new shares

The capital reorganisation and the change in board lot size would help maintain the transaction amount for each board lot at a reasonable level and attract more investors, provide flexibility for equity fund raising of the Company in the future and eliminate a substantial amount of the Company’s accumulated losses, hence, allowing greater flexibility for the Company to pay dividends in the future Accordingly, the Directors consider that the capital reorganisation and change in board lot size are in the interests of the Company and the Shareholders as a whole Details are set forth in the announcements dated 10 December 2020, 24 February 2021 and the circular dated 23 December 2020

Save as disclosed, there was no other subsequent event after the year ended 31 December 2020

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Biographical Information of Directors and Senior Management

EXECUTIVE DIRECTORS

MR. WONG KING SHIU, DANIEL

Mr WONG King Shiu, Daniel, aged 61, 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 is also the authorised representative (the “Authorised Representative”) of the Company pursuant to Rule 5 24 of the GEM Listing Rules of Stock Exchange and the process agent of the Company (the “Process Agent”) under Part 16 of the Companies Ordinance, Chapter 622 of the laws of Hong Kong with effect from 12 November 2020

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

Mr WONG Kui Shing, Danny, aged 61, holds a Bachelor of Arts degree from the University of Hong Kong He ceased to be the Authorised Representative and Process Agent with effect from 12 November 2020

He is currently an executive director and chief executive officer of BCI Group Holdings Limited (Stock Code: 8412) since 16 February 2021, a non-executive director of TFG International Group Limited (Stock Code: 542) He is also an independent non-executive director of Far East Holdings International Limited (Stock Code: 36) He was an executive director of GREATER BAY AREA DYNAMIC GROWTH HOLDING LIMITED (Stock Code: 1189) from 20 September 2019 to 25 August 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), of which the listing of shares has been suspended since 17 August 2020, 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) From 27 September 2017 to 2 March 2020, he was an independent non-executive director of Tech Pro Technology Development Limited, of which the listing of shares had been cancelled under Rule 6 01A on 2 March 2020 In addition, Mr Wong was a former executive director of SMI Holdings Group Limited, of which the listing of shares has been cancelled on 14 December 2020 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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Biographical Information of Directors and Senior Management

INDEPENDENT NON-EXECUTIVE DIRECTORS

MR. HUNG HING MAN

Mr HUNG Hing Man, aged 50, is the chairman of audit committee (the “Audit Committee”) and nomination committee (the “Nomination Committee”) of the Company He 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 joined the Group on 24 April 2015

Mr Hung is also an independent non-executive director of Heng Tai Consumables Group Limited (Stock Code: 197) since 20 February 2017 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

He was an independent non-executive Director of REXLot Holdings Limited (Stock Code: 555) (“REXLot”) from 1 January 2019 to 26 November 2020 On 20 August 2020, a winding up order (the “Winding Up Order”) was made by the High Court of Hong Kong against REXLot upon a winding up petition filed on 9 March 2020 in respect of a debt of HK$770,609,876 28 owning under convertible bonds issued by REXLot Liquidators were appointed to REXLot pursuant to an order made by the High Court of Hong Kong dated 27 August 2020 On 18 September 2020, an appeal was lodged against the Winding Up Order with the Court of Appeal of Hong Kong

REXLot is a company incorporated in Bermuda with limited liability and, together with its subsidiaries, are principally engaged in lottery system and game development business and distribution and marketing of lottery products in China The securities of REXLot are listed on the Main Board of the Stock Exchange (Stock Code: 555) but have been suspended since 1 April 2019 Mr Hung has confirmed that he was not one of the respondents of such petition nor a party of such winding up proceedings and am not aware of any actual or potential claim that has been or will be made against him because of the Winding Up Order

MR. WONG HOI KUEN

Mr WONG Hoi Kuen, aged 60, is the chairman of the remuneration committee (the “Remuneration Committee”) of the Company and the member of the Audit Committee and Nomination Committee He 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 joined the Group on 16 August 2017

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 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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Biographical Information of Directors and Senior Management

He was an independent non-executive director of REXLot Holdings Limited (Stock Code: 555) from 29 June 2018 to 27 November 2020 On 20 August 2020, a winding up order (the “Winding Up Order”) was made by the High Court of Hong Kong against REXLot upon a winding up petition filed on 9 March 2020 in respect of a debt of HK$770,609,876 28 owning under convertible bonds issued by REXLot Liquidators were appointed to REXLot pursuant to an order made by the High Court of Hong Kong dated 27 August 2020 On 18 September 2020, an appeal was lodged against the Winding Up Order with the Court of Appeal of Hong Kong

REXLot is a company incorporated in Bermuda with limited liability and, together with its subsidiaries, are principally engaged in lottery system and game development business and distribution and marketing of lottery products in China The securities of REXLot are listed on the Main Board of the Stock Exchange (Stock Code: 555) but have been suspended since 1 April 2019 Mr Wong has confirmed that he was not one of the respondents of such petition nor a party of such winding up proceedings and am not aware of any actual or potential claim that has been or will be made against him because of the Winding Up Order

DR. CHEN SHENGRONG

Dr CHEN Shengrong, aged 39, is a member of the Audit Committee, Remuneration Committee and Nomination Committee She 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

Mr CHANG Ki Sum Clark, is a member of The Hong Kong Institute of Certified Public Accountants Mr Chang has over 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 Mr Chang is responsible for company secretarial and overall financial management matters of the Group

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 21 ANNUAL REPORT 2020

Directors’ Report

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 2020

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 9 to 18 and the Chairman’s Statement as set out on pages 5 to 8 of this report Such discussion forms part of this Directors’ Report

RESULTS AND DIVIDENDS

The Group’s loss for the year ended 31 December 2020 and the state of affairs of the Group at that date are set out in the consolidated financial statements on pages 49 to 52

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 2020

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 Directors’ Report, the Company has not entered into any equity-linked agreement for the year ended 31 December 2020

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Directors’ Report

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 2020, 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 45 4% of the total sales for the year and sales to the largest customer included therein amounted to 14 6% Purchases from the Group’s five largest suppliers accounted for 80 7% of the total purchases for the year ended 31 December 2020 and purchase from the largest supplier included therein amounted to 30 6%

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 23 ANNUAL REPORT 2020

Directors’ Report

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 (Chairman and Chief Executive Officer)

Mr Wong Kui Shing, Danny

Mr Chan Kai Leung (resigned on 5 January 2021)

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 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 and the senior management of the Group are set out on pages 19 to 21 of the annual report

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Directors’ Report

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 25 ANNUAL REPORT 2020

Directors’ Report

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

At 31 December 2020, 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 03% 20,000,000 — 0 35% 10,008,000 — 0 17%

(a) The percentage is calculated based on the total number of ordinary shares of the Company in issue as at 31 December 2020, which was 5,744,191,908 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 Divisions 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 2020 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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Directors’ Report

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

On 6 April 2020, the Company granted a total of 42,192,000 Options with rights to subscribe 42,192,000 ordinary shares of HK$0 1 each in the share capital of the Company under the Share Option Scheme

As at 31 December 2020, details for Options granted and remained effective are as follows:-

Batch of Grant Name Title Exercise price Date of Grant (Note) (HK$)	Number of share options
	Outstanding as at 1 January 2020 Lapsed during the period Cancelled during the period Exercised during the period Outstanding as at 31 December 2020
DIRECTORS A WONG Kui Shing, Danny Executive Director 0 153 11/4/2017 A CHEN Shengrong Independent non-executive Director (“INED”) 0 153 11/4/2017 A HUNG Hing Man INED 0 153 11/4/2017 B WONG King Shiu, Daniel Executive Director 0 130 27/9/2017 B CHAN Kai Leung Executive Director 0 130 27/9/2017 B WONG Hoi Kuen INED 0 130 27/9/2017 FORMER DIRECTORS A TSE Chi Wai Former Executive Director (Currently a consultant of Company) (“Consultant”) 0 153 11/4/2017 A Takashi TOGO Former Executive Director (Currently a Consultant) 0 153 11/4/2017 A WU Jingjing Former Executive Director (Currently a Vice President of the Business Development department) 0 153 11/4/2017 A WONG Chi Yung Former Non-Executive Director (Currently a Consultant) 0 153 11/4/2017	5,688,000 (5,688,000) — — — 2,016,000 (2,016,000) — — — 2,016,000 (2,016,000) — — — 57,000,000 (57,000,000) — — — 5,016,000 (5,016,000) — — — 2,016,000 (2,016,000) — — — 57,000,000 — (57,000,000) — — 57,000,000 (57,000,000) — — — 2,016,000 (2,016,000) — — — 33,000,000 (33,000,000) — — —
Sub-total:	222,768,000 (165,768,000) (57,000,000) — —

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Directors’ Report

Batch of Grant Name Title Exercise price Date of Grant (Note) (HK$)	Number of share options
	Outstanding as at 1 January 2020 Lapsed during the period Cancelled during the period Exercised during the period Outstanding as at 31 December 2020
EMPLOYEES A 0 153 11/4/2017 B 0 130 27/9/2017 C 0 100 21/6/2019 D 0 100 6/4/2020	232,968,000 — (232,968,000) — — 334,680,000 (80,568,000) (254,112,000) — — 60,048,000 (10,008,000) (50,040,000) — — 22,176,000 — (20,160,000) (2,016,000) —
Sub-total:	649,872,000 (90,576,000) (557,280,000) (2,016,000) —
CONSULTANTS A Star Rich Consultants Limited Business Consultant 0 153 11/4/2017 A LAM Wai Hung Business Consultant 0 153 11/4/2017 A LI Hi Choi Consultant — Marketing 0 153 11/4/2017 A WONG Ka Ching Consultant — Corporate Finance Advisory 0 153 11/4/2017 A TAM Tsz Yeung, Alan Consultant — Software Development 0 153 11/4/2017 B Gain Rich Consultants Limited Business Consultant 0 130 27/9/2017 B CHOI Kam Yan Simon Consultant — Investment 0 130 27/9/2017 B CHENG Shing Tak Consultant — Big Data Business 0 130 27/9/2017 C CHAN Wing Chang Business Consultant (Japan) 0 100 21/6/2019 C LEUNG Po Ting, Doris Business Consultant (Japan) 0 100 21/6/2019 C CHAN King Wai Business Consultant (Japan) 0 100 21/6/2019 C Strategist Digital Limited Consultant — Marketing 0 100 21/6/2019 C LAM Wai Hung Business Consultant 0 100 21/6/2019 D HUANG Guozhen Consultant — AI Development 0 100 6/4/2020	52,992,000 — (52,992,000) — — 30,000,000 — (30,000,000) — — 30,000,000 — (30,000,000) — — 30,000,000 — (30,000,000) — — 30,000,000 — (30,000,000) — — 57,000,000 (57,000,000) — — — 57,000,000 (57,000,000) — — — 57,000,000 (57,000,000) — — — 30,000,000 — (30,000,000) — — 30,000,000 — (30,000,000) — — 30,000,000 — (30,000,000) — — 30,000,000 — (30,000,000) — — 27,000,000 — (27,000,000) — — 20,016,000 — — (20,016,000) —
Sub-total:	511,008,000 (171,000,000) (319,992,000) (20,016,000) —
TOTAL:	1,383,648,000 (427,344,000) (934,272,000) (22,032,000) —

Note:

A: The Options were granted on 11 April 2017 under Scheme Mandate Limit refreshed on 30 June 2016 with no vesting period The exercise period is from 11 April 2017 to 10 April 2027 The closing price per Share immediately before the date of grant on 11 April 2017 was HK$0 145
B: The Options were granted on 27 September 2017 under Scheme Mandate Limit refreshed on 30 June 2017 with no vesting period The exercise period is from 27 September 2017 to 26 September 2027 The closing price per Share immediately before the date of grant on 27 September 2017 was HK$0 130

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Directors’ Report

C: The Options were granted on 21 June 2019 under Scheme Mandate Limit refreshed on 28 June 2018 with no vesting period The exercise period is from 21 June 2019 to 20 June 2029 The closing price per Share immediately before the date of grant on 21 June 2019 was HK$0 091
D: The Options were granted on 6 April 2020 under Scheme Mandate Limit refreshed on 28 June 2018 with no vesting period The exercise period is from 6 April 2020 to 5 April 2030 The closing price per Share immediately before the date of grant on 6 April 2020 was HK$0 071

On 7 April 2020, an employee exercised 2,016,000 Options at the exercise price of HK$0 1 The grant date of the Options was 6 April 2020 The weighted average closing price of shares immediately before the date of exercise by the employee was HK$0 076 per Share

On 20 April 2020, a consultant, Huang Guozhen, exercised 20,016,000 Options at the exercise price of HK$0 1 The grant date of the Options was 6 April 2020 The weighted average closing price of shares immediately before the date of exercise by the consultant was HK$0 076 per Share

The Board, especially the executive Directors of the Company are responsible for overseeing the operation of the Company as well as providing leadership for the Company to put forward the business strategy and work towards the business goals of the Company Meanwhile, the independent non-executive Directors provide independent opinions to the Board as appropriate

The employees of the Company are responsible for the daily operations of Company’s business in various aspects, including but not limited to financial, compliance, human resources, public relations of the Company Some of the employees are responsible for different projects and businesses of the Company, including but not limited to projects in China and Japan

The consultants are engaged for providing advice on various company operations, including but not limited to marketing, webcast business in Japan and other IT developments Some of them shall introduce potential investors and projects to the Company As the IT and AI market trends are ever-changing, the consultants shall provide us the updated advice and/or bring potential projects for the benefits of sustainable development of the Company

Options are granted to them as they are engaged with only options as service fees Some of the Options to them were granted at premium of the closing prices of Shares on the respective date of grant The Company believes that this provides motivations for the consultants to create value for the Company without affecting the operating cost of the Company The number of Options granted to each consultant is determined with reference to the market and the potential benefits and/or income they may bring to the Company with the projects they involved

Save as disclosed above, none of the outstanding Options were exercised or cancelled or lapsed during the year ended 31 December 2020

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Directors’ Report

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

At 31 December 2020, 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			861,824,000	15 0 %
				(Registered
				Shareholder)
	Through controlled			45,408,000	0 79%
		corporation_(Note b)_	(Beneficial Owner)
Discover Wide Investments Limited	Beneficially owner			403,971,449	7 03%
(Note c)				(Registered
				Shareholder)

Note:

(a) The percentage is calculated based on the total number of ordinary shares of the Company in issue as at 31 December 2020, which was 5,744,191,908 Shares

(b) The 45,408,000 Shares are held by Corporate Advisory Limited (“Corporate Advisory”), which is wholly-owned by Mr Zhang Rong Pursuant to the Division 7 and 8 of Part XV of the SFO, Mr Zhang is deemed to have an interest in all shares in which Corporate Advisory has, or deemed to have an interest

(c) Mr Wong Kui Shing, Danny, the executive Director, was deemed to be interested in the 403,971,449 Shares by virtue of his controlling interests in Discover Wide

Save as disclosed above, as at 31 December 2020, 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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Directors’ Report

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 2021

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

SUBSEQUENT EVENTS

Subsequent events are set out in the “Management Discussion and Analysis” on pages 17 to 18 in this annual report

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 31 ANNUAL REPORT 2020

Directors’ Report

DIRECTORS’ INTEREST IN COMPETING BUSINESS

During the year ended 31 December 2020 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 interest	Nature of interest
Wong King Shiu, Daniel	Huisheng International		Money Lending Business	Independent non-executive
		Holdings Limited			director of Huisheng
		(“Huisheng”),
		Stock Code: 1340
Wong Kui Shing, Danny	TFG International Group		Money Lending Business	Non-executive director of
		Limited (“TFG”),			TFG
		Stock Code: 542

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

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 33 to 44

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 26 March 2021

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

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 2020, 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 King Shiu, Daniel served as both the Chairman and the Chief Executive Officer during the year 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.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, 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

BOARD OF DIRECTORS AND ITS RESPONSIBILITIES

The Board, which currently comprises five Directors, including two 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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Corporate Governance Report

The composition of the Board, details of backgrounds and qualifications of all Directors are set out in the “Corporate Information” and “Biographical Information 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 48 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 2020

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 During the year ended 31 December 2020, all Directors participated in continuing professional development regarding their duties and responsibilities as a director of a listed company which included reading materials and/or attending training courses 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 by rotation and re-election in accordance with the Articles of Association and the Code

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Corporate Governance Report

BOARD MEETING

During the year of 2020, the board held totally 16 board meetings and 1 general meeting 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	16/16	1/1
Mr Wong Kui Shing, Danny	12/16	0/1
Mr Chan Kai Leung_(Resigned on 5 January 2021)_	16/16	1/1
	Attendance/	Attendance/
	Number of	Number of
	board	general
Name of Director	meetings held	meeting held
Independent non-executive Directors:
Mr Hung Hing Man	16/16	1/1
Mr Wong Hoi Kuen	16/16	1/1
Dr Chen Shengrong	13/16	1/1

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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Corporate Governance Report

DIRECTORS’ AND OFFICERS’ INSURANCE

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

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 and make recommendation to the Board;
(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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Corporate Governance Report

During the year of 2020, 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; and
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 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 has the discretion to nominate and recommend any person, as it considers appropriate to the Board for further approval

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

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 2020, 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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Corporate Governance Report

During the year of 2020, 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; and
made recommendation for the appointment of Mr Wong King Shiu, Daniel, the executive Director as the Authorised Representative and the Process Agent with effect from 12 November 2020, based on the business operations and conditions of the Company

AUDIT COMMITTEE

The Company established an 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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Corporate Governance Report

During the year of 2020, 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 2019;
reviewed the first quarterly report and results announcement of the Company for the three months ended 31 March 2020;
reviewed the interim report and the interim results announcement of the Company for the six months ended 30 June 2020;
reviewed the third quarterly report and results announcement of the Company for the nine months ended 30 September 2020;
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; and
considered the re-election of auditors of the Company and discussing with the auditors about the audit plan

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

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 2020 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 2020, 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 48

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 2020, 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	780
Non-audit services	0

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 41 ANNUAL REPORT 2020

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 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

COMPANY SECRETARY

As at 31 December 2020, 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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 42 ANNUAL REPORT 2020

Corporate Governance 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

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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Corporate Governance Report

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 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 2020

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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Independent Auditor’s Report

==> picture [160 x 49] intentionally omitted <==

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 49 to 120, which comprise the consolidated statement of financial position as at 31 December 2020, 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 2020, 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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

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$317,098,000 as at 31 December 2020 is 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

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$105,614,000 as at 31 December 2020 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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Independent Auditor’s Report

Equity investments at fair value through other comprehensive income

Refer to Note 20 to the consolidated financial statements

The Group measured its equity investments at fair value though other comprehensive income 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 equity investments at fair value through other comprehensive income of HK$50,846,000 as at 31 December 2020 and the fair value gain of HK$39,053,000 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 client;
Obtaining the external valuation reports 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 equity investments at fair value through other comprehensive income 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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Independent Auditor’s Report

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, 26 March 2021

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Consolidated Statement of Profit or Loss

For the year ended 31 December 2020

		2020	2019
	Notes	HK$’000	HK$’000
INTEREST REVENUE		7,186	11,177
OTHER REVENUE		38,508	52,535
TOTAL REVENUE	6&7	45,694	63,712
Cost of sales and services		(29,270)	(40,731)
Gross profit		16,424	22,981
Bank and other interest income		6,831	13
Other income and gains	8	18,185	654
Selling and distribution expenses		(672)	(4,760)
Administrative expenses		(34,304)	(41,757)
Loss on extension/initial recognition of loan receivables	23(c)&(d)	(7,481)	(15,249)
Gain/(loss) on extension/early redemption of promissory
notes	32	5,721	(421)
Equity-settled share-based payment expenses		(1,416)	(9,627)
Fair value (loss)/gain on investments at fair value
through profit or loss		(2,795)	5,703
Change in fair value of investment properties		—	(33,196)
Finance costs	9	(11,843)	(6,557)
LOSS BEFORE TAX	10	(11,350)	(82,216)
Income tax credit	12	403	281
LOSS FOR THE YEAR		(10,947)	(81,935)

Attributable to:
Owners of the Company		(9,758)	(80,850)
Non-controlling interests		(1,189)	(1,085)
		(10,947)	(81,935)

LOSS PER SHARE	14		(Restated)
Basic		HK(4.08) cents	HK(33 94) cents

Diluted		HK(4.08) cents	HK(33 94) cents

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 December 2020

	2020	2019
	HK$’000	HK$’000
LOSS FOR THE YEAR	(10,947)	(81,935)

OTHER COMPREHENSIVE INCOME/(LOSS)
Items that may be reclassified to profit or loss:
Exchange differences on translation of
foreign operations	18,162	(5,571)
Items that will not be reclassified to profit or loss:
Change in fair value of equity investments at fair value
through other comprehensive income	39,053	4,852
Income tax on items that will not be reclassified to profit
or loss	(8,850)	—
OTHER COMPREHENSIVE INCOME/(LOSS)
FOR THE YEAR, NET OF INCOME TAX	48,365	(719)
TOTAL COMPREHENSIVE INCOME/(LOSS)
FOR THE YEAR	37,418	(82,654)

Attributable to:
Owners of the Company	38,665	(81,583)
Non-controlling interests	(1,247)	(1,071)
	37,418	(82,654)

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Consolidated Statement of Financial Position

At 31 December 2020

		*2020*	2019
	Notes	*HK$’000*	HK$’000
*NON-CURRENT ASSETS*
Investment properties	15	*317,098*	298,672
Property, plant and equipment	16	*4,141*	5,601
Goodwill	17	*3,865*	3,865
Right-of-use assets	18	*3,410*	5,670
Other intangible assets	19	*5,137*	5,920
Equity investments at fair value through other comprehensive
income	20	*50,846*	9,012
Prepayments, deposits and other receivables	21	*1,007*	1,053
Deferred tax assets	22	*3,949*	3,525
Loan receivables	23	*56,408*	45,849
Total non-current assets		*445,861*	379,167
*CURRENT ASSETS*
Inventories	24	*389*	385
Trade receivables	25	*2,796*	9,778
Contract assets	26	—	186
Prepayments, deposits and other receivables	21	*26,792*	37,692
Loan receivables	23	*49,206*	70,728
Investments at fair value through
profit or loss	27	*27,118*	45,478
Bank and cash balances	28	*7,904*	4,959
Total current assets		*114,205*	169,206
*CURRENT LIABILITIES*
Trade payables	29	*4,275*	9,169
Contract liabilities	26	*1,318*	4,053
Other payables and accruals	30	*17,882*	38,591
Current tax liabilities		85	163
Bank and other loans	31	*30,205*	40,106
Promissory note payables	32	—	63,553
Lease liabilities	33	*2,752*	3,045
Total current liabilities		*56,517*	158,680
*NET CURRENT ASSETS*		*57,688*	10,526

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Consolidated Statement of Financial Position (Continued)

At 31 December 2020

		*2020*	2019
	Notes	*HK$’000*	HK$’000
TOTAL ASSETS LESS CURRENT LIABILITIES		*503,549*	389,693
*NON-CURRENT LIABILITIES*
Promissory note payables	32	*70,882*	—
Lease liabilities	33	*1,007*	3,085
Loan from a shareholder	34	*3,143*	3,053
Amount due to a director	35	*3,576*	9,006
Deferred tax liabilities	22	*9,355*	—
Total non-current liabilities		*87,963*	15,144
*NET ASSETS*		*415,586*	374,549

*CAPITAL AND RESERVES*
Share capital	36	*574,419*	572,216
Reserves	39	*(154,608)*	(195,919)
Equity attributable to owners of the Company		*419,811*	376,297
Non-controlling interests		*(4,225)*	(1,748)
*TOTAL EQUITY*		*415,586*	374,549

Approved by the Board of Directors on 26 March 2021

Wong King Shiu, Daniel Director

Wong Kui Shing, Danny

Director

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Consolidated Statement of Changes in Equity

For the year ended 31 December 2020

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)(i)) (note 39(a)(iv)) (note 39(a)(ii)) (note 39(a)(iii))
At 1 January 2019 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 and 1 January 2020 Loss for the year Other comprehensive income for the year: — Exchange differences on translation of foreign operations — change in fair value of equity investments at fair value through other comprehensive income — Income tax on items that will not be reclassified to profit or loss	572,216 107,551 90,434 (15,053) — (375,164)* (3,687) 376,297 (1,748) 374,549 — — — — — (9,758) — (9,758) (1,189) (10,947) — — — 18,220 — — — 18,220 (58) 18,162 — — — — — — 39,053 39,053 — 39,053 — — — — — — (8,850) (8,850) — (8,850)**
Total comprehensive income for the year Equity-settled share-based payment 37 Exercise of share options Cancellation of share option Disposal of partial interest in a subsidiary	— — — 18,220 — (9,758) 30,203 38,665 (1,247) 37,418 — — 1,416 — — — — 1,416 — 1,416 2,203 740 (740) — — — — 2,203 — 2,203 — — (91,110) — — 91,110 — — — — — — — — — 1,230 — 1,230 (1,230) —
At 31 December 2020	574,419 108,291 — 3,167 — (292,582) 26,516 419,811* (4,225) 415,586*

Note:

These reserve accounts comprise the consolidated reserve of approximately HK$(154,608,000) (2019: approximately HK$(195,919,000)) in the consolidated statement of financial position

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Consolidated Statement of Cash Flows

For the year ended 31 December 2020

	2020	2019
	HK$’000	HK$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax	(11,350)	(82,216)
Adjustments for:
Equity-settled share-base payment expenses	1,416	9,627
Finance costs	11,843	6,557
Bank and other interest income	(6,831)	(2,146)
Change in fair value of investment properties	—	33,196
Gain on disposal of property, plant and equipment	—	(27)
Written off of property, plant and equipment	35	145
Fair value loss/(gain) on investments at fair value through
profit or loss	2,795	(5,703)
Dividends received from investments at fair value through
profit or loss	(164)	(243)
Depreciation of property, plant and equipment	1,818	1,479
Depreciation of right-of-use assets	2,958	4,600
Amortisation of other intangible assets	783	782
Loss on extension/initial recognition of loan receivables	7,481	15,249
(Gain)/loss on extension/early redemption of promissory notes	(5,721)	421
Operating profit/(loss) before working capital change	5,063	(18,279)
Change in inventories	(4)	(111)
Change in trade receivables	6,982	(6,562)
Change in contract assets	186	(172)
Change in loan receivables	21,522	56,638
Change in prepayments, deposits and other receivables	(17,642)	(14,116)
Change in investments at fair value through profit or loss	15,565	(1,763)
Change in trade payables	(4,894)	6,823
Change in other payables and accruals	(19,328)	(46,184)
Change in contract liabilities	(2,735)	(963)
Cash generated from/(used in) operations	4,715	(24,689)
Tax paid	(99)	—
Loan interest paid	(2,552)	(3,337)
Net cash generated from/(used in) operating activities	2,064	(28,026)

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Consolidated Statement of Cash Flows (Continued)

For the year ended 31 December 2020

	2020	2019
	HK$’000	HK$’000
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment	(362)	(3,175)
Proceeds from disposal of property, plant and equipment	—	34
Payments for construction works of investment properties	—	(295)
Proceeds from disposal of equity investment at fair value through
other comprehensive income	—	22,372
Proceeds from disposal of an associate that was disposed in
previous year	13,888	25,750
Refundable deposit for acquisition of a company received	14,700	—
Bank interest received	111	13
Dividends received from investments at fair value through
profit or loss	164	243
Loan to Dehuang	(8,500)	—
Net cash generated from investing activities	20,001	44,942
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of lease liabilities	(3,070)	(4,043)
Lease interest paid	(255)	(233)
Proceeds from issue of shares	2,203	1,001
Repayment of promissory notes	—	(11,186)
Repayment of amount advance from a director	(8,280)	—
Amount advance from a shareholder and a director	2,850	12,006
Repayment of bank and other loans	(11,739)	(12,275)
Net cash used in financing activities	(18,291)	(14,730)
NET INCREASE IN CASH AND CASH EQUIVALENTS	3,774	2,186
Cash and cash equivalents at beginning of year	4,708	4,407
Effect of foreign exchange rate changes	(829)	(1,885)
CASH AND CASH EQUIVALENTS AT END OF YEAR	7,653	4,708

ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS
Bank and cash balances other than time deposits	7,653	4,708
Time deposits	251	251
Cash and cash equivalents as stated in the consolidated statement of
financial position	7,904	4,959
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	7,653	4,708

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020 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

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 requirements under 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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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:

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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 consolidated 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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 and the PRC 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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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

(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 2020, if the share prices of the investments increase/decrease by 10%, loss after tax for the year would have been HK$2,264,000 (2019: HK$3,750,000) lower/higher, arising as a result of the fair value gain/loss of the investments

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 75 ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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

The Group uses two categories for non-trade loan receivables which reflect their credit risk and how the loan loss provision is determined for each of the categories In calculating the expected credit loss rates, the Group considers historical loss rates for each category and adjusts for forward looking data

Category	Definition	Loss provision
Performing	Low risk of default and strong	12 month expected losses
	capacity to pay
Non-performing	Significant increase in credit	Lifetime expected losses
	risk

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

5. FINANCIAL RISK MANAGEMENT (Continued)

(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 2020
Trade payables	4,275	—	—
Other payables and accruals	17,882	—	—
Bank and other loans	30,205	—	—
Promissory note payables	—	88,304	—
Loan from a shareholder	—	3,233	—
Amount due to a director	—	3,576	—
	52,362	95,113	—

At 31 December 2019
Trade payables	9,169	—	—
Other payables and accruals	38,591	—	—
Bank and other loans	40,106	—	—
Promissory note payables	69,329	—	—
Loan from a shareholder	—	3,143	—
Amount due to a director	—	9,006	—
	157,195	12,149	—

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

5. FINANCIAL RISK MANAGEMENT (Continued)

(e) Interest rate risk

At 31 December 2020, the Group’s bank deposits of approximately HK$251,000 (2019: approximately HK$251,000), other loan of approximately HK$10,015,000 (2019: approximately HK$11,581,000), loan from a shareholder of approximately HK$3,143,000 (2019: HK$3,053,000) and promissory note payables of HK$70,882,000 (2019: HK$63,553,000) bear interests at fixed interest rates and therefore are subject to fair value interest rate risks

At 31 December 2020, the Group’s exposure to interest-rate risk arises from its bank balances of approximately HK$7,653,000 (2019: approximately HK$4,708,000) and bank loan of approximately HK$20,190,000 (2019: approximately HK$28,525,000) These bank balances and bank loan bear interests at variable rates varied with the then prevailing market condition

At 31 December 2020, 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$97,000 (2019: approximately HK$138,000) lower (2019: 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$63,000 (2019: approximately HK$119,000) higher (2019: higher), arising mainly as a result of higher interest expenses on bank loans

(f) Categories of financial instruments

	2020	2019
	HK$’000	HK$’000
Financial assets:
Equity investments at fair value through other
comprehensive income	50,846	9,012
Investments at fair value through profit or loss —
Mandatorily measured	27,118	45,478
Financial assets at amortised cost (including bank and
cash balances)	142,953	168,778

Financial liabilities:
Financial liabilities at amortised costs	129,963	163,478

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020
Recurring fair value
measurements:
Investments at fair value
through profit or loss
—Listed equity securities
in Hong Kong	27,118	—	—	27,118
Equity investments at fair
value through other
comprehensive income
— Private equity
investment	—	—	50,846	50,846
Investment properties
Commercial — PRC	—	—	317,098	317,098
Total recurring fair value
measurement	27,118	—	367,944	395,062

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

5. FINANCIAL RISK MANAGEMENT (Continued)

(g) Fair values (Continued)

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

*Disclosures of level in fair value*	*hierarchy*(	Continued)	Continued)
		Fair 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 atfair 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

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

At 31 December 2020

		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	5,593	9,012	298,672	313,277
Total gains recognised in
— consolidated profit or loss	4	—	—	4
— other comprehensive income	—	39,053	—	39,053
Disposal	(5,597)	—	—	(5,597)
Exchange realignment	—	2,781	18,426	21,207
At end of year	—	50,846	317,098	367,944

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 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)

(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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020

					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	RMB30,000 per	Increase	317,098
		approach		square meter
			Market price of	RMB32,000 per	Increase
			commercial	square meter
			Market price of	RMB190,000 per	Increase
			carpark	unit
			Unexpended	RMB10,892,000	Decrease
			construction cost
Private equity investments	(i)	Investment	Capitalization rate	6 5%	Decrease	50,846
classified as equity		method (for
investments at fair		properties)	Monthly market rent	RMB28 per square	Increase
value through other				meter
comprehensive income			Monthly rental	RMB37–78 per	Increase
			income	square meter
	(ii) Direct		Market price	RMB1,200 per	Increase
		comparison		square meter
		method (for
		land)
	(iii) Discounted		Discount rate	11 46%	Decrease
		cash flow (for
		financial assets
		and liabilities
		at amortised
		costs)

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 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			Monthly rental	RMB37–43 per	Increase
			income	square meter
	(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 cash		Rate of return	2 31%	Increase	5,593
through profit or loss		flow

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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

6. OPERATING SEGMENT INFORMATION

The Group has three reportable segments as follows:

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

	IT solutions and	IT solutions and				Securities	Securities
	maintenance		Money	lending		investments		Total
	2020	2019	2020		2019	2020	2019	2020	2019
	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Segment revenue:
Sales to external customers	38,508	54,668	7,186		9,044	—	—	45,694	63,712

Segment (loss)/profit	(8,296)	(26,296)	493		458	(2,757)	5,927	(10,560)	(19,911)
Reconciliation:
Bank and other interest income								6,831	13
Change in fair value of investment properties								—	(33,196)
Corporate and other unallocated expenses and gains								4,222	(22,565)
Finance costs								(11,843)	(6,557)
Loss before tax								(11,350)	(82,216)

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

6. OPERATING SEGMENT INFORMATION (Continued)

	IT solutions and	IT solutions and				Securities	Securities
	maintenance		Money	lending		investments		Total
	2020	2019	2020		2019	2020	2019	2020	2019
	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Segment assets	126,954	89,791	49,823		71,352	27,184	39,947	203,961	201,090
Reconciliation:
Corporate and other unallocated assets								356,105	347,283
Total assets								560,066	548,373

Segment liabilities	(90,382)	(80,422)	(163)		(226)	(10,015)	(11,581)	(100,560)	(92,229)
Reconciliation:
Corporate and other unallocated liabilities								(43,920)	(81,595)
Total liabilities								(144,480)	(173,824)

Other segment information:
Depreciation on:
Segment assets	836	1,444	142		145	—	—	978	1,589
Corporate and other unallocated assets								3,798	4,490
								4,776	6,079

Amortisation of other intangible assets on:
Segment assets	783	782	—		—	—	—	783	782

Income tax credit								403	281
Capital expenditure on:
Segment assets								217	2,007
Corporate and other unallocated assets								145	1,464
								362	3,471

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

6. OPERATING SEGMENT INFORMATION (Continued)

Geographical information

	Revenue		Non-current	assets
	2020	2019	2020	2019
	HK$’000	HK$’000	HK$’000	HK$’000
Hong Kong	45,232	61,131	15,983	20,345
PRC except Hong Kong	462	2,581	318,675	300,424
Consolidated total	45,694	63,712	334,658	320,769

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 transaction with one external customer of the IT Solution and maintenance segment during the year ended 31 December 2020 (2019: nil) 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:

		2020	2019
		HK$’000	HK$’000
Customer	1*	6,444	N/A

Revenue from customer did not exceed 10% of the total revenue during the year ended 31 December 2019

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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:

	2020	2019
	HK$’000	HK$’000
Sale of computer hardware and software	30,982	40,780
Provision of services	7,526	11,755
Revenue from contracts with customers	38,508	52,535
Loan interest income	7,186	11,177
Total revenue	45,694	63,712

Disaggregation of revenue from contracts with customers:
Geographical markets
Hong Kong	38,048	52,086
PRC except Hong Kong	460	449
Total	38,508	52,535

Major products/services
Sale of computer hardware and software	30,982	40,780
Provision of technical support and maintenance services	7,526	11,755
Total	38,508	52,535

Timing of revenue recognition
At a point in time	30,982	40,780
Over time	7,526	11,755
Total	38,508	52,535

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

8. OTHER INCOME AND GAINS

		2020	2019
	Notes	HK$’000	HK$’000
Dividend income		164	243
Government grant	(i)	2,453	—
Recognition of forfeited deposit	(ii)	14,666	—
Gain on disposal of property, plant and equipment		—	27
Net foreign exchange gains		387	—
Others		515	384
		18,185	654

Notes:

(i) During the year, the Group received government grants of approximately HK$2,453,000 under the Employment Support Scheme provided by the Hong Kong government
(ii) On 2 August 2019, the Group and Winner Sino Corporate Development Limited (the “Purchaser”) and the Purchaser’s guarantor entered into sale and purchase agreement (the “Agreement”), pursuant to which the Group has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase 100% of the issued share capital of Joyunited Investments Limited (the “Target Company”), an indirect wholly-owned subsidiary of the Company, and sale loan at a consideration of RMB260,000,000 (equivalent to approximately HK$295,874,000) in cash

The completion has not been taken place before 31 October 2019 (the “Long Stop Date”), no such later Long Stop Date can be agreed by the Purchaser and the Group The directors of the Company are of the view that as a result of the default by the Purchaser, the Purchaser 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”) During the year ended 31 December 2020, the directors of the Company confirmed that in accordance with the terms of the Agreement, the deposit of RMB13,000,000 (equivalent to approximately HK$14,666,000) paid by the Purchaser to the Group has been forfeited in favour of the Group

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED 89 ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

9. FINANCE COSTS

An analysis of finance costs is as follows:

	2020	2019
	HK$’000	HK$’000
Interest on other loans	1,274	1,486
Interest on bank loans	1,368	1,904
Lease interest	255	233
Imputed interest on promissory notes	8,946	2,934
	11,843	6,557

10. LOSS BEFORE TAX

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

	2020	2019
	HK$’000	HK$’000
Cost of inventories sold	24,514	36,037
Cost of services provided	4,756	4,694
Depreciation of property, plant and equipment	1,818	1,479
Depreciation of right-of-use assets	2,958	4,600
Amortisation of other intangible assets	783	782
Expenses related to short-term leases	250	211
Auditors’ remuneration	780	680
Employee benefit expense (including directors’ remuneration —
note 11):
Salaries, allowances and benefits in kind	19,299	19,372
Pension schemes contribution	1,051	1,325
Equity-settled share-based payment expenses	745	2,664

	21,095	23,361
Equity-settled share-based payment to consultants	671	6,963
Written off of property, plant and equipment	35	145
Foreign exchange differences, net	(387)	141
Gain on disposal of property, plant and equipment	—	(27)

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2020
Executive directors:
Mr Wong King Shiu, Daniel		160	840	18	1,018
Mr Wong Kui Shing, Danny		160	—	3	163
Mr Chan Kai Leung	(ii)	160	958	18	1,136
		480	1,798	39	2,317
Independent non-executive
directors:
Dr Chen Shengrong		160	—	—	160
Mr Hung Hing Man		160	—	—	160
Mr Wong Hoi Kuen		160	—	—	160
		480	—	—	480
Total		960	1,798	39	2,797

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2019
Executive directors:
Mr Wong King Shiu, Daniel		160	840	18	1,018
Mr Tse Chi Wai	(i)	80	423	9	512
Mr Takashi Togo	(i)	80	120	—	200
Mr Wong Kui Shing, Danny		160	—	18	178
Mr Chan Kai Leung	(ii)	160	984	18	1,162
		640	2,367	63	3,070
Non-Executive director:
Mr Wong Chi Yung	(i)	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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

11. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS (Continued)

(a) Directors’ emoluments (Continued)

Notes:

(i) Retired on 28 June 2019

(ii) Resigned on 5 January 2021

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 one (2019: two) directors whose emoluments are reflected in the analysis presented above The emoluments of the remaining four (2019: three) individuals are set out below:

	2020	2019
	HK$’000	HK$’000
Salaries, allowances and benefits in kind	4,174	2,954
Pension schemes contribution	72	54
	4,246	3,008

Their emoluments were within the following band:

	Number of individuals
	2020	2019
HK$Nil — HK$1,000,000	—	2
HK$1,000,001 — HK$1,500,000	4	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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

12. INCOME TAX CREDIT

	2020	2019
	HK$’000	HK$’000
Current tax — Hong Kong	21	19
Current tax — PRC	—	100
Deferred tax credit_(note 22)_	(424)	(400)
	(403)	(281)

Hong Kong Profits Tax has been provided at a rate of 16 5% on the estimated assessable profit for the year ended 31 December 2020 (2019: 16 5%)

For the year ended 31 December 2020, 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 2019

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:

	2020	2019
	HK$’000	HK$’000
Loss before tax	(11,350)	(82,216)
Tax calculated at domestic tax rates applicable to profit or loss
in the respective countries	(2,676)	(19,244)
Tax effect of income that is not taxable	(4,236)	—
Tax effect of expenses that are not deductible	3,673	10,544
Tax effect of temporary differences not recognised	506	8,395
Tax effect of tax losses not recognised	2,838	966
Tax effect of utilisation of tax losses not previously recognised	(446)	(883)
Income tax on concessionary rate_(note)_	(42)	(39)
One-off tax reduction	(20)	(20)
Tax credit for the year	(403)	(281)

Note: For the year of assessment 2020/21 and 2019/20, 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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

13. DIVIDEND

The directors of the Company did not recommend the payment of any dividend for the years ended 31 December 2020 and 2019

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:

	2020	2019
	HK$’000	HK$’000
Loss for the year attributable to owners of the Company	(9,758)	(80,850)

	2020	2019
Weighted average number of ordinary shares for basic and
diluted loss per share (as adjusted to reflect the share
consolidation on 19 January 2021)	239,068,411	238,203,976

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 2020 and 2019

15. INVESTMENT PROPERTIES

	2020	2019
	HK$’000	HK$’000
At 1 January	298,672	336,971
Additions	—	295
Fair value loss	—	(33,196)
Exchange differences	18,426	(5,398)
At 31 December	317,098	298,672

Investment properties were revalued at 31 December 2020 and 2019 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 2020, the carrying amount of investment properties of approximately HK$317,098,000 (2019: approximately HK$298,672,000) pledged as security for the Group’s bank loans amounted to approximately HK$20,190,000 (2019: approximately HK$28,525,000)

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

16. PROPERTY, PLANT AND EQUIPMENT

		Furniture,
	Leasehold	fixtures and
	improvements	equipment	Motor vehicles	Total
	HK$’000	HK$’000	HK$’000	HK$’000
COST:
At 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 and 1 January
2020	2,364	2,784	3,458	8,606
Exchange realignment	—	44	26	70
Additions	—	362	—	362
Written off	—	(348)	—	(348)
At 31 December 2020	2,364	2,842	3,484	8,690
ACCUMULATED DEPRECIATION AND
IMPAIRMENT LOSS:
At 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 and 1 January
2020	417	958	1,630	3,005
Exchange realignment	—	16	23	39
Provided during the year	564	580	674	1,818
Written off	—	(313)	—	(313)
At 31 December 2020	981	1,241	2,327	4,549
CARRYING AMOUNTS:
At 31 December 2020	1,383	1,601	1,157	4,141

At 31 December 2019	1,947	1,826	1,828	5,601

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

17. GOODWILL

	2020	2019
	HK$’000	HK$’000
Cost
At 1 January and 31 December	3,865	3,865

Carrying amount:
At 31 December	3,865	3,865

	2020	2019
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 14 5% (2019: approximately 18 7%) 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% (2019: 3%) annual growth rate

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

18. RIGHT-OF-USE ASSETS

Disclosures of lease-related items:

	2020	2019
	HK$’000	HK$’000
At 31 December:
Right-of-use assets
— Land and buildings	3,410	5,670
The maturity analysis, based on undiscounted cash flows, of the Group’s lease liabilities is as follows:
— Less than 1 year	2,881	3,127
— Between 1 and 2 years	990	2,403
— Between 2 and 5 years	34	977
	3,905	6,507
For the year ended 31 December:
Depreciation charge of right-of-use assets
— Land and buildings	2,958	4,600
Lease interests	255	233
Expenses related to short-term leases	250	211
Total cash outflow for leases	3,575	4,487
Additions to right-of-use assets	715	6,780

Lease commitments of short-term leases	98	30

The Group leases various land and buildings Lease agreements are typically made for fixed periods of 1 to 3 years (2019: 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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

19. OTHER INTANGIBLE ASSETS

		Money
	Customer	lending
	relationships	licence	Total
	HK$’000	HK$’000	HK$’000
	(note (a))	(note (b))
COST:
At 1 January 2019, 31 December 2019, 1 January
2020 and 31 December 2020	7,828	440	8,268
ACCUMULATED AMORTISATION AND
IMPAIRMENT LOSS:
At 1 January 2019	1,566	—	1,566
Provided during the year	782	—	782
At 31 December 2019 and 1 January 2020	2,348	—	2,348
Provided during the year	783	—	783
At 31 December 2020	3,131	—	3,131
CARRYING AMOUNTS:
At 31 December 2020	4,697	440	5,137

At 31 December 2019	5,480	440	5,920

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 6 years (2019: 7 years)

(b) The Group’s money lending license of HK$440,000 (2019: HK$440,000) at 31 December 2020 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 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

20. EQUITY INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

	2020	2019
	HK$’000	HK$’000
Unlisted equity investments, at fair value	50,846	9,012

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

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 four (2019: one) buildings 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 2020, it was measured at fair value of approximately HK$50,846,000 (2019: approximately HK$9,012,000)

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

100

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

21. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

		2020	2019
	Notes	HK$’000	HK$’000
Prepayments		1,160	1,281
Deposits and other receivables	(a)(b)(c)	26,639	37,464
		27,799	38,745

Analysed as:
Non-current portion
Prepayments		1,007	1,041
Deposits and other receivables		—	12
		1,007	1,053
Current portion
Prepayments		153	240
Deposits and other receivables	(a)(b)(c)	26,639	37,452
		26,792	37,692
		27,799	38,745

Notes:

(a) As at 31 December 2020, included in the other receivables of approximately HK$4,612,000 (2019: HK$18,500,000) is receivables from the purchasers of Faithful Asia Up to the approval date of the consolidated financial statements approximately HK$1,855,000 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 The refundable deposit of HK$14,700,000 was received during 2020
(c) As at 31 December 2020, included in other receivables of approximately HK$18,591,000 (2019: HK$ nil) is due from a former non-controlling shareholder of a subsidiary who will repay mortgage loan on behalf of the subsidiary

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

101

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

22. DEFERRED TAX

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

	Revaluation
	of equity
	investments
	at fair value
	through other	Other
	comprehensive	intangible
	income	assets	Tax losses	Total
	HK$’000	HK$’000	HK$’000	HK$’000
At 1 January 2019	—	(1,034)	4,159	3,125
Credited to consolidated profit or loss	—	129	271	400
At 31 December 2019 and 1 January 2020	—	(905)	4,430	3,525
Credited to consolidated profit or loss	—	129	295	424
Debited to other comprehensive income	(8,850)	—	—	(8,850)
Exchange realignment	(505)	—	—	(505)
At 31 December 2020	(9,355)	(776)	4,725	(5,406)

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

	2020	2019
	HK$’000	HK$’000
Deferred tax assets	3,949	3,525
Deferred tax liabilities	(9,355)	—
	(5,406)	3,525

The Group has tax losses arising in Hong Kong of approximately HK$135,713,000 (2019: approximately HK$124,236,000) that are available indefinitely and in Mainland China of approximately HK$10,044,000 (2019: approximately HK$8,754,000) 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 (2019: HK$nil)

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

102

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

23. LOAN RECEIVABLES

	2020	2019
	HK$’000	HK$’000
Loan receivables	105,614	116,577

Analysed as:
Non-current assets	56,408	45,849
Current assets	49,206	70,728
	105,614	116,577

Notes:

(a) As at 31 December 2020, loan receivables of approximately HK$720,000 (2019: approximately HK$20,000,000) are guaranteed by an independent third party
(b) As at 31 December 2020, loan receivables of approximately HK$49,206,000 carried at fixed effective interest at 12% per annum and with the terms ranging from 9 months to 4 years 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
(c) As at 31 December 2020, included in loan receivables are receivable from Dehuang of approximately HK$50,712,000 (2019: HK$45,849,000) (note 32) which is unsecured, non-interest bearing, repayable on 2 September 2022 (2019: 2 September 2021) and measured at amortised cost using effective interest rate of 14 42%

On 31 December 2020, the Group entered into a supplemental agreement with Dehuang, pursuant to which the maturity date of the loan receivables was extended to 2 September 2022 The Group recognized a loss on extension of loan receivables amounted to approximately HK$6,787,000 accordingly

(d) As at 31 December 2020, included in loan receivables are receivable from Dehuang of approximately HK$7,878,000 which is unsecured, non-interest bearing, repayable on 15 October 2022 and measured at amortised cost using effective interest rate of 4 35% The Group recognized a loss on initial recognition of loan receivables of approximately HK$694,000
(e) 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$9,821,000 were fully settled

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

103

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

24. INVENTORIES

	2020	2019
	HK$’000	HK$’000
Finished goods and merchandises	389	385

25. TRADE RECEIVABLES

	2020	2019
	HK$’000	HK$’000
Trade receivables	2,796	9,778

Notes:

(a) The Group has granted credit terms to its customers within 30 to 90 days (2019: ranging from 30 to 90 days) The Group seeks to maintain strict control over its outstanding balances by imposing 2% (2019: 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
(b) The aging analysis of trade receivables, based on the invoice date, and net of allowance, is as follows:

	2020	2019
	HK$’000	HK$’000
Within 1 month	1,509	8,400
1 to 2 months	1,116	1,081
2 to 3 months	—	286
Over 3 months	171	11
	2,796	9,778

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

104

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

25. TRADE RECEIVABLES (Continued)

Notes: (Continued)

	2020	2019
	HK$’000	HK$’000
At 1 January	—	62
Amount written off as uncollectible	—	(62)
At 31 December	—	—

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

	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 2020
Weighted average expected
loss rate	0%	0%	0%	0%	0%	0%
Receivable amount (HK$’000)	1,509	1,116	160	—	11	2,796
Loss allowance (HK$’000)	—	—	—	—	—	—
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)	—	—	—	—	—	—

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

105

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

26. CONTRACT ASSETS AND LIABILITIES

Disclosures of revenue-related items:

		As at	As at	As at
		31 December	31 December	1 January
		2020	2019	2019
		HK$’000	HK$’000	HK$’000
Contract assets — provision of technical support and
maintenance services		—	186	14
Contract liabilities — sale of computer hardware and
software		—	1,809	1,061
Contract liabilities — provision of technical support
and maintenance services		1,318	2,244	3,955
Total contract liabilities		1,318	4,053	5,016

Contract receivables (included in trade receivables)		2,796	9,778	3,216

			2020	2019
			HK$’000	HK$’000
Transaction prices allocated to performance obligations unsatisfied at
end of year and expected to be recognised as revenue in:
— 2020			—	4,288
— 2021			1,321	3
			1,321	4,291

Year ended 31 December			2020	2019
			HK$’000	HK$’000
Revenue recognised in the year that was included in	contract
liabilities at beginning of year			4,053	4,961

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

106

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

26. CONTRACT ASSETS AND LIABILITIES (Continued)

Significant changes in contract assets and contract liabilities during the year:

	2020	2020	2019	2019
	Contract	Contract	Contract	Contract
	assets	liabilities	assets	liabilities
	HK$’000	HK$’000	HK$’000	HK$’000
Increase due to operations in the year	—	35,952	193	51,587
Transfer of contract assets to receivables	(186)	—	(21)	—
Transfer of contract liabilities to revenue	—	(38,687)	—	(52,550)

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

27. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

		2020	2019
		HK$’000	HK$’000
Equity securities listed in Hong Kong, at fair value	(Note)	27,118	39,885
Unlisted investment funds, at fair value		—	5,593
		27,118	45,478

Note: The investments included above as at 31 December 2020 and 2019 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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

107

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

28. BANK AND CASH BALANCES

	2020	2019
	HK$’000	HK$’000
Cash and bank balances other than time deposits	7,653	4,708
Time deposits	251	251
	7,904	4,959

Notes:

(a) As at 31 December 2020, the bank and cash balances of the Group denominated in RMB amounted to approximately HK$1,056,000 (2019: approximately HK$1,346,000) 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

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:

	2020	2019
	HK$’000	HK$’000
Within 1 month	655	4,783
1 to 2 months	417	4,362
2 to 3 months	3,203	23
Over 3 months	—	1
	4,275	9,169

30. OTHER PAYABLES AND ACCRUALS

	2020	2019
	HK$’000	HK$’000
Accruals	6,806	4,621
Other payables	11,076	33,970
	17,882	38,591

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

108

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

31. BANK AND OTHER LOANS

		2020	2019
	Notes	HK$’000	HK$’000
Bank loans:
Mortgage loan	(i)	20,190	28,525
Other loans:
Margin loans	(ii)	10,015	11,581
		30,205	40,106

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% (2019: 5 39%)

The mortgage loan is secured by a charge over the Group’s investment properties with fair value of approximately HK$317,098,000 (2019: approximately HK$298,672,000), and personal guarantee by former shareholders of a subsidiary

(ii) As at 31 December 2020, the margin loans are secured by the Group’s equity securities listed in Hong Kong with fair value of approximately HK$14,759,000 (2019: approximately HK$16,726,000) and repayable on demand As at 31 December 2020, included in the loans of approximately HK$10,015,000 (2019: approximately HK$11,581,000) is charged at a fixed interest rate of 8 25% (2019: 8 25%) 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 and 1 January 2020	63,553
Imputed interest	8,946
Gain on modification	(5,721)
Exchange realignment	4,104
At 31 December 2020	70,882

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

109

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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)_	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 was recognized on the date of issuance of the PN

At 31 December 2019, the promissory note was 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 2020, the PN is measured at amortised cost using effective interest rate of 14 28% (2019: 14 28%)

On 29 June 2020, the Group entered into supplemental agreement with the PN holder, pursuant to which the maturity date of the PN was extended to 2 September 2021 The Group recognized a gain on modification of PN amounted to approximately HK$3,263,000

On 3 September 2020, the Group entered into supplemental agreement with the PN holder, pursuant to which the maturity date of the PN was extended to 2 September 2022 and the interest rate revised to 11% per annum The Group recognized a gain on modification of PN amounted to approximately HK$2,458,000

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

110

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

33. LEASE LIABILITIES

			Present value	of lease
	Lease payments		payments
	2020	2019	2020	2019
	HK$’000	HK$’000	HK$’000	HK$’000
Within one year	2,881	3,127	2,752	3,045
In the second to fifth years, inclusive	1,024	3,380	1,007	3,085
	3,905	6,507
Less: Future finance charges	(146)	(377)
Present value of lease liabilities	3,759	6,130	3,759	6,130
Less: Amount due for settlement within
12 months (shown under current
liabilities)			(2,752)	(3,045)
Amount due for settlement after 12
months			1,007	3,085

At 31 December 2020, the average effective borrowing rate was 4 35% to 5 25% (2019: 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 2020, loan from a shareholder is advanced from Mr Zhang Rong and is unsecured, interest bearing at 3% (2019: 3%) and due for repayment on 1 January 2022 (2019: 1 January 2021)

35. AMOUNT DUE TO A DIRECTOR

As at 31 December 2020, the amount is unsecured, interest-free and due for repayment on 1 January 2022 (2019: 1 January 2021)

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

111

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

36. SHARE CAPITAL

		Number	of shares	of shares		Share	capital	capital
		2020			2019	2020		2019
						HK$’000		HK$’000
Authorised:
Ordinary shares of HK$0 10 (2019:
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
		2020			2019	2020		2019
						HK$’000		HK$’000
Issued and fully paid:
Ordinary shares of HK$0 10 (2019:
HK$0 10) each
At the beginning of the year		5,722,159,908		5,712,151,908		572,216		571,215
Exercise of share options		22,032,000		10,008,000		2,203		1,001
At the end of the year		5,744,191,908		5,722,159,908		574,419		572,216

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

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

112

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 cancelled during the year ended 31 December 2020 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 2017–26	0 130
		September 2027
21 June 2019	21 June 2019	21 June 2019–20 June 2029	0 100
6 April 2020	6 April 2020	6 April 2020–5 April 2030	0 100

CHINA INFORMATION TECHNOLOGY DEVELOPMENT LIMITED ANNUAL REPORT 2020

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Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

37. SHARE OPTION SCHEME (Continued)

For options granted on 11 April 2017, 27 September 2017, 21 June 2019 and 6 April 2020, 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 During the year ended 31 December 2020, the Company cancelled all the share options

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

	2020	2020	2019	2019
	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	1,341,456,000	0.1351	1,134,408,000	0 1414
Granted during the year	42,192,000	0.1000	217,056,000	0 1000
Exercised during the year	(22,032,000)	0.1000	(10,008,000)	0 1000
Cancelled during the year	(1,361,616,000)	0.1314	—	—
Outstanding at the end of the year	—	—	1,341,456,000	0 1351

The estimated fair values of the options granted on 6 April 2020 are approximately HK$1,416,000

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

	6 April
	2020
Share price at the date of grant	HK$0.07
Exercise price	HK$0.10
Expected volatility	63.19%
Expected life	10 years
Risk free rate	0.76%
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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114

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

38. STATEMENT OF FINANCIAL POSITION OF THE COMPANY

	2020	2019
	HK$’000	HK$’000
NON-CURRENT ASSETS
Investments in subsidiaries	—	—
Right-of-use assets	2,842	4,848
Loan receivable	7,878	—
Total non-current assets	10,720	4,848
CURRENT ASSETS
Due from subsidiaries	221,910	248,767
Prepayments, deposits and other receivables	1,993	16,750
Cash and bank balances	5,544	321
Total current assets	229,447	265,838
CURRENT LIABILITIES
Other payables and accruals	5,500	5,225
Lease liabilities	2,226	2,275
Total current liabilities	7,726	7,500
NET CURRENT ASSETS	221,721	258,338
Total assets less current liabilities	232,441	263,186
NON-CURRENT LIABILITIES
Lease liabilities	962	3,026
Due to a director	3,196	8,656
Total non-current liabilities	4,158	11,682
NET ASSETS	228,283	251,504

CAPITAL AND RESERVES
Share capital	574,419	572,216
Reserves	(346,136)	(320,712)
TOTAL EQUITY	228,283	251,504

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115

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

39. RESERVES

(a) Group

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

(i) 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

(ii) 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

(iii) 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 2020 and 2019 were distributable in the form of cash dividends

(iv) 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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116

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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 2019	107,108	81,250	(492,215)	273	(303,584)
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 and 1
January 2020	107,551	90,434	(518,697)	—	(320,712)
Total comprehensive loss for the
year	—	—	(26,840)	—	(26,840)
Equity-settled share-base payment	—	1,416	—	—	1,416
Exercise of share options	740	(740)	—	—	—
Cancellation of share option	—	(91,110)	91,110	—	—
At 31 December 2020	108,291	—	(454,427)	—	(346,136)

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Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

40. INVESTMENTS IN SUBSIDIARIES

Particulars of the principal subsidiaries as at 31 December 2020 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 Technology	Hong Kong	HK$100	100%	Office management
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 (Guangzhou) Co ,	PRC	HK$1,300,000	84%	Provision of system
Ltd **				integration and
				maintenance services in
				the PRC
DataCube Research Centre	Hong Kong	HK$1	100%	Big data application
Limited
Guangzhou Xinfeng Investment	PRC	HK$101,400,000	100%	Assets acquisition,
Consultancy Company				management and
Limited**				consultancy services
Global Shine Investment Limited	Hong Kong	HK$1	100%	Securities trading
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

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118

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

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				Amount	from
	note	Lease	Bank and	Loan 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 2019	—	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 and 1 January
2020	63,553	6,130	40,106	3,053	9,006	121,848
Change in cash flows	—	(3,325)	(11,739)	—	(5,430)	(20,494)
Non-cash changes
— imputed interest	8,946	—	—	—	—	8,946
— gain on extension of
promissory notes	(5,721)	—	—	—	—	(5,721)
— interest charged	—	255	—	90	—	345
— additions of lease liabilities	—	715	—	—	—	715
— early termination of a lease	—	(17)	—	—	—	(17)
— exchange differences	4,104	1	1,838	—	—	5,943
At 31 December 2020	70,882	3,759	30,205	3,143	3,576	111,565

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119

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

42. EVENTS AFTER THE REPORTING PERIOD

On 15 January 2021, an ordinary resolution was passed on share consolidation (“Share Consolidation”), pursuant to it, every 24 issued and unissued existing shares of par value HK$0 10 each in the share capital of the Company will be consolidated into 1 consolidated share of par value HK$2 40 each in the share capital of the Company and the total number of consolidated shares in the issued share capital of the Company immediately following the Share Consolidation will be rounded down to a whole number by cancelling any fraction in the issued share capital of the Company arising from the Share Consolidation 5,504,850,579 shares was cancelled by way of Share Consolidation

43. APPROVAL OF FINANCIAL STATEMENTS

These consolidated financial statements were approved and authorised for issue by the Board of Directors on 26 March 2021

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120

Five Year Financial Summary

31 December 2020

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
	2020	2019	2018	2017	2016
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
			(Restated)
RESULTS
REVENUE	45,694	63,712	51,666	48,817	14,221

Loss before tax	(11,350)	(82,216)	(80,168)	(117,283)	(49,354)
Income tax credit/(expenses)	403	281	1,913	504	(661)
LOSS FOR THE YEAR	(10,947)	(81,935)	(78,255)	(116,779)	(50,015)

Attributable to:
Owners of the Company	(9,758)	(80,850)	(75,308)	(112,456)	(48,143)
Non-controlling interests	(1,189)	(1,085)	(2,947)	(4,323)	(1,872)
	(10,947)	(81,935)	(78,255)	(116,779)	(50,015)

ASSETS, LIABILITIES AND NON-CONTROLLING INTERESTS

		As at 31 December	As at 31 December	As at 31 December
	2020	2019	2018	2017	2016
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
			(Restated)
TOTAL ASSETS	560,066	548,373	596,458	691,983	685,940
TOTAL LIABILITIES	(144,480)	(173,824)	(149,883)	(156,692)	(139,603)
NET ASSETS	415,586	374,549	446,575	535,291	546,337

Equity attributable to:
Owners of the Company	419,811	376,297	447,252	539,071	547,216
Non-controlling interests	(4,225)	(1,748)	(677)	(3,780)	(879)
	415,586	374,549	446,575	535,291	546,337

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Particulars of Property Interests

Particulars of property interests held by the Group as at 31 December 2020 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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AI assistant

China Information Technology Development Limited — Annual Report 2021

51312_rns_2021-03-26_cadc6558-d5dd-4b59-864f-30952bb2cfbd.pdf

2020 ANNUAL RESULTS ANNOUNCEMENT

Hong Kong, 26 March 2021

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

Contents

Corporate Information

EXECUTIVE DIRECTORS

AUDITOR

LEGAL ADVISOR

INDEPENDENT NON-EXECUTIVE DIRECTORS

PRINCIPAL BANKERS

COMPANY SECRETARY

COMPLIANCE OFFICER

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS

AUTHORISED REPRESENTATIVES

REGISTERED OFFICE

NOMINATION COMMITTEE

REMUNERATION COMMITTEE

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

AUDIT COMMITTEE

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

GEM STOCK CODE

COMPANY WEBSITE

Chairman’s Statement

MARKET OVERVIEW

Chairman’s Statement

Chairman’s Statement

PROSPECTS

Chairman’s Statement

ACKNOWLEDGMENTS

Wong King Shiu, Daniel

Management Discussion and Analysis

BUSINESS REVIEW

CITD Group

Management Discussion and Analysis

Management Discussion and Analysis

MACRO SYSTEMS

Management Discussion and Analysis

DATACUBE

Management Discussion and Analysis

FUTURE PROSPECT

Management Discussion and Analysis

FINANCIAL REVIEW

Revenue

Cost of sales and services

Gross profit

Other income and gains

Management Discussion and Analysis

Selling and distribution expenses

Administrative expenses

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

Change in fair value of investment properties

Finance costs

Loss attributable to owners

Management Discussion and Analysis

FINANCIAL POSITION

Liquidity and financial resource

Capital structure

PRINCIPAL RISKS AND UNCERTAINTIES

Foreign Exchange Rates Risk

Management Discussion and Analysis

Liquidity Risk

Price Risk

EMPLOYEES AND REMUNERATION POLICIES

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

SUBSEQUENT EVENTS

Capital Reorganization and Change in Board Lot Size

Share Consolidation (“Share Consolidation”)

Management Discussion and Analysis

Capital Reduction (“Capital Reduction”)

Share Sub-division (“Share Sub-division”)

Change in Board Lot Size

Biographical Information of Directors and Senior Management

EXECUTIVE DIRECTORS

MR. WONG KING SHIU, DANIEL

MR. WONG KUI SHING, DANNY

Biographical Information of Directors and Senior Management

China Information Technology Development Limited Annual Report 2021