FIYTA Precision Technology Co., Ltd. — Interim / Quarterly Report 2004

Aug 10, 2004

SHENZHEN FIYTA HOLDINGS LTD. 2004 Semi-Annual Financial Report (Unaudited)

I. Accounting Statements

Balance Sheet

Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2004 In RMB

Assets	Consolidated	Consolidated	the Company	the Company
Items	June 30,2004	December 31,2003	June 30,2004	December 31,2003
I. Current assets
Monetary funds	79,929,503.17	117,527,033.00	68,798,562.99	108,287,580.00
Short-term investment	18,379,228.88	54,879,747.00	18,379,228.88	54,879,747.00
Dividend receivable				244,067.00
Accounts receivable	25,591,127.89	19,548,777.00	22,898,570.05	21,333,611.00
Other receivables	19,810,288.84	19,475,900.00	111,363,205.33	82,166,537.00
Account prepaid		375,346.00
Inventories:	192,735,807.68	152,648,834.00	84,490,322.26	76,926,841.00
Expenses to be apportioned	463,592.44	64,996.00	79,666.76	68,891.00
Total current assets	336,909,548.90	365,102,633.00	306,009,556.27	343,907,274.00
II. Long-term investment
Long-term equity investment	4,885,000.00	4,885,000.00	46,396,954.56	38,969,452.00
III. Fixed assets
Fixed assets, cost	111,497,412.45	108,364,742.00	86,450,461.73	84,928,525.00
Less: accumulative depreciation	54,093,199.79	51,861,002.00	39,609,449.66	37,915,519.00
Fixed assets, net	57,404,212.66	56,503,740.00	46,841,012.07	47,013,006.00
Less: Provision for devaluationof fixed assets	2,909,032.12	2,921,871.00	2,600,000.00	2,600,000.00
Fixed assets, net	54,495,180.54	53,581,869.00	44,241,012.07	44,413,006.00
Construction-in-progress	156,803,525.71	125,227,493.00	156,803,525.71	125,227,493.00
Total fixed assets	211,298,706.25	178,809,362.00	201,044,537.78	169,640,499.00
IV. Intangible assets and other assets
Intangible assets	16,902,179.53	17,163,777.00	16,902,179.53	17,163,777.00
Long-term expenses to be apportioned	8,580,219.92	6,886,724.00	2,268,072.66	2,424,322.00
Total intangible assets and otherassets	25,482,399.45	24,050,501.00	19,170,252.19	19,588,099.00
Total assets	578,575,654.60	572,847,496.00	572,621,300.80	572,105,324.00

Balance Sheet (Cont’d)

Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2004 In RMB

Liabilities and shareholders’ equity	Consolidated	Consolidated	the Company	the Company
Items	June 30,2004	December 31,2003	June 30,2004	December 31,2003
I. Liabilities:
1. Current liabilities
Short-term bank loan:		100,000.00		100,000.00
Accounts payable	33,339,727.86	34,504,530.00	1,356,939.81	1,585,347.00
Advance receipt	5,199,782.29	5,181,480.00	4,182,966.17	4,606,618.00
Salaries payable	54,630.20	123,2457.00	1,399.50	2,967.00
Welfares payable	2,617,702.21	2,728,289.00	2,330,136.18	2,280,392.00
Dividend payable
Taxes payable	-13,740,519.64	-10,184,367.00	-4,529,350.57	-2,249,691.00
Other payables	30,247,683.40	12,618,067.00	49,209,535.04	46,618,751.00
Other accounts due	27,426.32	125,479.00	9,653.88	36,355.00
Expenses allotted in advance	29,746.43	811,969.00	40,765.48	668,223.00
Total current liabilities	57,776,179.07	47,117,904.00	52,602,045.49	53,648,962.00
2. Long-term liabilities
Special accounts payable	3,000,000.00	3,000,000.00	3,000,000.00	3,000,000.00
Total long-term liabilities	3,000,000.00	3,000,000.00	3,000,000.00	3,000,000.00
Total liabilities	60,776,179.07	50,117,904.00	55,602,045.49	56,648,962.00
II. Minority shareholders equity	’ 780,220.22	7,273,230.00
III. Shareholders’ equity
Share capital	249,317,999.00	249,317,999.00	249,317,999.00	249,317,999.00
Capital public reserve	191,847,232.65	191,847,234.00	191,847,232.65	191,847,234.00
Surplus public reserve	130,467,791.52	130,467,792.00	130,467,791.52	130,467,792.00
Incl.: public welfare fund	25,036,994.11	25,036,994.00	25,036,994.11	25,036,994.00
Retained earnings	-54,613,767.86	-56,176,663.00	-54,613,767.86	-56,176,663.00
Total Shareholders’ Equity	517,019,255.31	515,456,362.00	517,019,255.31	515,456,362.00
IV. Total shareholders’ equity andliabilities	578,575,654.60	572,847,496.00	572,621,300.80	572,105,324.00

Statement of Profit and Profit Distribution

Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2004 In RMB

	Consolidated	Consolidated	the Company	the Company
Items	Jan. to Jun., 2004	Jan. to Jun., 2003	Jan. to Jun., 2004	Jan. to Jun., 2003
I. Income from principal business	134,155,051.11	105,587,869.25	73,331,187.24	54,562,014.70
Less: Costs of principal business	83,653,395.26	63,023,284.52	44,133,099.10	29,158,908.38
Less: Taxes and surcharges of principalbusiness	758,541.14	719,217.33	509,764.23	144,618.61
II. Profit from principal businesses	49,743,114.71	41,845,367.40	28,688,323.91	25,258,487.71
Add: Profit from other businesses	1,162,293.14	330,251.64	561,270.08	233,582.03
Less: Operation costs	27,380,170.96	29,480,001.52	21,977,901.35	20,144,536.94
Overheads	19,936,829.79	14,175,298.37	12,124,234.73	9,520,685.59
Financial expenses	-200,585.98	-216,585.95	-272,629.83	-192,079.65
III. Operating Profit (loss is stated with “-“)	3,788,993.08	-1,263,094.90	-4,579,912.26	-3,981,073.14
III. Investment income (loss is statedwith “-“)	-2,440,618.45	6,363,355.26	4,986,884.11	9,015,389.38
Subsidy income
Non-operating income	1,165,442.60	2,393,240.01	1,162,917.00	1,800,000.00
Less: Non-operating expenses	27,150.73	607,356.59	8,388.12	1,905.69
Add: adjustment of the gain/loss of the previous year
IV. Total profit (loss is stated with “-“)	2,486,666.50	6,886,143.78	1,561,500.73	6,832,410.55
Less: Income tax	923,771.36	819,519.40	-1,394.41	753,560.55
Minority owners’/shareholders equity*	’	-12,225.62
V. Net Profit (loss is stated with “-“)	1,562,895.14	6,078,850.00	1,562,895.14	6,078,850.00
I. Add: retained earnings at year beginning	-56,176,663.00	-60,525,963.00	-56,176,663.00	-60,525,963.00
Other transfer-in
II. Distributableprofit	-54,613,767.86	-54,447,113.00	-54,613,767.86	-54,447,113.00
Less: Allotting statutory surplus publicreserve
Allotting statutory public welfarefund
Allotting staff’s reward and welfarefund
Allottingreserve fund
Allotting enterprise development fund
Investment returned withprofit
III. The total profit distributable to the investors	-54,613,767.86	-54,447,113.00	-54,613,767.86	-54,447,113.00
Less: Dividends of preferential sharespayable
Provision of discretionary surplus publicreserve
Dividend payable for common shares

Dividends of common shares convertedinto capital/capitalstock
IV. Retainedprofit	-54,613,767.86	-54,447,113.00	-54,613,767.86	-54,447,113.00

Additional information: 1. Income from sales and disposal of subsidiaries or investees 2. Loss from natural disaster 3. Increase/decrease of the total profit due to change of accounting policy 4. Increase/decrease of the total profit due to change of accounting estimation 5. Loss from debts reorganization 6. Others

Cash Flow Statement

Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan. to Jun., 2004 In RMB

Items	Consolidated	the Company
I. Net cash flows arising from operating activities
Cash received from sales of goods and supply of labor	145,256,895.97	75,572,205.59
Other business related cash receipts	211,186.49	345,665.90
Subtotal of cash flow in	145,468,082.46	75,917,871.49
Cash paid for purchase of goods and reception of labor services	122,821,320.94	54,430,363.71
Cash paid to and for staff	18,667,278.90	10,662,031.69
taxes paid	12,923,824.65	5,384,654.44
Other business related cash payments	27,013,170.56	47,040,039.62
Subtotal of cash flow out	181,425,595.05	117,517,089.46
Net cash flows arising from operating activities	-35,957,512.59	-41,599,217.97
II. Cash flows arising from investment activities:
Cash received from recovery of investment	51,003,863.01	51,003,863.01
Cash received from investment income	594,718.18	594,718.18
Net amount of cash received from disposal of fixed assets, intangible assets and other long termassets	82,141.00	70,781.00
Interest income obtained
Subtotal of cash flow in	51,680,722.19	51,669,362.19
Cash paid for construction/purchase of fixed assets, intangible assets and other long termassets	35,640,591.04	31,879,012.84
Cash paid for investment	17,538,681.51	17,538,681.51
Subtotal of cash flow out	53,179,272.55	49,417,694.35
Net cash flow arising from investment activities	-1,498,550.36	2,251,667.84
III. Cash flows arising from fund raising activities:
Other fund-raising related cash received
Subtotal of cash flow in
Cash paid for liabilities repayment	100,000.00	100,000.00
Other fund raising related cash payments	41,466.88	41,466.88
Subtotal of cash flow out	141,466.88	141,466.88
Net cash flow arising from fund-raising activities	-141,466.88	-141,466.88
IV. Influence upon cash due to change of exchange rate
V. Net increase of cash and cash equivalents	-37,597,529.83	-39,489,017.01

Cash Flow Statement (Cont’d)

Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan. to Jun., 2004 In RMB

Additional information	Consolidated	the Company
1. Net cash flows arising from adjustment of net profit into operating activities
Net profit	1,562,895.14	1,562,895.14
Add: Reserve for deterioration of assets
Depreciation of fixed assets	2,232,197.79	1,693,930.66
Amortization of intangible assets	261,597.47	261,597.47
Long-term expenses to be apportioned	464,881.26	156,249.34
Decrease (less: increase) of expenses to be apportioned	183,403.56	-10,775.76
Increase (less: decrease) of expenses drawn in advance	-782,222.57	-626,457.52
Loss from disposal of fixed assets, intangible assets and other long termassets
Losses from rejection of fixed assets
Financial expenses	-220,585.98	-272,629.83
Investment loss (less: income)	2,440,618.45	-4,986,884.11
Deferred tax loan (less: debit)
Decrease (less: increase) of inventories	-40,086,973.68	-7,563,481.26
Decrease (less: increase) of operative items receivable	-3,908,739.78	-27,631,709.28
Increase (less: decrease) of operative items payable	1,875,415.75	-4,181,952.82
Net increase (less: decrease) of value added tax
Minority shareholders’ gain/loss
Net cash flows arising from operating activities	-35,957,512.59	-41,599,217.97
2. Investment and fund-raising activities with no cash income and expensesinvolved
Capital converted from liabilities
Convertible company bonds due within a year
Fixed assets rented through financing
3. Net increase of cash and cash equivalents:
Ending cash balance	79,929,503.17	68,798,562.99
Less: Opening cash balance	117,527,033.00	108,287,580.00
Add: Ending cash equivalent balance
Less: Opening cash equivalent balance
Net increase of cash and cash equivalents	-37,597,529.83	-39,489,017.01

II. Notes to the Accounting Statements

(I) Accounting Policies, Accounting Estimation and Preparation of the Consolidated Accounting Statements

(1) Accounting standards and system

The Company implements the PRC Enterprise Accounting Standards and the PRC Enterprise Accounting System and other relevant regulations in preparing these accounting statements.

(2) Fiscal year

January 1 to December 31 of a calendar year.

(3) Standard Currency for Book Keeping

The Company uses Renminbi (RMB) as the standard currency for book keeping.

(4) Principle of bookkeeping and basis of pricing The Company takes the accrual system as the basis for book keeping; various assets are priced based on the actual costs unless there is otherwise special specification.

(5) Foreign Currency Translation:

Foreign currency transactions are stated in Renminbi after conversion at the exchange rate published by the People’s Bank of China at the beginning of the month when a transaction takes place. Monetary assets and liabilities in foreign currency on the balance sheet day are converted into RMB based on the standard rate published by the People’s Bank of China on the very day. The exchange gain/loss incurred therefrom is directly stated in the gain/loss of the very period except the exchange gain/loss involved in the foreign currency loan designated for purchase/construction of certain fixed assets which should be capitalized.

(6) Cash and cash equivalents

Cash listed in the statement of cash flow refers to the cash in hand and bank deposits ready for payment at any time. Cash equivalent refers to the investment held by the Company with short term (3 months), strong liquidity and low risk of value fluctuation that is easy to be converted into cash of known amount.

(7) Short-term investment

The short term investments refer to the investment which can be realized at any time after procurement with the holding time not exceeding one year. They include stock investment and securities investment, and measured based on the investment costs at the time of procurement. The cash dividends which have been announced for distribution but not yet received and the bond interest which is due but has not yet been received in the actual payment. The dividends or interest arising from the short-term investment while holding are used to offset the investment costs except the dividend or interest already stated in the accounts receivable. The short term investment is charged based on the lower of the cost and the market price at the end of the year and the reserve for price falling is provided on individual investment basis.

(8) Accounts receivable and reserve for bad debts

The loss from the bad debts is stated by allowance method.

Provision for bad debt is made after the specific assessment of the recoverability of the

accounts receivable. The Group usually makes the provision based on a certain proportion after analysis on accounts receivable at the end of a period. For the accounts receivable difficult to be recovered, provision for bad debt shall be provided based on the practical experience combined with practical conditions.

Bad debts are recognized when irrefutable evidence shows that certain account receivable is impossible to be recovered because of debtor’s dissolution, bankruptcy, insolvency, serious deficiency of cash flow, etc. and offset with the reserve for corresponding bad debt already provided.

(9) Inventories:

Inventories consist of raw materials, work-in-process, finished products and easily-consumed products with low value. Inventories are stated according to the actual cost when they were obtained. Raw materials and finished products are stated according to the costs at the time of delivery calculated based on weighted average. The low-value consumption goods and packing materials are stated in the cost on once-and-for-all basis as taken out for use. Costs of finished products and products in process include those of raw materials, direct manpower, and all indirect production expenses amortized on percentage basis.

Inventories are stated at the lower of the cost and the realizable net value due to the reasons of being damaged, completely or partially out-of-date or the cost being lower than the sales price. Reserve for depreciation of inventories are allotted based on the balance between the cost of individual inventory items and their realizable net value. The net realizable value of the inventories was determined based on the market price less the estimated sales costs and relevant taxes in process of normal production and operation.

(10) Long-term investment

Long-term equity investment refers to the long term equity investment with holding term exceeding one year.

Long-term equity investment cost is stated according to the actual payment at the time of investment, or according to the book value of non-cash assets output plus relevant taxes. The equity method has been used for this Group’s investment in an investee which takes over 20% of the total voting-bearing assets of that investee or the investment produces significant affect on the investee’s financial and operation decision even the investment takes below 20% its total voting-bearing capital; The cost method has been used for the Company’s investment in an investee which takes below 20% of the total voting-bearing assets of that investee or the investment produces no significant affect on the investee’s financial and operation decision even the investment takes over 20% its total voting-bearing capital.

If the recoverable amount is lower than the book value of the investment and the reduced amount is unrecoverable within a certain period of time predictable because the investee’s stock price has been falling continually or the investee’s business operation has been worsened, while such lowered value is impossible to be recovered in the predictable future, reserve for devaluation of long term equity investment are allotted based on the balance between the amount recoverable and the book value of the long investment.

(11) Fixed assets pricing and depreciation

Fixed assets are defined as the premises, buildings and other principal production and operation equipment with direct connection with production and operation as well as the

non-production/operation equipment with unit price of over RMB 2,000 and service life exceeding 2 years.

Fixed assets purchased or newly constructed are stated at the actual cost at the time of obtainment. For the fixed assets evaluated at the time of the Company’s restructuring, the value confirmed by the state assets authority through the appraisal is the entry value.

Fixed assets are depreciated by straight line method; depreciation is made based on the entry value less 5 – 10%of the predicted net residue value within the predicted service life on average basis.

The estimated service life and predicted residual	The estimated service life and predicted residual	ratio of fixed assets are stated as follows:	ratio of fixed assets are stated as follows:
Fixed Assets	Predited Service Life	Annual Depreciation	Predicted
		Rate	Residual Rate
Housing & Building	20 to 35 years	2.6%-4.8%	5%-10%
Machine & Equipment	10 years	9%-9.5%	5%-10%
Motor Vehicles	5 years	19%	5%
Electronic Equipment	5 years	19%	5%
Other equipment	5 years	19%	5%

Fixed assets are stated at the lower of the book value and the recoverable amount at the end of a period.

When the ability of fixed assets to create economic benefit has seriously affected in fact and the recoverable amount is lower than the balance of the book value, reserve for deterioration can be provided. When fixed assets have actually been unable to bring about any financial benefit, reserve for deterioration should be provided in full.

(12) Construction-in-progress

Construction-in-progress refers to capital assets in process of construction or installation and is stated in the engineering costs based on the expenses actually paid. The costs involved in valuation include the building expenses and other direct expenses, cost of machines and equipment, installation cost; but also include loan expenses incurred in the special loan of such project before the fixed asset has reached the predicted application status. The construction in progress is transferred into the fixed assets after the works has reached the predicted application status.

If any construction in process has been suspended for a long time and is estimated unable to restart the work within foreseeable time; or construction in process has been proved backward in terms of performances and technology and the economic benefit to be brought about by it is greatly indefinite and the recoverable amount is lower than the balance of book value, reserve for deterioration is permitted to be provided.

(13) Loan expenses

Such loan expenses as interest from the special loans for purchasing/constructing fixed assets, depreciation/premium amortized, auxiliary expenses, foreign exchange difference, etc. can be capitalized and stated in the costs of assets if they compliance wit the following three items:

1. Assets expenses have already incurred;

2. Loan expenses have already incurred;

3. The necessary purchase/construction activities to make the assets up to the planned application status have already started.

When the fixed asset purchased/constructed has reached the predicted application status, the capitalization of the loan cost stops. The loan expenses incurred afterwards are stated in the gain/loss of the current period.

Interest expense in the loan expenses is based on the weighted average of the accumulative expenditure of the fixed asset purchased/constructed and the weighted average interest rate of the relevant loans and its capitalized amount is determined within the limit not exceeding the interest of the special loan actually incurred in the current period.

For the expenses of the special foreign currency loans and the auxiliary expenses of material special loans, the capitalized amount is recognized based on the amount actually incurred. Expenses of other loans are directly stated as financial expenses at the very period of incurrence.

(14) Intangible assets evaluation and amortization

The intangible asset is mainly land use right.

Land use right is charged based on the actual payment and amortized over 50 years according to the straight-line method. Commencing from January 1, 2001, the land use right obtained or purchased by means of paying land assignment fee is calculated as intangible assets prior to commencement of the construction project with the actual payment as the cost. The book value of the land use right during building construction on the land is all changed over to the cost of construction-in-progress.

(15) Long-term expenses to be proportioned

Long term expenses to be apportioned, refer to various expenses, including the payment for improved the rented fixed assets, which have been paid but are to be apportioned over more than 1 year (with one year exclusive).

Expenses for improving the rented fixed assets refer to the expenses actually incurred for improving the fixed assets rented for operation purpose which should be amortized in average over the shorter term of the rent term and the service life of the rented assets.

Other long term expenses to be apportioned are amortized on average basis in the beneficiary term of the relevant items by means of straight-line method.

The expenses incurred in the preparation of the Company had been aggregated in the long term expenses to be amortized and were stated in the gain/loss of the very period in the very month when the Company started the production and operation on once-and-for-all basis.

If the projects involved with long term expenses to be apportioned are unable to provide benefit in the afterwards accounting terms, the balance of such expenses not yet amortized shall all be transferred to the current gains/losses.

(16) Special accounts payable

Special accounts payable refer to the funds appropriated for special purpose to the company by the government, such as the special fund for technical innovation, technical research, etc. as well as the fund obtained from other sources.

When such fund is used to purchase fixed assets, the company should transfer the corresponding fund into the capital public reserve.

(17) Revenue recognition

Sales of goods

Sales income is recognized when the significant risks and rewards of ownership of the goods have been transferred to customers, the economic benefits associated with the transaction can flow into this Group and the amount of sales-related costs can be measured reliably.

Cash discount is stated as the financial expense of the current period of actual incurrence; sales allowance eats up part of the income of the current period of actual incurrence. Labor services

Income from labor services is recognized at the time of completion in case the service starts and ends within a fiscal year. Income from labor services starting and ending in different fiscal years is recognized based on the percentage of completion at the balance sheet day provided that the result of the labor service transaction can be reliably measured.

(18) Accounting treatment of income tax

This Group adopts tax payable method in treating income tax expenses.

• (19) Method of preparing the consolidated financial statements

• The Company implements the Provisional Regulations on Printing and Issuing Consolidated Accounting Statements promulgated by the Ministry of Finance of the People’s Republic of China (Document on Accounting (1995) No. 11).

Consolidated financial statements cover the financial statements of the subsidiaries in the consolidation ended June 30, 2002. In accordance with the Official Reply to the Request for Instructions on the Consolidation Range for Consolidated Accounting Statements promulgated by the Ministry of Finance (Document on Accounting (2) (1996) No. 2, a subsidiary whose income from the principal business is below 10% of the Company’s income from principal business, whose total assets is below 10% of the Company’s total assets, whose total profit is below 10% of the Company’s total profit shall not be consolidated.

Subsidiaries refer to the businesses whose voting-bearing capital is directly or indirectly held by the Company by over 50%, or whose financial and operation policies are decided by the Company even though the Company controls its voting-bearing capital below 50% and the Company is entitled to obtain profit from their operation activities.

The balance of the material current accounts and transactions between the Company and its consolidated subsidiaries shall be offset while preparing the consolidated statements. If the accounting policy adopted by a consolidated subsidiary differs from that by the parent company while such difference occurred therefrom affects greatly the consolidated statements, the accounting policy implemented by the parent company shall be adjusted.

(II) Taxes

Taxes the Group has to pay are summarized as follows:

Taxation basis

Taxes Rate

Value-added tax	17%	Calculated based on 17%of the sales income less the input VAT allowed for offsetting in the current period.
Operation tax	5%	Housing lease income
urban
construction	1%	Payment of VAT and business tax in the very period
tax
Business income tax	15-33%	Amount of income taxable (1)

The Group provides the business income tax based on the balance of the total income less the items permitted for deduction as the taxable income amount. According to the relevant cases of the income tax, the Group, a company incorporated within Shenzhen Special Economic Zone, applies tax rate of 15%; the other companies incorporated in other places apply tax rate of 33%. In addition, Shenzhen FIYTA Shenzhen FIYTA Sophisticated Timepieces Manufacture Co., Ltd., one of the Company’s subsidiaries, has been approved by the local tax authority to enjoy preferential treatment of two years’ total exemption and three years’ half exemption from business income tax commencing from the year of making profit.

(III) Controlled subsidiaries and joint ventures

Subsidiaries: Shenzhen Feitu New Tech Development Co., Ltd. Xi’an Haomen Restaurants & Recreation Co., Ltd. Shenzhen Harmony World Watches Center Co., Ltd. Shenzhen Feijing Sophisticated Optical Instruments Manufacture Co., Ltd. Shenzhen FIYTA Sophisticated Timepieces Manufacture Co., Ltd. Shenzhen Feiyu Artistic Timepiece Co., Ltd. Shenzhen Harmony World Watches Center Co., Ltd.	Registration place Legal represe ntative Registered capital Shenzhen Chen Zhili HKD3,080,000 Xi’an Men Tengshan HKD16,000,000 Shenzhen Xu Dongsheng RMB15,000,000 Shenzhen Xu Dongsheng RMB7,000,000 Shenzhen Xu Dongsheng RMB10,000,000 Shenzhen Zhu Gensen HKD3,000,000 Shenzhen Lu Bingqiang RMB2,800,000		Investment by the Company original currency Conversion in RMB proportion controlled by the Company Principal Business Cons olidat ed or not Remark s RMB992,626 HKD107,313 USD143,475 1,848,000 60% Pulse gilding and vacuum film plati ng No Note (1) RMB11,040,000 11,040,000 62% Catering, recreation, fine goods No Note (2) RMB13,625,000 13,625,000 90% purchase sales and repair services of timepieces and components Yes RMB6,300,000 6,300,000 99% Processing, production and marketing of sophisticated optical instruments Yes RMB9,000,000 9,000,000 99% Producing various timepieces and movements, spares and parts, sophisticated timepieces and repair service Yes RMB825,000 USD192,981 1,905,000 Producing and marketing various artistic timepieces No Note (3)） RMB1,400,000 1,400,000 50% Top brand watches, glasses, ornaments, gifts, general merchandise, handicrafts Yes Note (4)

• (1) The operation term of the company terminated on December 16, 2003 and the liquidation started in December, 2003. Therefore, it was not consolidated in 2004 Semi-annual Accounting Statements commencing from the date of liquidation.

• (2) The company sold its assets of catering and recreation in 2003 and stopped business activities before the end of 2003.

• (3) The operation term of this subsidiary terminated on November 28, 2001 and the liquidation started at the end of 2001. The liquidation had not ended at the end of the report period. It was not consolidated the Group’s consolidated statements commencing from 2001.

• (4) The company is a joint venture of the Company. Its income from the principal business, total assets and total profit in the previous year were all less than 10% of the Company’s income from the principal business, total assets and total profit. It has always used the equity method for accounting. This year, the Company has been controlling its financial and business management while its total profit this year has exceeded 10% of the Company’s total profit. Therefore, from 2003 on, this joint venture has been consolidated in the Group as a subsidiary of the Group.

(IV) Notes to the principal items on the accounting statements

1. Monetary funds:

Items	June 30, 2004	December 31, 2003
_	___	_____
Cash on hand	272,638.39	261,365.00
Bank deposit	79,534,483.20	109,835,486.00
Other Monetary	122,381.58	7,430,182.00
Funds
Total	79,929,503.17	117,527,033.00

• Foreign exchange funds ended June 30, 2003 are stated as follows:

Items	June 30, 2004
currencies	Conversion in RMB
HK$	6,011,934.82
US$	5,315,326.95
￡	1,683.00

2. Short-term investment

Items Stock investment Repurchase of government bonds Total	June 30, 2004 Investment amount Provision for price falling 22,319,633.51 3,940,404.63 22,319,633.51 3,940,404.63	December 31, 2003 Investment amount Provision for price falling 4,780,952.00 905 068.00 51 003 863.00 55 784 815.00 905,068.00
	Investment amount 22,319,633.51 22,319,633.51

3. Accounts receivable

June 30, 2004

December 31, 2003

		_____	_____	_____	_____	_____	_____
			_____			_____
	Age	Amount	Proportio	Provision for	Amount	Proportio	Provision for
			n	bad debts		n	bad debts
_____		______	_____	___	____	_____	___
Within a year		16,073,344.23	24.02%	388,182.49	11,865,071.00	19.04%	1,814,340.00
1~2	years	5,614,871.38	8.39%	1,307,108.00	5,252,669.00	8.43%	1,307,108.00
2~3	years	13,989,434.58	20.90%	12,284,748.00	14,343,287.00	23.02%	12,284,748.00
Over	3 years	31,252,748.19	46.69%	27,359,232.00	30,853,178.00	49.51%	27,359,232.00
Total		66,930,398.38	100%	41,339,270.49	62,314,205.00	100%	42,765,428.00

• Ended June 30, 2004, there were no accounts receivable owed by the shareholders holding more than 5% (including 5%) of the Company’s total shares except note (vi)2.

Ended 30, 2004, the top five debtors of the accounts receivable and the amounts are listed as follows:

as follows:
Companies		Amount receivable	Proportion in the total of the
			accounts receivable
________		__	______
____
Timepieces and Sewing	Machine	982,604.03	1.47%
Wholesale Station of Yingkou	General
Merchandise Co.
Siping No. 1 Department Store		823,302.04	1.23%
Anshan Timepieces and Photographic		807,815.00	1.21%
Equipment Co.
Culture and Timepieces Co.		773,021.00	1.15%
Qingdao Orient Group Co., Ltd.		764,149.00	1.14%

4. Other receivables

June 30, 2004 Age Amount Proportio n Provision for bad debts Within a year 9,827,170.94 29.60% 535,288.00 1~2 years 12,317,286.97 37.10% 6,113,164.00 2~3 years 1,418,532.77 4.27% 117,709.00 Over 3 years 9,641,587.16 29.03% 6,628,128.00 Total 33,204,577.84 100% 13,394,289.00 Ended June 30, 2004, there were no arrears owed by 5% (including 5%) of the Company’s total shares.	December 31, 2003 Amount Proportio n Bad debt 12,318,271.00 37.48% 535,288.00 10,700,393.00 32.55% 6,113,164.00 559,605.00 1.7% 117,709.00 9,291,920.00 28.27% 6,628,128.00 32,870,189.00 100% 13,394,289.00 the shareholders holding more than

Ended 30, 2004, the top five debtors of other receivables and the amounts are listed as follows:

Companies Shenzhen Feiyu Artistic Timepiece Co., Ltd. Xinlongtai Industrial Co., Ltd. Shenzhen Feitu New Technology Development Co., Ltd. Xi’an Aviation Engine Co. Zhuangtu Commodities Trading Center	Amount receivable 5,352,480.13 1,573,876.89 1,184,030.00 715,034.21 641,807.20	Proportion in the total of the accounts receivable 16.12% 4.74% 3.57% 2.15% 1.93%

5. Expenses to be	apportioned
Items	December 31, 2003	increase this year	amount amortized	June 30, 2004
			this year
Rent	211,723.00	200,100.20	308,829.59	102,993.61
Insurance premium	39,399.00	54,978.47	58,958.05	35,419.42
Simple fitting up fee	198,122.00	101,000.00	125,530.00	173,592.00
Repairing fee		14,517.30	5,332.40	9,184.90
Others	197,752.00	38,135.82	93,485.31	142,402.51
Total	646,996.00	408,731.79	592,135.35	463,592.44

6. Inventories

Items Raw materials Products in process Finished products and goods in stock Packing materials and low-value consumption goods Total	June 30, 2004 Amount Provision for price falling 46,463,921.50 22,806,228.00 3,625,620.12 206,138,305.04 40,687,354.98 1544.00 256,229,390.66 63,493,582.98	December 31, 2003 Amount Provision for price falling 41,469,655.00 22,806,228.00 4,161,965.00 167,946,783.00 40,730,071.00 2,606,730.00 216,185,133.00 63,536,299.00
	Amount 46,463,921.50 3,625,620.12 206,138,305.04 1544.00 256,229,390.66	Amount 41,469,655.00 4,161,965.00 167,946,783.00 2,606,730.00 216,185,133.00

• For the net realizable value of the inventories, refer to the market price. It is determined based on the regional estimated sales expense and the amount after the relevant taxes.

7. Long-term investment

	Items	June 30, 2004	December 31,
			2003
_____		____	_____
			_
Stock	investment	3,085,000.00	3,085,000.00
Other	equity	1,800,000.00	1,800,000.00
investment
Total		4,885,000.00	4,885,000.00

① Stock investment

	Investees	Share	Number in	Proportion	Investment	Market	Reserve	Remarks
		type	the	of capital	amount	price at	for
			investees’			year end	devaluatio
			total				n
			registered
			shares
_______		_	_	_	__	_	_	_
	_	_	_	_		_	_	_
Wanneng Joint Stock Co., Ltd.		Legal person	1.1 million shares	0.13%	3,000,000.00			Not listed
		shares
Xi’an Stock	Tangcheng Joint Co., Ltd.	Legal person	50,000 shares	0.10%	85,000.00			Not listed
		shares

Total

3,085,000.00

② Other equity investment

②Other	equit	y	in	vest		m	ent
										Investment amount
										Initial investment	amount
Investees			Investmen				original currency Conversion in			RM Equity adjusted			Adjusted amoun			Ending balance % in the investee
			Term							year			accumulated equi					equity
____			___				__ __ _______						__			__ ____
			__
Shenzhen CATIC		C	13	years			300,000..00 300,000..00									300,000..00 15%
Transmit Co., Ltd.
Shenzhen	Rese		20 years				1,500,000.00 1,500,000.00									1,500,000.00 50%
Institute of	North
China	Polytec
University
Total							1,800,000.00 1,800,000.00									1,800,000.00
8. Fixed assets		and accumulative depreciation
Fixed assets, type and cost					opening balance				Increase in the report period					decrease in the report period				ending balance
__						_____		_______				_______					_______
Housing buildings			and				72,511,196.00											72,551,196.00
Machines equipment				&			15,449,740.00			225,650.00					87,358.48			15,588,031.52
Electronic	equipment						7,211,917.00		2,619,414.35						446,858.00			9,384,473.35
Motor vehicle							6,456,294.00			915529.94					145,202.66			7,226,621.28
Other equipment							6,735,595.00			51,495.30								6,787,090.30
Total						108,364,742.00			3,812,089.59						679,419.14			111,497,412.45
Accumulative
depreciation
Housing buildings			and				30,219,991.00		1,049,059.02									31,269,050.02
Machines equipment				&			8,178,294.00			553,098.47					63,856.45			8,667,536.02
Electronic equipment							4,796,114.00			466,453.44					305,187.00			4,957,380.44
Motor vehicle							3,912,205.00			267,343.70					137,942.53			4,041,606.17
Other equipment							4,754,398.00			403,229.10								5,157,627.14
Total							51,861,002.00		2,739,183.77						506,985.98			54,093,199.79
9. Construction in				process
Projects	December					31, increase in		the	Fixed assets		Other				June 30, 2004			Fun
	2003						report year		transferred		decrea							ds
									in this year		ses							sour
																		ce
Developme	125,227,493.42 31,576,032.29														156,803,525.71			self
nt of FIYTA
Hi-tech
Industrial
Park
Total	125,227,493.42 31,576,032.29														156,803,525.71
10. Long-term		expenses					to be proportioned
Items			December				31, increase	this year Transfer			out		this		amount amortized			June 30, 2004
			2003							year					this year
Fixed rented	assets			4,379,366.00 3,129,865.49										-	1,215,132.04			6,294,098.79
expense	for

improving works Trademark 2,255,007.00 156,250.00 2,098,757.66 compensation Other deferred 252,351.00 64,987.53 187,363.47 payment Total 6,886,724.00 3,129,865.49 1,436,369.57 8,580,219.92

11. Short-term Loan

Items June 30, 2004 December 31, 2003 Bank loan: secured 100,000.00 Miscellaneous Total: 100,000.00

12. Accounts payable

Age Within a year within over 1 year but below 2 years within over 2 but below 3 years Over 3 years Total	June 30, 2004 Balance 32,332,109.82 1,007,618.04 33,339,727.86	proportion (%) 96.98% 3.02% 100%	December 31, Balance 33,609,383.63 895,146.37 34,504,530.00	December 31,	2003 proportion (%) 97.41% 2.59% 100%

Of the accounts payable, there is none owed to the shareholders holding more than 5% (with 5% inclusive) of the Company’s shares.

13. Advance Receipts

Age Within a year within over 1 year but below 2 years within over 2 years but below 3 years Over 3 years Total	June 30, 2004 Balance proportio n (%) 3,318,442.12 63.82% 1,881,340.17 36.18% 5,199,782.29 100%	December 31, Balance 3,300,139.83 1,881,340.17 5,181,480.00	December 31,	2003 proportion (%) 63.69% 36.31% 100%

Of the advance receipts, there is none directly owed to the shareholders holding more than 5% (with 5% inclusive) of the Company’s shares.

14. Other payables

Age Within a year within over 1 year but below 2 years within over 2 years but below 3 years Over 3 years Total	June 30, 2004 Balance 22,104,663.80 2,986,539.43 5,156,480.17 30,247,683.40	proportio n (%) 73.08% 9.87% 17.05% 100%	December 31, Balance 6,707,959.31 2,131,951.56 3,778,156.13 12,618,067.00	December 31,	2003 proportion (%) 53.16% 16.90% 29.94% 100%

Of the other payables, there is none directly owed to the shareholders holding more than 5% (with 5% inclusive) of the Company’s shares.

15. Taxes Dutiable

Taxes June 30, 2004 Business tax dutiable 215,714.21 VAT not yet offset -14,124,275.01 urban construction tax dutiable 70,335.15 Business income tax dutiable 97,706.01 Others Total -13,740,519.64 16. Expenses allotted in advance Items June 30, 2004 Water and electricity 29,746.43 Advertisement Others Total 29,746.43 17. Other accounts dutiable Items June 30, 2004 Educational Surcharge 27,426.32 Flood fighting fund Total 27,426.32 18. Special accounts payable Items June 30, 2004 Fund financed for construction of enterprise technology center 3,000,000.00 Total 3,000,000.00 19. Capital Stock Items June 30, 2004 Negotiable shares, not listed 130,248,000.00 Negotiable shares, listed 119,069,999.00 Including: Domestically listed RMB ordinary shares 60,749,999.00 Domestically listed RMB based foreign shares 58,320,000.00 Total: 249,317,999.00 20. Capital public reserve Items June 30, 2004 Share premium 177,354,784.00 Value added in assets assessment 13,753,693.00 Price difference in related 738,757.00

December 31, 2003 304,293.00 -11,665,376.00 62, 311,299.00628.00 802,789.00 -10,184,367.00 December 31, 2003 118,868.00 614,130.00 78,971.00 811,969.00 December 31, 2003 64,690.00 60,789.00 125,479.00 December 31, 2003 3,000,000.00 3,000,000.00 December 31, 2003 130,248,000.00 119,069,999.00 60,749,999.00 58,320,000.00 249,317,999.00 December 31, 2003 177,354,784.00 13,753,693.00 738,757.00

transactions Total

191,847,234.00

191,847,243.00

21. Surplus public reserve

Items June 30, 2004 Statutory surplus public reserve 43,445,904.00 Statutory public welfare fund 25,036,994.00 Discretionary surplus public 61,984,894.00 reserve Total 130,467,792.00 22. Retained earnings Items June 30, 2004 Retained profit - Retained earnings at year -56,176,663.00 beginning - Profit this year 1,562,895.14 Total -54,613,767.86

December 31, 2003

43,445,904.00 25,036,994.00 61,984,894.00 130,467,792.00 December 31, 2003 -56,176,663.00

-56,176,663.00

23. Income from principal business

Items Jan.1 to Jun. 30, 2004 Jan.1 to Jun. 30, 2003 Income from sales of products 66,243,641.43 50,943,319.85 Income from sales of goods 60,647,687.49 38,000,319.42 Operating and service income 8,961,822.78 Property income 7,263,722.19 7,682,407.20 Total 134,155,051.11 105,587,869.25

24. Costs of principal business

Items	Jan.1 to Jun. 30, 2004	Jan.1 to Jun. 30, 2003
Product sales cost	32,852,632.53	26,392,384.26
Commodity sales cost	50,110,901.96	32,071,113.45
Operating and service costs		4,307,114.75
Property costs	689,860.77	252,672.06
Total	83,653,395.26	63,023,284.52

25. Taxes and surcharges of principal business

Items Jan.1 2004 Business tax Urban construction tax Educational Surcharge others Total 26. Financial expenses Types Jan.1 2004 Interest payment	to Jun. 30, Jan.1 to Jun. 30, 2003 504,197.25 566,188.42 60,585.97 48,512.03 193,757.92 104,516.88 758,541.14 719,217.33 to Jun. 30, Jan.1 to Jun. 30, 2003 2,114.00

Less: Interest income 411,893.82 306,191.95 Exchange losses Less: Exchange gain Bank service charges 160,399.69 89,606.00 others 48,794.15 Total -200,585.98 -216,585.95

27. Profit from other business

		Jan.1 to	Jun.	30,	2004				Jan.1 to Jun. 30,
									2003
Items		Income			Cost	tax	Profit		Profit
Income from
repairing and		1,539,905.73			386,050.69		1,153,855.04		321,704.63
replacement
others		143,303.34			134,865.24			8,438.10	8,547.01
Total		1,683,209.07			520,915.93		1,162,293.14		330,251.64
28. Investment		income
Types					Jan.1 to Jun. 30, 2004		Jan.1	to Jun. 30, 2003
Earnings from investment		short	term		-2,795,826.67				5,998,760.75
Investees adjusted based on equity method									425,638.20
Securities investment						351,335,63
income from disposal invested companies			of	the					-61,043.69
Others						3,872.59
Total					-2,440,618.45				6,363,355.26
29. Non-operating income
Main items					Jan.1 to Jun. 30, 2004		Jan.1	to Jun. 30, 2002
Output VAT,		carried-in		and
transferred out
Net income from assets		disposal	of fixed			702,525.26			1,460.00
Accounts unnecessary to be paid
others						462,917.00			2,391,780.01
Total						1,165,442.60			2,393,240.01
30. Non-operating expenses
Main items				Jan.1 to Jun. 30,		2004	Jan.1 to	Jun. 30, 2003
Input VAT carried-in
Net losses on disposal of fixed assets						4,358.62		588,004.33
Penalty payment					21,322.50			15,500.00
others						1,469.61		3,852.26
Total					27,150.73			607,356.59

(V) Notes to the relevant items on the accounting statements of the parent company

1. Accounts receivable

June 30, 2004

December 31, 2003

Age		Amount	Proportio	Provision for	Amount	Proportio	Provision for bad
			n	bad debts		n	debts
Within a year		11,269,139.77	18%	278,907.00	12,826,090.00	21.00%	278,907.00
1 to	2 years	4,776,863.14	7.63%	886,564.00	4,257,273.00	7%	886,564.00
2~3	years	15,100,647.29	24.12%	11,692,934.00	13,747,737.00	23% .	11,692,934.00
Over 3 years		31,459,681.86	50.25%	26,849,357.00	30,210,273.00	49%	26,849,357.00
Total		62,606,332.05	100%	39,707,762.00	61,041,373.00	100%	39,707,762.00
	Top five debtors of the accounts receivable at the end of the period are as follows:
	Companies			Amount receivable		Proportion	in the
						total of the	accounts
						receivable
	Timepieces and Sewing		Machine Wholesale		982,604.03		1.56%
	Station	of Yingkou General Merchandise Co.
	Siping No. 1 Department		Store		823,302.04		1.31%
	Anshan	Timepieces	and Photographic		807,815.00		1.29%
	Equipment Co.
	Culture	and Timepieces Co.			773,021.00		1.23%
	Qingdao Orient Group Co., Ltd.				764,149.00		1.22%

• Ended June 30, 2004, there were no accounts receivable owed by the shareholders holding more than 5% (including 5%) of the Company’s total shares.

2. Other receivables

June 30, 2004 Age Amount Proportion Within a year 97,195,124.51 78.66% 1~2 years 17,212,618.28 13.93% 2~3 years 1,574,686.28 1.27% Over 3 years 7,576,983.26 6.14% Total 123,559,412.33 100%	June 30, 2004 Age Amount Proportion Within a year 97,195,124.51 78.66% 1~2 years 17,212,618.28 13.93% 2~3 years 1,574,686.28 1.27% Over 3 years 7,576,983.26 6.14% Total 123,559,412.33 100%	Provision for bad debts 228,158.00 6,104,150.00 86,558.00 5,777,341.00 12,196,207.00	December 31, 2003 Amount Proportio n 70,493188.00 75% 16,312,566.00 17% 455,768.00 0.5% 7,101,222.00 7.5% 94,362,744.00 100%	Provision for bad debts 228,158.00 6,104,150.00 86,558.00 5,777,341.00 12,196,207.00
	Amount Proportion 97,195,124.51 78.66% 17,212,618.28 13.93% 1,574,686.28 1.27% 7,576,983.26 6.14% 123,559,412.33 100%

• Ended June 30, 2004, there were no other receivables owed by the shareholders holding more than 5% (including 5%) of the Company’s total shares.

3. Long-term equity investment

Items	June 30, 2004	December 31, 2003
Stock investment	3,085,000.00	3,085,000.00
Subsidiaries:	41,511,954.56	34,084,452.00

Others Total

1,800,000.00 1,800,000.00 46,396,954.56 38,969,452.00

（1） Stock investment

（1）St	o	ck	inve	stment
Investees				Type	of	Quantity	Proportion in the		Investment		Market	Reserve	Remarks
				share			registered	capital	amount		price at	for
							of the investee				year end	devaluat
												ion
Wanneng Joint Stock				Legal person		1.1	0.13%		3,000,000.00				Not	listed
Co., Ltd.				shares		million
						shares
									85,000.00				Not	listed
Xi’an Tangcheng				Legal person		50,000	0.10%
Joint Stock	Co.,		Ltd.	shares		shares
Total									3,085,000.00
（2）Subsidiaries:
Investees				Operation term			Proportion	in	the	June	30, 2004	December		31,
							registered	capital	of			2003
							the investee
Shenzhen		Feitu		1983-2003			60%
New Technology
Development			Co.,
Ltd.
Xi’an Haomen				1994-2009			75%		5,800,500.00			5,800,500.00
Restaurants			&
Recreation			Co.,
Ltd.
Shenzhen				1997-2012			90 %		5,618,976.69			5,752,069.00
Harmony		World
Watches		Center
Co., Ltd.
Shenzhen		Feijing		1997-2007			90 %
Sophisticated
Optical
Instruments
Manufacture			Co.,
Ltd.
Shenzhen		FIYTA		1999-2009			90%		27,086,306.16			20,056,373.00
Sophisticated
Timepieces
Manufacture			Co.,
Ltd.
Shenzhen				1993-2008			50%		3,006,171.71			2,475,510.00
Harmony		World
Watches		Center
Co., Ltd.
Total									41,511,954.56			34,084,452.00
（3）Other equity investment
								Initial investment amount
Investees	Investment			Initial	investment		_________					Proportion		in	the
	term			amount								Investees’ equity

		original currency	Conversion in RMB	Equity adjusted	Adjusted		Ending balance
				this year	amount	of
					accumulated
					equity
Shenzhen	13 years	300,000.00	300,000.00				300,000..00	15%
CATIC Culture
Transmit Co.,
Ltd.
Shenzhen	20 years	1,500,000.00	1,500,000.00				1,500,000.00	50%
Research
Institute of
Northwest
China
Polytechni
c
University
Total		1,800,000.0	1,800,000.0					1,800,000.0
		0	0					0

4. Income from principal business

Items Jan.1 FIYTA watches Property income Total	to Jun. 30, 2004 Jan.1 to Jun. 30, 2003 66,067,465.05 46,879,607.50 7,263,722.19 7,682,407.20 73,331,187.24 54,562,014.70

5. Costs of principal business

Items Jan.1 to Jun. 30, 2004 Jan.1 to Jun. 30, 2003 FIYTA watches 43,443,238.33 28,906,236.32 Property costs 689,860.77 252,672.06 Total 44,133,099.10 29,158,908.38

(VI) Related Parties and Related Transactions

1. Related parties with control relationship

Companies CATIC SHENZHEN HOLDINGS LTDS. CATIC Shenzhen Corporation	Registered address Shenzhen Shenzhen	Principal business Investing to set up entities, domestic trade, materials supply and sales Import and export of motor vehicles, equipment and machinery made within the Group.	Relationship Company type the Company’s parent company Joint stock co., ltd. shareholder of the Company’s parent company solely owned by the state	Legal Representative Wu Guangquan Wu Guangquan

2. Balance of Main Accounts Receivable from the Related Parties

Company Names June 30, 2004 December 31, 2003 Shenzhen Feiyu Artistic Timepiece 5,472,480.00 5,472,480.00

Co., Ltd. Shenzhen Feitu New Technology 1,884,030.00 1,884,030.00 Development Co., Ltd. CATIC Shenzhen Corporation 1,500,000.00 1,500,000.00

3. Related Parties without Control Relationship

Company names Shenzhen Tianma Microelectronics Co., Ltd. Shenzhen CATIC Property Management Co., Ltd. Shenzhen Rainbow Emporium Co., Ltd. Shenzhen Nanguang (Group) Co., Ltd. Shenzhen CATIC Culture Transmit Co., Ltd. Shenzhen Research Institute of Northwest China Polytechnic University	Relationship controlled by the same parent company controlled by the same parent company shareholder sharing the same Chairman of the Board sharing the same Chairman of the Board Associated company Joint venture company

4. Material related transactions with the related parties

Items Jan.to Jun., 2004 Property management fee Total	Jan. to June, 2003 495,100.80 0.00 495,100.80 0.00	Jan. to June, 2003 495,100.80 0.00 495,100.80 0.00
		0.00 0.00

Note: The related party involved in this transaction is Shenzhen CATIC Property Management Co., Ltd.

(VII) Additional information

1. The net assets-income ratio and earnings per share are calculated in accordance with the Rules for Public Companies to Disclose Information and Prepare Statements (No. 9) promulgated by China Securities Regulatory Commission (CSRC).

Profit of the report Net assets-income ratio period

Earnings per share (RMB/share)

	Fully diluted	Weighted average	Fully diluted		Weighted
					average
Profit from principal businesses	9.621%	9.636%		0.200		0.200
Operating profit	0.733%	0.734%		0.015		0.015
Net profit	0.302%	0.303%		0.006		0.006
Net profit less non- recurring loss/gain	0.082%	0.082%		0.002		0.002

2. Schedule of Reserve for Deterioration of Assets

Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2004 In RMB Items Opening Balance increase in the report period Decrease in the report period ending balance I. Accounts receivable 56,159,717.00 0.00 1,426,157.51 54,733,559.49 Incl.: Accounts receivable 42,765,428.00 0.00 1,426,157.51 41,339,270.49	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2004 In RMB Items Opening Balance increase in the report period Decrease in the report period ending balance I. Accounts receivable 56,159,717.00 0.00 1,426,157.51 54,733,559.49 Incl.: Accounts receivable 42,765,428.00 0.00 1,426,157.51 41,339,270.49	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2004 In RMB Items Opening Balance increase in the report period Decrease in the report period ending balance I. Accounts receivable 56,159,717.00 0.00 1,426,157.51 54,733,559.49 Incl.: Accounts receivable 42,765,428.00 0.00 1,426,157.51 41,339,270.49	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2004 In RMB Items Opening Balance increase in the report period Decrease in the report period ending balance I. Accounts receivable 56,159,717.00 0.00 1,426,157.51 54,733,559.49 Incl.: Accounts receivable 42,765,428.00 0.00 1,426,157.51 41,339,270.49	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2004 In RMB Items Opening Balance increase in the report period Decrease in the report period ending balance I. Accounts receivable 56,159,717.00 0.00 1,426,157.51 54,733,559.49 Incl.: Accounts receivable 42,765,428.00 0.00 1,426,157.51 41,339,270.49
Items	Opening Balance	increase in the report period	Decrease in the report period	ending balance
I. Accounts receivable	56,159,717.00	0.00	1,426,157.51	54,733,559.49
Incl.: Accounts receivable	42,765,428.00	0.00	1,426,157.51	41,339,270.49
Other receivables	13,394,289.00	0.00	0.00	13,394,289.00
II. Reserve for devaluation of short-term investment	905,068.00	3,035,336.63	0.00	3,940,404.63

Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2004 In RMB Items Opening Balance increase in the report period Decrease in the report period ending balance I. Accounts receivable 56,159,717.00 0.00 1,426,157.51 54,733,559.49 Incl.: Accounts receivable 42,765,428.00 0.00 1,426,157.51 41,339,270.49	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2004 In RMB Items Opening Balance increase in the report period Decrease in the report period ending balance I. Accounts receivable 56,159,717.00 0.00 1,426,157.51 54,733,559.49 Incl.: Accounts receivable 42,765,428.00 0.00 1,426,157.51 41,339,270.49	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2004 In RMB Items Opening Balance increase in the report period Decrease in the report period ending balance I. Accounts receivable 56,159,717.00 0.00 1,426,157.51 54,733,559.49 Incl.: Accounts receivable 42,765,428.00 0.00 1,426,157.51 41,339,270.49	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2004 In RMB Items Opening Balance increase in the report period Decrease in the report period ending balance I. Accounts receivable 56,159,717.00 0.00 1,426,157.51 54,733,559.49 Incl.: Accounts receivable 42,765,428.00 0.00 1,426,157.51 41,339,270.49	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2004 In RMB Items Opening Balance increase in the report period Decrease in the report period ending balance I. Accounts receivable 56,159,717.00 0.00 1,426,157.51 54,733,559.49 Incl.: Accounts receivable 42,765,428.00 0.00 1,426,157.51 41,339,270.49
Items	Opening Balance	increase in the report period	Decrease in the report period	ending balance
I. Accounts receivable	56,159,717.00	0.00	1,426,157.51	54,733,559.49
Incl.: Accounts receivable	42,765,428.00	0.00	1,426,157.51	41,339,270.49
Other receivables	13,394,289.00	0.00	0.00	13,394,289.00
II. Reserve for devaluation of short-term investment	905,068.00	3,035,336.63	0.00	3,940,404.63

Incl.: Stock investment	905,068.00	3,035,336.63	0.00	3,940,404.63
Securities investment	0.00	0.00	0.00	0.00
III. Reserve for price falling of inventories	63,536,299.00	0.00	42,716.02	63,493,582.98
Including: goods in stock	42,716.02	0.00	42,716.02	0.00
Finished products	40,687,354.98	0.00	0.00	40,687,354.98
Raw materials	22,806,228.00	0.00	0.00	22,806,228.00
Packing materials and low-value consumptionarticles	0.00	0.00	0.00	0.00
IV. Total reserve for devaluation of long-term investments	0.00	0.00	0.00	0.00
Incl.: Long-term equity investment	0.00	0.00	0.00	0.00
Long term credit investment	0.00	0.00	0.00	0.00
V. Reserve for devaluation of fixed assets	2,921,871.00	0.00	12,838.88	2,909,032.12
Incl.: Housing & buildings	2,600,000.00	0.00	0.00	2,600,000.00
Machines & equipment	321,871.00	0.00	12,838.88	309,032.12
VI. Reserve for depreciation of intangible assets	0.00	0.00	0.00	0.00
incl.: Patent	0.00	0.00	0.00	0.00
Trademark	0.00	0.00	0.00	0.00
VII. Reserve for Construction-in-progress	0.00	0.00	0.00	0.00
VIII. Reserve for devaluation of entrustedloan	0.00	0.00	0.00	0.00