FIYTA Precision Technology Co., Ltd. — Interim / Quarterly Report 2006

Apr 20, 2006

SHENZHEN FIYTA HOLDINGS LTD. 2006 1[st] Quarterly Report – Full Text

Stock Code: 000026 200026 Short form of the Stock: FIYTA A FIYTA B Public Notice No:2006－015

SHENZHEN FIYTA HOLDINGS LTD.

2006 1[st] Quarterly Report – Full Text

§ 1 Important

I.1 The Board of Directors, the Supervisory Committee, directors, supervisors and senior executives of the Company hereby confirm that there are no important omissions, fictitious statements or serious misleading information carried in this report, and shall take all responsibilities, individually and/or jointly, for the authenticity, accuracy and completion of the whole contents.

1.2 No director, director or any senior executive has expressed that he/she is not sure for the genuineness, accuracy or completeness of this quarterly report or has any different opinion on the same.

1.3 Name List of Directors Absent from the Meeting

Name of director absent
	Cause of absence	Trustee’s Name
from the meeting
Wang Baoying	In business trip	Xu Dongsheng

1.4 The financial report of this report period has not been audited.

1.5. Mr. Wu Guangquan, the Chairman of the Board, Mr. Xu Dongsheng, the Managing Director, Mr. Li Dehua, Deputy General Manager and Chief Financial Officer and Mr. Hu Xinglong, Manager of the Financial Department, hereby ensure the accuracy and completeness of the financial report enclosed in this quarterly report.

§2 Company Information

2.1 Basic Information

Short form of the		Short Form before	Short Form before
	FIYTA A, FIYTA B
stock:		Change (if any)
Stock Code:	000026 200026
	Secretary of the Board		Securities Affairs Representative
Names	Hao Huiwen:		Chen Zhuo
	20~~th~~Floor, FIYTA Technology Building, Gaoxin S. Road One, Nanshan District,
Liaison Address
	Shenzhen
Tel.	0755-86013992		0755-86013669

1

SHENZHEN FIYTA HOLDINGS LTD. 2006 1[st] Quarterly Report – Full Text

Fax	0755-83348369	0755-83348369
E-mail	investor@fiyta.com.cn	investor@fiyta.com.cn

2.2 Financial Information

2.2.1 Financial Highlights

In RMB

			Increase/decrease of the end of
	End of the report period	End of the previous year	the report period vs the end of
			the previous year (%)
Total assets	657,548,235.33	621,275,547.20	5.84%
Shareholders’ equity
(excluding minority	538,249,795.66	533,371,239.36	0.91%
equity)
Net assets per share	2.159	2.139	0.91%
Net assets per share
	2.107	2.030	3.79%
after adjustment
			Increase/decrease of the report
		From year beginning to the end
	Report period		period vs the same period of the
		of the report period
			previous year (%)
Net cash flows arising
	-28,417,964.16	-28,417,964.16
from operating activities
Earnings per share	0.02	0.02	547.87%
Earnings per share
	0.02	-	-
(Note)
Net assets-income ratio	0.91%	0.91%	0.76%
Net assets-income rate
after deducting the
	0.80%	0.80%	0.07%
non-recurring gains and
loss

Note: In case there was any change in the Company’s share capital taken place in the duration from the end of the report period to the date of disclosing this report, the earnings per share should be based on the up-to-date share capital.

Non-recurring gain and loss
	Amount
items
Net amount of
non-operating income and	40,777.98
expenses
Losses from short term
	-657,759.39
investments
Less: Amount affected by
non-recurring gain/loss	6,116.70
income tax
Total	-610,864.71

2.2.2 Financial Statement

2.2.2.1 Balance Sheet

Prepared by: SHENZHEN FIYTA HOLDINGS LTD. March 31, 2005 In RMB	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. March 31, 2005 In RMB	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. March 31, 2005 In RMB	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. March 31, 2005 In RMB	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. March 31, 2005 In RMB
	Ending Balance		Opening Balance
Items
	Consolidated	Parent company	Consolidated	Parent company
Current assets:
Monetary funds	54,235,831.27	41,854,777.46	47,710,206.11	29,988,789.99
Short-term
	1,463,400.00	1,463,400.00	4,949,220.00	4,949,220.00
investment

2

SHENZHEN FIYTA HOLDINGS LTD. 2006 1[st] Quarterly Report – Full Text

Notes receivable			550,000.00	550,000.00
Dividend receivable		244,066.90		244,066.90
interest receivable
Accounts receivable	19,752,331.03	15,563,555.67	27,659,618.52	21,367,150.45
Other receivables	19,991,026.35	84,908,832.04	17,329,135.64	106,055,435.82
Advance to supplier	1,038,861.74	59,999.99	526,831.60	59,999.99
Subsidies receivable
Inventories	270,595,364.64	71,829,404.29	233,861,001.05	61,888,807.31
Expenses to be
	824,781.92	139,205.00	689,324.14	142,103.53
apportioned
Long-term debt
investment due within a
year
Other current assets
Total current assets	367,901,596.95	216,063,241.35	333,275,337.06	225,245,573.99
Long-term investment:
Long-term equity
	10,385,500.87	164,096,353.59	10,385,500.87	159,145,424.44
investment
Long term bond
investment
Total long-term
	10,385,500.87	164,096,353.59	10,385,500.87	159,145,424.44
investments
Consolidated price
difference
Fixed assets:
Fixed assets, cost	323,830,145.18	294,079,415.54	314,215,739.27	291,699,290.65
Less: accumulative
	65,244,395.85	53,223,675.86	63,305,277.38	50,857,649.80
depreciation
Fixed assets, net	258,585,749.33	240,855,739.68	250,910,461.89	240,841,640.85
Less: Provision for
devaluation of fixed	2,860,323.09	2,600,000.00	2,860,323.09	2,600,000.00
assets
Fixed assets, net	255,725,426.24	238,255,739.68	248,050,138.80	238,241,640.85
Engineering supplies
Improvement of
shareholder’s assets for			7,909,517.63
operating rent
Construction-in-progres	134,773.24	134,773.24	134,773.24	134,773.24
s
Disposal of fixed
assets
Total fixed assets	255,860,199.48	238,390,512.92	256,094,429.67	238,376,414.09
Intangible assets and
other assets:
Intangible assets	16,127,214.33	16,242,387.93	16,242,387.93	16,242,387.93
Long-term expenses
	7,273,723.70	4,386,321.07	5,277,891.67	4,062,993.96
to be apportioned
Other long term
assets
Total intangible
	23,400,938.03	20,628,709.00	21,520,279.60	20,305,381.89
assets and other assets
Deferred taxes:
Deferred taxes and
debit
Total assets	657,548,235.33	639,178,816.86	621,275,547.20	643,072,794.41
Current liabilities
Short-term Loan	60,000,000.00	60,000,000.00	20,000,000.00	20,000,000.00
Notes payable
Accounts payable	19,964,004.75	2,272,004.19	28,992,468.45	46,011,182.83
Advance from
	1,333,553.00	10,000.00	4,235,032.14	3,283,700.14
customers
Salaries payable	614,908.66	66,290.66	1,679,877.40	69,064.40
Welfares payable	2,966,391.74	1,977,731.21	2,871,521.81	1,978,323.61
Dividends payable
Taxes payable	-8,975,153.14	2,246,708.27	-10,744,164.79	2,571,988.26

3

SHENZHEN FIYTA HOLDINGS LTD. 2006 1[st] Quarterly Report – Full Text

Other accounts due	35,242.11	19,462.16	38,460.40	7,282.92
Other payables	30,885,647.47	24,240,100.27	28,918,936.66	25,611,311.27
Expenses allotted in
	2,087,777.67	648,431.13	1,409,493.00	720,408.31
advance
Predicted liabilities
Long-term liabilities
due within one year
Total other current
liabilities
Total current liabilities	108,912,372.26	91,480,727.89	77,401,625.07	100,253,261.74
Long-term liabilities
Long-term Loan
Bonds payable
Long term accounts
payable
Special accounts
	3,000,000.00	3,000,000.00	3,000,000.00	3,000,000.00
payable
Other long-term
liabilities
Total long-term
	3,000,000.00	3,000,000.00	3,000,000.00	3,000,000.00
liabilities
Deferred taxes:
Deferred taxes and
credit items
Total liabilities	111,912,372.26	94,480,727.89	80,401,625.07	103,253,261.74
Minority shareholders’
	7,386,067.41		7,502,682.77
equity:
owners’/shareholders’
equity
Paid-up capital (or
	249,317,999.00	249,317,999.00	249,317,999.00	249,317,999.00
share capital)
Less: Returned
investment
Net paid-up capital
	249,317,999.00	249,317,999.00	249,317,999.00	249,317,999.00
(or share capital)
Capital Public
	191,847,232.65	191,847,232.65	191,847,232.65	191,847,232.65
Reserve
Surplus Public
	98,654,301.02	98,654,301.02	98,654,301.02	98,654,301.02
Reserve
Incl.: Statutory
	25,036,994.11	25,036,994.11	25,036,994.11	25,036,994.11
public welfare fund
Retained earnings	-1,569,737.01	4,878,556.30	-6,448,293.31	0.00
Including: Cash
dividend
Unidentified
investment loss
Foreign currency
conversion balance of
statement
Total
owners’/shareholders’	538,249,795.66	544,698,088.97	533,371,239.36	539,819,532.67
equity
Total liabilities and
owners’/shareholders’	657,548,235.33	639,178,816.86	621,275,547.20	643,072,794.41
equity

Legal representative: Wu Guangquan Chief Financial Officer: Li Dehua Manager of the Accounting Department: Hu Xinglong

2.2.2.2 Statement of Profit and Profit Distribution

Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan to Mar, 2006 In RMB

	The report period	The report period	Same Period of the Previous Year	Same Period of the Previous Year
Items
	Consolidated	Parent company	Consolidated	Parent company
I. Income from principal
	111,210,503.53	43,311,930.83	88,916,628.28	38,445,687.58
businesses

4

SHENZHEN FIYTA HOLDINGS LTD. 2006 1[st] Quarterly Report – Full Text

Less: Costs of
	71,412,799.18	21,391,531.43	58,435,299.81	20,056,247.46
principal business
Taxes and
surcharges of principal	857,431.21	742,540.93	655,757.91	607,126.28
business
II. Profit from principal
businesses (loss stated	38,940,273.14	21,177,858.47	29,825,570.56	17,782,313.84
with“-“)
Plus: Profit from other
businesses (loss stated	437,747.25	59,434.76	341,144.57	215,437.74
with“-“)
Less: Operation costs	19,092,663.64	12,640,099.90	13,809,361.41	9,672,622.29
Overheads	13,655,191.41	8,369,306.34	11,564,222.86	6,364,325.24
Financial
	897,517.29	266,429.20	279,141.41	153,014.36
expenses
III. Profit from
businesses (loss stated	5,732,648.05	-38,542.21	4,513,989.45	1,807,789.69
with“-“)
Plus: Investment
income (loss stated with	657,759.39	5,608,688.54	-3,568,006.57	-1,059,888.83
“-“)
Subsidy income
Non-operating
	103,265.51		39,042.88	8,085.00
income
Less: Non-operating
	62,487.53	2,821.64	10,368.63	2,973.63
expenses
IV. Total Profit (loss
	6,431,185.42	5,567,324.69	974,657.13	753,012.23
stated with“-“)
Less: Income tax	1,668,898.58	688,768.39	221,644.90
Minority
	-116,269.46
shareholders’equity
Add: Amount of
unrecognized
investment loss
incurred in the report
period
V. Net Profit (loss
	4,878,556.30	4,878,556.30	753,012.23	753,012.23
stated with“-“)
Plus: Retained
earnings at year	-6,448,293.31	0.00	-54,268,783.00	-54,268,783.00
beginning
Other transfer-in
VI. Profit available for
	-1,569,737.01	4,878,556.30	-53,515,770.77	-53,515,770.77
distribution
Less: Allotting
statutory surplus public
reserve
Allotting statutory
public welfare fund
Allotting staff’s
reward and welfare fund
Allotting reserve
fund
Allotting
enterprise development
fund
Investment
incomeed with profit
VII. The profit
distributable to the	-1,569,737.01	4,878,556.30	-53,515,770.77	-53,515,770.77
investors
Less: Dividends of
preferential shares
payable
Allotting
discretionary surplus

5

SHENZHEN FIYTA HOLDINGS LTD. 2006 1[st] Quarterly Report – Full Text

public reserve
Dividend payable
for common shares
Dividends of
common shares
converted into
capital/capital stock
VIII. Retained earnings	-1,569,737.01	4,878,556.30	-53,515,770.77	-53,515,770.77
Additional Information
to the Profit Statement
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
Legal representative: Wu Guangquan Accounting Department: Hu Xinglong		Chief Financial Officer: Li Dehua Manager of the

2.2.2.3 Cash Flow Statement

Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan to Mar, 2006 In RMB	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan to Mar, 2006 In RMB	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan to Mar, 2006 In RMB
	The report period
I
tems	Consolidated	Parent company
I. Net cash flows arising from operating activities
Cash received from sales of products and
	126,516,008.28	47,613,921.49
supply of labor
Rebated taxes received
Other business related cash receipts	455,462.74	337,252.46
Subtotal of cash flow in	126,971,471.02	47,951,173.95
Cash paid for purchase of goods and
	111,483,994.10	19,071,652.93
reception of labor services
Cash paid to and for staff	14,892,858.26	7,280,275.92
Taxes paid	6,643,545.11	3,131,140.51
Other operation related cash payments	22,369,037.71	45,347,086.39
Subtotal of cash flow out	155,389,435.18	74,830,155.75
Net cash flows arising from operating
	-28,417,964.16	-26,878,981.80
activities
II. Cash flows arising from investment activities:
Cash received from recovery of investment	3,000,000.00	3,000,000.00
Cash received from investment income
Net amount of cash received from disposal of
fixed assets, intangible assets and other long	104,885.00
term assets
Other investment related cash receipts
Subtotal of cash flow in	3,104,885.00	3,000,000.00
Cash paid for construction/purchase of fixed
assets, intangible assets and other long term	7,459,495.68	3,553,230.73
assets
Cash paid for investment
Other investment related cash payments
Subtotal of cash flow out	7,459,495.68	3,553,230.73
Net cash flow arising from investment	-4,354,610.68	-553,230.73

6

SHENZHEN FIYTA HOLDINGS LTD. 2006 1[st] Quarterly Report – Full Text

activities
III. Cash flows arising from fund raising
activities:
Cash received from absorption of investment
Cash received from borrowings
Other fund-raising related cash received	40,000,000.00	40,000,000.00
Subtotal of cash flow in	40,000,000.00	40,000,000.00
Cash paid for liabilities repayment
Cash paid for dividend/profit distribution or
repayment of interest
Other fund raising related cash payments	701,800.00	701,800.00
Subtotal of cash flow out	701,800.00	701,800.00
Net cash flow arising from fund-raising
	39,298,200.00	39,298,200.00
activities
IV. Influence upon cash due to change of
exchange rate
V. Net increase of cash and cash equivalents	6,525,625.16	11,865,987.47
Additional Information to the Cash Flow
Statement
1. Net cash flows arising from adjustment of
net profit into operating activities
Net profit	4,878,556.30	4,878,556.30
Plus: Provision for devaluation of assets
Depreciation of fixed assets	3,986,081.48	2,195,794.38
Amortization of intangible assets	208,923.60	208,923.60
Long-term expenses to be apportioned	1,430,130.94
Decrease (less: increase) of expenses
	-135,457.78	2,898.53
to be apportioned
Increase (less: decrease) of expenses
	158,787.57	494,546.13
drawn in advance
Loss (less: income) from disposal of
fixed assets, intangible assets and other long	-40,777.98
term assets
Losses from rejection of fixed assets
Financial expenses	701,800.00	701,800.00
Investment loss (less: income)	-657,759.39	-657,759.39
Deferred tax loan (less: debit)
Decrease (less: increase) of
	-27,246,364.86	-4,324,558.78
inventories
Decrease (less: increase) of operative
	-5,944,331.26	-21,446,603.78
items receivable
Increase (less: decrease) of operative
	-5,641,283.32	-8,932,578.79
items payable
Others
Minority shareholders’equity	-116,269.46
Net cash flows arising from operating
	-28,417,964.16	-26,878,981.80
activities
2. Investment and fund-raising activities with
no cash income and expenses involved
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	54,235,831.27	41,854,777.46
Less: Opening cash balance	47,710,206.11	29,988,789.99
Plus: Ending cash equivalent balance
Less: Opening cash equivalent balance
Net increase of cash and cash equivalents	6,525,625.16	11,865,987.47
Legal representative: Wu Guangquan Accounting Department: Hu Xinglong	Chief Financial Officer: Li Dehua Manager of the

2.3 Total Shares and Shares Held by Top Ten Shareholders of Negotiable Shares at the End of the Report Period

7

SHENZHEN FIYTA HOLDINGS LTD. 2006 1[st] Quarterly Report – Full Text

Total shareholders at the end of the
	19,531
report period
Shares held by the top ten shareholders
Shareholder’s name (full name)	Negotiable shares held at the year end	Types (A-, B-or H-shares, or others)
Henan Fangchen Technology &
	1,709,700.00	A-share
Trade Co., Ltd.
Zeng Ying	717,490.00	B-share
KUNG NGAI HIN	597,322.00	B-share
Zhengzhou Tengbo Trade Co., Ltd.	509,400.00	A-share
Ou Yanping	500,458.00	B-share
Xue Peiming	444,800.00	B-share
Lin Hongbo	362,880.00	B-share
China Pingan Insurance (HK) Co.,
	346,110.00	B-share
Ltd.
Wang Haiyang	344,803.00	A-share
MIN LIU	341,900.00	B-share

§3 Discussion and Analysis of the Management

3.1 Summary of the Operation Activities in the Report Period

In the report period, the Company continued to guide various work with the brand strategy according to the guideline of “carrying through the company’s philosophy, improving the quality of manpower, reinforcing brand integration and devoting efforts to innovative development” worked out at the year beginning and kept steady growth in various businesses. As a result, the profit grew by a big margin over the same period of the previous year. The Company’s revenue from the principal business was RMB 111.2105 million and profit from the principal business was RMB 40.4689 million, with a growth rate of 25.07% and 35.69% respectively over the same period of the previous year. The Company realized a total profit amounting to RMB 6.4312 million and net profit amounting to RMB 4.8785 million, with a growth rate of 559.84% and 547.87% respectively over the same period of the previous year.

In the first quarter, FIYTA watches experienced a favorable sales trend. The leading products, including “Shenzhou Six Spacecraft” space flight watches and Gold Buddha watches launched before the Chinese Spring Festival kept flourishing sales and the gross profit also increased by a big margin. In the report period, the sales income of FIYTA watches was RMB 32.3696 million, an 8.20% growth over the same period of the previous year. Harmony World Watches Center added three chain shops, namely EUROPE Shop in Harbin, Lishan Shop in Kunming and Kairui Shop in Chongqing. In the first quarter, Harmony World Watches Center realized sales income amounting to RMB 67.8986 million, a 36.69% growth over the same period of the previous year. The rental income from FIYTA Building and FIYTA Technology Building amounted to RMB 10.9423 million, a 17.34% growth over the same period of the previous year.

8

SHENZHEN FIYTA HOLDINGS LTD. 2006 1[st] Quarterly Report – Full Text

3.1.1 Businesses or products with the turnover and profit taking over 10% of the total from the principal businesses

√ Applicable □ Inapplicable

	In RMB ’000	In RMB ’000	In RMB ’000
	Principal Businesses Based on Sectors
	Principal business income	Principal business cost	Gross profit rate (%)
Timepiece manufacture	32,369.60	15,459.70	52.24%
Other wholesale and
	67,898.60	54,122.80	20.29%
retail
Lease services	10,942.30	1,830.30	83.27%
Incl.: related
	0.00	0.00	0.00%
transactions
	Principal Businesses Based on Products
Manufacture and sales
	32,369.60	15,459.70	52.24%
of FIYTA watches
Sales of foreign famous
	67,898.60	54,122.80	20.29%
watches
Incl.: related
	0.00	0.00	0.00%
transactions

3.1.2 Seasonal or Periodical Characteristics of Business Operation

□ Applicable √ Inapplicable

3.1.3 Profit Compositions in the Report Period (Proportions of profit from principal businesses, profit from the other businesses, expenses in the period, investment income, subsidy income, net non-operating income and expenditure in the total profit and the significant changes and causes in comparison with those of the previous report period)

√ Applicable □ Inapplicable

Items	Amount In RMB	Amount In RMB	Proportion in total profit (%)	Proportion in total profit (%)	Proportion in total profit (%)
	Jan to Mar, 2006	2005	Jan to Mar, 2006	2005	Increase/decre ase rate
Principal business profit	38,940,273.14	129,173,020.42	605.49%	695.84%	-12.98%
Profit from other business lines	437,747.25	744,145.09	6.81%	4.01%	69.80%
Period expenses	33,645,372.34	110,603,660.52	523.16%	595.81%	-12.19%
Investment income	657,759.39	-1,144,477.69	10.23%	-6.17%	265.89%
Net amount of non-operating income and expenses	40,777.98	394,565.11	0.63%	2.13%	-70.17%
Total profit	6,431,185.42	18,563,592.41	100.00%	100.00%	0.00%
Note: Bigger change in the proportion of investment income in the total profit over that in the previous report period was
nly due to profit-making in stock investment in the report period.

3.1.4 Significant Changes in the Principal Business or its Structure and the Causes in Comparison with the Previous Report Period

□ Applicable √ Inapplicable

9

SHENZHEN FIYTA HOLDINGS LTD. 2006 1[st] Quarterly Report – Full Text

3.1.5 Significant Changes in the Earning Power of the Principal Business (Gross Margin Rate) in Comparison with the Previous Report Period and the Causes

□ Applicable √ Inapplicable

• 3.2 Significant Events, its Impacts and the Solutions

√ Applicable □ Inapplicable

1. For analysis on influence from tax policy, according to the Circular of the State Ministry of Finance and the State Administration of Taxation CAI SHUI [2006] No. 33, commencing from April 1, 2006, China has adjusted the tax items and tax rates of our country’s prevailing consumption tax and the relevant policy, where various high grade watches with sales price (with VAT exclusive) of over RMB 10,000 (with RMB 10,000 inclusive) per piece shall be levied with consumption tax at the rate of 20%. As the proportion of FIYTA watches applicable to the above taxation is small, the said policy has not produced significant affect upon the business of FIYTA watches. However, the above tax policy may produce fluctuation affect upon sales of famous brand watches at Harmony Famous Brand Watches chain shops. However, on long term basis, the famous brand watch manufacturers and distributors shall enhance communication and cooperation in order to stabilize the famous watch consumption market and reduce the affect from the taxation factor upon the sales market; in addition, the price demand flexibility of high grade watches is relatively small, therefore, on long term basis, the above policy will produce less affect upon sales of famous brand watches.

2. About implementation of regular related transactions (The Announcement of Regular Related Transactions in 2006 was published on Securities Times and Hong Kong Commercial Daily dated April 20, 2006). The property management service of the Company’s FIYTA Building and FIYTA Technology Building is offered by CATIC Property Management Co., Ltd. The service charge has been determined based on the market price. In the report period, the service charge payable by the Company was RMB 609,200, which complies with the predicted amount. The Company sells watches via special counters of Shenzhen Rainbow Supermarket Co., Ltd. In the report period, the Company paid the fee totaling RMB 394,600, which complies with the predicted amount.

Occupancy of non-operating funds and progress of clearing arrears

□ Applicable √ Inapplicable

3.3. Accounting Policies, Accounting Estimation, Change in the Consolidation and Significant Accounting Errors and the Causes

□ Applicable √ Inapplicable

3.4 Relevant explanation of the Board of Directors and the Supervisory Committee on the “opinions on non-compliance” expressed by the auditor in process of auditing

□ Applicable √ Inapplicable

10

SHENZHEN FIYTA HOLDINGS LTD. 2006 1[st] Quarterly Report – Full Text

3.5 Prediction of the possibility of the accumulated net profit from the year beginning to the end of the next report period being of loss; or warning for big changes in the net profit in comparison with the same period of the previous year and the reasons

√ Applicable □ Inapplicable

As the Company’s income from the principal business grows and the earning power improves, it is predicted that the accumulative net profit of the first half year of 2006 shall increase by 50% over the same period of the previous year.

3.6 Rolling adjustment of the disclosed annual operation plan or budget

• Applicable √ Inapplicable

3.7 About the time schedule for the equity reform of a listed company that has not started the reform

√ Applicable □ Inapplicable

On April 12, 2006, the Company held a shareholders’ meeting to review the equity separation reform proposal. However the proposal was not approved through voting. The Company shall try every means to restart the equity separation reform work three months later according to the Measures on Reform for Equity Separation in Listed Companies.

Explanation about the reasons why a listed company has undertaken to conduct the equity separation reform but failed to manage timely implementation.

□ Applicable √ Inapplicable

11