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

Aug 11, 2006

Shenzhen FIYTA Holdings Ltd. 2006 Semiannual Report (Summary)

－ Stock Code: 000026 200026 Short form of the Stock: FIYTA A FIYTA B Public Notice No:2006 020

SHENZHEN FIYTA HOLDINGS LTD.

2006 Semiannual Report

(Summary)

Shenzhen FIYTA Holdings Ltd. 2006 Semiannual Report (Summary)

§ 1 Important

1.1The 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. The summary of the semiannual report is taken from the full text of the semiannual report. The full text is published in the website www.cninfo.com.cn at the same time. An investor who wants to know the detail of the report, please read carefully the full text of our Semi-annual Report.

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 semiannual report or has any different opinion on the same.

1.3 All the directors attended the board meeting.

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 semiannual report.

§2 Company Information

2.1. Basic Data

Short form of the
	FIYTA A, FIYTA B
stock:
Stock Code:	000026 200026
Stock Exchange
	Shenzhen Stock Exchange
Listed with
	Secretary of the Board	Securities Affairs Representative
Names	Hao Huiwen:	Chen Zhuo
	20~~th~~Floor, FIYTA Technology Building,	20~~th~~Floor, FIYTA Technology Building,
Liaison Address	Gaoxin S. Road One, Nanshan District,	Gaoxin S. Road One, Nanshan District,
	Shenzhen	Shenzhen
Tel.	0755-86013992	0755-86013669
Fax	0755-83348369	0755-83348369
E-mail	investor@fiyta.com.cn	investor@fiyta.com.cn

2.2 Financial Data Summary

Shenzhen FIYTA Holdings Ltd. 2006 Semiannual Report (Summary)

2.2.1 Financial Highlights

In RMB	In RMB	In RMB	In RMB
			Increase/decrease of the
			end of the report period vs
	End of the report period	End of the previous year
			the end of the previous
			year (%)
Current assets:	386,670,710.95	333,275,337.06	16.02%
Current liabilities	117,951,535.77	77,401,625.07	52.39%
Total assets	675,294,130.93	621,275,547.20	8.69%
Shareholders’ equity
(excluding minority	546,966,628.42	533,371,239.36	2.55%
equity)
Net assets per
	2.194	2.139	2.55%
share
Net assets per
share after	2.131	2.087	2.11%
adjustment
			Increase/decrease of the
		Same Period of the	report period vs the same
	Report Period (Jan – Jun)
		Previous Year	period of the previous year
			(%)
Netprofit	13,595,389.06	5,209,639.04	160.97%
Net profit after
deduction of non-	12,338,589.59	7,396,174.29	66.82%
recurring loss/gain
Earningsper share	0.055	0.021	160.97%
Earnings per share
	-	-	-
(Note)
Net assets-income
	2.49%	1.00%	1.49%
ratio
Net cash flows
arising from	-26,564,640.47	-8,722,830.88	－
operating activities

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.

2.2.2 Non-recurring gain and loss items

√ Applicable □ Inapplicable

√Applicable□Inapplicable	√Applicable□Inapplicable
In RMB
Non-recurring gain and loss items	Amount
Earnings from short term
	1,335,191.64
investment
Net amount of non-operating
	114,210.15
income and expenses
Amount affected bythe income tax	-192,602.32
Total	1,256,799.47

2.2.3 Discrepancies between CAS and IAS

Shenzhen FIYTA Holdings Ltd. 2006 Semiannual Report (Summary)

□ Applicable √ Inapplicable

§3 Changes in Share Capital and Particulars about Shareholders

3.1 Change in the Company’s Shares

□ Applicable √ Inapplicable

• 3.2 Top ten shareholders and shares held by them

in shares

		in shares	in shares	in shares	in shares	in shares	in shares
Total
		19,852
Shareholders
Shares held by the top ten shareholders
						Q’ty of
	Nature of			Proportion of	Total shares		Shares pledged
Shareholders						Non-negotiable
	Shareholders			shares held	held (shares)		or frozen
						Shares Held
CATIC Shenzhen
	Others			52.24%	130,248,000	130,248,000	0
Holdings Ltd.
Zhejiang
International Trust &	Others			2.25%	5,605,824	0	0
Investment Co., Ltd.
Henan Fangchen
Technology & Trade	Others			0.61%	1,513,700	0	0
Co., Ltd.
Zhengzhou Tengbo
	Others			0.20%	509,400	0	0
Trade Co., Ltd.
	Foreign
Qu Yanping				0.20%	500,458	0	0
	shareholder
	Foreign
Xue Peiming				0.18%	444,800	0	0
	shareholder
	Foreign
Lin Chubin				0.17%	419,854	0	0
	shareholder
	Foreign
Lin Hongbo				0.15%	362,880	0	0
	shareholder
Zhang Mei	Others			0.14%	359,000	0	0
Wang Guiqiang	Others			0.14%	356,773	0	0
Shares held by the top ten shareholders of negotiable shares
Shareholders			Q’ty of Negotiable Shares Held			Share Type
Zhejiang International Trust &
			5,605,824			RMB ordinary shares
Investment Co., Ltd.
Henan Fangchen Technology &
			1,513,700			RMB ordinary shares
Trade Co., Ltd.
Zhengzhou Tengbo Trade Co.,
			509,400			RMB ordinary shares
Ltd.
Qu Yanping			500,458			Foreign shares listed domestically
Xue Peiming			444,800			Foreign shares listed domestically
Lin Chubin			419,854			Foreign shares listed domestically
Lin Hongbo			362,880			Foreign shares listed domestically
Zhang Mei			359,000			RMB ordinary shares
Wang Guiqiang			356,773			RMB ordinary shares

Shenzhen FIYTA Holdings Ltd. 2006 Semiannual Report (Summary)

Wang Haiyang	344,803	RMB ordinary shares
	The shareholder that holds over 5% (including 5%) of the total share
	capital is CATIC SHENZHEN HOLDINGS LTD. In the report period
	there was no change in the shareholding and there were no shares
	held by it pledged or frozen.
	Among the top ten shareholders, there exists no business
Relationship/concerted action
	relationship between the promoter shareholder and other
among the above shareholders
	shareholders of negotiable shares. The Company has not found any
	business relationship among other shareholders of negotiable shares
	and cannot identify whether there are any shares held other
	shareholders of negotiable shares pledged or frozen.

3.3 Change in Controlling Shareholder and the Actual Controller

• Applicable √ Inapplicable

§ 4 Directors, Supervisors and Senior Executives

• 4.1 Changes in shares held by directors, supervisors and senior executives

• Applicable √ Inapplicable

§ 5 Discussion and Analysis of the Management

In the first half year of 2006, the Company achieved a steady progress in its three principal businesses of FIYTA Watches, sales of world brand watches by the Harmony World Watches Center and property according to the according to the work 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, based on the Company’s philosophy and values and insisting on the brand strategy to guide various work. As a result, the Company achieved a big growth in profit making over the same period of the previous year.

The Company has been enjoying a growing trend in revenue from various principal businesses, and achieved a big growth especially in retails of famous brand watches. In the report period, the revenue from the principal businesses hit RMB 229,743 thousand, a 43.45% growth over the same period of the previous year. The Company has been much improved in earning capacity, achieved a big growth in revenue. In the report period, the Company realized profit amounting to RMB 17,079 thousand and net profit amounting to RMB 13,595 thousand, with a growth rates of 169.18% and 160.97% respectively over the same period of the previous year.

In the report period, affected by the increase of investment for expansion of Harmony Chain Shops and increase of inventories, the net cash flow arising from the business activities was RMB-26,565 thousand. At the end of the report period, the total assets amounted to RMB 675,294 thousand and shareholders’ equity amounted to RMB 546,967 thousand, with growth rates of 8.69% and 2.55% respectively over the end of the previous year. The main cause is that in the report period, the Company realized a profit amounting to RMB 13,595 thousand and the short term bank loan increased by RMB 40,000 thousand in the report period.

Shenzhen FIYTA Holdings Ltd. 2006 Semiannual Report (Summary)

5.1 Sectors and Products Involved in the Principal Business

In RMB ‘000

Principal Businesses Based on Sectors

In RMB ‘000	In RMB ‘000	In RMB ‘000	In RMB ‘000	In RMB ‘000	In RMB ‘000	In RMB ‘000
Principal Businesses Based on Sectors
						Increase/decr
					Increase/decrea	ease of
				Increase/decrea
					se of principal	principal
			Principal	se of revenue
	Principal				business cost	business
Sectors or		Principal	business	from principal
	business				over the same	profit rate
products		business cost	profit rate	businesses over
	income				period of the	over the
			(%)	the previous
					previous year	period of the
				year (%)
					(%)	previous year
						(%)
Timepiece
	60,754.60	28,457.30	53.16%	13.77%	5.57%	3.64%
manufacture
Other
wholesale	146,555.00	114,849.80	21.63%	68.14%	63.60%	2.17%
and retail
Lease
	22,433.50	3, 917.30	82.54%	14.51%	-6.04%	3.82%
services
	Principal Businesses Based on Products
Manufacture
and sales of
	60,754.60	28,457.30	53.16%	17.32%	10.03%	3.10%
FIYTA
watches
Sales of
foreign
	146,555.00	114,849.80	21.63%	68.14%	63.60%	2.17%
famous
watches

5.2 Principal Businesses Based on Regions

In RMB ‘000

		Increase/decrease of revenue from principal
Regions	Principal business income
		businesses over the previous year (%)
Northeast China	23,231.90	7.83%
North China	28,731.30	116.50%
Northwest China	43,546.00	35.30%
East China	31,644.70	69.82%
Southwest China	9,818.10	59.16%
South China	70,337.70	49.19%

5.3 Other businesses with significant influence upon the net profit

□ Applicable √ Inapplicable

5.4 Operation of joint stock companies

□ Applicable √ Inapplicable

5.5 Significant change in principal business and its structure in comparison with the previous year and the reasons

Shenzhen FIYTA Holdings Ltd. 2006 Semiannual Report (Summary)

□ Applicable √ Inapplicable

5.6 Material Changes in the Earning Capacity (Gross Profit Rate) of the Principal Business over the Previous Year

□ Applicable √ Inapplicable

5.7 Reasons of Big Change in the Profit Composition over the Previous Year

□ Applicable √ Inapplicable

5.8. Application of the Proceeds Raised through Share Offering

5.8.1 Application of Proceeds Raised through Share Offering

□ Applicable √ Inapplicable

5.8.2 Change of Projects

• Applicable √ Inapplicable

5.9 Plan of the Board of Directors to Update the Business Plan of the Second Half Year

□ Applicable √ Inapplicable

5.10 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

Prediction of	□Loss√Big growth in the same direction
operation result	□Bigdropin the same direction□from loss-incurringtoprofit-making
Note to the
prediction of
operation result	As the Company’s income from the principal business grows and the earning
(Note to the cause,	power improves, it is predicted that the accumulative net profit of the period from
uncertainty and	January to September, 2006 shall increase by 100% to 150% in the same period of
influence of the	the previous year.
prediction of
operation result)

5.11 Explanation of the management on the “non-standard opinion” of the certified public accountants in the report period.

□ Applicable √ Inapplicable

5.12 Explanation of the management on the change and handling of the issues involved in the “non-standard opinion” of the certified public accountants in the previous year.

• Applicable √ Inapplicable

Shenzhen FIYTA Holdings Ltd. 2006 Semiannual Report (Summary)

§6 Significant Events

• 6.1 Acquisition and Sales of Assets and Assets Reorganization

• 6.1.1 Acquisition and transfer-in of assets

• Applicable √ Inapplicable

• 6.1.2 Sales or transferred-out assets

• Applicable √ Inapplicable

6.1.3 Progress of the assets reorganization or announcement on acquisition or sales of assets after publication of the report or the announcement on such activity and the influence of such activity upon the operation result and financial status in the report period.

□ Applicable √ Inapplicable

• 6.2 ． Material Guarantees

• Applicable √ Inapplicable

• 6.3 Credits and Debts with Related Parties

• √ Applicable □ Inapplicable

In RMB ‘000

		Fund provided by the	Fund provided by the	Fund provided by related	Fund provided by related
		Company to the related parties		parties to the Company
Related parties	Relationship
		Amount		Amount
			Balance		Balance
		incurred		incurred
	Controlling
Shenzhen CATIC
	shareholder and
Property
	legal person	1,289.60	0.00	0.00	0.00
Management Co.,
	controlled by the
Ltd.
	eventual controller
	Controlling
Shenzhen Rainbow	shareholder and
Supermarket Co.,	legal person	915.40	0.00	0.00	0.00
Ltd.	controlled by the
	eventual controller
Total		2,205.00	0.00	0.00	0.00

Where: The total amount of the funds the Company provided to the controlling shareholder and its subsidiaries was RMB 2,205.00 thousand and the balance was RMB 0.00 in the report period.

6.4 Material Lawsuits and Arbitration

• Applicable √ Inapplicable

Shenzhen FIYTA Holdings Ltd. 2006 Semiannual Report (Summary)

6.5 Notes to Analysis on other Significant Events, their Affects and Solution

Occupancy of non-operating funds and progress of clearing arrears

□ Applicable √ Inapplicable

6.6 Special commitments made by the former shareholders of non-negotiable shares in process of the equity separation reform and the implementation of the commitments

□ Applicable √ Inapplicable

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

√ Applicable □ Inapplicable

The relevant work is in process of preparation in a positive way. The Company is trying to publish the second equity separation reform proposal before September 30, 2006. The Company shall timely announce in public the progress of the said reform.

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

□ Applicable √ Inapplicable

As the Company’s equity separation reform proposal has been turned down while the Company once disclosed that “the Company shall start the equity separation reform work in three months as soon as possible according to the regulations such as the Measures on Administration over Listed Companies’ Equity Separation Reform”, The Company has enhanced the communication with the shareholders of non-negotiable shares, the relevant work is in process of positive preparation.

§ 7 Financial Report

7.1 Auditors’ Opinions

Financial Report √ Non-audited □ Audited

7.2 Financial Report

7.2.2 CONSOLIDATED INCOME STATEMENT

For the six months ended June 30, 2006

Shenzhen FIYTA Holdings Ltd. 2006 Semiannual Report (Summary)

Turnover Cost of sales Gross profit Other revenue Selling expenses Administrative expenses Other operating expenses Profit from operations Finance costs Profit before tax Income tax Profit for the period Attributable to: Equity holders of the parent Minority interests Earnings per share Basic	Notes 4 5 8	For the six months ended June 30, 2006 2005 Unaudited Unaudited RMB’000 RMB’000 229,743 160,156 (148,618) (102,791) 81,125 57,365 4,672 1,397 (36,359) (25,033) (27,927) (23,208) (3,134) (3,673) 18,377 6,848 (1,299) (503) 17,078 6,345 (3,603) (1,065) 13,475 5,280 13,595 5,210 (120) 70 13,475 5,280 RMB 0.055 RMB 0.021	For the six months ended June 30, 2006 2005 Unaudited Unaudited RMB’000 RMB’000 229,743 160,156 (148,618) (102,791) 81,125 57,365 4,672 1,397 (36,359) (25,033) (27,927) (23,208) (3,134) (3,673) 18,377 6,848 (1,299) (503) 17,078 6,345 (3,603) (1,065) 13,475 5,280 13,595 5,210 (120) 70 13,475 5,280 RMB 0.055 RMB 0.021
			Unaudited RMB’000 160,156 (102,791)
			57,365 1,397 (25,033) (23,208) (3,673)
			6,848 (503)
			6,345 (1,065)
			5,280
			5,210 70
			5,280
			RMB 0.021

7.3 Notes to the Accounting Statements

7.3.1 In case of change in the accounting policy and accounting estimate or any correction of any accounting errors, state the concerned details, reason and the amount as affected.

□ Applicable √ Inapplicable

7.3.2 In case there is significant change in the consolidation range of the financial statements, state the reason and amount as affected.

□ Applicable √ Inapplicable