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

Aug 11, 2006

SHENZHEN FIYTA HOLDINGS LIMITED 深圳市飞亚达（集团）股份有限公司

INTERIM RESULT

These consolidated financial statements have not been audited, but have been reviewed by the company’s directors.

CONSOLIDATED INCOME STATEMENT

For the six months ended June 30, 2006

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

SHENZHEN FIYTA HOLDINGS LIMITED

深圳市飞亚达（集团）股份有限公司

CONSOLIDATED BALANCE SHEET At June 30, 2006

ASSETS Non-currents assets Property, plant and equipment Investment properties Construction in progress Prepaid lease payments Available-for-sale investments Deferred tax assets Other non-current assets Current assets Inventories Trade receivables Bills receivable Other receivables and prepayments Amount due from an ultimate company Tax recoverable Financial assets at fair value through profit or loss Bank balances and cash Total assets	Notes 9 10	June 30, 2006 Unaudited RMB’000 81,487 177,961 135 14,852 10,386 15,466 1,316 301,603 290,254 20,962 － 34,210 － 2,150 2,122 52,673 402,371 703,974	December 31, 2005
			Audited RMB’000 77,182 181,174 135 15,081 10,386 15,466 1,554
			300,978
			233,861 27,205 550 32,551 － 1,403 4,949 47,711
			348,230
			649,208

SHENZHEN FIYTA HOLDINGS LIMITED

深圳市飞亚达（集团）股份有限公司

CONSOLIDATED BALANCE SHEET - (continued) At June 30, 2006 Notes EQUITY AND LIABILITIES CAPITAL AND RESERVES Registered capital Reserves Equity attributable to equity holders of the parent Minority interests Total equity Non-current liabilities Deferred income Current liabilities Trade payables Staff welfare payable Other payables and accruals Amount due to a related company Amount due to an invested company Tax payable Bank loan - secured 11 Total liabilities Total equity and liabilities	CONSOLIDATED BALANCE SHEET - (continued) At June 30, 2006 Notes EQUITY AND LIABILITIES CAPITAL AND RESERVES Registered capital Reserves Equity attributable to equity holders of the parent Minority interests Total equity Non-current liabilities Deferred income Current liabilities Trade payables Staff welfare payable Other payables and accruals Amount due to a related company Amount due to an invested company Tax payable Bank loan - secured 11 Total liabilities Total equity and liabilities	June 30, 2006 Unaudited RMB’000 249,318 298,005 547,323 7,376 554,699 3,000 35,451 19,884 18,631 － 12,309 － 60,000 146,275 149,275 703,974.00	December 31, 2005
	11		Audited RMB’000 249,318 284,410
			533,728 7,503
			541,231
			3,000
			28,992 18,820 24,641 215 12,309 － 20,000
			104,977
			107,977
			649,208.00

SHENZHEN FIYTA HOLDINGS LIMITED

深圳市飞亚达（集团）股份有限公司

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2006

	Share	Capital	Statutory
	capital	reserves	reserves	Retained profits	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Balance at December 31, 2005	249,318	191,108	82,706	10,596	533,728
Net profit for the 6 months				13,595	13,595
Balance at June 30, 2006	249,318	191,108	82,706	24,191	547,323

FOR THE SIX MONTHS ENDED JUNE 30, 2005

Balance at December 31, 2004 Net profit for the 6 months Balance at June 30, 2005	Share capital RMB’000 249,318 249,318	Capital reserves RMB’000 191,108 191,108	Statutory reserves RMB’000 114,519 114,519	Retained profits RMB’000 (36,770) 5,210 (31,560)	Total RMB’000 518,175 5,210
					523,385

SHENZHEN FIYTA HOLDINGS LIMITED

深圳市飞亚达（集团）股份有限公司

CONSOLIDATED CASH FLOW STATEMENT

For the six months ended June 30, 2006

Cash flows from operating activities Profit before taxation Adjustment for: Amortization of prepaid lease payments Amortization of non-current assets Depreciation of investment properties Depreciation of property, plant and equipment Dividend income Gain on disposal of property, plant and equipment Interest paid Interest income Provision for obsolescent inventory Operating profit before working capital changes Increase in inventories (Increase)/Decrease in trade receivables Increase in bill receivable Decrease/(Increase) in other receivables and prepayments Decrease in amount due from a related company Increase in amount due to a related company (Decrease)/Increase in trade payables Increase in staff welfare payable Increase in other payables and accruals Decrease/(Increase) in financial assets at fair value through profit or loss Cash used in operations Interest paid Tax paid Net cash used in operating activities	For the six months ended June 30 2006 2005 Unaudited Unaudited RMB’000 RMB’000 17,078 6,345 229 229 238 196 3,213 3,213 7,463 4,650 － － (12) (1) 1,299 503 (141) (277) － (232) 29,367 14,626 (56,393) (11,217) 6,243 (1,731) 550 － (1,659) 3,462 － 1,500 (215) － 6,459 (28,150) 1,064 (57) (6,010) 604 2,827 2,667 (47,134) (34,422) (17,767) (19,796) (1,299) (503) (4,350) 420 (23,416) (21,379)	For the six months ended June 30 2006 2005 Unaudited Unaudited RMB’000 RMB’000 17,078 6,345 229 229 238 196 3,213 3,213 7,463 4,650 － － (12) (1) 1,299 503 (141) (277) － (232) 29,367 14,626 (56,393) (11,217) 6,243 (1,731) 550 － (1,659) 3,462 － 1,500 (215) － 6,459 (28,150) 1,064 (57) (6,010) 604 2,827 2,667 (47,134) (34,422) (17,767) (19,796) (1,299) (503) (4,350) 420 (23,416) (21,379)
		Unaudited RMB’000 6,345 229 196 3,213 4,650 － (1) 503 (277) (232)
		14,626 (11,217) (1,731) － 3,462 1,500 － (28,150) (57) 604 2,667
		(34,422) (19,796) (503) 420
		(21,379)

SHENZHEN FIYTA HOLDINGS LIMITED

深圳市飞亚达（集团）股份有限公司

CONSOLIDATED CASH FLOW STATEMENT - (continued) For the six months ended June 30, 2006

Cash flows from investing activities Interest received Proceeds on disposal of property, plant and equipment Purchase of property, plant and equipment Acquisition of available-for-sale investments Dividend income from available-for-sale investments Investment income from designed deposit Payments for construction in progress Decrease in designated deposits Decrease in minority interests Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayments of borrowings Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Analysis of cash and cash equivalents at the end of June 30 Bank balances and cash	For the six months ended June 30 2006 2005	For the six months ended June 30 2006 2005
	Unaudited RMB’000 141 113 (11,869) － － － － － (7) (11,622) 40,000 － 40,000 4,962 47,711 52,673 52,673	Unaudited RMB’000 277 － (13,589) － － － (450) － (70)
		(13,832) － －
		－ (33,711) 84,792
		51,081
		51,081

NOTES TO THE FINANCIAL STATEMENT FOR THE PERIOD ENDED JUNE 30, 2006

1. Corporate information

Shenzhen Fiyta Holdings Limited (the “Company”) was established in the People’s Republic of China (the “PRC”) as a joint stock limited company a reorganization of its predecessor company, Shenzhen Fiyta Timing Industry Company, in December 1992. The Company’s Renminbi Ordinary Shares (“A Shares”) and Domestically Listed Foreign Shares (“B Shares”) were listed on the Shenzhen Stock Exchange in March 1993.

The Company’s holding company is CATIC Shenzhen Holdings Limited (“CATIC”) which holds 52.24% of its equity interest. CATIC’s H Shares were listed on The Stock Exchange of Hong Kong in September 1997.

The Company and its subsidiaries (the “Group”) are principally engaged in the design, manufacture, assembly and sale of quartz analog watches, clocks, watch casings, and property management.

2. Basis of preparation and accounting policies

Basis of preparation

The interim consolidated financial statements for the six months ended June 30, 2006 have

been prepared in accordance with IAS 34 Interim Financial Reporting.

The interim consolidated financial statements do not include all the information and

disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at December 31, 2005.

Consolidation scope and significant accounting policies

The consolidation scope and accounting policies adopted in the preparation of the interim

consolidated financial statements are consistent with those followed in the preparation of the

Group’s annual financial statements for the year ended December 31, 2005.

3. Segment information

For the six months ended June 30, 2006 (unaudited) Turnover Segment results Unallocated expense Operating profits Finance costs Profit before taxation Taxation Profit after taxation Minority interest Net profit Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure Depreciation and amortization - property, plant and equipment - investment properties Amortization of prepaid leasehold land Provision for doubtful debts Provision for obsolescent inventories	Clocks and watches RMB’000 207,310 64,003 498,039 89,275 11,869 7,463 － － － －	Property rental RMB’000 22,433 18,516 177,961 － － － 3,213 229 － －	Total
			RMB’000 229,743
			82,519 (64,142)
			18,377 (1,299 )
			17,078 (3,603 )
			13,475 120
			13,595
			676,000 27,974
			703,974
			89,275 60,000 149,275 11,869
			7,463
			3,213
			229
			－
			－

－ 3. Segment information (continued)

. Segment information－(continued)
For the six months ended June 30, 2005 (unaudited) Turnover Segment results Unallocated expense Operating profits Finance costs Profit before taxation Taxation Profit after taxation Minority interest Net profit Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure Depreciation and amortization - property, plant and equipment - investment properties Amortization of prepaid leasehold land Provision for doubtful debts Provision for obsolescent inventories	Clocks and watches RMB’000 140,565 43,409 462,933 60,402 13,589 4,650 － － － －	Property rental RMB’000 19,590 15,421 184,387 － － － 3,213 461 － －	Total RMB’000 160,155
			58,830 (51,982 )
			6,848 (503)
			6,345 (1,065 )
			5,280 (70)
			5,210
			647,320 27,974
			675,294
			60,402 20,000
			80,402
			13,589
			0 4,650
			3,213
			461
			－
			－

There are no sales or other transactions between the business segments． Segment assets comprise operating assets and mainly exclude deferred tax assets, designated deposits and investments．Segment liabilities comprise operating liabilities and mainly exclude minority interests, certain borrowings and tax payable． All assets and operations of the Group are located in the PRC．

4. Turnover and revenue

The Group in engaged in the design, manufacture, assembly and sale of quartz analog watches, clocks, watch straps and watch casings, and property management. Revenue recognized during the period is as follows:

Turnover Rental income Sales of goods Other revenue Bank interest income Repair and maintenance income Gain on disposal of financial assets at fair value through profit or loss Gain on disposal of property, plant and equipment Others Total revenue	For the six months ended June 30, 2006	For the six months ended June 30, 2006
	2006 unaudited RMB’000 22,433 207,310 229,743 142 1,610 2,734 70 116 4,672 234,415	2005
		unaudited RMB’000 19,590 140,566
		160,156 277 994 － 13 112
		1,396
		161,552

5 ． Profit from operations

Profit from operations is arrived at:

For the six months ended June 30

After charging: Amortization of prepaid leasehold land Amortization of other non-current assets Exchange loss Depreciation of property, plant and equipment Depreciation of investment properties Fair value loss on financial assets at fair value through profit or loss Loss on disposal of property, plant and equipment Cost of inventories sold Rent paid under operating leases Staff costs (including directors’ remuneration – note 6, 7)	2006 Unaudited RMB’000 230 1,166 31 2,637 3,213 － 58 143,307 1,290 28,530 180,462	2005
		Unaudited RMB’000 230 1,946 － 2,575 3,213 2,661 14 97,156 1,370 21,313
		130,478

6 ． Staff cost

ff cost
Wages and salaries Staff welfare Social insurance expenses	For the six months ended June 30
	2006 Unaudited RMB’000 26,933 1,612 1,289 29,834	2005
		Unaudited RMB’000 19,606 1,366 1,077
		22,049

7 ． Directors’ remuneration

Particulars of the emoluments of the directors for the period were as follows:

For the six months ended June 30

Fees Other emoluments	2006 Unaudited RMB’000 － 38 38	2005
		Unaudited RMB’000 － 45
		45

8 ． Earnings per share

The calculation of earnings per share is based on the consolidated profit after tax and after minority interests for the period of RMB13, 595, 000 (2005: RMB5, 210, 000) and 249,318,000 shares (2005: 249,318,000 shares) on issue.

9 ． Trade receivables

Within 1 year 1 year to 2 years 2 years to 3 years over 3 years Provision for doubtful debts	June 30, 2006 Unaudited RMB’000 19,133 1,467 654 42,014 63,269 42,307 20,962	December 31, 2005	December 31, 2005
			Audited RMB’000 25,665 1,322 691 41,833
			69,512 42,307
			27,205

10 ． Financial assets at fair value through profit or loss

Market value of listed investments - equity shares	June 30,2006 Unaudited RMB’000 2,122	December 31,2005
		Audited RMB’000 4,949

The financial assets at fair value through profit or loss are traded in active markets and are valued at market prices at the end of period by reference to Stock Exchange quoted prices.

11 ． Bank loan - secured

Repayable within one year	June 30, 2006 Unaudited RMB’000 60,000	December 31, 2005
		Audited RMB’000 20,000

The bank loan was interest bearing at 5.58% per annum (2004: 5.31%) and guaranteed by the holding company, CATIC Shenzhen Holdings Limited.

12 ． Related party transactions

During the six months, the Group had the following material transactions with related parties in normal course of its business:

Property management fee paid to: Shenzhen CATIC Property Management Co., Ltd Commission paid to: Shenzhen Rainbow Department Store Co., Ltd	For the six months ended June 30	For the six months ended June 30
	2006 Unaudited RMB’000 1,290 915	2005
		Unaudited RMB’000 1,371
		420

13 ． Approved of the financial statements

The financial statements were approved and authorized for issue by the board of directors on August 11, 2006.

SUPPLEMENTARY INFORMATION FOR THE PERIOD ENDED JUNE 30, 2006

The impact of IFRS adjustments on the PRC statutory financial statements is as follows:

As report under PRC statutory financial statements IFRS adjustments: - Adjustment on deferred tax assets - Reclassification of prior year profit appropriation to staff welfare payable - Adjustment on fair value for financial assets at fair value through profit or loss - Adjustment on provision for bad debt - Others As restated after IFRS adjustments	Net profit for the six months ended June 30, 2006 2005 Unaudited Unaudited RMB’000 RMB’000 13,595 5,210 － － － － － － － － － － 13,595 5,210	Shareholders’ equity
		June 30, , 2006 December 31, , 2005 Unaudited Audited RMB’000 RMB’000 546,966 533,371 15,466 15,466 (15,949) (15,949) － － (454) (454) 1,294 1,294 547,323 533,728