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

Oct 20, 2006

SHENZHEN FIYTA HOLDINGS LTD. 2006 3[rd] Quarterly Report – Full Text

SHENZHEN FIYTA HOLDINGS LTD.

2006 3rd Quarterly Report – Full Text

§ 1 Important

1.1 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 Independent Director Ji Qinzhi failed to attend the Board meeting for business reason and authorized independent Director Guo Wanda to exercise voting at the meeting on behalf.

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
	S FIYTA A, FIYTA B			FIYTA A
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,		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

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SHENZHEN FIYTA HOLDINGS LTD. 2006 3[rd] Quarterly Report – Full Text

2.2 Financial Information

2.2.1 Financial Highlights

In RMB	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 (%)
Total assets		720,041,182.14	621,275,547.20	15.90%
Shareholders’ equity
(excluding minority		553,903,095.93	533,371,239.36	3.85%
equity)
Net assets per
		2.222	2.139	3.85%
share
Net assets per
share after		2.156	2.087	3.31%
adjustment
				Increase/decrease of the
			From year beginning to the	report period vs the same
		Report period
			end of the report period	period of the previous year
				(%)
Net cash flows
arising from		-15,253,074.91	-41,817,715.37
operating activities
Earnings per share		0.028	0.082	69.52%
Earnings per share
		0.028	-	-
(Note)
Net assets-income
		1.25%	3.71%	0.47%
ratio
Net assets-income
rate after deducting
		1.26%	3.46%	0.49%
the non-recurring
gains and loss
Non-recurring gain and
		Amount
loss items
Short-term investment		1,418,181.36
Net amount of
non-operating income		-43,804.91
and expenses
Amount affected by the
		6,570.74
income tax
Total		1,380,947.19

2.2.2 Financial Statements

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SHENZHEN FIYTA HOLDINGS LTD. 2006 3[rd] Quarterly Report – Full Text

2.2.2.1 Balance Sheet

Prepared by: SHENZHEN FIYTA HOLDINGS LTD. September 30, 2006 In RMB

	End of the period	End of the period	End of the previous year	End of the previous year
Items
	Consolidated	Parent company	Consolidated	Parent company
Current assets:
Monetary funds	63,375,544.70	55,326,311.74	47,710,206.11	29,988,789.99
Short-term
	2,203,200.00	2,203,200.00	4,949,220.00	4,949,220.00
investment
Notes receivable			550,000.00	550,000.00
Dividend
		244,066.90		244,066.90
receivable
interest receivable
Accounts
	21,661,480.15	14,514,229.04	27,659,618.52	21,367,150.45
receivable
Other receivables	21,836,464.02	126,286,757.74	17,329,135.64	106,055,435.82
Advance to
	4,381,700.72	59,999.99	526,831.60	59,999.99
suppliers
Subsidies
receivable
Inventories	318,954,855.26	62,208,220.99	233,861,001.05	61,888,807.31
Expenses to be
	1,055,526.91	83,461.58	689,324.14	142,103.53
apportioned
Long-term debt
investment due
within a year
Other current
assets
Total current
	433,468,771.76	260,926,247.98	333,275,337.06	225,245,573.99
assets
Long-term
investment:
Long-term equity
	10,385,500.87	169,014,847.02	10,385,500.87	159,145,424.44
investment
Long term bond
investment
Total long-term
	10,385,500.87	169,014,847.02	10,385,500.87	159,145,424.44
investments
Consolidated
price difference
Fixed assets:
Fixed assets, cost	329,665,358.39	300,772,450.66	322,125,256.90	291,699,290.65
Less:
accumulative	70,616,649.03	58,464,119.23	63,305,277.38	50,857,649.80
depreciation
Fixed assets, net	259,048,709.36	242,308,331.43	258,819,979.52	240,841,640.85
Less: Provision
for impairment of	2,860,323.09	2,600,000.00	2,860,323.09	2,600,000.00
fixed assets
Fixed assets, net	256,188,386.27	239,708,331.43	255,959,656.43	238,241,640.85
Engineering
supplies
Construction-in-prog	316,864.54	316,864.54	134,773.24	134,773.24
ress

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Disposal of fixed
assets
Total fixed assets	256,505,250.81	240,025,195.97	256,094,429.67	238,376,414.09
Intangible assets
and other assets:
Intangible assets	11,788,551.30	11,788,551.30	16,242,387.93	16,242,387.93
Long-term
expenses to be	7,893,107.40	5,107,405.14	5,277,891.67	4,062,993.96
apportioned
Other long term
assets
Total intangible
assets and other	19,681,658.70	16,895,956.44	21,520,279.60	20,305,381.89
assets
Deferred taxes:
Deferred taxes
and debit
Total assets	720,041,182.14	686,862,247.41	621,275,547.20	643,072,794.41
Current liabilities
Short-term Loan	90,000,000.00	90,000,000.00	20,000,000.00	20,000,000.00
Notes payable
Accounts payable	42,720,134.04	2,790,445.02	28,992,468.45	46,011,182.83
Advance from
	1,248,757.00	492,457.00	4,235,032.14	3,283,700.14
customers
Salaries payable	976,762.02	33,101.80	1,679,877.40	69,064.40
Welfares payable	3,482,580.53	2,015,628.31	2,871,521.81	1,978,323.61
Dividends payable
Taxes payable	-12,568,795.43	3,321,349.86	-10,744,164.79	2,571,988.26
Other accounts
	43,910.28	22,689.38	38,460.40	7,282.92
due
Other payables	26,108,947.10	23,319,867.18	28,918,936.66	25,611,311.27
Expenses
	3,747,568.48	1,515,319.62	1,409,493.00	720,408.31
withheld
Predicted
liabilities
Long-term
liabilities due within
one year
Total other current
liabilities
Total current
	155,759,864.02	123,510,858.17	77,401,625.07	100,253,261.74
liabilities
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	158,759,864.02	126,510,858.17	80,401,625.07	103,253,261.74

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SHENZHEN FIYTA HOLDINGS LTD. 2006 3[rd] Quarterly Report – Full Text

Minority
	7,378,222.19		7,502,682.77
shareholders’equity
owners’/shareholder
s’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 (or share	249,317,999.00	249,317,999.00	249,317,999.00	249,317,999.00
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	14,083,563.26	20,531,856.57	-6,448,293.31
Including: Cash
dividend
Unidentified
investment loss
Foreign currency
conversion balance
of statement
Total
owners’/shareholder	553,903,095.93	560,351,389.24	533,371,239.36	539,819,532.67
s’equity
Total liabilities and
owners’/shareholder	720,041,182.14	686,862,247.41	621,275,547.20	643,072,794.41
s’equity

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

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SHENZHEN FIYTA HOLDINGS LTD. 2006 3[rd] Quarterly Report – Full Text

2.2.2.2 Statement of Profit and Profit Distribution

Prepared by: SHENZHEN FIYTA HOLDINGS LTD. July to September, 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
	115,548,931.65	40,598,808.67	85,107,021.04	42,633,971.34
principal businesses
Less: Costs of
	75,553,635.41	18,050,829.67	52,217,340.46	21,560,270.68
principal business
Taxes and
surcharges of	801,805.61	700,958.85	738,741.09	638,098.47
principal business
II. Profit from
principal businesses	39,193,490.63	21,847,020.15	32,150,939.49	20,435,602.19
(loss stated with“-“)
Plus: Profit from
other businesses	101,416.91	-240,534.04	139,587.50	-131,507.11
(loss stated with“-“)
Less: Operation
	18,487,973.65	11,019,611.69	15,532,412.35	10,613,837.69
costs
Overheads	11,164,011.44	5,245,779.21	11,858,683.60	6,182,181.71
Financial
	939,460.64	-145,547.53	736,475.59	453,710.92
expenses
III. Profit from
businesses (loss	8,703,461.81	5,486,642.74	4,162,955.45	3,054,364.76
stated with“-“)
Plus: Investment
return (loss stated	82,989.72	2,435,408.69	1,602,634.40	2,157,256.89
with“-“)
Subsidy
			0.00	0.00
income
Non-operating	26,957.00	26,697.00	49,525.00	44,550.00
income
Less:
Non-operating	184,972.06	161,183.74	19,881.55	1,074.63
expenses
IV. Total Profit (loss
	8,628,436.47	7,787,564.69	5,795,233.30	5,255,097.02
stated with“-“)
Less: Income tax	1,696,365.56	851,097.18	1,714,152.20	1,163,156.58
Minority
	-4,396.60		-10,859.34	0.00
shareholders’equity
Plus: Amount of
unrecognized
investment loss
incurred in the
report period
V. Net Profit (loss
	6,936,467.51	6,936,467.51	4,091,940.44	4,091,940.44
stated with“-“)
Plus: Retained
earnings at year	7,147,095.75	13,595,389.06	-49,059,143.96	-49,059,143.96
beginning
Other
transfer-in
VI. Profit available	14,083,563.26	20,531,856.57	-44,967,203.52	-44,967,203.52

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SHENZHEN FIYTA HOLDINGS LTD. 2006 3[rd] Quarterly Report – Full Text

for 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
returned with profit
VII. The profit
distributable to the	14,083,563.26	20,531,856.57	-44,967,203.52	-44,967,203.52
investors
Less: Dividends of
preferential shares
payable
Allotting
discretionary surplus
public reserve
Dividend
payable for common
shares
Dividends of
common shares
converted into
capital/capital stock
VIII. Retained
	14,083,563.26	20,531,856.57	-44,967,203.52	-44,967,203.52
earnings
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

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SHENZHEN FIYTA HOLDINGS LTD. 2006 3[rd] Quarterly Report – Full Text

6. Others

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

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SHENZHEN FIYTA HOLDINGS LTD. 2006 3[rd] Quarterly Report – Full Text

2.2.2.3 Profit from the Year Beginning to the End of the Report Period and Statement of Profit Distribution

Prepared by: SHENZHEN FIYTA HOLDINGS LTD. January to September, 2006 In RMB

	From year beginning to the end of the	From year beginning to the end of the
			Same Period of the Previous Year
Items	report period
	Consolidated	Parent company	Consolidated	Parent company
I. Income from
	345,292,010.97	123,786,882.12	245,263,053.86	115,497,251.43
principal businesses
Less: Costs of
	222,778,106.31	55,263,524.73	153,542,859.12	59,615,812.07
principal business
Taxes and
surcharges of	2,195,246.57	1,900,966.08	2,204,324.41	1,947,817.74
principal business
II. Profit from
principal businesses	120,318,658.09	66,622,391.31	89,515,870.33	53,933,621.62
(loss stated with“-“)
Plus: Profit from
other businesses	976,922.88	81,616.15	435,257.01	-370,864.43
(loss stated with“-“)
Less: Operation
	54,847,068.71	33,183,635.87	40,565,181.56	26,954,862.13
costs
Overheads	39,090,831.76	21,110,153.46	35,066,933.69	18,931,037.69
Financial
	3,025,007.83	126,839.62	1,239,032.03	736,356.67
expenses
III. Profit from
businesses (loss	24,332,672.67	12,283,378.51	13,079,980.06	6,940,500.70
stated with“-“)
Plus: Investment
return (loss stated	1,418,181.36	11,287,751.94	-1,045,437.64	4,005,871.03
with“-“)
Subsidy
income
Non-operating	213,825.70	26,697.00	161,840.21	125,907.33
income
Less:
Non-operating	257,630.61	164,740.70	56,519.13	7,543.00
expenses
IV. Total Profit (loss
	25,707,049.12	23,433,086.75	12,139,863.50	11,064,736.06
stated with“-“)
Less: Income tax	5,299,653.13	2,901,230.18	2,778,686.83	1,763,156.58
Minority
	-124,460.58		59,597.19
shareholders’equity
Plus: Amount of
unrecognized
investment loss
incurred in the
report period
V. Net Profit (loss
	20,531,856.57	20,531,856.57	9,301,579.48	9,301,579.48
stated with“-“)
Plus: Retained
earnings at year	-6,448,293.31		-54,268,783.00	-54,268,783.00
beginning
Other

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transfer-in
VI. Profit available
	14,083,563.26	20,531,856.57	-44,967,203.52	-44,967,203.52
for 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
returned with profit
VII. The profit
distributable to the	14,083,563.26	20,531,856.57	-44,967,203.52	-44,967,203.52
investors
Less: Dividends of
preferential shares
payable
Allotting
discretionary surplus
public reserve
Dividend
payable for common
shares
Dividends of
common shares
converted into
capital/capital stock
VIII. Retained
	14,083,563.26	20,531,856.57	-44,967,203.52	-44,967,203.52
earnings
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

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SHENZHEN FIYTA HOLDINGS LTD. 2006 3[rd] Quarterly Report – Full Text

1. Loss from debts reorganization 6. Others

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

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SHENZHEN FIYTA HOLDINGS LTD. 2006 3[rd] Quarterly Report – Full Text

2.2.2.4 Statement of Cash Flow from the Year Beginning to the End of the Report Period

Prepared by: SHENZHEN FIYTA HOLDINGS LTD. January to September, 2006 In RMB	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. January to September, 2006 In RMB	Prepared by: SHENZHEN FIYTA HOLDINGS LTD. January to September, 2006 In RMB
	From year beginning to the end of the report period
Items
	Consolidated	Parent company
I. Net cash flows arising from operating
activities
Cash received from sales of products
	404,412,853.46	137,198,062.90
and supply of labor
Rebated taxes received
Other business related cash as
	2,979,943.13	1,728,784.53
received
Subtotal of cash flow in	407,392,796.59	138,926,847.43
Cash paid for purchase of goods and
	321,969,749.42	50,578,607.25
reception of labor services
Cash paid to and for staff	40,979,598.77	18,929,372.81
Taxes paid	20,318,781.41	13,214,116.74
Other operation related cash payments	65,942,382.36	94,858,652.57
Subtotal of cash flow out	449,210,511.96	177,580,749.37
Net cash flows arising from operating
	-41,817,715.37	-38,653,901.94
activities
II. Cash flows arising from investment
activities:
Cash received from recovery of
	3,000,000.00	3,000,000.00
investment
Cash received from investment income
Net amount of cash received from
disposal of fixed assets, intangible assets	168,485.00	10,000.00
and other long term assets
Other investment related cash receipts
Subtotal of cash flow in	3,168,485.00	3,010,000.00
Cash paid for construction/purchase of
fixed assets, intangible assets and other	13,322,731.04	6,655,876.31
long term assets
Cash paid for investment
Other investment related cash
payments
Subtotal of cash flow out	13,322,731.04	6,655,876.31
Net cash flow arising from investment
	-10,154,246.04	-3,645,876.31
activities
III. Cash flows arising from fund raising
activities:
Cash received from absorption of
investment
Cash received from borrowings	110,000,000.00	110,000,000.00
Other fund-raising related cash
received
Subtotal of cash flow in	110,000,000.00	110,000,000.00
Cash paid for liabilities repayment	40,000,000.00	40,000,000.00
Cash paid for dividend/profit
	2,175,500.00	2,175,500.00
distribution or repayment of interest
Other fund raising related cash
	187,200.00	187,200.00
payments
Subtotal of cash flow out	42,362,700.00	42,362,700.00
Net cash flow arising from fund-raising	67,637,300.00	67,637,300.00

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activities
IV. Influence upon cash due to change of
exchange rate
V. Net increase of cash and cash
	15,665,338.59	25,337,521.75
equivalents
Additional Information to the Cash Flow
Statement
1. Net cash flows arising from
adjustment of net profit into operating
activities
Net profit	20,531,856.57	20,531,856.57
Plus: Provision for devaluation of
assets
Depreciation of fixed assets	9,170,944.54	7,502,180.57
Amortization of intangible assets	364,375.49	364,375.49
Long-term expenses to be
	4,019,277.78	1,977,945.92
apportioned
Decrease (less: increase) of
	-366,202.77	58,641.95
expenses to be apportioned
Increase (less: decrease) of
	2,338,075.48	794,911.31
expenses withheld
Loss (less: income) from
disposal of fixed assets, intangible assets	55,515.28	57,955.66
and other long term assets
Losses from rejection of fixed
assets
Financial expenses	2,066,867.09	2,066,867.09
Investment loss (less: income)	-1,418,181.36	-1,418,181.36
Deferred tax loan (less: debit)
Decrease (less: increase) of
	-81,237,283.47	-319,413.68
inventories
Decrease (less: increase) of
	-2,364,059.13	-13,378,400.51
operative items receivable
Increase (less: decrease) of
	5,145,559.71	-56,892,640.95
operative items payable
Others
Minority shareholders’equity	-124,460.58
Net cash flows arising from
	-41,817,715.37	-38,653,901.94
operating 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	63,375,544.70	55,326,311.74
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
	15,665,338.59	25,337,521.75
equivalents

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[rd] Quarterly Report – Full Text

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

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SHENZHEN FIYTA HOLDINGS LTD. 2006 3[rd] Quarterly Report – Full Text

2.3 Total Shareholders and Shares Held by Top Ten Shareholders of Negotiable Shares at the End of the Report Period (A company that has not yet undergone stock reform).

Total shareholders at the end of the report	Total shareholders at the end of the report	18540 shareholders (including 9351 shareholders	18540 shareholders (including 9351 shareholders
period		of A shares and 9189 shareholders of B shares)
Shares held by the top ten shareholders of		negotiable shares
		Negotiable shares
Serial			Types (A-, B- or H-shares,
	Shareholder’s name (full name)	held at the end of the
No.			or others)
		report period
	Zhejiang International Trust &
1		11550645	A SHARES
	Investment Co., Ltd.
	Henan Fangchen Technology &
2		1513700	A SHARES
	Trade Co., Ltd.
	Bank of Communications – Yuhua
3		623074	A SHARES
	Securities Investment Fund
4	Zhengzhou Tengbo Trade Co., Ltd.	509400	A SHARES
5	Wang Haiyang	344803	A SHARES
6	Li Hua	314900	A SHARES
7	Yang Bin	307900	A SHARES
8	Tao Qiying	302200	A SHARES
9	Yang Caixia	297411	A SHARES
10	Zhang Yulan	296500	A SHARES
Shares held by the top ten shareholders of negotiable B shares
		Negotiable shares
Serial			Types (A-, B- or H-shares,
	Shareholder’s name (full name)	held at the end of the
No.			or others)
		report period
1	Xue Peiming	444800	B SHARES
2	Ou Yanping	420000	B SHARES
3	Lin Chubin	419854	B SHARES
4	KGI ASIA LIMITED	347000	B SHARES
	GUOTAI JUNAN SECURIES HONG
5		314970	B SHARES
	KONG LIMITED
6	Lin Hongbo	300900	B SHARES
	CHINA PINGAN
7		298330	B SHARES
	INSURANCE(HK)CO.LTD
8	Zeng Ying	283590	B SHARES
9	Chen Aiqun	282200	B SHARES
10	Li Ping	270000	B SHARES

§3 Discussion and Analysis of the Management

3.1 Summary of the Operation Activities in the Report Period

In the report period, the Company has been insisting on the practice of leading various activities with the Brand Strategy. The three leading businesses of sales of FIYTA watches and Harmony World Watches and the properties have been developing continuously and steadily and the profit has grown by a big margin over the same period of the previous year. The leading products, including FIYTA SOARING Watch and Gold Buddha Watch, etc. have been keeping good sales and the gross profit rate of the products has risen somewhat; Harmony World Watches Center has established 48 chain shops in big and medium cities all over China and the earning power has been improving constantly.

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SHENZHEN FIYTA HOLDINGS LTD. 2006 3[rd] Quarterly Report – Full Text

In the third quarter, the Company realized a turnover in its principal business by RMB 115.55 million, a 35.77% growth over the same period of the previous year, net profit RMB 6.94 million, a 69.52% growth over the same period of the previous year. From January to September this year, the revenue from the principal business was RMB 345.29 million and net profit was RMB 20.53 million, growing by 40.78% and 120.74% over the same period of the previous year.

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	In RMB ‘000
	Principal Businesses Based on Sectors
	Principal business
		Principal business cost	Principal business profit rate (%)
	income
Timepiece
	29,072.00	14,431.90	50.36%
manufacture
Other wholesale and
	74,950.10	58,720.30	21.65%
retail
Lease services	11,526.80	2,401.40	79.17%
Incl.: related
	0.00	0.00	0.00%
transactions
Principal Businesses Based on Products
Sales of FIYTA
	29,072.00	14,431.90	50.36%
watches
Sales of foreign
	74,950.10	58,720.30	21.65%
famous 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

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

□ Applicable √ Inapplicable

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

• Applicable √ Inapplicable

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SHENZHEN FIYTA HOLDINGS LTD. 2006 3[rd] Quarterly Report – Full Text

3.2 Significant Events, its Impacts and the Solutions

Implementation of Regular Related Transactions

(1) Both of the Company’s FIYTA Building and FIYTA Technology Building have used property management services and a small quantity of property lease services from Shenzhen CATIC Property Management Co., Ltd. The property management price is determined with reference to the market price by both parties. In the report period, the Company’s property rental and management service charge payable amounted to RMB 1.93million, which complies with the estimate. (2) The Company sells watches through the franchised counters of the Rainbow Supermarket. In the report period, the sales cost incurred to the franchised counters in the report period was RMB 2.19million, which complies with the estimate at the year beginning. The Announcement on the Regular Related Transactions in 2006 was published on Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn. on April 20, 2006.

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

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 period from January to December, 2006 shall increase by more than 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 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

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SHENZHEN FIYTA HOLDINGS LTD. 2006 3[rd] Quarterly Report – Full Text

3.8 Notice of a Company still not in Process of the Stock Reform by the Date of Publishing this Quaterly Report

• √ Applicable □ Inapplicable

Specific causes of being unable to conduct the stock reform up to now. All the stakeholders have not yet determine the specific plan for the equity separation reform.

Time schedule for the stock reform

It is predicted that the Company shall get into again the process of the equity separation reform and disclose the information concerning the equity separation reform before Nov.30,2006

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