FIYTA Precision Technology Co., Ltd. - Interim / Quarterly Report 2007

Financial Report

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

I. Accounting Statements

I. Accounting Statements	I. Accounting Statements	I. Accounting Statements	I. Accounting Statements	I. Accounting Statements
Balance Sheet Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2007 In RMB
Assets	Ending balance		Opening balance
	Consolidated	Parent company	Consolidated	Parent company
Current assets:
Monetary funds	67,373,208.75	61,305,801.33	60,226,078.54	48,521,282.16
Transaction based financialassets	2,970,000.00	2,970,000.00	2,138,400.00	2,138,400.00
Notes receivable
Accounts receivable	35,284,640.15	17,727,618.21	29,949,363.85	12,258,698.48
Advance to Suppliers	12,058,462.35	-0.01	7,785,252.34	59,999.99
Dividend receivable		2,770,434.88	244,066.90	2,770,434.88
Other receivables	21,437,385.99	262,622,917.04	13,863,209.85	214,996,031.04
Inventories	435,474,193.84	55,616,949.61	371,196,239.94	55,072,650.67
Non-current assets due withina year
Other current assets	0.00	0.00	0.00	0.00
Total current assets	574,597,891.08	403,013,721.06	485,402,611.42	335,817,497.22
Non-current assets:
Long term accounts payable
Long-term equity investment	5,519,041.29	147,433,298.65	5,519,041.29	161,199,323.70
Real Estate Investment
Fixed assets	260,723,533.15	242,370,034.41	260,501,370.86	242,888,183.06
Construction-in-progress	205,261.50	205,261.50	151,261.50	151,261.50
Engineering supplies
Disposal of fixed assets
Intangible assets	11,643,695.56	11,530,495.56	11,815,732.72	11,702,532.72
Goodwill
Long-term expenses to be apportioned	7,923,238.20	6,041,404.06	8,557,457.77	6,226,236.60
Deferred income tax	4,135,520.20	4,003,061.18	3,162,755.00	3,030,295.98
Other non-current assets
Total non-current assets	290,150,289.90	411,583,555.36	289,707,619.14	425,197,833.56
Total assets	864,748,180.98	814,597,276.42	775,110,230.56	761,015,330.78

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

Balance Sheet (Cont’d) Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2007 In RMB	Balance Sheet (Cont’d) Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2007 In RMB	Balance Sheet (Cont’d) Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2007 In RMB	Balance Sheet (Cont’d) Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2007 In RMB	Balance Sheet (Cont’d) Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2007 In RMB
Shareholders’ equity and liabilities	Ending balance		Opening balance
	Consolidated	Parent company	Consolidated	Parent company
Liabilities
Current liabilities
Short-term Loan	190,000,000.00	190,000,000.00	140,000,000.00	140,000,000.00
Accounts payable	47,621,390.26	1,703,505.91	39,397,856.09	11,749,442.14
Advance from customers	3,862,052.99	74,292.00	550,455.25	242,866.25
Staff’s wages payable	5,099,331.72	2,042,139.61	4,838,675.92	2,048,540.41
Taxes payable	-21,751,641.51	3,789,861.31	-17,689,494.22	4,235,357.75
Dividends payable
Other payables	32,363,157.74	32,741,594.67	26,635,471.04	28,622,329.62
Total other current liabilities	0.00	0.00	0.00	0.00
Total current liabilities	257,194,291.20	230,351,393.50	193,732,964.08	186,898,536.17
Long-term Loan	0.00
Bonds payable
Long term accounts payable	5,000,000.00		5,000,000.00
Special accounts payable	3,000,000.00	3,000,000.00	3,000,000.00	3,000,000.00
Deferred income tax			967,398.56	967,398.56
Total non-current liabilities	8,000,000.00	3,000,000.00	8,967,398.56	3,967,398.56
Total liabilities	265,194,291.20	233,351,393.50	202,700,362.64	190,865,934.73
Owner’s equity
Paid-up capital	249,317,999.00	249,317,999.00	249,317,999.00	249,317,999.00
Capital Reserve	191,847,232.65	191,847,232.65	191,847,232.65	191,847,232.65
Surplus Reserve	101,480,997.62	101,480,997.62	101,480,997.62	101,480,997.62
Retained Earnings	49,181,988.51	38,599,653.65	22,181,958.14	27,503,166.78
Total owners’ equity attributable to the parent company	591,828,217.78	581,245,882.92	564,828,187.41	570,149,396.05
Minority shareholders’ equity:	7,725,672.00		7,581,680.51
Total owner’s equity	599,553,889.78	581,245,882.92	572,409,867.92	570,149,396.05

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Total liabilities and owners’ equity	864,748,180.98	814,597,276.42	775,110,230.56	761,015,330.78

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

Statement of Profit and Profit Distribution Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2007 In RMB	Statement of Profit and Profit Distribution Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2007 In RMB	Statement of Profit and Profit Distribution Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2007 In RMB	Statement of Profit and Profit Distribution Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2007 In RMB	Statement of Profit and Profit Distribution Prepared by: SHENZHEN FIYTA HOLDINGS LTD. June 30, 2007 In RMB
Items	Jan.to Jun.,2007		Jan.to Jun.,2006
	Consolidated	Parent company	Consolidated	Parent company
I. Business income	350,380,602.40	100,926,241.66	231,353,224.49	84,240,346.76
Less: Business costs	230,404,336.46	42,956,580.97	147,959,110.10	37,942,818.18
Business Taxes and Surcharge	2,106,269.38	1,744,703.03	1,393,440.96	1,200,007.23
Sales expenses	47,669,139.13	26,650,743.15	36,359,095.06	22,164,024.18
Overheads	34,079,236.97	19,815,542.67	27,926,820.32	15,864,374.25
Financial expenses	6,812,413.20	104,635.54	2,085,547.19	272,387.15
Investmentincome	836,668.09	836,668.09	1,335,191.64	1,335,191.64
III.Operating profit	30,145,875.35	10,490,704.39	16,964,402.50	8,131,927.41
Plus: Non-operating income	843,780.30	331,739.40	186,868.70
Less: Non-operating expenses	6,858.77		72,658.55	3,556.96
IV. Total profit	30,982,796.88	10,822,443.79	17,078,612.65	8,128,370.45
Less: Income tax expense	3,838,775.02	-274,043.08	4,013,334.62	2,460,180.05
V. Net profit	27,144,021.86	11,096,486.87	13,065,278.03	5,668,190.40
Net profit attributable to the owner of the parent company	27,000,030.37	11,096,486.87	13,185,342.01	5,668,190.40
Minority shareholders’ equity	143,991.49		-120,063.98
VI. Earnings per share
(I) Basic earnings per share	0.108		0.053
(II) Diluted earnings per share	0.108		0.053
Items	Jan.to Jun.,2007		Jan.to Jun.,2006
	Consolidated	Parent company	Consolidated	Parent company
Net profit	27,000,030.37	11,096,486.87	13,185,342.01	5,668,190.40
Plus: Retained earnings at year beginning	22,181,958.14	27,503,166.78	-6,448,293.31
Profit available for distribution	49,181,988.51	38,599,653.65	6,737,048.70	5,668,190.40
Less: Provision of

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statutory surplus public reserve
Provision of statutory publicwelfarefund
Profit available for distribution to the investors	49,181,988.51	38,599,653.65	6,737,048.70	5,668,190.40
Less: Dividends of common shares payable
Retained Earnings	49,181,988.51	38,599,653.65	6,737,048.70	5,668,190.40

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

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Cash Flow Statement Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan to Jun 2007 In RMB	Cash Flow Statement Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan to Jun 2007 In RMB	Cash Flow Statement Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan to Jun 2007 In RMB	Cash Flow Statement Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan to Jun 2007 In RMB	Cash Flow Statement Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan to Jun 2007 In RMB
Items	ReportPeriod		SamePeriod ofthePreviousYear
	Consolidated	Parent company	Consolidated	Parent company
I. Net cash flows arising from operating activities
Cash received from sales of goods and supply of labor	409,107,319.92	103,924,762.27	279,614,438.26	95,107,822.32
Other business related cash receipts	5,389,442.42	2,776,003.47	1,498,569.30	1,009,428.31
Subtotal of cash flow in	414,496,762.34	106,700,765.74	281,113,007.56	96,117,250.63
Cash paid for purchase of goods and receptionof laborservices	337,985,392.66	31,526,203.50	225,397,611.12	36,853,225.59
Cash paid to and for staff	36,542,923.26	16,962,882.54	28,530,696.04	13,018,518.31
Taxes paid	19,117,691.66	11,573,497.56	12,412,814.74	7,373,835.97
Other operation related cash payments	52,442,868.72	77,209,800.69	41,336,526.13	63,257,829.46
Subtotal of cash flow out	446,088,876.30	137,272,384.29	307,677,648.03	120,503,409.33
Net cash flows arising from operating activities	-31,592,113.96	-30,571,618.55	-26,564,640.47	-24,386,158.70
II. Cash flows arising from investment activities:
Cash received from recovery of investment			3,000,000.00	3,000,000.00
Net amount of cash received from disposal of fixed assets, intangible assets and other long termassets	561,045.00	561,045.00	112,885.00
Subtotal of cash flow in	561,045.00	561,045.00	3,112,885.00	3,000,000.00
Cash paid for construction/purchase of fixed assets, intangible assets and other long termassets	6,844,601.83	2,227,708.28	10,123,823.65	5,408,915.42
Subtotal of cash flow out	6,844,601.83	2,227,708.28	10,123,823.65	5,408,915.42
Net cash flow arising from investment activities	-6,283,556.83	-1,666,663.28	-7,010,938.65	-2,408,915.42
III. Cash flows arising from fund raising activities:
Cash received from borrowings	70,000,000.00	70,000,000.00	40,000,000.00	40,000,000.00
Subtotal of cash flow in	70,000,000.00	70,000,000.00	40,000,000.00	40,000,000.00
Cash paid for liabilities repayment	20,000,000.00	20,000,000.00
Cash paid for dividend/profit distribution or repayment of interest	4,977,199.00	4,977,199.00	1,461,300.00	1,461,300.00
Subtotal of cash flow out	24,977,199.00	24,977,199.00	1,461,300.00	1,461,300.00
Net cash flow arising from fund-raising activities	45,022,801.00	45,022,801.00	38,538,700.00	38,538,700.00

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IV. Influence upon cash due to change ofexchangerate
V. Net increase of cash and cash equivalents	7,147,130.21	12,784,519.17	4,963,120.88	11,743,625.88

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

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Cash Flow Statement (Cont’d) Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan to	Cash Flow Statement (Cont’d) Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan to	Cash Flow Statement (Cont’d) Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan to	Jun 2007 In RMB	Jun 2007 In RMB
Items	Amount in	report period	Amount of the same period of the previousyear
	Consolidated	Parent company	Consolidated	Parent company
1. Net cash flows arising from adjustment of net profit into operating activities
Net profit	27,144,021.86	11,096,486.87	13,065,278.03	5,668,190.40
Plus: Provision for devaluation of assets
Depreciation of fixed assets	6,200,211.04	4,724,571.07	5,850,888.12	4,917,277.63
Amortization of intangible assets	359,537.16	359,537.16	417,847.20	417,847.20
Long-term expenses to be apportioned	3,302,849.54	2,220,011.73	2,469,351.64	1,169,681.81
Loss (less: income) from disposal of fixed assets, intangible assets and other long termassets	-31,739.40	-31,739.40	-114,210.15
Losses from rejection of fixed assets
Financial expenses	5,166,704.98		1,298,781.76	155,000.00
Investment loss	-836,668.09	-836,668.09	-1,335,191.64	-1,335,191.64
Decrease of deferred income tax	-972,765.20	-972,765.20	410,047.05	410,047.05
Increase of deferred income tax	-967,398.56	-967,398.56
Decrease of inventories	-63,702,089.90	31,565.06	-56,393,135.11	-2,280,589.53
Decrease (less: increase) of operative items receivable	-17,168,271.15	-41,270,536.57	4,583,862.10	-3,268,672.08
Increase (less: decrease) of operativeitems payable	9,913,493.76	-4,924,682.62	3,181,840.53	-30,239,749.54
Net cash flows arising from operating activities	-31,592,113.96	-30,571,618.55	-26,564,640.47	-24,386,158.70
2. Investment and fund-raising activities with no cash income and expenses involved
Capital converted from liabilities
Convertible company bonds due withina year
3. Net increase of cash and cash equivalents:
Ending cash balance	67,373,208.75	61,305,801.33	52,673,326.99	41,732,415.87
Less: Opening cash balance	60,226,078.54	48,521,282.16	47,710,206.11	29,988,789.99
Plus: Ending balance of cash equivalent
Less: Opening balance of cash
~~i~~ ~~l~~ ~~t~~

equivalent
Net increase of cash and cash equivalents	7,147,130.21	12,784,519.17	4,963,120.88	11,743,625.88

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

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II. Notes to the Accounting Statements

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

1. Basis for Preparation of Accounting Statements

The financial statements are prepared according to the enterprise accounting standards and the Enterprise Accounting System promulgated by the central government.

2. Fiscal Year

The Company adopts the calendar year for its fiscal year. A fiscal year is from January 1 to December 31 of years.

3. Functional currency for bookkeeping

The Company uses Renminbi as the functional currency for bookkeeping.

4. Bookkeeping basis and valuation principle:

The Company adopts the accrual basis for its bookkeeping. All the assets are stated based on the costs at the time of acquisition and reverse for impairment of the assets is provided in case of subsequent impairment of the assets.

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 on the first day of the month when a transaction takes place. An item in foreign currency shall be stated after conversion based on the exchange rate as of the balance sheet date. The exchange differences arising from differences between the spot rate as at the balance sheet date and that recognized initially or the difference in the spot rate as at the previous balance sheet rate is charged to the current gain and loss. The non-monetary items in foreign currency measured based on the historical cost are converted based on the rate of the transaction day without change of the amount of the functional currency for bookkeeping; the non-monetary items in foreign currency measured based on the fair value is converted based on the exchange rate as of the date of determining the fair value; the differences between the amount of the functional currency for bookkeeping after conversion and the original book amount are treated as change in fair value and charged to the current gain and loss.

The exchange gain/loss arising from the borrowings attributable to the purchase/construction of the fixed assets will be treated based on the principle of capitalization of the borrowing expenses;

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the exchange gain/loss in directly connection with development of real estate property shall be capitalized before completion of the real estate property.

6. Cash and cash equivalents

Cash listed in the statement of cash flow refers to the cash in hand and bank deposits and cash equivalents ready for payment at any time. Cash equivalent refers to the investment held by the Company with short term (not exceeding 3 months), strong liquidity and low risk of value fluctuation that is easy to be converted into cash of known amount.

7. Calculation for Financial Instruments

Financial instruments include financial assets and financial liabilities

Financial assets are classified into four types at the initial recognition as follows:

(1) The financial assets measured based on the fair value and with the changes stated to the current gain and loss include tradable financial assets and the financial assets measured based on the fair value and with the changes stated to the current gain and loss.

(2) Held to maturity investments
(3) Loans and accounts receivable
(4) Financial Assets Available for Sale

Financial liabilities are classified into four types at the initial recognition as follows:

(1) The financial liabilities measured based on the fair value and with the changes stated to the current gain and loss include tradable financial liabilities and the financial liabilities measured based on the fair value and with the changes stated to the current gain and loss.

(2) Other Financial Liabilities

8. Accounts receivable and provision for bad debts

Accounts receivable refer to accounts receivable and other receivables. The Company adopts the allowance method for possible loss arising from bad debts. Accounts receivable are listed based on the net amount of the amount actually incurred less the provision for bad debts.

(1) Accounts Receivable

Accounts receivable include the accounts receivable from the related parties and that receivable from non-related parties.

Reserve for bad debts is provided after assessment of the recoverability of the accounts receivable. Reserve for bad debits is provided when evidence proves that it is difficult to recover any accounts receivable. For the accounts receivable for which no special reserve for bad debts

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is provided, general reserve for bad debts is provided based on the following proportions by means of aging:

ns of aging:
Age	Proportion
within a year	5%
1 -2 years	10%
2 -3 years	30%
Over 3 years	50%

(2) Criteria for determining bad debts:

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 include raw materials, products in process, finished products, commodities in stock, low-priced and easily-worn articles and packing materials, etc. which are stated based on the lower of the cost and the net realizable value.

Inventories are charged based on the actual cost at the time of acquisition. The costs of raw materials and finished products at the time of delivery are calculated based on the weighted average; the costs of low-priced and easily-worn articles are calculated based on once-and-for-all resale at the time of receiving; packing materials are charged to the production cost on once-and-for-all basis at the time of receiving. Costs of finished products and products in process include those of raw materials, direct manpower, and all indirect production expenses amortized at proper proportion at normal production capacity.

Reserve for price-falling of inventories is provided based on the balance of the cost of individual inventory items higher than the net realizable value.

The net realizable value of the inventories was determined based on the market price less the estimated costs to incur at the time of completion, the sales costs and relevant taxes in process of normal production and operation.

The Company adopts perpetual inventory system as its stock taking system.

Long term Equity Investment
(1) Long-term equity investment

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Long term investment includes the Company’s equity investment in its subsidiaries, associates, joint ventures and the investees on which the Company has no control power, joint control power or significant influence without quotation in the active market and whose fair value is not reliably measurable.

Recognition of initial investment cost

Consolidation of Enterprises under the Same Control

The consolidated party takes cash payment, assignment of non-cash assets or assuming liabilities as the consolidation consideration. It is necessary to take the share of the book value of the owner’s equity of the party consolidated as the initial investment cost of the long term equity investment. For the differences between the initial investment cost of the long term equity investment, cash paid and non-cash assets assigned and the book value of the liabilities assumed, it is necessary to adjust the capital reserve. In case the capital reserve is not sufficient to offset, it is necessary to adjust the retained earnings. In case the party consolidated takes the equity securities issued as the consolidation consideration, it is necessary to take the share of the book value of the owner’s equity of the party consolidated acquired on the consolidation date as the initial investment cost of the long term equity investment. In case of taking the total book amount of the shares issued as the capital stock, for the balance between the initial investment cost of the long term equity investment and the total book amount of the shares issued, it is necessary to adjust the capital reserve. In case the capital reserve is not sufficient to offset, it is necessary to adjust the retained earnings.

Consolidation of Enterprises not under Same Control

For the consolidation of an enterprise fulfilled in a single exchange transaction, the consolidation costs are the assets paid, liabilities incurred or assumed and the fair value of equity based securities as issued for the purpose of obtaining the control power of the party purchased. For the consolidation of an enterprise fulfilled in a number of exchange transactions, the consolidated cost is the sum of every single transaction costs. All direct relevant expenses incurred to the purchaser in consolidation of an enterprise should be charged to the cost of enterprise consolidation. In case there is any provision on some future event as specified in the consolidation contract or agreement which may influence the consolidation costs, while such future event is expected to probably occur on the date of purchase and the amount which affects the combination cost can be reliably measured, the purchaser should charge it to the consolidation cost.

Long term equity investment obtained in a way other than the long term equity investment formed in the enterprise consolidation

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The long term equity investment as acquired by cash payment should take the purchase consideration as actually paid as the initial investment costs, which include the expenses, tax and duties and other necessary expenditures in direct connection with the long term equity investment; The long term equity investment obtained by issuing equity based securities should be regarded as initial investment cost based on the fair value of the equity based securities as issued; the long term equity investment provided by the investor should be taken as the initial investment cost based on the value as specified in the investment contract or agreement provided that the value as specified in the contract or agreement is unfair.

Successive Measurement of Long Term Equity Investment

In case the investor can exercise control over the investees or has no common control power or significant influence, while there is no quotation in the active market or the investment cannot be reliably measured based on the fair value, the cost method is used for calculating the long term equity investment; the long term equity investment calculated based on the cost method is charged based on the initial investment cost; additional or recovered investment should adjust the cost of the long term equity investment; the cash dividend or profit announced for distribution by the investee is recognized as the current investment income; the investment income recognized by the investor is only limited to the amount of accumulated net profit distributed after the investee has accepted the investment; the aforesaid amount exceeding the profit or cash dividend is recovered as the initial investment cost;

The long term equity investment is calculated based on the equity method if the investor has control or joint control power and produces significant influence upon the investee. In case the long term equity investment is greater than the fair value based share in the investee’s recognizable net assets enjoyable by the investor, the initial investment cost in the long term equity investment shall not be adjusted. In case the initial cost of long term equity investment is smaller than the fair value based share in the investee’s recognizable net assets enjoyable by the Company, the balance shall be charged to the current gain and loss and at the same time long term equity investment cost shall be adjusted. After the investor has acquired the long term equity investment, the investment gain/loss should be recognized according to the share in the realized net gain/loss in the investee which can be enjoyed or should be shred; The investor should reduce the book value of long term equity investment correspondingly according to the part enjoyable in the profit or cash dividend announced for distribution by the investee; The net loss incurred to the investee as recognized by the investor should be reduced to zero in maximum based on the book value of long term equity investment and other long term equity which has actually formed net investment in the investee except that the investor has the obligation of assuming extra loss.

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In disposal of long term equity investment, the balance between the par value and the price when it is actually obtained is stated in the gains/losses of the very year. For the long term equity investment calculated based on the equity method, in case the other change in the owners’ equity other than the net gain and loss in the investee is charged to the owners’ equity, in disposal of that investment, the party that has formerly been stated in the owners’ equity at the time of disposal of that investment should be transferred to the current gain and loss based on the corresponding proportion.

(2) Impairment of long-term equity investment

At the end of the period if the recoverable amount is lower than their book value due to continuously falling market price, worsened operation of the investee, reserve for devaluation of long term investment shall be provided based on the balance of the recoverable amount lower than the book value of the long term investment.

11. Fixed assets pricing and depreciation

Fixed assets refer to tangible assets used for producing commodities, providing labor services, leasing, operation or management with service life exceeding one year and higher unit value. Commencing from January 1, 2001, when any land is used for self-use project construction, the book value of the land use right forms part of the costs of housing and building.

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 value for book entry.

Fixed assets are depreciated by straight line method based on the entry value less the predicted net residue value within the predicted service life. For the fixed assets for which reserve for impairment is provided, the depreciation amount is determined according to the book value after deduction of the reserve for impairment and the remaining service life.

The estimated service life, predicted residual ratio and annual depreciation ratio are stated as follows:

		Estimated	Annual
	Estimated	residual	depreciation
Types of fixed assets	service life	ratio	rate
Housing and buildings	20 to 35 years	5%	2.7%-4.8%
Machines & equipment	10 years	5%-10%	9%-9.5%

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Motor vehicles	5 years	5%	19%
Electronic equipment	5 years	5%	19%
Other equipment	5 years	5%	19%
Refurbishment	5 years	0%	20%

Income from disposal of fixed assets, including sales, assignment, scrapping, or impairment, is charged to the non-operating income or expenditure after deduction of its book value and relevant taxes.

Expenditures for repairing and maintenance of fixed assets are charged to the current expenses at the time of incurrence. The follow-up expenditures arising from major restructuring, extension, improvement, refurbishment of fixed assets, etc. may be capitalized when the economic benefit of such fixed assets which flows into the enterprise has exceeded the amount as previously estimated. For the follow-up expenditures for major restructuring, extension, improvement, etc., depreciation is provided during the useful period of the fixed assets according to the straight-line method, and for the expenditures for refurbishment, depreciation is provided within the predicted beneficial period according to the straight-line method.

Fixed assets are stated at the lower of the book value and the recoverable amount at the end of a period. In case there is any sign or change in environment which shows that the book value of individual fixed assets may exceed the amount recoverable, the Company shall make impairment test over such asset. If the book value of some individual asset exceeds the amount recoverable, the balance shall be recognized as the impairment loss.

12. Construction in process

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 engineering 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. Depreciation starts to be provided commencing from the next month after construction-in-progress is transferred to fixed assets when it reaches the useful status as predicted; that which has been put into application but has not yet undergone the procedures of completion settlement, it may be charged based on the estimated value and shall not be adjusted after the actual value has been determined.

In case there is any sign or change in environment which shows that the book value of individual construction-in-progress may exceed the amount recoverable, the Company shall

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make impairment test over such asset. If the book value of some individual asset exceeds the amount recoverable, the balance shall be recognized as the impairment loss.

13. Loan expenses

Loan expenses, such as interest arising from designated loans for purchase/construction of fixed assets, start to be capitalized and charged to the cost of such assets when asset expenditures and loan expenses have already incurred and the purchase/construction activities have already started in order to make the assets reach the predicted application status. The capitalization stops when the fixed asset as purchased/constructed has reached the predicted application status and the follow-up loan expenses are stated in the loss/gain of the very period.

For interest expense in each period in the loan expenses which does not exceed the limit of the interest expenses actually incurred in the designated loan in the very period based on the accumulated expenditure weighted average of the fixed assets as purchased/constructed in the very period and the weight average interest rate of the relevant loan, the capitalization amount is determined.

Expenses of other loans are directly stated as financial expenses in the very period of incurrence.

14. Intangible Assets

Intangible asset is land use right and is stated as the net amount of cost less the accumulated amortization.

The land use right as purchased is used as the actual cost based on the amount actually paid. Intangible assets are stated at the lower of the book value and the recoverable amount at the end of a period. In case there is any sign or change in environment which shows that the book value of individual intangible assets may exceed the amount recoverable, the Company shall make impairment test over such asset. If the book value of some individual asset exceeds the amount recoverable, the balance shall be recognized as the impairment loss.

15. Long-term expenses to be proportioned

Long-term expenses to be proportioned including expense for trademark use fee and various expenses already paid but the amortization term is over one year (with one year exclusive) are amortized on average basis according to the predicted beneficial period and are presented as the net amount actually paid less the accumulated amortization.

16. Wages to the Employees

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The Company’s on-service staff join the staff’s social security system established and managed by the local government, including pension and medical insurance and other social security system. With the exception of the above, the Company has no other significant staff’s benefit commitment.

According to relevant regulations, the Company provides insurance premiums and public reserve based on a certain proportion of total wages not less than the minimum as specified but not exceeding the maximum and hands in to the social security authority. The corresponding payments are stated in the current production costs or expenses.

17. Dividend Distribution

The cash dividend to be distributed with approval of the shareholders’ general meeting is recognized as liability in the very period of approval.

18. Special accounts payable

Special accounts payable refer to the fund 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.

The Company used this fund for purchasing fixed assets and the corresponding amount is transferred to the capital reserve upon approval by the relevant departments after successful completion inspection.

19. Income recognition Sales of goods/products

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 the Company and the amount of sales-related costs can be measured reliably.

Labor services

Income from labor services is recognized based on the percentage of completion in the very period when labor service has been supplied.

Other incomes are recognized on the following basis:

Interest income – it is recognized based on the deposit term and effective yield.

Subsidy income – it is recognized when actually received.

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For the operation lease, the rent of the operation lease is recognized based on the straight line method in different periods during the lease term.

20. Operating Lease

Operating lease refers to a lease with the major risks in connection with the ownership of the assets as well as the rewards belonging to the leasor. The rent from the operation leasing is recognized as the expenses within the lease period based on the straight-line method.

21. Accounting Treatment of Income Tax

The Company adopts the balance sheet liability approach in accounting treatment of the income tax expenses

1) The balance sheet day. According to the differences based on the provision of the tax law from the accounting treatment, such differences can be distinguished from provisional difference of tax payable and provisional difference for offsetting, which can be recognized as deferred income tax asset and deferred income tax liability and are measured according to the income tax amount with the predicted amount payable (or reimbursable) calculated according to the tax law. The income tax and deferred income tax of the very period are stated to the gain and loss of the very period as the income tax expenses or income but excluding the deferred income tax arising from transaction or events in consolidation of enterprises and directly charged to the owner’s equity.

22. Method of preparing the consolidated financial statements

The range of consolidated financial statement includes the Company and the subsidiaries in the consolidation range. Commencing from the date of obtaining a subsidiary’s eventual control power, the Company starts to consolidate the income, costs and profit in the corresponding period; and stops consolidation commencing from the date of losing the eventual control power. The balance of the material current accounts, transactions and unrealized profit in the Company are offset while preparing the consolidated statements. The part in the owner’s equity of a subsidiary in the consolidation range which does not belong to the Company is presented individually on the consolidated financial statement.

If the accounting policy adopted by a consolidated subsidiary differs from that by the Company while such difference occurred therefrom affects greatly the consolidated statements, the accounting policy implemented by the Company shall be adjusted.

(II) Taxes

Taxes and tax rates applicable to the Company are as follows:

Taxes

Tax rate Taxation basis

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		Balance of 17%of the taxable sales less the input tax allowed for
Value-added tax	17%	offsetting in the current period.
Business tax	5%	Housing lease income
Urban construction tax		Amount of VAT and business tax paidin the very period
Business income tax(1)	15%,33%	Amount of income taxable
Housing Tax (2)	1.2%	70% of the cost of the real estate

(1) The Company 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 Company, 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 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. The year 2002 is the first year the said subsidiary made profit on accumulated basis; In the report year, the said subsidiary provided its business income tax based on the taxation rate of 7.5%.

(2) a. According to Article 5 of the Circular of Shenzhen Local Tax Bureau on Printing and Issuing the Questions and Answers on a Number of Policies on Use of Housing Tax and Vehicle and Vessel Use Tax, a production operator should pay Housing Tax based on 70% of the cost of the real estate at the tax rate of 1.2%. The Company pays the Housing Tax according to the tax rate as specified in the aforesaid circular.

(2) b. According to Article 9 of the Measures for Implementation of Housing Tax in Shenzhen Special Economic Zone, tax payers that have newly constructed or purchased housing and buildings (excluding housing and buildings constructed illegally) can be exempted from the housing tax for three years commencing from the month of construction or purchase. On June 27, 2006, the Company finished registration and filing with the Statement of Tax Exemption and Reduction Registration and Filling SHEN DI SHUI SAN JI YING JIAN BEI GAO ZI [2005] No. 35121 through No. 3 Inspection Office of Shenzhen Local Tax Bureau The Company may enjoy tax exemption commencing from the date of registration and filing.

(3) Other taxes are paid according to the specific regulations of the central government.

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(III) Controlled Subsidiaries

						Investment by the Company	Investment by the Company	Proportion
								directly/ indirectly		Consolidate
			Registered	Legal	Registered		Conversion in	controlled by the		d or not
Subsidiaries			place	representative:	capital	Original currency	RMB	Company	Principal Business	(Y/N)	Remarks
Xi’an		Haomen									IV
Restaurants		&			HK$16,000,000.				Catering, recreation, fine
Recreation Co., Ltd.			Xi’an	Men Tengshan	00	RMB11,040,000.00	11,040,000.00	62%	goods	N	1. a
Shenzhen Harmony									purchase sales and repair
World	Watches				RMB123,800,00	RMB122,300,000.0			services of timepieces and
Center Co.,	Ltd.		Shenzhen	Xu Dongsheng	0.00	0	122,300,000.00	98.79%	components	Yes
Shenzhen		Feijing
Sophisticated Optical
Instruments
Manufacture		Co.,			RMB7,000,000.0				Processing, producing and
Ltd.			Shenzhen	Xu Dongsheng	0	RMB6,300,000.00	6,300,000.00	99.879%	selling optical instruments	N	IV.2
Shenzhen		FIYTA							Producing various clocks
Sophisticated									and watches, movements,
Timepieces									spares and parts,
Manufacture		Co.,			RMB10,000,000.				sophisticated timepieces,
Ltd.			Shenzhen	Xu Dongsheng	00	RMB9,000,000.00	9,000,000.00	99.879%	and repairing	Y

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							High grade clocks and		IV
							watches, glasses,
Shenzhen							ornaments, gifts, general
Harmony World							merchandise and
Watches Center			RMB2,800,000.0				handicrafts (excluding gold
Co., Ltd.	Shenzhen	Fang Juan	0	RMB1,400,000.00	1,400,000.00	50%	and silver jewelry )	Y	1. b

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(IV) Notes to the Consolidated Financial Statements

1. Monetary funds

1. Monetary funds
Items Cash on hand Bank deposit Other Monetary Funds Total	June 30, 2007 534,602.79 65,096,238.25 1,742,367.71 67,373,208.75	December 31, 2006 422,854.50 58,410,164.42 1,393,059.62
		60,226,078.54

As at June 30, 2007, other monetary funds held by the Company were mainly for providing security for the short term investments.

As at June 30, 2007, monetary fund at the year end includes the following foreign currency balances:

Amount, in Conversion in Foreign Currencies Exchange RMB RMB rate HK$ 6,224,642.51 0.9744 6,065,291.66 US$ 551,474.94 7.6155 4,199,757.41 Pound Sterling 110 15.3 1,683.00 Total 10,266,732.07

2. Transactional Financial Instruments

Fair value at the end Fair value at the Items of the period beginning of the period Financial assets that are measured at fair value and changes in the value are 2,970,000.00 2,138,400.00 charged to current gain and loss.

3. Accounts receivable

3. Accounts receivable
Items Accounts receivable Less: provision for designated bad debts Provision for general bad debts Net amount of accounts receivable	June 30, 2007 76,486,854.28 38,095,601.88 3,106,612.25 35,284,640.15	December 31, 2006 71,151,577.98 38,095,601.88 3,106,612.25
		29,949,363.85

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Aging of accounts receivable and reserve for bad debts are as follows:

Age Within a year 1 to 2 years 2 to 3 years Over 3 years Total	June 30, 2007 Amount Proportio n Provision for bad debts 29,665,809.25 39.24% 827,238.29 1,724,389.62 2.24% 141,878.06 5,992,372.84 7.78% 2,112,861.34 39,104,282.57 50.74% 38,120,236.44 76,486,854.28 100.00% 41,202,214.13	December 31, 2006 Amount Proport ion Provision for bad debts 23,881,051.12 33.56% 827,238.29 1,411,929.36 1.99% 141,878.06 6,788,308.38 9.54% 2,112,861.34 39,070,289.12 54.91% 38,120,236.44 71,151,577.98100.00 %41,202,214.13	December 31, 2006 Amount Proport ion Provision for bad debts 23,881,051.12 33.56% 827,238.29 1,411,929.36 1.99% 141,878.06 6,788,308.38 9.54% 2,112,861.34 39,070,289.12 54.91% 38,120,236.44 71,151,577.98100.00 %41,202,214.13
			41,202,214.13

As at June 30, 2007, in the balance of other receivables, there are no arrears from the shareholders that hold more than 5% (including 5%) of the Company’s shares.

As at June 30, 2007, the total amount of accounts receivable owed by top five debtors was RMB 5,945,616,.25, taking 7.72% of the total amount receivable.

As at June 30, 2007, the accounts receivable for which reserve for bad debts has been provided at bigger proportions on accumulated basis are summarized as follows:

				Balance of accounts	Reserve for bad debt
Company Names				receivable at year end	provided at year end	Age
Beijing Urban/Rural Trade Center Co.,		Ltd.		2,033,710.15	2,033,710.15	Over 3 years
Qingdao Handry Timepieces,	Glasses		and
Jewelry Co.				1,298,215.01	1,298,215.01	Over 3 years
Timepieces and Sewing Machine		Wholesale
Station of Yingkou General Merchandise Co.				982,604.03	982,604.03	Over 3 years
Siping No. 1 Department Store				823,302.04	823,302.04	Over 3 years
Anshan Timepieces and Photographic		Equipment
Co.				807,815.02	807,815.02	Over 3 years
Jilin Timepieces and Photographic Paraphernalia
Wholesale Co.				890,387.77	890,387.77	Over 3 years
Shenyang Cultural Building Co.,	Ltd.	Timepiece
Branch				773,020.92	773,020.92	Over 3 years
Qingdao Orient Group Co., Ltd.				764,149.26	764,149.26	Over 3 years
Anshan Timepiece and Sewing Machine Co.				696,745.88	696,745.88	Over 3 years
Shantou Overseas Time Lounge				647,818.28	647,818.28	Over 3 years
Datong Timepeice and Sewing		Machining
Purchase and Supply Station				623,586.07	623,586.07	Over 3 years
Beijing Blue Island Building				638,980.96	638,980.96	Over 3 years
Kunming Yutaixiang Timepeices Co.				609,251.89	609,251.89	Over 3 years
Xidan Department Store of	Beijing		Xidan
Department Store Co., Ltd.				544,265.48	544,265.48	Over 3 years

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Others (below RMB 500,000 for a single item) 28,585,226.85 25,961,749.12 Over 3 years Total 40,719,079.61 38,095,601.88

4. Other receivables

4. Other receivables
Items Other receivables Less: reserve for bad debts Total	Ending balance 28,468,169.47 7,030,783.48 21,437,385.99	Opening balance 19,108,880.64 7,030,783.48
		12,078,097.16

Aging of other receivables and reserve for bad debts is as follows:

Age	Ending balance Amount Proporti on 14,306,727.25 49.11% 3,014,735.82 10.83% 504,325.16 1.81% 10,642,381.24 38.25% 28,468,169.47 100.00 %	Opening balance Amount Proporti on Provision for bad debts 5,973,319.80 31.26% 298,665.99 2,332,042.80 12.20% 233,204.28 298,412.70 1.56% 89,523.81 10,505,105.34 54.98% 6,409,389.40 19,108,880.64 100.00 % 7,030,783.48	Opening balance Amount Proporti on Provision for bad debts 5,973,319.80 31.26% 298,665.99 2,332,042.80 12.20% 233,204.28 298,412.70 1.56% 89,523.81 10,505,105.34 54.98% 6,409,389.40 19,108,880.64 100.00 % 7,030,783.48
	Proporti on 49.11% 10.83% 1.81% 38.25% 100.00 %	Proporti on 31.26% 12.20% 1.56% 54.98% 100.00 %
Within a
year
1 to 2
years
2 to 3
years
Over 3
years Total
			7,030,783.48

As at June 30, 2007, in the balance of other receivables, there were no arrears from the shareholders holding more than 5% (including 5%) of the Company’s shares.

As at June 30, 2007, other receivables for which reserve for bad debts has been provided at bigger proportions on accumulated basis are summarized as follows:

Company Names Xinlongtai Industrial Co., Ltd. Zhuangtu Commodities Trading Center Xi’an Aviation Engine Co. Shenzhen Feijing Sophisticated Optical Instruments Manufacture Co., Ltd. Total	Ending balance of other receivables Reserve for bad debt provided at year end Age 1,573,876.89 1,573,876.89 Over 3 years 641,807.20 641,807.20 Over 3 years 602,551.69 602,551.69 Over 3 years 6,199,676.83 1,293,685.48 2 to 3 years 9,017,912.61 4,111,921.26

5. Advance to Suppliers

. Advance to Suppliers
Items	Ending balance		Opening balance
Age of advances to suppliers	Amount	Proportion	Amount	Proportion
Within a year	12,058,462.35	100.00%	7,725,252.35	99.23%

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2 to 3 years Total	0.00% 59,999.99 0.77%
	12,058,462.35 100.00% 7,785,252.34 100.00%

As at June 30, 2007, in the advances to suppliers, there were no arrears owed by any shareholding holding over 5% (with 5% inclusive) of the Company’s shares.

6. Inventories and Provision for falling price of inventories

Opening balance 43,408,372.98 2,864.00 1,930,715.85 372,047,127.60 417,389,080.43 Increase in the year Decrease in the year 18,747,520.18 27,445,320.31 4,306,426.71		Ending balance 45,670,717.91 69,522.41 431,620,367.30
		477,360,607.62
		18,747,520.18 23,138,893.60
46,192,840.49		41,886,413.78

(1) In process of normal production and operation, 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.

(2) That the cost of inventories at the end of the period increased by 14.23% over the year beginning was mainly due to the corresponding growth of inventories and corresponding increase of inventory reserve with growth of sales in the year resulted from increase of 6 new shops.

(3) Reserve for price falling of inventories decreased by 9.32% was mainly due to disposal and discarding of partial inventories in the report period and reverse for price falling of finished products in stock transferred out.

Long-term equity investment

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Items		Ending balance	Opening balance
Stock investment (1)		3,085,000.00	3,085,000.00
Other equity investment (2)		2,734,041.29	2,734,041.29
Total long-term equity investment		5,819,041.29	5,819,041.29
Provision for impairment	of
long-term equity investments (3)		300,000.00	300,000.00
Long-term equity investment, net		5,519,041.29	5,519,041.29

(1) Stock investment

(1) Stock investment
Investees Nature of Sharehold ers Q’ty Investment Proportion HUANENG POWER (a) Corporate shares 1,100,000 0.13% Xi’an Tangcheng Joint Stock Co., Ltd. Corporate shares 500,000 0.10% Total	Initial investment cost 3,000,000.00 85,000.00
	3,085,000.00

(2) Other equity investment

		Starting and	Proportion
		Ending Year	of shares	Investment
Investees		of Investment	held	amount
Shenzhen Research Institute of Northwest		2002.2-2022.
China Polytechnic University		2	50%	1,500,000.00
Xi’an Haomen Restaurants & Recreation
Co., Ltd. (b)		1994-2009	62%	5,800,500.87
		1995.5-2008.
Shenzhen CATIC Culture Transmit Co., Ltd.		5	15%	300,000.00
Shenzhen	Feijing Sophisticated Optical
Instruments	Manufacture Co., Ltd. (c)	1997-2007	90%	-4,866,459.58
	Total			2,734,041.29

(3) Provision for impairment of long-term equity investments

Opening balance Increase in Decreas Investees Ending balance the report e in the

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			report
			period
Shenzhen CATIC Culture
Transmit Co., Ltd.	300,000.00	--	--	300,000.00

Shenzhen CATIC Culture Transmit Co., Ltd. wound up in October, 2005. The Company recognized all the book balance of the investment amounting to RMB 300,000.00 as reserve for impairment of long term investment.

Fixed assets and accumulative depreciation

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Original value Housing and buildings Machines & equipment Motor vehicles Electronic equipment Other equipment Sub-total Accumulative depreciation Housing and buildings Machines & equipment Motor vehicles Electronic equipment Other equipment Sub-total Net value Provisions for impairment of fixed assets Housing and buildings Sub-total Book value	Opening balance Increase in the report period Decrease in the report period Ending balance 289,864,143.05 3,952,501.65 293,816,644.70 9,668,721.46 22,325.00 9,691,046.46 9,463,070.49 716,223.62 10,179,294.11 9,829,613.01 1,039,183.90 - 10,868,796.91 6,231,910.68 93,581.00 6,325,491.68
	325,057,458.69 5,823,815.17 - 330,881,273.86
	50,820,632.17 3,756,193.10 - 54,576,825.27 6,044,621.86 303,372.60 6,347,994.46 4,457,874.48 643,919.94 5,101,794.42 6,041,854.52 1,014,364.50 7,056,219.02 4,064,189.76 265,100.91 - 4,329,290.67
	71,429,172.79 5,982,951.05 - 77,412,123.84
	253,628,285.90 253,469,150.02 2,600,000.00 2,600,000.00
	2,600,000.00 2,600,000.00
	251,028,285.90 250,869,150.02

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10. Improvement of fixed assets rented for operation

Refurbishment of retail

	Refurbishment of retail
Items
	shops
Opening balance	9,473,084.96
Increase in the report period	4,450,594.08
Depreciation in the report period	4,069,295.91
Ending balance	9,854,383.13

11. Construction in process

Project Budget Opening balance Air conditioning engineering for FIYTA Technology Building 302,523.00 151,261.50 Illumination engineering for FIYTA Technology Building 120,000.00 Total 151,261.50	Project Budget Opening balance Air conditioning engineering for FIYTA Technology Building 302,523.00 151,261.50 Illumination engineering for FIYTA Technology Building 120,000.00 Total 151,261.50	Increase in the report period 54,000.00 54,000.00	Transferred into the fixed assets in the report period 0.00	Ending balance Funds source 151,261.50Self-raised fund 54,000.00Self-raised fund 205,261.50
	151,261.50

None of the aforesaid construction in progress experienced borrowing expenses necessary to be capitalized.

12. Intangible assets

		Accumulativ						Remaini
					Amount	Transfer
Types	Initial amount	ely amortized in the report period	Opening balance	Increase in the report period	amortized in the period	out in the report period	Ending balance	ng amortiz ation term	Way of acquisi tion
Land use
right
FIYTA Building at	15,487,349. 60	3,956,854.0 4	11,702,532. 72		172,037.1 6		11,530,495.5 6	33	Purcha se

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Zhenhua road, Futian

District Trademark use right Total	113,200.00 113,200.0 0 113,200.00 10年 Purcha se 15,600,549. 60 3,956,854.0 4 11,702,532. 72 113,200.0 0 172,037.1 6 - 11,643,695.5 6 - -

13. Long-term expenses to be proportioned

									Remai
			Accumulativel				Transfer
Types		Amount initially incurred	y amortized in the report period	Opening balance	Increase in the report period	Amount amortized in the period	out in the report period	Ending balance	ning amortiz ation term
Cost	for
making special		10,687,550. 10	6,106,932.01	4,906,625.0 2	1,854,938.2 3	2,180,945.16		4,580,618.09
counters									1-2年
ERP expenses		1,128,004.0 0	678,978.40	498,230.00	68,704.00	117,908.40		449,025.60	1-2年
Trademark
licensing royalty		3,750,000.0 0	2,807,492.34	1,130,007.6 6		187,500.00		942,507.66	4年
Refurbishing
expenses and others		10,304,275. 88	8,353,189.03	2,022,595.0 9	636,469.26	707,977.50		1,951,086.85	3-4年
Total		25,869,829. 98	17,946,591.78	8,557,457.7 7	2,560,111.49	3,194,331.06	0.00	7,923,238.20

14. Asset of deferred income tax

14. Asset of deferred income tax
Items	Ending balance	Opening balance
Asset of deferred income tax	4,135,520.20	3,162,755.00
Total	4,135,520.20	3,162,755.00
15. Short-term Loan
Types of Borrowings	Ending balance	Opening balance
Bank loans
- Secured loans	190,000,000.00	140,000,000.00

The annual interest rate of the aforesaid bank loan is 6.12-6.57% and CATIC Shenzhen Holdings Ltd., the Company’s holding shareholder, offered guarantee and assumed joint responsibility of guarantor.

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16. Accounts payable

As at June 30, 2007, the total accounts payable in the Company was RMB 47,621,390.26. As at June 30, 2007, in the accounts payable, there are no arrears from the shareholders that hold more than 5% (with 5% inclusive) of the Company’s shares.

As at June 30, 2007, there are none in the big accounts payable with age exceeding 3 years.

17. Advance Receipts

As at June 30, 2007, the total advance receipts in the Company was RMB 3,862,052.99. Of the advance receipts, there was no big account with age exceeding 1 year.

In the advance receipts, there are no arrears owed to the shareholders that hold more than 5% (with 5% inclusive) of the Company’s shares.

18. Other payables:

As at June 30, 2007, the total other payables in the Company was RMB 32,363,157.74. As at June 30, 2007, in the other payables, there are no arrears from the shareholders that hold more than 5% (with 5% inclusive) of the Company’s shares.

19. Taxes payable

9. Taxes payable
Taxes Business tax Value-added tax Urban construction tax Business income tax Others Stamp tax Total	Ending balance 674,250.42 -26,288,477.72 119,930.73 3,218,278.06 137,461.00 321,888.49 -21,751,641.51	Opening balance 406,253.85 -20,985,036.19 106,724.42 2,293,642.64 285,906.20 138,093.93
		-17,754,415.15

20. Salaries Payable to Staff

Salaries payable to staff at the end of the period was RMB 5,099,331.72, the amount at the beginning of the period was RMB 4838675.92. The amount at the end of the period was mainly the salaries payable to staff amounting to RMB 1,274,655.39; and the expenses, such as the amount of staff’s insurance premium, education surcharge, etc. was RMB 3,824,676.33.

21. Long term accounts payable

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Items Fund for financing the construction of the Company’s technology center (1) Loan (2) Total	Ending balance 3,000,000.00 5,000,000.00 8,000,000.00	Opening balance 3,000,000.00 5,000,000.00
		8,000,000.00

(1) According to the document SHEN JING MAO FA [2002] No. 93, the Company’s technology center has been certified as an enterprise technology center at municipal level in Shenzhen. For this reason, the Company was granted financing fund for constructing the technology center amounting to RMB 3,000,000.00, which was all used for purchasing equipment.

(2) The fund was borrowed by Shenzhen Harmony World Watches Center Co., Ltd., one of the Company’s subsidiaries from Beijing Heng Da Li Swiss Clocks and Watches Co., Ltd., one of its associates.

22. Liabilities of deferred income tax

Items	Ending balance	Opening balance
Liabilities of deferred income tax	-	967,398.56
Total	-	967,398.56

Capital Stock

		Increase/ Decrease resulting	Increase/ Decrease resulting	Increase/ Decrease resulting	Increase/ Decrease resulting	Increase/ Decrease resulting
		from	the change in the report
				period
			Public Reserve
		Shar	Bon	Conv	Oth	Sub-	Opening
		es	us	erted	ers	total	balance
	Ending balance	allott	shar	share
		ed	es	s
(I) Non-negotiable shares
1. Promoters’ shares	130,248,000.00	--	--	--	--	--	130,248,000.00
including:
Domestic corporate shares	130,248,000.00	--	--	--	--	--	130,248,000.00
Total non-negotiable shares	130,248,000.00	--	--	--	--	--	130,248,000.00
(II) Listed negotiable shares

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1. Domestically listed ordinary shares (in RMB)	60,749,999.00	--	--	--	--	--	60,749,999.00
Including: Senior executives’ shares	48,210.00	--	--	--	--	--	48,210.00
2. Foreign shares listed					--
domestically	58,320,000.00	--	--	--		--	58,320,000.00
Total listed negotiable shares	119,069,999.00	--	--	--	--	--	119,069,999.00
(III) Total Capital Stock	249,317,999.00	--	--	--	--	--	249,317,999.00

The aforesaid capital stock has been verified by Shekou Zhonghua Certified Public Accountants by Capital Verification Report SHE ZHONG YAN ZI BAO ZI (1998) No. 16. 24. Capital Reserve

24. Capital Reserve	24. Capital Reserve
Items Opening balance Increase in the report period Decrease in the report period Share capital premium 177,354,784.00 -- -- Value added in assets assessment 13,753,691.65 -- -- Price difference in related transactions 738,757.00 -- -- Total 191,847,232.65 -- -- 25. Surplus Reserve Items Opening balance Increase in the report period Decrease in the report period Statutory surplus public reserve 39,496,103.62 -- Statutory public welfare fund Statutory discretionary surplus public reserve 61,984,894.00 -- -- Total 101,480,997.62		Ending balance 177,354,784.00 13,753,691.65 738,757.00 191,847,232.65 Ending balance 39,496,103.62 -- 61,984,894.00

	--
		101,480,997.62

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26. Retained earnings

Items Amount Retained earnings at year beginning 22,181,958.14 Plus: Profit in the report period 27,000,030.37 Surplus public reserve transferred in -- Less: Allotting statutory public reserve Dividend payable for common shares -- Retained earnings at year end 49,181,988.51

27. Operation Income and Costs

Sectors Watch manufacture and retail Income from property management rent Other business Total	Amount in report period Income from principal businesses Principal business cost 324,046,518.5 1 229,018,444.4 6 27,341,859.04 3,887,910.12 2,491,094.41 996,851.48 353,879,471.9 6 233,903,206.0 2	Amount of the same period of the previous year Income from principal businesses Principal business cost 207,309,628.98 143,307,169.2 1 22,433,450.34 3,917,301.69 1,610,145.17 734,639.20 231,353,224.49 147,959,110.1 0	Amount of the same period of the previous year Income from principal businesses Principal business cost 207,309,628.98 143,307,169.2 1 22,433,450.34 3,917,301.69 1,610,145.17 734,639.20 231,353,224.49 147,959,110.1 0
			734,639.20
			147,959,110.1 0

28. Taxes and surcharge of principal business

Items Business tax Urban construction tax Educational Surcharge Others Total	Amount in the report period 1,465,701.53 216,163.81 356,538.59 67,865.45 2,106,269.38	Amount of the same period of the previous year 820,580.73 171,480.31 363,382.65 37,997.27
		1,393,440.96

30. Operation costs

Items

Amount in the Amount of the

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report period same period of the previous year Operation costs 47,669,139.13 36,359,095.06

The operation costs in the report period increased by RMB 11,310,044.07 over the same period of the previous year was mainly due to growth of timepieces retail business which resulted in increase of advertisement costs and rental.

31. Financial Expenses

1. Financial Expenses
Items Interest income – bank deposit Interest payment – bank loan Exchange losses Service charges Others Total	Amount in the report period 229,135.52 5,166,704.98 361,339.06 1,513,504.68 6,812,413.20	Amount of the same period of the previous year 141,796.95 1,298,781.76 31,281.50 876,280.88 21,000.00
		2,085,547.19

Of the financial expenses in the report year, the interest payment for the bank loan increasing by RMB 3,867,923.22 was mainly due to bank loan amounting to RMB 190,000,000 at the end of the report period, a RMB 130,000,000.00 growth over the same period of the previous year and the interest payment increased correspondingly.

32. Investment income

Items Amount of the Amount in the same period of report period the previous year Earnings from stock investment 836,668.09 1,335,191.64 -- -- Earning from securities investment Dividend distributed to the Investees involved -- in calculation based on the cost method Provision for devaluation of long-term -- investments

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Provisions for devaluation of short-term investment Total 836,668.09 33. Non-operating income Items Amount in the report period Income from disposal of fixed assets 31,739.40 Income from insurance claim 100,000.0 0 Governmental reward 700,000.0 0 Others 12,040.90 Total 843,780.30 34. Non-operating expenditures Items Amount in the report period Loss from disposal of fixed assets -- Penalty payment 6,858.77 Others -- Total 6,858.77
		1,335,191.64
		Amount of the same period of the previous year 70,399.03 116,469.67
		186,868.70
		Amount of the same period of the previous year 57,616.88 2,725.96 12,315.71 72,658.55

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

Accounts receivable

Items	Amount in report period	Opening balance
Accounts receivable	58,101,206.70	52,632,286.97
Less: reserve for bad debts	40,373,588.49	40,373,588.49
Net amount of accounts receivable	17,727,618.21	12,258,698.48

Aging analysis of the Company’s accounts receivable is as follows:

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Within a year 1 to 2 years 2 to 3 years Over 3 years Total	Amount in report period Amount Propor tion Provision for bad debts 8,938,861.63 15.38 % 172,597.90 1,137,580.261.96% 130,135.26 7,122,389.35 12.26 % 2,112,861.34 40,902,375.4 6 70.40 % 37,957,993.9 9 58,101,206.7 0100.00 % 40,373,588.4 9	Amount in report period Amount Propor tion Provision for bad debts 8,938,861.63 15.38 % 172,597.90 1,137,580.261.96% 130,135.26 7,122,389.35 12.26 % 2,112,861.34 40,902,375.4 6 70.40 % 37,957,993.9 9 58,101,206.7 0100.00 % 40,373,588.4 9	Amount in report period Amount Propor tion Provision for bad debts 8,938,861.63 15.38 % 172,597.90 1,137,580.261.96% 130,135.26 7,122,389.35 12.26 % 2,112,861.34 40,902,375.4 6 70.40 % 37,957,993.9 9 58,101,206.7 0100.00 % 40,373,588.4 9	Opening balance Amount Propor tion Provision for bad debts 3,451,957.98 6.56% 172,597.90 1,301,357.56 2.47% 130,135.26 7,042,871.15 13.38 %2,112,861.34 40,836,100.2 8 77.59 %37,957,993.9 9 52,632,286.9 7 100.00 %40,373,588.4 9	Opening balance Amount Propor tion Provision for bad debts 3,451,957.98 6.56% 172,597.90 1,301,357.56 2.47% 130,135.26 7,042,871.15 13.38 %2,112,861.34 40,836,100.2 8 77.59 %37,957,993.9 9 52,632,286.9 7 100.00 %40,373,588.4 9
	58,101,206.7 0	100.00 %	40,373,588.4 9	52,632,286.9 7	100.00 %

2. Other receivables

2. Other receivables
Items	Amount in report year	Opening balance
Other receivables	268,993,705.52	221,152,860.25
Less: reserve for bad debts	6,370,788.48	6,370,788.48
Other receivables, net	262,622,917.04	214,782,071.77

(1) Aging analysis of the Company’s other receivables is as follows:

Amount in report year Amount Propor tion Provision for bad debts Within a year 254,837,711.41 94.74 % 177,226.73 1 to 2 years 472,318.560.18% 27,325.86 2 to 3 years 1,246,085.24 0.46% 89,523.81 Over 3 years 12,437,590.31 4.62% 6,076,712.08 Total 268,993,705.5 2 100.00 % 6,370,788.48	Amount in report year Amount Propor tion Provision for bad debts Within a year 254,837,711.41 94.74 % 177,226.73 1 to 2 years 472,318.560.18% 27,325.86 2 to 3 years 1,246,085.24 0.46% 89,523.81 Over 3 years 12,437,590.31 4.62% 6,076,712.08 Total 268,993,705.5 2 100.00 % 6,370,788.48	Amount in report year Amount Propor tion Provision for bad debts Within a year 254,837,711.41 94.74 % 177,226.73 1 to 2 years 472,318.560.18% 27,325.86 2 to 3 years 1,246,085.24 0.46% 89,523.81 Over 3 years 12,437,590.31 4.62% 6,076,712.08 Total 268,993,705.5 2 100.00 % 6,370,788.48	Amount in report year Amount Propor tion Provision for bad debts Within a year 254,837,711.41 94.74 % 177,226.73 1 to 2 years 472,318.560.18% 27,325.86 2 to 3 years 1,246,085.24 0.46% 89,523.81 Over 3 years 12,437,590.31 4.62% 6,076,712.08 Total 268,993,705.5 2 100.00 % 6,370,788.48	Opening balance Amount Propor tion Provision for bad debts 207,640,874.12 93.89 % 177,226.73 273,258.60 0.12% 27,325.86 1,110,705.91 0.50% 89,523.81 12,128,021.62 5.49% 6,076,712.08 221,152,860.25100.00 % 6,370,788.48	Opening balance Amount Propor tion Provision for bad debts 207,640,874.12 93.89 % 177,226.73 273,258.60 0.12% 27,325.86 1,110,705.91 0.50% 89,523.81 12,128,021.62 5.49% 6,076,712.08 221,152,860.25100.00 % 6,370,788.48
	268,993,705.5 2	100.00 %	6,370,788.48	221,152,860.25	100.00 %

3. Long-term equity investment

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Items	Opening balance	Increase in the report	Decrease in the report period	Ending balance
		period
Stock investment
(1)	3,085,000.00			3,085,000.00
Subsidiaries (4)	156,614,323,70		13,766,025.05	142,848,298.65
Other equity
investment (2)	1,800,000.00			1,800,000.00
Total long-term
equity investment	161,499,323.70			147,733,298.65
Provision for
impairment of
long-term equity	300,000.00			300,000.00
investments (3)
Net amount of
long-term equity
investment	161,199,323.70			147,433,298.65

The long term equity investment of the Company includes:

(1) Stock investment

			Nature of				Proportion in the
			Shareholde			registered capital		Initial investment
Investees			rs		Q’ty		of the investee	cost
Wanneng	Joint	Stock	Corporate	1,100,000			0.13%	3,000,000.00
Co., Ltd.			shares
Xi’an Tangcheng		Joint	Corporate		500,000		0.10%	85,000.00
Stock Co.,	Ltd.		shares
	Total							3,085,000.00
(2) Other equity investment
			Starting			and
			Ending		Year	of	Investment
Investees			Investment				Proportion	Investment amount
Shenzhen	Research Institute of 2002.2-2022.2						50%	1,500,000.00

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Northwest China Polytechnic University Shenzhen CATIC Culture Transmit Co., Ltd. 1995.5-2008.5 15% Total	300,000.00
	1,800,000.00

(3) Provision	for impairment of long-term equity investments	for impairment of long-term equity investments	for impairment of long-term equity investments
				Decrease
			Increase in
Investees		Opening balance	the report period	in the report period	Ending balance
Shenzhen	CATIC	Culture
Transmit Co., Ltd.		300,000.00	--	--	300,000.00

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(4) Subsidiaries

Investment amount Change in accumulated equity Book Balance Invest ment Starting and Propor Ending Year tion Opening Opening Increase in the Dividend to be Investees of Investment (%) balance Ending balance balance report period distributed Ending balance Opening balance Ending balance Shenzhen Harmony World Watches 1997-2012 98.79 122,425,000.00 122,425,000.00 2,198,348.32 2,198,348.32 124,623,348.32 124,623,348.32 Center Co., Ltd. Shenzhen Harmony World Watches 1993-2008 50 1,400,000.00 1,400,000.00 983,877.69 983,877.69 2,383,877.69 2,383,877.69 Center Co., Ltd. Shenzhen FIYTA Sophisticated Timepieces 1999-2009 90 9,000,000.00 9,000,000.00 19,673,056.40 13,766,025.05 5,907,031.35 28,673,056.40 14,907,031.35 Manufacture Co., Ltd. Shenzhen Feijing Sophisticated Optical Instruments 1997-2007 90 6,300,000.00 6,300,000.00 -11,166,459.58 -11,166,459.58 -4,866,459.58 -4,866,459.58 Manufacture Co., Ltd. Xi’an Haomen Restaurants & 1994-2009 62 11,040,000.00 11,040,000.00 -5,239,499.13 -5,239,499.13 5,800,500.87 5,800,500.87 Recreation Co., Ltd. Total 150,165,000.00 150,165,000.00 6,449,323.70 -7,316,701.35 156,614,323.70 142,848,298.65

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4. Operating Income and Cost

Sectors Sales of timepieces Income from property management Other business Total	Amount in report year Operation income Operation costs 72,500,380.17 38,071,819.37 27,341,859.04 3,887,910.12 1,084,002.45 996,851.48 100,926,241.66 42,956,580.97	Amount of the same period of the previous year Operation income Operation costs 60,754,623.11 33,295,393.37 22,433,450.34 3,917,301.69 1,052,273.31 730,123.12 84,240,346.76 37,942,818.18	Amount of the same period of the previous year Operation income Operation costs 60,754,623.11 33,295,393.37 22,433,450.34 3,917,301.69 1,052,273.31 730,123.12 84,240,346.76 37,942,818.18
			730,123.12
			37,942,818.18

6. Investment income

Items Amount of the Amount in the same period of report period the previous year Earnings from stock investment 836,668.09 1,335,191.64 Earning from securities investment -- -- Dividend distributed to the Investees involved in -- calculation based on the cost method Provision for devaluation of long-term -- investments Provisions for devaluation of short-term investment Total 836,668.09 1,335,191.64

(VI) Related Parties and Related Transactions

1. Related parties with controlling relationship

(1) Basic information of the related parties with control relationship and the relationship with the Company are as follows:

Company Names	Company Names	Registered address	Principal business	Relationship	Ownership or type	Legal representati
						ve:
			Investing to set up	The
CATIC	SHENZHEN	Shenzhen	entities, domestic trade,	Company’s	Joint stock co.,	Wu
HOLDINGS	LTDS.		materials supply and	parent	ltd.	Guangquan
			sales	company

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				shareholder
			Import and export of	of the
CATIC Corporation	Shenzhen	Shenzhen	motor vehicles, equipment and machinery made within the Group.	Company’s parent	Solely owned by the state	Wu Guangquan
				company

(2) Registered capital of the related party with control relationship and the change

		Increase in the report	Decrease in the
Company Names	December 31, 2006	year	report year		June 30, 2007
CATIC SHENZHEN
HOLDINGS LTDS.	642,000,000.00	--		--	642,000,000.00
CATIC Shenzhen
Corporation	80,000,000.00	--		--	80,000,000.00
Shenzhen Feijing
Sophisticated Optical
Instruments
Manufacture Co., Ltd.	7,000,000.00	--		--	7,000,000.00
Shenzhen FIYTA
Sophisticated
Timepieces
Manufacture Co., Ltd.	10,000,000.00	--		--	10,000,000.00
Shenzhen Harmony
World Watches Center
Co., Ltd.	123,800,000.00	--		--	123,800,000.00
Xi’an Haomen
Restaurants &
Recreation Co., Ltd.	HK$ 16,000,000.00	--		--	HK$ 16,000,000.00
Shenzhen Harmony
World Watches Center
Co., Ltd.	2,800,000.00	--		--	2,800,000.00
Beijing Henglianda
Timepiece Co., Ltd.	10,000,000.00				10,000,000.00

(3) Shares held by the related party which can control the Company and the change:

Entity Names Ending balance Amount

CATIC SHENZHEN HOLDINGS LTD.

– direct holding 130,248,000.00

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CATIC Shenzhen Corporation - Indirect holding 81,153,009.00

(4) Shares or equity in the related party controlled by the Company directly or indirectly held and the change

						Decrease	Decrease
			Increase in			in the
			the report			report
		Opening balance period				period		Ending balance
Company Names			Prop
			Propor Amou	ortio	Amo		Propo		Proportio
		Amount	tion nt	n		unt	rtion	Amount		n
Shenzhen Feijing Sophisticated			99.00
Optical Instruments		6,300,000.00	% --	--		--	--	6,300,000.00	99.00%
Manufacture Co., Ltd.
Shenzhen FIYTA Sophisticated			99.00
Timepieces Manufacture Co.,	Ltd.	9,000,000.00	% --	--		--	--	9,000,000.00	99.00%
Shenzhen Harmony Watches Center Co., Ltd.	World	122,425,000.00	98.79 % --	--		--	--	122,425,000.00	98.79%
Xi’an Haomen Restaurants &			62.00
Recreation Co., Ltd.		11,040,000.00	% --	--		--	--	11,040,000.00	62.00%
Shenzhen Harmony Watches Center Co., Ltd.	World	2,800,000.00	50.00 % --	--		--	--	2,800,000.00	50.00%
Beijing Henglianda Timepiece Co., Ltd.		5,000,000.00	50.00 % --	--		--	--	5,000,000.00	50.00%
2. Related Parties without	Control Relationship
Company Names						Relationship with the
							Company
Shenzhen CATIC Property Management							controlled by the same
Co., Ltd.								parent company
								shareholder
Shenzhen Rainbow Supermarket Co., Ltd.							controlled by the same
								parent company
								shareholder
Shenzhen Shenhang Electronic Machinery
Co. Ltd.							Minority shareholders

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Beijing Heng Da Li Swiss Clocks and Watches	Associate of a controlled
Co., Ltd.	subsidiary
Shenzhen Maiwei Cable TV Equipment	controlled by the same
Co Ltd	parent company

3. Related transactions

(1) Pricing policy

The transactions with the related parties are priced based on the prices specified in the agreements executed by both parties.

(2) Significant transactions between the Company and the related parties are stated as follows:

	Amount in report year	Amount of the same
		period of the previous
		year
Items and companies	Amount in transaction	Amount in transaction
(1) Receiving labor services
Shenzhen CATIC Property Management
Co., Ltd.	440,567.94	887,134.21
(2) Leases (Operating rent)
Shenzhen CATIC Property Management
Co., Ltd.	402,480.00	402,480.00
(3) Leases (operating lease)
Shenzhen CATIC Real Estate	659,700.00	472,449.60
Shenzhen CATIC Sunshine Real Estate
Development Co., Ltd.		144,300.00
Shenzhen Maiwei Cable TV Equipment
Co Ltd	154,379.80	347,188.80
(4) Payment for sales expenses with
designated counters in the supermarket
Shenzhen Rainbow Supermarket Co.,
Ltd.	2,405,177.70	1,215,370.28
Total	4,062,305.44	3,468,922.89

4. Balance of the Current Accounts with Related Parties

Items and companies Ending balance Opening balance Remarks

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Accounts receivable
Shenzhen Rainbow Supermarket Co.,
Ltd.	72,933.80	668,927.30
Other receivables
Shenzhen CATIC Property Management			Deposit in
Co., Ltd.	58,341.58	130,278.58	security
Xi’an Haomen Restaurants & Recreation			Current
Co., Ltd.	2,400,000.00	2,400,000.00	account
			Current
CATIC Real Estate	109,950.00	219,900.00	account
Other payables
Xi’an Haomen Restaurants & Recreation			Account
Co., Ltd.	12,311,302.88	12,311,302.88	recovered
Shenzhen CATIC Property Management			Current
Co., Ltd.	716,462.66	528,796.57	account
Accounts payable
Xi’an Haomen Restaurants & Recreation			Current
Co., Ltd.	89,442.46	89,442.46	account
			Current
Long term accounts payable			account
Beijing Heng Da Li Swiss Clocks and Watches Co., Ltd.	5,000,000.00	5,000,000.00	Borrowings

(VII) Contingencies

Ended the report period, the Company had no significant contingencies necessary to be disclosed

(VIII) Commitments

1. Capital Commitment

Ended the report period, the Company had no capital payment commitment for which agreement had been executed but not necessary to be confirmed on the accounting statement.

2. Operation Lease Commitments

According to the irrevocable operational lease contracts as executed already, the future minimum rentals necessary to be paid are summarized as follows:

Items	Ending balance	Opening balance
Within a year	9,232,971.00	7,345,100.00
1 to 2 years	8,926,714.00	6,462,300.00

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2 to 3 years Over 3 years Total	4,462,736.00 422,300.00 23,044,721.00	5,948,000.00 844,600.00
		20,600,000.00

(IX Miscellaneous

According to the document [2007] SHANG HE JING WAI TOU ZI ZHENG ZI NO. 00276, FIYTA （ HONGKONG ） LIMITED, the Company’s subsidiary incorporated in Hong Kong, has been approved by the Ministry of Commerce of the People’s Republic of China with registered capital of US$ 1.2858 million. Its capital was 100% contributed by Shenzhen FIYTA Holdings Ltd. It is mainly engaged in sales of various analog watches and movements, spares and parts, various timing instruments. At present, the corporate registration and registration with the industry and commerce authority are in process of handling.

(X) Post Events

The Company published the third announcement of the Prospectus of Equity Separation Reform on July 14, 2007 (Refer to Securities Times and http://www.cninfo.com.cn)The equity reform work is still in progress at the present.

(XI) Provisions for impairment of fixed assets

Items	Opening balance	Decrease in the report period	Ending balance
I. Provision for bad debts	48,232,997.61		48,232,997.61
Incl.: Accounts receivable	41,202,214.13		41,202,214.13
Other receivables	7,030,783.48		7,030,783.48
II. Provisions for impairment of inventories	46,192,840.49	4,306,426.71	41,886,413.78
III. Reserve for impairment of transactional financialassets	4,357,600.00	831,600.00	3,526,000.00
IV. Provision for impairment of the held to the dueinvestment			-
V. Provision for impairment of long-termequityinvestments	300,000.00		300,000.00
VI. Provision for impairment of fixed assets	2,600,000.00		2,600,000.00
VII. Provision for impairment of investment basedrealestate			-
VIII. Provision for impairment of engineering supplies			-
IX. Provision for impairment of construction-in-progress			-
X. Provision for impairment of productionbased biologicalassets			-
XI. Provision for impairment of oil and gas assets			-
XII. Provision for impairment of intangible assets			-

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XIII. Provision for impairment of goodwill				-
XIV. Others				-
Total	101,683,438.10			96,545,411.39

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(XII) Statement of Changes in Owner’s Equity

Statement of Changes in Owner’s Equity

	Statement of Changes in Owner’s Equity	Statement of Changes in Owner’s Equity	Statement of Changes in Owner’s Equity	Statement of Changes in Owner’s Equity	Statement of Changes in Owner’s Equity	Statement of Changes in Owner’s Equity	Statement of Changes in Owner’s Equity
Prepared by: SHENZHEN FIYTA HOLDINGS LTD.	January to December, 2006 In RMB
Items	Total owners’ equity attributable to the parent company
	Paid-up capital	Capital Reserve	Less: share s in stock	Surplus Reserve	Retained Earnings	Minority shareholders’ equity:	Total owner’s equity
I. Balance at the end of the previous year	249,317,999.00	191,847,232.65		98,654,301.02	-6,448,293.31	7,502,682.77	540,873,922.13
Plus: Change of accounting policy
Correction of previous errors
II. Balance at the year beginning	249,317,999.00	191,847,232.65		98,654,301.02	6,448,293.31	7,502,682.77	540,873,922.13
III. Amount involved in increase/decrease in the year				2,826,696.60	26,436,525.03	77,367.72	29,340,589.35
(I) Net profit					29,263,221.63	77,367.72	29,340,589.35
(II) Profit and loss directly charged to the owner’s equity
1. Net change in the fair value of the financial assets available for sale
2. Influence from change of the other owner’s equity

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of the investee
3. Influence from the income tax in connection with the owner’s equity as charged
4. Others
Total of the aforesaid (I) and (II)	-	-	-	-	29,263,221.63	77,367.72	29,340,589.35
(III) Capital provided and decreased by the owner
1. Capital provided by the owner
2. Amount of share payment charged to the owner’s equity
3. Others
(IV) Profit Distribution				2,826,696.60	-2,826,696.60		0.00
1. Provision of surplus public reserve				2,826,696.60	-2,826,696.60		0.00
2. Distribution to the owner
(V) Internal carry-over of owner’s equity
1. Increased capital converted from capital reserve
2. Increased capital converted from surplus reserve
3. Making up Deficit with Surplus Public Reserve
IV. Ending balance	249,317,999.00	191,847,232.65		101,480,997.62	19,988,231.72	7,580,050.49	570,214,511.48

Statement of Change in Owner’s Equity Prepared by: SHENZHEN FIYTA HOLDINGS LTD. Jan. to Jun., 2007 In RMB Total owners’ equity attributable to the parent company

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	Paid-up capital	Capital Reserve	Less: shares in stock	Surplus Reserve	Retained Earnings	Minority shareholders’ equity:	Total owner’s equity
I. Balance at the end of the previous year	249,317,999. 00	191,847,232. 65		101,480,997.62	19,988,231.72	7,580,050.49	570,214,511.48
Plus: Change of accounting policy					2,193,726.42	1,630.02	2,195,356.44
Correction of previous errors
II. Balance at the year beginning	249,317,999. 00	191,847,232. 65		101,480,997.62	22,181,958.14	7,581,680.51	572,409,867.92
III. Amount involved in increase/decrease in the year					27,000,030.37	143,991.49	27,144,021.86
(I) Net profit					27,000,030.37	143,991.49	27,144,021.86
(II) Profit and loss directly charged to the owner’s equity							-
1. Net change in the fair value of the financial assets available for sale							-
2. Influence from change of the other owner’s equity of the investee							-
3. Influence from the income tax in connection with the owner’s equity as charged							-
4. Others							-
Total of the aforesaid (I) and (II)	-	-	-	-

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				27,000,030.37	143,991.49	27,144,021.86
(III) Capital provided and decreased by the owner
1. Capital provided by the owner
2. Amount of share payment charged to the owner’s equity
3. Others
(IV) Profit Distribution
1. Provision of surplus public reserve
2. Distribution to the owner
3. Others
(V) Internal carry-over of owner’s equity
1. Increased capital converted from capital reserve
2. Increased capital converted from surplus reserve
3. Making up Deficit with Surplus Public Reserve
IV. Ending balance	249,317,999. 00	191,847,232. 65	101,480,997.62	49,181,988.51	7,725,672.00	599,553,889.78

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AI assistant

FIYTA Precision Technology Co., Ltd. — Interim / Quarterly Report 2007

53563_rns_2007-08-20_78f7fe95-a40f-44ea-b13f-dd70d4281ef3.PDF

Financial Report

I. Accounting Statements

II. Notes to the Accounting Statements

1. Basis for Preparation of Accounting Statements

2. Fiscal Year

3. Functional currency for bookkeeping

4. Bookkeeping basis and valuation principle:

5. Foreign Currency Translation

6. Cash and cash equivalents

7. Calculation for Financial Instruments

(2) Other Financial Liabilities

8. Accounts receivable and provision for bad debts

(1) Accounts Receivable

(2) Criteria for determining bad debts:

9. Inventories:

Recognition of initial investment cost

Consolidation of Enterprises under the Same Control

Consolidation of Enterprises not under Same Control

Successive Measurement of Long Term Equity Investment

(2) Impairment of long-term equity investment

11. Fixed assets pricing and depreciation

12. Construction in process

13. Loan expenses

14. Intangible Assets

15. Long-term expenses to be proportioned

16. Wages to the Employees

17. Dividend Distribution

18. Special accounts payable

19. Income recognition Sales of goods/products

Labor services

20. Operating Lease

21. Accounting Treatment of Income Tax

22. Method of preparing the consolidated financial statements

(II) Taxes

(IV) Notes to the Consolidated Financial Statements

1. Monetary funds

2. Transactional Financial Instruments

3. Accounts receivable

4. Other receivables

5. Advance to Suppliers

6. Inventories and Provision for falling price of inventories

(1) Stock investment

(2) Other equity investment

(3) Provision for impairment of long-term equity investments

10. Improvement of fixed assets rented for operation

11. Construction in process

12. Intangible assets

13. Long-term expenses to be proportioned

14. Asset of deferred income tax

16. Accounts payable

17. Advance Receipts

18. Other payables:

19. Taxes payable

20. Salaries Payable to Staff

21. Long term accounts payable

22. Liabilities of deferred income tax

26. Retained earnings

27. Operation Income and Costs

28. Taxes and surcharge of principal business

30. Operation costs

31. Financial Expenses

32. Investment income

2. Other receivables

(1) Aging analysis of the Company’s other receivables is as follows:

3. Long-term equity investment

(1) Stock investment

(4) Subsidiaries

4. Operating Income and Cost

6. Investment income

(VI) Related Parties and Related Transactions

1. Related parties with controlling relationship

(2) Registered capital of the related party with control relationship and the change

3. Related transactions

(1) Pricing policy

(2) Significant transactions between the Company and the related parties are stated as follows:

4. Balance of the Current Accounts with Related Parties

(VII) Contingencies

FIYTA Precision Technology Co., Ltd. Interim / Quarterly Report 2007