威孚高科(000581)苏威孚Ｂ2003年年度报告（英文版）

ANNUAL REPORT 2003 WEIFU HIGH-TECHNOLOGY CO., LTD. 无锡威孚高科技股份有限公司 (Incorporated in the People’s Republic of China with limited liability) April 16, 2004 0 CONTENTS SECTION I IMPORTANT 2 SECTION II COMPANY INFORMATION 2 SECTION III KEY ACCOUNTING AND BUSINESS DATA 3 SECTION IV SHARE CAPITAL AND SHAREHOLDER 4 SECTION V DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND STAFF 6 SECTION VI CORPORATE SUPERVISORY SYSTEM 8 SECTION VII SHAREHOLDERS’ GENERAL MEETING 10 SECTION VIII REPORT OF THE BOARD OF DIRECTORS 11 SECTION IX REPORT OF THE BOARD OF SUPERVISORS 16 SECTION X SIGNIFICANT EVENTS 17 SECTION XI FINANCIAL STATEMENTS 18 SECTION XII DOCUMENTS FOR REFERENCE 60 1 SECTION I IMPORTANT MPORTANT: The Board of Directors of Weifu High-Technology Co., Ltd. collectively and I individually accept full responsibility for the authenticity, accuracy and completeness of the information contained in this report and confirm that there are no false statements and material omissions which would make any statement in this report misleading. The whole directors assure that the content of Annual Report is true, veracious and complete. Jiangsu Certified Public Accountant and PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. issued the unqualified Auditors’ Report for the Company respectively. Mr. Xu Liangfei, legal representative of the Company, Mr. Han Jiangming, General Manager of the Company, and Ms. Sun Qingxian, Deputy General Manager as well as person in charge of Financing confirm that the Financial Report enclosed in the Annual Report is true and complete. The reader is advised that the 2003 annual report of the Company has been prepared originally in Chinese. In the event of a conflict between this version and the original Chinese version or difference in interpretation between the versions of the report, the Chinese version shall prevail. SECTION II COMPANY INFORMATION 1. Legal Name of the Company: In Chinese: 无锡威孚高科技股份有限公司 In English: WEIFU HIGH-TECHNOLOGY CO., LTD. 2. Legal Representative: Mr. Xu Liangfei 3. Secretary of Board of Directors: Mr. Liu Yonglin Authorized Representative: Mr. Zhou Weixing Contact Address: No.107, Renmin West Road, Wuxi, Jiangsu, China Tel: (86) 510-2719579 Fax: (86) 510-2751025 E-mail: wfjt @ public1.wx.js.cn 4. Registered Address: Plot 46, Wuxi National High-Tech Industrial Development Zone Head Office: No.107, Renmin West Road, Wuxi Post Code: 214031 Homepage: http://www.weifu.com.cn E-mail: web@weifu.com.cn 5. Information Disclosure Media: Securities Times, China Securities and Ta Kung Pao Internet Web Site Designated by CSRC for Publishing the Annual Report: http://www.cninfo.com.cn The Place Where the Annual Report is Prepared and Placed: Securities Dept. of the Company 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock: Weifu High- Tech, Su Weifu-B Stock Code: 000581, 200581 7. Other Related Information of the Company (1) Initial registration date: Oct. 22, 1988 Address: No.107, Renmin West Road, Wuxi Registration Date after Change: Sep. 28, 1995 Address: Plot 46, Wuxi National High-Tech Industrial Development Zone (2) Registration Number of enterprise legal person’s business license: 3200001103404 (2/2) (3) Registration Number of taxation: 320208250456967 (4) Domestic Auditor: Jiangsu Certified Public Accountant Address: No.28, Liangxi Road, Wuxi International Auditor: PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. Address: 12th Floor, Shui On Plaza, 333 Huai Hai Zhong Road, Shanghai, P.R.China 2 SECTION III KEY ACCOUNTING AND BUSINESS DATA 1. Major accounting data (1) Major accounting data as of year 2003 (In RMB’000) Total profit 275,018 Net profit 239,557 Net profit after deducting non-recurring gains and losses 239,557 Profit from main operations 368,103 Other operating profit -4,917 Operating profit 100,058 Investment income 166,734 Subsidy income 8,226 Net cash flow arising from operating activities 8,659 Net increase in cash and cash equivalent 111,092 (2) Difference in net profit audited by domestic auditor and international auditor and the relevant explanations The Company’s net profit as of year 2003 audited by Jiangsu Certified Public Accountants and PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. was RMB 238,104,424.22 and RMB 239,557,000 respectively. Adjustment on net profit based on International Accounting Standards: reorganization of investment income (loss) under equity method amounting to RMB 1,452,575.78. 2. Key accounting data and financial indexes over the previous three years Indexes/Items Unit 2003 2002 2001 Income from main operations RMB’000 1,612,093 1,499,973 1,019,062 Net profit RMB’000 239,557 197,646 159,590 Total assets RMB’000 2,888,951 2,508,934 2,178,645 Shareholders’ equity (excluding RMB’000 2,046,544 1,894,260 1,781,310 minority interests) Earnings per share (diluted) RMB/share 0,55 0.45 0.37 Earnings per share (weighted) RMB/share 0.55 0.45 0.37 Net assets per share RMB/share 4.69 4.34 4.08 Net assets per share after adjustment RMB/share 4.69 4.33 4.07 Net cash flow per share arising from RMB/share 0.02 0.27 0.32 operating activities Return on net assets (diluted) % 11.71 10.34 8.96 (Weighted) % 12.16 10.76 9.34 (2) Return on net assets and Earnings per share calculated based on net profit after deducting non-recurring gains and losses in accordance with the Regulation on Information Disclosure for Listed Company (No.9) by China Securities Regulatory Commission Return on net assets Earnings per share Profit in the report (%) (RMB) Items period (RMB’000) Fully Weighted Fully Weighted diluted average diluted average Profit from main operations 368,103 17.99 18.68 0.84 0.84 Operating profit 100,058 4.89 5.08 0.23 0.23 Net profit 239,557 11.71 12.16 0.55 0.55 Net profit deducting 239,557 11.71 12.16 0.55 0.55 non-recurring gains and losses (4) Changes in Shareholders’ Equity and the relevant explanations (In RMB’ 0000) Capital Surplus Statutory Retained Total shareholders’ Items Share capital equity reserve reserve welfare funds profit Amount at the 43,636.615 91,149.60 14,287.90 4,708.10 40,351.90 189,426.02 period-begin Increase in this 4,003.30 1,334.40 23,955.70 27,959.00 period Decrease in 12,730.50 12,730.50 this period Amount at the 43,636.615 91,149.60 18,291.10 6,042.50 51,577.10 204,654.52 period-end 3 SECTION IV SHARE CAPITAL AND SHAREHOLDERS I. Change in Shares (ended Dec.31st, 2003) Unit: share Increase/decrease of this time (+, - ) Before the After the Items change Rationed Bonus Capitalization of Additional change Others Subtotal shares shares public reserve issuance I. Unlisted Shares 1. Sponsors’ shares 121566150 121566150 Including: State-owned share 121566150 121566150 Domestic legal person’s shares Foreign legal person’s shares 2. Raised legal person’s shares 10400000 10400000 3. Inner employees’ shares 4. Preference shares or others Total unlisted shares 131966150 131966150 II. Listed Shares 1. RMB ordinary shares 215893100 28800 215921900 2.Domestically listed foreign 88400000 88400000 shares 3. Overseas listed foreign shares 4. Others 106900 -28800 78100 Total listed shares 304400000 304400000 III. Total shares 436366150 436366150 II. About shareholders of the Company (1) Total Number of Shareholders at the end of report period: 69,133. (2) About shares held by main shareholders Ended Dec. 31, 2003, particulars about the top ten shareholders of the Company Name of shareholders Number of Change in Classification Shares shares (share) 1.WUXI WEIFU GROUP COMPANY LIMITED 121566150 — State-owned legal person share 2. ROBERT BOSCH GMBH 14144000 — B-share 3. HUAAN INNOVATION SECURITIES 9005698 -7308924 A-share INVESTMENT FUNDS 4. GT PRC FUND 6294938 6294938 B-share 5. SHANGHAI BAOSTEEL CHEMICAL 6024500 6024500 A-share COMPANY LTD. 6. RONGTONG NEW BLUE CHIP SECURITIES 5642348 5272848 A-share INVESTMENT FUNDS 7. YUYANG SECURITIES INVESTMETN FUNDS 5263926 4139863 A-share 8. KINGTAI SECURITIES INVESTMETN FUNDS 4976635 -667113 A-share 9. TONGQIAN SECURITIES INVESTMETN 4697950 2159328 A-share FUNDS 10. YUYUAN SECURITIES INVESTMETN 3940217 1159271 A-share FUNDS 4 Notes: Among the top ten shareholders, Rongtong New Blue Chip Securities Investment Funds and Tongqian Securities Investment Funds belong to the same funds company; Yuyang Securities Investment Funds and Yuyuan Securities Investment Funds belong to the same funds company. (3) Particulars about the holding shareholder of the Company A shareholder who has the actual holding right to the Company is Wuxi Weifu Group Company Limited, as well as state-owned sole enterprise, whose legal representative is Mr. Xu Liangfei. The said company was founded on Dec. 14, 1994, its registered capital was RMB 134,830,000, and it was mainly engaged in Processing and manufacturing of general machinery, instruments and meters, import and export. In the report period, the holding shareholder remained unchanged. (3) Particulars about the top ten shareholders of circulation share of the Company No. Number of share Name of shareholders Type of shares held (share) 1 ROBERT BOSCH GMBH 14144000 B-share 2 HUAAN INNOVATION SECURITIES 9005698 A-share INVESTMENT FUNDS 3 GT PRC FUND 6294938 B-share 4 SHANGHAI BAOSTEEL CHEMICAL 6024500 A-share COMPANY LTD. 5 RONGTONG NEW BLUE CHIP 5642348 A-share SECURITIES INVESTMENT FUNDS 6 YUYANG SECURITIES INVESTMETN 5263926 A-share FUNDS 7 KINGTAI SECURITIES INVESTMETN 4976635 A-share FUNDS 8 TONGQIAN SECURITIES 4697950 A-share INVESTMETN FUNDS 9 YUYUAN SECURITIES INVESTMETN 3940217 A-share FUNDS BTFE-VALUE 10 PARTNERS INTELLIGENT 3879734 B-share FD-CHINA B SHS FD Notes: Among the top ten shareholders, Rongtong New Blue Chip Securities Investment Funds and Tongqian Securities Investment Funds belong to the same funds company; Yuyang Securities Investment Funds and Yuyuan Securities Investment Funds belong to the same funds company. 5 SECTION V DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND STAFF I. Particulars about directors, supervisors and senior executives 1. General information Shares held Shares held Name Gender Age Position Office term at the at the year-begin year-end Chairman of the Xu Liangfei Male 59 Jun. 2002～Jun. 2005 12800 12800 Board Vice Chairman of Han Male 52 the Board, General Jun. 2002～Jun. 2005 12800 12800 Jiangming Manager Li Tonghua Male 60 Director Jun. 2002～Jun. 2005 12800 12800 Wang Director Male 38 Jun. 2002～Jun. 2005 8000 8000 Weiliang Gao Director Male 50 Jun. 2002～Jun. 2005 6500 6500 Guoyuan Shi Director, Deputy Male 41 Jun. 2002～Jun. 2005 2000 2000 Xingyuan General Manager Chen Male 46 Director Jun. 2002～Jun. 2005 - - Zhaolin Zhang Independent Male 60 Jun. 2002～Jun. 2005 - - Xiaoyu Director Ouyang Independent Male 45 Jun. 2002～Jun. 2005 - - Minggao Director Chen Independent Male 53 Jun. 2002～Jun. 2005 - - Qilong Director Chen Independent Male 64 Jun. 2002～Jun. 2005 - - Juchang Director Chairman of the Chen Male 36 Supervisory Jun. 2002～Jun. 2005 2000 2000 Xuejun Committee Li Guodong Male 54 Supervisor Jun. 2002～Jun. 2005 - - Zhang Male 34 Supervisor Jun. 2002～Jun. 2005 - - Jiming Wang Male 54 Supervisor Jun. 2002～Jun. 2005 - - Chuan Wang Male 37 Supervisor Jun. 2002～Jun. 2005 2000 2000 Xiaodong Deng Male 40 Supervisor Jun. 2002～Jun. 2005 4800 4800 Xijiang You Male 36 Supervisor Jun. 2002～Jun. 2005 6400 6400 Jianzhong Deputy General Sun Female 50 Manager, Person in Apr. 2002～Jun. 2005 - - Qingxian charge of Financing Miao Deputy General Male 40 Apr. 2003～Jun. 2005 - - Yuming Manager Secretary of the Liu Yonglin Male 60 Jun. 2002～Jun. 2005 8000 8000 Board 6 2. Directors and Supervisors holding the position in Shareholding Companies Name Shareholding Companies Position Office term Xu Liangfei Wuxi Weifu Group Company Limited Chairman of the Board Till now Li Tonghua Wuxi Weifu Group Company Limited Director, Deputy General Manager Till now Wang Weiliang Wuxi Weifu Group Company Limited Director, Deputy General Manager Till now Gao Guoyuan Wuxi Weifu Group Company Limited Director, Deputy General Manager Till now Chen Zhaolin Bosch (China) Investment Co., Ltd. Executive supervisor Till now Li Guodong Wuxi Guolian Development (Group) Co. Manager of Investment & Management Till now Zhang Jiming State Investment Machinery and Light Business Manager Till now Industrial Co. Wang Chuan China Auto Industry General Co. Section Chief Till now Investment and Development Corp. 3. Annual Remuneration for Directors and Supervisors and Senior Executives nit:(in RMB’0000) Total amount of annual remuneration 150 Total amount of annual remuneration of top 3 directors 50 drawing the highest payment Total amount of annual remuneration of top 3 senior 70 executives drawing the highest payment Subsidies of the independent directors 5 Other treatment for independent directors Reimbursement for travel costs upon attending the meetings of the board of directors and shareholders Annual remuneration Numbers of person RMB 25,000-50,000 1 RMB 50,000-100,000 2 RMB 100,000-200,000 5 RMB 200,000-300,000 1 4. Directors and Supervisors Leaving Posts At 2002 Shareholders’ General Meeting of the Company, Mr. Zu Jilin’s resignation due to retiring age problem and Mr. Ge Songping’s resignation due to work change were approved. Mr. Shi Xingyuan and Mr. Chen Juchang were elected as directors of the 4th Board (of which, Mr. Chen Juchang was elected as independent director). Deputy General Manager Mr. Gao Guoyuan and Mr. Ge Songping left the posts of directors of 4th Board due to work need and took the posts of Deputy General Manager of Wuxi Xiefu Group Co., Ltd.. The 7th meeting of 4th Board determined to remove the post of Deputy General Manager from Mr. Gao Guoyuan and Mr. Ge Songping, and engage Mrs. Sun Qingxian and Mr. Miao Yuming as Deputy General Manager of the Company. Ⅱ. Corporate Staff 1. Numbers of the staff Dated Dec.31, 2003, the Company employed 3,453 people. 2. Classification of the staff Unit: person Classification Number of Staff Percentage (%) Production 2,526 73.15 Sales and Marketing 174 5.04 Engineering Technology 342 9.90 Finance 26 0.75 Administration 178 5.16 Other 207 6.00 3. Education degree of the staff Educational Degree Number of Staff Percentage (%) Senior High School 2,458 71.18 Technical Secondary School 386 11.18 Junior College 373 10.80 University Graduate 203 5.88 Master 30 0.87 Doctor 3 0.09 4. Particulars about the retirees As of December 31, 2003, total amount of retired employees for whom the Company bears pensions amounted to 890. 7 SECTION VI CORPORATE SUPERVISORY SYSTEM 1. Supervisory System Profile Conformity to the requirements by the Company Law, the Securities Law and the relevant laws and regulations promulgated by the State Securities Regulatory Commission, the Company has amended and improved its Articles of Association, and set up the corresponding normative systems of Corporate Supervisory. In accordance with the Guideline for setting up Independent Director System among Listed Companies promulgated by the State Securities Regulatory Commission, the Company supplemented an independent director at the 2002 Shareholders’ General Meeting on Jun.12, 2003 so that the total number of the independent directors attained an surpassed the proportion prescribed in Guideline and the Company has set up corresponding special committee. It has been up to the relevant requirements on listed companies by the State Securities Regulatory Commission in terms of the corporate supervisory system. 2. Performance of the Independent Directors Conformity to the requirements by the Guideline for setting up Independent Director System among Listed Companies and Administration rules on Listed Companies, the Company has engaged 4 independent directors and established the expert committees involving strategy, auditing, nomination, remuneration and results assessment, among which independent directors held the post of Director Commissioner in the committees of auditing, nomination, remuneration and results assessment. Ever since they took office, the Company’s independent directors have consciously performed their duties to express independent opinions with regard to the significant policy decision upon attending the Board meetings and relevant meetings. 3. Separation between the Company and principal shareholders in business, assets, personnel, organizations, and finance 1) Business Independence The Company has its own completed production system, supply chain and sales channels. It has the ability to operate facing to the market. It didn’t restricted by principal shareholders. 2) Assets Independence At the time of the Company’s B Shares issuance in 1995, definition and transfer on assets were made clearly, and relevant registration procedures for properties were finished accordingly. As a result, explicit assets relations have been formed between the Company and its majority shareholder. 8 3) Financial Independence With an integral financial department, the Company has installed and maintained a complete accounting and financial system for internal control and subsidiaries management. The relevant financial functions have been performed independently, including opening accounts with banks, paying taxations as well as making financial decisions. 4) Personnel The Company has its own independent operational and administrative departments, including labor, personnel and wages management. Senior executives, including marketing manager, principal treasurer and secretary of the board of directors, all hold full-time positions and received payment accordingly from the Company. Appointments of directors have all been conducted subject to the nomination by the board of directors and approved by the shareholders’ meeting, and there existed no Directors or General Manager nominated by government institutions; there existed no intervention about the engagement and disengagement decision-making of the Board of Directors and Shareholders’ General Meeting by Wuxi Weifu Group Co., Ltd. and government institutions. 5) Functional Organization As a legal person, the Company has installed a well-functioned internal organization for its daily operation. 4.Performance Assessment and Incentive Mechanism The Company democratically conducted the performance assessments for its senior managements personnel with emphasis on the innovation and working results. The payment was confirmed by the assessing result. 9 SECTION VII SHAREHOLDERS’ MEETING In the report period, the Company held 2002 shareholders’ General Meeting and 2003 provisional Shareholders’ General Meeting, with contents as follows: 1. 2002 Shareholders’ General Meeting On Apr.18, 2003, in “China Securities”, “Securities Times” and “Ta Kung Pao” the Company published the resolution of the 7th meeting of the 4th board of directors and a notice about convening 2002 Shareholders’ General Meeting on Jun.12, 2003. On Jun.12, 2003, 2002 Shareholders’ General Meeting was held and there were 25 shareholders or their proxies presenting at the meeting, representing 191,017,593 shares (including 19,105,614 foreign B-shares) taking 43.78% of the total shares of the Company. The meeting examined and approved the working report 2002 of the Board; The working report 2002 of the Supervisors; Financial Settlement plan 2002 and Profit Distribution Plan 2002; Reengagement of Jiangsu Gongzhen Certified Public Accountants and PricewaterhouseCoopers Zhongtian Certified Public Accountants as the Company’s auditors for fiscal 2003; Proposal on the subsidies of the independent directors; Proposal on changing directors; Proposal on the cooperation of the Company and Germany Bosch Company. The above Resolutions were published in “China Securities”, “Securities Times” and “Ta Kung Pao” on Jun.13, 2003. 2. 2003 Provisional Shareholders’ General Meeting On Nov. 18, 2003, in “China Securities”, “Securities Times” and “Ta Kung Pao” the Company published the resolution of the 12th meeting of the 4th board of directors and a notice about convening 2002 Shareholders’ General Meeting on Dec. 23, 2003. On Dec. 23, 2003, 2003 Provisional Shareholders’ General Meeting was held and there were 30 shareholders or their proxies presenting at the meeting, representing 201,865,212 shares (including 15,935,000 foreign B-shares) taking 46.26% of the total shares of the Company. The meeting examined and approved Plan on thorough cooperation between the Company and Germany Robert & Bosch Company about diesel oil spray business, which determined Wuxi Euro-Asia Diesel Oil Spray Co., Ltd. would transform to foreign investment corporation through assets reorganization to be involved in Euro III Emission Standard Spray System. 3. Election and Change of Directors At 2002 Shareholders’ General Meeting of the Company, Mr. Zu Jilin’s resignation due to retiring age problem and Mr. Ge Songping’s resignation due to work change were approved. Mr. Shi Xingyuan and Mr. Chen Juchang were elected as directors of the 4th Board (of which, Mr. Chen Juchang was elected as independent director). 10 SECTION VIII REPORT OF THE BOARD OF DIRECTORS I. Discussion and analysis of the Board The year 2003 was a year when the structural adjustment in the car industry in the State was conducted post. On the one hand, the whole car industry still developed in a relatively rapid speed. However, its development was still very unbalanced with detailed reflection as follows: Saloon cars continued to keep a trend of accelerative development while diesel cars developed in a slower way. On the other hand, structural adjustment in car industry was push in an accelerative way and structural adjustment of diesel cars was much more outstanding with its market inclined to two sides, namely being inclined to light trucks and heavy trucks. Aiming at this austere situation, the Board and the Management of the Company has adjusted the marketing strategy timely, firstly, speeding up the development of new products so as to adapt to the need of adjustment to market structure; secondly, carrying out quality standard of international car industry TS16949 with product quality as the main line; thirdly, further deepening internal management and further fulfilling the measures of reducing the cost. Through the said efforts, the Company has still kept a certain growth in 2003 and totally realized income from main operations and net profit amounting to RMB 1,612.093 million and RMB 239.557 million respectively in the whole year, an increase of 7.47% and 21.21% respectively over the last year. II. Operation (I) Main operations classified according to products Unit: RMB’0000 Items Income Cost of Gross Increase/decrease Increase/decreas Increase/decrea from main main profit in income from e in cost of main se in gross operations ratio (%) main operations profit ratio over operations operations over over the last year the last year (%) the last year (%) (%) Fittings and accessories of gas 145,258.18 106,361.12 26.78 6.19 8.09 -4.63 engine Converter and 5515.57 4116.02 25.37 273.30 259.39 12.85 muffler Materials 10,435.55 13,921.86 -33.41 -11.04 2.18 48.13 (II) Formation of main operations and its market share Unit: RMB’0000 Categories Income from main Market share (%) Place in the industry operations A pump 25578.25 60.37 No. 1 PW pump 28176.94 31.23 No. 1 I pump (including IW 19100.81 45.28 No. 1 and PL pump) VE pump 19045.20 - No. 1 Single plunger pump 4964.49 28.12 No. 2 Injector 24126.18 29.88 No. 1 Precision pump parts 12619.76 31.23 No. 1 Source: Statistics Association of China’s Machinery Industry, Fuel Injection Sub-branch (2003) 11 (III) Operations of main holding and share-holding companies of the Company 1. Nanjing Weifu Jinning Co.,Ltd., whose 80% equity was held by the Company, was mainly engaged in the production of diesel and fuel injecting system products (the core product was VE distribution pump) with its registered capital amounting to RMB 256 million. At the end of year 2003 its total assets amounted to RMB 413.0726 million and its net profit was RMB 35.9753 million in 2003. 2. Wuxi Weifu Lida Converter and Cleaner Company Limited, whose 94.81% equity was held by the Company, was mainly engaged in the production of such products as cleaners and mufflers of tail gas etc. with registered capital amounting to RMB 260 million. At the end of 2003, its total assets amounted to RMB 254.6264 million and its net profit was RMB 2.6029 million in 2003. 3. Wuxi Euro-Asia Diesel Fuel Injection Co., whose 48% equity was held by the Company, was mainly engaged in the production of P and S series injectors and nozzles with registered capital amounting to RMB 253.5610 million. At the end of 2003, its total assets amounted to RMB 565.99 million and its net profit was RMB 151.9477 million in 2003. 4. Zhonglian Automobile Electronics Co., whose 20% equity was held by the Company, was mainly engaged in the production of automobile electronic control system products with registered capital amounting to RMB 600.62 million. At the end of 2003, its total assets amounted to RMB 1,154. 38 million and its net profit was RMB 413.6984 million in 2003. (IV) Main suppliers and customers (1) Suppliers The total purchase amount from the top five suppliers accounted for 35.92% of total purchase amount in the year. (2) Customers The total sales amount to the top five customers accounted for 50.31% of total sales amount in the year. III. Investment In the report period, the Company’s total investment in the technical reform projects was RMB 135.4774 million, which was mainly used in the investment of such technical reform projects as PW2000 pump etc.. (I) Use of the raised proceeds In 2000, the Company implemented the project on shares allotment and totally raised the proceeds amounting to RMB 405.06 million, which would be used in the project of “Converters and cleaners of automobile tail gas with annual output of 2 million sets” according to commitment in the Prospectus. Ended the end of year 2002, the Company had invested RMB 227.43 million accumulatively and there was still RMB 177.63 million left. The investment of fixed assets has been finished and there was still raised proceeds amounting to RMB 177.63 million left. (II) Changes in the raised proceeds Since the investment of fixed assets in the said projects has been finished and the rest investment of project was mainly used in supplementing the working capital, in order to exert the use results of the raised proceeds in a better way, after approved by the 2nd Temporary Shareholders’ General Meeting for 2002 held on July 18, 2002, the Company decided to change to invest the rest capital amounting to RMB 177.63 12 million in the said raised proceeds into “Technical reform project of PW2000 pump with annual output of 100,000 pieces”. The said resolutions of the Temporary Shareholders’ General Meeting were published on Securities Times, China Securities and Ta Kung Pao dated July 19, 2002. (III) Use of the raised proceeds changed Ended Dec. 31, 2003, the Company had invested RMB 177.63 million in the said investment projects changed and had fundamentally formed the capability of PW2000 pump with annual output of 100,000 pieces. IV. Analysis to the financial position and operating results Unit: RMB’0000 Financial indexes In 2003 In 2002 Increase in 2003 Reasons for changes over that in 2002 (+/-%) Total assets 288,895.10 250,893.40 15.15 Increase in investment of fixed assets Shareholders’ equity 204,654.40 189,426.00 8.04 Increase in net profit Profit from main 36,810.30 36,836.40 -0.07 Increase in income from operations main operations Net profit 23,955.70 19,764.60 21.21 Increase in investment earnings and income from main operations Net increase in cash 11,109.20 -18,338.30 - and cash equivalents V. Routine work of the Board of Directors (I) Meetings and resolutions of the Board 1. On Apr. 16, 2003, the 7th Meeting of the 4th Board of Directors was held and the following resolutions have been passed: ① Annual Report 2002 and its Summary ② Financial Settlement and Profit Distribution Preplan 2002. The profit distribution preplan for 2002 is to distribute cash dividends amounting to RMB 2 (tax included) for every 10 shares. ③ Renewal of Engaging Jiangsu Gongzheng Certified Public Accountants and PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. as the Domestic and Oversea Auditors of the Company in 2003 ④ Director Mr. Zu Jilin and Mr. Ge Songping’s Requests for Resigning from the Positions of Directors Due to Reaching Age of Retirement and Change in Work Respectively; Supplementing Mr. Shi Xingyuan and Mr. Chen Juchang as Directors in the 4th Board of Directors of the Company (of which, Mr. Chen Juchang as Independent Director). ⑤ Dismissing Mr. Gao Guoyuan and Mr. Ge Songping from the Positions of Deputy General Managers of the Company Due to Work Assignment; Engaging Ms. Sun Qingxian and Mr. Miao Yuming as Deputy General Managers of the Company ⑥ Annual Allowance of Independent Directors of the Company is RMB 50,000. ⑦ Preliminary Opinion on Comprehensive Cooperation Project Between Bosch Company and the Company ⑧ Deciding to Holding Annual Shareholders’ General Meeting 2002 on June 12, 2003 13 2. On May 22, 2003, the Company held the 8th meeting of the 4th Board of Directors, which approved the following resolutions in the way of communication vote. ① Agreed the general cooperation proposal between the Company and Germany Bosch Company and decided to submit it to the Shareholders’ General Meeting for approval and asked for the Shareholders’ General Meeting to accredit the Board of Directors to carry out the material palaver with Germany Bosch Company on the introducing-into of license certification and the detailed terms of the contract. ② Decided to add examining the content of the cooperation proposal between the Company and Germany Bosch Company in 2002 Annual Shareholders’ General Meeting held on June 12. 3. On Aug. 12, 2003, the Company held the 9th meeting of the 4th Board of Directors, which examined and approved the following resolutions: ① Semiannual Report in 2003 of the Company and its Summary; ② The report of profit distribution preplan for the mid-term of 2003: neither profit distribution for mid-term nor transfer from capital public reserve to share capital and all undistributed profit is carried forward to next half year. 4. On Oct. 16, 2003, the Company held the 10th meeting of the 4th Board of Directors, which examined and consistently approved the following resolutions: the 3rd quarterly report of 2003 of the Company. 5. On Oct. 30, 2003, the Company held the 11th meeting of the 4th Board of Directors, which examined and approved Self-check Report on Current Capital between the Company and Associated Companies and Guarantee for External Parties. 6. On Nov. 17, 2003, the Company held the 12th meeting of the 4th Board of Directors, which examined and approved the following resolutions: ① Agreed the general cooperation proposal between the Company and Germany Bosch Company on spraying business of diesel oil. ② Decided to hold the 1st Provisional Shareholders’ General Meeting on Dec. 23, 2003, for examining the general cooperation proposal between the Company and Germany Bosch Company on spraying business of diesel oil. (II) Execution of resolutions of the Shareholders’ General Meeting 1. The proposal of distribution of bonus and dividend confirmed by 2002 Annual Shareholders’ General Meeting was finished implementation on Aug. 1, 2003. 2. The Provisional Shareholders’ General Meeting in 2003 authorized the general cooperation proposal between the Company and Germany Bosch Company who has formally signed contract and at present are ready to submit for approval. VI. Profit distribution preplan for 2003 As audited by Jiangsu Gongzheng Certified Public Accountants Co., Ltd., the Company realized net profit totally RMB 238,104,400 in 2003, plus the retained profit at the end of 2002 amounting to RMB 313,933,700, the distributable profit for shareholders is RMB 552,038,200. According to the regulation of Articles of Association of the Company, after appropriating 10% as public reserve totaling 26,688,500 and 5% as welfare fund totaling RMB 13,344,200, the distributable profit for shareholders of the statutory account audited as Chinese Accounting System is RMB 512,005,500. The 14 Board of Directors decided to distribute RMB 2 cash bonus (including tax) per ten shares based on the total share capital amounting to 436,366,150 shares at the end of 2003. The left distributable profit is carried forward to next year. VII. Other events 1. Jiangsu Gongzheng Certified Public Accountants Co., Ltd., made special explanation on occupying capital by the controlling shareholder and other associated parties of the Company. The explanation pointed out: 1) The balance at year-beginning of current capital between the Company and its controlling shareholder (Wuxi Weifu Group Co., Ltd.) caused by transaction of goods supply is receivables from Wuxi Weifu Group Co., Ltd. amounting to RMB 38,032,190 and the balance at year-end is payables to Wuxi Weifu Group Co., Ltd. amounting to RMB 368,235. 2) The Company occurred no current capital with the auxiliary subsidiaries of the controlling shareholder, Wuxi Weifu Group Co., Ltd.. 3) The balance at year-beginning of current capital among the eight auxiliary subsidiaries of the Company caused by transaction of goods supply is receivables from the subsidiaries amounting to RMB 53,877,183 and the balance at year-end is payables to the subsidiaries amounting to RMB 41,666,122. 2. Special explanation and independent opinion of the independent directors on the accumulated and current guarantee for external parties of the Company and execution of Document No.56 Independent directors believe: 1) The situation of current capital reflected in Special Explanation on Occupying Capital by the Controlling Shareholder and Other Associated Parties of the Company belongs to normal current capital, occurred for meeting the need of the production and operation activities of the Company, are commercial behavior on the basis of justness, fairness and publicity and there existed no situation of illegally occupying the Company’s capital by the principal shareholder. 2) The Company has not provided guarantee for the controlling shareholder and other associated parties 15 SECTION IX REPORT OF THE SUPERVISORY COMMITTEE I. Work of the Supervisory Committee The Supervisory Committee held two meetings in the report period: 1. The 4th meeting of the 4th Supervisory Committee was held on Apr. 16, 2003 and the examined topics were Work Report of the Supervisory Committee in 2002, 2002 Annual Report of the Company and its Summary, Report of Financial Settlement and Profit Distribution Preplan for 2002 of the Company and the 1st Quarterly Report in 2002 of the Company; 2. The 5th meeting of the 4th Supervisory Committee was held on Aug. 15, 2003 and the examined topics were Semiannual Report in 2003 of the Company and its Summary and Report of Profit Distribution Preplan in the 1st Half Year of 2003. II. The Supervisory Committee expressed independent opinion for the following events: 1. Operation according to law. In 2003, the members of the Supervisory Committee were present at every meeting of the Shareholders’ General Meeting and the Board of Directors and supervised over the decision-making and operation of the Company. The Supervisory Committee believes that every decision-making procedure of the Company this year were in accordance with laws, regulations and Articles of Association of the Company, the internal control system of the Company was perfect. When the Company’s directors and senior executives executed authorities, there found neither behavior of breaking laws, regulations and Articles of Association of the Company nor abusing authorities and damaging the interest of the Company and the Shareholders. 2. Check of the Company’s financing. The members of the Supervisory Committee attended every meeting of the Board of Directors this year and examined annual, semiannual and quarterly report and other documents submitted by the Board of Directors. The Supervisory Committee believes that the financial report in every period reflected objectively and truly the financial situation and operation result of the Company. 3. Usage of raised capital. The Supervisory Committee believes the invested projects in the latest raised capital of the Company were implemented according to relevant resolutions of the Shareholders’ General Meeting in accordance with relevant statutory procedure. 4. Related transaction. The Supervisory Committee believes the related transaction occurred in the report period could incarnate the principle of market trading and did not damage the interest of the Company. 16 SECTION X SIGNIFICANT EVENTS I. In the report period, the Company has no significant lawsuits and arbitrations. II. In the report period, the Company has no significant purchase, sale and disposal of assets. III. Significant related transaction between the Company and its principal shareholder, Wuxi Weifu Group Co., Ltd. in 2003 Unit:’0000 Items 2003 2002 Purchase of goods 112.5 8330.48 Sales of goods 16363 18280.05 Purchase of fixed assets 45.9 8916.20 Sales of fixed assets - 23.38 Processing expenses - 418.09 Procurement discount income - 15.09 Land and trademark fees 406.3 319.44 Income from funds occupied - 22.65 The above associated transactions were executed strictly according to the associated contracts signed by the two parties and had no change in the respect of trading price, trading way and settlement. IV. Significant contracts and implementation 1. No assets custody, engagement or leasing occurred between the Company and other companies in this report period; 2. The Company has no guarantee events in the report period; 3. The Company has not entrusted others to deal with management of cash assets in the report period. V. Commitment events of the principal shareholder The principal shareholder holding over 5% equity of the Company has no commitment events in the report period or lasting in the report period. VI. Engagement and disengagement of Certified Public Accountants In the report period, Jiangsu Gongzheng Certified Public Accountants Co. and PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. were reengaged as Certified Public Accountants of the Company in 2003 and the remuneration that the Company paid to the Certified Public Accountants was: the auditing expense (all expenses) of Jiangsu Gongzheng Certified Public Accountants Co. for 2003 was RMB 450,000 and it provided service for the Company for ten years; the auditing expense (all expenses) of PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. was RMB 770,000 and it provided service for the Company for nine years 17 SECTION XI FINANCIAL STATEMENTS 1. Auditors’ Report TO THE SHAREHOLDERS OF WEIFU HIGH-TECHNOLOGY COMPANY LIMITED We have audited the accompanying consolidated balance sheet of Weifu High-Technology Company Limited (hereinafter referred to as “the Company”) and its subsidiaries (hereinafter together with the Company referred to as “the Group”) as of 31 December 2003 and the related consolidated statements of income, and cash flows for the year then ended. These consolidated financial statements set out on pages 2 to 42 are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of 31 December 2003 and the consolidated results of its operations and its cash flows for the year then ended, in accordance with International Financial Reporting Standards. PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. 14 April 2004 Shanghai, The People's Republic of China 18 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in Renminbi (“RMB”) thousands, except for earnings per share) Notes 2003 2002 Sales, net 4,27 1,612,093 1,499,973 Cost of sales (1,243,990) (1,131,609) Gross profit 368,103 368,364 Other operating income 4 407 246 Distribution costs (78,217) (91,929) Administrative expenses (177,422) (148,844) Other operating expenses (5,324) (16,055) Profit from operations 6 107,547 111,782 Finance cost, net 5 (7,489) (3,889) Share of results of associates before tax 13 162,785 116,573 Income from unconsolidated subsidiaries 14 3,943 4,363 Income from trading investments 6 - Government grants 21 8,226 - Impairment loss of investment 15 - (12,133) Profit before tax and minority interests 275,018 216,696 Income tax expense 7(b) (27,137) (15,849) Profit before minority interests 247,881 200,847 Minority interests 25 (8,324) (3,201) Net profit 239,557 197,646 Earnings per share 8 - Basic RMB 0.55 RMB 0.45 - Diluted Not applicable Not applicable The accompanying accounting policies and notes form an integral part of these consolidated financial statements. 19 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2003 (All amounts in RMB thousands) 31 December 31 December Notes 2003 2002 ASSETS Non-current assets Leasehold land 10 49,706 27,792 Property, plant and equipment, net 11 906,002 903,501 Intangible assets 12 32,370 23,373 Investments in associates 13 475,365 384,787 Investments in unconsolidated subsidiaries 14 41,769 37,826 Available-for-sale investments 15 43,520 43,520 Total non-current assets 1,548,732 1,420,799 Current assets Inventories, net 16 354,845 321,150 Due from related parties 27(e) 1,165 55,865 Prepayments 5,032 8,168 Trade and other receivables, net 17 491,920 326,787 Trading investments 26(b) - 28,000 Cash and bank deposits 26(b) 487,257 348,165 Total current assets 1,340,219 1,088,135 Total Assets 2,888,951 2,508,934 20 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEET (CONTINUED) AS OF 31 DECEMBER 2003 (All amounts in RMB thousands) 31 December 31 December Notes 2003 2002 EQUITY AND LIABILITIES Shareholders’ equity Ordinary shares 22 436,366 436,366 Reserves 23 1,094,407 1,054,375 Retained earnings 24 515,771 403,519 Total shareholders’ equity 2,046,544 1,894,260 Minority interests 25 77,310 58,519 Non-current liabilities Long-term bank borrowings 20(b) 160,000 - Long-term payables 21 47,538 12,660 Total non-current liabilities 207,538 12,660 Current liabilities Trade and other payables 18 333,144 357,214 Current-tax liabilities 5,846 (3,860) Due to related parties 27(e) 9,564 16,688 Dividend payable 416 208 Short-term bank borrowings 20(a) 195,500 157,500 Accruals and other current liabilities 19 13,089 15,745 Total current liabilities 557,559 543,495 Total liabilities 765,097 556,155 Total Equity and Liabilities 2,888,951 2,508,934 The accompanying accounting policies and notes form an integral part of these consolidated financial statements. 21 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands) Notes 2003 2002 CASH FLOWS FROM OPERATING ACTIVITIES: Cash generated from operations 26(a) 40,530 141,983 Interest paid (14,463) (11,115) Income tax paid (17,408) (12,078) Net cash from operating activities 8,659 118,790 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of a subsidiary, net of cash and bank acquired - (2,975) Purchase of leasehold land (5,836) - Purchase of property, plant and equipment (239,552) (225,948) Proceeds from disposals of property, plant and equipment 26(c) 137,386 214 Increase in investments in associates 13 - (21,577) Increase in available-for-sale investments 15 - (13,855) Increase in investments in unconsolidated subsidiaries 14 - (7,306) Proceeds from disposals of available-for-sale investments - 5,080 Proceeds from disposals of trading investments 6 - Interest received 4,447 17,201 Dividends received 66,307 27,106 Net cash used in investing activities (37,242) (222,060) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in short-term bank borrowings 38,000 (10,000) Increase in long-term bank borrowings 160,000 - Repayments of long-term bank borrowings - (1,500) Dividends paid (87,065) (87,273) Cash injection from minority shareholders - 6,000 Cash received from government grants 28,740 12,660 Net cash from financing activities 139,675 (80,113) Net increase (decrease) in cash and cash equivalents 111,092 (183,383) Cash and cash equivalents at beginning of year 376,165 559,548 Cash and cash equivalents at end of year 26(b) 487,257 376,165 The accompanying accounting policies and notes form an integral part of these consolidated financial statements. 22 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands) Reserves Statutory Statutory public Discretion- Share Capital surplus welfare ary surplus Total Retained capital surplus reserve fund fund reserve fund reserves earnings Total equity Note 22 Note23(a) Note 23(b) Note 23(c) Note 24 Balance as at 1 January, 2002 436,366 908,919 73,272 36,711 1,785 1,020,687 324,257 1,781,310 Dividends declared after 1 January, 2002 from retained earnings as of 31st December, 2001 (Note 9) - - - - - - (87,273) (87,273) Donation received - 146 - - - 146 - 146 Increase in Subsidiary’s capital surplus – debts waived - 2,431 - - - 2,431 - 2,431 Net profit for 2002 - - - - - - 197,646 197,646 Appropriations: - statutory surplus reserve fund - - 20,741 - - 20,741 (20,741) - - statutory public welfare fund - - - 10,370 - 10,370 (10,370) - Balance as at 31 December, 2002 436,366 911,496 94,013 47,081 1,785 1,054,375 403,519 1,894,260 Dividends declared after 1 January, 2003 from retained earnings as of 31 December, 2002 (Note 9) - - - - - - (87,273) (87,273) Net profit for 2003 - - - - - - 239,557 239,557 Appropriations: - statutory surplus reserve fund - - 26,688 - - 26,688 (26,688) - - statutory public welfare fund - - - 13,344 - 13,344 (13,344) - Balance as at 31 December, 2003 436,366 911,496 120,701 60,425 1,785 1,094,407 515,771 2,046,544 The accompanying accounting policies and notes form an integral part of these consolidated financial statements. 23 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 1. GENERAL INFORMATION Weifu High-technology Company Limited (the “Company”) was incorporated in the People’s Republic of China (the “PRC”) on 22 October 1992 as a joint stock limited company. The Company is principally engaged in the manufacture and sale of fuel injection pumps for use in diesel engines and injectors and components for fuel injection pumps. The registered office of the Company is No.46, Wuxi State Hi-tech Industrial Development Zone, Jiangsu Province, and the Company has approximately 3,454 and 3,783 employees as of 31 December, 2003 and 2002 respectively. The Company’s domestic listed foreign investment shares (“B share”) and domestic Renminbi ordinary shares (“A share”) are listed on the Shenzhen Stock Exchange. The Company together with its consolidated subsidiaries are hereinafter collectively referred to as “the Group”. 2. ACCOUNTING POLICIES The principal accounting policies adopted in preparation of these financial statements of the Group are set out below: (a) Basis of presentation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”, which includes International Accounting Standards and Interpretations) as published by the International Accounting Standards Board. These consolidated financial statements have been prepared under the historical cost conversion with the exception of fair value measurement of certain financial instruments. This basis of accounting differs from that used in Group’s statutory accounts (“Statutory Accounts”) which are prepared in accordance with PRC Accounting Standards for Business Enterprises and the Accounting System for Business Enterprises. The adjustments made to conform the Statutory Accounts of the Group to IFRS are shown in Supplementary Information. The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current event and actions, actual results could differ from those estimates. 24 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 2. ACCOUNTING POLICIES (Continued) (b) Group accounting (1) Subsidiaries Subsidiaries, which are those entities in which the Group has an interest of more than one half of the voting rights or otherwise has power to govern the financial and operating policies, are consolidated. Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given up or liabilities undertaken at the date of acquisition plus cost directly attributable to the acquisition. The excess of the cost of acquisition over the fair value of net assets of the subsidiary acquired is recorded as goodwill. See Notes 2(g) for the accounting policy on goodwill. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Company. The results of operations and net assets of certain subsidiary companies are not material to those of the Group; hence, they have been excluded from consolidation. Investments in subsidiaries that are excluded from consolidated financial statements are accounted for by the equity method. 25 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 2. ACCOUNTING POLICIES (Continued) (b) Group accounting (Continued) (1) Subsidiaries (Continued) As of 31 December 2003, the consolidated financial statements include the financial statements of the Company and its subsidiaries as follows: Name of consolidated Place of Registered capital Percentage of equity subsidiary company registration Principal activities (RMB’000) interest 2003 2002 Directly Indirectly Nanjing Weifu Jingning Nanjing, Manufacture and sale of diesel 256,000 256,000 80% - Company Limited. PRC engines, machinery, electronic (“Nanjing Weifu”) products and automotive components. Wuxi Weifu Leader Wuxi, PRC Manufacture and sale of 260,000 30,000 94.81% - Catalytic Converter catalytic converter, catalyzer Company Limited and automotive components (“Weifu Leader”) Jiangsu Weifu Wuxi, PRC Manufacture and sale of 30,000 30,000 80% - Nanometer nanometer material and Technology Company products Limited (“Weifu Nanometer”) Name of unconsolidated Place of Registered capital Percentage of equity subsidiary company registration Principal activities (RMB’000) interest 2003 2002 Directly Indirectly Wuxi Weifu Mashan Wuxi, PRC Manufacture and sale of fuel 12,237 12,237 72.78% 12.22% Fuel Injection injection equipment Equipment Factory Wuxi Weifu Chang’an Fuel Wuxi, PRC Manufacture and sale of 21,490 21,490 85% - Injection Co., Ltd. injection equipment for diesel Wuxi Weifu Jida New Wuxi, PRC Manufacture and development 5,000 5,000 70% - Material Development of metallic and non-metallic Co., Ltd. materials (2) Associates Investments in associates are accounted for by the equity method of accounting. Associates are entities over which the Group generally has between 20% and 50% of the voting rights, or over which the Group has significant influence, but which it does not control. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not to recognise further losses, unless the Group has incurred obligations or made payments on behalf of the associates. 26 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 2 ACCOUNTING POLICIES (Continued) (c) Foreign currency translation Items included in the consolidated financial statements of the Group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to the Group. The consolidated financial statements are presented in RMB, which is the measurement currency of the Group. Transactions in other currencies are translated into Rmb at the exchange rates prevailing at the dates of transactions. Monetary assets and liabilities denominated in other currencies at the consolidated balance sheet date are re-translated at exchange rates prevailing at that date. Non-monetary assets and liabilities in other currencies are translated at historical rates. Exchange differences arising from changes in exchange rates subsequent to the transaction dates are included in consolidated income statement. (d) Leasehold land Leasehold land represents land use fees paid for long leasehold land and is classified as operating leases. The prepaid lease payments are amortized over the lease period (thirty to fifty years) on a straight-line basis. (e) Property, plant and equipment and depreciation Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss. The initial cost of an asset comprises its purchase price, construction cost and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Depreciation is calculated using the straight-line method to write off the cost, after taken into account the estimated residual value at 3% of cost, of each asset over its expected useful life. The expected useful lives are as follows: Buildings 30-35 years Machinery and equipment 10-16 years The useful lives of assets and depreciation method are reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefit from items of property, plant and equipment. Expenditures incurred after the property, plant and equipment have become ready for its intended use, such as repairs and maintenance and overhaul costs, are recognised as expense in the period in which they are incurred. In situations where it is probable that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of the asset beyond its originally assessed standard of performance, the expenditures are capitalised as an additional cost of the asset. 27 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 2. ACCOUNTING POLICIES (Continued) (e) Property, plant and equipment and depreciation (Continued) When assets are sold or retired, their costs and accumulated depreciation and accumulated impairment losses are eliminated from the accounts and any gain or loss resulting from their disposal is included in the consolidated income statement. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. (f) Construction-in-progress Construction-in-progress represents properties and plant under construction and machinery and equipment under installation and testing, and is stated at cost. This includes cost of construction, site restoration cost, plant and equipment and other direct costs plus borrowing costs which mainly include interest charges arising from borrowings used to finance these projects during the construction period. Construction-in-progress is not depreciated until such time as the assets are completed and ready for their intended use. (g) Intangible assets Intangible assets are measured initially at cost. Intangible assets are recognized if it is probable that the future economic benefits that are attributable to the assets will flow to the Group; and the cost of the asset can be measured reliably. After initial recognition, intangible assets are measured at cost less accumulated amortization and any accumulated impairment losses. Intangible assets are amortized on a straight-line basis over the best estimate of their useful lives. The amortization period and the amortization method are reviewed periodically to ensure that the method and period of amortization are consistent with the expected pattern of economic benefits from intangible assets. (1) Trademarks Amounts paid for trademarks are capitalised and then amortised on a straight-line basis over the expected useful lives. The expected useful life is 30 years. Trademarks are reviewed for impairment at each balance sheet date. The trademark is registered with an unlimited usage period. The management considers the useful life of the trademark will not be less than 30 years, which is the operating period of Nanjing Weifu. 28 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 2 ACCOUNTING POLICIES (Continued) (g) Intangible assets (Continued) (2) Research and development costs Expenditure for research is recognised as an expense when incurred. Expenditure on development is charged against income in the period incurred except for project development costs, which comply strictly with all of the following criteria: • the product or process is clearly defined and costs are separately identified and measured reliably; • the technical feasibility of the product is demonstrated; • the product or process will be sold or used in-house; • the assets will generate future economic benefits (e.g. a potential market exists for the product or its usefulness in the case of internal use is demonstrated); and • adequate technical, financial and other resources required for completion of the project are available. Capitalization of costs starts when the above criteria are first met. Expenditure recognised as an expense in previous accounting periods is not reinstated. The recoverable amount of development costs is estimated whenever there is an indication that the asset has been impaired or that the impairment losses recognised in previous years no longer exist. In the year ended 31 December 2003, there is no capitalized expenditure on development. 29 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 2 ACCOUNTING POLICIES (Continued) (g) Intangible assets (Continued) (3) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of the acquired subsidiary at the date of acquisition, and is included in intangible assets. Goodwill is amortized using the straight-line method over its estimated useful life of one to five years. Management determines the estimated useful life of goodwill based on its evaluation of the respective companies at the time of acquisition, considering factors such as existing market share, potential growth and other factors inherent in the acquired companies. At each balance sheet date the Group assesses whether there is any indication of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of goodwill is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount. (h) Impairment of long lived assets Property, plant and equipment and other non-current assets, including investments in associates and intangible assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset’s net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. (i) Investments The Group classified its investments in debt and equity securities into the following categories: trading, held-to-maturity and available-for-sale. The classification is dependent on the purpose for which the investments were acquired. Management determines the classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis. 30 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 2 ACCOUNTING POLICIES (Continued) (i) Investments (Continued) Investments that are acquired principally for the purpose of generating a profit from short-term fluctuations in price are classified as trading investments and included in current assets; for the purpose of these consolidated financial statements short term is defined as 3 months. Investments with a fixed maturity that management has the intent and ability to hold to maturity are classified as held-to-maturity and are included in non-current assets, except for maturities within 12 months from the balance sheet date which are classified as current assets; during the period, the Group did not hold any investments in this category. Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale; and are included in non-current assets unless management has the express intention of holding the investment for less than 12 months from the balance sheet date or unless they will need to be sold to raise operating capital, in which case they are included in current assets. Purchases and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. Cost of purchase includes transaction costs. Trading and available-for-sale investments are subsequently carried at fair value. For the available-for-sales investments that have a quoted market price in an active market, the fair value is based on quoted bid prices; for available-for-sale investments that does not have a quoted market price, but the fair value can be reliably determined, the fair value is constructed on the basis of the market price of the similar financial instrument or derived from cash flow models; for available-for-sales investments that the fair value can not be reliably determined, are carried at amortised cost, using the effective yield method, less accumulated impairment loss. Realised and unrealised gains and losses arising from changes in the fair value of trading and available-for-sale investments are included in the consolidated income statement in the period in which they arise. 31 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 2 ACCOUNTING POLICIES (Continued) (j) Operating leases Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated income statement on a straight-line basis over the period of the lease. (k) Inventories Inventories are stated at the lower of cost and net realisable value. Cost, calculated on the weighted average basis, comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. (l) Trade receivables Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. A provision for impairment of trade receivables is established when there is an objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, discounted at the market rate of interest for similar borrowers. (m) Cash and cash equivalents For the purposes of the cash flow statement, cash represents cash on hand and deposits with banks, which can be withdrawn on demand. Cash equivalents represent short-term, highly liquid investments, which are readily convertible into known amounts of cash with original maturity period of three months or less and are subject to an insignificant risk of change in value. 32 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 2 ACCOUNTING POLICIES (Continued) (n) Borrowings and borrowing costs Borrowings are initially recognized at the proceeds received, net of transaction costs incurred. They are subsequently stated at amortised costs using the effective yield method; any difference between net proceeds and redemption value is recognized in the consolidated income statement over the period of the borrowings. Borrowing costs include interest charges and other costs incurred in connection with arranging borrowings and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. Borrowing costs are expensed as incurred, except when they are directly attributable to the acquisition, construction or production of the property, plant and equipment that necessarily take a substantial period of time to get ready for its intended use in which case they are capitalized as part of the cost of that asset. Capitalization of borrowing costs commences when expenditures for the asset and borrowing costs are being incurred and the activities to prepare the asset for its intended use are in progress. Borrowing costs are capitalized at the weighted average cost of the related borrowings until the asset is ready for its intended use. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recorded. (o) Deferred income taxes Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. (p) Pension scheme Pursuant to the PRC laws and regulations, contributions to the basic old age insurance for the Group’s local staff are made monthly to a government agency based on certain percentage of the standard salary set by the provincial government. The government agency is responsible for the pension liabilities relating to such staff on their retirement. The Group accounts for these defined contributions on an accrual basis. The Group has no obligation for the payment of pension benefits beyond the contribution described above. 33 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 2 ACCOUNTING POLICIES (Continued) (q) Government grants Grants from the government are recognised in the consolidated balance sheet at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the consolidated income statement over the period necessary to match them with the costs they are intended to compensate. Government grants relating to the acquisition of property, plant and equipment are set off against their initial cost, resulting in being effectively credited to the consolidated income statement over the periods and in the proportions in which depreciation on these assets is charged. (r) Provisions A provision is recognized when, and only when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable (i.e. more likely than not) that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. When a provision is no longer probable that an outflow of resources embodying economic benefit will be required to settle the obligation, the provision will be reversed. (s) Revenue recognition Revenue comprises the invoiced value for the sales of goods net off rebates and discounts, and after eliminating sales within the Group. Provided it is probable that the economic benefits associated with a transaction will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognized on the following basis: (i) Sales of goods and raw materials Revenue is recognized when the significant risks and rewards of ownership of goods and materials have been transferred to the buyer. 34 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 2 ACCOUNTING POLICIES (Continued) (s) Revenue recognition (Continued) (ii) Interest income Interest income is recognized on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity. (iii) Dividend income Dividend income is recognized when the right to receive payment is established. (t) Dividends Dividends are recorded in the Group’s consolidated financial statements as liability in the period in which they are approved by the Group’s shareholders. (u) Segments Business segments provide products or services that are subject to risks and returns that are different from those of other business segments. Geographical segments provide products or services within a particular economic environment that is subject to risks and returns that are different from those of components operating in other economic environments. The Group conduct the business within one business segment and the Group also operates within one geographical segment because its revenue are primarily generated in the PRC and its assets are located in the PRC. (v) Subsequent events Post year-end events that provide additional information about the Group’s position at the balance sheet date or those that indicate the going concern assumption is not appropriate (adjusting events), are reflected in the consolidated financial statements. Post year-end events that are not adjusting events are disclosed in the notes when material. (w) Contingencies Contingent liabilities are not recognized in the consolidated financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognized in the consolidated financial statements but disclosed when an inflow of economic benefits is probable. 2. ACCOUNTING POLICIES (Continued) (x) Comparatives 35 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. 3 FINANCIAL RISK MANAGEMENT (a) Financial risk factors and financial risk management The Group activities expose it to a variety of financial risks, including credit risk, liquidity risk, interest rate risk and foreign exchange risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. (1) Credit risks The Group has no significant concentration of credit risk with any single counter party or group counter parties. The Group has policies in place to ensure that sales of products are made to customers with an appropriate credit history. The Group has policies that deposits are put in reputable banks. (2) Liquidity risks Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. (3) Interest rate risk The Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group has no significant long-term interest-bearing assets. The Group policy is to maintain all its borrowings in fixed rate instruments. The interest rates of borrowings are disclosed in Note 20. (4) Foreign exchange risk The Group has no significant foreign exchange risk due to limited foreign currency transactions. 36 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 3 FINANCIAL RISK MANAGEMENT (Continued) (b) Fair value estimation (1) Cash and cash equivalent The carrying amount of cash and cash equivalents approximated their fair value due to these financial instruments either carry a current rate of interest or have a short period of time between the origination of the cash deposits and their expected maturity. (2) Trade and other receivables and payables The carrying amount trade and other receivables and payables, which are all subject to normal trade credit terms, approximates their fair value. (3) Due from and due to related parties The carrying amount of due from and due to related parties, which are all subject to normal trade credit terms, approximates their fair value. (4) Borrowings As at 31 December 2003 the carrying amount of borrowings approximates their fair value as these borrowings bear quoted market interest rates. (5) Available-for-sale investments The carrying amount of available-for sale investments cannot be reliably estimated and disclosed because these investments do not have quoted market prices in an active market and other methods reasonably estimating fair value for these investments are not available. 37 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 4 Sales Sales comprised: 2003 2002 Sales of goods 1,640,793 1,517,462 Less: surtaxes (7,935) (6,295) Less: Cash discount on sales (20,765) (11,194) 1,612,093 1,499,973 Other operating income - Dividend income 407 246 5 Finance costs 2003 2002 Interest income - Bank deposits 4,458 6,999 - Loans to Weifu Group Company Limited (“WFGC”) (Note 27(c)) - 227 4,458 7,226 Interest on - Bank loans 14,463 11,115 Less: amount capitalized in construction-in-progress (2,516) - 11,947 11,115 (7,489) (3,889) 38 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 6 Profit from operation The following items have been included in arriving at profit from operations: 2003 2002 Depreciation on property, plant and equipment (Note 11) 61,328 45,992 Provide for impairment of property, plant and equipment (Note 11) 9,666 6,537 Loss on disposal of property plant and equipment (Note 26(c)) 4,254 11,983 Amortisation of intangible assets - Goodwill (Note 12) 594 3,961 - Trademark (Note 12) 876 876 Amortisation of leasehold land (Note 10) 1,472 1,044 Research and development expenditures 28,641 40,248 Repairs and maintenance and overhaul costs of property, plant and equipment 26,536 16,235 Inventory - Cost of inventories recognized as expense 1,040,318 890,347 - Provision for inventory obsolescence 5,110 7,799 Impairment charge for bad and doubtful debts and written-off of uncollectable receivables 23,712 4,655 Staff costs - Salary and wages 117,472 109,552 - Staff and workers’ bonus and welfare fund 16,309 19,892 - Contribution to statutory pension scheme 24,510 23,670 - Provision for housing fund 9,436 6,270 The Company and its subsidiaries provide for staff welfare and contributions to the statutory pension fund based on a certain percentage of the total salaries. Staff welfare consists of staff welfare fund, medical insurance fund, housing fund, and unemployment insurance etc. The relevant percentages are as follows: Percentage Staff welfare fund 14% Medical insurance fund(included in Staff welfare fund) 8% Housing fund 8%~12% Unemployment fund 2% Statutory pension fund 21%-22% 39 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 7 Taxation (a) Value-added Tax (“VAT”) The Company and its subsidiaries are subject to VAT, which is charged on top of the selling price at a general rate of 17%. Input VAT from purchase of raw materials and other production materials can be netted off against ouput VAT from Sales. VAT payable or receivable is the net difference between periodic output and deductible input VAT. (b) Enterprise Income Tax (“EIT”) (1) Income tax expense in the consolidated income statements comprised: 2003 2002 Current tax 20,830 15,694 Share of tax of associates 6,307 155 Income tax expense 27,137 15,849 (2) The reconciliation of the applicable tax rate to the effective tax rate is as follows: 2003 2002 Accounting profit before tax and minority interest 275,018 216,696 Tax calculated at the effective tax rate of 15% (2002: 15%) 41,253 32,504 Utilisation of tax losses of subsidiaries (359) - Tax effect of expenses that are not deductible in determining taxable profit 5,053 8,245 Tax effect of income that are not taxable in determining taxable profit (18,810) (18,608) Income tax exemption - (6,292) 27,137 15,849 The Company, being a high-technology enterprise registered in Wuxi Hi-tech Industrial Development Zone, is subject to EIT at a reduced rate of 15%. Nanjing Weifu, being a high-technology company registered in Nanjing Hi-tech Development Zone is also subject to EIT at a reduced rate of 15%. 40 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 8 Earnings per share Basic earnings per share is calculated by dividing the net profit by the weighted average number of ordinary shares in issue during the year. 2003 2002 Net profit 239,557 197,646 Weighted average number of ordinary shares in issue 436,366,150 436,366,150 Basic earnings per share 0.55 0.45 The diluted earnings per share was not calculated, because no potential dilutive shares existed during the year. 9 Dividend per share At the meeting of the board of directors dated 14th April, 2004, a dividend in respect of 2003 of RMB 0.2 per share amounting to a total dividend of RMB 87,273,230 was proposed (Note 30). These consolidated financial statements do not reflect this dividend payable, which will be accounted for in shareholders’ equity as an appropriation of retained earnings in the year ended 31 December 2004. The dividends declared in respect of 2002 and 2001 were RMB 87,273,230 and 87,273,230, respectively. 41 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 10 Leasehold land 2003 2002 Cost Beginning of year 33,038 33,038 Additions 23,386 - End of year 56,424 33,038 Accumulated amortisation Beginning of year 5,246 4,202 Charge for the year 1,472 1,044 End of year 6,718 5,246 Net book value End of year 49,706 27,792 Beginning of year 27,792 28,836 Leasehold land represents land use fees paid for the right to use the parcels of land where the Group’s factory buildings in Wuxi and Nanjing are located. Since all land in the PRC is owned by the state or is subject to collective ownership, the risks and rewards of the parcel of land remain with the State. As a result, such lease payment is accounted for under operating leases and is charged to the income statement on a straight-line basis over lease terms of thirty to fifty years. 42 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 11 Property, plant and equipment 2003 Machinery and Construction-in-p Buildings equipment rogress Total Cost Beginning of year 197,385 647,339 325,953 1,170,677 Additions 5,866 2,180 237,058 245,104 Purchase from WFGC (Note 27(c)) - 459 - 459 Disposals (1,487) (24,571) (163,494) (189,552) Transfer 1,130 161,715 (162,845) - End of year 202,894 787,122 236,672 1,226,688 Accumulated depreciation Beginning of year 42,802 210,863 - 253,665 Charge for the year 5,521 55,807 - 61,328 Disposals (36) (14,608) - (14,644) End of year 48,287 252,062 - 300,349 Impairment loss Beginning of year - 11,104 2,407 13,511 Additions - 9,666 - 9,666 Disposals - (433) (2,407) (2,840) End of year - 20,337 - 20,337 Net book value End of year 154,607 514,723 236,672 906,002 Beginning of year 154,583 425,372 323,546 903,501 For the year ended 31 December, 2003, borrowing cost capitalised as property, plant and equipment amounted to approximately Rmb 2,516,000 (2002: Nil), capitalisation rate is 5.49% per annum (2002: Nil). 43 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 11. Property, plant and equipment (Continued) 2002 Machinery and Construction-in-p Buildings equipment rogress Total Cost Beginning of year 106,649 457,673 378,429 942,751 Additions 28,000 9,122 99,664 136,786 Purchase from WFG (Note 27(c)) 41,245 84,862 - 126,107 Acquisition of a subsidiary 5,740 8,338 2,735 16,813 Disposals (6,595) (45,185) - (51,780) Transfer 22,346 132,529 (154,875) - End of year 197,385 647,339 325,953 1,170,677 Accumulated depreciation Beginning of year 29,048 164,510 - 193,558 Charge for the year 3,796 42,196 - 45,992 Purchase from WFGC (Note 27(c)) 10,611 26,334 - 36,945 Acquisition of a subsidiary 550 2,746 - 3,296 Disposals (1,203) (24,923) - (26,126) End of year 42,802 210,863 - 253,665 Impairment loss Beginning of year - 8,072 - 8,072 Additions - 4,130 2,407 6,537 Acquisition of a subsidiary - 794 - 794 Disposals - (1,892) - (1,892) End of year - 11,104 2,407 13,511 Net book value End of year 154,583 425,372 323,546 903,501 Beginning of year 77,601 285,091 378,429 741,121 44 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 12 Intangible assets 2003 Trademarks Goodwill Total Cost Beginning of year 26,356 13,459 39,815 Additions - 10,467 10,467 End of year 26,356 23,926 50,282 Accumulated amortization Beginning of year 3,577 12,865 16,442 Charge for the year 876 594 1,470 End of year 4,453 13,459 17,912 Net book value End of year 21,903 10,467 32,370 Beginning of year 22,779 594 23,373 Nanjing Weifu acquired trademarks from WFGC at a consideration of RMB 26,355,900 for a period of 30 years effective from 20 August 1997. In December 2003, the Company increased its investment in Weifu Leader with a total amount of RMB 230,000,000. After the capital injection , the Company held 94.81% equity interest in Weifu Leader. The excess of the cost of the investment over the fair value of the Company’s share of the net assets of Weifu leader at the capital injection date amounted to RMB 10,467,374, which is recognised as goodwill and included in the consolidated financial statements. 45 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 12 Intangible assets (Continued) 2002 Trademarks Goodwill Total Cost Beginning of year 26,356 11,872 38,228 Additions - 1,587 1,587 End of year 26,356 13,459 39,815 Accumulated amortization Beginning of year 2,701 8,904 11,605 Charge for the year 876 3,961 4,837 End of year 3,577 12,865 16,442 Net book value End of year 22,779 594 23,373 Beginning of year 23,655 2,968 26,623 46 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 13 Investments in associates 2003 2002 Beginning of year 384,787 273,872 Addition in investments in associates - 21,577 Share of results before tax 162,785 116,573 Share of tax of associates (Note 7(b)) (6,307) (155) Dividend received (65,900) (27,080) End of year 475,365 384,787 As of 31 December 2003, the Group had the following associates: Place of Percentage of equity Name registration Principal activities Carrying amount interest 31 December 31 December Directly Indirectly 2003 2002 Wuxi Europe Asia Diesel Fuel Wuxi, PRC Manufacture and sale of nozzles 245,198 172,264 48% - Injection Co., Ltd. holders for diesel fuel injection (“Wuxi Europe Asia”) Zhonglian Automobile Electronics Shanghai, Manufacture and sale of 227,862 210,467 20% - Co., Ltd. PRC automobile electronic equipment Wuxi Weifu Mechanism Wuxi, PRC Manufacture and sale of diesel 2,305 2,056 28.98% - Manufacturing Co., Ltd. fuel injection, automotive (“Weifu Mechanism components Manufacturing”) 475,365 384,787 There were no changes in the interests held in the associates in 2003 and 2002. 14 Investments in unconsolidated subsidiaries 2003 2002 Beginning of the Year 37,826 26,157 Addition of investments in unconsolidated subsidiaries - 7,306 Share of results 3,943 4,363 Disposals - - End of year 41,769 37,826 47 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 14 Investments in unconsolidated subsidiaries (Continued) As of 31 December 2003, the Group had the following unconsolidated subsidiaries: Place of Percentage of equity Name registration Principal activities Carrying amount interest 31 Decmber 31 December Directly Indirectly 2003 2002 Wuxi Weifu Mashan Fuel Wuxi, PRC Manufacture and sale of fuel 10,780 10,671 72.78% 12.22% Injection Equipment Factory injection equipment Wuxi Weifu Chang’an Fuel Wuxi, PRC Manufacture and sale of 28,546 23,815 85% - Injection Co., Ltd. injection equipment for diesel Wuxi Weifu Jida New Material Wuxi, PRC Manufacture and development 2,443 3,340 70% - Development Co., Ltd. of metallic and non-metallic materials 41,769 37,826 15 Available-for-sale investments 2003 2002 At beginning of year 57,686 48,911 Additions - 13,855 Disposals - (5,080) At end of year 57,686 57,686 Less: Impairment losses (14,166) (14,166) 43,520 43,520 Available-for-sale investments were investments in unlisted legal person shares, including approximately RMB 45,750,000 (2002: RMB 45,750,000) of investments in financial institutions. 16 Inventories, net 31 December 31 December 2003 2002 Raw materials 24,475 23,054 Work in progress 106,294 90,932 Finished goods 243,083 221,061 373,852 335,047 Less: Provision for obsolescence (19,007) (13,897) 354,845 321,150 48 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 17 Trade and other receivables, net 31 December 31 December 2003 2002 Notes receivable 172,382 66,767 Accounts receivable 342,264 285,948 Other receivables 33,613 12,968 548,259 365,683 Less: Provision for doubtful accounts (56,339) (38,896) 491,920 326,787 18 Trade and other payables 31 December 31 December 2003 2002 Notes payables 24,800 80,000 Trade payables 259,297 243,592 Other payables 49,047 33,622 333,144 357,214 19 Accruals and other current liabilities 31 December 31 December 2003 2002 Accrued expenses 3,537 3,326 Welfare payable 6,121 3,691 Advance from customer 3,198 5,496 Other levies payables 233 3,232 13,089 15,745 49 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 20 Borrowings (a) Short-term bank borrowings 31 December 31 December 2003 2002 Unsecured bank borrowings 136,500 16,500 Secured bank borrowings 59,000 141,000 195,500 157,500 Short-term bank borrowings bear interest at rates ranging from 4.536% to 5.040% (2002: 4.779% to 5.310%) per annum, of which RMB 59,000,000 were guaranteed by a related company – Weifu Group Co., Ltd.(“WFGC”) (2002: RMB 91,000,000 were guaranteed by WFGC and RMB 50,000,000 by a third party). (b) Long-term bank borrowings 31 December 31 December 2003 2002 Secured bank borrowings 160,000 - Less: Amounts due within one year - - 160,000 - Long-term bank borrowings are guaranteed by WFGC and bear interest at rate 5.49% per annum. The long-term borrowings are repayable within the period from year 2005 to year 2006. 21 Long-term payables 31 December 31 December 2003 2002 Deferred government grants (i) 30,658 12,660 Leasehold land payables (ii) 15,000 - Long-term government borrowings 1,880 - 47,538 12,660 50 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 21 Long-term payables (continued) (i) Government grants represent funds received relating to acquisition and construction of property, plant and equipment as well as expenditures relating to certain research and development projects. The movement of government grants for the year ended 31 December 2003 were as follows: 2003 2002 Beginning of year 12,660 - Receipt during the year 28,740 12,660 Amount earned and recognized as income (8,226) - Amount allocated to set off against initial costs of related construction-in-progress. (2,516) - End of year 30,658 12,660 (ii) The Group acquired a leasehold land in Nanjing Hi-tech Development Zone at the cost of RMB 19,500,000, of which 15,000,000 will be repayable within the period from year 2005 to year 2007. 22 Ordinary shares As of 31st December 2003 and 2002, the details of share capital (par value of RMB 1 each) were as follows: Number of shares Amount 31 December 31 December 31 December 31 December 2003 2002 2003 2002 State-owned legal person shares 121,566,150 121,566,150 121,566 121,566 Legal person shares 10,400,000 10,400,000 10,400 10,400 Employee shares 24,000,000 24,000,000 24,000 24,000 A shares 192,000,000 192,000,000 192,000 192,000 B shares 88,400,000 88,400,000 88,400 88,400 436,366,150 436,366,150 436,366 436,366 The B Shares rank pari passu in all respects with the A Shares. 51 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 23 Reserves (a) Capital surplus 31 December 31 December 2003 2002 Share premium 908,919 908,919 Other capital surplus 2,577 2,577 911,496 911,496 In accordance with the provisions of the Company’s articles of association, the Company shall record the following as capital surplus: (i) share premium arising from the issue of shares in excess of par value; (ii) surpluses arising from revaluation of assets; and (iii) Other items in accordance with the Company’s articles of association and relevant regulations in the PRC. Capital surplus can be utilised to offset prior years’ losses or for the issuance of bonus shares. Share premium mainly represents total proceeds from the issuance of A and B shares and the rights issue in excess of par value, net of expenses relating to the issuance of the shares such as underwriting commissions, fees for professional advisors and promotional expenses. Share premium can be utilized to offset prior years’ losses or to issue bonus shares. (b) Statutory reserves In accordance with the Company Law and the Company’s articles of association, the Company and its subsidiaries shall appropriate 10% of their annual statutory net profit (after offsetting any prior years’ losses) to the statutory surplus reserve fund account. When the balance of such reserve reaches 50% of each entity’s share capital, any further appropriation is optional. The statutory surplus reserve can only be utilised, upon approval by the relevant authority, to offset prior years’ losses or increase capital. However, such statutory surplus reserve must be maintained at a minimum of 25% of share capital after such issuance. 52 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 23 Reserves (Continued) (c) Statutory public welfare fund According to the relevant financial regulations of the PRC and the articles of association of the Company, the Company and its subsidiaries are also required to appropriate 5% to 10% of their annual statutory net profit (after offsetting any prior year’s losses) to a statutory public welfare fund to be utilized to build or acquire capital items, such as dormitories and other facilities for the Company and its subsidiaries’ employees, and can not be used to pay for staff welfare expenses. Title to these capital items will remain with the Company and its subsidiaries. 24 Retained earnings According to the articles of association of the Company, the earnings available for distribution are the lower of the amount determined under the PRC accounting standards and the amount determined under IFRS. As of 31 December 2003, the earnings available for distribution were RMB 512,005,000 (2002: RMB 401,207,000) 25 Minority interests 2003 2002 Beginning of year 58,519 45,102 Acquisition of a subsidiary - 2,227 Increase of minority interests arising from the capital 10,467 - increase of the subsidiary Cash injection from minority shareholders - 6,000 Share of net profit of subsidiaries 8,324 3,201 Increase in subsidiaries’ capital surplus - 1,989 End of year 77,310 58,519 53 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 26 Cash generated from operations (a) Reconciliation from net profit to cash generated from operations: 2003 2002 Net profit 239,557 197,646 Adjustments for: Minority interest 8,324 3,201 Income tax 27,137 15,849 Provision for doubtful debts and write-off of uncollectible accounts receivable 23,712 4,655 Provision for inventory obsolescence 5,110 7,799 Loss on disposal of property, plant and equipment 4,254 11,983 Depreciation of property, plant and equipment 61,328 45,992 Provision for impairment loss of property, plant and equipment 9,666 6,537 Amortization of intangible assets 1,470 4,837 Amortization of leasehold land 1,472 1,044 Government grants earned and recognized as income (8,226) - Share of results of associates before tax (162,785) (116,573) Income from unconsolidated subsidiaries (3,943) (4,363) Income for trading investments (6) - Provision for impairment loss of available-for-sale investments - 12,133 Dividend income (407) (246) Interest expense 11,947 11,115 Interest income (4,458) (7,226) Changes in working capital (excluding the effects of acquisition of subsidiaries) 214,152 194,383 Increase in Inventories (38,805) (125,957) Increase in trade and other receivables (182,405) (36,128) Decrease (Increase) in prepayments 3,135 (8,049) Decrease (Increase) in due from related parties 16,668 (51,088) Increase (decrease) in trade and other payables (30,081) 189,632 Increase (decrease) in due to related companies 54,908 (481) Increase (decrease) taxes payable 6,284 (8,412) Decrease in accrual and other current liabilities (3,326) (11,917) Cash generated from operations 40,530 141,983 54 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 26 Cash generated from operations (Continued) (b) Analysis of the balances of cash and cash equivalents 31 December 31 December 2003 2002 Cash on hand 134 272 Bank deposits 487,123 347,893 487,257 348,165 Trading investments with maturity within three months - 28,000 Cash and cash equivalents 487,257 376,165 (c) Other information Proceeds from sale of property, plant and equipment comprise 2003 2002 Net book value 172,068 23,762 Less: Loss on sale of property plant and equipment (4,254) (11,983) Increase in trade and other receivables (6,428) (10,824) Increase in due from related parties (24,000) (211) Decrease in trade and other payables - (530) Proceeds from sale of property plant and equipment 137,386 214 55 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 27 Related party transactions Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. (a) Name of related companies and relationship Name Relationship WFGC Shareholder which owns a 27.86% equity share of the Company Wuxi Europe Asia Associated company Zhonglian Automobile Electronics Company Associated company Limited Weifu Mechanism Manufacturing Associated company (b) The Company and WFGC have entered into the following agreements: (1) Trademark licensing agreement The agreement is for a ten-year term with effect from 1 May, 1995. The Company shall pay WFGC a license fee of 0.3% of the sales value of the Company’s products bearing the licensed trademark, with an annual minimum fee of RMB 1,200,000. (2) Land use right leasing agreement The agreement is for a term of 50 years with effect from 1 March, 1995. The annual rental for the first year is RMB 327,285, which is subject to an annual increment of 10%. 56 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 27 Related party transactions (Continued) (c) Significant transactions with WFGC for the year ended 31 December 2003 are as follows: Except as disclosed in Note 20, significant transactions with WFGC for the year ended 31 December, 2003 are as follows: 2003 2002 Purchases of materials 1,125 83,305 Sales of products 163,630 182,800 Purchases of property, plant and equipment 459 89,162 Interest income - From the amounts due from WFGC, net - 227 - Cash discount on material purchases - 151 Processing expenses - 4,181 Fees for use of land and trademark 4,063 3,914 (d) Significant transactions with other related companies for the year ended 31 December, 2003 are as follows: 2003 2002 Purchase of materials from - Weifu Mechanism Manufacturing 62,046 22,749 - Wuxi Europe Asia 114,879 86,526 Sales of products to - Weifu Mechanism Manufacturing 18,002 7,495 - Wuxi Europe Asia 64,210 43,735 57 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) 27 Related party transactions (Continued) (e) Balances with related parties 31 December 31 December 2003 2002 Due to related parties - WFGC 368 - - Wuxi Europe Asia 9,196 16,688 9,564 16,688 Due from related parties - WFGC - 38,032 - Weifu Mechanism Manufacturing 1,165 17,833 1,165 55,865 The amounts due to/from related companies arose from the above transactions and were unsecured, interest-free and had no fixed repayment terms. 28 Contingent liabilities As of 31st December, 2003, the Group had no significant contingent liabilities. 29 Commitments As of 31st December, 2003, the Group had the following significant commitments: (a) Commitment to acquire property, plant and equipment amounting to approximately RMB 215,570,000 (2002: RMB 270,000,000); (b) Commitment to invest approximately RMB 250,000,000 on the project of mechanical diesel fuel injection system; (c) Commitment to increase its investment in Wuxi Europe Asia together with Robert Bosch GmbH, and the registered capital of Wuxi Europe Asia will increase from USD 30,200,000 to USD 200,000,000; (d) Commitment to invest in Weifu Environmental Catalysts (Wuxi) Co.,Ltd. in an amount of approximately RMB 24,500,000. 30 Subsequent events At the meeting of the board of directors dated 14 April 2004, a dividend in respect of 2003 of 58 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) RMB 0.2 per share amounting to a total dividend of RMB 87,273,320 was proposed (Note 9). 31 Approval of financial statements The consolidated financial statements were approved for issuance by the board of directors of the Company on 14 April, 2004. 59 WEIFU HIGH-TECHNOLOGY COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands unless otherwise stated) Impact of IFRS adjustments on profit after taxation and minority interests and net assets Net profit Shareholders’ equity 31 December 31 December 2003 2002 2003 2002 As reported in the statutory accounts 238,104 204,033 2,042,779 1,891,947 Adjustment for income from associates 1,453 (6,387) 3,765 2,313 As restated under IFRS 239,557 197,646 2,046,544 1,894,260 SECTION XII DOCUMENTS FOR REFERENCE 1. Financial Statements affixed therewith the signatures and stamps of the Company’s legal representative, principal treasurer and chief accountant; 2. Original Auditors’ Report affixed therewith the stamps of the accounting firms ,the signatures and stamps of the certified public Accountants; 3. Originals of all released documents and announcements disclosed on the press designated by the State Securities Regulatory Commission during this reporting year. Board of Directors of Weifu High-Technology Co., Ltd. Apr. 16, 2004 60