苏威孚Ｂ(200581)2007年年度报告（英文版）

无锡威孚高科技股份有限公司 二0 0七年年度报告 WEIFU HIGH-TECHNOLOGY CO., LTD. ANNUAL REPORT 2007 April 15, 2008 1 Contents Section I. Important Notes 3 Section II. Company Profile 4 Section III. Summary of Accounting and Business Data 5 Section IV. Changes in Share Capital and Shareholders 8 Section V. Particulars about Directors, Supervisors, Senior Administrative Personnel and Workers 12 Section VI. Administration of the Company 20 Section VII. Particulars about Shareholders’ General Meeting 24 Section VIII. Report of the Board of Directors 24 Section IX. Report of the Supervisory Committee 38 Section X. Significant Events 38 Section XI. Financial Report 46 Section XII. Documents for Reference 121 2 WEIFU HIGH-TECHNOLOGY CO., LTD. ANNUAL REPORT 2007 Section I. Important Notes Board of Directors and Supervisory of Committee of Wuxi Weifu High-Technology Co., Ltd. (hereinafter referred to as the Company) and its directors, supervisors and senior executives hereby confirm that there are no any fictitious statements, misleading statements, or important omissions carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. No director, supervisor and senior executive stated that they couldn’t ensure the correctness, accuracy and completeness of the contents of the Annual Report or have objection for this report. All the directors attended the meeting. Jiangsu Gongzheng Certified Public Accountants Co., Ltd. issued the standard unqualified Financial Report for the Company. 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 2007 is authentic and complete. 3 Section II. Company Profile 1. Legal Name of the Company: In Chinese: 无锡威孚高科技股份有限公司 Abbreviation: 威孚高科、苏威孚B In English: WEIFU HIGH-TECHNOLOGY CO., LTD. Abbreviation: WFHT 2. Legal Representative: Mr. Xu Liangfei 3. Secretary of Board of Directors: Mr. Zhou Weixing Authorized Representative of Stock Affairs: Mr. Chu Yong Contact Address: No.107, Renmin (W) Road, Wuxi, Jiangsu, China Tel: (86) 510-82719579 Fax: (86) 510-82751025 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 Postal Code: 214031 Homepage: http://www.weifu.com.cn E-mail: web@weifu.com.cn 5. Information Disclosure Media: Securities Times, China Securities and Hong Kong Wen Wei Po 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) Certified Public Accountants engaged by the Company: Jiangsu Gongzheng Certified Public Accountants Co., Ltd. Address: No.28, Liangxi Road, Wuxi 4 Section III. Summary of Accounting and Business Data I. Major accounting data 1. Major accounting data of 2007 Unit: RMB Operating profit 286,052,891.88 Total profit 283,105,086.64 Net profit attributable to shareholders 230,428,273.70 of the listed company Net profit attributable to shareholders of the listed company after deducting 215,526,494.46 non-recurring gains and losses Net cash flow arising from operating 204,316,975.69 activities Items of non-recurring gains and losses Unit: RMB Items of non-recurring gains and losses Amount 3,801,876.48 (1) Gains and losses in disposal of non-current asset (2) Governmental subsidy calculated into current gains 4,529,511.53 and losses (3) Net amount of other non-operating income and -1,426,578.68 expenditure except for he above items 15,734,190.05 (4) Balance of switching back of the welfare payable (5) Impact on income tax of the aforesaid losses/gains -3,625,056.35 (6) Minority shareholders’ income -4,112,163.79 Total 14,901,779.24 2. Balance of net profit calculated according to international and domestic accounting standards and regulations, and explanations Unit: RMB CAS IAS Net profit 230,428,273.70 230,428,273.70 Net asset 2,625,892,705.01 2,625,892,705.01 Explanations on No differences difference II. Key accounting data and financial indexes over the previous three years 1. Main accounting data 5 Unit: RMB Increase/d ecrease in this year 2007 2006 2005 compared with last year (%) After Before Before adjustment After adjustment After adjustment adjustment adjustment 3,121,339,002.0 2,481,157,299.4 2,669,956,992.2 2,790,950,53 2,790,950,530.7 Operating income 16.91% 4 7 2 0.75 5 238,697,249. Total profit 283,105,086.64 130,773,959.11 134,858,283.88 109.93% 240,790,724.31 51 Net profit attributable to 181,905,034. shareholders of the listed 230,428,273.70 88,279,693.90 93,108,229.12 147.48% 184,407,973.89 46 company Net profit attributable to shareholders of the listed 168,991,921. company after deducting 215,526,494.46 73,573,080.81 89,251,053.53 141.48% 171,494,861.28 85 non-recurring gains and losses Net cash flow arising from -282,094,942. 204,316,975.69 406,031,620.73 406,031,620.73 -49.68% -282,094,942.43 operating activities 43 Increase/d ecrease at the end of this year At the end of At the end of 2006 compared At the end of 2005 2007 with that at the end of last year (%) After Before Before adjustment After adjustment After adjustment adjustment adjustment 5,123,863,986.4 4,865,134,909.7 4,863,813,947.8 4,472,615,18 4,475,396,965.3 Total assets 5.35% 4 3 8 0.87 4 Owners’ 2,398,579,105.9 2,204,347,045.1 2,202,187,391.9 2,341,982,20 2,343,952,837.4 equity(Shareholders’ 8.92% 6 2 6 1.18 6 equity) 2. Main financial indexes Unit: RMB 6 Increase/decrea se in this year 2007 2006 2005 compared with last year (%) Before After After Before After adjustment adjustment adjustment adjustment adjustment Basic earnings per share 0.41 0.16 0.16 156.25% 0.32 0.33 Diluted earnings per share 0.41 0.16 0.16 156.25% 0.32 0.33 Basic earnings per share after deducting non-recurring gains and 0.38 0.13 0.16 137.50% 0.30 0.30 losses Fully diluted return on equity 9.61% 4.00% 4.23% 5.38% 7.77% 7.87% Weighted average return on equity 10.02% 3.85% 3.76% 6.26% 8.01% 8.11% Fully diluted return on equity after deducting non-recurring gains and 8.99% 3.34% 4.05% 4.94% 7.22% 7.32% losses Weighted average return on equity after deducting non-recurring gains and 9.37% 3.21% 3.61% 5.76% 7.44% 7.54% losses Net cash flow arising from operating 0.36 0.72 0.72 -50.00% -0.50 -0.50 activities per share Increase/decrea se at the end of At the end this year At the end of 2006 At the end of 2005 of 2007 compared with that at the end of last year (%) Before After After Before After adjustment adjustment adjustment adjustment adjustment Net asset per share attributable to 4.23 3.89 3.88 9.02% 4.13 4.13 shareholders of listed company III. Changes in shareholders’ equity and relevant explanations Unit: RMB Amount at the Increase in this Decrease in this Amount at the Items period-begin period period Period-end Share capital 567,275,995.00 567,275,995.00 Capital reserve 906,439,963.98 906,439,963.98 Surplus reserve 222,767,110.84 19,203,352.74 241,970,463.58 Retained profit 505,704,322.14 230,428,273.70 53,239,912.44 682,892,683.40 Total 2,202,187,391.96 249,631,626.44 53,239,912.44 2,398,579,105.96 shareholder’s 7 equity Reason for changes: 1. Withdrawal of statutory surplus reserve amounted to RMB 19,203,352.74. 2. Common share dividend distributed in this year amounted to RMB 34,036,559.70 . Section IV. Changes in Share Capital and Shareholders I. Change in shares Unit: Share Before the change Increase or decrease of this time (+) After the change Capitaliz New Bonus ation of Amount Proportion shares Others Subtotal Amount Proportion shares public issued reserve I. Restricted shares 123,941,426 21.85% -9,788,376 -9,788,376 114,153,050 20.12% 1. State-owned shares 2. State-owned legal 122,844,193 21.66% -8,782,215 -8,782,215 114,061,978 20.11% person’s shares 3. Other domestic shares 1,097,233 0.19% -1,006,161 -1,006,161 91,072 0.02% Including: Domestic non-state-owned legal 975,802 0.17% -975,802 -975,802 0 0.00% person’s shares Domestic natural person’s 121,431 0.02% -30,359 -30,359 91,072 0.02% shares 4. Foreign shares Including: Foreign legal person’s shares Foreign natural person’s shares II. Unrestricted shares 443,334,569 78.15% 9,788,376 9,788,376 453,122,945 79.88% 1. RMB Ordinary shares 328,414,569 57.89% 9,788,376 9,788,376 338,202,945 59.62% 2.Domestically listed foreign 114,920,000 20.26% 114,920,000 20.26% shares 3. Overseas listed foreign shares 4. Others Ⅲ. Total shares 567,275,995 100.00% 0 0 567,275,995 100.00% II. Statement on changes of restricted shares Unit: Share 8 Restricted Restricted Restricted shares Restricted Name of the restricted shares Restricted Date for releasing shares in increased shares in shareholders released in condition the restriction year-begin in this year-end this year year Restricted shares Wuxi Xinzhongya Investment & 2,439,504 2,439,504 0 0 transferred April 5, 2007 Development Corporation into tradable shares Restricted shares State Investment Machinery and 1,829,628 1,829,628 0 0 transferred April 5, 2007 Light Industrial Co., Ltd. into tradable shares Restricted shares Guolian Trust & Investment Co., 975,802 975,802 0 0 transferred April 5, 2007 Ltd. into tradable shares Restricted shares Wuxi Weifu Industry Corporation 1,097,777 1,097,777 0 0 transferred April 5, 2007 into tradable shares Restricted shares Shanghai Automotive Industry 1,829,628 1,829,628 0 0 transferred April 5, 2007 Corporation (Group) into tradable shares Restricted shares Machinery Assets Management 609,876 609,876 0 0 transferred April 5, 2007 Co., Ltd of Jiangsu Province into tradable shares Restricted shares Wuxi Xitong Property 975,802 975,802 0 0 transferred April 5, 2007 Management Co., Ltd into tradable shares 25 percent restricted Senior executives’ shares 121,431 30,359 0 91,072 - shares transferred 9 into tradable shares Total 9,879,448 9,788,376 0 91,072 － － III. Particulars about issuance and listing of shares 1. The previous three year ended the period-end; the Company issued neither new share nor derived securities. 2. In August 2007, the Company implemented the distribution plan(tax included) of offering RMB 0.6 for each 10 shares. 3. There existed no inner employees’ shares in the Company. IV. Particulars about shareholders 1. Total Number of Shareholders at the end of report period: 44,576. 2. Ended the report period, particulars about the top ten shareholders of the Company: (Unit: share) Unit: Share Total shareholders 44,576 Particulars about shares held by the top ten shareholders Proporti Shares Amount of Nature of on of Amount of pledged Names of shareholders restricted shareholder share share held or shares held held frozen State legal WUXI WEIFU GROUP COMPANY LIMITED 20.11% 114,061,978 114,061,978 person’s shares B-share ROBERT BOSCH GMBH 3.24% 18,387,200 shareholder BANK OF CHINA -E FUND STRATEGY A-share GROWTH NO.2 BLEND SECURITIES 2.60% 14,723,748 shareholder INVESTMENT FUND INDUSTRIAL AND COMMERCIAL BANK A-share OFCHINA-KAIYUAN SECURITIES 1.71% 9,696,090 shareholder INVESTMENT FUND BANK OF CHINA -ICBC CREDIT SUISSE A-share CORE VALUE STOCK SECURITIES 1.48% 8,402,384 shareholder INVESTMENT FUND HTHK-VALUE PARTNERS INTELLIGENT B-share 1.44% 8,150,725 FD-CHINA B SHS FD shareholder BANK OF COMMUNICATIONS-HUAAN A-share BAOLI ALLOCATION SECURITIES 1.37% 7,777,700 shareholder INVESTMENT FUND BANK OF CHINA –E FUND VALUE A-share 1.34% 7,607,966 SELECTIVE STOCK SECURITIES shareholder 10 INVESTMENT FUND BANK OF COMMUNICATIONS-KERUI A-share 1.10% 6,231,570 SECURITIES INVESTMENT FUND shareholder GUOTAI JUNAN SECURIES HONG KONG B-share 1.07% 6,097,608 LIMITED shareholder Particulars about shares held by the top ten unrestricted shareholders Amount of Name of shareholder unrestricted Type of share shares held Domestically listed ROBERT BOSCH GMBH 18,387,200 foreign share BANK OF CHINA -E FUND STRATEGY GROWTH NO.2 BLEND 14,723,748 RMB common share SECURITIES INVESTMENT FUND INDUSTRIAL AND COMMERCIAL BANK OFCHINA-KAIYUAN 9,696,090 RMB common share SECURITIES INVESTMENT FUND BANK OF CHINA -ICBC CREDIT SUISSE CORE VALUE STOCK 8,402,384 RMB common share SECURITIES INVESTMENT FUND Domestically listed HTHK-VALUE PARTNERS INTELLIGENT FD-CHINA B SHS FD 8,150,725 foreign share BANK OF COMMUNICATIONS-HUAAN BAOLI ALLOCATION 7,777,700 RMB common share SECURITIES INVESTMENT FUND BANK OF CHINA –E FUND VALUE SELECTIVE STOCK 7,607,966 RMB common share SECURITIES INVESTMENT FUND BANK OF COMMUNICATIONS-KERUI SECURITIES 6,231,570 RMB common share INVESTMENT FUND Domestically listed GUOTAI JUNAN SECURIES HONG KONG LIMITED 6,097,608 foreign share Domestically listed VALUE PAPTNERS HIGH-DIVIDEND STOCKS FUNDS 6,040,891 foreign share Among the above shareholders, there exists no associated relationship between Wuxi Explanation on associated Weifu Group Company Limited, the first largest shareholder of the Company, and other relationship or consistent shareholders, and they do not belong to the consistent actionist regulated by the actions among the above Management Measure of Information Disclosure on Change of Shareholding for Listed shareholders Company. The Company was unknown whether there exists associated relationship among the other shareholders. 3. Particulars about the holding shareholder and actual controller 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. 11 4. Block diagram for property right and controlling relationship among actual controllers and the Company: State-owned Assets Supervision & Administration Commission of Wuxi Municipality of Jiangsu Province ↓100% Wuxi Weifu Group Company Limited ↓20.11% Weifu High-technology Co., Ltd. V. In the report period, there were no changes on controlling shareholders of the Company. Section V. Particulars about Directors, Supervisors, Senior Administrative Personnel and Workers I. Directors, supervisors and senior administrative personnel 1. Basic information Total remune Drawing ration remuner drawn ation from from Shares Shares Reason the sharehol Begin date for End date for held at Name Title Sex Age held at for Compa ders’ office term office term year-begi year -end change ny in units or n the other report related period units or (RMB’ not 0000) Chairman Restrict Xu of Male 63 June 1, 2005 June 1, 2008 19,469 14,602 ed for Yes Liangfei Directors listing Restrict Han GM Male 56 June 1, 2005 June 1, 2008 19,469 14,602 ed for 40.25 No Jiangming listing 12 Wang Director Male 42 June 1, 2005 June 1, 2008 12,168 12,168 Yes Weiliang Gao Director Male 53 June 1, 2005 June 1, 2008 9,886 9,886 Yes Guoyuan Ge Director Male 53 June 1, 2005 June 1, 2008 24,453 24,453 Yes Songping Restrict Shi Director Male 45 June 1, 2005 June 1, 2008 3,042 2,281 ed for 27.55 No Xingyuan listing Rudolf Director Male 51 May 1, 2007 June 1, 2008 Yes Maier Zhang Independe Male 63 June 1, 2005 June 1, 2008 5.00 Yes Xiaoyu nt Director Ouyang Independe Male 49 June 1, 2005 June 1, 2008 5.00 Yes Minggao nt Director Chen Independe Male 57 June 1, 2005 June 1, 2008 5.00 Yes Qilong nt Director Chen Independe Male 68 June 1, 2005 June 1, 2008 5.00 Yes Juchang nt Director Chen Supervisor Male 40 June 1, 2005 June 1, 2008 3,042 3,042 27.55 No Xuejun Li Supervisor Male 58 June 1, 2005 June 1, 2008 Yes Guodong Zhang Supervisor Male 38 June 1, 2005 June 1, 2008 Yes Jiming Restrict Ou Jianbin Supervisor Male 41 June 1, 2005 June 1, 2008 10,585 7,939 ed for 24.28 No listing Restrict You Supervisor Male 40 June 1, 2005 June 1, 2008 9,734 7,300 ed for 7.16 No Jianzhong listing Sun Deputy Fema 54 June 1, 2005 June 1, 2008 27.54 No Qingxian GM le Miao Deputy Male 44 June 1, 2005 June 1, 2008 27.55 No Yuming GM Wang Deputy Male 52 June 1, 2005 June 1, 2008 27.87 No Yawei GM Restrict Deng Deputy Male 44 June 1, 2005 June 1, 2008 7,301 5,476 ed for 27.56 No Xijiang GM listing Restrict Zhou Secretary Male 44 June 1, 2005 June 1, 2008 2,282 2,282 ed for 22.22 No Weixing of BD listing Total - - - - - 121,431 104,031 - 279.53 - 13 Explanations: i. In the report period, the Company did not implement equity encouragement plan. ii. Reason for changes of Xu Liangfei, etc, senior executives’ shares: sold the 25 pecent defrosted senior executives’ shares with restriction in the secondary market. 2. Directors and Supervisors holding the position in Shareholding Companies Position in Name Shareholding companies shareholding Office term companies Chairman of the Xu Liangfei Wuxi Weifu Group Company Limited Board, General Till now Manager Director, Deputy Wang Weiliang Wuxi Weifu Group Company Limited Till now General Manager Director, Deputy Gao Guoyuan Wuxi Weifu Group Company Limited Till now General Manager Director, Deputy Ge Songping Wuxi Weifu Group Company Limited Till now General Manager Bosch Automotive Diesel System Rudolf Maier General Manager Till now Co., Ltd. Manager of the Wuxi Guolian Development Group Li Guodong Investment Till now Co., Ltd. Management Dept. Senior Manager of State Investment Machinery and Zhang Jiming Automobile Parts Till now Light Industrial Co., Ltd. Investment Dept. 3. Main work experiences of the directors, supervisors and senior administrative personnel in the latest five years and position and part-time job in other organ excluding shareholder’s company (1) Main work experiences in the latest five years Mr. Xu Liangfei: he has served successively as the Chairman of the Board, General Manager and Secretary of CPC of Wuxi Weifu Group Co., Ltd.; now he took post of Chairman of the Board of the Company, Chairman of the Board, General Manager, Secretary of CPC of Wuxi Weifu Group Co., Ltd. Mr. Han Jiangming: he has successively as Vice Chairman of the Board and General Manager of the Company; he is now in charge of Vice Chairman of the Board and General Manager of the Company. Mr. Wang Weiliang: Director: He has served successively as Director and concurrently Deputy General Manager of Wuxi Weifu Group Co., Ltd.; now he is in charge of Director and concurrently Deputy General Manager of Wuxi Weifu Group 14 Co., Ltd. and Director of the Company. Mr. Gao Guoyuan: he has served successively as Deputy General Manager of the Company and Director and concurrently Deputy General Manager of Director Wuxi Weifu Group Co., Ltd.; At present, he is Director and Deputy General Manager of Wuxi Weifu Group Co., Ltd. and Director of the Company. Mr. Ge Songping: he has served successively as Deputy General Manger of the Company and Director & concurrently Deputy General Manager of Wuxi Weifu Group Co., Ltd.; At present, he is Director and Deputy General Manager of Wuxi Weifu Group Co., Ltd. and Director of the Company. Mr. Shi Xingyuan: he has served successively as Director and concurrently Deputy General Manger of the Company; he is now Director and Deputy General Manager of the Company. Mr. Rudolf Maier, new-engaed director of the Company in May 2007; he ever acted as the president of Business Department of Commercial Vehicles of Diesel injection System of Bosch; now acts as the General Manager of Bosch Automotive Diesel System Co., Ltd. Mr. Zhang Xiaoyu: he has served successively as Independent Director of the Company, Executive Vice-president of China Machinery Industry Federation, Director-General of Society of Automobile Engineers of China (SAE China), Honorary Director General of China Association of Automobile Manufacturers, Director General of Chinese Society for Internal Combustion Engines (CSICE) and Committee member of China Association for Science & Technology; now he is Independent Director of the Company, Executive Vice-president of China Machinery Industry Federation, Director-General of Society of Automobile Engineers of China (SAE China), Honorary Director General of China Association of Automobile Manufacturers, Director General of Chinese Society for Internal Combustion Engines (CSICE) and Committee member of China Association for Science & Technology. Mr. Ouyang Minggao: he has served successively as Independent Director of the Company, Appointed Professor of Cheung Kung Scholars of Ministry of Education of PRC, Dean of the Automobile Engineering Department of Tsinghua University, Director of the State-level Lab of Automotive Security and Energy-Saving, and concurrently Director of Engine Institute of SAE China and as well as member of the (Electricity-Powered Automobile) Priority Expert Group of the “10th Five-Year Plan” 863 Program; now he is in charge of Independent Director of the Company, Appointed Professor of Cheung Kung Scholars of Ministry of Education of PRC, Dean of the Automobile Engineering Department of Tsinghua University, Director of the State-level Lab of Automotive Security and Energy-Saving, and concurrently Director of Engine Institute of SAE China and as well as member of the (Electricity-Powered 15 Automobile) Priority Expert Group of the “10th Five-Year Plan” 863 Program and standing member of committee of CPPCC National Committee. Mr. Chen Qilong: he has served successively as Independent Director of the Company and General Manager of Wuxi United Small and Medium Enterprises Guarantee Company; and now he is Independent Director of the Company. Mr. Chen Juchang, he has served successively as Independent Director of the Company and President of Wuxi Association of Automobile Manufacturers; he is now in charge of Independent Director of the Company and President of Wuxi Association of Automobile Manufacturers. Mr. Chen Xuejun: he has served successively as Chairman of Supervisory Committee, Secretary of CPC, and Secretary of the Commission for Disciplinary Inspection of the Company; he now took post of Chairman of Supervisory Committee, Secretary of CPC, and Secretary of the Commission for Disciplinary Inspection of the Company. Mr. Li Guodong: he has served successively as supervisor of the Company and General Manager of Investment Management Department of State-owned Assets Investment & Development Corporation of Wuxi Municipality; now he holds the post of supervisor of the Company. Mr. Zhang Jiming: he has served successively as Supervisor of the Company and Senior General of State Investment Machinery and Light Industrial Co., Ltd.; he now holds the post of Supervisor of the Company and Senior General of State Investment Machinery and Light Industrial Co., Ltd. Mr. Ou Jianbin: he has served successively as Chairman of the Board and General Manager of Wuxi Weifu Lida Catalytic Converter Co., Ltd.; now he is in charge of Supervisor of the Company and General Manager of Wuxi Weifu Lida Catalytic Converter Co., Ltd. Mr. You Jianzhong: he has served successively as Supervisor of the Company, Branch Union President of Oil Pump Plant; now he takes the post of Supervisor of the Company, Branch Union President of Oil Pump Plant. Ms. Sun Qingxian: she has served successively as Deputy General Manager and concurrently financial charger of the Company; now she is Deputy General Manager and concurrently financial charger of the Company. Mr. Miao Yuming: he has served successively as Assistant to the General Manager and Deputy General Manager of the Company; he now takes the post of Deputy General Manager of the Company. 16 Mr. Deng Xijiang: he has served successively Supervisor, assistant to General Manager and Deputy General Manager of the Company; now he is Deputy General Manager of the Company. Mr. Zhou Weixing: he has served as Chief Director of Securities Department of the Company; now he is Secretary of the Board and Chief Director of Securities Department of the Company. (2) Position and part-time job in other organ excluding shareholder’s company: Relationship with the Name Position and part-time job organ Title Company Wuxi Weifu Automotive Diesel System Co., Holding subsidiary of Chairman of the Board Ltd. the Company Holding subsidiary of Nanjing Weifu Jinning Co., Ltd. Chairman of the Board the Company Wuxi Weifu Lida Catalytic Converter Co., Holding subsidiary of Chairman of the Board Ltd the Company Xu Liangfei Joint stock company Vice Chairman of the Bosch Automotive Diesel System Co., Ltd. of the Company Board Holding subsidiary of Wuxi Weifu World Trade Co., Ltd Chairman of the Board the Company Zhonglian Automotive Electronic Systems Joint stock company Vice Chairman of the Co., Ltd. of the Company Board Wuxi Weifu Automotive Diesel System Co., Holding subsidiary of Director Ltd. the Company Holding subsidiary of Vice Chairman of the Nanjing Weifu Jinning Co., Ltd. the Company Board Wuxi Weifu Lida Catalytic Converter Co., Holding subsidiary of Director Han Jiangming Ltd the Company Wholly-funded Wuxi Weifu Mashan Fuel Injection subsidiary of the Director Equipment Co., Ltd. Company Joint stock company Bosch Automotive Diesel System Co., Ltd. Director of the Company Wuxi Weifu Automotive Diesel System Co., Holding subsidiary of Director Ltd. the Company Wang Weiliang Joint stock company Bosch Automotive Diesel System Co., Ltd. Director of the Company Holding subsidiary of Director & General Gao Guoyuan Wuxi Weifu World Trade Co., Ltd the Company Manager Wuxi Weifu Lida Catalytic Converter Co., Holding subsidiary of Director Ltd the Company Ge Songping Joint stock company Bosch Automotive Diesel System Co., Ltd. Supervisor of the Company Shi Xingyuan Nanjing Weifu Jinning Co., Ltd. Holding subsidiary of Director 17 the Company Joint stock company Director, General Rudolf Maier Bosch Automotive Diesel System Co., Ltd. of the Company Manager Wholly-funded Wuxi Weifu Chang’an Fuel Injection subsidiary of the Director Equipment Co., Ltd. Company Wuxi Weifu Lida Catalytic Converter Co., Holding subsidiary of Director Ltd the Company Wuxi Weifu Automotive Diesel System Co., Holding subsidiary of Sun Qingxian Director Ltd. the Company Holding subsidiary of Nanjing Weifu Jinning Co., Ltd. Supervisor the Company Wholly-funded Wuxi Weifu Mashan Fuel Injection subsidiary of the Supervisor Equipment Co., Ltd. Company Wuxi Weifu Automotive Diesel System Co., Holding subsidiary of Miao Yuming Director Ltd. the Company Holding subsidiary of Deng Xijiang Wuxi Weifu World Trade Co., Ltd Director the Company Holding subsidiary of Nanjing Weifu Jinning Co., Ltd. Director the Company Chen Xuejun Wuxi Weifu Automotive Diesel System Co., Holding subsidiary of Supervisor Ltd. the Company Wuxi Weifu Lida Catalytic Converter Co., Holding subsidiary of Director, General Ltd the Company Manager Ou Jianbin Joint stock company Wuxi Weifu World Trade Co., Ltd Director of the Company 4. Annual Remuneration for Directors, Supervisors and Senior Executives (1) Procedure and reference of decision-making for directors, supervisors and senior executives: Payments for senior executives of the Company depends on relevant wages and remuneration policy of state and province and performance situation of the Company’s benefit, confirmed referring to measures of assessment on state-owned large and medium enterprise of city government. Annual remuneration was divided into two parts of post wages and wages based on benefits. The former is confirmed by post title and the later is directly connected to economic benefits and paying according to various benefit indexes performance situations. (2) In the report period, there were 10 directors, supervisors and senior executives drew remuneration from the Company and totaled to RMB 2,595,300. (3) In the report period annual allowance of independent directors amounted to RMB 50,000 (After tax), applying for reimburse of traveling charges for attending Board meeting and Shareholders’ General Meeting on fact. 18 5. Changes on Directors, Supervisors and senior executives The Company’s former director Mr. Chen Shaolin changed due to work and resigned his post of director of the Company, the Board of Directors decided to engage Mr. Rudolf Maier as the Director of 5th Board of Directors of the Company to succeed Mr. Chen Shaolin. There were no changes on other director, supervisors and senior executives. II. Staff of the Company 1. Numbers of the staff Dated Dec.31, 2007, the total number of the registered workers of the Company was 2,361. 2. Classification of the staff Unit: Person Classification Number of the staff Percentage (%) Production 1663 70.43 Sales and marketing 146 6.18 Technology 262 11.10 Finance 32 1.36 Administration 160 6.78 Others 98 4.15 Total 2361 100 3. Education degree of the staff Unit: Person Education degree Number of staff Percentage (%) Master and above 23 0.97 Bachelor 191 8.09 Junior college 409 17.32 Technical secondary school 221 9.36 Polytechnic school g 830 35.15 Senior high school and below 687 29.11 Total 2361 100 4. Particulars about the retirees The payments for the retirees are born by the society endowment insurance. 19 Section VI. Administration Structrue I Administration of the Company According to the spirits of Notice(ZJGSZ[2007] No.28)on Issues Concerning Campaign to Strengthen Governance of Listed Companies promulgated by CSRS (hereinafter referred to as Notice) and Notice on Issues Concerning Implement Campaign to Strengthen Governance of Listed Companies in Shenzhen promulgated by Shenzhen Stock Exchange, the Company performed Special Activities of the Company Administration in the report period in accordance with the unified deployment of CSRC Jiangsu Security Regulatory Office and Shenzhen Stock Exchange. (1) Carefully made self-inspection. The Company made self-inspection according to the accessory of Notice issued by CSRC- Issues Concerning Campaign to Strengthen Special Activities of Listed Companies Administration, and confirmed Announcement of Self-inspection Report and Reorganizing Plan Regarding the Special Activities to Enhance Company Administration in Wuxi Weifu Hi-Tech Co. Ltd. and reported it to Jiangsu Security Regulatory Office for approval on Aug.18, 2007. The relevant information appeared in No.2007-14 announcement of the Company-Announcement of Self-inspection Report and Reorganizing Plan Regarding the Special Activities to Enhance Company Administration in Wuxi Weifu Hi-Tech Co. Ltd. (China Securities, Securities Times, Hong Kong Wen Wei Po and Juchao web site http://www.cninfo.com.cn on Aug.19, 2007). (II) Received comments. According to the regulations of Shenzhen Stock Exchange, the Company uploaded the systems for standard operations onto the column for Special Activities of Listed Company in Shenzhen Stock Exchange web site (www.szse.cn), including the emended Articles of Association, Discussion Rules of Shareholders’ Meeting, Discussion Rules of Board of Directors, Discussion Rules of the Supervisory Committee, System of Investors Relation Management, System of Information Disclosure Management, System of collected Funds Management, System of Related Transaction Management, System of Management, Management System of Shares Held by Directors, Supervisors, and Senior Executives and their Changes and Detailed Rules of General Manager’s Working, and received the comments on administration of the Company by investors and publics through special telephone and fax. (III) CRSC Jiangsu Security Regulatory Office inspected the company administration and special activities of company administration, and sent SZJ[2007] No.221-Letter Regarding Comprehensive Evaluation and Reform Suggestion Of the Company Administration in Wuxi Weifu Hi-Tech Co. Ltd. on Oct.9, 2007, which considered that the three meetings of the Company operated normally, and the Board of Directors and Supervisory Committee could keep stable and did not disobey the rules in their tenure; internal control system was basically established and in effect. (IV) Reform of the problem existing in company administration. In the report period, according to the requirements of Notice, the Company has reformed the problem pointed out in Evaluation Suggestion issued by Jiangsu Security 20 Regulatory Office during the self-inspection period and reform issues pointed by Jiangsu Security Regulatory Office. The relevant information appeared in No.2007-19 announcement –Reform Report of the Special Activities in Company Administration in Wuxi Weifu Hi-Tech Co. Ltd. (China Securities, Securities Times, Hong Kong Wen Wei Po and Juchao web site http://www.cninfo.com.cn on Nov.2, 2007) The Company had more recognized the problems existing in company administration after performing the special activities of company administration. Through self-inspection, public comments and reform, the Company could solve the problems including perfecting relevant system of company administration, systematizing the management of investors’ relation and taking effect for a long time, and establishing working system of special committees of Board of Directors, which could make the internal control system of the Company more complete and perfect. II. Duty performance of independent directors Conforming to the requirements by Administration rules of Listed Companies and the Guideline Opinion for Establishing Independent Director System among Listed Companies, the Company has engaged 4 independent directors. In accordance with the requirement of “the Guideline Opinion”, the independent directors of the Company could consciously performed their duties to express independent opinions with regarding to the significant policy decision when attending the board meetings and relevant meetings in 2007. Particulars about independent directors attending the meetings of the Board: Times are Present in Entrusted Name supposed to be Absence Remark person presence attended Zhang Xiaoyu 5 4 1 0 Ouyang Minggao 5 5 0 0 Chen Juchang 5 4 1 0 Chen Qilong 5 5 0 0 Particulars about objection on relevant issues presented by independent director: Contents of the objection Name Issues presented objection Remark presented Zhang Xiaoyu Naught Naught Ouyang Minggao Naught Naught Chen Juchang Naught Naught Chen Qilong Naught Naught III. Separation between the Company and principal shareholders in business, assets, personnel, organizations, and finance 21 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’s not been 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 Wuxi Weifu Group Co., Ltd. 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 tax bu law as well as making financial decisions. 4. Personnel Independence 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 neither directors or general managers recommended by the gonernmental department, nor the engagement and disengagement decision made by the Board of Directors and Shareholders’ General Meeting with intervenor from Wuxi Weifu Group Co., Ltd. and governmental institutions. 5. Organization Independence The Company has its own integrated legal person’s administration structure and daily organized running institutions. IV Self-evaluation report of the Company internal control In the report period, strictly according to the relevant regulations and rules of Notice on Issues Concerning Campaign to Strengthen Governance of Listed Companies promulgated by CSRC (ZJGSZ[2007] No.28) and Guidance To Listed Company Internal Control promulgated by Shenzhen Stock Exchange, following the basic principle of internal control system and its actual situation , the Company established comparatively perfect internal control system, which accord with the requirements of relevant state laws, administrative regulations and department rules. The Company internal control activities cover all the process of production operation, owning scientific and reasonable decision-making, implementing and supervising systems, and could be fulfilled and implemented smoothly. The Company internal control system effectively controlled the risk inside and outside of the Company, which guaranteed normal operations and business activities on the rails, and protected the 22 security and integrity of the Company assets. Compared to Guidance to Listed Company Internal Control promulgated by Shenzhen Stock Exchange, the Company internal control was normative, strict, sufficient and efficient in all aspects such as internal environment, aim setting, issues identifying, risk evaluating, risk countermeasure, control activities, information and communication, inspecting and supervising, and so on, which accord with the relevant requirements of CSRC and Shenzhen Stock Exchange as a whole. The Company will continue perfecting the internal control system and ensure the effective implementation of the internal control system in the future. V Opinions of the Company Supervisory Board on self-evaluation of the Company internal control According to the relevant regulations of Guidance to Listed Company Internal Control and Notice regarding Doing Well the Work of 2007Annual Report of Listed Companies promulgated by Shenzhen Stock Exchange, the Supervisory Committee of the Company expressed opinions on the self-evaluation of the Company internal control system as follows: According to the relevant regulations and rules of CSRC and Shenzhen Stock Exchange, following the basic principle of internal control system and its actual situation, the Company perfected internal control system which included all the process of the Company, guaranteed normal operations and business activities on the rails, and protected the security and integrity of the Company assets. The institution of the Company internal control, internal audit and related personnel was full and complete, which ensured the sufficient and efficient implementing and supervising of the important activities of the Company internal control. In 2007, the Company did not disobey Guidance to Listed Company Internal Control promulgated by Shenzhen Stock Exchange and the Company internal control system. The Supervisory Committee considered: generally speaking, the Company internal control embodied integrality, rationality and validity; self-evaluation of the Company internal control reflected the actual situation of the Company internal control completely, factually and exactly. VI Opinions of the Company Independent Directors on self-evaluation of the Company internal control According to the relevant regulations of Guidance Opinion on Regarding Establishing Independent Directors System Of Listed Companies, Guidance to Internal Control of Listed Companies, Rules Governing Listing of Stock On Shenzhen Stock Exchange and The Article of Association, we carefully read self-evaluation of the Company internal control and realized the relevant information specifically. With the independent standpoint and judgment, and the attitude of being responsible for the Company and all the shareholders, we express independent opinion on self-evaluation of the Company internal control after discussing as follows: The Company had basically established perfect internal control system, and formed internal control system with the base of the Company business control system, 23 accounting system control system, internal audit control system, information system control system and environment control system. The internal control system could adapt the requirement of the Company management and the demand of the Company development, provide reasonable assurance of compiling true and fair financial statement, and provide assurance of normal operation of all business activities and implementation of the relevant state laws and regulations and the Company internal rules and regulations. The Company internal control of subsidiary companies, related transaction, external guarantee, the use of raised funds, important investment and information disclosure was strict, sufficient and efficient, guaranteed the Company business management on the rails and had rationality, integrality and validity. The self-evaluation of the Company internal control made by Board of Directors accorded with the actual situation of the Company internal control. VII Performance Assessment, Incentive Mechanism and implementation on senior executives by the Company The Company democratically conducted the performance assessments for its senior executives with emphasis on the innovation and working results. The payment was confirmed by the assessing result. Section VII. Particulars about Shareholders’ General Meeting In the report period, the Company held one shareholders’ general meeting and the details are as follows: On May 22nd of 2007, the Company held Annual Shareholders’ General Meeting 2006. The public notice of resolutions of the meeting has been published on Securities Times, China Securities, Hong Kong Wen Wei Po and Juchao website (www.cninfo.com.cn) dated May 23rd of 2007. Section VIII. Report of the Board of Directors I. Discussion of the Board of Directors (I) Review on operations in the report period 1. In 2007, the commercial vehicle which takes diesel as power material presents rapid growth after experiencing the steady development in 2006, which brought new opportunity to production and operation of the Company. In order to ensure the sustainable and steady development of the Company, the board of directors carried out arrangement in time, adjusted products structure of the Company and reasonably allotted various production elements, overcame the disadvantages arising from the rising material price and increase in financial expense so as to maintain comparatively stabilization of the performance of the Company. 2. Particulars about main business and operations of the Company The Company belongs to machinery manufacturer enterprise, mainly engaging in 24 production and sales of diesel & fuel oil injection system products. The Company realized revenue from main business and profit from main business respectively amounting to RMB 3,121,339,000 and RMB 286,053,000 in the full year, increased by 16.91% and 106.33% respectively over the same period of last year, and realized net profit attributable to parent company with RMB 230,428,300 and increased by 147.48% over the same period of last year. That revenue from operation increased by 16.91% was because Wuxi Weifu Automotive Diesel System Co., Ltd, a subsidiary in consolidated statement, increased revenue from operation. That profit from business increased by 106.33% was because Wuxi Weifu Automotive Diesel System Co., Ltd increased in profit from main operation and investment income. Net profit attributable to parent company increased by 147.48% was due to: ① increase in total operation revenue; ② increase of investment income that Bosch Automotive Diesel System Co., Ltd. invested by the Company has turned to make profit from its original situation-loss. (1) Main operations classified according to products Unit: RMB’0000 Increase/d Increase/de Increase/d ecrease in crease in ecrease in income cost of gross Gross from operation profit Income from Cost of profit operation Items over the ratio over operation operation ratio over the same the same (%) same period the period the period of last year last year last year (%) (%) (%) Fittings and accessories of internal 269,340.19 202,709.47 24.74% 18.60% 20.69% -1.30% combustion engine Catalyst and 13,393.44 11,945.57 10.81% -36.27% -29.51% -8.56% muffler (2)Formation of main operations and its market share Unit: RMB’0000 Income from main Market share Categories Place in the industry operations (%) PS 7100 69,403.00 46.14 1 PW 2000 35,456.77 PW pump 18,307.29 32.04 2 VE pump 52,577.73 100.00 1 25 A pump 15,413.06 47.83 1 I pump (including PL, IW and PM 33,013.51 40.82 1 pump) Single plunger 6,581.26 28.07 2 pump Injector 11,062.58 15.82 2 Precision pump 17,128.03 25.81 1 parts Data Source: Statistics Association of China’s Machinery Industry, Fuel Injection Sub-branch (2007) Statistical Data Collection in Fuel Injection Equipment Industry. (3) Main suppliers and customers Unit: RMB’0000 The total purchase amount Accounting for total 102,309.08 50.79％ from the top five suppliers purchase amount % The total sales amount to the Accounting for total 145,867.81 46.73％ top five customers sales amount % 3. Explanation on assets composition and material change in items of profit statement in the report period (1)Account receivable: amount at period-end amounting to RMB 562,205,600, decreased 86,118,100 over period-begin, mainly because subsidiary Wuxi Weifu Automotive Diesel System Co., Ltd. in consolidated statement decreased account receivable at period-end compared with period-begin. (2) Note receivable: amount at period-end amounting to RMB 647,047,800, increased 194,154,400 over period-begin, mainly because the Company and its holding subsidiary Wuxi Weifu Automotive Diesel System Co., Ltd increased payment by note settlement. (3) Other accounts receivable: amount at period-end amounting to RMB 62,037,400, increased 52,880,700 over period-begin, mainly because of the investment to Wuxi Weifu International Trade Co., Ltd, borrowing to Wuxi Autocam Precise Machinery Co., Ltd and increased payment for goods of Bosch Automotive Diesel System Co., Ltd. (4) Long-term equity investment: amount at period-end amounting to RMB 900,814,300, increased RMB 133,361,400 over period-begin, mainly because of the increase of investment income from Bosch Automotive Diesel System Co., Ltd and Wuxi Weifu Environmental Protection Co., Ltd. (5) Construction in progress: amount at period-end amounting to RMB 119,578,300, increased RMB 33,262,200 over period-begin, because the construction in progress 26 has been turned into fixed assets. (6) Accounts payable: amount at period-end amounting to RMB 639,816,300, increased RMB 90,881,700 over period-begin, because subsidiary Wuxi Weifu Automotive Diesel System Co., Ltd in consolidated statement and the parent company increased accounts payable. (7) Total operating cost: amount at this report period amounting to RMB 2,971,553,500, increased RMB 464,617,800 over the same period of last year with an increase rate of 18.53%, mainly because the total operating income increased. (8) Sales expense: amount at this report period amounting to RMB 104,410,900, decreased RMB 17,258,000 over the same period of last year with a decrease rate of 14.18%, mainly because of the decrease of the subsidiary in consolidated statement-Wuxi Weifu Automotive Diesel System Co., Ltd. (9) Administration expense: amount at this report period amounting to RMB 278,545,800, increased RMB 36,835,800 over the same period of last year with an increase rate of 15.24%, mainly because of the increase in administration expense of Nanjing Weifu Jinning Co., Ltd. (10) Financial expense: amount at this report period amounting to RMB 91,804,100, increased RMB 28,495,400 over the same period of last year with an increase rate of 45.01%, mainly because of the rising of interest rate for taking loan from bank and the change in exchange rate as well. (11) Investment income: amount at this report period amounting to RMB 136,267,400, increased RMB 160,648,500 over the same period of last year, mainly because Bosch Automotive Diesel System Co., Ltd.(the Company holds 31.50% equity of it) has turned to make profit from its original situation-loss in 2007. 4. Material changes in cash flow composition in the report period (1) Net cash flow arising from operation activities: amounting to RMB 204,317,0 00 but amounted to RMB 406,031,600 in last year, and RMB 201,714,600 flowed out, which was mainly owing to the great increase in notes receivable of the parent company and the holding subsidiary- Wuxi Weifu Automotive Diesel System Co., Ltd. (2) Net cash flow arising from investment activities: amounting to RMB -76,270,100, but amounted to RMB -183,359,500 in last year and RMB 107,089,4 00 flowed in, which was mainly due to the decrease of fixed asset investment and increase in cash received from investment income. (3) Net cash flow arising from financing activities: amounting to RMB -174,331,600, but amounted to RMB -190,479,800 in last year and RMB 16,148,200 flowed in, mainly due to paying back the partial loans of bank. (4) Net increase in cash and cash equivalents: amounting to RMB -46,284,700, but amounted to RMB 32,192,200 in last year, this was mainly due to the cash flow arising from operation activities decreased. 5. Utilization of equipments, obtain of orders, sales or overstock of products and change of technology personnel 27 (1) In the report period, production equipments worked well and operating factor of main equipments was up to 95%. (2) In the report period, the products inventory of the Company increased RMB 33,214,100 over period-begin. (3) In the report period, technology personnel of the Company remain unchanged. 6. Operation status of main holding company and share-holding 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 346.2868 million. At the end of year 2007 its total assets amounted to RMB 695,257,900 and its net profit was RMB 41,172,300 in 2007. (2) Wuxi Weifu Lida Catalytic Converter Co., Ltd., 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 2007, its total assets amounted to RMB 337,015,600 and its net profit was RMB 22,100,600 in 2007. (3) Bosch Automobile Diesel System Co., Ltd., whose 31.5% equity was held by the Company, It was mainly engaged in the production of electrical control diesel oil system series, and P and S series injectors and nozzles with registered capital amounting to USD 200 million, total asset amounting to RMB 3,499,570,900 at the end of 2007, and it realized net profit amounting to RMB 120,787,100 in 2007. (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. Total capital amounted to RMB 1,224,357,400 at the end of 2007 and its net profit was RMB 302,558,500 in 2007. (5) Wuxi Weifu Automotive Diesel System Co., Ltd., whose 70% equity was held by the Company, was mainly engaged in the production of diesel oil and fuel oil system series products, with registered capital amounting to RMB 300 million. At the end of 2007, its total assets amounted to RMB 1,075,499,500 and its net profit was RMB 88,508,800 in 2007. (II) Outlook on future development of the Company 1. Analysis on industry trends The Company belongs to machinery manufacturer enterprise, its products fuel injection system is core part of diesel automotive engine, is typical technology-intensive and capital-intensive industry. At present, comprehensive market share of products of the Company accounting for 50% or so. With gradually strict of the state’s emission regulations and real demand of energy saving, bring new opportunity for development of the Company. Due to existing in the upgrading stage of industry technology platform, the said industry still remains at the converting phase from the national Emission level II to level III in 2008. 2. Future developing strategy of the Company 28 According to arrangement of implementation of the state’s emission regulations and real demand of energy saving, it is estimated that China would perform nation’s No.III Emission Regulation in Jul, 2008. The Company started to fully cooperate with German Bosch in order to meet implementation of the nation’s No.III Emission Regulation and demand of energy saving in 2004, establish joint stock enterprise, to produce products satisfying the nation’s No.III Emission Regulation or above, at present, investment and various technologies have all been set and put into market in small batches. Through cooperation with Bosch Corporation, the Company’s own technology platform also obtained upgrading, shortening the distance with international Multinational Corporation and laying the foundation for further development of the Company. 3. Capital demand for future development of the Company, financing and utilization plan Because projects of future development of the Company had been put in, there is no capital demand in the near future, capitalized expenses in every year could be solved through its own accumulation; nowadays the Company establishes close relationship with bank so that current capital demanding for production could be completely solved through bank. 4. Risks existed in future development Fuel injection system industry is severely influenced by nation’s policy, especially the national macro adjustment and control as well as automotive industry. The continuous rising of the raw material increased the cost of the Company and influenced the operation achievements of the Company. The rising of interest rate for bank loan, and expectation of the continuous adding in interest and change in exchange rate all add cost for the Company’s financing activities, which directly influences the financial expense of the Company. According to the aforesaid risks and disadvantages, the Company took the following measures: (1) In regarding of the changes of the national policy, the Company will strengthen the analysis to the tendency of the changes of the national macro-policy, timely grasp the policy guide and establish the correspondent countermeasures. Transform the marketing idea, strengthen the quality senses, and strive for winning customers with high quality products and service. (2)Strengthen the internal management and improve the economic profit by improving quality of products, cutting down material consume and carrying out activities for cutting down cost and saving expenditure. (3)Perfect the product designing, further reduce the energy consumption to meet the demands on energy-saving of the customer on the basis of improving the reliability of products. II. Investment of the Company During the report period, the Company has totally poured RMB 152,030,300 for investment in technology reform and external investment. 1. Application of raised proceeds 29 In the report period, the Company has not carried out financing activities. The previously raised proceeds have all been used in the relevant investment projects approved by the shareholders’ general meetings. 2. Investment with the non-raised proceeds During the report period, the investment with the non-raised proceeds is as follows: (1) Project of nationalization of components of Bosch automobile, the total investment amounted to RMB 120 million, the accumulative investment amount made in this report period reaches at RMB 92.5 million. (2) Project of in-line pump measure, the total investment amounted to RMB 25 million, the accumulative investment amount made in this report period reaches at RMB 16.9306 million. (3) Project of electrical high-pressure pump matched with Bosch, the total investment amounted to RMB 12.5 million, the accumulative investment amount made in this report period reaches at RMB 8.4377 million. (4) Increase investment in Wuxi Weifu Autocam Precise Machinery Co., Ltd. With the development of set business, the two related parties decided to increase investment with the same proportion. The registered capital is increased to USD 10 million from the original USD 6 million, with USD 2 million investment increased by the Company. The accumulative investment amount made in this report period reaches at USD 1.19 million (converting to RMB 9.162 million). (5) Increase investment in Wuxi Weifu International Trade Co., Ltd by the Company alone. The registered capital is increased to RMB 30 million from the original RMB 5 million. With that, the equity share held by the Company will turn to85.833% from the original 15%. The accumulative investment amount made in this report period reaches at RMB 25 million. III. Routine work of the board of directors (I) Meetings and resolutions of the board of directors 1. On Apr 16th of 2007, the board of directors of the Company held the 8th meeting of the 5th board of directors, and the contents of the meeting has been published respectively on China Securities, Securities Times, Hong Kong Wen Wei Po and Juchao website (www.cninfo.com.cn) dated Apr 18th of 2007. 2. On Aug 15th of 2007, the board of directors of the Company held the 9th meeting of the 5th board of directors, and the contents of the meeting has been published respectively on China Securities, Securities Times, Hong Kong Wen Wei Po and Juchao website (www.cninfo.com.cn) dated Aug 17th of 2007. 3. On Oct 24th of 2007, the board of directors of the Company held the 10th meeting of the 5th board of directors, and the contents of the meeting has been published respectively on China Securities, Securities Times, Hong Kong Wen Wei Po and Juchao website (www.cninfo.com.cn) dated Oct 26th of 2007. 4. On Nov 1st of 2007, the board of directors of the Company held the provisional meeting, and the contents of the meeting has been published respectively on China Securities, Securities Times, Hong Kong Wen Wei Po and Juchao website (www.cninfo.com.cn) dated Nov 2nd of 2007. 30 5. On Dec 26th of 2007, the board of directors of the Company held the provisional meeting, and the contents of the meeting has been published respectively on China Securities, Securities Times, Hong Kong Wen Wei Po and Juchao website (www.cninfo.com.cn) dated Dec 28th of 2007. (II) Implementations of resolutions of the Shareholders’ General Meeting The proposal of distribution of bonus and dividend confirmed by 2005 Annual Shareholders’ General Meeting was implemented completely on Aug 7th of 2006. (III) Duty performance of the Audit Committee of the Board 1. The Audit Committee of the Board of the Company examined the financial statements prepared by the Company before the entrance of the certified public accountant for annual audit, and issued the written opinion in which they expressed that: the preparation of the 2007 financial statements (initial one) of the Company was in strict accordance to the new accounting standard and truthfully reflected the financial condition and operation achievement of the Company in 2007. After the certified public accountant issued the initial opinion, the Audit Committee examined the financial accounting statement (first audit) and presented with written opinion which assured that the preparation of the 2007 financial statements (initial one) of the Company was in strict accordance to the new accounting standard and truthfully reflected the financial condition and operation achievement of the Company in 2007. 2. After the certified public accountant has entered for audit, the Audit Committee and the certified public accountant negotiated and confirmed the time schedule for the annual audit of the financial statements of the Company. Moreover, it continuously strengthened the negotiation with the certified public accountant and urged him to present the audit report in the agreed time by way of letter of supervision and urge. 3. The Audit Committee handed in the summary for the audit work of the certified public accountant Co., Ltd and the resolution on renewal of the cooperation relationship with the certified public accountant Co., Ltd in the next year. It holds that: as the 2007 annual audit organization of the Company, Jiangsu Gongzheng Certified Public Accountants Co., Ltd could be earnest, responsible and honest to implement their responsibility of audit; through execution of the audit work, they objectively evaluated the financial condition and operation achievement of the Company; independently issued audit opinion according to the business regulation, qualified criterion and moral principle. It was suggested to re-engage Jiangsu Gongzheng Certified Public Accountants Co., Ltd as the audit organization of the Company for 2008. (IV) Duty performance of the Remuneration and Examination Committee 1. The 5th meeting of the Remuneration and Examination Committee was held on Nov 23rd of 2007 by way of non-spot. The following proceeding has been examined and approved in this meeting: The 2006 Proposal on Encashing the Annual Salary Examination of the Senior 31 Executives of the Company was examined and approved in this meeting; 2. Referring to the examination opinion on the remuneration of the directors, supervisors and senior executives of the Company in the report period, the annual remuneration (before taxed) of the directors, supervisors and senior executives of the Company disclosed in the 2007 annual report, which covers the basic salary, bonus, allowance, welfare of employee, various insurance premium, public reserve, annual bonus and remuneration received from the Company in other way, is the same to the remuneration they actually receive. IV. Profit distribution preplan of 2007 The data offered by Jiangsu Gongzheng Certified Public Accountants Co., Ltd on the 2007 audit of the Company: the consolidated net profit of the Company amounts to RMB 266.03 million, among which RMB 230.43 million goes to the net profit attributable to owners of parent company, RMB 35.6 million for minor shareholders equity. Net profit of the parent company is RMB 192.03 million. According to the regulations of the Article of Association, the parent company should take 10% of its net profit for withdrawing legal surplus public reserve which is RMB 19.2 million. After that, the profit available for distribution for the shareholders is RMB 172.83 million for the current year. According to the new accounting standard, the undistributed profit of the previous years reaches at RMB 201.7 million after the retroactive adjustment. In this report period, the profit for distribution for 2006 has been cashed with RMB 34.04 million, so at the end of 2007, the rest undistributed profit of the parent company amounts to 340.49 million. According to the commitment on dividend made in the share merger reform of the Company, the 2007 profit distribution preplan is: take 50% of RMB 172.83 million, the rest profit available for distribution of 2007, for profit distribution to shareholders. The Company plan to take the total shares at the end of 2007 amounting to 567,275,995 as the cardinal number, and distribute 1.53 (tax included) cash bonus for every 10 shares held by all the shareholders, so totally RMB 86.79 million dividends has been sent out. V. Explanation on fund occupation made by the holding shareholders and other related parties of the Company in 2007 issued by Jiangsu Gongzheng Certified Public Accountants Co., Ltd. All the shareholders of Weifu High Technology Co. Ltd., We accepted entrustment to examine 2007 Financial Report for Weifu High Technology Co. Ltd (hereafter Weifu High Technology for short). Special explanation of occupying capital of Weifu High Technology’s holding subsidiaries and other related parties can be used in supplementary analysis. This is not part of financial report but according to supplementary information offered in regulation of Notice of China Securities Regulatory Commission and the State-owned Assets Supervision and Administration Commission of the State Council Concerning Some Issues on Regulating the Funds between Listed Companies and Associated Parties and Listed 32 Companies’ Provision of Guaranty to Other Parties No. 56 [2003] Promulgated by CSRS. Weifu High Technology’s responsibility is to implement and offer authentic, legal and complete financial documents and other information in accordance with above notices, and our responsibility is to offer special explanation to above requirements, on the basis of implementation of annual report examination. Capital exchanges of Weifu High Technology with its holding subsidiaries and other related parties in year 2007: I. Relationship of related parties existing capital exchanges Related parties Related relationship Wuxi Weifu International Trade Co., Ltd. The same parent company Wuxi Weifu Trade Co., Ltd. The same parent company Joint venture of its holding Kunming Xitong Machinery Co., Ltd. shareholder Holding subsidiary of Wuxi Weifu Automobile Diesel System Co., Ltd. consolidated report Wuxi Weifu-Autocam Precision Machinery Co., Ltd. Joint venture Wuxi Weifu Precision Machinery Manufacturing Co., Cooperated enterprise Ltd. II. Capital exchanges with its holding subsidiaries and other related parties Through checking, details of capital exchanges with above companies can be seen in attachments. Wuxi Weifu International Trade Co., Ltd is founded with capital from Wuxi Weifu Group Co. Ltd., Weifu High Technology, Wuxi Weifu Lida Catalytic Converter Co., Ltd (holding subsidiary of Weifu High Technology). Wuxi Weifu Group Co. Ltd. paid RMB 2.75 million accounting 55% of the registered capital; Weifu High Technology paid RMB 0.75 million accounting 15% of the registered capital; and Wuxi Weifu Lida Catalytic Converter Co., Ltd paid RMB 1.5 million accounting 30% of the registered capital. According to extraordinary solution in Dec. 2007 of Weifu High Technology, the company added RMB 25 million solely to Wuxi Weifu International Trade Co., Ltd, and paid this ended Dec. 2007. Because Wuxi Weifu International Trade Co., Ltd had not finished related administration change registration for added capital, the added capital was put into exchange account. Wuxi Weifu International Trade Co., Ltd finished dministration change registration for added capital in March 2008, with registered capital of RMB 30 million. Weifu-Autocam is a joint venture of Weifu High Technology Co. Ltd, founded by the Company and American Autocam. Because expanding of the company is very fast and the development capital demand is rather great, the company borrowed RMB 6,000,000 from Weifu High Technology Co. Ltd and has returned that in March of 2008 with the bank loan interest at the same period. Through examination, we haven’t found the existing following behaviors in Weifu High Technology Co. Ltd, except for the mentioned matters: Expenses of paying salary, welfare, insurance, advertisement for its holding 33 shareholders and other related parties, costs and other expenses ; Splitting and lending capital to holding shareholders and other related parties compensational or not; Offering entrusted loan to related parties through bank or non banking financial organizations; Entrusting holding shareholders and other related parties to have investment activities; Giving bank acceptance bills without authentic transaction background to its holding shareholders and other related parties; Paying back debts in place of its holding shareholders and other related parties. The special explanation is only to know the use of occupied capital of Weifu High Technology’ shareholders and other related parties, and this could not be used for any other purposes. Results occurred by inappropriate use has nothing with certificated accountants and certified public accountants of the examination business. In order to know the capital occupation of Weifu High Technology’ shareholders and other related parties better, consolidated statement on fund occupancy made by the holding shareholders and other related parties of the Company in 2007 is attached for reading. Attachment: Consolidated statement on fund occupancy made by the holding shareholders and other related parties of the Company in 2007 Jiangsu Gongzheng Certified Public Accountants Co., Ltd. Wuxi·China April 13, 2008 34 Consolidated statement on fund occupancy made by the holding shareholders and other related pa Acc Accumulated occurrence Interest Accounting Balance of Related relation for the of occ item occupied fund Non-operating fund between fund occupation of Fund occupier calculated by at the occupied occupancy occupier and listed 2007(interest listed period-begin fund in ret company of occupied company of 2007 fund 2007 ba excluded) 2 Other Wuxi Weifu International With the same parent Present big shareholders and accounts 2,500.00 Trade Co., Ltd company their subsidiary enterprise receivable Subtotal - 2,500.00 - Original big shareholders and their subsidiary enterprise Subtotal - - - - Accumulated Acc occurrence Interest Accounting Balance of Related relation for the of item occupied fund occ Other related capital between fund occupation of Fund occupier calculated by at the occupied exchange occupier and listed 2007(interest listed period-begin fund in company of occupied company of 2007 ret fund 2007 excluded) ba 35 2 Accounts With the same parent Wuxi Weifu International receivable, 24.91 4,833.63 4,8 company Trade Co., Ltd etc. Big shareholders and their Accounts With the same parent subsidiary enterprise receivable, 14.73 512.44 4 company Wuxi Weifu l Trade Co., Ltd etc. Kunming Xitong Machinery Joint venture of Accounts 592.14 6,938.06 6,0 Co., Ltd holding shareholders receivable Subtotal 631.78 12,284.13 - 11, Other accounts Holding subsidiary 767.56 671.63 1,4 Wuxi Weifu Automobile receivable, Diesel System Co., Ltd etc. Other Joint venture accounts 600.00 Subsidiary of listed company Wuxi Weifu Autocam Precise company receivable, and its subsidiary enterprise Machinery Co., Ltd etc. Other accounts Affiliated company - 37.53 3 receivable, Wuxi Weifu Precise Machinery etc. Manufacture Co., Ltd Subtotal 767.56 1,309.16 - 1,4 36 Related natural person and the legal person controlled by him Subtotal - - - - Other related parties and the subsidiary enterprise Subtotal - - - - Total 1,399.34 13,593.29 - 12, Jiangsu Gongzheng Certified Public Accountants Co., Ltd Certified Pu Wuxi, China Jin Zhanglu April 13, 2008 Liu Darong 37 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 5th meeting of the 5th Supervisory Committee was held on Apr.16, 2007 and the examined topics were Work Report of the Supervisory Committee 2006, 2006 Annual Report of the Company and its Summary, Report of Financial Settlement and Profit Distribution Preplan for 2006 of the Company, Proposal Report of Predicted Related Routine Transaction Amount and the 1st Quarterly Report in 2007 of the Company; 2. The 6th meeting of the 5th Supervisory Committee was held on Aug.15, 2007 and the examined topics were Interim Report in 2007 of the Company and its Summary, Interim Profit Distribution Preplan 2007 of the Company, and Report of Self-inspection and Change Plan on Strengthening Governance for Listed Companies. II. Independent opinion expressed by the Supervisory Committee for the following events: 1. Operations according to law. The Supervisory Committee believed that every decision-making procedure of the Company in the report period had been in accordance with laws, regulations and Articles of Association. While the Company’s directors and senior executives executed authorities, there found neither behavior of breaking laws, regulations and Articles of Association nor abusing authorities and damaging the interest of the Company and the Shareholders. 2. Check of the Company’s financial status. 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 believed that the financial report in every period reflected objectively and truly the financial situation and operation result of the Company. 3. Related transactions. The Supervisory Committee believed that the related transaction occurred in the report period had been conducted according to the Related Transactions Agreement signed between Wuxi Weifu Group Co., Ltd and the Company, and through the approval of the Shareholders’ General Meeting, related transactions could reflect the principle of market trading without doing harm to the interest of the Company. 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. Particulars on sharing security and insurance companies: Proportion Initial Gains and Financial Name of the party Amount held in equity of Book value at Share investment losses in calculation held (Share) the period-end source amount report period item Company Guolian Securities Long term Subscri 12,000,000.00 12,000,000 1.20% 12,000,000.00 6,960,000.00 Co., Ltd. investment ption Nanjing Hengtai Insurance and Long term Subscri 1,000,000.00 1,000,000 1.85% 1,000,000.00 10,000.00 Broker Securities investment ption Co., Ltd. Jiangsu HSBC Long term Subscri Insurance Agents 500,000.00 500,000 10.00% 500,000.00 0.00 investment ption Limited Total 13,500,000.00 13,500,000 - 13,500,000.00 6,970,000.00 - - 39 IV. The related transactions between the Company and its first largest shareholder, Wuxi Weifu Group Co., Ltd. in 2007 Unit: RMB’0000 Items Transaction amount in 2007 Transaction amount in 2006 Purchase of goods 731.40 899.50 Sales of goods 22,443.10 19,476.80 Purchase of fixed assets 959.10 809.30 Land and trademark fees 651.90 464.70 Guarantee amount for the loans of Company and 10,000.00 17,000.00 subsidiaries 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. V. Significant contracts and implementation 1. In the report period, the Company had no entrustment, contracting or leasing from other companies; or other companies had no entrustment, contracting or leasing from the Company; 2. In the report period, the Company provided guarantee amounting to RMB 60 million for its controlling subsidiary Nanjing Weifu Jinning Co., Ltd, provided guarantee amounting to RMB 80 million for its controlling subsidiary Wuxi Weifu Chang’an Fuel Injection Equipment Co., Ltd., provided guarantee amounting to RMB 37 million for its controlling subsidiary Wuxi Weifu Mashan Fuel Injection Equipment Co., Ltd., and provided guarantee amounting to RMB 15 million for its controlling subsidiary Wuxi Weifu Lida Catalytic Converter Co., Ltd.; thus the total amount for guarantee the Company provided was RMB 192 million, and there was no guarantee breaking the rule. 3. In the report period, the Company did not entrust others to conduct management of cash and assets. VI. Commitment events of the principal shareholder The principal shareholders holding over 5% equity of the Company had no commitment events except share merger reform commitments in the report period or lasting to the report period. VII. Engagement and disengagement of Certified Public Accountants In the report period, Jiangsu Gongzheng Certified Public Accountants Co., Ltd. was reengaged as auditing institutions of the Company in 2007. And the auditing expense of 2007 (all expenses) for Jiangsu Gongzheng Certified Public Accountants Co., Ltd. was RMB 800,000 and this CPA had provided services for the Company for 16 years. According to Notice of China Securities Regulatory Commission on the Relevant Issue about the Auditing of the Companies That Issue the Domestically Listed B-shares in Foreign Currencies(No. 30 [2007] of China Securities Regulatory Commission), along with the implementation of new accounting and auditing guidelines, China’s accounting and auditing standards have achieved substantial convergence with international accounting and auditing standards. In view of this situation, the requirements in relevant information disclosure provisions promulgated by this Commission that a company which issues the domestically listed B-shares in foreign currencies shall carry out the overseas auditing when hiring an accounting firm with the securities or futures 40 business. Through negotiation and agreement with Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd., the Company will not engage it as the overseas Accountants Co., Ltd. for auditing. VIII. In the report period, the Company, its Board of Directors and directors received no inspection and administrative penalty by CSRC, criticism by circulating a notice by CSRC, or public condemnation by Shenzhen Stock Exchange. IX. Relevant Particulars about the Receptions of the Company on Investigation and Interview In order to further regulate the actions of information disclosure of listed companies, the Company received investigation and media interview with criterion and in strict accordance with relevant regulations of Guidance for Information Disclosure of Listed Companies formulated by Shenzhen Stock Exchange and Management System of Investor Relations of the company. In the report period, the Company respectively received the investigation and interview from investors in some institutions such as fund companies, securities companies, insurance companies, etc. and common investors; meanwhile, the company communicated adequately with vast investors through forms of investor consultative calls, the interactive platform of investor relations, etc. and answered the questions the investors raised seriously, accurately and timely. During the reception, both the Company and relevant person for information disclosure, in strict accordance with relevant laws and regulations and related provisions of Information Disclosure Measure of the Company, followed the fair, open and just principle, without implementing discriminated treatment and without disclosing, revealing or betraying non-public and significant information selectively and privately to specific objects, and received 300 visiting investors all the year. Registration form for receiving research, communication and interview in the report period: Contents discussed and Date Place Way The received parties materials supplied Bank of Communications Reception room of Spot Scheroders Fund Operation status and future Jan.16, 2007 the Company research Management Company development of the Company Limited China International Reception room of Spot Operation status and future Jan.24, 2007 Capital Corporation the Company research development of the Company Limited Reception room of Spot Fudun Assets Management Operation status and future Jan.31, 2007 the Company research Co., Ltd. development of the Company Reception room of Spot Fullgoal Fund Operation status and future Feb.6, 2007 the Company research Management Co., Ltd. development of the Company Reception room of Spot Operation status and future Mar.7, 2007 China Securities Co., Ltd. the Company research development of the Company Reception room of Spot Operation status and future Mar.13, 2007 Liuhe Investment Co., Ltd. the Company research development of the Company Guotai Jun’an Reception room of Spot Consultation Operation status and future Mar.20, 2007 the Company research Services(Shenzhen) Co., development of the Company Ltd. Shenzhen Rongzhe Reception room of Spot Operation status and future Apr.4, 2007 Enterprises Consultant the Company research development of the Company Co., Ltd. Everbright Pramerica Reception room of Spot Operation status and future Apr.11, 2007 Fund Management Co., the Company research development of the Company Ltd. Reception room of Spot Orient Fund Management Operation status and future Apr.20, 2007 the Company research Co., Ltd. development of the Company 41 Reception room of Spot American GE Asset Operation status and future May 10, 2007 the Company research Management Co., Ltd. development of the Company Conference room of Spot 36 Fund Managers and Operation status and future May 22, 2007 the Company research shareholdes from E Fund development of the Company Reception room of Spot Fortis Haitong Investment Operation status and future Jun.5, 2007 the Company research Management Co., Ltd. development of the Company Jun.13, 2007 Reception room of Spot Guotai Fund Management Operation status and future the Company research Co., Ltd. development of the Company Reception room of Spot Operation status and future Jun.20, 2007 Rixin Securities Co., Ltd. the Company research development of the Company CITIC-Prudential Fund Reception room of Spot Operation status and future Jun.27, 2007 Management Company the Company research development of the Company Ltd. Reception room of Manager of ICBC Credit Spot Operation status and future Sep.15, 2007 the Company for Sunrise Asset research development of the Company Investors Management Co., Ltd. Reception room of 11 organizations such as Spot Operation status and future Sep.17, 2007 the Company for Orient Securities Co., Ltd., research development of the Company Investors etc. Reception room of Industrial Security, China Spot Operation status and future Nov. 6, 2007 the Company for Universal Asset research development of the Company Investors Management etc. Reception room of Six fund companies of the Company for Spot China Jianyin Investment Operation status and future Nov. 15, 2007 Investors research Securities, United Bank of development of the Company Switzerland etc. Reception room of Spot Shandong Entrust and Operation status and future Nov. 21, 2007 the Company for research Investment Company development of the Company Investors Reception room of Spot Operation status and future Dec. 4, 2007 the Company for Citic Security, Bosch Fund research development of the Company Investors Reception room of Spot Operation status and future Dec. 5, 2007 the Company for United Security Company research development of the Company Investors Reception room of Spot Operation status and future Dec. 10, 2007 the Company for Morgan Stanley research development of the Company Investors Reception room of Spot Dacheng Fund Operation status and future Dec. 12, 2007 the Company for research Mangement Co., Ltd. development of the Company Investors Reception room of Spot Operation status and future Dec. 17, 2007 the Company for CLSA research development of the Company Investors Reception room of Fortis Haitong Spot Operation status and future Dec. 18, 2007 the Company for InvestmentManagement research development of the Company Investors Co., Ltd. 42 X. Special commitments made by original non-circulating shareholder in process of Share Merger Reform and its implementation: Name of Special commitment Implementation shareholders 43 Wuxi Weifu I. Commitment on additional deliver shares Weifu Group which participated the Share Merger Reform has committed: after Group Co., implementation of share reform, if its operation performance could not reach to Ltd. the planned target, Weifu Hi-tech would additionally deliver shares one time to A-share circulating shareholders (the said commitment would cease to be in force till additional-deliver ended). i. Activating condition of additional deliver shares: 1. according to audited annual financial report of Weifu Hi-tech, its total net profit realized in 2006 and 2008 is less than RMB 0.85 billion (because in 2006 and 2007 automotive effluent standards exists in turning zone as well as Bosch Automotive Diesel System Co., Ltd. exists in losses turning into profit in input period, it is difficult to predict the large margin growth point of the Company’s performance, and operation performance in 2006 exists uncertainty); or 2. Weifu Hi-tech’s net profit realized in 2008 would be less than RMB 0.34 billion; or 3. Any annual financial report from 2006 to 2008 of Weifu Hi-tech would be issued auditing opinion except Qualified Opinion. ii. Amount of shares additional delivered: based on circulating A shares before the share reform, arranging value of delivering 0.5 share per 10 shares, additionally deliver totaled 14,040,000 shares. If there exist bonus, capitalization of share It did not reach the equity or share impairment in Weifu Hi-tech, deliver shares volume comparably conditions of increase or decrease; if the Company’s share equity changed due to additional implementation. deliver, allot, convertible bonds and certificate, etc. so as to comparably change in share equity of original non-circulating and circulating shareholder, so additional arranged value totaling 14,040,000 shares remained unchanged. iii. Date of shares additional delivered: within 20 days after approval of Weifu Hitech Annual Report in the year of activating condition of additional deliver shares by shareholders’ general meeting, Weifu Group would implement commitment of additional deliver according to related process. iv. Target of shares additional delivered: all unrestricted circulating A-share shareholders of the Companies registered in the registration date of additional deliver share and equity after Weifu Hi-tech Annual Report in the year of activating condition of additional deliver shares is disclosed. v. Implementing guarantee for commitment of shares additional delivered: within expiry date of the said commitment of shares additional delivered, Weifu Group would authorize Shenzhen Stock Exchange and Registering & Clearing Corp. to provisionally safekeep non-circulating shares amounting to 14,040,000 shares which used to implement guarantee for commitment of shares additional delivered and held from Weifu Hi-tech since the date of implementation of Share Merger Reform, and technically guarantee perform the above commitment. II. Commitment on restricted period and the lowest price for shares held impairment Non-circulating shares of Weifu Hi-tech held by Weifu Group could not listed or transferred within 60 months since possessing of listing right. After the expiry of The said commitment is the commitment period, original non-circulating shares would be listed for sale in implementing and there is no Shenzhen Stock Exchange, the proportion of sales volume to total share equity of shares held impairment. Weifu Hi-tech could not exceed 5% within 12 months as well as 10% within 24 months, and sales price ought not to less than RMB 10 per share (the lowest impairment price of shares holding would be calculated ex-right at the same time if share price ought to ex-right according to regulation). III. Commitment on Bonus Plan The commitment is being After the implementation of Share Merger Reform of the Company, Weifu Group performed. “Weifu Group would make a proposal and vote for it: cash dividend of Weifu Hi-tech in 2005 would make a proposal and are not less than RMB 4, proportion of cash dividend from 2006 to 2008 are not vote for it: cash dividend of Weifu Hi-tech in 2005 is not less than 50% of distributable profit for investors realized by the Company in less than RMB 4 per 10 current year. shares has been completely performed. IV. Commitment on arrangement of incentive system in the administrative level In order to promote the listed company’s steady and healthy development, and fully mobilize senior executives so as to ensure the combination of the The commitment is being administrative level, shareholders, and the interests of the Company, Weifu Group performed, and will be committed: after the accomplishment of Share Merger Reform, under related implemented after related regulations of state and Wuxi government in terms of incentive system in the policy appears on the stage. administrative level of listed company, Weifu Hi-tech would actively promote the plan for the incentive system in administrative level of Weifu Group. 44 XI. Capital occupied by the controlling shareholder and subsidiaries Dated the report period, the controlling shareholders and subsidiaries didn’t occupy capital. XII. Special explanation and independent opinions of external guarantee of the Company provided by independent directors: In the report period, the Company can strictly implement the regulations of ZJF [2003] No.56 Document. After we verified the relevant financial information of the Company, the explanations of the external guarantee of the Company were as follows: 1. Dated the end of the report period, the Company didn’t provide guarantee for controlling shareholders, its subsidiaries, other related parties of which the Company held less than 50% share equity, any non-legal units or individuals; 2. Dated the end of the report period, the total amount of external guarantee amounted to RMB 182 million, of which the amount of guarantee of the parent company for the controlling subsidiary was RMB 182 million; 3. Ended the report period, the Company had no direct or indirect guarantees for warrantees whose assets liability ratio exceeded 70%. 4. Dated the end of the report period, the Company had no guarantee getting out of line. XIII. Periodically report and provisional report of the Company in the report period are as follows: Order of Disclosing Contents of notice Date of notice notice newspaper Suggested Notice On Releasing The 2007-001 Apr.3, 2007 Restricted Shares For Listing 2007-002 The Summary Of Annual Report 2006 Apr.19, 2007 Notice On Resolutions Of The 8th 2007-003 Apr.19, 2007 Meeting Of The5th Board Of Directors Notice On Resolutions Of The 5th 2007-004 Meeting Of The 5th Supervisory Apr.19, 2007 Committee Notice On 2006 Annual Shareholders’ 2007-005 Apr.19, 2007 China Securities Meeting Notice On Estimation Of 2007 Routine 2007-006 Apr.19, 2007 Related Transaction The First Quarterly Summary Report Of 2007-007 Apr.19, 2007 2007 Notice On Resolutions Of 2006 Annual 2007-008 May 23, 2007 Securities Times Shareholders’ General Meeting Notice On Abnormal Fluctuation Of 2007-009 Jun.7, 2007 Stock Trading Notice On Implementation Of Bonus 2007-010 Jun.30, 2007 Distribution Of 2006 2007-011 The Summary Of Semi-Annual Report Hongkong Wen Aug.17, 2007 2007 Wei Po 2007-012 Notice On Resolutions Of The 9th Aug.17, 2007 Meeting Of The5th Board Of Directors 2007-013 Notice On Resolutions Of The 6th Meeting Of The 5th Supervisory Aug.17, 2007 Committee 2007-014 Notice On Strengthening Corporate Aug.17, 2007 Governance Of Listed Companies 2007-015 Notice On Pre-estimated Increase in Sep. 29, 2007 45 Achievements 2007-016 Notice On Pre-estimated Increase in Oct.26, 2007 Achievements of 2007 2007-017 Notice On Resolutions Of The 10th Oct.26, 2007 Meeting Of The5th Board Of Directors 2007-019 Notice On Strengthening Corporate Governance Rectification Of Nov. 2,2007 The Company 2007-020 Notice On Resolutions Of Extraordinary Nov. 1,2007 Meeting Of The Board Of Directors 2007-021 Notice On Resolutions Of Extraordinary Dec. 28,2007 Meeting Of The Board Of Directors The aforesaid documents were all published on the website engaged by CSRC: http://www.cninfo.com.cn Section XI. Financial Statement SGW(2008) No.A235 Auditors’ report To the shareholders of Weifu High-Technology Co., Ltd. , We have audited the accompanying financial statements of Weifu High-Technology Co., Ltd. (“the Company”), including consolidated balance sheet and balance sheet of parent company of 31 December 2007, and consolidated profit statement and profit statement of parent company, and consolidated statement on changes of shareholders’ equity and statement on changes of shareholders’ equity of parent company, and consolidated cash flow statement and cash flow statement of parent company for the year ended, and notes to the financial statements for the year ended. I. Management's responsibility for the financial statements The Company's management is responsible for the preparation and fair presentation of the financial statements in accordance with the Enterprises Accounting Standards and Enterprises Accounting System. The responsibility includes: (1) designing, performing and maintaining internal control related to the preparation and fair presentation of the financial statements, which are free from material misstatements whether due to frauds or errors; (2) choosing and applying right accounting policies; (3) making reasonable accounting estimates. II. Auditor's responsibility Our responsibility is to express an audit opinion on these financial statements based on our audit. We performed our audit in accordance with Chinese Certified Public Accountants' Auditing Standards. Those standards require us to comply with professional ethics, and to plan and perform our audit so as to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures of the financial statements. The selective audit procedures depend on auditor's judgment, including the evaluation of the risk of material misstatement of the consolidated financial statements due to frauds or errors. When evaluating risk, we consider internal control related to 46 financial statements, in order to design auditing procedures, but not for the purpose of expressing an opinion on the internal control's effectiveness. An audit also includes assessing the appropriateness of the accounting policies adopted and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that we have obtained sufficient and appropriate audit evidences to provide a basis for our audit opinion. III. Auditing opinion In our opinion, the Company’s financial statements have been prepared in accordance with the Enterprises Accounting Standards and Enterprises Accounting System, and they fairly present, in all material respects, the financial position of the Company as of December 31, 2007, and its operation results and cash flows for the year ended. Jiangsu GongZheng Certified Public Accountants Co., Ltd. China Accountant: China Accountant: Wuxi, P.R.C April 13 2008 47 Balance Sheet Prepared by Weifu High-Technology Co., Ltd. Dec. 31, 2007 Unit: RMB Amount at period-end Amount at period-begin Items Merger Parent Company Merger Parent Company Current assets: Monetary funds 761,808,821.98 236,564,251.25 817,487,438.01 367,016,919.83 Settlement provisions Capital lent Transaction finance asset Notes receivable 647,047,830.91 280,973,461.06 452,893,389.62 160,943,255.11 Accounts receivable 562,205,614.93 284,757,497.93 648,323,729.12 277,208,152.55 Accounts paid in advance 33,091,895.95 18,427,570.33 23,796,204.03 7,468,067.34 Insurance receivable Reinsurance receivables Contract reserve of reinsurance receivable Interest receivable Other receivables 62,037,428.91 70,096,949.13 9,156,681.16 23,988,732.13 Purchase restituted finance asset Inventories 757,824,937.67 318,434,906.55 724,610,866.46 326,925,070.09 Non-current asset due within one year Other current assets Total current assets 2,824,016,530.35 1,209,254,636.25 2,676,268,308.40 1,163,550,197.05 Non-current assets: Granted loans and advances Finance asset available for sales Held-to-maturity securities Long-term account receivable Long-term equity 900,814,161.11 1,455,402,497.41 767,452,737.09 1,390,148,769.35 investment Investment property Fixed assets: 1,142,693,379.30 663,719,396.29 1,139,893,329.96 631,588,094.79 Construction in progress 119,578,250.69 104,186,166.94 152,840,416.62 131,046,189.13 Engineering material Disposal of fixed asset Consumable biological asset Oil and gas asset Intangible assets 106,304,427.42 28,750,245.57 116,434,105.91 13,731,118.59 Expense on Research and Development Goodwill Long-term expenses to be 1,112,335.56 1,091,087.41 apportioned Deferred income tax asset 29,344,902.01 6,594,829.69 9,833,962.49 4,649,945.13 Other non-current asset Total non-current asset 2,299,847,456.09 2,258,653,135.90 2,187,545,639.48 2,171,164,116.99 48 Total assets 5,123,863,986.44 3,467,907,772.15 4,863,813,947.88 3,334,714,314.04 Current liabilities: Short-term loans 1,485,955,800.00 859,413,800.00 1,464,069,600.00 803,426,100.00 Loan from central bank Absorbing deposit and interbank deposit Capital borrowed Transaction financial liabilities Notes payable 174,171,187.21 169,058,000.00 151,652,100.00 151,652,100.00 Accounts payable 639,816,308.16 300,446,996.28 548,934,656.91 269,770,168.69 Accounts received in 13,004,488.11 967,216.25 6,704,561.81 4,189,422.40 advance Selling financial asset of repurchase Commission charge and commission payable Wage payable 91,398,945.30 15,995,385.86 77,763,118.23 21,593,513.69 Taxes payable 18,779,738.55 -7,272,613.71 4,009,926.50 -5,706,296.51 Interest payable 416,000.00 Other accounts payable 47,513,991.73 55,840,839.66 96,794,989.32 104,435,923.57 Reinsurance payables Insurance contract reserve Security trading of agency Security sales of agency Long-term liabilities due 73,000,000.00 70,000,000.00 within 1 year Other current liabilities 13,160,822.37 1,523,280.88 10,267,944.84 999,483.00 Total current liabilities 2,483,801,281.43 1,395,972,905.22 2,433,196,897.61 1,420,776,414.84 Non-current liabilities: Long-term loans Bonds payable Long-term account 12,950,000.00 6,120,000.00 payable Special accounts payable Projected liabilities Deferred income tax 88,200.00 liabilities Other non-current 1,220,000.00 1,596,000.00 liabilities Total non-current liabilities 14,170,000.00 7,804,200.00 Total liabilities 2,497,971,281.43 1,395,972,905.22 2,441,001,097.61 1,420,776,414.84 Owner’s equity (or shareholders’ equity): Paid-in capital (or share 567,275,995.00 567,275,995.00 567,275,995.00 567,275,995.00 capital) Capital public reserve 906,439,963.98 922,196,148.96 906,439,963.98 922,196,148.96 Less: Inventory shares Surplus public reserve 241,970,463.58 241,970,463.58 222,767,110.84 222,767,110.84 Provision of general risk Retained profit 682,892,683.40 340,492,259.39 505,704,322.14 201,698,644.40 Balance difference of foreign currency translation Total owner’s equity attributable to parent 2,398,579,105.96 2,071,934,866.93 2,202,187,391.96 1,913,937,899.20 company 49 Minority interests 227,313,599.05 220,625,458.31 Total owner’s equity 2,625,892,705.01 2,071,934,866.93 2,422,812,850.27 1,913,937,899.20 Total liabilities and owner’s 5,123,863,986.44 3,467,907,772.15 4,863,813,947.88 3,334,714,314.04 equity Profit Statement Prepared by Weifu High-Technology Co., Ltd. January-December, 2007 Unit: RMB This period Same period of last year Items Parent Parent Merger Merger Company Company 3,121,339,002.0 1,638,476,405.0 2,669,956,992.2 1,391,809,338.9 I. Total operating income 4 6 2 3 3,121,339,002.0 1,638,476,405.0 2,669,956,992.2 1,391,809,338.9 Including: Operating income 4 6 2 3 Interest income Insurance gained Commission charge and commission income 2,971,553,486.6 1,637,235,179.6 2,506,935,685.6 1,381,535,192.7 II. Total operating cost 0 9 1 2 2,433,046,063.5 1,405,473,569.3 2,030,518,368.9 1,169,905,177.5 Including: Operating cost 8 8 8 3 Interest expense Commission charge and commission expense Cash surrender value Net amount of expense of compensation Net amount of withdrawal of insurance contract reserve Bonus expense of guarantee slip Reinsurance expense Operating tax and extras 17,058,211.96 6,905,941.62 16,588,828.35 6,078,338.04 Sales expenses 104,410,928.61 66,752,278.22 121,668,945.55 65,079,685.16 Administration expenses 278,545,820.38 86,404,727.05 241,710,036.00 96,186,995.62 Financial expenses 91,804,112.69 54,464,849.74 63,308,694.83 43,707,656.40 Losses of devaluation of asset 46,688,349.38 17,233,813.68 33,140,811.90 577,339.97 Add: Changing income of fair value(Loss is listed with “-”) Investment income (Loss is listed with “-”) 136,267,376.44 195,948,488.47 -24,381,077.81 -21,849,715.60 Including: Investment income on affiliated company and joint venture Exchange income (Loss is listed with “-”) III. Operating profit (Loss is listed with “-”) 286,052,891.88 197,189,713.84 138,640,228.80 -11,575,569.39 Add: Non-operating income 10,794,925.83 1,538,567.53 13,539,543.63 1,057,385.78 Less: Non-operating expense 13,742,731.07 7,208,042.17 17,321,488.55 8,800,876.74 Including: Disposal loss of non-current asset IV. Total Profit (Loss is listed with “-”) 283,105,086.64 191,520,239.20 134,858,283.88 -19,319,060.35 Less: Income tax 17,074,912.85 -513,288.23 7,708,964.67 -618,815.67 V. Net profit (Net loss is listed with “-”) 266,030,173.79 192,033,527.43 127,149,319.21 -18,700,244.68 Net profit attributable to owner’s equity of 230,428,273.70 93,108,229.12 parent company Minority shareholders’ gains and losses 35,601,900.09 34,041,090.09 50 VI. Earnings per share i. Basic earnings per share 0.41 0.16 ii. Diluted earnings per share 0.41 0.16 Cash Flow Statement Prepared by Weifu High-Technology Co., Ltd. January-December, 2007 Unit: RMB This period Same period of last year Items Merger Parent Company Merger Parent Company I. Cash flows arising from operating activities: Cash received from selling 3,960,765,710.99 1,734,359,489.36 3,337,116,079.49 1,568,260,660.28 commodities and providing labor services Net increase of customer deposit and interbank deposit Net increase of loan from central bank Net increase of capital borrowed from other financial institution Cash received from original insurance contract fee Net cash received from reinsurance business Insured savings and net increase of investment Net increase of disposal of transaction financial asset Cash received from interest, commission charge and commission Net increase of capital borrowed Net increase of returned business capital Write-back of tax received 931,011.53 879,750.85 Other cash received concerning 19,745,456.87 57,849,228.52 24,227,518.66 73,459,921.81 operating activities Subtotal of cash inflow arising from 3,981,442,179.39 1,792,208,717.88 3,362,223,349.00 1,641,720,582.09 operating activities Cash paid for purchasing commodities 2,997,690,976.18 1,473,901,624.19 2,232,117,471.16 1,189,000,130.61 and receiving labor service Net increase of customer loans and advances Net increase of deposits in central bank and interbank Cash paid for original insurance contract compensation Cash paid for interest, commission charge and commission Cash paid for bonus of guarantee slip Cash paid to/for staff and workers 307,524,422.03 138,785,373.26 281,994,776.50 127,556,157.46 Taxes paid 206,653,316.72 83,259,711.52 193,935,896.89 72,551,484.38 Other cash paid concerning operating 284,805,719.82 163,883,052.32 207,433,583.72 109,550,398.41 activities Subtotal of cash outflow arising from 3,796,674,434.75 1,859,829,761.29 2,915,481,728.27 1,498,658,170.86 operating activities 51 Net cash flows arising from operating 184,767,744.64 -67,621,043.41 446,741,620.73 143,062,411.23 activities II. Cash flows arising from investing activities: Cash received from recovering 75,000.00 10,000.00 4,575,005.79 4,575,005.79 investment Cash received from investment income 59,760,015.53 154,747,445.41 56,137,846.00 55,952,446.00 Net cash received from disposal of 23,684,392.21 5,022,480.98 14,264,640.99 2,822,197.61 fixed, intangible and other long-term assets Net cash received from disposal of subsidiaries and other units Other cash received concerning investing activities Subtotal of cash inflow from investing 83,519,407.74 159,779,926.39 74,977,492.78 63,349,649.40 activities Cash paid for purchasing fixed, 150,626,824.37 114,209,068.55 243,591,029.53 197,071,583.16 intangible and other long-term assets Cash paid for investment 9,162,685.00 24,062,685.00 14,745,987.00 14,745,987.00 Net increase of mortgaged loans Net cash received from subsidiaries and other units Other cash paid concerning investing activities Subtotal of cash outflow from 159,789,509.37 138,271,753.55 258,337,016.53 211,817,570.16 investing activities Net cash flows arising from investing -76,270,101.63 21,508,172.84 -183,359,523.75 -148,467,920.76 activities III. Cash flows arising from financing activities Cash received from absorbing investment Including: Cash received from absorbing minority shareholders’ investment by subsidiaries Cash received from loans 3,024,649,300.00 1,669,286,300.00 2,583,028,458.88 1,424,082,200.00 Cash received from issuing bonds Other cash received concerning 5,600,000.00 financing activities Subtotal of cash inflow from financing 3,030,249,300.00 1,669,286,300.00 2,583,028,458.88 1,424,082,200.00 activities Cash paid for settling debts 3,056,163,100.00 1,683,298,600.00 2,469,872,583.68 1,119,866,700.00 Cash paid for dividend and profit 148,417,762.07 84,327,498.01 303,635,723.08 265,745,937.35 distributing or interest paying Including: Dividend and profit of 25,949,969.48 minority shareholder paid by subsidiaries Other cash paid concerning financing activities Subtotal of cash outflow from 3,204,580,862.07 1,767,626,098.01 2,773,508,306.76 1,385,612,637.35 financing activities Net cash flows arising from financing -174,331,562.07 -98,339,798.01 -190,479,847.88 38,469,562.65 activities IV. Influence on cash due to fluctuation in exchange rate V. Net increase of cash and cash equivalents -65,833,919.06 -144,452,668.58 72,902,249.10 33,064,053.12 Add: Balance of cash and cash 713,693,509.99 276,016,919.83 650,185,188.91 242,952,866.71 equivalents at the period -begin 52 VI. Balance of cash and cash equivalents at 647,859,590.93 131,564,251.25 723,087,438.01 276,016,919.83 the period -end 53 Statement on Changes of Owners' Equity Prepared by Weifu High-Technology Co., Ltd. Dec.31, 2007 Amount in this report period Owners' equity belonged to the parent company Items Less: General Paid-up capital Surplus Capital reserves Treasury risk Retained p (Share capital) reserves Stock provision I. Balance at the end of the last year 567,275,995.00 906,439,963.98 222,767,110.84 505,704, Add: Changes of accounting policy Error correction of the last period II. Balance at the beginning of this year 567,275,995.00 906,439,963.98 222,767,110.84 505,704, III. Increase/ Decrease in this year (Decrease is 19,203,352.74 177,188, listed with'"-") (I) Net profit 230,428, (II) Profits and losses calculating into owners' equity 1. Net changing amount of fair value of financial assets available for sale 2. Effect of changes of other owners' equity of invested units under equity method 3.Effect of income tax related to owners' equity 4. Others Total of (I)and (II) 230,428, (III) Owners' devoted and decreased capital 1. Owners' devoted capital 2. Amount calculated into owners' equity paid in shares 3. Others (IV) Profit distribution 19,203,352.74 -53,239, 1. Withdrawal of surplus reserves 19,203,352.74 -19,203, 2. Withdrawal of general risk provisions 3.Distribution for owners (shareholders) -34,036, 4.Others (V) Carrying forward internal owners' equity 1.Capital reserves conversed to capital (share capital) 2. Surplus reserves conversed to capital (share capital) 3.Remedying loss with profit surplus 4.Others IV. Balance at the end of this report period 567,275,995.00 906,439,963.98 241,970,463.58 682,892, Statement on Changes of Owners' Equity (Con.) Prepared by Weifu High-Technology Co., Ltd. Dec.31, 2007 Amount in last year Owners' equity belonged to the parent company Items General Less: Paid-up capital risk Capital reserves Treasur Surplus reserves Retained p (Share capital) provisio y Stock n I. Balance at the end of the last year 567,275,995.00 925,249,818.64 267,449,061.69 582,007 Add: Changes of accounting policy -20,421,624.66 -44,681,950.85 58,115 Error correction of the last period II. Balance at the beginning of this year 567,275,995.00 904,828,193.98 222,767,110.84 640,122 III. Increase/ Decrease in this year (Decrease is - listed with'"-") 1,611,770.00 -134,418 (I) Net profit 93,108 (II) Profits and losses calculating into owners' equity 1. Net changing amount of fair value of financial assets available for sale 2. Effect of changes of other owners' equity of invested units under equity method 3.Effect of income tax related to owners' equity 4. Others 1,611,770.00 Total of (I)and (II) 1,611,770.00 230,428 (III) Owners' devoted and decreased capital 1. Owners' devoted capital 2. Amount calculated into owners' equity paid in shares 3. Others (IV) Profit distribution -227,526 1. Withdrawal of surplus reserves -226,910 2. Withdrawal of general risk provisions 3.Distribution for owners (shareholders) -616 4.Others (V) Carrying forward internal owners' equity 1.Capital reserves conversed to capital (share capital) 2. Surplus reserves conversed to capital (share capital) 3.Remedying loss with profit surplus 4.Others IV. Balance at the end of this report period 567,275,995.00 906,439,963.98 222,767,110.84 505,704 Notes to Financial Statement Note1. Basic information of the Company By the approval of STGS (1992) No. 130 issued by Jiangsu Economic Restructuring Committee (hereinafter referred to as Jiangsu ERC), Wuxi Weifu High-Technology Co., Ltd. was established as a company of limited liability with funds raised from targeted sources, and registered at Wuxi Administration for Industry & Commerce in October 1992. The original share capital of the Company totaled RMB 115.4355 million, including state-owned share capital amounting to RMB 92.4355 million, public corporate share capital amounting to RMB 8 million and inner employee share capital amounting to RMB 15 million. In the year 1994 and 1995, the Company was restructured and became a holding subsidiary of Wuxi Weifu Group Co., Ltd (hereinafter referred to as “Weifu Group”). The ultimate owner of Wuxi Weifu Group Co., Ltd. is State-owned Assets Supervision & Administration Commission of Wuxi People’s Government. By the approval of Jiangsu ERC and Shenzhen Securities Administration Office in August 1995, the Company issued 68 million special ordinary shares, with a face value of RMB 1 for each share, and the total value of those shares amounted to RMB 68 million. After the issuance, the Company’s total share capital increased to RMB 183.4355 million. By the approval of CSRC in June 1998, the Company issued 120 million RMB ordinary shares (A-share) at Shenzhen Stock Exchange through on-line pricing and issuing. After the issuance, the total share capital of the Company amounted to RMB 303.4355 million. In the middle of 1999, deliberated and approved by the Board and Shareholders’ General Meeting, the Company implemented the plan of granting 3 bonus shares for each 10 shares. After that, the total share capital of the Company amounted to RMB 394.46615 million, of which state-owned shares amounted to RMB 120.16615 million, public corporate shares RMB 10.4 million, foreign-funded shares (B-share) RMB 88.40 million, RMB ordinary shares (A-share) RMB 156 million and inner employee shares RMB 19.5 million. In the year 2000, by the approval of the CSRC and based upon the total share capital of 303.4355 million shares after the issuance of A-share in June 1998, the Company allotted 3 shares for each 10 shares, with a price of RMB 10 for each allotted share. Actually 41.9 million shares was allotted, and the total share capital after the allotment increased to RMB 436.36615 million, of which state-owned corporate shares amounted to RMB 121.56615 million, public corporate shares RMB 10.4 million, foreign-funded shares (B-share) RMB 88.4 million and RMB ordinary shares (A-share) RMB 216 million. In April 2005, Board of Directors of the Company has examined and approved 2004 Profit Pre-distribution Plan, and examined and approved by 2004 Shareholders’ General Meeting , the Company distributed 3 shares for each 10 shares to the whole 57 shareholders totaling to 130,909,845 shares in 2005. The Company registered at the Wuxi High and New Technology Development Zone and the registration number was 3200001103404. The Company belongs to the mechanical industry and mainly engages in the production and sales of fuel injection pump of the diesel internal combustion engine as well as the fuel injector and other matching parts used in the fuel injection pump. According to the Share Merger Reform Scheme of the Company that passed by related shareholders’ meeting of Share Merger Reform and SGZF [2006] No.61 Reply on Questions about State-owned Equity Management in Share Merger Reform of Wuxi Weifu High-Technology Co., Ltd. issued by State-owned Assets Supervision & Administration Commission of Jiangsu Province, the Weifu Group etc. 8 non-circulating shareholders arranged pricing with granting 1.7 shares for each 10 shares to circulating A-share shareholders (totally granted 47,736,000 shares), so as to realize the originally non-circulating shares can be traded on market when satisfied certain conditions, the scheme has been implemented on Apr.5, 2007. The Financial Report has been approved by the board of the Company on Aug.15, 2007 and disclosed. Note2. The compiling basis of financial statement This financial statement is presented based on continous operations and actual occurred transactions and matters, and in according to the Accounting Standards for Business Enterprises and its applications guidance issued by Ministry of Finance to confirm and measure, and according to the regulations of Accounting Standards for Business Enterprises No.30—Presentation of Financial Statemen whose information carried were prepared in conformity with the Company’s accounting policy and accounting estimate, and these accounting policy and accounting estimate are established according to the Accounting Standards for Business Enterprises as well as the Company’s practical circumstance. The 2006 financial report forms of the Company was edited according to Accounting System For Business Enterprises, relevant accounting standard for business enterprises and related complementary regulations. According to Circular on Issuing the No.7 Questions and Responses of Information Disclosure Standards of Public Companies- Compilation and Disclosure of the Comparative Financial Accounting Information during the Transition Period between the New and Old Accounting Standards promulgated by China Securities Regulatory Commission (hereinafter CSRC for short) ZJKJZi[2007]No.10, this company confirms the initial amount on the balance sheet of Januany 1st, 2007 in accordance with the regulations of Notes On Doing Well The Work Of Disclosuring The Financial Accounting Information Related With The New Accounting Standards in according to ZJF[2006]No.136 promulgated by CSRC, analyses the 5th to the 19th item in Accounting Standard for Business Enterprises No. 38 - First time adoption of Accounting Standards for Business Enterprises and the regulations in the Explanation No.1 to Accounting Criteria for Enterprises, carries up and adjusts the influence of profit statement in the comparable period and the balance sheet at the beginning of the comparable period, and reports according to the 58 regulations in Accounting Standard for Business Enterprises No. 30 - Presentation of financial statements and Accounting Standard for Business Enterprises No. 33- Consolidated financial statements. Note3. Declaration in accordance with the Accounting Standards for Business Enterprises The Company declares that the financial statement prepared is accorded with the requirement of Accounting Standards for Enterprises, which truly and completely reflects the financial information of the Company such as financial status, operational results and cash flow etc. Note4. Significant accounting policy and accounting estimates, and making method of consolidated financial statements (I) Accounting period Adopt the Gregorian calendar system, that is, from Jan.1 to Dec.31 of Gregorian calendar is an accounting period. (II) Recording currency Accounting calculation takes RMB as the recording currency. (III) Attribute of measurement The Company measures in accordance with regulated accounting measurement attribute, the attribute of measurement of items in statement hasn’t changed in the report period. The Company generally adopt historical cost when measuring accounting factors, for those adopting replacement cost, changeable net present value, present value, and fair value to measure, take the confirmed amount of accounting factors can be acquired and dependably measured as the basis. (IV) Cash Equivalent Cash Equivalent refers to short-term (be at term within 3 months since purchase date) investment held by the Company with strong fluidity and easy to be converted into known amount of cash which has slight changes in value. (V) Calculation method of foreign currency business When originally confirming, the occurred foreign currency transaction adopt spot exchange rate of transaction date to convert foreign currency amount into recording standard currency amount. At the end of the period, the monetary items of foreign currency adopt period-end spot exchange rate to convert, the exchange balance resulting from the difference of spot exchange rate between period-end and original confirmation or the previous one should calculate into profit and loss of current period; and the exchange balance resulting from foreign currency loans that related with purchasing or constructing asset that accorded with capitalization conditions should be dealt in accordance with the principle of loans expense capitalization. The non-monetary items of foreign currency that measured with historical cost in period-end still adopt spot exchange rate of transaction date, not change its recording currency amount. 59 (VI) The calculation method of financial assets and financial debts 1. Classification of financial assets and financial debts Financial assets including tradable financial assets, financial assets that designated fair value to calculate its changes and calculate into profit and loss of current period, investment held till at term, receivable account, and financial assets for sale etc.. Financial debts including tradable financial debts, and financial debts designated fair value to calculate its changes and calculate into profit and loss of current period. 2. Confirmation evidence and measuring method of financial tools i. When the Company becomes a party of financial tools contract, confirm an item of financial assets or financial debts. The financial assets that accord with following terminating confirmation conditions should terminate confirmation: the contract right of acquiring cash flow amount of financial assets terminates, the financial assets has already transferred which is conformed to regulation. And terminate confirming the financial debt or its one part that totally or partially released its current obligation. ii. The financial assets or financial debts originally confirmed by the Company are measured according to fair value. For financial assets or financial debts that measured with fair value whose changes are calculated into profit and loss of current period, relevant transaction expenses directly calculate into profit and loss of current period; for other kinds of financial assets or financial debts, relevant transaction expenses calculate into original confirmation amount. iii. The Company implements subsequent measurement on financial assets according to fair value, and not deduct the transaction expenses that may occurred in future disposal for the financial assets. But except following situations: A. The investments held till at term and receivable accounts adopt actual interest rate method, and measure according to amortized cost; B. The equity tool investments that haven’t quoted price on active market and its fair value can’t be dependably measured, and derivative financial assets that linked to equity tools and balance through delivering this equity tool, measure according to cost; C. When the financial assets no longer suit to measure according to fair value resulting from the changes in holding purpose or ability, or its fair value can no longer be measured dependably etc., the Company alternated to measure according to cost, the cost is fair value of the financial asset on reclassification date. iv. The Company adopts actual interest rate method, implement subsequent measure on financial debts according to amortized cost. But except the following situations: A. The financial debt measured with fair value whose changes are calculated into profit and loss of current period, measure according to fair value, and not deduct future transaction expenses probably occur for its settling; B. When financial debt no longer suit to measure according to fair value resulting from changes occurred in holding purpose or ability, or its fair value can’t be dependably measured etc., the Company alternated to measure according to cost, the cost is book value of the financial debt on reclassification date; C. The financial debt derivatives linked to equity tool that has no quoted price on active market whose fair value can’t be dependably measured and should balance 60 through delivering this equity tool, measure according to cost; D. The financial guarantee contract that not belonging to designated for financial debt that measured with fair value and its changes are calculated into profit and loss of current period, or loan commitment not designating to measure with fair value, whose changes are calculated into profit and loss of current period, and will borrow with interest rate that less than the market, should implement subsequent measurement according to the higher one of the following two price amounts after initial confirmation: a. The amount confirmed according to contingency standards; b. The balance after initial confirmation amount deducting accumulated amortization that confirmed according to income standards. v. Except those related with hedge, the Company deal with gains or losses formed in the fair value changes of financial assets or financial debts according to following regulations: A. For the financial assets or financial debts measured with fair value whose changes are calculated into profit and loss of current period, the gains and losses resulted from fair value changes, calculate into profit and loss of current period; B. The gains and losses result from fair value changes of tradable financial assets, excluding the depreciation loss and exchange balance resulting from foreign currency financial asset, calculate into capital public reserve, transfer out when the financial asset terminate confirmation, calculate into profit and loss of current period. vi. The financial assets or financial debts that the Company measured with amortized cost, excluding related with the hedge, the gains or losses resulting from confirmation determination, depreciation or amortization calculate into profit and loss of current period. vii. The Company calculates the offset result of fair value changes of hedge tool and hedged item in the same accounting period into profit and loss of current period. 3. Confirmation of fair value of financial assets and financial debts The financial assets or financial debts that existing active market confirm its fair value with the quoted price on active market, the quoted price on active market including prices easy to be acquired from Exchange, broker, industry association, pricing service organization etc. termly, which represents the price of market transaction that actually occurred in a fair shake; the financial assets or financial debts not exist active market, adopt value estimation skill to confirm its fair value. The value estimation skill include refer to price used in recent market deals carried through by the parties that familiar with situation and deal by freewill, current fair value of other financial assets or financial debts that are essentially the same, discounted cash flow method, and option pricing model etc.. 4. Depreciation provision for financial asset At the end of the period, the Company checks the book value of financial asset beyond those measures with fair values whose changes are calculated into profit and loss of current period, and draw depreciation provision for the financial asset that has objective evidence to show its depreciation. When drawing the depreciation provision, implement single depreciation test on those has material single amount; and 61 implement depreciation test in financial assets group that has characteristic of similar with credit risk on those hasn’t material single amount. The detail method of drawing depreciation provision for main financial asset is as follows: i. For tradable financial assets that can be measured dependably with fair value, draw depreciation provision for the part that fair value lowered than book value, and calculate into profit and loss of current period; for tradable financial asset that can not be dependably measured with fair value, draw depreciation provision with the part that present value of estimated future cash flow (excluding not yet occurred future credit loss) lowered than book value, and calculate into profit and loss of current period. When the tradable financial asset occurring depreciation, even though the financial asset hasn’t terminating confirmation, the accumulated loss that originally calculating into the owners’ equity resulting from the decrease in fair value should be transferred out, and calculate into profit and loss of current period. ii. Draw depreciation provision for investment held till at term with the part that present value of its estimated future cash flow (excluding not yet occurred future credit loss) lowered than book value, and calculate into profit and loss of current period. 5. The confirmation and measurement of financial asset transfer i. The confirmation of financial asset transfer When transferring almost all risk and reward of financial asset ownership to transferee in following situations, the enterprise confirm transfer of the financial asset, terminate confirmation of the financial asset. A. The enterprise sell financial asset without recourse attachment; B. Sell the financial asset, meanwhile sign agreement with the purchaser, and repurchase it according to fair value of the financial asset on the promised time limit day; C. Sell the financial asset, meanwhile sign put option contract with purchaser, but judging from articles of the contract, this put option is a material out of the money option. ii. Measurement of financial asset transfer A. Confirmation of financial asset whole transfer: confirm according to balance of book value of transferred financial asset and accumulated changing amount of received consideration and fair value that originally directly calculated into owner’s equity, calculate into profit and loss of current period; B. Confirmation of partial transfer of financial asset: financial asset partially transferring, should amortize book value of whole financial asset which is between the terminating confirmation part and not terminating confirmation part according to each relative fair value, and calculate into profit and loss of current period according to book value of terminating confirmation part and balance of received consideration of terminating confirmation part with the amount of corresponding terminating confirmation part in accumulated changes of fair value that originally directly calculating into owner’s equity. The amount of terminating confirmation part in accumulated changes of fair value that originally calculating into owner’s equity, should confirm after amortizing the accumulated amount according to relative fair 62 value of terminating confirmation part and not terminating confirmation part of financial asset. 6. Confirmation standards of bad debt of receivable account and withdrawal method of bad debt provision 1)Confirmation standards of bad debt: for the receivable account that still can’t be reclaimed after discharging with its bankrupt property or heritage due to the debtor go bankruptcy or die, and that the debtor hasn’t performed the repaying obligation while exceeding the time limit, and there’s obvious characteristic showing it can’t be reclaimed, confirm as bad debt. 2) Calculation method of bad debt loss: adopt allowance method. 3) It takes singly devaluation test for receivable account with odd significant amount (including receivable account and other receivables). Withdrawing the provision for bad debt in accordance with the balance between the present value of predicated expected cash flow of account receiavable is lower than its book value; receivable account with odd significant amount which did not occur devaluation should consolidated into the account receivable of deducting odd significant amount of account receivable, and withdrawing the provision for bad debt according to analysis to account age in period-end account. The withdrawal proportion of bad debt provision for various aging mix is as follows: Withdrawal proportion in this Withdrawal proportion in Account age year last year Within 6 months Don’t draw 5% 6 months to 1 year 10% 1 year to 2 years 20% 10% 2 years to 3 years 40% 30% 3 years to 4 years 50% 4 years to 5 years 100% 80% Above 5 years 100% (VII) Calculation method of inventory and confirmation standard and withdrawing method of the provision for depreciation of inventory Inventory classification: Classified mainly as inventory material, low-value consumption goods, product in process, and finished goods etc.. Inventory pricing: The inventory material daily adopt planned cost to calculate, fix the differences of material cost separately according to first grade, carry forward material cost difference that should undertake at the end of the period according to planned cost of the raw material drawn or sent, adjust the planned cost to actual cost; pricing the finished product according to actual cost, and adopt weighted average method to carry forward sales cost when sending. Amortization of low-value consumption goods: Pricing the low-value consumption goods according to actual cost when acquired, adopt one-off amortization method to calculate when drawing, while the amount is relatively large, amortize it within one year. 63 Inventory system: Adopt perpetual inventory system. Provision for inventory depreciation: At the end of the period, estimate price of the inventory according to the lower one between cost and net realizable value, draw depreciation provision and calculate into profit and loss of current period according to the balance of net realizable value lowered than the book cost of single material for the inventory with various quantity and low single price. . (VIII) Calculation method of long-term equity investment 1. Confirmation of initial investment cost of long-term equity investment For the consolidation of enterprises that under the same control, take the book value proportion of the owner’s equity of consolidated party on consolidation date as initial investment cost of long-term equity investment. The balance of initial investment cost of long-term equity investment and paid cash, transferred non-cash asset, and book value of debt taken, should adjust capital public reserve; and adjust retained earning while the capital public reserve isn’t enough to offset. For the consolidation of enterprises that under different control, take assets paid out in order to acquire the control right of purchased party on purchase date, occurred or undertaken debt and fair value of issued equity securities as initial investment cost of long-term equity investment. The long-term equity investment acquired in other manners except from the enterprise consolidation, should confirm its initial investment cost according to following regulations: A. The long-term equity investment acquired by paying cash, should take purchasing price that actually paid as initial investment cost. Initial investment cost including expense, tax and other necessary payout that directly related with acquiring the long-term equity investment. B. The long-term equity investment acquired by issuing equity securities, should take fair value of the issued equity securities as initial investment cost. C. The long-term equity investment invested by investors, should take the promised value in investment contract or agreement as initial investment cost, excluding those promised in the contract or agreement that the value is not fair. D. The long-term equity investment acquired by non-monetary asset exchange, its initial investment cost should be confirmed according to Accounting Standards of Business Enterprise No.7—Non-monetary Asset Exchange. E. The long-term equity investment acquired by debt reorganization, its initial investment cost should be confirmed according to Accounting Standards No.12—Debt Restructuring. 2. Subsequent measurement of long-term equity investment i. The following long-term equity investments adopt cost calculation method: A. The long-term equity investment on the invested units controlled by the Company. The investment of the Company on the subsidiaries and calculated on cost method and adjusted according to equity method while compiling the consolidated financial statements. B. The long-term investment that the Company hasn’t together control or material influence on invested party, and hasn’t quoted price on active market so its fair value 64 can’t be dependably measured. ii. The long-term equity investment that the Company has together control or material influence on the invested party, adopt equity method to calculated. (IX) The fixed assets pricing and depreciation method 1. Definition of fixed assets The fixed assets refer to housing, buildings, machinery and equipment, means of transportation and other equipment, instrument and tools etc. related to production and operation that has over 1 year lifetime and unit value amounting to more than RMB 2 thousand as well as other assets not in connection with production and operation with a unit value amounting to more than RMB 2,000 and over 2 years lifetime. 2. Pricing of fixed assets The fixed assets are recorded in account according to actual cost upon its acquisition (including purchasing payment, relevant tax, and attributable to the transportation charge, discharging expense, installing expense and service fee for professional persons occurred before the fixed asset reached the predicated usage conditions. 3. Classification and deprecation method of fixed assets Depreciation of fixed assets adopt average lifetime method to draw with classification according to estimated lifetime after original value of fixed asset deducting residual value (5%). The fixed asset classification, the estimated lifetime and annual depreciation rate of various fixed assets in year 2007 are as follows: Annual Fixed assets Estimated lifetime depreciation Rates Housings 35 years 2.71% Buildings and 20 years 4.75% constructions Imported equipments 7.92% 12 years Machinery Equipment Domestic equipments 9.50% 10 years Transportation 10 years 9.50% equipments Office equipments 5 years 19.00% Decoration expenses 5 years 19.00% of houses 65 The fixed asset classification, the estimated lifetime and annual depreciation rate of various fixed assets in year 2006 are as follows: Annual depreciation Fixed assets Estimated lifetime Rates Housing and building 20～ 35 2.77%-4.85% Specific equipment 10.5 9.24% Transportation equipments 10 9.7% General equipment 10～ 16 6.06%-9.7% Other equipment 5～ 10 9.7%-19.4% The fixed asst withdrew the provision for devaluation; dedcutting the provision for the devaluation of fixed asset withdrawn accumulated the depreciation amount. (X) The calculation method of construction in pogress and the confirmation standard and the withdrawing method of provision for the devaluation of construction in pogress 1. The confirmation of construction in pogress carring forward into fixed asset When consruction engneering in process has reached the scheduled state in commission, and has proceeded the final accounts of completing, validate all the actual expenses as the fixed asset; if the fixed asset has reached the scheduled state in commission without proceeding the final accounts of completing, validate the cost and provide the devaluation, and adjust the original provisional estimated value according to the actual costs after finishing the final accounts of completing, without adjusting the original withdrwal devaluation. 2. Devaluation provision of construction in pogress Completely check over the construction in pogress at the end of the period. If some evidence show that the construction in pogress has depreciated, the provision of devaluation preparation of the construction in pogress will be calculated into the losses and gains in current period. In general, provide the devaluation provision of the construction in pogress when existing one or several situations as follows: i. The construction in pogress ceased for a long time and will not start working again in the following 3 years; ii. The construction in pogresshas dropped behind either in performance or in technology, and its economic benefits have much uncertainty; 66 iii. Other situations which shows that the construction in progress had happened devaluation. (XI) Intangible assets pricing and amortization policy, the confirmation standard and withdrawing method of the provision for the devaluation of intangible asset 1. Intangible assets pricing: The intangible asset is initially measured according to cost: i. The cost of purchased intangible asset include purchase amount, related taxes and other payout occurred directly attributed to help this asset reaching its estimated purpose. ii. The cost of self developed intangible asset include total payout amount that occurred after satisfying asset confirmation condition and meanwhile satisfying the following conditions before reaching its estimated purpose, but exclude the payout that has already been expenses in previous period: ① Completing this intangible asset to make it workable or tradable is technically feasible; ② Have the intention of completing this intangible asset and using or selling it; ③ The manner of intangible asset producing economic interest include be able to verify the product produced by this intangible asset or the intangible asset itself exist market, the intangible asset that will be used interiorly should verify its usefulness; ④ Have enough technique, financial resource and other resources to support, so as to complete the development of this intangible asset, and have ability to use or sell this intangible asset; ⑤ The payout attributed to development phase of this intangible asset can be measured dependably. iii. The cost of intangible asset that investors invested is confirmed according to promised value in the investment contract or agreement. iv. The cost of intangible asset acquired from non-monetary asset exchange, debt restructuring, government grants and enterprise consolidation, should be confirmed respectively according to Accounting Standards for Business Enterprises No.7—Non-monetary Asset Exchange, Accounting Standards for Business Enterprises No.12—Debt Restructuring, Accounting Standards for Business Enterprises No.16—Government Grants and Accounting Standards for Business Enterprises No.20—Business Combinations. 2. Amortization of intangible assets i. The intangible asset that has a limited lifetime adopt straight-line method to amortize averagely within lifetime since it’s workable, and be calculated into profit and loss of current period, the Company recheck the lifetime and amortization method of intangible asset that has limited lifetime at least at each end of the year, once discovering the lifetime and amortization method is different from previous estimation, should change the years of amortization and amortization method; ii. The intangible asset that has an uncertain lifetime doesn’t amortize, the Company recheck the lifetime of intangible asset with uncertain lifetime in each accounting period, but if there’s evidence shows the lifetime of intangible asset is limited, then 67 should estimate its lifetime and amortize according to the aforesaid method i. iii. The land use right of the Company and subsidiaries take average amortization in accordance with residual usage years. iv. The trademark use right of Nanjing Weifu Jinning Co., Ltd. (shareholding subsidiary, hereinafter referred to as “Weifu Jinning”) would be amortized over 30 years on average; computer software would be amortized as per 5 years. v. The franchise of Wuxi Weifu Automotive Diesel System Co., Ltd. (shareholding subsidiary, hereinafter referred to as “Weifu Diesel System”) would be amortized over 10 years; administrative software would be amortized as per 5 years. (XII) Confirmation method of the provision for long-term assets depreciation 1. On the balance sheet day, the Company made an examination on the long-term assets; when the following sign existed in assets which showed that depreciation may occur in the assets, estimate its reclaimable amount, and withdraw the provision for assets depreciation and losses and gains in current period according to the balance of reclaimable amount of the asset lowered than the book value. These signs include: i The Market price of assets decreased sharply in current period, and the fall was obviously greater than the pre-estimated fall due to time process or normal use. ii. There are or will be significant changes happening to the economic, technical or legal environment etc. of the Company’s operations as well as the assets’ market in current period and it causes or will cause unfavorable influence to the Company. iii. The market interest rate or other market remuneration rate has raised in current period and it influences the Company’s calculating the discount rate of future cash flow’s present value of assets pre-estimation, resulting in the sharp decrease in the assets’ receivable amount. iv. There were evidences showing that the asset had been old and out of date or its entity had been damaged. v. The assets have been or will be left unused, terminated or planed to be disposed in advance. vi. The internal report’s evidence shows that the economic performance has been or will be lower than that of anticipation, e.g. the net cash flow that the Company has created or the realized operating profit (or loss) is far below (or above) the pre-estimated amount. vii. Other signs showing that depreciation may have occurred to the assets 2. For the intangible assets whose goodwill and utilization life-span were uncertain formed by enterprise consolidation, they needed to be tested every year no matter whether there are depreciation signs in existence. 3. For the goodwill formed by enterprise consolidation, it should be distributed to relevant asset group or asset group combination at the end of every year; then, it is needed to make a depreciation test on the asset group or asset group combination which includes goodwill, calculate the receivable amount and compare it with its book value. If the receivable amount of asset group or asset group combination is below its book value, the balance should firstly be reduced and distributed to the book value of the goodwill in the asset group or asset group combination; if the book value of goodwill is not enough to offset and reduce the balance, the balance which is not 68 offset and reduced will be distributed by other assets according to their book value. 4. Basis for withdrawal of provision for long-term investment depreciation, provision for fixed assets depreciation, provision for project under construction depreciation and provision for intangible assets depreciation: the Company withdraws provision for assets depreciation according to the balance of the receivable amount of single asset below book value at period-end; the receivable amount is confirmed based on the higher one of asset pre-estimation future cash flow’s present value and the net amount left by fair value of assets minus disposal expenses. If it is difficult to estimate the receivable amount of single asset, its receivable amount will be confirmed based on the asset group which the asset belongs to. 5. Cognizance of the asset group during the depreciation test: the relevant minimum asset group which can share the coordination benefit from consolidation pre-estimated in internal company. 6. Once the loss on long-term investment depreciation is confirmed, it can not be switching back. (XIII) Amortization method of long-term expenses to be apportioned The long-term expenses to be apportioned occurred to the Company is priced on actual cost, and equally amortized according to the pre-estimated benefiting term; for the long-term items to be apportioned with no benefits in the later accounting period, it is needed to totally calculate their amortization balance value into losses and gains in current period when confirming them. (XIV) Calculation method of loan expenses (1) The loan expenses occurred to the Company includes loan interest, amortization of reduction price and premium price, assistant expenses and the exchange balance from foreign currency loan. The amortization of the interest, discount or premium and exc hange difference from, the specific loan for purchasing fixed assets,if meeting the followi ng three conditions, loan expenses should be capitalized. ① Asset disburse has been occurred. ② The borrowing costs has already incurred. ③ Purchase construction activity for achieving the asset utility condition has started. Other loan interest, amortization of reduction price and premium price and the exchange balance from foreign currency loan should be deemed as expenses of the period while they occur. (2)Where a general borrowing is used for the acquisition and construction or production of assets eligible for capitalization, the enterprise shall calculate and determine the to-be-capitalized amount of interests on the general borrowing 69 by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. Auxiliary expense of general loan should be counted into current loss and interest. (3)To determine capitalized amount： Capitalized interest for purchasing fixed asset at the end of the current period is the accumulated expense and weight average asset multiplied capitalization rate. And the capitalization rate is determined by following principles： ① Interest of the specialized loan for purchasing fixed assets is the capitalization rate； ② Above single specialized loan for purchasing fixed assets, the capitalization rate is the weighted average interest rate of these general borrowings. (4)Temporary stop of capitalization: If the purchase and buildi ng activities for fixed assets stop abnormally and the interrupt ion interval exceeds three months, the capitalization of borrow ing cost should be stopped temporarily and deemed as the expe nses of current period until the re-start of purchasing and buil ding activities for assets. (5)Stop of capitalization: When the purchased fixed assets hav e reached the expected serviceable condition, stop the capitalization of borrowing cos t. (XV)Confirmation evidence of deferred income tax assets and deferred income tax liabilities 1. If there is the temporary difference that can be offset and deducted between the book value of assets and liabilities and the tax calculating basis, it is needed to confirm the deferred income tax assets from temporary difference that can be offset and deducted, with the income amount that should be paid taxes for and that it is likely to obtain to offset and deduct the temporary difference that can be offset and deducted as the limit.Yet, these deferred income tax assets generated due to the initial confirmation of assets or liabilities in the transactions simultaneously bearing the following features can not be confirmed: i. This transaction is not an enterprise consolidation; 70 ii. The transaction affects neither accounting profit nor income amount payable (or it can offset or deduct the losses) when it happened; 2. With regard to the temporary difference that can be offset and deducted and is relating to subsidiaries, associated enterprises and joint ventures’ investment, if it can simultaneously satisfy the following terms, the relevant deferred income tax assets can be confirmed: i. The temporary difference is likely to be switched back in the foreseeable future. ii. It is likely to gain the income amount that should be paid taxes for and can be used for offsetting and deducting the temporary difference that can be offset and deducted. 3. For the losses that can be offset and deducted and taxes offset and reduction, which can carry forward in the latter years, it is needed to confirm relevant deferred income tax assets with the future tax-payable income amount that is likely to be obtained to offset and deduct the losses that can be offset and deducted and taxes offset and reduction as the limit. 4. On the balance sheet day, it is needed to make a recheck on the book value of deferred income tax assets. If it is likely to be unable to obtain enough tax-payable income amount for offsetting and deducting the benefit of deferred income tax assets in future, it is needed to decrease and calculate the book value of deferred income tax assets. When it is likely to obtain enough tax-payable income amounts, the decreased and calculated amount can be switched back. (XVI) Calculating method on salary payable to staff The staff’ salary means that the enterprise gives various remunerations for obtaining services providing by the employees or other relevant expenses. It includes: i. Staff’s salary, bonus, allowance and subsidy; ii. Staff’s welfare; iii. Hospitalization insurance, endowment insurance, unemployment insurance, occupational injury insurance and childbirth insurance, etc. social insurances; iv. Housing public reserve; v. Labor union expenditure and personnel education expense; 71 vi. Non-monetary welfare; vii. Compensation for rescinding the labor relationship with employee; viii. Other expenses related with the services the employee supply. During the accounting period of an employee' providing services to an enterprise, the Company shall recognize the compensation payable as liabilities. Except for the compensations for the cancellation of the labor relationship with the employee, the enterprise shall, in accordance with beneficiaries of the services offered by the employee, treat the following circumstances respectively: (1)The compensation for the employee for producing products or providing services shall be recorded as the product costs and service costs; (2)The compensation for the employee for any on-going construction project or for any intangible asset shall be recorded as the costs of fixed asset or intangible assets; (3)The compensation for the employee other than those as mentioned in Items (1) and (2) shall be recorded as profit or loss for the current period. The social insurance such as hospitalization insurance, endowment insurance, unemployment insurance, occupational injury insurance and childbirth insurance; and housing public reserve handed by the company for the staff should be calculated in proportion of total salary according to the relevant regulations of local government during the accounting period of the services the employee supply to the company. Before the expiration of the contract, the company rescinds the labor relationship between the company and the staff or encourage staff accept the suggestion on compensation for accepting reduction at will, at the same time satisfy the following conditions, projected liabilities occurs for confirming rescinding the labor relationship with employee and giving compensation and is reckoned into current gains and losses: i. The company officially established the plan on rescinding the labor relationship or brings forward the suggestions on reduction at will, and will be implemented; 72 ii. The company could not singly withdraw rescinding the labor relationship or suggestions of reduction. (XVII) Projected liabilities If the obligations relevant to contingencies conform to following conditions, the company will confirm it as projected liabilities: 1. The obligation is the current one born by the company; 2. The implementation of the obligation possibly resulted in outflow of economic profit from the company; 3. The amount of the obligation could rely on calculation. The estimated debts shall be initially measured in accordance with the best estimate of the necessary expenses for the performance of the current obligation. To determine the best estimate, an enterprise shall take into full consideration of the risks, uncertainty, time value of money, and other factors pertinent to the Contingencies. The company shall check the book value of the estimated debts on the balance sheet date. If there is any exact evidence indicating that the book value cannot really reflect the current best estimate, the enterprise shall adjust the book value in accordance with the current best estimate. (XVIII)Calculation method of government grants The government grants related to the proceeds, if those used for compensating the relevant future expenses or losses of the enterprise shall be recognized as deferred income and shall, during the period when the relevant expenses are recognized, recorded in the current profits and losses; or if those used for compensating the relevant expenses or losses that have been incurred to the enterprise shall be directly recorded in the current profits and losses. The government grants related to the assets shall be recognized as deferred income and shall be distributed averagely in the related asset using period, then counted into current loss and interest. However, government subsidiary according to nominated amount shall be counted into current loss and interest directly. (XIX) Confirmation method of income 73 1. Selling merchandise Main risks or remuneration in ownership of commodity are transferred to purchaser, and did not implement continuous management or actual control on that commodity; relevant income has gained or obtained receipt of gathering, the income and cost from selling that commodity could be reliably measured which is confirmed as the realization of operating income. 2. Supplying labor force The total labor force income and cost can be reliably measured, the economic profit relevant with transaction possibly flows into enterprise, for the labor force which is begun and finished within same accounting year, the company confirms as income when accomplish the labor force; for the labor force which is begun and finished in different accounting years, under the circumstances that the results of supplying labor force transaction could be reliably estimated, the company confirms as income on the date of asset liabilities statement in percentage method. 3. Transferring the asset usage right Economic profit relevant to transfer of asset usage right could flow into and the income amount could be reliably estimated, while the company confirms as the realization of income from transfer the asset usage right. (XX) Confirmation principle of income tax The accounting management of income tax adopts debt method of asset liabilities. Current income tax payable and deferred income tax is reckoned into current gains and losses as income tax, but except for the followings: i. Enterprise merger ii. Transaction or matters confirmed in owners’ equity directly. ( XXI) Determining principle and compile method for financial report consolidation scope (1)Determining principle on consolidation scope The consolidating scope of consolidated financial report of the Company was made on the basis of control. Control refers to the determined financial and operation policies of invested 74 companies of the Company, and the profit obtain right from the operation of invested companies. On determining controlling invested companies, current transferable company liability and current implemented equity and other potential voting factors should all be considered. Investments to other companies occupying above 50% voting capital total amount (not included 50%) or not above 50% but having factual controlling right, should be counted into consolidating scope. (2)Methods carried in consolidated financial report Consolidated financial report is in accordance with regulations of Accounting Standard for Business Enterprises No. 33 - Consolidated financial statements. On the basis of financial reports of the parent company and subsidiaries of the consolidating scope, according to other related documents and long term equity investment of equity law, it was made by offsetting parent company’s right capital investment and subsidiaries ‘s right of owning shares amount and internal significant transaction. (3)Financial policies for its subsidiaries： Holding subsidiaries’ financial policy should keep in line with the Company. (4) Right amount of minority shareholders should be determined by parent companies’ belonging amount subtracted belonging right amount of parent company’s subsidiaries. Income of minority shareholders should be determined by remaining amount of parent company’s investment income divided by current year loss and interest of the parent company’s belonging subsidiaries. (XXII) Explanation on accounting policy, accounting estimation change and mistake corrections (1) From implemented Enterprise Accounting System and corresponding enterprise financial codes of the Company was changed to implement Enterprise Accounting Standards (hereby named new Accounting Standards) issued by Ministry of Finance on Feb 15, 2006. According to Enterprise Accounting Standards No.38---Initial Implementation of Enterprise Accounting Standards, it traced and adjusted income tax events, as well as traced and adjusted long term investment 75 and other events to Enterprise Accounting Standards Explanation No.1. Combined retained income influence to the Company at the beginning of 2006 and 2007 and net profit influence to Company of 2006 for implementing new Accounting Standards are as follows： Unit: RMB Combined and retained Combined and retained Combined net profit of Item income at the income at the 2006 beginning of 2006 beginning of 2007 Income tax 9,062,208.92 9,745,762.49 683,553.57 Long-term equity investment balance 5,182,375.56 9,266,700.33 4,084,324.77 amortization Right or interest influence to -811,148.19 -750,491.31 60,656.88 minority shareholders Total 13,433,436.29 18,261,971.51 4,828,535.22 Combined capital reserve influence for implementing new Accounting Standards to the company are as follows： Unit: RMB Occurred combined Combined capital reserve at Combined capital reserve capital Item the beginning of 2006 at the beginning of 2007 reserve at thbeginning of 2006 Long-term equity -20,421,624.66 -20,421,624.66 － investment balance Retained income influence to the parent company at the beginning of 2006 and 2007 and net profit influence to the 76 parent company of 2006 for implementing new Accounting Standards are as follows： Unit: RMB Retained income at the Retained income at the Net profit for the parent Item beginning of 2006 beginning of 2007 c o m p a ny o f 2 0 0 6 Income tac 4,014, 421.79 4,649,945.13 635,523.34 Long-term equity investment 4,186,950.60 6,280,425.40 2,093,474.80 balance amortization Calculated by cost method to -190,824,677.01 -300,841,874.91 -110,017,197.90 its subsidiaries Total -182,623,304.62 -289,911,504.38 -107,288,199.76 Capital reserve influence for implementing new Accounting Standards to the company are as follows： U nit: RMB Parent Parent Parent company’s company’s company’s Item capital reserve at capital reserve at occurred capital the beginning of the beginning of reserve of 2006 2006 2007 occurred 2006 Calculated by cost method to -1,611,770.00 its subsidiaries -3,053,669.68 -4,665,439.68 (2) As stated in 6(6) of Notes IV and 9(3) of Note IV, in accordance with the resolution of board of directors of the Company, the Company changed the withdrawing proportion of provision for bad debts and expected net salvage value of fixed asset and expected service life in the report period, the Company adopted future 77 use method in the accouting estimation, and the influences by the accouting estimation on the consolidated net profit of the Company and net profit of the parent company in year 2007 are as follows: Net profit of parent Items Consolidated net profit company Provision for bad debts 14,739 11,459 Depreciation of fixed asset -8,005 -4,452 Income tax -1,220 -1,051 Influences on minority shareholders’ income 631 － Total 6,145 5,956 Note 5. Taxes Turnover tax Value-added tax: sales of commodities would be taxed value-added tax and the tax rate is 17%. Business tax: 5% of the incomes such as lease income; etc would be taxed as business tax. Circulation tax addition The Company and the subsidiaries pay urban maintenance and construction taxes, which are 7% of the total sum of value-added tax and business tax payable, and education additional charges, which are 4% of the total sum of value-added tax and business tax payable. Income tax The Company, its subsidiaries Weifu Jinning, Weifu Diesel System and Wuxi Weifu Lida Catalytic Converter Co., Ltd. are all high-tech enterprises registered at the High and New Technology Development Zone, and enjoy a preferential tax rate of 15% according to relevant state regulations on income taxation; Income tax rates of other shareholding subsidiaries are all 33%. Note 6. Company combination and consolidated financial report 1. Shareholding subsidiaries 78 Shareholding subsidiaries refer to investees for which the Company’s investments take up over 50% of their total registered capital (excluding 50%), or which have actually been controlled by the Company even though the Company’s investments take up less than 50% of their total registered capital. By Dec.31, 2007, the Company’s shareholding subsidiaries are as follows: Registered Registration Investee capital Business scope place (RMB’0000) Accessories and matching parts of Downtown Weifu Jinning 34,628.70 internal Nanjing combustion engine Accessories and matching parts of Wuxi Weifu Mashan Oil Pump Mashan, 4,500.00 internal and Oil Nozzle Co., Ltd. Wuxi combustion engine Wuxi Weifu-Jilin University Developmen Metal nano New Material Application and 500.00 t zone, Wuxi powder Development Co., Ltd. Accessories and Wuxi Weifu Chang’an Oil matching parts of Chang’an, Pump and Oil Nozzle Co., 6,000.00 internal Wuxi Ltd. combustion engine Huishan Jiangsu Weifu Nano-Science District, 3,000.00 Nano materials and Technology Co., Ltd. Wuxi 79 New Weifu Lida Catalytic District, 26,000.00 Muffle, purifier Converter Co., Ltd. Wuxi Accessories and New matching parts of Weifu Diesel System District, 30,000.00 internal Wuxi combustion engine Wuxi Weifu Mashan Oil Pump and Oil Nozzle Co., Ltd. hereinafter referred to as “Weifu Mashan”; Wuxi Weifu-Jilin University New Material Application and Development Co., Ltd. hereinafter referred to as “Weifu Jida”; Wuxi Weifu Chang’an Oil Pump and Oil Nozzle Co., Ltd. hereinafter referred to as “Weifu Chang’an”; Jiangsu Weifu Nano-Science and Technology Co., Ltd hereinafter referred to as “Weifu Nano”; 2. Change of the consolidation scope of the financial statements Consolidation Consolidatio Reasons for the Investee scope of last n scope of change year this year Jinning Yes Yes No Weifu Mashan Yes Yes No Weifu Jilin Yes Yes No Weifu Chang’an Yes Yes No Weifu Nano Yes Yes No Weifu Lida Yes Yes No Weifu Diesel Yes Yes No 3. Joint venture 80 Joint venture refers to enterprises whose operating activities are controlled by 2 investors or more according to articles of a contract. By Dec.31, 2007, the Company’ joint venture companies are as follows: Registered Registration Equity Investee capital Business scope place held (%) (RMB’0000) Weifu New District, Environmental 5,000.00 49.00 Cataly st Wuxi Protection Wuxi Weifu-Autocam New District, Accessory of USD600.00 50.00 Fine Machinery Co. Wuxi automobiles LTD. Chaoyang Fittings and Weifu-Jialin accessories of Chaoyang, Machinery 800.00 50.00 internal Liaoning Manufacturing Co. combustion LTD engine Weifu Environmental Protection: founded collectively by Weifu Lida, which is the Company’s subsidiary; Huawei (Shanghai) Nano-Technology Co., Ltd and BVI Yingdong Holdings Co., Ltd in May 2004. According to the Company’s Articles of Association, Weifu Lida, Huawei (Shanghai) Nano-Technology Co., Ltd etc. would jointly control this company. The Company consolidated it in the proportion. The Company listed this into consolidated financial report according to proportion law. Enterprise Financial Standards and Guidelines issued by Ministry of Finance in Feb. 15, 2006 and Memo No. 4 of New Accounting Standards Implemented by Listed Companies by Shenzhen Stock Exchange will be changed form proportion method into right method. Wuxi Weifu-Autocam Fine Machinery Co. LTD. (hereinafter referred to as Weifu-Autocam): a Sino-Foreign joint venture company founded by the Company and American Autocam in August 2005. Each of the two parties holds a stake of 50% in Weifu-Autocam and control the company jointly. 81 Chaoyang Weifu-Jialin Machinery Manufacturing Co. LTD (hereinafter referred to as Weifu-Jialin): a limited company founded by the Company and Chaoyang Jialin Machinery Manufacturing Co. LTD in June 2006. Each of the two parties holds a stake of 50% in Weifu-Jialin and control the company jointly. Note 7. Commentary on main items of consolidated financial statements (The amount is taking RMB thousand as unit, excluded the specific explanations in the followings) 1. Monetary capital Dec.31, 2007 Dec.31, 2006 Cash 578 327 Current deposit in bank (RMB) 431,478 493,674 Current deposit in bank (US$ 3,041,090) 22,216 25,567 Current deposit in bank (EUR2,000,350) 21,338 19,673 Current deposit in bank (YEN 10,457,000) 670 3,953 Fixed deposit in bank 171,500 169,000 Other monetary capital (RMB) 114,029 95,027 Other monetary capital (EUR 1,000,000) - 10,266 761,809 817,487 [Note] Sum of earnest money of the other monetary capital Items Dec.31, 2007 Dec.31, 2006 Bank acceptance 113,949 94,400 Excluded the aforesaid guarantee, the monetary fund in period-end had no such restricted items as other pledge, frozen; or risks of potential taking back. 2. Notes receivable Dec.31, 2007 Dec.31, 2006 Trade acceptance 74,900 326,619 Bank acceptance 572,148 126,274 Total 647,048 452,893 82 The amount of note receivable in year-end increased RMB 194154800 compared with last year-end, which was mainly because the Company and its subsidiary Weifu Diesel Oil System increased note settlement in this year, of which the Company increased RMB 120,030,200 and its subsidiary Weifu Diesel Oil System increased RMB 104,117,600. The due date of notes receivable at year-end is before Jun.30, 2008. Of the total, Bank acceptance of RMB 6,918,700 is mortgaged for opening notes payable. 3. Accounts receivable (1) Analysis of the account time Dec.31, 2007 Provision for bad Proportion of Net Amount Proportion debts provision amount Within 6 months 512,436 84.73 － － 512,436 From 6 months to 1 47,463 7.85 4,746 10.00 42,717 year From 1 year to 2 7,213 1.19 1,435 19.88 5,778 years From 2 years to 3 2,123 0.35 849 40.00 1,274 3 years above 3,430 0.57 3,430 100.00 － Individual 32,145 5.31 32,145 100.00 － cognizance 604,810 100.00 42,605 7.02 564,504 Dec.31, 2006 Proporti Provision for bad Proportion of Net Amount provision on debts amount Provision % RMB’000 % RMB’00 Within 1 year 665,812 93.43 25,941 3.90 639,871 From 1 year to 2 6,855 0.96 685 10.00 6,170 From 2 years to 3 2,168 0.30 650 30.00 1,518 From 3 years to 4 987 0.14 494 50.00 493 From 4 years to 5 203 0.03 162 80.00 41 5 years above 1,890 0.27 1,890 100.00 - Individual 34,745 4.87 34,514 99.34 231 83 712,660 100.00 64,336 9.03 648,324 (2) Classified according to account nature Dec.31, 2007 Dec.31, 2006 Items Amount Proportion Amount Proportion Domestic account receivable with single significant amount 530,289 87.68% 625,190 87.34% Domestic account receivable with single unsignificant amount 42,376 7.01% 52,725 7.81% Individual cognizance 32,145 5.31% 34,745 4.85% 604,810 100.00% 712,660 100.00% Notes: Account receivable with single significant amount indicated the account which is above RMB 1 million; account receivable with single unsignificant amount indicated the account which is less than RMB 1 million; (3) The balance of accounts receivable at period-end does not include debts owned by major shareholders possessing more than 5% (including 5%) of the Company’s shares. (4) The total amount owed by the top five units in arrears in accounts receivable amounted to RMB 242,510,000, accounting for 40.10% of the total accounts receivable. 4. Account paid in advance 2007-12-31 2006-12-31 Within 1 year 32,799 23,402 1 year to 2 years 36 199 2 years to 3 years 187 195 Above 3 years 70 - 33,092 23,796 5. Other accounts receivable (1) Analysis of the account time Dec.31, 2007 Amount Proportion Provision for bad Proportion of provision Net debts Provision amount Within 6 months 56,843 85.33 － － 56,843 From 6 months to 4,271 6.41 14 0.34 4,257 1 year 84 From 1 year to 2 915 1.37 27 2.92 888 years From 2 years to 3 49 0.07 11 22.04 38 years 3 years above 39 0.06 28 72.14 11 Individual 4,504 6.76 4,504 100.00 － cognizance 66,621 100.00 4,584 6.88 62,037 Dec.31, 2006 Amount Proportion Provision for bad Proportion of provision Net d bt P ii t Within 1 year 8,989 63.25 139 1.55 8,850 From 1 year to 2 247 1.74 4 1.62 243 years From 2 years to 3 18 0.13 5 27.78 13 years From 3 years to 4 47 0.33 8 17.02 39 From 4 years to 5 54 0.38 43 80.00 11 5 years above 23 0.16 23 100.00 - Individual 4,834 34.01 4,834 100.00 - 14,212 100.00 5,056 35.57 9,156 (2) It does not include debts owned by major shareholders possessing more than 5% (including 5%) of the Company’s shares at period-end. (3) Except for the debts owned by related companies and reserve fund for employment in other accounts receivable that were not withdrawn as the provision for bad debts, others were all withdrawn as provision for bad debts according to relevant proportions. (4）The total amount owed by the top five units in arrears in other accounts receivable amounted to RMB 61,117,500, accounting for 91.73% of the total other accounts receivable. (5）The main units and amount in arrears Nature or Content Dec.31, 2007 RMB Nanjing University etc.[ Note 1] Advance investment fund 4,400,000.00 Wuxi Weifu Precise Machineray Manufacturing Co., Ltd. Payment for goods 9,315,746.73 [Note 2] 85 Wuxi Weifu International Trade Co. Ltd.[Note3] Account paid in advance 25,000,000.00 for capital increase Weifu-Autocam[Note 4] Temporary borrowing 6,000,000.00 Bosch Auto Diesel System Co.Ltd.[Note 5] Payment for goods 16,401,705.65 [Note1] Arrears of RMB 2,400,000 from Nanjing University, Southeast University, Nanjing Science and Technology University and Nanjing Industrial University was the investment fund that the Company advanced each amount of RMB 600,000 for the aforesaid universities when Weifu Nano was jointly sponsored by the Company and the aforesaid four universities, which will be returned annually by using the dividends from Weifu Nano according to the cooperation agreement by each university. The debt of RMB 2,000,000 owed by Jiangsu Province Technology & Science Center was the Company’s advance account. As there are difficulties in receiving the aforementioned accounts by dividends from Weifu Nano year by year, the total amount was withdrawn as provision for bad debts in accordance with prudence principle. [Note 2] Wuxi Weifu Precision Machinery Manufacturing Co. Ltd. is associated company of the Company, hereinafter Weifu Precision Manufacturing. [Note 3] Wuxi Weifu International Trade Co.Ltd.(hereinafter Weifu International Trade) is associated company of the Company. The Company plans to increase investment RMB25, 000,000 to this company and paid RMB25, 000,000 on Dec.24, 2007. Till Dec.31, 2007, this item is listed in the form temporaily, for the company has not finished alteration on industrial and commercial register of increasing investment; thus, the account is temporarily listed in the item. [Note 4]Weifu Autocam is the jointly-operated enterprise of the Company, due to enlargement of operation scale, temporarily borrowed the Company RMB 6 million and returned to the Companby in March 2008. [Note 5] Bosch Auto Diesel System Co.Ltd is the affiliated enterprise of the Company, with the following of the short form of Bosch Auto Diesel System. 6. Inventory Dec.31,2007 Dec.31 ,2006 Inventory Inventory Inventory Inventory amount falling p rice amount falling price Inventory 167,576 177,495 29,104 Goods in 169,040 19,147 148,442 130 86 Finished 546,538 73,762 470,826 42,918 883,154 125,329 796,763 72,152 The net realizable value of the inventories is determined by reference to the estimated price for sales of inventories deducting the estimated finished cost and sales expenses in the normal course of operation. 7. Long-term equity investment Increase in Decrease in Dec.31,2006 this period this period Dec.31,2007 Investment to joint venture and associated enterprise 695,436 185,699 51,573 829,562 Investment to other enterprise 116,183 － 765 115,418 Provision for devaluation of long-term investment -44,166 － － -44,166 767,453 185,699 52,338 900,814 (1) Long-term equity investment calculated by equity method Increase Increase Increase or or Invest Amoun or Divide Amount Original decrease decrease ment t at decrease ds at Name of investees investm in in propor period- in equity receive period-e ent cost investme accumula tion begin in this d nd nt in this ted period period equity Bosch Auto Diesel 457,44 - System [note 1] 31.50% 549,557 5 38,044 - -54,068 495,489 Zhonglian Automobile Electronic Co. 20.03% 120,124 213,086 - 69,325 50,193 112,094 232,218 Weifu Precision 20.00 - Manufacturing % 2,000 5,090 2,195 480 4,805 6,805 Weifu - Environmental 49.00 Protection [note 2] % 24,500 - 64,810 - 40,310 64,810 Wuxi Longsheng Technology Co., 20.00 Ltd. % 200 1,005 - 264 - 1,069 1,269 Weifu International 45.00 Trade [note 3] % 2,250 3,314 - 433 900 597 2,847 87 Weifu-Autocam 50.00 [note 4] % 23,547 11,611 9,162 1,085 - -1,689 21,858 50.00 Weifu-Jialin % 4,000 3,885 - 381 - 266 4,266 695,43 726,178 6 9,162 176,537 51,573 103,384 829,562 [Note 1] Bosch Auto Diesel System: The registered capital is US$ 200,000,000, in which The Company funded US$ 60,000,000, accouting for 30% of registered capital, and Weifu Jinning funded US$ 3,000,000, accouting for 1.5% of registered capital. [Note 2] Weifu Environmental Protection: founded collectively by Weifu Lida, which is the Company’s subsidiary; Huawei (Shanghai) Nano-Technology Co., Ltd and so on in May 2004. According to the Company’s Articles of Association, Weifu Lida, Huawei (Shanghai) Nano-Technology Co., Ltd and so on would jointly control this company. The Company brought it into the rabge of consolidated financial statements in 2006, and consolidated by proportion method; according to Accounting Standard for Business Enterprise and its application guidance issued by Ministry of Finance on Feb.15, 2006 and No.4 Memorandum to Implement New Accounting Standards by the Listed Company promulgated by CSRC, the Company will calculate by equity method instead of proportion method. [Note 3]Weifu International Trade is a limited liability company founded by the Company, subsidiary company Weifu Lida and Weifu Group with joint funds in April, 2004; the Company invested RMB 750,000, the controlling subsidiary Weifu Lida invested RMB 1,500,000, respectively accounting for 15% and 30% of the registered capital RMB 5,000,000 of Weifu International Trade. [Note 4] Weifu-Autocam is joint venture founded by the Company and American Autocam in Aug. 2005. The Company is supposed to fund US$ 3,000,000 accounting for 50% of the registered capital RMB 6,000,000 of the company. (2) Long-term equity investment calculated by cost method Investme A mo un t Increase/ A mo un t Name of investees nt at Decrease i i d b i hi i d d Wuxi Guolian Securities Co. 1.20 12,000 - 12,000 Guangxi Liufa Co., Ltd. 1.22 1,600 - 1,600 Changchai Group , Finan cing Co . 800 - 800 Chaoyang Diesel Eng ine Operating Co . 9.09 200 -200 - Hejun Initiative Investmen t Co. 11.72 33,000 - 33,000 Nanjing Hengtai Insurance Broker Co. 1.85 1,000 - 1,000 88 Jiangsu Huifeng Insurance Agency Co. 10.00 500 - 500 Yangdong Co., Ltd. 1.18 2,356 - 2,356 Henan Gushi Wein ing Oil Pu mp & Nozzle Co., Ltd. [Note 1 ] 3,166 - 3,166 Jiangnan Hoisting and Conveying Machinery Co. LTD of Changcai Group 1,621 -565 1,056 Wuxi Keda Chuangxin Inv estment Co., ltd. 1.875 3,000 - 3,000 Beijing Futian Environmental Po wer Holding Co., Ltd . 12.95 56,940 - 56,940 116 ,183 -765 115,418 [Note 1] Over 4 investees including Henan Gushi Weining Oil Pump & Nozzle Co., Ltd. amounted to RMB 3,166,400, were invested by Nanjing Weifu Jinning Co. Details of those companies will not be listed herein considering their smaller production scale. Henan Province Gushi Weining Oil Pump & Nozzle Co. fully appropriated provision for devaluation amounting to RMB 2.03 million in 2001. Because of being unable to keep in touch with Pufa Machinery Industrial Co., Ltd., Nanjing Machinery Industry Foreign Trading Co. and Changjiang Economic Development Co. and other investing companies, it fully appropriated provision for devaluation in their investment in 2002. The situation of the aforesaid companies remained unchanged in year 2007, thus, the appropriated provision for devaluation is not adjusted. [Note 2] Over 4 investees including Jiangnan Hoisting and Conveying Machinery Co. LTD of Changcai Group amounted to RMB 105,600,000, were invested by Nanjing Weifu Jinning Co. Details of those companies will not be listed herein considering their smaller production scale. (3) Provision for devaluation of long-term investment A mo un t at Increase Decrease A mo un t at period-begi in th is in th is period -en d n period period Hejun Initiative Investment Co. 30,000 - - 30,000 Henan Gushi Weining Oil Pump & 3,166 - - 3,166 Nozzle Co., Ltd. etc. Beijing Futian Environmental 11,000 - - 11,000 Power Holding Co., Ltd. 44 ,166 - - 44 ,166 89 8. Fixed assets and accumulated depreciation (1)Original value of fixed assets Increase Decrease Items Dec.31,2006 Reclassification Dec.31,2007 in this in this Buildings 518,748 84,767 - 40 603,475 General equipment 138,425 21,280 14,391 6,619 167,477 Special equipment 781,529 47,747 - 23,255 806,021 Transportation 1,499 19,461 2,122 - 20,084 equipment Other equipment 203,110 7,979 -14,391 8,084 188,614 1,661,273 163,895 - 39,497 1,785,671 (2)Accumulated depreciation Increase Decrease Items Dec.31,2006 Reclassification Dec.31,2007 in this in this Buildings 91,313 26,451 - 7 117,757 General equipment 46,475 24,689 - 2,432 68,732 Special equipment 299,893 65,256 - 15,637 349,512 Transportation 1,236 7,650 1,463 - 7,877 equipment Other equipment 73,196 17,648 - 3,408 87,436 518,527 135,507 - 22,720 631,314 （3）Provision for fixed assets Items Dec.31,2006 Increase Reclassification Decrease Dec.31,2007 General equipment 779 5,036 - 106 5,709 Special equipment 2,074 3,881 - - 5,955 2,853 8,917 - 106 11,664 （4）Book value Items Dec.31,2006 Dec.31,2007 Buildings 427,435 485,718 General equipment 91,171 93,036 Special equipment 479,562 450,554 Transportation 11,811 12,207 equipment Other equipment 129,914 101,178 1,139,893 1,142,693 [Note 1] Original value of fixed assets has increased RMB 163,894,574 this year; it’s mainly because of the transfer-in amounting to RMB 129,118,820 from project in construction, and the rest are direct outsourcing. [Note 2] Decrease in original value of fixed assets this year includes the decreases because of not consolidating the statement of Weifu Environment Protection by 90 proportion method and thus transferring out the original value of fixed asset amounting to RMB 9, 679,938, and other decrease mainly because of sale or retirement. [Note 3] There are no fixed assets used for renting-in through financing or for mortgage in the fixed assets at period-end. [Note 4] Decrease in accumulated depreciation includes the decreases because of not consolidating the statement of Weifu Environment Protection by proportion method and transferring out the accumulative depreciation in period-begin amounting to RMB 1, 752,906. [Note 5] The sealed general and special equipment in the fixed assets at period-end can be withdrawn as provision for devaluation according to the balance as the receivable amount is lower than its book value. Decrease in provision for devaluation of fixed assets is mainly because that the fixed assets for withdrawing the provision for devaluation of fixed assets in previous years had been disposaled this year, including the decrease because of not consolidating Weifu Environment Protection by proportion method and thus transferring out the provision for the devaluation of fixed asset in period-begin amounting to RMB 86,363. 9. Project in construction Increase Amount of Amount at Other Amount at in transfer period-begin decrease period-end this to fixed Project of High Pressure 13,240 29,516 13,273 - 29,483 Track Joint Project of Technology 12,495 1,320 852 - 12,963 Reform on Nationalizing The second period project - 7,385 - - 7,385 in Weifu Jinning Hi-tech Project of No.103 Plot in 44,691 44,262 67,065 - 21,888 Wuxi New Developed Area Wuxi Huishan Development 28,771 4,857 - 13,910 19,718 Zone Project Miscellaneous Projects 53,643 28,351 47,928 5,925 28,141 152,840 115,691 129,118 19,835 119,578 Provision for depreciation - - of project in construction 152,840 119,578 [Note 1] Capital source of project in construction: Project of Productivity Improving on High Pressure Track Joint, Project of Technology Reform on Nationalizing Parts of Fuel System, Project of No.50 Plot in New Developed Area, Project of No.103 Plot in New Developed Area, Huishan Development Zone Project and Miscellaneous 91 Projects are projects of self-raised funds, capital source of PW Pump 2000 is special capital of national debt technology renovation. [Note 2] The capitalized loan interests in Huishan Development Zone Project are RMB1, 300,247. [Note 3] Other decrease of Huishan Development Zone Project is because the land uses right tuned into intangible assets. [Note 4] Other decrease of Miscellaneous Projects is because the statement of Weifu Environmental Protection is not consolidated according to the proportion this year and thus transfeering out the amount of construction in progress in period-begin. 10. Intangible assets Increase Decrease Items Dec.31,2006 in in Dec.31,2007 this period this period (1)Original value of the intangible assets Land use right of parent 30,452 14,769 15,683 - company Trademark permit use 26,356 26,356 - - right Weifu Jinning Land use right of Weifu 28,752 28,752 - - Jinning Software of Weifu Jinning 346 - - 346 Land use right of Weifu 25,612 - 12,380 13,232 Diesel oil System Chartered right of Weifu 37,109 - - 37,109 Diesel oil System Software of Weifu Diesel 5,412 142 - 5,554 oil System Proprietary technology of Weifu Environmental 8,575 - 8,375 - Protection 146,931 15,825 20,955 141,801 (2) Accumulative 92 Increase Decrease Items Dec.31,2006 in in Dec.31,2007 this period this period Land use right of parent 1,038 664 - 1,702 Trademark permit use 7,081 7,957 876 - right Weifu Jinning Land use right of Weifu 8,386 958 - 9,344 Software of Weifu 104 69 - 173 Land use right of Weifu 1,314 392 745 961 Diesel oil System Chartered right of Weifu 9,262 3,713 - 12,975 Diesel oil System Software of Weifu Diesel 1,323 1,062 - 2,385 Proprietary technology of 1,132 - 1,132 - Weifu Environmental 29,640 7,734 1,877 35,497 (3)Book value Items Dec.31,2006 Dec.31,2007 Land use right of parent 13,731 28,750 Trademark permit use 19,275 18,399 right Weifu Jinning Land use right of Weifu 20,366 19,408 Software of Weifu 242 173 Land use right of Weifu 24,297 12,271 Diesel oil System Chartered right of Weifu 27,848 24,134 Diesel oil System Software of Weifu Diesel 4,089 3,169 Proprietary technology of Weifu Environmental 6,585 - P t ti 116,433 106,304 [Note 1] Land use right of parent company increase RMB15,635,582 this year ,which is because that the Company purchased the land use right of one lot in Wuxi Huishan Development Zone. [Note 2] Decrease of land use right in Weifu Diesel oil System this year is because that it transfer part of land use right to WeiFu Environment Protection this year. [Note 3] No situation of intangible assets that can be draw back being lower than book value, so not withdraw the provision for devaluation of intangible assets. [Note 4] Decrease in Proprietary technology of Weifu Environmental Protection this 93 year is because of not consolidating joint venture by proportion method this year. 11 Deferred income tax asset Dec.31,2007 Dec.31,2006 Deferred Deductible Deferred Deductible Items income tax temporary income tax temporary asset difference asset difference Provision for bad 2,452 47,189 5,160 69,392 Provison for 18,876 72,152 125,329 3,751 depreciation of Provision for 1,750 2,853 11,664 421 devaluation of fixed others 6,267 41,779 502 3,345 29,345 225,961 9,834 147,742 12. Provision for devaluation of asset Decrease in Amout this period withdrwal Items Dec.31,2006 Written Dec.31,2007 in this Switching off or period back other decrease Provision for bad 69,392 502 16,055 6,650 47,189 Provision for depreciation of 72,152 53,444 100 167 125,329 inventory Provision for 44,166 - - - 44,166 devaluation of Provision for 2,853 8,917 20 86 11,664 devaluation of 188,563 62,863 16,175 6,903 228,348 [Note] Other decrease in this year includes the decrease of provison for bad debts RMB 540, 077, the decrease of provision for depreciation of inventory RMB166, 600, RMB 86, 363 decrease of provision for devaluation of fixed assets because of not consolidating Weifu Environment Protection by proportion method and thus transferring out the provision for bad debt in period-begin. 13. Short-term loans 94 Sorts of loan Dec.31,2007 Dec.31,2006 Guaranteed loan 292,000 282,000 Mortgage loan 1,350 － Credit loan (RMB) 1,134,169 1,119,600 Credit loan (USD 8,000,000) 58,437 62,470 1,485,956 1,464,070 [Note 1] No short-term loans which have fallen due but not been repaid occurred in this account. [Note 2] Mortage loan in short-term loans is got by Weifu Lida pledging the bank acceptance. [Note 1]The Guaranteed Loan includes: RMB 60,000,000 for Weifu Jinning by the Company; RMB 37,000,000 for Weifu Mashan by the Company; RMB 80,000,000 for Weifu Chang’an by the Company and RMB 15,000,000 for Weifu Lida by the Company and another RMB 100,000,000 for the Company by Weifu Group. 14. Notes payable Sorts of notes Dec.31,2007 Dec.31,2006 Bank acceptance 174,171 151,652 15Accounts payable (1) Analysis of debt age Dec.31, 2007 Dec.31, 2006 Payable account Proportion Payable account Debt age Proportion (%) amount (%) amount In a year 96.99 620,558 97.58% 535,643 One to two 1.76 11,246 1.96% 10,727 years Two to three 0.96 6,167 0.16% 897 years Above three 0.29 1,845 0.30% 1,668 years 100.00% 639,816 100.00% 548,935 (2) There was no huge payable account above three years (3) Payable accounts of owning above 5%（including 5%）shares Item Dec.31, 2007 Dec.31, 2006 Weifu Group － 11,811 95 16 Employees’ salary payable Item Dec.31, 2006 Increase in this Decrease in this Dec.31, 2007 period period Salary, bonus, allowance and subsidy 9,662 189,561 186,188 13,035 Employees’ welfare 18,621 -784 17,836 － Employee’s encouragement and welfare fund 1,229 － 1,229 － Social insurance 29,253 73,986 82,956 20,283 Housing Fund Social Insurance 1,297 16,409 15,968 1,738 Housing allowance for old employees 5,000 35,029 29 40,000 Labor union expenditure and Personnel 6,642 6,997 4,297 9,342 Others (internal insurance etc.) 6,059 1,372 430 7,001 77,763 322,570 308,933 91,399 [Note 1] Decrease of this year does not include the consolidated the statement of Weifu Environmental Protection in proportion method and thus transferring outh the amount in period-begin amounting to RMB 1,410,514. [Note2] Housing allowance for old employees: Employee’s housing allowance is in accordance with the old employee’s house buying allowance was made provision by directors’ meeting. [Note3] Internal insurance：According to supplementary old-age insurance and staff deposit endowment plan, employees, since the second year of entering the Company, pay 2% of their average salary as well as 1% supplemented by the enterprise, and these can all be get when they retired. 17Taxes payable Taxes Dec.31, 2007 Dec.31, 2006 VAT -1,513 4,536 Tax for city construction 37 465 Income tax 16,756 -3,489 Extras of education expense 49 306 Others 3,451 2,192 18,780 4,010 96 18. Other payables (1)Debt of owning above 5%(including5%) of its shares Item Dec.31, 2007 Dec.31, 2006 Weifu Group 134 － (2)There was no huge other payables above three years. (3)Other huge payables are listed as follows: Character or content Dec.31, 2007 Bosch Group Trademark using 4,285 expense Nanjing Turbine& Electric Machinery (Group) Co., Ltd. Loan 4,000 （above 3 years debt） Nanjing Advanced Technology Developing Co. Land expense 13,913 Nanjing Steamship Engine Group Co., Ltd. 3,000 Land purchase: The account payable amounting to RMB 19,500,000 to Nanjing New&High-tech Development Corp. is for land use right of 200,000 square meters in Hign-tech District, Nanjing Weifu Jinning got in Dec. 2002. Balance of period-end is account that had not been account payable in 2006. Nanjing Steamship Engine Group Co., Ltd.: Weifu Jinning borrowed RMB 8,000,000 from Nanjing Steamship Engine Group Co., Ltd. in Aug. 1997, the both parties promised to amortize. At present, Weifu Jinning has repaid RMB 4,000,000. 19Non-current liabilities due within 1 year Dec.31, 2007 Dec.31, 2006 Guaranteed loan － 70,000 Pledge loan － 3,000 － 73,000 20. Other current liabilities Content Dec.31, 2007 Interest of bank loan 2,361 Payable share interest to minority 2,964 shareholders of Weifu Jinning Other 7,836 97 21. Long-term accounts payable Items Dec.31, 2007 Nanjing Finance Bureau New&Hi-tech Branch nancial supporting fund (2001) 1,880 Nanjing Finance Bureau New&Hi-tech Branch nancial supporting fund (2003) 140 Nanjing Finance Bureau New&Hi-tech Branch nancial supporting fund (2004) 1,710 Nanjing Finance Bureau New&Hi-tech Branch ancial supporting fund (2005) 1,140 Nanjing Finance Bureau New&Hi-tech Branch nancial supporting fund (2006) 1,250 Nanjing Finance Bureau New&Hi-tech Branch inancial supporting fund (2007) 1,230 National debt transferred to loan [Note7] 5,600 12,950 [Note 1] To encourage Weifu Jinning to enter Nanjing New& High Technology Industry Development Zone, financial supporting capital is allotted by New & High branch of Finance Bureau of Nanjing for supporting use, the term is from Dec.20, 2001 to Aug.18,2 007, Provided that the operation period in the zone is less than 10 years, financial supporting capital will be reimbursed. [Note 2] To encourage Weifu Jinning to enter Nanjing New& High Technology Industry Development Zone, financial supporting capital is allotted by New & High branch of Finance Bureau of Nanjing for supporting use, the term is from Dec. 24, 2003 to Dec. 24, 2007, Provided that the operation period in the zone is less than 10 years, financial supporting capital will be reimbursed. The original calculating into the other account payable should be transferred to long-term account payable. [Note 3] To encourage Weifu Jinning to enter Nanjing New& High Technology Industry Development Zone, financial supporting capital is allotted by New & High branch of Finance Bureau of Nanjing for supporting use, the term is from Aug.15, 2004 to Aug.4, 2012, Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note 4] To encourage Weifu Jinning to enter Nanjing New& High Technology Industry Development Zone, financial supporting capital is allotted by New & High branch of Finance Bureau of Nanjing for supporting use, the term is from Oct. 20, 2005 to Oct. 20, 2020, Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note 5] To encourage Weifu Jinning to enter Nanjing New& High Technology Industry Development Zone, financial supporting capital is allotted by New & High branch of Finance Bureau of Nanjing for supporting use, the term is from Jul. 20, 2006 to Jul. 20, 2021, Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note 6] To encourage Weifu Jinning to enter Nanjing New& High Technology Industry Development Zone, financial supporting capital is allotted by New & High branch of Finance Bureau of Nanjing for supporting use, the term is from Sep. 17, 2007 to Sep. 17, 2022, Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. 98 [Note7] National debt transferred to loan is the transferred national debt capital received by Weifu Jinning. 22. Share capital Dec.31, 2006 Increase and Dec.31, 2007 decrease in the period Non-circulating share capital with restricted trade conditions -National legal person share 122,844 -8,782 114,062 -Other internal capital share 1,097 -1,006 91 Including：other internal capital 976 -976 － share Owning shares by senior executors 121 -30 91 123,941 -9,788 114,153 Circulating share capital -Domestically listed foreign shares 114,920 － 114,920 (B-share) -Domestically listed ordinary shares 328,415 9,788 338,203 (A-share) 443,335 9,788 453,123 567,276 － 567,276 23. Capital Reserves Increase or Dec.31, 2006 decrease in the Dec.31, 2007 period Capital premium [Note 1] 888,497 - 888,497 Other capital reserve [Note 2] 17,943 - 17,943 906,440 - 906,440 [Note 1] Capital premium refers to the part of exceeding share capital when the Company issues B-shares and A-shares; [Note 2] Other capital reserve refers to the donation that the Company accepts non-cash assets. The assets have been coped with. And capital reserve identified by its subsidiaries and right law in proportion. 24. Surplus Public Reserve 99 Decrease Increase in the Dec.31, 2006 in the period Item period Dec.31, 2007 Statutory surplus public reserve 222,767 19,203 － 241,970 25. Undistributed profit Item Dec.31, 2007 Dec.31, 2006 Undistributed profit at the beginning 505,704 640,122 Add: Net profit in this year 230,428 93,108 Less: Statutory surplus public reserve withdraw 19,203 Dividends of ordinary shares 34,036 226,910 Getting employee’s encouragement － 616 and welfare fund Undistributed profit in the period end 682,893 505,704 [Note1] On April 13, 2008, the 11th Meeting of the Fifth Board of Directors of the Company decided to make provision for legal remaining reserve from 10% of the net profit of this year. [Note2] On April 16, 2007, the 8th Meeting of the Fifth Board of Directors of the Company examined and passed the 2006 Profit Distribution Plan and gave RMB 0.6(including tax) per 10 shares to all shareholders, and there were in total RMB34,036,559.70 interest of shares. The above distribution plan was examined, passed and implemented shareholders’ meeting of 2006. 26. Income from business Item Year of 2007 Year of 2006 Income of diesel oil internal-combustion engine 2,698,271 2,264,078 pump and accessory Income of catalyze purifier and accessory 133,934 192,409 Income of other products 55,470 24,670 Income of other business 238,533 188,800 100 3,126,208 2,669,957 Operation income of 2007 increased RMB 451,380,000, 16.91% than 2006, which was mainly for the parent company’s operation income increase of RMB 246, 670, 00. Subsidiary Weifu Diesel System in consolidated report increased RMB 21, 911 of its operation income because of the influence of heavy diesel vehicle industry. Total sales income to the top 5 clients in the main operation income is RMB1, 458,680,000, 46.73% of the main operation income. 27. Cost from business Item Year of 2007 Year of 2006 Cost of diesel oil internal-combustion engine pump 2,027,094 1,646,409 Cost of diesel oil internal-combustion engine pump 119,456 177,169 Cost of other products 56,045 26,997 Cost of other business 230,451 179,943 2,433,046 2,030,518 Operation cost of 2007 increased RMB 402,530, 000, 19.82% than 2006, which was mainly for the increase of operation income. 28. Tax of core business and associate charges Year of 2007 Year of 2006 City maintenance and construction 10,451 10,358 Education associate charge 5,969 5,951 Business tax 638 280 17,058 16,589 29. Financial expenses Year of 2007 Year of 2006 Loan interest expenses 87,491 75,313 Draft discount interest 13,686 10,825 Commission expenses 329 742 Exchange losses 3,373 -11,629 Interest income of bank deposit(Note) -13,075 -13,062 91,804 62,189 101 [Note] Income of bank deposit includes income of fixed deposit interest. 30. Losses from devaluation of asset Item Year of 2007 Year of 2006 Losses of bad debts -15,553 -3,584 Losses of depreciation of inventory 53,344 40,262 Losses of devaluation of fixed asset 8,897 -3,537 46,688 33,141 31. Investment income Year of 2007 Year of 2006 Income of unconsolidated subsidiaries and affiliated 128,671 -23,661 companies [Note 1] Other long-term equity investment income 7,118 546 Income from transfer of fund 478 1,125 Income from transfer of equity － 105 mortize balance of long-term equity investment [Note － -2,496 136,267 -24,381 There was no significant limitation of investment income return. [Note 1] Income of unconsolidated subsidiaries and affiliated companies Year of 2007 Year of 2006 Weifu Autocam 1,085 -2,774 Weifu Jialin 381 -115 Weifu Environment Protection 16,944 － Zhonglian Auto Electronic Co., Ltd. 69,325 52,616 Weifu Precision Manufacturing 2,195 1,338 Bosch Auto Diesel System 38,044 -75,701 Weifu International Trade 433 270 Wuxi Longsheng Technology Co., 264 705 128,671 -23,661 In 2006, Weifu Environment Protection combined according to proportion law, and made calculation according to equity method this year. [Note 2] List on amortization balance of long-term equity investment: 102 Year of 2007 Year of 2006 Bosch Auto Diesel System － -2,496 － -2,496 32. Non-operating income Item Year of 2007 Year of 2006 Income of disposing fixed assets 807 2,219 Income of invisible asset transfer 5,230 － Subsidy income 4,460 10,583 Other 298 738 10,795 13,540 33. Non-operating cost Item Year of 2007 Year of 2006 Loss of disposing fixed assets 2,618 6,564 Expenses of donation 350 2,249 Market commodity adjusting fund etc. 9,306 7,854 Other expenses 1,469 654 13,743 17,321 34. Expense of income tax Items 2007 2006 Income tax payable 36,645 8,393 Added loan of deferred income tax － 88 Added assets of deferred income tax -19,570 -772 Expense of income tax 17,075 7,709 35. Related item explanation for cash flow statement (1)Received other cash RMB19, 745,456.87 related to operation activity is mainly of income of the bank deposit interest and government grants etc. 103 (2)Paid other cash RMB 284,704,919.82 related to operation activity is mainly of operation expense and management expense. (3) Supplementary materials of cash flow statement Items 2007 2006 I. Net profit subject to cash flow arising from operating activities Profit, net 230,428 93,108 Add: Minority shareholders’ income 35,602 34,041 Provision for fixed assets devaluation 46,688 33,141 Fixed assets depreciation 135,507 106,120 Allocations of intangible assets 7,735 7,569 Allocations of long-term expenses to be allocated 280 193 Losses from disposal of fixed, intangible and other long-term assets(Income is listed with “-”) -3,633 3,302 Losses from obsolete fixed assets(Income is listed with “-”) 213 1,044 Losses from changes of fair value(Income is listed with “-”) - - Financial expenses 87,491 76,433 Losses from investment(Income is listed with “-”) -136,267 24,381 Decrease of deferred income tax(Increase is listed with “-”) -19,570 -772 Increase of deferred income tax( (Decrease is listed with “-”) - 88 Decrease of inventory(Increase is listed with “-”) -110,523 40,606 Decrease of operating receivables(Increase is listed with “-”) -150,987 -161,589 Increase of operating payables(Decrease is listed with “-”) 61,839 184,743 Other -35 4,334 Net cash generated from operations 184,768 446,742 II. Significant investment and financial activities not related to cash flows Capital transferred from debts Convertible company bonds due within one year Fixed assets leasing for financing III. Net increase in cash /cash equivalent Balance of cash at period-end 647,860 723,087 Less: Balance of cash at period-beginning 723,087 650,185 Add: Balance of cash at period-beginning(Proportion in the first half merger affiliated enterprises) 9,393 - Add: Balance of cash equivalent at period-end - - Less: Balance of cash equivalent at period-beginning - - 104 Net increase in cash /cash equivalent -65,834 72,902 (4) Constitution of cash and cash equivalents Item 2007-12-31 2006-12-31 Cash balance listed in balance sheet 761,809 817,487 Less: Guarantee of bank acceptance bill not conforming to the definition of cash 113,949 94,400 Balance of cash and cash equivalents listed in cash flow statement 647,860 723,087 Note 8. Notes to the main items in the financial statements of the parent company(The amount is taking RMB thousand as unit excluded the specific explanations) 1. Accounts receivable 2007-12-31 Amount Proportion Provision Proportion of Net amount (%) for bad debts provision (%) Within six 259,935 83.16 － － 259,935 Between 6 months- 1year 24,760 7.92 2,476 10.00 22,284 Between 1-2 3,024 0.97 605 20.00 2,419 Between 2-3 199 0.06 80 40.00 119 Above three 338 0.11 338 100.00 － Recognized by 24,319 7.78 24,319 100.00 － 312,575 100.00 27,818 8.90 284,757 2006-12-31 Amount Proportion Provision Proportion of Net amount (%) for bad debts provision (%) Within six 290,262 91.64 14,723 5.00 275,539 Between 6 months- 1,433 0.45 143 10.00 1,290 Between 1-2 205 0.07 62 30.00 143 Between 2-3 422 0.13 211 50.00 211 Above three 123 0.04 98 80.00 25 Recognized by 1,261 0.40 1,261 100.00 - Within six 23,024 7.27 23,024 100.00 - 316,730 100.00 39,522 12.48 277,208 2. Other accounts receivable 105 2007-12-31 Amount Provison for bad debt Within six months 65,263 － Between 6 months- 1 year 4,051 － Between 1-2 years 750 － Between 2-3 years 33 － Recognized by single 4,400 4,400 74,497 4,400 2006-12-31 Amount Provison for bad debt Within 1 year 23,783 － Between 1-2 years 206 － Recognized by single 4,400 4,400 28,389 4,400 Note: At the end of 2007 mainly composes of payments receivable or advance money of the subsidies and related parties, till money borrowed by employees, investment incurred for other shareholders of Weifu Narometer etc. The investment withdrawn 100% bad debts reserve incurred for other shareholders of Weifu Narometer by the Company amounting to RMB 4,400,000. 3. Long-term equity investment 2007-12-31 2006-12-31 Consolidated subsidiaries 695,848 697,951 Joint companies and affiliated companies 738,298 670,742 Other long-term equity investment 51,256 51,456 Provision for devaluation of long-term investment -30,000 -30,000 1,455,402 1,390,149 (1) Investment on subsidiaries calculated based on cost method 106 Amount at Decrease A mo un t at Name of the Investment Increase the in the the investee proportion in the period period-end period-begin period Weifu Jinning 80.00% 178 ,640 - - 178 ,640 Weifu Lida 94.81% 230 ,114 - - 230 ,113 Weifu Nanometer 80.00% 24 ,000 - - 24,000 Weifu Diesel Oil 70.00% 140 ,000 - - 140 ,000 System Weifu 92.60% 44 ,368 5 ,552 48 ,696 Mashan (Note 1 ) 1 ,225 Weifu Chang ’an (Note 94.63% 77 ,329 9 ,350 70 ,899 2) 15 ,780 Weifu Jida 70.00% 3 ,500 - - 3,500 697 ,951 14 ,902 17 ,005 695 ,848 [Note 1] Increase in the report period was that the Company transferred the equity of Weifu Mashan held by Weifu Chang’an; decrease in the report period was that the Company received the distributed previous years profit of Weifu Mashan. [Note2] Increase in the report period was that the Company transferred the equity of Weifu Chang’an held by Weifu Mashan; decrease in the report period was that the Company received the distributed previous years profit of Weifu Chang’an. (2) Long-term equity investment calculated based on equity method Increase Increase Increase /decreas Amount /decrease Amount Initial e Name of the Investment at the in /decrease Bonus at the amount investm in equity gained investee proportion period-b investme of period-be ent cost in the accumul egin nt in the gin period ative period equity Weifu Autocam 50.00% 23,547 11,611 9,162 1,085 - -1,689 21,858 Weifu Jialin 50.00% 4,000 3,885 - 381 - 266 4,266 Bosch Automobile Diesel Oil System Co., 435,96 472,20 Ltd. 30.00% 523,695 5 - 36,236 - -51,494 1 Zhonglian Automobile Electronic Company 213,08 232,21 Limited 20.03% 120,124 6 - 69,325 50,193 112,094 8 Wuxi Weifu 20.00% 2,000 5,090 - 2,195 480 4,805 6,805 107 Precise Machinery Manufacturing Co., Lt d. Wuxi Weifu International Trade Co., Ltd. 15.00% 750 1,105 - 145 300 199 950 670,74 738,29 674,116 2 9,162 109,367 50,973 64,181 8 (3) Other long-term equity investment calculated based on cost method Name of investee Investmen A mo un t in Increase/de A mo un t in Gulian Securities Co., Ltd. 1 .20 12 ,000 - 12,000 Guangxi Liufa Co., Ltd. 1 .22 1,600 - 1,600 Fin ance Co mp an y of 800 - 800 Zhaoyang Diesel Operating Co., 9 .09 200 -200 - d Hejun Venture Capital Co., Ltd. 11 .72 33 ,000 - 33,000 Nanjing Hengtai Insurance and 1 .85 1,000 - 1 ,000 k HSBC Jiangsu i i InsurancedAgents 10 .00 500 - 500 i i d Yangdong Co., Ltd. 2,356 - 2 ,356 51 ,456 -200 51,256 (4) Provision for devaluation of long-term investment\ A mo un t Increase in Decrease A mo un t in in the th e p eriod in the th e period period period en d beginnin g Hejun Venture Capital 30 ,000 - 30 ,000 Co., Ltd. - 4. Operating ncome Items 2007 2006 Pump, injection and fittings 1,438,557 1,240,483 Income from other products 29,366 7,036 Other business income 170,553 144,290 108 1,638,476 1,391,809 5. Operating cost Items 2007 2006 Pump, injection and fittings 1,207,063 1,019,022 Income from other products 33,112 11,685 Other business income 165,299 139,198 1,405,474 1,169,905 6. Investment income Items 2007 2006 109,366 Investment income calculated -20,945 based on equity method － Investment income from 105 transaction financial assets Bonus of subsidiaries calculated 79,802 － based on cost method Other bonus calculated based on 6,970 361 cost method Transferring income of equity -190 1,125 － Balance of long-term equity -2,496 investment 195,948 -21,850 7. Explanations on cash flow statement (1)Cash received arising from other operating activities amounted to RMB 57,849,228.52 which was the current fund received from subsidiaries and interest income of bank deposit 109 (2) Cash paid for other operating activities amounted to RMB 163,883,052.32 which was paying the operation expense and administration expense; (3) Supplementary materials of cash flow statement Items 2007 2006 I. Net profit subject to cash flow arising from operating activities Profit, net 192,034 -18,700 Add: Provision for devaluation of asset 17,234 577 Fixed assets depreciation 84,572 57,998 Allocations of intangible assets 664 86 Allocations of long-term expenses to be allocated - - Losses from disposal of fixed, intangible and other long-term assets(Income is listed with “-”) 1,206 2,108 Losses from obsolete fixed assets(Income is listed with “-”) - 1,023 Losses from changes of fair value(Income is listed with “-”) - - Financial expenses 49,098 38,344 Losses from investment(Income is listed with “-”) -195,948 21,850 Decrease of deferred income tax(Increase is listed with “-”) -1,945 -636 Increase of deferred income tax( (Decrease is listed with “-”) - - Decrease of inventory(Increase is listed with “-”) -15,165 -31,653 Decrease of operating receivables(Increase is listed with “-”) -165,206 -6,188 Increase of operating payables(Decrease is listed with “-”) -34,166 78,253 Other - - Net cash generated from operations -67,621 143,062 II. Significant investment and financial activities not related to cash flows Capital transferred from debts Convertible company bonds due within one year Fixed assets leasing for financing III. Net increase in cash /cash equivalent Balance of cash at period-end 131,564 276,017 Less: Balance of cash at period-beginning 276,017 242,953 Add: Balance of cash equivalent at period-end - - Less: Balance of cash equivalent at period-beginning - - Net increase in cash /cash equivalent -144,453 33,064 (4) Constitution of cash and cash equivalents 110 Item 2007-12-31 2006-12-31 Cash balance listed in balance sheet 236,564 367,017 Less: Guarantee of bank acceptance bill not conforming to the definition of cash 105,000 91,000 Balance of cash and cash equivalents listed in cash flow statement 131,564 276,017 Note 9. The relationship of the related parties and transactions (Unit: RMB’ 000) 1. The related parties existing controlling relationship Relationship with Legal Name of enterprise Registered address Core business Economic type the Company representative Weifu Group Wuxi city Machine processing Parent Company Wholly owned by the Xu Liangfei state Weifu Mashan Mashan,Wuxi i.c.engine components Subsidiary Company Limited ao Guoyuan Development Weifu Jida Metal Nano-material Subsidiary Company Limited u Liangfei District, Wuxi Weifu Chang’an Chang’an, Xishan i.c.engine components Subsidiary Company Limited ao Guoyuan New District, Silencer, Weifu Lida Subsidiary Company Limited Xu Liangfei Wuxi Catalytic converter Huishan District, Weifu Narometer Nanometer Materials Subsidiary Company Limited Xu Liangfei Wuxi Nanjing Weifu Jingning Oil pump and oil mouth Subsidiary Company Limited Xu Liangfei Development Weifu Diesel New District i.c.engine components Subsidiary Company Limited Xu Liangfei Oil System Wuxi 2. Registered capital of the related parties existing controlling relationship and the changes Amount in Name of Amount in the period Increase in Decrease in the period enterprise beginning the period the period end Weifu Group 134,830 - - 134,830 Weifu Mashan 45,000 - - 45,000 Weifu Jida 5,000 - - 5,000 Weifu Chang’an 60,000 - - 60,000 Weifu Lida 260,000 - - 260,000 Weifu Narometer 30,000 - - 30,000 Weifu Jingning 256,000 90,287 - 346,287 111 Weifu Diesel Oil System 200,000 100,000 - 300,000 3. Share capital of the related parties existing controlling relationship and the changes 1. Amount in the period Decrease in Amount in the period Increase in the Name of enterprises beginning the end period Amount % period Amount % Weifu Group 114,062 20.11 - - 114,062 20.11 Weifu Mashan 45,000 100.00 - - 45,000 100.00 Weifu Jida 3,500 70.00 - - 3,500 70.00 Weifu Chang’an 60,000 100.00 - - 60,000 100.00 Weifu Lida 246,500 94.81 - - 246,500 94.81 Weifu Narometer 24,000 80.00 - - 24,000 80.00 Weifu Jingning 204,800 80.00 72,229 - 277,029 80.00 Weifu Diesel Oil System 140,000 70.00 70,000 - 210,000 70.00 4. The related parties existing joint controlling relationship 2. Registered Relationship with Legal Name of enterprise Main business Economic type address the Company representative New Joint venture Sino-foreign joint Weifu Environmental district of Catalyst company of Weifu venture enterprise Xu Liangfei Wuxi Lida New Spare parts of Joint venture Sino-foreign joint Weifu Autocam district of automobiles Gao Guoyuan enterprise venture enterprise Wuxi Accessories Zhao yang, of oint venture Limited Weifu Jialin i Xiaofeng Liaoning internal-co en terp rise company mbustion 5. Registered capital of the related parties existing joint controlling relationship and the changes 3. Name of Amount in the Increase in the Decrease in Amount in the enterprise period period the period period end beginning Weifu Environmental 50,000 - - 50,000 Weifu Autocam USD6,000 - - USD6,000 Weifu Jialin 8,000 - - 8,000 112 6. Share capital of the related parties existing joint controlling relationship and the changes 4. Amount in the period Decrease in Amount in the period Increase in the Name of enterprises beginning the end period Amount % period Amount % Weifu Environmental 24,500 49.00 - - 24,500 49.00 Weifu Autocam USD3,000 50.00 - - USD3,000 50.00 Weifu Jialin 4,000 50.00 - - 4,000 50.00 7. Type of the related parties without existing joint controlling relationship 5. Name of enterprises Relationship with the Company Bosch Auto Diesel System Affiliated company Weifu Precise Machinery Affiliated company Wuxi Weifu International Trade Co., Ltd. The same parent company Wuxi Weifu Economic Trade Co., Ltd. The same parent company Wuxi Weixin Machinery Co., Ltd. The same parent company Kunming Xitong Machinery Co., Ltd. Joint venture company of Weifu Group 8. The transactions between the Company and the related parties (1) Purchase of commodities or labor force 6. Name of enterprises 2007 2006 Weifu Group 7,314 9,572 Weifu Precise Machinery 133,744 93,821 Bosch Auto Diesel System 34,824 32,266 Wuxi Weifu International Trade Co., Ltd. 5,599 2,608 Wuxi Weifu Economic Trade Co., Ltd. 2,157 2,246 Wuxi Weixin Machinery Co., Ltd. 3,595 － (2) Sale of commodities Name of enterprises 2007 2006 Weifu Group 224,431 194,768 Weifu Precise Machinery 15,712 15,555 Bosch Auto Diesel System 105,926 71,016 113 Wuxi Weifu International Trade Co., Ltd. 39,756 13,767 Weifu Jialin 47,264 5,879 Wuxi Weifu Economic Trade Co., Ltd. 2,149 251 Kunming Xitong Machinery Co., Ltd. 59,246 － Wuxi Weixin Machineray Co., Ltd. 2,399 － (3) Leasing fees, technological service fee, and Commission fees 2007 2006 Technological service fees for Bosch Diesel Oil System payable 4,397 8,410 Commission fees for the import of Wuxi Weifu International Trade Co., Ltd. － 370 Leasing fees for equipments of Weifu Autocam receivable 131 － (4) Purchase of fixed assets Name of enterprises 2007 2006 Bosch Auto Diesel System － 72,500 Weifu Precise Machinery － 168 Weifu Group 9,591 8,093 (5)Sales of fixed assets Name of enterprises 2007 2006 Weifu Autocam － 125 (6) Other transaction of the Company and Weifu Group The following agreements with Weifu Group: The agreement of using trademark The Company sells products using the trademark of Weifu Group, and pays 0.3% of the total sales amount for using trademark. The amount every year would be no less than RMB 1,200,000. The agreement takes effect from May 1, 1995 with the duration of 10 years. Due to that the duration was expired, the two parties concerned signed the following supplementary agreement on April 19, 2005: the original contract will be prolonged for ten years till April 30, 2015 and other articles of original contract will continuously take effect. The leasing agreement of land using right The Company paid the first rent fees amounting to RMB 327,285 to Weifu Group in order to obtain use right for land, with an increase of 10% year by year. The 114 agreement takes effect from March 1, 1995 with the duration of 50 years. In according to the relevant regulations in Law of the People’s Republic of China on Urban Real Estate Administration, Method on The Management of Land Asset Leasing of National Supervision Enterprise(WXGZIQ [2007] No 24 and on Printing and Distributing the Notice the Lowest Standard for Selling the Industrial Using Land from Jiangsu Proovincial Government Office (SZBF[2007] No.21),, the Company and Weifu Group reached the agreement on land leasing dated August 8, 2007. The Company leased the industrial using land of Weifu Group with the acre of 100,000 kilometers Jan 1, 2007 to Dec. 31, 2009 and the annual rent was RMB 2,600,000. The execution for the said price dated from Jan 1, 2005 to Dec. 31, 2014. The significant transactions of the company and Weifu Group are as follows: 2007 2006 Expenses for using land and trademark 6,519 4,647 Amount of guarantee for loans of the Company and 100,000 170,000 subsidiaries The prices of related transactions between the Company and the related parties would be transacted according to the ordinary commercial price; there were no significant situations that are higher or lower than the normal transaction price. (7) Transactions between the Company, its subsidiary and its joint venture company-Weifu Environmental (The occurred amount for last year is the unconsolidated part according to the proportion principle, and the occurred amount for this year is the amount transacted) 2007 2006 Purchase commodities 90 ,284 81,003 Sell co mmo dities, water and electricity, etc. 4 ,388 1,144 Rent, etc. 240 122 Transfer the u sing right o f land 17 ,414 － (8) Weifu Autocam has borrowed RMB 6 million from the Company, and it will pay back the money together with the related interest which is calculated according to the lending rate of bank at the same time. 9. The Balance of accounts receivable and payable of the related parties 2007-12-31 2006-12-31 Accounts receivable: Bosch Auto Diesel System － 144 Weifu International Trade Co., 363 275 Ltd. Wuxi Weifu Economic Trade Co., 497 196 115 Ltd. Weifu Jialin 17,208 6,878 Kunming Xitong Machinery Co., 15,302 5,921 Ltd. Weifu Autocam － 125 Bosch Auto Diesel System 31 － Other account receivable: Bosch Auto Diesel System 16,402 － Weifu International Trade Co., 25,000 － Ltd. Weifu Autocam 6,000 － Weifu Precise Machinery 9,316 3,111 Accounts paid in advance: Weifu Environmental － 13 Account received in advance Wuxi Weifu Economic Trade Co., － 49 Ltd. Weifu International Trade 34 － Accounts payable: Weifu Group 1,167 11,811 Weifu International Trade Co., － 31 Ltd. Weifu Precise Machinery 408 38 Weifu Environmental 5 － Bosch Auto Diesel System 15,986 11,583 Weifu International Trade Co., 4 － Ltd. Other accounts payable: Weifu Group 130 － Bosch Auto Diesel System － 40,113 Note 10. Contingencies Ended Dec.31, 2007, the Company and its subsidiaries has no significant contingent debts and losses. Note 11. Commitments Ended Dec.31, 2007, the Company and its subsidiaries has the following significant commitment: The Company and its subsidiaries need to pay RMB 90 million for workshop building 116 and equipment purchasing (contract has been made). Note 12. Subsequent Non-adjustment Event on the Balance Sheet Date Except the followings, there existed no other significant after date non-adjusted events in balance sheet: 1. On Apr 13th of 2008, the profit distribution plan of 2007 has been examined and approved in the 11th meeting of the 5th board of directors of the Company. It is decided to send RMB 1.53(tax included) per 10 shares held by its shareholders, taking the profit available for distribution after the withdrawal of public reserve. With that sending method, totally RMB 86,790,000 dividend will be sent. The aforesaid distribution preplan still needs examination from the shareholders’ meeting for approval. 2. Ended on Apr 13th of 2008, totally RMB 133,200,000 of bills payable of the Company at the end of 2007 has been cashed. 3. In March of 2008, the Company has taken back the borrowing of RMB 6 million from Weifu Autocam. 4. In March of 2008, Weifu Autocam, the joint venture company of the Company has increased its registered capital with USD 4 million, in which the Company takes accounts for USD 2 million. 5. In March of 2008, the temporary board meeting of the Company agreed that the Company jointly established Wuxi Weixinfa Venture Capital Co., Ltd with Wuxi Innovation Venture Capital Co., Ltd, and the new company mainly engaged in the investment on automobile electronics, energy-saving and environmental protection and key spare part of automobiles; the Company invested RMB 90 million and taking 90 percent of the registeration capital of the new company. Weifu International Trade has well transacted the industry and commercial change registration related to capital increase. After this capital increase, Weifu International Trade will become a holding subsidiary of the Company. Note 13. Non-recurring Gains and Losses (Unit:’0000) Items 2007 2006 1.Gains and losses arising from disposal of 3,897 -3,219 non-circulating assets 2.Governmental subsidy written into current gains and 4,460 10,582 losses 3. Other non-operating net amount of income and -1,522 -2,164 expense except for the aforesaid items 117 4. Income on investment of transaction financial assets － 105 5. Balance after setting off welfare payable 15,734 － Less: Amount influenced by the income tax on 3,615 1,013 the above gains and losses Less: Minor shareholders equity 4,109 434 Total 14,845 3,857 Note 14. Table for disclosing contrast between the shareholders equity balance under the new and old accounting standards (Unit: RMB). Data disclosed in the Data disclosed in the No. Items Balance 2007 Annual Report 2006 Annual Report The shareholders’ equity on Dec 31st of 2006(the original accounting 2,204,347,045.11 2,204,347,045.11 standard) Balance existed in the long-term 1 -11,154,924.33 -4,186,949.66 -6,967,974.67 equity investment[Note 1] Including: Balance existed in the long-term equity investment formed by share merger between the - - enterprises under the same control Other credit balance existed in the long-term equity investment arising - - from adoption of equity method 2 Investment real estate which plans to - - take fair value mode for calculation 3 The previous depreciation which should be made up for calculation - - because of the projected fee for discarding asset 4 Employee termination indemnity - - according with projected liability 5 Share-based payment - - 6 Restructure obligation according - - with projected liability 7 Enterprise merger - - Including: devaluation reserve of goodwill calculated on the basis of - - the book value of the goodwill of the 118 merger enterprise under the same control according to the new accounting standard Financial asset and financial asset 8 available for sale which are calculated with fair value and whose - - change is written into the current gains and losses Financial asset and financial liability 9 available for sale which are calculated with fair value and whose - - change is written into the current gains and losses 10 Equity increase arising from spin-off - - financial instrument 11 Derived financial instrument - - 12 Income tax [Note 2] 9,745,762.49 9,745,762.49 - 13 Minor shareholders’ equity 219,874,967.00 219,874,967.00 - 14 The special retroactive adjustment made by the listed company with B - - share and H share 15 Others - - st The shareholders’ equity on Jan 1 of 2007 (the new accounting 2,422,812,850.27 2,429,780,824.94 -6,967,974.67 standard) [Note 1] Reason accounting for the balance existed in long-term equity investment: in the consolidated statement prepared by the Company according to the original Accounting Standard for Enterprise and its related accounting principle, in according to New Accounting Standards and No. 1 Explanation on Accounting Standard for Enterprise, the long-term equity investment balance of the subsidiaries offsets capital reserve of RMB 20,421,624.66, increased the retained profit from the switching back of amortized long-term euiqyt invesetment balance of RMB 9,266,700.33; totally decreased RMB 11,154,924.33 in shareholders’ equity dated Jan 1st of 2007. [Note 2] According to the accounting policy, the Company withdrawed reserve for bad debt and provision for obsolete stocks for accounts receivable. Referring to the new accounting standard, the balance between the book value of asset and basic amount for asset taxation should be used to calculate deferred income tax asset. Totally, RMB 9,745,762.49 has been increased in retained earnings on Jan 1st of 2007, in which RMB 9,745,762.49 goes to the shareholders’ equity of the parent company, and RMB 750,491.31 for the minor shareholders’ equity. Note 15. Supplementary information Earnings per share and return on equity Items 2007 2006 119 Net profit attributable to the shareholders of the 230,428,273.70 93,108,229.12 common share of the Company(Unit: RMB) Common shares issued by the parent company 567,275,995.00 567,275,995.00 Equity converted to share capital during the － － report period Weighted average of the common shares of the 567,275,995.00 567,275,995.00 parent company Basic earnings per share 0.41 0.16 Diluted proceedings － － Diluted earnings per share 0.41 0.16 Fully diluted return on equity 9.61% 4.23% Weighted average return on equity 10.02% 4.07% Earnings per share and return on equity after deducting non-recurring gains and losses Basic earnings per share 0.38 0.16 Diluted earnings per share 0.38 0.16 Fully diluted return on equity 8.99% 4.05% Weighted average return on equity 9.37% 3.90% Note 16: Other significant proceedings The Board of the Company agrees to hand out the 2007 Financial Report of the Company on Apr 13th of 2008. 120 Section XII. Document for Reference I.The Accounting Statement bearing signature and seal of legal representative, financial charger and accounting organ officer; II. The original Auditing Report bearing signature and seal of certified public accountants and certified accountants. III. All text documents and original notices disclosed in appointed newspapers by CSRC in report period. eaw Board of Directors of Weifu Hi-technology Co., Ltd. April 15, 2008 121