苏威孚Ｂ(200581)2008年年度报告（英文版）

无锡威孚高科技股份有限公司 二0 0八年年度报告 WEIFU HIGH-TECHNOLOGY CO., LTD. ANNUAL REPORT 2008 April 18, 2009 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-----------------------------------------------------9 Section V. Particulars about Directors, Supervisors, Senior Executives and Workers-----------------13 Section VI. Administration of the Company-----------------------------------------------------------------20 Section VII. Particulars about Shareholders’ General Meeting-------------------------------------------24 Section VIII. Report of the Board of Directors--------------------------------------------------------------25 Section IX. Report of the Supervisory Committee---------------------------------------------------------37 Section X. Significant Events---------------------------------------------------------------------------------38 Section XI. Financial Report-----------------------------------------------------------------------------------44 Section XII. Documents for Reference---------------------------------------------------------------------116 2 WEIFU HIGH-TECHNOLOGY CO., LTD. ANNUAL REPORT 2008 Section I. Important Notes Board of Directors and Supervisory of Committee of 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. Director Rudolf Maier was absented for the meeting due to business, and he authorized Chairman of the Board Wang Weiliang to exert voting right on behalf oh him. Other directors all presented the Board meeting in which the Annual Report was examined and approved. Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd. issued the standard unqualified Financial Report for the Company. Mr. Wang Weiliang, Legal Representative of the Company; Mr. Chen Xuejun, 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 2008 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. Wang Weiliang 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 Province, China Tel: (86) 510-82719579 Fax: (86) 510-82751025 E-mail: wfjt@ public1.wx.js.cn 4. Registered Address: No.5, Huashan Road, New District, Wuxi City, Jiangsu Province, China Head Office: No.107, Renmin West Road, Wuxi City, Jiangsu Province, China Postal Code: 214031 Homepage: http://www.weifu.com.cn E-mail: web@weifu.com.cn 5. Information Disclosure Media: Securities Times, China Securities Journal 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: Office of the Board of Directors 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 4 Address: No.107, Renmin West Road, Wuxi City, Jiangsu Province, China Registration Date after Change: Dec. 9, 2008 Address: No.5, Huashan Road, New District, Wuxi City, Jiangsu Province, China (2) Registration Number of Enterprise Legal Person’s Business License: 32020000014926 (3) Registration Number of taxation: 320208250456967 (4) Certified Public Accountants engaged by the Company: Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd. Address: No.28, Liangxi Road, Wuxi City, Jiangsu Province, China Section III. Summary of Accounting and Business Data I. Major accounting data 1. Major accounting data of 2008 Unit: RMB Operating profit 245,189,749.37 Total profit 215,685,390.19 Net profit attributable to the shareholders of the listed company 193,418,292.38 Net profit attributable to the shareholders of the listed company after 204,532,322.10 deducting non-recurring gains and losses Net cash flow arising from operating activities 808,493,643.23 Items of non-recurring gains and losses Unit: RMB Items of non-recurring gains and losses Amount Gains and losses from the disposal of non-current asset -15,164,032.94 Governmental subsidy calculated into current gains and losses, while closely related with the business of the Company, excluding the fixed-amount or fixed-proportion 2,493,089.50 governmental subsidy according to the unified national standard Held transaction financial asset, gains/losses of changes of fair values from transaction financial liabilities, and investment gains from disposal of transaction financial asset, 732,718.87 transaction financial liabilities and financial asset available for sales, exclude the effective hedging business relevant with normal operations of the Company Net amount of other non-operating income and expenditure beside for the above items -837,415.44 Impact on income tax 1,509,536.18 Other items of gains/losses conforming to the definitions of non-recurring gains/losses 152,074.11 Total -11,114,029.72 2. Differences of net profit calculated according to international and domestic accounting standards and regulations, and explanations Unit: RMB Net profit Net asset Amount Amount Amount in Amount in this period in last period period-begin in period-end 5 IAS 193,418,292.38 230,829,383.93 2,629,330,343.06 2,726,901,029.67 CAS 193,418,292.38 230,829,383.93 2,629,330,343.06 2,726,901,029.67 Items adjusted in accordance with IAS and its totals: IAS 193,418,292.38 230,829,383.93 2,629,330,343.06 2,726,901,029.67 IAS 193,418,292.38 230,829,383.93 2,629,330,343.06 2,726,901,029.67 Explanations on differences No differences based on CAS and IAS II. Key accounting data and financial indexes over the previous three years 1. Main accounting data Unit: RMB Increase/de crease this year 2008 2007 compared 2006 with that of last year (%) After Before adjustment After adjustment Before adjustment After adjustment adjustment Operating income 3,033,289,602.71 3,121,339,002.04 3,185,418,491.24 -4.78% 2,481,157,299.47 2,669,956,992.22 Total profit 215,685,390.19 283,105,086.64 284,293,536.54 -24.13% 130,773,959.11 134,858,283.88 Net profit attributable to 193,418,292.38 230,428,273.70 230,829,383.93 -16.21% 88,279,693.90 93,108,229.12 shareholders of the listed company Net profit attributable to shareholders of the listed company 204,532,322.10 215,582,906.41 214,548,020.44 -4.67% 73,573,080.81 89,251,053.53 after deducting non-recurring gains and losses Net cash flow arising from 808,493,643.23 184,767,744.64 212,033,256.84 281.31% 406,031,620.73 446,741,620.73 operating activities Increase/de crease at the end of this At the end of 2008 At the end of 2007 At the end of 2006 year compared with that at 6 the end of last year (%) After Before adjustment After adjustment Before adjustment After adjustment adjustment Total assets 4,597,901,224.38 5,123,863,986.44 5,159,099,919.03 -10.88% 4,865,134,909.73 4,863,813,947.88 Owners’ equity(Shareholde 2,506,344,515.41 2,398,579,105.96 2,401,440,471.44 4.37% 2,204,347,045.12 2,202,187,391.96 rs’ equity) Share capital 567,275,995.00 567,275,995.00 567,275,995.00 0.00% 567,275,995.00 567,275,995.00 2. Main financial indexes Unit: RMB Increase/decreas e this year 2008 2007 compared with 2006 that of last year (%) Before After After Before After adjustment adjustment adjustment adjustment adjustment Basic earnings per share 0.34 0.41 0.41 -17.07% 0.16 0.16 (RMB/Share) Diluted earnings per share 0.34 0.41 0.41 -17.07% 0.16 0.16 (RMB/Share) Basic earnings per share after deducting non-recurring gains 0.36 0.38 0.38 -5.26% 0.13 0.16 and losses (RMB/Share) Fully diluted return on equity 7.72% 9.61% 9.61% -1.89% 4.00% 4.23% (%) Weighted average return on 7.88% 10.02% 10.03% -2.15% 3.85% 3.76% equity (%) Fully diluted return on equity after deducting non-recurring 8.16% 8.99% 8.93% -0.77% 3.34% 4.05% gains and losses (%) Weighted average return on equity after deducting 8.73% 9.37% 9.33% -0.60% 3.21% 3.61% non-recurring gains and losses (%) Net cash flow per share arising from operating 1.43 0.33 0.37 286.49% 0.72 0.72 activities (RMB/Share) At the end of Increase/decreas At the end of 2007 At the end of 2006 2008 e at the end of 7 this year 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 shareholders of listed company 4.42 4.23 4.23 4.49% 3.89 3.88 (RMB/Share) 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 909,301,329.46 1,721,021.18 907,580,308.28 Surplus reserve 241,970,463.58 20,469,042.29 262,439,505.87 Retained profit 682,892,683.40 193,418,292.38 107,262,269.52 769,048,706.26 Total shareholder’s 2,401,440,471.44 213,887,334.67 108,983,290.70 2,506,344,515.41 equity Reason for changes: 1. Withdrawal of statutory surplus reserve amounted to RMB 20,469,042.29. 2. Common share dividend distributed in this year amounted to RMB 86,793,227.23. 8 Section IV. Changes in Share Capital and Shareholders I. Change in shares Unit: Share Before the change Increase/Decrease of this time (+, -) After the change Conver New Proporti Bonus sion of Proportio Amount shares Others Subtotal Amount on shares public n issued reserve I. Restricted shares 114,153,050 20.12% -39,538 -39,538 114,113,512 20.12% 1. State-owned shares 2. State-owned legal person’s 114,061,978 20.11% 114,061,978 20.11% shares 3. Other domestic shares 91,072 0.02% -39,538 -39,538 51,534 0.01% Including: Domestic non-state-owned legal person’s shares Domestic natural person’s shares 91,072 0.02% -39,538 -39,538 51,534 0.01% 4. Foreign shares Including: Foreign legal person’s shares Foreign natural person’s shares 5. Senior executives’ shares II. Unrestricted shares 453,122,945 79.88% 39,538 39,538 453,162,483 79.88% 1. RMB Ordinary shares 338,202,945 59.62% 39,538 39,538 338,242,483 59.63% 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 9 Restricted Restricted Restricted Restricted Name of shares Reason for Date for releasing shares in shares released shares in report shareholders increased this restricted trade restricted trade year-begin this year date year Release its Xu Liangfei 14,602 14,602 0 0 restriction Dec. 2008 while resigned Release its Deng Xijiang 5,476 5,476 0 0 restriction Dec. 2008 while resigned Release its Ou Jianbin 5,954 5,954 0 0 restriction Dec. 2008 while resigned Release its You Jianzhong 7,300 7,300 0 0 restriction Dec. 2008 while resigned Release its 25% Senior executives’ restriction for 68,144 16,610 0 51,534 Jan. 1, 2008 shares senior executive Total 101,476 49,942 0 51,534 － － III. Particulars about issuance and listing of shares 1. The previous three years ended as the report period; the Company issued neither new shares nor derived securities. 2. In August 2008, the Company implemented the distribution plan (tax included) of offering RMB 1.53 for each 10 share. 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: 58,390. 2. Ended the report period, particulars about the top ten shareholders of the Company: (Unit: share) Unit: Share Total shareholders 58,390 Particulars about shares held by the top ten shareholders Proportion Amount of Shares Nature of Amount of Names of shareholders of share restricted pledged or shareholder share held held shares held frozen State legal WUXI WEIFU GROUP COMPANY LIMITED 20.11% 114,062,978 11,062,978 0 person’s 10 shares B-share ROBERT BOSCH GMBH 3.24% 18,387,200 0 0 shareholder INDUSTRIAL AND COMMERCIAL BANK A-share OFCHINA- E FUND VALUE SELECTED 3.14% 17,802,668 0 0 shareholder STOCK FUND GUOTAI JUNAN SECURIES HONG KONG B-share 2.30% 13,020,991 0 0 LIMITED shareholder AGRICULTURAL BANK OF CHINA- A-share GREAT WALL ANXIN RETURN MIXED 1.87% 10,629,675 0 0 shareholder STOCK FUND CHINA MERCHANTS BANK- EVERBRIGHT PRAMERICA A-share 1.73% 9,806,705 0 0 ADVANTAGEOUS ALLOCATION STOCK shareholder FUND BANK OF COMMUNICATIONS-KERUI A-share 1.44% 8,155,187 0 0 SECURITIES INVESTMENT FUND shareholder INDUSTRIAL BANK- EVERBRIGHT A-share 1.33% 7,558,572 0 0 PRAMERICA BONUS STOCK FUND shareholder CHINA PACIFIC LIFE INSURANCE CO., A-share 1.14% 6,456,784 0 0 LTD.-INDIVIDUAL BONUS shareholder A-share ORIENT SECURITIES COMPANY LIMITED 1.00% 5,676,222 0 0 shareholder Particulars about shares held by the top ten unrestricted shareholders Amount of unrestricted Name of shareholder Type of share shares held Domestically listed foreign ROBERT BOSCH GMBH 18,387,200 share INDUSTRIAL AND COMMERCIAL BANK OFCHINA- 17,802,668 RMB common share E FUND VALUE SELECTED STOCK FUND Domestically listed foreign GUOTAI JUNAN SECURIES HONG KONG LIMITED 13,020,991 share AGRICULTURAL BANK OF CHINA- GREAT WALL 10,629,675 RMB common share ANXIN RETURN MIXED STOCK FUND CHINA MERCHANTS BANK- EVERBRIGHT PRAMERICA ADVANTAGEOUS ALLOCATION 9,806,705 RMB common share STOCK FUND BANK OF COMMUNICATIONS-KERUI SECURITIES 8,155,187 RMB common share INVESTMENT FUND INDUSTRIAL BANK- EVERBRIGHT PRAMERICA 7,558,572 RMB common share BONUS STOCK FUND CHINA PACIFIC LIFE INSURANCE CO., 6,456,784 RMB common share LTD.-INDIVIDUAL BONUS 11 ORIENT SECURITIES COMPANY LIMITED 5,676,222 RMB common share BANK OF COMMUNICATIONS- GREAT WALL JIUFU 5,452,851 RMB common share CORE GROWTH STOCK FUND 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, general machinery, instruments and meters, import and export. In the report period, the holding shareholder remained unchanged. 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. 12 Section V. Particulars about Directors, Supervisors, Senior Executives and Workers I. Directors, supervisors and senior executives 1. Basic information Total Drawing remunerati remuner on drawn ation from the from Shares Shares Reason Company sharehol Begin date for End date for office held at held at Name Title Sex Age for in the ders’ office term term year-be year change report units or gin -end period other (RMB’000 related 0)(before units or tax) not Wang Chairman of Male 44 June 12, 2008 June 11, 2011 12,168 12,168 Naught 0.00 Yes Weiliang Directors Vice Chen Chairman & Male 42 June 12, 2008 June 11, 2011 3,042 3,042 Naught 38.83 No Xuejun GM The restrict ed Shi Director Male 47 June 12, 2008 June 11, 2011 2,281 1,711 shares 27.59 No Xingyuan were release d Gao Director and Male 55 June 12, 2008 June 11, 2011 9,886 9,886 Naught 27.59 No Guoyuan Deputy GM Ge Director Male 55 June 12, 2008 June 11, 2011 24,453 24,453 Naught 0.00 Yes Songping 13 Rudolf Director Male 52 June 12, 2008 June 11, 2011 0 0 Naught 0.00 Yes Maier Independent Du Fangci Male 65 June 12, 2008 June 11, 2011 0 0 Naught 5.95 No Director Independent Ma Huilan Female 58 June 12, 2008 June 11, 2011 0 0 Naught 5.95 No Director Independent Yu Xiaoli Female 46 June 12, 2008 June 11, 2011 0 0 Naught 5.95 No Director Chairman of Han the Male 58 June 12, 2008 June 11, 2011 14,602 14,602 Naught 30.11 No Jiangming Supervisory Committee Wang Supervisor Male 43 June 12, 2008 June 11, 2011 500 500 Naught 0.00 Yes Xiaodong Yang Supervisor Male 57 June 12, 2008 June 11, 2011 0 0 Naught 13.00 No Weiliang Deputy Sun GM& Female 55 June 12, 2008 June 11, 2011 0 0 Naught 27.59 No Qingxian Financing Charger Miao Deputy GM Male 46 June 12, 2008 June 11, 2011 0 0 Naught 27.59 No Yuming Wang Deputy GM Male 54 June 12, 2008 June 11, 2011 0 0 Naught 27.92 No Yawei Zhou Secretary of Male 46 June 12, 2008 June 11, 2011 2,282 2,282 Naught 21.50 No Weixing BD Total - - - - - 69,214 68,644 - 259.57 - Explanations: i. In the report period, the Company did not implement equity encouragement plan. ii. Reason for changes of shares held by senior executives: Xu Liangfei, Deng Xijiang, Ou Jianbin and You Jianzhong, etc Directors and Supervisors release their restrictions on shares while they left their posts; for the restricted shares held by other senior executives, 25 pecent shares were released its restrictions. 2. Directors and Supervisors holding the position in Shareholding Companies Position in Name Shareholding companies shareholding Office term companies Rudolf Maier Bosch Automotive Diesel System Co., Ltd. General Manager Till now Full-time Deputy Du Fangci Chinese Auto Industry Association Till now Secretary-General Zhejiang University Power Machinery and Vehicular Director of the Yu Xiaoli Till now Engineering Institute Institute 14 Deputy General Wang Xiaodong Bosch Automotive Diesel System Co., Ltd. Till now Manager 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. Wang Weiliang: He has served successively as Director and concurrently Deputy General Manager of Wuxi Weifu Group Co., Ltd.; now, he is the Chairman of the Company. 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; now, he is the Vice-chairman and concurrently General Manager of the Company. Mr. Shi Xingyuan: he has served successively as Director and concurrently Deputy General Manger of the Company; now, he is the 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 Wuxi Weifu Group Co., Ltd.; now, he is Director and Deputy General Manager 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.; now, he is the Director of the Company. Mr. Rudolf Maier, he ever acted as the President of Business Department of Commercial Vehicles of Diesel Injection System of Bosch; now, he acts as the General Manager of Bosch Automotive Diesel System Co., Ltd. and the Director of the Company. Mr. Du Fangci: he successively was the Division Chief of former Automobile Section of Machine Building Industry Ministry and Division Chief of State Bureau of Machine Building Industry. Now, he is the Full-time Deputy Secretary-General of Chinese Auto Industry Association and the Independent Director of the Company. Ms. Ma Huilan: she successively acted as the Chairman of Jiangsu Gongzheng Certified Public Accountants Co., Ltd. Now, she is the Consultant of Jiangsu Gongzheng Certified Public Accountants Co., Ltd. and the Independent Director of the Company. Ms. Yu Xiaoli: she was born in Jan. 1963 with Doctor Degree. Now, she is Director of the institute of Zhejiang University Power Machinery and Vehicular Engineering Institute and the Independent Director of the Company. Mr. Han Jiangming: he has successively as Vice Chairman of the Board and General Manager of the Company; he is now in charge of Exective Director and General Manager of Wuxi Weifu Chang’an 15 Co., Ltd. and the Chairman of the Supervisory Committee of the Company. Mr. Wang Xiaodong: he successively served as Division Chief of Products Development Department of the Company, Marketing and Sales Director of Bosch Automotive Diesel System Co., Ltd.; now, he is the Deputy General Manager of Bosch Automotive Diesel System Co., Ltd. and Supervisor of the Company. Mr. Yang Weiliang: he successively served as Work Department of Party Committee; now, he is the Supervisor of the Company. 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 General Manager and Deputy General Manager of the Company; he now takes the post of Deputy General Manager of the Company. Mr. Wang Yawei: he has served as the Deputy General Manager of the Company; now, he is the Deputy General Manager and concurrently Vice Dean of Engineering Technology Institute 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 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 Holding subsidiary of Wuxi Weifu Automotive Diesel System Co., the Company; Chairman of the Board; Ltd.; Holding subsidiary of Chairman of the Board; Nanjing Weifu Jinning Co., Ltd.; the Company; Chairman of the Board; Wuxi Weifu Leader Catalytic Converter Co., Holding subsidiary of Vice Chairman of the Ltd.; the Company; Wang Weiliang Board; Bosch Automotive Diesel System Co., Ltd.; Joint stock company of Vice Chairman of the Zhonglian Automotive Electronic Systems the Company; Board; Co., Ltd.; Joint stock company of Vice Chairman of the Foton Environmental Protection Engine Co., the Company; Board. Ltd. Joint stock company of the Company. Wuxi Weifu Leader Catalytic Converter Co., Holding subsidiary of Director; Ltd..; the Company; Director; Chen Xuejun Wuxi Weifu Automotive Diesel System Co., Holding subsidiary of Director; Ltd.; the Company; Director. Nanjing Weifu Jinning Co., Ltd.; Holding subsidiary of 16 Bosch Automotive Diesel System Co., Ltd. the Company; Joint stock company of the Company. Holding subsidiary of Nanjing Weifu Jinning Co., Ltd.; the Company; Director; Shi Xingyuan Wuxi Weifu Precision Machinery Joint stock company of Director. Manufacturing Co., Ltd. the Company. Wholly-funded Wuxi Weifu Mashan Oil Pump and Oil subsidiary of the Nozzle Co., Ltd.; Company; Executive Director; Wuxi Weifu International Trade Co. Ltd.; Holding subsidiary of Director and GM; Gao Guoyuan Wuxi Weifu Precision Machinery the Company; Director; Manufacturing Co., Ltd.; Joint stock company of Chairman of the Board. Wuxi Weifu-Autocam Precision Machinery the Company; Co. Ltd. Joint stock company of the Company. Wuxi Weifu Leader Catalytic Converter Co., Holding subsidiary of Ge Songping Director Ltd.. the Company Joint stock company of Rudolf Maier Bosch Automotive Diesel System Co., Ltd. Director, General Manager the Company Wholly-funded Han Jiangming Wuxi Weifu Chang’an Fuel Co., Ltd. subsidiary of the Executive Director Company Joint stock company of Wang Xiaodong Bosch Automotive Diesel System Co., Ltd. Deputy General Manager the Company Holding subsidiary of Wuxi Weifu Leader Catalytic Converter Co., the Company; Ltd..; Holding subsidiary of Director; Wuxi Weifu Automotive Diesel System Co., the Company; Director; Ltd.; Joint stock company of Sun Qingxian Director; Wuxi Weifu-Autocam Precision Machinery the Company ; Supervisor; Co. Ltd.; Holding subsidiary of Supervisor. Nanjing Weifu Jinning Co., Ltd.; the Company; Bosch Automotive Diesel System Co., Ltd. Joint stock company of the Company. Holding subsidiary of Wuxi Weifu Automotive Diesel System Co., the Company; Director; Ltd.; Holding subsidiary of Miao Yuming Director; Wuxi Weifu International Trade Co. Ltd.; the Company; Director. Nanjing Weifu Jinning Co., Ltd. Holding subsidiary of the Company. Nanjing Weifu Jinning Co., Ltd.; Holding subsidiary of Director; Wang Yawei Wuxi Weifu Automotive Diesel System Co., the Company; Director; 17 Ltd.; Holding subsidiary of Director; Bosch Automotive Diesel System Co., Ltd.; the Company; Director. Zhonglian Automotive Electronic Systems Joint stock company of Co., Ltd. the Company; Joint stock company 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: Remunerations for senior executives of the Company depends on the policy Plan on Remuneration and Incentive and Examination of Remuneration passed in Shareholders’ General Meeting which was confirmed by Remuneration and Remuneration Examination Committee of the Board of the Directors referring to performances on the accomplishment of annual main target and indexes. Annual remuneration was divided into two parts of basic annual remuneration and wages based on benefits. The former is confirmed by post title and the later is directly connected to economic benefits of the Company and paying according to various benefit indexes performance situations. (2) In the report period, there were 9 Directors, Supervisors and Senior Executives drew remunerations from the Company and totaled to RMB 2,417,700. (3) In the report period annual allowance of Independent Directors amounted to RMB 50,000 (After tax), applying for reimbursement of traveling charges for attending Board meeting and Shareholders’ General Meeting on fact. 5. Changes on Directors, Supervisors and senior executives (1) Change of Directors: The Company held 2007 Annual Shareholders’ General Meeting on June 12, 2008, and election on changing the office term was carried out, in which Mr. Wang Weiliang, Mr. Chen Xuejun. Mr. Shi Xingyuan, Mr. Gao Guoyuan, Mr. Ge Songping, Mr. Rudolf Maie, Mr. Du Fangci, Ms. Ma Huilan and Ms. Yu Xiaoli were elected as the Directors of the 6th Board of the Directors of the Company; originally the Directors of the 5th Board of the Directors of the Company Mr. Xu Liangfei, Mr. Han Jiangming and Independent Director Mr. Zhang Xiaoyu, Mr. Ouyang Minggao and Mr. Chen Qilong did not take the posts of Directors of the Company. On June 12, 2008, the Company held the 1st meeting of the 6th Board of the Directors of the Company, in which Mr. Wang Weiliang was elected as the Chairman and Mr. Chen Xuejun was elected as the Vice-chairman. (2) Change of Supervisors: The Company held 2007 Annual Shareholders’ General Meeting on June 12, 2008, and election on changing the office term was carried out, in which Mr. Wang Xiaodong was elected as the Supervisor of the Company and formed the Supervisors of the 6th Supervisory Committee of the Company with Supervisor Mr. Han Jiangming and Mr. Yang Weiliang elected in Staff Representative Conference of the Company; originally the Supervisors of the 5th Supervisory Committee Mr. Chen Xuejun, Mr. Zhang Jiming, Mr. Li Guodong, Mr. You Jianzhong and Mr. Ou 18 Jianbin did not take the posts of Supervisors of the Company. On June 12, 2008, the Company held the 1st meeting of the 6th Supervisory Committee of the Company, in which Mr. Han Jiangming was elected as the Chairman of the Supervisory Committee. (3) Change of Senior Executives: On June 12, 2008, the Company held the 1st meeting of the 6th Board of the Directors of the Company, in which Mr. Chen Xuejun was engaged as the General Manager; Mr. Gao Guoyuan, Ms. Sun Qingxian, Mr. Miao Yuming and Mr. Wang Yawei were engaged as the Deputy General Manager; Mr. Zhou Weixing was engaged as Secretary of the Board of the Company. II. Staff of the Company 1. Numbers of the staff Ended as Dec. 31, 2008, the total number of the registered workers of the Company was 5,830. 2. Classification of the staff Unit: Person Classification Number of the staff Percentage (%) Production personnel 3,301 56.62 Sales and marketing personnel 246 4.22 Technical personnel 856 14.68 Financing personnel 60 1.03 Administrative personnel 439 7.53 Others 928 15.92 Total 5,830 100 3. Education degree of the staff Unit: Person Education degree Number of staff Percentage (%) Master and above 43 0.74 Bachelor 363 6.22 Junior college 853 14.63 Technical secondary school 479 8.22 Polytechnic school g 1,205 20.67 19 Senior high school and below 2,887 49.52 Total 5,830 100 4. Particulars about the retirees The payments for the retirees are born by the society endowment insurance. Section VI. Administration Structrue I. Administration of the Company According to the requirements 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 and CSRC Jiangsu Security Regulatory Bureau SZJGSZi No. [2007]104 Notice on the Matters concerning Carrying out a Special Campaign on the Corporate Governance of Listed Companies, the Company conducted sustainable rectification works based on the prophase self-inspection, rectification and rectification suggestions by iangsu Security Regulatory Bureau and Shenzhen Stock Exchange. The rectification was published Juchao website (http://www.cninfo.com.cn) appointed by Shenzhen Stock Exchange on July 19, 2008. For that Accumulative votings were adopted in Shareholders’ General Meeting, Rules of Procedure for Shareholders’ General Meeting, Rules of Procedure for the Board of Directors and Rules of Procedure for the Supervisory Committee, the Company newly revised in according to the requirements of Company Law, Securities Law and the Rules for Governance of the Company and implemented after the approval from the 2007 Annual Shareholders’ General Meeting, Board of the Directors and the Supervisory Committee. The Company has prepared Detailed Rules for the Implementation of On-line Votings of Shareholders’ General Meeting and would be implemented after the approval from the 2008 Annual Shareholders’ General Meeting. 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 3 independent directors. In accordance with the requirement of “the Guideline Opinion”, the independent directors of the Company could consciously performed their duties to 20 express independent opinions with regarding to the significant policy decision when attending the board meetings and relevant meetings in 2008. Particulars about Independent Directors attending the meetings of the Board: Present in Entrusted Times are supposed to Absence Name person presence Remark be attended (Times) (Times) (Times) Du Fangci 5 5 Ma Huilan 5 4 1 Yu Xiaoli 5 4 1 Particulars about objection on relevant issues presented by Independent Director: Name Issues presented objection Contents of the objection presented Remark Du Fangci Naught Naught Ma Huilan Naught Naught Yu Xiaoli Naught Naught III. Separation between the Company and principal shareholders in business, assets, personnel, organizations, and finance 1. Business Independence The Company has its own completed production system, supply chain and sales channels. It has the ability to operate facing to the market. It’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 21 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 on Internal Control of the Company 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 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 2008 Annual 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 22 supervising of the important activities of the Company internal control. In 2008, 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, truthfully 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, 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 on internal control of the Company 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 established Plan on Remuneration of Senior Executives and Incentive and Examination of Remuneration, in which annual senior executives’ system was constituted by basical annual remuneration and incentive remuneration, and annual income of senior executives was judged by Remuneration and Remuneration Examination Committee of the Board of the Directors. 23 Section VII. Particulars about Shareholders’ General Meeting In the report period, the Company held two shareholders’ General Meeting and the details are as follows: On June 12, 2008, the Company held Annual Shareholders’ General Meeting 2007. The public notice of resolutions of the meeting has been published on Securities Times, China Securities Journal, Hong Kong Wen Wei Po and Juchao website (www.cninfo.com.cn) dated June 13, 2008. On Nov. 27, 2008, the Company held the 1st Extraordinary Shareholders’ General Meeting 2008. The public notice of resolutions of the meeting has been published on Securities Times, China Securities Journal, Hong Kong Wen Wei Po and Juchao website (www.cninfo.com.cn) dated Nov. 28, 2008. 24 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 2008, huge change happened to the external operation environment of the Company. In the first half year, the situation was that demand for products exceeded supply, price of raw materials and interest rate for loans received a great rise; while for the later half year, demand fell sharply, and kept an unceasing recession, which brought significant influence upon operation of the whole year. The followings accounted for the reasons: ○ 1 the nation started to implement national st level-III standard for emission since Jul. 1 of 2008. Rising of car purchasing caused advanced consumption of heavy commercial autos in the first half year, which brought overdraft of market; ○2 the further spread of the global financial crisis had already influenced entity economy, which directly brought falling demand and surplus capacity. In order to maintain stability of the Company, the board of directors and the management level made prompt arrangement: at one side, speeded up adjustment in products structure; at the other side, actively adopted measures to reduce cost, save expenditure, compress inventory, and strengthen turn-back of account receivable, which made it possible for the Company to keep a comparatively stable operation in such a bad operation environment. 2. Particulars about main business and operations of the Company The Company belongs to machinery manufacturer enterprise, mainly engaging in production and sales of diesel & fuel oil injection system products. 25 The Company realized revenue from main business and profit from main business respectively amounting to RMB 3,033,289,600 and RMB 245,189,700 in the full year, decreased by 4.78% and 14.74% respectively over the same period of last year, and realized net profit attributable to parent company with RMB 193,418,300 and decreased by 16.21% over the same period of last year. Total operation income decreased by 4.78%, which was due to that: to the Company and consolidated subsidiaries, demand in diesel engine market fell greatly in 2008, besides, for the state started to implement national level-III standard for emission since Jul. 1st of 2008, products meeting national level-II standard received an impact, thus operation income dropped. Operation profit decreased by 14.74%, which was due to that: total operation cost of the Company and consolidated subsidiaries increased greatly in 2008. Net profit attributable to parent company decreased by 16.21%, which was due to that: ○ 1 total operation income decreased; ○ 2 total operation cost increased greatly, for that because new emission standard was implemented, the Company and consolidated subsidiaries eliminated part equipments in respond, and withdrew depreciation provision for inventory and provision for bad debt for account receivable owed by part customers whose financial condition deteriorated. (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 279,929.56 225,619.91 19.40% -7.25% -3.74% -2.94% internal combustion engine Catalyst and muffler 23,399.40 20,768.09 11.25% 39.76% 39.86% -0.06% (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 53,091.81 42.57 1 PW 2000 33,204.78 26 PW pump 13,705.84 30.77 2 VE pump 39,039.67 100.00 1 A pump 15,385.54 47.50 1 I pump (including PL, IW and PM 30,680.42 41.63 2 pump) Single plunger pump 6,329.89 25.16 2 Injector 11,177.24 17.38 2 Precision pump parts 19,831.32 23.66 1 Data Source: Statistics Association of China’s Machinery Industry, Fuel Injection Sub-branch (2008) Statistical Data Collection in Fuel Injection Equipment Industry. (3) Main suppliers and customers Unit: RMB’0000 The total purchase amount from Accounting for total 66,140.46 35.83% the top five suppliers purchase amount % The total sales amount to the top Accounting for total 112,814.50 37.15％ five customers sales amount % 3. Explanation on material changes in assets composition and items of profit statement over the same period of last year (1) Note receivable: amount at period-end amounting to RMB 388,733,800, decreased by 39.92% over period-begin, mainly because the Company and its holding subsidiary Wuxi Weifu Automotive Diesel System Co., Ltd. decreased payment by note settlement this year. (2)Account receivable: amount at period-end amounting to RMB 468,041,500, decreased by 23.65% over period-begin, mainly because the parent company and subsidiaries reinforced dun for account receivable. (3)Inventory: amount at period-end amounting to RMB 507,375,800, decreased by 33.08% over period-begin, mainly because parent company and consolidated subsidiaries strengthened control on inventory capital in the report period in consideration of operation risk and conversion of emission standard. (4)Long-term equity investment: amount at period-end amounting to RMB 1,216,336,300, increased by 35.20% over period-begin, mainly because that the Company received good investment return from Bosch Automotive Diesel System Co., Ltd. which enjoyed a great rising performance in 2008. (5)Short-term loan: amount at period-end amounting to RMB 843,036,700, decreased by 43.27% over period-begin, mainly because that parent company and subsidiaries returned loans to bank in 2008 thus reduced capital cost. (6)Notes payable: amount at period-end amounting to RMB 231,760,200, increased by 33.07% 27 over period-begin, mainly because parent company and subsidiaries increased payment settlement by notes rather than by cash. (7)Sales expense: amount at period-end amounting to RMB 128,035,800, increased by 20.82% over the same period of last year, mainly because parent company increased expense for after-services of three guarantees. (8)Administration expense: amount at period-end amounting to RMB 361,056,800, increased by 28.92% over the same period of last year, mainly originated from increase in salary expense, depreciation as well as R&D expense, and from that subsidiary amortized and eliminated intangible assets in one time. (9)Loss from asset devaluation: amount at period-end amounting to RMB 111,490,800, increased by 138.04% over the same period of last year, mainly because that the Company withdrew provision for bad debt for account receivable owed by part customers whose financial condition was seriously deteriorated; the Company and consolidated subsidiaries withdrew provision for depreciation of some correspondingly eliminated equipments and inventories since new emission standard was implemented. (10)Investment income: amount at period-end amounting to RMB 365,029,800, increased by 166.33% over the same period of last year, mainly because Bosch Automotive Diesel System Co., Ltd. (31.50% shares held by the Company) offered investment income of RMB 264,958,000 for the Company in 2008, RMB 226.91 million up over 2007. 4. Material changes in cash flow composition in the report period (1) Net cash flow arising from operation activities: amounted to RMB 808,493,600 but amounted to RMB 212,033,300 in last year, more RMB 596,460,300 flowed in, which was mainly due to that the Company strengthened risk control upon inventory and account receivable in consideration of safety operation, thus caused great drop in the four capitals. (2) Net cash flow arising from investment activities: amounted to RMB -117,706,600 but amounted to RMB -73,112,900 in last year, more RMB 44,593,700 flowed out, which was mainly due to that cash paid by parent company and controlling subsidiaries for purchasing long-term assets increased and cash received from disposing long-term assets decreased. (3) Net cash flow arising from financing activities: amounted to RMB -873,515,700 but amounted to RMB -176,331,600 in last year, more RMB 697,184,100 flowed out, which was mainly due to that parent company and controlling subsidiaries adopted capital deflation policy and returned bank loans. (4) Net increase in cash and cash equivalents: amounted to RMB -182,728,600 but amounted to RMB -37,411,200 in last year, which was mainly due to that parent company and controlling subsidiaries returned bank loans with unused assets. 5. Utilization of equipments, obtain of orders, sales or overstock of products and change of technical personnel (1) In the report period, production equipments worked well and utilization rate of main equipments was over 90%. (2) In the report period, the products inventory of the Company decreased RMB 250,863,000 over period-begin. (3) In the report period, technical personnel of the Company remain unchanged. 28 6. Operation status of main holding company and share-participating company (1) Nanjing Weifu Jinning Co., Ltd., (the Company holds 80% equity), 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 346,286,800. At the end of year 2008, its total assets amounted to RMB 635,004,000 and its net profit was RMB 44.96 million for 2008. (2) Wuxi Weifu Leader Catalytic Converter Co., Ltd., (the Company holds 94.81% equity), was mainly engaged in production of products such as cleaners and mufflers of tail gas etc., with registered capital amounting to RMB 260 million. At the end of year 2008, its total assets amounted to RMB 371,513,600 and its net profit was RMB 7,933,000 for 2008. (3) Bosch Automobile Diesel System Co., Ltd., (the Company holds 31.50% equity), was mainly engaged in production of electrical control diesel oil system series, and P and S series injectors and nozzles, with registered capital amounting to USD 200 million. At the end of year 2008, its total assets amounted to RMB 4,988,411,100 and its net profit was RMB 841,136,200 for 2008. (4) Zhonglian Automobile Electronics Co., Ltd., (the Company holds 20% equity), was mainly engaged in production of automobile electronic control system products, with registered capital amounting to RMB 600.62 million. At the end of year 2008, its total assets amounted to RMB 1,347,418,900 and its net profit was RMB 400,326,800 for 2008. (5) Wuxi Weifu Automotive Diesel System Co., Ltd., (the Company holds 70% equity), was mainly engaged in production of auto-used diesel oil and fuel oil system series products, with registered capital amounting to RMB 300 million. At the end of year 2008, its total assets amounted to RMB 620,352,400 and its net profit was RMB 11,784,600 for 2008. (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 for diesel automotive engine, is typical technology-intensive and capital-intensive industry. At present, comprehensive market share of products of the Company remains at 40% to 50%. With gradually stricter of the state’s emission regulations and real demand for saving energy, the Company received new opportunity for development in the industry. However, due to the uncertainties of implementation of the aforesaid policy and technical route, the Company also faced difficulty in analysis and judgment. 2. Future developing strategy of the Company According to arrangement of implementation of the state’s emission regulations and real demand of energy saving, it is estimated that China would perform national level-III emission standard among light vehicles less than 3.5 tons from July of 2009. The Company confirmed strategy for future development: ○ 1 actively produce fuel oil ejection system products needed for meeting national level-III or above emission standards, take self development and joint-venture cooperation as foundation for realizing future development strategy, pour full-round efforts to cooperate with Bosch Automobile Diesel System Co., Ltd. for localization of common rail system, actively develop automobile post-treatment system products adopting to national emission standards and manage to obtain a leading advantage in market in aspect of technology; ○ 2 for traditional industry, the Company advance manufacture craft, enlarge coverage of products and make the Company a pioneer in domestic engineering dynamical mechanism. 29 3. Capital demand for future development of the Company, financing and utilization plan In accordance to demand for future development, the Company will promptly make development programming and implementation scheme. Through raising proceeds by self-accumulation, and financing in banks and capital markets, the Company guarantees proceeds supply for future development. 4. Risks existed in future development Fuel ejection system industry is severely influenced by state policy, similar to auto industry, especially change and implementation power of the industry-applicable policies. Main risks existed in future development: ○ 1 promotion speed and implementation power of state policies relevant to saving energy and reducing emission; ○ 2 changes in raw materials and interest rate of loans. Great climbing of price for raw materials increased cost in production and also influenced operation performance 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 influenced the financial expense of the Company. Aiming at the aforesaid risks, the Company planned to take 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. (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 149,039,000 for investment in technology reform and external investments. 1. Application of raised proceeds 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 investments with the non-raised proceeds are as follows: (1)RMB 49.95 million was input in high-pressure common rail project and RMB 43,273,000 was input in this report period. (2)RMB 49.97 million was input in fuel system fittings localization project and RMB 1,525,000 was input in this report period. (3)RMB 173.32 million was input in Weifu Jinning High-tech Park phase-II project and RMB 26,341,000 was input in this report period. (4)RMB 49.98 million was input in Wuxi New District project and RMB 1.04 million was input in this report period. (5)RMB 36.58 million was input in Wuxi Huishan Development Zone project and RMB 14,246,000 was input in this report period. 30 (6)RMB 35 million was input in capacity-expansion project of oil atomizer applicable to diesel engine and RMB 9,049,000 was input in this report period. (7)RMB 53,565,000 was totally input for other piecemeal engineering projects in this report period. III. Routine work of the board of directors (I) Meetings and resolutions of the board of directors 1. On Mar. 28th of 2008, the board of directors of the Company held extraordinary meeting, and the contents of the meeting was published respectively on China Securities Journal, Securities Times, Hong Kong Wen Wei Po and Juchao website (www.cninfo.com.cn) dated Apr. 2nd of 2008. 2. On Apr. 13th of 2008, the board of directors of the Company held the 11th meeting of the 5th board of directors, and the contents of the meeting was published respectively on China Securities Journal, Securities Times, Hong Kong Wen Wei Po and Juchao website (www.cninfo.com.cn) dated Apr. 15th of 2008. 3. On Jun. 12th of 2008, the board of directors of the Company held the 1st meeting of the 6th board of directors, and the contents of the meeting was published respectively on China Securities Journal, Securities Times, Hong Kong Wen Wei Po and Juchao website (www.cninfo.com.cn) dated Jun. 13th of 2008. 4. On Jul. 28th of 2008, the board of directors of the Company held extraordinary meeting, and the contents of the meeting was published respectively on China Securities Journal, Securities Times, Hong Kong Wen Wei Po and Juchao website (www.cninfo.com.cn) dated Jul. 30th of 2008. 5. On Aug. 25th of 2008, the board of directors of the Company held the 2nd meeting of the 6th board of directors, and the contents of the meeting was published respectively on China Securities Journal, Securities Times, Hong Kong Wen Wei Po and Juchao website (www.cninfo.com.cn) dated Aug. 27th of 2008. 6. On Oct. 23rd of 2008, the board of directors of the Company held the 3rd meeting of the 6th board of directors, and the contents of the meeting was published respectively on China Securities Journal, Securities Times, Hong Kong Wen Wei Po and Juchao website (www.cninfo.com.cn) dated Oct. 25th of 2008. (II) Implementations of resolutions of the Shareholders’ General Meeting The proposal on distribution of bonus and dividend confirmed by 2007 Annual Shareholders’ General Meeting was implemented completely on Aug. 4th of 2008. Plan on Remuneration and Incentive and Examination of Remuneration approved in the Shareholders’ General Meeting dated Nov. 28th of 2008 started to implement. (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 2008 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 2008. After the certified public accountant issued the initial opinion, the Audit Committee examined the 31 financial accounting statement (first audit) and presented with written opinion which assured that the preparation of the 2008 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 2008. 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 2008 annual audit organization of the Company, Jiangsu Gongzheng Tianye 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 Tianye Certified Public Accountants Co., Ltd. as the audit organization of the Company for 2009. (IV) Duty performance of the Remuneration and Examination Committee 1. The 6th meeting of the Remuneration and Examination Committee of the Board was held on August 25, 2008 by way of spot. The following proceeding has been examined and approved in this meeting: The Proposal on Plan on Remuneration and Incentive and Examination of Remuneration of the Senior 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 2008 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 2008 The audit data offered by Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd. on the year 2008 of the Company: the consolidated net profit of the Company amounts to RMB 206.81 million, among which RMB 193.42 million goes to the net profit attributable to owners of parent company, RMB 13.39 million for minor shareholders equity. Net profit of the parent company is RMB 204.69 million. According to the regulations of the Article of Association, the parent company should take 10% of its net profit for withdrawing statutory surplus public reserve which is RMB 20.47 million. After withdrawing, the profit available for distribution for the shareholders is RMB 184.22 million for 32 the current year. The undistributed profit of the previous years reaches at RMB 340.49 million. In this report period, the profit for distribution for 2007 has been cashed with RMB 86.79 million, so at the end of 2008, the rest undistributed profit of the parent company amounts to 437.92 million. According to the commitment on dividend made in the share merger reform of the Company, the 2008 profit distribution preplan is: take 50% of RMB 184.22 million, the rest profit available for distribution for shareholders of 2008, for profit distribution to shareholders. The Company plans to take the total shares at the end of 2008 amounting to 567,275,995 shares as the radix, and distributed RMB 1.62 (tax included) cash dividend for every 10 shares of all the shareholders, so totally RMB 91.90 million dividends has been sent out. V. Explanation on fund occupation made by the holding shareholders and other related parties of the Company in 2008 issued by Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd. Explanation on Fund Occupation Made by the Holding Shareholders and Other Related Parties of the Company In 2008 All the shareholders of Weifu High-Technology Co., Ltd., We accepted entrustment to audit 2008 Financial Report for Weifu High-Technology Co., Ltd. (hereinafter referred to Weifu High Technology). Special explanation of occupying capital of Weifu High Technology’s holding subsidiaries and other related parties in year 2008 can be used in supplementary analysis. However, this is not composing part of Financial Statement, but supplementary information provided according to regulation of Notice of Regulating the Funds between Listed Companies and Associated Parties and Listed Companies’ Provision of Guarantee to Other Parties-No.56 [2003] document 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 notice, and our responsibility is to offer special explanation according to above requirements, on the basis of implementation of annual report audit. Capital exchanges between Weifu High-Technology Co., Ltd. and its holding shareholders and other related parties in year 2008: I. Relationship of related parties existing capital exchanges Related parties Related relationship Wuxi Weifu Group Co., Ltd. Controlling shareholder Wuxi Weifu International Trade Co., Ltd. Holding subsidiary of consolidated statement Wuxi Weifu Trade Co., Ltd. The same parent company Wuxi Weixin Machinery Co., Ltd. The same parent company Kunming Xitong Machinery Co., Ltd. Joint venture of its holding shareholder Wuxi Weifu Automobile Diesel System Co., Ltd. Holding subsidiary of consolidated statement Wuxi Weifu-Autocam Precision Machinery Co., Ltd. Joint venture Wuxi Weifu Precision Machinery Manufacturing Co., Ltd. Cooperated enterprise II. Capital exchanges with its holding shareholders 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. 33 Ltd., Weifu High Technology, Wuxi Weifu Leader Catalytic Converter Co., Ltd. (holding subsidiary of Weifu High Technology), etc. At the beginning of 2008, the registered capital of this company was 5 million. Wuxi Weifu Group Co. Ltd. paid RMB 2.75 million accounting for 55% of the registered capital; Weifu High-Technology Co., Ltd. paid RMB 0.75 million accounting for 15% of the registered capital; and Wuxi Weifu Leader Catalytic Converter Co., Ltd paid RMB 1.5 million accounting for 30% of the registered capital. According to resolution of the extraordinary meeting of the Board in Dec. 2007 of Weifu High Technology, the Company added RMB 25 million solely to Wuxi Weifu International Trade Co., Ltd, and paid this investment in Dec. 2007. Because Wuxi Weifu International Trade Co., Ltd had not finished related administration change registration for the added capital, the added capital was put into exchange account temporarily. Wuxi Weifu International Trade Co., Ltd finished administration change registration for added capital in March 2008, with registered capital of RMB 30 million. This company became the controlling subsidiary company of the Company. 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, together with relevant interest calculated according to bank loan interest rate of that period. Through examination, we haven’t found the following behaviors in Weifu High-Technology Co., Ltd., except for the matters mentioned in the attachment: 1. Period expenses of salary, welfare, insurance, advertisement paid for its holding shareholders and other related parties, cost and other expenses carried over for them; 2. Splitting and lending capital to holding shareholders and other related parties, free or not free; 3. Offering entrusted loan to related parties through bank or non banking financial organizations; 4. Entrusting holding shareholders and other related parties to have investment activities; 5. Issuing commercial acceptance bills without authentic transaction background to its holding shareholders and other related parties; 6. Paying back debts in place of its holding shareholders and other related parties. The special explanation is only used to know capital occupancy of Weifu High Technology’ holding shareholders and other related parties, and this could not be used for any other purposes. Results occurred by inappropriate use has nothing to do with the certificated accountants and CPAs conducting the audit. 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 2008 is attached, and readers are suggested to read this statement together with the audited financial statement. Attachment: Consolidated statement on fund occupancy made by the holding shareholders and other related parties of the Company in 2008 Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd. The Chinese Certified Public Accountant: Jin Zhangluo Liu Darong Wuxi · P.R.China April 16, 2009 34 Consolidated Statement on Fund Occupancy Made by the Holding Shareholders and Other Related Parties of the Listed Company In 2008 Unit: RMB 0’000 35 Accumulated Related Interest occurrence relation Accounting Type of Balance of for the of between item occupied fund at occupation of fund Name of fund occupier fund calculated occupied the period-begin 2008 (interest occupier occupier and by listed fund in of 2008 of occupied listed company fund 2008 company excluded) Controlling, Subsidiary Account shareholder, Weifu Trade Co., Ltd. of holding receivable, 482,431.27 actual 7,685,135.66 shareholder etc. controller and affiliated Joint venture Account enterprises Kunming Xitong Machinery Co., Ltd. of holding receivable, 15,301,976.46 65,564,927.52 shareholders etc. Subtotal - - - 15,784,407.73 73,250,063.18 - Other account Subsidiaries Weifu International Trade Co., Ltd. Subsidiary 25,000,000.00 receivable, of listed etc. company Other and account affiliated Weifu-Autocam Precision Machinery Co., Ltd. Joint venture 6,000,000.00 receivable, enterprises etc. Subtotal - - - 31,000,000.00 - - 36 Related natural person and controlled legal person Subtotal - - - - - - Other related person and - - - affiliated enterprises Subtotal - - - - - - Total - - - 46,784,407.73 - 73,250,063.18 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 7th meeting of the 5th Supervisory Committee was held on April 13, 2008 and the examined topics were Work Report of the Supervisory Committee 2008, Special Report on Influence of Accounting Policy and Accounting Estimation Changes in 2008 on Consolidation Net Profit and Parent Company’s Net Profit in 2008, Self-estimation Report of Internal Control, Rules of Procedure of Supervisory Committee, Annual Report 2008 and Summary, Report of Financial Settlement and Profit Distribution Preplan for 2008 of the Company, Proposal on Prediction of Amount in Daily Related Transaction Department in 2009; 2. The 2nd meeting of the 6th Supervisory Committee was held on August 25, 2008 and the examined topics were Interim Report in 2008 of the Company and its Summary, Interim Profit Distribution Preplan 2008 of the Company. 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, semi-annual and quarterly financial reports 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 transactions 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 harm to the interest of the Company. 38 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: Gains Change in Proportion and Initial owners’ Accounting Name of the party Amount held in equity of Book value at losses Share investment equity in calculation held (Share) the period-end in source amount the report item Company report period period Guolian Long-term Subscr Securities Co., 12,000,000.00 18,000,000 1.20% 12,000,000.00 0.00 0.00 investment iption Ltd. Nanjing Hengtai Long-term Subscr Insurance and 1,000,000.00 1,000,000 1.85% 1,000,000.00 0.00 0.00 investment iption Broker Co., Ltd. Jiangsu HSBC Long-term Subscr Insurance Agents 500,000.00 500,000 10.00% 500,000.00 0.00 0.00 investment iption Limited Total 13,500,000.00 19,500,000 - 13,500,000.00 0.00 0.00 - - IV. The related transactions of the Company in 2008 Unit: RMB’0000 Type of Transaction Transaction Contents of related Related units amount in amount in transaction transaction 2008 2007 Wuxi Weifu Precision Machinery 9,835.10 13，374．40 Manufacturing Co., Ltd. Wuxi Weifu Group Co., Ltd. 735.00 731.40 Bosch Automotive Diesel Oil Purchase of 3,076.20 3,482.40 Systems Co., Ltd. components Purchase of Sales of oil pump Wuxi Weifu Trade Co., Ltd. 206.00 215.70 goods and and oil mouth labor service Wuxi Weixin Machinery Co., Ltd. 0.00 359.50 products and components Wuxi Longsheng Technology Co., 161.80 242.30 Ltd. Wuxi Weifu Autocam Co., Ltd. 5.10 - Wuxi Weifu Environmental 16,351.10 9,028.40 Catalyst Co., Ltd. Sales of Sales of oil pump and goods and Wuxi Weifu Precision Machinery oil mouth products 1,276.80 1,571.20 labor and components Manufacturing Co., Ltd. service Bosch Automotive Diesel Oil 11,796.30 10,592.60 Systems Co., Ltd. Wuxi Weifu Group Co., Ltd. 5,930.50 22,443.10 Chaoyang Weifu Jialin Co., Ltd. 3,759.10 4,726.40 Wuxi Weifu Trade Co., Ltd. 115.80 214.90 39 Kunming Xitong Machinery Co., 5,599.20 5,924.60 Ltd. Wuxi Weixin Machinery Co., Ltd. - 239.90 Wuxi Weifu-Autocam Co., Ltd. 17.00 - Purchase of Wuxi Weifu Environmental 303.80 438.80 components Catalyst Co., Ltd. Use of Paying fees for trade mark using trade Wuxi Weifu Group Co., Ltd. 627.00 651.90 and land mark and land lease lease Total 59,795.80 74,237.50 The above associated transactions were executed strictly according to the associated contracts signed by the two involved parties and there was no change in 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 for assets from other companies; or other companies had no entrustment, contracting or leasing for assets from the Company; 2. In the report period, the Company provided guarantee amounting to RMB 47.5 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 there was no guarantee breaking the rule. 3. In the report period, the Company did not entrust others to conduct management of cash assets. VI. Commitment events of the principal shareholders 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 CPAs In the report period, Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd. was reengaged as auditing institutions of the Company in 2008. And the auditing expense of 2008 for Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd. was RMB 800,000 (all expenses) and this CPAs had provided services for the Company for 17 years. VIII. In the report period, the Company, its Board of Directors and directors received no inspection and administrative penalty from 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 40 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, 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 100 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 Reception room of Spot 16 persons of Guoxin Operation status and future Jan. 11, 2008 the Company research Fund, etc. development of the Company Reception room of Spot Operation status and future Feb. 19, 2008 CLSA the Company research development of the Company Reception room of Spot Operation status and future Feb. 26, 2008 GF Securities Co., Ltd. the Company research development of the Company Reception room of Spot Operation status and future Feb. 27, 2008 Value Partners the Company research development of the Company Reception room of Spot 2 persons of Jianxin Fund Operation status and future Mar. 21, 2008 the Company research Management Co., Ltd, etc. development of the Company 2 persons of CSC Reception room of Spot Operation status and future May 16, 2008 SECURITIES (HK) the Company research development of the Company LIMITED, etc. Reception room of Spot Operation status and future May 19, 2008 7 persons of CICC the Company research development of the Company 3 persons of Great Wall Reception room of Spot Operation status and future May 27, 2008 Fund Management the Company research development of the Company Company Limited, etc. Reception room of Spot 3 persons of Donghai Operation status and future May 30, 2008 the Company research Securities Co., Ltd, etc. development of the Company Reception room of Spot Operation status and future Jun. 30, 2008 Many shareholders the Company research development of the Company Reception room of Spot 30 persons of Guoxin Operation status and future Aug. 27, 2008 the Company research Securities development of the Company 3 persons of Bank of Reception room of Spot Operation status and future Sep. 19, 2008 China International the Company research development of the Company Securities, etc. Reception room of Spot Operation status and future Sep. 23, 2008 Value Partners the Company research development of the Company 2 persons of Taiwan First Reception room of Spot Operation status and future Sep. 24, 2008 Global Investment Trust the Company research development of the Company Co., Ltd. Reception room of Spot Everbright Securities Co., Operation status and future Oct. 17, 2008 the Company research Ltd. development of the Company Reception room of Spot Operation status and future Oct. 27, 2008 UBS the Company research development of the Company 41 Reception room of Spot Operation status and future Nov. 18, 2008 Orient Securities Co., Ltd. the Company research development of the Company Reception room of Spot Guolian Securities Co., Operation status and future Nov. 20, 2008 the Company research Ltd. development of the Company X. Special commitments made by original non-circulating shareholders in process of Share Merger Reform and its implementation: Name of Special commitment Implementation shareholders I. Commitment on additional deliver shares Weifu Group which participated the Share Merger Reform has committed: after implementation of share reform, if its operation performance could not reach to 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 Wuxi Weifu shares. If there exist bonus, capitalization of share equity or share impairment in Weifu Hi-tech, It reached the Group Co., deliver shares volume comparably increase or decrease; if the Company’s share equity changed conditions of due to additional deliver, allot, convertible bonds and certificate, etc. so as to comparably change Ltd. implementation. 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 commitment period, The said original non-circulating shares would be listed for sale in Shenzhen Stock Exchange, the commitment is implementing and proportion of sales volume to total share equity of Weifu Hi-tech could not exceed 5% within 12 there is no shares months as well as 10% within 24 months, and sales price ought not to less than RMB 10 per held impairment. 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 After the implementation of Share Merger Reform of the Company, Weifu Group would make a being performed. proposal and vote for it: cash dividend of Weifu Hi-tech in 2005 are not less than RMB 4, “Weifu Group proportion of cash dividend from 2006 to 2008 are not less than 50% of distributable profit for would make a investors realized by the Company in current year. proposal in its Shareholders’ General Meeting and vote for it: the promises of Weifu Hi-tech in 2005, 42 2006 and 2007 has been performed completely, it would be implemented in 2008 as promised. 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 administrative level, shareholders, and It is actively the interests of the Company, Weifu Group committed: after the accomplishment of Share promoted with Merger Reform, under related regulations of state and Wuxi government in terms of incentive mature condition. system in the administrative level of listed company, Weifu Hi-tech would actively promote the plan for the incentive system in administrative level of Weifu Group. XI. Capital occupied by the controlling shareholder and its subsidiaries Ended the report period, the controlling shareholders and subsidiaries didn’t occupy capital of the Company. XII. Special explanation and independent opinions on external guarantee of the Company provided by independent directors: According to relevant regulations of document [2005] No.120 issued by CSRC, we verified the relevant financial information of the Company for 2008 and audit report provided by CPAs; according to our independent judgment, we made the following explanations on the external guarantee of the Company: (I) The Company didn’t provide guarantee for controlling shareholders, their subsidiaries, any non-legal units or individuals. (II) In 2008, the total amount of external guarantee amounted to RMB 122 million, including: 1. The Company, a legal entity, totally provided external guarantee amounting to RMB 122 million, mainly included guarantee amounting to RMB 55 million for its wholly-owned subsidiary-Wuxi Weifu Chang’an Fuel Injection Equipment Co., Ltd.; guarantee amounting to RMB 37 million for its wholly-owned subsidiary-Wuxi Weifu Mashan Fuel Injection Equipment Co., Ltd., and guarantee amounting to RMB 30 million for Wuxi Weifu Leader Catalytic Converter Co., Ltd. 2. Holding subsidiaries and joint stock subsidiaries had no external guarantee. (III) The Company had no direct or indirect guarantee for objects whose assets liability rate was over 70%. (IV) The Company’s guarantee did not reach the requirement of Item 41 in Articles of Association. (V) The amount of single guarantee did not exceed 10% of recent audited net profit. XIII. Periodically reports and provisional reports of the Company in the report period are as follows: Disclosing Notice No. Titles of notice Date of notice newspaper Revised Notice On Pre-estimated 2008-001 Jan. 30, 2008 Increase in Achievements of 2007 2008-002 Notice on External Investment Apr. 2, 2008 2008-003 Notice on Annual Report 2007 Apr. 15, 2008 43 Notice on Resolution of the 11th 2008-004 Apr. 15, 2008 Meeting of the 5th Board of Directors China Securities th Journal, Notice on Resolution of the 7 Meeting 2008-005 Apr. 15, 2008 Securities Times, of the 5th Supervisory Committee Hong Kong Wen Wei Po Notice on Daily Related Transaction in 2008-006 Apr. 15, 2008 2008 Notice on Annual Shareholders’ 2008-007 Apr. 15, 2008 General Meeting 2007 Notice on Providing Guarantee for 2008-008 Apr. 18, 2008 Others Notice on the First Quarterly Report of 2008-009 Apr. 25, 2008 2008 2008-010 Notice on Shareholders’ Sales May 16, 2008 2008-011 Notice on Resolution of Annual Jun.13, 2008 Shareholders’ General Meeting 2007 2008-012 Notice on Resolution of the 1st Meeting Jun.13, 2008 of the 6th Board of Directors 2008-013 Notice on Resolution of the 1st Meeting Jun.13, 2008 of the 6th Supervisory Committee 2008-014 Notice On Implementation Of Bonus Jul. 26, 2008 Distribution Of 2007 2008-015 Self-inspection Report of Capital Occupancy of the Company and Large Jul. 30, 2008 Shareholders 2008-016 Notice on Semi-annual Report 2008 Aug. 27, 2008 2008-017 Notice on Resolution of the 2nd Aug. 27, 2008 Meeting of the 6th Board of Directors 2008-018 Notice on Related Transaction Sep. 19, 2008 2008-019 Notice on Resolution of the 2nd Meeting of the 6th Supervisory Sep. 27, 2008 Committee 2008-020 Notice on Resolution of the 3rd Oct 25, 2008 Meeting of the 6th Board of Directors 2008-021 Notice on Holding the 1st Extraordinary Oct 25, 2008 Shareholders’ General Meeting 2008 2008-022 Notice on the Third Quarterly Report Oct 25, 2008 of 2008 2008-023 Notice on Resolution of the 1st Extraordinary Shareholders’ General Nov. 28, 2008 Meeting 2008 2008-024 Notice on Name Change of CPAs Dec. 20, 2008 2008-025 Explanation on Cognizance of Hi-tech Dec. 25, 2008 Enterprises The aforesaid notices were all published on the website http://www.cninfo.com.cn engaged by CSRC. Section XI. Financial Statement BALANCE SHEET 44 Dec. 31, 2008 Prepared by Weifu High-Technology Co., Ltd. Unit: RMB Balance at period-end Balance at year-begin Items Merger Parent Company Merger Parent Company Current assets: Monetary funds 633,818,074.23 228,735,378.18 791,962,685.73 236,564,251.25 Settlement provisions Capital lent Transaction finance asset Notes receivable 388,733,826.26 197,129,578.52 647,047,830.91 280,973,461.06 Accounts receivable 468,041,533.70 243,063,549.71 613,004,957.02 322,443,607.99 Accounts paid in advance 33,595,448.26 20,937,261.75 33,810,290.13 18,427,570.33 Insurance receivable Reinsurance receivables Contract reserve of reinsurance receivable Interest receivable Dividend receivable Other receivables 6,611,679.75 1,913,035.12 11,489,912.38 32,410,839.07 Purchase restituted finance asset Inventories 507,375,789.63 194,914,308.68 758,238,756.73 318,434,906.55 Non-current asset due within one year Other current assets 4,913,524.44 4,312,582.47 Total current assets 2,043,089,876.27 886,693,111.96 2,859,867,015.37 1,209,254,636.25 Non-current assets: Granted loans and advances Finance asset available for sales Held-to-maturity securities Long-term account receivable Long-term equity investment 1,216,336,268.93 1,775,737,750.20 899,689,966.07 1,455,402,497.41 Investment property Fixed assets 1,047,314,144.93 621,566,379.00 1,143,165,909.79 663,719,396.29 Construction in progress 171,144,058.98 126,462,367.06 119,578,250.68 104,186,166.94 Engineering material Disposal of fixed asset Productive biological asset Oil and gas asset Intangible assets 78,229,946.20 28,074,191.73 106,304,427.42 28,750,245.57 Expense on Research and Development Goodwill Long-term expenses to be 2,372,655.75 1,112,335.56 apportioned Deferred income tax asset 39,414,273.32 8,643,664.77 29,382,014.14 6,594,829.69 Other non-current asset Total non-current asset 2,554,811,348.11 2,560,484,352.76 2,299,232,903.66 2,258,653,135.90 Total assets 4,597,901,224.38 3,447,177,464.72 5,159,099,919.03 3,467,907,772.15 BALANCE SHEET (Con.) Dec. 31, 2008 Prepared by Weifu High-Technology Co., Ltd. Unit: RMB Current liabilities: 45 Short-term loans 843,036,725.49 615,000,000.00 1,485,955,800.00 859,413,800.00 Loan from central bank Absorbing deposit and interbank deposit Capital borrowed Transaction financial liabilities Notes payable 231,760,209.02 192,450,209.02 174,171,187.21 169,058,000.00 Accounts payable 502,090,202.96 300,072,484.51 659,838,875.03 344,973,632.91 Accounts received in advance 19,023,738.35 1,795,586.83 22,606,832.04 967,216.25 Selling financial asset of repurchase Commission charge and commission payable Wage payable 135,485,636.96 62,362,525.91 91,398,945.30 15,995,385.86 Taxes payable 11,436,759.32 -2,482,224.39 18,365,942.02 -7,272,613.71 Interest payable Dividend payable Other accounts payable 99,693,552.47 83,506,503.70 50,101,172.00 11,314,203.03 Reinsurance payables Insurance contract reserve Security trading of agency Security sales of agency Noncurrent liabilities due within 1 year Other current liabilities 10,683,370.14 1,250,000.00 13,160,822.37 1,523,280.88 Total current liabilities 1,853,210,194.71 1,253,955,085.58 2,515,599,575.97 1,395,972,905.22 Non-current liabilities: Long-term loans Bonds payable Long-term account payable 15,700,000.00 12,950,000.00 Special accounts payable Projected liabilities 1,604,658.96 Deferred income tax liabilities Other non-current liabilities 2,090,000.00 1,220,000.00 Total non-current liabilities 17,790,000.00 1,604,658.96 14,170,000.00 Total liabilities 1,871,000,194.71 1,255,559,744.54 2,529,769,575.97 1,395,972,905.22 Owner’s equity (or shareholders’ equity): Paid-in capital (or share capital) 567,275,995.00 567,275,995.00 567,275,995.00 567,275,995.00 Capital public reserve 907,580,308.28 923,981,806.57 909,301,329.46 922,196,148.96 Less: Inventory shares Surplus public reserve 262,439,505.87 262,439,505.87 241,970,463.58 241,970,463.58 Provision of general risk Retained profit 769,048,706.26 437,920,412.74 682,892,683.40 340,492,259.39 Balance difference of foreign currency translation Total owner’s equity attributable to 2,506,344,515.41 2,191,617,720.18 2,401,440,471.44 2,071,934,866.93 parent company Minority interests 220,556,514.26 227,889,871.62 Total owner’s equity 2,726,901,029.67 2,191,617,720.18 2,629,330,343.06 2,071,934,866.93 Total liabilities and owner’s equity 4,597,901,224.38 3,447,177,464.72 5,159,099,919.03 3,467,907,772.15 PROFIT STATEMENT AND PROFIT DISTRIBUTION STATEMENT 2008 Prepared by Weifu High-Technology Co., Ltd. Unit: RMB 46 Amount in this period Amount in last period Items Merger Parent Company Merger Parent Company I. Total operating income 3,033,289,602.71 1,702,913,005.12 3,185,418,491.24 1,638,476,405.06 Including: Operating income 3,033,289,602.71 1,702,913,005.12 3,185,418,491.24 1,638,476,405.06 Interest income Insurance gained Commission charge and commission income II. Total operating cost 3,153,129,637.66 1,886,477,264.57 3,034,909,802.41 1,637,235,179.69 Including: Operating cost 2,463,879,992.14 1,507,769,057.89 2,492,363,854.19 1,405,473,569.38 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 16,838,985.06 7,183,536.00 17,058,211.96 6,905,941.62 Sales expenses 128,035,832.75 91,899,848.68 105,970,789.55 66,752,278.22 Administration expenses 361,056,794.49 161,040,023.89 280,059,074.16 86,404,727.05 Financial expenses 71,827,254.71 61,118,755.18 92,621,074.67 54,464,849.74 Losses of devaluation of asset 111,490,778.51 57,466,042.93 46,836,797.88 17,233,813.68 Add: Changing income of fair value(Loss is listed with “-”) Investment income (Loss is listed 365,029,784.32 412,107,478.57 137,061,554.87 195,948,488.47 with “-”) Including: Investment income on 363,714,457.16 344,107,714.75 127,763,042.47 109,365,740.61 affiliated company and joint venture Exchange income (Loss is listed with “-”) III. Operating profit (Loss is listed 245,189,749.37 228,543,219.12 287,570,243.70 197,189,713.84 with “-”) Add: Non-operating income 4,229,360.08 132,727.45 10,794,925.83 1,538,567.53 Less: Non-operating expense 33,733,719.26 25,920,237.94 14,071,632.99 7,208,042.17 Including: Disposal loss of 22,856,467.22 19,399,000.63 2,617,982.34 1,434,925.07 non-current asset IV. Total Profit (Loss is listed with 215,685,390.19 202,755,708.63 284,293,536.54 191,520,239.20 “-”) Less: Income tax 8,878,213.27 -1,934,714.24 17,778,085.45 -513,288.23 V. Net profit (Net loss is listed with 206,807,176.92 204,690,422.87 266,515,451.09 192,033,527.43 “-”) Net profit attributable to owner’s 193,418,292.38 230,829,383.93 equity of parent company Minority shareholders’ gains and 13,388,884.54 35,686,067.16 losses VI. Earnings per share i. Basic earnings per share 0.34 0.41 ii. Diluted earnings per share 0.34 0.41 CASH FLOW SHEET 2008 Prepared by Weifu High-Technology Co., Ltd. Unit: RMB Items Amount in this period Amount in last period 47 Merger Parent Company Merger Parent Company I. Cash flows arising from operating activities: Cash received from selling commodities and providing labor 3,878,206,476.54 2,128,377,796.84 3,566,540,821.09 1,734,359,489.36 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 23,026,976.28 11,692,400.57 Other cash received 66,303,819.56 126,863,428.25 19,814,002.66 57,849,228.52 concerning operating activities Subtotal of cash inflow 3,967,537,272.38 2,255,241,225.09 3,598,047,224.32 1,792,208,717.88 arising from operating activities Cash paid for purchasing commodities and receiving labor 2,330,972,396.87 1,454,433,690.88 2,603,308,410.77 1,473,901,624.19 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 346,220,548.57 140,085,525.93 307,524,422.03 138,785,373.26 workers Taxes paid 215,058,124.98 73,821,833.08 207,634,805.17 83,259,711.52 Other cash paid concerning 266,792,558.73 180,092,895.19 267,546,329.51 163,883,052.32 operating activities Subtotal of cash outflow 3,159,043,629.15 1,848,433,945.08 3,386,013,967.48 1,859,829,761.29 arising from operating activities Net cash flows arising from 808,493,643.23 406,807,280.01 212,033,256.84 -67,621,043.41 operating activities 48 II. Cash flows arising from investing activities: Cash received from 5,321,068.87 1,823,615.00 10,000.00 recovering investment Cash received from 54,184,062.59 123,601,442.34 61,460,582.62 154,747,445.41 investment income Net cash received from disposal of fixed, intangible and 8,157,513.83 1,869,436.08 23,684,392.21 5,022,480.98 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 67,662,645.29 125,470,878.42 86,968,589.83 159,779,926.39 investing activities Cash paid for purchasing fixed, intangible and other 169,525,026.42 96,980,477.99 150,918,784.37 114,209,068.55 long-term assets Cash paid for investment 15,844,220.00 39,294,800.00 9,162,685.00 24,062,685.00 Net increase of mortgaged loans Net cash received from subsidiaries and other units Other cash paid concerning investing activities Subtotal of cash outflow from 185,369,246.42 136,275,277.99 160,081,469.37 138,271,753.55 investing activities Net cash flows arising from -117,706,601.13 -10,804,399.57 -73,112,879.54 21,508,172.84 investing 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 1,657,201,911.00 925,000,000.00 3,024,649,300.00 1,669,286,300.00 Cash received from issuing bonds Other cash received 5,600,000.00 concerning financing activities Subtotal of cash inflow from 1,657,201,911.00 925,000,000.00 3,030,249,300.00 1,669,286,300.00 financing activities Cash paid for settling debts 2,300,120,985.51 1,169,413,800.00 3,056,163,100.00 1,683,298,600.00 Cash paid for dividend and profit distributing or interest 202,996,605.04 141,382,253.51 150,417,762.07 84,327,498.01 paying Including: Dividend and profit of minority shareholder paid 25,407,052.95 27,049,969.48 by subsidiaries Other cash paid concerning 27,600,000.00 financing activities Subtotal of cash outflow from 2,530,717,590.55 1,310,796,053.51 3,206,580,862.07 1,767,626,098.01 financing activities Net cash flows arising from -873,515,679.55 -385,796,053.51 -176,331,562.07 -98,339,798.01 49 financing activities IV. Influence on cash due to fluctuation in exchange rate V. Net increase of cash and cash -182,728,637.45 10,206,826.93 -37,411,184.77 -144,452,668.58 equivalents Less: Balance of cash at period-begin-associated companies 9,393,928.02 merged in proportion method of last year Add: Balance of cash and cash equivalents at the period 678,013,454.68 131,564,251.25 724,818,567.47 276,016,919.83 -begin VI. Balance of cash and cash 495,284,817.23 141,771,078.18 678,013,454.68 131,564,251.25 equivalents at the period -end 50 CONSOLIDATED STATEMENT ON CHANGES OF SHAREHOLDERS’ E 2008 Prepared by Weifu High-Technology Co., Ltd. Amount in this report period Shareholders' equity attributable to the parent company Items Less: General Paid-up capital Capital reserves Treasury Surplus reserves risk Retained profit (Share capital) Stock provision I. Balance at the end of the last year 567,275,995.00 909,301,329.46 241,970,463.58 682,892,683.40 Add: Changes of accounting policy Error correction of the last period Others II. Balance at the beginning of this year 567,275,995.00 909,301,329.46 241,970,463.58 682,892,683.40 III. Increase/ Decrease in this year (Decrease is -1,721,021.18 20,469,042.29 86,156,022.86 listed with'"-") (I) Net profit 193,418,292.38 (II) Profits and losses calculating into owners' -1,721,021.18 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 -1,721,021.18 Total of (I)and (II) -1,721,021.18 193,418,292.38 (III) Owners' devoted and decreased capital 51 1. Owners' devoted capital 2. Amount calculated into owners' equity paid in shares 3. Others (IV) Profit distribution 20,469,042.29 -107,262,269.52 1. Withdrawal of surplus reserves 20,469,042.29 -20,469,042.29 2. Withdrawal of general risk provisions 3. Distribution for owners (shareholders) -86,793,227.23 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 the report period 567,275,995.00 907,580,308.28 262,439,505.87 769,048,706.26 52 CONSOLIDATED STATEMENT ON CHANGES OF SHAREHOLDERS’ EQU 2007 Prepared by Weifu High-Technology Co., Ltd. Shareholders' equity attributable to the parent company Items Share capital Surplus reserves Retained profi I. Balance at the end of the last year 567,275,995.00 926,861,588.64 290,774,487.89 419,434,973 1. Changes of accounting policy -20,421,624.66 -68,007,377.05 86,269,348 2. Error correction of the last period others II. Balance at the beginning of this year 567,275,995.00 906,439,963.98 - 222,767,110.84 505,704,322 III. Increase/ Decrease in this year (Decrease is listed with'"-") - 2,861,365.48 - 19,203,352.74 177,188,361 (I) Net profit 230,428,273 (II) Profits and losses calculating into owners' equity - 2,861,365.48 - - 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 2,861,365.48 Total of (I)and (II) - 2,861,365.48 - - 230,428,273 (III) Owners' devoted capital - - - - 1. Owners' devoted capital in the report period 2. Treasury stock purchased this year 3. Amount calculated into owners' equity paid in 53 shares (IV) Profit distribution this year - - - 19,203,352.74 -53,239,912 1. Distribution for shareholders 19,203,352.74 -19,203,352 2. Withdrawal of surplus reserves 3. Withdrawal of employee bonus and welfare fund -34,036,559 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 the report year 567,275,995.00 909,301,329.46 - 241,970,463.58 682,892,683 54 STATEMENT ON CHANGES OF OWNERS’ EQUITY OF PARENT COM 2008 Prepared by Weifu High-Technology Co., Ltd. Year 2008 Line Items Less: Surplus 次 Share capital Capital reserves Treasury Stock reserves I. Balance at the end of the last year 567,275,995.00 922,196,148.96 241,970,463 1. Changes of accounting policy 2. Error correction of the last period II. Balance at the beginning of this year 567,275,995.00 922,196,148.96 0 241,970,463 III. Increase/ Decrease in this year (Decrease is listed with'"-") 0 1,785,657.61 0 20,469,042 (I) Net profit (II) Profits and losses calculating into owners' equity 0 1,785,657.61 0 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 1,785,657.61 Total of (I)and (II) 0 1,785,657.61 0 (III) Shareholders' devotion capital 0 0 0 1. Shareholders' devotion capital 2. Amount calculated into shareholders' equity paid in shares 3. Others 55 (IV) Profit distribution 0 0 0 20,469,042 1. Withdrawal of surplus reserves 20,469,042 2. Distribution for shareholders 3. Others(Withdrawal of employee bonus and welfare fund) (V) Carrying forward internal owners' equity 0 0 0 1. Capital reserves conversed to capital (share capital) 2. Surplus reserves conversed to capital (share capital) 3. Remedying loss with profit surplus IV. Balance at the end of the report year 567,275,995.00 923,981,806.57 0 262,439,505 56 STATEMENT ON CHANGES OF OWNERS’ EQUITY OF PARENT COMPAN 2007 Prepared by Weifu High-Technology Co., Ltd. Year 2007 项目 Line Less: Surplus Share capital Capital reserves Treasury Stock reserves I. Balance at the end of the last year 567,275,995.00 926,861,588.64 249,888,236.81 1. Changes of accounting policy 0.00 -4,665,439.68 0.00 -27,121,125.97 2. Error correction of the last period II. Balance at the beginning of this year 567,275,995.00 922,196,148.96 0.00 222,767,110.84 III. Increase/ Decrease in this year (Decrease is listed 0.00 0.00 0.00 19,203,352.74 with'"-") (I) Net profit (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) 0.00 0.00 0.00 0.00 (III) Shareholders' devotion capital 0.00 0.00 0.00 0.00 1. Shareholders' devotion capital 2. Amount calculated into shareholders' equity paid in 57 shares 3. Others (IV) Profit distribution 0.00 0.00 0.00 19,203,352.74 1. Withdrawal of surplus reserves 19,203,352.74 2. Distribution for shareholders 3. Others(Withdrawal of employee bonus and welfare fund) (V) Carrying forward internal owners' equity 0.00 0.00 0.00 0.00 1. Capital reserves conversed to capital (share 0.00 capital) 2. Surplus reserves conversed to capital (share 0.00 capital) 3. Remedying loss with profit surplus IV. Balance at the end of the report year 567,275,995.00 922,196,148.96 0.00 241,970,463.58 58 Notes to Financial Statement Note 1. 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), 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’ 59 General Meeting , the Company distributed 3 shares for each 10 shares to the whole 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 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, 2006. Note 2. 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. Note 3. 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. Note 4. 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 60 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 adopts 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. (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 61 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 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. 62 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 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 63 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 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: Account age Withdrawal proportion 64 Within 6 months Don’t draw 6 months to 1 year 10% 1 year to 2 years 20% 2 years to 3 years 40% Above 3 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. 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 65 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 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 adopts 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 iare as follows: 66 Annual Fixed assets Estimated lifetime depreciation rates Housings 35 years 2.71% Buildings and constructions 20 years 4.75% Imported equipments 12 years 7.92% Machinery Equipment Domestic equipments 10 years 9.50% Transportation equipments 10 years 9.50% Office equipments 5 years 19.00% Decoration expenses of houses 5 years 19.00% 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; 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 67 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 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 68 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 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 69 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 exchange difference from,t he specific loan from purchasing fixed assets, if meeting the following three conditions, loan expenses should be capitalized. ① Asset disburse has been occurred. ②The borrowing costs has already incurred. ③Purchase 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 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： ①Interest of the specialized loan for purchasing fixed assets is the capitalization rate； ②Above 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 building activities for fixed as sets stop abnormally and the interruption interval exceeds three months, the capitalizat 70 ion of borrowing cost should be stopped temporarily and deemed as the expenses of c urrent period until the re-start of purchasing and building activities for assets. (5)Stop of capitalization: When the purchased fixed assets have reached the expected serviceable condition, stop the capitalization of borrowing cost. (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; 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; 71 v. Labor union expenditure and personnel education expense; 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; 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 72 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 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 73 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 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. Note 5. Taxes 1. 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. 2. 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. 3. Income tax The Company, its subsidiaries Weifu Jinning, Weifu Diesel System and Wuxi Weifu Leader Catalytic Converter Co., Ltd. are all high-tech enterprises, 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 25%. 74 Note 6. Enterprise merger and consolidated financial report 1. Enterprise merger under the common control in the report year In the report year, Wuxi Weifu International Trade Co. Ltd.was mergered under the common control. Wuxi Weifu International Trade Co. Ltd. was originally jointly established and funded by Weifu Group, the Company and Weifu Leader. Weifu Group held 55% stakes and became the controlling shareholder of Weifu International Trade; the Company held 15% stakes of Weifu International Trade at the year-begin, the Company singly funded RMB 25 million in this February, after adding the capital, the proportion of shares held by the Company was 85.63%, the proportion of shares held by Weifu Leader was 5%, the consolidated proportion of shares held by the Company and Weifu Leader was 90.83%, and Weifu International Trade became the controlling subsidiary of the Company. In the report year, the Company brought Weifu International Trade into the scope of consolidated statement and made retroactive adjustment on the consolidated statement of last year. 2. Shareholding subsidiaries 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, 2008, the Company’s shareholding subsidiaries are as follows: Registered Registration Equity held Investee capital Business scope place (%) (RMB’0000) Accessories and matching parts of Weifu Jinning Nanjing City 34,628.70 80.00 internal combustion engine Accessories and Wuxi Weifu Mashan Oil Pump and Oil matching parts of Mashan, Wuxi 4,500.00 100.00 Nozzle Co., Ltd. internal combustion engine Wuxi Weifu-Jilin University New Material Development 500.00 70.00 Metal nano powder Application and Development Co., Ltd. zone, Wuxi Accessories and Wuxi Weifu Chang’an Oil Pump and Oil Chang’an, matching parts of 6,000.00 100.00 Nozzle Co., Ltd. Wuxi internal combustion engine Jiangsu Weifu Nano-Science and Huishan 3,000.00 80.00 Nano materials Technology Co., Ltd. District, Wuxi New District, Weifu Leader Catalytic Converter Co., Ltd. 26,000.00 94.81 Muffle, purifier Wuxi Weifu Diesel System New District, 30,000.00 70.00 Accessories and 75 Wuxi matching parts of internal combustion engine New District, International Wuxi Weifu International Trade Co. Ltd. 3,000.00 90.83 Wuxi trade 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”. 3. Change of the consolidation scope of the financial statements Consolidation Consolidation Investee scope scope of this Reasons for the change of last year year Weifu Jinning Yes Yes No change Weifu Mashan Yes Yes No change Weifu Jida Yes Yes No change Weifu Chang’an Yes Yes No change Weifu Nano Yes Yes No change Weifu Leader Yes Yes No change Weifu Diesel System Yes Yes No change Weifu International Trade Yes Yes No change 4. Joint venture Joint venture refers to enterprises whose operating activities are controlled by 2 investors or more according to articles of a contract. By Dec. 31, 2008, the Company’ joint venture companies are as follows: Investee Registration Registered Equity held Business place capital (%) scope Weifu Environmental Protection New District, 5,000.00 49.00 Catalyst Catalyst Co., Ltd. Wuxi Wuxi Weifu-Autocam Fine New District, Accessory of USD1,000.00 50.00 Machinery Co. LTD. Wuxi automobiles Fittings and accessories of Chaoyang Weifu-Jialin Machinery Chaoyang, 800.00 50.00 internal Manufacturing Co. LTD Liaoning combustion engine Weifu Environmental Protection: founded collectively by Weifu Leader, which is the 76 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 Leader, Huawei (Shanghai) Nano-Technology Co., Ltd etc. would jointly control this company. 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-Jialin and control the company jointly. 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 for items is taking RMB thousand as unit, excluded the specific ones with special explanation) 1. Monetary capital Dec. 31, 2008 Dec. 31, 2007 Cash 402 596 Demand deposit – deposit in RMB 378,683 461,614 Demand deposit – deposit in USD - 22,216 Demand deposit – deposit in EURO（EURO 900） 9 21,338 Demand deposit – deposit in YEN - 670 Fixed deposit 107,719 171,500 Other monetary capital 8,472 80 Other monetary capital(guarantee money) 138,533 113,949 633,818 791,963 [Note]Amount of guarantee money in fixed deposit and other monetary capital Dec. 31, 2008 Dec. 31, 2007 Guarantee money for bank’s acceptance bill 138,533 113,949 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, 2008 Dec. 31, 2007 Commercial acceptance bill 84,330 74,900 Bank acceptance bill 304,404 572,148 Total 388,734 647,048 77 The amount of notes receivable in year-end decreased RMB 258.31 million compared with last year-end, which was mainly because the Company and its subsidiary Weifu Diesel Oil System decreased notes settlement this year, of which the Company decreased RMB 83.84 million and its subsidiary Weifu Diesel Oil System decreased RMB 200.1 million. The due date of notes receivable at year-end is before Jun. 30, 2009. Of the total notes receivable as of year-end, bank acceptance bill of RMB 13,985,900 was issued as mortgage for opening notes payable. 3. Accounts receivable (1) Analysis of the account age Dec. 31, 2008 Proportion Provision for Proportion of Amount Net amount (%) bad debts provision ( ) Within 6 months 432,924 80.77 - 432,924 6 months to 1 year 27,650 5.16 2,765 10 24,885 1 to 2 years 11,300 2.11 2,259 20 9,041 2 to 3 years 1,987 0.37 795 40 1,192 Above 3 years 3,133 0.58 3,133 100 - Individual 59,012 11.01 59,012 100 - cognizance 536,006 100.00 67,964 468,042 Dec. 31, 2007 Proportion Provision for Proportion of Amount provision (%) Net amount (%) bad debts (%) Within 6 months 562,302 85.75 - 562,302 6 months to 1 48,199 7.35 4,820 10 43,379 year 1 to 2 years 7,543 1.15 1,500 20 6,043 2 to 3 years 2,136 0.33 855 40 1,281 Above 3 years 3,433 0.52 3,433 100 - Individual 32,145 4.90 32,145 100 - cognizance 78 655,758 100.00 42,753 613,005 (2)Account receivable in foreign currency Dec. 31, 2008 Dec. 31, 2007 Type of Sum in Sum in foreign Exchange Converted Exchange Converted original original currency rate to RMB rate to RMB currency currency USD 2,263 6.8346 15,467 2,724 7.3046 19,897 EURO 545 9.6590 5,263 - - - 20,730 19,897 (3) Classified according to account nature Dec. 31, 2008 Dec. 31, 2007 Provision Provision Item Proportion Proportion Amount for bad Amount for bad (%) (%) debts debts Account receivable with significant 415,001 77.42 2,505 576,396 87.90 4,353 amount in single item Account receivable with no significant 61,993 11.57 6,447 47,217 7.20 6,255 amount in single item Individual 59,012 11.01 59,012 32,145 4.90 32,145 cognizance 536,006 100.00 67,964 655,758 100.00 42,753 Notes: (1) Account receivable with significant amount in single item indicated the one which is above RMB 1 million; account receivable with no significant amount in single item indicated the one which is less than RMB 1 million. For those accounts receivable with significant amount in single item, the Company made separate devaluation test. Due to that no objective evidence had been found showing that devaluation had already happened to the accounts, the Company had to respectively withdraw provision for bad debt for the accounts receivable which were still in credit period according to aging analysis of accounts. (3) The balance of accounts receivable at period-end does not include accounts owned by major shareholders holding more than 5% (including 5%) shares of the Company. Arrearage owned by related units could be found in 9, Note 9. (4) The total amount owed by the top five units in accounts receivable amounted to RMB 236.15 million, accounting for 44.06% of the balance of accounts receivable as of year-end. 4. Account paid in advance 79 Dec. 31, 2008 Dec. 31, 2007 Within 1 year 32,152 33,517 1 to 2 years 1,196 36 2 to 3 years 51 187 Above 3 years 196 70 33,595 33,810 5. Other accounts receivable (1) Analysis of the account age Dec. 31, 2008 Proportion Provision for Proportion of Amount provision (%) Net amount (%) bad debts (%) Within 6 months 5,809 51.81 - - 5,809 6 months to 1 322 2.87 18 5.45 304 year 1 to 2 years 224 2.00 14 6.62 210 2 to 3 years 277 2.47 18 6.62 259 Above 3 years 78 0.69 48 61.36 30 Individual 4,504 40.16 4,504 100.00 - cognizance 11,214 100.00 4,602 6,612 Dec. 31, 2007 Proportion of Proportion Provision for Amount provision Net amount (%) bad debts (%) Within 6 months 6,296 39.17 - - 6,296 6 months to 1 year 4,272 26.57 14 0.34 4,257 1 to 2 years 915 5.69 27 2.92 888 2 to 3 years 49 0.30 11 22.04 38 Above 3 years 39 0.25 28 72.14 11 Individual 4,503 28.02 4,503 - - cognizance 16,074 100.00 4,583 11,490 (2) The balance of other accounts receivable at period-end does not include accounts owned by major shareholders holding more than 5% (including 5%) shares of the 80 Company. Arrearage owned by related units could be found in 9, Note 9. (3) The other account receivable at year-end decreased RMB 4.86 million over that of year-begin, which was mainly due to that the Company took back arrearage of RMB 6 million from Weifu Autocam this year. (4) Except for the debts owned by related companies and reserve fund for employees in other accounts receivable that were not withdrawn with the provision for bad debts, others were all withdrawn with provision for bad debts according to relevant proportions. (5)The of total amount owed by the top five units in balance of other accounts receivable as of year-end amounted to RMB 5.63 million, accounting for 50.23% of the total other accounts receivable. (6)Main units owing arrearage and specific amount of arrearage: Nature or content Dec. 31, 2008 Amount paid on its behalf Nanjing University, etc[note] 4,400 for investment, etc [Note] Nanjing University, Southeast University, Nanjing University of Science and Technology as well as Nanjing University of Technology owed arrearage of RMB 2,400,000 to the Company, since the Company paid RMB 600,000 for each of the four universities on their behalf when the Company and the four aforesaid universities started to establish Weifu Nonotechnology Co., Ltd. According to the cooperation agreement, the universities would take the bonus distributed from Weifu Nonotechnology since it established to repay the investment amount initially paid by the Company year by year. As the arrearage of RMB 2,000,000 owed by Jiangsu Science and Technology Center, it was also the amount paid by the Company on its behalf. Whereas some difficulty existed in taking back the aforesaid arrearage through annual bonus from Weifu Nonotechnology, the Company so withdrew provision for bad debt in sum according to cautious principle. 6. Inventory Dec. 31, 2008 Dec. 31, 2007 Inventory Inventory Inventory falling price Inventory falling price reserves reserves Inventory 151,614 44,961 167,576 32,323 materials Goods in 130,516 - 169,040 6,485 production 375,306 108,140 546,538 86,521 Finished products 81 3,040 - 414 - Inventory goods 660,476 153,101 883,568 125,329 [Note 1] The net realizable value of the inventories refers to the estimated price for sales of inventories after deducting the estimated cost occurred till the inventories finished, estimated sales expenses and relevant tax expense. [Note 2] Inventory at period-end decreased RMB 250,860,000 compared with that in period-begin with a decline of 33.08%, which was influenced by the implementation of State Emission Regulations, the Company reduced the inventory of products with lower emission standard, and withdrew depreciation reserves for the obsolete products at the same time. 7. Other current assets Dec. 31, 2008 Dec. 31, 2007 Receivable export tax rebates 4,891 4,313 Others 23 - 4,914 4,313 8. Long-term equity investment Increase in Decrease in Dec. 31, 2007 Dec. 31, 2008 this period this period Investment to joint venture and 828,438 378,409 55,907 1,150,940 associated enterprise Investment to other 115,418 - 1,133 114,285 enterprises Provision for devaluation of -44,166 -5,856 -1,133 -48,889 long-term investment 899,690 372,553 55,907 1,216,336 (1) Long-term equity investment calculated by equity method Increase Increase Increase or Investm Amount or or Amount Initial decrease ent at decrease Dividends decrease at Units invested investm in proporti period-b in equity received in period-en ent cost investme on egin in this accumula d nt in this period ted equity period Bosch Auto Diesel 31.50% 549,557 495,489 - 264,958 - 210,890 760,447 System [Note 1] Zhonglian Automobile 20.03% 120,124 232,218 - 80,186 53,512 138,768 258,892 Electronic Co. Weifu Precision 20.00% 2,000 6,805 - 3,177 672 7,310 9,310 Machinery 82 Weifu Environmental 49.00% 24,500 64,810 - 6,906 - 47,216 71,716 Protection [Note 2] Wuxi Longsheng 20.00% 600 1,269 400 83 - 1,152 1,752 Technology Co., Ltd. Weifu-Autocam 50.00% 37,842 21,858 14,295 7,524 - 5,835 43,677 [Note 3] Weifu-Jialin 50.00% 4,000 4,266 - 880 - 1,146 5,146 Wuxi Weifu Ecnomics Trade Co., 42.38% 1,723 -1,723 - - - - Ltd. [Note 4] 1,150,94 738,623 828,438 12,972 363,714 54,184 412,317 0 [Note 1] Bosch Auto Diesel System: The registered capital is USD 200,000,000, in which the Company funded USD 60,000,000, accounting for 30% of registered capital, and Weifu Jinning funded USD 3,000,000, accounting for 1.5% of registered capital. [Note 2] Weifu Environmental Protection: founded collectively by Weifu Leader-the Company’s subsidiary; and Huawei (Shanghai) Nano-Technology Co., Ltd, etc in May 2004. According to the Company’s Articles of Association, Weifu Leader, Huawei (Shanghai) Nano-Technology Co., Ltd and so on would jointly control this company. [Note 3] Weifu-Autocam is a joint venture founded by the Company and American Autocam in Aug. 2005. The Company funded USD 5,000,000, accounting for 50% of the registered capital USD 10,000,000 of the company. [Note 4] Wuxi Weifu Trade Co., Ltd.: a limited corporation established with both investments from Weifu International Trade and Weifu Group in December of 2005. Funds invested by Weifu International Trade take 42.38% registered capital of Wuxi Weifu Trade Co., Ltd., and in February of 2008, Weifu International Trade transferred all equities of Wuxi Weifu Trade Co., Ltd. held by it to Weifu Group. (2) Long-term equity investment calculated by cost method Investment Amount at Increase/D Amount at Units invested period-begi ecrease in proportion period-end n this period Wuxi Guolian Securities Corporation [Note 1] 1.20 12,000 - 12,000 Guangxi Liufa Co., Ltd. 1.22 1,600 - 1,600 Changchai Group, Financing Company 800 - 800 H&J Vanguard Investment Co., Ltd. 11.72 33,000 - 33,000 Nanjing Hengtai insurance brokers Limited 1.85 1,000 - 1,000 Jiangsu Huifeng Insurance Agency Co. , Ltd. 10.00 500 - 500 Yangdong Co., Ltd. 1.18 2,356 - 2,356 83 Henan Gushi Weining Oil Pump & Nozzle 3,166 -1,133 2,033 Co., Ltd. etc. [Note 2] Changzhou Diesel Engine Group Corporation, 1,056 - 1,056 etc. [Note 3] Wuxi Capital Investment Co., Ltd. 1.875 3,000 - 3,000 Beijing Futian Environmental Power Holding 12.95 56,940 - 56,940 Co Ltd 115,418 -1,133 114,285 [Note 1] Guolian Securities Corporation: originally referred to Guolian Securities Co., Ltd., and changed to the present name this year. The Company invested with cost of RMB 12 million, holding 18 million shares which accounted for 1.20% of the total shares. [Note 2] The 4 units including Henan Gushi Weining Oil Pump & Nozzle Co., Ltd. were invested by Nanjing Weifu Jinning Co., Ltd. with investment amount totaling to RMB 3,166,400. Details of those companies will not be listed here in consideration that their scales are too small. Henan Province Gushi Weining Oil Pump & Nozzle Co. fully appropriated provision for devaluation amounting to RMB 2.03 million in 2001. In 2008, Weifu Jinning transferred equities of Pufa Machinery Industrial Co., Ltd., Nanjing Machinery Industry Foreign Trading Co., Ltd. and Changjiang Economic Development Co., Ltd. held by it to Nanjing Machinery & Electronics Industrial (Group) Co., Ltd., meanwhile, transferred the provision for depreciation of RMB 1.13 million which had been already withdrawn. [Note 3] The 3 units including Changzhou Diesel Engine Group Corporation were invested by Nanjing Weifu Jinning Co., Ltd. with investment amount totaling to RMB 1,056,000. Details of those companies were not separately listed here in consideration that their scales were too small. (3) Provision for devaluation of long-term investment Decrease Dec. 31, Increase in Dec. 31, in this 2007 this period 2008 period H&J Vanguard Investment Co., 30,000 3,000 - 33,000 Ltd. Henan Gushi Weining Oil Pump 3,166 - 1,133 2,033 & Nozzle Co., Ltd. etc. Beijing Futian Environmental 11,000 - - 11,000 Power Holding Co., Ltd. Jiangsu Huifeng Insurance - 500 - 500 Agency Co. , Ltd. Yangdong Co., Ltd. - 2,356 - 2,356 44,166 5,856 1,133 48,889 [Note] Due to that Jiangsu Huifeng Insurance Agency Co., Ltd. and Yangdong Co., Ltd. received successive losses in operation and their financial condition deteriorated, 84 the Company withdrew prevision for depreciation in sum for this year. 09. Fixed assets and accumulated depreciation Item Dec. 31, 2007 Increase in Decrease in Dec. 31, 2008 this period this period (1)Original value of fixed assets Buildings 603,475 674 25,250 578,899 General equipment 167,477 10,202 17,097 160,582 Special equipment 806,286 95,885 54,124 848,047 2,535 Transportation equipment 20,240 1,400 19,105 Other equipment 188,751 6,407 3,989 191,169 1,786,229 114,568 102,995 1,797,802 (2)Accumulated depreciation Item Dec. 31, 2007 Increase in Decrease in Dec. 31, 2008 this period this period Buildings 117,757 22,169 13,418 126,508 General equipment 68,732 19,799 12,453 76,078 Special equipment 349,521 63,600 33,215 379,906 1,344 Transportation equipment 7,913 2,005 8,574 Other equipment 87,476 17,026 2,817 101,685 631,399 124,599 63,247 692,751 (3)Provision for fixed assets devaluation Item Dec. 31, 2007 Increase in Decrease in Dec. 31, 2008 this period this period General equipment 674 8,906 479 9,101 Special equipment 10,990 38,244 5,272 43,962 Other equipment - 4,674 - 4,674 11,664 51,824 5,751 57,737 (4)Book value Items Dec. 31, 2007 Dec. 31, 2008 Buildings 485,718 452,391 85 General equipment 98,071 75,403 Special equipment 445,775 424,179 Transportation equipment 12,327 10,531 Other equipment 101,275 84,810 1,143,166 1,047,314 [Note 1] Original value of fixed assets increased RMB 114.57 million this year, among which RMB 97.47 million came from conversion of construction in process and others came from external purchase. [Note 2] Decrease of original value of fixed assets mainly came from sales and discarding as useless. [Note 3] Fixed assets as of period end did not include ones hired-in through financing and ones used as mortgage. [Note 4] There were part plants (the orginal value of RMB 270,870,000) in the house building at period-end, the house right certificate isstill under the progress. [Note 5] Fixed assets as of period end included some general, special and other equipments sealed up for keeping. The Company had already withdrawn devaluation reserve for these equipments referring to the balance between the amounts receivable and their book values. Devaluation reserve for fixed assets decreased in this report period due to that some fixed assets had been disposed as useless and corresponding devaluation reserve for fixed assets were written-off. 10. Project in construction Amount of Increase in projects Dec. 31, 2007 Dec. 31, 2008 this period transferred to fixed assets Project of High Pressure Track 29,483 43,273 36,472 36,284 Joint Project of Technology Reform on 12,963 1,525 13,317 1,171 Nationalizing Parts of Fuel System The second period project in Weifu 7,385 26,341 - 33,726 Jinning Hi-tech Zone Project of No.103 Plot in Wuxi 21,888 1,040 - 22,928 New District Wuxi Huishan Development Zone 19,718 14,246 - 33,964 Project 86 Capacity-expansion of oil ejector - 9,049 - 9,049 available for diesel engine Miscellaneous Projects 28,141 53,565 47,684 34,022 119,578 149,039 97,473 171,144 Devaluation reserve for projects in - - construction 119,578 171,144 [Note 1] Capital used for projects in construction all came from self-raised proceeds. [Note 2] Capitalized borrowing interests in Wuxi Huishan Development Zone Project reached at RMB 1,300,247. 11. Intangible assets Dec. 31, Increase in Decrease in Items Dec. 31, 2008 2007 this period this period (1)Original value of the intangible assets 30,452 30,452 Land use right of parent company - - Trademark permit use right Weifu 26,356 26,356 - - Jinning 28,752 28,752 Land use right of Weifu Jinning - - Software of Weifu Jinning 346 - - 346 Land use right of Weifu Diesel oil 13,232 - - 13,232 System Chartered right of Weifu Diesel oil 37,109 - - 37,109 System Software of Weifu Diesel oil 5,554 38 - 5,592 System 141,801 38 - 141,839 (2)Accumulative amortization 87 Dec. 31, Increase in Decrease in Items Dec. 31, 2008 2007 this period this period Land use right of parent company 1,702 676 - 2,378 7,957 8,833 Trademark permit use right Weifu 876 - Jinning 9,344 10,302 Land use right of Weifu Jinning 958 - Software of Weifu Jinning 173 69 - 242 Land use right of Weifu Diesel oil 961 282 - 1,243 System Chartered right of Weifu Diesel oil 12,975 24,134 - 37,109 System Software of Weifu Diesel oil 2,385 1,117 - 3,502 System 35,497 28,112 - 63,609 (3)Book value Items Dec. 31, Dec. 31, 2008 Land use right of parent company 28,750 28,074 18,399 17,523 Trademark permit use right Weifu Jinning 19,408 18,450 Land use right of Weifu Jinning Software of Weifu Jinning 173 104 Land use right of Weifu Diesel oil 12,271 11,989 System Chartered right of Weifu Diesel oil 24,134 - System Software of Weifu Diesel oil 3,169 2,090 System 106,304 78,230 [Note 1] Because the situation had not happened that recyclable amount of intangible 88 asset is less than its book value, the Company did not withdraw devaluation reserve for intangible assets. [Note 2] Chartered right (Weifu Diesel oil System): according to the Permit and Technology Assistance Agreement reached between the Company and Germany Bosch Company, the Company could manufacture and sell some VE pump and P pump (reaching national level II standard)which was originally designed out by Bosch Company, with technology and technology assistance from Bosch Company. The actual enterprise implementing permit manufacture representing the Company was Weifu Diesel oil System. The chartered right referred to the initial payment paid by the Company for this proceeding and Weifu Diesel oil System decided to amortize within 10 years. According to the document Reply Letter on Implementing National Level-III Emission Standard applicable for Diesel Oil Autos promulgated by State Environmental Protection Administration (HH (2007) No.519), all auto (engine) makers were prohibited to make and sell autos (engine) which only met national level-II standard since Jan. 1, 2008. For that, Weifu Diesel oil System made full amortization for the aforesaid asset this year. 12. Deferred income tax asset Dec. 31, 2008 Dec. 31, 2007 Items Deferred Deferred Temporary Temporary income tax income tax difference difference asset asset Formation of provision 1,844 72,566 2,489 47,337 for bad debts Formation of provision for depreciation of 23,248 153,101 18,876 125,329 inventory Formation of provision for devaluation of fixed 8,828 57,737 1,750 11,664 asset Formation of others 5,494 36,625 6,267 41,779 39,414 320,029 29,382 226,109 13. Provision for devaluation of asset Amount Decrease in Dec. 31, withdrawn this period Dec. 31, Items 2007 in this Switching Written off 2008 period back or other Provision for bad debts 47,337 33,006 83 7,694 72,566 89 Provision for 125,329 43,707 15,935 - 153,101 depreciation of inventory Provision for devaluation 44,166 5,856 - 1,133 48,889 of long-term investment Provision for devaluation 11,664 51,834 - 5,761 57,737 of fixed assts 228,496 134,403 16,018 14,588 332,293 [Note] Provision for devaluation of long-term investment was written off in this report period due to that long-term equity investment project had been transferred thus the Company wrote off relevant provision for devaluation of long-term investment; Provision for devaluation of fixed assts was written off in this report period due to that fixed assets had been discarded as useless thus the Company wrote off relevant provision for devaluation of fixed assets. 14. Short-term loans Type Dec. 31, 2008 Dec. 31, 2007 Guaranteed loan 82,000 292,000 Mortgage loan 26,037 1,350 Credit loan (RMB) 735,000 1,134,169 Credit loan (USD 8,000,000) - 58,437 843,037 1,485,956 [Note 1] No short-term loans which have fallen due but not been repaid occurred in this account. [Note 2] Mortgage loan in the short-term loans of period-end was loan in EURO obtained by Weifu Diesel oil System with fixed deposit receipts as mortgage. [Note 3] Guaranteed loans in the short-term loans of period-end included guarantee loan of RMB 37 million provided by the Company for Weifu Mashan and RMB 45 million for Weifu Chang’an. [Note 4] Short-term loans of period-end decreased RMB 642.92 million over that of period-begin, which was mainly due to that the Company decreased bank loans, lowed down capital cost to reduce risks influenced by the financial crisis. 15. Notes payable Type of notes Dec. 31, 2008 Dec. 31, 2007 Bank acceptance bill 231,760 174,171 Notes payable of period-end increased RMB 57.59 million over that of period-begin, 90 with an increase rate of 33.06%, which was mainly due to that the Company increased settlement by notes which caused decrease of account payable. 16. Account payable Dec. 31, 2008 Dec. 31, 2007 Proportion Proportion Debt age Account payable Account payable (%) (%) within a year 94.94 476,655 97.05 640,378 One to two years 2.93 14,720 1.71 11,296 Two to three years 0.74 3,723 0.96 6,320 Above three years 1.39 6,992 0.28 1,845 100.00 502,090 100.00 659,839 [Note 1]There was no huge account payable with debt age above three years. [Note 2]Accounts payable to shareholders holding over 5% shares (5% included) of the Company Item Dec. 31, 2008 Dec. 31, 2007 Weifu Group － 1,167 17. Account received in advance [Note] No account of shareholders units holding over 5% shares (5% included) of the Company 18. Employees’ salary payable 91 Increase in this Decrease in Item Dec. 31, 2007 Dec. 31, 2008 period this period Salary, bonus, allowance and subsidy 13,035 249,037 233,175 28,897 Employees’ welfare － 17,891 17,891 - Social insurance, etc. 20,284 72,032 67,861 24,455 Housing Fund Social Insurance 1,738 17,250 17,302 1,686 Housing allowance for old employees 40,000 2,217 3,702 38,515 Labor union expenditure and Personnel education 9,341 6,868 5,695 10,514 Others (internal insurance etc.) 7,001 25,013 595 31,419 91,399 390,308 346,221 135,486 [Note 1] 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 of last year as well as 1% supplemented by the enterprise, and these can all be got when they retired once. According to the proposal on Suspension of Implementation of Supplementary Old-age Insurance and Staff Deposit Endowment Plan approved in Employee’s Representative Meeting of the Company, the increased amount of internal insurance came from withdrawal for Suspension of Implementation of Supplementary Old-age Insurance and Staff Deposit Endowment Plan. [Note 2] Salary payable of year-end increased RMB 34.15 million over that of year-begin, with an increase rate of 37.29%, which was mainly due to that some annual encouragement for part employees had not been sent yet, and parent company withdrew internal insurance. 19. Taxes payable Taxes Dec. 31, 2008 Dec. 31, 2007 VAT -241 -2,148 Tax for city construction -4 37 92 Income tax of enterprise 9,865 16,857 Extras of education -2 49 expense Others 1,819 3,571 11,437 18,366 Tax payable of year-end decreased RMB 6.93 million over that of year-begin, which was mainly due to that operation profit decreased this year thus the income tax payable correspondingly decreased. 20. Other account payable (1) Accounts payable to shareholders holding over 5% shares (5% included) of the Company Item Dec. 31, 2008 Dec. 31, 2007 Weifu Group － 130 (2) Other huge accounts payable are listed as follows: Character or Dec. 31, Debt age content 2008 Trademark using Bosch Group Within a year 6,289 expense, etc. Nanjing High-tech Developing Land expense Above 3 years 13,913 Corporation Nanjing Electromechanical Current account, Mainly within a 6,817 Industry (Group) Co., Ltd. etc. year Expenses paid for employees Within a year 46,150 leaving their posts or retired Nanjing High-tech Developing Corporation: The account payable amounting to RMB 19,500,000 to Nanjing High-tech Development Corp. is for land use right of 200,000 square meters in High-tech District, Nanjing Weifu Jinning got in Dec. 2002. Balance of period-end is the account payable for this proceeding. Nanjing Steamship Engine Group Co., Ltd.: Weifu Jinning borrowed capital of RMB 8,000,000 from Nanjing Steamer Machine Group Co., Ltd. in August of 1997. The two parties agreed to amortize, till now, RMB 4,000,000 had been repaid. With agreement from Nanjing Steamer Machine Group Co., Ltd., the rest borrowing transferred to repay to Nanjing Electromechanical Industry (Group) Co., Ltd. 21. Other current liabilities Item Dec. 31, 2008 Dec. 31, 2007 Interest occurred from bank loans 2,994 2,361 93 Minor shareholders’ dividends - 2,964 payable from Weifu Jinning Others 7,689 7,836 10,683 13,161 22. Long-term accounts payable Items Dec. 31, 2008 Nanjing Finance Bureau Hi-tech Branch Financial 1,880 [Note 1] supporting fund (year 2001) Nanjing Finance Bureau Hi-tech Branch Financial 140 [Note 2] supporting fund ( year 2003) Nanjing Finance Bureau Hi-tech Branch Financial 1,710 [Note 3] supporting fund ( year 2004) Nanjing Finance Bureau Hi-tech Branch Financial 1,140 [Note 4] supporting fund ( year 2005) Nanjing Finance Bureau Hi-tech Branch Financial 1,250 [Note 5] supporting fund ( year 2006) Nanjing Finance Bureau Hi-tech Branch Financial 1,230 [Note 6] supporting fund ( year 2007) National debt transferred to loan [Note 5,600 7] Nanjing Finance Bureau Hi-tech Branch Financial 2,750 [Note 8] supporting fund ( year 2008) 15,700 [Note 1] To encourage Weifu Jinning to enter Nanjing High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech branch of Finance Bureau of Nanjing for supporting use, the term is from Dec. 20, 2001 to Aug. 18, 2007. Provided that the operation period in the zone is less than 10 years, financial supporting capital will be reimbursed. [Note 2] To encourage the Company to enter Nanjing High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech 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 High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech branch of 94 Finance Bureau of Nanjing for supporting use, the term is from Aug. 5, 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 High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech 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 High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech 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 High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech 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. [Note7] National debt transferred to loan: is the transferred national debt capital received by Weifu Jinning in 2007. [Note 8] To encourage Weifu Jinning to enter Nanjing High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech branch of Finance Bureau of Nanjing for supporting use, the term is from Nov. 10, 2008 to Nov. 10, 2023. Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. 23. Share capital Increase and Dec. 31, 2007 decrease in the Dec. 31, 2008 period Non-circulating share capital with restricted trade conditions -Domestic legal person shares 114,062 - 114,062 -Other domestic shares 91 -39 52 Including: Shares by senior 91 -39 52 executors 114,153 -39 114,114 Circulating share capital -Domestically listed foreign shares 114,920 - 114,920 (B-share) -Domestically listed ordinary shares 338,203 39 338,242 (A-share) 453,123 39 453,162 95 567,276 - 567,276 24. Capital Reserves Increase and Dec. 31, 2007 decrease in the Dec. 31, 2008 period Capital premium [Note 1] 888,497 - 888,497 Other capital reserve [Note 2] 17,943 - 17,943 Other capital reserve [Note 3] 2,861 -1,721 1,140 909,301 -1,721 907,580 [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 in proportion and affiliated companies in equity method. [Note 3] Capital reserve produced in combination under common control: refers to that the Company combined Weifu International Trade in this year, and the part the combination cost was less than the interests of the Company was calculated into capital reserve. 25. Surplus Public Reserve Increase in Decrease in Item Dec. 31, 2007 Dec. 31, 2008 the period the period Statutory surplus 241,971 20,469 - 262,440 public reserve 26. Undistributed profit Item Dec. 31, 2008 Dec. 31, 2007 Undistributed profit at the beginning 682,893 505,704 Add: Net profit in this year 193,418 230,428 Less: Statutory surplus public 20,469 19,203 reserve withdraw Dividends of ordinary shares payable 86,793 34,036 Undistributed profit in the period end 769,049 682,893 [Note 1] Statutory surplus public reserve was withdrawn as 10% of the net profit of this year. [Note 2] On April 13, 2008, the 11th Meeting of the Fifth Board of Directors of the Company examined and passed the 2007 Profit Distribution Plan and sent RMB 1.53 (including tax) per 10 shares to all shareholders, and there were in total RMB 86,793,227.23 interest of shares. The above distribution plan was examined, passed and implemented Shareholders’ General Meeting of 2007. 96 27. Operating income Item Year 2008 Year 2007 Income of diesel oil internal-combustion engine pump 2,820,952 3,112,671 d Income of catalyze purifier and 224,268 133,934 accessory Income of other products 20,106 55,470 Import & export trade 149,985 109,435 Income of other business 309,108 238,533 Combination offset -491,129 -464,625 3,033,290 3,185,418 Total sales income to the top 5 clients in the operating income is RMB 1,128,140,000, which was 37.15% of the main operation income. 28. Operating cost Item Year 2008 Year 2007 Cost of diesel oil internal-combustion engine pump 2,299,306 2,450,531 and accessory Cost of catalyze purifier and 198,914 119,456 accessory Cost of other products 23,958 56,045 Import & export trade 142,655 104,673 Cost of other business 290,176 230,451 Combination offset -491,129 -468,792 2,463,880 2,492,364 29. Operating tax ans extras Year 2008 Year 2007 City maintenance and 10,406 10,451 construction tax Education associate charge 5,953 5,969 Business tax 480 638 16,839 17,058 30. Financial expenses Year 2008 Year 2007 Loan interest expenses 92,302 87,491 Bill discount interest 16,920 13,686 97 Commission expenses 1,517 346 Exchange losses -2,2782 4,239 Interest income of bank deposit -16,130 -13,141 (Note) 71,827 92,621 [Note] Income of bank deposit includes income of fixed deposit interest. 31. Losses from devaluation of asset Item Year 2008 Year 2007 Losses of bad debts 32,923 -15,404 Losses of depreciation of 27,772 53,344 inventory Losses of devaluation of fixed 46,073 8,897 asset Losses of devaluation of 4,723 － long-term equity investment 111,491 46,837 The losses of devaluation of assets in this year increased RMB 64,650,000 compared with that of last year, with the growth rate of 138.04%, which was mainly because that the financial status of one of clients in accounts receivable was deteriorated severely, and the total amount was withdrawn as bad account provision; due to the state implementing new emission laws and regulations, the Company withdrew relevant out-of-date equipments and inventory as depreciation provision. 32. Investment income Year 2008 Year 2007 Income of joint-venture companies and 363,714 127,764 affiliated companies [Note 1] Other long-term equity investment income - 7,118 Income from transfer of equity 583 478 Income from transfer of securities 733 1,702 365,030 137,062 There was no significant limitation of investment income returns. [Note] Income of joint venture companies and affiliated companies Year 2008 Year 2007 Weifu Autocam 7,524 1,085 Weifu Jialin 880 381 98 Weifu Environmental Protection 6,906 16,944 Zhonglian Auto Electronic Co., Ltd. 80,186 69,325 Weifu Precision Machinery 3,177 2,195 Bosch Auto Diesel System 264,958 38,044 Weifu International Trade - -474 Wuxi Longsheng Technology Co., Ltd. 83 264 363,714 127,764 33. Non-operating income Item Year 2008 Year 2007 Income of the dispoal of fixed 215 807 assets Income of intangible asset transfer - 5,230 Government subsidiary [Note 2] 2,493 4,460 Other 1,521 298 4,229 10,795 [Note 1] the non-operating income decreased RMB 6,570,000 compared with that of last year, which was mainly because that Bosch Auto Diesel System transferred part of income of land RMB 5,230,000 in last year. [Note 2] Details of government subsidiary Item Year 2008 Return of value added tax 1,590 300 Subsidy of environment protection 500 Subsidy of technology reform of VE pump Other 103 2,493 34. Non-operating expense Item Year 2008 Year 2007 Income of the dispoal of fixed 22,856 2,618 assets Expenses of donation 2,004 350 Market commodity adjusting 7,947 9,635 fund etc. 99 Other expenses 927 1,469 33,734 14,072 [Note] the non-operating expense increased RMB 19,660,000 compared with that of last year, which was mainly because that the state implemented new emission laws and regulations, the products of the Company would upgrde, and parts of old and out-of-date equipment were disgarded as useless. 35. Expense of income tax Items Year 2008 Year 2007 Income tax payable 18,910 37,385 Added loan of deferred income -10,032 -19,607 Expense of income tax 8,878 17,778 The income tax payable in this year decreased RMB 18,480,000 compared with that of last year, which was mainly because that the operation profit of the Company in this year decreased. 36. Related item explanation for cash flow statement (1)Received other cash RMB 66,303,819.56 related to operation activity are mainly the expense received of retired employees, income of the bank deposit interest and government grants etc. (2)Paid other cash RMB 266,792,558.73 related to operation activity are mainly the operation expense and three guaratee expenses of management expense, travelling expenses, transport expenses, warehouse leasing expenses, scientific research expenses, business entertainment expenses, water and electricity expenses etc. (3) Supplementary materials of cash flow statement Items Year 2008 Year 2008 I. Net profit subject to cash flow arising from operating activities Net profit 206,807 266,515 Add: Provision for fixed assets devaluation 111,491 46,837 Fixed assets depreciation 124,599 135,557 Amortization of intangible assets 28,112 7,735 Allocations of long-term expenses to be amortized 570 280 Losses from disposal of fixed, intangible and other long-term assets(Income is listed with “-”) 1,780 -3,633 Losses from obsolete fixed assets(Income is listed with “-”) 20,861 213 Losses from changes of fair value(Income is listed with “-”) - - Financial expenses 92,302 87,491 Losses from investment(Income is listed with “-”) -365,030 -137,062 Decrease of deferred income tax(Increase is listed with “-”) -10,032 -19,608 Increase of deferred income tax( (Decrease is listed with “-”) - - 100 Decrease of inventory(Increase is listed with “-”) 223,091 -107,243 Decrease of operating receivables(Increase is listed with “-”) 393,803 -168,859 Increase of operating payables(Decrease is listed with “-”) -19,860 103,810 Other Net cash generated from operations 808,494 212,033 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 495,285 678,013 Less: Balance of cash at period-beginning 678,013 724,819 Add: Balance of cash at period-beginning for affiliated enterprises mergerd in proportion method in first half year - 9,393 Add: Balance of cash equivalent at period-end - - Less: Balance of cash equivalent at period-beginning - - Net increase in cash /cash equivalent -182,729 -37,411 (4) Constitution of cash and cash equivalents Item Dec. 31, 2008 Dec.3 1, 2008 Cash balance listed in balance sheet 633,818 791,962 Less: Guarantee of bank acceptance bill not conforming to the definition of cash 138,533 113,949 Balance of cash and cash equivalents listed in cash flow statement 495,285 678,013 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 (1) Analysis of account age Dec. 31, 2008 Proportion Provision Proportion of Amount Net amount (%) for bad debts provision (%) Within six months 238,456 79.30 - - 238,456 Between 6 months to 1 4,837 1.61 484 10 4,353 year 101 Between 1-2 years 67 0.02 13 20 54 Between 2-3 years 334 0.11 133 40 201 Above three years 201 0.07 201 100 - Recognized by single 56,808 18.89 56,808 100 - 300,703 100.00 57,639 243,064 Dec. 31, 2007 Proportion Provision Proportion of Amount Net amount (%) for bad debts provision (%) Within six months 297,622 84.97 － － 297,622 Between 6 months to 1 year 24,760 7.07 2,476 10.00 22,284 Between 1-2 years 3,024 0.86 605 20.00 2,419 Between 2-3 years 199 0.06 80 40.00 119 Above three years 338 0.10 338 100.00 － Recognized by single 24,319 6.94 24,319 100.00 － 350,262 100.00 27,818 322,444 (2) Classified by character of account Dec. 31, 2008 Dec. 31, 2007 Propo Provision Propo Provision Item Amount rtion for bad Amount rtion for bad (%) debts (%) debts Account receivable with 232,713 77.39 467 281,792 90.15 2,821 significant single amount Account receivable with 11,182 3.72 364 6,464 2.07 678 not significant single amount 102 Recognized by 56,808 18.89 56,808 24,319 7.78 24,319 single 300,703 100.00 57,639 312,575 100.00 27,818 Note: Account receivable with significant single amount refers to account receivable with amount over 1 million; account receivable with not significant single amount refers to account receivable with amount less than 1 million. To account receivable with significant single amount, the Company independently make depreciation test. Because there is no objective proof to show it has depreciated, the account receivable in ctedit term is still respectively withdrew as bad debt provision as analysis of account age. (3) There is no debt of shareholders who held over 5% equity of the Company in the balance of account receivable, and details of debt of relevant units could be found in Note 9 (9). (4) The total amount of the top 5 debt units in the year-end balance of account receivable is RMB 117,500,000, which is 33.55% of in the year-end balance of account receivable. 2. Other accounts receivable Dec. 31, 2008 Proportion Provision Amount (%) for bad debts Within six months 1,692 26.80 - Between 6 months- 1 146 2.31 - Between 1-2 years 45 0.71 - Between 2-3 years 30 0.48 - Recognized by single 4,400 69.70 4,400 6,313 100.00 4,400 Dec. 31, 2007 Proportion Provision Amount (%) for bad debts Within six months 27,577 74.92 - Between 6 months- 1 year 4,051 11.00 - Between 1-2 years 750 2.04 - Between 2-3 years 33 0.09 - Recognized by single 4,400 11.95 4,400 36,811 100.00 4,400 [Note 1] The balance of other account receivable at the end of 2008 is mainly the 103 money reserve borrowed by employees, investment account incurred for other shareholders of Weifu Nano etc. The investment withdrawn 100% bad debts reserve incurred for other shareholders of Weifu Nano by the Company amounting to RMB 4,400,000. [Note 2] Other account receivable an the year-end decrease RMB 30.5 million compared with that of last year, which is mainly because that the Company invested RMB 25 million to Weifu International Trade, the procedure of adding investment has been completed in this year, and it was transferred as long-term equity investment; received temporary loan of Weifu Autocam RMB 6 million. 3. Long-term equity investment Dec. 31, 2008 Dec. 31, 2007 Consolidated subsidiaries 723,770 696,797 Joint venture companies and affiliated companies 1,041,568 737,349 Other long-term equity investment 51,256 51,256 Provision for devaluation of long-term investment -40,856 -30,000 1,775,738 1,455,402 (1) Investment on subsidiaries calculated based on cost method Amount at Investment Increase Decrease Amount at the Name of the investee the proportion in the period in the period period-end period-begin Weifu Jinning 80.00% 178,640 - - 178,640 Weifu Leader 94.81% 230,114 - - 230,114 Weifu Nano 80.00% 24,000 - - 24,000 Weifu Diesel Oil - System 70.00% 140,000 - 140,000 Weifu Mashan 100.00% 48,695 - - 48,695 Weifu Chang’an 100.00% 70,899 - - 70,899 Weifu Jida 70.00% 3,500 - - 3,500 Weifu International - Trade [Note] 85.83% 949 26,973 27,922 696,797 26,973 - 723,770 [Note] Weifu International Trade was founded by Weifu Group, the Company and Weifu Leader, and Weifu Group held 55% of its equity, which was the controlling shareholder. The parent company held 15% equity of Weifu International Trade at the year-begin, while the Company increased investment RMB 25 million, so after adding the capital, the Company held 85.83% equity of it, and Weifu International Trade became the controlling subsidiary of the Company. (2) Long-term equity investment calculated based on equity method 104 Increase Increase Increase/de /decrease Initial Amount at /decrease Bonus crease Amount at Name of the Investment in investme the in equity gained amount of the investee proportion investme nt cost period-begin in the accumulati period-begin nt in the period ve equity period Weifu Autocam 50.00% 37,842 21,858 14,295 7,524 - 5,835 43,677 Weifu Jialin 50.00% 4,000 4,266 - 880 - 1,146 5,146 Bosch Automobile Diesel Oil System Co., Ltd. 30.00% 523,695 472,201 - 252,341 - 200,847 724,542 Zhonglian Automobile Electronic Company Limited 20.03% 120,124 232,218 - 80,186 53,512 138,768 258,892 Wuxi Weifu Precision Machinery Manufacturing Co., Lt d. 20.00% 2,000 6,806 - 3,177 672 7,311 9,311 687,661 737,349 14,295 344,108 54,184 353,907 1,041,568 (3) Other long-term equity investment calculated based on cost method Investment Amount in the Increase/de A mo un t in the Name of investee period crease in p rop o rtion period end beginn ing the p eriod Gulian Securities Co., Ltd. 1 .20 12 ,000 - 12,000 Guangxi Liufa Co., Ltd. 1.22 1,600 - 1,600 Finance Co mp an y of 800 - 800 Changchai Group Hejun Venture Capital Co., Ltd. 11 .72 33 ,000 - 33,000 Nanjing Hengtai Insurance and 1.85 1,000 - 1,000 Broker Securities Co., Ltd. Jiangsu HSBC Insurance Agents 10 .00 500 - 500 Limited Yangdong Co., Ltd. 2,356 - 2,356 51 ,256 - 51,256 (4) Provision for devaluation of long-term investment Amount in Increase in the Decrease in Amount in the the period period the period period end 105 beginning Hejun Venture Capital Co., Ltd. 30,000 3,000 - 33,000 Weifu Nano - 1,500 - 1,500 Weifu Jida [Note 1 ] - 3,500 - 3,500 Yangdong Co., Ltd. [Note 2] - 2,356 - 2,356 Jiangsu HSBC Insurance Agents - - 500 Limited [Note 2] 500 30,000 10,856 - 40,856 [Note 1] The net profit of Weifu Jida appeared negative due to operation loss, so the total amount in this year was withdrawn as depreciation reserve, and the loss which exceeded investment part was withdrawn as predicted liability. [Note 2] The financial status of Yangdong Co., Ltd. and Jiangsu HSBC Insurance Agents Limited was deteriorated due to lasting operation loss, so the Company totally withdrew depreciation reserve based on the steadiness principle. 4. Operating income Items Year 2008 Year 2007 Oil pump, nozzel and fittings 1,431,036 1,438,557 Income from other products 19,927 29,366 Other business income 251,950 170,553 1,702,913 1,638,476 5. Operating cost Year 2008 Year 2008 Year 2007 Oil pump, nozzel and fittings 1,246,708 1,207,063 Income from other products 23,582 33,112 Other business income 237,479 165,299 1,507,769 1,405,474 6. Investment income Items Year 2008 Year 2007 Investment income calculated 344,108 109,366 based on equity method Bonus of subsidiaries calculated 69,417 79,802 based on cost method Other bonus calculated based on - 6,970 cost method Transferring income of equity - -190 Other 187 - 106 Predicted liability -1,605 - 412,107 195,948 7. Explanations on cash flow statement (1)Cash received arising from other operating activities amounted to RMB 126,839,428.25 which was the current fund received from subsidiaries and interest income of bank deposit (2) Cash paid for other operating activities amounted to RMB 180,092,895.19 which was the operation expense and three guaratee expenses of management expense, travelling expenses, transport expenses, warehouse leasing expenses, scientific research expenses, business entertainment expenses, water and electricity expenses etc. (3) Supplementary materials of cash flow statement Items Year 2008 Year 2007 I. Net profit subject to cash flow arising from operating activities Net profit 204,690 192,034 Add: Provision for fixed assets devaluation 57,466 17,234 Fixed assets depreciation 76,786 84,572 Amortization of intangible assets 676 664 Allocations of long-term expenses to be amortized - - Losses from disposal of fixed, intangible and other long-term assets(Income is listed with “-”) 19,282 1,206 Losses from obsolete fixed assets(Income is listed with “-”) - - Losses from changes of fair value(Income is listed with “-”) - - Financial expenses 54,316 49,098 Losses from investment(Income is listed with “-”) -412,107 -195,948 Decrease of deferred income tax(Increase is listed with “-”) -2,049 -1,945 Increase of deferred income tax( (Decrease is listed with “-”) - - Decrease of inventory(Increase is listed with “-”) 115,459 -15,165 Decrease of operating receivables(Increase is listed with “-”) 163,977 -165,206 Increase of operating payables(Decrease is listed with “-”) 128,311 -34,166 Other Net cash generated from operations 406,807 -67,621 II. Significant investment and financial activities not related to cash income and expense Capital transferred from debts Convertible company bonds due within one year Fixed assets leasing for financing 107 III. Net increase in cash /cash equivalent Balance of cash at period-end 141,771 131,564 Less: Balance of cash at period-beginning 131,564 276,017 Add: Balance of cash equivalent at period-end - - Less: Balance of cash equivalent at period-beginning - - Net increase in cash /cash equivalent 10,207 -144,453 (4) Constitution of cash and cash equivalents Item Dec. 31, 2008 Dec. 31, 2007 Cash balance listed in balance sheet 228,735 236,564 Less: Guarantee of bank acceptance bill not conforming to the definition of cash 86,964 105,000 Balance of cash and cash equivalents listed in cash flow statement 141,771 131,564 Note 9. The relationship of the related parties and transactions (Unit: RMB’ 000) 1. The related parties existing controlling relationship Registered Relationship Legal Name of enterprise Core business with the Economic type address representative Company Wholly owned by Weifu Group Wuxi city Machine processing Parent Company Xu Liangfei the state Accessories and Gao Weifu Mashan Mashan,Wuxi fittings of internal Subsidiary Company Limited engine components Guoyuan Development Weifu Jida Metal Nano-material Subsidiary Company LimitedXu Liangfei District, Wuxi Chang’an, Accessories and Gao Weifu Chang’an fittings of internal Subsidiary Company Limited Xishan engine components Guoyuan New District, Silencer, Weifu Leader Subsidiary Company Limited Xu Liangfei Wuxi Catalytic converter Huishan Weifu Nano Nanometer Materials Subsidiary Company Limited Xu Liangfei District, Wuxi Nanjing Oil pump and oil Weifu Jingning Subsidiary Company Limited Xu Liangfei Development mouth Accessories and Weifu Diesel New fittings of internal Subsidiary Company Limited Xu Liangfei Oil System District, engine components W i Weifu International New Subsidiary Company LimitedGao Trade District, G 2. Registered capital of the related parties existing controlling relationship and the changes 108 Name of Amount in the Increase in the Decrease in the Amount in the enterprise period beginning period period 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 Leader 260,000 - - 260,000 Weifu Nano 30,000 - - 30,000 Weifu Jingning 346,287 - - 346,287 Weifu Diesel 300,000 - - 300,000 Oil System Weifu International Trade 5,000 25,000 - 30,000 3. Share capital of the related parties existing controlling relationship and the changes 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 Leader 246,500 94.81 - - 246,500 94.81 Weifu Nano 24,000 80.00 - - 24,000 80.00 Weifu Jingning 277,029 80.00 - - 277,029 80.00 Weifu Diesel 210,000 70.00 - - 210,000 70.00 Oil System Weifu International 2,250 45.00 25,000 - 27,250 90.83 Trade 4. The related parties existing joint controlling relationship 109 Name of Registered Relationship with the Legal Main business Economic type enterprise address Company representativ Weifu New district of Joint venture company Sino-foreign joint Environmental Catalyst Ou Jianneng Wuxi of Weifu Leader venture enterprise Protection New district of Spare parts of Joint venture Sino-foreign joint Gao Weifu Autocam Wuxi automobiles enterprise venture enterprise Guoyuan Accessories and Zhaoyang, Joint venture Li Weifu Jialin fittings of Limited company Liaoning enterprise Xiaofeng internal 5. Registered capital of the related parties existing joint controlling relationship and the changes Name of Amount in the Increase in the Decrease in the Amount in the enterprise period beginning period period period end Weifu Environmental 50,000 - - 50 ,000 Protection Weifu Autocam USD6,000 USD4,000 - USD10,000 Weifu Jialin 8 ,000 - - 8,000 6. Share capital of the related parties existing joint controlling relationship and the changes Amount in the period Decrease in Amount in the period Name of Increase in beginning the end enterprises the period Amount % period Amount % Weifu Environmental 24,500 49.00 - - 24,500 49.00 Protection Weifu Autocam USD3,000 50.00 USD2,000 - USD5,000 50.00 Weifu Jialin 4,000 50.00 - - 4,000 50.00 7. Type of the related parties without existing joint controlling relationship Name of enterprises Relationship with the Company Bosch Auto Diesel System Affiliated company Weifu Precision Machinery Affiliated company Wuxi Weifu Trade Co., Ltd. The same parent company Wuxi Weixin Machinery Co., Ltd. The same parent company Joint venture company of Weifu Kunming Xitong Machinery Co., Ltd. Group Wuxi Longsheng Technology Co., Ltd. Affiliated company of Weifu 110 Leader 8. The transactions between the Company and the related parties (1) Purchase of commodities or labor force Name of enterprises Year 2008 Year 2007 Weifu Group 7,350 7,314 Weifu Precision Machinery 98,351 133,744 Bosch Auto Diesel System 30,762 34,824 Wuxi Weifu Trade Co., Ltd. 2,060 2,157 Wuxi Weixin Machinery Co., Ltd. 2,972 3,595 Weifu Environmental Protection 163,511 90,284 Wuxi Longsheng Technology Co., Ltd. 1,618 2,423 Weifu Autocam 51 - 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. (2) Sale of commodities or labor forces, etc. Name of enterprises Year 2008 Year 2007 Weifu Group 59,305 224,431 Weifu Precision Machinery 12,768 15,712 Bosch Auto Diesel System 117,963 105,926 Weifu Jialin 37,591 47,264 Wuxi Weifu Trade Co., Ltd. 1,158 2,149 Kunming Xitong Machinery Co., Ltd. 55,992 59,246 Wuxi Weixin Machineray Co., Ltd. - 2,399 Weifu Environmental Protection 3,038 4,388 Weifu Autocam 170 - 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. (3) Leasing fees, technological service fee, and commission fees Year 2008 Year 2007 Technological service fees for Bosch Diesel Oil System payable 3,229 4,397 Leasing fees and interest income of Weifu Autocam receivable 275 131 House rental fees of Weifu Environmental 240 240 111 Protection receivable The prices of related transactions between the Company and the related parties would be transacted according to the contract price. (4) Purchase of fixed assets Name of enterprises Year 2008 Year 2007 Weifu Group － 9,591 Wuxi Weixin Machinery Co., Ltd. 2,972 － (5) Sales of fixed assets Name of enterprises Year 2008 Year 2007 Weifu Autocam 1,166 － (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 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 significant transactions of the company and Weifu Group are as follows: Year 20 08 Year 20 07 Expenses for using land and trademark 6 ,270 6,519 Amount of guarantee for loans of the Company and － 100,000 subsidiaries 112 Transfer of account receivable[ Note] 15 ,934 － [Note] The Company and Weifu Group respectively signed Sales Agent Contract and Supplementary Agreement for Sales Agent Contract in Jan. 1995 and Jan. 1991, in which all the maintenance components of Oil Pump & Oil Nozzle produced by the Company have been entrusted Weifu Group to sell as an agent. The Company and Weifu Group negotiated and decided to terminate the aforementioned contract and agreement since April 1, 2008, and the account receivable of the aforesaid products sold by Weifu Group were transferred to the Company with payment. In according with the No. SZZPBZi (2008) 1038 Report of Assets Appraisal issued by Jiangsu Zhongtian Assets Appraisal Office Co., Ltd., the appraisal values of the relevant account receivable of Weifu Group ended as March 31, 2008 was RMB 16,772,700; and according to the Transfer Agreement on Account Receivable signed by the Company and Weifu Group on July 29, 2008, considering the dunning cost and uncertain recovery risks of the account receivable, the Company paid the transfer account of RMB 15,934,065 based on the 95% of the appraisal values. 9. The Balance of accounts receivable and payable of the related parties Dec. 31, 2008 Dec. 31, 2007 Accounts receivable: Bosch Auto Diesel System 22,956 16,433 Wuxi Weifu Trade Co., Ltd. 264 497 Weifu Jialin 13,670 17,208 Kunming Xitong Machinery Co., Ltd. 10,307 15,302 Weifu Precision Machinery 211 9,320 Other account receivable: Weifu Autocam － 6,000 Bills payable: Weifu Environmental Protection 10,800 － Accounts payable: Weifu Group － 1,167 Weifu Precision Machinery 2,513 4,390 Weifu Environmental Protection 39,947 5 Bosch Auto Diesel System 22,997 21,784 Weifu International Trade Co., Ltd. 456 15 Wuxi Weixin Machinery Co., Ltd. 14 － Other accounts payable: Weifu Group － 130 Note 10. Contingencies Ended Dec. 31, 2008, the Company and its subsidiaries have no significant contingent debts and losses except for the following matters: 1. The Company and its subsidiaries took the bank deposit of RMB 138,530,000 as the bails or pledges to obtain the bank acceptance bill or get bank loans, etc. 2. The Company and its subsidiaries took the bank deposit of RMB 13,985,900 as the pledges to obtain the bank acceptance bill. 113 Note 11. Commitments Ended Dec. 31, 2008, the Company and its subsidiaries have the following significant commitment: The Company and its subsidiaries need to pay RMB 79,130,000 for workshop building 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 April 16, 2009, the Profit Distribution Preplan of 2008 has been examined and approved in the 4th meeting of the 6th Board of Directors of the Company. It is decided to send RMB 1.62(tax included) per 10 shares to all the shareholders; totally RMB 91.9 million cash dividends will be sent. The aforesaid distribution preplan still needs examination from the Shareholders’ General Meeting for approval. 2. Ended as April 16, 2009, totally RMB 107,034,300 of bills payable of the Company at the end of 2008 has been cashed. Note 13. Non-recurring gains and losses (Gains listed with “+”, Losses listed with “-”; Unit:’000) Items Year 2008 Year 2007 1. Gains and losses arising from disposal of -15,164 3,897 non circulating assets 2. Governmental subsidy written into current gains and 2,493 4,460 losses 3. Other non-operating net amount of income and expense -1,409 -1,522 except for the aforesaid items 4. Income from transaction financial assets 733 1,701 5. Balance after setting off welfare payable - 15,734 6. Net profit before the merger under the common control 571 401 Total nonrecurring gains/losses -12,776 24,671 Amount influenced by the income tax on the above gains 1,510 -4,176 and losses Net amount of non-recurring gains/losses -11,266 20,495 Including: Non-recurring gains/losses attributable to -152 4,214 minority shareholders’ gains/losses Non-recurring gains/losses attributable to shareholders of -11,114 16,281 parent company’s gains/losses Note 14. Supplementary information Earnings per share and return on equity 114 Items Year 2008 Year 2007 Net profit attributable to the shareholders of the common share of the Company(Unit: RMB) 193,418,292.38 230,829,383.93 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 parent company 567,275,995.00 567,275,995.00 Basic earnings per share 0.34 0.41 Diluted proceedings － － Diluted earnings per share 0.34 0.41 Fully diluted return on equity 7.72% 9.61% Weighted average return on equity 7.88% 10.03% Earnings per share and return on equity after deducting non-recurring gains and losses Basic earnings per share 0.36 0.38 Diluted earnings per share 0.36 0.38 Fully diluted return on equity 8.16% 8.93% Weighted average return on equity 8.34% 9.33% Note 15. Other significant proceedings The Board of the Directors of the Company agrees to hand out the 2008 Annual Financial Report of the Company on April 16, 2009. 115 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. Board of Directors of Weifu High-Technology Co., Ltd. April 18, 2009 116