二 0 0 八年半年度报告 2008 Semi-annual Report · Net cash flow arising from operating...

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无锡威孚高科技股份有限公司

WEIFU HIGH-TECHNOLOGY CO., LTD.

二 0 0 八年半年度报告 2008 Semi-annual Report

Dated August 27, 2008

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Contents Section I. Important Notice ……………………………………………………………………. Section II. Company Information …………………………………………………………….. Section II. Changes in share capital and particulars about shares held by main shareholder…. Section IV. Directors, Supervisors and senior Executives ……………………………………. Section V. Disscuss and analysis of the management ………………………………………… Section VI. Significant Events ………………………………………………………………… Section VII. Financial Report …………………………………………………………………. Section VIII. Document for References ……………………………………………………….

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Section I. Important Notice Board of Directors and Supervisory Committee of Wuxi Weifu High-Technology Co., Ltd. (hereinafter referred to as the Company) and its directors, supervisors and senior executives hereby confirm that there are no any important omissions, fictitious statements or serious misleading information carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. This summary is abstracted from the full text of Semi-annual Report 2008 and is published on website www.cninfo.com.cn. And the investors are suggested to read the full text of semi-annual report to understand more details. No director, supervisor and senior executive stated that they couldn’t ensure the correctness, accuracy and completeness of the contents of the Semi-annual Report or have objection for this report. Director Mr. Shi Xingyuan went out for business and authorized director Mr. Chen Xuejun to exert his voting right on his behalf. All the other directors attended the meeting of the Board. 2008 Semi-annual Financial Report of the Company has not been audited. Principal the Company Wang Weiliang; General Manager Chen Xueju; Person in Charge of Accounting Works Sun Qingxian, and Person in Charge of Accounting Organ (Accounting Officer) Dou Yu hereby confirm that the financial report in the Semi-annual Report 2008 is true and complete.

Section II. Company Information I. Basic information (I) Company Name:

Name in Chinese: 无锡威孚高科技股份有限公司 Name in English: WEIFU HIGH-TECHNOLOGY CO., LTD.

(II) Stock Listing and Trading: Shenzhen Stock Exchange Short Form of the Stock: Weifu High-tech, Su Weifu-B Stock Code: 000581, 200581

(III) Registered Address: No.5 of Huashan Road, National Hi-Tech Industry Development Zone, Wuxi Head Office: No.107, Renmin Road (W), Wuxi City Postal Code: 214031 The Company’s Internet Website: http://www. weifu.com.cn E-Mail: web@ weifu.com.cn

(IV) Legal Representative: Mr. Wang Weiliang (V) Secretary of the Board of the Company: Mr. Zhou Weixing

Representative of Securities Affairs: Mr. Chu Yong Mailing Address: No.107, Renmin Road (W), Wuxi City Tel.: 86-510-2719579 Fax: 86-510-2751025 E-Mail: wfjt @ public1.wx.js.cn

(VI) Names of Newspapers designated by CSRC and chosen by the Company: Securities Times, China Securities, Hong Kong Wen Wei Po Internet Website chosen by the Company: http://www.cninfo.com.cn

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Interim Announcement for reference: Securities Department of the Company (VII) Other Related Information of the Company

1. Initial registration date: Oct. 22, 1988 Address: No.107, Renmin West Road, Wuxi Date of Change: August 28, 2008 Address: No.5 of Huashan Road, National Hi-Tech Industry Development Zone, Wuxi 2. Registration Number of enterprise legal person’s business license: 320200000014926 3. Registration Number of taxation: 320208250456967 4. Certified Public Accountants engaged by the Company: Domestic: Jiangsu Gongzheng Certified Public Accountants Co., Ltd. Address: No.28, Liangxi Road, Wuxi

II. Key Financial Data and Indexes (I) Key accounting data and financial indexes

(Unit: RMB)

At the end of this report period

At the period-end of last year

Increase/decrease at the

end of this report period

compared with that of

last year (%) Total assets 5,472,092,585.42 5,159,099,919.03 5.72%Owners’ equiy ( or Shareholders’ equity) 2,527,006,010.98 2,401,440,471.44 5.23%Net assets per share 4.4546 4.2333 5.23%

This report period

(Jan.-June)

The same period

of last year

Increase/decrease in this

report period compared

with that of last year (%)Operating profit 158,606,992.16 127,139,084.09 24.75%Total profit 150,256,804.35 125,312,381.79 19.91%Net profit 127,253,068.96 94,719,973.43 34.35%Net profit after deducting non-recurring gains and losses 128,639,017.07 92,273,139.70 39.41%

Basic earnings per share 0.22 0.17 29.41%Diluted earnings per share 0.22 0.17 29.41%Return on equity 5.04% 4.12% 0.92%Net cash flow arising from operating activities 273,469,642.20 131,167,510.62 108.49%

Net cash flow arising from per share operating activities 0.48 0.23 108.70%

(II) Items of non-recurring gains and losses and amount involved: (Unit: RMB) Unit: RMB

Items of non-recurring gains and losses Amount Gains and losses from the disposal of non-current asset -425,048.12Net non-operating income and expense excluded the aforesaid items -1,359,587.10Amount of switching back the provision for bad debts 0.00Amount of switching back the provision for depreciation of inventory 0.00Other non-recurring gains and losses recognized by CSRC 0.00Less: Amount of income tax influenced by non-recurring gains and losses 405,564.86

Less: Amount of minority shareholders influenced by non-recurring gains and losses -6,877.75

Total -1,385,948.11

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(III) Difference in accounting statement prepared under CAS and IAS and explanation:

Unit: RMB CAS IAS

Net profit 127,253,068.96 127,253,068.96Net asset 2,744,471,124.98 2,744,471,124.98

Explanations on differences No differences

Section III. Changes in share capital and particulars about shares held by main shareholders I. Statement of change in shares

Unit: Share Before the change Increase/decrease in this time (+, -) After the change

Amount Proportion New

shares offering

Bonus share

Capitalization

of Public reserve

Other Subtotal Amount Proportion

I. Restricted shares 114,153,050 20.12% 93,794 93,794 114,246,844 20.14%1. State-owned shares 2. State-owned legal person’s shares 114,061,978 20.11% 114,061,978 20.11%

3. Other domestic shares 91,072 0.02% 93,794 93,794 184,866 0.03%Including: Domestic non-state-owned legal person’s shares

Domestic natural person’s shares 91,072 0.02% 93,794 93,794 184,866 0.03%

4. Foreign shares Including: Foreign legal person’s shares

Foreign natural person’s shares

II. Unrestricted shares 453,122,945 79.88% -93,794 -93,794 453,029,151 79.86%1. RMB Ordinary shares 338,202,945 59.62% -93,794 -93,794 338,109,151 59.60%2.Domestically listed foreign shares 114,920,000 20.26% 114,920,000 20.26%

3. Overseas listed foreign shares

4. Others III. Total shares 567,275,995 100.00% 0 0 567,275,995 100.00% II. About shareholders and shares held

Unit: Share Total shareholders at the

end of report period 50,463

Particulars about shares held by the top ten shareholders

Names of shareholders Nature of shareholder

Proportion of share

held

Amount of share held

Amount of restricted

shares held

Shares pledged or

frozen

WUXI WEIFU GROUP COMPANY LIMITED State-ownedlegal person 20.11% 114,061,978 114,061,978

ROBERT BOSCH GMBH B-share shareholder 3.24% 18,387,200

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AGRICULTURAL BANK OF CHINA－GREAT WALL ANXIN RETURN MIXED TYPE SECURITIES INVESTMENT FUND

A-share shareholder 1.87% 10,629,675

GUOTAI JUNAN SECURIES HONG KONG LIMITED

B-share shareholder 1.82% 10,296,973

CHINA INDUSTRIAL AND COMMERCIAL BANK－E FUND VALUE SELECTIVE STOCK SECURITIES INVESTMENT FUND


BANK OF COMMUNICATIONS － KERUI SECURITIES INVESTMENT FUND


HTHK-VALUE PARTNERS INTELLIGENT FD-CHINA B SHS FD

B-share shareholder 1.40% 7,971,925

CHINA MERCHANTS BANK－EVERBRIGHT PRAMERICA ADVANTAGEOUS ALLOCATION STOCK SECURITIES INVESTMENT FUND


BANK OF CHINA－ ICBC CREDIT SUISSE CORE VALUE STOCK SECURITIES INVESTMENT FUND


INDUSTRIAL BANK － EVERBRIGHT PRAMERICA BONUS TYPE SECURITIES INVESTMENT FUND


Particulars about shares held by the top ten unrestricted shareholders

Name of shareholder Amount of unrestricted shares held Type of share

ROBERT BOSCH GMBH 18,387,200 Domestically listed foreign share

AGRICULTURAL BANK OF CHINA－GREAT WALL ANXIN RETURN MIXED TYPE SECURITIES INVESTMENT FUND 10,629,675 RMB common share

GUOTAI JUNAN SECURIES HONG KONG LIMITED 10,296,973 Domestically listed foreign share

CHINA INDUSTRIAL AND COMMERCIAL BANK－E FUND VALUE SELECTIVE STOCK SECURITIES INVESTMENT FUND

8,800,000 RMB common share

BANK OF COMMUNICATION － KERUI SECURITIES INVESTMENT FUND 8,155,187 RMB common share

HTHK-VALUE PARTNERS INTELLIGENT FD-CHINA B SHS FD 7,971,925 Domestically listed

foreign share CHINA MERCHANTS BANK－EVERBRIGHT PRAMERICA ADVANTAGEOUS ALLOCATION STOCK SECURITIES INVESTMENT FUND


BANK OF CHINA－ICBC CREDIT SUISSE CORE VALUE STOCK SECURITIES INVESTMENT FUND 6,767,200 RMB common share

INDUSTRIAL BANK－EVERBRIGHT PRAMERICA BONUS TYPE SECURITIES INVESTMENT FUND 6,558,592 RMB common share

CHINA EVERBRIGHT BANK － JUTIAN RESOURCES OPTIMIZED MIXED TUPE SECURITEIS INVESTMENT FUND


Explanation on associated relationship or consistent actions among the above shareholders

Among the top ten shareholders, there exists no associated relationship between Wuxi Weifu Group Company Limited, the first largest shareholder of the Company, and other shareholders, and they do not belong to the consistent actionist regulated by the Management Measure of Information Disclosure on Change of Shareholding for Listed Company. The Company was unknown whether there exists associated relationship among the other shareholders.

Shares held by the shareholders with restricted tradable conditons and restricted conditions

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No. Name of the

restricted shareholders

Amount of the restricted shares held

Date to be listed for trade

Amount of additional

listed sharesRestricted condition

April 5, 2011 28,363,800

April 5, 2012 28,363,800

1 Wuxi Weifu

Group Limited

Company

114,061,978

April 5, 2013 57,334,738

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, original non-circulating shares would be listed for sale in Shenzhen Stock Exchange, the proportion of sales volume to total share equity of Weifu Hi-tech could not exceed 5% within 12 months as well as 10% within 24 months, and sales price ought not to less than RMB 10 per share (the lowest impairment price of shares holding would be calculated ex-right at the same time if share price ought to ex-right according to regulation).

III. In the report period, the controlling shareholder of the Company remained unchanged. Section IV. Directors, Supervisors and Senior Executives I. Changes in shares held by directors, supervisors and senior executives of the Company

Unit: Share

Names Office title

Shares held at

period-begin

Increase in shares held

in this period

Decrease in shares held

in this period

Shares changed

in the report period

Reason of change

Wang Weiliang Chairman 12,168 12,168

Chen Xuejun Vice Chairman and Deputy GM 3,042 3,042

Shi Xingyuan Director 2,281 570 1,711 25% restricted circulations

Gao Guoyuan Director & Deputy GM 9,886 9,886 Ge Songping Director 24,453 24,453 Rudoif Maier Director 0 0 Du Fangci Independent Director 0 0 Yu Xiaoli Independent Director 0 0 Ma Huilan Independent Director 0 0 Han Jiangming Supervisor 14,602 14,602 Yang Weiliang Supervisor 0 0

Wang Xiaodong Supervisor 0 500 Supplement in

election of changing term

Sun Qingxian Deputy GM & Financial Charger 0 0

Miao Yuming Deputy GM 0 0 Wang Yawei Deputy GM 0 0 Zhou Weixing Secretary of the Board 2,282 2,282

II. New engagement and dismissed directors, supervisors and senior executives in the report period.

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In the report period, the Board of Directors, Supervisory Committee of the Company held the election of changing term: Wang Weiliang, Chen Xuejun, Shi Xingyuan, Gao Guoyuan, Ge Songping, Rudolf Maier, Du Fangci, Ma Huilan and Yu Xiaolu were elected as the directors of the 6th Board of Directors of the Company; the board of directors elected Wang Weiliang as the Chairman and Chen Xuejun as the Vice Chairman. Han Jiangming, Wang Xiaodong and Yang Weiliang constituted the supervisors of thte 6th Supervisory Committee (Wang Xiaodong was the shareholder supervisor), and the supervisory committee elected Han Jiangming as the President of Supervisory Committee. The Board of Directors engaged Chen Xuejun as the General Manager, with the nomination of General Manger, Gao Guoyuan, Sun Qingxian, Miao Yuming and Wang Yawei as the Deputy General Mangers. The Board of Directors engaged Zhou Weixing as the Secretary of the Board and Chu Yong as the Representative of the Securities Affairs. III. The Company held 2007 Annual Shareholders’ General Meeting in the report period.

Section V. Disccuss and analysis of the management I. Analysis to financial status and operating results of the Company in the report period. 1. Analysis to operating results of the Company The main operations of the Company in the report period remained unchanges compared with the same period of last year, the Company remains principally engaged in the manufacturing and sales of fuel injection system of diesel engines for vehicles. In the first half of the year, truck in commercial automotive industry kept sharp rise and brought active influnces on operations in first half of year of the Company, and the operation of joint venture---Bosch Automotive Diesel System Co., Ltd. would realize high speed increase with the actualization of State III Emmission Regulation. The Company realized sales income amounting to RMB 1,875,096,500 and net profit 127,253,100 in the first half of the year, respectively increased 13.61% and 34.35% over the same period of last year. 2. Financial status and analysis Unit: RMB

Items Jan.-Jun., 2008 Jan.-Jun., 2007 Increase/decrease % Total operation income 1,875,096,458.14 1,650,410,708.88 13.61

Operation profit 158,606,992.16 127,139,084.09 24.75

Net profit 127,253,068.96 94,719,973.43 34.35

Amount at period-end Amount at period-begin

Total assets 5,472,092,585.42 5,159,099,919.03 6.07

Shareholder’s equity 2,527,006,010.98 2,401,440,471.44 5.23

Notes: (1) Main business income increased by 13.61% over the same period of last year, mainly due to increased of business of the Company’s major production, especially pump PW2000 and PS7100. (2) Main business profit increased by 24.75% over same period of last year, mainly due to increased in investment income. (3) Net profit increased by 34.35% over same period of last year mainly due to increased of income from investment. (4) Total assets increased by 6.07% over the report-begin mainly due to increased of receivable account, receivable notes and investment. (5) Shareholders’ equity increased by 5.23% over the report-begin mainly due to realization of net profit in the report period.

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3. Financial Index and analysis Unit: RMB

Items Jan.-Jun. 2008 Jan.-Jun. 2007 Increase/Decrease (%)

Operating expenses 66,548,547.22 76,649,048.83 -13.18

Administration expenses 194,225,958.88 174,401,069.91 11.37

Financial expenses 62,692,577.06 46,181,405.01 35.75

(1) Operating expenses decreased by 13.18% over the same period of last year mainly due to accrued sales discount and increase of three guarantees (for repair, replacement and compensation of faulty products) of the subsidiary company Nanjing Weifu Jinning Co., Ltd. over the same period of last year. (2) Administration expenses increased by 11.37% over the same period of last year mainly due to increases of science research expenses of Wuxi Weifu Automobile Diesel Oil System Co., Ltd. (3) Financial expenses increased by 35.75% over the same period of last year mainly due to increases of fianancial expense of the Company and subsidiary companies caused by the increase of credit rate. 4. Main operation classified according to industries

Unit: RMB Main operations classified according to industries

Classified according to industries or products

Income from operations Cost of operations

Gross profit

ratio (%)

Increase/decrease in income from operations over the same period of last year (%)

Increase/decrease in cost of

operations over over the same period of last

year (%)

Increase/decrease in gross profit ratio over over the same period of last year (%)

Other standard components and parts 1,875,096,458.14 1,486,259,237.49 20.74 13.61 19.29 -3.77

5. Main operation classified according to products

Unit: RMB

Classified according to

industries

Total operating income

Total operating cost

Gross profit ratio (%)

Increase/decrease in income from operations over the same period

of last year (±%)

Increase/decrease in cost of

operations over over the same period of last

year (%)

Increase/decrease in gross profit ratio over over the same period

of last year (±%)

1. Fittings and accessories of internal combustion engine

1,764,418,570.20 1,386,395,502.03 21.42 11.66 17.08 -3.64

2. Muffler & catalytic converter

110,677,887.94 99,863,735.46 9.77 57.64 61.51 -2.16

6. Main operations and areas

Unit: RMB

Categories of area Operating inceom Increase/decrease of operating

income over the previous period (%)

Inside the province 456,996,564.50 27.16Outside the province 1,418,099,893.64 12.10

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7. Operations of share-holding company (1) Zhonglian Automobile Electronics Co., 20% shares held by the Company, mainly engaged in producing automobile electronics control system, and realized net profit amounting to RMB 150 million in the 1st half year of 2008. (2) Bosch Automotive Diesel System Co., Ltd., 31.50% shares held by the Company and consolidated statement subsidiary, mainly engaged in producing diesel automotive electronic control system, and realized net profit amounting to RMB 200 million in the first half year of 2008. II. Issues and difficulties in operation Prices of raw materials, especially prices of steel, oil, etc. greatly rose over the same period of last year, price of products basically kept steady, and rasing the interest rate for several times by the Pepole’s Bank of China caused great increase of financial expense, which brought great difficulties to operation of the Company. III. Investments in the report period 1. The Company possessed no usage of raised funds 2. Investments by non-raised funds ① Project of nationalization of components of Bosch automobile, the total investment amounted to RMB 120 million, the accumulative investment ended the report period amounted to RMB 119,646,700. ② Project of in-line pump measures, the total investment amounted to RMB 25 million, the accumulative investment ended the report period amounted to RMB 23,805,700. ③ Project of electrical high-pressure pump matched with Bosch, the total investment amounted to RMB 12.5 million, the accumulative investment ended the report period amounted to RMB 15,020,800. Section VI. Significant Matters I. Administration of the Company In the report period, according to requirements of the Company Law of PRC, Securities Law and related laws and regulations promulgated by CSRC, the Company unceasingly perfected its administrative structure and various systems combined with the development of special administration activities of listed companies, and basically conform to the administration requirement of CSRC. II. 2007 Interim Distribution Plan 2007 Interim Distribution Plan: neither distributing bonus nor implementing capitalization of reserves. III. Significant lawsuits and arbitrations The Company had no significant lawsuit or arbitration occurred in the report period or occurred in previous period and sustained in the report period. IV. Significant assets purchased, sold or assets reconstruction. The Company had no significant assets purchased, sold or assets reconstruction in the report period. V. Significant related transactions Particulars about related transactions between the largest shareholder, Wuxi Weifu Group Co., Ltd. and the Company in the 1st half year of 2008

Unit: RMB’0000 Items 1st half year of 2008 1st half year of 2007

Purchasing goods 1,828.20 181.10

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Selling goods 5,930.70 10,806.00 Purchasing fixed asset - 959.10

Import fixed assets agent 477.70 - Cost of usage of land and trademark 375.50 286.10 Supplying guarantee amount for the loan of the Company and subsidiaries 5,000.00 17,000.00

VI. Significant contracts and the implementation 1. In the report period, the Company had never kept as custodian, contracted or leased any other company’s assets and vice versa. 2. Ended the report period, the Company provided guarantee amounting to RMB 47.5 million for consolidated controlling subsidiary Weifu Chang’an Oil Pump & Nozzle Co., Ltd.; guarantee amounting to RMB 37 million for consolidated controlling subsidiary Weifu Mashan Oil Pump & Nozzle Co., Ltd; guarantee amounting to RMB 15 million for consolidated controlling subsidiary Weifu Lida Catalyzing and Purifying Co., Ltd; guarantee amounting to RMB 30 million for controlling subsidiary Nanjing Weifu Jinning Co., Ltd.. 3. Creditor’s rights and debt intercourse with related party

Unit: RMB’0000 Large shareholders and

affliated enterprise

Balance at period-end of

2007

Occurred amount of borrower during Jan.-Jun., 2008

Occurred amount of lender during Jan.-Jun., 2008

Balance on Jun.30, 2008

Wuxi Weifu Group Co., Ltd. -129.73 1,888.00 1,758.27 0.00

Kunming Xitong Machinery Co., Ltd. 1,530.20 3,463.22 4,166.00 827.42

Wuxi Weifu Economic Trade Co., Ltd. 49.72 306.12 299.75 55.65

Wuxi Weixin Machinery Co., Ltd. 0.00 297.22 297.22 0.00

Wuxi Weifu International Trade Co., Ltd. 36.31

In March, 2008, the investemnt of Weifu High-technology Co., Ltd. was 85.83% of registered capital after increasing

investment RMB 25 million. Total 1,486.50 5,954.56 6,521.24 883.07

4. In the report period, the Company had never entrusted others to manage cash management. VII. In the report period, the Company and its Board of Directors received no inspection, legislative punishment, a criticism by circulating a notice from CSRC, or public condemnation from Shenzhen Stock Exchange. VIII. Special commitments made by original non-circulating shareholder in process of Share Merger Reform and its implementation

Name of shareholders Special commitment Implementation

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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 shares. If there exist bonus, capitalization of share equity or share impairment in Weifu Hi-tech, deliver shares volume comparably increase or decrease; if the Company’s share equity changed due to additional deliver, allot, convertible bonds and certificate, etc. so as to comparably change in share equity of original non-circulating and circulating shareholder, so additional arranged value totaling 14,040,000 shares remained unchanged. iii. Date of shares additional delivered: within 20 days after approval of Weifu Hitech Annual Report in the year of activating condition of additional deliver shares by shareholders’ general meeting, Weifu Group would implement commitment of additional deliver according to related process. iv. Target of shares additional delivered: all unrestricted circulating A-share shareholders of the Companies registered in the registration date of additional deliver share and equity after Weifu Hi-tech Annual Report in the year of activating condition of additional deliver shares is disclosed. v. implementing guarantee for commitment of shares additional delivered: within expiry date of the said commitment of shares additional delivered, Weifu Group would authorize Shenzhen Stock Exchange and Registering & Clearing Corp. to provisionally safekeep non-circulating shares amounting to 14,040,000 shares which used to implement guarantee for commitment of shares additional delivered and held from Weifu Hi-tech since the date of implementation of Share Merger Reform, and technically guarantee perform the above commitment.

It did not reach the conditions of

implementation.

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, original non-circulating shares would be listed for sale in Shenzhen Stock Exchange, the proportion of sales volume to total share equity of Weifu Hi-tech could not exceed 5% within 12 months as well as 10% within 24 months, and sales price ought not to less than RMB 10 per share (the lowest impairment price of shares holding would be calculated ex-right at the same time if share price ought to ex-right according to regulation).

The said commitment is implementing and there is

no shares held impairment.

III. Commitment on Bonus Plan After the implementation of Share Merger Reform of the Company, Weifu Group would make a proposal and vote for it: cash dividend of Weifu Hi-tech in 2005 are not less than RMB 4, proportion of cash dividend from 2006 to 2008 are not less than 50% of distributable profit for investors realized by the Company in current year.

The said commitment is implementing. “Weifu

Group would make a proposal and vote for it:

Weifu High-tech has implemented in years

2005 and 2006. For 2007, it will be implemented

before Aug 12th of 2008.

Wuxi Weifu Group Co., Ltd.

IV. Commitment on arrangement of governance encouragement system In order to promote the listed company’s steady and healthy development, fully mobilize senior executives so as to ensure to combine the interests of the governance and shareholders of the Company, Weifu Group committed: after finishing Share Merger Reform, under related regulations of state and Wuxi government in terms of governance encouragement system of listed company, Weifu Hi-tech would actively promote plan for Weifu Group governance equity encouragement.

The said commitment is implementing, and would be performed after related

policy appears on the stage.

IX. Other significant events The shareholders holding 5% shares of the Company existed no commitment in the period or carried down from the previous period except for special commitment for share merger reform. X. Capital occupied by the controlling shareholder and subsidiaries and independent opinion: According to SZJGSZ No. 325 (2008) document released by Jiangsu Supervisory Bureau, CSRC on Further Standardizing Capital Current Between Listed Company, Big Shareholder as well as Other Related Parties, as independent directors of Weifu High-Technology Co., Ltd., we examined relevant resolution of Prediction on Daily Related Transaction Amount of 2008 of the Company and

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checked the Semi-annual Report 2008, then we present the following opinions: (I)Capital current and occupancy do exist between the Company, its large shareholder-Wuxi Weifu Group Co., Ltd. as well as other related parties, which mainly belongs to the daily related transactions occurred from the daily production and operation activities of the Company. The daily related transactions amount is in line with the normal business development of the Company. With perfecting the Company’s administration, the related transaction between Company and its large shareholder will decrease gradually. For example, the Company and its large shareholder-Wuxi Weifu Group Co., Ltd. terminated sales agency agreement in April of 2008, thus the capital current between the Company, its large shareholder as well as other related parties will decrease gradually. The daily related transaction of the Company are examined and approved in board meeting and shareholder’s meeting and such legal procedure, and disclosed in the resolution notice of the Company’s periodic report, the Board and shareholders’ meeting. (II)After inspection, it is not found that the Company has capital current and occupancy which are not disclosed. (III)With inspection, it is clear that except the normal operation capital current and occupancy, the Company, its large shareholder as well as other related parties have no other non-operation capital current and iccupancy. XI. Special explanation and independent opinion issued by independent directors on the external guarantee: In the report period, the Company can strictly implement the regulations of ZJF [2003] No. 56 Document. After we verified the relevant financial information of the Company, now the explanations of the external guarantee of the Company were as follows: 1. Ended the report period, the Company didn’t provide guarantee for controlling shareholders and other related parties, which the Company held less than 50% share equity, any non-legal units or individuals; 2. Ended the report period, total amount of external guarantee amounted to RMB 129.5 million; including the amount of guarantee of the parent company for the controlling subsidiary was RMB 129.5 million; 3. Ended the report period, the Company had no indirect or direct guarantees for warrantees which assets liability ratio exceeding 70%. 4. Ended the report period, the Company existed no guarantee out of line.

XII. Equity of non-listed financial enterprises and planned listed companies held

Name of the party held Initial

investment amount

Amount held(Share)

Proportion in equity of the

Company

Book value at period-end

Gains and losses in

report period

Changes on owners’ equity in the report

period

Guolian Securities Co., Ltd. 12,000,000.00 12,000,000.00 1.20% 12,000,000.00 0.00 0.00Nanjing Hengtai Insurance and Broker Securities Co., Ltd. 1,000,000.00 1,000,000.00 1.85% 1,000,000.00 0.00 0.00

Jiangsu HSBC Insurance Agents Limited 500,000.00 500,000.00 10.00% 500,000.00 0.00 0.00

Total 13,500,000.00 13,500,000.00 - 13,500,000.00 0.00 0.00 XIII. Periodically report and provisional report of the Company in the report period are as follows: Order of notice Contents of notice Date of notice Name of newspapers

China Securities Securities Times 2008-001 Amended Notice for 2007 Rising

Performance Prediction Jan 30th of 2008 Hong Kong Wen Wei Po

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China Securities Securities Times 2008-002 Notice on External Investment Apr 2nd of 2008 Hong Kong Wen Wei

Po China Securities Securities Times 2008-003 Summary of 2007 Annual Report Apr 15th of 2008 Hong Kong Wen Wei

Po China Securities Securities Times 2008-004 Resolution Notice of the 11th Meeting of

the 5th Board Apr 15th of 2008 Hong Kong Wen Wei Po

China Securities Securities Times 2008-005 Resolution Notice of the 7th Meeting of

the 5th Supervisory Committee Apr 15th of 2008 Hong Kong Wen Wei Po

China Securities Securities Times 2008-006 Notice on 2008 Daily Related Transaction Apr 15th of 2008 Hong Kong Wen Wei

Po China Securities Securities Times 2008-007 Notice on Holding the 2007

Shareholders’General Meeting Apr 15th of 2008 Hong Kong Wen Wei Po

China Securities Securities Times 2008-008 Notice on Providing Guarantee for Others Apr 18th of 2008 Hong Kong Wen Wei

Po China Securities Securities Times 2008-009 The 1st Quarterly Report of 2008 Apr 25th of 2008 Hong Kong Wen Wei

Po China Securities Securities Times 2008-010 Notice on Sales of Shareholders May 16th of 2008 Hong Kong Wen Wei

Po China Securities Securities Times 2008-011 Resolution Notice of the 2007

Shareholders’General Meeting Jun 13th of 2008 Hong Kong Wen Wei Po

China Securities Securities Times 2008-012 Resolution Notice of the 1st Meeting of

the 6th Board Jun 13th of 2008 Hong Kong Wen Wei Po

China Securities Securities Times 2008-013 Resolution Notice of the 1st Meeting of

the 6th Supervisory Committee Jun 13th of 2008 Hong Kong Wen Wei Po

XIV. Registration form for receiving research, communication and interview in the report period. Date Place Way The received

parties Contents discussed and

materials supplied

Jan 11th of 2008 Reception room of the Company Spot research 16 persons from

Guoxin Fund Operation status and future

development of the Company

Feb 19th of 2008 Reception room of the Company Spot research CLSA Limited Operation status and future

development of the CompanyFeb.26th of 2008 Reception room Spot research GF Securities Co., Operation status and future

15

of the Company Ltd. development of the Company

Feb.27th of 2008 Call conference Value Partners Operation status and future development of the Company

Mar.21st of 2008 Reception room of the Company Spot research

2 persons from CCB Principal

Asset Management

Co., Ltd.

Operation status and future development of the Company

May 16th of 2008 Reception room of the Company Spot research 2 persons from

Capital SecuritiesOperation status and future

development of the Company

May 19th of 2008 Reception room of the Company Spot research

7 persons from China

International Capital

Corporation Limited



3 persons from Great Wall Fund

Management Co., Ltd.



3 persons from Donghai

Securities


June 30th of 2008 Phone communication

Several shareholders


The abovementioned documents all published in website of CSRC: http//www.cninfo.com.cn

Section VII. Financial Statement I. The Interim 2008 Financial Statements of the Company was not audited. II. Financial Report (Supplementary I) III. Notes to financial statement (Supplementary II)

Section VIII. Document for Reference I. The text of Interim Report bearing the signature of the Chairman of the Board; II.The Accounting Statement bearing signature and seal of legal representative, financial charger and accounting organ officer; III. All text documents disclosed in China Securities, Securities Times, and Hong Kong Wen Wei Po; IV. The text of Articles of Association of the Company.

Chairman of the Board: Wang Weiliang Board of Directors of

Weifu High-technology Co., Ltd. August 27, 2008

Supplementary I. Financial Report

16

BALANCE SHEET Prepared by Weifu High-Technology Co., Ltd. Jun.30, 2008 Unit: RMB

Amount at period-end Amount at period-begin Items Merger Parent Company Merger Parent Company Current assets:

Monetary funds 831,950,822.00 234,570,873.62 791,962,685.73 236,564,251.25Settlement provisions Capital lent Transaction finance asset Notes receivable 765,381,513.78 369,999,825.66 647,047,830.91 280,973,461.06Accounts receivable 715,037,558.94 387,133,997.91 587,287,504.64 284,757,497.93Accounts in advance 52,417,705.82 42,140,391.40 33,810,290.13 18,427,570.33Insurance receivable Reinsurance receivables Contract reserve of

reinsurance receivable

Interest receivable Other receivables 36,820,162.49 83,499,878.78 37,207,364.76 70,096,949.13Purchased restituted

finance asset

Inventories 601,354,017.09 261,988,267.84 758,238,756.73 318,434,906.55Non-current asset due

within one year

Other current assets 5,165,011.80 4,312,582.47 Total current assets 3,008,126,791.92 1,379,333,235.21 2,859,867,015.37 1,209,254,636.25Non-current assets:

Granted loans and advances

Finance asset available sales

Held-to-maturity securities Long-term account

receivable

Long-term equity investment 1,019,073,705.82 1,596,704,661.77 899,689,966.07 1,455,402,497.41

Investment property Fixed assets: 1,107,898,486.65 635,081,735.27 1,143,165,909.79 663,719,396.29Construction in progress 185,095,223.13 149,358,300.69 119,578,250.68 104,186,166.94Engineering material Disposal of fixed asset Consumable biological

asset

Oil and gas asset Intangible assets 102,457,910.15 28,409,298.57 106,304,427.42 28,750,245.57Expense on Research and

Development

Goodwill Long-term expenses to be

apportioned 2,316,403.72 1,112,335.56

Deferred income tax asset 29,224,064.03 7,138,042.43 29,382,014.14 6,594,829.69Other non-current asset

Total non-current asset 2,446,065,793.50 2,416,692,038.73 2,299,232,903.66 2,258,653,135.90Total assets 5,454,192,585.42 3,796,025,273.94 5,159,099,919.03 3,467,907,772.15

17

BALANCE SHEET (Con.)

Prepared by Weifu High-Technology Co., Ltd. Jun.30, 2008 Unit: RMB Current liabilities:

Short-term loans 1,421,641,044.69 770,000,000.00 1,485,955,800.00 859,413,800.00Loan from central bank Absorbing deposit and

interbank deposit

Capital borrowed Transaction financial

liabilities

Notes payable 266,676,063.19 244,940,000.00 174,171,187.21 169,058,000.00Accounts payable 763,766,951.35 411,186,433.50 659,838,875.03 300,446,996.28Accounts received in

advance 23,230,916.51 5,235,903.66 22,606,832.04 967,216.25

Selling financial asset of repurchase

Commission charge and commission payable

Wage payable 82,058,998.17 18,680,552.08 91,398,945.30 15,995,385.86Taxes payable 23,157,136.57 5,229,928.45 18,365,942.02 -7,272,613.71Interest payable Other accounts payable 63,101,085.64 97,241,388.83 50,101,172.00 55,840,839.66Reinsurance payables Insurance contract reserve Security trading of agency Security sales of agency Long-term liabilities due

within 1 year

Other current liabilities 51,689,264.32 10,327,595.51 13,160,822.37 1,523,280.88Total current liabilities 2,695,321,460.44 1,562,841,802.03 2,515,599,575.97 1,395,972,905.22Non-current liabilities:

Long-term loans Bonds payable Long-term account payable 12,950,000.00 12,950,000.00 Special accounts payable Projected liabilities

Deferred income tax liabilities Other non-current liabilities 1,450,000.00 1,220,000.00

Total non-current liabilities 14,400,000.00 14,170,000.00 Total liabilities 2,709,721,460.44 1,562,841,802.03 2,529,769,575.97 1,395,972,905.22Owner’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 907,613,800.04 923,981,806.57 909,301,329.46 922,196,148.96Less: Inventory shares Surplus public reserve 241,970,463.58 241,970,463.58 241,970,463.58 241,970,463.58Provision of general risk Retained profit 810,145,752.36 499,955,206.76 682,892,683.40 340,492,259.39Balance difference of

foreign currency translation

Total owner’s equity attributable to parent company 2,527,006,010.98 2,233,183,471.91 2,401,440,471.44 2,071,934,866.93

Minority interests 217,465,114.00 227,889,871.62 Total owner’s equity 2,744,471,124.98 2,233,183,471.91 2,629,330,343.06 2,071,934,866.93Total liabilities and owner’s 5,454,192,585.42 3,796,025,273.94 5,159,099,919.03 3,467,907,772.15

18

equity

PROFIT STATEMENT Prepared by Weifu High-Technology Co., Ltd. Jan.-Jun., 2008 Unit: RMB

19

This period Same period of last year Items Merger Parent Company Merger Parent CompanyI. Total operating income 1,875,096,458.14 1,029,925,413.95 1,650,410,708.88 904,289,640.52Including: Operating income 1,875,096,458.14 1,029,925,413.95 1,650,410,708.88 904,289,640.52

Interest income Insurance gained Commission charge and commission

income

II. Total operating cost 1,823,884,005.73 1,034,682,190.29 1,545,477,488.46 873,008,782.91Including: Operating cost 1,486,259,237.49 890,751,246.33 1,245,958,723.21 748,787,617.09

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 11,253,112.71 4,781,241.87 10,070,572.90 4,344,096.69Sales expenses 66,548,547.22 45,457,244.79 76,649,048.83 40,673,434.94Administration expenses 194,225,958.88 56,389,947.38 174,401,069.91 55,424,794.72Financial expenses 62,692,577.06 32,913,021.24 46,181,405.01 23,954,511.67Losses of devaluation of asset 2,904,572.37 4,389,488.68 -7,783,331.40 -175,672.20Add: Changing income of fair

value(Loss is listed with “-”)

Investment income (Loss is listed with “-”) 107,394,539.75 169,639,086.50 22,205,863.67 93,089,336.48

Including: Investment income on affiliated company and joint venture 107,394,539.75 100,221,706.75 21,245,863.67 11,390,914.84

Exchange income (Loss is listed with “-”)

III. Operating profit (Loss is listed with “-”) 158,606,992.16 164,882,310.16 127,139,084.09 124,370,194.09

Add: Non-operating income 184,767.42 19,900.79 5,740,646.82 164,349.38Less: Non-operating expense 8,534,955.23 5,388,167.38 7,567,349.12 4,200,710.10Including: Disposal loss of

non-current asset 1,055,928.33 888,829.32 1,092,600.64 1,032,869.00

IV. Total Profit (Loss is listed with “-”) 150,256,804.35 159,514,043.57 125,312,381.79 120,333,833.37Less: Income tax 12,672,759.36 51,096.20 13,312,567.27 311,188.57V. Net profit (Net loss is listed with “-”) 137,584,044.99 159,462,947.37 111,999,814.52 120,022,644.80

Net profit attributable to owner’s equity of parent company 127,253,068.96 159,462,947.37 94,719,973.43 120,022,644.80

Minority shareholders’ gains and losses 10,330,976.03 17,279,841.09

VI. Earnings per share i. Basic earnings per share 0.22 0.28 0.17 0.21ii. Diluted earnings per share 0.22 0.28 0.17 0.21

CASH FLOW STATEMENT Prepared by Weifu High-Technology Co., Ltd. Jan.-Jun., 2008 Unit: RMB

Item This period Same period of last year

20

Merger Parent Company Merger Parent Company

I. Cash flows arising from operating activities: Cash received from selling commodities

and providing labor services 1,789,740,882.62 967,411,232.13 1,574,039,016.32 849,344,427.57

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 9,978,444.61 3,420,973.25 Other cash received concerning operating

activities 7,800,915.32 26,153,073.56 13,624,104.08 4,874,314.17

Subtotal of cash inflow arising from operating activities 1,807,520,242.55 993,564,305.69 1,591,084,093.65 854,218,741.74

Cash paid for purchasing commodities and receiving labor service 1,169,385,020.46 697,028,470.73 1,140,017,978.17 791,079,199.15

Net increase of customer loans and advances

Net increase of deposits in central bank and interbank

Cash paid for original insurance contract compensation

Cash paid for interest, commission charge and commission

Cash paid for bonus of guarantee slip Cash paid to/for staff and workers 161,936,611.53 75,240,577.33 148,458,189.79 70,625,718.99Taxes paid 135,867,847.65 41,212,293.81 109,502,483.61 45,761,531.76Other cash paid concerning operating activities 66,861,120.71 41,683,641.47 61,937,931.46 34,396,037.77

Subtotal of cash outflow arising from operating activities 1,534,050,600.35 855,164,983.34 1,459,916,583.03 941,862,487.67

Net cash flows arising from operating activities 273,469,642.20 138,399,322.35 131,167,510.62 -87,643,745.93

II. Cash flows arising from investing activities: Cash received from recovering investment 3,438,430.00 Cash received from investment income 69,417,379.75 960,000.00 98,064,875.16Net cash received from disposal of fixed,

intangible and other long-term assets 435,950.00 396,400.00 9,191,238.42 3,736,511.21

Net cash received from disposal of subsidiaries and other units

Other cash received concerning investing activities

Subtotal of cash inflow from investing activities 3,874,380.00 69,813,779.75 10,151,238.42 101,801,386.37

Cash paid for purchasing fixed, intangible and other long-term assets 92,712,668.28 54,004,123.13 127,936,477.60 110,776,205.27

21

Cash paid for investment 14,294,800.00 39,294,800.00 9,162,685.00 9,162,685.00 Net increase of mortgaged loans Net cash received from subsidiaries and other units

Other cash paid concerning investing activities

Subtotal of cash outflow from investing activities 107,007,468.28 93,298,923.13 137,099,162.60 119,938,890.27

Net cash flows arising from investing activities -103,133,088.28 -23,485,143.38 -126,947,924.18 -18,137,503.90

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 993,515,395.75 500,000,000.00 1,518,172,100.00 813,298,600.00 Cash received from issuing bonds

Other cash received concerning financing activities

Subtotal of cash inflow from financing activities 993,515,395.75 500,000,000.00 1,518,172,100.00 813,298,600.00

Cash paid for settling debts 1,057,830,151.06 589,413,800.00 1,479,701,100.00 823,298,600.00Cash paid for dividend and profit

distributing or interest paying 70,363,734.50 27,493,756.60 70,533,403.10 21,461,171.06

Including: Dividend and profit of minority shareholder paid by subsidiaries 20,150,015.39 22,049,969.48

Other cash paid concerning financing activities

Subtotal of cash outflow from financing activities 1,128,193,885.56 616,907,556.60 1,550,234,503.10 844,759,771.06

Net cash flows arising from financing activities -134,678,489.81 -116,907,556.60 -32,062,403.10 -31,461,171.06

IV. Influence on cash due to fluctuation in exchange rate

V. Net increase of cash and cash equivalents 35,658,064.11 -1,993,377.63 -27,842,816.66 -137,242,420.89Add: Balance of cash and cash equivalents

at the period -begin 678,013,454.68 131,564,251.25 721,418,567.47 276,016,919.83

VI. Balance of cash and cash equivalents at the period–end 713,671,518.79 129,570,873.62 693,575,750.81 138,774,498.94

22

STATEMENT ON CHANGES OF OWNERS’ EQUITY Prepared by Weifu High-Technology Co., Ltd. Jun.30, 2008 Unit: RMB

Amount in this report period Owners' equity attributable to the parent company

Item Paid-up capital (Share capital) Capital reserves

Less: Treasu

ry Stock

Surplus reserves

General risk provis

ion

Retained profit Others Minority interest Total owners’ equity

I. Balance at the end of the last year 567,275,995.00 909,301,329.46 241,970,463.58 682,892,683.40 227,889,871.62 2,629,330,343.06 Add: Changes of accounting policy Error correction of the last period II. Balance at the beginning of this year 567,275,995.00 909,301,329.46 241,970,463.58 682,892,683.40 227,889,871.62 2,629,330,343.06 III. Increase/ Decrease in this year (Decrease is listed with'"-") -1,687,529.42 127,253,068.96 -10,424,757.62 115,140,781.92

(I) Net profit 127,253,068.96 10,330,976.03 137,584,044.99 (II) Profits and losses calculating into owners' equity -1,687,529.42 1,687,529.42 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 -1,687,529.42 1,687,529.42 Subtotal of (I)and (II) -1,687,529.42 127,253,068.96 12,018,505.45 137,584,044.99 (III) Owners' devotion and decreased capital 1. Owners' devotion capital 2. Amount calculated into owners' equity paid in shares 3. Others (IV) Profit distribution -22,443,263.07 -22,443,263.07 1. Withdrawal of surplus reserves 2. Withdrawal of general risk provisions 3.Distribution for owners (shareholders) -22,443,263.07 -22,443,263.07 4.Others (V) Carrying forward internal owners' equity 1.Capital reserves conversed to capital (share capital) 2. Surplus reserves conversed to capital (share capital) 3.Remedying loss with profit surplus 4.Others IV. Balance at the end of this report period 567,275,995.00 907,613,800.04 241,970,463.58 810,145,752.36 217,465,114.00 2,744,471,124.98

23

STATEMENT ON CHANGES OF OWNERS’ EQUITY (CON.) Prepared by Weifu High-Technology Co., Ltd. Jun.30, 2008 Unit: RMB

Amount in same period of last year Owners' equity attributable to the parent company

Item Paid-up capital (Share capital) Capital reserves

Less: Treasury

Stock

Surplus reserves

General risk provis

ion

Retained profit Others Minority interest Total owners’ equity

I. Balance at the end of the last year 567,275,995.00 926,861,588.64 290,774,487.89 419,434,973.59 219,874,967.00 2,424,222,012.12 Add: Changes of accounting policy -20,421,624.66 -68,007,377.05 86,269,348.55 750,491.31 -1,409,161.85 Error correction of the last period II. Balance at the beginning of this year 567,275,995.00 906,439,963.98 222,767,110.84 505,704,322.14 220,625,458.31 2,422,812,850.27 III. Increase/ Decrease in this year (Decrease is listed with'"-") 3,172,002.70 94,719,973.43 -11,853,560.21 86,038,415.92

(I) Net profit 94,719,973.43 17,279,841.09 111,999,814.52 (II) Profits and losses calculating into owners' equity 3,172,002.70 -219,641.94 2,952,360.76 1. Net changing amount of fair value of financial assets available for sale


3.Effect of income tax related to owners' equity 4. Others 3,172,002.70 -219,641.94 2,952,360.76 Subtotal of (I)and (II) 3,172,002.70 94,719,973.43 17,060,199.15 114,952,175.28 (III) Owners' devotion and decreased capital 1. Owners' devotion capital 2. Amount calculated into owners' equity paid in shares (IV) Profit distribution -28,913,759.36 -28,913,759.36 1. Withdrawal of surplus reserves 2. Withdrawal of general risk provisions 3.Distribution for owners (shareholders) -28,913,759.36 -28,913,759.36 4.Others (V) Carrying forward internal owners' equity 1.Capital reserves conversed to capital (share capital) 2. Surplus reserves conversed to capital (share capital) 3.Remedying loss with profit surplus 4.Others IV. Balance at the end of this report period 567,275,995.00 909,611,966.68 222,767,110.84 600,424,295.57 208,771,898.10 2,508,851,266.19

24

STATEMENT ON CHANGES OF OWNERS’ EQUITY OF PARENT COMPANY Prepared by Weifu High-Technology Co., Ltd. Jan.-Jun., 2008 Unit: RMB

Owners' equity attributable to the parent company Item Paid-up capital (Share capital) Capital reserves Less: Treasury Stock Surplus reserves Retained profit Others Total owners’ equity

I. Balance at the end of the last year 567,275,995.00 922,196,148.96 241,970,463.58 340,492,259.39 2,071,934,866.93 Add: Changes of accounting policy - Error correction of the last period - II. Balance at the beginning of this year 567,275,995.00 922,196,148.96 - 241,970,463.58 340,492,259.39 - 2,071,934,866.93 III. Increase/ Decrease in this year (Decrease is listed with'"-") - 1,785,657.61 - - 159,462,947.37 - 161,248,604.98

(I) Net profit 159,462,947.37 159,462,947.37 (II) Profits and losses calculating into owners' equity - 1,785,657.61 - - - - 1,785,657.61

1. Net changing amount of fair value of financial assets available for sale -


-

3.Effect of income tax related to owners' equity -

4. Others 1,785,657.61 1,785,657.61 Subtotal of (I)and (II) - 1,785,657.61 - - 159,462,947.37 - 161,248,604.98 (III) Owners' devotion and decreased capital - - - - - - -

1. Owners' devotion capital - 2. Amount calculated into owners' equity paid in shares -

(IV) Profit distribution - - - - - - - 1. Withdrawal of surplus reserves - 2. Withdrawal of general risk provisions - 3. Distribution for owners (shareholders) - (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 - IV. Balance at the end of this year 567,275,995.00 923,981,806.57 - 241,970,463.58 499,955,206.76 - 2,233,183,471.91

25

STATEMENT ON CHANGES OF OWNERS’ EQUITY OF PARENT COMPANY (CON.)

Prepared by Weifu High-Technology Co., Ltd. Jan.-Jun., 2008 Unit: RMB

Owners' equity attributable to the parent company

Item Paid-up capital (Share

capital) Capital reserves Less:

Treasury Stock

Surplus reserves Retained profit Others

Total owners’ equity

I. Balance at the end of the last year 567,275,995.00 926,861,588.64 249,888,236.81 464,489,022.81 2,208,514,843.26 Add: Changes of accounting policy -4,665,439.68 -27,121,125.97 -262,790,378.41 -294,576,944.06

Error correction of the last period -

II. Balance at the beginning of this year 567,275,995.00 922,196,148.96 - 222,767,110.84 201,698,644.40 - 1,913,937,899.20 III. Increase/ Decrease in this year (Decrease is listed with'"-") - - - - 120,022,644.80 - 120,022,644.80

(I) Net profit 120,022,644.80 120,022,644.80

(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 -

Subtotal of (I)and (II) - - - - 120,022,644.80 - 120,022,644.80 (III) Owners' devotion and decreased capital - - - - - - - 1. Owners' devotion capital - 2. Amount calculated into owners' equity paid in shares -

3. Others -

(IV) Profit distribution - - - - - - -

1. Withdrawal of surplus reserves -

2. Withdrawal of general risk provisions -

3.Distribution for owners (shareholders) -

4.Others -

26

(V) Carrying forward internal owners' equity - - - - - - -

1.Capital reserves conversed to capital (share capital) - 2. Surplus reserves conversed to capital (share capital) - 3.Remedying loss with profit surplus - 4.Others -

IV. Balance at the end of this year 567,275,995.00 922,196,148.96 - 222,767,110.84 321,721,289.20 - 2,033,960,544.00

无锡威孚高科技股份有限公司 2008 年中期财务报表附注

第 27 页

Supplementary II. Notes to financial statements

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’ 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


第 28 页

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. The 2006 financial report forms of the Company was edited according to Accounting System for Business Enterprises, relevant accounting standard for business enterprises and related complementary regulations. According to Circular on Issuing the No.7 Questions and Responses of Information Disclosure Standards of Public Companies- Compilation and Disclosure of the Comparative Financial Accounting Information during the Transition Period between the New and Old Accounting Standards promulgated by China Securities Regulatory Commission (hereinafter CSRC for short) ZJKJZi[2007]No.10, this company confirms the initial amount on the balance sheet of Januany 1st, 2007 in accordance with the regulations of Notes On Doing Well The Work Of Disclosuring The Financial Accounting Information Related With The New Accounting Standards in according to ZJF[2006]No.136 promulgated by CSRC, analyses the 5th to the 19th item in Accounting Standard for Business Enterprises No. 38 - First time adoption of Accounting Standards for Business Enterprises and the regulations in the Explanation No.1 to Accounting Criteria for Enterprises, carries up and adjusts the influence of profit statement in the comparable period and the balance sheet at the beginning of the comparable period, and reports according to the regulations in Accounting Standard for Business Enterprises No. 30 - Presentation of financial statements and Accounting Standard for Business Enterprises No. 33- Consolidated financial statements. 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 The Company measures in accordance with regulated accounting measurement attribute, the attribute of measurement of items in statement hasn’t changed in the report period. The Company generally adopt historical cost when measuring accounting factors, for those adopting replacement cost, changeable net present value, present value, and fair value to measure, take the confirmed amount of accounting factors can be acquired and dependably measured as the basis.


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(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 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;


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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. 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


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with fair value, draw depreciation provision with the part that present value of estimated future cash flow (excluding not yet occurred future credit loss) lowered than book value, and calculate into profit and loss of current period. When the tradable financial asset occurring depreciation, even though the financial asset hasn’t terminating confirmation, the accumulated loss that originally calculating into the owners’ equity resulting from the decrease in fair value should be transferred out, and calculate into profit and loss of current period. ii. Draw depreciation provision for investment held till at term with the part that present value of its estimated future cash flow (excluding not yet occurred future credit loss) lowered than book value, and calculate into profit and loss of current period. 5. The confirmation and measurement of financial asset transfer i. The confirmation of financial asset transfer When transferring almost all risk and reward of financial asset ownership to transferee in following situations, the enterprise confirm transfer of the financial asset, terminate confirmation of the financial asset. A. The enterprise sell financial asset without recourse attachment; B. Sell the financial asset, meanwhile sign agreement with the purchaser, and repurchase it according to fair value of the financial asset on the promised time limit day; C. Sell the financial asset, meanwhile sign put option contract with purchaser, but judging from articles of the contract, this put option is a material out of the money option. ii. Measurement of financial asset transfer A. Confirmation of financial asset whole transfer: confirm according to balance of book value of transferred financial asset and accumulated changing amount of received consideration and fair value that originally directly calculated into owner’s equity, calculate into profit and loss of current period; B. Confirmation of partial transfer of financial asset: financial asset partially transferring, should amortize book value of whole financial asset which is between the terminating confirmation part and not terminating confirmation part according to each relative fair value, and calculate into profit and loss of current period according to book value of terminating confirmation part and balance of received consideration of terminating confirmation part with the amount of corresponding terminating confirmation part in accumulated changes of fair value that originally directly calculating into owner’s equity. The amount of terminating confirmation part in accumulated changes of fair value that originally calculating into owner’s equity, should confirm after amortizing the accumulated amount according to relative fair 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 in this year


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Within 6 months Don’t draw 6 months to 1 year 10% 1 year to 2 years 20% 2 years to 3 years 40% 3 years to 4 years 4 years to 5 years Above 5 years

100%

(VII) Calculation method of inventory and confirmation standard and withdrawing method of the provision for depreciation of inventory Inventory classification: Classified mainly as inventory material, low-value consumption goods, product in process, and finished goods etc.. Inventory pricing: The inventory material daily adopt planned cost to calculate, fix the differences of material cost separately according to first grade, carry forward material cost difference that should undertake at the end of the period according to planned cost of the raw material drawn or sent, adjust the planned cost to actual cost; pricing the finished product according to actual cost, and adopt weighted average method to carry forward sales cost when sending. Amortization of low-value consumption goods: Pricing the low-value consumption goods according to actual cost when acquired, adopt one-off amortization method to calculate when drawing, while the amount is relatively large, amortize it within one year. Inventory system: Adopt perpetual inventory system. Provision for inventory depreciation: At the end of the period, estimate price of the inventory according to the lower one between cost and net realizable value, draw depreciation provision and calculate into profit and loss of current period according to the balance of net realizable value lowered than the book cost of single material for the inventory with various quantity and low single price. . (VIII) Calculation method of long-term equity investment 1. Confirmation of initial investment cost of long-term equity investment For the consolidation of enterprises that under the same control, take the book value proportion of the owner’s equity of consolidated party on consolidation date as initial investment cost of long-term equity investment. The balance of initial investment cost of long-term equity investment and paid cash, transferred non-cash asset, and book value of debt taken, should adjust capital public reserve; and adjust retained earning while the capital public reserve isn’t enough to offset. For the consolidation of enterprises that under different control, take assets paid out in order to acquire the control right of purchased party on purchase date, occurred or undertaken debt and fair value of issued equity securities as initial investment cost of long-term equity investment. The long-term equity investment acquired in other manners except from the enterprise consolidation, should confirm its initial investment cost according to following regulations: A. The long-term equity investment acquired by paying cash, should take purchasing price that actually paid as initial investment cost. Initial investment cost including expense, tax and other necessary payout that directly related with acquiring the long-term equity investment. B. The long-term equity investment acquired by issuing equity securities, should take fair value of the issued equity securities as initial investment cost. C. The long-term equity investment invested by investors, should take the promised value in investment contract or agreement as initial investment cost, excluding those promised in the contract or agreement that the value is not fair.


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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:

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

Fixed assets Estimated lifetime Annual 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%


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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 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


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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 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


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according to the balance of the receivable amount of single asset below book value at period-end; the receivable amount is confirmed based on the higher one of asset pre-estimation future cash flow’s present value and the net amount left by fair value of assets minus disposal expenses. If it is difficult to estimate the receivable amount of single asset, its receivable amount will be confirmed based on the asset group which the asset belongs to. 5. Cognizance of the asset group during the depreciation test: the relevant minimum asset group which can share the coordination benefit from consolidation pre-estimated in internal company. 6. Once the loss on long-term investment depreciation is confirmed, it can not be switching back. (XIII) Amortization method of long-term expenses to be apportioned The long-term expenses to be apportioned occurred to the Company is priced on actual cost, and equally amortized according to the pre-estimated benefiting term; for the long-term items to be apportioned with no benefits in the later accounting period, it is needed to totally calculate their amortization balance value into losses and gains in current period when confirming them. (XIV) Calculation method of loan expenses (1) The loan expenses occurred to the Company includes loan interest, amortization of reduction price and premium price, assistant expenses and the exchange balance from foreign currency loan. The amortization of the interest, discount or premium and exchange difference from, the specific loan for purchasing fixed assets,if meeting the following three conditions, loan expenses should be capitalized.

Asset disburse has been occurred.① ②The borrowing costs has already incurred. ③ Purchase construction activity for achieving the asset utility condition has started. Other loan interest, amortization of reduction price and premium price and the exchange balance from foreign currency loan should be deemed as expenses of the period while they occur. (2)Where a general borrowing is used for the acquisition and construction or production of assets eligible for capitalization, the enterprise shall calculate and determine the to-be-capitalized amount of interests on the general borrowing 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：

Interest of the specialized loan for purchasing fixed assets is the capitalizatio① n rate； Above single specialized loan for purchasing fixed assets, the capitalization rate is the ②

weighted average interest rate of these general borrowings. (4)Temporary stop of capitalization: If the purchase and building activities for fixed assets stop abnormally and the interruption interval exceeds three months, the capitalization of borrowing cost should be stopped temporarily and deemed as the expenses of current 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


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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; 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


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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 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.


第 39 页

(XX) Confirmation principle of income tax The accounting management of income tax adopts debt method of asset liabilities. Current income tax payable and deferred income tax is reckoned into current gains and losses as income tax, but except for the followings: i. Enterprise merger ii. Transaction or matters confirmed in owners’ equity directly. (XXI) Determining principle and compile method for financial report consolidation scope (1)Determining principle on consolidation scope The consolidating scope of consolidated financial report of the Company was made on the basis of control. Control refers to the determined financial and operation policies of invested 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 Turnover tax Value-added tax: sales of commodities would be taxed value-added tax and the tax rate is 17%. Business tax: 5% of the incomes such as lease income; etc would be taxed as business tax. Circulation tax addition The Company and the subsidiaries pay urban maintenance and construction taxes, which are 7% of the total sum of value-added tax and business tax payable, and education additional charges, which are 4% of the total sum of value-added tax and business tax payable. Income tax The Company, its subsidiaries Weifu Jinning, Weifu Diesel System and Wuxi Weifu Lida Catalytic Converter Co., Ltd. are all high-tech enterprises registered at the High and New Technology Development Zone, and enjoy a preferential tax rate of 15% according to relevant state regulations on income taxation; According to the regulations on Enterprise Income Tax implemented in Jan.1, 2008, the Company and the aforesaid subsidiaries all applied the recognization of high-tech enterprises and the resultes were not definite ended the report period, the enterprise income tax was temporarily adopted 25% in quarterly paid in advance. Income tax rates of other shareholding subsidiaries are all 25%.

Note 6. Company combination and consolidated financial report


第 40 页

1. 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 June 30, 2008, the Company’s shareholding subsidiaries are as follows:

Investee Registration place

Registered capital

(RMB’0000)

Equity held (%) Business scope

Weifu Jinning Downtown Nanjing 34,628.70 80.00

Accessories and matching parts of

internal combustion

engine

Wuxi Weifu Mashan Oil Pump and OilNozzle Co., Ltd. Mashan, Wuxi 4,500.00 100.00


internal combustion

engine Wuxi Weifu-Jilin University NewMaterial Application and DevelopmentCo., Ltd.

Development zone, Wuxi 500.00 70.00 Metal nano

powder

Wuxi Weifu Chang’an Oil Pump andOil Nozzle Co., Ltd.

Chang’an, Wuxi 6,000.00 100.00


internal combustion

engine Jiangsu Weifu Nano-Science andTechnology Co., Ltd.

Huishan District, Wuxi 3,000.00 80.00 Nano materials

Weifu Lida Catalytic Converter Co.,Ltd.

New District, Wuxi 26,000.00 94.81 Muffle, purifier

Weifu Diesel System New District, Wuxi 30,000.00 70.00


internal combustion

engine

Wuxi Weifu International Trade Co.Ltd.

New District, Wuxi

3,000.00 90.83

Accessories and matching parts of nternal combustion

engine

Wuxi Weifu Mashan Oil Pump and Oil Nozzle Co., Ltd. hereinafter referred to as “Weifu Mashan”; Wuxi Weifu-Jilin University New Material Application and Development Co., Ltd. hereinafter referred to as “Weifu Jida”; Wuxi Weifu Chang’an Oil Pump and Oil Nozzle Co., Ltd. hereinafter referred to as “Weifu Chang’an”; Jiangsu Weifu Nano-Science and Technology Co., Ltd hereinafter referred to as “Weifu Nano”; Wuxi Weifu International Trade Co. Ltd. hereinafter referred to as “Weifu International Trade”. 2. Change of the consolidation scope of the financial statements

Investee Consolidation Consolidation Reasons for the change


第 41 页

scope of last year

scope of this year

Jinning Yes Yes No change

Weifu Mashan Yes Yes No change

Weifu Jilin University Yes Yes No change

Weifu Chang’an Yes Yes No change

Weifu Nano Yes Yes No change

Weifu Lida Yes Yes No change

Weifu Diesel System Yes Yes No change

Weifu International Trade No Yes Note

Annotation: Weifu International Trade was founded by the Company and the subsidiary company of the Company Weifu Lida and Weifu Group in April, 2004, with the registered capital RMB 5,000,000, including: the Company invested RMB 750,000, which was 15% of registered capital; Weifu Lida invested RMB 1,500,000, which was 30% of registered capital; Weifu Group invested RMB 2,750,000, which was 55% of registered captal. The Company unilaterally increased investment RMB 25,000,000 to Weifu Guomao, which was paid on Dec. 24, 2007. The related industrial and commercial register of change was done in March, 2008, and after increasing investment, the registered capital was RMB 30,000,000, including: the Company invested RMB 25,750,000, which was 85.83% of registered capital; Weifu Lida invested RMB 1,500,000, which was 5% of registered capital; Weifu Group invested RMB 2,750,000, which was 9.17% of registered capital. Weifu International Trade became the holding subsidiary company of the Company. 3. Joint venture Joint venture refers to enterprises whose operating activities are controlled by 2 investors or more according to articles of a contract. By June 30, 2008, the Company’ joint venture companies are as follows:

Investee Registration place

Registered capital

(RMB’0000)

Equity held (%)

Business scope

Weifu Environmental Protection

Catalyst Co., Ltd. New District,

Wuxi 5,000.00 49.00 Catalyst

Wuxi Weifu-Autocam Fine Machinery Co. LTD.

New District, Wuxi USD1,000.00 50.00

Accessory of automobiles

Chaoyang Weifu-Jialin MachineryManufacturing Co. LTD

Chaoyang, Liaoning 800.00 50.00

Fittings and accessories of

internal combustion

engine Weifu Environmental Protection: founded collectively by Weifu Lida, which is the Company’s subsidiary; Huawei (Shanghai) Nano-Technology Co., Ltd and BVI Yingdong Holdings Co., Ltd in May 2004. According to the Company’s Articles of Association, Weifu Lida, Huawei (Shanghai) Nano-Technology Co., Ltd etc. would jointly control this company. Wuxi Weifu-Autocam Fine Machinery Co. LTD. (hereinafter referred to as Weifu-Autocam): a Sino-Foreign joint venture company founded by the Company and American Autocam in August 2005. Each of the two parties holds a stake of 50% in Weifu-Autocam and control the company jointly. In March, 2008, Weifu Autocam increased registered capital amounted to USD 4 million,


第 42 页

after increasing the capital, the registered capital was USD 10 million, the two partied respectively held 50% stakes and jointly controlled the company. Chaoyang Weifu-Jialin Machinery Manufacturing Co. LTD (hereinafter referred to as Weifu-Jialin): a limited company founded by the Company and Chaoyang Jialin Machinery Manufacturing Co. LTD in June 2006. Each of the two parties holds a stake of 50% in Weifu-Jialin and control the company jointly. Note 7. Commentary on main items of consolidated financial statements (The amount is taking RMB thousand as unit, excluded the specific explanations in the followings)

1. Monetary capital

June 30, 2008 Dec.31, 2007

Cash 728 596

Current deposit in bank (RMB) 554,254 461,614

Current deposit in bank (US$6,700) 46 22,216

Current deposit in bank (EUR 694,750) 7,524 21,338

Current deposit in bank (YEN 13,324,000) 859 670

Fixed deposit in bank 150,122 171,500

Other monetary capital (RMB) 118,418 114,029

831,951 791,963

[Note] Sum of earnest money of the other monetary capital Items June 30, 2008 Dec.31, 2007

Bank acceptance 118,279 113,949

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 June 30, 2008 Dec.31, 2007 Trade acceptance 102,570 74,900Bank acceptance 662,812 572,148

Total 765,382 647,048The amount of note receivable in year-end increased RMB 118,333,700 compared with last year-end, which was mainly because the Company and its subsidiary Weifu Jinning and Weifu Lida increased note settlement in this year, of which the Company increased RMB 89,026,400 and its subsidiary Weifu Jinning increased RMB 13,930,400 and Weifu Lida increased RMB 15,509,100. The due date of notes receivable at year-end is before Dec.31, 2008. Of the total, Bank acceptance of RMB 8,279,300 is mortgaged for opening notes payable. 3. Accounts receivable


第 43 页

(1) Analysis of the account age June 30, 2008

Amount Proportion Provision for bad debts

Proportion of provision Net amount

Within 6 months 645,063 84.63 －－ 645,063

From 6 monthsto 1 year

54,374 7.13 5,437 10.00 48,937

From 1 year to 2years

23,543 3.09 4,709 20.00 18,834

From 2 years to3 years

3,645 0.48 1,441 39.54 2,204

3 years above 2,705 0.35 2,705 100.00 －

Individual cognizance

32,930 4.32 32,930 100.00 －

762,260 100.00 47,222 6.05 715,038

Dec.31, 2007



RMB’000 % RMB’000 % RMB’000

Within 6 months 536,584 85.17 －－ 536,584

From 6 monthsto 1 year

48,200 7.65 4,820 10.00 43,380


7,543 1.20 1,501 19.89 6,042


2,136 0.34 854 40.00 1,282

3 years above 3,433 0.54 3,433 100.00 －

Individual cognizance

32,145 5.10 32,145 100.00 －

630,041 100.00 42,753 6.79 587,288

(2) Classified according to account nature June 30, 2008 Dec.31, 2007

Items Amount Proportion Amount Proportion

Domestic account receivable with single significant amount

670,857 88.01% 551,820 87.59%Domestic account receivable with single unsignificant

58,473 7.67% 46,076 7.31%


第 44 页

amount Individual cognizance

32,930 4.32% 32,145 5.10%

762,260 100.00% 630,041 100.00%Notes: Account receivable with single significant amount indicated the account which is above RMB 1 million; account receivable with single unsignificant amount indicated the account which is less than RMB 1 million; (3) The balance of accounts receivable does not include debts owned by major shareholders possessing more than 5% (including 5%) of the Company’s shares. (4) The total amount owed by the top five units in arrears in accounts receivable amounted to RMB 338,530,000, accounting for 43.39% of the total accounts receivable. 4. Account paid in advance

June 30, 2008 Dec.31, 2007

Within 1 year 48,929 33,5171 year to 2 years 3,232 362 years to 3 years 25 187Above 3 years 232 70

52,418 33,810 5. Other accounts receivable (1) Analysis of the account time

June 30, 2008



Within 6 months 34,532 83.45 －－ 34,532From 6 monthsto 1 year

1,906 4.61 8 0.43 1,898


356 0.86 10 2.84 346


52 0.13 8 15.94 44

3 years above 31 0.07 31 100.00 －Individual cognizance

4,504 10.88 4,504 100.00 －

41,381 100.00 4,561 11.02 36,820

Dec.31, 2007

Amount Proportion Provision for b d d bt

Proportion of i i

Net amount

Within 6 months 32,013 76.60 －－ 32,013

From 6 months to 1 year

4,271 10.22 14 0.34 4,257


915 2.19 27 2.92 888


第 45 页


49 0.12 11 22.04 38

3 years above 39 0.09 28 72.14 11Individual cognizance

4,504 10.78 4,504 100.00 －

41,791 100.00 4,584 10.97 37,207(2) It does not include debts owned by major shareholders possessing more than 5% (including 5%) of the Company’s shares at period-end. (3) Except for the debts owned by related companies and reserve fund for employment in other accounts receivable that were not withdrawn as the provision for bad debts, others were all withdrawn as provision for bad debts according to relevant proportions. (4）The total amount owed by the top five units in arrears in other accounts receivable amounted to RMB 38,024,700, accounting for 91.89% of the total other accounts receivable. (5）The main units and amount in arrears

Nature or Content June 30, 2008

RMBNanjing University etc.[ Note 1] Advance investment 4,400,000.00Bosch Auto Diesel System Co.Ltd.[Note 2] Loan 30,153,281.43

[Note1] Arrears of RMB 2,400,000 from Nanjing University, Southeast University, Nanjing Science and Technology University and Nanjing Industrial University was the investment fund that the Company advanced each amount of RMB 600,000 for the aforesaid universities when Weifu Nano was jointly sponsored by the Company and the aforesaid four universities, which will be returned annually by using the dividends from Weifu Nano according to the cooperation agreement by each university. The debt of RMB 2,000,000 owed by Jiangsu Province Technology & Science Center was the Company’s advance account. As there are difficulties in receiving the aforementioned accounts by dividends from Weifu Nano year by year, the total amount was withdrawn as provision for bad debts in accordance with prudence principle. [Note 2] Bosch Auto Diesel System Co.Ltd is the affiliated enterprise of the Company, with the following of the short form of Bosch Auto Diesel System. 6. Inventory

June 30, 2008 Dec.31, 2007

Inventory Inventory Inventory Inventory

Inventory 152,916 32,420 167,576 32,420

Goods in 191,154 19,147 169,040 19,147

Finished 382,033 73,182 546,952 73,762

726,103 124,749 883,568 125,329

The net realizable value of the inventories is determined by reference to the estimated price for sales of inventories deducting the estimated finished cost and sales expenses in the normal course of operation. 7. Long-term equity investment

Dec.31,2007 Increase in Decrease in June 30, 2008


第 46 页

this period this period Investment to joint venture and associated enterprise

828,438 121,690 2,306 947,822Investment to other enterprise

115,418 － 1,133 114,285

Provision for devaluation of long-term investment

-44,166 － -1,133 -43,033 899,690 121,690 2,306 1,019,074

(1)Long-term equity investment calculated by equity method

Name of investees

Investment

proportion

Original investment cost

Amount at

period-begin

Increase or

decrease in

investment in this period

Increase or

decrease in equity

in this period

Divideds received

Increase or

decrease in

accumulated

equity

Amount at

period-end

Bosch Auto DieselSystem [note 1]

31.50%

549,557 495,489 - 63,000 - 8,932 558,489

Zhonglian Automobile Electronic Co.

20.03

% 120,124 232,218 - 30,000 - 142,094 262,218

Weifu PrecisionManufacturing

20.00%

2,000 6,805 - 1,430 - 6,235 8,235

Weifu Environmental Protection [note 2]

49.00

% 24,500 64,810 - 6,777 - 47,087 71,587

Wuxi Longsheng Technology Co., Ltd.

20.00%

200 1,269 - - - 1,069 1,269

Weifu EconomicsTrade [note 3]

42.38%

- 1,723 -2,306 583 - - -

Weifu-Autocam [note 4]

50.00%

37,842 21,858 14,295 4,968 - 3,279 41,121

Weifu-Jialin 50.00

% 4,000 4,266 - 637 - 903 4,903

738,223 828,438 11,989 107,395 - 209,599 947,822[Note 1] Bosch Auto Diesel System: The registered capital is US$ 200,000,000, in which The Company funded US$ 60,000,000, accouting for 30% of registered capital, and Weifu Jinning funded US$ 3,000,000, accouting for 1.5% of registered capital. [Note 2] Weifu Environmental Protection: founded collectively by Weifu Lida, which is the Company’s subsidiary; Huawei (Shanghai) Nano-Technology Co., Ltd and so on in May 2004. According to the Company’s Articles of Association, Weifu Lida, Huawei (Shanghai) Nano-Technology Co., Ltd and so on would jointly control this company. [Note 3]Weifu Economics Trade is a limited liability company founded by the Company, subsidiary company Weifu International Trade and Weifu Group with joint funds in Dec., 2005; the controlling subsidiary Weifu International Trade invested RMB 2,305,100, accounting for


第 47 页

42.381% of the registered capital of Weifu EconomicsTrade; the stake has been transferred to Weifu Group in Feb., 2008. [Note 4] Weifu-Autocam is joint venture founded by the Company and American Autocam in Aug. 2005. The Company is supposed to fund US$ 3,000,000 accounting for 50% of the registered capital RMB 6,000,000 of the company.

(2) Long-term equity investment calculated by cost method

Name of investees Investment proportion

Amount at

period-bei

Increase/Decrease in this period

Amount at period-end

Wuxi Guolian Securities Co. 1.20 12,000 - 12,000Guangxi Liufa Co., Ltd. 1.22 1,600 - 1,600Changchai Group, Financing Co. 800 - 800Hejun Initiative Investment Co. 11.72 33,000 - 33,000Nanjing Hengtai Insurance Broker Co. 1.85 1,000 - 1,000Jiangsu Huifeng Insurance Agency Co. 10.00 500 - 500Yangdong Co., Ltd. 1.18 2,356 - 2,356Henan Gushi Weining Oil Pump & Nozzle Co., Ltd. [Note 1] 3,166 -1,133 2,033Jiangnan Hoisting and Conveying Machinery Co. LTD of Changcai Group [Note 2] 1,056 - 1,056Wuxi Keda Chuangxin Investment Co., ltd 1.875 3,000 - 3,000Beijing Futian Environmental Power Holding Co., Ltd. 12.95 56,940 - 56,940

115,418 -1,133 114,285

[Note 1] Over 4 investees including Henan Gushi Weining Oil Pump & Nozzle Co., Ltd. amounted to RMB 3,166,400, were invested by Nanjing Weifu Jinning Co. Details of those companies will not be listed herein considering their smaller production scale. Henan Province Gushi Weining Oil Pump & Nozzle Co. fully appropriated provision for devaluation amounting to RMB 2.03 million in 2001. Because of being unable to keep in touch with Pufa Machinery Industrial Co., Ltd., Nanjing Machinery Industry Foreign Trading Co. and Changjiang Economic Development Co. and other investing companies, it fully appropriated provision for devaluation in their investment amounted to RMB 1,133,300 in 2002. The three investors’ investing amounts were all taken back in Jan., 2008. [Note 2] Over 4 investees including Jiangnan Hoisting and Conveying Machinery Co. LTD of Changcai Group amounted to RMB 105,600,000, were invested by Nanjing Weifu Jinning Co. Details of those companies will not be listed herein considering their smaller production scale. (3) Provision for devaluation of long-term investment

Amount at period-begin

Increase in this period

Decrease in this period

Amount at period-end

Hejun Initiative Investment Co. 30,000 - - 30,000Henan Gushi Weining Oil Pump & Nozzle Co., Ltd. etc. 3,166 - 1,133 2,033

Beijing Futian Environmental Power 11,000 - - 11,000


第 48 页

Holding Co., Ltd.

44,166 - 1,133 43,033

8. Fixed assets and accumulated depreciation

Items Dec.31, 2007 Increase in this period

Reclassification

Decrease in this

Jun.30,

2008(1)Original value of

Buildings 603,475 421 - - 603,896

General equipment

167,615 3,882 -

3,765

167,732

Special equipment

806,286 12,854 - 689 818,451

Transportation equipment

20,240 1,596 - 493 21,343

Other equipment 188,613 7,896 - 517 195,992

1,786,229 26,649 - 5,464 1,807,414(2)Accumulated

Items Dec.31, 2007 Increase in Reclassificat Decrease Jun.30, Buildings 117,757 10,701 - - 128,458General equipment

68,772 8,253 - 2,569 74,456

Special equipment

349,521 28,578 - 404 377,695


7,913 992 - 273 8,632

Other equipment 87,436 11,674 - 447 98,663

631,399 60,198 - 3,693 687,904（ 3） Provision for fixed assets

Items Dec.31, 2007 Increase in Reclassificat Decrease Jun.30, General

i t 5,710 - - - 5,710

Special equipment 5,954 - -

52 5,902

11,664 - - 52 11,612（4）Book value

Items Dec.31, 2007 Jun.30, Buildings 485,718 475,438General equipment

93,133 87,566

Special equipment

450,811 434,854


12,327 12,711

Other equipment 101,177 97,329

1,143,166 1,107,898[Note 1] Original value of fixed assets has increased RMB 26,649,294.83 this year; it’s mainly because of the transfer-in amounting to RMB 17,036,433.96 from project in construction, and


第 49 页

the rest are direct outsourcing. [Note 2] Decrease in original value of fixed assets this year includes the decreases because of sales and rejection. [Note 3] There are no fixed assets used for renting-in through financing or for mortgage in the fixed assets at period-end. [Note 4] Decrease in depreciation of fixed assets this report period mainly because the provision for the depreciation of fixed asset withdrawan in prior years have been disposed in this report period.

9. Project in construction

Amount at

period-beginIncrease inthis period

Amount of transfer to fixed

Other decrease Amount at

period-end

Project of High Pressure Track J i t

29,483 32,346 3,407 58,422Project of Technology Reform on Nationalizing Parts of Fuel System

12,963 1,493

14,456

The second period project in Weifu Jinning Hi-tech Zone 7,385 - 7,385

Project of No.103 Plot in Wuxi New Developed Area 21,888 1,004 22,892

Wuxi Huishan Development Zone Project

19,718 7,768 27,486

Miscellaneous Projects 28,141 40,488 13,629 546 54,454

119,578 83,099 17,036 546 185,095

Provision for depreciation of - -

119,578 185,095

[Note] Capital source of project in construction: Project of Productivity Improving on High Pressure Track Joint, Project of Technology Reform on Nationalizing Parts of Fuel System, Project of No.50 Plot in New Developed Area, Project of No.103 Plot in New Developed Area, Huishan Development Zone Project and Miscellaneous Projects are projects of self-raised funds.

10. Intangible assets

Items Dec.31,2007Increase inthis period

Decrease in this period June 30, 2008

(1)Original value of the

Land use right of parent 30,452 - - 30,452Trademark permit use right 26,356 - - 26,356

Land use right of Weifu 28,752 - - 28,752Software of Weifu Jinning 346 - - 346

Land use right of Weifu Diesel 13,232 - - 13,232Chartered right of Weifu 37,109 - - 37,109

Software of Weifu Diesel oil 5,554 - - 5,554

141,801 - - 141,801

(2) Accumulative amortization


第 50 页

Items Dec.31,2007Increase inthis period

Decrease in this period June 30, 2008

Land use right of parent 1,702 341 - 2,043Trademark permit use right 7,957 438 - 8,395Land use right of Weifu 9,344 479 - 9,823Software of Weifu Jinning 173 35 - 208Land use right of Weifu 961 141 - 1,102Chartered right of Weifu 12,975 1,856 - 14,831Software of Weifu Diesel oil 2,385 556 - 2,941

35,497 3,846 - 39,343

(3)Book value

Items Dec.31,2007 June 30, 2008

Land use right of parent 28,750 28,409Trademark permit use right 18,399 17,961Land use right of Weifu 19,408 18,929

Software of Weifu Jinning 173 138Land use right of Weifu Diesel 12,271 12,130Chartered right of Weifu 24,134 22,278Software of Weifu Diesel oil 3,169 2,613

106,304 102,458[Note] No situation of intangible assets that can be draw back being lower than book value, so not withdraw the provision for devaluation of intangible assets.

11. Deferred income tax asset

June 30, 2008 Dec.31, 2007 Items

Deferred Deductible Deferred Deductible

Provision for bad 3,055 51,783 2,489 47,337

Provison for 18,738 124,749 18,876 125,329

Provision for 1,672 11,612 1,750 11,664

others 5,759 38,392 6,267 41,779

29,224 226,536 29,382 226,109

12. Provision for devaluation of asset Decrease in

this period

Items Dec.31,2007

Amout

withdrwal

in this

period

Switching

back

Written off or other decrease

June 30,

2008

Provision for bad debts

47,337 4,693 23 224 51,783


第 51 页

Provision for depreciation of inventory

125,329 - 580 - 124,749

Provision for devaluation of long-term equity investment

44,166 - 1,133 - 43,033

Provision for devaluation of fixed assts

11,664 - 52 - 11,612

228,496 4,693 1,788 224 231,177

13. Short-term loans Sorts of loan Juen 30, 2008 Dec.31,2007

Guaranteed loan 177,000 292,000

Mortgage loan 1,350 1,350

Credit loan (RMB) 1,134,989 1,134,169

Credit loan (EURO 10,000,000) 108,302 -

Credit loan (USD 8,000,000) - 58,437

1,421,641 1,485,956[Note 1] No short-term loans which have fallen due but not been repaid occurred in this account. [Note 2] Mortage loan in short-term loans is got by Weifu Lida pledging the bank acceptance. [Note 3]The Guaranteed Loan includes: RMB 30,000,000 for Weifu Jinning by the Company; RMB 37,000,000 for Weifu Mashan by the Company; RMB 45,000,000 for Weifu Chang’an by the Company and RMB 15,000,000 for Weifu Lida by the Company and another RMB 50,000,000 for the Company by Weifu Group. 14. Notes payable

Sorts of notes June 30, 2008 Dec.31, 2007

Bank acceptance 266,676 174,171

15Accounts payable (1) Analysis of debt age

June 30, 2008 Dec.31, 2007Debt age Proportion Payable account Proportion Payable account

In a year 95.92 732,589 97.05 640,379

One to two years 2.46 18,807 1.71 11,295

Two to three years

1.38 10,524 0.96 6,319

Above three years

0.24 1,847 0.28 1,846


第 52 页

100.00 763,767 100.00 659,839

(2) There was no huge payable account above three years (3) Payable accounts of owning above 5%（including 5%）shares did not exist.

16. Employees’ salary payable

Item Dec.31, 2007 Increase in this

period

Decrease in

this period

June 30, 2008

Salary, bonus, 13,035 92,465 101,539 3,961

Employees’ welfare － 9,915 9,915 －

Employee’s 20,284 35,224 34,548 20,960

Social insurance 1,738 8,310 9,557 491

Housing Fund

Social Insurance

40,000 6 3,385 36,621

Housing allowance 9,341 3,285 2,666 9,960

Labor union

expenditure and

7,001 3,391 326 10,066

91,399 152,596 161,936 82,059[Note 1] Housing allowance for old employees: Employee’s housing allowance is in accordance with the old employee’s house buying allowance was made provision by directors’ meeting. [Note 2] Internal insurance：According to supplementary old-age insurance and staff deposit endowment plan, employees, since the second year of entering the Company, pay 2% of their average salary as well as 1% supplemented by the enterprise, and these can all be get when they retired.

17. Taxes payable

Taxes June 30, 2008 Dec.31, 2007

VAT 9,021 -2,148Tax for city

construction

763 37

Income tax 9,402 16,857Extras of education

expense

464 49

Others 3,507 3,571

23,157 18,366 18. Other account payables (1)Debt of owning above 5% (including5%) of its shares did not exist. (2)There was no huge other payables above three years. (3)Other huge payables are listed as follows:

Character or June 30, 2008

Bosch Group Trademark using 9,139


第 53 页

Nanjing Turbine& Electric Machinery (Group) Loan 4,000

Nanjing Advanced Technology Developing Co. Land expense 13,913

Nanjing Steamship Engine Group Co., Ltd. 1,717

Land purchase: The account payable amounting to RMB 19,500,000 to Nanjing New&High-tech Development Corp. is for land use right of 200,000 square meters in Hign-tech District, Nanjing Weifu Jinning got in Dec. 2002. Balance of period-end is account that had not been account payable in the report period. Nanjing Steamship Engine Group Co., Ltd.: Weifu Jinning borrowed RMB 8,000,000 from Nanjing Steamship Engine Group Co., Ltd. in Aug. 1997, the both parties promised to amortize. At present, Weifu Jinning has repaid RMB 4,000,000. 19. Other current liabilities

Content June 30, 2008 Dec.31, 2007

Interest of bank loan 3,557 2,361

Payable share interest to minority 5,257 2,964

Other 42,875 7,836

51,689 13,161

20. Long-term accounts payable

Items June 30, 2008

Nanjing Finance Bureau nancial supporting fund (2001) 1,880

Nanjing Finance Bureau

New&Hi-tech Branch [Note 1] nancial supporting fund (2003)

140


New&Hi-tech Branch [Note 3] nancial supporting fund (2004)

1,710


New&Hi-tech Branch [Note 4]nancial supporting fund (2005) 1,140


New&Hi-tech Branch [Note 5]nancial supporting fund (2006) 1,250


New&Hi-tech Branch [Note 6] inancial supporting fund (2007)

1,230

National debt transferred to loan 5,600

12,950 [Note 1] To encourage Weifu Jinning to enter Nanjing New& High Technology Industry


第 54 页

Development Zone, financial supporting capital is allotted by New & High branch of Finance Bureau of Nanjing for supporting use, the term is from Dec.20, 2001 to Aug.18,2 007, Provided that the operation period in the zone is less than 10 years, financial supporting capital will be reimbursed. [Note 2] To encourage Weifu Jinning to enter Nanjing New& High Technology Industry Development Zone, financial supporting capital is allotted by New & High branch of Finance Bureau of Nanjing for supporting use, the term is from Dec. 24, 2003 to Dec. 24, 2007, Provided that the operation period in the zone is less than 10 years, financial supporting capital will be reimbursed. The original calculating into the other account payable should be transferred to long-term account payable. [Note 3] To encourage Weifu Jinning to enter Nanjing New& High Technology Industry Development Zone, financial supporting capital is allotted by New & High branch of Finance Bureau of Nanjing for supporting use, the term is from Aug.15, 2004 to Aug.4, 2012, Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note 4] To encourage Weifu Jinning to enter Nanjing New& High Technology Industry Development Zone, financial supporting capital is allotted by New & High branch of Finance Bureau of Nanjing for supporting use, the term is from Oct. 20, 2005 to Oct. 20, 2020, Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note 5] To encourage Weifu Jinning to enter Nanjing New& High Technology Industry Development Zone, financial supporting capital is allotted by New & High branch of Finance Bureau of Nanjing for supporting use, the term is from Jul. 20, 2006 to Jul. 20, 2021, Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note 6] To encourage Weifu Jinning to enter Nanjing New& High Technology Industry Development Zone, financial supporting capital is allotted by New & High branch of Finance Bureau of Nanjing for supporting use, the term is from Sep. 17, 2007 to Sep. 17, 2022, Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note7] National debt transferred to loan is the transferred national debt capital received by Weifu Jinning.

21. Share capital

Dec.31, 2007

Increase and

decrease in the

period

June 30, 2008

Non-circulating share capital with

restricted trade conditions

-National legal person share 114,062 － 114,062

-Other internal capital share 91 94 185

Including：other internal capital

share

－ 133 133

Owning shares by senior executors 91 -39 52


第 55 页

114,153 94 114,247

Circulating share capital -Domestically listed foreign shares (B-share)

114,920 － 114,920

-Domestically listed ordinary shares (A-share)

338,203 -94 338,109

453,123 -94 453,029

567,276 － 567,276

22. Capital Reserves

Items Dec.31, 2007

Increase and

decrease in the

period

June 30, 2008

Capital premium [Note 1] 888,497 - 888,497

Other capital reserve [Note 2] 20,804 -1,687 19,117

909,301 -1,687 907,614 [Note 1] Capital premium refers to the part of exceeding share capital when the Company issues B-shares and A-shares; [Note 2] Other capital reserve refers to the donation that the Company accepts non-cash assets. The assets have been coped with. And capital reserve identified by its subsidiaries and right law in proportion.

23. Surplus Public Reserve

Item Dec.31, 2007 Increase in the period

Decrease in the period

June 30, 2008

Statutory surplus 241,970 －－ 241,970

24. Undistributed profit

Item June 30, 2008

Undistributed profit at the beginning 682,893

Add: Net profit in this year 127,253

Undistributed profit in the period end 810,146

25. Income from business

Items Jan.-June, 2008 Jan.-June, 2007

Income of diesel oil 1,632,857 1,476,888


第 56 页

Income of catalyze purifier and 89,256 56,068

Income of other products 29,495 20,378

Income of other business 123,488 97,077

1,875,096 1,650,411

Total sales income to the top 5 clients in the main operation income is RMB 823,330,000, 43.91% of the main operation income.

26. Cost from business


Cost of diesel oil

internal-combustion engine pump

1,244,754

1,091,114

Cost of diesel oil

internal-combustion engine pump

81,212 50,116

Cost of other products 26,591 18,024

Cost of other business 133,702 86,705

1,486,259 1,245,959

27. Tax of core business and extra harges


City maintenance and construction tax

7,139 6,337

Education associate charge 4,083 3,617

Business tax 31 117

11,253 10,071

28. Financial expenses


Loan interest expenses 50,214 48,483Draft discount interest 9,227 6,282 Commission expenses 962 60 Exchange losses 8,059 -2,640 Interest income of bank deposit(Note) -5,769 -6,004

62,693 46,181

[Note] Income of bank deposit includes income of fixed deposit interest.


第 57 页

29. Losses from devaluation of asset


Losses of bad debts 4,670 -12,770

Losses of depreciation of inventory -580 5,007

Losses of devaluation of fixed asset

equity investment

-1,133 -

Losses of devaluation of fixed asset -52 -20

2,905 -7,783

30. Investment income


Income of unconsolidated subsidiaries and affiliated companies [Note ]

106,812 21,246

Other long-term equity investment income

－ 960

Income from transfer of equity 583 － 107,395 22,206

There was no significant limitation of investment income return.

[Note] Income of unconsolidated subsidiaries and affiliated companies Jan.-June, 2008 Jan.-June, 2007 Weifu Autocam 4,968 -1051Weifu Jialin 637 175Weifu Environment Protection 6,777 9,996Zhonglian Auto Electronic Co., Ltd. 30,000 28,000Weifu Precision Manufacturing 1,430 842Bosch Auto Diesel System 63,000 -16,716

106,812 21,246

31. Non-operating income

Item Jan.-June, 2008 Jan.-June, 2007

Income of disposing fixed assets 48 498

Income of intangible asset

transfer

－ 5,230

Others 137 13

185 5,741

32. Non-operating expense


第 58 页

Item Jan.-June, 2008 Jan.-June, 2007

Loss of disposing fixed assets 1,056 1,093

Expenses of donation 1,250 196

Market commodity adjusting

fund etc.

5,983 4,790

Other expenses 246 1,488

8,535 7,567

33. Expense of income tax Items Jan.-June, 2008 Jan.-June, 2007

Income tax payable 12,515 12,491

Added assets of deferred income 158 822

Expense of income tax 12,673 13,313 34. Related item explanation for cash flow statement (1)Received other cash RMB 7,800,915.3 related to operation activity is mainly of income of the bank deposit interest etc. (2)Paid other cash RMB 66,861,120.71 related to operation activity is mainly of operation expense and management expense. (3) Supplementary materials of cash flow statement

Items Jan.-June,

2008

Jan.-June,

2007

I. Net profit subject to cash flow arising from operating

activities

Profit, net 127,253 94,720

Add: Minority shareholders’ income 10,331 17,280

Provision for fixed assets devaluation 2,905 -7,783Fixed assets depreciation 60,198 59,732Allocations of intangible assets 3,847 3,680Allocations of long-term expenses to be allocated 161 128

Losses from disposal of fixed, intangible and other long-term

assets(Income is listed with “-”) 1,008 -4,635

Losses from obsolete fixed assets(Income is listed with “-”) - -

Losses from changes of fair value(Income is listed with “-”) - -

Financial expenses 50,214 48,483

Losses from investment(Income is listed with “-”) -107,395 -22,205

Decrease of deferred income tax(Increase is listed with “-”) 158 881

Increase of deferred income tax( (Decrease is listed with “-”) - -88


第 59 页

Decrease of inventory(Increase is listed with “-”) 157,465 39,443

Decrease of operating receivables(Increase is listed with “-”) -240,594 -267,226

Increase of operating payables(Decrease is listed with “-”) 207,919 168,758

Other - -

Net cash generated from operations 273,470 131,168II. 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 713,672 693,576Less: Balance of cash at period-beginning 678,014 721,419Add: Balance of cash equivalent at period-end - -Less: Balance of cash equivalent at period-beginning - -Net increase in cash /cash equivalent 35,658 -27,843

(4) Constitution of cash and cash equivalents Items June 30, 2008 June 30, 2007

Cash balance listed in balance sheet 831,951 808,576Less: Guarantee of bank acceptance bill not conforming to the definition of cash 118,279 115,000Balance of cash and cash equivalents listed in cash flow statement 713,672 693,576

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

June 30, 2008

Amount Proportion

(%) Provision

for bad debtsProportion of provision (%) Net amount

Within sixmonths 342,771 81.78 －－ 342,771

Between 6 months-1 year 32,546 7.76 3,255 10.00 29,291Between 1-2years 18,190 4.34 3,638 20.00 14,552Between 2-3years 866 0.21 346 40.00 520Above threeyears 469 0.11 469 100.00 －Recognized bysingle 24,319 5.80 24,319 100.00 －

419,161 100.00 32,027 7.64 387,134


第 60 页

Dec.31, 2007

Amount Proportion(%)

Provision f b d d bt

Proportion of i i (%)

Net amountWithin sixmonths 259,935 83.16 －－ 259,935Between 6 months-1 year 24,760 7.92 2,476 10.00 22,284Between 1-2years 3,024 0.97 605 20.00 2,419Between 2-3years 199 0.06 80 40.00 119Above threeyears 338 0.11 338 100.00 －

Recognized bysingle 24,319 7.78 24,319 100.00 －

312,575 100.00 27,818 8.90 284,757

2. Other accounts receivable

June 30, 2008

Amount Provison for bad debt Within six months 83,500 － Recognized by single 4,400 4,400 87,900 4,400

Dec.31, 2007

Amount Provison for bad debt

Within six months 65,263 －

Between 6 months- 1 year 4,051 － Between 1-2 years 750 － Between 2-3 years 33 －

Recognized by single 4,400 4,400

74,497 4,400 Note: At the end of the report period mainly composes of payments receivable or advance money of the subsidies and related parties, till money borrowed by employees, investment incurred for other shareholders of Weifu Narometer etc. The investment withdrawn 100% bad debts reserve incurred for other shareholders of Weifu Narometer by the Company amounting to RMB 4,400,000. 3. Long-term equity investment

June 30, 2008 Dec.31, 2007

Consolidated subsidiaries 723,771 696,798


第 61 页

Joint companies and affiliated companies 851,678 737,348 Other long-term equity investment 51,256 51,256 Provision for devaluation of long-term investment -30,000

-30,000

1,596,705 1,455,402 (1) Investment on subsidiaries calculated based on cost method

Name of the investee

Investment proportion

Amount at the

period-begin

Increase in the period


Amount at the

period-endWeifu Jinning 80.00% 178,640 - - 178,640Weifu Lida 94.81% 230,114 - - 230,114Weifu Nanometer 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 - - 3,500Weifu International Trade

85.83% 950 26,973 - 27,923

696,798 26,973 - 723,771

(2) Long-term equity investment calculated based on equity method

Name of the investee

Investment proportion

Initial investment cost

Amount at theperiod-begin

Increase/decrease

in investmen

t in the period

Increase /decreas

e in equity

in the period

Bonus gained

Increase/decrease amount

of accumul

ative equity

Amount at the

period-end

Weifu Autocam 50.00% 37,842 21,858 14,295 4,968 - 3,279 41,121Weifu Jialin 50.00% 4,000 4,266 - 637 - 903 4,903Bosch Automobile Diesel Oil System Co., Ltd.

30.00% 523,695472,20

1 - 63,000 - 11,506 535,201Zhonglian Automobile Electronic Company Limited

20.03% 120,124232,21

8 - 30,000 - 142,094 262,218Wuxi Weifu Precise Machinery Manufacturing Co., Lt d.

20.00% 2,000 6,805 - 1,430 - 6,235 8,235

687,661737,34

8 14,295 100,035 - 164,017 851,678

(3) Provision for devaluation of long-term investment Amount in Increase in the Decrease in Amount in the


第 62 页

the period beginning

period the period period end

Hejun Venture Capital Co., Ltd. 30,000 - - 30,000

(4) Other long-term equity investment calculated based on cost method

Name of investee Investment proportion

Amount in the period

Increase/decrease in the

Amount in e period end

Gulian Securities Co., Ltd. 1.20 12,000 - 12,000 Guangxi Liufa Co., Ltd. 1.22 1,600 - 1,600 Finance Company of Changchai 800 - 800 Hejun Venture Capital Co., Ltd. 11.72 33,000 - 33,000 Nanjing Hengtai Insurance and Broker Securities Co., Ltd. 1.85 1,000 - 1,000 Jiangsu HSBC Insurance Agents Limited 10.00 500 - 500 Yangdong Co., Ltd. 2,356 - 2,356

51,256 - 51,256 4. Operating ncome


Pump, injection and fittings 918,840 822,932

Income from other products 13,392 8,707

Other business income 97,693 72,651

1,029,925 904,290

5. Operating cost


Pump, injection and fittings 767,995 675,342

Income from other products 13,200 8,675

Other business income 109,556 64,771

890,751 748,788

6. Investment income


Investment income calculated 100,222 11,391

Bonus of subsidiaries calculated 69,417 80,738

Other bonus calculated based on － 960

169,639 93,089


第 63 页

7. Explanations on cash flow statement (1)Cash received arising from other operating activities amounted to RMB 26,153,073.56 which was the current fund received from subsidiaries and interest income of bank deposit (2) Cash paid for other operating activities amounted to RMB 41,683,641.47 which was paying the operation expense and administration expense; (3) Supplementary materials of cash flow statement

Items

Jan.-June,

2008

Jan.-June,

2007

I. Net profit subject to cash flow arising from operating

activities

Profit, net 159,463 120,023

Add: Provision for devaluation of asset 4,389 -176Fixed assets depreciation 36,240 34,377Allocations of intangible assets 341 332Allocations of long-term expenses to be allocated - -

Losses from disposal of fixed, intangible and other long-term

assets(Income is listed with “-”) 884 879

Losses from obsolete fixed assets(Income is listed with “-”) - -

Losses from changes of fair value(Income is listed with “-”) - -

Financial expenses 27,494 21,461

Losses from investment(Income is listed with “-”) -169,639 -93,089

Decrease of deferred income tax(Increase is listed with “-”) -543 311

Increase of deferred income tax( (Decrease is listed with “-”) - -

Decrease of inventory(Increase is listed with “-”) 56,447 12,807

Decrease of operating receivables(Increase is listed with “-”) -204,747 -212,164

Increase of operating payables(Decrease is listed with “-”) 228,070 27,595

Other - -

Net cash generated from operations 138,399 -87,644II. 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 129,571 138,774Less: Balance of cash at period-beginning 131,564 276,016Add: Balance of cash equivalent at period-end - -Less: Balance of cash equivalent at period-beginning - -Net increase in cash /cash equivalent -1,993 -137,242


第 64 页

(4) Constitution of cash and cash equivalents Items June 30, 2008 June 30, 2007

Cash balance listed in balance sheet 234,571 253,774Less: Guarantee of bank acceptance bill not conforming to the definition of cash 105,000 115,000Balance of cash and cash equivalents listed in cash flow statement 129,571 138,774

Note 9. The relationship of the related parties and transactions (Unit: RMB’ 000) 1. The related parties existing controlling relationship

Name of enterprise Registered address Core business

Relationship with the

CompanyEconomic type Legal

representative

Weifu Group Wuxi city Machine processing

Parent Company

Wholly owned by the state Xu Liangfei

Weifu Mashan Mashan,Wuxi i.c.engine components Subsidiary Company

Limited Gao Guoyuan

Weifu Jida Development District, Wuxi

Metal Nano-material Subsidiary Company

Limited Xu Liangfei

Weifu Chang’an Chang’an, Xishan

i.c.engine components Subsidiary Company

Limited Gao Guoyuan

Weifu Lida New District, Wuxi

Silencer, Catalytic converter Subsidiary Company

Limited Xu Liangfei

Weifu Narometer Huishan District, Wuxi

Nanometer Materials Subsidiary Company

Limited Xu Liangfei

Weifu Jingning Nanjing De elopment

Oil pump and oil mo th

Subsidiary Company Limited

Xu LiangfeiWeifu Diesel Oil System

New District, W i

i.c.engine components

Subsidiary Company Limited

Xu Liangfei

Weifu International Trade

New District, Wuxi

i.c.engine components Subsidiary Company

Limited Xu Liangfei

2. Registered capital of the related parties existing controlling relationship and the changes

Name of enterprise


beginning




end Weifu Group 134,830 - - 134,830 Weifu Mashan 45,000 - - 45,000 Weifu Jida 5,000 - - 5,000 Weifu Chang’an 60,000 - - 60,000 Weifu Lida 260,000 - - 260,000 Weifu Narometer 30,000 - - 30,000 Weifu Jingning 346,287 - - 346,287 Weifu Diesel Oil System 300,000 - - 300,000

Weifu International Trade 5,000 25,000 - 30,000


第 65 页

3. Share capital of the related parties existing controlling relationship and the changes


beginning

Amount in the periodEnd Name of

enterprises Amount %


Decrease in the

period Amount % Weifu Group 114,062 20.11 - - 114,062 20.11Weifu Mashan 45,000 100.00 - - 45,000 100.00Weifu Jida 3,500 70.00 - - 3,500 70.00Weifu Chang’an 60,000 100.00 - - 60,000 100.00Weifu Lida 246,500 94.81 - - 246,500 94.81Weifu Narometer 24,000 80.00 - - 24,000 80.00Weifu Jingning 277,029 80.00 - - 277,029 80.00Weifu Diesel Oil System 210,000 70.00 - - 210,000 70.00Weifu International Trade 2,250 45.00 25,000 - 27,250 90.83

4. The related parties existing joint controlling relationship

Name of enterprise

Registered address Main business Relationship with

the Company Economic type Legal

representative

Weifu Environmental

New district of

Wuxi Catalyst

Joint venture company of Weifu

Lida

Sino-foreign joint venture enterprise

Xu Liangfei

Weifu Autocam New

district of Wuxi

Spare parts of automobiles

Joint venture enterprise

Sino-foreign joint venture enterprise

Gao Guoyuan

Weifu Jialin Zhaoyang, Accessories of Joint venture Limited company Li Xiaofeng

5. Registered capital of the related parties existing joint controlling relationship and the changes

Name of enterprise


beginning



Amount in the period end

Weifu Environmental 50,000 - - 50,000

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 Name of

enterprises

Amount in the period beginning


end

Amount %


Decrease in the

period Amount % Weifu Environmental 24,500 49.00 - - 24,500 49.00Weifu Autocam USD3,000 50.00 USD2,000 - USD5,000 50.00


第 66 页

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 Precise Machinery Affiliated company

Wuxi Weifu Economic Trade Co., Ltd. The same parent company

Wuxi Weixin Machinery Co., Ltd. The same parent company

Kunming Xitong Machinery Co., Ltd. Joint venture company of Weifu Group

8. The transactions between the Company and the related parties (1) Purchase of commodities or labor force

Name of enterprises Jan.-June, 2008 Jan.-June, 2007 Weifu Group 18,282 1,811 Weifu Precise Machinery 66,392 69,887 Bosch Auto Diesel System 17,404 19,346 Wuxi Weifu Economic Trade Co., Ltd. 902 940 Weifu Jialin 13 － Weifu Autocam 51 －

(2) Sale of commodities

Name of enterprises Jan.-June, 2008 Jan.-June, 2007

Weifu Group 59,307 108,060 Weifu Precise Machinery 7,938 8,474 Bosch Auto Diesel System 68,406 56,553

Weifu Jialin 21,745 28,380

Wuxi Weifu Economic Trade Co.,

Ltd. 1,831 896

Kunming Xitong Machinery Co.,

Ltd. 29,589 32,703

Wuxi Weixin Machineray Co., Ltd. 8 － (3) Leasing fees, technological service fee, and Commission fees

Jan.-June, 2008 Jan.-June, 2007 Technological service fees for Bosch Diesel Oil System payable 3,023 3,000


第 67 页

Interest income for equipments of Weifu Autocam receivable 118 － Leasing fees for equipments of Weifu Autocam receivable － 52

(4) Purchase of fixed assets


Weifu Precise Machinery 2,972 － Weifu Group － 9,591

(5) Purchase of imported fixed assets as agency


Weifu Group 4,777 － (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:

Jan.-June, 2008 Jan.-June, 2007

Expenses for using land and trademark 3,755 2,861 Amount of guarantee for loans of the Company and subsidiaries 50,000 170,000

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.


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(7) Transactions between the Company, its subsidiary and its joint venture company-Weifu Environmental

Jan.-June, 2008 Jan.-June, 2007

Purchase commodities 68,424 43,640

Sell commodities, water and electricity, etc. 1,605 1,714

Transfer the using right of land － 17,414

9. The Balance of accounts receivable and payable of the related parties June 30, 2008 Dec.31, 2007

Accounts receivable:

Bosch Auto Diesel System － 31

Wuxi Weifu Economic Trade Co.,

Ltd.

566 497

Weifu Jialin 15,681 17,208

Kunming Xitong Machinery Co.,

Ltd.

8,274 15,302

Weifu Precise Machinery 198 －

Other account receivable:

Bosch Auto Diesel System 30,153 16,402

Weifu Autocam － 6,000

Weifu Precise Machinery － 9,316

Accounts payable:

Weifu Group － 1,167

Weifu Precise Machinery 422 408

Weifu Environmental 29,808 5

Bosch Auto Diesel System 19,003 15,986

Weifu International Trade Co.,

Ltd.

9 4

Other accounts payable:

Weifu Group － 130

Weifu Precise Machinery 3,303 －

Note 10. Contingencies Ended June 30, 2008, the Company and its subsidiaries have no significant contingent debts and losses. Note 11. Commitments Ended June 30, 2008, the Company and its subsidiaries have the following significant commitment:


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The Company and its subsidiaries need to pay RMB 103,210,000 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. The profit distribution 2007 had been accomplished on August 4, 2008. 2. Ende August 25, 2008, RMB 29,230,000 in notes payables had been paid.

Note 13. Non-recurring Gains and Losses (Unit:’0000)


1. Gains and losses arising from disposal of -425,048.12 4,635,046.16

2. Governmental subsidy written into current － 1,300,000.00

3. Other non-operating net amount of income and -1,359,587.10 -1,670,881.23

Less: Amount influenced by the income tax on -405,564.86 565,585.73

Less: Minor shareholders equity 6,877.75 1,251,745.47

Total -1,385,948.11 2,446,833.73

Note 14. Supplementary information Earnings per share and return on equity


Net profit attributable to the shareholders of

the common share of the Company(Unit: 127,253,068.96 94,719,973.43

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 0.22 0.17

Diluted proceedings －－

Diluted earnings per share 0.22 0.17

Fully diluted return on equity 5.04% 4.12%

Weighted average return on equity 5.16% 4.21%

Earnings per share and return on equity after deducting non-recurring


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Basic earnings per share 0.23 0.16

Diluted earnings per share 0.23 0.16

Fully diluted return on equity 5.09% 4.01%

Weighted average return on equity 5.22% 4.10%

Note 15. Other significant proceedings The Board of the Company agrees to hand out the 2008 Semi-anuual Report of the Company on August 25, 2008.

二 0 0 八年半年度报告 2008 Semi-annual Report · Net cash flow arising from operating...

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Transcript of 二 0 0 八 年 半 年 度 报 告 2008 Semi-annual Report · Net cash flow arising from operating...

二 0 0 八年半年度报告 2008 Semi-annual Report · Net cash flow arising from operating...

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