Weifu High-Technology Group Co., Ltd.

Transcription

1 Weifu High-Technology Group Co., Ltd. ANNUAL REPORT 2016 April

2 Section I. Important Notice, Contents and Paraphrase Board of Directors, Supervisory Committee, all directors, supervisors and senior executives of Weifu High-Technology Group Co., Ltd. (hereinafter referred to as the Company) hereby confirm that there are no any fictitious statements, misleading statements, or important omissions carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. Chen Xuejun, Principal of the Company, Ou Jianbin, person in charger of accounting works and Ou Jianbin, person in charge of accounting organ (accounting principal) hereby confirm that the Financial Report of 2016 Annual Report is authentic, accurate and complete. Other directors attending the Meeting for annual report deliberation except for the followed Name of director absent Title for absent director Reasons for absent Attorney Rudolf Maier Director On a business trip Chen Xuejun Chen Yudong Director On a business trip Chen Xuejun Concerning the forward-looking statements with future planning involved in the Report, they do not constitute a substantial commitment for investors. Investors should be cautious with investment risks. The Company described the risks that might occurred in the operation in the report IX- The Company s future development prospects of Section IV- Discussion and Analysis of the Operation and X. Risks with financial instrument concerned in Section XI. Financial Report, as well as the risk management policy the Company will take in order to reduce those risks. Investors should pay attention to relevant content. The China Securities Journal, Securities Times, Hong Kong Commercial Daily and Juchao Website are the information disclosure media appointed by the Company, all information should be prevail on the above mentioned media, investors are advice to pay attention on investment risks. The profit distribution plan that deliberated and approved by the Board is: based on total stock issue of 1,008,950,570, distributed 6.00 Yuan (tax included) bonus in cash for every 10-share hold by all shareholders, 0 shares bonus issued (tax included) and no capitalizing of common reserves carried out. 2

3 Contents Section I Important Notice, Contents and Paraphrase... 2 Section II Company Profile and Main Finnaical Indexes... 5 Section III Summary of Company Business... 9 Section IV Discussion and Analysis of Operation Section V Important Events Section VI Changes in shares and particular about shareholders Section VII Preferred Stock.53 Section VIII Particulars about Directors, Supervisors,Senior Executives and Employees Section IX Corporate Governance Section X Corporate Bond Section XI Financial Report Section XII Documents Available for Reference

4 Paraphrase Items Refers to Contents Company, The Company, Weifu High-technology Refers to Weifu High-Technology Group Co., Ltd. Weifu Group Refers to Wuxi Weifu Group Co., Ltd. Industry Group Refers to Wuxi Industry Development Group Co., Ltd. Robert Bosch, Robert Bosch Company Refers to Robert Bosch Co., Ltd., ROBERT BOSCH GMBH Bosch Automobile Diesel, Bosch Diesel System Refers to Bosch Automobile Diesel System Co., Ltd. Weifu Automotive Diesel Refers to Wuxi Weifu Automotive Diesel System Co., Ltd. Weifu Leader Refers to Wuxi Weifu Leader Catalytic Converter Co., Ltd. Weifu Jinning Refers to Nanjing Weifu Jinning Co., Ltd. Weifu Chang an Refers to Wuxi Weifu Chang an Co., Ltd. Weifu Mashan Refers to Weifu Mashan Pump Glib Co., Ltd. Weifu ITM Refers to Wuxi Weifu ITM Supercharging Technique Co., Ltd. Weifu Tianli Refers to Ningbo Weifu Tianli Supercharging Technique Co., Ltd. Weifu Schmidt Refers to Wuxi Weifu Schmidt Power System Spare Parts Co., Ltd. Weifu International Trade Refers to Wuxi Weifu International Trade Co. Ltd. Weifu Autocam Refers to Wuxi Weifu-Autocam Fine Machinery Co. Ltd. Weifu Environment Refers to Wuxi Weifu Environment Catalyst Co.,Ltd. Kunming Xitong Refers to Kunming Xitong Machinery Co., Ltd. Weifu Tianshi Refers to Anhui Weifu Tianshi Machinery Co., Ltd. Weifu Precision Machinery Refers to Weifu Precision Machinery Manufacturing Co., Ltd. Zhonglian Electronic Refers to Zhonglian Automobile Electronic Co., Ltd. Taiji Industrial Refers to Wuxi Taiji Industrial Co., Ltd. CSRC Refers to China Securities Regulatory Commission SZ Stock Exchange Refers to Shenzhen Stock Exchange Jiangsu Gongzheng Refers to Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd. (Special Ordinary Partnership) The reporting period Refers to From 1 Jan to 31 Dec

5 Section II Company Profile and Main Finnaical Indexes I. Company information Short form of the stock Weifu High- Tech, Su Weifu-B Stock code , Stock exchange for listing Shenzhen Stock Exchange Name of the Company (in 无锡威孚高科技集团股份有限公司 Chinese) Short form of the Company 威孚高科 (in Chinese) Foreign name of the Company WEIFU HIGH-TECHNOLOGY GROUP CO.,LTD. (if applicable) Short form of foreign name of WFHT the Company (if applicable) Legal representative Registrations add. Chen Xuejun No.5, Huashan Road, New District, Wuxi City Code for registrations add Offices add. No.5, Huashan Road, New District, Wuxi City Codes for office add Company s Internet Web Site weifu.com.cn II. Person/Way to contact Secretary of the Board Rep. of security affairs Name Zhou Weixing Yan Guohong Contact add. No.5, Huashan Road, New District, Wuxi City No.5, Huashan Road, New District, Wuxi City Tel Fax wfjt@public1.wx.js.cn wfjt@public1.wx.js.cn III. Information disclosure and preparation place Newspaper appointed for information disclosure Securities Times; China Securities Journal; Hong Kong Commercial Daily Website for annual report publish appointed by 5

6 CSRC Preparation place for annual report Office of the Board of Directors IV. Registration changes of the Company 组织机构代码 N Changes of main business since listing (if No change applicable) The Company s controlling shareholder was Weifu Group before 2009.The controlling shareholder changed to Industry Group from 31 st May 2009 because Previous changes for controlling shareholders Industry Group merged Weifu Group in 2009.Becasue both Weifu Group and (if applicable) Industry Group were wholly state-owned companies of Wuxi State-owned Assets Supervision & Administration Commission of State Council, which as actual controller had no changes. V. Other relevant information CPA engaged by the Company Name of CPA Offices add. for CPA Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd. (Special Ordinary Partnership) 10/F, No.5 Building, Jiakaicheng Fortune Center, Jingrong 3 rd Street, Taihu Xincheng, Binghu District, Wuxi, Jiangsu Province Signing Accountants Bo Lingjing, Meng Yin Sponsor engaged by the Company for performing continuous supervision duties in reporting period Applicable Not applicable Financial consultant engaged by the Company for performing continuous supervision duties in reporting period Applicable Not applicable VI. Main accounting data and financial indexes Whether it has retroactive adjustment or re-statement on previous accounting data for accounting policy changed and accounting error correction or not Yes No Changes over last year 2014 Operating income (RMB) 6,422,700, ,741,643, % 6,354,480, Net profit attributable to shareholders of the listed company(rmb) Net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses(rmb) Net cash flow arising from operating activities(rmb) 1,672,224, ,515,388, % 1,539,439, ,435,963, ,232,371, % 1,404,877, ,344, ,045, % 889,899,

7 Basic earnings per share (RMB/Share) Diluted earnings per share (RMB/Share) % % 1.51 Weighted average ROE 13.53% 13.32% 0.21% 15.05% End of 2016 End of 2015 Changes over end of last year End of 2014 Total assets (RMB) 17,263,771, ,704,093, % 14,488,589, Net assets attributable to shareholder 12,927,344, of listed company (RMB) 11,783,228, % 10,859,034, VII. Difference of the accounting data under accounting rules in and out of China 1. Difference of the net profit and net assets disclosed in financial report, under both IAS (International Accounting Standards) and Chinese GAAP (Generally Accepted Accounting Principles) Applicable Not applicable The Company had no difference of the net profit or net assets disclosed in financial report, under either IAS (International Accounting Standards) or Chinese GAAP (Generally Accepted Accounting Principles) in the period. 2. Difference of the net profit and net assets disclosed in financial report, under both foreign accounting rules and Chinese GAAP (Generally Accepted Accounting Principles) Applicable Not applicable The Company had no difference of the net profit or net assets disclosed in financial report, under either foreign accounting rules or Chinese GAAP (Generally Accepted Accounting Principles) in the period. VIII. Quarterly main financial index 1 st Q 2 nd Q 3 rd Q 4 th Q Operating income 1,533,288, ,833,187, ,522,896, ,533,327, Net profit attributable to shareholders of the listed company 405,471, ,097, ,126, ,529, Net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses Net cash flow arising from operating activities 331,616, ,016, ,178, ,152, ,831, ,709, ,521, ,282, Whether there are significant differences between the above-mentioned financial index or its total number and the relevant financial index disclosed in the company s quarterly report and semi-annual report Yes No 7

8 IX. Items and amounts of extraordinary profit (gains)/loss Applicable Not applicable Item Note Gains/losses from the disposal of non-current asset (including the write-off that accrued for impairment of assets) Governmental subsidy reckoned into current gains/losses (not including the subsidy enjoyed in quota or ration according to national standards, which are closely relevant to enterprise s business) Profit and loss of assets delegation on others investment or management Held transaction financial asset, gains/losses of changes of fair values from transaction financial liabilities, and investment gains from disposal of transaction financial asset, transaction financial liabilities and financial asset available for sales, exclude the effective hedging business relevant with normal operations of the Company Switch back of provision for depreciation of account receivable which was singly taken depreciation test Other non-operating income and expenditure except for the aforementioned items -6,229, ,835, ,283, Including government 43,963, ,227, subsidy income 170,915, received from relocation by policy 205,047, ,047, ,156, ,650, ,044, ,338, ,097, ,970, ,481, , ,049, Relocation expenses -57, ,257, ,174, Less: Impact on income tax 42,191, ,378, ,042, Impact on minority shareholders equity (post-tax) 2,742, , ,028, Total 236,260, ,016, ,561, Concerning the extraordinary profit (gain)/loss defined by Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, and the items defined as recurring profit (gain)/loss according to the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, explain reasons Applicable Not applicable In reporting period, the Company has no particular about items defined as recurring profit (gain)/loss according to the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss 8

9 Section III Summary of Company Business I. Main businesses of the company in the reporting period (I) Main business of the company 1. The company belongs to auto parts industry, and its main business products include diesel fuel injection system products, exhaust after-treatment system products and air management system products. 2. Main uses of the company's products (1) The diesel fuel injection system products are widely used in different power diesel engines supporting all types of trucks, passenger cars, buses, construction machinery, marine, farm machinery and generator sets. The company not only makes products matching with the main engines used at home but also exports some products to the Americas, Southeast Asia, and the Middle East. The products meet the needs of emission regulations of the national. (2) The exhaust after-treatment system products mainly support the major manufacturers of automobile, motorcycle and general machinery at home which meet the National emission standards. (3) The wheel diameter range of air management system products (supercharger) covers 30mm to 125mm whole series which matches with most of the domestic small-bore diesel engine plants and some six-cylinder diesel engine manufacturers and meet the needs of the light and heavy commercial vehicles and some passenger cars. The company has the vacuum valve control that meets the emission standards of Euro IV & Euro V, the electronically controlled variable geometry turbochargers, the titanium-aluminum alloy superchargers, the electric superchargers, the ceramic ball bearing superchargers and some kinds of gasoline engine turbochargers. 3. Business model of the company The company follows the operating philosophy of making competitive products, creating famous brands, striving for first choices, and creating value for the users, implements the business model that parent company unifies the management and subsidiaries decentralize the production. Namely, the group company is responsible for making strategic development planning and operation targets, and making the unified management, instruction and assessment for the finance, significant personnel management, core raw materials, quality control, and technology of the subsidiaries. The subsidiaries arrange production based on the order management model of market, which makes the subsidiaries keep the consistent quality with the company, helps keep abreast of customer needs and saving logistics costs, maintain the timeliness of products production and supply, and improve the company s economic benefits. During the reporting period, the company s main business and business model has no significant changes. (II) Development stage and periodic characteristics of the industry the company involves and the company's industry position during the reporting period The Company belongs to the industry of auto parts, which is closely related to macro-economic situations, auto industry policies and market demands. The Company has grown into one of key domestic enterprises for 9

10 providing core auto (power engineering) parts after more than 60 years of development, and has formed a distinct advantage within industry since it has always kept pace with the upgrading of national motor vehicle emission standards, been busy with strategic disposition and enhanced its technical reserves these years. The Company features a full line of diesel fuel injection systems as well as excellent exhaust gas after-treatment system technology. As a major provider for domestic self-owned motor after-treatment market, the Company takes a leading position in domestic market in terms of technical level, market size and production capability with high superiority in its integrated technology of catalyst and after-treatment system. The Company also has a full line of air intake systems (supercharger) and its technical strength is a lead in domestic market with the production in line with national emission standard. At present, the Company has finished the whole industry chain layout in terms of air intake system, diesel fuel injection system and exhaust gas after-treatment system, which is able to provide systematic integration solution for the customers, and it is also one of the companies which have the most complete product reserves and can satisfy the national emission standard. From the perspective of development history of Chinese auto market, it has stepped into a mature stage with stable growth after rapid growth in past decades of years, and the sales growth will be slowing down every year in future and the core technologies will be changing with each passing day. Nowadays, the problems regarding pollution and haze have become serious social issues concerned by the public, therefore, the government shall take a further step to strengthen the implement of emission regulation as well as the supervision and improvement on motor vehicle exhaust emissions, meanwhile, the government shall be dedicated to promote the development of new energy automobiles. In order to meet the upgrading requirements of emission regulation, the Company shall be planning research and development direction for new technologies, actively promoting the adjustment of product structures, accelerating to cultivate new growth point of sales, keeping enhancing competitive capacity, and building a new development pattern. II. Major changes in main assets 1. Major changes in main assets Major assets Note of major changes Equity assets Fixed assets Intangible assets Construction in progress No major change No major change No major change Amount at period-end has major decline over that of year beginning mainly because the new-built plant of Weifu Leader has turned into fixed assets 2. Main overseas assets Applicable Not applicable 10

11 III. Core Competitiveness Analysis The company is an important new high-tech enterprise of the National Torch Plan. Over the years, the company has been standing in the industry's leading position and possessing the obvious technological advantages by relying on the scientific research basis, such as "National Enterprise Technology Center", "Post-doctoral Research Center", "Graduate Research Center of Jiangsu Province", and "Achievement Industrialization Base of National High Technology Research and Development Plan". During the reporting period, centered on technology innovation and development strategies, taking technology innovation as a main line, management innovation as security and quality innovation and system innovation as comprehensive innovation mechanism, the Company has been constantly improving its core competitiveness in terms of basis, technical crafts and product innovation. The Company has taken the upgrading of three system products as a priority, accelerated to break through key technologies, and comprehensively improved system integration (service) capability; oriented by the customer requirement, the Company has also consolidated and expanded market positively to comprehensively improve its product market share; it also has attracted high quality talents with perfect incentive mechanism, intensified innovation incentive, optimized human resources management system, and enhanced executive force; the Company has taken increasing resource use efficiency as a goal, accelerated the integration of informatization and industrialization, strengthened the capability of allocation of enterprise element resources, focused on quality benefits, created technology quality cost comparative advantages so as to maintain stable enterprise development. Core competitiveness of the Company has no major changes in the Period 11

12 Section IV Discussion and Analysis of the Operation 1. Introduction (I) General introduction Under the influence of the purchase tax reduced by 50% in 2016, car market gets aormer greately with saels volume over the prediction at beginning of the Year. Production and sales of the vehicles in the whole year has a growth trends of steady rise overall. According to the numbers from CAAM: in 2016, the whole national has a production and sales of vehicle amounts of million and million repectively, a y-o-y growth 14.46% and 13.65%, including million and million respectively for passenger cars, with a 15.50% and 14.93% growth on a y-o-y basis, passenger cars is still the main driving force for the development of automotive industry. The Country put more investment in key areas in the Year, and increased spending on efforts of governance overload, as the continuse growth in logistic industry, the commercial vehicle, medium and heavy commercial vehicle in particular has a strong recovery, the declining tendency for two consecutive years in negative growth is over. Benefited from the stable growth of automobile market and the recovery of commercial vehicles, the Company has achieved a sound development in various businesses and all the economic indexes have exceeded the goals set at the beginning of the year. Fuel injection systems have seized the opportunity of non-road T3 emission upgrading to accelerate the expansion of non-road market and captured the market quickly; automotive common-rail high-pressure pump products have taken the market opportunities and achieved stable growth of sales at month-on-month basis, completed the tasks delivered by the customers with quantity and quality guaranteed; after-treatment systems have maintained a sound momentum of sales growth benefited from the implementation of national purchase tax halve policy and the increase of market share of Chinese brand passenger vehicles; the business of air intake systems (superchargers) has a good development momentum; diesel superchargers have seized key customers and its market share maintains stable growth; gas superchargers have been ready for bulk supply after preliminary technical development and customer authentication and will become a new highlight for development of auto core parts. Regarding the parts manufacture business, the Company has drastically boosted its production capacity with nearly zero-defect quality guaranteed, able to meet the delivery requirement. During the Period, the Company achieved operation revenue of 6423 million Yuan with a y-o-y growth of 11.86%; total profit amounting to 1819 million Yuan, a 9.32% growth on a y-o-y basis; total assets amounting to million Yuan, a 9.93% up from a year earlier; and the equity attributable to owners of parent company amounting to million Yuan, a 9.71% growth on a y-o-y basis. (II) Works implemented 1. The Company has continued to promote the construction of management accounting, further strengthened budget control; the Company also completed the preparation for building a group foreign currency cash pool, 12

13 made a plan for the business of purchasing and exchanging foreign currencies, reduced use cost of foreign currency and boosted capital efficiency. In 2016, the group has sound financial incomes by optimizing structure configuration of financial products. 2. The Company has carried out continuous improvement activities and in 2016, the employee participation rate has reached up to 80%. In the face of drastic growth of market demands and the increasing of customer delivery requirements of this year, the Company has taken an active role in efforts to production and quality control, maintained a good operation of the Company. Various indexes have reached the predetermined targets in the year of 2016, and the customer satisfaction has been enhanced drastically. At the same time, the company has introduced Q11 manufacturing principle in the group, also promoted to build one-in-one-out firewall for 22 core products, and strengthened employee training and internal mistake-proofing ability. 3. The Company has completed the online of second phase and the third phase of ERP project of the group, and the first phase of MES system has already been staged online for related business divisions. The first phase of SRM has been successfully online and the group supercomputing center has performed preliminary operation. 4. The Company has completed the reengineering audit for ERP-SAP flow for six modules of the related subsidiaries, which has lay a solid flow basis for the company blue print design; meanwhile, The Company has also followed up the operation of risk assets of various business divisions based on the actual, taken a further step to control risks. 5. The Company has continued to promote safety and environmental protection target-oriented responsibility system to build safety enterprise, introduced normalized management of ISO14001 environmental management system, completed the construction of safety production standardization system and safe environmental protection organization network, ensuring the effective operation and control of the whole system and providing guarantees for sustainable and stable operation and management. 6. The Company has further deepened talent development strategy and promoted medium and long term incentive mechanism. The Company has also strengthened the construction of human resources integration and internal recruitment deployment platform. The Company has focused on strategy development goal of the Company and optimized the structural adjustment of human resources, promoted potential talents cultivation mechanism and enhanced the promotion of core talents incentive and management mechanism, ensuring the Company will share the development result together with the employees and the employee income will be increased steadily. II. Main business analysis 1. Introduction See the I-Introduction in Discussion and Analysis of the Operation 13

14 2. Revenue and cost (1) Constitute of operation revenue Amount Ratio in operation Ratio in operation Amount revenue revenue Increase/decrease y-o-y Total operation revenue 6,422,700, % 5,741,643, % 11.86% According to industries Automobile parts 6,043,223, % 5,419,602, % 11.51% Other business 379,476, % 322,040, % 17.83% According to products Automobile fuel injection system 3,614,457, % 3,032,437, % 19.19% Intake system 256,544, % 213,835, % 19.97% Automotive post processing system 2,172,222, % 2,173,329, % -0.05% Other business 379,476, % 322,040, % 17.83% According to region Domestic sales 6,169,779, % 5,439,916, % 13.42% Foreign sales 252,921, % 301,727, % % (2) About the industries, products, or regions accounting for over 10% of the company s operating income or operating profit Applicable Not applicable Operating revenue Operating cost Gross profit ratio Increase/decrease of operating revenue y-o-y Increase/decrease of operating cost y-o-y Increase/decrease of gross profit ratio y-o-y According to industries Automobile parts 6,043,223, ,586,960, % 11.51% 11.16% 0.24% According to products 14

15 Automobile fuel injection system 3,614,457, ,567,980, % 19.19% 18.27% 0.55% Intake system 256,544, ,110, % 19.97% 22.12% -1.35% Automotive post processing system 2,172,222, ,821,869, % -0.05% 1.56% -1.33% According to region Domestic sales 6,169,779, ,334,912, % 20.55% 13.17% 4.59% Foreign sales 252,921, ,048, % % % -1.56% Under circumstances of adjustment in reporting period for statistic scope of main business data, adjusted main business based on latest one year s scope of period-end Applicable Not applicable (3) Income from physical sales larger than income from labors Yes No Industries Item Unit Increase/decrease y-o-y Fuel injection system multiple-piston pump Sales volume In 10 thousand units % Output In 10 thousand units % Storage In 10 thousand units % Sales volume In 10 thousand sets % Fuel injection system injector Output In 10 thousand sets % Storage In 10 thousand sets % After-treatment system purifier Sales volume In 10 thousand pieces % Output In 10 thousand pieces % Storage In 10 thousand pieces % Sales volume In 10 thousand units % Intake system turbocharger Output In 10 thousand units % Reasons for y-o-y relevant data with over 30% changes Storage In 10 thousand units % Applicable Not applicable 1 Fuel injection system--- multi-cylinder pumps have a greater growth benefited from the recovery growth of commercial vehicle market, which making the demands on automotive common-rail high pressure fuel pump increase. 2 After-treatment system--- air purifiers have a greater growth for the reason of implementing of national purchasing tax halve policy and the increase of market share of Chinese brand passenger vehicle market. 3 Air intake system---superchargers business have a sound development momentum, mainly because diesel 15

16 supercharger has seized the core customers and its market share has maintain stable growth. After technical development at first stage and client authentication, gas supercharger has been ready for bulk supply. (4) Fulfillment of the company s signed significant sales contracts up to this reporting period Applicable Not applicable (5) Constitute of operation cost Classification of industries and products Industries Item Amount Ratio in Ratio in Amount operation cost operation cost Increase/decrea se y-o-y Automobile parts Direct material 3,550,614, % 3,325,622, % 6.77% Automobile parts Labor cost 402,808, % 325,323, % 23.82% Automobile parts Depreciation 147,968, % 109,737, % 34.84% Automobile parts Varieties of consumption 485,568, % 365,847, % 32.72% Products Item Amount Ratio in Ratio in Amount operation cost operation cost Increase/decrea se y-o-y Fuel injection system Direct material 1,675,874, % 1,470,582, % 13.96% Fuel injection system Labor cost 322,019, % 269,811, % 19.35% Fuel injection system Depreciation 124,639, % 89,222, % 39.70% Fuel injection system Varieties of consumption 445,447, % 341,622, % 30.39% Intake system Direct material 158,681, % 128,381, % 23.60% Intake system Labor cost 16,853, % 14,425, % 16.83% Intake system Depreciation 11,497, % 10,834, % 6.12% Intake system Varieties of consumption 10,078, % 7,772, % 29.66% After-treatment system After-treatment system Direct material 1,716,058, % 1,723,291, % -0.42% Labor cost 63,936, % 41,085, % 55.62% After-treatment Depreciation 11,832, % 13,048, % -9.32% 16

17 system After-treatment system Varieties of consumption 30,042, % 16,452, % 82.60% (6) Whether the changes in the scope of consolidation in Reporting Period Yes No (7) Major changes or adjustment in business, product or service of the Company in Reporting Period Applicable Not applicable (8) Major sales and main suppliers Major sales client of the Company Total top five clients in sales (RMB) 2,675,185, Proportion in total annual sales volume for top five clients 41.64% Ratio of the related sales in total annual sales from top five clients 27.26% Information of top five clients of the Company Serial Name Sales (RMB) Proportion in total annual sales 1 Bosch Automobile Diesel 1,750,915, % 2 Client II 386,093, % 3 Client III 197,355, % 4 Client IV 183,886, % 5 Client V 156,934, % Total -- 2,675,185, % Other situation of main clients Applicable Not applicable The Company has association with Bosch Automobile Diesel, and directors, supervisors, senior executives, core technicians and actual controller of the Company have no equity in main clients directly or indirectly. Main suppliers of the Company Total purchase amount from top five suppliers (RMB) 1,535,707, Proportion in total annual purchase amount for top five suppliers 33.03% Ratio of the related purchase in total annual purchase amount from top five suppliers 25.21% 17

18 Information of top five suppliers of the Company Serial Suppliers Purchasing amount (RMB) Ratio in annual total purchasing amount 1 Weifu Environment 1,020,202, % 2 Supplier 1 158,394, % 3 Bosch Automobile Diesel 151,969, % 4 Supplier 2 110,590, % 5 Supplier 3 94,551, % Total -- 1,535,707, % Other notes of main suppliers of the Company Applicable Not applicable The Company has association with Weifu Environment and Bosch Automobile Diesel, and directors, supervisors, senior executives, core technicians and actual controller of the Company have no equity in main suppliers directly or indirectly. 3. Expenses Increase/decrease y-o-y Note of major changes Sales expense 213,304, ,586, % Management expense 797,426, ,534, % Financial expense -9,109, ,123, R&D investment Applicable Not applicable During the reporting period, the company focused on the enterprise technology innovation strategy and planning, adhered to the technological innovation, accelerated the research and development of key projects and products, put forth effort to improve the industrialization of new products, and enhanced new power for the enterprises development. The company made breakthroughs in the technological innovation fields, while actively expanded the research and development of high-pressure fuel injection system products in marine, agricultural machinery and other fields; the post-processing R & D products not only met the Guo V emission standards, but also gradually imported into the applications of Guo VI diesel vehicle projects; air intake products developed from diesel engine to gasoline engine, and gasoline engine supercharger technology and manufacturing level gradually became mature. The smooth implementation of these projects ensured the company's leading position in engine core components industry in the future. 18

19 R&D investment of the Company Change ratio Number of R&D (people) 1, % Ratio of number of R&D 20.79% 19.81% 0.98% R&D investment (Yuan) 319,386, ,087, % R&D investment accounted for R&D income 4.97% 5.00% -0.03% R&D investment capitalization (Yuan) % Capitalization R&D investment accounted for R&D investment 0.00% 0.00% 0.00% The reason of great changes in the proportion of total R&D investment accounted for operation income than last year Applicable Not applicable Reason for the great change in R&D investment capitalization rate and rational description Applicable Not applicable 5. Cash flow Item Y-o-y changes Subtotal of cash in-flow from operation activity 5,815,453, ,663,575, % Subtotal of cash out-flow from operation activity 5,288,109, ,121,530, % Net cash flow from operation activity 527,344, ,045, % Subtotal of cash in-flow from investment activity 11,296,028, ,362,967, % Subtotal of cash out-flow from investment activity 10,330,540, ,150,465, % Net cash flow from investment activity 965,488, ,212,502, % Subtotal of cash in-flow from financing activity 323,359, ,812, % Subtotal of cash out-flow from financing activity 1,062,028, ,425,273, % Net cash flow from financing activity -738,669, ,460, Net increased amount of cash and cash equivalent 754,908, ,012,087, % Main reasons for y-o-y major changes in aspect of relevant data Applicable Not applicable 1. Cash in/out flow from investment activity have a y-o-y growth, mainly because principal and interest of the entrust financial received in the Period and expenses for purchasing entrust financial increased on a y-o-y basis; 2. Subtotal of cash in-flow from financing activity decline from a year earlier, mainly because the short-term loans received in the Period declined on a y-o-y basis. 19

20 Reasons of major difference between the cash flow of operation activity in report period and net profit of the Company Applicable Not applicable Mainly due to the investment, and specific influencing factors found more in supplementary information of cash flow statement carried in Annotation of the Report. III. Analysis of the non-main business Applicable Not applicable Amount Ratio in total profit Note Whether be sustainable Investment income Income mainly form the two The company joint ventures Bosch joint ventures the Company Automobile Diesel and Zhonglian 1,377,945, % holding (Bosch Automobile Electronic production and operation was Diesel and Zhonglian stability, so the investment can be Electronic) sustained stable. Asset impairment 88,590, % Non-operating income Non-operating expense 50,617, % 10,328, % IV. Assets and liability 1. Major changes of assets composition End of 2016 End of 2015 Ratio in Ratio in Amount Amount total assets total assets Ratio changes Notes of major changes Monetary fund 3,969,674, % 3,274,679, % 2.14% Account receivable 1,324,703, % 1,261,163, % -0.36% Inventory 1,349,444, % 865,574, % Amount at period-end has major growth over that of period-begin 2.31% mainly due to the demand growth in market and stock up for spring festival Investment property 25,113, % 20,233, % 0.02% 20

21 Long-term equity investment 3,421,030, % 3,283,584, % -1.09% Fix assets 2,447,840, % 2,320,627, % -0.60% Construction in process 90,621, % 162,402, % Amount at period-end has major declined over that of period-begin -0.51% mainly due to the new-built plant from Weifu Leader has turned into fixed assets Short-term loans 150,000, % 360,000, % Amount at period-end has major declined over that of period-begin -1.42% mainly because the bank loans decreased for financing mode adjustment Long-term loans 60,000, % 0.35% 2. Assets and liability measured by fair value Applicable Not applicable Items Amount at the beginning period Changes of fair value gains/losses in this period Accumulative changes of fair value reckoned into equity Devaluatio Amount n of of withdrawi purchase ng in the in the period period Amount of sale in the period Amount in the end of period Financial assets 3. Available for sale financial assets Subtotal of financial assets 456,010, ,302, ,722, ,278, ,847, ,010, ,302, ,722, ,278, ,847, Above total 456,010, ,302, ,722, ,278, ,847, Financial liabilities Whether there have major changes on measurement attributes for main assets of the Company in report period or not Yes No 21

22 3. The assets rights restricted till end of the period Item Book value at period-end Restriction reason Monetary fundmonetary funds 439, Cash delosit paid for LC Monetary fundsmonetary fund 75,100, Cash deposit paid for bank acceptance Notes receivablenote receivable 23,180, Notes pledge for bank acceptance Total 98,719, V. Investment 1. Overall situation Applicable Not applicable 2. The major equity investment obtained in the reporting period Applicable Not applicable 3. The major non-equity investment doing in the reporting period Applicable Not applicable 4. Financial assets investment (1) Securities investment Applicable Not applicable 22

23 Short Code Variety form of of of securiti securities securit es ies Initial investment cost Accounti ng measure ment model Book value at the beginning of the period Changes in fair value of the current profit and loss Cumulative fair value changes in equity Current purchase amount Current sales amount Profit and loss in the Reporting Period Book value at the end of the period Accountin g subject Capita l Source Domestic Fair Financial and foreign value SDEC 199,208, measure 358,278, ,276, ,638, ,278, ,958, ,694, assets available Own funds stocks ments for sales Domestic Miracl Fair Financial and foreign e Logist value 69,331, measure 97,732, ,578, ,084, ,343, ,153, assets available Own funds stocks ics ments for sales Total 268,539, ,010, ,302, ,722, ,278, ,385, ,847, Disclosure date of securities investment approval of the Board Disclosure date of securities investment approval of the Shareholder Meeting (if applicable) (2) Derivative investment Applicable Not applicable The Company has no derivatives investment in the Period 23

24 5. Application of raised proceeds 无锡威孚高科技集团股份有限公司 2016 年年度报告全文 Applicable Not applicable (1)Overall application of raised proceeds Applicable Not applicable In 10 thousand Yuan Year Way Total raised capitals Total raised capital used in Period Total accumulative raised capitals used Total raised capital has purpose of uses changed in Period Cumulative raised capitals has purpose of uses changed in total Ratio of cumulative raised capitals has purpose of uses changed Total accumulativ e raised capitals unused Usage of the retained raised capitals and what is expected to invested with those capitals Raised capitals idle for more than two years 2012 Private placement No un-used raised fund 285, , , ,365 12, % 0 at end of the Period 0 Total , , , ,365 12, % Explanation on General usage of raised capital On 21 January 2012, the CSRC issued the reply on approving non-public issuance of Weifu High-technology Group Co., Ltd. (ZJXK(2012)No.109), pursuant to which, the Company was approved to issue new shares not exceeding 112,858,000 by non-public offering. On 10 February 2012, Jiangsu Gongzheng issued capital verification report (SGW(2012)No.B006), stating that as on 10 February 2012, Weifu High-tech has already issued 112,858,000 RMB common shares (A-share) and raised capital proceeds of RMB2,866,028, after deduction of issuance expense of RMB15,904,657.07, the net raise proceeds was RMB2,850,124, Relevant notice (Notice No.: and No.: ) has released on Juchao Website dated 1 Feb and 28 Feb respectively. On 26 March 2013 and 23 May, the Company holding a 9 th session of 7 th BOD and AGM of 2012 respectively, for deliberated and approved the Proposal of Change the Raised Fund Project Investment, mainly adjusted part of the content in industrialized projects of exhaust After-treatment system products. Relevant notice (Notice No.: , No.: and No.: ) have released on Juchao Website dated 28 March 2013 and 24 May 2013 respectively. On 21 April 2015 and 28 May, the Company holding a 21 st session of 7 th BOD and AGM of 2014 respectively, for deliberated and approved the Proposal of Adjusting Part of the Raised Fund Projects and Capacity and Change Part of the Raised Fund Project Investment, mainly adjusted the plans and capacity of R&D of WAPS and Industrialization and Parts Productivity 24

25 Improvement for Diesel Common Rail System and the Construction project in Industrial Park, change the project of R&D of Automotive Power Battery Materials and Power Battery. Relevant notice (Notice No.: , No.: and No.: ) have released on Juchao Website dated 23 April 2015 and 29 May 2015 respectively. On 15 April 2016, the Company holding a 5 th session of 8 th BOD for deliberated and approved the Proposal of Supplement Circulating Fund with the Remaining Raised Fund and Interest Permanently, the remaining raised fund and interest income are agreed to supplement working capital of the Company permanently. Relevant notice (Notice No.: and No.: ) have released on Juchao Website dated 19 April The raised fund project investment have completed till end of the Period, raised fund accumulated to RMB 2,850,124,300. (2) Situation of committed project of raised proceeds Applicable Not applicable In 10 thousand Yuan Committed investment projects &investment of raised fund Projects Total changed or not committed (including investment changed of raised partially) capitals Total investment after adjustment (1) Amount invested in this year Amount of accumulated investment till the year-end (2) Investment program till the year-end (3)=(2)/(1) Predicted serviceable condition date of project Profit achieved in this year Reach the predicted interest or not Project feasibility was changed hugely or not Investment project commitment R&D of WAPS, industrialization, productivity expansion of diesel common rail system parts Construction project in industrial zone Industrialization of After-treatment system Yes 62,032 59, , % , No No Yes 57,750 57,750 7, , % , Yes No Yes 26,000 26,000 26, % , No No Research institution project No 5,154 5,154 5, % Yes No R&D of Automotive Power Battery Materials and Power Battery Yes 10,000 0 No Yes Equity acquisition No 34, , , % , Yes No 25

26 Liquid assets supplementation No 90,000 89, , % Yes No Permanent liquid assets supplementation No 12,365 2,365 12, % Yes No Subtotal of commitment projects , , , , , Investment orientation for fund over-arising N/A Total , , , , , Situation about not coming up to schemed progress or expected revenue and the reason(in specific project) Explanation on great changes of feasibility of project Amount, usage and progress of using for fund raising out of the plan Change of implementation place of investment project of raised capitals Reasons for missing the schedule: i WAPS R&D and industrialization and production capacity improvement of diesel common rail system components The common rail technology route covered the entire Guo IV diesel engine for automobile market, resulting in the market demand for WAPS system not reaching expectation; the rise in raw material prices of the component of common rail products and the decline in sales prices affected the expected returns. ii Industrialization projects of automobile exhaust post-processing system products The fierce competition in diesel fuel market affected the product sales and prices and then affected the expected benefits. The Company changed the "automobile power battery materials and power battery research and development projects" to the permanent supplementary working capital, mainly because that this project still has a great deal of uncertainty in technical route at present and the investment scale is rather large, in order to prevent investment risks, the company has always been careful in the implementation of this project; in order to improve the use efficiency of raised funds and protect the interests of investors, the company changed the raised funds of this project to permanent supplementary working capital and invested all of them in the company's main business. But at the same time, the company continued to track the development of power batteries, continued to carry out the cooperation among production, study and research, and timely made investments with its own funds according to market changes. Not applicable Not applicable Adjustment of implementation way Applicable 26

27 for investment project of raised capitals 无锡威孚高科技集团股份有限公司 2016 年年度报告全文 Occurred in the Period The Company has completed the project investment of raised funds, remaining raised funds of RMB million for the WAPS research and development and industrialization and the production capacity improvement of diesel common rail system components. In order to improve the use efficiency of raised funds, reduce the company's financial expenses and maximize the interests of the company and shareholders, the company held the 5 th meeting of the 8th Board of Directors on April 15, 2016, considered and approved the company's Proposal on Using the Surplus Raised Funds and Interest Income to Permanently Replenish the Working Capital, and agreed the company to use the surplus raised funds and interest income to permanently replenish the working capital. Applicable Invested in pre-phases and replacement for raised fund projects Temporarily supplement for the current capitals with idle raised capitals Remaining raised fund and reasons from project implementation According to the Verification Report of Raised-Fund Project Invested in Advance with Self-raised Funds of WFHT (Su Gong W[2012] No. E1100) issued by Jiangsu Gongzheng Tianye Certified Public Accountants Co., Ltd. Up to 29 February 2012, the actual investment funding for fund-raised project invested in advance with self-raised funds amounting as million Yuan, including 1. R&D of WAPS, industrialization, productivity expansion of diesel common rail system parts: million Yuan; 2. construction project in industrial zone: million Yuan; 3. industrialization of tail treatment system: million Yuan; 4. research institution project: million Yuan; 5. Equity acquisition project: million Yuan. On 31 March 2012, the Proposal of Replacing the Working Capital Input to Projects by Raised Capital was deliberated and approved by 2 nd extraordinary meeting of 7 th session of the Board, agreed to replacing the working capital input to projects by raised capital with million Yuan. Not applicable Applicable 1.The Company has completed the project investment of raised funds. The surplus raised funds of RMB million were used for the WAPS research and development and industrialization and the production capacity improvement of diesel common rail system components. In the implementation process, based on the saving principle and ensuring the implementation effect of the project, this project strictly controlled the costs by strengthening the cost control, supervision and management, while implemented the resource sharing model to reduce the repeated investment, and thus reduced total expenditures for the project; 1. Since the implementation of the company s fund-raising project, the company took special account management for the raised funds, and the raised funds generated a certain interest income during the deposit; 3. On April 15, 2016, the 5 th meeting of the 8 th Board of Directors of the company considered and approved the Proposal on Using the Surplus Raised Funds and Interest Income to Permanently Replenish the Working Capital, and agreed the company to use the surplus raised funds and interest income to permanently replenish the working capital. 27