无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Weifu High-Technology Group Co., Ltd. Semi-Annual Financial Report 2018 August 2018 1 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Financial Report I. Audit report Whether the semi annual report is audited □ Yes √ No The company's semi annual financial report has not been audited. II. Financial statement Unit in note of financial statement refers to CNY: RMB (Yuan) 1. Consolidated balance sheet Prepared by Weifu High-Technology Group Co., Ltd 2018-6-30 In RMB Item Ending balance Opening balance Current assets: Monetary funds 3,042,709,775.25 3,118,709,412.83 Settlement provisions Capital lent Financial assets measured by fair value and with variation reckoned into current gains/losses Derivative financial assets Notes receivable 1,676,937,153.03 1,464,256,934.83 Accounts receivable 2,374,955,337.33 1,995,577,830.90 Account paid in advance 99,860,122.30 97,576,197.88 Insurance receivable Reinsurance receivables Contract reserve of reinsurance receivable Interest receivable 1,480,250.00 2,281,979.17 Dividends receivable 546,269,615.74 Other receivables 17,839,885.07 5,214,623.41 Purchase restituted finance asset Inventories 1,241,695,545.38 1,478,939,040.70 2 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Divided into assets held for sale Non-current assets due within one year Other current assets 4,586,279,800.73 3,887,997,290.53 Total current assets 13,588,027,484.83 12,050,553,310.25 Non-current assets: Loans and payments on behalf Available-for-sale financial assets 479,236,360.00 588,142,869.00 Held-to-maturity investments Long-term receivables Long-term equity investments 4,261,256,191.08 4,140,064,825.58 Investment property 22,761,528.91 23,544,830.78 Fixed assets 2,625,557,400.23 2,584,872,628.54 Construction in progress 195,609,102.08 100,345,461.28 Project materials Disposal of fixed assets Productive biological assets Oil and natural gas assets Intangible assets 332,886,731.99 340,632,143.36 Research and development costs Goodwill 1,784,086.79 1,784,086.79 Long-term deferred expenses 7,951,490.73 2,969,770.81 Deferred income tax assets 202,373,683.03 203,007,622.23 Other non-current assets 203,344,783.19 195,088,675.74 Total non-current assets 8,332,761,358.03 8,180,452,914.11 Total assets 21,920,788,842.86 20,231,006,224.36 Current liabilities: Short-term borrowings 359,000,000.00 243,000,000.00 Loan from central bank Absorbing deposit and interbank deposit Capital borrowed Financial liability measured by fair value and with variation reckoned into current gains/losses Derivative financial liability Notes payable 1,086,240,637.65 947,976,759.10 3 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Accounts payable 2,596,968,053.96 2,570,956,205.83 Accounts received in advance 38,744,126.90 42,820,236.07 Selling financial asset of repurchase Commission charge and commission payable Wage payable 272,784,575.15 327,778,677.29 Taxes payable 94,439,018.34 93,869,690.36 Interest payable 555,009.72 401,928.43 Dividend payable 1,210,740,700.00 Other accounts payable 65,356,662.87 62,937,940.90 Reinsurance payables Insurance contract reserve Security trading of agency Security sales of agency Liability held for sale Non-current liabilities due within one year 5,000,000.00 10,000,000.00 Other current liabilities Total current liabilities 5,729,828,784.59 4,299,741,437.98 Non-current liabilities: Long-term loans 45,000,000.00 45,000,000.00 Bonds payable Including: preferred stock Perpetual capital securities Long-term account payable 19,407,272.00 17,496,363.00 Long-term wages payable 30,448,132.88 30,448,132.88 Special accounts payable 18,265,082.11 18,265,082.11 Accrual liabilities Deferred income 439,544,262.06 451,281,721.77 Deferred income tax liabilities 7,062,415.26 17,406,622.39 Other non-current liabilities Total non-current liabilities 559,727,164.31 579,897,922.15 Total liabilities 6,289,555,948.90 4,879,639,360.13 Owners’ equity: Share capital 1,008,950,570.00 1,008,950,570.00 Other equity instrument 4 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Including: preferred stock Perpetual capital securities Capital reserve 3,416,016,805.42 3,417,841,402.89 Less: Inventory shares Other comprehensive income 28,866,874.66 87,169,455.01 Reasonable reserve 1,119,601.82 2,606.93 Surplus reserve 510,100,496.00 510,100,496.00 Provision of general risk Retained profit 10,146,111,143.84 9,811,609,138.92 Total owners’ equity attributable to parent company 15,111,165,491.74 14,835,673,669.75 Minority interests 520,067,402.22 515,693,194.48 Total owners’ equity 15,631,232,893.96 15,351,366,864.23 Total liabilities and owner’s equity 21,920,788,842.86 20,231,006,224.36 Legal Representative: Chen Xuejun Person in charge of accounting works: Ou Jianbin Person in charge of accounting institute: Ou Jianbin 2. Balance Sheet of Parent Company In RMB Item Ending balance Opening balance Current assets: Monetary funds 2,603,443,354.29 2,460,413,190.84 Financial assets measured by fair value and with variation reckoned into current gains/losses Derivative financial assets Notes receivable 418,685,069.60 449,209,323.02 Accounts receivable 1,003,118,142.78 1,047,012,889.92 Account paid in advance 58,841,677.78 52,269,971.38 Interest receivable 228,052.78 97,627.77 Dividends receivable 532,862,944.82 Other receivables 178,153,549.80 50,174,653.16 Inventories 386,390,243.97 425,577,163.53 Assets held for sale Non-current assets due within one year Other current assets 4,394,258,562.40 3,876,370,675.52 5 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Total current assets 9,575,981,598.22 8,361,125,495.14 Non-current assets: Available-for-sale financial assets 403,296,360.00 512,202,869.00 Held-to-maturity investments Long-term receivables Long-term equity investments 5,052,525,076.38 4,962,522,689.49 Investment property Fixed assets 1,560,811,227.67 1,567,315,925.73 Construction in progress 59,671,595.15 29,152,398.74 Project materials Disposal of fixed assets Productive biological assets Oil and natural gas assets Intangible assets 192,303,346.51 196,726,670.75 Research and development costs Goodwill Long-term deferred expenses Deferred income tax assets 114,410,983.88 114,706,976.54 Other non-current assets 103,943,087.63 80,866,308.04 Total non-current assets 7,486,961,677.22 7,463,493,838.29 Total assets 17,062,943,275.44 15,824,619,333.43 Current liabilities: Short-term borrowings 180,000,000.00 78,000,000.00 Financial liability measured by fair value and with variation reckoned into current gains/losses Derivative financial liability Notes payable 381,906,378.48 459,762,950.78 Accounts payable 965,506,741.66 1,082,206,882.07 Accounts received in advance 11,405,762.35 12,242,442.51 Wage payable 196,370,045.34 216,598,203.73 Taxes payable 66,402,908.98 71,370,793.35 Interest payable 292,055.55 93,777.78 Dividend payable 1,210,740,700.00 Other accounts payable 13,611,772.35 9,982,668.55 6 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Liability held for sale Non-current liabilities due within one year Other current liabilities Total current liabilities 3,026,236,364.71 1,930,257,718.77 Non-current liabilities: Long-term loans Bonds payable Including: preferred stock Perpetual capital securities Long-term account payable Long-term wages payable 16,665,236.81 16,665,236.81 Special accounts payable Accrual liabilities Deferred income 395,256,852.69 407,070,636.08 Deferred income tax liabilities 5,094,154.34 15,382,844.99 Other non-current liabilities Total non-current liabilities 417,016,243.84 439,118,717.88 Total liabilities 3,443,252,608.55 2,369,376,436.65 Owners’ equity: Share capital 1,008,950,570.00 1,008,950,570.00 Other equity instrument Including: preferred stock Perpetual capital securities Capital reserve 3,488,221,286.39 3,488,221,286.39 Less: Inventory shares Other comprehensive income 28,866,874.66 87,169,455.01 Reasonable reserve Surplus reserve 510,100,496.00 510,100,496.00 Retained profit 8,583,551,439.84 8,360,801,089.38 Total owners’ equity 13,619,690,666.89 13,455,242,896.78 Total liabilities and owner’s equity 17,062,943,275.44 15,824,619,333.43 7 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 3. Consolidated Profit Statement In RMB Item Current period Last Period I. Total operating income 4,960,801,890.99 4,728,125,599.02 Including: Operating income 4,960,801,890.99 4,728,125,599.02 Interest income Insurance gained Commission charge and commission income II. Total operating cost 4,446,134,584.97 4,235,672,796.49 Including: Operating cost 3,889,590,289.69 3,736,290,938.86 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 38,000,352.40 37,862,282.48 Sales expenses 106,347,559.85 71,559,262.66 Administration expenses 413,983,378.78 399,568,734.73 Financial expenses -1,776,908.37 1,688,051.32 Losses of devaluation of asset -10,087.38 -11,296,473.56 Add: Changing income of fair value(Loss is listed with “-”) Investment income (Loss is listed with “-”) 1,149,033,168.39 955,437,915.36 Including: Investment income on affiliated company and joint 968,640,145.91 833,565,520.64 venture Exchange income (Loss is listed with “-”) Income from assets disposal(Loss is listed with “-”) 1,588,185.36 -125,780.60 Other income 14,032,459.71 15,608,007.28 III. Operating profit (Loss is listed with “-”) 1,679,321,119.48 1,463,372,944.57 Add: Non-operating income 3,881,128.87 2,784,579.48 Less: Non-operating expense 2,327,872.38 3,764,224.66 IV. Total Profit (Loss is listed with “-”) 1,680,874,375.97 1,462,393,299.39 Less: Income tax expense 102,927,297.96 94,025,933.36 8 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 V. Net profit (Net loss is listed with “-”) 1,577,947,078.01 1,368,367,366.03 (i) Net profit of continuous operating (Net loss is listed with “-”) 1,577,947,078.01 1,368,367,366.03 (ii) Net profit of business termination (Net loss is listed with “-”) Net profit attributable to owners of parent company 1,545,242,704.92 1,325,922,029.56 Minority shareholders’ gains and losses 32,704,373.09 42,445,336.47 VI. Net after-tax of other comprehensive income -58,302,580.35 -39,797,212.50 Net after-tax of other comprehensive income attributable to owners -58,302,580.35 -39,797,212.50 of parent company (I) Other comprehensive income items which will not be reclassified subsequently to profit of loss 1. Changes as a result of re-measurement of net defined benefit plan liability or asset 2. Share of the other comprehensive income of the investee accounted for using equity method which will not be reclassified subsequently to profit and loss (II) Other comprehensive income items which will be reclassified -58,302,580.35 -39,797,212.50 subsequently to profit or loss 1. Share of the other comprehensive income of the investee accounted for using equity method which will be reclassified subsequently to profit or loss 2. Gains or losses arising from changes in fair value of -58,302,580.35 -39,797,212.50 available-for-sale financial assets 3. Gains or losses arising from reclassification of held-to-maturity investment as available-for-sale financial assets 4. The effect hedging portion of gains or losses arising from cash flow hedging instruments 5. Translation differences arising on translation of foreign currency financial statements 6.Other Net after-tax of other comprehensive income attributable to minority shareholders VII. Total comprehensive income 1,519,644,497.66 1,328,570,153.53 Total comprehensive income attributable to owners of parent 1,486,940,124.57 1,286,124,817.06 Company Total comprehensive income attributable to minority shareholders 32,704,373.09 42,445,336.47 VIII. Earnings per share: (i) Basic earnings per share 1.53 1.31 (ii) Diluted earnings per share 1.53 1.31 9 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Enterprise combine under the same control in the Period, the combined party realized net profit of 0 Yuan before combination, and realized 0 Yuan at last period for combined party Legal Representative: Chen Xuejun Person in charge of accounting works: Ou Jianbin Person in charge of accounting institute: Ou Jianbin 4. Profit Statement of Parent Company In RMB Item Current period Last Period I. Operating income 2,315,142,655.13 1,626,480,415.71 Less: Operating cost 1,698,516,522.90 1,268,622,661.58 Operating tax and extras 20,760,852.64 14,826,758.76 Sales expenses 17,030,807.96 13,791,093.39 Administration expenses 216,259,763.11 184,157,736.45 Financial expenses -5,330,079.95 -346,977.87 Losses of devaluation of asset 468,622.39 48,394.70 Add: Changing income of fair value(Loss is listed with “-”) Investment income (Loss is listed with “-”) 1,137,350,229.02 1,830,767,022.75 Including: Investment income on affiliated company and 894,788,126.54 767,309,765.64 joint venture Income from assets disposal(Loss is listed with “-”) 698,843.73 -143,090.25 Other income 11,813,783.39 13,915,329.88 II. Operating profit (Loss is listed with “-”) 1,517,299,022.22 1,989,920,011.08 Add: Non-operating income 26,550.35 244,259.65 Less: Non-operating expense 989,892.95 2,088,732.14 III. Total Profit (Loss is listed with “-”) 1,516,335,679.62 1,988,075,538.59 Less: Income tax expense 82,844,629.16 47,444,108.88 IV. Net profit (Net loss is listed with “-”) 1,433,491,050.46 1,940,631,429.71 (i) Net profit of continuous operating (Net loss is listed with “-”) 1,433,491,050.46 1,940,631,429.71 (ii) Net profit of business termination (Net loss is listed with “-”) V. Net after-tax of other comprehensive income -58,302,580.35 -39,797,212.50 (I) Other comprehensive income items which will not be reclassified subsequently to profit of loss 1. Changes as a result of re-measurement of net defined benefit plan liability or asset 2. Share of the other comprehensive income of the investee 10 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 accounted for using equity method which will not be reclassified subsequently to profit and loss (II) Other comprehensive income items which will be -58,302,580.35 -39,797,212.50 reclassified subsequently to profit or loss 1. Share of the other comprehensive income of the investee accounted for using equity method which will be reclassified subsequently to profit or loss 2. Gains or losses arising from changes in fair value of -58,302,580.35 -39,797,212.50 available-for-sale financial assets 3. Gains or losses arising from reclassification of held-to-maturity investment as available-for-sale financial assets 4. The effect hedging portion of gains or losses arising from cash flow hedging instruments 5. Translation differences arising on translation of foreign currency financial statements 6.Other VI. Total comprehensive income 1,375,188,470.11 1,900,834,217.21 VII. Earnings per share: (i) Basic earnings per share (ii) Diluted earnings per share 5. Consolidated Cash Flow Statement In RMB Item Current period Last Period I. Cash flows arising from operating activities: Cash received from selling commodities and providing labor 4,321,753,642.57 3,437,449,626.28 services Net increase of customer deposit and interbank deposit Net increase of loan from central bank Net increase of capital borrowed from other financial institution Cash received from original insurance contract fee Net cash received from reinsurance business Net increase of insured savings and investment Net increase of amount from disposal financial assets that measured by fair value and with variation reckoned into current gains/losses 11 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Cash received from interest, commission charge and commission Net increase of capital borrowed Net increase of returned business capital Write-back of tax received 28,784,608.45 22,168,009.92 Other cash received concerning operating activities 20,879,944.10 19,713,087.22 Subtotal of cash inflow arising from operating activities 4,371,418,195.12 3,479,330,723.42 Cash paid for purchasing commodities and receiving labor 2,812,244,020.34 2,032,254,137.91 service Net increase of customer loans and advances Net increase of deposits in central bank and interbank Cash paid for original insurance contract compensation Cash paid for interest, commission charge and commission Cash paid for bonus of guarantee slip Cash paid to/for staff and workers 683,701,600.44 614,817,453.84 Taxes paid 342,578,412.02 325,770,301.21 Other cash paid concerning operating activities 153,970,471.84 154,087,588.94 Subtotal of cash outflow arising from operating activities 3,992,494,504.64 3,126,929,481.90 Net cash flows arising from operating activities 378,923,690.48 352,401,241.52 II. Cash flows arising from investing activities: Cash received from recovering investment 5,361,095,457.96 3,091,512,477.03 Cash received from investment income 463,686,171.47 430,252,079.05 Net cash received from disposal of fixed, intangible and other 39,773,802.87 53,235,402.65 long-term assets Net cash received from disposal of subsidiaries and other units Other cash received concerning investing activities Subtotal of cash inflow from investing activities 5,864,555,432.30 3,574,999,958.73 Cash paid for purchasing fixed, intangible and other long-term 362,947,568.87 212,687,557.71 assets Cash paid for investment 6,084,063,284.96 5,925,993,243.66 Net increase of mortgaged loans Net cash received from subsidiaries and other units Other cash paid concerning investing activities 10,000,000.00 Subtotal of cash outflow from investing activities 6,457,010,853.83 6,138,680,801.37 12 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Net cash flows arising from investing activities -592,455,421.53 -2,563,680,842.64 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 330,000,000.00 185,000,000.00 Cash received from issuing bonds Other cash received concerning financing activities 5,470,000.00 Subtotal of cash inflow from financing activities 335,470,000.00 185,000,000.00 Cash paid for settling debts 219,000,000.00 152,500,000.00 Cash paid for dividend and profit distributing or interest 9,337,888.74 17,164,736.59 paying Including: Dividend and profit of minority shareholder paid by 174,600.00 11,958,920.00 subsidiaries Other cash paid concerning financing activities 339,091.00 1,049,711.28 Subtotal of cash outflow from financing activities 228,676,979.74 170,714,447.87 Net cash flows arising from financing activities 106,793,020.26 14,285,552.13 IV. Influence on cash and cash equivalents due to fluctuation in 810,171.83 -3,018,810.88 exchange rate V. Net increase of cash and cash equivalents -105,928,538.96 -2,200,012,859.87 Add: Balance of cash and cash equivalents at the period-begin 2,948,439,354.22 3,795,223,678.11 VI. Balance of cash and cash equivalents at the period-end 2,842,510,815.26 1,595,210,818.24 6. Cash Flow Statement of Parent Company In RMB Item Current period Last Period I. Cash flows arising from operating activities: Cash received from selling commodities and providing labor 2,707,966,926.41 1,138,848,252.21 services Write-back of tax received Other cash received concerning operating activities 9,047,393.86 505,652,991.97 Subtotal of cash inflow arising from operating activities 2,717,014,320.27 1,644,501,244.18 Cash paid for purchasing commodities and receiving labor 1,572,426,004.69 707,951,478.67 service Cash paid to/for staff and workers 361,672,047.87 277,978,923.53 13 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Taxes paid 242,573,191.33 133,461,523.26 Other cash paid concerning operating activities 142,557,335.52 168,294,750.99 Subtotal of cash outflow arising from operating activities 2,319,228,579.41 1,287,686,676.45 Net cash flows arising from operating activities 397,785,740.86 356,814,567.73 II. Cash flows arising from investing activities: Cash received from recovering investment 5,174,745,373.00 2,974,601,492.00 Cash received from investment income 450,095,688.15 1,365,386,425.45 Net cash received from disposal of fixed, intangible and other 38,214,564.65 52,252,940.94 long-term assets Net cash received from disposal of subsidiaries and other units 2,410,502.57 Other cash received concerning investing activities Subtotal of cash inflow from investing activities 5,663,055,625.80 4,394,651,360.96 Cash paid for purchasing fixed, intangible and other long-term 187,935,182.03 61,095,071.88 assets Cash paid for investment 5,687,713,200.00 5,617,929,258.63 Net cash received from subsidiaries and other units Other cash paid concerning investing activities 173,000,000.00 Subtotal of cash outflow from investing activities 6,048,648,382.03 5,679,024,330.51 Net cash flows arising from investing activities -385,592,756.23 -1,284,372,969.55 III. Cash flows arising from financing activities Cash received from absorbing investment Cash received from loans 180,000,000.00 80,000,000.00 Cash received from issuing bonds Other cash received concerning financing activities Subtotal of cash inflow from financing activities 180,000,000.00 80,000,000.00 Cash paid for settling debts 78,000,000.00 80,000,000.00 Cash paid for dividend and profit distributing or interest paying 3,391,380.55 1,637,133.32 Other cash paid concerning financing activities Subtotal of cash outflow from financing activities 81,391,380.55 81,637,133.32 Net cash flows arising from financing activities 98,608,619.45 -1,637,133.32 IV. Influence on cash and cash equivalents due to fluctuation in 761,175.27 -3,018,810.88 exchange rate V. Net increase of cash and cash equivalents 111,562,779.35 -932,214,346.02 Add: Balance of cash and cash equivalents at the period -begin 2,454,696,969.20 2,143,377,059.99 VI. Balance of cash and cash equivalents at the period-end 2,566,259,748.55 1,211,162,713.97 14 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 7. Statement of Changes in Owners’ Equity (Consolidated) Amount for current period In RMB Current period Owners’ equity attributable to parent company Other Provisio Item Minority Total owners’ equity instrument Less: Other Surplus n of Reasonable interests equity Share capital Capital reserve Inventor comprehensiv Retained profit Perpetual reserve reserve general Preferre Oth y shares e income capital d stock er risk securities I. Balance at 1,008,950,570.0 3,417,841,402.8 510,100,496.0 515,693,194.4 15,351,366,864.2 the end of the 87,169,455.01 2,606.93 9,811,609,138.92 0 9 0 8 3 last year Add: Changes of accounting policy Error correction of the last period Enterpris e combine under the same control Other II. Balance at 1,008,950,570.0 3,417,841,402.8 510,100,496.0 515,693,194.4 15,351,366,864.2 87,169,455.01 2,606.93 9,811,609,138.92 the beginning 0 9 0 8 3 15 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 of this year III. Increase/ Decrease in this year -58,302,580.3 -1,824,597.47 1,116,994.89 334,502,004.92 4,374,207.74 279,866,029.73 (Decrease is 5 listed with “-”) (i) Total -58,302,580.3 comprehensiv 1,545,242,704.92 32,704,373.09 1,519,644,497.66 5 e income (ii) Owners’ devoted and -12,945,402.5 -1,824,597.47 -14,770,000.00 decreased 3 capital 1.Common shares -12,945,402.5 -12,945,402.53 invested by 3 shareholders 2. Capital invested by holders of other equity instruments 3. Amount reckoned into owners equity with share-based 16 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 payment 4. Other -1,824,597.47 -1,824,597.47 (III) Profit -1,210,740,700.0 -15,604,600.0 -1,226,345,300.0 distribution 0 0 0 1. Withdrawal of surplus reserves 2. Withdrawal of general risk provisions 3. Distribution -1,210,740,700.0 -15,604,600.0 -1,226,345,300.0 for owners (or 0 0 0 shareholders) 4. Other (IV) Carrying forward internal owners’ equity 1. Capital reserves conversed to capital (share capital) 2. Surplus reserves conversed to 17 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 capital (share capital) 3. Remedying loss with surplus reserve 4. Other (V) Reasonable 1,116,994.89 219,837.18 1,336,832.07 reserve 1. Withdrawal 10,050,468.8 in the report 1,395,689.84 11,446,158.69 5 period 2. Usage in the report 8,933,473.96 1,175,852.66 10,109,326.62 period (VI)Others IV. Balance at 1,008,950,570.0 3,416,016,805.4 510,100,496.0 10,146,111,143.8 520,067,402.2 15,631,232,893.9 the end of the 28,866,874.66 1,119,601.82 0 2 0 4 2 6 report period 18 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Amount for last year In RMB Last period Owners’ equity attributable to parent company Other equity instrument Prov Less Pe ision Item : Minority rp etu Inve Other of Total owners’ equity Reasonable interests Share capital Pr Capital reserve ntor comprehensive Surplus reserve Retained profit al reserve gene efe y income ca Ot rre shar ral pit he d es al r risk sto se ck cu riti es I. Balance at the end 1,008,950,570.00 3,417,841,402.89 144,722,827.51 89,005.19 510,100,496.00 7,845,639,990.88 471,086,098.05 13,398,430,390.52 of the last year Add: Changes of accounting policy Error correction of the last period Enterprise combine under the same control Other II. Balance at the beginning of this 1,008,950,570.00 3,417,841,402.89 144,722,827.51 89,005.19 510,100,496.00 7,845,639,990.88 471,086,098.05 13,398,430,390.52 year 19 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 III. Increase/ Decrease in this year -57,553,372.50 -86,398.26 1,965,969,148.04 44,607,096.43 1,952,936,473.71 (Decrease is listed with “-”) (i) Total comprehensive -57,553,372.50 2,571,339,490.04 75,870,434.54 2,589,656,552.08 income (ii) Owners’ devoted and 8,480,761.72 8,480,761.72 decreased capital 1.Common shares invested by 9,520,000.00 9,520,000.00 shareholders 2. Capital invested by holders of other equity instruments 3. Amount reckoned into owners equity with share-based payment 4. Other -1,039,238.28 -1,039,238.28 (III) Profit -605,370,342.00 -39,650,290.00 -645,020,632.00 distribution 1. Withdrawal of surplus reserves 2. Withdrawal of general risk 20 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 provisions 3. Distribution for owners (or -605,370,342.00 -39,650,290.00 -645,020,632.00 shareholders) 4. Other (IV) 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 surplus reserve 4. Other (V) Reasonable -86,398.26 -93,809.83 -180,208.09 reserve 1. Withdrawal in the 17,947,661.67 2,379,810.36 20,327,472.03 report period 2. Usage in the 18,034,059.93 2,473,620.19 20,507,680.12 report period (VI)Others IV. Balance at the end of the report 1,008,950,570.00 3,417,841,402.89 87,169,455.01 2,606.93 510,100,496.00 9,811,609,138.92 515,693,194.48 15,351,366,864.23 period 21 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 8. Statement of Changes in Owners’ Equity (Parent Company) Amount for current period In RMB Current period Other equity instrument Less : Pe rp Inve Other Item etu Reasonable Share capital Pr Capital reserve ntor comprehensiv Surplus reserve Retained profit Total owners’ equity al reserve efe ca Ot y e income rre pit he d shar al r sto se es ck cu riti es I. Balance at the end of the last year 1,008,950,570.00 3,488,221,286.39 87,169,455.01 510,100,496.00 8,360,801,089.38 13,455,242,896.78 Add: Changes of accounting policy Error correction of the last period Other II. Balance at the beginning of this year 1,008,950,570.00 3,488,221,286.39 87,169,455.01 510,100,496.00 8,360,801,089.38 13,455,242,896.78 III. Increase/ Decrease in this year -58,302,580.3 222,750,350.46 164,447,770.11 (Decrease is listed with “-”) 5 -58,302,580.3 (i) Total comprehensive income 1,433,491,050.46 1,375,188,470.11 5 (ii) Owners’ devoted and decreased capital 22 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 1.Common shares invested by shareholders 2. Capital invested by holders of other equity instruments 3. Amount reckoned into owners equity with share-based payment 4. Other (III) Profit distribution -1,210,740,700.00 -1,210,740,700.00 1. Withdrawal of surplus reserves 2. Distribution for owners (or -1,210,740,700.00 -1,210,740,700.00 shareholders) 3. Other (IV) 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 surplus reserve 4. Other (V) Reasonable reserve 1. Withdrawal in the report period 3,751,960.66 3,751,960.66 2. Usage in the report period 3,751,960.66 3,751,960.66 (VI)Others IV. Balance at the end of the report period 1,008,950,570.00 3,488,221,286.39 28,866,874.66 510,100,496.00 8,583,551,439.84 13,619,690,666.89 23 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Amount for last year In RMB Last period Other equity Less instrument : Perp Inve Other Item Pr etua Reasonable Share capital efe l Capital reserve ntor comprehensive Surplus reserve Retained profit Total owners’ equity reserve rre capi Ot y income d tal her sto secu shar ck ritie es s I. Balance at the end of the last year 1,008,950,570.00 3,448,408,786.39 144,722,827.51 510,100,496.00 5,525,644,079.79 10,637,826,759.69 Add: Changes of accounting policy Error correction of the last period Other II. Balance at the beginning of this year 1,008,950,570.00 3,448,408,786.39 144,722,827.51 510,100,496.00 5,525,644,079.79 10,637,826,759.69 III. Increase/ Decrease in this year 39,812,500.00 -57,553,372.50 2,835,157,009.59 2,817,416,137.09 (Decrease is listed with “-”) (i) Total comprehensive income -57,553,372.50 3,001,267,943.68 2,943,714,571.18 (ii) Owners’ devoted and decreased capital 1.Common shares invested by shareholders 2. Capital invested by holders of other equity instruments 3. Amount reckoned into owners equity with share-based payment 24 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 4. Other (III) Profit distribution -605,370,342.00 -605,370,342.00 1. Withdrawal of surplus reserves 2. Distribution for owners (or -605,370,342.00 -605,370,342.00 shareholders) 3. Other (IV) 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 surplus reserve 4. Other (V) Reasonable reserve 1. Withdrawal in the report period 4,785,959.00 4,785,959.00 2. Usage in the report period 4,785,959.00 4,785,959.00 (VI)Others 39,812,500.00 439,259,407.91 479,071,907.91 IV. Balance at the end of the report period 1,008,950,570.00 3,488,221,286.39 87,169,455.01 510,100,496.00 8,360,801,089.38 13,455,242,896.78 25 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 I I I . Basic information of the Company 1. Historical origin of the Company By the approval of STGS (1992) No. 130 issued by Jiangsu Economic Restructuring Committee, Weifu High-Technology Group Co., Ltd. (hereinafter referred to “the Company” or “Company”) 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. Between year of 1994 and 1995, the Company was restructured and became a holding subsidiary of Wuxi Weifu Group Co., Ltd (hereinafter referred to as “Weifu Group”). By the approval of Jiangsu ERC and Shenzhen Securities Administration Office in August 1995, the Company issued 68 million special ordinary shares (B-share) with value of RMB 1.00 for each, 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. 26 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 According to the Share Merger Reform Scheme of the Company that passed by related shareholders’ meeting of Share Merger Reform and SGZF [2006] No.61 Reply on Questions about State-owned Equity Management in Share Merger Reform of Weifu High-Technology Co., Ltd. issued by State-owned Assets Supervision & Administration Commission of Jiangsu Province, the Weifu Group etc. 8 non-circulating shareholders arranged pricing with granting 1.7 shares for each 10 shares to circulating A-share shareholders (totally granted 47,736,000 shares), so as to realize the originally non-circulating shares can be traded on market when satisfied certain conditions, the scheme has been implemented on April 5, 2006. On 27 May 2009, Weifu Group satisfied the consideration arrangement by dispatching 0.5 shares for each 10 shares based on the number of circulating A share as prior to Share Merger Reform, according to the aforesaid Share Merger Reform, with an aggregate of 14,039,979 shares dispatched. Subsequent to implementation of dispatch of consideration shares, Weifu Group then held 100,021,999 shares of the Company, representing 17.63% of the total share capital of the Company. Pursuant to the document (XGZQ(2009)No.46) about “Approval for Merger of Wuxi Weifu Group Co., Ltd. by Wuxi Industry Development Group Co., Ltd.” issued by the State-owned Assets Supervision and Administration Commission of Wuxi City Government, Wuxi Industry Development Group Co., Ltd. (hereinafter referred to as Wuxi Industry Group) acquired Weifu Group. After the merger, Weifu Group was then revoked, and its assets and credits & debts were transferred to be under the name of Wuxi Industry Group. Accordingly, Wuxi Industry Group became the first largest shareholder of the Company since then. In accordance with the resolutions of shareholders' meeting and provisions of amended constitution, and approved by [2012] No. 109 document of China Securities Regulatory Commission, in Feb., the Company issued RMB ordinary shares (A-share) of 112,858,000 shares to Wuxi Industry Groups and overseas strategic investor, ROBERT BOSCH GMBH (hereinafter referred to as Germany BOSCH), face value was RMB 1 Yuan per share, added registered capital of RMB112,858,000 Yuan , and the registered capital after change was RMB 680,133,995 Yuan. Wuxi Industry Group is the first majority shareholder of the Company, and Germany BOSCH is the second majority shareholder of the Company. In March 2013, the profit distribution pre-plan for year of 2012 was deliberated and approved by the Board, and also passed in Annual General Meeting 2012 of the Company in May 2013. On basis of total share capital 680,133,995 shares, distribute 5-share for every 10 shares held by whole shareholders, 340,066,997 shares in total are distributed. Total share capital of the Company amounting RMB 1,020,200,992 up to 31 December 2013. Deliberated and approved by the company’s first extraordinary general meeting in 2015, the company has repurchased 11,250,422 shares of A shares from August 26, 2015 to September 8, 2015, and has finished the cancellation procedures for above repurchase shares in China Securities Depository and Clearing Corporation Limited Shenzhen Branch on September 16, 2015; after the cancellation of repurchase shares, the company’s paid-up capital (capital) becomes RMB 1,008,950,570 Yuan after the change. 27 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 2. Registered place, organization structure and head office of the Company Registered place and head office of the Company: No. 5 Huashan Road, New District, Wuxi Unified social credit code: 91320200250456967N The Company sets up Shareholders’ General Meeting, the Board of Directors and the Supervisory Committee. The Company sets up Administration Department, Technology Centre, organization & personnel department, Office of the Board, compliance department, IT department, Market & Strategy Department, Party-masses Department, Finance Department, Purchase Department, Manufacturing Quality Department, MS (Mechanical System) division, AC(Auto spare parts) division and DS (Diesel System ) division etc. and subsidiaries such as Wuxi Weifu Leader Catalytic Converter Co., Ltd. and Nanjing Weifu Jinning Co., Ltd. 3. Business nature and major operation activities of the Company Operation scope of parent company: Technology development and consulting service in the machinery industry; manufacture of engine fuel oil system products, fuel oil system testers and equipments, manufacturing of auto electronic parts, automotive electrical components, non-standard equipment, non-standard knife tool and exhaust post-processing system; sales of the general machinery, hardware & electrical equipment, chemical products & raw materials (excluding hazardous chemicals), auto spare parts and vehicles (excluding nine-seat passenger car); internal combustion engine maintenance; leasing of the own houses; import and export business in respect of diversified commodities and technologies (other than those commodities and technologies limited or forbidden by the State for import and export) by self-operation and works as agent for such business. (Any projects that needs to be approved by laws can only be carried out after getting approval by relevant authorities) Major subsidiaries respectively activate in production and sales of engine accessories, auto spare parts, mufflers, and purifiers. 4. Relevant party offering approval reporting of financial statements and date thereof Financial statements of the Company were approved by the Board of Directors for reporting dated 24 August 2018. Shareholding ratio Proportion Registered Business scope Stateme (%) of votes capital (in nt Shortname of Name of subsidiary (%) 10 thousand consolid subsidiary Directly Indirectly Yuan) ate (Y/N) Internal-combustion Nanjing Weifu Jinning Co., Ltd. Weifu Jinning 80.00 -- 80.00 34,628.70 engine and Y accessories Wuxi Weifu Leader Catalytic Purifier and muffler Weifu Leader 94.81 -- 94.81 50,259.63 Y Converter Co., Ltd. Weifu Mashan Pump Glib Co., Ltd. Internal-combustion Weifu Mashan 100.00 -- 100.00 16,500 engine and Y accessories Wuxi Weifu Chang’an Co., Ltd. Weifu Chang’an 100.00 -- 100.00 21,000 Internal-combustion Y 28 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 engine and accessories Wuxi Weifu International Trade Co. Weifu International 100.00 -- 100.00 3,000 Trade Y Ltd. Trade Wuxi Weifu ITM Supercharging Internal-combustion Technique Co., Ltd. Weifu ITM 100.00 -- 100.00 16,000 engine and Y accessories Wuxi Weifu Schmidt Power System Internal-combustion Spare Parts Co., Ltd. Weifu Schmidt 66.00 -- 66.00 7,600 engine and Y accessories Ningbo Weifu Tianli Supercharging Internal-combustion Technique Co., Ltd. Weifu Tianli 54.23 -- 54.23 11,136 engine and Y accessories Wuxi Weifu-Autocam Fine Machinery Weifu Autocam 51.00 -- 51.00 USD1,510 Auto parts Y Co. Ltd. Wuxi Weifu Leader Catalytic Weifu Leader -- 60.00 60.00 1,000 Purifier and muffler Y Converter (Wuhan) Co., Ltd. (Wuhan) Weifu Leader (Chongqing) Weifu Leader Purifier and muffler -- 100.00 100.00 2,615.17 Y Automobile Parts Co., Ltd. (Chongqing) Nanchang Weifu Leader Automobile Weifu Leader Purifier and muffler -- 100.00 100.00 5,000 Note ① Parts Co., Ltd. (Nanchang) Note ①: Found more in 5-‘Change of consolidation scope for other reasons” in Note VIII IV. Basis of preparation of financial statements 1. Preparation base The financial statement were stated in compliance with Accounting Standard for Business Enterprises –Basic Norms issued by Ministry of Finance, the specific 41 accounting rules revised and issued dated 15 February 2006 and later, the Application Instruments of Accounting Standards and interpretation on Accounting standards and other relevant regulations (together as “Accounting Standards for Business Enterprise”), as well as the Compilation Rules for Information Disclosure by Companies Offering Securities to the Public No.15 – General Provision of Financial Report (Amended in 2014) issued by CSRC in respect of the actual transactions and proceedings, on a basis of ongoing operation. In line with relevant regulations of Accounting Standards of Business Enterprise, accounting of the Company is on accrual basis. Except for certain financial instruments, the financial statement measured on historical cost. Assets have impairment been found, corresponding depreciation reserves shall accrual according to relevant rules. 2. Going concern The Company comprehensively assessed the available information, and there are no obvious factors that impact sustainable operation ability of the Company within 12 months since end of the reporting period. 29 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 V. Major Accounting Policies and Estimation Specific accounting policies and estimation attention: The Company and its subsidiaries are mainly engaged in the manufacture and sales of engine fuel oil system products, Auto spare parts, mufflers and purifiers etc., in line with the real operational characteristics and relevant accounting standards, many specific accounting policies and estimation have been formulated for the transactions and events with revenue recognized concerned. As for the explanation on major accounting judgment and estimation, found more in Note V-28-“Other major accounting policy and accounting estimation”. 1. Statement on observation of Accounting Standard for Business Enterprises Financial statements prepared by the Company were in accordance with requirements of Accounting Standard for Business Enterprises, which truly and completely reflected the financial information of the Company in the period, such as financial position, operation achievements and cash flow. 2. Accounting period Accounting period of the Company consist of annual and mid-term, mid-term refers to the reporting period shorter than one annual accounting year. The company adopts Gregorian calendar as accounting period, namely form each 1 January to 31 December. 3. Business cycles Normal business cycle is the period from purchasing assets used for process by the Company to the cash and cash equivalent achieved. The Company’s normal business cycle was one-year (12 months). 4. Recording currency The Company’s reporting currency is the RMB Yuan. 5. Accounting Treatment Method for Business Combinations Business combination is the transaction or events that two or two above independent enterprises combined as a reporting entity. Business combination including enterprise combined under the same control and business combined under different control. (1) The business combination under the same control Enterprise combination under the same control is the enterprise who take part in the combination are have the same ultimate controller or under the same controller, the control is not temporary. The assets and liability acquired by combining party are measured by book value of the combined party on combination date. Balance of net asset’s book value acquired by combining party and combine consideration paid (or total book value of the shares issued), shall adjusted capital reserve (share premium); if the capital reserves (share premium) is not enough for deducted, adjusted for retained earnings. Vary directly expenses occurred for enterprise combination, 30 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 the combining party shall reckoned into current gains/losses while occurring. Combination day is the date when combining party obtained controlling rights from the combined party. (2) Combine not under the same control A business combination not involving entities under common control is a business combination in which all of the combining entities are not ultimately controlled by the same party or parties both before and after the combination. As a purchaser, fair value of the assets (equity of acquiree held before the date of purchasing included) for purchasing controlling right from the acquiree, the liability occurred or undertake on purchasing date less the fair value of identifiable net assets of the acquiree obtained in combination, recognized as goodwill if the results is positive; if the number is negative, the acquirer shall firstly review the measurement of the fair value of the identifiable assets obtained, liabilities incurred and contingent liabilities incurred, as well as the combination costs. After that, if the combination costs are still lower than the fair value of the identifiable net assets obtained, the acquirer shall recognize the difference as the profit or loss in the current period. Other directly expenses cost for combination shall be reckoned into current gains/losses. Difference of the fair value of assets paid and its book values, reckoned into current gains/losses. On purchasing date, the identifiable assets, liability or contingency of the acquiree obtained by the Company recognized by fair value, that required identification conditions; Acquisition date refers to the date on which the acquirer effectively obtains control of the acquiree. 6. Preparation method for consolidated financial statement (1) Recognition principle of consolidated scope On basis of the financial statement of the parent company and owned subsidiaries, prepared consolidated statement in line with relevant information. The scope of consolidation of consolidated financial statements is ascertained on the basis of effective control. Once certain elements involved in the above definition of control change due to changes of relevant facts or circumstances, the Company will make separate assessment. (2) Basis of control Control is the right to govern an investee so as to obtain variable return through participating in the investee’s relevant activities and the ability to affect such return by use of the aforesaid right over the investee. Relevant activates refers to activates have major influence on return of the investee’s. (3) Consolidation process Subsidiaries are consolidated from the date on which the company obtains their actual control, and are deconsolidated from the date that such control ceases. All significant inter-group balances, investment, transactions and unrealized profits are eliminated in the consolidated financial statements. For subsidiaries being disposed, the operating results and cash flows prior to the date of disposal are included in the consolidated income statement and consolidated cash flow statement; for subsidiaries disposed during the period, the opening balances of the consolidated balance sheet would not be restated. For subsidiaries acquired from a business combination not under common control, their operating results and cash flows subsequent to the acquisition date are included in the consolidated income statement and consolidated cash flow statement, and the opening balances and comparative figures of the consolidated balance sheet would not be restated. For subsidiaries acquired from a business combination under common control, their operating results and cash flows from the date of commencement of the accounting period in which the combination occurred to the date of combination are 31 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 included in the consolidated income statement and consolidated cash flow statement, and the comparative figures of the consolidated balance sheet would be restated. In preparing the consolidated financial statements, where the accounting policies or the accounting periods are inconsistent between the company and subsidiaries, the financial statements of subsidiaries are adjusted in accordance with the accounting policies and accounting period of the company. Concerning the subsidiary obtained under combination with different control, adjusted several financial statement of the subsidiary based on the fair value of recognizable net assets on purchased day while financial statement consolidation; concerning the subsidiary obtained under combination with same control, considered current status of being control by ultimate controller for consolidation while financial statement consolidation. The unrealized gains and losses from the internal transactions occurred in the assets the Company sold to the subsidiaries fully offset "the net profit attributable to the owners of the parent company". The unrealized gains and losses from the internal transactions occurred in the assets the subsidiaries sold to the Company are distributed and offset between "the net profit attributable to the owners of the parent company" and "minority interest" according to the distribution ratio of the Company to the subsidiary. The unrealized gains and losses from the internal transactions occurred in the assets sold among the subsidiaries are distributed and offset between "the net profit attributable to the owners of the parent company" and "minority interest" according to the distribution ratio of the Company to the subsidiary of the seller. The share of the subsidiary’s ownership interest not attributable to the Company is listed as “minority interest” item under the ownership interest in the consolidated balance sheet. The share of the subsidiary’s current profit or loss attributable to the minority interests is listed as "minority interest" item under the net profit item in the consolidated income statement. The share of the subsidiary’s current consolidated income attributable to the minority interests is listed as the “total consolidated income attributable to the minority shareholders” item under the total consolidated income item in the consolidated income statement. If there are minority shareholders, add the "minority interests" item in the consolidated statement of change in equity to reflect the changes of the minority interests. If the losses of the current period shared by a subsidiary’s minority shareholders exceed the share that the minority shareholders hold in the subsidiary ownership interest in the beginning of the period, the balance still charges against the minority interests. When the control over a subsidiary is ceased due to disposal of a portion of an interest in a subsidiary, the fair value of the remaining equity interest is re-measured on the date when the control ceased. The difference between the sum of the consideration received from disposal of equity interest and the fair value of the remaining equity interest, less the net assets attributable to the company since the acquisition date, is recognized as the investment income from the loss of control. Other comprehensive income relating to original equity investment in subsidiaries shall be treated on the same basis as if the relevant assets or liabilities were disposed of by the acquiree directly when the control is lost, namely be transferred to current investment income other than the relevant part of the movement arising from re-measuring net liabilities or net assets under defined benefit scheme by the original subsidiary. Subsequent measurement of the remaining equity interests shall be in accordance with relevant accounting standards such as “Accounting Standards for business Enterprises 2 – Long-term Equity Investments” or “Accounting Standards for business Enterprises 22 – Financial Instruments Recognition and Measurement”. The company shall determine whether loss of control arising from disposal in a series of transactions should be regarded as a bundle of transactions. When the economic effects and terms and conditions of the disposal 32 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 transactions met one or more of the following situations, the transactions shall normally be accounted for as a bundle of transactions: ①The transactions are entered into after considering the mutual consequences of each individual transaction; ② The transactions need to be considered as a whole in order to achieve a deal in commercial sense; ③The occurrence of an individual transaction depends on the occurrence of one or more individual transactions in the series; ④ The result of an individual transaction is not economical, but it would be economical after taking into account of other transactions in the series. When the transactions are not regarded as a bundle of transactions, the individual transactions shall be accounted as “disposal of a portion of an interest in a subsidiary which does not lead to loss of control” and “disposal of a portion of an interest in a subsidiary which lead to loss of control”. When the transactions are regarded as a bundle of transactions, the transactions shall be accounted as a single disposal transaction; however, the difference between the consideration received from disposal and the share of net assets disposed in each individual transactions before loss of control shall be recognized as other comprehensive income, and reclassified as profit or loss arising from the loss of control when control is lost. 7. Joint arrangement classification and accounting treatment for joint operations In accordance with the Company’s rights and obligation under a joint arrangement, the Company classifies joint arrangements into: joint ventures and joint operations. The company confirms the following items related to the share of interests in its joint operations, and in accordance with the provisions of the relevant accounting standards for accounting treatment: (1) Recognize the assets held solely by the Company, and recognize assets held jointly by the Company in appropriation to the share of the Company; (2) Recognize the obligations assumed solely by the Company, and recognize obligations assumed jointly by the Company in appropriation to the share of the Company; (3) Recognize revenue from disposal of the share of joint operations of the Company; (4) Recognize fees solely occurred by Company; (5) Recognize fees from joint operations in appropriation to the share of the Company. 8. Determining standards for cash and cash equivalent Cash refers to stock cash, savings available for paid at any time; cash and cash equivalent refers to the cash held by the Company with short terms(expired within 3 months since purchased), and liquid and easy to transfer as known amount and investment with minor variation in risks. 9. Foreign currency business and conversion The occurred foreign currency transactions are converted into the recording currency in accordance with the middle rate of the market exchange rate published by the People's Bank of China on the transaction date. Thereinto, the occurred foreign currency exchange or transactions involved in the foreign currency exchange are converted in accordance with the actual exchange rate in the transactions. At the balance sheet date, the account balance of the foreign currency monetary assets and liabilities is converted into the recording currency amount in accordance with the middle rate of the market exchange rate published by the People's Bank of China on the transaction date. The balance between the recording currency amount converted 33 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 according to exchange rate at the balance sheet date and the original recording currency amount is disposed as the exchange gains or losses. Thereinto, the exchange gains or losses occurred in the foreign currency loans related to the purchase and construction of fixed assets are disposed according to the principle of capitalization of borrowing costs; the exchange gains and losses occurred during the start-up are included in the start-up costs; the rest is included in the current financial expenses. At the balance sheet date, the foreign currency non-monetary items measured with the historical costs are converted in accordance with the middle rate of the market exchange rate published by the People's Bank of China on the transaction date without changing its original recording currency amount; the foreign currency non-monetary items measured with the fair value are converted in accordance with the middle rate of the market exchange rate published by the People's Bank of China on the fair value date, and the generated exchange gains and losses are included in the current profits and losses as the gains and losses from changes in fair value. The following displays the methods for translating financial statements involving foreign operations into the statements in RMB: The asset and liability items in the balance sheets for overseas operations are translated at the spot exchange rates on the balance sheet date. Among the owners’ equity items, the items other than “undistributed profits” are translated at the spot exchange rates of the transaction dates. The income and expense items in the income statements of overseas operations are translated at the average exchange rates of the transaction dates. The exchange difference arising from the above mentioned translation are recognized in other comprehensive income and is shown separately under owner’ equity in the balance sheet; such exchange difference will be reclassified to profit or loss in current year when the foreign operation is disposed according to the proportion of disposal. The cash flows of overseas operations are translated at the average exchange rates on the dates of the cash flows. The effect of exchange rate changes on cash is presented separately in the cash flow statement. 10. Financial instrument Financial instrument is the contract that taken shape of the financial asses for an enterprise and of the financial liability or equity instrument for other units. (1) Classification and measurement on financial assets and financial liability In terms of investment purposes and economic natures, the Company divides its financial assets into financial assets( with its variation of fair value reckoned into current gains/losses), financial assets available for sale, account receivables and held-to-maturity investments, among which, transactional financial asset is measured at fair value and movement of its fair value is recorded in current gains and losses; financial asset available for sale is measured at fair value and movement of its fair value is recorded in owners’ equity; account receivables and held-to-maturity investments are measured at amortized cost. In terms of economic nature, the Company divides its financial liabilities into two groups, namely financial liabilities at fair value through gains and losses and other financial liabilities at amortized cost. (2) Determination of fair values for financial assets and financial liabilities 34 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 The fair value refers to the price that will be received when selling an asset or the price to be paid to transfer a liability in an orderly transaction between market participants on the date of measurement. Financial instruments exist in an active market. Fair value is determined based on the quoted price in such market. An active market refers to where pricing is easily and regularly obtained from exchanges, brokers, industrial organizations and price fixing service organizations, representing the actual price of a market transaction that takes place in a fair deal. While financial instruments do not exist in an active market, the fair value is determined using valuation techniques. Valuation technologies include reference to be familiar with situation and prices reached in recent market transactions entered into by both willing parties, reference to present fair values of similar other financial instruments, cash flow discounting method and option pricing models. As for the equity investment of the investee held by the Company, which has no controlling rights, common control or significant influence (that is under the major influence), has no quota in an active market and the fair value cannot be measure reasonably, than divided into financial assets available for sale and measured by cost. (3) Recognition basis and measurement for transfer of financial assets That the Company grants or delivers financial assets to party other than the issuer of such financial assets equals transfer of financial assets. Financial assets transferred could be the entire or part of such financial assets. Two forms are listed as follows: ① Transfer of right for collecting cash flow of financial assets to another party; ② Transfer financial assets to another party, while the aforementioned right is retained, with obligation of paying such cash flow to final collector When that the Company has transferred almost all risks and remunerations arising from ownership of all or part financial assets to another party, accordingly, recognition for such entire or part financial assets shall be ceased. Gains and losses are determined by the received consideration less the carrying value of the transferred financial assets. Meanwhile, the original accumulated gains or losses of financial assets recognized in the owners’ equity shall transferred to gains and losses; when all risks and remunerations attached to ownership are retained, recognition for such entire or part financial assets shall continue, and the consideration received shall be viewed as financial liabilities. As for the financial assets which the Company has neither transferred nor retained all risks and remunerations attached to ownership of such financial assets, while control upon such financial assets still exists, recognition shall be conducted in light of the degree of its continuous involvement in the transferred financial assets. Accordingly, relevant liabilities shall be recognized. (4) Recognition for termination of financial assets and liability Upon satisfaction of one of the following condition, financial assets will immediately experience discontinued recognition: ① Right entitled by contract in respect of collection of cash flow from such financial asset terminates. ② Such financial assets have been transferred and meet discontinued recognition condition for financial assets as 35 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 regulated by Accounting Standard for Enterprise No.23-Transfer of Financial Assets. Only when present obligations under financial liability have been released entirely or partly, could cease recognition of such financial liability or part thereof. (5) Impairment of financial assets The Company conducts inspection on carrying values of financial assets, except for transactional financial assets, as at balance sheet date. If there is objective evidence indicating that impairment has happened to financial assets, impairment reserve then shall be provided. Financial asset with great amount in single item is subject to separate impairment test. In case of any objective evidence indicating that impairment has happened to such financial asset, impairment loss shall be recognized and recorded in current gains and losses. As for the financial assets with no great amount in single item and those which prove to be not impaired after separate test, the Company will conduct impairment test on basis of credit portfolio which is determined in light of customers’ credit records and historical bad debts, so as to recognize impairment loss. Objective evidence indicating impairment happens to financial assets means the proceedings meeting the three characteristics: actually occurred subsequent to initial recognition of such financial assets, bring influence over the estimated future cash flow of such financial assets, and such influence could be reliably measured by the Company. The followings are included in objective evidences indicating impairment happens to financial assets: ① Serious financial difficulty happens to issuer or debtor; ② Breach of terms of contract by debtor, such as breach or overdue in repaying interest or principal; ③ Creditor makes concession for debtors who experience financial trouble in light of consideration for economy or laws; ④ Debtor is very likely to experience bankrupt or financial reorganization; ⑤ Financial assets are not able to be traded in active market since material financial difficulty happens to issuer; ⑥ It is unable to judge whether cash flow from certain asset in a group of financial assets has decreased, while it is finally found that the estimated future cash flow of such financial asset has actually decreased since its initial recognition and the decrease can be reliably measured by reference to the general valuation based on open data. For example, payment capacity of debtor of such financial assets portfolio gradually worsens, or unemployment in country or region where the debtor locates risen, price of guaranty falls greatly in the place where it locate, and the industry in which it belongs to is unpromising; ⑦ Material negative changes happen to technologies, markets, economy or law environment in which debtor operates, which leads to that equity instrument investor is not likely to be able to recover investment cost; ⑧ Fair value of equity instrument investment experiences severe or non-temporary falling; ⑨ Other objective evidence indicating impairment happens to financial assets. In the event of impairment in financial asset at amortized cost, impairment loss is calculated based on the difference between carrying value and present value of estimated future cash flow discounted at effective interest 36 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 rate. After impairment loss is recognized for financial asset at amortized cost, if there is objective evidence indicating value of such financial asset has recovered, which is objectively related to proceedings occurred after recognition of such loss, the original impairment loss shall be reversed and recorded in current gains and losses. However, the carrying value subsequent to such reversal shall not exceed the amortized cost of such financial asset as at the reversal date on assumption that such impairment loss had not been provided. Impairment of available-for-sale financial assets: in the event that decline in fair value of the available-for-sale equity instrument is regarded as “severe decline” or “non-temporary decline” on the basis of comprehensive related factors, it indicates that there is impairment loss of the available-for-sale equity instrument. In particular, “severe decline” refers to fair value is lower than 50% of the cost price and last for over one year. “Non-temporary decline” refers to fair value fell for over 6-month sessions. When the available-for-sale financial assets impair, the accumulated loss originally included in the other comprehensive income arising from the decrease in fair value was transferred out from the capital reserve and included in the profit or loss for the period. The accumulated loss that transferred out from the capital reserve is the balance of the acquired initial cost of asset, after deduction of the principal recovered, amortized amounts, current fair value and the impairment loss originally included in the profit or loss. After recognition of the impairment loss, if there is objective evidence showing recovery in value of such financial assets impaired and which is related to any event occurring after such recognition in subsequent periods, the impairment loss originally recognized shall be reversed. The impairment loss reversal of the available-for-sale equity instrument will be recognized as other comprehensive income, and the impairment loss reversal of the available-for-sale debt instrument will be included in the profit or loss for the period. When an equity investment that is not quoted in an active market and the fair value of which cannot be measured reliably, or the impairment loss of a derivative financial asset linked to the equity instrument that shall be settled by delivery of that equity instrument, then it will not be reversed. 11. Account Receivable (1) Account Receivable withdrawal on single significant amount and with bad debt provision accrued for single item Determine basis or amount standards for single The Company’s account receivables with above RMB 1 million in single item significant amount is defined as account receivables with significant amount in single item. In line with the difference of present value of future cash flow lower its book Withdrawal method for account with single significant value, carried out impairment test independently and withdrawal the bad debt amount and withdrawal single item bad debt provision reserves 37 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (2) Receivables with bad debt provision accrual by credit portfolio Combination Bad debt provision accrual Classify to many combination based on credit portfolio for those receivables with minor account singly and those with major amount but has no impairment been found after testing Age analysis method independently; base on the actual loss ratio of the receivables of previous years, with same or similar credit portfolio, and combining actual condition accrual bad debt reserves. In combination, accounts whose bad debts provision was accrued by age analysis: √ Applicable □ Not applicable Account age Rate for receivables Rate for other receivables Within 6 months 6 months to 1 year 10.00% 10.00% 1-2 years 20.00% 20.00% 2-3 years 40.00% 40.00% Over 3 years 100.00% 100.00% 3-4 years 100.00% 100.00% 4-5 years 100.00% 100.00% Over 5 years 100.00% 100.00% In combination, withdrawal proportion of bad debt provision based on balance proportion □ Applicable √ Not applicable In combination, withdrawal proportion of bad debt provision based on other methods: □ Applicable √ Not applicable (3) Account receivable with minor single amount but with withdrawal bad debt provision for single item Reasons for withdrawal single item bad The present value of future cash flow has major difference with the receivable group’s debt provision present value of future cash flow Withdrawal method for bad debt Carried out impairment test independently, accrual bad debt reserves according to the provision difference of present value of future cash flow lower its book value 12. Inventories Dose the Company need to comply with disclosure requirements of the special industry No (1) Classification of inventories The Company’s inventories are categorized into stock materials, product in process and stock goods etc. (2) Pricing for delivered inventories A. Generally, stock materials are calculated at planned cost. Material cost difference is individually set according 38 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 to classification of grant types. Pursuant to the difference between the planned cost of the received or delivered raw materials and the material cost the aforesaid cost should share after carrying forward at period-end, the Company adjusts the planned cost to effective cost; finished products are priced at effective costs, and carried forward to operating cost by weighted average method when being delivered; B. Products in process are priced at effective costs, and carried forward to finished products at actually occurred cost; C. Finished self-produced products are priced at effective costs, and carried forward to operating cost by weighted average method; external purchase goods (from import and export trades) are carried forward to sales cost by individual pricing method. (3) Recognition evidence for net realizable value of inventories and withdrawal method for inventory impairment provision Inventories as at period-end are priced at the lower of costs and net realizable values; at period end, on the basis of overall clearance about inventories, inventory impairment provision is withdrew for uncollectible part of costs of inventories which result from destroy of inventories, out-of-time of all and part inventories, or sales price lowering than cost. Inventory impairment provision for stock goods and quantity of raw materials is subject to the difference between costs of single inventory item over its net realizable value. As for other raw materials with large quantity and comparatively low unit prices, inventory impairment provision is withdrawn pursuant to categories. As for finished goods, commodities and materials available for direct sales, their net realizable values are determined by their estimated selling prices less estimated sales expenses and relevant taxes. For material inventories held for purpose of production, their net realizable values are determined by the estimated selling prices of finished products less estimated costs, estimated sales expenses and relevant taxes accumulated till completion of production. As for inventories held for implementation of sales contracts or service contracts, their net realizable values are calculated on the basis of contract prices. In the event that inventories held by a company exceed order amount as agreed in sales contracts, net realizable values of the surplus part are calculated on the basis of normal sale price. (4) Inventory system Perpetual Inventory System is adopted by the Company and takes a physical inventory. (5) Amortization of low-value consumables and wrappage ①Low-value consumables The Company adopts one-off amortization method to amortize the low-value consumables. ②Wrappage The Company adopts one-off amortization method to amortize the wrappage at the time of receipt. 39 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 13. Classified as assets held for sale The Company classifies non-current assets or disposal groups that meet all of the following conditions as held-for-sale: according to the practice of selling this type of assets or disposal groups in a similar transaction, the non-current assets or disposal group can be sold immediately at its current condition; The sale is likely to occur, that is, the Company has made resolution on the selling plan and obtained definite purchase commitment, the selling is estimated to be completed within one year. Those assets whose disposal is subject to approval from relevant authority or supervisory department under relevant requirements are subject to that approval. Where the Company loses control over its subsidiary due to disposal of investment in the subsidiary, whether or not the Company retains part equity investment after such disposal, investment in the subsidiary shall be classified in its entirety as held for sale in the separate financial statement of the parent company subject to that the investment in the subsidiary proposed to be disposed satisfies the conditions for being classified as held for sale, and all the assets and liabilities of the subsidiary shall be classified as held for sale in consolidated financial statement. The purchase commitment identified refers to the legally binding purchase agreement entered into between the Company and other parties, which sets out certain major terms relating to transaction price, time and adequately stringent punishment for default, which render an extremely minor possibility for material adjustment or revocation of the agreement. Assets held for sale are measured at the lower of heir carrying value and fair value less selling expense. If the carrying value is higher than fair value less selling expense, the excess shall be recognized as impairment loss and recorded in profit or loss for the period, and allowance for impairment shall be provided for in respect of the assets. In respect of impairment loss recognized for disposal group held for sale, carrying value of the goodwill in the disposal group shall be deducted first, and then deduct the carrying value of the non-current assets within the disposal group applicable to this measurement standard on a pro rata basis according to the proportion taken by their carrying value. If the net amount of fair value of non-current assets held for sale less sales expense on subsequent balance sheet date increases, the amount previously reduced for accounting shall be recovered and reverted from the impairment loss recognized after the asset is classified under the category of held for sale, with the amount reverted recorded in profit or loss for the period. Impairment loss recognized before the asset is classified under the category of held for sale shall not be reverted. If the net amount of fair value of the disposal group held for sale on the subsequent balance sheet date less sales expenses increases, the amount reduced for accounting in previous periods shall be restored, and shall be reverted in the impairment loss recognized in respect of the non-current assets which are applicable to relevant measurement provisions after classification into the category of held for sale, with the reverted amount charged in profit or loss for the current period. The written-off carrying value of goodwill shall not be reverted. The non-current assets in the non-current assets or disposal group held for sale is not depreciated or amortized, and the debt interests and other fees in the disposal group held for sale continue to be recognized. If the non-current assets or disposal group are no longer classified as held for sale since they no longer meet the condition of being classified as held for sale or the non-current assets are removed from the disposal group held for sale, they will be measured at the lower of the following: 40 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (I) The amount after their book value before they are classified as held for sale is adjusted based on the depreciation, amortization or impairment that should have been recognized given they are not classified as held for sale; (II) The recoverable amount. 14. Long-term equity investment Long-term equity investments refer to long-term equity investments in which the Company has control, joint control or significant influence over the investee. Long-term equity investment without control or joint control or significant influence of the Group is accounted for as available-for-sale financial assets or financial assets measured at fair value with any change in fair value charged to profit or loss. (1) Determination of initial investment cost Investment costs of the long-term equity investment are recognized by the follow according to different way of acquirement: ①For a long-term equity investment acquired through a business combination involving enterprises under common control, the initial investment cost of the long-term equity investment shall be the absorbing party’s share of the carrying amount of the owner’s equity under the consolidated financial statements of the ultimate controlling party on the date of combination. The difference between the initial cost of the long-term equity investment and the cash paid, non-cash assets transferred as well as the book value of the debts borne by the absorbing party shall offset against the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted. If the consideration of the merger is satisfied by issue of equity securities, the initial investment cost of the long-term equity investment shall be the absorbing party’s share of the carrying amount of the owner’s equity under the consolidated financial statements of the ultimate controlling party on the date of combination. With the total face value of the shares issued as share capital, the difference between the initial cost of the long-term equity investment and total face value of the shares issued shall be used to offset against the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted. (For business combination resulted in an enterprise under common control by acquiring equity of the absorbing party under common control through a stage-up approach with several transactions, these transactions will be judged whether they shall be treat as “transactions in a basket”. If they belong to “transactions in a basket”, these transactions will be accounted for a transaction in obtaining control. If they are not belong to “transactions in a basket”, the initial investment cost of the long-term equity investment shall be the absorbing party’s share of the carrying amount of the owner’s equity under the consolidated financial statements of the ultimate controlling party on the date of combination. The difference between the initial cost of the long-term equity investment and the aggregate of the carrying amount of the long-term equity investment before merging and the carrying amount the additional consideration paid for further share acquisition on the date of combination shall offset against the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be adjusted. Other comprehensive income recognized as a result of the previously held equity investment accounted for using equity method on the date of combination or recognized for available-for-sale financial assets will not be accounted for.) ②For a long-term equity investment acquired through a business combination involving enterprises not under common control, the initial investment cost of the long-term equity investment shall be the cost of combination on the date of acquisition. Cost of combination includes the aggregate fair value of assets paid by the acquirer, liabilities incurred or borne and equity securities issued. (For business combination resulted in an enterprise not under common control by acquiring equity of the acquire under common control through a stage-up approach with 41 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 several transactions, these transactions will be judged whether they shall be treat as “transactions in a basket”. If they belong to “transactions in a basket”, these transactions will be accounted for a transaction in obtaining control. If they are not belong to “transactions in a basket”, the initial investment cost of the long-term equity investment accounted for using cost method shall be the aggregate of the carrying amount of equity investment previously held by the acquire and the additional investment cost. For previously held equity accounted for using equity method, relevant other comprehensive income will not be accounted for. For previously held equity investment classified as available-for-sale financial asset, the difference between its fair value and carrying amount, as well as the accumulated movement in fair value previously included in the other comprehensive income shall be transferred to profit or loss for the current period.) plus the combination cost measured by costs which have directly connection with acquisition are considered as initial investment cost of such long-term equity investment. Realizable assets and liabilities undertaken by such assets (including contingent liabilities) of the party being combined as at the combination date are all measured at fair values, without consideration to amount of minority interests. The surplus of combination cost less fair value net realizable assets of the party being combined is recorded as goodwill, and the deficit is directly recognized in the consolidated statement of gains and losses. ③Long-term investments obtained through other ways: A. Initial investment cost of long-term equity investment obtained through cash payment is determined according to actual payment for purchase; B. Initial investment cost of long-term equity investment obtained through issuance of equity securities is determined at fair value of such securities; C. Initial investment cost of long-term equity investment (exchanged-in) obtained through exchange with non-monetary assets, which is of commercial nature, is determined at fair value of the assets exchanged-out; otherwise determined at carrying value of the assets exchanged-out if it is not of commercial nature; D. Initial investment cost of long-term equity investment obtained through debt reorganization is determined at fair value of such investment. (2) Subsequent measurement on long-term equity investment ①Presented controlling ability on investee, the investment shall use cost method for measurement. ②Long-term equity investments with joint control (excluding those constitute joint ventures) or significant influence on the investee are accounted for using equity method. Under the equity method, where the initial investment cost of a long-term equity investment exceeds the investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date, no adjustment shall be made to the initial investment cost. Where the initial investment cost is less than the investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date, the difference shall be charged to profit or loss for the current period, and the cost of the long term equity investment shall be adjusted accordingly. Under the equity method, investment gain and other comprehensive income shall be recognized based on the Group’s share of the net profits or losses and other comprehensive income made by the investee, respectively. 42 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Meanwhile, the carrying amount of long-term equity investment shall be adjusted. The carrying amount of long-term equity investment shall be reduced based on the Group’s share of profit or cash dividend distributed by the investee. In respect of the other movement of net profit or loss, other comprehensive income and profit distribution of investee, the carrying value of long-term equity investment shall be adjusted and included in the capital reserves. The Group shall recognize its share of the investee’s net profits or losses based on the fair values of the investee’s individual separately identifiable assets at the time of acquisition, after making appropriate adjustments thereto. In the event of inconformity between the accounting policies and accounting periods of the investee and the Company, the financial statements of the investee shall be adjusted in conformity with the accounting policies and accounting periods of the Company. Investment gain and other comprehensive income shall be recognized accordingly. In respect of the transactions between the Group and its associates and joint ventures in which the assets disposed of or sold are not classified as operation, the share of unrealized gain or loss arising from inter-group transactions shall be eliminated by the portion attributable to the Company. Investment gain shall be recognized accordingly. However, any unrealized loss arising from inter-group transactions between the Group and an investee is not eliminated to the extent that the loss is impairment loss of the transferred assets. In the event that the Group disposed of an asset classified as operation to its joint ventures or associates, which resulted in acquisition of long-term equity investment by the investor without obtaining control, the initial investment cost of additional long-term equity investment shall be the fair value of disposed operation. The difference between initial investment cost and the carrying value of disposed operation will be fully included in profit or loss for the current period. In the event that the Group sold an asset classified as operation to its associates or joint ventures, the difference between the carrying value of consideration received and operation shall be fully included in profit or loss for the current period. In the event that the Company acquired an asset which formed an operation from its associates or joint ventures, relevant transaction shall be accounted for in accordance with “Accounting Standards for Business Enterprises No. 20 “Business combination”. All profit or loss related to the transaction shall be accounted for. The Group’s share of net losses of the investee shall be recognized to the extent that the carrying amount of the long-term equity investment together with any long-term interests that in substance form part of the investor’s net investment in the investee are reduced to zero. If the Group has to assume additional obligations, the estimated obligation assumed shall be provided for and charged to the profit or loss as investment loss for the period. Where the investee is making profits in subsequent periods, the Group shall resume recognizing its share of profits after setting off against the share of unrecognized losses. ③Acquisition of minority interest Upon the preparation of the consolidated financial statements, since acquisition of minority interest increased of long-term equity investment which was compared to fair value of identifiable net assets recognized which are measured based on the continuous measurement since the acquisition date (or combination date) of subsidiaries attributable to the Group calculated according to the proportion of newly acquired shares, the difference of which recognized as adjusted capital surplus, capital surplus insufficient to set off impairment and adjusted retained earnings. 43 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 ④Disposal of long-term equity investments In these consolidated financial statements, for disposal of a portion of the long-term equity investments in a subsidiary without loss of control, the difference between disposal cost and disposal of long-term equity investments relative to the net assets of the subsidiary is charged to the owners’ equity. If disposal of a portion of the long-term equity investments in a subsidiary by the parent company results in a change in control, it shall be accounted for in accordance with the relevant accounting policies as described in Note III.- 6 “Preparation Method of the Consolidated Financial Statements”. On disposal of a long-term equity investment otherwise, the difference between the carrying amount of the investment and the actual consideration paid is recognized through profit or loss in the current period. In respect of long-term equity investment accounted for using equity method with the remaining equity interest after disposal also accounted for using equity method, other comprehensive income previously under owners’ equity shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee on pro rata basis at the time of disposal. The owners’ equity recognized for the movement of other owners’ equity (excluding net profit or loss, other comprehensive income and profit distribution of investee) shall be transferred to profit or loss for the current period on pro rata basis. In respect of long-term equity investment accounted for using cost method with the remaining equity interest after disposal also accounted for cost equity method, other comprehensive income measured and reckoned under equity method or financial instrument before control of the investee unit acquired shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee on pro rata basis at the time of disposal and shall be transferred to profit or loss for the current period on pro rata basis; among the net assets of investee unit recognized by equity method (excluding net profit or loss, other comprehensive income and profit distribution of investee) shall be transferred to profit or loss for the current period on pro rata basis. In the event of loss of control over investee due to partial disposal of equity investment by the Group, in preparing separate financial statements, the remaining equity interest which can apply common control or impose significant influence over the investee after disposal shall be accounted for using equity method. Such remaining equity interest shall be treated as accounting for using equity method since it is obtained and adjustment was made accordingly. For remaining equity interest which cannot apply common control or impose significant influence over the investee after disposal, it shall be accounted for using the recognition and measurement standard of financial instruments. The difference between its fair value and carrying amount as at the date of losing control shall be included in profit or loss for the current period. In respect of other comprehensive income recognized using equity method or the recognition and measurement standard of financial instruments before the Group obtained control over the investee, it shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee at the time when the control over investee is lost. 44 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Movement of other owners’ equity (excluding net profit or loss, other comprehensive income and profit distribution under net asset of investee accounted for and recognized using equity method) shall be transferred to profit or loss for the current period at the time when the control over investee is lost. Of which, for the remaining equity interest after disposal accounted for using equity method, other comprehensive income and other owners’ equity shall be transferred on pro rata basis. For the remaining equity interest after disposal accounted for using the recognition and measurement standard of financial instruments, other comprehensive income and other owners’ equity shall be fully transferred. In the event of loss of common control or significant influence over investee due to partial disposal of equity investment by the Group, the remaining equity interest after disposal shall be accounted for using the recognition and measurement standard of financial instruments. The difference between its fair value and carrying amount as at the date of losing common control or significant influence shall be included in profit or loss for the current period. In respect of other comprehensive income recognized under previous equity investment using equity method, it shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant asset or liability by investee at the time when equity method was ceased to be used. Movement of other owners’ equity (excluding net profit or loss, other comprehensive income and profit distribution under net asset of investee accounted for and recognized using equity method) shall be transferred to profit or loss for the current period at the time when equity method was ceased to be used. The Group disposes its equity investment in subsidiary by a stage-up approach with several transactions until the control over the subsidiary is lost. If the said transactions belong to “transactions in a basket”, each transaction shall be accounted for as a single transaction of disposing equity investment of subsidiary and loss of control. The difference between the disposal consideration for each transaction and the carrying amount of the corresponding long-term equity investment of disposed equity interest before loss of control shall initially recognized as other comprehensive income, and subsequently transferred to profit or loss arising from loss of control for the current period upon loss of control. (3) Impairment test method and withdrawal method for impairment provision Found more in Note V-20-”impairment of long-term investment” (4) Criteria of Joint control and significant influence Joint control is the Company’s contractually agreed sharing of control over an arrangement, which relevant activities of such arrangement must be decided by unanimously agreement from parties who share control. All the participants or participant group whether have controlling over such arrangement as a group or not shall be judge firstly, than judge that whether the decision-making for such arrangement are agreed unanimity by the participants or not. Significant influence is the power of the Company to participate in the financial and operating policy decisions of an investee, but to fail to control or joint control the formulation of such policies together with other parties. 45 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 While recognizing whether have significant influence by investee, the potential factors of voting power as current convertible bonds and current executable warrant of the investee held by investors and other parties shall be thank over. 15. Investment real estate Measurement mode Measured by cost method Depreciation or amortization method Investment real estate is stated at cost. During which, the cost of externally purchased properties held-for-investment includes purchasing price, relevant taxes and surcharges and other expenses which are directly attributable to the asset. Cost of self construction of properties held for investment is composed of necessary expenses occurred for constructing those assets to a state expected to be available for use. Properties held for investment by investors are stated at the value agreed in an investment contract or agreement, but those under contract or agreement without fair value are stated at fair value. The Company adopts cost methodology amid subsequent measurement of properties held for investment, while depreciation and amortization is calculated using the straight-line method according to their estimated useful lives. The basis of provision for impairment of properties held for investment is referred to Note V-20-“Impairment of long-term assets” 16. Fixed assets (1) Confirmation conditions Fixed assets refer to the tangible assets for production of products, provision of labor, lease or operation, with a service life excess one year and has more unit value. (2) Depreciation methods Categories Method Years of depreciation Scrap value rate Yearly depreciation rate House and Building Straight-line depreciation 20~35 5 2.71~4.75 Machinery equipment Straight-line depreciation 10 5 9.50 Transportation equipment Straight-line depreciation 4~5 5 19.00~23.75 Electronic and other equipment Straight-line depreciation 3~10 5 9.50~31.67 As for the fixed assets with impairment accrual, calculated depreciation amount based on the accumulative number of impairment of fixed assets accrual. (3) Recognization basis, valuation and depreciation method for financial lease assets The Company affirms those that conform to below one or several criteria as the finance lease fixed assets: ① Agreed in the lease contract (or made a reasonable judgment according to the correlated conditions on the 46 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 lease commencement date), the ownership of lease fixed assets can be transferred to the Company after the expiry of the lease period; ② The Company has the option to purchase or lease the fixed assets, and the purchase price is estimated to be much less than the fair value of the lease of fixed assets when exercises the options, so whether the Company will exercise the option can be reasonably determined on the lease commencement date; ③ Even though the fixed asset ownership is not transferred, the lease term accounts for 75% of the service life of the lease fixed assets; ④ The present value of the Company’s of minimum lease payment on the lease commencement date is equivalent to 90% or more of the fair value of the lease fixed assets on the lease commencement date; the present value of the leaser’s of minimum lease payment on the lease commencement date is equivalent to 90% or more of the fair value of the lease fixed assets on the lease commencement date; ⑤ The leased assets with special properties can only be used by the Company without major modifications. The fixed assets rented by finance leases is calculated as the book value according to the lower one between the fair value of leased assets on the lease commencement date and the present value of the minimum lease payments. (4) The impairment test method of fixed assets and the method of provision for impairment see Note V-20-“Long term asset impairment”. 17. Construction in process From the date on which the fixed assets built by the Company come into an expected usable state, the projects under construction are converted into fixed assets on the basis of the estimated value of project estimates or pricing or project actual costs, etc. Depreciation is calculated from the next month. Further adjustments are made to the difference of the original value of fixed assets after final accounting is completed upon completion of projects. The basis of provision for impairment of properties held for construction in process is referred to Note V-20-“Impairment of long-term assets” 18. Borrowing costs (1) Recognition of capitalization of borrowing costs Borrowing costs comprise interest occurred, amortization of discounts or premiums, ancillary costs and exchange differences in connection with foreign currency borrowings. The borrowing costs of the Company, which incur from the special borrowings occupied by the fixed assets that need more than one year (including one year) for construction, development of investment properties or inventories or from general borrowings, are capitalized and recorded in relevant assets costs; other borrowing costs are recognized as expenses and recorded in the profit or loss in the period when they are occurred. Relevant borrowing costs start to be capitalized when all of the following three conditions are met: ① Capital expenditure has been occurred; ② Borrowing costs have been occurred; ③ Acquisition or construction necessary for the assets to come into an expected usable state has been carried out. 47 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (2) Period of capitalization of borrowing costs Borrowing costs arising from purchasing fixed asset, investment real estate and inventory, and occurred after such assets reached to its intended use of status or sales, than reckoned into assets costs while satisfy the above mentioned capitalization condition; capitalization of borrowing costs shall be suspended and recognized as current expenditure during periods in which construction of fixed assets, investment real estate and inventory are interrupted abnormally, when the interruption is for a continuous period of more than 3 months, until the acquisition, construction or production of the qualifying asset is resumed; capitalization shall discontinue when the qualifying asset is ready for its intended use or sale, the borrowing costs occurred subsequently shall reckoned into financial expenses while occurring for the current period. (3) Measure of capitalization for borrowing cost In respect of the special borrowings borrowed for acquisition, construction or production and development of the assets qualified for capitalization, the amount of interests expenses of the special borrowings actually occurred in the period less interest income derived from unused borrowings deposited in banks or less investment income derived from provisional investment, are recognized. With respect to the general borrowings occupied for acquisition, construction or production and development of the assets qualified for capitalization, the capitalized interest amount for general borrowings is calculated and recognized by multiplying a weighted average of the accumulated expenditure on the assets in excess of the expenditure on the some assets of the special borrowings, by a capitalization rate for general borrowings. The capitalization rate is determined by calculation of the weighted average interest rate of the general borrowings. 19. Intangible assets (1) Measurement, use of life and impairment testing ① Measurement of intangible assets The intangible assets of the Company including land use rights, patented technology and non-patents technology etc. The cost of a purchased intangible asset shall be determined by the expenditure actually occurred and other related costs. The cost of an intangible asset contributed by an investor shall be determined in accordance with the value stipulated in the investment contract or agreement, except where the value stipulated in the contract or agreement is not fair. The intangible assets acquired through exchange of non-monetary assets, which is commercial in substance, is carried at the fair value of the assets exchanged out; for those not commercial in substance, they are carried at the carrying amount of the assets exchanged out. The intangible assets acquired through debt reorganization, are recognized at the fair value. 48 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 ② Amortization methods and time limit for intangible assets: Land use right of the company had average amortization by the transfer years from the beginning date of transfer (date of getting land use light); Patented technology, non-patented technology and other intangible assets of the Company are amortized evenly with the shortest terms among expected useful life, benefit years regulated in the contract and effective age regulated by the laws. The amortization amount shall count in relevant assets costs and current gains/losses according to the benefit object. As for the intangible assets as trademark, with uncertain benefit terms, amortization shall not be carried. Impairment testing methods and accrual for depreciation reserves for the intangible assets found more in Note V-20-“Long-term assets impairment”. (2) Internal accounting policies relating to research and development expenditures Expenses incurred during the research phase are recognized as profit or loss in the current period; expenses incurred during the development phase that satisfy the following conditions are recognized as intangible assets (patented technology and non-patents technology): ① It is technically feasible that the intangible asset can be used or sold upon completion; ② there is intention to complete the intangible asset for use or sale; ③ The products produced using the intangible asset has a market or the intangible asset itself has a market; ④ there is sufficient support in terms of technology, financial resources and other resources in order to complete the development of the intangible asset, and there is capability to use or sell the intangible asset; ⑤ the expenses attributable to the development phase of the intangible asset can be measured reliably. If the expenses incurred during the development phase did not qualify the above mentioned conditions, such expenses incurred are accounted for in the profit or loss for the current period. The development expenditure reckoned in gains/losses previously shall not be recognized as assets in later period. The capitalized expenses in development stage listed as development expenditure in balance sheet, and shall be transfer as intangible assets since such item reached its expected conditions for service. 20. Impairment of long-term asset The Company will judge if there is any indication of impairment as at the balance sheet date in respect of non-current non-financial assets such as fixed assets, construction in progress, intangible assets with a finite useful life, investment properties measured at cost, and long-term equity investments in subsidiaries, joint controlled entities and associates. If there is any evidence indicating that an asset may be impaired, recoverable amount shall be estimated for impairment test. Goodwill, intangible assets with an indefinite useful life and intangible assets beyond working conditions will be tested for impairment annually, regardless of whether there is any indication of impairment. If the impairment test result shows that the recoverable amount of an asset is less than its carrying amount, the impairment provision will be made according to the difference and recognized as an impairment loss. The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the 49 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 future cash flows expected to be derived from the asset. An asset’s fair value is the price in a sale agreement in an arm’s length transaction. If there is no sale agreement but the asset is traded in an active market, fair value shall be determined based on the bid price. If there is neither sale agreement nor active market for an asset, fair value shall be based on the best available information. Costs of disposal are expenses attributable to disposal of the asset, including legal fee, relevant tax and surcharges, transportation fee and direct expenses incurred to prepare the asset for its intended sale. The present value of the future cash flows expected to be derived from the asset over the course of continued use and final disposal is determined as the amount discounted using an appropriately selected discount rate. Provisions for assets impairment shall be made and recognized for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group shall determine the recoverable amount of the asset group to which the asset belongs. The asset group is the smallest group of assets capable of generating cash flows independently. For the purpose of impairment testing, the carrying amount of goodwill presented separately in the financial statements shall be allocated to the asset groups or group of assets benefiting from synergy of business combination. If the recoverable amount is less than the carrying amount, the Group shall recognize an impairment loss. The amount of impairment loss shall first reduce the carrying amount of any goodwill allocated to the asset group or set of asset groups, and then reduce the carrying amount of other assets (other than goodwill) within the asset group or set of asset groups, pro rata on the basis of the carrying amount of each asset. An impairment loss recognized on the aforesaid assets shall not be reversed in a subsequent period in respect of the restorable value. 21. Long-term Deferred Expenses Long-term expenses to be amortized of the Company the expenses that are already charged and with the beneficial term of more than one year are evenly amortized over the beneficial term. For the long-term deferred expense items cannot benefit the subsequent accounting periods, the amortized value of such items is all recorded in the profit or loss during recognition. 22. Employee compensation (1) Accounting treatment for short-term compensation During the accounting period when the staff providing service to the Company, the short-term remuneration actual occurred shall recognized as liability and reckoned into current gains/losses. During the accounting period when staff providing service to the Company, the actual short-term compensation occurred shall recognized as liabilities and reckoned into current gains/losses, except for those in line with accounting standards or allow to reckoned into capital costs; the welfares occurred shall reckoned into current gains/losses or relevant asses costs while actually occurred. The employee compensation shall recognize as liabilities and reckoned into current gains/losses or relevant assets costs while actually occurred. The employee benefits that belong to non-monetary benefits are measured in accordance with the fair value; the social insurances including the medical insurance, work-injury 50 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 insurance and maternity insurance and the housing fund that the enterprise pays for the employees as well as the labor union expenditure and employee education funds withdrawn by rule should be calculated and determined as the corresponding compensation amount and determined the corresponding liabilities in accordance with the specified withdrawing basis and proportion, and reckoned in the current profits and losses or relevant asset costs in the accounting period that the employees provide services. (2) Accounting treatment for post-employment benefit The post-employment benefit included the defined contribution plans and defined benefit plans. Post-employment benefits plan refers to the agreement about the post-employment benefits between the enterprise and employees, or the regulations or measures the enterprise established for providing post-employment benefits to employees. Thereinto, the defined contribution plan refers to the post-employment benefits plan that the enterprise doesn’t undertake the obligation of payment after depositing the fixed charges to the independent fund; the defined benefit plans refers to post-employment benefits plans except the defined contribution plan. (3) Accounting for retirement benefits When the Company terminates the employment relationship with employees before the end of the employment contracts or provides compensation as an offer to encourage employees to accept voluntary redundancy, the Company shall recognize employee compensation liabilities arising from compensation for staff dismissal and included in profit or loss for the current period, when the Company cannot revoke unilaterally compensation for dismissal due to the cancellation of labor relationship plans and employee redundant proposals; and the Company recognize cost and expenses related to payment of compensation for dismissal and restructuring, whichever is earlier. The early retirement plan shall be accounted for in accordance with the accounting principles for compensation for termination of employment. The salaries or wages and the social contributions to be paid for the employees who retire before schedule from the date on which the employees stop rendering services to the scheduled retirement date, shall be recognized (as compensation for termination of employment) in the current profit or loss by the Group if the recognition principles for provisions are satisfied. (4)Accounting for other long-term employee benefits Except for the compulsory insurance, the Company provides the supplementary retirement benefits to the employees satisfying some conditions, the supplementary retirement benefits belong to the defined benefit plans, and the defined benefit liability confirmed on the balance sheet is the value by subtracting the fair value of plan assets from the present value of defined benefit obligation. The defined benefit obligation is annually calculated in accordance with the expected accumulated welfare unit method by the independent actuary by adopting the treasury bond rate with similar obligation term and currency. The service charges related to the supplementary retirement benefits (including the service costs of the current period, the previous service costs, and the settlement gains or losses) and the net interest are reckoned in the current profits and losses or other asset costs, the changes generated by recalculating the net liabilities of defined benefit plans or net assets should be reckoned in other consolidated income. 51 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 23. Accrued liability (1) Recognition principle An obligation related to a contingency, such as guarantees provided to outsiders, pending litigations or arbitrations, product warranties, redundancy plans, onerous contracts, reconstructing, expected disposal of fixed assets, etc. shall be recognized as an estimated liability when all of the following conditions are satisfied: ① the obligation is a present obligation of the Company; ② it is Contingent that an outflow of economic benefits will be required to settle the obligation; ③ the amount of the obligation can be measured reliably. (2) Measurement method: Measure on the basis of the best estimates of the expenses necessary for paying off the contingencies 24. Revenue Dose the Company need to comply with disclosure requirements of the special industry No (1) Concrete judging criteria for time of recognized The major risks and remuneration entitled to the ownership of goods are transferred to buyer; neither retains the continued management right generally related to ownership, nor exercise effective control over the sold products; the relevant economic benefits are probable to flow into the Company; the relevant income and costs can be measured reliably. Concrete judging criteria for time of recognized the income from goods sales: The Company's domestic sales revenue recognition time: The company delivers goods as agreed, checks the goods that the buyers have received and inspected during the period of the last reconciliation date and this reconciliation date with the buyers on the reconciliation date as agreed, and transfers the risks and remunerations to the buyers after checking, the Company issues the invoices to the buyers in accordance with the recognized varieties, quantities and amounts and affirms the sales revenue realization on the reconciliation date. The Company's overseas sales revenue recognition time: After checking by the customs, the Company affirms the sales revenue realization according to the date of departure on the customs declaration. (2) Recognition of revenue of assets using right alienation Revenue from use by others of enterprise assets shall be recognized only when the associated economic benefit can flow into the Company, and the amount of revenue can be measured reliably, revenue measured by the follow: ① Interest income amount: calculated and determined in accordance with the time that others use the enterprises cash and the actual interest rate. ② Royalty revenue amount: calculated and determined in accordance with the charging time and method of the relevant contract or agreement as agreed. The basis that the Company confirms the revenue from transferring the right to use assets. Rental income: the revenue realization is confirmed after collecting the rent on the date as agreed in the rental 52 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 contract (or agreement). For the rent not received on the date as agreed in the contract or agreement but can be received, and of which the amount of revenue can be measured reliably can also be recognized as revenue. (3) When confirming the incomes of labor services and construction contracts according to the percentage of completion method, determine the basis and method of the contract completion plan. For the service transaction results can be estimated reliably on the balance sheet date, the service revenue is determined and recognized by adopting the percentage of completion method. The completion progress of service transaction is determined by the proportion of incurred costs in the estimated total cost. The total service revenue is determined by the received or receivable contract or agreement costs, except that the received or receivable contract or agreement costs are not fair. On the balance sheet date, the service revenue of the current period is determined by multiplying the total service revenue by the completion progress and deducting the amount accumulated in the previous accounting period and confirmed to render the service revenue. Meanwhile, the labor costs of the current period are carried forward by multiplying the total estimated costs of labor services by the completion progress and deducting the amount accumulated in the previous accounting period with confirmed service costs. For the service transaction results cannot be estimated reliably on the balance sheet date, respectively dispose as following circumstances: ①The incurred labor costs estimated to be compensated are confirmed to render the service revenue according to the incurred labor costs, and are carried forward by the equivalent amount. ②The incurred labor costs estimated not to be compensated are reckoned in the current profits or losses, and are not confirmed to render the service revenue. 25. Government Grants (1) Determination basis and accounting for government grants related to assets (1) Types Government grants are transfer of monetary assets or non-monetary assets from the government to the Group at no consideration. Government grants are classified into government grants related to assets and government grants related to income. As for the assistance object not well-defined in government’s documents, the classification criteria for assets-related or income-related grants are as: whether the grants turn to long-term assets due to purchasing for construction or other means. (2) Recognition and measure The government grants shall be recognized while meet the additional conditions of the grants and amount is actually can be obtained. If a government grant is in the form of a transfer of monetary asset, the item shall be measured at the amount received or receivable. If a government grant is in the form of a transfer of non-monetary asset, the item shall be measured at fair value. If the fair value can not be reliably acquired, than measured by nominal amount. 53 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (3) Accounting treatment A government grant related to an asset shall be recognized as deferred income, and reckoned into current gains/losses according to the depreciation process in use life of such assets. A government grant related to income, if they making up relevant expenses and losses for later period, than recognized deferred income, and should reckoned into current gain/loss during the period while relevant expenses are recognized; if they making up relevant expenses and losses that occurred, than reckoned into current gains/losses. A government grant related to daily operation activity of the Company should reckoned into other income; those without related to daily operation activity should reckoned into non-operation income and expenses. The financial discount funds received by the Company shall write down relevant borrowing costs. (2) Determination basis and accounting for government grants related to income (1) Types Government grants are transfer of monetary assets or non-monetary assets from the government to the Group at no consideration. Government grants are classified into government grants related to assets and government grants related to income. As for the assistance object not well-defined in government’s documents, the classification criteria for assets-related or income-related grants are as: whether the grants turn to long-term assets due to purchasing for construction or other means. (2) Recognition and measure The government grants shall be recognized while meet the additional conditions of the grants and amount is actually can be obtained. If a government grant is in the form of a transfer of monetary asset, the item shall be measured at the amount received or receivable. If a government grant is in the form of a transfer of non-monetary asset, the item shall be measured at fair value. Measured by nominal amount if the fair value can not be reliably acquired. (3) Accounting treatment A government grant related to an asset shall be recognized as deferred income, and should be reckoned into current gain/loss according to the depreciation process of the use of such assets life. A government grant related to an asset shall be recognized as deferred income, and evenly amortized to profit or loss over the useful life of the asset. A government grant related to daily operation activity of the Company should reckoned into other income; those without related to daily operation activity should reckoned into non-operation income and expenses. The financial discount funds received by the Company shall write down relevant borrowing costs. 26. Deferred tax assets / deferred income tax liabilities (1) Deferred income tax assets or deferred income tax liabilities are realized based on the difference between the carrying values of assets and liabilities and their taxation bases (as for the ones did not recognized as assets and liability and with taxation basis recognized in line with tax regulations, different between tax base and its book 54 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 value) at the tax rates applicable in the periods when the Company recovers such assets or settles such liabilities. (2) Deferred income tax assets are realized to the extent that it is probable to obtain such taxable income which is used to set off the deductible temporary difference. As at the balance sheet date, if there is obvious evidence showing that it is probable to obtain sufficient taxable income to set off the deductible temporary difference in future periods, deferred income tax assets not realized in previous accounting periods shall be realized. (3) On balance sheet date, re-review shall be made in respect of the carrying value of deferred income tax assets. If it is impossible to obtain sufficient taxable income to set off the benefits of deferred income tax assets in future periods, then the carrying value of deferred income tax assets shall be reduced accordingly. If it is probable to obtain sufficient taxable income, then the amount reduced shall be switched back. (4) Current income tax and deferred income tax considered as income tax expenses or incomes reckoned into current gains/losses, excluding the follow income tax: ①Enterprise combination; ②Transactions or events recognized in owner’s equity directly 27. Lease (1) Accounting for operating lease The rental fee paid for renting the properties by the company are amortized by the straight-line method and reckoned in the current expenses throughout the lease term without deducting rent-free period. The initial direct costs related to the lease transactions paid by the company are reckoned in the current expenses. When the lessor undertakes the expenses related to the lease that should be undertaken by the company, the company shall deduct the expenses from the total rental costs, share by the deducted rental costs during the lease term, and reckon in the current expenses. Rental obtained from assets leasing, during the whole leasing period without rent-free period excluded, shall be amortized by straight-line method and recognized as leasing revenue. The initial direct costs paid with leasing transaction concerned are reckoned into current expenditure; the amount is larger is capitalized when incurred, and accounted for as profit or loss for the current period on the same basis as recognition of rental income over the entire lease period. When the company undertakes the expenses related to the lease that should be undertaken by the lessor, the company shall deduct the expenses from the total rental income, and distribute by the deducted rental costs during the lease term. (2) Accounting for financing lease Assets lease-in by financing: On the beginning date of the lease, the entry value of leased asset shall be at the lower of the fair value of the leased asset and the present value of minimum lease payment at the beginning date of the lease. Minimum lease payment shall be the entry value of long-term accounts payable, with difference recognized as unrecognized financing expenses. Unrecognized financing expenses shall be reckoned in financial expenses and amortized and using effective interest method during the leasing period. The initial direct costs 55 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 incurred by the Company shall be reckoned into value of assets lease-in. Finance leased assets: on the lease commencement date, the company affirms the balance among the finance lease receivables, the sum of unguaranteed residual value and its present value as the unrealized financing income, and recognizes it as the rental income during the period of receiving the rent. For the initial direct costs related to the rental transaction, the company reckons in the initial measurement of the finance lease receivables, and reduces the amount of income confirmed in the lease term. 28. Other important accounting policy and accounting estimation In the process of applying the Company's accounting policies, due to the inherent uncertainty of business activities, the Company needs to judge, estimate and assume the book value of the report items cannot be accurately measured. These judgments, estimates and assumptions are made on the basis of the historical experience of the Company’s management and by considering other relevant factors, which shall impact the reported amounts of income, expenses, assets and liabilities and the disclosure of contingent liabilities on the balance sheet date. However, the actual results caused by the estimated uncertainties may differ from the management's current estimates of the Company so as to carry out the significant adjustments to the book value of the assets or liabilities to be affected. The Company regularly reviews the aforementioned judgments, estimates and assumptions on the basis of continuing operations, the changes in accounting estimates only affect the current period, of which the impacts are recognized in the current period; the changes in accounting estimates not only affect the current period but also the future periods, of which the impacts are recognized in the current and future periods. On the balance sheet date, the important areas of the financial statements that the Company needs to judge, estimate and assume are as follows: (1) Provision for bad debts According to the accounting policies of the accounts receivable, the Company adopts the allowance method to calculate the bad debt losses. The impairment of receivables is based on the assessment to the collectability of the accounts receivable. The impairment of accounts receivable requires the management’s judgments and estimates. The actual results and the differences between the previously estimated results shall affect the book value of accounts receivable and the provision or return of the receivables’ bad debt reserves during the period estimated to be changed. (2) Inventory impairment According to the inventory accounting policies, the Company measures by the comparison between the cost and the net realizable value, if the cost is higher than the net realizable value and the old and unsalable inventories, the Company calculates and withdraws the inventory impairment. The inventory devalues to the net realizable value by evaluating the inventory’s vendibility and net realizable value. To identify the inventory impairment, the management needs to obtain the unambiguous evidences, and consider the purpose to hold the inventory, and judge and estimate the impacts of events after the balance sheet date. The actual results and the differences between the previously estimated results shall affect the book value of inventory and the provision or return of the inventory impairment during the period estimated to be changed. (3) Held-to-maturity investments 56 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 The Company classifies the non-derivative financial assets that meet the requirements, have the fixed or ascertainable repayment amount and fixed due date, and that the Company has the positive intention and ability to hold to maturity as the held-to-maturity investment. This classification involves a lot of judgments. In the process of making the judgments, the Company will evaluate its willingness and ability to this held-to-maturity investment. Except in certain cases (such as the investments with insignificant sales amount when the maturity date comes), if the Company fails to hold these investments till the maturity date, then all the investments shall be reclassified to the available-for-sale financial assets which cannot be classified as the held-to-maturity investments in this fiscal year and the next two fiscal years. This kind of case may have a significant impact on the relevant financial assets value listed on the financial statements, and may affect the Company's financial instruments risk management strategy. (4) Impairment of held-to-maturity investments The Company determines that the impairment of held-to-maturity investments largely relies on management's judgments. The objective evidences of impairment include that the issuer has serious financial difficulties so that the financial assets cannot continue to be traded in an active market, or cannot be able to fulfill the contract terms (for example, breach the contract of paying the interests or principal), etc. In the process of making the judgments, the Company needs to evaluate the impact of the objective evidence of impairment to the expected future cash flows of the investment. (5) Impairment of financial assets available for sale The Company determines that the impairment of held-to-maturity investments largely relies on management's judgments and assumptions so as to determine whether it is needed to affirm its impairment loss in the profit statement. In the process of making the judgments and assumptions, the Company needs to evaluate the extent and duration when the fair value of the investment is less than the cost, as well as the financial situation and short-term business prospects of the investees, including the industry conditions, technological change, credit rating, default rates, and risks of the counterparty. (6) Preparation for the impairment of non-financial & non-current assets The Company checks whether the non-current assets except for the financial assets may decrease in value at the balance sheet date. For the intangible assets with indefinite service life, in addition to the annual impairment test, the impairment test is also needed when there is a sign of impairment. For the other non-current assets except for the financial assets, the impairment test is needed when it indicates that the book amounts may not be recoverable. When the book value of the asset or group of assets exceeds its recoverable amount, i.e. the higher between the net amount by subtracting the disposal costs from the fair value and the present value of expected future cash flows, it indicates the impairment. As for the net amount by subtracting the disposal costs from the fair value, refer to the sales agreement price similar to the assets in the fair trade or the observable market price, and subtract the incremental costs determination directly attributable to the disposal of the asset. When estimating the present value of the future cash flow, the Company needs to make significant judgments to the output, price, and related operating expenses of the asset (or asset group) and the discount rate used for calculating the present value. When estimating the recoverable amount, the Company shall adopt all the relevant 57 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 information can be obtained, including the prediction related to the output, price, and related operating expenses based on the reasonable and supportable assumptions. The Company tests whether its business reputation decreases in value every year, which requires to estimating the present value of the asset group allocated with goodwill or the future cash flow combined by the asset group. When estimating the present value of the future cash flow, the Company needs to estimate the future cash flows generated by the asset group or the combination of asset group, and select the proper discount rate to determine the present value of the future cash flows. (7) Depreciation and amortization The Company depreciates and amortizes the investment property, fixed assets and intangible assets according to the straight-line method in the service life after considering the residual value. The Company regularly reviews the service life to determine the depreciation and amortization expense amount to be reckoned in each reporting period. The service life is determined by the Company based on the past experience of similar assets and the expected technological updating. If the previous estimates have significant changes, the depreciation and amortization expense shall be adjusted in future periods. (8) Income tax In the Company’s normal business activities, the final tax treatment and calculation of some transactions have some uncertainties. Whether some projects can be disbursed from the cost and expenses before taxes requires needs to get approval from the tax authorities. If the final affirmation of these tax matters differs from the initially estimated amount, the difference shall have an impact on its current and deferred income taxes during the final identification period. (9) Early retirement benefits and supplementary retirement benefits The expenses of the Company's early retirement benefits and supplementary retirement benefits and the amount of liabilities are determined in accordance with various assumptions. These assumptions include the discount rate, the average growth rate of health care costs, the subsidy growth rate of the early retired personnel and retirees and the other factors. The differences between the actual results and assumptions will be immediately identified and included in the costs of the current year. Although the management thought the reasonable assumptions have been adopted, the changes in the actual experience and assumed conditions will impact the costs and liability balances of the Company's internal early retirement benefits and supplementary retirement benefits. 29. Changes of important accounting policy and estimation (1) Changes of major accounting policies □ Applicable √ Not applicable (2) Changes of important accounting estimate □ Applicable √ Not applicable 58 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 30. Other Nil VI. Taxation 1. Major taxes and tax rates Tax Basis Tax rate Tax rate of 17%/16%, 11%/10%, 6% and 5%, rate for exported commodities is stipulated by VAT Taxable income the state with declaration of export tax rebate, rate of tax may be “exempted, credited and refunded” City maintaining Turnover tax 7% & construction tax payable Corporation Taxable income 25%、15% income tax Educational surtax Turnover tax 5% payable Disclose reasons for different taxpaying body Taxpaying body Income tax rate Weifu Mashan, Weifu Chang’an, Weifu International Trade, Weifu ITM, Weifu Schmidt, Weifu Leader 25% (Wuhan), Weifu Leader (Chongqing), Weifu Leader (Nanchang) 2. Tax preference On 17 November 2017, the Company got a “High-Tech Enterprise Certificate” issued jointly by Science & Technology Department of Jiangsu Province, Department of Finance of Jiangsu Province, Jiangsu Provincial Office, SAT and Jiangsu Local Taxation Bureau, certificate No.: GR201732000007. Corporate income tax of the Company shall be taxed by 15% in three years since 1 January 2017 in accordance with State regulations. On 27 December 2017, Weifu Jinning got a “High-Tech Enterprise Certificate” issued jointly by Science & Technology Department of Jiangsu Province, Department of Finance of Jiangsu Province, Jiangsu Provincial Office, SAT and Jiangsu Local Taxation Bureau, certificate No.: GR201732004010. Corporate income tax of the Weifu Jinning shall be taxed by 15% in three years since 1 January 2017 in accordance with State regulations. On 17 November 2017, Weifu Leader got a “High-Tech Enterprise Certificate” issued jointly by Science & Technology Department of Jiangsu Province, Department of Finance of Jiangsu Province, Jiangsu Provincial Office, SAT and Jiangsu Local Taxation Bureau, certificate No.: GR201732001828. Corporate income tax of the Weifu Jinning shall be taxed by 15% in three years since 1 January 2017 in accordance with State regulations. On 29 November 2017, Weifu Tianli got a “High-Tech Enterprise Certificate” issued jointly by Science & Technology Bureau of Ningbo, Department of Finance of Ningbo, Ningbo Office, SAT and Ningbo, Zhejiang Provincial Local Taxation Bureau, certificate No.: GR201733100363. Corporate income tax of the Weifu Tianli 59 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 shall be taxed by 15% in three years since 1 January 2017 in accordance with State regulations. On 17 November 2017, Weifu Autocam got a “High-Tech Enterprise Certificate” issued jointly by Science & Technology Department of Jiangsu Province, Department of Finance of Jiangsu Province, Jiangsu Provincial Office, SAT and Jiangsu Local Taxation Bureau, certificate No.: GR201732001043. Corporate income tax of the Weifu Autocam shall be taxed by 15% in three years since 1 January 2017 in accordance with State regulations. VII. Notes to major items in consolidated financial statements 1. Monetary capital In RMB Item Closing balance Opening balance Cash on hand 594,764.72 736,773.22 Cash in bank 2,941,916,050.54 3,027,702,581.00 Other monetary fund 100,198,959.99 90,270,058.61 Total 3,042,709,775.25 3,118,709,412.83 Other explanation Separate explanation is required for accounts with restricted application purposes, deposited overseas and of potential recovery risks arising from pledge, mortgage or frozen: Item 2018-06-30 2017-12-31 Bank acceptance bill, L/C and other collateral 99,317,091.42 89,623,690.04 Frozen dividend 881,868.57 646,368.57 Total 100,198,959.99 90,270,058.61 Other note: The frozen dividend of RMB 881,868.57 represents the part of dividends distributed by SDEC Power (stock code: 600841) and Miracle Automation (stock code: 002009) in 2017 and 2018 held by the Company as financial assets available for sale. According to the notices numbered Yue 03MC [2016]2490 and Yue 03MC [2016]2492 served by Guangdong Shenzhen Intermediate People’s Court, these dividends were frozen. 2. Note receivables (1) Classification of notes receivable In RMB Item Closing balance Opening balance Bank acceptance bill 1,605,304,038.52 1,399,006,661.54 Commercial acceptance bill 71,633,114.51 65,250,273.29 Total 1,676,937,153.03 1,464,256,934.83 60 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (2) Notes receivable already pledged by the Company at the end of the period In RMB Item Amount pledge at period-end Bank acceptance bill 389,454,825.85 Total 389,454,825.85 (3) Notes endorsement or discount and undue on balance sheet date In RMB Item Amount derecognition at period-end Amount not derecognition at period-end Bank acceptance bill 552,021,420.12 Total 552,021,420.12 (4) Notes transfer to account receivable due for failure implementation by drawer at period-end: Nil 3. Accounts receivable (1) Accounts receivable by category: In RMB Closing balance Opening balance Book balance Bad debt reserve Book balance Bad debt reserve Types Book Accrual Accrual Book value Amount Ratio Amount value Amount Ratio Amount ratio ratio Receivables with bad 2,006,9 debt provision 2,389,03 14,082,1 2,374,955 11,359,20 1,995,577,8 99.93% 0.59% 37,035. 99.90% 0.57% accrual by credit 7,510.65 73.32 ,337.33 4.21 30.90 11 portfolio Accounts with single significant amount 1,594,67 1,594,67 1,935,1 1,935,107 and bad debts 0.07% 100.00% 0.10% 100.00% 8.10 8.10 07.25 .25 provision accrued individually 2,008,8 2,390,63 15,676,8 2,374,955 13,294,31 1,995,577,8 Total 100.00% 0.66% 72,142. 100.00% 0.66% 2,188.75 51.42 ,337.33 1.46 30.90 36 Account receivable with single significant amount and withdrawal bad debt provision separately at period end: 61 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 □ Applicable √ Not applicable Account receivable provided for bad debt reserve under aging analysis method in the groups: √ Applicable □ Not applicable In RMB Closing balance Age Account receivable Bad debt reserve Accrual ratio Sub item of within one year Within 6 months 2,307,180,116.48 6 months to 1 year 64,424,536.74 6,442,453.69 10.00% Subtotal of within 1 year 2,371,604,653.22 6,442,453.69 1-2 years 10,503,584.81 2,100,742.93 20.00% 2-3 years 2,317,159.87 926,863.95 40.00% Over 3 years 4,612,112.75 4,612,112.75 100.00% Total 2,389,037,510.65 14,082,173.32 0.59% Explanation on combination determines: Excluding the account receivable accrual impairment provision separately; based on actual loss ratio of the receivable groups that owes same or similar risk features, which has classify by age in previous years, determine accrual ratio for bad debt provision combine with real condition In combination, withdrawal proportion of bad debt provision based on balance proportion for account receivable □ Applicable √ Not applicable In combination, withdrawal proportion of bad debt provision based on other methods for account receivable: Nil (2) Bad debt provision accrual collected or switch back Bad debt provision accrual was 2,905,380.31 Yuan; the amount collected or switches back amounting to 512,580.00 Yuan. Important bad debt provision collected or switch back: Nil The bad-debt provisions transferred back in the current period are mainly the bad-debt provisions counting and drawing at the end of the prior period were withdrawn by means of monetary fund and banknotes in the current period; (3) Account receivable actual charge off in the period In RMB Item Amount written off Other small companies 10,260.35 Major written-off for the major receivable: Nil 62 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (4) Top 5 receivables at ending balance by arrears party Total period-end balance of top five receivables by arrears party amounting to 1,282,384,362.70 Yuan, takes 53.64 percent of the total account receivable at period-end, bad debt provision accrual correspondingly at period-end amounting as 3,325,257.94 Yuan. (5) Account receivable derecognition due to financial assets transfer Nil (6) Assets and liabilities resulted by account receivable transfer and continues involvement Nil 4. Advance payment (1) Advance payment by age In RMB Closing balance Opening balance Age Amount Ratio Amount Ratio Within one year 91,326,612.65 91.46% 94,641,350.21 96.99% 1-2 years 8,119,187.54 8.13% 2,550,321.91 2.61% 2-3 years 291,797.54 0.29% 319,185.79 0.33% Over 3 years 122,524.57 0.12% 65,339.97 0.07% Total 99,860,122.30 -- 97,576,197.88 -- Explanation on reasons of failure to settle on important advance payment with age over one year: Nil (2) Top 5 advance payment at ending balance by prepayment object Total period-end balance of top five advance payment by prepayment object amounted to 43,603,202.61 Yuan, takes 43.66 percent of the total advance payment at period-end. 5. Interest receivable (1) Category In RMB Item Closing balance Opening balance Time deposit 1,480,250.00 2,281,979.17 Total 1,480,250.00 2,281,979.17 63 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (2) Major overdue interest Nil 6. Dividends payable (1) Dividends payable In RMB Item (or invested unit) Closing balance Opening balance RBCD 303,884,540.74 Zhonglian Automobile Electronic Co., Ltd. 239,400,000.00 Shanghai CD Dengtong Equity Investment 2,985,075.00 Total 546,269,615.74 (2) Important dividends payable with account age over one year Nil 7. Other accounts receivable (1) Other accounts receivable by category In RMB Closing balance Opening balance Book balance Bad debt provision Book balance Bad debt provision Category Book Accrual Accrual Book value Amount Ratio Amount value Amount Ratio Amount ratio ratio Other account receivable with single significant 2,775,55 2,775,55 2,775,5 2,775,552 11.93% 100.00% 25.60% 100.00% amount and 2.63 2.63 52.63 .63 withdrawal bad debt provision separately Other receivables with bad debt 20,492,4 2,652,60 17,839,88 8,067,4 2,852,842 5,214,623.4 88.07% 12.94% 74.40% 35.36% provision accrual by 91.25 6.18 5.07 66.20 .79 1 credit portfolio 23,268,0 5,428,15 17,839,88 10,843, 5,628,395 5,214,623.4 Total 100.00% 23.33% 100.00% 51.91% 43.88 8.81 5.07 018.83 .42 1 Other receivable with single significant amount and withdrawal bad debt provision separately at end of period: 64 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 √ Applicable □ Not applicable In RMB Closing balance Account receivable(units) other receivable Bad debt reserve Accrual ratio Reasons American HESS 1,514,671.20 1,514,671.20 100.00% Bankruptcy Nanjing Jinning Machinery Factory 1,260,881.43 1,260,881.43 100.00% Un-recyclable Total 2,775,552.63 2,775,552.63 -- -- In combination, other accounts receivable whose bad debts provision was accrued by age analysis: √ Applicable □ Not applicable In RMB Closing balance Age Other accounts receivable Bad debt provision Accrual ratio Sub item of within one year Within 6 months 17,570,796.64 6 months to one year 142,703.03 14,270.30 10.00% Subtotal within one year 17,713,499.67 14,270.30 1-2 years 19,594.63 3,918.93 20.00% 2-3 years 208,300.00 83,320.00 40.00% Over 3 years 2,551,096.95 2,551,096.95 100.00% Total 20,492,491.25 2,652,606.18 12.94% Explanations on combination determine: Explanations on combination determine: Excluding the other account receivable accrual impairment provision separately; based on actual loss ratio of the receivable groups that owes same or similar risk features, which has classify by age in previous years, determine accrual ratio for bad debt provision combine with real condition. In combination, withdrawal proportion of bad debt provision based on balance proportion for other account receivable: □ Applicable √ Not applicable In combination, withdrawal proportion of bad debt provision based on other methods for other account receivable: □ Applicable √ Not applicable (2) Bad debt provision accrual collected or switch back Bad debt provision accrual was 18,392.08Yuan; the amount collected or switches back amounting to 218,628.69 Yuan. The major switch back or collected of the bad debt provision in the Period: Nil The bad-debt provisions transferred back in the current period are mainly the bad-debt provisions counting and drawing at the end of the prior period were withdrawn by means of banknotes in the current period; 65 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (3) Other receivables actually written-off during the reporting period Nil (4) Other receivables by nature In RMB Nature Ending book balance Opening book balance Intercourse funds receivable from units 13,940,315.41 4,883,788.59 Cash deposit 3,534,058.10 3,457,080.65 Staff loans and petty cash 5,342,707.17 2,099,504.91 Other 450,963.20 402,644.68 Total 23,268,043.88 10,843,018.83 (5) Top 5 other receivables at ending balance by arrears party In RMB Ratio in total ending Ending Ending balance of Company Nature Age balance of other balance bad bet provision receivables Intercourse Within 6 Baodun (Tianjin) Electrical Co., Ltd. 10,000,000.00 42.98% funds of unit months Ningbo Jiangbei High-Tech Industry Performance Park Development Construction Co., 1,767,000.00 Over 3 years 7.59% 1,767,000.00 bond Ltd. Advance Specific American HESS payment 1,514,671.20 6.51% 1,514,671.20 identification transfer-in Intercourse Specific Nanjing Jinning Machinery Factory 1,260,881.43 5.42% 1,260,881.43 funds of unit identification Nanjing Yinkun Tongchang Assets Intercourse Within 6 883,610.10 3.80% Management Co., Ltd. funds of unit months Total -- 15,426,162.73 -- 66.30% 4,542,552.63 (6) Account receivables related to government subsidies Nil (7) Other receivable for termination of confirmation due to the transfer of financial assets Nil 66 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (8) The amount of assets and liabilities that are transferred other receivable and continued to be involved Nil 8. Inventory (1) Inventory classification In RMB Closing balance Opening balance Item Depreciation Depreciation Book balance Book value Book balance Book value reserve reserve Raw materials 440,849,100.13 81,123,527.46 359,725,572.67 444,304,506.71 83,879,268.03 360,425,238.68 Goods in process 161,751,574.16 15,483,517.38 146,268,056.78 198,648,407.88 15,483,517.38 183,164,890.50 Finished goods 894,902,092.67 159,200,176.74 735,701,915.93 1,098,294,008.21 162,945,096.69 935,348,911.52 Total 1,497,502,766.96 255,807,221.58 1,241,695,545.38 1,741,246,922.80 262,307,882.10 1,478,939,040.70 (2) Inventory depreciation reserve In RMB Increase in the current period Decrease in the current period Item Opening balance Closing balance Accrual Other Switch back or write-off Other Raw materials 83,879,268.03 1,300,000.00 4,055,740.57 81,123,527.46 Goods in process 15,483,517.38 15,483,517.38 Finished goods 162,945,096.69 3,744,919.95 159,200,176.74 Total 262,307,882.10 1,300,000.00 7,800,660.52 255,807,221.58 ① Net realizable value of the inventory refers to: during the day-to-day activities, results of the estimated sale price less costs which are going to happen by estimation till works completed, sales price estimated and relevant taxes. ② Accrual basis for inventory depreciation reserve: Item Accrual basis for inventory impairment Specific basis for recognization provision Materials on The materials sold due to finished goods Results from the estimated sale price of such inventory less the cost hand manufactured, its net realizable value is what will happen, estimated sales expenses and relevant taxes till lower than the book value the goods completed Goods in process The goods in process sold due to finished Results from the estimated sale price of such inventory less the cost goods manufactured, its net realizable value what will happen, estimated sales expenses and relevant taxes till is lower than the book value the goods completed Finished goods its net realizable value is lower than the Results from the estimated sale price less the vary taxes which shall book value be taken in process of sales 67 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 ③Reasons of switch-back for inventory falling price reserves: Item Reasons of switch-back Materials on hand The market price for the materials for selling soaring in the Period, thus switch-back in the inventory falling price reserves which was accrual ④Reasons of write-off for inventory falling price reserves: Item Reasons of write-off Materials on hand Used for production and the finished goods are realized sales Goods in process Goods in process completed in the Period and corresponding finished goods are realized sales in the Period Finished goods Sales in the Period (3) Explanation on capitalization of borrowing costs at ending balance of inventory Nil (4) Assets completed without unsettlement from construction contract at period-end Nil 9. Other current assets In RMB Item Closing balance Opening balance Entrust financing products 4,549,580,000.00 3,841,320,000.00 Receivable export tax rebates 15,440,435.90 14,289,026.22 Prepaid taxes and VAT retained 19,725,423.93 25,338,518.05 Input tax to be deducted and certification 1,090,087.75 2,568,145.27 Other 443,853.15 4,481,600.99 Total 4,586,279,800.73 3,887,997,290.53 10. Financial assets available for sale (1) Particular about financial assets available for sale In RMB Closing balance Opening balance Item Depreciation Depreciation Book balance Book value Book balance Book value reserves reserves Instrument equity 518,669,466.95 59,433,106.95 459,236,360.00 469,495,975.95 59,433,106.95 410,062,869.00 available for sale: Measured by fair 178,332,264.00 178,332,264.00 266,376,600.00 266,376,600.00 68 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 value Measured by cost 340,337,202.95 59,433,106.95 280,904,096.00 203,119,375.95 59,433,106.95 143,686,269.00 Other -- financial 20,000,000.00 20,000,000.00 178,080,000.00 178,080,000.00 products Total 538,669,466.95 59,433,106.95 479,236,360.00 647,575,975.95 59,433,106.95 588,142,869.00 (2) Financial assets available for sale measured by fair value at period-end In RMB Instrument equity Instrument debt Type Total available for sale available for sale Cost /liability of equity instrument/ amortization cost of debt 144,371,235.00 144,371,235.00 instrument Fair value 178,332,264.00 178,332,264.00 Amount of fair value changes that accumulatively reckoned in 33,961,029.00 33,961,029.00 other comprehensive gains (3) Financial assets available for sale measured by cost at period-end In RMB Book balance Depreciation reserves Ratio of share-hol Cash The invested Period-begin Period-beginni Incre Decr ding in divid entity Increased Decreased Period-end Period-end ning ng ased eased invested end entity Guolian 12,000,000. 12,000,000.00 0.95% Securities 00 Guangxi 1,600,000.0 Liufa Co., 1,600,000.00 1,600,000.00 1,600,000.00 1.22% 0 Ltd. Financial Company of Changchai 800,000.00 800,000.00 800,000.00 800,000.00 Group Co., Ltd. HEJUN 33,000,000. VANGUAR 33,000,000.00 33,000,000.00 33,000,000.00 11.72% 00 D GROUP Nanjing 1,000,000.0 1,000,000.00 1,000,000.00 1,000,000.00 1.85% 69 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Hengtai 0 Insurance and Broker Co., Ltd. Henan Gushi Weining Oil 2,033,106.9 2,033,106.95 2,033,106.95 2,033,106.95 Pump & 5 Nozzle Co., Ltd. Beijing Zhike Industrial 86,940,000. Investment 86,940,000.00 11,000,000.00 11,000,000.00 12.66% 00 Holding Group Co., Ltd.(Note) Wuxi Xidong Technologic 5,000,000.0 5,000,000.00 1.43% al Industry 0 Park Co., Ltd. Shanghai IMS Automotive 10,000,000. 10,000,000.00 10,000,000.00 10,000,000.00 12.27% Electronic 00 System Co., Ltd. Shanghai CD Dengtong 50,746,269. 14,925,373.00 35,820,896.00 14.93% Equity 00 Investment Fund Protean 152,143,2 Holdings 152,143,200.00 00.00 Corp. 203,119,375. 152,143,2 Total 14,925,373.00 340,337,202.95 59,433,106.95 59,433,106.95 -- 95 00.00 The 15th meeting of the eighth board of directors of the company reviewed and approved the Proposal on Foreign 70 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Investment. The company will invest 30 million US dollars in the E-round preferred stock issued by Protean and the two parties will establish a Sino-foreign joint venture in China. According to the investment cooperation agreement, the company paid the initial investment of 24 million US dollars on May 21, 2018. The company obtained the equity certificate of subscribing 10,212,765 shares of E-round preferred stock issued by Protean and became a shareholder of the Protean E-round preferred stock with the equity certificate number of Number E-1. (4) Changes of impairment in Period In RMB Instrument equity Instrument debt Type Total available for sale available for sale Balance of impairment accrual at period-begin 59,433,106.95 59,433,106.95 Balance of impairment accrual at period-end 59,433,106.95 59,433,106.95 (5) Where the fair value of equity instruments available for sale drops significantly or not contemporarily at period-end, without impairment provision is made Nil 11. Long-term equity investment In RMB +,- Endin Other Ca g Add compr pit Other balan itio ehensi Impai The invested al Investment gains equit Cash dividend or ce of Opening balance nal ve rment Oth Closing balance entity re recognized under y profit announced impai inve incom accru er du equity chan to issued rment stm e al cti ge provi ent adjust on sion ment I. Joint venture Wuxi Weifu Environment Protection 522,882,789.26 42,852,567.41 565,735,356.67 Catalyst Co., Ltd. Subtotal 522,882,789.26 42,852,567.41 565,735,356.67 II. Associated enterprise RBCD 2,608,796,934.00 706,611,723.39 607,769,081.48 2,707,639,575.91 Zhonglian 959,036,193.36 211,952,191.28 239,400,000.00 931,588,384.64 71 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Automobile Electronic Co., Ltd. Weifu Precision Machinery 49,348,908.96 6,943,964.90 56,292,873.86 Manufacturing Co., Ltd. Subtotal 3,617,182,036.32 925,507,879.57 847,169,081.48 3,695,520,834.41 Total 4,140,064,825.58 968,360,446.98 847,169,081.48 4,261,256,191.08 12. Investment real estate (1) Investment real estate measured at cost √ Applicable □ Not applicable In RMB Construction Item House and building Land use right Total in process I. Original book value 1.Opening balance 63,545,325.48 63,545,325.48 2. Increased in the period (1) Outsourcing (2) Inventory\fixed assets\construction in process transfer-in (3) Increased by combination 3. Decreased in the period (1) Disposal (2) Other transfer-out 4.Closing balance 63,545,325.48 63,545,325.48 II. Accumulated depreciation and accumulated amortization 1.Opening balance 40,000,494.70 40,000,494.70 2. Increased in the period 783,301.87 783,301.87 (1) Accrual or amortization 783,301.87 783,301.87 3. Decreased in the period (1) Disposal (2) Other transfer-out 4.Closing balance 40,783,796.57 40,783,796.57 72 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 III. Depreciation reserves 1.Opening balance 2. Increased in the period (1) Accrual 3. Decreased in the period (1) Disposal (2) Other transfer-out 4.Closing balance IV. Book value 1. Ending Book value 22,761,528.91 22,761,528.91 2. Opening Book value 23,544,830.78 23,544,830.78 (2) Investment real estate measured at fair value □ Applicable √ Not applicable (3) Investment real estate without property certification held Nil 13. Fixed assets (1) Fixed assets In RMB Machinery Transportation Electronic and Item Housing buildings Total equipment equipment other equipment I. Original book value 1.Opening balance 1,537,881,197.20 2,214,135,391.61 40,678,767.59 423,482,779.18 4,216,178,135.58 2. Increased in the period 13,805,750.48 122,279,067.31 2,666,200.95 53,131,026.10 191,882,044.84 (1) Purchase 17,920,740.54 208,172.41 3,737,953.77 21,866,866.72 (2) Construction in process 13,805,750.48 104,358,326.77 2,458,028.54 49,393,072.33 170,015,178.12 transfer-in (3) Increased by combination 3. Decreased in the Period 15,081,226.35 7,279,444.18 10,203,624.37 32,564,294.90 (1) Disposal or scrapping 15,081,226.35 7,279,444.18 10,203,624.37 32,564,294.90 4.Closing balance 1,551,686,947.68 2,321,333,232.57 36,065,524.36 466,410,180.91 4,375,495,885.52 73 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 II. Accumulated depreciation 1.Opening balance 283,668,171.81 1,077,183,649.52 29,697,332.26 185,833,218.62 1,576,382,372.21 2. Increased in the period 25,793,559.46 84,971,976.30 1,517,629.56 29,730,334.80 142,013,500.12 (1) Accrual 25,793,559.46 84,971,976.30 1,517,629.56 29,730,334.80 142,013,500.12 3. Decreased in the Period 14,791,563.81 6,421,864.04 1,632,480.02 22,845,907.87 (1) Disposal or scrapping 14,791,563.81 6,421,864.04 1,632,480.02 22,845,907.87 4.Closing balance 309,461,731.27 1,147,364,062.01 24,793,097.78 213,931,073.40 1,695,549,964.46 III. Depreciation reserves 1.Opening balance 48,038,049.98 73,320.38 6,811,764.47 54,923,134.83 2. Increased in the period (1) Accrual 3. Decreased in the Period 534,612.88 0.48 0.64 534,614.00 (1) Disposal or scrapping 534,612.88 0.48 0.64 534,614.00 4.Closing balance 47,503,437.10 73,319.90 6,811,763.83 54,388,520.83 IV. Book value 1. Ending Book value 1,242,225,216.41 1,126,465,733.46 11,199,106.68 245,667,343.68 2,625,557,400.23 2. Opening Book value 1,254,213,025.39 1,088,913,692.11 10,908,114.95 230,837,796.09 2,584,872,628.54 (2) Temporarily idle fixed assets Nil (3) Fixed assets acquired by financing lease Nil (4) Fixed assets acquired by operating lease Nil (5) Certificate of title un-completed In RMB Item Book value Reasons Boiler room and guard house of Weifu Jinning 2,876,014.42 Still in process of relevant property procedures Plant and office building of Weifu Chang’an 44,885,378.07 Still in process of relevant property procedures 74 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 14. Construction in progress (1) Construction in progress In RMB Closing balance Opening balance Item Depreciation Depreciation Book balance Book value Book balance Book value reserves reserves 2nd Phase construction project 3,530,380.40 3,530,380.40 3,364,768.05 3,364,768.05 in industrial park Weifu Tianli Technical 18,086,324.59 18,086,324.59 16,518,417.24 16,518,417.24 Transformation Project Technical transformation of parent 51,456,827.21 1,470,033.00 49,986,794.21 23,611,775.63 1,470,033.00 22,141,742.63 company Technical transformation of Weifu 84,307,233.92 84,307,233.92 32,705,249.53 32,705,249.53 Autocam Other project 41,794,711.58 2,096,342.62 39,698,368.96 27,711,626.45 2,096,342.62 25,615,283.83 Total 199,175,477.70 3,566,375.62 195,609,102.08 103,911,836.90 3,566,375.62 100,345,461.28 (2) Changes of major projects under construction In RMB Acc umu includi Inter Propor lated ng: est tion of amo interes capit Pr Sour Bu Fixed assets Other project unt t aliza Opening increased in the Closing og ceof Item dg transfer-in in decreased in invest of capital tion balance Period balance res fund et the Period the Period ment inter ized rate s s in est amoun of budget capit t of the the aliza year year tion 2nd Phase constructi on project Oth 3,364,768.05 7,282,775.95 7,117,163.60 3,530,380.40 in er industrial park 75 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Weifu Tianli Technical Oth 16,518,417.24 1,567,907.35 18,086,324.59 Transform er ation Project Technical transforma Oth tion of 23,611,775.63 90,442,603.61 62,597,552.03 51,456,827.21 er parent company Technical transforma Oth tion of 32,705,249.53 88,909,818.12 37,307,833.73 84,307,233.92 er Weifu Autocam 157,380,766.1 Total 76,200,210.45 188,203,105.03 107,022,549.36 -- -- -- 2 (3) The provision for impairment of construction projects Nil 15. Intangible assets (1) Particular about intangible assets In RMB Non-patent Trademark and Computer Item Land use right Patent Total technology trademark license software I. Original book value 1.Opening balance 382,073,520.00 3,539,793.05 41,597,126.47 51,218,449.46 478,428,888.98 2. Increased in the period 1,181,977.78 1,181,977.78 (1) Purchase 1,181,977.78 1,181,977.78 (2) Internal R&D (3) Increased by combination 3. Decreased in the period (1) Disposal 4.Closing balance 382,073,520.00 3,539,793.05 41,597,126.47 52,400,427.24 479,610,866.76 II. Accumulated amortization 76 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 1.Opening balance 70,825,229.06 2,271,368.77 9,709,000.00 38,344,247.79 121,149,845.62 2. Increased in the period 4,190,708.88 176,989.86 4,559,690.41 8,927,389.15 (1) Accrual 4,190,708.88 176,989.86 4,559,690.41 8,927,389.15 3. Decreased in the period (1) Disposal 4.Closing balance 75,015,937.94 2,448,358.63 9,709,000.00 42,903,938.20 130,077,234.77 III. Impairment provision 1.Opening balance 16,646,900.00 16,646,900.00 2. Increased in the period (1) Accrual 3. Decreased in the period (1) Disposal 4.Closing balance 16,646,900.00 16,646,900.00 IV. Book value 1. Ending Book value 307,057,582.06 1,091,434.42 15,241,226.47 9,496,489.04 332,886,731.99 2. Opening Book value 311,248,290.94 1,268,424.28 15,241,226.47 12,874,201.67 340,632,143.36 Ratio of the intangible assets from internal R&D in balance of intangible assets at period-end was 0%. (2) Land use rights without certificate of ownership Nil 16. Goodwill (1) Original book value of goodwill In RMB The invested entity or items Opening balance Increase during the period Decreased during the period Closing balance Weifu Tianli 1,784,086.79 1,784,086.79 Total 1,784,086.79 1,784,086.79 (2) Goodwill depreciation reserves Nil Other note Goodwill of the Weifu Tianli: the Company controlling and combine Weifu Tianli by increasing the capital, the goodwill is the number that combination cost greater than the fair value of identical net assets of Weifu Tianli 77 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 17. Long-term unamortized expenses In RMB Item Opening balance increased in the Period Amortized in the Period Other decrease Closing balance Remodeling costs etc. 2,969,770.81 6,075,566.34 1,093,846.42 7,951,490.73 Total 2,969,770.81 6,075,566.34 1,093,846.42 7,951,490.73 18. Deferred income tax assets and deferred income tax liabilities (1) Deferred income tax assets un-offset In RMB Closing balance Opening balance Item Deductible temporary Deferred income Deductible temporary Deferred income difference tax assets difference tax assets Bad debt reserves 20,748,735.98 3,154,735.07 18,591,825.81 2,834,842.52 Inventory falling price reserves 234,020,244.05 36,250,953.16 240,520,904.57 37,599,678.75 Fixed assets depreciation reserves 20,198,782.12 3,246,011.41 20,459,349.51 3,285,096.52 Construction in process depreciation 3,566,375.62 534,956.34 3,566,375.62 534,956.34 reserves Intangible assets depreciation reserves 16,646,900.00 2,497,035.00 16,646,900.00 2,497,035.00 Financial assets available for sale 10,000,000.00 1,500,000.00 10,000,000.00 1,500,000.00 depreciation reserves Deferred income 436,541,555.15 65,499,039.14 447,676,720.31 67,151,508.04 Internal un-realized profit 29,144,718.41 5,398,961.55 28,149,575.30 4,972,350.93 Payable salary, accrued expenses etc. 531,770,116.00 81,259,345.81 526,642,684.53 81,166,909.39 Depreciation assets, amortization 16,162,648.59 3,032,645.55 9,768,298.31 1,465,244.74 difference Total 1,318,800,075.92 202,373,683.03 1,322,022,633.96 203,007,622.23 (2) Deferred income tax liabilities un-offset In RMB Closing balance Opening balance Item Taxable temporary Deferred income tax Taxable temporary Deferred income tax differences liabilities differences liabilities Asset evaluation increment for 13,121,739.54 1,968,260.92 13,491,849.42 2,023,777.40 combination not under the same control 78 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Change of fair value for the financial 33,961,029.00 5,094,154.34 102,552,300.00 15,382,844.99 assets available for sale Total 47,082,768.54 7,062,415.26 116,044,149.42 17,406,622.39 (3) Deferred income tax assets and deferred income tax liabilities listed after off-set In RMB Trade-off between the Ending balance of Trade-off between the Opening balance of Item deferred income tax deferred income tax assets deferred income tax assets and deferred income tax assets assets and liabilities or liabilities after off-set liabilities at period-begin or liabilities after off-set Deferred income tax 202,373,683.03 203,007,622.23 assets Deferred income tax 7,062,415.26 17,406,622.39 liabilities (4) Details of unrecognized deferred income tax assets In RMB Item Closing balance Opening balance Bad debt reserves 356,274.25 330,881.07 Inventory falling price reserves 21,786,977.53 21,786,977.53 Loss of subsidiary of Weifu ITM etc. 145,170,897.49 160,376,822.42 Fixed assets depreciation reserves 34,189,738.71 34,463,785.32 Provision for impairment of financial assets available for sale 49,433,106.95 49,433,106.95 Total 250,936,994.93 266,391,573.29 (5) Deductible losses of un-recognized deferred income tax assets expired on the followed year In RMB Year Ending amount Opening amount Note 2018 5,322,336.59 23,365,456.08 Weifu ITM and other subsidiaries have operating losses 2019 35,159,237.40 35,159,237.40 Weifu ITM and other subsidiaries have operating losses 2020 44,811,748.35 44,811,748.35 Weifu ITM and other subsidiaries have operating losses 2021 46,080,956.48 46,080,956.48 Weifu ITM and other subsidiaries have operating losses 2022 10,959,424.11 10,959,424.11 Weifu Mashan and other subsidiaries have operating losses Weifu Leader (Wuhan) and Weifu Leader (Nanchang) have 2023 2,837,194.56 operating losses Total 145,170,897.49 160,376,822.42 -- 79 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 19. Other non-current assets In RMB Item Closing balance Opening balance Engineering equipment paid in advance 203,344,783.19 195,088,675.74 Total 203,344,783.19 195,088,675.74 20. Short-term loans (1) Types of short-term loans In RMB Item Closing balance Opening balance Debt of honor 359,000,000.00 243,000,000.00 Total 359,000,000.00 243,000,000.00 Note for types of short-term loans: Nil (2) Overdue short-term loans without payment Nil 21. Notes payable In RMB Type Closing balance Opening balance Bank acceptance 1,086,240,637.65 947,976,759.10 Total 1,086,240,637.65 947,976,759.10 Notes expired at period-end without paid was 0.00 Yuan. 22. Account payable (1) Account payable In RMB Item Closing balance Opening balance Within 1 year 2,443,885,021.54 2,452,140,381.86 1-2 years 74,618,775.30 43,524,905.85 2-3 years 4,528,284.50 2,318,008.01 Over 3 years 73,935,972.62 72,972,910.11 80 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Total 2,596,968,053.96 2,570,956,205.83 (2) Important account payable with account age over one year Nil 23. Account received in advance (1) Account received in advance In RMB Item Closing balance Opening balance Within 1 year 32,550,368.42 34,272,416.20 1-2 years 4,880,699.28 7,271,092.26 2-3 years 478,964.54 346,383.11 Over 3 years 834,094.66 930,344.50 Total 38,744,126.90 42,820,236.07 (2) Important account received in advance with account age over one year Nil (3) Project settled without completed from construction contract at end of the period Nil 24. Wages payable (1) Wages payable In RMB Increase during Decreased during Closing Item Opening balance the period the period balance I. Short-term compensation 147,444,265.93 552,717,728.57 551,598,001.98 148,563,992.52 II. Post-employment welfare- defined contribution plans 34,299,401.90 75,365,636.13 86,492,467.45 23,172,570.58 III. Dismissed welfare 3,397,642.16 2,534,994.78 862,647.38 IV. Other welfare due within one year 121,670,000.00 41,525,853.95 80,144,146.05 V. Other short-term welfare-Housing subsidies, 20,967,367.30 75,247.00 1,001,395.68 20,041,218.62 employee benefits and welfare funds Total 327,778,677.29 628,158,611.70 683,152,713.84 272,784,575.15 81 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (2) Short-term compensation In RMB Item Opening balance Increase during the period Decreased during the period Closing balance 1. Wages, bonuses, allowancesand subsidies 128,145,458.85 444,358,686.59 442,039,905.59 130,464,239.85 2. Welfare for workers and staff 0.00 36,510,439.50 36,510,439.50 0.00 3. Social insurance 8,642,880.67 34,717,154.89 36,349,752.03 7,010,283.53 Including: Medical insurance 6,749,035.02 27,589,802.57 28,777,883.18 5,560,954.41 Work injury insurance 1,221,106.56 4,482,888.57 4,694,772.55 1,009,222.58 Maternity insurance 672,739.09 2,644,463.75 2,877,096.30 440,106.54 4. Housing accumulation fund 1,062,011.00 30,258,592.00 30,667,173.00 653,430.00 5. Labor union expenditure and 9,593,915.41 6,872,855.59 6,030,731.86 10,436,039.14 personnel education expense Total 147,444,265.93 552,717,728.57 551,598,001.98 148,563,992.52 (3) Defined contribution plans In RMB Item Opening balance Increase during the period Decreased during the period Item 1. Basic endowment insurance 17,818,243.64 63,188,840.92 67,471,461.20 13,535,623.36 2. Unemployment insurance 1,664,483.26 1,600,662.13 1,622,429.76 1,642,715.63 3. Enterprise annuity 14,816,675.00 10,576,133.08 17,398,576.49 7,994,231.59 Total 34,299,401.90 75,365,636.13 86,492,467.45 23,172,570.58 Other explanation: 1. Post-employment welfare- defined contribution plans: The Company participates in the pension insurance and unemployment insurance plans established by government authorities by laws. Under these plans, the Company makes monthly contribution to these plans based on 19% and 0.5% of the social insurance contribution base for 2017 respectively. Other than the aforesaid monthly contribution, the Company takes no further payment obligation. The relevant expenditure is included in current profit or loss or cost of relevant assets when occurs. Found more of enterprise annuity in Note XVI-4.” Annuity plan” 2. Dismiss welfare: The wages payable resulted from the implementation of inner retirement plan. 25. Tax payable In RMB Item Closing balance Opening balance Value-added tax 35,720,771.51 26,675,795.24 82 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Enterprise income tax 48,507,346.26 53,333,508.69 Individual income tax 948,422.26 3,102,645.73 Urban maintenance and construction tax 2,089,045.74 1,873,973.56 Educational surtax 1,492,175.51 1,338,552.54 Other (including stamp tax and local funds) 5,681,257.06 7,545,214.60 Total 94,439,018.34 93,869,690.36 26. Interest payable In RMB Item Closing balance Opening balance Long-term borrowing interest for installment 90,972.22 79,826.39 Interest payable for short-term loans 464,037.50 322,102.04 Total 555,009.72 401,928.43 Major overdue interest: Nil 27. Dividends payable In RMB Item Closing balance Opening balance Common stock dividends 1,210,740,700.00 Total 1,210,740,700.00 Other explanation, including important dividend payables without payment over one year, and explained u-payment reasons: Nil 28. Other payable (1) Classification of other payable according to nature of account In RMB Item Closing balance Opening balance Deposit and margin 20,194,038.96 20,977,476.26 Social insurance and reserves funds that withholding 7,139,777.20 7,689,385.68 Intercourse funds of units 31,165,472.64 25,754,545.98 Other 6,857,374.07 8,516,532.98 Total 65,356,662.87 62,937,940.90 83 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (2) Significant other payable with over one year age In RMB Item Closing balance Reasons of un-paid or carry-over Nanjing Jidian Industrial Group Co., Ltd. 4,500,000.00 Intercourse funds Total 4,500,000.00 -- 29. Noncurrent liabilities due within one year In RMB Item Closing balance Opening balance Long-term loans due within one year 5,000,000.00 10,000,000.00 Total 5,000,000.00 10,000,000.00 30. Long-term loans (1) Classification of long-term loans In RMB Item Closing balance Opening balance Guaranteed loan 45,000,000.00 45,000,000.00 Total 45,000,000.00 45,000,000.00 Note for classification of long-term loans: Nil Other explanation, including interest rate interval: nil 31. Long-term account payable (1) Listed by nature In RMB Item Closing balance Opening balance Hi-tech Branch of Nanjing Finance Bureau [note ①] 1,140,000.00 1,140,000.00 Hi-tech Branch of Nanjing Finance Bureau[note ②] 1,250,000.00 1,250,000.00 Hi-tech Branch of Nanjing Finance Bureau[note ③] 1,230,000.00 1,230,000.00 Loan transferred from treasury bond [note ④] 1,017,272.00 1,356,363.00 Hi-tech Branch of Nanjing Finance Bureau[note ⑤] 2,750,000.00 2,750,000.00 Hi-tech Branch of Nanjing Finance Bureau[note ⑥] 1,030,000.00 1,030,000.00 Hi-tech Branch of Nanjing Finance Bureau[note ⑦] 960,000.00 960,000.00 84 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Hi-tech Branch of Nanjing Finance Bureau[note ⑧] 5,040,000.00 5,040,000.00 Hi-tech Branch of Nanjing Finance Bureau[note ⑨] 2,740,000.00 2,740,000.00 Hi-tech Branch of Nanjing Finance Bureau[note ⑩] 2,250,000.00 Total 19,407,272.00 17,496,363.00 Other explanation: [Note ① To encourage Weifu Jinning to enter Nanjing High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech branch of Finance Bureau of Nanjing for supporting use, the term is from 20 October 2005 to 20 October 2020. Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note ②] To encourage Weifu Jinning to enter Nanjing High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech branch of Finance Bureau of Nanjing for supporting use, the term is from 20 July 2006 to 20 July 2021. Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note ③] To encourage Weifu Jinning to enter Nanjing High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech branch of Finance Bureau of Nanjing for supporting use, the term is from 17 September 2007 to 17 September 2022. Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note ④] Loan transferred from treasury bond: Weifu Jinning received RMB1.87 million Yuan of special funds from budget of the central government, and RMB1.73 million Yuan of special funds from budget of the local government. The non-operating income transferred in was 1.87 million Yuan in 2011 which was confirmed not to return, if the Company pays back special funds of 3.73 million Yuan to the local government in 11 years since 2012, then the Company needs to repay the principal of 339,091.00 Yuan each year. [Note ⑤] To encourage Weifu Jinning to enter Nanjing High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech branch of Finance Bureau of Nanjing for supporting use, the term is from 10 November 2008 to 10 November 2023. Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note ⑥] To encourage Weifu Jinning to enter Nanjing High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech branch of Finance Bureau of Nanjing for supporting use, the term is from 27 October 2009 to 27 October 2024. Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note ⑦] To encourage Weifu Jinning to enter Nanjing High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech branch of Finance Bureau of Nanjing for supporting use, the term is from 27 December 2010 to 27 December 2025. Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note ⑧] To encourage Weifu Jinning to enter Nanjing High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech branch of Finance Bureau of Nanjing for supporting use, the term is from 28 December 2011 to 28 December 2026. Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note ⑨] To encourage Weifu Jinning to enter Nanjing High-tech Technology Industry Development Zone, financial supporting capital is allotted by High-tech branch of Finance Bureau of Nanjing for supporting use, the term is from 18 December 2013 to 18 December 2028. Provided that the operation period in the zone is less than 15 years, financial supporting capital will be reimbursed. [Note ⑩]: Financial support funds are the support funds provided by the management office of Nanjing Intelligent 85 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Manufacturing Industrial Park to encourage Weifu Jinning to enter Nanjing Intelligent Manufacturing Industrial Park, and the allotted time is from February 11, 2018 to February 11, 2033. If the operating period in the area is less than 15 years, the financial support funds shall be refunded. 32. Long-term employee payable (1) Long-term employee payable In RMB Item Closing balance Opening balance II. Dismiss welfare 13,782,896.07 13,782,896.07 III. Other long-term welfare 16,665,236.81 16,665,236.81 Total 30,448,132.88 30,448,132.88 (2) Change of defined benefit plans Nil 33. Special payable In RMB Opening Increase during Decreased during Item Closing balance Causes balance the period the period Removal compensation of subsidiary Weifu 18,265,082.11 18,265,082.11 Jinning [note ] Total 18,265,082.11 18,265,082.11 -- Other explanation: Note: Removal compensation of subsidiary Weifu Jinning: in line with regulation of the house acquisition decision of People’s government of Xuanwu District, Nanjing City, Ning Xuan Fu Zheng Zi (2012) No.001, part of the lands and property of Weifu Jingning needs expropriation in order to carry out the comprehensively improvement of Ming Great Wall. According to the house expropriation and compensation agreement in state-owned lands signed between Weifu Jinning and House Expropriation Management Office of Xuanwu District, Nanjing City, RMB 19.7067 million in total are compensate, including operation losses from lessee RMB 1.4416 million in total. The above compensation was received in last period and is making up for the losses from lessee, and the above lands and property have not been collected up to 30 August 2018. 34. Deferred income In RMB Item Opening balance Increase during the period Decreased during the period Closing balance Causes Government grand 451,281,721.77 1,395,000.00 13,132,459.71 439,544,262.06 86 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Total 451,281,721.77 1,395,000.00 13,132,459.71 439,544,262.06 -- Item with government grants involved: In RMB Amount reckoned Amount Cost Othe Assets New grants in in reckoned into reduction r Item Opening balance Ending balance related/Incom the Period non-operat other income in the chan e related ion in the period period ges revenue Industrialization project for injection VE pump system Assets with electronically 3,605,001.46 721,000.30 2,884,001.16 related/Incom controlled high e related pressure for less-emission diesel used Appropriation on reforming of production line technology and R&D ability of 7,100,000.00 7,100,000.00 Assets related common rail system for diesel by distributive high-voltage Fund of industry Income 60,400,000.00 60,400,000.00 upgrade (2012) related Fund of industry Income 60,520,000.00 60,520,000.00 upgrade (2013) related Appropriation on central basic 2,857,142.87 2,857,142.87 Assets related construction investment R&D and industrialization of the high pressure variable pump of the 9,956,904.72 9,956,904.72 Assets related common rail system of diesel engine for automobile 87 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Research institute of motor vehicle exhaust 3,116,125.34 3,116,125.34 Assets related aftertreatment technology Fund of industry Income 36,831,000.00 36,831,000.00 upgrade (2014) related New-built assets compensation after 170,951,302.78 11,813,783.39 159,137,519.39 Assets related the removal of parent company Fund of industry Income 40,000,000.00 40,000,000.00 upgrade (2016) related Guiding capital for the technical reform from State Hi-Tech 9,740,000.00 9,740,000.00 Assets related Technical Commission Implementation of the variable cross-section 12,438,231.54 12,438,231.54 Assets related turbocharger for diesel engine Demonstration project for 1,808,806.64 880,000.00 2,688,806.64 Assets related intelligent manufacturing Assets related Other 31,957,206.42 515,000.00 597,676.02 31,874,530.40 Income related Total 451,281,721.77 1,395,000.00 13,132,459.71 439,544,262.06 -- Other explanation: (1) Appropriation on industrialization project of electrical control and high voltage jet VE system of low emissions diesel: in September 2009, Weifu Jinning signed “Project Contract of Technology Outcome Transferring Special Capital in Jiangsu Province” with Nanjing Technical Bureau, according to which Weifu Jinning received appropriation RMB 6.35 million in 2009, RMB 4.775 million received in 2010 and RMB 0.875 million received in 2011. According to the contract, the attendance date of this project was: from October of 2009 to March of 2012. This contract agreed 62% of newly increased investment in project would be spent in fixed assets investment which are belongs to the government grand with assets/income concerned. In 2013, accepted by the science & technology agency of Jiangsu Province, and RMB 4,789,997.04 with income related was reckoned into current operation revenue directly; the RMB 7,210,002.96 with assets related was amortized during the 88 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 predicted service period of the assets, and RMB 721,000.30 amortized in the Period. (2) The appropriation for research and development ability of distributive high-pressure common rail system for diesel engine use and production line technological transformation project: according to XCJ No. [2010] 59, the Company has received special funds of 7.1 million Yuan appropriated by Finance Bureau of Wuxi New District in 2011 and used for the Company’s research and development ability of distributive high-pressure common rail system for diesel engine use and production line technological transformation project; this appropriation belongs to government subsidies related to assets, and will be amortized according to the depreciation process of the underlying assets when the project is completed. (3) Industry upgrading funds (2012): In accordance with the document Xi Xin Guanjing Fa [2012] No.216 and Document Xi Xin Guancai Fa [2012] No. 85, the Company received funds of 60.4 million Yuan appropriated for industry upgrading this year. (4) Industry upgrading funds (2013): In accordance with the document Xi Xin Guan Jing Fa [2013] No.379, Xi Xin Guan Jing Fa [2013] No.455, Xi Xin Guan Cai Fa [2013] No.128 and Xi Xin Guan Cai Fa [2013] No.153, the Company received funds of 60.52 million Yuan appropriated for industry upgrading in 2013. (5) Appropriation for investment of capital construction from the central government: In accordance with the document Xi Caijian [2012] No.43, the Company received appropriation of 5 million Yuan for investment of capital construction from the central government in 2012. The project has passed the acceptance check in current period, this appropriation should be amortized within the surplus service life of current assets. (6) R&D and industrialization of the high pressure variable pump of the common rail system of diesel engine for automobile: the Company received appropriated for the project in 2013 with 8.05 million Yuan in line with documents of Xi Ke Ji [2013] No.186, Xi Ke Ji [2013] No.208, Xi Cai Gong Mao [2013] No.104, Xi Cai Gong Mao [2013] No.138, Xi Ke Ji [2014] No.125, Xi Cai Gong Mao [2014] No.58, Xi Ke Ji [2014] No. 246 and Xi Cai Gong Mao [2014] No.162. Received RMB 3 million in 2014 and RMB 0.45 million in 2015; and belongs to government grant with assets concerned, and shall be amortized according to the depreciation process. (7) Vehicle exhaust after-treatment technology research institute project: in 2012, the subsidiary Weifu Leader has applied for equipment purchase assisting funds to Wuxi Huishan Science and Technology Bureau and Wuxi Science and Technology Bureau for the vehicle exhaust after-treatment technology research institute project. This declaration has been approved by Wuxi Huishan Science and Technology Bureau and Wuxi Science and Technology Bureau in 2012, and the company has received appropriation of 2.4 million Yuan in 2012, and received appropriation of 1.6 million Yuan in 2013. This appropriation belongs to government subsidies related to assets and will be amortized according to the depreciation process. (8) Industry upgrading funds (2014): In accordance with the document Xi Xin Guan Jing Fa [2014] No.427 and Xi Xin Guan Cai Fa [2014] No.143, the Company received funds of 36.831 million Yuan appropriated for industry upgrading in 2014. (9) New-built assets compensation after the removal of parent company: policy relocation compensation received by the Company, and will be amortized according to the depreciation of new-built assets, amount of 89 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 11,813,783.39 Yuan amortize in the year. (10) Fund of industry upgrade (2016): In accordance with the document Xi Xin Guan Jing Fa [2016] No.585 and Xi Xin Fa [2016] No.70, the Company received funds of 40 million Yuan appropriated for industry upgrading in 2016. (11) Guiding capital for the technical reform from State Hi-Tech Technical Commission: In accordance with the document Xi Jing Xin ZH [2016] No.9 and Xi Cai GM [2016] No.56, the Company received a 9.74 million Yuan for the guiding capital of technical reform (1st batch) from Wuxi for year of 2016, which included in the government subsidy with assets-concerned, and will amortized according to the depreciation process after acceptance (12) Implementation of the variable cross-section turbocharger for diesel engine: In accordance with the document YCZ Fa[2016] NO.623 and “Strong Industrial Base Project Contract for year of 2016”, subsidiary Weifu Tianli received a specific subsidy of 16.97 million Yuan, the fund supporting strong industrial base project (made-in-China 2025) of central industrial transformation and upgrading 2016 from Ministry of Industry and Information Technology; and belongs to government grant with assets concerned, and shall be amortized according to the depreciation process. (13) Demonstration project for intelligent manufacturing: under the Notice Relating to Selection of the Intelligent Manufacturing Model Project in Huishan District in 2016 (HJXF[2016]No.36), a fiscal subsidy of 3,000,000 Yuan was granted by relevant government authority in Huishan district to our subsidiary Weifu Leader in 2017, totally 0.88 million Yuan appropriate funds received in the year, to be utilized for transformation and upgrade of Weifu Leader’s intelligent manufacturing facilities. This subsidy belongs to government grant related to assets which shall be amortized based on the depreciation progress of the assets. 35. Share capital In RMB Changeduringtheperiod(+,-) Opening balance New shares Shares transferred from Closing balance Bonus share Other Subtotal issued capital reserve Total shares 1,008,950,570.00 1,008,950,570.00 36. Capital reserve In RMB Item Opening balance Increase during the period Decreased during the period Closing balance Capital premium (Share 3,372,647,413.97 3,372,647,413.97 capital premium) Other Capital reserves 45,193,988.92 1,824,597.47 43,369,391.45 Total 3,417,841,402.89 1,824,597.47 3,416,016,805.42 90 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 37. Other consolidated income In RMB Current period Less: written in other comprehensive Closing Account before Belong to Item Opening balance income in Less : income tax Belong to parent minority balance income tax in the previous period expense company after taxshareholder and carried period s after tax forward to gains and losses in current period II. Other comprehensive income items which 87,169,455.01 -59,786,808.00 8,804,463.00 -10,288,690.65 -58,302,580.35 28,866,874.66 will be reclassified subsequently to profit or loss Gains or losses arising from changes in fair value 87,169,455.01 -59,786,808.00 8,804,463.00 -10,288,690.65 -58,302,580.35 28,866,874.66 of available-for-sale financial assets Total other 87,169,455.01 -59,786,808.00 8,804,463.00 -10,288,690.65 -58,302,580.35 28,866,874.66 consolidated income 38. Reasonable reserve In RMB Increase during the Decrease during this Item Opening balance Closing balance period period Safety production costs 2,606.93 10,050,468.85 8,933,473.96 1,119,601.82 Total 2,606.93 10,050,468.85 8,933,473.96 1,119,601.82 Other explanation, including changes and reasons for changes: According to the “management method of extraction and use the safety production costs for enterprise” Cai Qi [2012] No.16 jointly issued by Ministry of Finance and Administration of Production Safety Supervision, the provision is based on the actual operation revenue of last period, extract on average month-by-month basis through excess regressive method Among the above safety production costs, including the safety production costs accrual by the Company in line with regulations and the parts enjoy by shareholders of the Company in safety production costs accrual by subsidiary in line with regulations. 91 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 39. Surplus reserves In RMB Item Opening balance Increase during the period Decrease during this period Closing balance Statutory surplus 510,100,496.00 510,100,496.00 reserves Total 510,100,496.00 510,100,496.00 Other explanation, including changes and reasons for changes: Withdrawal of the statutory surplus reserves: Pursuit to the Company Law and Article of Association, the Company extracted statutory surplus reserve on 10 percent of the net profit. No more amounts shall be withdrawal if the accumulated statutory surplus reserve takes over 50 percent of the registered capital. 40. Retained profit In RMB Item Current period Last period Retained profits at the end of last period before adjustment 9,811,609,138.92 7,845,639,990.88 Retained profits at the beginning of the period after adjustment 9,811,609,138.92 7,845,639,990.88 Add: The net profits belong to owners of patent company of this period 1,545,242,704.92 2,571,339,490.04 Common dividend payable 1,210,740,700.00 605,370,342.00 Retained profit at period-end 10,146,111,143.84 9,811,609,138.92 Details about adjusting the retained profits at the beginning of the period: 1) The retroactive adjustments to Accounting Standards for Business Enterprises and its relevant new regulations affect the retained profits at the beginning of the period amounting to 0 Yuan. 2) The changes in accounting policies affect the retained profits at the beginning of the period amounting to 0 Yuan. 3) The major accounting error correction affects the retained profits at the beginning of the period amounting to 0 Yuan 4) Merge scope changes caused by the same control affect the retained profits at the beginning of the period amounting to 0 Yuan. 5) Other adjustments affect the retained profits at the beginning of the period amounting to 0 Yuan 41. Operating income and cost In RMB Current period Last period Item Income Cost Income Cost Main operating 4,725,759,054.05 3,682,028,566.53 4,480,811,897.39 3,526,184,596.99 Other operating 235,042,836.94 207,561,723.16 247,313,701.63 210,106,341.87 Total 4,960,801,890.99 3,889,590,289.69 4,728,125,599.02 3,736,290,938.86 92 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 42. Business tax and surcharges In RMB Item Current period Last period City maintenance and construction tax 15,131,214.76 15,554,573.84 Educational surtax 10,807,786.47 11,107,313.56 Property tax 7,130,285.13 6,488,252.36 Land use tax 3,243,530.28 3,131,115.90 Vehicle use tax 24,297.00 18,915.00 Stamp duty 1,578,877.86 1,556,803.30 Other taxes 84,360.90 5,308.52 Total 38,000,352.40 37,862,282.48 43. Sales expenses In RMB Item Current period Last period Salary and fringe benefit 23,852,704.11 16,800,347.95 Consumption of office materials and business travel charge 5,767,944.92 5,184,310.23 Transportation charge 19,146,343.03 17,050,992.80 Warehouse charge 3,241,966.63 1,546,815.48 Three-guarantee fee 40,015,843.08 20,963,280.32 Business entertainment fee 8,251,206.32 6,230,440.89 Other 6,071,551.76 3,783,074.99 Total 106,347,559.85 71,559,262.66 44. Administration expenses In RMB Item Current period Last period Salary and fringe benefit 94,992,042.41 116,204,076.96 Depreciation charger and long-term assets amortization 24,091,878.82 23,516,873.88 Consumption of office materials and business travel charge 7,840,515.40 10,088,373.09 Incentive fund 64,279,800.00 41,805,000.00 Other 222,779,142.15 207,954,410.80 Total 413,983,378.78 399,568,734.73 93 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 45. Financial expenses In RMB Item Current period Last period Interest expenses 9,075,955.05 4,482,686.51 Note discount interest expenses 409,282.24 402,851.58 Saving interest income -11,684,097.62 -9,918,625.28 Gains/losses from exchange -491,644.75 6,084,256.36 Handling charges 913,596.71 636,882.15 Total -1,776,908.37 1,688,051.32 Other explanation: The interest expenses for year of 2017 including the 1,135,848.00 Yuan received of regards for the provincial engineering center 46. Asset impairment loss In RMB Item Current period Last period I. Bad debt loss 2,192,563.70 1,918,243.57 II. Inventory falling price loss -2,202,651.08 -13,214,717.13 Total -10,087.38 -11,296,473.56 47. Investment income In RMB Item Current period Last period Income of long-term equity investment calculated based on equity 968,640,145.91 833,565,520.64 Investment income from holding financial assets available for sales 3,220,575.00 235,500.00 Investment income obtained from disposal of financial assets available for sales 17,370,816.75 24,625,516.88 Entrust financial income 159,801,630.73 97,021,850.83 Gains/losses of subsidiary liquidation -10,472.99 Total 1,149,033,168.39 955,437,915.36 48. Income from assets disposal In RMB Sources Current period Last period Income from disposal of non-current assets 1,820,229.59 235,193.85 94 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Losses from disposal of non-current assets -232,044.23 -360,974.45 Total 1,588,185.36 -125,780.60 49. Other income In RMB Source of other income Current period Last period Government subsidy related with daily operation activities 14,032,459.71 15,608,007.28 Total 14,032,459.71 15,608,007.28 50. Non-operating income In RMB Amount reckoned into current Item Current period Last period non-recurring gains/losses Government subsidy 3,667,570.46 1,498,749.45 3,667,570.46 Other 213,558.41 1,285,830.03 213,558.41 Total 3,881,128.87 2,784,579.48 3,881,128.87 Government subsidy reckoned into current gains/losses: In RMB Whether the Caus Gran impact of Whether e of Natu Assets ting subsidies on special Current Item distri re Last period related/Incom subj the current subsidie period butio type e related ect profit and s n loss Income Steady post subsidy in Wuxi No No 967,170.46 1,402,281.45 related Social insurance fund for recruiting college Income graduates by small & medium enterprise in No No 27,468.00 related Ningbo City Income Patent funding No No 621,500.00 related Fund of manufacturing of intelligent Income transformation for common rail pump in No No 1,340,000.00 related Huishan District Grants of high-tech enterprise recognized Income award from Management Committee of No No 500,000.00 related Jiangbei District 95 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Income Discount on imported equipment No No 103,000.00 related Employment subsidy from Employment Income management service of Jiangbei District, No No 86,520.00 related Ningbo City Special fund for 333 high-end talents Income No No 30,000.00 training project related Income Other No No 19,380.00 69,000.00 related Total -- -- -- -- -- 3,667,570.46 1,498,749.45 -- 51. Non-operating expenditure In RMB Amount reckoned into current Item Current period Last period non-recurring gains/losses Total non-current assets disposal losses 167,094.34 1,175,039.72 167,094.34 Including: fixed assets disposal losses 167,094.34 1,175,039.72 167,094.34 Donations 13,500.00 Local fund 2,015,771.73 1,957,389.72 Other 145,006.31 618,295.22 145,006.31 Total 2,327,872.38 3,764,224.66 312,100.65 52. Income tax expense (1) Statement of income tax expense In RMB Item Current period Last period Payable tax in current period 102,952,291.92 84,212,598.76 Adjusted the previous income tax -603,416.68 -644,798.91 Increase/decrease of deferred income tax assets 633,939.20 10,513,650.01 Increase/decrease of deferred income tax liability -55,516.48 -55,516.50 Total 102,927,297.96 94,025,933.36 (2) Adjustment on accounting profit and income tax expenses In RMB 96 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Item Current period Total profit 1,680,874,375.97 Income tax measured by statutory/applicable tax rate 252,131,156.40 Impact by different tax rate applied by subsidies 3,581,538.92 Adjusted the previous income tax -603,416.68 Impact by non-taxable revenue -145,876,642.65 Impact by the deductible losses of the un-recognized previous deferred income tax -4,510,779.88 The deductible temporary differences or deductible losses of the un-recognized 492,355.10 deferred income tax assets in the Period Other -2,286,913.25 Income tax expense 102,927,297.96 53. Other comprehensive income See Note VII. 35 “Other comprehensive income” 54. Items of ash flow statement (1) Other cash received in relation to operation activities In RMB Item Current period Last period Income from bank deposit interest 12,485,826.79 10,505,698.00 Government subsidy 8,212,570.46 8,156,049.45 Other 181,546.85 1,051,339.77 Total 20,879,944.10 19,713,087.22 (2) Other cash paid in relation to operation activities In RMB Item Current period Last period Expenses of sales cash paid 46,539,395.20 45,844,220.52 Expenses of management cash paid 100,789,163.46 104,847,303.37 Other 6,641,913.18 3,396,065.05 Total 153,970,471.84 154,087,588.94 (3) Cash received from other investment activities Nil 97 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (4) Cash paid related with investment activities In RMB Item Current period Last period Borrowing of Baodun (Tianjin) Electrical 10,000,000.00 Co., Ltd. are paid Total 10,000,000.00 (5) Other cash received in relation to financing activities In RMB Item Current period Last period Weifu Leader received the borrowings 5,470,000.00 from Wuxi Industrial Group Total 5,470,000.00 (6) Cash paid related with financing activities In RMB Item Current period Last period Liquidation charges 1,049,711.28 National debt paid transfer to loans 339,091.00 Total 339,091.00 1,049,711.28 55. Supplementary information to statement of cash flow (1) Supplementary information to statement of cash flow In RMB Supplementary information This Period Last Period 1. Net profit adjusted to cash flow of operation activities: -- -- Net profit 1,577,947,078.01 1,368,367,366.03 Add: Assets impairment provision -10,087.38 -11,296,473.56 Depreciation of fixed assets, consumption of oil assets and depreciation of 142,796,801.99 134,523,929.25 productive biology assets Amortization of intangible assets 8,927,389.15 9,475,063.57 Amortization of long-term deferred expenses 1,093,846.42 1,281,403.15 Loss from disposal of fixed assets, intangible assets and other long-term -1,588,185.36 1,300,820.32 98 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 assets(gain is listed with “-”) Losses on scrapping of fixed assets (gain is listed with “-”) 167,094.34 Financial expenses (gain is listed with “-”) 8,265,783.22 5,167,986.51 Investment loss (gain is listed with “-”) -1,149,683,398.46 -953,391,921.75 Decrease of deferred income tax asset( (increase is listed with “-”) 633,939.20 10,513,650.01 Increase of deferred income tax liability (decrease is listed with “-”) -55,516.48 -55,516.50 Decrease of inventory (increase is listed with “-”) 241,085,663.64 228,492,024.91 Decrease of operating receivable accounts (increase is listed with “-”) -606,831,311.20 -684,474,762.93 Increase of operating payable accounts (decrease is listed with “-”) 154,832,323.82 255,605,734.75 Other 1,342,269.57 -13,108,062.24 Net cash flow arising from operating activities 378,923,690.48 352,401,241.52 2. Material investment and financing not involved in cash flow -- -- 3. Net change of cash and cash equivalents: -- -- Balance of cash at period end 2,842,510,815.26 1,595,210,818.24 Less: Balance of cash equivalent at period-begin 2,948,439,354.22 3,795,223,678.11 Net increasing of cash and cash equivalents -105,928,538.96 -2,200,012,859.87 (2) Net cash payment for the acquisition of a subsidiary of the current period Nil (3) Net cash received from the disposal of subsidiaries Nil (4) Constitution of cash and cash equivalent In RMB Item Closing balance Opening balance Ⅰ. Cash 2,842,510,815.26 2,948,439,354.22 Including: stock cash 594,764.72 736,773.22 Bank deposit available for payment at any time 2,841,916,050.54 2,947,702,581.00 Ⅲ. Balance of cash and cash equivalent at period-end 2,842,510,815.26 2,948,439,354.22 56. Notes for the statement of owners equity changes Nil 99 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 57. Assets with ownership or use right restricted In RMB Item Book value at Restriction reason period-end Monetary fund 99,317,091.42 Cash deposit for bank acceptance Notes receivable 389,454,825.85 Notes pledge for bank acceptance Monetary fund 881,868.57 Court freeze In accordance with the civil ruling No.(2016)Y03MC2490 and No.(2016) Y03MC2492 of Guangdong Shenzhen Intermediate People's Court (Hereinafter referred to as “Shenzhen Intermediate People's Court”), the property with the value of 217 million Yuan under the Financial assets 166,608,867.78 name of the Company and other seven respondents and the third party Shenzhen Hejun availablefor sale Chuangye Holdings Co., Ltd. was frozen. As of the end of the reporting period, 4.71 million shares of Miracle Logistics and 11,739,102 shares of SDEC held by the Company were frozen. Total 656,262,653.62 -- 58. Item of foreign currency (1) Item of foreign currency In RMB Item Closing balance of foreign currency Rate of conversion Ending RMB balance converted Monetary fund Including: USD 15,019,676.83 6.6166 99,379,193.71 EUR 1,959,035.57 7.6515 14,989,560.66 HKD 9,178,111.52 0.8431 7,738,065.82 JPY 9,248,508.00 0.059914 554,115.12 Accounts receivable Including: USD 4,805,349.78 6.6166 31,795,077.36 EUR 968,745.75 7.6515 7,412,358.10 JPY 11,348,905.00 0.059914 679,958.29 Accounts payable Including: USD 673,126.61 6.6166 4,453,809.52 EUR 1,597,806.15 7.6515 12,225,613.75 CHF 20,630.15 6.6350 136,881.05 JPY 94,543,893.00 0.059914 5,664,502.81 100 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (2) Explanation on foreign operational entity, including as for the major foreign operational entity, disclosed main operation place, book-keeping currency and basis for selection; if the book-keeping currency changed, explain reasons □ Applicable √ Not applicable VIII. Changes of consolidation range 1. Enterprise merger not under the same control Nil 2. Enterprise merger under the same control Nil 3. Reverse purchase Nil 4. The disposal of subsidiaries Whether there is a subsidiary disposal on one time, which is loss control of rights □Yes √No Whether there is a subsidiary disposal by steps through multiple trading and loss control of rights in the period □Yes √No 5. Other reasons for consolidation range changed Explain the reasons on consolidate scope changes (i.e. subsidiary newly established, subsidiary liquidation etc.) and relevant information: In the Year, the wholly-owned subsidiary – Nanchang Weifu Leader Auto Parts Co., Ltd. was establised by investment from Weifu Leader, the industrial and commerce record was conpleted on 8 March 2018, and there was no business exercise in the reporting period actually 6. Other Nil 101 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 IX. Equity in other entity 1. Equity in subsidiary (1) Constitute of enterprise group Main operation Registere Share-holding ratio Subsidiary Business nature Acquired way place d place Directly Indirectly Spare parts of Enterprise merger under Weifu Jinning Nanjing Nanjing 80.00% internal-combustion engine the same control Automobile exhaust purifier, Enterprise merger under Weifu Leader Wuxi Wuxi 94.81% muffler the same control Spare parts of Weifu Mashan Wuxi Wuxi 100.00% Investment internal-combustion engine Spare parts of Weifu Chang’an Wuxi Wuxi 100.00% Investment internal-combustion engine Weifu Enterprise merger under International Wuxi Wuxi Trading 100.00% the same control Trade Spare parts of Enterprise merger not Weifu ITM Wuxi Wuxi 100.00% internal-combustion engine under the same control Spare parts of Weifu Schmidt Wuxi Wuxi 66.00% Investment internal-combustion engine Spare parts of Enterprise merger not Weifu Tianli Ningbo Ningbo 54.23% internal-combustion engine under the same control Spare parts of Enterprise merger not Weifu Autocam Wuxi Wuxi 51.00% internal-combustion engine under the same control Weifu Automobile exhaust purifier, Wuhan Wuhan 60.00% Investment Leader(Wuhan) muffler Weifu Leader Chongqin Automobile exhaust purifier, Chongqing 100.00% Investment (Chongqing) g muffler Weifu Leader Automobile exhaust purifier, Nanchang Nanchang 100.00% Investment (Nanchang) muffler Explanation on share-holding ratio in subsidiary different from ratio of voting right: Nil Basis of the invested unit control by the Company though holds half or below voting rights; and the invested unit without controls by the Company but with over half voting rights hold: Nil Major structured entity included in consolidate statement: Nil 102 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Basis of termination of agent or consigner: Nil Other note: In accordance with the resolution of Office Meeting 2017 No.(002), the 6.29% shares of Weifu Tianli held by Ningbo Shenhua Energy-Saving and Enviornmental Protection Tech. Co., Ltd. are acquired in the Year, after acquisition, shares of Weifu Tianli held by the Company increased to 54.23%, and file in industry and commerce bureau on 8 May 2018. (2) Important non-wholly-owned subsidiary In RMB Share-holding ratio of Gains/losses attributable Dividend announced to distribute Ending equity Subsidiary minority to minority in the Period for minority in the Period of minority Weifu Jinning 20.00% 14,039,076.96 15,604,600.00 166,673,874.88 Weifu Schmidt 34.00% 103,977.38 9,699,940.40 Weifu Leader 5.19% 3,712,573.37 85,078,510.19 Weifu Tianli 45.77% 3,707,146.34 100,120,917.35 Weifu Autocam 49.00% 11,141,599.05 158,494,159.40 Total 32,704,373.09 15,604,600.00 520,067,402.22 Explanation on holding ratio different from the voting right ratio for minority shareholders: Nil (3) Main finance of the important non-wholly-owned subsidiary In RMB Closing balance Subsidiary Non-current Non-current Current assets Total assets Current liability Total liability assets liability Weifu Jinning 844,802,667.29 331,265,814.56 1,176,068,481.85 285,415,594.32 55,389,251.34 340,804,845.66 Weifu Schmidt 92,971,564.08 38,943,805.27 131,915,369.35 102,971,926.15 102,971,926.15 Weifu Leader 2,491,180,678.70 1,045,889,830.01 3,537,070,508.71 1,881,471,789.42 24,300,604.32 1,905,772,393.74 Weifu Tianli 329,410,523.92 223,968,657.04 553,379,180.96 283,848,085.10 61,052,803.89 344,900,888.99 Weifu Autocam 292,491,401.69 280,137,032.48 572,628,434.17 251,950,534.98 251,950,534.98 Total 4,050,856,835.68 1,920,205,139.36 5,971,061,975.04 2,805,657,929.97 140,742,659.55 2,946,400,589.52 Opening balance Subsidiary Non-current Non-current Current assets Total assets Current liability Total liability assets liability Weifu Jinning 804,641,137.00 337,158,270.17 1,141,799,407.17 245,091,101.59 54,199,342.64 299,290,444.23 103 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Weifu Schmidt 88,975,034.68 33,405,432.30 122,380,466.98 93,741,159.45 93,741,159.45 Weifu Leader 2,392,378,693.81 978,224,529.85 3,370,603,223.66 1,793,072,212.90 23,503,280.34 1,816,575,493.24 Weifu Tianli 290,628,819.00 243,156,899.42 533,785,718.42 259,270,617.16 63,076,581.29 322,347,198.45 Weifu Autocam 250,884,987.49 216,134,430.81 467,019,418.30 169,012,066.26 169,012,066.26 Total 3,827,508,671.98 1,808,079,562.55 5,635,588,234.53 2,550,187,157.36 150,779,204.27 2,700,966,361.63 In RMB Current period Subsidiary Operation Income Net profit Total comprehensive income Cash flow from operation activity Weifu Jinning 345,257,893.56 70,230,711.18 70,230,711.18 34,921,442.31 Weifu Schmidt 90,961,973.06 304,135.67 304,135.67 11,277,941.76 Weifu Leader 1,589,176,188.66 76,364,083.43 76,364,083.43 -19,011,866.15 Weifu Tianli 196,673,863.48 8,293,196.15 8,293,196.15 -9,491,657.17 Weifu Autocam 234,675,435.40 22,670,547.15 22,670,547.15 3,466,284.14 Total 2,456,745,354.16 177,862,673.58 177,862,673.58 21,162,144.89 Last period Subsidiary Operation Income Net profit Total comprehensive income Cash flow from operation activity Weifu Jinning 320,793,577.32 75,554,314.01 75,554,314.01 51,524,867.08 Weifu Schmidt 63,231,942.41 -523,081.90 -523,081.90 -3,177,601.27 Weifu Leader 1,397,383,244.81 87,593,822.47 87,593,822.47 83,180,660.24 Weifu Tianli 160,306,384.47 804,668.07 804,668.07 7,731,426.95 Weifu Autocam 258,060,091.53 46,391,372.85 46,391,372.85 18,287,063.55 Total 2,199,775,240.54 209,600,886.31 209,600,886.31 158,446,533.01 (4) Significant restrictions on the use of enterprise group assets and pay off debts of the enterprise group Nil (5) Financial or other supporting offers to the structured entity included in consolidated financial statement range Nil 2. Transaction that has owners equity shares changed in subsidiary but still with controlling rights Nil 104 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 3. Equity in joint venture and cooperative enterprise (1) Important joint venture and cooperative enterprise Share-holding ratio Accounting treatment on Main Registered investment for Name operation Business nature Indirectl place Directly joint venture and place y cooperative enterprise I. Joint venture Wuxi Weifu Environment Catalyst Co., Wuxi Wuxi Catalyst 49.00% Equity method Ltd. II. Cooperative enterprise Internal Bosch Automobile Diesel System Co., combustion Wuxi Wuxi 32.50% 1.50% Equity method Ltd. engine and attachment Internal combustion Zhonglian Automobile Electronic Co., Ltd Shanghai Shanghai 20.00% Equity method engine and attachment Internal Weifu Precision Machinery combustion Wuxi Wuxi 20.00% Equity method Manufacturing Co., Ltd. engine and attachment Holding shares ratio different from the voting right ratio: Nil Has major influence with less 20% voting rights hold, or has minor influence with over 20% (20% included) voting rights hold: Nil (2) Main financial information of the important joint venture In RMB Closing balance /Current period Opening balance /Last period Weifu Environment Weifu Environment Current assets 3,284,020,160.10 3,011,258,785.42 Including: cash and cash equivalents 278,457,844.16 120,584,888.35 Non -current assets 290,878,020.94 284,089,421.89 Total assets 3,574,898,181.04 3,295,348,207.31 Current liabilities 2,400,664,228.68 2,211,790,474.13 Non –current liabilities 19,672,000.00 16,450,000.00 105 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Total liabilities 2,420,336,228.68 2,228,240,474.13 Shareholders’ equity attributable to parent company 1,154,561,952.36 1,067,107,733.18 Share of net assets calculated by shareholding ratio 565,735,356.67 522,882,789.26 Book value of equity investment in joint ventures 565,735,356.67 522,882,789.26 Operation income 1,864,398,010.43 1,571,581,523.69 Financial expense 47,189,696.29 30,728,151.56 Income tax expense 3,251,620.98 17,908,910.36 Net profit 92,057,072.82 90,618,512.17 Total comprehensive income 92,057,072.82 90,618,512.17 (3) Main financial information of the important cooperative enterprise In RMB Closing balance /Current period Opening balance /Last period Bosch Diesel Zhonglian Weifu Precision Bosch Diesel Zhonglian Weifu Precision System Automobile Machinery System Automobile Machinery Current assets 9,675,155,533.63 1,346,012,502.62 269,283,814.39 8,194,014,833.80 688,116,022.56 238,511,756.68 Non -current 2,449,077,752.32 4,519,310,194.86 127,131,232.18 2,696,164,046.92 4,668,848,226.74 123,616,959.50 assets Total assets 12,124,233,285.95 5,865,322,697.48 396,415,046.57 10,890,178,880.72 5,356,964,249.30 362,128,716.18 Current liabilities 4,894,935,119.46 1,212,230,464.04 112,123,028.11 3,949,654,684.13 566,609,302.26 112,597,321.52 Non –current 2,186,640.00 2,210,310.00 liabilities Total liabilities 4,894,935,119.46 1,214,417,104.04 112,123,028.11 3,949,654,684.13 568,819,612.26 112,597,321.52 Attributable to parent company 7,229,298,166.49 4,650,905,593.44 284,292,018.46 6,940,524,196.59 4,788,144,637.04 249,531,394.66 shareholders’ equity Share of net assets calculated 2,457,961,376.61 930,181,118.68 56,858,403.69 2,359,778,226.84 957,628,927.40 49,906,278.93 by shareholding ratio --Goodwill 267,788,761.35 1,407,265.96 267,788,761.35 1,407,265.96 --Unrealized profit of internal -18,110,561.77 -36,495.80 -18,770,053.91 -28,335.94 trading --Other -0.28 -529,034.03 -0.28 -529,034.03 Book value of 2,707,639,575.91 931,588,384.64 56,292,873.86 2,608,796,934.00 959,036,193.36 49,348,908.96 equity investment 106 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 in joint ventures Operation income 8,713,485,959.51 12,091,114.45 190,093,280.56 7,780,712,323.52 8,953,773.36 120,872,329.06 Net profit 2,076,330,091.90 1,059,760,956.40 34,760,623.80 1,750,186,156.84 980,886,111.95 17,474,566.01 Total comprehensive 2,076,330,091.90 1,059,760,956.40 34,760,623.80 1,750,186,156.84 980,886,111.95 17,474,566.01 income Dividends received from 303,884,540.74 318,528,894.62 joint venture in the year (4) Financial summary for non-important Joint venture and affiliate enterprise Nil (5) Major limitation on capital transfer ability to the Company from joint venture or affiliates Nil (6) Excess loss occurred in joint venture or affiliates Nil (7) Unconfirmed commitment with joint venture investment concerned Nil (8) Intangible liability with joint venture or affiliates investment concerned Nil 4. Major conduct joint operation Nil 5. Structured body excluding in consolidate financial statement Nil 6. Other Nil 107 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 X. Risk related with financial instrument Main financial instrument of the Company including equity investment, loans, account receivable, account payable etc., more details of the financial instrument can be found in relevant items of Note VII. Risks concerned with the above mentioned financial instrument, and the risk management policy takes for lower the risks are as follow: Aims of engaging in the risk management is to achieve equilibrium between the risk and benefit, lower the adverse impact on performance of the Company to minimum standards, and maximized the benefit for shareholders and other investors. Base on the risk management targets, the basic tactics of the risk management is to recognized and analyzed the vary risks that the Company counted, established an appropriate risk exposure baseline and caring risk management, supervise the vary risks timely and reliably in order to control the risk in a limited range. In business process, the risks with financial instrument concerned happen in front of the Company mainly including credit exposure, market risk and liquidity risk. BOD of the Company takes full charge of the risk management target and policy-making, and takes ultimate responsibility for the target of risk management and policy. Risk management department and financial control department manager and monitor those risk exposure to ensuring the risks are control in a limited range. 1. Credit Risk Credit risk refers to the one party fails to perform the obligation of the financial instruments, form the other party company mainly face credit risk for financial loss caused by the customer credit risks. In order to prevent the risks, the Company formulated an evaluation system for the new client’s credit and system to analyze the book credit for regular customer. The evaluation system for the new client’s credit aims at the new clients, the Company will conduct an background investigation based on the established process, with purpose of determine whether offer credit limit to the client and the amount of the credit and credit terms or not. Whereby, the Company setting a credit limits and credit period for every new client, and such limit is the maximum amount without additional approval. The system to analyze the book credit for regular customer refers to after purchase order received by regular customer, the Company will examine the order amount and outstanding balance, if the total over the credit limit, on the premise of additional approval, sales on account shall be realized, or prepayments for relevant amount shall be required. Furthermore, as for the sales on account occurred, the Company will guarantee the total credit risks in a controlling range by analyzed and review the monthly report of the risk attention for account receivables. The maximum credit risk exposure of the Company is the book amount of such financial assets, till end of 30 June 2018; lists of the maximum credit risk exposure of the Company are as: Item Amount of merge Amount of parent company Accounts receivable 2,374,955,337.33 1,003,118,142.78 Other receivables 17,839,885.07 178,153,549.80 2. Market risk Market risk of the financial instrument refers to the fair value of financial instrument or future cash flow due to 108 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 fluctuations in the market price changes and produce, mainly includes the IRR, FX risk and other price risk. (1) Interest rate risk (IRR) IRR refers to the fluctuate risks on Company’s financial status and cash flow arising from rates changes in market. IRR of the Company mainly related with the bank loans. In order to lower the fluctuate of IRR, the Company, in line with the anticipative change orientation, choose floating rate or fixed rate, that is the rate in future period will goes up prospectively, than choose fixed rate; if the rate in future period will decline prospectively, than choose the floating rate. In order to minor the bad impact from difference between the expectation and real condition, loans for liquid funds of the Company are choose the short-term period, and agreed the terms of prepayment in particular. (2) Foreign exchange (FX) risk FX risks refer to the losses arising from exchange rate movement. The FX risk sustain by the Company mainly related with the USD, EUR, SF, JPY and GBP, except for the USD, EUR, SF and JPY carried out for the equipment purchasing of parent company and Autocam, material purchasing from business section of Weifu Diesel System, technical service and trademark usage costs from business section of Weifu Diesel System and the import and export of Weifu International Trade, other main business of the Company are pricing and settle with RMB (Yuan). In consequence of the foreign financial assets and liabilities takes minor ratio in total assets, the Company has small FX risk of the financial instrument, considered by management of the Company. End as 30 June 2018, except for the follow assets or liabilities listed with foreign currency, assets and liabilities of the Company are carried with RMB 1. Foreign currency assets of the Company till end of 30 June 2018: Ending foreign Ending RMB balance Item Convert rate Ratio in assets currency balance converted Monetary fund Including: USD 15,019,676.83 6.6166 99,379,193.71 0.45% EUR 1,959,035.57 7.6515 14,989,560.66 0.07% JPY 9,248,508.00 0.059914 554,115.12 HKD 9,178,111.52 0.8431 7,738,065.82 0.04% Accounts receivable Including: USD 4,805,349.78 6.6166 31,795,077.36 0.15% EUR 968,745.75 7.6515 7,412,358.10 0.03% JPY 11,348,905.00 0.059914 679,958.29 Total ratio in assets 0.74% 2. Foreign currency liabilities of the Company till end of 30 June 2018: Ending foreign Ending RMB balance Item Convert rate Ratio in liabilities currency balance converted Accounts payable Including: USD 673,126.61 6.6166 4,453,809.52 0.07% EUR 1,597,806.15 7.6515 12,225,613.75 0.20% 109 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 CHF 20,630.15 6.6350 136,881.05 JPY 94,543,893.00 0.059914 5,664,502.81 0.09% Total ratio in 0.36% liabilities (3) Other pricing risk Classification of the Company held is the equity investments in financial assets available for sale, and such investment can be measured by fair value on balance sheet date, thus, the Company owns a risk of stock market changes. Furthermore, on the premise of deliberated and approved in 5th meeting of 8th session of the Board, the Company exercise entrust financing with the self-owned idle capital; therefore, the Company has the risks of collecting no principal due to entrust financial products default. Aims at such risk, the Company formulated a “Management Mechanism of Capital Financing”, and well-defined the authority approval, investment decision-making, calculation management and risk controls for the entrust financing in order to guarantee a security funds and prevent investment risk efficiently. In order to lower the adverse impact from unpredictable factors, the Company choose short-term and medium period for investment and investment product’s term is up to 3 years in principle; in variety of investment, the Company did not invested for the stocks, derivative products, security investment fund and the entrust financial products aims at security investment as well as other investment with securities concerned. 3. Liquidity risk Liquidity risk refers to the capital shortage risk occurred during the clearing obligation implemented by the enterprise in way of cash paid or other financial assets. The Company aims at guarantee the Company has rich capital to pay the due debts, therefore, a financial control department is established for collectively controlling such risks. On the one hand, the financial control department monitoring the cash balance, the marketable securities which can be converted into cash at any time and the rolling forecast on cash flow in future 12 months, ensuring the Company, on condition of reasonable prediction, owes rich capital to paid the debts; on the other hand, building a favorable relationship with the banks, rationally design the line of credit, credit products and credit terms, guarantee a sufficient limit for bank credits in order to satisfy vary short-term financing requirements. XI. Disclosure of fair value 1. Ending fair value of the assets and liabilities measured by fair value In RMB Ending fair value Item First-order Second-order Third-order Total I. Sustaining measured by fair value -- -- -- -- (2) Equity instrument investment 178,332,264.00 178,332,264.00 Total assets sustaining measured by fair value 178,332,264.00 178,332,264.00 II. Non-persistent measure -- -- -- -- 110 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 XII. Related party and related transactions 1. Parent company of the enterprise Share-holding ratio Voting right ratio on Parent company Registration place Business nature Registered capital on the enterprise for the enterprise parent company Wuxi Industry Operation of Wuxi 3,720,671,000 Yuan 20.22% 20.22% Group state-owned assets Explanation on parent company of the enterprise Wuxi Industry Development Group Co., Ltd was solely state-owned enterprise funded and established by Wuxi Municipal People’s Government which mainly took responsibility of authorizing the state-owned assets operation within a certain areas, investment management of significant project, investment and development of manufacturing and services and venture capital in high-tech achievement Ultimate controller of the Company is State-owned Assets Supervision & Administration Commission of Wuxi Municipality of Jiangsu Province. 2. Subsidiary of the Enterprise Found more in Note IX. 1.” Equity in subsidiary” 3. Cooperative enterprise and joint venture Found more in Note IX.3. “Equity in joint venture and cooperative enterprise” Other cooperative enterprise or joint ventures which has related transaction with the Company in the period or occurred previous: Nil 4. Other related party Other related party Relationship with the Enterprise ROBERT BOSCH GMBH The second largest shareholder of the Company Key executive Director, supervisor and senior executive of the Company 5. Related transaction (1) Goods purchasing, labor service providing and receiving Goods purchasing/labor service receiving In RMB Approved transaction Whether more than Related party Content Current period Last period limit the transaction limit Weifu Precision Goods and labor 22,934,380.54 50,000,000.00 No 20,428,172.03 Machinery 111 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Bosch Diesel Goods and labor 29,375,329.74 70,000,000.00 No 101,905,922.60 System Weifu Environment Goods 946,283,103.47 1,925,000,000.00 No 683,351,475.87 ROBERT BOSCH Goods 62,350,113.72 143,000,000.00 No 77,035,723.88 GMBH Goods sold/labor service providing In RMB Related party Content Current period Last period Weifu Precision Machinery Goods and labor 2,772,785.47 1,816,410.96 Bosch Diesel System Goods and labor 1,600,013,496.75 1,684,350,434.59 Weifu Environment Goods and labor 28,741,766.37 37,016,920.13 ROBERT BOSCH GMBH Goods and labor 319,461,744.57 1,583,518.80 (2) Related trusteeship management/contract & entrust management/ outsourcing Nil (3) Related lease As a lessor for the Company: In RMB Lessee Assets type Lease income in recognized in the Period Lease income in recognized last the Period Weifu Environment Workshop 1,254,028.50 1,194,313.00 As a tenant: Nil Explanation on related lease Weifu Leader entered into the house leasing contract with Weifu Environment, as for the plant locates at No.9 Linjiang Road, Wuxi new district, owed by Weifu Leader, rent-out to Weifu Environment, agreements are made as: Rental from 1 January 2017 to 31 December 2017 was 2,388,626.00 Yuan (4) Related guarantee Nil (5) Related party’s borrowed funds Nil (6) Related party’s assets transfer and debt reorganization Nil 112 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (7) Remuneration of key manager In RMB Item Current period Last period Remuneration of key manager 2,400,000.00 2,310,000.00 (8) Other related transactions Item Related party Current period Last period Fixed assets purchased Bosch Diesel System 42,735.04 Technology royalties paid etc. ROBERT BOSCH 2,805,114.55 2,468,484.66 GMBH 6. Receivable/payable items of related parties (1) Receivable item In RMB Closing balance Opening balance Item Related party Book balance Bad debt reserves Book balance Bad debt reserves Account receivable Weifu Precision Machinery 34,405.50 425,363.64 Account receivable Bosch Diesel System 611,995,184.24 615,770,490.57 72,188.07 Account receivable ROBERT BOSCH GMBH 96,482,607.56 Account receivable Weifu Environment 6,050,093.98 710,200.00 Other non-current Bosch Diesel System 877,500.00 assets (2) Payable item In RMB Item Related party Ending book balance Opening book balance Account payables Weifu Precision Machinery 13,680,801.84 9,737,530.74 Account payables Weifu Environment 723,117,682.74 379,374,827.01 Account payables Bosch Diesel System 14,183,956.17 44,262,749.15 Account payables ROBERT BOSCH GMBH 1,987,967.11 38,202,192.76 Account received in advance ROBERT BOSCH GMBH 579,650.36 Account received in advance Weifu Environment 5,850,143.44 6,514,951.87 Other accounts payable Industry Group 5,470,000.00 113 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 7. Commitments of related party Nil 8. Other Nil XIII. Share-based payment Nil XIV. Commitment or contingency 1. Important commitments Important commitments in balance sheet date Nil 2. Contingency (1) Contingency on balance sheet date Guarantees to subsidiary Guarantee Whether Guarantee amount (in Terminated guarantee Guarantee provided Debit bank Starting from received 10 thousand dated implemented Yuan) or not Jiangbei branch of Weifu High-Technology Group Weifu Tianli Bank of China in 5,000.00 2016-11-15 2021-11-10 N Co., Ltd. Ningbo (2) For the important contingency not necessary to disclosed by the Company, explained reasons The Company has no important contingency that need to disclosed XV. Events after balance sheet date 1. Important non adjustment matters Nil 114 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 2. Profit distribution In RMB Profit or dividend plans to distributed 1,210,740,700.00 Profit or dividend declare to distributed which have been approved 1,210,740,700.00 3. Sales return Nil 4. Other events after balance sheet date Nil XVI. Other important events 1. Previous accounting errors collection Nil 2. Debt restructuring Nil 3. Assets replacement Nil 4. Pension plan The “Enterprise Annuity Plan under the name of WFHT” has deliberated and approved by 8th meeting of 7th session of the Board: in order to mobilize the initiative and creativity of the employees, established a talent long-term incentive mechanism, enhance the cohesive force and competitiveness in enterprise, the Company carried out the above mentioned annuity plan since the date of reply of plans reporting received from labor security administration department. Annuity plans are: the annuity fund are paid by the enterprise and employees together; the amount paid by enterprise shall not over the 1/12 of the total salary of last years, amount paid by individual and enterprise shall not over the 1/6 of the total salary of last year, in accordance with the State’s annuity policy, the Company will adjusted the economic benefits in due time, in principle of responding to the economic strength of the enterprise, the amount paid by the enterprise at current period control in the 8.33 percent of the total salary of last year, specific paying ratio later shall be adjust correspondingly in line with the operation condition of the Company. In December 2012, the Company received the “Reply on annuity plans reporting under the name of WFHT” from labor security administration department, later, the Company entered into the “Entrusted Management Contract of the Annuity Plan of WFHT” with PICC. 115 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 5. Discontinued operations Nil 6. Segment (1) Recognition basis and accounting policy for reportable segment Determine the operating segments in line with the internal organization structure, management requirement and internal reporting system. Operating segment of the Company refers to the followed components that have been satisfied at the same time: ①the component is able to generate revenues and expenses in routine activities; ②management of the Company is able to assess the operation results regularly, and determine resources allocation and performance evaluation for the component; ③being analyzed, financial status, operation results and cash flow of the components are able to required by the Company The Company mainly engaged in the manufacture of fuel system of internal combustion engine products, auto parts, muffler and purifier etc., based on the product segment, the Company determine three reporting segment as auto fuel injection system, air intake system and car after-treatment system. Accounting policy for the three reporting segments are shares the same policy state in Note III Segment assets exclude financial assets through profit or loss at fair value, derivative instruments, dividends receivables, interest receivables, financial management products due within one year, financial assets available for sale, long term equity investment and other undistributed assets, since these assets are not related to products operation. (2) Financial information for reportable segment In RMB Add: investment/incom e measured by equity, income of financial products or possession and Product segment of Product segment of Product segment of disposal income, automotive Item automotive fuel automotive air the retained assets Offset of segment Total post-processing injection system intake system or gains/losses as system the financial assets available for sale or possession and disposal income 116 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Operating 3,102,531,936.37 1,702,505,894.52 276,835,296.54 121,071,236.44 4,960,801,890.99 revenue Operating 2,267,395,464.33 1,540,041,366.60 203,224,695.20 121,071,236.44 3,889,590,289.69 cost Total profit 470,140,658.42 40,905,079.54 20,795,469.62 1,149,033,168.39 1,680,874,375.97 Net profit 401,324,005.53 34,550,600.44 19,615,170.77 1,122,457,301.27 1,577,947,078.01 Total assets 9,112,788,174.84 2,954,472,168.12 797,969,043.92 9,278,108,867.85 222,549,411.87 21,920,788,842.86 Total 4,095,612,976.11 1,913,172,789.96 480,969,210.37 5,094,154.34 205,293,181.88 6,289,555,948.90 liabilities (3) If there are no segment in the Company, or the total assets and liabilities of the segment are un-able to disclosed, explain the reasons Not applicable (4) Other notes Nil 7. Major transaction and events makes influence on investor’s decision Nil 8. Other Nil XVII. Principle notes of financial statements of parent company 1. Accounts receivable (1) Category In RMB Closing balance Opening balance Book balance Bad debt reserves Book balance Bad debt reserves Types Book Accrual Accrual Book value Amount Ratio Amount value Amount Ratio Amount ratio ratio Receivables with bad 1,049,4 debt provision 1,006,26 3,150,97 1,003,118 2,477,035 1,047,012,8 100.00% 0.31% 89,925. 100.00% 0.24% accrual by credit 9,116.34 3.56 ,142.78 .41 89.92 33 portfolio Total 1,006,26 100.00% 3,150,97 0.31% 1,003,118 1,049,4 100.00% 2,477,035 0.24% 1,047,012,8 117 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 9,116.34 3.56 ,142.78 89,925. .41 89.92 33 Account receivable with single significant amount and withdrawal bad debt provision separately at period end : □ Applicable √ Not applicable Account receivable provided for bad debt reserve under aging analysis method in the groups: √ Applicable □ Not applicable In RMB Closing balance Age Account receivable Bad debt reserves Accrual ratio Subitem of within one year Within 6 months 787,013,605.57 6 months to one year 10,781,166.25 1,078,116.64 10.00% Subtotal within one year 797,794,771.82 1,078,116.64 1-2 years 943,376.16 188,701.22 20.00% 2-3 years 1,091,364.56 436,545.82 40.00% Over 3 years 1,447,609.88 1,447,609.88 100.00% Total 801,277,122.42 3,150,973.56 0.39% Explanations on combination determine: Except for the receivables with impairment reserves accrual singly; base on the actual loss ratio of the receivables of previous years, with same or similar credit portfolio, and combining actual condition accrual bad debt reserves to determined the accrual ratio for bad debt reserves In combination, withdrawal bad debt provision based on balance proportion for account receivable: □ Applicable √ Not applicable In combination, withdrawal bad debt provision based on other methods for account receivable: Combination of related party Related party Amount Proportion of the bad debt provision withdrawal (%) Weifu Leader 37,319,951.85 -- Weifu ITM 56,016,233.09 -- Weifu Autocam 8,405,583.57 -- Weifu International Trade 98,113,836.09 -- Weifu Tianli 1,441,969.98 -- Weifu Schmidt 3,694,419.34 -- Total 204,991,993.92 -- 118 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 (2) Bad debt provision accrual, collected or reversed Accrual bad debt provision 678,845.55 Yuan; collected or reversed 0.00 Yuan. Including major amount collected or reversed in the period: Nil (3) Receivables actually written-off during the reporting period In RMB Item Written-off amount Other small companies 4,907.40 Important receivables written-off: nil Explanation: the account was not occurred from related transaction (4) Top 5 receivables at ending balance by arrears party Total receivables collected by arrears party for the Period amounting to 852,601,230.38 Yuan, takes 84.73 percent in closing balance of the account receivables; 118,908.79 Yuan are accrual correspondingly for bad debt reserves. (5) Account receivable derecognition due to financial assets transfer Nil (6) Assets and liabilities resulted by account receivable transfer and continues involvement Nil 2. Other accounts receivable (1) Classification In RMB Closing balance Opening balance Book balance Bad debt reserves Book balance Bad debt reserves Type Book Accrual Accrual Book value Amount Ratio Amount value Amount Ratio Amount ratio ratio Other receivable with single significant 178,164, 10,457.0 178,153,5 50,395, 220,680.1 50,174,653. amount and 100.00% 0.01% 100.00% 0.44% 006.82 2 49.80 333.34 8 16 withdrawal bad debt provision separately 178,164, 10,457.0 178,153,5 50,395, 220,680.1 50,174,653. Total 100.00% 0.01% 100.00% 0.44% 006.82 2 49.80 333.34 8 16 119 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Other receivable with single significant amount and withdrawal bad debt provision separately at end of period: □ Applicable √ Not applicable In combination, other accounts receivable whose bad debts provision was accrued by age analysis: √ Applicable □ Not applicable In RMB Closing balance Age Other receivable Bad debt reserves Accrual ratio Subitem of within one year Within 6 months 12,270,196.99 6 months to one year 104,570.21 10,457.02 10.00% 1-2 years 12,374,767.20 10,457.02 Total 12,374,767.20 10,457.02 0.08% Explanations on combination determine: Except for the other receivables with impairment reserves accrual singly; base on the actual loss ratio of the receivables of previous years, with same or similar credit portfolio, and combining actual condition accrual bad debt reserves to determined the accrual ratio for bad debt reserves In combination, withdrawal bad debt provision based on balance proportion for other account receivable □ Applicable √ Not applicable In combination, withdrawal bad debt provision based on other methods for other account receivable √Applicable□ Not applicable Combination of related party Proportion of the bad debt Related party Amount provision withdrawal Weifu Chang’an 20,000,000.00 Weifu Mashan 21,789,239.62 Weifu Leader 100,000,000.00 Weifu Schmidt 24,000,000.00 Total 165,789,239.62 (2) Bad debt provision accrual, collected or reversed Accrual bad debt provision 8,405.53 Yuan; collected or reversed 218,628.69 Yuan. Including major amount collected or reversed in the period: nil (3) Other receivables actually written-off during the reporting period: Nil (4) Other receivables by nature In RMB 120 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Nature Ending book balance Opening book balance Staff loans and petty cash 2,193,166.13 1,438,626.00 Balance of related party within the scope of the merger 165,789,239.62 47,000,000.00 Current money with the enterprises 10,174,401.07 1,949,507.34 Other 7,200.00 7,200.00 Total 178,164,006.82 50,395,333.34 (5) Top 5 other receivables at ending balance by arrears party In RMB Ratio in total ending Ending balance of Company Nature Ending balance Book age balance of other bad bet provision receivables Current money with Weifu Leader 100,000,000.00 Within one year 56.13% the subsidiary Current money with Weifu Schmidt 24,000,000.00 Within one year 13.47% the subsidiary Current money with Weifu Mashan 21,789,239.62 Within one year 12.23% the subsidiary Current money with Weifu Chang’an 20,000,000.00 Within one year 11.23% the subsidiary Baodun (Tianjin) Current money with 10,000,000.00 Within one year 5.61% Electrical Co., Ltd. the enterprises Total -- 175,789,239.62 -- 98.67% (6) Account receivable with government grand involved Nil (7) Other account receivable derecognition due to financial assets transfer Nil (8) Assets and liabilities resulted by other account receivable transfer and continues involvement Nil 3. Long-term equity investment In RMB 121 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Closing balance Opening balance Item Book balance Impairment Book value Book balance Impairment Book value Investment for 1,466,611,689.17 1,466,611,689.17 1,451,041,689.17 1,451,041,689.17 subsidiary Investment for associates and joint 3,585,913,387.21 3,585,913,387.21 3,511,481,000.32 3,511,481,000.32 venture Total 5,052,525,076.38 5,052,525,076.38 4,962,522,689.49 4,962,522,689.49 (1) Investment for subsidiary In RMB Ending balance of Impairment The invested entity Opening balance Increased Decreased Ending balance impairment accrual provision Weifu Jinning 178,639,593.52 178,639,593.52 Weifu Leader 460,113,855.00 460,113,855.00 Weifu Mashan 168,693,380.51 168,693,380.51 Weifu Chang’an 220,902,037.30 220,902,037.30 Weifu 32,849,254.85 32,849,254.85 International Trade Weifu ITM 167,000,000.00 167,000,000.00 Weifu Schmidt 50,160,000.00 50,160,000.00 Weifu Tianli 90,229,100.00 15,570,000.00 105,799,100.00 Weifu Autocam 82,454,467.99 82,454,467.99 Total 1,451,041,689.17 15,570,000.00 1,466,611,689.17 (2) Investment for associates and joint venture In RMB +,- Investme Ending Other Cash nt balance Additiona comprehe dividend Opening gains/loss Other Ending of Company l Capital nsive or profit Impairme balance es equity Other balance impairme investmen reduction income announce nt accrual recognize change nt t adjustmen d to d under provision t issued equity I. Joint venture 122 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 II. Associated enterprise Bosch 2,503,154 675,879,1 580,955,7 2,598,078 Diesel ,814.59 64.22 39.65 ,239.16 System Zhonglian Automobi 959,036,1 211,952,1 239,400,0 931,588,3 le 93.36 91.28 00.00 84.64 Electronic Co., Ltd Weifu Precision 49,289,99 6,956,771 56,246,76 Machiner 2.37 .04 3.41 y 3,511,481 894,788,1 820,355,7 3,585,913 Subtotal ,000.32 26.54 39.65 ,387.21 3,511,481 894,788,1 820,355,7 3,585,913 Total ,000.32 26.54 39.65 ,387.21 (3) Other explanation In accordance with the resolution of Office Meeting 2017 No.(002), the 6.29% shares of Weifu Tianli held by Ningbo Shenhua Energy-Saving and Enviornmental Protection Tech. Co., Ltd. are acquired in the Year, after acquisition, shares of Weifu Tianli held by the Company increased to 54.23%, and file in industry and commerce bureau on 8 May 2018. 4. Operating income and cost In RMB Current period Last period Item Income Cost Income Cost Main business 2,136,258,034.82 1,533,313,082.59 1,473,896,379.07 1,129,630,086.97 Other business 178,884,620.31 165,203,440.31 152,584,036.64 138,992,574.61 Total 2,315,142,655.13 1,698,516,522.90 1,626,480,415.71 1,268,622,661.58 5. Investment gains In RMB Item Current period Last period Income of long-term equity investment calculated based on cost 62,418,400.00 949,835,680.00 Income of long-term equity investment calculated based on equity 894,788,126.54 767,309,765.64 123 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 Investment income from period of holding 3,220,575.00 235,500.00 the financial assets available for sale Investment income obtained from disposal of financial assets available 17,370,816.75 24,625,516.88 for sale Entrust financial income 159,552,310.73 97,021,850.83 Gains/losses of equity liquidation -8,261,290.60 Total 1,137,350,229.02 1,830,767,022.75 6. Other Nil XVIII. Supplementary Information 1. Current non-recurring gains/losses √ Applicable □ Not applicable In RMB Item Amount Note Gains/losses from the disposal of non-current asset 1,421,091.02 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 17,700,030.17 enterprise’s business) Profit and loss of assets delegation on others’ investment or management 159,801,630.73 Held transaction financial asset, gains/losses of changes of fair values from transaction financial liabilities, and investment gains from disposal of transaction financial asset, 17,370,816.75 transaction financial liabilities and financial asset available for sales, exclude the effective hedging business relevant with normal operations of the Company Switch-back of impairment of account receivable that practice impairment test independent 512,580.00 Other non-operating income and expenditure except for the aforementioned items 73,701.23 Less: Impact on income tax 29,876,415.88 Impact on minority shareholders’ equity 626,230.67 Total 166,377,203.35 -- 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 124 无锡威孚高科技集团股份有限公司 2018 年半年度财务报告 2. REO and earnings per share Earnings per share Weighted average Profits during report period Diluted EPS ROE Basic EPS (RMB/Share) (RMB/Share) Net profits belong to common stock stockholders of the 9.92% 1.53 1.53 Company Net profits belong to common stock stockholders of the 8.85% 1.37 1.37 Company after deducting nonrecurring gains and losses 3. 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 (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 (3) Explanation on data differences under the accounting standards in and out of China; as for the differences adjustment audited by foreign auditing institute, listed name of the institute Not applicable 4. Other Nil 125