Major Shareholder:

• CHDTGL ¡V 25.01% interest (State-owned domestic shares)
• Weifang Investment ¡V 6.22% interest (State-owned domestic shares)
• Shenzhen Investment ¡V 6.83% interest (State-owned domestic shares)
• Mr. Yeung Sai Hong ¡V 7.46% interest (Foreign shares)
• Mr. Li San Yim and his wife ¡V 6.83% interest (Domestic shares)

The history of the Company can be traced back to 1953 when Weichai Factory was established as a State-owned enterprise. Weichai Factory was one of the first diesel engine manufacturers in the PRC. After over half a century of development, the Company has become a major diesel engine manufacturer in the PRC specializing in the manufacture of high-speed heavy-duty diesel engines. The products of the Company are WD615 and WD618 Engines, the production of which commenced in 1989 and 2000, respectively.

The Company is headquartered in Weifang city, Shandong province, the PRC. Substantially all of the sales of the Company are made within the PRC and the revenue from the sale of WD615 Euro I Engines constitute most of such sales. In 2003, in terms of unit sales, approximately 50.1% of the Company's products were used in heavy-duty vehicles and approximately 47.1% were used in construction machines. These two industries experienced significant growth in recent years, with CAGRs of approximately 60.8% and 27.5%, respectively from 1998 to 2002 in terms of sales. The Directors believe that this was due to the high GDP growth rates, heavy infrastructure investment, and the development of highway system and logistics industry in the PRC in the past few years.

In the heavy-duty vehicle market, approximately 71.3%1 of the new heavy-duty vehicles with a load capacity of 15 tonnes (or above) sold in the PRC in 2003 were installed with the Company's products. The major customers of the Company in this market include the China Heavy Duty Truck Group, Shaanxi Zhongqi, Chongqing Hongyan and Beiqi Futian.

In addition to being used in heavy-duty vehicles, the Company's products are also widely used in construction machines, which include wheel-loaders, bulldozers and road-rollers. In 2003, the Company's products had a market share of approximately 73%2 of the new wheel-loaders with a load capacity of 5 tonnes (or above) sold in the PRC. The major customers of the Company in this market include Guangxi Liugong, Fujian Longgong and Shandong Lingong.

The Directors believe that the Group has the following competitive advantages:

• Being one of the largest heavy-duty diesel engine manufacturers in the PRC
• Technological advantages
• Strong research and development capability
• Being engaged in a fast growing industry in the PRC
• Strong sales and service network in the PRC
• An established and renowned customer base
• A stable and experienced management team
• Strong demand position and outstanding growth

• Reliance on the sales of WD615 Engines and the relevant end products
• Euro 2 and Euro 3 Engines may not be accepted by the market
• Reliance on a small number of customers (including the China Heavy Duty Truck Group)
• Risks relating ot the diesel engine production lines and the production capacity of the Company
• Lease of certain buildings and equipment
• Risks relating to the implementation of the Company's future plans
• Risks relating to the Company's research and development and the diesel engines market

Although the PRC Government currently still implements the Euro I Standards, it will implement Euro II Standards in September 2004. The Company has, ahead of that timetable, upgraded its WD615 and WD618 Engines to Euro II Standards in 2002 and 2003. The Company plans to increase the production and sales volume of its WD615 and WD618 Euro II Engines in tendam with market demand and further upgrade them to Euro III Standards in the near future.

Apart from the trend to lower emissions, the load capacity and power of heavy-duty vehicles in the PRC have also increased. The PRC Government has made the development of high-tonnage heavy-duty vehicles with an output of over 220 kW a major strategic direction for the automobile industry in the tenth Five-year State Plans (2001¡V2005). The Company intends to develop more powerful engines in conjunction with its development of Euro III Engines. The Company also plans to increase the output of its WD618 Engines, so as to further strengthen its position as a leading high-speed heavy-duty diesel engine manufacturer in the PRC.

The Company will continue to strengthen its dominant position in the market for heavy-duty vehicles and step-up its marketing efforts on its WD615 and WD618 Engines for coaches, as the Directors believe, with the continuing development and expansion of the highway system and the tourism industry in the PRC, the demand for coaches will increase. As for the market for construction machines, the Company plans to increase its market share in the wheel-loaders market, and step up its sales efforts in other types of construction machines, such as bulldozers and road-rollers. The Company intends to leverage on its strong financial position and technical expertise as well as the experience of its strong management team to grow the Company's business by a combination of further development of and investment in its existing core business, establishment of strategic alliance and synergistic acquisitions.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$888 million (based on the offer price HK$9.55 per shares). The Group at present intends to apply the net proceeds as follows: