Interest rates have been cut twice since early in June 2012 and banks’ reserve requirements had been lower three times since November 2011 to stimulate loan and investment growth. Also railway construction spending has been accelerated and other investment projects are expected to be approved by the Chinese government to help the economy grow. We have dramatically increased our R&D to approximately 5% of net sales in the 2012 second quarter.

As we continue to invest in new advanced products to meet our customer evolving requirements for new technologies and new performance. We also look to innovate new cost efficient production techniques to reduce costs. Our R&D provides a competitive edge to further build our brand equity by supplying new products with global quality and performance that offer added value to our domestic customers and to capture additional contracts to the large international OEMs as well.

New products offer us a chance to enhance our leadership position as we get closer to our current customers, attract new OEM and vehicle models and replaced imported steering units now being used in different vehicles that we had supplied before. We are particularly focused on advancing our electric power steering technology and production capacities to capture additional market share.

We made two various strategic moves during the second quarter of 2012. First, on May 25, 2012, we redeemed all of our outstanding senior convertible notes before their maturity dates. The total principal amount at May 25 was $23.6 million and negotiated total redemption price was $32.4 million including all principal accrued and unpaid interest and the make-whole amounts as of the date of redemption.

The five-year senior convertible notes were part of the $35 million transaction in February 2008 with a schedule maturity date of February 15, 2013. As a result of the redemption of the senior convertible notes, the total share count on a fully diluted basis will be reduced by approximately 3.3 million shares. The senior convertible notes issued by the company included terms that restricted the actions we could take to defend our shareholder value. With the redemption of the senior convertible notes, CAAS has more financial flexibility to fund future operations as this enhances our ability to defend our shareholder value.

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