苏常柴Ａ(000570)苏常柴2001年年度报告（英文版）
SavannaDragon 上传于 2002-04-11 19:24
CHANGCHAI COMPANY, LIMITED
2001 ANNUAL REPORT
Important: Board of Directors of the Changchai Company, Limited (hereinafter
referred to as the Company) individually and collectively accept responsibility for the
correctness, accuracy and completeness of the contents of this report and confirm that
there are no material omissions nor errors which would render any statement
misleading.
Being on the business trip, Dir. Li Hanhua, Dir. Sun Jian and Dir. Wang Jiaze were
absent from the Board meeting. Dir. Li Hanhua entrusted Chairman of the Board, Mr.
Zhang Junyuan, to vote on his behalf.
Arthur Andersen & Company Certified Public Accountants issued an Auditors’ Report
with explanatory notes for the Company, to which the Board of Directors and the
Supervisory Committee will make explanation in details. Investors are minded to
notice.
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Content
I. Company Profile-------------------------------------------------------------------------------3
II. Abstract of Financial Highlights and Business Data----------------------------------4
(I) Total profit and its composing as of the year 2001----------------------------------------4
(II) Principal accounting data and financial index over previous three years ended the
report year------------------------------------------------------------------------------------------4
(III) The profit are calculated according to Regulations on the Information Disclosure
of Companies Publicly Issuing Shares (No. 9) released by CSRC-------------------------5
(IV) Changes in shareholders’ equity in the report year-------------------------------------6
III. Changes in Share Capital and Particulars about Shareholders-------------------6
(I) Changes in shares capital---------------------------------------------------------------------6
(II) About shareholders---------------------------------------------------------------------------7
IV. Particulars about Director, Supervisor and Senior Executive and Staff---------8
(I) Particulars about the directors, supervisors and senior executives----------------------9
(II) Particulars about the annual salary---------------------------------------------------------9
(III) Directors, supervisors and senior executives leaving the office and the reason in
the report year--------------------------------------------------------------------------------------9
(IV) About stuff-----------------------------------------------------------------------------------9
V. Administrative Structure-------------------------------------------------------------------9
(I) Particulars about Company Administration----------------------------------------------10
(II) Performance of Independent Directors---------------------------------------------------10
VI. Brief Introduction of Shareholders’ General Meeting-----------------------------11
VII. Report of the Board of Directors------------------------------------------------------11
(I) Operation--------------------------------------------------------------------------------------11
(II) Investment-----------------------------------------------------------------------------------13
(III) Financial status-----------------------------------------------------------------------------15
(IV) Operation plan for the year 2002--------------------------------------------------------15
(V) Routine work of the Board of Directors-------------------------------------------------16
(VI) Profit distribution preplan and capital public reserve transferring into share capital
for the Year 2001--------------------------------------------------------------------------------17
(VII) Others matters-----------------------------------------------------------------------------18
VIII. Report of the Supervisory Committee----------------------------------------------18
(I) Particulars about the meeting of the Supervisory Committee--------------------------18
(II) Independent opinion------------------------------------------------------------------------19
XI. Significant Events-------------------------------------------------------------------------20
X. Financial Report----------------------------------------------------------------------------22
XI. Documents Available for Reference---------------------------------------------------22
AUDITORS’ REPORT------------------------------------------------------------------------23
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I. COMPANY PROFILE
1. Legal Name of the Company
In Chinese: 常柴股份有限公司
In English: CHANGCHAI COMPANY, LIMITED
Abbr.: CHANGCHAI CO., LTD.
2. Legal Representative: Mr. Zhang Junyuan
3. Secretary of the Board of Directors: Mr. Zhang Jianhe
Liaison Address: No. 123, Huaide Middle Rd., Changzhou, Jiangsu, China
Tel: (86) 519-6600448
Fax: (86) 519-6630954
E-mail: zjh00057@163.com
4. Registered Address and Office Address:
No. 123, Huaide Middle Rd., Changzhou, Jiangsu, China
Post Code: 213002
Internet Website: http://www.changchai.com.cn
E-mail: cctqm@public.cz.js.cn
5. Newspapers Chosen for Disclosing Information:
Securities Times and Ta Kung Pao
The Place Where the Annual Report is Prepared and Placed:
Office of the Company
Internet Website Designated by CSRC for Publishing the Annual Report of the
Company: http://www.cninfo.com.cn
6. Stock Exchange Listed with: Shenzhen Stock Exchange
Short Form of the Stock: Suchangchai A Stock Code: 000570
Suchangchai B 200570
7. Other Information about the Company
(1) The initial registration date: May 5, 1994;
The authority registered with: Changzhou Municipal Administration for Industry
and Commence
(2) The changed registration date: June 7, 2001
The authority registered with: Jiangsu Provincial Administration for Industry and
Commence
(3) The entity business license registration number: 3200001103367 (1/2)
(4) The tax registration number: 320403100121023
(5) Name of the domestic certified public accountants engaged by the Company:
Domestic: Anderson · Huaqiang Certified Public Accountants
Office address: 11/F, 1/Block, International Trade Bldg., No.1, Jianguo Men Wai
Avenue, Beijign, China
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International: Arthur Andersen & Company (HK) Certified Public Accountants
Address: 21st Floor Edinburgh Tower, the Landmark 15 Queen’s Road Central,
Hong Kong
II. ABSTRACT OF FINANCIAL HIGHLIGHTS AND BUSINESS DATA
(I) Total profit and its composing as of the year 2001 (In RMB’000)
Total profit -435,573
Net profit -381,429
Net profit after deducting non-recurring gains and losses -380,150
Profit from main business lines 164,046
Profit from other business lines 4,823
Operating profit -399,510
Investment income -37,567
Subsidy income 6,386
Net income / expenditure from non-operating -4,883
Net cash flows arising from operating activities 166,168
Net increase in cash and cash equivalent 99,228
Note: Net profit after deducting non-recurring gains and losses = Net profit – income
from non-operating – expenditure from non-operating + subsidy income – impact on
income tax = -381,429,000 – (4,171,000 – 9,053,000 + 6,386,000 –225,000) =
-380,150,000
Impact of International Accounting Standard (“IAS”) on net profit and net assets: (Unit:
In RMB’ 000)
Net (loss) profit Net assets
2001 2000 2001 2000
As reported in the statutory accounts of the Group (381,428) 34,988 1,239,420 1,627,951
Adjustments under IAS:
- Provision for impairment losses of property, plant and
equipment (39,537) - - 62,231
- Write off of pre-operating expenses and reversal of
amortization 802 267 - (802)
- Write off of housing fund (621) (22,074) - (22,074)
- Others - (1,594) - -
As reported under IAS (420,784) 11,587 1,239,420 1,667,306
(II) Principal accounting data and financial index over previous three years ended the
report year
(In RMB’000)
Items 2001 2000 1999
Income from main business lines 1,743,487 2,240,847 3,092,750
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Net profit -381,429 39,687 98,972
Total assets 2,926,504 3,530,311 3,414,050
Shareholders’ equity 1,239,421 1,627,951 1,460,480
Earnings per share (diluted) (RMB) -1.02 0.11 0.28
Earnings per share (weighted) (RMB) -1.02 0.11 0.28
Earnings per share after deducting
-1.02 0.07 0.27
non-recurring gains and losses (RMB)
Net assets per share (RMB) 3.31 4.53 4.15
Net assets per share after adjustment
3.19 4.41 4.03
(RMB)
Net cash flows per share arising from
0.44 -0.47 -0.55
operating activities (RMB)
Return on equity (%) (diluted) -30.8 2.34 6.78
(III) The profit are calculated according to Regulations on the Information Disclosure
of Companies Publicly Issuing Shares (No. 9) released by CSRC
Supplementary statement of profit:
Profit as of the report period Return on equity (%) Earnings per share (RMB)
Fully Weighted Fully Weighted
diluted average diluted average
Profit from main business lines 13.2 11.4 0.44 0.44
Operating profit -32.2 -27.8 -1.07 -1.07
Net profit -30.8 -26.5 -1.02 -1.02
Net profit after deducting non-recurring
gains and losses -30.9 -26.6 -1.02 -1.02
Note: Formula for Calculating Major Financial Indexes:
Earnings per share = net profit / total number of ordinary shares at the end of the year
Net assets per share = shareholders’ equity at the end of the year / total number of
ordinary shares at the end of the year
Net assets per share after adjustment = [shareholders’ equity at the end of the year –
accounts receivable over 3 years – deferred expenses – long term deferred expenses] /
total number of ordinary shares at the end of the year
Net cash flows per share arising from operating activities = net cash flows arising from
operating activities / total number of ordinary shares at the end of the year
Return on equity = net profit / shareholders’ equity at the end of the year 100%
Weighted average net assets-income ratio = P ÷ (Eo+NP÷2+Ei×Mi÷Mo-Ej × Mj ÷Mo)
Interpretation: P stands for profit as of the report year; NP stands for net profit as of the
report year; Eo stands for net assets at the beginning of the report year; Ei stands for
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increased net assets due to issue of new share or share transformed from bond in the
report year; Ej stands for decreased net assets due to counter purchase or distribute of
cash bonus in the report year; Mo stands for number of months in the report year; Mi
stands for number of months from the next month of increased assets to the end of the
report year; Mj stands for number of months from the next month of decreased assets
to the end of the report year.
Earnings per share (EPS) = P ÷ [So + Sl + Si × Mi ÷ Mo - Sj × Mj ÷ Mo]
Interpretation: P stands for profit as of the report year; So stands for total number of
shares at the beginning of report year; Sl stands for number of increased shares due to
capital public reserve transferring into share capital or distribution of dividend in the
report year; Si stands for number of increase shares due to issue of new share or share
transformed from bond in the report year; Sj stands for number of decreased shares due
to counter purchase or distribute of dividend in the report year; Mo stands for number
of months in the report year; Mi stands for number of months from the next month of
increased shares to the end of the report year; Mj stands for number of months from the
next month of decreased shares to the end of the report year.
(IV) Changes in shareholders’ equity in the report year
(Unit: in RMB’000)
Total
Share capital Capital public Surplus public Statutory public Retained
Items shareholder
(share) reserve reserve welfare fund profit
s’ equity
Amount at
374,249,551 857,417 237,016 89,426 159,268 1,627,951
year-begin
Increase in the
762 762
report year
Decrease in the
163,997 58,163 159,268 389,292
report year
Amount at
374,249,551 694,182 178,853 89,426 0 1,239,421
year-end
Reason for the changes:
(1) Decrease in capital public reserve is due to making up the deficits of the year 2001.
(2) Decrease in surplus public reserve is due to making up the deficits of the year
2001.
(3) Decrease in retained profit is due to the deficits suffered in 2001.
(4) Decrease in shareholders’ equity is due to the deficits suffered in 2001.
III. CHANGES IN SHARE CAPITAL AND PARTICULARS ABOUT
SHAREHOLDERS
(I) Changes in share capital
1. Changes in share capital
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Items Amount at year-begin Amount at year-end
I. Unlisted Shares
1. Promoters’ shares 153,160,000 153,160,000
Including:
State-owned shares 153,160,000 153,160,000
Domestic juristic person’s shares
Foreign juristic person’s shares
Others
2. Raised juristic person’s shares 10,064,000 10,064,000
3. Employee’s shares
4. Preference shares and others
Total unlisted shares 163,224,000 163,224,000
II. Listed Shares
1. RMB ordinary shares 111,025,551 111,025,551
2. Domestically listed foreign shares 100,000,000 100,000,000
3. Overseas listed foreign shares
4. Others
Total listed shares 211,025,551 211,025,551
III. Total shares 374,249,551 374,249,551
2. Issuance and Listing of Shares
(1) The Company conducted 1999 Share Allotment from Mar. 1, 2000 to Mar. 22, 2000.
Based on total share capital before allotment, 352,000,000 shares, rights shares totaling
22,249,551 shares were allotted on the basis of 3 for 10 at the price of RMB 9 per
share. Totally 22,249,551 rights shares were allotted in the share allotment activity
including 2,260,000 shares subscribed by shareholders of state-owned shares with cash;
987,500 shares subscribed by juristic person shareholders with cash; 102,054 shares
subscribed by Shareholders of previous transferred allotted shares and 18,899,997
shares subscribed by shareholders of public shares (including senior executives).
(2) In the report year, there is no change in share capital of the Company.
(3) There exist no employee’s shares in the Company.
(II) About Shareholders
1. Ended Dec. 31, 2001, the Company had totally 95,344 shareholders, of them, 77,738
shareholders with totally 274,249,551 domestic shares and 17,606 shareholders with
totally 100,000,000 foreign shares.
2. Particulars about shares held by the top ten shareholders at the end of the report year
Number of
Proportion in
No. Shareholder’s name holding shares
total shares (%)
(share)
(1) Changzhou State Assets Administrative Bureau 153,160,000 40.92
(2) Wujin Diesel Engineer Block Factory 5,330,000 1.42
(3) KUBOTA CORPORATION 5,000,000 1.34
(4) CBNY S/A PNC/SKANDIA SELECT FUND/CHINA EQUITY AC 2,349,181 0.63
(5) WEN HAI GEN 1,993,466 0.53
(6) Benniu Agricultural Machinery Factory 1,760,000 0.47
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(7) WEN PEI RONG 1,555,423 0.42
(8) WEN CAN RONG 1,317,564 0.35
(9) KWONG, LIN KUI 687,900 0.18
(10) Tongzhi Securities Investment Fund 640,000 0.17
Notes: (1) Changzhou State Assets Administrative Bureau (“the Bureau”) is the largest
shareholder of the Company, holding153,160,000 shares on behalf of the state. In the
report period, Shares held by the Bureau were not pledged or frozen. No. 2 and 6 were
the domestic juristic person shareholders; No. 10 was shareholder of domestic
circulating shares; and No. 3, 4, 5, 7,8, 9 were shareholders of foreign shares.
(2) There existed no associated relationship among the top ten shareholders.
3. Changzhou State Assets Management Bureau is the holding shareholder of the
Company as non-juristic person organization.
IV. PARTICULARS ABOUT DIRECTOR, SUPERVISOR AND SENIOR
EXECUTIVE AND STAFF
(I) Particulars about the directors, supervisors and senior executives
1. Directors, supervisors and senior executives
Number of
Name Title Gender Age Office term holding shares at
year-end (share)
Zhang Junyuan Chairman of the Board Male 47 Jun. 2001-Jun. 2003 0
Xue Guojun Director, General Manager Male 38 Apr. 2001-Apr. 2003 0
Li Hanhua Director Male 56 Jun. 2000-Jun. 2003 22179
Xu Zhenping Director Male 44 Jun. 2000-Jun. 2003 0
Sun Jian Director Male 43 Jun. 2000-Jun. 2003 0
Xuan Tingpu Director Male 58 Jun. 2000-Jun. 2003 0
Wang Jiaze Director Male 52 Jun. 2000-Jun. 2003 0
Chairman of the Supervisory
Lu Jin Male 51 Jun. 2000-Jun. 2003 18483
Committee
Li Zhengguo Supervisor Male 56 Jun. 2000-Jun. 2003 0
Yin Lihou Supervisory Male 37 Jun. 2000-Jun. 2003 0
Ni Mingliang Supervisory Male 34 Jun. 2000-Jun. 2003 0
Cao Huiming Supervisory Male 52 Jun. 2000-Jun. 2003 0
Zhu Xinmin Deputy General Manager Male 52 Jun. 2000-Jun. 2003 0
Shi Jianchun Deputy General Manager Male 39 Jun. 2000-Jun. 2003 0
He Jianguang Chief Engineer Male 37 Jun. 2000-Jun. 2003 0
Zhang Jianhe Secretary of the Board Male 44 Nov. 2001-Jun. 2003 0
2. Particulars about directors, supervisors or senior executives holding the position in
Shareholding Company
Directors, supervisors and senior executives of the Company have not hold the position
in Shareholding Company.
(II) Particulars about the annual salary
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1. In 2001, the annual salary received by directors, supervisors and senior executives
from the Company are paid in monthly based on the management regulation of wage
established by Changchai Co., Ltd.. Chairman of the Board Mr. Zhang Junyuan,
Director Mr. Xuan Tingpu, Mr. Wang Jiaze, Mr. Sun Jian and Supervisor Mr. Cao
Huiming receive no pay from the Company.
2. The total annual salary of directors, supervisors and senior executives received from
the Company is RMB 590,000. The total amount of the top three directors is RMB
200,000. The total amount of the top three senior executives is RMB 210,000.
3. In 2001, of directors, supervisors and senior executives, seven enjoy their annual
salary from RMB 50,000 to RMB 80,000 respectively; three enjoy their annual salary
under RMB 50,000 respectively.
(III) Directors, supervisors and senior executives leaving the office and the reason in
the report year
In the report year, Mr. Li Hanhua no longer hold the position of Chairman of the Board
of the Company due to work transfer; Mr. Wang Qiuping no longer hold the position of
Vice Chairman of the Board and General Manager of the Company due to work
transfer. Mr. Zhang Junyuan was elected as Chairman of the Board; Mr. Xue Guojun
was elected as Director and General Manager.
Mr. Lv Xiaoping no longer hold the position of Secretary of the Board of Directors of
the Company due to work transfer and Mr. Zhang Jianhe was engaged instead.
The aforesaid matters were published in Securities Times and Ta Kung Pao dated April
30, 2001 and Nov. 30, 2001 respectively.
(IV) About staff
By the end of the year 2001, the Company has totally 4444 registered employees,
including 2964 production personnel; 341 salespersons; 430 technicians; 72 financial
personnel, 110 administration personnel.
Education Background: 9 postgraduate; 210 persons graduated from bachelor’s degree;
328 persons graduated from 3-years regular college; 214 persons graduated from
Polytechnic school; 1885 persons graduated from senior high school and 1798 persons
graduated from junior high school or lower. The Company need not bear the costs of
retiree because that the Company.
V. ADMINISTRATIVE STRUCTURE
(I) Particulars about Company Administration
The Company strictly implements the PRC Company Law, the Securities Law and the
relevant laws and regulations issued by CSRC; continuously improves the legal person
administration system, has establishes modern enterprise system, and operates the
Company in a standardized way. The Company makes self- scrutiny according to the
Regulations of Administration of Listed Companies released by China Securities
Regulatory Commission and State Economic and Trade Commission dated Jan. 7,
2002. Details are set out as follows:
1. Shareholders and Shareholders’ General Meeting: The company is able to ensure all
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shareholders, especially safeguard the interests of small or medium shareholders could
fully conduct their rights. The Company has established the Rules of Procedures of the
Shareholders’ General Meeting, calls and holds shareholders’ general meeting strictly
according to the rules for shareholders’ general meeting. The Company conducted the
related transactions in a fair and reasonable way. At present, the Company is positively
solving the arrears arising from related transaction over previous year. Ended by the
report year, the said matter was making obviously progress.
2. The control shareholder and the public Company: The Company’s important
decision-making was made by Shareholders’ General Meeting and the Board of
Directors according to relevant laws, regulations and Articles of Association of the
Company. The Company is absolutely independent in personnel, assets, finance,
organization and business from its control shareholder. The Board of Directors, the
Supervisory Committee and the management perform their respective functions in an
independent way.
3. Directors and the Board of Directors: The Company has elected directors strictly
according to the engaging procedures stipulated in the Articles of Association. The
Company is positively promoting accumulative voting system according to the
Regulations of Administration of Listed Companies. All the directors have been
performing the duties in a faithful, truthful and diligent way based on the maximum
interest of the Company and the whole shareholders. The Company is positively
looking for the candidate of independent director and establishing the independent
director system and the special committee of the Board of Directors.
4. Supervisors and the Supervisory Committee: The Supervisory Committee has
supervised financial affairs, performance of the Company’s directors, managers and
other senior executives in terms of compliance with the laws and regulations, and
safeguarded the legal rights and interest of the Company and the shareholders.
5. Performance Valuation, Encouragement and Binding Mechanism: The Company is
positively establishing the standards and Procedures of performance valuation and
encouragement and binding mechanism for directors, supervisors and executives.
6. Relations with the Relevant Beneficiaries: The Company has been respecting the
legal rights and interests of the banks and other creditors, staff, consumers, suppliers
and other parties of related interests.
7. Information Disclosure and Transparency: In accordance with the information
disclosure system established by CSRC, the Company has been disclosing the relevant
information in a real, accurate, complete and timely way strictly according to the law,
regulations and the Articles of Association of the Company. The Company has
authorized the secretary of the Board of Directors to take charge of disclosing
information, receiving the visit and inquiry of the shareholders, providing the open
information to investors.
(II) Performance of Independent Directors
The Company is positively establishing the independent director system, and drafting
and amending the relevant rules in terms of the relevant regulations. The Company will
establish the independent director system before June 30, 2002 according to the
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relevant regulations.
VI. BRIEF INTRODUCTION OF SHAREHOLDERS’ GENERAL MEETING
In the report year, the Company held one annual Shareholders’ General Meeting.
2000 Shareholder General Meeting was held at the meeting room of trade union of the
Company in the morning of May 30, 2001.
The Company published the Announcement on holding 2000 Shareholders’ General
Meeting was published in Securities Times and Ta Kung Pao dated April 30, 2001 and
May 15, 2001 respectively.
Totally 54 shareholders/shareholder’s proxies and senior executives attended the
meeting, representing 162,500,914 shares, taking 43.42% of total shares of the
Company, including 161,894,112 A shares, taking 43.26% of total shares of the
Company, 606,802 B shares. The following proposals were examined and approved by
means of voting at the meeting:
1. 2000 Annual Report and its Summary;
2. 2000 Work Report of the Board of Directors;
3. 2000 Work Report of General Manager;
4. 2000 Work Report of the Supervisory Committee;
5. 2000 Profit Distribution Preplan and 2001 Profit Distribution Policies, namely, the
Company has decided to conduct neither profit distribution nor capitalization of capital
public reserve for the year 2000.
6. The proposal on engaging domestic and overseas auditors for the Company in 2001
7. The proposal on reelecting director of the Company. The Company agreed to the
application of Mr. Wang Qiuping for resignation from the post of director and elected
Mr. Zhang Junyuan as Director of the Company.
The relevant Public Notice of the meeting was published in Securities Times and Ta
Kung Pao dated May 31, 2001.
VII. REPORT OF THE BOARD OF DIRECTORS
(I) Business Highlights
1. Main Business Lines and Business Highlights
(1) The Company is mainly engaged in manufacturing and sales of diesels for
agricultural use, combines and transport vehicles for agricultural use.
The Company belongs to the industry of machinery manufacturing.
The formation of revenues from the main business lines according to the classification
of products in the report year is as follows:
Index Income from main business lines Profit of main business lines
Product name Amount (In RMB) Percentage % Amount (In RMB) Percentage %
Diesels 1,513,452,591 86.80 161,869,971 98.67
Spare parts 175,375,876 10.06 -2,557,259 -1.56
Transport vehicles for 54,658,967 3.14 4,732,817 2.89
agricultural use & combines
Total 1,743,487,434 100.00 164,045,529 100.00
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The formation of revenues from the main business lines according to the classification
of districts in the report year is as follows:
Index Income from main business lines Profit of main business lines
District Amount (In RMB) Percentage % Amount (In RMB) Percentage %
Jiangsu 1,614,371,356 92.60 146,579,866 89.36
Southwest 62,160,422 3.56 8,074,269 4.92
Northwest 955,636, 3.84 9,391,394 5.72
Total 1,743,487,434 100 164,045,529 100
(2) About Diesels Income – the Biggest Proportion in the Main Business Lines’
Income
Sales income RMB 1,513,452,591 Cost of sales RMB 1,351,582,620 Gross profit: 10.7%
2. Business Highlights of the Company’s Main Subsidiaries and Controlling
Subsidiaries
(Unit: RMB ’000)
Registered
Names of Companies Main products Total assets Net profit
capital
Changchai Yinchuan Diesel Engine Co., Ltd. Diesels 34,842.10 1,264,443,420 -146,170,880
Changchai Wanxian Diesel Engine Co., Ltd. Diesels 35,000.00 1,168,145,180 -184,090,410
Changchai Benniu Diesel Engine Parts Co., Ltd. Diesels and spare parts 33,786.40 1,242,044,340 -30,538,430
Changzhou Vehicle Co., Ltd. Four-wheel transport 50,000.00 1,013,407,900 -119,794,080
vehicles for agricultural use
Changchai Combine Harvesters Co., Ltd. Combine harvesters 48,500.00 2,232,759,520 -469,659,220
Changchai Jintan Diesel Engine Co., Ltd. Diesels 63,292.30 1,823,707,840 -377,589,000
3. Main Suppliers and Customers:
In 2001, the purchase amount of the first five suppliers made up 25.7% of the annual
total purchase amount; the sales amount of the first five customers made up 25% of the
Company’s total sales amount.
4. Problems and Difficulties Occurred in the Operation and the Solutions
In 2001, the operation condition of small diesel industry got further worse after its
universal descent in 2000. Adjustments of agriculture structure and descent in farmers’
purchasing capability have prevented market effective demands from increasing.
Meanwhile, the rapid emerging of local enterprises, imperfectness of the market
management system and the increasing intension of illegitimate competition all led to
protrusive conflicts between supplying and demanding. The further decrease in the
sales prices directly resulted in the huge deficits in 2001. Subsidiary companies that
produce terminal agricultural machinery also suffered from drastic impact and suffered
comprehensive deficits, which increased the losses after consolidation of financial
statements. Facing such difficult operation environment, the Company adopted various
measures and tried hard to raise the competitiveness of products.
(1) Quickened the internal reform pace, tried best to raise management efficiency, and
reduced costs. Lat year, the Company successively implemented system reform of
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motorcade, separation of social functions, and the work of simplifying organizational
structure and personnel, etc. The Company also adjusted some organizations,
re-allocated management functions, re-engaged mid-level cadres, delimited posts and
organizational structure in management so that the management personnel decreased
and work efficiency increased. The fees that occurred in various branch factories and
departments were remarkably lowered compared with those of previous years. The
Company achieved remarkable results in the work of reducing costs and saving
expenditure, in which the costs for single S195 and S1100 from January to December
were lowered 12% and 13% respectively compared with those of the same period.
(2) Improved the work of internal basic management and reinforced the enterprise
administration system. In view of problems existing in the management work, the
Company successively and respectively established and improved various system
construction work, namely, the Work and Meeting System for General Manager, the
Cadre Assessment System, the Management System of External Investment, the
Contract Management System, the Management System of New Product Development
Expenses and the Management System for Funds and Regular Meetings etc so as to
make every management work more procedural and standardized.
(3) Improved the management of sales, reduced management risks and improved
management quality. The Company established the management system of credit sales
and risk assessment, and improved the examination and approval procedures of
defining credit upper limit; gradually set up archives of bad customers, eliminated
management risks and lowered or reduced management losses through various means
according to classification. The Company reinforced dynamics in fund retrieval and
debit clearing, and conducted clearing of debts of old accounts through various means.
At the end of 2001, accounts receivable decreased by RMB 155.57 million compared
with those at the beginning of the year, and were lowered by 12.9%. The money funds
at the end of the year increased RMB 84.88 million compared with those at the
beginning of the year, and net cash flow from the operating activities in the report year
amounted to RMB 166 million.
(4) Expedited invitation of investors and funds, and tried best to seek break-through in
adjustment of products’ structure. The Company contacted and negotiated actively
with domestic or foreign well-known diesel or automobile manufacturers to seek
products that were technically advanced and had large market potential, strived to
create Changchai’s new point of economic growth in short term through means of joint
ownership and cooperative management, and to free itself from the predicament of low
grade, few technical content, and low competitiveness of prices to certain extent, and
some machines were in stages of sample test and trial setting. At the time when
inviting outside investors, the Company worked hard to carry out internal adjustment
on products’ structure. The 102 series diesel promoted on the market last year sold
well with continuous enlargement in dimension of forming complete sets and became
the emphasis of last year’s promotion. The Company reduced the cost of diesel for
three-wheel vehicle, and raised its reliability, and had produced nearly 100,000 sets.
Multi-cylinders reached the standard of let index. The Company currently had four
models reached let index of European 1 standard, and passed the test of let index with
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some of factories producing main engines to form complete engine sets in the national
test center.
(II) Investment in the Report Year
1. Application of Proceeds Raised Previously
Approved by China Securities Regulatory Commission ZJGSZ (2000) No. 7
Document, the Company allotted and sold shares to all shareholders at the rate of
allotting 3 shares for every 10 shares taking the total share capital RMB 352,000,000 at
end of 1999 as the base. The Company actually allotted and sold 22,249,551 shares in
total and raised net funds amounting to RMB 194,713,059.00. The funds raised this
time were collected on April 13, 2000, and the Company had announced change of
shares in public and registered the change with the Industrial and Commercial
Administration Bureau.
Particulars about using of the raised funds through share allotment in 1999 ended
December 31, 2001 are as follow:
(Unit: RMB ’000)
Fixed assets input (Equity Auxiliary current funds
Names of items Total
rights investment) input (Loans)
Back-carried all-feeding combines
29100 30000 59100
Self-propelled all-feeding combines
Self-propelled semi-feeding combines 24900 47410 72310
Total 54000 77410 131410
Remarks on investment projects funded with the raised proceeds:
(1) Harvest machinery developed rapidly since 1995, and up to 2000, great changes
had taken place in terms of market situation and competition of the industry. In order to
reduce investment risks and to safeguard interests of investors, the Company resolved
to adjust investment ways of the promised investment projects, which was discussed in
the 12th Meeting of the 3rd Board of Directors and disclosed later, and revised the fixed
assets input to the equity rights investment and revised the input of auxiliary current
funds to the loans to project companies. The change of investment ways was subject to
discussion and approval by the Shareholders’ Annual Meeting.
(2) The Company invested RMB 29.10 million in purchasing equity rights of
Changchai Combine Harvesters Co., Ltd. and RMB24.90 million in equity rights of
Jiangnan Transport Machinery Co., Ltd. with the raised funds; the Company offered
RMB 30 million and RMB 43.91 million respectively as loans to the aforesaid two
project companies. The development expenses for self-propelled semi-feeding
combines in the earlier stage was RMB 3.50 million; total raised funds used up
amounted to RMB 131.41 million, and the rest of raised funds RMB 63,303,100 was
deposited in the bank.
(3) The Company implemented three projects, namely, to achieve an annual production
capability of 7000 sets per year for back-carried all-feeding combines and 3000 sets for
self-propelled all-feeding combines and to build basic production lines of
self-propelled semi-feeding combines including processes of punching, welding,
painting and assembling etc. Self-propelled semi-feeding combines developed through
14
trial production of small batches were tested and appraised for production in December
2001, and the Company further improved the quality and raised the reliability to create
conditions of supplying the market in batches in 2002.
(4) Changchai Combine Harvesters Co., Ltd. that produces back-carried and
self-propelled all-feeding combines sustained deficits in 2001 due to impact from
market demand change, price war and product quality etc.
(5) Since self-propelled semi-feeding combine is complex in structure, highly consists
of technologies, and requires long development period, Jiangnan Transport Machinery
Co., Ltd. decided to utilize the existing production conditions to produce three-wheel
vehicles for agricultural use in advance before mass production. However, as a result
of drastic competition and reinforced integration in the industry of three-wheel
transport vehicle, its price fell and the average profit ratio dropped to 1%, which made
it difficult for successors to join in the industry and which made Jiangnan Transport
Vehicle Co., Ltd. sustain great losses in 2001.
2. There were no non-raised fund investment projects in the report year.
(III) Financial Status
1. Financial Index (Unit: RMB’000)
Increase/decrease (%) in
Names of indexes Year 2001 Year 2000
2001 compared with 2000
Total assets 2,926,504 3,530,311 -17.10
Long-term liabilities 318,323 169,721 87.56
Shareholder’s equity 1,239,421 1,627,951 -23.87
Profits from main business lines 164,046 344,614 -52.40
Net profit -381,429 34,988 -1190.17
2. Explanation on Reasons of Financial Status Change
(1) Increase in long-term liabilities is due to the additional long-term loan.
(2) Decrease in shareholders’ equity is due to the deficits suffered in 2001.
(3) Decrease in profit from main business lines is due to the price falling of the
Company’s product on one hand and the reduction in turnover on the other hand.
(IV) Business Plans for the New Year
To expedite modification of the three structures, and develop stably with agricultural
machinery production as foothold; to do beneficial sales, reduce costs and save
expenditure, and sort out integrated resources in an all-round way; to advance
technology and constantly make renovation, and positively promote joint-ownership
and cooperative management; to deepen reforms and operate effectively, and perform
scientific management and step onto another level.
Business goal of 2002: To realize RMB1.5 billion sales revenue, and sell 1.06 million
sets of diesels, emphasize on breakthrough in multi-cylinder production with full
strength, check on performance and renovate mechanism, do accounting section by
section and guarantee benefits, and try hard to eliminate losses and increase profits.
Focuses of Work in 2002:
1. To combine buy-off and expense evaluation for single-cylinder and multi-cylinder to
15
make them become market-oriented step by step.
2. To integrate the Company’s resources in an all-round way, reduce costs, increase
benefits and raise market competitiveness.
3. To positively adjust products structure, and try hard to seek new economic point of
increase.
4. To further strengthen and perfect fundamental administration work, and to make the
Company’s various work fit in with the development structure of small diesel market
which has many categories but small batch production.
(V) Daily Work of the Board of Directors
Particulars about meetings and resolutions of the Board of Directors in the report year
1. The 6th Meeting of the 3rd Board of Directors was held on April 8, 2001, which
discussed and passed the following items:
(1) 2000 Work Report of the Board of Directors;
(2) 2000 Annual Report and its Summary;
(3) 2000 Profit Distribution Preplan;
(4) 2001 Profit Distribution Policies;
(5) The Company asked Changchai Group to return RMB134.93 million that it owned
to the Company as soon as possible, and agreed to offset the aforesaid arrear with the
assessed Changchai Mansion in principle, which needed to be approved by relevant
authority.
2. The 7th Meeting of the 3rd Board of Directors was held on April 29, 2001, which
reviewed and passed the following items:
(1) According to the proposal of the shareholder Changzhou State Property
Administration Bureau: Since Mr. Li Hanhua resigned the post as chairman of the
Board of Directors and Mr. Wang Qiuping resigned the posts as vice chairman of the
Board of Directors, director and general manager both due to work change, it
recommended Mr. Zhang Junyuan as the candidate of director. The Board of Directors
agreed to Mr. Li Hanhua’s resignation as chairman of the Board of Directors, Mr.
Wang Qiuping’s resignation as vice chairman of the Board of Directors, and decided to
design the director Mr. Li Hanhua to perform duties of chairman of the Board of
Directors within authorization of the Board of Directors; The Board of Directors
agreed to Mr. Wang Qiuping’s resignation as director, and nominated Mr. Zhang
Junyuan as director candidate, which was submitted to the Shareholders’ General
Meeting for discussion; The Board of Directors agreed to Mr. Wang Qiuping’s
resignation as general manager, and engaged Mr. Xue Guojun as general manager who
was exempted from the post as vice general manager.
(2) Proposal on engaging auditors for 2001: Agreed to re-engage Arthur Anderson and
Anderson · Huaqiang as the Company’s domestic and international auditor in 2001,
and authorized the Board of Directors to make approval on annual auditing fees.
(3) Agreed to the items discussed in the 2000 Shareholders’ General Meeting and the
public notices.
3. The 8th Meeting of the 3rd Board of Directors was held on May 30, 2001, which
decided to elect Mr. Zhang Junyuan as chairman of the Board of Directors.
4. The 9th Meeting of the 3rd Board of Directors was held on July 25, 2001, which
16
reviewed the Public Notice on 2001 Interim Pre-deficits.
5. The 10th Meeting of the 3rd Board of Directors was held on August 14, 2001, which
reviewed and passed the following items:
(1) 2001 Interim Report and its Summary;
(2) 2001 Interim Profit Distribution Plan;
(3) Report on Revision of the Company’s Accounting System;
(4) Resolution on Transferring Shares of Guotai Junan Securities;
(5) Resolution on Engaging Xinda Lawyers’ Firm as the Company’s Lawyer;
(6) Resolution on Performance Evaluation and Encouragement System for Senior
Executives.
6. The 11th Meeting of the 3rd Board of Directors was held on September 4, 2001,
which reviewed and passed the Company’s offering of guarantee to Shuangli Company
for RMB30 million of loans. The period of guarantee is from September18, 2001 to
September 17, 2008.
7. The 12th Meeting of the 3rd Board of Directors was held on November 29, 2001,
which reviewed and passed the following item:
(1) Seriously studied the relevant stipulations of the PRC Company Law, Securities
Law and the Rules of Shenzhen Stock Exchange for Stock Listing etc, reviewed and
passed the rectification and reform measures and plans in view of problems raised by
CSRC Nanjing Special Office during its inspection tour in the Company.
(2) Reviewed and passed the proposal on engaging the secretary of the 3rd Board of
Directors;
(3) Reviewed and passed the proposal on canceling of Huading Science & Technology
Industrial Co., Ltd.;
(4) Reviewed and passed the proposal on adjusting investment modes of 1999 raised
capital projects;
(5) Reviewed and passed the proposal on supplemental disclosure of offering of
guarantee to Shenzhen Jinbeishen Investment Co., Ltd.
8. The 13th Meeting of the 3rd Board of Directors was held on December 29, 2001,
which reviewed and passed the following items:
(1) Reviewed and passed the proposal on 2000 Management Policies and Goals;
(2) Reviewed and passed the proposal on Liquidation of Changwan Company’s
Accounts Receivable and Clarification of Relevant Policies;
(3) Reviewed and passed the proposal on Transferring Shares of Share Purchasing
Project – i.e. Yihuai Railway. etc.
(VI) Profit Distribution Preplan or Preplan of Transferring of Capital Public Reserves
to Share Capital
The Company realized net profit of RMB -381,429,000 and RMB -420,784,000
thousand respectively in 2001 as audited by the domestic and international auditors
according to Chinese Accounting Standards and International Accounting Standards
respectively. Total profits available for distribution in the year plus the retained profit
RMB 159,268,000 at the beginning of the year amounted to RMB -222,161,000. The
Board of Directors decided neither to distribute profits of 2001 nor to transfer capital
17
public reserve to share capital. In view of large deficits that occurred in 2001, the
Company proposed to make up the deficits with the retained profit RMB 159,268,031
at the beginning of the year based on the lower profit of the parent company and the
Company, arbitrary surplus public reserve RMB 58,163,488 and capital public reserve
RMB 163,997,127. The aforesaid distribution preplan and plan of making up deficits
are subject to discussion in the 2001 Shareholders’ General Meeting.
(VII) Other Report Items
The designated newspapers for the Company to disclose information are Securities
Times and Hong Kong Ta Kung Pao.
VIII. REPORT OF THE SUPERVISORY COMMITTEE
In the report year, according to relevant laws and regulations such as the PRC
Company Law and the Articles of Association etc., the Supervisory Committee
seriously performed its duties, strictly supervised the significant decisions made by the
Board of Directors and management as well as the Company’s operation according to
law, production management and financial management in an all-round way, boosted
the Company’s standardized operation, and ensured veracity and legitimacy of its
economic operation.
(I) The Meeting of the Supervisory Committee
The Company held four meetings of the Supervisory Committee in the report year.
1. The 2nd Meeting of the 3rd Supervisory Committee was held on April 8, 2001, which
reviewed and passed the following items:
(1) In the report year, the Board of Directors and management operated in a
standardized way and strictly according to the PRC Company Law and the Articles of
Association, and basically established the internal control system. The
decision-making procedures were legal
(2) In the report year, the Certified Public Accountants issued the unqualified auditors’
report that objectively and factually reflected the Company’s financial status and
business results.
(3) The latest capital raised was from the share allotment in 1999, of which net raised
capital amounted to RMB 194,713,059.00 after deduction of issuing expenses RMB
5,532,900.00. And actual investment projects were in line with the promised ones.
(4) In the report year, neither inside trading was found, nor was damage of the interests
and rights of part of shareholders or runoff of the Company’s assets.
(5) The Company’s correlative transactions were fair and reasonable, and haven’t
damaged the interests of listed companies and of shareholders.
(6) The measure and ratio for provision of assets devaluation were same as those of
1999.
2. The 3rd Meeting of the 3rd Supervisory Committee was held on May, 28, 2001,
which reviewed and passed the 2000 Work Report of the Supervisory Committee.
3. The 4th Meeting of the 3rd Supervisory Committee was held on August 14, 2001,
which reviewed and passed the following items:
(1) 2001 Interim Report and its Summary;
18
(2) 2001 Interim Profit Distribution Plan;
(3) Agreed to the Report on Modification of the Company’s Accounting System;
(4) Agreed to the proposal on transferring of Guotai Junan Securities shares;
(5) Agreed to the proposal on engaging Xinda Lawyers’ Firm as the Company’s
Lawyer;
(6) Agreed to the proposal on performance evaluation and encouragement system for
senior executives.
4. The 5th Meeting of the 3rd Supervisory Committee was held on November 29, 2001,
which reviewed and passed the following items:
(1) Seriously studied the relevant stipulations of the PRC Company Law, Securities
Law and the Rules of Shenzhen Stock Exchange for Stock Listing etc, and defined
detailed rectification and reform measures concerning the inspection tour of CSRC
Nanjing Special Office in the Company.
(2) Reviewed and passed the proposal on canceling of Huading Science & Technology
Industrial Co., Ltd.;
(3) Reviewed and passed the proposal on adjusting investment modes of 1999 raised
capital projects;
(4) Reviewed and passed the proposal on supplemental disclosure of offering of
guarantee to Shenzhen Jinbeishen Investment Co., Ltd.
5. The 6th Meeting of the 3rd Supervisory Committee was held on December 29, 2001,
which reviewed and passed the following items:
(1) Reviewed and passed the proposal on 2000 Management Policies and Goals;
(2) Reviewed and passed the proposal on Liquidation of Changwan Company’s
Accounts Receivable and Clarification of Relevant Policies;
(3) Reviewed and passed the proposal on Transferring Shares of Four Share
Purchasing Project – shares of Futian, of Commercial Bank, of Yilai Genes and of
Yihuai Railway.
(II) Independent Opinions from the Supervisory Committee
1. Operation According to Law: In the report year, the main leaders of the Board of
Directors and management changed. In the 2000 Shareholders’ General Meeting, Mr.
Zhuang Junyuan was elected as chairman of the Board of Directors and Mr. Xue
Guojun was engaged as general manager, and they were finally decided in the 7th
Meeting of the 3rd Board of Directors. The Supervisory Committee believed that the
members of the Board of Directors and management staff worked seriously and
responsibly, had been operating in a standardized way and strictly according to the
PRC Company Law, Securities Law and the Articles of Association, and basically
established a good internal control system while decision-making procedures were
legitimate.
2. Financial Inspection: The Supervisory Committee seriously and deliberately
inspected the Company’s financial systems and financial status, believed that the
financial report of 2001 factually reflected the Company’s financial status and
management results, and the opinions of auditors and assessment towards relevant
events from Arthur Anderson Certified Public Accountants Certified Public
19
Accountants were objective and fair.
3. Actual Investment Project with Funds Raised Last Time:
The latest capital-raising was 1999 share allotment, in which a total net amount of
RMB 194,713,059.00 was raised. Ended December 31, 2001, the Company invested
RMB 29.10 million in purchasing equity rights of Changchai Combine Harvester Co.,
Ltd, and invested RMB 24.90 million in purchasing equity rights of Jiangnan Transport
Machinery Co., Ltd; The Company provided current funds RMB 30 million and RMB
43.91 million respectively in the manner of loan to the aforesaid two projects. The
Company also invested RMB 3.5 million in the initial stage of developing
self-propelled semi-feeding combines. The total raised fund used was RMB 131.41
million. The Company collected all inputs for the three projects by the end of the
report year. Since the input mode was not in compliance with that in the prospectus,
resolutions on adjusting investment mode were made in the 12th Meeting of the 3rd
Board of Directors and the 5th Meeting of the 3rd Supervisory Committee respectively,
and information on it was disclosed.
The Supervisory Committee believed the actual input mode of investment project was
different from what was promised, and the procedures of changing was legitimate.
4. Purchase and sales of assets. In 2001, the Company transferred equity rights of 5
million shares it held in Guotai Junan Securities Co., Ltd. to Shanghai State-owned
Property Management Company at the rate of RMB 1.3 per share. The total amount
RMB 6.5 million was transferred to the Company’s bank account in October 2001. The
Company signed an equity right transfer agreement on transferring RMB 28.32 million
of equities of Changchai Engine Machinery Co., Ltd. that it held in 2000 to Wujin
Diesel Machine Company and Shi Jianfang. The Supervisory Committee believed that
transactions of assets were reasonable in price, procedures of transferring were
legitimate, and there was no inside trading, no damage of shareholders’ equities or
runoff of the Company’s assets.
5. The correlative transactions were fair and reasonable, and didn’t damage the
interests and rights of the listed companies or shareholders.
6. The company suffered deficits in 2001, details of which were disclosed in the annual
report. The deficits were mainly resulted from intense competition on the market of
diesels for agriculture use and decrease of products prices. Now the Company’s
production and management were normal.
IX. SIGNIFICANT EVENTS
(I) The Company had no material lawsuits or arbitration.
(II) In the report year, the Company transferred 52% of share equities of Changchai
Engine Machinery Co., Ltd – its control subsidiary to Wujin Diesel Engine Body and
Shi Jianfang. Assessed by Changzhou Zhongtian Assets Assessment Firm taking
February 28, 2001 as the standard date, the equity of Changchai Engine Machinery Co.,
Ltd as shown in the book was RMB 28.32 million. The Company signed an equity
right transfer agreement with Wujin Diesel Engine Body and Shi Jianfang in the actual
assessment price of RMB28.32.
(III) In the report year, the Company’s controlling subsidiary Huading Science &
20
Technology Industrial Investment Co., Ltd (abbreviated as “Huading” company) was
terminated due to being unable to sustain management in 2000 according to the
resolution of the Shareholders’ General Meeting as concluded jointly by the Company
and Changzhou New District Development (Group) Head Office - the second large
shareholder of Huading company. The detailed clearing report was subject to
confirmation in the Shareholders’ General Meeting. Since Huading company
terminated, the consolidated financial statement of the report year will change. For
details, please refer to Public Notice in Securities Times and Ta Kung Pao dated Dec. 1,
2001.
(IV) In the report year, the Company had never kept as custodian, contracted or leased
any other company’s assets and vice versa.
(V) In the report year, the Company provided RMB 70 million’s guarantee for
Changzhou Gear Wheel Factory, among which there was still RMB 61.20 million
unfinished at the end of the report year. RMB 88 million’s guarantee provided for
Changzhou Tractor Plant hadn’t been finished yet.
(VI) In the report year, the Company hadn’t entrusted others to manage assets.
(VII) In the report year, there was additional RMB 30 million of debts owned to the
Company aroused in the correlative transactions between Changchai Group and the
Company. This amount was the loan that the Company’s controlling subsidiary
Huading Company provided to Changchai Group in 2001, and since Huading company
terminated, the amount was transferred to the Company. The 6th Meeting of the 3rd
Board of Directors discussed and agreed to offsetting of the debts that occurred in the
correlative transactions as conducted between Changchai Group Co., Ltd and the
Company with Changchai Building. On March 28, 2002, the two sides signed a formal
agreement on transferring the building at the assessment price of RMB 100,036,000.
The process of transferring ownership was finished.
(VIII) In the report year, the Company paid RMB 820,000 of auditing fees to Arthur
Anderson Certified Public Accountants. In 2002, the Company will re-engage
Anderson · Huaqiang Certified Public Accountants and Arthur Anderson Company as
its domestic and foreign auditors.
(IX) In 2001, the Company received internal circular notices of criticism from
Shenzhen Stock Exchange for its delay in disclosing of the guarantee for Changzhou
Gear Wheel Factory.
(X) CSRC’s Nanjing special office made inspection tour in the Company in the second
half of year 2001, and issued the Notification on Rectification Within Stated Time as
per NZJGSZ [2001] No.267 Document dated November 23, 2001. The directors,
supervisors and senior executives discussed and studied it seriously, and implemented
rectification measures one by one. After a period time of rectification, the Company
made remarkable improvement in its standardized administration in the following
terms:
A. In respect of the “Three Meeting”
1. As per requirements of the supervision and administration authority, the Company
modified the Articles of Association, formulated the Rules of Procedures of the
Shareholders’ General Meeting, the Rules of Procedures of the Board of Directors, the
Rules of Procedures of the Supervisory Committee and the Detailed Working Rules for
21
General Manager (relevant documents are subject to discussion and approval of the
Shareholders’ General Meeting, and made detailed regulations on authorization
limitation approval authorization of each power organization.
2. Standardized the operation of the Board of Directors and the Supervisory Committee,
and asked the directors, supervisors and recorders to sign on the meeting minutes of
each meeting.
3. Reinforce construction of the Supervisory Committee, and gave full play to the
supervision functions in terms of the standardized operation, financial management,
application of raised funds and relevant information disclosure etc.
B. In respect of application of raised funds
1. Formulated the Methods for Raised Capital Management according to CSRC
requirements.
2. According to the requirements, the Company changed the investment mode of 1999
raised capital investment project in the statutory procedures and disclosed relevant
information.
C. In respect of information disclosure
1. Formulated the Management Methods of Information Disclosure according to CSRC
requirements.
2. The Company made detailed supplementary disclosure for the issues that were
found in the inspection tour but were not disclosed in time.
D. Other important respects
1. The Company had formulated the Policy of Decision-making for Correlative
Transactions to standardize correlative trading and its corresponding information
disclosure action.
2. The Company had reinforced administration of external guarantee and strictly
controlled new guarantee action.
The concrete rectification reports were published in Securities Times and Hong Kong
Ta Kung Pao dated December 29, 2001.
X. FINANCIAL REPORT
(I) Auditors’ Report (please refer to the attachment)
(II) Consolidated Financial Statements (please refer to the attachment)
(III) Notes to the Consolidated Financial Statements (please refer to the attachment)
XI. CONTENTS OF DOCUMENTS FOR REFERENCE
Documents including:
1. The master copy of 2001 Annual Report carried with the Chairman’s signature.
2. The financial statement carried with signatures and seals of legal representative,
financial person in charge, and accounting clerk.
3. The body text of the auditors’ report carried with seals of Certified Public
Accountants as well as signatures and seals of the certified public accountants.
4. The master copies of documents and the original copies of public notices that were
disclosed in Securities Times and Hong Kong Ta Kung Pao designated by CSRC in the
report year.
22
5. The Articles of Association.
The aforesaid complete reference documents were placed in the Company’s office.
This annual report is prepared in both Chinese and English. Should there be any
difference in interpretation between the two versions, the Chinese version shall prevail.
Board of Directors of
Changchai Co., Ltd.
April 12, 2002
Attachment:
AUDITORS’ REPORT
TO THE SHAREHOLDERS OF CHANGCHAI CO., LTD.
We have audited the accompanying consolidated balance sheet of Changchai Co., Ltd. (the
“Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) as of
December 31, 2001 and the related consolidated statements of income, changes in equity and cash
flows for the year then ended. These consolidated financial statements are the responsibility of the
Group’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing. Those Standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of the Group as of December 31, 2001, and the
consolidated results of its operations and its cash flows for the year then ended in accordance with
International Financial Reporting Standards as published by the International Accounting Standards
Board.
Without qualifying our opinion, we draw attention to Note 2 to the consolidated financial
statements. The Group incurred a loss of approximately RMB 421 million for the year ended
December 31, 2001. The Group’s ability to continue as a going concern and to realize the
carrying value of its assets and discharge its liabilities as they fall due depends on the Group’s
future successful operations.
Hong Kong, the People’s Republic of China
April 10, 2002
23
CHANGCHAI CO., LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2001
(Amounts expressed in thousands of Renminbi (“RMB”))
Note 2001 2000
(Note 31)
ASSETS
Non-current assets
Leasehold land 4 84,393 78,853
Property, plant and equipment 5 727,183 843,108
Investments in associates 7 77,669 93,481
Other long-term investments 8 101,392 105,443
Prepayment for investment 9 57,000 -
Total non-current assets 1,047,637 1,120,885
Current assets
Inventories 10 452,247 699,207
Value-added tax recoverable 42,082 64,745
Due from CGC 11 137,323 191,369
Due from related parties 23 201,063 202,805
Receivables 12 727,494 1,057,031
Prepayments and other current assets 15,492 21,200
Short-term investment - 14,000
Pledged bank deposits 13,949 28,294
Cash and cash equivalents 13 309,924 210,697
Total current assets 1,899,574 2,489,348
TOTAL ASSETS 2,947,211 3,610,233
EQUITY AND LIABILITIES
Capital and reserves
Share capital 14 374,250 374,250
Reserves 15 873,034 1,293,056
Unrecognized investment losses (7,864) -
Total equity 1,239,420 1,667,306
Minority interests 46,013 119,601
Non-current liabilities
Long-term bank loans, less current portion 16 293,500 153,000
Current liabilities
Current portion of long-term bank loans 16 20,000 83,500
Short-term bank loans 16 425,990 522,750
Other payables, advances from customers
and accruals 208,485 178,827
Taxes payable 4,631 28,771
Dividends payable 4,810 4,810
24
Due to related parties 23 27,186 81,208
Notes and trade payables 677,176 770,460
Total current liabilities 1,368,278 1,670,326
TOTAL EQUITY AND LIABILITIES 2,947,211 3,610,233
CHANGCHAI CO., LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2001
(Amounts expressed in thousands of RMB, except earnings per share)
Note 2001 2000
Revenue 17 1,743,487 2,240,847
Cost of sales (1,579,442) (1,896,233)
Gross profit 164,045 344,614
Other operating income 19,567 47,038
Unrecognized investment losses 7,864 -
Selling expenses (190,343) (170,606)
General and administrative expenses (347,335) (209,629)
Other operating expenses (53,754) (28,253)
Loss from operations (399,956) (16,836)
Finance (cost) income, net 18 (30,057) 18,105
Share of losses from associates 7 (40,052) (8,514)
Other investment income 2,485 3,744
Gain on disposal of property, plant, equipment and
leasehold land 442 16,383
Other income (expenses), net 74 (3,796)
(Loss) profit from ordinary activities 19 (467,064) 9,086
Income tax expense 20 (2,195) (5,622)
Net (loss) profit after taxation but before minority interests (469,259) 3,464
Minority interests 48,475 8,123
Net (loss) profit after taxation and minority interests (420,784) 11,587
(Loss) earnings per share
- Basic 21 RMB (1.13) RMB 0.03
25
CHANGCHAI CO., LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2001
(Amounts expressed in thousands of RMB)
Reserves
Statutory Statutory Un-recogni
surplus public Discretionary zed
Share Capital reserve welfare surplus Retained Total investment
capital surplus fund fund reserve fund earnings Reserves loss Total equity
Note 14 Note 15(a) Note 15(b) Note 15(b) Note 15(b)
Balance, January 1, 2000 352,000 684,953 86,422 86,422 56,709 194,499 1,109,005 - 1,461,005
Provision for discretionary surplus reserve
fund after January 1, 2000 - - - - 1,453 (1,453) - - -
Rights issue 22,250 177,996 - - - - 177,996 - 200,246
Expenses on rights issue - (5,532) - - - - - (5,532) - (5,532)
Net profit for 2000 - - - - - 11,587 11,587 - 11,587
Profit appropriations from net profit 2000
- Statutory surplus reserve fund - - 3,005 - - (3,005) - - -
- Statutory public welfare fund - - - 3,005 - (3,005) - - -
Balance, December 31, 2000 374,250 857,417 89,427 89,427 58,162 198,623 1,293,056 - 1,667,306
Net loss for 2001 - - - - - (420,784) (420,784) (7,864) (428,648)
Other - 762 - - - - 762 - 762
Balance, December 31, 2001 374,250 858,179 89,427 89,427 58,162 (222,161) 873,034 (7,864) 1,239,420
CHANGCHAI CO., LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2001
(Amounts expressed in thousands of RMB)
Note 2001 2000
(Note 31)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from (used in) operations 22(a) 175,210 (196,563)
Interest paid (45,057) (40,096)
Income tax paid (3,838) (10,583)
Net cash generated from (used in) operating activities 126,315 (247,242)
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposal of Changchai Dongli Machinery Co., Ltd. (“CCDL”),
net of cash disposed 22(b) (6,149) -
Disposal of Huading Technology Xinye Investment Co., Ltd.
(“Huading”), net of cash acquired 22(b) 6 -
Acquisition of leasehold land (9,780) -
26
Acquisition of property, plant and equipment (29,985) (90,174)
Increase in investments in associates (24,240) (87,200)
Return of entrusted investments - 40,000
Decrease (increase) in other long-term investments 4,051 (16,764)
Decrease (increase) in pledged bank deposits 14,345 (28,294)
Proceeds from disposal of property, plant, equipment and
leasehold land 37,467 28,518
Interest received 5,840 6,915
Dividends received 4,717 2,414
Entrusted investment income - 1,330
Net cash used in investing activities (3,728) (143,255)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term bank loans (96,760) (19,290)
(Decrease) increase in loan from CGC (3,600) 10,760
Increase in loans from related parties - 60,000
Proceeds from long-term bank loans 233,480 254,470
Repayment of long-term bank loans (156,480) (162,470)
Contribution from a minority shareholder - 5,400
Proceeds from rights issue - 200,246
Expenses on rights issue - (5,532)
Dividends paid to minority shareholders - (509)
Net cash (used in) generated from financing activities (23,360) 343,075
Net increase (decrease) in cash and cash equivalents 99,227 (47,422)
Cash and cash equivalents, beginning of year 210,697 258,119
Cash and cash equivalents, end of year 13 309,924 210,697
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(Amounts expressed in thousands of RMB unless otherwise stated)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
Changchai Co., Ltd. (the “Company”) was established as a joint stock limited company in the
People’s Republic of China (the “PRC”) in 1994. The address of the Company’s registered
office is No.123 Huai De Zhong Rd., Changzhou, Jiangsu Province. As of December 31,
2001, the Company had employees of 4,188 (2000: 4,560). The Company’s domestic
investment ordinary shares (“A shares”) and domestically listed foreign investment ordinary
shares (“B shares”) have been listed on the Shenzhen Stock Exchange since 1994 and 1996
respectively.
The Company is principally engaged in the manufacture and sale of small and medium diesel
engines under “Changchai” brand name for use in agricultural machinery such as tricycles,
tractors and water pumps, and agricultural product processing machinery such as rice mills,
oil presses and pulverising machinery. The principal activities of its subsidiaries are shown
27
in Note 6.
The Company together with its subsidiaries listed in Note 6 are hereinafter collectively
referred to as the “Group”.
2. GOING CONCERN
The Group incurred a loss of approximately RMB 421 million for the year ended December
31, 2001. The Group’s ability to realize the carrying amount of its assets and discharge its
liabilities as they fall due depends on the Group’s future successful operations. The
consolidated financial statements were prepared on the assumption that the Group will
continue as a going concern.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in preparing the consolidated financial statements
of the Group is as follows:
(a) Basis of preparation
The financial statements are prepared under the historical cost convention and are also
prepared in accordance with International Financial Reporting Standards (“IFRS”), as
published by the International Accounting Standards Board, effective as of December 31,
2001. This basis of accounting differs from that used in the statutory accounts of the
Group, prepared in accordance with accounting principles and accounting standards
applicable to joint stock limited companies in the PRC (“statutory accounts”). The
principal adjustments made to conform the statutory accounts of the Group to IFRS are
shown in Note 24.
(b) Principles of consolidation
The consolidated financial statements of the Group include the Company and the
companies that it controls. This control is normally evidenced when the Group owns,
either directly or indirectly, more than 50 per cent of the voting rights of a company's
share capital and is able to govern the financial and operating policies of an enterprise so
as to benefit from its activities. The equity and net income attributable to minority
shareholders' interests are shown separately in the balance sheets and income statements,
respectively.
Investments in subsidiaries are accounted for using equity method in the Company’s
financial statements. The purchase method of accounting is used for acquired
businesses. Companies acquired or disposed of during the year are included in the
consolidated financial statements from the date of acquisition or to the date of disposal.
Investments in associated companies (generally investments of between 20 per cent to 50
per cent in a company’s equity) where significant influence is exercised by the Company
are accounted for using the equity method. An assessment of investments in associates
is performed when there is an indication that the asset has been impaired or the
impairment losses recognised in prior years no longer exist.
When the Group’s share of losses exceeds the carrying amount of the investment, the
28
investment is reported at nil value and recognition of losses is discontinued except to the
extent of the Group’s commitment.
All other investments are accounted for in accordance with IAS 39 as further disclosed
in Note 3(e).
Intercompany balances and transactions, including intercompany profits and unrealised
profits and losses are eliminated. Unrealised gains arising from transactions with
associates are eliminated to the extent of the Group’s interest in the associate, against the
investment in the associate. Unrealised losses are eliminated similarly but only to the
extent that there is no evidence of impairment of the asset transferred.
Consolidated financial statements are prepared using uniform accounting policies for
like transactions and other events in similar circumstances.
(c) Leasehold land
Leasehold land represented land use fees paid for leasehold land and is classified as
operating leases. The pre-paid lease payments are amortized over the lease period
(twenty-five to fifty years) on a straight-line basis.
(d) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and
accumulated impairment loss. The initial cost of an asset comprises its purchase price
and any directly attributable costs of bringing the asset to its working condition and
location for its intended use.
Expenditure incurred after the property, plant and equipment have been put into
operation such as repairs and maintenance and overhaul costs is normally charged to
income statement in the period in which it is incurred. In situations where it is
probable that the expenditure has resulted in an increase in the future economic benefits
expected to be obtained from the use of an item of property, plant and equipment beyond
its originally assessed standard of performance, the expenditure is capitalized as an
additional cost of property, plant and equipment.
Depreciation is calculated using the straight-line method to write off the cost, after
taking into account the estimated residual value, of each asset over its expected useful
life. The expected useful lives are as follows:
Buildings 20-30 years
Plant and machinery 6-15 years
Motor vehicles 5-10 years
Furniture, fixtures and equipment 5-10 years
29
The useful life and depreciation method are reviewed periodically to ensure that the
method and period of depreciation are consistent with the expected pattern of economic
benefits from items of property, plant and equipment.
When assets are sold or retired, their costs, accumulated depreciation and accumulated
impairment loss are eliminated from the accounts and any gain or loss resulting from
their disposal is included in the income statement.
Construction-in-progress represents plant and properties under construction and is stated
at cost. This includes costs of construction, plant and equipment, attributable
borrowing costs, which include interest charges and exchange differences arising from
foreign currency borrowings used to finance these projects during the construction
period, to the extent these are regarded as an adjustment to interest costs, and other direct
costs. Construction-in-progress is not depreciated until such time as the relevant assets
are completed and put into operational use.
(e) Investments
The Group adopted IAS 39 on 1st January, 2001. Accordingly, investments, other than
interests in subsidiaries, associates and joint ventures which are accounted for under IAS
27, IAS 28 and IAS 31 respectively, are classified into the following categories:
held-to-maturity, trading and available-for-sale. Investments with fixed or
determinable payments and fixed maturity that the Group has the positive intent and
ability to hold to maturity other than loans and receivables originated by the Group are
classified as held-to-maturity investments. Investments acquired principally for the
purpose of generating a profit from short-term fluctuations in price are classified as
trading. All other investments, other than loans and receivables originated by the
Company, are classified as available-for-sale. As of December 31, 2001, the Group has
only available-for-sale investments.
All purchases and sales of investments are recognised on the trade date.
Investments are initially measured at cost, which is the fair value of the consideration
given for them, including transaction costs.
Changes in the fair values of trading investments are included in financial expense.
Available-for-sale investments are carried at cost less impairment. The presumption that
fair value can be reliably measured is overcome and therefore, the Group measures such
financial instrument at amortized cost (see Note 8).
(f) Goodwill
30
Goodwill represents the excess of the costs of acquisitions of associates over the
Company’s interest in the fair value of the net identifiable assets and liabilities acquired
as at the date of the exchange transaction. Goodwill is carried at cost less accumulated
amortisation and accumulated impairment loss. Cost is amortized on a straight line
basis over its estimated useful life of 3 to 10 years.
The unamortized balances are reviewed at each balance sheet date to assess the
probability of continuing future benefits. If there is an indication that goodwill may be
impaired, the recoverable amount is determined for the cash-generating unit to which the
goodwill belongs. If the carrying amount is more than the recoverable amount, an
impairment loss is recognized.
(g) Inventories
Inventories are stated at the lower of cost and net realizable value. Cost, calculated on
the weighted average basis, comprises all costs of purchase, costs of conversion and
other costs incurred in bringing the inventories to their present location and condition.
Net realizable value is the estimated selling price in the ordinary course of business less
the estimated costs of completion and the estimated costs necessary to make the sale.
When inventories are sold, the carrying amount of those inventories is recognized as cost
of sales in the year in which the related revenue is recognized. The amount of any
write-down of inventories to net realizable value and any losses of inventories are
recognized as expenses in the year the write-down or loss occurs. The amount of any
reversal of any write-down of inventories, arising from an increase in net realizable
value, is recognized as a reduction in the amount of inventories recognized as an expense
in the year in which the reversal occurs.
(h) Receivables
Receivables are stated at fair value of the consideration given and are carried at cost,
after provision for impairment.
(i) Cash and cash equivalents
Cash represents cash on hand and deposits with banks (or other financial institutions)
which are repayable on demand.
Cash equivalents represent short-term, highly liquid investments which are readily
convertible into known amounts of cash with originally maturity of three months or less
and that are subject to an insignificant risk of change in value.
(j) Liabilities and equity
31
Financial instruments are classified as liabilities or equity in accordance with the
substance of the contractual arrangement on initial recognition.
Interest, dividends, gains, and losses relating to a financial instrument classified as a
liability, are reported as expense or income. Distributions to holders of financial
instruments classified as equity are charged directly to equity. When the rights and
obligations regarding the manner of settlement of financial instruments depend on the
occurrence or non-occurrence of uncertain future events or on the outcome of uncertain
circumstances that are beyond the control of both the issuer and the holder, the financial
instruments is classified as a liability unless the possibility of the issuer being required to
settle in cash or another financial asset is remote at the time of issuance, in which case
the instrument is classified as equity.
(k) Revenue recognition
Revenue is recognised when it is probable that the economic benefits associated with the
transaction will flow to the enterprise and the amount of the revenue can be measured
reliably. Sales are recognised net of sales taxes and discounts.
Revenue from sales of goods are recognised when delivery has taken place and transfer
of risks and rewards has been completed.
Revenue from rendering of services is recognised upon the delivery of services.
Interest is recognised on a time proportion basis that reflects the effective yield on the
asset.
(l) Income taxes
The income tax charge is based on profit for the year and considers deferred taxation.
Deferred taxes are calculated using the balance sheet liability method. Deferred
income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. Deferred tax assets and liabilities are measured using the tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled based on tax rates enacted or
substantially enacted at the balance sheet date.
The measurement of deferred tax liabilities and deferred tax assets reflects the tax
consequences that would follow from the manner in which the enterprise expects, at the
balance sheet date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are not discounted and are classified as non-current
assets (liabilities) in the balance sheet.
32
Deferred tax assets are recognised when it is probable that sufficient taxable profits will
be available against which the deferred tax assets can be utilised. At each balance sheet
date, the Group reassesses unrecognised deferred tax assets and the carrying amount of
deferred tax assets. The enterprise recognises a previously unrecognised deferred tax
asset to the extent that it has become probable that future taxable profit will allow the
deferred tax asset to be recovered. The Group conversely reduces the carrying amount
of a deferred tax asset to the extent that it is no longer probable that sufficient taxable
profit will be available to allow the benefit of part or all of that deferred tax asset to be
utilised.
Current tax and deferred tax are charged or credited directly to equity if the tax relates to
items that are credited or charged, in the same or a different period, directly to equity.
A deferred tax liability is recognised for all taxable temporary differences, unless the
deferred tax liability arises from goodwill for which amortisation is not deductible for
tax purposes.
(m) Provisions
A provision is recognised when, and only when an enterprise has a present obligation
(legal or constructive) as a result of a past event and it is probable (i.e. more likely than
not) that an outflow of resources embodying economic benefits will be required to settle
the obligation, and a reliable estimate can be made of the amount of the obligation.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best
estimate. Where the effect of the time value of money is material, the amount of a
provision is the present value of the expenditures expected to be required to settle the
obligation. When discounting is used, the increase in provision reflecting the passage
of time is recognised as interests expense.
Gains from the expected disposal of assets are not taken into account in measuring the
provision. Property, plant and equipment that is retired from active use is carried at the
lower of the carrying amount or estimated net selling price less costs of disposal.
When some or all of the expenditure required to settle a provision is expected to be
reimbursed by another party, the reimbursement is not recognised until it is virtually
certain that reimbursement will be received.
(n) Foreign currency translation
Companies within the Group maintain their books and accounting records in their
measurement currency – Renminbi (“RMB”), which is not a freely convertible currency.
Each entity within the Group translates its foreign currency transactions and balances
into its measurement currency by applying to the foreign currency amount the exchange
33
rate between the measurement currency and the foreign currency at the date of the
transaction. Exchange rate differences arising on the settlement of monetary items or
on reporting monetary items at rates different from those at which they were initially
recorded during the period or reported in previous financial statements are recognised in
the income statement in the period in which they arise.
(o) Borrowing costs
Borrowing costs generally are expensed as incurred. Borrowing costs are capitalised if
they are directly attributable to the acquisition, construction or production of a qualifying
asset. Capitalization of borrowing costs commences when the activities to prepare the
asset are in progress and expenditures and borrowing costs are being incurred.
Borrowing costs are capitalised until the assets are substantially ready for their intended
use. If the resulting carrying amount of the asset exceeds its recoverable amount, an
impairment loss is recorded.
Borrowing costs may include:
(i) interest on bank overdrafts and short-term and long-term borrowings;
(ii) amortisation of discounts or premiums relating to borrowings;
(iii) amortisation of ancillary costs incurred in connection with the arrangements of
borrowings;
(iv) finance charges in respect of finance leases recognised in accordance with IAS 17
“Leases”; and
(v) exchange differences arising from foreign currency borrowings to the extent that
they are regarded as an adjustment to interest costs.
Borrowings are initially recognised at the proceeds received, net of transaction costs.
They are subsequently carried at amortised costs using the effective interest rate method,
the difference between net proceeds and redemption value being recognised in the net
profit or loss for the period over the life of the borrowings.
(p) Research and development costs
Expenditure for research is recognised as an expense when incurred. Expenditure on
development is charged against income in the period incurred except for project
development costs which comply strictly with all of the following criteria:
(i) the product or process is clearly defined and costs are separately identified and
measured reliably;
34
(ii) the technical feasibility of the product is demonstrated;
(iii) the product or process will be sold or used in-house;
(iv) the assets will generate future economic benefits (e.g. a potential market exists for
the product or its usefulness in case of internal use is demonstrated); and
(v) adequate technical, financial and other resources required for completion of the
project are available.
Capitalization of costs starts when the above criteria are first met. Expenditure
recognised as an expense in previous accounting periods is not reinstated.
Capitalised development costs are amortised on a straight-line basis over their expected
useful lives.
The recoverable amount of development costs is estimated whenever there is an
indication that the asset has been impaired or that the impairment losses recognised in
previous years no longer exist.
(q) Employee benefits
Staff welfare
Provision for staff welfare is made based on 14% of the standard salaries specified by
local regulations.
Defined contribution plans
Pursuant to the PRC laws and regulations, contributions to the basic old age insurance
for the Group’s local staff are to be made to a government agency based on 27%-28% of
the standard salary set by the provincial government, of which 21% is borne by the
Group and the remainder is borne by the staff. The government agency is responsible
for the pension liabilities relating to such staff on their retirement.
The Group has no obligation for the payment of pension benefits beyond the
contribution described above.
(r) Financial instruments
(i) Definition
A financial instrument is any contract that gives rise to both a financial asset of one
35
enterprise and a financial liabilities or equity instrument of another enterprise.
A financial asset is any asset that is:
(a) cash;
(b) a contractual right to receive cash or another financial asset from another
enterprise;
(c) a contractual right to exchange financial instruments with another enterprise
under conditions that are potentially favourable; or
(d) an equity instrument of another enterprise.
A financial liabilities is any liability that is a contractual obligation:
(a) to deliver cash or another financial asset to another enterprise; or
(b) to exchange financial instruments with another enterprise under conditions
that are potentially unfavourable.
The financial assets and financial liabilities of the Group include cash and cash
equivalents, receivables, investments, payables and borrowings.
(ii) Recognition and measurement
Financial assets are initially recognised at cost which is the fair value of the
consideration given. They are subsequently carried at either fair value, cost or
amortized cost (using the effective interest rate method) according to IAS 39. A
“regular way” purchase or sale of financial assets is recognized using trade date
accounting. Gains and losses arising from changes in the fair value of those
available-for-sale financial assets that are measured at fair value subsequent to
initial recognition are included in net profit or loss for the period. The accounting
policies on recognition and measurement of the major items are disclosed in the
respective accounting policies found in this Note.
(iii) Presentation
Financial instruments are offset when the Group has a legally enforceable right to
offset and intends to settle either on a net basis or to realize the asset and settle the
liability simultaneously.
(s) Impairment of Assets
Financial instruments
Financial instruments are reviewed for impairment at each balance sheet date.
36
For financial assets carried at amortised cost, whenever it is probable that the Group will
not collect all amounts due according to the contractual terms of loans, receivables or
held-to-maturity investments, an impairment or bad debt loss is recognised in the income
statement. Reversal of impairment losses previously recognised is recorded when the
decrease in impairment loss can be objectively related to an event occurring after the
write-down. Such reversal is recorded in income. However, the increased carrying
amount is only recognised to the extent it does not exceed what amortised cost would
have been had the impairment not been recognised.
Other assets
Other assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Whenever the
carrying amount of an asset exceeds its recoverable amount, an impairment loss is
recognised in income or treated as a revaluation decrease for property, plant and
equipment that are carried at revalued amount to the extent that the impairment loss does
not exceed the amount held in the revaluation surplus for that same asset. The
recoverable amount is the higher of an asset’s net selling price and value in use. The
net selling price is the amount obtainable from the sale of an asset in an arm’s length
transaction less the costs of disposal while value in use is the present value of estimated
future cash flows expected to arise from the continuing use of an asset and from its
disposal at the end of its useful life. Recoverable amounts are estimated for individual
assets or, if this is not possible, for the cash-generating unit to which the asset belongs.
Reversal of impairment losses recognised in prior years is recorded when there is an
indication that the impairment losses recognised for the asset no longer exist or have
decreased. The reversal is recorded in income or as a revaluation increase. However,
the increased carrying amount of an asset due to a reversal of an impairment loss is
recognised to the extent it does not exceed the carrying amount that would have been
determined (net of amortisation or depreciation) had no impairment loss been recognised
for that asset in prior years.
(t) Contingencies
Contingent liabilities are not recognized in the financial statements. They are disclosed
unless the possibility of an outflow of resources embodying economic benefits is remote.
A contingent asset is not recognized in the financial statements but disclosed when an
inflow of economic benefits is probable.
(u) Subsequent events
Post-year-end events that provide additional information about the Group’s position at
the balance sheet date (“adjusting events”) are reflected in the financial statements.
37
Post-year-end events that are not adjusting events are disclosed in the notes when
material.
4. LEASEHOLD LAND
2001 2000
Cost
Beginning of year 89,097 89,097
Additions 9,780 -
Disposal of CCDL (Note 6) (2,377) -
End of year 96,500 89,097
Accumulated amortization
Beginning of year 10,244 7,606
Additions 2,394 2,638
Disposal of CCDL (Note 6) (531) -
End of year 12,107 10,244
Net book value
End of year 84,393 78,853
Beginning of year 78,853 81,491
Leasehold land represented land use fees paid for the acquisition of right to use the parcel of
land where the Company and its subsidiaries’ factory buildings are located.
Since all land in the PRC is owned by the state or is subject to collective ownership, the risks
and rewards of the parcel of land remain with the State. As a result, such lease payment is
accounted for under operating lease and is amortized to the income statement on a
straight-line basis over the lease term of twenty five to fifty years.
5. PROPERTY, PLANT AND EQUIPMENT
Movements in property, plant and equipment for the year ended December 31, 2001 were
follows:
2001 2000
Furniture,
Plant and Construction-in
Buildings Motor vehicles fixtures Total Total
machinery -progress
and equipment
Cost
Beginning of year 449,902 516,912 46,075 31,272 129,862 1,174,023 1,102,439
Additions 9,588 2,470 1,056 4,371 39,886 57,371 93,394
Reclassifications 15,613 23,019 336 709 (39,677) - -
Disposals of CCDL (Note 6) (41,954) (45,578) (3,036) - (1,042) (91,610) -
Disposal of Huading (Note 6) - (79) - - - (79) -
Other disposals (697) (36,900) (4,110) (107) - (41,814) (21,810)
End of year 432,452 459,844 40,321 36,245 129,029 1,097,891 1,174,023
38
Accumulated Depreciation
Beginning of year 76,002 215,937 25,271 13,705 - 330,915 267,958
Charge for the year 18,806 40,362 4,907 4,244 - 68,319 70,229
Disposals of CCDL (Note 6) (12,676) (34,191) (2,257) (74) - (49,198) -
Disposal of Huading (Note 6) - (68) - - - (68) -
Other disposals (15) (1,690) (2,612) (480) - (4,797) (7,272)
End of year 82,117 220,350 25,309 17,395 - 345,171 330,915
Impairment Loss
Beginning of year - - - - - - - -
Additions - 9,537 - - 16,000 25,537 -
End of year - 9,537 - - 16,000 25,537 -
Net book value
End of year 350,335 229,957 15,012 18,850 113,029 727,183 843,108
Beginning of year 373,900 300,975 20,804 17,567 129,862 843,108 834,481
Analysis of construction-in-progress is as follows:
2001 2000
Cost of construction, plant and equipment and other direct cost 113,029 129,862
Interest capitalized - -
113,029 129,862
As of December 31, 2001, machinery and equipment with an aggregate net book value of
approximately RMB 50 million (2000: RMB 44 million) had been pledged as collateral for
certain short-term bank loans (see Note 16(b)).
6. INVESTMENTS IN SUBSIDIARIES
As of December 31, 2001, the Company had the following significant subsidiaries, all of
which are companies incorporated in the PRC.
Percentage of equity
Name interest Principal activity
2001 2000
Changchai Wanxian Diesel Engines Co., Ltd. 60% 60% Manufacture and sale of diesel engines
Changchai Yinchuan Diesel Engines Co., Ltd. 60% 60% Manufacture and sale of diesel engines
Changzhou Changchai Benniu Diesel Engines 75% 75% Manufacture and sale of spare parts for diesel
Spare Parts Co., Ltd. engines
Jiangsu Changchai United Harvest Machinery 60% 60% Manufacture and sale of harvest machinery and
Co., Ltd. spare parts
Changchai Jin Tan Diesel Engines Co., Ltd. 71% 71% Manufacture and sale of diesel engines
(“JTDEC”)
39
Changzhou Vehicle Co., Ltd. 50% 50% Manufacture and sale of agricultural vehicles and
spare parts
Huading Technology Xinye Investment Co., Ltd. - 63% Investment in information technology and
(“Huading”) environment protection projects
Changchai Dongli Machinery Co., Ltd. (“CCDL”) - 52% Manufacture and sale of spare parts of diesel
engines
Huading and CCDL were disposed of during 2001. The disposal of Huading and CCDL
does not have any material impact on the financial position as of December 31, 2001 and
results of operations for the year then ended as well as that of the preceding year. For further
details of disposal, please refer to Note 22(b).
7. INVESTMENTS IN ASSOCIATES
2001 2000
The Group’s share of the net identifiable assets of associates 34,629 83,481
Loan to Jiangnan Vehicle 43,040 10,000
77,669 93,481
Loan to Jiangnan Vehicle bore interest at a rate of 5.75% (2000: 2.93%) per annum and will
be due on December 30, 2002.
As of December 31, 2001, the Group had the following associates, all of which are
incorporated in the PRC:
Name Investment period Percentage of equity interest held Carrying value Principal activities
2001 2000 2001 2000
Direct Indirect Direct Indirect
Changzhou Fuji Changchai Robin September 20, 1999 to 33% - 33% - 11,622 12,142 Manufacture and sale of gasoline engines
Gasoline Engine Co., Ltd. September 19, 2049 and relevant components
Beijing Tsinghua Xing Ye September 29, 1999 to 25% - 25% - 2,449 2,420 Project investment, business administration
Investment Management Co., Ltd. September 28, 2049 consulting and investment consulting
Shenzhen Gamma Web System Co., October 9, 1999 to 34% - 34% - - 6,236 Provision of internet service, development
Ltd. (“Shenzhen Gamma”) October 9, 2014 and sale of computer software and
hardware
Changchai Group Jiangnan Vehicle August 10, 2000 to 34.9% 5% 34.9% 15% 43,369 44,513 Manufacture and sale of vehicles and
Co., Ltd. (“Jiangnan Vehicle”) August 9, 2025 agricultural machinery
Nanjing Yilai Genetic Medical Co., December 9, 1999 to 33% - 33% - 20,229 28,170 Research of diagnostic technology,
Ltd. (“Nanjing Yilai”) December 8, 2014 manufacture and sale of genetic medical
equipment
77,669 93,481
40
The Group’s share of losses in associates:
2001 2000
Losses before taxation (19,589) (6,782)
Impairment of investment in associates (20,463) -
Amortization of goodwill - (1,732)
(40,052) (8,514)
8. OTHER LONG-TERM INVESTMENTS
As of December 31, 2001, other long-term investments represented investments in the
following companies’ legal person shares which are not publicly tradable. They are
classified as available-for-sale investments and carried at cost less impairment as there is no
quoted market price for such instruments and other methods of reasonably estimating the fair
values are inappropriate or unworkable.
Name of investee company Share of equity interest Carrying amount
2001 2000 2001 2000
Bei Qi Fu Tian Vehicle Co., Ltd. 7.3% 7.3% 53,350 53,350
Changzhou Commercial Bank 17.7% 17.7% 38,000 38,000
Guotai Junan Securities Co., Ltd. - 0.1% - 5,000
Lan Zhou North-west Vehicle Co., Ltd. 5% 5% 5,000 5,000
Others - - 5,042 4,093
101,392 105,443
9. PREPAYMENT FOR INVESTMENT
2001 2000
Lanzhou North-west Vehicle Co., Ltd. 57,000 -
The Group is planning to invest in Lanzhou North-west Vehicle Co., Ltd, in which the Group
will contribute RMB 57 million for an equity interest of 57%. As of balance sheet date, the
Group is in the process of finalizing legal procedures. The business scope of Lanzhou
North-west Vehicle Co., Ltd. includes manufacture and sale of agricultural vehicles and
machineries.
10. INVENTORIES
41
2001 2000
Raw materials 218,345 289,513
Work in process 102,599 134,625
Finished goods 168,483 285,525
489,427 709,663
Less: Provision for inventory obsolescence (37,180) (10,456)
452,247 699,207
Inventories expensed during the 2001 amounted to approximately RMB 1,579 million (2000:
RMB 1,896 million). As of December 31, 2001, inventories of approximately RMB 157
million were carried at net realizable value (2000: nil).
11. DUE FROM CGC
As of December 31, 2001, 40.92% (2000: 40.92%) of the Company’s share capital (the
“State-owned shares”) was registered in the name of Changzhou State Assets Bureau
(“CSAB”). Pursuant to documents issued by Changzhou municipal government and CSAB,
Changchai Group Company Limited (“CGC”) is entitled to dividends derived from the
State-owned shares. The Company’s management is of the view that CGC is able to exercise
control over the Company.
Breakdown of due from CGC is as follows:
Note 2001 2000
Construction of Changchai Mansion (a) 36,974 19,471
Receivables from to CGC (b) 41,167 116,316
Consideration receivable from assets
exchange scheme (c) 79,142 79,142
Payables to CGC (d) (19,960) (23,560)
137,323 191,369
(a) In August 1996, CSAB appointed the Company to construct Changchai Mansion, an
office building, on behalf of CGC. The receivable balance was unsecured, interest free
and had no fixed repayment terms.
(b) RMB 5.87 million (2000: RMB 8.23 million) bore interest at a rate of 6.72% (2000:
6.72%) per annum. Others were unsecured, interest free and had no fixed repayments
terms.
(c) Amounts receivable from CGC at the balance sheet date represented cash consideration
receivable from CGC in connection with an asset exchange scheme with CGC effective
July 16, 1999. They were unsecured and interest free.
(d) Payables to CGC represent loans from CGC and bore interest at rates ranging from
42
5.94% to 8.61% (2000: 5.94% to 8.61%) per annum.
12. RECEIVABLES
2001 2000
Accounts receivables 934,676 1,102,244
Other receivables 38,569 71,247
Notes receivables 39,776 29,313
1,013,021 1,202,804
Less: provision for doubtful debts (285,527) (145,773)
Receivables, net 727,494 1,057,031
Included in other receivables were loans to third parties amounting to RMB 11.7 million
(2000: RMB 17.7 million). These loans bore interest at rates ranging from 0% to 10% (2000:
0% to 10%) per annum.
13. CASH AND CASH EQUIVALENTS
2001 2000
Cash on hand 202 142
Current deposits 295,932 203,824
Fixed deposits 13,790 6,731
309,924 210,697
14. SHARE CAPITAL
Number of shares outstanding Share capital (RMB)
2001 2000 2001 2000
Stated-owned shares 153,160,000 153,160,000 153,160,000 153,160,000
Legal person shares 10,064,000 10,064,000 10,064,000 10,064,000
A shares 111,025,551 111,025,551 111,025,551 111,025,551
B shares 100,000,000 100,000,000 100,000,000 100,000,000
374,249,551 374,249,551 374,249,551 374,249,551
The B shares rank pari passu in all respects with the A shares except that the A shares can
only be purchased and traded by domestic investors.
15. RESERVES
(a) Capital surplus
43
In accordance with PRC accounting regulations and the provisions of the Company’s
articles of association, the Company shall record the following as capital surplus:
(i) share premium arising from the issue of shares in excess of par value;
(ii) surplus arising from revaluation of assets; and
(iii) other items in accordance with the Company’s articles of association and relevant
regulations in the PRC.
Capital surplus can be utilised to offset prior years’ losses or to increase the share
capital.
(b) Statutory surplus reserve fund, statutory public welfare fund and discretionary
surplus reserve fund
In accordance with the PRC Company Law and the Company and its subsidiaries’
articles of association, the Company and its subsidiaries shall appropriate 10 percent of
their annual statutory net profit (after offsetting any prior years’ losses) to the statutory
surplus reserve account. When the balance of such reserve fund reaches 50 percent of
each entity’s share capital, any further appropriation is optional. The statutory surplus
reserve can be utilised to offset prior years’ losses or to increase capital. However,
such statutory surplus reserve must be maintained at a minimum of 25 percent of share
capital after such usage.
According to the relevant financial regulations of the PRC and the Company and its
subsidiaries’ articles of association, the Company and its subsidiaries are also required to
appropriate 5 percent to 10 percent of their annual statutory net profit (after offsetting
any prior years’ losses) to a statutory public welfare fund. This fund can be utilized to
build or acquire capital items, such as dormitories and other facilities for the Company
and its subsidiaries’ employees, but can not be used to pay for staff welfare expenses.
Titles of these capital items will remain with the Company and its subsidiaries.
As stated in the Company and its subsidiaries’ articles of association, the Company and
its subsidiaries can appropriate their annual statutory net profit to the discretionary
surplus reserve fund after the appropriation of statutory surplus reserve fund and
statutory public welfare fund are made.
The Group did not make any appropriation to reserves or declare dividends in 2001 as it
is in a loss making position.
16. BANK LOANS
(a) Long-term bank loans
44
The repayment terms of long-term bank loans are analysed as follows:
2001 2000
Amounts repayable
- no later than one year 20,000 83,500
- between one and two years 248,500 20,000
- between two and five years 45,000 133,000
Total long-term bank loans 313,500 236,500
Less: current portion of long-term bank loans (20,000) (83,500)
Long-term bank loans, less current portion 293,500 153,000
Long-term bank loans bore interest at rates ranging from 4.77% to 6.534% (2000: 6.03%
to 7.12%) per annum. As of December 31, 2001, the long-term bank loans amounting
to RMB 115 million (2000: 115 million) were guaranteed by CGC and other long-term
bank loans were guaranteed by a related party of the Group.
(b) Short-term bank loans
Details of short-term bank loans are as follows:
Type of 2001 2000
loans Currency Amount Guarantee/Security Amount Guarantee/Security
Secured RMB 55,940 Secured by plant and equipment with 47,210 Secured by plant and equipment with
loans net book value of approximately net book value of approximately
RMB 50 million (Note 5) RMB 44 million (Note 5)
Guaranteed RMB 222,500 Guaranteed by a related party 304,500 Guaranteed by a related party
loans
Guaranteed RMB 94,260 Guaranteed by third parties 44,100 Guaranteed by third parties
loans
Unsecured RMB 53,290 - 126,940 -
loans
Total 425,990 522,750
Short-term bank loans bore interest at rates ranging from 5.11% to 7.92% (2000: 4.77%
to 8.61%) per annum.
17. REVENUE
2001 2000
Diesel engines 1,513,452 1,958,307
Agricultural machinery 54,659 192,356
Spare parts 175,376 90,184
1,743,487 2,240,847
45
18. FINANCE COST (INCOME)
2001 2000
Finance expenses
- Interest expenses on bank loans 45,057 40,096
- Cash discounts on receivables 35,346 9,258
80,403 49,354
Finance income
- Interest income from bank deposits (5,840) (6,481)
- Cash discounts on payables
- third parties (10,296) (57,324)
- a related party(Note 23(b)) (34,210) -
- Other interest income - (434)
(50,346) (64,239)
Less: amount capitalized as cost of property, plant
and equipment - (3,220)
30,057 (18,105)
19. (LOSS) PROFIT BEFORE TAX AND MINORITY INTERESTS
(Loss) profit before tax and minority interests was determined after crediting and charging the
following:
2001 2000
Crediting:
Income from other long-term investments - 3,744
Reversal of provision for inventory obsolescence - 356
Gain on disposals of property, plant, equipment and
leasehold land 442 16,383
Charging:
Staff costs
- salaries and wages 101,722 144,620
- staff welfare expenses 18,718 22,748
- contribution to statutory pension scheme 19,762 18,750
140,202 186,118
Depreciation of property, plant and equipment 68,319 70,229
Amortization of leasehold land 2,394 2,638
Provision for doubtful debts 139,754 13,992
Provision for inventory obsolescence 26,724 -
Provision for impairment of property, plant and equipment 25,537 -
Write-off of deferred asset - 14,576
Research and development expenses 1,521 701
46
Exchange losses - 607
20. TAXATION
(a) Value-added tax (“VAT”)
VAT is charged on top of selling price and is levied at general rate of 13% on gross sales
of diesel engines for agriculture use and 17% on gross sales of others. An input credit
is available whereby VAT previously paid on the purchase of semi-finished products,
raw materials etc. can be used to offset the VAT on sales to determine the net VAT
payable.
(b) Enterprise income tax (“EIT”)
The Company is subject to an EIT rate of 33% on taxable income determined according
to the PRC tax laws. With the approval from local authorities, the Company enjoys a
financial refund equal to 18% of its tax expense.
With the approval from local tax authorities, some of the Company’s subsidiaries enjoy
preferential EIT rates ranging from 0% to 15% on their taxable income or financial
refund equal to 18% to 33% of their tax expense.
According to Circular Guofa [2000]No.2 issued on January 11, 2000, effective from
January 1, 2001, the above tax benefits and financial refund would require approval from
the State Council. There was no assurance that the above preferential tax treatment
would be still available to the Company and its subsidiaries in the future. The financial
refund of 2001 and 2000 represented cash received during the year.
Taxation provided during the year comprised:
2001 2000
Current Taxation 1,746 11,137
Tax expense adjustment in relation to prior year profits 449 -
Financial refund - (5,515)
Total tax expenses 2,195 5,622
Deferred tax asset arising from tax losses or temporary differences are not accounted for
as there is no reasonable assurance that these assets will realize in the foreseeable future.
21. (LOSS) EARNINGS PER SHARE
47
The calculation of basic (loss) earnings per share was based on the net loss of RMB 420.78
million (2000: net profit of RMB 11.59 million) divided by the weighted average number of
shares in issue during the year of 371,800,509 (2000: 371,800,509) shares.
22. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
(a) Reconciliation from loss before taxation and minority interests to cash used in
operations:
2001 2000
(Loss) profit before taxation and minority interests (467,064) 9,086
Adjustments for:
Depreciation of property, plant and equipment 68,319 70,229
Amortisation of leasehold land 2,394 2,638
Write-off of deferred assets - 14,576
Impairment loss of property, Plant and Equipment 25,537 -
Provision for doubtful debts 139,754 13,992
Provision for (Reversal of) inventory obsolescence 26,724 (356)
Gain on disposal of property, plant, equipment and leasehold land (442) (16,383)
Share of losses from associates 40,052 8,514
Unrecognized investment losses (7,864) -
Entrusted investment income - (1,330)
Dividend income (4,717) (2,414)
Interest income (5,840) (6,915)
Interest expenses 45,057 36,876
Decrease (increase) in inventories 220,236 (28,833)
Decrease in due from CGC 57,646 1,197
Net decrease (increase) in receivables, amounts due from related parties,
VAT recoverable, prepayments and other current assets 150,055 (107,126)
Net decrease in amounts due to related parties, notes and trade payables,
tax payable, advances from customers, other payables and accruals (114,637) (190,314)
Cash generated from (used in) operations 175,210 (196,563)
(b) Non-cash transaction
(i) Disposal of CCDL
As of February
28, 2001
Property, plant, equipment and leasehold land 44,258
Inventories 31,573
48
Investment 11,801
Trade receivables 87,561
Cash 6,149
Trade payables (45,400)
Tax payable, other payables and accruals (62,093)
Short-term bank loans (24,612)
Minority interests (12,977)
Net assets at the date of disposal 36,260
Less: Waive of payables to acquirer as consideration
received (36,260)
Cash of CCDL disposed 6,149
Net outflow of cash from the disposal 6,149
(ii) Disposal of Huading
As of December
20, 2001
Property, plant and equipment 11
Trade receivable 159,000
Cash 2,896
Minority interests (60,000)
Net assets at the date of disposal 101,907
Less: Receivables acquired (45,000)
Property, plant and equipment acquired (11)
Other payables disposed (54,000)
Consideration received (2,902)
Cash of Huading disposed 2,896
Net cash inflow from the disposal (6)
23. RELATED PARTY TRANSACTIONS
(a) Names of related companies and nature of relationship
Name Nature of relationship
CGC See Note 11
Changzhou Tractor Company Limited (“Changzhou Tractor”) Controlled by CGC
Changzhou Wheel Gear Factory (“CWGF”) Controlled by CGC
Changchai Industrial Company Limited (“CIC”) Controlled by CGC
Changchai Technical Services Centre (“Service Centre”) Controlled by CGC
Changchai Qifu Diesel Engine Co., Ltd. (“Qifu Diesel”) Controlled by CGC
Changchai Changchun Diesel Engine Co., Ltd. (“Changchun Diesel”) Controlled by CGC
Changchai Group I&E Co., Ltd. (“Changchai I&E”) Controlled by CGC
Jiangnan Vehicle Associate of the Company
49
(b) Related party transactions
In addition to related party transactions disclosed in Notes 11, the Group had the
following material transactions with related parties for the year ended December 31,
2001:
(i) Sale of finished goods to related parties
2001 2000
Changchai I&E 73,386 60,454
Changzhou Tractor 42,934 14,472
Service Centre 5,133 3,762
Changchun Diesel - 538
Jiangnan Vehicle 10,217 851
131,670 80,077
(ii) Purchase of raw materials from related parties
2001 2000
CWGF 106,195 63,730
CIC 31,202 29,929
137,397 93,659
(iii) Cash discount on purchase
2001 2000
CWGF 34,210 -
(iv) Loan to a related party
2001 2000
CWGF - 50,000
Jiangnan Vehicle 43,910 10,000
43,910 60,000
(v) Loan from a related party
2001 2000
CWGF - 60,000
Pursuant to an agreement, the Company received a cash discount on purchases from
CWGF amounting to RMB 34 million and recorded this as financial income (Note 18).
(c) In addition to amounts due from CGC disclosed in Note 11, other balances with related
50
parties as of December 31, 2001 are as follows:
2001 2000
Due from related parties
Changchai I&E 93,867 88,754
CWGF - 50,000
Service Centre 27,243 26,276
Changzhou Tractor 25,206 24,815
CIC 1,453 12,200
Jiangnan Vehicle 53,294 760
Total 201,063 202,805
Due to related parties
CWGF 15,304 75,628
CIC - 2,642
Qifu Diesel 11,882 1,642
Changchun Diesel - 1,296
Total 27,186 81,208
Apart from transactions and balances with CGC, amounts due from/to related parties
mainly arose from the transactions disclosed in Note 23(b) above and reimbursement of
expenses on behalf of each other. These amounts were unsecured, interest free, and had
no fixed repayment terms unless otherwise stated.
24. IMPACT OF IAS ADJUSTMENTS ON NET (LOSS) PROFIT AND NET ASSETS
Net (loss) profit Net assets
2001 2000 2001 2000
As reported in the statutory accounts of the Group (381,428) 34,988 1,239,420 1,627,951
Adjustments:
- Provision for impairment losses of property, plant and equipment (39,537) - - 62,231
- Write off of pre-operating expenses and reversal of amortization 802 267 - (802)
- Write off of housing fund (621) (22,074) - (22,074)
- Others - (1,594) - -
As reported under IFRS (420,784) 11,587 1,239,420 1,667,306
25. SEGMENT INFORMATION
The Group conducts the majority of its business activities in one geographic and one business
segment.
51
26. FINANCIAL INSTRUMENTS
(a) Financial risk factors and financial risk management
The Group’s operation gives rise to exposure to credit risk, liquidity risk, interest rate
risk and foreign exchange rate risk.
(i) Credit risk
The carrying amounts of cash and cash equivalents, trade receivables, and other
current assets have reflected the Group’s exposure to credit risk in relation to
financial assets. No other financial assets carry a significant exposure to credit
risk.
Credit risks, or the risk of counterparty defaulting, are controlled by the application
of credit terms and monitoring procedures.
(ii) Liquidity risk
The Group’s policy is to maintain sufficient cash and cash equivalents to meet its
commitments over the next year in accordance with its strategic plan.
(iii) Interest rate risk
The interest rates and terms of repayments of short-term bank loans and long-term
bank loans are disclosed in Note 16.
As of December 31, 2001, change in interest rates would not have material impact
on the Group’s operating results and operating cash flows.
(b) Estimation of fair value
(i) Cash and cash equivalent
The carrying amount approximates fair value because these assets either carry a
current rate of interest or have a short period of time between the origination of the
cash deposits and their expected maturity.
(ii) Trade and other receivables and payables
The carrying amount of receivables and payables approximates fair value because
they are subject to normal trade terms.
52
(iii) Balances with CGC and related parties
No disclosure of fair values is made for balances with CGC and related parties as it
is not practicable to determine their fair values with sufficient reliability since most
of these balances are non-interest bearing and have no fixed repayment terms.
(iv) Borrowings
The carrying amount of borrowings approximates fair value based on current
market interest rates for comparable instruments.
27. SUBSEQUENT EVENTS
(a) On March 28, 2002, the Company signed an agreement with CGC to acquire the
Changchai Mansion from CGC for a price of RMB 100.04 million to settle outstanding
receivables from CGC.
(b) Pursuant to a resolution made by the board of directors dated April 10, 2002, the board
of directors of the Company proposed to utilize the Group’s beginning retained earnings
of RMB 199 million, discretionary surplus reserve fund of RMB 58 million and capital
surplus of RMB 164 million respectively, to make up for accumulated losses. This
resolution is subject to the approval by shareholders at the general shareholders’
meeting.
28. CONTINGENT LIABILITIES
As of December 31, 2001, the Group had the following contingent liabilities:
(a) Guarantee for bank loans
2001 2000
Related parties 182,360 140,500
Third parties 37,050 51,800
219,410 192,300
(b) No notes discounted with recourse as of December 31, 2001 (2000: 12.7 million).
29. COMMITMENTS
As of December 31, 2001, the Group had capital commitments of 8.8 million (2000: 24.4
million).
30. CHANGE IN ACCOUNTING POLICIES
53
From January 1, 2001, the Group is subject to newly effective IAS 39 “Financial Instruments
– Recognition and Measurement” and revised IAS 12 “Income Taxes”. There is no
significant financial impact caused from adopting these standards on the opening balances of
consolidated financial statements.
31. COMPARATIVE FIGURES
Leasehold land is separated from property, plant and equipment in the 2001 financial
statements. Accordingly, comparative figures have been reclassified to conform to the
current year’s presentation.
32. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements were approved by the board of directors on April
10, 2001.
54
