, fulfilled the obligation of information disclosure, and provide the materials relating to external guarantee to auditors. ⑥ The Company has tailored some of the terms of according to the Circular, and made regulations on the procedure of approving the external guarantee and the credit standards of the guarantee and prepared to report to the shareholders general meeting for approval. In general, in our opinion, the Company observed the Circular seriously, regulated the external guarantee, kept the financial risks under control, and protected the interests of investors. The publication for information disclosure of the Company is China Securities, Securities Daily, Hong Kong Business. IX. Report by Board of Supervisors 1 During the reporting period, three meetings of Board of Supervisors were held. (1) The Eighth Meeting of the Second Board of Supervisors was held on April 4, 2003. The meeting debated and passed the 2002 report of the Board of Supervisors and the report of the election of the new Board of Supervisors. (2) The First Meeting of the Third Board of Supervisors was held on the May 10, 2003. The meeting debated and passed the resolution of electing the organizer of the Board of Supervisors. (3) The Second Meeting of the Third Board of Supervisors was held on the July 17, 2003, The meeting debated and passed the Semi-annual Report of 2003 and its extract and the Semi-annual financial report of 2003. 2 The supervisors attended all the meetings of the Board of Directors, expressed the independent opinions and exercised the supervisory right. The Board of Supervisors carried out the following supervisory functions according to the Company Law and the Articles of Association: (1) Supervision of the compliance issues of the Company in its operation and management. The Board of Supervisors performed its supervisory duties through attending the meetings of Board of Directors. The Board31of Supervisors was of the The Board of Supervisors was of the view that the decision-making procedures of the Company were in compliance with the Company Law and the Articles of Association, a proper internal control system had been established, and there had been no violations of the laws, regulations and the Articles of Association and no acts harmful to the interests of the Company by the directors, supervisors and senior managers in fulfilling their duties. (2) Review of the financial status of the company Through its review, the Board of Supervisors, was of the view that the financial statements of the Company had been in compliance with relevant standards and regulations and truly reflected the financial status and operatingl performance of the Company. The auditor of the Company, PricewaterhouseCoopers Zhong Tian Certified Public Accountants issued an unqualified audit report. (3) Supervision of the use of proceeds from issuance of shares Through its review of the Board of Supervisors, was of the view that the proceeds from issuance of shares had been properly used in line with the commitments of the prospectus. (4) Supervision of the related party transactions Through its review, the Board of Directors was of the view that the transaction price of the acquisition and the disposal of fixed assets was fair and reasonable and that there was no under-table transactions, no acts harmful to the interests of the shareholders or leading to the loss of company’s assets. (5) Supervision of the related party transactions Through its review, the Board of Supervisors, was of the view that all related party transactions had been conducted fairly with pricing based on the market prices which are fair and there had been no harm done to the interests of the Company. X. Important Matters 1. Major litigations and arbitrations of the year ① In July 2002, the Company’s subsidiary Changan Automobile Sales Co., Ltd. sued Beifang Pudong Economic and Technology Development Co., Ltd. for disputes over RMB 9,430,000. The Company has received RMB 560,000 value of assets and RMB 910,000 in cash, and the verdict is that the remaining RMB 7,960,000 shall be paid by the defendant. 32 ② In September 2002, the Company sued Chengdu Materials Company Limited for sale receivables disputes over RMB 11,365,085.79. The verdict is that repayment of RMB 10,395,640.79 shall be made by the defendant. 2. The acquisition and disposal of asset, and merger and acquisition during the year. (1) Acquisition of assets The net profit Contributed to the Acquired company from Effects on the Transferring Acquired Price acquisition date to financial status and Company Assets (RMB ten the year end operating results thousand) (RMB ten thousand) Avoid the competition of the same trade, recombine the Chongqing 24% automobile business Changan shares of 19,614 -142 of the company, and Automobile Changan enhance the Group Co. Ford cooperation with Ford and the competition capability as whole. 990 mu land and the Lishui workshop Expand public- of manufacturing owned 120,000 5,000 - capacity and assets sqm and enhance competition operation related ability Co.,Ltd equipment and facility (2) There was no sale of assets and merger and acquisitions. 3. Significant related party transactions For details please refer to the disclosure regarding related parties and related party transactions in the notes to the financial statements. 4. Major contracts and their fulfillment 33 (1) There were no major entrustment, contracting by the Company of the assets of other companies and there were no major entrustment, contracting of the Company’s assets by other companies. The lease of the assets of other companies by the Company and lease of the assets of the Company was shown as follows: According to the production needs, the Company rented the office building of Changan Automobile Group Company’s Sales Company, the total area is 4,560 square metres, the monthly rental is RMB 40 per sq. m., the remaining building is 34,355 square metres and monthly rental is RMB 35 per sq. m. The Company rented land of CAC of 391,319 square metres, monthly rental is RMB 10 per sq. m. The Changan Automobile Group Company rented the offices of 5 th ,8 th ,9 th and 10 th floors of the Science and Technology Building of the Company due to office needs, the area is 9,056 square metres and monthly rental is RMB 40 per sq.m. (2) Major guarantees: the company provided joint loan guarantee for Chongqing Changan Ford Co. Ltd. for RMB 31,200,000. The guarantee was joint liabilities guarantee with a term is from April 15, 2002 to March 30, 2004. This guarantee is passed through the Seventh meeting of the Second Board and CAC provided the joint loan guarantee for Chongqing Changan Ford Co. Ltd. for the liability to the company. Chongqing Changan Ford Co. Ltd. refunded all the loan on May 15, 2003. (3) Asset entrustment matters: There is no asset entrustment matter of the company in 2003. 5. Commitments During the reporting period, there were no commitments of the Company or shareholders who held more than 5% of total shares. 6. During the reporting period, there were no changes of CPA firm. Auditor’s remuneration are shown below: Year Auditor Audit fees Other fees Note 2003 Pricewaterho RMB RMB The Company provided useCoopers 2,590,000 1,160,000 accommodation, but did not Zhongtian bear traveling expenses CPA The other fees paid to were audit fee for34the new issuance of A share, which did not affect the independent opinions the CPAs. PricewaterhouseCoopers Zhongtian CPA has provided the audit service to the Company for three years. 7. During the reporting period, the Company, the Board, and its directors did not receive any audit and investigation, disciplinary punishment, public criticism nor public censure from China Securities Regulatory Commission from the stock exchange. 8. Other important issues (1) For the purpose of technology renovation and rebuild of production line, the company disposed and wrote off part of assets. Through the review of the Board of directors, the company disposed and wrote off assets valued RMB 207,614,726 as total and 111,257,897 as net. According to PRC Corporate Income Tax Provisional Regulation and the rules for the Implement, the company should apply for the approval of tax bureau for the disposal itemized as expense and deducted from the taxable income. After the tax bureau approved, RMB 16.69 million would be deducted from the current corporate income tax payables, and the detail disposal amount is based on the approval of tax bureau. The detail of assets written off as bellows: The detail sheet of assets written off by the company in 2003 Items Original value Net Value Disposal of Fixed assets 191,028,080 98,013,509 Stocktake loss of Fixed 7,582,382 4,550,671 assets Disposal of CIP 6,821,003 6,821,003 The loss of Intangible assets 2,183,261 1,872,714 Total 207,614,726 111,257,897 The company actively took action for the disposal work and by the end of 2003, the company had collected RMB12.96 million of the disposal revenue and RMB 7.95 million receivables which had been written off in prior years. (2) The Company carried out strategy “3337”, which guiding the future development of the Company. (3) In order to strengthen the strategy relationship, on October 15, 2003, the Company signed the memo of building up strategy cooperation partnership with Ford Automobile Co., Ltd. (4) In 2003, Changan Suzuki carried out its 200 thousand automobiles expansion project, and Changan Ford carried 150 thousand35automobiles expansion project. (5) On 12 September 2003, the Company obtained and recognized upon the approval from the Ministry of Finance (“ MOF”) and the National Tax Bureau (“NTB”) (Document caishui [2003] No. 203 ) to enjoy an 30% CT reduction for the Company’s certain products for the period from March 2001 to December 2003, amounting to RMB 118.6 million. On 20 October 2003, Changan Suzuki obtained approval from MOF and NTB (Document caishui [2003] 218) to enjoy an 30% CT reduction for its certain products for the period from April 2002 to December 2003, amounting RMB 72.87 million, of which RMB 37.49 million was recognized. XI. Financial Report PwC ZT Shen Zi (2004) No. 1116 Report of the auditors To the shareholders of Chongqing Changan Automobile Co., Ltd. We have audited the accompanying consolidated balance sheet of Chongqing Changan Automobile Co., Ltd. (the “Company”) and its subsidiaries and its joint venture (hereafter collectively referred to as the “Group”) as of 31 December 2003 and the related consolidated income and cash flow statements for the year then ended. These consolidated financial statements are the responsibility of the Company’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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 present fairly in all material respects the consolidated financial position of the Group as of 31 December 2003 and the Group’s results of operations and cash flows for the year then ended in accordance with International Financial Reporting Standards. PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. 16 March 2004 Chongqing Changan Automobile Co., Ltd. Consolidated income statement For the year ended 31 December 2003 36 Year ended 31 December (all amounts in Renmibi (“RMB”) Notes 2003 2002 thousands) Sales 1 14,404,118 9,884,068 Sales tax and surcharge (370,448) (350,967) Net sales 14,033,670 9,533,101 Cost of sales (10,510,651) (6,999,382) Gross profit 3,523,019 2,533,719 Distribution costs (1,194,687) (750,820) Administrative expenses (630,150) (704,936) Other operating income and expenses 52,539 41,447 Profit from operations 2 1,750,721 1,119,410 Finance costs – net 3 45,309 53,372 Group profit before tax 1,796,030 1,172,782 Share of result of associates before tax 11 946 (48,245) Profit before tax 1,796,976 1,124,537 Taxation 5 (258,496) (176,435) Group profit before minority interest 1,538,480 948,102 Minority interest 25 (102,864) (82,956) Net profit 1,435,616 865,146 Basic earnings per share (RMB per share) 6 1.17 0.71 Chongqing Changan Automobile Co., Ltd. Consolidated balance sheet For the year ended 31 December 2003 31 December (all amounts in RMB thousands) Notes 2003 2002 ASSETS Non-current assets Property, plant and equipment 8 3,553,950 2,535,495 Land use rights 9 241,147 149,655 Intangible assets 10 114,091 47,553 Investments in associates 11 4,500 156,150 Available-for-sale investments 12 44,798 41,220 Other non-current assets 13 71,555 54,602 Deferred tax assets 14 100,447 97,212 4,130,488 3,081,887 Current assets Inventories 15 1,994,629 1,715,461 Receivables and prepayments 16 1,663,154 1,103,997 Held-to-maturity investments 17 99,729 - Cash and cash equivalents 18 3,096,325 2,873,901 6,853,837 5,693,359 37 Total assets 10,984,325 8,775,246 EQUITY AND LIABILITIES Shareholders’ equity Share capital 24 1,226,666 1,226,666 Share premium 24 833,438 833,438 Reserves 26 1,053,878 627,955 Retained earnings 1,696,390 784,830 4,810,372 3,472,889 Minority interest 25 947,461 829,079 Non-current liabilities Borrowings 20 245,000 150,000 Retirement benefit obligations 4, 21 19,884 27,000 264,884 177,000 Current liabilities Trade and other payables 19 4,332,384 3,697,083 Current tax liabilities 155,356 286,131 Borrowings 20 277,759 216,500 Provisions 22 196,109 96,564 4,961,608 4,296,278 Total liabilities 5,226,492 4,473,278 Total equity and liabilities 10,984,325 8,775,246 On 16 Mar 2004, Chongqing Changan Automobile Co., Ltd.’s Board of Directors authorised these consolidated financial statements for issue. 38 Chongqing Changan Automobile Co., Ltd. Consolidated statement of changes in shareholders’ equtiy For the year ended 31 December 2003 Share Share Other Retained (all amounts in RMB thousands) Notes capital premium reserves earnings Total (Note 24) (Note 24) (Note 26) Balance at 1 January 2002 1,226,666 833,438 348,142 248,563 2,656,809 Dividend relating to 2001 - - - (49,066) (49,066) Net profit for the year - - - 865,146 865,146 Transfer - - 279,813 (279,813) - Balance at 1 January 2003 1,226,666 833,438 627,955 784,830 3,472,889 Dividend relating to 2002 7 - - - (98,133) (98,133) Net profit for the year - - - 1,435,616 1,435,616 Transfer 26 - - 425,923 (425,923) - Balance at 31 December 2003 1,226,666 833,438 1,053,878 1,696,390 4,810,372 39 Chongqing Changan Automobile Co., Ltd. Consolidated cash flow statement For the year ended 31 December 2003 Year ended 31 December (all amounts in RMB thousands) Notes 2003 2002 Cashflow from Operating Activities Cash received from sales of goods or rendering of services 15,038,434 13,574,101 Refund of tax 75,698 14,692 Other cash received relating to operating activities 135,145 166,497 Sub-total of cash inflow 15,249,277 13,755,290 Cash paid for goods and services (10,086,497) (9,162,031) Cash paid to and on behalf of employees (463,343) (316,117) Payments of all types of taxes (1,554,182) (1,102,880) Other cash paid relating to operating activities (1,533,103) (1,087,906) Sub-total of cash outflow (13,637,125) (11,668,934) Net cashflow from operating activities 28 1,612,152 2,086,356 Cashflow from Investing Activities Net cash received from disposal of property, plant and equipment 28 2,613 20,635 Net cash received from disposal of land use rights 1,780 6,492 Cash received from return on investments - 5,000 Cash received from investment income 958 - Acquisition of subsidiaries, net of cash acquired - 6,494 Sub-total of cash inflow 5,351 38,621 Cash paid to acquire property, plant and equipment and construction in progress (1,144,839) (564,808) Cash paid to acquire land use right (27,302) (37,338) Cash paid for investment in associates - (46,806) Acquisition of a joint venture, net of cash paid 27 (139,313) - Cash paid for available-for-sale investments (2,900) - Other cash paid relating to investing activities (6,800) - Sub-total of cash outflow (1,321,154) (648,952) Net cashflow from investing activities (1,315,803) (610,331) Cashflow from Financing Activities Cash received from investments by others 2,650 26,674 Proceeds from borrowings 416,259 286,950 Sub-total of cash inflow 418,909 313,624 Cash repayment of amounts borrowed (260,000) (645,250) Cash payments for interest expenses (16,352) (25,826) Cash payments for distribution of dividends or profits (116,753) (49,066) Sub-total of cash outflow (393,105) (720,142) Net cashflow from financing activities 25,804 (406,518) Net Increase in cash and cash equivalents 322,153 1,069,507 Cash and cash equivalents at beginning of year 2,863,901 1,794,394 Cash and cash equivalents at end of year 18 3,186,054 2,863,901 40 CHONGQING CHANGAN AUTOMOBILE CO., LTD. YEAR ENDED 31 DECEMBER 2003 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In the notes, all amounts are shown in RMB thousands unless otherwise stated) General Information Chongqing Changan Automobile Company Limited (hereafter referred to as “the Company”) was established in the People’s Republic of China (hereafter referred to as “PRC”) under the Company Law of the PRC on 31 October 1996. As a joint stock limited company, the company issued 506,190,000 shares to its sole sponsor Changan Automobile Group Company Limited (hereafter referred to as “CAC”) in exchange for mini-automobile and engine manufacturing equipment and related assets. The company also issued 250,000,000 B shares to overseas investors, the total share capital was RMB 756,190 on the date of establishment. The Legal Representative’s Operating License issued by Chongqing Industrial and Commercial Administrative Bureau is Yu-Jin No. 28546236-3. On 19 May 1997, with the approval of China Securities Regulatory Commission, the Company issued 120,000,000 A shares to domestic public investors, thereby increasing the total share capital to RMB 876,190. On 26 June 1998, the Company issued bonus shares on the basis of 4 shares for each 10 shares to the existing 876,190,000 shares in issue as at 31 December 1997. The bonus shares were issued as a distribution from the share premium account within shareholders’ equity. As a result, RMB 350,476 was transferred from the share premium account to share capital increasing share capital to RMB 1,226,666. Accounting policies The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below: A Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (hereafter referred to as “IFRS”), which includes International Accounting Standards and Interpretations issued by the International Accounting Standards Board. The consolidated financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below. The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current event and actions, actual results ultimately may differ from those estimates. B Group accounting 41 CHONGQING CHANGAN AUTOMOBILE CO., LTD. YEAR ENDED 31 DECEMBER 2003 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In the notes, all amounts are shown in RMB thousands unless otherwise stated) (1) Subsidiaries Subsidiaries, which are those entities in which the Group has an interest of more than one half of the voting rights or otherwise has power to govern the financial and operating policies are consolidated. The existence and effect of potential voting rights that are presently exercisable or presently convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. The purchase method accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus costs directly attributable to the acquisition. The excess of the cost of acquisition over the fair value of the net assets of the subsidiary acquired is recorded as goodwill. See Note G for the accounting policy on goodwill. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, accounting policies of subsidiaries have been changed to ensure consistency with the policy adopted by the Group. (2) Joint ventures The Group’s interest in jointly controlled entities are accounted for by proportionate consolidation. The Group combines its share of the joint ventures’ individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group’s financial statements. The Group recognises the portion of gains or losses on the sale of assets by the Group to the joint venture that it is attributable to the other ventures. The Group does not recognise its share of profits or losses from the joint venture that result from the purchase of assets by the Group from the joint venture until it resells the assets to an independent party. However, if a loss on the transaction provides evidence of a reduction in the net realisable value of current assets or an impairment loss, the loss is recognised immediately. (3) Associates Investments in associates are accounted for by the equity method of accounting. Under this method the company’s share of the post-acquisition profits or losses of associates are recognised in the income statement and its share of post-acquisition movements in reserves are recognised in reserves. The cumulative post-acquisition movements are adjusted against the cost of the investment. Associates are entities over which the Group generally has between 20% and 50% of the voting rights, or over which the Group has significant influence, but which it does not control. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless the Group has incurred obligations or made payments on behalf of the associates. C Foreign currency translation 42 CHONGQING CHANGAN AUTOMOBILE CO., LTD. YEAR ENDED 31 DECEMBER 2003 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In the notes, all amounts are shown in RMB thousands unless otherwise stated) (1) Measurement currency The consolidated financial statements are presented in RMB, which is the measurement currency of the Company. (2) Transactions and balances Foreign currency transactions are translated into the measurement currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement. D Property, plant and equipment (1) Owned assets Property, plant and equipment are stated at cost or, in the case of assets injected into the Group at the time of its reorganisation, at valuation less accumulated depreciation representing the deemed cost to the Group, less accumulated depreciation and any impairment losses. All direct and indirect costs relating to the acquisition or construction of property, plant and equipment including interest costs on related borrowed funds during the construction period are capitalized as property, plant and equipment. (2) Subsequent expenditure Repairs and maintenance are charged to the income statement during the financial period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset. Major renovations made under operating leases are depreciated over the remaining useful life of the related assets, and are stated at cost less accumulated depreciation and any impairment losses. (3) Depreciation Depreciation is calculated over the actual production output or on a straight-line basis over their estimated useful life to write off the cost of each asset, to their residual values. Estimated useful life of property, plant and equipment are as follows: Buildings & Plants 20-40 years Equipment & Machinery 10-20 years Motor Vehicles 5-8 years Others 5-22 years 43 CHONGQING CHANGAN AUTOMOBILE CO., LTD. YEAR ENDED 31 DECEMBER 2003 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In the notes, all amounts are shown in RMB thousands unless otherwise stated) (4) Construction in progress Construction of a building or plant is considered to be completed and transferred to property plant and equipment on the date when substantially all the activities necessary to prepare the asset for its intended use are complete not withstanding any delays in the issue of the relevant commissioning certificate by the appropriate PRC authorities. Interest costs on borrowings to finance the construction of property, plant and equipment are capitalised, during the period of time that is required to complete and prepare the asset for its intended use. All other borrowing costs are expensed. (5) Disposal and impairment Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in operating profit. E Land use rights Amortisation of the land use rights is calculated on a straight-line basis to write off the cost over the lease term ranging from 30 to 50 years. F Investments The Group classified its investments in debt and equity securities into the following categories: trading, held-to-maturity and available-for-sale. The classification is dependent on the purpose for which the investments were acquired. Management determines the classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis. Investments that are acquired principally for the purpose of generating a profit from short-term fluctuation in price are classified as trading investments and included in current assets. Investments with a fixed maturity that management has the intent and ability to hold to maturity are classified as held-to-maturity and are included in non-current assets, except for maturities within 12 months from the balance sheet date which are classified as current assets. Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale; and are included in non- current assets unless management has the express intention of holding the investment for less than 12 months from the balance sheet date or unless they will need to be sold to raise operating capital, in which case they are included in current assets. Purchase and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. Cost of purchase includes transaction costs. Trading, held-to-maturity and available-for-sale investments are carried at cost less impairment. G Intangible assets (1) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of the acquired subsidiary/joint venture/associate at the date of acquisition. Goodwill on acquisitions has been amortised using the straight-line method over its estimated useful life. Where it cannot be demonstrated that there is future economic benefits to be derived, the goodwill on acquisition will be written off upon acquisition. 44 CHONGQING CHANGAN AUTOMOBILE CO., LTD. YEAR ENDED 31 DECEMBER 2003 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In the notes, all amounts are shown in RMB thousands unless otherwise stated) (2) Industrial property rights and proprietary technology Industrial property rights and proprietary technology are stated at cost and amortized on a straight- line basis over the expected beneficial period starting from the date of use. H Deferred assets Deferred assets mainly include utility capacity enhancement expenses and software that are amortized using the straight-line method over useful years. I Impairment of long lived assets Property, plant and equipment and other non-current assets, including intangible assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset’s net selling price and value in use. J Leases (1) A group company is the lessee Leases of land and buildings where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. (2) A group company is the lessor Assets leased out under operating leases are included in property, plant and equipment in the balance sheet. They are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term. K Inventories Inventories are stated at the lower of cost or net realisable value. Cost is determined by the weighted average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity) but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. L Trade receivables Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. A provision for impairment of trade receivables is established when there is an objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, discounted at the market rate of interest for similar borrowers. 45 CHONGQING CHANGAN AUTOMOBILE CO., LTD. YEAR ENDED 31 DECEMBER 2003 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In the notes, all amounts are shown in RMB thousands unless otherwise stated) M Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less. N Share capital (1) Share capital consists of A and B shares. (2) Incremental external costs directly attributable to the issue of new shares, other than on a business combination, are shown as a deduction, net of tax, in equity from the proceeds. Share issue costs incurred directly in connection with a business combination are included in the cost of acquisition. O Borrowings rrowings are recognized initially at the proceeds received, net of any transaction costs incurred. Borrowings are stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and redemption value is subsequently recognized in the statement of income over the period of the borrowings. P Deferred Income tax Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Q Employee benefits (1) Pension obligations The Group participates in defined employees retirement schemes regarding pension benefit required under existing PRC legislation. The contributions to the schemes are charged to the income statement as and when incurred. The Group’s obligations include contributions to a defined contribution retirement plan administered by a government agency determined at a certain percentage of the salaries of the employees. The pension obligation not covered by the above mentioned retirement scheme is estimated based on the present value of the estimated future cash outflows discounted using interest rates typically available to the company through bank deposit accounts. 46 CHONGQING CHANGAN AUTOMOBILE CO., LTD. YEAR ENDED 31 DECEMBER 2003 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In the notes, all amounts are shown in RMB thousands unless otherwise stated) Q Employee benefits (continued) (2) Termination benefits Termination benefits are payable whenever an employee’s employment is terminated before the normal retirement date. The Group recognises termination benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. (3) Housing fund and other benefits All of the Group’s full-time employees are entitled to participate in a state-sponsored housing fund. The fund can be used by the Group for the construction of employee quarters, by the employees for purchasing accommodation, or may be withdrawn upon their retirement. The Group is required to make annual contributions to the state-sponsored housing fund equivalent to a certain percentage of the employees’ salary. In addition, the Company provided subsidies to eligible employees for purchase of their own flats and accounted for such subsidies when occurred. In addition, the Company made provision at 14% of total salary of its employee for general welfare. R Provisions Provisions, for mainly warranty cost, are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. S Revenue recognition Revenue comprises the invoiced value for the sale of goods and services net of value-added tax, rebates and discounts, and after eliminating sales within the Group. Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer. Revenue from rendering of services is based on the stage of completion determined by reference to services performed to date as a percentage of total services to be performed. Rental income are recognised on an accrual basis. Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group. Dividends are recognised when the right to receive payment is established. T Dividends Dividends are recorded in the Group’s financial statements in the period in which they are approved by the Group’s shareholders. 47 CHONGQING CHANGAN AUTOMOBILE CO., LTD. YEAR ENDED 31 DECEMBER 2003 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In the notes, all amounts are shown in RMB thousands unless otherwise stated) U XII. Research and development Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is probable that the project will be a success considering its commercial and technological feasibility, and only if the cost can be measured reliably. Other development expenditures are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Development costs that have been capitalised are amortised from the commencement of the commercial production of the product on a straight-line basis over the period of its expected benefit. V Segment Reporting The Group’s turnover and profit for the year were mainly derived from the manufacture and domestic sale of automobiles and the principal assets employed by the Group are located in the PRC. Accordingly, no segmental analysis by business and geographical segments has been provided for the year. W Government Grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs they are intended to compensate. In 2003, the Group obtained and recognized grant of RMB 21.41 million from government in relation to research and development activities (2002 RMB 10.03 million). Government grants relating assets are presented in the balance sheet by deducting the grant in arriving at the carrying amount of the assets. The grants are recognized as income over the lift of depreciable assets by way of a reduced depreciation charge. 48 CHONGQING CHANGAN AUTOMOBILE CO., LTD. YEAR ENDED 31 DECEMBER 2003 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In the notes, all amounts are shown in RMB thousands unless otherwise stated) Financial risk management The financial assets of the Group include cash and bank balances, cash and time deposits with a related financial institution, investments, accounts and bills receivable, prepayments and other receivables, and amounts due from related companies. The financial liabilities of the Group include bank loans, accounts and bills payable, receipts in advance, accruals and other payables, accrued staff welfare and benefits and amounts due to related companies. (1) Interest rate risk The Group’s income and operating cash flows are substantially independent of changes in market rates. The interest rates and terms of the repayment of bank borrowings of the Group are disclosed in Note 20 to the financial statements. (2) Credit risk i. Cash at bank and in hand For prudent liquidity risk management, substantial amounts of the Group’s cash balances are deposited with Industrial and Commercial Bank of China, Bank of Communications, Ordnance Finance Company, China Merchants Bank, Shanghai Pudong Development Bank, Huaxia Bank, Zhongxin Industrial Bank and Minsheng Bank Corporation. ii. Receivables The Group does not have a significant exposure to any individual customer or counterparty. Credit risk on receivables has already been accounted for in the financial statements as they are shown net of provisions for bad and doubtful debts. (3) Fair values The fair values of cash and bank balances, cash placed with a related financial institution, short term investments, receivables and prepayments, trade and other payables, current tax liabilities, provisions, are not materially different from their carrying amounts. The carrying values of short term borrowings are estimated to approximate their fair values based on the nature or short term maturity of these instruments. The fair values of long term borrowings as estimated by applying a discounted cash flow using current market interest rates for similar financial instruments approximate their carrying values. Fair value estimates are made at a specific point in time and are based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement, and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. 49 CHONGQING CHANGAN AUTOMOBILE CO., LTD. YEAR ENDED 31 DECEMBER 2003 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In the notes, all amounts are shown in RMB thousands unless otherwise stated) Notes to the consolidated financial statements 1 Sales The Group principally derives its turnover from the manufacture, assembly and sale of automobiles, related spare parts and components. Sales represent the total invoiced value of goods supplied to customers, net of returns and allowances. Sales are made principally in the PRC. 2 Profit from operations The following items have been included in arriving at operating profit: 2003 2002 Depreciation on property, plant and equipment (Note 8) 287,086 309,481 Amortisation of land use rights (Note 9) 4,343 4,088 Impairment of property, plant and equipment (Note 8) 2,164 - Impairment of land use rights (Note 9) - 6,700 Loss on disposal of property, plant and equipment (Note 28) 98,118 27,727 Loss on disposal of land use rights (Note 28) 1,873 20,479 Repairs and maintenance expenditure on property, plant and equipment 113,722 70,386 Amortisation of intangible assets (Note 10) 11,270 8,958 Amortisation of deferred assets (Note 13) 7,181 6,473 Research and development expenditure 297,801 340,463 Operating lease rentals − property 28,276 23,073 Inventory − provision for loss 7,470 70,255 − reversal of inventory provision (46,158) (51,285) Impairment charge for bad and doubtful debts (Note 28) 32,609 25,779 Staff costs (Note 4) 505,584 363,111 Investment (income)/loss − Goodwill write-off - 19,143 − Provision for loss on investment (678) 12,780 − Income from securities investment (958) - 3 Finance costs – net 2003 2002 Interest expense (Note 28) (15,115) (24,542) Interest income 66,314 80,130 Net foreign exchange gain/(loss) 1,612 (461) Others (7,502) (1,755) 45,309 53,372 50 CHONGQING CHANGAN AUTOMOBILE CO., LTD. YEAR ENDED 31 DECEMBER 2003 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In the notes, all amounts are shown in RMB thousands unless otherwise stated) 4 Staff costs 2003 2002 Wages and salaries 384,602 279,364 Social security costs 66,546 47,885 Pension costs − defined contribution plans 54,436 35,862 505,584 363,111 The average number of employees in 2003 was 13,158 (2002: 11,419), 947 of whom (2002: 1,161) were part-time. The employees of the Group participate in a defined contribution pension plan organized by the relevant municipal and provincial governments under which the Group was required to make monthly contributions to this plan. Obligation in respect of retirement benefits of RMB 23,751 not covered by the above mentioned retirement scheme is the present value of the unfunded obligations include non-current portion of RMB 19,884 (2002: RMB 27,000). The current portion of RMB 3,867 (2002: RMB 1,956) have been included under other payables. 5 Taxation (1) Enterprise Income Tax (“ EIT”) Details of taxation charged during the year are as follows: 2003 2002 Current tax (261,731) (204,537) Deferred tax (Note 14) 3,235 28,102 (258,496) (176,435) The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the tax rate of the Company as follows: 2003 2002 Profit before tax 1,796,976 1,124,537 Tax calculated at a tax rate of 15% (2002: 15%) (269,546) (168,681) Tax refund or deduction 23,993 2,283 Additional deduction of research and development expenditure 424 19,884 Expenses not deductible for tax purposes (35,034) (44,390) Effect of different tax rates for associates and consolidated subsidiaries 21,667 14,469 Tax charge (258,496) (176,435) 51 CHONGQING CHANGAN AUTOMOBILE CO., LTD. YEAR ENDED 31 DECEMBER 2003 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In the notes, all amounts are shown in RMB thousands unless otherwise stated) 5 Taxation (continued) The EIT rates applicable to the Company, Chongqing Changan Automobile Import and Export Co., Ltd. and Chongqing Changan Automobile Sales Co., Ltd. are 15%. As approved by the local tax authorities, the Company and these subsidiaries file a consolidated income tax return. In 2003, the Company obtained and recognized EIT benefits amounting to RMB 17.59 million in relation to its purchase of domestically manufactured equipment (2002: Rmb Nil). The EIT rate applicable to Chongqing Changan Suzuki Automobile Co., Ltd (hereafter referred to as “Changan Suzuki”) is 15%. Changan Suzuki is entitled to two years’ exemption from income taxes followed by three years of a 50% tax reduction, commencing from the first cumulative profit-making year net of losses carried forward. Year 2002 is the third year of 50% tax reduction. Changan Suzuki qualified as the advanced technology enterprise in 2003, accordingly, the EIT has been provided at the rate of 10% based on the taxable income for the year. In 2003, Changan Suzuki obtained and recognized EIT benefits amounting to RMB 2.6 million in relation to its purchase of domestically manufactured equipment (2002: RMB 2.3 milllion). The EIT rate applicable to Changan Ford Automobile Co., Ltd. (hereafter referred to as “Changan Ford”) is 15%. Changan Ford is entitled to two years’ exemption from income taxes followed by three years of a 50% tax reduction, commencing from the first cumulative profit- making year net of losses carried forward. Changan Ford has not provided for any enterprise and local income taxes since it has no taxable income for the year. The EIT rates applicable to the other subsidiaries are 33%, except for Chongqing Anfu Automobile Co., Ltd and Chongqing Changan Special Automobile Co., Ltd, both of which were entitled to EIT exemption for year 2003 as approved by relevant tax bureaus. (2) Value-Add Tax (“VAT”) Output VAT is levied at a general rate of 17% on the selling price of goods. Input VAT paid on purchase of goods can be used to offset the output VAT to determine the net VAT payable. (3) Consumption Tax (“CT”) The Group’s automobile sale is subject to CT at rates ranging from 3% to 8% on the selling price of goods. On 12 September 2003, the Company obtained and recognized upon the approval from the Ministry of Finance (“MOF”) and the National Tax Bureau (“NTB”) (Document caishui [2003] No. 203 ) to enjoy a 30% CT and related surcharge reduction for the Company’s certain products for the period from March 2001 to December 2003, amounting to Rmb118.6 million. As of 31 December, the Company had overdue CT payable amounting to RMB 94.43 million, which was carried forward from previous years. The Company is communicating with relevant tax authorities on the settlement of this CT and awaiting for the final decision from the tax authorities. The directors believe that no additional liabilities will arise. On 20 October 2003, Changan Suzuki obtained approval from MOF and NTB (Document caishui [2003] No. 218) to enjoy a 30% CT reduction for its certain products for the period from April 2002 to December 2003, amounting to RMB 72.87 million, RMB 37.49 million of which was recognized during the year. 52 CHONGQING CHANGAN AUTOMOBILE CO., LTD. YEAR ENDED 31 DECEMBER 2003 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In the notes, all amounts are shown in RMB thousands unless otherwise stated) 6 Earnings per share Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year. 2003 2002 Net profit attributable to shareholders (RMB’000) 1,435,616 865,146 Weighted average number of ordinary shares in issue (thousands) 1,226,666 1,226,666 Basic earnings per share (RMB per share) 1.17 0.71 No diluted earnings per share is presented as there were no potential ordinary share outstanding during the year ended 31 December 2003 and 2002. 7 Dividend per share On 16 March 2004, per every ten shares, the Board of Directors proposed a final cash dividend of RMB 2.5 yuan (relevant tax included), totalling RMB 306,666,500 yuan (2002: RMB 98,133,280 yuan) and bonus dividend of two shares, totalling 245,333,200 shares (2002: Nil) for year ended 31 December 2003. The proposed dividend distribution is subject to the shareholders’ approval in their next meeting and will be recorded in the Group’s financial statements for the year ending 31 December 2004. 53 CHONGQING CHANGAN AUTOMOBILE CO., LTD. YEAR ENDED 31 DECEMBER 2003 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In the notes, all amounts are shown in RMB thousands unless otherwise stated) 8 Property, plant and equipment Buildings & Equipment & Construction in Plants Machinery Motor Vehicles progress Year ended 31 December 2002 Opening net book amount 459,112 1,367,592 17,177 387,184 Acquisition of subsidiaries 30,460 67,265 4,029 873 Additions 8,797 8,981 4,009 519,240 Transfers 57,143 320,994 6,185 (387,922) Disposals (Note 28) (10,676) (25,822) (982) (14,763) Depreciation charge (Note 2) (19,727) (274,762) (6,983) - Closing net book amount 525,109 1,464,248 23,435 504,612 At 31 December 2002 Cost or valuation 636,125 2,743,962 40,516 504,612 Accumulated depreciation (111,016) (1,279,714) (17,081) - Net book amount 525,109 1,464,248 23,435 504,612 Year ended 31 December 2003 Opening net book amount 525,109 1,464,248 23,435 504,612 Acquisition of joint venture 53,907 139,439 4,581 27,908 Additions 3,240 333,944 3,290 779,145 Transfers 63,967 316,006 7,942 (402,660) Disposals (Note 28) (2,204) (88,854) (627) (7,967) Others - (3,510) - - Depreciation charge (Note 2) (21,002) (246,284) (5,053) - Impairment charge (Note 2) - - (2,164) - Closing net book amount 623,017 1,914,989 31,404 901,038 At 31 December 2003 Cost or valuation 753,746 3,358,943 54,394 901,038 Accumulated depreciation (130,729) (1,443,954) (20,826) - Impairment charge - - (2,164) - Net book amount 623,017 1,914,989 31,404 901,038 19 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) 8 Property, plant and equipment (continued) During 2003, interest expenses of RMB 1,237 (2002: RMB 1,284) were capitalised in the cost of construction in progress at the rate of 5.76%. All of the Group’s buildings are located in PRC. The title to buildings of net book value RMB 49,448 (2002: RMB 75,289) are in the process of being transferred. As at 31 December 2003, buildings and land use rights with a net book value of RMB 82,215 (2002: budildings with a net book value of RMB 8,670) has been pledged as securities for short-term loans (see Note 20). The Company was established in the PRC on 31 October 1996 as a joint stock limited company as part of the restructuring of CAC that was a state-owned enterprise. On the same date, the principal business undertakings of CAC together with the relevant assets and liabilities were taken over by the Company. As required by the relevant PRC rules and regulations a valuation of the assets and liabilities to be injected into the Company was carried out at 31 December 1995 and approved by the State-owned Assets Administration Bureau and the injected assets and liabilities were reflected in the accounts on this basis. The 1995 valuation was a one-off exercise that established the deemed cost of the property, plant and equipment injected on the formation of the Company. Subsequent revaluations have not been performed and all further additions have been recorded at cost. In 2003, after a detailed study and upon approval by the Board of Directors, the Company recognized impairment loss relating to an obsolete production lines which were not expected to be used in the future, amounting to RMB 79,806. The Company estimated the recoverable amount of these assets using their net selling price. Such impairment loss of plant and equipment was included in the statement of income for the year ended December 31, 2003. In 2003, the production line were written off and included in disposals in the above analysis. 9 Land use rights 2003 2002 At beginning of year 149,655 83,719 Acquisition of joint venture or subsidiaries 72,186 45,537 Additions 27,302 58,158 Disposals (3,653) (26,971) Impairment charge (Note 2) - (6,700) Amortisation charge (Note 2) (4,343) (4,088) At end of year 241,147 149,655 - - 20 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) 10 Intangible assets Year ended 31 December 2002 Opening net book amount 19,449 Acquisition of subsidiaries 33,736 Additions 22,469 Amortisation charge (Note 2) (8,958) Write off (19,143) Closing net book amount 47,553 At 31 December 2002 Cost 60,902 Accumulated amortisation (13,349) Net book amount 47,553 Year ended 31 December 2003 Opening net book amount 47,553 Additions 77,808 Amortisation charge (Note 2) (11,270) Closing net book amount 114,091 At 31 December 2003 Cost 138,710 Accumulated amortisation (24,619) Net book amount 114,091 The above represents goodwill raising principally from acquisition of a joint venture (See Note 27), Trademark of “Chana” and production technology for the advanced model of the Alto mini- sedan and “Changan Star” automobiles transferred from Nanjing Changan Automobile Co., Ltd. (hereafter referred to as “Nanjing Changan”) and Changan Suzuki. 11 Investments in associates 2003 2002 At the beginning of year 156,150 157,589 Increase in investments - 46,806 Share of results (Note 28) 946 (48,245) Transfer to joint venture (152,596) At end of year 4,500 156,150 The associates, which is unlisted, is: Country of Interest held % incorporation Chongqing Changan Information Technology Co., Ltd.. PRC 21.43% - - 21 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) 12 Available-for-sale investments 2003 2002 Southwestern Securities Co., Ltd. 50,000 50,000 Chongqing Baoteman Biotechnology Co., Ltd 3,000 3,000 Chongqing Certification Authority Co., Ltd 1,000 1,000 Chongqing Changan Jinling Vehicle Part Co., Ltd 2,900 - Sub-total 56,900 54,000 Less: Provisions (12,102) (12,780) Total 44,798 41,220 Southwestern Securities Co., Ltd. (hereafter referred to as “Southwestern Securities”), is a limited liability company established in PRC as approved by the China Securities Regulatory Committee. The business of Southwestern Securities includes securities purchases and sales, securities underwriting, and investment consulting. The Group holds an equity interest of 3.07% in Southwestern Securities. Provision of RMB 12,102 have been made. The investments are valued at cost less provision. Directors are of the opinion that the realizable value will not fall below the carrying value. 13 Other non-current assets (1) Deferred assets Year ended 31 December 2002 Opening net book amount 10,304 Acquisition of subsidiaries 3,299 Additions 5,372 Amortisation charge (Note 2) (6,473) Closing net book amount 12,502 At 31 December 2002 Cost 27,701 Accumulated amortisation (15,199) Net book amount 12,502 Year ended 31 December 2003 Opening net book amount 12,502 Additions 4,134 Amortisation charge (Note 2) (7,181) Closing net book amount 9,455 At 31 December 2003 Cost 31,835 Accumulated amortisation (22,380) Net book amount 9,455 - - 22 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) The above mainly represent utility capacity enhancement fee and software. 13 Other non-current assets (continued) (2) Long-term receivable The Company has a loan facility for financing of production technology upgrading of RMB 1,200,000 of which RMB 205,000 was granted by the bank to Chongqing Qingshan Industries Company Limited (hereafter referred to as “Chongqing Qingshan”). As 31 December 2003, loan of RMB 62,100 (2002: RMB 42,100) was made to Chongqing Qingshan. The loan will be repaid in 2008. Interest cost on the bank loan taken to make this loan will be paid by Chongqing Qingshan, who is also responsible for payment of the loan. Pursuant to the contract between the Company and Chongqing Qingshan, amounts payable by the Company to Chongqing Qingshan amounting to RMB 50,000 has been pledged as securities for this long- term receivable. 14 I. Deferred tax assets Deferred income taxes are calculated in full on temporary differences under the liability method using a principal tax rate of 15%. The movement on the deferred income tax account is as follows: 2003 2002 At beginning of year 97,212 69,110 Income statement charge (Note 5) 3,235 28,102 At end of year 100,447 97,212 Deferred income tax arose from temporary differences from provisions and accruals of RMB 86,544 (2002: RMB 75,428) and impairment of assets of Rmb 3,145 (2002: Rmb 21,734). 15 Inventories 2003 2002 Raw materials (at net realisable value) 636,759 384,026 Work in progress (at cost) 90,395 51,685 Finished goods (at net realisable value) 1,245,362 1,262,763 Consumables (at cost) 22,113 16,987 1,994,629 1,715,461 16 Receivables and prepayments 2003 2002 Trade receivables 527,461 378,015 Less : Provision for bad and doubtful debts (146,892) (114,848) Trade receivables – net 380,569 263,167 Notes receivables 999,797 690,350 Advances to suppliers 152,232 78,959 - - 23 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) Other receivables 130,556 71,521 1,663,154 1,103,997 Receivables from related parties are disclosed in Note 29. 17 Held-to-maturity investments As of 31 December 2003, held-to-maturity investments comprise principally marketable securities with fixed maturity that management has the intent and ability to hold to maturity within 3 months. The carrying value of the investment approximated its fair value as of 31 December 2003. 18 Cash and cash equivalents 2003 2002 Cash at bank and in hand 3,096,325 2,873,901 As of 31 December 2003, cash balances of RMB 169,567 (2002: RMB 90,546) were held as the guaranteed deposits for notes payable and letter of credit. Cash balances of RMB 8,687(2002: RMB 111,647) can only be used for specific projects. Cash balances of RMB 10,000 (2002: RMB 10,000) were held as security for long term bank borrowings and were excluded from cash and cash equivalents presented in the cashflow statement. For the purpose of the cash flow statement, cash and cash equivalents comprise the following: 2003 2002 Cash at bank and in hand 3,096,325 2,873,901 Held-to-maturity Investments 99,729 - Less: restricted cash at bank (10,000) (10,000) Cash and cash equivalents in the cash flow statement 3,186,054 2,863,901 19 Trade and other payables 2003 2002 Trade payables 2,694,073 2,484,661 Notes payable 131,366 196,280 Dividend payable - 18,620 Other payables 599,215 402,099 Accrued expenses 179,102 170,557 Accrued sales compensation 274,658 253,956 Accrued payroll and welfare 86,795 65,120 Advances from customers 367,175 105,790 4,332,384 3,697,083 - - 24 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) Amounts approximately of Rmb137.087 million primarily representing unpaid research & development fee, repair fee, warehouse rental, and salary expense for independent directors, which were accounted for as accrual as at 31 December 2002, were reclassified into other payable to concur with current year presentation. Payables to related parties are disclosed in Note 29. 20 Borrowings 2003 2002 Current Bank borrowings - unsecured 183,259 160,000 - secured 94,500 56,500 277,759 216,500 Non-current Bank borrowings - secured 245,000 150,000 Total borrowings 522,759 366,500 Current bank loans as at 31 December 2003 bear interest at rates ranging from 1.98% to 6.96% per annum (2002: 5.04% to 5.85%). Of secured loans, RMB 84,000 (2002: RMB 20,000) were secured by buildings and land use rights with net book value of RMB 82,215 (2002: buildings with net book value of RMB 8,670); Other secured loans were guaranteed by two commercial banks with letter of credit. Non-current bank loans bear interest at rates ranging from 5.76% to 6.21% (2002: 6.03% to 6.21%) and were guaranteed by CAC. Maturity of non-current borrowings: 2003 2002 Over 5 years 245,000 150,000 Borrowing facilities The Group has the following undrawn committed borrowing facilities: 2003 2002 Floating rate - expiring beyond one year 955,000 1,050,000 The facilities have been arranged to help finance specific projects. - - 25 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) 21 V. Retirement benefit obligations 2003 2002 At beginning of year 28,956 33,000 Provisions - - Payments (5,205) (4,044) At end of year 23,751 28,956 Current 3,867 1,956 Non-current 19,884 27,000 23,751 28,956 The above obligations were actuarially recorded using the projected unit credit method. The material actuarial assumptions used in valuing these obligations are as follows: i. Discount rate adopted: 4% ii. Mortality: average life expectancy of residents in the PRC. 22 Provisions At beginning of year 96,564 Acquisition of subsidiaries 8,864 Charged for the year 258,032 Utilised during year (167,351) At end of year 196,109 The above represents the warranty costs for repairs and maintenance, which are estimated based on present after-sale service policies and prior years’ experiences on such costs incurred. 23 Commitments (1) Capital commitments Capital commitments for purchase of property, plant and equipment at the balance sheet date - - 26 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) but not recognised in the financial statements is as follows: 2003 2002 Contracted 571,435 408,674 Authorised but not contracted 1,067,223 1,008,331 1,638,658 1,417,005 (2) Operating commitments The future aggregate minimum contracted for at the balance sheet date but not recognised in the financial statements is as follows: 2003 2002 Production technology development Not later than 1 year 205,477 25,551 Later than 1 year and not later than 5 years 35,848 37,625 241,325 63,176 23 Commitments (continued) Lease of building Not later than 1 year 18,338 16,618 Later than 1 year and not later than 5 years 77,937 55,888 Later than 5 years 52,623 - 148,898 72,506 Lease of land use right Not later than 1 year 4,757 3,549 Later than 1 year and not later than 5 years 20,694 12,790 Later than 5 years 12,830 14,286 38,281 30,625 ERP project contract Not later than 1year 4,012 2,754 24 Share capital and share premium 2003 2002 V. Share capital . . 708,687 A shares of par value RMB1 each (non- 708,687 708,687 traded) 167,979 A shares of par value RMB1 each (traded) 167,979 167,979 350,000 B shares of par value RMB1 each (traded) 350,000 350,000 At 31 December 1,226,666 1,226,666 . Share premium Balance at 1 January and at 31 December 833,438 833,438 All the “A” and “B” shares rank pari passu in all respects. 25 Minority interests - - 27 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) 2003 2002 At beginning of year 829,079 522,797 Acquisition of subsidiaries - 179,698 Newly incorporated subsidiaries 2,650 62,248 Share of net profit of subsidiaries 102,864 82,956 Dividend paid (286) (18,620) Increase in net assets due to additional injection from the Company 11,071 - Others 2,083 - At end of year 947,461 829,079 26 Reserves Retained by Retained by Retained by Total the Company Changan Suzuki Nanjing Changan Statutory Statutory Reserve Enterprise Statutory Statutory reserve common fund expansion reserve common reserve fund reserve fund fund Year ended 31 December 2002 Balance at 1 January 2002 76,916 76,916 133,110 61,200 - - 348,142 Transfers 96,530 96,529 67,830 18,870 36 18 279,813 Balance at 31 December 2002 173,446 173,445 200,940 80,070 36 18 627,955 Year ended 31 December 2003 Balance at 1 January 2003 173,446 173,445 200,940 80,070 36 18 627,955 Transfers 145,641 145,642 106,080 28,560 - - 425,923 Balance at 31 December 2003 319,087 319,087 307,020 108,630 36 18 1,053,878 During the year, transfers from the statement of income to statutory reserve and statutory public welfare fund were made in accordance with the relevant statutory rules and regulations and the Articles of Association of the Company and Changan Suzuki, a foreign investment enterprise. Statutory reserve According to their Articles of Association, the Company is required to transfer 10% of its profit after taxation, as determined under PRC accounting regulations, to the statutory reserve until the reserve balance reaches 50% of the registered capital. - - 28 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) The statutory reserve can be used to make good previous years’ losses, if any, and may be converted into share capital by the issuance of new shares to shareholders in proportion to their existing shareholdings. The transfer to this reserve must be made before the distribution of dividends to shareholders. No cash distribution is allowed other than in liquidation of the Company. Statutory common reserve fund According to their Articles of Association, the Company is required to transfer 5% to 10% of its profit after taxation, as determined under PRC accounting regulations, to the statutory common reserve fund. The statutory common reserve public welfare fund can only be utilized on capital items for the collective benefits of the Companies’ employees such as the construction of dormitories, canteen and other staff welfare facilities. The transfer to this reserve must be made before distribution of dividends to shareholders. This reserve is non-distributable other than in liquidation of the Company. 26 Reserves (continued) Reserve fund According to the resolution of the Board of Directors of Changan Suzuki for the 2003 profit appropriation, the amount of RMB 208 million was transferred to reserve fund from the distributable profits at 31 December 2003. The reserve fund can be used for Changan Suzuki’s working capital purposes and to make good losses incurred. The reserve fund can also be used to increase capital of Changan Suzuki. The transfer to this reserve must be made before the distribution of dividends to investors of Changan Suzuki. No cash distribution is allowed other than in liquidation of Changan Suzuki. Enterprise expansion fund According to the resolution of the Board of Directors of Changan Suzuki for the 2003 profit appropriation, the amount of Rmb 56 million was transferred to enterprise expansion fund from the distributable profits at 31 December 2003. The enterprise expansion fund can be used for Changan Suzuki’s business development purposes and for working capital purposes. The enterprise expansion fund can also be used to increase capital of Changan Suzuki. The transfer to this reserve must be made before the distribution of dividends to investors of Changan Suzuki. No cash distribution is allowed other than in liquidation of Changan Suzuki. - - 29 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) 27 Acquisition According to the contract between the Company and CAC, and pursuant to the approval by the Company’s annual general meeting on 10, May 2003, the Company acquired from CAC a 24% equity interest in Changan Ford, a Sino-foreign equity joint venture enterprise established by the Company, CAC, Ford Motor Company (hereafter referred to as “Ford”) and Ford Motor (China) Ltd. (hereafter referred as the “Ford China”) on 27 April 2001 with a term of 50 years. The Ministry of Commerce approved the acquisition on 4 August, 2003. The date of acquisition is 31 August, 2003. The consideration for the acquisition was calculated based on the valued net assets of Changan Ford as at 31 December 2002, amounting to RMB196.14 million. The Company paid the consideration in cash to CAC on 27 August 2003. Upon the completion of the acquisition, the Company’s equity interest in Changan Ford increased from 26% to 50%. Details of net assets acquired and goodwill are as follows: i. Purchase consideration: Cash paid 196,138 Less: Fair value of net assets acquired (140,865) Goodwill 55,273 ii. The assets and liabilities arising from the acquisition are as follows: As of 31 August 2003 Cash and cash equivalents 27,276 Property, plant and equipment 133,713 Land use rights 34,649 Inventories 91,884 Receivables 34,184 - - 30 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) Payables (178,994) Provisions (4,254) Tax payable 2,407 Fair value of net assets acquired 140,865 Goodwill 55,273 Total purchase consideration paid 196,138 Less: Cash and cash equivalents in joint venture acquired (27,276) Less: Impact on consolidated cashflow statement of change in consolidation scope (29,549) Cash outflow on acquisition 139,313 Subsequent to the acquisition, the Company made additional capital injection to Changan Ford in cash with the amount of United State Dollar (“USD”) 4.82 million. Meanwhile, Ford and Ford China each made additional capital injection into Changan Ford by USD 2.41 million. These additional injection increased paid-in capital of Changan Ford from USD 98 million to USD 107.64 million. 28 Cash generated from operations 2003 2002 Profit before tax 1,796,976 1,124,537 Provision for bad debt and bad debt written off (Note 2) 32,609 25,779 Provision for stocks (38,688) 18,970 Impairment of property, plant and equipment (Note 8) 2,164 - Impairment of land use rights (Note 9) - 6,700 Depreciation of property, plant and equipment (Note 8) 287,086 309,481 Amortisation of Land use rights (Note 9) 4,343 4,088 Amortisation of intangible assets (Note 10) 11,270 8,958 Amortisation of deferred assets (Note 13) 7,181 6,473 Loss on disposal of property, plant and equipment (Note 2) 98,118 27,727 Loss on disposal of land use rights (Note 2) 1,873 20,479 Financial expenses (Note 3) 15,115 24,542 Investment (income)/loss (1,636) 31,923 Share of results of associates (Note 11) (946) 48,245 (Increase) in inventories (49,055) (987,696) (Increase)/Decrease in operating receivables (533,284) 499,782 (Decrease) /Increase in operating payables (20,974) 916,368 Cash generated from operations 1,612,152 2,086,356 In the cash flow statement, proceeds from sale of property, plant and equipment comprise: 2003 2002 Net book amount of property, plant and equipment disposed 100,238 52,508 (Note 8) - - 31 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) Less: Loss on disposal of property, plant and equipment (98,118) (27,727) (Note 2) Receivables 493 - Net book amount of property, plant and equipment used for investment - (4,146) Proceeds from sale of property, plant and equipment 2,613 20,635 29 Related party transactions The Company is controlled by CAC (incorporated in PRC), which owns 57.78% of the Company’s shares. The remaining 42.22% of the shares are widely held. The ultimate parent of the Group is China South Industries Group (hereafter referred to as “CSIG”, incorporated in PRC). Related parties, other than subsidiaries, and their relationship with the Company are as follows: Related parties’ name Relationship Chongqing Lear Changan Automobile Decorating Co., Ltd. Subsidiary of CAC Chongqing Changan Automobile Manufacturing Factory Subsidiary of CAC Changan Mini Vehicles Parts Factory Subsidiary of CAC Chongqing Changan Mini Vehicles Parts Sales Company Subsidiary of CAC Chongqing Changan Automobile Machinery Factory Subsidiary of CAC Chongqing Changan Transportation Company Subsidiary of CAC Changqing Changan Trading Company Subsidiary of CAC Chongqing Changan Kuayue Automobile Co., Ltd. Subsidiary of CAC 29 Related party transactions (continued) Related parties’ name Relationship Changan Kuayue Parts Sales Company Subsidiary of CAC Changan Machinery Factory Subsidiary of CAC Changan Automobile Rubber Parts Factory Subsidiary of CAC Chongqing Changan Construction Co., Ltd. Subsidiary of CAC Chongqing Jiangli Machinery Factory Subsidiary of CAC Chongqing Jiangchuan Machinery Factory Subsidiary of CAC Chongqing Jiangchao Engine Industry Co., Ltd. Subsidiary of CAC Chongqing Changan Jinling Vehicles Parts Co., Ltd Subsidiary of CAC Chongqing Changan Minsheng Logistics Co., Ltd. Subsidiary of CAC Changan Shengli Automobile Company Subsidiary of CAC Chongqing Changan Design Academy Subsidiary of CAC Chongqing Changan Construction Supervision Co., Ltd. Subsidiary of CAC Chongqing Changan Support Services Co., Ltd. Subsidiary of CAC Southwest Ordnance Industries Corporation Subsidiary of CSIG Chengdu Wanyou Economic Technological Development Co., Ltd. Subsidiary of CSIG Chongqing Wanyou Economic Development Co.,Ltd Subsidiary of CSIG Ordnance Finance Company Subsidiary of CSIG Chongqing Changan Information Technology Co., Ltd. Associate Changan Ford Automobile Co., Ltd. Joint venture The following significant transactions were carried out with related parties: (1) Sales of goods and services 2003 2002 - - 32 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) Sales of goods: CAC and its related companies 195,663 884,204 Chengdu Wanyou Economic Technological Development Co., Ltd. 572,046 431,468 Chongqing Wanyou Economic Development Co.,Ltd 260,738 191,030 Chongqing Changan Jinling Vehicles Parts Co., Ltd 39,691 - Changan Ford Automobile Co., Ltd. 22,054 274 Changan Automobile Manufacturing Factory 4,489 - 1,094,681 1,506,976 The sales with Changan Ford mainly occurred before the acquisition of the 24% share from CAC. Interest income: CAC and its related companies 882 6,185 Rental income: CAC 4,347 4,347 (2) Purchases of goods and services 2003 2002 Purchases of goods: Chongqing Lear Changan Automobile Decorating Co., Ltd 219,351 231,434 Chongqing Changan Kuayue Automobile Co., Ltd 45,049 63,303 Changan Automobile Manufacturing Factory 39,793 42,814 CAC 198,009 549,365 Chongqing Jiangli Machinery Factory 88,378 74,243 Chongqing Jiangchuan Machinery Factory 71,664 59,919 Chongqing Jiangchao Engine Industry Co., Ltd 21,673 16,803 Changan Automobile Rubber Parts Factory 14,814 12,291 Changan Mini Vehicles Parts Factory 5,898 4,910 Chongqing Changan Jinling Vehicles Parts Co., Ltd 483,466 - 1,188,095 1,055,082 2003 2002 Purchases of services: CAC --Construction fee 13,779 7,621 --Trademark fee 13,028 12,050 --Lease of land use right 4,052 2,824 --Building rental fee 16,618 16,618 --Water and Electricity fee 97,701 86,716 --Welfare 28,796 26,546 --Telephone fee 1,930 1,809 - - 33 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) --Education fee 7,804 6,719 --Security and Fire fighting fee 8,500 6,774 --Others 7,603 7,214 Chongqing Changan Minsheng Logistics Co., Ltd. --Transportation fee 395,369 146,294 Chongqing Changan Information Technology Co., Ltd. --Construction fee 21,191 12,347 --Technology service fee 28,269 10,560 Chongqing Changan Construction Co., Ltd. --Construction fee 156,935 25,593 Chongqing Changan Design Academy --Construction fee 16,685 1,712 Chongqing Changan Transportation Company --Transportation fee 1,313 210 Chongqing Changan Construction Supervision Co., Ltd. --Construction fee 1,263 298 820,836 371,905 (3) Year-end balances arising from sales/purchases of goods/services 2003 2002 Receivables from related parties: CAC and its related companies 25,488 17,277 Chengdu Wanyou Economic Technological Development Co.,Ltd. 137,000 72,824 Chongqing Wanyou Economic Development Co.,Ltd 24,004 - Southwest Ordnance Industries Corporation - 16,000 Changan Ford Automobile Co. Ltd. 11,855 761 198,347 106,862 2003 2002 Payables to related parties: Chongqing Lear Changan Automobile Decorating Co., Ltd. 77,216 102,588 Chongqing Changan Kuayue Automobile Co., Ltd. 8,920 22,439 Chongqing Changan Automobile Manufacturing Factory 836 3,249 Chongqing Jiangli Machinery Factory 11,028 14,866 Chongqing Jiangchuan Machinery Factory 9,622 9,082 Chongqing Jiangchao Engine Industry Corporation 5,233 3,984 Changan Automobile Rubber Parts Factory 1,061 4,483 Changan Mini Vehicles Parts Factory 7,312 1,231 Chongqing Changan Minsheng Logistics Co. Ltd. 58,703 40,463 CAC and its related companies 300 4,798 Chongqing Changan Jinling Vehicles Parts Co., Ltd 2,300 - Chengdu Wanyou Economic Technological Development Co., Ltd. 6,458 - - - 34 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) Chongqing Wanyou Economic Development Co.,Ltd 18,245 4,273 Chongqing Changan Design Academy 4,757 - Chongqing Changan Information Technology Co., Ltd. 3,180 50 Chongqing Changan Transportation Company 1,151 - Changan Kuayue Parts Sales Company - 3 216,322 211,509 (4) Deposits with related companies As at 31 December 2003, the Company had deposits of RMB 122,463 (2002: RMB 235,137) with Ordnance Finance Company. (5) Director’s remuneration In 2003, the total remuneration of the directors was RMB 649 (2002: RMB 358). (6) Counter-grantees The Company has provided a guarantee for bank loan of RMB 31,200 of Changan Ford. The period of the guarantee is from 15 April 2002 to 15 May 2005. CAC has also provided a counter- guarantee to the Company on behalf of Changan Ford Automobile Co., Ltd. 30 Principal subsidiaries Entity Country of Principal activities incorporation Chongqing Changan Automobile Import and PRC Import and export, sale of Export Co., Ltd (95%) automobiles and spare parts Chongqing Changan Automobile Sales Co., PRC Sale of automobiles, engines and Ltd (100%) spare parts Chongqing Changan Suzuki Automobile PRC Manufacture and sale of Co., Ltd (51%) automobiles and spare parts Nanjing Changan Automobile Co., Ltd PRC Manufacture and sale of mini (“ Nanjing Changan”) (41.92%) auto-mobiles and spare parts Hebei Changan Automobile Co., Ltd PRC Manufacture and sale of auto- (“ Hebei Changan”) (68.66%) mobiles and spare parts Chongqing Anfu Automobile Co., Ltd PRC Sale of automobiles and spare (“ Chongqin Anfu”) (50%) parts 169 Sales Offices (80%-100%) PRC Sale of automobiles and spare parts Chongqing Changan Special Automobile PRC Sale of special automobiles and Co., Ltd ( “Changan Special”) (50%) spare parts, automobile repair Chongqing Changan Service Co., Ltd (99%) PRC Sale of automobiles and spare parts - - 35 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) In 2003, the Company made additional capital injection in cash to Hebei Changan, amounting to RMB 81million. Upon completion of the additional injection, paid-in capital of Hebei Changan increased from RMB 88.98 million to RMB 169.98 million and the Company’s equity interest in Hebei Changan increased from 40.12% to 68.66%. In 2003, the Company made additional capital injection in cash to Nanjing Changan, amouting to RMB 25 million. Upon completioin of the injection, paid-in capital of Nanjing Changan increased from RMB 275 million to RMB 300 million, while the Company’s equity interest in Nanjing Changan increased from 36.55% to 41.92%. The Company is deemed to have effective control over Nanjing Changan because the shareholders who held 21.41% of the equity has entrusted the management of Nanjing Changan to the Company. The Company is deemed to have effective control over Chongqing Anfu as the Company has the power to control its strategic operating, investing and financing policies . The Company is deemed to have effective control over Chagnan Special as the Company has the power to control its strategic operating, investing and financing policies - - 36 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) 31 Interest in a joint venture Changan Ford is considered joint venture for IFRS reporting purposes because its strategic operating, investing and financing activities are jointly controlled by the Company and the joint venture partners. The Company’s profit and loss sharing from the joint venture correspond to its equity interest percentage.The following amounts represent the Group’s 50% share of the assets and liabilities and sales and results of the joint venture and are included in the consolidated balance sheet and income statement: As of 31, December 2003 Property, plant and equipment 303,251 Land use right 71,660 Current assets 456,101 831,012 Short term borrowings (157,259) Provisions (15,493) Other Current liabilities (326,322) (499,074) Net assets 331,938 From 1 September to 31 December 2003 Sales 521,108 Loss from operations (2,288) Net loss (1,419) Proportionate interest in joint venture’s commitments as of 31 December 2003 76,029 There are no contingent liabilities relating to the Group’s interest in the joint venture. The average number of employees in the joint venture in 2003 was 4,000 32 Subsequent events Apart from dividend distribution as disclosed in Note 7, following events occurred subsequent to 31 December 2003: On 16 March 2004, the Board of Directors approved an executive bonus plan (the “plan”) proposed by the Company. Certain officers of the Company are participants in the plan which provides that up to 4% of the Company’s consolidated net profit be set aside for distribution among participants based upon performance evaluation. The plan is subject to shareholders’ approval in their next meeting. - - 37 Chongqing Changan Automobile Company Limited Annual Report 2003(B share) On 16 March 2004, the Board of Directors approved to make solely additional capital injection by the Company to Nanjing Changan using land use rights and fixed assets, amounting to RMB 301.81 million. Upon completion of the injection, the Company’s equity interest in Nanjing Changan will increase from 41.92% to 71.01%. Impact of IFRS adjustments on the consolidated profit after taxation and shareholders’ fund ⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯ Net assets Net profit As reported in the accounts of the Group under PRC accounting regulations 4,738,778 1,450,675 1. Staff and worker’s bonus and welfare fund of Changan Suzuki charged against profit after taxation - (13,260) 2. Amortisation of goodwill arising on consolidation (16,313) 858 3. Reversal of revaluation surpluses of long term assets relating to the revaluation in 1995 (7,876) - 4. Deferred tax assets 95,783 (1,429) 5. Others - (1,228) As restated in conformity with IFRS 4,810,372 1,435,616 XXI. Documents for inspection 1. Financial statements with signatures and stamps of the legal representative, the head of the accounting and the head of accounting departments. 2. The original copy of audit report with the stamp of the CPA firm and the signature and stamp of the Certified Public Accountant. 3. All the original documents and manuscripts of the Company which has been disclosed in the reporting period in the newspapers designated by China Securities Regulatory Commission. 4. Annual reports published in other securities markets. Chairman of the Board of Directors: Mr. Yin Jiaxu General Manager: Mr. Zhao Luchuan Chongqing Changan Automobile Company Limited Marl 16, 2004 - - 38