长安汽车(000625)长安Ｂ2003年年度报告摘要（英文版）

Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company Chongqing Changan Automobile Limited Company Extracts of 2003 Annual Report §1 Important Notes 1.1 The Board of Directors of Chongqing Changan Automobile Co., Ltd. (hereinafter referred to as “the Company”) and the directors guarantee that the information contained in the annual report is free of false records, misguiding statements or significant omissions, and assume individual and joint liabilities for the truthfulness, accuracy and integrity of the annual report. The annual report extracts are extracted from the original report, and for detailed information, please refer to the annual report. 1.2 There are no directors of the Board who are unable to guarantee or agree the truthfulness, accuracy, completeness or disagreement on the contents of the annual report. 1.3 The Seventh Meeting of the Third Board of Directors was held on March 16, 2004 in the multimedia conference room of the Company. 15 directors should attend, and 10 attended actually. 3 persons were authorized representatives of directors, and 12 persons attended without the right to vote . Directors Mr. Li Shouwu, Mr Xu Liuping and Mr. Wang Chongsheng were absent; independent director Mr Guo Konghui, Mr Xia Donglin were absent. Directors, Mr. Li Shouwu entrusted directors Mr. Deng Tengjiang, Mr Wang Chongsheng entrusted directors Mr. Cui Yunjiang, independent director Mr Guo Konghui and Mr. Xia Donglin entrusted Mr. Gao Zhikai to attend and vote on their behalf, respectively. 1.4 The auditor of the Company, PricewaterhouseCoopers Zhong Tian Certified Public Accountants, issued an unqualified audit report. 1.5 Chairman Mr. Yin Jiaxu, General manager Mr. Zhao Luchuan and Chief Accountant Mr. Cui Yunjiang guarantee the truthfulness and completeness of the financial statements of the annual report 1.6 The annual report shall be presented in both Chinese and English, and should there be any conflicting understanding of the text, the Chinese version shall prevail. －1－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company §2 General Introduction of the Company 2.1 General Introduction of the Company Abbreviated name of the Changan Automobile, Changan B stock Stock Code 000625、200625 Place of listing Shenzhen Stock Exchange Registered and No. 260, Jian Xin East Road, Jiang Bei District, Chongqing Office Address Post code 400023 Internet Website of the http://www.changan.com.cn Company Email Address cazqc@mail.changan.com.cn of the Company 2.2 Contact persons and contact method Secretaries of the Board Securities matters Representative Name Cui Yunjiang, Li Jun No. 260, Jian Xin East Road, Jiang Contact Address Bei District, Chongqing Telephone 023-67591349 Fax 023-67866055 Email Address cazqc@mail.changan.com.cn －2－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company §3 Extracts of Accounting and Operating Data 3.1 Key accounting data (RMB thousand) Increase/Decrease 2003 2002 （％） 2001 Sales 14,404,118 9,884,068 45.73 7,331,806 Profit before tax 1,796,976 1,124,537 59.80 260,800 Net profit 1,435,616 865,146 65.94 206,183 December 31, December 31, Increase/Decrease December 31, 2003 2002 （％） 2001 Total assets 10,984,325 8,775,246 25.17 6,669,305 Shareholders’ 3,472,889 38.51 2,656,809 equity（excluding 4,810,372 minority interest） Net cash flow from operating 1,612,152 2,086,356 -22.73 986,180 activities 3.2 Key financial indicator (RMB Yuan) Increase/Decrease 2003 2002 2001 （％） Earnings per share 1.17 0.71 64.79 0.17 Return on net asset 29.84% 24.91% 19.79 7.7% Net cash flow from operating activities per 1.31 1.70 -22.94 0.80 share December 31, December 31, Increase/Decrease December 2003 2002 （％） 31, 2001 Net asset per share 3.92 2.83 38.52 2.17 Adjusted net assets 3.74 2.79 34.05 2.15 per share －3－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company 3.3 Reconciliation of net profits presented under the PRC accounting standards and International Financial Reporting Standards (“IFRS”) √ Applicable □ Not applicable (RMB 10 thousand) PRC accounting standards IFRS Net profit 145,068 143,562 Net Assets Net Profit As reported under PRC accounting standards 473,878 145,068 Adjustment made in accordance with IFRS 1. Staff and worker’s bonus and welfare fund of Changan Suzuki charged against profit after taxation - (1,326) Explanation 2. Amortization of goodwill arising on consolidation (1,631) 86 of Variance 3. Reversal of revaluation surpluses of long-term assets relating to revaluation made in 1995 (788) - 4. Deferred tax assets 9,578 (143) 5. Others - (123) As restated in conformity with IFRS 481,037 143,562 －4－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company §4 Changes in Shareholdings and Information on Shareholders 4.1 Change in shareholdings (Unit : share) Balance before Increase/Decrease in Balance after current change the reporting period change （+，-） I.Non-circulated shares 1、Promoter shares 708,666,000 0 708,666,000 Including: State-owned legal 0 0 person shares Domestic legal person shares 708,666,000 0 708,666,000 Foreign legal person shares 0 0 Others 0 0 2、Legal entity shares raised 0 0 3、Employee shares 21,000 0 21,000 4、Preference shares and others 0 0 Sub-total of non-circulated 708,687,000 0 708,687,000 shares II. Circulated shares 1、Domestic listed RMB shares 167,979,000 0 167,979,000 2、Domestic listed foreign shares 350,000,000 0 350,000,000 3、Overseas listed foreign shares 0 0 4、Others 0 0 Total circulated shares 517,979,000 0 517,979,000 III. Total shares 1,226,666,000 0 1,226,666,000 －5－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company 4.2 The largest ten shareholders Total shareholders at year end 27,147 Information about the largest ten shareholders (Unit: share) Increase/ Shares held % of Share Pledged/ Shareholders Name of the shareholder at the total Decrease type Frozen year-end shares in the year shares CHANGAN AUTOMOBILE non- GROUP COMPANY LIMITED 0 708,666,000 57.77 354,333,000 State-owned circulated (“CAC”) BBH BOSTON A/C GMO EMERGING MARKETS 2,827,000 11,928,940 0.97 circulated Unknown Foreign FUND GUOTAI JUNAN SECURIES Unknown 7,932,363 0.65 circulated Unknown Foreign HONG KONG LIMITED BBH BOSTON A/C Gom -5,677,497 7,622,383 0.62 circulated Unknown A-Share Emerging Markets Fund BERMUDA TRUST （ FAR EAST ） LTD-VALUE Unknown 7,617,443 0.62 circulated Unknown Foreign PARTNERS ‘ A’ FD BIAL/HSBC GLOBAL INVESTMENT FUNDS Unknown 7,000,000 0.57 circulated Unknown Foreign CHINESE EQUITY FF GREATER CHINA FD Unknown 6,400,037 0.52 circulated Unknown Foreign GT1 24037 CHINA INTL MARINE CONTAINERS (HONG 2,750,948 6,242,948 0.51 circulated Unknown Foreign KONG) LTD YUNNAN INTERNATIONAL TRUST & INVESTMENT CO., Unknown 5,954,010 0.49 circulated Unknown A-Share LTD BTFE-BOBL/MANULIFE GLOBAL FUND-CHINA Unknown 5,952,257 0.49 circulated Unknown Foreign VALUE Among the ten largest shareholders, CAC, who is a state-owned shareholder, had no relationship with the other shareholders, and nor was the party who agreed to act alike as stipulated in Administrative Related relationship of the ten measures on information disclosure concerning changes in largest shareholders and their shareholdings of listed companies; the Company did not know whether consistent act there was relationship among the other shareholders, and nor knew whether they were the parties who agreed to act alike as stipulated in Administrative measures on information disclosure concerning changes in shareholdings of listed companies. －6－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company Information about the large ten circulated shareholders Shares held at the Name of the shareholder (full name) Share type year-end (share) BBH BOSTON A/C GMO EMERGING MARKETS 11,928,940 B share FUND GUOTAI JUNAN SECURIES (HONG KONG) LIMITED 7,932,363 B share BBH BOSTON A/C Gom Emerging Markets Fund 7,622,383 A Share BERMUDA TRUST （ FAR EAST ） LTD-VALUE 7,617,443 B share PARTNERS ‘ A’ FD BIAL/HSBC GLOBAL INVESTMENT FUNDS 7,000,000 B share CHINESE EQUITY FF GREATER CHINA FD GT1 24037 6,400,037 B share CHINA INTL MARINE CONTAINERS (HONG KONG) 6,242,948 B share LTD YUNNAN INTL TRUST & INVESTMENT CO.,LET 5,954,010 A Share BTFE-BOBL/MANULIFE GLOBAL FUND-CHINA 5,952,257 B share VALUE HONGYANG SECURITIES INVESTMENT FUND 5,602,744 A Share Among the top ten circulated shareholders of the Company, the Company didn’ t know whether they had related relationship or Related relationship of the top ten largest circulated whether they were the party who shareholders agreed to act alike as stipulated in the Administrative measures on information disclosure concerning changes in shareholdings of listed companies 4.3 Information on the controlling shareholders and actual controller 4.3.1 Change in the controlling shareholders and actual controller □ Applicable √ Not Applicable －7－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company 4.3.2 Information on the controlling shareholders and other actual controllers Controlling shareholder: Changan Automobile Group Company Limited(“CAC”) Legal representative: Yin Jiaxu Date of establishment: October 28, 1996 Business scope and major products: manufacturing, development and sale of Changan series cars and spare parts; manufacturing and sale of firearms for civil use, ammunition, general use machinery, moudles, tools etc. Registered capital: RMB 740,000,000 Actual controller of CAC: China South Industries Group Legal representative: Xu Bin Date of establishment: June 29, 1999 Business scope and major products: investment and management of state-owned assets; manufacturing of guns and firearms; engineering prospecting and designing, construction, contracting, construction supervision; equipment installation, etc. Registered capital: RMB 12,645,210,000 －8－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company §5 Information on Directors, Supervisors and Senior Management 5.1 Change in shares held by directors, supervisors and senior management At the Reasons By the Name Position Sex Age Term of office beginning of for year-end the year changes Yin Jiaxu Chairman M 47 2003.05-2006.05 4,200 4,200 Zhao Deputy Luchuan Chairman, General Manager M 50 2003.05-2006.05 4,200 4,200 Li Shouwu Director M 37 2003.05-2006.05 0 0 Xu Liuping Director M 39 2003.05-2006.05 0 0 Deng Director M Tengjiang 47 2003.05-2006.05 0 0 Wang Director M Chongsheng 45 2003.05-2006.05 4,200 4,200 Guo Xuewu Director M 47 2003.05-2006.05 0 0 Director, Executive Deputy General Zhang Baolin Manager M 41 2003.05-2006.05 0 0 Ma Jun Director M 44 2003.05-2006.05 0 0 Director 、 Deputy General Manager,Board Cui Yunjiang Secretary M 40 2003.05-2006.05 0 0 Independent Guo Konghui Director M 68 2003.05-2006.05 0 0 Independent Xia Donglin Director M 42 2003.05-2006.05 0 0 Independent Gao Zhikai Director M 41 2003.05-2006.05 0 0 Independent Wen Zongyu Director M 40 2003.05-2006.05 0 0 Independent Liu Wei Director M 39 2003.05-2006.05 Organizer of the Board of Shi Yubao Supervisors M 50 2003.05-2006.05 0 0 Zhou Xiaying Supervisor F 54 2003.05-2006.05 4,200 4,200 Peng Supervisor Minggeng M 53 2003.05-2006.05 4,200 4,200 Cao Supervisor Dongping F 50 2003.05-2006.05 0 0 Xiong Huilin Supervisor F 44 2003.05-2006.05 0 0 Zhu Zhiping Supervisor M 41 2003.05-2006.05 0 0 Hua Dubiao Supervisor M 38 2003.05-2006.05 0 0 Fu Xiangyu Supervisor F 48 2003.05-2006.05 0 0 Senior Deputy Zhu Huarong General M 38 2003.03-2006.03 0 0 Manager －9－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company Manager Senior Deputy Huang General Zhongqiang Manager M 35 2003.03-2006.03 0 0 Deputy General Jia Yanyue Manager M 40 2003.03-2006.03 0 0 Deputy General Zou yi Manager M 40 2003.03-2006.03 0 0 Deputy General Cui Xiaomei Manager F 48 2003.03-2006.03 0 0 Board Li Jun Secretary F 34 2003.03-2006.03 0 0 5.2 Positions of the Directors and Supervisors in their respective shareholder companies √ Applicable □ Not Applicable Name Shareholder company Position Term of office Yin Jiaxu Changan Automobile Group Chairman, President, Secretary 1998.07- Company Limited of the Party Committee Wang Changan Automobile Group Director, Deputy Secretary of Chongsheng Company Limited the Party Committee, Vice 1996.01- President Guo Xuewu Changan Automobile Group Director, Vice President 1999.12- Company Limited Changan Automobile Group Director, Deputy General Company Limited Secretary of the Party 2000.09- Shi Yubao Committee, Chairman of the Worker’ s Union Zhou Changan Automobile Group Deputy Secretary of the Party Xiaying Company Limited Committee, Deputy Secretary to 1996.01- the Party Supervision Committee Peng Changan Automobile Group Vice President 1998.11- Minggeng Company Limited Changan Automobile Group President Assistant, Head of the Ma Jun 2001.02- Company Limited administration office Cao Changan Automobile Group Minister of the Finance 2000.03- Dongping Company Limited Department 5.3 Annual remuneration for directors, supervisors and senior management Total annual remuneration 64.89 Total remuneration of the three 21.62 highest paid directors Total remuneration of the three 22.09 highest paid management Remuneration of independent 5.00 per person per year directors Expenses incurred in attending board of directors meetings Other allowance for independent and shareholders general meetings and in the discharge of director responsibilities according to the Company’ s Article of Association are reimbursed by the Company －10－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company Association are reimbursed by the Company Directors and Supervisors who Yin Jiaxu, Li Shouwu, Xu Liuping, Deng Tengjiang, Wang did not receive remuneration Chongsheng, Guo Xuewu, Ma Jun, Shi Yubao, Zhou from the Company Xiaying, Peng Minggeng, Cao Dongping, Xiong Huilin Payment scope Headcount 30000-45000 4 45000-60000 3 60000-90000 4 §6 Report by Board of Directors 6.1 Operation discussion and analysis In 2003, the Company conducted its operation strictly in accordance with the strategic objective of “3337”and the requirement of “New ideas in development, new breakthrough in reform, new opportunity in the opening situation and new measures in the work”. It grasped the opportunity of the industry development and fully leveraged the advantage of the Company in being able to manufacture both automobiles and engines. It stood the adverse effect of SARS and market fluctuations and achieved good operating result. It sold 385,498 cars in total in 2003, which increased by 43% as compared with the same time of last year. It achieved sales revenue of RMB 14,404.12 million, which increased by 46% as compared with the same time of last year and realized a profit of RMB1,435.62 million, which increased by 65.9% as compared with the same time of last year. During the reporting period, the Company increased the percentage of middle to high level cars and conducted its operation in accordance with the strategy of “focus on mini-car and base on sedans”and acquired 24% of the equity rights of Changan Ford through its self-owned capital and incorporated Changan Ford into the scope of consolidated financial statement (consolidate by 50%). It strengthened its international cooperation with other companies and concluded memorandum of invest together with Ford in the following years to increase in this investment in sedan project.the production expansion project of 200,000 Changan Suzuki .and enhance of the sedan project The cons truction of the new area went on smoothly. During the reporting period, the Company has applied to issue more A shares to China Securities Regulatory Committee and now is being processed. The technology branch of the Company has started its operation formally and had got self-owned intelligence －11－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company property product. 6.2 The business operation by industry or product (RMB ten thousand) Variance of Gross Variance of Industry/ Sales Cost of sales Variance of margin cost of product revenue sales revenue margin (%) (%) sales (％) (％) Automobile 1,440,412.00 1,051,065.00 27.03 45.73 50.17 -7.38 Including: Related 109,468.00 79,879.00 27.03 -27.36 -25.15 -7.38 party transactions SC6350 709,270.00 493,472.00 30.43 52.75 61.85 -11.39 series Changan 232,695.00 168,635.00 27.53 111.60 97.74 22.63 Lingyang Alto sedan 215,889.00 186,041.00 13.83 16.81 21.06 -17.87 Others 282,558.00 202,917.00 28.19 23.24 30.01 -11.72 Including: Related 109,468.00 79,879.00 27.03 -27.36 -25.15 -7.39 party transactions Pricing for related party Fair market price transactions Necessity and continuity of Contribution to enhance the competition capability. related party transaction 6.3 Business operation by area (RMB ten thousand) Area Sales revenue Increase/decrease（％） Domestic 1,433,233 45.4% Overseas 7,179 161.24% 6.4 Main suppliers and customers (RMB ten thousand) Total purchase from Proportion in total 205,080 23.81% the top five suppliers purchase Total sales to top five Proportion in total 165,684 12% customers sales 6.5 Operation and performance of the subsidiaries of the Company (investment income accounts for 10% plus of net profit) □ Applicable √ Not applicable 6.6 The reasons for changes in main business and its structure □ Applicable √ Not applicable 6.7 The reasons for significant changes in profitable capability (gross margin) －12－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company □ Applicable √ Not applicable 6.8 The reasons for significant changes in structure of operating results and profit √ Applicable □ Not applicable Refer to Analysis on reasons for material changes in whole financial condition as compared with last year Analysis on reasons for material changes in whole financial condition as compared with last year √ Applicable □ Not applicable (RMB thousand) Increase/ Project 2003 2002 Decrease Reasons Of Changes Expansion of cnsolidation 10,984,325 8,775,246 25.17% scope, production and sales Total Asset sale Shareholders’ 4,810,372 3,472,889 38.51% equity Increase of profit Expansion of consolidation Revenue from scope, increase of sales of major business 14,404,118 9,884,068 45.73% major product Changan Star lines Series by 62.04%, increase in sales of Changan Suzuki Increase in sales and Cost of Good Sold 10,510,651 6,999,382 50.17% expansion in consolidation scope Profit from major Revenue increase and 3,523,019 2,533,719 39.05% business lines Consumer Tax reduction Increase in major business profit, decrease in general and Net Profit 1,435,616 865,146 65.94% administrative expense and increase in other operating profit Net increase in Cash and Cash 322,153 1,069,507 -69.88% More capital expenditure and Equivalent more settlement by notes 6.9 The impact of significant changes in the production and operation environment, macro policies and laws regulations on the Company √ Applicable □ Not applicable Refer to Discussion and Analysis on operating situation. 6.10 Completion of profite forecast □ Applicable √ Not Applicable 6.11 Completion of operation plan □ Applicable √ Not Applicable 6.12 The utilization of proceeds from previous public offerings √ Applicable □ Not applicable (RMB: ten thousand) －13－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company Gross Proceeds Accumulated proceeds 74,885.00 used in 4,270.00 used 71,409.00 raised current year proceeds Consistent Investment Planned Actual with plan project Change Earnings investment investment and earnings committed projection Automobile production 17,885 No 17,885 19,618 No line Engine production 23,000 No 23,000 23,810 No line Technology Development 10,000 No 6,524 0 No Center construction Additions to working capital and 24,000 No 24,000 1,274 Yes repayment of loans Total 74,885 - 71,409 44,702 - Reasons for According to the Board of the Directors, the raised Proceeds was used in not achieving June 1997. Because the feasibility report of the Changan Alto Sedans the plan and expansion project of 150 thousand automobiles was not approved by the earnings National Economic and Trade Committee and the State Planning Commission projection (foruntil February 1998 with the formal document Guo Jingmao Gai[1998]No.64 individual and the follow-up fund has not been set, the completion rate for the project is project) not in line with that disclosed in the prospectus. Furthermore, as the Technology Development Centre project was still in the stage of feasibility study, the actual usage of fund is not in line with those disclosed in prospectus in 1997. The Proceeds not used was RMB 34.76 million, accounting for 5% of the total Proceeds. Reasons for None the change and its procedure（ for individual project） Changes in projects □ Applicable √ Not applicable 6.13 The use of proceeds not from public offerings √ Applicable □ Not applicable (RMB ten thousand) Investment project Funds injected Project stage Earnings projection Technology Develop In progress Included in the overall of automobile 4,951.00 earnings of the Company production line －14－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company Technology Development of 15,555.00 In progress engine production line ERP project 1,417.00 In progress Industry Area 43,583.00 In progress Total 65,506.00 -- -- 6.14 Note for the “non-standard opinion”issued by Certified Public Accountants □ Applicable √ Not Applicable 6.15 Operation plan for next year of Board of directors √ Applicable □ Not applicable In 2004, the Company will develop gradually on its present basis and ensure the annual production and sales of 500,000 automobiles and will try its best to achieve the target of producing and selling 530,000 automobiles (the production and sales amount of Changan Ford calculated by 100%). The details are as follows: Company Planned Volume of Products Name Production and Sales Changan Star 220,000 Headquarter Series CM8 5,000 Changan Alto 50,000 Suzuki Lingyang 70,000 Fiesta 25,000 Changan Ford Mondeo 40,000 Nanjing Mini-lorry 75,000 Changan Hebei Changan Mini-van 45,000 Total 5３0,000 Profit forecast for next year □ Applicable √ Not Applicable 6.16 The draft scheme for cash dividend or bonus dividend of 2003 proposed by the Board of Directors －15－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company The net profit of 2003 is RMB 1,450,675,010 (RMB 1,435,616,237 under IFRS). RMB 145,641,211 is transfer to statutory reserve fund , RMB 145,641,211 is transferred to statutory common reserve fund. RMB 13,260,000 is transferred to staff bonus and welfare fund, RMB 106,080,000 is transferred to reserve fund and RMB 28,560,000 is transferred to enterprise expansion fund as to Changan Suzuki, which was included in the consolidation scope. As stipulated, distributable profit for shareholders is the lower of the two in A-share and B-share income statements audited, which is RMB 1,660,945,300. According to the scheme of the profit distribution, for per ten shares, cash dividend of RMB 2.5 yuan (relevant tax included), amounting to a total of RMB 306,666,500 yuan and bonus dividend of two shares, totalling 245,333,200 shares would be distributed. There is no transfer from capital reserve to share capital. The proposed dividend distribution is subject to the shareholders’approval in the general meeting §7 Important Matters 7.1 Acquisition of assets √ Applicable □ Not applicable (RMB ten thousand) Acquired Assets and Acquisition Date Acquired The net profit contributed Related transferring company price from acquisition date to party year end transaction Yes, it is 24% of the equity of determined Changan Ford held in by Changan 31 August 2003 19,614 -68 accordance Automobiles Group with the Co., Ltd valuation price. 990 mu of land, factory shops of 120,000 square meters, relevant property and 28 October 2003 5,000 No profit produced No equipments held by Public-Owned Assets Operating (holding) Co, Ltd of County Sushui 7.2 Sales of assets □ Applicable √ Not applicable Impacts on the continuity of operation and stability of management of related manners mentioned in 7.1、7.2 It is beneficial to avoid the competition from the same industry, to consolidate automobile businesses, to strengthen cooperation with Ford and to improve the －16－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company whole competitiveness of the Company. 7.3 Material guarantees √ Applicable □ Not applicable (RMB ten thousand) Warrentee Guarantee Amount Type Term Completed Related Date party Changan Joint liabilities 2002.4.15 － Yes Ford Co., 2002.04.15 3,120.00 Yes guarantee 2003.5.15 Ltd. Guarantee amount 0.00 Balance of Guarantee 0.00 Including: related party balance 0.00 Guarantee amounts to Ssubsidies 0.00 Guarantee not abided by the 0.00 regulation Ratio of guarantee to net assets 0.00 7.4 Debt transactions with related parties √ Applicable □ Not applicable (RMB ten thousand) Provide funds to Related parties Funds provided from related Related Parties parties Transaction Balance Transaction Balance Changan Automobiles 19,566.00 2,549.00 0.00 30.00 Group Co.Ltd Chengdu Wanyou Economic 65,809.00 13,700.00 646.00 646.00 Technological Development Co., Ltd. Changan Ford 2,123.00 0.00 0.00 0.00 Automobile Co. Ltd Chongqing Lear Changan Automobile 0.00 0.00 21,730.00 7,021.00 Decorating Co., Ltd. Chongqing Changan Kuayue Automobile 0.00 0.00 4,505.00 891.00 Co., Ltd. Chongqing Changan Automobile 449.00 0.00 3,979.00 81.00 Manufacturing Factory Chongqing Jiangli 0.00 0.00 9,105.00 1,103.00 Machinery Factory Chongqing Jiangchuan 0.00 0.00 7,166.00 962.00 Machinery Factory Chongqing Jiangchao Engine Industry Co., 0.00 0.00 2,167.00 523.00 Ltd. Changan Mini Vehicles 0.00 0.00 608.00 731.00 Parts Factory Changan Automobile 0.00 0.00 1,481.00 106.00 Rubber Parts Factory Chongqing Changan Minsheng Logistics 0.00 0.00 40,069.00 5,870.00 Co., Ltd. －17－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company Chongqing Wanyou Economic Development 28,474.00 2,400.00 1,824.00 1,824.00 Co.,Ltd Chongqing Changan Jinling Vehicles Parts 3,969.00 0.00 48,313.00 16.00 Co., Ltd Chongqing Changan 0.00 0.00 476.00 476.00 Design Academy Chongqing Changan Transportation 0.00 0.00 131.00 115.00 Company Chongqing Changan Information 0.00 0.00 2,827.00 318.00 Technology Co., Ltd. Total 120,390.00 18,649.00 145,027.00 20,713.00 7.5 Entrusted financing □ Applicable √ Not applicable 7.6 Implementation of Commitments □ Applicable √ Not applicable 7.7 Major litigations and arbitrations √ Applicable □ Not applicable ① In July 2002, Chongqing Changan Automobile Sales Co., Ltd sued Economic and Technology Development Co., Ltd. for disputes over accounts receivable from automobile sales, amounting to RMB 9.43 million. In 2002, Chongqing Changan Automobile Sales Co., Ltd received tangible assets with the value of RMB 560,000 and RMB 910,000 in cash, and the remenant RMB 7.96 million is verdicted to be returned by the defendent. This case is now being processed. ②In 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. At present, the defendant has been bankrupted and the Company has applied for the creditor’s rights. 7.8 Performance of the independent directors During the reporting period, the system of independent directors is further improved in accordance with Guidance on the establishment of independent director system in Listed Companies. According to relevant stipulation of China Securities Regulatory Commission, independent directors increased to 5. The independent directors have been honest, diligent and industrious in fulfilling their duties and expressed independent opinions on investment, related party transactions, assets acquisition and other －18－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company significant decision-makings, thus contributing to the improvement of decision-making capabilities of management and the safeguard of the Company’s interest, especially the minority shareholders’interests. The independent directors also made contributions in areas of strategy planning, innovation, remuneration-system design and financial management. §8 Report by Board of Supervisors 1. During the reporting period, three meetings of the Board of Supervisors were held: (1) The Eighth Meeting of the second Board of Supervisors was held on 4 April 2003. The meeting passed the work report of the Board of Supervisors for 2002 and the proposal of its election. (2) The First Meeting of the third Board of Supervisors was held on May 10, 2003. The meeting passed the proposal of the election of convener for the Board of Supervisors. (3) The Second Meeting of the third Board of Supervisors was held on July 17, 2003. The meeting passed the proposal of the whole body and extract of the semi-annual report of 2003 and the semi-annual financial statement. 2.The supervisors attended all the meetings of the Board of Directors, expressed independent opinions exercised their supervisory rights at meetings. 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 the Board of Directors. 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 relatively proper internal control system has been established, and there were no violations of the laws, regulations and the Articles of Association or 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 －19－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company Through its review, the Board of Supervisors, was of the view that the financial statements of the Company are in compliance with relevant accounting standards and regulations and truly reflected the financial status and operating 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 raised from public offering Through its review, the Board of Supervisors, was of the view that the proceeds from public offering had been properly used in line with the commitments of the prospectus. (4) Supervision of the acquisition and disposal of assets Through its review, the Board of Supervisors, was of the view that prices of acquisition and assets disposal were reasonable, and there was no undertable transaction or acts harmful to the interests of the shareholders or loss of the Company assets. (5) Supervision of related party transactions Through its review, the Board of Supervisors, was of the view that all related party transactions were conducted fairly with pricing based on the market prices which are fair and there was no harm to the interests of the Company. § 9 Financial Reports －20－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company 9.1 Audit opinion Auditor’s report Pwc ZT Shen Zi (2004)No.1116 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 －21－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company 9.2 Consolidated income statement For the year ended 31 December 2003 Year ended 31 December (all amounts in Renmibi (“RMB”) 2003 2002 thousands) Sales 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 1,750,721 1,119,410 Finance costs – net 45,309 53,372 Group profit before tax 1,796,030 1,172,782 Share of result of associates before tax 946 (48,245) Profit before tax 1,796,976 1,124,537 Taxation (258,496) (176,435) Group profit before minority interest 1,538,480 948,102 Minority interest (102,864) (82,956) Net profit 1,435,616 865,146 Basic earnings per share (RMB per share) 1.17 0.71 －22－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company Consolidated balance sheet As of 31 December 2002 31 December (all amounts in RMB thousands) 2003 2002 ASSETS Non-current assets Property, plant and equipment 3,553,950 2,535,495 Land use rights 241,147 149,655 Intangible assets 114,091 47,553 Investments in associates 4,500 156,150 Available-for-sale investments 44,798 41,220 Other non-current assets 71,555 54,602 Deferred tax assets 100,447 97,212 4,130,488 3,081,887 Current assets Inventories 1,994,629 1,715,461 Receivables and prepayments 1,663,154 1,103,997 Held-to-maturity investments 99,729 - Cash and cash equivalents 3,096,325 2,873,901 6,853,837 5,693,359 Total assets 10,984,325 8,775,246 EQUITY AND LIABILITIES Shareholders’equity Share capital 1,226,666 1,226,666 Share premium 833,438 833,438 Reserves 1,053,878 627,955 Retained earnings 1,696,390 784,830 4,810,372 3,472,889 Minority interest 947,461 829,079 Non-current liabilities Borrowings 245,000 150,000 Retirement benefit obligations 19,884 27,000 264,884 177,000 Current liabilities Trade and other payables 4,332,384 3,697,083 Current tax liabilities 155,356 286,131 Borrowings 277,759 216,500 Provisions 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. －23－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company Consolidated statement of changes in shareholders’equity For the year ended 31 December 2002 Share Share Other Retained (all amounts in RMB thousands) 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 - - - (98,133) (98,133) Net profit for the year - - - 1,435,616 1,435,616 Transfer - - 425,923 (425,923) - Balance at 31 December 2003 1,226,666 833,438 1,053,878 1,696,390 4,810,372 －24－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company Consolidated cash flow statement For the year ended 31 December 2003 Year ended 31 December (all amounts in RMB thousands) 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 1,612, 152 2,086,356 Cashflow from Investing Activities Net cash received from disposal of property, plant and equipment 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 (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 3,186,054 2,863,901 －25－ Extracts of 2003 Annual Report of Chongqing Changan Automobile Limited Company 9.3 Explanation to the changes in accounting policies, accounting estimates and calculation methods of the reporting period as compared with the latest annual report 1. There are no changes in accounting policies. 2.There are no changes in the accounting estimation. 3.There are no changes in the calculation methods. 9.4 Explanation to the changes of consolidation scope of the reporting period as compared with the latest annual report. Changan Ford Automobile Limited Company, Chongqing Changan Special Automobile Sales Co., Ltd and 15 sales subsidiaries were added to the consolidation scope. －26－