建车B(200054)ST建摩Ｂ2004年年度报告（英文版）

建设摩托 Annual Report 2004 (International) CHONGQING JIANSHE MOTORCYCLE CO.,LTD. Annual Report 2004 (International) Important Statements： The Board of Directors and the directors of the Company guarantee that there are no significant omissions, fictitious or misleading statements carried in the Report and we will accept individual and joint responsibilities for the truthfulness, accuracy and completeness of the Report. Mr. He Tongwei, the director, and Mr. Meng Weidong the independent director didn’t present the 20th meeting of the 3rd term of board, director Bai Baolin and independent director Xu Mingyue were entrusted to vote on their behalf. Mr. Chen Yongqiang, the Chairman of Board, Mr. Qiu Lin, the deputize GM, and Mr. Teng Feng, the Financial Supervisor hereby declares: the truthfulness and completeness of the report are guaranteed. Chen Yongqiang The Chairman of the Board Table of Contents I. Company Profile II. Financial Highlight III. Particulars About the Capital Share and Shareholders IV. Particulars about Directors, Supervisors, Senior Executives and Employees V. Managerial Structure VI. The Shareholders’General Meeting VII. Report of the Board of Directors VIII. Report of the Supervisory Committee IX. Significant Events X. Financial Statements 1 建设摩托 2004Annual Report (International) I. Company Profile （Ｉ） Statutory Chinese name: 重庆建设摩托车股份有限公司 Statutory English name: CHONGQING JIANSHE MOTORCYCLE CO.,LTD. （ＩＩ） Legal representative: Chen Yongqiang （ＩＩＩ） Secretary of the Board: Ju Bin Address: 47 Xiejiawan Zhengjie Jiulongpo District, Chongqing Tel: (023) 68676987 Fax: (023) 68676987 Email: cqjsmc@jianshe.com.cn （ＩＶ） Registered address: 47 Xiejiawan Zhengjie Jiulongpo District, Chongqing Office address: 47 Xiejiawan Zhengjie Jiulongpo District, Chongqing Post code: 400050 Website: http://www.jianshe.com.cn Email: cqjsmc@jianshe.com.cn （Ｖ） Information disclosure media: Website: http://www.cninfo.com.cn Press media: Securities Times, Hong Kong Commercial Daily Place where the reports and announcement are ready for inquiry: Secretary Office of the Board （ＶＩ） Stock listed in: Shenzhen Stock Exchange Abbreviation of the stock: ST Jianmo B Stock code: 200054 （ＶＩＩ） Misc. Information Primary registration date: July 19th , 1995 Secondary registration on: March 11 th, 2003 Primary registration place: Shenzhen Industry & Commerce Administrative Bureau Secondary registration place: Chongqing Industry & Commerce Administrative Bureau Business license No. 5000001805583 Taxation registration No. National: 500107747482423 Municipal: 500107747482423 Certified Public Accountant: Domestic: Shenzhen Nanfang-Minhe CPA Address: 8th floor. 2072 Shennanzhong Road, Electronic Building, Shenzhen International: More Stephens Shenzhen Nanfang-Minhe CPA Address: 8th floor. 2072 Shennanzhong Road, Electronic Building, Shenzhen 二 建设摩托 2004Annual Report (International) II. Financial Highlight （Ｉ） The Company achieved in the report year gross profit of RMB３７，１４６，０００and net profit of RMB３８，５７３，０００. Among them, net profit after deducting non-recurring gain/loss RMB５，３６２，０００, major business profit RMB２５２，６７５，０００, net cash flow due operation activities RMB１８１，４０２，０００, net increasing of cash and cash equivalents RMB３９５，２５８，０００. Note: Non-recurring items are including: non business express of RMB –６４５，０００， ｃａｐｉｔａｌ ｏｃｃｕｐａｔｉｏｎ ｃｈａｒｇｅ ｏｎ ｎｏｎｅ－ｆｉｎａｎｃｉａｌ ｅｎｔｉｔｉｅｓ ｏｆ ＲＭＢ１２，９９５ ｔｈｏｕｓａｎｄ， ｎｏｎ－ｂｕｓｉｎｅｓｓ ｉｎｃｏｍｅ ｏｆ ＲＭＢ１５４，０００， ｗｒｉｔｅ ｂａｃｋ ｏｆ ｉｎｖｅｎｔｏｒｙ ｉｍｐａｉｒｍｅｎｔ ｐｒｏｖｉｓｉｏｎ ｏｆ ＲＭＢ１９，６２８，０００， ａｌｌｏｗａｎｃｅ ｉｎｃｏｍｅ ｏｆ ＲＭＢ１，０７９，０００． Ｔｏｔａｌｌｙ ＲＭＢ３３，２１１，０００ （ＩＩ） Major accounting data and financial indices of the 3 years prior to the ending of the report year. Items ２００４ 2003 2002 Major business turnover (RMB’000) 1,850,975 1,384,716 488,950 Net profit (RMB’000) 38,573 11,799 -134,748 Total assets (RMB’000) 2,532,216 1,717,668 1,100,988 Shareholder’ s equity (RMB’000) 210,629 172,056 160,257 Earnings per share (yuan/share) 0.08 0.02 -0.28 Net asset per share (RMB) 0.44 0.36 0.34 Net asset per share adjusted (RMB) 0.44 0.24 0.32 Net Cash flow per share generated 0.38 0.50 -0.11 by business operation (RMB) Net earnings / capital ratio (%) 18.31 6.86 -84.08 Earnings per share after deducting 0.01 -0.11 -0.30 of non-recurring gain/loss (RMB) Earnings per share, weighted average (RMB) 0.08 0.02 -0.28 Net earnings / capital ratio after deducting of non-recurring gain/loss (%) 2.80 -32.33 -63.58 Net earnings / capital ratio, weighted (%) 0.20 0.07 -59.20 （ＩＩＩ） Notes to the difference of net profit (profit) and shareholders' equity determined respectively according to Chinese accounting standards and international accounting standards (RMB'000)： Items Net profit Net asset 三 建设摩托 2004Annual Report (International) 2004 2003 2003.12.31 2003.12.31 Ｕｐｏｎ Ｃｈｉｎａ ａｃｃｏｕｎｔｉｎｇ ｓｔａｎｄａｒｄ ２６，６５３ １５，９２５ ２０９，２６７ １６５，５６９ Ｄｅｐｒｅｃｉａｔｉｏｎ －４，１６７ －１，１０８ １４，４４７ １８，６１４ Ｔａｘ ａｄｊｕｓｔｍｅｎｔ —— －５，９３６ —— —— Ｖａｒｉａｔｉｏｎ ｏｎ ｒｅｌａｔｅｄ ｔｒａｎｓａｃｔｉｏｎ ８，５９０ ９，０８６ —— —— Ｖａｒｉａｔｉｏｎ ｏｎ ｅｑｕｉｔｙ ｉｎｖｅｓｔｍｅｎｔ －２，８９７ －１０，６４９ －１３，５４６ －１０，６４９ Ｐａｙａｂｌｅ ａｃｃｏｕｎｔ ｎｏｔ ｎｅｅｄｅｄ ｔｏ ｂｅ ６，８９３ —— —— —— ｐａｉｄ Ｍｉｎｏｒ ｓｈａｒｅｈｏｌｄｅｒｓ’ ｅｑｕｉｔｙ －５７ ５１８ ４６１ ５１８ Ｏｔｈｅｒ ｉｎｃｏｍｅ １，５６２ １，９９７ ５１８ ５１８ Ｄｅｆｅｒｒｅｄ ｔａｘ １，９９６ １，９９３ －１，９９６ －１，９９６ Ｏｎ ＩＡＳ ３８，５７３ １１，７９９ ２１０，６２９ １７２，０５６ （ＩＶ） Movement of shareholders’equity (in thousand shares and RMB’000) Capital Capital Surplus Incl. Public Profit not Total of Items share reserve reserve welfare distributed shareholders’equity Ａｔ ｔｈｅ ｂｅｇｉｎｎｉｎｇ ｏｆ －９３８，４７９ １７２，０５６ ｔｅｒｍ ４７７，５００ ５０７，３４９ １２５，６８６ ２４，６５４ Ｉｎｃｒｅａｓｅｄ ｔｈｉｓ ｔｅｒｍ ３８，５７３ ３８，５７３ Ｄｅｃｒｅａｓｅｄ ｔｈｉｓ ｔｅｒｍ ０ Ａｔ ｔｈｅ ｅｎｄ ｏｆ ｔｅｒｍ －８９９，９０６ ２１０，６２９ ４７７，５００ ５０７，３４９ １２５，６８６ ２４，６５４ Causation of the movement: The increasing of profit not distributed was caused by the profit of the Company in current year. 四 建设摩托 2004Annual Report (International) III. Particulars About the Capital Share and Shareholders (I) Changes in share capital In Shares Changes（+、-） Carried Before the over New After the Share Bonus Sub-t change from issuin Other change Allot share otal public g welfare I. Non-negotiable shares Incl. State-owned shares 357,500,000.00 0 0 0 0 0 0 357,500,000.00 Total of non-negotiable shares 357,500,000.00 0 0 0 0 0 0 357,500,000.00 II. Negotiable shares B shares 120,000,000.00 0 0 0 0 0 0 120,000,000.00 Total of negotiable shares 120,000,000.00 0 0 0 0 0 0 120,000,000.00 III. Total of capital shares 477,500,000.00 0 0 0 0 0 0 477,500,000.00 (II) Share placing and listing 1. The Company did not issue new shares and derived securities in the previous three years by the end of the report term. 2. There was no change of the total shares and share structure resulting from bonus shares, capitalization of common reserve fund, share allotment, issue of new shares, takeover and merger, conversion of convertible bonds into shares, capital reduction, listing of employees’shares or other reasons. 3. The Company does not have employees’shares. (III) Particulars about principal shareholders 1. The total number of shareholders by the end of report term was 20,998. 2. Particulars about the shareholding of the top ten shareholders: No. Name of the shareholders Share portion Share held at the Share type （%） end of year 五 建设摩托 2004Annual Report (International) 1 Jianshe Industrial (Group) Co., Ltd. 71.13 339,625,000 Not negotiable 2 China North Industrial Shenzhen Co. 3.74 17,875,000 Not Negotiable 3 HARUHIKO SUZUKI 0.30 1,437,336 Current B shares 4 Shen Guo 0.28 1,317,336 Current B shares 5 SEUNG YEOL PARK 0.22 1,038,325 Current B shares 6 Tang Jing Yuan 0.19 914,500 Current B shares 7 Liu Bintian 0.16 766,603 Current B shares 8 Yang Yang 0.15 715,500 Current B shares 9 Lie Zhidong 0.15 696,000 Current B shares 10 Chen Yun’e 0.13 616,000 Current B shares 11 Li Jianping 0.13 603,935 Current B shares 12 Wang Qilin 0.13 598,429 Current B shares Notes: (1) There isn’t any associated relationship between the 1st shareholder and the other shareholders among the top-10 list. None of them are regarded as “acting in concerts”in accordance with “The rules of information disclosure on change of shareholding.”Shareholders beyond the top-10 list are unknown for their condition of “associated relationship”and “acting in concert”. (2) The shares held by Jianshe Industrial (Group) Co., Ltd. holding over 5% of the total shares were neither pledged nor frozen. The proposed plan for changing of shareholding is as the follows: Jianshe Group and China Military Equipment Group Co., Ltd. (referred to as “CMEG” hereinafter) entered the “Share Equity Transferring Agreement”and the “Supplementary Agreement on Share Equity Transferring”on December 3rd 2004 and January 22nd 2005 respectively. According to the agreements, CMEG will accept all of the national-owned legal person shares amounted to 339,625,000 shares (71.13% of the total capital shares) held by Jianshe Group. The transaction of equity was basing on the net asset per share audited on December 31st 2003, the price was set by both parties at RMB0.38. CMEG will be holding 339,625,000 of state-owned legal person shares of the Company, which takes 71.13% of the total capital shares, and will take the place of Jianshe Group as the controlling shareholder of the Company. This transaction has been approved by National Assets Administrative Committee on March 9th 2005, and is subject to the consent of China Securities Regulatory Commission, CMEG also need to be approved for being released for its full liability of tender offer. (Progress of the transaction is available on December 7th , 2004, December 9th, 2004, and March 24th 2005 issues of Securities Times and Hong Kong Commercial Daily.) 六 建设摩托 2004Annual Report (International) 3. Particulars about the controlling shareholder Jianshe Industry (Group) Co., Ltd., the contolling shareholder of the Company was incorporated on September 9th , 1995 with registered capital of RMB409.550 million. The legal representative is Mr. Nie Xiaofu. It is a state-owned subsidiary of China Military Equipment Group Company. The business scope of the Group is : manufacturing and distributing of motorcycle, measure instruments, civil guns, machinery, air and conditioner; distribution of general machinery, electronic machinery, metal materials (excluding noble metals); repairing of home appliance; equipment installation and repairing; export the products of the Group itself; import of machinery and equipment, spare parts, raw materials that are required by the production of the Group itself. Operating of compensation trade. In the report term, the practical controller of the Company is CMEG. CMEG was found on June 29th 1999 with registered capital of RMB12,645.21 million, Mr. Xu Bin is the legal representative of the company. The company is involved in: investment and administration of state-owned assets; Developing, designing, manufacturing, sales, maintaining, of artillery, arms, missile, ammos, gun powder, rocket fuel, fuse, photon products, electric & photon-electric products, commanding & controlling equipment, night-viewing equipment, dynamite engineering, anti-chemical equipment, simulating training equipment, civil arms, machinery, automobile, measuring devices, fire protection equipment, environment protection equipment, construction machinery, information & telecommunication equipment, chemical materials, medical equipment, metal and non-metal materials & products, construction materials; warehousing and trucking. 4. There were no other corporate shareholders holding over 10% (inclusive) of the total shares of the Company in the report term. State-owned Property Administrative Committee China Military Equipment Group Co. Jianshe Industry (Group) Co., Ltd. Chongqing Jianshe Motorcycle Co., Ltd. 七 建设摩托 2004Annual Report (International) IV. Particulars about Directors, Supervisors, Senior Executives and Employees (I) Current directors, supervisors and senior executives of the Company 1. Basic information Name Position Sex Age Term Shares held Chen Yongqiang Chairman of the Board M 51 2003.2―2005.5 0 Qiu Lin Director / deputize GM M 42 2002.5―2005.5 0 Xi Zhengxing Director, vice GM M 48 2002.5―2005.5 0 Li Zhencheng Director M 53 2002.5―2005.5 0 Bai Baolin Director M 56 2002.5―2005.5 0 He Tongwei Director M 57 2002.5―2005.5 0 Sun Fangcheng Independent director M 42 2002.5―2005.5 0 Meng Weidong Independent director M 41 2002.5―2005.5 0 Xu Mingyue Independent director M 42 2003.2―2005.5 0 Zhu Zhiyong Independent director M 40 2003.2―2005.5 0 Lu Hongxian Chairman of Supervisory Committee M 36 2002.5―2005.5 0 Chen Fengzhen Supervisor F 49 2002.5―2005.5 0 Gao Jun Supervisor F 55 2002.5―2005.5 0 Wu Changlin Supervisor M 49 2002.5―2005.5 0 Zhang Dongyan Supervisor F 50 2002.5―2005.5 0 Yu Guohua Vice GM M 41 2002.5―2005.5 0 Xu Yong Vice GM M 39 2002.5―2005.5 0 Lei Ming Vice GM M 47 2002.5―2005.5 0 Teng Feng Vice GM, Financial Supervisor M 33 2002.5―2005.5 0 Ju Bin Secretary of the Board M 37 2002.5―2005.5 0 Particulars about directors and supervisors take job position in any of the shareholders. Name Take job in Position Job term since 八 建设摩托 2004Annual Report (International) Chen Yongqiang Jianshe Group Director, Secretary of the CCP committee, GM Dec. 2002 Qiu Lin Jianshe Group Vice GM Nov. 1997 Xi Zhengxing Jianshe Group Vice GM Nov. 1997 Li Zhencheng Jianshe Group Vice GM Feb. 2000 Lu Hongxian Jianshe Group Vice secretary of the CCP committee, Chairman of the worker’ s union July 2001 Chen Fengzhen Jianshe Group Chief accountant April 2003 Gao Jun Jianshe Group Director of auditing office, vice director of auditing and inspection dept. Jan 1999 and Dec. 2001 Vice secretary of discipline committee, director of discipline office, Wu Changlin Jianshe Group Dec. 1999 and Dec. 2991 inspection division (II) Major career history of the directors, supervisors and senior management and their jobs taken in parties other than shareholders of the Company. (1)Directors Chen Yongqiang: Chairman of the Board. Former director of Chongqing ChangAn Company, the party secretary, managing vice president and concurrently sell Company's general manager; Former Deputy secretary of Party Committee of China Military Equipment Group Co. Ltd, southwest district, deputy director; Former deputy director of Human Resource Department of China Military Equipment Group Co. Ltd. At present working as Jianshe Group's Chairman of the Board, the party secretary, general manager. Qiu Lin: Director. Former vice-minister of Jianshe Group's Manufacture Department. At present Jianshe group's Deputy General Manager; Company's acting general manager. Xi ZhenXin: Director. Former Chief engineer of Jianshe Group. At present Jianshe group's Deputy General Manager; Company's Deputy General Manager. Li ZhenChen: Director. Former factory director of Chongqing Pingshan Machinery Plant; Former Deputy General Manager of the Company. At present Jianshe Group's Deputy General Manager of the Company. Bai BaoLin: Director. Former Party Committee minister of Jianshe Group, Vice-Chairman of the trade union. At present Chairman of the Company’ s Trade Union, the Party branch secretary, and Division chief of general department. He TongWei: Director. Former Deputy General Manager of PinShan Taikai Carburetor Co. Ltd; Former Deputy Secretary of the Discipline Inspection Commission of Jianshe Group, Chief of Regulation Division, chief of 九 建设摩托 2004Annual Report (International) Supervisory Department, Minister of Development Planning Department, Chief of Investment Planning Division. At present Company's Deputy Secretary of the Party and concurrently vice factory director. Sun FangCheng: Independent director. Successive Chongqing accountant's teaching and research chief of the office of Industrial Management College, former deputy director and director of accountancy department. At present vice-president of Technical College of Chongqing, and concurrently vice-president of Chongqing Accounting Society, Chinese Accounting Society high industry science universities and colleges teaching professional committee's deputy chairman, committee member of evaluation committee of senior accountant's professional title of Chongqing, committee member of evaluation committee of the high title of institution of higher education in Chongqing, Manage group's vice group leader of discipline, committee member of Chongqing Philosophy social science awarding committee, member of Chongqing the Tenth-five Plan expert team, independent director of Jialin industrial Co. Ltd, China(Group), Chongqing Three Gorges Paint Co. Ltd, and Chongqing Oral Care Products Co. Ltd. Meng Weidong: Independent director. At present, Professor, Doctoral supervisor and Standing Vice-president of Business and Management Institute of Chongqing University. And concurrently the director of China Enterprise Reform and Research Development Center of Chongqing University and Hong Kong Chinese University, Deputy director of Securities Research institute of Chongqing University, Director of China Soft Science Research Association, the editorial member of "Manage in China and Foreign Countries" magazine, Independent director of Chongqing Department Store etc. Xu Mingyue, independent director. Worked as assistant, lecturer and professor of Chongqing southwest politics and law university. At present, professor and president of Law School of Chongqing university, Member of of CPPCC and Standing Committee of Chongqing Shapingba district, committee of CPPCC, Chongqing, lawyer of Chongqing Jinbo Law Firm, legal adviser of Chongqing Municipal Government, legislating and consulting committee of Chongqing Municipal Standing Committee of the National People's Congress, A supervisor of clean government of Intermediate Court of People's Court in Chongqing, A supervisor of clean government of Chongqing People’ s Prosecutors’ s office. Independent director of Chongqing Jianshe Motorcycle Co. Ltd, Chongqing Yu Development Co. Ltd and Chongqing Post Office Xinke Co. Ltd. Zhu Zhiyong, independent director. Former Dean of Economics Department, Economic Politics and laws of Southwestern Normal University, the visiting scholar of Economics School of Sichuan University. At present, Professor and vice-president of Economics School of Southwestern Normal University; master degree candidate's tutor of political economy; , director of Capital and Market Economic Academic Society, director of Chongqing Three Gorges Immigration and Economic Development Research Association, director of Chongqing Tax Society, director of China's Economic Development Research Association, the reserve person of technological leader of the first academy in Chongqing (political economy), independent director of Jianshe motorcycle Co. Ltd. 十 建设摩托 2004Annual Report (International) (2) Supervisors Lu Hongxian: Chairman of Supervisor Committee. Former cadre minister and General Manager Assistant of Jianshe Group’ s Party Committee Group. At present, deputy secretary of Party Committee, president of trade union of Jianshe Group; Company's secretary of Party Committee. Chen Fengzhen: Supervisor. Former vice general accountant of Jianshe Group; the manager of Goods and Materials Supply Company of Jianshe Group; At present Jianshe Group's general accountant. Gao Jun: Supervisor. Former Deputy Director of Jianshe Group’ s Auditing Office. At present director of Jianshe Group’ s Auditing Office, Vice-minister of Audit Supervision Divison. Wu Changlin: Supervisor. Former Deputy Director of Jianshe Group’ s Discipline Committee Office, Deputy Director of Supervisory Department. At present, Deputy Secretary of Jianshe Group’ s Discipline Committee, director of Discipline Office, director of Supervisory Department, deputy director of Audit Supervisory Department. Zhang DongYan: Supervisor. Former Deputy Director of Jianshe Group’ s Financial Department, director of Fund Management Division, Deputy Director of Auditing Office; Financial supervisor of Chongqing Jianshe Sales Co. Ltd. At present, Deputy General Manager of Chongqing Northern Construction Foreign Trade Co. Ltd. (3) Senior executives Yu GuoHua: Vice General Manager. Former General Manager of Chongqing Jianshe Sales Co. Ltd; general manager of Jianshe Engine Company; general manager's assistant of Jianshe Group. At present Company’ s Deputy General Manager. Xu Yong: Deputy General Manger. Former general manager of Jianshe Group Electric Motor Car Company; Deputy General Manger of Chongqing New Age Company; Deputy General Manger of Chongqing Jianshe selling Co. Ltd; At present, Company’ s Deputy General Manger. Lei Ming: Deputy General Manger. Former general manager of Nanhai Jianshe Motorcycle Co. Ltd; Deputy General Manger of Lingbo Jianshe Motorcycle Co. Ltd; Deputy General Manger of Chongqing Jianshe Manufactory Co. Ltd; At present, Company’ s Deputy General Manger. Teng Feng: Deputy General Manger. Former Deputy director of Jianshe Group’ s Financial Department. At present, Company’ s Financial director and Deputy General Manger. Ju Bing: Secretary of Board of Directors. Former deputy director of Jianshe Group’ s Construction Department, deputy secretary of the Party Committee. At present, Company’ s Secretary of Board of Directors 3. Annual remuneration 十一 建设摩托 2004Annual Report (International) (1) The Company determined the remuneration of directors, supervisors and senior executives according to the indicators of economic liability and their performances. (2) The total annual remuneration received by the current directors, supervisors and senior executives from the Company was amounted to RMB864,880. 2 directors (not including independent directors) received remuneration from the Company amounted to RMB98,500. The total amount of remuneration for the top 3 senior executives was RMB 174,1600. The annual subsidy of each independent director was RMB 20,000. (3) The total number of the current directors, supervisors and senior executives of the Company is 22. 9 of them received remuneration from the Company (not including independent directors). Number of persons receiving annual remuneration of below RMB 50,000: 4 persons. RMB 50,000 - RMB 60,000: 5 persons. Chairman Chen Yongqiang, directors Qiu Lin, Xi Zhengxing and Li Zhencheng, supervisors Chen Fengzhen, Gao Jun and Wu Changlin received remuneration from Jianshe Group. 4. Quitting and assigning of directors, supervisors and senior executives In the report term, Mr. Yan Qi resigned from his position of director for changing of job. The Board of Directors nominated Mr. Ding Jiuru to take his place. Mr. Yu Jiang resigned from the position of vice general manager. (III) Particulars about the employees As of December 31, 2004, the Company had 3084 employees in total. In terms of specialty composition, it had 2803 production employees, 105 sales employees, 96 technicians, 45 finance employees and 35 administration employees. In terms of educational status, the Company had 135 with university education or above, 143 graduates of colleges, 2860 graduates of technical secondary schools and high schools and 382 employees with education of junior high school and below. 十二 建设摩托 2004Annual Report (International) V. Managerial Structure (I) Status of company administration The Company has being constantly improving its corporate administration structure，established modern enterprise system and standardized its operation strictly according to the requirements of laws and regulations including the Company Law， Securities Law，Standards of Administration of Listed Companies and Guiding Opinions on the Establishment of Independent Director System at Listed Companies and in light of actual conditions of the Company. The details of year 2004 are as the followings: 1. Independent in personnel Jianshe Group – the controlling shareholder, entered the “Share Equity Transferring Agreement”with CMEG on December 3rd 2004. After the completion of transaction, CMEG will become the controlling shareholder. None of the directors, supervisors and senior management is taking any job in CMEG. There will be no cross personnel exist between the controlling shareholder and the Company. 2. Situation of competition with related parties For historical reason, competition has long existed between Jianshe Group and the Company. On December 29th 2004, the Company entered with Jianshe Group the “Asset Transferring Agreement”. Upon the completion of acquisition, the core assets of motorcycle manufacturing, spare parts, sales and retained air-conditioner assets would be transferred to the Company. Therefore competition will no longer exists between two of the parties. 3. Related transactions and providing of guarantee (1) Due to historical reason and nature of the Company’ s business, the Company has been related to Jianshe Group and its related parties in supplying of labour force and energy. Upon completion of the Asset Transferring Agreement, the related transactions with Jianshe Group will vary accordingly. On the one hand, Chongqing Jianshe Yamaha Motorcycle Co., Ltd. (Chongqing JY) and Zhuzhou Jianshe Yamaha Motorcycle Co., Ltd.(Zhuzhou JY) become the controlled subsidiaries of the Company. Therefore the related transactions between the Company and Chongqing JY will become the transaction between subsidiary and parent company. On the other hand, the water and power supply and goods purchasing relationship between Chongqing JY and Jianshe Group will become related transactions. The related transactions between the Company and Jianshe Group were formed because of normal business operation. These transactions are on market price basis and under the principle of both side fair and mutual benefit. Examination and approving procedures of the Board or the Shareholders’General Meeting are performed when necessary and in viewing of protecting the benefits of investors. (2) The Company provided Jia nshe Group RMB170,000,000 of loan security during the period between 十三 建设摩托 2004Annual Report (International) December 1998 and December 2004. Whereas China Industrial & Commercial Bank Chongqing Yangjiaping Branch issued “Notification of releasing Chongqing Jianshe Motorcycle Co., Ltd. from Rela ted Guarantee Responsibility”, the responsibility for the loans occurred has been released thereof. 4. The Company further improved its Article of Association and bylaws to make them more practical on conducting the business operation. (II) The performance of the independent directors For the year 2004, the independent directors have faithfully performed their duties, safeguarded the Company's interests and really protect the rights and interests of middle and small investors strictly according to relevant laws and regulations since they came into office. Within the scope of their powers and functions, they participated in the decision making of the board of directors of the Company, found out the status of the Company's business operation and management, put forward management proposals and actively promoted the Company's development. In the report period, the independent directors attended 6 board meetings and attended 2 shareholders' general meetings as nonvoting delegates, seriously examined proposals and expressed independent opinions on important matters including related transactions, external investment, share transferring and the engagement or dismissal of directors. The independent directors didn’t raised any objection on the proposals of the Board’ s meeting nor other events other than the Board meeting. Name of Independent Times of Presented Personally Entrusted others Absent (Times) Notes Director Board Meeting Sun Fangcheng 6 4 2 0 Meng Weidong 6 4 2 0 Xu Mingyue 6 6 0 0 Zhu Zhiyong 6 5 1 0 (III) The separation of the Company from its controlling shareholder in respect of personnel, assets, finance, organization and business 1. Personnel: The Company established independent functional department responsible for labour, personnel and wage management and formed labor, personnel and wage management system. At present, as for some staff and workers who originally signed long-term labour contracts with Jianshe Group, the Company has gradually modified the labour contracts with them according to Labor Law of the People's Republic of China so as to further complete the separation from its controlling shareholder in respect of personnel. 2. Assets: The procedure of transfer of property title of the houses and properties (original value of RMB93.447 十四 建设摩托 2004Annual Report (International) million and net va lue of RMB45.557 million at the end of report term) invested by the controlling shareholder Jianshe Group into the Company as fixed assets according to national regulations when the Company was established is being handled. 3. Finance: The Company has set up independent finance department, formed independent financial accounting system, established and perfected financial control system and internal control measures, opened independent bank accounts and paid taxes independently. 4. Organization: The Company has established an organizational structure that is independent of its controlling shareholder. The organs of the Company are able to exercise their functions independently. 5. Business: The Company has independent and complete development, purchase, production and marketing system. The Company is capable to perform business operation independently. (IV) Rewarding and assessment system applicable to senior executives of the Company The assessment of the senior executives of the Company is divided into daily assessment, quarterly assessment and annual assessment. Daily assessment is conducted in the forms of interview and talk mainly for supervising the daily work of senior executives. Quarterly assessment is mainly for appraising the status of quarterly fulfillment of the duties of senior executives. Annual performance assessment is conducted according to the Company's regulations on the annual performance assessment of senior executives. Their annual work performance is summarized according to the result of assessment. The result of assessment will be timely communicated to senior executives so that they can pertinently improve their work, give play to their strong points and make up their deficiencies in the next year. Incentive system includes quarterly incentive and annual performance incentive. The result of quarterly assessment of the senior executives by the assessment team of the Company is the basis for quarterly incentive. Annual performance incentive is granted according to the status of the fulfillment of the indicators of economic liability and the duties of senior executives. 十五 建设摩托 2004Annual Report (International) VI. The Shareholders’General Meeting The Company held one provisional shareholders’general meeting and one annual shareholders’general meeting. 1. The Board of Directors announced the holding of the 1st Provisional Shareholders’General Meeting on the Jan 14th , 2004 issues of Securities Times and Hong Kong Commercial Daily. The meeting was held at 9:00AM, Feb. 16th , 2004 in the 1st meeting room of the Company. Shareholders representing 358.6509 million shares attended the meeting, takes 75.11% of the total 477.50 million shares of the Company. Among this, 339.625 million shares are representing related shareholders, takes 71.3% of the total share capital, and 19.0259 million shares are representing non-related shareholders, takes 3.98% of the total share capital. （Ｉ） The proposal on transferring of creditor’ s rights involved with Chongqing Jianshe Motorcycle Co., Ltd., Chongqing Jianshe Sales Co., Ltd. and Chongqing North Jianshe Imp. & Exp. Co., Ltd. （ＩＩ） The proposed related transaction between the Company and Jianshe Industrial (Group) Co., Ltd. on assets interchange, and the proposal to the Shareholders’General Meeting for the authorization to the Board of Directors take the full responsibility on all relative processes of this transaction of assets. The proposal was passed by 19,025,900 shares that held by non-related shareholders takes 100% of valid voting rights on the meeting. （ＩＩＩ） The proposal of revising the Article of Association of the Company. (IV) The proposal of changing of the certified public accountant. The above resolutions can be found in Feb. 17th 2004 issues of Security Times and Hong Kong Commercial Daily. 2. The Board of Directors announced the holding of the Shareholders’General Meeting 2003 on the April 19th, 2004 issues of Securities Times and Hong Kong Commercial Daily. The meeting was held at 9:00AM, May 20th 2004 in the 1st meeting room of the Company. Shareholders representing 357.50 million shares attended the meeting, takes 74.87% of the total 477.50 million shares of the Company. The following proposals were adopted by 100% votes of the shareholders representing 357.50 million shares on the meeting. （Ｉ） Business Report 2003 and Business Plan 2004 Result of voting: the proposal was passed by 357.5 million shares, which takes 100% of the total shares presented the meeting. （ＩＩ） Proposal of profit distribution for year 2003: Result of voting: the proposal was passed by 357.5 million shares, which takes 100% of the total shares presented the meeting. （ＩＩＩ） 2003 Annual Report of the Board; Result of voting: the proposal was passed by 357.5 million shares, which takes 100% of the total 十六 建设摩托 2004Annual Report (International) shares presented the meeting. （ＩＶ） 2003 Annual Report of the Supervisory Committee; Result of voting: the proposal was passed by 357.5 million shares, which takes 100% of the total shares presented the meeting. （Ｖ） 2003 Annual Report of the Company and the Summary; Result of voting: the proposal was passed by 357.5 million shares, which takes 100% of the total shares presented the meeting. （ＶＩ） The proposal about the investment on establishing of A/C Company jointly with the Sales Company and the Trading Company, which are the controlled subsidiaries of the Company. Result of voting: the proposal was passed by 357.5 million shares, which takes 100% of the total shares presented the meeting. （ＶＩＩ） The proposal of adjusts the allowance for independent directors to RMB20 thousand per year. Result of voting: the proposal was passed by 357.5 million shares, which takes 100% of the total shares presented the meeting. The above resolutions were published on May 21st , 2004 issues of Securities Times and Hong Kong Commercial Daily. 十七 建设摩托 2004Annual Report (International) VII. Report of the Board of Directors (I) Analyzing of overall business status for the report term Basing on further researching on the historical environment and market trend for motorcycle products and auto air-conditioner, the Company formed its overall business plan for next 6 years, which is “3-steps in 6 years”. For the year of 2004, the Company carried forward implementation of the “9 Major Projects”, and realized the 1st step – transforming from domestic player into an international competitor. Backed by the technologies of Yamaha, the Company keep working on both of the domestic and overseas market, push forward the construction of manufacturing bases in Chongqing, Shanghai and Guangdong. Through enhancing of product structure adjustment and market developing, cutting of costs, and capital re-construction, the economical operation quality and risk resistance capability was empowered constantly. The Company’ s image was rebuilt in the capital market, the motorcycle industry and the customers as well. These laid a good foundation for the consistency and healthy of development. As for year 2004, the gross asset was amounted to RMB２，５３２，２１６ thousand, which increased by ４７．４２％ over the previous year; gross liability was RMB２，３１５，１３ thousand, which increased by ５０．５１％ over the previous year; the liability/asset ratio was ９１．４３％ which increased slightly over the previous year; At the end of year 2004, the shareholders’equity was amounted to RMB２１０，６２９ thousand, which increased by ２２．４２％ over the previous year, including: share capital RMB４７７，５００ thousand, capital reserves RMB５０７，３４９ thousand, surplus reserves RMB１２５，６８６ thousand, and distributable profit of RMB－８９９，９０６ thousand. The Company has achieved major business revenue of RMB１，８５０，９７５ thousand for the entire year, which increased by ３３．６７％ over the previous year; gross profit of RMB３７，１４６ thousand, net profit of RMB３８，５７３ thousand, income per share RMB０．０８, net asset per share RMB０．４４ and net income/asset ratio of １８．３１％. 1. Regarding the domestic market of motorcycle: The Company adopted the strategies of “emphasizing on lower section and external” and “emphasizing on country side”, enforced the 4-forth process on personnel, commanding, service and planning. The sales volume was increased significantly by carry out of general promotion actions in eight territories including Sichuan province. Great attention was laid on construction of networks of spare parts sales and after-service to enforce the core market and the weak point as well. For the year of 2004, the Company realized overall sales of 743.9 thousand motorcycles in domestic market, which increased by 49.4% over the corresponding term of last year at the same statistics range. 2. Regarding the international market of motorcycle: The Company enforced researching on overseas development strategies and restructuring. Investment been made concentrating on major markets; Sales network construction was enforced; Risk controlling capability was increased; Model JS250ATV has successfully passed the Europe Standard Certification test, which laid a good foundation for exporting by great scale in 2005. For the year of 2004, the Company has realized sales volume of 104.9 thousand motorcycles in international market, which decreased by 13.8% 十八 建设摩托 2004Annual Report (International) from the corresponding term of last year at the same statistics range. 3. Regarding the developing and production of motorcycles: The Company has accomplished developing of 28 brand new models, 31 reforming models, and 2 types of engines. 20 of the models have achieved the requirement of band II of national pollution regulations. JS250ATV has passed the Europe II standard test, which filled up the vacancy of the domestic motorcycle industry and became one of the leading products. The developing process has been redesigned and optimised. Investment on product developing has been completed both on software and hardware. “5-S” equipment management process was enforced significantly; Equipment management was enhanced, the spare part management database was improved which enables better controlling on spare parts management. 4. Regarding cost controlling: a risk controlling and cost alerting system, the supplying, production and sales chain was further optimised. The purchasing and management process of raw materials, tools, and accessory parts was improved. 5. Regarding auto air-conditioner compressor: in year 2004, the quality management system of auto air-conditioner compressor section passed the net version of ISO/TS16949 qualification. It ensures the Company to stay in the market of auto parts. (II) Operation in the report term 1. The scope of the Company's key business and its operation The Company is mainly engaged in the final assembly of motorcycles, mechanical processing and sales of parts and accessories of motorcycles and automobiles, manufacturing of moulds and jigs, standard mould racks, relevant technical services, purchase and sales of household electrical appliances, raw materials and equipment. (1) The distribution of income from key business and profit from key business of the Company in terms of upon geographic and industries. Geographical distribution: in RMB’000 Region Turnover Changed over previous year（％） South-west 537,035 60,793 East 200,717 16,028 十九 建设摩托 2004Annual Report (International) Middle-south 234,384 24,604 North 352,692 31,033 North-east 129,268 13,660 North-west 99,420 10,006 Total of domestic 1,553,516 156,124 Asia 183,759 30,222 Africa 46,753 10,945 America 25,009 7,154 Europe/ Atlantic 41,938 13,089 Total of international 297,459 61,410 Total 1,850,975 217,534 二十 建设摩托 2004Annual Report (International) Distribution on industries Industry Turnover RMB’000 Major business profit RMB’000 Industry １，８５０，９７５ ２１７，５３４ (2) Market share of main products produced and sold by the Company The major products of the Company take 6.24% of the overall domestic market share (data from “Window of Chinese Motorcycle Industry”). Major products take more than 10% of the major business turnover are as the followings Turnover Sales cost Gross profit ratio Major products RMB’000 RMB’000 % Motorcycle type JS125-27 142,840 119,223 16.53% Motorcycle type JS125-5 178,742 154,508 13.56% (3) For the report term, the major business turnover was increased by 33.67% over the previous year. This was caused by the construction of sales network and adjustment of the marketing strategy; strengthen of production management and developing of new products. Beside, Chongqing Jianshe Auto Air-conditioner Co., Ltd. and Shanghai Jianshe Motorcycle Co., Ltd. were added to the consolidation range. 二十一 建设摩托 2004Annual Report (International) 2. Operation and performance of main share -held subsidiaries and invested companies Registered Capital scale Net profit Name of the Companies Equity held capital Major products or service RMB’000 RMB’000 RMB’000 100.00% Chongqing Jianshe Sales Co., Ltd. 500 2,500 Sales of motorcycles and parts 47 (indirect) Design, manufacturing and sales of moulds and Shenzhen South Mould Factory 100.00% 12,000 870,679 -10,226 standard mould carriers Chongqing Jianshe Motorcycle 100.00% 17,875 33,301 Manufacturing and sales of motorcycles 863 Manufacturing Co., Ltd. Chengdu Jianshe Motorcycle 100.00% 14,500 161,756 Sales of motorcycles -49 Sales Co., Ltd. Chongqing Auto Air-conditioner Manufacturing, selling and service of auto 100.00% 160,000 384,939 5,636 Co., LTd. air-conditioner International trading of products or Chongqing North Jianshe 95.14% 60,378 340,416 technologies (except if limited by the national 39,736 International Trading Co., Ltd. government) New Times Motorcycle Co., Ltd. 62.50% 16,000 126,234 Sales of motorcycles and parts 170 Guangxi Jianshe Motorcycle 52.00% 1,500 1,656 Sales of motorcycles 189 Sales Co., Ltd. (Indirect) Shanghai Jianshe Motorcycle Co., Manufacturing of motorbikes, scooters and 51.00% 5,000 20,817 -2,092 Ltd. spare parts Chongqing Pingshan Kaitai Manufacture and sales of motorcycle 49.00% 158,759 152,123 1,735 Carburettor Co., Ltd. carburetor and general engine and parts 3. Main suppliers and customers The total amount of purchase from the top five suppliers accounted for 29.10% of the total purchase amount of the year. In the report period，the total amount of sales to the top five customers accounted for 23.24% of the total sales of the Company. 4. Problems and difficulties occurred in operation and their solutions 二十二 建设摩托 2004Annual Report (International) Since China’ s joinin g of WTO, giant international players enforced their business integration in Chinese market depending on their advantage of technology and capital. Facing the severe market situation brought by price rising of materials and parts, the Company was adjusting its strategic direction, and set out the “3-steps in 6 years”plan. The Company will do its best to become an international player depending on its great productivity, good image, fully developed service system, and good international partner. 5. As of December 31, 2004, the actual output and sales volume of motorcycles were 829,900 and 848,900 respectively. Which increased by 39.15% over the previous term. The output of auto air-conditioner compressor of 302500 units and sales of 310,200 units, which brought the Company the total sales income of RMB1,850,975,000 for the entire year. (III) Investment in the report period 1. The utilization of raised funds in the report period The Company neither raised funds nor used the funds previously raised in the report period. 2. Investment with non-raised funds in the report period (1) The Company invested with its own fund into the technical reforming project of the general assembling workshop. The budget was RMB21,736,000, and RMB19,392,000 practically paid in the report year. As of December 31, 2004, the investment reached up to 89.22% of the budget. (2) On May 15th 2004, the Company entered the Asset Restructuring Agreement (Draft) together with Shenjiang Technologies and the shareholders of Shanghai Fufu Industry Co., Ltd. –Liu Fulong and Liu Fulin. As set out by the agreement, the Company acquired 51% of the share equity of Shanghai Jianshe Motorcycle Co., Ltd. (former Shanghai Fufu Industry Co., Ltd.). (3) The Company entered the Asset Transferring Agreement with Jianshe Group on December 29th 2004. The Company will use its own capital of RMB381,930,300 and partial account receivable of the controlled subsidiary – Sales Company due from Jianshe Group to buy out 50% of share equity of Chongqing JY and Zhuzhou JY and assets of air-conditioner and motorcycle developing/testing equipment, which originally held by Jianshe Group. 二十三 建设摩托 2004Annual Report (International) (IV) Financial status and operating results Accounting indices 2004 2003 Increase/decrease Causation of the (±) change Total assets 1,717,668 Note 1 2,532,216 814,548 Shareholders’equity 172,056 Note 2 210,629 38,573 Major business profit 138,237 Note 3 114,438 252,675 Net profit 11,799 Note 4 38,573 26,774 Net increase of cash and cash -10,514 Note 5 395,258 405,772 equivalents Note: １． The increasing of total asset was because of the consolidation of Chongqing Jianshe Auto Air-conditioner Co., Ltd. ２． The increasing of shareholders’equity was because of the profit making of the year and leading to increasing of capital reserves. ３． The increasing of major business profit was because of the increasing of gross profit of the products. ４． The increasing of net profit was because of the increasing of major business profit of the year. ５． The increasing of cash and cash equivalents was because of the recovering of financial situation. (V) Correcting of significant accounting error and retrospective adjustment: There was not any significant accounting error or retrospective adjustment occurred during the year. (VI) Influence on the business operation of the company from the changing of macro policies 1. The 8th industry policy target of State Development and Reformation Committee of The People’ s Republic of China is to create a fair competition and consolidated market environment, make a legal management system structure of vehicle industry, set up a criterion of market behavior on vehicle industry field into the variety economy body, formulate some large-scale vehicle group which is with international competition ability via market competition and try to step into The Global 500 in 2010. Encourage vehicle manufacturing 二十四 建设摩托 2004Annual Report (International) organization increase the capability of R&D and technical creative, develop products with unique property right actively, carry out brand operation strategy and establish a new vehicle manufacturing system that making motorcycle manufacturer quit from the mechanism but enter into the new system. This policy point out a clear direction form motorcycle industry’ s development, to do this, the Company formulated a development strategy called: Three Steps within Six Years and now it has been roundly achieved staggered target. 2. According to the regulation of article [2003] 209 About the State Second Phase of Controlling Motorcycle and Civil Use Motor-Lorry’s Emission Standard Announcement which is issued by the State Environmental Protection General Bureau that all of the new product and imported motorcycle has to meet the standard of GB 14622 – The Second Phase Manufacturing Consistency Inspection Emission Limitation Index. No of manufacturing, import, sales and registration is allowed if the emission short of standard. The policy increases the condition of manufacturing limitation for the motorcycle organization and gives aid to increase technical standard for motorcycle industry. All of the motorcycle which is manufactured by the Company has passed the examination. 3. The Customs' Regulations on Protection of the Intellectual Property Right of People's Republic of China implementation policy enhanced the protection of motorcycle products’Intellectual Property Right and the competition of products’Intellectual Property Right is becoming intensification. The Company just starts the management of Intellectual Property Right protection and now the products which with Intellectual Property Right is not so much so that the Company made a developing strategy on product Intellectual Property Right and it has been roundly achieved staggered target at present. 4. According to the regulation of the industry changing article [2004]2881 About the Notice of Formulating Vehicle Leave Factory Quality Pass Certificate Management which is issued associate with State Development Revolution Committee, Ministry of Public Security that country will carry out supervise the Quality Pass Certificate versus the leave factory vehicles, it included to make a criterion on QPC form and content, motorcycle products has to has satisfied QPC which is issued by the manufacturer when the vehicle leaves factory and the regulation will be take effect in 1st July 2005. This management system is good for keep away rob, contraband and illegal registration of those assemble the vehicles and try the best to avoid tax dodging and tax evasion at the same time, and it formulates the competition behaviors of motorcycle organization good for the developing of motorcycle industry. 二十五 建设摩托 2004Annual Report (International) (VII) Business plan for the coming year 1. Business Target About the Company’s development goal of “taking 3 steps in 6 years”, namely, “achieving the leap from domestic market participant to domestic market competitor”, “achieving the leap from domestic market competitor to domestic market leader” and “achieving the leap from domestic market leader to international market competitor”. 2005 is the year with the start of the second step of “taking 3 steps in 6 years”. In order to achieve the development goal, the Company plans to manufacture and sell 1,010,000 motorcycles and the sales income will be 2.7 billion yuan. Moreover, the Company plans to produce and sell 520,000 air cond itioner compressors and the sales income is 280 million yuan. 2. A campaign of “achieving a gold, doing well in three major campaigns and offering nine supports” to ensure thorough implementation of the Company’ s strategy and to accelerate achievement of the Company’s goal of “taking 3 steps in 6 years”. The details are as follows: (1) Implementing the scientific development view in an all-round way, making three major campaigns well and achieving the goal of the whole year. Do well in market and sales. The Company must improve the quality of the network, expand the quantity of the sites and promote the market ability in an all- round way by means of making our products more competitive. Do well in development of science and technology. The Company will establish technological innovation system with the core of the technology center of state cognized enterprise; put new process of product research and development in practice, set up outlay budget of science and technology input and supervisory system of using of science and technology outlay and ensure smooth development of science and technology. This year the outlay put in science and technology will be 3% higher than sales income and the value of new products will be more than 58% of sales income of the Company. Do well in economic efficiency. The efficiency of the Company must be improved by reducing the cost. That is to say, the cost can be reduced from changing of concept, time, management, process and technology. The efficiency must be improved by strengt hening management of joint or cooperative companies. (2) Implementing the scientific development view in an all- round way and offer nine supports. Strengthen management of comprehensive budget and offer financial support; Strengthen object management and offer layout support; Implement project management and offer product support; 二十六 建设摩托 2004Annual Report (International) Strengthen sale management and offer market support; Implement process reforger and offer organization support; Strengthen management of technology quality and offer manufacture support; Strengthen digitization management and offer information resources support; Strengthen human resources management and offer talent support; Strengthen the political and ideological work and offer morale support. (VIII) Routine work of the board of directors 1. The board of directors of the Company seriously exercised the functions and powers granted by the Articles of Association of the Company and held 6 board meetings according to the status of production and operation of the Company in the report year. The particulars are as follows: (1) The 14th meeting of the 3rd term of Board was held on April 15th 2004. The followings are the resolutions. ① Business Report for 2003 and Business Plan for 2004; ② Proposal of profit distribution for year 2003: ③ 2003 Annual Report of the Board; ④ 2003 Annual Report of the Company and the Summary; (Attachment 1 and 2) ⑤ The proposal of requesting Shenzhen Stock Exchange to cancel the special treatment “*ST”on the Company. As confirmed by Shenzhen Nanfang-Minhe CPA with auditors’report Shen-Nan-Cai-Shen-Bao-Zi (2004) No.CA406, the Company has realized net profit of RMB15,925,000. The auditors’report is a report without qualified opinion. Currently the Company is requesting the relative department to cancel the “stoc k suspension alert”on the company. This is subject to the approval of the relative department. ⑥ The proposal about the investment on establishing of A/C Company jointly with the Sales Company and the Trading Company, which are the controlled subsidiaries of the Company. ⑦ The proposal of adjusts the allowance for independent directors to RMB20 thousand per year. ⑧ The proposal of holding the Shareholders’General Meeting 2003 at 9:00AM, May 20th, 2004 in the No. 1 meeting room of the Company. The above I. II. III. IV. VI. and VII are subject to the examination of the Shareholder’s General Meeting. The above resolutions are available in April 19th 2004 issues of Securities Times and Hong Kong Commercial Daily. (2) The 15th meeting of the 3rd term Board of Directors of Chongqing Jianshe Motorcycle Co., Ltd. was held at 14:30PM, April 26th, 2004 in the No.1 meeting room of the Company. 8 of the 11 directors presented the meeting. 2 of the absented directors entrusted other directors to vote on behalf of them. The following proposals were examined and passed as resolutions: ① The 1st Quarterly Report of 2004; 二十七 建设摩托 2004Annual Report (International) ② Mr. Yu Jiang will no longer take the position of Vice General Manager of the Company due to change of job. The above resolutions are available in April 28th 2004 issues of Securities Times and Hong Kong Commercial Daily. (3) The 16th meeting of the 3rd term of Board of Chongqing Jianshe Motorcycle Co., Ltd. was held at 9:00 AM, August 4th 2004. 10 of the 11 directors presented the meeting. The director who absented the meeting entitled another director to exercise his right of voting. The following resolutions are examined and adopted on the meeting: ① The Semi-Annual Report 2004 and its summary version. ② The proposal of interim profit distribution of year 2004, which is no profit distribution or capitalizing of common reserves will be implemented. ③ The proposal of acquiring Shanghai Fufu Industrial Co., Ltd. to establish Shanghai Jianshe Motorcycle Co., Ltd. ④ The proposal of Mr. Yan Qi no longer take the position of director of the Company. ⑤ The proposal of nominating Mr. Ding Jiuru as the candidate of director. The above resolutions ④ and ⑤ are subject to the examination and approval of the Shareholders’General Meeting. The above resolutions are available in August 10th 2004 issues of Securities Times and Hong Kong Commercial Daily. (4) The 17th meeting of the 3rd term of Board of Chongqing Jianshe Motorcycle Co., Ltd. was held at 9:00 AM, October 22nd 2004. 9 of the 11 directors presented the meeting. The director absent the meeting entitled another director to exercise his right of voting. The following resolutions are examined and adopted on the meeting: ① The 3rd Quarterly Report of 2004 ② The Company will extend the contract with Shenzhen Nanfang-Minhe Certified Public Accountants as the auditor of the Company for another one year. The payment for auditing service is RMB660 thousand. The above proposals are subject to the examination and voting on the next shareholders’general meeting. The resolutions are available on October 26th 2004 issues of Securities Times and Hong Kong Commercial Daily. (5) The 18th meeting of the 3rd term of Board was held on December 18th 2004, the “Report about China Military Equipment Group’s acquisition of partial stocks of Chongqing Jianshe Motorcycle Co., Ltd. –to the shareholders of the Company”was examined and passed on the meeting. The resolutions are available on December 21st 2004 issues of Securities Times and Hong Kong Commercial Daily. (6) The 19th meeting of the 3rd term of Board was held on December 29th 2004. “The proposal on acquisition of assets from Jianshe Industry (Group) Co., Ltd. and related transactions”was examined and adopted by the meeting. This proposal is subject to the approval of China Securities Regulatory Commission prior to the examination of the Shareholders’General Meeting. The resolutions are available on December 31st 2004 issues of Securities Times and Hong Kong Commercial Daily. 二十八 建设摩托 2004Annual Report (International) All of the above resolutions are available for inquiring in the website assigned by Shenzhen Stock Exchange: http://www.cninfo.com.cn. 2. The Company held one provisional shareholders’general meeting and one annual general meeting in the report term. All of the resolutions have been performed by the Board of Directors and completed before the ending of the report term. Among them, the profit distribution plan of year 2003 was: Neither profit distribution nor capitalization of reserves will be performed. (IX) Profit distribution or capitalization of capital public reserves for the year 2003 As the financial report prepared in according with the accounting standard of China, the net profit of the Company for year 2004 is amounted to RMB26,653 thousand, and the distributable profit is amounted to RMB-972,765 thousand; well in according with the international accounting standard, the net profit for year 2004 is RMB38,573 thousand and the distributable profit is RMB-899,906 thousand. In accordance with Article 202 of the Article of Association, no profit distribution will be performed for the year of 2003. The proceeds will be used to cover the losses of previous years. (X) Special statement of the CPA about the situation of fund occupation by the controlling shareholder and other related parties of the Company Shenzhen Nanfang-Minhe CPA Co., Ltd. performed particular inspection on the situation of fund occupation by the controlled shareholders of the Company and issued the following opinion: Complying with the conditions set out by “Notification to listed companies about capital transaction with related parties and offering of external guarantee” issued by China Securities Regulatory Commission and National State Property Administrative Committee, the Company produced “The summary sheet of fund occupation by the controlling shareholder and other related parties in year 2004”(the Summary Sheet) attached to this special statement. Ｔｈｅ ｓｕｍｍａｒｙ ｓｈｅｅｔ ｏｆ ｆｕｎｄ ｏｃｃｕｐａｔｉｏｎ ｂｙ ｔｈｅ Chongqing Jianshe Motorcycle Co., Ltd. prepared and disclosed “ ｃｏｎｔｒｏｌｌｉｎｇ ｓｈａｒｅｈｏｌｄｅｒ ａｎｄ ｏｔｈｅｒ ｒｅｌａｔｅｄ ｐａｒｔｉｅｓ ｉｎ ｙｅａｒ ２００４”(referred to as “Ｓｕｍｍａｒｙ Ｓｈｅｅｔ”hereinafter), and shall undertake the obligations for the truthfulness, legality and completeness of the Table. We reviewed the information carried in the Table against the accounting materials checked when we audit the 2004 financial statements, and relative contents of the audited financial statements. We found no variation in any of the significant aspects. Except for the related transactions carried in the 2004 financial statements, we performed no extra auditing procedures or other procedures on any of other information carried in the Table. For better comprehending of the situation of fund occupation by the controlling shareholder and other related parties of Chongqing Jianshe Motorcycle Co., Ltd. in 2004, the Table is suggested to be read with reference to the financial statements which has already been audited in the mean time. Attachment: Chongqing Jianshe Motorcycle Co., Ltd. - the table of overall situation of fund occupation by the 二十九 建设摩托 2004Annual Report (International) controlling shareholder and other related parties in year 2004. 三十 建设摩托 2003 Annual Report (International) Chongqing Jianshe Motorcycle Co., Ltd. The summary sheet of fund occupation by the controlling shareholder and other related parties in year 2004 Prepared by Chongqing Jianshe Motorcycle Co., Ltd. In RMB’000 At the beginning Increased this Decreased this At the end of Way of Property of the fund Name of the related parties Relationship Accounting subject Note of year year year year returning occupation Jianshe Industry (Group) Co., Ltd. Controlling shareholder Other account Cash, Operational ① 205,734 4,224,987 4,172,421 258,300 receivable non-cash Jianshe Industry (Group) Shanghai Partnership of the controlling Account receivable Non-cash Operational ② 16,768 — 16,648 — Partnership Company shareholder Chongqing Jianshe Casting Factory Subsidiary of the controlling Account receivable Non-cash Operational 7,079 — 7,079 — ③ shareholder Chongqing Jianshe Vehicle A/C Co., Subsidiary of the controlling Other account Operational — 10,600 — 10,600 ④ Ltd. shareholder receivable ① According to the Share Equity Transfer Agreement which is signed in Dec. 3rd 2004 and the Share Equity Transfer Complementarities Agreement which is signed in Jan. 22nd 2005 by Jianshe Industry (Group) Ltd (hereafter referred as to Jianshe Group) and China Military Equipment Group (hereafter referred as to Bing Zhuang Group)that Jianshe Group transferred its 339,625,000 State-own corporate shares to Bing Ling Group, the above transfer has agreed by Asset Management Committee of State Department on Mar. 9th 2005 and now submitting to China Securities Regulatory Commission for discussion. Bing Zhuang Group will become the holding shareholder of the Company, because of Bing Zhuang Group 100% holding the share of Jianshe Group that the related party relationship of Jianshe Group will become the subsidiary company of holding shareholder after the above procedure finished. The Company will still play a role as holding shareholder of Jianshe Group up to Dec. 31th 2004. The account receivable from Jianshe Group is increased form RMB2,05,734,000 in the beginning of the year to RMB2,58,300,000 at the end of the 21 建设摩托 2004Annual Report (International) year, all becomes the increase of current operational account receivable and the Jianshe Group planning to discharge arrearage in 2005. ② The account receivable form Jianshe Industry (Group)'s age of account has up to more than 3 years and the Company has drawn 50% bad debt provision, the Company has transferred to Jianshe Group according to evaluation value on Dec. 2004, the current account has transferred into other current assets for calculation and the related transfer procedure is in the process. ③ Chongqing Jianshe Casting Factory has been logout legal person qualification and will transfer the above creditor’ s rights agreement to Jianshe Group. ④ Chongqing Jianxing Mechanism Manufacturing Ltd. is the parts supplier to the Company, the above arrearage become provisional operation occupation and RMB7,000,000 has been transferred to Jianshe Group on Feb. 2005. 三十二 建设摩托 2004Annual Report (International) (XI) Independent opinions and special statements of the independent directors on the executing of the regulations set by Zheng-Jian-Fa [2003]56 about offering of external guarantees. In according with the document Zheng-Jian-Fa [2003]56. titled “The notifications to listed companies about standardizing of monetary transactions with related parties and offering of external guarantees” (shown as “the Notification” hereinafter) issued by China Securities Regulatory Commission, as the independent directors of the Company, we performed careful and responsible inspection on the Company’ s situation of external guarantees and executing of the regulations set out by the Notification. The followings are the statements on the relative issues: The Company has provided Jianshe Industry (Group) Co., Ltd. (shown as “Jianshe Group” hereinafter) guarantee for bank loans amount to RMB170 million for the term of December 1998 to December 2004. Whereas China Industrial & Commercial Bank Chongqing Yangjiaping Branch issued “Notification of releasing Chongqing Jianshe Motorcycle Co., Ltd. from Related Guarantee Responsibility”, the responsibility for the loans occurred has been released thereof. Ｅｎｄｅｄ Ｄｅｃｅｍｂｅｒ ３１ ２００４， ｔｈｅ ａｃｃｏｕｎｔ ｒｅｃｅｉｖａｂｌｅ ｄｕｅ ｔｏ Ｊｉａｎｓｈｅ Ｇｒｏｕｐ ｈａｓ ｉｎｃｒｅａｓｅｄ ｆｒｏｍ ＲＭＢ205,734,000 (at the beginning of the year) up to RMB258,300,000. All of these were operational increasing of receivables. Jianshe Group promised to clear the debt within year 2005. Ｗｅ ｃａｒｅｆｕｌｌｙ ａｎａｌｙｓｅｄ ｔｈｅ “Special statement of the CPA about the situation of fund occupation by the controlling shareholder and other related parties of the Company”and acknowledge that it has frankly reflecting the debts due to controlling shareholder. We hope Jianshe Group will fulfil its promise seriously. 33 建设摩托 2004Annual Report (International) VIII. Report of the Supervisory Committee (I) Meetings of the Committee In the report term, the Supervisory Committee held 6 meetings. The followings are the details: 1. The 13th meeting of the 3rd term of committee was held on April 15th , 2004, the following proposals were examined and passed: ① Business Report for 2003 and Business Plan for 2004; ② Proposal of profit distribution for year 2003: ③ 2003 Annual Report of the Board; ④ 2003 Annual Report of the Supervisory Committee; ⑤ 2003 Annual Report of the Company and the Summary; ⑥ The proposal of requesting Shenzhen Stock Exchange to cancel the special treatment “*ST” on the Company. ⑦ The proposal about the investment on establishing of A/C Company jointly with the Sales Company and the Trading Company, which are the controlled subsidiaries of the Company. The above resolution IV is subject to the examination of the Shareholders’General Meeting. 2. The 14th meeting of the 3rd Supervisory Committee was held on April 26th 2004. The 1st Quarterly Report of 2004 was examined and adopted by the meeting. 3. The 15th meeting of the 3rd term of Supervisory Committee of Chongqing Jianshe Motorcycle Co., Ltd. was held on August 4th 2004 in the 1st meeting room of the Company. 4 of the 5 supervisors presented the meeting. The absent supervisor entitled another supervisory to exercise his right of voting. The following proposals were examined and adopted: ① The Semi-Annual Report 2004 and its summary version. ② The proposal of acquiring Shanghai Fufu Industrial Co., Ltd. to establish Shanghai Jianshe Motorcycle Co., Ltd. ③ The proposal of acquiring the equity of Shanghai Fufu Industry Co., Ltd. and investing on establishing of Shanghai Jianshe Motorcycle Co., Ltd. 4. The 16th meeting of the 3rd term of Supervisory Committee was held on October 22nd 2004 The following proposals were examined and adopted: ① The 3rd Quarterly Report of 2004 ② The Company will extend the contract with Shenzhen Nanfang-Minhe Certified Public Accountants as the auditor of the Company for another one year. The payment for auditing service is RMB660 thousand. 34 建设摩托 2004Annual Report (International) 5. The 17th meeting of the 3rd Supervisory Committee was held on December 18th 2004, the “Report about China Military Equipment Group’ s acquisition of partial stocks of Chongqing Jianshe Motorcycle Co., Ltd. –to the shareholders of the Company” was examined and passed on the meeting. 6. The 18th meeting of the 3rd Supervisory Committee was held on December 29th 2004. “The proposal on acquisition of assets from Jianshe Industry (Group) Co., Ltd. and related transactions”was examined and adopted by the meeting. (II) Independent opinion of the Supervisory Committee: 1. Operation According to the Law In the opinion of the Supervisory Committee, the Company conducted its operation in a stadandardized way, implemended various resolutions in a practical way, the decision-making procedures complied with the relevant provisions of the PRC Company Law and the Articles of Association of the Company; the Company established complete internal control system; directors and senior executives did their jobs with due diligence in a work-respecting and honest way, and performed no action against the laws, regulations, the Articles of Association or harmful to the interest of the Company. 2. Financial Inspection The Supervisory Committee performed inspections on the execution of financial regulations and the financial situation of the Company. In the opinion of the Supervisory Committee, the Auditor’s Report truly reflected the Company’s financial position and operation result of the year. 3. Supervision on the utilizing of fund raised through share placing The fund raised in the past years hasn’t been used in the report term. The balance of the fund has been deposited in the bank and carried over to the arrangement of year 2005. 4. Acquisition and placing of assets The Company entered the Asset Transferring Agreement with Jianshe Group on December 29th 2004. The Company will use its own capital of RMB381,930,300 and partial account receivable amounted to RMB52,210,800 of the controlled subsidiary – Sales Company due from Jianshe Group to buy out 50% of share equity of Chongqing JY and Zhuzhou JY and assets of air-conditioner and motorcycle developing/testing equipment, which originally held by Jianshe Group. This significant acquisition is a related transaction which will benefit the Company in a long term and harmed no interest of other shareholders of the Company, especially the interest of middle-small shareholders and non-related shareholders. The transaction was on fairness and equal exchange basis and proceeded through legal process without under-table trade. 35 建设摩托 2004Annual Report (International) 5. Related transactions In the report term, the Company conducted related transactions with Jianshe Group and its subsidiaries in the business operation. The transactions are fair and on base of market price. It harms no interest of the Company or the shareholders. 36 建设摩托 2004Annual Report (International) IX. Significant Events (I) Material law suit or arbitration in the report term. １． The Company involved in no significant lawsuit or arbitration event in the report term. ２． Material lawsuit and arbitration with has not been closed yet: Lawsuit with due to Hebei Renqiu Tri-motorcycle Co., Ltd. about sole agent. This company raised the lawsuit in Hebei Changzhou Middle Court against the Company on April 18 2001. Currently the secondary trial has been closed. Henan High Court issued the “Civil Judgement” (2002)Ji-Jing-Yi-Zhong-Zi No.6 on April 22, 2002 to order the Company to pay RMB1,185 thousand to Hebei Renqiu Tei-motorcycle Co., Ltd. and undertake the court charge RMB10.5 thousand. The Company has requested for retrial to Hebei High Court. The request has been accepted and currently under trial supervise procedure. ３． Statement on the execution of significant lawsuits and arbitrations which has already been closed: （１） Anhui Provincial Military Industry Supplying Co. (Anhui Co.) owes the Company payment of RMB2,245 thousand. The Company sue to Chongqing Jiulongpo District Court on March 25, 2002 against this company. The Company won in the 1st instance, but Anhui Co. is planning to appeal again. But because they didn’t make the payment for court charge, the 1st Middle Court of Chongqing determined the effective of the conclusion of the 1st instance. In according with the judgement, the Company request for the compulsive execution on the defendant’s property and conducting evaluation on the property of the defendant. But this company has no property to be executed. The Company obtained credit execution certificate on June 20th 2004. （２） Chongqing Jiulongpo Hongchang Company (Hongchang Co.) owes the Company of RMB33,484 thousand for purchase payment. The Company sued to Chongqing High Court on September 27, 2001. The court issued the “Civil Mediation Letter”(2001)Yu -Gao-Fa-Min-Chu-Zi No.18 on December 12, 2001. Till present, Hongchang Co. has made the payment of RMB1,190 thousand to the Company, and the rest of RMB32,294 thousand is under execution. No further payment been made during the report term. （３） Chongqing Fenghuang Industrial Company owes the Company RMB6,885 of purchase payment. Till present the balance of RMB3,600 thousand still not been disbursed. The Company applied to the 1st Intermediate Court of Chongqing in April 2004 for execution on force. It is getting through the procedure at present. （４） Chongqing Fenghuang Industrial Company owes the Company RMB6,885 of purchase payment. Till present there still a balance of RMB3,600 thousand not been disbursed. The Company requested to the No.1 Middle Court to undertake compulsory execution. It is under processing at present. 37 建设摩托 2004Annual Report (International) (II) Asset acquisition, takeover or merger occurred in the report term. On February 29th 2004, the Company exchanged with the account receivable (book value of RMB68,581,000, evaluated value of RMB67,170,000 for the air-conditioner assets (book value of RMB70,835,000, evaluated value of RMB67,100,000) of Jianshe Group. The transaction price was basing on the evaluation result provided by public accountants. The Company acquired 51% of the share equity of Shanghai Jianshe Motorcycle Co., Ltd. (former Shanghai Fufu Industry Co., Ltd.) with RMB6,630,000. (III) For details of the significant related transactions please go to the notes to the financial statements. (IV) Important contracts and their execution 1.The events concerning the trusteeship, contracting or lease of assets in which the Company was involved In 2003, the Company continued to lease fixed assets to Jianshe Group. This leasing business involved original value of fixed assets of RMB273,689,000. Annual rental was RMB 24,129,000. The accumulated net income was RMB 7,984,000. 2.Material guarantee In the report period, the Company has been released from the joint liability assumed for the guarantee to Jianshe Group for the loan of RMB 170 million. 3.In the report period, the Company did not entrust any other party to management its cash assets. It does not plan to do so in the future. (V) None of the shareholders who are holding more than 5% of the share equity of the Company has conducted any commitment event. (VI) Engaging and dismissing of CPAs The 17th meeting of the 3rd Board of Directors decided on October 22nd 2004 that Shenzhen Nanfang-Minhe CPA will continue to be engaged as the accountant for year 2004. The total fee will be RMB660 thousand. This has been approved by the shareholders’general meeting. Till year 2004, Shenzhen Nanfang-Minhe CPA has been the accountant of the Company for successively 2 years. 38 建设摩托 2004Annual Report (International) (VII) None of the Company, its Board of Directors or its directors was under investigation, administrative punishment or public criticise by CSRC or public condemn by stock exchange in the report period. (VIII) Significant events that have been disclosed in the report term. 1. Jianshe Group and China Military Equipment Group Co., Ltd. (referred to as “CMEG”hereinafter) entered the “Share Equity Transferring Agreement”and the “Supplementary Agreement on Share Equity Transferring” on December 3rd 2004 and January 22nd 2005 respectively. According to the agreements, CMEG will accept all of the national-owned legal person shares amounted to 339,625,000 shares (71.13% of the total capital shares) held by Jianshe Group. The transaction of equity was basing on the net asset per share audited on December 31st 2003, the price was set by both parties at RMB0.38. CMEG will be holding 339,625,000 of state-owned legal person shares of the Company, which takes 71.13% of the total capital shares, and will take the place of Jianshe Group as the controlling shareholder of the Company. This transaction has been approved by National Assets Administrative Committee on March 9th 2005, and is subject to the consent of China Securities Regulatory Commission, CMEG also need to be approved for being released for its full liability of tender offer. (Progress of the transaction is available on December 7th, 2004, December 9th , 2004, and March 24th 2005 issues of Securities Times and Hong Kong Commercial Daily.) 2. In viewing of improving the capital quality and market competition ability, the Company entered the Asset Transferring Agreement with Jianshe Group on December 29th 2004. The Company will use its own capital of RMB381,930,300 and partial account receivable amounted to RMB52,210,800 of the controlled subsidiary – Sales Company due from Jianshe Group to buy out 50% of share equity of Chongqing JY and Zhuzhou JY and assets of air-conditioner and motorcycle developing/testing equipment, which originally held by Jianshe Group. The resolutions of the Board regarding this related transaction was disclosed on the December 31st 2004 issues of Securities Times and Hong Kong Commercial Daily. 39 建设摩托 2004Annual Report (International) X. Financial Statements (I) Financial Statements (attached) (II) Auditors’Report (attached) (III) Notes to the Financial Statements (attached) 40 建设摩托 2004Annual Report (International) XI. Documents for Reference １． Text of the Annual Report with the signature of the Chairman of Board. ２． Financial Statements with signatures and seals of the legal representative, Chief Accountant and person in charge of accounting affairs; 3. Original copy of the Auditors’Report under the seal of the accounting firm and signed by and under the seal of certified accountants. 4. Originals of all documents and manuscripts of Public Notices of the Company disclosed in public in the newspapers as designated by China Securities Regulatory Commission. ５． Special presentation of the CPA about the situation of fund occupation by the controlling shareholder and other related parties of Chongqing Jianshe Motorcycle Co., Ltd. in the year of 2004. The above documents are available in the secretary office of the Board of Directors of Chongqing Jianshe Motorcycle Co, Ltd. Note: This report has been prepared both in Chinese and English, in case of any conflict in understanding between the two versions, the Chinese version shall prevail. The Chairman of the Board Chongqing Jianshe Motorcycle Co., Ltd. March 29 th, 2005 41 建设摩托 2004Annual Report (International) CHONGQING JIANSHE MOTOCYCLE CO., LTD. (Incorporated in The People’ s Republic of China) Reports and Financial Statements For the year ended 31 December, 2004 42 建设摩托 2004Annual Report (International) 43 CONTENTS Items Page(s) AUDITORS’REPORT 1 CONSOLIDATED INCOME STATEMENT 2 CONSOLIDATED BALANCE SHEET 3 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 4 CONSOLIDATED STATEMENT OF CASH FLOWS 5-6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7-30 44 8/F., Electronics Building No. 2072 Shennan 马施云深圳南方民和 Zhong Road, ShenZhen 会 计 师 事务所 深圳市深南中路 2072 号电子大厦 8 楼 Moore Stephens Shenzhen Nanfang Minhe Tel 电话: (0755)8378 1017 Certified Public Accountants Fax 传真: (0755)8378 0119 REPORT OF THE AUDITORS TO THE SHAREHOLDERS OF CHONGQING JIANSHE MOTORCYCLE CO., LTD. (Incorporated in The People’s Republic of China) We have audited the accompanying consolidated balance sheet of Chongqing Jianshe Motorcycle Co., Ltd. (‘the Company”) and its subsidiaries (collectively referred to as “the Group”) as of 31 December, 2004 and the related consolidated income statement, consolidated statement of cash flows and changes in equity for the year then ended. These financial statements set out on pages 2 to 30 are the responsibility of the Group's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall presentation of the financial statements. 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 financial position of the Group as of 31 December, 2004 and the results of the operations and cash flows of the Group for the year then ended and in accordance with International Financial Reporting Standards. MOORE STEPHENS SHENZHEN NANFANG MINHE 1 Certified Public Accountants [29] March, 2005 2 CHONGQING JIANSHE MOTORCYCLE CO., LTD. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER, 2004 Notes 2004 2003 RMB’000 RMB’000 Turnover, net 4、5 1,850,975 1,384,716 Cost of sales (1,598,300) (1,246,469) Gross profit 252,675 138,247 Other income, net 6 43,236 39,246 Selling, general and administrative expenses (221,153) (120,006) Provision for bad and doubtful debts (11,298) (14,576) Profit from operations 7 63,460 42,911 Finance costs 8 (48,442) (41,103) Investment income, net 9 21,946 10,784 Share of profit/(losses) of associates 182 (892) 3 Profit before taxation 37,146 11,700 Taxation 10 1,996 1,993 Profit after taxation 39,142 13,693 Minority interests (569) (1,894) Net profit for the year 38,573 11,799 Earnings per share 11 RMB0.081 RMB0.025 (The notes on pages 7 to 30 form an integral part of these financial statements) 4 CHONGQING JIANSHE MOTORCYCLE CO., LTD. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER, 2004 Notes 2004 2003 RMB’000 RMB’000 NON-CURRENT ASSETS Property, plant and equipment 12 435,088 425,586 Land use right 13 3,613 - Interests in associates 14 72,096 71,912 Other investment 15 12,912 12,912 Other assets 16 52,806 76,931 576,515 587,341 CURRENT ASSETS Inventories 17 270,478 239,871 Notes receivable 29,983 10,688 Accounts receivable, prepayments and other receivables 18 464,509 467,795 Tax recoverable 12,293 12,293 Pledged deposits 27 720,150 336,650 Cash and bank balances 458,288 63,030 1,955,701 1,130,327 5 CURRENT LIABILITIES Notes payable 27 1,002,005 423,075 Accounts payable, accruals and other pay ables 601,861 479,708 Short-term loans 19 711,270 635,400 2,315,136 1,538,183 NET CURRENT LIABILITIES (359,435) (407,856) MINORITY INTERESTS 6,451 3,433 NON-CURRENT LIABILITIES Long-term loans 20 － 2,000 Deferred tax liability 21 － 1,996 － 3,996 210,629 172,056 SHAREHOLDERS’EQUITY Share capital 22 477,500 477,500 Reserves 23 (266,871) (305,444) 210,629 172,056 The financial statements on pages 2 to 30 were approved and authorised for issue by the Board of Directors on [29] March ,2005 and signed on its behalf by: 6 DIRECTOR DIRECTOR 7 CHONGQING JIANSHE MOTORCYCLE CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER, 2004 Statutory Statutory Share Revaluation revenue common Discretionary Accumulated Share capital premium reserve reserve welfare fund reserve fund losses Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Balance as of 31 December, 2002 477,500 384,579 122,770 32,070 24,654 68,962 (950,278) 160,257 Net profit for the year - - - - - - 11,799 11,799 Balance as of 31 December, 2003 477,500 384,579 122,770 32,070 24,654 68,962 (938,479) 172,056 Net profit for the year - - - - - - 38,573 38,573 Balance as of 31 December, 2004 477,500 384,579 122,770 32,070 26,654 68,962 (899,906) 210,629 (The notes on pages 7 to 30 form an integral part of these financial statements.) 8 CHONGQING JIANSHE MOTORCYCLE CO., LTD. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER, 2004 2004 2003 RMB’000 RMB’000 OPERATING ACTIVITIES: Profit before taxation 37,146 11,700 Adjustment: Provision for bad debts 11,298 14,576 Write-back of provision for obsolete inventory (19,628) (52,259) Depreciation 56,232 52,149 Loss/(gain) on disposal of property, plant and equipment 182 1,052 Write-back of impairment loss on property, plant and equipment - (3,020) Share of (profit)/losses in associates (182) 892 Loss on disposal of associates - 114 Interest expenses 44,193 39,156 9 Interest income (21,946) (10,898) Others - 1,049 Operating cash flows before movement in working capital 107,295 54,511 Increase in notes receivable (19,198) (8,133) Decrease/(increase) in accounts receivable, prepayments and other (60,223) (85,740) receivables Increase in inventories (10,979) (21,823) Increase in notes payable 86,500 262,591 Increase in accounts payable, accruals and other payables 122,200 37,362 Cash generated from operations 225,595 238,768 Interest paid (44,193) (39,156) 181,402 199,612 Net cash generated from operations 10 CHONGQING JIANSHE MOTORCYCLE CO., LTD. CONSOLIDATED STATEMENT OF CASH FLOWS (Continued) FOR THE YEAR ENDED 31 DECEMBER, 2004 2004 2003 RMB’000 RMB’000 INVESTING ACTIVITIES: Interest received 21,946 10,898 Proceeds from disposal of an associate - 43 Increase in interests in subsidiaries (5,945) - Increase in interests in associates - 79,605 Purchase of property, plant and equipment (54,771) (3,750) Proceeds from disposal of property, plant and equipment 215 1,571 NET CASH (OUTFLOW ) / INFLOW FROM INVESTING (38,555) 88,367 ACTIVITIES FINANCING ACTIVITIES: Increase in minority interest 2,961 2,867 Decrease in short term loan - (3,110) Increase in notes payable 557,080 - 11 New bank loans 75,870 38,400 Increase in pledged deposits (383,500) (336,650) NET CASH OUTFLOW FROM FINANCING 252,411 (298,493) ACTIVITIES INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS 395,258 (10,514) CASH AND CASH EQUIVALENTS AT 1 JANUARY 63,030 73,544 CASH AND CASH EQUIVALENTS AT 31 DECEMBER 458,288 63,030 (The notes on pages 7 to 30 form an integral part of these financial statements.) 12 CHONGQING JIANSHE MOTORCYCLE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER, 2004 1. ORGANISATION AND OPERATIONS Chongqing Jianshe Motorcycle Co., Ltd. (“the Company”) was incorporated as a joint stock limited company in the People's Republic of China (the “PRC) on 19 July, 1995. As part of the incorporation process, the company issued Domestically Listed Foreign Shares (“B shares”) to foreign investors by an international placing. The incorporation process, which took effect on 19 July, 1995, also involved a reorganisation carried out by the two promoters whereby (1) Jianshe Industries (Group) Corporation (“Jianshe Group”) injected certain of the assets and liabilities relating to its motorcycle business and (2) China North Industries Shenzhen Corporation injected its equity interest in Shenzhen South Mould Factory (“Shenzhen South Mould”) into the Company. The company's B shares were listed on the Shenzhen Stock Exchange on 25 July, 1995. The Company is principally engaged in the manufacture and sale of motorcycles and moulds. As of 31 December 2004, the Company directly owned equity investments in the following subsidiaries: Percentage of Place of Registered equity interest Investment Company incorporation capital held amount Principal activities RMB’000 % RMB’000 Jianshe Industries (Group) Corporation Sale of motorcycles and Sale Company Chongqing 12,000 100 12,000 components and provision of after sales service (“Jianshe Sales Company”) Shenzhen South Manufacture and sales of mould Shenzhen 17,875 100 17,875 Mould Factory (“Shenzhen South frames and moulds Mould”) Chongqing Jianshe Auto Manufacture and sales of air Chongqing 160,000 100 160,000 conditioner for motor car Air-conditioner Co., Ltd.. Shanghai Jianshe Motorcycle Co., Ltd Shanghai 5,000 51 6,630 Manufacture and sales of motorcycles and components 13 CHONGQING JIANSHE MOTORCYCLE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER, 2004 motorcycles and components Chongqing Jianshing Manufacture and sales of Chongqing 14,500 100 14,500 Motorcycle Manufacturing Co., Ltd motorcycles and components (“Manufacturing Company”) Guangxi Jianshe Nanning, Sale of motorcycles and Motorcycle Co., Ltd. 1,500 52(indirect) 780 Guangxi components (“Guangxi Jianshe”) Chengdu Jianshe Sichuan, Manufacture and sales of Motorcycle Sales Co., Ltd. 500 100(indirect) 500 Chengdu motorcycles and components (“Chengdu Jianshe”) Chongqing North Jianshe Import and export of various Import & Export Co., Ltd. Chongqing 60,378 95.14 60,226 products (“Import & Export Co.”) 14 建设摩托 2003 Annual Report (International) 2. BASIS OF PRESENTATION These financial statements are presented in Reminbi since that is the currency in which the majority of the Group's transactions are denominated. The financial statements of the Company for the year ended 31 December, 2004 were prepared in conformity with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standard Board. This basis of accounting differs from that used in the statutory accounts of the Group companies which were prepared in accordance with the accounting principles and the relevant financial regulations applicable to enterprises in the PRC (“PRC GAAP”). Adjustments have been made to the statutory accounts of the Company to conform to IFRS, as if those standards had been applied consistently throughout the year. The Group has net current liabilities as at 31 December, 2004. The financial statements have been prepared on the going concern bas is, as the holding company, Jianshe Industries (Group) Co.,LTD., has agreed to provide continuing financial support to enable the Group to meet its liabilities as and when they fall due in the foreseeable future, and has provided a guarantee for bank borrowings of the Group amounting to RMB454,990,000 (See note 25B(c)). The board of directors believe that it is appropriate to prepare the financial statements on the going concern basis. 3. PRINCIPAL ACCOUNTING POLICIES The financial statements have been prepared on the historical cost convention, except for the revaluation of property, plant and equipment and certain financial instruments. The principal accounting policies adopted are set out below. a) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to dominate the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. Ｏｎ ａｃｑｕｉｓｉｔｉｏｎ， ｔｈｅ ａｓｓｅｔｓ ａｎｄ ｌｉａｂｉｌｉｔｉｅｓ ｏｆ ａ ｓｕｂｓｉｄｉａｒｙ ａｒｅ ｍｅａｓｕｒｅｄ ａｔ ｔｈｅｉｒ ｆａｉｒ ｖａｌｕｅｓ ａｔ ｔｈｅ ｄａｔｅ ｏｆ ａｃｑｕｉｓｉｔｉｏｎ． Ｔｈｅ ｉｎｔｅｒｅｓｔ ｏｆ ｍｉｎｏｒｉｔｙ ｓｈａｒｅｈｏｌｄｅｒｓ ｉｓ ｓｔａｔｅｄ ａｔ ｔｈｅ ｍｉｎｏｒｉｔｙ＇ｓ ｐ ｒｏｐｏｒｔｉｏｎ ｏｆ ｔｈｅ ｆａｉｒ ｖａｌｕｅｓ ｏｆ ｔｈｅ ａｓｓｅｔｓ ａｎｄ ｌｉａｂｉｌｉｔｉｅｓ ｒｅｃｏｇｎｉｓｅｄ． 22 建设摩托 2003 Annual Report (International) Ｔｈｅ ｒｅｓｕｌｔｓ ｏｆ ｓｕｂｓｉｄｉａｒｉｅｓ ａｃｑｕｉｒｅｄ ｏｒ ｄｉｓｐｏｓｅｄ ｏｆ ｄｕｒｉｎｇ ｔｈｅ ｙｅａｒ ａｒｅ ｉｎｃｌｕｄｅｄ ｉｎ ｔｈｅ ｃｏｎｓｏｌｉｄａｔｅｄ ｉｎｃｏｍｅ ｓｔａｔｅｍｅｎｔ ｆｒｏｍ ｔｈｅ ｅｆｆｅｃｔｉｖｅ ｄａｔｅ ｏｆ ａｃｑｕｉｓｉｔｉｏｎ ｏｒ ｕｐ ｔｏ ｔｈｅ ｅｆｆｅｃｔｉｖｅ ｄａｔｅ ｏｆ ｄｉｓｐｏｓａｌ， ａｓ ａｐｐｒｏｐｒｉａｔｅ． 十六 建设摩托 2003 Annual Report (International) 3. PRINCIPAL ACCOUNTING POLICIES (continued) a) Basis of consolidation (continued) Ｗｈｅｒｅ ｎｅｃｅｓｓａｒｙ， ａｄｊｕｓｔｍｅｎｔｓ ａｒｅ ｍａｄｅ ｔｏ ｔｈｅ ｆｉｎａｎｃｉａｌ ｓｔａｔｅｍｅｎｔｓ ｏｆ ｓｕｂｓｉｄｉａｒｉｅｓ ｔｏ ａｌｉｇｎ ｔｈｅ ａｃｃｏｕｎｔｉｎｇ ｐｏｌｉｃｉｅｓ ｕｓｅｄ ｗｉｔｈ ｔｈｏｓｅ ｕｓｅｄ ｂｙ ｏｔｈｅｒ ｍｅｍｂｅｒｓ ｏｆ ｔｈｅ Ｇｒｏｕｐ． Ａｌｌ ｓｉｇｎｉｆｉｃａｎｔ ｉｎｔｅｒｃｏｍｐａｎｙ ｔｒａｎｓａｃｔｉｏｎｓ ａｎｄ ｂａｌａｎｃｅｓ ｂｅｔｗｅｅｎ ｇｒｏｕｐ ｅｎｔｅｒｐｒｉｓｅｓ ａｒｅ ｅｌｉｍｉｎａｔｅｄ ｏｎ ｃｏｎｓｏｌｉｄａｔｉｏｎ． b) Subsidiaries Ａ ｓｕｂｓｉｄｉａｒｙ ｉｓ ａ ｃｏｍｐａｎｙ ｉｎ ｗｈｉｃｈ ｔｈｅ Ｃｏｍｐａｎｙ ｈｏｌｄｓ， ｄｉｒｅｃｔｌｙ ｏｒ ｉｎｄｉｒｅｃｔｌｙ， ｍｏｒｅ ｔｈａｎ ５０％ ｏｆ ｔ ｈｅ ｅｑｕｉｔｙ ｉｎｔｅｒｅｓｔ ａｓ ａ ｌｏｎｇ－ｔｅｒｍ ｉｎｖｅｓｔｍｅｎｔ ａｎｄ／ｏｒ ｈａｓ ｔｈｅ ｐｏｗｅｒ ｔｏ ｃａｓｔ ｔｈｅ ｍａｊｏｒｉｔｙ ｏｆ ｖｏｔｅｓ ａｔ ｍｅｅｔｉｎｇｓ ｏｆ ｔｈｅ ｂｏａｒｄ ｏｆ ｄｉｒｅｃｔｏｒｓ ｏｒ ｍａｎａｇｅｍｅｎｔ ｃｏｍｍｉｔｔｅｅ． c) Interests in associates Ａｎ ａｓｓｏｃｉａｔｅ ｉｓ ａｎ ｅｎｔｅｒｐｒｉｓｅ ｏｖｅｒ ｗｈｉｃｈ ｔｈｅ Ｇｒｏｕｐ ｉｓ ｉｎ ａ ｐｏｓｉｔｉｏｎ ｔｏ ｅｘｅｒｃｉｓｅ ｓｉｇｎｉｆｉｃａｎｔ ｉｎｆｌｕｅｎｃｅ ｔｈｒｏｕｇｈ ｐａｒｔｉｃｉｐａｔｉｏｎ ｉｎ ｔｈｅ ｆｉｎａｎｃｉａｌ ａｎｄ ｏｐｅｒａｔｉｎｇ ｐｏｌｉｃｙ ｄｅｃｉｓｉｏｎｓ ｏｆ ｔｈｅ ｉｎｖｅｓｔｅｅ． The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. The carrying amount of such investments is reduced to recognise any impairment in the value of individual investments. Investments in associates are carried in the balance sheet at cost as adjusted by post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments. Any excess (deficiency) of the cost of acquisition over (below) the Group’s share of the fair values of the identifiable net assets of the associate at the date of acquisition is recognised as goodwill (negative goodwill). Ｗｈｅｒｅ ａ ｇｒｏｕｐ ｅｎｔｅｒｐｒｉｓｅ ｔｒａｎｓａｃｔｓ ｗｉｔｈ ａｎ ａｓｓｏｃｉａｔｅ ｏｆ ｔｈｅ Ｇｒｏｕｐ， ｕｎｒｅａｌｉｓｅｄ ｐｒｏｆｉｔｓ ａｎｄ ｌｏｓｓｅｓ ａｒｅ ｅｌｉｍｉｎａｔｅｄ ｔｏ ｔｈｅ ｅｘｔｅｎｔ ｏｆ ｔｈｅ Ｇｒｏｕｐ＇ｓ ｉｎｔｅｒｅｓｔ ｉｎ ｔｈｅ ｒｅｌｅｖａｎｔ ａｓｓｏｃｉａｔｅ， ｅｘｃｅｐｔ ｗｈｅｒｅ ｕｎｒｅａｌｉｓｅｄ ｌｏｓｓｅｓ ｐｒｏｖｉｄｅ ｅｖｉｄｅｎｃｅ ｏｆ ａｎ ｉｍｐａｉｒｍｅｎｔ ｏｆ ｔｈｅ ａｓｓｅｔ ｔｒａｎｓｆｅｒｒｅｄ． 十七 建设摩托 2003 Annual Report (International) 3. PRINCIPAL ACCOUNTING POLICIES (continued) d) Related parties Ｐａｒｔｉｅｓ ａｒｅ ｃｏｎｓｉｄｅｒｅｄ ｔｏ ｂｅ ｒｅｌａｔｅｄ ｉｆ ｏｎｅ ｐａｒｔｙ ｈａｓ ｔｈｅ ａｂｉｌｉｔｙ， ｄｉｒｅｃｔｌｙ ｏｒ ｉｎｄｉｒｅｃｔｌｙ， ｔｏ ｃｏｎｔｒｏｌ ｔｈｅ ｏｔｈｅｒ ｐａｒｔｙ， ｏｒ ｅｘｅｒｃｉｓｅ ｓｉｇｎｉｆｉｃａｎｔ ｉｎｆｌｕｅｎｃｅ ｏｖｅｒ ｔｈｅ ｏｔｈｅｒ ｐａｒｔｙ ｉｎ ｍａｋｉｎｇ ｆｉｎａｎｃｉａｌ ａｎｄ ｏｐｅｒａｔｉｎｇ ｄｅｃｉｓｉｏｎｓ． Ｐａｒｔｉｅｓ ａｒｅ ａｌｓｏ ｃｏｎｓｉｄｅｒｅｄ ｔｏ ｂｅ ｒｅｌａｔｅｄ ｉｆ ｔｈｅｙ ａｒｅ ｓｕｂｊｅｃｔ ｔｏ ｃｏｍｍｏｎ ｃｏｎｔｒｏｌ ｏｒ ｃｏｍｍｏｎ ｓｉｇｎｉｆｉｃａｎｔ ｉｎｆｌｕｅｎｃｅ． e) Foreign currencies Ｔｒａｎｓａｃｔｉｏｎｓ ｉｎ ｃｕｒｒｅｎｃｉｅｓ ｏｔｈｅｒ ｔｈａｎ Ｒｅｍｉｎｂｉ ａｒｅ ｉｎｉｔｉａｌｌｙ ｒｅｃｏｒｄｅｄ ａｔ ｔｈｅ ｒａｔｅｓ ｏｆ ｅｘｃｈａｎｇｅ ｐｒｅｖａｉｌｉｎｇ ｏｎ ｔｈｅ ｄａｔｅｓ ｏｆ ｔｈｅ ｔｒａｎｓａｃｔｉｏｎｓ． Ｍｏｎｅｔａｒｙ ａｓｓｅｔｓ ａｎｄ ｌｉａｂｉｌｉｔｉｅｓ ｄｅｎｏｍｉｎａｔｅｄ ｉｎ ｓｕｃｈ ｃｕｒｒｅｎｃｉｅｓ ａｒｅ ｒｅｔｒａｎｓｌａｔｅｄ ａｔ ｔｈｅ ｒａｔｅｓ ｐｒｅｖａｉｌｉｎｇ ｏｎ ｔｈｅ ｂａｌａｎｃｅ ｓｈｅｅｔ ｄａｔｅ． Ｐｒｏｆｉｔｓ ａｎｄ ｌｏｓｓｅｓ ａｒｉｓｉｎｇ ｏｎ ｅｘｃｈａｎｇｅ ａｒｅ ｉｎｃｌｕｄｅｄ ｉｎ ｔｈｅ ｐｒｏｆｉｔ ｏｒ ｌｏｓｓ ｆｏｒ ｔｈｅ ｐｅｒｉｏｄ． f) Inventories Ｉｎｖｅｎｔｏｒｉｅｓ ａｒｅ ｓｔａｔｅｄ ａｔ ｔｈｅ ｌｏｗｅｒ ｏｆ ｃｏｓｔ ａｎｄ ｎｅｔ ｒｅａｌｉｓａｂｌｅ ｖａｌｕｅ． Ｃｏｓｔ ｃｏｍｐｒｉｓｅｓ ｄｉｒｅｃｔ ｍａｔｅｒｉａｌｓ ａｎｄ， ｗｈｅｒｅ ａｐｐｌｉｃａｂｌｅ， ｄｉｒｅｃｔ ｌａｂｏｕｒ ｃｏｓｔｓ ａｎｄ ｔｈｏｓｅ ｏｖｅｒｈｅａｄｓ ｔｈａｔ ｈａｖｅ ｂｅｅｎ ｉｎｃｕｒｒｅｄ ｉｎ ｂｒｉｎｇｉｎｇ ｔｈｅ ｉｎｖｅｎｔｏｒｉｅｓ ｔｏ ｔｈｅｉｒ ｐｒｅｓｅｎｔ ｌｏｃａｔｉｏｎ ａｎｄ ｃｏｎｄｉｔｉｏｎ． Ｃｏｓｔ ｉｓ ｃａｌｃｕｌａｔｅｄ ｕｓｉｎｇ ｔｈｅ ｗｅｉｇｈｔｅｄ ａｖｅｒａｇｅ ｍｅｔｈｏｄ． Ｎｅｔ ｒｅａｌｉｓａｂｌｅ ｖａｌｕｅ ｒｅｐｒｅｓｅｎｔｓ ｔｈｅ ｅｓｔｉｍａｔｅｄ ｓｅｌｌｉｎｇ ｐｒｉｃｅ ｌｅｓｓ ａｌｌ ｅｓｔｉｍａｔｅｄ ｃｏｓｔｓ ｔｏ ｃｏｍｐｌｅｔｉｏｎ ａｎｄ ｃｏｓｔｓ ｔｏ ｂｅ ｉｎｃｕｒｒｅｄ ｉｎ ｍａｒｋｅｔｉｎｇ， ｓｅｌｌｉｎｇ ａｎｄ ｄｉｓｔｒｉｂｕｔｉｏｎ． g) Property, plant and equipment Ｐｒｏｐｅｒｔｉｅｓ ｕｓｅｄ ｆｏｒ ｐｒｏｄｕｃｔｉｏｎ， ｒｅｎｔａｌ ｏｒ ａｄｍｉｎｉｓｔｒａｔｉｖｅ ｐｕｒｐｏｓｅｓ， ｏｒ ｉｎ ｔｈｅ ｃｏｕｒｓｅ ｏｆ ｃｏｎｓｔｒｕｃｔｉｏｎ ｆｏｒ ｐｕｒｐｏｓｅｓ ｎｏｔ ｙｅｔ ｄｅｔｅｒｍｉｎｅｄ， ａｒｅ ｃａｒｒｉｅｄ ａｔ ｃｏｓｔ ｌｅｓｓ ａｎｙ ｉｄｅｎｔｉｆｉｅｄ ｉｍｐａｉｒｍｅｎｔ ｌｏｓｓ． Ｃｏｓｔ ｉｎｃｌｕｄｅｓ ｐｒｏｆｅｓｓｉｏｎａｌ ｆｅｅｓ ａｎｄ， ｆｏｒ ｑｕａｌｉｆｙｉｎｇ ａｓｓｅｔｓ， ｂｏｒｒｏｗｉｎｇ ｃｏｓｔｓ ｃａｐｉｔａｌｉｓｅｄ ｉｎ ａｃｃｏｒｄａｎｃｅ ｗｉｔｈ ｔｈｅ Ｇｒｏｕｐ＇ｓ ａｃｃｏｕｎｔｉｎｇ ｐｏｌｉｃｉｅｓ． Ｄｅｐｒｅｃｉａｔｉｏｎ ｏｆ ｔｈｅｓｅ ａｓｓｅｔｓ ｃｏｍｍｅｎｃｅｓ ｗｈｅｎ ｔｈｅ ａｓｓｅｔｓ ａｒｅ ｒｅａｄｙ ｆｏｒ ｔｈｅｉｒ ｉｎｔｅｎｄｅｄ ｕｓｅ ｏｎ ｔｈｅ ｓａｍｅ ｂａｓｉｓ ａｓ ｏｔｈｅｒ ｐｒｏｐｅｒｔｙ ａｓｓｅｔｓ． 十八 建设摩托 2003 Annual Report (International) Ｐｌａｎｔ ａｎｄ ｅｑｕｉｐｍｅｎｔ ａｒｅ ｓｔａｔｅｄ ａｔ ｃｏｓｔ ｌｅｓｓ ａｃｃｕｍｕｌａｔｅｄ ｄｅｐｒｅｃｉａｔｉｏｎ ａｎｄ ａｎｙ ｉｍｐａｉｒｍｅｎｔ ｌｏｓｓ． 十九 建设摩托 2003 Annual Report (International) 3. PRINCIPAL ACCOUNTING POLICIES (continued) g) Property, plant and equipment (continued) Ｄｅｐｒｅｃｉａｔｉｏｎ ｉｓ ｃｈａｒｇｅｄ ｓｏ ａｓ ｔｏ ｗｒｉｔｅ ｏｆｆ ｔｈｅ ｃｏｓｔ ｏｒ ｖａｌｕａｔｉｏｎ ｏｆ ａｓｓｅｔｓ， ｏｔｈｅｒ ｔｈａｎ ｌａｎｄ ａｎｄ ｐｒｏｐｅｒｔｉｅｓ ｕｎｄｅｒ ｃｏｎｓｔｒｕｃｔｉｏｎ， ｏｖｅｒ ｔｈｅｉｒ ｅｓｔｉｍａｔｅｄ ｕｓｅｆｕｌ ｌｉｖｅｓ， ｕｓｉｎｇ ｔｈｅ ｓｔｒａｉｇｈｔ－ｌｉｎｅ ｍｅｔｈｏｄ， ｏｎ ｔｈｅ ｆｏｌｌｏｗｉｎｇ ｂａｓｅｓ： Types Terms Rates Buildings 30—35 years 2.8—3.2% Machinery and equipment 7—20 years 4.9—13.9% Motor vehicles and other equipment 5—8 years 12.1—19.4% Ａｓｓｅｔｓ ｈｅｌｄ ｕｎｄｅｒ ｆｉｎａｎｃｅ ｌｅａｓｅ ａｒｅ ｄｅｐｒｅｃｉａｔｅｄ ｏｖｅｒ ｔｈｅｉｒ ｅｘｐｅｃｔｅｄ ｕｓｅｆｕｌ ｌｉｖｅｓ ｏｎ ｔｈｅ ｓａｍｅ ｂａｓｉｓ ａｓ ｏｗｎｅｄ ａｓｓｅｔｓ ｏｒ， ｗｈｅｒｅ ｓｈｏｒｔｅｒ， ｔｈｅ ｔｅｒｍ ｏｆ ｔｈｅ ｒｅｌｅｖａｎｔ ｌｅａｓｅ． Ｔｈｅ ｇａｉｎ ｏｒ ｌｏｓｓ ａｒｉｓｉｎｇ ｏｎ ｔｈｅ ｄｉｓｐｏｓａｌ ｏｒ ｒｅｔｉｒｅｍｅｎｔ ｏｆ ａｎ ａｓｓｅｔ ｉｓ ｄｅｔｅｒｍｉｎｅｄ ａｓ ｔｈｅ ｄｉｆｆｅｒｅｎｃｅ ｂｅｔｗｅｅｎ ｔｈｅ ｓａｌｅｓ ｐｒｏｃｅｅｄｓ ａｎｄ ｔｈｅ ｃａｒｒｙｉｎｇ ａｍｏｕｎｔ ｏｆ ｔｈｅ ａｓｓｅｔ ａｎｄ ｉｓ ｒｅｃｏｇｎｉｓｅｄ ｉｎ ｉｎｃｏｍｅ． h) Investment property Ｉｎｖｅｓｔｍｅｎｔ ｐｒｏｐｅｒｔｙ， ｗｈｉｃｈ ｉｓ ｐｒｏｐｅｒｔｙ ｈｅｌｄ ｔｏ ｅａｒｎ ｒｅｎｔａｌｓ ａｎｄ／ｏｒ ｆｏｒ ｃａｐｉｔａｌ ａｐｐｒｅｃｉａｔｉｏｎ， ｉｓ ｓｔａｔｅｄ ａｔ ｉｔｓ ｆａｉｒ ｖａｌｕｅ ａｔ ｔｈｅ ｂａｌａｎｃｅ ｓｈｅｅｔ ｄａｔｅ． Ｇａｉｎｓ ａｎｄ ｌｏｓｓｅｓ ａｒｉｓｉｎｇ ｆｒｏｍ ｃｈａｎｇｅｓ ｉｎ ｔｈｅ ｆａｉｒ ｖａｌｕｅ ｏｆ ｉｎｖｅｓｔｍｅｎｔ ｐｒｏｐｅｒｔｙ ａｒｅ ｉｎｃｌｕｄｅｄ ｉｎ ｔｈｅ ｎｅｔ ｐｒｏｆｉｔ ｏｒ ｌｏｓｓ ｆｏｒ ｔｈｅ ｐｅｒｉｏｄ ｉｎ ｗｈｉｃｈ ｔｈｅｙ ａｒｉｓｅ． i) Revenue recognition 二十 建设摩托 2003 Annual Report (International) Ｓａｌｅｓ ｏｆ ｇｏｏｄｓ ａｒｅ ｒｅｃｏｇｎｉｓｅｄ ｗｈｅｎ ｔｈｅ ｓｉｇｎｉｆｉｃａｎｔ ｒｉｓｋｓ ａｎｄ ｒｅｗａｒｄｓ ｏｆ ｏｗｎｅｒｓｈｉｐ ｏｆ ｔｈｅ ｇｏｏｄｓ ｈａｖｅ ｂｅｅｎ ｔｒａｎｓｆｅｒｒｅｄ ｔｏ ｃｕｓｔｏｍｅｒｓ， ｔｈｅ ｅｃｏｎｏｍｉｃ ｂｅｎｅｆｉｔｓ ａｓｓｏｃｉａｔｅｄ ｗｉｔｈ ｔｈｅ ｔｒａｎｓａｃｔｉｏｎ ｃａｎ ｂｅ ｒｅｃｅｉｖｅｄ ａｎｄ ｔｈｅ ａｍｏｕｎｔ ｏｆ ｒｅｖｅｎｕｅ ａｎｄ ｃｏｓｔｓ ｃａｎ ｂｅ ｍｅａｓｕｒｅｄ ｒｅｌｉａｂｌｙ． Ｓｅｒｖｉｃｅ ｉｎｃｏｍｅ ｉｓ ｒｅｃｏｇｎｉｓｅｄ ｗｈｅｎ ｓｅｒｖｉｃｅｓ ａｒｅ ｒｅｎｄｅｒｅｄ． Ｔｒａｄｅｍａｒｋ ｉｎｃｏｍｅ ｉｓ ｒｅｃｏｇｎｉｓｅｄ ｗｈｅｎ ｔｈｅ ｒｅｌｅｖａｎｔ ａｇｒｅｅｍｅｎｔ ｗａｓ ｓｉｇｎｅｄ ａｎｄ ｅｘｅｃｕｔｅｄ． Ｉｎｔｅｒｅｓｔ ｉｎｃｏｍｅ ｉｓ ａｃｃｒｕｅｄ ｏｎ ａ ｔｉｍｅ ｂａｓｉｓ ｂｙ ｒｅｆｅｒｅｎｃｅ ｔｏ ｔｈｅ ｐｒｉｎｃｉｐａｌ ｏｕｔｓｔａｎｄｉｎｇ ａｎｄ ａｔ ｔｈｅ ｉｎｔｅｒｅｓｔ ｒａｔｅ ａｐｐｌｉｃａｂｌｅ． 二十一 建设摩托 2003 Annual Report (International) 3. PRINCIPAL ACCOUNTING POLICIES (continued) j) Operating leases Ｌｅａｓｅｓ ｗｈｅｒｅ ｓｕｂｓｔａｎｔｉａｌｌｙ ａｌｌ ｏｆ ｔｈｅ ｒｉｓｋｓ ａｎｄ ｒｅｗａｒｄｓ ｏｆ ｏｗｎｅｒｓｈｉｐ ｏｆ ｔｈｅ ａｓｓｅｔｓ ｒｅｍａｉｎ ｗｉｔｈ ｔｈｅ ｌｅｓｓｏｒｓ ａｒｅ ａｃｃｏｕｎｔｅｄ ｆｏｒ ａｓ ｏｐｅｒａｔｉｎｇ ｌｅａｓｅｓ． Ｒｅｎｔａｌ ｉｎｃｏｍｅ ａｎｄ ｅｘｐｅｎｓｅｓ ｆｒｏｍ ｏｐｅｒａｔｉｎｇ ｌｅａｓｅｓ ａｒｅ ｉｎｃｌｕｄｅｄ ｉｎ ｔｈｅ ｄｅｔｅｒｍｉｎａｔｉｏｎ ｏｆ ｉｎｃｏｍｅ ｓｔａｔｅｍｅｎｔ ｏｎ ａ ｓｔｒａｉｇｈｔ－ｌｉｎｅ ｂａｓｉｓ ｏｖｅｒ ｔｈｅ ｌｅａｓｅ ｔｅｒｍ． Ｔｈｅ ｍａｃｈｉｎｅｒｙ ｌｅａｓｅｄ ｏｕｔ ｂｙ ｔｈｅ Ｇｒｏｕｐ ｉｓ ｒｅｃｏｒｄｅｄ ｉｎ ｆｉｘｅｄ ａｓｓｅｔｓ． k) Taxation Ｉｎｃｏｍｅ ｔａｘ ｅｘｐｅｎｓｅ ｒｅｐｒｅｓｅｎｔｓ ｔｈｅ ｓｕｍ ｏｆ ｔｈｅ ｔａｘ ｃｕｒｒｅｎｔｌｙ ｐａｙａｂｌｅ ａｎｄ ｄｅｆｅｒｒｅｄ ｔａｘ． Ｔｈｅ ｔａｘ ｃｕｒｒｅｎｔｌｙ ｐａｙａｂｌｅ ｉｓ ｂａｓｅｄ ｏｎ ｔａｘａｂｌｅ ｐｒｏｆｉｔ ｆｏｒ ｔｈｅ ｙｅａｒ． Ｔａｘａｂｌｅ ｐｒｏｆｉｔ ｄｉｆｆｅｒｓ ｆｒｏｍ ｎｅｔ ｐｒｏｆｉｔ ａｓ ｒｅｐｏｒｔｅｄ ｉｎ ｔｈｅ ｉｎｃｏｍｅ ｓｔａｔｅｍｅｎｔ ｂｅｃａｕｓｅ ｉｔ ｅｘｃｌｕｄｅｓ ｉｔｅｍｓ ｏｆ ｉｎｃｏｍｅ ｏｒ ｅｘｐｅｎｓｅ ｔｈａｔ ａｒｅ ｔａｘａｂｌｅ ｏｒ ｄｅｄｕｃｔｉｂｌｅ ｉｎ ｏｔｈｅｒ ｙｅａｒｓ ａｎｄ ｉｔ ｆｕｒｔｈｅｒ ｅｘｃｌｕｄｅｓ ｉｔｅｍｓ ｔｈａｔ ａｒｅ ｎｅｖｅｒ ｔａｘａｂｌｅ ｏｒ ｄｅｄｕｃｔｉｂｌｅ． Ｔｈｅ Ｇｒｏｕｐ’ｓ ｌｉａｂｉｌｉｔｙ ｆｏｒ ｃｕｒｒｅｎｔ ｔａｘ ｉｓ ｃａｌｃｕｌａｔｅｄ ｕｓｉｎｇ ｔａｘ ｒａｔｅｓ ｔｈａｔ ｈａｖｅ ｂｅｅｎ ｅｎａｃｔｅｄ ｏｒ ｓｕｂｓｔａｎｔｉｖｅｌｙ ｅｎａｃｔｅｄ ｂｙ ｔｈｅ ｂａｌａｎｃｅ ｓｈｅｅｔ ｄａｔｅ． Ｄｅｆｅｒｒｅｄ ｔａｘ ｉｓ ｔｈｅ ｔａｘ ｅｘｐｅｃｔｅｄ ｔｏ ｂｅ ｐａｙａｂｌｅ ｏｒ ｒｅｃｏｖｅｒａｂｌｅ ｏｎ ｄｉｆｆｅｒｅｎｃｅｓ ｂｅｔｗｅｅｎ ｔｈｅ ｃａｒｒｙｉｎｇ ａｍｏｕｎｔ ｏｆ ａｓｓｅｔｓ ａｎｄ ｌｉａｂｉｌｉｔｉｅｓ ｉｎ ｔｈｅ ｆｉｎａｎｃｉａｌ ｓｔａｔｅｍｅｎｔｓ ａｎｄ ｔｈｅ ｃｏｒｒｅｓｐｏｎｄｉｎｇ ｔａｘ ｂａｓｉｓ ｕｓｅｄ ｉｎ ｔｈｅ ｃｏｍｐｕｔａｔｉｏｎ ｏｆ ｔａｘａｂｌｅ ｐｒｏｆｉｔ， ａｎｄ ｉｓ ａｃｃｏｕｎｔｅｄ ｆｏｒ ｕ ｓｉｎｇ ｔｈｅ ｂａｌａｎｃｅ ｓｈｅｅｔ ｌｉａｂｉｌｉｔｙ ｍｅｔｈｏｄ． Ｄｅｆｅｒｒｅｄ ｔａｘ ｌｉａｂｉｌｉｔｉｅｓ ａｒｅ ｇｅｎｅｒａｌｌｙ ｒｅｃｏｇｎｉｓｅｄ ｆｏｒ ａｌｌ ｔａｘａｂｌｅ ｔｅｍｐｏｒａｒｙ ｄｉｆｆｅｒｅｎｃｅｓ ａｎｄ ｄｅｆｅｒｒｅｄ ｔａｘ ａｓｓｅｔｓ ａｒｅ ｒｅｃｏｇｎｉｓｅｄ ｔｏ ｔｈｅ ｅｘｔｅｎｔ ｔｈａｔ ｉｔ ｉｓ ｐｒｏｂａｂｌｅ ｔｈａｔ ｔａｘａｂｌｅ ｐｒｏｆｉｔｓ ｗｉｌｌ ｂｅ ａｖａｉｌａｂｌｅ ａｇａｉｎｓｔ ｗｈｉｃｈ ｄ ｅｄｕｃｔｉｂｌｅ ｔｅｍｐｏｒａｒｙ ｄｉｆｆｅｒｅｎｃｅｓ ｃａｎ ｂｅ ｕｔｉｌｉｓｅｄ． Ｓｕｃｈ ａｓｓｅｔｓ ａｎｄ ｌｉａｂｉｌｉｔｉｅｓ ａｒｅ ｎｏｔ ｒｅｃｏｇｎｉｓｅｄ ｉｆ ｔｈｅ ｔｅｍｐｏｒａｒｙ ｄｉｆｆｅｒｅｎｃｅ ａｒｉｓｅｓ ｆｒｏｍ ｇｏｏｄｗｉｌｌ （ｏｒ ｎｅｇａｔｉｖｅ ｇｏｏｄｗｉｌｌ） ｏｒ ｆｒｏｍ ｔｈｅ ｉｎｉｔｉａｌ ｒｅｃｏｇｎｉｔｉｏｎ （ｏｔｈｅｒ ｔｈａｎ ｉｎ ａ ｂｕｓｉｎｅｓｓ ｃｏｍｂｉｎａｔｉｏｎ） ｏｆ ｏｔｈｅｒ ａｓｓｅｔｓ ａ ｎｄ ｌｉａｂｉｌｉｔｉｅｓ ｉｎ ａ ｔｒａｎｓａｃｔｉｏｎ ｔｈａｔ ａｆｆｅｃｔｓ ｎｅｉｔｈｅｒ ｔｈｅ ｔａｘ ｐｒｏｆｉｔ ｎｏｒ ｔｈｅ ａｃｃｏｕｎｔｉｎｇ ｐｒｏｆｉｔ． Ｄｅｆｅｒｒｅｄ ｔａｘ ｌｉａｂｉｌｉｔｉｅｓ ａｒｅ ｒｅｃｏｇｎｉｓｅｄ ｆｏｒ ｔａｘａｂｌｅ ｔｅｍｐｏｒａｒｙ ｄｉｆｆｅｒｅｎｃｅｓ ａｒｉｓｉｎｇ ｏｎ ｉｎｖｅｓｔｍｅｎｔｓ ｉｎ ｓｕｂｓｉｄｉａｒｉｅｓ ａｎｄ ａｓｓｏｃｉａｔｅｓ， ａｎｄ ｉｎｔｅｒｅｓｔｓ ｉｎ ｊｏｉｎｔ ｖｅｎｔｕｒｅｓ， ｅｘｃｅｐｔ ｗｈｅｒｅ ｔｈｅ Ｇｒｏｕｐ ｉｓ ａｂｌｅ ｔｏ ｃｏｎｔｒｏｌ ｔｈｅ ｒｅｖｅｒｓａｌ ｏｆ ｔｈｅ ｔｅｍｐｏｒａｒｙ ｄｉｆｆｅｒｅｎｃｅ ａｎｄ ｉｔ ｉｓ ｐｒｏｂａｂｌｅ ｔｈａｔ ｔｈｅ ｔｅｍｐｏｒａｒｙ ｄｉｆｆｅｒｅｎｃｅ ｗｉｌｌ ｎｏｔ ｒｅｖｅｒｓｅ ｉｎ ｔｈｅ ｆｏｒｅｓｅｅａｂｌｅ ｆｕｔｕｒｅ． Ｔｈｅ ｃａｒｒｙｉｎｇ ａ ｍｏｕｎｔ ｏｆ ｄｅｆｅｒｒｅｄ ｔａｘ ａｓｓｅｔｓ ｉｓ ｒｅｖｉｅｗｅｄ ａｔ ｅａｃｈ ｂａｌａｎｃｅ ｓｈｅｅｔ ｄａｔｅ ａｎｄ ｒｅｄｕｃｅｄ ｔｏ ｔｈｅ ｅｘｔｅｎｔ ｔｈａｔ ｉｔ ｉｓ ｎｏ ｌｏｎｇｅｒ ｐｒｏｂａｂｌｅ ｔｈａｔ ｓｕｆｆｉｃｉｅｎｔ ｔａｘａｂｌｅ ｐｒｏｆｉｔ ｗｉｌｌ ｂｅ ａｖａｉｌａｂｌｅ ｔｏ ａｌｌｏｗ ａｌｌ ｏｒ ｐａｒｔ ｏｆ ｔｈｅ ａｓｓｅｔ ｔｏ ｂｅ ｒｅｃｏｖｅｒｅｄ． 二十二 建设摩托 2003 Annual Report (International) Ｄｅｆｅｒｒｅｄ ｔａｘ ｉｓ ｃａｌｃｕｌａｔｅｄ ａｔ ｔｈｅ ｔａｘ ｒａｔｅｓ ｔｈａｔ ａｒｅ ｅｘｐｅｃｔｅｄ ｔｏ ａｐｐｌｙ ｉｎ ｔｈｅ ｐｅｒｉｏｄ ｗｈｅｎ ｔｈｅ ｌｉａｂｉｌｉｔｙ ｉｓ ｓｅｔｔｌｅｄ ｏｒ ｔｈｅ ａｓｓｅｔ ｒｅａｌｉｓｅｄ． Ｄｅｆｅｒｒｅｄ ｔａｘ ｉｓ ｃｈａｒｇｅｄ ｏｒ ｃｒｅｄｉｔｅｄ ｉｎ ｔｈｅ ｉｎｃｏｍｅ ｓｔａｔｅｍｅｎｔ， ｅｘｃｅｐｔ ｗｈｅｎ ｉｔ ｒｅｌａｔｅｓ ｔｏ ｉｔｅｍｓ ｃｈａｒｇｅｄ ｏｒ ｃｒｅｄｉｔｅｄ ｄｉｒｅｃｔｌｙ ｔｏ ｅｑｕｉｔｙ， ｉｎ ｗｈｉｃｈ ｃａｓｅ ｔｈｅ ｄｅｆｅｒｒｅｄ ｔａｘ ｉｓ ａｌｓｏ ｄｅａｌｔ ｗｉｔｈ ｉｎ ｅｑｕｉｔｙ． 3. PRINCIPAL ACCOUNTING POLICIES (continued) k) Taxation (continued) Ｄｅｆｅｒｒｅｄ ｔａｘ ａｓｓｅｔｓ ａｎｄ ｌｉａｂｉｌｉｔｉｅｓ ａｒｅ ｏｆｆｓｅｔ ｗｈｅｎ ｔｈｅｙ ｒｅｌａｔｅ ｔｏ ｉｎｃｏｍｅ ｔａｘｅｓ ｌｅｖｉｅｄ ｂｙ ｔｈｅ ｓａｍｅ ｔａｘａｔｉｏｎ ａｕｔｈｏｒｉｔｙ ａｎｄ ｔｈｅ Ｇｒｏｕｐ ｉｎｔｅｎｄｓ ｔｏ ｓｅｔｔｌｅ ｉｔｓ ｃｕｒｒｅｎｔ ｔａｘ ａｓｓｅｔｓ ａｎｄ ｌｉａｂｉｌｉｔｉｅｓ ｏｎ ａ ｎｅｔ ｂａｓｉｓ． l) Impairment Ａｔ ｅａｃｈ ｂａｌａｎｃｅ ｓｈｅｅｔ ｄａｔｅ， ｔｈｅ Ｇｒｏｕｐ ｒｅｖｉｅｗｓ ｔｈｅ ｃａｒｒｙｉｎｇ ａｍｏｕｎｔｓ ｏｆ ｉｔｓ ｔａｎｇｉｂｌｅ ａｎｄ ｉｎｔａｎｇｉｂｌｅ ａｓｓｅｔｓ ｔｏ ｄｅｔｅｒｍｉｎｅ ｗｈｅｔｈｅｒ ｔｈｅｒｅ ｉｓ ａｎｙ ｉｎｄｉｃａｔｉｏｎ ｔｈａｔ ｔｈｏｓｅ ａｓｓｅｔｓ ｈａｖｅ ｓｕｆｆｅｒｅｄ ａｎ ｉｍｐａｉｒｍｅｎｔ ｌｏｓｓ． Ｉｆ ａｎｙ ｓｕｃｈ ｉｎｄｉｃａｔｉｏｎ ｅｘｉｓｔｓ， ｔｈｅ ｒｅｃｏｖｅｒａｂｌｅ ａｍｏｕｎｔ ｏｆ ｔｈｅ ａｓｓｅｔ ｉｓ ｅｓｔｉｍａｔｅｄ ｉｎ ｏｒｄｅｒ ｔｏ ｄｅｔｅｒｍｉｎｅ ｔｈｅ ｅｘｔｅｎｔ ｏｆ ｔｈｅ ｉｍｐａｉｒｍｅｎｔ ｌｏｓｓ （ｉｆ ａｎｙ）． Ｗｈｅｒｅ ｉｔ ｉｓ ｎｏｔ ｐｏｓｓｉｂｌｅ ｔｏ ｅｓｔｉｍａｔｅ ｔｈｅ ｒｅｃｏｖｅｒａｂｌｅ ａｍｏｕｎｔ ｏｆ ａｎ ｉｎｄｉｖｉｄｕａｌ ａｓｓｅｔ， ｔｈｅ Ｇｒｏｕｐ ｅｓｔｉｍａｔｅｓ ｔｈｅ ｒｅｃｏｖｅｒａｂｌｅ ａｍｏｕｎｔ ｏｆ ｔｈｅ ｃａｓｈ－ｇｅｎｅｒａｔｉｎｇ ｕｎｉｔ ｔｏ ｗｈｉｃｈ ｔｈｅ ａｓｓｅｔ ｂｅｌｏｎｇｓ． Recoverable amount is the greater of net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre -tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is land or buildings other than investment property carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. 二十三 建设摩托 2003 Annual Report (International) Where an impairment loss subsequently reverses, the carrying amount of the asset (cash -generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in Which case the reversal of the impairment loss is treated as a revaluation increase. 二十四 建设摩托 2003 Annual Report (International) 3. PRINCIPAL ACCOUNTING POLICIES (continued) m) Trade receivables Ｔｒａｄｅ ｒｅｃｅｉｖａｂｌｅｓ ａｒｅ ｓｔａｔｅｄ ａｔ ｔｈｅｉｒ ｎｏｍｉｎａｌ ｖａｌｕｅ ａｓ ｒｅｄｕｃｅｄ ｂｙ ａｐｐｒｏｐｒｉａｔｅ ａｌｌｏｗａｎｃｅｓ ｆｏｒ ｅｓｔｉｍａｔｅｄ ｉｒｒｅｃｏｖｅｒａｂｌｅ ａｍｏｕｎｔｓ． n) Investments in securities Ｉｎｖｅｓｔｍｅｎｔｓ ｉｎ ｓｅｃｕｒｉｔｉｅｓ ａｒｅ ｒｅｃｏｇｎｉｓｅｄ ｏｎ ａ ｔｒａｄｅ－ｄａｔｅ ｂａｓｉｓ ａｎｄ ａｒｅ ｉｎｉｔｉａｌｌｙ ｍｅａｓｕｒｅｄ ａｔ ｃｏｓｔ， ｉｎｃｌｕｄｉｎｇ ｔｒａｎｓａｃｔｉｏｎ ｃｏｓｔｓ． Ａｔ ｓｕｂｓｅｑｕｅｎｔ ｒｅｐｏｒｔｉｎｇ ｄａｔｅｓ， ｄｅｂｔ ｓｅｃｕｒｉｔｉｅｓ ｔｈａｔ ｔｈｅ Ｇｒｏｕｐ ｈａｓ ｔｈｅ ｅｘｐｒｅｓｓｅｄ ｉｎｔｅｎｔｉｏｎ ａｎｄ ａｂｉｌｉｔｙ ｔｏ ｈｏｌｄ ｔｏ ｍａｔｕｒｉｔｙ （ｈｅｌｄ－ｔｏ－ｍａｔｕｒｉｔｙ ｄｅｂｔ ｓｅｃｕｒｉｔｉｅｓ） ａｒｅ ｍｅａｓｕｒｅｄ ａｔ ａｍｏｒｔｉｓｅｄ ｃｏｓｔ， ｌｅｓｓ ａｎｙ ｉｍｐａｉｒｍｅｎｔ ｌｏｓｓ ｒｅｃｏｇｎｉｓｅｄ ｔｏ ｒｅｆｌｅｃｔ ｉｒｒｅｃｏｖｅｒａｂｌｅ ａｍｏｕｎｔｓ． Ｔｈｅ ａｎｎｕａｌ ａｍｏｒｔｉｓａｔｉｏｎ ｏｆ ａｎｙ ｄｉｓｃｏｕｎｔ ｏｒ ｐｒｅｍｉｕｍ ｏｎ ｔｈｅ ａｃｑｕｉｓｉｔｉｏｎ ｏｆ ａ ｈｅｌｄ－ｔｏ－ｍａｔｕｒｉｔｙ ｓｅｃｕｒｉｔｙ ｉｓ ａｇｇｒｅｇａｔｅｄ ｗｉｔｈ ｏｔｈｅｒ ｉｎｖｅｓｔｍｅｎｔ ｉｎｃｏｍｅ ｒｅｃｅｉｖａｂｌｅ ｏｖｅｒ ｔｈｅ ｔｅｒｍ ｏｆ ｔｈｅ ｉｎｓｔｒｕｍｅｎｔ ｓｏ ｔｈａｔ ｔｈｅ ｒｅｖｅｎｕｅ ｒｅｃｏｇｎｉｓｅｄ ｉｎ ｅａｃｈ ｐｅｒｉｏｄ ｒｅｐｒｅｓｅｎｔｓ ａ ｃｏｎｓｔａｎｔ ｙｉｅｌｄ ｏｎ ｔｈｅ ｉｎｖｅｓｔｍｅｎｔ． Ｉｎｖｅｓｔｍｅｎｔｓ ｏｔｈｅｒ ｔｈａｎ ｈｅｌｄ－ｔｏ－ｍａｔｕｒｉｔｙ ｄｅｂｔ ｓｅｃｕｒｉｔｉｅｓ ａｒｅ ｃｌａｓｓｉｆｉｅｄ ａｓ ｅｉｔｈｅｒ ｈｅｌｄ ｆｏｒ ｔｒａｄｉｎｇ ｏｒ ａｖａｉｌａｂｌｅ－ｆｏｒ－ｓａｌｅ ａｎｄ ａｒｅ ｍｅａｓｕｒｅｄ ａｔ ｓｕｂｓｅｑｕｅｎｔ ｒｅｐｏｒｔｉｎｇ ｄａｔｅｓ ａｔ ｆａｉｒ ｖａｌｕｅ． Ｗｈｅｒｅ ｓｅｃｕｒｉｔｉｅｓ ａｒｅ ｈｅｌｄ ｆｏｒ ｔｒａｄｉｎｇ ｐｕｒｐｏｓｅｓ， ｕｎｒｅａｌｉｓｅｄ ｇａｉｎｓ ａｎｄ ｌｏｓｓｅｓ ａｒｅ ｉｎｃｌｕｄｅｄ ｉｎ ｎｅｔ ｐｒｏｆｉｔ ｏｒ ｌｏｓｓ ｆｏｒ ｔｈｅ ｐｅｒｉｏｄ． Ｆｏｒ ａｖａｉｌａｂｌｅ－ｆｏｒ－ｓａｌｅ ｉｎｖｅｓｔｍｅｎｔｓ， ｕｎｒｅａｌｉｓｅｄ ｇａｉｎｓ ａｎｄ ｌｏｓｓｅｓ ａｒｅ ｒｅｃｏｇｎｉｓｅｄ ｄｉｒｅｃｔｌｙ ｉｎ ｅｑｕｉｔｙ， ｕｎｔｉｌ ｔｈｅ ｓｅｃｕｒｉｔｙ ｉｓ ｄｉｓｐｏｓｅｄ ｏｆ ｏｒ ｉｓ ｄｅｔｅｒｍｉｎｅｄ ｔｏ ｂｅ ｉｍｐａｉｒｅｄ， ａｔ ｗｈｉｃｈ ｔｉｍｅ ｔｈｅ ｃｕｍｕｌａｔｉｖｅ ｇａｉｎ ｏｒ ｌｏｓｓ ｐｒｅｖｉｏｕｓｌｙ ｒｅｃｏｇｎｉｓｅｄ ｉｎ ｅｑｕｉｔｙ ｉｓ ｉｎｃｌｕｄｅｄ ｉｎ ｔｈｅ ｎｅｔ ｐｒｏｆｉｔ ｏｒ ｌｏｓｓ ｆｏｒ ｔｈｅ ｐｅｒｉｏｄ． o) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. 二十五 建设摩托 2003 Annual Report (International) All other borrowing costs are recognised in net profit or loss in the period in which they are incurred. 3. PRINCIPAL ACCOUNTING POLICIES (continued) p) Trade payables Ｔｒａｄｅ ｐａｙａｂｌｅｓ ａｒｅ ｓｔａｔｅｄ ａｔ ｔｈｅｉｒ ｎｏｍｉｎａｌ ｖａｌｕｅ． q) Cash equivalents Ｆｏｒ ｔｈｅ ｐｕｒｐｏｓｅ ｏｆ ｔｈｅ ｃｏｎｓｏｌｉｄａｔｅｄ ｃａｓｈ ｆｌｏｗ ｓｔａｔｅｍｅｎｔ， ｃ ａｓｈ ｅｑｕｉｖａｌｅｎｔｓ ｒｅｐｒｅｓｅｎｔ ｓｈｏｒｔ－ｔｅｒｍ ｈｉｇｈｌｙ ｌｉｑｕｉｄ ｉｎｖｅｓｔｍｅｎｔｓ ｗｈｉｃｈ ａｒｅ ｒｅａｄｉｌｙ ｃｏｎｖｅｒｔｉｂｌｅ ｉｎｔｏ ｋｎｏｗｎ ａｍｏｕｎｔｓ ｏｆ ｃａｓｈ ａｎｄ ｗｈｉｃｈ ｗｅｒｅ ｗｉｔｈｉｎ ｔｈｒｅｅ ｍｏｎｔｈｓ ｏｆ ｍａｔｕｒｉｔｙ ｗｈｅｎ ａｃｑｕｉｒｅｄ； ｌｅｓｓ ａｄｖａｎｃｅｓ ｆｒｏｍ ｂａｎｋ ｒｅｐａｙａｂｌｅ ｗｉｔｈｉｎ ｔｈｒｅｅ ｍｏｎｔｈｓ ｆｒｏｍ ｔｈｅ ｄａｔｅ ｏｆ ｔｈｅ ａｄｖａｎｃｅ． 4. TURNOVER, NET Turnover represents the amount received and receivable for goods sold, less returns and allowances. 5. SEGMENTAL INFORMATION As the group is principally engaged in the manufacturing and sales of motorcycles, no segmental information is presented. The following table presents an analysis of the Group’s sales by geographical locations. In determining the Group’ s geographical segments, revenues are attributed to the segments based on the location of the customers. No 二十六 建设摩托 2003 Annual Report (International) geographical segment information regarding the assets of the Group is presented as all of the Group’ s assets are located in the People’s Republic of China. 2004 2003 RMB’000 RMB’000 The People’ s Republic of China 1,553,516 974,809 Other countries in Asia 183,759 239,848 Africa 46,753 127,899 Europe, Australia 41,938 20,229 Others 25,009 21,931 Total 1,850,975 1,384,716 二十七 建设摩托 2003 Annual Report (International) 6. OTHER INCOME, NET 2004 2003 RMB’000 RMB’000 Trademark income 11,500 10,259 Technology consultant fee income 3,200 3,200 Gain on disposal of property, plant and equipment (182) (1,052) Operating lease income, net 14,973 7,984 Sales of materials 12,656 14,843 Accounts payable written off 6,893 - Other income/(loss), net 1,185 (2,977) 43,236 39,246 7. PROFIT FROM OPERATIONS Profit from operations have been arrived at after charging/(crediting): 2004 2003 RMB’000 RMB’000 二十八 建设摩托 2003 Annual Report (International) Audit fee 1,657 760 Depreciation of property, plant and equipment 56,232 52,149 Write-back of provision for obsolete inventory (19,628) (52,259) Provision for bad debts 11,298 14,576 Write-back of impairment loss on property, plant and equipment － (3,020) Loss on disposal of property, plant and equipment, net 182 1,052 Staff costs 23,390 30,944 8. FINANCE COSTS 2004 2003 RMB’000 RMB’000 Interest expenses 44,193 39,156 Other 4,249 1,947 48,442 41,103 二十九 建设摩托 2003 Annual Report (International) 9. INVESTMENT INCOME, NET 2004 2003 RMB’000 RMB’000 Interest income 21,946 10,898 Loss on disposal of associates － (114) 21,946 10,784 10. TAXATION 2004 2003 RMB’000 RMB’000 Deferred tax credit (note 21) (1,996) (1,993) As the Company’s subsidiary Shenzhen South Mould Factory, was incorporated in Shenzhen, it is entitled to Enterprise Income Tax (“EIT”) at the rate of 15% according to the relevant regulations, while the Company and other subsidiaries of the Group are subject to EIT at the rate of 33% according to the local tax regulations The charge for the year can be reconciled to profit/(loss) per the income statement as follows： 2004 2003 三十 建设摩托 2003 Annual Report (International) RMB’000 RMB’000 Accounting profit/(loss) 37,146 11,700 Expenses that are not deductible in determining taxable profit (8,330) (40,703) Taxable profit 28,816 (29,003) Offset losses brought forward from previous years (28,816) - Deferred tax credit (1,996) (1,993) Tax expense (1,996) (1,993) 11. EARNINGS PER SHARE Earnings per share was calculated based on the consolidated net profit for the year ended 31 December, 2004 of RMB38,573,000 (2003: net profit for the year of RMB11,799,000) divided by 477,500,000 shares as at 31 December, 2004 (2003: 477,500,000 shares). 三十一 建设摩托 2003 Annual Report (International) 12. PROPERTY, PLANT AND EQUIPMENT Motor vehicles Construction in Land and Investment Machinery and and other progress buildings properties equipment equipment Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Cost At 1 January, 2004 146 113,801 35,497 793,296 9,939 952,679 Additions 6,031 5,362 - 112,496 7,147 131,036 Acquisition of subsidiary - 9,857 - 2,847 602 13,306 Disposals (4,556) - (35,497) (1,600) (196) (41,849) At 31 December, 2004 1,621 129,020 - 907,039 17,492 1,055,172 Accumulated depreciation and impairment - At 1 January, 2003: - 47,083 473,985 6,025 527,093 Additions - 3,102 - 88,889 1,574 93,565 Acquisition of subsidiary - 273 - 269 73 615 Disposals - - - (1,088) (101) (1,189) At 31 December, 2003 - 50,458 - 562,055 7,571 620,084 三十二 建设摩托 2003 Annual Report (International) Net book value 31 December, 2004 1,621 78,562 - 344,984 9,921 435,088 31 December, 2003 146 66,718 35,497 319,311 3,914 425,586 Land and buildings with net book value of RMB45,557,000 (2003: RMB48,472,000) was injected by Jianshe Group on incorporation. The transfer of ownership is still in progress. The directors consider that the carrying amount of properties, plant and equipment approximates their fair value. The Group did not earn any property rental income from its investment property leased out under operating leases. (2003: RMB400,000). 三十三 建设摩托 2003 Annual Report (International) 13. LAND USE RIGHT 1 January, Additions Amortizations 31 December, 2004 Remaining term 2004 Land use right - 3,625 12 3,613 49.25 Less: impairment - loss - - 3,613 Land use rights represented land located in Shanghai PRC. The land use right is held for a period of 49 years up to February, 2054. 14. INTERESTS IN ASSOCIATES 2004 2003 RMB’000 RMB’000 Unlisted investments, at cost 73,026 73,026 Share of post-acquisition result, net of dividend (930) (1,114) 72,096 71,912 Details of the Group’ s associates as 31 December, 2004 are as follows: Name of Associate Place of incorporation Percentage of Voting right Principal activities 三十四 建设摩托 2003 Annual Report (International) and operation equity interest held % % Chongqing Jianshe Chu Wan Co., Ltd. Transportation and Chongqing 20(Indirect) 20(Indirect) storage (“Chongqing Jianshe Chu Wan”) Huhehaote Jianshe Motorcycle Co., Ltd Sales of motorcycles Huhehaote 40(Indirect) 40(Indirect) and components (“Huhehaste Jianshe”) Chongqing Pingshan Taikai Oil & Manufacture and Chongqing 49 49 sales of carburetors Gas Co., Ltd. (Pingshan Taikai”) 15. OTHER INVESTMENT Unlisted investment held for resale 2004 2003 RMB’000 RMB’000 At cost 14,053 14,053 Less: impairment loss (1,141) (1,141) 12,912 12,912 16. OTHER ASSETS 三十五 建设摩托 2003 Annual Report (International) 2004 2003 Notes RMB’000 RMB’000 Accounts receivable to be swapped out (a) 52,211 67,170 Assets swapped in － 9,531 Other assets 595 230 52,806 76,931 In December, 2004, the Company entered into an “Assets Swap Agreement” and “Share Transfer Agreement” with Jianshe Group. Under the agreement, the Company’s subsidiary, Import & Export Co.’ s accounts receivable amounting to RMB52,211,000, is to be swapped for 50% of shareholding of Chongqing Jianshe Yamaha Motorcycle Co., Ltd. and Zhuzhou Jianshe Yamaha Motorcycle Co., Ltd. held by Jianshe Group, air conditioning equipment, motor testing and development equipment. As of 31 December, 2004, the transaction was still in progress (See Note 25B(b)). 17. INVENTORIES 2004 2003 RMB’000 RMB’000 Raw materials 103,879 64,467 Work-in-progress 43,823 36,305 Finished goods 122,776 139,099 三十六 建设摩托 2003 Annual Report (International) 270,478 239,871 Included above are raw materials of RMB2,174,000 and finished goods of RMB38,628,000(2003：raw materials of RMB 2,288,000,working-in-progress of RMB3,775,000 and finished goods of RMB77,248,000)carried at the net realizable value. 18. ACCOUNTS RECEIVABLE, PREPAYMENTS AND OTHER RECEVIABLES 2004 2003 RMB’000 RMB’000 Accounts receivable, prepayments and other receivables 464,509 467,795 Accounts receivable, prepayments and other receivables comprise the amounts receivable from the sale of goods of RMB 168,133,000 (2003: RMB207,937,000), and the amounts due from holding company and related company (See note 25C). The directors consider that the carrying amount of accounts receivable, prepayments and other receivables approximate their fair value. 19. SHORT-TERM LOANS 2004 2003 RMB’000 RMB’000 三十七 建设摩托 2003 Annual Report (International) Bank loan -Secured 18,100 8,700 -Unsecured 693,170 626,700 711,270 635,400 The short-term bank loans were secured by property, plant and equipment with net book value of RMB20,941,000 (2003: RMB11,755,000). Unsecured bank loans of RMB454,900,000 (2003: RMB508,500,000) were guaranteed by Jianshe Group. These bank loans bear interest at rates ranging from 4.23% to 6.37% per annum. 20. LONG-TERM LOANS 2004 2003 RMB’000 RMB’000 Bank loan –unsecured - 2,000 21. DEFERRED TAX LIABILITY 2004 2003 RMB’000 RMB’000 Balance of deferred tax arising from the revaluation 19,933 19,933 三十八 建设摩托 2003 Annual Report (International) surplus of fixed assets Deferred tax impact to prior years (17,937) (15,944) Deferred tax impact to current year (Note 10) (1,996) (1,993) - 1,996 22. SHARE CAPITAL 2004 2003 Shares’000 RMB’000 Shares’000 RMB’000 Unlisted share of RMB 1 each 357,500 357,500 357,500 357,500 B shares (listed) of RMB 1 each 120,000 120,000 120,000 120,000 Total 477,500 477,500 477,500 477,500 23. RESERVES 2004 2003 RMB’000 RMB’000 Share premium 384,579 384,579 三十九 建设摩托 2003 Annual Report (International) Revaluation reserves 122,770 122,770 Statutory revenue reserves 32,070 32,070 Statutory common welfare fund 24,654 24,654 Discretionary reserve fund 68,962 68,962 Accumulated losses (899,906) (938,479) (266,871) (305,444) 四十 建设摩托 2003 Annual Report (International) 23. RESERVES (continued) According to the Company Law of the PRC and Articles of Association of the Company, the Company is required to provide certain statutory reserves, which are appropriated from the net profit as reported in the statutory accounts. Accordingly, the Company shall set aside 10% of its net profit for statutory revenue reserve (except where the fund has reached 50% of the Company's registered capital) and 5% to 10% for the statutory common welfare fund. The Company may make appropriations from its net profit to the discretionary reserve fund upon approval by shareholders. These reserves cannot be used for purposes other than those of which they are created and could not be distributed as cash dividends without the prior approval by shareholders under certain conditions. When the statutory revenue reserve is not sufficient to cover the prior years' losses, the current year's net profit shall first be used to compensate the previous losses before the appropriations to the statutory revenue reserve and statutory common welfare fund. The statutory common welfare fund is designated for collective welfare of the employees. The statutory revenue reserve, discretionary reserve, share premium and revaluation reserves, if approved by shareholders, may be converted into share capital provided that the balance of the statutory reserve does not fall below 25% of the registered share capital. The Company may either distribute new shares in proportion to the number of shares held by shareholders, or increase the par value of each share. In accordance with the Articles of Association of the Company, the Company declares dividends based on the lower of retained earnings as reported in the statutory accounts prepared in accordance with PRC GAAP and the financial statements prepared in accordance with IFRS. As the statutory accounts have been prepared in accordance with PRC GAAP, the retained earnings as reported in the statutory accounts will be different from the amount reported in the accompanying consolidated statement of changes in equity. For the year ended 31 December, 2004, the Company reported accumulated losses of RMB972,765,000 and RMB899,906,000 in accordance with PRC GAAP and IFRS ,respectively (2003: accumulated losses RMB999,418,000 and RMB938,479,000 ,respectively). Pursuant to the resolution of the Board of Directors, the Company did not declare any profit for distribution. The resolution is subject to the approval by the shareholders in the forth coming annual general meeting. 四十一 建设摩托 2003 Annual Report (International) 24.ACQUISITION OF SUBSIDIARIES During the year, the Group acquired two subsidiaries: 2004 2003 RMB’000 RMB’000 Net assets acquired: Property, plant and equipment 12,570 73 Inventories - 16,961 Accounts receivable, prepayments and other receivable 702 204,588 Cash and bank balances 685 104,696 Intangible assets 3,625 Other assets - 6,459 Notes payable - (70,334) Accounts payable and other payable (12,582) (79,430) Short term loans - (119,000) 5,000 64,013 Less: minority interests (2,450) (6,401) 2,550 57,612 四十二 建设摩托 2003 Annual Report (International) Add: goodwill 4,080 - 6,630 57,612 Satisfied by: Cash/asset swap 6,630 57,612 25. RELATED PARTY TRANSACTIONS The Board of Directors are of the opinion that a complete list of the particulars of related companies will be of excessive length and therefore the list below contains only the particulars of those related companies which principally affect the results or net assets of the Group. A. Relationship Company Relationship Jianshe Industries (Group) Corporation (“Jianshe Group”) Holding company * Chongqing Jianxing Machinery & Fabrication Co., Ltd. Shareholder of holding company (“Jianxing Machinery”) 四十三 建设摩托 2003 Annual Report (International) Chongqing Jinjian Auto Air-Conditioner Co., Ltd. Subsidiary of holding company (“Jinjian Air-Condition ”) Huhehaote Jianshe Motorcycle Sales Co., Ltd. Associate of the Group (“Huhehaote Jianshe Sales”) Chongqing Jianshe YAMAHA Motorcycle Co., Ltd. Joint venture of holding company (“Jianshe YAMAHA”) Jianshe Industry (Group) Shanghai Company Joint venture of holding company (“Shanghai Company”) Chongqing Pingshan Taikai Oil & Gas Co., Ltd. Associate of the Group (Pingshan Taikai”) Chongqing New Modern Motorcycle Co., Ltd. Other investment of the Group (“Chongqing New Modern”) Chongqing Jianshe Chu Wan Co., Ltd. Subsidiary of holding company (“Jianshe Chu Wan”) * Jianshe Group and Weapon Equipment Group Corporation of China, entered into a “Share transfer agreement”on 3 December, 2004 and an “Supplement to the share transfer agreement” on 22 January 2005. According to the agreement and supplement, Jianshe Group will transfer the 339,625,000 of the Company’s shares to Weapon Equipment Group Corporation of China,. The transfer was approved by the China Stated-owned Assets Supervision on 9 March, 2005, and pending approval by China Securities Regulatory Commission. After the completion of the share transfer, Weapon Equipment Group Corporation of China, will become the holding company of the Company, Jianshe Group will remain as a related company of the Company. Up to 31 December 2004, the Jianshe Group is still treated as the holding company. 四十四 建设摩托 2003 Annual Report (International) 25. RELATED PARTY TRANSACTIONS (continued) B. Significant transactions (a) During the year ended 31 December, 2004, the Group had the following transactions with Jianshe group and other related companies: Year ended 31 December Transaction Related parties 2004 2003 RMB’000 RMB’000 Jianshe Group − Purchase of components and raw materials 223,297 132,138 − Subcontracting fees 16,155 12,574 − Sales of motorcycles and components, 281,215 274,881 service fees − Acquisition of property, plant and equipment 30,419 680 − Sales of property, plant and equipment 33,395 - − Service and processing income 424 - − Rental income 24,129 24,700 − Interest income 12,995 8,011 − Deferred consideration 52,211 67,170 − Sales of assets swapped in 11,594 - Jinjian Auto Air-Conditioner − Purchase of components and raw materials - 1,146 四十五 建设摩托 2003 Annual Report (International) − Sales of raw materials - 9,168 − Provision of services - 1,422 Jianxing Machinery − Purchases of components and raw materials 14,880 10,802 − Sales of raw materials and work-in-progress 2,600 - Jianshe YAMAHA − Purchases of components and raw materials 28,118 26,192 − Sales of components 23,338 17,582 Pingshan Taikai − Purchases of components and raw materials 10,352 11,283 Chongqing New Modern − Trademark income 8,000 8,000 − Technology consultant income 3,200 3,200 − Sales of work-in-progress 7,455 3,173 Huhehaote Jianshe Sales − Sales of finished goods 26,176 13,150 Jianshe Chu Wan − Purchases of components and raw materials 2,532 - − Sales of raw materials and work-in-progress 755 - − Subcontracting fees 8,411 8,856 The above transactions were carried out at estimated fair market price. 四十六 建设摩托 2003 Annual Report (International) 25. RELATED PARTY TRANSACTIONS(continued) (b) ASSETS SWAP WITH JIANSHE GROUP In December 2004, the Company entered into an “Assets Swap Agreement”and “Share Transfer Agreement”with Jianshe Group. Under the agreement, the Company’s subsidiary, Import & Export Co.’s accounts receivable amounting to RMB52,211,000, “Swapped-out asset”, is to be swapped for 50% of shareholding of Chongqing Jianshe Yamaha Motorcycle Co., Ltd. and Zhu zhou Jianshe Yamaha Motorcycle Co., Ltd. held by Jianshe Group, and air conditioning equipment and motor testing and development equipment, “Swapped-in assets”. The consideration was arrived at on the basis of a valuation carried out by an independent valuer jointly appointed by both parties, the difference of the values of the swapped-out asset and swapped-in assets is to be paid in cash by the other party. Accordingly, Messrs. Chongqing Kanghua Certified Public Accountants, were then engaged by both parties to carry out a valuation at the valuation date of 31 October 2004 for the assets swap. According to the valuation report “重 康会评报字(2004)第 65 号” issued by the valuer, the swapped-out asset was valued at RMB52,211,000. According to the valuation report “重康会评报字(2004)第 33-1 号, 第 33-2 号, 第 33-3 号”issued by the valuer, the swapped-in assets were revalued at RMB 434,141,000. The Company will settle the transaction by the swapped-out asset of RMB 52,210,000 and cash of RMB 381,930,000. At the same time, United securities corporation co., LTD. has issued an independent financial consultancy report over the Company’s asset swap related party transaction on 29 December 2004.. The above asset swap has to be approved by China Securities Regulatory Commission, then by the shareholders of the Company, Chongqing Jianshe Yamaha Motorcycle Co., Ltd. and Zhu Zhou Jianshe Yamaha Motorcycle Co., Ltd. (c) Accepting guarantee Ａｓ ａｔ ３１ Ｄｅｃｅｍｂｅｒ ２００４， ｔｈｅ Ｇｒｏｕｐ’ｓ ｓｈｏｒｔ－ｔｅｒｍ ｌｏａｎｓ ｏｆ ＲＭＢ４５４，９９０，０００ （２００３：ＲＭＢ５０８，５００，０００） ｗｅｒｅ ｇｕａｒａｎｔｅｅｄ ｂｙ Ｊｉａｎｓｈｅ Ｇｒｏｕｐ． 四十七 建设摩托 2003 Annual Report (International) 25. RELATED PARTY TRANSACTIONS (continued) C. Amounts due from/to related parties 2004 2003 RMB’000 RMB’000 (i) Amounts due from related companies Jianshe group 258,300 205,734 Shanghai Company - 16,648 Jianxing Machinery 12,506 - (ii) Amounts due to related companies Jianxing Machinery 4,954 1,500 Pingshan Taikai 5,477 5,049 Chongqing New Modem 7,754 41,238 Jinjian Auto Air-Conditioner - 5,053 Chongqing Jianshe Chu Wan 1,824 1,050 (iii) Notes payable to 四十八 建设摩托 2003 Annual Report (International) Jinjian Auto Air-Conditioner - 90,625 Jianshe Group 177,680 58,700 Chongqing New Modern - 19,000 The amount due from Jianshe Group bears interest at bank interest rate. (2003: same as bank rate). The amount due to related companies are interest free, unsecured and have no fixed terms of repayment. During the year, the Jianshe Group issued bills receivable to the Company amounting to approximately RMB805,945,000, the Company discounted the bills to bank and advanced the fund to the Jianshe Group. According to the agreement, those expenses arising from the discounted bills have been borne by Jianshe Group. 四十九 建设摩托 2003 Annual Report (International) 26. RETIREMENT BENEFITS SCHEME The Group participates in a retirement benefit scheme arrangement for its employees which is managed by Chongqing Jiulongpo Social Insurance Burean. The Group has obligations to make monthly contributions to the scheme, and the Chongqing Jiulongpo Social Insurance Burean is responsible for the retirement benefit scheme in all other aspects. For the year, the Group paid for the contribution of the benefit retirement scheme amounting to RMB2,965,000 (2003: RMB 4,380,000). 27. PLEDGE OF ASSETS Property, plant and equipment with the net book value of RMB20,941,000 (2003: RMB11,755,000) of the Group have been pledged as security for short-term loans of RMB18,100,000 (2003: RMB8,700,000). Deposits pledges as security for notes payable amounted to RMB720,150,000 (2002: RMB336,650,000). 28. CONTINGENT LIABILITIES At the balance sheet date, there was no undisclosed material contingent liability (In 2003, RMB 170,000,000 guarantee was provided to the Group for the bank loan). 五十 建设摩托 2003 Annual Report (International) 29. IMPACTS OF IFRS ADJUSTMENTS ON NET PROFIT AND SHAREHOLDERS’EQUITY Net profits/(losses) Shareholders’equity Year ended 31 December Year ended 31 December 2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000 As reported in the statutory accounts of the Group (under PRC GAAP) 26,653 15,925 209,268 165,569 Depreciation (4,168) (1,108) 14,446 18,614 Business tax and value-added tax — (5,963) — － Interest income and rental income 8,590 9,086 — － of related parties Difference on investment (2,897) (10,649) (13,546) (10,649) Accounts payable written off 6,893 － — Minority interest (57) 518 461 518 Other income 1,563 1,997 — － Deferred tax 1,996 1,993 — (1,996) As restated under IFRS 38,573 11,799 210,629 172,056 30. COMPARATIVE FIGURES 五十一 建设摩托 2003 Annual Report (International) Certain comparative amounts have been reclassified to conform with the current year's presentation, as in the opinion of the directors, such classification would produce a more appropriate presentation of the Group’s financial position. 31. LANGUAGE The report is originally prepared in Chinese. In the event of a conflict between this English translation and the original Chinese version or difference in interpretation between the two versions of the report, the Chinese language report shall prevail. 五十二