建车B(200054)ST建摩Ｂ2004年年度报告摘要（英文版）

Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. Chongqing Jianshe Motorcycle Co., Ltd. Annual Report 2004 Summary (International) §1 Important Declaration 1.1 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. This text is abstracted from the complete Annual Report, for details please read the complete version of the Annual Report. 1.2 Directors presented the meeting raised no objection on this report 1.3 Directors absented from the Board meeting Name of the Reason for absent Consignees Director He Tongwei On business travel Bai Baolin Meng Weidong On business travel Xu Mingyue 1.4 Shenzhen Nanfang-Minhe Certified Public Accountants issued standard auditing report without qualified opinion. 1.5 Mr. Chen Yongqiang, the Chairman of Board, Mr. Qiu Lin, the Deputy General Manager and Mr. Teng Feng, the Chief Financial Officer hereby declares their responsibilities for the truthfulness and completeness of the Financial Statement carried in this report. §2 Company Profile 2.1 Company Profile Stock ID ST Jianmo B Stock Code 200054 Stock Exchange Shenzhen Stock Exchange Registered address Registered address: 47 Xiejiawan Zhengjie Jiulongpo District, Chongqing and office address Office Address: 47 Xiejiawan Zhengjie Jiulongpo District, Chongqing Post Code: 400050 Post Code Post Code: 400050 Website: http://www.jianshe.com.cn Email. cqjsmc@jianshe.com.cn 1 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. 2.2 Contacts Secretary of the Board Name Ju Bing No. 47 Xiejiawan Zhengjie, Jiulongpo Address District, Chongqing Tel. 023-68676987 Fax. 023-68676987 Email. cqjsmc@jianshe.com.cn §3 Financial Highlights 3.1 Major accounting data In RMB Yuan Increase/decrease 2004 2003 from the previous year 2002 (%) Major business １，８５０，９７５，０００．００ 1,384,716,000.00 ３３．６７％ 488,950,000.00 turnover Gross profit ３７，１４６，０００．００ 11,700,000.00 ２１７．４９％ -136,815,000.00 Net profit ３８，５７３，０００．００ 11,799,000.00 ２２６．９２％ -134,748,000.00 Net profit deducted non-recurring ５，３６２，０００．００ -53,711,000.00 １０９．９８％ -144,720,000.00 gain/loss Net Cash flow generated by business １８１，４０２，０００．００ 199,612,000.00 －９．１２％ -24,591,000.00 operation Increase/decrease End of 2004 End of 2003 End of 2002 (%) Gross Assets ２，５３２，２１６，０００．００ 1,717,668,000.00 ４７．４２％ 1,100,988,000.00 Shareholders’Equity (Exclude Minority ２１０，６２９，０００．００ 172,056,000.00 ２２．４２％ 160,257,000.00 Shareholders’Equity) 3.2 Major financial indices In RMB Yuan Increase/decrease 2004 2003 from the previous year 2002 (%) Earnings per share ０．０８ 0.02 ３０３．９１％ -0.32 Earnings per share ０．０８ - － - (Note) Net earnings / capital １８．３１％ 7.00% １６１．６２％ -92.62% ratio Net profit/asset ratio on net profit less ２．５５％ -31.22% １０８．１５％ -68.00% non-recurring gain/loss Net Cash flow per ０．３８ 0.42 －９．５５％ -0.05 share generated by 2 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. business operation Increase/decrease End of 2004 End of 2003 End of 2002 (%) Net asset per share ０．４４ 0.36 ２２．５３％ 0.34 Net asset per share, ０．４４ 0.24 ８２．０３％ 0.32 adjusted Note: In case of the capital share has been changed at the date of this report comparing with that of at the beginning of report term, the new capital shares will be adopted in accounting of earnings per share. 3.3 Diversity between the Domestic and the International Accounting Standards √ applicable □ not applicable In RMB Yuan Domestic Accounting Standard Overseas accounting standard: Net profit ２６，６５３，０００．００ ３８，５７３，０００．００ Under “Corporation Accounting Standard” 26,653,000.00 Plus: Depreciation (4,167,000.00) Diversity of related transactions 8,590,000.00 Statement about the Diversity of equity investment (2,897,000.00) diversity Account payable not need to be paid 6,893,000.00) Minor shareholders’equity (57,000.00) Other gain/loss 1,562,000.00 Deferred tax 1,996,000.00 §4 Changes in Share Capital & Particulars about Shareholders 4.1. Statement of Changes in Shares In shares Before the changeChanged (+,-) After the changed Sub-total I. None negotiable shares 1. Promoter’s shares ３５７，５００，０００ ０ ３５７，５００，０００ Incl. State-owned shares 0 0 0 Domestic legal person shares ３５７，５００，０００ ０ ３５７，５００，０００ Overseas legal person shares 0 0 0 Others 0 0 0 2. Legal person shares placed 0 0 0 3. Employees’shares 0 0 0 4. Preference shares or others 0 0 0 Total of non-negotiable shares ３５７，５００，０００ ０ ３５７，５００，０００ II. Negotiable shares 1. Common shares in RMB 0 0 0 2. Foreign shares in domestic market １２０，０００，０００ ０ １２０，０００，０００ 3. Foreign shares in overseas market 0 0 0 4. Others 0 0 0 Total of negotiable shares １２０，０００，０００ ０ １２０，０００，０００ III. Total of capital shares ４７７，５００，０００ ０ ４７７，５００，０００ 3 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. Shares allotted from foundations, employees’shares traded on site, shares allotted to strategic investors, and shares allotted to common legal persons shall be presented their amount. □applicable √ not applicable 4.2 Top Ten Shareholders and Top Ten Negotiable Share Holders Total shareholders at the 18,960 end of the report period Top Ten Shareholders Shares held at Full name of Changed in the Property of the end of Proportion % Class of share Pledged or frozen shareholder term shareholder report term Jianshe Industry Non-negotiabl 0 339,625,000 71.13% 0State-owned (Group) Co., Ltd. e China Northern Non-negotiabl Industry Shenzhen 0 17,875,000 3.74% State-owned e Company HARUHIKO 1,437,336 0.30%Negotiable Others SUZUKI Shen Guo 1,317,336 0.28%Negotiable Others SEUNG YEOL 1,038,325 0.22%Negotiable Others PARK TANG JING 914,500 0.19%Negotiable Others YUAN Liu Bingtian 766,603 0.16%Negotiable Others Yang Yang 715,500 0.15%Negotiable Others Lie Zhidong 696,000 0.15%Negotiable Others Chen Yune 616,000 0.13%Negotiable Others Top Ten Shareholders of Negotiable Shares Negotiable shares held at the end of Full name of shareholder Share categories (A, B, H or others) report term HARUHIKO SUZUKI 1,437,336B shares Shen Guo 1,317,336B shares SEUNG YEOL PARK 1,038,325B shares TANG JING YUAN 914,500B shares Liu Bingtian 766,603B shares Yang Yang 715,500B shares Lie Zhidong 696,000B shares Chen Yune 616,000B shares Li Jianping 603,935B shares Wang Qilin 598,429B shares Notes to relationship or “action in The Company don’t know whether there is any related relationship among concert”among the top ten the above shareholders, neither any “Action in Concert”in as set out by shareholders. “Information Disclosing Regulations for Changing of Shareholding Status”. 4.3 Change in Controlling Shareholder and the Actual Controller 4.3.1 Change in Controlling Shareholder and the Actual Controller □applicable √ not applicable 4.3.2 Profile of the Controlling Shareholder and the Actual Controller Jianshe Industry (Group) Co., Ltd., the contolling shareholder of the Company was incorporated on September 9th, 4 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. 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. 4.3.3 Diagram of the controlling relationship between the Company and actual controller State-owned Property Administrative Committee 100% China Military Equipment Group Co. 100% Jianshe Industry (Group) Co., Ltd. 71.13% Chongqing Jianshe Motorcycle Co., Ltd. 5 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. §5 Directors, Supervisors and Senior Executives 5.1 Changes in Shares Held by Directors, Supervisors and Senior Executives Shares held at Shares held at Causation of Name Position Gender Age Job Term the beginning the end of change of term term Chen Yongqiang Chairman M 51 Since Feb.26 2003 0 0 Qiu Lin Director M 42 Since May 23rd 2002 0 0 Xi Zhengxing Director M 48 Since May 23rd 2002 0 0 Li Zhencheng Director M 53 Since May 23rd 2002 0 0 Bai Baolin Director M 56 Since May 23rd 2002 0 0 He Tongwei Director M 57 Since May 23rd 2002 0 0 Sun Fangcheng Independent M 42 Since May 23rd 2002 0 0 Director Meng Weidong Independent M 41 Since May 23rd 2002 0 0 Director Independent M Xu Mingyue 42 Since Feb.26 2003 0 0 Director Independent M Zhu Zhiyong 40 Since Feb.26 2003 0 0 Director rd Lu Hongxian Supervisor M 36 Since May 23 2002 0 0 Chen Fengzhen Supervisor F 49 Since May 23rd 2002 0 0 Gao Jun Supervisor F 55 Since May 23rd 2002 0 0 Wu Changlin Supervisor M 49 Since May 23rd 2002 0 0 Zhang Dongyan Supervisor F 50 Since May 23rd 2002 0 0 Vice General M Yue Guohua 41 Since May 23rd 2002 0 0 Manager Vice General M Xu Yong 39 Since May 23rd 2002 0 0 Manager Vice General M Lei Ming 47 Since Feb.26 2003 0 0 Manager Teng Feng CFO, Vice GM M 33 Since May 23rd 2002 0 0 Ju Bing CFO M 37 Since May 23rd 2002 0 0 5.2 Particulars about the directors and supervisors who take jobs in the shareholding parties √ applicable □ not applicable Name of the Get reward or Name Position taken Job term since shareholder allowance? Chen Yongqiang Jianshe Group ? Chairman, Secretary of CCP Committee, GM Dec. 2002 Yes Qiu Lin Jianshe Group Vice GM Nov. 1997 Yes Xi Zhengxing Jianshe Group Vice GM Nov. 1997 Yes Li Zhencheng Jianshe Group Vice GM Feb. 2000 Yes Vice secretary of the CCP committee, Chairman of the July 2001 Yes Lu Hongxian Jianshe Group worker’ s union Chen Fengzhen Jianshe Group Chief accountant April 2003 Yes Director of auditing office, vice director of auditing and Jan 1999 and Yes Gao Jun Jianshe Group inspection dept. Dec. 2001 Vice secretary of discipline committee, director of Dec. 1999 and Yes Wu Changlin Jianshe Group discipline office, inspection division Dec. 2991 6 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. 5.3 Annual remuneration of directors, supervisors and senior executives In RMB 10 thousand Yuan Total of annual reward 86.49 Top 3 directors 9.85 Top 3 managements 17.42 10K/Person.Y Independent Director 2.00 ear Other expenses of None Independent Directors: Directors and supervisors not Chairman Chen Yongqiang, Director Qiu Lin, Xi Zhengxing, Li Zhencheng, and taking rewards from the Supervisor Chen Fengzhen, Gao Jun, Wu Changlin Company Reward distribution Number of people Bellow 50K 4 50K-60K 5 §6. Report of the Board of Directors 6.1 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 RMB５０７，３４９ thousand, capital reserves RMB１２５，６８６ thousand, surplus reserves RMB－８９９，９０６ thousand, and distributable profit of RMB１，８５０，９７５ thousand. The Company has achieved major business revenue of RMB３３．６７％ thousand for the entire year, which increased by ３７，１４６% over the previous year; gross profit of RMB３８，５７３ thousand, net profit of RMB０．０８ thousand, income per share RMB０．４４, net asset per shar e RMB0.36 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 7 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. 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% 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. 6.2 Principal businesses classified based on industries/products In RMB 10 thousand Yuan Distribution on industries Major business cost Gross profit Increase/decrease On industry or Major businessMajor business Gross profit increased/decrease ration of major business product turnover cost ratio % d over increased/decr turnover (%) corresponding eased term Motorcycle 185,097.50 159,830.20 13.65% 33.67% 28.23% 3.67% manufacturing Including: related 11,770.70 9,713.20 17.48% -34.64% -37.63% 3.96% transactions Distribution on products JS125-27 14,284.00 11,922.30 16.53% 238.09% 222.58% 4.01% Motorcycle JS125-5 17,874.20 15,450.80 13.56% 109.37% 99.10% 4.46% Motorcycle Principle of pricing the On fair market price related transactions Statement on The related transactions between the Company and Jianshe Group were formed because of normal the necessity business operation. These transactions are on market price basis and under the principle of both and side fair and mutual benefit. Examination and approving procedures of the Board or the continuousnessShareholders’General Meeting are performed when necessary and in viewing of protecting the of related benefits of investors. The quality requirement, compensations, delivery and settlement processes 8 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. transactions are backed by well built credit between two of the parties. The Group provided capital supporting when the Company encountered difficulties in capital circulation. Therefore the above related transactions are necessary and rational. Including: The related transactions of the Company selling products to the controlling shareholders and its subsidiaries were amounted to RMB81,476,000.00 6.3 Major businesses distribution on regions In RMB 10 thousand Yuan Regions Major business turnover Increase/decrease of major business turnover (%) North 352,692.00 173.02% East 200,717.00 29.52% Mid-south 234,384.00 31.95% South-west 537,035.00 31.74% North-east 129,268.00 124.69% North-west 99,420.00 107.40% Asia 183,759.00 -23.39% Europe, Atlantic 41,938.00 107.32% America 25,009.00 14.03% Africa 46,753.00 -63.45% 6.4 Particulars about the vendors and clients In RMB 10 thousand takes the whole Top 5 vendors 41,318.10 29.10% purchasing Takes the whole Top 5 clients 43,024.20 23.24% sales 6.5 Business performance of partnership subsidiaries √ applicable □ not applicable In RMB 10 thousand Yuan Name of the company Chongqing Pingshan Taikai Carburetor Co., Ltd. Investment income Proportion in the 85.00 3.19% contributed Company’s net profit Shareholdi Business Manufacturing and sales of carburetor and general gas engine parts. ng Scope company Net profit 173.50 6.6 Major Change in the Principal Business or its Structure □applicable √ not applicable 6.7 Major Change in the Profitability (Gross Profit Rate) of the Major Business over the Previous Year √ applicable □ not applicable 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 9 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. 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. 6.8 Causation of Major Change in the Profit Composition over the Previous Year □applicable √ not applicable Causations of significant change on overall financial status □applicable √ not applicable 6.9 Significant changes in business environment, national policies and regulations impacting the financial situation and business performance in the past, present or future. √ applicable □ not applicable 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 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. 6.10 Profitability prediction □applicable √ not applicable 10 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. 6.11 Fulfilling of business plan □applicable √ not applicable 6.12 Utilization of fund raised from financing actions □applicable √ not applicable Changing of projects □applicable √ not applicable 6.13 Utilizing of non-raised fund √ applicable □ not applicable In RMB 10 thousand Yuan Projects Amount of the project progress Profitability Technical reconstruction of general assembling 1,939.20 None 89.22 workshop Purchasing of the 51% equity of Shanghai 663.00 100 -107 Jianshe Motorcycle Co., Ltd. 合计 2,602.20 - - 6.14 Statement on the “None-standard”opinion issued by the CPA □applicable √ not applicable 6.15 Business plan for the new year √ applicable □ not applicable 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 conditioner 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 11 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. 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 strengthening 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; 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. Prediction of profitability □applicable √ not applicable 6.16 Current profit distribution plan or capitalization of common reserves plan □applicable √ not applicable The company is making profit in the report term but not yet have any dividend plan. √ applicable □ not applicable Provide reason for not undertaking profit distribution when the company is making profit during the report Using and planning of retained profit term. The profit generated this term will be used to cover The accumulated retained profit is negative previous losses. 12 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. §7 Significant Events 7.1 Asset acquisitions √ applicable □ not applicable In RMB 10 thousand Yuan Net profit Credit contributed to and Relate Transf the Company debt Other party of d Party Pricing erred Assets Date of purchase Price since the asset transfe the transaction Transa policies comple was acquired rred ctions? tely? to the end of comple report term tely? Evaluation of Jianshe Group A/C assets Feb. 29 2004 6,710.00 564.00Yes Yes Yes the CPA The 51% equity of Liu Fulong, Shanghai On negotiation Nov. 1st 2004 663.00 -107.00No Yes Yes Liu Fulin Jianshe base Motorcycl e Co., Ltd. 7.2 Selling of property √ applicable □ not applicable In RMB 10 thousand Yuan Net profit contributed Credit to the and Gain/loss Relate Transf Other party Company debt from d Party Pricing erred transfe of the Asset sold Date of disposal Price since the disposal of Transa policies comple rred transaction asset was the asset ctions? tely? comple disposed to the end of tely? report term Jianshe Account Evaluation Feb. 29 2004 6,717.00 0.00 0.00Yes Yes Yes Group receivable of the CPA Influence of 7.1 and 7.2 on the consistency and stability of the management No significant influence 7.3 Significant guarantee □applicable √ not applicable 7.4 Significant related transaction 7.4.1 Related sales and purchasing 13 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. √ applicable □ not applicable In RMB 10 thousand Yuan Selling of products and services to related Purchasing of products and services from related Related parties parties parties Amount Ratio in same category Amount Ratio in same category Jianshe Group 28,163.90 13.26% 23,945.20 16.86% Jianxing 260.00 0.12% 1,480.00 1.04% Machinery Jianshe Trucking 75.50 0.04% 1,094.30 0.77% and Warehousing Jianshe Yamaha 2,333.80 1.10% 2,811.80 1.98% Huhehaote Jianshe 2,617.60 1.23% 0.00 0.00% Chongqing New 745.50 0.35% 0.00 0.00% Time Total 34,196.30 16.10% 29,331.30 20.66% 7.4.2 Credit and debt interchange √ applicable □ not applicable In RMB 10 thousand Yuan Provide money to the related parties Accept money from the related parties Related parties Amount occured Balance Amount occured Balance Jianshe Group 315,580.20 0.00 324,454.10 0.00 Total 315,580.20 0.00 324,454.10 0.00 Including: The Company provided RMB3,155,802,000 to the controlling shareholder and its subsidiaries in the report term, therefore the balance was RMB0.00. 7.5 Financing proxy □applicable √ not applicable 7.6 Fulfilling of consent issues □applicable √ not applicable 7.7 Material Lawsuits/Arbitrations √ applicable □ not applicable 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. 14 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. 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. 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. 7.8. Statement of the independent directors Presenting the Board meetings Name of Presented Presented by Independent Times of Board Meeting Absent Notes personally proxy Director Sun Fangcheng 6 4 2 0 Meng Weidong 6 4 2 0 Xu Mingyue 6 6 0 0 Zhu Zhiyong 6 5 1 0 Objection opinion raised by the independent directors on the business of the Company □applicable √ not applicable 15 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. §8 Report of the Supervisory Committee √ applicable □ not applicable (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. 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. 16 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. (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. 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. §9 Financial Report 9.1 Auditor’s Opinion Standard auditing statement without qualif ied opinion 9.2 Financial Statements 17 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. 9.2.1 Balance Sheet Consolidated Balance Sheet Ended December 31 2004 Notes 2004 2003 RMB’000 RMB’000 Non-current assets Property, plant and equipment 12 435,088 425,586 Land using right 13 3,613 － Investment on affiliates 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 Account receivable, advances and 18 464,509 467,795 other receivables Tax refundable 12,293 12,293 Mortgage savings 27 720,150 336,650 Cash and Bank deposit 458,288 63,030 1,955,701 1,130,327 Current Liabilities Notes payable 27 1,002,005 423,075 Account payable, preserved expenses 601,861 479,708 and other payables Short-term borrowings from bank 18 711,270 635,400 2,315,136 1,538,183 Net current liabilities (359,435) (407,856) Minor shareholders’equity 6,451 3,433 Long-term liabilities Long-term borrowings 19 － 2,000 Debt of deferred tax 20 － 1,996 － 3,996 Net asset 210,629 172,056 Shareholders’equity and liability Shareholders’equity Share capital 21 477,500 477,500 Provisions 22 (266,871) (305,444) 210,629 172,056 18 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. 9.2.2 Income Statements Consolidated Income Statements The year ended December 31 2004 Notes 2004 2003 RMB’000 RMB’000 Sales income, net 4 、5 1,850,975 1,384,716 Sales cost (1,598,300) (1,246,469) Gross profit (loss) 252,675 138,247 Other incomes, net 6 43,236 39,246 Sales and administrative expense (221,153) (120,006) Bad debt provision (11,298) (14,576) Operational profit (loss) 7 63,460 42,911 Financial expenses 8 (48,442) (41,103) Investment revenue 9 21,946 10,784 Profit due from affiliates (loss) 182 (892) Profit before tax (loss) 37,146 11,700 Tax 10 1,996 1,993 Profit after tax (loss) 39,142 13,693 Minor shareholders’ equity on (569) (1,894) gain/loss Net profit of the year (loss) 38,573 11,799 Profit per share (loss) 11 ＲＭＢ０．０８１ RMB0.025 19 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. 9.2.3 Cash Flow Statements Consolidated Cash Flow Statements The year ended December 31 2004 2004 2003 RMB’000 RMB’000 Business operation Profit before tax (loss) 37,146 11,700 Adjustment items Bad debt provision 11,298 14,576 Provision of inventory impairment (carry back) (19,628) (52,259) Depreciation 56,232 52,149 Loss (gain) from disposal of property, plant and 182 1,052 equipment Offset of property, plant and equipment impairment － (3,020) provision Loss due from affiliates (182) 892 Loss due from disposal of subsidiaries － － Loss from liquidation of affiliates － 114 Outgoing interests 44,193 39,156 Income interests (21,946) (10,898) Written back of securities investment impairment － － Others － 1,049 Business operation cash flow before the changing of 107,295 54,511 operational capital Decreasing of notes receivable (increase) (19,198) (8,133) Decreasing (increase) of account receivable, advance (60,223) (85,740) and other receivables Decrease of inventory (increase) (10,979) (21,823) Increasing of notes receivable (decrease) 86,500 262,591 Increasing (decrease) of account receivable, advance 122,200 37,362 and other receivables Cash flow from business operation 225,595 238,768 Interest paid (44,193) (39,156) Net cash generated by business operation 181,402 199,612 20 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. Consolidated Cash Flow Statement (Continue) The year ended December 31 2004 2004 2003 RMB’000 RMB’000 Investment activities 21,946 Interest collected 10,898 Income from liquidation of partnership － 43 Increasing of investment on subsidiaries (5,945) － Increasing of investment on partnerships － 79,605 Increasing of property, plant and (54,771) (3,750) equipment Income from disposing of property, 215 1,571 plant and equipment Net cash flow generated by investment (38,555) 88,367 Financing activities Increasing of minor shareholders’equity 2,961 2,867 Decreasing of short-term borrowings － (3,110) Financing by notes payable 557,080 － New bank loans 75,870 38,400 Deposit for issuing of drafts (383,500) (336,650) Net cash flow generated by financing 252,411 (298,493) activities Net increasing (decreasing) of cash and 395,258 (10,514) cash equivalents Balance of cash and equivalents at the 63,030 73,544 beginning of year Balance of cash and equivalents at the 458,288 63,030 end of year Statement on the changing of accounting policies, accounting estimations and method of calculating comparing with the latest term □applicable √ not applicable 9.4 Correcting of significant accounting error and its impact 21 Annual Report 2004 Summary Chongqing Jianshe Motorcycle Co., Ltd. □applicable √ not applicable 9.5 Changing of consolidation range comparing with the latest term √ applicable □ not applicable 2 companies added to the consolidation range in this annual report comparing with the previous annual report, they are: Chongqing Jianshe Auto A/C Co., Ltd., this company was invested by the Company together with Chongqing Jianshe Sales Co., Ltd. (subsidiary of the Company), and Chongqing North Jianshe Imp. & Exp. Co., Ltd. (subsidiary of the Company). The new company was incorporated on Feb.25 2004. Shanghai Jianshe Motorcycle Co., Ltd., in which the Company is holding 51% of its share equity. Chongqing Jianshe Motorcycle Co., Ltd. April 2nd 2005 22