苏常柴Ａ(000570)苏常柴Ｂ2005年年度报告摘要（英文）

Short form of the stock：Suchangchai A, Suchangchai B Stock code：000570, 200570 Report number:2006-004 CHANGCHAI COMPANY, LIMITED SUMMARY OF ANNUAL REPORT 2005 §1. Important Notes 1.1 Board of Directors, Supervisory Committee, directors, supervisors and senior executives of the Changchai Company, Limited (hereinafter referred to as the Company) individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are no material omissions nor errors which would render any statement misleading. The summary of annual report 2005 is abstracted from the full text of annual report; the investors are suggested to read the full text of annual report to understand more details. 1.2 All directors of the Company attended the Board meeting. 1.3 Horwath Hong Kong CPA Limited produced Auditors’ Report with qualified opinion for the Company; the investors are suggested to read the Financial Report enclosed in the full text of Annual Report to understand more details. 1.4 Person in charge of the Company Mr. Zhang Junyuan, person in charge of the accounting Mr. Xue Guojun and person in charge of handling accounting affairs Mr. Tang Jianzhong hereby confirm that the Financial Report enclosed in this Annual Report is true and complete. 1.5 This report was prepared in both Chinese and English. Should there be any difference in interpretation between the two versions, the Chinese version shall prevail. §2. Company Profile 2.1 Basic information Short form of the stock Suchangchai A, Suchangchai B Stock code 000570, 200570 Listed stock exchange Shenzhen Stock Exchange Registered address and office address No. 123, Huaide Middle Road, Changzhou, Jiangsu Post code 213002 Internet website of the Company http://www.changchai.com.cn E-mail of the Company cctqm@public.cz.js.cn 2.2 Contact person and method Secretary of the Board Securities affairs representative Name Shi Jianchun He Jianjiang Contact address No. 123, Huaide Middle Road, No. 123, Huaide Middle Road, Changzhou, Jiangsu Changzhou, Jiangsu Tel 86-519-6610041 86-519-6603656-3155 Fax 86-519-6630954 86-519-6630954 E-mail sjc000570@changchai.com Hjj000570@changchai.com 1 §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data (Unit: RMB) Increase/decrease 2005 2004 2003 over last year（％） Income from main operations 1,854,930,711.03 1,664,723,424.12 11.43 1,542,779,893.12 Total profit 45,737,645.82 48,267,440.92 -5.24 35,698,344.13 Net profit 49,296,879.81 46,034,180.58 7.09 54,347,089.30 Net profit after deducting 35,147,118.69 29,261,968.06 20.11 23,505,655.83 non-recurring gains and losses Net cash flows from operating activities 70,276,048.94 151,065,776.75 -53.48 187,763,577.90 Increase/decrease At the end of At the end of At the end of from the end of 2005 2004 2003 previous year（％） Total assets 1,830,769,349.58 1,854,577,041.70 -1.28 1,944,525,309.92 Shareholder’s equity (excluding 902,221,137.20 852,849,475.04 5.79 784,584,991.89 minority interests) 3.2 Major financial indexes Increase/decrease 2005 2004 2003 over last year（％） Earnings per share (RMB) 0.13 0.12 8.33 0.15 Return on equity (%) 5.46 5.40 0.06 6.93 Return on equity as calculated based on net profit 3.90 3.43 0.47 3.00 after deducting non-recurring gains and losses (%) Net cash flows per share arising from operating 0.19 0.40 -52.50 0.50 activities (RMB) At the At the Increase or decrease At the end end of end of from the end of of 2003 2005 2004 previous year（％） Net assets per share (RMB) 2.41 2.28 5.70 2.10 Net assets per share after adjustment (RMB) 2.05 1.85 10.81 1.67 Items of non-recurring gains and losses √Applicable □Inapplicable Items of non-recurring gains and losses Amount (RMB’000) Subsidy income 0 Add: Profit of current assets -785.41 Add: Various non-operating incomes (deducting Switching back reserve for impairment losses of assets) 4,284.16 Add: Switching back various reserve for impairment losses allotted in the previous years 20,639.65 Add: Disposal of investee’s equity income 1,000.00 Less: Disposal of expenditure of fixed assets 253.48 Less: Other non-operating expense 10,735.15 Total 14,149.76 2 3.3 Difference in net profit as audited by PRC Accounting Regulations and International Accounting Standards (IAS) √Applicable □Inapplicable Unit: RMB’000 CAS IAS Net profit 49,297 48,545 As determined pursuant to PRC accounting regulations 49,297 Elimination of disposal proceed receivable settled in previous years -10,000 Consolidation of unrecognised losses of subsidiaries -1,122 Excess loss shared by minority not recognized -1,096 Explanation on the difference Income audited to capital reserve in PRC accounts 1,559 Deferred tax assets not recognized in PRC accounts 9,900 Others 7 As determined pursuant to IFRS 48,545 §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in share capital (Unit: share) Increase / Before the change decrease in this After the change time (+, -) Number of Number of Proportion Subtotal Proportion shares shares I. Unlisted shares 163,224,000 43.61% 0 163,224,000 43.61% 1. Sponsor’s shares 153,160,000 40.92% 0 153,160,000 40.92% Including: Shares held by the State 153,160,000 40.92% 0 153,160,000 40.92% Share held by domestic legal person Share held by foreign legal person Other 2. Raised legal person’s 10,064,000 2.69% 0 10,064,000 2.69% shares 3. Inner employees’ shares 4. Preference shares or others II. Listed shares 211,025,551 56.39% 0 211,025,551 56.39% 1. RMB ordinary shares 111,025,551 29.67% 0 111,025,551 29.67% 2. Domestically listed 100,000,000 26.72% 0 100,000,000 26.72% foreign shares 3. Overseas listed foreign shares 4. Others III. Total shares 374,249,551 100.00% 0 374,249,551 100.00% 3 4.2 Statement of shares held by the top ten shareholders and the top ten shareholders of circulating share Total shareholders at the end of Total 66,619 shareholders (51,119 shareholders of A-share and 15,500 report year shareholders of B-share) Particulars about shares held by the top ten shareholders Number of Type of Total number Share pledged Full name of Shareholder Proportion non-circulation shareholders of shares held or frozen shares held 1. CHANGZHOU STATE-OWNED State-owned ASSETS ADMINISTRATIVE 40.92 153,160,000 153,160,000 0 shareholder BUREAU 2. WUJIN DIESEL ENGINEER Other 1.42 5,330,000 5,330,000 0 BLOCK FACTORY 3. DONGHAI SECURITIES CO., Other 0.66 2,482,810 0 Unknown LTD. 4. GUOTAI JUNAN SECURIES Foreign 0.52 1,943,030 0 Unknown HONG KONG LIMITED shareholder 5. BENNIU AGRICULTURAL Other 0.47 1,760,000 1,760,000 0 MACHINERY FACTORY 6. XIAO BING XIN Foreign 0.28 1,062,100 0 Unknown shareholder 7. XU BIN SHENG Foreign 0.19 722,550 0 Unknown shareholder 8. CHEN YONG QUAN Foreign 0.18 663,695 0 Unknown shareholder 9. ZHANG XIN Other 0.16 615,000 0 Unknown 10 、 TOYO SECURITIES ASIA Foreign 0.16 591,900 0 Unknown LIMITED-A/C CLIENT. shareholder Particulars about shares held by the top ten shareholders of circulation share Name of shareholders Numbers of circulation share held Type of share 1. DONGHAI SECURITIES CO., LTD. 2,482,810 A-share 2. GUOTAI JUNAN SECURIES HONG KONG LIMITED 1,943,030 B-share 3. XIAO BING XIN 1,062,100 B-share 4. XU BIN SHENG 722,550 B-share 5. CHEN YONG QUAN 663,695 B-share 6. ZHANG XIN 615,000 A-share 7. TOYO SECURITIES ASIA LIMITED-A/C CLIENT. 591,900 B-share 8. SHEN YUAN QIN 537,800 B-share 9. GANSU HAIYANG HOTEL MANAGEMENT CO., LTD. 492,100 A-share 10. SHANGHAIWANGUO SECURITIES (HONG KONG) 419,000 B-share LIMITED COMPANY Explanation on associated relationship among the The Company was unknown whether there exists above shareholders or consistent action associated relationship or the consistent actionist regulated by the Management Measure of Information Disclosure on Change of Shareholding for Listed Companies among the top ten shareholders of circulations share and between the top ten shareholders and the top ten shareholders of circulation share. 4.3 Particulars about the holding shareholders and actual controller of the Company 4.3.1 Particulars about change in the holding shareholders and actual controller of the Company □Applicable √Inapplicable 4.3.2 Introduction of especial situation for holding shareholder and other actual controller Changzhou State-owned Assets Administrative Bureau is the holding shareholder of the Company as non-legal person organ. 4 4.3.3 Property right and controlling relationship between the actual controller of the Company and the Company is as follows: CHANGZHOU STATE-OWNED ASSETS ADMINISTRATIVE BUREAU 40.92% CHANGCHAI COMPANY, LIMITED §5. Particulars about Director, Supervisor and Senior Executive 5.1 Particulars about changes in shares held by directors, supervisors and senior executives Drawing Total payment payment Number of Number of drawn from the from the holding holding Reason Company in shareholding Name Office Title Sex Age Office Term shares at shares at on the report companies or the the change period other related year-begin year-end (RMB’0000) parties or not (Yes / No) Chairman of the June 2003- Zhang Junyuan Male 51 28.9 No Board June 2006 Director, General June 2003- Xue Guojun Male 42 32.9 No Manager June 2006 Director May 2004- Lu Jiaxiang Male 51 0 No June 2006 Shi Jianchun Director, Deputy General Manager, June 2003- Male 43 27.06 No Secretary of the June 2006 Board Zhu Xinmin Director, Deputy June 2003- Male 58 27.30 No General Manager June 2006 Xu Zhenping Director, Assistant June 2003- Male 49 23.38 No General Manager June 2006 Qian Shufa Independent June 2003- Male 49 2 No Director June 2006 He Yihua Independent June 2003- Male 43 2 No Director June 2006 Lu Gang Independent June 2003- Male 41 2 No Director June 2006 Lv Weimin Chairman of the May 2004- Supervisory Male 51 28.9 No June 2006 Committee Ni Mingliang Supervisor June 2003- Male 39 7.36 No June 2006 Lu Zhonggui Supervisor June 2003- Male 38 7.04 No June 2006 Wu Keyun Supervisor June 2003- Male 42 200 200 6.08 No June 2006 Yan Gang Supervisor June 2003- Male 48 0 No June 2006 He Jianguang Chief Engineer June 2003 Male 41 27.17 No June 2006 Total 200 200 222.09 5 §6. Report of the Board of Directors 6.1 Discussion and analysis of management team in the report period In the report period, the Company accumulatively produced and sold various diesel engines amounting to 1,073,000 sets and 1,057,700 sets respectively, an increase of 5.09% and 5.53% respectively over the same period of the last year, including 63,600 multi-cylinder diesel engines, up 26.7% year-on-year; the Company realized sales revenues of RMB 1,854,930,700, an increase of 11.43% year-on-year and realized a net profit of RMB 49,296,900, up 7.09% year-on-year. Year 2005 is a key year that the Company implemented the three-year structure adjustment. Over the past one year, under the guide of the Board of Directors and the Management Team, the staff of the Company solidified and strived, guided by “Structure Adjustment and Benefit Sales”, overcome the unfavorable influence caused by “excess governance and limit governance” and the Emission Regulations promulgated by the State and the auxiliaries volumes of agro-vehicle tobogganed under the situation of macro-control, through a series of measures grasping new products development, quickening structure adjustment, enhancing input of technology innovation, strengthening quality control, implementing benefit sale, decreasing costs and increasing income etc., so as to continuously improved the economic operating quality of the Company; and energetically exploited the single-cylinder diesel engine market, continually increased auxiliaries volumes of such multi-cylinder diesel engine as tractor and combine harvester. In the report year, single-cylinder diesel engine of the Company won the honorary title of “China famous Products”; and the multi-cylinder diesel engine has been formed a complete set with the Great Wall Motor Company Limited and Dongfeng Automobile Co., Ltd. in a batch and successfully entered the automobile field, so that the Company obtained significant progress in the structure adjustment of products. 6.2 Statement of main operations classified according to industries or products Classified according to Income from Cost of Profit ratio of main Increase/decrease Increase/decrease Increase/decrease industries or products main operations main operations (%) in income from in cost of main in Profit ratio of operations main operations operations over main operations over the last year the last year (%) over the last year (%) (%) Diesels and components 1,854,930,711.03 11.43 1,617,072,201.64 9.79 12.80 1.29% Total 1,854,930,711.03 11.43 1,617,072,201.64 9.79 12.80 1.29% 6.3 Particulars about main operations classified according to areas Areas Income from main operations Increase/decrease in income (RMB) from main operations over the last year (%) East China 1,077,932,289.97 137,975,333.12 Northeast 138,393,176.53 17,714,326.60 Southwest 160,877,160.92 20,592,276.60 Central China 258,854,856.35 33,133,421.61 North China 143,780,121.86 18,403,855.60 Northwest 27,724,619.80 3,548,751.33 South China 152,917,669.35 19,573,461.68 6 6.4 Application of the raised proceeds □Applicable √Inapplicable Particulars about the changed projects □Applicable √Inapplicable 6.5 Application of the non-raised proceeds through shares offering □Applicable √Inapplicable 6.6 Explanation of the Board of Directors on the “Qualified Opinion” made by the Certified Public Accountants □Applicable √Inapplicable 6.7 The preplan on the profit distribution and capitalization of capital public reserve of the Board of Directors Audited by domestic and oversea auditors as per Chinese Accounting Standards and International Accounting Standards respectively, the net profit of the Company in 2005 was RMB 49,296,879.81 and RMB 48,545,000.00 respectively. The total profit available for distribution in the consolidated statement as of the year was RMB 187,841,394.41 and the profit available for distribution of the parent company was RMB 101,799,804.79. The Board of Directors planed to distribute cash dividends amounting to RMB 0.5 (tax included) for every 10 shares based on the total share capital amounting to 374,249,551 shares as at the end of the year 2005, and distributed cash amounting to RMB 18,712,477.55 in total. The retained profit was carried down to the next year. The aforesaid distribution preplan should be submitted to the Shareholders’ General Meeting 2005 for examination. The Company did not appropriate share distribution preplan though the Company achieved the profit in the report period □Applicable √Inapplicable §7. Significant Events 7.1 Purchase of assets □Applicable √Inapplicable 7.2 Sales of assets √Applicable □Inapplicable Opposing party of the Date of Sales price Net profit of the Gains/losses Related Assets Debts and transaction and assets sale sold assets arising from transaction ownership Liability sold contributed to the the sale or not involved involved in listed company in assets the assets from year-begin to transferred transferred the date of sale or not or not Assignee: Changzhou Jihe Machine Manufacture Co., Ltd. Jun. 30, RMB 1 RMB 1 0 No yes yes Assets sold: 35% 2005 million million equity of Changzhou Vehicle Co., Ltd. 7 The influence on the continuity of business and the stability of Management Team of the Company due to sale of assets: Changzhou Vehicle Co., Ltd. is shareholding company of the Company. After the transfer, there was no influence on the business continuity and stability of Management Team of the Company. 7.3 Significant guarantees √Applicable □Inapplicable Unit: RMB’0000 External guarantees of the Company (excluding guarantees for shareholding subsidiaries) Name of Date of occurrence For related Guarantee Guarantee Guarantee Accomplished companies (agreement signing parties or not amount type term or not guaranteed day) (yes or no) Changzhou Gear Jun. 29, 2005- June 29, 2005 500 Credit No No Plant Feb. 20, 2006 Changzhou Gear Jun. 30, 2005- June 30, 2005 500 Credit No No Plant Jun. 10, 2006 Changzhou Gear Jun. 16, 2004- June 16, 2004 1350 Credit No No Plant Jun. 15, 2005 Rest payment Changzhou Tractor Aug. 21, 1998- Aug. 21, 1998 8800 Credit of RMB 30 No Plant Nov. 30, 2006 million Insolvency Shandong Shuangli Mar. 6, 2002- Rest payment Mar. 6, 2002 3000 Credit No Group Co., Ltd. Mar. 5, 2009 of RMB 26.4 million Total guarantee amount occurred in the report period 1050 Total guarantee balance at the end of the report period 9400 Guarantees for shareholding subsidiaries by the Company Total guarantee amount occurred in the report period for shareholding 950 subsidiaries Total guarantee balance at the end of the report period for shareholding 950 subsidiaries Total guarantee amount of the Company (including guarantees for shareholding subsidiaries) Total guarantee amount 10350 Proportion of the Company’s net assets taken by the total guarantee 11.47% amount Including: Guarantee amount for shareholders, the actual controller or its related 1360 parties Guarantee amount for the debts of the guaranteed companies with an 0 asset-liability ratio of over 70%, directly or indirectly The amount by which the total guarantee amount exceeded 50% of the net 0 assets Total amount of the above three guarantees 10350 7.4 Significant related transactions 7.4.1 Related transaction concerning routine operation √Applicable □Inapplicable Unit: RMB’0000 8 Selling products and providing Purchasing products and accepting service to related parties service from related parties Amount of Proportion in Amount of Proportion in transaction amount of the transaction amount of the congener congener transactions transactions Changchai Group Import & 1200.96 Export Co., Ltd. 0.65 0 0 Total 1200.96 0.65 0 0 Including: The amount of related transactions amounted to RMB 12,009,644.52 that the Listed Company sold products or provided labor service to the controlling shareholder or its subsidiaries in the report period. 7.4.2 Related Credits and Liabilities current √Applicable □Inapplicable Unit: RMB’0000 Providing capital to related parties Providing capital to the listed company by related parties Amount occurred Balance Amount occurred Balance Changchai Group Co., Ltd. -175.7 6332.88 Changchai Group Import & -1169.55 7062.62 Export Co., Ltd. Changchai Industrial 0 1249.29 Corporation Total -1345.25 14644.79 Including: In the report period, the amount of capital of the Listed Company provided for the controlling shareholder and its subsidiaries was RMB -1,345,250,000, and the balance was RMB 14,644,790,000. Capital occupation and plan for clearing: √Applicable □Inapplicable 1、Changchai Group Co., Ltd. is associated enterprise of the Company. The Company should receive accounts of RMB 63,328,800 from Changchai Group Co., Ltd., mainly due to replacement of assets in 1999. Ended Dec. 31, 2005, Changchai Group Co., Ltd. should pay balance of the various funds amounting to RMB 63,328,800 to the Company, reducing RMB 1,757,000 compared with the end of year 2004. 2、Changchai Group Import & Export Co., Ltd. is a subsidiary enterprise of Changchai Group Co., Ltd.. Changchai Group Co., Ltd. held its 90% equity. Ended Dec. 31, 2005, Changchai Group Import & Export Co., Ltd. should pay non-operating payment amounting to RMB 69,854,900 to the Company, which remained unchanged compared with the end of year 2004. 3、Changchai Industrial Corporation is a subsidiary enterprise of Changchai Group Co., Ltd.. The Company should receive payment amounting to 12,492,900 from Changchai Industrial Corporation, mainly due to the loan in 1998. At present, this company has stopped business. Ended Dec. 31, 2005, Changchai Industrial Corporation should pay balance of the payment amounting to RMB 12,492,900 to the Company, which remained unchanged compared with the end of year 2004. 4、Special measures the Company disposed capital occupied: 9 Before the end of Sep. 2006, Changchai Group Co., Ltd. would plan to repay payment of RMB 63,328,800 by means of the cash. Before the end of Sep. 2006, Changchai Import & Export Co., Ltd. would plan to repay the arrearage of RMB 33 million by means of paying the debts with assets; before the end of Nov. 2006, Changchai Import & Export Co., Ltd. planned to repay the rest arrearage of RMB 36.8549 million by means of the cash. Changchai Industrial Corporation has stopped business several years ago, and was insolvency and will enter in liquidation procedure. The Company has withdrawn 100% provision for bad debts for its accounts receivable in 2001. The Company would draw back the arrearage of RMB 12,492,900 owed by Changchai Industrial Corporation according to the legal procedure. Clearing plan can surely solve the capital occupation problem before the end of 2006 or not: √Yes □No □Inapplicable 7.5 Financing entrustment □Applicable √Inapplicable 7.6 Implementation of commitments √Applicable □Inapplicable Commitments of shareholders related with equity division reform By enquiring the Company’s shareholders of non-circulation share, the Company primarily planned to decide the schedule of equity division reform: To enter procedure of equity division reform at the first ten days of April 2006 and publish the plan of equity division reform. 7.7 Significant lawsuits and arbitrations √Applicable □Inapplicable In the report period, the accumulative amount of the lawsuits and arbitrations involved by the Company was RMB 45,789,300, taking 5.08% the total amount of net assets at the end of the report period. The involved lawsuits and arbitrations were prosecuted by the Company because the opposing party could not repay funds timely that they should pay the Company. The detailed matters are as follows: Name of defendants Date of Name of lawsuit & Involved accepting & arbitration organ sum hearing (RMB’0000) Case disjudged of lawsuit from the previous years to the report period: 1. Tongshan County Tengyu Jun. 27, 2001 Changzhou Intermediate 493.06 Agro-engine Trade Centre People’s Court 2. Nanjing Jinwa Share-holding Jul. 9, 2002 Changzhou Intermediate 1,419.00 Co., Ltd. People’s Court 3. Shandong Hongli Group Co., Jun. 27, 2001 Changzhou Intermediate 1,436.00 10 Ltd. People’s Court 4. Anhui Tangshan County Jan. 5, 2001 Changzhou Intermediate 202.17 Hongda Agro-engine Company People’s Court Subtotal 3550.23 Case of lawsuits occurred in the report period: 1. Anhui Feicai Vehicle Co., Ltd. Apr. 2005 Changzhou Intermediate 1028.70 People’s Court Subtotal 1028.70 Total 4578.93 1. Explanation of the case: (1) The lawsuit case on Tongshan County Tengyu Agro-engine Trade Centre, the Company sued the application for enforcement execution to Changzhou Intermediate People’s Court on Apr. 13, 2002, but the appellee always did not pay. Now the Company is entrusting Xuzhong Roadway Court to execute. (2) The lawsuit case on Nanjing Jinwa Co., Ltd., the Company has singed a Settlement Agreement, which Lishui County Public-owned Assets Operation Co., Ltd. refunded the payment of RMB 14.19 million owed by Nanjing Jinwa Co., Ltd. with the land of 80 mu instead of Najin Jinwa Co., Ltd. to the Company. The said agreement is in execution. (3) The procedure of bankruptcy of Anhui Tangshan County Hongda Agro-engine Company has finished, and the Company’s discharging rate was zero. (4) For the details of lawsuit case on Anhui Feicai Vehicle Co., Ltd. happened in the report period, please refer to Securities Times and Ta Kung Pao dated Apr. 19, 2005. Anhui Feicai Vehicle Co., Ltd. (hereinafter referred to as Feicai Gufen) and Anhui Feicai (Group) Co., Ltd. (hereinafter referred to as Feicai Group) signed the Agreement on Discharging Debts with the Company on Nov. 30, 2005, the both parties confirmed that Feicai Group owed the Company payment for goods of RMB 6,288,886.70, and Feicai Group canceled out payment of RMB 6,288,886.70 owed by Anhui Feicai Vehicle Co., Ltd. with the land use right of 7200 sq.m. (residential land) to the Company. The said case has finished basically. Particulars about the lawsuits case occurred after the report period: On Jan. 7, 2006, the Company published the public notice on lawsuit between the Company and Shandong Shuangli Group Co., Ltd.. The main contents of the public notice: Ended Dec. 31, 2005, Shandong Shuangli Group Co., Ltd. (hereinafter referred to as Shuangli Group) should pay the payment of diesel engine amounting to RMB 12,390,185.78 in total to the Company; except for this, the Company provided the loan guarantee of RMB 30 million for it. Due to poor management of Shuangli Group, Shandong Liaocheng Intermediate People’s Court judged Shuangli Group into the insolvency procedure and to repay debts. On Jan. 5, 2006, the Company received the civil judgment from Beijing No. 1 Intermediate People’s Court, and the Court agreed the application for pre-trial property preservation proposed by China Development Bank, in which require the Company to undertake the loan guarantee responsibility of principal and interests of RMB 27,460,416.14 borrowed by Shandong Shuangli from China 11 Development Bank, and freeze the Company’s bank deposit or seal up the corresponding properties worth of RMB 27,460,416.14. The Company has applied for the preferential credit right amounting to RMB 27,460,416.14 and general credit right amounting to RMB 12,390,185.78 to bankruptcy liquidation group of Shuangli Group. The Company would disclose the relevant progress situation in time according to the regulations. §8. Report of the Supervisory Committee The Supervisory Committee considered that the Company could operate according to laws, there existed no problems in the financial situation, application of the raised proceeds, purchasing and sales of assets and related transactions. §9. Financial Report 9.1 Auditing opinion Horwath Hong Kong CPA Limited produced Auditors’ Report with qualified opinion for the Company; the investors are suggested to read the Financial Report enclosed in the full text of Annual Report to understand more details. 9.2 Financial statements (Attached) 9.3 In the report period, there was no change in accounting policy, accounting estimate and calculation method. 9.4 In the report period, there was no change in consolidated scope compared with the annual report of the latest year. Board of Directors of Changchai Company, Limited Mar. 16, 2006 12 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 (Amounts expressed in thousands of RMB, except earnings per share) 2005 2004 Note RMB’000 RMB’000 Turnover 5 1,854,931 1,664,723 Cost of sales -1,602,464 -1,460,586 Gross profit 252,467 204,137 Other operating income 17,210 9,925 Selling expenses -58,218 -59,134 General and administrative expenses -169,255 -97,661 Profit from operations 6 42,204 57,267 Finance costs, net 7 -15,375 -21,180 Share of results from associates 1,186 1,089 Other investment income 9,285 13,641 Gain on disposal of property, plant and - 1,371 equipment Impairment loss on property, plant and equipment (made) / reversed - -540 Gain on disposal of subsidiaries - 35,983 Other expenses, net - -3,922 Profit before taxation 37,300 83,709 Taxation 8 10,103 -150 Profit for the year 47,403 83,559 Attributable to: Equity holders of the parent 48,545 85,534 Minority interests -1,142 -1,975 47,403 83,559 Basic earnings per share 9 RMB0.13 RMB0.23 13 CONSOLIDATED BALANCE SHEETAS AT 31 DECEMBER 2005 2005 2004 Note RMB’000 RMB’000 ASSETS Non-current assets Property, plant and equipment 10 417,279 441,801 Land use rights 11 124,333 59,640 Construction in progress 12 17,326 70,568 Interests in associates 13 12,035 10,798 Available-for-sale investments 14 132,624 132,624 Deferred tax assets 8 9,900 - 713,497 715,431 Current assets Inventories 15 337,990 308,583 Value-added tax recoverable 21,155 18,490 Due from related parties 22 146,397 93,814 Trade and other receivables 240,232 298,801 Prepayments 8,768 12,291 Pledged bank deposits 83,946 49,647 Cash and cash equivalents 309,788 370,298 1,148,276 1,151,924 Total assets 1,861,773 1,867,355 14 CONSOLIDATED BALANCE SHEET (CONTINUED) AS AT 31 DECEMBER 2005 2005 2004 Note RMB’000 RMB’000 EQUITY Capital and reserves Share capital 17 374,250 374,250 Reserves 18 526,545 478,000 Attributable to equity holders of 900,795 852,250 the parent Minority interests 6,759 7,901 Total equity 907,554 860,151 LIABILITIES Non-current liabilities Borrowings – long term portion 16 8,500 8,500 Current liabilities Borrowings – short term portion 16 276,825 342,825 Other payables, advances from customers and accruals 171,892 197,139 Tax payable 2,233 4,913 Dividends payable 3,040 3,040 Note and trade payables 491,729 450,787 945,719 998,704 Total liabilities 954,219 1,007,204 Total equity and liabilities 1,861,773 1,867,355 15 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 Note 2005 2004 RMB’000 RMB’000 Operating activities Operating profit before taxation 37,300 83,709 Adjustments for: Share of results of associates -1,186 -1,089 Interest income -3,145 -2,588 Interest expenses 17,768 23,579 Dividend income -8,285 -3,585 Depreciation and amortisation 44,400 45,226 Gain on disposal of subsidiaries - -35,983 Loss/gain on disposal of property, plant and equipment 986 -1,371 Provision for bad and doubtful debts made / (reversed) 52,477 -4,686 Provision for inventories 7,672 7,546 Impairment loss on property, plant and equipment and construction in progress (released) / -15,886 540 made Construction in progress written off 5,078 3,165 Cash flow before changes in working capital 137,179 114,463 (Increase) / decrease in inventories -37,079 -88,964 Net decrease in trade and other receivables, amounts due from related parties, and -45,633 106,353 prepayments Net increase in amounts due to related parties, notes and trade payables, tax payable, advances from customers, other payable and 13,015 25,293 accruals Cash generated from operations 67,482 157,145 Interest paid -17,768 -23,579 Income tax refunded 203 - Net cash generated from operating activities 49,917 133,566 16 CONSOLIDATED CASH FLOW STATEMENT (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2005 Note 2005 2004 RMB’000 RMB’000 Investing activities Disposal of subsidiaries, net of cash - 277 disposed of Acquisitions of property, plant and -7,979 -2,936 equipment Expenditures on construction in progress -13,728 -8,223 Purchase of other long-term investments -51 -15,748 (Decrease) / Increase in amounts due to -34,299 42 associates Increase in pledged bank deposits - -12,843 Proceeds from disposal of property, plant, equipment and land use rights 200 3,057 Interest received 3,145 2,588 Dividend received 8,285 3,585 Net cash used in investing activities -44,427 -30,201 Financing activities Proceeds from bank loans 362,200 405,700 Repayment of bank loans -428,200 -478,400 Net cash used in financing activities 66,000 -72,700 Net (decrease) / increase in cash and cash -60,510 30,665 equivalents Cash and cash equivalents, beginning of 370,298 339,633 year Cash and cash equivalents, end of year 309,788 370,298 17