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Chongqing Changan Automobile Company Limited
2004 Semiannual Report
（B Share）
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Catalogue
I Important notes 2
II General introduction of the Company 3
III Changes in Shareholdings and
Information on Shareholders
4
IV Information on Directors,
Supervisors, Senior Management
6
V Discussion and analysis of
management
6
VI Important matters 12
VII Financial reports 15
VIII Notes 33
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I. Important Notes
The Board of Directors of Chongqing Changan Automobile Co., Ltd. (hereinafter referred to as “the Company”) and the directors guarantee that the information contained in the report are free of false records, misguiding statements or significant omissions, and assume individual and joint liabilities for the truthfulness, accuracy and integrity of the report.
Mr. Li Shouwu,Mr Xu Liuping,Mr Deng Tengjiang, Mr Zhang Baoling,Mr Wang Chongsheng ,Mr
Guo Konghui,Mr Wen Zhognyu were absent, Mr Li Shouwu entrusted Mr Yin Jiaxu, Mr Xu
Liuping entrusted Mr Zhao Luchuan, Mr. Deng Tengjiang and Mr zhang Baoling entrusted Mr.
Guo Xuewu, Mr Weng Zhongyu entrusted Mr Liu Wei ,Mr Guo Konghui entrusrted Mr Gao
Zhikai to attend and vote on his behalf.
Chairman Mr. Yin Jiaxu, General manager Mr. Zhao Luchuan and Chief Accountant Mr. Cui Yunjiang guarantee the truthfulness and completeness of the financial statements of the report.
The semiannual financial report is not audited.
The report shall be presented in both Chinese and English, and should there be any conflicting understanding of the text, the Chinese version shall prevail.
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II. General Introduction of the Company
1. Name of the Company: Chongqing Changan Automobile Company Limited 2. Place of listing: Shenzhen Stock Exchange
Abbreviated name of the stock: Changan Automobile, Changan B Share Code: 000625 200625
3. Registered address: No. 260, Jian Xin East Road, Jiang Bei District, Chongqing Post code: 400023 Company location: No. 260, Jian Xin East Road, Jiang Bei District, Chongqing Website: http://www.changan.com.cn Email: [email protected] 4. Legal representative: Mr. Yin Jiaxu 5. Secretaries of the Board: Cui Yunjiang, Li Jun Company location: No. 260, Jian Xin East Road, Jiang Bei District, Chongqing Telephone: 023-67591349 Fax: 023-67866055 Email: [email protected] 6. Newspapers for announcement: China Securities, Securities Times,
Hongkong Commercial Daily Website for announcement: http://www.cninfo.com.cn Filing Location of semiannual report: Office of BOD Filing Location of semiannual report: Office of BOD
7. Extracts of accounting and operating data (RMB thousand )
As at 30 June, 2004
As at 31 December 2003
Increase/decrease（％）
Current assets ( RMB thousand ) 8,449,414 6,853,887 23.28%
Current liabilities (RMB thousand ) 6,271,212 4,961,608 26.39%
Total assets (RMB thousand ) 13,017,489 10,984,325 18.51%Shareholders’ equity （excluding minority interest）( RMB thousand )
5,302,857 4,810,372 10.24%
Net asset per share（RMB yuan/share） 3.60 3.92 -8.16%Adjusted net assets per share （RMB yuan/share） 3.45 3.74 -7.75%
Six Months Ended 30 June, 2003
Six Months Ended 30 June, 2002
Increase/decrease（％）
Net profit ( RMB thousand ) 799,152 765,775 4.36%Net cash flow from operating activities（RMB yuan/share） 0.54 0.62 -12.90%
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Return on net asset（%） 15.07 18.49 -3.42%
Earnings per share（RMB yuan/share） 1,263,862 291,447 333.65%
Note: the above-mentioned “net asset per share”, “adjusted net asset per share”, and “return per share”
were calculated based on the total 1,471,999.2 thousand shares of year 2003 less issued bonus shares at
the end of the reporting period and during the reporting period. And the basis of calculation at the end
and the same period of last year was the original total 1,226,666 thousand shares.
8. Reconciliation of net profits presented under the PRC accounting standards and International
Financial Reporting Standards (“IFRS”) (RMB:thousand)
Net assets Net profit Prepared in accordance with PRC GAAP and Accounting Standards for Business Enterprises: 5,230,835 798,723 1.Amortization of goodwill arising on consolidation (15,884) 429 2. Reversal of revaluation surpluses from of long-term assets relating to revaluation made in 1995 (7,877)Deferred tax assets 95,783 As restated in conformity with IFRS: 5,302,857 799,152
III. Changes in Shareholdings and Information on Shareholders 1.Change in Shareholdings (Unit: share)
Balance before current change
Increase/Decrease in the reporting period（+，-）
ShareAllotment
Bonus Shares
Share Transfer
red From
Accumulation Fund
Additional
issueOthers Subtotoal
Balance after change
I.Non-circulated shares
1.Promoter shares 708,666,000 141,733,200 141,733,200 850,399,200Including: State-owned legal person shares Domestic legal person shares 708,666,000 141,733,200 141,733,200 850,399,200Foreign legal person shares Others 2.Legal entity shares raised
3.Employee shares 21,000 4,200 4,200 25,2004.Preference shares and others
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Sub-total of non-circulated shares
708,687,000141,737,400 141,737,400
850,424,400
II. Circulated shares
1.Domestic listed RMB shares 167,979,000 33,595,800 33,595,800 201,574,800
2.Domestic listed foreign shares 350,000,000 70,000,000 70,000,000 420,000,0003.Overseas listed foreign shares 4.Others Total circulated shares 517,979,000
103,585,800
103,595,800 621,574,800
III. Total Share 1,226,666,000245,333,200
245,333,200
1,471,999,200
2.At the end of the reporting period, there were 27,612 shareholders in the Company, including 16,171 shareholders of A shares and 11,441 shareholders of B shares. 3. The largest ten shareholders
Name of the shareholder Increase/ Decrease in
the year
Shares held at the year-end
% of total
shares
Share Type
Pledged/ Frozen shares
Nature offShareholders
CHANGAN AUTOMOBILE GROUP LIMITED (“CAC”)
141,733,20850,399,200 57.77%
Non-
Circulated 354,333,000 State-owned
BBH BOSTON A/C GMO EMERGING MARKETS FUND
5,822,521 17,751,461 1.21% Circulated Unknown Foreign
FF GREATER CHINA FD GT1 24037 3,800,008 10,200,045 0.69%
Circulated
Unknown
Foreign
BERMUDA TRUST （ FAR EAST ） LTD-VALUE PARTNERS ‘A’FD
1,830,689 9,448,132 0.64% Circulated
Unknown
Foreign
BOSHI VALUE INCREASE SECURITIS INVESTMENT FUND 1,524,477 9,146,860 0.62%
Circulated
Unknown
A share KGI ASIA LIMITED 6,315,621 8,984,273 0.61% Circulated Unknown Foreign BIAL/HSBC GLOBAL INVESTMENT FUNDS CHINESE EQUITY
1,400,000 8,400,000 0.57% Circulated
Unknown
Foreign
CHINA INTL MARINE CONTAINERS (HONG KONG) LTD
1,441,512 7,684,460 0.52% Circulated
Unknown
Foreign
CHINA-RELATED STOCKS MOTHER FUND Unknown 7,354,338 0.50% Circulated Unknown Foreign
GUOTAI JUNAN SECURIES HONG KONG LIMITED -702,437 7,229,926 0.49%
Circulated
Unknown
Foreign
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Related relationship of the ten largest shareholders and their consistent act
In the ten largest shareholders, the state-owned legal person shareholder Changan Automobile Group Limited has no related relationship with other shareholders. It also doesn’t belong to the persons acting jointly as stipulated in the Administrative Rules on the Disclosure of Shareholding Fluctuation in Listed Companies. Whether other shareholders of float shares have related relationship or whether they belong to the persons acting jointly as stipulated in the Administrative Rules on the Disclosure of Shareholding not is unknown.
4. There was no change in controlling shareholders and other actual controllers during the reporting period. 5. Information on the ten largest shareholders of circulated shares
Names of the shareholders(full name)
Amount of circulated shares held at the period
end
Types (A.B.H or others)
BBH BOSTON A/C GMO EMERGING MARKETS FUND 17,751,461 B share FF GREATER CHINA FD GT1 24037 10,200,045 B share BERMUDA TRUST（FAR EAST）LTD-VALUE PARTNERS ‘A’FD
9,448,132 B share
BOSHI VALUE INCREASE SECURITIS INVESTMENT FUND 9,146,860 A share
KGI ASIA LIMITED 8,984,273 B share BIAL/HSBC GLOBAL INVESTMENT FUNDS CHINESE EQUITY 8,400,000 B share
CHINA INTL MARINE CONTAINERS (HONG KONG) LTD 7,684,460 B share CHINA-RELATED STOCKS MOTHER FUND 7,354,338 B share
GUOTAI JUNAN SECURIES HONG KONG LIMITED 7,229,926 B share BBH BOS S/A MST TST BK OF JP RE:JF CN ACTIVE OPEN MOTHER FD 7,024,245 B share
Explanation on the related relationship or joint action of the above-mentioned shareholders Unknown
IV. Information on Directors, Supervisors, Senior Management 1.Chart of charges in the shares held by the directors, supervisors and senior management of the Company during the reporting period.
Name At the beginning of
the year By the year-end Reasons for changes
Yin Jiaxu 4,200 5,040 Bonus share Zhao Luchuan 4,200 5,040 Bonus share Wang Chongsheng 4,200 5,040 Bonus share Zhou Xiaying 4,200 5,040 Bonus share Peng Mingyu 4,200 5,040 Bonus share
⒉ There were no newly appointed or dismissed directors, supervisors and senior management during
the reporting period
V Discussion and analysis of management 1. The business operation of the Compnay
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(1) The scope of the key business operation of the Company
The Company is mainly engaged in the development, manufacturing and sales of mini cars and vans, small business cars and sedans including Changan Star mini-lorry series, Changan mini-van, Changan Suzuki’s Alto mini sedans and Lingyang, Changan Ford’s Fiesta and Mondeo, sedans, and the manufacturing and sales of various types of Jiangling engines for mini car series. (2) The industry condition during the reporting period During the first half of the year 2004, affected by the maro-control policy of the state as well as the seasonal factors of the auto-industry, our coutry’s auto industry, especially the sedan industry showed obviously the trend of decrease after it experienced a high-speed growth in 2002 and 2003. During the first half of the year 2004, the whole country produced and sold a total of 2.6771 million and 2.5536 million cars, increased by 27.10% and 24.15% as compared with the same period of last year. It produced and sold sedans of 1.2461million and 1.1320 million, increased by 36wjji37% and 31.59% as compared with the same period of last year. It produced and sold mini-lorries of 0.4007 million and 0.3923 million, increased by 27.79% and 11.59% as compared with the same period of last year. It produced and sold mini-vans of 0.0793 million and 0.0869 million cars, the production decreased by 7.70% and the sales increased by 31.33 % as compared with the same period of last year. Although the production and sales decreased as compared with last year, our country’s auto-industry still kept a comparatively high growth speed. It should be mentioned that, although the increase rate of whole the auto-industry decreased, the increase rate of the mini cars and van was higher than that of the last year. (3) The operation condition of the Company during the report period During the the first half of the year 2004, the Company has conquered many difficulities including transportation shortage, the price increase in energy and raw materials and the low growth rate of the whole auto-industry. It focused on the development strategy of “ Based on mini-cars, focus on sedans” , took the financial management as the central point and also emphasized the improvement of operation quality. The Compnay launched the activity of “ Double decrease and double increase” and also put emphasis on the implementation of strategies. It has developed detailed implementation policies in terms of base contruction, production organization, quality control, financial management, sales services and products research and development in order to ensure the implementation as well as the control of the “3337” strategic aim of the Company. It maintained a sustained development trend in the automobile production, sales and the overall profit. (Resources: Express Information on the Production and sale of China’s Automobile Industry) During the reporting period, the Company produced 247,664 automobiles, increased by 32.49% as compared with last year and sold 248,810 automobiles, increased by 27.46% (Changan Ford calculated this based on 50% of its production and sale volume), the growth rate of production and sale is a little bit higher than the growth rate of the state automobile market. And the sales increase mainly came from Changan Ford, Hebei Changan and Nanjin Changan, their sales volume increased by 12,915, 22,679
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and 16,455 respectively as compared with last year. The market share of the Compnay was 9.74%, up by 0.96% from 8.78% of last year, among which, the market share of sedans, minicars, minivans was 6.46%、 36.65%、35.64%、41.23% separately.
The production and sales volume of the Company for the first half of Year 2004 and 2003 is as follows: January to June of 2004 January to June of 2003
Product Name Production Volumn Sales Volumn Production Volumn Sales Volumn Mini-Cars 145,870 139,828 103,298 121,221Mini-vans 30,415 35,843 31,174 22,032
Sedans 71,379 73,139 52,462 51,958Total 247,664 248,810 186,934 195,211
Note1: during the report period, the statistic of Changan Ford was based on 50% of its production and sales volume and the calculation calibre is the same with that of the consolidated financial statements. The statistic of Changan Ford of last year was not included in the statistic scope. (4) Chart of the industy or main products that accounted for over 10% of the Company’s sales revenue
and main operating income Industry/products/ Products sales
revenue
(Ten thousand)
Products sales cost
(Ten thousand)
Gross Profit
(%)
Auto-manufacturing industry 1,014,242 753,612 25.70%Including: Mini-cars 463,729 338,754 26.95%
Sedans 446,232 335,567 24.80%
2. The analysis of the operating results and financial conditions (1) Main operating revenue, cost and profit During the reporting period, the Company has realized its main operating income of RMB 10.14 billion, up by 39.65% from the last year. The revenue increase mainly came from Changed Ford, Changan Suzuki, Nanjing Changan and Hebei Changan, their revenue was RMB 1.8 billion, RMB 0.244 billion, RMB 0.394 billion and RMB 0.605 billion respectively. In terms of the revenue structure, the sales revenue from sedan increased rapidly, up to 44% from 33.67% of last year and it was mainly due to the revenue increase from Changan Ford Fiesta and Modeo. When the main operating income increased, at the same time, the cost of main operating business increased rate was 40.95%, and the main operating profit increased rate was 36.15% which is basically appropriate with the increase in its main operating business. During this period, the Company net profit up by 4.36% from last year. The increase was mainly contributed to Changan Ford, at the same time, Hebei Changan and Nanjing Changan has balanced their profit and loss. The operating profit of the headquarters of the Company decreased by RMB 0.239 billion because of the decrease in price and sales volumn as well as the increase in expenses during this period (please refer to the “period expenses” for the reasons). The operating profit of Changan Suzuki
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decreased by RMB 21.13 million from last year because of the price adjustment of products during the first half of the year. (2) Period expenses The operating expenses of the first half of the year increased rate was 75.15%，compared with last year.
It increased mainly because Changan Ford was incorporated and the operating expenses increased by RMB 0.192 billion. The sales volume of Changan Suzuki, Nanjing Changan and Hebei Changan increased, which resulted in the increase in their operating expenses to different levels. The operating expenses of the headquarters of the Company increased by RMB 46.68 million because the sale service fee and transportation fee of a single car increased and the reversal of the compensation fee of the sales in the same period of last year has resulted in a relatively small comparative base. The administration expenses during the first half of the year increased rate 113.65% copared with the same time last year, mainly because the consolidated administration expenses of Changan Ford increased by RMB 0.104 billion and the consolidated administration expenses of the headquarters increased by RMB 0.125 billion. The main reason for the increase in the administration expenses of the headquarters was: a management impetus fund RMB 43.06 million was provided and the research and development fee increased by RMB 29.56 million from the last year. And the reversal of the inventory loss provision of RMB 26 million in the same period of last year has resulted in a relatively small comparative base. (3) Assets and liabilities Ended at June 30, the Company’s total asset was RMB 13.017 billion, up by 18.51% from the beginning of this year, mainly due to the scale increase of Changan Ford, Changan Suzuki, Nanjing Changan and Hebei Changan within the consolidation scope. The liabilities of the same period increased by 27.89 % because the Company increased its accounts receivables to suppliers by making use of its commercial credits and also because of the increase in the production and sales and service fee of “ Three Guarantees” as well as the increase in the Company’s long-term loans. The asset and liability ratio of the Company was 51.35% that maintained at a reasonable level. The explanations to the items that had relatively great fluctuations are as follows: The balance of the long-term loan was RMB 0.395 billion, up by 61.22% from the beginning of the year because the headquarters increased its loan of engineering investment by RMB 0.15 billion. 3. Problems and difficulties as well as solutions during the operation (1) Main problems and difficulties faced by the Company during the operation: ① During the reporting period, although the auto-industy ,especially the sedan industry still grew
rapidly, its speed has begun to slow down because of the influence of different factors including the state’s maro-control policy. ② Stimulated by a new auto-industry policy, a new round of emerges will test the scale production
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abilites of the enterprise. ③ Many auto enterprises have adopted the competition methods of launching new products in order to
grasp market opportunities timely and the speed of launching new products also increased. ④ Price-cut promotion has become an important method for many big brands to particitpate the
competition and the range as well as fregquency of price-cut also increased, which presented a higher requirements on the cost control abilities of the enterprises. ⑤ The main products: Mini-cars of Changan Star series produced by the headquarters of the Company
were in a leading position in the market, but the limit on the expansion of the production abilities has affected the increase in sales. (2) Main policies adopted by the Company: ① Stregthened the overall budget management work focusing on the finance and launched the
activities of “ Double Decreae and Double Increase” and also emphasized the strategy implementation. ② Conformed the system resources of purchase, manufacturing, sales and finance based on the
platform of ERP system and improved the Company’s management quality. ③ Put emphasis on the development of Company’s new products. The new product development work
went on smoothly and the first product CM8 of which the Company has independent intelligence property rights has unveiled successfully in Beijing International Automotive Industry Exhibition. Shanghai Engineering Reserch Insititute has completed the preliminary reasoning and research work and started the step of construction. ④ Strengthened the cooperation with Ford and Suzuki and emphasized the production expansion
project of Changan Ford and Changan Suzuki. Put forward actively the construction process of the seceond factory project of Changan Ford and increase the speed of products and profit structure adjustment and carried out the development strategy of “ Based on mini-cars, focus on sedans” in order to maintain the Company’s market share and profitabilitylevels. ⑤ Made full use of the advantages of the Company’s self-owned selling network, expanded and
improved the Company’s selling system in order to boost the Company’s sales. 4. The Company’s investment during the reporting period
(1) Use of capital raised (RMB: ten thousand )
Investment project committed
Actually Invested projects
Actual investment
amount Status Estimated
earnings
Technology development center
Technology development center 1,184 In
process
Included in the total revenue
As at 30 June 2004, there was RMB 22.92 million of capital raised which were deposited in banks
in terms of current or non-current deposit. The Compan will use the raised capital in accordance with
the prospectus and the actual development need of the Company.
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(2) Use of non-raised fund (RMB: ten thousand)
Invested projects Investment in 2003 Status Estimated earnings
1. Automobiles production lines
2,905 In process
2. Engines production lines
10,863 In process
3. ERP 862 In process 4. Industry Zone 18,572 In process 5. Others 263
Total 33,465
Included in the total revenue
.
4. The work emphasis during the latter half of the year (1) Continue to strengthen the overall budget management work focusing on the fiannce, launch the activity of “Double Decrease and Double Increase” in depth and improve the Company’s operation quality. (2) Adhere to the development strategy of “ Based on mini-cars, focus on sedans” on the basis of the overall strategic plan “ 3337” of the Company and further strengthen the leading position in the market of the cars of the Changan Star series and increase the lauch speed of CM8 which is the alternative product of Changan Star series. (3) Increase the steps to nurture independent development abilities of the Company. In the future, the Company will gradually launch new products including CV9, C16 and so on and will try its best to establish systematic independent development abilities as soon as possible. (4) Increase the construction speed of the technology reform and production ability expansion project of Changan Suzuki and Changan Ford and also increase the launch speed of the new products of sedans and grasp the market opportunities timely. (5) Make full use of advantages of the brand value of Changan of RMB 7.948 billion (resources: The Most Valuable 500 Brands of China of 2004 collectively issued by the world brand lab and world economy forum), set up the Company’s brand management system, conform the brand image and plan, strengthen the brand selling force and set up a strong autombile brand. (6) Continue to expand and improve the Company’s selling network and perfect the service system construction which is market-oriented and responsive and also focuses on the users. Strengthen the promotion of affection service brand. (7) Make use of the opportunites of takling with the recall scheme and improve the Company’s qulity and responsive abilities comprehensively.
VI. Important Matters
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1. Administration of the Company
Compliance with Company Law, Securities Law and Listing Regulations of Shenzhen Stock Exchange,
the Company is doing its best to establish a standard administrative structure, set up the modern
enterprise rules and regulate the Company’s operations in order to comply with Regulations for Listing
Companies.
2. 2003 profit distribution, implementation of 2004 additional A-share issue and 2004 interim profit
distribution
(1) The implementation of the 2003 profit distribution plan
In the 2003 General Shareholders Meeting held on April 23, 2004, the 2003 profit distribution plan was
determined that the total 122,666.6 shares of the Company at the end of 2003 will be taken as te basis
and dividend will be distributed to all shareholders at RMB 2.50 Yuan and 2 bonus shares per ten shares
(tax included).
The date of shares registration of A-share distribution was May 25, 2004; the last business day for B-share was May 25, 2004. Dividend distribution was held on May 26, 2004.
(2) Implementation of 2004 additional A-share issue
The scheme of 2004 additional A-share issue was approved by the Stock Issuance Examination and
Verification Committee of China Securities and Regulatory Commission （’CSRC’）and is now waiting
for the CSRC to authorize the issuance.
(3) 2004 interim profit distribution plan:
There is neither profit distribution nor any shares addition transferred from reserve.
3. Significant litigations and arbitrations
There were no significant litigations and arbitrations during the reporting period.
(1) In July, 2002, the Company’s subsidiary, Chongqing Changan Automobile Sales Co., Ltd brought an accusation against North Pudong Economic and Technolog Development Co., Ltd for disputes over automobile sale loans and the accused amount was RMB 9.43 million. In 2002, the Company has recovered physial assets of RMB 0.56 million and cash of RMB 0.91 million. And the court has ordered the accused party to return the left amount of RMB 7.96 milliion. The Company has recovered RMB 3.5 milliom (of which RMB 1.5 million has not arrived yet) on during the reporting period. (2) In September, 2002, the Company brought an accusation against Chengdu Material Co., Ltd for
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disputes over automobile sale loans and the accused amount was RMB11,365,085.79. The court has ordered Chengdu Material Contract Co., Ltd to repay RMB 10,395,640.79 Yuan and the Compay participated the auction of the remained asset of Chengdu Material Contract Co., Ltd during the repoting period and is now waiting for the allocation scheme of the auction team. 4.There were no significant assets acquisition matters during the reporting period.
5. Significant related party transaction Please refer to the notes of financial statements for the related party relationship and transactions 6. Material contracts and their fulfilment
(1) Leasing: For need of operations, the Company leases an office building with total area of 4,560
square meters and the monthly rental is RMB40 per square meter. Other floor spaces cover 34,355
square meters with a monthly rental of RMB35 per square meter. The Company leases 282,252
square-meter land of CAC with an annual rental of RMB10 per square meter. CAC leases all houses
of the fifth, eighth, ninth and tenth floor of the Company’s Science and Technology Building, with an
area of 9,056 square meters and a monthly rental of RMB40 per square meter. (2) Assets commitment: There was no material entrustment in which the Company entrusted others to
manage monetary assets during the reporting period, and there as neither such case which occurred in
prior periods and continued in the reporting period.
7. Capital transactions among related parties and the external guaranties (1) Guarantee matters: The Company had no guarantee matters during the reporting period.
(2) The appropriation of the Company’s capital by holding shareholders and their subsidiaries (Unit:
million)
Note 1: it was the operational capital appropriation caused by the sale of automobiles and materials.
8. The shareholders who hold over 5%(including 5%) of the Company’s shares have not any
Capital approriation Name of related parties
Related party relationships
Annual amount Accounting entries
Year end balances
Notes
Debit Credit Operating capital
transactions CAC and its subsidiaries
First big shareholders
1,409 2,262 Accounts receivable
1,696 Note 1
Capital borrowing None None None None None None Entrusted loans None None None None None None
Entrusted the related party to invest
None None None None None None
Issue commercial acceptane bill without actual transactions
None None None None None None
Substitute debt repayment
None None None None None None
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commitment that will significantly impact the Company’s operating results and financial position
during the reporting period.
9.The 2004 semiannual financial report is unaudited, and the certified public accountants are not
changed during the reporting period.
10. Other important matters
(1) During the reporting period, the Company, its Board and directors were not investigated, punished
or publicly criticized by CSRC and other authorities. The Company’s directors and management
didn’t bear any justicatory obligation.
(2) Special announcement and independent opinions of independent directors on the Company’s
accumulated and current external guarantee, guarantee against the regulation, the implementation of the
requirements in document No. 56 of zhengjianfa [2003]
In accordance with the document No. 56 of zhengjianfa [2003] Notification about the Problems on How
to Standerdize the Capital Transactions of Listing Companies and Related Parties As Well As the
External Guranty of Listing Companies and the requirements of Notification On How to Prepare Well
the 2004 Semiannual Report of Listing Companies By Shenzhen Stock Exchange issued by Shenzhen
Stock Exchange, and acting as the independent directors of Chongqing Changan Automobile Company
Limited, we made the following special announcement and independent opinions on the Company’s
accumulated and current external guarantee, guarantee against the regulation, the implementation of the
stipulation in document No. 56 of zhengjianfa [2003].
(1) Special announcement ① The capital transactions of the Company’s holding shareholders and other related parties can be
implemented according to document No. 56 of zhengjianfa [2003] strictly. ② The Company can strictly control he external guarantee risks. Ended at June 30, 2004, the Company
didn’t provide any guarantee to holding shareholders and any other related parties, non-legal persons or individuals of which the Compnay has less 50% shares. ③ The Company has made adjustments to its Company Statute in accordance with
document No. 56 of zhengjianfa [2003] and has set out the approval procedures of the Company’s external guarantee as well as the credit criteria of the guarateed and the stipulations has been reviewed and approved by the 2003 annual shareholders meeting.. (2) Independent opinions After verification, it was regarded that the Company can strictly follow the requirements of the
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notification and protect investors’ interests. (3) Index for other information announcement Announcements of the Company were all published in China Securities, Security Times and Hongkong Commercial Daily, which could be also reached at http://www.cninfo.com.cn in Internet ① Announcement of the important matter on 9 January, 2004, which was about the reduction in
comsuption tax of Changan Suzuki. ② Announcement of resolution report of the Sixth Meeting of the Third Shareholders Meeting on 17
Feburary, 2004, which was about the additional issue plan adjustment. ③ Announcement of resolution report of the Seventh Meeting of the Third Shareholders Meeting,
which was about the abstract of the 2003 annual report. ④ Announcement of resolution report of the first temporary Shareholders Meeting on March 19, 2004,
which was about the additional issue plan adjustment. ⑤ Announcement of supplementary report of 2003 annual report on April 8, 2004. ⑥ Announcement of resolution report of the Eighth Meeting of the Third Shareholders Meeting and
the first quarter report of 2004 on April 20, 2004. ⑦ Announcement of resolution report of the 2003 Annual Shareholders Meeting on April 24, 2004. ⑧ Announcement of dividned and interest allocation scheme of 2003 on May 19, 2004. ⑨ Announcement of the important matter on June 1, 2004, which was about the price cut of the Alto
mini-car of Changan Suzuki.
Ⅶ
Financial Report (unaudited)
I.Financial Statements
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Chongqing Changan Automobile Co., Ltd. Consolidated income statement
(all amounts in RMB
thousands)
Note Six Months end
ed 30 June 2004
Six Months ended 30 June 2003
Sales 10,142,417 7,262,862
Sales tax and surcharge -373,109 -276,043
________ ________
Net sales 9,769,308 6,986,819
Cost of sales -7,536,117 -5,346,608
________ ________ Gross profit 2,233,191 1,640,211
Distribution costs -905,293 -516,865
Administrative expenses -467,832 -218,968
Other operating income and expenses
126,157 24,219
________ ________ Profit from operations 986,223 928,597
Finance costs – net 1 38,849 32,492
________ ________ Group profit before tax 1,025,072 961,089
Share of result of associates before tax
261
________ ________
Profit before tax 1,025,072 961,350
Tax -138,202 -135,661
________ ________ Group profit before minority interest
886,870 825,689
Minority interest
-87,718 -59,914
________ ________ Net profit 799,152 765,775
======== ======== Basic earnings per share (RMB per share)
0.54 0.62
======== ========
——————————————————————————————————————————————————— 17
Chongqing Changan Automobile Co., Ltd.
Consolidated balance sheet as of 30 June 2004 30 June 31 December (all amounts in RMB thousands)
Note
2004 2003
ASSETS Non-current assets Property, plant and equipment
3,982,137 3,553,950
Land use rights 237,812 241,147 Intangible assets 96,826 114,091 Investment in associates 4,500 4,500 Available-for-sale investments
44,798 44,798
Other non-current assets 101,555 71,555 Deferred tax assets 100,447 100,447 4,568,075 4,130,488Current assets Inventories 2 2,291,195 1,994,629 Receivables and prepayments
2,275,225 1,663,154
Trading investments 371,709 99,729 Cash and cash equivalents 3,511,285 3,096,325 8,449,414 6,853,887Total assets 13,017,489 10,984,325 EQUITY AND LIABILITIES
Shareholders’ equity Share capital 3 1,471,999 1,226,666
Share premium 833,438 833,438 Reserves 1,053,878 1,053,878
Retained earnings 1,943,542 1,696,390 5,302,857 4,810,372
Minority interest 1,030,516 947,461 Non-current liabilities Borrowings 4 395,000 245,000 Retirement benefit obligations
17,904 19,884
412,904 264,884Current liabilities Trade and other payables
5,463,126 4,332,384
Current tax liabilities 159,509 155,356 Borrowings 5 347,798 277,759 Provisions 300,779 196,109 6,271,212 4,961,608
Total liabilities 6,684,116 5,226,492Total equity and liabilities 13,017,489 10,984,325
——————————————————————————————————————————————————— 18
Chongqing Changan Automobile Co., Ltd. Consolidated cash flow statement for six months ended 30 June 2003
Description
Six Months ended 30 June 2004
Six Months ended 30 June 2003
Cashflow from Operating activities Cash received from sales of goods or rendering of
services 10,011,206 8,161,090 Refund of tax 39,844 6,746 Other cash received relating to operating activities 251,690 150,312
Sub-total of cash inflow 10,302,740 8,318,148 Cash paid for goods and services 6,526,662 5,947,480 Cash paid to and on behalf of employees 301,622 263,613 Payments of all types of taxes 1,089,014 1,049,796 Other cash paid relating to operating activities 1,121,580 765,812
Sub-total of cash outflow 9,038,878 8,026,701 Net cashflow from operating activities 1,263,862 291,447 Cashflow from Investing Activities Cash received from investment withdrawal Cash received from return on investments Net cash received from disposal of property, plant and equipment 936 570 Other cash received relating to investing activities Sub-total of cash inflow 936 570 Cash paid to acquire property, plant and equipment and construction in progress 496,443 296,538 Cash paid for investment Cash paid for investment in associates Sub-total of cash outflow 496,443 296,538Net cashflow from investing activities (495,508) (295,968)Cashflow from financing Activities Cash received from absorbing investment Cash received from borrowings 334,147 150,800 Other cash received relating to operating activities Sub-total of cash inflow 334,147 150,800 Cash repayment of amounts borrowed 114,109 190,800 Cash payments for distribution of dividends or profits 301,453 124,388 Other cash paid relating to operating activities Sub-total of cash outflow 415,562 315,188 Net cashflow from financing activities (81,415) (164,388)Influence of changes in exchange rate on cash and cash equivalents 686,939 Net increase (decrease) in cash and cash equivalents 3,096,325 (168,909)Cash and cash equivalents at the beginning of the year 3,511,285 2,873,901 Cash and cash equivalents at end of year 334,147 2,704,992
——————————————————————————————————————————————————— 19
II. Notes to the financial statements I. General Introduction to the Company Chongqing Changan Automobile Company Limited (hereafter referred to as “the Company”) was established in the People’s Republic of China (hereafter referred to as “PRC”) under the Company Law of the PRC on 31 October 1996. As a joint stock limited company, the company issued 506,190,000 shares to its sole sponsor Changan Automobile Group Company Limited (hereafter referred to as “CAC”) in exchange for mini-automobile and engine manufacturing equipment and related assets. The company also issued 250,000,000 B shares to overseas investors, the total share capital was RMB 756,190 on the date of establishment. The Legal Representative’s Operating License issued by Chongqing Industrial and Commercial Administrative Bureau is Yu-Jin No. 28546236-3. On 19 May 1997, with the approval of China Securities Regulatory Commission, the Company issued 120,000,000 A shares to domestic public investors, thereby increasing the total share capital to RMB 876,190. On 26 June 1998, the Company issued bonus shares on the basis of 4 shares for each 10 shares to the existing 876,190,000 shares in issue as at 31 December 1997. The bonus shares were issued as a distribution from the share premium account within shareholders’ equity. As a result, RMB 350,476 was transferred from the share premium account to share capital increasing share capital to RMB 1,226,666. On 26 May, 2004, the Company issued bonus shares on the basis of 2 bonus shares for each 10 shares to the existing 1,226,666,000 shares in issue as at 31 December 2003. As a result, the total capital was increased to RMB 1,471,999,200. The Company and its subsidiaries as well as associates (hereafter referred to as “the Group”) are mainly engaged in the production and selling of automobiles and automobiles parts. II.Accounting policies The principal accounting policies adopted in the preparation of these consolidated financial
statements are set out below: 1. Basis of preparation The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (hereafter referred to as “IFRS”), which includes International Accounting Standards and Interpretations issued by the International Accounting Standards Board. The consolidated financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current event and actions, actual results ultimately may differ from those estimates.
2 Group accounting (1) Subsidiaries Subsidiaries, which are those entities in which the Company and its subsidiaries (hereafter
——————————————————————————————————————————————————— 20
referred to as “the Group”) has an interest of more than one half of the voting rights or otherwise has power to govern the financial and operating policies are consolidated. The existence and effect of potential voting rights that are presently exercisable or presently convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. The purchase method accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus costs directly attributable to the acquisition. The excess of the cost of acquisition over the fair value of the net assets of the subsidiary acquired is recorded as goodwill. See note G for the accounting policy on goodwill. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, accounting policies of subsidiaries have been charged to ensure consistency with the policy adopted by the Group.
(2) Joint ventures The Group’s interest in jointly controlled entities are accounted for by proportionate
consolidation. The Group combines its share of the joint ventures’ individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group’s financial statements. The Group recognises the portion of gains or losses on the sale of assets by the Group to the joint venture that it is attributable to the other ventures. The Group does not recognise its share of profits or losses from the joint venture that result from the purchase of assets by the Group from the joint venture until it resells the assets to an independent party. However, if a loss on the transaction provides evidence of a reduction in the net realisable value of current assets or an impairment loss, the loss is recognised immediately.
(3) Associates Investments in associates are accounted for by the equity method of accounting. Under this
method the company’s share of the post-acquisition profits or losses of associates are recognised in the income statement and its share of post-acquisition movements in reserves are recognised in reserves. The cumulative post-acquisition movements are adjusted against the cost of the investment. Associates are entities over which the Group generally has between 20% and 50% of the voting rights, or over which the Group has significant influence, but which it does not control. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless the Group has incurred obligations or made payments on behalf of the associates.
3 Foreign currency translation
(1) Measurement currency The consolidated financial statements are presented in Renminbi (“RMB”), which is the
measurement currency of the Company.
(2) Transactions and balances
Foreign currency transactions are translated into the measurement currency using the
——————————————————————————————————————————————————— 21
exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation of monetary
assets and liabilities denominated in foreign currencies, are recognised in the income
statement.
4 Property, plant and equipment (1) Owned assets Property, plant and equipment are stated at cost or, in the case of assets injected into the
Group at the time of its reorganisation, at valuation less accumulated depreciation representing the deemed cost to the Group, less accumulated depreciation and any impairment losses. All direct and indirect costs relating to the acquisition or construction of property, plant and equipment including interest costs on related borrowed funds during the construction period are capitalized as property, plant and equipment.
(2) Subsequent expenditure Expenditure incurred to replace a component of an item of property, plant and equipment
that is accounted for separately, is capitalized with the carrying amount of the component being written off. Other subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the item of property, plant and equipment. All other expenditure is recognized in the statement of income as an expense as incurred.
(3) Depreciation
Depreciation is calculated on the straight-line method to write off the cost of each asset, to their residual values over their estimated useful life as follows:
Buildings 20-40 years Plant and machinery 10-20 years Equipment and motor vehicles 5-8 years Others
5-22 years
(4) Construction in progress Construction of a building or plant is considered to be completed and transferred to property
plant and equipment on the date when substantially all the activities necessary to prepare the asset for its intended use are complete notwithstanding any delays in the issue of the relevant commissioning certificate by the appropriate PRC authorities.
Interest costs on borrowings to finance the construction of property, plant and equipment are
capitalised, during the period of time that is required to complete and prepare the asset for its intended use. All other borrowing costs are expensed.
(5) Disposal and impairment Where the carrying amount of an asset is greater than its estimated recoverable amount, it is
written down immediately to its recoverable amount.
——————————————————————————————————————————————————— 22
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in operating profit.
5 Land use rights Amortisation of the land use rights is calculated on a straight-line basis to write off the cost
over the lease term ranging from 20 to 50 years. 6 Investments The Group classified its investments in debt and equity securities into the following
categories: trading, held-to-maturity and available-for-sale. The classification is dependent on the purpose for which the investments were acquired. Management determines the classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis. Investments that are acquired principally for the purpose of generating a profit from short-term fluctuation in price are classified as trading investments and included in current assets. Investments with a fixed maturity that management has the intent and ability to hold to maturity are classified as held-to-maturity and are included in non-current assets, except for maturities within 12 months from the balance sheet date which are classified as current assets. Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale; and are included in non-current assets unless management has the express intention of holding the investment for less than 12 months from the balance sheet date or unless they will need to be sold to raise operating capital, in which case they are included in current assets. Purchase and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. Cost of purchase includes transaction costs. Trading, held-to-maturity and available-for-sale investments are carried at cost less impairment.
7 Intangible assets (1) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s
share of the net assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions has been amortised using the straight-line method over its estimated useful life. Where it cannot be demonstrated that there is future economic benefits to be derived, the goodwill on acquisition will be written off upon acquisition.
(2) Industrial property rights and proprietary technology
Industrial property rights and proprietary technology are stated at cost and amortized on a
straight- line basis over a 10 year expected beneficial period starting from the date of use or over the actual production output.
8 Deferred assets Deferred assets include utility capacity enhancement expenses that are amortized using the
straight-line method over 10 years. 9 Impairment of long lived assets Property, plant and equipment and other non-current assets, including intangible assets are
——————————————————————————————————————————————————— 23
reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset’s net selling price and value in use.
10 Leases (1) A group company is the lessee Leases of land and buildings where a significant portion of the risks and rewards of ownership
are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.
(2) A group company is the lessor Assets leased out under operating leases are included in property, plant and equipment in the
balance sheet. They are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term.
11 Inventories Inventories are stated at the lower of cost or net realisable value. Cost is determined by the
weighted average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity) but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.
12 Trade receivables Trade receivables are carried at original invoice amount less provision made for impairment of
these receivables. A provision for impairment of trade receivables is established when there is an objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, discounted at the market rate of interest for similar borrowers.
13 Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash
flow statement, cash and cash equivalents comprise cash on hand and deposits held at call with banks.
14 Share capital
(1) Share capital consists of A and B shares. (2) Incremental external costs directly attributable to the issue of new shares, other than on a
business combination, are shown as a deduction, net of tax, in equity from the proceeds. Share issue costs incurred directly in connection with a business combination are included in the cost of acquisition.
15 Borrowings Borrowings are recognized initially at the proceeds received, net of any
——————————————————————————————————————————————————— 24
transaction costs incurred. Borrowings are stated at amortized cost using the effective yield
method; any difference between proceeds (net of transaction costs) and redemption value is
subsequently recognized in the statement of income over the period of the borrowings.
16 Deferred Income tax Deferred income tax is provided in full, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred income tax.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit
will be available against which the temporary differences can be utilised. 17 Employee benefits (1) Pension obligations The Group participates in defined employees retirement schemes regarding pension benefit
required under existing PRC legislation. The contributions to the schemes are charged to the income statement as and when incurred. The Group’s obligations include contributions to a defined contribution retirement plan administered by a government agency determined at a certain percentage of the salaries of the employees and contributions to a supplementary pension fund of a fixed monthly amount per employee. The Group accounts for these contributions on the accrual basis.
The pension obligation not covered by the abovementioned retirement scheme is estimated
based on the present value of the estimated future cash outflows discounted using interest rates typically available to the company through bank deposit accounts.
(2) Termination benefits Termination benefits are payable whenever an employee’s employment is terminated before
the normal retirement date. The Group recognises termination benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value.
(3) Housing fund and other benefits All of the Group’s full-time employees are entitled to participate in a state-sponsored
housing fund. The fund can be used by the Group for the construction of employee quarters, by the employees for purchasing accommodation, or may be withdrawn upon their retirement. The Group is required to make annual contributions to the state-sponsored housing fund equivalent to a certain percentage of the employees’ salary. In addition, the Company provided subsidies to eligible employees for purchase of their own flats and accounted for such subsidies when occurred. In addition, the Company made provision at 14% of total salary of its employee for general welfare.
18 Provisions Provisions, for mainly warranty cost, are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made.
——————————————————————————————————————————————————— 25
Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Rental income are recognised on an accrual basis. Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group. Dividends are recognised when the right to receive payment is established.
19 Revenue recognition Revenue comprises the invoiced value for the sale of goods and services net of value-added
tax, rebates and discounts, and after eliminating sales within the Group. Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer.
Rental income are recognised on an accrual basis. Interest income is recognised on a time
proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group. Dividends are recognised when the right to receive payment is established.
20 Dividends payable Dividends are recorded in the Group’s financial statements in the period in which they are
approved by the Group’s shareholders. 21 Research and development Research expenditure is recognised as an expense as incurred. Costs incurred on
development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is probable that the project will be a success considering its commercial and technological feasibility, and only if the cost can be measured reliably. Other development expenditures are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Development costs that have been capitalised are amortised from the commencement of the commercial production of the product on a straight-line basis over the period of its expected benefit.
22
Segment Reporting
The Group’s turnover and profit for the year were mainly derived from the manufacture and
domestic sale of automobiles and the principal assets employed by the Group are located in the PRC. Accordingly, no segmental analysis by business and geographical segments has been provided for the year
23 Government Grants Grants from the government are recognised at their fair value where there is a reasonable
assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs they are intended to compensate. In 2003, the Group obtained and recognized grant of RMB 2.62 million from government in
——————————————————————————————————————————————————— 26
relation to research and development activities (2003 RMB 4 million). Government grants relating assets are presented in the balance sheet by deducting the grant in arriving at the carrying amount of the assets. The grants are recognized as income over the lift of depreciable assets by way of a reduced depreciation charge.
24. Financial risk management The financial assets of the Group include cash and bank balances, cash and time deposits
with a related financial institution, investments, accounts and bills receivable, prepayments and other receivables, and amounts due from related companies. The financial liabilities of the Group include bank loans, accounts and bills payable, receipts in advance, accruals and other payables, accrued staff welfare and benefits and amounts due to related companies.
(1) Interest rate risk The Group’s income and operating cash flows are substantially independent of changes in
market rates.
(2) Credit risk (3) Cash at bank and in hand For prudent liquidity risk management, substantial amounts of the Group’s cash balances
are deposited with Industrial and Commercial Bank of China, Bank of Communications, Ordnance Finance Company, China Merchants Bank, Shanghai Pudong Development Bank, Huaxia Bank, Zhongxin Industrial Bank and Minsheng Bank Corporation.
(4) Receivables The Group does not have a significant exposure to any individual customer or counterparty.
Credit risk on receivables has already been accounted for in the financial statements as they are shown net of provisions for bad and doubtful debts.
(5) Fair values The fair values of cash and bank balances, cash placed with a related financial institution,
short term investments, receivables and prepayments, trade and other payables, current tax liabilities, provisions, are not materially different from their carrying amounts.
The carrying values of short term borrowings are estimated to approximate their fair values based on the nature or short term maturity of these instruments.
The fair values of long term borrowings as estimated by applying a discounted cash flow using current market interest rates for similar financial instruments approximate their carrying values.
Fair value estimates are made at a specific point in time and are based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement, and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Notes to the consolidated financial statements (In the notes all amounts are shown in RMB thousands unless otherwise stated)
1.Finance costs
Six Months Ended at 30 June 2004
Six Months Ended at 30 June 2003
Interest expense 12,186 7,255
Less:Interest income 25,913 27,280
——————————————————————————————————————————————————— 27
Less: Capital appropriation interests 23,626 13,700
Foreign exchange losses -4,815 216
Foreign exchange gains 278 831
Others 3,597 1,848
-38,849 -32,492
The capital appropriation interests were mainly the interests charged on the dealers for their delayed
payment in accordance with the agreed interest rate.
2. Inventories
2004.1-6 2003 Raw materials (at net realisable value) 960,602 636,759Work in progress (at cost) 135,924 90,395Finished goods (at net realisable value) 1,165,191 1,245,362Consumables (at cost) 29,478 22,113 2,291,195 1,994,629
3. Shareholdings Balance before current change
Increase/Decrease in the reporting period（+，-）
Share Allotment Bonus Shares
Share Transfer
red From
Accumulation Fund
Additional
issueOthers Subtotoal
Balance after change
I.Non-circulated shares 1.Promoter shares 708,666,000 141,733,200 141,733,200 850,399,200Including: State-owned legal person shares Domestic legal person shares 708,666,000 141,733,200 141,733,200 850,399,200Foreign legal person shares Others 2.Legal entity shares raised 3.Employee shares 21,000 4,200 4,200 25,2004.Preference shares and others Sub-total of non-circulated 141,737,400 141,737,400
——————————————————————————————————————————————————— 28
shares 708,687,000 850,424,400II. Circulated shares 1.Domestic listed RMB shares 167,979,000 33,595,800 33,595,800 201,574,8002.Domestic listed foreign shares 350,000,000 70,000,000 70,000,000 420,000,0003.Overseas listed foreign shares 4.Others Total circulated shares 517,979,000
103,585,800 103,595,800 621,574,800
III. Total Share 1,226,666,000 245,333,200 245,333,200 1,471,999,200
4.Borrowings Current Bank borrowings 2004.1-6 2003 - unsecured 63,000 183,259 - secured 284,798 94,500 Non-current Bank borrowings - secured 395,000 245,000 Total borrowings 742,798 522,759 159,509 155,356 5. Accrued Liabilitis Accrued liabilities are the fees of “ three guarantees” provided for the cars that the Company sells. ⅣRelated party transactions The Company is controlled by CAC (incorporated in PRC), which owns 57.77% of the Company’s
shares. The remaining 42.23% of the shares are widely held. The ultimate parent of the Group is China South Industries Group (“CSIG”, incorporated in PRC).
Related parties, other than subsidiaries, and their relationship with the Company are as follows: Related parties’ name Relationship Chongqing Lear Changan Automobile Decorating Co., Ltd. Subsidiary of CAC Changan Automobile Manufacturing Factory Subsidiary of CAC Changan Mini Vehicles Parts Factory Subsidiary of CAC Chongqing Changan Mini Vehicles Parts Sales Company Subsidiary of CAC Chongqing Changan Automobile Machinery Factory Subsidiary of CAC Chongqing Changan Transportation Company Subsidiary of CAC Changqing Changan Trading Company Subsidiary of CAC Chongqing Changan Kuayue Automobile Co., Ltd. Subsidiary of CAC Changan Kuayue Parts Sales Company Subsidiary of CAC Changan Machinery Factory Subsidiary of CAC Changan Automobile Rubber Parts Factory Subsidiary of CAC Chongqing Changan Construction Co., Ltd. Subsidiary of CAC Chongqing Changan Jingling Co., Ltd Subsidiary of CAC Chongqing Jiangli Machinery Factory Subsidiary of CAC Chongqing Jiangchuan Machinery Factory Subsidiary of CAC Chongqing Jiangchao Engine Industry Co., Ltd. Subsidiary of CAC
——————————————————————————————————————————————————— 29
Chongqing Changan Minsheng Logistics Co., Ltd. Subsidiary of CAC Changan Shengli Automobile Company Subsidiary of CAC Chongqing Changan Design Academy Subsidiary of CAC Chongqing Changan Support Services Co., Ltd. Subsidiary of CAC Chongqing Changan Information Technology Co., Ltd. Associate
Chongqing Wanyou Economic Technological Development Co., Ltd.
Of the same ultimate holding company (China Ordnance Industries Corporation)
ChengduWanyou Economic Technological Development Co., Ltd
Of the same ultimate holding company (China Ordnance Industries Corporation)
Ordnance Finance Company Shareholder enterprise of the ultimate (controlling) holding company
Southwest Ordnance Industries Corporation Of the same ultimate holding company (China Ordnance Industries Corporation)
(1) Pricing policy The products that the Company sells are all priced based on the market prices. (2)Purchase of parts Related paties’ name Six Months Ended
30 June 2004 Year Ended
31 December 2003
Chongqing Lear Changan Automobile Decorating Co., Ltd. 129,052 219,351Chongqing Changan Kuayue Automobile Co., Ltd. 20,773 45,049Chongqing Changan Automobile Parts Factory 19,987 39,793Changan Automobile Manufacturing Factory CAC 23,958 198,009Chongqing Jiangli Machinery Factory 33,472 88,378Chongqing Jiangchuan Machinery Factory 33,932 71,664Chongqing Jiangchao Engine Industry Co., Ltd. 8,398 21,673Changan Mini Vehicles Parts Factory 2,750 5,898Changan Automobile Rubber Parts Factory 6,440 14,814Chongqin Changan Jinling Automobile Parts Co., Ltd. 265,862 483,466 544,624 1,188,095 (3) Sales of autos and engines Related parties’ name Six Months Ended 30
June 2004Year Ended 31
December 2003CAC and its related companies 43,882 195,664Chengdu Wanyou Economic Technological
Development Co., Ltd. 151,443 572,046Nanjing Changan Automobile Co., Ltd. 88,941 260,738Chongqing Wanyou Economic Technological
Development Co., Ltd. Chongqin Changan Jinling Automobile Parts Co., Ltd 49,422 39,691Chongqing Changan Automobile Parts Factory 2,107 4,489Chongqing Changan Ford 22,054 335,795 1,094,682 (4) Purchase of construction materials and payment of construction fee
Related parties’ name Six Months Ended Year Ended 31
——————————————————————————————————————————————————— 30
30 June 2004 December 2003CAC 1,136 13,779Chongqing Changan Construction Co., Ltd. 97,635 156,935
Chongqing Changan Design Academy 1,319 16,685Chongqing Changan Information Technology Co., Ltd. 9,654 21,191
Changan Jianshe Co., Ltd. 1,263 109,744 209,853
(5) Compresensive services fee
Related parties’ name
Transaction Six Months Ended 30 June 2004
Year Ended 31 December 2003
CAC Payment of trademark use fee
6,795 13,028
CAC Payment of land rental fee 2,026 4,257CAC Payment of buildings rental
fee 8,309 16,618
CAC Payment of water, electricity and gas 50,117 97,701CAC Payment of welfare 15,201 28,796CAC Payment of telephone fee 933 1,930 Payment of cultural education fee 2,685 7,804CAC Payment of police and fire
Protection fee 4,296 8,500
CAC Others 3,165 7,399 93,527 186,033
(6) Other related party transaction
Related parties’ name Transaction Six Months Ended 30 June 2004
Year Ended 31 December 2003
Chongqing Changan Minsheng Logistics Co., Ltd
Transportation fee
219,125 395,369
Chongqing Changan Transportation Compnay
Transportation fee
3,007 1,313
Chongqing Changan Information Technology Co., Ltd. 2,937 28,269
Chongqing Changan Information Technology Co., Ltd.
Payment of information service fee
225,069 424,951
CAC Rental income 2,173,440 4,347
CAC and its subsidiaries Discount income
1,062,629 882
3,056,070 5,229
(7)Receivables from and payables to related parties ①Accounts receivable from related parties
Related parties’ name 30 June 2004 31 December 2003 CAC and its related companies 16,963 25,488 Chengdu Wanyou Economic Technological
Development Co., Ltd. 18,473
Chengdu Wanyou Economic Technological 21,160
——————————————————————————————————————————————————— 31
Development Co., Ltd. Chongqing Changan Ford - 11,855 56,596 37,343 ②Notes receivable from related parties
Related parties’ name 30 June 2004 31 December 2003 Chengdu Wanyou Economic Technological Development Co., Ltd.
86,125 137,000
Chongqing Wanyou Economic Technological Development Co., Ltd.
44,550 24,004
130,675 161,004 ③Accounts payable
Related parties’ name 30 June 2004 31 December 2003 Chongqing Lear Changan Automobile Decorating
Co., Ltd. 95,953 77,216 Chongqing Changan Kuayue Automobile Co., Ltd 9,689 8,912 Changan Automobile Manufacturing Factory 2,688 805 Chongqing Jiangli Machinery Factory 7,806 8,357 Chongqing Jiangchuan Machinery Factory 5,973 9,622 Chongqing Jiangchao Engine Industry Co., Ltd. 2,122 5,233 Changan Mini Vehicles Parts Factory 2,481 7,312 Changan Automobile Rubber Parts Factory 1,296 1,061 Changan Kuayue Parts Sales Company 2,300 Minsheng Logistics Co., Ltd 4,001 9,242
132,009 130,060 ④Notes payable Related parties’ name 30 June 2004 31 December 2003 CAC 300 300 300 300 ⑤Advance from customers
Related parties’ name 30 June 2004 31 December 2003 Chongqing Wanyou Economic Technological Development Co., Ltd.
8,094 18,245
CAC 23 CAC’s related companies 44 Chongqing Changan Automobile Manufacturing
Factory 31
Chongqing Changan Kuayue Automobile Co., Ltd
9 9
Chengdu Wanyou Economic Technological Development Co., Ltd.
6,458
8,170 24,743 ⑥Other payables
Related parties’ name 30 June 2004 31 December 2003 CAC 3 Chongqing Changan Minsheng Logistics
Co., Ltd. 58,457 49,461
Chongqing Changan Design Academy 16 4,757 Chongqing Changan Information
Technology Co., Ltd. 2,441 3,180
Chongqing Jiangli Machinery Factory 357 2,671 Chongqing Changan Transportation
Company 1,472 1,151
62,746 61,220 (8)Deposits with related parties
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As at 30 June 2003, the Company had deposits of RMB zero (2003: RMB 122,463 Thousand Yuan ) with Ordnance Finance Company. V Reconciliation of the net assets and net profit presented under the PRC accounting standards and IFRS.
Net assets Net profit As reported in the accounts of the Group under PRC accounting regulations 5,230,835 798,723 1.Amortisation of goodwill arising on consolidation (15,884) 429 2.Reversal of revaluation surpluses of long term assets relating to the revaluation in 1995 (7,877)3.Deferred tax assets 95,783 As restated in conformity with IFRS 5,302,857 799,152
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Ⅷ Documents for inspection
⒈Semiannual report with signatures of the Chairment of the Board of Directors.
⒉Financial statements with signatures and stamps of the legal representative,the head of the
accounting and the head of accounting departments.
⒊All the documents of the Company which has been disclosed in the reporting periof in the
newspaper designated by China Securities Regulatory Commission.
⒋The Company Articles of Association.
⒌Semiannual reports published in other securities markets.
6. Other relevant materials.
Chairman of the Board of Directors: Mr. Yin Jiaxu General Manager: Mr. Zhao Luchuan Chongqing Changan Automobile Company Limited August 1, 2004