CHANGCHAI COMPANY, LIMITED
SEMI-ANNUAL REPORT 2009
August 2009Important Notes
The Board of Directors, the Supervisory Committee as well as Directors, Supervisors and
Senior Executives of the Changchai Company, Limited (hereinafter referred to as “the
Company”) warrant that this report does not contain any false or misleading statements or
omit any material facts and shall take individual and joint responsibility for the accuracy,
truth and completeness of its contents.
All Directors of the Company attended this Board meeting.
Person in charge of the Company Mr. Xue Guojun, person in charge of the accounting work
Mr. He Jianguang and person in charge of accounting organization Mr. Tang Jianzhong
hereby confirm that the Financial Report enclosed in this Semi-Annual Report was true and
complete.
Jiangsu Gongzheng Certified Public Accountants Co., Ltd has audited this Semi-Annual
Report 2009 of the Company and issued a standard unqualified Auditors’ Report for the
Company.Contents
I. Company Profile-------------------------------------------------------------------------------4
II. Major Financial Highlights and Indices---------------------------------------------------5
III. Changes in Share Capital and Shares Held by Principal Shareholders---------------6
IV. Particulars about Directors, Supervisors and Senior Executives ---------------------9
V. Discussion and Analysis of the Management --------------------------------------------9
VI. Significant Events -------------------------------------------------------------------------11
VII. Financial Report---------------------------------------------------------------------------15
VIII. Documents Available for Reference --------------------------------------------------74I. Company Profile
(I). Legal Name of the Company
In Chinese: 常柴股份有限公司
In English: CHANGCHAI COMPANY, LIMITED
Abbr.: CHANGCHAI CO., LTD.
(II) Legal Representative: Mr. Xue Guojun
(III) Secretary of the Board of Directors: Mr. Shi Jianchun
Securities Affairs Representative: Mr. He Jianjiang
Contact Address: No. 123, Huaide Middle Road, Changzhou, Jiangsu, China
Tel: (86) 519-86603656-3155, (86) 519-86610041
Fax: (86) 519-86630954
E-mail: sjc000570@changchai.com, hjj000570@changchai.com
(IV) Registered Address and Office Address: No. 123, Huaide Middle Road, Changzhou,
Jiangsu, China
Post Code: 213002
Internet Website: http://www.changchai.com.cn
E-mail: cctqm@public.cz.js.cn
(V) Newspapers Chosen for Disclosing Information of the Company: Securities Times and
Ta Kung Pao
The Place Where the Semi-annual Report is Prepared and Placed: Secretariat of the
Board
Internet Website Designated by CSRC for Publishing the Semi-annual Report of the
Company: http://www.cninfo.com.cn
(VI) Stock Exchange Listed with: Shenzhen Stock Exchange
Short Form of the Stock: Suchangchai A Stock Code: 000570
Suchangchai B 200570
(VII) Other Relevant Information of the Company
1. Initial registration date: May 5, 1994;
The registered institution with: Changzhou Municipal Administration Bureau for
Industry and Commence
2. The changed registration date: May 27, 2009
The registered institution with: Changzhou Municipal Administration Bureau for
Industry and Commence
3. Registered number of the business license: 320400000004012
4. Registered number of tax: 320401137155863
5. Name of the Certified Public Accountants engaged by the Company:
Domestic: Jiangsu Gongzheng Certified Public Accountants Co., Ltd.
Office address: 10/F, Yingtong Business Bldg., Changzhou, JiangsuII. Major Financial Highlights and Indices
1. Major accounting data and financial indices:
Unit: RMB Yuan
At the end of this
report period
At the period-end
of last year
Increase/decrease of the end of
this report period compared with
the period-end of last year (%)
Total assets 2,679,363,499.62 1,897,782,775.32 41.18%
Shareholders’ equity attributable to listed company 1,565,301,429.88 1,147,886,088.12 36.36%
Share capital 374,249,551.00 374,249,551.00 0.00%
Net assets per share attributable to shareholders of listed
company (Yuan/share) 4.18 3.07 36.16%
The report period
(Jan. -Jun.)
The same period
of last year
Increase/decrease of current
period year-on-year (%)
Operating revenue 1,247,512,762.60 1,150,292,907.96 8.45%
Operating profit 217,621,227.57 -897,044.55 ——
Total profit 218,623,563.05 -3,016,734.49 ——
Net profit attributable to shareholders of listed company 188,720,466.26 3,958,454.06 4,667.53%
Net profit attributable to shareholders of listed company
after deducting non-recurring gains and losses 60,359,887.38 6,078,143.96 893.06%
Basic earnings per share (Yuan/share) 0.50 0.011 4,445.45%
Diluted earnings per share (Yuan/share) 0.50 0.011 4,445.45%
Net return on equity (%) 12.06% 0.34% 11.72%
Net cash flow arising from operating activities 279,337,848.92 -38,175,536.53 ——
Net cash flow per share arising from operating activities
(Yuan/share) 0.75 -0.10 ——
Items of non-recurring gains and losses Amount
Gains and losses from disposal of non-current assets 155,696,100.51
Government subsidies recorded into gains and losses in current period 1,861,756.76
Gains and losses from changes of fair value of transaction financial assets and transaction
financial liabilities, and investment income from disposal of transaction financial assets,
transaction financial liabilities and financial assets available for sale
14,709,375.00
Net non-operating income and expenses -1,800,756.38
Total 170,466,475.89
Less: Impact on income tax 42,105,897.01
Total 128,360,578.88
2. Impact on net profit and net assets after the adjustment under IFRS:
(Unit: RMB Yuan)
Items Net profit Net assets
Under PRC GAAP 188,720,466.26 188,720,466.26
Under IFRS 1,565,301,429.88 1,565,301,429.88
Difference No difference
3. Calculating the return on equity and earnings per share according to No. 9 Guidelines onContents and Format for Information Disclosure of Companies That Make Public Offering of
Securities issued by CSRC (Revised in 2007)
Return on Equity (%) Earnings per Share (Yuan/share)
Profit in report period
Fully diluted Weighted average Fully diluted Weighted average
Net profit attributable to shareholders of
ordinary shares of the Company
12.06 13.86 0.50 0.50
Net profit attributable to shareholders of
ordinary shares of the Company after
deducting non-recurring gains and losses
3.86 4.43 0.16 0.16
III. Changes in Share Capital and Shares Held by Principal Shareholders
(I) Changes in share capital
1. On 26 Jun. 2009, 80,206868 shares subject to trading moratorium were released from the
trading moratorium for trade.
Before the change Increase/decrease in this time After the change
Quantity
(share)
Proportio
n (%)
Listing shares
subject to trading
moratorium
Othe
r
Subtotal
Quantity
(share)
Proport
ion (%)
I. Shares subject to moratorium 80,212,493 21.43 -80,206,868 -80,206,868
1. Shares held by the State 80,206,868 21.43 -80,206,868 -80,206,868
2. Shares held by state corporation
3. Shares held by other domestic
investors
5,625 0.00 5,625 0.00
Among which:
Shares held by domestic corporation
Shares held by domestic natural
persons
5,625 0.00 5,625 0.00
4. Shares held by foreign investors
Among which:
Shares held by overseas corporation
Shares held by overseas natural
persons
II. Shares not subject to moratorium 294,037,058 78.57 80,206,868 80,206,868 374,243,926 100.00
1. RMB ordinary shares 194,037,058 51.85 80,206,868 80,206,868 274,243,926 73.28
2. Domestically listed foreign shares 100,000,000 26.72 100,000,000 26.72
3. Overseas listed foreign shares
4. Others
III. Total shares 374,249,551 100.00 0 0 0 374,249,551 100.00
2. Listing date for trade of shares subject to trading moratorium
Date
Additional shares can be
listed for trading after
Balance of shares
subject to trading
Balance of shares not
subject to trading
Remarkexpiration moratorium moratorium
21 Jun. 2007 27,096,478 100,606,846 273,642,705 Implemented
12 Nov. 2007 1,680,000 98,919,346 275,322,705 Implemented
30 Jun. 2008 18,712,478 80,206,868 294,042,683 Implemented
26 Jun. 2009 80,206,868 0 374,249,551 Implemented
(II) Number of shares held by the top ten shareholders subject to trading moratorium and
condition of the trading moratorium
(Unit: Share)
No.
Name of shareholders
subject to trading
moratorium
Number of shares
subject to trading
moratorium
Date on which shares
can be listed for trading
Additional shares can
be listed for trading
Condition of
the trading
moratorium
21 Jun. 2007 18,712,478
30 Jun. 2008 18,712,478
1
State-owned Assets
Supervision and
Administration Commission
of Changzhou Municipal
Government
117,631,824
26 Jun. 2009 80,206,868
Note 1
Note 1: ① Non-tradable shares held by State-owned Assets Supervision and Administration
Commission of Changzhou Municipal Government would not be traded or transferred within
12 months from the date when the Share Merger Reform Plan was implemented;
② After expiration of the aforesaid period promised, State-owned Assets Supervision and
Administration Commission of Changzhou Municipal Government could sell original
non-tradable shares through listing and trading on the Shenzhen Stock Exchange, but
proportion of number of shares could be sold shall not exceed 5 percents of total shares of the
Company within 12 months, as well as not exceed 10 percents within 24 months.
③ As long as number of shares sold through listing and trading on Shenzhen Stock
Exchange reach one percent of total shares, the Company must disclose the public notice
within two working days as of the date when the said fact happened, but could continue sell
shares during period of the public notice.
(III) Particular about shareholders
1. Number of shareholders and shares held
Total number of shareholders 57235 shareholders in total (39651 shareholders of A-share and 17584 shareholders of B-share)
Particulars about shares held by the top ten shareholders
Name of shareholder Nature of shareholders
Proportio
n in total
shares
Total number
of shares held
Increase/decr
ease in the
report period
Shares subject
to moratorium
held
Shares
pledged or
frozen
1. State-owned Assets Supervision
and Administration Commission of
Changzhou Municipal Government
State-owned
shareholder
31.43% 117,631,824 0 56,137,432
2. BOCI SECURITIES LIMITED Foreign corporation 0.66% 2,456,863 0 Unknown
3. East Asia Union Holding (Group) Domestic corporation 0.48% 1,790,000 0 UnknownCo., Ltd
4. Guosen Securities Co., Lts Domestic corporation 0.47% 1,750,026 0 Unknown
5. China Construction Bank-ICBC
Credit Suisse Selected Balanced
Mixed Fund
Domestic corporation 0.35% 1,299,931 0 Unknown
6. Guotai Junan Securities Co., Ltd. Domestic corporation 0.32% 1,200,000 0 Unknown
7. SONG MING QIN Domestic natural person 0.28% 1,055,098 0 Unknown
8. Shanghai East Asia Union
Investment Consulting Co., Ltd
Domestic corporation 0.27% 1,009,900 0 Unknown
9. HOU JIAN GANG Domestic natural person 0.24% 900,000 0 Unknown
10. SHEN YOU BING Domestic natural person 0.21% 776,000 0 Unknown
Particulars about shares held by the top ten shareholders not subject to trading moratorium
Name of shareholders
Number of shares subject to
trading moratorium held
Type of shares
1. State-owned Assets Supervision and Administration Commission of
Changzhou Municipal Government
117,631,824 Renminbi ordinary shares
2、BOCI SECURITIES LIMITED 2,456,863
Domestically listed foreign
shares
3. East Asia Union Holding (Group) Co., Ltd 1,790,000 Renminbi ordinary shares
4. Guosen Securities Co., Lts 1,750,026 Renminbi ordinary shares
5. China Construction Bank-ICBC Credit Suisse Selected Balanced Mixed
Fund
1,299,931 Renminbi ordinary shares
6. Guotai Junan Securities Co., Ltd. 1,200,000 Renminbi ordinary shares
7. SONG MING QIN 1,055,098 Renminbi ordinary shares
8. Shanghai East Asia Union Investment Consulting Co., Ltd 1,009,900 Renminbi ordinary shares
9. HOU JIAN GANG 900,000 Renminbi ordinary shares
10. SHEN YOU BING 776,000 Renminbi ordinary shares
Explanation on associated relationship and action-in-concert among the
top ten shareholders
It is unknown whether there was any associated relationship
among the top ten tradable shareholders and among the top ten
shareholders not subject to moratorium, or whether there is any
action-in-concert among them as described by Measures for the
Administrative of Disclosure of Shareholder Equity Changes.
Note: 56,137,432 shares held by State-Owned Assets Supervision and Administrative
Commission of Changzhou Municipal Government has been pledged to Bank of Jiangsu Co.,
Ltd Changzhou branch.
2. Particulars about changes in the controlling shareholder and actual controller
During the report period, the controlling shareholder and actual controller remained
unchanged.IV. Particulars about Directors, Supervisors and Senior Executives
1. In the report period, there was no change in shares held by directors, supervisors and
senior executives of the Company.
2. In the report period, there was no engagement or dismissal of directors, supervisors and
senior executives.
V. Discussion and Analysis of the Management
1. Overall operation of the Company in the report period
For the first half year of 2009, the Company accumulatively sold various diesel engines and
power generation sets amounting to 536,400 sets in total, an increase of 5.47% year-on-year,
including 60,900 sets multi-cylinder diesel engines, up 17.12% year-on-year. The Company
realized sales revenues of RMB 1,247,512,762.60, an increase of 8.45% year-on-year and
realized a net profit of RMB 188,720,466.26, up 4,667.53% year-on-year.
In the report period, the operating achievements increased obviously over last year, and the
main reasons were as following: firstly, owing to influence of subsidiary policy for farm
machinery, sales volume of the products increased over the same period of last year.
Secondly, the Company enhanced management, adjusted product structure, so that the
product cost was controlled and profit from main business increased. Thirdly, the Company
sold 4,500,000 stocks of Foton Motor, which was recorded as transaction financial assets, so
the income before tax of the first half year of 2009 accumulatively increased RMB
14,805,000. Fourthly, 35,117,105 shares of *ST Kaima B held by the Company has
transferred to China Hengtian Group Co., Ltd at the consideration of RMB 5.33 Yuan per
share.
2. Analysis on operation of the Company in the report period
The Company belongs to the industry of machinery manufacturing, which is mainly engaged
in manufacturing and sales of single-cylinder diesel engines, multi-cylinder diesel engines,
fittings of diesels and power generation sets and etc.
(1) In the report period, the composing of the Company’s income from main operations
classified according to product was as follows:
Indices Income from operation Cost of operation Gross profit ratio
Products Amount (RMB) Amount (RMB) (%)
Diesel engines and fittings 1,233,742,110.79 1,069,130,141.92 13.34
Subtotal of other operating
income and expenses
13,770,651.81 14,708,107.19 -6.81
Total 1,247,512,762.60 1,083,838,249.11 13.12(2) In the report period, the composing of the Company’s income from main operations
classified according to area was as follows:
Area Income from operation (RMB)
Increase/decrease of income from
operation year-on-year (%)
East China 579,747,990.57 2.74
Northeast 74,118,447.95 10.78
Southwest 134,844,014.08 77.90
Central China 122,236,326.92 -1.40
North China 88,859,945.72 -14.11
Northwest 41,052,742.52 14.41
South China 80,120,943.65 6.06
Export 59,414,433.05 -31.38
(3) During the report period, gross profit ratio of main business of the Company increased to
13.34% from 9.64% at the same period of last year, mainly because price of raw material
dropped over the same period of last year, and the Company enhanced internal management
control, adjusted product structure, product cost was effectively controlled and profitability
of main business increased.
(4) Other operating activities which had significant influence to net profit in the report period
In the report period, the Company sold the 4,500,000 shares of Foton Motor held by it as
tradable financial assets and earned a pre-tax profit of RMB 14,805,000. Meanwhile, it also
gained another investment income of RMB 155 million by selling the 35,117,105 shares of
*ST Kama B held by it.
(5) Problems and difficulties encountered in operation
Considering the unfavorable impact brought by the global financial crisis on the Company’s
export business, the Company must try harder to expand the international market and
increase its export. Meanwhile, the Company should pay attention to building up a talent
team and adjusting the human resource structure, so as to provide a guarantee for the
Company’s technological upgrade and rapid development.
3. Investments made by the Company in the report period
(1) The Company had not raised any funds during the past three years.
(2) The Company did not launch any project invested by non-raised funds in the report
period.VI. Significant Events
1. Corporate governance in report period
In strict compliance with regulatory documents such as the Company Law and the Code of
Corporate Governance for Listed Companies, the Company kept perfecting its corporate
governance structure and operating in a regulated way. At present, the corporate governance
structure of the Company is considered basically in line with the regulatory documents
concerning the corporate governance of listed companies issued by CSRC.
2. As reviewed and approved at the 16th Meeting of the 5th Board of Directors of the
Company, the Board planned to, based on the Company’s total shares of 374,249,551 shares
as at 30 Jun. 2009, distribute a cash dividend of RMB 0.80 (tax included) and 5 shares for
each 10 shares to all shareholders.
3. In the report period, the accumulative capital in relation to the lawsuits and arbitrations in
which the Company was involved reached RMB 56,010,400. And the said lawsuits and
arbitrations were all cases carried down from the previous years to the report period. For
more details, please refer to the notes of the financial statements in this report.
4. Significant asset acquisition and sale in report period
On 27 May 2009, the Company signed the Stock Transfer Agreement with China Hengtian
Group Co., Ltd., transferring the 35,117,105 shares of *ST Kama B (Stock code: 900953)
held by it to the latter at the price of RMB 187,174,169.65. The said stock transfer was
examined and approved at the provisional meeting of the Board of Directors on 1 Jun. 2009,
and then at the 1st Provisional Meeting in 2009 of Shareholders’ General Meeting on 17 Jun.
2009. And the stock transfer transaction was confirmed when the Company received on 29
Jun. 2009 the Confirmation Letter for Stock Transfer issued by the Shanghai Branch of China
Securities Depository and Clearing Co., Ltd..
5. In the report period, the Company did not conduct any significant related transaction with
its actual controller or its subsidiaries.
6. In the report period, the Company provided loan guarantees of RMB 14.50 million for its
holding subsidiary—Changchai Benniu Diesel Engine Fittings Co., Ltd., including a
9.5-million guarantee with the term from 29 Oct. 2008 to 29 Oct. 2009 and a 5-million
guarantee with the term from 31 Oct. 2008 to 31 Oct. 2009.
7. Securities investment in report period
(1) Transactional financial assets
Seque
nce
No.
Securitie
s variety
Stock
code
Short form
of stock
Initial
investment
amount (RMB)
Number of
shares held
(share)
Book value at
period-end (RMB)）
Proportion
in total
securities
investment
at
Profits or losses in
report period
(RMB)period-end
(%)
Other securities investment held at period-end 0 0 0 0 0
Profits or losses from securities investment sold in
report period
— — — — 14,709,375.00
Total 0 — 0 0 14,709,375.00
(2) Equity held by the Company of other listed companies
Stock
code
Short form
of stock
Initial
investme
nt amount
(RMB)
Proporti
on of
shareho
lding
Book value
at
period-end
(RMB)
Profits or
losses in
report period
(RMB)
Change of
owner’ s
equity in
report period
Accounting
item
Source of
stock
600166 Foton
Motor 41784000.00
3.
94
%
478656250.00 0.00 304895000.00
Financial
assets
available for
sale
Exchange
assets of
Changcai
Group in
1999
600377
Ninghu
Expresswa
y
90500.00 317500.00 0.00 45500.00
Financial
assets
available for
sale
Transfer by
agreement
Total 41874500.00 — 478973750.00 0.00 304940500.00
(2) Equity held by the Company of non-listed financial enterprises and companies to be listed
Name of
the held
party
Initial
investment
amount (RMB)
Number of
shares held
(share)
Proportion
in equity of
the held
party
Book value at
period-end (RMB)
Profits
or
losses
in
report
period
(RMB)
Change
of
owner’
s
equity
in
report
period
Account
ing item
Source of
stock
Bank of
Jiangsu
38000000.00 38000000 0.48% 38000000.00 0 0
Long-ter
m equity
investm
ent
Sponsor’s
shares
Total 38000000.00 38000000 0.48% 38000000.00 0 0
8. In the report period, the Company did not sign any significant contract.
9. Researches, interviews and visits received in report period
Time of
reception
Place of reception
Way of
reception
Visitor
Main discussion and materials
provided
5 Feb. 2009
The 3rd Meeting Room
of the Company
Field research
Huabaoxingye Fund and
Shenwanbali Fund
The Company’s main operation, the
influence of macro-policies on the
Company and the Company’s futuredevelopment
6 Feb. 2009
The 3rd Meeting Room
of the Company
Field research Changjiang Securities
The Company’s main operation, the
influence of macro-policies on the
Company and the Company’s future
development
9 Feb. 2009
The 3rd Meeting Room
of the Company
Field research Guoxin Securities
The Company’s main operation and
its future development
10. Implementation of commitments
Commitments made by the originally non-tradable shareholders in the share merger reform,
as well as their implementation:
Serial
No.
Name of shareholder Commitment Implementation
1
the State-owned Assets Supervision
and Administration Commission of
Changzhou People’s Government
1. No trading and transfer of the held non-tradable
shares would be conducted within 12 months as of the
date when the share merger reform was implemented;
2. After expiration of the aforesaid undertaking, the
originally non-tradable shares could be sold through
listing and trading on Shenzhen Stock Exchange, but
the proportion of the sold shares in total shares of the
Company shall not exceed 5 percent within 12
months, as well as not exceed 10 percent within 24
months.
As approved, 18,712,478
shares were released from the
trading moratorium on 21
Jun.
2
Shareholders of raised legal
person’s shares
No trading and transfer shall be conducted within 12
months as of the date when the share merger reform
was implemented.
As approved, 10,064,000
shares were released from
trading moratorium on 21
Jun. 2007.
11. No shareholders holding over 5% of the Company’s shares made any further
commitments concerning the trading moratorium on shares in 2008.
12. In the report period, the Company, the Board of Directors of the Company and its
directors received no investigations, administrative punishment, criticism by circular from
CSRC, and no official criticism from the stock exchange; meanwhile, the directors and
management staff of the Company were not adopted any judicial compulsory measure on.
13. Special explanation and independent opinion from independent directors on the capital
occupation by the Company’s related parties and its provision of external guarantees
There existed no non-operational occupation of the Company’s capital by the holding
shareholder or other related parties.In the report period, the Company provided external guarantees and controlled the relevant
risks in strict compliance with relevant regulations. There existed no violation of the Circular
on Regulating Provision of External Guarantees by Listed Companies. The Company only
provided guarantees for the funds needed in the normal production and operation of its
holding subsidiaries, with a legal and reasonable decision-making procedure for the said
guarantees, which thus did no harm to the interests of the Company and its shareholders.
14. Other matters
(1) In the report period, no shareholders holding 30% of the Company’s shares put forward or
implemented plans of stock increase;
(2) In the report period, no relevant parties made compensation due to the commitments
made in the Company’s share merger reform and significant asset reorganization.VII. Financial Report
To all the shareholders of Changchai Company, Limited
We have audited the attached financial statements of Changchai Company, Limited
(hereinafter refer to as “the Company”) which comprise consolidated balance sheet and
balance sheet of parent company as at 30 Jun. 2009, and consolidated income statement,
income statement of parent company, consolidated statement on changes in equity, statement
on equity of parent company, consolidated cash flow statement, statement on cash flow of
parent company from Jan. to Jun. 2009 and notes to financial statements.
I. Directors’ responsibility for the financial statements
The directors are responsible for the preparation and the true and fair presentation of these
financial statements in accordance with Accounting Standards for Business Enterprises and
Accounting System for Business Enterprises of the People’s Republic of China. These
responsibilities include (1) designing, implementing and maintaining internal control relevant
to the preparation and the true and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error; (2) selecting and applying appropriate
accounting policies; (3) making accounting estimates that are reasonable in the
circumstances.
II. Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit
and to report our opinion solely to you, as a body and for no other purpose. We do not
assume responsibility towards or accept liability to any other person for the contents of this
report.
We conducted our audit in accordance with Independent Audit Standards promulgated by the
Chinese Institute of Certified Public Accountants. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable assurance as to
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and true and fair presentation of
the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
III. Audit opinion
In our opinion, the financial statements give a true and fair view of the state of affairs of the
Company as at 30 Jun. 2009 and of operating achievements and cash flows of the Company
from Jan. to Jun. 2009 in accordance with the Accounting Standards for Business Enterprise
and the Accounting System for Enterprises of the People’s Republic of China.
Jiangsu Gongzheng Tianye Certified Public Accountants
Certified Public Accountant of China CPA: Wang Wenkai, Dai Weizhong
China · Wuxi
10 Aug. 2009Balance Sheet
Prepared by Changchai Company, Limited 30 Jun. 2009 Unit: RMB Yuan
Amount at the period-end Amount at the period-begin
Items
Consolidation Parent company Consolidation Parent company
Current assets:
Monetary funds 849,987,171.26 802,218,005.31 402,778,967.15 378,820,707.08
Settlement fund reserve
Dismantle fund
Transaction financial asset 21,645,000.00 21,645,000.00
Notes receivable 31,584,198.04 30,334,198.04 27,121,088.60 26,721,088.60
Account receivable 298,330,508.28 258,257,469.52 204,208,036.51 160,990,383.74
Account paid in advance 12,615,992.45 11,207,206.15 9,683,253.18 8,569,751.19
Premium receivables
Receivables from reinsurers
Reinsurance contract reserve receivables
Interest receivable
Dividend receivable
Other account receivable 25,577,192.58 24,197,413.65 28,063,069.38 27,899,889.79
Financial assets purchased under agreements to resell
Inventories 262,912,117.34 217,126,353.76 323,777,713.81 289,425,993.52
Non-current assets due within 1 year 0.00 0.00
Other current assets 108,206.30
Total current assets 1,481,115,386.25 1,343,340,646.43 1,017,277,128.63 914,072,813.92
Non-current assets:
Loans and advance
Available for sale financial assets 478,973,750.50 478,973,750.50 174,033,250.00 174,033,250.00
Held to maturity investments 0.00 0.00
Long-term account receivable 0.00 0.00
Long-term equity investment 61,769,522.61 112,109,322.61 93,179,255.93 143,519,055.93
Investing property 71,635,245.23 71,635,245.23 72,739,415.63 72,739,415.63
Fixed asset 367,189,360.79 310,966,295.02 364,125,318.48 308,323,648.71
Project in construction 112,785,188.74 109,454,588.74 69,705,698.81 67,525,098.81
Engineering material
Fixed asset disposal
Bearer biological asset
Oil assets
Intangible assets 104,742,159.86 102,427,636.45 106,102,470.72 103,756,831.97
Development expense
Goodwill
Long-term expense to be apportioned
Deferred tax assets 1,152,885.64 1,152,885.64 620,237.12 620,237.12
Other non-current assets
Total of non-current assets 1,198,248,113.37 1,186,719,724.19 880,505,646.69 870,517,538.17Total assets 2,679,363,499.62 2,530,060,370.62 1,897,782,775.32 1,784,590,352.09
Current liabilities:
Short-term borrowings 47,500,000.00 51,200,000.00
Borrowing from Central Bank
Deposits and due to banks and other financial
institutions
Placements from banks and other financial institutions
Transaction financial liabilities
Notes payable 226,859,800.00 194,250,000.00 136,103,600.00 126,990,000.00
Account payable 425,650,890.14 390,991,084.33 361,368,076.43 334,431,191.26
Account received in advance 44,265,465.88 42,271,823.44 24,690,165.89 24,543,763.01
Financial assets sold under agreements to repurchase
Handling charges and commission payable
Employee’s compensation payable 25,330,203.36 21,799,018.78 25,369,781.88 21,831,003.69
Tax payable 16,991,333.79 20,965,709.94 -29,212,801.62 -27,781,020.54
Interest payable
dividend payable
Other account payable 141,976,215.94 141,132,524.50 88,548,123.52 89,518,212.18
Due to reinsurers
Insurance contract reserve
Customer deposits
Amount payables under security underwriting
Non-current liabilities due within 1 year 0.00 0.00
Other current liabilities 4,198,258.83 3,250,004.97 4,654,904.31 3,771,298.47
Total current liabilities 932,772,167.94 814,660,165.96 662,721,850.41 573,304,448.07
Non-current liabilities:
Long-term borrowings 62,000,000.00 62,000,000.00 42,000,000.00 42,000,000.00
Debentures payable
Long-term payables
Specific purpose account payables 690,000.00 690,000.00 690,000.00 690,000.00
Provisions for contingent liabilities
Deferred tax liabilities 109,274,812.50 109,274,812.50 37,149,762.50 37,149,762.50
Other non-current liabilities
Total non-current liabilities 171,964,812.50 171,964,812.50 79,839,762.50 79,839,762.50
Total liabilities 1,104,736,980.44 986,624,978.46 742,561,612.91 653,144,210.57
Owner’s equity (or shareholders’ equity)
Paid-in capital (or share capital) 374,249,551.00 374,249,551.00 374,249,551.00 374,249,551.00
Capital surplus 501,179,061.76 510,868,747.95 272,484,186.26 282,163,372.45
Less: Treasury Stock
Reserved fund
General risk provision 240,369,344.92 240,369,344.92 240,369,344.92 240,369,344.92
Retained earnings
Foreign exchange difference 449,503,472.20 417,947,748.29 260,783,005.94 234,663,873.15Total owners' equity attributable to holding company 1,565,301,429.88 1,543,435,392.16 1,147,886,088.12 1,131,446,141.52
Minority interest 9,325,089.30 7,335,074.29
Total owner’s equity 1,574,626,519.18 1,543,435,392.16 1,155,221,162.41 1,131,446,141.52
Total liabilities and owner’s equity 2,679,363,499.62 2,530,060,370.62 1,897,782,775.32 1,784,590,352.09
Income statement
Prepared by Changchai Company, Limited Jan.-Jun. 2009 Unit: RMB Yuan
In current period The same period of last year
Items
Consolidation Parent company Consolidation Parent company
I. Total sales 1,247,512,762.60 1,255,320,258.61 1,150,292,907.96 1,156,432,821.16
Including: Sales 1,247,512,762.60 1,255,320,258.61 1,150,292,907.96 1,156,432,821.16
Interests income
Premium income
Handling charges and commission income
II. Total cost of sales 1,201,087,846.36 1,214,002,985.79 1,125,204,769.57 1,132,945,611.59
Including: Cost of sales 1,083,838,249.11 1,106,419,500.15 1,034,337,620.32 1,050,826,375.33
Interests expenses
Handling charges and commission expenses
Claim expenses-net
Provision for insurance liability reserve
Expenses for reinsurance accepted
Payments on surrenders
Policyholder dividends
Taxes and associate charges 111,622.19 201,587.58 0.00
Selling and distribution expenses 55,539,292.48 53,477,331.68 34,745,959.68 33,246,772.52
Administrative expenses 61,026,897.65 54,740,529.53 67,773,996.60 62,159,675.43
Financial expense -3,217,766.99 -4,533,199.69 -7,853,289.41 -9,286,106.49
Impairment loss 3,789,551.92 3,898,824.12 -4,001,105.20 -4,001,105.20
Add: gain/(loss) from change in fair value (“-” means
loss)
-16,440,300.00 -16,440,300.00 -30,060,000.00 -30,060,000.00
Gain/(loss) from investment (“-” means loss) 187,636,611.33 187,636,611.33 4,074,817.06 4,074,817.06
Including: income form investment on affiliated
enterprise and jointly enterprise
Foreign exchange difference (“-” means loss)
III. Business profit (“-” means loss) 217,621,227.57 212,513,584.15 -897,044.55 -2,497,973.37
Add: non-business income 6,169,392.10 3,377,541.64 2,996,118.31 2,123,161.75
Less: non-business expense 5,167,056.62 5,167,056.62 5,115,808.25 5,008,425.60
Including: loss from non-current asset disposal
IV. Total profit (“-” means loss) 218,623,563.05 210,724,069.17 -3,016,734.49 -5,383,237.22
Less: Tax expense 27,909,581.78 27,440,194.03 -7,515,000.00 -7,515,000.00
V. Net profit (“-” means loss) 190,713,981.27 183,283,875.14 4,498,265.51 2,131,762.78
-Attributable to parent company 188,720,466.26 183,283,875.14 3,958,454.06 2,131,762.78
-Minority interest 1,993,515.01 539,811.45VI. Earnings per share
(I) basic earnings per share 0.50 0.011
(II) diluted earnings per share 0.50 0.011
Cash Flow Statement
Prepared by Changchai Company, Limited Jan.-Jun. 2009 Unit: RMB Yuan
In current period The same period of last year
Items
Consolidation Parent company Consolidation Parent company
I. Cash flows for operating activities:
Cash received from sales of goods or rending of services 1,381,845,211.20 1,362,060,681.86 1,218,357,703.77 1,221,635,379.61
Cash received on deposits and from banks and other
financial institutions
Net increased cash received on borrowings from central
bank
Cash received on placements from other financial
institutions
Premium received
Cash received from reinsurance
Net increased amount received on policyholder deposit
and investment
Cash received from disposal of held for trading financial
assets
Interests, handling charges and commission received
Cash received on placements from bank, net
Cash received under repurchasing, net
Refund of tax and fare received 8,197,024.83 5,794,682.48
Other cash received relating to operating activities 3,436,274.54 2,970,907.40 6,505,478.02 5,985,126.63
Sub-total of cash inflows 1,393,478,510.57 1,370,826,271.74 1,224,863,181.79 1,227,620,506.24
Cash paid for goods and services 975,548,726.70 1,006,219,223.95 1,109,256,002.47 1,116,103,871.60
Loans and advances drawn
Cash paid to central bank, banks and other financial
institutions, net
Claims paid
Interests, handling charges and commission paid
Dividends paid to policyholders
Cash paid to and on behalf of employees 99,411,807.47 89,838,515.04 99,258,631.04 91,689,506.52
Tax and fare paid 9,855,748.36 4,997,007.37 17,569,632.30 16,010,653.80
Other cash paid relating to operating activities 29,324,379.12 24,909,039.56 36,954,452.51 35,884,879.01
Sub-total of cash outflows 1,114,140,661.65 1,125,963,785.92 1,263,038,718.32 1,259,688,910.93
Net cash flow from operating activities 279,337,848.92 244,862,485.82 -38,175,536.53 -32,068,404.69
II. Cash Flows from Investment Activities:
Cash received from return of investments 36,911,141.63 36,911,141.63
Cash received from investment income 187,339,903.02 187,339,903.02 4,074,817.06 4,074,817.06Net cash received from disposal of fixed assets,
intangible assets and other long-term assets
177,877.01 177,877.01 2,195,800.31 2,071,694.19
Proceeds from sale of subsidiaries and other operating
units
Other cash received relating to investment activities
Sub-total of cash inflows 224,428,921.66 224,428,921.66 6,270,617.37 6,146,511.25
Cash paid for acquiring fixed assets, intangible assets
and other long-term assets
67,712,080.24 63,680,764.75 59,254,790.36 56,927,559.17
Cash paid for acquiring investments 0.00 0.00
Net cash used in loans
Net cash used in acquiring subsidiaries and other
operating units
Other cash paid relating to investment activities
Sub-total of cash outflows 67,712,080.24 63,680,764.75 59,254,790.36 56,927,559.17
Net cash flow from investing activities 156,716,841.42 160,748,156.91 -52,984,172.99 -50,781,047.92
III. Cash Flows from Financing Activities:
Cash received from absorbing investment
Including: Cash received from increase in minority
interest
Cash received from borrowings 57,700,000.00 20,000,000.00 28,500,000.00 0.00
Cash received from issuing debentures
Other proceeds relating to financing activities 11,345,239.60 11,345,239.60
Sub-total of cash inflows 57,700,000.00 20,000,000.00 39,845,239.60 11,345,239.60
Cash paid for settling debt 41,400,000.00 25,500,000.00 0.00
Cash paid for distribution of dividends or profit or
reimbursing interest
4,033,686.23 2,213,344.50 29,015,883.32 28,068,716.33
Including: dividends or profit paid to minority interest
Other cash payments relating to financing activities 1,112,800.00
Sub-total of cash outflows 46,546,486.23 2,213,344.50 54,515,883.32 28,068,716.33
Net cash flow from financing activities 11,153,513.77 17,786,655.50 -14,670,643.72 -16,723,476.73
IV. Effect of foreign exchange rate changes
V. Increase in cash and cash equivalents 447,208,204.11 423,397,298.23 -105,830,353.24 -99,572,929.34
Add : Cash and cash equivalents at year-begin 400,278,967.15 378,820,707.08 443,234,034.61 417,975,515.87
VI. Cash and cash equivalents at the end of the year 847,487,171.26 802,218,005.31 337,403,681.37 318,402,586.53Statement of Change in Owners’ Equity
Prepared by Changchai Company, Limited 30 Jun. 2009 Unit: RMB Yuan
Amount in current period Amount in last year
Owners’ equity attributable to parent company Owners’ equity attributable to parent company
Items
Pain-up
capital (or
share
capital)
Capital
reserve
Lessen:
treasury
stock
Surplus
public
reserve
General
risk
reserve
Retaine
d profits
Others
Minorit
y equity
Total of
owners’
equity
Pain-up
capital (or
share
capital)
Capital
reserve
Lessen:
treasury
stock
Surplus
public
reserve
General
risk
reserve
Retaine
d profits
Others
Minorit
y equity
Total of
owners’
equity
I. Balance as at the end of last year
374,249,55
1.00
272,484,
186.26
240,369,
344.92
260,783,
005.94
7,335,07
4.29
1,155,22
1,162.41
374,249,5
51.00
495,672,
761.92
240,369,
344.92
372,844,
737.18
8,014,96
7.89
1,491,15
1,362.91
Add: Change in accounting policy
Correction of previous accounting
errors
II. Balance as at the year begin
374,249,55
1.00
272,484,
186.26
240,369,
344.92
260,783,
005.94
7,335,07
4.29
1,155,22
1,162.41
374,249,5
51.00
495,672,
761.92
240,369,
344.92
372,844,
737.18
8,014,96
7.89
1,491,15
1,362.91
II. Increase/decrease in this year (“-”
means loss)
228,694,
875.50
188,720,
466.26
1,990,01
5.01
419,405,
356.77
-223,18
8,575.66
-112,06
1,731.24
-679,89
3.60
-335,93
0,200.50
(I) Net profit
188,720,
466.26
1,993,51
5.01
190,713,
981.27
-83,993,
014.91
-1,396,8
89.21
-85,389,
904.12
(II) Gain/loss recorded in owners’
equity directly
228,694,
875.50
-3,500.0
0
228,691,
375.50
-223,18
8,575.66
716,995.
61
-222,47
1,580.05
1. Net amount on changes in fair
value of financial assets available for sale
304,940,
500.50
304,940,
500.50
-300,45
2,750.00
-300,45
2,750.00
2. Effect on changes in other
owners’ equity of invested units under
equity method
-10,500.
00
-10,500.
00
2,150,98
6.84
2,150,98
6.843. Effect of income tax recorded in
owners’ equity
-76,235,
125.00
-76,235,
125.00
75,113,1
87.50
75,113,1
87.50
4. Other
-3,500.0
0
-3,500.0
0
716,995.
61
716,995.
61
Subtotal of (I) and (II)
228,694,
875.50
188,720,
466.26
1,990,01
5.01
419,405,
356.77
-223,18
8,575.66
-83,993,
014.91
-679,89
3.60
-307,86
1,484.17
（III）Input and reduced capital of
owners
1. Capital input by owners
2. Amount of shares-based payment
recorded in owner’s equity
3. Other
(IV) Profit distribution
-28,068,
716.33
-28,068,
716.33
1. Appropriating surplus reserve
2. Appropriating general risk
reserve
3. Distribution to owners
(shareholders)
-28,068,
716.33
-28,068,
716.33
4. Other
(V) Internal carry-over of owner’s
equity
1. Transferring capital reserve into
capital (share capital)
2. Transferring surplus reserve into
capital (share capital)3. Making up losses with surplus
reserve
4. Other
IV. Balance as at the period-end
374,249,55
1.00
501,179,
061.76
240,369,
344.92
449,503,
472.20
9,325,08
9.30
1,574,62
6,519.18
374,249,5
51.00
272,484,
186.26
240,369,
344.92
260,783,
005.94
7,335,07
4.29
1,155,22
1,162.41Note 1: General information
Changchai Company Limited (the Company for short hereafter) was founded in
People’s Republic of China in 1994. The domestic A share and the overseas B share
of the Company were respectively listed in 1994 and 1996.
The Company mainly engaged in the production and sales of small and
medium-sized single cylinders and multi-cylinder diesel engine with the label of
“Changchai” Brand. The diesel engine produced and sold by the Company were
mainly used in tractors, combine harvest models, light commercial vehicle, farm
equipment, small-sized construction machinery, generator units and shiplifts, etc.
There were such departments as Office Room of the Company, Financial Department,
Political Department, Investment and Development Department, Enterprise
Management Department, Human Recourses Department, Production Department,
Procurement Department, Sales Company, Chief Engineer Office, Technology
Center, Quality Assurance Department, Foundry Branch, Machine Processing
Branch, Single-cylinder Engineer Branch, Multi-cylinder Engineer Branch and
Overseas Business Division in the Company .
Note 2: Declaration on following Accounting Standard for Business Enterprises
Declaration from the Company: the Financial Report prepared by the Company was
in line with requirements of Accounting Standard for Busienss Enterprise, which
reflected the financial status, business result and cash flow of the Company truly and
objectively.
Note 3: Compiling foundation of financial statements
With going-concern assumption as the basis, the Company prepares its financial
statement in light of the actual transactions and matters, as well as recognition and
measurement in line with the accounting standard for business enterprise and its
application guidelines promulgated by the Ministry of Finance of PRC on 15 Feb.
2006. The financial statements shall be presented in line with the provision in the
Accounting Standard for Business Enterprise No. 30 – Presentation of Financial
Statement, in which the accounting information shall be prepared in light of the
accounting policies and accounting estimated of the Company. Such accounting
policies and accounting estimated shall be drawn up at the accounting standard for
business enterprises and the actual status of the Company.
Note 4: The main accounting policies and accounting estimation of the Company
1. Accounting periods
The accounting periods were divided into accounting year and metaphase, the
accounting year was from Jan. 1 to Dec. 31 and as the metaphase included monthly,
quarterly and semi-yearly periods.
2. Functional currency
RMB was the functional currency of the Company.3. The items of the statements of which the measurement attributes changed and the
adopted measurement attributes in the report period.
The Company measured according to the canonical accounting measurement
attributes. In the report period, measurement attributes were not changed. The
Company conducted the measurement of the accounting elements commonly by
historical cost. If using the way of replacement cost, net realizable value, present
value and fair value, the measurement should be on the basis of the amount of the
accounting element which could be obtained and measured reliably.
4. The standard for recognizing cash equivalent when making cash flow statement
Cash equivalent means the highly liquid, very safe investment which can be easily
converted into cash, and the company can hold it for a very short time (3 months
from the date of purchase).
5 Method of foreign currency translation
When foreign currency translation occurs, the spot exchange rate on the date of
translation (i.e., the middle price of the intraday foreign exchange rate of RMB
published by People’s Bank of China) shall be converted into RMB for keeping
accounts while the occurred foreign currency exchange or the foreign exchange
transactions shall be translated according to exchange rate adopted in actual
transactions. On the balance sheet date, the foreign currency monetary items and
foreign currency non-monetary items shall be treated in accordance with the
following provisions:
The foreign currency monetary items shall be translated at the spot exchange rate on
balance sheet date, of which happen during the normal business period shall be
recorded into gains and losses at the current period; of which happen during
organization period shall be recorded into long-term deferred expense. The exchange
gains or losses caused by the borrowing belonging to acquiring fixed assets shall be
treated by the capitalization of borrowing costs. Currency monetary items refer to the
currency funds, assets charged from the fixed or confirmed amount or debt payable,
including cash on hand, bank deposit, accounts receivable, other accounts receivable,
long-term accounts receivable, short-term accounts receivable, account payable,
other account payable, long-term borrowing, debentures payable and long-term
account payable, etc.
Foreign currency non-monetary items shall be translated at spot rate on the date of
transaction, not changing the amount of functional currency. Foreign currency
non-monetary items refer to the items other than the monetary ones.
The foreign currency non-monetary items measured through fair value shall be
translated at the spot rate on the date of confirming the fair value. The difference
between the amount of functional currency after translation and that of originalfunctional currency shall be treated as fair value fluctuation (exchange rate
fluctuation), being recorded into gains of losses at the current period.
6. The recognition and measurement of financial instruments and the transfer of the
financial instruments
1) Recognition of the financial assets
When an enterprise becomes a party to a financial instrument, it shall recognize a
financial asset or financial liability.
Where a financial asset satisfies any of the following requirements, the recognition
of it shall be terminated:
(1) Where the contractual rights for collecting the cash flow of the said financial
assets are terminated;
(2) Where the said financial asset has been transferred and meets the conditions for
recognizing the termination of financial assets as provided for in Accounting
Standard for Business Enterprises No. 23 – Transfer of Financial Assets.
Only when the prevailing obligations of a financial liability are relieved in all or in
part may the recognition of the financial liability be terminated in all or partly.
2) The classification, recognition and measurement of financial assets and financial
liabilities
The financial assets or financial liabilities got or born by the Company are measured
according to the following classifications:
(1) The financial assets or financial liabilities which are measured at their fair value
and the variation of which is recorded into the profits and losses of the current period
The interest rate or cash dividend which was gained in the period when the financial
assets held by the Company are measured at its fair value and of which the variation
is recorded into the profits and losses in the current period shall be recognized as
investment income. On balance sheet date, the in change in the fair value of the
financial asset or financial liability which is measured at its fair value and of which
the variation is recorded into the profits and losses of the current period, shall be
recorded into the profits and losses of the current period; When the said financial
assets of financial liabilities are on disposal, the difference between the fair value
and the amount in initial account shall be recognized as investment income,
meanwhile, the profits and losses arising from the change in fair value shall be
adjusted.
(2) The investments which will be held to their maturity
The investments which will be held to their maturity will regard the sum between the
gained fair value and the transaction expense thereof as the initially recognized
amount. The interest on bonds in payment, of which the mature interest is not drawn,
shall be solely recognized as the receivables.
The interest revenue which is measured and recognized by the amortized cost and
actual interest rate during the period of the investments which will be held to their
maturity shall be recorded into investment income. The actual interest rate which is
recognized in the period of gaining the investments which will be held to their
maturity, shall maintain unchanged within the predicted term of existence or within ashorter applicable term of the said investment which will be held to their maturity.
The little difference between actual interest rate and coupon rate of which interest
revenue can be measured at the coupon rate shall be recorded into the profits of
losses in the current period.
When the investments which will be held to their maturity are on disposal, the
difference between the obtained price and investment book value shall be recorded
into the profits and losses in the current period.
(3) The accounts receivables
The creditor’s right receivable formed during the Company selling commodity
outside or offering labor shall be regarded as the initially recognize amount in
according with the receivable price stipulated in the contract or agreement signed
between the Company and the buyers.
When the Company recovers or disposes the accounts receivable, the difference
between the obtained price and the book value of the accounts receivable shall be
recorded into the profits and losses in the current period.
(4) Financial assets available for sale
The financial assets available for sale will be regarded as the initial recognized
amount in according with the sum between the fair value obtained from the said
financial assets and the transaction expense thereof. The interest on bonds of which
the mature interest rate is not drawn in the payment or the cash dividend which is
declared but not extended in the payment shall be solely recognized as the
receivables.
The interest rate or cash dividend gained during the period of holding the financial
assets available for sale shall be recorded into investment income. On balance sheet
date, the financial assets shall be measured through fair value, while the change in
fair value is recorded into capital reserves (other capital reserves).
When the financial assets are on disposal, the difference between the obtained price
and the book value of the financial assets shall be recorded into investment income,
meanwhile, the amount on proposal transferring out from the accumulated amount
which is directly recorded into shareholders’ equity and arises from the variation of
the fair value, shall be recorded into investment income.
(5) Other financial liabilities
Other financial liabilities are regarded as the initial recognized amount in accordance
with the sum between the fair value and the transaction expense thereof. The
Company shall make subsequent measurement on other financial liabilities on the
basis of the post-amortization costs.
3) Main recognition method for the fair value of the financial assets or financial
liabilities
(1) The quotation in the active market shall be used to recognize the fair value of the
financial assets or financial liabilities existing in active market.
(2) If the financial instruments do not exist in the active market, the fair value shall
be recognized by value appraisal techniques.
(3) As for the financial assets initially obtained of produced at source and the
financial liabilities assumed, the fair value thereof shall be determined on the basisof the transaction price of the market.
(4) Main impairment test method of the financial assets and impairment provision
method
The recognition standard for impairment provision of the financial assets: the
Company shall carry out an inspection, on the balance sheet day, on the carrying
amount of the financial assets other than those measured at their fair values and of
which the variation is recorded into the profits and losses of the current period.
Where there is any objective evidence proving that such financial asset has been
impaired, an impairment provision shall be made.
The withdrawal method for impairment provision of the financial assets: as for the
impairment provision of the financial assets is measured on the basis of
post-amortization costs, if the current value of the predicted future cash flow of the
financial assets is below the difference in the carrying amount of the said financial
asset, the impairment provision of the financial assets shall be made; as for the
impairment provision of the financial assets available for sale, if the recoverable
amount is below the difference in the carrying amount, the impairment provision
shall be made. Where a sellable financial asset is impaired, even if the recognition of
the financial asset has not been terminated, the accumulative losses arising from the
decrease of the fair value of the owners’ equity which was directly included shall be
transferred out and recorded into the profits and losses of the current period.
7. The recognition standard and the withdrawal method for the bad debt provision of
the accounts receivable
1) Receivables are considered uncollectible after liquidation with statutory
procedures for debtors are in canceling or bankrupt, due death of debtors who has no
bequest and no undertaker on obligation, or caused by debtors fail to perform their
obligation to pay a debt over three years, and it will be recognized as bad debt.
2) Allowance method shall be adopted by the company in the computation of the bad
debts.
An independent impairment test shall be carried out on the accounts receivable with
significant single amounts (including accounts receivable and other receivables,
single amount is recognized as RMB 1 million), and provision for bad debts shall be
withdrawn on the basis of the balance between the current values of the predicted
future cash flow lower than book value. The accounts receivable with significant
single amounts but without occurring impairment shall be incorporated in accounts
receivable after deducting accounts receivable with significant single amounts, and
provision for bad debts shall be withdrawn in light of the aging analysis of closing
balance. In accordance with such situations as real financial status and cash flow
arising from debtors, the provision for bad debts shall be recognized based on aging
analysis combining individual recognition, and then recorded into the gains and
losses of the current period.
3) Withdrawal proportion of bad debts in every aging stage
Aging Proportion taking up the bad debt
provision for the accounts
Proportion taking up the bad debt
provision for the other accountsreceivable (%) receivable (%)
Within one year 2 2
1-2 years 5 5
2-3 years 15 15
3-4 years 30 30
4-5 years 60 60
Over 5 years 100 100
Withdrawal policies for bad debt reserves of related parties: according to the 9th
meeting of the 4th Board of Directors, as for the accounts receivable of the related
party of the Company with continuous operation ability, the withdrawal of bad debt
reserves could not excess 60% at most.
8. The classification, pricing and accounting methods for inventories; the recognition
standard and withdrawal method of the inventories falling price reserves
1) Classification of the inventories: inventories refer to the raw material, packing
material, unfinished products, finished products and low-value consumption which
have not been sold and consumed in the production operation process.
2) The inventory system is on the basis of perpetual inventory method.
3) The cost of various inventories shall be measured in light of planned cost when
buying in and putting in storage, while the cost shall be recorded in light of weighted
average when issuing from the storage; the cost of good manufactured shall be
carried forward at actual cost of the current period, while sales cost shall be carried
forward at weighted average method. Low value consumables shall be amortized by
employing the one-off write-off method when claiming.
4) As for the inventory falling price reserve: the inventories at the end of the report
period will be priced according to the lower of the product cost and the net realizable
value. When all the inventories are checked roundly, those which were destroyed,
outdated in all or in part, sold at a loss, etc, shall be withdrawn the inventory falling
price reserve. Where the coat of the single inventory item is higher than the net
realizable value, the inventory falling price reserve shall be withdrawn and recorded
into profits and losses of the current period. The net realizable inventory falling price
reserve refers to the value minus the predicted expense needed in the process of
completing the production and sales from the predicted price for sale when the
Company runs normally. If the value of the inventory with inventory falling price
reserve can be resumed, the inventory falling price reserve and the current income
shall be adjusted in line with the increase amount by being resumed (the increase
amount should be limited by the original withdrawal amount).
9. The method for measuring long-term equity investment
Long-term equity investment includes the equity investment to its subsidiaries by the
Company, the equity investment to the joint enterprises and the associated
enterprises by the Company, and the long-term equity investment of the Companythat does not do join t control or does not have significant influences on the invested
entity, and has no offer quotation in the active market and its fair value cannot be
reliably measured.
1) Equity investment to the subsidiaries
Subsidiary refers to the invested entity that can be controlled by the Company, i.e.,
the Company has the rights to decide the policies of finance and operation also can
be benefited from such operating activities. When ascertaining whether or not it is
able to control an invested entity, the Company shall take into consideration the
invested entities’ current convertible corporate bonds and the current executable
warrants held by the Company, as well as other potential factors concerning the
voting rights. As for the investment to the subsidiary, the amount recognized on the
basis of cost method shall be listed in the individual financial statements of the
Company, and shall be merged after making an adjustment by employing the equity
method when it works out consolidated financial statements.
The price of a long-term equity investment measured by employing the cost method
shall be included its initial investment cost. The dividends or profits declared to
distribute by the invested entity shall be recognized as the current investment income.
The recognized investment income shall be limited to the amount received from the
accumulative net profits or cash dividends obtained by the investing entity exceeds
the aforesaid amount, it shall be regarded as recovery of initial investment cost.
The Company purchased a few equity held by the minority shareholders of the
Company. When the Company made the consolidated financial statements, goodwill
was recognized by the difference between attributable share of the fair value of the
subsidiaries’ identifiable net assets on the transaction date which was measured and
recognized by employing the new equity proportion, and the increase long-term
equity investment cost owing to buying the equity. Apart from the part for goodwill,
the difference between the increase long-term investment cost and the attributable
share of the fair value of the subsidiaries’ identifiable net assets which began to
account constantly since the purchase date (or combination date) and was measured
and recognized by employing the new equity proportion, was adjusted to capital
reserves and retained earnings.
2) The investment to the joint enterprise and the associated enterprise
Where the Company and other parties do joint control over an invested entity, the
invested entity shall be their joint enterprise; where the Company is able to have
significant influences on an invested entity, the invested entity shall be its associated
entity.
The initial measurement of the joint enterprise and the associated enterprise is
carried out on the basis of historical cost, and the subsequent measurement of them
is conducted by employing the equity method. If initial investment cost in more than
the investing enterprise’ attributable share of the fair value of the invested entity’s
identifiable net assets for the investment, the difference shall be included in the
initial investment cost. If the initial investment cost is less than the investing
enterprise’ attributable share of the fair value of the invested entity’s identifiable net
assets for the investment, the difference shall be included in the current profits andlosses and the investment cost shall be adjusted simultaneously.
When measuring by employing equity method, the Company firstly makes an
adjustment for the net profits and losses of the invested entity, including the
adjustment on the basis of the fair value of the invested entity’s identifiable net
capital when obtaining the investment, and the adjustment conducted during the
period of unifying the accounting and its policies, then recognized the investment
profits and losses of the current period according to the attributable share of the net
profits and losses of the invested entity. The Company shall recognize the net losses
of the invested enterprise until the book value of the long-term equity investment
and other long-term rights and interests which substantially form the net investment
made to the invested entity are reduced to zero. However, the Company has the
obligation to undertake extra losses, the investment losses and predicted liabilities
shall be recognized continuously. The other change in shareholders’ equity of the
invested entity except the net profits and losses, shall be directly recorded into
capital reserve by the Company in accordance with attributable or undertaken part
measured by employing the proportion of holding equity, which are carried out under
the condition of unchanged proportion of holding equity. The Company shall, in the
light of the profits or cash dividends declared to distribute by the invested entity,
calculate the proportion it shall obtain, and shall reduce the book value of the
long-term equity investment correspondingly.
3) Other long-term equity investment
An long-term equity investment of the Company that does not do joint control or
does not have significant influences on the invested entity, and has no offer in the
active market and its fair value cannot be reliably measured, which was measured by
employing cost method.
10. The measure of measuring investment real estates
1) The classification of investment real estate
The investment real estate includes the right to use land which has already been
rented, the right to use any land which is held and prepared for transfer after
appreciation, and the right to use any building which has already been rented.
2) The initial measurement of the investment real estate shall be made at its cost.
(1) The cost of an investment real estate by acquisition consists of the acquisition
price, relevant taxes, and other expense directly relegated to the asset.
(2) The cost of a self-built investment real estate composes of the necessary expenses
for building the asset to the hoped condition for use.
(3) The cost of an investment real estate obtained by other means shall be recognized
in accordance with the relevant accounting standards.
3) The investment real estate shall be measured by means of cost pattern on balance
sheet date, depreciation or amortization for investment real estate shall be conducted
in the light of such relevant policies as depreciation or amortization of fixed assets
and intangible assets.
11. The method of measuring fixed assets1) The standard of fixed assets: are the houses, buildings, machines, engines, tanks,
transportation vehicles and other equipments, apparatus and instruments related to
production and operation which have been used over one year. So are the articles
with value of over RMB 2000 and over two years’ service life, which do not
belonged to the major equipments for production an operation.
2) The initial measurement of a fixed asset shall be made at its cost. The cost of a
purchased fixed asset is based on the actual expense; the cost invested to a fixed
asset by the investor shall be ascertained in accordance with the value as stipulated
in the investment contract or agreement; the cost of a self-constructed fixed asset
shall be formed by the necessary expenses incurred for bringing the asset to the
expected condition for use; the costs of fixed assets acquired through the exchange
of non-monetary assets, recombination of liabilities, merger of enterprises, and
financial leasing shall be respectively ascertained in accordance with the Accounting
Standard for Business Enterprises No. 7 - Exchange of Non-monetary Assets, the
Accounting Standard for Business Enterprises No. 12 – Debt Restructuring, the
Accounting Standard for Business Enterprises No. 21 – Leases.
3) If the relevant economic benefits are likely to flow into the enterprise and the cost
of the fixed asset can be measured reliably, the subsequent expenses related to a
fixed asset shall be included in the cost of fixed assets; otherwise, they shall be
included in the current profits and losses.
4) The depreciation shall be made when the fixed assets reach to the expected
condition for use, which shall be measured through straight-line method. expected
life and annual depreciation rate of various fixed assets:
Fixed assets Predicted useful life
(year)
Annual depreciation
rate
Houses and buildings 20-30 3.33%-5%
Machine equipments 6-15 6.67%-16.67%
Transportation
equipments
5-10 10%-20%
Other equipments 5-10 10%-20%
For a fixed asset, the provision for depreciation has been made, the depreciable
amount shall be measured on the basis of deducting the accumulative amount of the
provision for impairment of the depreciated fixed asset.
5) The Company shall, at the end of each year, have a check on the useful life,
expected net salvage and depreciation method of the fixed assets. If the fixed asset is
in a state of disposal or the fixed asset is unable to generate any economic benefits
through use or disposal as expected, the recognition of the fixed assets shall be
terminated. When the Company sells, transfers or discards any fixed asset, or any
fixed asset of the Company is damaged or destroyed, the Company shall deduct the
book value and relevant taxes from the disposal income, and include the amount in
the current profits and losses. If the recoverable amount of the fixed assets is less
than the book value, the book value shall be reduced to the recoverable amount.12. The method of measuring construction in process
The construction in process refers to the workshops, equipments and other facilities
under construction, consisting of the necessary expense for building the asset to the
hoped condition for use. The self-build one includes the material cost, direct labor,
direct equipment construction cost, and the expense of building works and erection
works in contract engineering, as well as the expense to be apportioned. The
borrowing costs with the condition of capitalization shall be handled according to
Accounting Standard for Business No. 17 – Borrowing Costs.
The construction in process, of which the fixed assets reach to the predicted
condition for use, shall carry forward fixed assets on schedule. The one that hasn’t
audit the final accounting shall recognize the cost and make depreciation in line with
valuation value. The construction in process shall adjust the original valuation value
at its historical cost but not adjust the depreciation that has been made after auditing
the final accounting.
13. The pricing and amortizing method of intangible assets
1) Pricing of the intangible assets
The intangible assets shall be initially measured according to its cost.
(1) The cost of outsourcing intangible assets shall include the purchase price,
relevant taxes and other necessary expenditure directly attributable to intangible
assets for the expected purpose.
(2) The cost of self-developed intangible assets shall include the total expenditures
incurred during the period from the time when it meets the following conditions to
the time when the expected purposes of use are realized, except that the expenditures
which have already been treated prior to the said period shall not be adjusted.
① It is feasible technically to finish intangible assets for use or sale;
② It is intended to finish and use or sell the intangible assets;
③ The usefulness of methods for intangible assets to generate economic benefits
shall be proved, including being able to prove that there is a potential market for the
products manufacturing by applying the intangible assets or there is a potential
market for the intangible assets itself or the intangible assets will be used internally.
④ It is able to finish the development of the intangible assets, and able to use or sell
the intangible assets, with the support of sufficient technologies, financial resources
and other resources;
⑤ The development expenditures of the intangible assets can be reliably measured.
(3) The cost invested into intangible assets by investors shall be determined
according to the conventional value in the investment contract or agreement.
(4) The costs of intangible assets acquired from non-monetary assets transaction,
debt recombination, government subsides, and merger of enterprises shall be
determined respectively according to the Accounting Standard for Business
Enterprises No. 7 - Non-monetary Assets, Accounting Standard for Business
Enterprises No. 12 – Debt Restructurings, Accounting Standard for Business
Enterprises No. 16 – Government Grants and Accounting Standard for BusinessEnterprises No. 20 – Business Combinations.
2) Amortization of the intangible assets
(1) As for the intangible assets with limited service life, which are amortized by
straight-line method when it is available for use within the service period, shall be
recorded into the current profits and losses. The Company shall, at least at the end of
each year, check the service life and the amortization method of intangible assets
with limited service life. When the service life and the amortization method of
intangible assets are different from those before, the years and method of the
amortization shall be changed.
(2) Intangible assets with uncertain service life may not be amortized. However, the
Company shall check the service life of intangible assets with uncertain service life
during each accounting period. Where there are evidences to prove the intangible
assets have limited service life, it shall be estimated of its service life, and be
amortized according to the above method mentioned in (1).
(3) The rights to use land of the Company shall be amortized according to the rest
service life.
14. The evidence and recognition method for withdraw the impairment provision of
long-term assets
(1) At the end of accounting period, the Company shall check the long-term assets.
There may be an impairment of assets when the following signs occur. The
recoverable amount shall be estimated and the asset impairment loss shall be made in
light of the difference that the recoverable amount of assets is less than the book
value when the impairment happens. The signs are stated as follows:
(1) The current market price of assets falls, and its decrease is obviously higher than
the expected drop over time or due to the normal use;
(2) The economic, technological or legal environment in which the enterprise
operates, or the market where the assets is situated will have any significant change
in the current period or in the near future, which will cause adverse impact on the
enterprise;
(3) The market interest rate or any other market investment return rate has risen in
the current period, and thus the discount rate of the enterprise for calculating the
expected future cash flow of the assets will be affected, which will result in great
decline of the recoverable amount of the assets;
(4) Any evidence shows that the assets have become obsolete or have been damaged
substantially;
(5) The assets have been or will be left unused, or terminated for use, of disposed
ahead of schedule;
(6) Any evidence in the internal report of the enterprise shows that the economic
performance of the assets has been or will be lower than the expected performance,
for example, the net cash flow created by assets or the operating profit (or loss)
realized is lower (higher) than the expected amount;
(7) Other evidence indicates that the impairment of assets has probably occurred.
2) The evidences to withdraw the impairment provision of long-term investment,fixed assets, construction in process and intangible asset: at the end of the report
period, the Company will withdraw the asset impairment provision according to the
difference that the recoverable amount of single asset is less than the book value.
The recoverable value shall be recognized according to the high one between the net
amount of fair value deducting disposal charge and the current value of the expected
future cash flow of assets. If the recoverable amount of the single asset cannot be
obtained, the recoverable amount shall be recognized on the basis of the asset group
to which the asset belongs.
3) The business reputation formed by merger of enterprises shall be distributed into
the related asset group at the end of every year, then the asset group shall have the
impairment test to measure the recoverable amount, comparing to the book value, if
the recoverable amount of the asset group is less than the book amount, the
difference shall first charge against the book value of the business reputation which
is apportioned to the asset group; if the book value of the business reputation is not
enough to charge against the difference, the uncharged balance shall be distributed
by the other assets of the asset group in accordance with the book value.
4) The recognition of the asset group under impairment test: the related minimum of
asset groups that can share the synergetic benefit brought from merger through the
prediction of the Company.
5) The above impairment losses of assets cannot be reversed as soon as they are
recognized.
15. The amortization method of long-term deferred expenses
The long-term deferred expenses occurred in the Company shall be priced at its
historical cost and conducted average amortization at the expected beneficial period.
As for the long-term deferred expenses item that cannot bring benefit in the
afterward accounting period, the amortized value in the said item shall be recorded
into the current profits and losses in total when it is recognized.
16. Measurement method of borrowing costs
1) The borrowing costs of the Company shall include interest on borrowings,
amortization of discounts or premiums on borrowings, ancillary expenses, and
exchange balance on foreign currency borrowings.
2) Where the borrowing costs incurred to the Company can be directly attributable to
the acquisition and construction or production of assets eligible for capitalization, it
shall be capitalized and recorded into the costs of relevant assets. Other borrowing
costs shall be recognized as expenses on the basis of the actual amount incurred, and
shall be recorded into the current profits and losses.
3) The borrowing costs shall be capitalized when the asset disbursements, the
borrowing costs and the acquisition and construction or production activities which
are necessary to prepare the asset for its intended use or sale have already incurred.
Where the acquisition and construction or production of a qualified asset is
interrupted abnormally and the interruption period lasts for more than 3 months, the
capitalization of the borrowing costs shall be suspended. When the acquisition andconstruction assets reach the predicted condition for use, the capitalization of the
borrowing costs shall be suspended, and the borrowing costs occur afterwards which
are used in the current period shall be recognized as profits and losses.
4) The to-be-capitalized amount in each accounting period shall be measured and
recognized on the basis of the weighted average amount of the accumulative
expenses from acquisition and construction assets and capitalization rate at the end
of the current period. As for specifically borrowed loans for the acquisition and
construction or production of assets eligible for capitalization, the to-be-capitalized
amount of interests shall be determined in light of the actual cost incurred of the
specially borrowed loan at the present period minus the income of interests earned
on the unused borrowing loans as a deposit in the bank or as a temporary investment.
Where a general borrowing is used for the acquisition and construction or production
of assets eligible for capitalization, the enterprise shall calculate and determine the
to-be-capitalized amount of interests on the general borrowing by multiplying the
weighted average asset disbursement of the part of the accumulative asset
disbursements minus the general borrowing by the capitalization rate of the general
borrowing used.
17. Measurement method of estimated debts
The obligation pertinent to Contingencies shall be recognized as estimated debts
when the following conditions are satisfied simultaneously:
(1) That obligation is a current obligation of the enterprise;
(2) It is likely to cause any economic benefit to flow out of the enterprise as a result
of performance of the obligation;
(3) The amount of the obligation can be measured in a reliable way.
The Company shall check the book value of the estimated debts on the balance sheet
date. If there is any exact evidence indicating that the book value cannot really
reflect the current best estimate, the Company will adjust the book value in
accordance with the current best estimate.
18. Measurement method of the deferred income tax assets or the deferred income
tax liabilities
Where there is difference (temporary difference) between the carrying amounts of
the assets or liabilities and its tax base, the deferred income tax assets or the deferred
income tax liabilities shall be determined. According to tax law, the deductible loss
and tax deduction which can deduct the taxable amount in the subsequent years,
regarding as temporary difference, shall be recognized as the corresponding deferred
income tax assets. As for the temporary difference arising from the initial recognition
of the goodwill, the corresponding deferred income tax liabilities. When the
temporary difference is arisen from the initial recognition of the assets or liabilities
incurring in the transaction which is not business combination and does not affect the
accounting profits or the taxable amount (or the deductible loss), the corresponding
deferred income tax assets and deferred income tax liabilities shall not recognized.
On the balance sheet date, the deferred income tax assets and deferred income taxliabilities shall be measured at the tax rate applicable to the period during which the
assets are expected to be recovered or the liabilities are expected to be settled.
The Company shall recognize the deferred income tax assets to the extent of the
amount of the taxable income which it is likely to obtain and which can be deducted
from the deductible temporary difference, deductible loss and tax deduction.
The deferred income tax liabilities arising from the temporary differences related to
the investments of subsidiary companies, associated enterprises and joint enterprises
shall be recognized. However, the deferred tax income assets and deferred income
tax liabilities shall not recognized which meet the conditions that the Company can
control the time of the reverse of temporary differences which are likely to be
reversed in the expected future.
19. Measurement method of revenues
1) The recognition of the revenue from selling goods: the revenue from selling shall
be recognized by the following conditions: The significant risks and rewards of
ownership of the goods have been transferred to the buyer by the Company; the
Company retains neither continuous management right that usually keeps relation
with the ownership nor effective control over the sold goods; the relevant amount of
revenue can be measured in a reliable way; the relevant revenue and costs of selling
goods can be measured in a reliable way.
2) The recognition of the revenue from providing labor services: When the total
revenue and costs from providing labor can be measured in a reliable way; the
relevant economic benefits are likely to flow into the enterprise; the schedule of
completion under the transaction can be measured in a reliable way, the revenue
from providing labor shall be recognized.
3) The recognition of the revenue from abalienating the right to use assets: When the
relevant economic benefits are likely to flow into the enterprises and the amount of
revenues can be measured in a reliable way, the revenue from abalienating the right
to use assets shall be recognized.
20. The recognition and measurement of the transfer of financial assets
1) The recognition of the transfer of financial assets: Where the Company has
transferred nearly all of the risks and rewards related to the ownership of the
financial assets to the transferee under the following circumstances, it shall
recognize the transfer of the financial assets and stop recognizing the financial asset.
(1) The Company shall sell the financial assets without the right of recourse;
(2) The Company shall sell the financial assets while signs the agreement with the
buyer, and repurchase at the fair value of the intraday financial asset during
stipulated time;
(3) The Company shall sell the financial assets while signs the put option contract
with the buyer, which is regarded as a significant out-of-money option judged by the
contract items.
2) The measurement of the transfer of financial assets
(1) The measurement of the transfer of the entire financial assets: The differencebetween the book value of the transferred financial asset and the sum of
consideration received from the transfer, and the accumulative amount of the
changes of the faire value originally recorded into the owners’ equity, shall be
recorded into the profits and losses of the current period.
(2) The measurement the transfer of partial financial asset: As for the transfer of
partial financial asset, the entire book value of the transferred financial asset shall,
between the portion whose recognition has been stopped and the portion whose
recognition has not been stopped, be apportioned according to their respective
relative fair value, and the difference between the book value of the portion whose
recognition has been stopped and the portion of the accumulative amount of changes
in the fair value originally recorded in the owners’ equity which corresponds to the
portion whose recognition has been stopped, shall be recognized after the
apportionment of the accumulative amount according to the relative fair value of the
portion of financial asset whose recognition has been stopped the portion of financial
asset whose recognition has not been stopped.
21. The accounting treatment of income tax expense
The accounting treatment of income tax expense was adopted balance sheet debt
method. The income taxes of the current period and deferred income tax of an
enterprise shall be treated as income tax expenses or incomes, and shall be excluding
the income tax incurred under the following circumstances:
1) The business combination;
2) The transactions or events directly recognized as the owners’ rights and interests.
Note 5: Tax and its advantage
The major tax categories and tax rates applicable to the Company are described as
follows:
(1) Turnover tax
Tax on value added: the tax rate of selling farm diesel engine shall be 13% or 17%,
while the tax rate of other sales income shall be 17%.
Business tax: the tax rate of the business tax applicable to the common labor and
other revenue shall be 5%.
(2) Tax on city maintenance and construction and extra-charges for education
Tax on city maintenance and construction, extra-charge for education: shall be paid
by measuring according to the rules of the tax paying unit which belongs to the
Local Taxation Bureau.
3) Income tax: income tax shall be measured at 25% in total. In accordance with
Notice of Ministry of Finance, State Administration for Taxation and General
Administration of Customs on the Tax Favorable Policies for Western Development,
Changchai Wanzhou Diesel Engine Co., Ltd., a subsidiary company of the Company,
shall pay corporate income tax at tax rate of 15% from 2001 to 2010.
(4) Tax on real estate: the tax rate of the real estate for self-use of which tax is
measured at 70% of the original value of the real estate at the end of last year, shall
be 1.2%. The tax rate of the real estate for renting, of which tax is measuredaccording to the revenue from leasing real estate, shall be 12%.
Note 6: Business merger and consolidated financial statement
1. Shareholding subsidiaries and joint-venture enterprises
1) Three shareholding subsidiaries under the Company as at 30 Jun. 2009:
(Unit: RMB ten thousand)
Name of subsidiaries Registration place
Legal
representative
Registered
capital
Shareholding
proportion
Major business
Changchai Wanzhou Diesel Engine
Co., Ltd. (Changwan)
No. 1101, Xiamen
Road, Wanzhou,
Chongqing
Yin Lihou 3500 60%
Production and sales of diesel
engine
Changzhou Changchai Benniu Diesel
Engine Fittings Co., Ltd. (Benniu)
Nanguan Village,
Benniu Town,
Wujin
Qiang Jinlong 3378.64 75%
Production and sales of diesel
engine fittings
Nanjing Changli Agricultural
Machinery Fittings Co., Ltd.
Economy
Development
Zone of Lishui
County, Nanjing
Xue Guojun 500 100%
Agricultural mechanization
production, electromechanical
product, spare parts and
maintenance service
2) Change in scope of the consolidated statement
As at 30 Jun. 2009, the consolidation scope of the subsidiaries and the Company
remained unchanged.
3) As at 30 Jun. 2009, there are no joint-venture enterprises in the Company.
2. Measure method of business combination
1) The business combination under the same control: the consideration paid by
combining party and the net assets obtained by the combining party shall be
measured according to the book value. As for the balance between the carrying
amount of the net assets obtained by the combining party and the carrying amount of
the consideration paid by it and the total par value of the shares issued, the additional
paid-in capital shall be adjusted. The direct cost for the business combination of the
combining party shall be recorded into the profits and losses at the current period.
The bonds issued for a business combination or the handling fees, commissions and
other expenses for assuming other liabilities shall be recorded into the amount of
initial measurement of the bonds or other debts.
2) The business combination not under the same control: the combination costs of
the acquirer and the identifiable net assets obtained by the acquirer shall be measured
based on fair value. The acquirer shall recognize the positive balance between the
combination costs and the fair value of the identifiable net assets it obtains from the
acquiree as business reputation. The combination costs are less than the fair value of
the identifiable net assets it obtains from the acquiree, it shall record the balance into
the profits and losses of the current period. The direct cost for the business
combination of the combining party shall be recorded into costs of business
combination. The bonds issued for a business combination or the handling fees,commissions and other expenses for assuming other liabilities shall be recorded into
the amount of initial measurement of the bonds or other debts.
3. Method for compiling consolidated financial statements
The consolidation scope of the consolidated financial statements includes the
Company and its subsidiaries.
Since the actual control right of the subsidiary was obtained, the Company has
started to bring it into combination, which shall be suspended since the actual control
date ends. All the significant current balance, transactions and unrealizable profits of
the Group shall be offset when the consolidated financial statements were made. The
shareholder’s interest of the subsidiaries which doesn’t belong to the portion that the
Company owns shall be represented solely as the minority interest in the
shareholders’ interest of the consolidated financial statements.
When the accounting policies or accounting period between the Company and its
subsidiaries, when the consolidated financial statements are made, the financial
statements of the subsidiaries shall be adjusted and combined according to the
accounting policies or accounting period of the Company.
As for the subsidiaries obtained from business combination not under the same
control, when the financial statements are made, the specific financial statements
shall be adjusted on the basis of the fair value of identifiable net assts on the
acquisition date. As for the subsidiaries obtained from business combination under
the same control, when the financial statements are made, the sides anticipated in the
combination shall exist at the present situation when the final controller started to
implement control.Note 7: Notes to major items of the consolidated financial statements
(The following amount is expressed in RMB unless otherwise special explanation)
7-01 Monetary funds
1） Items 2009-6-30 2008-12-31
Cash 370,448.92 181,888.70
Bank deposit 849,469,063.33 402,469,454.96
Other 7,623.49 127,623.49
Total 849,847,135.74 402,778,967.15
2） Foreign currency funds in the monetary funds
2009-6-30 2008-12-31
Foreign
currency
Original
currency
Exchang
e rate
Converted
into RMB
Original
currency
Exchang
e rate
Converted
into RMB
USD 6,076,762.17 6.8319 41,657,926.21 1,383,044.95 6.8346 9,452,559.01
EURO 205,255.83 9.6408 1,968,049.84 148,543.65 9.659 1,434,783.12
43,625,976.05 10,887,342.13
7-02 Tradable financial assets
Contents 2009-6-30 2008-12-31
Cost of Foton Motor’s shares 5,204,700.00
Change in fair value of Foton
Motor’s shares 16,440,300.00
Total 21,645,000.00
Closing balance has decreased compared with the opening balance, which was mainly because
that the Company sold 4,500,000 shares of Foton Motor that are divided in tradable financial
assets.
7-03 Notes receivable
1） Items 2009-6-30 2008-12-31
Bank acceptance bills 31,584,198.04 27,121,088.60
Total 31,584,198.04 27,121,088.60
2) No notes with overdue account that hadn’t received, mortgage or frozen account occurred atthe end of reporting period, which would exist significant limitation to cashability.
7-04 Accounts receivable
1） Aging 2009-6-30
Amount
Proportion
(%)
Withdrawal
proportion
(%)
Bad debt
provision
Net amount of
accounts
receivable
Within 1 year 282,694,147.74 49.33 2.19 6,195,260.07 276,498,887.67
1-2 years 4,018,408.25 0.70 44.26 1,778,577.98 2,239,830.27
2-3 years 27,107,975.55 4.73 34.20 9,272,023.09 17,835,952.46
3-4 years 17,125,585.91 2.99 96.94 16,601,740.00 523,845.91
4-5 years 6,604,223.37 1.15 81.35 5,372,231.40 1,231,991.97
Over 5 years 235,533,422.87 41.10 100.00 235,533,422.87
Total 573,083,763.69 100.00 274,753,255.41 298,330,508.28
2008-12-31
Amount
Proportion
(%)
Withdrawal
proportion
(%)
Bad debt
provision
Net amount of
accounts
receivable
Within 1 year 178,103,561.43 37.21 2.24 3,985,046.13 174,118,515.30
1-2 years 6,004,102.65 1.25 31.44 1,887,837.70 4,116,264.95
2-3 years 30,547,662.17 6.38 31.65 9,667,501.77 20,880,160.40
3-4 years 18,843,431.63 3.94 90.84 17,117,093.72 1,726,337.91
4-5 years 11,944,438.32 2.50 71.81 8,577,680.37 3,366,757.95
Over 5 years 233,219,721.86 48.72 100.00 233,219,721.86
Total 478,662,918.06 100.00 274,454,881.55 204,208,036.51
2）Classified by account nature
2009-6-30 2008-12-31
Items
Amount Propor
tion
Bad debt
provision
Amount Propor
tion
Bad debt
provision(%) (%)
Significant
single
amount
435,613,913.98 76.01 221,012,818.45 359,101,103.23 75.02 231,211,877.02
Insignificant
single
amount
137,469,849.71 23.99 53,740,436.96 119,561,814.83 24.98 43,243,004.53
573,083,763.69 100.00 274,753,255.41 478,662,918.06 100.00 274,454,881.55
Accounts receivable with significant single amounts (over RMB 1,000,000 Yuan) shall be
subject to impairment test separately. There is the objective evidences indicated impairment, thus
the Company withdrew reserve for bad debt of RMB 221,012,800 as at the end of reporting
period.
3）Foreign currency accounts receivable in accounts receivable
2009-6-30 2008-12-31
Currency Original currency RMB converted to Original currency RMB converted to
USD 2,232,012.56 15,248,886.63 1,909,749.38 13,052,372.86
Total 15,248,886.63 13,052,372.86
4）No arrearage from the shareholders holding over 5% (including 5%) of the equity of the
Company existed in the balance of accounts receivable.
5）The arrearage total of the first five arrearage entities listed in the closing balance of accounts
receivable was RMB 133,305,700, taking up 23.26% of the balance of accounts receivable.
7-05 Prepayment
2009-6-30 2008-12-31
1） Aging Amount Proportion (%) Amount Proportion (%)
Within 1 year 11,232,918.38 89.04 8,304,653.35 85.76
1-2 years 184,642.12 1.46 180,429.32 1.86
2-3 years 332,002.26 2.63 331,740.82 3.43
3-4 years
4-5 years
Over 5 years 866,429.69 6.87 866,429.69 8.95
Total 12,615,992.45 100.00 9,683,253.18 100.00
2） No account from shareholders holding over 5% (including 5%) of the equity of the
Company existed in the prepayments at the end of reporting period.
3） The arrearage total of the first five arrearage entities listed in the prepayment at the end of
reporting period was RMB 6,842,658.5, taking up 54.24% of the prepayment of the
Company at the end of the report period.4） Closing balance increased by 30.29% compared with the opening balance, which was
because the Company prepaid the part of payment for goods due to upward tendency in the
price of raw materials.
7-06 Other receivables
1） Aging 2009-6-30
Amount
Proportion
(%)
Withdrawal
proportion
(%)
Bad debt
provision
Net amount of
other receivables
Within 1 year 19,704,527.80 25.13 2 394,090.54 19,310,437.26
1-2 years 2,446,329.50 3.12 5 122,316.47 2,324,013.03
2-3 years 3,340,551.41 4.26 15 501,082.71 2,839,468.70
3-4 years 95,900.19 0.12 83.63 80,204.78 15,695.41
4-5 years 31,922.32 0.04 71.19 22,726.32 9,196.00
Over 5 years 52,789,809.70 67.33 97.96 51,711,427.52 1,078,382.18
Total 78,409,040.92 100.00 52,831,848.34 25,577,192.58
2008-12-31
Amount
Proportion
(%)
Withdrawal
proportion
(%)
Bad debt
provision
Net amount of
other receivables
Within 1 year 12,429,346.16 16.85 2 248,586.92 12,180,759.24
1-2 years 4,562,462.58 6.19 5 228,123.13 4,334,339.45
2-3 years 251,585.40 0.34 15 37,737.81 213,847.59
3-4 years 203,768.18 0.28 89.46 182,285.18 21,483.00
4-5 years 90,078.12 0.12 63.97 57,619.80 32,458.32
Over 5 years 56,210,878.37 76.22 79.93 44,930,696.59 11,280,181.78
Total 73,748,118.81 100.00 45,685,049.43 28,063,069.38
2） No arrearage from the shareholders holding over 5% (including 5%) of the equity of the
Company existed in other receivables at the end of the report period.
3） The arrearage total from the first five arrearage entities was RMB 34,990,200, taking up
44.63% of other accounts receivable of the Company at the end of report period.
4） Other accounts receivable with large amount were listed as follows:Entity Amount Nature of account
Changzhou Vehicle Co., Ltd. 11,658,255.41 Borrowing
Changzhou Investment Group Co., Ltd. 10,000,000.00 Borrowing
Changchai Combined Harvester Co., Ltd. 5,391,910.91 Borrowing
Lanzhou Changchai Northwest Vehicle
Co., Ltd. 5,000,000.00 Borrowing
Changzhou Compressor Co., Ltd. 2,940,000.00 Current payment
7-07 Inventory
1） Items 2009-6-30
Amount
Proportion
(%)
Provision for falling
price
Net amount of
inventory
Raw material 83,913,032.69 31.48 3,622,296.71 80,290,735.98
Consigned
materials for
processing 1,527,223.00 0.57
1,527,223.00
Goods in process 80,710,438.60 30.28 80,710,438.60
Finished products 99,657,592.39 37.39 99,657,592.39
Low-value
consumption 726,127.37 0.28
726,127.37
Total 266,534,414.05 100.00 3,622,296.71 262,912,117.34
2008-12-31
Raw material
Amount
Proportion
(%)
Provision for falling
price
Net amount of
inventory
Consigned
materials for
processing 105,308,232.52 31.18 13,005,393.08
92,302,839.44
Goods in process 3,038,765.60 0.90 3,038,765.60
Finished products 98,818,047.43 29.26 98,818,047.43
Low-value
consumption 129,978,563.63 38.48 971,756.37
129,006,807.26
Total 611,254.08 0.18 611,254.08Raw material 337,754,863.26 100.00 13,977,149.45 323,777,713.81
2）On balance sheet date, the inventory is measured according to the lower between cost and the
net realizable value. The inventory cost which was higher than the net realizable value should be
withdrawn falling price reverses. The net realizable value should be recognized in accordance
with the predicted price in the process of normal production and operation minus the amount of
the cost which was estimated to happen at the time of completion, the estimated sales expenses
and related tax expenses.
3）No capitalization amount of borrowing costs existed in the inventory of the Company, neither
did such inventory of which right was restricted as mortgage in the inventory at the end of the
report period.
7-08 Financial assets available for sale
Items 2009-6-30 2008-12-31 Remark
Cost on Foton Motor Stock 41,784,000.00 41,784,000.00
Holding 36,125,000 shares as at the end of the
report period
Change in fair value on
Foton Motor Stock 436,872,250.50 131,977,250.00
Fair value is calculated based on the closing price
as at the end of the report period.
Cost on Jiangsu
Expressway 90,500.00 90,500.00
Holding 50,000 shares as at the end of the report
period.
Change in fair value on
Jiangsu Expressway 227,000.00 181,500.00
Fair value is calculated based on the closing price
as at the end of the report period.
Total 478,973,750.50 174,033,250.00
Closing balance has increased by 175.22% compared with the opening balance, which was
because the fair value of shares of Foton Motor and Jiangsu Expressway held by the Company
rise in the reporting period.
7-09 Long-term equity investment
Name of investee
units
Invest
ment
term
Ratio in
the equity
of the
investee
units
Initial
investment
amount
Equity for
the current
period
Decrease for
the current
Accumulative
equity
Closing
balance of
impairment
provision
30 Jun. 2009
Changzhou Fuji
Changchai Robin
Gasoline Engine
Co., Ltd.
1999-
2049
33% 12,294,546.00 296,708.31 5,474,976.61 17,769,522.61
Beijing Tsinghua
Industrial
Investment
Management Co.,
1999-
2049
25% 2,500,000.00 -2,500,000.00 0.00Note: ①Notes: Others: RMB 20,000 was invested to Changzhou Economic and Technology
Development Company, RMB 100,000 was invested to Changzhou Tractor Plant, RMB 200,000
was invested to Industry Fund Fraternity of Changzhou Economic & Trade Commission, RMB
90,000 was invested to Beijing Project Machine Agricultural Machinery Co., Ltd.. The above
four items were hard to take back fully withdrawn impairment provision.
②Shenzhen Drgama Network System Co., Ltd. failed to do annual inspection for industry and
commerce administration for four years. It is in disorganization actually, so the Company
withdrawn impairment provision fully.
③In accordance with the resolutions of temporary meeting of the Board held on 1 Jun. 2009, of the
1st temporary shareholders’ general meeting held on 17 Jun. 2009 and of the equity transfer
agreement signed on 27 May 2009, the Company transferred 35,117,105 shares of KAMA Co., Ltd.
to China Hengtian Group Co., Ltd at the price of RMB 5.33 per share, totaling RMB
187,174,169.65 as equity transfer payment.
7-10 Investment properties
Name of projects 2008-12-31
Increase for the
current period
Decrease for the
current period
2009-6-30
Houses and
buildings
87,632,571.14
87,632,571.14
Less: accumulative
depreciation
14,893,155.51 1,104,170.40
15,997,325.91
Net value of 72,739,415.63 71,635,245.23
Ltd.
Shenzhen Drgama
Network System
Co., Ltd.
1999-
2014
34% 2,388,157.00 5,048,232.00 7,436,389.00 0.00
Jiangsu Bank 38,000,000.00 38,000,000.00
Lanzhou Northwest
Vehicle Corporation
5% 5,000,000.00 5,000,000.00
KAMA CO.,LTD.
(Corporate B stock)
5.49% 31,706,441.63 31,706,441.63 0.00
Yangdong Co., Ltd. 0.43% 1,000,000.00 1,000,000.00
Chengdu Changwan
Diesel Engine
Markeing Corp.
510,000.00 510,000.00 0.00
Chongqing
Wanzhou Changwan
Diesel Engine
Fitting Corp.
290,000.00 290,000.00 0.00
Other 410,000.00 410,000.00 0.00
Total 94,099,144.63 296,708.31 31,706,441.63 8,023,208.61 8,646,389.00 61,769,522.61investment
properties
In the reporting year, the investment property is Changchai Mansion, which was used for lease
and shall be measured by employing historical cost.
7-11 Fixed assets
1） Increase or decrease change in fixed assets
Original value 2008-12-31
Increase for the
current period
Decrease for the
current period
2009-6-30
Houses and
buildings 370,557,348.91
370,557,348.91
Machinery
equipment 402,949,999.28 23,916,100.98 4,711,854.93
422,154,245.33
Transportation
vehicle 23,187,028.08 639,225.40 1,821,999.00
22,004,254.48
Other
equipment 39,094,597.35 2,593,388.48 467,155.00
41,220,830.83
835,788,973.62 27,148,714.86 7,001,008.93 855,936,679.55
Accumulative
depreciation 2008-12-31
Increase for the
current period
Decrease for the
current period 2009-6-30
Houses and
buildings 148,904,523.47 6,653,685.84
155,558,209.31
Machinery
equipment 264,547,866.52 12,153,543.37 3,962,564.03
272,738,845.86
Transportation
vehicle 15,500,792.13 806,869.14 1,782,165.13
14,525,496.14
Other
equipment 27,738,264.08 1,640,183.22 457,016.59
28,921,430.71
456,691,446.20 21,254,281.57 6,201,745.75 471,743,982.02
Impairment
provision 2008-12-31
Increase for the
current period
Decrease for the
current period 2009-6-30
Houses and
buildings 11,344,597.44 1,983,964.80
13,328,562.24
Machinery
equipment 3,627,611.50 47,163.00
3,674,774.50
Transportation
vehicle
Other
equipment14,972,208.94 2,031,127.80 17,003,336.74
Net value of fixed
assets
2008-12-31 2009-6-30
Houses and buildings 210,308,228.00 203,654,542.16
Machinery equipment 134,774,521.26 145,740,624.97
Transportation vehicle 7,686,235.95 7,478,758.34
Other equipment 11,356,333.27 12,299,400.12
364,125,318.48 369,173,325.59
2） The original value of fixed assets was RMB 23,420,487.89 from the construction in
progress in the reporting period.
3） The increase of fixed assets in the reporting period is from the street properties and
machinery equipment; while the decrease is caused by the disposal of end-of-life
equipment.
4） No capitalization interest amount existed in the increase of the fixed assets.
5） Mortgage of the fixed assets
Fixed assets pledged on 30 Jun. 2009
Assets Original
carrying value
Net carrying
value
Loan balance
Houses and
buildings 12,614,700 9,248,900
Machinery
equipment 6,994,300 1,696,800
“Changwan borrowed RMB 8.5 million
from Chongqin Sanxia Bank Gaosuntang
Sub-branch
Houses and
buildings
4,776,200 2,277,500
Benniu borrowed RMB 2.0 million from
Jiangsu Wujin Rural Commercial Bank
Co., Ltd.
Houses and
buildings 23,881,300 11,387,300
Benniu borrowed RMB 10 million from
Agricultural Bank of China Changzhou
Wujin Sub-branch
48,266,500 24,610,500
6）The provision for impairment of fixed assets increased by RMB 2,031,127.80 in the reporting
period. In accordance with the policies stated in No. 14 of Note 4 to the consolidated financial
statement, the Company withdrew the provision for impairment of unused houses amounting to
RMB 1,983,964.80. Changzhou Changchai Benniu Diesel Engine Fitting Co., Ltd. madeprovision for impairment of machinery equipment by RMB 47,163.00.
7-12 Construction in progress
1) Construction projects
Opening
balance
Increase for the
current period
Transferring into
fixed assets in the
reporting period
Closing balance
Sources of
capital
Expansion capacity of
multi-cylinder
11,784,770.08 16,484,493.01 15,595,056.08 12,674,207.01
Self-finan
cing
Experimental
workshop of
technology center
17,129,608.17 16,284,933.47 950,529.92 32,464,011.72
Self-finan
cing
Renovation of
network of pipes
855,000.00 855,000.00
Self-finan
cing
Renovation of casting 20,760,295.15 10,279,042.16 31,039,337.31
Self-finan
cing
Other 19,176,025.41 23,451,509.18 6,874,901.89 35,752,632.70
Self-finan
cing
Total 69,705,698.81 66,499,977.82 23,420,487.89 112,785,188.74
2) Amount of interest capitalization in the construction in progress is RMB 1,869,051.00 in the
reporting period;
3）At the end of period, the construction in progress is made a overall check, there exists no
situation that the recoverable amount is lower than carrying value due to steady declines of
market price, technological obsolescence, damage, long-term idling, as a result, the provision for
impairment of the construction in progress shall not be withdrawn.
7-13 intangible assets
Items
Closing
initial
amount
Opening
balance
Increase
for the
current
period
Withdrawal
for the
current
period
Transfer-out
for the current
period
Closing
balance
Rest
amortiza
tion
Period
Land use
right
131,158,184.40 106,058,876.72 1,320,991.86 104,737,884.86 35.-43.3year
Special
technology
43,500.00 43,594.00 39,319.00 4,275.00
Total 132,369,684.40 106,102,470.72 1,360,310.86 104,742,159.86Note: At the end of period, there was no provision for impairment that need to be withdrawn.
7-14 Deferred income tax assets
1） Deferred income tax assets recognized 2009-6-30 2008-12-31
Provision for bad debts 1,152,885.64 620,237.12
Total 1,152,885.64 620,237.12
2） Deductible temporary difference 2009-6-30 2008-12-31
Provision for bad debts 4,611,542.57 2,480,948.47
Total 4,611,542.57 2,480,948.47
7-15 Short-term borrowing
1）Category 2009-6-30 2008-12-31
Loan on security 22,000,000.00 14,500,000.00
Collateral loan 20,500,000.00 31,700,000.00
Commission loan 5,000,000.00 5,000,000.00
Total 47,500,000.00 51,200,000.00
2）Breakdown of collateral loan
Loan bank Loan condition
Annual
interest
rate Loan term Closing amount
Chongqing Sanxia
Bank Gaosuntang
Sub-branch
Mortgage and
pledge
9.711 2008.8.7-2009.8.6 8,500,000.00
Agricultural Bank of
China, Changzhou
Wujin Sub-branch
Mortgage 5.346 2009.2.16-2009.8.13 3,000,000.00
Agricultural Bank of
China, Changzhou
Wujin Sub-branch
Mortgage 5.346 2009.6.4-2009.12.3 7,000,000.00
Jiangsu Wujin Rural
Commercial Bank Co.,
Ltd.
Mortgage 6.0003 2009.3.10-2009.12.25 2,000,000.00
20,500,000.00For details of mortgage, please refer to Note 7-11 (5) fixed assets.
3) Breakdown of loan on security
Loan bank Secured entity
Annual
interest
rate Loan term Closing amount
Bank of
Communications
Changzhou Branch
Business Department
Changchai
Company, Limited
5.0445 2009.3.6-2010.3.6 5,000,000.00
Bank of
Communications
Changzhou Branch
Business Department
Changchai
Company, Limited
5.0445 2009.3.11-2010.3.11 4,500,000.00
Bank of
Communications
Changzhou Branch
Business Department
Changchai
Company, Limited
5.0445 2009.3.13-2010.3.13 5,000,000.00
Chongqing Sanxia Bank
Gaosuntang Sub-branch
State-owned Assets
Guarantee Co., Ltd.
of Wanzhou
District, Chongqing
6.903 2009.4.21-2010.4.20 1,500,000.00
Chongqing Sanxia Bank
Gaosuntang Sub-branch
State-owned Assets
Guarantee Co., Ltd.
of Wanzhou
District, Chongqing
6.903 2009.5.13-2010.5.12 3,000,000.00
Chongqing Sanxia Bank
Gaosuntang Sub-branch
State-owned Assets
Guarantee Co., Ltd.
of Wanzhou
District, Chongqing
6.903 2009.6.3-2010.6.2 3,000,000.00
22,000,000.00
4) Breakdown of commission loan
Loan bank Entrusted entity
Annual
interest
rate Loan term Closing amount
Chongqing Sanxia Bank
Business Department
Chongqing
Wanzhou District
State-owned Assets
Guaranty Co., Ltd.
9.711 2008.9.11-2009.9.10 5,000,000.00
5,000,000.00
5）There was no overdue loan in the short-term loan as at the end of the report period.7-16 Notes payable
1）Category 2009-6-30 2008-12-31
Bank acceptance bills 226,859,800.00 136,103,600.00
Total 226,859,800.00 136,103,600.00
2）The main reason for the increase of closing balance by 66.68% compared to that of year-begin
in the notes payable was because the Company paid the supplier for the payment for goods
mostly by the means of bank acceptance bill.
7-17 Accounts payable
2009-6-30 2008-12-31
425,650,890.14 361,368,076.43
425,650,890.14 361,368,076.43
1）Classified by the nature of accounts payable
2009-6-30 2008-12-31
Amount Ratio (%) Amount Ratio (%)
Operating
accounts
payable 422,033,858.11 99.15 357,873,444.40 99.03
Accounts
payable for
engineering 3,617,032.03 0.85 3,494,632.03 0.97
425,650,890.14 100.00 361,368,076.43 100.00
2）No account which was owed to the shareholders holding over 5% (including 5%) of the
Company existed in the accounts payable.
7-18 Account collected in advance
2009-6-30 2008-12-31
44,265,465.88 24,690,165.89
44,265,465.88 24,690,165.89
1）No accounts collected in advance with large amount of which account age was over one year
existed in the balance at the period-end
2) No account which was owed to the shareholders holding over 5% (including 5%) of the
Company existed in the accounts collected in advance.
3) Closing balance has increased by 79.28% compared with the opening balance, which was
mainly because the Company prepaid the part of payment for goods due to upward tendency in
the price of raw materials..7-19 Payroll payable
Items 2008-12-31
Increase for the
current period
Decrease for the
current period 2009-6-30
Wages, bonuses, allowance and
subsidies for the employees 19,571,464.03 46,285,553.23
64,596,704.15 1,260,313.11
Welfare expenses for the
employees 4,614,815.89
4,614,815.89
Trade union funds and staff
training expense 5,625,787.85 1,282,628.14
1,248,958.24 5,659,457.75
Social insurances 172,530.00 23,205,814.05 22,967,911.55 410,432.50
Of which: endowment insurance 16,988,308.64 16,988,308.64
Basic medical insurance 172,530.00 4,342,318.06 4,104,415.56 410,432.50
Unemployment
insurance 980,322.59
980,322.59
Work injury insurance 521,475.81 521,475.81
Maternity insurance 373,388.95 373,388.95
Housing accumulation fund 4,733,348.00 4,733,348.00
Compensations for the
cancellation of the labor
relationship with the employees 1,184,483.00
1,184,483.00
25,369,781.88 81,306,642.31 99,346,220.83 7,330,203.36
7-20 Taxes and dues payable
Items 2009-6-30 Rate of tax for the
reporting period
2008-12-31
VAT
-19,046,369.06
Note 5 under this
notes to financial
statement
-32,856,189.17
Tax for municipal
maintenance and
construction
840,961.93
Note 5 under this
notes to financial
statement
959,173.65
Corporate income tax
33,001,645.12
Note 5 under this
notes to financial
statement
487,761.58
Housing property tax
268,718.15
Note 5 under this
notes to financial
statement
347,813.99
Individual income tax 20,095.18 Withhold and
remit
14,065.47Educational expenses
128,810.79
Note 5 under this
notes to financial
statement
103,088.60
Synthesis fee
1,777,471.68
Note 5 under this
notes to financial
statement
1,731,484.26
Total 16,991,333.79 -29,212,801.62
Closing balance of taxes and dues payable has increased by 205.75% compared with the opening
balance, which was mainly due to increase of income tax payable for making profit in the
reporting period.
7-21 Taxes and dues payable
2009-6-30 2008-12-31
141,976,215.94 88,548,123.52
141,976,215.94 88,548,123.52
1）The closing balance increased by 60.34% than the opening balance, which was because the
Company estimated that, in order to expand market and strengthen after-sales service, selling
concession and fee for three-guarantee service shall be increased.
2) The account over one year with the larger amount mainly was margin for quality and
performance guarantees.
3）No account which was owed to the shareholders holding over 5% (including 5%) of the
Company existed in the other payables.
7-22 Other current liabilities
Category 2009-6-30 2008-12-31
Accrued interest 576,645.48
Charges for disposing
pollutants
300,000.00 180,000.00
Dividend on shares 3,898,258.83 3,898,258.83
Total 4,198,258.83 4,654,904.31
7-23 Long-term loan
1）Category 2009-6-30 2008-12-31
Credit loan 62,000,000.00 42,000,000.00
Total 62,000,000.00 42,000,000.00
2) Breakdown of loan
Bank
Annual
interest
rate
Life of loan Closing amountChangzhou Branch, Bank
of China
benchmark
interest
rate
2008.10.15-2010.12.31 21,000,000.00
Changzhou Branch, Bank
of China
benchmark
interest
rate
2008.10.15-2011.9.25 21,000,000.00
China Construction Bank
Changzhou Branch
benchmark
interest
rate
2009.1.21-2012.1.20 20,000,000.00
62,000,000.00
3）Closing amount of long-term borrowing is a loan for technological renovation projects of trial
production shop of technical centre and a loan for casting renovation projects.
7-24 Deferred income tax liabilities
1) Deferred income tax liabilities recognized 2009-6-30 2008-12-31
Gains and losses from change in fair value of
tradable financial assets
4,110,075.00
Gains and losses from change in fair value of
financial assets available for sales
109,274,812.50
33,039,687.50
Total 109,274,812.50 37,149,762.50
2) Temporary difference taxable 2009-6-30 2008-12-31
Gains and losses from change in fair value of
tradable financial assets
16,440,300.00
Gains and losses from change in fair value of
financial assets available for sales
437,099,250.00
132,158,750.00
Total 437,099,250.00 148,599,050.00
The reason for the increase of deferred income tax liabilities in the period was because the fair
value of shares of Foton Motor and Jiangsu Expressway held by the Company rise in the
reporting period.
7-25 Share capital
Change in share capital in the reporting period
(Unit: Share)
Items
2008-12-31
Increase for the
current period
Decrease for the
current period 2009-6-30
1. Shares subject to trading
moratorium 80,212,493 80,206,868 5,625
2. Listed circulating shares 194,037,058 80,206,868 274,243,926(A-share)
3. Listed circulating shares
(B-share) 100,000,000 100,000,000
Total 374,249,551 80,206,868 80,206,868 374,249,551
7-26 Capital reserve
Items 2008-12-31
Increase for the
current period
Decrease for the
current period 2009-6-30
Premium on capital
stock 153,053,986.32 153,053,986.32
Other 119,430,199.94 228,705,375.50 10,500.00 348,125,075.44
Total 272,484,186.26 228,705,375.50 10,500.00 501,179,061.76
In the reporting period, the capital reserve has increase by RMB 228,705,375.50, which caused
by changed amount in financial assets available for sales (shares of Foton Motor and Jiangsu
Expressway) measured at the fair value and net amount of corresponding impact of deferred
income tax. In the reporting period, the capital reserve has decrease by RMB 10,500.00, which
was because of decrease of capital reserve of Benniu Company.
7-27 Surplus reserve
Items 2008-12-31
Increase for the
current period
Decrease for the
current period 2009-6-30
Statutory surplus
reserves 227,212,487.02 227,212,487.02
Discretionary surplus
reserve 13,156,857.90 13,156,857.90
Total 240,369,344.92 240,369,344.92
7-28 Retained profit
Items 30 Jun. 2009 31 Dec. 2008
Closing balance as at 31 Dec. 2008 260,783,005.94 372,844,737.18
Add: Changes in accounting policies
Opening balance as at 1 Jan. 2009 260,783,005.94 372,844,737.18
Add: net profit in 2008 188,720,466.26 -83,993,014.91
Profit available for distribution 449,503,472.20 288,851,722.27
Less: appropriating statutory surplus reserve
appropriating discretionary surplus reserve
Common stocks dividends payable 28,068,716.33Stock dividend transferred in stock capital
Retained profit as at 30 Jun. 2009 449,503,472.20 260,783,005.94
7-29 Minority interest
Jan.-Jun. 2009 Jan.-Jun. 2008
Minority interest 9,325,089.30 7,335,074.29
9,325,089.30 7,335,074.29
7-30 Operating revenue
Revenue Cost
Items
Jan.-Jun. 2009 Jan.-Jun. 2008 Jan.-Jun. 2009 Jan.-Jun. 2008
Diesel engine and fittings 1,233,742,110.79 1,132,439,943.95 1,069,130,141.92 1,023,322,223.80
Subtotal of income and cost
from main operations 1,233,742,110.79 1,132,439,943.95 1,069,130,141.92 1,023,322,223.80
Sale of raw materials 12,260,744.81 16,771,038.01 13,603,936.79 9,911,226.12
Rent 1,509,907.00 1,081,926.00 1,104,170.40 1,104,170.40
Subtotal of other operating
income and expenses 13,770,651.81 17,852,964.01 14,708,107.19 11,015,396.52
Total 1,247,512,762.60 1,150,292,907.96 1,083,838,249.11 1,034,337,620.32
The total sales income of the first five clients of the Company was RMB 280,914,100, taking up
22.77% of the Company’s income from main operation.
7-31 Business tax and extra charges
Items Jan.-Jun. 2009 Jan.-Jun. 2008 Paying standard
Urban maintenance
and construction tax 62,012.34 111,993.12
Please refer Note 5 of the
financial statement for details
Educational surtax 49,609.85 89,594.46
Please refer Note 5 of the
financial statement for details
Total 111,622.19 201,587.58
7-32 Financial expense
Items Jan.-Jun. 2009 Jan.-Jun. 2008
Interest expenses 1,922,468.08 1,702,028.93
Less: interest income 2,569,172.80 1,205,141.59
Exchange gains or losses 49,441.11 1,560,763.63Other -2,620,503.38 -9,910,940.38
Total -3,217,766.99 -7,853,289.41
Compared with the last year, the financial expenses have increase by 59.03%, which was caused
by a drop of sales promotion expenses received from supplier over the last period.
7-33 Loss of assets impairment
Items Jan.-Jun. 2009 Jan.-Jun. 2008
Provision for Bad debts 12,113,276.86 -4,001,105.20
Provision for falling price of
inventories -10,354,852.74
Provision for fixed assets
impairment 2,031,127.80
Total 3,789,551.92 -4,001,105.20
Loss of assets impairment has increased by 194.71% over the last period, which was caused by
switching back of provision for bad debt, provision for impairment of fixed assets and provision
for impairment of inventories.
7-34 Gains and losses on change in fair value
Items Jan.-Jun. 2009 Jan.-Jun. 2008
Gains and losses on change in fair
value of tradable financial assets -16,440,300.00 -30,060,000.00
Gains and losses on change in fair value is mainly because that the Company sold 4,500,000
shares of Foton Motor that are divided in tradable financial assets, correspondingly, the gains and
losses on change in fair value are switched back in the reporting period.
7-35 Investment income
Items Jan.-Jun. 2009 Jan.-Jun. 2008
Dividend distributed at cost
method 722,500.00 4,074,817.06
Income measured at equity
method 296,708.31
Income form shares sold 186,617,403.02
Total 187,636,611.33 4,074,817.06
The investment income has increase by 4504.79% compared with last reporting period, which
was because that the Company sold 4,500,000 shares of Foton Motor that are divided in tradable
financial assets, also the Company transferred 35,117,105 shares of KAMA Co., Ltd. to China
Hengtian Group Co., Ltd at the price of RMB 5.33 per share.
7-36 Non-operating incomeItems Jan.-Jun. 2009 Jan.-Jun. 2008
Income from disposal of fixed
assets 280,205.15 1,904,420.96
Insurance indemnity 45,031.58 315,841.33
Penalty Incomes 33,711.55
Subsidize revenue 2,502,342.35 250,000.00
Other 3,308,101.47 525,856.02
Total 6,169,392.10 2,996,118.31
1) In the reporting period, non-operating income has increased by 105.91% compared with the
last period, which was because that the Company disposed the rejected goods from the market
and Benniu (the subsidiary company of the Company) received VAT returned.
2) Subsidize revenue for the current period: the fund of the Three Gorges Reservoir Area
amounting to RMB 100,000.00 Changwan (Subsidiary of the Company) received Wanzhou
Financial Bureau of Chongqing, as well as the payment for VAT returned totaling to
2,402,342.35 in accordance with CZSJT Zi [2009] No. 40 document.
7-37 Non-operating expense
Items Jan.-Jun. 2009 Jan.-Jun. 2008
Losses on disposal of fixed assets 22,899.97 348,396.73
Grain risk fund and price subsidy 409,228.83 1,137,513.38
Donations 500,000.00
Amercement outlay 3,000.00
Losses on debt restructuring 1,389.67
Flood control security funds 847,122.60 1,137,513.38
Other 3,887,805.22 1,987,995.09
Total 5,167,056.62 5,115,808.25
7-38 Income tax expense
Items Jan.-Jun. 2009 Jan.-Jun. 2008
Income tax expense for the current period 32,552,305.30
Deferred income tax expense -4,642,723.52 -7,515,000.00
Total 27,909,581.78 -7,515,000.00
The income tax expenses for the current have increase by 471.38% over the last period, which
was because of increase of income tax payable in the current period.
7-39 Other cash received related to operating activities
From Jan. to Jun. 2009, the amount occurred is RMB 3,436,300, of which the items with
relatively larger amount are as below: (RMB ten thousand)
Items Jan.-Jun. 2009Interest income 256.92
Repayment of current capital 50
7-40 Other cash paid related to operating activities
The amount occurred from Jan. to Jun. 2009 is RMB 29,324,400, of which the items with
relatively larger amount are as below: (RMB ten thousand)
Items Jan.-Jun. 2009
Travel charge 729.63
Experimental development cost 331.30
Freight charges and repairs charge 454.26
Promotional expense and guarantee of repair 306.35
Administrative expense 184.06
7-41 Net increase of cash and cash equivalents
Items Jan.-Jun. 2009 Jan.-Jun. 2008
Closing monetary fund 849,987,171.26 337,403,681.37
Less: pledged fixed deposit 2,500,000.00
Closing balance of cash 847,487,171.26 337,403,681.37
Opening monetary fund 402,778,967.15 443,234,034.61
Less: pledged 2,500,000.00
Opening balance of cash 400,278,967.15 443,234,034.61
Net increase of cash and cash equivalents 447,208,204.11 -105,830,353.247-42 Supplementary information to consolidated cash flow statement
Items Jan.-Jun. 2009 Jan.-Jun. 2008
1. Adjusting net profit into cash flow arising from
operating activities
Net profit 190,713,981.27 4,498,265.51
Plus: Provision for assets impairment 3,789,551.92 -4,001,105.20
Depreciation of fixed assets, of oil-gas assets, of
productive biological assets
22,358,451.97
17,092,542.09
Amortization of intangible assets 1,360,310.86 1,456,967.69
Amortization of long-term deferred expense 133,283.37
Loss on disposal of fixed assets, intangible assets and
other long-term assets (income is listed as “-”)
-257,305.18
601,564.36
Loss on retirement of fixed assets (income is listed as
“-”)
Losses on change in fair value （income is listed as
“-”）
16,440,300.00
30,060,000.00
Financial expense（income is listed as “-”） 1,922,468.08 -7,853,289.41
Investment losses（income is listed as “-”） -187,636,611.33 -4,074,817.06
Decrease in deferred income tax assets（increase is
listed as “-”）
-532,648.52
Increase in deferred income tax liabilities（decrease is
listed as “-”）
-4,110,075.00
-67,899,875.00
Decrease of inventories (increase is listed as “-”) 71,220,449.21 70,509,480.44
Decrease in operating receivables (increase is listed as
“-”)
-110,860,564.01
-28,427,723.55
Increase in operating payables (decrease is listed as
“-”)
274,929,539.65
-50,270,829.77
Other
Net cash flows arising from operating activities 279,337,848.92 -38,175,536.53
2. Investing and financing activities that do not involving
cash receipts and payment:
Conversion of debt into capital
Convertible bond due with one year
Fixed assets financed by finance leases
3. Net increase in cash and cash equivalents:
Closing balance of cash 847,487,171.26 337,403,681.37
Less: Opening balance of cash 400,278,967.15 443,234,034.61
Add: closing balance of cash equivalents
Less: Opening balance of cash equivalents
Net increase in cash and cash equivalents 447,208,204.11 -105,830,353.24Note 8： Notes to financial statement of parent company
(The following amount is expressed in RMB unless otherwise special explanation)
8-01 Accounts receivable
2009-6-30
1）Aging
Amount
Proportion
(%)
Withdrawal
proportion
(%)
Bad debt
provision
Net amount of
accounts
receivable
Within 1 year 233,811,961.84 44.74 2.65 6,195,115.07 227,616,846.77
1-2 years 4,018,408.25 0.77 44.26 1,778,577.98 2,239,830.27
2-3 years 17,508,073.65 3.35 52.43 9,179,805.90 8,328,267.75
3-4 years 16,850,379.51 3.22 98.03 16,519,178.08 331,201.43
4-5 years 3,395,083.19 0.65 86.01 2,920,134.05 474,949.14
Over 5 years 247,049,079.55 47.27 92.20 227,782,705.39 19,266,374.16
Total 522,632,985.99 100.00 264,375,516.47 258,257,469.52
2008-12-31
Aging
Amount
Proportion
(%)
Withdrawal
proportion
(%)
Bad debt
provision
Net amount of
accounts
receivable
Within 1 year 126,565,462.95 29.54 3.15 3,985,046.13 122,580,416.82
1-2 years 5,855,998.83 1.37 32.11 1,880,432.51 3,975,566.32
2-3 years 23,847,353.03 5.57 40.09 9,560,697.80 14,286,655.23
3-4 years 16,957,837.57 3.96 97.60 16,551,415.50 406,422.07
4-5 years 3,398,383.19 0.79 86.02 2,923,434.05 474,949.14
Over 5 years 251,791,898.44 58.77 92.35 232,525,524.28 19,266,374.16
Total 428,416,934.01 100.00 267,426,550.27 160,990,383.74
2）Classified by account nature
2009-6-30 2008-12-31
Items
Amount
Propor
tion
(%)
Bad debt
provision
Amount
Propor
tion
(%)
Bad debt
provision
Significant
single
amount
430,696,787.18 82.41 206,005,891.70 348,050,930.99 81.24 209,049,516.96Insignificant
single
amount
91,936,198.81 17.59 58,369,624.77 80,366,003.02 18.76 58,377,033.31
Total 522,632,985.99 100.00 264,375,516.47 428,416,934.01 100.00 267,426,550.27
Accounts receivable with significant single amounts (over RMB 1,000,000 Yuan) shall be
subject to impairment test separately. There is the objective evidences indicated impairment, thus
the Company withdrew reserve for bad debt of RMB 206,005,900 as at 30 Jun. 2009.
3）Foreign currency accounts receivable in accounts receivable
2009-6-30 2008-12-31
Currency Original currency RMB converted to Original currency RMB converted to
USD 2,232,012.56 15,248,886.63 1,909,749.38 13,052,372.86
Total 15,248,886.63 13,052,372.86
4）The arrearage total of the first five arrearage entities listed in the closing balance of accounts
receivable was RMB 163,351,200, taking up 31.26% of the balance of accounts receivable.
5）No arrearage from the shareholders holding over 5% (including 5%) of the equity of the
Company existed in the balance of accounts receivable.
8-02 Other receivables
2009-6-30
1）Aging Amount
Proportion
(%)
Withdrawal
proportion (%)
Bad debt
provision
Net amount of other
receivables
Within 1 year 18,361,799.52 24.71 2.00 367,235.98 17,994,563.54
1-2 years 2,393,225.07 3.22 5.00 119,661.25 2,273,563.82
2-3 years 3,340,551.41 4.50 15.00 501,082.71 2,839,468.70
3-4 years 89,300.19 0.12 87.60 78,224.78 11,075.41
4-5 years 9,832.32 0.01 96.34 9,472.32 360.00
Over 5 years 50,117,950.94 67.44 97.85 49,039,568.76 1,078,382.18
Total 74,312,659.45 100.00 50,115,245.80 24,197,413.65
2008-12-31
Aging
Amount
Proportion
(%)
Withdrawal
proportion
(%)
Bad debt provision
Net amount of other
receivables
Within 1 year 12,316,348.66 17.39 2.00 246,326.97 12,070,021.69
1-2 years 4,529,733.40 6.40 5.00 226,486.67 4,303,246.73
2-3 years 251,585.40 0.36 15.00 37,737.81 213,847.59
3-4 years 175,078.18 0.25 99.20 173,678.18 1,400.004-5 years 86,912.32 0.12 64.11 55,720.32 31,192.00
Over 5 years 53,456,037.14 75.48 78.90 42,175,855.36 11,280,181.78
Total 70,815,695.10 100.00 42,915,805.31 27,899,889.79
2）No arrearage from the shareholders holding over 5% (including 5%) of the equity of the
Company existed in other receivables at the end of the report period.
3）The arrearage total from the first five arrearage entities was RMB 34,990,200, taking up 47.09
% of other accounts receivable of the Company at the end of report period.
4) Other accounts receivable with large amount were listed as follows
Entity Amount Nature of account
Changzhou Vehicle Co., Ltd. 11,658,255.41 Borrowing
Changzhou Trust Investment Co., Ltd. 10,000,000.00 Borrowing
Changchai Combined Harvester Co., Ltd. 5,391,910.91 Borrowing
Lanzhou Changchai Northwest Vehicle Co., Ltd. 5,000,000.00 Borrowing
Changzhou Compressor Co., Ltd. 2,940,000.00 Current payment
8-03 Long-term equity investment
Name of investee
units
Invest
ment
term
Ratio in
the
equity of
the
investee
units
Initial
investment
amount
Net amount as
at 31 Dec.
2008
Increase for the
current period
Decrease for
the current
period
Net amount as
at 30 Jun. 2009
Closing
balance of
impairment
provision
Changchai Wanzhou
Diesel Engine Co.,
Ltd.
1996-
2011
60% 21,000,000.00 21,000,000.00
21,000,000.00
Changzhou
Changchai Benniu
Diesel Engine
Fittings Co., Ltd.
1996-
2011
75% 25,339,800.00 25,339,800.00
25,339,800.00
Nanjing Changli
Agricultural
Machinery Fittings
Co., Ltd.
2007-
2022
100% 5,000,000.00 5,000,000.00
5,000,000.00
Changzhou Fuji
Changchai Robin
Gasoline Engine
Co., Ltd.
1999-
2049
33% 12,294,546.00 17,472,814.30 296,708.31
17,769,522.61
Beijing Tsinghua
Industrial
Investment
Management Co.,
1999-
2049
25% 2,500,000.00The reason for increase in the reporting period was ① because Changzhou Fuji Changchai Robin
Gasoline Engine Co., Ltd. measured at equity method, resulting in increase of investment income;
the reason for decrease was because that the Company, in accordance with the resolutions of
temporary meeting of the Board held on 1 Jun. 2009, of the 1st temporary shareholders’ general
meeting held on 17 Jun. 2009 and of the equity transfer agreement signed on 27 May 2009,
transferred 35,117,105 shares of KAMA Co., Ltd. to China Hengtian Group Co., Ltd at the price
of RMB 5.33 per share, totaling RMB 187,174,169.65 as equity transfer payment.
②Others: RMB 20,000 was invested in Changzhou Economic and Technology Development
Company, RMB 100,000 was invested in Changzhou Tractor Plant, RMB 200,000 was invested
in Industry Fund Fraternity of Changzhou Economic & Trade Commission, RMB 90,000 was
invested in Beijing Project Machine Agricultural Machinery Co., Ltd.. The above four items
were hard to take back fully withdrawn impairment provision.
③ Net assets of Beijing Tsinghua Industrial Investment Management Co., Ltd. was negative,
therefore, its long-term investment measured at equity method is reduced to zero；Shenzhen
Drgama Network System Co., Ltd. failed to do annual inspection for industry and commerce
administration for four years. It is in disorganization actually, so the Company withdrawn
impairment provision fully.
8-04 Operating revenue
Operating revenue Operating cost
Items
Jan.-Jun. 2009 Jan.-Jun. 2008 Jan.-Jun. 2009 Jan.-Jun. 2008
Diesel engine and fittings 1,242,540,082.16 1,139,513,572.49 1,091,941,451.32 1,040,524,748.48
Total of income and cost
from main operations 1,242,540,082.16 1,139,513,572.49 1,091,941,451.32 1,040,524,748.48
Sales of raw materials 11,270,269.45 15,837,322.67 13,373,878.43 9,197,456.45
Rent 1,509,907.00 1,081,926.00 1,104,170.40 1,104,170.40
Total of other operating
income and expense 12,780,176.45 16,919,248.67 14,478,048.83 10,301,626.85
Total 1,255,320,258.61 1,156,432,821.16 1,106,419,500.15 1,050,826,375.33
The total sales income of the first five clients of the Company was RMB 280,914,100, taking up
Ltd.
Shenzhen Drgama
Network System
Co., Ltd.
1999-
2014
34% 2,388,157.00
7,436,389.00
Jiangsu Bank 38,000,000.00 38,000,000.00 38,000,000.00
Lanzhou Northwest
Vehicle Corporation
5% 5,000,000.00 5,000,000.00
5,000,000.00
KAMA CO.,LTD.
(Corporate B stock)
5.49% 31,706,441.63 31,706,441.63
31,706,441.63
Other 410,000.00 410,000.00
Total 143,638,944.63 143,519,055.93 296,708.31 31,706,441.63 112,109,322.61 7,846,389.0022.61% of the Company’s income from main operations in the reporting period.
8-05 Investment income
Items Jan.-Jun. 2009 Jan.-Jun. 2008
Dividend distributed at cost
method 722,500.00 4,074,817.06
Income measured at equity
method 296,708.31
Income form shares sold 186,617,403.02
Total 187,636,611.33 4,074,817.06
The investment income has increase by 4504.79% compared with last reporting period, which
was because that the Company sold 4,500,000 shares of Foton Motor that are divided in tradable
financial assets, also the Company transferred 35,117,105 shares of KAMA Co., Ltd. to China
Hengtian Group Co., Ltd at the price of RMB 5.33 per share.
8-06 Supplementary information to consolidated cash flow statement
Items Jan.-Jun. 2009 Jan.-Jun. 2008
1. Adjusting net profit into cash flow arising from operating activities
Net profit 183,283,875.14 2,131,762.78
Plus: Provision for assets impairment 3,898,824.12 -4,001,105.20
Depreciation of fixed assets, of oil-gas assets, of productive biological
assets 18,798,994.00 14,985,480.32
Amortization of intangible assets 1,329,195.52 1,427,540.12
Amortization of long-term deferred expense
Loss on disposal of fixed assets, intangible assets and other long-term
assets (income is listed as “-”)
-141,574.40 564,698.05
Loss on retirement of fixed assets (income is listed as “-”)
Losses on change in fair value （income is listed as “-”） 16,440,300.00 30,060,000.00
Financial expense（income is listed as “-”） -9,286,106.49
Investment losses（income is listed as “-”） -187,636,611.33 -4,074,817.06
Decrease in deferred income tax assets（increase is listed as “-”） -532,648.52
Increase in deferred income tax liabilities（decrease is listed as “-”） -4,110,075.00 -67,899,875.00
Decrease of inventories (increase is listed as “-”) 79,201,291.22 84,384,739.22
Decrease in operating receivables (increase is listed as “-”) -118,965,026.36 -32,110,051.55
Increase in operating payables (decrease is listed as “-”) 253,295,941.43 -48,250,669.88
Other
Net cash flows arising from operating activities 244,862,485.82 -32,068,404.69
2. Investing and financing activities that do not involving cash receipts andpayment:
Conversion of debt into capital
Convertible bond due with one year
Fixed assets financed by finance leases
3. Net increase in cash and cash equivalents:
Closing balance of cash 802,218,005.31 318,402,586.53
Less: Opening balance of cash 378,820,707.08 417,975,515.87
Add: closing balance of cash equivalents
Less: Opening balance of cash equivalents
Net increase in cash and cash equivalents 423,397,298.23 -99,572,929.34Note 9: Relationship of related parties and associated transactions
(I) Related parties with controlling relationship
Name of enterprise Registered
address
Main business Relationship
with the
Company
Nature of
enterprise
Legal
representative
Code of
organization
Changchai Wanzhou Diesel
Engine Co., Ltd. (Changwan)
No. 1101,
Xiamen
Road,
Wanzhou,
Chongqing
Production and sales of
diesel engine
Shareholding
subsidiary
Limited
liabilities
Company
Yin Lihou
20793370-5
Changzhou Changchai Benniu
Diesel Engine Fittings Co., Ltd.
(Benniu)
Nanguan
Village,
Benniu
Town, Wujin
Production and sales of
diesel engine fittings
Shareholding
subsidiary
Limited
liabilities
Company
Qiang
Jinlong
25083232-8
Nanjing Changli Agricultural
Machinery Fittings Co., Ltd.
Economy
Development
Zone of
Lishui
County,
Nanjing
Agricultural
mechanization
production,
electromechanical
product, spare parts
and maintenance
service
Wholly-owned
subsidiary
Limited
liabilities
Company
Xue Guojun
66065240-X
State-owned Assets Supervision
and Administration Commission
of Changzhou Municipal
Government
Actual
controller
Note: As at 30 Jun. 2009, State-owned Assets Supervision and Administration Commission of
Changzhou Municipal Government holds 31.43% equities of the Company (state-owned equity),
which is actual controller.
(II) The registered capital of the aforesaid related parties with controlling relationships and
its change
Name of related parties 2008-12-31
Increase for the
current period
Decrease for the
current period 2009-6-30
State-owned Assets Supervision
and Administration Commission of
Changzhou Municipal
Government
Changchai Wanzhou Diesel
Engine Co., Ltd. (Changwan) 35,000,000 35,000,000
Changzhou Changchai Benniu
Diesel Engine Fittings Co., Ltd.
(Benniu)
33,786,400 33,786,400Nanjing Changli Agricultural
Machinery Fittings Co., Ltd. 5,000,000 5,000,000
(III) The shares or equity held by the related parties with controlling relationships and its
changes
2008-12-31 Increase/decrease for
the current period 2009-6-30
Name of related parties
Amount Percentage
％ Amount Percent
age ％ Amount Percentage
％
State-owned Assets Supervision and
Administration Commission of
Changzhou Municipal Government
117,631,824 31.43 117,631,824 31.43
Changchai Wanzhou Diesel Engine
Co., Ltd. (Changwan)
21,000,000 60 21,000,000 60
Changzhou Changchai Benniu Diesel
Engine Fittings Co., Ltd. (Benniu)
25,339,800 75 25,339,800 75
Nanjing Changli Agricultural
Machinery Fittings Co., Ltd.
5,000,000 100 5,000,000 100
(IV) Nature of related parties without controlling relationships
Related parties Relationship with the Company
Fuji Changchai Robin Diesel Engine Co., Ltd. Affiliated company of the Company
Note 10: Contingent events
(I) Lawsuits and arbitration in the reporting period
Names of defendants Date of accepting &
hearing
Names of lawsuits &
arbitration organs
Involved sum
(RMB’0000)
Remarks
Pending lawsuits carried down to the report period from the previous periods
1. Nanjing Jinwa
Share-holding Co., Ltd.
9 Jul. 2002 Changzhou Intermediate
People’s Court
1,419.00 Under execution
2. Shandong Hongli Group
Co., Ltd.
27 Jun. 2001 Changzhou Intermediate
People’s Court
1,436.00 During bankruptcy
liquidation
3. Shandong Shuangli
Group Co., Ltd.
Jan. 2006 The 1st Intermediate
People’s Court of Beijing
2,746.04
Total 6,094.10
Notes on the progress of the cases:
1. About the lawsuit case of Nanjing Jinwa Share-holding Co., Ltd.: The Company has signed a
settlement agreement where Lishui County Public-owned Assets Operation Co., Ltd. shall pay
the debt of RMB 14.19 million owed by Nanjing Jinwa Share-holding Co., Ltd. with 80 mu of
land. And the agreement is currently in the course of execution.2. About the lawsuit case of Shandong Hongli Group Co., Ltd.: The accused company owed
accumulatively RMB 14.36 million to the Company. The Company sued to Changzhou
Intermediate People’s Court in 2001 and sued for compulsory execution in April, 2002. Currently,
the defendant has started the procedure of bankruptcy.
3. The lawsuit case on the guarantee loan of Shangdong Shuangli Group Co., Ltd. was disclosed
in the 2006 Annual Report of the Company. Owing to the poor management of Shuangli Group,
Shangdong Liaocheng Intermediate People’s Court declared that Shuangli Group entered the
bankruptcy and debt repayment procedure. The Company applied to the bankruptcy liquidation
group of Shuangli Group for its privileged mortgage debt of RMB 27,460,400. The Company
actively exercised the land use right involving 93454.43 ㎡ of land provided by Shuangli Group
as a counter-guarantee for paying the debt. As at 30 June 2009, the Company has recalled RMB
19.8 million, and the balance of RMB 7,660,400 is in recovery.
(II) Guarantee
In the reporting period, the Company provided a loan guarantee of RMB 14.50 million for its
controlling subsidiary—Changchai Benniu Diesel Engine Fittings Co., Ltd.. Of which, the
guarantee period for RMB 9.50 million is from 29 Oct. 2008 to 29 Oct. 2009, while guarantee
period for the other amount of RMB 5 million is from 31 Oct. 2008 to 31 Oct. 2009.
Note 11： Non-adjusting events after balance sheet date
On 10 Aug. 2009, the Company held the 16th meeting of the 5th Board of Directors, in which the
profit distribution plan (bonus shares shall be allocated to all shareholders at the rate 5 for 10 and
cash dividends of RMB 0.80 shall be distributed for every 10 shares (tax included) to all
shareholders) was proposed. Such proposal shall be submitted to the 2nd Extraordinary
Shareholders’ General Meeting 2009 for review.
Note 12 Commitment events
As at 30 Jun. 2009, there was no commitment event that needed to make explanation from the
Company.
Note 13 Return on equity (ROE) and earnings per share (EPS)
1）ROE and EPS
Jan.-Jun. 2009 Jan.-Jun. 2008
ROE（%） Profit as of EPS（RMB Yuan） ROE（%） EPS（RMB Yuan）
reporting period
Fully
diluted
Weighted
average
Basic
EPS
Diluted
EPS
Fully
diluted
Weighted
average
Basic
EPS
Diluted
EPS
Net profit
attributed to the
ordinary
shareholders of
12.06 13.86 0.50 0.50 0.29 0.31 0.011 0.011the Company
Net profit
attributed to the
ordinary
shareholders of
the Company
after deducting
non-recurring
profits and losses
3.86 4.43 0.16 0.16 0.44 0.48 0.016 0.016
(1) The numerator shall be the current net profit attributed to the ordinary shareholders of the
Company when calculating earnings per share
Jan.-Jun. 2009 Jan.-Jun. 2008
The current net profit
attributed to the ordinary
shareholders
188,720,466.26 3,958,454.06
Total 188,720,466.26 3,958,454.06
(2) The denominator shall be the weighted average number of common shares outstanding when
calculating basic EPS, the process of measurement was as follows:
Jan.-Jun. 2009 Jan.-Jun. 2008
Number of common shares outstanding at the
year-begin
374,249,551.00
374,249,551.00
Add: weighted average number of common
shares issued in the reporting period
Less: weighted number of repurchase of
common shares in the reporting period
Number of common shares outstanding at the
year-end
374,249,551.00 374,249,551.00
(3) The denominator shall be the weighted average number of common shares outstanding when
calculating diluted EPS, the process of measurement was as follows:
Jan.-Jun. 2009 Jan.-Jun. 2008
the weighted average number of ordinary
shares in calculating the basic earnings per
share
374,249,551.00
374,249,551.00
Add: weighted average of common share
increasing on supposing that the diluted
potential ordinary shares convert into
ordinary shares already issued
the weighted average number of ordinary
shares in calculating the diluted earnings per
share
Total 374,249,551.00374,249,551.00
2）Extraordinary gains and losses
Items Jan.-Jun. 2009 Jan.-Jun. 2008
Gains and losses from disposal of non-current assets 155,696,100.51 1,556,024.23
Government subsidies recorded into gains and losses in
current period
1,861,756.76
Gains and losses from changes of fair value of
transaction financial assets and transaction financial
liabilities, and investment income from disposal of
transaction financial assets, transaction financial
liabilities and financial assets available for sale
14,709,375.00
Net non-operating income and expenses -1,800,756.38 -3,675,714.17
Total 170,466,475.89 -2,119,689.94
Less: Impact on income tax 42,105,897.01
Total 128,360,578.88 -2,119,689.94VIII. Documents Available for Reference
The following documents are available for reference:
1. Text of 2009 Semi-Annual Report carrying the signature of Chairman of the
Board;
2. Accounting statements carrying the signatures and seals of the person-in-charge of
the Company, the person-in-charge of accounting and the person-in-charge of the
accounting agency;
3. Originals of all the Company’s documents and public notices ever disclosed on
Securities Times and Ta Kung Pao designated by CSRC in the report period;
4. Articles of Association of the Company.
The aforesaid documents for reference are readily available in the Secretariat of the
Board of Directors of the Company.
This Semi-Annual Report was prepared both in Chinese and English. Should there
be any difference in interpretation of the two versions, the Chinese version shall
prevail.
Board of Directors
Changchai Company, Limited
12 Aug. 2009
